I posted this Twitter thread this morning. The plan to which it refers might be one of the more important things I have written:
I have suggested that no plan to address the current economic crisis that I have seen is good enough. In that case, I think I need to offer my own alternative plan to address this crisis. This is it. It's radical. It could work. I think it's essential. A thread….
First of all, let me make clear that my whole plan is 30 or so pages of A4, and even I don't think that can be turned into a Twitter thread. But you can read the whole thing here. It's the most comprehensive plan to tackle this crisis that I know of.
The crisis that we are facing is being caused by inflation. This started as a flurry after Covid reopening caused supply chain disruptions, but it is Putin's war and resulting gas price hikes by profiteering energy companies that are making this such a problem.
The problem is that inflation might reach 15%. Worse, for households on low incomes domestic price hikes might mean these households paying 24% or more of their after-tax income in energy costs. Staggeringly, all but the top 20% of households could be in fuel poverty.
Clearly, this issue needs to be addressed. But this is not the only problem. The Bank of England is currently seeking to ruin the economy by imposing interest rate rises that cannot work. This is going to deliver recession in the UK. The impact will be widespread.
In particular, schools, hospitals and care homes are all going to be unable to pay their energy bills this winter, creating massive new crises. And hundreds of thousands of companies are going to fail too, with millions unemployed. This is the bigger issue we must face.
In my plan I seek to tackle all these issues. I do not pretend that the issue is just about a household cost of living crisis, because it is not. Unless the big issues of public services and a failing economy are also addressed helping households will still leave us in trouble.
Taking households first though, the plan offers a range of necessary solutions. The big idea is to ensure that no household should spend more on energy as a proportion of after tax income than the wealthiest households in the country would if energy costs reached £4,200 a year.
The plan is that no household will spend more than 7% of their post-tax income on energy. This suggests variable rates of relief are need, from £2,600 a year for the lowest income households, with relief continuing all the way through to above average income households.
Most households will need more than £2,000 of relief to achieve this goal of no fuel poverty in the UK.
I suggest how to provide this relief. Everyone on a pension or benefits should get it, automatically. Everyone else would need to make a simple application. The payment would go to their energy company to prevent fraud.
I estimate that the cost of this would be £44 billion a year, and I think it would work. It could also be easily adjusted if energy prices fall, which is important.
But that is not enough. I also make proposals to put prepaid meters on lowest tariffs, always. I would also scrap standing charges, which are akin to a poll tax, and I would introduce progressive energy tariffs so that high consuming households pay more for their energy.
Ofgem would also need radical reform. One reason our energy prices are so high in the UK is that it maximises energy prices to deliver guaranteed profit for energy companies. It does not protect consumers. It protects profits.
This can and should change. I suggest how. Whether there is a worthwhile energy market left for consumer facing energy companies to partake in after that is a very good question. I doubt there will be.
But this is still not enough. If state services are to be protected and staff are to get fair pay rises, we need an emergency budget. I suggest that protecting public services will cost £80 billion in a year. It is unavoidable.
There may also need to be help for pressurised companies. I suggest a package linked to the number of employee jobs at risk. If the subsidy was £2,000 a job supporting smaller business might cost £20 billion this year.
Charities might also need help, and many are now dependent on them.
All in, this package might cost £144 billion. In the short-term deficit funding might cover this. To allay fears that this will be a burden on taxpayers I suggest a new Bank of England funding arrangement to provide this money, almost costlessly.
If this level of support is provided we should recover quickly from this crisis, which is where the real payback for that spend comes from. Preventing a recession is a price well worth paying, as we appreciated in 2008 and 2020. There will, however, remain longer term issues.
I suggest necessary new taxes that we need if we are to have the state we need. Most target wealth, which is heavily undertaxed in the UK. Other measures target tax abuse and windfall taxes also have a role, but on banks as well as energy companies, where they're hard to deliver.
And finally, we need the long-term reform that only a Green New Deal can deliver. We have no choice but transform our economy now to face the reality of climate change.
