I note that the FT has reported:
Ministers should raise taxes on the gambling industry in order to fund removing the two-child benefit cap and lift half a million children out of poverty, former prime minister Gordon Brown has said.
Reforming the way gambling is taxed could generate £3.2bn a year for the Treasury, Brown said, citing a report from the IPPR think-tank also published on Wednesday.
In principle, this is hard to argue with, but I will, nonetheless.
There are two issues here.
They are that gambling is harmful, and that harm needs to be eliminated. Tax can help achieve that goal. Addressing social, policy, and market failure is a key role for tax.
The other is that we are suffering from utterly unacceptable levels of child poverty in the UK. The government can address this issue through the benefits system, regulation, labour market, and other social policy reforms. The problem is not just about money, although money is obviously key.
The two issues might occasionally be related. Usually, they are not. The Venn diagrams of incidence undoubtedly overlap, but not enough to link the two in the way Gordon Brown is doing.
And most especially, the two can be tackled separately, and both should be tackled irrespective of the other, which is my key point. They are essentially independent. Brown's mistake is to conflate the two because he thinks taxes fund spending when they do not.
There is, in that case, a massive problem in his argument that conflates the issues. That is that if he was successful in tackling gambling - and we should be, because it is a massively addictive activity causing great harm - by his logic we would then have no money to tackle child poverty and so children would then still need to suffer because there was not enough gambling in the world to ensure they could be provided for.
But that is very obviously wrong. Children do not require gambling to survive. They require households with parents who are present, who can provide, in housing that is safe and available for the long term so that children can live in stable communities and can attend schools where they can be encouraged to flourish.
If only we stopped pretending tax funds anything, when government money creation does that, we could avoid nonsensee arguments of the sort Brown has presented, and the world could be a better place because we could stop pretending that we can only tackle child poverty if we can find a harm to tax enough, but by not too much to prevent it from being eleminated as a funding source, to let that happen. We could, instead, just do the right thing for both children and those who are the victims of the gambling industry, and I would call that a win. Brown is not delivering that, and it is the fault of his understanding of tax that this is the case. And that is why this is such a big intellectual issue, and an essential part of the politics of care.
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I have a lot of time for Gordon Brown and his undoubted interest in trying to solve poverty / child poverty. However, I agree that taxing betting / gambling more to fund spending on addressing child poverty is not the right approach.
I passed a comment about taxing gambling a lot more and/or banning all advertising in your blog the other day. It does, as you say, lead to social ills and accordingly should be properly dealt with.
Poverty – and child poverty in particular – is simply a national disgrace. It should be the foundation for government to take the necessary actions to help put the country back on track. A commitment to this alone – whilst recognising we have many more problems – could create a more equal society, lead to less stress on NHS, better educational outcomes, etc. The fact that it is not, is a political choice that the current Labour government – and previous Tory governments – should be ashamed of.
Brown remains a gormless idealogue. He has no original ideas & with the latest nonesense shows that he has always been a true neo-libtard with zero understanding of the political economy.
Everything he touched was a disaster, starting with the bullshit about BoE independence (I remembering imbeciles clapping him into No 11). He then did an ENRON with PFI – a stupid tory idea (is there any other sort?) – which he turbo-charged ensuring that an increasingly out-of-control banking/finance sector became even more turbo-charged. Hisd neo-libtard approach meant that he would never use gov money to fund, e.g. hospitals and still thinks taxes fund stuff. I despise the man & wish he would just shut up.
I have no time for Gordon Brown on this subject. I can remember when he and Tony relaxed the gambling laws and helped to make the gambling problem worse than ever!
The gambling boom was kicked off when Tony Blair’s Labour government passed the Gambling Act 2005, dramatically liberalising the laws governing betting.
I’m intrigued by the Blair government liberalising gambling laws (Gambling Act 2005). By ‘liberalising’ do you mean loosening? Why would anyone want to make it easier for the public to be fleeced by bookmakers? There’s a strong smell of “lobbying” (aka Bribery and Corruption in the real world) about it.
