The real problem is that we are not running a working system.
Not economically or financially.
Not socially.
Not environmentally.
Economically we are not balancing our books, and using debt to plug the gap. And we are paying millions of people to do nothing, in a society were simply existing is expensive, financially and environmentally.
Socially we are not nurturing the cohesion, understanding and specialist skills we need.
Environmentally we are not moving off fossil fuels fast enough.
We are still in the process of figuring out how to make it all work. How to provide a decent standard of life, how to do that in line with a working economic system, and have that system provide enough room to invest in future infrastructure that is sustainable.
We, obviously, have not figured out the big stuff yet.
Collecting taxes to pay for social security and fund national infrastructure looked like the solution. But that was back in the beginning of the 20th C when resources were cheap and demographics were in a special state. Now resources are expensive and we are arriving at a natural demographic balance. Taxes alone will not generate sufficient revenues to pay for our society and the investments we need to make. This has been true for 50 years. We need to face his fact.
GDP growth is not the answer because we still have an old economy based on fossil fuels, and an old structure that suppresses sustainable micro-economic activity.
Increasing wages is not an answer either. It does not address any of the major problems, it is not practical, and it assumes there is enough wealth to pay for all our needs. But as we have already said, we have higher social needs (with progressive demographics) than our economy can afford to generate taxes to pay for.
Increasing taxes will not do it either. We are already close the maximum tax rate an economy can withstand before it starts contracting. Some increase is possible, but it’s not enough to bridge the gap between our needs and our resources.
How do you meet expanded social needs at the same time as investing in the future, when you’re not generating enough taxes already?
You revert the social contract to its natural state.
The social contract over the long arc of human history has always been to guarantee a basic, decent life to all members of the group. We need to revive that contract. The social contract is not about money, it’s about a decent LIFE. The social contract is a guarantee of services, not cash. A guarantee of shelter, sustenance and access to basic services such as transport, health care and education.
Reverting to the natural social contract has a transformative effect on our finances. It reduces the cost of life, and it makes investment more affordable. It does this because it costs us less, as a society, to deliver basic life services than it does for each individual to buy the same services on their own. Every £1 it costs us to deliver basic services is worth 3 or 4 times as much to the recipient. So we trade pay for services, which reduces the cost of the services, which in turn means that we have to raise less taxes to pay for the same amount of service.
A natural social contract delivers better services, to more people, at lower cost. It brings our finances into balance, using a reasonable tax to fund affordable services. And it makes investment cheaper by lowering the cost of basic labour. Finally, and most importantly, it changes the relationship to work, from one of coercion for survival, to one of voluntary contribution for reward.
All this requires surprising little change and upheaval. We simply need to spend 3 years rolling out local community services for free food, local transport, Internet and basic phone services. These compliment the existing free healthcare, education and shelter services that we already provide. The rest of the benefits flow naturally without legislation. Wages fall of their own accord, micro-businesses start on their own, and the benefits of efficient resource use accrue naturally.
Making these changes is what LIFE is all about. We are about facing the big and real problems, and delivering solutions that will take us through a period of change as gently and peacefully as possible.
There is a direct link between dependency ratios and tax rates, and this limits the extent to which a mature human society can be capitalist or commercially-dominant.
First of all, let’s assume that the total activity necessary to support an individual person remains constant throughout their life. Babies and really old people need lots of care and attention, young kids in school need lots of resources, and working age people consume lots of resources in their productive activities, like commuting and training, as well as needing help with all the other stuff they don’t have time to do because they are working. So if every dependent uses 1 unit of activity, that unit must be generated by a productive person.
The more old people there are, and the longer we have to educate our children to make them productive members of our society, the higher the “dependency ratio”. That is the percentage of people of productive, working age versus the percentage of people who are too old to be productive, or who are too immature to be productive. If 50% of people are dependent, then the remaining 50% have to pay 50% of their production in taxes to provide for the 50% that aren’t working (and they have to generate 2 units of wealth, 1 for themselves and 1 for the taxes to pay for a dependent).
