Andrew Rawnsley has, like many others, looked back at the last week in the life of Rachel Reeves this morning in his column in The Observer. What he does, however, do is broaden his analysis, noting that:
We know that Sir Keir can be ruthless about disposing of people, but there is no evidence of a dispute between him and his neighbour on the fundamentals. Both their names are on the big decisions that he calls “tough and right”. He owns the government's economic strategy as much as she does. Throwing her overboard would not be strong and decisive. It would look feeble and desperate. And also pointless, because her successor would be confronted with precisely the same dilemmas, and none of the mooted candidates would pursue a substantially different approach.
So prime minister and chancellor are lashed to the same mast and bound to the same hope that the gloom will be pierced by glimmers of higher growth. Whether it turns up will decide their entwined fates.
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Peter, Richard literally provides alternatives every single day on this blog. You’re either a troll or it was a genuine naive question? If the latter, fair enough, but would suggest going through the blog to catch up.
I read The Guardian/Observer almost every day – but never bother with Rawnsley or Freedland or Jenkins or any of the other ‘Westminster Bubble’ reporters – precisely because they neither look nor think outside that box. When Rawnsley says any chancellor would be ‘confronted with precisely the same dilemmas’, what he means is that he is unable to think outside the current political centre-and-right consensus, which is still broadly neoliberal, even though it can plainly see that consensus disintegrating.
Same goes for economic correspondants on TV News. Why, almost to a man/woman, are they all such walking egos? My heart sinks everytime I hear the likes of C4 News’ Helia Ebrahimi ‘explain’ the latest economic stats to the audience.
The one shining exception is the BBC’s Andy Verity – an actual journalist who does his job (namely understanding the subject he reports on and pointing out that anyone portraying government finances as a ‘household’ has that wrong). What a shame Andy is only an ‘correspondant’ whilst his economics editor boss at BBC News, Faisal Islam (another giant ego), has not the slightest clue.
Its two years since the BBC published a “thematic review” into its impartiality wrt “taxation, public spending, government borrowing and debt output”. The report was damning (see excerpt below), but its been same old, same old ever since – e.g. BBC News continuing to platform the ever-wrong opinions of the IFS as iron-clad facts on the sustainability of government finances during budget day etc…
“too many” BBC journalists lack an understanding of “basic economics”. This particularly affects reporting on the central political issue of government debt, with “some journalists” apparently “instinctively” believing all debt to be inherently bad – and therefore failing to appreciate that the role of government debt is “contested and contestable”.
This opinion piece in The Guardian by economist James Meadway (no friend of MMT) rightly highlights the incaculable damage such ill-informed reporting has led to.
There always seems to be an obvious comparison between George Orwell’s Animal Farm sign board of values and objectives changing as various leaders personal wont and proclivities dictate and the inequitable bad end results being the return of the farmer and all of his. Neither were good outcomes. Orwell was a lonely person with insight beyond the availability of enough world wide access at the time to disseminate his insights widely as would be needed to incite change, no wonder he sometimes comes across as depressing.
Something has to give way in all this, and it will be for the better. There is a greater and ever growing awareness and clamour of the absolute need for sustainable equitable life. More than ever before in world history.
Your efforts and others similar are different, you all have the access and a greater reach into the world that will hopefully eventually reach the tipping point to a sustainable change to the better. Probably much sooner than later.
The papers are saying we should expect lower growth in 2025 than 2024. Is that reasonable? Here’s a few reasons why that might well be the case.
A year ago we had just had a general election, were negotiating new flexibility with the EU and the Democrats were going to control Washington. There was a mood of vague optimism. Of course 2024 turned out OK, ish. It takes time for shocks to hit. But they did, and they too have their impact.
Brexit is having an impact
There is no doubt about this: banks are already drifting away. Nissan is not so sure it’s staying after all. Mayhem is reigning in Whitehall. Uncertainty is going to last for some time. Like it or not that will dampen the animal spirits that drive the economy, even if in the end it all turns out well. Investment will be down in the meantime.
Trump’s in town
And he’s talking tariff wars, a reduction in US military spending overseas, tax wars and a real shift away from areas where investment is really required, like green technology. He also hates foreign cars and we sell the US quite a lot of cars. All of this has real and serious spillover effects for the UK. Trump is not good news for the UK economy. Demand for our goods and services will be down.