Agreed
You are right to point this out. I was extremely disappointed by this. Brown is so tiresome these days.
The underlying argument is that you legitimise gambling – known to destroy lives – by justifying it by taxing it for a good cause?
What are we going to tax next – child pornography? As we know, Neo-liberalism does not stop anywhere. The principle behind Brown’s suggestion (allow something harmful to exist because we need the income from it) is unforgiveable and similar to the one about why we must tolerate the rich – because we need them to pay for everything – the big lie.
Why doesn’t Brown just go away – he saved the rich in 2007/8 and helped make us pay for it from 2010. He achieved nothing.
When exactly did the Labour Party wander off into the Desert of Falsehoods? It strikes me it has never had any serious theory behind what it believes except for a short period in the immediate aftermath of the Second World War. In short it’s a party for amateurs!
I was at Edinburgh Uni when Gordon Brown was President of the Student Representative Council, and he then became the first ever student Rector.
He is good on social justice but not on other things. He did some good stuff as Chancellor (funding SureStart) – but – PFI, Iraq war, no.
I feel that one of our current problems as a society is that we are frightened of “morality”, or that we don’t understand it, or that we have an ideological (even ” moral”!!) aversion to it.
I don’t mean the beloved-of-the-right “moral panic” that regularly and hypocritically seizes the right wing press, about all sorts of politically charged issues, often involving sex, usually as a cover for thinly veiled fascism.
I mean the morality that knows that child poverty, or racism, or gross inequality or discrimination, is wrong, for its own sake, and not because it is inefficient, or causes social unrest or leads to violence or other pragmatic excuse.
So we are frightened to say the gambling giants are immoral or evil, and we should tax them and regulate them to curb their activity and reach. We feel we have to justify our moral taxation stance by saying it will fund child welfare support. Which is a lie (which is immoral!).
On the morality of gambling giants (note, I did not say “gambling” or “betting” – those are private moral decisions), I loved (and wept over) Sean Bean, in “Broken”.
https://m.imdb.com/title/tt6078644/
The whole series was brilliant. I suppose his parishioners would nowadays be classed as “terrorists” by Yvette Cooper, but which one of us didn’t cheer inside (and shock ourselves by reacting thus) when those machines got smashed?
Brown should not be frightened of moarlity. He is keen to say he is the son of a Mance.
better than theson of a toolmaker!
‘I mean the morality that knows that child poverty, or racism, or gross inequality or discrimination, is wrong, for its own sake, and not because it is inefficient, or causes social unrest or leads to violence or other pragmatic excuse.’
Indeed. The elites in the UK have never been very good on true morality, and that probably goes for all of us at times too. The difference of course is that the actions of those of us who do not wield some kind of influence or executive power affects only ourselves or a few. The amoral money-and-power-first decisions affect millions. Evil by its very nature is attractive but the worst forms of evil, wickedness and social injustice are those decisions made in the full realisation that many people will suffer. Culpability is the word I would use.
As for Gordon Brown, I seem to recall he abolished the 10% tax rate for the poorest about 20 or so years ago. Didn’t seem to be too concerned about poverty then. Incidentally, isn’t Theresa May a child of the Mance too? St Theresa of the Hostile Environment? They all make me shudder and they all make me angry. It would take a few days perhaps with a Royal Commission (although I’m no royalist) to make things much fairer and more equitable and yet as things get much worse for the majority, they run around like headless chickens. As I said if we can afford to fund wars, palaces, tax breaks for billionaires and corporations and many other things we can look after the poor, disabled and the millions who can’t make ends meet.
Brown was probably also framing his ‘tax gambling to reduce child poverty’ case, because he was addressing the government within its own self imposed fiscal rules – and thus expected to be listened to.
Even though he was framing it within a faulty ‘ tax funds spending ‘ framework he was a damned sight more persuasive and able to think on his feet, and actually sounded as if her cared about child poverty, within the interview on R4 Today than any of the present cabinet wheeled out on morning media rounds.
“Brown’s mistake is to conflate the two because he thinks taxes fund spending, when they do not”. And this from a former Chancellor of the Exchequer. Makes you wonder.
