Author: Malcolm Henry
Radically good ideas often sound absurd when put alongside the common-sense logic of everyday political debate. We rarely notice the toxic assumptions that constrain our imagination. Malcolm Henry's imagined interview, between a future leader of the Labour Party and Andrew Neil, brings together some of the powerful arguments that can help make Universal Basic Income (UBI) and a sovereign money system make sense, even in the cauldron of Sunday Politics.
AN: Josephine Bloggs, you have been elected as leader of the Labour Party on the back of a slogan – One Good Thing …
JB: Making money work properly for everyone.
AN: Yes, that’s all well and good, but you’ve persistently avoided answering any questions about anything else. How can you expect people to vote Labour at the next general election when you refuse to tell us what your position is on immigration, or defence, or health, or education, or foreign affairs?
JB: Because if money doesn’t work properly then nothing else can.
AN: That’s as may be but while you’re busy with your financial reforms who’s going to run the country and what policies will they be pursuing? The electorate needs to know.
JB: The electorate knows fine well that public services are run by civil servants and that politicians generally get in the way. Labour government policy, in all areas, will be to empower public servants to serve the public, to be helpful to people who need help. Far too much time and energy is wasted by public servants trying to satisfy the the whims of government ministers. That will stop.
AN: So nothing specific on health? Or education? Or immigration?
JB: Health and education are in crisis because of lack of investment and too much ideological meddling by politicians. It will take us one parliament – five years – to make our financial and fiscal systems work properly for everyone. During this time our policy for every other department will be to let the people who actually do the job – doctors, nurses, teachers – get on with it and respond to their requests for government help in whatever ways we can. When we’ve got money working properly we will then be able to give our health and education services the funding that they need to do the job.
AN: And immigration?
JB: We will encourage immigration officials to be as helpful as they can to everyone who needs help.
AN: Sounds like you’re going to be soft on immigration.
JB: No. Our immigration policy will operate within the constraints of whatever legislation we inherit. Same as everything else, apart from financial and fiscal reform. We will concentrate on doing one good thing - making money work properly for everyone. When it’s working properly people can then decide – at a general election - what changes they want in other policy areas, including immigration.
AN: Okay. Let’s move on to your financial reforms. You’re proposing to give everyone in the country £1,000 a month…
JB: Universal Basic Income.
AN: Call it what you like, you’re proposing to give people £1,000 a month for doing nothing.
JB: No, we’re proposing to give everyone a basic income as a right of citizenship.
AN: But it’s money for nothing! Your critics say that that it’s immoral to give people money that they haven’t worked for. Universal basic income is a recipe for universal idleness.
JB: Our critics need to think a bit harder about it. Dividends, rent, pensions, inheritances, a winning number on the premium bonds. All of these are money that we get without having worked for it. What is interest on loans? Money for doing nothing. Our entire financial system is built upon the concept of getting money for nothing.
AN: But all of these things that you’ve listed are sources of income that we get from money that we’ve earned and invested in shares, pension funds, property, and so on. That’s fundamentally different to being given money for simply existing, which is what your proposing.
JB: Are you seriously telling me that the privilege of having spare money to invest means that the income from it is morally superior to universal basic income? Our entire financial system is built on the concept of getting money for nothing. Banks create money out of thin air for almost no effort whatsoever and then rent it out to us. Money for nothing. The income that you get from your investments is money for nothing – you don’t do a stroke of work for it. When you sell your house for twice the money that you paid for it you’re getting money for nothing. When your Auntie Mavis dies and leaves you the contents of her bank account you’re getting money for nothing. Arguing against universal basic income on the grounds that it’s money for nothing is perverse, given the way that our financial system works.
AN: But even some of your supporters are concerned that giving people £1,000 a month will reduce the incentive to work, knocking a big hole in the economy. The Arthur Smith Institute has calculated that your UBI proposals will reduce GDP by as much as 8%. That’s not just recession, that’s a major depression. Economic catastrophe.
JB: This is a very strange argument. If our motivation to work stops after we’ve been given £1,000 a month then why on earth does any employer pay anyone any more than £1,000 a month? I don’t believe for a moment that UBI will discourage people from working. All of the available evidence suggests the opposite is true. All of the UBI trials that have been conducted over the last 40 years have reported an increase in economic activity.
AN: But most of these trials have been on a very small scale and in third world economies. There has never been UBI on a national scale so you can’t say what effect it will have on the economy – on businesses which drive the economy.