How to pay for this Green New Deal? It is not hard. UK savers love tax reliefs. Tax reliefs on pensions and ISAs have to be changed. If they were I estimate that £100 billion could be found from UK savers to fund the Green New Deal each year.
We are a wealthy country and it is UK wealth that must be foundation that provides the funding for the transition to becoming the state we need to be. When the country has £12 trillion of wealth funding the required money will not be hard.
The plan I propose is radical, realistic in the face of the crisis we have got, and necessary if the economy, households and public services are to survive intact.
The plan focuses on inequality and seeks to address it by eliminating fuel poverty as well as by taxing fairly.
But the plan also seeks to keep essential public services going, and people in jobs this winter as well. I am baffled as to why no one else is talking about these issues.
Finally, the plan addresses the long term, and finding for the transition to energy efficiency that we need. This funding can be delivered out of better utilisation of the UK's wealth. Tax incentives will drive the change.
From start to finish this is a plan for the crisis we are in. And I fear that unless something like this happens we are in the very deepest trouble. Please read on.
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Skimmed your report. Excellent and good to see a big section on the GND.
Thanks
Thank you, this makes sense, I will embark on the long process of reading the full document. Might one idea be for all of us to pass it on to others, our own MPs included?
As an aside, Richard has produced this over the course of a weekend or so, admittedly with the backing of years of experience, but where is a plan from our government? After all this is why they are elected and why we fund them and the ranks of helpers and experts that they have at the disposal?
I’ve sent a copy of the PDF to my MP for her to read and consider.
Thanks
Send to MP. Good idea, I will do the same.
Is the £12trillion of wealth owned by the State or the Individual?
Individuals
After a quick read, and I havnt looked at ‘How to Pay For It’ yet
1. You dont need pay slips, there are DWP systems that allows you to look up earnings via PAYE & (Most) Benefits in real time (PM me for more details)
2. We need some sort of provision for those who either use oil/solid fuel/LPG instead of gas or are ‘off grid’ – mostly caravan dwellers
3. Ditto something for those mostly elderly who have heating included in their rent OR are on District Heat schemes – who currently have to pay ‘commercial’ tariffs for Gas.
Sorry if I seem a bit picky but I realise that the scheme you have drawn up reaches most people and as I pay benefits for a living I have some idea of who might fall through the gaps
Payslips are partly as proof of identity
I agree the other issues, but this is high level stuff, and the detail would need to be filled on
Calor have said LPG is sourced differently and is (so far) relatively immune from cost pressures.
No mention of Brexit? I know the UK Gov is doing its utmost not to discuss Brexit, but I’d have thought it is a significant contributor to the current runaway inflation and, as such, worthy of a mention in your estimable paper. It’s not like Richard to miss an opportunity to rub it in about the biggest single act of political folly in my lifetime!
For once I ignored it….
I skimmed the troll responses/exchanges, noting Ken Mathieson’s question and your response.
Now 3/4 of Tories support the Lib Dem policy stolen (yet again) by Labour, thanks Richard for a great thread, summary blog and the link to your GND thinking I’ll try and read in full.
Is the new funding formula for BoE you mention, a direct benefit of being able to set our own State Aid rules and, therefore, the first real benefit of a Brexit experiment that brought us to needing your GND?
I’d be delighted if retail energy companies disappeared, but for as long as we were not self-reliant for all our energy needs we would still be vulnerable to the behaviour of the wholesalers. Will their grip be diminished or enhanced by fewer consumer-facing customers?
As you say it is essentially an inflation crisis, but won’t a wealth tax itself be inflationary, given that it won’t reduce the quantity of disposable income, and everything else will increase it?
We can’t control the world, I fear
“And the army of people needed to operate it could come from UK accountancy practices. Just push back the tax return submission deadlines (but not tax payment dates) by three months and all the required personnel could be found this autumn.”
Really? You think accountancy practices aren’t busy all year round? I realise that it’s been decades since you worked in an accountancy practice and so are out of date but the idea that accountancy practices could give up their staff to do the government’s work for 3 months is laughable. And, I’m curious as to how people will know how much tax they have to pay (you’re not pushing back the due payment date) as most clients rely on their accountant telling them. Which they do when they’ve completed their tax return. Under your scheme, the accountancy staff wouldn’t be around to help their clients for 3 months. You really haven’t thought this through. But of course you don’t have to.
