Introducing the Richard Murphy piece replicated below, Naked Capitalism’s Conor Gallagher says this:
According to the Kiel Institute, the UK has shovelled 19.266 billion euros into the corrupt hole of death that is Ukraine, which is always worth remembering when elites deliver the message that there’s no money.
The great divide between myself and liberals – be they family, friends, ex lovers, ex colleagues or, like Professor Murphy, objects of my partial but real admiration – is that I know the world is run by gangsters whose agendas our media, while vigorously dissenting on important but non critical matters, dutifully advance when it most counts.
Liberals do not yet know this.
Too blunt of me? I’ve done sugaring this pill. Too extreme/biased/conspiracist? I deal in facts and reason. Kindly do the same.
The professor still labours under the delusion, easily proved as such yet shared by many of my family, friends, ex lovers and ex colleagues, that “the corrupt hole of death that is Ukraine” is due to Russia’s unprovoked aggression. On this he is flat out wrong and, since the magnitude of that error is potentially world-ending, I will continue to call him and his fellow deluded out on it.
On the credit side few have done more than Richard Murphy to debunk the myth, also shared by many, that the ‘budget’ of a nation like Britain, issuing its own fiat currency, can be likened to that of a household, business, local government or nation – an EU member state, say – without its own currency. The latter can indeed run out of money, the former cannot.
Before dismissing this as at best inflationary and at worst “magic money tree” ravings, 1 give the prof a hearing, won’t you? That I’m so critical of him on other matters should add some weight – not to his arguments, which must be judged on their merits – but to my plea that he be given a hearing.
Nuff said. Over to Richard Murphy, in a piece reproduced two days ago by a Naked Capitalism whose commentariat below the line is of a higher standard than most.
Why “Spend before tax” is the Key to unlocking a future for young people
In a post I published here yesterday, I explained that in a country like the UK, which issues its own currency, has an effective tax system, a functioning legal system, and with that currency being acceptable for international trade, government spending always comes before tax.
That is not just a technical insight into how public finance works. It is, in my opinion, a political game-changer. A commentator then challenged me on that and asked how this might assist younger people in particular. I will define those as being under 35, or perhaps under 30. Then my focus is on how this understanding might let us tackle the structural crises that are shaping the lives of people of that age, so that people of my age do not leave them a politics of permanent scarcity, as could happen unless we change our economic narratives.
If we think “tax comes before spending”, that story is necessarily one of limits. That narrative suggests that we can only achieve better housing, jobs, education, or climate action if the money can be “found” through higher taxes, borrowing (which they choose to forbid to eliminate that choice), or cuts in government services elsewhere. The result is a politics of managed decline, where almost nothing ever changes.
If, on the other hand, we understand “spending comes first”, the story changes. The question is no longer “can we afford it?” but is, instead, “do we have the resources, skills, and technology to do it?” If the answer is yes, then, as John Maynard Keynes once noted, whatever it is we want can be done. The government can create the money, direct the work, and use taxation afterwards to keep the economy balanced, and that opens the door to a completely different policy agenda for younger people for all the reasons I note below.
Removing the “There Is No Money” Excuse
The most corrosive political message in the UK over the past fifteen years has been that “there is no money left”. It is the line used to justify cuts to public services, freezes in pay, and neglect of infrastructure.
Once we accept that spending comes first, this argument collapses. This correct narrative makes clear that the state is not dependent on tax revenues to act. It is dependent on the capacity of the economy to deliver what is needed. If there are unemployed or underemployed people, unused capacity or idle resources in the economy – whether in the state or private sector – the government can put them to work.
For younger people, this means public investment is always possible if the political will exists, whether that is in housing, jobs, climate action, or education. The barren landscape they now face can be transformed.
Full Employment and Skills Guarantees
In particular, understanding spending-first economics means the government can guarantee work, training, or education for everyone who wants it.
For those under 30, that could mean:
- Funded apprenticeships linked to the industries of the future and the continuing needs we know we will have.
- Guaranteed graduate placements in public service or climate projects for those who need them.
- Paid vocational retraining for those in insecure or low-paid work so that the economy can enjoy the benefits of people’s improved skills, which must become the core of the supposed productivity agenda, which has, in the current government’s hands, appeared to be all about eliminating people from the workplace rather than about empowering people within it.
In other words, rather than leaving young people to compete for a shrinking pool of “opportunities”, the state could instead create those opportunities directly, without waiting to “raise the money” first.
Housing as a Political Choice
Britain’s housing crisis is not the result of empty Treasury coffers. It is the consequence of decades of political choices: restricting social housing, treating homes as speculative assets, and refusing to plan for need.
