What would a 2019 People’s Budget look like?

Today is the 110th anniversary of the introduction of the People’s Budget by David Lloyd-George, then the Chancellor in the Liberal government of HH Asquith. Lloyd George’s aim was to wage “implacable warfare against poverty and squalidness” and to make poverty “as remote to the people of this country as the wolves which once infested its forests.” Backed up by radical policy in support of the Liberal welfare reforms, it was an example of what liberalism can do when it does not split the difference and sit on the fence. But 110 years on, our society faces a similar range of endemic problems. Perhaps it is time for to put forward a 21st century “People’s Budget” – a series of radical, ambitious, liberal ideas to eradicate poverty and inequality.

There are, as I see them, three “great ills” which constitute the broader umbrella of poverty and inequality. The first is precarity – a lack of economic security such as through unstable work, or an unstable housing situation. The second is the plutocracy which passes erroneously as “capitalism” today, and is rooted in inequality in property and capital ownership, allowing power to be accrued across generations and wielded by an ever-shrinking group of people. And the third is intergenerational inequality, which locks out the young as older generations hoard the fruits of the economy. How would a 2019 People’s Budget conquer these ills – truly conquer them, not tinker around at the edges and leave the fundamentals unchanged?

The the simplest way to conquer the root of precarity is to introduce a universal basic income (UBI). If set at a high enough level, it ensures that no person should ever lack the means to put food on the table and keep shelter over their heads. It allows people to immediately break free from the chains of poverty, and meaningfully enjoy their liberty – the true measure of freedom – in being able to choose how to live their lives without being forced down the routes of substandard housing or low-paid work just to survive.

In terms of fixing the plutocratic economy and returning it to a true system of capitalism – with capital in the hands of the masses, not hoarded by the vanishingly few – we should continue to press ahead with some of the great liberal policy we have advocated for decades. This includes employee ownership, and making every citizen a shareholder in a British Sovereign Wealth Fund, democratising capital so that every person sees the benefits of our national wealth. But we should also recognise the importance of property ownership to being able to meaningfully exercise free choice in the economy. To this end, land redistribution should be at the forefront of our thinking, in the form of a land value tax to punish the hoarders, as well as the most ambitious programme for building houses – particularly affordable and social housing – in modern history, going over the heads of the land-bankers and the developers to do so.

And for intergenerational inequality, the idea of a youth dividend was floated by Vince Cable, and was one of the most refreshing ideas a leader of our party has had in a generation. By taxing the wealth of the truly well-off – those who can in no way be said to have earnt their great fortunes, hundreds of times larger than the incomes of the poorest but frequently hardest working people in our society, making a mockery of any concept of meritocracy – we can fund a dividend to be given to every single young person on their eighteenth birthday to invest in education, or the deposit on a house, and redress the balance between young and old.

At the core of these ideas is a recognition that liberalism does not simply mean making the government as small as possible. Personal autonomy is a wonderful thing, but it is worth precisely nothing if that theoretical freedom cannot be meaningfully exercised due to poverty or economic precarity. And the idea of justice is worth nothing if we simply shrug our shoulders at vast swathes of land and wealth being owned by those who were lucky enough to be born the great-great-great-great-great-great-great-grandson of a Tudor baronet. By freeing people from their economic bonds, we not only relieve them personally of great stress and the poverty which absolutely nobody deserves – we also give them the time and the breathing space to engage in our democratic society, and thus also help nurse back to health our ailing civic institutions. So, contrary to any criticism that these reforms would impinge upon freedom, they would in fact begin to liberate millions of the most disadvantaged, which is surely the goal of liberalism.

In sum, then, a 21st Century “People’s Budget” should aim at being as radical as that of 1909: UBI, employee ownership, a Sovereign Wealth Fund, a proper land value tax, an unprecedented social and affordable housebuilding programme, and a Youth Dividend funded by a wealth tax. But perhaps more importantly, it should reassert that liberalism is not split-the-difference, fence-sitting mush, but rather the great emancipating ideology, laser-focussed on finally conquering poverty and squalidness, finishing the job Lloyd-George embarked upon 110 years ago.

* Harry is Communications Officer for the Young Liberals. He lives in South London, where he is training to be a barrister.

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  • David Evershed 29th Apr '19 - 8:36pm

    I suggest that rather than dividing up the cake in a different way, Liberal policy objectives should be to increase the size of the cake.

    This can be done by increasing productivity, which has stagnated in the UK for the last decade.

