The catastrophic results of last weeks General Election will no doubt cause a great deal of soul-searching in the Labour party. There will be some who will argue that the solution should be to move the party towards the centre ground – following the tactics of the Blair government. There will be others who will argue for a more radical left-wing approach.
For my part, I sincerely believe that the problem with Labour's 2015 Election Campaign is that there were few truly radical proposals in it. Sure, Ed Miliband tried hard to convince voters that the NHS was safer in Labour hands, and there were a few proposals like the abolition of non-dom tax status and the mansion tax. But in many ways, this really only seemed like a somewhat toned down version of Tory austerity.
Many would-be Labour voters probably ended up voting for the UK Green Party, who managed to attract 1,156,149 votes – despite only being rewarded with one seat. The fact is thatthe Green Party's manifesto contained a far more imaginative set of proposalsthan Labour's. And yet was there anything in the Green Party's proposals that was fundamentally at odds with Socialist principles?
For me, there are three very major proposals in the Green Party's program that could and should be seriously considered by Labour. Indeed, for me they are so sensible that I have argued that David Cameron'sgovernment should also take them seriously. They are:
- Replacing much of the existing tax system with a very modest tax on Financial Transactions in the UK
- Replacing much of the existing Welfare and Benefits system by an Unconditional Basic Income that would be paid to all Citizens from birth to death
- Replacing the current system in which the Nation's money supply is created by private banks as interest-bearing debt
As I mentioned yesterday, the £2 quadrillion figure isnearly 4000 times higher than the revenue generated by all the taxes collectedby Her Majesties Customs and Excise - £513.6 billion in 2014-15, implying that the government could scrap all the current tax system, and replace the lot with a universal financial transaction tax of just 0.0257%. The idea that everyone would pay – not just the traders in the City. Thus, if someone gets paid a salary (or a pension) of £2000, roughly 51p would be transferred to the treasury. And if they spent £1800 of that salary in credit card payments, gas and electricity bills, rent or whatever, they would lose a further 46p. So, while the amount paid by such an ordinary citizen would be negligible (less than £1), the amount that would be handed over by the high-frequency traders responsible for doing the $5.3 in foreign exchange trading would be very considerable. But that's only fair.
There is no reason to defend the current system based largely on VAT – value-added tax – that for some reason totally ignores Financial Transaction. A cynic would say that it is normal that the Financial Sector shouldn't pay VAT, because all that frantic trading doesn't actually add any value to the economy. But that is precisely why a radical reform of taxation would make so much sense.
Let me just point out one other huge advantage of using an FTT to raise the needed revenue instead of the current system. Currently, some 83% of all UK tax revenue comes from just four taxes, namely, Income Tax, VAT, National Insurance Contributions and Corporation Tax. All four are notoriously open to "tax optimisation" or evasion. Non-doms can declare their income abroad, and thus deprive the state of much needed income, even when they fully benefit from living in the UK. Scandals involving VAT claims are also rife, and have led to billions being paid out in unjustified "refunds". National Insurance Contributions can be avoided by paying workers under the counter. And, of course, the ability of multinationals like Starbucks, Amazon and Google to avoid paying their share of Corporation Tax has been a major scandal for years. All such abuses would end with a switch to an FTT based system.
Finally, it is worth remembering that the cost of implementing an FTT would be tiny compared with the cost of the current tax system. Now that the vast majority of payments are made electronically, it is literally just a question of adding a single line of code to the software that handles the transactions to allow the treasury to recover the funds. And changing the rate when needed would be no more complicated than allowing for fluctuation in the exchange rate.
Let us now look at the second major reform. This is the proposal that we should effectively scrap most of the current welfare and benefits system, and replace it by the introduction of an Unconditional Basic Income that would be paid to all Citizens, from birth to death. We are already used to the idea of a Universal Child Benefit paid for every child under 16. And we are also used to the idea that all people over a certain age should be entitled to a basic State Pension. The idea would be that everyone should also receive a basic income throughout life. Some people find the idea of paying people money for doing nothing objectionable, but it actually makes very good sense.
We currently have a system in which 97% of the money in circulation has been created by privately owned commercial Banks. Those banks effectively have a monopoly on money creation – a monopoly that they have enjoyed since the creation of the Bank of England in 1694. That ability to effectively lend out non-existent money and charge interest is the real reason why our entire system is biased towards making the rich even richer and the poor even poorer.
It is already outrageous that a Bank can lend money that it doesn't have, and dupe borrowers into believing that they are being lent money that has been deposited by someone else. But the insanity of the system becomes even more apparent when you consider the situation where Commercial Banks lend the UK government money that they don't have. In the five years that Osborne and Cameron have been in power, public sector debt has increased a staggering£625 billion, from roughly £975 billion at the end of 2009 to over £1600 at theend of 2014. That's roughly £10 000 of extra debt for every man, woman and child in the UK. And this, at a time when the UK government has been claiming that they have been handling the economy wisely.
No, they have been running bills and putting it all on the slate for the coming generations. Who benefits from this? It is the Banks who create the "money" that they lend. The historical record shows that interest payments on public sector debthas averaged 4.4% of GDP since the creation of the Bank of England in 1694. Servicingthis debt has robbed UK taxpayers of £654billion of hard earned cash since 1995, and over £49 billion in just 2014alone.
This insanity has to stop. The problem is that the City and the Bankers have the government in their claws. Osborne and Cameron know that if ever they were to challenge the status quo and threaten to kill the goose that has been laying golden eggs for the Bankers and their friends, then they could be squeezed hard by an increase in interest rates. With UK public sector debt at over £1600 billion, it is clear that any increase in the interest rates would totally cripple the government.
How can this situation be changed? While it would be nice to simply pass an act of parliament making it illegal for Banks to lend money they don't have, there will certainly be massive resistance to such a move. I suspect that the simplest strategy would be to introduce the first two measures – namely a tax on financial transactions, and a Basic Unconditional Income for all citizens and use them to provide a form of Quantitative Easing for the People. The Unconditional Basic Income would be true debt free money – it doesn't have to be paid back, and there would be no interest to pay. Thus, progressively it would be possible to use the mechanism to allow the economy to recover from the massive amounts of debt that are currently crippling it.
Some would argue that injecting debt free money directly into citizens' pockets could result in inflation. There's a simple solution. If the amount of money in circulation starts to increase too much, the Financial Transaction Tax could be used to remove any excess. With those two levers in place, the Bank of England would be able to adjust the amount of money in circulation, and at the same time gradually phase out our dependence on debt based money produced by Commercial Banks.
So, there you have it. Three very radical suggestions that could easily be part of a future Labour program.
Interestingly, those three proposals were already in themanifesto of the UK Green Party. Why not team up with them? Combine your ideas, and you would be able to provide a very real alternative to another 5 years of Tory austerity.