In 2010 Liam Byrne MP left a note for his Tory successor as Chief Secretary to the Treasury saying that he was very sorry, but there was no money left. He always said it was a joke, that he never meant it, and that he regretted it.
Maybe he did, but today a Labour shadow minister - Lucy Powell - is saying the same thing. I posted this on Twitter quoting her:
It staggers me that someone supposedly capable of being a minister in the next government can say something as stupid as “there is no money left”. Doesn't she know that one of the most fundamental jobs of government is to create the money we need? It can never run out, ever. https://t.co/u2OJIEv3D7
— Richard Murphy (@RichardJMurphy) July 18, 2023
It is staggering that she could say such a thing. It reveals either a very deep ignorance of what money is, how it works, and what the role of government is when it comes to money creation, which ignorance should by itself real rule her out of consideration for high office until she has received suitable training to understand the task, or it reveals something much more sinister, which is a wilful desire to deny assistance to children in poverty as a result of a choice made by the current government.
It would cost about £1.3 billion - or about 0.05% of GDP - to relieve that poverty.
The sum required is about 0.16% of government spending.
It could be covered more than twenty times over by cutting the interest paid to commercial banks on the deposits they hold with the Bank of England, on which there is no legal obligation to pay interest at base rate.
It could be covered by simply telling the Bank of England to cut the bank base rate by less than 0.1%, so cutting government borrowing costs, which a Labour government could do.
It could be more than covered by raising the higher rate of capital gains tax from 20% to 24%.
It could be covered by reducing the higher rate of tax relief on contributions to pensions from 40% to maybe 38%, which no one would notice.
It could be covered by issuing new bonds to cover the cost instead of letting the Bank of England issue more than £80 billion of such bonds in the next year (as it plans) simply to withdraw money from circulation in the economy to force up interest rates to unaffordable levels.
In fact, there are almost countless ways that £1.3 billion could be found.
But what is emphatically untrue is that there is no money left.
I despair.
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I say that there is no Vision, no Ethics and no Moral Compass left, there is plenty of money though
What I found interesting about that Tweet from ITV was the large number of replies underneath that specifically referenced fiat money creation with at least one mention of Stephanie Kelton s book.
Maybe the message is starting to cut through
Labour like all the other main parties in the UK is a faux party with the majority of members and MP’s completely unable to think beyond the very elementary idea of fiscal conservatism being the answer to inflation when in fact the causes of inflation are numerous and no economist on the planet as yet has a working theory of inflation. Fiscal Conservatism is arrogant primitiveness beyond belief!
But money creation is a contributing factor to inflation. The more money in circulation is not met by productivity gains so it has to lead to inflation alongside other factors. So there is a limit to money creation. Politics is deciding what to prioritise.
Of course there is a limit to money creatuion, biut not as you imply
The limit is full employment
Or the capacity to tax spending back
We are at neither so the linit is not operational right now
@ ben. Hey Ben why don’t you tell us why there’s been no fiscal conservatism under either a Conservative or Labour administrations in regard to the the outrageous house price bubble the bankers have been allowed to blow for fifty odd years. People like you are quick to mouth off about government profligacy with money but fall strangely silent when bankers are. Come on put your money where you mouth is and explain your one-sidedness. We know you won’t because you’ve been brain-washed by the Daily Mail’s and Thatcher’s of this world!
Here’s the Guardian article by Jamie Driscoll:-
https://www.theguardian.com/commentisfree/2023/jul/18/labour-voters-party-support-resignation-mayor-jamie-driscoll
Looks like Sir Kid Starver Dimwit has a fight on his hands!
A small point perhaps, but in the interests of accuracy the actual note left in the desk drawer said “There is no money.” not “There is no money left.” (https://www.itv.com/news/story/2013-06-24/liam-byrne-there-is-no-money-letter-to-chief-secretary-to-the-treasury/) An unwise joke in either case but the meaning is slightly different.
As you say Richard, utterly pathetic from labour. Innumerable ways to find the money to stick to the pledge to abolish the 2 child benefit limit, but they just parrot the Tory line. Obsessed with ‘fiscal rectitude’, terrified of the hysterical know nothings in the right wing press , and so on.
Jamie Driscoll is absolutely right to resign from labour and take them for the mayoralty. You know what? Despite the Guardian’s prediction the labour ‘machine’ has it sown upon the NE, I reckon he’ll win.
