E-mail to the treasury – Covid 19 Demand Side Economic Response

Ladies and Gentlemen of the Treasury.

I head up a political party: Direct Democracy Forum Reg Number 936.

We have as cornerstone policies:

1) A Senate, drawn from the streets, 2) Tax Reform (Total Economic Activity Levy, Replaces all other taxes) (TEAL), 3) A Universal Basic Income (Including National Health Insurance Funding) (UBI), 4) An Advancement Grant (for tertiary education and other advancement activities) (AG), 5) A Sovereign Wealth Fund (SWF), 6) Banking and Monetary Reform

We suggest the last five items should be adopted to relieve the effects of the Covid 19 pandemic and any subsequent economic fall-out.

Assuming an adult population of 35 Million adult South Africans, a UBI of R5000 per month would deliver R175 Billion into the demand side of the economy, each month. Apart from the obvious economic stimulus this would bring to the economy it would also have the effect of empowering and uplifting every recipient in the economy, and to ‘challenge’ the supply side to claim their share of that stimulus through trade and industry. A UBI is intended to replace all other grants.

A UBI can be paid for by a 2%TEAL on all the money flowing through the banking system. You would not be printing money so much as re-purposing existing money. If you created or borrowed the money you might wish to recycle it using TEAL. A ½% TEAL could also fund the Fiscus.

You can ‘create’ the required money, if you wish (see below*). This is what the banks would do if you borrowed R175 Billion from them, at interest. They would create the money from nothing, as is their wont, then lend it to you at interest. If treasury themselves created the money from nothing instead of going to the banks, treasury would get the money and save the country and the taxpayers the interest.

The ANC are talking of a Sovereign Wealth Fund (SWF). If you stimulate the demand side of an economy without ensuring that the supply side keeps pace, you have a classic inflation/hyper-inflation situation. The SWF can be used to intervene in the supply side of the economy to help it maintain the required balance between demand and supply. This it does by investing in the supply side economy. This, however, would not be the SWF’s sole function. The SWF can be rapidly funded using TEAL and other mechanisms to become effective in this manner, inside of months, or even days (see below**).

Part of the supply side intervention would be for the SWF to own and run commercial, industrial and community banks alongside privately owned and run banks, thus influencing the financial services sector. We believe that the S A Reserve Bank (SARB) should be wholly owned by the SWF and operated for the benefit of the economy, regulating the money supply and interest rates to that end. Any money creation (see above *) would be under the auspices of such a SARB.

The rational for this is that a UBI is an intervention designed to fill the void left by the already existing 4th Industrial Revolution’s lack of formal sector employment opportunities. The Covid 19 pandemic seems just to have accelerated the onset of this dilemma. There is more to this (see below **).

** Further details are available at our web site, http://ddforum.co.za. If you wish to discuss any of this you may contact me on +27 76 060 1973 and or at

Thank you for your attention.

John Barrington.
Leader, DDF.
24/03/2020

How to Fund a National Health Insurance Scheme

The DDF (Direct Democracy Forum) have blithely aimed to initiate a National Health Insurance Scheme for South Africa, based on a monthly deduction of R600 from their proposed UBI/BIG (Universal Basic Income/Basic Income Grant). The DDF have been avoiding the issue of how that would work, money-wise, largely because they did not know, with any certainty, what spend was needed.

Some research along with an independent source (Compare Guru) puts that spend at 8.8% of the GDP.

The arithmetic for that is as follows:

Assume a GDP of R3 Trillion.

The SA’s health spend is said to be 8.8% of the GDP = R3 Trillion X 8.8% = R264 Billion (includes public and private resourced health care).

Assume a Citizenry of 35 Million each getting a UBI/BIG, from which is deducted R600 per month and paid over to the NHIS.

So contributions from the UBI = R600 X 35 Million per month X 12 (for a year) = R252 Billion.

The point being that the R252 Billion contributions from the UBI/BIG are in the ballpark for the national health spend of R264 Billion.

The conclusion is that a NHIS funded from a UBI/BIG is doable.

We believed that was the case but it is nice to have some numbers with which to back it up.

See DDF Health Care Policies

Health Care:

Background:                                          PDF: Policy Statement Health Care

Goals: 

  • The purpose of Direct Democracy Forum (DDF) health care policies are to improve the health care delivery system through a process of incentivisation and privatisation.
  • It is anticipated that this will occur in stages and over time:

Stages:

  • 1) Incentivise public health care systems with bonus systems based on delivery and outcomes for health care units (HCUs).  A health care unit is any hospital or clinic or practice run or previously run by the state.
  • 2) Shift burden of salaries from the state to the HCUs based on delivery and outcomes.
    • This would probably be voluntary, that is state employees who wished to remain state employees rather than HCU employees could probably do so but would be unable to participate in the HCU profit share schemes and share ownership and etc. (see below).
  • 3) Offer profit sharing schemes for participating staff of HCUs also based on delivery and outcomes.
  • 4) Offer share ownership of HCUs for participating staff of HCUs,  in partnership with the state.
  • 5) Disinvest the state from health care delivery systems in favour of the private sector.

Payment for services:

  • The DDF will install a Basic Income Grant (BIG) system and recipients will receive as part of the BIG package, paid for membership of a national health insurance scheme (NHIS), much like existing private sector medical aid schemes except it would probably be run under the auspices of a Sovereign Wealth Fund.
  • Private sector medical aid scheme members will be able to use the HCU facilities as well as private health care facilities, as also will members of the NHIS have access to both sets of facilities.
  • Whichever scheme you are a member of will pick up the payments for services rendered in accordance with the rules of your scheme.
  • It would probably be possible to be a member of both the NHIS and private medical aid schemes.

How to fund the NHIS:

  • A deduction of around R600 per month per beneficiary from the UBI/BIG will in all likelihood adequately fund the NHIS (National Health Insurance Scheme) but could be adjusted up or down if needs be.
  • The arithmetic for that is as follows:
    • Assume a GDP of R3 Trillion.
    • The nation’s health spend is said to be 8.8% of the GDP = R3 Trillion X 8.8% = R264 Billion (includes public and private resourced health care).   
    • Assume a Citizenry of 35 Million each getting a UBI/BIG, from which is deducted R600 per month and paid over to the NHIS.
    • So contributions from the UBI = R600 X 35 Million per month X 12 (for a year)  = R252 Billion.
    • The point being that the R252 Billion contributions from the UBI/BIG are in the ballpark for the national health spend of R264 Billion. 
  • So a NHIS funded from a UBI/BIG is doable. 

Points to ponder:

  • Public health care workers would, in time, be paid based on services rendered rather than just for turning up for work.
  • The NHIS would probably be the single largest buyer of medical services and would just as probably have a sobering influence on medical costs and medical aid costs.
  • Health care patients would be free to use the service providers of their choice and service providers would, in theory, rise or fall based on the quality and quantity of the services they provide and their reputations in the health care market place.
  • It may be necessary to provide state run health care facilities for sectors of the health care market that cannot be run profitably by the private sector on its own.  Such state health care units may be run exclusively by the state or preferably, in partnership with private sector health care providers.

Conclusion:

The DDF  believe there should be an element of competition between medical facilities in order to stimulate the provision of improved services and improved patient experiences and outcomes.  Members of the public can attend the facility of their choice, the different institutions will be encouraged to compete with one another to provide better services and thus attract more patients and more revenue, from which the institutions and their staff will benefit.  

In short the DDF will be introducing rewards for good service delivery and consequences for poor service delivery.   The DDF believe this will benefit all sectors of the medical profession and their patients, who at the end of every day, are the most important players in a health care system.