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Half of all the 350 local councils in England could be at risk of going bust next year unless urgent action is now taken by the Government, the Levelling Up Secretary Michael Gove has been warned.

Clive Betts, the Labour chair of the Commons Levelling up, Housing and Communities Committee, has written to the minister in advance of his appearance before the committee next week expressing their concern, following an inquiry which revealed the financial distress currently facing councils across the country.

In his letter to Gove he quotes John Fuller the Vice-chairman of the Local Government's Resources and Economy panel and the Conservative leader of South Norfolk council, warning that: "We are probably at an inflection point, where the number of authorities contemplating issuing 114 [bankruptcy] notices is becoming more general, as opposed to the specific reasons we have seen thus far.

"There is a general understanding that if not this year, next year, about half of the authorities will be in distress. That is a significant number. “

The committee found that the situation had been made significantly worse by a huge backlog in auditing of local councils because they could not get private firms to do the work.

So far six authorities have had to declare they have run out of money – Labour run London borough of Croydon, Conservative run Thurrock, Liberal Democrat run Woking; Labour run Slough, Labour run Birmingham and now joined by Labour run Nottingham. This is leading to huge increases in council tax and services being pared to the legal minimum.

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Critics say that some cases – such as in Croydon and Thurrock - have been largely caused by bad decision making and risky commercial ventures which ran into trouble. However, the growing scale of the problem goes well beyond local issues.

Mr Betts writes: “Throughout our inquiry, we have heard from councillors, officers, and independent experts who have informed us that many local authorities face a difficult financial situation, with severe demand and cost pressures impacting on local authorities’ ability to deliver key services to their residents. This situation is becoming untenable for some local authorities and greater central Government support is clearly required.”

Among the councils complaining about support from Government include Conservative controlled North Yorkshire, which covers Rishi Sunak’s Richmond constituency,

Gary Fielding, an official from the council is quoted by Mr Betts as saying “We have moved from having one or two councils, with particular issues—whether it is maverick behaviour or leadership—being affected, to having what I regard as good councils, run by good officers and with political stability, now facing existential challenges.”

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Mr Sunak has so far used the crisis in councils to blame Labour. He cited Birmingham’s crisis an example of what would happen if Labour was in government, condemned Labour run Kirklees Council which runs services in Huddersfield as “not fit for purpose” and he said on Nottingham “working people are paying the price” for Labour councils' “financial mismanagement” after Nottingham City Council went bust.

However a recently published analysis by Moody’s, the credit rating agency has singled out 20 councils notably a slew of councils in Surrey, West Sussex and Essex that had high debt ratios. These include Spelthorne, Surrey Heath, Worthing, Runnymede, Brentwood, Uttlesford, Guildford, Adur  and Epsom and Ewell. These are all councils that the Conservatives lost a lot of votes and some like Worthing and Surrey Heath- which is Gove’s own constituency- where Labour and the Liberal Democrats gained control.

Unlike the big cities affected they represent small towns and rural and suburban areas.

Image by Gerd Altmann from Pixabay

“Let’s face it, the universe is messy. It is nonlinear, turbulent, and chaotic. It is dynamic. It spends its time in transient behavior on its way to somewhere else, not in mathematically neat equilibria. It self-organizes and evolves. It creates diversity, not uniformity. That’s what makes the world interesting, that’s what makes it beautiful, and that’s what makes it work.”

Donella H. Meadows, Thinking In Systems: A Primer

The Mont Pelerin Society was founded in 1947 by Friedrich von Hayek. The tenets of its faith can be described best in the words of David Harvey in his book ‘A Brief History of Neoliberalism’.

“Neoliberalism is in the first instance a theory of political economic practices that proposes that human well-being can best be advanced by liberating individual entrepreneurial freedoms and skills within an institutional framework characterized by strong private property rights, free markets, and free trade.”

Whilst it took a few decades for its proponents to win their arguments, since the 70s it has formed the backbone of political and economic thought that has driven public policy globally through national governments, and institutions like the IMF and the World Bank.

Mrs Thatcher was enamoured by Hayek and his book ‘Road to Serfdom’ which she read as an undergraduate at Oxford. It is reputed that at a Conservative party policy meeting, she took her copy of another of his books, ‘Constitution of Liberty’ from her bag, slammed it down on the table and declared, ‘This is what we believe’. From there, everything is history. Her insistence that ‘There is no such thing as public money, there is only taxpayers’ money’, provided the modus operandi for successive governments of all political stripes to implement policies that reflected Hayek’s political and economic beliefs.

