The Policy of Publicly-Created Money

Independent Green Voice points out that a sovereign nation must have the ability to be self-funding to an appropriate extent, without the absolute need to rely upon taxation, or to borrow from private interests via the bond markets.

We advocate the establishment of a source of publicly-created, debt-free money to free the nation from reliance upon borrowing from the bond markets.

Some people may want to read our 3-part series on the bond markets to give some background on what we say below, although the following document is complete in itself.

In order to ensure a financially sovereign nation, parliament and people, we advocate that we must: Establish a National Source of Publicly-Created, Debt-Free Money.

In addition to our Creating Wealth Policies explained here this would go a considerable way to reducing the undemocratic power of the bond markets over our democratically-elected governments.

WHEN ELECTED INDEPENDENT GREEN VOICE PLEDGES TO:

1. Introduce a Bill in the Scottish Parliament to bring in a law to set up a Scottish Debt Commission which will study the nature of our debt-based money system, promote understanding of the link between unsustainable growth and poverty; and the manner in which money is created as a debt for the profit of the private financial corporations; and to investigate the policy of creating a source of publicly-created debt-free money, at no cost to the taxpayer, which can help fund public projects.

2. Set up a Cross-Party Group in the Parliament to investigate and promote reform of the debt-based money system and to consider alternative public funding methods based on our debt-free publicly-created money proposals.

3. We will use our public profile as MSPs to publicise this vital subject which holds a key to the relief of poverty both in Scotland and worldwide.

------

MONEY FOR THE PEOPLE, BY THE PEOPLE

Principle: A Sovereign Parliament has the ability to create a Supply of Money without Indebting itself to the Bond Markets.

Policy: Establish a National Source of Publicly-Created, Debt-Free Money.

History tells us that Kings of old might have seemed "all powerful" physically, but if they couldn't do anything without borrowing money from their private financial funders, then they were not in charge economically.

They were not "sovereign". That is, they did not have authority over their own affairs.

It is the same today.

If a parliament has always to go to private interests (the bond markets) in order to acquire money for the nation, then the parliament is not sovereign, and the nation which it represents is not sovereign. It does not have the ultimate authority.

Worse, it is dependent upon, and potentially subject-to, these private financial interests. As we show in our article about Bond Vigilantes, it can even be brought down by them!

In our democracy, the sovereignty of the individual is linked to the sovereignty of the parliament which we elect. If the parliament's sovereignty – its authority – is "fettered" in some way, then consequently our personal sovereignty is also being restrained.

It is a myth – which has been running for hundreds of years – that only private interests can create and hold all the money, and that a sovereign Parliament of a sovereign nation which is meant to be representing its sovereign citizens, is somehow beholden to private investors for its money supply.

Indeed, it is ridiculous when you think about it.

A nation which has to rely upon privately-created money from the corporate banking system, or money loaned by private financial interests, in order to survive – is not a sovereign nation!

The fact is, every nation has the ability to create its own money right now – within reason of course. We don't want it getting out of hand and causing inflation.

Indeed, you cannot say that you live in a politically sovereign nation if it does not possess the financial independence to create its own money supply, free from the banks, or the private investors.

So that's a principle right there: A sovereign nation must have the ability to be self-funding to an appropriate extent, without the absolute need to rely upon taxation, or to borrow money from private interests via the bond markets.

Every nation should create for itself the ability to be financially sovereign in this way, to the best of its ability, given the circumstances it has to work with.

Please note, this is not a left-wing, or a right-wing point of view! It is just a fact, and the reason that it is not widely understood as patently obvious, and accepted as the truth, is simply down to the pervasive domination of the conventional economic view – that we have to rely upon private interests for the money supply – as constantly promoted via the mainstream media and academia.

So how does Parliament acquire money for the nation, right now?

PARLIAMENT OBTAINS MONEY in 4 WAYS

ONE: SEIGNIORAGE REVENUE (the profit from the creation of notes and coins)

The Issue Department of the nationally-owned British Central Bank (BCB) – currently mis-named "the Bank of England" – sells banknotes to the private banks at face value.

