Investing in Northern and Midland Rail infrastructure could make an enormous difference. This is an exceptionally insightful and useful article by Will Hutton. You have heard of the north-south divide. Now how about the west-east one? It says The Social Mobility Commission state of the nation report published last December showed disproportionate disadvantage in the east where the Brexit referendum was won. Birmingham and Manchester England’s next biggest cities after London need to be bigger and governed as regions to capture the agglomeration effects that lead to the prosperity that creates the greatest social mobility effects. This will be helped by HS2 linking Birmingham to London and Europe and to Liverpool and Leeds via HS3. I say the sooner these rail links are built the better it will be. And that can be enabled now with Sovereign Money without any more borrowing or taxes.
In the USA bonds are the normal US way of raising capital for public investments (eg New York Subway). As I understand it, the Government simply guarantees to repay the bond by a fixed date and then gets the capital very cheaply on a triple A security.
Should we be taking back public services into public ownership? Lord Adonis’s recent article Grayling’s rail bailout echoes the grave errors of New Labour makes a strong case for taking the railways back into public ownership. A useful model for transport is London’s TFL. This could be adopted in the regions.
The Carillion collapse suggests that management of the construction of hospitals and schools and management of services should be taken back in house. Capita’s woes cause further concerns about outsourcing . However an equally important issue is how infrastructure is financed. Government and local government need to rethink the use of private finance in the public sector. Its use is often an ideologically based decision, not a rational one.
Public Finance Initiatives In particular the use of Public Finance Initiatives (PFI’s) as a way of funding investments in hospitals and schools have turned out to be hugely expensive and not necessarily effective. There are also problems with secrecy. Both parliament and the public are unable to obtain essential information about these contracts including tax avoidance .
It is shocking that 85% of MPs don’t know where money comes from The commercial banks make money from creating 97% of our money supply . Thus they are incentivised to create debt, hugely increasing the nation personal debt. Instead, our money supply should be created by an independent public body to meet the nation’s needs. The proper role for banks is to provide funds for businesses. Germany has a far better banking system that provides better services that support economic development at local, regional and national levels.
The good news is that there are better ways of financing public investment. There is no justification for arguing that large infrastructure investments are best funded by outsourcing them to the private sector in order to provide the finance without government borrowing. People’s QE or Sovereign Money can be used to finance them without creating debt. Labour Leader Jeremy Corbyn is giving this serious consideration
J M Keynes, Milton Friedman and Martin Wolf have all advocated the idea of sovereign money. Most recently, Lord Adair Turner has proposed similar ideas, highlighting that ‘there are no technical reasons to reject this option’. Like Quantitative Easing (QE), Sovereign Money relies on the Bank of England creating money and putting this money into the economy. But whereas QE relied on flooding financial markets and hoping that some of this money would ‘trickle down’ to the real economy, Sovereign Money works by injecting new money directly into the real economy via government spending.
Funding rail infrastructure, hospitals and schools. Sovereign Money, as argued above, can be used to fund new rail infrastructure in the North to support the Northern Power House without incurring debtincurring debt . It can enable new hospitals and schools to be funded without borrowing. Sovereign money could also enable investment in building affordable homes and refurbing leaky homes , and schools to invest in renewable energy, saving them thousands of pounds, and community or regional power generation.
Every time I walk in my town, I see deteriorating infrastructure: rusting railings, damaged pavements and pot holes in the roads. And like many other many other local councils our council is selling off assets and privatising public facilities in order to make ends meet . It is as if we, the fifth richest economy in the world, were a third world country.
No longer is there any excuse for Austerity with all its deplorable effects. Brexit is another great folly. It all adds up to incompetent government.
If you want to make all this happen lobby your MP and support ney Positive Money . You can get together with others and form a local group.
More about all these issues and solutions can be found in Chapter 7 An economy that works for all in my recent book The 21st Century Revolution – A Call to Greatness. and Chapter 2 Understanding the Financial Crisis and Chapter 10 New Money of A Better World is Possible