It led to, as David Harvey also went on to say, ‘ the financialisation of everything … A power shift away from production to the world of finance’. It has overseen over those same decades the dismantling of public services, social security, deregulation and the breaking of labour and the unions, as well as huge increases in poverty and inequality.

Inevitably, this toxic philosophy has made the rich elite richer in what can only be described as an ongoing wealth grab. It has been responsible for the exploitation of some of the poorest countries in the world, who not only have had to watch as their own resources are plundered by Western corporations, but also have had to watch as their own existence is threatened by a climate crisis, not of their own making, but which keeps the profits of global corporations flying high.

Let’s fast forward to the present, where the consequences lie before us in all their horror. With a particular emphasis here on the UK and the effects of neoliberal dogma on the lives of citizens, which has resulted not just from decades of such policies, but the last 13 years of Tory austerity which have done so much damage to the public and social infrastructure meant to provide the foundations for a functioning economy and societal well-being.

Analysing the effects of austerity on the population, a study compiled by the Glasgow Centre for Population Health and the University of Glasgow (and debated in the House of Lords) ‘adds to the growing evidence of the profound and deeply concerning changes to mortality trends observed as a result of UK Government economic ‘austerity’ policies. These have slashed billions of pounds from our public services and social security system with devastating impacts. Without support, people have been swept up by a rising tide of poverty and dragged under by decreased income, poor housing, poor nutrition, poor health and social isolation – ultimately leading to premature deaths…’

The response to the pandemic which began in 2020, highlighted as nothing ever could, the effects of cuts to public spending on public health systems and social care services, and the inhumane effects of welfare reform on working people and some of the most vulnerable in our society. The human reality is shocking.

Last week’s Autumn Statement exposes not just that cruelty, but also highlights the false narrative upon which that cruelty is meted out by politicians, and the economic dogma which directs public policy and spending.

Jeremy Hunt was clear; ‘There’s no easy way to reduce the tax burden. What we need to do is take difficult decisions to reform the welfare state’. His Chief Secretary to the Treasury was even blunter, people must ‘do their duty’, get back to work, sick or not, or face the consequences, lose benefits. As if these were choices to be made by the sick or those struggling with their mental health, and not political choices borne of a political class that has lost its way.

As Ayla Ozmen at the Charity Z2K commented, ‘There is no evidence to support the idea that there are fully remote jobs available that are suitable for these groups. This is simply a cut for those of us who become seriously ill or disabled in the future and need the support of social security, and risks worsening people’s health and pushing them further from work.’

Frances Ryan, disability campaigner and journalist at the Guardian put it even more starkly. ‘The Tories are back monstering people on benefits.’ This was nothing to do she said, ‘with saving money’, but was, in fact, ‘performative cruelty’, ‘nothing more than a raid on the income of those who already have the least whilst being demonised by those with the most.’

We have, as she said, been here before. People died. It can be no accident. This is a deliberate choice by a currency-issuing government to inflict harm on those least able to defend themselves, and to be frank, those who have suffered more than their fair share of the politics of austerity and cuts to public spending.

The Spectator predictably chose a divisive headline for this month’s publication, ‘Britain’s welfare system is out of control,’ writing that, ‘the number of Britons claiming sickness benefits – 2.8 million – will still keep rising to 3.4 million by the end of the decade. Reversing this trend, it seems, is a political impossibility.’ 

The more accurate headline would have been, ‘Tory Government out of control’, since the reality is that government austerity lies at the heart of an ailing nation. A government displaying psychopathic tendencies couching its plans in the language of reducing debt, taking a responsible approach to public spending, and rewarding hard work. Language reminiscent of George Osborne in 2012 when he commented in a radio interview that it was, ‘unfair that people listening to this programme going out to work, see the neighbour next door with the blinds down because they are on benefits. The nasty party isn’t back, it never went away. It is depressing to note, equally, that the opposition, in its rhetoric about fiscal discipline and growing the economy to raise the revenue for public services, promotes the same lie that drives their proposed policies.

