Scrapping HS2 for those further north

PamelaJ1

nfk 2 an hour, you lucky thing!

This is a town with a population of 8,000ish. Strangely, the buses are rarely full.

HS2 would only have taken off 10 mins journey time down to London and a 2 hour journey from Leeds is pretty speedy anyway. Always a white elephant and unnecessary waste of money. Much more needed is an upgrade across the Pennines to Manchester.

Sorry I don’t understand.If spending all that money on the pandemic is not a problem, then why can’t “we”borrow ad lib to build as many hospitals , schools and railway tracks as we like?

And by the way , I agree with other Devon people , the line that runs through Dawlish is a nightmare, though very scenic

Atqui

Sorry I don’t understand.If spending all that money on the pandemic is not a problem, then why can’t “we”borrow ad lib to build as many hospitals , schools and railway tracks as we like?

... the very short answer is - we can. Though maybe not "ad lib".

The technicalities are a bit more complex. But ultimately, the government decides how and on what, money is spent.

And that will depend on its ideology.

I'll leave it at that.

Dickens

Atqui

Sorry I don’t understand.If spending all that money on the pandemic is not a problem, then why can’t “we”borrow ad lib to build as many hospitals , schools and railway tracks as we like?

... the very short answer is - we can. Though maybe not "ad lib".

The technicalities are a bit more complex. But ultimately, the government decides how and on what, money is spent.

And that will depend on its ideology.

I'll leave it at that.

You missed a bit, Dickens. The government decides how much money will be spent, but it doesn't have to 'borrow' it. It is the issuer of money. Always has been.

Taxation just ensures that there isn't too much money circulating, because that could cause inflation if there was a shortage of things to buy with it.

MaizieD

Dickens

Atqui

Sorry I don’t understand.If spending all that money on the pandemic is not a problem, then why can’t “we”borrow ad lib to build as many hospitals , schools and railway tracks as we like?

... the very short answer is - we can. Though maybe not "ad lib".

The technicalities are a bit more complex. But ultimately, the government decides how and on what, money is spent.

And that will depend on its ideology.

I'll leave it at that.

You missed a bit, Dickens. The government decides how much money will be spent, but it doesn't have to 'borrow' it. It is the issuer of money. Always has been.

Taxation just ensures that there isn't too much money circulating, because that could cause inflation if there was a shortage of things to buy with it.

... I always miss a bit! Yes - how much money is spent on what, is the point.

So, that just sounds like a case of juggling the money and budgeting accordingly then. Surely that's good, because as needs change the cash can be re distributed elsewhere. HS2 no longer assumes priority, so off it goes to Room 101. Some might say promises broken, but alternatively it can be seen as being sensible in the current climate.

What 'current climate' would that be, Josianne?

Am I being dense in my explanation? By current climate, I mean the money which was swiftly allocated to everything attached to the unforeseen pandemic.
So, having ample funds, if I set out to buy a Merc but unexpectedly the roof on my house collapses, I have to shelve one project in favour of the other. Not because I can't afford both, but because of priorities.

That was my interpretation of the situation Josianne ( similar analogy promising your child a new bike and then being made redundant) . But earlier in the thread those who know more about economics tell us this is not the case in government spending. I am pretty sure most of us mere mortals would believe ( even if mistakenly) that the huge amount of money spent on the unprecedented demand of the pandemic must have some effect on previous promises.

But, Josianne and Atqui, is assuming that the government is like a household, or a business enterprise and only has a certain, limited, amount of money to spend.

This is not true. The government, by way of the Bank of England, issues money. Governments have always issued money. That is the main way that the supply of money in the economy is increased. If there was a fixed amount of money available each member of the population, which increases year on year, would be getting a smaller and smaller share of the limited amount of money available. How would you account for the fact that in the 1950s, say, the population of the UK was about 51million and average wages were less than £10 pw while now the UK population is about 68 million and average wages are about £500 pw ?(https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/employmentandemployeetypes/bulletins/averageweeklyearningsingreatbritain/latest)

That money has had to come from somewhere and it certainly wasn't from taxation of the much smaller amount of money circulating 70 years ago. The truth is that, apart from some money which has come to the UK from export earnings (and balanced, don't forget by UK money going abroad to pay for imports) , the government has increased the supply of money available by issuing more.

