According to Politico this morning:
In an interview with The Times, Tory leadership contender Liz Truss says that Britain faces a “pivotal moment” and must “go for growth” by cutting taxes. “People should be able to have as much of their own money as possible because they are best placed to spend it,” said Truss.
Truss is, of course wrong. People are undoubtedly best placed to spend their money on some things. It would be ridiculous to pretend otherwise.
But people are not best placed to spend their money on health, education, tackling crime, defence, providing a social safety net, delivering environmental protection, and so much else. These things are public goods. They can only be supplied at all if they are widely, and most likely universally, available. There is no real market in them. No one could buy what is available collectively if they were to seek to do it individually and in isolation; the cost would be prohibitive.
So what Truss actually saying is that she wants to undermine public goods by prioritising private consumption, which is something quite different from what she explicitly says.
There is, however, a problem for Truss. The world wants more public goods right now. They are what we are most in need of. And that's why she would be a lousy prime minister.
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Richard – as a slight aside, have you been following Dan Niedle’s investigation into Zahawi and his shares in YouGov?
https://www.taxpolicy.org.uk/2022/07/19/zahawi_questions/
If not, here a few snippets:
Nadhim Zahawi has provided a series of unsatisfactory answers about his tax affairs. At least three appear to be false.
I have nine outstanding questions, some of which are very serious, and some of which suggest there has been a failure to pay that (should be tax) that was due.
As I said when I first wrote about Mr Zahawi, the public has a right to know if there are specific and obscure provisions of the tax code from which the Chancellor personally benefits. The public interest is even more powerful if it appears likely that the Chancellor, who is ultimately responsible for HMRC, will be the subject of an HMRC investigation. All the more so if, as I believe is the case, there are credible reasons to believe that the Chancellor has provided a series of false answers about his tax affairs.
These questions in large part result from help and assistance I’ve received from tax lawyers, tax accountants, commercial lawyers and entrepreneurs. I am immensely grateful for all of their help. If you have any further thoughts, please do post comments below, or contact me.
I have
I admire his courage
I have been feeding into the Observer’s more cautious line on his company
Of course it’s pandering to those conservative members who despite having received benefits from public goods have been encouraged to feel that they deserve their wealth (and ability to personally use private alternatives) and the ‘poor’ are undeserving shirkers.
I think she is appealing to the ‘selfish’ nature of those who will be voting and who will not ‘join the dots’ to work out what it actually means.
Craig
Do taxes fund public goods such as health, education, defence etc or are they funded directly by money created by the government for these and other purposes?
Thanks
I have answered this question in several
thousand blog posts and the odd book
Aye, Richard and I read them too. Hence, I am a little confused so excuse me. My daughter was also asking about this and I couldn’t it explain it properly. So if Tax doesn’t fund spending on public goods why should we be worried about Truss’s comments? My daughter and I would appreciate this being cleared up for us.
I am sorry – but I am quite sure you are wasting my time
Graeme: Here is one of Richard’s extremely clear explanations of how governments fund themselves, quoted by myself. You will need to shorten it for your daughter, I suspect, but no background in economics is needed to understand it. The trouble is, people want to believe that government spending is funded by taxation, for various reasons, including false intuition, and even altruism. But it just isn’t true. https://thepoundinyourpocket.org/2021/05/16/11-where-does-uk-government-money-really-come-from/
Thanks
Thank you Ade and Jan. My daughter and I appreciate that you chose to help. But the problem remains – if taxation does not fund government spending (in the manner typically believed) why does Ms Truss’ tax plans affect the provision of public goods. That as, we believe Richard has said before, is a separate ideological choice.
