A Universal Basic Income (UBI) is again being widely discussed as a radical policy to tackle inequality and provide us all with a new level of freedom in an uncertain future. I will leave aside the moral arguments in favour and against for this article and instead, look solely at how we could pay for a UBI at a meaningful level using a new micro-tax on all electronic transactions.
Preceding the 2016 Swiss referendum on introducing a UBI, BIEN-CH the non-profit organisation behind the vote, proposed the introduction of a micro-tax on all Switzerland’s electronic transactions. This would be levied on financial institutions like the Tobin-Tax, but crucially it would also include all electronic transactions made by everyone in the country. A sort of Super Tobin-Tax that the University of Zurich estimated when applied at a rate of 0.2% would generate 200 billion Swiss francs, more than enough to pay for a UBI in the country.
It is quite difficult to find complete data on the value of electronic transactions in the UK but looking at the most reliable data available, the potential taxable amounts are mammoth.
The most complete data I could find was from the Bank for International Settlements (BIS) who published statistics on payment, clearing and settlement systems in 2016. The data covers a wide range of transactions made in the UK in that year. The figures put the value of electronic payments by banks; consumers; interbank transfer systems like BACS, CHAPS and faster payment service; transactions cleared by central counterparties and clearing houses; and transactions processed by selected central securities depositories at a cool £386 trillion.
The BIS data is missing the value of trades made on the London Stock Exchange but the World Federation of Exchanges (WFE) publishes monthly and 12 month rolling figures. The WFE put the total value of share trading by the LSE group in the calendar year of 2019 at £162 trillion.
The total value is probably much higher due to the lack of good data available, but just working with these figures we can modestly estimate the total value of UK electronic transactions to be £548 trillion.
If we were to apply a Universal Transaction Micro-Tax in the UK across all of these transactions even at half the rate of the Swiss model at 0.1%, we could potentially raise £548 billion in revenue.
The bulk of the revenue from the micro-tax would come from financial trading and services, and the low rate would have a minimal impact on monthly household expenditure. The Office for National Statistics estimated the average weekly household spend in 2018 to be £573. Even assuming all of that spending is done through electronic transactions, a micro-tax applied at the 0.1% rate would be just 57p a week per household. The universal application of the micro-tax ties in very nicely with it funding a Universal Basic Income, with everybody contributing to the fund.
Is this enough to pay for a Universal Basic Income?
If we were to split the notional revenue raised from a Universal Transactions Tax annually (£548 billion) between 55 million people over the age of 15 in the UK then we could pay a monthly basic income of £830. This would not be enough to replace work but would certainly be enough to make a meaningful difference in people’s lives. We could levy the tax at a higher rate should we wish to increase the monthly level in future, but given the value of transactions are likely much higher, we could even levy the tax at a much lower level and still raise the required revenue even to pay the minimum or living UK average wage amount should we wish to.
A Universal Transaction Micro-Tax should therefore be seriously considered as a means to forge the way forward on this policy.
Darren Martin is the Press & Communications Officer for the Hackney Lib Dems and campaigns on radical social reform. He Tweets @Hackney__Darren.