Yesterday, I wrote slightly cynically about an approach from those lovely people at the Taxpayers’ Alliance. But, you know, they’re entitled to their view, even if they’re highly unlikely to admit who funds their research and their interest in seeing key tax rates lowered (the answer being, probably not people like you, gentle reader…). But I did promise to take a look at their findings, and thus give you an opportunity to comment.
But, before I do, here are some base statistics from their research;
- 40% of respondents stated that they were “relatively comfortable financially”
- 9% stated that they were “very comfortable financially”
- 13% indicated that they “can only just afford their costs and often struggle to make ends meet”
- 2% suggested that they “cannot afford their costs and often have to go without essentials like food and heating”
- 36% responded by stating that they “do not have money for luxuries but can normally comfortably cover the essentials”
Now, given that the debt charity, Step Change, claimed in their report in July of this year that over 3 million people are in problem debt in Great Britain, with almost 9.8 million showing signs of financial distress, based on polling carried out three months earlier and using a somewhat larger sample (5,326 adults as opposed to the Taxpayers’ Alliance’s 4,004), you might wonder about the accuracy of their base data, but let’s give them the benefit of the doubt.
So, let’s look at something that probably affects most of us, the basic rate of tax. Should we cut the basic rate from 20% to 15%? According to those polled by the Taxpayers’ Alliance;
- 28% strongly support such a cut
- 18% moderately support it
- 22% slightly support it
On the other hand;
- 7% slightly oppose it
- 4% moderately oppose it
- 4% strongly oppose it
In other words, it is claimed, 67% (there is rounding involved) support to some extent a cut in the basic rate of income tax from 20% to 15%, with only 15% opposing the notion. Now, one must acknowledge the potential impact of the Laffer curve on revenues raised, but one must note that such a cut would have no direct impact on the poorest, and would indeed most benefit higher rate taxpayers, as they would benefit to the extent of the maximum of the basic rate band.
And how much would it cost? According to HMRC, the impact of a 1% change in the basic rate (i.e. to 19% or 21%), would be £4.5 billion in 2020/21, rising to £5.6 billion in 2022/23. It’s probably true that you couldn’t simply multiply that by five in order to calculate how much cutting the basic rate band to 15% would cost, but you might think that something in the region of £20 billion might be credible. That’s about half of current Government spending on defence, or twice the spending on transport.
So, where do you find that from, unless you want to cut spending further? And that’s the problem with polling like this, in that it offers up a bunch of goodies, without considering what costs might arise. There is, I am reminded, no such thing as a free lunch…
Tomorrow, I’ll take a stroll through some of their other findings…
* Mark Valladares is the Monday Editor of Liberal Democrat Voice
Follow @LibDemVoice on Twitter
Like us on Facebook
Subscribe to our feed
Sign-up for our daily email digest
The Joy of Six 1119
Cheers! Gin Palace to open at Ludlow Food Centre
Are Lib Dems really the most opposed to more money being spent on potholes?
The escalating cost of Tory failure on immigration
Victoria Gardens energy efficiency event #dundeewestend
Stephen Glenn
Michael Kilpatrick
Mary Regnier-Wilson
Andrew Hickey
32 Comments
We need to come out and say this, and we don’t.
It should be rather obvious, shouldn’t it? If the government is going to provide something, it needs to collect tax to pay for it.
Somehow, this doesn’t seem to be in people’s heads, so they suppose that tax rates and government services are two unrelated things. Tories tend to go on about cutting tax without saying what cuts in government services that is going to have to lead to. Labour tend to go on about increasing government services, without saying what tax rises will pay for it.
Well, we have an excellent example we can give to illustrate this issue. There is no way the Conservatives in the 2010 government would agree to tax rises. If we had forced them to carry on paying direct government money to universities, there would have had to be bigger cuts elsewhere to pay for it – and the cuts that there were in that government were pretty appalling anyway.
People seemed to think that a coalition between a party that wanted to keep taxes down, and a party that wanted to have more government spending on things would do both. Er, no. Given that there was no way we could force the Conservatives to of against their main election pledge, all we could do was try to arrange things to deal with keeping tax down so they weren’t even worse.