Gambling is not one of my vices but from acquaintances, I know how addictive gambling is. At that point it is not about money or indeed winning. It is about the buzz of anticipation of possibly winning/losing a bet. And either way, then hurrying on to the next possible bet. A generation or so ago, high street betting shops by law had to be ‘uninviting’ so as not to encourage people to stay after placing their bet. I have not stepped inside a betting shop for years, but nowadays there seems to be almost as many high street betting shops as barbers, tattooists, nail bars and coffee bars for example. I expect they are far more inviting than previously together with appealing photographs in the window. But gamblers no longer have to venture along the high street. Online betting, betting apps etc., mean they can sit at home and bet instantly. Encouraged by e.g. ‘bet naaaw’ TV ads voiced by Ray Winston during breaks in sports coverage. And I understand the companies behing such betting sites, apps, are based in Gibraltar and similar types of jurisdiction. How would they be taxed at a national level?
The lottery does not help either, with its premise of you can become a multimillionaire for £1.
Not sure how the gambling industry can be better policed in the internet age. But better gambling awareness education and treatment for gambling addition would be a start.
Gambling, like many other vices, is about the dopamine hit.
My father was a compulsive gambler. When I was a child, every Friday evening he would take me to the local shops and buy sweets ‘for the weekend’. He always bet the sweetshop owner heads or tails whether he should pay the odd pence on the bill. If he lost he paid double. In money terms, pointless, but the money was not the point for either of them. (His addiction led him to a great deal more than this).
Sorry to hear that.
I had a great uncle who would bet all the time – and even did with me using match sticks on raindrops running down the window at age 8. I realised it was a mug’s game.
So well said Prof.
Gordon Brown is mopping up the flood of failures of his (and others) neoliberal sh1tshow legacy with a hanky.
Is he getting forgetful? Seems to have no memory of his hand in the dire situation we are in.
State-backed child abuse. Poverty is the biggest driver of neglect and abuse. 70% of poor children’s parents are in work. Work doesn’t pay, as you say Prof, Brown isn’t a systemic thinker. Even when this cap is removed it will be eaten away by the real costs of living and systemic failures of our neoliberal economy.
The right thing to do would be to for Brown to pull down the edifice of neoliberalism, call it out, but he won’t, instead he’s giving Liarbour a life raft, a solution to state inflicted child poverty, a fix that allows Liarbour to address the 2 child cap, but claim it’s staying within its cruel, rightwing confected fiscal rules, aka Austerity.
Austerity is a primary tool of neoliberalism, its function is to shift power and wealth from people to plutocrats. Protecting the fiscal rules lie, which Brown does, means he keeps the neoliberal lie going – that public spending comes from tax.
As ever, Liarbour, party funders before people.
I was lucky (or unlucky) enough to be involved with a gambling company behind the scenes. Things were slow to start but eventually more people started using the company and eventually they started making a profit, then a significant profit. Then they were investigated and deemed to be non compliant with gambling regulations and they became unprofitable.
Whenever a customer triggered the conditions for affordability checks they simply deleted the account and went elsewhere. Between the taxes levied, the safety checks and new sign up offers to try and entice people in it’s rapidly become an industry where only the big boys can operate. I’m not advocating to remove taxes and restrictions but the current system doesn’t work well, encourages abuse, doesn’t allow challenges to bigger players or keep people safe.
Child poverty is a black eye upon our country and we should absolutely be ashamed of it. It shouldn’t be a thing at all because money given to be spent on children flows back into the economy and is taxed a lot through this flow of spending through essentials to businesses to workers etc.
If Gordon Brown were really serious about child poverty, he would mention that the only place in the UK where child poverty is falling is Scotland, where he lives. This is thanks to the Scottish child payment, currently set at £27.15 per week per child under 16, for all families on benefits. This is of course down to the SNP controlled government, which is also committed to abolishing the two child cap next year – and they really do have to balance the books.
Thanks
Gordon Brown was Chancellor of the Exchequer and STILL doesn’t know how the economy works! How do we get through to the people who need to know?
