Thursday, 23 February 2017

Next stop....Prime Minister!

The whole Minister of Energy post must have gone to my head, because really I do think the country would be better off with engineers running the country rather than politicians.

Engineers are trained as problem solvers. Something is broken and needs fixing you call an engineer. Need to find a way to manufacture a new product, then an engineer can turn your ideas into reality. Building a new fancy glass office block, then it is the engineers that turn it into something safe and habitable. It is the whole mindset of thinking through problems from all angles and finding an actual solution, not just talking about it.

So lets pull away the safety nets and move aside the politicians, and see what kind of manifesto we can come up with that solves our problems rather than skating over the issues or making them worse.

Having recently watched the brilliant film "I, Daniel Blake", a moving portrayal of the workings of our benefits system and the struggles of those for whom it should be a lifeline, this has to be the place to start. The words of Daniel Blake describe the current benefits system pretty well.

"It's a monumental farce isn't it. Looking for non-existent jobs and all it does is humiliate me."

1. Provide a basic income to all residents of the UK.

It seems vital to me to value every single person, whether they are rich or poor, working or unemployed, young or old, sick or healthy and just provide a security net for everyone. I don't want to walk round town and see homeless sitting in the doorways, neither do I want children to be hungry or the elderly to be cold. These are all signs of a failed system. Isn't this what the welfare system is supposed to be eliminate? But it does it in the most complicated and degrading way possible, and many people seem to be falling through the net.

How simple would it be if everyone was entitled to £100 a week, £200 to cover rent too. (I am just using rough figures here) Everyone could understand that - one figure for every man woman and child. Cutting out the bureaucracy will make huge savings and reduce time and worry for those involved. I am talking about scrapping tax credits, housing benefit, child benefit, disability living allowance, income support, incapacity benefit, jobseekers allowance and council tax benefit to name just a few. The saving in paper alone would be incredible, let alone the man hours wasted on form filling.

Job centres would become skills centres, and everyone would have a choice whether to live on a basic income and have the freedom of time to raise kids, grow vegetables, study, paint masterpieces, or to get a job. The jobs then would have to pay more than the minimum wage and treat the workers with respect otherwise no one would want to do them. I am fairly convinced that most people would still choose the job option, but the key here is choice and respect.

This is not a new idea, but one that the Green Party promote and has already been trialed around the world, including in parts of the Netherlands and US, with generally positive results for peoples health.

Of course it would also require a simplification of the tax system too. Our current system allows big corporations such as Amazon to dodge tax through legal loopholes. The ethical consumer has a long list of other companies that play the same games. Clearly our tax system is way too over-complicated and, as far as the job of making sure taxation is fair, it is clearly broken.

2. Tax income not profit

Is this so obvious that I am missing something? Workers pay income tax in the UK - that is currently a basic rate of 20% of the money they earn. There is no option to reduce your declared income by taking out your running costs of energy bills, mortgage payments and childcare fees first and just being taxed on what is left (your 'profit'). Yet this is how corporations are charged tax. They generate an income, then employ accountants to discount as much of that income as they can, then transfer the remaining 'profits' to a sister company in a tax haven, so that the actual tax paid is minuscule. According to an article in the guardian Amazon paid only 0.1% tax on their £420 billion revenues in the UK for 2013.

This is a lot easier to track - that any sales in the UK generate tax in the UK,  no matter what tax haven the company is registered in. I would just love to see a tax system that everyone can understand at first glance like this. Even with a tax rate of just 1% of all revenue in the UK - that would still mean companies like Amazon paying 10 times what they currently get away with. Neither do I believe that 1% would be high enough.

You may say that higher taxes would drive companies like Amazon away, but before they arrived on the scene the same services were provided by hundreds of smaller businesses, from small bookshops to places like Woolworths. Giants like Amazon have changed the shape of our high street whilst depriving our government of taxes. Smaller businesses who pay their taxes (and generally employ more people), need to have a level playing field. Making the tax system a lot simpler would encourage and sustain more start up businesses.

You may think that we have this tax already in the form of VAT (Value Added Tax) on most of the products we buy. But to my mind the VAT ends up being another tax on the individual when they buy a product. For instance if you buy a new kettle, 20% of what you are paying is VAT, a tax that has been added on top of the original price. If Amazon buy a new kettle for the board room, they get to claim the VAT back, by deducting it from the VAT they have already collected from their own sales. In essence companies don't pay any VAT they only charge VAT - it is just another tax for us mugs at the bottom.

The list below shows the UK governments income from tax for 2013/14 from the Economics Help website.

Type of tax Revenue £ million
Income Tax 156,898 32.0%
NICs 107,690 22.0%
VAT 104,718 21.4%
Corporation  Tax 39,274 8.0%
Fuel duties 26,881 5.5%
Alcohol taxes 19,986 4.1%
Stamp Duty Land 9,273 1.9%
Capital Gains 3,908 0.8%
Inheritance tax 3,402 0.7%
Shares 3,108 0.6%
Insurance premium tax 3,014 0.6%
Air passenger duty 3,013 0.6%
Betting + gaming 2,098 0.4%
Landfill Tax 1,189 0.2%
Petroleum Revenue tax 1,118 0.2%
Climate Change levy 1,068 0.2%
Tax Credits -2,743 -0.6%
Total HMRC receipts 489,850

Top is income tax, paid by individuals based on their earnings. Followed by NICs (National Insurance Contributions), partially taken from the employees earnings and partial paid by the employer based on the employees earnings, but it is essentially a labour tax on individuals wages. Then comes VAT which I have already demonstrated is only paid by individuals and micro businesses that are not VAT registered. So already 75% of tax revenue is gathered from individuals, but then comes Corporation Tax at a paltry 8%. If we can afford to pay all that tax from the wages we receive from these companies, then their income must be vastly more, yet their contribution considerably less.