  • Harry – I’d missed the anniversary, but it’s always good to see people here refer to our history and heritage. I also noticed there’s a documentary on Lloyd George currently available on BBC iplayer (with only two weeks left to view it though). It’s the Dan Snow one, which I quite like. https://www.bbc.co.uk/iplayer/episode/b084l1s9/dan-snow-on-lloyd-george-my-greatgreatgrandfather
    LG is without doubt one of the most interesting of our former leaders. He had lots of good points – like the ’09 budget of course – but a few bad ones too. This programme is quite fair in bringing out both.
    To answer your question, I’m an old-fashioned tax and spend Liberal myself. I think the ’09 budget is one of the proudest moments in Liberal history, and I’d love to see us introduce a modern version based on similar values. And if we too had a swipe at the hereditary principle in the House of Lords while pushing it through, so much the better. 🙂

  • Paul Pettinger 30th Apr '19 - 11:49am

    David E, inequality stagnates our economy by holding people back. Greater equality can make the cake bigger and easily pay for itself. Great article Harry – thanks for sharing

  • Only if Universal Basic Income is set at the poverty level would it be the solution to poverty. However, it wold cost a huge amount and to really be enough to live on it would need to cover housing costs as well. All schemes for UBI set it far too low and don’t include housing costs. Most schemes replace the income tax allowance and some the National Insurance allowance as well and reduce existing benefits by the amounts of the UBI. Therefore the only people who will really benefit are people who can already afford to stay at home. It will not making not working a viable option.

    It is not possible even to increase the basic benefit levels to Joseph Rowntree Foundation’s poverty level for 2016/17 in one budget. These rates are:

    Single person no children £148
    Single person with two children £306
    Couple with no children £255
    Couple with two children £413.

    It is not possible to increase the building of social housing for rent to the Shelter target of 167,000 a year in one year.

    I have not seen a scheme for giving people at 18 a lump sum which is sufficient for the deposit on a house in London and southern England.

    Just as the 1909 People’s Budget didn’t end poverty in the UK, nor would another one.

    I have suggested to the “A Fairer Share for All” policy working group that we should modify our policy on building social housing so in year 4 we build 99,000 and in year 5 104,000 not 100,000 and in year 14 we reach the Shelter target of 167,000. I have suggested that we could finance increasing the benefit levels to those set out by the Joseph Rowntree Foundation increased by inflation from economic growth over an eight year period.

    I have also suggested having regional living wage levels set by the government rising to 70% of each region’s medium earnings over 7 years.

    David Evershed,

    I suggested we should have an economic growth target of 3% per year to, as you term it, “increase the size of the cake”.

  • Peter Martin 30th Apr '19 - 3:30pm

    @ David Evershed @MichaelBG

    “Liberal policy objectives should be to increase the size of the cake.”

    OK Fair enough. But I remember Sir Keith Joseph telling me at a meeting, when I was a young radical student in the early 70s, and I’d had the temerity to argue with him at a meeting I’d sneaked into, that “the trouble with you socialists is you’re far too concerned about how the cake should be shared out and not concerned at all about its size”

    Since then the “cake” has become a lot bigger but poverty is still a big problem. So how it is shared out does matter too. Incidentally I’ve always thought it is a sign of civilised behaviour to share out cake equally. Rather than fight over the biggest piece! The UK GDP per capita is about US$40,000 per person. Or ~£35.000 each.

    Isn’t that enough to guarantee everyone an income of at least £20,000 for a 40 hour working week?

  • Well said, Harry. I intend to say more (if I can escape the gardening), but I would like to make an important suggestion about UBI, an idea I thoroughly approve. The term accurately describes it — but it smells bad. The notorious tory Universal Credit has made the word Universal one not to use. “Basic” sounds, and of course very often IS in this context, niggardly. ‘Income’ is ok but boring.

    I suggest we should call it the National Income Dividend. The National Income is a familiar concept, but much less spoken of than the Gross National Product (which sounds like an urgent case for the plumber). But the man in the street I am is concerned at the end of the week first and foremost with how much there is in his pocket: you’ve got to have Income to bring home the bacon, your own chosen bits of the GDP.

    And it is, I suggest, a much more wholesome way of looking at this universal income, to regard it as your deserved reward for participation in the nation’s life as represented by its earnings. The ring is positive: dividends come from bank shares, and bank robberies, and shopping at the co-op. Child Benefit may sound like generosity, but you blooming well EARN it, bringing up the nation’s young, and it is on them that we shall all find ourselves depending in the years to come. Let everyone over 16 in the United Kingdom have his or her National Income Dividend — and earn more if he or she wishes to and can. If the NID were pitched at the level that now, with Benefits and Taxes, maintains something of a decent living, the rich would still be rich, without the poor starving. It ought to be more. I suggest it be literally tied to the National Income, as a percentage determined by Parliament (elected by PR, of course). It will replace almost all “Benefits”, and will consequently not be so expensive as some correspondents suppose.

