The post-budget reaction, after John Healey's debacle this week, is highlighting a number of issues.
The first, and most obvious, is the prevalence of the household budget analogy. Everywhere, commentators say “there is no money”, and politicians are all too willing to agree. But this is simply not true. The UK government creates its own money. It can never be short of it. Using that capacity is wise when the result is beneficial for the economy as a whole, and the risk of inflation is low, as is the case for this reason at present.
I know what the reaction to my saying this will be. We do have inflation, it will be said, and there is a risk that it will rise. That is true, but the inflation in question is not being caused by excess government money creation generating demand that exceeds the economy's capacity to supply goods and services.
Instead, it is being driven by external factors, including oil and gas price shocks, the AI bubble, which is pushing up government borrowing costs as investors sell bonds in favour of speculative share investments, and risks to global supply chains, particularly for food, arising from climate change and the consequences of Trump's war against Iran.
In these circumstances, and I cannot stress this enough, it is entirely possible to create money to meet the very real needs that exist within the UK economy while simultaneously taking action to address inflation caused by external economic shocks. The two issues are not directly related. Conflating them is one of the fundamental problems with current economic policy.
Inflation in the UK is not being caused by excessive payments to old-age pensioners living on less than £13,000 a year.
Nor is it being caused by universal credit payments of under £100 a week to so-called NEETs, young people not in employment, education or training.
Instead, inflation is being driven by external events and the exploitation of market power by large corporations.
That this exploitation is going on is evidenced in company reports this week, with Shell and a whole range of banks reporting substantial increases in profits and distributions to shareholders.
These profits have not arisen from their own efforts. They are the consequence of shortages in oil supply, which energy companies are exploiting through profit gouging or greedflation, and higher interest rates imposed by the Bank of England, which banks are using to generate excess profits.
The consequence is that inflation is being blamed on government spending that meets essential needs, while the real causes, external shocks and corporate profiteering, are being largely ignored and go unaddressed as a result.
And why has this argument been generated? It would seem that the aim is to demand that what the right loves to call welfare spending, and which I call social security, be cut.
This is what that expenditure is on (give or take):
| Benefit | Annual spending (£bn) |
|---|---|
| State Pension | 146.1 |
| Universal Credit | 79.2 |
| Personal Independence Payment (PIP) | 28.5 |
| Housing Benefit | 12.9 |
| Attendance Allowance | 8.5 |
| Disability Living Allowance | 8.3 |
| Employment and Support Allowance | 7.0 |
| Total of seven largest benefits | 290.5 |
| Total welfare spending (Great Britain) | 323.0 |
So, the aim of this supposed welfare expenditure is to:
- Support the elderly who have paid National Insurance all their lives.
- Protect those on wages too low to live on, especially when they have children.
- To support those with disabilities and serious illness.
- To support landlords by ensuring they can be paid their excessive rents.
Those demanding cuts in these payments have four things they should make explicit:
- They should say they want to increase inequality.
- They should say they think we have insufficient poverty in the UK
- They should make clear that the vulnerable should suffer more than they already do (and on this, please refer to my pre-Budget video on this issue, and the scale of poverty in this country).
- They should make clear that greed motivates their every action.
Then they should say why:
- Pensioners should not get the pensions they have paid for.
- The vulnerable should be ignored.
- Children should suffer extreme poverty.
After that, they need to explain what they think the costs of their action would be:
- Those from whom payments would be withdrawn
- To those who support those in need, many of whom are also living in poverty
- To the economy, taking multiplier effects into account.
- Their own well-being, also accounting for multiplier effects.
- Inflation.
- Government credibility, and so democracy in the UK.
What we are actually seeing is ignorance on display in these demands. Ignorance of:
- Economics, and most especially macroeconomics.
- Money, and how it is created.
- The nature and various causes of inflation.
- The lived conditions of others.
- Multiplier effects.
- Ethics.
And all of that makes me very angry, because this deliberate assault from those ignorant of so much has the single goal of making the already difficult lives of vast numbers of people in this country very much harder still. Candidly, I find that very hard to forgive.
And what I always want to ask is, just how did values in the country get so totally fucked up (there is no other appropriate term) that we arrived at the point where it is thought that debate on callous cruelty is something that should be at the forefront of political discussion in this country?
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Social security spending now is proportionally about the same as it was during Thatcher’s reign of terror but the news media always use terms like “spiralling” or “soaring” when discussing the costs. Twats.
In addition there is the panic – “welfare is rising out of control!” – which is driven by the right wing press.
Well, “welfare” spending in the UK (as a percentage of GDP) was (according to Google)
1985 – 11.5%
1995 – 12.2%
2005 – 10.8%
2015 – 11.3%
2025 – 10.9%
So, why all the fuss?
