Skip to content

Tim Worstall

I know, I\’m sorry,

Two in a day on Ritchie.

Discussing the normal distribution:

Yes, that’s the normal distribution – a widely recognised statistical phenomenon. As Wikipedia says of this diagram:

Dark blue is less than one standard deviation from the mean. For the normal distribution, this accounts for about 68% of the set (dark blue), while two standard deviations from the mean (medium and dark blue) account for about 95%, and three standard deviations (light, medium, and dark blue) account for about 99.7%.

What this says is that if you observe a phenomena (almost any phenomena) most results cluster around something that might be called normality. But there will always be so data which is way out of the normal range.

Now I don’t ignore stuff way outside the normal – Black Swan theory teaches the importance of that – but equally, and quite candidly, the vast majority of the time we can identify the outliers in any population (like toll roads and Catalonian anarchists) and say they are absolutely irrelevant to the formulation of policy that is likely to have any consequence for real people right now living their lives in the normal range of expectation. Or to put it another way – we can safely ignore this stuff.

So we can safely ignore the stuff that\’s two more more standard devations from the normal can we?

Good Oh. So what the top 2.5% of society earns or how they are taxed is something we can safely forget about then.

Good, glad we\’ve got that sorted.

In which we are challenged by Richard Murphy

A couple of days back I pointed to our favourite retired accountant\’s pieces in The Observer. They seemed very much like advice on how to avoid tax. Nothing illegal, of course, this is avoidance, not evasion. Just every Englishman\’s legal right to reduce his taxable income in the manners and ways which Parliament has approved.

Richard\’s answer was that, well, they were written to show how tax could be avoided and thus to spur the authorities to close down such possibilities. That\’s what I take from his response at least:

The first was written because I could think of no better way of killing a scheme then being promoted on the professional lecture circuit than to give it publicity. I didn’t have blogs etc in those days. It worked. I call that a success.

OK, you can make up your own minds as to the efficacy of that explanation. It produced a mild fit of the giggles in me but reactions may vary. In that comment he says:

But keep whistling if you want to find dirt Tim – because you won’t

The thing is, that challenge inspired one reader to go looking and via Companies House we find: well, actually, what we find is that Richard Murphy has been exercising that legal right of every Englishman to reduce his taxable income using the manners and ways which Parliament has approved.

So let us return to those Observer articles. This one, the fifth that I highlighted. It tells how you can, if you are in certain fortunate positions, incorporate yourself as a provider of services. Yes, there is corporation tax to pay on any profits, there are accounting expenses. However, once you\’ve paid the corporation tax there is no more basic income tax to pay when you pay those out as dividends and of course dividends do not attract national insurance payments.

As he says:

But, if the company is run with strong discipline, and keeps good accounts, then dividends can be substituted for most of the salary paid in the previous example. Just enough salary is still paid to make sure that the director is credited with paying national insurance – currently £4,615 – although no national insurance (or tax) is actually paid on this. That leaves a profit of £25,385 in the company on which corporation tax of £3,654 is paid. This is low because the first £10,000 of profit generated by a small limited company is tax-free.

That means a dividend of £21,731 can then be paid. Because that level of dividend does not take the recipient into the higher rate bracket, he or she does not have to pay any additional income tax on the dividend. The only tax paid will be the company\’s corporation tax bill of £3,654, which is £3,581 less than the self-employed person pays.

Quite excellent and Murphy has done us all a favour in explaining how this could be done. However, do note that he says he\’s done this so people can be prevented from doing this:

The fifth follows the logic of 1 and 2 – and was the way I thought I could seeking to highlight an abuse to draw attention to it.

Would I use that method now? No! I don’t need to. Was it the best I could do at the time? Yes, I thought so.

Do I apologise for using the Observer in that way? No!

But keep whistling if you want to find dirt Tim – because you won’t

Not least because a) years before you’ll find articles from me arguing against incorporation.

