Search Result for quantitative easing — 446 articles


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Tax Justice

Tax Us If You Can. A report for the Tax Justice Network published in September 2005 setting out its manifesto for action. Richard Murphy was one of the principal authors of the report.

The Price of Offshore. A report produced for the Tax Justice Network showing that offshore tax havens cost the governments of the world $255 billion a year in lost taxation revenues.

Closing the Floodgates A report for the Tax Justice Network on behalf of the Leading Group of Nations on how the massive tax losses by developing countries could be stemmed. Substantially written, and edited by, Richard Murphy it contains key chapters explaining how tax avoidance takes place.

Fiscal Paradise or Tax on Development? A discussion of tax haven activity for the Tax Justice Network and presented to the Special Committee on Globalisation of the Belgian Parliament 14 February 2005.

The Extractive Industries

Ghana‚ EITI - Delivering on the Promise? A report written for ISODEC in Ghana highlighting the problems with the first EITI report published in that country.

Extracting Transparency. A report for Global Witness, the Publish What You Pay Campaign, Transparency International and others on the need for an International Financial Reporting Standard for the Extractive Industries.

Digging for Justice. An article from Accountancy Magazine, December 2005 on the need for an International Financial Reporting Standard for the Extractive Industries.

Making It Add Up. A report on the Extractive Industries Transparency Initiative for Save the Children and Global Witness and presented to the World Bank conference on the EITI February 2005.

Country-by-country reporting

Country-by-Country Reporting. An article for the Tax Justice Network giving ten reasons why country-by-country reporting by major corporations is so important if we are to have a fairer world.

Location, Location. An article published in March 2004 in Accountancy magazine, the journal of the Institute of Chartered Accountants in England and Wales, about Richard's proposal for a new International Accounting Standard to tackle tax avoidance and evasion.

Reporting Turnover and Tax by Location. The proposal for a new International Accounting Standard referred to above, published in 2003 by the Tax Justice Network and the Association for Accountancy and Business Affairs.

Tax havens and secrecy jurisdictions


The current economic crisis

In place of cuts. Published by Compass, this is a comprehensive analysis of the UK Tax system and offers a straight forward set of proposals which would start to make it fairer. The report was written by George Irvin, Dave Byrne, Richard Murphy, Howard Reed and Sally Ruane.

The Green New Deal. Joined-up policies to solve the triple crunch of the credit crisis, climate change and high oil prices written by the Green New Deal group of which I am a member.

The Cuts Won't Work. The second report of the Green New Deal Group which argues that cutting public spending is the last thing any economy needs when in a recession.

The Great Tax Parachute. Written by Richard Murphy for the Green New Deal group. As the public are told by all the main political parties that large spending cuts are inevitable, the Green New Deal Group show that real alternatives exist. This briefing reveals, for the first time, that the public deficit could, in fact, be substantially offset by a range of progressive measures on tax.

Green Quantitative Easing. A paper by Richard Murphy and Colin Hines exploring the whole issue of quantitative easing and suggesting that because the first round of quantitative easing was captured for the benefit of the finance industry any new round must be very different with cash being spent into the economy to create a Green New Deal nationally and locally, with the only debt to be repurchased being PFI debt, to remove once and for all the legacy of that appalling system of finance.


The IFS really is the home of dismal economics

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The IFS published its analysis of the Spring Statement yesterday. The headline was that if the government was to meet need in the economy within the next few years then it was going to have to raise £41 billion pa in additional tax to pay for the that demand and balance the budget.

This is so typical of the IFS, which seems to specialise in persistently misunderstanding tax, the economy and the relationship between government spending, money and well being. Given the IFS is the, supposedly, most revered think tank on the issue this is some claim to make, so let me unpack that just a little.

First, let’s be clear that since 1694 the UK government has run almost persistent deficits and made no real attempt to ever clear its debts. The result is that in 324 years the government has not tried to run a balanced budget, and we have made decided economic progress despite (or rather precisely because of) that fact. So why is the IFS endorsing a goal, in the shape of a balanced budget, that makes no economic sense at all and which has been proven to be unnecessary by experience?