Household budget economics rules the roost. A narrative that is designed to deceive by shifting responsibility away from the government, to create an ever more divided society, whilst at the same time shovelling more and more wealth upwards as data published by Oxfam at the beginning of the year demonstrated. That the richest 1% of Britons hold more wealth than 70% of Britons.

This is a government already using its currency-creating powers to serve wealth, but covering its tracks by using a false narrative about how it spends, so it can justify cuts to spending on serving the public purpose. Whilst the poorest must ‘do their duty’ and sacrifice themselves on the pyre of austerity, this as the evidence shows, does not apply if you are wealthy, a corporation, or an arms manufacturer selling death and destruction. The, ‘there is no alternative’ slogan applies only if you are poor, hungry, homeless, old or sick. See the contradictions?

It’s not much better in the Labour camp.

Whilst Wes Streeting, the Shadow Secretary of State for Health & Social Care, on the same neoliberal wavelength, proposes an open door for the private healthcare sector, (ignoring the fact it’s been open for decades, in fact since Tony Blair), he claimed a few weeks ago that ‘the money simply isn’t there to continue NHS spending because the Tories have trashed the public finances.’

Streeting, like his Labour colleague Rachel Reeves, promoting the myth that there is a finite pot of money and the Tories have spent it all, which will require some fiscal discipline, which will in turn involve not being able to afford free school meals for all children, or a functioning NHS.

‘I’m not going to be able to magic money out of nowhere’, said Rachel Reeves with her serious, former economist at the Bank of England face. As if she couldn’t possibly know how government really spends. But in a horrible game of, ‘we’ll be fiscally responsible one-upmanship,’ she is effectively denying monetary reality and condemning people to more hardship. Well, not the corporations of course. They’ll come in for some star partnership treatment. Labour’s proposal for a ‘partnership’ with business, as if somehow it doesn’t have already the monetary tools it needs to create an economy that works for everyone, not just those that have sufficient power and influence to swing the rules in their favour.

Next up, we have Gordon Brown, a former Chancellor of the Exchequer for Labour, who just prior to the Autumn Statement, and in the same vein, advocated partnerships with big business and charities to address the growing poverty that has arisen out of the politics of Tory austerity and neoliberal dogma.

Heady words like Corporate Social Responsibility were banded about by the man who advocated deregulation and a light-touch government, praising the City of London for its achievements. All just before the financial sector came crashing down around our ears and the government was forced to bail it out, using those elusive currency-issuing powers the current government is denying long-suffering citizens. His light touch led to the politics of austerity by the Tory government, the dismantling of public and social infrastructure, cruel welfare reform, food banks and growing homelessness, all based on a false narrative of how government spends.

Dear Gordon, we don’t need big business or charity to sort out this avoidable disaster. With 3.8 million people, including one million children, destitute in Britain today, what we need is a government that is politically motivated to change things for the better to give people the tools they need to live productive lives that enrich their existence and not condemn them to a life of penury. We need politicians to embrace how money really works, not the lie that passes for reality.

While Gordon Brown calls on companies to step in, the new Chair of the Charity Commission vowed to crack down on ‘squeamish charities accepting donations’ and accused wealthy British citizens of ‘not pulling their weight when it came to charitable giving.’ A little bit of philanthropy does you good, apparently, not to mention reducing the tax bill.

Putting aside the proposed crackdown on squeamish charities in an era when ethical and moral considerations have been thrown out of the window by a political class more concerned with serving the dictates of the US hegemon and its corporate masters, anyone demonstrating such values should be praised not castigated.

As we have said many times before, charities are a failure of government. Their purpose is to mitigate a rotten economic system designed to exploit and impoverish some people and enrich others. Whether charities like the Trussell Trust feeding hungry people or the myriad charities supporting the homeless living in temporary accommodation or on the street, they function as an alternative to state involvement in serving public purpose.  This was the point of Cameron’s ‘Big Society’ to shift responsibility into the wider society.

Such charities are now struggling to meet growing need as a result of government-imposed austerity that has ironically led to cuts in their funding. This is a government-created vicious circle deriving from the politics of austerity, the demonisation of deficit and public debt, and a market-driven neoliberal ideology that favours a small state, with charitable provision of welfare, and privatised public services acting not in the interests of citizens, but rather the state acting as a cash cow for private profit.

