New Ideas Number 1- Public Ownership But Not As We Know It Jim

New Ideas Number 1- Public Ownership But Not As We Know It Jim

I promised new ideas when I started out on this blog, so this week I thought I’d make good on the promise. I want to set our briefly an idea for a new understanding of, or means of, public ownership. Or more precisely, my take on what is probably a well-known idea.

When we think of public ownership, too often we think of strikes, poor service, inefficiency or Ministers fiddling about with the decisions of managers, as Gerald Kaufman talked about in his great little book on How To Be a Minister. Or we think of images like these:

But I want to suggest that there is more to public ownership than coal mining or other giant monopoly industries, or great swathes of remote forest and upland. This website gives a pretty good (if standard) take on common ideas.

I also want to discount the traditional British form of public ownership, where we assume the state must own the property and take decisions on our behalf e.g. Brtish Steel, British Leyland, the forests estates etc. That leads to poorly thought through proposals to sell off public land by ‘passing ministers’ with too much power and not enough awareness of tradition and place, when proposed either at UK or Scottish levels.

I think the history of public ownership in the UK is very mixed, and has always been subject to passing political whim. Ministers will always be tempted to meddle in the running of businesses, either by second guessing management, or stripping out profit, or denying capital, or using price as a constraint on demand or by simply removing the competitive edge- managers know if they mess up the state will always be there to pick up the pieces. And so many right wingers want things to fail to justify privatisation. So, I’d say there are practical and theoretical reasons (1) to be cautious about the traditional form of public ownership in the UK, without ruling it out entirely of course.

I also don’t mean to say that the sort of mechanical socialism and Fabianism that dominated Labour and left-wing thinking for so long is the only way. But instead that of course that are many other means and forms of ownership- from the ancient world of estovers and pannage, to modern forms of common land and access , to Rochdale cooperative principles and mutuals.

But the problem with the traditional approach is that it tends to assume only two main actors- the private sector and the state, with no room for real members of the public. The problem with other forms of ownership such as common land, mutuals, co-operatives and others, is that either not enough people want the hassle of running the show themselves, or that they are too small to really affect trends, or that they are still subject to passing whims on taxation, regulation and incentives.

So What Is The Big Idea?

 So, enough with the throat-clearing and down to business. What is my idea?

My idea is simply this- that ownership of public assets should be transferred from the state to the public. More precisely, those who meet certain rules of UK citizenship will automatically become the owners of state assets. As owners they will have rights and responsibilities, and it will be for them as owners to decide on the future of major policy decisions including sell-off of local land, closure of facilities, or privatisation.

What do I mean by state assets. I mean firstly the transfer of all crown lands from the arcane fiction of the ‘Crown’ to members of the public. Not just that we would own (small shares in!) Buckingham Palace, but that we’d own the sea-bed, the foreshore, the airwaves and so on. Secondly I mean that at a regional and local level we’d own the roads, the railways, the land, the hospitals, schools, council buildings and so on.

Setting out one more time- whilst management of the assets would be vested in our representatives (and through them public employees)  as now, either at national, regional or local government levels, the legal ownership of the assets would be shared across UK citizens.

Now, we’d need some rules first of all about who qualifies. My suggestion is that anyone who has reached voting age and who is on the electoral register is entitled to a fraction of ownership and would be recognised as such. We don’t have to make ownership conditional on electoral registration of course but it might provide a boost to voting and participation in democracy.

Secondly, we’d need to define what rights and responsibilities such ownership entails. My view is that responsibilities are ‘civic’ in the sense of keeping up to date with trends and developments associated with the assets. And secondly that if a vote is called on something, one is required to participate. But I believe these responsibilities should be modest, whilst also empowering.

What does the idea mean in practice? Well, I’d suggest at local level that anyone on the local electoral register would be considered a part owner of the assets from all state bodies in the area- including government buildings, parks, roads, schools, forests, common land, hospitals and so on.

Secondly, it means that the managers of the assets- our current state-led pubic bodies, would take on a new role of stewardship, not the sometimes rather technocratic, aloof and arrogant ‘ownership to do with as we please on a change of political leadership’ approach we (too often) see. I believe for key local assets often at the centre of controversy- land sold off for new developments, planning decisions, closure of hospitals, that representative bodies will need to work far harder to secure agreement.

My idea is that according to some local ‘standing orders’ that define the limits of state authority and the circumstances under which change is allowed, that the state and local managers will need to be far more engaged in place, in community and in explaining and justifying decision making. We can imagine for example a proposal to sell off a school playing field where either all local people in the council area, or a defined subset ‘affected’ by the plans, will be able to demand, hold a referendum and defeat the proposal, perhaps much like a shareholder resolution can defeat the management of a company or send a strong signal on the desired direction of travel.

We can imagine consultative discussions held at national and local level with citizens (as owners) on the ideas a state entity is considering, before they are activated or indeed placed in manifestos. We can imagine a dedicated public body, analogous to the electoral commission, (the ‘Consultative Commission’ perhaps), taking national or regional or indeed local ‘rolling polls’ of the views of citizen-owners prior to an election campaign. We might find that citizens recognise a central hospital would be cheaper and more effective but want to keep their local hospital. We might find that citizens like keeping local job centres and tax offices or reject out of hand private companies running certain public functions.

One obvious issue to consider is the precise relationship between local and national decision making- but I think that can be overcome with enough thought. A second obvious issue is to define the circle of ‘affected’ people tightly enough so a local desire for action isn’t swamped by a national or regional push-back, whilst at the same time allowing meaningful and engaged citizens across a defined but not just hyper-local area. We would need to think carefully to avoid the problems encountered with the referenda-heavy, money-heavy policy and campaigning approach seen in California. We would need to look for ways for assets to be protected from a generation simply ‘cashing in’ as many did over the transfer of building societies from mutuals to private companies in the 1990s. 

 

Why Propose This? 

To me, this is a radically different proposal from standard common ownership. We are asserting the genuine power of citizens, as the owners of state assets, which, after all, their taxes and efforts have paid for. I hope it will improve the sense that citizens have of engagement with, and empowerment over, the political process.

I hope it would sharpen up the performance of state actors, across the education, council, health, environment, tax, social security and transport communities. I expect it would reduce the power of ideologues, winner-takes-all political administrations, think tanks and media moguls. I hope it would even reduce vandalism and disrespect for public property because after all, the owner in this case is the person considering the damage!

More broadly as well as linking ownership rights to voting and electoral registration, we could link it to the idea of a basic income, which I blogged on before. 

 

What Are the Downsides? 

Clearly I don’t have all the details worked out so much more work would be needed to translate this outline sketch into serious policy proposals. It may be that the idea isn’t radical at all, and is common in other countries (please let me know if it is!).

More work would be needed on legal definitions to ensure watertight ownership, and to define a ‘scheme of delegation and authority’ from local citizens to state entities. If we did take over Crown property, some more legal work would be needed to overcome centuries of daft constitutional showboating, overhangs and silly fiction.

More seriously, we’d need to undertake a large campaign of awareness raising to ensure people really did feel empowered and understood their rights and responsibilities. A crucial point as I mentioned above is to provide enough ’empowerment’ that a genuine local wish to prevent something occurring can be created, whilst avoiding a tidal-wave of NIMBY-style inertia and factionalism. But I see no reason why with enough care, such problems couldn’t be overcome.

 

Part of A Bigger Picture? 

 

Readers may have noticed that such a scheme, radical as it may sound, does not by any means tackle all of the fundamental issues facing us. Whilst I do believe it would go a long way to increase the sense of engagement with the state and empowerment that citizens feel, it only touches the surface of inequality issues.

In particular, it ignores the pattern and distribution of private ownership of resources- land, income and wealth, company shares, rental income and dividend etc. There are some fascinating ideas on newer forms of capitalism that I want to explore at a later date, centred around market socialism ideas.

To finish though , the real reason I think the idea would be worth exploring is back to my ideas on a fair, equal and liberal society:

‘It is fundamentally whether I feel I am an equal citizen of equal worth, with all the dignity, freedom and ability to execute my life plan that I expect.’

In that blog I set out a principle for just such a society which I think is relevant here:

Principle 5 The basic structure of society should be designed such that power is dispersed politically at multiple levels and across multiple geographical areas, consistent with the achievement of other principles and goals

I believe that we simply must go beyond discussions about tax and spend wealth transfers, about public vs private and get to a point where citizens really do feel equal, empowered and ‘all in it together’. I hope the idea I’d proposed might have some merit on the journey towards that ambition.

Thanks for reading.

 

Notes

(1) John Roemer A Future for Socialism (1994) Verso Books ISBN-13: 978-0860916536

 

Steering Us Towards More Inclusive Growth…

Steering Us Towards More Inclusive Growth…

This week I want to say something about the idea of inclusive growth. I want to particularly draw on the excellent work of the RSA’s Inclusive Growth Commission  in doing so, but then go further.

Like many , I’ve always found the idea of endless economic growth to be problematic. As we know, economic activity takes place within a broader social system, which also is nested within a still broader natural system. I’ll leave the problems created for the environment by economic growth for another day. But clearly, within the system we have, a lack of economic growth can be a source of human misery because of the resulting impacts on incomes, jobs and overall consumption, government revenue and so on. This video from the Bank of England explains this quite nicely.

The problem though is that there has been a tendency to assume that economic growth is all we need for delivery of broader human goods, such as job security, empowerment, human health and wellbeing, and equality and reduction in poverty.

However modern Britain (not just Britain of course) tells us that strong economic growth can exist alongside rising inequality, poor health, low job security, discrimination, rising income disparities, poor skills, and a host of other societal ills.