This is, secondly, most especially true when it is appreciated that since 1971, when money ceased to have any relationship with the gold standard, the so called national debt is, in fact, the largest component in the money supply. What the IFS is then doing is suggesting that although they believe the economy will grow that they want this to happen without the government playing a role in it so doing by injecting the essential liquidity that will fuel the increased activity that will be undertaken. How, I wonder, do they think that helps?

Third, what this shows is that, as ever, the IFS think that we live in a world of tax and spend, where the ability of the economy to supply care for the elderly is entirely dependent upon the capacity of large firms of accountants, staffed by highly paid individuals, to seek tax abuse at a significant profit on which they pay tax for as long as they think it worthwhile living in the UK.

And I kid you not: the IFS actually made a statement that we are dependent upon rich, highly mobile, individuals paying tax in the UK for the supply of government services in this country, and this despite the fact that they often say that imposing taxes on the high paid will never fund the services we require. It is as if they are wholly unaware of the completely paradoxical nature of these parallel claims.

The reality is that we are dependent on the overall level of income in the economy and, as importantly, whether income is spent or not. The actions of the wealthiest and highest earners (groups who usually overlap because the wealthy reach that state by not spending, which is easier when you don’t need all your income to live on) in not spending suggests they are not that valuable to the economy. That they contribute is savings: and we already have a glut of them. That's one good reason why national debt is rising: they are buying the government binds in question.

The rich and wealthy are also not that valuable because  their low overall rates of tax compared to both income and wealth suggests that our dependency upon them is tenuous, and that their replacement by lower paid, but likely to be as ambitious and in truth equally competent people of sound judgement, might in the event that there was an exodus from the country of the current incumbents of the highest paid posts actually be for the overall best of the country by creating a considerably improved income distribution.

And there are two other key issues the IFS ignore. The first is that national debt is £435 billion less than they say because of quantitative easing. John Redwood understands that. The IFS persist in not telling the truth about this. QE cancels government debt.

Last, the IFS continue to suggest that government spending is akin to pouring money into a hole. They ignore the fact that it is wealth creating in its own right. They ignore the fact that this spending is other people's income, on which they might pay tax. It seems that they, like the Office for Budget Responsibility, massively underestimate the economic multipliers on government spending, which is why both have got their forecasts so wrong in the past. And the result is that the IFS becomes part of the government propaganda machine for austerity.

It really is time that they stopped being given the respect that they get for largely following the Treasury script, which on this occasion would be exactly what the IFS is saying rather than what Philip Hammond did. This would not matter except for the fact that the Treasury has truly been the home of dismal economics for decades now. And so too then is the IFS.

What Philip Hammond should be doing today

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Philip Hammond is to make an economic statement today. It is expected that he will say that the UK is in better economic health than was expected in the budget last November. That is largely indicated by higher tax receipts, which imply growth. And, of course, it is now 'celebrated' that the government is covering its current spending with tax receipts, leaving only investment to be paid for with borrowing. I feel it is time for a quick Q&A.

Should we be celebrating our new found prosperity?

I fear not. Remember we’ve lost out in a decade of growth as a result of austerity. Many people are still worse off than they were in 2008. Much of the GDP growth we have seen is the result of population increases, much of which is from migration that may be a good thing, but which gives a false impression of the actual change in well being each person is enjoying, and the deficit was always going to fall anyway: the collapse in tax revenues in 2009 was always an aberration that would have largely reversed, come what may. We have as a nation suffered enormously to get to a position on the deficit that investment in 2010 onwards could have delivered so much better, with almost no downside for the UK as a whole.

But what about the debt?

