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

 

 

 

 

 

The Brexit White Paper- Big Holes in All the Wrong Places…

The Brexit White Paper- Big Holes in All the Wrong Places…

I have now had a chance to read the Brexit White paper. I’ve read hundreds of these things in my time (not healthy I know!) and this one appears to me nowhere near as bad as the press reports would have led me to believe in terms of its general structure or presentation. More clarity does indeed emerge and some objectives can be gleaned amid the bland generality and optimistic objectives.

Unfortunately the paper suffers from four major weaknesses:

– The tendency to suggest that because there is a mutual interest in succeeding between the UK and the EU, say for example on passporting of financial services, that there is therefore an identical mutual interest. In fact it’s clearly far more important to the UK than the EU on sheer weight of interest and numbers. This tendency to elide common interest into identical interest is a major weakness.Ironically, this flippant blindness is very similar to the SNP/Scottish independence campaign’s approach to UK relations post-separation
– Environmental protection- this is an obvious common and pan-European need to manage effectively- from transboundary air pollution to illegal waste shipments, from common carbon emissions trading schemes to marine planning. However the environment is barely mentioned- an astonishing absence considering that for example, workers’ rights get a chapter to itself, that future food, farming and marine policy will be up for grabs in the largest change in 50 years, that the bulk of UK environment law (80%+) is founded on EU law, and that environment is most at risk from the aggressive free trade open economy ideas that the government has floated
– Devolved nations and the future of the constitution- the paper is very weak indeed and provides neither answers nor ideas for the future relationship suggested between the various parts of the UK, clearly risking the future of the union with its insouciance and arrogance (and with signs that this is moving the poll numbers back towards Scots independence)
– Missing the bigger picture- Ok! We can possibly agree that the EU can be annoying; that the CAP is a nonsense; that the Greeks have been screwed by the Commission, the ECB and a German-led ordo-liberal model; that the loss of control of immigration is not an unreasonable thing to argue over. Yes, on reflection it’s clear that the elites were too arrogant or afraid to seek the people’s consent for the major changes 1986-2010.

But overall the elites were surely right in what they sought to achieve- for the real purpose of the EU isn’t economic any more. It is to bring us together in ways that deliver mutual common interest, that prevent war, that give Europe a voice in an increasingly Eastern-facing world, and which grow the common bonds of mutual respect, cultural ties and the ways of peace.

On that measure, the white paper is an enormous failure…

The Dangerous Business of Being Alive – Risks, Citizens and the Liberal State

The Dangerous Business of Being Alive- Risks, Citizens and the Liberal State 

‘The greatest risk in life is to risk nothing. The person who risks nothing, does nothing, has nothing, is nothing, and becomes nothing’ Norman Vincent Peale 

Welcome to the latest entry in my attempt to set out some principles for a liberal state, as a series of building blocks for new ideas for liberalism. This time I want to talk about risks, and citizens and the role of the state in a liberal society.

In an earlier post, I tried to set out what I see as the principles underpinning a fair and equal liberal society. In addition to making the case for freedom and equality (principles 1 and 3) I specifically suggested a role, an obligation for the state around managing risks for its citizens:

Principle 8- Society and its government must ensure a fair and effective management of social risks so that risks imposed by society on its citizens, arising from social-technological risks, or failure to act on foreseeable collective risks, are managed and that effective protection systems are in place.

It is this principle and this area of risk and obligations that I want to expand on now.

 

What Is Risk and What Types of Risk Are There?

The literature on risk is enormous and I have no intention of rehearsing it all here. In general , a risk is an event or choice that has yet to happen but which may happen and has a rough calculus of measurement based on probability times impact. So one risk can be low because although very likely, its impacts are modest. Another risk can be high, because even though its probability is lower, the outcome or impact is extremely serious. Here one might think of the risk of a US housing market crash that was felt to be very low in 2008 but whose consequences were and still are, extremely serious.

In the corporate world, risks are framed around choices that the corporation and its management has, even where the outside environment constrains those choices. However when thinking of citizens, we can quickly see that there will be personal and societal risks that intertwine with the obligations the state owes them.