Spending-first economics makes it clear that large-scale investment in social and affordable housing is always possible. The only real limits are the supply of land, skilled labour, and materials — all of which can be planned for, which should then become the focus of government attention. The dependency on private sector house building alone would end: the state could instead begin to drive this sector again, as it did for forty or more years from 1945 onwards.
For younger people, that should mean that secure, affordable rents and the chance to own a home cease to be a pipe dream.
Universal, Affordable Childcare
Childcare in the UK is currently among the most expensive in the OECD. This cost locks many young parents, and especially women, out of the workforce, limits career progression, and deepens inequality. With a spending-first approach, universal, affordable childcare is entirely possible. The government can hire and train carers, build facilities, and fund provision directly. The benefits, including higher employment, greater gender equality, and better early-years outcomes, would repay the investment many times over, as is seen in the many countries where this cost is capped for this reason.
Education at All Levels
Investment in education is not a “cost” in the spending-first framework. It is a choice to develop human capacity. That means:
- Properly funding school education and reimagining its role so that all children and young people can achieve their potential, when its current focus is on producing compliant workers for jobs that very largely no longer exist.
- Restoring university maintenance grants to eliminate inequality in this area.
- Reversing cuts to further education colleges.
- Funding lifelong learning so skills can be updated throughout a career.
If we can afford to waste young people’s potential as we do now, we can certainly afford to develop it.
Student Debt Relief
If the government can create the money it spends, then the argument that student debt must be carried for decades to avoid “costing the taxpayer” is false. That debt is a political choice, not a financial necessity. Student debt has always been a game of government financial engineering from which private sector financiers ultimately gained, and has never been about funding education, which has always, and as a matter of fact, been paid for up-front by the government, without exception.
Correctly understanding government financing and the role of both tax and debt within it enables consideration of either cancelling or radically reducing student debt, which would free up income for housing, family formation, consumer spending (which is key to continuing economic viability) and even pension provision, all of which stimulate the broader economy. Considering how to reduce this debt within a proper understanding of government financing is, then, an investment in future productivity and social stability, not a drain on public resources.
Climate Action Without Delay
Younger generations will live with the effects of climate breakdown for decades, and most certainly long after I am gone. It is a prospect that now haunts me, and continually reminds me of the failure of my generation when I knew this might happen when I was myself a teenager. A “tax first” mindset delays action until the “money can be found”. By then, it may well be too late.
A spending-first approach allows immediate investment in:
- Renewable energy infrastructure.
- Home insulation and retrofitting.
- Low-carbon transport systems.
- Flood defences.
Taxation can then be used to prevent inflation and to steer behaviour towards sustainable choices.
Tax for Fairness, not Funding
If tax does not exist to “fund” spending, it can be used to shape society. This is tax as an ‘economic steering wheel’ as I described it in the post to which I linked at the top of this one. This then means that tax can:
- Reducing extreme wealth and income inequality.
- Discouraging harmful economic activity.
- Supporting redistribution between regions and communities.
For younger people, that means a fairer distribution of power and resources so that opportunity is not locked up by those who already have it.
The Political Choice Ahead
If we accept the household analogy, younger people face a lifetime of economic scarcity, under-investment, and deferred promises.
If, instead, we understand that as a matter of fact, spending comes before tax, we open the political space to demand secure homes, good jobs, free education, affordable childcare, and a liveable planet now, and not in some imagined future when the books “balance”.
The truth is that the future younger people inherit will be decided less by the constraints of economics than by the limits of political imagination. That is why understanding “spend before tax” is not an abstract macroeconomic debate. It is the foundation for a politics that can actually deliver for the next generation.
See the comments at Naked Capitalism …
* * *
I also have done sugaring the pill, Phil. From a very different standpoint I also can see what others are still in denial about. The apocalyptic reality of the eco-crisis and the 6th mass extinction. And the utterly dreadful truth that we are not going to stop it. The military machine’s addiction to war, the corporate world’s obsession with money and a materialist consumerist version of what constitutes a good life are all carrying us further down the road to extinction. And not just humanity – we’re taking down with us most life on Earth. Like you I am often accused of being negative, pessimistic and doom mongering. No. I have been involved in working for the natural world for a long time and most of us who have been here with enough of an understanding of international politics know this too. It is utterly absolutely heartbreakingly real. As I’ve said to you before, to see how dark things really are you have to have developed the capacity to see that darkness. Most people I know grew up in relatively privileged lives where basically there was a goodness in the nurture and care they received. They have no idea how dark and evil are some of the dynamics operating around us. But soon they will know. High temperatures, fires and storms are nothing to what is going to hit us much sooner than I ever thought possible. They will then wake up. You are trying to wake them up Phil. Respect to you. But I have given up persuading others. I am going to spend the rest of my days alive giving everything I can to life. One way is through the creation of a collective of artists, musicians, writers and dancers to sing the real songs of life on this beautiful planet Earth. (www.stillmovingcompany.co.uk) Sorry to write like this but I feel we are comrades even though I am coming from a different perspective of all this evil. And I mean real shocking dark destructive evil. Most don’t even know this exists. In a way good for them. It means they didn’t encounter evil growing up and that is good. But now it’s time to wake up. In the meantime love to you Phil and everyone who reads this from a wild and crazy woman in Scotland
Thanks, crazy woman. I say ecocide and war are logical – nay, inevitable – consequences of one and the same thing. A world run for profit cannot by definition manage the most irreplaceable resource of all, this fragile earth of ours. Nor can it know peace. Aggression is part of our nature but, like other aspects of who we are, attendant tensions could be managed the way other threats to social cohesion are – envy, fear, lust etc. But an empire fading, its leaders prepared to risk nuclear war to reverse its primacy?