Let me quote Tory MP John Redwood:

I have not been worried about the state deficit for sometime, ever since Mr Brown found out that the UK state can literally print money to pay its bills. Mr Osborne, originally a critic of this in opposition, then discovered its charms in office as well. It turned out to have no adverse consequences on shop price inflation, though of course it caused massive price inflation in government bonds, because it was accompanied by severe pressure against bank lending to the private sector to avoid an inflationary blow off. I always adjust the outstanding debt by the £435 bn the state has bought up, as this is in no sense a debt we owe. So our government borrowing level (excluding future state pensions which some here worry about and which have always been pay as you go out of taxation) is modest by world standards at around 65% of GDP, and at current interest rates is affordable.

Most of the state debt we owe to each other anyway. The government owes it to taxpayers who own the debt in their pension funds and insurance policies. The state can always raise enough money to pay the domestic bills backed by the huge powers to tax, and as we have just seen when credit expansion and inflation are low it can also use liquidity created by the monetary authorities.

There is, then, no debt issue to worry about. The debt we have is the UK’s money supply. All it represents is uncollected tax. In the meantime it’s the essential lubricant to make economy work and the safe place of saving for your bank and pension fund that provides the essential security you want from our financial services system. If you want to remove government debt this security disappears and your savings will be at vastly greater risk. Is that what you want? Oh, and you will also have to pay for that reduction. It is achieved by collecting more in tax than is spent, which is enforced saving by any other name. And saving of that sort shrinks the economy by reducing government expenditure as a proportion of GDP, meaning those queues in A&E would get much longer.

So are these the conditions in which Hammond should spend more now?

Yes, of course he should. But that’s not because he has money in his piggy bank from those extra tax receipts. That is not the way in which government spending is funded. As a matter of fact all government spending is funded by the Bank of England making the money available to the government in its bank account. This is the same, identical, process as that used by a High Street Bank when advancing an overdraft to a customer who has yet to be paid the income out of which the bank confidently expects it will be repaid (or it would not advance the loan). We know this is true in the case of the government. Since 1694 it has been running an overdraft - the national debt - and what that proves is that it has, at last since then, always spent in advance of getting in the tax revenues that appear to cover the cost of the spending. There’s just one massive difference in this case. Unlike a household the government can simply print new money if it wants to cover its debts. We know that is true now: quantitative easing proved it. £435 billion government debt has been cancelled in this way, and again Tory MP John Redwood has provided the evidence that even Tory MPs know this to be the case. In that case tax is not absolutely necessary to pay for government spending, because it can happen anyway. What tax actually does is reduce the risk of inflation as a result of that government spending. That’s something quite different, and a truth that Philip Hammond should be facing, but isn’t. But whether he admits it or not, this current situation provides no better or worse reason for more spending now than existed in the last few years: the budget balance simply does not matter: in itself it’s a completely pointless book-keeping goal revealing a small minded approach to the management of the government’s role in the economy that fails to take into account all the enormous consequences of what it can do for the common good and instead sacrifices them for the sake of a dogmatic goal that has no real economic consequence at all.

But if tax is all about controlling inflation, and that’s rising shouldn’t Hammond be wary about more spending now?

A good question. It has to be understood that there are at least two types of inflation that we need to worry about.

One is demand pull inflation. This happens when the economy is overheating and there is excess demand as a result creating a shortage of supply of critical factors of production, but for the most important of which is labour. This means wages rise as employers bid to get the people they need, and so prices rise as people spend the extra money in heir pockets for which, however, there is not an increase in production to match. This is the type of inflation that extra taxes can address: by simply removing money from people’s pockets buy increasing the amount of tax that they have to pay then tax can reduce the excess demand in the economy. This works.

The second type of inflation is cost-push inflation. This arises when a factor be on the control of the domestic economy increases prices in it. An example would be the change in the exchange rate that came as a result of Brexit. This approximate 10% adjustment in the value of the pound did, inevitably, impact domestic prices because we have to pay for those things that we import, which were now more expensive. No amount of adjustment to UK taxation could alter the fact that these additional payments were due. The result is that it would be pointless to adjust UK tax to address this issue: the only way to do so would beaten either reverse the Brexit decision or to improve the attractiveness of UK exports to more than offset the additional cost of imports. Tax cannot change outcomes here. Interest rates can, but only at considerable cost to many households who are deeply in debt.

