We do?

This crisis is not necessary: it is the result of the deliberate attack by neoliberal politics on the NHS. Neoliberal politics and the economics that underpins it assume three things.

Firstly, it says that all human beings are simply rational economic actors, reducing all decisions to an assessment of personal advantage.

That’s not what rational means (we mean consistent only) and we don’t say that anyway.

My Word, The Curajus State is incompetent, who would have thought it…..

We are nowhere near these systems in so many areas it’s just ludicrous to think we can exit the EU in April 2019.

But I think it may be worse than that. After forty years of being in the EU I think we may find that the demand of creating independently what was previously possible only because it was shared may be insurmountable, as well as being beyond the capacity of our economy because the costs will be so great.

At sometime this realisation will dawn. Then, as I said in a tweet yesterday, someone in politics is going to have to realise that we just can’t leave the EU: it’s simply not technically and economically possible for the UK to replicate its systems, let alone in any way that gives us anything but a massive diseconomy of scale.

Those who would rule us are insufficiently competent to even negotiate our way out of a treaty.

But, still, of course, they should have greater power over our lives.

Spudda’s right! The Den of Iniquity!

The Isle of Man’s main telecoms provider has been hit by criminal proceedings brought against its chief financial officer Danny Bakhshi, in another claim of lawbreaking against an executive at an Aim-listed firm.

Manx Telecom told investors this afternoon Mr Bakhshi had been suspended “on a precautionary basis pending investigations being carried out” and that the charge was unrelated to his professional role.

That island wet ops squad should be looking inwards, not at peaceful retired accountants from Wandsworth!

The Isle of Man court of justice confirmed to The Telegraph that Mr Bakhshi, 50, has been charged with an offence related to bringing cannabis on to the island from Amsterdam.

Sorta depends on how much is alleged. A roach end in a pocket after a weekend away? Or a shipload to distribute?

Mr Bakhshi was charged after a quantity of cannabis allegedly worth almost £200 arrived in the Isle of Man from Amsterdam. A customs official intercepted the parcel. Mr Bakhshi was subsequently arrested.


I’m rather out of touch with these things. £200 is a few ounces? A heavy weekend party maybe?

Err, Whut?

Richard Murphy says:
August 16 2017 at 5:04 pm

Wages are declining

Debt is rising

New credit is being limited

One of those two last might be right. But which one is it?

Should we have rising debt or should credit be limited?


His point is that the low rates are unprecedented and despite them it is deflation and not inflation that has been the greatest fear, and with good reason. He is unable to explain what this might suggest happens next. And in fairness, we don’t know precisely. But nothing about it looks encouraging.

What he, and what most, won’t say is that it means that this current model of capitalism is dead. It is no longer entrepreneurial. It no longer innovates. It no longer provides work. It does not aspire to do so. It only seeks to make money out of money. And that’s why society can no longer afford it. The decade has been a death throe for neoliberal capitalism. What that record low represents is the dying note for markets that no longer work. But the new has yet to be born.

Record low interest rates show that people are only trying to make money out of money?


Wouldn’t high, especially high real, interest rates show that rather better?

Interesting use of the wiki idea

What I have not intended is that the wiki answer all known questions on tax. But that said, the first post is about glossaries of tax. Because I cannot make such a glossary overnight it provides access to other glossaries, two of which I have been involved in creating. And as subjects come up I expect I will expand specific issues as glossary items. I have done two, on transfer pricing and unitary taxation.

Comments will not be taken on the wiki: I have no intention that this be a free-for-all. Comments can be made here, and I suspect I will blog new items as they’re added unless that becomes tedious. People are also invited to submit copy or suggestions (with urls for links please) via email or as comments and I will consider them. That way it can grow but without having to spend forever editing corrections, which would very rapidly kill it.

The entire point of a wiki being to tap into the Wisdom of the Crowds in order to first populate, then correct and refine it.

But then yes, OK, not going to work with Ritchie’s output, is it? It’ll be corrected beyond recognition.


As anyone who knows the slightest thing about market theory will be aware, it suggests there are some quite strict conditions that must be met if markets are to be what an economist might term efficient in allocating resources appropriately. These conditions include the absence of large market players who can dominate sectors and set prices; the availability of consistent and accurate information on the activity of all market participants to all who wish to engage in the market; access to capital for all who want to supply so that they have the chance of doing so and, of course, an absence of systemic bias that might favour any one participant over another, so giving them an unfair advantage.