If people like me are having trouble persuading friends who are convinced that taxation funds government spending, try persuading them to ask this question on a Google search:
Does the UK Government create money to spend into the economy?
Yes, the UK government does create money, primarily through the Bank of England, to fund its spending. This creation of money is distinct from the money created by commercial banks through lending. The UK government, as a currency issuer, doesn’t need to “earn” money before it can spend; it can create new money to fund its expenditures.
It then goes on to elaborate….
Here’s a more detailed explanation:
Government Spending and Money Creation:
When the UK government spends, it creates new money, often by instructing the Bank of England to make a payment. This isn’t funded by existing tax revenue or borrowing in the same way a household or business operates.
The Bank of England’s Role:
The Bank of England, as the UK’s central bank, is responsible for managing the UK’s money supply. It can create new money electronically and use it to purchase government bonds (a form of borrowing) or make payments on the government’s behalf.
Taxation and Money Destruction:
While the government spends new money into existence, taxation plays a crucial role in managing the money supply. Taxes help to remove some of that newly created money from circulation, helping to control inflation and manage the national debt.
Quantitative Easing (QE):
The Bank of England can also engage in QE, which involves creating new money to buy assets, primarily government bonds. This is done to lower interest rates and stimulate the economy.
Distinction from Commercial Banks:
It’s important to distinguish this government money creation from the money created by commercial banks through lending. Commercial banks create money when they make loans, but this is separate from the government’s ability to create base money, according to the Bank of England.
Thanks
But when I asked DuckAi where uk gov gets its money from, money creation by BoE doesn’t feature anywhere! DDGo is pure neoliberal – oh no!
I wont copy out the answer, I might get banned… 😉 Suffice to say it lists 4 sources, taxes, non-tax revenues, borrowing, and grants and transfers.
This is what I asked Duck.ai-
“Where does the UK government get its money from?”
Maybe Duck.ai did an Oxford PPE?
🙂 or is that (:
Sounds like DDGo’s AI has been ‘trained’ like the BBC economics reporters, who ensure ‘balance’ (on occasions) by getting ‘contrasting opinions’ from a centre-left or centre-right neoliberal and a right-wing (or beyond) neoliberal.
It is very easy to bet against neoclassicals, because each time they identify a problem, the solution they will apply will be of (swallow) market logic. Others call it “let’s make profit out of a problem”. So I am sure that either will manufacture the solution in a fashion that is primarily profitable and perhaps, sometimes as a side effect it may benefit the kids/undeserving etc or to transfer the damage elsewhere.
This topic is a good testbed for a question I was struggling to formulate recently to understand the practical differences between current mainstream thinking and Prof Murphy’s.
I’m not trolling or criticising. My understanding of economics is poor and I need to read more, and perhaps my question can help other visitors to this blog identify what articles would most quickly help improve my understanding.
Here’s my understanding of the situation:
From the perspective of Brown’s mainstream framework, the government shouldn’t spend extra money (which comes from taxes) to reduce child poverty unless that extra spending is covered by raised taxes (or savings, reallocations, borrowing or income), otherwise inflation would be stoked. Hence the increased gambling tax suggestion.
In Murphy’s framework, the government can just spend the extra money (which it creates), because the economy isn’t currently in a state in which that spending would be inflationary. Tackling gambling harm through taxation is a good thing to do, but completely separate from spending commitments.
Conceptually very different, but in practical terms isn’t the difference one of judgement about whether the spending is inflationary?
Are you saying judgement does not matter?
And are you saying that I should not look at the facts and rationally form the view that there is no risk of inflation for this reason?
And do you, any way think child poverty is a price worth paying to have low inflation. Why?
Your comments try to close a circle that does not even exist.
I think “No” for each of those questions.
I’m trying to understand the practical effects of the two frameworks. I hadn’t intended to imply that judgement is unimportant or subjective. Nor did I intend to imply the practical differences between the frameworks were in some way insignificant. Apologies that that wasn’t clear.
