As I say on fiscal rules in the glossary to this blog:
Fiscal rules are targets set by governments to limit borrowing, debt, or deficits over time. They are presented as if they are neutral, technical constraints on what governments can do. In reality, they are arbitrary political choices.
Governments adopt and abandon fiscal rules at will. Each new government tends to change the rules it inherits. That alone proves that they are not immutable laws of economics but rhetorical devices designed to give the impression of discipline.
I added:
The primary function of fiscal rules has been to justify austerity measures. By pretending that there are financial limits to what governments can do, they have provided cover for cuts in public services, social security, and investment in social infrastructure.
Yesterday at the Labour Party's conference in Liverpool, Chancellor John Healey said:
[T]he Prime Minister and I are in lockstep that we will meet the fiscal rules.
That we will maintain control of Britain's finances.
The UK actually has, at present, three fiscal rules:
Rule 1. The current budget should be on course to be in balance or surplus by 2029/30 (‘stability rule')
Rule 2. Net financial debt should fall as a share of the economy in 2029/30 (‘investment rule')
Rule 3. Some types of welfare spending must remain below a pre-specified level (the ‘welfare cap')
To put these another way, they mean:
Rule 1. That the government will stop injecting net new money into the economy by 2029 to support its growth objective, and will rely entirely on the private sector to achieve this goal by then.
Rule 2. That the government will cease to provide the additional savings facilities that an economy that is growing in financial terms will need if financial security and stability are to be provided to the UK's financial institutions that underpin the operation of the UK's financial services sector and its overseas trade. Financial risk will, therefore, be increased as a result, with a resulting increase in the likelihood of financial instability.
Rule 3. That the government will maintain a policy of austerity that reduces the likelihood that those with the greatest needs in the UK will have those needs met.
I have little doubt that the government will not agree with my interpretation of these rules. However, read what they say, and understand what they are meant to achieve, and my version of their statements expresses the reality of their supposed priorities, to which John Healey recommitted this Labour government yesterday.
No doubt Andy Burnham will do so again today.
The history of these fiscal rules, introduced as they were by Gordon Brown in 1997, makes clear why this is the case, and what the real priority of government since then has been.
Brown was, entirely inappropriately, terrified of the City of London. He and Blair won a massive majority from the people of this country, as Starmer did again in 2024. In both cases, the victory represented rejection of Tory sleaze as much as it did enthusiasm for any Labour programme, and Blair, Brown and Starmer alike reflected that fact in their behaviour. Not one of them had any confidence in the mandate they had been given. None of them believed that a parliamentary majority provided them with the authority to challenge the status and power of the City of London. All of them, and now Andy Burnham, signed up to the belief that the purpose of government was to meet the needs of the financial services sector, and not the people of this country. Every single fiscal rule created since then has had this sole purpose. The aim has been to:
- Confirm that the government will bow to the interests of the City.
- Reiterate that, whatever the wishes and needs of the people of the UK, their priorities and political mandates, the City and those who speak for it will instead dictate the agenda of the government.
- State that if there is a conflict between the interests of the City and the interests of those who might elect governments in the UK, then the City shall have priority, whatever the cost to human well-being.
- Make clear that sovereignty has been surrendered by the democratic will of Parliament on the altar of high finance.
That is what John Healey confirmed yesterday. He did, to use the language I created in my 2011 book, The Courageous State, confirm himself to be a cowardly politician who will, when he sees a problem requiring attention, defer to the interests of the City and declare that markets will provide a solution, washing his hands of responsibility in the process.
I am so bored of this type of government. I have lived with it for decades. It has failed me. It has failed the people of this country. It has been designed to do so. There is no intention amongst those who now sit in our Cabinet to change this in any way. And yet, the possibility to do so does exist.
There is no need for this country to have a fiscal rule of the type noted.
There is nothing to stop it having a rule for government that states that everyone who wants to have a job should be able to have one, and that it is the job of the government to ensure that this is possible.
