Creating Wealth to Free us from Bond Market Slavery

The Role of Bond Markets should be Marginal to the Economy, not Central

As we said in our first Policy Document on the Bond Markets we must find ways to ensure we are not so reliant upon the bond markets for our money – in the same way that we're not reliant on our bank for constant loans, or worse, a loan shark!

A government which is not able to raise the money it needs from taxation, is going to end up needing to borrow from the bond markets.

If it needs to borrow a lot, then it is putting the bond markets into a central role in the economy – a place where the bond markets should not be located.

The proper role of the bond markets should be a sort of "last resort", in the sense that a person goes to a bank for a loan as a last resort. They should not be a first resort! Their role should be marginal, not central, to the functioning of the economy.

To make bond markets central to the functioning of the economy is to give them undue power and influence over the economy, over the stability of the government, and over the direction of the nation.

There has to be other ways to find the money. And the good news is that there is!

Here's some obvious ways:

1. Build a Productive and Wealthy Economy where a sufficient amount of Money can be found via reasonable Taxation

If we have a productive economy which is able to create wealth, then the amount of tax money coming into the Treasury will mean that we don't need to run so fast to the bond markets (the loan sharks) to make up the shortfall. At least, we will be able to marginalise their power to an extent.

So, taxation is one way of raising the money. Getting the balance right in order to create wealth for the people, and sufficient taxes for the Treasury to fund the public need, is a political question which will always be debated. After all, some taxes are unreasonable per se, and the rates are often too high.

The need for "growth": For taxation to be manageable – without becoming onerous to the population – it requires the economy to be "growing".

"Growth" in the economy is usually measured (inaccurately) as the Gross Domestic Product (GDP) – the sum of all goods and services produced in a given year, compared to the year before, measured as a percentage. However, "GDP per capita" or "Income per capita" are far more accurate ways of measuring growth.

If the economy is not growing, then the taxation burden upon each person can become more onerous each year.

Think of it this way.

Say we have a fixed population which requires a tax rate of 10% per person, from a total national GDP of £1000. Say, the taxes raised = £100 a year.

If in each passing year, the GDP is not "growing" then in 10 years' time the GDP is still £1000 but the needs of the public sector could be far more than £100. Say we need £200 a year for society's needs! This means the taxes will need to go up to 20% per person in order to raise the money. This is impossible for the population to manage and so we're going to have to borrow a lot more money.

However, if the economy was growing, and the GDP was greater, then we would not need to borrow so much extra cash from the bond markets since more of the money could be found via taxation at the same old rate of 10%. That is one option.

Let's also be aware that the bond markets always want "growth", but only for their own ends.

They see "growth" as a sign that the government will be able to raise the money to "manage their debts". That is, have enough money to pay back the bond holders – whether interest and/or principal.

But bond markets don't care how "growth" occurs. If bond markets believe that constant mass immigration is going to lead to "growth" (a very debatable economic point) then the bond markets will advocate mass immigration and oppose any government whose policy is to restrict immigration.

2. Ensure Regular Revenue Streams from National Wealth Creating Assets

Another way is through ensuring certain crucial infrastructures and industries provide regular revenue streams to the Treasury.

In this sense, it is not just about "re-distributing" the wealth once it is created but ensuring that the resources which create the wealth are effectively distributed in the first place.

Today in modern Britain, many national wealth-creating assets have been "sold off" into private hands and also into foreign hands!

The transfer of this ownership has meant that the British people do not enjoy the on-going value of the asset. The money they generate is lost to us.

Often, these are assets which our forebears created by their own blood, toil, tears and sweat. Yet they have been sold to the highest bidder and the annual revenue which they generate has been lost to the Treasury, and sometimes lost to the country itself, because the profits go into the bank accounts of foreign companies.

The family silver has been sold off in order to raise some short-term funds. Yet, the problem with selling off the family silver is that the funds can only come in once, and eventually you run out of things to sell.