Pre-industrial societies had low dependency ratios (~27%) because people died before they stopped being productive and young people became productive members of society at a very young age, at 12 years old or even younger. Around 1900 in the UK this ratio went up to 34%, because young people had to stay in school longer to be effectively productive, but there was no increase in overall production because life expectancy remained low at 47. In 1950 the ratio dropped to 31% because life expectancy rose to 70, adding 18 years of productive lifespan and only 5 years of retirement. By 2000 the ratio leapt up to 44%, because life expectancy rose to 82 (adding 12 dependent years) and most young stayed in education through their early 20s. Once life expectancy reaches 90, and young adults stay in education until they are 22, and even if people are productive until the age of 67, the dependency ratio reaches 50%. In practice every human society has around 5% disabled and sick people of productive age at any given moment, so we are already at or above the 50% dependency mark now.
Now we have dependency ratios of around 50%, and that means tax rates will have to approach 50% to pay for our social security (i.e. to pay for all the non-producing young, old and sick). Trouble is that tax rates above 40% reduce economic performance, and create a downward spiral that cyclically reduces economic performance and tax revenues. Most of the factors in this equation are beyond our control: the cost of materials is fixed globally, the cost of energy is high, and to invest in renewable energy also costs lots of money. The only factor that is really under our control is how much we pay ourselves. The more we pay ourselves, the more expensive we make our lives. Because so much of what we do and what we need includes the labour of someone else, pushing up wages just makes life more expensive. Because a large-scale human society is effectively dependent on socialised security (as opposed to family or tribal security), and because social security services contain a high proportion of labour, the cost of labour is directly related to the amount of taxes that need to be raised to pay for social security. When social security is provided by family or tribe, the vast majority of the labour is not paid for, it is provided as a social service in a conscious or unconscious trade for mutual security. Emulating that social trade of “labour for security” is the key to making our modern, large-scale societies affordably secure. But how?
The answer is more simple than you might imagine. Provide social security without charge. Just meet the basic survival needs of every person, and they will accept that security in lieu of fully-loaded wages. It’s a trade we have made consciously and unconsciously for generations upon generations, it is built into our DNA, and it is millennia older than any modern invention of the monetary-industrial-technical-information age. In fact it is so old and so deep that it has probably just floated past you, without you realising that it is the solution to our modern economic dilemma. So here it is again: provide everyone with the assurance of social security for free, and we will make our entire society affordable. Wages will come down, and we will be happy with that. We will accept the assurance of shelter and a decent meal in lieu of a surprisingly large portion of the wage we would have otherwise demanded without that assurance. And in so doing we make our social security cheaper, and we make investment cheaper at the same time. Everything that contains labour becomes cheaper.
The social trade of “labour for security” decreases the percentage of total activity in our society that is exchanged for money, i.e. is commercial. This table shows the extent to which all activity in a society can be commercial depending on the dependency ratio at a specific tax rate. The higher the dependency ratio, the higher the tax rate has to be to pay for the dependents. The less activity that is commercial (exchanged for money), the lower tax rate can be, because taxes are only needed to pay for the portion of dependent support that is paid for with money.
The chart below presents the factors contributing to the challenge, see below for detailed explanations.
What this shows is that the tax burden on the economy will inevitably exceed is maximal percentage as our population ages, unless the percentage of total activity in the society that is monetised is reduced.
In short: some services have to be exchanged for free, otherwise you go broke trying.
Blue line: Social Age/Lifespan
As human society passes through the 3 revolutions (Industrial, Technological and Information) it levels off and reaches a more stable balance of young and old in proportion to working age adults.
At the end the percentage of able and working age is a minority.
Green line: Resource Cost
This represents the percentage of the true cost of a resource that is reflected in it’s economic price. As human societies across the world all start their progression through the revolutions, and as the “externalities” of resource use manifest, the greater the percentage of the true cost of a resource gets incorporated in it’s economic price. Low values represent high exploitation.
This line could even go above 100% in the near future, as we have to recoup expenses related to previously unpaid-for externalities that come home to roost, such as climate change mitigation costs.
Red line: Tax Burden
The Tax Burden represents the monetary cost to the economy of meeting the social needs of the society. This increases with 2 factors:
Social lifespan – the percentage of a life spent maturing and ageing
Monetary Penetration – the extent to which total activity in the society is monetised, specifically the attribution of monetary values to services
Orange line: Tax Drag
This line compensates the tax effect on the economy by the extent to which true costs are incorporated in resource prices. While resources are available at below true cost (exploitation), the economy does not have to work as hard to generate the wealth to cover the tax burden. As the Resource Cost increases, the economy has to work harder to produce the same amount of wealth.
