Edmund Burke: “All that’s necessary for the forces of evil to win is for enough good men to do nothing”.
On 23 June, 2016 the UK public astounded the entire European political system (and much of the rest of the world) by voting to exit the EU in a referendum. The result was clearly unexpected with 75% of UK politicians urging the public to vote to remain within the EU, yet 52% of those that voted opted for the UK to exit the EU. It demonstrates the clear disconnect between politicians and public opinion. Those politicians are supposed to represent the interests of that electorate, that is not possible if they do not reflect their feelings. There are always opposing views in politics and within the public, but the unpredicted result exposes widespread disconnect.
Many large businesses (largely interested in economic issues) were appalled at the result in almost equal measure to 75% of the politicians. While the issues involved in the referendum were wide reaching and complex, the decision was widely seen to revolve around issues of immigration (though in reality it was about its control); sovereignty and the economy. Following the result, even the wisdom of calling the referendum has been questioned. If we believe in democracy, then the question is superfluous.
The referendum was conducted with every vote counting equally. This is far removed from the usual election process in the UK. The democratic input is far less questionable than the system used for either the UK elected politicians or the unelected EU political establishment. It is also more democratic than large swathes of other parts of the UK political system such as the unelected House of Lords. The UK has distorted democracy to comply with its capitalism, not adjusted capitalism to fit with genuine democracy. It has led to wholesale inequality as money has been prized above people.
The UK political system displays inherent unfairness. It is used by politicians to support both big business and the financial interests of the minority. That is why the vote to exit the EU has stunned the establishment. Most politicians that supposedly represent the interests of the less well off supported remaining in the EU. The pretext for this support was the EU laws and regulations supposedly best represented the interests of workers. The reality is that most of the legislation quoted existed before the UK joined what became the EU, or concerned areas where UK regulation exceeded EU standards. The reality is they opposed the exit politicians seeing these to be popularist and right-wing (though in reality there is nothing right-wing about controlling immigration). They avoided the implied limit on the minimum wage of having uncontrolled immigration from countries with far lower minimum wage levels than the UK. They ignored the impossibility of public service planning with uncontrolled population changes. It also showed a fundamental lack of confidence in their ability to win a future election. This was a long term decision that should not have concerned the remaining four years of the existing government that should have played no part in the campaign.
The referendum result is a startling example of how out of touch politicians are with their electorate, and how they fail to represent the public’s views. Yet this is the role they are supposed to perform. Politicians have taken it on themselves to believe that they know better. They simply do not statistically reflect the people. They more closely reflect the combined financial wealth of the electorate. This is the fundamental route of the problem, democracy has become distorted in the UK to protect financial interests rather than people.
By far the greatest argument put forward by the remain campaign was based on a wide body of experts warning that the economic consequences of withdrawal would be significant. The fact the public so readily discounted this advice shows the public have been untouched by the economic improvements of five decades of EU membership. Politicians and businesses must take full responsibility for that disconnect rather than questioning the wisdom of the outcome. Had business profits been shared more equitably, that disconnect would not have arisen. Had politicians protected the interests of most people rather than most finance the situation would never have arisen.
Of course this fails to include the issue of sovereignty and democracy. There appears widespread concern over the direction of the EU throughout Europe on these issues. The EU administration appears intent on steamrollering its views irrespective of the volume of anger this creates. Whether the UK would have greater influence from inside the EU, we will never know. The likelihood is the shakeup of an economy the size of the UK withdrawing from the EU will concentrate minds within the EU to react one way or the other. As the minor reforms negotiated before the referendum revealed, the UK had little effective voice from within the EU.
While supporters of remain expressed disbelief at the result on an economic level, the conditions of remaining in the EU had an uncomfortable economic implication which was ignored. Uncontrolled free movement of people necessarily encourages immigration to the most successful and richest economies. This may be sustainable within the single currency Eurozone (though probably not), but the UK was never a part of this, despite widespread economic predictions of disaster at the time the UK took the decision not to join. That decision later saved the UK economy in many respects. Clearly the dire warnings then were wrong, and this doubtless played a part in the UK public’s mistrust of the more recent forecasts.
Whatever a person’s view on the referendum result, we are where we are. Now our collective responsibility is to secure the best possible opportunities for the UK and its people. This is a time for strong action to negotiate trade deals as a priority, to re-establish the UK in the international arena, and an opportunity to permanently break political disconnect. As the UK moves forward in uncertain economic conditions, politicians must aim for policies that encourage businesses to follow a greater sharing of the rewards of success among employees.
Major challenges now face trade negotiators. Trade deals are the short-term priority. At the same time politicians must address their failure to represent the majority of people. These challenges have to be turned into positive opportunities. With regard trade deals, the UK has an opportunity to create truly international trade agreements, effectively the remit of the EEC that the UK joined rather than the political project the EU became, but extending them throughout the world. An opportunity to effectively provide permanent change to less established economies and an opportunity to ease trade with rapidly developing nations rather than the stagnating EU region.
