Taxing and Spending

It’s astonishing that leading Conservatives are still getting away with calls for tax cuts before the coming election without any challenge as to where they will cut spending to pay for them.  Our economy is flat-lining, our public debt rising, our population ageing, our young children smaller than their counterparts across the Channel, our schools and health services losing workers to higher-paid jobs – and yet serious Conservatives think we should cut taxes and spend less?

Paul Johnson’s just-published Follow the Money: how much does Britain cost? is a clearly-written guide to Britain’s dilemmas on public spending, and the failures to invest sufficiently in public infrastructure and services in recent decades. He’s been director of the Institute for Fiscal Studies (a body respected by all except supporters of Liz Truss’s economic strategy) for many years, and before then served in several government departments, so he knows what he’s talking about.

He sets out how progressive cuts in defence spending since the end of the Cold War in 1989-90 have funded rises in welfare spending.  Without going into details on the defence budget, he underlines that defence spending is more likely to rise than fall further: the Ukraine conflict has shown has stretched the UK’s stores of equipment and ammunition have become.  He doesn’t remark that rising North Sea oil revenues in the early 1990s (and the one-off gains from privatization) allowed Margaret Thatcher to cut taxes without deep cuts in services – though in retrospect she would have been wiser to accumulate oil revenues in a sovereign wealth fund, like Norway, or allocate them to improving the UK’s infrastructure.

North Sea oil revenues are now running down; and privatization has long since run its course.  So any government is faced with hard choices, about the level and distribution of taxation and about priorities in public spending.  ‘There are no easy solutions to the problems we face.  Tax cuts do not pay for themselves.  Debt cannot rise forever.  Spending implies taxing.  Economic constraints are real.’  (Tell that to Liz Truss and Boris Johnson.)

Liberal Democrats will disagree about the dilemmas he poses in raising the money.  But we will welcome his calls for long-overdue simplification of the UK’s tax system – which he partly blames on the ritual of annual budgets, with Chancellors loving to pull yet more concessions and allowances out of their hat as they dazzle their Commons audiences.  He warns of the complexities of taxing wealth, urges a reduction in tax reliefs and more attention to effective tax enforcement.  He is critical of the low level of welfare provision, but urges persistence with universal benefits and is sceptical about replacing them with some form of universal basic income.

Both on health spending and on education, he notes how the constant changes of government direction and policy have wasted resources in repeated reorganization at the cost of broader reforms.  Against right-wing taunts that the NHS is stuffed with managers, he notes that in comparison with other countries’ systems it is under-managed – as well as under-funded.  He is scathing about the long-term financial neglect of education and training for those who do not go to university, which has led to a national shortage of key skills in the work force.  He addresses the shift in taxation that must accompany a move to a sustainable economy.  There’s a wealth of detail on different areas of public spending, in clear prose supported by figures.  Liberal Democrat activists, Councillors and parliamentary candidates should all read it.

Two weeks ago, Paul Johnson returned to his attack on Tory irresponsibility, ‘despairing’ in a column in the Times about Conservative consideration of abolishing inheritance tax before the coming election, when the Office for Budget Responsibility had days before spelled out the severity of the fiscal challenges that Britain faces.  Tax cuts would have disastrous consequences for public services, and government debt.  Responsible government must make the case for tax reform and simplification – desperately needed – and for tax increases to fund public investment.  ‘More spending equals more tax’, he argues.  ‘Taxes in the UK are at their highest level ever but they are still well below the average of our European neighbours.  We can raise them.’

* William Wallace is Liberal Democrat spokesman on constitutional issues in the Lords.

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28 Comments

  • Tristan Ward 3rd Aug '23 - 1:02pm

    It’s not just defence spending that will rise. Ukraine has to be rebuilt (by someone, assuming Putin can be ejected, and there are huge costs coming down the road to pay for the transition to net zero. The national debt is huge, and so is the interest bill on that.

