Regardless of party politics, most people want a future where everyone has enough to live a dignified and comfortable life. To make that possible, we need to tweak a few things.
Universal Basic Income
I suggested a long time ago that in the far future we could afford a basic income for all, without any means testing on it, so that everyone has an income at a level they can live on. It turned out I wasn’t the only one thinking that and many others since have adopted the idea too, under the now usual terms Universal Basic Income or the Citizen Wage. The idea may be old, but the figures are rarely discussed. It is harder than it sounds and being a nice idea doesn’t ensure economic feasibility.
No means testing means very little admin is needed, saving the estimated 30% wasted on admin costs today. Then wages could go on top, so that everyone is still encouraged to work, and then all income from all sources is totalled and taxed appropriately. It is a nice idea.
The difference between figures between parties would be relatively minor so let’s ignore party politics. In today’s money, it would be great if everyone could have, say, £30k a year as a state benefit, then earn whatever they can on top. £30k is around today’s average wage. It doesn’t make you rich, but you can live on it so nobody would be poor in any sensible sense of the word. With everyone economically provided for and able to lead comfortable and dignified lives, it would be a utopia compared to today. Sadly, it can’t work with those figures yet. 65,000,000 x £30,000 = £1,950Bn . The UK economy isn’t big enough. The state only gets to control part of GDP and out of that reduced budget it also has its other costs of providing health, education, defence etc, so the amount that could be dished out to everyone on this basis is therefore a lot smaller than 30k. Even if the state were to take 75% of GDP and spend most of it on the basic income, £10k per person would be pushing it. So a couple would struggle to afford even the most basic lifestyle, and single people would really struggle. Some people would still need additional help, and that reduces the pool left to pay the basic allowance still further. Also, if the state takes 75% of GDP, only 25% is left for everything else, so salaries would be flat, reducing the incentive to work, while investment and entrepreneurial activity are starved of both resources and incentive. It simply wouldn’t work today.
Simple maths thus forces us to make compromises. Sharing resources reduces costs considerably. In a first revision, families might be given less for kids than for the adults, but what about groups of young adults sharing a big house? They may be adults but they also benefit from the same economy of shared resources. So maybe there should be a household limit, or a bedroom tax, or forms and means testing, and it mustn’t incentivize people living separately or house supply suffers. Anyway, it is already getting complicated and our original nice idea is in the bin. That’s why it is such a mess at the moment. There just isn’t enough money to make everyone comfortable without doing lots of allowances and testing and admin. We all want utopia, but we can’t afford it. Even the modest £30k-per-person utopia costs at least 3 times more than the UK can afford. Switzerland is richer per capita but even there they have rejected the idea.
However, if we can get back to the average 2.5% growth per year in real terms that used to apply pre-recession, and surely we can, it would only take 45 years to get there. That isn’t such a long time. We have hope that if we can get some better government than we have had of late, and are prepared to live with a little economic tweaking, we could achieve good quality of life for all in the second half of the century.
So I still really like the idea of a simple welfare system, providing a generous base level allowance to everyone, topped up by rewards of effort, but recognise that we in the UK will have to wait decades before we can afford to put that base level at anything like comfortable standards though other economies could afford it earlier.
Meanwhile, we need to tweak some other things to have any chance of getting there. I’ve commented often that pure capitalism would eventually lead to a machine-based economy, with the machine owners having more and more of the cash, and everyone else getting poorer, so the system will fail. Communism fails too. Thankfully much of the current drive in UBI thinking is coming from the big automation owners so it’s comforting to know that they seem to understand the alternative.
Capitalism works well when rewards are shared sensibly, it fails when wealth concentration is too high or when incentive is too low. Preserving the incentive to work and create is a mainly matter of setting tax levels well. Making sure that wealth doesn’t get concentrated too much needs a new kind of tax.
The solution I suggest is a culture tax. Culture in the widest sense.
When someone creates and builds a company, they don’t do so from a state of nothing. They currently take for granted all our accumulated knowledge and culture – trained workforce, access to infrastructure, machines, governance, administrative systems, markets, distribution systems and so on. They add just another tiny brick to what is already a huge and highly elaborate structure. They may invest heavily with their time and money but actually when considered overall as part of the system their company inhabits, they only pay for a fraction of the things their company will use.
That accumulated knowledge, culture and infrastructure belongs to everyone, not just those who choose to use it. It is common land, free to use, today. Businesses might consider that this is what they pay taxes for already, but that isn’t explicit in the current system.
The big businesses that are currently avoiding paying UK taxes by paying overseas companies for intellectual property rights could be seen as trailblazing this approach. If they can understand and even justify the idea of paying another part of their company for IP or a franchise, why should they not pay the host country for its IP – access to the residents’ entire culture?
This kind of tax would provide the means needed to avoid too much concentration of wealth. A future businessman might still choose to use only software and machines instead of a human workforce to save costs, but levying taxes on use of the cultural base that makes that possible allows a direct link between use of advanced technology and taxation. Sure, he might add a little extra insight or new knowledge, but would still have to pay the rest of society for access to its share of the cultural base, inherited from the previous generations, on which his company is based. The more he automates, the more sophisticated his use of the system, the more he cuts a human workforce out of his empire, the higher his taxation. Today a company pays for its telecoms service which pays for the network. It doesn’t pay explicitly for the true value of that network, the access to people and businesses, the common language, the business protocols, a legal system, banking, payments system, stable government, a currency, the education of the entire population that enables them to function as actual customers. The whole of society owns those, and could reasonably demand rent if the company is opting out of the old-fashioned payments mechanisms – paying fair taxes and employing people who pay taxes. Automate as much as you like, but you still must pay your share for access to the enormous value of human culture shared by us all, on which your company still totally depends.
Linking to technology use makes good sense. Future AI and robots could do a lot of work currently done by humans. A few people could own most of the productive economy. But they would be getting far more than their share of the cultural base, which belongs equally to everyone. In a village where one farmer owns all the sheep, other villagers would be right to ask for rent for their share of the commons if he wants to graze them there.
I feel confident that this extra tax would solve many of the problems associated with automation. We all equally own the country, its culture, laws, language, human knowledge (apart from current patents, trademarks etc. of course), its public infrastructure, not just businessmen. Everyone surely should have the right to be paid if someone else uses part of their share. A culture tax would provide a fair ethical basis to demand the taxes needed to pay the Universal basic Income so that all may prosper from the coming automation.
The extra culture tax would not magically make the economy bigger, though automation may well increase it a lot. The tax would ensure that wealth is fairly shared. Culture tax/UBI duality is a useful tool to be used by future governments to make it possible to keep capitalism sustainable, preventing its collapse, preserving incentive while fairly distributing reward. Without such a tax, capitalism simply may not survive.