So, as I wrote in an earlier blog on pay ratios, we need a package of measures for fairer work and more inclusive growth and I’d like to explore some of those ideas here.

Why Have We Arrived Here? 

So why have we arrived at a situation where we can have a strongly growing economy  but without some or all of the anticipated benefits of economic growth? Firstly, it’s worth saying that this isn’t exactly new- Fred Hirsch was writing about some of the problems with economic growth in the 1970s and many more have since.

Very simply put, I believe that as the political consensus began to accept the market and liberal economics as the best means to secure the advancement of social aims, we have ended up taking too shallow a view. We haven’t discriminated as well as we should have. We have tended to accept growth as a good thing, and then sought to redistribute the fruits of growth afterwards without looking at the quality of that growth and the problems it creates in achieving the growth. Often, and in addition, we’ve not made a very good case as to why economic growth matters, and we’ve taken too glib a view of issues of empowerment and identity that are clearly important to people, often suggesting they are holding back liberal trade and are relics of a time gone by. Arguably, this leads us to conditions ripe to be exploited by populists and even potentially underpins things such as Brexit. If people read and hear about how well the economy is doing, but can’t relate that to their own lives, it surely breeds a toxic mixture of cynicism, despair, disillusionment and anger.

I tried to show in my post on societal risks however that it is incumbent on governments to actively think through and manage the risks that its citizens face. Or, going back to first principles, that we need to look at the basic structures of society to ensure they are set up in a way that supports empowerment, dignity, the individual life plans that people make, and that sense that we are truly ‘all in it together’. Again from an earlier post:

‘Equality matters because ultimately, people need dignity and respect, they need the ability to execute their life plan, they need a sense of fairness in all of the rules and institutions and processes of society.’

Before I get down to details, I want to make it clear that I’m not talking about a ‘bolt-on’ to normal patterns of growth. Whilst it is good, for example,  to see a commitment from the Scottish Government to inclusive growth, I think there is a tendency for that commitment to be a series of additional costs added onto normal business as usual, and I think we need to go deeper than that.

 

The RSA and Inclusive Growth

As I mentioned at the start, the RSA’s Inclusive Growth Commission, which reported recently, has been examining these issues. The Commission’s job was to examine how inclusive growth could be achieved.   It sets out the challenges for the UK (with an admittedly English focus for solutions) very well, including the wide range of disparities in life chances, incomes, economic activity and skills across the regions, the worsening problem of in-work poverty, and the low spend on work programmes and skills that the UK makes compared to its competitors.

This diagram from the report illustrates the problem of in-work poverty:

The report itself is short and punchy and well worth a read, but it’s this key diagram that both informed and summarises a great deal of my own thinking:

 

In particular, the right hand side of the diagram is worth showing more clearly:

This sort of thinking ties in very well with a raft of traditional liberal policies and I’d like to comment on the ideas the RSA has put forward, before adding a few of my own.

Social Infrastructure Not exactly new thinking in many parts of Europe, but relatively new in the UK. It should be obvious that ‘pure’ economic growth policies are unbalanced if they ignore the needs of citizens. Chadwick and many more in the 19th century knew that. It should be obvious we need to support the human resources that make up the economy, ensure that working people have proper access to childcare, to mental health services and to the right mix of education, training and skills. But often we have assumed the market will provide, without making sure that everyone is included and without recognising that the more we spend on these preventative and facilitating services, the more our economy is likely to flourish. We have rushed into expanding University provision without always thinking through whether University is always the best option. We have shamefully neglected mental health provision, and acted like we mostly think community groups, activism and local pride are irrelevant to local economic dynamism. We too often act as if the loss of community ‘anchors’ such as post offices, pubs, small businesses and community halls is a necessary price of market or public service efficiency when they are clearly the bedrock of ensuring a truly local economy can function.

Thinking About Places and Decentralising Power It should be obvious but a central plan from London or Edinburgh doesn’t cut it today, if it ever did. We are too monochromatic and too centralised, and we lack resilience in our economic systems, our banking, our food provision and our retail offerings. We need to unleash the power of local people, of regional strengths, of previously disempowered and disillusioned people- the RSA is surely right to call for a fundamental reset in central-regional relationships. As the RSA rightly says we need minimum national standards but we must have local flexibility to decide on the best way to deliver those standards- no more massive, complex central plans for local democracy, for local economic functions or for pubic services reform. or at the very least, only when absolutely needed and not just because a new government or a new minister is in charge.

Just Being Smarter Too often the economic and the social policy communities don’t talk to each other. Too often social policy is seen as a cost, and economic policy as a wealth creator, when the reality is they both can be both. Too often grandiose regeneration plans don’t really involve local people, or aren’t tailored to local and regional distinctiveness or need. Too often infrastructure spend is just about large pieces of ‘kit’ with not enough recognition of the possibilities of procuring differently, of kick-starting self-sustaining changes during construction, or of supporting particular disadvantage groups through cleverer use of public (and private) funds. Too often Universities and colleges are not asked to take a more active local role, as large employers, providers of knowledge and skills and as potential community anchors of innovation and solidity in a changing world.

Measuring the Right Set of Things The RSA rightly calls for a much fuller basket of measures to understand and assess economic growth. Again this is not exactly  new (does anyone remember the 1999 sustainable development indicators?? ) but it is great to see- and I’ve reproduced the RSA’s proposed indicators below.

 

I agree with the RSA that a properly balanced picture of inclusive growth needs to understand much more than just GVA– it needs to try and understand the quality of jobs being created, the skills and training being attained by citizens, the patterns of income and any worrying disparities being created, and measures such as the strength and resilience of local communities, civic groups and local activists.

Finally, its great to see the RSA calling for a much more diverse, local and distinctive approach to banking. The UK is hugely reliant on a small number of large banks- it shouldn’t be, doesn’t have to be, and wasn’t always. Many successful countries, including in Europe, and the US, have much more diversified and locally and regionally focussed financial institutions. I agree with the RSA that diversity and greater decentralisation of the banking system is a key component of a more inclusive agenda. And of course with Blockchain...

 

What Else Might We Need? 

I think the RSA Commission has done a great job of setting out a chunky set of recommendations for people to consider. It is a report full of ideas, and I’ve certainly not mentioned all of them (for example the report also calls for a move away from the push to get more and more people to University, to a more discriminating approach that gives equal value to vocational education).

But I still don’t think the RSA’s work is the final word. So well else would I argue for? As usual dear reader, my words outrun your patience so let me be mercifully brief.

Firstly, I think we need to continue the path we are now on to increase the living wage, to ensure that work really does pay. We’ve made a start but we need to do much more. And as I argued before, I think there is a good case to go further and examine a Basic Income.

Secondly, we need to take action to cap pay and to set up a body to monitor it and report

Thirdly, we need another look at the opportunities for greater fairness in the tax system, to make sure that the tax system is fair, and is transparently so. Here I’d mention the ideas of the late Tony Atkinson, and ideas floated  in 2013 by the IFS

Fourthly I’d mention the new structure for companies that many are exploring- from social finance and community development companies, through to interesting ideas on the very nature of companies themselves- see here and here and here for example.

Fifthly, I’d mention the worker and community empowerment agenda- from including workers on company boards, to establishing greater incentives for people to establish cooperatives or mutual structures. These are not new ideas- Lloyd George’s Liberals were calling for such solutions in the 1920s and many other reformers have led the way, going back a long way , though I’d argue if anything since the 1990s the UK has gone backwards here. Sadly, we’ve never seriously gotten to grips with the ideas of Jo Grimond writing in the 1950s and 1960s. 

 

So, there it is- we need a broader, deeper and more thoughtful approach to economic growth. We do need more spending on public services, but we also need a more discriminating approach. In my view, only then can our economic system deliver what it should- freedom and opportunity for everyone. Thanks for reading.

 

 

Economic Fantasy,Fiscal Chicanery-Predictions About the SNP’s Growth Commission

Economic Fantasy,Fiscal Chicanery-Predictions About the SNP’s Growth Commission

This week I want to post some more overtly political thoughts, in the run up to the SNP’s annual conference and the impending launch of the SNP’s Growth Commission. Part prediction, part criticism, readers will soon see whether my remarks are on the money or way off. As it will be pretty obvious, I voted and will vote to remain in the UK, but I do try to treat the figures honestly, am happy to also highlight the UK’s deficiencies, and will also be happy to credit where independence brings advantages. For the avoidance of doubt, I don’t claim that it is not perfectly respectable to take a view for identity or other political reasons that independence is desirable (it just doesn’t convince someone like me that prefers the UK and also is concerned about equality and decent public services)

The Background- A Nonsense Economic Case in 2014 

Although always likely to vote no, a private dinner with the then SNP leader Alex Salmond persuaded me at the end of 2013 to have an open mind and to study the case for independence as closely as I could. Eight books, the Yes White Paper and 5,000 pages of reading later, I concluded that the economic case and the claimed fiscal consequences of the Yes campaign were a nonsense, and in fact worse, a giant mendacious duplicity.

That’s because no responsible movement which seeks a better life for all Scots would have made the sorts of self-evidently ridiculous claims that the SNP/Yes campaign did between 2012-14. As I hope previous blogs have shown, I take the responsibilities of the state to its citizens very seriously- and I expect anyone proposing change to start out by explaining to me how the poorest will be protected and decent public services maintained.

