Ahahahahahhhhhhhhha

The simple reality is that the premise of the report is wrong. The way to fund £20bn of extra healthcare spending is for the government to create the necessary funding for that purpose. And it can do this at any moment. The fact is that tax does not precede spend. It is always, and inevitably, true that spend precedes tax. In that case the hypothesis that extra tax must be raised before the NHS can be funded is incorrect. What actually happens is that if the government spends an extra £20 billion into the economy, and increases GDP directly as a result (because government spending is part of GDP, because it creates wealth) then the government can, if it so wishes, claim back some, all, or even more of that spend in tax if it so wishes, with the possibility that it might claim back more than is even spent being made possible by multiplier effects, which are quite high in the case of NHS expenditure.

Ritchie’s new theory. We don’t have to tax £20 billion in order to spend £20 billion more on the NHS.

No, no, don;’t be silly, MMT and all that.

Instead we should tax £30 billion extra in order to spend £20 billion on the NHS.

Much, much, better and MOAR TAX, d’ye see?

35 comments on “Ahahahahahhhhhhhhha

  1. Anyone familiar with how the cretin thinks – could they please explain to me something – How are the ‘Multiplier effects’ of NHS expenditure high? Is this some theory that all expenditure by the NHS automatically improves health and therefore yields more than the input? Is he really that deranged? It’s like the guy has had a frontal lobotomy with an icepick.

  2. So let me see if i’ve got this correct. Because of the multiplier any spending will repay itself through tax receipts (and may even exceed the initial spend) This is holy writ, but only applies to future spending, otherwise why is government debt so humungous – surely it pays for itself? Tax is only used to control inflation not for spending and if tax receipts exceed spending as per above then thats deflationary which is bad – we should have inflation so the multiplier must not lead to tax equalling spending, so spending must be greater than tax receipts so can’t pay for itself. Governments can spend the hell what they want without taxation which is only used to control inflation caused by government spending which is a free ride anyway, that pays for itself through taxation, but must not equal or exceed the original spending because deflation is bad.

  3. VP; that occurred to me as well; presumably he believes that the NHS pays for itself, ‘cos that’s what Bevan himself told him over lunch.

  4. “How are the ‘Multiplier effects’ of NHS expenditure high?”

    Positives such as this just “are”. They do not need to be proven. Everyone knows them. Because it would be good if they were true so to deny them means you want old folk and babies to die.

  5. “why is government debt so humungous – surely it pays for itself?”

    Negatives such as this “are not”

    Do you want old folk and babies to die?

  6. This sounds like the economic equivalent of the perpetual engine.

    What is truly scary is that other people think he’s talking sense.

  7. Fucking hilarious. The official treasury view of Ritchie’s tax gap analysis is now filed in the HoC library for all to see:

    http://researchbriefings.files.parliament.uk/documents/CBP-7948/CBP-7948.pdf

    Page 13: “In a debate on tax avoidance in June 2010, Treasury Minister David Gauke acknowledged these figures implied the gap was much, much greater than HMRC had estimated, but went on to argue that the analysis was ‘deeply and systematically flawed’; the Ministers comments are worth reproducing at some length:” and then they rip every part of Ritchie’s analysis to shreds.

  8. How does any government run a budget deficit then, for more than a year or two?

    If all spending creates its own tax revenue by over 100%, why is any country ever running a massive budget deficit? How come the UK has had over 10 years of deficit spending and the budget is still in the red?

  9. Jim

    I think the (Murphy) answer to this is

    (How can it be that?) no-one has seen fit to appoint Murphy to office to procure the outcome he promises.

  10. Noel Scoper,

    Mr Gauke could have saved a lot of time and paper by remarking “Murphy’s tax gap analysis is bollocks and the figures were pulled out of his arse”.

  11. Wait! ~It’s only the second Wednesday of the month and the moon is in the other half!

    He’s got his timing wrong!

    Unless I’ve missed a special bit of his complicated theories…

    OTOH he’s just a wanker…

  12. Hang on! Of course he’s right!

    Venezuela lends us £20,000,000,000,000,000 Bollys at a negative interest rate of -150% and raises its lower rate of taxation to 101%.

    Then, at precisely 10.49 on February 29, 2021 when the moon is full, Jezza digs into his wallet and repays the loan with a used fiver (keep the change fellow socialists!) and wham! the Venezuela economy is rescued and the NHS remains the Wonder of the World!

    A mighty one two from the dream team of Dick and Jezza!

    (Inspired by moqifen)

  13. @Noel

    Another super spot. Thank you. People are always criticising Murphy because the stuff he writes is not peer reviewed. Well now his tax gap work has been;

    “deeply and systematically flawed”

    “greatly overstates the tax gap”

    “an element of double counting”

    “The Tax Research estimate of tax debt is £28 billion. That is a snapshot of all tax owed on 31 March 2009 which does not represent the actual losses…[which were] £3 billion”

    “simply nonsense”

    “the £120bn figure ‘could be dangerous if not countered”

    “Murphy had claimed the annual cost of evasion was £70bn…Mr Murphy had assumed that the size of any tax gap would be the same across all taxes…” “…it gives completely the wrong answer for income tax due from employees”

    “Tax Research UK…uses a variant of a ‘currency demand’ model…The use of ‘currency demand’ models has been comprehensively and extensively criticised…”

  14. Someone should send it to Murphy’s employers. So they know the quality of the man they are funding.

  15. Richie’s policy worked well in Germany in the early 1920s. Everyone was a billionaire! Such was the boom that cash was constantly running short. Only dullards would choose to hold Britain back.

