T N D Anderson proposes a people’s bank and a Welsh currency

While Wales languishes at the bottom of most UK tables of economic success, a position being confirmed by austerity and likely to be exacerbated by Brexit, it may appear impossible that Wales could ever finance a basic income for our people. Certainly, most of the experiments with a universal basic income (UBI) have occurred in relatively wealthy countries – Finland, Sweden, Germany, Canada – but Kenya also figures on that list. Within the UK, Wales might appear to be a poor candidate, compared with the West Midlands, say. Official and unofficial disapproval for rewarding non-work is probably highest in London and the southeast of England. Despite the extreme wealth of favoured parts of these areas, and the poverty of less-favoured ones, political and social forces would probably make them late-adopters. If at all.

This article outlines how a UBI might be achieved in Wales. What follows is, however, necessarily simplified. This is not to patronise readers, merely to place focus on the key concepts and implications. These and their potential have been researched over the last year or so, but this article remains as work-in-progress.

First, most will be aware of the Bank of England’s quantitative easing (QE) programme that was utilised to bolster the banks after the 2007-08 crisis and has been in operation ever since. While the banks survived, any positive effects of QE on the economy have been less easy to discern. True, banks have profited, and asset prices have been inflated. Guess who wins from that? But that mass of the people who are not part of The One Percent (TOPs), in other words the other 99% of us, has not benefited.

Austerity has further reinforced the apparently remorseless transfer of wealth to the TOPs, who are just about managing to survive on incoming rents, fees, dividends and state subsidies. Poor things.

The UK Government has so far resisted supplying QE ‘at the bottom’ – sometimes called helicopter money (ie. direct payments into everyone’s bank account). Like increasing wages, this would probably be considered inflationary, completely unlike the magic money tree showering largesse at the top, of course.

Second, in a Treasury background paper to the Budget in 2013, it was noted that as the UK Government was sovereign, it could create as much money as it wanted. Prudence dictates that additions to the money supply might need to be limited, as inflation would undermine the currency. While only a handful of UK banks (eg. the Clydesdale Bank) apart from the Bank of England (BoE) are currently permitted to print notes, commercial banks are nevertheless creating very large amounts of credit by way of loans. Not much sign of restraint or control by the BoE there.

It appears then that the Treasury/Bank of England/UK Government have few theoretical objections to either QE or creating money. It is true that a former chair of the Financial Services Authority has said that the latter should only be used in an ‘extreme’ situation. If you are struggling on meagre benefits, if your children are hungry and living in poverty (as 31% of children in Wales are), or you are sleeping rough, you might ask how extreme would it have to get?

Third, there are several contemporary examples of local currencies in the UK, including the Totnes and Bristol pounds. These do not aim to put money into the system but just retain their spending power within their local areas. Such currencies can increase liquidity to some extent, but the overall effect is probably minor when all areas import so much from elsewhere in the UK and abroad rather than utilising more local sources of supply.

So how might we learn from the experiences of other regions and countries to best advantage Wales? Certainly, the Welsh Government (WG) strategy, in common with many other places, of encouraging foreign direct investment and infrastructure development (mostly in South Wales), has shown indifferent success. And there is no mechanism in place to spread any wealth generated. Bethan in Torfaen and Aled in Rhyl have seen scant evidence, but perhaps Rhys in Cardiff (and Ellen commuting from Bristol) have benefitted.

The proposals below should not be interpreted as reducing in any way the obligation on our governments, employers and society generally to ensure that personal and household incomes are sufficient for the dignity and good health of our fellow citizens, something we are currently failing to achieve.

With diminishing transfer payments (benefits etc) and reduced community involvement, the Government is becoming less relevant to the real needs of, and more distant from the people it purports to represent. It is no surprise that devolution is not recognised as having provided the benefits often claimed for it, and that the Brexit vote in Wales was directed against the political establishment here. True democracy, transparency and accountability remain in short supply.

In fact, the money economy (where a few conjure up and sequester millions) has become adrift from the real economy (where most people live, increasingly indebted and surviving on meagre incomes).

A new Welsh bank could clearly assist. It was telling that the WG chose to support an investment bank (based, again against advice, on Finance Wales) to promote business investment, rather than a bank for the people of Wales, as supported by some AMs. This should not be surprising as such top-down development, as in central Cardiff, tends to be preferred by over-mighty central governments – Big Government understands Big Business (or not!). But the semblance of an opportunity has been missed.

The bank proposed here, a ‘New Bank of Wales’ (NBoW), would truly be a people’s bank. All aspects of governance of the bank would require sophisticated participatory mechanisms and strict regulation. The people of Wales would own it and it could never be taken over, nationalised or broken up, without the full consent of the people. It would work like this…

All residents of Wales, of all ages, would be entitled to open an account at the new bank. Their application would cost £10. Until this fee was paid, when they would become ‘in good standing’, withdrawals and loans could not be made.

Of this amount, £5 would be used to develop the new bank (under the guidance of a steering group). Any surplus would form part of its capital. The other £5 would form the minimum balance permitted in one’s sterling account. Collectively, the latter would raise initial capital of £10 – 15m (assuming at least two-thirds of people in Wales applied for accounts). This capital could then be leveraged (utilising a conservative multiplier) to provide loan finance of more than £20m for household and community projects in Wales. In this respect, the bank would act as others do.

Once one’s sterling account was established, a sister account would also be created. From an agreed starting date, the bank would make an electronic payment to this latter account, in a new digital currency. Let’s call this the Ari (from arian). Now, and subject to the provisos herein, imagine A20 being deposited in the Ari account on the first of every month thereafter.

