February 2008

Timmy Elsewhere

At Pajamas Media.

About trade and tariffs n\’ stuff.

My original final line was something like: "Barriers to trade are therefore made up of both the costs of transport and tariffs and quotas. We\’re told that if we raise tariffs and quotas we\’ll become richer: if someone told you that raising the cost of transport would make us richer you would rightly think him insane. So with tariffs."

Editors edit….

Polly on Tax Avoidance

You\’ve really got to stop listening to Richard Murphy you know, he\’s making you look very foolish.

"Check out the recent report The Missing Billions from tax expert Richard Murphy, for the TUC, who identified £25bn of tax lost from the exchequer. He lists major companies whose tax payments don\’t begin to reflect the size of business and profits they seem to command in Britain. Note the tiny tax paid by BSkyB, Hanson, and Legal & General. It may be legal but that\’s not the point: profitable companies shouldn\’t be able to shuffle assets to pay less tax. Where is the public shame at "socially responsible" companies avoiding the spirit of the law? British stamp-duty payers may gnash their teeth over British Land Plc paying little tax, quite legally, when land values soared. What of easyJet\’s Stelios Haji-Ioannou, who said: "I have no UK income to be taxed in the UK"?

Since Tesco has murmured to other newspapers that it may sue the Guardian, to warn others against following our story – though no writ has arrived – let\’s stress that these low-tax paying habits are all very, very legal, all arranged by highly paid lawyers from highly respected world-beating City law firms. They set the seal on avoidance not just as OK, but as a good or even as a necessary business practice. (Incidentally, humbler Morrisons pays proportionately much more tax than Tesco). Vince Cable, the Liberal Democrat shadow chancellor, looking down this list of underpaying companies, is now asking why. "

Tesco\’s effective tax rate last year was 20% when the headline tax rate is 30%. This is what is used as clear evidence that tax avoidance is going on.

The Guardian Media Group\’s effective tax rate last year (please, go and look up your own accounts to check this) was 16% calculated the same way.

So who are the tax avoiding spivs now?

This is the problem with using Murphy\’s figures: he starts from such wildly unrealistic assumptions that by the time we get to his conclusions, you, the guardians of all that is left liberal and holy, are, well, to use your own words, Murphy is

"branding us spivs, swindlers, cheats and cads."

I can\’t help thinking that this is something of an own goal really.

The Welfare Problem

A very neat little story from Frank Field showing where the problem really lies:

The guy I buy my coffee from in the morning has run the franchise also for ten years. Every day during this time at least two and may be as many as five young people come in asking for a job. Not once has any of those young people been British.

There is simply something wrong with the incentives for those currently able to claim welfare. Quite what would be the subject of an entire book, rather than a simple blog post, but it\’s obvious that there is something wrong when people out of work are not beating the streets looking for it.

My own maunderings on the subject revolve around the marginal tax rates faced by those who would indeed move from benefits to work: I\’m sure it\’s possible to construct scenarios where someone would lose money, ie face a greater than 100% marginal tax rate, by moving from benefits into a low skilled job. Certainly, rates of 90%, 80%, are common at certain points on the income distribution.

Being someone who thinks that incentives really do matter, my thoughts therefore concentrate on how to remove those disincentives. The simplest method seems to be a citizen\’s basic income. Simply hand out to everyone the bare minimum necessary to keep body and soul together. You might tax it back way up the system (over median income perhaps), but this way the marginal tax rates faced by those at the bottom would be massively reduced, to 30 % or so (income tax and NI).

The biggest objection to this is probably the one that, well, if people got money without having to seek work, won\’t they just sit there on the cbi? Say "Ta!" and do nothing? It\’s possible, and certainly there would be some who did so. But there would also be others who responded to the much lower marginal tax rates by working….perhaps only part time, but working all the same. Which effect would dominate is at present unknown and it does, in forecasting which will, rather depend upon your view of human nature.

Are they, in the majority, feckless wasters, who with enough for the cider and the tabs will do nothing? Or rational economic actors who will, with reasonable incentives, start to work?

Our problem is that under the current system we can\’t tell: for few rational people would work rather than take benefits with an 80, 90, greater than 100% marginal tax rate. Being the cheery sort of soul I am I think that a cbi would lead to a rapid expansion of those looking for work: your view, driven by your view of human nature, might differ.

Can We Hang Them? Please?

Via, this. An Early Day Motion.

EDM 982

Burgon, Colin

That this House commends the achievements of Fidel Castro in securing first-class free healthcare and education provision for the people of Cuba despite the 44 year illegal US embargo of the Cuban economy; notes the great strides Cuba has taken during this period in many fields such as biotechnology and sport in both of which Cuba is a world leader; acknowledges the esteem in which Castro is held by the people and leaders of Africa, Asia and Latin America for leading the calls for emancipation of the world\’s poorest people from slavery, hunger and the denial of human rights such as the right to life, the right to shelter, the right to healthcare and basic medicines and the right to education; welcomes the EU statement that constructive engagement with Cuba at this time is the most responsible course of action; and calls upon the Government to respect Cuba\’s right to self-determination and resist the aggressive forces within the US Administration who are openly planning their own illegal transition in Cuba.


