Friday, June 07, 2024

Charles Moore on Tories and Labour

What are the two main parties' core beliefs? Lord Moore in The Spectator  The Spectator 1 June 2024 asks for clarification about:

 '...current confusion in which Tories hint at approval of socialist principles and Labour of capitalist ones,...' 

What clear choices are there for the ordinary voters on polling day July 4th?

Maybe the only clear choice is about competence? The decline in skills in managing public affairs over the long Tory regime after 5 prime ministers in 14 years does not inspire 'More of the same please'. Is there a chance that a fresh lot would do a lot better? Here's hoping... As Moore implies they are really playing a similar song with only slight variations and they don't have  anything very new to envision us with. Are the Lib-Dems any different?

If we are really in a capitalist system does that explain the growing need for food banks? If it is socialist why are the food banks needed at all with taxes the highest for 70 years?   Has socialism failed too?  Why is it becoming more difficult to buy a house on an average salary? Why are housing rents ever increasing? OK, we are in a mixed system - part socialist part capitalist - but are there any alterative tweaks to think about?

There is a system change that would begin to sort the inefficient running of the economy which the food banks and shortfalls of the NHS show up - after all,  technological success is not an issue so the issue is fairness. A new way would focus on where taxes comes from, how welfare is handled and how citizenship should be fairly recognised.

Tax reform is need to source a large input to the public purse from Land Value Tax  instead of from income tax and other taxes. The property market mirrors the speculative aspect of capitalism and brings  untaxed gains to homeowners when they have done nothing to produce the added land value. What such free lunch do renters get like that? Separating the land value from the house value  (about a quarter or a third of the Rightmove or Zoopla price) shows the value that should be taxed on an annual basis. The amount would need to match the average income tax currently paid so that for the period of the tax reform  any income tax paid would be a rebate allowed  against the charge for land value.  

There is an added green and a housing benefit to land value taxation in that it would encourage the development of land. A house could be enlarged to build rent-producing rooms under the same land tax charge. With more homes built to cover land tax charges on vacant land with planning permission, houses would become more affordable.  The failure to build enough homes has been a feature over decades  - land value tax is an incentive to build more - whilst Help to Buy schemes merely inflate prices by adding new money into the existing housing stock. 

Welfare reform should be included in this LVT tax shift by instituting a regular unconditional Universal Basic Income (aka: Citizen's Income). This should eventually replace most of the welfare benefits which are clearly inadequate given the food banks and housing benefit needed. The individual fine tuning of welfare benefits now needed would be  reduced  bringing large admin savings. The UBI would not be conditional on work and it would be provided for citizens only. These changes would make fairness for people a new feature of our socio-economic system, reducing the centralising nature of the state and curbing capitalistic power.  

Banking reform could add to the UBI sources (see this Blog elsewhere). For other banking reforms and how banking works see:  Charles Bazlinton - YouTube  .

posted  by Charles Bazlinton  author: The Free Lunch - Fairness with Freedom The Free Lunch - Fairness with Freedom 

Wednesday, January 24, 2024

James Robertson

James Robertson the pioneer of alternative economics has died (Obit. The Times 18 Jan.    Guardian 6 Dec 2023 ).  Through his writing and lobbying he drew together several strands of pioneering reform such as government reform, environment issues, money creation, land value taxation, citizen's dividend, et al., which are now generally known as New Economics or Green Economics.  

From 'Creating New Money' (NEF 2000) with Joseph Huber, to his later broader-based 'Future Money - Breakdown or Breakthrough?' (Green Books 2012) he provided indispensable research for anyone lobbying for change from the flawed entrenched economics of the 20th century to a system more based on the common good. His life's work is accessed on his website which is an excellent resource for research into these and many other issues.

He shows how the wealth intrinsic to common resources generated by, or available for the use of society as a whole, such as money creation and the natural resources of the earth including land value, are captured by special groups of people for their private use. Meanwhile people whose ordinary work, enterprise and proportionately high taxation add to the wealth flowing from those resources  but often have little or no share in that wealth.

