Back To The Future, Indeed

The directors and senior executives of United Utilities should be imprisoned for five years for what they had done to Windermere. That dumping should be known to future generations as one of the last acts of the lunatically privatised water companies, before the emergency renationalisation of Thames Water for nothing, since no one on the open market would have paid a penny for the shares, had set off the chain of events that had finally restored both sanity and sanitation.

If, as indubitably applies to the water companies, something would have to be nationalised rather than ever be allowed to go bust, then it does not belong in the private sector. Most of the world accepts that axiomatically. England is one of only two countries with privatised water. At the point of privatisation, the water companies were debt free, as befitted the monopoly suppliers of something that everyone had to have, and the raw material of which fell out of the sky for free. The money that those companies paid out in dividends would easily cover any infrastructure costs. Yet leakage is out of control, and raw sewage is being pumped into our rivers, our lakes and our seas. In 2022, Thames Water, typically of the sector, declared a billion pound profit in order to pay dividends, despite being £12 billion in debt.

So we are all expected to bail it out, at whatever rate happened to be demanded by the shareholders, themselves largely foreign states as such, which are allowed to own our vital infrastructure. They should be told to forget it. Those shares are worth what anyone else would now pay for them. How much is that? More broadly, since dividends are supposed to reward investment, then they should be limited by the Statute Law to the Bank Rate plus risk on the capital provided by the original share issue, with customers awarded shares for all capital converted from their payments.

Yet even if we could not get away with renationalisation without even further compensation, there is plenty of money for that or anything else. What is lacking is the political will. The exemption of primary residences from capital gains tax will one day look as bizarre as mortgage interest tax relief, which was also sacrosanct once. As will the taxation of wealth at a lower rate than earnings. Margaret Thatcher and Nigel Lawson corrected that in 1988. But in 1998, Tony Blair and Gordon Brown put the clock back to the Chancellor of the Exchequer who had gone on, as First Lord of the Treasury, to introduce monetarism to Britain and vice versa.

That was very much their style. The fortieth anniversary of Back to the Future is an opportunity to remind ourselves that Thatcher’s absolute ban on all government work for Andersen in view of its role in the DeLorean fraud lasted until the General Election of 1997, when the position of Secretary of State for Trade and Industry was given to Patricia Hewitt. Hewitt had secured employment from Neil Kinnock by writing him a gushing letter of support during his Leadership campaign, exactly the same as the one that she had sent simultaneously to Roy Hattersley. She went on to help found the Institute for Public Policy Research, and then, soon after Blair became Leader, to become Head of Research at Andersen Consulting, a position for which she had no qualification beyond her closeness to the next Prime Minister.

In 1997, Hewitt entered Parliament, Blair entered Downing Street, and the Labour commitment to regulate such companies was dropped. Andersen paid just over £21 million of the £200 million that Thatcher and John Major had demanded, barely covering the Government’s legal costs. It went on to write, among other things, a report claiming that the Private Finance Initiative was good value for money. That was the only report on the subject that the Blair Government ever cited, since it was the only one to say that ridiculous thing. Hewitt and Blair tried to give auditors limited liability. It took the Conservative Opposition and the Bush Administration to see them off. On this as on tax equity, Thatcher was a far better social democrat than Hewitt or Blair.

And what of Keir Starmer? In 1980, Thatcher signed the Venice Declaration of nine European countries against Israeli settlements on the West Bank. In 1981, she denounced the Israeli bombing of Iraq’s Osirak nuclear reactor, calling it illegal. In 1982, she responded to the Israeli invasion of Lebanon by imposing an arms embargo on Israel that remained in force until 1994. When Menachem Begin wrote to ask her to reconsider, then she did not even reply. She had not wanted to meet that unrepentant anti-British terrorist when he had visited London, and having done so, then she said that she wished that she had stuck to her guns. Speaking of guns, he still hated Britain enough to arm Argentina during the Falklands War. Benjamin Netanyahu may be his father’s son, and the Leader of the party that Begin founded, but he would have no reason to do that to Britain under Starmer.

