Larry Elliott on Corbynomics

Well, yes:

Another policy/option is to fund a national investment bank by slashing the state’s £93bn bill for corporate tax reliefs and subsidies. This sounds wonderful, but careful scrutiny of “corporate welfare” shows that it includes capital allowances designed to persuade companies to invest, regional aid to boost growth in rundown parts of the UK, and subsidies to keep bus and rail routes open – none of which Corbyn would presumably like to see stopped.

In other news, that sociologist, Farnsworth, is ignorant of what he speaks.

54 thoughts on “Larry Elliott on Corbynomics”

  1. ” If there was a magic money-tree for Corbyn to shake, George Osborne would probably have shaken it by now.”

    Quite.

  2. Theo

    Yet in the same comments section is this wonderfully withering put down by MaratAmiduPeuple:-

    “A belief in New Monetary Theory, which is what Corbyn is essentially talking, is another New Age mania…
    The basic argument being offered is that government deficits are unreal…
    In the past, idiots have thought that the only way a government could spend more was to raise funds by borrowing. However thanks to New Monetary Theory we now know this is not true. You can raise and spend as much as you want without borrowing and with no need to pay anything back….
    All you do is print money. But because this evokes bad memories, you call it something different. Its now called ‘peoples quantitative easing’. This discovery has been one of the great discoveries of our age and one hopes that those responsible get Nobel prizes. It is going to improve the lives of people everywhere more than anything since the discovery of electricity, which was not such a great thing anyway and is now destroying the planet due to global warming, but I digress.”

    Richard Murphy, Nobel Laureate

  3. Theo,

    It’s a good article.

    “This hasn’t stopped 35 economists putting their name to a letter of support for “People’s QE” … I have to confess to knowing of only two of these economists … A brief half an hour on Google none the less reveals virtually all of them to be of notably Left-wing persuasion. What is certain is that they cannot know much economic history to think “People’s QE” a sensible way of proceeding.”

  4. In the Telegraph article linked by Theo, there’s a poll for who is best placed to stop Corbyn. I voted for Ellen Ripley.

    “I say we take off and nuke the entire site from orbit. It’s the only way to be sure.”

    The entire site being Westminster of course when there’s a nice fully attended debate.

  5. PF
    Jeremy Warner is often good value, and one of the very few good writers at The Telegraph.

    As for the 35, only two of these economists are at decent universities — Leeds and UEA. The rest are at SOAS, and elite institutions like the universities of Greenwich and Kingston (where the former and unlamented blogger, Sunny Hundal, now ‘teaches’).

  6. It should be noted that £44bn of that £93bn is depreciation expense tied to the purchase of plant and equipment. Eliminating the depreciation deduction would result in plant and equipment being fully expensed at the time of purchase (or during construction, in the case of plant) rather than expensed over the life of the asset.

    How depreciation qualifies as a tax giveaway is rather confusing, and if Corbyn and his gang are simply going to end depreciation in the tax code, I’m fairly sure the end result will not be to his liking.

    Has anyone checked with Murphy about this?

  7. You could get 35 economists signing a motion for everyone to dig worms out of the ground and eat them. It means feck all.

  8. DTP

    “Eliminating the depreciation deduction would result in plant and equipment being fully expensed at the time of purchase (or during construction, in the case of plant) rather than expensed over the life of the asset.”

    It’s capital allowances (in the tax code) rather than depreciation, but yes, where capital expenditure is a major item of cost within a business, removing CA’s (tax relief on capital expenditure) would obviously be a major disincentive to invest.

    But the solution to that is Corbynomics isn’t it?

    Because of course we are talking (with large capital investments) about “infrastructure”, and if the private sector can’t now do it, then PQE will have to take up the mantle?

    The Curajus State rides to the rescue…

  9. Sorry about the terminology mixup; here in the USA there is no such thing as a capital allowance… In the IRC it’s called depreciation.

    The Labour Party seems to be moving in the direction that labor is in the USA with the Democrats. Labor leaders here still support Democratic candidates despite their opposition to labor friendly policy initiatives such as the Keystone pipeline.

  10. Interesting, I didn’t know that.

    In the UK, depreciation is simply the accounting treatment (useful life and all that), and which is independent of the tax treatment, hence depn is always added back and CA’s then deducted (according to asset type / other rules) in the tax comps.

    Mainly just timing (but not always) re net effect after x years.

    But yes, same thing in effect for this purpose, as in a really dumb idea if Corbyn thinks he might remove the tax allowance side! Unless, as I say, it’s a subtle ‘feature’…

  11. @Theophrastus

    A bit of a stretch to claim Leeds or UEA as serious universities.

