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Oh dear. People have got a bee in their bonnet about the economy – and as usual, they’re blaming the wrong person (me).

After publishing my article explaining why Rachel Reeves is facing a £41 billion shortfall in the UK’s public finances — I received a wave of responses from readers, especially on X/Twitter. Take a look:

“Explain how a government with a fiat currency can run out of money that it can create at will.”

“At no time do taxes fund government spending, all government spending is newly created money. https://bankofengland.co.uk/-/media/boe/files/quarterly-bulletin/2014/quarterly-bulletin-2014-q1.pdf This is your link to prove what I say is correct. Selling stuff to wealthy individuals was never for government spending, it was to stiff the UK public.”

“The UK creates money of of thin air. A government with its own currency issues two types of points on a spreadsheet: cash and bonds, and swaps these on demand (“repayment”). It sets interest on its own debt, via the central bank. So much for a debt burden.”

This one’s quite lengthy:

“I’ll not go down Mike’s throat about this because it’s a common misconception created by systematic miseducation. The UK is not short of money. It sold off and is still selling off assets, but assets are the source of wealth, not the source of money.

“All money is spent into existence as currency by governments. The problem is that private institutions have accumulated so much of it they can threaten to sell it off on the global money markets and reduce its value. Thus they can bully import-dependent western states into selling their assets and opening the door to the privatisation of every economic activity.

“With high energy and transport costs and relatively high labour costs, we are not a prime target for private investment. Therefore massive public investment is a must. If we do not crush the ‘disciplinary power’ of the money markets with international agreements on capital controls and BRICS-style mutual aid between trading partners – friendly states can buy currencies under threat, negating the bond and FX vigilantes – the UK is facing a future of permanent decline in many regions.

“It’s that serious. We desperately need a left-wing party with the knowledge and bravery to take on the money markets and form alliances with other nations. Otherwise, medium-term, we are sunk.”

This one is more brief:

“The UK can’t run out of pounds, the government spends them into existence. This article is a crock of shite.”

All of them are right — technically. But my article does not contradict what they’re saying.

You see, Rachel Reeves isn’t operating in technical reality. She’s operating in political reality.

And that’s a reality where rules are made not by economic necessity — but by ideological convenience. And – sadly – because our politicians dictate what actually happens in these matters, it is political reality that carries all the weight.

Empirical reality: what’s actually true about UK government money

Let’s start with the facts — not the media spin.

The UK issues its own currency: the pound (also known as Sterling).

It doesn’t borrow in foreign currency, and it can never go bankrupt in pounds.

The Bank of England creates money when the government spends.

Taxes are then used to remove money from the economy — mainly to:

• create demand for the currency,

• manage inflation by removing excess money,

• and enforce social contracts (redistribution, fairness).

The Bank of England admitted this in its own quarterly bulletin (2014 Q1). Here’s a direct quote:

“Rather than banks receiving deposits when households save and then lending them out, bank lending creates deposits.”

In other words: money is created when it’s spent. Not before.

So yes — the UK government can always “afford” to buy what’s available for sale in pounds. The real constraint isn’t money. It’s:

• inflation (spending too much into an economy already at full capacity),

• and real resources (labour, materials, skills, energy).

Political Reality – where Reeves chooses to live

Despite all of this, Rachel Reeves has chosen to adopt a framework that pretends none of it is true.

When she became Chancellor, Reeves imposed two arbitrary fiscal rules:

1. The government must fund all day-to-day spending from tax revenues. Borrowing is only allowed for investment.

2. Debt must fall as a percentage of GDP by the end of a rolling five-year period.

These aren’t laws of economics. They’re voluntary restrictions — a kind of self-inflicted austerity, designed to look “responsible” to the same markets that crashed the economy in the first place, back in 2008.

And this is the crux of the issue: Reeves behaves as though the UK government is a household. But governments are not households. They are the source of the currency. They don’t need to “earn” money before they spend it. They spend money into existence.

Why this matters now

Because Reeves insists on these constraints, she is now:

• ruling out meaningful tax rises on the wealthy (to appease wealthy voters),

• refusing to borrow more (to appease the markets),

• and unable to fund public investment at the scale needed.

So when she says there’s “no money,” she doesn’t mean there’s no money in a literal sense.

She means there’s no money within the arbitrary box in which she has imprisoned herself (and the rest of us).

Meanwhile, the NHS is crumbling.

Local councils are bankrupt.

Schools are mould-ridden.

Railways are broken.

Living standards are down 10 per cent for the poorest, since Covid alone.

And we’re meant to believe the only solution is more tax on working people, or more cuts.

It’s fiction.

Why were assets sold off?

Some readers rightly pointed out that the UK didn’t sell off its public assets because it needed money.

No — it sold them off to dismantle public control and empower private profit.

Water, energy, transport, housing, broadband, land — all were transferred into the hands of wealthy individuals, hedge funds, and corporations, often for a fraction of their long-term value.

Privatisation wasn’t smart economics. It was national vandalism — a deliberate strategy to:

• shrink the state,

• weaken democracy,

• and ensure that wealth flowed upward.

The result is a country that now has to rent back its own infrastructure — while pretending it can’t afford to invest.

What should Labour do instead?

Reeves does not have to play this game. She is choosing to.

A bolder, better Labour government would:

• Abandon these self-defeating fiscal rules

• Invest directly in green energy, housing, transport, and care

• Recognise that spending precedes taxation

• Accept that inflation is the only real limit — and use targeted taxes, regulation, and public ownership to control it

And yes — tax wealth. More than that, as I’ve written before: tax the profits of wealth.

It is not the nominal value of assets that matters most.

It is the income they generate — the rent, the dividends, the capital gains.

That’s where extraction happens.

That’s what needs to be taxed.

We’re not broke. We’re being held back.

The UK is not out of money.

It is out of imagination — and political will.

What we’re watching is not an economic crisis.

It’s a performance of restraint — one that serves the status quo and punishes the public.

Until we challenge the political reality Reeves operates in — until we expose it for the ideological fiction it is — nothing will change.

We will continue to be told we can’t afford what we need.

And the real tragedy is that the lie will be told with a straight face — by a government that could spend what it wanted, if it chose to.

My article handled this subject the way it did because I have to contend with the way the UK is actually being run – not the way some economic theorists might wish it to be.

For their preferred alternative to apply, voters would need to elect a government whose members accept empirical reality, rather than adopting their own arbitrary restrictions.

I look forward to learning their preferred choice of candidate.

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