TOWARDS AN ALTERNATIVE ECONOMIC STRATEGY National Economic Forum September 2022 Based on discussions in the National Economics Forum (NEF), I have incorporated many of the ideas from my colleagues into a single paper. In the final analysis, these ideas and any weaknesses and mistakes are my own. I would be delighted for these ideas to be challenged or elaborated on. The NEF is a discussion group and think-tank. It is a lobby group for an Alternative Economic Strategy Below are two sections: Analysis and a proposed Programme containing suggestions to: • Rescue the UK economy from collapse, • Aim for a much more equal society, and • Halt the spread of poverty to ever wider sections of our society. Solving our economic problems is not a technical issue, it is a highly political matter. It is a question of who has power and in whose interest they are working. It is clear that there has been a fundamental change in UK society in the last 40 years and that our whole society is now dominated by finance, both in the US and London. We will soon propose a more elaborate, long-term discussion on the AES. Both this and our short term proposals, will be open to discussion on how to achieve them and how realistic they are. No-one has all the answers and economic circumstances are constantly changing. We therefore welcome everyone, members of the NEF or not, and of any background to make contributions towards developing an AES. Finally, I would like to acknowledge and give thanks to Dhesh Chehal , Paul Forrest , Mark Conway & James Galland for their contributions and help with the creation of this document. Roger Hill Foreword Analysis Measures • Taxes • Investment • Public Investment and Control • Price Controls • Housing • The Future This document has been created by the National Economics Forum as part of the Citizens Independent Network. Copyright 2022. Errors and omissions excepted. All information correct as of August 2022 For more information, please visit https://cin.org.uk Alternatively, email us nef@cin.org.uk Contents 1 2 The USA and UK are dominated by Finance Capital that dwarf the traditional well known corporations. The former include mutual funds like BlackRock and Vanguard , hedge funds, banks and others. We two countries are facing a unique crisis, one unlike any that have preceded. It looks to be at least as damaging as the great 1929 crash and could be much worse. This is not scaremongering but based on the facts. Inflation is caused by the currency supply outrunning supply of goods and services. It was already increasing before the Covid crisis. The present rates of inflation are underestimations both here and in the US. The US changed its measurements of inflation to downplay it back in the 1980s. Using the old system their inflation is now running around 16%. Here in the UK key items such as house prices and shares are excluded. For most people mortgages and rents are the highest items of expenditure but probably not weighted accordingly in ONS figures. Currency is created by the creation of debt/loans by banks. For the last decade or so it has been augmented by a government sleight of hand called Quantitative Easing. This was used to flood the economy during the lockdowns and certainly made inflation worse. One effect was to raise the price of assets, making the holders even richer at the cost of people without such assets. Another key factor causing inflation is the lack of supply. One major cause of ongoing inflation, even before the current crisis, was the reduction in supply; the wholesale export of manufacturing from our countries to countries with cheaper labour: China being the most notable example. There has been a lamentable lack of investment in infrastructure, especially in the energy sector. A clear case of what is good for private enterprise not being good for the country. The recent Covid-19 and Ukraine crises have exacerbated the situation. Ukraine has been used by the energy companies to jack up prices, increase profits and fuel inflation. Cutting taxes is not going to work as demonstrated by previous tax breaks for high end taxes. The long term answer is mass investment to increase supply as discussed later. Partly due to historically low interest rates over the last decade, debt has expanded massively at government, business and household levels to all time highs. This has presented our governments with a problem that neo-liberalism simply cannot solve. With galloping inflation in the USA/UK and record levels of debt the governments have, within the narrow doctrine of neo-liberalism or monetarism, two options: either defend the currency or the economy. This would undermine what the USA perceives as its number 1 status in the World. As usual, the UK follows the US lead. To do this it must increase interest rates which cuts down loans and therefore the amount of currency being created. It must also reverse QE whereby it sells bonds thereby suck in money from the economy. Thus the price of bonds decreases which then also helps increase interest rates. The general effect is to raise the interest that households and companies have to pay which is already driving those most heavily indebted out of business, especially so called “ Zombie firms ”. As interest rates climb so increasing numbers of firms and households will default, threatening a banking crisis. The USA and UK are already in recession (two consecutive quarters with a decline in GDP) and if many more firms go out of business it could hit a depression. This decline in output will decrease supply thus adding to inflation, the very opposite of what the government is trying to achieve. We may end up with stagflation: inflation plus a stagnant economy. In the current crisis, major energy companies are raking in massive profits at the expense of the working public. Energy is one of those