As an example of how he helped those who were promoting the same issues I recall a Land Value Tax conference in 2006. An academic speaker had explained LVT but was perplexed as to how it might be made politically acceptable. In the lunch break I spoke to James who arrived to address the conference later and said that no one has mentioned citizen's income (or C.Dividend) as a means of making LVT more acceptable. When he spoke later he kept referring to CI and ..'I will bring more detail later...' and ended by giving a comprehensive view of how the new economics might be achieved with CI. It was the first time I had heard CI and LVT mentioned at a public event. Since that time the issue has become international with CI experiments being conducted. Progress is being made.    

Posted by Charles Bazlinton author: The Free Lunch - Fairness with Freedom. The book covers many aspects of the New Economics.

Wednesday, July 26, 2023

Central Bank Digital Currency (CBDC). The Digital Pound - Consultation. A response


The Bank of England asked for comments about its idea for a digital currency: 'The digital pound: a new form of money for households and businesses'. 

My submission was as follows: 

    ''I disagree with the proposal for a digital currency. It will disrupt the current banking model as this will have a tendency to reduce funds deposited with ordinary banks which will reduce banks'  scope to engender loans to customers. The proposal for centralizing normal retail banking implicit in a centrally controlled digital currency is a bad move and against the promotion of the freest flow of money to viable businesses through the relationship a bank has with its customers.

    Many people would possibly completely, or substantially, exit from their normal banking for much of their financial business and the existing banks will thus become weaker players in the promotion of the many local economies that comprise the national economy.

    The nation needs more banks of the normal current retail type and for them to be more localized particularly when they are involved in small and medium businesses who need credit to grow and provide employment.

    The idea of a central digital pound brings a danger that a central authority might, despite the privacy enhancing procedures proposed, in the extreme be able to control the spending freedom of every citizen for ideological or political reasons which is obviously with our current outlook, to be avoided. The banks are good at spotting fraud currently perpetrated and there is no need to use the reason of central surveillance possible through a digital pound as being essential for preventing scams.''  

Charles Bazlinton 30 June 2023

In the Financial Times article 'Central Banks should not be blind to the threats  posed by CBDCs' (25 July 2023) Eswar Prasad author of The Future of Money also warns about digital money.   

Posted by Charles Bazlinton 26 July 2023


Wednesday, March 15, 2023

Budget alternatives: Richard Werner on Digital Currencies & A New Financial System

UK Chancellor Jeremy Hunt is set to announce 12 regional growth projects with low tax and other investment incentives (ex-PM Liz Truss wanted 200 zones).  The decentralisation idea is a good one to spread new economic growth beyond the south-east into the regions but it misses a key factor in economic decentralisation - that of the money supply.  The ultimate is to have local banks which create money where everyone needs it - where they live in their local area. 

Professor Richard Werner in this new YouTube video discussion 'Why we need a New Financial System'  in discussion with Oliver Studd and George McNee,  says that digital currencies have been around for decades and ordinary licensed banks have been creating digital currency as they create bank loans for their customers.  He also adds to the current debate that central banks should create digital currencies for their monetary system (this starts at 15min on the video). He says that this would be a dangerous development which in giving everyone a current banking account with the Bank of England leads to a possibility of centralised surveillance  and control of their spending.  Do we trust that good central bank governance would always prevent such a move? In setting a centralised bank system for every citizen the normal banking system would be fundamentally changed for ever says Werner.  Such a strong pull towards centralised banking for all would weaken the normal business model of  current banks who need the deposits and relationships of their customers. The  banking currency produced by them was always digital as they did not print bank notes for the loan: Bank Digital Currency - BDC.  The only change now is to add Central to the acronym - CBDC and herein lies a danger.   

Werner says that in earlier times in Germany, monasteries would act as bankers until they were secularised and farmers, for instance, would have difficulty with their credit needs. What happened to remedy this  was the creation of local community banks designed to operate in specified localities. Now, nearly 200 years later the widespread Sparkhassen banks, the co-operative banking system and a sound locally-originating economy is a testimony to the practicality of the solution of locally created money. Britain was also a pioneer of local savings banks around the same time.  

