A few weeks ago, we published our report – A Global Tax Plan for a Global Pandemic. At the time, we advocated for a 21% global minimum corporate tax rate. Since then, the G7 have announced their agreement for a 15% global minimum corporate tax rate using an approach that as far as we know is broadly similar to the one outlined by the OECD in October 2020.
Using the data provided here, we have analysed the difference that a 15% compared to 21% global minimum tax rate would make to lower income countries. Our table below shows that, in total, lower income countries lose out on $8bn (£5.7bn) each year when you compare a 15% rate with a 21% rate. This comes at a time when the UK government is also decreasing the UK aid budget from 0.7% to 0.5% thereby depriving poorer countries of £4bn per year.
The government states that it wants to be a global leader. We are currently in the midst of a global pandemic. If it wanted to, our government could show that leadership by pushing for a global minimum corporate tax rate of at least 21% when it continues these discussions at the G20 in July.
To deprive poorer countries of almost £6bn in tax revenue at the same time as cutting £4bn in aid is simply scandalous. That’s £10bn that lower income countries could have been using to respond to the global pandemic still ravaging their countries.
*These figures are based on the OECD Oct 2020 proposal at a global minimum rate of 15% and 21%. We recognise that we do not yet have the detail of the G7 agreement to know whether or not the outcome would be substantially different under their proposal.
Church Action for Tax Justice responds to the G7 announcement regarding global taxation on 5th June 2021
Church Action for Tax Justice have responded with disappointment to the announcement by the G7 finance ministers regarding global taxation on Saturday 5th June 2021. We will study the details of the proposal as they emerge, but for now we do not believe that they represent a solution that is fair or just, especially in regard to lower income countries.
The G7, and the UK in particular, had a historic opportunity to demonstrate real global leadership in the course of this summit. Instead, the plan that has been announced indicates no more than slightly reformed business as usual. A global minimum tax rate of 15% is not high enough, and it appears as though the pillar one rules still favour the interests of high income countries at the expense of lower income countries. Our hope is that when these proposals are considered at the G20 that a much fairer distribution of tax revenue toward lower income countries will be considered.
This does not mean that we haven't recognised the significance of today's event. For the first time, there is a meaningful agreement on a global minimum corporate tax rate - albeit by G7 countries alone at present. The communique from the finance ministers does begin the process of addressing the scourge of tax havens, but in its present form it is nowhere near ending the injustice and unfairness that plagues our global tax system.
The Christian thinktank Theos has done us a great service in producing three reports on the contemporary landscape of Christian social action in the UK, in this guest blog, Richard Tiplady reflects on them.
Doing Good: A Future for Christianity in the 21st Century (Nick Spencer, 2016)
The key point of this report is summed up in one short section; “there may be fewer Christians but they are doing more. Not only is the size of British Christianity changing, but so is its shape, the way in which it lives out its faith … people of all religious faiths, and especially Christians, are disproportionately getting involved in social action in contemporary Britain” (p44-45).
The types of social action are many and varied. The 2014 National Church and Social Action Survey reported that “somewhere between 1.1 and 1.4 million volunteers participated in church-based social action in the UK” (p46). And the pattern is one of increase. By 2016, “churches had increased the average number of staff hours on social action by nearly a fifth in two years; increased the average number of volunteer hours on social action by nearly a sixth to 114.8 million hours per annum over the same two-year period; increased their spending on social action by nearly a seventh to approximately £393 million over the same two years; and increased the average number of social action initiatives undertaken by a fifth from 7.4 to 8.9 during this period. Moreover, the study found that over half (58%) of churches planned to increase social initiatives in the next 12 months” (p46).
Spencer draws on Catholic social thought to argue for the church’s distinctive approach. Benedict XVI’s 2016 encyclical Caritas in Veritate said that the church’s charitable activity does not merely meet the needs of the moment but is dedicated to others with heartfelt concern, enabling them to experience the richness of their full humanity. Christian social action, therefore, needs to express the visible mark of the love of the gospel, being characterised by commitment, love and an acknowledgement of the personal nature of all social encounters. Spencer provides a number of examples to illustrate, including Christians Against Poverty and Street Pastors.