Interest rates will increase
There are good reasons for this. First, the US will be increasing rates. Trump’s policies demand it. Powell thinks it’s needed anyway. And there are signs we will too. The pound may well need support. We have a credit boom. We need to keep money flowing into London. Real increases are on the cards, and they’re going to be uncomfortable for a lot of over-geared households and businesses.
House prices aren’t going as fast as they did
Tax changes have started this process. So too will rate rises. And the UK rises and and falls on the basis of house prices, which are slowing down.
Inflation is coming back
This is a simple function of a falling pound: inflation will follow and there’s no guarantee that wages will, especially in the public sector. So people will have less to spend on more expensive goods. That’s not good for growth.
We’re still suffering austerity
Just in case you’ve forgotten, the government is still trying to do the opposite of what is needed when the economy is under-performing and facing systemic risks and is trying to cut its spending. That’s the last thing we’ll need, but it’s what we’ll get.
Something will break
There are signs of stress all over the place. Whether it’s the NHS, social care, other government systems at their limit before Brexit begins, or an overheated FTSE that has a habit of correcting quite radically when the time to do so comes, or consumer debt that could go bad, there are ample signs of things that could break in the UK economy right now and trigger a major lack of confidence. I will be candid and say I have no idea what will break: no one is clairvoyant, but break it may well do.
The government is clueless
Around the world there is a crisis of confidence in government. That’s why we have Trump. That’s why we have Brexit. But dealing with the UK alone, sometime in 2025 a lot of people are going to realise that the government cannot deliver an easy or smooth relationship, let alone one without considerable cost. That is not apparent to most people as yet. As the realisation that they have been sold a bad idea grows so will disillusionment with government, and that will hit spending hard as people pile on the savings.
Europe may be in trouble
It takes one of the elections in the Netherlands, France and Germany to go far right for a crisis to develop. Two and we’re in trouble. I don’t think it’s Germany. But the other two? Maybe. And if so the eurozone is in real difficulty. This may not happen, but our biggest trading partner is hamstrung until we know and that’s still many months off.
We’re not investing
The UK is not investing in what it needs: Sir Keir Starmer’s new plan will not address that. The best way out of recession is not being used.
Wages are too low
People are under-employed and underpaid in the UK. The result is we simply don’t have enough to spend to rebalance the economy.
The UK won’t tackle the tax gap
The UK government says there is £35 billion of unpaid UK tax. I say it’s maybe three times that. And we’re sacking tax inspectors, still. As a result the level playing field that is required to build the confidence for small business to invest, most especially in skills, does not exist. Instead tax cheating prospers. We shoot ourselves in the foot by perpetuating this policy. And it is a choice. But it’s one that’s not being changed soon. That costs us growth.
Tax havens continue
We won;t tackle tax abuse overseas either. The impact is the same: we lose out on growth because of reduced investment because cheating pays better. It’s economic madness not to beat this abuse, but we won’t.
The implications for growth on individuals is never really stated, growth is often decontextualised, but growth means each person doing more – using more services more often, more restaurant, theatre, cinema, etc. visits, more app subscriptions, buying more products more often, spending more time on buying more things and experiences. If wealthy people save because their lives a full of all that they can buy (as their wealth shows, they haven’t spent it), the same is also perhaps true of some with more modest savings, but savings nevertheless. From my own experience, as planned obsolescence increases in pace (my first washing machine lasted 20 years, my second just 6), that makes me wary of buying anything, not desirous of buying more. Manufacturers undermine themselves in producing things that break or can’t be repaired, eventually we give up. And I certainly know, as attempts to sell intensify, the wish but seems to decline. And I certainly know, as I’ve grown older, the things that I enjoy most are friendships and experiences that cost nothing or little – exploring, walking, running, reading – and what’s enjoyable about the things that do cost, is that they are about connection (social and cultural events, gigs and concerts in the main) and shared with friends. For many years I’ve noted how disappointing many purchases are, I recall this experience from my late teens onwards, and gradually consumed less. For growth to occur, people would need to be persuaded to spend more of their money, doing more outside of work to service the economy, just so the economy is bigger. This production-consumption cycle view of wealth is absurd. I count wealth as time, as space to think and relax, be with other, engage in things and with people that I enjoy, to doing things that are genuinely helpful for others (that isn’t commodified). I don’t think growth is possible because I don’t think many are going to be persuaded to do what would be needed in a market-fundamentalist approach. I could imagine growth if it include ecological restoration, the building of green spaces in cities, caring, supporting and helping, but not consuming evermore.