It also derives from a toxic ideology of personal responsibility designed to absolve the state from any duty of care for its citizens. This has involved blaming and shaming people for what we are told is personal failure. Just what the neoliberal doctor ordered to keep citizens poor, downtrodden, divided and struggling to survive by forcing them to sacrifice themselves to preserve the economic status quo for the already excessively wealthy.

A status quo which is transferring more wealth into the hands of corporations and wealthy individuals who, in turn, are then invited to do their bit and donate to charity. As if people are dependent on their philanthropy, their goodwill, on their largesse to keep body and soul together. A fabrication that rests on the false notion that the government needs taxes to spend.

This narrative is constructed on the lie that government spends like a household budget, that its sources of funding are taxation or borrowing. Economic well-being depends on neither. It depends on a government that puts the needs of citizens as a priority to create a functioning economy and a healthy, thriving society. That in turn depends on the political decisions a government makes as the currency issuer, imposer of taxes and legislator. Decisions about how real resources are distributed and to whom. In fact, we are talking here about the sort of society we as citizens want to live in.

Instead, we are told that our economic and social well-being is dependent on the state of the public finances, whether the economy is growing enough to afford public services, or for those on the left, how much we will need to tax the wealthiest to pay for public infrastructure.

We are living a destructive lie that is readily promoted by a self-serving media. The daily round of nonsense that passes as monetary reality.

Whether it’s Philip Inman in the Guardian suggesting that since the days of cheap investment credit are over, chancellors must find a different source of revenue, namely increased taxes, The Times implying that a lower borrowing bill will give the Chancellor some ‘fiscal headroom’, as if he’s suddenly found a few more quid in the pot to spend or deliver a tax cut because of it. Or indeed, Andrew Neil, who explained to his attentive audience in the Daily Mail, that ‘the bond markets are where governments go to borrow money from investors […] when their spending plans exceed the amount they are able to raise in tax.’ Apparently, we need to ‘free ourselves from their tyranny.’  ‘The era of big government, cheap money and untrammelled borrowing is over’ he said.

Presenting the public accounts as if the government were a business or private individual that has to cut back in hard times or borrow to fund its spending because it has a limited pot of money. The Treasury gnomes working hard to balance the books, find some spare money down the back of the sofa, rob Peter’s department to pay Paul’s, or beg the capital markets for a loan. All rubbish.

As Professor Bill Mitchell notes, ‘debt issuance is a redundant part of the process… a hangover from past currency arrangements.’ Clearly the media hasn’t caught up. This is the con that drives public policy decisions and leads people to believe that government’s primary role is to balance the accounts, rather than deliver a functioning, stable and sustainable economy, the corollary of which is societal well-being.

The bottom line is that lower interest rates for government borrowing make no difference at all to the capacity of government to spend, or indeed cut taxes.

The cost has been high and will continue to be. Neither of the main political parties frames its role as an initiator of public purpose, rather they think they are Dicken’s Mikawber borne again. We have two political parties obsessed with fiscal discipline, whilst at the same time aiming to shift responsibility into the wider economy and society through partnerships with business or charity. Full on neoliberalism. Full on Hayek vision for government and society.

This is how the government and ones in waiting, and media lackeys like Andrew Neil keep the public trapped in a lie about how government spends, by presenting government finances as a household budget. It serves as an ideologically driven justification for cuts to public spending, not because it’s necessary, but to keep the neoliberal stranglehold in place which is about dismantling public infrastructure and enslaving citizens. This is what Andrew Neil supports. This is the big lie that distorts reality and will ultimately be the death of us if we fail to grasp its fundamental importance to our survival.

According to this narrative, money is a scarce commodity. Which it is not. The role of government is not to balance the books, but to serve its citizens. To decide how real resources are distributed and to whom, through its spending, taxation and legislative policies. It should be pretty obvious by now, who the current beneficiaries are, the corporate estate, the military machine, and those with excessive wealth, power and influence.

This distribution is a political choice driven by ideological aims and it is regrettable that those seeking progressive change are still caught like rabbits in Mrs Thatcher’s headlights. There is a lot at stake. A liveable planet where world citizens have their needs met and crushing poverty and inequality cease to be the norm. When a Labour spokesperson justifies Rachel Reeves watering down her green transition pledges because of the state of the public finances, and that fiscal rules were more important than any policy, you know that without a doubt we are in serious trouble.

