The Guardian wrote this about my interview on the Today programme this morning:
Two years ago, when Jeremy Corbyn was first running for the Labour leader, the tax campaigner Richard Murphy was identified as the brains behind “Corbynomics”. Murphy actively campaigned for Corbyn* and was credited with coming up with proposals for “people's QE (quantitative easing), an ambitious plan to use QE to fund infrastructure investment.
This morning Murphy was on the Today programme. But he is no longer a Corbyn economics guru, and he was on the programme expressing reservations about John McDonnell, the shadow chancellor's, announcement of his plan to raise tax for those earning more than £80,000. Murphy was not critical of the plan per se, but he argued that McDonnell was not being sufficiently ambitious, and that McDonnell was too worried about the need to balance the books on the current account. Murphy said:
We are talking about a handful of billions of pounds. It could be £5bn. It may be less. I've seen those estimates. I doubt if it's very much more than that. In other words, taxing income tax on those earning more than £80,000 a year, by an extra 5% say, will not make a big difference to the overall balance of the government's books.
It does make a difference, a powerful difference, to the signals on inequality, and I think that's important. But it doesn't solve [McDonnell's] underlying economic problems and it doesn't help his commitment to actually beat austerity, pay people what they deserve and so on. In other words, this policy constrains everything else he can do ...
McDonnell should have been talking about he was going to do to deal with the real issues that are facing the economy, the lack of investment, low pay, the lack of really good employment prospects for young people. All the comes from investment. He should have been talking about how he was going to fund that, and at the same time making clear that he was not going to be charging the same people who are going to get opportunity from that to pay for it. But he hasn't said that. So it's a political mistake to do it in this order.
Murphy set out his argument in more detail in a post on his blog yesterday. In it he argued that McDonnell was “just not leftwing enough to do the right thing for Labour”. Here's an extract.
Labour is not making an economic case for a post Brexit era.
So it's not saying that after Brexit Labour could require that 20% of all pension contributions be invested in UK job and wealth creating programmes as a condition of the tax relief that they enjoy. The last time I looked that would raise $16 billion a year for housing, green and innovation investment in the UK.
Nor is it saying that Labour could use QE to buy out ruinous PFI schemes, but I have no idea why not.
And it's not saying that Labour could, after Brexit, offer a national savings ISA that would invest in the UK, paying 2% per annum tax free to £5,000 of interest a year. Sure that's more than the cost of government borrowing, but after inflation it's a net zero cost to the government and the best savings product on the market. This would see money pour in. And what could it be used for? Start with social housing and the Green New Deal plus a dedicated transport fund. It also provides regional investment funds for each devolved government and region — and people can direct their money to the area they want. Think that what that could do. Pension saving would also be allowed in this fund. Cash would be liberated for the future investing in what we need now.
* I campaigned for my ideas in my opinion.
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Hi Richard
I love the idea of the ISA: the one question I have is that, if this was so successful it cannibalised the ISAs offered by private financial institutions would that threaten their liquidity? By threaten I mean, tip them over the edge. (I would imagine the main campaigners against this would be those financial institutions complaining they can’t compete but they also might raise this as a spectre, i.e. it sparking another sort of banking crisis)
thanks
I can’t see why it should
Do you have data suggesting it might?
And if so, what does that say about the UK economy?
Hi Richard: I assume the % of a typical financial institutions’ liquidity as supplied by ISA deposits is small but I didn’t know if you were any the wiser.
I entirely take your point about it reflecting poorly on the UK economy if it would threaten it of course though equally I wouldn’t put it past those same financial institutions to raise it as a phantom issue if they thought it (a government ISA) would threaten their profits.
I will be honest: I don’t know and have not checked
What are you thoughts about what the Guardian has written?
Is the Guardian using your interview on the Today programme to put down John McDonnell or promoting your ideas as an alternative to current economic thinking?
I am not the Guardian
I rather hope the latter
That’s how Andrew Sparrow tends to place my commentary when he uses it
Good word Richard.
If, as seems unlikely, Labour get elected and fail to pick up the tools the failure will be disastrous for the political future of the country.
* I campaigned for my ideas in my opinion.
By accepting unpaid invitations to packed pro-Corbyn rallies and giving rousing speeches.
Indeed
And why not?
It got my message out
It is politically infeasible for John Mc not to say he will balance the books.
But he believes it too
Given that political empowerment requires economic and monetary literacy and the Labour Party has done nothing to promote that in regard to the electorate it suggests very strongly they lack this literacy along with most of the other political parties with the possible exception of the Green Party. If the UK is in a mess it stems directly from this failure of literacy.
