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item0039B 692, 693
692 14 April 2003
 Baby Bonds
These are, potentially, the biggest idea of
this Government, as big a vote-winner for Labour as bargain-basement
Council-house sales were, for Margaret Thatcher. Indeed, the two ideas
come from the same stable, engineering the transfer of capital to a wider
range of citizens, a massive democratisation of the capital base of society
- one undertaken by the Tories, the other by Labour. For many Council
tenants, purchase of their houses at give-away prices merely enabled them to
sell on at a capital profit, pocketing the gain.
Capital was duly
redistributed.
And they are both related to the concept of
"citizens' income", which
argues for a social order in which the Government makes annual grants to
every citizen, reflecting his or her basic "share" of societal wealth, thus
creating a minimum base to which conventional
"earnings" can be added, according to the efforts and achievements of
each individual. Citizens Income is a concept with many distinguished
supporters, both on the Left and the Right - and they will all be
celebrating this weekend.
A leading supporter is the
right-winger Sam Brittan, who wrote in the FT this week -
"The potentially revolutionary measure
in this year's Budget is the Child Trust Fund. The revolutionary
aspect is that for the first time a British government is committed to
distributing capital to citizens, as distinct from welfare-in-kind, or
social security payments. I have long thought that Karl Marx made
the wrong criticism of privately-owned wealth: it is surely not that it
exists, but that too few of us have it. The ownership of a little
nest egg to tide people over bad luck, to avoid their becoming complete
wage-slaves, and to give them some opportunity to opt out for a while from
the rat race, was a privilege of the traditional middle-classes. An
extension of such privileges to all would be a far more revolutionary step
than anything in the Communist Manifesto... It is important that
those who really believe in citizen capitalism... carry on tub-thumping in
support of the Child Trust Fund initiative".
- For my part, I
dislike the Brittan jargon - it's all too glib - I don't
think that "citizen capitalism" means anything at all, it's just a shallow
slogan. I cannot take you to the money-grubbing FT (because of its
2002 commercialisation), but I have found the text of this
excellent piece on
Brittan's own weblog..
I do agree with Baby Bonds
-
while endowing the scheme, in my own mind, with a more liberal
socialist rationale. Once
the BB mechanism is in position, it will provide a framework for the steady
growth of citizen confidence, citizen optimism - and that lies at the very
epicentre of a successful society. And of a successful modern economy...
Have your sorted out your own reaction to this revolutionary concept? Drop me a line
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693
17 April 2003
Budget Footnotes Budgets
invariably throw up basic statistics which are difficult to come by, at
other times of year.
- Public expenditure is
running at £450 bn a year, which accounts for just over 40%
of the national wealth - which means (very roughly) you can think
of our national annual turnover as £1,000 bn. Or
thereabouts - don't take any of these figures too literally, but bear them
in mind as rough benchmarks.
- Continuity - that 40% was
roughly the level throughout the 1980s and 1990s under the Tories - which
is why the Opposition is so reluctant to talk tax-cuts, and concentrates
on the better deployment of the tax income.
- Redistribution of wealth -
nearly one-third of "public expenditure" consists of social security
payments - that is, they are "transfer payments" between citizens.
For my part, I do not think of this as "Government expenditure" in any
real sense: the OAP who chooses between beer v heating, holiday v new
shoes, is making personal "consumer decisions", and should be thought
of as part of the domestic consumer market. That is not in any sense
"Government" expenditure
- Making that deduction, the
Government actually spends
(i.e. roads, schools, hospitals, armed forces and equipment, public
service salaries) £325 bn a year - or roughly 30% of our
national domestic expenditure (= Gross Domestic Product).
- That 70:30 ratio is -
again, for me - the key figure in the modern economic equation.
Governments, whose decisions relate to only 30% of national turnover, are
not in a position to use "public works" to steer the economy any more.
That is where Japan has gone wrong, in recent years, and where Bush's
calculations of economic strength could still go seriously wrong...
- The spending propensity of the domestic
consumer - the 70% participant - is the key factor
determining the health of every advanced economy. Not roads or dams,
not arms or soldiers, not Millennium Domes or any other Government ruse.
And that dominance will increase over coming years, as private wealth
increases and public service requirements are satisfactorily met.
- Where does the money come from,
to finance public expenditure? 50%
comes from the direct taxes on individuals (Income Tax, National
Insurance, Council Tax), and another 25%
indirectly, added to things that we buy (by way of Excise duties and
VAT). About 15% is
levied on businesses themselves (Business rates, Corporation Tax,
Employers National Insurance) - and the remaining
10% comes from a rag-bag of
miscellaneous taxes - and borrowing, to balance the books in each year.
This fingerprint of public
expenditure does not change greatly, from one year to another. These
are the underlying structural truths of day-to-day life, in a modern
economy. But they are not always easy to get at - except at Budget
time...
What are your favourite
indicators of economic performance? Drop me a line
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