Show me the money…

In modern day Britain, most would probably agree that the NHS and schools need more funding each year. Better internal management might reduce waste and create greater impact. But the UK government could show a lot better leadership too.

Successive UK governments don’t so much lack courage (feeling fear but taking action anyway). The bigger problems are arguably that they:

  • lack incentive (complacency and dogma seem to have set in),
  • lack clarity (can’t agree what the problem is), and
  • lack imagination.

What more could be done by central government, regardless of political party?

  • bar politicians from serving more than three terms (a maximum of 15 years in parliament). New blood would bring fresh approaches, minimise complacency and cronyism. But what if not enough people stepped in to replace outgoing politicians? True leaders will step in to lead, because they care.
  • enlist pro-bono advice from professional consulting firms, about how they would go about solving complex societal problems.
  • scrap the ‘first past the post’ voting system, in favour of proportional representation. With at least one annual referendum on a big political issue (not just Brexit either).
  • ensure stronger messaging in early-years schools (all UK schools) about why education is so vital for self reliance, so fewer students drop out later. Perhaps self-reliance has fallen out of fashion? Ironically, the first step towards caring communities begins with self reliance and two strong legs of your own.
  • change criminal penalties to put a far greater weighting on the economic costs to society from crime. Cyber crime, fraud, domestic abuse, human trafficking and narcotics trafficking would likely see stronger minimum jail sentences.
  • simplify the  UK tax rules. The costs of complexity are way too high and borne by all of us.
  • change the rules on the proceeds of crime, so the ‘Mr Bigs’ have no chance of parole, until they offer up all the deemed global proceeds of crime. The government could usefully put such proceeds directly into bigger UK police budgets, where the proceeds are not able to be returned to the victims of crime. Bigger police budgets aren’t so much about turning the UK into a police state. But instead about increasing the arrest rate for those committing crime (currently there is too much focus on crime level stats and not enough on arrest rate stats instead).
  • change the rules on taxation – seriously look at introducing negative VAT on healthy foods, sportswear and the exercise industry.
  • prevent extensive tax avoidance amongst a relatively few companies and wealthy individuals, by changing the rules. Pierce elaborate tax-haven structures, citing substance over form. And create a special set of punitive employment taxes for those making a living as tax advisors.
  • review how UK foreign aid money (the approximately £14B of public money per yr) is spent. Earmark a bigger chunk of it for disaster relief and vaccination programmes (direct distribution of goods not indirect distribution of money). And give nothing to countries who choose  to fund their own space programmes. Or fund terrorist training camps within their borders.
  • apply a common-sense UK approach to immigration and social housing. Setting and defending quotas is a distraction and any figure set is inherently subjective. Having a local government policy to house anyone who decides to live in your jurisdiction probably isn’t realistic either. It just creates unmanageable responsibilities. And cruelly raises peoples’ expectations to unrealistic levels.
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UK austerity

In the current debate about UK austerity, what’s missing from the choice (not the fake choice between austerity and no austerity, but the hard choice between Social and Economic austerity) are two important other options (Productivity improvements and Philanthropy).

To elaborate, the current debate about austerity should be about the mix of four things:

(1) Social austerity – realisable tax rises for some or all current UK tax payers). Of course, history shows us that raising taxes encourages tax avoidance and discourages incentive to work harder.

(2) Economic austerity – alleviating current austerity through borrowing to burden future citizens with greater austerity.

(3) Productivity improvements – workers choosing (through a combination of after-hours study and after-hours volunteering?) to up-skill, to raise their productivity to ultimately alleviate austerity. When we change our expectations, build on small successes to boost our confidence and reframe current problems in a different way using personal flexibility, then there is every chance to better ourselves. If the future is about portfolio careers, and in the age of smart machines, ‘keeping our skin in the game’ through clever design, then up-skilling starts today. After all, process automation and machine learning won’t wait for us, but proceeds at its own pace. A final question about labour productivity at the national level. Which is better – fewer people employed but them generating higher average labour productivity (the French model, relative to the UK model) or, more people employed but with lower average labour productivity (the UK model, relative to the French model).

(4) Philanthropy – particularly high-net-worth individuals forming consortiums, to alleviate UK social deprivation through charitable foundation activity.

The best solution will probably come from a better combination of all four things.

One great opportunity with philanthropy is developing ‘hospital charities’ to build city hospitals that are entirely charity-funded and can take some ongoing pressure off the NHS, care homes and private hospitals. Such hospitals could offer a more selective range of treatments (target elective-surgeries with long waiting lists?), than the NHS.

Food for thought?

The only future certainty is taxes…

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In the future, medical advances and biotechnology might prevent death. But not the need for taxes.

This week I read a small but interesting tax article by Andrew Sentence (senior economic advisor at Price Waterhouse Coopers), in a column in the morning edition of the City Newspaper (London). In the article, Sentence highlighted that UK taxes on income and national insurance make up nearly half of tax revenues. Also that the combined burden of (labour-related) national insurance on employers and employees at 13.8% and 12% respectively, was higher than the 20% income tax rate on corporate profits.

Meanwhile the combination of UK Council taxes, business rates, stamp duty, inheritance tax and capital gains tax, levied on property values or wealth, raises only about 12% of total tax revenues.

The basic message of the article, was that the UK government needed to reform the tax system. And that it was time for George Osborne (UK Chancellor of the Exchequer) to make his mark as a tax reformer.

I couldn’t agree more. There’s little doubt that the UK Government desperately needs the quantum of all those taxes, to balance the annual Budget (income less infrastructure and other spending)  and pay down some of the £1.5 Trillion of legacy debt. The mix of taxes and the relative emphasis is the problem. The mix problem will only grow bigger, as companies invest further in automation and eliminate human jobs too.

To elaborate, as we further enter the age of Big Data, robotics, artificial intelligence and global trade, tax types and tax rates will have to change radically, else the social cohesiveness that we struggle to maintain at present, will be swept aside on a tide of conflict and protest.

The owners of ‘automated capital’ exploit various enterprise incentives and legal trading structures to minimise their corporate profits liable for corporate tax. They also continue to make economically-rational decisions to ‘offshore’ labour costs. Or replace labour with 24/7 automation, laying off human jobs in the process. The only way soften the social impacts of these changes is to more effectively tax the property purchases that such profits are invested in. And perhaps reform VAT to a much higher rate on luxury products than the standard 20% rate at present.

Say I’m right on this (current blue, pink and white collar jobs disappearing at a faster rate than future high-tech job are being created and in different regions of the World too). Where is the lobby group at present in the Western World to lobby effectively for the necessary tax reforms before it’s too late?

The emerging generation of school leavers has the most to lose from the forthcoming automation changes, with their entire working life ahead of them. They need to use their electoral votes wisely. And form a tax reform political party if necessary. The alternative is society facing soaring insurance costs, greater legal costs, a rising crime wave and serious inter-generational resentment.

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