As the GIMMS team was busy preparing for its social event in Abergavenny this weekend we didn’t have time to write our usual MMT Lens. However, we are delighted to reprint a blog from the economist Ellis Winningham written in 2017 on the subject of costed budgets. Ellis explains why costing is nonsense and a fraud in a country like the UK’s which is monetarily sovereign.
Were Ellis an advisor to Jeremy Corbyn he would ask that he included this short passage in his speeches:
“Now then, the Tories wish for me to discuss costing. Fine. I will oblige them.
I should like for us all to ask what are the costs of seven long years of Tory-led austerity? What are the costs of long-term unemployment; of low-wage underemployment; of the rise in illness both mental and physical; of NHS privatisation efforts; of the number of deaths resulting from benefits sanctions; of the damage to our educational system; of the rise in crime rates and harm to our communities due to police reduction; of our crumbling infrastructure; of our nation’s real resources left deliberately idle?
If the Tories wish to discuss costing, then let us start there, shall we?”
Originally published here on June 1, 2017 .
This Tory-led ‘costing’ theme currently running rampant throughout the UK is pure political nonsense, the lot of it. Costing has absolutely nothing to do with anything when it comes to the UK.
The UK Government is monetarily sovereign. It has the exclusive, monopoly authority to issue British pounds. Pounds come from nowhere else. When the UK Government spends, it is literally spending pounds into existence to ‘pay for’ programmes. So, the question of ‘enough money’ is entirely irrelevant to the UK. When it comes to government spending, it is always a question of real resources: Enough workers, enough steel, enough food, enough hospitals, enough medicines, enough cars, enough of everything but ‘money’. Pounds are merely a voucher that the government manufactures to purchase goods and services created by the private sector.
Because the government taxes and declares a punishment for not paying the tax, people are then forced to obtain pounds. They do that by selling their goods and services to the UK Government and the government then manufactures pounds to pay for them. By being the sole, exclusive issuer of the Pound Sterling, the UK Government always ensures that it can purchase whatever it needs to function as government in perpetuity without fear of going ‘broke’. This is the entire point of the British pound – to provision the UK Government with goods and services.
Try to understand – a national government is set up with the intention of being durable, lasting into the ages. It has to be durable, otherwise the nation will no longer exist. Therefore, the responsibility falls upon the UK Government to find a way to obtain what it needs to survive throughout the ages. There are two ways the government can do this:
- It can simply walk into the private sector and take what it needs by force, or
- It can operate a monetary economy. It lays a tax payable in the government’s own currency (The Pound Sterling) and declares a harsh punishment for not doing so, which then causes the private sector to sell the government goods, services and labour in order to obtain the pounds necessary to pay the tax. Two things now happen:
- As long as the UK Government can enforce its tax collections, the private sector will demand pounds. Because the tax drives the demand for pounds, the UK Government can now purchase anything that it needs to function as government in perpetuity as long as it is for sale in Pounds Sterling.
- Since the private sector demands pounds to pay the tax and accepts the government’s pounds as payment for goods and services, wide-spread acceptance of British pounds is achieved and so the production of and the buying and selling of goods and services will take place in the private sector priced in Pounds Sterling.
In short, British pounds are manufactured by the UK Government when it spends to access the nation’s real resources, and then the pounds are used by individuals in the private sector to access those real resources for their own use. This is called a modern monetary economy and the UK Government alone commands both the pound and the economy. So, are there enough real resources for the UK Government to spend pounds into existence for the NHS, schools, benefits and other public purpose initiatives? The answer is yes. There always has been enough.
Since there are enough real resources, then should the government not spend enough pounds into existence, some of those resources will lay idle. Examples of idle resources are unemployment and vacant factories.
I wish to be very clear here: This ‘costing’ talk is utter nonsense, It is a sham; a fraud designed by the Tories to redirect discussion away from the need for a return to fully-funded public programmes such as the NHS, a return to full employment, and away from the damage done by seven years of Tory austerity.
Lastly, the Global Financial Crisis of 2008 had absolutely nothing to do with Labour’s spending. It is clear that the GFC was a global phenomenon that began in the US. Blaming Labour’s spending for the Global Financial Crisis was an outright fraud perpetrated by the Tories – full stop. The resulting austerity was opportunity-driven, conducted by the Tories with malice aforethought in order to privatise everything imaginable for the benefit of their wealthy friends.
This ‘costing’ nonsense is yet another Tory fraud; one in which the Murdoch-driven media is willfully complicit mind you. The intent is to force Labour to play on the defensive and to keep the voter confused and in the dark concerning the real issues facing the British economy, so that the Conservatives can finish the job they were paid to do by their wealthy friends many years ago: The butchery of Britain.
So, were I an adviser to Jeremy Corbyn, I would ask that he include this brief passage in his speeches:
“Now then, the Tories wish for me to discuss costing. Fine. I will oblige them.
I should like for us all to ask what are the costs of seven long years of Tory-led austerity? What are the costs of long-term unemployment; of low-wage underemployment; of the rise in illness both mental and physical; of NHS privatisation efforts; of the number of deaths resulting from benefits sanctions; of the damage to our educational system; of the rise in crime rates and harm to our communities due to police reduction; of our crumbling infrastructure; of our nation’s real resources left deliberately idle?
If the Tories wish to discuss costing, then let us start there, shall we?”