The fact is that we have cost-push inflation in the UK. We do not have demand pull inflation. Therefore this is not the moment to deflate the economy to address the issue: that can actually only make things worse by reducing our cost effectiveness in producing goods for export, so threatening the balance of trade even more.

At the same time remember that there are many people who think that 3% inflation is quite acceptable: to percent limit is, like the goal of balancing the government’s books, and entirely arbitrary target without particular proven merit and the might be good reason for thinking that a higher rate of inflation could be of benefit, not least in reducing the value of outstanding debt by private individuals, which is a major threat to economic well-being.

So why should Hammond spend more now?

The answer to this question is really very simple. Philip Hammond should spend more now because there is need to be met, and that is the whole purpose of government spending. when there are unused resources in an economy and there is unmet need, whether that be for healthcare, education, infrastructure, social care, improve pay for those who have suffered the impact of austerity, all there is a need for greater transfer payments to address issues arising from inequality, then it is the governments job to make sure that resources are put to use and that transfer payments take place. It is simply negligent for it to do otherwise. and the fact is that right now we know that all these things are required, and we also know that in the sixth-largest economy in the world it is ridiculous to pretend that we cannot afford decent health care, education, support for those at risk, a proper judicial system, adequate policing, appropriate defence, and so much more. In that case of course Hammond should spend.

But won’t this create inflation?

It is very unlikely that this additional expenditure will create any significant new inflation, although there may be a short-term impact will have little consequence. What it will create is new growth. What new growth creates is new tax paid, because that is the inevitable consequence of people having higher incomes. It will not, therefore, necessarily create any greater imbalance in the government’s expenditure, overall. It will increase investment, and that is good from long-term prospects, and for the exchange rate, and so for the control of cost push inflation. And it will put the millions of people who are currently in part-time employment or in self-employment’s very marginal worth and which pay very little in the jobs they really want, and which will add value for the UK economy as a whole, meaning that overall we would be vastly better off. I am not saying the tap needs to be turned on forever: the investment that must be made to achieve this goal should, for example, the of the type which can be turned on and off. Investment in social housing rather than in massive infrastructure projects is a good example of the type of investment where this is possible. But for now the expenditure is very definitely desirable.

And what else should Philip Hammond be doing?

There is so much wrong with the UK economy that it is hard to know where to begin but I would start with:

  • A review of corporation tax to ensure that overall yields increase. An Alternative Minimum Corporation Tax should be on his agenda, as should full public country-by-country reporting to reveal who is, and is not, paying appropriate tax.
  • A review of the role of wealth tax in the UK to tackle inequality.
  • Creating a Money Commission to make clear how the UK will manage its central bank, national dent and the relationship with money after Brexit.
  • The creation of a proper National Investment Bank, able to issue bonds in its own right, to provide people with the identifiable secure savings structure that they desire that will let them see that their money is being used to find the long term future for this country that they want.
  • Tax reform to remove the vast majority of incentives for saving within that tax system which only subsidies the wealthy and increase inequality at present.
  • A plan to cancel student debt.

I bet he will not do any of this.

The role of public sector borrowing

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This post by was originally published on the web site of the Progressive Economics Group. The Group is involved in policy development on the assumption that a future government might abandon the dedication to neoliberal economics of those in recent decades. I recommend it as a source of wider reading.

Policy Issue

It has long been assumed that government spending is financed by taxation. This should be challenged, because it is not true. A clear understanding of the mechanisms for funding public expenditure is essential to implementing a sound fiscal policy. The question to be asked is this:

What is the appropriate and effective mechanism for funding public expenditure?


It is now widely agreed that government spending might be funded in three ways. The first method of funding public expenditure is to increase the supply of  government created money in the economy. This increase in the supply of government-created money happens every time the government spends. When the government spends it makes a commitment, or promise to pay, and this is accurately reflected in the fact that every banknote in the UK includes a printed version of that promise.

