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  My guess is that the world is divided into two groups of people: those who are really interested in the process by which central banks decide on monetary policy, and those who are largely disinterested. If I’m right, and you are part of the second group, it may be wise to skip this blog. As the job of central banks is to set interest rates to keep inflation close to target, and inflation over the recent past has been well above target, then a typical reaction might be that central banks have slipped up in some way. The Bank of England is a typical central bank in this respect, and it c ..read more

  Nothing works anymore, the country is in a mess, worker’s living standards have remained stagnant, public services are at breaking point. Such statements are now commonplace, and are increasingly brought together in articles like this one by Sam Knight in the New Yorker. But is all this the result of 14 years of bad government, or can the blame be laid at the door of one or two specific events like austerity or Brexit? Economic decline I want to start with a post I wrote two years ago, where I was already talking about an unprecedented era of UK macroeconomic decline. I focused on com ..read more

  My series of posts on detoxifying government debt was all about why Labour should not be afraid to increase public investment substantially. Public investment should be matched by borrowing because future generations benefit from individual investment projects. The same is not the case for most day to day (current) public spending. If the economy is not suffering from deficient aggregate demand, it makes sense to match increases in day to day spending with higher taxes. A fiscal rule that does this (often called the ‘golden rule’) makes sense. That day to day public spending needs to i ..read more

  The Labour party has for a long time been fearful about high government borrowing to fund additional public investment. It didn’t start with 2010 austerity. Gordon Brown, probably the best Chancellor the UK has had over the last 50 years, used PFI mainly as a way of getting public investment done without additional public sector borrowing. It didn’t make economic sense at the time, as public borrowing is normally a far cheaper way of financing investment, but it happened because increasing government debt to finance worthwhile public investment was seen as toxic. In parts 1-3 of this s ..read more

  “When you repeat a lie, you spread it. When you spread a lie, you strengthen it. When you strengthen a lie, you become an accomplice to it. In this disinformation age, we must do better.” George Lakoff Keir Starmer,in commenting on the recent Budget, said “Britain in recession, the national credit card maxed out, and despite the measures today, the highest tax burden for 70 years”. The analogy of maxing out the nation’s credit card has been repeated by other Shadow ministers. Rachel Reeves, Shadow Chancellor, has joined many Conservative ministers in saying there is no ‘magic money tre ..read more

  The Budget was predictable, and predictably boring. Hunt cut taxes, but the tax burden is still rising because of the tax increases already programmed in. Furthermore, he was only able to make the tax cuts he did (i.e. reduce the extent of tax increases) because he had previously pencilled in assumptions about public spending that were fantastically low. You can either portray those assumptions as Austerity 2.0 or just silly - I did the latter here. However, with (I hope) the not silly assumption that this will be the last Conservative budget [1] for a while, I thought it might be usef ..read more

 This week I was going to post the final part of my ‘detoxifying government debt’ series, but Sunak’s statement from No.10 last week means that it will have to wait. Lee Anderson had the Conservative Whip withdrawn because he said something wrong and didn’t apologise for it, but ministers were comically unable to say what was wrong about what he had said. They certainly didn’t want to say it was Islamophobic, although it certainly was. [1] Many commented that the Conservative party was reluctant to call Anderson’s words Islamophobic because that would expose the extent of Islamophobia wi ..read more

  Over the last fifteen years the UK has experienced or witnessed three crises stemming from financial markets, the Global Financial Crisis, the Eurozone crisis and Truss’s ill-fated ‘fiscal event’, all of which have led to a view that government debt is in some way toxic, and therefore public investment needs to be curtailed. Because it is more recent I will focus on the last, but it is worth just repeating why the other two have no relevance whatsoever. The Global Financial Crisis occurred in large part because banks started treating risky assets issued by the private sector (US subpri ..read more

  Perhaps Labour scaling back its proposed green investment is just a pre-election ploy, and will have no implications for what they do in government. Perhaps. But perhaps they genuinely think the country can only afford a modest increase in public investment; much less than the economy and public services need. As we shall see, this idea that the nation cannot afford to increase worthwhile public investment because it requires more government borrowing is quite wrong. In my last post I noted that both Shadow Chancellors Rachel Reeves and John McDonnell had adopted the falling government ..read more