And in today\’s Ritchie we get…..

When private sector financial services have so obviously failed and when the private sector is sitting on tens, if not, hundreds of billions of cash it has not a clue what to do with it is very obvious that paying the private sector to manage the projects we need to fund our economy, to allocate the investments that small business needs and to set long term economic priorities, on which subject they have no expertise or experience since all have been reduced to the decision making ability of the market trader, would be economic madness.

That’s why I argue we need to ensure that some of the wall of money sent into pension funds each year – just a quarter of it – be diverted instead into making real investment for the benefit of the future of this country so that those for whom those funds are supposedly invested have the prospect of a job until retirement. Second, they need to see that they’ve invested in something that their children can use and therefore pay them for – because that’s the basis for the fundamental economic contract which almost all private sector pension fund arrangements now quite explicitly ignore.

There is at the core of our economy a void right now. It’s a void because there is no demand. It’s a void because there are no new jobs. It’s a void because there’s no real investment. And there’s a void because there’s no real thinking on how to solve all three problems at once without breaking the bank.

It\’s lovely, isn\’t it? Just spend the money on the things I think are important and your pensions? No worries!

But, as ever, he\’s missing the damn point. Our question isn\’t \”where does the money come from?\” its\’ \”how does the money make money?\”.

So, let\’s agree, there\’s lots of pension money, lots of corporate money, out there not doing very much.

We\’d like it to be doing quite a lot so agreed, let\’s think about ways that we can get it to do so.

Ritchie\’s offering is the Underpants Gnomes.

1) Force Them!

2) ???

3) Profit!

There\’s no mechanism, no part 2), which allows profit to be made after we\’ve forced them to stick the money into these infrastructure investments. So forcing them won\’t lead to 3) the profts.

However, we could set up a 2), a structure for them to profit. We could allow tolls on roads. That\’s only an example you understand….but we\’ve got to provide the 2) for the plan to be able to work.

As we have done for windmills for example: yes, leave aside whether they\’re sensible at all and look just at how they did get the private money into them.

They set up a ways, ROCs and FiTs, so that we had a step 2) so that they could make money. At which point we didn\’t have to force anyone at all: in fact, we\’ve had to limit access to those profits as the wall of money came charging in.

All of which is why Ritchie\’s scheme is insane: there\’s no step 2) in his plan and if there is a step 2) then you don\’t need to do the forcing.

On the same subject but in a different piece he gives us:

Second, let’s get real: most small businesses employ just one person – and that’s the owner. there’s nothing wrong with that. But candidly it only suits some people, those not inclined to it should not try it, and those who are naturally tend to do it anyway. We don’t need to encourage entrepreneurship.

Oh, good. We\’ve just abolished incentives and their effects at the margin. but yes, I keep forgetting. Ritchie doesn\’t believe neo-classical economics so he doesn\’t believe that things happen at the margin, does he?

But jobs need to be taxed, fairly and properly so let’s not ask for tax favours for small business.

Jobs need to be taxed? What?

I can get incomes need to be taxed, get capital returns need to be taxed, but jobs? This is the man who says that unemployment is one of the great crimes of our times and he wants to tax jobs? Eh?

And capital could come in then as a flexible profit and equity sharing arrangement with lenders – as is really needed, with much less complexity than now.

Erm, if you\’re in a profit sharing and equity relationship then you\’re not in one with a lender. You\’re in one with an investor. Lending is debt, investing is equity.

And let’s not pretend that banks and business angels are going to supply this new capital – a new state invetsment bank needs to do that – funded using 25% of all pension contributions paid in this country as a condition of the tax releif  given on them. This would transform small buisiness capuital. We wouldn’t be making a few million avaiulable as Osborne wants: we’d make all the capital needed available.

And there it is: your pension is now going to be invested in the capital of start ups. Essentially, he\’s insisting that you get your pension through the medium of venture capital. Something which is going to be really, really, interesting, given his hatred of markets in second hand securities. Because without those secondary markets you can\’t sell out to buy an annuity, can you? Can\’t realise the capital value of your investments?

And this just in from the PCS paymasters:

And lastly as a matter of course make sure tax offices are open in all population centres of more than 30,000 people so people can go for HMRC advice whenever they need it.

Isn\’t that just amazingly lovely?

There\’s around 12,000 post offices for 65 million people: 5,000 people to a post office. So we need a tax office for 30,000 people. That\’s 2,000 tax offices then.

As of 2009 HMRC had 75,000 or so staff.

To staff a tax office (so you can drop in at any time! would require evening working etc) you\’re going to need, what, 5 or 6 people? Ah, no, sorry, forgot, 20 -30, eh? Manager, couple of junior managers, they\’ll have personal staff, need back office peeps, diversity training, that special person who teaches them how to mumble on the phone.

Yes, I think he might have managed it! Come up with a proposal to double the number of jobs for PCS members.

Amazing really: Ritchie\’s just so damn cheap, isn\’t he? Selling out for so little?

9 thoughts on “And in today\’s Ritchie we get…..”

  1. Thank the Lord my pension funds are in Spain.

    Out of reach of his unhealthy hands.

    This must be another one of his little ideas that he ‘hasn’t had time to think all the way through yet’

    Does he not see any downside to his great scheme?

    How about this simple one?

    You give me relief (legally ‘cos you are the govt. and you want me to save for my old age) and I put money there. Move the goal posts, change the ball and make me play against Man. Utd without shinpads and I’ll put it somewhere else.

  2. Oh, and I just loved the job creation scheme.

    Just what western Europe needs. More state-funded? ’employment’. Should solve all the problems.

    Productive economy? Way to go Mr. Murphy!

  3. Richieis planning the biggest heist in history.

    If you are in your thirties, you have to ask yourself a question: what are the odds of the State stealing your pension within the next thirty or so years?

  4. paying the private sector to manage the projects we need to fund our economy…would be economic madness.

    Aye, because state-managed projects work out so well from an economics perspective!!

    And what manner of idjit thinks projects “fund” something?!! Projects require funding, not the other way around.

  5. I’m confused. What sort of advice would so many people be looking to get from HMRC? I run a business and hardly ever speak to them, nor do I need to: most of the advice is either online or in computer programs, and even then most of it doesn’t apply to most people. The suggestion seems a little weird to me.

  6. Oh, wait. Ritchie’s some sort of accountant, isn’t he? Perhaps that’s it. He enjoys his chats with HMRC and thinks others might benefit too. But that doesn’t make sense either. If there’s that much unsatisfied demand, why doesn’t he start a business offering tax advice or even pleasant chats, and make a little money?

    Tim adds: The clue is that Ritchie is a paid propagandist for PCS: the union to which most tax officers belong.

  7. CHF, actually they are generally helpful if you ring them up. I have asked questions about VAT sometimes. However if the question is at all tricky then different staff give different answers.

  8. “The clue is that Ritchie is a paid propagandist for PCS”

    Ah! Thank you. That certainly does explain everything. I realised later that I’d somehow confused him (I think) with Richard Murphy.

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