I commented yesterday on LBC on Rachel Reeves telling the Sunday Telegraph that she has no plans to increase taxes on the wealthiest people in the UK.
The FT has an article this morning summarising her comments. At the core of their piece, and her comments, is this paragraph:
Speaking to the Sunday Telegraph, Reeves said Labour had no need to levy any form of wealth tax because her party would be rigorous in holding down public spending.
This is a staggering claim because there are so many assumptions implicit in that suggestion, which is a fair synopsis of the Telegraph article, which I have read.
First, there is an implication that taxes fund spending. They do not, of course. The Bank of England funds spending with the monetary equation being balanced by a combination of tax, borrowing and money creation. Reeves must know that but does not acknowledge it. To pretend that tax and spending are directly related, as she implies, is to deny the whole reality of fiscal policy and the economic tools within it.
Second, Reeves ignores the fact that tax is an instrument of social policy. It is the primary tool available for tackling inequality at the top end of the income and wealth spectrums, and what the statement she has made implies is that Labour must be happy with the current levels of inequality that exist in the UK even though they are very clearly destructive for society as a whole. That is a quite staggering position for a party on the supposed left of politics.
Third, this implies that Reeves believes that those with wealth are the generators of value in the economy. Actually, it is the spending power of people and government that, in combination, create value in our economy. But she thinks otherwise. The whole idea that wealth, disconnected as it now is from the making of investment in the economy, has anything to do with value generation is absurd, but this fundamental economic truth has clearly not yet permeated the core of the current Labour Party.
Fourth, the idea that all wealth is equal is implicit in this claim. That is not true. Wealth from, for example, speculation and rent extraction are not value-adding activities for the economy, and to suggest that they should enjoy low taxation (as they do) is an insult to those who work for a living.
Fifth, the idea that the current obvious injustices within the tax system should be retained - which means that those with income from unearned sources will continue to pay much less on their income and gains than do those with income from work - is being supported by Reeves, which is simply contrary to any known form of economic justice.
Sixth, there is the issue of spending. What Reeves is promising is austerity when what we need is spending to tackle the enormous problems that we face that cannot be resolved by private sector spending.
So why do this? Reeves is pandering to the idea put forward by Sangita Myska at the start of my interview with her yesterday that if we tax more, people have less to spend, and so the country is worse off. This is not true, of course. Government spending does not go into a bottomless pit, never to be seen again. It is spent on people and with businesses. In other words, government sending becomes other people's income. They pay tax on that and then, by and large, spend the rest. As a result, government spending stimulates the economy. What is more, it does so to much greater effect than does leaving income with the wealthy, who simply save what they get - which is precisely why we have such enormous wealth inequality in the UK now. Since, as a result, government spending has a much higher multiplier effect than leaving income with the well-off, the best way to grow the economy is to tax the rich and for the government to spend more - with the added benefit of much improved public services along the way. But again, Labour does not seem to know this.
Instead, Labour wants to maintain the status quo. And as Sangita Myska asked in her programme, what is the point of that when almost nothing seems to work now? I wish I could answer that question, but I cannot.
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Excellent post! This is like having a child running the country, unbelievable!
Reeves may well have just signed off the failure of Labour to win the next election.
I was furious when I heard Reeves being interviewed and promising not to raise any tax apart from non Dom, which surely will have reduced to almost zero by the next election given how many warnings they have had, and removing VAT from public schools. What is the f***** point of this so called Labour party. Time for the Unions to withdraw their funds.
Labour are supposed to be on the left of politics. But how are they different from Thatcher’s Tories? After all, Thatcher said that her greatest success was New Labour.
You are right of course but it is reported that there is evidence that the current Labour stance is working with the voters that Labour needs to win back from the tories.
Do we know what the Labour leadership really thinks? Do they secretly have some deeper understanding of economics that they are hiding from us? I doubt it but at the end of the day a drab politician like starmer can only put forward policies that the electorate believe in and which don’t frighten the press or the rich. He would not have the powers of persuasion to get people to vote for the change that is really required.
This is why the work you do is so important in hopefully in helping people to see through this nonsense.
My worry is that Labour will fail opening up the possibility of some populist nutter like Miele in Argentina. Check out the guardian’s articles on this geezer.
“You are right of course but it is reported that there is evidence that the current Labour stance is working with the voters that Labour needs to win back from the tories. ”
But, in the process losing a huge number of votes from those who used to think that Labour was a party for the working class. (I hope).
