There are moments when a lack of understanding of how the government is financed is used as an excuse for supporting the oppression of vulnerable members of society. Take this tweet from Andrew Sentance as an example:
So, @MarcusRashford great to hear you speaking up in n favour of the underprivileged children who need school meals. Is it OK to raise the top rate of tax on yourself and other top-earners to pay for this? Let us know.
— Andrew Sentance (@asentance) June 16, 2020
Andrew Sentance is a former member of the Bank of England Monetary Policy Committee. He knows how the Bank works. He knows how QE works. He knows tax does not fund government spending. Or at least, he should.
But he uses his ignorance to pretend that the government cannot afford to support vulnerable children unless the wealthy pay more tax.
So let me make it clear that no programme of government spending ever invented has been dependent upon the wealthy paying more tax.
It's true that controlling inflation requires that we tax the wealthy to reduce the amount of cash in the economy after the government has spent.
And it's also true that beating inequality requires that we proportionately tax the wealthy more than most people.
But paying for support for children who need a meal that their parent/s or carer/s cannot provide because of the gross inequality in our society has never required that we tax. The government can do that using Bank of England created money, just as it can bail out Easyjet using money made in the same way, or pay for anything else come to that, if it so wants. Becauses that's how government funding works.
I replied to Sentance saying this:
Do you have even the remotest idea of how government is actually funded Andrew, because if you had you’d know how utterly crass that question is at this moment and that all you’re doing is siding with those imposing poverty on kids who do not deserve it
— Richard Murphy (@RichardJMurphy) June 16, 2020
Sentance replied with this:
In effect he's saying that my position is sycophantic envy politics, when it's actually rational economics, a proper explanation of how government is funded and only reveals a concern for tackling inequality. He apparently knows nothing of such things, which we know because this was his reply:
In response to which said:
I resigned from Cambridge Econometrics when they appointed Sentance as an advisor because I could not face working with him, as they wanted me to do. It's one of those decisions I haven't regretted.
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Well done for pushing back so firmly (and politely).
Stupidity is forgivable but the disingenuous, patronising approach he adopts is not.
Thank you for your succinct comment on tax.
I could never quite find the right words when challenged before, but hopefully I’ll remember this for the future 🙂
What I was surprised with was how low the cap on income was before you are excluded from an entitlement to free school meals which is set at £7,000 per year. I hope I am wrong, that I misheard it but, if true, shows the crassness, insensitivity and lack of empathy from people, such as Andrew Sentance, who enjoy a salary many times that amount and have no understanding of the real hardship that some people in our country suffer and yet determine policies that impact on their lives. He embarrasses himself both by his thought process and his denial of SPEND AND TAX reality. Shame.
So the government just creates money. Or borrows it. Great. How is that paid back then. Does it devalue it when creating loads more. What a silly system. Surely equality then creates a need for fairer tax laws then?
How else do you think money is created?
And it’s paid back through tax, when required to control inflation
And yes we do need better tax
See Tax After Coronavirus (TACs) http://taxresearch.org.uk/Wiki/2020/05/11/tax-after-coronavirus-tacs/
This is the same guy that joined Pricewaterhouse Coopers (PwC) as their senior economic adviser in Nov 2011 (he retired from PwC at the end of October 2018). In and of itself, this speaks volumes about his views and opinions on taxation, economic policy etc.
But here are a few quotes from his PwC blog and other pulblications so that readers can judge for themselves:
23rd February 2012 – ‘But though these policy interventions were justified in the short-term, they cannot be used to sustain growth in the longer term. Government deficits need to be reduced to ensure sustainable debt levels. And the continuation of highly stimulatory monetary policies risks creating some combination of high inflation and permanently distorted financial markets’
https://pwc.blogs.com/economics_in_business/2012/02/all-shook-up-economic-policy-in-a-post-crisis-world.html
Paying Taxes 2016 – ‘European economies with high spending levels need to raise the revenue to fund their expenditure programmes, and this can often fall on employment income taxes. Finding efficiencies in government spending programmes, using technology to improve the delivery of public services, and welfare reforms – aimed at capping and limiting the availability of benefit payments -can all help to ease the amount of tax which falls on labour income’.
https://www.tralac.org/images/docs/8641/paying-taxes-2016-ch-3-tax-policy-and-administration.pdf
I am not surprised that you resigned when he was appointed and I comend you for taking such a stance.
