According to the Guardian, David Cameron will today "repeat Margaret Thatcher's mantra that there is no such thing as government money — only taxpayers' money."
This is an interesting idea, largely because it is completely wrong but also because of the status it has been given by those seeking to diminish the role of the government.
Let's consider firstly why the claim is wrong. One of the simplest ways to prove this is to simply go and ask for your share of the money back. Oddly, given what Cameron is saying, you will not find that there is any part of thegovernment's money that is earmarked as yours. That, of course, is because none is.
Second, try not paying what the government thinks you owe it and see what happens. Assuming there are staff still in the relevant HMRC office you will find they will firstly take a dim view of your approach and will secondly begin legal proceedings to recover the sum you owe. Any defence that you offer along the lines that the Prime Minister says that the government only hastaxpayers' money will not help you; you will discover that the law thinks that what David Cameron is saying is yours very definitely belongs to the government.
That, of course, as a matter of fact, is true. The law of property is created in this country in exactly the same way that the law of tax is created: parliament considers a matter and passes an Act and it becomes law. And parliament has decreed time and again that if you earn certain forms of income (most of them, in fact), buy many goods and services, own, dispose of or gift certain assets (even if involuntarily on death), move some things out of the UK or transfer your right to do many of these things to a company, trust of partnership then you will pay tax in some form or other, subject to any allowances or reliefs it too has chosen to give.
This means that the fact is, as I have often argued, that you actually do not ever have an unimpeded right to that part of your income that you owe in tax. That said, you may have the legal right to claim, in some situations such as when in self employment, the full sum owing to you by a customer out of which tax will be paid. If you're an employee you don't even have that right: you can only claim your income after tax has been deducted at source. But the reality is that the self-employed person (or company) is really in exactly the same boat, as is shown to be the case if VAT charged is part of the sum due by the customer. In that case the self-employed person has the absolute right to recover the full sum due to them, including by suing for it if need be, but that never makes the VAT their property. They always collected that for the government and that is to whom it belongs.
The same is true of the income tax (or corporation tax) that the self employed person owes to the government. This money never belonged to the taxpayer. It always belonged to the government and the lability to pay it always existed, even if the precise amount could not be certain at the time it was received. The taxpayer could of course have spent it all, and some rather unwisely do, but bankruptcy courts tend to beckon those who go down this route.
The simple fact is then that you only ever have a legal entitlement to your income (and any other property you own, come to that) after the tax due as a result of the process of acquiring or owning or using it has been paid. It's your net income after tax that you own; the rest very definitely belongs to the government. If is partly because we all innately know that is the case that we find tax cheats so offensive.
So why will David Cameron so blatantly misrepresent the truth today? Does he really not understand the rights of the organisation he heads? Or is it that he is being deliberately misleading?
I very strongly suspect that Cameron is, like Thatcher before him, spinning a deliberate falsehood for political reasons. So what is he trying to say?
First he is suggesting the insignificance of government. It 'has no money of its own; its a nothing'.
Second, he's breeding resentment: 'the government's got your money'.
Third, he's trying to undermine the supply of services by the government: 'you could spend this money better'. It is odd how this changed in the face of flooding but has now been forgotten again.
Fourth, he is, of course, arguing against redistribution by the government: 'it's your money the government gives away to benefit scroungers' is the sinister message he is making.
And he is undermining the collective responsibility of democracy: 'take back what is yours' he is saying instead.
This is cynical manipulation. It's just not true. And maybe someone should challenge him on it. They could start with a very basic point. Hand him a fiver and ask whose it is? Who created that note? Who protects its value? Who enforces any claim to its ownership by an individual? Who demands it be accepted a legal tender? No individual does any of those things: the government does. In that case the taxpayer's money only exists because of government action.
So whose money is it? Cameron's claim is bizarre.
It's ad wrong, of course, as it would be for him to say he is not democratically accountable for the good stewardship of government funds for which he must be held responsible. But that's a very different claim indeed.