Doing Good Better: The Case for Faith-based Social Innovation (Paul Bickley, 2017)
This report builds directly on the first one by noting the amount of faith-based social action in the UK, then suggesting that “sometimes, what is needed is not more but different – new ideas, new approaches, new practices. Many of the great social achievements of religious traditions have not been realised by doing the same thing more, but by pioneering and applying a new approach” (p12). This means that we should ask questions around religious social action that go beyond “how much good are they doing?”, and we should instead ask “how can they do good better?”.
We therefore need to look at the concept of social innovation. This is a ‘fuzzy concept’ that lacks a single clear definition, and Bickley provides a helpful summary – “new ideas that meet unmet needs”. He notes that social innovations do not spring fully formed from nowhere. Innovators work at a small scale, developing their ideas and prototypes before looking to see if they can be taken up at scale. This requires a hospitable environment and, given that religious institutions often have strong leadership structures that hinder the emergence of entrepreneurial behaviours, how might such an environment be inculcated.
The area of greatest weakness for churches is that we have relatively little innovation infrastructure, which can leave individuals short of the training, resources, and guidance that they need. Most Christian social action is delivered by small charities and churches; their local place-based nature gives them important advantages, but it provides limited capacity to support innovation, which needs institution-level support.
Growing Good: Growth, Social Action and Discipleship in the Church of England (Hannah Rich, 2020)
The 2016 Doing Good report looked at the growth of Christian social action in the context of a narrative of church decline. Somewhat paradoxically, this last report looks at the findings of a major research project in the Church of England that explored the relationship between social action, church growth and discipleship.
“It finds that social action can be a route to church growth in both numerical and spiritual terms. It is one of the key ways in which congregations can build wider networks of relationships which can result in people initiating a faith journey and joining the church” (p12).
Social action leads to church growth when it helps congregations to develop meaningful relationships with those they would otherwise not have done, or who might not have otherwise come into sustained contact with the church. It is frequently not what is done, but how it is done, which makes it conducive to church growth.
The report does not claim to offer a single guaranteed way to grow a church, but the research did identify a set of shared characteristics among churches that exhibit numerical growth while engaged in social action and helping people to grow in their faith. Many of these match the characteristics mentioned in the earlier From Evidence to Action research.
When a church is engaged in social action, it looks most like what people outside expect it to be, and that integrity is attractive to them. “It forms part of the ‘plausibility structure’ of Christianity in as much as it reflects the goodness of the Christian God as expressed in the gospel. If a church is recognised as a place where good things happen, it increases the plausibility that the belief systems behind it are also good” (p123). This supports Lesslie Newbigin’s argument that “the only possible hermeneutic of the gospel is a congregation which believes it” (p124). The church grows when it is known for the good that it does and when it provides opportunities for others to join in with it and thereby encounter the God behind it all.
Richard Tiplady is Director of Mixed Mode Training for the Scottish Episcopal Church. His PhD research was on the development of entrepreneurial leadership in the church. He been known to climb the occasional Munro, but doesn’t want you to do that because he doesn’t want them to get any busier.
A fundamental principle of biblical justice is that we are all equal before the law. The book of Leviticus reminds us: ‘Do not pervert justice; do not show partiality to the poor or favouritism to the great, but judge your neighbour fairly.’ (Lev 19:15) Yet a new report this month from Tax Watch reveals that such equality does not seem to apply to the way we pursue benefit fraud and tax fraud. While tax cheats costs the exchequer nine times as much as benefit cheats, you are 23 times more likely to be prosecuted for benefit fraud than tax fraud. This is surely unjust.
As Scripture makes clear, the temptation to show such partiality in judgements is perennial which is precisely why both the Old and New testaments rail against it.