Colin Burgon

Trickett, Jon
Cruddas, Jon
Gibson, Ian
Clapham, Michael
Mudie, George
Hopkins, Kelvin
McDonnell, John
Cryer, Ann
Abbott, Diane
Taylor, David
Riordan, Linda
Price, Adam
Skinner, Dennis
Heyes, David
Iddon, Brian
Jones, Lynne
Llwyd, Elfyn
O\’Hara, Edward
Campbell, Ronnie
Caton, Martin
Corbyn, Jeremy
Dismore, Andrew
Flynn, Paul
Francis, Hywel
Hamilton, David
Battle, John
Clark, Katy
Devine, Jim
Prentice, Gordon
Purchase, Ken
Sheridan, Jim
Singh, Marsha
Holmes, Paul
Hood, Jim
Hoyle, Lindsay
Humble, Joan
Lepper, David
Murphy, Denis
Owen, Albert
Cohen, Harry
Crausby, David
Dean, Janet
Dobbin, Jim
Drew, David
Efford, Clive
Etherington, Bill
Grogan, John
Hamilton, Fabian
Austin, John
Begg, Anne
Taylor, Dari
Wood, Mike
Anderson, David
Davies, Dai
Buck, Karen
Caborn, Richard
Challen, Colin
Cook, Frank
Sharma, Virendra Kumar
Simpson, Alan
Havard, Dai
Kilfoyle, Peter
Mackinlay, Andrew
Mitchell, Austin
Chaytor, David
Davidson, Ian
Galloway, George
Turner, Desmond
Salter, Martin
Vis, Rudi
Slaughter, Andy


A Conservative administration would increase health spending by up to an extra £28 billion a year, a leading moderniser has told The Times. Andrew Lansley, the Shadow Health Secretary, gave a long-term commitment that under the Tories health spending will rise to take up an extra 2 per cent of GDP.

Is Lansley still under the delusion that the problem with the NHS is a lack of money? I thought we\’d just tested that theory to destruction?

It\’s the way we spend it, not the amount we spend, which is the problem.

Vince Cable: Not a Great Logician

The idea that companies are "overtaxed" is difficult to sustain when leading companies are systematically avoiding tax.

When companies are going to great lengths, involving no little cost and a lot of hard work, to avoid taxation that is of course prima facie evidence that they are indeed being "overtaxed". If they were not being overtaxed they would of course just pay up and not bother, wouldn\’t they?


Guardian leader today:

The most worrying thing about tax avoidance is the corporate thinking it illustrates. Listen to Tesco\’s defence of its hunt for tax havens: it is already paying a lot in taxes, and avoiding giving any more is "our duty to shareholders and customers alike". That philosophy is becoming ever more widespread. Tax avoidance was once the sport of giant multinationals; but in the past couple of years, points out Stephen Herring of BDO Stoy Hayward, a whole tranche of mid-sized companies have got in on the act. Servicing them is the fastest-growing practice at his accountancy firm. Moving call centres offshore or selling more goods over the internet are modern business practices that not only reduce overheads but can also often reduce a company\’s taxes. Avoidance or efficiency or planning – whatever euphemism you use, paying the bare minimum in taxes is becoming part of Britain\’s business culture. That leaves more of the nation\’s tax bill to be footed by the rest of us. In the past decade, while corporation tax has been squeezed, income tax and national insurance has grown as a proportion of the country\’s tax take from 42.9% to 47.6%.

The most worrying thing is that The Guardian seemsnot to know the most basic thing about corporation tax. Sure, companies hand over the money but the actual burden isn\’t carried by them. It\’s carried by some combination of workers in the form of lower wages, investors in lower returns and customers in higher prices. That is, we already pay it. And according to the studies into tax incidence, it\’s the workers who get screwed the most.

These people really do have to stop listening to Richard Murphy.

Mary Riddell

In the Telegraph? What next? Polly and Mahdi following her?

…our big-bonus City bosses provide awful role models.

So, people who work all the hours God gave to finance industry, the thing which creates the wealth which is dragging hundreds of millions up out of destitution, who pay themselves a percentage of the value they create rather than a fixed fee, these are bad role models?

Dodgy Numbers

Gotta love this:

Under the new contract, responsibility for out-of-hours care automatically went to primary care trusts and as a result GPs, including part-time doctors, now work an average of 36.3 hours a week.

The piece has all sorts of numbers in it: £250k a year pay! and then that 36.3 hours a week. But look at the weasel "including part-time doctors". So what\’s the working week if you take out the part-timers?

I would assume that the average working week, as calculated including part timers, will have been declining for the last couple of decades actually. The medical profession, including GPs, is becoming increasingly feminised. There are thus many more part timers, those with young children etc.

Still, at least the Fawcett Society will be happy: someone is creating those high value part time jobs after all.

No, Not Hypocrisy

Ministers have been accused of "rank hypocrisy" after it emerged that a third of Gordon Brown\’s Cabinet are campaigning against Government plans to axe post offices in their own constituencies.

This is entirely rational: it\’s because they are working in two roles.

On the one hand they are constituency MPs, beholden to that small subset of the 50-70k voters in said constituency who ever put their heads above the parapet and say anything about anything.

On the other they are the guardians (hollow laughter: they\’re supposed to be) of the taxpayers\’ money in general and are supposed to look at the general picture.

The incentives on the first are that they do as said vocal constituents desire: they are, after all, their representatives. On the second, got to cut this waste of the taxpayers\’ money.

Sure, they ought to be telling the locals that they\’ll just have to suck it up for the general good: put that\’s political cowardice, not hypocrisy.

What an Excellent Idea

Time was when the left was well aware of the dangers of people seeking to use elected office for their own financial gain, and raised the demand that MPs should be paid no more than the average wage of their constituents.

No, truly. Inspired. So your average Labour MP, representing some chavvy gehtto would be paid the benefits rate while theTory sitting for The City and Westminster would be on £250 k a year.