I was invited onto LBC Radio this morning to discuss whether we needed a Budget. Presenter Matthew Wright, who seems to be keen to have me on his programme, asked the question because of the chaos of the last week or so in which Rachel Reeves has, very obviously, changed her mind many times with regard to what she might do in the announcement she has set to make on 26th November, presuming that the Labour government lasts that long.
I had a number of points to make.
Firstly, we do very definitely need a budget. Without a Budget, the government has no legal authorisation to spend, and therefore cannot. The only basis on which it can instruct the Bank of England to make payments is that Parliament has previously approved the expenditure in question, and as a consequence, a budget is absolutely essential.
Secondly, we need a Budget to approve the continuation of income tax and some other tax arrangements. Without Parliamentary approval, income tax, which is, for bizarre reasons, only approved from year to year, could not be collected. As a consequence, our government would, in practical terms, cease to function. So, again, we definitely need a budget.
Thirdly, moving on from these pragmatic points, I suggested that the problems that have arisen over the last few weeks have been caused, in part, by the constraints Rachel Reeves has placed on herself.
She chose to give control over monetary policy to the Bank of England, and so she has no control there.
She chose to create a fiscal rule when there was no need for such a thing, and they are entirely a work of make-believe, and she has now been seriously constrained by it, not least because it is, near enough, the one that the Tories used before she came into office. If they were failing using this role, and they were, unsurprisingly, she was always going to as well, and that is what she is doing.
And she chose to perpetuate the existence of the Office for Budget Responsibility, which was created by George Osborne in 2010. Worse, she has accepted that they have the power to say whether she might reach her fiscal rule based on their projections for the next five years when they have no better clue as to what is going on in the world than does Freda on the bus to Clapham Common.
It is wholly absurd to base budgets on long-term guesswork, and most especially on the guesswork of an organisation like the Office for Budget Responsibility whose track record with regard to forecasting can be fairly described as dire.
The result is that Reeves has created her own Budget mess, just as Labour seems to be choosing to make a mess of everything.
To add to that, I also pointed out that if only she understood how the economy worked, she would realise that there is no such thing as taxpayers' money, because she creates all the money that the government spends, whilst the so-called national debt is nothing of the sort; it is just the excess of the money she creates and does not tax back, deposited for safekeeping with the government by the City of London and its banks, not least beause there is nowhere else for them to put it. But she appears to know none of these things, so her ignorance compounds the other problems.
Can we do better? That was the question that Matthew put to me. I made clear that, of course, we could.
First, she could address all the problems I had highlighted.
Secondly, she could stop living in fear of financial markets when she has the power to control what they do.
Third, she should live in fear of us, the voters, right now, because she is not winning our favour.
Fourth, the whole fiasco budget, based on secrecy and hype, should be diffused. Instead, there should be widespread consultation, on a transparent basis, on what government spending priorities should be. This might involve a form of people's parliament, or large-scale focus groups, if you like, but these should not be behind closed doors. The evidence and the findings should be available for people to note.
The same should be true with tax rises. We are not going to get additional taxes on the wealthy, it would seem, and that is precisely because Rachael Reeves is terrified of them, when she should actually be listening to people, and if she did, she would realise that this is an essential course of action for her to follow because people are fed up with being fleeced by those who exploited the current financial system for their advantage at cost to everyone else.
And, let me stress, there is no reason why such processes should not take place. If they did, there would be better engagement with the government, better understanding of the processes of government, better understanding of the tax system, and a belief that we have a chance to be heard. Why any government would want to refuse that is hard to work out, but Labour does, and so I have precisely no sympathy with where they are.
In summary, as I said on air, we need courageous politicians, and we have cowardly ones instead.
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Fundamentally, in addition to having ‘lost the plot’, she has lost the trust of the people (as have most politicians). As you pointed out in your excellent David Graeber blog, trust should underpin society and economics. I find it interesting when you compare the UK view of politicians and the economy with a large portion of the populace of Scandinavian countries view of their politicians and the economy. One of the stark differences is that generally speaking the Scandinavian countries have quite a lot of trust in their governments…which is certainly not the case in the UK. Also, generally speaking (as the difference between executive level pay and others tends not to be as extreme as the UK) people consider themselves to be well-paid and they feel the government provides for them reasonably well. Something for her to think about?
I naively believe in the importance and power of conversation, discussion, trying to understand the other person’s POV and the like. Have you ever managed to have a private face to face talk with her, one that doesn’t use a QT format and not broadcast by the BBC? Or doesn’t she or her government allow that? I’d be interested in hearing why she rejects what seems to me to be your reasonable ideas.
I have had conversations with her. But not for some years, and am not expecting her to engage again.
