The Potency of Left Field ideas

Baroness Jones caused quite a stir when, in reaction to the appalling murder of Sarah Everard, she proposed a curfew on men going out after 6pm.

Chair of the Women’s Equality Committee, Caroline Nokes called it “a bonkers suggestion”[1] whilst Nigel Farage tweeted it was an example of the left being “deranged”[2]

Jones’s suggestion came in the context of advice to women from south London police “not go out alone”[3].  That so few detected any irony in her proposal reflects how few sadly saw the police’s advice as “a bonkers suggestion”, as well as revealing the predisposition of many to expect politicians of the left to advance “deranged” ideas.

And that was both the point and the power of Jones’s idea.  Being ironic doesn’t mean you are only joking.  There’s a logic in her proposal that holds up.  If women out on their own are in danger from men then it surely follows that men’s liberties should be curtailed, not women’s?  Ah, but not all men are to blame.  That’s true, but all women suffer the consequences and the police advice (and hands up who amongst us mightn’t have called it “sensible”) was to all women.

We’ve all experienced it from our schooldays and look back with a groan.  Someone drew a fat penis on the white board, nobody’s owned up and the whole of the class is held in detention.  But did you ever hear of a case where the class down the corridor were punished instead, even though it was known the culprit was not among them?

So why am I writing about this here?  Because left field ideas have the power to release us from our intellectual shackles.  To ask questions of ourselves, to challenge our prejudices and assumptions.  We need to do better than just cast them off as “bonkers”.  Otherwise we’ll carry on doing things, believing things, just because we always have.

However much we want to protect our ecosystems, you could never completely overhaul the tax system – that would be bonkers.  Like Jones’s idea, or imagining the earth a sphere that orbits the sun.


[1] https://theconversation.com/baroness-jones-why-did-so-many-people-take-her-6pm-curfew-for-men-proposal-at-face-value-157183

[2] https://www.theguardian.com/commentisfree/2021/mar/13/men-curfew-sarah-everard-women-adapt-violence

[3] https://www.lbc.co.uk/news/peer-jenny-jones-calls-for-6pm-curfew-for-men/

What we value

Back in December this blog issued two warnings about borrowing to finance the Covid support measures:

  1. That deferring tax raises until the point of return risked a sluggish recovery
  2. The “we can’t afford pay rises” narrative was likely to be trotted out again as an excuse for further austerity.

Arguably, last week’s budget partly recognised the former as a concern for there were few significant tax rises announced apart from the proposed Corporation Tax rise, and even that was deferred.

Nurse

However, NHS workers have been told they are to receive a paltry 1% rise, almost certainly representing a wage cut in real terms once inflation is taken into account.  And the reason for this lack of generosity?  You’ve guessed it: “We can’t afford it.”

There’s been a lot of debate in the media about this, but the question that seems to have been missing was to ask how much it was that we supposedly couldn’t afford?

So, I got out my fag packet and tried scribbling out a few sums:-

According to the government’s website there were 1,164,729 NHS workers last December of which 299,184 were nurses[1].  Payscale puts the average wage of an NHS employee at ₤26,974[2], so multiplying 1% of this by the total number of NHS workers gets you to about £314 million.  That would mean a 5% rise takes you to about £1.59 billion.  Now I know that there are pension costs and other benefits to add (I’m not including employers NI because that goes to the government) and that the cost of any increase is year-on-year, but…

The cost of the stamp duty holiday to date is estimated at £3.8 billion[3].  This has now been extended in full to June and in part to September, plus the chancellor has announced help for people to get 95% mortgages.  In comparison, the Royal College of Nursing’s 12.5% claim, widely condemned as unrealistic, would have first year costs (based on an average salary of £33,384[4]) of less than £1.25Bn.

One can’t help thinking that it’s more important to this government to shore up house prices than it is to address the structural inequalities in our system of rewards so starkly exposed during this pandemic.  And with average house prices set to rise by £10,000 this year[5], how can this subsidy be justified?  This is a double-whammy for health workers trying to buy their first homes.

“Levelling up” needs to amount to more than just throwing some sweeties around in red wall constituencies.  Many nurses and care workers have risked their lives and long-term health to help save those of others and are suffering from physical and mental exhaustion.  They won’t be the only ones with deep scars following this pandemic, but if a city worker performs heroically during a year they will usually be rewarded appropriately.  This is what needs levelling up.


