Phillip Inman's column in the Guardian on Saturday made a familiar argument. "Don't be fooled by recent good news", he said. "The UK economy is still in a precarious state."
His claim was that although tax receipts and retail sales are rising and inflation is falling, the UK economy remains fragile. He suggests as a result that calls for more spending are “unaffordable” and that fiscal caution is still required.
I am not persuaded. This is the usual neoliberal nonsense that economic hacks always roll out, and Phillip Inman has long been one. And it matters what people like him say, because arguments like this shape public understanding of what governments can and cannot do.
The flaws should be obvious.
First, the analysis assumes that government finances are like household finances. They are not, as I explain in this morning's video. The UK government is the monopoly issuer of sterling. It does not need to "find” money before it spends. It spends first, taxes later, and issues bonds to provide savings facilities and control interest rates. The claim that spending is “unaffordable” is therefore a political choice, not an economic fact.
Second, the Phillip (to whom, I should say, I have spoken many times and met) treats borrowing as inherently dangerous. That misunderstands the purpose of government borrowing. Public borrowing is simply the mirror image of private sector saving. That is what the sectoral balances make clear, as I also explain in this morning's video. If the government cuts spending when households and businesses are cautious, demand collapses. The result is stagnation, exactly what Britain has endured for 15 years.
Third, the column misreads the source of recent tax receipts. The Guardian itself notes that January's strong revenues were at least in part driven by capital gains, which are often one-off events. But the real question is not whether receipts are temporary. It is why the UK tax base is so narrow that windfalls matter at all. The answer lies in decades of tax cuts for wealth, tolerance of tax avoidance, and the growth of rentier income that escapes normal rates of taxation.
Fourth, the argument ignores the real constraint on government spending. It is not money. It is resources, whether they be labour, skills, energy, raw materials, land, or technology. Britain's problem is not that it spends too much. It is that it invests too little. We have underfunded housing, energy infrastructure, education, health care, and local government for years.
And fifth, the column repeats the neoliberal framing that has failed Britain since 2010. We were told austerity would restore growth. Instead, we got stagnation, crumbling infrastructure, declining public services, and rising inequality.
Those are not abstract issues. They have consequences.
First, underinvestment reduces productivity. If you do not build railways, insulate homes, train workers, or fund research, growth will not appear by magic.
Second, austerity erodes social security. When local councils cut services and benefits fail to keep pace with prices, insecurity spreads. People become angry, and that anger fuels the far right, a theme I have discussed often on this blog.
Third, inequality widens. Wealth accumulates in property and financial assets, while wages stagnate. Tax systems that favour capital gains over earned income reinforce this trend.
Fourth, democratic trust collapses. If governments claim they cannot afford decent public services while billions appear for banks, defence contracts, or tax cuts, people conclude — rightly — that politics serves the powerful.
And fifth, climate transition stalls. Britain cannot decarbonise without massive public investment in energy, housing, transport, and industry. Fiscal timidity is ecological irresponsibility.
So what should we conclude?
First, we need honesty about money. Government spending is constrained by resources, not by arbitrary fiscal rules. We must abandon the household analogy and the myth of the “taxpayer's money” funding spending.
Second, we need a programme of public investment. Housing, green energy, transport, health care, education, and social care all require sustained funding. That spending will create jobs, raise productivity, and improve well-being.
Third, we must reform taxation. Wealth, land, and excess corporate profits must be taxed properly. Tax havens and secrecy jurisdictions must be tackled. Banks should report corporate account data to HMRC to ensure that the estimated 40% of all small companies not paying their corporation tax at present do so simply because they can be identified as trading. Directors should be liable when companies disappear with unpaid tax. Those are proposals I have already set out.
Fourth, fiscal policy must support a politics of care. No one should be cold, homeless, untreated, or without education because of an accounting convention. Social security is not a luxury. It is a foundation of a civilised society.
And finally, we need a new narrative about the economy. Britain is not poor. It is mismanaged. We have enough resources, skills, and technology to provide well-being for all. What we lack is the political will to deliver that.
Phillip Inman is right about one thing. The UK economy is precarious. But he is not right about why. There, he is a long way from the mark. We are not in a precarious position because we spend too much. We are precarious because we refuse to spend where it matters.
Until that changes, we will keep mistaking accounting rules for economic reality and so condemn ourselves to decline.