It was pretty obvious that Scotland spent more than it earned, that a currency union with the UK would not happen, that oil was central to the case put forward and not a bonus, that start-up costs would be far higher than proposed, that far from being the 6th wealthiest country on earth, that an independent Scotland would face serious challenges, of the sort that blow out of the water the claims that we would have seamlessly transformed into a social democratic panacea, keeping the best parts of the UK and ditching the rest. This analysis ignores other downsides of independence (and of course I’m also putting upsides to one side for the moment).

Others who are far better with economics and numbers than I have shredded these claims- the clearest expositions I’ve seen come from Kevin Hague at Chokkablog, and I recommend reading here  and here for more (which from now on for this post I will take as read that a significant fiscal and economic challenge exists, rather than going through the numbers at length). However this excellent graph from Kevin Hague summarises the picture:

Now many (some?) independence supporters still believe all those claims to be true. But, belatedly, the SNP and its closest and former  advisers have signalled that the former case is dead, and that a new case is needed. Hence the ‘Growth Commission’, which is expected to report soon.

The Commission will need to explain how such a yawning gap can be overcome- which means it will need to talk about how to increase growth in an independent  Scotland, it likely wants to say in some way where and how decisions on tax and spend may be different, how social protections can be maintained, as well as other huge issues like what choice of currency should be made, how future decisions will affect trade and borders and so on. 

 

What The Growth Commission Can’t Do…

So, roughly speaking any independent Scotland will start with a structural deficit of 9-10%, the largest in the western world. The latest GERS figures set out this position very clearly:

Broadly speaking, GDP per head is slightly higher in Scotland (note that’s not the same as actual resources for citizens, or GNP), tax receipts per head are slightly lower, and spending is ALOT higher per head.

Let’s put aside for the moment the fact that current economic growth is fundamentally unsustainable, and work within the existing economic mindset. Let’s also note that Scots tax is take is around 35% of the Scottish economy (GDP), and that Scots spending is around 44% of the Scottish economy, (equivalent figures for the UK as a whole are around 33% tax take and 43% spending to GDP) .**** Correction-@FraserWhyte81 has rightly pointed out the UK numbers should be 36/40%-oops.See OBR: http://budgetresponsibility.org.uk) Correction ends******

 

I am also going to assume that Scotland takes its fair share of UK debt.

So what can’t the Commission do? At least, what can’t it do if it wants to avoid being seen as just another ridiculous paper-thin mouthpiece for ‘existential’ independence.

Well, for a start it can’t indulge in joke facts or conspiracy theories. What I mean is silly claims like the GERS figures are not complete, or that rightful Scottish tax income is somehow not included in the numbers, or that Scotland pays for English only spending,or that start-up costs of a new nation will somehow provide huge savings, or that we won’t have to take on our fair share of debt, or any number of other badly informed memes that are repeated endlessly on twitter or by disreputable crowd-sourced types. No, Scottish exports are not largely disguised as English exports. No, we are not missing ‘whisky export duty’. No, there are not secret oilfields being held back to do Scotland down.

For credibility it should also avoid the claim that GERS tells us nothing about the starting point for an independent Scotland. The Chokkablog deals with this point very well. It should also avoid trying to say that Scotland is a basket case thanks to decades of mismanagement by Westminster, or harping on about how no one thought in the 1970s to put aside oil revenues to create an oil fund a la Norway.

If it was being honest, the Commission would admit that it is very likely that Scotland would face higher costs of borrowing for its debt, simply because it is a new nation, with a large deficit and without the track record of debt management and payments  that the UK has. It would probably also admit that collection costs for taxes would be higher, at least initially, due to start-up costs and loss of economies of scale.

It should avoid implying that cuts to spending which are symbolic for some nationalists, but very small potatoes really, are the key to solving any spending gap- I am of course thinking of Trident, or the costs of repairing Westminster, or no longer paying the Scots share of the monarchy or House of Lords. My rough calculations suggest these save at best £300 million a year, which as we’ll see, is peanuts compared to the challenge faced.

Finally, although I am no currency expert, it seems to me that the commission should avoid wild claims about how the whole of the UK is run just to appease and maximise the benefits to London, or the city of London, or how the pound is kept artificially high and so on. Or how we can simply dictate to our larger neighbour what our currency options are.

 

What the Growth Commission Will Probably Do?

 

Let’s move on to what the Commission is likely to propose. In order to inform that I’ve reproduced from the latest GERS publication (1)  the breakdown of Scottish government revenues, and the breakdown of Scottish expenditures, including both Scottish direct expenditure and calculated costs of UK services provided to Scotland, such as defence.

 

I also thought it might be useful to provide a breakdown of the contribution of tax payers to revenues in the UK by income deciles, for the last year I could easily find (2012-13)(2) :

So, remember that the Commission is looking for ways to grow the economy, improve government revenues, and make different tax and spending choices. Independent Scotland would need to reduce its deficit from 10% to around 3% over time, or make up the gap from the loss of the UK fiscal transfer. Spending is around £68bn per annum, revenues are around £53 billion per annum, a gap of £15,000m. Now governments can live over the long-term with annual deficits no more than around 3% using conventional economics, which is our framework, so in reality the Commission needs to find around £10,ooo million a year from a combination of:

Higher Growth+Lower Spending+Higher Taxes+More Borrowing

What might it propose?

Different Tax and Spending 

The first very sensible and entirely appropriate thing it might say is that the point of an independent Scotland is to make different tax and spending choices. That is surely true, and the suggestion from many in the independence movement is that Scotland needs to follow a different economic and political path to England. The suggestion is often that cuts to public spending, although the lowest in the UK, are too high and that more expenditure on social protection, welfare, education and a host of other desirable things is needed.

But hold on, an independent Scotland will face the loss of the UK fiscal transfer of approximately £9-10,000 million a year or £1800-2000 per every person in Scotland. So, it is not credible to say that from day 1, Scots will start to spend more freely on a bunch of desirable things, without saying where the cash comes from, and even more importantly, where the substance comes from to plug the loss of the UK fiscal transfer. Looked at another way, a deficit of 10% per annum is miles from being sustainable, indeed a similar number in 2010 caused the UK a crisis from which is is still trying to recover. Either looked at as a need to get that deficit down, or as a need to plug the loss of the UK fiscal transfer the Commission will surely need to ‘fess up and admit that around £10,000 million a year of new government income, higher taxes or lower spending, or higher borrowing is needed.

So let’s finally get started on the detail. It seems clear that one thing on the minds of independence supporters is that there is a lot of unnecessary UK-led spending that Scotland currently pays for, but which add little or no value and are mere hang-ups of empire.

I predict that the Commission will gently suggest that defence spending can be cut- but will want to be vague about the level of it since that is a difficult political message to sell. Total defence spending is around £3,000 million a year including Trident. Your guess is as good as mine but let’s be generous to the Commissioners and suggest they may go for a maximum 50% cut, saving £1.5 billion a year. GERS tells us that roughly £2 billion more comes from various UK services such as foreign aid, diplomacy, embassies and the like. Let’s be generous and assume they can be cut in half and that the Commission may find them a tempting target as a UK reserved, slightly remote set of ‘things’. Of course the reality is, slashing things such as foreign aid, embassies and the like is hardly the actions of a social democracy but we’re being kind. So, maximum another £1 billion a year saved.

Well, this is getting hard isn’t it? We’ve cut defence and national services by 50% but we’ve only managed to shave £3bn off spending.

So, perhaps the Commission will move onto tax? Many on the left of the independence movement think taxes are too low in the UK and that we should move to the Nordics model of much higher taxes and much higher public expenditures as a share of GDP. Politicians know though, that raising taxes is always difficult, especially when we face the worst decade on record for personal incomes since the Napoleonic wars. Doubly difficult if you are trying to persuaded undecideds to vote for independence.

Another difficulty comes from my graph above on the relative contribution of income tax payers to government revenues. In a nutshell the top 10% pay hugely more as a proportion towards income tax revenues, and that trend is accelerating with higher income growth at the top of the scale and widening of the personal allowance at the bottom. Very difficult if you want to raise the taxes for the rich, whilst maintaining an open border to England.

So, whilst the obvious solution is to raise taxes, my bet is that the Commissioners will skirt the issue. The Commission will waffle on bit about differing economic models and the attractions of a Nordic style set-up of high taxes, high services. They will also point to Laffer-Curve economics, purporting to show that low taxes generate higher revenues. They will probably hint at higher taxes but not have the gumption to call for them. They will almost certainly claim that Westminster has ‘mismanaged’ Scotland’s finances, and that savings can be found from efficiency, new arrangements and the chance to start afresh with new agencies and new systems. They may well make some vague noises about tax evasion and how the post-Brexit UK wants to be a low tax, off-shore tax haven, and how independent Scotland will be having none of that.

I suspect given the currency of the topic, that the Commission will also make some vague positive noises about new forms of taxation and new sources of revenue- probably including looking at property and land taxes again, a Land Value Tax, possibly taxing renewables differently and possibly green taxes in the form of Ecological Tax Reform.

So, I’m not expecting too many tax specifics from the Commission- rather alot of generality about new models and new forms of revenue.

One thing that will be fascinating is how the tug-of-war between high tax, high spend nationalists and those seeking a low tax, high growth model, will resolve themselves.

Higher Borrowing

The Commission will probably gloss over higher borrowing for a number of reasons. Firstly its a common independence meme to have a go at the high debt of the UK, so calling for more debt for independent Scotland looks tough. Secondly, its pretty clear that challenging demographics and higher service costs means that Scotland already faces a debt challenge.

