Saturday, 22 March 2014

Complaint to the BBC over terrible video about government spending

Peter Martin kindly drew attention to an appallingly bad piece by Hugh Pym that has been published on the BBC Online website.

Once again it perpetuates the myth about the government drawing on a mysterious pile of financial resources that are out there somewhere in the world (in this case a pile of red sweets). Both Peter and Alex Little have complained to the BBC and got the usual dismissive response.

But it got their attention. So now it's my turn, and here's what I wrote:
The video shown is a factually inaccurate description of the way that government financing works and should be withdrawn or replaced.

The way HM Treasury works is that it spends first and backfills later. What Hugh should have shown in that the government spends 7 into the economy, 6 come back as direct taxation and the other is saved and swapped for government Gilts. The whole thing goes around in a big circle - from government to the wider economy and back again.

If the government wants to spend 8, then it just spends it on its float at the BoE, and that will leave 2 that get saved and swapped for government Gilts - which then restores the float.

Therefore the government no more goes cap in hand to obtain money, than a bank does to a worker when they get their salary paid into their account. Both are technically acts of 'borrowing', but not in the sense of creating any real obligation.

The Bank of England is a subsidiary of HM Treasury (as shown in the Whole of Government Accounts), and is required by law to take direction from HM Treasury (4(1) of Bank of England Act 1946). Any 'independence' the BoE has is limited. Nobody has the authority to bounce a government cheque. Parliament is sovereign.

Our currency system is a dynamic structure capable of supporting all real transactions in the economy and it is vitally important that the BBC gets that across. Otherwise it is supporting political myths that work to the detriment of licence fee payers and the BBC itself.
The BBC, being quintessentially British, makes it very easy to complain. If you can see the video then please complain about it, and ask that it be withdrawn. Use your own words. Be polite. Point out the flaws and ask what you want to be done.

Only by taking action can we change the way things are - a little at a time. In the words of the late Tony Benn: "Democracy is not just voting every 5 years and watching Big Brother in between and wondering why nothing happens. Democracy is what we do and say"