No one needs to play around to find £16 billion of potential spending capacity in UK fiscal rules. They just need to highlight the folly of such rules when the UK also has around £8 trillion of supposed financial wealth (and maybe more), most of whih is used for financial speculation. It could instead be used to fund constructive investment in ways I have outlined, many times.
You’ve got what I want to spend. Gimme.
A lot of that wealth is the houses people live in. What does he expect, saw off the end of the kitchen to hand over part of that wealth?
No, he expects you to take out a mortgage (or increase one you already have) to pay a wealth tax. Anyone who lives in a Council House with a rent less than the maintenance cost will be exempt.
And where does the money come from to take out or increase that mortgage if you’re already at full stretch or retired?
The whole problem with money obsessives and wealth taxes.
Yes. This is a 21st century tithe.
Or, alternatively and much more likely, you’ll write an IOU to the government every year. When you peg and/or the house is sold the government will call it in, and to your surprise you’ll find you no longer own it, but they do.
I believe this idea or something like it has already been floated for IHT. It also seems to be the way “lifetime mortgages” work.
A tithe was a *voluntary* donation out of income.
Originally the tithe was a requirement to “rejoice before the Lord” while consuming one-tenth of each harvest – more like a Harvest festival than a tax – but one year in three the farmer/landowner was supposed to donate the tithe to the priests and Levites who had no land to farm.
As a basic principle you should tax behaviour you don’t like and reward what you do like. We don’t like poverty and approve of people who can manage themselves. Tax poverty, reward wealth.
Possibly his daftest claim, though the competition is intense. We’re rolling in (other people’s) money but evil politicians refuse to spend it.
Google: UK Aid Spending: “£13.04 billion.”
Then stop it; it’s near enough £16 billion.
People who’ve become wealthy don’t invest, they speculate.
The things I want the gov’t to do with their money is investment.
See the difference.
If an investment is not speculative, surely it’s just going to be lost. Assuming speculation is for profit.
An investment in gilt-edged stock to match an expected liability is not speculative (if you get a Labour government the value of the investment and liability will both decrease but as they do so equally – or nearly equally if you invest to slightly more than cover the liability – there is no risk apart from the bankruptcy of the UK in which case the liability is as worthless as all the other pieces of paper).
Speculation is taking a risk *with the intention of making a profit*.
Investment *may* be to ensure that one doesn’t make a loss: there is a whole chapter in “Theory of Investment” on “Liability-Driven-Investment”. Please don’t get me started on this …
John. You just described the risk, so it must be a speculation. One is speculating that one will get that income & the principle returned.
These days, I’d say that’s highly speculative.
Just because an economist wrote a book doesn’t make it any truer than the usual bollox economists come out with..
@bis
If it is a liability-driven-investment then the is no risk that it will fail to cover the liability. One is speculating that the Sun will not turn nova and Russia will not drop a H-bomb on London before the gilt matures, but if we are wrong it doesn’t matter from the viewpoint of investment-matching – and we should not care about investments if either happened.
What these days is highly speculative is what £1million will be able to buy when Burnham resigns as Prime Minister – *not* whether the BoE will repay the gilt in devalued currency.
John. You’re talking like an investment manager & historic performance. This is a matter of markets which are future looking. There is most definitely a future where confidence in UK government finances collapses. I wouldn’t say you’re far off of it. It is people like you will have a hand in the manner of the collapse. You perpetuate the paradigm that there’s nothing much to worry about long past its sell by date. So instead of a gradual change it goes catastrophic.
I know all about the security of government paper. I used to make a market in government backed Russian bearer bonds. I used to bid sixpence for them, although the more ornate might merit a shilling. Sold them to the antique trade as curiosities. I still have some complete with their coupons. You any idea how many countries have defaulted on their debts? What would make the UK special?
Can I say this in simple words? Matching (or LDI in fashionable jargon) says that you need to pay N in a certain currency (in this case £stg) at a certain date D so you buy a guaranteed security that will pay you N+a tiny bit at a date a few days before D. [Any intervening interest payments go to cover expenses or to offset the price you paid for the security]. Since this is guaranteed by the government *and* the Bank of England which latter is the issuer of £ notes, the default risk on the asset is matched by an identical risk that the liability becomes worthless.
Secondly the risk of the UK government *openly* defaulting on gilt-edged is negligible: the practice of Labour governments is to partially default on debts owed to foreigners by devaluing the £ against the $ – Attlee devalued by one-third from $4.20 to $2.80, Wilson by one-seventh from $2.80 to $2.40,
So we get a lecture on what happened in the past.
*not* whether the BoE will repay the gilt in devalued currency.
Simply nonsense. Definition of a currency. A token of value widely, reliably & confidently accepted in commerce in exchange for goods or services. By the time you get to that point, people are no longer accepting sterling. It’s ceased to be a currency.
In which case the liability that you had has also gone the same way -point is thst you are still matched, so John77 is absolutely correct,
So an outcome that equals zero is acceptable? You’re mad.
At which point, it doesn’t matter, the debt is not worth collecting, the contract is unenforceable.
Both BiS and j77 are correct in there own way, but their worldviews are incommensurable
My worldview is based on reality: I have actually been involved in Liability-Driven Investment.
Hang on, I thought government could just spend what it likes? Why does it need this wealth?
