Dear Paul Krugman,
In Britain, we have been mired with a series of right wing governments that were elected on platforms of cheap populism and empty economic soundbites. We suffered a long decade of austerity with a repeated insistence that we must all “tighten our belts” as public spending was cut and cut again. Over the same period, corporation tax was cut by a third.
Our current prime minister was elected with a manifesto that claimed to finally end austerity and promised £20bn of tax cuts—which mostly benefitted wealthier households. Across the nine preceding years of Tory rule, the government had already given away some £86 billion to corporations and the super-rich through cuts in the headline rate of corporation tax, plus a further £6.8bn bonus to the wealthy in the form of cuts to inheritance tax and to the additional income tax rate. When Boris Johnson announced his bid to run, ten of Britain’s billionaires made donations to his party. Unsurprisingly, his economic policy in office, including the most recent budget update, made clear that the plan to help the wealthiest is not ending any time soon, despite the fact we are facing a growing cost of living crisis.
Tax cuts for the rich have so often been justified in terms of trickle-down effects that demonstrably fail to materialise—a point I need not convince you of, but this argument nonetheless resurfaces time and again in public discourse. Yet a regressive marginal tax burden is roundly ignored. At the same time, house prices continue to careen through the roof, ever raising the cost of living for renters and first-time buyers. Henry George’s sound argument, backed by none other than Winston Churchill, that we should shift the tax burden away from labour towards the unproductive parasitism of land monopoly, occasionally resurfaces in suggestions for a wealth or land value tax, but is easily swatted away as being somehow unfair or too radical.
On the flip side of all the wrong tax cuts, we have taken all these blows to public spending. I read your recent NYT column in which your relief that President Biden understands the value of investing in the future, through public infrastructure, children, and climate resilience, is tangible. You recognise nonetheless that the sound sense of such investment is not strongly recognised in much public discourse. Our Conservative government does not quite share the same unshakable reticence to invest in public infrastructure as the US Republican Party, and indeed is making song and dance of “levelling up” through infrastructure investment and skills training, presumably hoping that this party piece will distract from all the other ways in which public services and investment in the nation’s future have been short sold.
None of us here have to look very far to see and feel the effects of local government cuts. My local library, beloved to me as a child, has been levelled and will not be replaced. My council-owned allotment site, where members of the community can grow their own food, is in dire need of basic maintenance, but budget cuts mean that we are told time and again there is no money. Streets fill with litter and public conveniences are closed. If our government won’t even maintain the public services we already have, what hope have we that they will make the necessary investments in the future?
That broader short-sightedness is evident everywhere. Green levies that raised funds for energy efficiency improvements and investment in renewables were also shown to effect substantial savings in fuel bills for lower-income households, but now the government is looking to remove them. This echoes when Conservative Prime Minister David Cameron ordered his ministers to “cut the green crap” in 2013; now research shows that UK domestic energy bills are £2.5bn a year higher than they would otherwise have been. Despite the talk of “levelling up” skills, an apprenticeship levy in 2017 severely reduced the number of apprenticeships in the country and they remain well below that level now. The much-championed NHS is straining at the seams and the social care system is mired in a crisis of underfunding. Levelling up can’t just be about infrastructure, but must also be about health, education and incomes of ordinary folk.
Our last prime minister famously told a nurse who was struggling after receiving no pay rise in eight years that “there is no magic money tree”. The home secretary used the same phrase to defend a crisis in the use of food banks, and soon it seemed everyone was saying it—even those on the right of the Labour Party. This really gets to the root of the rhetoric—that conservatives know that the public conceives of the economy as being like a household, with a finite pile of money sitting in the bank. Of course there is a magic money tree, called economic growth, when public and private investment drives wealth generation. There is arguably another magic money tree, called quantitative easing, that apparently allows governments to create money to bail out banks but not to pay nurses or invest seriously in climate resilience.
The question is of course never really whether the country can make money, but how it drives growth, what it chooses to tax and what it decides to invest in to bring benefit to its citizens. We keep investing in the wealthy, not the wellbeing of the majority of people, and not in the future. But we are stuck in rhetorical ruts that allow vested interests to protect the status quo as if it were common sense and dismiss real reform as fairy-tale lefty fantasy. So my question for you, Professor Krugman, is how can we change this?
How do we show and convince people of the kinds of economic policies that would actively enhance their own quality of life, as well as that of the collective? What combination of data and discourse can get this message through at scale so people no longer shoot themselves in the foot in supporting populist demagogues? How do we collectively learn to truly assess future value of the actions we take today? I, like many others, have ideas along these lines, but I am interested first and foremost in your thoughts, which may then perhaps become a springboard for discussion with others. We must strive to steer a culture in which tax cuts for the rich are roundly denounced for what they are, and public spending is celebrated and targeted as an investment in our collective future.