There are in fact two counter-cultural realties expressed in the fact that we are all created in God’s image. On the one hand, the fact that everyone is created in God’s image (however marred that image subsequently is) means that we are all of equal worth and dignity in God’s sight. The second is that because everyone is created we are all under God’s authority and judgement. When we show partiality in law, we deny both of these realities. On the one hand we are treating people as if they are not equal – as if there is some significant, judgement-bearing difference between them. On the other hand, we are also setting ourselves up as some kind of authority in the place of God. We are claiming that we are able to determine someone’s value as opposed to the equal judgement that God has made. As such, partiality in law is simply an example of that age old sin – idolatry – in this case, a form of self-idolatry where we assume the place of God in judgement.
Yet that is what seems to be happening in the way we treat benefit and tax fraud respectively. As the Tax Watch report shows there is not a level playing field in the way these two crimes are treated. They point out how:
In highlighting this, I need to make it clear that I am in no way criticising the hard work of HMRC staff who diligently chase up as many tax fraudsters as they can. My criticism here is levelled at a succession of governments from both parties for their chronic failure to adequately resource HMRC, especially in respect of its compliance work which has seen a reduction of 800 staff over the last 4 years. While it is true that in the most recent budget the Chancellor announced an extra £100 million to chase down fraudsters, even here the emphasis was not specifically on tax fraud but on furlough fraud.
The question remains of course why is this the case? Why is it that we treat tax crime so differently to benefit crime? In answer to that, I am unavoidably drawn to the question of who benefits from the relatively light touch given to tax fraud, and to the issue of party funding. As such, I wonder if Micah’s advice remains as pertinent as ever.
Hear this, you leaders of Jacob, you rulers of Israel, who despise justice and distort all that is right;…Her leaders judge for a bribe. (Micah 3:11)
Dr Justin Thacker
Director, Church Action for Tax Justice
Tax, it can sound like a dirty word nowadays. Yet it is core to the smooth, equitable, functioning of society. We constantly hear on the news that there is no money left in the kitty, and that the government is like a household, with a limited budget. Yet here we are, in the midst of the biggest crisis since WWII: the Covid-19 pandemic. In order to prevent the entire collapse of society, the government has had to, rightly, fork out billions: £300bn so far to be exact. But already, our current Chancellor of the Exchequer, Rishi Sunak, has warned that ‘hard choices’ will need to be made to tackle the record levels of national debt incurred during this Covid-19 pandemic, in order to ‘balance the books’ for future generations.
Here at Ethical Consumer, we don’t believe that these ‘hard choices’ should take the form of tax rises or spending cuts on ordinary people. We fully agree with the Christian vision of a just and fair society in which the tax system plays a vital role. Just like Church Action for Tax Justice, Ethical Consumer do not see tax as a burden. It is a way of showing love for our neighbours and is a fundamental tool in creating a just and equal society in which no one suffers with poverty or inequality. To help us achieve this mission, we have launched a campaign to ask the government to impose a 10% Digital Services Tax (DST) on the Tech Giants (including Google, Amazon, Facebook, Microsoft, Apple and Netflix) to contribute to the estimated £300bn cost of the Covid-19 pandemic so far. It has not escaped our attention that these digital companies are not only making exceptional profits in the new locked-down world, but also have long histories of systematic tax avoidance all round the world.
It may interest you to know that the UK has already imposed a Digital Services Tax of 2% since April 2020. Thus, we recommend building upon that 2% tax rate and increasing it to 10% for a temporary ‘windfall’ period. In December 2020, we made a submission to the Treasury Select Committee on Tax after Coronavirus, advocating for precisely this. The DST itself is designed to be a temporary measure, until the Organisation for Economic Co-operation and Development (OECD), helps countries to agree to new global tax rules to prevent profit shifting by multinational digital companies.
Of course, any new iteration of a DST would have some safeguards in place to prevent companies passing on the tax to their consumers. Furthermore, the DST should also be applied to product sales, otherwise, companies such as Amazon will not be brought within its scope. We also call for exceptions to be made for other companies such as John Lewis, which are able to demonstrate through transparent reporting a good record of paying tax, to be excluded from the sales element of the DST. If you would like to learn more about our campaign, please click on this link.
We would love for you as individuals to join us in our fight for a 10% DST levied on the Tech Giants. You can find out more by visiting our website, keep up to date with our work by following us on Facebook, Instagram or Twitter, join our campaign by emailing your MP or host our Covid-19 Tech Tax Campaigner, Nabila Ahmed as a speaker at your online event.
