The Guardian reports that IPPR is continuing with its work in tax and related reforms and has suggested:
All UK-born citizens should be given £10,000 as a “universal minimum inheritance” when they turn 25 to help address growing wealth inequality, a thinktank has proposed.
Tax reforms and a selloff of assets including the government's stake in Royal Bank of Scotland could help create a citizens' wealth fund worth £186bn by 2029/30, the Institute for Public Policy Research (IPPR) said.
First, let me say I cannot find the document to which this refers, and I have looked*.
Second, let me say I am not bowled over by this idea unlike some things IPPR are doing right now. It gets a headline, but £10,000 at 25 could be significant. It could also be blown in minutes. And it has little impact on overall wealth. Given that £1 million of wealth is not uncommon now in the top 10% of wealth holders in the country this gesture is just that. It would take someone to earn £50,000 a year for 20 years and to spend nothing and pay no tax to get near wealth of that order: that is how distorted wealth now is. Gestures will not address that.
Third, what I did find was a document on capital ownership on their site which is part of their current output which did include ideas worth discussing. They are promoting three things. One is an employee ownership trust (EOT) in which a majority of a company's ownership is vested in its workforce. These exist: they are successful. The second is co-ops. I am a fan, although they have their own issues (but everything has). And third is a sovereign wealth fund for the UK, of which they say:
Like other sovereign wealth funds around the world, this would own shares in companies, land and other assets on behalf of the public as a whole. It would thereby manage existing public assets and transform a part of national private and corporate wealth into shared public wealth.
The Fund could be capitalised by a combination of capital receipts from the sale of public assets, revenues from a ‘scrip tax' on corporate stocks, and the hypothecation of wealth taxes. The Fund's investment mandate would be set by Parliament but it would be managed by an independent board on behalf of the public. The Fund would act to spread wealth by paying out a universal citizen's dividend to all or particular groups of the population, and by investing in the provision of universal basic services.
I am not sold on all the detail: I will need persuading that selling publicly owned assets is the way to create a sovereign wealth fund, for example. What I do like is the idea of a 'scrip tax'.
I wrote something about this so long ago I cannot find it, so I will start afresh. IPPR say:
The Fund could also be capitalised by a ‘scrip tax'. A scrip tax is a tax on corporate profits paid by firms issuing equity to government instead of cash. This transforms a stream of payments in the form of corporation tax into an asset that produces returns. A scrip tax would be paid by issuing new equity, which would moderately dilute shareholder value but would not reduce a corporation's working capital. Given the cumulative, compounding nature of the scrip tax, it could be set at a low rate and still create a substantial stake for the Fund over time.
If corporation tax was increased to 25% for larger companies with the increase payable in shares this tax could raise more than £5 billion pa. It has to be remembered that half of corporation tax is paid by small companies whose shares are usually of little value and where a differential in rates is desirable to reflect differing costs of capital. This does limit the yield.
But remember, it is not just yield that is the aim here. IPPR retains a worrying commitment to the idea that money and wealth are scarce commodities solely created in the private sector, and that theme does seem to run through some of this work. That, of course, is not true. A sovereign wealth fund is best capitalised by quantitative easing: after all, if we could do it for banks we can do it for people. And in terms of scale, people's quantitative easing could outstrip anything like a scrip tax and do so in a timescale where real change could be expected, which £5 billion a year may not deliver.
But this does not mean a scrip tax does not make sense: it does. The reason why is that it gives us all a stake in these businesses in a way that is not apparent now. Even those with pensions have not a clue in the vast majority of cases in what companies they have an interest. A sovereign wealth fund would hold that interest very tangibly, and should be actively engaged with companies to protect stakeholder rights.
This is why such a fund is important. It would say to companies that their arguments on shareholder value are wrong. Shareholders would then, very obviously, include real people who have real interest in tax being paid; who want public services and who abhor tax abuse, gender pay gaps, casualised working practices, anti-union attitudes and executive pay that abuses the whole system of market capitalism.
We need a sovereign wealth fund, but not to create wealth, because that we can do. We need it to hold wealth to account.
