Islamist nutters don’t scare me!

It is deeply upsetting that people have died and been injured today. But we need to remember how important it is that our democracy survives all challenges. That is why I, like so many others, will be at Westminster again soon.

Yes, despite the dangers Spud will soldier on!

Well, because most have some pride about the truth

Why aren’t most academics in the debate on issues of public importance?
….
Next time someone tells you Scotland has a £15billion deficit, throw three words at them: Professor Richard Murphy.

The influential professor of ­practice in international political economy at City University of London made his name exposing the way big companies avoid paying tax – and the ineffectiveness of governments in collecting tax.

He is a chartered accountant who has succeeded in sexing up his subject with his book The Joy of Tax.

This month he turned his ­attention to Scotland and in ­particular claims that the country has a £15billion deficit and is too poor to be an independent country.

Sigh, no one is claiming that Scotland is too poor to be an independent country. Only that there would have to be some sharpish cutting of spending, or raising of taxes, to fund the current budget deficit.

The question to be asked is one Danny Blanchflower posed to academic economists in 2012, which is ‘Where were you?’ The public is funding academics. Why aren’t they being seen and heard?

My own intuition is that academics are busy trying to work out the truth rather than just spouting off but you know, neoliberal that I am.

PS I have accepted three invitations to Scotland in the last couple of days.

Lucky Scots, eh?

BTW, someone must tell Spud that the SNP don’t, as a matter of policy, make peerage recommendations.

Tax Justice Network’s Latest

Our data differ in three areas. Most importantly, we introduce revenue data from the ICTD–
WIDER Government Revenue Database (GRD). The GRD was created in response to the absence
of a consistent, high quality, public data source for revenues. As the creators at the International
Centre for Tax and Development (ICTD) set out (Prichard et al. 2014), no pre-existing source met
these criteria. The set of papers published at the launch of the GRD (ICTD 2014) confirmed both
issues with the quality of data in IMF studies and the failure of multiple researchers to replicate the
results of a number of papers by researchers in the IMF Fiscal Affairs Department. The subsequent
publication of a version of the IMF dataset marked an important step towards transparency,
although it also confirmed that crucial issues remain—such as inconsistent GDP series (McNabb
2016).

ICTD include Sol Picciotto. Who is also TJN.

This is just quoting your mates.

“The IMF studies are wrong! See, my mate, under a different name, has said so!”

I fear the Spud is confused here

Why becoming a tax haven would be bad news for Britain

No wonder 82% of all Singaporeans live in state-owned housing, most of which is flats.

Spud, is, is he not, the one who keeps saying that there must be much more social housing?

Something which it appears tax havens can provide?

8 Many tax havens have a staggering debt problem
Running a tax haven is expensive. Local people have to be kept happy and that costs money, which these places don’t have. Singapore has national debt of more than 100% of GDP, which is much more than the UK.

Doesn’t Spud tell us that there should be much more government debt? And from the Singapore page on this:

Is it fiscally sustainable for Singapore to have such a high level of debt?

The answer is ‘Yes’.This situation is fiscally sustainable. This is because these reports only look at gross debt. Taking into account our assets, we have in fact no net debt

In Singapore’s case, we do not borrow to spend. We instead invest all borrowing proceeds. All borrowings are thus backed by assets. What we earn in investment income from our assets is more than sufficient to cover the debt servicing costs. The Singapore Government in fact has a strong balance sheet with assets well in excess of our liabilities.

That’s the Curajus State in action isn’t it? Government borrowing to invest in the economy?

Today’s menu includes half-baked Spud

Looking at context first, with regard to wealth the impact of inflation is unusually predictable. Inflation erodes the sum a debtor owes to the person who has lent to them. Deflation increases the sum owed to a lender. In quite straightforward terms inflation reduces the financial wealth of those who own debt and increases the net financial worth of those who owe money. Since the owners of debt are, by definition, wealthy it is very easy to see why inflation has come to be seen as the curse that it is usually represented to be. Low inflation preserves financial wealth so low inflation is good is the logic,

Thus Spud argues for higher inflation.