Most factors are outside our control, demographic changes and resource cost increases are basically fixed, the only factor within our control that can make a difference is monetary penetration (the percentage of total activity that is paid for with money). If as much activity as possible is pushed into the wealth economy and exchanged for money, the correlated tax burden on the wealth economy has to exceed it’s optimal maximum of around 40%.
On the other hand, if monetary penetration is kept below 80% in a society with 50%+ dependency, then tax rates can be restrained to the 40% maximum. Even better would be to push monetary penetration down to 70%, at which point the tax burden is under 36%.
See table: There is a direct relationship between dependency ratios and tax rates. In this table blue=capitalist, green/yellow=social, red=communist. Pick your tax rate and you can see which social system you need to have to make that tax rate possible.
If you live in a society with 50%+ dependency, the key is to have at least one fifth of all activity in “not paid for in cash”. Ever since the industrial revolution we have pushed to have more and more activity “monetised” (paid for with money), and therefore part of the society’s GDP, measured in money. That works fine while the majority of all activity is productive, (i.e. you don’t have a lot of old and young people) because taxes are a proportion of the money economy, and when the money economy is growing tax revenues rise faster than the increased expense caused by having more activity monetised. However once the majority of the population is dependent (i.e. lots of old and young people), having more activity monetised increases expenses more than it increases tax revenues.
The way to push monetary penetration down is to deliver social security as free, non-means-tested, universal services. This works to socialise the most basic portion of labour cost, because it is exchanged in an unconscious barter for the value of the services.
Data Table
Notes
1750
1800
1850
1900
1950
2000
2050
Social Activity (Barter)
% of total activity that is exchanged without cash
95%
90%
70%
60%
40%
20%
10%
Commercial Activity (Paid)
% of total activity that is paid for in cash/credit
5%
10%
30%
40%
60%
80%
90%
Avg Lifespan
45
46
47
47
70
82
90
Productive Start Age
12
14
15
16
17
20
23
Productive End Age
45
46
47
47
65
66
67
Working Age/Life
73%
70%
68%
66%
69%
56%
49%
Social Age/Lifespan
27%
30%
32%
34%
31%
44%
51%
Resource Cost
Actual cost relative to true/free cost
10%
20%
30%
40%
50%
70%
100%
Labour Production Effort
Working lifespan contribution factored by actual cost
733%
348%
227%
165%
137%
80%
49%
Economy Size (UK)
BoE Real GDP UK (1850+)
100
225
548
1,854
13,308
976,533
2,000,000
Underlying Economy (Real Effort)
Real economic effort, as if resources were true cost
10
45
164
742
6,654
683,573
2,000,000
Social Cost
Cost of providing for social lifespan on underlying economy factoring % of activity that is paid for
0
1
16
101
1,255
240,084
920,000
Tax Drag
Tax rates factored by Resource Cost
0.13%
0.61%
2.87%
5.45%
9.43%
24.59%
46.00%
Social Cost II
Cost of providing for social lifespan at actual resource cost factoring % of activity that is paid for
We don’t pay for everything today, we can’t pay for everything today, and it was never true that we would be able to pay for everything.
We were slightly distracted on our journey from pre-revolution to post-revolution into thinking that our reality was defined by the 3 revolutions (industrial, technological and information). We are still humans, and the revolutions were only changes to our methods, not our natures. Our reality was before, and remains today, that of a social, group animal surviving on a finite planet through our mutual exchange of support.
In pre-revolutionary society (pre-1840) the vast majority of people survived almost exclusively through the mutual exchange of support. There was never enough commercial activity to even consider paying for mutual social security, it had to be bartered for. The 3 revolutions transformed our ability to generate commercial activity. In a span of only 150 years (1840-1990) we expanded the percentage of total human activity that was commercial in nature from a small minority, to what seemed to be almost total encompassment. The speed and breadth of the revolutions almost blinded us to our reality, the reality of interdependence that we are now re-facing as we emerge into the post-revolutionary world.
For the short period when a society is in the midst of its revolutionary progression, it naturally has a population that consists mostly of working age adults, before the effects of advanced healthcare have kicked in, and before the information revolution requires the extended incubation of advanced education. During this mid-revolutionary phase the society can pay for its limited social needs by taxing the expanding economy.
