The UK can't run out of pounds any more than it can run out of inches or centimetres. In this response to Gary Stevenson, I explain why money is a public good, created by the state, and why it's wrong to claim the government is broke. That myth props up the austerity agenda. If we want real change, we must stop telling neoliberal stories—even by accident.
This is the audio version:
This is the transcript:
This is a video I didn't really want to make, but I think I've got to because in it I'm going to criticise a video that Gary Stevenson has made talking about how he thinks Rachel Reeves will have to charge more tax come this October. And the trouble with the video is that it reveals what Gary really thinks about how the economy works, and I'm pretty uncomfortable with that. But let me first of all say what Gary gets right, because I like to try and find common ground if I can.
Gary rightly sees that inequality in the UK is a class war issue, because it is. The wealthy have declared war on everybody else in this country, and he's right to call that out, as I have done as a tax justice campaigner for more than 20 years, but I welcome him to the ranks because everybody is welcome.
He's also right to say that there is quite a significant probability now that Rachel Reeves will be looking at how to tax those he describes as being in the middle class in the UK more. But I've got to tell you this, Gary's definition of middle class is pretty odd, and reflects the fact that he spent a long time working in the City of London, because I would definitely think people that he believes are on normal pay are on way above average pay, and the data supports that fact.
But what does Gary also know? He knows that the rich are hoarding wealth at our expense, and of course, this is an issue I have explained in my own series on the wealthy and how they behave. And as a consequence, I support one of Gary's calls, which is for solidarity between working and middle-class people in the face of the assault that they are suffering from the very wealthy, and those who support them within the political system.
So those are things we agree on.
Now I'm afraid I've got to talk about the things where I think Gary gets his economics wrong, and there are, I'm afraid to say, quite a lot of these.
Let's start with the fact that Gary's premise of his video, the whole idea within it, is that the UK is not only capable of running out of money, but that it actually is, and as a matter of fact, that is impossible.
Gary, throughout the entire video, ignores the fact that the UK government creates our money. He just doesn't refer to that fact. It's as if he isn't aware that we have a Bank of England, and every day, day in, day out, the Bank of England creates new money for the government and puts it into circulation, and without that happening, there would be no money in the UK at all.
So this idea that the UK can run out of money, as he puts it, because there won't be somewhere for the government to turn to raise extra taxes or to borrow from, is just wrong, and I'm going to return to that in this video because it's really important that you understand that's correct.
Gary also treats the economy as if it were a household. He quite explicitly does so.
He says right at the beginning of his video that he's going to compare the government to a wealthy person who has savings, wealth and income from both, and then pretends that the government is like that wealthy person, but they aren't. They're nothing like that wealthy person, and again, there is a very good reason. The wealthy person has money that was created by the government. The government creates money. In other words, the two are nothing like each other.
The wealthy person is dependent upon the government to provide the basis for their wealth.
The government is not dependent upon the wealthy person to provide the basis for its capacity to create money. That is entirely independent of those wealthy people.
So his confusion here is really quite significant.
Fundamentally, he simply isn't talking about the fact that money is a public good created by the government to benefit us all.
So let's come back to those points, and I'm going to elaborate on them.
Effectively, what Gary does is repeat the household budget myth, and that's a massive problem that I have with his video. The simple fact is that households are constrained as to what they can do by the availability of money to them, and they can only get that money by earning it or by being given it by way of government benefits or by borrowing it. That's it. But they can't create money.
But the government creates all the money that it needs to spend. Without exception, tax funds nothing. Borrowing funds nothing, as far as the government is concerned.
Tax reclaims the money that the government has spent to control inflation, and bonds are issued as a savings mechanism, first of all, to provide people with a safe place to put their money, and secondly, to take additional money out of circulation if that is necessary for the sake of controlling inflation as well.
But because the government can always create more money, it can never go broke. So, this story that it can, which is absolutely core to Gary's narrative in this video, is just wrong. And worse than that, it's dangerously wrong because the story that the UK is broke is the narrative that gives cover to the austerity agenda.
Those who promote austerity and say we have to cut public services, and Gary recognises that they exist in what he has to say, use this story to justify the fact that we are unable to meet service demands and therefore they must be cut. And Gary actually talks about that possibility. And none of that is true. The only constraint on the government is not its capacity to create money, because it can always do that. The constraint is its capacity to find things to buy; that is, people and resources who can be put to public use. That's completely different.
