Debt crisis, Carbon reduction and sleepless nights

National debt

I believe the way the National debt ( ND) is handled by all parties is just tinkering around the edges with the deficit and does not address the fundamental problem of a £1.4 T  debt. In terms of Green issues, it changes our focus away from climate change. I propose we take the £1.4T debt internally, among the home owners.

You must be joking!!!
Well, no, my reasoning is that if we take a combined approach of recapitalizing the economy, (through introducing risk capital) and carry out a proposed passive haus refurbishment of the housing stock, we provide a good incentive for investors, which could be as much as a £80K handout to the home owners over 14 years. A detailed explanation is given below:

By internalizing the ND we become in effect, UK Ltd, influenced by its new home owner shareholders. The ND is approximately £80K per home owner household. This debt is too much to bear on any group of citizens, especially first time buyers and young families but with the state recognising the home owner contributions and by being flexible with the terms of debt repayment, it could be afforded. I propose that the interest on the £80K is collected not by high street banks but the Bank of England, at the base rate, approximately 0.5%. The interest payment would be approximately £400 pa. The capital would be repaid over 100 years, which is easily within the concept of confidence (as illustrated by Positive money ,) in housing being of value for that period. This makes a total annual payment ( interest and capital ) of approximately £1,200 pa.

The Shareholder Dividend
Currently we pay between 2.5 – 3% of GDP as interest on the £1.48 Trillion national debt, which is £38 Bn, to financial institutions profiting from our circumstance. Such an arrangement has little value to the UK because a growing number of the investors are overseas investors who pay no UK tax. This proposal means that any financial transaction, coming out of dealing with debt issues makes the country richer from tax revenue.  Share holders in a prosperous economy should be paid a dividend when Britain Ltd makes a profit. Between 2000 and 2007 the growth rate was between 2 and 4 percent. This can also be used in part, to help with the home owner new debt burden. Just 1.7 percent of the growth would meet the repayment needed by the home owner. In effect they are only carrying the risk of no growth. This leaves room for a significant reduction in austerity cuts. As shareholders,  wider engagement in the political process could be brought about. The home owners would have the right and duty to defend against excessive spending by any party and would have power to vote against such acts as does the House of Lords at this time. Because of the wider and necessarily transparent governance there would be less opportunity for lobbyists to act when the final financial decision is with the wider community.

This sounds still an onerous amount and risk on a young family. Any additional cost can be balanced by looking at the existing mortgage payment and where the bank or building society charges 5% interest this could be restructured and government pressure on the banks to bring the real mortgage payment in line with the owners current mortgage payment.

Carbon Reduction

Approximately 20 percent Carbon saving, could be created through Passive Haus home refurbishment. Could the same use of BoE lending rates, as applied to the National Debt, be used to improve home energy efficiency to meet passive haus energy standards. With an increased demand the work at a best first guess, could be done for between £40K – £60K per household. Refurbishment to Passive Haus  standard would require a huge increase in the workforce of relatively low skilled people. Government could encourage a market such that the workforce would be working to design standards, freely available through open source. This is a low tech solution where localism could play a huge role in allocating resources. To convert the housing in the UK to Passive Haus standards would need all available local workforce to carry out the task. The annual interest payment at approximately 0.5% on £60K is £300. The potential saving in energy cost per house hold is £1000 per annum, easily covering the interest payment. The equipment installed can be split into short life items ( 20 years ) and long life items ( 100 years ). Capital repayment of items of 100 years life could be paid over that 100 year period. This is a special condition because the environmental cost of climate change demands such flexibility. If we estimate the split in capital equipment to be installed is 50 / 50, then £60K / 2 / 100 years = £300 repayment pa. Again within the realm of the energy saving cost. This leaves the remaining thorny issue of short lifespan capital equipment to be installed. From our assumed 50 / 50 split, the repayment is still £30K per house hold. Over 20 years the payment pa would be £1,500, which will still be too much for a young houseowner saddled with a huge mortgage. I suggest the solution would be to ensure any capital equipment to be installed, be approved by a Tender and National framework agreement, which encourages the manufacturers to give a guaranteed lifespan of at least 60 years. It must be upgradeable, updateable and flexible, in who can do any retrofitting, to encourage further localism.  This way such a combined costs of equipment and labour  can be met from potential energy savings.

Foot note:

1..If both proposals where taken up, the drop in unemployment to implement the passive haus refurbishment would produce savings in benefits payment between £100Bb to £200Bn. If this saving was used to paydown the debt during the first 14 years of implementing the proposal, we would paydown £1.4T ie. the total debt. Wait a minute, who are we repaying the debt to? The banks and financial institutions, no. We could pay the home owners who took on the debt risk and bought shares. Their deal was a low interest rate and capital repayment spread over 100 years. In any business where an injection of risk money from shareholders makes the business more profitable some of that profit should be paid in dividend. We have a choice we could keep the original promise of a 100 years loan term but in recognition of the help to the nation in reduced austerity and misery, the home owners could keep the option of taking the dividend over the 14 years to pay off other bills such as their mortgage.

The combined effect of both policies would be a internally managed National debt not subject to the vagaries of Moody’s credit rating. Reduced austerity, wider engagement in the political process, 30 percent reduction in our Carbon footprint and low unemployment for the next 10 years whilst the housing stock is refurbished and a substantial reduction in the debt owed by home owners.

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