There are far too many willing idiots in the world and Sentance seems to be one of them.
He shouldn’t have been allowed near the MPC as far as I am concerned, I admire your restraint…………………..
The context we are living through in effect empowers firmer ‘pushback’. This is not 2008; they cannot resurrect austerity in the sure knowledge that suffering for the many will be a ‘slow burn’ and generally, and conveniently out of sight. This time the consequences will be in their faces; and immediate.
I do think proponents of MMT too often allow neoliberals to set the debate agenda. He/She who controls the agenda often controls the debate; especially when it takes place in the British Press (heaven help us all), or even most mainstream broadcasters .
Yes – I think this BLM activity is not just about black lives, I think people have naturally joined in because it also sums up how they feel about other matters – one that has not been chosen for them by the establishment this time like BREXIT was.
This has sent a warning shot hopefully over the bows of Johnson and the ERG (the Egalitarianism Rejection Group) and might make them think about what they do next – hold off further harsh policies?
The pandemic has undoubtedly revealed just how shallow this Tory lot of Johnson and the ERG are – it is a Government(?!!) designed to destroy not sustain nor protect and I think people are beginning to see that now. The Tories are just so limited by their anti-Europe/pro U.S. ideology.
Completely unbelievable that the Bank of England should have had such a monetary system illiterate such as Andrew Sentance on its Monetary Policy Committtee particularly now that the BoE is gobbling up gilts like there’s no tomorrow in order to rescue the private sector from the adverse economic effects of the coronavirus pandemic. It’s not as though this direct financing is anything new for the BoE and we can go back to the First World War to see government directly financing the war effort and not waiting on taxes. What a backward country this is!
See page 214 Bradbury Notes:-
https://www.bankofengland.co.uk/-/media/boe/files/quarterly-bulletin/1969/the-boe-note-a-short-history.pdf
http://leconomistamascherato.blogspot.com/2019/12/currency-and-bank-notes-act-1914-very.html
https://bankunderground.co.uk/2017/08/08/your-country-needs-funds-the-extraordinary-story-of-britains-early-efforts-to-finance-the-first-world-war/“
Illiterate is a good term
He’s not alone unfortunately
Typo alert:
undertstanding (in heading)
becauses (near end of para beginning “But paying for support for children…”
PS Maybe some right wingers are starting to get it: see Simon Jenkins’s article at
https://www.theguardian.com/commentisfree/2020/jun/15/british-economy-cash-rishi-sunak
Apologies
As a kid in the 70s i went to school hungry, had school dinners in the summer holidays. I could never concentrate at school due being hungry all the time.
I am sorry Darren
I was lucky. I did not. But my mother was a music teacher and knew all too well that children did do just that. What I can’t recall is what she did about it, I admit. But she was in many ways quiet when it came to doing things, but did them anyway
Who is the “us” Sentance refers to. His fellow super wealthy no doubt.
What is more astounding is the total disregard for tackling the issue of providing nutrition for those who cannot afford it but instead boiling it down to whether rich people should suffer a minor drop in their income which they don’t spend anyway. Astonishing.
Andrew Sentance used by the corrupt Bank of England as a useful idiot! The BoE has already admitted indirectly that it cooked the books to fund the First World War:-
https://bankunderground.co.uk/2017/08/08/your-country-needs-funds-the-extraordinary-story-of-britains-early-efforts-to-finance-the-first-world-war/
The government also cooked the books for war funding purposes by temporarily going off the Gold Standard in that same war:-
https://en.wikipedia.org/wiki/Bank_of_England_%C2%A31_note
http://leconomistamascherato.blogspot.com/2019/12/currency-and-bank-notes-act-1914-very.html
https://www.gold.org/sites/default/files/documents/1914aug6.pdf
Excellent Helen thank you.
How does MMT account for money leaving the economy – e.g. if the government spends 10bn but 30% of that is spent buying stuff from overseas?
