Is UBI for health affordable?

The most significant opposition to UBI is summarised by Martinelli’s (2017, 43) claim that ‘an affordable basic income would be inadequate, and an adequate basic income would be unaffordable’. However, we have argued (Johnson, et al. 2020) that this assessment neglects the potential economic impact of a successful upstream intervention on health. We use dynamic modelling to assess the costs and returns on investment using the modelled health impacts of the UBI schemes in WP2. Dynamic modelling is essential as the pathways to impact suggest that larger transfers offer larger returns and that a scheme sufficient to assure unconditional satisfaction of need offers qualitatively distinct benefits by virtue of stress reduction.

First, we calculate the monetised health impact of UBI schemes using the modelled impacts on NCDs and CDs produced as part of our work on evaluating UBI’s impact on health. This allows for a NICE-endorsed cost-benefit analysis (CBA) to quantify the level of return for a given level of investment (Park, Jit & Wu 2018) over a period of 5, 10 and 20 years to act as a decision-making tool for policymakers (Brent 2013). The direct benefits of UBI on health include all medical costs/health service costs avoided due to reduced levels of disease (e.g. NCDs triggered through stress) derived from NHS reference cost data provided by NHS England and NHS Improvement (2020), comprising the average unit cost of providing defined services to NHS patients and costs based on specific interactions between patients and providers related to their healthcare activity. Monetisation of indirect benefits (i.e. social welfare in terms of individuals’ willingness-to-pay (WTP)) is achieved via combination of the quality-adjusted life-year (QALY) monetisation (QM) approach and the production-based approach. Individual WTP in monetary terms for an additional QALY gained is estimated via Shiroiwa et al. (2010) and the production-based approach assesses the indirect UBI benefits related to productivity loss averted because of decreased levels of mortality and morbidity. This case considers health as human capital rather than as intrinsic value. Cumulative income loss is estimated for the period of sickness (workplace absenteeism), and income losses due to premature death could be calculated using data on population-stratified employment rates and mean incomes from the Office for National Statistics. (HM Revenue & Customs 2020b; ONS 2018a; ONS 2020b).

Second, we model the initial costs of the three UBI schemes derived from WP1 by entering RF’s monetised data into the Landman Economics tax-transfer model (TTM). This micro-simulation model of the tax-benefit system was originally developed for the Institute for Public Policy Research and is also used by the Joseph Rowntree Foundation. The TTM uses data from the Family Resources Survey (FRS) to analyse the impact of direct taxes, benefits and data from the Living Costs and Food Survey (LCF) to model the impact of indirect taxes. The information in the FRS allows payments of direct taxes and receipts of benefits, tax credits and/or Universal Credit to be modelled for each household in the FRS using either the current tax-benefit system in place at the moment, or an alternative system of the user’s choice. The TTM is used to estimate the immediate, static ‘first-round’ impact of each of the three UBI options on individual and household net incomes in the UK. The outputs from the analysis includes: gross costs (overall UBI payments); costs net of reduction in other benefit/tax credit/Universal Credit payments; distributional impacts by income decile and other household characteristics; impact on poverty rates and winners and losers by position in the income distribution.

Third, we model the overall monetised economic returns on investment from those schemes by repeating the modelling to include the dynamic impacts at 5, 10 and 20 years to reflect data from RF on savings from lower sickness levels, lower levels of spending on national health, and the wider employment impact. As per Johnson, et al. (2020) Fig 2. these additional round impacts are factored back into the TTM, altering the modelled health and fiscal impacts of each of the UBI options.

Figure 2. Method by which financial viability is established with regard to health impact

Fourth, we evaluate fiscal strategies, through tax and governmental reform, to fill funding gaps over short, medium and long-term periods. We develop a fiscal strategy by applying health and wellbeing as a criterion to analysis of a range of options, including: raising the rate of corporation tax; reducing the number and cost of tax reliefs; a phased reduction in financial support to home owners and private landlords (£8bn a year); extending NICs to those over 65; raising the revenue yield from the new digital services tax on big technology companies; reversing the freeze in fuel excise duties since 2010 (raising £9bn); new levies on certain forms of privately owned wealth which currently stands at some £14tr, some 7 times the size of national income, and introducing higher rates on existing eco-taxes. Such fiscal options are assessed through the TTM to establish economic impact. This impact is then be fed back into a health microsimulation modelling to establish health impact, which is then monetised and fed back into Landman’s TTM modelling to determine a final framework for funding.