products which impacts the economy as a whole. Increases in prices hits businesses, all working and retired people and makes them poorer. Wage increases never over-take inflation. We need a fundamental change in the way we manage our economic affairs. Meanwhile we need an emergency package to begin to tackle the crisis. The US central bank, the Federal Bank, says it has decided to opt to save the dollar by limiting inflation as inflation weakens the dollar against other currencies and damages the dollar as the world reserve/trading currency. Analysis 3 4 TAX – INVESTMENT – GOLDEN SHARES PUBLIC OWNERSHIP – PRICE CONTROLS – HOUSING The following are some of the measures that can be taken to offset inflation and the destruction of living standards of millions of people. They include using tax changes, investment, public ownership, directives and law changes. The UK government, given our lack of written constitution, can make any laws it wishes, including retrospective laws that the courts cannot over-rule, especially now we are out of the EU. These proposals are for discussion but not set in concrete. But they are measures we must discuss. People and parties will prioritise according to their beliefs although we think there is little here to appeal to neo-liberals • Multinationals must pay tax on the income earned in our country. To impose this, we recommend a turnover tax on major companies, which at present, are clearly underpaying tax obligations. • To abolish the absurd, non progressive National Insurance Tax. • Relieve pressure on working people by raising the tax threshold from £12,570 to at least £20,000. • To compensate for this, to raise taxes on those on £60,000 and above at an increasingly progressive rate. • It is impossible at present to state accurate figures due to the rate of inflation. • To impose a progressive wealth tax on those with assets of over £1 million • To impose a small “transaction tax” on share/bond trading. Even a tiny tax would raise billions. • To increase the staff of Government Tax Offices with the remit of targeting the massive tax-evasion and tax- avoidance of high end income receivers, especially those on unearned income. • To outlaw offshore tax-arrangements & tax avoidance through trust arrangements. • To implement a Windfall Tax on companies exploiting shortages, especially the energy companies. • To begin a “root & branch” update and simplification of tax laws with the emphasis of closing loopholes and making these laws comprehensible to anyone with a decent education. Taxes Possible Measures 5 6 At the heart of any economic recovery has to be combined national and regional plans. We need to anchor our strategic industries to the United Kingdom, it is essential that the UK government take a “ golden share ” in them to ensure they stay in the UK. Relying on private shareholders has not worked. This is especially the case that most major companies in the UK are now dominated by US mutual funds. We cannot expect foreign funds to act in the interest of the UK, only in their own interests. Indeed, a so- called “Globalist” economic and social agenda is openly discussed by the Davos World Economic Forum's boss, Klaus Schwab , He calls it the “ Great Reset ”. This needs discussion elsewhere. But it clearly runs contrary to National Economic Planning. We need investment in Science, R&D, Science education, infrastructure, manufacturing, energy, IT, Transport, Housing, Health, Chemicals, Pharmaceuticals, Agriculture and much else. For this we need a national plan and the cooperation of our strategic companies, universities, local government, colleges and schools. All the strategies for investment in these areas need full discussion involving all sectors of society. This needs co-ordination, both financial and practical. Such co- ordination must be in the national interest not in that of the finance sector. The finance sector must be made subordinate to the needs of the country not as is the present case where the needs of the country are subordinate to the finance sector. Since 1930 until 1992 the UK had some form of Economic Development Council helping co- ordinate the economic activity of our country. During the 1930s it included the key figure of Keynes who's theories did so much to get government involved in investing in the economy. The latest was the that set up in 1961 under the Tories when the Tories still had some connection with this country and its future. It became a tripartite committee of government, business and trade unions with full support of Labour, Tories and Liberals. Conservative Prime Minister Thatcher largely ignored the mechanism and Prime Minister Major abolished it. Labour Prime Ministers Blair and Brown did not resuscitate it. A future progressive government should see as one of its priorities the re-establishment of such a National Economic Development Council. This should be complemented by National and Regional Investment Banks, with possible industrial sector banks to co-ordinate investment in a particular economic sector. In many sectors the choice is either/or. Either we continue to have our economy run in the interests of the US/UK finance sector or in the interests of our country. Either we can run our economy in the secrecy of board room and back room deals or make the whole process transparent, open to public, political and journalistic inspection. Thus would spotlight corruption and dirty dealings which would harm our economy, our society and our people. Public ownership can take many forms and can include the use of the market as a means of distribution just as efficiently as private ownership. The use of the market is preferable in some areas and encourages genuine competition, especially in the consumer sector. Public ownership should largely be confined to finance, infrastructure and natural monopolies