The big themes over the last 40 years are three-fold. First, broad stability. Second, rising pension payments (as the population ages). Third, a squeeze on unemployment benefits replaced by sickness and “in work” payments.
I will see if I can replicate that.
Good work…
I will forward you some graphics to help with any video that you might make in this regard, Richard
I am sick to the back teeth of the Tories and the media blaming “people on benefits” for everything. I’m basically a socialist but even I assumed that people receiving state support were essentially ok until I had to claim unemployment benefit for a few months in 2023 and help a relative apply for PIP recently.
So their relentless messaging does work if you have no direct experience of our miserly and punitive system.
There needs to be a national face to face campaign out on the streets by the trade unions and anti poverty NGOs and SOON because if Burnham calls an early election and loses the Hard Right will go wild if they get in.
I have recreated the data on this for a blog tomorrow
But thank you
If welfare spending is broadly stable and pension spending is rising, that does suggest that spending on “discretionary” (by which I mean judged to be necessary) is falling.
Paul
There will be a blog breaking all this down tomorrow.
“Fucked up” up is the right terminology. We have passed the point where politeness is appropriate….and most of the folk who comment in here must be spending quite a lot of time swearing at the telly. Helia Ibrahimi drives me to a rage – I now have to leave the room when she is talking shite on C4 News. in her annoying “I know it all” manner.
I know her.
I will refrain from comment.
It’s genuinely tragic that you have to keep saying this, but please continue because very few voices are doing so. I agree completely, of course.
Thank you, John
I have a very lovely but I suspect Tory voting neighbour who’s view is that work should pay. I instead judge a society by how it cares for it’s vulnerable. In that category I would include the elderly, the sick/disabled those unable to find suitable work and other marginalised groups such as ethic minorities and our LGBTQ. Apologies if I’ve missed anyone. Beveridge kind of set a vision for our welfare state. Sadly not only has it been systematically dismantled, but those needing help are being demonised and blamed for problems they didn’t create and they have no power solve.
After years of working hard now find myself unable to work full time due to disabilities and health issues. Had they not raised my state pension age by 7 years I would be retired and it wouldn’t be an issue. But this and the lack of suitable treatment on the NHS leave me unlikely to be able to work full time and constrained financially. Every day I’m bombarded with politicians from all major parties berating me for being a drain on society and for not trying. I have recently been successful with a certain benefit that is extremely hard to get and a truly horrible process to go through. This now enables me to pay for the support I need and treatment I’ve failed to get through the NHS. It also enables me to continue working. But every day I’m made to feel I along with the immigrants are responsible the downfall of the country. What have we become?
We have become a sick society driven by the greed of a few.
And can I add you to your list of those prejudiced against, those deemed by an uncaring society to not be neurotypical, including those with autism, ADHD, dyslexia, and more?
And, good luck and thank you for sharing.
Sorry I should have added those too. But I think you understood the points I was trying to make.
It’s not clear to me why someone who is neurotypical deserves less money from the public account than someone who isn’t. This is not a point about needing health treatments in the country with the worst system in northern and western Europe.
I am not quite sure I am following your logic here.
Work already pays. It’s a Tory lie to say people are better off on benefits. Universal Credit is £35 less than basic monthly costs.
And the Tories, Reform and their media know very well that there aren’t enough jobs just for the healthy able bodied unemployed alone never mind the sick and disabled.
They know because some of us continually send them the data just so we know for our own satisfaction that they know they’re lying.
It is ignorance, and a complete lack of morality!
The entire discussion around the budget has been predicated on “What’s in it for me in the short term”, on assumption that everything is a zero sum game. .
So: nothing about state capability (including happy, healthy, educated people), infrastructure, investment and positive spirals. Nothing about inequality, corruption, inefficient multipliers, ability to fund.
In reality people are not so selfish. But the context of the “debate” is that “you get it” or “they get it”, encouraging the view that “Its everyone out for themselves”. Ironically, as people get poorer, and less invested, it might well be the case. Civilisations fail.
The other evening I enjoyed watching The Normans, often thinking, “Oh, I didn’t know that”. Could you present an economic version? Until people’s fundamental awareness of macroeconomics is upped, we’ll be dragged down.
Just when you thought you’d get a break!
What I see, and I may be wrong, is a case of diverting the blame, very similar to the anti immigrant or minority tactic. The Government is creating money but not recouping enough due to low taxation on the very people and organisations wealth accumulates in. These people and organisations are using their accumulated wealth to ensure the government can’t tax them. Part of the tactic is to then point at the so called debt they helped create and blame “the poor.” There are other areas of stupidity on the Governments part, paying private landlords to house welfare recipients, paying private companies to carry out public services, but that feels like the crux of it. A game of diverting the blame.