There is, however, a problem with money printing. Unless it is properly controlled it can lead to inflation. All inflation is not bad; on the contrary some inflation is useful. Over recent years we have seen the strenuous efforts made by central banks to avoid deflation. Deflation can have recessionary consequences. The Bank of England sets 2% per annum as its inflation target consistent will sustainable growth. The policy challenge is to permit the injection of just enough money to achieve this goal, taking other factors into account.

Broadly speaking, the way to do this is by taxing most of the money a government  creates through its spending out of existence soon after that spending takes place. Tax fulfils two goals in this process. First, it controls inflation, and this role is now seen by many as the primary purpose of taxation. Second, in effect the government endorses the value of its own currency by requiring that tax be paid making use of that money it creates.

However, to ensure that happens, spending that delivers public services must  takes place before tax can be charged. Unless this were the case the money to make tax payment by households and businesses would not exist. By accepting its own currency in settlement of tax obligations the government fulfils its “promise to pay”. This circuit, in which a government creates money to fund expenditure that is returned as tax payments  is the concrete way in which the government creates, delivers and maintains a stable currency for use in trade.

A growing economy requires general price increases, or inflation. Except under unusual circumstances, a general increase in prices requires an increasing money supply. A fiscal deficit is the only way in which money can be injected into an economy continuously.   It follows that governments must run a near perpetual deficit or face the risk of creating a liquidity crisis due to a shortage in the money supply, which would then create a risk of deflation.

The question then arises as to how this deficit should be funded in a fiat monetary system; that is, a monetary system in which money itself lacks value (in contrast to a system in which gold was convertible into money). ‘Fiat’ in this context means that the money in an economy is only backed by the government's promise to pay and has no other convertible value except for the payment of tax.

There are, in essence, three ways in which a government can fund a deficit. The first and most obvious of these would be for the government run an overdraft with its central bank, which is the Bank of England in the case of the UK. There would be no reason for  interest to be paid on this overdraft if the government owns the central bank, as is the  case in the UK, because paying interest to oneself is merely an accounting exercise.

Historically a central bank offering a government an apparently unlimited overdraft was considered profoundly imprudent. That was because until 1971, when the USA came off the gold standard, all currencies were ultimately restricted in their availability by the conversion requirement into gold under what came to be called the Bretton Woods System. The ability of the government to print money without constraint, which a central bank overdraft for its government implied, threatened monetary stability as a consequence. As a result the government's deficit was in effect repackaged in the form of bonds (or gilts). These interest bearing bonds were sold by the government to third- parties. In this way the gilts market was created.

What that market effectively ensured until 1971 was that the government must use money already in existence for its spending. When the amount of money was fixed to existence  of gold this was an appropriate goal. Since the link with gold has been removed the constraint imposed by having to borrow makes no sense: there is no limit, subject to inflation objectives, to the amount of money that might usefully exist.

That said, although the gilts market is, in theory, now entirely unnecessary for the purposes of funding government deficits it has turned out that in practice there are significant, and overall beneficial, uses for government created bonds. The most obvious is as a place of guaranteed safe deposit for those with funds they wish to save. A government can never default on a bond that it issues in its own currency because it can always instruct its central bank to create the money required to make repayment of a  bond when redemption is due. As a consequence the owners of gilts have an absolute guarantee that their funds are safe. This is fundamental to the financial security of an economy.

That said, this means that government bonds are an asset with very low inherent risk. As  a consequence, gilts have the lowest interest rate paid in any market. Despite this they  still have great appeal to pension fund trustees and insurance companies, both of which have an obligation to settle liabilities far into the future.

Gilts also appeal to those who wish to deposit extremely large amounts for short periods of time. Very large amounts cannot receive the guarantee that the government gives normal bank depositors. In particular, companies seeking to place millions and even billions of pounds on deposit overnight seek security for their cash. They achieve this security not by placing the funds in bank accounts, but by temporarily purchasing government bonds from banks. These they then sell back the bonds the following morning at a very marginally higher price to cover the interest earned. This is called the ‘repo’ market.