Before this, right wing politicians had made the most vulnerable pay for a recession caused by the banking crisis, not that the vulnerable were the ones making money from it. On the other hand there is a party that thinks the vulnerable need to be financed by the middle earners. Both parties share a tax system that is totally inappropriate for today’s society. Constant meddling by these politicians has made the entire tax structure so complicated that the richest elements of society can, and do, employ the best advice on how to avoid it. Politicians have done the same to benefits. It is so complicated and inefficient it costs more to run than it should and allows abuse.
Since we have a 5 year term of office for a Government, no one is prepared to unpick the mess. No one is redesigning the tax and benefit structure because it will take far longer than a 5 year term of office to sort.
So who exactly benefits from this system? Not the vulnerable because their benefits are so inadequate it leads to further public spending on housing, health and so on. It is not 99% of taxpayers who are so over-taxed they cannot save to adequately fund their own retirement, so that too leads to greater demand on public spending.
Worse still we have all become so resigned to the situation no one looks for a way through. Some believe it is their lot to struggle, others to pay tax to fund the struggle of others. It is worse than a mess, it is a disaster that is not waiting to happen, but is continually unfolding. Change is needed.
When automation becomes an affordable technology we replace the current system and redesign work to use its capabilities. We continue this as software or machines enable further advances. So why do we so resolutely hold on to a tax system that is not fit for purpose, is taxing the wrong people, and is inadequately funding the vulnerable? Why is no politician prepared to tear up the system and start again?
Probably the fear that change is rarely popular though this has been challenged by the public’s decision to leave the EU. Not because change is wrong, but because people, and businesses, fear the unknown. So why not identify the ideal tax and benefit system, and then slowly but surely integrate it to alleviate the fear? It will not solve all the problems instantly, it will need long-term interim measures to change the system that has evolved over many years. This has to be preferable to further adjusting an already dysfunctional system. A fair system that ends evasion and avoidance at one end, and system fraud and a host of social problems at the other and in the middle it stops the over-taxation of workers.
It can be done, but it requires bold moves:
- change the electoral system to provide greater continuity of policy while retaining 5 year voting for individual politicians – it is called proportional representation
- redesign public spending to be efficient to reduce the amount of tax needed – it is called being prudent
- redesign tax to be fundamentally fair and unavoidable- it is called Land Value Tax and consumption taxes
- identify alternative public sector revenues to offset tax – it is called good news
- redesign benefits to effectively protect the vulnerable – it is called civilised
- reduce political influence and make decisions on public sector delivery the responsibility of the professionals with the sector experience – it is called de-politicisation
- reject the constant bickering over public or private ownership and accept that it is monopoly situations that always create problems – it is called effective regulation and competition
- develop a transition policy to iron out the inequalities of changing the income and spending systems – it is called necessary
- develop a combination of the above to cope with future changes in the economy and environment – it is called Forward Thinking
Is it left wing or right wing? It is not either, it is forward planning based on fairness and common sense.
Forward Thinking stands for preparing the UK for future social conditions in a digital age and placing people at the forefront of services. To achieve this, it is necessary to engage the public in decision making, challenge spending policies, and seek efficiency in service delivery. This needs coherent policies between activities, and fundamental change to the tax and benefits system. Forward Thinking will develop a culture of prevention rather than cure and waste reduction at all levels to secure a strong and consistent economy. The aim of this paper is to explore a tax neutral change to policies, but to improve services and to make tax commensurate with an ability to pay.
The two leading parties rely on dividing popular opinion to gain the votes of either the vulnerable or those described as ‘haves’. This divisive practice relies on keeping the vulnerable impoverished. They then resent people that have more. It also leads to excessive tax of the ‘haves’, because the system lumps together the ‘merely haves’ and ‘aspiring haves’ with the ‘really haves’. Worse still, the political parties convince them the benefits system is the reason the taxes are so high, ignoring the fact the benefits element is small by international comparison. The importance of this divide is purely political. It allows the two leading parties to identify their policies with a part of the electorate. It makes no effort to remove poverty, or tax according to ability to pay. It does not help the economy. It only ‘justifies’ the two major parties and divides society.
Forward Thinking is about reducing political influence while:
- protecting the vulnerable
- running efficient public services that place people at the centre of the service
- reducing tax
- taxing only those with the ability to pay and
- preparing for major future social and economic changes
Forward Thinking creates a fair system without increasing overall taxes, but it will stimulate the economy and better protect against recessions.
Politicians, and the media, revel in the social divide. It results in impoverishing vulnerable people and a complex set of largely regressive taxes. Forward Thinking would introduce the Land Value Tax (which would replace many of the current taxes) to bring greater equality and simplicity to tax, while providing a stimulus to the economy. No current tax has this ability. It would become the centre point of taxes, replacing Council Tax, Business Rates, Inheritance Tax, Capital Gains Tax and Land Stamp Duty. It would significantly reduce the number of people paying Income Tax in the short-term and replace it in the long-term. Forward Thinking would also replace Corporation Tax with a lesser Turnover Tax.
