The Transformation Deal is a fiscal framework designed to transform the UK economy from one that is dysfunctional, sluggish, debt-laden and supportive of only a few (the top 1% of income earners, owners of assets – especially land – and pensioners) into one that is successful, dynamic, growing, environmentally responsible and that serves everyone.
The primary means of achieving this are as follows:
- Shifting the burden of taxation away from the productive economy (workers, value-adding businesses) and moving it to landowners and other rent-seekers using a Land Value Tax
- Licensing the ‘Commons’ – i.e. charging those who use public resources for private gain so that the public receive their fair share of the profits (such as banks, airlines internet service providers, oil & gas companies etc)
- Abolishing most of the welfare state and introducing an Unconditional Basic Income (UBI), thus freeing ordinary people to work, earn an income and make better decisions for themselves and their families without interference or punishment from the state.
- Introducing a Flat Rate Tax on all personal income. This will simplify the entire tax system so that we all understand it, the administrative burden of compliance is made lighter, and the opportunities to avoid tax are massively reduced.
- Reducing transaction taxes, but not for polluters or rent-seekers, thus supporting normal economic activities and reducing costs for consumers, but not encouraging an increase in consumption that is damaging to the environment or wellbeing of the general population
None of the new taxes should be punitive or excessive. The idea is to move the entire economy forward, not to fight old battles or settle scores.
The UBI will retain some means-tested benefits where this is appropriate and required (i.e. for the disabled, pensioners, carers and others who are less able to take advantage of the Transformed economy). There is acknowledgement that some people will require greater support than others, whatever the economic outlook.
The Transformation Deal is unashamedly pro-business and pro-worker, while providing unwavering support to every citizen. It is committed to ending all poverty, partly through the UBI, but also by giving everyone the opportunity to enjoy the benefits of the Transformed economy. It is also unequivocally opposed to rewarding rent-seeking (i.e. extracting payment from the economy without adding value), as the current system does, by ending subsidies on land and other assets and by taxing land ownership at a sustainable level.
It does not (for now) take a position on the many policy areas beyond tax and benefits, but would clearly lean towards progressive approaches that improve delivery and enhance the experience of users, consumers, patients, students, workers, commuters, tenants and customers. Policies that serve everyone, support a more effective economy and are affordable should always be the goal.
On the issue of the fiscal deficit, the Transformation Deal will seek to eliminate the deficit, but only through economic growth. No further cuts to public spending are envisaged, except from efficiency savings or aspects of the Transformation Deal that will reduce costs (i.e. removal of employers National Insurance, reductions in VAT or simplified tax collection/benefit paying requiring less resource).
By the same token, spending on public services will only be increased through economic growth also. There is no room for further borrowing, money printing or other monetary magic tricks (such as negative interest rates or whatever other wheeze those in power come up with next). We will become wealthier by increasing value in the economy, not by trying to trick the market.
Why have I created the Transformation Deal?
I have been interested for a long time in economic policies that make a break from the under-performing consensus that has governed us for much of the last 25 years. Unconditional Basic Income (UBI), Land Value Tax, Flat Tax, Commons Licences and the general simplification of our economic governance are all ideas that could help our economy move forward in leaps and bounds, but I struggled to find a source that had brought them together in a costed, coherent way. So, this is my attempt to do just that. Lots of people are currently talking about why UBI is a good idea, for example, but very few are able to outline how we will pay for it.
I’ve tried to apply the following principles to all tax and benefits proposals:
- They should be simple to understand and implement, thus improving accountability, reducing bureaucracy and ensuring effective impact. Taxes should be easy to collect, benefits easy to distribute.
- They should be fair (a very subjective term, but in essence: nobody should be left out; everybody should be given reasonable opportunity to provide for themselves and their family; and nobody should unduly profit from the efforts of others)
- There should always be incentive to add value and disincentive to destroy value or rent-seek
- They should not attempt to punish people for past economic wrongdoing, nor compensate them for past mistakes. We need to look forwards, not backwards
- They must be affordable within the current economic climate. The aim is to improve the economy, but we must start from where we are. There is no ‘wish-list’ of spending, no reckless borrowing and no monetary or fiscal ‘tricks’ that will magically make everything better.
- They should support all people and businesses that add value – private enterprise is not the enemy – but they should not subsidise private gain. No private interests should be allowed to dip into the public purse or extract wealth from common resources.
- They should support effective public services, infrastructure and regulation, which are absolutely necessary for any market to function well. However, any increases in public spending (and/or reduction in the fiscal deficit) must be achieved by growing the economy
- They must move us towards ending poverty completely, either by income redistribution or by the empowerment of those on low incomes. They should provide extra support to those who need it.
- They should empower the people to achieve their own outcomes directly, rather than seek to impose political outcomes or targets.
- They must provide a fiscal infrastructure that encourages our economy finally to make the transition from dirty, carbon-based and nuclear energy to clean, renewable energy.
- The Transformation Deal is revenue neutral in relation to current public spending. This is partly to counter the objection from different parts of the political spectrum that the deal with increase taxes or decrease public spending. It aims to keep both constant until a political decision is taken to do otherwise
- They should try to avoid ‘double dipping’ (i.e. taxing the same thing twice) which is why land will generally only be taxed once with LVT. i.e. Income people receive from renting a room in their house, or inheriting land, for example, will not be subject to the flat income tax
As a member of the UK Green Party, it is my hope that the Transformation Deal will be adopted by it as their core economic proposal in the next General Election. However, I can only lobby for that to be the case. I have no formal power to make that happen.
I have no problem with any other interested parties stealing the ideas they find here or contributing to their development. The proposal outlined here is not quite fully formed and I would keenly welcome any comments, feedback or challenge that readers would like to make. I have already borrowed heavily from the work done by many other people and am open to all reasonable ideas, so please challenge anything here if you have any thoughts!
I will outline the details of each of these areas over the coming weeks, so watch this space…