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Do we not also need to shift the narrative from there’s always money for pensioners, but nothing for our young people? In the search for the so called grey vote our policies have become far to focused on older people whilst our 18-25s find rising costs for their education, limited access to benefits and rising housing costs forcing them to live at home without the opportunities that had previously been available for our young adults. I am increasingly concerned that our policies are becoming so hostile that many are emmigrating taking their skills with them. I don’t blame them. If I was a young doctor with a massive student loan I’d think about a country paying more and providing better opportunities. But this is not good for our country or our economy. Younger Greens like Zack get this and are able to mobilise this demographic, but this is a problem for our older demographic too. Who is going to pay our pensions and care for us? As we become an increasingly old society we can’t afford to alienate our brightest and best.
Much to agree with
The Guardian went down the pan after the Tortoise media takeover. They sacked most of their decent journalists, including Carole Cadwallerd, and have been betraying their roots ever since.
I don’t buy it anymore.
Point of Order: Agree entirely that The Guardian has gone down the pan since they “gave away” The Observer to Tortoise Media but they (Guardian Media Group) still own The Guardian not Tortoise Media.
I still subscribe to their UK digital version of The Guardian but as you say, since they offloaded The Observer they’ve lost a large number of great journalists including Carole Cadwalladr and Andrew Rawnsley which has diminished their overall quality of output. Most of the UK version is now filled with articles that seem to have been written by journos from their outlets in the US and Australia, most of it just clickbait. Sadly it’s not been the same since Alan Rusbridger edited it.
And as Richard has pointed out here, Philip Inman is steeped in spouting neoliberal bollocks.
Andrew Rawnsley? Great? When? Not for decades, if ever.
I notice some refreshingly anti neolib attitude seeped into the Guardian this morning (evidently the sub editors were busy elsewhere). The report on the end of the Winter Olympics (which I succeeded in avoiding for the past few weeks) reflected on the success of Norway. Now that I had noted, for obvious reasons. Always ready to cheer on a small country to which I have personal ties, once dedicated to peace (not so much nowadays, sadly: et tu, Norway?). The article concluded:
“Unlike countries such as the US, Norwegians put less emphasis on competition and specialisation in their youth sports – scores are not recorded in team sports matches featuring children under 12 – and more importance on fun. Norwegians believe this leads to fewer children becoming discouraged and quitting sports before they have time to develop their potential…
“We don’t do skeleton or bobsleigh because that costs too much money. We are a very rich country, but we believe in the socialist way of doing things. That success should be from working hard and being together,” Morten Aasen, a former Norwegian Olympian, said in 2018.
“Geir Jordet, a professor at the Norwegian School of Sports Sciences in Oslo, told CNN Sports his country’s athletic success comes down to a simple formula: “Collaboration, communication and care.”
Much to agree with.
Very good
Without wishing to digress from your original post, I think Rawnsley as a political hack has been consistently:
critical of Brexit’s political and economic consequences.
Identifying austerity measures (especially those pursued by Conservative and Labour governments post-2010) as having damaged public services and living standards — contributing to long-term economic and political dissatisfaction.
openly critical of Nigel Farage, especially in the context of his influence on British politics, seeing him as a disruptive political figure whose role in Brexit and current UK politics does more harm than good to serious governance.
I’m sure that chimes with what’s being discussed here?
I think I’m right in saying that Tortoise Media bought The Observer from the Guardian Media Group which, I believe, is owned by the Scott Trust. The Guardian isn’t owned by Tortoise Media, therefore.
A brilliant summary of where we are and what we need to do. I shall share widely.
All that you say is both reasonable and correct. It follows that what Inman says is unreasonable and incorrect. Why?
Why does he he reach the conclusions that he does? Or perhaps he just has an inflexibility of mind/too old/too set in his ways?
Pity the Guardian only offers space for the neo-libs (I am sure he would deny this – whilst continuing to sit in the neo-lib envelope).
I suggested that Richard looked at Inman’s article and I’m pleased he did but like you I am baffled that in 2026 the Guardian’s senior economics correspondent can get things so fundamentally wrong. I expect this in the Telegraph etc. because they have vested interest in propagating inequality but surely the supposedly flagship liberal outlet can do better than this.
Two bits of news that depressed me profoundly in the last week.