A fundamental principle of Forward Thinking is to change to fair taxes. To divert income taxes to consumption taxes and Land Value Tax. The huge benefit of this is fairness, low collection cost and the difficulty of evasion. We are constantly told the high wealth individuals are the ones with the means to pay advisers to avoid their tax, and that they are the most likely to move. This is the reason a Land Value Tax will change the fairness and unite the country again.
The case for a Land Value Tax
The Land Value Tax works by valuing each piece of land and applying a tax rate to it. The best statistics available are old (2011) and while the values will have changed, the proportional changes will not be so great (though Land Value Tax would be based on up-to-date data):
Analysis of England to Calculate Land Value Tax (Hectares, £ per Hectare Land Value, Total Land Value in £s and % of Total)
From the calculation on a land value in England of £1.842 trillion residential properties would pay 79.5% of the tax and businesses 15.5% while agriculture would only contribute 4.8%. Council Tax is unfairly distributed because it uses property bands. Rather than alarming existing householders, it is therefore useful to examine the distribution of residential property values. Again the data is dated, but remains useful to show the huge variation (and the complete inadequacy of the rates banding) in property wealth:
Upper Bounds of Household Net Property Wealth, 2012 (£s upper bound)
On this basis, the top 1% of property wealth owners would be liable for 54% of the residential part of the tax assuming the tax is introduced at a flat rate for all. Land Value Tax, unlike Council Tax, is not a residency tax it is an ownership tax, so people in rented accommodation do not pay the tax. The reason the tax is so fair is that it is based on land values. Land gains value because of its location. The value to that location is gained from the bordering facilities, such as transport links, schools, or other amenities. In other words the infrastructures that taxpayers have funded through the state. To the owner this is unearned income, to the taxpayer it is a huge investment.
For all the overtaxed ‘nearly haves’ who think this will result in them paying more tax – they are wrong. It taxes the ‘really haves’ much more equitably:
Comparison of Property Wealth in 2012 and Income Tax in 2014, by Decile Group (% of Total)
The fact is the ‘middle classes’ have become so used to being unfairly over-taxed that views of tax are distorted. The Land Value Tax will even benefit most of the top 10%:
Comparison of Property Wealth in 2012 and Income Tax in 2016, For Top 10% (% of Total)
The usual objection to the Land Value Tax is that it can force the asset-rich low income householders to move because of the tax implication. The most frequent approach to this issue is to allow pensioners to defer tax payment, the amount due becoming a land charge. Other choices include a rebate scheme. Eventually part of the solution is to increase pensions. Pensioners who are tenants are already badly affected because their incomes have not been linked to average wages. The problem is mainly one that affects the present generation of pensioners. Those born after around 1955 have been badly affected anyway because of the banking collapse and the Government’s response to it. Had today’s pensioners lived their working lives under a Land Value Tax scheme then they would have enjoyed the full fruits of their labour instead of paying huge sums in Income Tax. They would therefore have ample savings. There will clearly need to be long-term transitional measures to protect pensioners to offset the over-taxation they have suffered under Income Tax. The tax would need to be phased in over a prolonged period so as not to double tax individuals.
Land Value Tax purists argue that it should be the only tax charged. The difficulty with this is it means some people are not paying any tax, and this does not create responsibility for public spending. At minimum consumption taxes (VAT and specific duties) need to be retained.
Structural social and economic changes
“If it ain’t broke – don’t fix it” is a well-known phrase that supports doing nothing. It works well all the time the system is not broken. With a currently strong UK economy (compared with other European countries), there is a temptation to assume the system is functioning. However, there are gathering pressures on public finance that face two huge, and irreversible trends that politicians are simply ignoring beyond the implications of EU withdrawal:
- an ageing population, meaning a growing part of the population will not be contributing to public finances and will inevitably have increased health and social demands
- technological and artificial intelligence changes that will increasingly challenge the notion of full employment and will result in differences in income that will dwarf today’s already significant inequalities
In 2014 the Institute of Economic Affairs calculated the Government would need to cut public spending by more than 25%, or impose huge tax increases. This was because official calculations had failed to account for future pension and health care liabilities. It would result, within two years, in tax rises equal to more than 17% of GDP, or £300 billion, to meet all future spending commitments. This is larger than the entire current annual NHS budget. It would increase taxes from 38% to 55% of national income.“The underlying problem is that successive governments have made promises which can simply not be honoured from the existing tax base”. While the predicted spending cuts or tax increases have not been fully made, the financial shortfall remains. What is disappearing are the heads of politicians in the sand.