  • And well said, Peter Martin. What on earth IS the point in increasing the GDP (“enlarging the cake” ha ha ) if only the already very well off get the benefit? We may boast about being the fifth largest economy, but that is either silly or dishonest: what counts is income per head, and we have been sliding down the rankings for years, having now slumped to 24th or so. When I were a lad the kids in the playground argued whether it was us, what won the war, or Sweden, what dodged it, that came second in the world after the United States of America. Most of the countries that lost the war are now better off than us, with our wonderful Grandmother of Parliaments, still bravely limping on with a FPTP that suits some very nicely, thank you!

  • Innocent Bystander 30th Apr '19 - 6:11pm

    David Evershed,
    I look forward to your comments as they are rare shafts of sense in a world where swingeing increases in tax, until the last sparks of enterprise and ambition have been extinguished, is the only answer.
    Your critics overlooked your second paragraph. There is no point increasing the size of our economy until we face the challenge of running it at a profit.
    But no one is interested in that mere detail.
    If you start a political party I might join it.

  • Well done Harry.
    Now all the Lib Dems have to do is to win a general election and form a government so they can implement a People’s Budget and reform the electoral system.
    Good luck with that.

  • Innocent Bystander 30th Apr '19 - 7:59pm

    I blame Attlee. The rest of the world, whether Allies or Axis, rolled up their sleeves and worked hard to build new economies. Our government decided to bestow the rewards of victory on its people, prematurely.
    We have now reached the stage where a UBI can be seriously proposed so that millions can sit at home watching box sets while others pay the tax to support their leisure.
    There are billions of people across this planet who know that if they don’t earn they don’t eat.
    Unless this country changes its ways then the British will end up in the same sad state.
    (p.s. I actually think it’s already too late. In the words of one of my favourite singers – “It’s a hard rain a-gonna fall”).

  • I think the analysis by the Resolution Foundation and Mark Carney is the wrong way round. So long as businesses can increase production by employing more people they are unlikely to invest in increasing productivity. Low real wage rates is a factor in this. If wages were higher and if businesses had difficulty in recruiting people then businesses would invest to increase the productivity of their existing employees.

    William Francis,

    Thanks for the link to the idea of a baby bond. I note that it would take 18 years before anyone would be able to use these funds, which is much longer than my eight years to increase benefit levels to the poverty level. I like the idea, perhaps we could do it in pounds rather than dollars, so every child gets the first thousand pounds and then the children of the poorest in society get £2,000 a year. So by the time they are 18 they have a fund of £46,215 (according to the article). However this is based on a 3% interest rate and to keep its value it there would need to be no inflation. So I would amend the scheme so the interest rate is 3% on top of the average rise in house prices and after 18 the sum just increases in line with average house rises. Also if the objective is to spread home ownership then the fund can only be used for buying a home. An amount of £46,215 with the same real value relative to house prices would indeed be enough for a deposit everywhere in the UK.

    I wonder how much it cost? If we assume each year group has 750,000 in it, the first year it would cost £750 million, in the second less than £2.25 billion and in the 18th year less than £26.25 billion plus less than £6.5 billion in interest on top of housing price inflation. According to the 2018 budget book for the year 2018-19 Government expenditure is expected to be 38.2% and £812.8 billion. From this we can calculate the size of the UK economy as £2127 billion.

  • Innocent Bystander 1st May '19 - 8:17am

    Asquith was PM of a very rich imperial country.
    St. Clem was PM of a very bankrupt one.
    “Generally regarded” = “I regard”.
    If he had found 1% of the effort he devoted to nationalisation and the welfare state to economic reconstruction (like every other nation did) we might have a manufacturing industry similar to Germany’s (who put all their effort into reconstruction).
    Two further items on his charge sheet? The determination to establish an independent nuclear deterrent which has added only a laughably small component to the west’s deterrent stance but at huge cost for Britain. The cost of cleaning up that legacy, here and now, is many, many times the EU divorce bill.
    Finally, he unbelievably supplied mass murderer Stalin with the Rolls Royce Nene engine as a gesture of goodwill on the promise that Stalin would not use them for military purposes. Did Stalin keep his word? Don’t ask a silly question.
    The engine was used in the Mig-15 and killed many allied servicemen, including Clem’s own countrymen, in Korea.