    On top of that the country simply seems not to be working any more: putting the infrastructure in place to make it work better will cost a bomb (though other solutions are of course available to help make things work better).

    And we all know about the endlessly increasing costs of health and old age….not to mention teachers pay and everything else.

    I was at a recent talk where Will Hutton suggested tax and other measures that might by the end of a parliament raise £100 billion a year – which is peanuts when you consider the urgent demands.

    “Squeezing the rich” and windfall taxes will not raise the necessary money either. I suggest significant general tax rises are not politicaly sustainable.

    The only easy source of significant money essential to get to net zero (I suggest the political problem that overrides all others, with education next) in particular is private capital.

    Private capital will have to be paid to invest – which means it has to make profits in exchange for the risk it us taking. Liberals should be willing to accept this.

  • “‘There are no easy solutions to the problems we face. Tax cuts do not pay for themselves. Debt cannot rise forever. Spending implies taxing. Economic constraints are real.” This should be self-evident.
    There are however solutions (albeit not easy) that can begin to address the structural problems that beset the UK economy including the shift in taxation that must accompany a move to a sustainable economy as this article outlines
    https://londonlovesbusiness.com/we-tax-the-wrong-things-as-natural-resources-are-a-free-gift-of-nature/

  • Peter Martin 3rd Aug '23 - 2:09pm

    “Debt cannot rise forever”

    Joe and other neoliberals might think that it is self evident that it (ie Govt debt) can’t but a quick glance at a graph showing the rising debt level since the National Debt was first created in the 17th century would indicate just the opposite.

    The Government rarely goes out to borrow money in the sense that it actively asks others for a loan. It acts more like a bank and seeks deposits which usually involve the sale of gilts or government bonds. Its is often said in MMT circles that the government’s debt is everyone else’s asset. Or that the government’s deficit is everyone else’s savings. The government cannot force anyone else to save with it but if they want to do that it makes sense to let them.

    Anyone complaining the Government’s deficit is too high is also complaining that the rest of us, including our overseas trading partners, are saving too much.

    Having said this, there is an inflation problem at the moment and not much spare capacity in the economy. If William Wallace had explained the need for govt to keep a relatively tight fiscal policy because of this he would have been right in his analysis.

    It’s inflation and the extent of unused economic capacity which is important. Deficits and debts will look after themselves if the economy is run sensibly.

  • David Evans 3rd Aug '23 - 4:01pm

    Hello Peter (Martin),

    The key part of your post is the last six words – “if the economy is run sensibly”.

    Our problem is that increasingly over the last thirty years it hasn’t been.

  • The problem with trying to run a market economy versus command economy is that consumers and producers make most of the decisions that mold the economy. While government activities can guide these decisions, it doesn’t make them.
    The state guides the overall pace of economic activity, attempting to maintain steady growth, high levels of employment, and price stability. By adjusting spending and tax rates (fiscal policy) or managing the money supply and controlling the use of credit (monetary policy), it can slow down or speed up the economy’s rate of growth or recovery from shocks and, in the process, affect the level of prices and employment.
    Ideas about the best tools for stabilizing the economy changed substantially between the 1960s and the 1990s. In the 1960s, the government had great faith in fiscal policy, or the manipulation of government revenues to influence the economy. Since spending and taxes are controlled by the government, these elected officials played a leading role in directing the economy. A period of high inflation, high unemployment, and large government deficits weakened confidence in fiscal policy as a tool for regulating the overall pace of economic activity. Instead, monetary policy—controlling the money supply through such devices as interest rates and quantitative easing—assumed a growing involvement.
    Tax and spending decisions ultimately come down to political decisions on the extent of public services and welfare provision to be delivered by the state rather than longer-term economic growth considerations. In the UK, historically that level has been around 40% of national income across the business cycle and financed by a combination of tax and borrowing. It has proven difficult for any government to go much beyond or below these levels for any length of time and stay in power, so we get periodic changes of government to redress the balance when policy swings too much one way or the other.

