There is NO ‘national debt’. Politicians like Keir Starmer are SCAREMONGERING
Keir Starmer and money: he doesn’t understand how it works but he wants us to put him in charge of the UK’s economy. How insane would we have to be to do that? Oh, and Rishi Sunak doesn’t know how it works either.
Let’s try to put this ridiculous nonsense about us having to pay back a mythical “national debt” to rest, if we can.
This Writer has been trying to work out a better way to describe it for a long time – practically since it became a political football during the run-up to the 2010 election, in fact – and I have learned a lot about the way the UK’s money system works in that time.
Here’s how it works:
All UK money is created as demanded by the government. It asks the Bank of England, which it owns, to create the sums it needs in order to fund its political projects and policies and puts that money into the economy.
(And in order to prevent inflation, as more and more money is pumped into the system – and also to validate Sterling (the Pound) as a currency – the government takes money back out of the system in taxes.)
Without the money the government creates, the economy would not work – unless we all went back to bartering one set of goods for another, but this is not as good a system as using a currency.
So we could say that money is the lifeblood of the economy – it invigorates the system and keeps it alive.
Taking that comparison further: we don’t say we owe our heart a debt of blood because it pumps eight pints of it around our bodies, without which we couldn’t survive, do we?
And if we give blood, for medical purposes, we don’t expect to have to pay our heart back in some extraordinary way; our bodies just make more of it.
So it seems strange to consider all the money the Bank is told to create for the economy as being debt; it is something else, for which I have yet to find a good pithy name.
As such, it seems to This Writer that governments should work out how much they need to have in the economy at any given time, in order to achieve their aims, and remove that from any notion of debt. This would then give them a better idea of how much to tax out of the system at any time. There are other indicators available to show who it should be taxed from.
It seems to me that this (possibly naive) model is endorsed by the economist Richard Murphy in his new – long – ‘X’ thread about why Keir Starmer’s twaddle about the “national credit card” is ridiculous.
Read:
Quite extraordinarily, leading politicians, including Kier Starmer and Rachel Reeves have in the last few days returned to talking about the country maxing out its credit card, just as David Cameron did in 2015. This is utterly absurd. A thread…
— Richard Murphy (@RichardJMurphy) February 10, 2024
Here’s the bit that corroborates what I was thinking:
Some of the savings accounts are literally with a bank, because that is what NS&I, or National Savings & Investments, which is what it used to be called, really is. Around £230 billion of the so-called national debt is made up of deposits with this state-owned bank.
— Richard Murphy (@RichardJMurphy) February 10, 2024
So the national debt is actually the money that makes the economy work. That’s not a debt – it’s an assset!
He continues:
We would never describe deposits with a bank as a threat to its viability and something that they must urgently pay back or limit in amount. So, in that case, why on earth are we saying that about this national savings bank?
— Richard Murphy (@RichardJMurphy) February 10, 2024
The only real difference between bank savings bonds and those issued by the government is that gov’t bonds can be bought and sold during their life because they are traded on stock exchanges. But they’re still savings accounts, just like those from banks and building societies.
— Richard Murphy (@RichardJMurphy) February 10, 2024
That’s only because we know that, like all savings accounts, the person depositing the money can at some time ask for it back. But we don’t say banks are in debt because they also owe the money saved with them back to depositors. So why do we do that in the case of governments?
— Richard Murphy (@RichardJMurphy) February 10, 2024
In other words, the government is saving money with itself, or it owes itself money, whichever way you want to look at it. In either case, who cares?
— Richard Murphy (@RichardJMurphy) February 10, 2024
Having said all that, let’s get back to this maxed-out government credit card story and let me ask a simple question, which is, have you ever heard of anyone who saved in their credit card account? No, me neither.
— Richard Murphy (@RichardJMurphy) February 10, 2024
Now he’s getting into why the “maxed-out credit card” story is daft.
But, let’s for a moment assume that these politicians are right (I know, it’s hard to imagine, but do so, just for a moment). Assuming that they are, who is it that they think issued this credit card?
— Richard Murphy (@RichardJMurphy) February 10, 2024
And do you really think they’d get tough on your credit limit in that case? I really do doubt that as well. In fact, I promise you that they won't.