1. That the government cheerfully announced that £30bn had been withdrawn from our economy (what it calls a surplus) and seemed to think that was a “good thing”.
https://www.theguardian.com/politics/2026/feb/19/uk-reports-record-breaking-surplus-rachel-reeves
2. Local news that the current UK economic climate, as manifested in Bristol, whose citizens are desperate for housing, means that the highest offer for an industrial estate near Temple Meads station came, not from a housing developer (they seem to be sitting on their hands at present) but a commercial developer, wanting to improve the industrial units.
https://www.bristolpost.co.uk/news/bristol-news/bristols-housing-crisis-explained-one-10825486
In neither story do I see any evidence of good government, of initiative of deliberate policy, of any attempt to actually MAKE change – merely the wringing of well greased palms in helpless passive surrender to “market forces”, because “we can’t afford it”.
This is why so many people don’t vote. Because voting doesn’t result in a “government”, merely another set of “His Majesty’s managers”.
The 31 January deadline for income tax tax returns – and balancing payments and the first payments on account for the next year, and also capital gains tax payments – means that January is always a big month for tax receipts. This year the surplus was about £30 billion. Receipts of £133 billion and spending of around £100 billion. Last year the surplus was £15 billion.
First, total government spending is over £1,200 billion. This “surplus” is less than 3% of the spending over the whole year. Nice to have but a one-off. It does not reflect substantial changes in the economy as a whole.
Second, apparently the “analysts” expected a surplus of about £24 billion. So their models were wrong by around 25%. The mathematical models, and the people who create and use them, are poor at predicting human behaviour.
Third, the tax collected reflects income received and capital gained realised in the 2024/25 tax year, between 9 and 21 months earlier. It is a very slow trailing indicator of where we were a year or two ago. And by “we” I mean people who pay income tax by six monthly instalments – not most employees on PAYE – and people who own and sell enough capital assets pay capital gains tax. About 12 million people in a country of approaching 70 million. About one in six.
And fourth, capital gains tax receipts were £17 billion, up £7 billion from last year. So about half of the additional surplus was CGT. Income tax receipts were up a bit but by a much smaller percentage. In part this may reflect the CGT annual exemption being halved again to £3,000 from 2024/25. It also may reflect CGT rates increasing in October 2024. Although the top rate of 24% is still much less than the top rates of income tax. But capital gains tax is often a choice of when to sell. I expect many people were realising gains before the October 2024 budget at the old CGT rates, and perhaps also before the spring budget in case rates rose again. But once assets are sold, those gains are not realised again. I expect CGT receipts in January 2027 for the 2025/26 tax year might be down again.
CGT is a small tax, less than a tenth of income tax, not a firm basis for drawing conclusions about the economy.
Thanks
Agreed
The Guardian, with the exceptions of Aditya Chakrabortty, Larry Elliott and John Harris is hopeless these days (although sometimes I wonder about Larry). I suspect they won’t publish the letter I sent to the editor on Saturday as it challenges the Guardian’s neo-liberal narrative
Uncharacteristically Richard you seem to indulge Inman more than one might expect. The tone of the piece seems revolting, with its. ‘Leftists’ and Green ‘extremists’ ‘wishing for things they cant afford’ – as if it goes without saying that ‘there is no money’ ‘
He has not the slightest interest in how on earth we got here – (15 years of austerity ‘we cant afford it’.
The nearest he gets to any analysis is to talk about £bns spent – on SEND or defence – no interest in real resources, that we may have or real things that we want to produce – whether its drones or hip operations. Keynes ‘anything we can actually do we can afford’ must be turning in his grave.
Someone should ask the ignorant bastard – where he thinks the money goes if we spend to employ all our unemployed doctors.
I get accused of believing in MMT, I always come back with; ” but you believe in TTM”. The Taxpayer Theory of Money has caused considerable and unnecessary damage to everyone’s wellbeing. It is the equivalent of economic “flatearthism”, and underpins all those other dangerous beliefs such as ” the household budget”, and “fiscal sustainability”.
I would be careful with the language, even if the frustration is understandable.
The point to make is not that people are foolish, but that they are using the wrong mental model. What most critics believe is the “taxpayer theory of money” – that government must first collect tax before it can spend. But operationally that is not how a currency-issuing state works. Spending creates the pounds that are then used to pay tax. The Bank of England has said this explicitly.
The household analogy and talk of “running out of taxpayers’ money” follow from that mistaken premise, and they lead to bad policy – austerity, under-investment and weakened public services.
