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Blue Reform's Terho pitches new form of basic income, not a "stipend for being lazy"

The breakaway populist party, Blue Reform, proposes an alternative bundled state benefit to replace Finland's current mosiac of state aid.

Sampo Terho
Sampo Terho Image: Jarno Kuusinen / AOP

As short-term and temporary jobs become more prevalent, more and more workers in Finland find themselves in a situation in which they use a combination of their earned income and state benefits to make ends meet. Some have suggested a guaranteed universal basic income might be the way forward in an increasingly fragmented world, as it can prevent marginalization.

Minister of European Affairs, Culture and Sport Sampo Terho says his Blue Reform political party opposes the traditional understanding of a universal basic income, and announces that they have come up with a better, more motivational version to take its place.

"It's completely different from the traditional philosophy behind a universal basic income: the idea that you pay a no-strings-attached stipend to everyone for being lazy," he says.

"The idea behind our concept is to encourage people to work," Terho says.

The negative income tax model proposed by Blue Reform would combine housing benefits, basic allowances and labour market support payments into one bundle, paid as a single benefit payment. The support would start out at current levels, but decrease as the recipient's earned income rises.

"You can always earn more on top of the basic payment, so there is always motivation to work," Terho explains. "In order to receive the basic income, everyone judged able to work would have to prove they were actively seeking work."

Everyone should be able to keep 2/3 of their salary

The new model proposed by the Blue Reform party - which the latest political poll indicated enjoys just 1.6 percent of the Finnish population's support - would bundle some benefits, but it would keep the so-called earnings-related allowance that the unemployed receive for about a year after they are laid off. They would expand this benefit to include everyone, regardless of whether they belong to a trade union or unemployment fund, which is a current requirement.

Terho states that all workers should be able to retain two-thirds of every euro they earn. He says a system based on this principle would provide the necessary incentives to stay in work, as well as inspire people to move forwards with their lives.

"When low-income or middle-income earners receive a pay increase, they should be able to keep more than half of it; I would even say two-thirds," he said.

Terho says that the current system is designed in such a way that income doesn't necessarily improve when a person finds a job, because their unemployment allowance decreases along with their added income. He says the system should be reworked to reward initiative better.

Negative income tax provides people that earn below a certain amount with supplemental pay from the government, instead of paying taxes. The Blue Reform party chair clarifies that his party's new benefit would not apply to people with incomes that exceed the top salary level.

"Up until around three thousand euros," he says.

Taxpayers group: Tricky combination

Teemu Lehtinen, CEO of the Taxpayers' Association of Finland, says he won't pass judgement on the Blue Reform idea, because he hasn't had a chance to familiarize himself with it yet. But he does say that a reworking of the state benefit system is a central issue in Finland today. He says there are many groups who are actively exploring its development.

"In this context, the Blue's idea of negative income tax will likely enter the conversation, as it is one way to distribute social benefits that are linked to earned income," he says.

However Lehtinen is wary of plans that simultaneously try to dismantle incentive traps and end income inequality, as he says the two objectives are often at cross-purposes.

"A challenging whole to be sure because there won't be an unlimited supply of state money available in the future either," he says.

It will cost a cool billion

Blue Reform chair Sampo Terho says his new basic income reform could be executed with fewer budget constraints than the tax breaks enacted in the current governmental term.

"It could easily be rolled out for about one billion euros in cost effects," he says.

He points out that his new improved model would eventually create savings.

"The reform would bring more people into the job market and reward them for hard work."

Under the Blue Reform plan, people wouldn't have to apply for multiple forms of social assistance, as they all would be bundled in a basic support package.

"Incentive traps are best removed by keeping the amount of support alternatives that have to be taken into consideration to a minimum," Terho says.

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