Note that quite clearly he states that this method of incorporation is an \”abuse\”, that he\’s argued against it for years and that he wrote the article to expose this abuse and thereby, hopefully, lead to it being closed down.

So, what do we find from Companies House about the directorships of one R. Murphy?

Fulcrum Publishing Ltd:

“Publishes original written materials”, seems to have been his old vehicle for paid writing.

Jointly owned 50:50 by Ritchie and Jacqueline Murphy (same address, born 1963, presumably his wife).

Hasn’t traded since 2003, but when it was trading it paid out all of its profits as dividends. Incorporation and taking dividends from the company instead of a salary is a classic tax/NI avoidance strategy – as he set out in his Observer article.

I wonder how much of the company’s work his wife did, or whether giving her shares was just a device to save tax by transferring half of the income to her? Did \”the rewards paid [to her] match the underlying economic substance\” (Ritchie\’s own test of whether incorporation is \”abusive\”)? It seems unlikely that she was generating 50% of the profits from his writing.

It\’s difficult to see what legitimate non-tax reason he would have for incorporation, and (as he said in his reply to you) he regularly argues against incorporation – for other people.

(Via email, so no link).

Now that looks very like income shifting. But, as regular readers of his blog will know his wife is a GP. Working part time, paid pro-rata for her hours and as regular readers will also know they have young children. Now a GP, these days, working even part time, will be a higher rate taxpayer. However, a GP on maternity leave probably wouldn\’t be a higher rate taxpayer. So shifting income from accountant to wife, through the medium of dividends from a jointly owned business, would (or could perhaps, for this part is speculative) reduce tax paid by allowing two personal allowances to be used and two sets of basic rate income tax to be used before the very tippy toppy of the family income would be (possibly) subject to higher rate income tax. And, of course, there\’s the NI savings. Plus, of course, there\’s no corporation tax on that first £10,000 of profits and no basic rate income tax to pay on dividends either.

Perhaps we should turn here to Ritchie\’s report for the TUC, The Missing Billions. Listed as a method of tax avoidance is:

Tax is paid by a person who did not really generate the income that they declare.
For example, income is quite often switched between members of a family to
ensure it is declared by the person with the lowest tax rate even though the
family member in question did not really earn the income in question.

Hmmm.

It is for this reason that Professor David Ulph, formerly of HM Revenue & Customs,
has sought to distinguish tax avoidance from tax planning. To do so, he has said
that tax planning happens when a taxpayer adjusts their real social, economic or
organisational affairs to obtain the “best outcome” in response to the tax system.
In contrast, tax avoidance happens when a taxpayer uses artificial or contrived
methods of adjusting their social, economic or organisational affairs to reduce their
tax liability in accordance with the law while not affecting the economic substance
of the transactions3.
This definition makes clear that tax avoidance is artificial. The purpose of tax avoidance
is to obtain tax relief no matter what the circumstances of the transaction that gave
rise to the tax. Tax planning, on the other hand, is obtaining tax relief for something
you would be doing anyway, or which the Government wishes to encourage. This puts
tax planning firmly within the domain of tax compliance.

OK. We do seem to be still in a grey area as to whether this is tax planning or tax avoidance. It could be either, there could have been, in fact I\’m absolutely certain there was, a reason why a freelance writer would incorporate: other than reduction of tax bills. Similarly, the payment of the income as dividends rather than a salary would not have been influenced at all by the NI savings: recall that Ritchie tells us that the Observer article is not a guide to what to do, it\’s a guide to what is possible and a guide to what must be stopped.