What politicians such as John McDonnell should be doing is sketching out a vision of a just society not trying to out do the Tories at balancing the books. Richard as shown clearly how it would be possible to rebuild society so not to do so would be failing everyone who believes in a just society. In similar way I recently had an extension to my house this was paid for by using my savings and borrowings this cost £45000 but my income is less than £25000. And just like me you also find businesses spending more money when investing than they receive in income so why can’t government do likewise. At least we the people should be offered a real choice or maybe building houses,hospitals,schools and roads etcetera isn’t important
Derek
I think that as a politician you are faced with either stating and restating tired cliches (“strong and stable”) on the assumption that that the vast majority of voters are not able to absorb messages of greater complexity or seeking to address the issues in detail. The media cannot deal with the latter hence the minority stop reading newspapers or listening / watching radio and TV.
The dumbing down process is relentless, I can’t see how a serious campaign can be launched given the current state of the media in the UK. You can have six minutes on Radio Four or ten minutes squeezed between the brain warping repetition of adverts on commercial outlets.
The only way to combat this is through the repetitive restatement of complexity and detail, alas this is never going to happen in a world dominated by the need to attract audiences.
I don’t Gree
Good ideas get through
There is a lack of them
“Taxes DO NOT FUND government spending!!!”
Once the aghast, eye-popping, incredulity has died down, an explanation will be demanded.
Richard, could you not have stated that outright to the Today audience on Radio 4 the other day?
It’s written in the Joy of Tax, after all.
Unfortunately you have to some extent answer the question
I understand.
But you have, quite rightly IMO, been regularly bemoaning the fact that McDonnell doesn’t seem to get this, hence his book-balancing narrative, so it wouldn’t have been exactly off topic to have slipped it in as a prescription for how he should approach the public accounts.
“Taxes *Do Not Fund* Government spending!!!”
How’s that for a tax bombshell, mainstream media?
Maybe next time, eh?
I try….
“A trap is a function of the trapped”. Labour must set a trap for the Tories. I agree with you Richard Labour needs to be a lot more radical, but with a softer approach. Labour should face up the fact that the party (and the country) are divided over the present direction of travel. A lot like Capitalism and many don’t. For those that like Capitalism we offer our present manifesto. For those that don’t we suggest you form yourselves into worker co-ops and all become members of the same bank.There is a problem, Worker Self Directed Enterprises (WSDE’s) as a system is a direct challenge to the economic system of Capitalism we all live in. However, income and wealth would be better shared and not polarised between the 1% owning virtually everything and the 99% struggling to make ends meet; worker co-ops would result in a much more stable economic system.
Worker-co-ops are an alternative to the undemocratic hierarchical enterprises which are a feature of our present Capitalist system. If workers democratically controlled their own enterprises you wouldn’t find them awarding a few executives at the top with huge salaries, large payments of dividends to wealthy shareholders whilst most the workforce had to make do with the left overs. Neither would the workers vote to shut up shop and export their jobs to a lower wage economy, leaving themselves unemployed, struggling to pay their bills and a burden on the social.
We have to recognise that the two systems are incompatible. Some people will not be willing to take the plunge into something so unfamiliar. We would all face the risk of ditching a familiar for an uncertain future. The difficulty is that Capitalism is the only system the great majority of us know. The left’s narrative is very plausible, but it is also for many a leap in the dark. The right can also conjure up a plausible narrative, even if they must employ trickery and airbrush history. Even so the prospect of changing economic systems can be very scary. What if it all goes wrong? What then? We could all end up in a worse place — Stalinism and all that. Labour must find a way to alleviate these concerns.
Therefore, many even on the left will, and do oppose such radical change. Hence the current difficulties within the Labour party. We should not be over critical; history teaches us they are right to be cautious.
One way to allay fears is to make the choice of joining or forming a WSDE a democratic choice. Thus, the community based WSDE and the Capitalist system would co-exist as two separate systems. Members of one would be free to join or leave the other whenever the grass on the other side looked greener.
If they choose to become part of the WSDE movement they all agree to join the same bank constituted for that purpose. To keep the two systems separate, protect the WSDE’s investments and keep them out of the hands of the “banksters” and at the same time ensure proper funding. Members of this bank can include the NHS, social care, local authorities, county councils, research, artistic, sport and academic institutions and by agreement small and medium enterprises. There will be certain protocols that members will need to follow, but if each candidate can demonstrate that their activity adds value to the economy, entry should be automatic. Zero sum business models that enrich a few at the expense of the many will not be allowed. They must remain in the Capitalist system. Economic rent seeking and rent-extraction will not be permitted. They too must remain within the Capitalist system.