The biggest factor in controlling the amount of money issued is inflation. Some inflation is tolerable, but if the government kept on issuing money when there weren't enough goods and resources available to buy with it then rampant inflation would occur, such as in the much quoted examples of pre WW2 Germany and Zimbabwe.

But it is painfully obvious that there is no shortage of goods and services available to purchase in the country at the moment. The NHS and social care is a prime example, likewise improving infrastructure. There should also be investment in the 'Green' economy to combat climate change. So there is no reason to limit the supply of money at the moment.

The primary tool used by governments to control the amount of money in circulation is taxation. Taxation takes money out of the economy to stop runaway inflation taking hold.

So, that's the simple explanation.

It gets more complex when one considers that there are two 'economies'. The 'real', everyday economy that we are all involved in of buying and, in many cases, providing (businesses) the goods and services the population wants or needs.

The other is the economy of the stock markets, hedge funds, etc. where people are speculating mainly to increase their wealth without actually contributing much to the 'real' economy. I think of it as the 'money market' where the concentration is on just increasing wealth. It's not an intrinsically Bad thing; I'm sure that many Gnetters have savings invested to 'grow' their money, in stocks & shares, ISAs, National savings vehicles etc. but it is non productive and does little for the 'real' economy unless some of the 'wealth' is spent.

But what I am trying to say is that there is no earthly reason why the government should, at this time, be trying to restrict the supply of money to the real economy by cutting back on government investment. There is plenty for it to 'buy' that would provide jobs and services to support businesses and the 'real' economy. The pandemic money wasn't 'borrowed' and doesn't have to be 'repaid'. It was newly created money.

Sorry this is so long, but it's not really a very simple thing to explain.

There is also the fact that the already eye wateringly high cost of HS 2 had been increasing even before you throw the pandemic into the mix so in my humble opinion it was the sensible decision to cancel that particular section.

Thank you for the detailed post MaizieD. I think my brain grasps about 50 % of the set up.
Just one quick question here, so why did Gordon Brown (as a previous Chancellor of the Exchequer), say there was NO money LEFT in the kitty when he handed over?

Josianne

Thank you for the detailed post MaizieD. I think my brain grasps about 50 % of the set up.
Just one quick question here, so why did Gordon Brown (as a previous Chancellor of the Exchequer), say there was NO money LEFT in the kitty when he handed over?

It wasn't Gordon Brown, it was Liam Byrne and it was meant to be a joke. Other, earlier, ministers have said much the same sort of thing. Byrne has quoted, for example, 'the Tory chancellor Reginald Maudling, who bounced down the steps of the Treasury in 1964 to tell Jim Callaghan: “Sorry to leave it in such a mess, old cock.” '

The truth is, if you look at the figures. that the Labour government left the country well on the way to recovery from the recession caused by the global financial crisis and that the tory 'austerity' cuts in government spending made that recovery much slower because it took money out of the economy which meant unemployment and business failure because there was less money available.

Keynes, who is counted among the great economic thinkers, said that the way to recover from a depression was for a government to spend. President Roosevelt did just that in the 1930s and lifted the US out of the Great Depression (a world wide phenomenon) far faster than other countries.

The idea that most of us find it difficult to understand is that a country with its own, independent, currency has the ability to issue money. It doesn't have to 'balance the books' because it doesn't have a finite amount of money to work with, unlike a household or a business.

This article is interesting when it comes to notes left by ministers of departing governments:

www.theguardian.com/global/2010/may/17/liam-byrne-letter-wider-tradition

Thank you * Maisie* for your explanation , which I’m trying to get my head round.
A question …I’m not doubting what you say , but why do politicians always ask the question “ How are you going to pay for xyz?” when there’s a budget, if money is unlimited and not dependant on taxes? I hear you groan at my lack of understanding .Perhaps the only people to vote should take a test in economics!

Josianne

Thank you for the detailed post MaizieD. I think my brain grasps about 50 % of the set up.
Just one quick question here, so why did Gordon Brown (as a previous Chancellor of the Exchequer), say there was NO money LEFT in the kitty when he handed over?

... can I jump in here?

Liam Byrne's "there's no money left" was meant as a joke - but gave rise to the 'Labour bankrupted Britain' meme.

It was a 'play' on the 1965 note left by the Tory Chancellor Reginald Maudling for his successor (Jim Callaghan) which read "good luck old cock, sorry to leave it in a mess".

The BoE can create new money out of nothing via Quantitative Easing. Since the 2007/8 crisis it has created £billions. If a country has a sovereign Central Bank, it can create new money, and the very idea that "there's no money left" is just a very silly - but useful - political 'joke'. (Byrne later admitted it was a daft thing to say).

The way to understand how the economy works is to study economics - as opposed to the media's 'shock-horror' headlines.

This article is interesting when it comes to notes left by ministers of departing governments.
I like John Major's gesture and note!

... can I jump in here?

You're welcome, Dickens. It's nice to have company

I never particularly disliked Cameron until I saw him waving that ‘there’s no money left’ note around on some sort of tv debate. It just seemed horribly spiteful given that many people watching it had no idea the note was a joke.

Atqui

Thank you * Maisie* for your explanation , which I’m trying to get my head round.
A question …I’m not doubting what you say , but why do politicians always ask the question “ How are you going to pay for xyz?” when there’s a budget, if money is unlimited and not dependant on taxes? I hear you groan at my lack of understanding .Perhaps the only people to vote should take a test in economics!

I'm not groaning at all, Atqui. It's a difficult concept to get your head round when all your life you've been told that there is only a limited amount of money available to the country. I was a bit about it at first but the more I read and thought about it, the more obvious and logical it became.

The 'How are you going to pay for it?' question stems from the days when we were on the Gold Standard. That is, the value of money was backed by the amount of gold (and silver) that the country held. Indeed, the original bank notes were a promise to pay the bearer the value of the note in gold or silver. Carrying a £1 bank note around was a good deal easier than carrying. say, the 1lb of silver it represented.

When a country was on the Gold Standard it had to have gold reserves to cover the value of its currency and if it was short of money it did have to truly 'borrow' gold or silver from other countries or wealthy individuals to cover its expenditure. That's how the Napoleonic Wars (late 18th/early 19th C) were funded, for example. And taxation was a way of raising money for a government. Income tax was introduced then, as well.

But the Gold Standard for country's currencies was abolished in the early 1970s, which freed countries to issue as much of their currency as they wanted. I don't think the implications of this have fully sunk in for many politicians; they are not usually particularly knowledgeable about economics anyway.

Maggie Thatcher, with her famous statement about there being no government money, only taxpayer's money, cemented the belief that taxation funds spending and it's a hard belief to eradicate. But it wasn't true then and isn't true now. Taxation ensures that there isn't too much money floating around the economy causing inflation. Of course, it also means that the government doesn't have to continually issue more and more money ad lib, but it doesn't limit what can be spent.

She was right in one way; the country's money doesn't belong to the monarch any more, so it must belong to us, collectively and we are all taxpayers in some way because every financial transaction we make is taxed, even if the transaction is being made by people on benefits, who are not normally regarded as being 'taxpayers'.

So, the politician's question about 'how are you going to pay for it?' is based on a misunderstanding (deliberate or real) of how the country's money 'works'. It looks good to accuse other parties of squandering money and it goes down well with a population which believes that there is only a limited amount of money available.

I believe that if people understood how money is issued they would be able to make better judgements and choices when presented with a party's spending plans. To really think about what would benefit the country and its citizens, not about 'what would it cost?'.

MaizieD

...I believe that if people understood how money is issued they would be able to make better judgements and choices when presented with a party's spending plans. To really think about what would benefit the country and its citizens, not about 'what would it cost?'.

Thinking about that - a smart electorate which knows its onions is probably not what government(s) want. What if we all united against them?

Thus we have divide et impera...

The Tories always want to shrink the State - hence the austerity of the last 12 years and the insidious privation of many health services. By telling us constantly about all the money that has spent on dealing with covid, much of which went to their friends' pockets they are trying to soften us up for another period of austerity.