Last week, the government lied about there not being enough money to pay the public sector workers, unless there were compensatory cuts.
Since the money involved in meeting the pay review demands is around £4 billion, which the head of the Institute for Fiscal Studies, Paul Johnson, has described as “money down the back of the sofa” and that out of the total UK public spending of around £1 trillion, it’s trivial – equivalent to an accounting or forecasting error.
Indeed, more than seven times this £4 blllion sum can be found if the Bank of England were to stop unnecessarily showering the commercial banks with more and more money as a part of its Quantitative Easing (QE) programme.
This huge funding source was first highlighted last week by fellow member of the Green New Deal group, Richard Murphy, in his blog entitled ‘If only the government preferred people to bankers we’d all be more than £30 billion better off’.
Indeed Richard, the New Economics Foundation’s Frank Van Leuven and Dominic Caddick have been warning about the unearned income provided to banks by the QE process for a year now.
Richard’s blog details how around £30bn can be diverted from the banks to provide funding for secure, adequately paid jobs and much needed improvements in the social and environmental sectors of the UK.
This is not, of course, the only funding source for such a crucial social and green new deal. Others are the estimated £55 billion a year of tax breaks for pension savers which must be redesigned to support employment creating investment with social and environmental goals, as should some of the £70 billion a year saved tax free in ISAs.
Increased revenue could also come from a fairer taxation system, where the wealthier contribute far more. Finally as a backstop for any funding shortfalls, the Bank of England’s QE money creation programme could be restarted, though with only minimum interest paid to the commercial banks for their involvement.
Clearly money is not a problem. What is, though. is the lack of political will of politicians from all parties and the lack of a consolidated campaign by unions, business and social and environmental activists to enable MPs to confidently answer the question always asked regarding any proposal to improve social and environmental conditions – ah yes, but how do you pay for it?
It was heartening to read Paul Mason’s positive call for an economic regime change in an otherwise rather dispiriting New European #347, with its projections of the rise of the extreme right in Germany, Spain and France.
To prevent this, the centre left in all countries have got to give a message of hope by explaining why there is more than enough money to pay for the social and environmental improvements that their increasingly insecure voters crave.
In the UK, £30bn could easily be found to meet these needs. During the banking crisis of 2008-09 and Covid in 2020, more than £875bn of government-created money via quantitative easing (QE) was transferred to the commercial banks, and then on to the private sector and individuals.
Although doing nothing to earn this money, these banks are still paid the Bank of England base interest rate on the total sums they hold.
When interest rates were under 1 per cent, as they were from 2009 to 2021, these interest costs were insignificant. Now that the base rate is 5 per cent, the sum paid has soared to about £45bn a year. But if the majority of this money was paid at 0.1 per cent interest, it would save around £30bn per year that could be spent on social and environmental projects.
Another source could be from making the £70bn a year invested in tax-free ISAs dependent on them being used for employment-creating social and green investments.
Clearly money is not a problem for the UK or other European countries. The problem lies with the lack of political courage and vision from centre left parties Europe-wide.