Accepting university fees, and concentrating on getting a generous loan system all could use to pay for it was the best way we could do it. Otherwise what? More massive cuts in pensions or the NHS?
So let’s now make it clear – what happened with student fees in the 2010-15 should serve as a warning for what would happen if people continue to say they want tax cuts. What next? Payment for NHS services by personal loans? Well, if there was a big cut in income tax, something like that would have to happen.
There aren’t enough suckers like me who, on a modest retirement income, positively WANTS to pay more income tax. I’d rather pay it directly than indirectly. When my washing machine packs up, I can’t go to a well known store and say to the manager; “I’m not earning that much, so will you let me off a few quid on that (you name the make)?” “Sorry, sir, that’s the price we have to charge to cover our costs” would probably be the reply.
Wasn’t it a Lib Dem idea to raise the threshold on the Basic Rate, which the Tories would now have us believe was their idea in the first place? I think that’s what Matthew Huntbach is on about (sorry if I’m wrong, Matthew). We never hear much about that in the attempt to excoriate the party for ever as the ratters on Tuition Fees. Remember “Maggie Thatcher, milk snatcher”? It’s time to move on – and be careful what pledges you sign from now one!
Mark has quoted what a 1% rise in the Basic Rate of Income Tax could raise. So, let’s make it 2%! Or, why not introduce a hypothecated tax such as a Health Tax instead? What did the late Paddy famously say (with apologies to James Otis)? “No taxation without explanation”.
Call me old fashioned or even naive if you like, but I subscribe to the view that taxes are what you pay as your passport to a civilised society. They are like the daily spoonful of cod liver oil we used to get at school as children after WW2 (no malt added, we were tough in Leicester). It tasted horrible; but, boy, did it do you good!
Perhaps, before the anti fish oilers start tapping away, I should have added the words “or at least that’s what we were told” at the end.
@ Matthew Huntbach,
“It should be rather obvious, shouldn’t it? If the government is going to provide something, it needs to collect tax to pay for it.”
It’s only obvious for LOCAL government. The position for central government is slightly less obvious. The government levies taxes to create a demand for the currency and thereby give it a value. But it should also be obvious that the Govt has to spend the currency into existence before it is available in the economy to be collected as taxes.
It simply isn’t possible for the central government to collect more in taxes than it has created in the first instance by its spending into the economy. It always has to be in deficit and debt.
@ Mark Valladares,
“So, where do you find that (£20 billion- PM) from, unless you want to cut spending further?”
If you could just tear yourself away from your bad habit of thinking the Government’s finances are like a household’s you’d find these kinds of questions were a lot easier to answer.
The problem with Govt cutting it’s own spending is that it cuts its own income too. You and I tend not to have that problem. We’re just too small for that to be an issue. Conversely, if it increases its spending it increases its income. So why doesn’t it do that?
There’s only one reason why not and that is inflation.
So can we afford to spend more on all the things we’d like to spend money on without raising taxes? Probably not. But we could afford to spend some extra on some things without inflation becoming an issue.
@ Peter Martin
The problem with what you say is that it just boosts the Tories. If you keep pushing the idea that there’s no need to raise tax to pay for government services, then of course people are going to vote Tory, because the Tories come out clearly as the party that is most about keeping taxes down.
Our country is in a mess because we have had cuts after after cuts on government spending. And the likes of you have encouraged that by saying there’s no need for tax rises. All the sorts of services and things for young people that councils used to provide have gone. It’s now over a decade ago that I was a councillor, and it was bad enough then as there was very little the council could choose to do due to it having so little money. But now councils have had huge further cuts. Legal support for people all gone, now if you can’t pay the fortune lawyers require, law means nothing, you can’t afford to challenge. Retirement age gone right up, can’t get a state pension until years later than used to be the case. Etc etc etc, and YOU Peter Martin are supporting all this by what you say when you dismiss the idea that maybe we do need to raise tax to help make things better.
