UBS delivers the necessity of social cohesion within the available budget and without resorting to unconventional monetary theory. They achieve this through three primary mechanisms:
- Local design & delivery efficiency
- Increasing retained earnings for low skill work
- Activating innate social tendencies for contribution
UBS will require initial investment to introduce, but over 5-10 years the above factors bring the cost of UBS down to the same level as the current conditional benefits system.
UBS services are funded out of general tax revenues, and ideally income taxes are hypothecated to UBS provision.
There are two simple questions embedded in any proposal for spending tax revenues:
- Is their spare capacity to raise additional revenues?
- What else could you do with the same money?
These are inherently political questions, with substantially political answers, however there are some parameters within which at least the first question exists. The percentage of GDP collected and spent by government in different societies can be reasonably accurately assessed, especially in the more advanced countries. Based on Heritage Foundation’s 2014 Index of Economic Freedom: the highest tax take of any advanced countries is less than 51%, (average top 10 taxing countries: 45%. OECD Top 10: 42.8%. ECB EU17: 42%). If we exclude countries with populations of less than 10 million we get on average of 41.6%. While these numbers do not represent any theoretical maximum to total available revenues, they do represent typical outcomes of societies’ attempts to balance the resources available for social cohesion and the balance remaindered to facilitate specialisation. Given that these balances have had a century or so to adjust to the swinging pendulums of different democratic initiatives seeking to find a balance, we can also infer a level of sophistication in their attempt to address the maintenance of incentives and the suppression of avoidance.
To deserve a label of “sustainable” it seems reasonable to commit to not exceeding a budgetary constraint of 42% of GDP. This is a standard our work aspires to meet, and we believe so should any proposal for 21st century social prosperity.
There is a strong argument that the existing social infrastructure needs additional resources to be fit for purpose, and that the inevitable increase in demand resulting from impending demographic affects (ageing) will add to the existing demand on resources – see Whole of Government Accounts. If we assume that these two needs will consume much of the 6% of available revenues between the U.K.’s current tax take of 36% and a maximum tax take implied by statistical average of advanced societies (42%), then the standard for truly sustainable solutions must be that they are self financing.
Self financing can be achieved through a combination of cost reduction, efficiencies, and substitutions. If a new initiative is to break our dependency on growth and debt it will have to enable structural change in our society and economy that allows us to properly fulfil the social contract that binds our society together, and do so at the same time that it stimulates the innovation and freedom of contribution that are the hallmarks of successful specialisation.
One opportunity for cost reduction is embedded in the requirement for some UBS services to be designed and delivered locally.
This presents the potential for cost savings compared to the kind of top down costings which are necessarily used in pre-implementation research on UBS. Research conducted by the RSA in 2012 suggests that local design and delivery can yield efficiencies of 14%, achieved through locally specific design that leverages local features that only intimate knowledge of a specific community can expose.
Increased net earnings
UBS have a “social wage” effect, replacing costs for basic living services, and allowing retention of more earnings . This effect is considerably greater for those on lower pay.
Over time this effect will decrease pressure on wages. And to the extent that the cost of delivering UBS consists of low skill labour then that cost reduction will feed back into reductions in the cost of the services themselves.
Social effort activation
Accepting this aspect is not necessary to the mathematics of affordability, and will prove to be the icing on the cake of UBS. The primary effect will be increasing the quality of life through the enablement of a greater diversity of activities.