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Rebalancing Society...

April 29, 2020 4:00 PM
By Keith Melton

Rebalancing Society - reviewing the economic costs

From the ChairWe need a major economic shift as we emerge from the pandemic lockdown, which was put in place for health reasons but has inevitably had huge financial and economic repercussions. This is going to need more fundamental change than most current politicians seem ready to contemplate. It is certainly going to require change on a scale a Boris Johnson Government will not readily embrace. But then I wonder whether, or for how long, Johnson can stay in charge - as it would seem the long knives are already out of the drawer and being sharpened.

I have argued in my previous three articles from the Chair ("The times they are a` changing` 1" here; Part 2 here; and Part 3 here) that sound environmental thinking requires significant shifts of behaviour and policy. Some of these changes may be achieved with very little economic cost - just one example could be the lowering of speed limits to lower fossil fuel usage. No cost to implement and probably only marginal cost to economic activity.

On the other hand, some changes will need significant investment to bring them about quickly. For example, we need to speed up the change from fossil fuel vehicles to electric vehicles. Some change can be forced on the market by regulatory changes with no immediate cost to the public purse, but that will almost certainly need to be supported by financial incentives to the motor industry if we are not to see widespread redundancies and closures as companies move their centres of manufacture to countries with less strong regulatory systems.

However - it is also of concern that this will be happening just as this country is also leaving the regulatory protection of the European Union. It is not difficult to envisage the UK as a rogue state on an island off the coast of Europe, having crashed out of the EU, seeking to allow its manufacturing industries to cash in from a low-regulation regime! We must not let this happen!

UBI - Universal (or `Unconditional`) Basic Income

Ed DaveyI was pleased to see Ed Davey has been pressing for moving towards UBI (Unconditional Basic Income) as a policy idea that made it to the media headlines. I have been an avid supporter of UBI for a long time now and wrote recently about its potential use in place of using the derided Universal Credit system as part of the Corvid-19 rescue package.

There has been some extended discussion of UBI on various FaceBook threads and there seems to be a consensus building that it should be Lib Dem policy. In fact it (sort of) already is! Back in the early 1990`s Policy Paper 007 (!) supported a Citizens` Income which was more or less what UBI is. Sadly this didn`t survive the Orange Bookers` takeover of Economic Policy during the Coalition years, but it now seems to be an idea for its time. Perhaps this is one policy change Green Lib Dems can agree on for when the lockdown finishes - we will include it on the agenda of the GLD Virtual Conference to begin on 20th June. So, watch this space!

One thing worthy of note is that as far back as 1969 there have been claims that UBI would actually make a difference in terms of the overall improvement of mental health in society. One of the key benefits of alleviating poverty is the reduction of stress levels associated with that poverty and this would have a significant affect on the mental health of children. The article to which this idea is linked contains the following paragraph.

"UBI would also help people, usually women and children, to leave abusive relationships.
Domestic abuse occurs more often in poorer households, where victims lack the financial means
to escape. Universal credit makes it more difficult for women to leave abusive situations."

There still seems to be a rump of right-wing libertarian Lib Dems who did not yet choose to leave what they saw as the floundering Lib Dem ship. They, unsurprisingly, raise the "terribly costly" nature of UBI as a reason for not attempting it. So, as part of my reasoning for the title of this article "Rebalancing Society", let me attempt to demolish the myth of the expense of UBI as an argument against it.

The argument goes that in order to pay for this idea (and, mostly, detractors choose to argue about the COST rather than the sustainable environmental benefits and merits of UBI) we would need to raid the piggy banks of natural Lib Dem support amongst middle income voters, so it would "put people off" voting for us. So, opponents of UBI always ask what they consider to be the Killer Question in an argument - `What will you set the UBI income level at?`

It does not matter what you answer (£x per person) because they will then say - `If you multiply £x by the very large number of people in the country you get a very, very large number of £s`!! Then they go on to claim: `We win - it`s too expensive!`

My counter-argument is that the actual number you use for the calculations does not matter, anyway, because you can establish a process to make the introduction of UBI to be a fiscally neutral form of taxation over the population as a whole. In that way it would be a very progressive form of taxation and would be a wholly redistributive, rebalancing process. For once, the very rich would pay for the very poor.