@ Arwel
“I doubt it but at the end of the day a drab politician like starmer can only put forward policies that the electorate believe in and which don’t frighten the press or the rich.”
Your argument is destroyed by the SNP who actually dared to say they would implement Attlee style policies and gained electoral success! Starmer is a “Trojan Horse” Tory pulling the wool over your eyes.
For my education, I read a blog from an American right-wing financial guru. In a recent post, he describes the work of Peter Turchin, who studies how through history societies have grown, flourished, and collapsed. The driving force that leads to eventual collapse is the “wealth pump”, the trickle-up of conventional economics. Inexorably, fewer and fewer people own more and more of the economy. For instance, in the US the ratio of median wage to GDP has declined 7-fold since 1980.
As far as I can see, the differences from earlier civilizations and cycles are (a) we are destroying the entire planet, not just a region, and (b) we now have the weapons to wipe ourselves out completely.
The endgame of refusing to address inequality is even worse than for earlier societies.
Will Reeves et al ever recognise the consequences of doing nothing?
The blog
https://www.mauldineconomics.com/frontlinethoughts/the-science-of-cycles
The Turchin book
https://www.goodreads.com/book/show/62926960-end-times
“The lessons of world history are clear, Turchin When the equilibrium between ruling elites and the majority tips too far in favor of elites, political instability is all but inevitable. As income inequality surges and prosperity flows disproportionately into the hands of the elites, the common people suffer, and society-wide efforts to become an elite grow ever more frenzied. He calls this process the wealth pump; it’s a world of the damned and the saved. And since the number of such positions remains relatively fixed, the overproduction of elites inevitably leads to frustrated elite aspirants, who harness popular resentment to turn against the established order. Turchin’s models show that when this state has been reached, societies become locked in a death spiral it’s very hard to exit.”
I share Richard’s views on Reeves – although my language would be more robust.
Here we have an ‘opposition’ MP and possible Chancellor talking of a ‘steady state’ scenario – that she is in fact not going to change much at all. There is nothing radical again being said – the only implicit radicalism is as Richard points out – it is in my view austerity and the intention to still to dismantle the state bequeathed to the nation after World War II. These are now the radical ideas of our time – not Left wing ideas.
So, rather than having a true agonism with ideas being equally contested, Labour and our politics are actually enabling the antagonism of the rich towards working people yet again.
And appearing in a rich persons mouthpiece like The Telegraph – who in my view represents a MINORITY of voters in the country and talking to them like this whilst telling other outlets that they will bring change is just so dishonest. But – again it reifies where we are and what is going on.
Why I am particularly angry with Reeves is not because she is a woman (and I’m afraid I do not believe that woman are better than men in these roles – we are all human beings capable of good and bad) but because to me, if you really believe that taxes pay for things, and that there is only so much money, then how can you not tax?
That means that Reeves ACCEPTS inequality, that she accept a grossly distorted distribution of money as a social utility.
Now that is bad enough. But this ‘relaxed attitude’ to people getting rich comes with consequences because we know that they not only hide their money but use their money to influence politics – as well as getting a vote.
The money of the rich – can we be frank here – corrupts politics ; distorts it and Reeves is saying – like her boss, and like Mandelson and his boss, that that is acceptable. That’s what this issue comes down to. Corruption.
Well, it’s not good enough.
Finally, my ire must now be turned to the ‘most sophisticated electorate in the world’ – the British voter. You know, I don’t think the British have a clue what they want. I often say that its not the publics’ fault as they are bombarded with lies 24/7 about money, taxes and are kept occupied by all sorts of shite but that which they really need to know.
But come on now folks – isn’t time to wise up? Only a tiny percentage of you are going to get richer than you are now. Many more of you are going get poorer.
For goodness sake wake up. Stop worshipping the rich and their lifestyles because all you are doing is worshipping your tormentors – wanting to join your tormentors even. The rich are your corrupt oppressors. Think about it.
I truly recognise that Craig Murray tends to polarise opinion – you either really love him or really hate him – there is no middle ground, but on this he is spot on.
https://www.craigmurray.org.uk/archives/2023/08/destitution-capitalism/
From the sublime to the ridiculous.
For my sins, I’ve become hooked on the US legal drama ‘The Good Wife’ that ran between 2009 and 2016 with Alan Cumming particularly good as the nasty spin doctor and was all the rage with massive viewing figures
If, like me, you believe that when America sneezes, two weeks later UK gets the flu, you should check it out.