  • It should not be forgotten that Thatcher came to power in 1979 with a very clear idea/theory about how to turn around the stuttering economy that made us “The sick man of Europe”. She believed that cutting taxes, balancing the books, and breaking the power of the Unions would revitalise the economy. NS oil revenues started in 1980 and immediately went big. A little later the big, early privatisations like British Gas and BT raised lots of money.

    Result: an epic depression. From memory around 25% of UK manufacturing closed permanently but Thatcher was saved by the Falklands War which enabled a covert U-turn on spending.

    Later, especially as NS revenues declined from the mid-90s, financial deregulation meant that borrowing (but privatised as mortgages and, later student loans) soared. I didn’t attempt the sums, but those two, if redenominated as national debt, might double it.

    Bottom line: Thatcher’s theory was WRONG but worked politically for two reasons, firstly it made influential people (including many middle class) richer and, secondly, because there was and is no effective opposition in the sense of an alternative understanding of the economy and, flowing from that, what policy actions to take.

    The tragic thing is that developing a better understanding of the economy is something a small party can and should do.

    So, to change the world (or just the UK) this party needs to ask itself why it’s unable to address the ‘big picture’ issues.

  • Tristan Ward 3rd Aug '23 - 10:03pm

    @ Gordon

    Why is it wrong to want to “balance the books”? You seem to suggest that it us wrong to want to do so.

    I am a simple animal. It seems to mw to be self evident that if you cannot pay for something you cannot have it. Yes you can borrow provided you can (a) pay the interest AND (b) so long as your creditor is willing g to lend money to you and (c) does not want the capital back. What am I missing?

  • Liberal democrat economic policy has its roots in classical political economy, Henry George’s Land Value Tax, the ethical and communitarian economics of the New Liberals, and the ‘constructive’ Liberalism in the role of the state in economic planning which emerged from neoclassical economics and the ‘national efficiency’ movement of the 1900s. The Liberal Industrial Inquiry’s 1928 Yellow Book marked radical Liberals’ enthusiasm for industrial reorganization and public works.
    The enthusiasm for public works and Keynesian economic management – which David Lloyd George launched onto the political agenda at the 1929 general election – was only intermittently matched by support for more detailed forms of state intervention and planning. Likewise, the party’s support for redistributive taxation and social welfare provision was frequently qualified by the insistence that the ultimate Liberal aim was not the expansion of the functions of the state but the pursuit of ‘ownership for all’. Post-war Liberal policy was shaped by the ideas of reformist intellectuals such as John Maynard Keynes and William Beveridge. Beveridge espoused a constructive Liberalism declaring that Liberalism was ‘a faith, not a formula’ and that its economic content must change to reflect the economic context.For Beveridge, not only was the old doctrine of balanced annual budgets entirely redundant, but even free trade was no longer a fundamental tenet. It was ideological and generational changes in the early 1960s under Jo Grimond that opened up common ground with revisionist social democrats, re-established its progressive credentials and ultimately formed the basis for the Liberal/SDP merger and the manifestos that have since followed.

  • Peter Martin 4th Aug '23 - 8:13am

    @ Tristan Ward,

    “Why is it wrong to want to ‘balance the books’?. ………What am I missing?”

    Good question!

    It’s fine for you and I because we are *users* of currency. The same argument would apply to your local council and even the devolved Governments of Wales, Scotland and Northern Ireland. However it is different for the Westminster government which is an *issuer* of currency.

    If it collects back in taxes every £ which it has issued by spending them into the economy, which can be either in cash or other securities such as bonds, then there wouldn’t be any £ in the economy. So the Government has to adjust its spending to ensure that the economy is running neither too hot nor too cold.

    That’s all there is to it. Although some would say it’s easier said than done.

