Citizen's wealth funds, a citizen's dividend and basic income.

A citizen's wealth fund built up via progressive taxation on wealth and the one-off issue of a longterm government bond has huge progressive potential. Owned by citizens, the fund would socialise a growing proportion of wealth, build a pro-equality force into the structure of the economy and provide an annual citizen's dividend as a step towards a weekly Basic Income.

Wealth, and how it's distributed, matters. In the UK privately-held wealth stands at more than six times the size of the economy, up from three times in the 1960s. (1) Yet little of the surge in wealth levels of recent decades has been harnessed for the public good.

Most of this growing wealth mountain has been captured by the already wealthy, reversing the earlier long-term trend to greater wealth equality, and intensifying the concentration of ownership. Wealth is much more unequally distributed than incomes. Wealth also begets wealth. With the considerable returns from ownership (in the form of profits, rents and dividends) accruing disproportionately to the already rich, the UK's model of capitalism operates, as Thomas Piketty has put it, as a 'fundamental force for divergence'. (2)

Moreover, wealth has become increasingly privately owned in recent decades, in part the product of rolling privatisation of industry, natural resources, land and housing. In the UK, public wealth holdings--from profitable state-owned enterprises like the Land Registry and Ordnance Survey to the remaining land and property portfolios owned by local authorities and public institutions like the NHS --account for a little over a tenth of total wealth; a post-war low. As a result, net public wealth (assets minus debt) has fallen steadily from half of national income to become a negative figure today, leaving the UK as one of only a handful of rich countries with a public balance sheet deficit. (3) But while private wealth has grown significantly in the past three decades, and even though much of this growth is unearned, these holdings are disproportionately lightly taxed.

Britain's towering wealth mountain offers a huge potential resource for building a better and more equal society. But tackling the scale of wealth concentration, managing national assets more effectively and spreading capital ownership more widely requires some big policy shifts. One way of building a more even spread of wealth would be promote alternative (but under-represented) business models--from partnerships to co-operatives--which distribute economic gains more equally, as proposed by the Labour Party in Alternative Models of Ownership (2017).

This article examines an alternative but complementary approach: the introduction of a citizen's wealth fund. There are three broad approaches to the creation of collectively-owned wealth funds.

While scores of countries have pooled wealth through sovereign wealth funds, nearly all created from the proceeds of oil, few of these act as a progressive force. Most operate as little more than unaccountable and non-transparent investment arms of the state, with, in nearly all cases, the returns accruing to treasuries, not directly to citizens.

A second approach could be called social wealth funds: collectively-owned funds, created and managed by the state but with clear social goals, such as extending the provision of free social care. Examples include the Norwegian Fund--the largest of all such funds and now worth over $1 trillion--and the Australian Future Fund, used mostly to help meet civil service pension liabilities. The UK has an example of this approach: the Shetland Charitable Trust. The Shetland Trust was funded in the 1970s by a charge on oil companies through annual disturbance payments in return for operational access to the North Sea. It is now worth almost [pounds sterling]200 million (a sizeable sum for a population of 22,000), and the returns have been used to fund social projects, from new leisure centres to support for the elderly.

A third approach is citizen's wealth funds. These are distinguished by being managed independently of the state and being owned directly by citizens. This model has a very distinct purpose: it is not a means for governments to manage budgets and spending commitments. Rather, by spreading the ownership of part of the economy to all citizens, a citizen's wealth fund represents a direct and permanent attack on inequality. The only existing example that comes close to such a model, and one of the most transparent and pro-equality of existing sovereign funds, is the Alaskan oil-based Permanent Fund. This has been paying a citizen's dividend--averaging $1,150 a year--since 1982. It is high-profile and popular and has helped Alaska become one of the most economically equal of all US states.

This approach offers a more radical shift than in the case of the first two models. It would democratise a growing proportion of wealth, giving citizens a direct and equal stake in the economy. And it would provide a new source of collective empowerment, quite separate from the state--rather than providing the Treasury with a new source of funding, with the ensuing risk of the fund being used simply as a source of substitute revenue.

A citizen's wealth fund for the UK

A UK citizen's wealth fund would be a collectively-owned pool of wealth, with the returns shared across the population. All citizens would own an equal part of the wealth held by the fund, which would have the effect of giving them a direct stake in economic success, and putting meat on the bones of the much-debated but elusive goal of 'inclusive growth'. (4) The fund would help reduce the extreme concentration of the ownership of wealth and capital and ensure that a growing part of the gains from economic activity are captured and shared equally throughout society.

Such a fund would raise the level of publicly owned capital, and the potential income streams that it offers, bringing a strong counter to the bloated power of private capital. By locking in part of the gains from economic success for all, a citizen's wealth fund would create a 'fundamental force for convergence', helping to...