What the Tories and the populist right encourage is tunnel vision – not seeing ourselves as whole individuals, but channelled into particular mind-sets – we are “consumers” when they want to reduce environmental and working conditions, “motorists” when they want to give priority to motorised traffic, “taxpayers” when they want to give away tax cuts, and so on. So when the Taxpayers’ Alliance conducts a survey only about taxes, they get a very predictable outcome. We as liberals should encourage more holistic thinking.
@ Matthew Huntbach,
“And the likes of you have encouraged that by saying there’s no need for tax rises.”
That’s simply not true. Possibly there will. But not necessarily.
As I have just said to Mark Valladares, (1.30pm) , if a Govt cuts its spending it also cuts its income. Essentially its like a dog chasing its own tail. It sees a target, ie a smaller deficit, but the process of trying to reach it causes the target to move further away. We can’t treat the Nation’s finances as if it were a household.
If you won’t accept it from me maybe you’ll accept YV’s explanation:
Laffer is just an excuse for the rich to get out of paying their fair share. Bringing down income tax in the way suggested won’t help tackle inequality, it will make it more difficult. The whole point of progressive income tax IS to redistribute income.
“you might think that something in the region of £20 billion might be credible. That’s about half of current Government spending on defence, or twice the spending on transport.
So, where do you find that from, unless you want to cut spending further?”
I’m a little amused by this as £20bn were the tax cuts that Nick Clegg/Vince Cable/Tim Farron et al wanted in 2008 . It ended up as a tax shift (the net tax burden was remaining unchanged in the 2010 manifesto) but at the time it was tax AND spending cuts.
@ Peter,
I always enjoy your comments, regardless of the obtuseness therein. There is, self-evidently, a correlation between revenue raising and expenditure, albeit not an exact one., regardless of your gallant attempt to blur the issue. And really, using Yanis as an argument in your defence? His one attempt to run an economy wasn’t exactly a triumph was it, albeit that he inherited a smoking ruin…
Yes, you can just print the extra money you need if you’re a government, but experience tells us that such a strategy doesn’t work. I enjoyed my trip to Caracas four years ago. I didn’t enjoy having to walk around with a huge wedge of banknotes in my pocket.
So, whilst a government’s budget is not like a household one, the basic principle that, if you cut taxes by £20 billion, you will either have to cut spending or raise other revenues, remains pretty constant. Now, if you cut taxes and, by triggering a wave of investment in infrastructure and new enterprises that generate higher revenues down the road, you actually generate higher revenues, you’ve solved your problem of how to find the funds to spend on your continuing projects. That is, of course, a big if.
And, if you’re the Taxpayers’ Alliance, cutting taxes is overtly intended to reduce the ability of government to spend, creating opportunities for free enterprise to take over service provision and reducing the State to a minimum. Now, if private enterprise is altruistic, that might work. The evidence is, unfortunately, that it doesn’t always work as well, as the US healthcare system demonstrates, producing worse outcomes at a higher cost whilst leaving millions unprovided for.
Interestingly, the Taxpayers’ Alliance seldom promote their suggestions for cutting Government expenditure, although one relatively recent attempt was noticeable for its general lack of attractiveness to those who are supposedly so keen on tax cuts.
@ Hywel,
The irony is not lost on me. That said, I like to put numbers into context because, above a certain point, the sheer scale of them can be hard to comprehend.
@ Mark
“……if you cut taxes and, by triggering a wave of investment in infrastructure and new enterprises that generate higher revenues down the road, you actually generate higher revenues, you’ve solved your problem of how to find the funds to spend on your continuing projects. ”
No you haven’t! You’re still thinking of a National economy as if it were a household. If you or I have a higher income we can spend more. That is because we are households. A National government issuing its own currency, like the UK, should do the exact opposite, overall, but take into account regional differences. “Finding the funds” isn’t a problem! If the economy is running hot, which will mean that its revenues are high, then it should back off its spending to prevent inflation. Or, do as you suggest, and raise taxes to compensate for any necessary expenditure.
