Basic Income – from party policy to electable manifesto commitment

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Having long campaigned on LDV for Universal Basic Income, it was heartening to see UBI adopted as party policy at Conference. The challenge now is to transform Conference vote into a credible manifesto commitment, and a persuasive electable UBI policy.

Recent LDV articles have advocated UBI on various grounds, including Leyla Moran on precarity, Paul Hindley and Daniel Duggan on social justice, Anton Georgiou on inequality, and Jane Dodds on empowerment. Others including  Malcolm Berwick-Gooding have asked how UBI can be funded. Chris Northwood and George Kendall have proposed income tax, and Darren Martin a transaction micro-tax.

The web site The Case for Basic Income seeks to set out the main arguments for UBI. These are

  • social justice, addressing inequality, including gender inequality
  • welfare system efficiency and effectiveness, avoiding intrusive means-testing
  • economic necessity, acknowledging work reduction through automation, avoiding economic crisis and austerity
  • human flourishing, enabling wider choice of lifestyle
  • environmental responsibility, creating income other than by employment and more output

These are powerful, appealing, and convincing arguments, which we should fully deploy.

We also have to respond to the two main counter-arguments. Many claim that UBI presents a work disincentive. But in fact, it is current welfare benefits which erect a disincentive to work by being withdrawn £ for £ if a recipient finds work, creating an enormous marginal rate of tax, and hence the infamous ‘unemployment trap’. UBI avoids this as it is retained in full if someone starts to work.

So the main challenge is affordability. The claim is that UBI is either too small to be meaningful, or too large to be affordable. Revenue-neutral schemes which fund UBI by increasing taxation and reducing other benefits do indeed produce little overall change. Proposals for wealth tax funding face the administrative challenge of taxing a wide range of assets continuously, a proposed land tax misses the most profitable Internet companies who use little to no land, and eco-taxes should be designed to reduce pollution and so become self-cancelling.

Hence the proposal for ‘sovereign money’. Financial orthodoxy has traditionally raised money as government debt. By 2018 this reached £1.87tn, or 85% of GDP, a figure which is rising drastically through necessary Covid-19 spending. In addition, 2018 household debt stood at £1.2tn, or 61% of GDP. This makes total debt equal to 146% of GDP. In Japan, government debt alone is now 234% of GDP. These figures are in one sense meaningless, since multiples of GDP will never be repaid. But more importantly, these levels of debt constrain social expenditure, including constraining the affordability of UBI. We need to radically redefine and re-engineer this debt-ridden economy. In a new paradigm, UBI replaces the household debt necessarily incurred by low income households to supplement declining income from employment. Sovereign money replaces government deficit and accumulated debt, and removes the need for austerity policy.

These are the radical definitions needed to advocate a substantial affordable UBI. They are set out more fully in Stephanie Kelton’s new book ‘The Deficit Myth’, and in my own book ‘Basic Income and Sovereign Money’.

For those interested, these will be debated at a forthcoming Bristol Festival of Ideas on line conference ‘Is it time for UBI’. All welcome.

 

* Geoff Crocker is a professional economist writing on technology at http://www.philosophyoftechnology.com and on basic income at www.ubi.org. His recent book ‘Basic Income and Sovereign Money – the alternative to economic crisis and austerity policy’ was recommended by Martin Wolf in the FT 2020 summer reading list.

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241 Comments

  • Mr Crocker You give a mention to the issue of disinventives and affordability.

    What is your response to the charge that it reinforces inequality rather than reducing it ……. by giving a similar amount to a billionaire as it does to someone on the minimum wage ?

  • Various LDV articles have indeed advocate UBI on various grounds but I don’t remember any of them being warmly welcomed by many of the readers.

    UBI is benefit. The current benefit system has room for improvement, but at least it does not give money to the wealthy who don’t need it.

  • @ Martin So you think that asking a question amounts to, ‘Lacking much sense’.

    Thank you, Martin. You might have done better to wait and see if we get an answer.

  • Steve Trevethan 2nd Oct '20 - 4:45pm

    Thank you for an interesting article!

    Stephanie Kelton’s “The Deficit Myth” is indeed very well worth reading as are “The Production of Money” by Ann Pettifor and the writings of Warren Mosler.

    If, as it seems, the currency issuer (HMG for us), not the taxpayer, finances government expenditure, perhaps the financing of UBI needs to be considered “at arms length” from taxation?

    Might the bail-out of the bankers be a recent, relevant example of this?
    Did tax-payers bail out the bankers some 12 years ago?

    Perhaps a differentiation of taxation reasons/purposes/consequences might be appropriate?
    Stephanie K. lists four:
    * To get the government’s money used (Provisioning?)
    * Inflation management
    * Wealth distribution management
    * Behaviour influencing/management

    Stephanie K. writes that sovereign money is public money and so should be more broadly shared and not concentrated for the few. Has she made a valid point?

    Might her discussion of the minimal-if-any cost of a National Job Guarantee Scheme to eliminate unemployment and build an efficient national economy also be relevant?

  • Innocent Bystander 2nd Oct '20 - 5:00pm

    Oh no!
    A perfect storm. A combination of ‘The Couch Potatoes’ Handout’ paid for by Kelton’s “Everyone can have as much money as they like! Debt and deficits are mere figments of the imagination!”
    The British people have far more common sense.
    BTW the taxpayers did not bail out the banks. They bailed out our life savings and pensions that were inside.

  • Simon McGrath 2nd Oct '20 - 5:31pm

    In some ways this is helpful -instead of raising the money from taxes the author proposes simply to print it. what could possibly go wrong ?

  • Peter Martin 2nd Oct '20 - 6:02pm

    @ Steve, @ Geoff Crocker and Others,

    It’s important to emphasise that whilst Stephanie Kelton, and other MMT economists, understand that the Govt can just create money in a computer ( much less expensive than printing it) , even to fund a UBI, they also understand that they probably shouldn’t unless there is spare capacity in the economy.

    As Stephanie says “a UBI is a poor substitute for a guaranteed job”. Jobs create something! Including spare capacity. A UBI doesn’t.

    https://twitter.com/stephaniekelton/status/822081407635877888?lang=en

    MMT has possibly been too successful in getting its message across that Govt budgets don’t have to balance. They don’t but that doesn’t mean that Govt can create money as they please for hare-brained schemes like the UBI.

    “The claim is that UBI is either too small to be meaningful, or too large to be affordable”.

    That’s because it is!

  • The “giving money to billionaires” argument simply isn’t valid. Any sensible implementation of UBI would involve changes to the tax system to recover it from the well off.

    And UBI would incentivise work. The current system disincentivises work, particularly short term or casual jobs, by withdrawing benefits (along with the administrative hassle of declaring it).

  • @ Geoff Crocker Thank you for providing a link to your paper, Mr. Crocker.

    I note you write : “UBI is effective since it has an automatic 100% take up rate, compared to current welfare benefits, especially those targeted to elderly people which have low take up rates”.

    Two questions

    1. Can you confirm for me the annual amount (per person) to be universally paid out to each individual from UBI should it be introduced now ?

    2. Assuming your automatic 100% take up rate, can you confirm that someone on the national minimum wage of £8.72 per hour will receive the same flat rate amount as the top ten individuals shown below on the Sunday Times Rich List ?

    The top 10 richest people in the UK according to the Sunday Times Rich List, May 2020 :

    1. Sir James Dyson and family, household goods and technology, wealth £16.2billion

    2. Sri and Gopi Hinduja and family, industry and finance, £16billion

    3. David and Simon Reuben, property and internet, £16billion

    4. Sir Leonard Blavatnik, investment, music and media, £15.78billion

    5. Sir Jim Ratcliffe, Ineos chemical giant, £12.15billion

    6. Kirsten and Jorn Rausing, inheritance and investment, £12.1billion

    7. Alisher Usmanov, mining and investment, £11.68billion

    8. Guy, George and Galen Jr Weston and family, retail, £10.53billion

    9. Charlene de Carvalho-Heineken and Michel de Carvalho, inheritance, brewing and banking, £10.3billion

    10. The Duke of Westminster and the Grosvenor family, property, £10.29billion

  • Peter Martin 2nd Oct '20 - 8:43pm

    @ Geoff Crocker,

    “I argue that UBI is superior to Job Guarantee”

    You may well think that. But having cited Stephanie Kelton in your OP you should make it clear she has it the other way around. As do all leading MMT economists.

    There are many arguments against the UBI. It doesn’t have the desired countercyclical nature of the JG, for example, so it can’t act as an automatic stabiliser. Then there is the potentially inflationary effect caused not only by the cost of the UBI but the loss of productive capacity too.

    It’s clearly insufficient to say the extra Govt spending needs only to be finite in nature. It also needs to be limited to the extent that it doesn’t cause higher than desirable inflation.

  • Peter Martin 2nd Oct '20 - 8:57pm

    @ Nick Baird,

    “And UBI would incentivise work. The current system disincentivises work, particularly short term or casual jobs, by withdrawing benefits (along with the administrative hassle of declaring it).”

    You’ve presented no evidence for this assertion. Another more likely scenario is that it spreads the disincentive more evenly. At present there is a tax free threshold of £12.5 k so there is very incentive to earn that amount for most workers.

    If this threshold was reduced to say £4k and the next tax band went up to say 30% what would happen then? This is where we need some figures for what is being suggested. Would this fund a UBI of £5k?

    So there is only the same incentive to now earn 32% of the previous amount tax free. So why not work 32% as much legally and make up some more in the black economy?

  • @ Geoff Crocker I’m afraid you didn’t answer my question.

    To be more explicit, what do you envisage will be the equal annual amount per individual person that will be paid out to the Duke of Westminster…. and to John Smith a care worker employed in a Care Home to look after the elderly ?

  • Peter Martin 2nd Oct '20 - 10:37pm

    @ Geoff Crocker,

    It’s not difficult to go through your 5 main points and offer more sensible alternatives. For example, if automation means there’s less need for human labour why not share out the work so we have all have fewer hours in the working week and longer holidays?

    Lib Dems are fond of superficially quoting Beveridge without actually reading what he has to say in any depth. What do you make of this?

    (Ch8, p 20, “Full Employment in a Free Society”, “The Purpose of Employment”)

    “Idleness is not the same as Want, but a separate evil, which men do not escape by having an income. They must also have the chance of rendering useful service and of feeling that they are doing so.”

    The Job Guarantee addresses this issue in addition to the all the points you’ve raised in a way that isn’t socially divisive. A UBI initially creates a class of the institutionally recognised unemployed who will inevitably become the unemployable. As Beveridge pointed out many years ago, in the passage I quoted above, there is more to social inclusiveness than just having an income. Especially if it is a far from adequate income.

  • Peter Martin 2nd Oct '20 - 11:20pm

    It’s somewhat odd to be in the middle for a change. On the one side I see the usual crowd which includes Joe Otten, Simon McGrath and Innocent Bystander who clearly don’t understand the nature of what economists like Stephanie Kelton are saying.

    On the other side I see Geoff Crocker, Nick Baird and many others who have supported a UBI who also don’t understand MMT, but they think they do. They’ve latched on to the idea of “free money” . So we see sentences like:

    “Sovereign money replaces government deficit and accumulated debt, and removes the need for austerity policy.”

    Sorry but it doesn’t.

    Austerity is a perfectly respectable economic policy. The mistake made by the Coalition was to use it in the wrong way. It should only be used to cool down an overheating economy and to lower the inflation rate. It doesn’t necessarily do anything for the Government’s deficit. If Govt cuts its spending it cuts its income too. It will always cool down the economy though which is partially why we have very low inflation. As a counter to that Govt’s often lower interest rates to warm it up again. They can’t do that now very easily! Better not to try by making them negative!

  • Hello. Geoff.
    What is the amount of basic income you have in mind?

    Advocates of sovereign money advocate citizen’s dividends.
    However, that amount is small.
    In the view of sovereign money, citizens’ dividends are assumed to be in line with economic growth.

    Reference
    https://internationalmoneyreform.org/news/2018/06/value-of-money-and-making-monetary-reform-apolitical-through-citizens-dividend/

    “It should be noted that the amount of new money needed each year to keep a stable inflation rate is much less than the yearly state budget.”
    “The amount of new money needed in a completely transformed system can be expected to follow the GDP growth plus the targeted inflation rate. This is normally less than a tenth of the state budget.”

    https://internationalmoneyreform.org/wp-content/uploads/2019/09/Concrete-design-proposals-for-the-monetary-authority-in-a-sovereign-money-system.pdf

    “The sole distribution of newly created money as a variable citizen dividend e.g. to all adult citizens (with the right to vote) within the currency area also seems like quite an interesting instrument.”
    “However, it should be borne in mind that this would by no means be enough to finance a basic income, but that the distributions per citizen would rather remain in the range of 10-20€/month in the Euro-area.”

    And MMT denies basic income in terms of inflation.
    For example, Pavlina Tcherneva points out:

    ” If the [basic income] program is implemented as an ‘add-on,’ rather than a replacement for existing government programs, spending on UBI could be as high as 20–35% of GDP annually. UBI would be an enormous fiscal impulse by any measure. The worry is not that it would compromise the government’s budget, but that the expenditure represents vast purchasing power and command over real resources, equivalent to a fifth or more of the US economy. Would the economy produce the needed additional output to satisfy this new demand? If not, how would the resulting real resources be distributed and priced, in order to soak up the additional purchasing power? If output does not adjust sufficiently, the program would prove to be inflationary.”

    What do you think of these opinions?

  • Catherine Jane Crosland 3rd Oct '20 - 7:51am

    David Raw, the reason Universal Basic Income needs to be truly universal, is to ensure that no-one is ever left with no income at all.
    At the moment, people face delays before they can receive benefit, or their benefits can be “sanctioned”, leaving them with nothing. Someone on a “zero hours contract” may have a reasonable income some of the time, but then without warning there may be weeks when “zero hours” means literally zero hours and zero income.
    People who are self employed may also experience a sudden drop in income, due to many factors outside their control.
    A universal basic income means people in these situations would still have some basic income.
    Yes, making it universal would mean that millionaires would receive it too. But does this really matter? Do you object to the state pension, on the grounds that millionaires receive it?

  • Yawn, so all the LibDems can come up with to fund UBI is to turn the UK into the Kingdom of Funny Money by redefining debt in a way that will further ruin the value of Sterling, causing price rises in imported goods thus making all the easy money of UBI almost worthless. Clever Trevor. These scams play into the hands of the right wing and make it unlikely progressive parties will gain power, so actually take the country further away from being a progressive paradise.

  • Peter Martin 3rd Oct '20 - 8:26am

    @ Catherine Jane Crosland,

    Only millionaires who have made NI contributions receive the State pension. If anyone pays into a pension scheme, whether it be public or private, it is only right they should receive a payout too. The Beveridge plan for welfare was initially contributions based. No contributions would mean no welfare but that principle has since been much diluted.

    It doesn’t follow that we need to give everyone something so that no-one ends up with nothing. The Lib Dems create a problem for themselves by denying that contributions matter. If the system was more contributions oriented, as Beveridge envisaged, there would be no, or much less, stigma attached to receiving a payout. If we’ve paid in, we should be paid out when we need it.