That’s Thursday’s hobby horse.
‘constructive investment’
To be determined by the Board of Constructive Investment, headed by Sir Ritchie.
Is buying a loaf of bread constructive? He will decide.
You think he’ll alow us filthy Neoliberals™ bread?….
Such luxury is only allowed for those paying homage and tithes to the Church of Ely…
As I put in a comment recently, the total spending capacity of the UK looks like being around £100 billion. (annual incomes/12) £8 trillion of financial wealth may well exist. But that’s in assets. To realise the value they’d have to sold. Who to?
Exactly. Perhaps the government, with all of its made up MMT trillions?
Like QE?
It occurred to me that if anyone other than an economist tried to explain QE to you, you’d presume they were barking mad. “How would that help anything?”
Perhaps Murphy has in mind this famous quote – from another advocate of untrammeled state power and unlimited expenditure:
‘The currency remains stable when the speculators are put under lock and key. … excess profits must be removed from economic circulation.’
I’m ashamed to admit I don’t recognize the quote, but it sounds like something that Schacht, the author of the Reich’s economic miracle and banker of its massive military buildup, might have said. Back in Apartheid days the South African government took over the Schacht Plan word for word. “Removed from economic circulation” means diverted to government-approved strategy, so the money does in fact get back into the economy via a roundabout route.
It’s closely related to Hjalmar Schacht for sure although the English translation is disputed. It’s actually from Hitler himself. I always feel Murphy wants the very top role although I’m sure his increasingly precarious financial situation would also welcome the Schacht role!
From what I learned at Cambridge he’s written employment contracts for his kids who get national minimum wage from his LLP. The residual profit divided by the hours he puts in, is in the £2-£3/hour range he said, but he’s got the SRP and his wife owns the house outright, he’s ok financially. Had to repay the last grant his other LLP with Hines got from Polden Puckham Charitable Foundation though, which was amusing.
Also amused that there’s a ‘summer intern’ working for his team, don’t recall that role being advertised, I wonder if it’s a special university friend of one of his sons, but that’s where the company income goes afaik. His own ignorance and self-belief doesn’t need funding now.
in the £2-£3/hour range he said,
Jeez. Cleaners get multiples of that. Does he take in washing?
It could instead be used to fund constructive investment
Well, start writing those business plans. I’m sure you’ll attract investment in no time.
Newsflash! John Healey has been appointed Chancellor.
Could be a lot worse – at least he stabbed TTK in the front.
But Mad Ed is Foreign Sec. That may not keep him away from his Net Zero hobbyhorse.
But it will put him up agains DJT, and the result could be ebntertaining.
Is it possible to buy tickets?
David Miliband usurped by his brother, again. Although I understand the original plan was Miliband Minor to Chancellor and Senior to FO but the Labour women put their foot down as more Milibands in top jobs than women.
I was never convinced Milimajor was interested in giving up his $1 million a year sinecure in NYC. Not to mention the secret tropical island that comes with being head of International Rescue …
Labour is still (along with the LibDems) one of the parties that has elected more knights as leader than women.
TBF to Andeh, thats about as sensible as he could do, given what he’s got. Mad Ed has had his eco toybox taken away, and sent to circle the globe in a jet for the next 3 years, where he can’t do that much damage (or at least less damage that he can do with his eco-bollox), the economy has been entrusted to someone who isn’t an obvious swivel eyed loon, and Mahmood has been left at the Home Office which presumably means Andeh agrees with her attempts to bring a smidgen of sense to the immigration system.
Maybe the Northern Messiah means business and realises he’s going to have to piss off quite a bit of his own party to actually make some improvements out in the real world.
Andeh’s first announced target is to ‘eliminate’ rough sleeping. Since he couldn’t manage to make much of a dent in Manchester, I very much doubt anything will come of it.
(As we all know most rough sleeping is down to either head cases who refuse to use the hostels provided, or those who have been barred for violence, drug-dealing, arson …)
Whats the worst he can do over rough sleeping? Throw a couple of billion at it? Chicken feed, in the big scheme of things. Yes it’ll all be wasted, but most of government spending is wasted. No change there. If thats the sort of thing he wants to concentrate on let him get on with it. He could be doing far more damage elsewhere….
Don’t count your chickens… Haigh is back with license to interfere everywhere, Ange is back, exactly where she was doing most damage, like G.Brown before him, mad Ed is still there ready to unleash the dogs if any of the others aren’t toeing his line…
Rayner’s back at housing. Good. She showed zero intention of actually doing anything sensible to get more houses out of the ground when she was there last time, so the more she f*cks that up the better. Makes it easier for a (hopefully) Right wing administration to have lots of low hanging fruit to pick.
Restore has the only housing policy that’s likely to work. But they don’t call it a housing policy.
Yeah!! Even the Liberals in Oz propose to limit the number of immigrants to the number of houses built.
its not constructive though. its destructive spending.
if it were constructive it would damn near happen without state demsnding it.
It could instead be used to fund constructive investment in ways I have outlined, many times.
The commies never mention that once you kill the rich and take their stuff, you only get to spend it ONCE. Then it’s gone. You can’t redistribute wealth, you can only destroy it.
Commie dick Murphy speaks of wonderful things that can be done with other people’s money. It’s a trick. He wants to destroy their money so they will be dependent on the state.