Early adopter societies, entering the revolutionary cycle before the majority of other societies have started, can also exploit under-priced resources abroad, and create an over-sized economy that allows the increasing social burden of its maturing demographic to be paid for out of a tax on its inflated economy.
But once the majority of societies have entered the revolutionary cycle it is not possible to maintain an exploitation-inflated economy, because resources are no longer available at below true value.
A mature post-revolutionary society has a minority working age population and an economy that, while greatly enlarged from its pre-revolutionary state, is still a minority of total activity. At this point, a tax on the economy high enough to pay for the social needs will reduce economic performance, creating a downward spiral.
This looks like a big problem. But in fact it is just the re-emergence of a truth that was always there: no matter how blindingly brilliant the 3 revolutions have been, they did not change the basic truth about our nature: we are a group, social species, dependent on our group for our individual survival, and visa versa.
There has always been a massive amount of activity in our group that was never “paid” for, and it could never be afforded from a tax on commerce. Only the short period in the evolution of a society through its revolutionary cycle, when working age populations are high, supports an illusion that we can buy our way out of our interdependence.
The “first world” in the 20th C was not at a destination, it was simply a stage in motion through the natural progression to a normalised demographic, in a resource-constrained world. Human populations naturally resolve into quite likeable and practical distributions, as birth rates fall off with increased security. The pricing of finite resources naturally resolve to comply with the closed-circuit reality of our planet. This normalised reality is not a problem, it has ample opportunity for greater joy, but it does require us to recognise and accept our situation. We do not live lives defined by the value of commerce (revolutionary activity), nor are we limited by the taxes we can impose on commerce. The only real limit we face is that of finite resources.
Our reality is the same as it ever was: the majority of our activity is social, a barter between humans for services. A minority of the activity in an advanced human society is commercial, and that’s OK.
We cannot abandon the revolutions, our enlarged populations are entirely dependent on the continuing practice of industrial, technological and information activity. But our dependence on them is purely practical. Revolutionary activity is contextual to our desires, and our desires are human. Defined as “joy”, we seek and find reward to interconnection and interaction on a human level, commerce is merely an enabling method. The future of humanity depends on accepting our social nature and leveraging the revolutions.
The way to accomplish this unification is to accept our mutual social contract for support services, and welcome the functional contributions of the revolutions while rejecting their dysfunctional elements. Industry, technology and information are all good when filtered through understanding of their roles in support of human society. The two primary requirements this understanding gives us are:
our success is based on the wondrous specialisation we can support within our groups
we live on a finite planet.
The aspects of the revolutions that support specialisation and sustainability are invaluable. Industrial, technological and information processes that denigrate specialisation or sustainability can be comfortably jettisoned.
What LIFE is proposing is simple, a radical evolution: public services instead of welfare.
If we provide each other with safety (guaranteed access to the basic necessities of life in the event of need),
free of charge and without means testing,
we will remake our economy and come into balance with our environment.
That’s it. This one simple change will bring growth to our economy, sanity to our public finances, and joy to our lives.
This is not utopian, this is simple, basic stuff. We can spend the same amount of money that we are already spending on welfare today, but instead of providing benefits, we provide the actual services that those benefits are supposed to buy. The services only cover the bare necessities of life, and they are available universally to every citizen, irrespective of circumstance. No “benefit trap”.
No one is forced to take the services, they are just there to provide a floor to living standards to those that want to use them.
You know something’s wrong, that we have not sorted out a decent way to live together, yet. And you know that there is a better way, that we are not this stupid and blind, that we can do a better job of living together in peace with prosperity. Well, you’re right… here is why and how.
The tension in money
The search for a truly functional economic system is still going on – we haven’t got there yet. The richest societies are swimming in wealth and debt at the same time, the fastest growing countries are destroying their living environments, and the failing countries are mired in restrictive cultures. Capitalism may be the “least worst” system, but it is not good enough to sustain human life on this planet.
Marx’s critique of capitalism (that the working classes would eventually revolt against those who accumulated the capital) has turned out to be misplaced. It is more true that we are evolutionarily predisposed to the acceptance of hierarchy, even when it is dispensed from no more meritorious source than random genetics. The real failure of capitalism as a system for organising human societies is no less foundational than the failure in Marxist theory, its failure is the absurdity of placing a system of capital at the root of a system for organising humans.
