Yves here. While Richard Murphy’s examples are from the UK, the general point he makes still applies: that “money” constraints on sovereign currency issuer are illusory; what makes it necessary and desirable to cut spending or raise taxes is inflation.
Now readers might ask who the “we” is in the headline. Investors like tight money. The plebes are the losers.
By Richard Murphy, a chartered accountant and a political economist. He has been described by the Guardian newspaper as an “anti-poverty campaigner and tax expert”. He is Professor of Practice in International Political Economy at City University, London and Director of Tax Research UK. He is a non-executive director of Cambridge Econometrics. He is a member of the Progressive Economy Forum. Originally published at Tax Research UK
There is no budget that does not unravel. Rishi Sunak’s has. It’s apparent there is much wrong with it, but the most significant was the issue surrounding nurses pay, which is totemic of the austerity built into the budget, none of which is necessary.
The last year has shown that the argument ‘we cannot afford it’ does not hold true. If there are resources available to use that need to be put to use then the reality is that there is nothing that this country cannot afford.
Money is not scarce. Money is a wholly artificial mechanism created to ensure that the necessary exchanges that put people to work in our economy can take place. That can be done. The money to make this possible can always be created.
And the necessary exchanges are those that fairly reward people. Anyone who thinks that NHS staff only deserve a 1% pay rise are callously indifferent to the effort they have made and and the suffering that they have endured.
To argue that we can pay no more is to ignore the staggering £37bn of waste in NHS track and trace. It is to also ignore the fact that 92% of this year’s deficit has been funded by the Bank of England, as will next year’s too, of which I am certain.
To pretend in that case that money is not available is a straightforward lie. All the money we need to make our economy work is available. There is just a choice to pretend otherwise that prevents people getting fair pay, and imposes austerity.
I accept that creating money this way is inflationary. But it only inflates one thing, and that is the wealth of those already wealthy. It was another political decision, also made in this budget to do nothing about that. There were no steps taken to address inequality.
The corporation tax increases were deferred. Capital gains tax was not increased, and remains a massive creator of injustice. There was no attempt to make those in high earnings pay as much national insurance as those in lower pay.
Council tax remains incredibly unjust, and biased to the rich and against those on low income. Those with investment income continue to pay much less in tax than those who work for a living do, because they do not pay national insurance. An extra tax to correct this was needed.
But none of these political choices were made. Instead it was decided to penalise those working in the NHS. And to penalise those in care, education and other vital services on which we depend as well.
And none of this was necessary. Taxes could, and should, have been increased in the way I have noted to address the issues Bank of England funding of the government creates. But the decision to leave the rich with their riches cannot be used to justify punishing the NHS.
This is all politics. It is politics to bias funding to Tory MP’s seats with extra funding. It is politics to penalise working people on low pay, as most who work for the government are. It is politics to leave the well off with their unearned gains.
And the sad thing is, it works. So strong is this narrative; so embedded is our belief that there are deserving rich people, and undeserving poor people who have to work for the common good, for heaven’s sake, and so sure are we that Eton cares, that apparently we forgive them.
How do I know? Because the Tories have a 13 point poll lead. The gain for them of permitting mixing at Christmas that has unnecessarily killed tens of thousands, and our pathetic gratitude at being potentially allowed out again six months later means we will vote for them.
The masochism within this is unfathomable. ‘Beat us some more’ we appear to be saying. ‘Grind down those who work until there is nothing left but grind for insufficient reward’ is the plea, whilst the wealthy get wealthier.
When will we wake up and appreciate this is all just abuse? That we are all being collectively bullied by an elite who think we can get away without, just as easily as they think they can pay off senior civil servants?
The reality is that we too now need a settlement to compensate us for that abuse. We too need to be paid for the effort made, the contempt suffered, and the indignity endured as a result of the indifference thrown our way. And soon.
I hope soon. Because I can’t see how things can continue like this. Our society is already fragile enough. I worry about how much more it can take. And when I see people – in our government – choose to abuse it further, I worry.
I worry that people cannot survive this. Real, warm blooded, caring, loving people can be broken by this. And that’s what makes me angry. Because this is unnecessary. The money to deliver a decent society exists.
All that we need to make the lives of the vast majority of people in this country is a real understanding of economics, of money, of how it interacts with tax, and how we can use that for the common good.
But no political party seems to get that as yet. And until they do, this unnecessary suffering will continue. And that makes me very angry. Pointless pain is what we’re enduring. And all for the sake of accepting that money is not a constraint on our potential, and never will be.