Money Creation and Society

Debate between Austin Mitchell and Angus Brendan MacNeil

Thursday 20th November 2014 Commons Chamber

[Austin Mitchell (Great Grimsby) (Lab)]

I welcome this debate and congratulate hon. Friends on securing it, because we have not debated this matter for over 100 years, and it is time we did so. This House and the Government are obsessed with money and the economy, but we never debate the creation of money or credit, and we should, because, when it comes to our present economic situation and the way the banks and the economy are run, that is the elephant in the room. It is time to think not outside the box, but outside the banks; it is time to think about the creation of credit and money.

I speak as a renegade social creditor who is still influenced by social credit thinking; I do not pledge total allegiance to Major Douglas, but I am still influenced by him. As has just been pointed out, 93% of credit is created by the banks, and a characteristic of what has happened to the economy since the ’70s is the enormous expansion of that credit. I have here a graph from Positive Money showing that the money created by the banks was £109 billion in 1980. Thanks to the financial reforms and the huge increase in the power of the banks since then, by 2010 that figure had risen to £2,213 billion, whereas the total cash created by the Government—the other 3%—had barely increased at all. Since 2000 we have seen the amount of money created by the banks more than double.

That has transformed the economy, because it has financialised everything and made money far more important. It has created debt-fuelled growth followed by collapse. It is being controlled by the banks, which have directed the money into property and financial speculation. Only 8% of the credit created has been lent to new businesses. The Government talk about the march of the makers, but the makers are not marching into the banks, because the banks are turning them away. Even commercial property is more important than makers. That has created a very lop-sided economy, with a weak industrial base that cannot pay the nation’s way in the world because investment has been directed elsewhere, and a very unequal society, which has showered wealth on those at the top, as Piketty shows, and taken it away from those at the bottom.

A very undesirable situation is being created. We have built an unstable economy that is very exposed to risk and to bubble economics, thanks to the financialisation process that has gone on since 1979. The state allocates all credit creation to the banks and then has to bail them out and guarantee them, at enormous expense and with the creation of debt for the public, when the bubble bursts and they collapse.

Some argue—Major Douglas would have argued this—that credit should therefore be issued only by the state, through the Bank of England. That would probably be a step too far in the present situation, given our present lack of education, but we can and should create the credit issued by the banks. We can and should separate the banks’ utility function—servicing our needs, with cheque books, pay and so on—and their speculative role. The Americans have moved a step further, with the Volcker rule, but it is not quite strong enough. In this country we tend to rely on Chinese walls, which are not strong at all. I think that only a total separation of the banks’ utility and speculative arms will do it, because Chinese walls are infinitely penetrable and are regularly penetrated.

We can limit the credit creation by the banks by increasing the reserve ratios, which are comparatively low at the moment—the Government have been trying to edge them up, but not sufficiently—or we could limit their power to create credit to the amount of money deposited with the banks as a salutary control. We could tax them on the hidden benefit they get from creating credit, because they get the signorage on the credit they create. If credit is created by banknotes and cash issued by the Government, the Government get the profit on that—the signorage. The banks just take the signorage on all the credit they issue and stash it away as a kind of hidden benefit, so why not tax that and give some of the profit from printing money to the state?

Martin Wolf, in an interesting article cited by my right hon. Friend the Member for Oldham West and Royton (Mr Meacher), has argued that only central banks should create new money and that it should be regulated by a public credit authority, rather like the Monetary Policy Committee. I think that that would be a solution and a possible approach. Why should we not regulate the issue of credit in that fashion?

That brings us back to the old argument about monetarism: whether credit creation is exogenous or endogenous. The monetarists thought that it was exogenous, so all we have to do is cut the supply of money into the economy in order to bring inflation under control. That was a myth, of course, because we cannot actually control the supply of money; it is endogenous. The economy, like a plant, sucks in the money it needs. But that can be regulated by a public credit authority so that the supply matches the needs of the economy, rather than being excessive, as it has been over the past few years. I think that that kind of credit authority needs to be created to regulate the flow of credit.