    The main contribution we all make during our working lives is to get up in the morning to keep the economy functioning. If we didn’t do that the trains and buses wouldn’t run, the schools and factories would open, and there wouldn’t even be any electricity or gas to boil a kettle to get us going with that first cup of tea or coffee.

    So the important thing is to keep people working. If those on ZHC jobs don’t get enough hours they can make them up on JG jobs. That would put an end to ZHC’s probably. Employers wouldn’t be able to have employees at their beck and call. If anyone is too sick to work they still get paid but we can call it sick pay. Those who don’t need the money don’t have to do the work, ie make a contribution, if they don’t need to.

    This doesn’t mean that anyone who loses their job will have to accept a JG job to survive. They will still receive unemployment benefit. The length of time will depend on contributions made. More contributions will mean more benefits. It will be the same a choosing an insurance policy. We can pay more , or less, for higher or lower cover.

    http://pavlina-tcherneva.net/job-guarantee-faq/

  • Thank you Geoff.
    Doesn’t the household have assets as well as debt?
    Household debt and household assets.
    Isn’t it necessary to consider both of these?

  • Peter Martin 3rd Oct '20 - 8:45am

    @ Geoff Crocker,

    If you understood MMT you wouldn’t be saying that the JG was workfare.

    No MMT economist would say that, including Stephanie Kelton, who you do seem to respect. It’s designed to be a living wage for those who need it and to be a buffer against inflation. It sets a floor for terms and conditions which all other employers have to match.

    Pavlina Tcherbeva covers the rationale in the link I provided above. See #18.

    Warren Mosler explains it all very well in this article.

    http://moslereconomics.com/2011/09/19/the-umkc-buckaroo-a-curreny-model-for-world-prosperity/

  • Peter Martin 3rd Oct '20 - 9:13am

    @ Geoff Cocker,

    “The proposal certainly is that sovereign money replaces debt-bearing deficit funding.”

    If you understood MMT you also wouldn’t be saying this. ‘Sovereign money’ is just a IOU of government which doesn’t pay any interest. But it’s still a debt. At present Govt can issue “sovereign money” IOUs and 0% interest or gilt based IOUs at -0.06% interest. That’s right it’s negative! (as of 2nd Oct)

    So it’s actually more expensive to issue sovereign money than issue conventional debt. But even if it wasn’t it wouldn’t make any difference because the Govt is a currency issuer. It can set long term and short term interest rates to suit itself. If it wants 10% it can have 10%.

    The confusion arises because of what we conventionally consider debt. We don’t consider issued money to be debt for historical reasons connected with the gold standard. There was, in theory, supposed to be enough gold to cover the issue of paper. But there isn’t any longer any metallic connection, so it should all be counted as debt.

  • @Peter Martin – “You’ve presented no evidence for this assertion”

    Universal Credit is withdrawn at a rate of 63 pence per pound earned. That’s has the effect of being “taxed” at a rate of 63% before you get anywhere near the tax free threshold, and before you incur any other costs e.g. transport to get to work.

    That doesn’t much matter if you are in full time employment and earning over the tax free threshold. But if you are in a situation where all you can find is short term and/or part-time work at minimum wage that has a relatively big effect.

    If the introduction of UBI was accompanied by taking the tax free threshold down to zero and increasing the basic rate of tax to e.g 30%, you would still keep 70% of what you earned, on top of the UBI itself. So ANY work, no matter how temporary or part-time, will always be worth doing.

  • Peter Martin 3rd Oct '20 - 10:15am

    @ kyunkyun,

    Yes we should, as individuals, probably look at our own personal finances in the same way as a business. ie We tot up our assets and liabilities on a balance sheet.

    The problem arises, in a macroeconomic sense, when the value of all of our assets (which is mainly the land and houses we own) is very much dependent on the liabilities we have incurred to own them. Here I’m in agreement with Geoff Crocker (sorry for mispelling your name previously, Geoff!) We’ve created a bubble economy which is far too reliant on private debt. If the bubble bursts many will end up with more liabilites than assets. Our balance sheets won’t balance except with the inclusion of a large negative number! The Govt will be scared stiff about this possibility.

    Governments have been increasingly reluctant to take on debt. But if the UK as whole has a current account deficit, someone in the UK has to be doing the borrowing. So if not the Government, it has to be the rest of us. That’s why interest rates are ultra low. To discourage saving and encourage borrowing.

  • Peter Martin 3rd Oct '20 - 11:10am

    @ Nick,

    This time last year there were around 2 million people on UC. The figure has more than doubled due to the Covid problem. But 2 million or so would be a more normal figure. The UK work force is about 32 million so we are talking about 6% or so that normally receive UC. There is a strong requirement that UC claimants look for work or face sanctions including loss of the benefit.

    There won’t be many who make the sort of calculation you describe but there will be some. It really doesn’t make any sense to make people look for jobs when there aren’t any. It makes much more sense to offer them something if they can’t find anything. This is a much more socially responsible policy and gets us away from sanctions and all the rest of the harshness that I know Lib Dems don’t like any more than I do.

    There will be some who will refuse to take up a living wage job. “Job” doesn’t mean working on a chain gang. JG jobs will include a high proportion of education and retraining too. The objective will be to create a more highly skilled workforce that isn’t dependent on the JG. But why would they want to do that? Possibly it’s because they have an illicit, even criminally obtained, other source of income. Criminals do exist. They aren’t all in jail! And you’re suggesting we pay them a UBI too?

    Of course at the moment a JG is problematic. It could be temporarily necessary to define a job as simply to isolate and do some private study and retraining from home.

  • @ Martin Good to have your support, Martin. I guessed you’d come round in the end.

    @ Catherine Jane Crossland As Peter Martin points out, “Only millionaires who have made NI contributions receive the State pension”. It’s a good job Trump isn’t a UK taxpayer…………

    @ Joe Otten Unusually, I find myself in the same lobby as your good self on this occasion, Joseph, but with regret I found your initial response to Mr Crocker shall we say, a tad un worthy, and superc…ious.

    In my view, speaking as Chair of a Food Bank, the issue of poverty and inequality was made infinitely worse by the support given to so called ‘welfare reform’ and the introduction of Universal Credit as supported by your friend the former Member for Hallam and his friends.

    A prediction : The Liberal Democrats will be taken to the cleaners by all forms of the media and their opponents if they stick to the UBI policy, so don’t say you haven’t been warned..

    A massive more generous reform of UC and PIP is required taking out the punitive features in its administration.

  • @ Geoff Crocker Do you think :

    “We can easily show that the new multiple, m’ which equals (mY+UBI)/(Y+UBI) is < m, ie inequality has decreased, because multiplying this out, we get (mY+UBI)< mY+mUBI ie UBI1, which it’s bound to be. Hence UBI does reduce inequality."

    ………..would play well as a soundbite for Ed Davey or on a Focus leaflet ?

  • Steve Trevethan 3rd Oct '20 - 12:13pm

    At bottom, are we discussing, most interestingly, the distribution and creation of money and the social and economic effects and possibilities of such?
    If so, does this indicate that it would be more efficient if current economics ceased to separate the “economy” from society and think, feel and act using socio-economic frames?
    Might it help the many if “economics” used accessible vocabulary and language structures/genres?
    Might inequality also be reduced indirectly as well as directly?
    Might inequality, with its inevitable consequences of avoidable personal and social suffering and economic inefficiency be reduced by:
    *Bringing offshore capitalism onshore
    *”Democratising”/”socialising” the creation, management and pricings of credit?

  • Catherine Jane Crosland 3rd Oct '20 - 1:15pm

    David Raw, you say that “the Liberal Democrats will be taken to the cleaners by all forms of the media and their opponents if they stick to the UBI policy”. But I don’t remember ever hearing the Green Party attacked or ridiculed by the media for having a policy of UBI

  • Catherine Jane Crosland 3rd Oct '20 - 1:24pm

    Following my last comment, it seems that the Green Party policy is that every adult would receive at least £ 89 per week, and there would be extra payments for people who face barriers to finding work, for example disabled people and single parents

  • Peter Martin 3rd Oct '20 - 2:07pm

    @ Geoff Crocker,

    Putting aside the algebra for a moment, all you’re saying is that if the BoE creates a lot of money and shares it out equally then wealth inequality falls.

    So suppose, to take an extreme example, we all get BoE cheques for a trillion pounds. But, just previously, say everything had been nationalised at its current value. So the richest person in the UK would be worth £1016 billion. The poorest would be worth £1000 billion. That’s definitely making us all more equal!

    If that’s what you want then go for it. But there is an obvious snag. It doesn’t square too well all that Lib Dem election talk about fiscal responsibility.

    @ William Francis

    “How would a UBI not increase output?”

    Maybe you should be asking how a UBI wouldn’t increase inflation! If it’s a small UBI it won’t make much difference. But the bigger it is the more inflationary it will become.

  • @ Catherine Jane Crosland I was aware of that, Catherine, but you’ll find the Scottish Green Party (with more seats at Holyrood than the Lib Dems) have a more pragmatic approach of wishing to trial UBI rather than going straight in at the deep; end. Here are some links

    ‘Scotland can lead the world with Universal Basic Income pilot …greens.scot › news › scotland-can-lead-the-world-with-…
    11 Jun 2020 – Scotland would grab the world’s attention by undertaking a three-year pilot of a Universal Basic Income, the Scottish Greens have said’.

    Coronavirus Crisis: time for Basic Income in Scotland …greens.scot › blog › coronavirus-crisis-time-for-basic-in…
    22 Apr 2020 – Scotland would grab the world’s attention by undertaking a three-year pilot of a Universal Basic Income, the Scottish Greens have said.

    There is also a paper on their web site comparing six different formats of UNI. Lib Dems should do some homework first.

  • Peter Martin 3rd Oct '20 - 4:20pm

    @ Geoff,

    Wealth is just the sum of all previous incomes so the principle is the same.

    There’s always going to be a problem of inflation if incomes are separated from the productive process. As a Lib Dem you should be aware of what Adam Smith had to say:

    “It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own self-interest. We address ourselves not to their humanity but to their self-love, and never talk to them of our own necessities, but of their advantages”

    This is not to say that butchers, brewers and bakers don’t take pride in their work but Smith is saying they wouldn’t do what we need them to do to anywhere near the same extent if they didn’t have their own self interest at heart. So the principle of a UBI essentially undermines how the system is designed to operate.

    So, a small UBI will be possible but if you make it large enough to “take everyone out of poverty” you’ve really short circuited the system and it will cease to function.

    It’s best to wait for some other country it out first and see how they go. Then we can learn for free. A UBI can’t be trialled. It has to be done feet first otherwise it’s not universal. Also every needs to be convinced that it is permanent otherwise they won’t behave as they otherwise would. They’ll just treat a temporary UBI as a windfall and won’t change their behaviour as they might if they know the payments will be continuous.

  • Steve Trevethan 3rd Oct '20 - 6:54pm

    Might it be the case that such active and well researched interest in U. B. I. demonstrates that “The Market” is not self-regulating?
    If this is so, might it be the case that our current “market”, or economy, is actually regulated, perhaps “invisibly”, and that its outcomes, which include great wealth for some and poverty and starvation for others, are tolerated and/or purposed by those with the power to achieve and behave differently?
    Might we then consider the purposes, actions and restraints of action of this second “invisible hand” which may be intentional and/or unwitting?
    Besides considering external ways of managing our current inequalities and their consequences, might we also consider “internalities” which could be managed more efficiently and equitably?

  • Katharine Pindar 3rd Oct '20 - 10:25pm

    Geoff Crocker, I understand I think the points in your paper that workers’ wages have declined inexorably while capital income has increased in recent years, and that in general wages are likely to remain inadequate with the increasing use of sophisticated technology further reducing employment possibilities. Here indeed is a situation requiring remedial action, and I was glad to read of it.

    I want to see a system change to ensure that every adult of working age in this country does receive by right a minimum guaranteed income, to ensure that they reach at least the accepted poverty level. But I do not see a UBI achieving this, or indeed aimed at it. I believe our first aim as a party should be to work to lift the 14 million people in this country who already live in poverty out of it, and to ensure that the numbers do not grow, as I am afraid they are already doing this autumn.

    Therefore I spoke against the UBI motion at the virtual Conference. I think it is the wrong approach, and if ever implemented liable to produce a kind of underclass of disadvantaged people whom Government will happily then ignore. There is a great deal of ignoring of complexity in the proposal. It is targeted at individuals. But individuals are in households, and have families. What about supporting the children? What about housing needs? What about payments when people fall sick and can’t work temporarily? No, I am sure that David Raw is right and that increased targeted welfare payments are what is required now. I suppose Universal Credit should then probably be rejigged to be the universal guaranteed income that is needed, free from debt, part of this ‘sovereign wealth’ idea that you promote, which is new to me.

    I think Peter Martin makes some very good points, above, and that Steve Trevethan’s deeper thinking should be heeded . (I liked your recent article, Steve, though too occupied with Conference to be able to join in the discussion of it.)

  • Peter Martin 3rd Oct '20 - 10:25pm

    @ Geoff,

    You’re right that there is a bit more to wealth than the accumulation of previous income. But nevertheless wealth does matter as much as income. Wealth creates an income. Owning a house, for example, means you don’t have to pay rent. So in this future society of yours where the machines have taken all our jobs and we don’t have anything to do we will have to address inequalities in both.

    Many on the so-called progressive centre-left are stuck in a ‘robots are coming for our jobs’ narrative, which always somehow morphs into a resignation that there will never be enough jobs for all those who desire them. Ergo we need a basic income to keep people eating. Apparently, human creativity will then spring forth to replace the despair of unemployment because the UBI will allow people to engage their inner entrepreneurial spirit. We’ll see businesses popping up all over the place, and the creation of great works of art and music !

    Sorry but I’m not convinced. Especially as when the supposedly progressive centre left aren’t talking about a UBI, and robots taking our livelihoods, they are usually telling us all how it was such a mistake to leave the EU. We’ll no longer have a viable agricultural sector because there will be no EU workers to pick the apples and pack the lettuces etc. Old people won’t have anyone to get them out of bed in the mornings in their nursing homes because EU workers will have all gone home.

    The genuine left should never concede that any worker is surplus to requirements, or that we swap the demand that everyone should have both the right to work and an obligation to contribute what we can to society. This creates the wealth which should then be shared in an equitable fashion. Beveridge was right in saying that idleness, or what we would term underemployment or unemployment, is a separate evil which will not be cured by simply giving everyone an income.

  • Katharine Pindar 4th Oct '20 - 1:06am

    Geoff, thank you for answering me, but I don’t agree. Our party already wants to abolish sanctions, and it wouldn’t be too great a step, I suggest, for Universal Credit to be replaced with a Guaranteed Minimum Income. (Perhaps it could be called a Gimme!) As to intrusiveness, the point I made about UBI being an over-simplification is the answer to that, and extra benefits such as sickness and housing payments would still require checking by the benefits staff. And as to expense of administration, that would be little compared with the enormous cost of a UBI.

    I think the idea that people with such a payout would relax and be creative at any age is perhaps a nice fancy of middle-class highly educated people. I agree with Peter, if I read you right, that satisfaction and personal self-regard, as well as the respect of others, may be important gains from having a paid job in the estimation of many people.

  • Peter Martin 4th Oct '20 - 5:48am

    @ Geoff,

    You’re saying:

    “……….automation is displacing employment, evidenced by long term stagnation in aggregate real wages.”