And, speaking of private companies providing public services, I urge everyone to watch this;
https://youtu.be/R5R7z14eLQE?si=CoeaqfoWxBIU7t4K
This is a prime example of the cruelty of privatisation, neoliberalism and the financialisation of the economy, and human life. When money is the main driving factor, no one has the time or resources to care.
Thank you
Shaking with rage, would be appropriate.
I rarely look at newspapers anymore but all I ever see when I do it’s vicious attacks on welfare, the disabled – day after day headlines screaming ‘…but no cuts to welfare’ like it’s a cancer eating away at everything and must be stopped. absolute propaganda blitz on it. The NHS will be next.
To Channel 4s.credit, they made an excellent doc last week called The Experiment, I suggest to it seek out and view it.
Am disgusted with Burnham. Pathetic, passive – traded any values he appeared to have soon as he walked into number 10. Please, don’t do Googlebox again.
1.
For your information, I love your really angry posts as much as I am in awe of your auditor like analysis of it all – just get it out Richard, get it out. And when we come here to agree, yours is no longer a lone voice. That is what is important – you are sharing something.
Some thoughts:
Are we really saying that those who invented/implemented the NHS, social security, pensions etc., had no idea of the growth in population (leading to cycles of more elderly etc)? Were they that stupid not to consider that? Have they been caught out? I don’t think so. Social security by its nature extends life. But that is what the Neo-liberals are saying. It’s bullshit. Social security was a commitment to cohesive society to prevent soviet style communism and German fascism by those who’d seen and fought it – God bless them. It was a down payment on domestic peace.
I think that especially since 2010 – putting aside the previous Thatcherite continuity of Blair – the people of this country have been economically brutalised by smiling, posh, self regarding , lying extremists who are out of touch with reality, propelled only by their ability to outspend the opposition into power, nothing more.
Added to that is this reductionist view about money – that all the money that exists is all that exists and we have to make ‘tough decisions’ about who gets what – a total negation of macro concepts and a willing ignorance of the inequality of its distribution – an inequality that is celebrated as ‘success’!
To be clear, it is Neo-liberalism and its politicians, economists, the media, academia, the internet that has fucked us up. GIGO – Garbage IN- Garbage OUT.
Oh and another reason why I am shaking with rage… If I read this right, I am going to get another huge increase in rent next summer… And Healey made it worse!!!
Life is impossible for everyone. It should not be like this.
https://www.thisismoney.co.uk/money/buytolet/article-16248787/Landlords-come-droves-warn-rents-soar-Healeys-tax-grab.html
Nearly every political programme is now framed around something which as Chris Mason said ‘ wasn’t mentioned in the budget statement’. ‘When will you get welfare spending down'<p>
As you Richard and commentors here say, ‘welfare’ spending is not ‘ballooning’ . Even on BBC R4 Today the head of the OBR quietly said it wasn’t ballooning. But the very breathlessness of the BBC interviewers’ posing the question to politicians imply that it is. Not only that – but that ‘welfare’ is the only possible way extra money ‘can be found’ for anything else – especially for ‘defence’.<p>
And politicians seem happy with that binary framing – as if the whole budget reduces to ‘welfare or defence’ – maybe its just easier for everyone . [Some analyst said that many Hungarians now find it more disturbing and uncomfortable to have more debate and conflicting views in the media than under Orban’s state propaganda – which they new probably wasn’t true – but they could live with it – as background noise with which they didn’t have to engage.]<p>
Its this tramlining of debate that’s so very Ministry of Truth. Even within their own household analogy there is absolutely no journalistic curiosity about the £billions of unnecessary subsidies and ‘interest payments’ to the banks or the oil companies raking in £billions from high oil prices . Windfall taxes and withdrawal of subsidies would dwarf what may theoretically be extracted from ‘welfare’. But no – it cant be said.
Thank you
2.
I have not been speaking to my brother since last year as we fell out badly over immigration (he lives in Ireland and we know what has been cracking off over there). When I have tried to discuss Neo-liberalism and it’s manipulation of people with him his response took some unpicking but this is what he said.
He said that what is the use of him knowing all this when there was nothing he could do about it? Knowledge of who was shafting him was not enough. He (and people he knew) were not going to be listened to. I challenged that – why make people (immigrants) who had not made these decisions pay for those who had? There was no answer except ‘What else can I do?’. His pursuit of immigration was his way of getting the message over to those who will not listen. Immigrants were collateral damage in his eyes in his bid to be heard by the unlistening. In his mind he was suffering enough – he had made sacrifices, now the sacrifice had to be born by someone else. This ‘someone else’ (an immigrant living in his community) was more tangible than any politician or ideology. Brutal eh? Is it a form of trying to assert control in a failed democracy?