Spud also argues that we should all be saving for our pensions using bonds.

Sigh.

The second is that inflation is woefully inadequately measured because it ignores asset price changes and so, by implication, one of the biggest costs of living in the form of house prices.

Sigh, RPI includes cost of housing, CPI does not.

This contrasts with controllable inflation arising from situations capable of being influenced by the government of the state whose currency is inflating. These might be wage inflation; excess demand in the economy or a shortage of taxation to counter the level of government spending

Amazingly, the thought of reducing the government spending does not occur to him….

Excess demand is an absolute and a relative term: absolutely it indicates an unjustified exuberance beyond the capacity of the economy to meet demand. Relatively it is an exuberance of demand relative to the capacity of people in the economy to pay. The responses are quite different. The first needs interest rate rises; the second pay rises.

That’s a Nobel winning insight. Excess demand comes from low wages.

As for inflation due to insufficient taxation, we have seen the exact opposite for a long time: the inflation rate has suggested over taxation.

Says the man who wants to increase taxation by reducing the tax gap. As the Spuddie argued only yesterday:

I well remember Jacob Rees Mogg arguing against Michael Meacher in the House of Commons on one of the Private Member’s Bills I wrote for Michael. The aim of the Bill was to tackle tax evasion, which is money that is already due to HMRC. Rees Mogg’s argument against the bill was that it would result in more tax being paid and that was undesirable as a matter of absolute fact, so it must be opposed. I was shocked but in a moment realised the true agenda.

Yep, there it is:

It is my suggestion that this is where the UK finds itself now. It is true that there is too much debt, but to control that with interest rate increases will exacerbate the true crisis, which is a shortage of labour income within the economy as a whole.

It is also true that most of the current inflation is uncontrollable, unless Brexit us cancelled and OPEC respond by increasing oil supply, both of which are incredibly unlikely.

In that case, let’s be clear; the UK does not need an interest rate rise now. But labour markets are in need of fundamental reform to support and improve long term lay rates, and there is no sign of that happening. That’s the big issue around inflation that needs addressing. And there is no one to address it. And that may be the biggest failure in UK political economy right now.

We should reduce inflation by increasing pay for everyone. Truly a Nobel winning idea.

Soapy Joe And Spud, my how we are enriched

And now Jolyon Maugham is bringing a case against Uber demanding a VAT receipt for a journey he made in a car provided by that company. He knows, of course, that he won’t get one. Uber claims it does not provide taxi services, saying its drivers do that and it is a mere booking agency. But that claim is inconsistent with the facts, which have been upheld because Uber drivers have been found to be employees in a tribunal hearing.

No, they haven’t, they’ve been found to be workers.

Sigh.

Must be a whiff of something in the air

Murphy is making his usual two mistakes, of not understanding the economics nor the logic.

On the economics he’s missed that GDP, and thus the size of the economy, is production, or consumption, or income. Each of which will be, by definition, equal (absent people lying about tax of course).We thus don’t need the exact and precise details that he’s mumbling about because we can estimate from a combination of the different methods. As the ONS actually does to reach those GVA (GVA is roughly equivalent for GDP for a sub-national area) numbers at the three NUTS levels.

He’s also wrong in logic of course. He’s the proponent of the Courageous State idea, which is that the government should take a much more heavy handed approach to the management of the economy. Lots of lovely planning and firm state action. And yet here he is insisting that the government really has no clue, not a scoobie, about the state of the economy at anything less than UK level. Something which would make that detailed planning a tad difficult one would think. But then the internal contradictions of his own arguments are not really something that trouble Professor Murphy. Perhaps there’s a whiff of ermine in the air?

