In Defence of Liberty

Driven by data; ridden with liberty.

A Hopeless Agenda

Short manifestos can elucidate important ideas, helping the public coalesce around key campaigns. Independent columnist Owen Jones has launched his own 9-point manifesto, labelled the ‘Agenda for Hope’.

1)      A statutory living wage, with immediate effect, for large businesses and the public sector, and phased in for small and medium businesses over a five-year Parliament.

A living wage is calculated based upon current tax rates and prices. If taxes on income, including National Insurance (NI), for full-time workers on the present minimum wage were reduced to zero, this would effectively instate a living wage on current prices. A 2006 meta-study by David Neumark and William Wascher found that, in line with basic economics, large minimum wage increases have substantial effects on unemployment.

2)      Resolve the housing crisis by regulating private rents and lifting the cap on councils to let them build hundreds of thousands of houses and in doing so, create jobs, bring in rent revenues, stimulate the economy and reduce taxpayers’ subsidies to landlords.

This point ignores that local councils are also bound by planning restrictions. The “cap on councils” is not one of building, but of borrowing. Cutting the planning restrictions will ameliorate the housing issue. It is not necessary for the state to build – it is only necessary that the state allows others to build. What Jones means by “regulating private rents” is rather opaque, but tenancy agreements are already regulated by numerous Acts of Parliament and contract law.

3)      A 50p per cent tax on all earnings above £100,000 – or the top 2 per cent of earners – to fund an emergency jobs and training programme for young unemployed people.

In the combination of income tax and NI, an even higher marginal tax rate already exists on these earners. Moreover, Jones provides neither estimates for extra tax revenue nor the cost of this national employment programme. Some energy companies, such as British Gas, presently offer insulation services. A second problem with a national employment programme is that, as eloquently explained by US President Barack Obama, “there’s no such thing as shovel-ready projects”.

This graph was correct in August 2011, and shows the variety of marginal rates. (Photo: CPS)

This graph was correct in August 2011, and shows the variety of marginal rates. (Photo: CPS)

A Sandstorm of Inflation

4)      An all-out campaign to recoup the £25bn worth of tax avoided by the wealthiest each year.

There is no source cited, but this probably comes from the TUC-TJN estimate of tax avoidance, which calculated the overall tax gap was £120bn. This overestimate arises from definitional differences between the Tax Justice Network and HMRC, including many aspects of tax planning that are the intended consequence of tax law. There is not a pot of gold at the end of the anti-avoidance rainbow.

5)      Publicly run, accountable local banks. Transform the bailed-out banks into regional public investment banks, with elected taxpayers’ representatives sitting on boards to ensure they are accountable.

Jones does not highlight that a highly similar system already operates within Spain. The boards became drunk on political influence, leading to these regional savings banks needing saving. In 2013, the Spanish Prime Minister ordered the regional banks to be placed under greater scrutiny of the central bank.

6)      An industrial strategy to create the “green jobs” and renewable energy industries of the future.

Jones cites Germany as a model. According to Eurostats, energy prices for household consumers in Germany are about 60% higher than they are in Britain. This would help impoverish British consumers, but also violate the initial prong of Jones’ grand plan. As I specified earlier, the living wage is calculated with respect to present prices. Jones’ idea for industrial reform would vastly increase energy costs, thereby eroding the statutory living wage in a sandstorm of inflation.

Economics is a useful study, particularly if it lands on the Triple Word score. (Photo: LendingMemo)

Economics is a useful study, particularly if it lands on the Triple Word score. (Photo: LendingMemo)

The Harsh Constraints

7)      Publicly owned rail and energy, democratically run by consumers and workers. As each rail franchise expires, bring them back into the public sector, with elected representatives of passengers and workers to sit on the new management boards.

A management structure of this kind would be highly prone to capture by insiders. Even when pay offers are represented by a nation’s government, who presumably draw from a much larger constituency than consumers, trades unions may still strike. If pay demands are not satiated, the workers could still strike and disrupt services. If pay demands are always met, the consumers would inexorably find their travel and energy costs rising, further undermining the statutory living wage. The harsh constraints involved in resource allocation are not magically repealed or resolved by elected boards.

8)      A new charter of worker’s rights fit for the 21st century. End all zero-hour contracts, with new provisions for flexible working to help workers. Allow all unions access to workplaces so they can organise, levelling the playing field turnout and giving them a chance to improve wages and living standards. Increase turnout and improve democratic legitimacy in union ballots by allowing workplace-based balloting and online voting.

Whilst I do sympathise with those reforms to union voting systems, this is rather incomplete as a “new charter”. Zero-hour contracts are useful when the work demands are highly variable, changing irregularly from week to week, like tutoring. Banning these contracts is inflexibility in of itself.

9)      A universal childcare system that would pay for itself as parents who are unable to work are able to do so, and which would take on the inequalities between richer and poorer children that begin from day one.

Commonly, parents already provide a childcare system. The statement that this system would “take on the inequalities between richer and poorer children than begin from day one” sits astride two dubious assumptions. Firstly, it is assumed that parents with little wealth generally provide significantly worse childcare that their richer peers. Secondly, the standard of this universal childcare system must be assumed to be higher than that of their parenting. Neither assumption appears to have been substantiated. A lack of expensive gifts and extravagant holidays does not imply a lack of love and attention.

Rather than an ‘Agenda for Hope’, Owen Jones provides a hopeless regurgitation. Many of these policies have been tried in either other countries or our own past. This is no revitalisation.

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This entry was posted on January 31, 2014 by in National Politics and tagged , .
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