Thirdly, being realistic, independent Scotland will likely face higher costs of borrowing and with a 10% deficit, rapidly increasing debt burdens- doubling as a percentage of GDP every 10 years if left unchecked, and reaching a gargantuan 300% within 20-odd years. So, my bet is that the Commission will say that a measure of extra borrowing will be required ‘in the early years’ as part of a ‘prudent’ approach to an ‘integrated economic growth strategy’ as well as a new fiscal rule to only borrow to invest for the long-term in due course.

I firmly predict that the Commission will elide borrowing for the long-term into just borrowing, whilst having a free pop at the UK government for being irresponsible and clueless.

Higher Growth, The Multiplier!

Now here is surely where the Commission will focus. If cutting spending to reach the magic £10,000 million a year to just keep us where we are relative to the UK is hard, if proposing to raise taxes to plug the gap is also hard. If borrowing sends the wrong signal and is anyway expensive and unsustainable, then what do you have left?

My prediction is that you have 3 things. Firstly, you have a general lecture of the sort that civil servants like to write, or that appear in economics textbooks, setting out the range of new powers and choices that an independent Scotland would have. These are the famous ‘levers’, and include control of total spending, total taxes, total borrowing, currency, competition policy, industrial policy, education and training, infrastructure, and so on. Quite a lot will be said on that, trying to imply that no one else in the world, including and especially the UK government, have ever thought of this, and that mere possession of the magical powers means you are well on the way to solving the problem.

Of course the reality is that all government’s are trying to raise growth all the time, using these same powers but let’s move on.

Secondly, we can expect a variety of cherry-picked examples, somewhat inconsistent in their intellectual underpinnings, showing a ‘bonus’ from independence and plucked from across time and space, scales and geographies, sectors and tax takes. Possibly at this point the Commission choses to include a plea for better statistics on the Scottish economy, especially macro-economic statistics, and with exports and import statistics separated out. There will likely be an invoking of the ‘known unknowns, or unknown unknowns’ and darkly implying that although this is a serious Commission, its work has been seriously hampered by a lack of statistics that must be improved, with language implying that probably Scotland is being shafted in some way.

This list of examples will also include a rather irrelevant list of current Scottish economic strengths, by sector and by export size, with some carefully picked examples of where Scotland does better than the UK, thus implying that we’re just better overall. The list will include oil and gas, whisky and food, universities, renewables , financial services and medicine/life-sciences, and probably farming and creative industries and gaming as well.

Thirdly, in general terms the Commission will speculate on the level of increased growth needed and how that might be done. This should of course be the major part of the report, but I am willing to bet that it says interesting but underdeveloped things that you would enjoy reading about in theory, but wouldn’t bet the future of the country on. As Kevin Hague says,  at the level of bonus from independence set out in the 2014 white paper (0.1%) you’d need more than 100 years to get back to where we are now with that level of ‘bonus’.

So, expect the Commission to talk about new growth models, and to ‘raise the ambition’ to outperform the UK annually to make up the slack within a period of say 10-15 years. Now currently ‘average’ UK has been in the 2-2.5% range, though Brexit may make it lower of course. And Scots growth, particularly recently, has been lower than that. We need to bridge the gap between revenues and spending by our £10,000m minus the spending cuts above of £3,000m or roughly £7,000 million per annum. Scots GDP is around £150billion a year and assuming we don’t raise the tax take proportion , then around 35% is captured in new taxes. So, essentially we can calculate the additional growth rate needed either by taking Chokka blog’s 16% additional growth needed relative to UK, or by dividing £7Bn/0.35= £20,000m of new ‘GDP’ needed or growing the economy by around 13% in real terms. Remembering my number is lower because I assume some spending cuts, and also remembering this is per head overall and so not counting growth just due to inflation or immigration.

Now, normally a government would be delighted if it raised trend annual growth by 0.5%, which is 5 times larger than the bonus assumed in the white paper. Additional growth of 0.5% a year means you’d need roughly 25-30 years to catch up to current levels. Meantime you’d have incurred around £200 billion of new debt and debt to GDP will have reached 200%. If you want a faster transition, say 10 years or less then my simple arithmetic suggestions if you raise Scottish growth from less than 2% per annum to 4% then you need only 3-5 years, during which time your debt is only raised by 25% of GDP. But doubling economic growth sounds easier than it is (ALOT easier).

For these reasons, I think the Commission will either just stick with ‘growth generality’ of which I’ll say more in a second, or plump for a additional growth bonus without attempting to justify. I’ll go with a guess that the Commission will call for ways to ‘explore’ raising Scots growth to 2.5% in the short term and 3% over the medium term, using cherry picked examples as above.

Finally, the Commission will almost certainly list a range of opportunities and priorities and no doubt these will include:

-renewables as a low cost sustainable future energy source, a possible source of tax revenue and a competitive advantage and a source of exports and jobs

– some generalities on the benefits of infrastructure including some blame to Westminster for under-investing and a call to arms to invest in Scotland’s schools, roads, ports, airports, water and sewerage systems

– some flirting with the idea of more state control of key industries including perhaps nationalising the railways or setting up national or regional investment banks. Expect this section to be needed to calm left-leaning supporters worried about the focus on economics and low tax, as well as too good an opportunity to have a pop at (albeit mostly stupid) Tory privatisation and private involvement in public services, as well as appealing to the small but vociferous radical independence people with empowered local economic development

– one of the SpAds will have read something about cities and there will be a need to compete with Westminster’s city deals process, so expect some generality on the opportunities arising from cities, as well as a few mildly interesting points on digital, low carbon transport, informatics and big data and new tax mechanisms like TIF

– Expect some vague calls to explore decentralising to unleash a ‘double dividend’ of growth at Scottish and local level, but carefully vague so as not to make any commitments

– Expect something about how great the opportunity to decommission all those oil and gas platforms will be, with a big number and little to say about economic value and the moral responsibilities of the big oil majors, but lots about how Scotland can lead the way on this

– Do expect an invocation of the history of Scots innovation at some point- especially on manufacturing, engineering and the like. This gives an opportunity to quote how Scots manufacturing has declined shamefully at the hands of the UK government, as well as claiming a new opportunity for the future

– Expect some generality about new models needed for housing , and calls to innovate to fund these houses, including entirely obvious calls to deploy institutional investors and tempt mobile capital in search of returns etc. etc.

– Expect a list of other opportunities that will pour forth once we are independent- the list designed to impress you with the sheer range of things that can be done, with no real analysis of how or whether they really boost growth, fit into an overall strategy or can be achieved without heavy new spend. This list to include vocational training, energy and heat, green technologies and the circular economy, tourism etc.

– Of course expect a heavy emphasis on Brexit and how bad that will be and how it will create a whole series of opportunities for companies itching to move to Scotland to access the single market- from financial services to car manufacturers, from service companies to exporters.

– There will of course be something (rightly) on how independence means Scotland can shape a new approach to immigration policy more tailored to its needs. In reality though, immigration would need to be huge to really make a difference to the growth gap- its no use increasing the sheer size of the economy, its the size of the economy per head that matters. The SNP will be well aware that despite all the body politic noises about civic nationalism and immigrants being welcome in Scotland, that’s arguably because immigration is so low. There will be a nervousness to place too much emphasis on large scale immigration, so the Commission will stick to saying its a good thing, that they want to be part of the EU and free movement, and to look for ways to tempt foreign talent in short supply and compete with negative, neoliberal post-Brexit UK

– There will have to be something about a new industrial strategy, but I’m not sure exactly and I do look forward to seeing if there is anything new in that. I suspect it will just be a rehash of known points about training and education, infrastructure, public research, universities, infrastructure, and start up and commercialisation support plus a dash of low carbon transition. The problem is, that anyone can write that- it requires time, energy, money and new standards and laws to achieve it and that is hard in a newly independent small nation. But I’ll wait and see

– Finally, I’d expect the whole growth strategy to be underpinned by an inclusive growth agenda, which would be very welcome, although possibly with more emphasis on new costs to business, rather than new ideas on raising growth. So, very welcome things like equality duties, workers rights, possibly exploring basic income, workers on boards, gender quality on boards, women in STEM subjects, providing more public services for free, improving the life of the precariat and so on.

In passing, I’m sure the Commission will have something to say on the thorny issues of currency and open borders, how to manage capital flight and how to raise taxes whilst having an open border with England, when England might be outside the UK. But I’ve gone on long enough, and need to finish.

 

Why the Growth Commission and Economic and Fiscal Case Remains Fantasy and Chicanery

Even going on this long, and in a rather jaundiced way, I’ve barely touched the surface. I have considered it, and I cannot see an easy or even credible way for an independent Scotland to maintain its current standards of living, public spending and tax rates, without high levels of disruption.

I’ve said why I think the Commission will struggle as well. To recap:-

-it might suggest some spending cuts that aren’t contentious but the ‘easy’ ones aren’t easy or credible and are anyway nowhere near enough

– raising taxes looks difficult, if they are really honest they will call for it,but I think they will only hint and mostly dodge

– the Commission will be tempted to list things like new economic powers or new approaches, in the hope that these sound impressive enough to the average voter

– the Commission will definitely want to say why inclusive growth+ Brexit plus all these choices= happy days for Scotland,though I doubt its little more than a wishful thinking guess or bet, that may or may not come off

– the Commission will surely want to say that growth needs to be higher but at best will pluck a bonus for growth figure from the air, and avoid the central problem that implausible levels of additional growth are needed and avoid proper analysis- I hope I’m wrong

So I fear dear reader, the Commission’s report will be nicely written with a few nice new ideas and things to put in the public domain for debate, but continuing to suggest things can be straightforwardly managed, and it is all achievable with just a soupcon of trouble.