For example, if the Royal Bank of Scotland wants £10,000 of £10 notes, it gives the BCB £10,000 of its own money. The BCB then authorises the printing of 1,000 x £10 notes at De La Rue printers.

"Seigniorage" is the (unwieldy) term used to describe the profit enjoyed by the BCB after it has subtracted the cost of printing and distributing this cash. It's the profit on the cash creation.

This profit is then given directly to the British Treasury. The Treasury is then free to spend it on national matters, such as public spending.

In other words, the BCB creates this money out of nothing and the public purse enjoys the profit. That is perfectly proper for it to do so. After all, we need cash to exchange, and a publicly-owned body of the State, such as the BCB, is the proper authority to be tasked with this necessity.

To recap: The BCB creates these bank notes out of nothing, sells them to the banking system, and the profits of this issue go direct to the Treasury.

According to the Bank of England's Annual Report and Accounts for 1 March 2024–28 February 2025, the profit from the note issue during this period was £4,438 million.

It's Report states (1):

There has been an increase in notes in circulation throughout the year of £3,575mn to a value of £90,593mn (2024: £87,018mn). The increase has been mainly driven by strong foreign demand from UK tourism with the £20 notes and higher use in ATMs with the £50 notes. (p40)

The net profits/losses of the Issue Department are referred to as seigniorage, and paid/claimed directly to/from HM Treasury via the National Loans Fund (NLF), an account held at the Bank by HM Treasury. The £4,438mn net seigniorage income is comprised of income and profits of £4,501mn, less £57mn expenses and a buffer withheld by the bank of £6mn. (p41)

So, the important point to grasp is that in 2024-25 over £4.4 billion came into society simply as a result of the State literally printing it. It didn't borrow it from anybody.

It is Debt-Free money!

It is not owed to anyone! It is simply created, and we enjoy its benefits when it is spent into society.

That's a good deal.

The only constraint on that source of revenue is demand. Bank notes are printed on demand. That is, if the public's demand for cash goes down, because of the rise in electronic methods of payment, then fewer notes are printed and there will be less seigniorage revenue.

Now, when we consider that just after WW2, almost half the total money supply was physical cash, and when we compare that with today, where, with the rise of electronic forms of payment, only around 4% is physical notes and coins – then we can see that we are missing out on a massive amount of debt-free public revenue. (2)

TWO: TAXATION

The government raises money for public spending projects through taxation.

THREE: NON-TAX REVENUE

This revenue is from income generated by state-owned assets or services, such as public corporations. In the days when more of British industry was "nationalised", then this revenue was greater. It also includes interest earned on state-assets such as student loans.

FOUR: BORROWING

The government also borrows money from the private sector (nationally and internationally).

This is because it always fails to raise enough through seigniorage, taxation, and non-tax revenue in any given year, and so the shortfall has to be borrowed.

It borrows from investors who can be individuals, and financial institutions, by selling "bonds" (also called "gilts"). These are basically IOUs which promise, "If you buy this bond, we'll pay it back to you, with interest, at some future date."

The "National Debt" is the total borrowing which is outstanding, and which is still to be paid back.

The "interest on the national debt" refers to the interest which must also be paid to these bond holders for the duration of the bond.

This year, 2025-26 alone, the interest payments on the National Debt amount to £111.2 billion; 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 ]

This is money which simply goes to private investors at home and abroad. Around one third of the Debt is owned by foreign companies, and so the interest payments simply drain out of the country.

For those who want to know more, we've gone into how all this works, and the dangers, in our 3-part series which can be navigated from here.

Where does Money Come from to Pay back the Bonds?

It is us, the taxpayers, who foot the bill when the time comes for repayment.

But it also comes from even more government borrowing! Like a Ponzi scheme: The money comes in at one end, in order to pay out what is owed at the other!

That is, the government borrows more money in order to pay back what it already owes. Clearly, that's not a very good way to run a household, let alone a nation!

