Fighting words but….

Col Gaddafi\’s second son and heir apparent appeared on television late in the evening to say there would be \”rivers of blood\” and that Libya was on the brink of a civil war that would burn its oil wealth.

\”Our spirits are high and the leader Muammar Gaddafi is leading the battle in Tripoli, and we are behind him as is the Libyan army,\” he said. \”We will keep fighting until the last man standing, even to the last woman standing…We will not leave Libya to the Italians or the Turks.\”

That\’s actually something that\’ll be decided by those doing the standing, fighting and dying, not you laddie.

Does not compute

So, the latest booze scare:

Sir Richard Thompson, President of the Royal College of Physicians, said: “How many more people have to die from alcohol-related conditions, and how many more families devastated by the consequences before the Government takes the situation as seriously as it took the dangers of tobacco?

“We already know from the international evidence that the main ways to reduce alcohol consumption are to increase the price and reduce the availability of alcohol, yet the government continues to discuss implementing marginal measures while ignoring this evidence.

Hmm. So, that international evidence:

Deaths from liver disease have doubled in Britain in recent years while other countries such as France have seen “profound” falls thanks in part to “strict” rules on marketing drink, a strongly-worded article in The Lancet claims.

OK, France is one to copy then.

In France, “very strict regulation of alcohol marketing” and a market “saturated with cheap wine” led to the industry focusing on increasing quality, and so reducing deaths.

Oh. So what we actually want to do is flood the country with cheap cider so that manufacturers concentrate upon quality not quantity then.

You know, do as the French.

Which leads us to the question: Has Sir Richard Thompson actually read the report he is pontificating about?

Silvio Berlusconi\’s 24 gifts to Ruby the Heart Stealer Karima El-Mahroug disclosed


Details of a cache of 24 presents totalling nearly £200,000 and allegedly given by Silvio Berlusconi to the teenage dancer at the centre of the under age prostitution charge against him emerged from prosecutors details of the case against him.

Berlusconi\’s a billionaire, isn\’t he. Assume it\’s just one billion.

£200,000 in presents out of a net worth of 1 billion, means that he\’s spent 0.02% of his assets on her.

Average household assets in the UK are what, £200,000? (Top 10% £850,000, bottom 10% £8,000, median will be below mean here).

So, for the average Englishman the same expenditure would be £40,

Hmm, no, that doesn\’t gets us repeated legovers with a pneumatic teenage dancer, does it?

If newspaper reports on pricing are to be believed, this gets a single quickie in the back of the car from a heroin addict street walker.

Seems Silvio got something of a deal here then……

Penthouse cover story

Standing at the newspaper counter just now, as one does, my eye, as it can be, was drawn to the current Portuguese Penthouse, the cover story of which, translated, seems to be:

Sodomy, the ultimate taboo.

Now I agree, given my age, inclinations and general uxoriousness, I don\’t know this following statement to be true, but I\’m generally under the impression that that ship sailed some time ago.

From Willy to the Resolution Foundation

The Resolution Foundation has detailed the impact on the 6 million lower- and middle-income households in Britain whose average net household income is £20,300 a year and who spend disproportionally more on the goods going up fastest in price. A fifth are now materially deprived and over half have savings worth less than a month\’s wages. Only the seriously better-off are now escaping the squeeze.

This rather surprised me. It\’s a general rule of thumb that the inflation rate for higher earners is higher than the general inflation rate. This is because they both purchase more services (esp health and education) and servic es generally have a higher inflation rate and also that some of what those higher earners buy is positional goods.

These too have a higher than general inflation rate.

So, we actually get the Resolution Foundation telling us that the inflation rate being faced by low to middle earning households is higher than that being faced by those higher earners.

Bit of a puzzle really: how do we get from hte general finding to this specific one?

The answer is in this report.

In October 2008, sharp oil price inflation meant that by far the biggest
year-on-year increases in prices occurred in the domestic electricity, gas
& other fuels (+39.3 per cent), food (+10.1 per cent) and transport fuels
& lubricants (+9.2 per cent) components.

And yes, low to middle income households do spend a greater portion of their incomes on such fuels than do higher earners. So this is how we get our \”squeezed middle\”.

Hmm….but, you see, those huge rises in energy costs are not simply a result of either soaring global prices or of a falling pound. We are actually, quite deliberately, adding to them. The renewables obligation, carbon taxes, the EU cap and trade system, feed in tariffs.