The whole tax system currently benefits the big companies over small businesses, at the expense of individuals. I say turn it on its head, so that all businesses pay the same percentage tax, with no discounts or benefits for the companies that can afford the most accountants, or that use tax havens. Are you with me on this one?

And while we are discussing money I would like to be sure that the finance sector don't continue to abuse their power either....

3. Remove the power to create money from the banks

This is best explained by Positive Money, who have created a whole series of snippets explaining how money is created by the banks every time we take out a loan and why it is so bad for 90% of the population.

In essence when your bank approves you a loan or mortgage they type the numbers into their computer, thereby creating the money for your loan from thin air, and then proceed to charge you interest on it for the next 5 - 25 years. It is a genius scheme to make money from nothing, no wonder their profits are so high (although obviously their profits for tax purposes in the UK are abysmal). There is no pot of grannies savings that you are borrowing from, this kind of banking went out the window with the dawn of computers and the removal of the gold standard by Nixon in the 1970's. The only thing holding the whole system up is our belief, which is probably why they are constantly measuring 'consumer confidence'.

Imagine if that money creation potential is taken away from the banks and given to the government. The money could be created to build hospitals and clean energy systems, providing jobs and improving services. The trouble is governments don't tend to think long term either, so an independent group is needed, that isn't under the influence of bankers or politicians, and this is what Positive Money propose.

Lets have money creation controlled by an independent group, not the banks, who's only motive is increasing their profits. They really aren't interested in whether the economy is stable, that the austerity measures are hurting the very fabric of society or that people are overwhelmed with mountains of debt. The money created can then be used to fund services and infrastructure, rather than to create investment and housing bubbles.

Phew! Just 3 policies that would deal with some of the fundamental issues underlying the fabric of society. Please let me know if you can see any flaws or have some more policies to propose to deal with some of the big issues that the politicians skirt over or ignore. Debate, discussion and differing opinions is very welcome, though personal insults won't make it through my approval.

Please take from this that there is hope. It is possible to defeat the life-sucking 'dementors' of poverty, austerity, greed, inequality, homelessness, debt and environmental destruction, and the solutions really aren't that drastic or impossible to imagine.


  1. All sounds good, but I would add some sort of land value tax, rent control or other pain and discouragement for the rentier class. Otherwise, all that basic income goes straight into paying someone else for the privilege of shelter. It is the biggest issue facing my generation and I fear we are headed for a new form of feudalism in the next 50 years.

    1. Yes, sounds like a good idea. Thanks for the contribution.

      Hopefully taking the creation of money away from the banks would slow the rise in house prices that creates bubbles and stop houses being seen as an investment rather than a home. I think it is also important to use an inflation measure that includes house prices. It seems such a lie to declare inflation at 1.4%, when the house prices are rising at over 7%. If you get a wage rise based on inflation then you will never be able to keep up with rents or mortgages.

      When town planning permission was introduced, it was intended to have a tax, so that no one could make money out of getting planning permission granted. Instead the planning permission has led to more speculation from investors, an increase in house prices, and tight restrictions on self build. So something would need to change on that front.

      Don't forget that there will also be a growth in apartments and flats in cities, as office blocks are converted to accommodation, once all the office workers start to work-from-home and companies down-size their office requirements.

    2. That's true. I do have a sneaking suspicion that come the next crash, a handful of cash rich individuals or companies will buy up huge amounts of housing stock.

      And yes, real housing figures should be included in inflation. It infuriates me.

      So are you going to run for office? :D

    3. In Jan 2018 we are due to implement the next phase of the EU Energy Performance of Buildings Directive (yes we are still EU so legally binding). When a building is sold or let currently the landlord/owner has to provide an energy rating. From 2018 only buildings that achieve better than an E/D rating can be rented out (I don't think the actual level has been decided yet, but should be at least an E) This will put an onus on landlords to improve the energy efficiency of their properties. Imagine in Loughborough, a student town, where come June all the properties are vacated, but the landlords can't get new tenants in 20-40% of them, until they have renovated the buildings to a suitable standard. Some landlords who are in it for the long haul may act, others, maybe with some of the problematic older terraced buildings, may decide to just cash in their investment. To my mind this could give the house market a bit of a wobble, with a glut of properties flooding the market. Investors aren't going to want properties that they then have to renovate before they can rent them out, so this will be an ideal time for individuals to buy something cheap that they can do improvements to. Whether this will be enough to trigger a crash, I wouldn't know, but I am surprised that there isn't already a scramble to ditch low energy rated buildings. I guess they don't know what is coming....

      Now if you also introduce a hefty tax on empty buildings, and prices are depressed, this should discourage investors from wanting to buy more houses to rent.

      I think this discussion is a long way off from running for office. But it is really good to have this discussion and get some new ideas out there, so that when we engage our current politicians we can show that we are engaged and that they aren't doing enough.