There is nothing that says we cannot run government so that every young person in the UK gets the type of education that they need, rather than that which is deemed necessary for them to partake in in a neoliberal economy which is intent upon minimising employment, and then offering the maximum number of bullshit jobs, as David Graeber would have put it, to those left desperate enough to take them.
There is nothing that says this government could not commit itself to eradicating poverty with all its devastating social consequences.
There is nothing that says that this government cannot commit to the defence that is necessary against climate change, and the lack of resilience that we have with regard to critical supplies of goods and services that are essential for the maintenance of life in this country, and against the abuse of so many people by neoliberal and far-right politics that treats them as expendable or alien, and so available to be abused.
There is nothing that says we cannot manage the economy to achieve these goals, and do so in a way that is designed to manage inflation, because we know that is technically possible. What is more, we know that it is possible without the use of penal interest rates.
There is nothing that says we cannot build a sustainable future for our children, grandchildren and those who will come beyond them.
There is nothing that says any of these things is impossible, and simultaneously.
They are not, however, happening, and that is by political choice. Because John Healey and Andy Burnham are deliberately choosing not to do these things, and because they do not even possess the curiosity to wonder whether alternatives to those that the Treasury imposes upon them might be available, they are, like all their predecessors since 1979, guilty of the deliberate destruction of well-being in this country by making it their priority to achieve this outcome.
If anyone asks me why I cannot support a Labour government in this country, that is why.
All that baffles me is that anyone would still support this Labour Party, or why any trade union would wish to financially donate to it, or why anyone would imagine it will deliver anything of consequence for people in this country. It is time for people of courage to walk away from Labour. They have had their chance. They have blown it. We need a real alternative in this country now. They will never be it again.
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Hear, hear!
This is a ‘Darren Jones’ government.
True….. but which party should I vote for (or join)? The Greens do appeal but their transformation from environmental campaign group/party to a “party of government” is not looking good either.
It’s a beauty parade…. all about picking the least ugly.
Of course, PR might allow more diversity that might produce a party I could happily vote for but we are still in a FPTP system.
I am inclined Green
No, they are not there yet. But they might. And there is nowhere else to go.
Things like properly funding care have been driven by the Lib Dems, and plenty of their members are also pushing for more recognition of MMT over Neoliberal Economics. Their strength in local pockets is also based on getting additional funding for hospitals and other essential services, not cost-cutting. If you look at their activities at a local level what they’re doing is pretty well in line – and many at those local levels seem to be frustrated that this isn’t then translated into a coherent national message.
I think you overstate the significance of the LibDems. Sorry.
Any party that ignores the significance of climate change is living in denial. War and immigration will be driven by climate change and the need to move to areas that are more livable. Equally food security is driven by climate change. I live in a farming area and the very wet winter followed by drought have been disastrous. Okay a local grower has had big success with melons due to the warm temperatures but generally crop yields have been dreadful.
I think the Green Party is transitioning from a small party where members can directly influence policy to a party of grown ups. I feel our leaders have integrity and genuine motivation. I like Andy Burnham as a person but he’s being influenced by people who I like much less.
Thank you for a concerningly relevant article on a significant instance of the fact that what we are told and encouraged to expect by too many politicians is too rarely what we actually get.
AI comments on “Stated Labour Values” and “Implemented Labour Values” present interesting contrasts!
What are we actually looking at here?
(the standard opening question in the philosophical investigations undertaken by me and the late great John Doyle + others).
First we have a pair of people with no experience outside of politics. Their lives & experiences were formed in the Wezzie village. Bunrt-ham learnt on the knee of the Broon (off-balance-sheet-accounting aka PFI R-US). Healey is a cipher. Because they know little (remind me how a degree in English equips you to understand finance?) they are easily manipulated. A poster on a previous blog noted that in the most recent Kynaston book, it was noted that Labour govs of the 1960s were even then frightened of “the City”. Thee bullshit on “fiscal rules” is a reflection of neither knowing what they are doing. It’s not that Burnt-ham and Healey are dumb (I’m sure they are not), just a combo of don’t know much and scared. As for Darren Jones, a traitor to his class and groomed by the FinMin – fully of certainty & thus unfit to sit on a parish council. This crew will deliver England into the hands of fart-rage & co – with help from the BBC – natch.