Personal risks are those that a person freely enters into, having a choice, knowing the consequences and accepting the outcome. Investments, dietary choices, betting, career choices might be examples. Other risks that a citizen faces however, are not freely entered into- an obvious one being ill-health, or a compulsory purchase order on their house by the state.

Another way to think about these two types of risks are as Ronald Dworkin discussed, ‘option bad luck’ and ‘brute bad luck’. Option bad luck corresponds to a risk through choice whereas brute bad luck is trying to capture the idea that despite your best planning as an individual, shit happens.

Yet another way to frame this two-fold typology is based on Thomas Meyer (1), ‘optional risks’ and ‘non-optional risks’ (Meyer p28). Again, optional risks are ones the citizen decides to take to improve their life position, freely entered into and with the acceptance of gains or losses. Non-optional risks are those that happen anyway without the element of individual choice, based perhaps on their physical impediments, societal impositions, ‘acts of god’ or other risks outside their control (including as I will discuss- state choices).

For the moment, I want to focus on risks between the individual, the society they live in, and the role of the state. Clearly, these intra-state risks are not the only type of risks, and risks exist both between states, and between and across generations (sustainability generally and climate change in particular being the obvious examples). But to make things easier, I want to focus on a single state and the relation to its citizens and the obligations the state has.

 

Ok, What’s Your Point Caller 

 

My point is quite a simple one. If we believe in a society where all persons are equal, where we need to ensure they have opportunities to follow their life plans, and where some choices and risks are outwith their control, then we immediately create a role for the state to intervene to manage some of those risks. Another way to look at this is in terms of the difference between having theoretical rights and opportunities, and actual ability to follow through to pursuing them.

Let’s now go back to the quote at the state of this post:

‘The greatest risk in life is to risk nothing. The person who risks nothing, does nothing, has nothing, is nothing, and becomes nothing’ Norman Vincent Peale

Such a quote and hundreds more like it, can be found across the literature of positive thinking and urging people on. However I’ve always thought that the thinking behind such suggestions neglects the element of circumstance, of brute bad luck, of ‘shit happens’. Yes with enough luck, willpower and gumption, some people can overcome any adverse circumstances. But what if you come from a  chaotic family? Or through sheer bad luck lose most of your life savings? Or are dogged with poor health, or born with a disability? Or are a victim of shoddy workmanship or downright business deceit? What if sweeping technological change wipes out the industry you work in, or decimates your local community? Are we really to fall back on exhortation?

No, it seems clear that for some risks, the non-optional risks, the state has an obligation to step in and help its citizens. This idea has been accept for a long time, but is particularly relevant in a new age needed for liberalism, a liberalism ‘5.0’.

Let’s be clear what we’re saying: the state has an obligation to act when its citizens face risks that are outwith their reasonable control, where the state itself through collective societal choice made one choice, amongst a range of choices, and that choice had consequences. The state and its citizens collectively has a duty to consider the consequences of its actions or failure to act, and to ensure that suitable systems and support programmes are in place to compensate and support those citizens affected by such choices. And we are talking very broadly- not just the choice to pursue policy A or law B, but the very decision to use a model of capitalism, to allow for private property, to accept certain features of the basic structure of society. Individual citizens facing bad outcomes, non-optional risks, are unlikely to have had the choice to accept some or all of these ‘macro’ choices, and hence are owed a duty to be looked after and supported.

A useful way to consider some of this is to consider Dworkin’s famous ‘insurance market’ (2)

 

Another Way Of Looking at Risk

Here is a (mercifully briefer) way to look at risks, drawn substantially from Meyer (p29)(1)

  • risks arising from private choices
  • risks including political options (socio-structural)- the state makes decisions (presumably) calculated to promote the common interest by authorising certain economic, social or foreign policies
  • Social-Technological risks-arising from the combined public and private choices about technologies that are made, often in the absence of a proper assessment of their impact on individuals or society (and something Tony Atkinson wished to see addressed)
  • Socio-cultural risks- where no positive actual choice is made, but governments and the state are effectively negligent, failing to take action in the face of foreseeable consequences of government inaction (examples might include unemployment, lack of preparation for automation, systematic discrimination of women or minorities etc.)