    UEA is ranked 213th in the world econ departments.

    https://ideas.repec.org/top/top.econdept.html

    Leeds, SOAS and the other places dont make into the top 254…

    And the guy from UEA isnt part of the economics department.

    But there was one who is emeritus at UCL, which is 18th on the list. A Post-Keynesian. Most of them appear to be at former polys. There is one at Queen Mary, which is surprisingly at 111th on the list. (but he is in the school of business and management).

  12. Seems to me you guys portray your objections to spending on social insurance as part of a more general objection to government involvement in the private sector. So you’re supposedly anti-government on the one hand but are happy to use the ‘heavy hand’ of government when it suits your purposes [eg. corporate welfare]

    Seems to me your objection is really about who you see as the deserving and the undeserving. So you believe that corporations, the so-called ‘1%’ deserve the help they get, for the most part, while the ‘99%’ for the most part, do not. To me, as a leftie, that’s ass backwards.

  13. KJ

    Are you taking Kevin Farnsworth’s “calculations” on so-called corporate welfare at face value?

    Stupid boy! I suggest you take a closer look at his credentials as an economist. (Clue: he doesn’t have any).

  14. PF –

    In the U.S. there is book (accounting) depreciation and tax depreciation. One is GAAP/IFRS and the other is IRC (Internal Revenue Code). For all intents and purposes, U.S. tax depreciation is the equivalent of your capital allowance.

  15. @ Andrew K

    No Dean Baker actually. Have you read his book “The Conservative Nanny State: How the Wealthy Use the Government to Stay Rich and Get Richer”. I can highly recommend it. But I guess you’re now going to rubbish his economic credentials as well. Which really would make you look very ‘silly’….

  16. KJ –

    Farnsworth’s numbers are shit… and if he knew anything about economics or accounting he wouldn’t be pushing them. It isn’t so much that I object to the reduction of corporate welfare (because I don’t), what I object to is Farnsworth being so illiterate about the subject he’s writing about that he can’t avoid making obvious – and laughable – mistakes.

    As to Dean Baker, there’s nothing wrong with his credentials. Invariably it’s his analysis of the problem and conclusions he draws from that analysis that sucks.

  17. “As to Dean Baker, there’s nothing wrong with his credentials. Invariably it’s his analysis of the problem and conclusions he draws from that analysis that sucks.”

    Well, I’d wager that in an economics debate, Dean Baker would wipe the floor with each and every one of you without breaking sweat.

  18. KJ
    Could you let me have a page reference for that £93bn figure in the Dean Baker book? I am unable to find it there.
    Thank you.

  19. “Well, I’d wager that in an economics debate, Dean Baker would wipe the floor with each and every one of you without breaking sweat.”

    Perhaps, but only if (a) you didn’t listen too closely to his arguments, and (b) because his arguments tended to support your already-impervious-to-facts belief system.

    In any event, it’s worth noting that if Dean Baker was any good, he wouldn’t have the time to be writing for every lefty web site in the USA… He’d be doing actual policy work with the sort of people who have the power and/or influence to make a difference. Much like Robert Reich, the fact that Baker has a lot of time on his hands speaks volumes as to how seriously the do-ers in public policy take him.

    The fact that he’s done nothing more than noodle around on a keyboard during the Obama Years tells you all you need to know about Dean Baker.

  20. KJ –

    Did Baker’s book have chapters on Bill/Hillary and the Clinton Foundation? Or Harry Reid?

    Of course I already know the answer… If he had he wouldn’t be welcome to blog at HuffPo, now would he?

  21. Meanwhile, you noodle around on a keyboard posting disparaging remarks about someone… noodling around on a keyboard…

  22. KJ
    The courtesy of a reply to my question would be very welcome. Heaven forfend that you are winging it and the figure is not there.
    Are you confusing Kevin Farnsworth and Dean Baker perhaps? An easy enough mistake – the names are similar.

  23. KJ

    “Seems to me you guys portray your objections to spending on social insurance as part of a more general objection to government involvement in the private sector. So you’re supposedly anti-government on the one hand but are happy to use the ‘heavy hand’ of government when it suits your purposes [eg. corporate welfare]”

    Before we go meandering around which blogger we think is great and which writer we think sucks, perhaps you could tell me what YOU mean by “heavy hand of goverent” and “corporate welfare”. I’m afraid I don’t recognise any of it in anything anyone has said.