On the 28th of August 2020, the BBC’s medical editor Fergus Walsh published an article asking the public whether it was “time to move on and get back to normal life?” Now, as I write this blog on the 19th of January 2021, having not left the house for more than an essential shopping trip for a number of weeks, I think it’s safe to say the answer was no.
But that is simply to answer the question on a surface level, taking it as a question of whether It is time to return to the norms of family life, the norms of meeting with friends over dinner or enjoying a drink in the local pub. In many regards, though the time is clearly not yet, I do long to see a return to those norms. However, I want to challenge the shallow nature of Fergus’s question, as I propose what we should really be asking ourselves is whether pre-COVID life was ever really normal at all?
The COVID-19 pandemic has brought to the surface a plethora of inequalities throughout our society, but it hasn’t created most of them. It may have exacerbated them, but many existed before this pandemic began and if we’re not careful, they’ll continue to exist long after it’s over. Even if you just slightly lift the lid of pre-COVID society, you begin to see deep rooted inequalities, unprecedented environmental challenges and so much more. Our broken systems and structures dragged society on, increasing inequality and fuelling a climate crisis. Normal was never really that normal. So to answer Fergus’s question, no, I don’t think it’s time to return to normal. Not now and not ever. I believe it’s time to create a new normal.
As Christians we are called (according to Micah 6:8) ‘to act justly, to love mercy and to walk humbly with your God’. Christianity regularly guides its followers down the path of justice, righteousness, fairness and equality. We have a rich history of being at the forefront of social justice, whether that be through Equiano and Wilberforce’s fight for the abolition of slavery, or John and Susanna Wesley as they pioneered UK children’s education through the Sunday School movement. The call to do good, to seek justice and to correct oppression is a call the Church has diligently heeded throughout its existence.
The Christian fight for a more just, equal and fair society is something we’re powerfully reminded of as the world remembers the struggles of Martin Luther King Jr and the Civil Rights Movement in America on MLKDay last week. Here at Church Action for Tax Justice, we believe that the Christian vision of a just and fair society is one that we need to once again set our gaze upon as we begin to contemplate life after COVID and hope to shape this new normal.
Our name really does give away our game. If you hadn’t guessed it already we’re a Christian organisation encouraging the Church in the campaign for tax justice. We believe the tax system can play a vital role in building a more just and sustainable society, one that falls more in line with the Christian vision we previously mentioned.
We believe that tax should not be seen as a burden: it’s a way of showing love for our neighbour and creating the type of society that as Christians we hope for, one where poverty and inequality are a thing of the past. As an organisation we seek to raise awareness throughout Churches and faith communities of the fundamental relationship between taxation, equality and public services. We are currently in the middle of our Fair Tax Now campaign. This campaign highlights the stories of those most impacted by our unfair tax systems and encourages individuals to email their MPs for fairer taxes. Additionally, next week the house of Lords will be debating our Fair Tax Now report.
We would love you as individuals and as churches to join us in our fight for Tax Justice. You can find out more by visiting our website, keep up to date with our work by following us on Facebook, Instagram or Twitter, join our campaign by emailing your MP or host our programme director Dr Justin Thacker as a speaker at your online service.
We are also running a series of Bible studies exploring a number of topics. The studies are free and can be booked here
Author: Bryn Lauder
A version of this article was published in Church Times
When Boris Johnson was admitted to hospital with covid-19, a number of commentators suggested that the coronavirus was a great leveller. When even heads of state can succumb to the illness, then we are all equally susceptible. The truth of course is that the virus is not the great leveller but instead the great revealer. In particular, it has exacerbated the inequalities that pre-dated this virus and it has created, or at least highlighted, some new ones.