Meanwhile, if you really want to tackle wealth have a wealth tax and level the playing field on taxes on income so that unearned income is not favoured. Both of these matter. But scrip taxes have a much more important role than raising a bit of money.
* Note to think tanks and others: having pretty websites is all well and good. Being able to find things is better. And if the press mentions you it's a really good idea to make it easy for people to follow up - the IPPR Twitter feed has also not helped this morning.
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* Given the ubiquity of online media, it is more than annoying how often the online articles fail to provide a link to their sources. I’ve then failed on some occasions to find the quoted sources, despite the source’s website having a section called Press Releases, Media or the like.
This might persuade me that some of the originating sources are providing press releases to the media, and embargoing the release on their own website for some period. Or have I been unlucky?
You may well be right
This may be it, from the Idependent website: https://www.ippr.org/research/publications/our-common-wealth
Thanks
I know that you have sort of covered this but that Sovereign Wealth Fund would want to have a damn good charter.
As things currently stand, pension funds, SWF’s and state owned enterprises around the world are some of the pushiest proponents of ‘shareholder value’. They behave like capitalists in the belief that it is their fiduciary duty to do so. It is only their ownership that distinguishes them from the worst of the worst.
So the idea that the fund would “invest in universal basic services” is critical and needs to be well defined. The last thing we need is another wealth fund adding yet more capital to the already over-capitalised financial markets of the world.
I agree
Few pension funds act in their members’ best interests it seems to me
Local authority pensions seem an exception – and I acknowledge my bias
I thought this sounded like a good idea until I remembered that by that age my 18 year old grandson would have at least (£9,250 x £11,300) x 4 of student debt.
I can’t follow your workings here, Carol. I don’t believe anyone could accumulate almost half a billion GBP in student debt in seven years.
Only someone with limited imagination would think the way to be worth a million was to earn £50k a year for 20 years.
I have clients whose businesses were worth well in excess of a million after only 5 or so years during which time they took very little from their business.
You shouldn’t think so narrowly Richard.
As a serial entrepreneur I am well aware of capital gains
I am equally well aware how few make them
I can also spot trolls
‘Seymour’, your comments really are quite silly.
You think that cherry-picking or fabricating a convenient, unrepresentative example or two actually constitutes an argument. As if anyone would be fooled by that – you know that they wouldn’t so it seems that your only purpose is to irritate.
As for your comment above. The only thing it tells us is that you have rich clients. How very fortunate for you.
By the way. Biggest political story of the day.
Corbyn – for the many, not the Jew.
No comment by you.
You can be damn sure if it was the Tory leadership being accused of race hate you’d be commenting on it.
Or is it a bit close to home for you?
This is not a blog about Labour
Or anti-semitism, which I condemn unreservedly
And if you think I am an uncritical Labour supporter I suggest you ask Corbyn and McDonnell – I know they would not agree
You will be deleted from now on
Thanks Seymour,
Lately I’ve been taking the opportunity to correct this sort of nonsense when it appears and until now this blog hasn’t provided one (not that it should necessarily).
To begin with I acknowledge that real anti-semitism currently exists and an examination of Europe’s alt-right / far right confirms this. Any suggestion that Corbyn is a part of that falls into 3 categories:
1. Another attempt by the Tories to create a smear and reverse the fortunes of a new leader that they haven’t been able to lay a solid glove on. The general failure of the tabloid’s “jihadi” Jezza stories should have been lesson enough for them after the GE. But without any real insight or imagination on their side what else can they do? The know that the little lift that they got out of the Salisbury episode will soon be forgotten.
2. Part of the disingenuous campaign to conflate anti-zionism with anti-semitism. From the 1950’s onward any one that questions the excesses of the Israeli state has been smeared as a racist. Despite its dishonesty and unfairness the tactic worked to some extent because it drew upon on holocaust guilt and fed into the Cold War politics of the US’ strategic alliance with Israel. Over time an unstated obligation has emerged where all Western leaders are expected to be supportive of Israel. Now that we have the prospect of British PM that is critical of Israel the pro-Zionist contingent are back to their old tricks.