In this way, the country has been "asset stripped". Meanwhile, other people, often foreign companies, are enjoying the revenue stream.

We cannot have an economy built on the extraction of wealth out of our country!

When this happens, we find that we have no money and we have to go cap-in-hand to the bond markets. These lenders now find themselves enjoying a central place in our national economy – as the money providers – a role which they were never meant to occupy.

So here's something we should look to do: We can try to ensure that the revenue streams of certain key industries and assets can be used for the benefit of the public.

Ideally, we want assets which generate a continuous revenue for the public purse.

In a modern society that is going to include a degree of government intervention.

How much, of course, is the question of politics.

For example, this may include a certain amount of nationalisation of rail, energy and water; or it may simply require ensuring the private ownership of such companies remains British, that the profits remain in the UK, and that they are taxed sufficiently.

It's going to include a certain limit to foreign ownership of national companies so that the profit of the company is not extracted abroad.

It's going to include a limit on the extent to which companies can take profits out of the country.

It's going to include government procurement programmes which deliberately seek British companies to supply the needs.

It's going to include limiting the ability to keep wealth off-shore – and effectively taxing those who do.

All these things will keep money staying in the country; keep revenue coming into the Treasury; and mean there is less need to run to the bond markets to borrow the money we don't have.

Let's make no mistake. It is true that "nationalisation" can often go too far!

A nationalised industry can become sclerotic. That is, workers can get used to under-performing because they know their income is safe. Union leaders can abuse their position by constantly seeking more money because they know the government (ultimately, us, the taxpayers) will fund it. We must avoid falling into those traps (again).

But there has to be a balance, and it's our job to find it.

Surely, all people, whether of "the left" or "the right" can see the benefits of a regular income stream coming into the Treasury from certain key areas of the economy and certain fields of industry.

3. Government should not Borrow from Foreign Investors

One way of economically protecting the country is not to borrow from (aka sell government bonds to) foreign investors.

It should be the law that bonds can only be bought by investors domiciled in the UK. That means that the annual interest payments, and the principal, will stay in the UK economy instead of leaving the country.

Furthermore, if the bond holders are located outside the UK then, if they choose to sell their bonds off at scale, they will cause a panic in the UK bond market, which could translate into higher fixed interest on UK government bonds – which will lead to unsustainable tax rises and cuts to public spending. We could have foreign actors bringing down our own democratically-elected government. That's unacceptable!

If they live abroad, it is also much harder to bring such malign actors to justice. While it is possible to convict foreign people in UK courts, it can be complicated if foreign jurisdictions don't play ball. Why should the UK be at the mercy of the intentions of foreign investors in this way? It seems crazy!

4. Develop the Policy of "Publicly-Created Money"

As above, we should have wealth-producing industry in our own country which can create a sufficient amount of the money which is needed for public spending, without having to run to the bond markets (aka the Loan Sharks).

However, in those cases where there is a short-fall, we should be open to careful and judicious publicly-created money, free of debt.

Governments have the power to create money. How much "publicly-created money" should we create? That's an economic and political question.

However, it doesn't affect the principle that we can do this!

This would also help to marginalise the power of the bond markets over our country. Of course, they would scream and claim, incorrectly, that this is "inflationary". But it can be done.

If the government can create a £100 bond, it can create a £100 note. The element which makes the bond good makes the note good.

Why should we be paying, this year 2025-26 alone, £111.2 billion in interest payments on the National Debt; equivalent to 8.3 per cent of total public spending.

[ See "% Debt interest (central government, net of APF)" at obr.uk/forecasts-in-depth/tax-by-tax-spend-by-spend/debt-interest-central-government-net ]

When elected, the MSPs of Independent Green Voice will get this conversation moving!

Our Policy Document The Policy of Publicly-Created Money: Money For the People, By the People is an example of what could be done, and what our Independent Green Voice MSPs will advocate.