If you are going to present such measures, how many people do you think will be needed? Any idea? And if the accountancy practices say “no thanks, we’re busy enough as it is and won’t be releasing staff” what then? Conscription? And who pays for the staff’s time?
And you think HMRC could cope with the additional work? You’re lucky if you get a response from them for anything in less than 8 weeks at the moment. You think they’d be able to deal with the additional work of 20 odd million household applications under your proposed scheme?
The thing about your ideas is they are impractical. That’s your advantage. You can come up with any fanciful ideas without any plan or idea of how they would be implemented. I bet you won’t even give answers to the basic questions raised above.
I don’t know how long it took you to write this drivel but thank goodness the only time wasted on it was yours.
You’re talking nonsense – and you know it
I know very well how tax staff in firms work
And the payment on account in January will be that due last July, to be adjusted in April
Now go and waste your time somewhere else, I suggest
“And the payment on account in January will be that due last July, to be adjusted in April”
You are so clearly out of touch it would be funny if not so dangerous. Nothing is ‘adjusted in April’. Payments on Account (if they are due) for 2021-22 would be have been payable on 31st Jan 2022 and 31st July 2022. But the BALANCING payment for 2021-22 is due 31st Jan 2023. And that balancing payment can’t be calculated without the 2021-22 tax return being completed. And the completion of the 2021-22 tax return also sets the level of the 1st Payment on Account due for 2022-23, which is ALSO due on 31st January 2023.
And many clients won’t have made Payments on Account of 2021-22 yet (for a variety of reasons you obviously aren’t aware of). So won’t have paid anything toward their final 2021-22 tax liability and will be wholly reliant on completion of their 2021-22 tax return in order to know what to pay on 31st Jan – both balancing payment for 2021-22 and 1st Payment on Account for 2022-23.
You really have no ideal how the self assessment system works do you? So much for being a tax ‘expert’.
“to be adjusted in April” Thank God you aren’t advising anyone any more.
And of course, and as predicted, you’ve no answer to any of the questions I posed.
It takes a bear of very, very small brain not to realise a law could simply require a first payment for 2022/23 that was the same as that due on 31/7 with an adjustment on 30/4
But you clearly can’t comprehend I am talking things requiring legislation here so I think it time you went back to helping your unfortunate clients
Sorry to have to be direct, but you came here to be rude and made a fool of yourself
I have skimmed through the report. I don’t have time to read it more carefully just now and I intend to do so this evening. After that I intend to send a copy of the pdf, maybe with a few comments of my own, to my MP, who is likely to dismiss it out of hand, various Green Party members and to some YouTubers.
I think that somehow the various news outlets and political parties must be made aware that it exists and so that your proposals become part of the discussion.
I have been telling some of them….
“The plan is that no household will spend more than 7%”
couldn’t possibly work, in fact it would crank up demand to unprecedented levels..after all where is the incentive to
be sensible.. can leave the heating on all day, the lights on all day, the windows open etc etc without penalty. It is a bizarre idea.
That is more than almost all groups pay now
Why do you trolls come here to display your ignorance?
I live in France, pay all my taxes there, and my house is entirely heated by electricity. I recognize that what folllows is not necessarily a guide to UK costs (dammit, I used to be a statistician). But:
My gross income for 2021 was 17, 331€ and my net income 16, 520€.
My electricity bill (EDF basic tariff) to June 2021 was 1847€ 53 – which is 11% of net income or 10.7% of the gross.
Now I am not poverty-stricken and as a pensioner I seem to get a remarkably good deal on tax, but the minimum wage is currently 19, 740€ gross or around 15, 000€ net, so broadly the same as me.
Are you sure about 7% being what (or, more than) the poorest pay now ? Or have I misread ?
{obviously I could try to dig out a figure, but since you seem to have it to hand ….)