In our list of ways in which tax is avoided from the Missing Billions we get:

1. putting a transaction that an individual might undertake into the name of
their partner or children or alternatively into a company or trust, or in the case of
a company choosing to create a separate subsidiary that enjoys a tax advantage
in a group of companies

OK,

3. paying the income of a director of a company as a share dividend rather than as
a salary so that National Insurance is not paid

Similarly, OK

A little later we get:

What is the cost of individual tax avoidance?
This figure is best estimated by considering the main techniques that individuals use
to avoid tax. These are as follows.
1. Income is reallocated to a person or entity that has a lower tax rate than the
individual whose activity really generates the income. The people or entities to
whom the income is diverted might be:
a. other members of a person’s family e.g. a spouse or child
b. a trust for the benefit of a person’s family
c. a company owned by the individual but taxed at lower rates than those they
might enjoy personally

Something of a restatement of the above.

3. Changing the nature of a transaction so that it appears to be something different
from what it actually is. This is commonplace, the most popular tactics being to:
a. convert income into capital gains, which are almost always taxed at lower rates
b. convert earned income into unearned income such as dividends to avoid
National Insurance charges that only apply to earned income

Umm, yes.

And he calculates income shifting as costing around £1.3 billion in lost tax revenues. Even quotes the Treasury as arguing that:

data published in the pre-Budget Report for 2007 that
at least £250 million a year has been lost from income shifting between spouses
within privately owned limited companies5.

And the dividend thing?

However, it is thought that there are at least 200,00019 (and maybe many
more) companies now registered in the UK that are owned and managed by the one
person who also generates all the income of the company who then substantially
rewards themselves by way of payment of a dividend to avoid the payment of National
Insurance Contributions that would arise. Assuming each of these persons has above
average income, because if they do not there is little or no incentive to incorporate
a company (it being easier to be self employed), the likely distribution from each
company might be as high as £50,000 a year, or £10 billion, a sum within the plausible
range. If this whole sum had been subject to the employer’s and employee’s National
Insurance Contributions avoided in each company, the figure lost probably exceeds
£9,000 per annum, or a total of £1.8 billion.

Now, I have to point out here that absolutely none of the above is in any way illegal. Indeed, I don\’t think that there\’s anything wrong with doing these things at all. The law is what the law is and we all, as Englishmen, have the right to order our affairs to as to reduce, to the legal limit, the invasions of the State into our wallets. So it\’s not just that I don\’t think there\’s nothing wrong with doing such things, I tend to think that they\’re actually admirable.

But as we can see, Richard has slightly different ideas about what is morally and ethically acceptable: at least that\’s the way I read his report. That while certain things are legal they shouldn\’t be is perhaps one way of reading it all, that some things are legal but shouldn\’t be done anyway another.

But wait, I hear the call. This all stopped in 2003 didn\’t it?

Well, yes, with Fulcrum, yes, it did.

The Tax Gap Ltd (formerly Tax Research Ltd):

Carries out “social science research”. Shares owned 90% Ritchie, 10% Jacqueline.

Paid out small (£3-4k) directors’ salaries in 2005, 2006 & 2007 (another classic tax/NI avoidance strategy, keeping the salary under the personal allowance).

Paid out a £12,000 dividend in 2006 (classic NI avoidance strategy, to take money out as NI-exempt dividend rather than salary).

Profits of nearly £13,000 retained in the company (another classic tax avoidance strategy, to delay paying dividends until a year when your income is below the higher rate threshold).

Oh. If we are to continue our speculation about GPs and maternity pay, we might assume that income shifting is now not a useful strategy. For why shift income to someone who is already in the higher tax band? But we do note the other parts of the Observer technique. Low directorial salaries, enough that the director is credited with having paid NI (ie, that State pension accruals continue) without having to actually pay NI and then the rest of the profit being paid out as dividends.

And do note again, the tax free first £10k of profits was abolished in 2006, so at least in 2005 the first £10k of dividends would have been entirely free of either corporation tax or basic rate income tax.

As I shall have to repeat myself: there\’s nothing illegal about this. To my mind there\’s nothing immoral or even the slightest tinge of moral turpitude about it all. This is simply the exercise of the legal right to reduce ones\’ taxable income.

