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You can find the current article at its original source at https://www.theguardian.com/politics/2017/sep/27/labour-should-be-wary-of-the-magic-money-tree
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| Labour should be wary of the magic money tree | Labour should be wary of the magic money tree |
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| John McDonnell would be better advised to put a levy on PFI contracts held by non-EU tax domiciled companies, rather than make a pledge which could turn out to be as disastrous as university tuition fees were for the Liberal Democrats (McDonnell’s hall of smoke and mirrors, 27 September). This tax would make it cheaper to buy out the most intractable and inflexible contracts delivering a rotten public service. | John McDonnell would be better advised to put a levy on PFI contracts held by non-EU tax domiciled companies, rather than make a pledge which could turn out to be as disastrous as university tuition fees were for the Liberal Democrats (McDonnell’s hall of smoke and mirrors, 27 September). This tax would make it cheaper to buy out the most intractable and inflexible contracts delivering a rotten public service. |
| Even in the New Labour years, taxation in Germany was consistently higher than the UK. In the seven years before the financial crash this gap averaged 2.25% of GDP. Since 2010 this has widened to over 4% of GDP – £75bn a year. Having originally opposed Major’s PFI, this is why, rather than raising taxes, Blair and Brown gladly signed up for these Ponzi schemes, whose Treasury cost-benefit analysis assumed PFI owners were paying UK taxes, without this being written into their contracts. Consistently higher taxation is why Germany has no need for a “magischer Geldbaum” (the magic money tree scoffed at by Theresa May). Meanwhile, Britain has ended up with austerity and Brexit.David NowellNew Barnet, Hertfordshire | Even in the New Labour years, taxation in Germany was consistently higher than the UK. In the seven years before the financial crash this gap averaged 2.25% of GDP. Since 2010 this has widened to over 4% of GDP – £75bn a year. Having originally opposed Major’s PFI, this is why, rather than raising taxes, Blair and Brown gladly signed up for these Ponzi schemes, whose Treasury cost-benefit analysis assumed PFI owners were paying UK taxes, without this being written into their contracts. Consistently higher taxation is why Germany has no need for a “magischer Geldbaum” (the magic money tree scoffed at by Theresa May). Meanwhile, Britain has ended up with austerity and Brexit.David NowellNew Barnet, Hertfordshire |
| • Stefan Stern is quite right (Chanting won’t save the NHS, 27 September), but why does he not mention the need for more money of all the public services, which must mean more taxes? Not more from those who do not have enough for a decent life. But not just from corporations and the very rich either. There are many people, like me, who are comfortably off, taking holidays (even two a year?), buying things we do not really need, decorating our homes, improving our kitchen equipment etc, and could quite well afford to pay more towards the general good of our society. | • Stefan Stern is quite right (Chanting won’t save the NHS, 27 September), but why does he not mention the need for more money of all the public services, which must mean more taxes? Not more from those who do not have enough for a decent life. But not just from corporations and the very rich either. There are many people, like me, who are comfortably off, taking holidays (even two a year?), buying things we do not really need, decorating our homes, improving our kitchen equipment etc, and could quite well afford to pay more towards the general good of our society. |
| Politicians – even Jeremy Corbyn – seem afraid to suggest this, but there are more public-spirited people than they realise. We might try thinking of ourselves not as taxpayers, who always seem to be assumed to be selfish, but as members of a community who have to subscribe to it according to their means. I want to pay more tax for the public services I enjoy, whether they are directly maintained by central government or delegated, with insufficient finance, to local authorities which are not allowed to raise their own money as they need.Susan ReynoldsLondon | Politicians – even Jeremy Corbyn – seem afraid to suggest this, but there are more public-spirited people than they realise. We might try thinking of ourselves not as taxpayers, who always seem to be assumed to be selfish, but as members of a community who have to subscribe to it according to their means. I want to pay more tax for the public services I enjoy, whether they are directly maintained by central government or delegated, with insufficient finance, to local authorities which are not allowed to raise their own money as they need.Susan ReynoldsLondon |
| • Philip Hammond must be as blind as he is bland if he really believes that “ordinary working people will end up footing the bill” for Labour’s economic policies (Corbyn warns Tories: shape up or ship out, 27 September). We know from the 2017 manifesto that Labour will seek to spread taxation according to ability to pay and that this approach attracted far more widespread support than anyone expected. If scaremongering is all the Tories can offer, bring on the next election.Ian GordonFolkestone, Kent | • Philip Hammond must be as blind as he is bland if he really believes that “ordinary working people will end up footing the bill” for Labour’s economic policies (Corbyn warns Tories: shape up or ship out, 27 September). We know from the 2017 manifesto that Labour will seek to spread taxation according to ability to pay and that this approach attracted far more widespread support than anyone expected. If scaremongering is all the Tories can offer, bring on the next election.Ian GordonFolkestone, Kent |
