crisis debt economics environment Key Article politics problems society taxes

Can we afford for Britain not to lead?

Britain, partly on account of its preeminent financial center in the City, may be the only advanced country positioned to move to a new socio-economic model.

Any country proposing to make an even moderately radical break from the status quo will face deep scepticism from the establishment, and the establishment today is embodied in the international financier and the global corporation, on whom the peace of our societies and the satisfactions of the great majority are now dependent.

Our current system already rides a razor-thin line between plausibility and fantasy with never-seen-before levels of debt and monetary adventurism, the credibility of which are predicated on long term projections of growth and stability that beggar the imagination.

Any new ideas for how to structure our political economy must either promise to conform to the tightrope we are on, or provide a credible alternative. Any plan that increases spending or investment but does not raise new revenues must necessarily be dependent on some combination of growth, debt, or monetary expansion. Given the already stretched boundaries of the current construct, notions of higher levels of growth, debt, or monetary expansion can only be dependent on justifications that amount to postulation. What seems certain, and to which Greek politicians can attest, is that no country without control of its own currency and direct access to an international financial centre would be able to entertain deviating from the path of the status quo.

It is the very precariousness of the status quo that lends weight to the admonitions of the establishment, embodied in the advice doled out by Germany (through the Eurogroup) and the world’s financial überinstitutions. They are, rightly, deeply sceptical of novel approaches that refuse to adhere to the established limits of fiscal and economic boundaries, because the precious commodity of confidence that underpins the entire system is not within their direct control and rests on a generalised acceptance of models that use historical basis as their justification.

Thrust thus into the seemingly concrete confines of fiscal and economic rules that prescribe that “there is no alternative” (TNA), there are some that divine an escape route through the use of the very tools that support the status quo, and favourite amongst those is monetary adventurism, mostly in some form of “quantitive easing”. Primarily a despondent and confused left, but also an angry and careless right, are gravitating to justifications for their expansionist promises that rely on the use of the same growth, debt, and monetary adventurism that their nemeses already deploy. Irrespective of the quality of their arguments, what is evident is that their ideas are dependent for practical application on the existing financialisation of the economy. This new gloss on old ideas betrays their plans as contradictory to the analysis that they use to substantiate their intentions. If the current malaise is substantially explained by the financialisation of the political economy over the last 30 years, how can the remedy be to lean further on that same system to justify investment? If we are destroying the planet with our growth based models for advancement, how can it be a solution to devise new systems that are ever more dependent on further growth? If expanded debt has substituted for fiscal rectitude, how can more debt, justified by more growth, help to retrieve balance in our affairs?

This then is the root corruption at the base of the supposedly new models we are offered today: that they are at once a critique of the status quo, and they then lean on the established structures to enable their proposed remedies. They cannot stand, and they will face the same fate as Greece: to be subjugated to the established structures, or face penury and exclusion, lest they unbalance the precarious justifications used in the rest of the system by the rest of the world. This is not cruel punishment, this is simply self preservation by the majority.

No model that will not simultaneously increase public revenues and balance that burden with an increase in the quality of life of the great majority can walk away from the established constructs. If the model depends on the existing structures but refuses to accept the strictures of that regime it will be, and must be, frozen out when it comes to implementation.

Moving on from the vanities of the shallow philosophies of the new left and the new right, what of the possibilities for proper change? What of the fate of a properly constructed new political economy, wherein the fiscal logic is not dependent on infinite growth, debt, or monetary adventurism? Such a concept would also have to face the realities of the status quo, and navigate a future in which the rest of the world remained to be convinced of such a path. This could only be achieved in a society which had control of its own currency and direct access to a domestic financial market with sufficient depth and strength to weather the early phase of establishment. Otherwise the maintenance of the inherited debt would quickly overwhelm the nascent reconstruction. This substantial hurdle would be insurmountable in all except a very few countries, and amongst those possibly only the UK has the demos and the institutional fabric strong enough to make it happen.

Britain could lead the way and do what others want to do, but cannot do, because we host the institutional fabric necessary to enable change independently. There is a world of difference between proposing a fiscally balanced future that only needs to maintain the existing debt load, and a proposal to exacerbate the existing paradigm as a means of reaching a promised future. The sanctity of government bonds rests in the ultimate power of a state to raise taxes, which is the resorting guarantee behind the economic projections of any particular administration. If the financial markets have convinced themselves that the current debts are sustainable on the current projections then any new plan that incorporates raising the revenues to pay for its proposals leaves the current status unruffled. There would remain any number of underlying assumptions that a new plan would have to leave undisturbed, and that is where a strong domestic financial market becomes important. The critical impact of a judgement to sustain continued credibility, versus the costs of concluding otherwise, is only likely in a country that has monetary independence and a deeply integrated financial system. For those reasons Britain is uniquely placed to make the move to a more sustainable and joyful political economy, and to benefit from the first mover advantages.

Completing the next phase of the post 1945 settlement by extending the same principles embodied in the NHS to a complete range of basic life supporting services is well within our grasp, with recent research from UCL suggesting such an extension would need only a 2.3% GDP rise in taxes. The effect would be transformative and lay the foundation of a new age of innovation, social cohesion, and rebalanced labour relations.  By shifting the responsibility for a satisfied demos from material consumption to a more relational basis, dependence on finance is reduced at the same time that costs are reduced through social wage substitutions. Until other societies replicate the model, the first movers benefit from substantial competitive advantage.

If human societies are to break the current mould that seems to lead inexorably to never-seen-before destructions, then it can only happen if a new model is established free from the implausible justifications of infinite growth on a finite planet, unrepayable debt, and magic money. Few countries have the present time luxury to consider these long term problems, less have the predisposition to question their own orthodoxies, and even fewer have the capacity and strength to embark on such a journey. Can anyone other than Britain take the lead? Can anyone afford for Britain not to take the lead?

politics taxes WellFair

Income Taxes only used for NHS & universal basic services

LIFE will ensure that all money raised from Income Taxes, National Insurance, Inheritance Tax, and other personal taxes are only spent on public services.

Public services include the NHS, education, transport, housing, food, communications, as well as public safety, legal aid, and our democracy.

To provide the additional revenues to cover the cost of the expanded public services (WellFair) we will halve the personal allowance, treat capital gains as income, set corporation tax at the same as income tax, and change inheritance tax rules to a lifetime allowance of £1,000,000 per person.


economics problems taxes

Perfectly understandable

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.

understandingBut 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.

For data and analysis of tax rates, see here.


What is the proper rate for income tax?

Ask yourself, what is the reason why the income tax rate is at 22% or 40% or whatever it is currently at?

The answer to that question today, is that income tax is set at a rate by politicians which they believe will get them re-elected.

The proper answer to that question, is that income taxes should be set at the rate necessary to pay for the services that we have agreed are appropriate for our society. If we decide to spend more then income taxes will have to be higher, and if we decide to spend less then income taxes can be lowered accordingly.

LIFE will set income taxes at the rate necessary to pay for the wellfair services, and that is a simple and straightforward relationship that everybody can understand. And because everybody pays income taxes on all of their income, everybody has an interest in this balance.

The basic rate necessary to pay for the wellfair services as they exist today is 25%, an additional 5% is required to cover the cost of pensions.

citizen taxes

Tax allowances disenfranchise us

If we are all going to own our WellFair state, we all need to pay for it.

If you’re earning £6,000 a year and geting free healthcare, housing, local transport and Internet access (amongst other WellFair services), then paying £2,000 in taxes makes you an owner, a citizen, a contributor and an equal.

Don’t sell your hard-earned right to be an equal citizen in this society for a few measley quid!