One gentleman on the News this morning suggested our welfare state is out of control. He said people are taking too much out of the system, and the government doesn’t take enough taxes. Just wondered if he was right, sorry I forgot his name but he’s the author of two books about it. Is he right would you suggest Richard?
All this Labour government’s aspirations are utterly meaningless unless they spend more money. They will not spend money whilst sticking to the fallacy of maintaining a balanced budget, i.e. only spending what they tax. It is difficult to see Reeves committing a volte-face and reversing direction.
Unless Labour spend serious money there will be no growth. That’s not what the electorate want. I agree with your previous analysis that it’s not what Labour ministers want either. Labour still has some political capital, it can last some months longer without changing course. It cannot last for the whole parliament without changing direction. Even George Osborne had to change direction and row back on austerity (though not enough and he never admitted it).
So, in a while, Kier Starmer will be faced with a choice. Change direction or go down with his ship. The least difficult way to avoid a watery grave will be to defenestrate Rachel Reeves. Will he continue to be lashed to the same mast as Reeves? He’s an intelligent man. More likely he’ll loosen the ropes lashing them together and push her overboard. It will probably be evident when he starts loosening those ropes. Then we will know Reeves will soon be gone.
Feel we are definitely asking the wrong questions.
I spoke at a Labour event this week re the implications of Trump’s rise to power (process) for the UK. I chose to focus on a narrative on the economic inequality creating conditions for populist support amplified by social media owned by oligarchs. My argument was even though political system is different here, similar enabling conditions exist and that addressing economic equality which is particularly bad in the UK is a necessary condition for good quality green growth. The point is of course that Labour’s mission should be addressing inequality and that good quality green growth might be the outcome of the inequality mission. I also posited that non partisan place based initiatives and coalition building around the circular economy for example might be a new approach to ‘doing politics’ and generating support for prioritising addressing inequality.
But with so much in flux, anchoring the discussion in relation to good quality green growth might have been a mistake? I was struck by your post that savers were a barrier to growth this week. I am a saver, self employed who does not have a defined benefit pension. So I don’t really see another way. If I go out and spend as you suggest I face a choice of
a) increasing consumption on stuff I don’t need and creating more emissions
b) investing in green projects managed by others – I tried that for 5 years and lost a lot of money
c) starting my own circular economy thing – suspect I would be rubbish;
d) investing in greening my domestic envt. This is no doubt what I should do as it is probably economically the most sensible, but I’m so short of time to do the necessary research to be confident in selecting suppliers and fitters that have the necessary skills, I almost always come to a standstill. As I understand it those who do decide to invest in heat pumps can wait up to a year to find fitters in Brighton.
On a more optimistic note in the last week I may have identified opportunities to participate in initiatives that are starting to link c) and d). So maybe despite or because of doom and gloom at the national level opportunities for local level disruption and system change will appear?
Richard, one of your strengths seems to be that you are a realist and instead of burying your head in the sand like most politicians, you try and highlight/tackle the issues at large – rather than just being a pessimist that you have been accused of being. It seems most politicians strategy is just to promise unicorns and pray for the best, hence the state of the world we’re in. One obvious example is Labour’s current ‘growth strategy’. I would say from all accounts we’re heading for a huge recession/depression in the next couple of years, after the current stagflation we’re currently experiencing.
Oh how times could have been different if we got Corbyn.
I think it was Malcolm McLaren that once called punk ‘Britain’s one throw at rock’n’roll’ – I increasingly find myself thinking of 2017 as Britain’s one throw at decent government (at least for the foreseeable future).
Re the difference if Corbyn had won in 2017, as he very nearly did, Alas, I have to disagree. I believe he’d’ve lasted a fortnight before being toppled in a CIA-managed “A Very British Coup”, & clapped in the UK’s Guantanamo, HMP Belmarsh, & the country run by a “puppet” appointed by the Crown, under martial law, with no reference to Parliament
People who accuse the statement of fact as ‘negative’ are those who do know what is possible, and that those possibilities exist.
It is because they exist and are not acted upon that produces the criticism in the first place!
Criticism in an absence of no alternatives is worthless to both critics and consumers of what is being critiqued. All it is, is sort of empathy with stupidity and shortsightedness – what Adam Curtis calls ‘Oh Dearism’, where problems are noted with ‘tut,tut’, a shake of the head and the sentiment that thank goodness it is not my problem………………………
The post-war era was driven by cheap and abundant fossil fuel energy. That era has come to a close. Essentially you cannot have growth without the energy input, so we would need to move rapidly to a steady-state repair/reuse low carbon society.