A study from Oxford University has suggested that 35% of existing UK jobs are now at risk of automation in the next 20 years. The exact forecast may prove inaccurate, but the huge changes in the workplace in the last 20 years are undeniable. Automation will increasingly challenge low skilled jobs. The further development of artificial intelligence and computer technology will also increasingly challenge high skilled jobs. The traditional political division of workers versus the owners will change to a divide between almost everyone and a minute part of the population who own the software and technology, unless we address that society.
Without wishing to be personal, Bill Gates is a very clever man and he and his company have fundamentally changed productivity in offices. He is, as a result, a very rich man. However, he doesn’t pay taxes in the UK (why would he? He is American). The UK does not gain taxes from all the typists his software has replaced, unless they have retrained. The productivity advantages that Microsoft’s software has provided, has on the other hand, benefited the business owners, widening the inequalities. It has long been thus, electricity put the gas street lighters out of business and the car rather reduced demand for stable boys. More jobs are coming under such threats, and over the next 20 years the exponential advance of technology will gather pace.
Technology offers huge productivity and wealth opportunities. Unless that profitability is more equally shared, this will prove increasingly destructive to society. We need to retrain those replaced workers for roles where technology has a lower role to play. We need to plan for changes that will challenge the employment levels, to become a future ready society.
There is an urgent need for Forward Thinking to address these huge future changes and convert them into opportunities to improve society and ultimately the economy.
The current political structure is not designed for future conditions, and worse still it is already failing:
- tax and benefits comprise a collection of laws created when social conditions bore no likeness to today’s society. They incur high administration costs and need replacing with purpose designed taxes and benefits
- tax and benefits are so complex they foster large scale abuses and evasion
- tax continues to include regressive taxes
- taxpayers subsidise workers’ pay through tax credits while the companies that employ them shirk their pay responsibilities and make profits that further feed the income of those not affected
- poverty remains an issue in the UK
- food bank use is increasing
- the richest 100 people achieved an increase in wealth of £40.1 billion in a single year while the government imposed further constraints on the income of the most vulnerable
- politicians continue to decide on areas in which they have no expertise
- politicians distort public views on tax and public spending by failing to benchmark with other countries and demonising elements of the population
- politicians introduce popular (vote winning) changes to pension regulations that are proving disastrous in Australia (where they are trying to reverse the policy) and place intolerable burdens on the next generation to support the elderly
- successive governments waste huge sums of money on failed projects (particularly IT initiatives) and policies, the value of which dwarfs the equally unacceptable tax evasion and benefit frauds
In short politicians are simply not taking responsibility for today’s society let alone the future of the country, and now have the added challenges of being independent of the EU. Forward Thinking encourages the public to take a more responsible position than the politicians have achieved.
Politicians are dividing society with misleading information. That divide can be bridged with a fair tax and benefits system that reunites the population. Ironically the gap between the ‘merely haves’ and the ‘really haves’ is much wider than the gap between the poorest and most of the ‘haves’. Parts of the latter group form the paymasters of one of the two major parties, so there is little surprise those politicians perpetuate the divide. Meanwhile the paymasters of the other major party have had more fleeting moments of power, but in those have shown a similar trait of looking after themselves rather than addressing the wider issues.
Social and economic inequalities need to change, but not at the expense of the economy. Essential public spending is reliant on the strength of the economy. New policies must encourage both businesses and public services to take economically, socially and environmentally responsible decisions. The electorate needs to equally take ownership of its responsibilities. The government needs to support all in the meeting of those demands.
Public services have been developed with repeated political interference rather than entrusting the professionals from the sector to develop the best methods of delivery. The result is we inherit an inefficient tax system, feeding an inefficient benefit system, and inherit public services that are run in a way no private company would consider expedient. The British people understand the importance of saving, spending, and borrowing responsibly. It has the right to expect its Government to hold itself to the same standard.
This is a paper putting forward opportunity for that rethink. It aims to promote a fairer system able to meet the demands that will arise. It aims to stimulate debate, engage the public and potentially result in a new form of political party that engages the population in making decisions for the wider interests of the UK. While Forward Thinking promotes a series of measures, the public would have the opportunity to decide on major individual changes. This binds politicians to reflecting public opinion.
Disillusionment with the current political parties is increasing and has been strongly visible since the 1997 election. In the 2010 General Election, only 65.1% of the electorate even cast a vote. In 2015 the figure rose to just 66.1% (by comparison in Germany there was a turnout of more than 71.5%). The 2016 EU referendum achieved a higher turnout of 71.8%. Voter turnouts in general elections have always varied, but the decline since 1992 when 77.7% of the eligible electorate cast a vote is strong. It was a warning that politicians had failed to engage with the electorate. A point further illustrated with the EU referendum outcome.
