Income for Me, Wealth for We: A Path to Economic Justice

29^th October 2015

In a soundbite ridden speech at the Conservative party conference, David Cameron promised an “assault on poverty”.  But he said absolutely nothing about what could be done to back up that claim. Where is the substance, where is the commitment, where is the strategy that will reduce poverty? He did say he would seek to tackle the “scourge of poverty”, which is best achieved by helping people back into work where the new “national living wage” will mark a “giant leap forward”. But that was it.

It’s not just the Prime Minister. The political rhetoric around extreme inequality has typically little to say about concrete proposals as to how reduction can be achieved and how to help us all progress to prosperity. But some of the toughest challenges confronting human civilization lend themselves to practical solutions hidden in plain sight. These solutions don’t require us to strike tough compromises or to unravel complex priorities. These policy ideas simply require us to think clearly and act decisively.

I propose an Agenda for Progressive Prosperity, which aims to minimise extreme inequality and create greater opportunity for all by bringing significant financial relief to the poor and squeezed middle.  It is based on an inequality-busting strategy of “Income for Me, wealth for We”. We keep the income we earn from our work and we share the wealth we all create more equitably. The tax system would be reformed to shift the base from income to wealth and to encourage greater social responsibility.

This could be achieved would be by abolishing income and payroll taxes for the majority of the population. This impact could be more than covered by a greater contribution based on a small percentage of asset value above a threshold from those who have accumulated significant wealth; they will still be better off. With more funds brought into circulation, consumer demand will be boosted and more jobs created, leading to greater opportunity for all.

About 80% of income tax payers earn under £32,000 yet the income tax they pay contributes just 8% of government revenue.  Abolishing income tax for lower earners could give up to 15% pay rise for 25 million people and inject £55 billion into the economy, increasing demand, encouraging growth and boosting jobs. The effect would be gradual as many in this group are currently having their wages topped up by welfare benefits. As take home pay increased, benefit eligibility would go down, reducing welfare spending while still ensuring that all families received what they need. This could be followed up with reducing or abolishing employee National Insurance (and later for employers) which would return even more funds to those that earned it, creating even more opportunity to spend, save and acquire assets that appreciate in value, a benefit previously denied to them.

Government talks about cutting budgets when it is not considering the other sources of income that could be raised to maintain and indeed expand those services.  If the government was a business, it should be seeking new markets for revenue rather than cutting back on expenditure and reducing supply (of services).

One source of alternative revenue is from those that already own substantial assets. Government revenue could be replenished by a greater contribution from those that had accumulated the assets we all helped to create. This could be achieved with a small tax based on a percentage of wealth assets, as wealth by definition means you already have enough to live on. This is a socially just approach, not merely based on the ability to pay but also on the moral grounds that we are all the wealth creators but our system allows wealth to be accumulated only by the few. A simple tax on wealth of 1.5% on assets of over £2 million would do it. There is a very strong business case for the wealthy to invest more in the national agenda rather than their personal agenda. A well educated, healthy people with an efficient and modern infrastructure is a very strong basis for a wealthy nation with opportunity for all, not just the few.

By generating government revenue from wealth instead of income, we could take a major step toward minimising economic inequality. The problem, of course, is that our political leaders are not bold enough to say that those with substantial accumulated wealth should contribute more and how it could be achieved.

So an effective assault on poverty will only deliver when our government has a clear strategy and is truly committed to a practical plan of action, not just a conference sound bite.