Importantly, the Ari would be legal tender in Wales only, and valueless outside it. Special provisions would be made for border areas (Hay-on-Wye etc).

The Ari would be accessible by debit card only. A demand for printed notes would probably arise from account holders who may prefer to handle small transactions in cash. The Governors of the bank and currency managers should therefore consider issuing notes in useful denominations (eg. A10).

All commercial and Third Sector enterprises based in Wales that wished to share in the new liquidity provided by the Welsh Ari, could also apply for accounts. At their discretion, they could accept the Ari in part-payment to the extent that their supply chain allows. In theory, hairdressers might accept 90% towards the bill, whereas a supermarket chain might accept 30%, say. Or none, of course.

The value of the Ari would be set at A1 = £2.00. When and if desirable, the currency could float against a basket of currencies of Wales’s major trading partners, including sterling. Both monetary and fiscal measures would be utilised to support the value of the Ari. The Ari would not generally be convertible to sterling, except at the highest levels (ie. banks), at an exchange rate designed to deter, under a protocol to be devised, and never from outside Wales.

The new bank would offer a range of accounts to their customers in both sterling and Ari (and other major currencies). Investment and loan accounts would be restricted to personal, household and community purposes, with key lending criteria including sustainability and environmental friendliness. If denominated in Ari, a loan could be repaid in part from the borrower’s future monthly allocations. The interest rate would be low. If the loan were made partly in sterling, repayment would be at market rates.

The primary rationale for the creation of the bank would be to create a savings medium for the people of Wales and to retain their capital here. Meanwhile, the Ari would provide what would be a complementary income, regardless of whatever other income they received, or whatever its source.

The Ari allocation would be made available to all residents of Wales. Children born today (as with adults in Wales) would accumulate Ari in their NBoW account (which the bank would also utilise to provide loans). Parents would have no automatic right to the funds accrued by their children. On reaching 16, the latter would have full access to at least A4000 – to spend, to save or to invest, one hopes, in their further education, say.

That allocation would be equivalent to about £10 a week per person initially. Adults could utilise it for any discretionary purpose wherever the Ari was accepted. £10 a week may mean very little to those with plenty, but they could be encouraged to invest in the new bank’s investment fund or long-term bonds. Nominal interest could be paid if the social purpose of the investments were significant.

On death, our personal Ari account would expire once certain expenses (eg. funeral) were paid. Our sterling account at the new bank would form part of our estate.

Interest on sterling balances would be liable for taxation. Interest would not be paid on Ari balances. All adult account holders would be levied 5% on their minimum monthly Ari balance, to fund a Treasury function and other regulatory provision in Wales. A further levy of 2% would support a ‘community trust fund’ that would provide finance for socially worthwhile projects.

One can imagine that this concept of ‘free money’ would be well-supported as providing an element of equity and additionally benefitting the least well-off. Relative positions would remain unchanged, but the absolute positions of those on lower incomes would be improved. Here in Wales we could begin to tackle the apparently intractable issues of poverty, low pay, housing, and the losses of public services, amenity and welfare by increasing the monthly allocations in a carefully phased manner.

Confidence in the currency, essential to establish and then uphold, would be automatic as it began flowing into our accounts. That confidence would quickly be shared by newcomers on opening accounts for themselves and any dependents, and by participating enterprises. It would become self-defeating to undermine.

The proposed new bank would obviously become a national project, for which governmental support would be necessary. Take-up could easily and quickly exceed 80%.

While households would benefit, the additional liquidity would primarily contribute to and revive the long-suffering foundation economy in Wales, and generate more demand for locally produced goods. Market gardeners, organic egg producers, tradespeople and other small businesses would immediately benefit from their local customer base, and continue to do so. Over time, they would probably rationalise their supply chains in ways that could facilitate new small-scale development in Wales.

In addition to increasing monthly allocations, and as a mark of their confidence in their own currency, the people of Wales might soon choose to accept part-payment of their salaries and benefits in Ari. The Welsh Government could buy Ari from the bank and use it for its own purposes – procurement within Wales, for example.

Any increases in the monthly allocations of Ari would be reflected in the economic and social well-being of the community. But more ambitious uses of the Ari are envisaged. For example, a rationalisation of the work-week (eg. 35 hour’s pay for 30 hour’s work, or a general reduction to 20 hours) could be facilitated by compensatory payments in Ari. Library and school-crossing volunteers could be paid in Ari.

Partial substitution of salaries and wages paid in Ari could occur up to the point where formal employment becomes the choice of people rather than something they are coerced into doing. One’s Ari allocation should eventually be sufficient to form a Universal Basic Income (UBI), with rationalised work utilised to pay for items beyond necessities – imported goods, foreign holidays, cars etc.

While some inflation of the Ari, desirably 1 – 2% a year, might have a spillover effect on the pound, its impact is likely to be slight. This is because Wales’s economy is a small part of the sterling zone, and we have a significantly lower GDP/capita.

There are obviously rough edges around this idea in its present state. Nonetheless, governments have successfully applied elements of the above, and the concepts are eminently portable. For example, if Greece had revived the drachma when their Plan A failed, selling their country’s assets could have been avoided or limited.

Now is the time for our Plan B. We, the people of Wales, have the right to demand autonomy and to take control of our own affairs. The control of our bank and our Arian could never lie elsewhere. But we need a government of Wales with sufficient enterprise, endeavour, imagination and ambition to deliver it.

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