The difficulty is that in the West we associate democracy and capitalism together as a reflection of the cold war. They are not the same thing at all. Democracy is about giving control and power to the people, capitalism gives power to money. We have adapted our democracy to accommodate capitalism, not adapted capitalism to comply with real democracy. In consequence money is valued far higher than people, and it leads to the neglect of some people. If the power is returned to a true democracy, then we need to change attitudes to our economic principles.
Nonvoters at a General Election, 1945-2015 (% of Electorate)
Source: Election Results
Politicians are failing to engage the public in decisions that affect us all. Political party membership is declining across Europe, but the UK decline is notable.
Membership of the Conservative, Labour and Liberal Democrat Parties, 1928-2013 (Million Members)
Source: House of Commons Library Report
Compared with other European countries, party membership in the UK is low. This shows a high level of dissatisfaction with politicians and the policies they follow. It is because democracy has been diluted to fit with the wishes of those with money.
Political Party Membership as a Percentage of National Electorate, 2012 (%)
Source: European Journal of Political Research
In 2015 the first past the post system delivered a majority Government that had gained the votes of only 24% of the electorate. The number of people who did not vote was much higher than the number of votes any single party gained. Nonvoters represented 33.9% of the electorate. One party gained 12.6% of the votes and gained one parliamentary representative. In contrast just 4.7% of the votes delivered 56 representatives (8.6%) to another party. With the decline in the support of the traditional two major parties in Britain, it is more likely that coalition governments will become a regular feature of British politics.
The situation is even more distorted than these statistics indicate. The Electoral Reform Organisation can predict almost certain “safe seats” that represent 56% of the seats (368) in a General Election, rendering 25.9 million potential votes as a complete foregone conclusion. That means the election is fought over an effective possible electorate of 19.38 million and only 282 candidates. Under such a system no one can be surprised that a third of people choose not to vote.
The inequalities of the electoral system are clear, and may well contribute to the voters’ disaffection with politics. Forward Thinking would return to a true democratic system, with people at the forefront of decision making. The alternatives of various forms of proportional representation are dependent on the parties finding compromise policies. That means no one has voted for the eventual package of policies followed. This is the same as coalition governments. Proportional representation also means no single party is accountable for its decisions, but it is the norm in Europe.
Any extreme views of a party are moderated by proportional representation. It brings politics to the centre ground. Essentially, it brings longer term stability because there is consistency of the core parliamentary representatives. It forces all parties to consider the longer term issues. In contrast, the UK first past the post system only empowers a single party for a five-year period. That party can be voted out, leaving the next party to correct its inadequacies. It leads to short-term policies that also result in decisions that can lead to the next generation paying for its decisions. Proportional representation gives an equal value to every vote.
The UK tradition of first past the post, and (with the notable recent exception of 2010-2015) single party Government, has led to short-term policies. These lack cohesion and long-term issues are ignored. This is a major reason the UK differs from other European countries in its public spending policies. It is also why National Insurance payments are woefully inadequate by European comparison which then results in inadequate pensions. Other countries in Europe are far more alert to the ageing population issue.
Politicians have reached an all-time low in popularity. The public believe they abuse the system for their own gain rather than addressing the important social, economic and environmental issues. Politicians have become removed from their public and involved in scandal after scandal in which the media revels. This furthers the disassociation of the public and politics. It needs to be repaired by involving the public in decisions. Too often policies are devised by political parties to appeal to sectors of the public that have a vote in marginal seats. Geography makes some votes more influential than others. Forward Thinking policies stand for a change to the electoral system, giving each vote an equal influence on the government while keeping public access to politicians. We have already seen that if these distortions are removed, then people become engaged in political decision making in the EU referendum.
After the 2015 General Election results, the opposition parties talked about how to gain power in the future rather than the best interests of the country. General Elections have become a power struggle. It is forgotten that politicians are elected to serve the public’s interests. Politics in the UK has become dominated by two parties. These have different paymasters and they look to protect the interests of their ‘members’ without thought to long-term outcomes. Consumer research by Gallup and YouGov on “who are British politicians looking out for?” further shows the electorate’s disillusionment with politics. There is an increasing belief of betrayal:
Who Are British Politicians Looking Out for, 1944-2014 (%)
Source: 1944 and 1972 Gallup, 2014 YouGov
The electorate rejected the Alternative Vote style of proportional representation in a referendum in 2011. The option they were given was a poor form of the voting system. Forward Thinking would offer an opportunity to vote on a different one that keeps all the benefits of parliamentary representation. Forward Thinking believes Direct Party and Representative Voting should be used. It will provide multi party political stability in the UK. This will allow real and progressive changes to tax and spending. It will form the basis for environmental and social policies that address the future. It also provides an opportunity to develop true cohesion between the public sectors. This will create greater efficiency and fairness. It has the potential to unite rather than divide, and concentrate on prevention rather than cure.
Now that the UK has elected to leave the EU, there is an absolute need to concentrate on policies that unite the electorate. The deliberately divisive and misleading campaigning, on both sides, for the referendum only serves to emphasise the need for unifying politics.
