No money left, or is it just in the wrong places?
All three main UK political parties now base their economic arguments on a premise which has come to be accepted as truth, but which may be false. The premise is that ‘there is no money left’ and this is used to justify austerity. We don’t want to cut, the argument goes, but there is no money left, so we have to make difficult decisions.
Is there really no money left, or is it just all in the wrong places? I would suggest the latter, and here is some evidence.
Last month, EU Commission President Jose Manuel Barroso revealed that tax avoidance across the EU results in a loss of €1 trillion a year, nearly double the 2012 combined annual budget deficit of all member states. In something of an understatement he remarked, “This is a huge amount of money to simply let through the net.’
So if tax avoidance was tackled and this money was collected, there would be no need for cuts. But the Coalition has axed 10,000 jobs at HMRC and George Osborne has launched a legal challenge to the EU’s planned 0.1 per cent financial transaction tax which could raise tens of billions.
And what about the £375 billion the Bank of England has created as Quantitative Easing in the last few years, which seems to have been absorbed in the financial system with no discernible impact? As Adnan Al-Daini asks here, what if that money had been used to build social housing and invested in developing renewable energy? How many jobs would have been created, reducing benefits spending, and how much would have been returned in tax revenue? Al-Daini admits he is not an economist, but then, neither is George Osborne.
Similarly, the European Central Bank has created 500 billion Euros in QE and lent it to the banks at one per cent They promptly lent it out at rates up to 18 per cent.
We are constantly told that British workers must accept wage cuts or wage freezes because we are in a global race, a fight for survival in which companies must become ever meaner and leaner. And we can all see that small local businesses really are finding it hard to survive, as low wages and benefit cuts mean people don’t have money to spend.
But big business is actually hoarding cash on a massive scale. Official statistics show that UK corporate cash balances stood at £671 billion on the most recent figures, around 46 per cent of national income. So there is a lot of cash sitting in the bank, but companies who have made their money here feel no obligation to invest it in the UK. Allister Heath, Editor of City A.M. says ‘a lot of the cash being hoarded here has been earmarked for more dynamic, higher return economies and will eventually be shipped off. As I have argued previously, the UK is being treated by some as a milch cow’.
Add to this the steep rise in the numbers of people earning over £1million per year and the argument that there is no money left looks increasingly unconvincing.
And what of government spending? We’re told deep cuts are urgently needed in areas like welfare, but spending in other highly questionable areas goes ahead. The Help to Buy scheme has been roundly condemned by analysts and will expose the government to £130 billion liability.
Similarly, the National Audit Office has questioned the economic case for High Speed 2, but the government is determined to press ahead with a scheme which will cost around £17 billion.
Quite simply, there is plenty of money, but it is either hoarded, uncollected, or spent on dubious schemes. Austerity and frugality, like taxes, are for the little people.
We now live in a country where some people earn a million pounds a year whilst others struggle to pay for incontinence pads, and many depend on food banks to eat. This is the result of deliberate political decisions. There is no inevitability about it, as we are led to believe.
© Bernadette Meaden has written about political, religious and social issues for some years, and is strongly influenced by Christian Socialism, liberation theology and the Catholic Worker movement. She is an Ekklesia associate and regular contributor. You can follow her on Twitter: @BernaMeaden
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