    “……creeping automation is reducing the labour content of output and hence the need to work and/or the remuneration for work.”

    But you don’t like the phrase:

    ” ….robots are coming for our jobs ”

    I don’t know about you, but in our household we have such items as an automatic washing machine, an automatically controlled central heating system, timers on the oven, we use the internet and computers to do our banking and some shopping. Previous generations would have used mangles, dolly tubs, open fire grates that needed cleaning out daily, they’d have to wait their turn in a queue to obtain money from a bank or send cheques in the post etc. So, clearly automation isn’t a bad thing.

    In a sensibly ordered society it’s not a threat. We can use it to produce the same amount of goods and services in a shorter time or more goods and services in the same time.

    But, if you have come to the conclusion that increased automation inevitably must leads to a “stagnation in aggregate real wages” and the only solution is to hand out a yet-to-be-explained-in-detail UBI to those who have suffered from a “displacing (of their) employment” , you must be going wrong somewhere!

    How about using your understanding of MMT to argue that wages have fallen because Govt has been preoccupied with an outdated neoliberally inclined economic theory which has created the conditions we now see in the labour market. The main thrust of any progressive thinking shouldn’t be to argue for a UBI, or even a JG, but a condition of full employment. There’s no reason to swallow the line that automation makes this impossible. The obvious counter to the neoliberals, if they persist, is that they should then accept that the standard working week should be reduced to 30 hours.

    That will shut them up!

  • Catherine Jane Crosland 4th Oct '20 - 7:00am

    Katharine, why do you think that UBI would “produce a kind of underclass of disadvantaged people who the government will then happily ignore”?
    I don’t think many people would choose to live on UBI indefinitely rather than looking for work. UBI is “basic” income – just enough for essentials. Someone with just UBI would have little or no money to spend on luxuries. Most people would still look for work, although perhaps some people would choose to work fewer hours.
    The government could still provide support for people looking for work, through advisors at jobcentres or elsewhere. This support might actually be more successful when the element of fear was removed. In the current situation, a jobseeker knows that jobcentre staff have the power to remove their only source of income. Clearly this is not conducive to a relaxed, friendly relationship. But with UBI, jobcentres would have nothing to do with the benefits system, and would be solely about providing careers guidance, and support for people having difficulty in finding work

  • I’m not sure where the idea that we’re going to jump into a national launch of UBI comes from. The conference motion was about progressing the idea of it, with the intention of it becoming reality at some point in the future. There’s a lot of work to be done on the details, which should include trials, and especially in communicating what is a radical concept to a wider audience, some of whom struggle to see beyond ‘free money for doing nothing’.

    IMO, the idea that it is bad for the poor because the wealthy will get it too, is a red herring. If those wealthy people aren’t paying way, way more in tax to help fund the system, then the problem is that they aren’t being taxed properly. And the introduction of UBI gives us the opportunity to review the tax system as a whole. I agree with whoever it was that reminded us that it could introduce a lot of problems if we try to reduce it to zero, so I think we should assume we don’t reduce it below £5000, but that’s something we can discuss following some proper modelling.

    One of the strongest arguments in favour of the concept of UBI is to think of it as the whole community benefiting from our collectively inherited wealth. In short, if you are OK with children being supported by and inheriting from wealthy parents (either above or below the inheritance tax threshold), then you should be OK with every citizen being supported by and inheriting from our collective wealth – much of which was accumulated thanks to our shared resources or from the work of the ancestors of the less wealthy in society who were not paid properly at the time.

  • Nonconformistradical 4th Oct '20 - 9:39am

    @Geoff
    Peter Martin in his post at 4th Oct ’20 – 5:48am said
    “How about using your understanding of MMT to argue that wages have fallen because Govt has been preoccupied with an outdated neoliberally inclined economic theory which has created the conditions we now see in the labour market. The main thrust of any progressive thinking shouldn’t be to argue for a UBI, or even a JG, but a condition of full employment.”

    I agree – Geoff please do that.

    Irrespective of automation issues (I have some of the automation technology Peter Martin mentions but not all of it) there is still much work which needs to be done – and by humans rather than machines. Personally I would rather pay humans to do it rather than some gargantuan corporation which owns the technology.

    But Geoff – please do the explaining in plain English rather than economese – assume you are trying to convince ordinary human beings who know nothing about economics beyond the struggle they have to put food on the table and a roof over their head.

  • James Fowler 4th Oct '20 - 9:59am

    I don’t UBI will sell on the doorstep. The arguments are technical and abstract, and it doesn’t sound plausible – rather like the 2019 Labour manifesto. It’s not the only argument against it or even the best one, but it’s one that political parties can’t afford to ignore.

    If we want to to distinctive in financial matters in a way that would have instant leverage and controversy we could propose:

    1. Merge income tax and national insurance.
    2. Abolish stamp duty and introduce CGT to all housing.
    3. Impose VAT uniformly and raise the income tax threshold.

  • David Garlick 4th Oct '20 - 10:15am

    I welcome the UBI adoption. Clearly if this is going into a manifesto it will be attacked/dismissed on the basis of affordability . We must commission credible, independent research to establish the true cost of any commitments we make and be very clear on the circumstances that would make its introduction possible/not possible. There is no room for a further ‘broken promise’. If that were to happen on this commitment it would be on a scale way above the student fees debacle. Politics is easy to forget when doing a good and right thing. Let’s not make that mistake.

  • Steve Trevethan 4th Oct '20 - 11:08am

    Thanks to Katharine Pindar!

  • Peter Martin 4th Oct '20 - 12:49pm

    @ Geoff,

    “I don’t think it (full employment) can any longer be attained”

    It’s been pretty close to it in the SE of England for as long as I can remember. In the 70’s when I was a student it was easy enough to get a reasonably well paid temporary job there, but when I looked for work in the North of England, from where I originate, it was much harder and the wages were much lower. The problem for govt was that a general stimulus created an overheating, and inflation, in the South before a thaw had set in in the other more peripheral areas of the UK. So if it’s possible in SE England it’s possible anywhere. It’s not that the people of the UK are any more or less hard working in different areas. It just needs Govt to apply its stimulus in a more targetted way.

    It’s the same story the EU. A general stimulus of the monetary variety is not going to be selective enough to address regional variations. Extra spending in the wealthy areas will probably create too much inflation whereas the same spending in the peripheral regions will be much more effective in utilising the available and underused capacity. In the other words both the UK and the EU should concentrate on providing jobs where people are living rather than where they aren’t. .

    This induces unnecessary migrations and creates problems of depopulation in some regions but the opposite problem in the wealthier areas.

    @ Katharine @ Catherine Jane Crosland,

    Introducing a UBI is also an acceptance that full employment, or as close to it as we can reasonably achieve, is no longer possible. Geoff says exactly this. Once we go down that road we are writing off a whole class of people as being surplus to requirements. This is what will create the underclass. Some would say we already have it.

    We need to do everything possible to prevent this happening rather than rolling over by accepting very neoliberally inclined arguments. If Geoff understands MMT he should realise they are false arguments. Automation could be used to enable the working week to four days. Or give everyone six weeks minimum holidays. It really makes no sense for 80% of the workforce to carry on working as normal and have remaining 20% permanently unemployed.

    Unless perhaps you want to create a sense of fear in the 80% and use that as a disciplinary force.

  • “I welcome the UBI adoption. Clearly if this is going into a manifesto it will be attacked/dismissed on the basis of affordability”. Errrrr, no. Not quite. I don’t think so.

    As someone who has participated in eighteen general elections, three Holyrood elections, countless local elections, and worn out a few pairs of shoes and doorsteps, I think it will be laughed out of court by people saying “why are you giving the same amount to top rate taxpayers and the billionaires and such as Dyson and the Duke of Westminster”.

    It’s unlikely they’ll work it out on their ipads that : “(mY+UBI)/(Y+UBI) is < m, ie inequality has decreased, because multiplying this out, we get (mY+UBI)< mY+mUBI ie UBI1, which it’s bound to be".

    As Lloyd George said many years ago in the famous Limehouse speech, "“A fully equipped Duke costs as much to keep up as two dreadnoughts, and Dukes are just as great a terror, and they last longer.”

    In 2020, Dukes (and Philip Green) still don't elicit much sympathy from most of the rest of us and I don't want my taxes to give them a further dividend.

  • I’ve not seen any plan for UBI where it will go to tax exiles, so Mr Dyson will have to survive without it.

    Simply reminding the cynical public that the very wealthy will be paying far more in tax than any UBI income is not too complex for most of the public, or too tricky to describe on the doorstep.

    That’s not to say it’ll be an easy sell. Sadly, IMO, more people at doorstops will be worried about free money for the poor people who will spend it on fabs, booze and flat-screen tvs than they will about the super-rich. See also attitudes towards inheritance tax.

    But assuming we’ve got another four years before the next manifesto is being finalised, we’ve got time to do research into not just what sort of scheme we propose, but we have between now and then to work beyond party politics to introduce the wide public to the concept and to persuade them of its viability. Depending on how far we get with that between now and publishing the next manifesto will inform how much emphasis we put on the policy, and what it is we’d be proposing in the following five years.

    It’s a bit like our policy on regulating cannabis. There will be some on the door step, with some help from the media, who think this means we are in favour of teenagers getting stoned, don’t care about those developing mental health problems or drug driving. Just because some people will misunderstand our policy doesn’t mean it’s not the right thing to do or worth pursuing.

  • @ Fiona I think you’ll find Sir James Dyson is a UK tax payer on a personal level so he would get it.

    It was his business HQ and most of his manufacturing capacity that was shipped out to Singapore where he can take advantage of cheap labour with different ’employment rights’..

  • Katharine Pindar 4th Oct '20 - 6:42pm

    Geoff, in-work poverty is already a fact of life for many British families. As you have shown yourself, earned income has steadily declined compared with consumer expenditure since the late 40s. and has been less than consumer expenditure since 1995. People in insecure employment, on zero-hours contracts and the minimum wage, fall in and out of poverty, and the tremendous growth in food-bank usage by people usually working at least part-time shows in practice what the statistics can prove.

    What we are all wanting is to ensure that every individual of working age in this country can come to be assured of a guaranteed minimum income. Everyone who wants a job should be provided with one, but we can’t ensure that all the jobs will be lasting and pay enough, or that individuals are always able to stay in them. It seems to me that a UBI is a blunderbuss of a supposed solution, when what is needed specifically is a top-up for people of working age when their income, earned or unearned, falls short. That answer is almost glaring at us when we look at the Chancellor’s present and planned provisions in this health crisis. But what may be a lasting way forward is to make Universal Credit into a guaranteed minimum income which can’t be reduced or earned.

    Fiona, I don’t think it is feasible to have test pilots of UBI, for the simple reason that usage of it (as someone has already said above) would be quite different in a test situation from the situation if it really were rolled out nationally. Which I can’t see the nation accepting as both practical and desirable.

    Catherine, I entirely agree with Peter’s reply at 12.49 today, answering both you and Geoff.

  • Voters will reject UBI as another daft idea of the Left.

  • Peter Martin 4th Oct '20 - 8:29pm

    @ Geoff,

    I suspect that you do actually understand MMT but that you don’t really agree with it. Which is of course fair enough if you make that clear, explain what your objections are and why you differ.

    However, you’ve dipped into it, with reference to Stephanie Kelton’s book, to try to come up with a way of making a UBI look ‘affordable’ in a way I can’t imagine she or any other MMT economist would approve of.

    You’ve mentioned Guy Standing with some approval and, again, it’s fair enough to agree with him if you choose, but Bill Mitchell has made it quite clear in his blog that he is definitely not in tune with MMT opinion.

    http://bilbo.economicoutlook.net/blog/?p=42340

  • Geoff Crocker,

    Thank you for the mention and providing a link to my February 2018 article, however my first name is Michael not Malcolm.

    This article does not set out at what level a Basic Income should be introduced, how much it would cost and how it would be financed. You talk of the government creating money to fund a UBI but don’t say how much this should be either in year one or any other year.

    A realistic manifesto commitment would be to introduce a Basic Income of £48.08 a week, for everyone when they turn 18 and to abolish their right to an Income Tax Personal Allowance. If we assume there are about 800,000 people turning 18 each year, the maximum this could cost is £2 billion (£2500 x 800,000). The maximum cost assumes than no one in the year after then turn 18 pays income tax. If they are earning the 18 to 20 minimum wage (of £6.45 an hour) and work only 37 hours a week then they would pay £46.39 a week income tax.

    By the time they are 21, if they are in work the amount they pay extra in tax compared to those who don’t have a Basic Income will equal the amount of Basic Income.

    We could then focus our main welfare spending on ending sanctions, providing a work allowance of at least £50 a week for single people and couples (and a second-earner work allowance), restoring all the other benefits cuts made since 2010 and increasing the working-age benefit above inflation towards being enough to meet a household’s basic needs (according to the Social Metrics Commission this is £157 for single people and £271 for a couple).

  • Peter Martin 5th Oct '20 - 12:59am

    @ Geoff,

    You are of course entitled to your POV but why include Stephanie Kelton as an implied ally, and by further implication MMT itself, when you clearly disagree with just about everything? Everyone knows that a sovereign state can issue money. That’s never been in question!

    Your annoying inclusion of SK’s book as a reference, without a single quote from it, allowed “Innocent Bystander” to come out with a typical piece of nonsense before I entered the argument. “The Deficit Myth”, as written by Stephanie, is an attempt to explain why the Govt nearly always gets back in taxes less than it spends. This shouldn’t be used as a reason to raise taxes and/or cut spending unless there is an inflation problem. It’s not a justification for the Govt to create lots of new spending money for itself on dubious projects like a UBI.

  • Geoff,

    Does your 5-7.5% figure depend on the current situation of the Coronavirus crisis? If there was no Coronavirus don’t you think that an increase in aggregate demand of £100 billion would be inflationary considering the UK’s historical rates of economic growth?

    Even if the £100 billion was divided between those of working age this would only provide about £44.72 a week. Would you expect to increase it in the second year?

    Do you think the party is likely to support such a large increase in money within the next four years? If not, do you think £20 billion might be a more realistic figure to get the party to agree to?

  • Catherine Jane Crosland 5th Oct '20 - 8:28am

    Katharine, UBI does not mean that the government regards unemployment as acceptable. The government should still aim to ensure that everyone who wants a job can find one. UBI just recognises that most people will have times during their lives when they will be temporarily without work, or need to take a break from work for a time, and a universal basic income is the best way of ensuring that no-one is ever left entirely without income, and no-one can be forced to work at times when it would be detrimental to their physical or mental health to do so.

  • I would rather adopt a policy of increasing contribution based benefits instead of UBI.

    Many people made unemployed in recent months are surprised at how little their past NI contributions affect their social security entitlement and are also excluded by savings and capital limits:

    https://www.google.com/amp/s/amp.theguardian.com/world/2020/sep/30/hundreds-of-thousands-who-lost-jobs-in-pandemic-denied-universal-credit

  • @David – the point is that whether or not Dyson gets it is a red herring in a serious discussion of whether or not the rich or poor benefit the most, because you don’t need to be a maths whizz to get that rich people will be paying far, far more in tax, and people will think that as with pensions, he’s earned it.

