If only he knew anything about debt, macro, GDP or even economics

Despite this debt will always be falling as a part of GDP, but how is not explained;
And borrowing for investment is outside this book balancing exercise, except it clearly is not because total debt has to fall in proportion to GDP, meaning that in all likelihood a current surplus has to be run: after all, how else might this be guaranteed?

How about if GDP goes up faster than the debt grows? As has happened for most of the past 2 centuries……

Still not getting it

The banking industry needs to be subject to a financial transaction tax on all flows to compensate for the lack of VAT paid by it.

An accountant doesn’t know the difference between VAT exempt and VAT zero rated?

Plus, a professor of some sort of economics doesn’t know the difference between a transactions tax and a consumption one? Is entirely unaware of tax incidence?

This would be progressive, and at very low rates for most UK households, but should rise in rate as flows increased.

For example, if the rate differs per household income then how is that a tax incident upon the banking industry?

This quite apart from the macroeconomic effect of a financial transactions tax, which is to shrink the economy and thus lower overall tax revenues. Making this a bit redundant:

Additional revenues raised should be used to lower tax rates, most especially for those with lower income. This is not a plan to increase tax rates: it is a plan for a better tax system.

Amazing how ignorant you can be and still teach in the British university system, isn’t it?

Of course monetary policy has no meaning nor influence these days

And we can print as much cash as we like, spend it, and “markets” will have no influence upon us.

Asian markets tumbled and the Turkish lira dived almost eight percent on Monday on fears that the economic crisis gripping Turkey could spill over into the global economy.

It’s amazing how those dang international markets always do have heir verdict upon domestic economic policy, isn’t it?

But it is a policy you damn fool!

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?

Is he really this stupid?

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?

How stories change, eh?

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.

Ritchie cannot even read a set of accounts these days

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.

It’s amazing what he doesn’t get really

But that brought us to another theme, where again I bow to Danny’s expertise. This is the so-called NAIRU – that is the non-accelerating inflation rate of unemployment. It’s not that long ago that the bank thought this was 8%. Then it was 7%, then 5%. Now it’s about 4.5% on their opinion. But why? As Danny explained, when researching a new book out next year from Princeton entitled ‘Not working: where have all the good jobs gone?’ he looked at NAIRU since 1945. He says as a result that it’s quite fair to argue that from 1947 to 1958 it was 1.5%. Of course the world has changed since 1958 (excepting the fact that’s when I arrived in it). And the profile of employment has changed radically too. But why has NAIRU changed? Or has it? Could it be argued that it is now no more than 2.5%? I think that plausible.

The actual purpose of most labour market reform over the past few decades – ever since Thatcher started to rush the unions – has been to lower Nairu.

If you asked Snippa whether that had worked he’d indignantly insist not.

But there he is insisting it did work.

The important thing being that he’ not even understand the conflict, would he?

Quite gorgeous

I entirely agree. And I share his frustration. For years I have been seeking to present balanced argument on tax in the media. It’s hardly radical to say that you expect people to pay the right amount of tax, in the right place, at the right rate and at the right time, after all. Nor is it radical to say that you want the government to do this even-handedly in the interests of fair competition. From whatever political perspective you come that, surely, makes sense.

But like Rupert, I have been put up, time and again, against people I consider extremists. That is people like the so-called Taxpayers’ Alliance and the Institute for Economic Affairs, both of which organisations argue for the end of the structure of society as we know it, the destruction of democracy as we are familiar with it, and the end of those services on which the most vulnerable people in this country rely. They also promote tax havens that would destroy fair competition and undermine markets. And that has been done in the name of supposed balance. But it is not. It creates bias.

I just hate being put up against people who know anything.

I will have to think hard about that one. And the next time I am asked to go on air with the likes of Mark Littlewood from the Institute of Economic Affairs I might have to think seriously about whether to do so, or not.

The BBC is biased. It’s biased because it gives the far right a platform where none can be justified.