I followed your previous suggestion to ask ChatGPT and a number of queries to it were helpful in broad brush terms, though I’m still curious about how practical differences pan out in particular scenarios, such as the two-child benefit cap. I think I’m clearer now.
https://bsky.app/profile/lonwon.bsky.social/post/3luo6bbktic23
Thanks
Lon
I find it depressing and debilitating in equal measure that such a political heavyweight as Gordon Brown still chants ‘tax and spend’. He is obviously not an unintelligent man so can he truly not understand fiat currency? I don’t believe so. In which case what arguments would he, or even could he, make against what so many of us here now believe is the more rational, just and progressive approach to economics?
Failing that then, is he just another high powered individual that has been captured?
Declaration of interest: My mum had a cousin who created a chain of (old fashioned) betting shops in Scotland, more than half a century ago, then sold out the business to William Hill, so he could retire to watch international golf in his fortys, was good friends with some Scottish golfers – but he kept the property. He kept his first shop running separately, so he could protect his original employees. Lovely man, and chauffered my wife and I at our wedding in his Roller. He was a happy generous man, and enjoyed the money he had made.
But of course that was a million miles away from international online gambling thuggery of today.
What puzzles me is how GOV and/or the financial industry can so easily and unaccountably close us down financially if we offend their politics (suddenly you lose yr bank account, your credit card company blocks transactions, VISA, Mastercard Paypal, HBOS, have you blacklisted and YouTube block your monetisation, but for some inexplicable reason it is impossible for gov to control corporate crime and online financial thuggery. I don’t believe them. They could if they wanted to. They can sanction whole countries into poverty, but not a gambling conglomerate? Pull the other one, it’s got a rollover accumulator attached.
Much to agree with.
It is the simplistic ‘silver bullet’, hypothecation argument. A tax on this (bad) would pay for that (good), when it is never that simple, even apart from the argument about money creation.
Sadly it is also what the mass of the public tend to understand, which if you’ve ever done any canvassing and had doorstep conversations you’ll have tended to find. The lack of understanding and interest, let alone today’s disinformation, can be very depressing. So the politicians retreat to those silver bullets, not helped by an equally ill informed media
We live in a society where most people believe tax funds government spending, annoying but probably true. In that society you want to illustrate the taxes that could be raised from a largely undesirable and exploitive activity, gambling, would be sufficient to overcome child poverty in the UK, which most think a desirable aim.
The idea isn’t about direct linking of one to the other, the idea is illustrating the scale of the funding. It is more that if many people do believe taxes fund expenditure and that eliminating child poverty is good, they should just add to the overall tax burden by taxing gambling properly. No harm in increasing the tax burden as the outcomes would be good; less gambling, better investment in young people.
I don’t think this idea is aimed at most readers of this blog as we know there are other ways of achieving this, spend then tax.
In his interview on BBC Radio Four’s ‘Today’ Programme, Brown also said that the Fiscal Rules should be relaxed (not just in the UK) in order to fund the announced increase in defence spending, and that there should be an issue of ‘Special Bonds’ across Europe (including the EU) to fund the ‘required’ expenditure.
But where does the money come from to buy these Bonds? I am assuming that bond purchasers and the Bond Market doesn’t have massive piles of cash stacked up doing nothing from which to purchase these bonds; so where does the money come from?
The idea is, to be polite, utterly bonkers.
One of Brown’s most laughable gambits was to propose that Glasgow be energised by becoming a gambling destination “Las Vegas on the Clyde “. Thankfully this crazy scheme did not get off his crayon pad.
If you tax gambling then does that extend to the biggest gambling den- The City.? The amount of harm fone by their gambling is massive when it all goes pear shaped (e.g. GFC 2008) especially when manipulated like Trump is doing with his on/off tariffs – which no doubt his mates are making a killing on the Stock Market swings.
We need financial transaction taxes.
I have used Ai to investigate the meaning of financial transfer tax. While I am a bit wiser, the different types of this tax cause me some confusion. I’m sorry if you have already explained this somewhere, but I could not find anything in your files. Might you consider an article on this subject?
This one is in draft.
So are some others though, but it will happen.