Here’s why taxes are high – and politicians are wrong to say we don’t need more
HMRC: if our tax inspectors concentrate on rich people instead of the poor, we’ll ALL be better-off.
This is brilliant stuff from Gary Stevenson that debunks the dogma from politicians – in both the Conservative and Labour parties – that taxes need to be slashed:
Is that clear?
In brief: neoliberal governments since 1979 have sold off all the property they own, meaning that – in order to provide services – they have to rent property from the rich people to whom they sold it all.
This is, of course, a ridiculous proposition because renting property from rich people is much more expensive than owning it oneself. We can see this from the sale of council housing; now councils don’t have any low-cost, low-rent houses, more and more people are becoming homeless because they can’t pay the sky-high rents demanded by private landlords, or the sky-high mortgages demanded by lenders.
So ordinary working people are now having to pay enormous taxes in order to allow our governments to pay for these services at exorbitant prices, because they’ve given all the means of providing these services to the rich.
And when we hear talk of more taxes, we logically conclude that it refers to us paying them – after all, wealth means dodging taxes; the rich pay very little in comparison to the rest of us.
Gary is saying we need to make sure those very wealthy people have to pay more taxes – at a level that will force them to sell the assets they have bought from the government and hoarded away from the rest of us.
That’s a pretty tall order!
But persuading them – nudging them, if you like (remember the nudge unit, long-term readers?) – to sell is the only way to get taxes down for all of us.
If our governments own their own assets again, then they will be able to provide the services we need at a much lower cost and our taxes can fall again, for a realistic, justifiable reason.
That way, we will all enjoy more prosperity.
That is why the likes of Jeremy Hunt and Rachel Reeves are absolutely wrong to say they want to cut taxes. They mean they want to cut taxes for poor people, and the only way to do that is to cut public services.
And you’ll still be paying more, because the government will be using privately-owned assets to provide its services.
The problem is, they don’t want to increase taxes for rich people, partly because they are rich people, and partly because rich people give them donations to keep them from forcing those rich people to give money to the Treasury.
That’s why they lie to us that higher taxes are a bad idea.
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Here’s a copy of a letter I sent to the Treasury outling how spending, taxation, & so-called National Debt really works:
HM Treasury
The Correspondence and Enquiry Unit
1 Horse Guards Road
Westminster
London
SW1A 2HQ
United Kingdom
01/03/2024
Views on government spending & taxation issues enshrine a completely inaccurate description about how it all really works. There seems to be no cognizance of money creation (its introduction INTO circulation via government (gov) spending & licensed lending via banks) & destruction (subsequent removal over time FROM circulation via national taxation, gov bond sales & private bank loan repayment).
Politicians, OBR, & most of the media perpetuate the completely wrong idea that money for public spending & investment can only be sourced from a limited pot of money based on taxation, always in short supply + has to be borrowed + the absurd claim of “we have no money left”. Nothing could be further from the truth.
And therein lies the root cause of decades of under-investment in public infrastructure & services + “Austerity” policy that clearly does not work & definitively CANNOT work. It is reflected in the parliamentary mantras of “where’s the money to come from” + “you are the party of tax & spend” etc. It leads to the ludicrous narrative of National Debt & the asinine concept of “Taxpayers’ Money”. It has also trashed our economy, compounded by the demolition wrecking ball of Brexit.
Here are some FACTS NOT OPINIONS which your research team can readily check & verify.
Points are enumerated for ease of reference:
1 The Audit & Exchequer Departments Act (AEDA) became Statute Law in 1866.
2 Hitherto informal dealings were now formalised in law, compelling the Bank of England (BoE) to provide government (gov) with whatever amounts for spending were ordered & whenever.
BoE was not concerned (AEDA was actually BoE’s idea, resulting from abject panic over Abraham Lincoln’s introduction in 1862 of the Greenback Dollar i.e. gov printed money NOT “borrowed” from private banks) as there was no physical transfer of real money – just a paper 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’s Consolidated Fund, with the gov “liability” reduced 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 are inevitable, highly pertinent & apposite: 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 thus wrong & palpably absurd.
9 The primary purpose (& there are others) of taxation? To remove money from circulation – to counter potential inflationary pressures.
10 Stable developed currency-issuing countries thus CANNOT EVER RUN OUT OF MONEY – it is NOT a fixed/limited resource but a continuous cyclical FLOW of transactions 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!
11 The so-&-quite-erroneously-called National Debt was for example cited 3/4 months ago as £2.3 Trillion (Tr).
Wrong! Gov redeemed over the last 10 years £900 Billion (B) of it via Quantitative Easing (QE) but has not deducted it from the £2.3 Tr. Gov now owns its own debt – nonsense!
12 HMTreasury’s Asset Finance Purchase Facility (AFPF) was credited with that £900 B by BoE – simply via computer keyboard data entry. Note again that there was no physical transfer of real money.
13 The real figure left? £1.4 Tr. £400 B of that is owned by foreign governments as a cost-saving facility for international trade/transactions with UK & each other in Sterling – alternatives are too costly, complex, & slow.
14 Of the remaining £1 Tr, £800 B is owned mostly by pension & insurance funds with an imperative need to keep circa 65% of funds under management in a totally safe environment = gov bonds. Continued reliability of private/occupational pension or insurance funds utterly depends on this useful & absolute necessity.
Without it risky speculation takes its place. Remember Maxwell!