And so Gary has to address this fact. He's pretending that the government is a microeconomic actor. In other words, it suffers whatever the market lets it have, but that's simply not true. The government creates markets. It regulates markets. It creates money. It creates the tax system in which they operate. It creates the rules of contract by which they operate as well. And it creates the money that we all spend, and it has done so since an Act of 1866, which basically regulated the process by which the Bank of England acts under government instruction to do everything that I've just described.
Now, we didn't have pure modern monetary theory back then, and we were on the gold standard, but the basic premise on which the government operates has not varied for 160 years now, near as dammit, and we should understand that.
This idea that tax is used to pay for government services is wrong.
Tax controls inflation, and it can be used to redistribute wealth, and it can be used as part of social and industrial policy by the government to shape the society that we live in.
It doesn't, however, fund anything. Its primary role is to reclaim the money that the government has spent to control inflation, and Gary overlooks all of this because he thinks that tax somehow is also independent of government, when very clearly it isn't. Tax is a government creation.
And there's a danger of using false metaphors in the way that Gary is doing.
If you say the government is broke, as he has, then you enable the austerity agenda.
If you say the government is broke, you then enable the neoliberal idea that we mustn't tax the rich because we are utterly dependent upon them for our well-being.
And if you talk about the government as a household, you say that it is the victim of markets, and so we must not in any way disrupt markets because if we were to do so, and those who operate within them, there is nothing that can be achieved.
And all of those things are wrong because the government creates markets. It creates wealth by literally spending it into existence - every single pound of the government's deficit is a pound of private wealth, because money can be two things simultaneously, and the government is never broke, and can never need to impose austerity.
The UK can never run out of pounds any more than you can run out of goals in a game of football, runs in a game of cricket or whatever else you might like to think of as a sporting metaphor. The government can never run out of pounds because all they are is a measure, a measure of economic activity.
The real limit is our economic capacity, therefore, and not money.
The constraint we face is, is there enough labour, land, energy, and material in our economy to deliver what we need, but not is there enough money because there's always enough money if we want it, because the government can always create more. And so too can commercial banks under license from the government as well.
So real activity matters much more than debt ratios and all the things that Gary focuses upon in his video. He's got his attention in the wrong place.
So what needs to be done?
We need to reject the household budget myth completely.
We need to challenge the neoliberal narrative that says austerity is essential.
And we need to understand the proper roles of taxation within the economy, and one of those is to redistribute wealth, and Gary's right about that one, but he can't pick on one in isolation. We have to understand that public money is a much bigger narrative than that, as is taxation, and the two in combination can be used to build a just and sustainable economy.
We cannot afford false narratives.
Even using them as metaphors for correct arguments doesn't work because it feeds that neoliberal narrative, which for 45 years has been so dangerous to everyone in the UK economy, as Gary recognises, but which he must not encourage.
We must not misguide the public when we're trying to create change.
We need better economic stories.
And one of those is that the government isn't broke. It's failing by choice. Tax is a tool, and it isn't using it properly, and wealth is being hoarded, and we need to address that fact.
A better economy starts with better storytelling, better metaphors, and better narratives, and I'm making a quiet appeal to Gary here. Please tell better stories because this one really didn't work.
Poll
Who is right, Gary or me? Can the UK run out of money, or is that impossible as it makes the stuff?
- You're right - the government can never go bust because it can always create more money (87%, 280 Votes)
- I am really confused by this issue (8%, 26 Votes)
- I'd rather not pick (3%, 9 Votes)
- Gary's right - we can go bust (2%, 6 Votes)
Total Voters: 321
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“Gary, throughout the entire video, ignores the fact that the UK government creates our money.”
It’s simple enough Gary Stevenson has joined the ranks of the mainstream media and the nation’s political parties which studiously avoid explaining how the nation’s currency is created to pay taxes. It’s like living in a disfunctional cult where you’re not allowed to question the cult leader’s beliefs!
Richard
An idea or two
Should there be one of those graphs or tables showing the distribution of income in the UK on the site so it can be referred to in any of these discussions where earnings are mentioned?
Secondly and a more philosophical point that BCE Theologians might have started to get their head around
The Government and Banks create money for free, on that basis do we need to look at ‘making money from money’ as something that at best should not be encouraged and taxed and some forms of speculation should be stopped entirely?
1) Noted, but hard to keep up to date, so probably not realistic
2) Most wisdom traditions say this. I am aware of this.