I fully subscribe to the multiplier effect and spend before tax – but I admit this is one area of it that I can’t quite get my head around.
If it’s paid in sterling it remains in sterling
… meaning that it will inevitably come back into the UK at some point and end up taxed? Is my understanding correct?
Then I guess the big issue there is if having to convert it to buy things in foreign currency and our exchange rate is poor.
I still can’t get my head around why e.g. Argentina keeps getting into crises by getting into debt in foreign currency. Why not use it’s own?
No one will accept its own
And re your first comment, basically yes
“… the National Debt went up unlawfully from £650 million in 1914 to £7,500 million in 1919.”
https://www.newchartistmovement.org.uk/articles/the-bradbury-to-the-rescue-by-justin-walker
Economic response to another crisis the coronavirus pandemic now being repeated but electronically.
Will somebody buy Andrew Sentance a history book!
I mean what’s genuinely breathtaking is the ignorance of immediate evidence.
Government has immediately and enormously increased spending in the last 3 months, without any corresponding tax increase whatsoever.
How has that been possible if the Government needs tax to spend?
I’ve said it before and I’ll say it again.
Kids go hungry in the UK not because there isn’t enough food or the logistics to distributed it. They go hungry due to a lack of money. How crazy is that!?
Give them the money, or the voucher or the whatever. Or just give them the food. Or would we rather they go hungry?
And not just in the UK. People tend not to know that the mass starvation that can afflict the Third World – think Band Aid and Ethiopia as an example, all those years ago – is due to the fact that people cannot afford to buy the food that they need. We know that drought and crop failure occurs, but it is inability to buy food on the world market that causes the problems. And usually the money is not there because of institutionalised corruption in the countries that suffer so.
Remember that this was policy in this country
The Irish potato famine was a choice: Ireland exported food throughout that era
Precisely Marcus Rashford’s point. From his letter to MPs: “Political affiliations aside, can we not all agree that children should not be going to bed hungry?”
Spot on
It’s just cruel.
It’s like they should be punished for their crap circumstances.
I think there is this underlying idea that it’s due to crap parents making poor decisions. Spending their money on fags, the bookies and booze.
Kids going hungry is a political choice. It’s policy.
One reply to Rashford I read on twitter really hit the nail for me in expressing the beliefs of the right:
“It’s the parent’s responsibility to feed their children, not the government’s.”
Where does this belief come from and what judgments does it lead to?
> “It’s the parent’s responsibility to feed their children, not the government’s.”
> Where does this belief come from and what judgments does it lead to?
I think it’s fault based politics. Inequality in our society relies upon the allocation of fault. If you are rich, it is because you are talented and have worked hard, and deserve it. If you are poor, it is your fault. To admit otherwise is to ask questions about “neo-liberalism” and the role of government in providing a more equal society, and address the fact that 4m children live in poverty.
I’m a bit surprised that someone with such a high public profile as Mr Sentance is prepared to offer such gauche comments in public, and on this particular forum, even if they do reflect his personal. I would have expected him to have mustered a little more sophistication and to have displayed at least a token awareness of the complexities around this subject.
Andrew Sentance purely an exercise in political deflection. Similarly Mike Hancock was urging footballers to put their hands in their own pockets to help the financial plight of the Premier League. I also remember Mr Blair saying he was relaxed about the earnings of David Beckham. What some footballers earn is a pittance ( low millions) when compared with the vast amounts (high millions/billions) paid to the top bankers and hedge fund managers. The footballers are picked on because the majority are from the working class, while the super rich backers of the Tory Party get a free ride.
“What some footballers earn is a pittance ( low millions) “
“The footballers are picked on because the majority are from the working class“
Is this post serious or a parody? As it happens football is historically a working class sport but it’s completely lost touch with that fan base to the point where there is now a ton of resentment
Oh, come on…..
I am known to stand on the terraces
And yes,m you still can at Cambridge United
Yoru case is decidedly hollow
Yes agree league 2 is real, I follow a team in the conference north. The Premiership is what’ I was referring to
I quite like League 2
It is a bit rough but the friend I go with a few times a year and I always enjoy the match