    IMO, far more people will be concerned about those they think have not earned it. Yes, some of those will try to appear progressive by complaining about Dyson, and I fully expect that the likes of the Mail and Express will feed their readers that line, so I do see it being mentioned ‘at the doorstep’, but I don’t think it’s a serious problem for anyone who is open to discussion.

    Pilots may not be able to mimic the full experience, but that doesn’t mean they won’t provide valuable information and be an important part of the process of getting people used to what many will think of as a radical approach.

  • Steve Trevethan 5th Oct '20 - 9:12am

    Might it help if we were to consider this matter by stylising the sets of recipients, some possible action and possible macro socio-economic factors?

    Sets of Recipients
    Those who have no employment whilst seeking such
    Those who have no employment whilst not seeking such
    Those who are unable to work
    Those who are employed and receive insufficient income

    Possible Actions
    Reduce excessive “Internal” costs such as housing, medicines, excessive/rentier financial costs, optional wars etc
    Introduce Nationally/Sovereign money financed and locally organised guaranteed “employment with status” scheme
    Introduce U.B.I
    Carry on as now with some mods
    ?

    Macro socio-economic (or economo-social) factors might include:
    Inflation rates
    Employment rates
    Social and mental health
    Financial costs/benefits actual and perceived
    Public acceptability

  • @ Fiona I’m sorry, Fiona, we’ll have to agree to differ.

    Giving Dyson etc UBI is the equivalent of a tax rebate in terms of cash in his pocket. It’s an extension of the Coalition when Lib Dems agreed to cut the top rate of tax when applying cuts to welfare benefits for those at the opposite end of the financial spectrum.

    Some Lib Dems seem to be looking for a magic cure Holy Grail to rescue them from the party’s present self inflicted dire situation. In my judgement without rigorous trial and a top taper cap UBI won’t be it. At the very least do some doorstep opinion sampling to test the public mood. It’s like washing a car the Rolls Royce with a hosepipe when there’s a forest fire of poverty on the doorstep.

    LLG, for all his faults and excesses would have understood that. He’s now probably
    dancing like a whirling dervish in his grave. Dust down a copy of the National Insurance Act, United Kingdom, 1911 and have a look.

  • Peter Martin 5th Oct '20 - 10:33am

    @ Geoff,

    I’m sure you’ll have heard objections to the idea of Govt creating money along the lines that this is what happened in Zimbabwe and the Weimar Republic. So that’s why I say that everyone does know that Sovereign Govts can do this even though they argue they shouldn’t .

    The MMT position is that interest rates should be set at zero so that removes the difference being bond issue and sovereign money issue. What is then issued, to cover Govt spending, has to be determined by the likely impact the spending has on the level of inflation. I’m agnostic on the idea personally. I’d say that 2% should be OK if inflation is also targetted to be 2%. But I would say the Govt should make up their minds about what they should be and stop fiddling around with them. The MMT suggestion was ridiculed at first but now interest rates are heading into negative territory it all looks much more reasonable to conventional opinion.

    Everyone likes Stephanie. She is very personable. I’ve tried to get her over to give a talk at the Labour conference but she’s always been booked up. We’ve had Bill Mitchell a couple of times. Whereas with some of the other big names there can a tendency to be less diplomatic and state their opinions more forcibly. Nevertheless when you say things like:

    “These are the radical definitions needed to advocate a substantial affordable UBI. They are set out more fully in Stephanie Kelton’s new book….”

    You really give as example and shouldn’t hide behind what you claim she said in private. She probably wouldn’t use the term “affordable” anyway. It’s the potential effect on inflation and levels of production that is important.

  • Catharine Jane Crosland,

    The government no longer aims ‘to ensure that everyone who wants a job can find one’. They want a level of unemployment which keeps inflation in the region of 2%. I don’t even think that most of the members of Federal Policy Committee and Federal Conference Committee believe that government should ‘aim to ensure that everyone who wants a job can find one’.

    What level of UBI do you think would meet a person’s needs so they can refuse a job offer, and what evidence do you have this is the correct level?

    Macro,

    The £6,000 of disregard for savings and the maximum of £16,000 has been the same for years. I don’t recall when these were last increased. They were at this level in 2010 and I believe in 2005 as well.

    David Raw,

    I think the question of giving an amount of money to those with high incomes can be overcome by knowing at what level of income a person is no better off and/or worse off. In a discussion of a Compass scheme I pointed out that a single person earning more than £12,500 would be worse off. If a UBI was set at the Income Tax Personal Allowance level and this allowance is abolished then anyone earning more than £12,500 would be no better off.

  • Geoff Crocker,

    It seems your answer to my question (would you increase UBI in the second year?) is that you don’t know. This makes setting out how much we want a UBI to be after five years of a government with us in it impossible. We wouldn’t be able to make a firm commitment on the UBI level in our manifesto.

    You give figures for a two year period therefore we should consider half of each figure as the annual amount – £22.5 billion, very close to my £20 billion figure. An increase in spending of £100 billion is an increase of £77.5 billion assuming you could stop people borrowing all of the £22.5 billion. If there was no forecast economic growth then I would expect economic growth to increase to close to 3% and inflation to increase by over 0.875%. If there was forecast economic growth inflation can be expected to increase by this percentage as well.

    It doesn’t seem liberal to increase the amount people need to earn before they can borrow and make getting on the housing-ladder even more difficult. It would make more sense to reduce your £100 billion by the amount you expect people to borrow and the value the economy is expected to grow by. If growth was forecast to be 2% this would reduce the £100 billion down to £37.5 billion. With a level of growth of 2% already expected it might be possible for the economy to grow by more than an extra 1%. With working-age people receiving £16.77 a week in UBI the amount borrowed to spend into the economy might be reduced as well and if these happened inflation would increase by less than 0.875%.

  • Nonconformistradical 5th Oct '20 - 1:42pm

    Steve Trevethan at 5th Oct ’20 – 9:12am is making an attempt to understand the problem by listing some possible scenarios we might need to consisder – thank you Steve.

    It would be really helpful I think if Geoff Crocker and Peter Martin could take their discussion about MMT etc. elsewhere and instead address how we should deal with those scenarios, whilst ensuring at the same time that the work which needs to be done by human beings in UK does actually get done.

  • Peter Martin 5th Oct '20 - 2:50pm

    @ Geoff,

    Comments which include Z and the WR make me groan too. But, the point is that even people like “Innocent Bystander” will know both created lots of “sovereign money” and there were hyperinflations.

    So Everyone? OK maybe my 3 year old granddaughter won’t know that but it won’t be long before she does!

    I’m not saying a small UBI will do the same but that’s probably what would happen if the more wide eyed of UBI advocates decided they were going to really get serious about paying everyone a UBI of sufficient size to ensure that even those with no other income at all had “enough money to keep them out of poverty.”

    Except they won’t after the hyperinflation!

  • Innocent Bystander 5th Oct '20 - 3:30pm

    Many thanks to Peter and Geoff for their debate which has brightened this dismal time.
    I have much enjoyed it.
    My own perspective on MMT is congruent with Terry Pratchett”s on the cosmos.
    “It’s turtles all the way down”.
    Stephanie is Bernie’s economic advisor which says it all, really, but it will provide entertainment for the rest of us until the fad dies and is replaced by an even more desperate clutching at straws.

  • Steve Trevethan 5th Oct '20 - 3:31pm

    Thanks to Nonconformistradical!
    Thanks to Geoff Crocker! I’ll have a go at an article and see if it is good enough to submit.

  • Peter Martin 5th Oct '20 - 8:03pm

    @ Geoff (cont)

    I used to do some work for a German computer company. There would often be some banter about how us Brits lived on tick and couldn’t manage without our credit cards etc etc. If you follow the German comedian Henning Wehn he incorporates all this in his act. All good fun of course, but if you analyse what they are saying it’s quite clear that they don’t see that if someone is in surplus then someone else has to be in deficit. It’s arithmetically impossible for the rest of the EU to be like Germany. But that’s what they expect of others. If they can manage with the euro why can’t everyone?

    But, get back to what what you suggested, and if they do think that, they are right about bonds and cash. Suppose the Government sells the BoE £N worth of gilts. The BoE end up all square. They’ve swapped £N worth of cash for £N worth of gilts. The Govt end up with the £N in cash which they duly spend. But they still have a liability of £N to the BoE.

    But the BoE are really a part of government. So let’s put the BoE and the Treasury together. So the Govt now ends up owning its own bonds. Does this mean the Govt’s liability has gone away? No. It’s still there in an accounting sense just as it was before, in an accounting sense. So whether its the issue of bonds or some smoke and mirrors QE operation the issuing of cash is no different from the issuing of bonds apart from the level of interest that goes with the bonds. But if it’s 0% in both cases……..

  • Katharine Pindar 5th Oct '20 - 10:02pm

    Marco, I agree with you – better increase contribution-based benefits than try to introduce a UBI, which in any case can’t be rapidly brought in. There must be many people unfortunately surprised to find this year how little the rates of benefit are: – enough, as a friend of mine experiencing them said, to live on for a few weeks but a real problem after that when new expenses (such as school uniforms) become essential. You make a good point and helpful reference about the savings and capital limits to the payouts, and those long-standing amounts should surely be raised.

    The UBI proposal, and now our policy, is unfortunately no way to help deal with the now increasing poverty in our country, or promote economic growth, where people have sufficient money to buy goods and enough goods are produced by people in work.

  • Geoff,

    The title of this article is “Basic income – from party policy to electable manifesto commitment”. Did you create the title or was it created by an LDV editor? The title does not give the idea that this article is about arguing for the concept of a UBI; the party has accepted the principle of a UBI. The title suggests this article is about moving from a principle to something we can present in a manifesto to the electorate. Therefore my questions about how your ideas can be turned into a policy we could present are valid. It is very surprising to me that you can’t answer them considering the title of this article. Now we have agreed the principle of a UBI we need to discuss what level we would set for it and how this would be funded.

    I am surprised you will not talk about how much inflation would be caused by the introduction of a UBI funded by a £100 billion increase in the monetary supply.

    Have you tried converting Ed Davey to your economic thinking where government budgets don’t need to balance and the government can fund extra spending from the money the Bank of England creates? Have you given him a free invitation to your forthcoming October 12-13 conference?

    Peter,

    I am surprised that you say that MMT would consider increasing the money supply to pay for government spending as increasing the National Debt. The Bank of England holds part of our National Debt I see no reason why it can’t just write it off.

  • Peter Martin 6th Oct '20 - 5:59am

    @ Geoff,

    You know very well you’re being disingenuous. QE is not the sale of bonds ” to insurance companies and pension funds”. There is a taboo about the sale of bonds directly from a Govt to the central bank. Therefore, as a work around, the Govt pretends to sell its bonds to the private sector. The private sector, knowing how to play the game, then sell them on to the central bank. No doubt for more than they paid, so it’s a nice little risk free earner for them.

    @ Michael BG,

    It really doesn’t make any difference whether the BoE write off their ownership of bonds. From their POV they can’t run at a loss so they do need to keep the bonds on the books to prevent that. Any yield on the bonds can be returned to the Treasury.

    @ Michael BG, @ Geoff

    Many in the MMT fraternity argue we shouldn’t use the terms “money supply” and “debt”. From the POV of the currency issuer there are only accounting identities. Is the economy running too hot, with a risk of inflation, or too cold, with the danger of recession with too much unemployment? That’s the important question for macro-economists.

    Conventional economic thinking by many economists, including Geoff it would seem, about Govt debt hasn’t changed since Gold standard days. Then debt could reasonably be described as anything that wasn’t backed by Gold reserves. “Sovereign Money” wasn’t considered debt because it was backed by Gold – at least in theory . Except even then the paper was still the liability (debt) and the Gold was the counterbalancing asset. But Gilts weren’t backed by anything tangible so therefore it was debt.

    So why do some of them think it’s still like that and it’s less expensive to issue Sovereign money than bonds -even now with negative interest rates? If all Treasury bonds yielded 0%, they would be functionally equivalent to cash. A modern form of what were once called Bradbury pounds.

    They really should drag themselves into the 21st century!

    PS Some economists are doing better than others on educating the public. The real problem though is that they, for some reason, seem completely incapable of reaching a consensus. If Scientists can largely do that on the way the Universe functions why is it so hard when it’s a much simpler problem of how economies work? If they can’t agree themselves, how can they do other than create confusion?

  • Peter Martin 6th Oct '20 - 6:55am

    @ Geoff,

    “(The supply side) is core to making output available with less labour input, therefore creating the need for UBI ‘ ???

    So you’re saying when workers improve their productivity they can’t expect higher wages, the benefits have to go to their employer in the form of higher profits. And to enable them to keep buying up the stuff they’ve made their wages need to be topped up with a publicly funded UBI?

    Who was it who said the UBI was a left wing policy?

  • Peter Martin 6th Oct '20 - 10:57am

    @ Geoff,

    This is quantitative easing.

    https://www.investopedia.com/terms/q/quantitative-easing.asp

    So on a narrow definition of the term it is simply an asset swap, as many economists, see for example the Nobel Prize winning economist Fama, would argue.
    Google {Fama, QE, Asset Swap)

    However you have correctly stated that QE involves the simultaneous sale of Govt bonds to financial institutions. So why is the Govt selling bonds to the institutions at the same time as its own bank is buying them up? This leads us to a wider definition which then leads to accusations of “a money go round” and “money printing”. Not that there is anything wrong with doing this if the correct macroeconomic considerations are properly applied.

    So if we take a broader definition both yourself and Fama are correct, albeit with some limitation in the scope of definitions.

    Surely this cannot be a matter of any dispute? If we can agree on this I’ll withdraw my accusation of disingenuity.

    “national debt would then not rise in the way it does”

    National Debt is very much dependent on how you define it. Do you want to include debt owned by the BoE or don’t you? I don’t see it matters much either way.

    Different countries have different rules but none of them make much sense. The Americans have decided that coinage shouldn’t count as National Debt. This has led to the suggestion that the Fed /US Federal Treasury simply create 27 x trillion dollar coins. Hey presto! No National Debt. If they created another couple they could have a National Surplus.

    Hooray! All our children and grandchildren won’t have to worry about repaying the debts of their profligate forebears! They’ll just need to know how to knock out a few coins!

    Google {Trillion Dollar Coin Wiki)

  • Peter Martin 6th Oct '20 - 11:31am

    “This is actually close to the position of both Randall Wray and Stephanie Kelton as I read them. ”

    A fundamental point often made by MMT economists is that the mainstream hasn’t sufficiently changed its thinking since the removal of gold from the system. Both SK and RW will say the same thing too. Warren Mosler gave me the explanation of why the monetary base was historically not counted as debt. It used to be backed by gold. You might want to check with SK on that when you see her.

    “Interest rates may be low at present, but total annual debt repayments still amount to £39bn annually in the UK, and if interest rates rise, this will become a substantial burden on the taxpayer to fund the financial sector. I don’t see the point. Debt-free sovereign money is surely preferable?”

    Issuing money is issuing govt IOUs at 0%. QE was designed to bring down interest rates. Further QE won’t make them go negative. So if Govt wants 0% it can have 0% for as long as it likes. But if for any reason it wants higher interest rates it will need to engage in anti-QE. ie sell off some BoE owned bonds to depress their price. So supposedly “sovereign money” is neither here nor there. The argument is predicated on the incorrect assumption that Govt doesn’t have full control over the level of interest rates.