Unfortunately neoliberal turbo-capitalism has to expand all the time, so something has to give and I don’t think it will be pleasant.
The tax take is going to fall dramatically making Labours fiscal rule unachievable without tax rises or cuts in public expenditure. Whether you agree or not with her fiscal rules does not alter the fact the Govt is wedded to them.
You do realise that these people are really not that important in the overall tax take, don’t you? And you do realise that people coming here will generate more than those leaving take with them?
When someone leaves the UK they convert their money from pounds sterling to the currency of wherever they move to. In order to do that someone else has to buy their pounds. The total number of pounds remains exactly the same. And since those pounds can only be spent in the UK it makes no difference.
Let people leave if they want to it makes no difference to the economy.
On a different, but related, note we don’t require inward investment of the sort Reeves was (unsuccessfully) genuflecting to China for. I guess this craving for inward investment is a hangover from the era of the gold standard. Back then a foreign investor could literally ship their gold to the UK and increase the money supply here. In doing so they would boost the economy. That’s not true any more. If they want to invest in UK they have to spend pounds sterling. They have to get those pounds from someone who has them in the UK. So the money would first flow out of the UK and then straight back in again, a net benefit of zero. The money, as pounds sterling was here all the time and doesn’t increase with inward investment.
That’s not to say that there is no issue if we lose talented people through immigration (though, is there really a strong correlation between talent and wealth?). And we do, of course, benefit from new ideas and cross fertilisation that may come from inward investment. But it seems to be to be a mistaken understanding that the economy suffers directly through emigration or benefits directly through inward investment.
The Consolidated Fund (CF) is the Treasury’s current account at the BoE. In its annual report there is the following paragraph. This is an example of an Excel Spreadsheets warning, “circular reference unresolved”.
“The financing needs of the CF are expected to be met over the long term mainly
through future tax revenue receipts and other government revenues. Whilst the
level of receipts in any year is subject to policy changes and, relatedly the UK’s
economic position, any shortfall can be met through the issuance of debt from
the NLF, the demand for which remains robust. Therefore, in accordance with the
Government Financial Reporting Manual, whilst the accounts are prepared on a
cash basis it has been concluded that it is appropriate to consider the CF as a
going concern.” https://assets.publishing.service.gov.uk/media/66e1b81bcaa02d92e72c8dbb/Consolidated_Fund_Account_2023-24_FINAL.pdf
The NLF (National Loans Fund) is a virtual Bank inside the Treasury. It has infinite Sterling currency assets that can support infinite Sterling liabilities. Nowadays, it makes loans to cover the deficit in the CF every year; alas, it will never see those loans repaid. But; the Gilts it had issued to supposedly cover the loan to cover the deficit in the CF, will get paid back! How does that work then?
Just listened to the Two Matts podcast where they got so much wrong on MMT I was shouting at the phone but to their credit they did say they would like to have you on their Podcast to discuss MMT. It would be great if you went on and explained it.Their email is xxxxx
I sense the imprint of John Van Reenen on Reeves’ policies. He seems obsessed with making the UK private sector more ‘efficient’, and apparently he believes that giving businesses a haircut will force them to use more AI, more automation, etc. Where he thinks the money for this will come from is a mystery.
My own view is that ‘efficiency’ is an odd target in these times. Firstly, what is efficient about encouraging firms to lay off workers who then rely on the state to support them? Secondly, where are the social priorities in such a policy? I fear Reeves may be in thrall to a very lopsided economist.
His thinking is very Tufton street aligned, as far as I can see. He seems to what are called zombie companies to fail. He appears to believe chaos is the precondition for growth. So do they think that.
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Buy me a coffee!
Interesting.
Do you have an alternative, and a pathway to that alternative?
This blog has been steadily explaining it for some time, and I keep developing those themes.
Also read the Taxing Wealth Report.
Peter, Richard literally provides alternatives every single day on this blog. You’re either a troll or it was a genuine naive question? If the latter, fair enough, but would suggest going through the blog to catch up.
I read The Guardian/Observer almost every day – but never bother with Rawnsley or Freedland or Jenkins or any of the other ‘Westminster Bubble’ reporters – precisely because they neither look nor think outside that box. When Rawnsley says any chancellor would be ‘confronted with precisely the same dilemmas’, what he means is that he is unable to think outside the current political centre-and-right consensus, which is still broadly neoliberal, even though it can plainly see that consensus disintegrating.