But small local banks grow and are bought up by larger banks who tend to like to deal in large loans for large customers, leaving smaller business customers overlooked. There is a need for many small banks to be created. These preferably will have a common-good profit motive and protected through a majority charity ownership holding which distributes bank profits to local good causes and needs. This ownership model locks in  the common-good theme preventing private predatory takeovers of small successful profitable banks.

Decentralisation is needed more and more and the fundamental way to do it is to encourage the creation of local banks. Growth for special regional zones  is a start but why not target support to enable the decentralisation of the money supply to every 'local zone' by encouraging lots of tiny local community bank start-ups where the small and micro business are? Everyone knows that such businesses create the jobs and wealth. What's not to like Mr Hunt?  

    

Wednesday, August 03, 2022

Sunak vs Truss: Debt, Inflation and Levelling Up

The Conservative leadership contenders ask:  When does the Covid-induced public debt start to get paid off? What about inflation if we reduce taxes to ease household finances? How do you achieve levelling up?

A FT letter writer Mark Hofman in August 2020  said that in the example of Japan which has had huge public debt levels for a long time:

     'government bonds held on the balance sheet of the Bank of Japan are effectively the Japanese government owing the bond debt to itself...so why not put a line through those entries on each side of the balance sheet? The level of debt would be reduced without the        taxpayer having to pay anybody anything, and with nobody being poorer.' 

If there is a possibility of inflation due to this he says it can be resolved by raising the reserve requirements of commercial banks at the central bank (in the UK's case - the Bank of England). He asks: Why consider the conventional way of paying off this debt with taxes for generations, when there is a better way?

Beware of suggestions that governments are like households and must not spend beyond their income.  Householders are not like that as they cannot create their own money whereas sovereign govenments, with careful monetary control can do so safely, as Hofman describes. 

On levelling up:  Change how tax is raised by levying a small annual charge on the value of all land, including the value of the land footprint of all homes. At the same time any tax raised in this way would be allowed against a personal income tax liability. For many homeowers the total charge would not change. 

Benefits would accrue:

  • House price rises - now with a land value levy - would slow or fall and homes become gradually more affordable since speculation would be damped down and a steadier market would encourage first time buyers. 
  • Homes would become less attractive for pure investment rather than for living in personally. Recent governments just subsidise new buyers which raises the price of homes and brings developers more profit. The crazy price boom continues.
  • More homes would be built as development would be encouraged - for example a house with a large plot would be built on to share the land value levy over new, extra homes. Or an extension to create a separate rentable flat. New homes would be built to low carbon standards. Countryside would be preserved.
  • Renters would be helped as the land charge would be on the landlord. Landlords would be anxious to have their property occupied at lower rents rather than keep homes empty waiting for increased rent.

Levelling up at a stroke, for many. Those who are land rich and income poor, thus short of cash, would be allowed to defer payment until they sell the home. 

The young would be able to consider buying and homeownership would increase. Older people in large homes would be nudged into downsizing. The increasing wealth divide between homeowners and renters would ease.

For the common good we need such monetary and taxation policies. Which candiate, or party, will grasp these choice fruits?  

Posted by THE FREE LUNCH - FAIRNESS WITH FREEDOM Charles Bazlinton

             

Saturday, June 04, 2022

Jubilee - A very suitable word?

Great words get borrowed and highjacked for quite different purposes.  'Jubilee' was originally 'a year of emancipation and restoration'  (OED) in ancient Jewish history when people who had lost their family land through debt and poverty went back to it with all debts wiped out. It was a time of  great rejoicing and was unmistakably introduced by people going through the land blowing ram's horn trumpets announcing 'Proclaim Freedom'. It was the ultimate levelling of wealth from the time of the previous Jubilee after which some people had prospered whilst others fell into poverty. See the Bible: Leviticus 25:8-10. The purpose of Jubilee was to reset the economic  imbalances and was pointedly political. It restored control to the people. 

