Every person in the country could be given a fixed sum of money to cover their basic needs irrespective of whether they are rich or poor, under plans drawn up by the Labour party.

The party would trial a universal basic income if it wins power, shadow chancellor John McDonnell has revealed.

Under initial plans, pilot schemes would be held in Liverpool, Sheffield and the Midlands, Mr McDonnell told the Mirror.

The proposals would do away with the need for welfare, as every citizen in the country would be given a fixed sum of money to cover their needs regardless of whether they are in work or unemployed.

Mr McDonnell said people can spend the cash how they like, but the intention is for it to be used to study, set up a business or leave work to care for a loved one.

He said: ‘I’d like to see a Northern and Midlands town in the pilot so we have a spread.

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‘I would like Liverpool – of course I would, I’m a Scouser – but Sheffield have really worked hard.

‘I’ve been involved in their anti-poverty campaign and they’ve done a lot round the real living wage.

‘I think those two cities would be ideal and somewhere in the Midlands.’

Trials have been held elsewhere in the world, including Kenya, Finland and the US, as well as potentially being explored in four Scottish cities.

The shadow chancellor was this week handed a feasibility report for different universal basic income (UBI) models for low-income areas, including one in which a whole community gets basic incomes.

All the means-tested benefits – apart from housing benefit – would be taken away and every adult would pocket, for example, £100 per week, plus an additional £50 for each child they have.

‘Of course it’s a radical idea,’ Mr McDonnell said.

‘But I can remember, when I was at the trade unions -campaigning for child benefit and that’s almost like UBI – you get a universal amount of money just based on having a child.’

The concept of a UBI has been around since at least the 1960s and was raised in the 1972 US -presidential election, followed by the introduction of a UBI scheme called the Manitoba Basic Income Experiment in Winnipeg in 1975.

In the UK, the charity Citizen’s Income Trust has been encouraging debate on the issue for 35 years.

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But some critics fear that UBI would be too expensive, including John Kay, former director of the Institute for Fiscal Studies.

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He said: ‘If you do the numbers, either the basic income is unrealistically low or the tax rate to finance it is unacceptably high. End of story.’

Mr McDonnell is convinced of the benefits and said Ed Miliband was also keen to see the pilots included in the manifesto.

He said: ‘The reason we’re doing it is because the social security system has collapsed.

‘We need a radical alternative and we’re going to examine that.’

‘If you look at the Finland pilot, it says it didn’t do much in terms of employment, but did in terms of wellbeing – things like health. It was quite remarkable.’