We see now in Westminster a parliament dominated by 2 hollowed out intellectually barren parties where anyone of talent has been ( the Tories under Johnson) hounded out, or is being (labour).
Asa Compass member the attempt to kick out Neal Lawson is so stupid, self defeating and plain….mad l barely have the words to describe it.
I gather that Richard does not always see eye to eye with fellow MMT theoretician Professor William Mitchell, but there is surely much to agree with (and much useful ammunition) in his latest blog article:
“Starmer must confront the reality – more spending will be required but taxes will probably also have to be higher”
https://billmitchell.org/blog/?p=60987
I agree with him on tax
To save embarrassment on the part of labour, I get first dibs on taking over the royal mint. As a household is like the government then it must be legal for me to print money.
It’s high time we re-set the bar on the capabilities of those seeking high office in this country.
Now that wouldn’t that be radical?
I’m tired of ‘conviction politics’ and wallies like this.
It’s all about what we can’t do at the moment.
I’m attracted to a term I just picked up in Byline Times this month: ‘Revanchment’. Meaning revenge by taking back territory or status lost previously.
Having read Clara Matei (The Capital Order) and a good many others, I can only conclude that capital’s revanchism is the seeking of taking us back to some mythical golden era when the markets dominated the world and states just went along with it – no social programmes or progress of any kind – just a static society ran for exploitation and underpinning unaccountable power with all the accrued output as wealth. A slave state in other words.
I wonder if the Powell-numpty even knows what revanchism is? Stymied certainly doesn’t.
🙂
“It would cost about £1.3 billion – or about 0.05% of GDP – to relieve that poverty”
& there is no money left according to one of Sir Kid Starvers colleagues……..But but but But there is always tax 🙂
The Aviation Tax Gap report by the NGO Transport & Environment notes that in the case of the UK, the tax gap, between removing all tax exemptions on aviation and the current situation is: ……current situation £2.5bn tax revenues in 2022 vs potentially £5.5bn in revenues (no tax examptions).
It is note worthy that it is the better off that fly & thus are quite able to bear the additional, & modest tax burden.
The extra £3bn could then head in the direction of those most in need – poor. hungry children.
We can be 100% sure this will NOT happen under any vile-liebore government under Sir Kid Starver.
That anybody can look themselves in the mirror and support the current status quo beats me.
The money in circulation has all been created by the government. The question should be, “Is there enough money in circulation”?
No one disputes that we are living through austerity. That alone is an indicator that there is not enough money to go around, and there is only one source of more money that does not require repaying: government money from government spending.
The observation is that despite austerity and low public sector wages, there must be other causes of the inflation we see. Those in the know predict that inflation will fall automatically at the end of the year once last year’s energy price rises are no longer factored into the 12-month inflation figures. The Bank of England’s response is doing bugger all, as evidenced by the response of inflation over the last 6 months.
This Government paid $1.3bn on “planning” for a tunnel ripping through Stonehenge.
Powell, Reeves, and Starmer flaunt their profound ignorance at every opportunity. They appear to have no understanding of the nature of money and its consequences for public finances. The cynical interpretation is that they don’t believe a word of the nonsense they utter; they are simply pandering to the supposed ignorance of their target electorate. A kinder view is that the financial markets impose the need for ‘fiscal rectitude’ upon them – a ‘don’t frighten the horses’ approach. My fear is that, like Sunak, they are true believers and should be nowhere near the levers of economic policy.
Hi Richard, on the subject of silly statements by politicians, I see the usual Tory slime (IDS and Rees Mogg) have been blaming the UK’s low productivity on working from home. Could you maybe do an article on productivity one day?
The fact that GDP is used is ridiculous in the first place and according to their measure Ireland is about twice as productive as the UK which is total nonsense because we all know Ireland’s GDP figures are completely distorted by corporate tax receipts.
Isn’t it really more a measure of GDP per capita than labour productivity?
Thanks R
I’ll try
But no promises..
The world is flooded with sterling, dollars, yen and euros. Where, I wonder, does Lucy Powell and other flat-earth economists, think that this money originated?
I think it’s a mistake to say Shadow Culture Secretary Lucy Powell is ignorant of how money works Richard. It may be true, but what she says is the mainstream consensus. It’s not just a question of educating her but trying to change the whole dominant worldview we live under.
So you are actually agreeing with me?
And you are agreeing that Labour had learned nothing since 2010?