  • Steve Trevethan 6th Oct '20 - 12:36pm

    To whom are the annual debt repayments paid/due to be paid?
    When?
    What are the terms and conditions etc.?
    What is the fundament origin of this “debt money”
    Are there “money creation cops” and/or debt “repayment cops?”
    If so, who?

  • Peter Martin 6th Oct '20 - 2:27pm

    @ Geoff,

    “the sales were largely to insurance companies and pension funds who ‘loaned’ the £435bn of QE.”

    I find it inconceivable that any trained economist can give such a superficial explanation of QE. You’ve not mentioned the central bank at all.

    £435 bn may be somewhat out of date. This reference puts the BoE’s bond holdings at £700 bn.

    So where has this come from? Has it been lent by ” insurance companies and pension funds” too? If it has it can only be because these financial organisations knew they could buy bonds from the Govt at one price and sell to the BoE at a higher one. Otherwise why would they bother?

    https://www.bloomberg.com/news/articles/2020-06-22/boe-s-bailey-says-he-d-shrink-balance-sheet-before-raising-rates

  • Peter Martin 6th Oct '20 - 3:11pm

    @ Steve,

    The interest is paid to anyone redeeming bonds or anyone depositing money in a govt account. I won £50 on my Premium bonds last month so maybe some of that has come to me! £39 billion sounds a lot but the so-called National Debt is something like £2 trillion. According to my calculation this is 1.95%. I’m not sure how this relates to the general level of interest rates which is less than 1%.

    Maybe some long time existing higher interest bonds? Or perhaps the figure is out of date?

    Some general points:

    1) 2% isn’t unreasonable when the govt has an inflation target of 2%. This is zero in real terms. I’m not fully in agreement with MMT’s 0% policy.

    2) Even if all new borrowing was at 0% there still could be an interest bill if Govt doesn’t recall older bonds.

    3) Any net costs to Govt need to be viewed as interest on money saved. No-one is going to get rich buying Govt bonds. Is my £50 prize really undeserved?

  • Peter Martin 6th Oct '20 - 3:25pm

    @ Geoff,

    Ok. If you’re saying you genuinely hadn’t realised the BoE owned some £700 bn or so of govt bonds then I’ll withdraw my accusation of being ingenuous.

    Modern standards of debate are really quite civilised compared to what went on in Shakespeare’s time.

    Here is a list of some choice insults:

    https://www.nosweatshakespeare.com/resources/shakespeare-insults/

  • Peter Martin 6th Oct '20 - 9:48pm

    @ Geoff,

    I can’t of course speak for Bill. But I think I’ve already said the Govt has essentially used QE to create the conditions for what advocates of Sovereign Money have always wanted- which is close to zero interest on money used for Govt spending.

    If we did a thought experiment of the BoE and the Treasury being merged the £700 bn would largely disappear. They are mainly Treasury IOUs. So the Govt would then have the option of simply creating cash for their spending or they could sell bonds into the market to raise cash in the conventional manner.

    They’d only do the latter if they deliberately wanted to push up interest rates.

    The fact that the Treasury and the BoE aren’t merged doesn’t really change anything.

  • Geoff Crocker,

    Your suggestion of £53.5 billion in your 13th December 2018 paper is better, in terms of not increasing inflation as much. However, I am not convinced that most of this money would actually replace the £53.5 billion of annual new borrowing. It would replace some of it. Are there any figures for how many people are borrowing each year? If so, this would give some idea of how much new borrowing might not be taken out.

    (I am thinking about registering for the conference on next Monday and Tuesday.)

    I am not convinced that talking about funding a UBI totally from sovereign money even at £20 a week will convince people a UBI is affordable. I do think we should be having a discussion about how much annual government spending we could finance from sovereign money rather than increasing the national debt and what the constrains are.

    Unlike you I still believe it is possible for governments to achieve full employment. Last week Peter Martin put up a link to an article by Dirk Ehnts where he says that EU countries will commit to achieving full employment. Therefore he must think it is still achievable.

    I don’t see it as a choice between a UBI and a job guarantee. I support both and would like to see a job and training guarantee piloted in north-east England. Any job and training guarantee scheme must be totally voluntary with no sanctions for people who refuse to take one up. However, I would pay an amount above a person’s benefits (as happened with Employment Training in 1980s and 90s) rather than paying the minimum wage.

  • Peter Martin 7th Oct '20 - 9:26am

    @ Michael BG,

    I think this was the link by Dirk Ehnts

    Search { Dirk Ehnts MMT Eurozone }

    Yes of course it’s possible to have close to EU full employment. But I’m sceptical. The Germanic attitude to debt and deficits is the fundamental problem. It extends right across the political spectrum. Most of us Brits are used to waving a piece of plastic over a machine to pay our bills. If you go into a German hotel which caters for international visitors it can be like that, but often in local shops and restaurants it’s cash only. The Germans don’t like credit cards! Maybe the Covid precautions will have changed things.

    So I can’t see the EU legalising anything that can be termed MMT or even standard Keynesian economics. There is no chance, IMO, of either a EU JG or a UBI anytime soon. Even the Finns seem to have gone cold on the idea.

  • Peter Martin 8th Oct '20 - 2:35am

    @ Geoff,

    I agree that direct purchase from the Treasury to the Central Bank should be allowed. The FT is reporting that this is starting to happen:

    https://www.ft.com/content/664c575b-0f54-44e5-ab78-2fd30ef213cb

    It clearly doesn’t make any sense to use pension funds as a ‘middleman’ as a work around. They won’t be doing it for free.

    On the face of it, there does seem cause for concern if factories are highly automated. On the other hand this argument has been around for a long time. When PCs first started to appear in offices and homes 25 years ago there was much talk of the leisured society. Bank tellers had already been displaced by ATMs. My father, for example, had taken early retirement because his metalworking skills were being displaced by computerised milling machines. And the paperless office too. Remember that one? Yet employment is now at a record level, 76.6% according to ONS, and we’re using more paper than ever!

    https://www.bbc.co.uk/news/business-52364811

    So, often, predictions don’t turn out to be quite right. And the figures show that we shouldn’t give up on the idea of full employment. Which doesn’t, incidentally have to mean everyone works 40 hours per week for 50 weeks of the year.

    The problem for us is to ensure that these jobs are worthwhile jobs and that wages are sufficient for both a viable lifestyle and to enable everyone to be able to afford to purchase what we all produce. Even it’s just a few people doing the production. The capitalists know that this is a problem. They don’t want to pay higher wages but they do want to be able to sell their production. That’s why many on the right are pushing for a UBI.

    You say “we need a considered discussion of UBI compared to JG”. But are Lib Dems doing that? Was there any mention of a JG at your last conference?

  • Hello Geoff.
    You said as follows.

    https://bit.ly/33FlI4A

    “Yes even rich people would receive it but they’d be taxed on it.”

    What does this mean?
    Does this mean something like this?

    “Rich people can also receive basic income, but on the other hand, rich people have to pay more taxes.”

  • Peter Martin 8th Oct '20 - 9:43am

    @ Geoff,

    I’m not sure what you mean by ‘deliberate complicity’. If there is a rule against direct purchase, the obvious work around is to involve third parties. So they purchase the bonds from the Treasury at one price knowing they can sell on to the BoE at another. Would it be possible for you to find out what the margin might be and what this charade has cost in total?

    The ECB will be playing the same game. They’ll be in the market for bonds issued by Greece, Italy and others but without wanting to purchase directly from the National Govts. The intervention of the ECB in the market as a buyer will lift their price and so reduce the effective interest rates paid by the deficit countries. This is all very nice of the ECB to help them out in this way, but it will come at a cost!

    I also agree with your previous point about German surpluses. I’ve said the same thing myself. It’s the underlying reason I supported Leave. Nothing to do with being ‘anti European’. The German treatment of Greece in 2015 clinched it for me. Large German surpluses creates large debts for others, including us, but if those debts aren’t allowed by Treaty obligation then there are fundamental contradictions in the economic structure which can only mean one thing. It won’t end well.

    https://www.ft.com/content/e257ed96-6b2c-11e4-be68-00144feabdc0

  • Peter Martin 8th Oct '20 - 10:12am

    The ONS say that 76.6% of people aged 16 to 64 (why not 66?) were in paid work. Unemployment is approx 4%. So what are the other 22% doing? Some will be students but I’d say we would have around 15% who aren’t working and aren’t looking for work for whatever reason.

    So if they are capable of working but are lucky enough to be able to manage perfectly well without it, why do they need a UBI?

  • Peter Martin 8th Oct '20 - 12:01pm

    “Should I be worried about our increasing tendency to agree?”

    I had a similar experience with a “Positive Money” advocate on FB just last year. What started off as a heated disagreement about the nature of Govt debt cooled down after a time as we both realised we had the similar end goals. He was with you that “sovereign money” wasn’t debt. I was saying it should be on the basis of the sectoral balances but that liability was a better term.

    Many would say this was just a technicality. I’m a Physicist/Engineer in what used to be my day job so I like technicalities and the maths that goes with it!

  • Peter Martin 8th Oct '20 - 12:24pm

    @ Geoff,

    “Prying into the lives of the 15% of people who choose not to work is what UBI seeks to avoid ….”

    Possibly some of those 15% are put off by the harsh nature of the welfare system. They may choose to not claim benefits, even though they are entitled, and may not show up in the system. But whatever the number it would be useful to know what it is for costing purposes.

    The JG has the same advantage. Anyone could choose to take it up regardless of their personal circumstances. There would be no means test or intrusive questioning. One of my personal interests is the ability of people with such conditions as Down’s syndrome to obtain employment. If they are up against able bodied competition in the jobs market they’ll always lose out. But many would like jobs and need to be given the opportunity to make a positive contribution.

    Another advantage of the JG is that it wouldn’t have as much impact on taxation rates. So it can be meaningfully trialled in areas of high unemployment and rolled out from there, and learning as we go along.

    https://www.bbc.co.uk/news/blogs-ouch-32613957

  • Peter Davies 8th Oct '20 - 3:32pm

    @Peter Martin. People not in paid work but not unemployed include:

    Those married to or “living as man and wife” with someone who is in paid employment. These will include a significant number who choose not to work mainly because they are bringing up young children. It will also include many who can’t find a job. Overall single earner households are typically much poorer than either dual income households or single people in work and are not much above single unemployed.

    People who are between jobs. The delay in starting benefits puts many in this category. Those that change jobs regularly (e.g. contractors) don’t generally bother trying.

    Long term ill or disabled.

    The first two are among those I want to see UBI benefitting. The third should be considered separately and should definitely not be in your 15%

  • Peter Martin 8th Oct '20 - 3:54pm

    @ Peter Davies,

    Point 1) You could reintroduce what used to be known as the married man’s allowance. It would, of course, have to be brought up to date to include same sex couples and the possibility, even likelihood, that a woman is the sole earner.

    There could be an increased child benefit and/or a tax allowance for children.

    All a lot less convoluted than having a UBI

    2) Anyone who has lost their job through no fault of their own should receive unemployment benefit for a generous period of time. No intrusive questioning etc. This is how Beveridge envisaged the system should work.

    3) Long term sick or disabled. I’d put them on a JG, call it sick pay and leave it at that. But you could call it a benefit if you prefer. There would be extra benefits to cover social care if needed. The carers could be recruited under the JG scheme.

    I can’t see that such a broad brush approach as a UBI is the best way to tackle any of these issues.

  • Peter Martin 8th Oct '20 - 7:56pm

    @ Geoff,

    I take your point that I could have chosen a better word than convoluted. Maybe ‘random’. But even the term broad brush is something of an understatement. It’s more like throwing a whole tin of paint and hoping for the best.

    I’m not a political party proposing an electable manifesto commitment. The argument for a JG hasn’t been given anywhere the same level of attention as for a UBI. Pavlina T and others have lots of good ideas but just what might be acceptable to the electorate can only be ascertained by asking them.

    Proponents of a JG aren’t like the Khmer Rouge. We aren’t going to force redundant college lecturers out into the potato fields. What happens to them now? I would expect anything might be an improvement.

    It strikes me that you (Lib Dems) are only concerned with how total production is shared out. Not that you’re particularly socialist and want a widescale redistribution. It’s more that you want it shared out in just such a way as no-one goes hungry at the bottom of the scale. But from a socialist perspective it seems quite reasonable to address the issue of what our responsibilities are.

    Not that there is anything particularly new in the concept. In any pre capitalist society there’s an expectation that all members should do their bit – if they can. In the Bible, we have:

    “……we gave you this command: if someone won’t work, he shouldn’t eat!”
    2 Thessalonians 3:10

  • Peter Martin 8th Oct '20 - 8:08pm

    @ Geoff,

    But, before you accuse me of taking our policy from the Bible, it’s just an example of what most people used to think and, except for the Lib Dems, probably still do. This is why Tory governments can get away with cutting welfare benefits to the bone. Most voters want to help those who genuinely need help but they aren’t at all sympathetic to the notion of handing out cash unconditionally and with no questions asked.

    The advantage of the JG is that no-one can then say that unemployment is voluntary and a chosen lifestyle.

  • Peter Davies 8th Oct '20 - 9:28pm

    @Peter Martin Even if you think it’s less complicated to constantly monitor who someone is sleeping with so you can cut off their benefits and give the money to their partner instead, you are missing the point. None of those three groups or several others are not people who have made a lifestyle decision to avoid work and stay poor. Your 15% is complete nonsense.

  • Katharine Pindar 8th Oct '20 - 10:17pm

    Geoff, you have sneered at ‘anything but’ Universal Credit, and deplored the harshness and conditionality of its application. But we as a party were in favour of the general concept when it was first introduced, and as a party we have tried to demand alleviation of its bad features, such as the five-week initial wait for it, the undoubtedly cruel sanctions which have left people in real deprivation, and the loans which recipients have no real means of repaying.

    All such features were highlighted by the UN Rapporteur of Extreme Poverty, Philip Alston, after his visit here in November 2018, when he called out the government’s handling of it as indifferent and even callous.

    But UC does not need to be handled like that. It could be as it should have been, a guaranteed minimum income support for people between or without jobs, given without reference to their savings, not reduced as they find bits of jobs to resume, an altogether much larger weekly payment, and accompanied as earlier benefits were with hardship grants, not loans, when additional costs occur. Much more sensitive and caring handling of Universal Credit was recommended by Philip Alston, as part of a new understanding of the needful social contract between government and people, and it is a great pity that our party did not follow up his recommendations in all their breadth. It is not too late to demand reform of the extent and usage of Universal Credit, and it is what would be most useful in the immediate future.

  • Peter Martin,

    As I wrote in that thread (https://www.libdemvoice.org/on-blood-letting-covid-economics-and-goldilocks-65908.html#comments), I am not convinced that the EU will pursue full employment in the future. I think that they will return to limiting deficits to 3% of GDP and will force austerity on some EU countries when what they will need will be an economic stimulus.

    Geoff,

    The ONS data does not give the answers to my question regarding how many people increased their debt between 2016 and 2018. It just states 100,000 extra households had property debt and 300,000 extra households had financial debt. Later they give other figures for the increase in the number of households with hire purchase debt – 708,000; and with student loans – 231,000. I think it is possible to calculate the percentages of total households without debt as just under 45% and without financial debt – just over 57%. Therefore the amount of any UBI which could reduce the amount borrowed is between 45 and 57 percent. The amount borrowed cannot be reduced by the total cost of a UBI because about 43% of households have no debt.

