Stop Digging?

The annual tax take is more than one trillion pounds. £20 billion is not a "black hole". This is just an excuse not to do things, although quite possibly while putting up taxes at the same time. And which taxes? 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. But neither of those is going to happen. Keir Starmer thinks that if anything could be done about child poverty, then it would have been done by now. He has said that.

A sovereign state with its own free-floating, fiat currency 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 require 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. 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. There is no debt. There is no debt. There is no debt.

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". Terms such as "taxpayers' money" are extremely and intentionally misleading. "Fiscal headroom" is nothing other than 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.

Giving up democratic political control of monetary policy has been a disaster. Without a manifesto commitment, Labour farmed out monetary policy. The Liberal Democrats forced the creation of the Office for Budget Responsibility. The Conservatives created the Economic Advisory Council out of thin air. Yet on none of those occasions have the salaries of the First Lord of the Treasury, of all other Treasury Ministers, and of all senior Treasury civil servants, been halved, as in each of those cases they should have been. It is difficult to see why those people should be paid anything at all once the Budget Responsibility Bill had become an Act and given the OBR the last word on everything. The same OBR, that is, that Rachel Reeves would have us believe had kept her in the dark about the "black hole".