So I would say this: the issue is not belief in MMT. It is recognising the accounting reality of our system. Once we understand that, we can debate the real questions – inflation, resource use, inequality and how we maintain our five forms of capital – instead of myths about empty coffers.
I was pleased to see Clara Mattei interviewed on Channel 4 a few days ago during her UK tour promoting her new book. It is quite rare to hear this perspective articulated on national television. I think she absolutely nailed the way she dismantled many of the dominant fiscal narratives, advancing arguments very much aligned with those set out in your article: https://youtu.be/9M_dq_0ljsc?si=aJzUz4a1uMk_m4P5
She was good. but he interview was frustrating for two reasons.
First, her analysis is remarkably limited. She shows that:
• Austerity was imposed after the First World War to restore class power.
• The goal was to weaken labour movements, not to balance budgets.
• Fiscal tightening, wage suppression, and monetary orthodoxy were coordinated tools.
• Economists and technocrats helped legitimise these policies as “scientific”.
In other words, austerity was political economy in action, and a deliberate redistribution of power.
But then, she appears to have remarkably little to say about what we do next except for a very limited Marxist analysis of class struggle, which simply does not work well enough in the modern environment in my opinion. Like too many people on the left, she is long on working out what has happened, and what is going wrong, but has a very limited solution focus.
Fair critique. But reading the comments, many people seemed genuinely refreshed to hear a different narrative articulated, as many do not fully realise or are not able to articulate the way neoliberalism affects them. It is often a first step before looking for solutions. I am not yet sure whether her new book Escape from Capitalism offers sufficiently concrete ideas on how to disentangle from the system.
Nit from what I heard in that interview
As a fan of Mattei – whose last book ‘The Capital Order’ is extremely well researched – I have to concede that you are right about the key ‘and what next then’ policy response.
However, let us be clear. We do not necessarily need a ‘class war’ response in the classical Marxian sense.
In order to have a proper functioning democracy, we need much more going on than some (usually rich) gentleman’s agreement that markets have all the answers and that politics is a waste of time. The false consensus that we live with now that Inman and his ilk serve out daily. Giddens rules at the moment.
What we need are opposing views that recognise the real power structures in our society and mitigate continuously between them in order to produce better, fairer outcomes. This approach would also be realistic in that it would contain an honest appraisal of human weakness in the setting of power. The revitalization of Liberalism could be here.
So in one sense, Mattei and the old left are right; there needs to be an antagonism in politics to make it work for the better and the greater good and I think that this idea of the modern politics of care is maybe where this can start, rather than along the older lines of ‘class’? Care applies to everyone in some way. It is class blind.
Again, I’ve been reading Chantal Mouffe and her ideas about politics (it is a long,long road folks) and the concept of agonism – the acceptance of continuous conflict channeled in the right political system in some positive way that can cope with pluralistic politics that generates debate and new ideas and watches over us.
I am ‘ademocratic’ at the moment. I have no rational reason to believe in democracy as it is. What I want to see is for democracy to ‘grow-up’ and mature. It’s high time.
And the stakes have never been higher.
Noted
Absolutely super blog, as usual, Thank you for keeping me sane! The Guardian – on whole I have to agree that it is very mediocre (and clearly declining) and the journalistic standards similar. I subscribe (very reluctantly) to the digital addition) to keep me tuned into events and to record what the enemy are up to. What I most detest is that it also gives oxygen (and probably money) to the most vile people including Deforms, Tories, LINO’s. Unforgivable. As someone I once knew wisely said “an open mind is much like a sewer – any old shit goes through it”
Interesting report here
https://www.theguardian.com/food/2026/feb/23/uk-food-security-cyber-attack-riots-tinderbox-analysis
Thanks
Even without cyber attacks I can remember empty supermarket shelves (basic not luxury items) on several occasions during Covid during the 8am pensioner/vulnerable people periods. It was played down at the time. UK does not have a food security policy. The official policy is: if we don’t grow it, we can import it. Yeah…
We are ALREADY vulnerable to an unacceptable level and have been for years.
The gov’t will simply ensure that the state can protect itself effectively, from civil disorder, and that the important people can access their stockpiles of Krug and caviar. What else matters?