In fact, I think that the whole thing is extraordinarily admirable. Richard Murphy has, from this information, the biggest brass balls on the planet, cojones to make a prize stud bull jealous.

He writes reports about how appalling certain tax arrangements are while using said tax arrangements himself.

The only thing which leaves it not quite entirely perfect is that the income from the report, The Missing Billions, presumably went into Tax Research LLP, not The Tax Gap Ltd, so we cannot actually say that the money received for writing the report was subject to the treatment that the report denounced.

But as they would say around here, cojones grandes Mr. Murphy, cojones grandes.

Update: and here is Richard\’s response.

I will admit to not finding it hugely convincing but that is no doubt an issue with me rather than anyone else.

A couple of things though:

I note the right wing blogosphere is seeking yet again

No, come along now, it\’s me, Tim Worstall. Get the name right if nothing else, any publicity is good…well, you know the phrase.

Secondly:

\”I make no claim to being a paragon of virtue, or to having not changed my mind on occasion (if I’d been wiser, for example, the Tax Gap Limited would always have been an LLP – but I didn’t get that right at the time I incorporated it) or to having not learned from experience. Well, that puts me amongst the rest of humanity then doesn’t it? But apparently not for these people. If I am flawed like the rest of us – and if my thinking has changed over time (as it obviously has) and my behaviour with it then apparently I’m a hypocrite in their book – which is absurd.\”

I similarly am no paragon of virtue: you can find on this very blog the story of how I bribed a North Korean KGB official. Nor am I worried about people changing their minds: on this very blog you can read my admission that I once voted Green Party.

Finally:

First of all – as I’ve often said the issue is one of intimidation – they seek to propagate the message that if anyone stands up to their vicious form of capitalism they will seek to crush them. So much for a belief in liberty! It takes courage to stand up to such behaviour. They know that. They want to stop others entering the fray by behaving as they do. In that way they hope to crush our current democratic way of life in the UK, Europe and beyond, not least by eliminating debate.

No, I do not wish to \”crush them\”, I do not want to \”stop others entering the fray\”, am not interested in \”eliminating debate\” and have a very strong \”belief in liberty\”.

All of which, of course, is why I argue against so many of Richard\’s ideas, for I am engaging with those entering the fray, debating rather than eliminating such, am taking the arguments seriously rather than crushing them and am, by doing so, contributing to that very liberty that I believe in so strongly.

As to his explanation, well, I leave it up to you to make up your own minds on that. You know, like free people, living in liberty do?

Well, yes Polly, but what does it mean?

But it has not been a pointless exercise. Two-thirds of ideas come from public servants themselves, who may not suggest abolishing their own jobs, but do come forward with good practical savings drawn from experience: water cooler and paper savings, IT procurement, modifications to telephone exchanges, making people pay for frivolous freedom of information requests to deter time wasted on costing the flying of flags. A councillor calls for his allowances to be cut, a police officer for short cuts to charging people with minor offences. What\’s striking is their sincerity and earnestness. These are not \”sod the government\” responses from a workforce about to have a million members brutally sacked, but a reminder that large numbers of public servants care about doing their jobs well.

That tallies with my own experience, taking low-paid jobs while researching my book Hard Work. I was struck time and again at how even agency workers – outsourced and not a part of the schools, hospitals, nurseries or nursing homes where they worked – strove to do their best, often against the odds, with the wrong equipment, inept managers or rules that were obstacles to kindness. They were more frustrated by waste or hindrances to good work than by their own rotten terms and conditions. Most took a pride in their jobs that went under-recognised: a strong flavour of that pride emerges in these ideas.

I don\’t doubt a single word of it. However, it is important to point out what this means.

Hayek was right.

Knowledge is local, the bits and pieces of information we need to make things work better (in the economists\’ jargon, what we need to know so that we can improve productivity) reside with those actually doing the things that are being done.

Those bits and pieces of knowledge do not reside with the planners in their offices in Whitehall. They are dispersed, distributed, among the toilers at the coal face.