  • The governments deficit is the outcome of its spending decisions and timing of tax receipts. Debt as a % of GDP and deficits increased significantly during the Covid Pandemic. Household savings increased to historically high levels as a consequence of lack of goods and services for discretionary spending. However, as lockdowns ended and the economy began to reopen inflation started to rise as accumulated savings began to be spent. While it was hoped this would be transitory, the inflation has proven persistent and has been exacerbated by the Ukraine war. The government is engaged in tightening both fiscal policy and monetary policy in an effort to reduce spending in the economy and contain inflationary pressures.
    Lord Wallace’s article concludes quoting Paul Johnson “Tax cuts would have disastrous consequences for public services, and government debt. Responsible government must make the case for tax reform and simplification – desperately needed – and for tax increases to fund public investment. ‘More spending equals more tax’, he argues. ‘Taxes in the UK are at their highest level ever but they are still well below the average of our European neighbours. We can raise them.’
    This is the crux of the issue. We can raise taxes in certain areas like Employers National Insurance and Property taxes and at the same time make the tax system more progressive and equitable.
    The proposal that Liz Truss was advocating about cutting taxes and offsetting the cuts by raising interest rates (which were always going to go up anyway) or cutting spending to raise economic growth when there are real constraints in the economy, as Paul Johnson points out in his book, caused severe economic harm to millions of people across the country and the credibility of the UK’s financial stability credentials.
    Management of the public finances requires competent individuals that can apply clear-headed thinking. Paul Johnson has established the IFS as one such group. Jeremy Hunt has displayed such thinking as has Rachel Reeves for Labour and Sarah Olney for the LibDems

  • Christopher Haigh 4th Aug '23 - 2:27pm

    Given the cost if living crisis domestic demand in the economy must be in a state of weakness The interest rate rises by the bank of England must be to sell treasury bonds overseas to bolster the value of the pound to eliminate imported cost push inflation. This is how we can justify party policy to help suffering mortgage holders

  • Christopher,

    the BofE is forecasting that the UK will avoid recession Bank of England says interest rates will remain high for at least two years but as you indicate not by much of a margin with 0.4% growth predicted for 2024. The banks forecasts indicate that “The unemployment rate was projected in May to remain below 4% until the end of 2024, before rising over the second half of the forecast period to about 4.5%. Unemployment is now expected to increase to almost 5%, though the Bank said there was unlikely to be a significant rise in distressed mortgage payers defaulting on home loans.”
    The Resolution Foundation writes “the Bank’s forecasts suggest that the backdrop to the election next year will be rising unemployment, average increases in mortgages of around £3,000 as households move off fixed-rate deals, and weak GDP – with growth for 2024 the weakest for an election year since 1992 (at just 0.4 per cent).”
    I would advocate the introduction of a job guarantee scheme in the LibDem manifesto targeted at the circa 350,000 long-term unemployed (unemployed for over six months). That would provide for direct measures aimed at boosting demand at lower income levels in 2024-25 and mitigating the rise in unemployment. It could be tax-funded via employers NI to bring UK social security levies closer to European levels How do UK tax revenues compare internationally?and avoid any inflationary impact of a fiscal stimulus until inflation expectations are firmly anchored at the 2% target.

  • Peter Martin 4th Aug '23 - 4:40pm

    @ Joe & Christopher,

    “BofE is forecasting that the UK will avoid recession”

    That’s all right then! So there’s nothing to worry about? Or maybe there is?

    A slightly more honest view comes in an article from the FT a few years ago.

    “Bank of England not able to forecast next recession, it admits”

    Andy Haldane called the bank’s failure to forecast the 2008 financial crisis a “Michael Fish moment” after the weather forecaster’s infamous 1987 dismissal of a hurricane in England that duly arrived.

    So by their own admission their models “aren’t that good” and they couldn’t get it right in 2008.

    The BoE has been undecided about whether we’ll have a recession. Around half say we will and have say we won’t. So whatever happens they’ll be able to produce a reference showing they got it right.

