I posted this thread on Twitter this morning:
Steve Barclay, the Health Secretary, is saying today that if nurses get inflation matching pay rises patients will suffer. But if inflation is 10% then tax revenue should increase by 10%. So he needs to explain what he's doing with the extra tax he's not using to pay nurses.
He will no doubt claim he's using it to pay interest on government debt. Five things follow. First, that's a one off cost. Most of the extra cost is in index linked bonds and as inflation tumbled this year so will that cost, but tax revenues will remain 10% higher despite that.
That's because inflation, which determines the cost of these bonds is going to disappear but absolute price levels which determine tax revenues are going to remain inflated by 10% or more. So money to pay nurses is available, after all.
Second, most of that extra interest cost won't be paid for 15 years because of the way the index-linked bond system works: almost all this extra expense is paid when these bonds are redeemed and on average that's in more than 15 years time.
Third, Barclay is ignoring that roughly one third of all government interest costs goes straight back to the government because it owns one third of the UK national debt. It's terribly convenient for him to ignore a little detail like this.
Fourth, he ignores the fact that the government could save almost £40bn in interest by stopping payment of interest on the funds effectively gifted to commercial banks as a result of quantitative easing. It's in the government's power to do so, but they prefer paying bankers to nurses.
Fifth, the interest rate the government has to pay could be brought down by the government telling the Bank of England to reduce its base interest rate, which it has the power to do. But, again, it prefers to pay interest to the already wealthy than pay nurses a fair rate of pay.
My point is threefold then. Firstly, the additional money to pay nurses is available: inflation and the tax system essentially guarantee that fact.
Secondly, instead of using the additional money available to it to pay nurses the government is instead deciding to pay more interest on its debts, when the vast majority of that additional interest cost could be avoided by it.
So, thirdly, the government is consciously deciding to prefer paying bankers to paying nurses at this moment, but that is not by necessity. That is the choice it is making as part of the economic civil war it has declared on the people of this country.
And there is of course the other essential point that Barclay misses altogether, which is that paying the nurses' (and teachers', and ambulance workers') pay rises pay for themselves.
That's because roughly 40% of the pay rise comes back in tax and national insurance the moment the payment is made, and tax is also paid every time the additional money paid to nurses is spent by those who benefit from that additional spending throughout the economy.
So, in fact, paying the nurses does in itself raise the additional taxes needed to pay the nurses (and others) what they are due right now. But Barclay either does not know that or does not want to know that.
Either way, he's choosing to impose misery on the country right now when none is required. That's the Tory way of pursuing class warfare, which is what is going on, with the Tories wanting wealth to win over meeting need. It's a callous politics that we're all suffering.
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YES, of course they can “afford it”.
In broad terms, tax revenues to the government rise in line with inflation so a “below inflation rise” for public sector workers is cutting the deficit.
It might be tempting to assume that tax revenues only rise in line with earnings but remember, income tax is only a small part of the tax take. VAT is a function of price so by definition (give/take a switch to zero rated goods) the revenue from this tax MUST rise with inflation. If wages are rising more slowly than prices the beneficiary must be corporate profits…. which are taxed (well, that is if they are not shuffled offshore… but let’s not get started on that!).
In short, the “can’t afford it” argument is wrong…. and those advancing it know it and do it for narrow, selfish reasons.
There is a simpler way to show that the ‘can’t afford it’ contention is wrong in every way. The government is the monopoly issuer of the currency, hence, can afford anything it thinks it needs. The most obvious conclusion to draw from this is that Barclay, and others of like ilk, don’t think they ‘need’ to pay NHS nurses, and other public workers. As pointed out, they would rather dividends went to the rich, an indication of a class war by anyone’s metric, it seems to me. An article in the Guardian today (I forget which one) argues that since they know they are going to lose the next election, they don’t care about anything other than rewarding themselves and their ‘friends’. A political system that allows this sort of carry-on is deeply corrupt. What else can you call it?
“It might be tempting to assume that tax revenues only rise in line with earnings but remember, income tax is only a small part of the tax take.”
