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Richard Murphy

23 Nov, 9 tweets, 2 min read

There is an obsession that the national debt must be repaid. Assuming it is properly calculated (and I have real doubt about that) it’s coming on for £2,100 billion. Knowing what makes this up is really important. Then we can decide if we really want to repay it. Stay with me….

Around £200bn of the national debt is made up of National Savings & Investments. That's things like Premium Bonds and the really safe savings accounts older people tend to appreciate. So why do we want to force these people into riskier savings accounts? I don't think we do.

Around £400bn of the national debt is owned by foreign gov'ts. That's cool: they want to fund us. They do that because they want to hold our currency. That's because that helps them trade with the UK. Would we want to force them to take their money back in that case? I doubt it.

Around £800bn of the national debt is owned by the UK government. It's bought its own debt back using quantitative easing (QE). So this debt is not now owed to anyone. After all, you can't owe yourself money. So why are we obsessing about this? For no good reason, I'd suggest.

But it's true that QE also results in UK banks and building societies now having about £900bn on deposit account with the Bank of England. But that's deliberate. This money stops them failing in the event of a financial crisis. So why would we want to repay that? I don't know.

And then there's very roughly £700 billion of other debt if the Office for National Statistics have got their numbers right (which I doubt). Whatever the right figure, this debt is owned by UK pension funds, life assurance companies and others who want really secure savings.

Why do pension funds and life assurance companies want government debt? Because it's always guaranteed to pay. So it provides stability to their promise to pay out to their customers, pensioners and savers. Would we want to deny them the chance to do that? I seriously doubt it.

So, the question is in that case, which bit of the national debt do you really want to repay? Because right now every bit plays a vital role in keeping the UK, its pensioners, savers and banks, plus its international trade secure. Now which bit of that do you want to forego?

Or is that that we really do not need to repay the national debt, and the claim that we have to do so is made up to give reason to tax you (but not the wealthy and big business) quite a lot more and to persuade you that austerity is really necessary when it isn't? You decide.

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More from @RichardJMurphy

Richard Murphy

@RichardJMurphy

22 Nov

There’s massive misunderstanding about what QE is and what it does. So please forgive a long thread on one of the most important tools used in modern economics, which if used properly might provide real hope for a better future.

Outside Japan QE was unknown until 2009. Since then the UK has done £845 billion of it. This is a big deal as a consequence. But as about half of that has happened this year it’s appropriate to suggest that there have been two stage of QE, so far. And I suggest we need a third.

Stage 1 QE started in 2009 and was last used in 2016. It created £445bn of new money. That was used to buy £435bn of government bonds, or gilts, and £10bn of corporate bonds, which we can ignore. There were three goals to first stage QE.

Read 68 tweets

Richard Murphy

@RichardJMurphy

15 Nov

Rarely has the UK faced an existential crisis like the one it does at this moment. The relationships between its member nations are uncertain. We face meltdown with the EU, even if we get a deal. And the special relationship with the US is anything but that. This is unprecedented

What has now happened in this mess? The architects of it, secure in the knowledge that the damage they sought to create has been delivered and their consulting futures are secure, have walked out of government. Is that by chance? No. It’s deliberate distraction.

The Brexiteers aim has always been apparent. It has been to maximise the chance of disruption. That’s because they believe financial capitalism works best in such conditions. And they are right. Moments of chaos are times when hedge funds have greatest chance of making money.

Read 13 tweets

Richard Murphy

@RichardJMurphy

5 Nov

The government is going to do £450bn of quantitative easing (QE) this year. That should more than cover its total borrowing fir the year, meaning the actual sum owed to third parties will fall, and so will real national debt as well as a result. 1/-

Saying this, I know that much of the new money created by the Bank of England to fund QE ends up back on central bank reserve accounts held by U.K. High Street banks and building societies with the Bank of England. And that interest is paid on their balances 2/-

The interest paid in those balances is 0.1%. That rate is controlled by the Bank of England, and will not be changing for a long time to come. In effect then the government is paying banks and building societies 0.1% to make them hold new money that cancels the national debt 3/-

Read 9 tweets

Richard Murphy

@RichardJMurphy

29 Oct

In the summer of 2015 Jeremy Corbyn used a pile of my ideas to help him become Labour leader. By spring 2016 his team were telling me they were sitting out Brexit as it was just a Tory fight. 1/

At that moment I knew this was a man who played politics, and not political leadership, and I walked away from any association. I did not regret it. Whatever he said, or was said for him, he was always posturing 2/

Politics is about tough decisions. About finding the way to real answers. There is a lot Labour is still getting very wrong, on Covid, the economy, electoral reform and more. But Corbyn was never the answer on any of those issues either 3/

Read 6 tweets

Richard Murphy

@RichardJMurphy

24 Sep

The government is thought likely to offer a replacement for furlough today that will make employers pay a significant part of the cost of keeping employees on when there is no work for them. This will not solve unemployment. It will encourage it.

Let me offer a simple example. Assume an employer has 10 employees, all on £2,000 a month. The employer has enough work for five people. They could sack 5 people and save £10,000 a month. Or Sunak offers a scheme where all ten are kept.

Under this scheme the company pays for the work the employees do, i.e. £10,000. Then it pays 1/3 of the wages for the time they’re not working i.e, £3,333. The government then pays 1/3 of their wages when not working i.e. £3,333. And the employees lose £3,333 in wages in total.

Read 7 tweets

Richard Murphy

@RichardJMurphy

13 Sep

We have to face the possibility that our government is planning economic destruction for its own political ends – which are the demise of the state as we know it taxresearch.org.uk/Blog/2020/09/1… Does the government actually want mass unemployment and is setting out to achieve it?

Before our government chose to become a pariah state, and before it was clear it planned to fail on Covid testing I expected UK unemployment to exceed five million next year. But now it may be very much worse. And I beginning to fear that is exactly what the government wants.

We find it very hard to comprehend a government that chooses to create unemployment. But remember Thatcher did just that. She created unemployment to destroy unions and manufacturing so she could create a different type of society. Is Cummings now planning something similar?

Read 20 tweets

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