Even if all of the Commission’s wish list comes to fruition, just how we get there avoiding capital flight, recession, loss of living standards, avoiding tax rises and austerity cuts on steroids, and avoiding piling up massive public debt, will be beyond them. Why? Because in my view this is simply one problem that can’t be solved without pain, and pain that I think is entirely unnecessary. Thanks for reading- you won’t have long to wait to see if I am right.

 

Notes

(1) Government Expenditure and Revenue Scotland 2015-16 Scottish Government August 2106

(2) House of Commons Library Briefing Paper Number 06569 June 2015 Income Tax:Increases in the Personal Allowance 2010-2015

 

 

 

 

 

 

 

 

 

 

 

Basic Income Part 2- How Much Would It Cost?

Basic Income Part 2- How Much Would It Cost?

In the first part of this two part post, I discussed what basic income is, why it might be a good idea, and how some of the many objections to it can, I think, be overcome.

In this post, I want to say something on the costs, and what level of Basic Income (BI) might be possible, and some of the implications of that. I also want to pick up a few more points that I should have made first time around.

 

Firstly, A Confession

I probably should have realised earlier that my plan to comment on and model the costs of a BI in a simple way were not realistic. That’s because  to set realistic BI goals, not only do you need evidence of market and individual responses to the BI level but you need to:

– understand the current benefits and social protection system in some detail
– understand the current tax system in some detail
– understand household/ family patterns of income and expenditure in some detail
– understand work on living wage and minimum income standards
– understand the broader labour market

So in what follows, I have done my best but lack the information (and ability!) to do more than make some very basic points. My own pretty basic spreadsheet is here:

Basic Income Calculations Feb 2017

And that draws heavily from particularly a single report from the IFS that provides an overview of the benefits system. I also get my numbers on the tax side of the discussion from the RSA BI report that I quoted from last time (1).

So, feel free to challenge the numbers but I drew some comfort from arriving in my own simple way at roughly the same numbers as the RSA.

 

How Much Does the Benefits System Currently Cost and Which Parts Are Relevant to BI?

I draw my numbers for the benefits system costs from the afore mentioned IFS report (2, Table 3.1). It’s worth saying that these numbers are before the full introduction of Universal Credit. I think it makes sense to use these numbers for two reasons:

– the new UC system is still being implemented and numbers for it are hard to come by

– the older system is more familiar to most, and handily splits the types of support needed by type of recipient.

The IFSr report  (2) summarises the current system  here:

(for those whose eyes are struggling, its Table 3.1!)(note that this is far from being all types of social protection expenditure).

Very broadly, including all types of recognised social  tax and benefit spending (but excluding some forms of social protection such as social care), then the costs of the UK benefit system in 2015-16 were roughly £211 billion. With about 64m citizens in the UK, that gives a starting point on average of £3291 if we just divide one number by the other.We could call this a ‘smearing across all’ option.

But as in Part 1, I think it’s clear that we can’t just sweep away all benefits and provide a general sum- people who are sick, disabled and older, and who experience varying housing costs, need to be treated differently.

So, in my basic spreadsheet calcs, I considered two options. Option 1 excludes pensions and housing benefits, removing respectively £98bn and £24bn of spending from the £211 billion sum that could be used for a BI scheme, but also reducing the number of people receiving it from 64m to roughly 51.8m (i.e. excluding pensioners only). Option 2 does the same but also excludes special payments for maternity/paternity, disability, winter fuel payments and free TV licences. Most of those latter items are quite small but the exclusion for disability and sickness is large.

Under these two options, Option 1 allows about £92bn to be used to fund a BI, whereas Option 2 allows only £45bn. Not surprisingly, both options reduce the BI that could be provided from the ‘smear across all’ figure of £3291, to respectively £1772, and £875 per annum.

Keep reading because this is only half the calculation but I think it does highlight a few points:

-there is a big difference between just assuming the entire benefit system spend can go to a BI, and what happens if you then assume some people and recipients will have differentiated needs.

– if we exclude pensions, then a large spend is removed, with quite a large recipient base removed as well (but with spend removal proportionately larger than recipient removal)

– if we start to remove politically popular smaller benefits such as free TV licences, the effect is modest. However accepting that pregnant women and new fathers have different needs seems a no brainer and changes the picture very little, and is also a modest impact so seems to make sense

– However under Option 2 the exclusion of a further £41bn for sick and disabled people makes quite a difference, as I make the assumption that they receive both current payments and the BI. That seems a fair assumption to me, but I lack the data to confirm it.

Clearly, if we stopped here, the BI figure is low and the game ‘looks a bogey’ as they say.

 

We Need To Include Tax Changes as Well

I confess from here on, and with time constraints, I’ve had to fall back on the numbers quoted in the RSA report ((1), page 25 Table 3).

Table 3: Savings from benefits, tax reliefs and allowances34

Policy

Cost (£bn)

Child Benefit and Child Tax Credits

34

Working age benefits (Income Support, JSA, etc)

27

Working Tax Credits

7

Administrative savings and Tax Credits written off

10

Student grants and loans written off

3

Personal allowances (income tax)

68

Primary threshold and self-employed reliefs (NI)

23

State Retirement Pension, SERPS, S2P, Pension Credit, and MIG

90

Higher rate tax relief on pension contributions

10

Total

272

Note(s): Savings based on 2012-13 rates.

I have simply taken (some of) the tax changes proposed there and assumed they are correct and incorporated them into my ‘model’. These changes are to remove personal allowances entirely, to remove NI reliefs and thresholds, and to remove higher rate tax relief on pension contributions. These provide a handy £107 billion to go towards funding a BI. When that figure is added to my two options (i.e. £107+ either £92bn or £45bn), then the BI rate becomes £3836 under option 1 and £2940 under option 2. In passing I should say I assume a 75% administrative savings at DWP rather than the quite conservative 50% that the RSA use.

Again, there may well be basic errors and distorting assumptions in my simple arithmetic – do let me know if you spot them!

For what it’s worth, UK GDP is around £1900 billion, and current benefits and tax spend is around 11-12% of GDP, or around 30% of total government expenditure. Therefore each 1% of GDP diverted via tax to governance spending raises  around £19 billion.

Current UK expenditure by type is here: (taken from Budget 2016 report (3)

The point of showing this is that I couldn’t see an easy way to raise the BI level substantially- to have a BI of £7000 means there is a ‘gap’ to fill of c£210 billion or 11% of GDP compared to my two options. To create a BI of £12,000 appears to need a further £469 billion or 24% of GDP. I don’t see either of those propositions being realistic, ever. What I mean is that regardless of the need to phase in or generate citizen support, that those levels of GDP allocated to a BI are simply unrealistic, distorting and would surely distract from other needs.

But perhaps I am missing something?

I also lack the data to work out what further changes can be applied to the tax system to create scope for further increases to the BI. No doubt, some will argue that taxes need to go up further and that seems sensible. See for example this from Malcolm Torry on alternative means of creating a BI.

But each 1p income tax rise raises somewhere between £5-10 billion  p.a only, and even to raise the BI by a further £1000 a year would seem to require £50-65 billion-  a very large tax increase indeed. It seems to me, that if such a tax rise were feasible, I’d want to consider a much broader range of things as candidates for the extra cash- including new housing, new low carbon infrastructure, additional health and particularly mental health spending, and education including perhaps free tuition again.

So, I leave my basic calculations on Basic Income here!

 

The Link To A Decent Standard of Living? 

I realised in the course of these simple sums that I was approaching the problem by considering what could be funded, rather than what was needed. What I also needed to consider is the extent to which a BI at these levels made any difference to living standards or in providing a better safety net. After all, this is one of the claimed benefits for a BI.

In writing this, I drew upon a few reports on the Living Wage, the calculation of the Living Wage and its relationship to the Minimum Income Standard that underpins the Living Wage calculation.

The key table I draw on for reaching conclusions is this one:

 

In a nutshell, it seems to me that the BI levels I discussed above are very similar to current benefit rates (with the possible exception of sickness and disability benefits being paid on top). Because I exclude pensions, and because I lack the dynamic model to test things, it is hard to conclude other than that the BI at the level above does not significantly impact on a citizens contribution to having a decent standard of living. There are other benefits, but assuming that a  BI allows for a minimum income standard to be met, at a level of £2900-3800 a year, won’t match up with the MIS calculations.
I may be wrong on the contribution to living standards,and others may want to show me why. Nonetheless, it seems to me that a BI of c £3000 would be an excellent thing to have, for the reasons outlined in Part I, but that as I also said in Part I, we need to look to a much wider range of interventions to get us to the basic level of security and dignity that a society based on liberal principles should look for.
Briefly on why exclude pensions? Partly because older people are likely to have higher needs so it makes sense to separate that out. Partly because, intuitively, it makes sense to me to go more slowly, and consider folding in the pensions system in due course. I also think that this element of ‘pay as you go’ contribution works reasonably well, and is accepted, so why change it? With a fair wind, the new Single Tier pension should address a lot of previous pensions anomalies.

 

 

Other Issues

 

As ever, I’ve gone on too long and won’t win any prizes for brevity. But before I sum up, I did want to mention a few other points that perhaps I should have covered in Part I.

One the importance of the pilots, I want to re-emphaise that we really need to understand in some detail, and in a real world way, how people will react to the scheme. To take just one example, the Working Tax Credit (WTC) created a strange incentive whereby marginal benefit losses were much lower if you worked 16 hours rather than 15 hours. Result? Lots of people working 16 hours and not 14 hours a week, regardless of whether that suited them or was socially sensible.