What happens in the wider economy starts at the top with the government and flows down resulting from its spending, taxing and legislative policies. We need to understand that the state of the public finances is an irrelevant sideshow and that the real test is what government has done to ensure a functioning and balanced economy, that respects the planet and the human beings that depend on it for their survival.

We need as a matter of urgency to understand what a functioning democracy, with an informed public no longer willing to throw themselves on the pyre of harmful austerity could achieve. The art of the possible to save humanity from a political class intent on serving the interests of a small group of people, not to mention their own interests through the revolving door. As Jason Hickel notes in his book ‘Less is more: How degrowth will save the world.

“When people live in a fair, caring society, where everyone has equal access to social goods, they don’t have to spend their time worrying about how to cover their basic needs day to day – they can enjoy the art of living. And instead of feeling they are in constant competition with their neighbours, they can build bonds of social solidarity.”

It is currently no more than an aspiration for change, but the struggle must continue to make it a reality for humanity.

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The post The empire of lies (and its consequences) appeared first on The Gower Initiative for Modern Money Studies.

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Jeremy Hunt on Wednesday told the nation that he was "cutting taxes" and pushing the UK towards a brave new era of higher growth and prosperity.

However, official forecasts and figures released after his statement paint a very different picture.

Despite the Chancellor's claims, these figures show that the British economy, public services and taxpayers' pockets are set for a protracted period of pain for years more to come.

Here's all the bad news the Chancellor didn't want to tell us about today.

Low Growth for Years to Come

Rishi Sunak today claimed that his Government is "delivering" on growth thanks to the "difficult" decisions he has taken. However, the Government's own Office for Budget Responsibility today confirmed that growth is actually expected to be lower than previously expected for most of the years in its forecast.

This means that the long-run of anaemic growth presided over by the Conservatives since 2010 is expected to continue even longer than previously thought.

Far from "turning the corner", today's forecast suggests that the British economy is set to remain at a dead end for some time to come.

Taxes Will Rise to a New High

"Conservatives cut your taxes", Jeremy Hunt insisted today as he announced plans for cuts to National Insurance.

However, according to the Government's own figures, the overall tax burden paid by taxpayers in the coming years is actually going to increase.

Thanks to the extension of so-called 'fiscal drag' caused by the Government's decision to freeze tax thresholds, the overall tax burden will now rise to its highest level since the Second World War.

These rises mean that according to analysis by the Institute for Fiscal Studies, taxes are set to rise by a larger amount in this parliament than in any other in post-war history.

"The overall effect of the tax changes we’ve seen is that for most people, this is still going to be a tax rise" the IFS Director Paul Johnson said.

Living Standards Will Continue to Fall

Despite Hunt's promise of a new era of prosperity under this Government, new OBR figures show that since 2019 the UK has experienced the biggest fall in living standards since records began in the 1950s.

And despite Sunak's claim to be "delivering" on reducing rising living costs, today's forecast shows that inflation is now expected to remain "higher for longer" than previously forecast, and will not reach the Bank of England's target of 2% until a year later than previously expected.

The truth is that most will continue to feel worse off for some years yet.

Public Services Will be Slashed to Pay for Tax Cuts

Hunt's statement confirms that his National Insurance cuts will be paid for by cuts to public spending.

The plans are predicated on a mere one per cent planned year on year increase in resource spending. For many departments that means real-terms cuts in expenditure with overall departmental budgets cut by £19 billion compared to plans last March.

As the OBR's Richard Hughes said today: "The eagle-eyed amongst you will recognise that is roughly equal to the amount the chancellor spent on the two big tax cuts in this fiscal event."

As part of this plan, the government plans to slash the size of the civil service, with job numbers being cut to levels last seen before the pandemic.

Looking at the government's own plans released today, some departments are set for huge cuts to their budget on a scale that looks undeliverable.

'Levelling Up' will be Levelled Down

Hunt today claimed to be "levelling up" the country. However, according to the Government's own figures, the Department for Levelling Up is set to see its resource spending budget slashed in half from around £4 billion last year to around £2 billion in 2024-25.

Other departments set for cuts include the Home Office, Culture Department and HMRC.

Overall Public Investment will be Cut

Sunak claimed last month that his Government is taking "long-term decisions for a brighter future."