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All very good points, Richard. I’d also add that Cameron claims he’s delivering tax cuts for people on low incomes which is to a large extent tosh because:
a) most of the benefit from the real terms tax allowance increases over the last 4 years has gone to people on middle to high incomes, with only a small proportion going to the low paid;
b) the ConDems have increased VAT by 2.5 percentage points, which hits the poorest particularly hard (even taking account of zero rating of food etc.)
All this is an attempt to install the far-right ‘libertarian’ meme that taxation is theft into the mainstream, in line with what extremist groups such as the Taxpayers Alliance want to see. Because of a compliant right-wing media Cameron is mainly seen as this cuddly centre-ground figure whereas in fact he is an extreme right wing politician – just as bad as Osborne or Nigel Farage, for example.
Wholeheartedly agreed Howard
Not to mention housing costs (inflated by bubble after bubble) where the wealth of the poorest is syphoned off even more!
All of your five implications are the things supply side economics want us to believe.
Ann Pettifor’s book Just Money explains that credit is a creation of society through a well regulated banking system. The Right would use to believe that money is a commodity which is held by rich individuals and we have to go to them for credit. They tell us they can spend their money better than the state but it is largely special pleading on the behalf of private wealth.
Ann Pettifor says, and is not alone, that money creates work and thus wealth, enabling the debt to be repaid. What the Govt. is saying is that we have to have money to put people back to work and it doesn’t grow on tress. It confuses, as you often point out, the economics of the household or firm with that of the state.
I agree with Ann
The argument that our money only exists because of government action disregards the history of money. Whilst it is undoubtedly true that without government action money as we now know it would not function, we have to ask how did we get to this point? Up until fairly recently, money was precious metals which required no action, or at least much less action, from government to make work. The government did not create gold/silver, did not give it physical properties, or give it validity as a means of exchange. These things did just happen. So if we say that the government’s power over money is something to be grateful for we have to remember that they created that power for themselves and replaced the natural form of money, precious metals, which had a successful run of several thousand years beforehand.
Whose head was on the coin for millennia? Why, the head of the government!
Your argument simply does not work
“Whose head was on the coin for millennia? Why, the head of the government!
Exactly! Coins simply didn’t hold value unless a sovereign’s head or such was on the coin.
james -there is no ‘natural’ form of money-it is a question of humans deciding on social consequences. Gold and silver depended (and still does!) on huge amounts of slave labour without which Greece and Rome would not have had such power-the idea of returning to this grossly unjust and exploitative arrangement is horrific -better to use the ‘token’s we have now but put them to better social uses.
You want to go back to using precious metals for money? Are you crazy? Imagine having no electronic money, paying for everything (including holidays, electricity, a coffee,…) with physical lumps of metal. And having to store your stash of metal somewhere secure and safe. Not to mention, from a macroeconomic viewpoint, there being no way to adjust the money supply to respond to inflation etc. You keep your “natural” precious metals, I’ll stick with well-managed fiat currency and a strong state and society.
I am not advocating a return to metallic money. But I am pointing out that the idea that money needs a government to enable it shows recency bias. Precious metals need no government to give them legitimacy or exchange value. Pure fiat monies have only been around for 40 ish years. (And since then we’ve had many more problems with inflation than we did previously. But that is a whole other question.)
And having metallic money does not preclude electronic or paper transactions. The metal is held in a vault and paper and electronic transfers change who owns it. Which was exactly what used to happen for a long time.
I really do think that you have got your history very wrong. Just think back to, let’s say, Roman times, or before. It is certainly true that precious metals were used as currency, that they only got their use as currency because they had been certified to be truly precious metal by the presence of a government stamp i.e. as a coin with the head of the Emperor, or whoever, upon it.