Gary Stevenson’s narrative arc appears to be a Robin Hood type one, whereby if you tax the richest, government coffers will be full allowing the needs of the poorest to be met and harmony is restored to the land. He does not address the dysfunctions of neoliberalism and by not identifying it and calling it out, it continues to remain embedded in the mainstream economic thinking.
No one can doubt Gary’s good intentions and commendable commitment to the general good. Too much of our political discourse attempts to crush public-spirited individuals because of disagreements. It is generally easy to invalidate people with high sounding generalities.
Rather than what could have been a grand, all-embracing condemnation, Richard applauds what Gary says where they agree and offers careful proposals of how their common intentions can lead to creative and positive results.
A master class in making valid distinctions and arguing for agreement on better policies.
Thank you, Richard.
Thanks
I tried
Indeed. Rather than condemning Gary for selling out, or being a tool of the establishment, I hope most of your commentators will recognise that we are all on a journey to better understanding.
As a long time contributor and a Stevenson (not related) I second Joe.
( I kept it short, guv,)
🙂
Thanks
I was listening to the BBC’s Briefing Room podcast yesterday evening on “Should the government worry about debt?”
https://www.bbc.co.uk/programmes/m002gqzx
Normally I find David Aaronovitch asks some incisive questions and gets some interesting answers but this time I got increasingly depressed and then frustrated and annoyed at the smug economists he was speaking to. Duncan Weldon (PPE at Oxford, formerly of The Economist), Mehreen Khan (historian at Oxford, now economics correspondent of The Times), Chris Giles (economics at Cambridge and Birkberk, then the IFS, now economics correspondent of The Financial Times).
So inevitably we got a parade of establishment voices mouthing variations on “the government needs to cut spending, or raise taxes, or borrow from the market”. No thinking outside the box, let alone challenging if this is the right box or even if there is in fact a box at all. This despite them recognising that QE conclusively shows that government borrowing does not need to involve the market, that 25% of gilts are owned by the government itself through the Bank of England’s Asset Purchase Facility and most of the rest by investors in the UK, and also that any fiscal rules are made up for political purposes. All very worried about the UK’s ability to “service” its public debt (because we are running out of pounds, was the unsaid implication) and the prospect of investors refusing to buy gilts (and again unsaid, but implied that without gilt issuance we would not be able to pay for public services. And without any analysis of why investors might want gilts, or where they get the funds to buy them).
A horribly missed opportunity to explain what government debt actually is and how it works.
I would have shared your frustration.
You can send your missives to them with this address : briefingroom@bbc.co.uk
RJM you are putting a lot of water between yourself and GS. I found his channel before I found your blog, when I found the latter, I was delighted to have a much broader field of knowledge and analysis presented to me; sometimes rather beyond me, but by sticking with it, I’m getting a grasp on many topics which helps me greatly in understanding what is wrong (with what politicians and the MSM spout) where before it simply felt wrong, and I saw the system as broken. It is easy to imbibe some neoliberal economic nonsense when you’ve been steeped in it for decades, even if you’re resisting it in ignorance as I was.
Back to Gary Stevenson. He reaches a lot of people, that is his aim. Likely a younger audience, who will have known nothing but neoliberalism.
When we introduce children to solid food, we do it gradually, we wean them. Finding GS first, I was weaned, you could say. One idea to put the brakes on inequality. Then we can tackle other things. But first the brake lever to stop the runaway train.
I hope GS will drop the household model, but I think you’ve made your point. And we don’t know his reasons for how he frames his message. Many commentators are dismissing him, making assumptions. Patience please. I’m with those who say build bridges.
The video left things open, I think.
Its sort of simple – ‘the government cant run out of money’, ‘anything we can do we can afford’…. and yet, and yet…. this isn’t generally understood…….
Not only Stevenson – who is at least sounding as if he cares about grotesque inequality, but also BBC ‘investigative’ programmes – safely distanced from any current affairs and news – sort of pussy foot around, pointing to the problem but not necessarily addressing it.
In a recent radio 4 Briefing Room David Aaronovitch asked ‘Do we need to worry about national debt’ – ‘yes sort of, but not really’. They mentioned fiscal rules – but again ‘sort of silly, but may be useful sometimes’.
The discussion stopped being curious at the point when ‘Japan gets away with massive debt because its owned locally, interest rate is low’ etc etc. But just didn’t ask ‘so who owns our debt’ or ‘from whom did with borrow the pandemic money from?’.