100% agree.
Same goes for economic correspondants on TV News. Why, almost to a man/woman, are they all such walking egos? My heart sinks everytime I hear the likes of C4 News’ Helia Ebrahimi ‘explain’ the latest economic stats to the audience.
The one shining exception is the BBC’s Andy Verity – an actual journalist who does his job (namely understanding the subject he reports on and pointing out that anyone portraying government finances as a ‘household’ has that wrong). What a shame Andy is only an ‘correspondant’ whilst his economics editor boss at BBC News, Faisal Islam (another giant ego), has not the slightest clue.
Its two years since the BBC published a “thematic review” into its impartiality wrt “taxation, public spending, government borrowing and debt output”. The report was damning (see excerpt below), but its been same old, same old ever since – e.g. BBC News continuing to platform the ever-wrong opinions of the IFS as iron-clad facts on the sustainability of government finances during budget day etc…
This opinion piece in The Guardian by economist James Meadway (no friend of MMT) rightly highlights the incaculable damage such ill-informed reporting has led to.
https://www.theguardian.com/commentisfree/2023/jan/31/bad-economics-bbc-tory-austerity-uk-politics
There always seems to be an obvious comparison between George Orwell’s Animal Farm sign board of values and objectives changing as various leaders personal wont and proclivities dictate and the inequitable bad end results being the return of the farmer and all of his. Neither were good outcomes. Orwell was a lonely person with insight beyond the availability of enough world wide access at the time to disseminate his insights widely as would be needed to incite change, no wonder he sometimes comes across as depressing.
Something has to give way in all this, and it will be for the better. There is a greater and ever growing awareness and clamour of the absolute need for sustainable equitable life. More than ever before in world history.
Your efforts and others similar are different, you all have the access and a greater reach into the world that will hopefully eventually reach the tipping point to a sustainable change to the better. Probably much sooner than later.
The papers are saying we should expect lower growth in 2025 than 2024. Is that reasonable? Here’s a few reasons why that might well be the case.
A year ago we had just had a general election, were negotiating new flexibility with the EU and the Democrats were going to control Washington. There was a mood of vague optimism. Of course 2024 turned out OK, ish. It takes time for shocks to hit. But they did, and they too have their impact.
Brexit is having an impact
There is no doubt about this: banks are already drifting away. Nissan is not so sure it’s staying after all. Mayhem is reigning in Whitehall. Uncertainty is going to last for some time. Like it or not that will dampen the animal spirits that drive the economy, even if in the end it all turns out well. Investment will be down in the meantime.
Trump’s in town
And he’s talking tariff wars, a reduction in US military spending overseas, tax wars and a real shift away from areas where investment is really required, like green technology. He also hates foreign cars and we sell the US quite a lot of cars. All of this has real and serious spillover effects for the UK. Trump is not good news for the UK economy. Demand for our goods and services will be down.
Interest rates will increase
There are good reasons for this. First, the US will be increasing rates. Trump’s policies demand it. Powell thinks it’s needed anyway. And there are signs we will too. The pound may well need support. We have a credit boom. We need to keep money flowing into London. Real increases are on the cards, and they’re going to be uncomfortable for a lot of over-geared households and businesses.
House prices aren’t going as fast as they did
Tax changes have started this process. So too will rate rises. And the UK rises and and falls on the basis of house prices, which are slowing down.
Inflation is coming back
This is a simple function of a falling pound: inflation will follow and there’s no guarantee that wages will, especially in the public sector. So people will have less to spend on more expensive goods. That’s not good for growth.
We’re still suffering austerity
Just in case you’ve forgotten, the government is still trying to do the opposite of what is needed when the economy is under-performing and facing systemic risks and is trying to cut its spending. That’s the last thing we’ll need, but it’s what we’ll get.
Something will break
There are signs of stress all over the place. Whether it’s the NHS, social care, other government systems at their limit before Brexit begins, or an overheated FTSE that has a habit of correcting quite radically when the time to do so comes, or consumer debt that could go bad, there are ample signs of things that could break in the UK economy right now and trigger a major lack of confidence. I will be candid and say I have no idea what will break: no one is clairvoyant, but break it may well do.
The government is clueless
Around the world there is a crisis of confidence in government. That’s why we have Trump. That’s why we have Brexit. But dealing with the UK alone, sometime in 2025 a lot of people are going to realise that the government cannot deliver an easy or smooth relationship, let alone one without considerable cost. That is not apparent to most people as yet. As the realisation that they have been sold a bad idea grows so will disillusionment with government, and that will hit spending hard as people pile on the savings.