Most who know anything about market theory say that’s the model at the limit. Much of the rest of economics is about how close is the real world to that model? Further, how close does it have to be for market resource allocation to be efficient?

The answers being not very and very little.

That’s why we do indeed say that the big four UK supermarkets – used to at least – have pricing power and yet the shops are full while Venezuela starves. We also go on to say that the cure to those ills like pricing power is more markets – Aldi and Lidl come to mind as the latest competitors providing that. We even see that decline in supermarket pricing power in their annual results.

BTW, Hayek also proved that perfect information isn’t possible to collect. Which is the other reason we use markets, for planning is even worse in the absence of perfect information.

If only the Senior Lecturer at Islington Technical College had paid attention in his introductory economics lectures.

So Ritchie doesn’t understand ETF’s either

The second is broader, and is a liquidity issue. If there is a run on these funds in the event of a stock market downturn I can see them adding to liquidity pressure as they effectively leverage the underlying assets by double quoting them. This could ratchet a downturn in market sentiment and add to instability, effectively reflecting the burst of a double bubble. Anything that can do that is dangerous. The fact that ETFs have had a good track record simply says they have reflected the market recovery (as opposed to the real market recovery) from 2008. Nothing suggests that they add real value, and I strongly suspect that in a period of instability they would do the exact opposite.

There are leveraged ETF’s most certainly, but the definition of an ETF doesn’t imply leverage at all. Consider and ETF which says it is invested in BP and Shell, tracking those two stocks. It will buy 100 Shell, 100 BP, (ignore weighting here) and then issue 200 ETF shares, each of which is half a BP share and half a Shell share. If more people want to buy hte ETF then they buy more Shell and BP shares, if more people want to sell then they sell hunks of stock.

This isn’t leverage. No more of the asset is created than existed before the ETF.

Liquidity can indeed be a problem, a those running open ended funds in commercial property have found out but that’s a different matter.

Well done to Richard Murphy here, well done indeed.

He quotes Eamonn Butler:

Without constitutional rules to prevent minorities being exploited by majorities, democracy will turn into mere majoritarian populism, or into rotating elected dictatorships.

Then, via a link to schools segregation in Virginia, we get to this from Smurf:

What’s the link with Charlottesville? Well, that’s where much of this economic logic began, and not least as part of the resistance to the process of granting equal rights. And as the right wing have got more powerful, and their think tanks more aggressive it is appropriate to make clear that their aim is to defend fundamental divides in society.

So, how and why was school desegregation, indeed all of Jim Crow, overturned? Constitutional protections preventing minorities being exploited by majorities, exactly that protection from majoritarian populism.

Thus we at the ASI are racist fascists because we support the constitutional limitations which prevent something like Jim Crow.

That’s pretty good even by Richard Murphy’s standards.

Shouldn’t an accountant who has actually prepared tax returns know this?

The London Borough of Newham has suggested that its research has shown that half of all its buy-to-let landlords were not registered for self assessment with HMRC when it introduced a regulatory regime for its landlords. Their estimate is that maybe £200 million of tax is not being paid in London alone as a result of the failure of landlords to register to declare tax that they owe.

OK, that’s interesting:

Up to 13,000 landlords in just one London borough have been identified as failing to declare their rental income, prompting estimates that unpaid tax in the capital is costing the public purse nearly £200m.

Newham council in east London, the first to introduce a compulsory borough-wide licensing scheme for landlords in 2013, shared their names and property addresses with HM Revenue & Customs. Newham, which has 27,000 registered landlords, said it understands that 13,000 had not registered for self-assessment, which is generally required if a property owner receives £2,500 a year or more in rent. HMRC would not confirm the figure.

No, you don’t have to register if you receive more than £2,500 in rent. You must register if you receive more than £10,000 in rent. Or, more than £2,500 after allowable expenses. That’s after maintenance, and or depreciation, and until recently at least, after mortgage interest.

Ritchie then charges off to talk about gross rental income, entirely ignoring this basic point.