    FWIW, my prediction is that we won’t just have a recession we’ll have another crash.

    https://www.ft.com/content/005d4c0e-f84e-11e6-bd4e-68d53499ed71

  • @ Tristan Ward

    Read what I wrote in context – a short list of things Thatcherites believed would revitalise the economy. IIRC, it was done in the context of a business downturn which was made far, far worse by the lack of deficit spending so it was wrong. In general, as a currency issue (see Peter Martin) the government doesn’t have to balance the books. The oft-forgotten extra factor is that it DOES have to create value – but that’s complicated and another story.

    The larger point I was driving at is that considered in the round, Thatcherism has been an epic failure. I remember some research done after she was deposed that looked the effect on UK industry expecting to find that the dead wood had been pruned leaving survivors fitter and more competitive. They actually found a bimodal distribution; one group was internally competitive and one way off the pace. The difference? The laggards were UK-owned, the better ones foreign-owned.

    So, the wider point is that Thatcherism has comprehensively failed at every level per WW’s article and it’s getting critical as the underlying pathology remains undiagnosed, let alone treated.

    One might expect another party to sweep in with a clear idea of their goal, and a hard-headed strategy to get there but the LibDems aren’t even close. I don’t believe they have the institutional capacity to do so. And that should worry all of us.

  • Peter Martin,

    as Niels Bohr, the Nobel laureate in Physics and father of the atomic model, is quoted as saying, “Prediction is very difficult, especially if it’s about the future!”
    The Economist article How high should Britain’s interest rates go? writes “…it can take over a year for the effects of monetary policy to feed into the economy. The sophisticated central banker is supposed to “target the forecast” for inflation, rather than reacting too zealously to what has already happened. Otherwise, he might neglect inflationary or disinflationary pressures that are starting to build but do not yet appear in the data.
    The trouble is that inflation forecasting has gone haywire of late. In July 2022 the average forecaster surveyed by the Treasury expected inflation to fall to 3.6% by the end of 2023; today the expected figure is 4.9%…The less confidence you have in economists’ assurances that the inflation problem will soon dissipate, the trickier it is to set aside the fact that the hard data say monetary policy is still too loose.”
    Chancellors and Finance Directors nonetheless have to produce fiscal budgets and firms business plans on the best forward looking macroeconomic data that is available to them. That data is principally the BofE, Treasury and OBR forecasts together with external assessments by trusted bodies like the IFS. Stagflation is a tricky economic environment to navigate and requires careful calibration of the economic levers available to government to avoid inadvertently precipitating an economic crash.

  • Gordon,

    if by balancing the books you mean achieving a budget surplus, that occurred in 1988 for one year only. Government spending rose by almost 13% between 1979 and 1990 in real terms. Overall, Britain’s total debt-to-GDP ratio fell from 46% in 1979 to 32% in 1991. It was not budget surpluses that reduced debt as a % of GDP, but the combined effect of economic growth and inflation. just as it was in earlier post-war years.
    During the 1980s the government allowed the economy to expand at a significantly higher rate than its long-run trend growth rate. This was because they felt there had been a “supply side miracle”. They argued that its supply-side policies enabled the economy to grow at a faster rate than before. It proved over-optimistic; most of the economic growth was caused by consumer borrowing and spending. This was reflected in a large current account deficit and growing inflation.
    The process of de-industrialisation and growth of service sector was inevitable, whatever politicians had done. However, Thatcher’s stubbornness in 1981, did mean we experienced a much deeper recession than was necessary.
    The supply-side policies of the 1980s were a mixed bag. There is no doubt that some privatised industries saw great strides in efficiency and quality of service – a combination of both privatisation and greater competition. The greater labour market flexibility, could be responsible for reducing the structural unemployment that developed in the UK (though it took many years to have an effect) and was not accompanied by the necessary investment in the Northern industrial and coal mining regions worst affected.
    She came to power promising to solve inflation, but left power with an unnecessary inflationary boom, which led to another unnecessary recession and housing crash in 1991. The next government that takes over from Sunak’s administration needs to be careful to avoid those same mistakes.

