Most of us can see a problem emerging for the Chancellor of the Exchequer. Coronavirus has led to the excess expenditure of some £400 billion to keep the normal economy afloat. It is not over yet, and government debts are piling up. It is a bit like punting. There is the guy punting down the river, who gets into a bit of a problem near the bridge, puts one foot on the base of the bridge arch, and, too late, feels the punt and bridge move apart with his weight on both feet. We, and he, know that he will finish in the water. Sunak was not late realising. He, as in other similar economies, decided to do what it takes and supported workers forbidden to work because of the pandemic. It is not a problem of his making. But his feet are moving apart and long legs will not solve the problem.

Most of us, too, think we can see the problem. The punt and bridge are moving part because government expenditure is not matched by income from taxation. We remember “austerity” which followed the 2008 crisis to balance the books, and realise this crisis is Times Ten and do not know when the budgetry problem can be solved. The answer seems to be to kick the ball further down the road. Almost all the commentators see the problem in these terms. Some mention BREXIT and rightly see a crisis coming in the New Year, but the Chancellor’s problem is basically an accounting one – too little income and too much historic expenditure. Plus, there is the normal Keynesian point that recessions require government expenditure stimuli to bring the economy back to normal. Note the assumption of some kind of normal.

Some rightly look further back. They recognize that Gordon Brown as Chancellor did fund the NHS properly and that was followed by cuts under his Tory successor, Osborne, which we are now paying for. The frenetic rush to address having almost no PPE stocks cost £12 billion, much of it wasted. Our NHS underfunding then has cost us tens of billions now. That is certainly true, and other failures in public funding in care homes, benefits, mental health, schools, public health are now biting us. Yet all of this analysis is within a framework of Treasury thinking and established political responses, and it is possible that the thinking does not go deep enough and does not address the problem we really have.

Let us ask an obvious question. The Government owes £1.8 trillion, but to whom does it owe that money? The answer is a bit slippery, but we can get some kind of answers. First, it owes some of it to us through the banks. We put money in the bank and the bans hold government bonds which used to yield interest, but now yield very little. But let us probe this a little more. Some of us put money in the bank, a lot of it. This includes very profitable companies. Other people, the poor and the young, are borrowing money from the banks, often at 20% or more interest. The banks make their profit from the poor, and merely hold a lot of government debt. Second, now the Government is borrowing money from itself through what is called Quantitative Easing, or QE. It is best to think of this as printing money. It costs the Government nothing and allows expenditure to soar. Previously, as with the German inflation of the mark in 1922, printing money leads to inflation. Economists do not explain why QE does not lead to inflation. Third, international finance including oil economies, China, Japan, dictators and the very rich will possibly hold some UK government debt as well as having a well-appointed house in London. Debt is not a problem if people are willing to hold it, but debt also signifies a big discrepancy between those who have it, and those who do not, namely our Government.

But we are merely skirting round the problem. To see it clearly, we must double its size. The Government owes something approaching £2 trillion, but since Margaret Thatcher the State Public Sector has had something like another £1 trillion sold off, often at knockdown prices, to the rich who now support the Tories. Telephones, Gas, Electricity, Water, Trains, Car Companies, Shipyards, Post Office, Bus and Coaches, Defence Companies, Land and all kinds of public sector resources built up over decades were sold off or privatised and the money went into the coffers of the Exchequer, vast amounts. When Thatcher sold off Local Authority Council Houses, through a legal sleight of hand, she claimed the money for the central Exchequer, spent it, but not on building more Council Houses, hence our present housing crisis. When the vast amounts received for North Sea Oil, at zero cost to the Government were sold off, the money was not saved for the long-term as the Norway Government did, but was spent mainly during the long period of Tory dominance. Indeed, we should all be angry that the Tories during this period were claiming economic competence while really they were spending not just the family silver, but all the resources needed for a good functioning public sector. They were worse than the Prodigal Son. Often their rich friends profited, and of course, European companies often bought up the utilities. But it was even worse than that, because the Tories began borrowing to build needed hospitals, local authority facilities and schools, as we now know, often at crippling rates of interest. Worse still, private contracts are now used in the NHS, Defence, the Home Office and elsewhere to run the public sector where there is no competition and the contracts involve vast profits. The corporate state of Fascism is with us, fortunately thus far without the violence. Most economists would agree at all of this adds up to at least £2 trillion, taking the public sector from vast surplus for our good into overdraft and private dependence. If we take the overall public sector loss in more recent times at £3 trillion, that comes out at £40,000 per capita, but because that is redistributed  some have gained hundreds of thousands or millions, while others are paying thousands and tens of thousands for resources they no longer have or now go without.

Where has all this money gone? The taxation take, especially for the rich, has been relatively low, because the public coffers have been raided, indeed, cleaned out. They have accumulated and been relatively lowly taxed. Taxes on wealth have more or less disappeared. Council Tax is based on property values of 1991 when property prices since then have gone up three or four times. The money has gone into investments, property overseas, international capital and into tax havens. How much? There is now an industry intent on hiding how much. It is secret beyond secret. We are all guessing, and there are different figures depending on whether you look at UK citizens who avoid tax offshore or UK trading companies who hide profits there. Aside this disinformation, £100 billion a year of tax avoided would not be outlandish, excuse the pun. It is the kind of money the Treasury needs. So both within the UK, and through international tax avoidance, the rich have soaked up this money. They get the rich contracts, high salaries, big pensions, profits, bonuses, the government spending, low taxes and massive windfall profits on property while the poor struggle. This is reflected in a two tier wage system. The poor get £10 an hour and often pay their own costs, while the rich get a £100 an hour, or even a £1,000 an hour for work which reflects being in the right place, rather than merit.

So, the real divide is private wealth and public squalor, the rich and the poor, and the failure to require the rich both to face proper levels of pay, profit and taxation, and the Tories will not acknowledge or address that this is the problem. They will duck a wealth tax, Council Tax re-evaluation, transactions tax, eliminating off-shore tax holdings, and other such reforms. Indeed, they may even seek to make the UK a bigger tax haven to attract money in to cover the present crisis after Brexit with a sticking plaster. So, the real underlying problem will not be addressed. There will not be the jobs, income, wealth, resources in poor areas to really lift them. The bias to the South East will continue. The sink estates and impoverished areas cut off from good work will stay that way. While Sunak shows goodwill, the real levelling will not take place, just as the idea of “levelling up” to the rich is unreal to start with.

It was clear at the last election that unless Boris had thrown out the promise to “level up” in the North and to create a “Northern Powerhouse” – (what is a Powerhouse?) – the Tories would have lost the election. With that, and the false antisemitic charges against Corbyn, the Tories won. Sunak must channel some funds up north and seek to redress the imbalances which have been going on for decades, but it is a few billions which are announced, when hundreds of billions have gone the other way, especially in the ownership of wealth.  we have discussed this without even mentioning the subsidy to the banking system giving them the funds to build skyscrapers, give ridiculous bonuses and pay out big profits, even when they went through the crisis in 2008.

The accounting problem waits for a solution, but without the rich being held to account, it will be entrenched. But the real underlying problem, the gap that has opened up between rich and poor, made worse by the plundering of the public sector goes on and gets worse. The payments handed to the North will not change it. The gap will remain open. Brexit, falsely trumpeted as a solution, will make it worse. The Tory politics of window dressing will leave millions of casualties because the whole economy is so skewed. That failure has been going on for decades, and the present adjustments do not change it. The gap opens up and the Conservative Government is in terminal failure.