Richard Murphy

Richard Murphy     (Chartered accountant, blogger)
Born	21 March 1958
Interests	Modern monetary theory

Richard Murphy is a British chartered accountant and political economist who campaigns on issues of tax avoidance and tax evasion. He advises the Trades Union Congress on economics and taxation, and founded the Tax Justice Network. He is a Professor of Accounting Practice at University of Sheffield Management School.

Professor Richard Murphy blogs at Funding the Future, formerly Tax Research UK.

His best known book is "The Joy of Tax".

What tax is for

In "The Joy of Tax", Richard Murphy challenges almost every idea you have about tax. For him, tax is fundamentally about the ideas that shape the sort of society we want to live in, not technicalities. His intention is to demonstrate that there is indeed a joy in tax, and by embracing it we can create a fairer society and change the world for the better.

Tax has been a feature of human society for a very long time. Almost no one gives tax a good press even though, as Murphy argues, it has been fundamental to the development of democracy the world over. Whilst we may not like tax very much, in contrast it is clear that we really do like the public services which governments provide. So much so, in fact, that for most of the last 300 years, people have been more than happy for governments to run deficits by spending more than they raise in taxation.

The 2008 Financial Crisis apparently changed all that. The issues of debt, deficits, cuts and austerity have dominated the political agenda ever since. Virtually every aspect of the government's finances and how to rearrange them in the forlorn hope of balancing the books has been discussed in great detail. Despite that, there has been almost no real discussion during this period about what tax is for and how it contributes to the creation of the society we aspire to.

Taxpayers' money

"There is no such thing as taxpayers’ money"

On 1 August 2024, Richard Murphy posted on X:

"There is no such thing as taxpayers’ money.

"It’s an economic truth that every time a government spends, it creates new money to do so. It does not spend what is commonly called taxpayers’ money.

"Nor does it spend funds borrowed from the City.

"It simply asks the Bank of England to make a payment – and that’s what that Bank does, extending an overdraft to the government to let it do so."

New Labour Chancellor

On 30 July 2024, Richard Murphy posted on YouTube:

"If Rachel Reeves wants to go down as one of the worst Chancellors in history, then she set about establishing her claim with yesterday’s ‘blame the Tories for things we all already knew’ speech.

"When her ambition is to penalise pensioners but let the rich off tax increases, you know how badly she’s misjudged the mood of the country."

Neoliberalism is over

On 7 September 2022, Richard Murphy wrote:

Yesterday was bad. It was, in fact, very, very bad. If Boris Johnson was a disaster, Liz Truss has set out to be worse. I very much doubt that any prime minister has set out to create so many conflicts from the outset of their premiership in the way that Truss has.

The portent of things to come came when Truss’s senior adviser team was announced. Her economics advisers come from the Taxpayer’s Alliance and the Institute of Economic Affairs. Both are secretive far-right think tanks.

They hate government. They assume that whatever government does can be better done by markets. They don’t believe in the NHS. They think pension and care provision should be provided privately. They hate taxes. And now they are at the heart of government.

Another adviser also comes from the IEA. Truss has made clear her course. She will use her time in office to seek to dismantle the state. As a result she sets herself on a collision course with the civil service and the people of this country.

This, I am sure is not by accident. Truss is clearly intent on collision courses. Her first commitment as PM in her speech outside Number 10 was to build more roads. As a rebuke to the green lobby that took some beating.

She managed to beat it, however, by appointing Jacob Rees-Mogg to be Business Secretary, with responsibility for the environment. The man is a climate change denier. It is almost impossible to imagine a worse appointment.

Except for Suella Braverman as Home Secretary, who hates migrants.

Or Thérèse Coffey to Health, despite her dubious track record on abortion issues.

Her sackings were also significant. She has reduced her support base to Johnson loyalists who sided with her against Rishi Sunak. It is an incredibly narrow base inside a Tory party that is already deeply divided, and more than able to sack those Prime Ministers they do not like.

She has also set herself on a collision course outside Westminster. Her boosterism, matched with significant spending pledges and promises of tax cuts means that she is on collision course with the Bank of England.

The Bank will read this as inflationary. They will be increasing interest rates as a result. An increase to 3% is now forecast by Christmas. The knock-on effect will be a bigger household budget crisis for some than that caused by energy. Mortgage costs will skyrocket.

That will impact rents too, unless of course this government follows Nicola Sturgeon in announcing a rent freeze, which is incredibly unlikely given its ethos.

Outside parliament, it is hard to see how any of this is going to sell well. An energy price cap at £2,500 will not look like a lot of help for many struggling households.

A fight on civil service pay - which the economic advisers Truss has appointed will want - will crush already underfunded public services and compound many problems in society.

The green agenda is in tatters and matters enormously to young people, unsurprisingly.

Mortgage rate increases will lead to a debt crisis. A banking crisis could follow.

And in all this there is no hint of support for any businesses, except banks and energy companies who are exploiting the current situation for all it is worth. The supposed march of the entrepreneurs that Truss and her cohort believe in is not going to happen.

Instead, the sound of closing doors on businesses heading for bankruptcy is what to expect. I wish I did not think millions will be unemployed. But I do. Truss clearly aims to match Margaret Thatcher on this issue.

