Monday, December 02, 2019

Election 2019. Debt-free public funding: broadband, water, energy. Public debt mountains not needed....

The Labour party has said it will bring utility companies into public ownership:
         We will bring rail, mail, water and energy into public ownership to end the great privatisation  rip-off and save you money on your fares and bills. We will deliver full-fibre broadband free to everybody in every home in our country...
See: Labour Manifesto p7 . Subsequent reported statements say that they will issue government bonds to do so - that is: borrow money and pay interest on the new debt.  

Lord Vallance of Tummel (ex-BT Chair) writes in The Times 19 Nov 2019 that the reason BT was privatised was to access sufficient capital for technological transition to digital. He states that telecoms ranked lower than the NHS, police, defence etc. in the annual  spending round and says there is no reason to believe that these priorities would change if BT came back to public ownership. He clearly does not realise what a government of a sovereign state with its own independent currency can do, to provide tax-free, debt-free funds.  Free money can be issued for non-inflationary productive investment such as developing broadband, railways, etc. No borrowing from banks is needed at all, Lord Vallance. No queues. No begging bowls. Just careful management of how the money is handled. 

As Prof Richard Werner wrote back in 2010, specifically on broadband investment:
Government Money
        One principle in monetary economics is that money creation used for productive purposes is not  inflationary. It is therefore possible to finance the Broadband Initiative with the creation of government money, without anyone incurring any costs or debts, and without any interest burden. From an economics perspective this is indeed the most efficient way to fund such productive government expenditure  

George Osborne, Chancellor of the Exchequer, concurred with that same view through a Treasury briefing document in 2013 (see para: 3.34), that money creation can be carried out to finance fiscal deficits, thus:

      ' It is theoretically possible for monetary authorities to finance fiscal deficits through the creation of money. This would allow governments to increase spending or reduce  taxation without raising corresponding finance from the private sector.'  

All the main parties are into spending much more government money than in the austerity days. But none of them mention money creation as a tool for financing public needs. Instead there are scare stories about public debt mountains and more tax. But if pension funds had their utility assets bought up through debt-free funding (no debt mountain-building) they could invest the cash in productive industry and commerce - Hey! there's a new capitalist idea for financial wizards to think on. A resurgence of new and newly capitalised businesses to fund our pensions? 

To prevent a property market boom through the cash released from re-nationalisations, the Labour idea of land value tax on commercial property would be a wise move. (Labour Manifesto p50).     

Posted by Charles Bazlinton. Author: The Free Lunch - Fairness with Freedom   

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