[1] https://www.gov.uk/government/news/record-numbers-of-doctors-and-nurses-working-in-the-nhs

[2] https://www.payscale.com/research/UK/Employer=The_National_Health_Service_(NHS)/Salary

[3] https://commonslibrary.parliament.uk/research-briefings/cdp-2020-0082/

[4] https://www.nurses.co.uk/nursing/blog/a-quick-overview-of-nurses–salaries-in-the-uk-in-2021/#average

[5] https://www.thisismoney.co.uk/money/mortgageshome/article-9338495/What-happen-house-prices-2021-Savills-predicts-4-growth.html

Unsustainable response

Back in November, Rishi Sunak commented on Radio 4’s Today programme that the current projections for UK borrowing are “obviously not sustainable”.  The question that nobody seems prepared to put to him is why there is no attempt made to balance the books?  It’s as if the consensus on the need to spend and the knowledge that borrowing is cheap means that the normal expectations of raising taxes to pay short-term costs no longer apply.  The only people who vociferously question the wisdom of this just want us to plough on through the pandemic without imposing lockdown measures, believe economic ills can be avoided this way and that they can justify the consequential deaths and health-service meltdown as the lesser of two evils.

But whilst we all understand that the normal rules may be broken in extraordinary times, does acting in an economically unsustainable way actually reduce or compound the problem?

Because it’s one thing to commit to a known amount of borrowing and another to commit to writing any number of cheques to get us through and worry about how they are going to be honoured later.

And then, pressured by recognition of the gambles he is taking, he thinks that he can take the edge off by doing the same but just a bit less i.e not writing all of the cheques necessary, or else capping them.  For his other repeated mantra that few have looked to challenge is that he “can’t support everyone”.  Which, of course, is not true: he’s the Chancellor; if there’s a will there’s a way.

Those who are not supported or not supported sufficiently well are then written off as “nonviable”.  And they will be considered, even sometimes by the people themselves, as victims of the pandemic.  They are not.  Furlough payments and support grants are not really acts of beneficence: they are compensation payments for the Government’s messing with the normal social contract that the Government has a moral duty to honour.

And whilst we’ve yet to find out who will pay for this, we’ve had a foretaste in his recent spending review.  The bulk of public sector workers are to have a pay freeze even though many of their number have been at the forefront of our battle against the virus and sustained casualties in doing so.

In October, I performed some rudimentary modelling to look into what it would cost to provide comprehensive life support for all businesses affected by the Government’s public health restrictions.  There is plenty of scope to quibble with the figures here, but it alarms me that I’m struggling to find anyone else motivated to do something similar and publish their findings.

Cutting to the headlines, I reckoned on the figure of £240 billion per annum to provide proper sustainable support to tie businesses and their employees through the most stringent of lockdowns.  This could be paid for by raising income tax by 26p and corporation tax by 21p.  Now, so long as the Chancellor does not shirk his responsibility for paying in full to keep businesses afloat, I’m not adamantly opposed to him failing to raise taxes now.  And there will be many who will blanche at these figures and believe that it’s not politically possible to levy supplements anywhere near these levels even over the short term.  But the Chancellor’s been giving strong hints that collection day is on its way.  And I think we need to look at whether the alternatives will be any better.

I began this train of thought by pointing out that the money to pay these kinds of bills must logically be available because it was not being spent.  This has now been confirmed by the ONS who reckon that the percentage of disposable income directed towards savings trebled to reach 29.1% in the 2nd quarter of this year, an all-time high since records began in 1987.  This was driven by an £80.5 billion reduction in spending in the quarter.

The problem is that whilst the top 4 of the 5 earning quintiles saved more between March and September 2020 than they did in the corresponding period in 2019, the lowest quintile saved less.  This indicates that the poorest are bearing the heaviest burden of the pandemic, and this is a conclusion shared by the ONS.

The unconscionable thing, though, is that whilst the poor are hit hardest, public sector workers have been earmarked for austerity and businesses and individuals driven to bankruptcy, there are many in the UK who are richer at the end of this pandemic period than they were at the beginning.  And yet they’ve not been asked to pay a penny piece more in tax[1].

Life Support Supplement


[1] (1) Figures taken from House of Commons Briefing Paper, Author: Bridgid Francis-Devine (26th November 2020). https://researchbriefings.files.parliament.uk/documents/CBP-9060/CBP-9060.pdf

 

 

 

 

The Balancing Act fallacy

Speaking to Andrew Marr on 4th October, the Prime Minister Boris Johnson said: “And, you know, we’ve got to continue to bear down on this virus, whilst protecting the economy. That’s the balance we’ve got to strike.”

Few will take him to task for saying this, as it is a sentiment that is widely held.

So, I will.

The problem, as ever, is the way we use terms and the presuppositions we make.  People talk of getting the economy going again, as if it’s a stalled vehicle.  If only we can restore what was working before, they think, then we would be more or less OK from an economic perspective.

Since restoring the old normal is not fully compatible with measures needed to combat the spread of the virus,  there is a need to balance the two, they believe.

