Seigniorage Sharing: Direct Payments To Citizens

Direct Payments To Citizens

from: http://www.bankofenglandact.co.uk

One alternative to both increasing public spending and reducing taxes is to make direct payments to citizens. If the amount of newly-created money in a particular year was £200billion, a direct payment of £4,444 could be made to every eligible voter (regardless of income).

There are some significant advantages to this – the most democratic way of spending newly-created money is to give every single citizen power over how to spend their share. It would also reduce the risk of the newly-created money being spent inefficiently by central government.

In addition, this ‘basic income’ or ‘Citizen’s Dividend’ could coincide with the complete removal of Job Seekers Allowance (the benefit paid to the unemployed). Job Seekers Allowance is currently between £50 and £64.30 per week, and is funded through ‘transfer payments’ – in other words, taking money from one group of people to pay another. Removing this completely, but paying a ‘basic income’ to every citizen regardless of income or working status would leave the unemployed better off (at £85.46 per week on the figures above). This basic income would also be paid regardless of the person’s income, removing the ‘benefits trap’ (whereby under the current benefits regime, getting a job can actually reduce your income). It would mean that every hour worked would increase the person’s income, giving people a positive incentive to find productive labour.

Before complaints about ‘benefits scroungers’ are made, it is worth remembering that everyone who is a full citizen over the voting age would receive this money, regardless of income or working status. It would be up to each individual to decide whether that £4,444 is used to allow them to work part-time, stay at home with the kids, work for a charity voluntarily, not work at all, take a few months off work to train for a career change, buy a new sofa or conservatory for the house, or blow the lot on champagne in a trendy City bar. It would allow everyone the freedom to take time off to find a better or more suitable job. It would allow new mothers to take more maternity leave at no cost to the employer. It would allow parents to take the school summer holidays as a sabbatical, without costing their employer anything. (In fact, this may be a win-win for the employer too, by allowing them to reduce their staff costs in the typically quiet summer months).

It’s also important to remember that someone who chooses not to work is still valuable to the economy as a customer with spending power.

This is a big discussion that often falls under the banner of ‘basic income’ or ‘citizen’s dividends’. It is not integral or essential to this particular reform, and is mentioned here simply to alert people to the possibilities. However, under the existing regime, such an idea would be impossible, as any basic income would need to be raised through taxation, and would therefore simply involve redistributing income, and have no benefit on the economy. In contrast, after the reform it would be possible for this basic income to be funded via the newly created money at no cost to anyone.

As with reducing taxes and increase public spending, direct payments to citizens is just one option that the democratically elected government could choose to take. This reform simply dictates how – and by whom – money is to be created, and although we have made recommendations above as to how the newly created money should be spent, the final decision will always be taken by the democratically elected government of the day.