Yet Thatcher must never have seen a banknote, since she thought that the State had no money of its own. In reality, the issuing of currency is an act of the State, which is literally the creator of all money. As a sovereign state with its own free-floating, fiat currency, the United Kingdom has as much of that currency as it chooses to issue to itself, with readily available fiscal and monetary means of controlling any inflationary effect, means that therefore need to be under democratic political control. The responsibility of the Government is to ensure the supply of goods and services to be purchased with that currency.

It is impossible for the currency-issuing State to run out of money. Money “lent” to the Treasury by the Bank of England is money “lent” to the State by the State; such “debt” will never be called in, much less will bailiffs be sent round. Call this “the Magic Money Tree” if you will. There is no comparison between running the economy and managing a household budget, or even a business. There is no “national credit card” to “max out”. “Fiscal headroom” is only the gap between the Government’s tax and spending plans and what would be allowed under the fiscal rules that it sets for itself and changes frequently.

That is what both fiscal policy and monetary policy are for: to give the currency its value by controlling inflation to a politically chosen extent while discouraging certain politically chosen forms of behaviour, and while encouraging others, including economic equality, which is fundamental to social cohesion and thus to patriotism. If there were “no such thing as society”, and Thatcher really did say that, then there could be no such thing as the society that was the family, or the society that was the nation. But there is no debt. It is an accounting trick. The Treasury, which is the State, has issued bonds to the Bank of England, which is the State. Even if those bonds were held by anyone else, then the State could simply issue itself with enough of its own free-floating, fiat currency to redeem them. Say it again that there is no debt. There is no debt. There is no debt.

Taxation is not where the State’s money comes from. Nothing is “unaffordable”, every recession is discretionary on the part of the Government, and there is no such thing as “taxpayers’ money”. Within and under that understanding, a tax of one to two per cent on assets above £10 million could abolish the two-child benefit cap 17 times over, while merely taxing each of Britain’s 173 billionaires down to one billion pounds per head would raise £1.1 trillion, an entire year’s tax take. The taxation of unearned income at the same rate as earnings could easily abolish the two-child benefit cap as advocated by Nigel Farage and Suella Braverman, restore the £20 per week uplift to the Universal Credit two in five claimants of which were in work, and extend that uplift to disability benefits, all of which would inject money directly into the consumer economy. And so on.

In asserting that “the rider is as big as the horse”, Kemi Badenoch had already demonstrated her perfect ignorance of the fact that all state benefits were taxable income, that the state pension was a benefit, that two in five Universal Credit claimants were in work, that Personal Independence Payment was an in-work benefit, and that if half of adults were not paying income tax, then, apart from a few very wealthy tax avoiders or evaders, half of adults had gross annual incomes of less than £12,570. Now she rejoices to inform us that, “Hardworking taxpayers are funding subsidised cars for constipation and tennis elbow”, in which case she should try to get one, and that “If you’re on benefits, you should make the same responsible choices about having children as everyone else. We must keep the two-child benefit cap”, as if no one on benefits were in work, nor did parents ever lose their jobs and have to sign on. She cannot believe a word of her criticism of Net Zero, since she is a thoroughgoing Malthusian.

There is no case whatever for cutting the benefits of the sick and disabled as if that would cure them or find them jobs, for retaining the two-child benefit cap, for withdrawing the Winter Fuel Payment from anyone, for increasing workers’ bus fares by 50 per cent, for failing to freeze Council Tax, for threatening to abolish the single person discount, for increasing employers’ National Insurance contributions so as to destroy charities and small businesses while making it impossible for big businesses to take on staff or to increase wages, for forcing working farmers of many decades’ standing who formally inherited their parents’ farms to sell them to giant American agribusinesses, or for any other form of austerity. There is an unanswerable economic and moral case for the full compensation of, among others, the victims of Orgreave, Grenfell Tower, the Windrush scandal, the Post Office scandal, and the contaminated blood scandal, as well as the WASPI women and those, such as Andrew Malkinson, who had been wrongfully imprisoned. All while renationalising the railways, the Royal Mail, and the water companies.