  • Peter Martin 5th Aug '23 - 8:30am

    “if by balancing the books you mean achieving a budget surplus, that occurred in 1988 for one year only.”

    The Government deficits were small for other years too.

    ” most of the economic growth was caused by consumer borrowing and spending…….”

    So was the Government surplus and other low deficits. If everyone is borrowing and spending, government tax revenues increase too. Government surpluses/low deficits aren’t always the good thing the mainstream claim them to be. In an economy like the UK’s they are more likely to be an indication of the build up of too much private debt.

    When the private debt bubble bursts we then see a recession. This happened just a few years later in the early 90s.

    “…….this was reflected in a large current account deficit and growing inflation.”

    No. The two aren’t connected. No matter how large a credit boom we create, we can’t force other countries to supply us with more goods and services than they accept from us in return. This has to be entirely their choice. However, if the government does create a credit boom, spending will naturally increase sharply. Naturally this will have potentially inflationary consequences, and particularly in the property market.

  • Peter Davies 5th Aug '23 - 10:58am

    “if by balancing the books you mean achieving a budget surplus, that occurred in 1988 for one year only.”

    A better definition is static real-terms government net worth. That is a situation where total government assets – debts remains constant adjusted for inflation (an alternative version adjusts for GDP).

  • Peter Martin,

    bank lending inflates land prices and, thereby, interest payments to the financial sector. The more banks lend, the higher real estate prices rise, thus encouraging more bank lending. When the imbalance becomes too large, the bubble bursts.
    Just as mortgage lenders regard the rental income from property as a flow of money that can be diverted to interest payments, international banks regard the export earnings of foreign countries as revenues that can be used to pay interest on foreign loans.
    The US Treasury and State Department supports Caribbean tax havens in order to offset the negative impact on the US balance of payments of US military operations abroad.
    The US is the world’s second largest financial centre with a 19% share of global finance transactions. The largest is the UK with a 25% share and 9 of the 10 main offshore tax havens. The flow of capital from around the world to the City of London has enabled the to UK to run large current account deficits since 1983. The ONS reports “Although the balance of payments accounts are, in principle, balanced, in practice imbalances between the current, capital and financial accounts arise from imperfections in source data and compilation. This imbalance, a usual feature of balance of payments data, is labelled net errors and omissions”. According to the investigations of economist Michael Hudson “errors and omissions,” is an euphemism for the hot, liquid money of drug dealers and government officials embezzling the export earnings of their countries. https://www.counterpunch.org/2016/02/03/why-michael-hudson-is-the-worlds-best-economist/

  • Peter Davies,

    I think you are right. Debt as a proportion of public assets is a more meaningful measure than debt as % of GDP if the principle purpose or use of deficit funding is investment in physical infrastructure.

  • Christopher Haigh 5th Aug '23 - 2:20pm

    Liberal Democrats don’t appear to be represented on the parliamentary treasury committee, so how does the party question the policy of the Bank of England in detail ?

  • Peter Martin 6th Aug '23 - 9:02am

    @ Joe,

    You’re right that property prices will rise because everyone expects them to always rise on the basis of previous experience. The banks will always lend into a rising market which secures their collateral – so there’s no point blaming them.

    You’ll have a rising market when interest rates are lowered as monetarism has now almost entirely replaced Keynesianism as the main tool of economic policy. The problem arises when interest rates are increased by govt. This converts high levels of private debt in bad private debt. This is not the natural market based process you allude to. It is a quite deliberate act of government.

    You are right that a deficit in the current account can be offset by a surplus in the capital account. The two sum to zero in a currency which is allowed to freely float. You are also right that the use of tax havens with the direct encouragement of the UK govt also facilitates the movement of very shady sources of “hot money”.

