The economy we experience is driven by the mechanism of currency which we use, and the means by which conventional exchanges are taxed. We might want economic life to be different, but efforts to reform piecemeal this deeply interconnected set of systems are resisted by the ways in which different parts are influenced by the whole.
From the early 1990s, various community groups in the UK operated our own currencies, where exchanges of goods and services were accounted using group units of exchange. While these were used mainly for person-to-person transactions, it was difficult for local businesses and charities to be involved (though some were) and this, together with very small scale and minimum fixed overheads, limited our operations and impact. Local Exchange Trading Systems [ LETS ] groups, whose accounts were £ value equivalent, were inevitably limited by volunteer burnout, while Timebanks, which accounted the hours volunteered, were limited by the duration of grant-funding for organisers, who acted as brokers, maintained accounts, and vetted volunteers.
The exceptional costs of the pandemic have largely been met through a massive programme of public borrowing, but financial markets will not indefinitely continue to lend to governments rapidly increasing their debt as a multiple of GDP at low interest. So it’s inevitable that local authorities will experience a conventional spending crunch, made worse through a loss of high street income.
This proposal is to grant local authorities powers to issue a new and complementary kind of money, which operates on a different set of issuance and taxation rules, specifically designed for new small businesses with local customers, and to help local family enterprises gain back otherwise lost trade. This money will stay local as it will exist in digital form only, in accounts held by local authority departments (e.g. a community library or sports centre), local charities and individuals or partnerships resident in the local authority area.
Use of this money will encourage holders of it to shop locally, and for shops accepting it to purchase goods and services with local preference, encouraging a greener, more circular economy. This will provide councils with an interest-free line of credit, to the extent local account holders accept this new money in exchange for local authority purchases, or as grants given in this form to community groups for carrying out activities which the council intends supporting. To encourage acceptance of its money, the council will accept it in payment of sports centre admission and memberships, library fees and in part payment of rents and council tax.
A simpler means of taxation for this new kind of money compared to conventional income and VAT taxes is proposed. Instead of extra sources of income and profits having to be accounted and declared as with taxation on conventional earnings, a percentage commission on each transaction will be paid directly to the council whenever this kind of money is transferred from one account holder to another. When a council department receives it or when money is paid into a local charity account, this commission will be waived.
This policy will shift a very small proportion of taxation revenue initially from central to local government. It will give local voters a greater stake in how their local authority is run and how it manages its priorities. It will give local people who can earn and spend this kind of money a greater sense of belonging to and identification with their community. It will raise the profile of local family-run businesses serving people within their area, compared to much larger private corporate businesses which often compete ruthlessly and treat suppliers and employees unfairly. This will incentivise local authorities to rethink their decision making processes concerning purchasing and making grants to local groups. A local authority should be considered a network of different organisations as varied as recycling and waste collection are from parks and gardens, planning, local care homes, primary schools and libraries. The proposed kind of money will work better when its spending is decided in as decentralised a manner as possible within this network.
Having transaction taxes for this new and complementary kind of money will provide an equivalent kind of filter to a firewall within a computer network, or a biological cell wall within a multi cell organism. Out of area trade will occur as now using conventional money. But currency exchangers won’t be able to undermine the new economic context due to the firewalling effect of transaction taxes in keeping this money local. As all units making up this type of currency will exist within accounts with a common account holder agreement, this agreement and contract can be adapted to restrict avoidance of local taxes due on transactions when legal ownership of currency units changes.
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