Understanding the UK’s Financial Challenges

UK Economy Series - #ExposingtheTruth Behind Politicians' Lies About Your Money

Understanding the UK’s Financial Challenges: 

Why Cutting Costs Isn’t the Solution

Just a couple of months after the general election, it's clear that the Labour Party is facing a funding shortfall. 

This was expected, as experts predicted that the financial plans accepted by Labour from the Office for Budget Responsibility would lead to a lack of funds for essential programs. 

This issue is evident with the two-child benefit cap, and winter fuel allowance for Pensioners, and even more problems are likely to arise.

The government doesn’t have enough money to meet its obligations and needs to find more. 

While increasing taxes on wealth is an option, there are other solutions too. 

One potential change is to stop paying interest on the central bank reserve accounts held by commercial banks with the Bank of England.

Confused? Ok, let’s break this down: 

When the government spends or receives money, these transactions go through commercial banks to the Bank of England. 

These banks have special accounts called central bank reserve accounts. These accounts are where government money enters the real economy and where it returns through taxes or bonds.

From 2008 to 2021, the value of these accounts skyrocketed from £20 billion to nearly £1 trillion. Although it has decreased slightly since then, the government pays interest on these accounts at the Bank of England’s base rate. This results in about £40 billion a year in interest payments.

Some argue that this interest is necessary to maintain economic stability, but other central banks, like those in Europe and Japan, don’t pay such high interest on similar accounts. 

The UK could save up to £30 billion a year by reducing these payments, though the net benefit might be around £20 billion after accounting for tax impacts.

With a tweek here and there, this could be £22 billion, and cover the ficticious black hole Labour keep saying is there!

It could make a significant difference. 

It would end child poverty, cover overdue pay for junior doctors, 

support special educational needs, 

abolish the bedroom tax, restore disability payments, 

improve local services, 

and enhance social care. 

Instead, this money is currently going to the banks and bankers

The Labour Party should consider this change. It's a substantial amount that could transform public services and support those in need. 

This idea should be seriously evaluated as Rachel Reeves prepares to announce her first budget.

Will she do it? We'll say no. 

NO, she won't because she is an ex banker, she is pandering to the global banks. She is for the bankers and against the working person.