There is no budget that does not unravel. Rishi Sunak's has. It's apparent there is much wrong with it, but the most significant was the issue surrounding nurses pay, which is totemic of the austerity built into the budget, none of which is necessary.
The last year has shown that the argument ‘we cannot afford it' does not hold true. If there are resources available to use that need to be put to use then the reality is that there is nothing that this country cannot afford.
Money is not scarce. Money is a wholly artificial mechanism created to ensure that the necessary exchanges that put people to work in our economy can take place. That can be done. The money to make this possible can always be created.
And the necessary exchanges are those that fairly reward people. Anyone who thinks that NHS staff only deserve a 1% pay rise are callously indifferent to the effort they have made and and the suffering that they have endured.
To argue that we can pay no more is to ignore the staggering £37bn of waste in NHS track and trace. It is to also ignore the fact that 92% of this year's deficit has been funded by the Bank of England, as will next year's too, of which I am certain.
To pretend in that case that money is not available is a straightforward lie. All the money we need to make our economy work is available. There is just a choice to pretend otherwise that prevents people getting fair pay, and imposes austerity.
I accept that creating money this way is inflationary. But it only inflates one thing, and that is the wealth of those already wealthy. It was another political decision, also made in this budget to do nothing about that. There were no steps taken to address inequality.
The corporation tax increases were deferred. Capital gains tax was not increased, and remains a massive creator of injustice. There was no attempt to make those in high earnings pay as much national insurance as those in lower pay.
Council tax remains incredibly unjust, and biased to the rich and against those on low income. Those with investment income continue to pay much less in tax than those who work for a living do, because they do not pay national insurance. An extra tax to correct this was needed.
But none of these political choices were made. Instead it was decided to penalise those working in the NHS. And to penalise those in care, education and other vital services on which we depend as well.
And none of this was necessary. Taxes could, and should, have been increased in the way I have noted to address the issues Bank of England funding of the government creates. But the decision to leave the rich with their riches cannot be used to justify punishing the NHS.
This is all politics. It is politics to bias funding to Tory MP's seats with extra funding. It is politics to penalise working people on low pay, as most who work for the government are. It is politics to leave the well off with their unearned gains.
And the sad thing is, it works. So strong is this narrative; so embedded is our belief that there are deserving rich people, and undeserving poor people who have to work for the common good, for heaven's sake, and so sure are we that Eton cares, that apparently we forgive them.
How do I know? Because the Tories have a 13 point poll lead. The gain for them of permitting mixing at Christmas that has unnecessarily killed tens of thousands, and our pathetic gratitude at being potentially allowed out again six months later means we will vote for them.
The masochism within this is unfathomable. ‘Beat us some more' we appear to be saying. ‘Grind down those who work until there is nothing left but grind for insufficient reward' is the plea, whilst the wealthy get wealthier.
When will we wake up and appreciate this is all just abuse? That we are all being collectively bullied by an elite who think we can get away without, just as easily as they think they can pay off senior civil servants?
The reality is that we too now need a settlement to compensate us for that abuse. We too need to be paid for the effort made, the contempt suffered, and the indignity endured as a result of the indifference thrown our way. And soon.
I hope soon. Because I can't see how things can continue like this. Our society is already fragile enough. I worry about how much more it can take. And when I see people - in our government - choose to abuse it further, I worry.
I worry that people cannot survive this. Real, warm blooded, caring, loving people can be broken by this. And that's what makes me angry. Because this is unnecessary. The money to deliver a decent society exists.
All that we need to make the lives of the vast majority of people in this country is a real understanding of economics, of money, of how it interacts with tax, and how we can use that for the common good.
But no political party seems to get that as yet. And until they do, this unnecessary suffering will continue. And that makes me very angry. Pointless pain is what we're enduring. And all for the sake of accepting that money is not a constraint on our potential, and never will be.
Thanks for reading this post.
You can share this post on social media of your choice by clicking these icons:
You can subscribe to this blog's daily email here.
And if you would like to support this blog you can, here:
“If it’s a debt, it has to be repaid,” wrote my politically illiterate, but articulate, well educated friend in response to a copy of your article on why the national debt does not have to be repaid. As you say, with all parties singing the same song, there is a mountain to climb, but it IS difficult to escape from the household budget model. That’s the permanent advantage of the populists. Simplistic slogans for complex problems. Stick at it, Richard, for all our sakes and please devise new ways to move your argument into party political circles.