in today's economic climate. A thriving private sector, especially in the small and medium enterprise sector is essential for innovation and growth. It was the suppression of this sector that largely led to the inefficiency, stagnation and corruption within the Soviet Union resulting in its eventual collapse. What is clear is that there is an overwhelming cased for public ownership of finance, infrastructure and natural monopolies in partnership with strategic companies within which the government via appropriate means has a controlling golden share Investment Public Ownership & Control Price Controls These, of course, are extremely unpopular with those who advocate the “free market” But at the same time these people are happy with the control of our prices & production by the gigantic US finance companies and our own hedge funds, insurance companies, pension funds and banks which make a nonsense out of “free market” propaganda and ignore the Monopolies and Cartels which control our economy. In terms of the national interest, regardless of the interests of these vested interests, it is quite clear that two major sectors contribute to huge additional costs to our country: rents and energy. Both, especially rents, act as a drain on resources and cost push inflation. It is possible for a government of any persuasion except that of neo- liberalism to put controls and holds on both rents and energy prices. The extent to which compensation would be paid, if any, would depend on the political outlook of the government. 7 8 Empty housing stock, often for speculation purposes A huge increase in housing availability would happen if this stock were seized after a period of vacancy. Compensation depending on circumstances. Empty public housing stock that councils can't afford to refurbish An immediate national fund to refurbish publicly owned housing that council can't presently afford. Undeveloped brownfield sites Identify brownfield sites suitable for housing and build. This could include converting empty offices and shops. Land Value Tax We also to discuss Land Value Tax. Could it complement or replace other forms of property taxes? Land Banking Large speculative companies are buying up land but not using it for building. This must be seized with compensation depending on circumstances. An additional, huge cost to the country is the price of housing. The causes are complex and a few are mentioned here. We can see it is a complex question. National Builders' Cartel Building in the UK is dominated by a handful of national builders. We need direct works teams and local builders employed to build housing to a much higher standard and for houses to have gardens in most cases. Housing for generational accommodation not quick profits. Greenfield site building – basic housing estates/ribbon development or villages with facilities A spin off from the UK building Cartel, apart from low quality housing, is the advent of small, scattered housing estates and ribbon development with no extra facilities. This is overloading our present facilities. Future housing must be built with facilities and good transport connections. Private rental sector This should be wound down in favour of a greatly extended council house provision Council housing & private tenancy housing Private tenants must have the same rights as council tenants both in terms of quality of repairs and tenancy rights. Tenants who abuse their tenancies with Anti-Social Behaviour, non payment of rent, drug abuse and criminal activity must face the consequences and not be allowed to abuse the long drawn out legal procedures. Council Housing Council housing must be limited to British Citizens. All British Citizens must have the choice of a council house. There must be a strict waiting list on a first-come first served basis. It may be that there must be a basic number of years of British Citizenship before qualifying to go on the housing list. “Hope Valuation” of land When land is obtained by compulsory purchase, the seller can appeal that the land could fetch a higher than market price if in the future planning permission was granted. This means the seller can receive around 100 times the market price. This is a major disincentive for Councils to buy land for council house building. This process is under review, possibly to introduce a cap. It should be abolished altogether. Housing 9 10 The population of the UK is now 67 million and growing. 56.5 million live in England with a vastly greater population density than the other three countries. Clearly, with migration being overwhelmingly inward, up to 300,000 net immigration per annum over the last decade this has led to much greater pressure on our resources quite apart from problems of integration. We are now faced with a real crisis of social provision and need a pause in net immigration with balanced migration as an alternative. We need to look at what could be the optimum population for the UK and the huge imbalance of population and job distribution. Clearly, with our country dependent on imports for 60% of its food supply and huge imports goods it could make itself, we need to develop a long term plan involving every British Citizen. We simply cannot carry on with our failing housing, failing education, failing health, failing transport, failing water supply, failing manufacturing, failing science and everything else. Shakespeare put decline better in the Seven ages of man, where he describes the last age: “ Sans teeth, sans eyes, sans taste, sans everything. ” This must and cannot be the future of Great Britain. We at the NEF hope this paper will stir some ideas and will lead to those who care about our country to start thinking about and acting on our future. Migration The Future For more information, please visit https://cin.org.uk Alternatively, email us nef@cin.org.uk 11