Well done Spud, well done

It’s not by chance that the UK is the centre of corporate fraud: ministers chose to make it that way

POSTED ON MARCH 20 2017

The Guardian has today reported massive money laundering through UK banks: some $740 million is alleged to have be n illicitly laundered in the UK.

From the Guardian:

Documents seen by the Guardian show that at least $20bn appears to have been moved out of Russia during a four-year period between 2010 and 2014. The true figure could be $80bn, detectives believe.

Being between 4% and 1% of the activity makes you the centre, does it?

Fake news spotted

As an economist,

Professor Richard Murphy

As an economist, I’ll tell you that to assess Scotland’s economy you need to know about how much people have to spend in the country, how much is invested in Scotland, how much the Scottish Government spends, what the country’s exports and imports are, how much is saved, and the total tax paid in Scotland.

Note that’s seven separate bits of data. And we only have reliable figures on some of what the government spends. As for the rest, Revenue Scotland is still struggling to work out which people are tax resident in Scotland and it has no clue at all on what corporation tax, VAT or other taxes are due, precisely because no-one has to declare those taxes separately for Scotland. It’s the same with imports and exports: no-one knows what these are because there are no border posts at Carlisle, Berwick-on-Tweed or Stranraer. On investment and savings, we’re equally clueless.

The message then is a simple one: when people say Scotland is in financial trouble, or running a deficit, or anything else, ask them how they know. If they say it’s the GERS (Government Expenditure and Revenue Scotland) report, tell them to read the home page for that report where it is quite candid about the fact that the data in it is estimated.

Sigh. We can and do measure GVA to NUTS1 regions. Even to NUTS2 ones. We even look at income to NUTS3 regions. And, of course, income, production and consumption all equal each other.

An economist would know this.

To be blunt, Westminster is saying as loudly and clearly as it can that Scotland quite literally does not count by refusing to measure what happens there.

Interestingly, let us take Ritchie’s argument seriously for a moment. For that also means that Westminster doesn’t know what is happening in England, or Wales, or, in fact, any other subset of the UK. It’s a plot I tell you, a plot!

The excellent management of a bank

Regulators at the Bank of England are growing increasingly concerned about the future of Co-operative Bank as the beleaguered lender struggles to find a rescue buyer.

It is understood the Prudential Regulation Authority (PRA) has begun drawing up contingency plans for the troubled bank, which put itself up for sale last month amid mounting concerns about its capital position.

If Co-op Bank is not bought, it will be forced to attempt a costly restructuring that would result in bondholders owning the lender in return for its debts being wiped out. If a rescue is not forthcoming, the PRA would step in and force the bank into resolution, which would result in it being wound up.

But as Spud told us, it would be very wrong of the authorities to insist that the bank was run by people who actually knew anything about banking, wouldn’t it?

Spud misses the point being made

So, he gives evidence to the House of Lords. Lovely. Who then say:

According to HMRC’s latest estimates, the total tax gap amounts to £36 billion or 6.5 per cent of total direct and indirect tax liabilities. Professor Richard Murphy challenged HMRC’s methodology, arguing that the figure is an underestimate. For the purposes of this report we use HMRC’s estimates of the overall gap.

That is, we don’t believe Spud. But there’s more!

Most of the evidence submitted to the inquiry challenged HMRC’s analysis of the behavioural effects of the measures arguing that the estimated tax gap reductions would either never materialise in full or might even go the other way.

Some argued that, to the extent that record-keeping would improve, the result would not necessarily be in the Exchequer’s favour.

That is, the errors in record keeping which drive Spud’s estimate are not all in the direction of less tax, it’s even possible that they, in aggregate, trend the other way, meaning that Spud’s estimates are even more wrong!

What then worries about our Professor’s intellect is that he quotes this to show that he is right……

Does the SNP appoint peers?