Which means that Hayek was right.

We cannot plan our public services in the centralised manner that we do: or rather, we cannot plan them as we do and have any hope if having said public services efficiently delivered nor with that efficiency increasing. For the knowledge we would need to be able to plan such is not held centrally, cannot be held centrally, so we cannot plan centrally.

Thus Hayek was right.

If such central planning is not possible, as Polly has pointed out to us, then we are forced to fall back to the only other method of economic organisation we have, that of markets.

So Hayek really was right.

The amusement of course comes from it being Polly Toynbee who provides us (absolutely correctly) with the evidence with which to prove this contention. It is the little people who know how to run things better. So Polly has just proven that Hayek was right while she would insist to her last breath that of course Hayek was wrong.

Amusing, no?

A message for the TPA

A recent report from the TPA suggested that we should redefine poverty. Instead of it being 60% of median household income, as it is at present, if we move it to 50% of mendian household income then we\’ve actyually got a chance of being able to afford to both reduce poverty and also make work pay.

Hmmm.

(The OECD defines poor as someone living in a household with less than half the median income, adjusted for family size.)

Oh, OK then, we\’ll just be adopting the international standard as our definition of poverty then.

Excellent, let\’s do that then.

Not a lot of sympathy, no

ACTRESS Susan Penhaligon has condemned television bosses as ageist, saying that at 61 she can only find roles in theatre.

The former Bouquet Of Barbed Wire star says she is desperate to shake off her image as the teenage temptress Prue Manson in the hit Seventies drama because she wants more mature roles.

But Susan says that whenever she goes for a TV role, she finds 20 other actresses from her age group battling for the same part.

The actress, whose 1976 drama Bouquet Of Barbed Wire is being remade by ITV, told Radio Times: “Thankfully I love theatre, as TV really doesn’t want older actresses.”

She added: “Twenty well-known older actresses are chasing about four good parts a year, not counting Holby City and the soaps. Equity, the actors’ trade union, ran a campaign about just this.”

Susan was hailed the “face of the decade” in the Seventies and the British answer to French actress and model Brigitte Bardot.

I understand the frustration, of course, but don\’t have all that much sympathy.

But if you get the job in your 20s because of your looks (OK, at least in part for your looks, she wouldn\’t have got the parts she did if she\’d been a munt) then I don\’t think it\’s all that unfair that when he looks have gone so have the parts.

If you\’ve been getting the parts because of being an outstanding actress (like, say, Judi Dench, Maggie Smith, Vanessa Redgrave) then the parts don\’t dry up.

It\’s a bit like a footballer whining because Man U doesn\’t want him when he\’s 50. Sorry, but one of the things you were selling was your youthful physique….

I see what George has done here

Clearly, \”neo-liberal\” isn\’t strong enough now:

Václav Klaus, the ultra-neoliberal Czech president,

Ultra-neoliberal now, eh?

But the sleight of hand is here:

Worldwide, subsidies for fossil fuels are 12 times greater than subsidies for renewable energy. Many of the most generous handouts are awarded by rightwing governments (think of the money lavished on the oil industry under George Bush).

Umm, no, you see it\’s not money lavished on the oil industry by George Bush that makes up those fossil fuel subsidies. Very much not so actually.

I can’t find the full IEA report but I have found the slides used to illustrate it. Here.

Last page. Who are the subsidisers? In order, Iran,  Russia, Saudi Arabia, India, China, Egypt, Venezuela, Mexico, Indonesia, Argentina, Iraq, Uzbekistan, UAE and so on….

Absolutely none of the advanced industrialised countries are providing sufficient subsidy to even make the list. Only 8 of the G-20 do ….and none of the rich ones.

So, you see what they’ve done? They’ve compared what poor countries do to subsidise fossil fuels with what rich countries do to subsidise renewables….and yet left us with the impression that it’s all rich countries doing both.