I will try…
With that education in mind, here’s the BBC being schooled by (I know not whom) in where the money the govt has borrowed has actually come from, ie the BofE. I’m encouraged to see this on the MSM https://threadreaderapp.com/thread/1367205630176620550.html
You can’t have the peasants thinking that austerity is not necessary Richard.
Next thing you’ll be telling everyone that hedge-funds are parasitic enterprises!
Terrible!
What will be the tipping point? And when will it happen? Despite the incompetent handling of the pandemic, despite the corruption in the awarding of govt. contracts, despite the number of deaths, despite the appalling treatment of many, there does not appear to be sufficient anger in response. If a General Election was held today, the Tories would get back in.
At the moment, I think they will get away with it. They will find new groups to vilify and demonise and will con many into blaming them for the problems that they, the alleged govt, have caused . I’m struggling to see how it changes.
Craig
So agree with this outpouring Richard. It seems to be the only narrative people are being offered. Labour is not offering any coherent understandable vison of a better society. In this one-party failing state, the government has its own oppositon, who get more air time than the ‘official’ opposition – back benchers, red wallers, ex chancellors etc. Add in the pliant BBC, and government ‘owning’ most of the press, – there is a mountain to climb.
Anybody that views the pay ‘increase’ to the NHS and public sector employees as anything other than a deliberate action as part of the overall desire to drive all public services into the ‘free’ market is hopelessly naive.
Standard Tory MO, underfund a service, demoralise and insult the staff, disenchant the users, claim There Is No Alternative except to open it up to the markets, sell at fire sale prices. All the Tories chums get a nice uplift, job done!
In something I suspect is not unrelated, I notice the discussions around opening the NHS up as part of US trade deal have gone very quite.
Hi Richard,
Just caught this clip from BBC – it seems some journalists have picked up that a big chunk of govt spending is covered by QE. The basic message is govt deficit is not the issue. https://www.bbc.co.uk/programmes/p098knqz?at_custom4=D4DF8AA4-7C3A-11EB-8C30-0A223A982C1E&at_custom3=%40BBCNewsnight&at_medium=custom7&at_custom2=twitter&at_campaign=64&at_custom1=%5Bpost+type%5D
Indeed…
I “discovered” MMT about 2 years ago ,and as I have gradually learned more about it, it has struck me that many of its now leading proponents around the world only came to it very recently, as a result of the GFC. I think that to now be getting the the exosure and consideration that it does, is pretty good going. It is being promulgated by some very capable people, including yourself Richard. Putting it about is something we can all contribute to. I know that I have introduced it to three or four of my friends via Facebook posts. I will be getting a speaker to come and talk to my local Labour Party and following that I will propose a resolution to my CLP that Labour adopt MMT as the basis of all its economic policy (OK, don’t laugh). As you have said yourself Richard, some people ARE questioning what they are being told in the MSM. But we are asking people to suddenly start to believe that the sun goes round the earth, rather than the other way around. It is not surprising that it is going to take a while to catch on. But I do think a lot of progress is being made. I am just starting the first of Bill Mitchell’s online MMT courses, and 2,600 people have signed up. Nil carborundum.
🙂 Thanks!
> I will be getting a speaker to come and talk to my local Labour Party and following that I will propose a resolution to my CLP that Labour adopt MMT as the basis of all its economic policy
I think this is really commendable, a process of education from the ground up. I’ll try the same with my local political party
Do you ever contemplate, Richard, that if the truth about how money is created and how effortlessly government debt can be stacked on the Bank of England’s balance sheet becomes common knowledge, this might open the doors to a brand new breed of populism in this country?
Namely, in the nightmare scenario, majority votes would be repeatedly won by whoever promises to print the most money and plays down inflation the most, until financial responsibility is eroded at all levels of society and, eventually, after a couple of currency crises and ruinous recessions we end up pegging the pound to the euro.
Perhaps that is what Rishi Sunak (who doubtless understands exactly how government borrowing works) and all who have been and will be in his job fear the most.
Terentius
that’s why the bankers insisted on an ‘Independent’ bank and why they designed the euro. The Governor of the Bank of England was also involved in the late 1990s. A 3% deficit was the maximum and above that the states should borrow from the market. The market would impose discipline upon them.