Much to agree with
I think some people will carry on supporting Labour because they think that what they are doing is right, others will say “well Reform/Tories/Greens would be worse and we do not want that”, others cling to the outdated idea that Labour is a left wing party (hahahaha), while others are too embarrassed to admit they got it wrong by voting Labour. Another reason is that people think the government has no choice over what it does and they are carrying out policies in our long-term interest.
None of these arguments stand up as we know but its difficult to convince people otherwise. I know several people who fall into the various categories above and so far I have not convinced them that Labour is a waste of space!
Noted
I watched snippets of Mr Healey’s speech and thought, ‘He hasn’t a clue. What on earth induced Burnham to appoint him Chancellor?’ I rather suspect Healey himself knows he hasn’t a clue. Might we be better off without a Chancellor of the Exchequer – either ‘Position vacant’ [until a suitable candidate can be found] or even ‘Position deleted’ [because no Chancellor can do anything good for the people of this country until the grip of the money men and vested interests is removed]? A hundred years or more ago, the House of Lords was denied control over the country’s finances because it simply represented inherited and unchallengeable wealth. And now the Commons can be described in much the same way (apart from the ‘inherited’ bit). We have to vote them out, or admit defeat and accept that some form of revolution is inevitable.
Our school system was designed to meet the needs of the factory owners of the 19th century, not to create a well informed society. Today not much has changed.
Agreed
I agree!
I read somewhere a while ago, so do not trust me at all on this, but the English education system is based on a Prussian model (sitting in rows behind a desk), which is based on their military training system.
Were all raised as good little soldiers to smile, nod, repeat back, don’t question, take what we’re given and ask for no more. And if we ‘dissent’ we are outcast and on our own, vulnerable to motor nature.
Someone once described it beautifully as “producing pen-pushers for capitalism”.
That’s about it.
How about……..
The Government will provide enough bonds and other banking facilities needed to allow the efficient operation of essential financial services such as pensions and insurance and as a safe haven for depositors.
The level of interest payable on these will reflect the functions which it is provided for.
I don’t think it is cowardice, Richard – a Labour vote helps to keep out the Farage bunch.
I think we are all waiting for the end of neo0liberalism. We individually have little power to implement change. Change is like bankruptcy, slowly then quickly. Many of us will continue to vote Labour or Green till change comes about – and we will do what is necessary to support change for the better. We do agree that Labour is part of the problem not the solution.
It’s not cowardice . It’s Frustration
Even that argument fails
He will not achieve that
He is laying the foundations of fascism.
tbh, I think Labour fears fascism as much as we do
I am not convinced.
I see what Shabana Mahmood does.
Tinkerman Burnham and Healey are not living in the real world.
It has been clear that from the start of the US/Israel war on Iran that 20% plus of the global oil/as/diesel/ aviation fuel/sulphar/nitrogen/helium etc supply was/is not reaching the market.
Plus due to Saudi breaking the truce with the Houthie’s the outage is now 30%.
According to UK Oil Watch, the UK only has 23 days of actual consumption of diesel available. And there is no UK government controlled strategic reserve of diesel. The UK government relies on just in time supply and commercial comanies holding reserves.
The UK gets very little diesel from the Gulf. Rather it relies on the North Sea and US refineries. There is will a fierce bidding war between the UK and other countries for what is going to be a very limited supply.
The UK has the lowest reserves of gas in Europe.
As the Colonel comments, the UK government has done no planning for the obvious risks of shortages.
Due to Trump, the US neocons and Israel’s war on Iran the UK along with the rest of the world faces a serious economic down turn, shortgages of fuel, food etc.
What is the UK response? Raise interest rates, a stupid fiscal policy that will decrease the economy, increase austerity ( but increase spending on the military) cause massive harm to the majority of the population. All because Labour are scared shitless of the City and BoE.
A pox on all UK political parties.