Think for a moment: they’re comparing $50 billion with $550 billion, as if it is therefore obvious that we (the US, UK etc) should therefore both reduce fossil subsidies and increase renewables. But what on earth does Iran subsidising petrol have to do with how much the UK or Germany should subsidise solar PV?

Impressively done George but horribly misleading. Iran is the biggest subsidy merchant, over $100 billion a year. What\’s that got to do with Shrub?

Petty, pedantic – and also wrong

That\’s what Ritchie tells me I am.

Which brings us to entry two in his \”Joy of Tax\” series. The things which we enjoy only because the State gets to riffle through our wallets.

What did tax do for me today?

It provided the road I drove along to take my sons out this morning.

Nothing else will ever pay for roads in a rural area.

That’s the Joy of Tax.

Hmmm:

A private road association is an organization, typically nonprofit, specializing in private roads.

….

Two-thirds of the Swedish road system is run by these organizations, which range in size from a few households to tens of thousands of households.

And there I was thinking that we should all be more like Sweden.

The peril of low taxes!

Here.

Usual Grauniad complaint that if taxes are low then there\’s no such thing as society (cont. pg 94).

Among the Arab oil producers, for example, taxation accounted for only 5% of gross domestic product in 2002, rising to 17% in the non-oil countries – which is still very low compared with Germany (39%), Italy (41%) and Britain (37%).

Not quite, for we normally include such things as oil and gas royalties as taxes (which they are of course, upon Ricardian Rents).

However, there\’s a much larger fault in this analysis. I\’ve not got the exact number at my fingertips but the UK govt only takes in the low 20s % ish level of GDP for the actual goods it buys/provides.

All the rest of that tax share of GDP is on redistribution of incomes. And I\’m deeply unconvinced that anyone thinks we\’ve got too little government in the UK (even if there are many who think there\’s too little redistribution).

Reasons for corporate secrecy

RACE ace Ben Collins has been linked with telly\’s motoring mystery man The Stig – in documents from his own company.

Papers issued by Collins Autosport show the F3 driver signed up with Top Gear just as the iconic \”white Stig\” character appeared on screen in 2003.

Accounts filed that December reveal the firm had achieved a \”cornerstone year\”.

They add that it was partly because of on-track success and say: \”In addition, driving services were also provided for the BBC, mainly in the Top Gear Programme.\”

All this corporate transparency, sometimes it\’s a little too much, you know?

Cat among the pigeons

Ooooh, this is going to be fun.

So, following Amnesty and all sorts of environmental groups pointing to the horrible pollution from the oil business in the Niger delta, the UN (UNEP, the environmental peeps) does a big report on who is to blame for it.

The result is that it\’s not Shell or the Government, it\’s the locals who cut into the pipelines to steal the oil.

90% of it, anyway.

Those environmental groups don\’t like this at all.

This will, I am sure, run and run.

Err, why?

Currently the Human Fertility and Embryology Authority (HFEA) imposes a £250 cap on payments so as to avoid commercialising the procedure.

\”We are suggesting moving closer to the Spanish system. But there is no suggestion of adopting the US model where a good-looking girl with a degree can get $30,000 (£19,000) for her eggs.\”

But the low payment is thought to be behind a shortage in egg and sperm donation which is driving infertile women and men to overseas – often unregulated – clinics, according to research.

Now the HFEA is considering adopting the Spanish system which would see the payment cap lifted to £800.

\”We want to review egg donation,\” Professor Lisa Jardine, the chair of the HFEA told the Sunday Times.

Why won\’t you move to the American system?

You\’ve already bought into the idea that people are, at least in part, motivated by money. So why not allow an open market?

If you allow payments that are too high then the principle of donation is lost.

You, the \”ethical\” bureaucrats, may think that the principle of \”donation\” is very important but:

The number of women registered as egg donors has risen slightly from 946 in 1998 to 1,150 now. The real problem is that the number of women wanting fertility treatment has risen much faster than this.