Capitalism is an economic system, and not a political system. Moreover it is an economic system specifically focused on capital, and its kissing-cousin ‘money’. When capitalism is purloined to become a social system, it faces an inevitable tension that must exist in a system that recognises money as the only representation of value. In a “capitalist society” money is used in two different ways:
a medium for transactions (including those that do not create any wealth),
a store of wealth.
These two roles pull in fundamentally opposing directions, and corrupt the very foundation of capital as an economic element.
In its transactional role the impetus is always to create more money, to represent a higher and higher proportion of the total activity in the system. Because if capitalism is to be the social system, then it is necessarily forced to embrace the notion that all activity can and should be represented by money. In its role as a store of wealth, on the other hand, it is necessary to constrain the supply of money to only that amount that represents the remaining capital after transactions have been completed.
The tension between these opposing roles that money must play in a purely capitalist society, is its ultimate downfall – not the class revolution imagined by Marx.
The only thing that can be everything and special at the same time, is nothing.
21st century enlightened economics recognises a third, or middle way. It recognises capitalism as a perfectly valid mechanism for representing economic activity, and at the same time recognises that economic activity is only a subset of the total society, because the economy is a child of the society. Once we relinquish the enslavement of capital as the sole representative of all transactions, we are freed to recognise that there are many transactions in the social sphere that are bartered for social value, and which are much better not recognised as having monetary value.
The 20th century classroom
The 20th century was really the battleground of two 19th-century phenomena: the scientific revolution, and the pressure that revolution placed on the organisation of human societies. Developments in scientific knowledge led first to the industrial revolution, then to the electronic revolution, and lastly, but not finally, to the information revolution. In each revolution the capability to create and recognise increases in wealth grew exponentially. Each revolution also led to exponential increases in our ability to look after ourselves, to feed ourselves and provide for our health, leading to massive increases in the human population. We stand here in the morning of the 21st century, almost exhausted by the incredible events of the last 150 years, and yet facing, with immediate significance, the challenge of bringing it all together into a sustainable mix. We must now complete the fourth revolution, the sustainability revolution, if we are to go into the afternoon of this century with anything like the population we have today.
If we could see ourselves today, we would see a person standing on the top of the globe, brandishing pieces of paper, and shouting out “This is my worth!”. And in an instant we would recognise the fallacy of ‘economics as society’. The compulsion to bring every activity into the monetary realm is a self-defeating strategy that pits credibility against the wealth it seeks to protect. As more and more of a society’s activity is turned into money, and money is used a store of security, the dragon chases its tail until it has consumed itself. This is where we are now. As our money seeks security, it is the flow of the money that defines the value of the assets, and the connection between wealth and money is loosened, until it is lost. We are there already: the price of nearly every asset is not significant of its real value, instead it is the quality of its ability to provide a secure store of money that defines it’s price.
21st-century enlightened society
21st century enlightened society is one in which a capitalist economy exists alongside, and inside, a sustainable human society. 21st-century enlightenment economics retains and nurtures the perfectly human elements of competitive resource allocation, reward for effort and innovation, and it does so without pretending to be a system for organising human society.
The organisation of large-scale human society is in every way a superior activity to that of economics. 21st-century social organisation must meld the interests of humans, with the preservation of our environment, it must acknowledge our tribal tendencies, accept our natural ambition, recognise our dependence on specialisation, and appeal to our highest callings to follow a path that is inherently sustainable and balanced.
Bad endings
There are two root causes for the failure of every large-scale human society to date: environmental destruction, and specialist denigration. Why are fascism and communism ultimately doomed to failure? Because they both fail to honour and support the specialisation necessary for complex large-scale societies. Why is capitalism doomed to failure? Because it fails to recognise environmental and social values. Why are religious societies doomed to failure? Because they do not provide the freedom necessary to allow specialisation to flourish.
And large-scale human societies are equally dependent on their ability to honour and nurture specialisation for their survival. Large numbers of humans require complex infrastructure and sophisticated administration to survive, and both of those are dependent on the availability of, and respect for, a wide range of specialists. Honouring specialisation has a kissing-cousin too: respecting diversity, which inevitably leads to secularism.
By learning from our history and understanding the proper role of economics, we can start to divine the threads we must weave into a path to a sustainable future: we must protect our environment, honour and nurture specialisation, and recognise our economy as a child of society.
