Section 4: Raising the money · Chapter 12
The pound that comes back
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Let’s dismantle the myth that the state cannot afford to build things because it has “run out of money.”
This argument is built on the false premise that government spending is a one-way street, like a household. When a family spends money on a home extension, they get the asset, hand over the cash, and that’s the end of it.
But the cash doesn’t disappear, it moves. It becomes someone else’s income. Which is why a government is not like a household budget. When a currency-issuing state invests in its own economy, that money moves in a circle. Every pound the state injects into productive infrastructure sets off a powerful chain reaction known as an economic multiplier.
When the state funds a project, that money immediately pays the wages of engineers, project managers, and construction workers. Those workers don’t stuff that cash under their mattresses. They spend it on the high street, paying for groceries, haircuts, and clothes, boosting local businesses. Those businesses, in turn, expand and hire more staff.
The Treasury takes a cut at every stage. It collects income tax and national insurance from the workers, VAT on their purchases, and corporation tax from the businesses.
This investment creates downstream savings across the state apparatus. If you build high-quality, insulated homes, you don’t just create construction jobs. You reduce the number of people going to hospital with chronic respiratory illnesses caused by damp housing. You reduce the welfare bill by moving people from low-wage gig insecurity into stable, high-skilled careers.
“The state has a unique capability. It can make investments that are unprofitable for a private hedge fund, yet profitable for the nation as a whole. It collects all the taxes those investments generate, and that changes the arithmetic.”
We said our nation is hostage to the idea that they are trapped in a room. The “unaffordable” narrative has stopped our leaders from even trying the handle. Nobody even checked whether the door was locked.