    Do the Lib Dems propose doing anything about this?

  • Ant-corruption and tax evasion measures that need to be introduced are well understood and highlighted in the Transparency International campaign
    “Almost without fail, anonymous companies and trusts appear at the centre of major cases of corruption, money laundering and tax evasion”.
    “Countries should create centralised, public registers of beneficial ownership with verified information on who ultimately owns or controls these structures. These would allow everyone to see who’s hiding behind anonymous companies and trusts – and help authorities, journalists and civil society to more effectively expose and fight corruption, money laundering and other financial crimes”
    High Priced Luxury property is the asset of preference for much of the illicit funds funnelled through the City. There is reportedly almost 52,000 such properties held anonymously through 18,000 offshore companieshttps:NEARLY 52,000 UK PROPERTIES STILL OWNED ANONYMOUSLY – DESPITE NEW TRANSPARENCY LAW. Requiring the registration of beneficial ownership of all land in the UK (not just the holding company) and taxing that land is an important element in combatting corruption, money laundering and tax evasion.

  • Peter Hirst 6th Aug '23 - 2:19pm

    The missing word in this blog is “growth”. By sustainably growing our economy we can fund our public services without borrowing or increasing taxes. The opportunities for green growth are enormous with the right investment.. Discussing tax and spend is like rearranging the deckchairs on the Titanic without mentioning increasing the country’s income.

  • Peter Hirst,

    sustainable growth implies lower economic growth in terms of GDP and more emphasis on quality of services, wellbeing and environmental constraints . A better quality of life, lower inequality, shorter working hours and much less focus on consumerism is a different approach to ever increasing levels of output of goods and services.

  • Peter Hirst 6th Aug '23 - 2:46pm

    I agree with all you state Joe. However we would still need some income to fund services and provide for a decent material life. It should come from expanding some existing industries such as organic food production, renewable energy, electric cars and the insulation industry and creating new ones such as carbon capture, nature enhancement and vital infrastructure. Whether this can be done without maintaining some GDP is debatable.

  • Peter Martin 7th Aug '23 - 8:04am

    @ Joe,

    ” A better quality of life, lower inequality, shorter working hours and much less focus on consumerism is a different approach to ever increasing levels of output of goods and services…..”

    That sounds a bit like socialism , Joe!

    @ Peter Hirst

    “However we would still need some income to fund services…..”

    What we need are resources rather than income per se. A reliable and consistent source of clean energy is probably our greatest need right now. Money in itself won’t create that. Money can, however, be used to divert creative human and other resources from doing something else towards a solution to that problem.

    ” It (money ?) should come from expanding some existing industries such as organic food production, renewable energy, electric cars and the insulation industry and creating new ones such as carbon capture, nature enhancement and vital infrastructure.”

    These are all worthwhile projects but it’s still a mistake to think in terms of expanding some industries to “pay for” others. Think of how the government diverted resources for the war effort in WW2 for example. That wasn’t by creating new industries to create extra spending money for government.

    “Whether this can be done without maintaining some GDP is debatable”.

    Not really. Again using the WW2 example, the spending on producing armaments caused GDP to rise sharply. Take a look at the data. The extra spending on ‘green technology’ will do the same.

  • David Symonds 8th Aug '23 - 10:59am

    May i mention that the Sovereign Grant is to be raised by 45% this year! Absolutely shameful at a time when people are struggling with household bills and high mortgages. The King gets £86M a year from the taxpayer and that should be frozen or in my view halved so that other pressing priorities can be made for the taxpayer and the nation. I ask that Lib Dem MPs and Peers raise this matter with the Chancellor of the Exchequer and senior Government Ministers as a matter of urgency. If the King had any thought he would ask the Govt to abandon the rise but he probably won’t. Remember that the Duchies of Cornwall and Lancaster each net £50m a year for the royals as it is. Justice or what?

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