If you are destroying your environment, denigrating the contributions of specialists, or promoting money is the only signifier of value, then you should know that you are also sowing the seeds of the destruction of your society. If you restricting individual liberty, you are restraining the unnecessary experimentation that is the heart of innovation. If everything is money, then money cannot be capital, and your capitalist economy is broken. Use a hammer to drive a screw, and you end up with nails.
Happy endings
There is a happy ending. Understanding the proper roles of money, diversity and environment leads us to a new, sustainable social structure; one that must incorporate these essential ingredients:
An economy that uses money for trade and commerce, and does not attempt to put a price on every activity.
A society that values the contribution of specialists, and protects the freedom they need to succeed.
A deep respect for the natural environment on which we depend.
We achieve a sustainable economy by providing the basic necessities of life to each other, without charge or condition. In this way we confine the use of money primarily to commercial transactions, and so we protect the proper role of capital, and allow it to operate usefully inside our economy. We also own our social responsibility, and make ourselves the masters of our economy, because we are not asking money to fill an unnatural role as our social security.
We create a sustainable society by recognising the value to the whole society of diversity, and the essential contribution of specialists of all kinds. Individual liberty is the foundation of successful specialisation.
We protect our environment by incorporating it is a valid priority in all our policies, and by enforcing its recognition in the pricing structures of our economy.
These are the foundations of LIFE’s policies. Grounded in a clear understanding of what is necessary to survive, we can complete the final revolution: to provide a future worth living for our children and their children.
The size of our public debt means that we are rightfully concerned about interest rates on Treasuries. As we continue to rack up an additional 5%+ a year of GDP in extra debt, only the anomaly of historically very low interest rates has made it possible to continue without more drastic changes. Pretty much all of the parties in Westminster understand the situation, and are fearful of making any suggestions that UK PLC will deviate from a course of austere spending control.
What no one wants to deal with is that we really don’t have spending under control, and every pressure we see ahead (ageing population, healthcare costs, energy infrastructure, pensions) looks likely to push spending up, not down. Borrowing an additional 5%+ of GDP a year is not “under control”, especially when you’re already at 90% of GDP. The current government’s budgets don’t even forecast making a dent in total public debt before the end of the decade.
The end of QE is coming, even if the UK and Europe want to continue theirs, the USA’s QE dwarfs them, and as it is retracted over the next two years interest rates on debt around the world will rise. UK 10 Year Treasuries have already gone from 1.7% to 2.3% in the lead up to the announcement that the US Federal Reserve will start “tapering” their QE late this year or early next. Historically the UK has paid a 10 year interest rate on its debt closer to 5%, and that simply means that as debt revolves in the coming years the cost of servicing our debt will rise. This extra cost of debt servicing (minimum +£5B/year, more likely +£20B/yr) will easily eat up any of the ‘savings” being proposed by any of the major political parties today (ConDem headline savings: £11B/yr).
If, as it seems evident we will, we go into 2016 with 100% public debt/GPD, rising interest rates, and no plan to bring the total debt down for another 5 years, most investors will see UK Treasuries as one of many junk bond opportunities, not a safe haven. Nothing the ConDem coalition, or the Labour opposition, proposes suggests that our situation in 2016 will be anything other. Assuming that investors hold fast through the 2015 election, for lack of better options globally and because humans are naturally optimistic, then the next government will have to have a pretty radical budget plan ready to roll, or 2016 is going to see the UK joining the list of “bankrupt European nations that let their social costs run away from their economic realities”.
LIFE is the only political movement in the UK with a plan to address this potentially catastrophic situation.
LIFE will convert the benefits system into a universal services model, raise taxes, and create significant economic growth. Not because our policies are magic, just because we understand economics. We understand that removing the floor on monetary unit labour costs stimulates very significant micro-economic activity, activity that is currently suppressed by the monetary benefits welfare system.
Delivering social security as universal services also makes it politically possible to broaden the tax base, because the equivalent of a ‘living wage’ is guaranteed. Once the services are up and running they cost no more to deliver than the old benefits system, but they deliver economic advantages that the benefits system cannot: the liberation of micro-economic activity, the abolition of the minimum wage, and the effective socialisation of a significant portion of the cost of delivering real social security (absorption of cost by the population as part of the implicit barter for social security).