There’s serious trouble on the way, and when it arrives, there will be some in the Parliamentary Labour Party who will want to explore solutions that take us to a better place. The chaos will bring opportunity. It may well not be Rachel Reeves, but I hope and believe you’ll be able to engage with them, along with others who hold similar progressive views. Keep a bag packed, I’d suggest.
I’m 30 minutes walk from the station.
I had a similar, depressing, reflection to Susan’s. It seems that no journalist is either willing or knowledgable enough to put these kind of questions directly to Reeves.
I’m not sure what a “people’s parliament” would be like, but at present we have a House of Commons whose members have been elected by the people and whose debates are not secret. Sometimes they’re a charade, having become too much of a silly ding-dong between Parties, but serious questions do continue to be raised in the chamber. I understand why the Party system came into being but I’d like to see less focus on it, more focus on independent thought. (I’m old enough to remember when the voting slips at a general election didn’t even mention Party affiliations because you were after all voting for individuals.) Some of our best Parliamentarians are independent, both in the Commons and in the Lords. The Speaker’s job is to ensure that intelligent contributions are considered with due respect; government ministers should not be allowed to ignore them just because they do not conform to the Party line.
Freda (formerly from Clapham Common) has just arrived here on Megabus from London, and says she definitely knows more than Rachel Reeves. For a start, she knows how many beans make five, which is more than anyone at the Treasury, and even she can see that freezing tax allowance thresholds is regressive, dragging the poorest into paying tax, and Freda would like to remind Rachel that if the Prime Minister can break all his leadership and election pledges because of “changed circumstances”, then how come Ms Reeves can’t change her self-invented “fiscal rule” (which she nicked from the Tories anyway) to fit the cost of living crisis, climate collapse, the needs of the NHS, social care, our justice and prison system, education, potholes, young people, and homelessness?
Freda sees these things every day, and even if the Chancellor doesn’t have a clue what to do, Freda does.
The Chancellor can stick her hand into her very deep Treasury pocket, and start spending some money before the roof falls in. Freda saw it done in 2008/9, and Freda saw it done in 2020/21. Freda’s old dad says, “we did it after the war, and we WERE broke then, so why can’t we do it now?”
Freda may just be an omnibus passenger, without use of a Ministerial limo, 2 grace and favour residences, or a wardrobe of freebie clothes, but Freda just wants it pointed out that she and everyone else on the omnibus know a damn sight more about money than that Reeves woman!
😉
Much amused, and to agree with.
One thing you can say has undermined Starmer’s administration is the lack of a Mission Statement based primarily on a thorough analysis of how the Capitalist Class has been performing in the UK in conjunction with its government. All we’ve had is the meaningless mantra that the government is committed to growth which every hue of political party will confirm, even the Greens if only to make the country more sustainable. This lack of a detailed Mission Statement reveals that for 14 years the Labour Party has basically piddled around to put it crudely relying on the historical fact that sooner or later the public will get fed up with the Conservatives Party’s policies. Fortunately for the UK the public has rumbled Starmer’s lack of analysis and the fact he’s gone back on his word in regard to the pledges he made to get elected. Clearly Starmer and his Svengali McSweeney aren’t very bright are they!
Noted. I will build one into my Budget suggestions.
This is the sort of analysis Starmer should have been making during Labour’s years in the wilderness. Its central argument builds on the work of Charles Tilly’s sociological analysis of the evolution of the state and capitalism. Bresser-Pereira argues there has been evolution of capitalism for the worst as we are now in the era of neoliberal rentier-financier capitalism and badly need to move to a new era of what he calls democratic managerialism:-
https://bresserpereira.org.br/index.php/social-theory/capitalism-and-modernity/11930-8473
Here’s a brief explanation of Charles Tilly’s historical evolutionary link between state and capitalism to provide background:-
https://drive.google.com/file/d/1mUdisni1J9dGtVA2thBRVHJDb30ciLSx/view
Thanks
Thinking about it is it not the case that Starmer didn’t bother with much analysis and derive a Mission Statement from it during the years of waiting because he’d already decided which side he was batting for so why make the effort?
Last night in disgust I just turned C4 news off when the idiot that is their economics ‘person’ started talking about the cost of borrowing because the government was borrowing money apparently from the markets which was putting up borrowing costs. It was as if there was no government money, no state agency at all in these affairs.
Reeves seems to choose this line of thought along with her boss. They are sitting there on top of a load of powers and simply refuse to acknowledge them. Yet they say that they are merely ‘accepting the world as they find it’.
The world that they accept then is one based on lies and myths created by people like Margaret Hilda Thatcher and Frederick von Hayek who chose to rewrite human history and fiscal reality, and ultimately democracy.