As a practical matter it would be very difficult if not impossible to replace gilts in the pension, insurance and banking sectors with a private sector security instrument. As a consequence there is a systemic need to issue gilts. However, the idea that the  government is dependent upon doing so to raise funds is a legacy of the pre-1971 monetary era. It is no longer true. Gilts are now issued as a favour to the financial  markets to provide a safe deposit service to the market that it needs. They are not issued  to fund government expenditure, because they are not needed for this purpose. This is precisely why real interest rates on gilts have shown a markedly downward trend over time, and they now carry an effective near zero interest rate.

Unfortunately international regulation has not recognised this fact. As a result the EU still bans central bank lending to the governments that own them, reflecting thinking from the pre-1971 system. This ban is, however, now worked round using the technique known as quantitative easing (QE). QE occurs when a central bank (or one of its subsidiary companies) purchases gilts issued by the government that owns it. The Bank pays for these gilts by crediting the account of the seller of those gilts (for example, a pension fund) with an amount equal to the value of the bonds purchased. The money for this transaction is not provided by taxpayers. It is instead created out of thin air by the Bank of England lending it to one of its own subsidiaries to buy the gilts in question, in exactly the same way as all bank loans are created by the use of double entry book- keeping.

The result is that the ownership of a government owed debt is transferred to a government-owned bank. In effect the government has then lent itself money. This self- lending is strictly equivalent to printing currency, and more practical for the large sums involved in the QE process. Whether the loans involved then have interest paid on them  is of no importance, since the interest payment cancels itself out (appearing in the national accounts as an expenditure from the government to the central bank, and an income from the central bank to the government). QE does then permit a central bank to provide its government with a long-term interest free loan that also has no set repayment date. This no interest, infinite maturity date loan provides a funding mechanism for government expenditure that is an alternative to taxation.

In formal terms this is expressed as follows:

G is government spending
T is tax revenue
t  is the time period (for example 2018)
∆B  = B(t) – B(t-1) is the change in the level of government borrowing
∆M = M(t) – Mt-1) is the change in the level of government created money in a period (most of which, will be QE)

These produce the following identity, which is true by definition:

G = T + ∆B + ∆M

In words, government spending must equal taxation plus the change in government borrowing plus the change in government created money.

The policy implications are clear. The perennial question of ‘how is it going to be paid for’ is answered by this equation. All government spending is initially paid for  by creating new money. The new money provides the means to either collect additional tax revenue, or to fund new gilt issues. If there was a risk of deflation and neither tax increases or bond issued were desirable, then this identity makes clear that a government can alternatively create and repurchase its own debt to fund its spending.  At  an aggregate level the government can adjust the elements of the identity to foster full employment, subject to inflationary pressure. As such it is this equation that is at the core of managing the macroeconomy.

Policy Framework

The lesson in all of these instances is that a sustainable stimulus policy must not only attend to demand and interest rates, but also to the relation of real wages to productivity. It is not a matter of wage-led vs. profit-led dynamics as putative opposites, but rather of the sequential link between the two. “The engine which drives Enterprise is … Profit” (Keynes).

The spending-funding identity explained in this briefing makes clear that governments, and not markets, are the drivers of the decision-making on the level of taxation, borrowing, interest rates and the optimal balance between the these factors. That optimal balance is the value of each that is consistent with the government's policy goals. If, for example, the government seeks to achieve full employment, then what this approach suggests is that it is at complete liberty to do so without market interference.

So long as there is spare capacity within the economy that needs to be usefully employed the government can create new funding to achieve that goal. Should the increase in demand generate undesired inflation, the government can either cancel the additional spending by greater taxation or by selling its bonds in the financial market (which transfers private liquidity to the government).

A government with its own currency can, if it chooses, take command of their own financing and as a consequence of the national economy, and it is not beholden to the financial markets.