So again – a hint of enlightenment but still left with ‘maybe we might need austerity to keep it in check’….
Depressing
The first time I heard of the household ‘arsehole’ theory being seriously challenged was by Paul Krugman of all people, so this idea of challenging something that The Adam Smith Institute endorses has been around for some time and can be read and digested by people like Stevenson. He has no excuse. Krugman – whom I find a bit flaky at times – also asserted “We are not a household. We are an economy. Your spending is my income, and my spending is your income.” This was all before I discovered RJM.
We don’t have to make friends with people who get things wrong; we should not compromise on economic facts – especially when the lies we live with produce so much pain. Sorry, there you go.
This is a dirty, filthy and unfair war we are engaged in. I wager this: you cannot negotiate with greed; it is an extreme position. Yes, we must be civil and try and win people over, but we must also be resolute and persistent and sacrifice nothing to those who already have everything.
Hi Richard, thanks for another excellent video.
Just one point: on the video, you encourage viewers to use chat gpt to create a letter to send to our MPs about the points made. I am interested in why you suggest that we outsource this summary to a “big-tech” AI model, rather than to use our own words.
Carol
That’s because many more peopole will write with assistance thahn without it. Like it or not, most people do not write anything these days, beyond a shopping list or text.
I am disappointed that you feel your readers are so limited in their writing skills but thank you for your superb videos/blog!
I have taught undergraduates, and seen the writing of many postgraduates.
Last night I followed Crispin Flintoff’s webinar on the YourParty idea.
I don’t normally follow chat on his calls because it’s often a few people arguing amongst themselves, but when I saw Gary Stevenson’s name coming up and people saying we had to follow him, and invite him to speak, I had to butt in.
I told them to look at what you had to say about him. I have no idea if anyone took any notice, but someone said she would like to see a discussion between the two of you.
The point is that Crispin is going to do these webinars every week, different days, going to a different group meeting for YourParty. Last night it was a video of the meeting in Rotherham on Wednesday. That’s a lot of people who could be persuaded by Gary Stevenson if he does get involved. Or perhaps you could persuade Crispin otherwise?
I haven’t spoken to him for a bit…
Perhaps you could direct him to this video. On the webinar last night some were talking about Gary’s video.
I have sent the links to his team
l think Gary Stevenson is a force for good, but this needed saying. Well said, Richard.
I do think GS makes a good point that govt fiscal injections just end up in rich pockets unless we first address structural inequality.
Gary has written about MMT previously (open democracy 2020) but am not sure if he knows about commercial bank role too via BofE ‘Money Creation in the modern economy’
I keep on being told this, and some of the comments being posted here under different names appear to be remarkably similar, so someone is obviously propagating their story, but the reality is that the comments are fleeting, and insignificant, and so this is the last chance somebody has to make reference to it here.
You and Gary are both fighting the same fight and doing a great job educating people. The debate over methods is important, but you agree on what matters most.
The more people we have doing this the better.
Speaking of which, can I do another story referencing this transcript?
Yes
I posted this as a comment on your vid, Richard but am intrigued as to whether I live in an echo chamber…and whether/where my logic is wrong
Feel free to point me in the direction of good sources to learn more!
Comment:
And ironically Richard mentions resources are finite (ie at 9:30 on the video – we are limited by resources) which is exactly the premise of “tax the rich; they’re currently gaining all the resource/assets at the cost of lower, middle classes, and government”)
Inflating your way out of “lack of money” is of course an option (ie Richard’s point about the UK government’s unlimited money supply). But as a country does this, it loses credibility internationally and so capital markets price UK government bonds higher and higher…which makes it harder and harder for bonds to be used to control inflation or raise capital (as the cost to the gov to service the debt gets higher and higher)
And also international investors AND uk savers will be more wary about amassing pound sterling (savings) as they internationally will be worth less and less compared to other currencies… prices for overseas buyers in their local currencies will look the same to them, but the £ pricing will get higher and higher (due to exchange rates). Mortgage and borrower interest rates will increase too, making UK borrowers/homeowners (on variable rates) even worse off. Goods, energy, services imported from overseas will rapidly rise in cost for local (UK) importers and consumers. Recession (and “austerity”) becomes more likely…
Furthermore if UK wages fail to keep pace with UK inflation/sterling costs of UK assets/resources, guess who suffers? Ordinary, working people…
You are using bogus economics.
Of course there are finite resources on the planet. But that does not mean that we cannot use resources more effectively and increase production.