THE 2.9 TRILLION QUESTION: Or the £2,900,000,000,000 QUESTION: Or the £2,900 BILLION QUESTION

Now you might be thinking, "Well, if the government has the power to create money, which it does when it creates notes and coins which it sells to the private banking system, and for which we enjoy the profits, then why doesn't it just create all, or a proportion of, the money to make up for the taxation shortfall?"

You might be thinking, "Why does it borrow from the private financial corporations, and private investors, and add to this national debt, which is indebting us all, and which means that our taxes have to continuously rise, in order to find the money to pay these people back?"

And those would be very good questions!

In fact, it is the 2,900 Billion Pound Question, which is the projected UK national debt for 2026.

It was the question that Thomas Edison, inventor of the light bulb, answered when he said, "If our nation can issue a dollar bond, it can issue a dollar bill. The element that makes the bond good makes the bill good." (3)

MONEY BY THE PEOPLE, FOR THE PEOPLE

We've seen that the public purse acquires the seigniorage revenue on the cash issue. This is debt-free as far as the public purse is concerned.

Our proposal is that we need more debt-free money coming into society.

We are not saying that we need more notes and coins – unless there is a demand for them.

Rather we are saying, "Simply extend this debt-free seigniorage principle to the creation of non-cash money – which is the electronic numbers which represent most money today!"

If the government is creating cash money debt-free, it can and should create a supply of non-cash money debt-free – that is, the money which exists only in electronic format.

If it does this, it could slowly pay off the national debt; it could reduce the tax burden; and it could take away a lot of financial power from private interests who are simply leaching off a well-established, albeit largely unnecessary, process of money creation.

This debt-free money which Parliament created would be spent, not lent, into society.

We call it publicly-created debt-free money – to distinguish it from privately-created debt-based money created by the privately-owned banking system.

Since it is Publicly-Created money by the State, bypassing the corporate and private beneficiaries, then we can call it Money by the People, for the People – the Democratic Imperative!

SPENDING, NOT LENDING, MONEY INTO EXISTENCE

Creating money in this way and spending – not lending – it into society is a perfectly reasonable suggestion.

Vincent Vickers, Governor of the Bank of England between 1910 and 1919, made that exact suggestion when he advocated in his book Economic Tribulation, that, "Any additional supply of money should be issued as a clear asset to the State; so that money will be spent into existence, and not lent into existence." (4)

People rightly ask, "Would this be inflationary?"

The answer is that it depends upon what the money is spent. Are we using the money to connect and develop the economy, or are we using the money in a neutral way where it has no effect on the economy, or in a way which actively hurts the economy?

For example, if we use the money to build a bridge then we are improving the efficiency of the economy in that area. That is likely to reduce prices.

If we use the money to blow up the bridge, then we are inhibiting trade in that area, and that is likely to make costs higher. We see that today with the war in Iran. Billions are being spent on the war, and energy and food prices are going up for us all!

REFERENCES

1. Bank of England, "Annual Report and Accounts. 1 March 2024–28 February 2025", at

bankofengland.co.uk/-/media/boe/files/annual-report/2025/boe-2025.pdf

2. This webpage from the Bank of England (27-2-25) entitled "What is Money?" says "96% of money is held electronically. 4% of money is held physically as cash." See bankofengland.co.uk/explainers/what-is-money

3. Thomas Edison, quoted in The New York Times, December 6, 1921, in its report "Ford Sees Wealth in Muscle Shoals".

4. V.C. Vickers, Economic Tribulation, originally published in Great Britain: John Lane The Bodley Head Ltd, 1941, Ch.7, p.75 and reprinted in the USA: Omni Publications, 1974, p.67.

FOOTNOTE

This reform has also been explained clearly and in-depth in the 2012 book "Modernising Money: How our Monetary System is Broken and How it can be Fixed" by Andrew Jackson and Ben Dyson which is available in paperback on Amazon and available for free download at modernisingmoney.org

The reform has also been converted into a draft Act of Parliament (2011), which is "good to go" and available here.