I sid, think, that is what should be the target
Sorry if I got it wrong
Do you actually know anyone who left the lights on all day, etc? when the cap was a lot lower before April, because I don’t. I do know that most families were very careful about usage as they did not want to reach the cap.
I also know that the 6.6 million households in fuel poverty now would love to just pay 7%, as would the 8.8 million whose households would be in fuel poverty in October, and the 10 million in January if nothing is done to reduce the price caps.
Thank heavens someone like Richard is prepared to think properly about these problems, and tell MPs what he thinks.
I’ve skimmed through all your Report, and it seems to me to be coherent, sensible, and ethical. It’s a structure, not a plan complete in every detail. I wish I felt that any govt. of the UK, current or in prospect, could loosen their minds enough to take it on board. But I’ll share it, and talk about it, with as many people as I can.
Thanks
Hi Richard,
What are your thoughts on the use of sovereign wealth funds to fund the green deal.
E.g. offshore wind has expanded massively in the UK but the industry building the windfarms has been offshore.
Rather than try and make everything in the UK, what about insisting that any significant green deal investment must include partial ownership by a UK Green Deal sovereign wealth fund?
With regards to taxing more, are you sure the money actually exists – e.g. the UK property market is valued at trillions but how many forced sales would it take before the whole valuation collapsed?
I think we are far too late to worry about that
Sorry – but let’s put the climate first now
I `agree – but will it be possible to raise the level of tax you expect (will there be a large enough number of buyers of assets to be divested to pay for the tax demands)?
Also the UK is a net importer of food and energy – won’t printing 144 billion blow up the trade deficit, crash the value of the pound, increasing the amount needed?
Lastly doesn’t the UK need to sell more goods and services to the rest of the world to pay for the much more expensive imported energy? Does the green deal still work if the UK doesn’t retain an interest in the technologies developed?
I am suggesting taxing income and gains not wealth
You seemed to miss that
And tell me how a deep recession and a population is poverty is going to help the exchange rate? I am all ears
‘ Most target wealth, which is heavily undertaxed in the UK’
My working assumption was that long term revenue would be coming from wealth taxes. And this wasn’t a challenge – more of a genuine question – I have no idea of the figures / how much earnings / wealth could be expected to be taxed from the very wealthy.
I think the tiered energy pricing is a really promising policy – but it needs to be based on number of residents in a dwelling – rather than just the size of the dwelling. A bit like an inverse poll tax – this could also be used to drive optimal occupancy of housing. (Charge much higher council tax but provide a per resident rebate – this would incentivise empty nesters to downsize / reduce the number of empty properties).
I am simply talking about increasing the tax rate on income from wealth to that on earnings right now
I do not think this will challenge anyone with regard to payment: the source exists
I accept some issues with a progressive tariff will need addressing: disability is clearly another one, but they’re hardly insurmountable
Impressive reading indeed Richard. The very fact you’ve produced this in such a short period of time, demonstrates that Starmer, Davey, Rishi and Truss simply don’t have the nous to grasp the nettle and get things done in a cogent and wholly sensible way.
I asked a care home owner today if they’d have to shut up shop if energy costs rise to the levels predicted. There home is very modern indeed, and well staffed. It makes little profit, directors do not get huge salaries and they are onshore and pay all their taxes in the UK. They pay staff just above the National Living Wage.
They broke down in tears, and I sat watching & listening to them pour their heart out about the lack of care from HMG or the opposition. About how they’d lose the people they care for to homes which have no qualms about paying no tax, and paying the minimum wage to staff – in short, offshore owned care homes. It truly saddened me. It was clear they cared very deeply about the people they care for, very deeply.
I have sent a copy to my Tory MP, but I doubt he’ll understand the sensibilities and thorough reasoning in your report.
Thank you.
Thank you
You see my concern
A very comprehensive and positive report of what the crisis is and ways to mitigate or solve it. Clearly, the Tories are not going to like it, (or Labor) let alone implement any of it without tremendous pressure from everyone concerned – individuals, business, public sector, unions, NGOs political parties………… the problem is getting over these positive plans to both the public and the powers that be. You do mention briefly energy efficiency and insulation. Our priority must be the reduction of demand for energy, UK housing is in an appalling state regarding insulation and most new build are not installing maximum ecologically effective systems. The Green New Deal needs to be promoted as a central part of the planning for 2023.
