Angela Rayner needs to take an economics class
Angela Rayner needs to take an economics class
Tom LawsonMon, May 11, 2026 at 6:17 PM UTC
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The former deputy PM wants to pay for her spending by taxing the rich more
Pity my pupils going into their A-levels in economics on Monday, befuddled by a brand-new technical term invented by Angela Rayner the night before. In Sunday’s swingeing criticism of the Prime Minister she gave us a new sub-section of the macroeconomy: the “everyday economy”.
“We need immediate action to cut costs for households and put money back into the everyday economy,” she argued. But in doing so, she neglects the most basic principles that my A-level pupils learn in week one as fresh-faced members of lower-sixth. In an economy it all connects, you see. The clue is in the word “macro”.
That starting point for those learning economics is the “circular flow of income”. Households spend on the output of firms, firms pay people who use their wages to spend. Circular. Hopefully, this virtuous circle keeps going around and around, thus providing the much-desired “multiplier effect” to deliver bang for the Government’s buck.
But Rayner wants to pay for her spending by taxing the rich more – supposing that they are not in that same everyday economy, but instead exist in some other realm or dimension. As any fule kno, as Molesworth would put it, it doesn’t really matter where you take the tax out: tax is a leakage from the flow and reduces national income – the overall amount people have to spend.
We teach it with a bathtub analogy, where GDP is the level of the bath. Tax comes out the plughole and additional spending from government in the tap. This “Keynesian” model assumes that whatever is demanded is produced, which is contentious.
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Even accepting the Keynesian approach, which is, by the way, the one favoured by the Left and other exponents of big government, Angela Rayner’s new division of the water in the bath between the everyday Everyman and the toffs doesn’t survive common sense. We all participate. Staying at the Ritz isn’t an everyday thing, but it is everyday hard work for the maids, bellhops and pastry chefs who go on to spend their salary.
In Rayner’s economics class, where she taught her non-macro macroeconomics, she railed against “trickle-down” economics. “Inequality, alongside squeezed living standards, is the outcome of a model built on deregulation, privatisation, and trickle-down economics,” she claimed.
Here she is willingly or obliviously confusing wealth and income, a common error that we start correcting in week two or three of the A-level course. It is true that it is much more uncertain whether wealth concentrated in the elites automatically trickles down to reduce poverty.
But current spending is income (a flow), not the stock of wealth, and when someone spends it on a British product or service, no matter whether they are rich or poor, that spending goes into the flow.
Rayner could come to us for a remedial course. Or, at least, she could clarify her thinking in order to align it with the basic fundamentals of how the world works, everyday and all days, before A-level candidates up and down the land sit their second paper on May 18.
Tom Lawson is headmaster of Eastbourne College in East Sussex
Source: “AOL Money”