I’ve just finished Escape from Capitalism and was somewhat underwhelmed. Interesting examples of historical political suppression of workers’ interests in order to benefit capital from a Marxian perspective while using a Keynesian critique of austerity but solutions on how to rein back rentier racketeering? Unfortunately not really. Drawing again on Marxian thought, she advocates the development of grassroot locally based activism of which her work with the ‘Forum for Real Economic Emancipation in Tulsa is an example. Further examples are given on pp155 et seq.
It seems that even Marxists like Mattei do not think that the State has a role in people’s lives just as much as our Neo-liberal friends. It is a weird confluence of anti-statism.
I still believe that the role of the state is to arbitrate on behalf of all groups in society especially erring on the side of the less powerful. Now a properly Christian country would do that, would it not?
Great piece Richard. Sadly the household budget analogy for an economy, the aggregate of households, is pervasively, persuasively stuck in the minds of lazy economic journalists. But I wonder if this mindset is a consequence of an excessive focus on accounting and double-entry bookkeeping, when there are other ways of modelling an economy? Maybe we should focus on understanding the resource and investment deficiencies that we know are the root of the problem, not the depiction of debt in the UK’s chart of accounts. If only we could move the debate to more active modelling of the flows of value in our economy, the desired outcomes and the environmental constraints, we might not be captured by the nerdy bookkeeping of the BoE’s balance sheet. There are better ways of modelling, and the compute power is there to do it.
Thanks for this.
I think the problem is not that we use double-entry bookkeeping too much, but that we use it too little, or rather, we forget what it is telling us. Every entry has two sides. When government spends, someone receives. When tax is paid, someone’s income is reduced. The state is always the counterparty in the system, and ignoring that is exactly how the household-budget myth survives.
Journalists look only at one side of the ledger – “government debt” – and forget the matching asset in the private sector. That is not excessive accounting; it is bad accounting.
Double entry is not capitalist ideology. It is simply a language for recording relationships. And it tells us something crucial: public deficits are private surpluses. Once you see that, the panic about the national debt looks very different.
You are right that we must also focus on real resources – housing, energy, skills, environmental limits, investment. Those are the true constraints. But good accounting helps reveal them. It shows who gains, who loses, and where capacity is missing.
So the task is not to abandon accounting. It is to use it properly, remembering that government is always the other side of the entry, and then to ask the real question: are we maintaining our physical, human, social, environmental and financial capital well enough for the future?
You are right of course, and I agree that good bookkeeping always shows the counterparty entries in any flow of value, and clearly shows up the advantaged and disadvantaged. But, being a part time plumber and mechanic, and only an amateur accountant, I can’t help but love Bill Phillip’s hydraulic flow model of the economy as a way of visually communicating the dynamics and flows, economic capacity and the importance of money creation. See ‘How does the economy work?’ Science Museum https://www.sciencemuseum.org.uk/objects-and-stories/how-does-economy-work
It’s fun
It is not wholly, accurate.
But it’s fun
Ive just had a little lightbulb moment (dull trealight really) on the balancing of redistributive taxation.
Until today, although I understood in theory about the redistributive possibilities of taxation, I don’t think I’d thought it through in terms of “both sides of a ledger”.
If we tax the income and capital gains of the wealthy, then that rather feeble, lazy ineffective money leaves one part of the economy, where it isn’t working very hard to make the world a better place, or creating jobs, although it may be causing asset inflation – keeping property prices high.
If we then create and spend an equivalent sum of money into a different part of the economy where it WILL work hard (increasing the disposable income of a low income person, or investing in providing a much needed resource (social care, housing, a better court system, SEND provision) then the “in/out” figure for the spending & taxing still “balances”, and the same total amount of money is circulating “in the economy”, but much more positive good is being done with it, per £ – more push for your pound – with social multipliers working as well, to produce more in tax receipts leaving the economy than was originally being spent in the first place, thus this further removed money can create some more anti-inflationary leeway, and allow more governent-created money to be spent into that extra opportunity hole.
Where the tealight started glowing slightly brighter, was when I thought about the problem as 2 sides of a ledger. I hope I’ve made a little progress in MacroEconomics & Double Entry Book-keeping for Dummies, key stage 1. Can I write for the FT now?
Brilliant!
Rather belatedly back to the Guardian. As well as those mentioned: George Monbiot, Robert Reich, Nesrine Malik, Arva Madhavi, Rebecca Solnit. Though I do of course read The National!