Politicians would spend recklessly, causing inflation and a financial collapse. Money should be left in the hands of “prudent, responsible and cautious bankers”. Or so their story goes.
You may hear hollow laughter in the breeze.
In fact the banks created securitised assets , lent recklessly and created the greatest financial crisis since the 1930s. It is a danger but so is the banker thinking of Mr. Sunak.
Then after their shareholders were saved, they insisted that the public sector had to be cut to balance the books.
As for parity with the euro, it is probable that Brexit will soon ‘achieve’ it.
I absolutely agree with this.. what will could well happen if populism takes over and force Govts to print and pay excessively is that the boom is great but the bust is horrendous when everything is reigned in. In that sense the story is akin to Keynesian and boom bust economics of the 60s/70s..of course the MMT purist will argue responsible government wont allow this to happen. But many not would concur
I admire your faith in democracy
But tell me, what would you rather instead?
And how would you defeat populism?
So, you are willing to accept bad policy NOW (leaving people without work and failing to invest in the infrastructure we need to ameliorate climate change) on the off chance that the people in power at some point in the future might pursue the wrong policy?
Let’s get today’s policy right and worry about tomorrows “what ifs” tomorrow.
Precisely
It’s sad to say the UK is Neanderthal Land. If you ask the majority of the electorate why private banks aren’t forced to balance their books before they lend like politicians want the government to they simply don’t understand the question or the reason for it!
This is like the Neanderthals dying out because homo sapiens were better at social networking to mobilise resources and of course the invention of money really boosted social networking to get things done.
That’s a great rage against the machine
It is how I felt this morning!
I would say that it is a permanent feeling, long may it last. The undecided will listen to conviction. Its not just what you say, it’s how you say it too.
All you have to do is read Timothy Snyder’s ‘Road to Unfreedom’ – even just the first chapter – and his description of ‘the politics of inevitability’ to know what is going on here.
We are being led by the nose into an abyss.
I’ve bought that on your recommendation @PSR…I trust that it will be informative.
Generally, the populace is only interested in sport, celebs and when they can go to the pub. We here or on Twitter will pick over the political disaster but a significant minority will vote Con…again. Until it affects them directly, in their pocket nothing but nothing will change.
I was thinking of the disappointed Cornish fisherman, in their place I would – literally – camp outside their new Con MPs house or office and make their life as painful/disruptive as possible. What will be the point of writing to your MP? I get a standard template answer and it usually directs me to an article behind a paywall in the Telegraph.
Regarding NHS pay, I help where I can. From reading blogs the front line staff lack basics such as coffee and snacks so I contribute to my local hospital charity, (although I disagree with the charity concept in principle). I just hope it gives them some relief but what can we do to alter the political landscape? In my view, the MSM is the only way to change things, when that is altered all else will flow from that.
Why is industry not kicking up a bigger fuss over the Brexit fallout? Because picking a fight with the government will make their life even more difficult. To some extent, the same applies to the MSM. Any awkward questions mean no further contact.
I’ll give them this: the Tories have grasped the psychological means to control the views of a large population.
Note how even though the government has been found outside the law in several respects nothing changes. Patel has allegedly bought off a senior civil servant (for in excess of £300k apparently).
Notice also how no one is sacked no matter how evil and guilty they are. The BBC is a party to this gaslighting. Way back in 2008 they were asking the very people who brought the system down for their opinion! I gave up on BBC news several years ago. The examples are legion of the skewing events to favour the government.
I agree with everything you say Ian.
The book that you say you will read (Snyder’s ‘Road to Unfreedom’) is a compelling account of how ALL levels of society – from politicians down to voters – are locked in to a particular conceptual world view that leads to the ‘death spiral’ effect we’ve discussed here.
It’s the politics of hopelessness produced by vested interests and a consequence of that is a brutalised, hard bitten society that revels in expanding nihilism and suffering. It is identity politics through the common ground of pain – another way of looking at Guy Standing’s ‘precariat’ concept, but I think Snyder gets closer to the twisted psychology better.
And typically, Neo-lib economists like von Hayek and Friedman of course never saw it coming – just like they didn’t all the market crashes we had up to the big one one in 2008 either.