That brings me to the Government’s economic policy. The Government tell us that they have a long-term economic plan, which of course is total nonsense. Their only long-term economic plan is slash and burn. The only long-term economic planning that has been done is by the Bank of England.

[Mr MacNeil]

To quote Harry S. Truman, the worst thing about economists is that they always say, “On the other hand”. The hon. Gentleman talks about limiting and regulating how much money is to be sucked in by the economy, but who would decide that? The difficulty is that although the economy might be overheating in a certain part of the country, such as the south-east of England, it could be very cool in others, such as the north of Scotland. What might be the geographical effects of limiting the money going into the economic bloodstream if some parts of the plant—I am extending his metaphor—need the nutrients while other parts are getting too much?

[Austin Mitchell]

The hon. Gentleman often asks tricky questions, but this one is perfectly clear-cut. The credit supply for the peripheral and old industrial parts of the economy, which include Scotland, but also Grimsby, has been totally inadequate, and the banks have been totally reluctant to invest there. I once argued for helicopter money, as Simon Jenkins has proposed, whereby we stimulate the economy by putting money into helicopters and dropping it all over the country so that people will spend it. I would agree to that, provided that the helicopters hover over Grimsby, but I would have them go to Scotland as well, because it certainly deserves its share, as does the north of England. However, I do not want to get involved in a geographical dispute over where credit should be created.

The only long-term plan has been that of the Bank of England, which has kept interest rates flat to the floor for six years or so—an economy in that situation is bound to grow—and has supplemented that with quantitative easing. We have created £375 billion of money through quantitative easing. It has been stashed away in the banks, unfortunately, so it has served no great useful purpose. If that supply of money can be created for the purpose of saving the banks and building up their reserve ratios, it can be used for more important purposes—the development of investment and expansion in the economy. This is literally about printing money. Those of us with a glimmering of social credit in our economics have been told for decades, “You can’t print money—it would be terrible. It would be disastrous for the economy to print money because it leads to inflation.” Well, we have printed £375 billion of money, and it has not produced inflation. Inflation is falling.

Common Fisheries Policy

Debate between Austin Mitchell and Angus Brendan MacNeil

Thursday 15th March 2012 Commons Chamber

[Austin Mitchell]

It is certainly the way forward, as I shall argue. We need the 10-year approach and the regional basis that the hon. Gentleman suggests. We probably have to accept that the Commission will set the standards and objectives up there in the stratosphere in Brussels, but we must hand management—including the technical measures, the timetables and implementation of the decisions taken in Brussels, and what kind of quotas are used—to the regional advisory councils, which are far better at handling it and can do so in consultation with fishermen—the stakeholders in the industry. The regional advisory councils can also work with the scientists, bringing them together with the fishermen. That is the basis of management, and that is what the Minister has to fight for. Bringing all the stakeholders in is effectively what the Committee recommends.

Decision making on these matters should be brought down from Brussels. Unfortunately, the Commission is proposing not only to maintain the old control system, but that it should have co-decision-making powers with the Parliament, which is potentially disastrous.

[Mr MacNeil]

Is not one of the problems that the template of the common fisheries policy will continue? Rather than the fishermen feeling contempt towards Europe, they will feel contempt towards the regional bodies. What we need to do is look at other jurisdictions, such as the Faroe Islands, that have days at sea and area closures, accompanied by a zero discard policy because fishing has been moved out of an area. The template needs to change.

[Austin Mitchell]

I agree with the hon. Gentleman—that is what we have to do and what we could operate regionally if we got the powers to do so. That is the way that we have to go, but if co-decision making is handed to the European Parliament, politics will be involved again. I can imagine the Spanish MEPs will fight vigorously for their industry in a way that the English MEPs are not conditioned to do.

I imagine, too, that the conservationists will have a much louder voice than the fishermen, because there are no fishermen in the European Parliament but there are lots of conservationists. Although some of my best friends are conservationists, their interests are not necessarily those of the commercial fishing industry. Conservationists are also over-alarmist about stocks, and on the basis of panic about stocks, they propose measures that will never work. It is vital that we separate policy and implementation. Implementation should go down to the RACs and policy stay in Brussels.

