National Insurance & Person Tax

Surely the government is making a mistake by increasing National Insurance contributions. As energy and other raw materials become scarce and therefore expensive it is going to be increasingly important to make it cheaper to employ people (especially in the developed world). A healthy economy has a high level of employment, with just enough slack (unemployment) to allow for some flexibility.

Since public services employ a very significant percentage of the population it makes little sense to take with one hand and give straight back with the other (in increased employers contributions).

I would reduce National Insurance with the aim of eliminating it altogether. NI was designed as a tax that everyone pays at a similar level and everyone takes a pension, health care and employment cover. The reasons for the way NI works are long since lost in the mists of time and are not well understood. High earns may complain about the way Income Tax increases on higher earnings but you don't often hear that NI actually works the other way around. If you model the total personal tax it comes out at about 25% across the board.

Maybe the first step would be to bring it down to 10% but eventually I would like to simplify the personal tax regime by having single direct tax based on Income;

First £8,000 tax free - this needs to be sufficiently higher than the level of benefits available to the unemployed to maintain an incentive to work
Further £20,000 at 25% - medium level earners are significantly better off
All additional income at 50% - those earning over £100K might be penalised slightly

Alternatively it would be interesting to model what happens if a flat tax rate of, say, 30% would work. There is an argument that capturing 30% from everyone is better than taking 50% for the few rich people not employing a good accountant.

It would also be necessary to recover the tax income handed back to employers by reducing or eliminating their NI contributions. We want businesses to employ people, indeed it needs to be efficient to employ a person instead of purchasing an energy intensive machine. Additional Corporation Tax might penalise good businesses but we could take a tax off energy intensive businesses in the form of a steep Carbon Tax.

Population & Housing

Having seen David Attenborough present the Horizon special the other night it seem obvious that the UK government needs to set a target population for the country to work towards. Somewhere between 50 - 60 million seems about right. Achieving the target might take a generation but policy should be bent towards the goal starting with a look at tax and benefits that relate to children other than the first.

Further efforts need to be made toward addressing our high levels of teenage pregnancy, indeed education towards making it the norm for couples to wait until at least the age of 25 would almost certainly lead to better parenting.

The overall population target should be adopted at regional level by adopting the current policy towards new housing development. Instead of expanding the housing stock a mechanism should be developed to promote the building of new energy efficient houses while simultaneously redeveloping older houses where it is not economical to bring them up to modern building standards. Maybe there is an opportunity to resolve the inequity of Stamp Duty at the same time?

Q: how to make it economically desirable to demolish old energy-inefficient houses?

Proposal to Reform TV License Fee

Objectives;

1. Reduce beauracracy
2. Reduce costs of issuing, policing and prosecuting

Proposal;

Fixed fee per household to be added to Council Tax, eliminate TV License
Re-employ those currently working in the TV License system into tax or benefit frauds
BBC receives index linked fee based on revenue collected = fee * # of households

Proposal to Reform Road Tax

Objectives;

1. Reduce beauracracy

Proposal;

Road tax to be collected by Insurance company
Insurance company pay money collected to Treasury
New combined Tax + Insurance certificate to be issued by DVLA on (electronic) instruction from Insurer, cross reference with MOT database
Does not change car registration system in any way

Proposal for Child Benefit Reform

Objectives;

1. Remove any financial incentive to have more than 2 children
2. Contribute to drive for lower UK population (~45 million)
3. Maintain overall cost of child benefit
4. Focus benefit where most needed

Proposal;

Child benefit for first child only
Double current payment

How Objectives Are Achieved;

• Objective 1&2 are obvious - double benefit allows for 2 children but gives some incentive to stop at 1
  
• Child benefit currently paid for 2 children - check this - therefore overall cost should be slightly lower
  
• Poor families will receive existing means tested benefits
• No longer paying benefit for third child to those who can afford it

Domestic Energy Pricing Proposal

If we are all being encouraged to save energy how come the pricing model for most energy tariffs (gas and electricity) get cheaper as consumption increases? For example my gas bill from July - September 2008 shows the first 396 kWh at 7p with addition kWh at nearly half price (3.056p).

When you think about it the cost of electricity is fairly cheap. Even a big, plasma TV using 0.5kW is only costing about 30p an hour. It might cost £1 to cook dinner for four in an electric oven. By taking up all the available energy efficiency advice, low power light bulbs, eliminate stand-by, etc, the average household might stand to gain £200 a year - big deal!

Anyone looking at domestic renewable energy (solar PV, wind, heat pumps) soon realises that the economics are marginal with 10+ years payback. While large scale renewables are claiming close to parity with fossil fuels investment is unreliable (see recent announcements by EDF and E.ON regarding their commitment to wind power).

Therefore we need to price domestic energy from fossil fuel in a manner that;

• encourages efficiency
• makes small scale renewables cost effective (~5 year payback)
• does not punish those less able to pay
• does not punish those who are efficient in their use of energy

My proposal is that domestic energy should be priced in such a way that the price increases with usage. The energy regulators should have a key role in determining the quantity and base price, while the market would be free to establish the price of additional energy.

Those energy companies that offer a flat rate generally impose an annual fixed fee. These should be eliminated as they penalise low energy users. The energy companies will squeal about their fixed costs but they must be encouraged to recover these costs from high energy users and through energy efficiency services.

I believe this is a simple step that achieves all the goals set out above.

In addition this can be extended to replace the current fuel subsidies for low income and pensioner households. You simply need to increase the amount of energy they get at the lower rate or lower their base price.