If turkeys bred for Xmas could vote would you be surprised they vote as they were genetically selected to?
Douglas Adams made a comical point out of such born to be eaten mentality.
I suppose that goes with born to be at Eton, too.
The thing about Eton btw, is that none of the Royals are schooled there! Interesting innit? Only the slave masters sons – not daughters, see?
As for polls , you know my opinion, they are balls. In the current era they are more about perception management, advertising and story building, gaslighting in short, for the ever more ‘sophisticated’ vote rigging.
The controlled Oppositions and the current systems of supposed democracy, have evolved over centuries to retain the status quo , which is only ever threatened by revolutionary uprising and decapitation of the ruling castes.
They have found ever more ways to chain the masses.
Religion, Education, Welfare, Jobs, Entertainment, News – Identity Politics and self censorship – along with patriotism, canon foddering and being good little selfish minions, who know their place and will at a button push, jump to fight anyone threatening their minionship and masters ancient rights – that is the specially bred turkey or Aberdeen Angus if you prefer, that we are.
We must keep pointing at the truth, as one does at a man overboard in a high sea, if there is any hope of rescuing.
So let’s say the RCN achieve their goal of a 12.5% payrise (I know, I’ve had a few glasses of Rioja). A third would be taxed anyway and the remainder put back into the wider economy (unless there’s some cunning nurses that are being paid via the Caymen isles)
What are the Govt so worried about? Or is it just callous ideology?
See this morning’s post
The following is apposite with respect to your comments re Uk serfs/proles/peasants:
“a nation or world of people who will not use their intelligence are no better than animals that do not have intelligence, such people are beasts of burden and steaks on the table by choice & consent”
William Cooper: “Behold a Pale Horse”
The above summarises what most of the UK “population” has sunk to. I have great sympathy for the poor, who apparently constitute 23% or 24% of the UK population. I have none for those that allowed such percentages to continue.
“I accept that creating money this way is inflationary. ”
This reads to me like you are referring to the NHS pay rise. Do you you mean to refer to QE ?
QE is inflationary in the sense that asset prices are inflated
But not otherwise
“QE is inflationary in the sense that asset prices are inflated…But not otherwise”
What a statement!!! So for example QE leads to asset inflation but everything else is immune? So house prices price, they sell, downsize and spend the rest on their lifestyle.. that’s not inflationary? Can wrap that in any permanent income hypothesis explanation and it’s inflationary .. to say anything else is dumbing down to the point of lying.
You read me right
And I am not lying
Fantastic, I think this is the most important comment you have put forward supporting MMT:-
“The last year has shown that the argument ‘we cannot afford it’ does not hold true. If there are resources available to use that need to be put to use then the reality is that there is nothing that this country cannot afford.
Money is not scarce. Money is a wholly artificial mechanism created to ensure that the necessary exchanges that put people to work in our economy can take place. That can be done. The money to make this possible can always be created”.
Crisp it up a bit and and I’d proudly wear if on a Tee-shirt or the rear of my dinner jacket.
It’s the essence of the argument against austerity. Thank you.
Thanks
Richard,
Concerning money, I remember a quote from someone who is, I think, a common acquaintance of ours, the admirable Canon Peter Challen from the Christian Council for Monetary Justice.
Peter may have been quoting someone else, but he used to say:
“Saying there isn’t enough money us like saying there aren’t enough inches to measure something!”
Peter is an old friend
And he is spot on with this
I’m going to pinch that one if I may.
Great!
MMT is in operation but it is privately owned & run for private profit & bonuses.
It is the main money creation system as detailed by The Bank of England Q1 2014 Bulletin.
What needs to be done is to take it into public ownership or render it unnecessary by competing with it. Please remember by law banking corporations have the same rights to create IOUs as citizens have so could continue to effectively create money out of nothing unless this is made to be counterfeiting, which it is really but with Government complicit. You might think private banking corporations (within The City of London) run the country & I would not blame you,
Actually the state has now doubled the M1 money supply in the past decade via QE. Prior to that the state only created about 3 % of all our money in the form of cash and coins. The other 97 % was all bank created electronic credit. (ie bank loans/overdrafts). So we now have a situation were that split is more like 50/50. We are half way to pure Sovereign Money and “competing ” with the banks, that itself is a remarkable change.