And this will not be by chance. The IEA is a particular exponent of the idea of the zombie company, as they describe them, which they say only survives because of low interest rates and the implicit state aid that provides.

They have long wanted the economy rid of what they think to be the deadweight that these companies represent within the economy, believing they are holding back creative new opportunities for emergent enterprises.

They call the process they are set upon ‘creative destruction’. By creating conflict and collision courses it seems that Truss is intent on this destruction. But there will be nothing creative about it. That was never possible, anyway. There will just be victims.

Truss has brought the most right-wing government to office in the UK in the modern era. But it’s important to note that its right-wing thinking focuses only on what it dislikes. There is no policy agenda within that thinking. Their belief is that need will be met by business.

They believe that out there in the economy are new businesses who have only been waiting for the destruction of government for them to emerge into the marketplace so that they can replace the services the government supplies now.

Some such scavengers will no doubt exist. The health care scammers will abound. Dodgy insurance schemes will be peddled. But this is not the environment in which innovation, risk, the needs of society and the constraints of the planet can be reconciled by the commercial sector.

Truss is, therefore, setting out to fail. Her appointments and priorities prove it. The collision course she is set upon is dangerous. The cost to us all of her choices will be enormous.

In this case we have to ask the question, what comes after Truss? A Labour Party beholden to the neoliberal agenda is not the place to find those ideas. Nor are the simple demands of Enough is Enough a cogent response, even if they are superficially appealing to some.

The time to create the agenda for a post-neoliberal world, where economic and social justice and a belief in the virtues of accountable democracy has arrived. That’s where I will be going with my thinking now. We can do better than this. To survive, we have to.

Gifting the banks £136 billion

On 18 November 2022, Richard Murphy explained on Twitter how quantitative easing results in the UK government (i.e. Jeremy Hunt) gifting vast sums of money to the commercial banks, instead of spending on Education, NHS etc, or lowering taxes:

The government is going to pay our commercial banks £136 billion of excess interest over the next five years on money the government gifted to them using the QE process. That’s £27bn a year that could be used in the NHS and education. This is outrageous. A thread….

The key issue to understand here is that when the government made almost £900 billion of new money using the QE process that got spent into the economy via our commercial banks, like Lloyds, Barclays and Santander. What happened as a result was that these banks ended up with over £900 billion supposedly on deposit account with the Bank of England. They are being paid Bank of England base interest rate on these deposits.

In 2021 that bank base rate was 0.1%. Even in March this year it was expected to peak at around 2% and then fall to 1.25%. Now the Office for Budget Responsibility forecasts a peak of 5% and then only a slight decline to 4.25% by 2027.

I used this new interest rate forecast plus forecast falls in these deposit account balances because of (unlikely to happen) plans to reverse QE to forecast how much extra interest the banks will be paid over 5 years as a result of the increase in official interest rates. The answer is £155 billion of extra interest due over five years. Now, in practice I accept some might need to be paid for technical reasons. So I adjusted for that. The excess payment then became to £136 billion over five years.

That is £27 billion a year on average for the next five years that the government will be paying to the commercial banks on money they never earned but were instead given because of the QE process. Let me put this in context. £27 billion a year also happens to be the amount of increased tax a year imposed yesterday. All of that is going to our banks. They are the only people gaining from it under Hunt’s plans.

Alternatively, £27 billion was the total cuts a year imposed yesterday. And what I am suggesting is that all of those cuts were made to ensure we can pay the banks what they are not owed, but which the government wants to pay them.

This is absurd. This interest need not be paid. There is no law requiring it. Pre-2008 nothing at all was paid on these balances. I reckon 0.1% on total balances over £100bn would be more than enough to fulfil the policy goal for making payments. And that would save £136 billion.

In other words we could, by simply denying the banks their unearned gains, provide enough to protect and reinvest in the NHS and to protect and invest in education.

The government has made a choice. They have decided banks should gain. As a result they have decided people will die and children will not get the future they deserve. And they have done that so that bankers can have massive bonuses on ill-gotten income.

I think this is wrong. I think it should be put right. I call on all politicians to stop these absurd and unnecessary payments to banks and to use the money for essential public services instead.

And for those who want the detail, my workings are here. Please complain. Please do so now. Tell your MP to change this, now.

 

Documents by Richard Murphy

Title	Document type	Publication date	Subject(s)	Description
Document:Boris Johnson's first two priorities for post-Brexit Britain	Article	1 February 2020	Boris Johnson Freeport Brexit Freedom of movement	Boris Johnson has admitted what Brexit was for. He wants to control and constrain people. The market in labour will be constrained. And let’s not for a moment pretend that a Freeport supports markets: freeports are instead about permitting the free movement of capital beyond the control of the state and without the imposition of any taxes.
Document:Modern Monetary Theory: an explanation	blog post	18 April 2023	Neoliberalism Central bank Money Inflation Quantitative easing Modern monetary theory	The MMT approach to the command of resources is the polar opposite of that in neoliberalism. MMT seeks to do what is possible. Neoliberalism seeks to constrain what is possible.
Document:Rachel Reeves needs to develop some decent ideas very quickly	blog post	25 May 2023	City of London Rachel Reeves G7 Keir Starmer Brexit	Rachel Reeves is a person out of time, out of ideas, and right now with no answer to any question that might reasonably be asked of her. It's very depressing.

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References

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