It\’s our own damn government causing this higher inflation rate for that squeezed middle.

Yup, they being screwed over because we\’re going Green.

Well quite

But for all this, the twin motors of capitalism and consumerism are driving profound changes for the better, especially when allied with technological advances, good governance and rapid urbanisation. People are living longer. Their lives are more prosperous and more peaceful.

Excellent stuff: but this is about Africa and it\’s in The Observer.

How did something so off message manage to get in there?

On lesbian actresses

No, not that sort, the regular sort:

The casting of Portman, Moore and Bening, all straight actresses, in the roles of women who are bisexual or lesbian has provoked acrimony in Hollywood\’s gay community. Some argued that only well-known heterosexual stars were happy to take gay parts because they could be confident their career would not suffer. This view was drily echoed by gay British novelist Stella Duffy this weekend. \”It seems it is always fine for straight women to play lesbians – in fact, they quite often get Oscars for it,\” she said.

Sorta: two points though.

The generally accepted proportion of lesbians among the female population is 1-2%. So we would rather expet, in the absence of any confounding factor, 1-2% of actresses to be such. So he relative scarcity isn\’t really all that much of a surprise.

And as to straight women playing lesbians: umm, yes, this really is rather the point. What they\’re being paid for is to pretend to be something they\’re not.

You know, acting?

Joseph Rowntree Foundation: numpties again

\”Water poverty\” will become the new fuel poverty for an increasing number of households as scarcity of supply pushes up bills, according to an influential thinktank that says Britain must deal urgently with climate change.

A report by the Joseph Rowntree Foundation, one of the largest social policy research-and-development charities, says that low-income households are at particular risk because of new methods being introduced to increase the efficient use and distribution of water. It defines \”water poverty\” as when households spend 3% or more of their income on water bills.

Blimey, have you ever seen such a mish mash of logical idiocy in your life?

Assume, for a moment, that the basic premise is correct: that climate change will mean water shortages.

Great, so what do we do about this?

Yup, we have to price water properly:

Water companies are moving away from flat-rate fees to new charging models that bill customers with steadily higher prices according to how much water they use.

Excellent, tiered prices. Basic allowance at cheapo prices, you want to start watering the 10 acre paddock you pay a fortune. Great, just what the economist ordered.

So, umm, JRF are actually complaining about the very solution to the problem they identify.

It\’s all a bit of a let down from the early days, isn\’t it? JR himself, when he saw that there was no decent cheap housing went and built some. His fortune is now used to complain about actually solving problems.

Yes, this does tend to happen

The report, Richer Yet Poorer: Economic inequality and polarisation in the North of England, shows that economic growth has exacerbated the gap between rich and poor with the highest-earning 20% increasing their earnings at double the rate of the bottom 20%.

Periods of fast economic growth do tend to do this, increase inequality.

One reason, here in the UK, is that the top 20% tend to be getting their income from market activity, from working. Wages do, especially in times of fast economic growth, tend to rise faster than inflation.

However, a very large part of the bottom 20% are getting their incomes from State benefits. These tend to rise with inflation, not with wage growth.

Thus economic growth will expand income differentials.

Still beats not having economic growth, obviously.

Those tax dodging bastards at the Co Op

Looking at their 2009 financial statements, we find that income tax paid in 2009 was £3.1m 1 and that profit for the financial year (after significant items) was £164.6m 2. That makes their \’effective tax rate\’ under the Guardian\’s preferred metric a measly 1.9%.

Excellent work.

A serious note to the Barlcay\’s PR team.

You\’ve got to come out fighting you know, you\’ve got to be making these sorts of cases.

UKUncut: blithering idiots once again

UKUncut really are remarkable. They\’ve managed to once again take as their target a company which isn\’t doing anything wrong with tax: Barclays.

Think through their targets so far: Arcadia does pay all of its corporation tax, Lady Green isn\’t British and doesn\’t live here, so there\’s no tax system on the planet which would tax her income here.

They\’re insisting that Vodafone should pay tax in the UK on phones sold in Germany to Germans from German shops. Boots hasn\’t dodged anything, they\’ve just replaced equity with debt, meaning that it\’s the people who receive the interest who pay the tax, not the company issuing the dividends: it\’s not even clear that the total tax take has fallen.