The first past the post electoral system used in the UK has led to constant minor adjustment to tax and benefits. It has failed to redesign them, while social conditions keep changing. This leads to disjointed policies and fails to consider the knock on effects of the changes on other services. In turn, this leads to inefficient use of tax money. It promotes short-term policies which are inadequate on environmental issues, or the ageing population, or changes in the economic structure. This guarantees the inefficiencies continue. It produces minor changes in tax leading to inefficiency in both who is paying and collection costs. The complexities introduced by constant minor change lead to the opportunity for tax evasion.
The current National Insurance system was created under a postwar society. Adjustments have failed to take account of the huge social changes. When National Insurance was developed, it assumed full employment and that wages for men would be enough to keep a wife at home raising children. Today’s society has many more diverse family structures. There are more women in paid employment, people are living longer, the UK has long-term unemployment, and employment patterns have changed. Technology means fewer employees produce more goods. Many of the new jobs are low paid, temporary and insecure. Parts of the population are forced to switch between the labour market and dependency on benefits, and mid life retraining is often necessary. Even people in well-paid occupations can be subject to the disaster of losing a job, a home, and even a family. Debt and financial insecurity have become features of society. Tax and benefits have failed to reflect these changes.
The benefits system is equally complicated. It has developed through constant minor change rather than fundamental rethought. It too has failed to take account of the huge social changes. The complexities lead to major administrative costs. The benefits fail to reach the correct individuals. Payments fail to reach people at the correct time. All of these failings are abuses by the State. The complexities also lead to abuses by individuals and people gain benefits that they should not, in the same way as the complicated tax structure allows evasion.
International benchmarking shows that many of the UK public spending priorities are outdated. The defence budget and overseas aid programmes refuse to move on from the days of the British Empire. There is underspending on health and pension provision. The electorate is provided with inflated views on the cost of unemployment. Education fails to provide pupils with life skills. It continues to value academic qualifications above practical skills and therefore fails to provide employers with potential staff with the correct skills.
The short-term, first past the post, political system leads to vast inefficiency in public spending. Parties rush through legislation because of the time limit of office. Spending is wasted on reversing previous policies. These costs can be significant but are only occasionally made public when a scandal is reported by the often politically motivated media. Examples of wastage abound, particularly on IT where the government record is little short of appalling (it has been estimated at a huge £50 billion). This includes projects that are dropped, such as the Labour party’s £5 billion on a National Identity Scheme alone.
This is in stark contrast to actions in countries where some form of proportional representation brings greater political stability while keeping regular elections. It provides a platform where prevention rather than cure policies can be used. This leads to efficient public services and better use of taxes.
Examples of the inadequacy of short-term politics also abound, and they encourage politicians to over promise. How can politicians promise to increase the number of doctors when it takes seven years to train them? Yet parties make such promises at election time. In this case the only way to fulfill the promise is to bring more overseas doctors in. Yet at the same time medical schools are turning away thousands of suitable applicants because it costs £175,000 per student to train them. Of those who qualify in the UK, more than 4,700 then work outside the UK. At the same time up to 3,000 doctors have been hired from overseas by the NHS in the past year. These are wasteful and expensive policies and they fail to improve the health service.
The first past the post system strongly favours the two major political parties. They have a vested interest in keeping it. So less than a quarter of the electorate get their choice of Government and the rest of the votes are wasted. The elections are fought on policies put forward by the parties without international benchmarking. Voters’ opinions of the importance of policies are therefore distorted by what the politicians decide are the major issues. The result is the UK muddles along with both public spending and tax levels that do not reflect either the social or economic conditions, and are at odds with other countries. Worse still there is no measure of how strong or weak public support is for the policies.
Without international context, the electorate is being deliberately misled. There is no gauge on whether the proposed budgets are reasonable or outrageous, whether the service is efficient or wasteful, successful or failing.
Politics has become removed from its purpose. Parties follow an ideology, often designed to appeal to people’s fears and concerns rather than their hopes and needs. Political parties identify a set of policies, ask people to vote on them, and then act on them, when most people did not vote for them. Worse still, in a General Election the electorate chooses a candidate, and by default this is a vote for the party. Since parties ‘whip’ their MPs to comply with the party policies on major issues, it is possible for the views of a candidate chosen to be overruled by the party, even though the party is effectively using the votes gained for that candidate to gain power. This worsens the minority nature of government in the UK.
Political change in the UK has therefore become reactive rather than proactive. The role of politicians needs to change. Politicians need to move to a position of identifying and understanding what the public do want, and then devising the system to deliver it.
This site involves policies that are far removed from current ones, but it identifies the reasons for the proposed changes. It gives international benchmarks, so the electorate can gauge the sense of the tax or spending. Many of the policies are so far removed from current ones that to boost democracy, a number of mass public referendums of policies would need be held before implementation. That is, returning democracy to its original idea: The people and not their representatives.
