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RIP-Real Incomes Policy
Thematic note

Supporting people's care

Hector McNeill1

This note is part of a series as a sequel to the article, From nominal growth to stable real incomes. To place this note in context readers are encouraged to read this article before reading this note.

On 22nd November 2021, the UK government passed a proposal establishing a new cap on deductions from assets to support care costs for the elderly. The main asset people have, and not always fully paid off, is the family house. This vote on a proposition which has not been fully explored (see footnote) or explained is regrettable because it reflects a complete lack of imagination and seriousness with which this issue is being addressed.

The conversion of care provisions into an asset stripping process is regrettable and this reflects a complete failure of the provisions of the system of national assurance schemes and other options. It is completely at odds with the government's assertions of its seriousness about "levelling up".

The unfortunate result of quantitative easing (QE), a wanton act, was not directed at those who suffered as a result of the financial crisis in 2008 but rather bailed out the guilty parties, who have become enriched, at the expense of wage-earners ever since.
Real Incomes Policy

RIP has two macroeconomic policy instruments:

The PPR is a measure of progress of each economic unit in lowering the ratio between changes in output prices against variations in input costs. The PPL is a rebate on a basic levy according to the PPR values achieved. Economic units can manage their affairs to minimize the levy even to zero. In this way the macroeconomic policy is coordinated by the participatory development of companies and their work forces and not by largely arbitrary interest and debt targets.

RIP bases policy impact and success on the knowledge and calculations made by the economic actors thereby solving the calculation and knowledge problem in an operational structure that more closely approximates participatory constitutional economics.

For the last 12 years with interest rates driven down to close to zero, families have not been able to save to build up a sufficient sum to create their own a source of fixed income. With steady decline in real wages over the last 50 years and accelerated under QE, saving was becoming increasingly difficult in any case.

If there was a national insurance scheme based not only on productive investments but also on profit sharing within companies this shabby treatment of wage-earners could be avoided.

The need to invest in people

Recently the government raised National Insurance rates but did not relate this to any scheme for basing viable bases for raising wages linked to corporate productivity. Funds are invested in schemes managed by financial services groups who skim of a profit for their shareholder. There is a bad habit amongst financial asset traders who also handle pension fund portfolio management to dump poor transactions into the accounts of pension funds on the basis of the excuse that specific options did not work out as expected. This involves a manipulation of transaction dates and times.

There is a need to clean up the asset trading business so as to ensure that it serves the interest of those who are not primarily involved in asset trading. This clientele consists of the majority of out population whose income depends upon the wages received in exchange for their work exercised for companies.

Real Incomes Policy can help

Real Incomes Policy helps companies combine raised costs, such as wages, with raised productivity linked to their output prices so as to help keep unit prices within accessible bounds. The rises in productivity combined with competitive prices means growth based on market penetration rather than increase debt through QE. The main outstanding challenge is to come to a mutually satisfactory arrangement on how the proceeds of rises in productivity are distributed between labour and profit and ongoing investment to raise productivity.
Footnote: Groups who operate within an ideological frame of mind tend to make propositions that fit within their predefined decision prefences which invariably signifies that many alternative options are not identified or analysed. This introduces a bias which in many cases results in an inefficient or even prejudicial "solution". This is the case here according to the limited information that has een issued on this propostition.

That MPs vote on a proposition such as this without access to the full facts on such a sensitive question is a reflection of the poor state of pubic standards and responsibiliy of those concerned; it reflects a lack of real concern for constituents. What amounts to a slapdash approach is alarming because it suggests an amateurism and incompetence to policy-preparation in a period when there is a need for more competent and informed analysis for decision making on policies.

The well established techniques, methods and processes applied in the discipline of decision analysis are not evident in what are presented as the outputs of the government's decision making apparatus. A proposal in 2007 of a Decision Analysis Brief (DAB), as an obligatory detailed review of policy options to achieve defined objectives, to be placed before constituent assemblies for review and discussion before any vote can be authorised, was made in the book, "The Briton's Quest for Freedom .. Our unfinished journey. I have been asked to provide a more detailed description of a DAB so I will take the opportunity to post the resulting document on this site in due course.

1  Hector McNeill is director of SEEL-Systems Engineering Economics Lab

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