Your claims are therefore dependent upon going into prehistory, and I really see no comparison with current economics that is worthwhile in doing so
Richard, if you read Treasure Island the pirate has a collection of coins from lots of different places. The locals in England would not have known who all the kings were on the foreign coins. To them a face of a foreign king might be as meaningful as any kind of official looking imprint. But if they knew the weight of the metal then those coins would be money to them as much as the ones with their own king on. That’s why our names for currencies all originate from weights. It is not the king that created the money. If anything the king puts his face on it to try and leverage the power already intrinsic in the metal, not the other way round. It is an interesting subject for sure.
“You want to go back to using precious metals for money? Are you crazy?”
Because of it’s scarcity, gold and silver had value, but it was holding the money supply to that scarcity that meant the money supply couldn’t expand to meet economic demand.
If there was a trade deficit, gold would be pulled out of the country, constricting the money supply even further. It was adherence to the gold standard that prolonged the depression of the 1930s.
You can only take that line by utterly disregarding history. Precious metals were not inherently precious – they have no usage apart from decoration. In fact they seem to have been chosen as the material for money by the first kings that minted money simply because they were pretty and had little other use. They gained value because the kings required a percentage back in the form of taxes not because of any intrinsic worth. You only have to look at the history of the renaissance to find massive inflation or the booms and busts of the Victorian business cycle to discover metallic based currencies don’t do what their advocates claim.
Think about what you are saying. They acquired their value because the kings required a certain percentage back…? So a king could have chosen any scarce object, which people didn’t particularly value and demand some of it. So it could have been sea shells or pine cones. Then what? He has the pine cones, what does he do with them? He can’t spend them because no one values them. He could say, I’m going to keep on demanding pine cones so you must accept them in payment so I can get them back again. Really? We are talking societies without huge state spending bureaucracies here, without mass communication or literacy. Or is it more likely that within society money emerged as commodities which did have a use value – wool, salt etc. And the kings taxed this because it already had value. And precious metals became the most popular in many places.
You are arguing in absurdum
If you decide to attribute value to something that must be used in exchnage of course you do not do so by making it something that can be replicated without your control
Counter arguments need to be credible to be tenable
Yep anything with sufficient rarity to stop the ‘market’ being flooded can be used as currency. Examples from history do include such things as shells. http://en.wikipedia.org/wiki/Shell_money
Since kings required taxes to be paid in this form, farmers had to sell their produce on the market to pay their taxes and demand for the money is so created.
I don’t have to think about – it is there to be read in the historical and anthropological sources plain as day. Forget about the myths peddled by economists, they are just that myths.
True – agreed – tax is not the taxpayers’ money, but what is bought and built up and provided by that money is.
Government, at least in the theory of modern democracy, is only the agent of the electorate, of the citizenry, as your last paragraph implies:
“It’s as wrong, of course, as it would be for him to say he is not democratically accountable for the good stewardship of government funds for which he must be held responsible. But that’s a very different claim indeed.”
Alas, this Government has a very poor grasp of the political contract between Government and governed: it takes in the contractually agreed tax, but keeps reneging on the contract, by applying that revenue to undermine the whole basis upon which it is collected – namely, that it should be applied for the common good, rather than for the enrichment of its snake-oil merchant chums, while demonizing whole sectors of the poor, the disabled, the marginalized and the vulnerable. With every day that passes its validity diminishes, rather as did that of Mr Yanukovych.
Andrew
I wholeheartedly agree that the government is accountable to taxpayers. But what we have at present is the worst of all worlds: government that pretends that it is not responsible for its own actions whilst failing to account for its responsibility to those who elected it.
Richard
Quite right and well put Richard. Cameron is propagating fairy tales to keep the populace hoodwinked. Socialism for the banking sector whilst pretending to be ‘hands off’ the ‘free’ flow of money and the myth of ‘free choice’. Utterly disgusting and a thuggish rejection of social responsibility.
Richard,
You say tax belongs to the government, and then the rest of your argument follows from that.
The problem with your argument is that the “government”isn’t a stand alone entity. It’s sole purpose is to represent the electorate for and and on behalf of them. As such, nothing “belongs” to government directly. It belongs to the very same electorate and taxpayers, and is only managed by that government on behalf of them.
