WHY does much of the British left continue to accept the neoliberal myth that so-called “taxpayers’ money” pays for government spending? This hasn’t been the case since Richard Nixon scrapped the Bretton Woods Agreement in 1971, from which point, pound sterling has been a floating fiat currency.  

By accepting this falsehood, which is more than half-century old now, the left is making a rod for its own collective back.

Right-wing politicians and media commentators use it to corner left-wing politicians and trade union leaders who call for improvements to public services. “How are you going to pay for it?” is the usual refrain from these naysayers, followed by, “which taxes are you going to increase?”

It’s a trick that was most vividly exploited against John Smith’s shadow budget that was published just before the 1992 election, when Neil Kinnock led the Labour Party to its fourth defeat in a row.

The Tories used an attack ad to good effect referring to Labour’s so-called “double [tax] whammy,” which helped John Major secure an unexpected victory for the Conservative Party.

Taxes do not provision central government, but they are vital to control inflation, generate a value for the currency, address inequality, deter spending on certain products like cigarettes, and create a social contract between government and the public.

Richard Murphy, the economist and co-founder of the Tax Justice Network, produced a short video last year explaining why taxation is essential.

So, it’s encouraging to see the Green Party leader Zack Polanski making a break from that outdated economic orthodoxy.

But he has generated a kneejerk reaction from the same right-wing politicians and media commentators, who peddle the taxpayers’ money myth.

They want to preserve the disastrous neoliberal status quo that has further enriched Britain’s wealthy elites, but has devastated our manufacturing industry, ruined our public services, destroyed our heavy industry and wrecked our infrastructure. That is why around 15 million British citizens are living in poverty in the world’s sixth biggest economy.

But centrist Labour MPs like David Pinto-Duschinsky, former special adviser to Alistair Darling, are still desperate to debunk Polanski’s ideas on how the economy should be run.

They did the same with Jeremy Corbyn 10 years ago when he offered hope to millions that another world was possible.  

Pinto-Duschinsky recently posted a snazzy fast-paced video on social media in which he accused Polanski of promoting quack economics, after the Green Party leader had called for the water industry to be renationalised. This is despicable, dishonest politics designed to fool people into thinking that a good society is unaffordable.

But these deplorable right-wing and centrist politicians never have a problem with finding money for war?

The reality is the government issues the currency so it has access to as much money as it wants. But despite Pinto-Duschinsky’s claims to the contrary in his video, nobody is saying the government can spend without limit. 

Not me, not Polanski, not esteemed heterodox economists like Richard Murphy, Steve Keen and Stephanie Kelton, not anyone. It’s just a strawman argument that defenders of the economic status quo always trot out. The reality is that governments are limited by the availability of real resources in the economy such as workers, infrastructure, machinery, energy, transport etc. 

If governments spend beyond the economy’s ability to absorb that spending, then inflation will ensue. Governments should therefore focus their attention on building these real resources to make the country more resilient when crises occur around the world, like the illegal war being waged against Iran by Israel and the US.

In addition to the myth about “taxpayers’ money” the political and economic establishment also propagate another myth about so-called “government borrowing.” For a start, “government borrowing” is a misnomer. The reality is government are selling bonds, also known as gilts.

Truth be told, the government is actually providing savings accounts for the likes of banks, insurance companies, pension funds, foreign investors and wealthy individuals.

But the government is not obliged to sell bonds to fund its spending programme, for the reasons I have already spelt out. Interestingly, the Bank of England, which is owned by the government, holds around 30 per cent of the bonds sold by the Treasury. It’s a bit like taking £10 out of the left pocket of your trousers and putting it in your right pocket, and then saying your right pocket owes your left pocket £10. But it’s the same pair of trousers that belong to you.

It wouldn’t surprise me if some, maybe most, of those MPs who are spreading this blatantly false propaganda are doing so out of ignorance. I can tell you from my time as an MP that most parliamentarians haven’t got a clue about how the monetary system works. 

This Mark Twain quote is apposite. He said: “It ain’t what you don’t know that gets you into trouble. It’s what you know for sure that just ain’t so.” It was the American industrialist Henry Ford who reportedly said: “It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning.” 

Surely the task of the left is to bring about that revolution to sweep away the politicians who defend this broken neoliberal system, and replace them with representatives who will stand up for the people instead of faceless corporations and wealthy oligarchs.