Hi Richard,
Really interesting analysis and comprehensive plan. It is a pity that few ,if any, of our politicians appear to be able do anything other than “tinker and manage” a broken system rather than take a step back from it and consider basic and long overdue reforms.
A very minor point- I know you agree that GDP is a wholly inadequate measure of growth so I wonder if every opportunity should be taken to provide a better alternative in order to wean ourselves off it.
Colin
One thing at a time!
I could not cover that in the report
Great plan, but could never be accomplished as politicians that matter are all part of the WEF program follow their 2030 agenda. Our government, left and right has been penetrated by the WEF and so have the bog global companies, including the big energy companies. If they wanted to help us, they would have done that a long time ago. Instead, we have been brought into this mess by the politicians and big corporates as that is part of the agenda 2030……… You will own nothing, but will be happy. One way of getting us there is to hollow us all out by making the things we all need unaffordable.
As for borrowing money for free from the bank of England will never happen as it is a private company who’s only goal is to make money.
I’m afraid we all need to wake up, smell the coffee and stand together as a unit and not let them trample all over us. Don’t forget courage breeds courage, especially if we haven’t got anything left to lose….. Let’s hope we can show courage well before that happens.
Sorry, but this is nonsense
There is no WEF agenda or deep state
There is just the corruption of neoliberal thinking: we need no more explanation than the isolation that promotes and the insulation it makes those in power feel from consequences
@van twinkle That sounds a tad paranoid. As for the BofE being a private company, that is simply not true. You appear to have woken from a twenty year sleep. I would go back to sleep if I were you.
It was nationalised in 1946
If it was nationalise, why is it registered at companies house and why do we have to contact the company ourselves if we would like further information?
Surely if the company was really nationalised, all tax payers should be able to extract information through companies house?
https://find-and-update.company-information.service.gov.uk/company/RC000042
Just go to their website fir all the data you want
Politely, stop being stupid and learn how to use Google
But the capitalist class is panicking now, and rightly, because the current widespread despair and likely spiralling descent is what happens when ordinary people do have nothing and cannot afford discretionary expenditure.
We have nothing and we are not happy. When the economy implodes in the new year and unemployment is rising steeply and people are dying and the health service cannot afford to keep going or pay its own bills, there won’t be a deep-seated urge to embrace disaster capitalism. There will either be civil disobedience and debt repayment negligence and people on the streets, or there will be a general election. I would tend towards the latter, though it might be the first swiftly followed by the second.
Not many people would vote for more capitalism in that election. The British will decide it is necessary to embrace European social democracy, and not before time.
The ideas in Chapter2 seem very sensible- do you have any estimate (in the current circs and then taking account of projected global price rises) of what these reforms in the pricing mechanism would mean to the average consumer energy bill? Also, I wonder why you think that the idea of Ofgem purchasing energy is only applicable in an “emergency ” situation?
Mike Parr has provided estimates
See his comments on this blog – they should be searchable
I need to rant about the stupidity of those who are ‘helping people through this crisis’.
I am a pensioner and I am compulsorily on a pre-payment meter. Like most people my electricity usage is pretty constant throughout the year, but my gas usage fluctuates with the temperature.
Currently my electricity cost is about £45 per month.
It has just been confirmed to me that the £400 I will receive to help with energy prices this winter will all be credited to my electricity meter, at a rate of £66/67 per month. So I will have an additional £20 monthly credit on my electricity that I can use after the final payment in March, towards my electricity. So I won’t have to pay any electricity costs, roughly from October to May. Why can’t I use the balance towards my gas cost? (I do understand that my electricity cost will go up).
This is just another example of those making up the rules not having the faintest idea how real people live.
That is ridiculous….
There is a glimmer of logic. Virtually every household has electricity, but not everyone has gas, so crediting elctricity should mean everyone gets the money. But they do not have the faintest idea what it means that people cannot afford their heating bills. Having more money next May does not help pay the gas bill in December.