    I agree with you that we need people and especially politicians and the media to understand deficits are not necessary a bad thing and governments should run deficits if they are needed to run the economy to produce better outcomes for people. Indeed I think there should be more support for ‘people’s quantitative easing’.

    I haven’t asked you to produce a budget. I have asked you to engage in a debate on the effects of your proposals are likely to have in the real economy. I don’t think the points I have made are unreasonable for you to engage with. I would expect these points to be made by others.

  • Geoff,

    You may think that sovereign money or ‘people’s quantitative easing’ are inevitable, but on Monday you posted a link to Rishis Sunak’s speech to the Tory online conference where he still talks of ‘balancing the books’ and people on TV news programmes still talk of the need to pay back what the government borrows.

    No UK government has pursued economic policies to achieve full employment since 1980 and I am not aware of any other country achieving full employment since the 1970s. I think it is the lack of this policy aim which has led to the decline in real wages. In the UK the unemployment rate was 3.8% at the end of last year. Wales, the South East, and the South West had an unemployment rate of 3% in January 2020, while in Northern Ireland it was 2.3%. If it was possible to have full employment in Northern Ireland it should be possible to have it in all UK regions.

    You say there are lots of problems with a Job Guarantee, however I advocate a JG pilot in the north east, which would be totally voluntary. It would pay £50 a week plus travelling expenses on top of a person’s benefits. If a job it would be tailored to an individual skills to keep their existing skills up to date, if training it would be in an area where there are jobs and the individual must want to work in this area after the training. The initial length would be one year and could be extended or terminated early if the individual get a ‘real’ job.

  • Katharine,

    In our 2019 manifesto we promised to:
    End the two-child limit for benefits;
    End the benefit cap;
    Increase work allowances and introduce a second earner work allowance (I would also restore the work allowance for single people and couples without children and increase them to £50 a week);
    Increase Local Housing Allowance in line with average rents (I would also restore it to the 50th percentile);
    Abolish the bedroom tax;
    End the sanctions regime;
    Reverse the cuts to Employment and Support Allowance;
    End Work Capability Assessments; and
    Reinstate the Independent Living Fund.

    I hope we can extend this list to include reversing all the cuts to benefits made since 2010, and a commitment to at least increase benefits each year in line with inflation or the increase in average earnings whichever is higher, with the aim to increase benefit levels to the amounts that the Social Metrics Commission say people need to meet their basic needs of £157 a week for a single person and £271 for a couple.

  • Peter Martin 9th Oct '20 - 3:28am

    @ Geoff,

    “You need to at least say whether JG would offer people work, or require it of them….”

    The JG should initially be in addition to what we have at present. Presently there is a requirement that payment of JSA does require a willingness to work which I’d waive in the initial stages of the JG and during any trial period. In the longer term as the idea of the JG becomes, hopefully, more widely accepted that could change. I’d start at the younger end of the age scale with any work requirement. Work doesn’t have to mean working on a chain gang. Especially for younger people a large degree of training can be involved. It can be used to finance apprenticeship schemes.

    It could be a way of financing university students. There’d be 30 weeks spent at university. 10 weeks doing community work. That still leaves 12 weeks for holidays.

    What’s your problem with society imposing some requirement on its citizens? There has been some talk on LDV of a social contract. But its an odd sort of contract that doesn’t have a two way requirement. This doesn’t mean a JG will be compulsory. If you don’t need the money there will be no need to do the job.

    For anyone who has a particular problem with this, Govt could offer the option of extra NI contributions when in work, in exchange for longer periods of support when out of it. It would be like choosing insurance cover. Workers could choose the level of cover that suited them.

  • Peter Martin 9th Oct '20 - 10:20am

    @ MichaelBG,

    “Rishis Sunak’s speech to the Tory online conference where he still talks of ‘balancing the books’ and people on TV news programmes still talk of the need to pay back what the government borrows.”

    Rishi Sunak does strike me as being one of the more competent of the Tory leadership. As a politician he’s probably not, especially when at a Tory conference, going to do anything other than promise to ‘restore the health of the public finances’ , or however he wants to put it.

    We have a situation where the government has created £700+ bn and it’s out in the economy, including the international economy, somewhere. Its going to come back as taxes sooner or later. The economy could become quite buoyant when it starts to get spent and respent. There could even be an inflation risk. But, assuming that’s kept in check, we could have a situation where the economy is zipping along quite nicely without the need for much deficit spending. Rishi Sunak could well have been born under a lucky star.

    @ Peter Davies,

    I don’t know where you get the idea that I’m in favour of ‘monitoring who people sleep with’. Maye you are confusing me with someone else?

    It’s often struck me as unfair that the business community can put their partners on the books as employees of the company whereas those who work as employees can’t. So another possibility would be to have transferrable personal tax allowances. No bedroom snooping would be at all necessary!

  • Peter Martin 9th Oct '20 - 10:44am

    @ Geoff,

    The previous couple of generations of my own family have been called up for military service and their ‘Job Guarantee’ involved killing people. Fortunately that’s not something my generation has ever had to do. But other types of jobs were always relatively plentiful. There’s nothing new about requiring everyone to make a contribution – if they are fit and healthy enough to make it.

    We’ve all inherited the benefits of the efforts of previous generations. They might have built the railway network but the trains don’t drive and maintain themselves. Hospitals don’t run on their own. We all have to keep making a contribution.

    The I-didn’t-ask-to-be-born argument is best left to young children.

  • Peter Martin 9th Oct '20 - 12:50pm

    @ Geoff,

    Some JG questions answered.

    “Will JG offer work related to someone’s skill, with matching remuneration, near where they live? ”

    If someone has marketable skills they won’t need a JG. But if their old skills are no longer required in a changing economy the emphasis of any JG will be retraining. We aren’t suggesting we open up new coal mines to give displaced miners something to do.

    Will it be permanent, or precarious as many MMT advocates describe it, with JG offered in a downswing and withdrawn when the economy rebounds?

    JG will be there regardless but there will be less uptake if the economy is doing well.

    Will adequate family income depend on accepting a JG offer?

    It’s not workfare. The emphasis of any JG program will be to equip workers with new skills and get them off the JG. That’s where their adequate future income will come from. You can’t learn how to lay bricks just in a classroom. The best way to do that is work on a building site helping out as you can. Having said that there will be time spent in classrooms too.

  • Peter Martin 9th Oct '20 - 2:32pm

    @ Geoff,

    You perhaps don’t appreciate the difference between a particular example and the generality. There’ll be a whole list of options for retraining. I’m sure you really do know that. So who’s trivialising now? What’s the word used when someone pretends to know much less than they do?

    The JG won’t have to be withdrawn unless the economy is running so close to full capacity that it’s not needed any longer. This is what happened in the USA with their Works Progress Administration. If that does happen it will be a good thing!

    https://en.wikipedia.org/wiki/Works_Progress_Administration.

    Look, if automation reduces the need for workers why can’t we share out what work there is and have shorter working weeks and longer holidays? You might want to try having a go at answering a question yourself!

  • Peter Martin 9th Oct '20 - 3:33pm

    @ Geoff,

    “My data proves unequivocally that labour income has reduced and household debt increased.”

    OK. But why? The neoliberal idea has long been to squeeze wages and boost profits. The problem arises that the workers, that’s Mr and Ms Average in Lib Dem terms, can no longer afford to buy up what they have produced. So the short term fix has been to encourage the rise in household debt to boost demand and keep the economy ticking over. The result is clear for all to see. We’ve priced the younger generation off the property ladder and we’ve created a bubble in the housing market.

    It means we need a return to sensible demand management and a return to full employment. We don’t need a UBI. That’s just another neolib quick fix to try to keep profit margins up.

  • Geoff – You say (comment 4/10 @ 10:48pm), “I also disagree with MMT that money is quintessentially debt and that double-entry accounting requires government money to be matched by assumption of debt” and make much the same points in an earlier comment (3/10 @ 9:24am).

    For the sovereign money point consider a £10 note. It says explicitly “I promise to pay the bearer on demand the sum of ten pounds”. In other words, it IS debt, specifically a bearer bond – that is a certificate of debt payable to the person who has the note. When the UK was on the gold standard they could be exchanged at the Bank of England for gold. Now I believe that even if you find a discontinued version down the back of the sofa you can still change it – but if it’s very old, you may have to travel in person to the bank of England where a cashier will honour the debt by swopping it for a current £10 note.

    Notes are, of course issued in denominations convenient for circulating in the community as opposed to trading by the City but sovereign money can equally be created electronically more easily and cheaply but that is just a different form-factor.

    As for double entry accounting, it is simply a record-keeping convention and certainly does NOT ‘require’ or constrain in any way what is recorded. I am not an accountant so others may correct me, but I think the issue of a £10 note by government would initially be recorded in double entry as:
    * Govt liability: £10 (new debt)
    * Govt asset: £10 (new asset – cash in hand)
    As the money is spent the ‘cash’ side of that turns into something else – a new school for instance.

    So, in general, much of the government’s accumulated deficit equates to its capital investment in roads, schools, hospitals, and the rest plus working capital for the economy as a whole. To the extent that deficit spending is used to subsidise revenue spending (as an alternative to taxation) it will, if continued across the business cycle, eventually cause inflation somewhere in the system – but it’s not a simple linkage.

    In practice, governments have preferred to grow debt to keep taxes down but have dodged responsibility by arranging that the debt is effectively privatised in the form of consumer loans, mortgages, student loans etc.

    That’s crushing ordinary people and steadily tanking the economy because of their reduced spending power.

  • Peter Davies 9th Oct '20 - 5:00pm

    @ Peter Martin The bedroom snooping comes from the need to determine who is or is not a partner. The current definition for the purposes for benefit purposes is married or “living together as man or wife” If they conclude that that is what you are doing, they will remove about 20% of joint benefits (both on JSA) 25-100% UC or up to 100% (one partner working). If you want to replace that with a married man’s allowance then you need to do it on the same basis. The complexity of administering this through PAYE is enormous especially if couples break up, come together, die or change roles during a tax year.

  • Peter Martin 9th Oct '20 - 7:22pm

    @ Geoff,

    I’d say you’re only considering a debt which bears interest as real debt. But debt doesn’t have to bear interest. It can be interest free or 0% rated. If I’m slow paying an invoice I may not be charged interest but I do have an outstanding debt.

    Going back to the time that gilts bore 5%, or whatever, then you’d say that was debt and it made more sense to issue what you term Sovereign Money which was interest free. Maybe. But the MMT explanation of why Government “borrowed” money was always that it was the regulation of interest rates in the market. They aren’t fully controlled by the market. Short term rates are set by the monetary committee of the BoE. They are, I think 0.1%. Long term rates are not set quite so precisely but they are controlled by the intervention of the BoE in the bond market. So far it has been mainly as a buyer which has pulled down the rate to just about 0%.

    So, the BoE and Govt have got together to do what many have wanted and have all Govt debt set at close to 0%.

    The correct way to understand fiat money is that it’s an asset to the holder and a liability or a debt to the issuer.

  • Peter Martin 9th Oct '20 - 7:33pm

    Geoff,

    I can accept that some proponents of a UBI aren’t neoliberal themselves per se. But they are mistaken in wanting to advocate a neoliberally inclined policy

    A bit like wanting to support a very ordoliberally/neoliberally inclined EU!

    I’m not the only one saying this!

    https://www.theguardian.com/commentisfree/2017/jun/23/universal-basic-income-ubi-welfare-state

  • Peter Martin 10th Oct '20 - 6:55am

    @ Geoff,

    Warren Mosler explains why fiat money has a value as follows:

    Imagine setting up a new colony in Africa in the 19 century. The colonial power wants the people living there to work for them in a variety of ways. Maybe on farms, as soldiers, civil servants or whatever. So the colonialists issue a fiat currency called the Crown and demand payment of taxes in that currency. There is a tax on huts and boats. If the tax isn’t forthcoming, the soldiers confiscate or burn the huts and the boats.

    Of course, the only way to obtain the Crowns is to do the work wanted done by the colonialists. The Crown then acquires a value and is used for general trading purposes throughout the colony.

    It doesn’t make sense to pay out a UBI having done this. But it does make much more sense to ensure that there is full employment in the colony because this is the purpose of creating the currency in the first place.

    OK so we don’t have our huts and boats burnt if we don’t pay our taxes, but we can go to jail. I realise that some Lib Dems won’t like this explanation of the power of a sovereign state but there isn’t a better one.

  • Peter Martin 10th Oct '20 - 9:00am

    @ Geoff,

    The Lib Dem problem, or part or it, is a reluctance to admit that we’re living in a coercive state. You think that Bob will accept Amy’s money because he knows he can spend it at Chris’s shop. And so on down an infinite alphabet. But this only works because the alphabet is finite. Zoe knows she can use it to pay her taxes. So it would be impossible to have a situation where you couldn’t use your ££ to pay your taxes but you could use them to settle your grocery bill. The £ is just a tax voucher. If the Government issued pieces of paper with say “£10 tax voucher” printed on them they’d be functionally equivalent to £10 notes. Or the Govt could do it virtually in a computer.

    There’s no need to do that now because the Govt owns the BoE. But when they didn’t this was the basis of the so-called Bradbury Pound issued by the Treasury during WW1. No gold backing. Just a promise that the Government would accept them as payment.

    There have been a few suggestions that the Greeks and Italians night do something like this to circumvent euro rules. But I’m sure the PTB in the EU would know very well what they were getting up to.

  • Peter Martin 10th Oct '20 - 9:17am

    @ Geoff,

    There’s nothing in the Mosler explanation which suggests that there can’t be involuntary unemployment. Once the colonialists have issued their tax bills they have to be prepared to make sure that there is enough paid work available by spending enough Crowns into the economy. They don’t want to create unnecessary resentment by demanding the impossible and then sending in the troops to burn huts down.

    Of course there’s going to be the danger that if they try to run the economy too hot there will be a significant inflation problem before there is full employment. So they would be better off not doing that and being an employer of last resort to mop up the last difficult 2 or 3 % of the unemployment problem. ie Offer a JG to those who need it.

  • Peter Martin 10th Oct '20 - 10:52am

    @ Geoff,

    The evidence isn’t helpful to your case. When the Confederacy collapsed after the American civil war Confederate dollars became worthless. After WW2 Reichsmarks only had some value because the occupying powers propped up what remained of the German financial system. Even so there was a huge potential inflation problem which could only be solved by scrapping the old currency and replacing it with the DM.

    When East Germany folded in 1989 (?) the Ostmark was only worth something under the limitations set by the unified German Govt. The Russians Govt was ultra selective in what Rouble payments it would accept. The roubles it rejected became worthless. If Govt doesn’t exist or, for some reason, chooses not to accept its currency of issue then it has no value.

  • Katharine Pindar 10th Oct '20 - 11:46am

    Geoff, thank you for continuing to engage with all of us promptly and patiently, which is often not the case with authors. I agree that Universal Credit was used harshly by the Government because they maintained that the only way out of poverty was through work, so people of working age unless sick or disabled must be forced to find paid work. You have shown how the rates of pay for work have declined, and cannot be expected to rise much. I do believe there should be a back-up Job Guarantee scheme where people are paid the minimum wage. But it is likely that the hours of available work will decline, as is already happening (and is surely quite desirable, allowing people to have more time for their families and their leisure pursuits), so the minimum wage for the hours worked will not give people a sufficient income.