Europe may be in trouble
It takes one of the elections in the Netherlands, France and Germany to go far right for a crisis to develop. Two and we’re in trouble. I don’t think it’s Germany. But the other two? Maybe. And if so the eurozone is in real difficulty. This may not happen, but our biggest trading partner is hamstrung until we know and that’s still many months off.
We’re not investing
The UK is not investing in what it needs: Sir Keir Starmer’s new plan will not address that. The best way out of recession is not being used.
Wages are too low
People are under-employed and underpaid in the UK. The result is we simply don’t have enough to spend to rebalance the economy.
The UK won’t tackle the tax gap
The UK government says there is £35 billion of unpaid UK tax. I say it’s maybe three times that. And we’re sacking tax inspectors, still. As a result the level playing field that is required to build the confidence for small business to invest, most especially in skills, does not exist. Instead tax cheating prospers. We shoot ourselves in the foot by perpetuating this policy. And it is a choice. But it’s one that’s not being changed soon. That costs us growth.
Tax havens continue
We won;t tackle tax abuse overseas either. The impact is the same: we lose out on growth because of reduced investment because cheating pays better. It’s economic madness not to beat this abuse, but we won’t.
In summary
2025 is not looking good.
Some of this I agree with.
Quite a lot e.g. that 2024 was ok, and interest rates will rise (unless forced by the USA) I don’t.
But I offer it for debate.
The implications for growth on individuals is never really stated, growth is often decontextualised, but growth means each person doing more – using more services more often, more restaurant, theatre, cinema, etc. visits, more app subscriptions, buying more products more often, spending more time on buying more things and experiences. If wealthy people save because their lives a full of all that they can buy (as their wealth shows, they haven’t spent it), the same is also perhaps true of some with more modest savings, but savings nevertheless. From my own experience, as planned obsolescence increases in pace (my first washing machine lasted 20 years, my second just 6), that makes me wary of buying anything, not desirous of buying more. Manufacturers undermine themselves in producing things that break or can’t be repaired, eventually we give up. And I certainly know, as attempts to sell intensify, the wish but seems to decline. And I certainly know, as I’ve grown older, the things that I enjoy most are friendships and experiences that cost nothing or little – exploring, walking, running, reading – and what’s enjoyable about the things that do cost, is that they are about connection (social and cultural events, gigs and concerts in the main) and shared with friends. For many years I’ve noted how disappointing many purchases are, I recall this experience from my late teens onwards, and gradually consumed less. For growth to occur, people would need to be persuaded to spend more of their money, doing more outside of work to service the economy, just so the economy is bigger. This production-consumption cycle view of wealth is absurd. I count wealth as time, as space to think and relax, be with other, engage in things and with people that I enjoy, to doing things that are genuinely helpful for others (that isn’t commodified). I don’t think growth is possible because I don’t think many are going to be persuaded to do what would be needed in a market-fundamentalist approach. I could imagine growth if it include ecological restoration, the building of green spaces in cities, caring, supporting and helping, but not consuming evermore.
Thanks
And agreed – many purchases are disappointing
I think hard before committing, and that tendency is growing. Most especially I have a desire to buy things that will last.
One gentleman on the News this morning suggested our welfare state is out of control. He said people are taking too much out of the system, and the government doesn’t take enough taxes. Just wondered if he was right, sorry I forgot his name but he’s the author of two books about it. Is he right would you suggest Richard?
Yoiu know he’s not.
The only people extracting too much from our state are the wealthy.
Read the Taxing Wealth Report 2024.
All this Labour government’s aspirations are utterly meaningless unless they spend more money. They will not spend money whilst sticking to the fallacy of maintaining a balanced budget, i.e. only spending what they tax. It is difficult to see Reeves committing a volte-face and reversing direction.
Unless Labour spend serious money there will be no growth. That’s not what the electorate want. I agree with your previous analysis that it’s not what Labour ministers want either. Labour still has some political capital, it can last some months longer without changing course. It cannot last for the whole parliament without changing direction. Even George Osborne had to change direction and row back on austerity (though not enough and he never admitted it).
So, in a while, Kier Starmer will be faced with a choice. Change direction or go down with his ship. The least difficult way to avoid a watery grave will be to defenestrate Rachel Reeves. Will he continue to be lashed to the same mast as Reeves? He’s an intelligent man. More likely he’ll loosen the ropes lashing them together and push her overboard. It will probably be evident when he starts loosening those ropes. Then we will know Reeves will soon be gone.
