A Minimum Income Guarantee for the UK

We are in the midst of a severe, global recession. The spread of the COVID-19 pandemic has caused countries to implement the most significant public health interventions in post-war history. Entire populations are now practicing social distancing and isolation. The effects on GDP are expected to be significant, with some forecasters predicting a quarterly contraction of 15% over the next three months for the UK.1 Unemployment is expected to reach levels not seen since the 2008 financial crisis, with almost half a million new applications to universal credit (UC) in less than two weeks. Monetary policy in the UK is also largely exhausted, with both interest rates and quantitative easing reaching their ‘effective lower bounds’ – a point beyond which further reductions have little or no positive effect on spending in the economy. Trying to get the economy moving by making credit cheaper will be like pushing on a piece of string.