Precisely
@Cyndy Hodgson
I’m in a similar position to you, and I’d much rather that £400 came off my gas bill too. I use an average per day of 4 kwhs of leccy over the year. That increases to about 5-5.5 kwhs in the depths of winter and decreases to 2.5-3 kwhs at the height of summer.
However, my gas usage, when the radiators are off, is only about 3kwhs, currently 22p including VAT, but excluding the Standing Charge (S/C), per day, but can hit 36kwhs (at current prices £2.65, inc VAT, excluding S/C) a day when it’s really cold, and leading up to averaging 24kwhs (£1.77) during normal cold weather, and then winding down as the weather warms up.
Similar to you, I expect my September leccy to cost me £30.80 (inc VAT) and my S/C will be £15.77; a total of £46.58p, give or take a few bob depending on my actual usage (I’ve assumed an average of 3.5 KWHs per day.)
From Oct 1st those prices will increase. I predict the power companies will not dare increase the leccy S/C by much (a few % at most, it might even decrease by a couple of %) after having damn well near doubled it from April (mine went up from £1.91p per week to £3.68p per week!!!!) Apparently, that near doubling of leccy S/C’s is to pay for all those power companies that went bust last year.
Assuming the leccy S/C remains more or less the same, but that the leccy increases by say 40%, then October’s bill, at an average of 4 KWHs per day, will be £50.93, and the S/C approx. £16.30; a total of £67.23p. So, I won’t be building up much credit, if any, when my £66/67 Pre-payment voucher is sent to me every month.
However, as I won’t actually be paying any leccy for 6 months (provided I keep an eagle eye on my usage), here’s what I’m going to do regarding my gas bill.
I’m with a different power company for my gas, and it’s a credit meter NOT a pre-payment one. I have an online account for my gas. So, I’m going to pay weekly into that gas account what I would’ve been feeding weekly into my Pre-payment leccy meter. I shall take a gas reading every Saturday morning (1st Oct falls on a Sat), and work out precisely what my bill for that week is. I shall pay that online; and not a penny more. This way, hopefully, I’ll keep on top of my gas account… that’s the plan, anyway! In effect, I’m turning my credit gas meter into a pre-payment one via that online account. How well I keep it up remains to be seen, given the way food prices are going. Sainsbury’s is charging 95p for a pint of milk! That’s sheer exploitation as our local titchy newsagent is selling it for 70p a pint; that’s about 25% less than Sainsbury’s and he doesn’t have the purchasing power of a huge supermarket.
If I had a gas pre-payment meter, then I’d be using the credit top-ups I would’ve been spending on leccy for the gas instead.
The gas prices in April near doubled (mine went from 3.8p to 7.4p per KWH) but the S/C barely increased. I suspect this time round the gas S/C will increase a lot, but hopefully the gas should increase by about a 33% to 9.8p per KWH. I’m rounding that up to 10p. Between Oct 1st – 31st March I used 3,211 gas KWHs (actual usage, not estimated), so I expect to pay about £321 for the gas alone, not including the S/C. IF the S/C near doubles, just like the leccy one did in April, then I can add £98 to the gas bill, totalling about £419 over 6 months, which works out at about £16 per week I need to pay weekly into my online account for gas. I’d be paying about £15 per week into my leccy meter (which I don’t have to cos of that £66 monthly voucher) so that more or less sorts my gas out…. In theory!
But I haven’t even factored in any increases that may happen in January…. There’s only so much pre-planning I can cope with before I lose the will to live. I’ll deal with January when I know more and not until.
And if I end up in debt to British Gas, then so be it and stuff ‘em! I go hungry for no man, beast or power company.
Good luck
I have read your fascinating article. I am by no means an expert but at last I have seen joined up thinking that offers hope. Thank you for that. I sincerely hope people of influence wake up and follow your advice.
Thanks
Dearest Richard
Thank you for this.
I know that most detractors will see me as a ‘Murphy Fanboy’ but I will say this anyway.
I’d like to formally here record my appreciation of your work – including ‘How to Survive 2023’.
