Funding the Future

There are six reasons to tax and none involve funding the government

As a matter of fact, tax does not fund government spending because government money creation does that. So why do governments tax? There are six good reasons to do that. 

Government deficits create private wealth

It’s widely claimed that our national debt threatens the well-being and stability of the UK, which is quite absurd when the national debt exactly equates to the value of private wealth that the government has injected into the UK’s economy. Why is it that those talking about the national debt do not seem to know this stuff?

Every action has a reaction

It’s an economic truth that every action has a reaction, and yet economists and politicians often ignore that fact by pretending that some forms of government spending - and most especially benefits – deliver no useful outcomes at all. That’s not true, but what it says is that this process of thinking about reactions requires their serious attention.

Governments don’t borrow from financial markets

The obsession with the national debt is absurd. The UK government has no need to ever borrow money. It can create all the money is wants, when it wants, from the Bank of England. The reality is that the City is desperate to save its excess funds – created by government spending more than the sums it reclaims in taxation – with the government because the government alone can always guarantee to repay funds saved with it. But that’s not borrowing. That’s the government offering savings facilities as a favour to the City.

Labour could create a national bank

The UK’s banks are amongst its least popular businesses in the country because they don’t give a damn about their customers and provide a perfunctory service. The UK government could provide an alternative in that case – and did at one time, called the GiroBank. I argue that Labour should get on and do this again.

There is no such thing as taxpayers’ money

It’s an economic truth that every time a government spends it creates new money to do so. It does not spend what is commonly called ‘taxpayers’ money. Nor does it spend funds borrowed from the City. It simply asks the Bank of England to make a payment – and that’s what that Bank does, extending an overdraft to the government to let it do so.

The Bank of England is fuelling inflation

The Bank of England is signaling we’re going to have high interest rates for a long time because it thinks we are still at risk of suffering inflation. But that’s absurd. The Bank of England is now the biggest creator of inflationary pressure in our economy.

Repaying bank loans destroys money

The Bank of England is signaling we’re going to have high interest rates for a long time because it thinks we are still at risk of suffering inflation. But that’s absurd. The Bank of England is now the biggest creator of inflationary pressure in our economy.

The Bank of England is fuelling inflation

The Bank of England is signaling we’re going to have high interest rates for a long time because it thinks we are still at risk of suffering inflation. But that’s absurd. The Bank of England is now the biggest creator of inflationary pressure in our economy.

Austerity does not save money

Like almost all economic truths, austerity works in the opposite way to that which most people think. It does not save money. Instead, it prevents the government creating the money required to deliver what the economy is capable of.