There were not to be kings to accumulate wealth to themselves and their court, and the repetition of cycles of Jubilees would guard against permanent accumulations of land control and enable the poorest to become self-sufficient again. You were not able to purchase land ownership rights, only the harvest rights for limited years. The system guarded against anyone assuming kingly status through wealth which would endanger freedom and the common good. 

Amazing enlightened times! The entire Jubilee year was to be a holiday. Our recent Jubilee celebrations, whilst fairly acknowledging that our Queen as Head of State has been a benign and gracious holder of the office, achieves nothing in the spirit of the original Jubilee for ordinary people. Apart from one day's holiday. 

Maybe news from Ukraine will point the way to a revival  of a people-centred Jubilee ideal? Alexander Rodnyansky, a Cambridge Professor, is now Economic Adviser to  Volodymyr Zelensky, President of Ukraine and The Spectator 4 June 2022 reports: 

    'he says he is interested in establishing  universal basic income throughout Ukraine: a fixed cash payment for residents rather than a network of welfare benefits which leads to inefficiencies in the system...We could be the first.'  

Jubilee years have been celebrated - quite bizarrely given the origin - for some centuries to note anniversaries of rule by monarchs. Why not a people's Jubilee in the spirit  of the common good?  We are not able to re-apportion land ownership in our day but land values are identifiable and could contribute to a universal basic income. See elsewhere on this Blog as to how it could be done. Recapturing the 'Proclaim Freedom' spirit of the original idea with a Peoples' Jubilee by  establishing a Universal Basic Income (also know as Citizen's Income) is needed.  

posted by Charles Bazlinton, 4 June 2022   Author: The Free Lunch - Fairness with Freedom.    


Monday, December 06, 2021

Merryn Somserset Webb favours land value tax

In a philosophical article in Saturday's FT (4 December 2021) Merryn Somerset Webb writes that she 'favours land value tax'  as she explores aspects of ownership and capitalism.  She refers to land wealth as communal wealth.  The article is about  how selfish we allow our society to be.

Owners of land are gaining as 'house prices' keep booming everywhere. People and firms are putting their wealth increasingly into property and prices are responding - upwards. Just take note that every building deteriorates so the gain is in the underlying land value. Lloyds Bank's new chief Charlie Nunn is hoping to quadruple 'the budget for its private home rental market'  (FT 6 December 2021) which is great for landlord rents and the bank gains the security of the underlying land value gain but not the renters. 

Value in land is largely dependent on location, which is about the ease with which work can be found nearby, such as rail links, good roads, business employment, etc. These things are nothing to do with the land owner's skill - but rather utility providers' provision of good services and such things as planning permission. The land owner can make a desirable valuable house which takes cost and ingenuity but the land value is quite outside their ability to make any individual difference to, land value is a gift from society, the community around. It's just that owners get the gain but renters don't.

This quite unfair situation has another facet for end of life social care. The current plans (see Kings Fund) are for there to be an £86,000 cap on care charges. The scare is that homes may need to be sold to pay for care at some point.  Will a home be safeguarded?      

A much fairer method of paying for care is to tax land value. Almost every piece of land with or without a house or building on it has  value and a small percentage tax charged every year would go to providing end of life care for all. Those with the higher priced property would pay more which would be proportional to the gain in value that society has created on their land.  In the setting of land value tax a allowance below which no land value tax would be payable would be set, so that many poorer homeowners would be land tax exempt. Renters who will never have any prospect of land value gain and thus no land tax, would gain the universal state-provided care but not be charged at any time. Home owners would be paying over some of their lifetime property gains for their later life care as they pay the tax. 

These ideas should be seen in the context of wider tax reforms where income tax paid would be allowable against a liability for land value tax. A gradual tax shift from tax on wealth gained through work onto community inspireded wealth would happen. 

Fairness comes through using community inspired wealth to pay for community needs.

Charles Bazlinton. Author: The Free Lunch- Fairness with Freedom

Saturday, May 08, 2021

Hartlepool levelling up: Was that it?

