Pluses and minuses in the pre-Brexit budget | Letters
Polly Toynbee (A sticking plaster budget for a country in decline, Journal, 30 October) reports Paul Johnson of the Institute for Fiscal Studies as asking rhetorically why most countries in Europe raise more money in taxes than the UK. The answer is because they have higher levels of public spending. As I explain in my book Debt or Democracy, in the same way banks increase the money supply as they lend, states increase the money supply when they spend. By the same token, repayment of bank loans and state taxes and charges remove money from circulation.
As Philip Hammond's budget demonstrates, the level of proposed public spending is based on speculation about the likely future tax take, not some pre-existing tax piggy bank. It is only after each accounting period that the balance between tax and spending is revealed. Rather than squeezing money out of the pocket of a beleaguered (private) taxpayer, public spending is putting money in people's pockets. Through taxation of both the public and private sectors, the state is asking for some or all of it back. The level of tax and spend is therefore a matter of political choice, not some immutable neoliberal economic logic.
Mary Mellor
Newcastle upon Tyne