Third, to add a little more context, based on a number of sources, including data from HMRC and letting agencies, I estimated that maybe £3.2 billion of rent was undeclared for tax purposes in 2011. This was about ten per cent of the total rental market at the time, which implied a vastly higher compliance rate than Newham has now found. If the Newham rate was extrapolated at national average rents the undeclared rents would be £13 billion. This, I stress, does not mean tax is lost on that whole sum as costs can be offset even against undeclared income, but it does, rather worryingly suggest that I have been seriously underestimating tax gaps.

He even mentions costs against income without grasping that you only have to register if your net, not gross, income exceeds £2,500.

So, more of the usual absurd twattery there. It gets worse of course:

Third, the loss, which may when extrapolated across 32 London boroughs, be about £480 a property, seems very unlikely indeed to take into consideration unpaid capital gains tax. Much of the return from buy-to-let is made in this way. In 2011 I estimated that about twenty one per cent of all privately owned UK housing stock was in the buy-to-let sector, suggesting that the same proportion of sale transactions in this sector at that time were also likely to relate to such properties. Since gains were commonplace at the time this might have suggested almost 200,000 gains on such property should have arisen that year. In fact only 52,000 property sales were declared for CGT purposes. I accept, of course, that some properties may have been sold at a loss and others might have realised non-chargeable gains, but candidly I think this was a decided minority of gains.

The portion of buy to let is expanding in the housing supply. Which does indeed mean that more are buying than selling, so we can’t get to the number of sales by looking at the average of holdings. That’s not even accounting, that’s just statistics.


Quite remarkable finding by Spudda

Scotland is the only part of the UK running a consistent trade surplus

Natural resource producer runs goods trade surplus.

Quite remarkable, don’t know how they do it.

…..but for those with an interest in Scottish economics the implication is at least interesting. The persistent claim that Scotland has a weak economy and is unable to sustain itself is not supported by this data. The chance that it may now and certainly did, support the UK economy as a whole, is, however supported.

Whut? A goods trade surplus indicates a strong economy? Err, but, the US had a massive trade surplus during the Depression…….

Snippa Spuds

The First World War was partly paid for with quantitative easing

To put it another way, because the country did not rush forward to fund the Great War as the government expected, the Bank of England (then, admittedly, a privately owned institution), stepped in and saved the government’s day by buying over £2oo million of the debt that had to be raised to fund the initial war effort. In effect, it created money out of thin air to do so, and as a consequence effectively used what we would now call quantitative easing for the purpose of funding the war effort.

Hmm. From the source:

And this episode was to be the first of several instances during the war where the Bank used its own reserves to provide needed capital.

Is the use of the reserves of a privately owned Bank of England actually the same as inventing money out of thin air and QE?

Money is another thing the professor of practice doesn’t understand

First, let’s be clear we’re not printing lots of money to stay afloat. It is true that the Bank of England has created £435 billion of new money using quantitative easing since 2009. Despite this UK broad money supply (M4, as it is called) has fallen since then. To say that printing money is creating excess money supply is just wrong as a result.


Butchering the jargon a bit broad money is MV. Base money times velocity of circulation. We’ve done the QE because V fell hugely, massively increasing (like 10x) the M thus makes sure that MV doesn’t fall. He’s just entirely missed the very reason we did all of this.

To say that’s we’re heavily in debt is also wrong. I refer to the evidence here. The Bank of England would say we owe 89 per cent of GDP in national debt at present. This, however, ignores the fact that the Bank of England actually owns one quarter of that debt. The true figure for national debt actually owing to third parties (which is what matters) is, then, 67 per cent of GDP, which is historically an incredibly low rate.

And as V recovers then we’re going to have to reverse that QE to get the excess M out of the economy or we will have significant inflation.

Nor is inflation a concern. Inflation is running at just over two per cent now. There is not a hint (barring adjustments caused by Brexit) of more to come. To talk of hyperinflation is absurd.

Why then are the Fed and BoE discussing when they’re going to be reversing QE?

And in that case of all these things are taken into account let’s then be clear that the exchange rate cannot be imperilled by money printing. In fact, again the exact opposite is likely to be true because money printing will boost the economy towards full employment, will encourage investment and will boost productivity, all of which improve the exchange rate. So once more the prediction made is wrong.

Depends how much you print. What’s the value of the Z $ these days?

And isn’t it odd that someone attempting to describe a part of economics seems entirely unaware of effects at the margin? Where, you know, all economics happens?

