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.