| • Professor Richard Murphy (Letters, 27 September) is mistaken when he claims that “QE debt carries no interest cost” and that we can ignore capital markets by using “People’s QE” to finance public spending cost-free. As a chartered accountant, he should know better. No debit exists without a credit, and the purchase of bonds by the Bank of England results in one form of public debt (government securities) being replaced by another (Bank of England deposits). Interest is payable on these deposits at the Bank of England base rate – currently 0.25%. This is not zero. | • Professor Richard Murphy (Letters, 27 September) is mistaken when he claims that “QE debt carries no interest cost” and that we can ignore capital markets by using “People’s QE” to finance public spending cost-free. As a chartered accountant, he should know better. No debit exists without a credit, and the purchase of bonds by the Bank of England results in one form of public debt (government securities) being replaced by another (Bank of England deposits). Interest is payable on these deposits at the Bank of England base rate – currently 0.25%. This is not zero. |
| Quantitative easing swaps the benefit of locking-in the interest rate payable on long-term fixed-rate government securities for variable interest charges. The good news is that the £435bn of QE debt that we have today has been swapped into deposits paying 0.25%, costing the exchequer just £1bn in interest each year on this element of the national debt. However, the base rate could change very quickly depending on economic conditions and the decisions of the Monetary Policy Committee. An increase to 2% – historically still quite low – would cost an extra £8bn a year in interest, while at 5% – the rate in 2006 before the financial crisis – the annual interest cost would be £21bn higher than it is now. | Quantitative easing swaps the benefit of locking-in the interest rate payable on long-term fixed-rate government securities for variable interest charges. The good news is that the £435bn of QE debt that we have today has been swapped into deposits paying 0.25%, costing the exchequer just £1bn in interest each year on this element of the national debt. However, the base rate could change very quickly depending on economic conditions and the decisions of the Monetary Policy Committee. An increase to 2% – historically still quite low – would cost an extra £8bn a year in interest, while at 5% – the rate in 2006 before the financial crisis – the annual interest cost would be £21bn higher than it is now. |
| Borrowing to finance public spending can be a sensible policy in the right circumstances, especially if directed at infrastructure and other investments that generate economic growth. But, politicians considering People’s QE as a policy choice should understand that there is no such thing as free finance, even for governments. As it turns out, even printing money costs money.Martin Wheatcroft Author of Simply UK Government Finances 2017-18 | Borrowing to finance public spending can be a sensible policy in the right circumstances, especially if directed at infrastructure and other investments that generate economic growth. But, politicians considering People’s QE as a policy choice should understand that there is no such thing as free finance, even for governments. As it turns out, even printing money costs money.Martin Wheatcroft Author of Simply UK Government Finances 2017-18 |
| • Professor Richard Murphy says the government would be doing large companies a favour by issuing more debt that they can place their enormous cash piles into. Such a hunger for secure savings opportunities would be evident, if it were there, in current purchases of gilts by said large companies. The government’s Debt Management Office regularly publishes the data on who owns gilts. Once we strip out local authorities, pension and insurance companies, banks, the Bank of England, foreigners and households we’re left with those “private non-financial companies” owning some £1.5bn or so of government bonds – under 0.1% of total issuance. This is not evidence of a craving for a secure savings opportunity.Tim WorstallSenior fellow, Adam Smith Institute | • Professor Richard Murphy says the government would be doing large companies a favour by issuing more debt that they can place their enormous cash piles into. Such a hunger for secure savings opportunities would be evident, if it were there, in current purchases of gilts by said large companies. The government’s Debt Management Office regularly publishes the data on who owns gilts. Once we strip out local authorities, pension and insurance companies, banks, the Bank of England, foreigners and households we’re left with those “private non-financial companies” owning some £1.5bn or so of government bonds – under 0.1% of total issuance. This is not evidence of a craving for a secure savings opportunity.Tim WorstallSenior fellow, Adam Smith Institute |
| • Good golly, Ms Polly (Ignore the cynics. Corbyn is forging a path to power, 26 September).Jane and John AirsLiverpool | • Good golly, Ms Polly (Ignore the cynics. Corbyn is forging a path to power, 26 September).Jane and John AirsLiverpool |
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| • Read more Guardian letters – click here to visit gu.com/letters | • Read more Guardian letters – click here to visit gu.com/letters |
| • This article was amended on 28 September 2017 to correct Martin Wheatcroft’s name in the subheading. | • This article was amended on 28 September 2017 to correct Martin Wheatcroft’s name in the subheading. |