This is wondrous

Compare, for example, a land value tax (LVT)and the current English and Welsh council tax. To some degree (albeit approximately, and poorly at that) the council tax is a transaction tax. It has implicit within it a charge. That is why, for example, it is capped.

What’s the transaction which takes place? Breathing or summat?

Another is in terms of rate of return: in the modern, imperfect, economy rates of return to those with significant wealth have been much higher than those to people of lesser wealth because of tax abuse, market control through exercise of monopoly power and other reasons. A wealth tax corrects for that.

Next, there is an opportunity cost. As Brooke Harrington has explained in her book Capital Without Borders, a characteristic of modern capital accumulation has been it’s extreme risk aversion, which is a trait accentuated by the role of professional trustees and risk managers in the management of many modern portfolios. This has reduced the amount of capital exposed to entrepreneurial activity, with implications all too obvious in the world economy where, as I suggested in my book Dirty Secrets, this risk aversion is killing capitalism from within.

How can you actually believe both of those things?

And perhaps last for now (although I am very open to persuasion that there are issues I have not listed) is the fact that those with wealth have, come what may, lower marginal propensities to consume meaning that society cannot be indifferent to the distribution of wealth beyond certain limits if it is interested in maximising well-being.

Yes you idiot, they go and invest it to the benefit of society. Sheesh.

Second order does so confuse

“The economic logic for inheritance tax business property relief being granted on investment in Aim quoted shares is baffling,” says Richard Murphy, professor of practice in International Political Economy at Islington Technical College.

“Rarely are these companies real start-ups, and their flotation is more frequently linked to releasing funds for founder shareholders than it is to raising new funds,” he adds. “The merits of attracting funds into this market seem few and far between for a government critically short of tax revenue. If there was an obvious candidate for a wholly unjustified tax relief to be removed then this one should win the prize.”

How do you raise funds for a new business? But showing that there’s a likely exit route to the investors.

Thus, an exit route for investors in a successfully achieved start up aids in raising money for start ups.

He never quite does get the effects of his musings, does he

Spudda tells Scotland how to do it. Then explains some more:

Let me unpack that a bit. The two things that a government may want to hold fixed with regard to its currency are its value, reflected in the exchange rate, and it is interest rate. The third dependent variable is the amount of debt in circulation, which used to be considered a matter largely beyond its control. I’ll return to this third point in a moment and stick with the first two for now.

A government might want to fix an exchange rate for three reasons. First is the old fashioned one of national pride. This departed the scene with floating exchange rates in the 70s. The second is because it has agreed to do so. This was why the UK was vulnerable to attack 1992: it had agreed semi-fixed exchange rates with Europe that speculators knew were economically unsustainable on the basis of trade fundamentals. It laid itself wide open to attack as a result. The third reason is to control inflation. This is pretty much a forlorn hope in exchange rate management: if trade indicates that the currency needs to fall in value come what may it will. A government needs to let that happen and address the domestic issues that necessitated the move in value (lack of investment, poor products, poor productivity) instead of wasting money supporting the currency. It would also better tackle inflation with changes in domestic tax rates than intervene in international markets. The important point is that if it agrees on all these three things it cannot be held to ransom on the exchange rate. The risk disappears.

On interest rates the threat is from the bond markets that might refuse to buy new bonds issues unless the rate rises. This threat was possible when it was thought a government had to sell its bonds come what may – effectively the third, uncontrolled, variable noted above. But this risk no longer exists because QE now eliminates it. If there was now a market based attack on interest rates it would require the sale of bonds already in existence to force their price up. And the answer to that now is that a government would just buy those bonds back and so neuter the attack using QE. The weapon the attackers used – that there was no other buyer for debt and so governments were beholden to markets – has gone because the government can itself be a buyer. The interest rate weapon is history.

To put it another way, Scotland will not be beholden to markets if it chooses not to be so. But it has to have its own central bank and currency to achieve that. Nothing less will do.

So, exchange rate starts falling for whatever reason. Thus there is import led inflation. Hmm. So, as said, the interest asked for by the markets (ie, the price at which they will buy newly issued debt falls) rises. We’re going to solve this by printing more money into an inflationary environment, are we?

Is’t this what Zimbabwe did?