Central to the changes proposed is the removal of politics where it does not belong. It supports a return of decision making in public services to the skills of experts from the service rather than career politicians.
The site takes each spending area and provides policy suggestions. It examines each tax and duty and puts forward a new policy. There is a further section examining other important issues not singly definable by either expense or tax.
The basic principles
The policies are far-reaching and incorporate fundamental changes to the political system. Importantly the policies are coherent, but an outline of Forward Thinking proposals is:
- Reducing political influence on public services so experienced professionals from the sector decide on delivery. The government provides policy direction but the sector itself decides how to deliver it
- Encouraging the economy with policies supporting stable development and growth in economic, social and environmental terms. Provide an unintrusive political background and advanced information on tax changes for business. Support social and environmental responsibility of those companies and end tax subsidies on profits or the pay of the board of directors for those not meeting true living wages but giving tax benefits to companies that share profits among employees
- Wholesale incorporation of public opinion into policy development, thereby encouraging political involvement and returning to a more pure form of democracy
- Developing public sector policies that address current and future conditions with coherent policies so each of the public services works together to deliver a better society working on prevention rather than cure at all levels. A future ready public service to assist people and the economy
- Public sector cost efficiencies at all levels to achieve more service at lower cost to the taxpayer
- Creating alternative public incomes, previously unexplored, that could significantly contribute to reducing the tax burden in total
- Simplifying taxes to reduce the costs of both collection and evasion. Forward guidance to businesses, and a shift in personal taxes to pay as you spend
- Long-term simplification of benefits to lessen the costs of administration, remove poverty and make benefit inconsistencies and delays a feature of the past while also removing abuses by people and authorities
- Identification and introduction of a true living wage to all that encourages work but protects the vulnerable
- Changing the election system to give equal value to all votes and strengthens public access to their representative. Creating a system where long term planning becomes natural
- Improving and encouraging social responsibility by both the state and the electorate
- Reappraising public spending priorities in line with the other policies
Why We Need Forward Thinking
The ageing population has to be a major political consideration, a feature faced by most western economies. Yet the current UK public benefits and services are simply not designed to cope with this simple, inescapable issue. We need a future ready economy and social system. This is where the UK most differs from other European countries. It is one of the largest failings of the first past the post election system. Short-term policies designed to have instant appeal to parts of the population cannot address the long-term needs of the country.
Increases in automation will further the changes in the workplace. A study from Oxford University has suggested that 35% of existing UK jobs are at risk of automation in the next 20 years. The report is not in isolation:
- The Future of Employment in 2013, again coming from Oxford dons suggested 47% of total US employment is at risk
- In 2015 the Bank of England applied The Future of Employment 2013 study and applied it to the UK and identified 15 million jobs are at risk of automation
- A 2014 report by the consultancy McKinsey looked at 12 technologies that could have an economic impact of between $14 and $33 trillion each year concluding “millions of people will require new skills”
- The World Economic Forum in 2016 identified 5.1 million jobs lost between 2015 and 2020 over 15 economies (7.1 million lost with only 2 million gained)
Far more jobs will be lost than will be gained. We are being lulled into a false sense of security from reports of the ‘highest number of people in jobs ever’ from the Government. They are failing to look to the future impacts of a host of technology changes including:
- driverless vehicles
- further advances in robotics
- artificial intelligence
- the Internet of ‘things’ which will advance hugely when 5G networks are released starting in 2020
- advances in 3D printing
It requires a different approach to rewards and taxes. Technology so far has focused on replacing unskilled and low paid jobs. This will change and a much wider range of skills will be challenged. Education has to respond by identifying and preparing the skills employers will need. There needs to be a capability to redeploy those people, and benefits to support these career interruptions.
To unify the public, and companies, there has to be transparent fairness in tax and benefits. There needs to be a re-balancing of spending and tax. There is a need to redefine the country as a cooperative, with all stakeholders willingly contributing at an affordable and equitable level. Those services should command pride. Some areas of spending need to be kept, some need to be increased, such as health and pensions where the demands are growing as the population ages. These need to be increased as a proportion of what the country produces, – the gross domestic product (GDP). Others need to be reduced so that the demands of taxation do not restrict opportunity.
In the same way the private sector needs to cope with the economic changes, then so public spending has to reflect affordability. It is immoral to build public sector debt, and shift the onus of repayment on the next generation when the policies employed take little or no account of long-term trends. Borrowing to fund today’s services is merely passing the issue to the next generation. It is both expensive and irresponsible.
Inefficient use of taxes, confused policies and a lack of a long-term approach to social change have created disaffection with the entire political system. This increases with the needless interference of politics in areas where trained and experienced professionals have greater and more relevant insight. Those professionals can deliver better service at lower cost without this interference. Such a redefinition would achieve greater results at lower cost to the taxpayer. It will also result in relevant policies to the service. Many decision areas involve investments that have much longer term benefits and costs than a political term of office. Many companies invest in such projects with pay back periods of more than five years for the long-term benefit of the operation, and the state must follow this.