— Richard Murphy (@RichardJMurphy) February 10, 2024
The truth is that all this is absurd. There is no credit card. There is no credit limit on what our government can borrow. And, in reality, it’s borrowing a lot less than most other equivalent countries in Europe are and they’re generally doing a lot better than us.
— Richard Murphy (@RichardJMurphy) February 10, 2024
That we have a debt problem is untrue. What we actually have are vast numbers of people who want to save thousands of billions of pounds with the government because they know it is the safest place to put their money.
— Richard Murphy (@RichardJMurphy) February 10, 2024
In fact, so good is the government at repaying deposits that most people in the UK would not save with a commercial bank unless they knew that the government was guaranteeing the first £85,000 of deposit that they saved with it.
— Richard Murphy (@RichardJMurphy) February 10, 2024
Let’s also be clear that if the supposed cost of this national debt is currently high, that’s because the Bank of England wholly unnecessarily increased interest rates in a completely inappropriate attempt to control inflation, which those interest rate hikes could never achieve.
— Richard Murphy (@RichardJMurphy) February 10, 2024
To put it another way, almost everything politicians say about the economy is made up of convenient myths that they create that have not a single element of truth within them.
— Richard Murphy (@RichardJMurphy) February 10, 2024
Here comes the punchline: why are Labour and the Tories making such a fuss about a so-called debt that doesn’t actually exist? Read on:
Your guess is as good as mine as to why they do not want us to have the healthcare, social care, education, social housing, justice system, defence, and other things that we all want, but they make up these stories about the national debt to make sure that we cannot have them.
— Richard Murphy (@RichardJMurphy) February 10, 2024
We are instead only constrained by the limits of what we can actually do as a nation. What I know is that as a nation we could have the health service, education, social care, and everything else that we need.
— Richard Murphy (@RichardJMurphy) February 10, 2024
Those myths are being perpetuated by our leading politicians from all the leading parties (the Tories, Labour, the SNP, and LibDems), denying us, as a result, the chance to live in the country we want with the services that we need being supplied to everyone who requires them.
— Richard Murphy (@RichardJMurphy) February 10, 2024
So the real question that Labour and others spreading these falsehoods have to answer is why are they so anxious to be in power when the only thing that they want to do when they get into office is to fail us all? I wish I knew the answer to that.
— Richard Murphy (@RichardJMurphy) February 10, 2024
So there you have it.
There is no national debt.
The money created by the government, through the Bank of England, is what energises the economy (we can see that demonstrated by the fact that there has been practically no growth in the years since David Cameron and George Osborne imposed austerity on us).
Political parties talk about a fictional national debt and a fictional national credit card to make us believe that, as a nation, we cannot afford the public services and assets that we need. This is a lie.
The conclusion?
Political parties that tell this lie do not deserve our vote and there should be no Labour, Conservative, Liberal Democrat or SNP MPs in the House of Commons after the next general election – unless they change their tune radically.
Vox Political needs your help!
If you want to support this site
(but don’t want to give your money to advertisers)
you can make a one-off donation here:
Be among the first to know what’s going on! Here are the ways to manage it:
1) Register with us by clicking on ‘Subscribe’ (in the right margin). You can then receive notifications of every new article that is posted here.
2) Follow VP on Twitter @VoxPolitical
3) Like the Facebook page at https://www.facebook.com/VoxPolitical/
Join the Vox Political Facebook page.
4) You could even make Vox Political your homepage at http://voxpoliticalonline.com
5) Join the uPopulus group at https://upopulus.com/groups/vox-political/
6) Join the MeWe page at https://mewe.com/p-front/voxpolitical
7) Feel free to comment!
And do share with your family and friends – so they don’t miss out!
If you have appreciated this article, don’t forget to share it using the buttons at the bottom of this page. Politics is about everybody – so let’s try to get everybody involved!
Buy Vox Political books so we can continue
fighting for the facts.