So your view is perhaps conditioned on where you live. The SE of England maybe? Any extra spending there will be inflationary (more in wages and house prices than the price of groceries) and will need to be covered by extra taxation which needs to also be geographically targetted. Whereas the same spending in, say, the NE of England or Northern Ireland probably won’t be.
PS. It’s been a long time since any Greek finance minister has run the Greek economy. YV is no exception. The rules are decided by the EU’s SGP which insists on household economics.
PPS I’m sure you know very well I’m not a supporter of the Taxpayers Alliance. That is really being “obtuse” if you didn’t pick that up 🙂
@ Peter Martin
PPS I’m sure you know very well I’m not a supporter of the Taxpayers Alliance.
Yes, you ARE a supporter of the Taxpayers Alliance.
You may not realise it, but the way EVERY time you respond to a comment about the need for tax rises by saying it is unnecessary, that is giving support to them.
It is difficult to be honest and come out and say that some tax increase is needed in order to pay for government services. I actually felt sorry for the Conservative Party after the last election because Theresa May came out with what I thought was a reasonable acceptance of that on one issue and a suggestion of how it could be done, and she was viciously attacked for it (I was ashamed that the Liberal Democrats joined in with that) and that was perhaps the main reason why they didn’t get a majority.
I do understand your point that it isn’t quite as simple as just income one side, spending on the other, for national government. However, given the damage that has been caused to our country by it being dominated so long with politicians who push the idea that tax reduction is the main thing that is needed, I think we need to reverse that. So, saying something that seems to support it is not a good idea right now.
At the moment we have this real problem that it seems most voters think tax levels and government spending are two completely separate unrelated things. What happened with funding for universities and how our party is still attacked on that more than anything else illustrate that issue. Actually, of course, how we did it WAS very much in the way you suggest, because underneath it was pay for universities by increased government borrowing – disguised as individual borrowing.
Matthew Huntbach:
Indeed, indeed. As I have pointed out before, Peter Martin has a fairly consistent record in marshalling what purport to be left wing arguments to arrive at right wing conclusions.
@Peter Martin
“If a government cuts its spending it also cuts its income” (8 Nov). Yes, I think I get that. So, does that mean that, if a government increases its spending it also increases its income? Is that what a ‘trickle down’ economy is supposed to do? But it doesn’t work, does it, or at least not to the extent required? So, what do you do if you want to spend more money? Print it or borrow it? Surely that’s been tried here and elsewhere before, often with damaging results?
Then there’s local government, which you mention in your first post in this thread. Yes, ‘local government’, usually the District Council in a three tier area like mine, collects taxes on behalf of itself, the other two councils (town/parish and county) and the Police Commissioner as well as the uniform business rates, the latter going straight to the Treasury; but that ‘tax’ only represents, or at least used to represent, barely a third of the money required to run things locally. The rest used to come from revenues and central government grant. As you probably know, the amount that local government has received has been progressively reduced over this decade, with nothing but the Council Tax, based on early 1990s property values, to pick up the slack. You know the rest.
You were quite dismissive of my suggestion regarding televised debates a few days ago. Sorry if my feeble efforts were not worthy of a more thorough reply. I would however be interested in knowing what YOU would do in this instance, or is it just ‘the economy, stupid’?
@ Martin @ Matthew,
You are both making the mistake of thinking that the political right wish to pursue lower all round taxes. The T in VAT means that’s a tax too! That’s not one we hear about normally in the context of wanting to lower taxes, but it is one that disproportionately affects the less well off.
You also know very well that I don’t say tax rises are always unnecessary. I’m sure I’ve said this many times before but, in case you’ve missed it, taxes are necessary to prevent inflation. So if you’re saying we need to raise income tax by 1% to counteract higher than desirable levels of inflation you could be correct. But if you are saying we need to increase taxes to raise money to pay for for the NHS then you’re wrong!
Actually I would say this is something that most Tories, at least those in positions of power, understand perfectly well. If they need a £1 billion, or whatever, to buy off the Ulster Unionists they know they can just create it and most of it will come back as increased revenue anyway. Similarly, for any amount of money that they actually want to spend. £400 billion to bail out the banks? No problem!