  24. What is “corporate welfare”? Can you define it, give examples, figures, references? I have no idea what it is.

  25. “happy to use the ‘heavy hand’ of government when it suits your purposes [eg. corporate welfare”

    Not taxing is not the same as providing welfare.

  26. Andrew K –

    The numbers are Farnsworth’s, not Baker’s. If memory serves they were published in the Guardian a week or so ago. I have little regard for Dean Baker, but he is a competent economist. I doubt he would try to characterize capital allowance/tax depreciation a corporate welfare. At least I hope he wouldn’t.

  27. Tomsmith

    Don’t help him!

    He’s a Corbynista with a new phrase to repeat ad nauseum; he can’t begin to tell you what the words actually mean.

  28. Dennis the Peasant

    I am well aware that the numbers are Farnsworths, and have been in touch with him about them. The man is shameless.

    I know more, of which I will not speak at the moment as I wish to dob him in with the Uni.

    Incidentally, Ritchie has confirmed in comments on his blog that he is working with Farnsworth, or at the very least talking to him.

  29. Corporate welfare is essentially tax giveaways to, er, corporations. Thought that would be obvious. I’ve often found it curious how the government can collect and disclose finely detailed data on how much tax money goes to the disabled, the poor, and the elderly, and to educate the young etc.. But when it comes to welfare for big business, it just cannot seem to find the resources to gather and analyze the costs. I wonder why that is?

  30. KJ
    Because the notion is bollocks, devised by a sociologist.
    Now can I have that fucking page reference please? I am losing patience.

  31. Calm down dear boy, you’ll do yourself a mischief. I didn’t say I had a reference for a specific figure, just that I gleaned some general information about corporate welfare from DBs book.

  32. However, if you insist on me providing a reference for a figure. Well Baker shows in his book “The End of Loser Liberalism,” that patent protection is worth hundreds of billions of dollars a year to the drug industry alone.

  33. KJ
    So in other words Baker’s magnum opus has little if anything to do with the matter at hand, and you are winging it by mentioning an author whose name you think will impress (this is the logical fallacy known as the “appeal to authority “) and whose book you clearly have not read (another logical fallacy: “being a bit of a wanker”).
    QED

  34. KJ

    Thanks for showing us you really don’t understand what you are talking about. “Tax Giveaways? Really?

    The default position is no tax. The government doesn’t charge tax; companies go about their business.

    1.CT is taken from companies, the calculation being based upon a measure of their profits. If the goverent charges less tax on that profit, it IS NOT AND CANNOT BE welfare.
    2. Their profits – by every accepted accounting standard – is after interest and depreciation. If a government doesn’t allow depreciation but instead operates a system of capital allowances then that CANNOT BE welfare.

    Now, you silly little over-indulged frat boy, why don’t you go back to occupying Wall Street. Or better still; get a job! One that requires a bit of training.

  35. “Incidentally, Ritchie has confirmed in comments on his blog that he is working with Farnsworth, or at the very least talking to him.”

    Well, that would explain why Farnsworth doesn’t understand the concept of capital allowance/tax depreciation.

  36. “I’ve often found it curious how the government can collect and disclose finely detailed data on how much tax money goes to the disabled, the poor, and the elderly, and to educate the young etc.. But when it comes to welfare for big business, it just cannot seem to find the resources to gather and analyze the costs. I wonder why that is?”

    In the USA the IRS and Treasury publish all the data required to such an analysis, and both very often do such analysis themselves. The other places were you can find such analysis is OMB (Office of Management and Budget) and CBO (Congressional Budget Office).

    As with the USA, I’m sure everything you’d require for the Empire is out there, and probably on the internet, you just have to have a bit of training and a little brains to find it.

  37. “Well Baker shows in his book “The End of Loser Liberalism,” that patent protection is worth hundreds of billions of dollars a year to the drug industry alone.”

    And you couldn’t have provided a better example of why policy makers in the Democratic Party have never taken Dean Baker seriously.

    Patent protections provide several huge benefits to the general public… which is why they are in place.

    The first should be obvious even to a lefty; patent protection encourages the development of new drugs, which is a hideously expensive (and high risk) proposition. Want to empty the new drug pipeline and significantly lower research and development? End or curtain patent protection. And what goes away? Corporate profits as well as new drugs to combat everything from HIV to Ebola to cancer.