The lowest income strata of society would benefit by the whole sum of the UBI because the tax allowances would be set above whatever basic level was chosen, therefore the poorest people would not pay any tax on UBI income. Above a certain level the lowest tax rates would claw back a small proportion of the UBI from lower earners, but they would still be better off than without it. Towards the median level of income a greater portion of UBI would find its way back into public coffers.

And in what even the Tories would consider to be middle income individuals and families the taxation system could be set to recover virtually all of the UBI, making them no better off and no worse off (just like baby-Bear`s porridge it would be just right!)

What would be required in the UBI system is a new rate, perhaps two new rates, of taxation that progressively recover the costs of the whole exercise. But those rates would not apply at or below middle-income levels. It also needs to be said that those rates would not need to be as high as the highest tax rates of the 1960`s, for anyone else old enough to remember the Beatles complaints about the taxman (`There`s one for you: Nineteen for me!` referred to the top rate of 95% of tax) >>> Listen here!

In addition to the fiscal neutrality (or, perhaps, as part of it) there would be savings on at least some of the current means-tested benefits. Some could be ditched altogether, offering significant administrative savings. Some could be simplified offering qualified savings and some would need to remain, for example to balance large regional variances of housing costs.

Feeding the country

One of the biggest factors to have emerged from the Pandemic lockdown has been the centrality of food strategy. I have already referred to this in the previous articles, but I wanted to pick the subject up again in terms of Rebalancing Society. There is no doubt that we have to increase the proportion of our food that is provided from within our own borders, simply in terms of food security and then in terms of reducing food-miles. Having spent many years of my professional life lecturing on International Marketing, I know that, because of Ricardo`s Law of Comparative Advantage, the relative price of food in the UK will inevitably rise if we choose to be more self-sufficient in food.

Secondly, in order to decrease the threat of biodiversity loss within our agricultural industry, we are going to have to insist on less-intensive forms of agriculture becoming the new normal. This, too, will create an upward pressure on food prices.

Thirdly, in order to secure the future of non-industrial agriculture, we need to rebalance the cost and price framework of foods, so that smaller and medium sized farms can survive economically. We need to lessen the economic power of retailers in favour of paying a fair price to farmers for their produce.

The overall effect of these three things will be to raise the real prices of food as a proportion of incomes across the board. If we are to ensure a just transition for this process, however, we need to ensure that food-poverty is eradicated and also that, for the lower economic strata of society, the price of food does not preclude other purchases.

Value Judgements

This brings us back to UBI and the taxation structure in the country. Whatever level is chosen it must allow for the eradication of food poverty. We also need to have a grownup conversation about people`s values in this country, too. This needs to factor in food prices and environmental qualities of air pollution and water pollution and so on - set against the perceived value of being able to "jet off to southern Europe for a fortnight`s sun" without paying the true cost of the pollution caused by the air travel used.

Recovery from the high economic costs of the Pandemic Lockdown, should not lead us all into the next crisis from which recovery might prove to be much more difficult. One of Donald Trump`s arguments about having a lockdown that is too long was the aphorism that "..the remedy must not be worse than the illness."

But I think that we need to turn this flawed thinking on its head. Trump`s proposals that we should weaken environmental protections in order to "...get back to business as usual as soon as possible" - a view shared by right wing Tories - is wrong simply because it was "business as usual" that was causing Global Heating and Biodiversity Loss in the first place. We must choose improved values of a New Normal, otherwise we will just be leaping from the frying pan into the fire.

Society seems addicted to unsustainable, ever-increasing consumption. And, as with any addiction, the first step to controlling it is to recognise the real nature of the problem. Society has become powerless over unfettered consumption - and as a result our lives have become unmanageable. The second step is to recognise that the new power of human togetherness, greater than ourselves as individuals, can perhaps restore us to sanity.

Share YOUR values with us

If you are interested in being part of the grownup conversation on our societal values as they relate to the environment, Keith Melton (Keith Melton)referred to above, and if you want to take part in our "Summer Season" of Conferences, events, webinars and meetings, then please Pre-register your interest by sending us an email to info@greenlibdems.org.uk

I look forward to hearing from you...

Keith Melton

Chair of the Green Liberal Democrats