Looking through the arched window
On 11 November 2024, on Armistice Day, Cat Hobbs of the lobby Group “We Own It”, called for a truce. She explained that two groups of bondholders, two groups of rich people, were competing to ‘rescue’ the privately owned public utility: Thames Water.
One set of rich folks, she explained briefly, was a group of bondholders charging 9.75% interest; the other was another almost equally rich group, but they were charging only 8.00% interest. Interest was the price they wanted to levy for ‘investing’ their money in bailing out the stricken private company.
Cat asked why there was no third option on the table: public ownership. She asked why there was no option where a refinancing of the debt of Thames Water would take place at 4.75% interest – at considerably less cost to both the UK taxpayers and Thames Water customers.[1] She could have asked why there was no fourth option. One possible fourth option might involve reparations, where those who had in the past stripped this public company of its assets and its ability to supply reliable clean water, and its competency to dispose of sewage safely, were not to be pursued by our government for the damages they had caused to health and safety.
Alternatively, Cat could have asked why there was no fifth option. This could have been a wider and more general redistribution of public assets, or assets that should be public and which are in most other European countries. In this case, rather than working through the issues of one privatised badly functioning utility at a time, the entire public domain would be dealt with together – through legislation. However, Cat was being practical, and she only had the space of a tweet to fill; but outlining the fourth and fifth options would, if it had been done, put her preferred 4.75% proposal in the centre of an enlarged Overton window. Her proposal was nationalisation, financed by public borrowing, at 4.75%.
Source: https://x.com/CatHobbs/status/1773736722213257340
A month earlier in October 2024, the Common Sense Policy Group had published a response to Rachel Reeves’ first budget, titled ‘Spend to Save Britain: A Common Sense Approach to the 2024 Budget’[2] The Common Sense group explained that:
“The Chancellor of the Exchequer, Rachel Reeves, has described the UK economy as being in its worst state since the aftermath of WWII. But the Government’s fiscal rules mean that it has shied away from a Beveridge-style public investment package that made Attlee’s administration from 1945 so successful. While the change to the definition of debt has freed up some space for borrowing for investment in infrastructure, an austerity agenda that has clearly failed over the last 15 years for current spending, on things like public health and education, is likely to persist.”
The Common Sense Policy Group explained that investing in Britain, to rebuild public sector spending, would result in large returns through productivity multipliers (£2.74 for the economy for every £1 of public funding invested). They showed that this could be supported through taxation on passive wealth, taxation of excessive carbon production, greater taxation of luxury consumption (as occurs in China) and greater taxation of corporate profit
The Policy Group suggested that Reeves should have considered having a target of reducing poverty and increasing income and wealth equality. That this target should be for a measurable reduction to occur for all of the UK. They suggested as well that there should be targets for falls in poverty and income and wealth inequality within and between all nations and regions. They suggested this because of how the UK has become the most economically unequal large country in Europe.
Over time scale the Policy Group suggested that inequalities must be falling by the third year of the forecast with the intention that they continue to do so until they return to their UK 1960s lows, equalities which most European countries enjoy today. And that this could be achieved through infrastructure and current spending investment as well as fair and efficient taxation.
The Common Sense Policy Group proposed that Rachel Reeves could and would have had better targets if she saw the world through a more interesting Overton window rather than the very small circular window she appeared to be looking through. As Floella Benjamin used to say on the children’s TV show, Play School, a relic from the distant past: “Which window shall we look through today?”. The arched window was clearly the most interesting.
Source: https://www.pedestrian.tv/entertainment/just-gonna-say-it-play-school-arch-window/
To quote directly from the Common Sense report – these were some of the alternatives to how we currently operate. These are the kinds of targets we could have:
- Public Sector Net Worth must increase by the fifth year of the forecast.
- Public Sector Net Debt must reduce sustainably and predictably by the tenth year of the forecast by insulating the nation from international price spikes and economic crises via:
1. large-scale, public-sector driven investment in secure, low-cost and plentiful renewable energy.
2. re-establishment of local manufacturing capabilities for products essential to national security, including commodities like steel, and medicines, vaccines and personal protective equipment crucial to defending against future pandemics.
3. Operate the newly renamed National Wealth Fund as a National Investment Bank with sufficient capital to make largescale investment in infrastructure and R&D projects that are essential to meeting the new economic rules.