Of course that has also increased inequality , so some other intervention is now necessary to redistribute that a bit more fairly. Furlough and increased UI have been good thus far, but should be used much more going forward as well as Richards green bonds.
But if the economy ever does pick up the banks will have to be sat on to keep lending down and stop it going into property and shares once again. Sadly this govt(like all others before it) looks intent on stoking another housing bubble by promoting easier to get mortgages. They should be looking at supply not demand there. More money chasing the same housing stock can only result in one thing.
I am a complete layperson with regard to the content of your blogs and am so pleased to have discovered them today, thank you. I watched BBC Question Time last night and was intrigued by Miatta Fahnbulleh’s comments regarding balancing the UK’s books, or not! Today, in my household, we are finally trying to get a small understanding of ‘where does the money come from’ and have been reading some of your blogs. I would love to see your non-political explanations and views circulated to a wider audience ie those who may not be seeking the information but like me will be astounded to have found the blogs and replies an education and fascinating! Not least, we will have and need a more aware electorate going forward. Thank you.
Thank you and good luck with this
If you want more there is Stephanie Kelton’s The Deficit Myth and my The Joy of Tax
I’d also like to recommend a little book called “The Case for a Job Guarantee” by Pavlina R. Tcherneva. It’s 128 pages provide a great compliment to Kelton’s “Deficit Myth.”
Richard Murphy, I found you thanks to cross-postings on Naked Capitalism. Some of your readers may want to check out that blog as well. I am grateful for your fury and disgust over this issue.
That is a good book
And thank you
As always, it is about political choices.
The government chooses to spend £22 billion on faulty test and trace that still does not work properly (22 billion! so far! that is about a quarter of the entire education budget for a whole year!); hundreds of millions on overpriced, inadequate, late PPE sourced from their friends and family; hundreds of thousands on redecorating a flat; etc. etc. The state-owned “British DARPA” will have have a budget of hundreds of millions, outside normal public procurement rules and free of scrutiny. The Towns Fund will nakedly “reward” places that elected Conservative MPs, over and above other many places in greater need, and ministers even gloat openly about it in Parliament.
But we can’t afford more than 1% for NHS workers, and nothing for any other public sector workers. While we *can* afford to throw tens of billions at companies through “superdeductions” that will reward them for expenditure many would have incurred anyway.
An MP’s basic pay has increased from £65,000 in 2010 to £81,000 in 2020. Surprise, that is an increase in real terms. Over the same 10 year period, a nurse’s starting salary increased from from £21,000 to £24,000, a decrease in real terms. https://fullfact.org/online/public-sector-salaries/
It stinks. This government will go down in the annals as one of our worst ever, but pity the poor mugs like us who have to live through it.
Thanks
And see this morning’s post…
Greetings from the darkest corner of the former British Empire, the occupied 6 counties of Ireland. Firstly, thanks so much for your work on this. Illuminating and readily digestible.
Secondly, I brought up some of your points at a People Before Profit online budget meeting the other day; it was good to see that others were aware of your work. More will be now, as I put up links to this blog.
Go raibh maith agat.
Thanks
The thought occurs to me that one obvious ‘next move is for followers of Richard perhaps ought to consider an entry into the body politic. I’m not naive enough to believe this is not a hard sell to the general public, but every movement has to start somewhere. It’s difficult, Richard, to see how you reach the wider audience you need to effect real change, without taking that ‘next step’. You have my vote, in an independent Scotland! All joking aside, I think most right thinking political observers now realise the Union’s jig is up. Where better to press forward with your economic views than within a fledgling democracy?
Maybe
But I know my limits
I am a thinker, who happens to be able to gab into microphones in a coherent fashion
But day to day politics requires different skills and do I want to drag them back out again? I am not sure….
The solution, I reckon, is simple …but will it happen? The Labour Party needs to WAKE UP and take your ideas on board, Richard. Ordinary citizens need a new leader to emerge within the Labour Party, carrying a new, determined, and radical attitude. The new leader must show willingness to actually oppose the Tories at Westminster, not just frown and mumble, then vote with the Tories on every issue that might actually matter.
I’d say people should be putting pressure on Labour, the way the Berniecrats are putting pressure on the Democratic Party in the USA. UK citizens in general are unsettled, unhappy and (rightly) worried about their future. Offer them a settled future where their lives and prospects actually will get better, and the votes will come.