  16. Dear Mr Worstall

    And in other news, P. Murphy has launched a space programme whereby he will reach the moon by standaing in a bucket with two ropes tied to the handle with which he will lift himself up into earth orbit and therefrom to a transfer orbit to the moon, where he will lower himself gently to the surface.

    All he needs is a space suit.

    DP

  17. I really struggled to get my head round MMT put forward by Spud.

    I’ve recently been listening to one of McDonell’s economic advisers (missed her name) and an excellent Planet Money primer on the subject. I now realise the problem was Spud’s mangling of the subject, not me.

  18. “It (taxation) may be to reduce inequality i.e. taxing those with more than others simply for social purpose”

    I can understand the social purpose of giving money to poor people, but the “social purpose” simply of taking an honest man’s money from him? For if spending preceeds taxation, which in turn does not contribute to that spending, then this confiscation makes no difference to the welfare of the poor does it?

  19. The Planet Money podcast isn’t an excellent primer, to my mind.

    I really don’t know where to begin. To say that if you hold your head funny and then act correctly you’ll get wonderful results is kinda useless unless the bounds on acting correctly are understood. Else you’ll end up in inflation horror. Or all the economy building politician-favoured bridges to nowhere. Etc.

    And the stuff only works – even in their own minds – if there’s in essence no external money effects of any substance. (You can’t pay dollars back with discounted bolivars) – so the relevance seems remarkably narrow.

    Unless you’re after establishing a World Government, of course.

  20. We’ve all been hoodwinked. In line with his green credentials, the whole of the £20 billion is to be spent taking the NHS “off grid”. Every piece of equipment will be powered by renewables and all vehicles will be electric. Powering all hospitals, doctors surgeries etc by renewables will increase employment by 20 million as solar panels and windmills will be attached to every roof surface in the entire nhs estate. As a bonus theres a stockpile of body parts that haven’t been incinerated. As is well known due to the intransigence of the evil tories the incidence of food poverty has exploded with a massive increase in food banks. Despite this puzzingly there is a crisis of obesity so these surplus body parts will have lots of fat on them which means the incinerators can power large steam turbines.
    At a stroke will will solve the unemployment problem, solve global warming, tax receipts will be in the gazillions and without any negative side effects. In fact it’s reckoned uk tourism will increase by 500% as the world comes to marvel at our totally renewable eco friendly NHS. Their will be no negative side effects , though to be on the safe side it will be best to delay any vital surgery until midday on a sunny day in august and not to visit casualty after twilight. Tests of bicycle powered generators on hospital wards have been deemed “not a success” though Mr Murphy puts this down to neo liberal thinking which he hopes to eliminate by the withholding of medication (thus again saving the nhs money)

    Truly a genius walks amongst us

  21. All those Nobel Prize winners and great so-called economists of the past hundred years who didn’t realise you could just print money and spend it on the NHS and just watch the money roll in.

    If you could make loads of money from NHS spending Goldman Sachs would own the Department of Health by now.

  22. “The way to fund £20bn of extra healthcare spending is for the government to create the necessary funding for that purpose. And it can do this at any moment.”

    So, let me get this straight.
    1) There is no need to raise taxes to fund the healthcare spend.
    2) therefore it’s wrong to say that you must raise tax at the same level as the spending – that would be an evil Tory lie.
    BUT….
    3) You must raise tax to match the spending. In fact you might need to raise taxes even MOAR!!! This is good and courageous.

    This statements are, candidly, consistent and anyone who suggests otherwise is to banned.

  23. Powering all hospitals, doctors surgeries etc by renewables will increase employment by 20 million as solar panels and windmills will be attached to every roof surface in the entire nhs estate. As a bonus theres a stockpile of body parts that haven’t been incinerated. As is well known due to the intransigence of the evil tories the incidence of food poverty has exploded with a massive increase in food banks. Despite this puzzingly there is a crisis of obesity so these surplus body parts will have lots of fat on them which means the incinerators can power large steam turbines.

    Why would we need to incinerate body parts if the NHS is powered by the renewable sources?

    Could use them to solve the food poverty problem though…
    I bet the numbers going to the food banks would miraculously drop.

    Too macabre?

  24. I put it to him some years ago that the USSR had all the conditions available to do this.

    Plenty of natural resources, big population, its own currency to print as it wanted, plus the protections of the gulag from dissent.

    It should have been the richest country on the planet if Richie’s views were right.

    Comment just got the usual avoidance.

  25. Adrian: Sensible MMTers (e.g. me not Murphy) simply claim that having your own currency has an advantage, namely that the relevant country and “print and spend” UP TO THE POINT where full employment is achieved. Indeed, that’s what Keynes said.

    The “freedom to print” will not of itself make up for poor productivity of the sort found in Russia.

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