15 The £2 B left in ISAs + previous schemes + Premium Bonds are 100% safe savings of general public savers & investors.
16 Why inconvenience all of these bondholders/savers who did not want to sell &/or to force them into risky speculation? Why do we take part in this ludicrous false narrative of National Debt? Which part of it do you want to repay & for heavens sake why?
17 Moving on: the so-called National Debt (ND) figure is inherently & demonstrably wrong & the flawed rationale behind reducing it absurd – already shown earlier. Apart from the £400 billion of foreign country UK bondholding, a facility which they absolutely need, the rest belongs to public depositors. A pension fund is, for example, just a management company looking after our money & interests. The principal safe way of doing this is to save with the government by purchasing its bonds. This means very simply that it is a banking arrangement – 100% safe as the government is the creator & issuer of the currency. Those deposits belong to the government until redemption is requested which historically was virtually never or until government decides that it wants to do QE & neither is of any consequence since it uses those powers of money creation to do it. The idea therefore that gov needs to “borrow” some of this money & pay interest on that “borrowing” is nothing short of ludicrous. Given that BoE & gov are in essence one & the same, this “debt” or “borrowing” & “repayment with interest”, is not simply inconsistent but nonsensical – you cannot be a debtor & creditor simultaneously relative to a given tranche of money & having “borrowed” the money in the first place by attracting the deposit (i.e. the gov bond sale) with the concomitant liabilty to repay at interest, there is literally no sense in “borrowing” it a second time via BoE which is owned by government!
18 ND arises via sale of gov debt instruments (GDI) aka bonds/gilts etc & the USE of some of it to offset the “structural deficit” (SD) = the difference between the spend & subsequent over time tax collection amounts.
19 NB however that bonds are/were seldom if ever redeemed (until QE). If bondholders sought to release part or all of the value of their bonds, it invariably would be via “open market” sale – a transfer of ownership with no gov involvement! Even on term-expiry most investors tended to term-renewal. Very rare actual redemption by gov was done via money creation – also true of interest due.
20 The partial use of bond-sale receipts for SD offset treated as being “borrowed” & “untenable debt” that must be paid down is complete nonsense – little more than habituation & a legacy of BoE’s former private status.
21 Moving on again to QE – perhaps even more absurd. BoE & Gov had their reasons for it – just not good ones with ineffectual counter-productive results (I concede that this bit is an opinion) but that in any event is another separate discussion.
22 The £ 900 B QE money & bond interest due was simply created electronically, credited to the AFPF & relayed to Central Bank Reserve Accounts (CBRAs) created & held by BoE for use by private commercial banks – who were then instructed to increase the accounts of bondholders that formerly owned these bonds No physical money was transferred, just electronic data only
23 Finally, I will discuss the £ 400 B cost of the pandemic Where did it come from? Clearly not from taxation (nonsensical anyway) which very obviously decreased anyway, nor from bond sales in the midst of QE + ND did not increase by that amount, during that pandemic period & as explained there is no pool of money held at BoE ready to be given to gov.
24 That £ 400 B is an example of money creation at work upon command/instruction from HMTreasury – it is a real & factual phenomenon. Here’s confirmation from BoE….
“The money we used to buy bonds when we were doing quantitative easing (to pay £445 billion for the 2009 financial crisis and [initial] £300 billion for COVID) did not come from government taxation or borrowing. Instead, like other central banks, we can create the money digitally in the form of ‘central bank reserves’. We use these reserves to buy bonds” (Bank of England, 13 Jan 2023)
25 May I suggest that your researchers/staff should become acquainted with the basics of MMT, the work of Professor Richard Murphy, co-founder of the “Green New Deal”, author of “The Joy of Tax” & “The Courageous State (all of compelling & relevant content) & take a look at his “Funding the Future” site & blog? He is far from unique in this economics field but his work is a very good place to start. Here are just 3 examples of his videos (< 10 mins each) which you can easily find on U-tube.
How Governments Create Money + There Is No Such Thing As Taxpayers' Money + What Part Of The National Debt Would You Want To Repay?
You should also consider direct contact with Prof Richard Murphy – his details can be found on the "Funding the Future" website/blog.
From JM Keynes: "Anything we can actually do, we can afford."
From JK Galbraith: "The study of money, above all other fields in economics, is one in which complexity is used to disguise truth or to evade truth, not to reveal it."
Please note that I am not an economist & have no background in that subject. I have found out about all of this; why can't you? I believe that the outline above is accurate. It is time for change & to put an end to the Public Spending/Taxation Myths & the Ludicrous Narrative of National Debt that has our politicians in servitude to habituation of entrenched & outmoded practices.
Thanks for this very detailed contribution — there’s a lot here to unpack, and clearly a great deal of thought and research has gone into it.
While my article focused more on how asset stripping and tax policy have tilted power toward the wealthy — especially through mechanisms like privatisation — your argument brings in another vital layer: how we think about public spending in the first place.
You’re right to highlight that governments with monetary sovereignty (like the UK) are not financially constrained in the same way as households, and the narrative that public spending must be “paid for” by immediate taxation is often more ideological than factual. The idea that governments “run out of money” is a political framing, not an economic inevitability.
That said, where my piece aimed to target the distribution of public wealth and the way tax policy entrenches inequality, you’re rightly pointing out that the debate itself often takes place inside a flawed paradigm — one that masks the reality of money creation and spending.
Appreciate the references too — Murphy’s work and MMT perspectives do deserve more attention in mainstream discourse. It would be refreshing if more media outlets and politicians engaged with this level of economic literacy.
Thanks again for taking the time to share it.