The Tories are failing miserably to take care of the citizens of the UK …but because there is no opposition (outside of Scotland and Wales) they have their tails up. Give the Tories genuine, articulate opposition with sharp teeth attached, and things can–and will–change.
Forget the Tories. Work on Labour….
Oh I certainly will.
Sorry – I’m looking at the post dated 2nd March where Helen Schofield did a summary of her findings about money creation.
Are you saying Helen that the subsequent setting up of the OBR (and any legal underpinning that accompanied it) and the ‘necessity’ of having a ‘balanced budget’ effectively superseded or silenced the 1866 Act?
Is that where we are?
I am not sure who toy are asking – but nom that is not what I am saying, at all
Richard – it was a question I was putting to Helen Schofield that’s all about an exchange we had during her long informational post on March 2nd.
In one sense it is relevant to this post in that if the setting up of the OBR (balanced budgets et al) ran contrary to the mechanics of the 1866 Act, then the Tories have obviously artificially created a ‘stop’ or excuse not to use the 1866 Act to give society the money it/we need and create more pain instead.
I’m not sure of the causal relationship between the OBR (and its faux rationale for being set up) and the 1866 Act. I’m surmising that the Government just hides away from its responsibilities behind the OBR set up that’s all.
It seems to me also a deliberate act to close the door on the country that was opened for the financial sector in 2008, that also confirms to me my suspicions that the Government is their to promote and protect the interests of the private sector and to hell with the rest of us.
Not to worry. Maybe Helen might pipe up. Sorry – I have been rather busy at work and just lost track.
Fine, fine, heartfelt piece Richard…perhaps your finest. Thank you.
The 64,000 dollar question has to be ‘Why?!…is neither party happy/willing to adopt a position of ‘spending to make the country a better, happier place’ when ‘the markets’ seem not only resigned to it, but enthusiastic to the point of gagging for it?’
An idea whose time has finally come…and no-one dates say it! WTAF as my young people would have it.
See thus morning’s thread….
A cheeky solution to the government finance crisis and inflationary problems.
Let the treasury launch a brand new type of gilt-edged stock. One that will be of massive attraction to investors, passive funds and anyone else who wants the best of both security and full bloodied equity performance. I am suggesting an index-linked gilt but instead of being indexed to inflation it is instead indexed to the equity market in the form of the FT all share index. (Other indexes could be used of course).
The derivatives market is well used to these types of security and the added level of sophistication over traditional gilts should make this types of investment the absolute dog’s bollocks to all investors. Further advantages to the exchequer would be that purchase money goes directly into government coffers and not into those of equity market profit takers. This could put a bit of a cap on the equity market which may not be such a bad thing.
Also, interest rates would not be driven sky high and loose money in the banking system will easily be hoovered up. This will have the advantage of reducing money supply and should thereby moderate inflation.
Can you think of a reason for the government not to give this hybrid gilt stock a trial run? If it kills off a few hedge funds on the way, this would be reason enough for me.
If successful, with a few tweaks such as a zero-coupon bond perhaps, it might even form the basis of a new currency. This could give Bitcoin some well deserved competition and as a commodity currency, it would not be subject to the ravages of inflation.
Robin Ducret
I can think of a million reasons why the government would not want to do some thing. To stupid
But let’s just start with the fracture that it’s stupidly pointless
This is a complete piss take
This from today’s Observer business leader puzzles me:-
“And why, after all the lessons learned during the 2008 financial crash, has the UK left itself so vulnerable to an increase in rates?
The answer to the last question is the Bank of England’s purchase of government debt through its quantitative easing programme. With more than a third of government debt on its books, the central bank has become a major mortgage lender to the UK government, and that debt is no longer on fixed-rate terms for 10 or 20 years, but refinanced overnight on the international money markets.”
Either I don’t understand the bank’s role in money creation, or the Observer doesn’t. And if we really are vulnerable to short term interest rate variation, why not refinance for longer periods.
Can you clarify what they are saying?
The argument is that the clearing banks now have more than £800bn on deposit, technically, with the Bank of England. That they cannot withdraw or use this is neither here or there: they are the result of QE. The assumption is that bank base rate must be paid on them. But there is no law that says that. It just has been the case since QE began. If rates rose the rate on these could remain fixed. Problem solved.