Analysis from the Institute for Fiscal Studies has shown markedly different impacts according to pre-existing income, work, health, education, age, ethnicity and gender. It has also demonstrated new inequalities in respect of type of housing, ability to work from home, requirement to commute on public transport and access to green spaces. As their report concluded, ‘We might all be in this together, but we are not all in it equally.’ So while we are aware that from a health point of view, the virus affects older males more severely than other groups, we may be less aware that in terms of employment it is women under 25 who are disproportionately affected. Perhaps more troubling is that there is clear evidence that medical vulnerability to the virus tracks income deciles with poorer communities impacted to a much greater extent than the wealthiest. Similarly, recent analysis by the International Monetary Fund has shown that while the health effects of an epidemic/pandemic last as long as the outbreak, the economic impact on the poor can extend for at least five years beyond the life of the disease. The same economic shock is not experienced by the wealthy.
But does this matter? Is there something inevitable about inequality, that it is perhaps even God-ordained? My answer to is yes to the former, but a resounding no to the latter. There is a parallel with sin here. Yes, it is inevitable, but that does not mean that it is God’s intention. A misunderstanding of this simple truth is why we so often misappropriate Jesus’ statement that the poor will always be with us (Mark 14:7; Matt 26:11; John 12:8). In saying this, Jesus was quoting Deuteronomy 15:11: ‘There will always be poor people in the land.’ But what we miss is what the Deuteronomic passage goes on to say, ‘Therefore I command you to be open-handed towards your fellow Israelites who are poor and needy in your land.’ What we have here then is a both an empirical statement – ‘There will always be poor people’ – and an ethical imperative – ‘Therefore I command you to be generous.’ The inevitably of inequality is no more a prescription for passive acceptance than it is in respect of sin. None of us say, ‘Sin is inevitable, so why bother doing anything about it?’ Yet, for some reason that can be our attitude to inequality – one of the fruits of sin.
So how can we tackle it? Well there are many ways but at least one of them involves ending the unfair tax system that impacts both the global and national poor. Globally, it has been estimated that up to three times the amount we give in aid to Africa leaves that continent via tax-dodging by multinational corporations. Recently, the OECD has been leading a process to reform the global tax rules but many wealthy nations oppose reforms that would help the poorest. Here in the UK, the most recent analysis suggests that when all taxes are taken into account (not just income but also council, VAT, taxes on wealth) - and when we consider growth in the value of assets - then the richest in our country pay just 18% of their income in tax compared to 42% for the poorest. This is fundamentally unfair.
Recently, we celebrated the anniversary of the birth of Florence Nightingale. It was instructive to me how many of the Christians commenting on this drew attention to the care she showed the soldiers dying in Crimea. That is true of course, but what they all seemed to miss is that her real contribution was not in one-to-one care, but in the way she used statistics to analyse disease and death rates, and recommend policy solutions in response. Nightingale raised her head above the parapet of the immediate to ask the question ‘Why are so many dying?’ Hygiene standards that save countless lives today are the result. I wonder if as Christians we need to do the same. Of course, in our communities there are many individuals suffering and we must minister to them, but at the same time there is a need for some of us to raise our heads and look at the big picture of what is going on, and tackle these structural causes of inequality too. And that is what tax justice is all about.
Church Action for Tax Justice
All-age tax justice
Val Jenner reflects on her experience of leading an all all-age tax justice service.
For Tax Justice Sunday, on 14 June, I led a Quaker all-age meeting for worship themed around tax justice.
To help churches highlight the issues involved in tax avoidance around the world the CATJ website provided all of us with lots of material – a video version of a service, a short video illustrating some of the problems and other Bible-based materials.
For Quakers in Britain, who follow unprogrammed, silent meetings for worship - where, while an elder holds the worship space prayerfully, 'ministry' may arise through the working of the Spirit from anyone who is present, but should not be prepared beforehand - a Sunday dedicated to a special theme is a challenge. However with help from the excellent materials available, and mixing this with Quaker Faith & Practice, our book of discipline, we were able to do this at my local Quaker meeting.
The key to this was using the one semi-programmed format we are familiar with: all-age worship. This allowed us to keep our young people and their families with us for the whole hour, instead of going into children’s meeting as usual after the first fifteen minutes. It required looking at the language used in the materials and thinking about the meaning of the concepts to find accessible, child friendly versions, thinking about activities and story that would give us metaphors and holding forms.