When Andy Burnham spoke about the need to reverse 40 years of neoliberal economic policy I thought for just a moment that he might actually mean it. Then he appointed John Healy as continuity Chancellor.
Zack Polanski, Rachel Millward, some other Green Party members and MPs, plus a few Labour MPs, like Clive Lewis and Richard Burgeon do show some understanding of MMT and neoliberalism, but they need to clearly challenge the government’s economic and fiscal policies in the way you do Richard, in their speeches, social media, TV & radio interviews to get the message across. It would be good to see you speaking at a fringe meeting at the Greens’ annual conference Richard – any chance?
We have an event that day.
Sorry Richard, would you mind clarifying please – what event, where, and on what day? Thanks
As I have been advertising since August, we have an event this Saturday when the Greens are meeting. The event is in Ely. Right now it is sold out.
It is the same quandary we have always faced.
Vote for something vile
OR
Get something even more vile
They designed our pseudo democracy cleverly indeed and I see no way out.
Would I be right to conclude western democracy is a sham after having read the article and the comments after it?
At present, much of it is.
I am pleased to note that Andy Burnham recognised this today.
It is no0t enough to redeem him.
Jolly well said. Like you I am heartily fed-up with Labour (government and party). Its long suffering, fifty years and counting. Labour cannot even talk a good outcome so enthralled are they to do bidding of those that will bribe them. Selling-out pays extremely well, as I was reminded again yesterday when I read in the Guardian how well the offspring of one Tony Blair has faired! What a smug traitor Blair is. As for Gordon Brown, I believe him to be even more complicit with his unctuous self righteousness. They all fail upwards and become a part of an elite that actually believe themselves superior and above democracy. Traitors all.
Richard,
I thought that your letter in The Guardian on Friday regarding the unnecessary scrapping of the Old Age Pension triple lock, was excellent.
I hope that you don’t mind that I have quoted it verbatim, together with your name and details, in a letter to my Labour MP, after it was reported today that the triple lock is likely to be scrapped in 2030.
I think that your recent posts have been excellent and I agree with them wholeheartedly.
Thank you, and feel free to use anything here.
Richard,
is there no chance of you arranging a meeting with Andy Burnham?
I very much doubt it.
I am extremely disappointed.
Maybe the triple lock needs to be dealt with and is unfair (I hope to be a retiree myself soon, I’m knackered, and you know what – bored with working in systems that make everything so bloody difficult) but what is truly bad is that it has to be ‘let go’/sacrificed on truly false foundations and reasons.
But then again, it was created and sustained by those faulty, factless based foundations wasn’t it? Kids had to go hungry to feed the elderly etc.
Neo liberalism has turned life into a sort of ‘groundhog day’. Okay, the victims change (the elderly, the young, the middle class, immigrants, teachers) but the ‘groundhog’ is the suffering – someone always has to suffer in order for someone to gain or just be allowed to exist.
When will we realise that if we embraced authentic democracy and how money is really made we could get closer to some form of heaven here on earth in the here and now rather than dreaming of/wishing for it only existing when we are er…….dead?
Elements of the human condition never ceases to bring out contempt in me.
So Burnham is, another sado-populist prime minister after all.
Tim Snyder (On Freedom, 2024 p.148):
‘Sado-populism offers only the spectacle of others still more deprived….salves the pain of immobility by directing attention to others who suffer more……bargains ,in other words, not by granting resources but by offering relative degrees of pain and permission to enjoy the suffering of others’.
To paraphrase Frank Gallagher from the TV show ‘Shameless’:
‘Andy Burnham……fuck ‘im’.
Much to agree with.
I’m hoping that government wants to reform economic policy, but that there is only so much it can do without spooking the City, mainstream media and others.
Perhaps when there are some demonstrable improvements resulting from government interventions, then economic change will follow.
Spook the City then. The impact would only last days. It is worth it.
Why, when the UK is supposedly the 6th (when I last looked) richest country in the world (or 9th, depending on measure), is it appropriate to stop the process of (very slowly) improving the value of our pension, which is substantially below the OECD average (source: https://researchbriefings.files.parliament.uk/documents/SN00290/SN00290.pdf)?
