A Sustainable Economy
Tackling Britain’s private debt crisis
Economic growth remains the predominant policy goal in the UK. However, the pursuit of economic growth stands at odds with environmental sustainability, and it is not needed to achieve social objectives such as full employment and improved quality of life.
A fundamentally different approach to managing the economy is required that puts people and the planet ahead of growth in GDP.
National Investment Bank and small & medium businesses
As of July 2017, the Bank of England measured the stock of private debt held by individuals at £1.548 trillion; making household sector indebtedness one of the biggest problems facing the United Kingdom’s economy and society.
Is this level of private household debt a problem requiring action by an incoming Labour government? And can public policy address the unprecedented levels of household debt?
Procurement & the Third Sector
The 2017 Labour Manifesto calls for a National Investment Bank (NIB) and a network of regional development banks. A ₤250 billion “National Transformation Fund” would be focused on infrastructure and housing, and NIB would provide ₤25 billion/year lending to small businesses, including coops, and to contribute to “transforming our financial system”.
But how best to ensure that access to affordable credit is provided to the small and medium enterprises most in need of it?
Universal Basic Income
For public sector workers, outsourcing to third sector organisations of local government and NHS delivery represents as big a threat as the private sector.
A Labour government should consider returning cooperatives, mutuals, social enterprises and third sector organisations to their original function of employment provision and generation, community support and self defence.
Control of the Energy Sector
A universal basic income (UBI), tax-free weekly income to every individual, provides an administratively simple method to resolve a range of social problems. A modified scheme that provided a universal and unconditional income at a moderate starting level, leaving much of the existing system intact, would be feasible, affordable and beneficial.
Changing Occupational Pension Funds
In its 2017 manifesto the Labour Party promised to bring energy sector back under public control through a phased approach, which is most sensible. The transition phase is likely to be challenging and will need effective management.
Public policy in the energy sector should target new capacity creation rather than taking over existing and potentially overvalued capacities.
Wage policy & public investment for sustainable development
British employees have traditionally relied on occupational pension funds in addition to Pay-As-You-Go State pensions to provide retirement income. These workplace funds are becoming less able to provide income security for all, let alone promote economic growth and financial stability. A change in state benefits must form the core of any retirement income provision system. If occupational pensions are to form a meaningful part of the change, a number of problems need to be addressed.
Successful Macroeconomic Stimulus
Decades of neoliberalism leave Britain with high inequality and the worst investment and productivity performance in the developed world. Reconstructing this broken economic system requires a comprehensive policy mix based on public investment and labour market policies for equality-led growth.
Replacing Universal Credit
Modern economies can be stimulated by macroeconomic policies that increase purchasing power. If the stimulus is deficit-financed, the resulting increase in national debt can be accommodated within broad limits.
This policy brief looks at the conditions that allow for successful implementation of macroeconomic stimulus programmes appropriate for a progressive government.
Citizens’ wealth funds
The Conservative Government elected in 2015 declared an objective of reducing expenditure on working age claimants by £12 billion a year – that is £12 billion from the unemployed, the chronic sick and the low-paid (and their children). The then Labour leadership decided to abstain on the issue. There could be no better example of the bankruptcy of mainstream politics in Britain.
It is doubtful whether existing policies could in fact secure such a reduction in the near future.
Since 2008, the question of inequality has moved up the political agenda. This rising concern has yet to translate into policy action. The UK continues to sit towards the top of the global inequality league, while leading forecasters predict a deepening economic divide until 2020.
Citizens' wealth funds offer a positive opportunity to tackle the twin problems of rising inequality and under-investment.
Labour Mobility in UK and EU
For four decades British governments have placed priority on maintaining low inflation. Under Conservative governments this functioned as the central macroeconomic policy goal. A Labour government will come under strong pressure to maintain this priority, though it is frequently in conflict with other objectives such as economic growth and full employment.
Population health & reduction of health inequalities
Free movement of labour and migration/immigration are hotly debated throughout Europe, especially in election campaigns. Some of these discussions and even political initiatives ignore important facts and arrive at unrealistic, unpractical or unfair conclusions.
Innovation, Jobs & Productivity: Supporting Business R&D
The UK has the longest and strongest tradition of research on the social determinants of health and health inequalities for any country, more government papers and reports, and more policy. Yet British governments have struggled to reduce inequalities in health.
Hurricane Irma & Tax Havens
Direct and indirect public support (subsidies and tax relief) for business R&D in the UK is higher than most other OECD countries, excluding the US, Korea, Canada and France. Also, the UK support regime relies on both direct grants and indirect support via tax credits with equal measures.
Nevertheless, total R&D expenditure as percentage of GDP in the UK (1.7%) is relatively low compared to OECD countries (2.43%).
Publicly Funded Drug Research
As the National Audit Office confirmed in their last report on the British Overseas Territories, the UK has the backstop financial responsibility for ensuring that these quasi-autonomous and self-governing locations are financially solvent:
"The UK bears the ultimate risk of potential liabilities from its overseas territories.
It is important …. that the UK should reinforce its close working with Territories to manage risks in government finances, disaster and crisis management."
This has particular significance in the context of the devastating impact of Hurricane Irma.
A National Care Service
It is government policy, not market processes, which cause high drug prices. Patent monopolies have the negative effects that free market oriented economists typically ascribe to government interference in the market. Altering government policy would make drugs cheaper for the NHS and thus increase provision.
Monetary Policy: Beyond QE
The adequate provision of social care is a major issue facing the UK. A near crisis has been triggered by the failures of privatised provision, aggravated by the austerity inflicted upon the NHS.
However, it is not just a question of providing enough care but also about developing new and different forms of care.
A Ministry of Tax
Two decades after the granting of independence to the Bank of England to determine its own monetary policy, the doctrine which formed the basis for this policy has been discredited by the financial crisis of 2007-2010 and its aftermath. This doctrine was the New Consensus on Monetary Policy, that monetary policy, principally varying the interest rate at which the central bank provides funds to the money market, can effectively regulate the rate of inflation and the business cycle.
Tax is an effective tool available to any government to implement its social and economic policies. The current institution for collecting taxes, HM Revenue and Customs, does not allow effective use of the tax instrument.