However, as the recent collapsing schools scandal has shown, there is little evidence of such long-term thinking under this Govenrment, when it comes to the state of the public realm.

The long-term lack of investment seen over the past decade is set to become even worse according to today's Autumn Statement. Figures contained within it reveal that Hunt intends to implement a long-term cash freeze in public sector investment. This means that there will be significant real-terms cut in the amount of money being invested into public services under his plan for years more to come.

‘Growth is one of the stupidest purposes ever invented by any culture.

We’ve got to have an ‘enough’.

Always ask growth of what, and why, and for whom, and who pays the cost, and how long can it last, and what’s the cost to the planet, and how much is enough.

Donella Meadows – Environmental scientist, educator and writer.

The city of Derna, Libya, hit by cyclone Daniel. Image taken 21/9/23 by Dipartimento della Protezione Civile/Flickr. Creative Commons 2.0 license

We are living in troubling times. Whilst Western vassal leaders pursue endless wars at the behest of the hegemon, cheer on death, destruction and facilitate injustice under the illusory banner of freedom and democracy, the existential threat of climate change and its consequences for humanity has been put on the back boiler, shuffled off the list of priorities. As vast resources are poured into a profitable war machine with seemingly no end of monetary resources available, humanity sits at a crossroads as snake oil politicians re-sell the politics of public austerity dressed up as pain today for future gain.

As Antonio Guterres noted in a speech at the UN last month, referring to Derna in Libya where thousands lost their lives in unprecedented flooding:

‘Derna is a sad snapshot of the state of our world – the flood of inequity, of injustice, of inability to confront the challenges in our midst.[…]

 

“Our world is becoming unhinged.

 

Geopolitical tensions are rising.

 

Global challenges are mounting.

 

And we seem incapable of coming together to respond.”

After decades of COP conferences, it is clear that commitment to action has been little more than hot air and promises which go nowhere, by politicians driven by short-term political objectives and winning the next election, not forgetting the corporate influence which coerces political decision-making. The pandemic and the war in Ukraine have changed the world in ways that are difficult to comprehend for many, and yet the political response is to forge ahead with further destruction.

As we have seen in recent weeks during the Conservative conference, and to the consternation of many environmental campaigning organisations and some in his own party, Prime Minister Rishi Sunak has delayed or abandoned critical measures to reduce emissions and approved licences for more oil and gas development.

Whilst we should have our doubts about the concept of net zero as a mechanism to cut emissions, we are without doubt currently travelling in the wrong direction, as three climate scientists discuss in an article in The Conversation:

“The time has come to voice our fears and be honest with wider society. Current net zero policies will not keep warming to within 1.5°C because they were never intended to. They were, and still are, driven by a need to protect business as usual, not the climate. If we want to keep people safe, then large and sustained cuts to carbon emissions need to happen now. That is the very simple acid test that must be applied to all climate policies. The time for wishful thinking is over.

 

The only way to keep humanity safe is the immediate and sustained radical cuts to greenhouse gas emissions in a socially just way.”

This will mean a global rebalancing of access to real resources, and support for the Global South to address the Western-imposed climate injustices, exploitation, poverty and inequity which has its roots in colonialism. We urgently need to sweep away the economic model which puts growth and profit over people’s lives and planetary well-being, and then greenwashes its way to more of the same and is a toxic mix of short-termism and greed which pervades government and the corporate estate.

While politicians focus on domestic issues, important as they are, we can no longer ignore the wider planetary context of our existence and the interdependent nature of the world in which we live.

The UK may be an island (still holding on to pretensions of colonial power and influence), but it is not unaffected by the geopolitical twists and turns that are currently determining a shift in the balance of power as countries in the Global South begin to reject the western economic model of exploitation, and theft of their resources.

A model which has been promoted by a US-led IMF and World Bank predicated on the lie of household budget economics, unfair trade rules and corporate domination which has overseen more exploitation as a result of its actions and the growth of poverty and inequality to prop up what has become a monstrous economic model. Indeed, what we are seeing is a Western world in turmoil at those power shifts, doing its best to hold on to the status quo, so favourable to itself.

Equally, none of us, as we are beginning to realise, are unaffected by a changing climate which will increasingly impact water resources and global food production which will most certainly affect everyone without some strategic, targeted planning, as an unstable climate becomes the norm across the planet.