It seems that of the 25 million odd women in the country 24,998,850 disagree with you.

What the fuck is it with these people that makes them assume that their distaste for trade is shared by everyone else?

For that\’s what it is, it\’s just that old English nonsense that bringing money into things is just not done.

It\’s absurd, we\’re so short of men willing to toss off into plastic cups that sperm is imported wholesale from Denmark.

Any literary historians out there?

So pondering a little project.

As part of that I need to know what were likely wages/pay to people who wrote the penny dreadfuls.

Then, what were likely advances from publishers for novels…no, not the three volume standard, not what Dickens or whoever famous got for their part works. But what was the scale of pay, if you like, for a competent but not famous wordsmith?

Penny dreadfuls, then stories and part works in \”respectable\” magazines and, possibly, what was the likely pay for the shilling shockers later in the 19th century.

Anyone actually know?

A brief google hasn\’t really thrown anything up…..although there is at least an indication that one could set up as a penny dreadful publisher for about £50.

General wages of the time I can find.

Hmm, also, if anyone knows of a site that gives rough living costs? Rent on a house,/flat/mansionflat/coldwater walkup and so on? Food costs?

I think I can find the cost of a Maida Vale villa by rereading something I\’ve got on Marx but (and I can find out what he got paid by the New York Times that way too) but I\’d love to be pointed to a general site that covers costs of living etc. Cab fares, (hackney, obviously), trams? Underground? etcetcetc

Update: So, penny a line for the dreadfuls, eh? Or half a pint a line.

Hmm, I do stuff now at 5 cents a word which is less (in terms of beer) than that…..

So to make £1 a day (a good, solid, middle class income at the time, could run a household in London with servants etc) it would need to be 3,000 words a day or so each and every day (7/52). OK, that works in terms of what I wanted it to….

Fascinating stuff

I mentioned that a certain retired accountant had written some pieces for The Observer describing how you could in fact organise your affairs in order to reduce your taxes. This, in some contrast to his current public position that one should not reorganise one\’s affairs in order to reduce the tax which is righteously due.

He has responded:

The first was written because I could think of no better way of killing a scheme then being promoted on the professional lecture circuit than to give it publicity. I didn’t have blogs etc in those days. It worked. I call that a success.

Richard\’s point is thus that the best way to close down a tax avoidance scheme is to tell everyone how to use said tax avoidance scheme.

I stand corrected.

Truly cretinous

Ed Miliband steps up his bid for the Labour leadership today by promising substantial tax cuts for any company prepared to guarantee a \”living wage\” of at least £7.60 an hour. The commitment is designed to appeal to the party\’s core supporters who believe New Labour took insufficient measures to combat low pay, despite having introduced a legally binding minimum wage that now stands at £5.83 an hour.

A company that agreed to set the \”living wage\” as its minimum rate – as opposed to the legal minimum – would pay lower rates of corporation tax.

Sigh.

The difference in take home pay between the minimum wage and the living wage is entirely the amount of income tax and national insurance charged on the wages of the low paid.

If you actually wanted to provide a living wage to everyone working then what you would do is make the income tax personal allowance and the national insurance threshold the same as the full time full year minimum wage.

There, all done, all sorted.

But of course these crazed lunatics campaigning for the living wage can\’t see this: perhaps they just can\’t manage the sums. Therefore we get the ideas like the imposition of a different corporation tax rate dependent upon wage rates.

Can we shoot them all, please?

Will Hutton\’s mea culpa

There is no longer any discrimination in our embrace of cultural liberalism; it stretches into every nook and cranny of our lives – from the financial markets to sex – and sometimes with consequences none of us like. It was Howard Davies, when he ran the Financial Services Authority, who compared financiers to consenting adults; the inference was that he had no more business inquiring into their private business affairs than he would into what went on in their bedrooms. His liberalism has been proved wrong. The story of the past six decades is in many ways the story of how we threw off our shackles only to discover that we do need some constraints, even in the City. And in the bedroom? Our extreme liberal stance has seen us deluged under a tidal wave of pornography. The debate in the years ahead will not be about how to continue with our baby boomer liberalism, but over how and where we need restraint around some shared principles and rules.

