Simpler approach to tax and money benefits everyone

In the video below, Martin Wolf describes an alternative financial system that would work in the public interest and encourage the right kind of risk-taking. This kind of radical financial thinking is what we need. We certainly need to stop believing what the wealthy tell us who have a vested interest in the current system.

The focus on simplicity and transparency is similar to some tax ideas I put on Twitter yesterday. In a nutshell, politicians should stop trying to incentivise our behaviour through complex tax reliefs and should run a much ‪#‎simpler‬ ‪#‎fairer‬ ‪#‎transparent‬ ‪#‎better‬ tax system.

As an example abolish all the current tax reliefs and abolish National Insurance switch to

  • £20K tax-free income threshold for people,
  • 40% flat rate income tax on people,
  • 5% income tax for local authorities
  • 5% revenue tax on businesses
  • a flat rate 15% VAT on consumer purchases.

This then stops all the tax avoiding behaviours because there is nothing to avoid. There is no pension tax relief, no mortgage interest relief, no eis. Then people will behave in their own best interests and not to avoid a tax. I am sure the economy would work better.

Martin Wolf understands the financial system better than me and explains it here

 

Why is it that large institutions dehumanise us?

I was at an event on Monday, where I got some insights on the role of government and large institutions in defeating poverty.  I left with a strong sense that achieving this task is inhibited by the way large government and business institutions don’t work for people. This article sets out preliminary thoughts.  Answering the question will take longer than is possible here.

This was a Tory conference fringe event organised by Tim Montgomerie of The Good RightThe event hashtag was #defeatingpoverty.  This featured four government ministers discussing their ideas on how to reduce poverty, increase social mobility and expand opportunity.  This may seem ironic to some, since Michael Gove, Sajid Javid, Ian Duncan Smith and Ruth Davidson are frequently attacked by the left for doing things that achieve the opposite of these aims.  

But I discerned a theme underlying all their ideas.  It is clear they do believe in #defeatingpoverty.  But these four ministers have a distinctive take on how to do it.  They each believe that it is not the government’s job to provide us with everything we need and give us the money to get out of poverty, but their job is to provide us with the tools we need to help ourselves.  The most valuable things the government can do is to provide education, an economy with jobs, healthcare, housing, public transport, infrastructure and essential utilities.

Now, that could easily have been said by many Labour politicians as well. 

Conservatives and Labour have similar goals but believe in very different means

It is interesting that if you listen closely to both left and right-wing politicians and dig into their remarks, the surprising thing is they both seem to want similar outcomes.  What they disagree about is, what is the best and fairest way to get there.

But the media prefer disagreements to agreement.  Agreement does not make good politics and does not make good media.  So what happens in the media debates and interviews is that this common aim is obscured and missed and the discussion concentrates on the means to get there.  These debates tend to focus on how each side has different means to get to the aim rather than revealing the common ground and purpose. 

Labour_1592957cLabour argue that the conservatives do not understand what it is like to be poor and disadvantaged.  The Conservatives just look after their rich friends and the tax and business policies are evidence of how the conservatives are nasty, self-interested and unfair.  Austerity targets the poorest and the rich thrive.

Conservative_logo_2006.svgConservatives argue that Labour ideas are too expensive, we cannot afford them, that they remove the incentive to work, they do not celebrate excellence and suppress individual initiative and enterprise.  Labour policies are prone to create higher tax and spend, reduce our competitiveness and depress growth which creates more poverty.

Now I know that the arguments from each side are more nuanced and go into greater depth than I have done here.  But if you dig deeper into the speeches from each side you will find that there is a commonality of aim but a disagreement about means. 

Because they favour different means, when describing aims, they each use different language.  The Conservatives talk about opportunity, family, jobs, growth, choice, excellence.  Whilst Labour discuss fairness, social justice, jobs, public ownership and control, growth.  Each side emphasises these because they each believe they are the most important means to reduce poverty, increase social mobility and expand opportunity for all not just a privileged few.

The_Good_Right_Cover2So whilst it seemed odd to some people that the Tories should hold an event titled #defeatingpoverty, for me it is not bizarre at all.  The Good Right within the Tories is a subgroup that champions this purpose.  It is great to see this as an aim expressed clearly within the party

But if the both Labour and Conservatives agree about the aim, who has the right answer on the means to achieve the aim?  The Conservatives or the left-wing alternatives?