Secondly, and perhaps controversially, is the issue of whether a BI should be limited in some way to only applying to a certain number of children? On the one hand, purists might say ‘absolutely not’ since the whole purpose of a BI is to be unconditional and non-withdrawable. Additionally, if we don’t provide a BI to families with large numbers of children, we risk the future of those children. On the other hand, it seems there would be nothing to stop, under a BI scheme, a family to have 8 children, with no thought to how to manage, and scoop up £25,000 from the state, with no requirement to work for doing so. This is a tricky one and I don’t have the answer. Perhaps, perhaps, the way forward is to limit payments of BI to no more than 3 children?

Thirdly, the BI allows the removal of the current absurd anomaly in the Child Benefit payment system, where a supposedly universal benefit is now means tested. But because of the daftness of our system, those who have a single higher earner in the family but a lower overall income, lose child benefit whereas those two earning split, do not. It is this sort of ridiculous unfairness that a BI can solve.

Fourthly, the more I dig into the UK benefits system, the more detail I find. Things such as passported benefits, Council Tax relief and so on, are also very important but I’ve not seen BI reports considering them, or how they should be treated. Any takers?

Finally, the current benefits system relies on a passporting system- that is, if you are eligible for certain benefits, you are automatically eligible for things such as free dental checks, free eye car, free school means, disabled parking schemes  and so on. More here. These are really important benefits and any BI would have to consider how to minimise administration if they were to be retained separately. Or perhaps they are folded into the BI scheme? I don’t have numbers to hand on the costs of such benefits.

 

Conclusions 

 

I’ve gone on far too long over two posts so time to summarise. To repeat from Part 1, I think there are clear benefits to a BI

– it gives greater choices and fosters human dignity, especially for those on lower incomes

– it is easier to administer

– there could be substantial admin savings from having a less complex welfare system

– it has potential to promote entrepreneurial citizens’ action

– it provides a much stronger safety net (depending on level of income set)
– it will greatly reduce waste and fraud as it’s very hard to claim fraudulently
– a BI scheme faces the future in terms of automation
– can be phased in

I stand by those claims-but with some caveats. Firstly, it seems to me that it is perfectly feasible to introduce a BI at around £2900-£3800 per annum. Secondly, it seems to me that further changes to the tax system might allow that to be raised a little further.

However, I can’t see a way to generate the very large BI payments that some call for, and I think at these levels it is clear that BI is only one component of an integrated approach to modern, fair work. As I said in Part I, it seems to me

‘… that BI needs to be part of a wider package of fair work which includes things like pay ratios, higher taxes, how we tax wealth and capital, and worker empowerment.’

My work in preparing Part 2 simply confirms that. We need to think more radically about wages, fairness, pay and empowerment in our system of work.

I also think we need to consider a wider range of UK benefits in future designs for a UK BI, such as the passported benefits or Council Tax reduction.

But, overall I am excited about BI schemes, and convinced, that done well, they really can make a difference. Thanks for reading.

 

Notes

 

(1)  The Royal Society of Arts Creative citizen, creative state: The principled and pragmatic case for a Universal Basic Income 2015

(2) Institute for Fiscal Studies A Survey of the UK Benefits System IFS Briefing Note BN13 2016 Accessed at https://www.ifs.org.uk/bns/bn13.pdf

(3) HM Treasury Budget 2016 report, accessed at https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/508193/HMT_Budget_2016_Web_Accessible.pdf

(4) Centre for Research in Social Policy Loughborough University accessed at http://www.lboro.ac.uk/research/crsp/mis/results/

 

Basic Income Part I- Why Consider It?

 

Basic Income Part I- Why Consider It? 

‘There shall be paid to every person, when arrived at the age of twenty-one years, the sum of fifteen pounds sterling, as a compensation in part, for the loss of his or her natural inheritance, by the introduction of the system of landed property. And also, the sum of ten pounds per annum, during life, to every person now living, of the age of fifty years, and to all others as they shall arrive at that age’– Thomas Paine 

What Is Basic Income? Is Basic Income a good idea? Is it feasibility? Is it affordable?

There is much talk of the possibilities of setting up a basic income for citizens and I wanted to take the chance to set out my own early thoughts. This is such a large topic that I can’t hope to cover all the bases but I do want to make a contribution. I’ll draw on the already vast literature on this and try and add my own contribution. In this blog, I’ll focus on the what and the why, returning in part two to look more closely at costs and the wider issues a basic income raises.

I am in-principle a supporter of Basic Income, but I recognise that there are practicalities and costs to consider, and that on its own, it is far from a ‘magic bullet’.

It’s worth saying that, although there is a lot of thinking and activity now happening on this, that the idea is not new with support going back in Europe to the civic republicans of Concorcet and Paine (quoted above) but taking a longer view, the first Caliph Abu Bakr (albeit for controlling his newly acquired lands!) introduced some form of basic income.

 

What Is A Basic Income?

Put simply, a Basic Income (BI) or Citizens Income or guaranteed basic income is a payment by the state to its citizens which is (largely) unconditional and is paid regardless of earnings. The key points are that normally the income is unconditional, with minimal conditions attached, and that it applies to all citizens (with minimal conditions on that too).

I’ll come back to proposals on the correct level in part 2, but a very good report from the RSA (1) proposes a level around £3600 per annum for the UK for example. A recent Swiss referendum, which included a lively campaign with gold coins dumped in  square as above(!), rejected a proposal to introduce a much higher income of around £2,000 per month.

A few seconds spent googling tells us more but I found this note from the RSA and this video to be a useful starting point. You can also find more here and here and here . And even more here .

More substantially I found Malcolm Torry’s ‘Money for Everyone’ book (2) to be very useful.

 

Why On Earth Would the State Give Free Money Away?

 

 

There is plenty of differing arguments about the reasons for a BI but they are generally of three types:

(1) Increasingly the nature of work is changing with evidence of greater anxiety and stress in the lower reaches of the workforce,rising inequality and some evidence of unfair or dehumanising practice. A BI set at a proper level would free up citizens to chose work that they really wanted, as opposed to work that they had to take, particularly for those with lower incomes and who currently have less choices.

Often a related argument is that in a world expected to see a rapid ‘Rise of the Robots’ over the next 30 years, we need to find ways to both protect vulnerable workers from automation, and to prevent a disastrous collapse in demand in the economy as jobs disappear. The argument runs like this: automation and robots are advancing rapidly- up to 50% of all jobs will be threatened; we need to find alternative ways to ensure people have jobs and income not just for their own dignity and self-worth, but because consumer spending is essential to keeping the economy moving so that no jobs= no incomes=no spending=no demand=no investment or production or services and so on.

A further related point is that BI advocates claim that as a society we simply don’t recognise, value or reward unpaid activity sufficiently well. Things such as volunteering, neighbourhood support, caring and a host of others could be freed up to focus on things that benefit society, with those doing such things free by their BI to do more.

Also included in this batch of arguments is that at a time of greater change, insecurity and anxiety, a BI generates a stronger safety net.

(2) Our (UK) welfare system is too complex, too arbitrary  and too harsh. There are ample horror stories about harshness, petty detail  and incompetence in the UK welfare system. Putting aside arguments over political motives and morality, one can argument that for three reasons the current ever increasing complexity of the welfare system is wrong and needs changed

– firstly, the system penalises low income people who face crazy marginal tax rates of 70% plus at certain largely arbitrary income thresholds and this acts as a harsh, unfair and punitive disincentive to take certain types of work

See for example this graph of marginal tax rates from the aforementioned RSA report:

 

– secondly, the cost of writing the complex rules, enforcing them, checking and waste and fraud is huge and both frustrating and largely without economic value. A BI scheme would be much simpler, more cheaper to administer and virtually eliminate fraud as its unconditionality means its extremely easy to check for compliance and extremely hard to defraud

– thirdly, a BI system would eliminate one type of state overreach- whereas at present bureaucrats are empowered to require very long forms to be filled out asking all kinds of detailed questions about a citizen’s business- their income, who they live with, where and how they work, if they have kids and so on, but a BI eliminates all that (up to a point anyway)

(3) A BI scheme would force companies paying lower wages for boring, repetitive and soulless jobs to compete for workers who would now have real choices if the work does not appeal. Companies may have to pay more, improve conditions or autonomy or simply be nicer to their workers. As a related bonus, it may be that BI encourages entrepreneurship across private, public, third sector and social enterprise as peoples’ creative energies are freed up when their basic needs are covered.

 

Proponents of BI also point out that a BI scheme could be phased in over time, over place and according to age or type of income scheme.

 

So, to summarise the stated or proposed benefits of BI:

– it gives greater choices and fosters human dignity, especially for those on lower incomes
– it is easier to administer

– there could be substantial admin savings from having a less complex welfare system

– it has potential to promote entrepreneurial citizens’ action

– it provides a much stronger safety net (depending on level of income set)
–  it will greatly reduce waste and fraud as it’s very hard to claim fraudulently
– a BI scheme faces the future in terms of automation
– can be phased in

Plenty of other people have listed their thoughts on the pros and cons, for example here and here. The Brookings Institute gives its 3 reasons here

 

Great! Free Cash! Let’s Do It Right? 

Not so fast- not surprisingly given the enormous change in theory and practice that such a policy would require, plenty of people have raised plenty of objections. I may have missed some, but let me list the main objections and then say why I think most are mistaken, some require more evidence, and some are simply turn on your view of humanity itself.

Three of the biggest ones can be summarised like this ‘A BI would be morally corrupting of the will to work, and ruinously expensive, and destroy the freedom and rights of the rich’. Dear reader, I’ll deal with two of those in a moment, and defer the costs issue to Part 2 of this blog.