    You will say, yes, there is another case where UBI will be needed! And the underlying assumption must be, I suppose, that nobody shall be forced to work. People can be idle, that is use their time freely, if they want to. Yes, I want that too. Yet it remains the case that there is much self-worth as well as esteem from other people tied up with people seen to be having a job, and our society does not believe in general in people getting something for nothing. So although I do want as Beveridge did for everyone to have enough to live on whatever their circumstances, I continue to think that UBI is too broad-brush an approach, too expensive because it may well require a rise of two or three per cent in general taxation which will not be generally thought acceptable, and too opposed to what very many people regard as fair and sensible.

    Yes, let us strive to ensure that everyone has a guaranteed minimum income, and I think people can be persuaded to accept that. But a drastic reform to Universal Credit, to ensure that people in and out of paid work are given that income as of right when not working, is one major way to achieve that, and more likely to be fulfilled eventually than a UBI.

  • Peter Martin 10th Oct '20 - 2:43pm

    @ Geoff Croker,

    “……means that UBI funded by sovereign money has now arrived”

    Sadly and Unfortunately (for you), it hasn’t.

    For a start the present Govt is unlikely to introduce a UBI.

    The creation of what you call £745bn of debt free sovereign money, and I would term near interest free BOE financed debt or liability, can’t be taken as a precedent that we can always do this.

    Just because we don’t have an inflation problem, at the moment, when no one is spending very much, doesn’t mean we won’t have one in the future when the Covid problem abates. Unless you have a working crystal ball that is!

  • Peter Martin 10th Oct '20 - 6:12pm

    Katharine,

    “I do want as Beveridge did for everyone to have enough to live on whatever their circumstances”

    I’m not sure you’re right about Beveridge. He once added the conditionality for public support for those who not only would not work but couldn’t work “…. complete and permanent loss of all citizen rights – including not only the franchise but civil freedom and fatherhood.”

    His later book “Full Employment in a Free Society” doesn’t contain anything quite so bad, so may have moved away from that sort of nonsense, but the overall tone is very sexist. He was probably progressive by the standards of his time but he wouldn’t fit in well with current Lib Dem Party. The best you could say was that he was concerned to help those who were prepared to help themselves but if they weren’t that was just too bad.

    What’s your opinion of Beveridge, Geoff?

  • Peter Martin 10th Oct '20 - 6:39pm

    @ Geoff,

    “I accept that UBI has work to do in establishing a philosophical point here about human ontology”

    So how would you go about doing that?

    I don’t know if you’ve ever shared a flat with others in your student days. It’s quite a long time in my case but when people didn’t pull their weight, left the kitchen in mess etc or let everyone down by not doing what they were tasked to do, harsh words would often be spoken. These were usually fairly basic and didn’t include ‘philosophical’ or ‘ontology’.

    It’s the same in the workplace. The best way to get yourself fired is to rub up everyone the wrong way by not making the necessary effort in your job. There will unlikely be any support from your fellow workers and without that the unions won’t want to get involved either. Honest mistakes are generally more readily tolerated.

    I haven’t noticed any particular correlation between political opinion and greater or lesser tolerance in this respect. Even Lib Dems don’t argue that we all have “universal right to …. to inherited infrastructure and technology”. At least I’ve never come across any!

  • Katharine Pindar 10th Oct '20 - 8:11pm

    Thank you, Geoff – your first point reminded me of our good Liberal song, ‘God gave the land to the people’! Of course resources should be shared more equally, and I want to see land-value taxation to increase government revenue, while taking your point that the government largesse could be paid out without incurring debt, and without thinking in any case that the growth in the national debt must be repaid. I agree too with your last point, having written myself earlier to the effect that the Chancellor’s payouts already set us well on the way to general acceptance that the government needs to ensure everyone has a minimum income. A happy thought, that, indeed, as you express it!

    How we can ensure that everyone WILL receive a guaranteed minimum income (and I think I am going to call it a GIMME and enjoy that too!) is the problem we are all trying to solve, and certainly I am still trying to think it out. But what really worries me is that Tories do not change their spots, and so I can’t see them actually trying to solve the problem of millions of our fellow citizens living in poverty. And what I would like our party to insist on is that that should be our first objective, part of a new Social Contract between government and people.

    Peter, I understand William Beveridge was not an easy character, and Labour politicians didn’t like all his work in the government of the Second World War. But just listen to him on YouTube, the clip where he talks to Pathe News. He says he wants all citizens and families to have all the cash benefits needed for security for the sake of one insurance stamp, that nobody is to fall below a certain standard, and that there should be a maximum of individual freedom and responsibility consistent with the abolition of want . That satisfies this modern Liberal, at least!

  • Peter Martin 11th Oct '20 - 9:06am

    @ Geoff,

    You still haven’t told me how you are going to go about “establishing a philosophical point here about human ontology”

    Most voters will want to help those who they consider to be deserving cases but they’ll want conditions attached to that help. To get your policy accepted, you’ll need votes. I could be wrong but I’m not sure that reading poetry on the doorstep to waverers and doubters is going to do much good.

    Whether you are actually a Lib Dem I’ve actually “come across” is a moot point. We haven’t actually met. You might argue one position from an intellectual perspective but I suspect that in practice you’d be like anyone else. You’d be more helping, for example, to those you thought needed help and would appreciate your efforts. You wouldn’t hand out assistance unconditionally and universally.

  • Peter Martin 11th Oct '20 - 9:26am

    @ Geoff,

    In case you’re thinking I’m sneering at your choice of poetry I’d just like to say this is not the case. But I’d question whether it supports your claim we all have to accept institutionalised unemployment which is the motivation for a UBI.

    Its much more a reason to share out the available work to give us all more free time. All you can say about this is that “Shorter working weeks, longer holidays, and job shares have long been the trend.”

    How about giving it an extra push? Campaign for a 30 hour week. 45 week year. The problem of falling wages can then be addressed to enable the workers to be able to purchase what they have produced in those 30 hours and 45 weeks.

  • Katharine Pindar 11th Oct '20 - 9:21pm

    Geoff, good to hear about Stewart Lansley’s work, and let’s hope it becomes known and is influential in taxing the international monsters. But of course, land-value taxation is a solution proposed just for this country, to prevent profiteering from land by the big landowners and building firms, and bring down the cost of land for building the many new houses which are sorely needed. As you will know, house-price inflation, and high-cost new housing, is one of the main reasons why rates of pay for work aren’t sufficient to keep people out of poverty, despite low mortgage interest rate and housing benefit for renters.

  • Peter Martin 11th Oct '20 - 10:14pm

    @ Geoff,

    Sharing out the available work in the manner I suggested doesn’t equate to a “work-centric view”. A 30 hour week 45 week year would mean we all would work 15.4% of the time. So for every 1 hour we work we have more than 5 hours free to do something else.

    You seem to be suggesting, with your algebraic exercise, that reduced income inequality is a good thing. So why wouldn’t reduced inequality in the number of hours worked also be a good thing?

  • Peter Martin 12th Oct '20 - 1:32pm

    @Geoff,

    Most would regard their occupation as important to their identity even if they weren’t prepared to go as far as to say it was essential. If you look up Beveridge, he saying it’s the latter.

    Having said that it doesn’t mean we are all workaholics. We enjoy time off work in a way we possibly wouldn’t if we were unemployed.

    On the one hand, you claim that ” No-one is talking about ‘institutionalised unemployment’ imposed on people.” on the other you are claiming a UBI is necessary because the capitalist system is incapable of reducing working hours to tailor the length of the working week to accommodate a reduction in human effort which will be the likely consequence of increased automation.

    Anyone who understands the system will tell you why capitalists don’t want to reduce the length of the working week. They would rather have a pool of unemployed living on a pittance of a UBI so show their workforce who’s in charge. They want to use the threat of unemployment as disciplinary measure.

    The Polish economist Michael Kalecki explained the “problem” of full employment as follows:

    “it would cause social and political changes which would give a new impetus to the opposition of the business leaders. The ‘sack’ would cease to play its role as a disciplinary measure. The social position of the boss would be undermined, and the self-assurance and class-consciousness of the working class would grow. . . . ‘Discipline in the factories’ and ‘political stability’ are more appreciated than profits by business leaders. Their class instinct tells them that lasting full employment is unsound from their point of view, and that unemployment is an integral part of the ‘normal’ capitalist system.”

  • Peter Martin 12th Oct '20 - 8:19pm

    @ Geoff,

    You will, of course, be familiar with the NAIRU. I’d have it as the NAIRUU. The Non Accelerating Inflation Rate of Unemployment and Underemployment. The official mainstream theory that we can’t have full employment isn’t anything to do with robots taking jobs. That’s just for the gullible. It’s connected with keeping the workers in line and to keep their wages down.
    https://en.wikipedia.org/wiki/NAIRU

    So the answer to your question of ‘where are these industrialists’? (And politicians and bankers and economists). Is that they include everyone who goes along with mainstream theory. It’s naturally not something they are keen to discuss on TV though.

  • Peter Martin 13th Oct '20 - 4:23am

    @ Geoff,

    You perhaps should take off your Lib Dem issue rose tinted spectacles now and again. There’s always going to be different class interests involved between the owners of capital and those who work for the owners. I tend to think we have a mixture of better capitalists and much worse ones. We can make deals with the former. Naturally the owners want to bring out the best in their workers and they aren’t going to do that by being openly hostile. That’s why the deal can be done but we still need to recognise the reality of the situation.

    You wouldn’t take every utterance by a Tory politician at face value. They say the same about wanting every family in the UK to not be in a condition of poverty. Some of them sound like they really mean it but do we fully believe them?

    The post war Keynesian consensus broke down in the 70s. The election of the Thatcher govt saw the start of a new ruling class consensus on how the economy should be run. The election of a Labour govt in 1997 didn’t do anything to change that. But that experiment has now run its course. It was always dependent on encouraging everyone but Govt to borrow ever growing amounts by ever lowering interest rates. This was always going to reach the end of the line when they’d pushed them down to 0% and this is where we are now.

    We need both some fresh thinking and a return to some older thinking. We don’t concede, as you seem to want to, that full employment is just not possible. That’s defeatism with no rational justification. The point of the JG is to challenge the notion that there is a trade off between inflation and everyone having a job. I expect Stephanie has already explained that.

  • Peter Martin 13th Oct '20 - 10:41am

    @ Geoff Croker,

    “… importantly aggregate wage, will reduce with automation. Moreover, empirical data shows this to be inexorably the case”

    You might want to have another look at your data. If you’ve somehow come to the conclusion that using a variety of techniques, automation being just one of them, to produce more in less time actually makes us worse off then you must be going wrong somewhere.

    Humans are naturally inventive and learn from experience. Even without automation we’ll learn as we go along and do things more efficiently. That’s always happened and is largely the reason why GDP has risen over the last couple of centuries. It’s why we have a better material standard of living now than we did in the 19th century.

  • Peter Martin 13th Oct '20 - 1:40pm

    @ Geoff,

    The biggest jumps in productivity , arguably, occurred when the market was less free than it normally is. ie During wartime. But, however free it might or might not be, however the balance is between socialism and capitalism, if we are producing more goods and services we should be better off.

    The problem for the capitalists is that they have to pay their workers enough to be able to also be good customers and buy up everything they’ve made. On the other hand they don’t want to pay too much so that their profit margins suffer. They’ve managed to have the best of both worlds in recent decades by the simple wheeze of encouraging everyone to top up their purchasing power through personal borrowing. That’s why wages aren’t keeping up. They don’t have to if we are all borrowing to fuel aggregate demand.

    Now that’s much more difficult to do than it was. So they are looking at other ways to both have their cake and eat it. A UBI is one of them.

  • Geoff Crocker,

    Sorry about the delay in replying.

    The academic paper you provided a link to doesn’t deal with my points. In it you argue against Piketty’s model and his three equations (laws of economics). Therefore you should be aware that other people are going to question your theory.

    Are you really saying that no-one has ever pointed out to you that:
    £100 billion is 5% of the UK economy;
    £150 billion is 7.5%;
    The UK economy has not grown by more than 3% for a sustained period of time and 3% should be seen as the optimum level of economic growth to be aimed for each year;
    Increasing government spending by more than 3% is likely to cause inflation;
    The annual figure for borrowing between 2016 and 2018 is £22.5 billion;
    Only about half of households in the UK have any debt;
    And therefore with economic growth forecast to be 1.4% a UBI of £100 billion funded completely by sovereign money would cause inflation and would not replace all of the amount borrowed by households in a year, because about half of the UBI will go to household who would not have borrowed anyway?

    I wrote, “but on Monday you posted a link to Rishis Sunak’s speech to the Tory online conference where he still talks of ‘balancing the books’”
    At 4.57 pm on 5th October you posted, “https://www.bbc.co.uk/news/uk-politics-54419352 proves my point :(” The title is “Rishi Sunk vows to ‘balance books’ despite pandemic” Do you deny making this post to a link to a BBC News article on Rishi Sunak’s speech to the Tory online conference?

  • Peter Martin 14th Oct '20 - 4:27am

    @ Geoff,

    ” Meanwhile you propose no workable solution to either debts……”

    Any solution has to involve a correct understanding of the problem. In principle the government could introduce QE on such a scale that all what we called Govt debt was replaced by what you call Sovereign Money. So all my Premium Bonds would have to be replaced by ££. Would it mean that the Govt was in a better position?

    If the American Govt issued 27 x trillion dollar coins, they would be debt free according to you. Would they be in a better position?

    I’ve just Googled UK household debt to be £60k on average. And a UBI will bring us all back into the black? I don’t think so!

    Debts are a part of the workings of finance. We shouldn’t be scared about money we owe to ourselves. All the supposedly wonder economies are in debt. Germany is in debt ($3 trillion) Singapore is in debt ($400 billion) Do we owe all this money to the extra-terrestrials? There is no need for anyone to worry that we have to keep our extra galactic creditors happy. They are not going to send in the bailiffs and repossess our planet. If I am ever proved wrong about that, they will not be at all interested by the digits in our computers , or the printed pieces of paper we call money. It will the resources of our planet which might interest them and I would expect they, unlike many of us Earthlings, would be smart enough to appreciate the difference between money and resources.

    They should also be smart enough to know that all money is created by crediting and debiting accounts, and that money functions as a unit of account, medium of exchange, store of value, and record of debt. Every debt has a corresponding credit denominated in the unit of account of that jurisdiction, so that all debt as someone’s liability is someone else’s asset, which nets to zero. Since money is not only someone’s debt (a payable) but also someone else’s credit (a receivable), it is just as true to say that the world owns over 75 trillion in financial assets, expressed in USD, as it is to say that the world owes 75 trillion in financial liabilities.

    If there were no credit-debt relationships, that is, if all financial liabilities were extinguished, then there would be no money, and exchange of goods and services would be reduced to barter.

  • Peter Martin 14th Oct '20 - 12:17pm

    Geoff,

    You still don’t get it. No-one, not me, not any other advocate of MMT I know, would suggest that personal debt doesn’t matter. I’ve only ever taken out loans for house purchase and once for a business start up. All successfully repaid. Payday enders and loan sharks are bad news which everyone would do well to avoid.