I mean I’m through wasting time arguing with folk who still believe that on matters vital to empire and class rule – like Syria, Russia, Julian Assange or China rising – corporate media cannot be trusted. Even those who say they already know this frequently show, Gell-Mann amnesia style, that ‘knowledge’ to be superficial.
Stay wild.
Some observations:
Firstly, this claim……
……..only deals with the amount of money given in direct “aid” to Ukraine by the UK. As Alex Krainer noted almost a year ago:
i.e. If Ukraine defaults on those loans the UK as guarantor, along with British financial institutions, ends up responsible for those debts. Which could be anything from a further additional tens of billions above and beyond that 19 billion Euros.
Krainer continues in detail the consequences of the UK’s financial over-commitment in keeping Project Ukraine afloat included not only these unspecified loan guarantees, which could well be double that 19 billion alone, but also that the Bank of England lowered the UK’s credit standards to maintain liquidity in order to prevent a systemic collapse of the UK economy.
Think about that. The British establishment were and remain prepared to collapse the UK economy to guarantee Ukraine keep going.
Which suggests that the Alaska meeting in two days time is likely causing a lot of sleepless nights in those quarters. What, to cite just one example, is that 100 year deal that Starmer brokered with Ukraine before Trump entered office worth to offset the British Establishment’s investment in Ukraine if most of the valuable land and resources – or even all of Ukraine, ends up in Russian hands?
What if there is some agreement out of Alaska – either immediately or further down the line – which returns Russia’s frozen/stolen foreign assets? Where will the UK find the money to service the debt it has guaranteed to the WB for an economy which has either collapsed, or which has seized to exist as a viable State?
If Ukraine is lost, the talk about Farage being the next PM may well be premature. With the likelihood of an IMF appointed Financial Commissar a distinct possibility?
Secondly:
Whilst there is no question that the BTL discussion on NC is as described, the problem many people have found is that what does appear only appears if it concurs with management consultant……..
https://en.wikipedia.org/wiki/Naked_Capitalism
……Susan Webber’s limited world view. I have encountered a number of people with similar experiences of Ms Webber’s (aka Yves Smith), let’s go with pearl clutching sensitivities, to any BTL posting which either does not sufficiently match her opinions or which challenges something she has written in the introduction to a piece or BTL.
This results in an immediate rebuke to the point of rudeness and beyond to any BTL poster who fails to toe the line. Which is to express an opinion which contradicts something Ms Webber has either said or does not agree with.
And the thing is, you never see the poster who is attacked in this cowardly way defending themselves and their own reputation, which Ms Webber has no qualms in publicly trashing.
That is not because they do not reply but because, like all from the PMC, Ms Webber does not give right of reply. Any response to the self-appointed oracle, no matter how polite, rational, reasoned or reasonable, does not see the light of day. It is censored.
At one point earlier this year, Susan took her bat and ball home for a short period by suspending all BTL comment.
Regardless of the standard of BTL comment on that site this mardy arsed attitude results in the BTL discussion being extremely limited. Effectively an echo chamber where assumptions cannot be properly challenged and seriously debated. I know, as a result of experience*, that I’m not alone in considering that site a mere vanity project for another spoilt member of the PMC.
* In my case I fell foul of the unwritten rule by subtly expanding on the wider positional context of an argument Professor Michael Hudson had written which Ms Webber had clearly misunderstood and tried to criticise what she clearly did not comprehend. Compounding this sin of correcting the management by responding rationally to the bollocking rather than slinking off to sit on the naughty step.
To be blunt (and I’m obviously not alone from what I’ve read from others on other sites who have been through the same process), I’m too old in the tooth to waste time by accepting that kind of childish nonsense from any member of the managerial class. I didn’t put up with it forty years ago when I was Union rep. These days, with the clock running down, I’m even less patient. Something either does what it says on the tin or it doesn’t. Unfortunately, NC doesn’t make the cut.