When LIFE is elected in 2015, we will have a practical economic plan that constrains public spending, increases revenues, produces sustainable economic growth, and provides a reasonable medium-term path to total debt reduction.
It is evident that the Westminster incumbents, of all shades, do not have a plan, and can’t imagine a plan, that will save the UK from junk status in 2016. This is serious stuff: the future of the British way of life depends on a credible budgetary and economic plan for the 2015 General Election.
To quote Lord Adonis, “Once you have an economic plan, the rest, of course, is ‘detail’, essentially,…”.
The Bank for International Settlements (BIS) released a report today on the state of the world economy and national budgets. It makes for pretty dire reading – especially if you think we are already suffering under unbearable austerity. http://www.bbc.co.uk/news/business-23028023
Bottom line: interest rates will at least double before the next General Election, and none of the incumbent politicians has a plan to get debt down to anything that could be considered reasonable historically.
To cope with this and get back to firmer ground the government is going to face cutting spending by £100Bn, not the £10Bn currently being negotiated. This simply cannot be done without a wholesale rethink of how to fund our social security. No amount of tinkering will work, the numbers are just too big.
LIFE’s plan to change social security to services instead of benefits (WellFair), to a system that pays the people delivering the services, instead of those receiving them, is the only plan being proposed by any political movement that can possibly cope with the the future we face.
If you think LIFE’s policies are radical, you’re not paying attention. LIFE’s policies are the most gentle, humane and digestible way forward. Instead of plunging into an abyss of austerity and debt without end, we are proposing a way to balance and joy. You may think it sounds corny, but it’s deadly serious – do the maths.
Maths:
Start with £1,500Bn of debt (current). Add £50Bn a year in interest (at current rates). Add £70Bn a year in extra borrowing (current, with 2013 austerity). Add £50Bn a year in interest at future rates (conservative estimate, could be twice this). Add £50Bn a year to reduce the debt to £1,200Bn by 2020 (that’s still 80% of GDP)
= £220Bn reduction in spending required = 33% of all current spending.
Want to know how to solve this equation without destroying our society? Check the LIFE budget plans.
“There’s been a lot of head shaking in recent days about the size of Cyprus’ banking sector relative to its economy.
And it is indeed grossly inflated with assets and liabilities at around €126bn, or 700% of the island’s GDP.
If you have a banking sector that size you’re asking for trouble – for how can a state guarantee for depositors be credible? If the banks go under the state wouldn’t be able to rescue the savers.
How foolish.
Yet we’ve nothing to be smug about here in Britain.
This chart (below) from Albert Gallo, an analyst at RBS, shows that we’re not that far behind. Despite all the deleveraging of recent years our banking sector still has assets and liabilities equal to 450% of our GDP.
Remember this next time you hear from one of the banking industry lobbyists how vital it is for the UK’s economic future to have a massive banking sector. Remember Cyprus.
We have three crises today: an economic crisis, a social crisis and a climate crisis.
In the UK the economic crisis is that we are borrowing £2 an hour, for every hour worked by every man and woman in employment. That’s new borrowing every hour worked by every person in the country – and that is with “austerity”.
The social crisis is that, despite not being able to afford the services we already have, those services are not good enough and not meeting the needs. We are not building the cohesive, educated and participatory citizenry necessary to sustain our complex, modern society.
The climate crisis is that our unaffordable and ineffective society is also borrowing from the natural world around us, when we are ready overdrawn on that account. This debt cannot be “written down” or “forgiven”, it must be paid. We have the technology to solve the climate crisis, and the resources to solve the social crisis, what is missing is an economic model that allows that to become a reality.
The current economic model is preventing us from solving the social and climate crises. The LIFE economic model is the key to unlocking our potential and to solving these crises. BY REPLACING CASH DISTRIBUTIONS WITH WELLFAIR SERVICES WE CAN ENSURE THAT WE DO BUILD A COHESIVE, EDUCATED AND PARTICIPATORY CITIZENRY. Wellfair reduces the cost of delivering social services, and automatically promotes sustainable resource use.
We have three crises and one solution – the choice is ours. The switch to wellfair will require everyone to participate more, and it will not be without its winners and losers. The alternative is a downward spiral of debt, social disintegration and further climate instability.
The choice is yours to make, and now is the only time that you can make it.
UK LIFE 
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