    But the currency issuer is not a household! I’m sure you must teach your students that. They have to be in debt in an accounting sense otherwise they haven’t issued anything!

    Say the Greek Govenmenet issued the New Drachma. They’d spend, say, 100 billion ND into the economy and they get 80 billion back in taxes in year1.

    So the Government would have a net position of -20 billion ND. Everyone else would be +20 billion ND. Souppose they then sell 5 billion of ND bonds. Their net position is now -15 billion in cash. -5 billion in bonds. Everyone else is +15 billion cash +5 billion bonds.

    Is this any different? Maybe if the interest rate are non zero to a significant extent but if they are actually zero there is no difference at all.

    It’s just a matter of very simple arithmetic.

  • Peter Martin 14th Oct '20 - 12:38pm

    @ Michael,

    Rishi Sunak is playing to the gallery. There’s no need to be too worried about him.

    This time next year the economic recovery will, hopefully, be well underway. The £700 bn that he’s recently spent into the economy will start to come back as taxes. There won’t be much of a Govt deficit.

    Rishi Sunak will put it all down to his personal insistence of the importance of ‘sound economics’ and claim he’s the man to trust with the stewardship of the countries finances. He’ll have one eye on the next rung up the ladder.

    At least that’ll be his plan. I can’t see why it won’t work but of course there is always the unforeseen.

  • Peter Martin 14th Oct '20 - 5:25pm

    @ Geoff,

    “….the currency issuer has to observe simple double-entry accounting principles and record money creation as debt.”

    This, in the absence of any gold backing, is what I would say. But, you obviously disagree.

    Do you have an academic reference to support your case?

  • Peter Martin 14th Oct '20 - 7:58pm

    @ Geoff,

    “Thank you for enlightening us with your example of ‘simple arithmetic’ that -20bn+20bn=0.”

    You’re welcome.

    How would your arithmetic work out? 0 + 20bn = 0 ?

  • Peter Martin 15th Oct '20 - 6:40am

    @ Geoff,

    What’s the theoretical basis of not counting the coinage? I previously provided a link to the trillion dollar coin idea that surfaced in the USA sometime ago.

    We could do the same and have trillion pound coins. They wouldn’t be released but kept on the books of the Treasury as an offset to any other Govt debt. All you are really suggesting is that we simply don’t count Govt debt and hey presto it goes away!

    You’re losing whatever intellectual rigour Economics might have. You’re throwing out Godley’s sectoral balance approach to understanding the way they interact – for example.

    It’s a sad indictment of the subject that Economists can’t build any kind of consensus at all. They can’t even agree what money is. It would be like Chemists not being able to agree what atoms and molecules were!

  • Peter Martin 15th Oct '20 - 10:41am

    @ Geoff,

    Look, whatever the other drawbacks/deficiencies of Godley’s sectoral balances at least they add up arithmetically. -3+1+2=0

    The importance of the trillion dollar/pound coin argument is not that actually should actually bother to mint them. Sure, you could do that and put them on display for all to see to try to claim that you’d abolished debt but it would just make you look ridiculous.

    Anyway, that’s all you are doing by wanting to not bother to count issued money as debt.

    Physicists may have some disagreements when it comes to interpreting the latest and more esoteric theories, but at least they have got off first base. Everyone agrees on the nature of electric current and what Ohms law is! Maxwell’s equations too which would indicate they have probably got up to many more bases without serious disagreement.

  • Peter Martin 15th Oct '20 - 10:51am

    @ Geoff,

    PS. Just noticed you’d said:

    “As you yourself point out, BoE holding of £745bn of government debt virtually means this amount of money creation is currently debt free.”

    No I didn’t. It’s interest free but not debt or liability free if you apply the correct accounting procedures.

    You’re confusing the payment of interest with the occurrence of liability. The currency issuer always has a liability for its issued currency unless it chooses for some reason to renege on its obligation.

  • Peter Martin 15th Oct '20 - 3:59pm

    @ Geoff,

    Again, I didn’t say that Physics was “a settled matter”. Do you have a similar conversation going on with someone else? Maybe you’re confusing me with them!

    So the way I’d put it, was that the relatively new stuff was a matter a some discussion and even argument, but there is always a strong pressure to try to reach some sort of consensus. So we don’t, in Physics, end up in completely different schools of thought.

    You can leave aside MMT’s interpretation of the sectoral balances if you like. But there is really nothing remarkably different about them. If we start from the National Accounting Identities:

    We have GDP = C + I + G + (X – M)
    GDP = C + S + T

    or maybe you don’t agree with them either?

    We can work out the sectoral balance equation

    (G – T) + (X – M)+ (I – S) = 0

    The point is that G is government spending. It really doesn’t matter whether it is spending from coins or what you term sovereign money or any other source. It all has to be included.

  • Peter Martin 15th Oct '20 - 8:59pm

    @ Geoff,

    Seigniorage is an outmoded term and refers to the time when a metalic coin only contained a percentage of the metal value shown on the coin. It had to be like that otherwise a small rise in the value of the metal would have meant the coins would have likely been melted down for profit.

    A paper note, or its digital equivalent, is almost 100% seigniorage, if you insist on hanging on to the term. and it has been like that for a long time. So the “seigniorage” goes to the state anyway except if the State decides to pay interest on borrowed money.

    The question you are avoiding is about whether the Govt should do that. ie Pay interest on borrowed money. The answer has to be: Maybe. That’s not in line with MMT BTW. They say interest rates should always be set at 0%. I would say that any government should have the democratic right to set interest rates to what they want them to be. At the moment they want close 0% which is fair enough.

    Interest rates aren’t set by the market, so there’s no reason to say that money should just be issued without proper accounting procedures being applied. Having zero interest is what we have at the moment. But not zero liability.

    You’re not accepting of the obvious difference between zero interest and zero liability.

  • Peter Martin 15th Oct '20 - 9:20pm

    @ Geoff,

    David Bohm doesn’t build bridges or design aeroplanes. The Physics behind those is well established. Sure Bridges can collapse and aeroplanes can crash. It may be something mundane like a metal fatigue but it’s more likely to be a human error. Crashes are not going to be connected with any fundamental philosophical problems to do with quantum mechanical causality. Introducing this is just obfuscation.

    Scientists and engineers usually do know what they are doing. If they design a bridge it will be unlikely to collapse if it’s properly maintained. Unlike the financial structure known as the eurozone! How that ever got it’s tick of approval would have to be a mystery.

  • Peter Martin 16th Oct '20 - 4:16am

    @ Geoff,

    Quantum mechanics has always produced mathematical output which has created philosophical difficulties. Shrodinger was one of the first to point out with his cat thought experiment. Naturally there are attempts to resolve these which lead to some disagreements.

    But these are far removed from our everyday lives. On a slightly more mundane, but perhaps more useful, level when meteorologists failed to forecast that famous hurricane they accepted they needed to do better in the future. When economists failed to predict the 2008 GFC they just went quiet for a while but carried on as normal, as soon as they thought it was safe to do so.

    Maybe in some parallel universe it isn’t like that at all, and economists are actually embarrassed when they get it all wrong. Maybe the Lib Dems are the the natural party of Govt! Perhaps the UK is still a member of a very successful EU. Maybe my football team is doing much better than it? I hope so!

  • Peter Martin 16th Oct '20 - 4:42am

    @ Geoff,

    “Zero interest on debt and zero debt liability on sovereign money creation also approximate each other when debt is not redeemed”

    No they don’t.

    If you want to express the non redemption of debt, ie a default, in interest terms it would have to involve an abrupt switch to a highly negative rate of interest for just sufficient length of time to cancel out the principal.

    During WW2 the Japanese issued Yen in China which were overstamped by the military Govt there. After the conflict the Japanese refused to accept them, ie accept the debt, and they became worthless. You can say that issued money is debt free, if you like, but the only way to really make it so is to default and so Govt can expunge its liability. In which case it becomes worthless to anyone else.

  • Geoff Crocker,

    I am glad you have apologised for your error with regard to your posting a link to Rishi Sunak’s speech.

    I am surprised that you find any of my comments cryptic. I have a very direct style and possibly it is this that makes you resistant to engaging with my points. Have you realised that I actually think funding some of the government expenditure with sovereign money is a good idea? And this is why I wish to explore what the constrains are.

    You made some interesting comments at 12.29 pm on 10th October. I am not convinced that your point one will be achieved quickly. As Katharine (and Peter Martin) say, people don’t like the idea of people receiving something for nothing. This is why replacing the Income Tax Personal Allowance might be an acceptable way of introducing a UBI, and I suppose the unfunded part can be funded by the issuing of more money.

    You write that the issue of sovereign money is “constrained by potential full output GDP”. I agree with this. This is why I challenge you that increasing the money supply by £100 billion before the Coronavirus crisis would have increased it by more than output could be increased by within a year. And it is this restraint, how much “output GDP” or UK production can be increased within a year which is the real constraint, not how much can be produced in the distant future.

    I still would like you to engage with my issue of how much could the government have created in sovereign money for this year if there had been no coronavirus. Do you accept that UK growth rates have averaged less than 3% between 1993 and 2007? Do you accept that there is a limit to how much the UK economy can grow in a year? Do you have an idea of how much the UK economy can grow year-on-year?

  • Peter Martin,

    I hope you are correct about Rishi Sunak, but I doubt it. If there is no vaccine for coronavirus next year there will be no economic recovery. We will be having lockdowns when the schools have holidays to control the spread of the virus. If Rishi Sunak doesn’t restore the furlough scheme the economic effects will take years to recover from. Another year of coronavirus could result in our economy declining by a quarter (and this might be optimistic), with millions more people trying to live on Universal Credit and aggregate demand falling off a cliff. Without the government stimulating the economy and not trying to pay off what it has borrowed it could get even worse.

    Of course it is possible that Boris Johnson will tell Sunak that he has to restore the March furlough scheme and we could see light at the end of the coronavirus crisis. But the bigger the decline in the economy and the rise in unemployment the longer it will take for unemployment to be reduced.

  • Peter Martin 16th Oct '20 - 12:57pm

    @ Geoff,

    It doesn’t make any difference whether the debt is new or old. Old debt can simply be rolled over to create new debt as the Government chooses. So it’s all new debt – effectively.

    I had to smile when the Government made a big thing of “paying off” the “final installments” of WW1 debt recently. Did they really? How about they called in bonds which were paying out 3% and replaced them with bonds paying out something closer to 0%?

    Even if they’d just created the cash, at will, it would have simply been a swap of one type of IOU for another.

  • Geoff,

    Perhaps you have moved closer to my position with your talk of incremental sovereign money funding at a level which should not increase inflation and takes account of other economic variables.

    I agree with you that shifting financial orthodoxy from the ‘deficit myth’ is a huge task. This is why I think discussing the constraints is so important.

    This is why I am concerned with how practical the funding of part of the government’s expenditure by sovereign money would be. And this includes addressing what constraints need to be considered when setting the amount of new sovereign money injected into the economy. Therefore if we ignore the idea that UBI can replace all of household borrowing, we should be able to discuss the constraints. With this is mind can you answer the following questions? Do you accept that there is a limit to how much the UK economy can grow in a year? Do you have an idea of how much the UK economy can grow year-on-year?

  • Geoff,

    I note your faith in models. This shouldn’t come as any surprise to me because of things you have written earlier in the comments. If you used a comprehensive econometric model to obtain your answer to my question then it wouldn’t really be your view, but the view of the people who created the comprehensive econometric model. Any such model is only as good as the information used and the relationships set out in the model.

    Even without stating a view on what the UK economy can grow year-on-year, you could state if you believe there is such a limitation. Do you believe there is such a limit? Can you agree with me that annual economic growth is a constraint for the amount of sovereign money that should be created each year?

  • Geoff,

    I came across this equation:

    d Unemployment = b0 + b1 Growth
    (the letters should be Greek but I don’t know how to change the font in the comments).

    Where d Unemployment is the change in unemployment rate, where b0 is 0.83 and b1 is -1.77.

    If growth is 1% then it calculates the change in unemployment as:

    0.83 – 1.77 * 1

    In this case a deduction of 0.94%

    If growth is zero then unemployment is increased by 0.83%.

    If this were included in the model you were using then I would not have confidence that it represented a good model for the UK economy. This is because I think that if growth is less than 1% the rate of unemployment increases more than this equation calculates.

    With coronavirus and the increased discussion of models and modelling we all should be aware that any model is only as good as the information used to create it. Do you agree? Have you ever come across any econometric models where you would reject their predictions because you felt their modelling was not good enough?

  • Peter Martin 20th Oct '20 - 11:42am

    @ Geoff,

    There has been a Peter Martin who’s played Test cricket for England. There is one who is an Economics editor for the Melbourne Age. There was even one who flew a plane under Tower Bridge some years ago. All different people I’m afraid!

    I made a point on UBI funding on a later thread which you might care to comment on. This is that according to the law of sectoral balances the governments deficit is exactly equal to what everyone else ie the Domestic Private Sector and the Overseas Sector wants to save. Just issuing supposedly “debt free Sovereign money” doesn’t get around the potential problem that you’d have if they didn’t want to save anything.

    If trade were exactly balanced and the net savings domestically were zero then you’d have to finance your UBI through the taxation system.

  • Peter Martin 20th Oct '20 - 3:25pm

    PS I notice that the other Peter Martin, (definitely not me !) , has offered to write a paper on UBI and “funded by sovereign money”.

    Sounds like a good idea. Can I write one too? What’s the going rate?

  • Peter Martin 20th Oct '20 - 3:32pm

    @ Geoff,

    Re. your comment of 3.23pm: I take that to mean that you don’t have an answer so you’re going to claim you’ve already provided it.

  • Peter Martin 20th Oct '20 - 7:49pm

    @ Geoff,

    There’s a fair bit of nonsense talked about identities and equations. So what’s an identity? It’s something that’s always true and can’t be solved. It doesn’t tell us anything we don’t already know.

    For example: Sin(A+B) = SinACosB + CosASinB
    That’s always true for any value of A and B

    An equation is, for example, A + B + C = 0
    Or if we subtract one form the other: ΔA + ΔB + ΔC=0

    The Goldley rationship is just this equation.
    ΔGS + ΔPDS + ΔFS = 0

    So if the govt gives £10k to the Private Domestic Sector we know that the first term goes down by £10k and the second goes up by £10k. I can’t see why anyone has a problem with this.

  • Peter Martin 20th Oct '20 - 9:59pm

    @ Geoff,

    If you “don’t think this is the place to discuss …equations and identities in mathematics” why did you say I “haven’t understood (your) critique of the use of Godley identity as if it were an equation.”

    That’s ‘cos it is an equation and not an identity in mathematical terms! If you start something you should be able to justify it or correct yourself later.

    There is no contradiction with MMT. MMT doesn’t say the Govt should always aim to be in deficit. If the private domestic sector is desaving and the overseas sector is running a deficit (ie buying from us more than it is selling) the government sector will not be running a deficit.

    It could be possible that the Government is determined to run a deficit at the same time as the other two sectors are keen to do the same. Something will have to give and someone will have to win out but it isn’t a great way to run an economy. The Government should generally try to accommodate the wishes of the other two sectors and at the same time try to prevent inflation.

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