Your logic also has a very disturbing authoritarian streak running through it. That some big government has over-arching rights to the assets of it’s electorate. I suspect this is a cornerstone of your “courageoues state”. If this is what you think, then truly I am proud to be a libertarian. I pay tax out of my earnings as part of a contract or agreement with the state. My income is not the state’s first, and my own afterwards, and I am a subject of the state, not subjugated.
Government is undoubtedly a stand alone entity
Separate in its continuity from just about all else, especially in the history of the UK
Shall we deal in facts, not emotive hysteria?
Incidentally; I very strongly consider myself a libertarian but in a democratic environment
Right wing libertarianism is for the few at the expense of democracy
That’s the difference
some see freedom as an absence of obligations to the wider society, yet it is only through society that our rights are upheld ; police, courts, social security, common action to prevent flooding (I live only a few miles from the Somerset levels )defence, the creation of money-to name a few.
Obviously there is a balance to be had for things to work well. The American libertarian ideology seems to be constructed on ideas of self sufficiency. Hobbs, the philosopher, told us that without society “the life of man is solitary, poor, nasty brutish and short.”
NOT as one misprint had it, “nasty British and short”!
As St Benedict realised many centuries ago, true freedom comes from commitment
It is an idea that completely passes libertarians by
But it is taking its responsibility to those who elected it seriously.
The difference between them and you is how you/they define ¨electors¨
From the ConLabLib viewpoint ¨electors¨ is all too obviously not meant to be the general mass of population.
We do not have democracy, we have an elected dictatorship!
Not even ‘elected’ John!
Richard,
Can I give another reason why the mantra is often made, and is unfortunately often unwittingly repeated by people who should be challenging it. It is to disinfranchise those citezens who are not tax payers and return us to a state in which only tax payers have power over government.
How often do you hear that RBS was bailed out by tax payers money?
It was governments money. If the requirement to bail out banks caused a reduction in the government budget, as it did, then it is those citezens (School children, university students, unemployed, the ill, pensioners) who also lose out in government spending as had been otherwise. In fact the bank bail outs have been paid for mostly by cuts in spending than increased taxes being levied. The banks were therefore not bailed out (and thereby owned) by the taxpayers but by the citezenry as a whole. Yet the tory led government want to perpetuate this myth and indeed are toying with the idea of returning RBS shares to taxpayers!
This idea that taxpayers own the government’s assets (and are therefore the government should be accountable to them) is so insidious that it was even repeated twice above:
Andrew Dickie says:
March 4 2014 at 8:43 am
True — agreed — tax is not the taxpayers’ money, but what is bought and built up and provided by that money is.
Richard Murphy says:
March 4 2014 at 9:06 am
Andrew
I wholeheartedly agree that the government is accountable to taxpayers.
You make a good point Jean-what the taxes provide for us is a ‘common wealth’ and to be shared with those that, for economic/health reasons, cannot pay tax.
The idea of ‘common wealth’ is obnoxious to neo-liberals who pedal the 19th century utilitarian myth (more valid at that time) that individuals chasing their own self-interest creates the common good -the phrase begs so many questions as to be virtually meaningless.
“tax is not the taxpayers’ money, but what is bought and built up and provided by that money is.”
That makes no logical sense at all.
Richard is entitled to his view that it is incorrect for tax to be called “taxpayers’ money”. But the corollary of that must be that it is also incorrect to use phrases such as “our NHS” or “our Royal Mail”. If tax receipts are the government’s money, then those institutions are also the government’s, not “ours”, or “the family silver” (ghastly phrase…).
But it is not your NHS
It is collectively our NHS
But that does not mean we have an ownership stake per se
But Cameron implies to suggest otherwise and he is wrong to do so
“It is collectively our NHS”.
Ah, so tax receipts are “collectively” taxpayers’ money too, then? Point proven, I think.
