The Chancellor presents the Government’s annual budget tomorrow. Commentators are focusing on whether the cost of pandemic support will have to be paid for by increases in corporation or income taxes.
Let’s be clear: to date, the Government’s pandemic response has cost around £500 billion, and with many of the support packages still in place, the final cost could end up being £700-£800 billion, even without any further new variants and further lockdowns. That level of deficit can’t be cleared by increasing corporation or income tax by a couple of percent, and to pretend that is a solution is totally dishonest.
This might have just about been manageable had the Government gone into the pandemic in robust financial health. But, of course, it didn’t, as by early 2020, UK Government finances were already in desperate condition.
During the current financial year, the Government will fund only about 55% of its spending through tax, with the balance covered by debt. Desperate as this situation is, unfortunately, it’s much worse than that, as much of the tax is dependent on the debt being in place. For example, a government employee who pays income tax and PAYE and VAT, but whose salary is funded by debt, is, in effect, just recycling that debt. Without the initial debt, the tax receipts would vanish. If it sounds like a badly constructed house of cards, that’s because it is.
But most of the new borrowing isn’t actually borrowing. It’s funded directly via the Bank of England’s balance sheet. Which is to say, the Bank of England simply creates the money and gives it to H.M. Government. Through a bizarre accounting convention, any interest the Government has to pay on this newly created money is simply returned to the Treasury by the Bank.
Sounds too good to be true which, unfortunately, it is.
If the new digital money was being used to invest in high potential new industries, you might just about be able to justify it. But it isn’t; it is used to pay people to stay at home or to fund the pointless and hopelessly inadequate track and trace scheme.
Creating half a trillion of new money to fund completely unproductive activities – what could go wrong? The most probable answer is inflation, and not just a little bit of inflation.
And what does inflation do? It devalues debt, so the biggest debtors of all (government and large corporations) benefit. And it dramatically increases the cost of basic goods, with the poorer members of society suffering the most. Inflation is, in effect, yet another transfer of wealth from the 99% to government and large corporations.
Commodity prices, including copper, wheat, timber, and wholesale electricity prices are already suggesting that rapid increases in inflation are just around the corner.
Forget tax rises. The Government will make us pay for the pandemic through inflation. As with their other stealth measures, the majority won’t even realise it’s happening until it is too late.
Freedom Alliance is a party of freedoms, including financial freedoms. We see debt at the government level as having funded the obscene size of government we now have. At the personal and small business level debt has developed into a trap.
Weaning the Government and society off their addiction to debt won’t be easy, but our future manifestos will detail just how we propose to do this. If we don’t, society and the economy will never be able to be truly free of control by governments, banks, and large corporations.
For the time being, our focus is on campaigning to end lockdowns forever and to preserve medical freedom. Please vote for us in the May elections, and consider joining us, or standing as a candidate.
We need pro-freedom candidates in as many constituencies as possible if we are ever to get out of this mess, and reclaim our personal, professional, and economic freedoms.
If you’d like to know more about standing as a candidate in your local area, please don’t hesitate to get in touch with me at [email protected]
Jonathan Tilt A.C.A., Freedom Alliance Founder and Treasurer