I’m not arguing against free speech. Nor is Rupert. What we are saying is that the balance in reasonable debate is not unreasoned extremism. And it’s time the BBC realised that. As yet they do not.

Therefore no one who knows anything should ever be on the BBC.

Err, yes

There is plenty of discussion in the financial media this morning on whether or not this will be the week when the Bank of England finally raises interest rates above 0.5%, which has been their ceiling for near enough a decade. The broad consensus is that they will. The broad agreement as to the reason is that pride requires that they do so.

OK, so, why shouldn’t they?

The savings ratio is at an all-time low as households are under threat of being unable to make ends meet.

Tuberoso betrays his lack of economic knowledge again.

As Keynes pointed out, the paradox of thrift. In a recession people logically save more. But that’s bad for the economy as a whole. So, we actively desire to lower the savings rate to get out of the recession. The policy has now worked, huzzah. But then that means we’re out of the recession and should be raising interest rates in order to raise the savings rate, no?

Why, yes, idiot is indeed idiot

There are three things to note. First, the lower half of the income distribution (broadly earning less than £24,000 pa in the year in question) get 10% of all pension tax relief.

The so-called middle-income earners (earning £24,000 to about £54,000 in that year) enjoy 40% of tax reliefs.

And the top 10% of earners, all earning over £54,000 pa) enjoy 50% of all tax relief.

Yes, OK.

In other words, tax relief for those best off – which is nothing more than a straightforward state subsidy for their savings which increases the wealth divide in the UK as a result – costs £27 billion a year.

Ahhhh. Well, you see, there’s this lifetime thing? Pensions savings are made over a working lifetime. And wages change over a working lifetime. It’s not exactly unusual that older people make more money than younger. Which is why we do adjust for age when considering income at times.

We’ve also the fat that pensions are indeed part of that wealth divide. But then we also nee to consider lifetime effects. The 21 year old just starting work has no pensions savings. The 65 year old just retiring has the most he’s every going to have. We thus really o need to look at age adjusted incomes and age adjusted wealth.

But the Senior Lecturer doesn’t know enough economics to know this, does he?

This isn’t the worst of it

One of Britain’s biggest charities gave £275,000 to an Irish republican group whose offices were raided this year by anti-terrorism police investigating sex-trafficking, violent intimidation and “paramilitary-style attacks”.

Joseph Rowntree Charitable Trust funded a support group closely linked to the Irish National Liberation Army (INLA), a banned terrorist organisation. A man held in the raids was charged with running a brothel and extortion.

The York-based trust was strongly condemned yesterday by a politician from Northern Ireland’s nationalist SDLP party. She called the award “sickening”. The Charity Commission ordered the trust last night to “explain and justify” its funding decision. A source close to the regulator labelled it “astonishing and absolutely appalling”.

The Times reported this week that the trust, a Quaker organisation, had given £550,000 to a group that accused a Labour MP of “industrial-scale racism” for highlighting the sexual abuse of girls by gangs of British Pakistani men.

Didn’t they send some money Ritchie’s way? Far worse, obviously.

No, not really

Three things to note and use in conversation. This proves:

The state can do things better than the private sector;
The Tories now know this;
The government can take services back into the state sector.
The obvious corollary is that is this can be done for the probation service is can be done elsewhere.

Absolutely everyone agrees that the State can do some things better than the private sector. Just as everyone other than Nicolas Maduro thinks and agrees that the private sector can do some things better than the state.

The arguments are always over which. And here the claim is – claim note, not proof – that the state can do probation better than the private sector. Could be true too, this isn’t a ditch I’d be willing to die in. I’m interested to find out too. But that the state claims it can do it better isn’t proof now, is it?

Does the tax gap shrink by £1 billion then?

And if not, why not?

Bookmakers are in line for a £1bn tax rebate after a court ruled they were wrongly charged VAT on revenue from controversial fixed-odds betting terminals (FOBTs).