Studying housing in London between 1994 and 2000, I was exposed to many great public intellectuals – through the work of the Chartered Institute of Housing and the housing management course of the University of Westminster where I studied as a mature student -that contributed to the housing field – some of them sadly no longer with us.
People like Professor John Hills from the LSE but who was working with the Joseph Rowntree Foundation that was bursting with talent in the 1990’s who dealt with social policy and inequality; Alan Holmans – a housing academic and civil servant who did much to look at and raise awareness of the challenges of affordable housing supply in the UK, David Donnison, Anne Power (Hill’s wife), Julian Le Grand, Howard Glennerster, Marilyn Chambers, Professor Paul Spicker, Danny Dorling etc., – all of whom created such a lot of research and data that powered further research by other housing and social policy academics.
All I can say is that you are up there with them all in my view – raising issues that are all to often ignored and using detailed and principled research methods to highlight them in your chosen field which of course overlaps with housing (what doesn’t overlap with housing, after all?).
So, many thanks for your hard work. I know you say that you enjoy it and all that. But your work is also very important and it is only the ignorant, the craven and the ideologues who are repelled by it. And who the hell are they any way?
Yours sincerely,
PSR
Thanks
Appreciated
[…] Any or all of those are possible: I think all three will be required as I reflect in Surviving 2023. And I stress, all need help, and not just […]
Interesting thoughts and ideas by but (my daughter and) I am still confused by your views on tax and how to reconcile
“I suggest necessary new taxes that we need if we are to have the state we need.”
With your YouTube video on the role of tax in MMT where you not only say that governments do not fund expenditure with tax, you go further to argue about “liberating tax from the role of raising funds to finance” government activity.
We would love to understand this better – is it a simple as while you explain MMT very well, you don’t agree with its view on the role of tax? Thanks.
I have suffered COVID at the same time as you, so sympathies and hope for a full recovery. This version is a brute.
There are six reasons to tax:
1) To ratify the value of the currency: this means that by demanding payment of tax in the currency it has to be used for transactions in a jurisdiction;
2) To reclaim the money the government has spent into the economy in fulfilment of its democratic mandate;
3) To redistribute income and wealth;
4) To reprice goods and services;
5) To raise democratic representation – people who pay tax vote;
6) To reorganise the economy i.e. fiscal policy.
I am arguing for new taxes to tackle inequality
Thanks Richard, I understand all of those points but IMO that is not what you are saying in this piece. You are making a specific link to the “state that we need”, presumably a larger and more proactive one. This seems to be a counter argument to the one put forward by Truss which argues for low tax, low state.
But both arguments rely on the assumption that rather than liberating tax from the role of raising funds, that remains its central role in both cases.
This may be semantics re what “state” means but IMO your message is in danger of being misunderstood. More scarily the general public will continue to fall for the idea that greater state intervention necessarily implies higher levels of taxation.
More spending means more tax if inflation is to be avoided
Wouldn’t it be better to say “Other things being equal, more spending means more tax if inflation is to be avoided”?
Does a having greater quantity of money in circulation in and of itself imply that there will be inflation? It may mean that unused resources start being used and the extra money facilitates the corresponding economic activity.
Government spending does of course contribute to inflationary pressure but so does money created by private banks when they issue loans. If a service that might be funded by the government is in fact funded by private loans, who is to say that the inflationary pressure exerted by those loans is not greater than that which would have been exerted by the government spending? In either case the government will need to tax to control any resulting inflation, but how do you assess which case requires the greater amount of taxation?
“Does having greater quantity of money in circulation in and of itself imply that there will be inflation? ”
No, but it can increase the risk, especially if we target full employment at a living wage so let’s not deny it
And how do you manage it? Judgement, as ever. There is no either tool at the end of the day. Informed judgement is ll we ever have, whatever people try to tell you
The informed bit is important though
True, but in “Surviving 2023” tax is included in the section about how will we pay for this not what about inflation.
I appreciate that I have asked this a few times – but it is a genuine question – you and many others continue to discuss tax in the context of paying for government spending. This includes those who appear to support MMT. Why?