 

Sorry, I’m Still Not Convinced The State Has A Duty or Even a Role

You may be thinking by this point, if you made it this far, ok I can see a role for the state in providing management of risks, but either this is just a minimal level of protection to provide a basic standard of living, or an option to do so- its not a duty.

Sorry- I don’t agree. If you accepted my earlier principles for a liberal society, then it flows pretty clearly from the commitment to treat citizens equally, to respect their need for positive as well as negative liberty, and their right to follow their own life plan with dignity and the ability to see it through, that the state has a duty to act.

Why? Well firstly because if we accept citizens are equal and have rights, then when the state fails to act on the various risks listed above, it is encroaching on its citizens rights.

A second way to think about this is in terms of a social contract. We can imagine a hypothetical contract where, in return for accepting my responsibilities as a citizen and all that flows from that, I have the right to expect to be insured against the worst risks in life, since my social contract prevents me acting outwith the rules and norms of the society I am in. For example, if I am poor and hungry, I am not allowed (theoretically) to steal from the richer and better endowed and I cannot simply take over private land and begin to grow my own food. So, in return, I am owed some level of protection/insurance in return…

One final way to consider the issue is this- it seems clear that no one is morally entitled to take risks that affect third parties, unless the latter have given their express consent. But in managing the social-structural, socio-technical and socio-cultural risks mentioned above, states do this to their citizens all the time. But it is NOT valid to simply sacrifice the few for the good of the many- this would violate any number of clear liberal principles. So, as soon as it is clear that risks are being imposed, it is equally clear that rights for protection/compensation are activated.

So, the citizen has the right to expect protection, and the state has the duty to provide it.

But what does any of these mean in practice?

 

Types of Collective Risks and Consequences

In very general terms, one might re-cast my 5 ages of liberalism to match the types of risks we are discussing:

Age 1- managing risks arising from lack of religious freedom, arbitrary state or monarchical power and lack of property rights

Age 2- managing risks arising from the growth of capitalism, of pollution and sustainability risks, and lack of political representation

Age 3- managing the social consequences of increasingly collective societal decisions imposed on individuals

Age 4- managing risks associated with life circumstances, industrialisation and post-industrialisation

Age 5- Facing up to today’s risks- immigration, gender inequality, minority rights, accelerated technological change, global environmental degradation, and a realisation that risks exist that flow from the very nature of capitalism and the basic structure of society itself.

So, we are searching for things that the state owes an obligation to its citizens to address, across the full range of socio-structural, socio-technological and socio-cultural risks discussed above.

We are searching for things where the state has made decisions between options, and those decisions have consequences for individuals. We are looking for decisions and risks that violate basic rights, and where something can be done about that. We are excluding on the whole individual decisions where a choice was made and it didn’t work out. We are particularly looking for those risks that, absent substantial wealth and resources, it is difficult for an individual to foresee, to manage via self-help alone, and where reasonable efforts are  or have been already made by the citizen to address the risk.

 

Practical Examples Please!

In one sense, none of the above is new- states have long accepted the need to provide some form of safety net for their citizens. Since 1945 in the UK, a complex and interlocking set of public services have been established to try and provide social protection and social insurance for citizens.

So, some obvious areas where the state has a duty to manage risk are: providing a fair, effective and comprehensive health service. Providing a decent, free and effective education for all, allowing them to take a full part in society. Providing for people in their old age via pensions, and providing a series of protections and wealth transfers for those affected by unemployment, disability, sickness, and so on- the welfare system.

In addition, a whole range of public regulation exists to protect citizens from the inimical consequences of bad products, lying businesspeople, chicanery, shoddy workmanship, and bad advice. Think of the entire systems of legal protection and regulation that now exist in the UK around environmental protection and environmental health, health and safety at work, public health protection and disease prevention, consumer protection and product rules.

But are these enough? I’d suggest very strongly not, and as we enter the fifth age of liberalism, we need to think again about the duties- NOT the political options- that the state owes us.