Richard Murphy is Professor of Practice in International Political Economy at City University, London and Director of Tax Research UK. He is a non-executive director of Cambridge Econometrics.

This policy brief may be downloaded here as a pdf

After fifteen years of my saying PFI does not work the NAO finally agrees. Why has it taken so long?

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As the Guardian reports this morning:

Taxpayers will be forced to hand over nearly £200bn to contractors under private finance deals for at least 25 years, according to a report by Whitehall’s spending watchdog.

In the wake of the collapse of public service provider Carillion, the National Audit Office found little evidence that government investment in more than 700 existing public-private projects has delivered financial benefits.

The cost of privately financing public projects can be 40% higher than relying solely upon government money, auditors found.

I have a number of ways I could respond to this, but I am (for once) simply going for the 'told you so' route.

From 'People's Pensions' in 2003, where Colin Hines and I advocated local authority bonds as an alternative to PFI, the the Green New Deal, where we developed the theme, to green quantitative easing, and then People's Quantitative Easing, I can claim some credit in being an anti-PFI campaigner, and always because it was glaringly obvious that it failed to deliver value for money.

That is 15 years of saying so.

And now, finally,  the NAO catches on.

Three questions:

  1. Why has the NAO taken so long to state the obvious?
  2. When will local authority bonds be part of the UK savings architecture?
  3. When will People's (or Green, for they are the same) QE be used to underpin those bonds via a National Infrastructure Bank, which is an idea Labour borrowed from my work?

We cannot afford to wait for answers.

The fundamental flaw in PFI can be overcome by People’s QE

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The supposed advantage of PFI is that the risk of contracts going wrong is passed from the government to a contractor.

There are two flaws with this. First, many contracts fail to transfer this risk: in other words cost over-runs are still borne by the government. In that case PFI can best be called an expensive con-trick by contractors on the government.

The second flaw is that in the rare cases when the risk is actually transferred from the government to the contractor, as has happened in the case of Carillion, limited liability lets the contractor fail and pass the risk on to stakeholders throughout society. In that case PFI can best be called an expensive con-trick by contractors on society.

I have long argued there is an alternative. It is, of course, a National Investment Bank funded by People’s QE (which I originally called Green QE).

It really is time for Labour to say so. After all, it’s what helped Corbyn get the leadership, so why won’t he talk about it now?

The FT admits it: Corbyn is coming

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The FT is running a most amusing feature today:

It's amusing because of the hysteria that lies just below the surface within it.

It's amusing because underneath the hysteria the truth is told. Take this, for example:

Capitalism is not working for the under-40s, so they’re voting for socialism.

And this not of reality:

Many will have little option but to pay more [tax]. “In the long term, there is little that can be done to reduce this burden, unless people consciously work less hard, move down the jobs ladder or emigrate”

It's also amusing because it clearly thinks it is addressing a real possibility.

And it's amusing for what it predicts.

Let me look at those things.

Labour will increase corporation tax rates

They will. And rightly so. Even big business is bemused at the absurdly low rates it is being offered whilst it is sitting on enormous cash piles that they have no idea what to do with, barring lending it to the government. Of course they should pay more.

Labour will increase capital gains tax rates

I sincerely hope so: it is absurd that the highest capital gains tax rate is 28% and that is less than most people pay when NIC is included on their pay. The income tax and national insurance rates should be aligned.

Labour will abolish CGT entrepreneur's relief

I hope so: I explain why, here.

Labour will increase income tax rates

At the the top end that is appropriate: we have a regressive tax system. It's time that was corrected.

Labour will crack down on tax avoidance

That's a problem?

Labour would introduce a financial transactions tax

Stamp duty on shares has not stopped London being the epicentre of global financial markets, at cost to the country as a whole. Deal with it.

And then there is some nonsense:

Labour would push down the price of UK gilts

Hang on: that would mean interest rates rose. Isn't that what markets want?

But, haven't you noticed that UK national debt has increased massively since 2008 and this has not happened?

And hasn't the FT noticed QE?