But when the money is for social purposes they’ll ask “who is going to pay for it?” You are both falling into their trap by trying to give what might seem, superficially, to be a reasonable explanation. They’ll use it against you everytime when votes are at stake.
Peter is pushing ” You can print as much money ad you like and spend it” policy again and he is right you can, but only as long as people have faith in the currency. Print too much, lose faith and your currency isn’t a currency anymore it is toilet roll as Zimbabwe, Argentina, Germany ( in the 1920’s) and others found to their cost. Now Peter has no answer to the ” What happens if all faith in your currency is gone” so he ignores the question but by failing to answer it he has effectively doomed his argument. There is no intrinsic value to currency, it is built on faith and the perception of what people think it is worth, print more and more and faith leaches away and you are left with nothing. Ironically the policy of hard Brexit Peter preaches dents the faith the world has in the UK so Peter’s room to print ourselves out of our problems is further eroded. Peter believes in easy solutions wrapped up in tin foil, they may work for a little time but in the end they will doom us to further misery. A word of advice if you hear the rustling of tin foil and a squeal of ” Tis easy just print more money” run, run like the wind.
@ Peter Martin,
Incomplete quote edits to suit. Check. Straw man built. Check. Given that the full paragraph as written is designed to suggest my cynicism that such a strategy actually works, your approach merely confirms in my mind that, in order to win an argument, you are happy to misquote and misrepresent.
And I didn’t suggest that you are a member of the Taxpayers’ Alliance, although your Carly Simon inspired interpretation of the sentence in question smacks of “the lady doth protest too much”.
@ John Marriott,
“So, does that mean that, if a government increases its spending it also increases its income?”
Yes. But that’s not really the point. If it overdoes it it will create too much inflation. The real problem is that governments tend to undo it. They have too much idle capacity and recession. As previously said the Government needs to level up the economic playing field nationally to prevent overheating in the SE of England but recession in the regions. Government support for local councils is one way of doing that.
There is the same problem but on much larger scale in the EU. There needs to be the same program of fiscal equalisation right throughout the eurozone to level out the relative imbalances.
Another possibility is something like Joe Bourke’s much touted Land Value Tax. It certainly doesn’t possess any magic bullet properties to cure all our economic ills but it does, potentially, have a role to play in the reduction of wealth inequality.
P.S. On the point of TV debates you have to understand that the TV companies want something snappy. A head to head contest between the leaders of the two leading parties is what they obviously prefer. They don’t want “we agree with Nick” (Or Jo) all over again. The Libs and Lib Dems have always had a problem with getting in on the act. It’s frankly just ridiculous for Jo Swinson to play the gender card whenever things don’t go her way.
@ Mark,
Apologies if I misunderstood what you were getting at, but I took the two paragraphs starting with “And, if you’re the Taxpayers’ Alliance…” to be directed towards myself. I’m not the Taxpayer Alliance, I don’t speak for them and neither do I support their neoliberalism! It’s easy enough to always claim misquotation. I don’t believe I’ve done that at all.
It is important to know what the control pedals do when working any piece of machinery. The national economy is a bit like that too. Most people, including I would say yourself, are of the opinion that if the Government has lots of money coming in then it has more to spend. If it has less coming in then it has less to spend. I’m saying that’s the wrong way around!
The way the euro economies are forced to operate is wrong too. So before the GFC the economies of Ireland, Greece, Spain, Italy were severely overheating. Money was being borrowed to provide whole new towns in Spain, for example, for which there was no real need. That borrowing boosted the governments coffers as the money was spent and respent. It was a positive feedback loop which was totally out of control. But the Governments were largely staying within the set rules. Until the crash hit that is!
Frankie,
Please go away and annoy someone else. I doubt you’d ever understand what I’m saying. Some people just don’t get it! There’s nothing I can do about that.
What I find interesting about the Tax Payers Alliance survey is that nearly 50 % of people describe themselves as comfortably off and that, presumably, is after tax. If you raise the income at which tax is paid or or lower the basic rate, at the moment they will become even more comfortably off so the obvious solution is to raise taxes at the high end of the spectrum. Now we hit the Laffer curve.
