Spain introduces minimum income guarantee

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According to recent reports, Spain is introducing a minimum income guarantee for the poorest households.

What is the minimum income guarantee?

The initiative, designed to help the poorest homes is intended to be permanent. It’s estimated that up to 850,000 homes will be involved.

José Luis Escrivá -minister of inclusion who brought the plan together is quoted in the Financial Times:

“The minister said the minimum income guarantee, which will be means-tested on both the income and the non-housing wealth of potential recipients, was “completely the opposite” of so-called universal basic income, a much more expensive measure that has been trialled in countries such as Finland and involves paying everyone a fixed amount.”

The Spanish Prime Minister Pedro Sanchez had this to say;

“…a milestone in our democracy to ensure that no-one is left behind … a permanent benefit, on a similar basis to those in other European countries and that its final design has been achieved thanks to the work of the Tax Agency, the Social Security system and the regional governments. Its annual cost will stand at around 3 billion euros and it will benefit close to 850,000 homes, half of which have children in their care. To calculate the amount of the benefit, the income of each household will be analysed, and the benefit will cover the difference up to the minimum income that corresponds to this household. These will begin to be distributed in June, according the rate at applications are dealt with.”

What is Universal Basic Income and how is it different?

Each adult citizen receives a set amount of income, regardless of means. The idea is to reduce poverty and improve quality of life. The universal aspect makes implementation more straightforward than means testing.

Is this what was implemented in the Finnish trial? How did it go?

In part, although their system targeted the unemployed, and aimed to get them into work. The trial found that participants were happier, but the goal to get people into work was not considered to have been achieved.

Is this any different to initiatives brought in by governments across the world to protect people’s incomes during the Coronavirus crisis?

To a large extent not, many countries including the U.K. are effectively guaranteeing a minimum income for most citizens. The main difference is the Spanish scheme is designed to be permanent.  It is not clear yet if the scheme will mirror other benefit schemes such as the Universal Credit system in the UK, or become a more comprehensive scheme.

And the future?

There have been several schemes trailed around the World based on similar ideas.  In the future, as jobs may potentially be replaced by more technological solutions, governments may want to see how successful these initiatives are at providing incomes for people.

Notes and Sources

Final details have not yet been released by the Spanish Government.

The official website of the Spanish government is inaccessible at the time of publication.  The link is;

https://www.lamoncloa.gob.es/lang/en/presidente/news/Paginas/2020/20200523sanchez-briefing.aspx

Therefore we have also sourced information from the following press articles.  Note the FT has a paywall;

https://www.ft.com/content/0b6a5d25-e078-4dfc-b314-f659b566317e

https://uk.reuters.com/article/uk-health-coronavirus-spain-poverty/spain-to-fight-poverty-with-income-scheme-for-2-5-million-people-idUKKBN22X216

BBC summary of the recent Finnish experiment;

www.bbc.co.uk/news/amp/world-europe-47169549