Blog 2023 Malcolm Blair-Robinson

In 2008 at the height of the financial crisis I wrote this book, setting out new ideas for the future governance of our country. Some of these have not stood the test of time but some have, including many key ideas covering the economy, education, the NHS and foreign affairs. And, especially now when governance is becoming dysfunctional, constitutional reform. When it was published in 2009 my agent sent a copy to every member of the then Tory shadow cabinet, in preparation for their taking power, which they did in 2010 in coalition with the Lib Dems. Sadly I don’t think any of them read it. Had they done so our country would be in a better place today. You might have  fun with it now. Unfortunately it was never put on Kindle, so only paperback.

  Amazon UK

Until we see what the Chancellor Jeremy Hunt has to say in his Autumn Statement next Thursday, there is little point in pontificating about the mess we are in, save to say it is of our own making, not Putin’s or the Chinese or whatever.

But what I would like to do now is to set out the way our financial structure should be organised in ten simple rules. Informed readers will spot a number of significant variations to the current dysfunctional chaos. Those for whom these things are really confusing might, I hope, find a simple foundation upon which to build future understanding. Professional economists will find their eyes popping.

1  Central Banks are banks, not Treasuries, and should never in future set interest rates or print money. Their stewardship of these responsibilities has been a disaster leading to gross fixed asset inflation, excessive borrowing, floods of money so cheap as to be almost free and nil return on savings. The combination has led to general inflation out of control and terror in the Bank of England, charged with keeping inflation low, that to do so will bust the economy. So it has done too little to late.

2 The democratically elected government must be responsible for the money supply, credit rules and interest rates, because these are political decisions, which must be taken in the interests of the wider economy and the social priorities of the majority as represented in parliament.

3 Markets must serve the people rather than the people be subservient to markets.

4 Governments must never, ever, borrow to meet day to day expenditure. They can either cut spending or increase taxes. They can also either increase the money supply to boost economic activity, or, if the economy is overheating, reduce the money supply and raise  interest rates.

5 Interest rates must always, this is a golden rule, provide a meaningful return to savers. The  average must not be lower than 5%

6 Money is a measure, not a thing and it must measure economic activity, not itself. It is the property of the State (hence the King’s head) and only the state’s treasury can print it. When it does it enters the economy as new money. No loans or gilts are involved.

7 Gilt Edged securities are not a credit card to be used by governments to live beyond their means, conning voters that prosperity is their offer. Neither should they be used as an aspiration to invest in this and that project, many of which never  actually come to fruition. Cancelling things to save money already borrowed, without giving it back,  is a modern political option, which in civil life would be classed as fraud.

8 Gilt Edged securities are a necessary instrument for investors, both domestic and foreign, who  seek absolute bedrock security without risk. Depending on their coupon (interest rate) their trading value fluctuates between issue and redemption, but if held for the term, are absolutely guaranteed. Pension funds are obvious customers. The more the economic activity the greater the demand, including  from overseas investors. The government can issue gilts on a continuous basis, not to spend, but to invest in its own reserves of either gold or foreign exchange. Thus the more the economy grows the more the State’s reserves expand.

9 Infrastructure investment can  be funded with borrowed money but it must be with annotated bonds, which redeem not more than five years after the completion of the project. The coupon should, as with all gilts, be fixed not variable.

10 Index linked gilts are fine until the index takes off, as it has now. They can then become a real problem for the government. It is for investors to organise portfolios hedged against inflation. The government’s job is to prevent inflation getting out of hand.

The NHS is probably the most comprehensive health service in the world. But it is now in crisis at every level and in every sphere. From time to time I plan expose what I believe are fatal flaws, which hobble its outcomes and frustrate both its selfless, overworked and dedicated staff as well as its suffering patients. Today I want to talk about money.

From the moment it was founded the NHS was launched on a mathematical impossibility. You cannot provide an infinite service on a finite budget. Yet it has always been the case that the NHS has had to work within the financial constraints or generosity (the latter not very often) of the government of the day. But the NHS, while planning large numbers of pre-booked procedures, investigations and treatments,  does not know for certain what any day will bring. Because its budget is fixed for the year and because it is paid out of general taxation, the more patients it has to deal with, the less it has to spend on each of them. That is plainly ridiculous.

The more customers who enter a supermarket the more they spend and the more the company stocks up to supply them. Imagine the fiasco if the owners were paid by the government a fixed sum to feed an unknown number of people in the district. Soon there would be hunger, shortages and queues.

The first thing we have to get straight is that the NHS is not free. We all pay for it. The problem is we are throwing money at the wrong business model. What is required is a funding system that expands with demand, so the more patients and procedures, the more the money. Not because the government allocates more, but because it is done automatically.

This is not a proposal to privatise the NHS. Nor does it, nor should it, involve the private sector for organisational reasons which I will lay out in a later blog.  The Government, or rather the State, should be the sole employer and provider, but instead of a fixed budget met from general taxation, it would be on the actual cost  paid by a universal insurance premium surcharged to income tax. Re-set annually, it would be calculated according to the current cost of the service and the  ability to pay, so the higher earners would pay more than the lowest. The State would be the sole insurer and there would be no exclusions from cover, as in private insurance schemes, which exclude existing health conditions or add surcharges to cover them.

The principle of the greater the demand, the greater the money, would be established and there would be democratic control of what was or was not free at the point of delivery. To make it work huge reform and de-structuring would be required to the byzantine structures and hierarchies which proliferate at the moment. These will be discussed in a future post.

The object is a health service without waiting lists, queues and cancellations, or such abuses as moonlighting doctors earning big money in private practice while others work themselves into the ground filling the gaps. What we need is an NHS, operating 24/7, giving  joined up care to those in need, which is all of us at some point in our lives and with the money, staff and equipment to do the job properly.

That was the big idea at the beginning in 1948. It can be delivered, but not until we put the funding on a footing that meets the ambition.

All my (quite long) life, I have been a keen observer and sometimes participant in the political merry-go-round which is the politics of democracy. By its nature democracy is undisciplined and unpredictable, which is exactly what it needs to be, otherwise it could not and would not be free. But it has to be grown up. And it has to have at its apex, in our case the House of Commons, people who are principled and driven by the desire to make a difference through public service, so as to improve the lot of their constituents who put them there. They also have a responsibility, when in government, to the wider mass of voters who have given their party a majority to govern. They must be compassionate and fair and very conscious of the collective needs and priorities not only of their own party and voters, but of the whole population. What they must not be is journey men and women who view parliament as a stepping stone on their career path to fame and fortune. They cannot fool about forming and trashing one administration after another, clever but stupid, introverted, deaf to reason, blind to light and strangers to truth.

I do not have to list the sad roll call of current Tory MP’s who meet this humiliating specification, reducing our country to something of an international laughing stock, bringing glee to our rivals and enemies and despair to our friends. They are on the back benches, at all levels of government and in the cabinet. Not all of course. There are some honourable souls who lie sleepless at the shocking turn of events. New words are coined. Permacrisis is a good one. Funny even, were it not true.

Time is up. This has to stop.