But that’s not why Nicola Sturgeon has undoubtedly earned the title. She’s there because she stands head and shoulders above all else in the field. Partly that’s because she leads a pretty united party in a parliament that seems to go about its business in a much better way than Westminster. And it’s because her team at Westminster are, without doubt, the most able group in parliament, partly because almost all of them have real world experience way beyond the political sphere, which is now so rare elsewhere. And they use that skill extremely effectively.

Guess who?

In that case, and given that the future of the UK is in doubt, the question of who the two most powerful politicians in the UK might be is clearly answered by May and Sturgeon. But if you asked who is the most powerful, and wholly appropriately considered that answer in the context of whether or not there is a Union, then May might come second.

As I understand it Widmerpool did actually have some talent.

Wherein Spud misunderstands again

The message is abundantly clear. Britain (and the whole world) needs more government debt to meet the demand for stable, secure places to invest. And the UK government is a particularly good provider of that stable, secure investment opportunity. And such is the demand for it that people are willing to, in effect, earn no interest at all (after inflation is allowed for) on those funds just to make sure they’re in safe hands.

Any rational government would meet this demand by issuing more of the debt the markets demand. They would be consciously using the offered chance to borrow at zero per cent real, and actually incredibly low nominal rates, to pour debt into the market and on very long terms. Thirty year, fifty year or even perpetual debt would sell right now. The funds could then be used to build the future those pension funds want for their membership, including homes for their grandchildren.

Not entirely sure how you build a pension on bonds carrying negative interest rates to be honest.

But the real misunderstanding from Spudmonster is that he’s right, the market is shouting that it would like more government debt. So the Bank of England should sell that debt it owns to the market, right? Unravel that QE which Spuddy insists will never be unravelled.

This leads us to what he’s ignoring. The4 price of government debt is deliberately and specifically raised by the BoE owning so much of it. Meaning that we cannot, without unravelling that distortion, say very much about the true price of government debt can we?

From the Professor of Practice in International Political Economy at City, University of London.

We can’t tell anything useful about Scottish GDP because:

Why might the data be misstated? First, there simply isn’t enough data to reliably estimate Scottish GDP. We have no figures for where sales take place in the UK, for example. VAT returns are an utterly unreliable source for this: a UK company does not submit data separately on sales in Scotland from elsewhere. The same is largely true on spending. So forget Scottish GDP data: we just don’t know what it is.

It’s entirely true that it’s difficult to track sales by location inside a customs union or single market.

But then we don’t measure GDP by sales anyway. We measure by production, consumption or incomes, each of which should be, but won’t because of cheating, the same.

And we can measure place of production, place of consumption and place of the person earning the income.

Which is why ONS uses the income and production approaches to measuring GVA, GVA being the equivalent of GDP in smaller statistical units than that customs union or single market.

Shouldn’t a professor, even one of practice, in international political economy, even at Islington Technical College, know this?

Err, rilly?

John Carlisle says:
March 12 2017 at 7:26 am
I think a nationwide poll will show that the remainers are substantial majority, while the leavers are an entrenched minority, sustained by the cognitive dissonance. We need to fight to stay in – by whatever means!

Didn’t we, err, just have a national poll?

His ambitions are so modest

A number of people have asked me what I would do if I was to head HMRC

Last, I am assuming tax policy is a Treasury issue and that HMRC’s task is implementation

So, for example, it would consider why we spend so much subsidising pensions and whether this pays for society.

So, the first thing is to dive into policy then.

Sigh.

Isn’t that a well run bank?

Stricken Co-operative Bank has warned that it may have to raise as much as £750m from investors if it fails in its attempt to find a buyer for the business.

The ethical lender, which was rescued by a group of US hedge funds in 2013, cautioned that it is considering forcing its existing investors to help fill its capital hole by bailing in bondholders and converting their bonds into shares.

On top of a debt-for-equity swap, which would be at the expense of the funds that saved the lender in 2013, Co-op Bank would also seek to raise a further £300m in new equity, to show the Bank of England it has sufficient capital.

That decision to run it with people with no knowledge of banking worked out well then, didn’t it Spud.