    The second reason for patent protection is more subtle, and is also a matter of public policy: Patent protections allow drug companies enough revenue from First World sales to take losses on Third World sales. The fact that the average African (or African government) cannot afford the newest medicines is partially remedied by drug companies supplying those drugs either at cost or (more often) at a loss. The higher prices charged in the USA are, in part, an indirect subsidy to the Third World recipients of the drugs. The fact that this quid pro quo exists isn’t exactly a secret.

    Dean Baker is well aware of all this, but choses to ignore it because like most progressives, the sick, the poor and the non-white are, as Thomas Sowell has pointed out, only there to serve as mascots.

  38. I wouldn’t personally say that corporate welfare is always *necessarily* a bad thing. Some of these giveaways arguably do a lot of good. But I guess my general point was that companies that benefit from these policies are just as dependent on the government as the guy who gets the working tax credit. And, when Conservatives concentrate their fire on the latter rather than on the former, it makes me wonder if their problem isn’t with government assistance per se, but only with government assistance to poor and working people. I mean, they may say that they want small government, but what I suspect they’re often really pushing for is a government that’s small when it comes to helping people and big when it comes to helping business

  39. KJ,

    It’s not “corporate welfare”, as Ironman and various others have tried to point out to you. How many times before you think you might start to question this / think and try and understand it?

    If you have zero comprehension of numbers (or any form of analysis whatsoever), then sure fine – but otherwise I am not sure what you think you are trying to achieve here?

    And if you really are completely clueless on this (rather than just having a laugh!?), come back and I’ll try and explain it with a very simple “dummies profit and loss” to try and make the point a little more clearly? Though if you really don’t get numbers at all, it might all be a bit pointless?

  40. “But I guess my general point was that companies that benefit from these policies are just as dependent on the government as the guy who gets the working tax credit.”

    Really? That’s quite the broad assertion, isn’t it? Would you happen to have something in the way of analysis to back that up… from Dean Baker perhaps?

    In the case of the drug companies, an elimination or reduction of patent protections simply means that they adjust their R&D and their product mix to produce drugs that have lower development costs and/or carry less risk of failing to get regulatory approval. On a practical level that means several things: 1) Fewer “niche” drugs (drugs treating a relatively small percentage of the population) and 2) Fewer donations or sales below First World market prices to Third World populations.

    Over time a drug company will adjust its product mix and R&D to ensure the rate of return to investors is close to the rate of return enjoyed when patent protections were in place. That’s what companies do… adjust to changing circumstances and incentives in the marketplace.

    Drug companies aren’t dependent on “corporate welfare”. They are responding to specific tax incentives offered them by policy makers in the furtherance of specific policy goals that benefit the general population (as well as the drug company)… Those goals being 1) more R&D, 2) more niche drugs, and 3) cheap drugs for the poorest populations. Removing the incentives means that the policy goals go unfulfilled, not that the company then collapses into bankruptcy.

  41. The sort of literal analogies that occur to me, ie if one was to try and link the corporate idea with personal, with regard to actual ‘welfare’ (rather than charging less or more tax), might include for example:

    Working tax credits – being a sort of “reverse VAT”, you manage to sell 100 so government gives the company an extra 20, because 100 isn’t nearly enough to cover its outgoings (so it’s not even a reduction in VAT, from 20% to 10% say, but a “refund” of VAT pro rata to sales, because its customers (employers) didn’t buy (pay) enough..!?).

    Unemployment benefit – being “we didn’t make any sales this month, government, can you please pay us some money to help cover our outgoings”

    Etc…

  42. Here in the UK there were anu number of numbskulls like KJ insisting that in-work benefits were a subsidy to employers, “corporate welfare” to KJ’s open (meaning vacant) mind. So our very political chancellor reduces them, increases the minimum wage to a ‘nation living wage’ and unemployment will follow. Not unemployment for the affluent Occupy types, but for real people.

    KJ you are a stupid little arsehole.

  43. Ironman

    Reading the comments above, and carefully, I don’t believe KJ ever made the case for governments giving companies benefit through the process of personal welfare…

    I understood his comments in the vein of “But I guess my general point was that companies that benefit from these policies are just as dependent on the government as the guy who gets the working tax credit“…

    Are you ‘helping’ him..;)

    “political chancellor” – that’s extraordinarily polite.

  44. Ironman

    I don’t remember asking for your opinion but since we’re sharing our thoughts..

    I think you should go fuck yourself

  45. @KJ, I like you idea of “paying less tax”=welfare.

    Just think of the massive gift welfare that occurs in the UK due to there being no gift tax. I calcuate that the loss to the treasury is at least 120B on christmas and birthday presents alone. And then another 83M on cars given for getting good A-level results.

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