THERE is much discussion going on in supposedly learned economic circles right now about how Rachel Reeves might raise the money that she supposedly needs to fill her government’s “black hole” of £22 billion, as well as to find the money for the essential investment that we all know is required in our economy.

This is what Labour promised during the General Election campaign with its pledge of “change”. What I have is the duty to report to you that almost all of this discussion involves the discussion of truly appealing ideas, or utter drivel.

The fact is that there can never be a never be a “black hole” in the UK Government’s finances. That is impossible because the UK Government is ultimately responsible for the creation of all the money that we use.

It alone, then, can never run out of money. It is impossible for it to do so. As was proved during the quantitative easing eras of 2009 to 2016 and again in 2020 and 2021, if the Government really requires money, then it can always create it, as it did back then.

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In that case the obvious answer to Reeves’s funding dilemma is that she create some more money to solve the problem that she faces. It really is as simple as that.

Alternatively, she could tell the Bank of England to stop the quantitative tightening process that it is currently undertaking, as a result of which it will raise £100bn of funding this year, not a penny of which will be productively invested in our economy.

She only has to send a memo to the Bank and tell them to stop, and that money could instead be used to fill her “black hole” – but she won’t do that.

Instead she wants to claim that “very difficult decisions” will have to be made. In other words, she thinks she will have to impose austerity on us all instead of facing up to the governor of the Bank of England.

But how hard are these decisions really? According to the Office for National Statistics, the UK has financial wealth of more than £15 trillion.

To put that in context that is £15,000,000,000,000 or £15 million million. And all that Reeves needs is a bit more than £22bn. Again, to put that another way, what she needs is about 0.14 pence out of every pound of financial wealth in the UK and her problem will be solved. That really cannot be hard to find. It would be easy to raise the money in question through taxation.

All she would have to do is equalise the rate of tax on income and capital gains and she could raise £12bn of the money that she needs, each and every year from now on.

If only she would also charge National Insurance on investment income from rents, dividends, interest and trusts – when at present these all enjoy tax rates almost half in real terms of that on income from work – she would raise maybe £18bn more. Her black hole would have disappeared with money left over. The workings are in my Taxing Wealth Report 2024. https://taxingwealth.uk

But there is something else she could do that would really transform the way our economy works. Right now the Government spends a staggering £70bn a year subsidising the savings of the wealthiest in our communities.

Admittedly, the Government doesn’t report this as a cost because the expense is seen as a reduction in tax paid, which is a neat way of hiding it from view, but it happens nonetheless.

And let me stress, this is welfare for the wealthy because at least half of this massive subsidy goes to the top 10% of UK income earners.

As a result many of them get more by way of subsidies for their savings a year than many in need and on benefits ever get from the state.

Worse still, I think that almost all this money is wasted. The vast majority is “saved” in the City of London. They use it to speculate in the shares of companies already in issue, or to buy corporate bonds that are usually issued to fund totally economically pointless takeover activity between stock exchange companies, or to buy buildings that are already in existence.

In that case, tiny amounts of the total of more than £7 trillion of savings subsidised in this way is actually used to fund new investment in our economy.

It’s as if the City has forgotten that its job is to fund business and entrepreneurial activity, which neither it nor banks almost ever do now.

So, how to address this massive issue? That’s simple. All that is required is that the rules on ISA and pension saving be changed so that all ISA savings and 25% of all new pension contributions must be saved in ways that fund new investment in the UK economy and its essential transition to sustainability.

That money would, in other words, be used to fund investment in tackling climate change, restoring public infrastructure, transforming our power systems and railways, and much more.

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And how would these investments pay a return to investors?

Firstly, by generating new income as they were built and secondly because they would add value to the UK economy over time, more than covering the cost of their funding. That’s really not hard to work out, or prove.

And in total, up to £100bn a year – which is probably much more than we could at present spend on these projects – could be raised in this way each year. Problem solved in that case, as the saying goes.

And what is the Scottish angle? It is that if Reeves refuses to do this – as I suspect she will – then the SNP should adopt this programme so that the people of Scotland would, after independence, have the opportunity to use their savings to fund the Scottish future that they really want rather than to finance speculation in far away stock markets.

I think a lot of people would welcome that.