Fisheries

Debate between Austin Mitchell and Angus Brendan MacNeil

Thursday 12th May 2011 Commons Chamber

[Austin Mitchell (Great Grimsby) (Lab)]

I congratulate the hon. Member for Richmond Park (Zac Goldsmith) both on his record on conservation issues and on securing this important debate. It is marvellous that the grumbles and grievances of Members about the Independent Parliamentary Standards Authority have subsided so much that we have time for a full-length debate on this matter. I hope that all the hon. Members for inland fishing ports who are round about me in the Chamber are gathering to give us their ports’ views on the CFP. Fishing rarely gets such an opportunity for a serious debate. We are usually squeezed in at the end of another serious discussion, but today we have time, and I hope all fishing Members use it.

Hugh Fearnley-Whittingstall certainly did a useful and important job, but we should draw attention to the iniquities of the CFP, which causes the problem of discards in the first place. The CFP puts marine wildlife, seaweed and all forms of sea life into the European constitution. It is the first constitution to include seaweed, marine life, algae and all the other things. That is a great achievement in constitution making: “We hold these truths to be self-evident. Marine life has a right to be part of the European constitution, to be dealt with only by European vessels!” That is Stalinism at sea—the last vestige of the Stalinist state—and it is being imposed on the waters around Britain, where it has been most damaging.

It is my contention that it is impossible to deal adequately with the problem of discards as long as the CFP remains, because it is the major cause of discards.

[Mr MacNeil]

I am sure that the hon. Gentleman is aware of a European consultation paper on the CFP. The paper admitted the failure of the CFP and that the areas where it worked were those under national control. Surely if people want the CFP to continue, they should allow national control to 199 miles, and apply the CFP between 199 and 200 miles—a minimal ribbon. The CFP has failed and will continue to do so, but there are no milestones by which we can correct the CFP in future. We will bumble on for years with the CFP unless European Governments get their acts together and get rid of it.

[Austin Mitchell]

I hope that that becomes part of Scottish National party policy and that it is implemented by the new SNP Government in Edinburgh—it certainly needs to be. I hereby renew my application to become the SNP fisheries spokesman. My previous applications over the years have been consummately rejected.

The important point is that the CFP allocates catches by quota to fishing vessels in mixed fishing grounds, which waters around the British coast are. As long as we control catches by quotas, there will always be discards, because fisherman who put to sea for haddock or cod will catch species that are not in their quotas.

[Mr MacNeil]

Does the hon. Gentleman agree that one other main problem with the CFP is the single-species stipulation, which often applies to the species that are most under threat? That causes distortions in the catching of other species and leads to discards. There are better models than the EU model, such as those in Norway, Iceland and the Faroes. The CFP model is the worst of the lot. That is why those countries will have nothing to do with Europe.

[Austin Mitchell]

I agree, absolutely—this speech is becoming a duet between me and the Scottish National party, which is an interesting state of affairs. The problem that the hon. Gentleman points to is that simplistic solutions will not work. The problem with Hugh Fearnley-Whittingstall’s proposals is that they are simplistic. The EU has responded to them with another simplistic solution, which will not work either. It took the Norwegians 20 years to develop their techniques, and they did it in very different fisheries, with an emphasis on conserving the young, immature fish. Norway’s job has therefore been much easier, but it has taken it 20 years to eliminate discards. We have had 10 years of working to reduce discards, in which they have been reduced by 50%. That has happened partly, it has to be said, as a result of decommissioning, but also because of other measures, such as square-mesh panels, which were developed by the industry as a means of conservation.

Fixed-term Parliaments Bill

Debate between Austin Mitchell and Angus Brendan MacNeil

Tuesday 16th November 2010 Commons Chamber

[Austin Mitchell]

Again, that was because the then Government were hanging on, as Macmillan was replaced by Sir Alec Douglas-Home. They had to hang on to the bitter end, which was October 1964, because they were disastrously placed in the polls. That is another example to support my argument, which is that bad Governments want the maximum. This Government are a bad Government and they are trying to legislate for the maximum—they are trying to set bad practice in concrete.