Factor into this that it is the people who are causing the least emissions that suffer the most, as more extreme weather conditions, being exacerbated by the current El Nino weather system, have produced unprecedented droughts and floods.

While the West largely refuses to accept its culpability and is unwilling to offer reparations, the Global South is, without doubt, waking up to the possibility of an alternative even at this late stage. What is needed, as the economist Fadhel Kaboub suggests, is a new financial architecture – for the Global South to ‘design a coherent comprehensive vision for south-south cooperation, complete with trade, finance, and investment policies on its own terms, then welcome cooperation and partnership from the global north on fair, equitable, and transparent terms, under a new model of multilateral cooperation.’

Even as a new world order is emerging, with all the uncertainties that occur in times of change, we have politicians in the UK and elsewhere still behaving like the colonialists of old, still able to dictate the rules of engagement.

Worse, they are still stuck with their heads in the sand, bleating about whether action on climate change or to address global inequity is currently affordable. Indeed, cuts to foreign aid announced in 2020 have been attributed to the government’s aim to cut public expenditure.

Even an article published in the Guardian in August quoting Katy Chakrabortty from Oxfam repeated the nonsense suggesting that “The UK government has tried to give what it could, but it has no emergency reserves to dip into.”

Oxfam, like so many other charities, mitigating a rotten economic model rather than challenging it, fails at the first hurdle by implying that the government has no money of its own and must pull in its horns and get the public finances in order.

At the same time, both parties are fixated on future growth as the mechanism to manage public finances and create future funding for public services. A morally indefensible use of a lie to justify cuts at home and abroad. On that narrative, we are certainly done for.

Whether it’s the yearly ‘we’ve run out of money’ joke surrounding the US debt ceiling, or an EU which, when it chooses, imposes rules on deficit and debt (unless there is a pandemic or a war), or indeed the UK where Mrs Thatcher is still alive and well, dictating to the left and right her mantra ‘There is no such thing as public money; there is only taxpayers’ money’, orthodoxy rules. If it weren’t so serious, it would be laughable.

Fiscal discipline is the guiding force for decision-making, wherever you look. Certainly, over the last few months which culminated in the latest conference season of the usual hot air, lies and propaganda on all sides, that narrative has been predominant, with institutions and the media doing their usual good job at keeping the public in the dark. The willing participation in a lie about how the government spends to deceive an ignorant public.

This is a common thread which pervades economic policy and has done so for decades, pursued by successive governments both Labour and Tory.

In a speech in 2012, Rachel Reeves said ‘Sound public finances will always be the indispensable platform for delivering better jobs, better services, and a strong, growing economy.

What I want to demonstrate this morning is that being trusted with the nation’s finances and building a stronger, fairer, Britain are imperatives that are not only compatible they are inseparable’.

Then last month in a recent article in the FT she wrote: ‘During my time as an economist at the Bank of England, I learnt a very simple lesson: your sums must always add up.’ Ergo she ‘will never spend what we cannot afford.’

Reeves still backing the austerity horse as if there were a scarcity of money, and as if the government’s role is to manage the finances and balance the books, rather than to provide stability through its spending and taxation policies throughout the economic cycle, or when disasters strike, to ensure that the public infrastructure meets the needs of all, and that there is a fair and equitable distribution of real resources. These are the starting blocks for a functioning economy.

Then, predictably, with the same message in her speech in Liverpool last week, whilst committing to ‘rebuild Britain,’ she vowed to deploy ‘iron clad fiscal rules’, stupidly comparing the state finances to her own mum’s, sitting at the kitchen table doing her accounts.

So, Labour’s big plan is to rebuild Britain but impose fiscal discipline at the same time, two clearly mutually exclusive propositions. As Professor Mitchell put it in a recent blog aptly entitled ‘British Shadow Chancellor promising the impossible:’

“The general problem with fiscal rules, […] is the government of the day does not have the capacity to directly control all variables that come together to determine the final fiscal outcome.

 

The point is that essentially non-government, spending and saving decisions, determine economic activity in tandem with government spending and tax decisions; and tax revenue and welfare spending are functions of that economic activity.

 

So, if the non-government sector reduces its overall spending, then other things being equal, economic activity falls and tax revenue declines, and as unemployment rises, welfare spending also increases.”

So much for fiscal rules and common sense.