Economy and Population

I have been reading "The Great Boom Ahead" written by Harry S. Dent, Jnr in 1993. His hypothesis is that economic cycles are tied to periodic fluctuations in population, that the baby boom following World War II meant resulted in a peak of consumption between the mid-90's and 2007. He actually predicts that there would be an economic crash around 2008 and that our economy would remain in recession until 2022 when the next birth boom reaches the peak of their spending power.

It makes you wonder whether our economy is just a great big ponzi scheme based on growing population and increased consumption! If you study the impending pensions crisis you definitely get that feeling.

Now combine this with a need to decrease our population long term in order to foster a sustainable society.

How would companies grow without a growing market for their goods? Who would invest in companies without growth potential? How can companies develop improved products without the market to sustain a return on investment?

Investment based on profits (dividends) not growth (share price)?
Profits based on efficiency, quality, customisation not ecomony of scale, mass production?

Darwinian Response

Darwin's theory of Natural Selection tells us that survival is dependant upon a species being well adapted to its surroundings. We are changing our world at an unprecedented rate, of that there can be no doubt, undoubtedly leading to the extinction of many species. Will we be one of them?

Homo Sapiens are an adaptable species and will probably be able to survive anything, even a large scale nuclear war. The question is what will our society look like? Will we be able to maintain our "civilisation" or will we be forced back into a subsistence existance? Can our economy exist without cheap energy? Where will our energy come from once fossil fuels run out (this is only a question of time and whether we care about future generations)? The chances are that we will have to consume less and that there will need to be fewer of us in order to reach long term sustainability.

I believe the debate needs to move on from the symptom issues of Climate Change, environment destruction and extinction to discuss "Sustainability". We need to address the question of how to sustain our society in the long term? Starting with the basics of food, water, heating and clean air, how much energy and raw materials are required to sustain us? It is safe to assume that we want our future society to include good health care, education, be safe (i.e. policing, fire, social services, etc), that we wish to continue to improve our knowledge of the world. What other things really matter to us and what resource do we need to have them? We could apply a "hierarchy of needs" similar to that proposed my Maslow to identify necessities and luxuries.

The upper levels of Maslow's hierarchy focus on Esteem and Self-Actualisation, those things that give us pleasure in rich, free countries where basics are taken for granted. As a result of our study of sustainability we might find that our materialistic approach to building self-esteem has to change. Could we evolve as a society so that big homes, inefficient cars and regular foreign holidays are no longer the things we strive for?

It seems to me that we are much more likely to be able to develop a sustainable society if we are in harmony with our environment, in other words we are well adapted, therefore it makes sense to minimise the disruption that we cause to the planet.

Population

Today I have been reading about population issues. I have been aware and confused by the lack of government policy for some time but I hadn't realised quite how serious matters are for the UK in particular. My recollection from the late '90s was that UK population was about to go into decline but the economic boom years since then have re-ignited the fire of our population with some estimates showing the UK could have 77 million people by 2050 and 100 million by the end of the century.

What is even more scary is that research into finding a sustainable level of population for the UK shows that we might already have 30 million "too many" people in the country. The vast majority of our wealth and food is generated overseas and south-east England is one of the most densely populated areas in the world.

On a global scale many countries have succeeded in bringing their birth rates under control and are entering a period of slow decline in population as a result. Yet none of the main political parties in the UK have a policy on population.

The main reasons seem to be civil liberties and religion. However a policy that sets out to work towards a given target, say 50 million by 2050, doesn't need to infringe upon the rights of any individual as other countries have shown. Some couples will still have large families and immigration will still take place but overall the average will be reduced through "Stop at Two" programmes and availability of contraception.

The big question on my mind today is whether it is all too late. With a soaring population all our efforts to live more sustainably are for nought. The planet will survive and mankind will no doubt survive in much smaller numbers but what of our society? What will get lost along the way? How much pain are we storing up for the next generation?

I want to find out whether it's possible to drive this agenda from the bottom up; if all councils in the UK set their own population reduction targets then there is no need for central government controls.

A Star on Earth?

BBC's Horizon recently screened an interesting programme about the prospect of nuclear fusion power called "Can we make a star on Earth?". The conclusion of the programme, presented by the entertaining Professor Brian Cox, was that nuclear fusion power is a real prospect that given proper funding might produce real results in 20 - 40 years.

However the programme contained a very informative interview with Saul Griffith of wind energy firm Mankani Power where the alternatives were examined. Cox sets Griffith a challenge to show what would be required to give every person on the planet 5kW of energy within 25 years without recourse to fossil fuels (given that today's average US energy consumption is 11.4kW).

To accumulate the necessary 30TW they assume 5TW from conventional nuclear, 5TW from Wind, 10TW from Solar, 2TW from Biomass, etc. But creating 5TW of wind power in 25 years would mean building a full size, 3MW, turbine every 3 minutes, the same impossible problems face solar and even conventional nuclear would require 5,000 new reactors to meet it's quota.

Essentially there are three factors in this equation that we can effect;

1. The population of the world - this assumed a population of 6 billion so we can reduce our target if we find ways to control our population.
2. The average energy target of 5kW is a reasonable one but even a tiny reduction would have a massive effect.
3. Let's pray the engineers working on nuclear fusion are successful sooner than they predict!

Ultimately, if we don't balance this equation then nature will take a grip and force us into balance by reducing our population as predicted recently by James Lovelock.

For those of us that are not world renowned nuclear scientists we can best have a positive impact by reducing consumption and this is where Transition Initiatives can be so powerful.