Claim about cost of Labour’s welfare policy is unsubstantiated

Published: 26th Sep 2019

In brief

Claim

Labour’s planned welfare spending will cost £520 billion.

Conclusion

This is based on the assumption that the Labour Party introduces universal basic income for all adults at a certain level. It has so far only said it will trial such a scheme if it gets into government and not released much detail on how such a scheme would work.

 

Labour’s universal basic income policy would cost £504 billion.

 

This is based on the assumption that the Labour Party introduces universal basic income for all adults at a certain level. It has so far only said it will trial such a scheme if it gets into government and not released much detail on how such a scheme would work.

Claim 1 of 2

"Labour is planning an eye-watering benefits splurge that would cost taxpayers around £520 billion a year, analysis has found..."

Daily Express, 23 September 2019

Earlier this week the Daily Express’ front page led with an exclusive on the cost of the Labour party’s welfare spending proposals.

The article cites unpublished analysis done by the Conservative party and claims that the proposals would take the UK welfare bill up to £520 billion a year. (The value of what is currently spent on welfare depends on what you count in that category, but the Institute for Fiscal Studies says spending on welfare is currently around £224 billion a year—£98 billion for non-pensioners and £126 billion for pensioners).

The Express’ claim  is misleading, because most of the supposed spending is based on the assumption that Labour introduces a basic income at a specific level. Labour have pledged to trial a basic income in certain areas, but not specified the level at which this will be or their intention to roll the scheme out nationally .

Even if we ignore this factor, neither the Express nor the Conservatives have published any further details on this analysis, so we can’t say how accurate their sums are overall. Analysis like this should be published in full so that anyone can check where it’s from and how it’s calculated. We can take a look at some of the elements of spending the report mentions though. 

Where does all this money come from?

Most of the supposed spending (£504 billion of the total £520 billion) comes from the cost of delivering a universal basic income. This, as the name suggests, is the idea to give every citizen, regardless of their wealth or income, a regular basic income from the state.

However, there is no indication that Labour Party policy is to immediately introduce a basic income for all. Labour suggested it plans to trial basic income if it gets into government. We don’t know how many people would be involved, or the level of basic income they would receive.

If we look beyond that issue, we can ask how accurate the Express’ claim is that rolling out a universal basic income across the country would cost £504 billion.

The problem is that we don’t know at what level a  basic income might be set, so it’s impossible to estimate its total cost.

We’ve asked Labour, the Conservatives and the Express for more information about how the figures in the article were calculated.

The cost of delivering a universal basic income could vary considerably   depending on who is eligible and what level it is set at (and linked to this, whether it will constitute a total replacement for other types of benefits or supplement them).

If you ignore any cost of actually administering the scheme, £504 billion is the equivalent of providing a universal basic income of around £9,600 a year to each adult aged 18 or over in the UK.    

That’s not an unreasonable estimate of the costs of a basic income. For example, the International Labour Organisation (ILO) says   a universal basic income should provide a basic standard of living for everyone, and so makes estimates based on the poverty threshold in each country.

In the UK the ILO says that threshold is £8,800 per year for an adult, so not that far below the £9,600.

But a universal basic income could also be far less generous and so far less costly. For example Labour’s shadow chancellor John McDonnell said in May that Labour would study another proposal for a basic income of £48 per week, which is   equivalent to around £130 billion per year if provided to all UK adults aged 18 and over.

There are other issues with the £520 billion figure

On top of the £504 billion the Express adds the cost of various policies proposed by Labour to get to a total of £520 billion.

For example, it says the cost of scrapping plans to raise the retirement age to 67 (as pledged in Labour’s 2017 manifesto) would cost £9.9 billion according to “financial experts”.

We’ve not been able to find the figure and the Express haven’t told us their source. But it wouldn’t necessarily be the case that the cost of this would be in addition to any universal basic income that was introduced.

A basic income could possibly remove the need to have the existing benefits system, including state pensions.

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