FORGET THE BUDGET, THE LONG TERM THREAT TO GOVERNMENT FINANCES ARE FAR MORE SERIOUS, WARN THE AUTHORS OF A NEW BOOK.
iDisrupted authors warn that, regardless of what happens in the budget, government receipts will deteriorate in the longer term – but there is an escape clause.
As George Osborne prepares his budget speech and attention focuses on the scale of UK government debt and borrowing, John Straw and Michael Baxter, authors of iDisrupted, a new book on disruptive technology, warn that government finances will be even more stretched in the longer term. They say that there are reasons to expect tax receipts to fall sharply in ten years-time, even though, as individuals, we may be better off.
John Straw, co-author of iDisrupted, cited the rise of the sharing economy to support this argument. He said “Take as an example the sharing economy converging with autonomous cars. Car ownership will fall. You won’t need to own a car if you can a hail a driverless car as and when it is needed.”
Michael Baxter added “We will be better off as result of sharing cars, but the consequential fall in car demand may lead to falling tax receipts.”
Baxter continued “Or take the rise of the free economy. Economic theory says price is determined by marginal cost. The marginal cost of many digital technologies is zero. So we will increasingly see more products carrying a free price tag. That’s good for consumers, but bad for tax receipts.”
Take another example, changes that are occurring in the energy industry.
In the book iDisrupted it states “Currently, energy generated by householders, for example via photovoltaics, is fed into the national grid and shows up in energy bills and is counted towards GDP. But as photovoltaics become more efficient, combined with advances in energy storage, we may see a situation in which many households become almost fuel self-sufficient. In this scenario, it is possible that householders’ own energy production might increase, but this will be invisible to government. In this instance, GDP may appear to contract. The problem in part may relate to how we define GDP.
“Regardless, in a sharing economy, in which a high proportion of households are energy self-sufficient and in which digital products are free, people may be better off, but GDP may fall.”
“This may pose a particular problem for governments.”
“Declining GDP is bad news for government tax receipts.”
“It is hard to see how government spending can be funded in an economy that sees declining GDP, even if households are no worse off.”
There is a solution, however.
iDisrupted states “In an economy made more efficient by a sharing mantra, and energy self-sufficiency, inflation is less likely to be a danger. Governments could fund spending by the printing of money.”
IDisrupted, disruptive technology changing the human race forever, is available in all good book shops. For more see here
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