Feel we are definitely asking the wrong questions.
I spoke at a Labour event this week re the implications of Trump’s rise to power (process) for the UK. I chose to focus on a narrative on the economic inequality creating conditions for populist support amplified by social media owned by oligarchs. My argument was even though political system is different here, similar enabling conditions exist and that addressing economic equality which is particularly bad in the UK is a necessary condition for good quality green growth. The point is of course that Labour’s mission should be addressing inequality and that good quality green growth might be the outcome of the inequality mission. I also posited that non partisan place based initiatives and coalition building around the circular economy for example might be a new approach to ‘doing politics’ and generating support for prioritising addressing inequality.
But with so much in flux, anchoring the discussion in relation to good quality green growth might have been a mistake? I was struck by your post that savers were a barrier to growth this week. I am a saver, self employed who does not have a defined benefit pension. So I don’t really see another way. If I go out and spend as you suggest I face a choice of
a) increasing consumption on stuff I don’t need and creating more emissions
b) investing in green projects managed by others – I tried that for 5 years and lost a lot of money
c) starting my own circular economy thing – suspect I would be rubbish;
d) investing in greening my domestic envt. This is no doubt what I should do as it is probably economically the most sensible, but I’m so short of time to do the necessary research to be confident in selecting suppliers and fitters that have the necessary skills, I almost always come to a standstill. As I understand it those who do decide to invest in heat pumps can wait up to a year to find fitters in Brighton.
On a more optimistic note in the last week I may have identified opportunities to participate in initiatives that are starting to link c) and d). So maybe despite or because of doom and gloom at the national level opportunities for local level disruption and system change will appear?
Thanks
Agreed – personal choices are not easy
Richard, one of your strengths seems to be that you are a realist and instead of burying your head in the sand like most politicians, you try and highlight/tackle the issues at large – rather than just being a pessimist that you have been accused of being. It seems most politicians strategy is just to promise unicorns and pray for the best, hence the state of the world we’re in. One obvious example is Labour’s current ‘growth strategy’. I would say from all accounts we’re heading for a huge recession/depression in the next couple of years, after the current stagflation we’re currently experiencing.
Oh how times could have been different if we got Corbyn.
I think it was Malcolm McLaren that once called punk ‘Britain’s one throw at rock’n’roll’ – I increasingly find myself thinking of 2017 as Britain’s one throw at decent government (at least for the foreseeable future).
MY VIEWS ON A CORBYN VICTORY IN 2017
Re the difference if Corbyn had won in 2017, as he very nearly did, Alas, I have to disagree. I believe he’d’ve lasted a fortnight before being toppled in a CIA-managed “A Very British Coup”, & clapped in the UK’s Guantanamo, HMP Belmarsh, & the country run by a “puppet” appointed by the Crown, under martial law, with no reference to Parliament
Instead he was ousted by a pre-emptive coup and the electorate denied any real choice.
The purge continues…
https://www.theguardian.com/uk-news/2025/jan/19/jeremy-corbyn-john-mcdonnell-police-pro-palestine-march-london
Starmer must be a very frightened and insecure man, to pursue those who disagree with him to this extent.
Commit genocide, and the UK will support you with weapons and rhetoric.
Protest about genocide and the police will come for you.
Well said.
People who accuse the statement of fact as ‘negative’ are those who do know what is possible, and that those possibilities exist.
It is because they exist and are not acted upon that produces the criticism in the first place!
Criticism in an absence of no alternatives is worthless to both critics and consumers of what is being critiqued. All it is, is sort of empathy with stupidity and shortsightedness – what Adam Curtis calls ‘Oh Dearism’, where problems are noted with ‘tut,tut’, a shake of the head and the sentiment that thank goodness it is not my problem………………………
Here’s Starmer’s version of “tough and right”:-
https://www.theguardian.com/society/2025/jan/19/quarter-of-english-councils-may-have-to-sell-homes-to-balance-books-study-finds
Clearly Angela Rayner may as well pack up and go home and do something useful other than being an apologist for Keir Starmer!
QED – Bristol is doing it right now.
https://www.bristolpost.co.uk/news/bristol-news/mass-council-house-sell-shock-9853855
Gov has starved councils of cash while loading them with responsibilities.