The finding, in a case brought against HM Revenue & Customs by the high-street bookmaker Betfred, will be seen as a major victory for an industry reeling from the government’s decision earlier this year to slash the maximum bet on FOBTs from £100 to £2.

A tax tribunal ruled that collecting VAT on FOBTs between 2005 and 2013 had “breached the principle of fiscal neutrality” because similar roulette-style games played in casinos and online were exempt from the tax.

Note what the ruling is. That £1 billion of tax already paid is not righteously due under current law. Therefore that calculation of what the tax gap is must be reduced, no? For it is – supposedly – the amount righteously due but not paid, something which must clearly be offset by that not due but paid.

And how much other tax is being over collected?

No matey, it ain’t

In fact, all that they have not noted is that the role of tax is to cancel the money the government has created, meaning that the tax yield and not the interest rate is now the primary tool for the control of inflation in the UK.

This is important. What we actually have here is, as Peter has noted, an admission that the government can create money at will. So the ‘magic money tree’ exists, as a matter of fact. But what we have not got is an admission on the role of tax in this equation.

What that suggests is that the role of tax in controlling inflation has to be the next argument brought to the Treasury’s attention.

Interestingly, the Tuberator thinks the economy is not running at full whack, therefore we require further fiscal stimulus. Thus taxes should fall so as to provide both that and a little moe inflation. The Tuberator does not recommend lowering tax levels. Thus the Tuberator does not believe his on theory.

A thought

Assume MMT. Tax is to reduce inflation.

Taxing incomes reduces inflation. Taxing companies doesn’t – all corporate income is of course income to someone at some point.

Therefore MMT says abolish corporation tax.


The question next assumes that when the government spends it’s at cost to other activity elsewhere in the economy. But this is only true when the economy is at productive full employment. We’re a long way from that right now.

We’ve the highest employment to population ratio since the early 70s, the lowest unemployment rate since about then. We have skills shortages all over the place. We’ve lots of excess capacity, do we?

Compare and contrast

July 18:

Anyone who knows anything about business knows that it is cash flow crises that kill businesses. It’s not, in my opinion, tariffs, changed regulation, the Irish border, disinvestment or anything else that will deliver mayhem in the UK next year. It’s something much more prosaic that will do that. It will be giant traffic jams at ports that will impose lasting damage on the UK. So many businesses will suffer crippling cash flow problems the impact could be massive, and cumulative of course.

Mark Carney has said he may need to reduce interest rates to compensate for Brexit. He’s not got much scope to do so. And the cost of money will not be the issue next year. It will be its absence that will matter as debts do not get paid. This is the coming crisis of Brexit. And it is beyond Mark Carney’s reach to address it.

The government could though. It will be the only creditor able to waive what is owing next year and survive the experience. PAYE, VAT and other sums owing may have to be put on hold if business is to survive Brexit, in my opinion.

That is, don’t collect taxes owed during the chaos.

July 20:

The government has now suggested how it will respond to the suggestion that Dover will cease to function in the case of a No Deal Brexit. According to the FT:

The UK government will instruct officials to relax efforts to collect border taxes if Britain leaves the EU without a withdrawal deal, a junior minister told peers on Thursday.

Speaking to a House of Lords subcommittee, Mel Stride, financial secretary to the Treasury, said the government knew it would have to balance security concerns, revenue expectations and the pressure to keep goods flowing across borders.

“We will not compromise on security,” Mr Stride said. “But there will, perhaps particularly in the case of a place like Dover, where you have to keep flow moving very quickly or you have all sorts of problems, there will be a trade off between keeping the flow going and revenue protection.”

He added: “The priority will be to keep flow moving”.

This is is a quite extraordinary statement. First, it acknowledges that there will be a break down in law and order.

Second, it acknowledges that the resultin criminality will be permitted.

Third, it admits that an unfair playing field, biased against honest domestic businesses, will be created as importers not paying VAT will be able to undermine them.

How outrageous that the government intends to do what I said government should do, don’t collect taxes during the chaos.

D’ye think he’s even noted the reversal?