Firstly, the planet is not a closed system. We can use exogenous energy more effectively, and that is the whole logic of renewable energy in a nutshell.
We can also use human resource resources more effectively.
We can learn and develop new technology.
To pretend that the world is finite absolutely is, therefore, a completely bogus claim, but you use it to justify your claims with regard to money. I only refer to the use of finite resources in the sense that we cannot destroy our planet. We are, therefore, talking about totally different things.
And you are also talking about money as if there is, somehow, some finite correct amount of it in proportion to any set quantity of economic transactions, but that contradicts just about every theory of money that exists, including those on the velocity of money and its circulation.
If, in other words, you wish to make a very wide range of utterly implausible assumptions you can reach your conclusions. If you live in the real world, you can’t. The choice is yours. I know where I stand.
Whilst I appreciate the reply, I was actually looking for more of a learning experience than “you’re wrong, trust me”.
Or perhaps I’m misunderstanding/misinterpreting what you wrote?
I’ve been intrigued by others’ views on the economy and I’m also intrigued by yours. As an educator myself I would love to know more about where to learn about the views you’re expressing. Is that something you can help with?
Bear in mind, I’m a musician…I have no economics training. Just interested in learning and trying to make the world a better place.
Ok, what seemed like an aggressive tone was misinterpreted by me.
Try this morning’s blog in tax and spend.
Try by free ebook Money for nothing and my Tweets for free, but note the but on inflation needs updating.
And try The Joy of Tax.
And why not just ask Chat GPT to summarise my thinking?
As I read it, AK is not really using finite resources as a constraint at all. Rather that are making the simple point that unconstrained issue of new money (something that is within the control of the state) has consequences. I think we all agree with that. One of those consequences may be more money chasing resources that doesn’t increase as fast (ie inflation)
And one lever the state can pull to try to control that (not mentioned by AK in this context) is taxation. Put the money in circulation to drive positive economic behaviour, and tax it back to stop negative consequences. No?
And then you have choices about how you raise the tax – who pays, and what the base and rate are. So for example you could try to use the tax system to encourage or inhibit behaviours, or to reduce inequality.
(Glad to see I can say all of that in much less than 200 words!)
Then why mention contrained resources?
I discovered your YouTube and blogs after those of GS. I have found both enlightening.
What troubles me is that successive goverments regardless of party continue to implement the austerity agenda.
Is this just a massive con by the rich to move the tax burden away from themselves onto the middle and poorest classes? I’m certainly starting to think that way.
It’s also great that RJM is educating us on how the money cycle actually works. As a non economist I previously had no idea. Maybe the treasury mandarins and our politicians should also be watching your YouTube and reading your blog. They might learn a few things!
You are right: there is a con by the wealthy going on.
And thank you.
Lots of people, myself included, are starting to realise what’s going on.
GS warned that becoming too influential could get him and his peers de-platformed.
It would be good to hear some views on this.
Let me be clear: I want him ti be clear, but do not harm along the way. That is supportive.
“Tax reclaims the money that the government has spent to control inflation”.
Technically different but amounts to saying that taxation funds government expenditure.
I am confused.
No, it is not the same at all.
One assumes depdendency of the state on the rest of the economy, and the other assumes that the relationship is the other way around.
One assums the books must be balanced and the other does not.
The difference is massive.
I have written a lot about. Search it.
I will do a blog post about it, just for you (and whoever esle reads it).
Now out, here https://www.taxresearch.org.uk/Blog/2025/08/09/why-it-matters-that-government-spending-comes-before-tax/
Thank you. I will buy your book and buy you a small coffee by way of recompense.
The book to look at is ‘Money for nothing and my Tweets for free’. It’s free, here. https://www.taxresearch.org.uk/Blog/wp-content/uploads/2021/04/Money-for-nothing-and-my-Tweets-for-free.pdf
You’d only need to buy one after that. I stress, I would write the section on inflation in that differently these days.
It strikes me that anyone who understands double entry bookkeeping well enough to draw up a trial balance, will understand MMT intuitively. All the political and economic implications of that understanding follow automatically.
Gary was never a bookkeeper or accountant. So he’s coming at the problem from a very different angle, that of a traditional economist with all the built in misconceptions that he has been taught. Perhaps all that’s needed is to teach everyone a bit of book keeping!
There is a lot to that – and Steve Keen would agree.
IMO the simpler this can be made, the better.