And for this I worked with Friends from our children’s committee, two of whom, like me, are elders in our meeting. All of whom are used to, and skilled in, thinking about the needs of our young people and their religious education. We thought about activities that younger children might like and what our strengths were to facilitate these – for example one is an artist so she led a group in painting and drawing, another is an accountant so he was part of a discussion group. We also agreed we wanted to bring it back to everyone’s experience in lockdown – people’s needs and the experiences of sharing and kindness that we have had in different ways.
The other complication was of course using zoom in this changed time. Normally we would all be together in the big meeting room and activities would happen in the corners and children and adults might move around, make some noise and act as a background to, and sometimes swap with, those holding the silence. It’s not a problem for us usually, but the thought of that going on from different homes all in one screen felt too much. So we used chat rooms for the central twenty-minute activities. We finished up after meeting with a discussion chat room for those who wanted to explore practical next steps. I don’t think we could have attempted this at the beginning of our online experiments with worship, but it’s a sign that we’ve learnt a lot in the past months and are all more comfortable with the medium.
I hope you find the resulting format helpful. It’s just one response, from one worship community, but the materials on offer on the website are rich enough to afford a lot of fun with re-jigging, re-wording, cutting and pasting to produce something specific to your community’s needs. Enjoy!
Val Jenner is a member of Central England Quakers and an elder at Selly Oak Local Meeting. She is also a member of CATJ West Midlands.
The script that Val used is available here
Do deficits matter? Kelton says 'No'
A Review of Stephanie Kelton, The Deficit Myth: Modern Monetary Theory and How to Build a Better Economy (2020: John Murray Press)
‘How are we going to pay for it?’ That seems to be the concern of swathes of our political class and journalists as on a seemingly weekly basis we get another announcement about coronavirus spending. Theresa May famously told us 'There is no magic money-tree' and James Meadway, former adviser to John McDonnell, would seem to agree, so on at least some parts of both the left and the right the problem of how to pay for coronavirus is indeed a problem.
But is it? For as UK public debt has grown by a staggering £190bn and our debt to GDP ratio is at a 50-year high, Stephanie Kelton, Professor of Economics at Stony Brook University steps into the debate and essentially says, ‘Don’t worry, it will be fine.’ That is perhaps, not entirely accurate. But what she does say is that the deficit is not the thing we should be worried about. That is not our problem; unemployment is.
Kelton is an advocate of what is called Modern Monetary Theory (MMT). A bit like postmodernism, MMT is so different to how we usually think about public finance that it can take a bit of effort to get our head round it and it is also sometimes a bit slippery around the edges. Nevertheless, it has a core idea that turns on its head how we usually think about tax and public spending.
In short, MMT states that we don’t need taxes to pay for things; the government can pretty much pay for what they want. There really is a magic money tree.
As Kelton makes clear, this is not necessarily a socialist idea; the things we pay for could just as well be more military spending as much as unemployment benefits and healthcare. But the primary point is that we don’t need to collect the taxes to pay for what we want. In a reversal of the usual tax then spend dynamic, according to MMT, we first spend and then collect the taxes afterwards.
The key point here is that contra Thatcher, national governments – at least ones which are able to issue their own sovereign currency (USA, UK, Australia, Japan, but not the Eurozone) – are not like households. They don’t have to balance their books; their central banks really can just print money. How is this possible? Because money is not gold. The British pound used to be pegged to a tangible asset, like gold, but the gold standard disappeared in the '70s and since 1992 the pound hasn’t been fixed to anything. The reason our pound has value then is primarily because our government says it has value, and we – and many other countries in the world – continue to have a sufficient level of trust in our government. In particular, we trust the value of the money we hold because the government requires us to pay taxes in that currency. In other words, the very fact that the government asks us to pay taxes in pounds means that we seek to earn pounds in order to pay those taxes. And if we are seeking to earn pounds then such pounds have value. Their value lies not in their gold equivalence, but in the demand that everyone has for them.