I must be a bit odd. I like what he says on several issues and the way he can suggest other interpretations.
But I have become more cautious about his accuracy and judgement.
Even more despairing than Labour’s own professed ignorance of all this , is that none of Richard’s points are brought up when this is being reported on BBC or other media.
Its as though all correspondents, or interviewers – accept the whole ideas framework – tax funds spending, rentier wealth is the same as investment , inequality cannot be addressed etc etc
This thought framework seems now to be the defining characteristic of our democracy – ‘Ignorance is Strength’ .
@ Andrew Broadbent
“This thought framework seems now to be the defining characteristic of our democracy – ‘Ignorance is Strength’ .”
If alive today I’d like to think George Orwell would have gone for “Monetary illiteracy is Strength!”
Back in the 1990s when Globalisation was being talked about as the new Universal panacea it was always assumed that this would mean that the good ideas of the west like Democracy and the Enlightenment would flow outwards. Nobody ever thought much about the flow coming the other way, but here they all are.
Authoritarianism, suppression of a free news media, the growth of inequality and even old horrors that we thought we would never again see in the West like religious fanaticism.
The thought network has indeed changed
Just seen this Comment under a similar article (by someone else).
“I understand why people on the left want something different; but right now the new Labour strategy of being similar but nicer humans is probably the right one. V difficult for an attack campaign from the tabloids to scare people when you’re as evidently dull and trustworthy as Starmer – whatever you then do in govt.”
And at one time it was what I thought too. Especially given how Starmer has behaved re what he promised to get elected.
But what you say here is that he and Rachel Reeves really do have no different ideas, and really do think it should be”more of the same”.
Very well said Richard.
In order to not fall in to utter despair I have to try to convince myself that this is just a political ploy by Labour to try to win the election and that having won they then have five years in which to try to change the narrative. i.e. that tax does not fund spending, that austerity is economic madness, that government budgets are not like household budgets etc etc.
My fear is that you are right and that they really believe what they are saying. I’m also not convinced that as an election strategy it will be effective and we may yet have a repeat of 1992 leaving us with the current bunch of morally bankrupt charlatans.
I agree with much of what you said, and that Reeves’ views are horrifying to those who would hope that the oppressive policies of the Conservative party over the last 13 years might end with a Labour victory.
However, I was most suprised that in your penultimate paragraph you said “the best way to grow the economy is to tax the rich and for the government to spend more” which surely carries the implication that taxes fund spending.
No, that relates entirely to multiplier effects
The simple answer to why Reeves behaves as she does is her aim is to promote and maintain oligarchy, one in which she’s an associate and enabler. All Labour will do is work to increase inequality, making sure at the same time they’re on the winning team. All this does in the (not very) long run is result in social collapse but hey; this faux culture offers no debt jubilee and maintains a largely belligerent and ignorant electorate so what else should anyone expect? It was always going to fail. Let’s get it over with and prepare to rebuild differently from the ruins.
In the Independent this morning
https://www.independent.co.uk/news/uk/politics/keir-starmer-policies-benefit-cuts-reeves-b2399406.html
a letter from “70 prominent academics” urges Labour to scrap the “balance the books” mantra and “petty and arbitrary” fiscal rules and focus on increasing investment based on Lord O’Neill’s recent utterances on the subject. However, the letter doesn’t spell out the economic rationale behind the proposal and just relies on warm sentiments that treats the electorate more or less like children.
These academics are merely asking for a little more appearance of caring rather than boldly exposing the cynical and deliberate use of the household finances analogy to protect the privilege of the rich.
Guardian letters support you
https://www.theguardian.com/business/2023/aug/24/the-cure-for-sick-britain-restore-public-spending
It’s not for nothing that I call Reeves and Starmer flat-earther economists – like pte-Copernican astronomers trying to ignore Copernicus.
Added to which Reeves at least is a political thug (See Reeves skewered
https://twitter.com/JackMonaghan1/status/1593265355253846017?t=xIwOt6uraSRupVq3khSDqA&s=07)
As to STARMER AND REEVES? Not a comedy duo – the Laurel and Hardy, or Abbott and Costello – of politics, but the unfunny coupling of stupidity, of vacuity and toxicity, of New Nu Labour, politics’s answer to How Low Can You Go? Answer? Bottomless!
Time the Peace and Justice Party took over from the labour party.