But if we look more closely at what exactly needs attention we could look to address the economic dilemma more imaginatively than just envisioning a return to what was.  So let’s look more closely at what people and businesses want from the economy:

  • For people, that they have sufficient income to meet their ongoing costs with a bit left over to treat themselves and their family, take a break and save for the future
  • For businesses, that they have sufficient revenue to meet their ongoing costs with a bit left over to grow their businesses, invest in R&D and reward their staff with bonuses and investors with dividends.

Both will agree that meeting costs is the most important of these: the bit left over is what we live for, but we can put it on hold for a while if necessary.  However, if this “bit left over” is not spent, businesses may be starved of revenue.  Furthermore, if government rules mean that businesses cannot operate as they did previously, they will not be able to sell their product or service at all or as effectively and thus will lose revenue.  If they shed staff to reduce costs, those newly made redundant will have insufficient income to meet their personal ongoing costs. This will this impact businesses further since we are all business customers.  It’s a vicious circle. 

But it’s a vicious circle because it’s a circle.  What makes it so vicious is also what makes it avoidable.  For what both people and businesses need right now is their income assured.  If it is then they can financially play their part in providing that revenue for other businesses which will then result in personal incomes being protected.  To the extent that it happened before the pandemic (the “old viable”) it is perfectly economically possible for it to happen after. 

It is prevented from happening because to comply with the government’s health strategy some products and services become unavailable.  And where that is so, the financial transactions that are needed to keep the money circulating, thus protecting businesses and personal incomes, do not happen.  But the point is if you can make the financial transaction happen then the purely economic problem is solved.

Through the Job Retention Scheme and the various support grants and loans that the government has made available, some of the necessary financial transaction substitutions have been made.  The problem is that now it is apparent that the JRS needs to run much longer than the government planned.  And because it has made no attempt up to now to balance its books by taxing to finance its spending, it has now decided that the continuation of these necessary economic measures is unaffordable.

And it’s at this point that you realise that the government just hasn’t got it.  Their measures have delivered benefical economic outcomes in proportion with the extent they mirrored what was happening pre-lockdown, but in their minds this carried a general economic burden that the old activity did not because the latter was “generating wealth”. For they see wealth as being created by economic activity and what they think they are doing has been to put an extremely expensive sticking plaster in place until such time as this economic activity can return to normal to bring the wealth back.

As I and many other green economists have argued, it’s a mistake to conflate GDP/economic activity with wealth creation.  Not all of what they want to return is wealth-creating in real terms, particularly polluting activities such as air travel.  The value of these activities to the economy is that they stimulate circulation by offering attractive services.  It’s the circulation that serves the economy: the cost/benefits in terms of wealth of the activity itself can only properly be assessed using different metrics[1].

In conclusion, then: to protect the economy the government needs to keep money circulating.  To protect its people (and by doing so invest in future wealth creation) it needs to pursue a health strategy designed to combat the spread of the virus as much as possible without putting intolerable strains on supplies of essential goods and services, the provision of education and the protection of people’s mental and emotional wellbeing.  There is a balance to be struck within the latter, but between the former and the latter there is none: both can be achieved so long as the government is prepared through taxation to circulate money to replicate as closely as possible the transactions that have been lost through the imposition of restrictions[2].

October 2020


[1] The metrics are not naturally monetary, however there is little in life that one cannot attach some monetary value if one finds it helpful.  The point is, however, that true wealth is primarily measured in terms of wellness and green capital (Natural, Intellectual, Social, Inspirational and Physical).  For more on this see the Seven Roads document

[2] For more on how this can be done, see the Hibernate and Circulate document

Eat out to help out

So here we have it, UK’s much-praised Chancellor is urging us to “eat out to help out”.  Recognition of the absurdity of this formula requires a certain naivety, we being so brainwashed into thinking economic orthodoxy to be a law of nature.  We need to see the world more like the boy in Andersen’s “Emperor’s New Clothes” tale.

To that end, here are some naïve questions:

1). At what point in the digestive process do I start helping out?  At what point do the new riches emerge?

2). If I’m sick afterwards, will I have succeeded in helping out, or do I have to keep down the food for a longer period of time for this to work?  How long before it’s OK to poo?

3). How many meals successfully consumed are needed to economically offset the costs of each additional Covid-19 case resulting from the initiative?  Can it be measured in calories?

 

So what is the rationale?  “This is a consumption-driven economy” Sunak apparently told the Times newspaper.  So the NHS will sort out the medical problem and we’ll all eat our way to solving the economic one. 

I’ll try again.

Imagine there’s no money, just an agreement between friends that we all do stuff to help each other.  Imagine our consumption patterns under this arrangement were the same as before the pandemic. 

Then the pandemic hits. 

So we ask some people to stop working if their work is nonessential.  Tell me why anyone needs to starve or to abandon for good the enterprises they were previously employed in?  Why would anyone lose their home?  Why must we lose more than just the nonessential work?

 

So my real (non-flippant) questions are:

1). Isn’t being a consumption-driven economy something we might want to change rather than encourage? 

