At the root of what I would call ‘social accountancy’ is how money has become divorced from its reason for existence. It is now a ‘thing’ in its own right, seeming to be building a life of its own.
One reason for this is the way it is accounted for, particularly in terms of the short-term, bean-counting model currently called accountancy. A change in that model to one that included and accommodated what money achieved when being used, might be more beneficial.
This idea started years ago when people used to call Concorde a ‘White Elephant’. Yet I would argue it cost hardly anything because building it, then using it, kept thousands employed directly, who all paid tax, and then many others employed indirectly, who also paid tax. The money kept moving, and hundreds of thousands, if not millions, enjoyed a reasonable life… arguably not bad for a White Elephant.
And lessons were learned – not least being the huge technological spin-offs that have led to other businesses growing, where people are employed and….pay tax. An obvious example here is DARPA, the US Government’s Defense Advanced Research Projects Agency whose work led directly to the development of the internet. And look how many new businesses have sprung from that.
A more topical example is the planned Government investment of £9.8m in Nissan’s much lauded new car venture, which is expected to yield ’2,000 new jobs’. If we were to assume a collective average wage of £26,000 and a 20% income tax take, that equals £10,400,000 a year in income tax: a complete Return on Investment in less than one year. Many businesses would kill for that.
Going back to Concorde: From the signing of the contract the two governments invested heavily as staff were employed and contractors signed up. The staff were paid, and in those days income tax rates were higher than today. So let’s say some 30% (on average) of that salary bill came straight back to the Government in income tax. In practice it was probably more.
But now extend the idea. One example: any education the new staff needed required not just trainers but an organisation to support them. The trainers, the support staff and even the builders paid income tax. Add the shopkeepers, energy suppliers, transport providers (even if that is just shoe leather), farmers and food processors, and a panoply of others – all making a living, all paying income tax.
One person’s disposable income became the next person’s salary and a source of income tax.
Yet modern accountancy models oblige businesses to, for example, close down here and move off-shore because the manufacturing costs – to just that business – are lower. In fact the money system (such as the stock market) even ‘praises’ them for doing so.
But neither the company nor the stock market has to account for the people put out of work – no longer paying tax, and requiring support from the benefits system. That is a model where money wins for its own sake – not for the sake of the people whom it once served.
And such actions also give other countries an income tax bonanza which maybe the UK should be getting.
The by-products in terms of wider economic growth, more contented and fulfilled people and intangibles such as reduced load on law and order services, the health service and a wide range of other services cannot be fathomed because we have no process that can account for them as part of the ‘whole’.
Is our present trajectory completely mad? What do you think?