He will no doubt claim he’s using it to pay interest on government debt. Five things follow. First, that’s a one off cost. Most of the extra cost is in index linked bonds and as inflation tumbled this year so will that cost, but tax revenues will remain 10% higher despite that.
That’s because inflation, which determines the cost of these bonds is going to disappear but absolute price levels which determine tax revenues are going to remain inflated by 10% or more. So money to pay nurses is available, after all.
Second, most of that extra interest cost won’t be paid for 15 years because of the way the index-linked bond system works: almost all this extra expense is paid when these bonds are redeemed and on average that’s in more than 15 years time.
Third, Barclay is ignoring that roughly one third of all government interest costs goes straight back to the government because it owns one third of the UK national debt. It’s terribly convenient for him to ignore a little detail like this.
That delay on the interest might apply to index-linked gilts. Not that I accept that accounting but still, let’s say we do.
So, how many of the index-linked gilts does the govt own? My estimation would be that the BoE, through QE, owns precisely none of them but I’m open to better information on that.
Little details, eh?
This is also interesting, don’t you think?
And there is of course the other essential point that Barclay misses altogether, which is that paying the nurses’ (and teachers’, and ambulance workers’) pay rises pay for themselves.
That’s because roughly 40% of the pay rise comes back in tax and national insurance the moment the payment is made, and tax is also paid every time the additional money paid to nurses is spent by those who benefit from that additional spending throughout the economy.
So, in fact, paying the nurses does in itself raise the additional taxes needed to pay the nurses (and others) what they are due right now. But Barclay either does not know that or does not want to know that.
If that’s true then the NHS costs us out here nothing at all. It’s all paid for by the tax raised from paying NHS workers. Which is fun, no?
So fun that it might not, actually, be true.
You are correct that the government/BoE currently owns no index-linkers
https://www.bankofengland.co.uk/markets/bank-of-england-market-operations-guide/results-and-usage-data#:~:text=APF%20financial%20stability%20gilt%20portfolio%20holdings%20%C2%A30%20million&text=As%20confirmed%20in%20the%2012,2022%20on%20financial%20stability%20grounds.
“Public purse pay rises pay for themselves” is an Ann Pettifor line (a person possibly even dimmer than the Dick Tater). He should logically be arguing for them to be paid a million each, or whatever the right number is to raise so much tax we can pay off the National debt.
So, in fact, paying the nurses does in itself raise the additional taxes needed to pay the nurses
The man’s reinventing perpetual motion machines.
Richard Dawkins skewered the fallacy nicely in his description of naked mole rats in The Selfish Gene: “[they] are homocoprophagous, which is a polite way of saying that they eat one another’s faeces (not exclusively: that would run foul of the laws of the physics)”.
Quote: “Most of the extra cost is in index linked bonds and as inflation tumbled this year so will that cost, but tax revenues will remain 10% higher despite that.” /Quote
This is spectacular nonsense from the Spud. Index linked bonds pay interest based on the current value of the bond. They remain in step with tax revenues. If inflation falls, that doesn’t lead to a corresponding fall in interest payments; they just increase more slowly.
On this evidence, the appealing prospect of beating Murphy senseless might increase his intelligence
“… but absolute price levels which determine tax revenues are going to remain inflated by 10% or more. So money to pay nurses is available, after all…”
So a one-time (nominal/illusory) windfall is to be used to pay nurses more just this year? Or next year too, and the next, and the one after that, and…? Which page of the Accountancy manual does that appear on?
Decnine
According to the great Moqifen his brother couldn’t have sat his accountancy exams but I am led to believe there was some kind of arrangement akin to ‘Skullion’s scholars’ in ‘Porterhouse Blue’ whereby an impostor sat Murphy’s exams for him so he won’t ever have opened a pager of any accountancy manual….He spent the exam in the pub (before he was banned)
Paying nurses costs nothing, because if I pay them £100 they give me back £40, so I can use that £40 to pay them the £100……
The man’s insane.