It was in 1983 that Margaret Thacher told a Tory Party conference that:
There is no such thing as public money; there is only taxpayers' money.
She was wrong, of course, The exact opposite is true. All money is created by the government. Taxpayer's merely used government created money.
This, however, has not stopped Nadine Dorries from spouting the same nonsense:
C4 borrowings sit on the Gov balance sheet. Gov has no money of its own, it's tax payer derived. This is part of the debate re privatisation decision/ future sustainability. https://t.co/502ECFf1SA
— Nadine Dorries (@NadineDorries) November 23, 2021
Let's leave aside that as the minister responsible Nadine Dorries did not know how Channel 4 is funded.
Let's leave aside too that just because something is on the government balance sheet it must be moved off it, as she clearly implies.
Let's just deal with that 'the government has no money of its own' argument.
This is very obviously untrue. Let me illustrate this with a chart from a recent report from the New Economics Foundation:
The Covid crisis was not funded by taxpayers or so-called taxpayer's money. It was funded with money created by the Bank of England using the quantitative easing process that matched the government's deficit. No supposed taxpayer funding was involved, at all. And, as the Bank of England has now admitted, most of this new money will never be cancelled, or be repaid to use the common parlance. In other words, the government created the money it spent.
And that is what happens every day, whenever the government spends. The only reason to tax - and get the public involved - is to reclaim that money to prevent inflation from occurring. But, in itself, tax never, ever, pays for government spending.
There is no such thing as taxpayer money in that case.
And there is no trust arrangement between the government and taxpayers for that reason.
That does not mean there is no reason for a relationship of trust between taxpayers and the government. There is, as I explain here, although I would update that argument now. But it is not tax funding government spending that creates that trust. I explain it better in this video. Maybe Nadine Dorries should watch it.
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One thing we can be sure of is that Dorries – an unreformed Thatcherite if ever there was one – won’t watch your video, Richard, or indeed any other that challenges the dogmatic worldview she has held for years. She is, quite simply, a small minded, ideologue and a nasty piece of work, which is why Johnson has put her where she is: to ‘sort out’ the BBC and C4 – and we all know what that means – and maintain the culture war distraction policy that’s so important to keeping a good section of the population fired up against Labour and any other person/entity (e.g. Chris Packham, the National Trust, etc) seen to deviate from the one true path of right wing populism. And as she’s yet another government minister who has no trouble lying in support of what she believes/says (see, for example, her comment about James O’Brien at the select committee appearance earlier in the week), expect the inevitable negative outcomes from the BBC and C4 reviews backed up by Dorries spouting any old nonsense that supports that outcome. I’ve no doubt that if this were the USA she’d be a ‘stop the steal’, ultra Trumpist member of the Republican party and do very well at it.
You are right…
Depressing, isn’t it?
There are too many big words in it for her. She is probably too busy emailing broadcasters for employing journalists she doesn’t like and admonishing BBC political correspondents for not being sycophantic enough.
My most charitable description of her is a deranged sociopath, which is probably why she is such a darling of the hard right and their media cheerleaders.
I think a lot of other people need to hear the message too.
Sorry, can I just ask… is the government doing Overt Monetary Financing (OMF) ?
Treasury issues bonds. BOE buys them. The end.
Or is there more to it?
Thanks!
Wilson Logan.
Effectively that ios exactly what they have done
I would suggest cc-ing Rachel Reeves on the memo too…
That is a most excellent idea, Alice. Rachel Reeves and the Labour Party in general, have bought into the dogmatic concept of “balancing the books”.
As Richard Murphy has explained in simple terms, understandable, even to a simpleton like myself, money created by the government does not need to be and never will be “repaid” and the limits of this money creation are limited only by inflation, controlled by the judicious use of taxation.
I can only surmise that Labour’s insistence on this worship at the shrine of Thatcherism is to avoid “frightening the horses” since the proverbial “man-in-the-street” has not the slightest idea how government finance actually works.
No wonder when the entire process is hidden behind jargon, management-speak and general obfuscation.
A thorough process of education is sorely needed.
There is an element of Greek tragedy here. ‘Re-paying’ the three hundred billion ‘borrowed’ or created by QE, will cause great damage to the economy for no good reason.