The left argue that the market punishes the weak and the only way to fix this is through collective action by government and government taxation.  This is the best way to help the weakest and to lift them out of poverty.  The right argues that the dead hand of government suppresses initiative, creativity and enterprise and business is better suited to many tasks.  But in my view both of these arguments misunderstand the nature of large-scale institutions and the way they do and don’t work.

Large institutions are letting us down 

After Thatcher, it was generally accepted that government-run organisations and businesses are not efficient or effective at many tasks and they should leave many things to the private sector.  Business does it better goes the argument.

But in the 21st century we have increasingly seen that it is not just government run organisations that can fail but many badly run, inhuman organisations of all types from business, government and not for profit sectors.  In fact in many areas, the government do things better.  (There are great hospitals, schools and transport services that show this).

We have recently seen a number of dramatic examples of institutions that do not serve the people they exist to serve.  If we want to help people lift themselves out of poverty or help them get anything else done, then we need to address the way our larger institutions are not working for people or to help people.  I would highlight three areas of concern 

1. When people go to work in large institutions of business, government or charity they can lose their humanity and their talent to be people

1-compressed-300x200Steve Hilton wrote about this in More Human and analysed it in many different fields   

Something strange happens to people when they cross the portal of their workplace each day.  They lose some of the skills they naturally have at home and with their friends.

I frequently observe that people in their personal lives understand how to flourish and understand how to interact with people, so they connect with others, are active in their lives, take notice of what happens, keep learning and find ways to give.  But as they go to work they feel they are not allowed to do this and they stay within their job descriptions, are constrained by rules and remain in their silos at work.  At its worst they develop a sense of entitlement. 

This is manifest in all levels at work from the customer service handler who cannot help the person on the phone, to the executives at Volkswagen who thought they could cheat the government and the public for 10 years, to the bankers who have lost sight of their purpose to serve customers,  the charities who bamboozled older donors into giving more money.  There are news stories every week and we all have experiences of dealing with institutions and being frustrated, horrified and indignant.

2.  Large institutions and government favour single national solutions.  But single national solutions to do not encourage the development of creative, innovative ideas.  They tend to suppress initiative. 

Even though everyone loves the idea of it, the NHS is now a monster that we cannot control and most worryingly many staff are very disheartened, frustrated and just want to leave even though they love looking after people. 

The history of state-funded education since 1975 has been pretty disastrous under both Labour and Conservative governments.  And again we see that many teachers feel like the NHS staff.  They are disheartened, frustrated and just want to leave even though they love young people and love their subject. 

Large businesses very rarely create great innovation from within.  However, they have come up with a solution.  What they do is wait for smaller businesses to come up with stuff and then acquire the smaller business and apply their investment and systems to scale it and grow it.  But in this solution the innovation and fresh thinking happens elsewhere away from the larger business.  There are a few examples that contradict this, but they usually involve one extraordinary individual (e.g. Steve Jobs, Richard Branson, Larry Page, Bill Gates) who operates like a small business owner but with big business money.

3.  The welfare state focuses on what people are not or don’t have rather than what they can do or might achieve.

Alex-SmithAlex Smith has written about how the welfare state has provided a safety net and done many great things, but there has been an unfortunate side effect.  It addresses what people have not got and what they cannot do.  It treats those it helps as dependents.  It has led many of those who depend on it to become disconnected, inactive, have narrowing horizons, and a sense of entitlement.  It is disempowering them and creating an environment that discourages initiative and self-help.  Whereas people flourish when they connect, are active, take notice, keep learning and find ways to give.

Click here to read more

So my title question was:  Why is it that institutions dehumanise us?

In this article, I have written about why I think this question is important. I have not answered it yet.  I will follow this up later.  I will also go on to discuss why this matters to business when they create products and services that aim to attract more customers.

What priorities were discussed at the event?

I was inspired to write about these issues due to the debate at the Good Right event on Monday.  It is not directly what was discussed, but it was implied in the ideas that we explored.  My takeaway from the event was that I feel that I side with the Good Right in believing it is more important to capture the human spirit and our capacity to innovate than to equalise the outcomes for everyone.  

Something that matters a lot to me is that all politicians should support the aim to defeat poverty, develop social mobility, build social justice and create opportunity

The team last night highlighted five areas that must be the priority for a government that wants to achieve these aims.  These are things that will help us to help ourselves.  These are the priorities for the government institutions

  • Build more houses
  • Provide better education
  • Have effective healthcare
  • Building national infrastructure
  • Have a growing economy

Tim MontgomerieThank you to Tim Montgomerie and the team at The Good Right and the Legatum Institute for provoking me to write about this and providing a lot of the stimulus material.  You can see more by clicking on the links