3. Both of the above.
Now Seymour, that said I wouldn’t be expecting this line of attack to be too wildly successful. For one thing the largely millennial demographic that have consolidated Corbyn’s position were all born after the end of the Cold War. Upon seeing your little slogan: “For the many not for the Jew” they would likely be bemused, dismissive or both. Conversely, a persistent line of accusations equating Corbyn with anti-semitism is likely to attract a level of unsolicited support for him from elements of the alt-right. For some that prospect would be a little worrying although cynics might find it to be rather amusing.
All-in-all the anti-semitic smear was never bound to be a vote winner. With time it will fall just as flat as that rubbish about jihadis and Venezuelans. It is all born of the same decrepit mentality.
Oh, and by the way:
“Stop Jeremy Corbyn’s trial by media over antisemitism”
‘More than forty senior academics write to condemn what they see as an anti-Corbyn bias in media coverage of the antisemitism debate’:
https://www.theguardian.com/politics/2018/apr/02/stop-jeremy-corbyns-trial-by-media-over-antisemitism
Headline item for the SWF « The Fund could be capitalised by a combination of capital receipts from the sale of public assets ». Public assets are shrinking rapidly. Everyone from Theresa May to the IPPR and NEF is pushing for the sale of public assets, especially hospital sites. The value locked in public assets is more than just a capital receipt to be used to fund current revenue spending, pay off the national debt or set up a SWF.
Agreed, wholeheartedly
I’ll second that.
What’s the point of selling public assets to create sovereign wealth? Public assets are sovereign wealth.
Its like the IPPR are trying to invent some hybrid of socialism and neo-liberalism at a time when neo-liberalism is dying. The whole thing is so untimely and ill-conceived.
Deborah,
Agreed. Whole idea is stupid. So what they’re saying is we sell off public assets and invest some of the proceeds in a sovereign wealth fund that will make small amounts of money each year (except the years it loses money). Then we can use said small amounts of money to pay for public services.
Like we could use it to pay towards a national health insurance scheme to partially cover the cost of private health care at private hospitals. Private hospitals probably on the sites of existing NHS hospitals.
The alternative would of course just be not to sell the public assets in the first place and use government’s fiscal powers to fund them properly immediately.
I really can’t see a scrip dividend paid to the government as a workable proposition.
Which growing company would really want to pay their taxes in that way?
It is one thing to pay the tax that is due and to then forget about it, but it is something completely different to know that one day the government is going to have received so many of these scrip shares that it is now the majority shareholder. It would surely amount to a policy of nationalising all companies in the long run, but maybe I have just misunderstood the suggestion?
It would be pretty odd if that was the outcome
Theoretically it would be possible
But it is likely that in that case state support might be needed anyway
Michael says:
“…. the government is going to have received so many of these scrip shares that it is now the majority shareholder. It would surely amount to a policy of nationalising all companies in the long run, but maybe I have just misunderstood the suggestion?..”
The Japanese Government/CB has been buying up japanese companies, I think….not quite in this way, but via corporate bonds or some such device. It similarly seems like a form of default nationalisation.
In a similar twist we have a part nationalised RBS. There are strange things going on, the consequences of which are capable of various interpretation.
About 5% of Japanese equities are, I think, now government owned
“About 5% of Japanese equities are, I think, now government owned”
I had suspected it might be more than that. But there’s a lot of government backing which is not represented by any equity on paper.
Same applies here. ‘We’ are paying for it, but we don’t have any proprietary rights. Not visibly anyway.
I agree the Sovereign wealth funds are more visibly accountable. However so are SNAC Shareholder Nomination to the AGM committee members being named and elected at AGMs and reporting back and answering directly at the AGMs to members attending and in the Annual Report. This includes using the Swedish system explaining on why their do or do not believe the best talented management are Board Directors.
Meglomanic selfish ‘corporate psychopaths’ Ref: Prof Clive Boddy most fear losing control and power which is what a resolution to remove them by a shareholders resolution at an AGM would do. Even the threat is historically enough to have them resign as the wolves in the pack turn on them. With diverse shareholding and compulsory voting that threat is currently just smoke.
Implement SNAC committees and we restore the old direct transparent solution. . do you agree?