Paul
There is no reason
Richard,
I note that another commenter asked if there was no chance of you meeting with Andy Burnham, which as you replied would seem unlikely.
However is there no possibility of you being able to meet with those that Andy Burnham could have difficulty in ignoring such as union heads, other MP’s on the left who have some kind of relationship with him or perhaps leaders of the Lib Dems and the Greens (parties that he may well have to rely on for coalition in the future).
Also is there anything that those who comment on this thread could do to support such efforts. assuming of course that I am not living in complete fantasy land by even suggesting this.
The problem is I am finite.
I think my days of that kind of campaigning, which is massively time-consuming, are over.
Sorry.
Title needs amending. Time to walk quietly away from existing fiscal rules as this Labour Government has begun to do and can consolidate with our support.
A bit long but more to the point . No other Government would be able to even begin such changes without provoking a general confrontation with established interests as RM has set out more than once including to our Labour Party Branch. Thanks again Prof Murphy, Labour has learned at lot from you.
Thanks
If the UK did actually change tack and go all in for MMT isn’t there a risk when all other countries (as far as I know) follow neoliberalist rules that they would interpret increasing debt as increasing the risk of inflation thereby frightening investors into selling UK assets and currency provoking a decrease in the pound. On the other hand if there are investors wanting to hold on to UK bonds, wouldn’t they demand higher yields thereby driving up UK interest rates?
In sum wouldn’t they both contribute to inflation?
What I’m getting at is. Is it not extremely difficult for the UK being an open economy to be the only country using MMT ?
An open economy creates constraints, but I would frame you question differently.
MMT is not a policy a country “goes all in for”. It describes how a currency-issuing government already operates. I stress “already”. We cannot adopt what we are already doing. The policy question is what government does with that understanding.
Sterling could certainly fall if investors sold it. That could increase import prices. But selling sterling requires someone else to buy it, and there is no automatic relationship between a government deficit and a falling exchange rate.
Nor must higher gilt yields dictate UK interest rates. The government does not need bond markets to provide the pounds it spends, and the Bank of England ultimately determines the short-term interest rate.
The real vulnerability of an open economy is its dependence on imports, particularly essentials such as energy, food and materials. That is why increasing domestic productive capacity, resilience and energy independence matters so much.
MMT does not remove those constraints. It helps us identify what the constraints actually are.
I have been bombarding the FT and the Guardian with letters that do not get published.
we have to come to the conclusion that there is an establishment conspiracy to hide the facts.
for example the national net worth is £13.5 trn which has grown from £3trn in 1995.
it is preposterous that it is seriously stated there is no money left to pay for the triple lock, social care or for NEETS, which because of the multiplier effect will more than pay for itself.
Similarly money spent to invest in assets such as housing pays for itself.
Although Richard is right to say that money can be created it is more tangible for most to accept the case for managing thenational balance sheet and to tax wealth embodied in property values, pension funds and balance sheets of companies and banks.
Richard needs to reconsider the case for wealth taxes.
I have very strongly made the case for wealth taxes in the Taxing Wealth Report
I just think a wealth tax is the worst of all options available to achieve that goal.
I was greatly entertained by the leader of english labour as he drew attention to the leader of Scotland’s government…. Swinney …saying (on the same day burnam’s dad died) that he… burnham…. would be the last leader of the UK…….a pantomime act using his dad’s death to attack Scotland’s leader and by association….Scotland( how dare they want to run their own country)..at the same time sneaking in the dismantling of the triple lock ( that would be Scotland’s fault as well). If burnam had gone on any longer he would have had me sobbing….( with laughter.) I hope the english nation are smarter than burnam gives them credit for…and incidentally Swinney did not know of burnham’s loss..but hey who cares if you get your facts wrong…I think we can all agree …..a treacherous little man.
I was furious about the profound English imperialist exceptionalism of that comment by Burnham – especially his most obnoxious moment.