Those who correctly understands how modern money systems actually work and how government spending happens and what constraints it, still struggle with this part of the tax debate…
It matters because she thinks it does and will behave as if it does in that case
If uses the cuts to justify reduced spending for political purposes the theory does not matter
Graeme, if person has been reading someone’s writings over an extended period of time, it’s very easy, I’m sure, to forget some of it. But the reasons why tax needs to be paid if not to fund public goods and services is set out extremely clearly in the book The Courageous State. So clearly in fact that, unless your daughter is very young, she woud probably be able to understand it for herself. I’m always heartened by the curiosity of the young. Not long ago someone on another forum asked exactly that same point on behalf of a neice, so I was really glad to be able to suggest that useful book.
In Economics, ‘Public goods’ have a particular definition. You appear not to understand what this definition is, are you really an economist?
I have written on the issue in peer reviewed journals. I use the term wholly appropriately.
Ms. Barber, you’re trolling. Suppose we look at the definition of public goods provided by Investopedia (https://www.investopedia.com/terms/p/public-good.asp). It starts, “In economics, a public good refers to a commodity or service that is made available to all members of a society.” Murphy’s discussion is fully consistent with that definition. He knows what he’s talking about.
Go on then, Jill: rather than an immediate resort to ad hominem, give your best argument.
What is your particular definition of “public goods”, and explain then to us why items such as “health, education, tackling crime, defence, providing a social safety net, delivering environmental protection” are not public goods.
That will be fun, when they all are using the standard definition
“But people are not best placed to spend their money on health, education, tackling crime, defence, providing a social safety net, delivering environmental protection, and so much else. These things are public goods.”
You are of course wrong…
A public good is something non-rivalrous and non-excludable. We can exclude people from health care, from the social safety net, from education. It is also true that at least two of those are rivalrous. You cannot have the kidney I’ve just had implanted, Jimmy cannot have the classroom seat already occupied by Jenny.
This doesn’t mean that they’re not goods for the public to have, nor good for the public to have. Even, it leaves open whether government should provide them or not. But the one thing they’re not is public goods.
This ranks as one of the most stupid arguments I have ever allowed on here
But, go in then, provide examples of what public goods are and then explain why my suggested items are referred to in almost every definition of a public good, without any mention of your qualification
And because you’re trying to change the definition, please cite your sources
Not sure if Izzy is Jill or not, but I expected some hair-splitting by reference to a theoretical paradigm of pure public goods.
If they are going to argue that, for example, sunlight or air are not “public goods” because they are not sufficiently non-rivalrous and non-excludable (there is a limit of both, and we can’t both have the same bit) then I’m going to ask them to identify any public goods worth having, and suggest the rarified purity of their category makes it is almost meaningless.
As with too much economics, it is trying too hard to become a rigorous science like maths or physics, with too little relation to the real political economy. Try working with the world as it is, not as you would like it to be.
Andrew
None of these people is blocked
None has come back
They look to be different
Richard
Glad to see you back in good form.
I recommend by the way Guy Standing on “the Blue Commons”
Just out and lucid on the need to manage the Commons.
It’s not just about Public goods but also the Commons.
All need management which Tory leadership candidates seem to think is not necessary.
Nb I just been prevented from posting comments on the Telegraph comments section. Free speech has its limits.
I am sure energy is a public good. However, the people vying to be our next PM have problems with their environmental credentials. They all appear to have taken donations from companies espousing climate science denial, particularly Sunak. Do tory voters not care?
https://bylinetimes.com/2022/07/19/rishi-sunaks-family-profiting-from-ties-to-oil-giant-shell/
We are told that public sector workers must accept pay restraint (that is, more real terms pay cuts) to control inflation. (As an aside, it is not clear to me why, as the present inflation is due to costs of energy and resources not labour, and paying public sector workers more will not directly affect the future prices that consumers pay for education or healthcare or fire protection – when was the last time you received an invoice from a state school, or an NHS hospital, or the fire brigade?)
Meanwhile Truss and others are advocating tax cuts. They say it will increase growth, but the evidence for that actually happening when it has been done before is very poor. What almost certainly will increase is inflation. Oh.