And now there\’s Barclays:

Protesters have targeted more than 35 branches of Barclays bank, with pickets, poetry readings and even colouring competitions, in another of a series of days of direct action organised by the UK Uncut group.

They were highlighting Barclays\’ admission that it paid just £113m in UK corporation tax in 2009 – a year when it rang up a record £11.6bn in profits.

There\’s two major reasons that bill was so low. The first is the one that people have already cottoned on to, that the previous year they\’d made losses, losses can be carried forward. There is no rational tax system possible which would not allow this. You pay tax on your cumulative profits over time, not just the profits in any one arbitrary time period.

But the other one is this:

Barclays\’ $13.5 billion sale of its asset management business to BlackRock relieves the immediate worries over the bank\’s capital, analysts said, though it will also increase the group\’s reliance on investment banking to generate earnings.

Ooooh, what\’s that? They sold off a subsidiary.

said it will book an $8.8 billion net gain on the cash and shares deal.

$8.8 billion? Mebbe £5 billion then as a capital gain on that? Hmm, is that liable to corporation tax?

The Substantial Shareholding Exemption applies only to trading companies, or trading groups, who sell or otherwise dispose of shares, interests in shares and certain assets related to shares in other trading companies or holding companies of trading groups. There’s no Corporation Tax to pay on any gain on these disposals, and any losses are not allowable to set off against gains on the disposal of shareholdings outside of the Substantial Shareholdings Exemption or any other assets.

Oh, no it isn\’t is it?

Umm, gosh, can we think of anyone who has used exactly this provision of the law?

Err, yes, actually we can.

For the record, though, some comments have completely missed the mark on GMG\’s corporation tax position. The reason such a low CT bill is found in the latest figures is that the proceeds of the profitable sale of GMG\’s Autotrader business were reinvested and thus attracted a tax relief aimed specifically at transactions of that sort. Taking reliefs as intended by parliament is not tax avoidance.

Yes, that\’s right: the Guardian Media Group made use of exactly this provision. And that isn\’t, at all, tax avoidance. It\’s using, as they say, a tax provision specifically enacted by Parliament for the purpose meant by Parliament.

Guess who the guy saying that is? It\’s Richard Brooks: yes, the guy who writes the Vodafone tax stories for Private eye. You know, the guy whose reporting started off the whole UKUncut teenage Trot nonsense in the first place.

And as Murphy R reports:

No complicated planning was needed to produce the low tax charge on the sale of this interest: the government has since 2002 provided that Substantial Shareholdings Relief is due when an asset of this sort is sold and no tax is due. The Guardian was, therefore, being tax compliant: the company is doing what the government wants, and for which it provides a relief. It would appropriate to criticise the government for introducing a tax relief of this sort: the Guardian cannot be criticised for using it when the law required that it be applied.

Not only isn\’t this not tax avoidance, it\’s not even tax planning: it is, as we get from the keyboard of the oracle himself, tax compliance.

So given all of this, given the way that Brooks and Murphy so strongly defend GMG (recall, Murph tells us that not only was there nothing wrong in The Guardian doing this, they had to do it!), what in buggery are those idiots doing hanging around the bank branches yesterday?

And why isn\’t Chuka Ummuna being forced to wear a Dunce\’s Cap?

Answers on a postcard please…..

Update: There\’s a more reasoned and accurate description here.

Barclays and tax

Dunno how exactly true this is but it\’s persuasive to me:

\’On page 38 of the Annual Report you will find the relevant figures for corporation tax paid to the UK in the financial years 2007, 2008 and 2009. You will note that Barclays had an effective corporation tax rate of 27%, 9% and 23% respectively in each year.

As the UK Corporate Tax Rate for the same three years was 30%, 28.5% and 28%, we need only concern ourselves with the 2008 financial year where the effective rate was 9% against a 28.5% nominal tax rate.

In 2008, Barclays had a nominal corporate tax charge of £1,464 million which was reduced to £453 million by adjustments. You can look yourself at the detail but the major adjustment was the offset of £859 million of unrecognised non-taxable losses. This was the cost to Barclays of the banking collapse, in other words the losses incurred in writing down or off the bad loans etc which resulted from the worldwide collapse in asset values.

I rather suspect that the £113 million referred to by Umunna and the Guardian is the cash amount paid to the treasury in 2009 representing unpaid corporate tax from the 2008 financial year.\’

Does Richard actually read his own blog?