The post-war era was driven by cheap and abundant fossil fuel energy. That era has come to a close. Essentially you cannot have growth without the energy input, so we would need to move rapidly to a steady-state repair/reuse low carbon society.
Unfortunately neoliberal turbo-capitalism has to expand all the time, so something has to give and I don’t think it will be pleasant.
This really is not good news.
https://www.lbc.co.uk/news/millionaires-leave-uk/
It makes absolutely no difference to anything. Tell me why you think it does?
The tax take is going to fall dramatically making Labours fiscal rule unachievable without tax rises or cuts in public expenditure. Whether you agree or not with her fiscal rules does not alter the fact the Govt is wedded to them.
You do realise that these people are really not that important in the overall tax take, don’t you? And you do realise that people coming here will generate more than those leaving take with them?
Even, as I’ve seen in another article, if it is the stated £1.3bn, it is a tiny amount in the overall scheme of things.
I don’t think anyone can know that figure.
And let’s also note, their tax funds nothing. Tax never does, and the wealthy are seriously undertaxed right now.
So what is the issue?
When someone leaves the UK they convert their money from pounds sterling to the currency of wherever they move to. In order to do that someone else has to buy their pounds. The total number of pounds remains exactly the same. And since those pounds can only be spent in the UK it makes no difference.
Let people leave if they want to it makes no difference to the economy.
On a different, but related, note we don’t require inward investment of the sort Reeves was (unsuccessfully) genuflecting to China for. I guess this craving for inward investment is a hangover from the era of the gold standard. Back then a foreign investor could literally ship their gold to the UK and increase the money supply here. In doing so they would boost the economy. That’s not true any more. If they want to invest in UK they have to spend pounds sterling. They have to get those pounds from someone who has them in the UK. So the money would first flow out of the UK and then straight back in again, a net benefit of zero. The money, as pounds sterling was here all the time and doesn’t increase with inward investment.
That’s not to say that there is no issue if we lose talented people through immigration (though, is there really a strong correlation between talent and wealth?). And we do, of course, benefit from new ideas and cross fertilisation that may come from inward investment. But it seems to be to be a mistaken understanding that the economy suffers directly through emigration or benefits directly through inward investment.
Thanks Tim
The Consolidated Fund (CF) is the Treasury’s current account at the BoE. In its annual report there is the following paragraph. This is an example of an Excel Spreadsheets warning, “circular reference unresolved”.
“The financing needs of the CF are expected to be met over the long term mainly
through future tax revenue receipts and other government revenues. Whilst the
level of receipts in any year is subject to policy changes and, relatedly the UK’s
economic position, any shortfall can be met through the issuance of debt from
the NLF, the demand for which remains robust. Therefore, in accordance with the
Government Financial Reporting Manual, whilst the accounts are prepared on a
cash basis it has been concluded that it is appropriate to consider the CF as a
going concern.” https://assets.publishing.service.gov.uk/media/66e1b81bcaa02d92e72c8dbb/Consolidated_Fund_Account_2023-24_FINAL.pdf
The NLF (National Loans Fund) is a virtual Bank inside the Treasury. It has infinite Sterling currency assets that can support infinite Sterling liabilities. Nowadays, it makes loans to cover the deficit in the CF every year; alas, it will never see those loans repaid. But; the Gilts it had issued to supposedly cover the loan to cover the deficit in the CF, will get paid back! How does that work then?
PS. The NLF loan to the CF for 2024/25 looks to be not far short of £200 billion
https://www.ons.gov.uk/economy/governmentpublicsectorandtaxes/publicsectorfinance/timeseries/ruus/pusf
Thanks
Hi Richard
Just listened to the Two Matts podcast where they got so much wrong on MMT I was shouting at the phone but to their credit they did say they would like to have you on their Podcast to discuss MMT. It would be great if you went on and explained it.Their email is xxxxx
I have written to them
I sense the imprint of John Van Reenen on Reeves’ policies. He seems obsessed with making the UK private sector more ‘efficient’, and apparently he believes that giving businesses a haircut will force them to use more AI, more automation, etc. Where he thinks the money for this will come from is a mystery.
My own view is that ‘efficiency’ is an odd target in these times. Firstly, what is efficient about encouraging firms to lay off workers who then rely on the state to support them? Secondly, where are the social priorities in such a policy? I fear Reeves may be in thrall to a very lopsided economist.
His thinking is very Tufton street aligned, as far as I can see. He seems to what are called zombie companies to fail. He appears to believe chaos is the precondition for growth. So do they think that.