The current Tory leadership debate and the next election continue/will continue to be framed by the argument that tax should be considered from a how will we pay for it. “Surviving 2023” perpetuates rather than challenges this IMO. Hence the question, which so far remains unanswered.
I don’t think it does….
I ask for tax to tackle inequality
I explain using tax reliefs to influence behaviour
And I suggest running deficits
I don’t think I say tax pays for spending
Might you say where I did?
I agree that if we target full employment at a living wage then this will almost certainly involve an increase in taxation. But I think that we must be absolutely clear why this is so. If not then, to the casual observer, it can look as if we are doing exactly the same as the advocates of “tax and spend” but not being completely open about it.
Consider the following, and I realise that for the purposes of illustration I am being somewhat simplistic:
Policy 1: Requires £10M government spending but because much of the money reawakens a dormant part of the economy, the inflationary pressure can be nullified by taxes amounting to £6M.
Policy 2: Requires £10M government spending but because it is badly designed and shuts down part of the economy the resulting inflationary pressure would require taxation amounting to £14M to nullify it.
Now from the “tax and spend” perspective the “price” of the two policies is the same: If we can afford one policy we can afford the other, they both “cost” £10M. The reality is, however, if we implement policy 2 we will end up having to raise more than twice as much tax as if we implement policy 1.
While it is true that, other things being equal, increased spending leads to increased inflationary pressure which may, in turn, lead to increased taxation, it is the inflationary pressure of our overall policy that is important for calculating how much taxation will be needed than the cost of the policy to exchequer.
The “tax and spend” mentality has become so ingrained since the 70’s that points like this need to be hammered home repeatedly.
Richard is asked the same questions quite frequently, and it is better to read his works more widely in the first place. But essentially the answer to your question is that Richard believes the Government can lend to itself as much as it likes, and the only real purpose of taxation in relation to that borrowing and public expenditure is to maintain a link between the amount that is spent and the value of the currency. Taxation provides that link.
And it controls inflation, tackles inequality, and directs behaviour
Thanks Ian, I am aware of what Richard says and quoted his YT video to that effect. FWIW, I agree with him. Hence I am confused why here and previously he chose to refer to tax more in its traditional role rather than in the one he and I believe, or appear to.
Richard, I refer to this report where tax is considered in the section “How to pay for it” and the quote about the size of the state that is needed. Why not discuss tax in a separate section called “How to deal with subsequent inflationary pressures”?
Based on what is written it’s hard not to conclude that you still believe that tax plays a role in how to pay for the required spending this winter. I expect that this is how the narrative will be framed in the media too, which is a shame and a problem.
I live in the real world
I do not exist to promote MMT
I exist to relieve poverty
I can make pragmatic choices with regard to both, but relieving poverty is much more important
And I really don’t think I compromised
And your posting behaviour still suggests you might be trolling
To Bernard Hurley – as Mick Lynch is currently tirelessly pointing out, and it appears unarguably, inflation for the past year has been rising and that has not been because of wages going up. Current wage demands are to chase prices, because prices are ahead of wages, not the other way round. So, given the entire point of Richard’s plan is to support families who cannot pay their bills, it is not going to be useful to consider the effect of the plan on inflation. There presumably won’t be any. All the extra liquidity will be used to pay bills. When energy prices come back down next year, inflation will presumably come down too.
The extra money in the economy generated by government assistance will go into tax havens and the bank accounts of the shareholders, many of them foreign, who own the energy wholesalers. I hope they are ashamed of themselves.
How is asking a simple question trolling? This is your field of expertise and I am simply asking for clarification. If you cannot/will not give it just say so.
My problem is I have answered you several times and have referred you to what to read and you seem unwilling to do that
I can’t work out why
Richard,
In the section on energy pricing you suggest that Ofgem purchase energy from companies for a “fair” price. This price would, in the majority of cases, be far below the price which could be obtained on the global wholesale energy market. Has Ofgem or anybody else got the power to force companies to sell energy at this “fair” price
No. But it could be given them. It really would not be hard. It’s what governments do.