The group suggested institutional reform to drive economic success, growth and long-term debt reduction:
1. Recognise the de facto political control over the Bank of England and rescind its national independence. This recognises that fiscal and monetary policy are inextricably linked and that the Bank’s independence is so narrowly defined as to be meaningless. When crises hit, the Government should be able to use monetary levers directly and be subject to democratic oversight. There is nothing wrong with using monetary policy to achieve national economic success.
And a return to public investment for the public good:
2. Take our house back. Renting essential services and utilities from companies that obtained them through the public asset stripping of the 1980s and 90s cannot be allowed to continue. It is baffling to rent services we require forever.
3. Address the weaknesses in our economy by investing in infrastructure, including gaining control over utilities and public transport, to support productivity, growth, inter- and intra-regional inequality and a broad, sustainable and fairer tax base.
4. Deliver ‘current spending investment’ to produce exponential savings for the public purse downstream and productivity benefits that drive growth and bring debt down in the long term. Borrowing to fund public health interventions that cost £3,800 per year in good health to enable reactive services that cost £13,500 to move beyond crisis, recover and bring down costs is just common sense.
Tax reform to close the fairness gap, streamline the system and shift the burden from productive, socially beneficial work to passive wealth and environmentally harmful activity:
5. Roll regressive employee National Insurance Contributions into Income Tax, raise rates by 3 points and equalise rates for dividends with those for Income Tax to raise £58.1 billion per year. This is a hugely popular approach with the public.
6. Introduce a progressive annual Wealth Tax on household wealth above £2 million beginning at 2%, with an additional tax on large financial transactions out of the country to deal with capital flight, to raise £43 billion after allowance for avoidance. Wealth sitting in the UK that distorts the housing and other markets, is enjoyed elsewhere or not spent or taxed at all, is of no benefit to the nation.
7. Establish a carbon tax of around £55 to £60 per tonne in 2024 as well as a permanent excess tax on fossil fuel companies and a redirection of current subsidies to fossil fuel producers, to raise around £13 billion in current prices.
8. Introduce a tax on frequent flyers and on private jets departing from the UK, the latter set at £780 per passenger per flight, to raise a further £4.5 billion per year.
9. Reverse fuel duty freezes since 2010 (accompanied by investment in making public transport more affordable than driving) to raise almost £20 billion per year.
10. Replace the outdated and regressive Council Tax with a Proportional Property Tax (PPT) similar to that in Northern Ireland at a rate of 0.7% for primary residences (double for second homes and empty properties) in Scotland, 0.9% in Wales and 0.95% in England, while compensating any low-to-middle income households that lose out. This would raise approximately £9 billion per year.
11. Remove 40 of the largest unnecessary or badly targeted tax reliefs and allowances that enable the wealthy to avoid paying tax through avoidance schemes, which should raise just under £74 billion.
And among much else:
12. Remedy our polluted and failed water supply and waterways.
13. Reduce crime.
14. Fully fund and address the failings in the NHS and social care.
15. Build a strong and healthy foundation for all children and young people.
16. Address the funding crises in further and higher education.
17. Build high-quality, affordable public, social and private housing.
18. Deliver cheap, clean and effective transport.
Commentators explained ‘Perhaps the biggest problem for Labour lies in the fact there are no easy short-run solutions. National renewal takes time: the legacy of the last fourteen years will not be overcome in a single parliamentary term.’[3] But if you are not being daring, it may take longer than time itself – you may see no overall progress. Furthermore: ‘the proposals for taxing wealth in this budget are way too modest.’[4] But at least we are more often and more loudly now asking the right questions.
References:
[1] Cat Hobbs on Thames Water https://x.com/CatHobbs/status/1855903379895062710
[2] Common Sense Budget Response https://researchportal.northumbria.ac.uk/en/publications/spend-to-save-britain-a-common-sense-approach-to-the-2024-budget
[3] Jo Michell (2024) Beyond Growth: Can Labour rise to the politics of growth after fourteen years of stagnation? Phenomenal World, 21 November, https://www.phenomenalworld.org/analysis/beyond-growth/.
[4] Özlem Onaran (2024) An alternative needs-based budget: analyses the strengths and weaknesses of Rachel Reeves’ first Budget, Labour Hub, 6 November, https://labourhub.org.uk/2024/11/06/an-alternative-needs-based-budget/
For a PDF of this article and a link to the original publication click here.
Source: https://x.com/FloellaBenjamin/status/895763509748879360