Ecept for the ‘fiscal drag’ trick, where allowances are not raised at all; so wage rises are not only captured for income tax, but for an increasing number, at a higher tax rate, and therefore higher take for Government.
Completely irrelevant to all this; I watched PMQs today (Heaven knows why). Rishi Sunak should just take his troops, move across the floor, and sit on the Opposition benches. He is effectively claiming he doesn’t govern the country. He isn’t responsible for anything; and everything that is wrong about absolutely everything, is actually the fault of the Labour Party. Work that one out, outside the literal lunacy of our Parliament.
He does this week after week. Truss did it day after day (did she last a week?). Johnson did it all the time, and then some more (it is called “charisma” or “witty, effective debating” within the limited imagination of Conservative circles). They have all been sitting too long at the feet of Gove, the snakeoli salesman’s laest convincing snakeoil guru; who thinks this is all you need to govern………
Well this is Britain, and he seems to be right. The wisdom of our Great Constitution is, that since the Conservatives have so thoroughly trashed the economy and everything else in sight over the last thirteen years, and turned Britain into a windblown desertland; the Conservatives are entitled to two more years of Government (sic), because there are still a few crumbling ruins left standing among our institutions and services they have yet to be so thoroughly levelled to the ground, they are finally beyond recovery (I presume they all follow the prescriptions of Scipio Africanus). Only then then will they scarper, and leave someone else to clean up their mess; as they always do.
Bravo, Sir. The non-party, ideology-free, argument for fairness, justice and progress for the whole nation is being made by you in particular. Alas, the parties that should be making similar (Greens, Labour) are either silenced or rapidly disappearing down the same rabbit hole as the Tories.
The energy bills and higher food and interest charges suck purchasing power out of the economy. It therefore, needs, more spending power to prevent a recession -which is much more expensive in businesses closed, unemployment and more claims on the state, less investment and less revenue.
The Truss ‘tax cut ‘ model would give more to the well off who could be tempted to hoard it until things pick up or even send it to the Isle of Man.
Money paid to the people who produce real wealth-goods and services-would be paid back into the private sector.
Keynes taught us all this over 80 years ago.
Agreed
What the Tories fear most is democracy. If the majority of the population know that the real reason for the dire state of public services is due to the deliberate austerity measures aimed at weakening the position of working people in order to strengthen capital and all its interesst, then the Tories will be done for. The Tories are desperate to deflect away from the real reasons for the crisis with quibbles about whether teachers’ real pay has gone down by 24% or 23% depending upon whether RPI or CPI is used as an index of inflation. Putin is a good excuse, Harry a wonderful distraction, the World Cup, Coronation you name it, the populace will be fed continued nonsense in the Tory political desperation.
The Government narrative which Barkley used today is to undermine public support for the nurses by saying a pay rise would have to be funded by cuts elsewhere in the NHS. As you have previously said ministers continue to lie. It’s nasty stuff.
Most 12 year olds could understand the gist of the arguments and points put forward.
In turn, this begs the question: why doesn’t the MSM use some of these points when they “interview” tory ministers?
(Or would it be all too embarassing – for the minister?)
The hard line by the Tories is only because they are doing their level best like the true fascists they are to promote the illusion that there is no way out of the situation.
The question is – will the British public fall for it – again?
Some nurses are being offered £40 an hour to strike break. If that can be offered they can offer a real pay rise to the ones on strike.
I know its wild conspiracy theory stuff but I’m beginning to think that the government just want lots of elderly, sick and vulnerable people to die in the beleif that it reduces the burden on the state, takes pressure off the health service and pension funds.
I am not sure how wild that is
What is even wilder is that most of them would vote Conservative. But then the current Tories don’t even seem to care about retaining power. They’ve given up and are just concentrating on trashing the state and taking as much as they can for themselves and their friends.
The OBR tell us the Brexit effect of a 4% permanent shrinkage to the economy is costing the treasury £30Bn in lost tax. – That’s the only maths lesson anyone needs to understand.