 

The Common Objections

Objection 1- It Will Destroy the Impulse to Work

This is a common objection- that providing a BI at any sort of non-trivial level will destroy people’s incentive to work, rendering them work-shy fops lying around boozing and watching TV. Or more seriously, that the nature of humans, or at least poorer humans,  means that absent strong incentives or penalties, people will take the path of least resistance. Or put another way, a BI scheme is unfair as it rewards the workshy and penalises the worker. Or that people need the structure and ‘whip’ provided by a strong welfare state.

Whether you think this is true depends on why you think people work, what makes people tick, and ultimately on your view of humans and their motivation, ethics and psychology. I note in passing the odd thinking that suggests that poorer people need penalties to make them work, but that any penalty at all is considered a disincentive for the rich to work, and that apparently, rich people need incentives to work and poor people need penalties.

For me, I do not think for a moment that there won’t be some people who do indeed chose not to work and laze around. However I am of the view that the vast majority of people want to work and make a contribution, that the BI has the potential to increase work activity by removing penalties and disincentives like the high marginal rates we saw above. I think that a BI would be one of the clearest possible demonstrations that we are indeed, ‘all in this together’ and give people confidence and the ability to try new things, to experiment and to even do unpaid work for a while, confident that no one can take their BI away. I think that BI is an excellent example of the state recognising and valuing the need for people to follow their life plans, and maintain a sense of dignity and equality.

As for fairness, I’m sorry you’ll need to explain to me why providing a BI that allows for a basic level of dignity is unfair, when we currently have a societal system where those born rich live longer, are happier and have more opportunities simply because of their circumstances of birth. I honestly think a BI has the potential to strengthen societal bonds and by creating a more equal society, has the potential to strengthen democracy too.

 

Objection 2 This Is State Overreach on a Massive Scale, Penalising the Rich for Being Successful 

It’s pretty clear that a BI will cost money if it is to make a difference, and that the rich will have to pay for it. There, I said it.

But in a world where recently, pay for the highest earners and wealth is rocketing along with inequality, then I’m afraid that I think things like  BI are the price of a decent society (you can see my thinking on inequality and on the principles for a liberal society here and here ). So, for the reasons I advanced in my earlier blogs, a BI is a key means of fulfilling the fairness test in society, not a perversion of it.

 

Objection 3- A BI is An Egregious Example of Dead-Weight Costs- We Need to Target Limited Resources!

This objection is trying to say that normally, our state interventions want to avoid ‘dead-weight’ costs- that is costs and payments for things that would have happened anyway. In other words, why pay rich people a Basic Income when they don’t need it, which is what you have to if the system is to be unconditional?

Actually, this is easily answered- we tilt the tax and benefits system to ensure that richer people pay more tax, and make adjustments so that they don’t see an increase in income overall. Simples.

Objection 4- It’s Just Too Complex to Try 

Actually this objection has some merits- this is a huge change and we would need to proceed with caution. That is why in practice, so many proposals for BI schemes start at a local level and with pilots. We do want to have a rigorous before and after evaluation. We do want to understand what savings can be made administratively, or how local pay rates changed, the impact on business and employment, which differing rates of BI have what impacts, the interactions of BI with the remaining parts of the social protection system, how BI affects the housing market, and most importantly, how people in receipt of BI chose to behave and whether it actually makes a difference.

But these are just reasons to experiment and to pilot, at sufficient scale to draw lessons, not reasons not to do it. The most promising proposals look at a locality,a city or a rural environment, and evidence from all three would be important.

Objection 5- Companies Will Take Advantage and Lower Wages 

There is clearly some risk that left to their own devices, at least some companies who knew that citizens were about to receive a BI would act to (overtly or covertly) lower wages or other benefits as a chance to make a free buck. Now in locations with no minimum wage, that is a serious issue. However in the UK at least, we have a minimum wage, and we simply need to keep an eye on company behaviour and act accordingly. It is clear to me that BI would merely be one part of an overage package of ‘fair and empowering modern work’ – and this is another issue I’ll return to in due course. Meantime, we ask the Low Pay Commission to keep an eye on the issue.

 

Objection 6- Immigrants Will Take Advantage 

Given our current lively debate on immigration, some people would have a real fear that a generous UK BI, for example, would encourage even more immigration to the UK and that this would be an outrageous burden on good honest UK tax payers.

In reply, we can note that either outside the EU we will be free to control immigration as we see fit. Or, if my preference to remain in the EU ever comes to pass, we can look at ways to ensure that the definition of UK citizen is tight enough to ensure that abuse is minimised. I don’t know what the right level is, but we could for example  introduce a rule into our BI that only those citizens born in the UK or children of those born in the UK are automatically entitled, and that other people would either have to become UK citizens and live here, or have to be working for a defined period first (5 years? 10 years?) to qualify. We can also introduce a rule that ex-patriats are not entitled to the payment. I suspect this could raise some issues should we remain in the EU, but the basic point that this can be fairly easily addressed stands.

 

Objection 7- A BI Destroys the Link Between Benefits and What Has Been Paid Into the System

I think two replies are possible to this objection. The objection is based on a feeling that, actually, our social protection system should be based on payments that reflect how much people have paid into the system, and personal payments adjusted accordingly. And further, that it is unfair that someone who has not paid in much or anything, should receive the same rights as someone who has spent a lifetime working. And that with falling support for the welfare system, we need to go back to where we started in the 1940s, where welfare was a form of pooled collective insurance, not a means of redistribution.

Up to a point, I am sympathetic to these ideas when we are talking about the standard welfare approach- and the importance of the so-called contributory principle. Policy makers and people are looking for ways to make the system fairer and to reclaim that sense of ownership of welfare that originally made it so popular. But as this article discusses, actually we need to think more creatively about how to give people a stake in the system, and I think BI does that far better than trying to return to the original ideas of Beverage.

It’s also worth noting that a pretty small fraction (less than 15%) of the welfare system now relies on contributions to determine payments.

So, my response is that (a) we need a better means of securing support for the welfare/social protection system and that is exactly what BI gives us and that (b) look the link is already broken so let’s not pretend our current system links contributions and payments very closely anyway.

 

Objection 8 Some Low Income People Will Lose Out and/or Basic Income is Too Blunt a Tool

A final objection I want to consider is a very real one, which has two parts. Firstly, people worry that those currently in receipt of welfare or other social protection payments will lose out if the BI is set at too low a level.

The second objection is that people are very diverse- with a vast range of ages, needs, circumstances, geography and expectations. On that basis, a BI which starts out with the intent of empowering people and their choices simply ends up straightjacketing them. Or that in order to account for variances in need, the BI would need to be set so low as to make no difference, and with supplements needed, or at a level so high to cover all cases that the costs would be ruinous.

The sorts of things people have in mind are families with kids with some working and some not, or the vast variation in housing costs across the UK, or the varying needs of disabled or sick people, or the needs of carers etc.

This is a serious objection and the reply comes in two parts. Firstly, the transition to a new system from the old will indeed likely create winners and losers and hard cases, and that these will need careful management and transitional arrangements. At one level that is simply the stuff of policy design and government. So, one could say, noted, and move on.

That’s a bit glib though so a second response is to say yes, this is an issue but point to work from the BI network or the RSA looking at exactly those issues and findings ways to manage them. See this table for example:

 

The second objection is really important and one that shows that, whilst important, BI on its own is not a single answer. I think is is indeed the case that despite being able to remove large swathes of the current welfare system and its accompanying administration, that we would need at least 3 types of additional payments:-

– public pensions would need to remain (though depending on the level of BI even this might not be true over time)

– payments for disabilities or other physical or mental health or special circumstances which mean that life is more costly for some citizens, would need to be retained.

– Housing costs vary so substantially across the country that a standard element for housing built into the BI simply wouldn’t work, so we will continue to need a housing payment system

So, any BI in the short-term would likely need to be accompanied by pensions, special payments for circumstances outwith personal control, and housing. But over time, we may be able to merge BI with pensions. And we should note that special payments are a relatively small proportion of the total social protection system (c17%). And finally, our whole approach to housing needs to change, which may over time render direct housing payments a less important element of the system.

So, this is a good objection and we need to concede that any BI could not replace the entire social protection system, but I’d argue it could do a tremendous amount meantime.

 

A Word on Conditions 

The aim of BI is to keep conditions as simple as possible. As I mentioned above, we do need to write in some conditions on who qualifies as a citizen, to give us the best chance of securing public support.

I would argue that there is a further opportunity that could be built into BI however. I think there is a clear case to use citizens BI payments as of right, but to add in a responsibility as well. That responsibility would come in the form of a requirement to participate in democracy. In its simplest form, this could be just a requirement to ensure that if you want to receive a BI, you must be on the electoral register. Or slightly more ambitiously, if you want to receive BI you need to vote in at least 80% of all elections over a defined period. I think people would grumble but I think that most would choose to comply, if nothing else for the large incentive! If we did insist on voting as an actual requirement to receive BI, I’d suggest we’d need to add in a need for ‘none of the above’ style options.

 

To Conclude Part I

 

To summarise so far. I think BI is a potentially really strong idea with plenty of benefits. I think most of the objections I listed above can be overcome. I accept that we would need to start slowly and carefully with pilots, and move to a fuller system over time once we understand the issues better. I also agreed with those who say that, initially at least, things like pensions, housing and social payments for individual circumstances will need to be retained.

I argue that BI meets my tests for the principles of a liberal society, and that whilst it clearly is a means of distributing income and wealth, it is a necessary one. BI can’t replace all of the welfare system however.