Agreed
Governments seem to have no compunction about using QE when they want to spend on something or when they feel they have to for some reason. However when they do not wish to spend they trot out all the excuses about there not being any money. I suspect that many politicians actually know how a fiat currency works but are playing on the ignorance of the general public who have no idea how it works and also have no idea what QE actually is. In playing this game “Taxpayer’s money” is a useful propaganda phrase.
Of course there are true believers who simply have not thought things out and I suspect that Nadine Dorries is one of them. What is truly disheartening is the number of senior Labour Party politicians who also seem to be true believers.
I too suspect that many politicians (and civil servants) do know how a fiat currency works but parrot the ‘taxpayers money’ line in public. As for educating the public and the next generation on the matter, the magnificent Martin Lewis would be a formidable and widely trusted champion of the truth.
Maybe Nadine Dorries should just go and do something else – anything – than what she is doing now.
Did you know that an anagram of her name is: ‘deniers inroad’!!! I kid you not! She’s certainly making unwelcome inroads concerning the truth of the nature of money isn’t she?
She and too many of her colleagues are such liars.
I found the following from https://www.young-enterprise.org.uk/teachers-hub/financial-education/
which states to be “ a trusted provider, supporting schools, colleges and universities” and say they are “ currently working with more than 1/3 of all schools in England and Wales.”
Their 11-14 financial education framework includes, “ I know that the government collects money through taxation and uses it to benefit the wider community e.g. via benefits and support for charities.”
This is consolidated in the 14-16 follow on, “ I know the different taxes I must pay now and in the future and some of the ways this money is used by government through public spending.”
It may not use the phrase “taxpayer’s money” but it certainly will condition youngsters not to question the narrative.
So depressing
Get this………………..
I went to hospital in the Derbyshire town of Bakewell today for an appointment at Newholme Hospital. As ever, I noted some of the empty buildings (that were wards) and deteriorating windows and the moss on the roof and weeds in the gutters. I asked what was going on – what was the future of the place?
I was told that the empty (but recent looking) ward across from the reception was going to be demolished, and a new facility built. The building I was in might be demolished.
Then I was told something amazing. That the service operating out of that building had to pay rent to the NHS.
I said that that cannot be – it’s ALL the NHS isn’t it? How can the NHS charge NHS services to use NHS buildings? My informants concurred, telling me that it was a con.
Can someone at this august blog tell me what the fuck is going on in the NHS?
Is that normal?
For a strategic centre of a business to charge its own business unit rent on accommodation to deliver a service that the centre is supposed to be delivering? In the public sector? So short of money?
And what impact does ‘paying rent’ have on the patient service budget?
This sounds to me like the face of privatisation – the same sort that we saw in the railways where every joined up relationship that creates a seamless service is turned into a cost centre and revenue stream that sees the synergies evaporate for the service user and money accrue to managers and investors and walls appear between departments and wards.
To top it off, I was told that ward block to the East of where I was had been sold off as flats sometime back.
I mean – am I wrong or is something really wrong happening here? I’d love to know and if I am wrong please put me right!
Is the NHS a property management company or a heath provider!! What are they doing!
Some schools have to earn a rate of return on some of their activities for the same reason….can you believe it?
Well – look – I must look either really silly of naive but to me its just not supposed to work like that. All it does is undermine the fact that the NHS is Government funded not tax funded when you ‘pretend’ that it’s being ran like a business for supposed ‘cash flow’ reasons. And it creates jobs and posts for people who are not related to delivery of the basic service it is there for.
No wonder the NHS is in a mess.
If we accept that (too much) inflation is to be avoided, then there still is a link between taxation and government spending.
But is one of the points here that the level of government spending shouldn’t actually impact the level of taxation, or in other words that the level of spending shouldn’t depend on “government revenues”? And that whatever the level of government spending, a certain level of taxation should keep inflation low enough?
Yes, to some degree
I suggest that you read Stephanie Kelton’s The Deficit Myth
Thank you, will do.
Good morning
Isn’t this story in the FT yesterday saying the same thing about so-called “taxpayers’ money”?
UK taxpayers face billions in losses from Covid loan schemes
https://www.ft.com/content/d5576d0e-ed4d-4087-b3b5-2bed6076dde4
Yes