People who are comfortably off can pay for tax advice to reduce the amount of tax they have to pay. Tax avoidance is perfectly legal because it has been politically acceptable for decades, but what if it was no longer acceptable, that everyone was legally obliged to pay the tax they are supposed to do? Tax avoidance is a game that should be outlawed just like fox hunting and then the Laffer curve would cease to apply . We could then reduce tax for those who are struggling and compensate by increasing tax on those that are comfortably off.
If you look at the sociology of capitalism it is obvious that you need a middle class which is able to buy goods and services, so increasing the size of the middle class makes sense. We are about to undergo a huge technological change as well as, hopefully, tackling the climate crisis. I believe businesses may need help with both and that government investment in green goods and services is vital. We can’t wait for these to become cheaper in the usual way because we have to change people’s consumption habits quickly.
We need to have a reliable tax take from that nearly 50% of the poll and especially from the top 9%. We also need to increase the size of the middle class so people are able to afford a greener style of life, and that means increasing the income levels of people in the remaining 50%. Of course, the results from this survey may not be a accurate, but I think more attention needs to be paid towards income and tax levels at the high end of the spectrum rather than expecting those at the lower end to keep on paying. We therefore need some objective research about actual income levels in the UK.
Peter,
I understand exactly what you are saying I also know you have no answer for the question ” What happens when people lose faith in the value of a currency”, hence why you want me to go away because the correct answer to the question is “much pain is inflicted as faith has to be restored”. You can’t accept that answer because if you do your tinfoil philosophy crashes about your ears and years of looking in obscure places, talking to fellow tinfoil enthusiasts goes up in smoke. Tis sad but true.
A little anecdote about some people’s attitude to paying taxes. A few years ago during one of my ‘campaigns’ for re-election as a County Councillor I knocked on the door of a bungalow in a fairly affluent part of the town. A gentleman who looked about my age at the time (early 60s) answered the door and, during our brief conversation, said something like; “Why should I have to pay for education? I haven’t got any children at school any more”. To which I asked; “Have you got any grandchildren locally?” “Yes”, he replied. “Well”, I asked, “what about them?” Judging by the look on his face I don’t think that he had factored that in.
Sadly, that’s often what you’re up against. That’s what some people expect. Scandinavian levels of public services on North American levels of taxation.
Frankie: You just do not understand, Peter has found a monetary theory that can eliminate poverty everywhere. I am not sure how he decides what a separate country is, but whatever it is each country prints its own currency. Whatever it prints out, it gets back anyway and national debt is wealth (is he a US Republican?). If everyone around the world did this global poverty would be eliminated.
I must admit that my understanding must be deficient too, because, to me, it seems to be that his strategy involves ripping off poor countries by devaluing the money used to pay for their goods.
Martin,
I’ll let you in on a secret but don’t tell Peter. His tinfoil theory could work, but only in a closed economic environment. If you are the sole issuer of currency then yes you can issue as much as you like and people have to use it. The problem he has is until there is one government covering the whole of the world you have alternatives. I’ll use a real world example Turkey, they much prefer to be paid in Euro’s and Dollar than Lira and if you are a Russian tourist then you use Dollars not Rubles. Why do Turks like Euro’s and Dollars because of their nice pleasing to the eye look, no because they have more faith in them than the Lira and even more faith in them than the Ruble. The fact you need faith in a currency to give them value is beyond Peter, his faith in the Pound is beyond debate and he can not envisage it could ever not be wanted, but it can and if we follow Peter’s advice it will soon be as popular as the Ruble. If we follow Peter we will all be wanting to be paid in Dollar’s or Euro’s because the Pound will be regarded as intrensically worthless ( They just keep printing more of them).
I seem to remember that a few years ago there was some talk of allowing the euro to be accepted in purchasing in parallel to the pound over here. What happened to that? Or was it a figment of my imagination?