I also feel that BI needs to be part of a wider package of fair work which includes things like pay ratios, higher taxes, how we tax wealth and capital, and worker empowerment. This is a wider debate about the future of work, and for another day.

However, if you have made it this far you’ll have noticed that costs and levels of payment have yet to be covered. I’ll return to that in Part II of this blog piece. Thanks for reading.

 

 

Notes

(1) The Royal Society of Arts Creative citizen, creative state: The principled and pragmatic case for a Universal Basic Income 2015

(2) Malcolm Torry  Money for Everyone Policy Press ISBN 878-1-44731-125-6

(3) The Royal Society of Arts accessed at https://www.thersa.org/discover/publications-and-articles/rsa-blogs/2015/12/in-support-of-a-universal-basic-income–introducing-the-rsa-basic-income-model#comments-section

 

 

 

Pay Ratios, Inequality and Fairness…

Pay Ratios, Inequality and Fairness…

‘For people to retain faith in capitalism and free markets, big business must earn and keep the trust and confidence of their customers, employees and the wider public. For many ordinary working people – who work hard and have paid into the system all their lives – it’s not always clear that business is playing by the same rules as they are..’

Even Mr Corbyn is Right Sometimes…

I’ve little time for Jeremy Corbyn but just occasionally his instincts are right- as when he recently raised the idea of pay controls for the highly paid.

Now of course the random way he presented it and the lack of nuance made it an easy target but I was surprised and disappointed how quickly people dismissed the idea. Either its apparently ‘just bonkers’, or won’t work, or is bad politics or all of the above.

But I don’t think it is. Yes, we need more than just a cap on pay ratios to address rising inequality and the rising inequality of power that comes with it. Yes, noted that rich people have other sources of income than salaries- including dividends, capital gains and rental income. Yes, the politics may be hard- but I suspect that’s more to do with how our perspective has narrowed after too much centralism over the last 30 years. We can be just too easily led by a consensus that slowly narrows our view.

A Little Background and Some Graphs…

In the 1960s the ratio of a CEO’s pay to that of the average worker was around 20:1, rising to around 40:1 in the 1970s. What is it now? Around 147:1 in the UK and still rising, much higher in the US. There is no convincing evidence that such massive increases of pay, so that a FTSE 100 boss earns £5.5m a year, is really linked to the brilliance or the insight or the output or the outcomes for the company. Instead we have reports like this.

 

 

For example, this diagram below shows executive pay plotted against Total Shareholder Returns (TSR). If pay drove performance then you’d expect to see a bunching around a line or curve- but looks pretty random relationship to me.

 

 

What Has The UK Done?

Now the UK to be fair has a decent set of corporate governance arrangements in place, as part of a well established rule of law, clear corporate governance codes and steadily increasing transparency.

The Liberal Democrat Business Secretary Vince Cable introduced reforms in 2013 that including a binding vote on the pay policies of listed companies, and an advisory non-binding vote on individual pay, as well as increasing transparency requirements e.g. here 

When becoming Prime Minister, Teresa May promised further reforms to consider how to give stakeholders more of a say on pay, consider measures to connect to employee, customer and supplier voice, and consider extending requirements from public to larger private companies.

This is all set out in a worthy but rather modest Green Paper.

After the usual rather nice civil service summary of the issues, including this understated point:

CEO pay increases have shown some signs of restraint in recent years. The median 2016 increase so far for FTSE100 CEOs is c.2% (the same as the median increase in 2015), and less than 1% for the top 3013. This comes after very big gains since 1998, however, with a median pay package for FTSE100 CEOs in 2016 of £4.3m. Such high levels of pay may feed a public perception that the top end of the corporate world has become disconnected from the experiences of ordinary working people.’

…the paper duly sets out a few incremental improvements to consider. But there are not enough- reading this from the High Pay Centre gives the statistics. Indeed the white paper quotes polling data suggesting how strongly the public supports action on high pay.

(For example, Opinium research for PWC’s ‘Time to Listen’ paper published in June 2016 found that two-thirds of respondents believe executive pay is too high; and in a YouGov poll for CIPD in Sept 2015, only 14% of respondents agreed that CEO pay is good value for investors) (1) 

But it isn’t just a case of soaking in righteous outrage at fat cats. The paper fails because it considers executive pay to be the concern of owners, shareholders and direct stakeholders like workers, suppliers and customers.

All very well, but consider again the quote at the start of this post:

For people to retain faith in capitalism and free markets, big business must earn and keep the trust and confidence of their customers, employees and the wider public. For many ordinary working people – who work hard and have paid into the system all their lives – it’s not always clear that business is playing by the same rules as they are..’

The quote is actually from Mrs May at the start of the Green Paper. Reading it, it is crystal clear that executive pay is a problem for society, not just individual businesses. There have always been examples on pay restraint based on values, such as the Quakers, or from leading edge companies (John Lewis cap pay at 75:1, Lloyds at 65:1) but this is a systemic problem and requires a public/state led systemic response.

Not the Only Answer But…

Now, on its own a pay ratio cap won’t of course solve inequality but it certainly won’t make it worse. As I’ve written elsewhere:

‘Equality matters because ultimately, people need dignity and respect, they need the ability to execute their life plan, they need a sense of fairness in all of the rules and institutions and processes of society…it is fundamentally whether I feel I am an equal citizen of equal worth, with all the dignity, freedom and ability to execute my life plan that I expect.’

“Are you comfortable with your executive salary?”

Pay ratio caps would be a clear sign that we are all actually part of something collective. For the public sector, where we really want a sense of service, rather than leaders driven by money, we can start with a ratio of 20:1, giving top public servants a handy £200,000+ salary. In the private sector, we can start with publicly listed companies and those  enjoying limited liability and go for a target of 40:1 over time. If you want a higher reward, either don’t work for the public sector or use forms of unlimited liability, with their higher rewards but higher risks.

Oh! It It Just Too Hard or Impractical…

Why not? Well the objections are: it will destroy commerce and business; it’s too hard politically; we won’t be able to compete or attract top talent; it won’t achieve its aims; it will be too easy to avoid.

As I mentioned above, the polls however suggest that there is an argument to be won here.

My responses- it won’t destroy business- we lived with these ratios in the 1970s and were fine.

It is hard politically but given the urgency of addressing the problems of disconnect and inequality we face then a bit of Kennedy-like ‘doing it because it is hard’ seems appropriate.

More seriously, much lower pay levels would indeed drive away many from the public sector or listed companies or those enjoying limited liability. But having met many of those running the big companies, I see no evidence we couldn’t replace them with equally competent people at lower salaries. As for achieving its aims- coupled with other measures it would, and remember, the central aim is to show solidarity, rebuild trust and give people that sense of fairness and equality we so obviously lack at the moment. Avoidance- well we may drive a move towards non-salary reward but other measures can be considered- capital gains reforms, taxing gains on capital and income at the same level above a threshold, wealth taxes etc.

One thing people always seem to forget is both the crucial role of the public sector in creating wealth, and the enormous benefits we allow companies and their owners and leaders to have by allowing limited liability and a legal persona. We have always expected duties on companies in return, and a pay ratio cap would merely be the latest.

As the Green Paper dutifully reports:

‘The United States, France, Sweden, Belgium, Switzerland, Australia and the Netherlands, for example, have all recently introduced, or are actively considering, new measures to strengthen shareholder rights over executive pay and increase public transparency.’

Part of a Broader Agenda …

“If CEO pay packets aren’t a problem… why doesn’t everyone get one?”

If pay ratios on their own don’t do the job, then what else do we need to consider. Well, greater transparency is a must, including in future much more detail on beneficial ownership of companies and land, as Dr Cable mentioned in his speech I linked to above. A great old liberal policy, and one that certain Labour thinkers also considered, is to require worker representation on boards, or to promote cooperatives and mutuals for their socially beneficial impacts.

In order to properly assess what the policy should be, remove the politics once agreed, and provide a firm evidence base, then we should adapt the current Low Pay Commission to take on a remit for advising on and regulating high-pay as well. We’ll have to overcome the Goldman Sachs problem but let’s be honest- we have more things to worry back with that ‘great vampire squid wrapped around the face of humanity‘ than just pay ratios

Finally, the ever-excellent Matthew Taylor CEO of the RSA, is reviewing the future of work for the government and we need to consider the possible role for basic income schemes on our fairness ideas.

In time we may want to consider either a high pay actual cap (100:1?) and tax breaks for those companies making progress, or faster progress towards our 40:1 goal.

 

 

Practical Steps…

‘Does my bonus look big in this?’

So, to summarise:

  • we create a Pay Commission, modelled on the Low Pay Commission but with a remit to create and maintain a high-pay ratios cap system
  • We restrict public sector pay ratios to a maximum of 20:1
  • Over time, we create pay ratios of 40:1 for those listed companies and companies enjoying limited liability
  • We continue to explore a broader agenda on the role of companies in the twenty-first century, how to empower workers and stakeholders
  • We keep pushing on transparency, in this area and on beneficial ownership, tax avoidance and a range of other harms that businesses can cause us.

And once more, why all this? Because unequal societies do worse than more equal ones, because equality and equal status is vital for the dignity of what it means to be human, and because as I set out in my post on the basic principles for a liberal society:

‘Principle 2- Social and economic inequalities are to be arranged so that they are both:

(a) to the greatest benefit of the least advantaged, consistent with the just savings principle..’

I don’t pretend it would be easy- but to make the basic structure of society fairer and more equal, then it seems to me it’s a vital reform…

 

Notes

(1) Quoted in Corporate Governance Report Green Paper November 2016 Department for Business, Energy and Industrial Strategy