2). Given that we consume more than is ecologically sustainable in many sectors and that the consequences of this consumption endangers our future, why is there so little thought given to making nonessential consumption unessential to the economy?

Asset Based Taxation (ABT) is, at least, a thought in this direction.  Please take the time to read the Seven Roads document if you haven’t already and give me your feedback. 

Seven Roads to Asset Based Taxation

Covid-19 response under ABT

 

 

The struggle to be heard

Labour’s response on dealing with the economics of Covid-19 has been rather insipid to date. Beyond criticising the Chancellor for a one-size-fits-all approach there’s no big new ideas coming from Anneliese Dodds. One would hope she would be consulting widely at this time, but her office responded with the predictable “thank you but Anneliese can only respond to constituents.”

It’s depressing that these isn’t more capacity, within the offices of people with such important constitutional positions, to engage with suggestions from the wider public. There’s probably never been a time when the population has been so well educated an informed as now, and democracy should be about us all coming together to problem-solve. There was some talk of setting up people’s assemblies, around the time of the Brexit impasse, and it is a great shame that these weren’t pioneered. Maybe their time will come.

Letter to Shadow Chancellor Anneliese Dodds

The grip of concepts

So, furlough payments have been extended in the UK but it’s clear the language is changing. We are now being encouraged back to work not because it is now any more safe (forget “R”, more people infected in aggregate means greater risk of catching the disease), but because they cannot afford to maintain the current levels of support forever. It’s oh so predictable and oh so sad.

My latest addition in the Papers section discusses the effect having the wrong conceptual framework has on our ability to find the best solutions to problems.

Conceptual straitjackets

 

Covid-19

The current health crisis is occupying so much of the current bandwidth of government worldwide that insufficient attention is being paid to the economic tsunami that is following in its wake.

Radical measures are required, and it has been heartening to see that some of the necessary policy has been enacted by finance ministers across the globe.

As well as lobbying government, I launched a petition on Change.org arguing that where businesses are being forced to close their doors their fixed costs should be met. This includes paying the salaries of all staff whose jobs are temporarily non-viable.

The petition is at https://www.change.org/fund_staff_salaries

Three days later, Rishi Sunak announced his Job Retention Scheme saying that 80% of salaries would be met up to £2,500 per month. Later, he followed it up with the Statutory Self-Employed Pay scheme, offering something of the same for the self-employed.

It is hugely to the Chancellor’s credit that he has done this and yet I can’t help thinking that a light-bulb moment has been missed.

I say this, because if you truly understand why this remedy needs taking you would understand that the 20% haircuts and the caps are self-defeating.

The challenge for our governments is to enable many nonessential businesses to go into hibernation. These sleeping businesses have no access to revenue, so this must be met by government in the form of paying all their fixed costs (mainly rent, rates and salaries). If this is done, a domino effect of failure and insolvency can be avoided.

Tourism aside, many of these nonessential services were being paid for out of our disposable income. We cannot buy these services now and most of us would happily donate in tax what we were spending in order to keep the economy on an even keel.

That’s what should happen in a well-ordered system: at times of crisis we experience a loss of amenity. We should not be tumbling towards economic meltdown because we can no longer buy lattes. We need, for now, to keep the same money circulating in the same way, just minus the service.

The two principal taxes that should be raised to pay for this are income tax and corporation tax. Businesses benefiting from government assistance in this way should not be making profits, so corporation tax should start at 100% and maybe tapered down in proportion to the help sought.

This should be done temporarily and immediately. Taxing when the economy is trying to recover is not the right time.

It may seem anomalous for a Campaign that does not have a place for either income taxes or corporation tax in its ultimate vision should be proposing this. But this is where I take a different view from some Green colleagues who are seeing this as a good opportunity to introduce Universal Basic Income. Now is not the time. Now is the time to keep things in aspic. When it is realised that it is possible to sustain our economy without so much of the activity we thought was necessary, other models of operating will start to look much more credible.

Temporary Retrenchment Scheme

Advice to the Chancellor

Campaign launch

We are now inviting all interested parties to contribute to this campaign with your impressions and comments.
We would be delighted to hear from anyone who would like to work with us to put some more flesh on these proposals.

I see the process going something like this:-

1) Sanity check the basic ideas by seeking feedback from a largely invited audience
2) Further research, fact-finding and modelling with the aim of publishing a more substantial publication
3) Publicity efforts, events, outreach to sympathetic organisations
4) Lobbying of politicians in any country where we feel there may be traction

I’d expect the campaign to be a broad church with as many variants as there are minds contributing, and this will be reflected in the published literature that this web site will host. However, I will reserve the right of editorial control over the “authorised” version of these proposals, so that original intentions are not lost or unduly watered-down.

Please do fill in the contact form if you’d like to be part of this process or simply kept informed on how we are getting on.

Nick

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