Good points. And I too find Yves (Susan Webber’s nom de plume) informative but brittle. Moreover, Conor’s worldview is more in tune with mine.
More important than either, when we’ve been round the Alt Media block a time or ten, we see that no one source – not Michael, not Richard, not Alex Krainer, not even yours truly – is without their blind spots and obsessions. We have to factor these in and triangulate.
Greetings Phil,
wonderful phrase: “kin, friends, exes, and former colleagues”, that I have given up talking to.
Rings a bell with me, although to be honest you beat me on the “exes”, plural, more than one……
I would probably be bankrupt if i had 2 “exes” in Germany……
Anyway, you take care
Cheers
Billy
PS. Goerge Galloway, bless him, maintains that all 522 were released without charge?
Hi Billy. I’ve since changed the wording you quote to “family, friends, ex lovers, ex colleagues …”
George Galloway is right. Charges have yet to be brought, if ever they are. See my post yesterday on why that might be.
Murphy wrote that piece on August 10th.
Two related pieces he wrote two days later on August 12th…..
https://www.taxresearch.org.uk/Blog/2025/08/12/could-2008-happen-again/
https://www.taxresearch.org.uk/Blog/2025/08/12/could-2008-happen-again-part-2/
……..provide a sobering wake-up call on the dangers posed “by the accumulated private financial debt, which has boomeranged beyond all expectations of getting it “under control” without sweeping reforms.” (Hat tip to poster bon bon over at Larry Johnson’s SONAR21 site).
Murphy’s point is that 2008 could happen again:
“…..whilst the world’s media obsesses about government debt, there is, quietly, but undoubtedly inevitably, a growing debt crisis developing in the world banking systems.”
Arguing that:
“…..the real likely debt risk that will create the next global financial crisis is almost certainly already on the balance sheet of most of the world’s major bankers. That is because it is represented by overvalued property where the chance of loan repayment is low precisely because the properties in question will, at some point in the not too distant future, become unsaleable, either because of changes in the market demand for property within the commercial sector, or because flood risks [NB from Global Warming] will mean that the buildings in question will be uninsurable, creating a crisis for the banks because the security that they have for their lending will no longer be of any value.”
Quoting (in the second article on this issue) a Guardian report about Santander loosening its lending rules Murphy continues…..
“As a consequence of Rachel Reeves’ absurd desire to relax regulation in the City of London so that it might be reckless once more, coupled with bankers willingness to make loans that they know they will never have the responsibility for recovering, because the senior staff in these institutions will all (they hope) have retired before such eventuality arises, we are seeing a recklessness of the style seen from around 2005 onwards re-emerging in the UK mortgage market.”
Among several factors which are likely to trigger a 2008 type event from a ‘Labour’ Government and Chancellor repeating the same basic errors of it’s Blair/Brown predecessors, Murphy further notes:
“……we do know that the UK employment market is getting tighter, and finding work is getting more difficult. We also know that the employment market is facing significant disruption as a consequence of AI. The potential for this to have serious consequences in the mortgage market is something that is not being talked about as yet, but should be, I think. This risk is not being factored into these loan offers, but it is very real.”
The question is, we know who is, let’s go with, ‘contributing’ to Labour Party Coffers and individual Ministers bank balances to turn a blind eye and provide cover for what is taking place in Gaza…..
https://www.declassifieduk.org/revealed-the-tzipi-hotovely-diary/
……just who is paying Reeves and Starmer to once again take the UK economy down this ruinous path at a time when the Government’s ability to bail out the banks (again) – followed no doubt by a further two or three decades of ‘Forever Austerity’ – is severely restricted by the UK’s overextended financial commitments* represented by its loan guarantees to the World Bank on behalf of a collapsing Ukraine?
* A further word on Government financial commitments.
I don’t recall offhand the precise column description, but one financial commitment you will find listed on the debit side of the Government balance sheet concerns the liabilities (at present theoretical rather than actually required payment) taken on from the Thatcher era and subsequent privatisations.
BT, which employed me (I nearly wrote “worked” for) for thirty-five years will suffice as a case in point. When it was privatised in 1984 the Thatcher government acted as guarantor for the pension fund. This was necessary to sweeten the pill for The City and the finance sector, who did not want that particular liability hanging around their necks when there was money to be made (another case of privatising the profits and socialising the risks).
Consequently, that liability goes on the Government’s debt column as a (at present potential) cost if the pension scheme goes belly up. This is not limited to BT. The Uk Government, any UK Government, has the same liability for at least the Gas, Electric, Water and Post Office privatisations.
Should, as Murphy predicts, another 2008 event occurs, I would go further in predicting it would be far worse than 2008 and would more than likely have knock on effects which would seriously impact not only on these pension funds but also the ability of the Government to meet the liabilities for them should they go under as a result of the kind of crisis Murphy anticipates.