Personally, I’ve never been that attached to the pound, just like I can’t understand why so many Brits are so attached to the blue passport. I reckon that, if you had euro coins with the Queen’s head on it, that would satisfy a lot of people. You may laugh; but if I lived north of the border and things pan out as Nicola and her friends hope, I could be facing the prospect of a new currency, whether I like it or not.
John,
They would be facing the reality of a new currency the question would be what would it be their own Scottish pound or the Euro. You could quite easily end up with a situation as with Turkey where locally you can use the Scottish pound, but locals prefer you pay in Euro’s and even the British pound. Of cause if you travel across into England you’d need bring English pounds ( even now Scottish notes are not always accepted). It would be another consequence of Independence of which there would be many. In many ways the SNP are like the Brexiteers they peddle easy solutions for difficult issues and down play the consequences.
Some interesting thoughts from John and Frankie.
What tHey don’t mention is whether those of us who live in Scotland would prefer to live in a social liberal democratic polity with proportional representation, and in the EU with full voting rights, or to suffer indefinite right wing government under the dreadful Johnson, Gove and co.
@John Marriott “ I seem to remember that a few years ago there was some talk of allowing the euro to be accepted in purchasing in parallel to the pound over here. What happened to that? Or was it a figment of my imagination?”
There’s no legal reason why shops can’t accept Euros, or indeed Pokémon cards, as the Bank of England states in a rare moment of whimsy,
and some shops, mainly in London or other tourist areas, do. I’ve certainly seen the odd shop doing so in Leeds.
@ Martin,
“…… each country prints its own currency”
Usually done in a computer these days. But, you’re getting there slowly. And, yes this is the usual model. There are a few smaller exceptions like Ecuador using the US$. But, on the other hand, the Canadians use their own dollar. The Kiwis and Aussies too have their own separate dollars. We have the pound etc.
The big exception is the euro. That can only be fixed by creating the single country of the USE or maybe it will be called Europa.
Yes the National Debt is a store of wealth. If you own some Gilts then you own some of the National Debt and you are wealthier than if you didn’t own them. Again, a small sign of some progress in your understanding.
But then you go off the rails slightly with your comment that “it seems to be that his strategy involves ripping off poor countries by devaluing the money used to pay for their goods.” If any country, rich or poor, want to sell a shipment of whatever they make, say textiles, in exchange for US$ then that’s up to them. If they think the US$ is devalued they can ask for more of them. They can spend the US$ they have earned buying something else for themselves. Ultimately that is the single reason for trade. To swap something you can make for something which you can’t. Or at least not easily. Or, they can choose to save them by buying US Treasuries which just adds to the $22 trillion in the US Savings account a.k.a the US National Debt.
But keep on thinking about it. You’ll get there in the end!
@Daniel Walker
Really? So, there are some odd shops in Leeds, then? What do they sell? Lol!
@David Raw
I take your point. Odd, isn’t it? The Scots were urged to back the union during the 2014 referendum as this was the best guarantee of their staying in the EU! If we do crash out of the EU and Scotland were to gain its independence from the U.K., unless a ‘sweetheart’ deal could be arranged with the EU, surely rejoining as a new member would mean accepting the Euro, Schengen and further integration as well. Unless, of course, the majority of the voters in Scotland were happy with this.
This link, from 2009, has just turned up in my FB feed!
“Britain needs ‘savage’ cuts, says Liberal Democrat leader Nick Clegg”
Cuts to spending on imported luxuries maybe? Or maybe not. NC meant cuts to Govt spending. ‘No we don’t!’ we all should have said. Because if you cut Govt spending you cut Govt income too and the deficit won’t necessarily decrease. The deficit was, in fact, reduced, to some extent, by reducing interest rates to encourage us all to borrow and spend more which in turn increased Government’s revenue.
But we had the cuts anyway. Remainers are to some extent justified in saying that austerity economics wasn’t all the fault of the EU. However, the EU is just a group of people and NC was certainly part of the EU inner circle at the time.
Those cuts and the austerity that followed helped create the conditions for the popular discontent that led to Brexit.
https://www.theguardian.com/politics/2009/sep/18/nick-clegg-liberal-democrats-spending