One thing we do know for sure – and I contest that this is not hard to work out – is that this acceptance is helping the rich to continue to accrue more wealth which they have been doing since 2010. And rich donors are everywhere in politics providing clothes, glasses and entertainment for politicians.
So, what this looks like is that on C4 news last night, one minute you have Clive Lewis talking about changing the Labour prime minister to get things moving, then the in-house C4 idiot-boy economics bod tells the same viewers that changing the leadership won’t matter because the markets lend the state money anyway and nothing will change!! Think about it. We have gone from hope to no hope in a matter of minutes.
Is it any wonder that we are in such a mess? The media has become a part of our daily abuse. No wonder many of us can’t work out what an earth is going on. It’s cynical but also absurd. I wish we had a modern day Samuel Beckett who could write a play about it.
Neil MacDonald. I have actually entertained him in my home when he was a producer and I was doing a Dispatches. I never saw him as a presenter, and still don’t, and he seems to know nothing about economics. I turned to YouTube in protest.
It was the same on BBC Breakfast TV this week. Emma Vardy (last seen reporting from the US and previously the Northern Ireland correspondent) giving a lamentable critique of the government’s Budget dilemma that was a classic of orthodox economic thinking and soundbites that dominate the media. Is there a TV journalist in the BBC or anywhere who is going to challenge it?
Not many. That is what they are taught / allowed to say.
The general thrust of the argument in this article and the linked video is correct but the truth is that no party can attain government with no purpose, other than to remain in power, and then adopt a purpose, like reaching one down from the shelf.
Thus, it’s impossible for Labour to escape the straitjacket of neoliberalism it has stupidly volunteered to adopt. By doing so it shackled itself to a corpse.
But the rot set in, not with the advent of Starmer and Reeves but with Blair and Brown, when they accepted the Thatcherite settlement in 1997.
The simple truth is that neoliberalism is not in the interest of the ordinary people who Labour is supposed to represent. It is an ideology that only benefits – superficially – the rich and powerful. It’s inimical to everyone else and to the planet and all its inhabitants in general.
For Labour to change it would have to renounce not merely Starmer and Reeves, inept though they both are, but neoliberalism itself. Otherwise, it’s just rearranging the deck chairs on the sinking Titanic.
Despite the mixing of metaphors, the onus must now be on new progressive forces, hopefully the Green Party, to articulate the progressive narrative that already exists and that comprises a viable alternative, consistent with responsible stewardship of life on a finite planet.
Baroness Bennett, a Green Party peer who was on ‘Any Questions’ on Radio4 today and yesterday evening, was much less articulate on wealth taxation than I would have liked. I think there’s a long way to go before there’s a clear message advocating serious change in our approach to the economy. It appears that Zack Polanski has picked up the cudgel, but it will take time for the new ideas to get traction.
I have written to Radio 4 a few times complaining that they peddle the same old nonsense of fiscal ‘black holes’ and ‘there’s no money’. Not sure what else I can do.
As Richard says, they can say only what they are allowed to say.
There was another, astonishing example of Government-by-Panic yesterday, in the attempted distraction tactic of rushing out a statement about asylum seekers. The proposed shift to a Danish-style asylum system – protection for now, removal later when a country is “safe” – is as doomed to fail as is their “management” of the economy.
Safety assessments are notoriously unreliable. Countries can look stable one year and fall back into conflict or repression the next. Recent experience in Afghanistan, Sudan and Syria shows how quickly conditions can deteriorate. A system that forces people back on the basis of an over-optimistic judgement will return them straight into danger.
It would also of course hit the UK economy. Even under these new proposals, refugees will spend many years here. They will work, gain skills, and support employers in sectors already facing chronic staffing shortages. Removing them the moment a civil servant signs off a “safe” designation will disrupt businesses and waste the investment they – and we – have made.
The social cost is just as serious. People build friendships, relationships and family ties over years. Uprooting them is not just harsh; it invites legal challenges, especially where children are involved. A revolving-door system of protection followed by compulsory return creates instability for everyone, including local communities.
Like every other frantic attempt they are making to project the appearance of control, it will come at the heavy price of safety, economic sense and social cohesion.
Much to agree with.
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I loathe the callousness of these proposals made by politicians seeking personal advancement by persecuting innocent people.
Shabana Mahmood features significantly in Paul Holden’s “Fraud”, as a member of Labour Together, during their years of deceit and betrayal of the Labour Party. She seems to have a problem with “terminological inexactitude” according to Holden’s account.
And she is clearly on manouevres…
Amusing choice of name for your passenger on the Clapham Omnibus. When I was a lad, Freda was the Blue Peter tortoise, and she definitely knew more about economics than the Chancellor does!
She arrived out of thin air as I typed.