THE RICHARD J MURPHY YOUTUBE CHANNEL
DEBATE AMMUNITION
Labour's Job Creation Contradiction
Funding the Future | July 2026
Topic
Why Labour cannot promise more jobs while allowing the Bank of England to deliberately destroy them through high interest rates and quantitative tightening.
The video that this Debate Ammunition supports is available here.
The Core Argument
Pat McFadden, the Work and Pensions Secretary in Keir Starmer's dying government, says Labour wants to create jobs. But at the same time Bank of England, with the full cooperation of the Treasury, is pursuing policies designed to destroy them. You cannot do both at the same time.
High interest rates and quantitative tightening are not neutral technical tools. They are deliberate instruments for suppressing demand and for creating unemployment, and they are working. General unemployment has reached 5% in the UK, and youth unemployment 10%.
The solution is straightforward. Labour must end Bank of England independence, cut the base rate, stop quantitative tightening, and redirect ISA and pension savings into productive investment in the UK economy. That is how jobs could actually be created in the UK, but it would require a radical change in Labour economic policy to achieve that outcome.
Key Statistics
|
Statistic |
Figure |
|---|---|
|
General unemployment rate |
5% |
|
Youth unemployment rate |
10% |
|
Annual flow into ISAs available for redirection |
~£70 billion |
|
Total available for investment via ISA and pension reform |
Over £100 billion per year |
The Argument Structure
Step 1 — Labour's policy is internally contradictory:
Pat McFadden says Labour must promises jobs while the Bank of England, supported by the Treasury, is simultaneously using high interest rates and quantitative tightening to deliberately reduce demand and create unemployment. The government is pressing the accelerator and the Bank of England the brake at the same time. This does not produce movement; it produces an economy in a tailspin.
Step 2 — The inflation justification does not hold:
The Bank of England is holding rates high, it says, to beat inflation, but almost all UK inflation since 2020 has been imported from supply chain disruptions after COVID, the Ukraine war, and conflict in the Gulf. None of these were within the Bank of England's control. Raising interest rates to suppress domestic demand in response to external shocks has no logical basis and imposes enormous costs on workers and communities.
Step 3 — End Bank of England independence and cut the base rate:
The base rate is also set high to attract mobile capital into the City of London, enriching bankers at the expense of every other participant in the economy. Bringing the Bank back under Treasury control and cutting the rate would reduce government interest costs, reduce mortgage and rent costs, free household spending, and restore demand. More demand means more jobs.
Step 4 — Redirect savings into productive investment:
Around £70 billion flows into ISAs each year, and pension contributions attract over £70 billion in annual tax relief. Both are currently wasted on second-hand shares and City speculation. Requiring these flows to be invested in UK bonds funding transport, energy, housing, schools, hospitals and green infrastructure would release over £100 billion a year for job creation without increasing government borrowing, because real assets would back every pound spent.
Their Argument → Your Rebuttal
|
They Say |
Your Response |
|---|---|
|
Bank of England independence is essential to keep inflation under control and maintain market confidence. |
The Bank has had a single tool, the base rate, and a single target, 2% inflation, since 1997. There are no targets for growth, employment or living standards. The inflation we actually experienced after 2020 was driven by external supply shocks: COVID supply chains, war on Ukraine, and the Gulf. Interest rates cannot fix disrupted shipping routes or energy markets. All they can do is destroy domestic demand and jobs. Market confidence is not diminished when a government uses its economic powers purposefully. It is diminished when policy is visibly incoherent. |
|
People on health and disability benefits could work if there were better incentives and more pressure. |
The evidence required to receive most health and disability benefits is high. The claimant rate reflects genuine need, not fraud or preference. But the prior question is: where are the jobs they are supposed to move into? If the Bank of England is deliberately suppressing demand to raise unemployment, there is no pool of vacancies waiting for benefit claimants. Stigmatising claimants while maintaining policies that ensure there are not enough jobs is not a welfare reform strategy. It is scapegoating. |
|
Using ISA and pension savings for government investment would undermine savers' returns and confidence. |
Savers would still receive tax relief and a return on their money. What would change is where the money goes: into bonds funding real infrastructure rather than into second-hand shares and City speculation that delivers nothing to the productive economy. The current system subsidises unproductive saving on a massive scale, costing over £80 billion a year in tax relief while creating few new jobs, no new infrastructure and no new productive capacity. Giving savers a stake in real investment in their own communities is a stronger offer, not a weaker one. |
|
The government cannot afford to fund a major job creation programme given current debt levels. |
This is the Treasury view: the belief, refuted by Keynes in the 1930s and every crisis since, that money is a scarce resource and government use of it crowds out the private sector. When the economy has unused capacity and rising unemployment, the constraint is not money but real resources. Investment that employs people, raises tax revenues and reduces social security payments is not a cost to the public finances; it is a contribution to them. Quantitative tightening is currently withdrawing money from the economy. Stopping it costs nothing. |
The One-Liners
“You cannot promise people jobs with one hand while the Bank of England destroys them with the other.”
“Five per cent unemployment and ten per cent youth unemployment are not market outcomes; they are policy choices.”
“High interest rates do not fix imported inflation. They just make ordinary people pay for problems they did not cause.”
“Over eighty billion pounds of public savings a year currently subsidises City speculation. It could be funding jobs instead.”
“The Treasury view was wrong in the 1930s. It is still wrong now.”
Questions to Ask
If Bank of England independence is working, why are unemployment and youth unemployment both rising while wages stagnate?
Which specific domestic demand pressures was the Bank targeting with its high interest rate and quantitative tightening plan, given that all post-2020 inflation was imported from overseas?
How does the government plan to place people from health and disability benefits into jobs that Bank of England policy is simultaneously eliminating?
What is the public benefit of £80 billion a year in tax relief on ISA and pension savings that fund second-hand shares rather than new productive investment?
Further Reading
|
Post |
Date |
What it covers |
|---|---|---|
|
Bank of England independence has been a disaster and it's time for it to end |
23 Apr 2026 |
Sets out why Bank of England independence has produced near 5% unemployment and 10% youth unemployment while serving the City at the expense of working people. |
|
1 May 2026 |
Explains how raising rates when demand is already falling risks the same catastrophic error as defending the gold standard in the 1920s. |
|
|
24 Apr 2026 |
Full alternative economic programme including redirecting ISA and pension savings into bonds to fund over £100 billion a year of productive UK investment. |
|
|
31 May 2026 |
Concise statement of the case for redirecting ISA and pension savings into UK investment to create jobs and support the climate transition. |
|
|
30 Mar 2026 |
Explains why ISA and pension savings as currently structured create no productive investment, no new jobs and no economic growth. |
|
|
29 Sep 2024 |
Details how quantitative tightening restricts investment and why it should be ended, with the case for redirecting savings into productive capital. |
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[…] The Debate Ammunition for this video is available here. […]
It is realy good that Keynes was there or we would all be speaking German now.
The Treasury decided that the building HS2 was costing too much and they rubbed 2 braincells together and and came up with a spiffing idea, They decided double the construction time and so reduce the cost, in fact it more than doubled the cost. The contractors made a fortune especialy as the contract was “design and build” and payment was “cost plus”. There will be no extra trains beyond Birmingham because the two track section was not doubled.