What did 'levelling up' mean in the Hartlepool swing to the Tories?  The Hartlepool constituency, returned a Tory MP Jill Mortimer, 'farmer and business woman', after a 50 year run for Labour. That day was also the vote for the Tees Valley mayor and Ben Houchen won a resounding victory. Perhaps the Mayor Houchen factor was at work. Perhaps it was that in  Hartlepool with the Labour candidate still an EU fan who wants a second referendum, and with Hartlepool  very strongly Leave, maybe that prompted the strong rejection. Who allowed that to happen?

Ben Houchen, in winning his first Tees Valley contest in 2017 as a Tory promised to nationalise the local airport which he did and it created many new jobs.  Nationalisation is a policy borrowed from Labour.  Houchen has always said he is locality oriented and the use of socialist policies shows he is a non-ideolgical Tory.  The Boris-Rishi government has supported his Tees Valley projects - including environmental climate change schemes - by directing spending to the area. Also Treasury North, which is a partial government departmental move to Darlington, is a rather socialist, state planning idea. It probably helps in all these local changes that Chancellor of the Exchequer Rishi Sunak holds a nearby constituecy.  

Freemarket conservatives wanting small government (don't move but reduce the Treasury?), low borrowing and 'let the market rule'  are rare these days. Covid-19 financial support has meant Tory central government money is now always on tap for lots of schemes. The (allegedly) penny pinching austerity gloom of the Cameron-Osborne era is well gone, and now seen merely as anti-Labour sound bites, but which helped dampen expectations of government-directed productive investment which now the New Tories are unashamedly borrowing from Labour.  But remember: the high priestess of the free market, Margaret Thatcher secured a deal for Nissan in Sunderland in the 1980s with a  special central government money deal for Nissan.     

So the Conservatives are doing what is needed to remain in power whilst favouring neglected voters by boosting their local economy with cash handouts. Old fashioned pork barrel politics, as ever. The latest scheme is the Community Renewal Fund which will share £220m with 100 favoured places in a year and five of those are the five towns of the Tees Valley. Red Tories are in town.

The problem with such politics - sensible enough given the limited vision - is that only some groups of voters are favoured rather than producing a fairer outcome for all. Under Old Labour it might be such as union members,  managers of state institutions, and home renters; under Old Conservatives it might be shareholders, capitalists eager for state grants and home owners. 

When will overall fairness prevail? Instead of a hope that a trickle-down of government money may come my way via my Mayor, why not each citizen respected as contributer and beneficiary of a good recovering economy?   The previous blogpost on Universal Basic Income  illustrates how that idea of a payment to everyone unconditionally is well researched to be affordable - 'revenue neutral'. Even better an extra measure would be the funding of UBI to include land value tax charged on the land value underlying all homes, and allowable against income tax,  along with a reform of council tax. Renters would benefit as they would pay no charge, the landlord would. 

We need a re-set in our politics and economics in favour of fairnes for all, not just for instance the homeowners who are benefitting  from a housing boom. That would be better levelling up. Our society is becoming increasingly divided as defined by owning or renting a home. Renters are being sidelined as they have no unearned nest-egg accumulating on the value of the land with their house as homeowners do. We all contribute to our economy as we work and run things and a healthy economy raises house (actually land) prices, but that value is soley due to land ownership. Too bad if you rent your home, no level playing field for you from your contribution, it all gravitates down to the owner. What's fair in that?

Posted by Charles Bazlinton author The Free Lunch - Fairness with Freedom

 

Thursday, November 05, 2020

Universal Basic Income: 'Fasten the seatbelt before hitting the wall' - Ronnie Cowan MP

Following 100,000+ votes for the petition in favour of Universal Basic Income (this blog March 19 2020) a Parliamentary debate was held on October 13th in Westminster Hall .  

The Debate Pack  for this gives a clear overview of the idea of a non-means-tested benefit (like the long-standing Child Benefit)  and should have prepared the Minister for Work and Pensions, Will Quince for a considered reply to the request. But he was scathing in his response.   

