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Life after coronavirus and new priorities for Government spending

(12 Posts)
Ramblingrose22 Sun 12-Jul-20 14:40:06

According to new research to be published this week -

"Britons are prepared to pay higher taxes to turn the country into a kinder, more equal and supportive place to live after the coronavirus pandemic is over".

We know there'll be higher taxes because of the money borrowed to protect workers, businesses and the economy.

The purpose of my question is not about the higher taxes arising from this - it is about whether people would be willing in principle to pay more tax after the end of the pandemic to bring about a more equal and supportive society.

SueDonim Sun 12-Jul-20 14:42:36

We would, if it resulted in better services, especially for those who are more vulnerable. Not if it was for vanity projects, though.

MaizieD Sun 12-Jul-20 18:36:06

^ because of the money borrowed^

Can I just ask, where do you think this money has been 'borrowed' from?

Ramblingrose22 Sun 12-Jul-20 20:18:50

MaizieD - I used the word "borrowed" loosely as I wasn't sure.

Is it money printed by the Bank of England?

I didn't watch coverage of the Summer Statement which may have explained this.

I am happy to be corrected. Where has the money used to help furloughed workers, some unemployed people and for other coronavirus measures come from, please?

PamelaJ1 Sun 12-Jul-20 20:27:20

I had heard a rumour that Philip Hammond had built up a ‘war chest’ to help us through brexit. Have we spent it all?

Apparently we all say that we would pay more taxes but then vote for the party that promises to bring tax down.
Please don’t ask me where I read either bits of information. It must have been the BBC news or the Times.

I have the feeling that we are heading towards hard times.

MaizieD Sun 12-Jul-20 21:47:54

Basically, Ramblingrose22, it is 'printed' by the BoE (though it's just done by keying in amounts on a computer, not by actually printing cash). Some of the money is 'borrowed, in that it is sold as government bonds, which are for a fixed period at a guaranteed rate of interest. People purchase bonds as a safe way to save, they get the interest and are guaranteed to get the principal back at full term. Lots of our private pension moneys and private investments are held as government bonds (aka gilts). So this is useful for savers and investors. Money has been 'raised' by these means for hundreds of years.

The rest is owed to no-one. The BoE pays the governments bills when told to but as the BoE is 'owned' by the government (us) it doesn't have to be paid back. .

What we don't do is 'borrow' from other countries or from billionaires.

Now, most economists absolutely know this. So all that stuff about 'maxing out the credit card', or 'running out of money' is nonsense. We (i.e the government) can issue as much as it wants so long as it doesn't lead to inflation.

We can do this because our currency isn't backed by gold and silver reserves, it hasn't been since the early 1970s. (And neither is any other country's money.)

The idea that a national economy is like a household economy, that it has a finite amount of money, is absolutely false. If you were to google 'government budgets are like household budgets ' you'll get pages of results of economists saying that it is not so. It's a bit mind boggling, because that's what we've always been told and it's hard to let go of it.

And taxation doesn't fund spending, taxation ensures that there isn't surplus money in the economy (which would cause inflation) and is a way of redistributing the nation's 'wealth.

So the money that the government is at present putting into the economy is helping the economy to survive, keeping thousands and thousands of businesses afloat, and by paying wages also doing the same as we spend it. All that raising taxes will do, if it's done before the economy recovers, is to limit the money that can be spent into the economy and slow down our recovery. Those years of austerity post 2010 were completely unnecessary and actually hampered recovery from the global financial crash on 2008.

But using the 'household economy' myth has been useful to tory governments because they don't believe in state spending. They want a minimal 'state' with lots of privatised 'public' services. It's ideology driven, not practical.

This is a good site to look at if you're interested and want to find out more:

gimms.org.uk/2019/02/10/uk-government-spending-taxation-bank-lending/

But there's loads on the web! Look for MMT

FarNorth Sun 12-Jul-20 21:58:30

Mind-boggling MaizieD, thank you.

MaizieD Sun 12-Jul-20 23:17:48

The most interesting aspect of MMT (which is what I've tried to describe) is that it's not a 'leftie' thing. It's an explanation of how government money 'works'; it can be used by the left or the right, it's completely apolitical. The 'politics' comes from how it's applied.

Oopsminty Sun 12-Jul-20 23:30:33

Hi MaizieD, not sure that many people believe we've borrowed money from other countries or billionaires

Quantitative Easing has been used before and no doubt will be used again

Like you say, a consequence can be a rise in inflation or problems with pensions

This link explains it

www.bbc.co.uk/news/business-15198789

MaizieD Sun 12-Jul-20 23:50:23

^ not sure that many people believe we've borrowed money from other countries or billionaires^

As most people think we 'borrow' from someone/something that needs to be paid back I just thought I'd eliminate possibilities!

Of course, QE doesn't have to be done by the BoE buying back bonds. It could just issue the money.. cut out that middle operation. It would have the same effect on the economy and no effect on savings via bond purchases.

It would be better really. Inflating the bond prices just means that holders who sell them on make an unearned killing on them.

PECS Mon 13-Jul-20 08:53:28

Well wherever the money is coming from it seems the Gov. have a spare £705m to build a huge lorry customs park in Kent so we can be free of European bureaucracy & create our own! grin

MaizieD Mon 13-Jul-20 09:01:08

They've also spaffed away a few £billion in uncompeted for contracts for their friends and relations (see the other thread).

It's utterly appalling that Sunak is threatening tax increases to 'pay for' this corruption fest. It's double-duping the population 😠