It is important that all members of the WSDE movement belong to the same bank, because in so far as they transfer funds against one and another the net cost across the whole system is always zero. Every debit will be cancelled by every credit. If the WSDE movement covers every single aspect of the economy e.g. Agriculture, fisheries, housebuilding, health, social care, transport and so on and all our needs can be meet from within that community — the cost to the community is zero. Of course, that will not be the case there will be trading between members of the WSDE community and between the WSDE community and the Capitalist community and trading between home and abroad. Capitalism, feudalism and WSDE’s will co-exist for many years. Any economic system must serve all. However, the only net funding the WSDE system would require is where it owes money outside its own system
However, we must acknowledge there is a problem with this scenario. There will be enterprises and institutions with a surplus and equally those with a corresponding deficit in funding e.g. NHS & Social Care. Let’s as an illustration imagine that in typical Capitalist fashion those with a surplus will be offered say 0.25% on their credit balances and those in deficit will be charged say 10% on theirs. The differential two rates will always be a net drain on the WSDE economy. The result will be that that economy too (in accordance with the arithmetic of compound interest rates) will be sent every so often just like Capitalism into economic, booms, busts and depression. But that happens only because the bank is owned by Mr and Mrs 1%. If the bank is owned by the community of WSDEs the problem disappears. The WSDE’s cannot owe themselves money. In true jubilee and Christian tradition, the debit and credit entries are written off against each other.
To encourage people to form their own co-ops the minimum wage in the Community economy can be set at £20phr and nobody earning under £100k pays any income tax. Poor people are like rich people. They generally like money and generally don’t like paying tax. That’s all the heavy lifting Labour needs to do. No need to try and explain the science behind this policy, although of course it is available for all those who are interested.
The trap in question is that this proposal can only be attacked by exposing the critics as champions of the interest of the 1%.The Tories can in no way match the minimum wage or tax promises. They have to oppose them. They have to oppose the democratic and voluntary choice of the co-op members. A choice that the members can reverse at any time.
There’s a lot of radical economic policies (or at least their impact would be radical) (indeed much of this blog) which can be argued for on the grounds of simple common sense, without having to nail your colours too far to a political ideology IMO. This is what Labour need to do. Make the common sense case for increased investment and getting money recirculating. Then if they want to do more in terms of actual redistribution, learn from the Tories, don’t bang on about it now, be sneaky and bring it forward once you’re in government.
Hi John,
This sounds interesting, are these ideas discussed in more detail anywhere?
I was thinking along these lines the other day when reading about Robin Hood energy in Nottingham. If the left ideas are sound they should in theory work on a smaller scale. i.e. to prove that energy companies are exploiting us, a left wing group, perhaps the LP, a large union or maybe something new and baggage free, could set up their own. They could pay experienced people reasonable salaries to do the work as a normal company but plough the profits back in to investment, rebates or just lower bills. If your salaries and terms were decent you would attract good staff and have good productivity. Profit sharing or bonuses could be allocated fairly to encourage hard work and unity of purpose. If it worked then the service would be better and/or the bills would be lower, so more people would naturally want to join. The concept would be proven and the left would have not only gained experience in a business sector but also a cast iron example of the superiority of their ideas. You could even have competing companies within a sector to promote efficiency. The ethos of the company would promote left wing ideas and I presume legal securities could be set up to prevent the companies ever being bought out or taken over by mainstream capital.
I presume this would work for banking, insurance, pensions, healthcare, supermarkets etc, too. Just about anything eventually I suppose. The LP alone has allegedly ~600,000 members, so surely there are enough people with socialist sympathies to make these ideas viable. If we need an investment bank, can’t one be set up by the left? Despite what Mail readers would like to believe not everyone on the political left is a useless scrounger, we have capital to invest and expertise to utilise it. The more the Tories privatised the state the more sectors and opportunities they would be relinquishing control of to our alternative society.
To me it seems the main issue the left has at the moment is one of trust. So to win back the trust we perhaps need to start proving our concepts instead of expecting faith. Perhaps we could even set up news organisations to tell our side of the story, not a new Pravda or the Socialist Worker but proper objective fact based journalism. Again by providing a quality product you naturally attract more customers. It wouldn’t need to be high brow or boring, even socialists like celebrity gossip sometimes.
I suppose ultimately what I’m saying is that we should beat them at their own game.
That was my recent thought anyway. Perhaps I am a just a naive dreamer.
Alberto
“Are these details discussed anywhere?”
Try democracyatwork@.infor
Richard, much though I would like to see ideas such as yours implemented I think Carole Wilcox and KeithP above have it right in that trying to explain them in the election environment would just be counter-productive and result in a monstering by the media.
OK, please let’s have lots of radical ideas such as yours in the manifesto small print but the swing voters won’t be reading it, their decisions seem to respond to emotional triggers rather than to any thought-through understanding of policies — and this is something that the Conservatives and their supporters in the media fully understand and manipulate. Theresa May is hoovering up all the people in love with Brexit, even though they have no idea what it will mean in practice and don’t seem to realise that Labour are fully committed to it anyway. The people who think that Jeremy Corbyn is too scruffy and unpatriotic to be PM, and give that as a reason for not voting for a Labour County Councillor, aren’t interested in strategies for infrastructure investment. The people who are comfortably off, including lots of pensioners, are happy with things as they are, and the people who are struggling haven’t got the time or energy to think any of this through.
Maybe a cynical view, but to win an election requires a mastery of “dark arts” (ask Alastair Campbell), that’s where Corbyn and co. seem to be failing.
We need to add dark arts to good ideas
Bernie Sanders began to get near it