Deciding about PQE

But almost everything about ‘QE for the people’ is silly

Hmm. By:

Tony Yates is Professor of Economics at the University of Birmingham and a former Bank of England macroeconomist.

As against the retired accountant from Wandsworth (one who specialised in tax accounts for luvvies), now 0.2 of a Professor, who says:

You’re a neoliberal troll for disagreeing with my idea, an idea which is mine and I thought it up and me and this is your last comment here.

It’s a toughie that one, isn’t it?

It is indeed true that they laughed at Einstein but then they also laughed at Bozo the Clown.

25 thoughts on “Deciding about PQE”

  1. All you need to know is that it starts “People’s” — like the People’s Democratic Republic of North Korea, or the People’s Liberation Army.

  2. Does Tom Wells read this blog I wonder?

    One of the next topics has to be Murphy’s funding. The Friend’s Provident Foundation political neutrality stance can’t possibly live along side the grant they have given to Murphy.

    Also Murphy’s demands for tax transparency for everyone except himself would be worth a chortle.

    And his LLP which is an LLP in name only as his wife does nothing (surely it’s not an ‘artificial structure’ designed to make him qualify for the FPF grant as FPF don’t give grants to sole traders…….)

    Ha ha

  3. I still don’t get this whole PQE thing. I get the National Investment Bank bit, and it borrows money by issuing bonds which are then bought by the BoE using printed cash. But what does it do with the money its then got? Does it just dole it out as free grants to whoever wants to build an old people’s home, or hospital extension? Does the money given out have to be repaid? With interest? Or is it just free money to build whatever they like? And what about running costs? Its all very well building loads of shit, buildings and the organisations that use them have ongoing costs. How are public bodies to pay for those? Or is the NIB going to fund day to day running costs too? If they are repayable grants/loans, how are the borrowers going to make a cash return on ‘social ‘projects to repay the money? What happens when the economy is flying along on this raft of free money, and needs slowing down, do they just turn it off dead and make everyone redundant?

  4. One thing that caught the eye was the statement relating to PQE that it is the job of the BoE to deliver two per cent inflation. For those of us with vivid memories of the 60’s and 70’s and the idea of three per cent controlled inflation the dangers involved in more complex financial global conditions never mind what exactly is inflation when the shadow economy might be greater than the perceived one never mind property etc.is deeply worrying. PQE could be the agent of a major collapse.

  5. Jim: You’ve exceeded your monthly allotment of question marks and you’re going to have to apply for another round of People’s Question Endorsement grants before you can have those answered.

  6. “You’re a neoliberal troll for disagreeing with my idea, an idea which is mine and I thought it up and me and this is your last comment here.”

    Did he really say that?!

  7. Well the huge gulags he’ll want to build to house all his detractors will create a lot of jobs. I’m sure he’s planning the penthouse suite for our fine host.

  8. “You’re a neoliberal troll for disagreeing with my idea, an idea which is mine and I thought it up and me and this is your last comment here.”

    Has the LHTD murphed into Anne Elk?

  9. One oar and rowing in circles

    Jim says:
    September 18 2015 at 9:55 am
    Richard – the person who came up with the £93 billion number doesn’t appear to even understand capital allowances in his verbal summary. He implies if a company spends 100 on a truck it gets 110 back from the Government. I really don’t think having this research as a significant part of strategy helps Corbyn’s credibility whatsoever.
    To quote the author:
    “taxpayers not only effectively pay the costs of the entire investment, the government provides an additional ‘bonus’ equivalent to 10 per cent of the total cost of the outlay.”

    Richard Murphy says:
    September 18 2015 at 10:21 am
    If the review is considered the basis of a suggestion to review the use of government subsidy I am happy with it
    I have not read the paper in any detail, to be honest

    Andrew Jackson says:
    September 18 2015 at 12:15 pm
    I have, and I’ve exchanged emails with the author to explain to him how capital allowances work.
    He is trying to establish the extent to which the tax system can be regarded as a subsidy of capital expenditure, but unfortunately the report which gives rise to the £93bn figure rests on a large number of (what I consider to be) misunderstandings about the capital allowances system.
    The most serious of these misunderstandings is that the gross allowances are used rather than the tax effect of those allowances; another is a certain confusion of profit and cash. As the grounds for the calculation (at least to the extent it relates to capital allowances, which is considerable) are extremely shaky, the result of £93bn cannot be considered to be at all reliable.
    I understand the figures are to be revised, and have offered to assist with that, although I haven’t heard anything on that front for a little while.

    Richard Murphy says:
    September 18 2015 at 12:23 pm
    I am not defending the £93 bn
    As I said I have not read the report
    I do think all allowances and reliefs need reviewing

    Ironman says:
    September 18 2015 at 10:51 am
    Capital allowances in the CT regime are not a ‘subsidy’. That is really very simple. Since they make up the lion’s share of the £93m it isn’t “just fine”; it’s a misnomer.

