Emeritus Prof Christopher May1d ago

As Rachel Reeves (finally) swings behind an explicit statement that Brexit has cost the UK around 8% of GDP, we might ask what that looks like:

It equals around £224bn a year (in 2025), which given the UK's tax burden of around 35% is £78bn in lost tax revenue a year.

So if you wondering why the public sector is under-funded, while a continuing austerity logic is always in play, this lost tax income for the state is also contributing to budget shortfalls.

#Brexit #politics
h/t Observer

Show threadRobert Pluim 🇪🇺1d ago
@ChrisMayLA6 The UK public sector is underfunded because the government chooses to do so. It has nothing to do with "missing" tax receipts, as tax does not fund spending, it is gathered *after* spending. Repeat after me: a government is not a household, it does not need to balance income and expenditure
Show threadEmeritus Prof Christopher May

@rpluim

Ha ha, teaching a grandmother to suck eggs... in theory you are right (as is MMT), but with our political class operating on a different set or principles tax receipts remain an issue - if the bond markets were relaxed about MMT, and the political class adopted it as an operating logic, then you would be right.... but equally, state spending could be higher, if the UK chose & took the hit on Gilt yields.

Mar 22 at 10:23amWeb
Show threadRobert Pluim 🇪🇺1d ago
@ChrisMayLA6 If we're going to discuss MMT, then I'm going to point out that gilt yields are irrelevant, as the government does not need to borrow to fund spending 😁 (and before someone shouts "inflation", that only happens if you overcreate money)
Show threadEmeritus Prof Christopher May23h ago

@rpluim

Doesn't 'need' to but chooses to; so they are irrelevant if a Govt. is choosing to create credit to fund public services (by adopting a MMT-like fiscal policy), but all too relevant if the Govt. chooses to retinal an orthodox fiscal stance.

We can wish the Govt. would adopt MMT as part of their (our) fiscal political economy, but until they do, the bond market will shape political decisions.

As for inflation; that's entirely dependent on the rate of credit creation & how its deployed

Show threadRobert Pluim 🇪🇺23h ago
@ChrisMayLA6 I think we're in violent agreement on the functioning of money and bonds. I see no hope of the current UK government ever acknowledging those realities, let alone acting based on them. (Isn't the whole "we must borrow exactly what we spend" fairly recent? I'll have to check on Mr Murphy's site)
Show threadEmeritus Prof Christopher May23h ago

@rpluim

Given no Govt. has ever managed that, it's only a rhetorical commitment....

Show threadJohn Leach17h ago
@ChrisMayLA6 @rpluim if a government freely chooses a fiscal stance that causes a problem then why don't you consider that the cause of the problem?
Show threadEmeritus Prof Christopher May15h ago

@johnl @rpluim

Its a good Q. but needs be put into the context of that 'choice' - to choose MMT would be to not only shift the fiscal stance of the UK it would be to go up against bond markets (at least for the period of transition), and sad to say bond market traders influence currency traders & other market makers in financial instruments - the choice is part of the problem, the global political economy is also a problem for the choice unless you thought the UK could be autarkic