  • Innocent : “Generally regarded” = “I regard”.

    In 2004, the University of Leeds and Ipsos Mori conducted an online survey of 258 academics who specialised in 20th-century British history and/or politics. Attlee came top….. something repeated in 2012 and 2016 in other academic surveys.

    “Asquith was PM of a very rich imperial country”

    Yes, in a country with a huge discrepancy between the few rich and the many poor. An old age pension starting at 70 wasn’t a huge undertaking when average male life expectancy was 51 and for women 55 at birth in 1910. (Office of National statistics). Today it’s 79 and 83 which may have some connection to the Attlee welfare state.

  • To the coy Innocent Bystander — “There are billions of people across this planet who know that if they don’t earn they don’t eat.” That is true, of course, though it need not be. What is also true is that there are billions of people who know that if they do not earn their parents will feed them. We call them children. There is, I admit, wide divergence between societies and nations in when “children” cease to be treated as such. In our country I suppose we would say it is 16; and in this we are fortunate, although it is also true that not all children get the food (or education) they need and deserve, in our “rich and fruitful land”.

  • Innocent Bystander 1st May '19 - 12:00pm

    I acknowledge that my words are unheeded.
    The armies of the “God of Nonsense” stand in numberless array against me (and perhaps David Evershed).
    As to being a ” “rich and fruitful land”, well we have a colossal public and private debt, a huge budget deficit which demonstrates that it can never be paid off or even prevented from ever increasing so our land is the opposite of those.
    But, no matter, those with no answers cling to the belief that Britain has always been rich, is rich and always will be rich so the question is only which taxes to increase and how to distribute the proceeds.
    The super rich don’t pay UK taxes (and never will as they are domiciled elsewhere) and the closing of offshore tax havens only requires the simple step of persuading all the nations on earth to agree with the British. Punitive taxes will only extinguish the last traces of British ‘mojo’ and ambition.

  • Matthew Huntbach 1st May '19 - 8:43pm

    David Evershed

    I suggest that rather than dividing up the cake in a different way, Liberal policy objectives should be to increase the size of the cake.

    Yes, and that is what every government we have had in the past four decades has said, and has said its policy is. Every government since the one elected in 1979, which drastically reduced the income tax rate for the rich, has said we shouldn’t have tax designed to reduce inequality, because letting the rich stay rich is rewarding them for productivity, and that will benefit us all really.

    This can be done by increasing productivity, which has stagnated in the UK for the last decade.

    Er, so why is it that with every government doing what you say should be done, as you now say, it has had opposite of the effect you say it would have?

    You seem to be a Tory according to what you say the policy of governments should be. I joined the Liberal Party in the 1970s because in those days I felt it was the most effective opposition to the Conservative Party. You seem to want to turn the Liberal Democrats into the party I joined it to oppose.

    Anyway, since 2010 most people seem to think the Liberal Democrats are the party you want them to be. So has that helped the party build up more support since then?

  • Peter Martin 2nd May '19 - 9:06am

    @ Innocent Bystander

    “……..we have a colossal public and private debt, a huge budget deficit which demonstrates that it can never be paid off or even prevented from ever increasing…”

    This common misunderstanding is responsible for nearly all our, and the EU’s, economic and political woes – including Brexit!

    The Government’s role is not to ‘pay off’ debt. In accountancy, everything needs to sum to zero. Therefore the Govt has to hold the negative numbers so that the rest of us can have positive numbers. It’s just simple arithmetic.

  • Peter Martin 2nd May '19 - 9:23am

    @David Evershed, @ Matthew Huntbach,

    “This (ie a bigger cake) can be done by increasing productivity, which has stagnated in the UK for the last decade”

    This is true. It’s also true that productivity has stagnated. It’s known in mainstream economic circles the “productivity puzzle”. This is because the conventional thinking is that an increased productivity comes first, which enables employers to afford to pay higher wages, which they do out of the kindness of their hearts, and which then makes everyone better off.

    It’s not a puzzle at all if we look at what really happens in the economy. Employers nearly always have a choice between paying more out in capital equipment or more out in labour costs. So if I grow strawberries, for example, I can either pay for human pickers or robot pickers. If you look on youtube you can see lots of amazing technology which is available to modern growers. But it’s not cheap.

    If wages are low, I’d be better off employing a few extra human workers and having a relatively low productivity operation. If wages are high, then it makes more sense to buy in the technology. Therefore it is the cost of labour which is the main driver for higher productivity.

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