Cruel Britannia is available
in either print or eBook format here:
The Livingstone Presumption is available
in either print or eBook format here:
Health Warning: Government! is now available
in either print or eBook format here:
The first collection, Strong Words and Hard Times,
is still available in either print or eBook format here:
Not National Debt but rather National Investment…. Dontcha think?
It’s what the fabulous Spanish series The Money Heist is all about.
You are wrong in asserting that Sunak (& others) don’t not KNOW how national finance REALLY works. Sunak for instance when he was Chancellor ordered £400 billion to cover the costs of the government’s response to the Covid pandemic. Where did he get it from? Taxation? Nonsense & in any event taxation obviously decreased substantially during the pandemic; so-called national debt did not rise by that amount either; & as we all know, there is no “pot or pool” of physical money within BoE ready to be doled out to the grateful hands of government.
That £400 Billion represents money creation at work, & it was ordered by Sunak. Ergo, he KNOWS full well how it works & that makes him a liar.
If it helps I am appending the 1st part of a submission I sent to the BBC (awaiting reply). Please feel free to use any or all of if you wish.
1 The Audit & Exchequer Departments Act (AEDA) became Statute Law in 1866
2 Hitherto informal dealings were now formalised in law, compelling BoE to provide gov with whatever amounts for spending were ordered & whenever
BoE was not concerned (AEDA was actually BoE’s idea) as there was no physical transfer of real money – just a ledger entry that increased the gov account It was then spent into existence (circulation) by gov – a process mirrored today via computer data entry
3 This “money” was thus “loaned” to gov to be partially repaid over time by the subsequent collection of national taxation, remitted back to BoE, who reduced the gov liability accordingly This partial “repayment” was not physically recycled nor is it today
4 More “money” would then be created to order, with taxation again over time repaying some of it in a continuous cycle of creation (spend into circulation) & destruction (remove from circulation) – a process still operating today
5 In 1866 BoE was a private company & we can see with gov in perpetual “debt” to BoE the origins of the enormous power & influence that banking still wields over gov
6 BoE nationalised in 1948 is now essentially part of gov so 3 questions: from whom is this money borrowed, to whom is it repaid, & why?
7 Logically inescapable: gov spending clearly MUST & DOES ALWAYS PRECEDE TAXATION
8 Concepts of Tax & Spend” “Taxpayers’ Money” & “Taxation Funds Spending” are wrong & palpably absurd
The primary purpose of taxation? To remove money from circulation – to counter potential inflationary pressures
Stable developed currency-issuing countries thus CANNOT EVER RUN OUT OF MONEY – it is NOT a fixed/limited resource but a continuous cyclical FLOW through the Economy
NB There is no pot or pool of money in BoE vaults, ready to be doled out to the grateful hands of government!
Hi Alan – thanks for your detailed and passionate response. I can see you’ve spent a great deal of time researching how the UK’s monetary and fiscal systems function, and I appreciate the effort you’ve made to share that with me.
You’re absolutely right that the way money is created – particularly in a sovereign, currency-issuing country like the UK – is wildly misunderstood by both the public and many in politics and the media. The story we’re so often told about “taxpayers’ money” and the “national credit card” is, as both of us have said in different ways, deeply misleading and damaging.
I don’t doubt that Sunak and others understand how the system actually works – as you point out, actions like pandemic-era spending clearly reveal an awareness of monetary sovereignty and money creation. My point, though, is that understanding and telling the public the truth are two very different things. If a politician knowingly misleads the public about the nature of public finance to justify austerity or avoid taxing the wealthy, that’s not ignorance – it’s deception. And that deception needs to be challenged, as you’ve done in your letters and as I aim to do in my writing.
On the technical details you’ve provided – such as the history of the 1866 Audit & Exchequer Departments Act, the cycle of money creation and destruction, and the nature of the so-called “national debt” – there’s a lot in there that aligns with Modern Monetary Theory (MMT) and the work of economists like Richard Murphy, as you’ve noted. While I don’t necessarily subscribe wholesale to any one framework, I think these perspectives are essential in shifting the conversation away from false narratives that keep people poor and public services underfunded.
Ultimately, I think we’re on the same side here: pushing for a more honest, reality-based discussion of how money and power really operate in the UK. I genuinely appreciate your contribution to that effort.