It is I think quite fair to say that a great many people who callled me yesterday afternoon were stunned by the news that Barclays paid just £113 million in tax in the UK in 2009.

And off we go into a discussion of how they\’re tax dodging bastards.

Yet we actually know the answer, Ritchie kindly provided it to us only one week ago:

So let’s get back to the one tax the banks do pay as a charge on the income they make – which is corporation tax. As the Mail on Sunday notes today, based on research I did for them, the likelihood that any of our big banks will be paying any serious sums in corporation tax for a while to come is remote in the extreme. That’s because the 2009 accounts of each of the major banks shows just how much deferred tax asset they’re sitting on relating to tax losses that they can offset against their future profits – including those subject to Project Merlin. The figures are:

HSBC _ £4.2 billion

Barclays – £1 billion

Lloyds – £4 billion

RBS – £5.1 billion

Add them together and that’s more than £14.3 billion of tax that’s not going to be paid any time soon. Or at UK current corporate tax rates some £51 bn of profit that needs to be earned before tax is paid.

They made losses which they can carry forward and offset against tax.

There\’s no mystery here, just the simple and obvious point that you pay profits tax on your cumulative profits, offsetting losses, as will be true in any not entirely insane system of taxing profits.

In which I am mentioned elsewhere

Toby Young in The Spectator:

But even if you bracket that question, Murphy’s definition of “tax compliance” doesn’t get us very far. For instance, it lets Vodafone off the hook since “the economic substance” of the company’s “transactions” were carried out in Germany, not the UK. Non-doms, too, wriggle free since the tax they avoid paying is that due on their non-UK earnings. The only miscreant Murphy catches in his “compliance” net is Sir Philip Green – not a particularly impressive haul.

For anyone wishing to continue this debate with Murphy, I should warn you that his self-righteousness knows no bounds. In one of his blogs, he accuses me of “failing to understand morality” and says the fact that I’m hoping to set up a free school with taxpayers’ money “adds insult to injury”. “He’s not a person with whom I really wish to be acquainted,” he harrumphs.

Needless to say, he’s not averse to a bit of careful tax planning himself. The indefatigable conservative blogger Tim Worstall has dug around in Companies House and discovered that Murphy has taken advantage of a tax avoidance strategy that he himself condemns as an “abuse” in one of his blogs. Nothing illegal about it – and not immoral, either, since we all have a right to pay no more tax than the law demands of us. But it’s quite astonishing that Murphy accuses me of “failing to understand morality” for merely defending a practice that he himself indulges in.

On the distribution of the gains from trade

Saying that everyone could be made better off with increased international trade is not the same as people actually being made better off. There are winners and losers from increased international trade, and while I agree that the gains exceed the losses in almost all cases, the gains haven\’t been distributed in a way that leaves everyone, or even most everyone, better off (see, e.g., widening inequality and where the costs of these kinds of adjustments fall). When some people are made better off and others made worse off at the same time, economists cannot say it is unambiguously better or worse. If we are going to make the argument that trade is good because everyone could potentially be made better off, we should do much more than we have to ensure that this potential is realized, i.e. that the gains from trade are distributed widely across the population rather than concentrated among a smaller set of winners.


But this argument then generally morphs into an insistence that we should not have free trade until that compensatory mechanism is put in place, so that, say, I, who will be gaining from that free trade will be compensating those who will lose from that free trade.

Hmm. But do you see what is implicit in that argument?

That there are gains that I am not getting, gains that are going to some other, as a result of our not currently having free trade.

This is obvious: if free trade benefits me and disbenefits you, then not free trade must disbenefit me and benefit you.

Which leads to the question: are you compensating me for those benefits you are getting and the disbenefits I am getting from the absence of free trade?

Where, in short, is my check from those benefitting from protectionism?

What\’s that?


Fuck you then matey.

So, cutting tax rates does raise revenues then?

Yet as corporation tax rates have come down in the UK, from 52% in the late 1970s to 28% today, total revenue from the levy has remained surprisingly buoyant. EU figures show that the UK\’s corporation tax take was worth 3.6% of GDP in 2008 – down slightly from 4% in 2006, before the credit crunch, but little changed from a decade earlier. When Margaret Thatcher came to power in 1979, the corporation tax take, at £4.6bn, formed 5.4% of total tax revenues. Last year, the £38.5bn paid by Britain\’s companies made up 7% of the government\’s tax take.

Darn that Laffer Curve, it\’s everywhere!