 

New Risks, New State Obligations

 

I want to finish on a few examples of areas where I feel, going forward, a real liberal state would offer much more than is traditionally accepted as subject to risk management. That’s not to say by not tackling them here, I am agreeing that the UK has a fully effective set of risk management for health, education, welfare and so on. But let me highlight some others:

 

  • Legal Redress, Protection From Libel and Slander

To play a full part in society, it should be obvious in a capital-led, internet savvy, information rich society, that all citizens need adequate ability to pursue redress for illegal action against them, including slander and libel. At the moment, we seem to be cutting back on provision or relying on private insurance often attached to housing insurance or car insurance. But if we really respected our citizens, we’d be seeing this access to legal resource as a right, not a nice (or depending on your politics, nasty!) thing to have

  • Information Security and Identity Protection

In the modern world, your information can come to define you- and your identity can be stolen. At the moment, the state is too often ignoring these foreseeable risks, too often creating risks itself with casual mismanagement of information, or too grasping of information for worthy but overstated ends. Too often, major private companies like Facebook or Google are left to define what is ok, when the state should be picking up the baton, identifying and managing the risks proactively on behalf of its citizens

  • Full employment and Technological Risks

Too often, full employment is see as a thing that governments hope to achieve, based on political choice and/or philosophy. I mean, we might want it but we can’t buck the market right?

I want to suggest that this is a clear socio-structural risk that all political parties should be striving for, as an accepted duty of government. It was in the past, it should be again. Why? Because economical and social evidence and human psychology and dignity demands it- that all citizens have the opportunity to work and to work in ways that give them creativity, agency and purpose. Related to that, a whole swathe of articles on automation and the rise of the robots (something I’ll come back to) point to an overwhelming need to focus on the future and manage these emerging socio-technological risks for citizens

  • Housing and Place

We have clearly gone off-course in the UK when it comes to housing and place making. Our places are too often designed for people with cars, people with wealth, people for whom choices based on resources exist, or designed for the needs of business. Our sense of public place for democracy and civic forces to play out is just too weak. Our plan making relies on the private sector to come forward with house building and we now have a model where most of our public spending on housing subsidies private rental rather than public house building. Too many younger people face enormous obstacles to get on the housing ladder. Too many more citizens, following the signals they are given, are taking advantage of the rental market to drive up prices and rents as a way of providing for their future, in a literally beggar-thy-neighbour approach. These risks are both socio-structural (arising from a combination of open capital flows to and from the UK, tax laws, the retreat from public house building, and lack of regulation) as well as being socio-technological and socio-cultural (especially the lack of questioning as to what might happen when such choices were made, or if we continue to fail to plan for new housing). We must do better.

I don’t have time and space here, but just as important, and especially in Scotland, is our entire approach to land ownership, common land and common space.

  • Capital and Inequality

In an earlier blog, I ran through the current state of inequality in the world, and why it matters. Following Piketty and others, these socio-structural and socio-cultural risks were, and are, entirely clear and foreseeable. The enormous levels of inequality are bad, foreseeable and preventable, and are a classic example of citizens on their own being unable to either fully foresee the impacts, or fully address them given the macro-economic and financial forces ranged against them. The case for government action, preventative and proactive, to address inequality, could not be clearer.

 

Conclusions

 

As usual, I’ve gone on longer than planned during these early foundational pieces. I hope I have convinced you that, based on liberal principles, there is a right for citizens and a duty on states, for risks to be managed. I’ve talked about those risks and their nature, and why they are to be managed.

I’ve finished by hinting at the areas where, going forward, we need more focus on these risks, not as a nice to have, but as a fundamental component of a liberal, fair and effective society. In future, I’ll return to the individual areas and flesh out the details.

But let me finish with a comment to the sceptical. Almost all triumphs of private business turn out to be underpinned by previous public action (on research, on education, on capital or infrastructure support, on limited liability, on tax rules, or the rule of law). Almost all rich people have a tendency to forget what absence of resources looks and feel like, and why being stuck in the system is so hard. Almost all trapped within a system of low resources, bad services and loss of control can sense the system is not geared to support them. Unless we address these risks, proactively and systematically, we will never have the fair and equal society that we want.

 

Notes

(1) Thomas Meyer ‘The Theory of Social Democracy’ Polity ISBN 978-0-7456-4113-3

(2)Ronald Dworkin ‘Sovereign Virtue’ Harvard University Press ISBN 978-0674-008106