[Mr MacNeil]

As I listen to the hon. Gentleman, I wonder whether cause and effect are a bit mixed up. One complaint that we have had in the past is about the Government holding an election at a time of their choice when they feel the runes are looking good for them rather than fixing the democratic process in some way so that the gerrymandering of polity and of the climate in the country could not happen. The idea of having a fixed Parliament is exactly that. It is best fixed at four years, I think—the hon. Gentleman thinks that it is best fixed at three—but the problem in the past has been that it has been for five years and was then cut short. It is not the length of time that makes a Government bad; it is just that bad Governments run out of time but would keep going for six or seven years if they possibly could.

[Austin Mitchell]

I accept that point. The argument for fixed terms used to be that Governments would manipulate the economy to suit their own purposes and would go to the country when it suited them. Now Governments are so disastrously buffeted by economic circumstances that they will seek to hang on as long as possible.

Parliamentary Voting System and Constituencies Bill

Debate between Austin Mitchell and Angus Brendan MacNeil

Wednesday 20th October 2010 Commons Chamber

[Austin Mitchell]

If the number of Members is reduced, the voice of the constituencies will be proportionally less in this House, and that is another argument for keeping the 650, as I propose. What will happen if the Executive are reduced in this House? Will we have more Executive appointments in the Lords? Will we appoint more of those grovelling chief executives and chairmen who wrote to The Daily Telegraph to support the Government’s plans for cuts at the expense of their customers, saying in effect, “It doesn’t matter how much damage you inflict on our customers and on demand for our businesses, we support the Government.” That is clearly a plea for knighthoods or Government jobs. Will the Government respond to that by creating posts outside Parliament for these people? How will they reconstitute the Executive to make them less strong proportionally in a reduced House? We have heard nothing on that.

Secondly, the reduction would reduce the pool of talent from which to select Ministers and to make all the other contributions that MPs make. Heaven knows, the pool is not all that big now. We do not have all that much talent, and certainly not the level that we used to have—[Interruption.] Well, we have some, especially from Humberside. Our contribution is big, but it is not enough. I would like a bigger pool of talent in the House to pick Ministers from.

Most importantly, the change would reduce the service that we provide to our constituents. I have always found constituency work exciting and interesting, and a solace for my failure to be appointed to any ministerial job—or my ability to mess up any ministerial appointment that I have been offered, which has always been very short-lived because of the joys of constituency work. I find it very satisfactory—

[Mr MacNeil]

May I take this opportunity to place it on the record that I would have loved to see the hon. Gentleman as a Fisheries Minister at one time?

[Austin Mitchell]

I was hoping that the SNP would appoint me Fisheries Minister for Scotland, but that post would have been a little difficult to handle from Grimsby. I never even achieved the rank of PPS to the Minister—[Interruption.] I apologise, Ms Primarolo. I was led astray.

There is a genuine issue about the service that we provide to our constituents. I know that we have changed over the years from senators to servants of our constituency, and I know that the amount of work has steadily increased. That is a necessary development, because our constituents want to be heard more. We no longer have the same sort of subservient, quiet and loyal electorate that would vote for parties and did not want their voice to be heard. People want to be heard and they want us to listen to them. They want to communicate with us and they want us to raise the problems that they raise with us. That is the job, and we would be less able to do that if there were fewer of us here.

Parliamentary Voting System and Constituencies Bill

Debate between Austin Mitchell and Angus Brendan MacNeil

Tuesday 12th October 2010 Commons Chamber

[Austin Mitchell]

Why does my hon. Friend not see that it is daft to give the second Chamber a better representative system than the first Chamber? It is important that the first Chamber has a system that gives us representation according to the way people vote. That is the essence of proportional representation; that is all we are trying to include in the referendum.

[Mr MacNeil]

Having just heard the words uttered by the hon. Member for Rhondda (Chris Bryant), it is a fact that for the electors here, we effectively have a unicameral system, because they do not vote for those who enter the Chamber down the corridor.