    ' when we even begin to think about introducing a UBI, we see that not only would the   cost  be astronomical, but the Government would have to increase taxation mercilessly' 

Clearly his department had not been allowed to give him a balanced view, for instance he rubbished the Finland UBI pilot trial without checking out the benefits, as Chris Stephens MP pointed out:    

    'Surely the Finnish model demonstrated that people rejected precarious work and that  employers had to increase pay and model terms and conditions. It is just not the case, that the Finnish model suggested a disincentive to work.'

The cost of UBI has been carefully assessed by the Citizen's Income Trust to be affordable. 'Strictly revenue neutral' is their phrase. It is very easy to rubbish a scheme by choosing a high UBI rate and showing it is unaffordable but the CIT sets a meaningful rate and shows it would be affordable for the taxpayer and effective for welfare. Additional benefits would accrue when such people as family member carers of the elderly might be more able to continue giving their care when adding their UBI payment to income from a part-time job. It could make countless family-oriented care situations more possible rather than leaving the state to pick up the total care bill at a far higher charge. 

Annie Miller's book  Essentials of Basic Income  give throughly researched findings which the Minister also failed to acknowledge.

Despite the huge financial measures that Covid-19 restrictions have forced on the UK government, Mr Quince is ignoring the many welfare gaps a UBI might help him to fill. The media is full of such comments as: 'government ''wilfully ignoring'' ' sectors of workers like those represented by The Association of Independent Professionals and the Self-Employed  ( 'Devastating gaps in aid for self-employed' The Times Nov 3. 2020).   

Some of these support schemes depend on a firm's previous profit records, so a new business start-up has nothing to show for the government to match with grants or income top-ups. Many  new businesses might be formed if UBI was there to encourage people to make a start by giving them a guaranteed small regular income. It is common knowledge that it is new businesses that create new jobs. Besides, extra UBI money in the hands of everyone will be spent and give a boost to the general economy. The governemnt should launch a pilot scheme for road-testing UBI in the UK.

It is reported that some billions of pounds handed out through various business support is likely to have been fraudulently acquired. Let's start a UBI scheme that will enable new jobs to be created honestly and to address the worst povery cases directly - with cash in the hand guaranteed to deal with unforeseen emergencies.  

In The Times Mark Littlewood** (Universal basic income is not the answer to the welfare question, Nov 2 , 2020) writes a really good summary of some of the benefits of UBI (despite the title he sounds half convinced):

  • the attraction of UBI is its simplicity
  • means testing would be handled through taxation  
  • meal vouchers for school children in school holidays would not be needed
  • each household would have enough in cash for the necessities 
  • about the existing universal credit scheme he says problems persist

He is worried about the impact on work incentives, but he should study the Hansard Debate Pack (link above) which shows, apart from the above Finnish model giving positive employment effects;  the Utrecht experiment yielded 'positive effects'  for employment for lower educated groups, and for the very long running Alaska Permanent Fund:  

    'Our results show that adverse labor market effects are limited, and, importantly, a small universal and unconditional cash transfer does not significantly reduce aggregate employment'

As Ronnie Cowan MP (Invercylde) said in the debate, concerning the huge numbers still under extreme financial privation under Covid-19: 

     'I am asking that we do something now before it is too late. We do not know what the final straw will be. We need to plan now, to go forward. It is wise to fasten the seatbelt before hitting the wall.'

The pandemic is likely to force the  government into finding a better way of handling welfare. UBI would do this and would achieve a move towards fairness, justice and an incentive to create new businesss and work. It would help poverty relief for hard pressed individuals and families, which causes Tories often promote. 

** Mark Littlewood is head of the Institute of Economic Affairs : 'we promote the intellectual case for a free economy, low taxes, freedom in education, health and welfare and lower levels of regulation.'   

Fair enough! That's what everyone would like if they had the income and the assets to fulfil that dream for themselves. When will the IEA think outside the narrow elitist box of the 'free' economy and market forces and realise that to empower everyone with a non-means-tested  basic income would help promote another of their aims of: 'creating a society that fosters innovation, entrepreneurship...'

Surely libertarians naturally favour a basic income for all? A new basic right for eveyone  - a  gain in freedom that they famously champion?

Posted by Charles Bazlinton author The Free Lunch - Fairness with Freedom