A functioning economy needs good public services and a well-educated workforce to service it and a decade of austerity has left the sector in a state of decay. Capital investment in such things as schools and hospitals is all very well and good, but such infrastructure also requires nurses, doctors, teachers and other public sector workers to run them. Reeves’ big idea to borrow for capital investment and cover day-to-day spending through tax receipts is just more of the same old nonsense couched in household budget economics and ignores the fundamentals. That government is the currency issuer and spends the money into existence first and from that everything else flows. Rebuilding Britain starts there.

In a nutshell, with Labour at the helm spending is to be predicated on the holy grail of future growth to raise the taxes to pay for public services. Can we wait that long? How many will die in the wait?

And so much for rebuilding Britain, as if the future can be predicted with certainty. A former Bank of England economist clearly too clever by half and a plan with a potential dead end. On the basis of previous and current experience, from financial crashes to pandemics and wars, the future has proved itself to be less than certain, indeed unknowable.

In the meantime, whilst we wait, the waters in every sense will continue to rise. Indeed, the reality is that without adequate spending and appropriate legislation now to address a decaying public infrastructure, deliver a green transition and protect people from the worst excesses of a world ruled by corporate diktat, the future will be very bleak.

The Tories, also on the same old track at their Conference, ‘sound money or run out of money under Labour’, will, apparently, ‘always protect public services’ (yes Jeremy Hunt actually said that), but they are ‘always honest about the taxes that pay for them.’ Just those few words are instructive about their intentions.

This of course is nothing new. We can trace this neoliberal narrative way back to the 70s and Callaghan’s Labour government. However, George Osborne with his Thatcherite credentials gave us an austerity package that cut spending on public infrastructure and services, cut welfare spending, imposing sanctions and other destructive mechanisms wrecking people’s lives, whilst at the same time creating a fractured and divided society. The pandemic brought home to the nation the terrible consequences of those cuts to spending and we are still paying the price.

Putting it politely, the nation is being stuffed by politicians fixated on fiscal discipline to serve their own political objectives or prove they are fiscally responsible. Instead of using the power of the public purse to rebuild a fairer Britain, oversee a more equitable distribution of real resources and a green transition through targeted spending, taxation and legislative policies, what we have, as Matt Kennard describes in his book ‘Silent Coup’, is the unstoppable rise of global corporate power, with the full compliance of government. With both Labour and Tory promising yet more partnerships with big business in one way or another, the die is being cast.

In a saner world, where democracy counted and where the government put the interests of its citizens and the planet first, before those of its corporate mates, we could do so much better. The heart of change lies in understanding the power of the pound. And yet we seem incapable of even engaging with monetary reality, not even to ensure a future for our children.

Every day the evidence piles up about what happens when governments use the lie of scarcity of money to excuse their cuts to spending or to delay action. From a collapsing NHS and social care system, schools and other public buildings that are falling down due to faulty construction and lack of adequate maintenance, local authorities facing bankruptcy and all that means for local service provision, food banks, rising homelessness, the list goes on. And still the lies just keep spewing from their mouths.

Political manoeuvring to discredit the party in power or the party in waiting, while Rome burns, is the name of the game. Not only is it shameless and shameful, it is a political choice unconnected to the state of the public finances. That surely should be the wake-up call for all.

When all is said and done, the tax and spend model is destroying the infrastructure that sustains a functioning economy and is, to be frank, killing people. And yet politicians are doubling down on that narrative as if there were no alternative.

An understanding of the power of the pound, the role of government as currency issuer, imposer of taxes and legislator is the starting place. But, at heart, it is the political decisions that derive from that monetary framework that really count. Is it so hard to understand that the real constraints to spending are not financial but real resources, followed by the decisions about how and to whom they are distributed to create equity and address the key challenges we face? On current experience, we have seen exactly how that system works for the richest and most powerful.

Regrettably, it is clear how the political establishment views citizens. Outside of their inclusive rhetoric at election or Conference time, we are just expendable pieces on a chess board, pawns in the great neoliberal game of securing power and wealth for the few.

Here’s what we could do with an informed public, a functioning democracy and a political class that served citizens instead of itself and its corporate masters. It starts here. Pass it on.

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The post Humanity sits at a crossroads as politicians re-sell the politics of public austerity appeared first on The Gower Initiative for Modern Money Studies.