Wanted! 
New Model of the UK

What is your "model" of the UK?  How do you configure your own "nation state", in your mind? In business, one talks about a "business model", as a means of describing how a trading system operates, or is planned to operate - the language comes from psychology, more particularly epistemology ("the theory of knowledge").

Government actions such as the recent threat to limit LA taxation presuppose a model - of the economy, the polity and the society - which subtly informs all political thinking.  It is vital that that model is "correct" - otherwise, the wrong policy conclusions will flow.  We should debate that model, openly.

• Let me try to state the propositions which underlie my own “model”, just to show what I mean.  The imaginative process is not an easy one.

My model is thus a unitary one, in all principal matters of
(a) trade and (b) welfare.  These are peculiarly functions of the UK State.  In making its principal “welfare promises” to all its citizens, a state should put the full weight of its credit behind each promise – in education, medical care, sickness and unemployment benefits, pensions.  Indeed, for the modern world, those welfare promises constitute the primary pillars of statehood.

Federal is good  I consider that a federal provincial model akin to those or Germany or Spain, suitably designed for UK circumstances, would work extremely well – indeed, the essential sinews of the appropriate model are to be seen at work, in Wales.  My full reasoning is set out at Building a Better Britain .  And I would wish to see executive devolution taken much further still, to all our great city regions – Newcastle, Liverpool, Manchester, Birmingham, Bristol, Leeds, Bradford, Nottingham, Norwich, Plymouth. Bournemouth, Southampton – with no doubt much lively debate over the final list, within each Province.  Provincial devolution (to our “big regions”) is entirely compatible with the re-launching of our great cities, although the process must be structured far more skilfully than in the case of either Scots or Welsh devolution.

I favour, you may recall, a Graduate Tax, levied on all future graduates, by way of percentage premium on their primary income-tax liability.  That was Charles Clarke’s initial preference.  I have always been content with the principle that graduates should fund additional university funding requirements, rather than draw down upon general taxation.  I simply threw in, for good measure, a bit of wealth redistribution, by levying the tax on all graduates, including graduates from wealthier families who did not need public funding in the first place.

The Pertax would seem to be a wholly-new fiscal instrument.  The State makes a specific outlay, for the benefit of a particular person, and is entitled to recoup the money only in certain circumstances.   Any student may use these Pertax facilities – not only those whose families cannot afford to pay outright.  This is not a conventional “loan” arrangement, for a borrower lacking other ways to pay – it is potentially something far grander.  It is potentially an alternative way of funding certain public service themselves.

Unlike a loan, with a Pertax there is no outright obligation to “repay”.   From the student who drops out or flunks the exams’ the State will not be entitled to recoup any part of its outlay.  The liability to pay this Pertax will be triggered only by the achievement of a graduate qualification of some kind.  And then earning more than a minimum trigger income.

If a graduate chooses a low-income life-style, and never earns more than £15,000 pa at present values, the State will never be able to levy the Pertax at all.  The impecunious graduate cannot be made to “repay” in any other way.   Again, this bears none of the hallmarks of a conventional loan.

If the graduate continues for the whole of life in low-income employment (albeit in excess of £15,000 pa) and yet retires or dies without completing the “repayment”, the State will not be able to recover the balance against his estate, however wealthy he may turn out to be in death – again, unlike a loan.

I have not worked out what happens if the graduate emigrates, and lives a life outside the UK Income Tax regime – can a tax be levied in any other way, on “foreign” income?  Has any reader of this Website sussed that out?

If it works, the Pertax would constitute a powerful new fiscal instrument.  Effectively, the State would be acting as a special form of financier, funding the individual’s requirements on very favourable terms, while using the mandatory mechanisms of “tax” to recoup its outlay.  The formal mechanism of “tax collection” would be used for an entirely novel purpose.  The terms of the transaction are attractive - low-interest, with repayment deferred potentially over 30/40 years – coupled with the contractual extinction of any obligation to repay if the “borrower” cannot afford it.  As an alternative to conventional borrowing, this form of transaction would have much to commend it, even for those who could afford to borrow in the ordinary commercial market.

If that is right, consider the other possible applications of this device.  If “Top-Up Fees”, why not all tuition fees?  Why not maintenance, living costs?  Why should students not be allowed to draw down “maintenance moneys”, to avoid excessive work commitments during periods of study?  Why should the scheme not be applied to mature students, and the “late” acquisition of qualifications?  And turning to the NHS, why should medical operations and treatments not be “sold” to those requiring them, on similar deferred terms?

Have I got this analysis right?   Is the Pertax a stalking-horse for a new form of “State credit financing” – asking individuals to assume personal responsibility for funding their own “big-lump” expenditure?  Would the State not be going into competition with the private-banking system?  Such a system would have certain drawbacks, because it would necessarily “make a loss” – simply because there is no profit-factor built into its calculations.  But the net effect (having accounted for the loss) would be to relieve the State Purse of obligations that would be all the higher without the Pertax recoupment process.