    Richard Murphy says:
    September 18 2015 at 11:30 am
    They are a subsidy
    There is no universal principle of tax relief on capital spending
    It is a choice made by parliament to give them
    And one capable of review as to rates and assets they relate to
    Shall we therefore discuss the real world – not your make believe?

    Jim says:
    September 18 2015 at 10:53 am
    Sure – review seems reasonable (and as you say should be done by any chancellor on an ongoing basis).
    But my point is trumpeting the report as some kind of Ace card as politicians seem likely to do is a mistake. Even if the figures are correct, the commentary will just lead to significant credibility issues in my opinion.

    Translation: I am happy to use those spurious figures, but only to an audience with no understanding of the issues.

  10. Murph says: ” There is no universal principle of tax relief on capital spending”

    Is there a country anywhere that doesn’t allow a business to expense capital purchases in their accounts to off set against tax… or have I missunderstood the arguement?

    I’ve only done accounting 101 so I’m far from an expert but I understood him saying that if your business buys a truck its a subsidy depreciating it as an expense. Not to mention he seems to think you get the whole cost of the trunk plus 10% back rather than the tax %???

  11. Jim, at one point RM was claiming the NIB wouldn’t give loans or grants. I think the thinking (for want of a better word) was that the NIB would not just fund but manage the project. Richie’ll Fix It, or something like that.

    Throw in the pensions and you’ve got out retired luvvy accountant merrily strapping together economic-cycle money-printing, electoral-cycle political control, long-term liabilities and large-scale project management (with some nice feedback loops from planning and regulatory arms of govt) – and claiming he knows what he’s doing.

    I’ve got the phrase ‘ putting all your egos in one bastard’ running through my head for some reason…

  12. DJ

    Given that the construction sector in the UK seems to be overheating already, he might have to bring over all those guys who built the original gulags.

  13. Tim,

    Have you contacted The Sun to offer to write anything for them? They seem to have decided that anti-Murphy snark is worth publishing, and you might just be the world expert in that. Pitch a weekly “Murph’s a fuckwit, and here’s why” column to them.

  14. @S2

    Not a bad idea. It would be easy to choose a couple of Murphy’s howlers each week, debunk them and get an expert in the field to sign off that Murphy was wrong.

  15. Dongguan John:

    Is there a country anywhere that doesn’t allow a business to expense capital purchases in their accounts to off set against tax?

    On some things, the UK. You can’t claim depreciation on a building, for example.

    But that doesn’t alter Ironman’s point that corporation tax is a profits tax. It’s just that tax sometimes takes a different view as when you should recognise income and expenditure. On buildings, for example, you recognise gains and losses for tax only when you sell the building, while accounting says (broadly) you recognise gains when you sell but losses immediately whenever the building loses value.

  16. “Manhattan Brit

    Dongguan John:

    Is there a country anywhere that doesn’t allow a business to expense capital purchases in their accounts to off set against tax?

    On some things, the UK. You can’t claim depreciation on a building, for example.”

    …you could claim capital allowances (RDAs) if you were using the building for R&D and at a rate of 100% at that.

  17. Andrew C: Smartarse 🙂

    Point stands though – as a general matter, the UK does not allow the cost of ALL capital assets against taxable profits.

  18. Manhattan Brit

    The point is tht any variation between accounting rules and tax rules leads to situations where things get bent out of shape. So you can’t claim land and buildings against tax…so set up a property company and lease them instead. In so ,any ways, it would be simpler if the tax authorities just accepted the accounting view of profit as the taxable profit and they got rid of all those “breaks”. So 100% capital allowances encouraged businesses to “invest”…because investment is always a good thing, that a “corajus society” wants. Then you had ACT to encourage companies to pay dividends….etc etc. they just distort economic decisions and I doubt they ever achieved anything.

  19. What sort of expert doesn’t even bother to read the paper they are quoting, and given the main issues are accounting based and he is an accountant with tax experience its at least in an area he should understand himself without waiting for someone to write him a for dummies edition

  20. “They” never laughed at Einstein.

    Most people who knew physics deeply were amazed. Stunned. They gave him a Nobel prize as quickly as they could. A few minds were perplexed and didn’t want to agree with the conclusions, but laughter wasn’t an option.

    Some non-trained dogmatics, Nazi and Soviet in particular, refused to accept it purely on the basis that most of the discoverers of quantum physics were Jewish. I can’t help thinking of people who shout “neo-liberal” every time someone discovers some aspect of economic theory that isn’t collectivist. (Not that the far right doesn’t ignore anything that shows governments out-perform the private sector in a few select areas.)

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