Tag Archives: edward leigh

No, Sir Edward, we are not going bankrupt!

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“We are going bankrupt as a nation — there will not be the money to pay for the NHS or pensions.” This was the impassioned cry from Sir Edward Leigh (Con, Gainsborough) in Tuesday’s Commons debate on public health restrictions. He referred in particular to the closing of pubs at 10pm and more generally to what he saw as a need to let businesses “get on and do business”.

Fortunately he was wrong. We won’t go bankrupt as a nation. This is because we create our own money. He no doubt thinks that business activity is always needed, through taxation, to pay for public services such as the NHS. This is not the case. The state is at liberty to create whatever money is needed to pay for public services. Taxation is needed to remove money from circulation to prevent inflation, not to pay for public services.

Inflation occurs when the economy is working at full capacity and the money in circulation creates effective demand beyond what the real economy can meet. The pandemic reduces both supply and effective demand. The supply of hospitality services is reduced by measures to prevent the spread of the virus. Effective demand for hospitality services, and for other services and goods, is reduced by the loss of income suffered by many businesses and employees whose work is affected by the COVID restrictions.

Most money circulating in the economy is normally created by private banks when they make loans. Money is destroyed when loans are repaid or written off, such as through bankruptcies, and when taxes are paid. Investment in several areas of the economy – such as hospitality, the arts and aviation – is likely to be depressed at the moment, which means that private money creation will be below normal.  It is not at all clear that the money being put into circulation through business support schemes, additional social security payments and health expenditure needs to be balanced by increased taxation. In any case, increased business activity could create its own need for taxation by stimulating an increase in the money created by private banks.

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Vince Cable 1, Labour Party attack document 0

Back in 2005 the Labour Party published a document attacking 100 (alleged) spending commitments the Liberal Democrats had made, including one which accurately quoted Vince Cable from his website:

Twickenham has one of the best bee keeping centres in the country. Many local people support it. Benefits from bees’ natural pollination activities are enormous, worth billions of pounds. There is however negligible research into damaging diseases and I have pressed the ministry of agriculture for a bigger research commitment.

Oh, how Labour laughed back then at the absurdity of the idea that money should be spent on hard working bees rather than …

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George Osborne: he was for cracking down on public sector pay before he was against it reviewing it

Poor old George Osborne. It’s a tough job being Ken Clarke’s deputy the Tories’ shadow chancellor, desperately walking the tightrope between keeping happy your right-wing, Hannan-worshipping party activists (and that’s the majority of them), while trying not to scare away the voters for whom a right-wing, Hannan-worshipping party is a nightmare spectre (and that’s the majority of them).

That, at least, is the only explanation I can come up with for George’s current confusion about whether or not he’s in favour of a crack down on public sector pay and pensions. Here, for instance, is the Financial Times which …

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