Author Archives: Tim Worstall

Saying average bank base rates are going to be below 5% in the future looks like one of the most reliable forecasts anyone can make, based on the long term trend data.

Saying rates may not be far from zero may be almost as reliable now.

But McCafferty did not, of course, draw the obvious conclusion. The first is that in that case monetary policy has little or no roll to play in the economy.

Why will interest rates be low? Because given the economic conditions it will be our policy that interest rates will be low.

Low interest rates are not a proof that monetary policy has no role, it is a bloody monetary policy.

And, second, that in that case giving any significant role in the management of the economy to a supposedly independent central bank makes no sense at all, because the only instrument they have to use is the interest rate and for all practical purposes it will have no impact on economic management in the foreseeable future.

Would having high interest rates change the economic outcome? Then someone still has to decide what monetary policy is going to be, don’t they?

One is to pretend that there is any future for monetary policy in the timescale Labour now need to be concerned about. There isn’t. Carney says he can see three interest rate rises in the next three years. I would call that optimistic. But at best that means rates will reach 1.5% before, inevitably, crashing to zero again. In other words, any policy (including putting the central bank at the core of economic policy) based on neoclassical thinking which, as Michell confirms, puts monetary concerns at its core is simply irrelevant.

What are low interest rates if they’re not monetary policy?

There is no surprise here: the reason why I refused the job of being McDonnell’s chief economic adviser in 2015 (Meadway was to be my deputy) was because McDonnell was adamant that he had to sign up to Osborne’s fiscal charter that required balanced budgets.

Stories do change over time, isn’t that nice? Because the old one was that he’d take the peerage but wanted a decent salary on top of the Lords Allowances to do the job.

There has been much anguish expressed about the latest Amazon accounts for its UK operating company. This is unsurprising. Those accounts suggest that Amazon has increased its UK activity from £1.45bn of sales in 2016 to £1.99bn of sales in 2017, with its profits increasing threefold from £24m to £72m. Yet its overall apparent tax charge was still a minuscule £1.7m.

However, all is not as it seems. Once the tax effect of payments made to staff using share option schemes is taken out of account, this company looks as if it paid £4.7m in tax in 2017, compared with £3.7m the year before. That’s actual cash paid, and it suggests a tax rate of approximately 6.4% in 2017 compared with 15.5% in 2016. Given that the expected tax rate for the 2017 accounts was 19.25%, Amazon appeared to pay only a third of what might have been due.

Amazon explains the fuss by referring to the effect of those share payments. But that’s a sideshow, in my opinion.

Well, it would help if the accountant writing this article were able to do the most basic reading of accounts. Share options, awards, they’re part of paying the staff. They’re an expense, which is why they’re not part of the profits which make up the bit taxed.

So, what were the profits after we take off the cost of those share awards? And what is the percentage of those post all costs of business then paid in tax?

No, not what is he tax paid as a percentage of profits before all costs, but what is the percentage of profits paid as tax as a percentage of taxable profits?

Do note that The G isn’t allowing comments on Spudder’s piece.