But if they are not pegged to any fixed standard, then one implication of this is that the government (via its central bank) can just issue money as it sees fit. It doesn’t need to be backed by anything fixed and tangible. The government can just do it.
But if that’s the case then why do governments collect taxes – why not just print as much money as we want? Because to do so without restraint would cause runaway inflation, and in a situation of runaway inflation the value of our currency obviously does decrease.
So MMT is not a recipe for recklessness, there are limits to the magic money tree, but Kelton’s point is that the limits are set by inflation, not by the size of the deficit – hence the title of her book. Taxes then are one of the ways in which we stop the runaway train of inflation. They take money out of the system so that in essence we don’t have too much to spend. They act as a break on inflation, but critically – according to Kelton – they are not being collected so that we can pay for things.
As she argues, we don’t tax in order to then spend. We spend the money and then tax it partly to ensure there’s not too much of it sloshing around. 'The government doesn’t need our money. We need their money. We’ve got the whole thing backward.' All of which means we needn’t worry about the deficit in the way that most economists and politicians seem to.
Now all of this might sound a bit crazy – it just can’t be true. And that was very much my first reaction, and while MMT is certainly not mainstream economists it does seem as though those who would criticise it don’t quite manage to land their punches.
So, Edward Chancellor, an economic historian has suggested that following an MMT prescription would inevitably lead to inflation because 'The truth is that governments have an inherent bias towards inflation', but we’ve not had an inflationary problem for 30 years and with the current crisis the chances of that are near-zero. More to the point, inflation is precisely the one thing that MMT watches like a hawk – it is not a prescription for reckless spending.
More significantly, Martin Wolf in his analysis of MMT essentially argues that its framework is correct – the value of money is created by governments demanding tax receipts in that currency – but that we need to be careful, not least because governments cannot be trusted to implement it wisely. He has a point, but at the same time the history of neoliberal economics is that even with so-called responsible government behaviour huge boom and busts have occurred. It is not as though, in the absence of an MMT approach, our economic system has been devoid of crises. In other words, the problem he posits is not unique to MMT, it’s a feature of any reckless government.
So overall I’m quite taken with Kelton’s argument but I do have two critiques, not so much of the theory, but of the book. The first of these is simply that it does lack empirical support. There is a smattering of empirical evidence cited throughout but overall it feels somewhat thin. Presumably Kelton would argue that’s because MMT hasn’t been tried sufficiently and of course there may be some truth in this.
More importantly, I don’t think she does enough to directly engage with those economists who do reject MMT. It’s not enough to say they are just stuck in a different economic paradigm. I presume some of them are intelligent enough to be open to new ideas, so why isn’t it more broadly accepted? The book would have been considerably strengthened by dealing directly with such critiques.
Whether or not we need to worry about the current deficit is of major political and economic significance, and therefore for that reason this book is hugely important. MMT has been around for some time and so, in one sense, this is nothing new, but its arguments have to a large extent been ignored and ridiculed. It is time they were taken seriously and properly engaged with, and this book is a great introduction to ensuring that happens. MMT might still be dismissed but it can no longer be ignored and for that we can thank Kelton.
The UK government is proposing a series of ten freeports across the country. Freeports are areas, not necessarily connected to actual ports, in which business activity can take place free from the normal tax and regulations that apply in the rest of the country. The intention is that they encourage business development in those areas.
However, we think freeports are a bad idea. They create an uneven playing field between businesses that can move to the freeport zone and those that can't, and international experience has shown that they are notorious as being havens of criminal activity and money laundering.
The European Parliament produced a highly critical report of the Luxembourg example commenting that, 'Free ports are conducive to secrecy. In their preferential treatment, they resemble offshore financial centres, offering both high security and discretion and allowing transactions to be made without attracting the attention of regulators and direct tax authorities.' The Financial Action Task Force went further saying that they can be 'misused for money laundering and terrorist financing'.
Moreover, there is scant evidence that they do actually create a significant number of good jobs; they seem to just shift jobs from one area to another.
There is currently a government consultation taking place and CATJ has responded to it. You can read our consultation response here
Dr Justin Thacker is the National Coordinator for Church Action for Tax Justice