Political policy centres on a balance of tax and spending. It is also assumed that tax is unpopular. However, those public services are both necessary and desirable. So spending efficiency is essential in a strong policy.
The quality of life in different countries in Europe is difficult to measure. The OECD offers an incomplete comparison, but covers some important areas:
UK positioning in the OECD Better Life Index, 2015 (Scores out of 10 and Rank out of 34)
The statistics show the UK has a poor ranking for both education and work-life balance. There is much scope for improvement in many areas of life in the UK. The UK has the highest income inequality in the EU according to the OECD, followed by Latvia and Greece. It also has the sixth highest poverty rate (behind Greece, Spain, Portugal, Italy and Estonia).
Many of the countries listed above, that have better life index rankings than the UK, also have higher total levels of tax. Taking only the countries identified in the better life top rankings, the UK ranks in the middle by tax level. It has much lower tax than the Nordic countries which rank high in the life index.
Tax Levels for High-ranking Countries in the OECD Better Life Index, 2015 (Total Tax as a percentage of GDP)
Countries where the population have higher life satisfaction, also have less wealth and income inequality than the UK. Wealth inequality is high in the UK. If the national minimum wage had kept pace with the FTSE 100 CEO’S salaries between 1999 and 2015, it would have reached £20.70 per hour. In that period it reached just £6.70 (which was increased to £7.20 in 2016). Businesses need to take responsibility for their role in the public disconnect.
Inequality in the UK is hidden in official statistics that divide wealth and income into 10% groups. While the inequalities in the lowest 10% are significant, the inequality within the top 10% is now of a staggering level. Moreover, it is set to further increase as the owners of technology make increased inroads into commerce and industry. While this will allow greater production from fewer people that too will continue to challenge the notion of full employment. It is too simplistic to assume that because there are more people in employment in the UK than ever before, that employment levels will for ever ride the technology avalanche. It will not, and steps need to be taken to cope with the change.
There are many reasons for reducing inequalities. Studies based on the work of Professors Richard Wilkinson and Kate Pickett, have analysed international data. They show that societies with greater inequality between rich and poor are far more unhealthy than societies with a more equal income distribution. Their study shows that:
- More unequal societies have more problems with general health, mental illness, infant mortality, drug use, obesity, imprisonment rates, teenage pregnancies and homicides. All of these issues increase public spending costs
- More equal societies have better education and general health, more innovation, higher social mobility and more trust. These are all features having a positive impact on society
In the last year the increase in wealth of just the richest 100 people was more than £40 billion (and this excludes the wealth they had previously amassed). That same money could:
- Pay the energy bill for all 26.4 million UK households for over a year (13 months) which would cost £40.1 billion OR
- Provide 2.76 million Living Wage jobs which would have wiped out unemployment which would cost £40.06 billion. It could have provided 1.83 million jobs paid at an average salary which would cost £40.09 billion. It could promote all 1.386 million National Minimum Wage jobs to Living Wage jobs which would cost £3.52 billion OR
- Pay the grocery bill for all food bank users for 14 years which would cost£37.76 billion OR
- Pay a year’s rent for nearly half of all renting households, or 4.05 million people which would cost £40.04 billion OR
- Provide eighteen times the value of annual loans provided by the payday lending industry which would cost £39.6 billion
These inequalities cannot continue in a progressive economy and society and they would be stopped if we had a true form of democracy. Official statistics start to show the size of the inequalities:
UK Income Distribution, by Decile Group, 2014 (£ per Household)
Source: HM Customs & Excise
The figure shows the huge disparity in incomes between the bottom 10% and the top 10%. However, within the income of the top 10% even greater differences can be found. Unfortunately data on the top 10% is only available up to 2012:
UK Income Distribution of the Richest 10%, 2012 (£ per Household)
Source: The World Top Incomes Database
All these top earning individuals pay the same percentage of that income in tax. The supposed progressive nature of Income Tax fails among the leading earners. The earnings inequality within the graph is far greater than the inequality in the previous graph. Yet among lower income groups the proportion of earnings taken in tax rises as earnings increase. In other words Income Tax is progressive only when the ‘merely haves’ are taxed, not the ‘really haves’. The situation will worsen as owners of technology gain even greater wealth and the ‘merely haves’ jobs are challenged.
There is a further divisive inequality issue. Increasingly benefits for the lowest income groups and the vulnerable are applied to households, yet tax remains personal. If the household measure is correct for benefits, it has to equally apply to income.
The Pillars of the Policies
The following sections summarise the major policy areas. In practice, many of these policies need to work alongside the others. It is partly the cohesion of the policies that makes Forward Thinking so far removed from current politics and progressive. The detailed policies are far more numerous and far reaching than can be summarised under such headings: