£18bn cuts to public services

MadeinYorkshire I think you're hallucinating. Maybe you should have a lie down.

More about tax.

So given that government income is generated by the sale of gilts (bonds)

The question is - what does the government do with tax revenue?

The governments balance sheet clearly needs balancing, and this is what tax revenue is used for - to pay back its borrowing, and balance its books.

So what is obvious is that

taxes are not the source for government spending, and are not essential for governments to spend

But are people right to think that one way for them to support the provision of government services they value is to pay more taxes?

It isn't all generated by the sale of gilts, though. That's just some of it.

Crazily enough, if you think about it, apart from gilts bought by foreign investors, most of them are bought with money the state created in the first place! If you have a NSI account, or premium bonds, or gilts, you are using money that originated from the state to fund them...

volver

But are people right to think that one way for them to support the provision of government services they value is to pay more taxes?

No. It's a myth.

It's state creation of money that enables you to pay the tax in the first place.

When you think about it, in the 1950s, say, the UK population was about 45 -50 million people and a 'good' wage £12 - £20 per week.

70 years later, the population is 66+million and a 'good' wage (taking £25,000 pa as around median) is upwards of £500+ a week.

There's still enough money to go round (or would be if better distributed). Where has it come from?

My brain just exploded.

Not sure I'm convinced, but I see what you are getting at.

So when Sturgeon says we have a lot more benefits up here (free prescriptions etc) because some of us pay more tax, is that just lying?

volver

My brain just exploded.

Not sure I'm convinced, but I see what you are getting at.

So when Sturgeon says we have a lot more benefits up here (free prescriptions etc) because some of us pay more tax, is that just lying?

It's accepted dogma, IMO. But probably to some extent true because the Scottish government is funded from Westminster. You do have a finite amount of money unless you can get more from tax.

But when you become independent make sure that you have your own currency; otherwise you'll still be reliant on central UK monetary policy.

Prentice

Whitewavemark2

Just in the middle of getting dressed and it occurs to me really government borrowing is just like anyone applying for a mortgage or for a project.

You have to be able to convince the bank that you are a long term safe bet and that they will get their money back.

You have to disclose details of income and how you are going to earn it.

The same for guilts.

PS they are called guilts because they are usually seen as a safe bet in which to invest.

Am not sure about the last part of your comment, as I understood them to be called gilts, the meaning of which was perhaps the word golden?

but perhaps,given the state of our financially unbalanced society guilts is a more appropriate spelling!!!

I'm going for a lie down... ?

So there is a link between government spending (debt) and tax (credit)

But one is not dependent on the other.

So government spending and investment creates and pays for jobs which in turn generates tax revenue, and even more taxes when they purchase goods and services with their income. These taxes will pay to reduce government debt over a period of time.

MaizieD

Well, if people won't challenge the lie that taxation funds spending; or even give the idea a bit of consideration, what else do you expect?

The real sadness of this is that the only thing that is going to pull us out of the economic mess that we're in is increased state spending because I can't see meaningful investment coming from any other source.

I have explained the reasoning behind my assertions many, many times. Do I have to do it again ( Noooooooooo, I hear the cry go up )

There are many arguments about what the country needs Maizie,

The force of your insistence that everyone believes what you believe is beginning to sound like we are listening to a priest from the sixteenth century.

In those days, if you asked anyone if they were a Christian, they would almost certainly say "yes". However, if, in answer to the question "do you believe in transubstantiation", you said no, you could, under one monarch, be a hero. Under another, you would be burnt to death.

If you ask the public now if they want a "sound economy", they would, almost certainly say yes. So, we mainly agree about the wider argument. Your "Taxation doesn't fund spending!" doesn't matter a jot to most people. If it were a matter of their life and death, people would agree. If they were also MMT believers, they might well agree. Otherwise, they don't care.

These are not the economics currently taught. What if taxes don't actually "fund spending"? What if they can print all they want? Those proponents of MMT, many grinding their political axe, will tell you that if the government spends too much, the excess demand will also cause inflation. And what is the MMT answer to this? Inflation can be curtailed by reducing government spending and raising taxes. So where, please, is the difference to the wider aim? Taxation probably doesn't fund spending in a direct exchange, but it is a shorthand for the circulation that takes it back into the funding pool. So why does it matter?

If we all want a sound economy and we want the best for all, perhaps we have to get together and discuss ideas instead of shouting slogans at one another. We won't succeed; sadly, we are human. But at least we can come closer to what we all want.

Inflation of course brings down government debt.

growstuff

MadeinYorkshire I think you're hallucinating. Maybe you should have a lie down.

Ha, ha!

Be nice to have a lie down, if only I could sleep!

Taken me 9 months and 13 incorrect bills from British Gas to get a proper amount on my account. In August they reduced my Fixed DD to £30 a month stating 'my payments were spot on'! Now want £300 a month off me, which I cannot pay .... what exactly does the "Price cap" mean, as myself and my disabled friend who they also want £300 off will be paying £3600 ... she turned her heating on for a few hours at the weekend as her and husband both disabled now and her gas smart meter unit hit over £15!

Me and my conservatory are not going to cope! My heating in here is underfloor electric so it would be twice as much almost for just a few hours .... not happening! Hypothermia coming up!

MaizieD

volver

But are people right to think that one way for them to support the provision of government services they value is to pay more taxes?

No. It's a myth.

It's state creation of money that enables you to pay the tax in the first place.

When you think about it, in the 1950s, say, the UK population was about 45 -50 million people and a 'good' wage £12 - £20 per week.

70 years later, the population is 66+million and a 'good' wage (taking £25,000 pa as around median) is upwards of £500+ a week.

There's still enough money to go round (or would be if better distributed). Where has it come from?

All the money and bonuses "Bankers and Rich People" earn is taxed, fully, when earned. Business created that money, correct?

The force of your insistence that everyone believes what you believe is beginning to sound like we are listening to a priest from the sixteenth century.

Suppressing my first instinct to be very cross with you, Daisy Anne I just think that's very amusing...

If you ask the public now if they want a "sound economy", they would, almost certainly say yes. So, we mainly agree about the wider argument. Your "Taxation doesn't fund spending!" doesn't matter a jot to most people. If it were a matter of their life and death, people would agree.

It is actually a matter of life and death for some people when welfare benefits are cut on the excuse that 'we can't afford the'm, or to force people into work, and where claims are so tardily processed that people die of terminal illness or starvation waiting for their claims to be settled. Or people die on hospital waiting lists because the NHS is being kept short of funds. Not just on waiting lists either, they die in ambulances queuing outside A&E departments, or even just during the several hours wait at home for ambulances to arrive...

And, quite frankly, people should care a jot about whether taxation or spending comes first because a massive deception is being practised on the population when government claims that they have to tax before they can spend. Understanding that this is not true allows for much better informed political choices when it comes to voting in general elections where the accusation of parties being 'spendthrift' hold a great deal of weight with voters. I like the idea of people knowing the truth or otherwise of what they are being told.

These are not the economics currently taught. What if taxes don't actually "fund spending"? What if they can print all they want? Those proponents of MMT, many grinding their political axe, will tell you that if the government spends too much, the excess demand will also cause inflation

No they don't. They tell you that putting money into the economy ad lib without there being sufficient resources available for that money to buy will cause inflation. Which is why taxation has such a key role in keeping the supply of money under control.

As for it 'not currently taught', there is a whole swathe of economy professors teaching MMT. Just as there are monetarists, neo Keynesians and a host of others.

Taxation probably doesn't fund spending in a direct exchange, but it is a shorthand for the circulation that takes it back into the funding pool. So why does it matter?

It matters as I have said above. A belief that a country is like a household and constrained by the same budgetary rules gives a completely different perspective on one's view of how the country's economy is being handled from the view from the perspective of, given certain constraints to control inflation, a country can spend what it pleases on what it feels is important for its economy and its citizens without having to raise the money from its citizens first.

If we all want a sound economy and we want the best for all, perhaps we have to get together and discuss ideas instead of shouting slogans at one another.

Well, that is what I am trying to do. 'Shouting slogans' is a good way to arouse interest. It's such a radical concept for many people. Sorry if it bores you.

What has to be understood is that MMT isn't a 'theory' It is an account, based on evidence and research, of how a state obtains its finance. It is completely apolitical.

The state can use its self financing powers in any way it wants to. it can give it all to the wealthy or it can give it all to the poor, or it can just use it to enable a more equable distribution. It can withhold money and put 'the markets' above all else, or it can use it to provide services for the population. The ultimate deciders of how the money is spent is the voting population who make a choice about which party's plans sound the best. It should be an informed choice.

I have spent my life championing 'minority' causes of one sort or another, based on evidence. I won't stop now....

MadeInYorkshire

grannyrebel7

Do you ever think we're living in a parallel universe? This government just goes from bad to worse. Three weeks in and they've done a Boris style U-turn already! Granted it's the right thing to do, but it doesn't look good for Truss and her merry band. Keep making mistakes Liz! That's fine by me

It's unreal isn't it?

I am getting to the point where I think it is deliberate now to stir up civil unrest, I cannot see any other reason why this is happening, but then again why would they want that? I have actually been thinking that all these fit young male "asylum seekers" - not half starved women and children who have walked across Europe, may be mercenaries to pile in when civil unrest happens, as I doubt our army boys will want to turn on their own? Bit 'conspiracy theorist' I know but it all just seems so ODD, the pandemic, vaccines, Truss and Kwarteng doing quite bizarre things?? I am so confused about it all ....

So, when we lived in a largely agricultural society, families sent, often the second son, abroad to work, save and buy land. They would then send another relative, brother or cousin, sent to do the same and then help the next family member. Were we sending mercenaries? This system is always what has happened. One of the younger, male members of the family was sent. They made a path for others to follow.

This has been the way that poor/dispossessed families have coped when there was little at home for them. You would have thought this was something new that happened overnight.

The UK hasn't had a largely agricultural society for centuries.

You are accepting the premise that asylum seekers are mercenaries. Any evidence for that?

growstuff

The UK hasn't had a largely agricultural society for centuries.

You are accepting the premise that asylum seekers are mercenaries. Any evidence for that?

Not agricultural, but that is exactly what has been happening for many years, many of the migrant communities do this. East European migrants tend not to because their prospects are better in EU.
Not mercenaries, although some terrorism by extremists has taken place and a lot of effort has to be taken to reduce the incidents.

Terrorism in U.K. is almost 100% home grown.

How much Katie59?

growstuff

How much Katie59?

???.

Whitewavemark2

Terrorism in U.K. is almost 100% home grown.

You know perfectly well that the recent terrorist attackers have originated in the migrant community

We're all bl**dy migrants.

This is the kind of stuff Irish economic migrants had to face not even that long ago. Even into the 80s/90s

JaneJudge

This is the kind of stuff Irish economic migrants had to face not even that long ago. Even into the 80s/90s

That’s hardly surprising considering the IRA terrorism at the time
If you are a migrant, terrorism originating in your community is not going to endear you to the rest of the population.