Let alone People's Quantitative Easing?

The article is really very confused when it comes to these issues.

As it is on:

Labour nationalising

Yes, the railways, the NHS and PFI.

The first favours FT readers: they commute.

And they are all very popular. Just as is Labour's housebuilding pledge. And why? Because they represent efficient use of government money in meeting need.

I think we can conclude that FT readers are only interested in this when it suits their own portfolio's needs, whatever else they might say.

But the best but if all is the simple underlying message - the FT is taking Labour very seriously indeed.

On interest rates, growth and the need for the most massive rethink

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The FT has reported that:

The Bank of England says “further modest increases” in interest rates are likely as it tries to bring inflation down to its target of 2 per cent in the next few years.

This comes after the Monetary Policy Committee left rates unchanged despite inflation increasing to 3.1 per cent in November. As the FT continued:

Markets expect the BoE will raise interest rates up to twice next year, once in May and a possible second time towards the end of 2018, bringing them from their current levels of 0.5 per cent to 1 per cent by the end of the year.

Before noting:

Though borrowing would become more expensive, 1 per cent would still represent a historically low interest rate level and could still encourage households and businesses to borrow and spend.

And suggesting:

The committee believes the UK economy cannot grow much faster than 1.5 per cent a year without pushing up inflation. As a result, the bank’s outlook for the economy and living standards remains weak — leading members to stress that more interest rate rises are likely to become necessary.

Three comments seem appropriate.

The first is that it seems increasingly absurd that the MPC is only worrying about inflation. In part that's because the country could do with some to assist those in debt manage the burdens they face. It's also because the measure is simply so crude, failing to take into account so many impacts on the economy arising from issues over which the MPC has no real control, whether by interest rate changes or by conventional quantitative easing. And it is because the goal is now so contradictory when it is believed that we must have growth to see an increase in real wages and yet any sign of growth must be snuffed out at birth by an interest rate rise for fear of inflation. What the policy inevitably means is we are doomed to stagnation in living standards.

Second, this suggests that the Bank of England badly needs a better measure for economic targeting, but this has to be set by the government: it is not for it to set in isolation. The logic of using interest rates to manage inflation is so now so hopelessly inappropriate for the UK economy (and the vast majority of the people who live in the country) that urgent change in policy priorities is overdue if the cycle of guaranteed despondency in which we are stuck is to be broken. Charles Adams has suggested that targeting increasing median income makes sense and I have a lot of sympathy with that.

Third, the idea that the Bank of England, or anyone else, has the foresight to forecast growth next year for the economy when there are so many massive headwinds facing the country undermines their credibility at present. More caution, a little more wisdom, and a demand that the government play its role with fiscal policy to which the Bank might lend a hand, might have been appropriate, I suggest. But that's not what we got from a body dedicated to conventional wisdom. In which case a minor revolution in thinking is required.

This economic crisis we have to make better decisions than last time

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Having reviewed this morning's news I am well aware that I will be posting a series of blogs that will suggest the UK economy - and in some cases the global economy is in deep trouble. That's because it very obviously is, with massive political and social implications, which is what matters. As I have said before, there is trouble ahead, and we have a choice. Of course we can succumb. That's always an option. It is the one chosen in 2010. Or we can face the music.

In 2010 I suggested the use of what I then called Green QE, and which has since been renamed People's QE, as the way to tackle recession. Jeremy Corbyn adopted it in 2015. I explained how it worked in more detail here, before he did so. And as I said in 2015, People's QE was the weapon to deal with the next crisis: it was not a policy for the moment when a government could borrow at low or no interest.

If that crisis is coming, and I think it is, then it is worth noting that People's QE is just about the only tool now to hand to deal with it. Yanis Varoufakis said that on Question Time last week (2.25 on).

Please recall that there are ways to address the crisis we're facing. We could face the music, and if not dance, at least get through what's coming our way and come out on the other side in a better place. But to do that we have to make better decisions than were made from 2010 onwards, or we really are in trouble.