In late 2022, a group of researchers published a working paper which would transform the understanding of how the UK government is financed.

"The Self-Financing State" with Co-Author Andrew – A Deep Dive into the UK’s Public Finance Operations

In this revealing interview, we’re joined by Andrew, co-author of The Self-Financing State—a paper that lays bare how UK public finance actually operates, based on institutional, legal, and operational evidence. In five key parts, we break down the research and explain why this is one of the most important economic papers published in the UK in decades.

1. Government Spending = Money Creation

We kick off by exploring the central insight of the paper: UK government spending creates new money. It is not funded by taxes or borrowing. Andrew explains how this is embedded in legislation, with the Consolidated Fund at the centre of operations. The Treasury spends first—taxes and bond sales happen later and serve different purposes.

2. Bonds Don't Fund Spending

The paper shows that bonds are not issued to raise money, but to support monetary policy and the financial system. Andrew details the Full Funding Rule, the role of gilts and Treasury bills, and how the shift to interest-on-reserves post-QE makes debt issuance largely obsolete from a funding perspective.

3. The Bank of England Is Not Independent

Although the Bank of England is said to be independent, the paper shows that it is functionally subordinate to the Treasury in all spending operations. From QE indemnities to the Ways and Means facility, the central bank acts as a tool of the state. Independence is limited, mostly rhetorical, and undermines democratic accountability.

4. Misleading Framing of Deficits and Debt

We tackle the myth that government must "live within its means." Andrew explains how deficits are not under direct government control, but result from private sector saving and economic activity. Austerity, then, is not necessary—it’s a political choice sold as an economic imperative.

5. Public Debt = Private Wealth

Finally, we reframe government debt as a form of safe public saving. Bonds are demanded by pension funds and institutions because they are secure and state-backed. The idea that the national debt is something to “pay down” ignores its function as the backbone of private financial security.

Why this matters

This episode is essential listening for anyone who wants to understand how money actually works in the UK. If you care about the economy, public services, or Scottish independence, this is not just theory—it’s the real-world plumbing of the financial system. And it’s time more people knew about it.

🎧 Listen now

A link to the fascinating paper: https://www.ucl.ac.uk/bartlett/sites/bartlett/files/the_self-financing_state_an_institutional_analysis_of_government_expenditure_revenue_collection_and_debt_issuance_operations_in_the_united_kingdom.pdf

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