“Remember though, that earlier this year Bloomberg Economics estimated that Brexit was costing the UK economy £100bn a year in lost output. Reversing or ameliorating that would not fill Britain’s black hole, but it would be a start.” So wrote Jonty Bloom (£) in the most recent edition of the New European.
In fact, he was too pessimistic about options available to the next government to fund the £220bn he says must be invested to solve the UK’s crises.
Tax rises should be couched in terms of meeting the public’s desire for a fairer taxation system, where the wealthier contribute far more.
In terms of borrowing, the emphasis should be on personal savers and pension funds. Change the rules on Isas so that some of the £70bn saved annually can be invested in government-backed social or green bonds at a competitive interest rate.
Tax relief on pension contributions costs £54bn a year at present, so 25 per cent of all contributions could be directed to investments in such bonds, making more than £25bn available. A much-needed example of intergenerational solidarity.
Finally, he fails to mention the money-creation ability of the government should there be any shortfall in the more than £200bn per year needed.
During the banking crisis of 2008-09 and Covid-19 in 2020, more than £875bn of government-created money via quantitative easing (QE) twice saved the economy.
QE could therefore be another funding source to help rebuild Broken Britain’s infrastructure, a national emergency if ever there was one.
The local election results and the internecine war within the Tory party over their small state, low tax obsession did not exactly feature in the doorsteps in the run-up to the local election. We therefore need to be planning for a Tory defeat and a Labour government, possibly propped up by the Lib Dems and SNP.
This means that until the next election late next year the emphasis has to shift away from trying to persuade the government to change and improve things, towards fighting a relentless and focused war of attrition against the environmental and social harms this government is likely to force upon the country in the next year.
This would range from the 600 laws bonfire to its blocking of improvements in pay and conditions and infrastructure funding needed to prevent the further deterioration of health, education, housing etc.
Whilst doing this, it is crucial to realise that the key and most important target now has to be to get the opposition parties to all have an adequately transformational social and environmental programme. But this will also need a clear explanation of exactly how to pay for it.
Once this is in place, then those parties will be in a position to campaign for a credible series of really radical policies in their election manifestos. Their end goals should be to bring massive improvements for the majority and a sense of security about the future not seen since the Attlee government.
The centrality of the need to answer the question of ‘how do you pay for it’ is the fact that it is always the first question asked of any opposition spokesperson, as well as minister, when proposing any policy. It is also used by the right wing media to undermine any opposition party policy proposal that doesn’t suit its small state, low tax agenda.
Indeed, the key question reportedly asked of Labour by its focus groups is ‘how would it be paid for?’
At present, the inability to answer confidently and comprehensively that question cows opposition parties and prevents them from putting forward the massive and adequately funded radical agenda, to transform and improve the UK’s present dire social and environmental situation so desperately needed.
There are key ideas that underpin QuEST.
The first is that savings, tax, and government money creation – Quantitative Easing (QE), fr example – are all essential parts of the government funding cycle. This is an ongoing process where the three are balanced against each other and the needs of our society and planet to create the overall level of desired economic activity required to ensure that all needs are met, sustainability is assured and as many wants as possible can reasonably be satisfied.
All these funding issues are within the control of the government. It can design and control tax systems, and invest in their effectiveness. It can also define the rules that shape the tax-driven savings mechanisms that are used to manage 81 per cent of UK wealth, including ISA accounts and pension funds.
And the government is also responsible for deciding how much money it wishes to create and inject into the economy through the quantitative easing (QE) process to fund the investment that society needs. During the banking crisis of 2008/09 and Covid in 2020, more than £875 billion of government-created money – made using QE – saved the economy on those occasions. That proved the power of money creation – or QE.
Now it just has to be understood that this is a force for social and environmental good and not just for emergencies.
In terms of prioritising these demands, the easiest to grasp and the one most likely to get public support, and hence the most likely to get an initial opposition party buy-in, will be proposing a ‘Save for the Planet’ and ‘Savers for Society’ approach.
This would involve changing the rules on ISAs (Individual Savings Accounts) so that some of the £70 billion saved annually could be invested in government-backed green bonds at a competitive interest rate. This would be extremely popular with savers and, given they tend to be older and that their savings would be used to employ huge numbers of younger workers, this would be a good example of intergenerational solidarity.
In addition, if pension rules were changed so that, in exchange for the tax relief given on these contributions = which costs £54 billion a year at present – 25 per cent of all contributions had to be invested in green bonds, then more than £25 billion could be used to tackle the climate emergency.
There are a number of advantages of involving millions of savers, via changes in rules on ISAs and pensions in the budget. The money would pay for the training and employment of a huge workforce which could directly provide jobs, possibly for the savers themselves or their relatives, and help to strengthen their local economy.
It would also help tackle the increasing worry about the climate emergency and its effects on younger people’s future.
The second area most likely to get public support and hence stiffen the resolve of opposition parties is shifting the tax emphasis towards a fairer taxation system, where the wealthier contribute far more.
Once dismissed as the politics of envy by the Conservatives, the growing insecurity that is now rising up the class ladder, and the accompanying public resentment about the wealth being amassed by an ever richer, but small, elite should increase the political attractiveness of such measures.
Finally, any shortfall in the more than £200bn per year likely to be needed to solve the UKs environmental and social problems can be made up by QE. As has been pointed out during the banking crisis of 2008/09 and Covid in 2020, more than £875 billion of government-created money saved the economy on those occasions.
The next government, assuming it lasts five years, will likely require around £100bn a year of environmental improvements (see appendix).
Costings for the overall social infrastructural and worker needs are more difficult to find, but one recent guestimate put it at over £100bn a year.
What the opposition parties are at present offering when asked how they would pay for social and environmental improvements fall far short to this. Labour and Lib Dems both want a windfall tax, itself short term given the likely fall in energy prices, and Labour’s endlessly repeated small beer policies on non dom taxes and VAT on public schools clearly are woefully inadequate.
Even Labour’s commendable £28 bn a year green fund is only around a quarter of what is needed.