He\’s talking about the baby boomers of course: his whole new book is about the smashing of the old, creation of the new, by them using himself as subject number 1.

Was it Herodotus who was the first to say, as he reached sensecence, that society had gone to the dogs?

Ho hum, still, at least we know that one writer in each generation can get a best seller out of this trope.

Too few women consultants!

And here we were, thinking that the medical profession had at least some connection to science, perhaps even statistics:

The NHS faces a chronic shortage of women in senior positions as female medical staff hit a glass ceiling, doctors\’ leaders are warning.

Fewer than 30% of consultant posts in the health service are held by women, even though two-thirds of doctors entering the profession are female.

Cretins.

In a career where it takes 30 years to rise to the top the proportion of women entering the profession now is entirely unrelated to the proportion of women at the top of it now.

The important number is the proportion of women who entered the profession 30 years ago: that will give you the only useful number to compare with the proportion of that cohort who are now at the top of the profession.

Female doctors also earn, in general, 18% less than male doctors.

Yup, because many more female doctors work part time than do male doctors.

A deep and fearful misunderstanding

One of the most ancient — and certainly one of the most fundamental — rights of any British citizen is the right to a fair trial. One of the basic justifications for the state is that it protects us from unjust attempts to deprive us of our liberty. So who would have believed that in the 21st century, the Government would connive in the systematic denial of that right to its citizens?

Umm, no, that\’s not a justification for the State at all.

The justification for the State is that there are some things which have to be done both communally and non-voluntarily. The justification for the fair trial bit, the whole civil liberties bit, is that having handed over the monopoly of legitimate violence to the State we therefore need defence from that State.

The right to a fair trial is our defence against an over-eager, over-zealous and even over-bearing State.

Now that we\’ve corrected that misapprehension why the State is happy to connive in systematic denial is obvious. Reducing our powers of protection against the State increase the power of the State over us.

What bureaucracy would not like, desire, that?

If you don\’t understand the original reason

The of course your criticism is going to be false, isn\’t it?

Self-service checkouts were intended to bring an end to long supermarket queues, but research suggests some lines have lengthened since the technology was introduced.

There then follows lots of harrumphing from both sides about whether the self service checkouts have in fact reduced queueing times or not. The supermarkets against the union.

But self service checkouts haven\’t been brought in to reduce check out times. They\’ve been brought in to reduce labour costs: as with almost all automation, this is the reason.

You end up with one bird monitoring 6,8,10 checkouts, instead of needing one per check out.

So far so trivial, but it\’s an important lesson that a certain type of lefty needs to get. Raise wages and people will look at ways to employ less labour. And it\’s not just buying in from lower wage countries either: almost any job can be automated to some extent if the wages go high enough that it\’s worth doing so.

Those arguing, for example, for a \”living wage!\” would do well to remember this. At any one time there are some number of jobs which are just on the cusp of it being worth automating them. A 10%, 20%, rise in wages will be enough to tip the decision to automate rather than employ.

Which jobs those are is constantly changing of course as technology advances.

In the larger scheme of things of course this is wonderful: freed from check outs that labour is now available to go and do something else: wipe bottys or pour pints for example, meaning we get both checked out groceries and wiped botties or pulled pints. We\’ve two things instead of one to enjoy as a society and are thus richer.

But in that smaller sense it\’s worth remembering that raising the price of labour is going to reduce the number of people employed in current activities as raising the price of labour increases the motivation to automate.

As we can see in that humblest of scenes, the supermarket check out queue.

And as, in fact, that earlier burst of automation, bar codes, did when they came out.