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BASIC DEFINITION

A Local Exchange Trading System or Scheme (LETS) is an arrangement between a group of people, whereby they agree to exchange goods and services, not as one-to-one bartering but with a pooled system of credits and debits. Thus they create a local currency, usually equivalent to sterling values, which can only be spent within this group. A record of the transactions is kept by an accountant, and the balances, which always add up to zero overall, are published periodically to the members, together with a listing of what is offered and wanted by the members. There is usually a small subscription to defray the sterling costs of running the system and transaction fees in the local currency which feed the system account, from which payments to those carryiing out the administrative work of the scheme are disbursed. There is no charge for having a negative balance or interest on positive ones but in some sophisticated schemes a "demurrage" tax on large static positive or negative balances is operated, with the aim of encouraging the members to trade more often. The detailed rules are usually decided by a Core Group of elected officers, who also arrange social events and carry out all the other tasks and forward planning which are necessary to the smooth running and development of the scheme.

COMMON QUESTIONS

1. Is it secure? The most usual question people ask when they first hear about LETS is "How do the organisers stop people running away with the money?" If you understand how the scheme works, you will have no anxiety on this score. There isn't any money. There is only credit or commitment. The worst that can happen is that someone uses a lot of other people's time or takes a lot of goods from the scheme and does not do or give enough to keep his own account near to zero. It's no problem for those whom he robbed - they have their credits to spend and he cannot take that away. The problem is his - of losing his own credibility - in other words, if people have access to the accounts - and it is important that this information is regularly made available - they may not wish to trade with someone who does not return good measure. Equally problematic for the scheme are members who keep on doing good deeds, accumulate credits, and don't get around to spending them - as well as depriving themselves of all the goodies which are available, they are reducing others ' opportunities to earn . The thing about LETS is that they are local and you can't take them with you. They are to be used here and now.

2. What about sterling costs for materials etc? It is common for out-of-pocket expenses, eg building materials, travel expenses, to be reimbursed in sterling, depending on the circumstances of the person doing the job. Any such payments are not recorded within the LETS accounts.

3. Are people equal? Another common question is how people decide the value of their time. Some schemes prefer members' time to be equal, others prefer a more free-market approach, others suggest a standard hourly rate for people to use when in doubt, which is typically equivalent to £5, £6 or £7. Nearly always it is up to the traders to agree the rate between themselves and in practice what usually happens in a LETS scheme as a natural process is that the minimum and maximum wages tend to be less extreme than in the sterling economy.

4. What about Tax? Most trading on a LETS scheme is well below tax thresholds, so this is not generally a problem. In any case, the Inland Revenue's rules disregard casual trading, ie of skills other than one's normal profession. So a solicitor who likes to mend bicycles on the LETS scheme does not have to declare that in his tax return, but if he chooses to offer his professional services on the scheme, according to current legislation, that should be included in his tax return, and for this reason some professional trades are offered with a proportion charged in sterling, to cover payments which will be due to the Inland Revenue.

5. What about Benefits? Here the situation is potentially more frought in since the legislation is obscure and can be interpreted variously in local social security offices, but in practice there have been very few instances of difficulties. Letslink UK offers a detailed Briefing on DSS matters for anyone who is anxious on this score.

 

FINDING OUT MORE

Every scheme has its own publicity material and joining information which will tell you how the particular scheme works - they all vary according to local conditions and the practices which they have developed in that area. Many schemes run open evenings which serve as a "vetting" of potential members as well as giving you a chance to meet the organisers and other members. Under LETS SCHEMES IN LONDON is a listing, under areas, of telephone contacts for schemes known to us in greater London, with further details of each (to be added). Please let us know if you do not get any response, as it helps us keep this information up to date. If there is no scheme near you and/or you want to trade across London - some skills and services might not be available on your local scheme - you might also be interested in joining London-Wide-LETS (see separate page). If you are not in London and/or you want a detailed list of books and other resources, you will need to send an SAE plus 1 loose stamps to LETSLINK UK,12 Southcote Road, London N19 5BJ.

 

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