Curiously no: you’re ignoring the points made about the very nature of money, and the contractual situation
You’re also ignoring context
No language can be properly interpreted outside it, I think
I am aware there are those who disagree, but they have a philosophy I do not share
@ Stephen Hyde says:
Stephen, you say that my assertion that “tax is not the taxpayers’ money, but what is bought and built up and provided by that money is.” makes no logical sense at all.
Could I ask you to note that I go on to qualify that statement by describing the relationship between Government and governed as being one of agent and principal?
It’s an unusual, even unique, agency, since in a principal/agency arrangement any moneys deployed are usually the property of the principal.
But, as Richard has said time and again, Government differs from other organizations, and here, the RIGHT to the funds , along with the funds, belong to the Agent, but WHAT those funds purchase/create DO belong to the Principal = “We, the people”, the citizens of the UK.
With all due respect, Richard, you are standing on the wrong leg here…
Cameron should possibly have used other wording, but at the end of the day, the government has to act as a fiduciary of nations assets it is claiming to manage on behalf of the people.
A small minority, whether from a certain right, or your part of the left cannot claim the money is theirs. What happens when a new government comes in? It is supposed to take over the fiduciary responsibility on these assets, with hopefully no 180 degree shift in all policies. This would create huge wastage!
So when Cameron says it is my money, I do agree with him, however unfortunate the language may be. I hope they spend it accordingly to the mandate the people have given him and limit profligacy as much as possible. In the UK, you can be happy it is not as bad as in quite a few more traditional socialist European countries (or regions like in my non-beloved Wallonia), where there are decades of tradition of waste, corruption, useless “public works”, politicians living like London banksters and the like.
I want my tax money to be spent wisely. That does not mean I am against benefits, higher zero tax bracket, and more importantly investment in education and healthcare.
I do not know if you have deliberately chosen to ignore the points I made or not but either way your comment reveals no comprehension of what I actually said
Oh dear! Tax is levied on a variety of stuff – income, capital gains, property value, etc. But it does not follow that you don’t own the part of your income which is taxed by income tax. The PAYE system does not of itself identify the liability – it is no more than a (compulsory) payment on account. Don’t know why you are so pendantic on this point – nor why you would seek to misquote only a selected bunch of politicians. After all, it is a loose definition that most if not all of the mainstream media regularly make use of – not to mention most politicians.
I am not being pedantic: this is an issue fundamental importance
Of course most politicians say things like this: it is the neoliberal consensus at work
That is also why you do not recognise it as being an issue: I presume that you buy into that oppressive ideology
the pedantry derives from how often you air it. You are also wrong. That you think you are right does not stop it being pedantic.
Actually I think it is an issue. The lazy way the media report stuff is a constant irritation. I can understand why the red tops do it – don’t think the BBC have a leg to stand on.
This comment has been posted further to point 5 of the comments policy to which attention is drawn.
Has money ever been created without government and tax? Tax is one of the things that imparts value to money and keeps it in circulation. Jesus had it right when he drew attention to the head on the coin and said “Render unto Caesar that which is Caesar’s.
That sounds like you’re a modern monetary theorist to me
I’m an historian – I have no idea what “a modern monetary theorist” is.
Well, you share a view with them…
“That sounds like you’re a modern monetary theorist to me”
Is it a theory you approve of, Richard?
Yes
In a word
I don’t whether or not it is exactly the same thing, but I am a big advocate of government money creation, either by creating and spending it into circulation, borrowing from the country’s own central bank or bank nationalisation.
To my mind, there is little need for a government to go into debt. It can meraly create the money either by borrowing its own bonds or creating it on a computer keyboard and spend it into circulation and tax it back out again.
There is no reason for a government to go into debt to the private sector.
do you mean this http://en.wikipedia.org/wiki/Modern_Monetary_Theory?
I wouldn’t know about that. I do know that wealth has never existed without states no matter what right wing libertarians think.
I do mean that, and the conclusion that you have reached is the right one
thank you. I also know states have never existed without taxation. Therefore wealth cannot exist without taxation.
I also agree with that