JB: Businesses will love it. UBI will reduce their monthly wage bill by up to £1,000 per employee per month. This will give UK businesses a huge commercial advantage.
AN: Hang on a minute. You’re the leader of the Labour Party and you’re promoting a policy to cut workers’ wages.
JB: I’m promoting a policy that abolishes wage slavery, levelling the playing field between employers and employees. When we introduce UBI the legislation will include the right of employers to reduce wages by up to £1,000 a month, but it will also include the right of employees to renegotiate their contracts. In some cases they’ll be perfectly happy to accept the full £1,000 salary cut. Why not? There will be no loss of income overall. Other workers, especially those doing unpleasant work for low wages – cleaners, for example – will be less likely to accept a much of a cut, if any, in which case their overall income will rise, at no extra cost to the employer.
AN: Okay, let’s set aside concerns about the effects of universal basic income. How are you going to pay for it? In the same report the Arthur Smith Institute calculates that universal basic income of £1,000 a month will cost the taxpayer £700 billion pounds a year. That’s a huge amount of money, nearly half of the UK’s GDP. It’s unaffordable!
JB: The Arthur Smith Institute is almost right. If you were stupid enough to try to fund basic income using conventional taxation it would add about £500 billion to the annual tax bill. But our financial reforms mean that we’re actually going to cut conventional taxation by about 35% in the first year, getting rid of stupid taxes like national insurance and VAT.
AN: This makes no sense. You say that your basic income will cost £500 billion more to fund than, presumably existing welfare payments that it will replace, and that you’re going to cut taxation by 35%, what’s that another £200 billion?
JB: About £240 billion.
AN: That’s a £740 billion black hole. How on earth are you going to fill it.
JB: We’re going to stop the nonsense of taxing productive activity – that’s what national insurance is, taxing jobs – that’s what VAT is, taxing trade – and create a system that guarantees a regular cycle of money between those who need to buy things and those who have things to sell. We call it the Common Cashflow Fund. We’ll be launching a website next week that shows how it works and what it will mean for your personal finances.
AN: I still don’t understand how you’re going to do this. You have to fund it by taxing something. What are you going to tax?
AN: Money? You’re going to tax money?
JB: Yes. Specifically idle money. For an economy to thrive money has to be available and mobile. Businesses rely on having customers with money to spend. Therefore if we want our economy to thrive we need to keep our money moving. We’ll keep money moving through the economy by applying negative interest to every bank account – a tiny trickle of money flowing out of every account every hour into the Common Cashflow Fund, which gets distributed as universal basic income every month.
AN: Wait a minute. How is anyone going to be able to save if you’re pilfering from their bank account every hour?
JB: There’s a trickle coming out every hour but there’s £1,000 coming in every month, which makes it very easy to save if you have another source of income, like a job or a private pension. Each of us will be able to maintain a balance of less than £40,000 without penalty. If you have more than that you’ll be keen to lend or invest it rather than let it be nibbled away by negative interest, which is why the system will be so good for the economy. Money will be readily available at zero interest. Businesses will get the short term loans or the long term investment that they need without the burden of interest payments. Same with government.
AN: But money in the bank is what makes people rich. Your negative interest is an attack on wealth.
JB: No it’s not. Money in the bank is an illusion of wealth – the 2008 crash surely taught us that. If you want to stay wealthy, spend your spare money on something valuable, or invest it in something profitable.
AN: So the rich are going to convert their cash into property. You’re going to create a property bubble. You’re going to price ordinary people out of the housing market.
JB: We’ve been living with a property bubble for 30 years. Ordinary people are already priced out of the housing market. Which means our proposals for restricting mortgage lending and rents – will be very welcome.
AN: Aha! There it is. Old-fashioned socialism. Interventionism. Government control of the housing market. You told me earlier that you weren’t going to be bringing in any new policies apart from financial reform.
JB: Restricting house prices is financial reform. Our economy has been fuelled by deliberate house price inflation for the last 30 years and it’s unsustainable. Our proposal is driven by pragmatism, not socialism. If current government policy on mortgage lending is allowed to continue the shambles that is our economy will descend into catastrophic failure. The 2008 crash was just an indication of what’s to come.
AN: I have no doubt that we’ll come back to this, but we’ve run out of time today. So thank you, Josephine Bloggs.
The publisher is the Centre for Welfare Reform.
One Good Thing © Malcolm Henry 2017.
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