Wednesday, September 29, 2010

Greg Philo: Privatize the National Debt

Britain is the sixth richest nation in the world. Total personal wealth in the UK is £9 trillion, and the richest 10% of the British people—about a million wealthy families—own £4 trillion of it, with an average per rich family of £4 million. The bottom 50% of the British people own just 9% of the wealth, the least wealthy being the bottom 10% of households who are in debt—they owe more money than they own.

Yet we are in such a crisis, having emptied the treasury to prop up the banks, and to pay the £ million bonuses the parasitic banking community take whether we like it or not, that we are all to suffer the worst cuts in public services ever! The media sing in chorus “we are all in it together”, but does it seriously sound as though we are, with such a vast inequality of wealth distribution?

The economy has already recovered sufficiently for the banks to have started making obscene profits again, and to have already returned to giving themselves financial commendations in the shape of fatter bonuses than ever, and the country is already richer than it was before the financial crisis, despite the media bleating. Maybe it is because the economy meant is that very wealth I made account of in the paragraph above. With stock markets rising, banks making profits, cash bonuses and champagne eqally profusely flowing, the sector of the economy that covers the rich are indeed looking up, and the reason is that the rest of us are having to count the cost!

There is no popular mandate for Con-Dem policies that will radically reduce growth, put up unemployment and affect the bottom 6 million people hardest—those who have no wealth at all. The Con-Dems are doing this though their popularity is already steeply in decline, and Labour has already gone ahead of the other parties according to a recent poll. The consequence of what they are doing is likely to be serious social unrest. The British people are not passive and it is a myth that they will accept policies that they see as profoundly unfair. The consequences of unfair policies is revolution—as a minimum, mass demonstrations, strikes, popular unrest and perhaps rioting.

Professor Greg Philo of the Glasgow University Media Group says the answer is plain, and he has checked it out via public opinion surveys and interviews with wealthy people. He proposes a one-off tax of just 20% on the wealthy decile. This tax of 20% on the very richest people in Britain would raise £800 billion—a fifth of the total £4 trillion they own. That is enough pay off the national debt and dramatically reduce the deficit, since interest payments on the national debt are a large part of government spending.

Nor would this rich segment of society actually have to produce the money immediately, if at all! Voodoo economics? Not at all. If the richest 10% assume liability for the £ billion national debt, it would be cleared from the governments accounts, reducing the deficit instantly to a manageable size. That would instantly relieve the pressure on markets which would soar, and the stock and bond owners, including the banks would immediately be presented with remarkable gains which would go a long way to returning to them the money they have agreed to pay out. Indeed, they can pay their 20% tax in installments out of the earnings they would be making, and even if that were not sufficient to pay off all of their 20%, they could simply agree to pay it along with their death duty.

Philo's group commissioned a YouGov poll of over 2,000 people to test attitudes to the tax and found it was an extremely popular proposal. 74% of the population approved (44% strongly), and agreement was spread right through social groups. Only 10% did not approve. Those in the higher income brackets were more supportive than the less well paid of the wealthy class. They were the ones who realized the measure would turn out to be beneficial for them as well as the country, not merely in the immediate returns they would get, but also in their desire to keep society on an even keel. They knew that unrest, strikes and riots would reduce confidence and profits, and that the poor are the ultimate consumers, and stripping them of the little they have will just depress markets. Even if they were unable to recover all of the 20%, they knew they were wealthy enough not to actually miss the loss.

A problem for the British and US economies is that much of the nations' resources have been directed into inflated property values, which is where many of the bonuses ended up. Extra houses is buried money. It is not liquid and is inaccessible. The tax would re-circulating some of it once the government had no need to cut services, as public spending, stimulating growth. Unemployment resulting from the proposed cuts would be avoided, extra benefits would then also be avoided, and tax revenue would not fall.

At present, we have a lot of billionaires resident in the UK who pay no tax at all. There is quite a separate call for them to pay their just taxes. If people have substantial assets, want to live here and to be British, then they will have to pay their bit. The public will have little time for non-doms, exiles or what will be seen as unacceptable attempts at avoidance. This proposal is similar, but is a mere one off necessity. The Revenue offices know who have the wealth and collecting it ought not to be a problem. The main problem indeed is likely to be the extent of privatization of revenue collection. That, most sensible Britain’s will think, should not be in private hands. Already it has led to absurd mistakes and injustices, so it should be returned fully to the civil service.

The absurdity of privatizing many of our public services is itself a symptom of the desperate need for reliable sinks for the surplus capital swilling around the world. It should be used to put people into work, not to squeeze even more unneeded capital out of them.

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