What I see is an unmet need for justice manifesting itself in a surrogate, crude, home made form. My brother was someone who would give you the shirt off his back at one time. Not any more. My mother was an ex-trade unionist who volunteered a lot of her life who died thinking Farage was her salvation.
What makes people change so? Economic crimes against humanity committed by Neo-liberals – not fascists or communists/socialists.
I think the obsession with shrinking the welfare budget is just what I like to call “The politics of spite”. Where, as an excuse to do nothing, politicians will point out vulnerable groups they can label as “free loaders” and get other groups to see them as the reason they’re so miserable. In reality, the reactionary group gets nothing from the policy except the knowledge that someone is being punished. Nothing is gained, the cuts don’t raise extra funds, the economy doesn’t grow, extra resources aren’t utilised.
Everybody loses with this political narrative and action. But it helps win some votes. Everyone would be better off with a more equal MMT based economy where there is no need for the othering of everyone against each other!
I hate it!
I have been thinking about the question you pose. I saw a quote from MAGA women who was upset with Trump. He is not hurting the people he should do, she said. My take is that when things are not going well and there is little hope of change, some like a target on which to discharge their frustration. I think at some level many will know it is not fair do look for more reasons to blame them. It does relieve them of the burden of thinking. Splitting the world into good and bad is a primative psychological defence.
A good post. The BBC seems to be at the forefront of the assault on welfare/social security with constant references to the ‘cost of welfare’ and ‘there are other things we need to spend money on’. Oddly enough all those making those comments are themselves quite well off so do not have to bother about state support. Also they are totally ignorant of both how governments are funded and the share of payments as a % of total spend over time, which it seems has not increased. They also illustrate their ignorance by seeming oblivious to the fact that welfare payments which invariably go to those who are not well off are recycled into the economy – which supports jobs and tax receipts. Cutting such benefits reduces spend and economic activity!
3.
The question as to why Neo-liberalism persists seems straightforward to me but we need to redefine what success is.
Neo-liberalism persists because it is actually simply very effective/successful for those who champion it. It delivers time after time. That is why change is resisted. The cost to society is constantly ignored and the politics of division and identity ruthlessly deployed to splinter even the sharpest analysis.
As Neo-liberalism has begun to unwind, it extremism has come more and more to the fore – look at the political donation arrangements in the U.S. and even over here. It is even prepared to play with war – the Vietnam war was a bonanza for corporate America whilst leaving the State in a right mess. That is why we never learn from wars: because some people make a lot of money from wars.
So, declaring war in one’s domestic arena makes sense too to Neo-liberals and in our case, the war is on social security users – someone must be seen to pay (as my brother demonstrates) to be sacrificed to provide ersatz justice – but never the Neo-liberal themselves. That’s the genius of Neo-liberalism. Privatize the rewards/socialize the dis-benefits – as Rand said – shrug them off.
I’m not defending my brother’s mindset; I’m saying lets be glad to not be like him but understand that in many ways its not his fault. He and others have been treated unjustly and desperately wants justice and driven to the point where any form of it will do not matter how perverse.
Going forward into the dark, let this blog be a place of reason where we don’t fall for the genius of Neo-liberalism.
Thank you
What about the cost of not paying though?
Children being taken into care, ill health, crime etc
To say nothing of the rise of Fascism
Whatever else you think about it both Bismark and Stolypin were right.
The Tsar didnt listen to Stolypin and we all know how that ended
I fully agree John, but that can always be made into an issue of personal failure – the Neo-liberals even hyper-individualize failure so that (apparently) a person is sovereign to destroy their lives – their behaviour has nothing to do with anyone else – it’s a choice or a weakness. all made in isolation. Even being successful is all about the ‘individual’, not luck, or who else helped or team work is it?
Looking at the gilded lives of where many Neo-liberals come from, looking at how it was supported in its infancy and even now at its think tank funding reveals that Neo-liberalism is and was a project of the wealthy who saw the riches of the world and connived to claim it for themselves.
Much to agree with
The BBC knows that the household budget and credit card analogies are bogus, because a report they commissioned said so. See:
BBC publishes thematic review into taxation, public spending, government borrowing and debt output (2023)
See the Full Report, and the comment, the “national debt is not like household or personal debt, not like a credit card”
Newsreader Simon McCoy mentioned this on air five years ago.
“BBC finally tells the truth about government borrowing” (Mar 2021)
But they all carry in spreading what they know to be misinformation.
Makes me think of Kinnock in 1983…
– I warn you not to be ordinary.
– I warn you not to be young.
– I warn you not to fall ill.
– I warn you not to get old.
Correct
Alas, might “our” society be reasonably described as a “Mediacracy”, with a flawed democratic face?