Patrick O’Flynn Patrick O’Flynn

There might be a way to avoid higher taxes after coronavirus. Here’s how

‘Let us never forget this fundamental truth: the state has no source of money other than money which people earn themselves. If the state wishes to spend more it can only do so by borrowing your savings or by taxing you more. It is no good thinking someone else will pay – that “someone else” is you. There is no such thing as public money; there is only taxpayers’ money.’

These words, by Margaret Thatcher at the 1983 Conservative party conference, have often been used as a justification for rolling back the state so that private citizens can spend more of their own money. They seem to cast the state as a parasitical creature, eager to be active but always needing to be fed.

They come from an era when Ronald Reagan was making similar points across the Atlantic, albeit in a less severe style. Reagan’s message to the public sector, he once joked, was: ‘Don’t just do something, stand there’. Another favourite line of his was that the nine most terrifying words in the English language were: ‘I’m from the government and I’m here to help.’

A favourite line of Reagan’s was that the nine most terrifying words in the English language were: ‘I’m from the government and I’m here to help’

But that hardly describes modern political reality. Not when governments across the western world bailed out the privately-owned banking system a dozen years ago. And not when they are, right now in the midst of this pandemic, keeping private enterprises large and small afloat by giving them enormous sums of money borrowed in the name of taxpayers.

And so a re-evaluation of Thatcher’s words becomes both overdue and inevitable. The basic truth of her statement remains intact. But what if a huge upsurge in the money the state spends is widely conceded to be essential in order to tackle enormous crises like the financial crash and coronavirus? 

It would be fanciful and politically unsellable for today’s right to rely on the idea that somehow there are still sufficient ‘efficiency savings’ to be found in state spending, after a decade of ‘austerity’.

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