10 May 2015

An open letter to David Cameron, UK primeminister for another 5 years

Mr Cameron,

First, my congratulations on a truly stunning victory. You certainly surprised just about everyone - including, I imagine, yourself.

The question is - what now?  You may think that the British electorate has voted to continue with 5 more years like the ones that they have just had to live through. And it is true that nearly 37% of them really did vote for your policies and candidates. But, of course, that means that 63% voted for other policies.

I imagine that you are convinced that your policy of rolling back the state, and letting the private sector take charge is the right one for the nation. I suppose that you believe that cutting back on public expenditure, and reducing taxes as much as possible, is the best recipe.

Before you make a final decision to continue business as usual, I would dearly like you to reflect on a number of proposals that I suspect that you have never thought about, and yet which could well be exactly what the UK needs.

Suppose I said that there was a way to massively reduce taxes on company profits and and kick start the economy that would cost virtually nothing. Would you be interested? You should be....

So, what are my proposals? (see also here).

My first suggestion involves introducing a modest transaction tax on all financial transactions. Financial transactions in the UK are currently running at about £2 quadrillion a year (that's £2,000,000,000,000,000). Total UK tax revenue from all sources for 2014-15 was £513.6 billion.
That number is roughly 4000 times smaller, meaning that you could actually replace all the current sources of taxation (Income tax, VAT, Corporation Tax, National Insurance contributions) with a single tax on financial transactions of around 0.025%.

To make things clear for you, I've compiled a table showing the current revenue generated by all the taxes levied by your government during fiscal year 2014-2015, together with the level of FTT that would be sufficient to ABOLISH each tax.

You could ABOLISH Income tax with an FTT of just over 0.008%.
You could SCRAP VAT with an FTT of just over 0.005%
You could ABOLISH National Insurance Contributions for a similar amount
You could ABOLISH Corporation Tax with an FTT of just over 0.002%

Of course, there may be some of the current range of taxes that you would want to keep.  After all, taxing tobacco, alcohol and petrol can be good for people. It's up to you to keep some of those taxes if you want. But the simple fact is that you have the choice. Don't assume that your friends in the City necessarilly know what is best for Britain. Consider the possibility that their total opposition to any form of financial transaction tax might just be more to do with a desire of the UK Financial Services industry to keep the massive levels of transactions out of the spotlight.

By taxing ALL transactions you would have a totally fair, simple system that would be virtually impregnable to fraud. It would cost virtually nothing to run, and would allow the size of Her Majesties Customs and Excise to be dramatically reduced. Surely that must appeal to someone like yourself, keen to see State interference in business and private life reduced?

And imagine the boost for UK manufacturing if Corporation Tax was at 0%, if National Insurance Contributions were eliminated, and if members of the public were not forced to pay 20% VAT everytime they need to buy something.

My second suggestion would be to scrap the entire benefits system. That's right, scrap it completely. Replace the whole thing with an Unconditional Basic Income that would be paid to all UK citizens from birth to death. You might prefer to have the payments higher for the under 18s, and for pensioners - which is effectively what the UK already has via the system of Child Benefits and the Guaranteed State Pension.

But before you reject the option of keeping those payments going throughout the entire life each and every citizen, consider the following points.

Firstly, if you gave everyone such an Unconditional Basic Income and included the payments as taxable income, you could enormously simplify the tax and benefits system. Even Iain Duncan-Smith should approve. No need to have an arbitrary threshold for starting to pay income tax. People would simply add up all their income (including the Basic Income) and pay a certain percentage in tax on the combined revenue. In the end it's actually effectively the same thing as having a negative income tax for people on very low pay - an idea defended by none other than Milton Friedman back in 1968.

Secondly, by giving even working people the basic income payments, this is actually effectively a subsidy for UK business. Currently, a large proportion of the UK governments benefits payments go to people who are not working. You must surely see that if, instead, the same payments were made to people in work, it would mean that UK businesses could provide their employees with a living wage without paying as much. This would mean that UK business would be more competitive than manufacturers elsewhere because their production costs would be lower.  Surely, that has to be a good idea?

There's a third important reason why an Unconditional Basic Income for all UK citizens would be a particularly good idea at the present time - given the massive increase in immigration and the threat from UKIP. Suppose that the payments were only made to UK Citizens, or people who had been resident for a certain fixed period (say 3 years). This would mean that bona fide UK citizens would be able to live decently on salaries that would not be sufficient for someone arriving from elsewhere in the European Union or from further afield. Importantly, this would avoid the need to impose quotas on immigration - if people wanted to come, they would be entitled to do so. But it would no longer be so easy for clandestine immigrants to undercut UK residents by accepting payment at abnormally low rates.

The third main suggestion that I would like you to consider concerns the possiblity of reforming the way money is created in the UK. I note that you were not present in the Commons back in November 2014 when Conservative MP Steven Baker opened a debate on the question of "Money Creation and Society". And given the total absence of any coverage in the press, it is extremely probable that you still have no clue about the true nature of money. Indeed, you famously said that there 'is no money tree". Sorry Mr Cameron. There is. There is one in every commercial bank because when they make loans they create the "money" out of thin air. This fact has now been stated very clearly by the Bank of England, so there is no excuse for the British Premier not knowing this vital fact.

So, if you can understand that the £625 billion increase in public sector debt that your government took on between the end of 2009 and the end of 2014 involved borrowing money from banks that didn't even have the money that they lent you, can you not understand that there is a fundmental need to completely rethink the entire basis of our monetary system.

Please can you read the book on Modernising Money, produced by the Positive Money group  in the UK? If you did, I cannot believe that you could ignore that many of the UK's problems are directly the result of a dysfunctional monetary system. You could fix that.

OK. I think that I have already gone on for long enough. I realize that you are going to be very busy in the coming months and years. But, I sincerely believe that the three main proposals that I have made here should not be rejected as the product of some bunch of Marxist loonies.  They are, quite simply, very sensible workable suggestions that could allow your Conservative government to really allow Britain to move forward.

Please think about them. Here they are again:
  1. Replace most existing taxes with a 0.025% tax on all Financial Transactions
  2. Replace most of the existing benefits system with an Unconditional Basic Income
  3. Replace the current system where 97% of the Nation's Money Supply is produced by Commercial Banks in the form of interest-bearing debt
As it happens, it turns out that the three proposals were actually in the UK Green Party's manifesto... and 1,156,149 voted for them.  It's not because the UK's first past the post system only gave those voters one MP that they were misguided. The Green party's proposals for reforming money creation even got mentioned on the BBC.

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