A proposal for greater equity

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  • Picture of Philip Rodgers
    Philip Rodgers
    Economist: specialisations; monetary economics, economics of fisheries
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Universal basic income is a right, not a supplement to benefits, argues Philip Rodgers. In a new paper he argues that it could be financed by scrapping taxes, and replacing them with charges for our use of resources. The result would be conservation, environmental protection and a fair share for all

This proposal contains three elements drawn from a modern method of financing government expenditure. It contends that a social dividend, call it a universal basic income if you wish, is a right rather than a supplement to the benefits system. It offers growth born out of the replacement of all forms of taxation by a system of charging for the use of resources which are often free at present, and a general means of conserving resources and the environment in all its aspects. Such a proposal can be so broad because it relates to the general form of financing. The word equity implies a fair share and that is the underlying basis of the proposal.

The basic precepts are:

1) that the resources and infrastructure of a country belong in equal part to its citizens;

2) that citizens have an equal right to the economic benefits of the resources and infrastructure;

3) that taxation of any form for any purpose is always harmful to national income, and;

4) that the function of government is to manage resources and infrastructure as an agent of the people and collect the charges necessary to limit their use to sustainable levels.

An extended working paper setting out the discussion in greater depth is available from the University of Lincoln Library repository.  Remarkably, this system would be less burdensome than taxation. 

This country possesses natural resources in the form of land, forestry, fisheries, airwaves and so forth. All belong to the Crown as the representative of the people. In addition, a considerable residual capital infrastructure exists from investment in previous times: roads, bridges, tunnels, car parks, buildings, housing and more that have been laid down and maintained, often since the industrial revolution. Usually, free use of these assets is permitted, yet they frequently provide an economic return which is not recognised. Take roads as an example. Companies are permitted to use them without charge (apart from the so-called road fund licence) in order to convey their goods on which they make a profit. The outcome of this is over-use. A private owner would not dream of permitting such a slack situation, especially as they have the maintenance costs to meet. They would make a charge for someone to use their road to cover the costs and extract some rent. Instead, the economic benefit is left to those using the asset. But ultimately the benefit is dissipated by over-use, as happens with traffic congestion.

I prefer to call a universal basic income a social dividend, because it more accurately describes the concept presented here. The philosophical foundation for a social dividend emerges from the question of ownership, but charges for the use of resources and infrastructure have not been collected until now. Despite years of investment of funds wrested from the people by taxation, free use of resources and infrastructure has been permitted and the inevitable over-use has occurred. The charges gathered for the use of these resources would be sufficient to provide all the funding government needs for its expenditure (made on behalf of the people) and the surplus could be distributed as a dividend to the owners of the resources and investments – the people.

It can readily be seen that a social dividend is not a replacement for the benefits system. On the contrary, it is a right, a wholly justified return to even the poorest on what they own and of which they are currently deprived because their ownership rights are only rarely enforced.

Evidence that charging for the use of scarce resources leads to their conservation was shown by the Professor of Economics at the University of Copenhagen, Jens Warming, more than a hundred years ago. Not only that, Warming also identified the paradox that society as a whole and the industry participants involved were both better off economically. There is however a flipside to this. Society cannot be expected to bear additional charges for using resources and infrastructure. It is necessary ultimately wholly to abolish taxation, if for no other reason than that it reduces the earning capacity of the resource. 

It is clear from Keynesian theory that taxation always reduces the potential size of an economy. Some will point out that this would be impossible at present owing to international treaties, but it might prove worthwhile to educate other governments so that the whole world could enjoy the benefits. Countries do not live in isolation, and it is probably a necessity if pollution is to be controlled. Ideas like taxing fuel consumption simply lead to more efficient engines and a concomitant increase in their use.

This proposal, then, suggests that conservation, carbon emissions, traffic congestion and a host of other problems can be controlled by the introduction of charges to produce resource and infrastructure markets, humanity’s normal means of rationing scarce resources. 

These charges would replace taxation. They would produce more revenue than taxation because of the stimulus to the economy. The surplus over government expenditure would provide a social dividend to the owners of the resources and infrastructure, the people and repay the sovereign debt which threatens to absorb substantial amounts of future tax revenue.

Dr Philip Rodgers is a Visiting Fellow in economics at the Lincoln International Business School. He has specialised in resource economics for over thirty years, serving for two terms as President of the European Association of Fisheries Economists

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