I mentioned earlier this morning that I had been asked to make comment after a speech Jeremy Corbyn gave on the economy this morning. This is what I said:
I'd like to thank Jeremy for asking me to join him this morning.
You've just heard Jeremy speak on three themes on which I have done a lot of work in recent years. They are the tax gap, broader issues of tax justice and what Jeremy has described as People's Quantitative Easing. If I might I'd like to add a little elaboration on each.
First, the tax gap. This is the difference between the amount of tax that HMRC should collect if tax law worked as parliament intended and the amount it actually collects.
HMRC thinks this figure is around £35 billion a year. I estimate it at more than three times that sum. And as the National Audit Office said this week in their report on HMRC's accounts, both of us could be right.
That's because the difference between these two estimates is political.
As the National Audit Office say, HMRC and I define tax avoidance very differently. So HMRC, for example, exclude the sort of abuse undertaken by the likes of Google, Amazon and Starbucks and I include it. I'll leave you to decide which approach makes more sense.
Again, the way HMRC and I estimate tax evasion is different. HMRC very largely work on a ‘bottom up approach'. That means they sample the tax returns they get, estimate the errors, and then assume if people do not submit a tax return then by and large they have no income. When it comes to the shadow economy they use what they call illustrative estimates — or what the FT once called figures they'd made up.
I on the other hand, as the National Audit Office has acknowledged, work from figures for GDP downwards. That seems to me to be logical. After all — if we're looking for missing data it's somewhere out there in total which is why I compare the total GDP suggests is due with what is paid. And I get a big difference as a result.
The story is much the same with debt, where I include the figure for debt written off by HMRC because they've decided not to chase it — because I don't think they have the staff to do so, and HMRC don't.
Unsurprisingly I believe Jeremy's right to highlight these issues I have raised on the tax gap. That's not because all this missing tax is recoverable, much as it would be great if that were true. Instead it's because the government's choice to focus on a relatively small figure for the tax gap means, first of all, that the additional tax collected will also be small and, second, that the resources allocated to the task are absurdly low. In that context I'd mention that the £750 million extra allocated in the budget simply represented cancellation of cuts already in the HMRC budget. There was no real new money at all.
So, what Jeremy's saying is that there is money out there in the tax gap to be collected that would change the political agenda. I think he's right to say so.
As I also think he's right on tax justice. Despite its bluster this government has an appalling record on tax justice. Two weeks ago it was Conservative MEPs who formed most of the group that voted against greater tax transparency in the EU parliament by opposing country-by-country reporting that would hold multinational companies to account for what they pay, and where.
We know that the pressure of such publicity on large companies can work. This week HMRC published research saying that many companies changed their attitude to tax fiddling in 2013 in the wake of Margaret Hodge's onslaught on tax cheats in the Public Accounts Committee. Country-by-country reporting could have the same impact on behaviour. I welcome Jeremy's support for an idea I first created way back in 2003.
And then there's People's QE. A report in the FT yesterday said that conventional QE is not working. House prices in Germany, Norway and London are rocketing as a result of it.
That's hardly surprising. If you land a pile of effectively free cash on a plate in front of bankers I have to tell you that you'd need to be straightforwardly naïve to think they'll lend it to the productive economy for three reasons.
First, that would involve engaging with risk from real business, and bankers hate that.
Second, lending to the SME sector does not inflate bankers' personal wealth in the way that lending to boost house prices does.
And third, if bankers do want to take risk they want to establish the odds. That is why, for example, the stock market has hit record highs of late when there is no reason for it to do so.
People's QE fundamentally changes all that. It is QE because it would be new money pumped into the economy as a result of the Bank of England buying back bonds, but in this case they'd be what are effectively new bonds created by a government owned investment bank that would have the aim of funding new housing, infrastructure, sustainable technology and so much more that would guarantee jobs in every constituency in the UK and long term careers and opportunities for so many who need them.
The choice as to which QE you pursue is, like the tax gap you believe in or the demand you make of multinational corporations when it comes to transparency, essentially political. I will leave that political judgment to Jeremy. I am not a politician. But I can say three things.
The first is that tackling the tax gap could raise billions more than this government says is possible.
Second, multinational corporations can be brought to account for their tax, and that is to the advantage of all smaller businesses in this country that will then be competing with them on a level playing field. The SME community in the UK may well be the real winners from what Jeremy is saying here.
And third, if anyone wants to promote jobs and business in this country then there is no better way of doing so right now than People's QE. You just have to believe that if we could create £375 billion for banks between 2009 and 2012 then it is worth creating a lot less now to deliver growth, jobs, prosperity, hope and a future for people in this country.
I believe Jeremy's right to say that. And I welcome the fact that as a result he's a rare politician putting forward a plan that could benefit everyone in the UK.
For the record, I draw attention to the comments made in my earlier blog.
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Hi Richard, glad to hear these issues getting something approaching mainstream exposure.
Would be interest to get further thoughts from you but two things in particular strike me as odd about Osborne’s “policies” in this area, and they both represent massive opportunities for an attack- shame this didn’t happen pre- May 8th.
One is the point you make that SMEs are left fighting on an uneven playing field by large corporates dodging tax, which the Tories are hardly rushing to correct- and yet Labour are painted as ‘anti-business’.
Clearly “business” can mean a lot of things, so it would not take a genius for an opposition party to exploit this contradiction and build a platform that is pro-SME (“hard-working entrepreneurs” if you like!) whilst revealing the Tories to be the political arm of hedge funds and “big” business.
Secondly, Osborne’s whole strategy, as Corbyn has stated, amounts to a kind of managed decline, and is fundamentally reactionary and defensive- a holding action against the growing economies of Asia etc. The less well off in our society are thrown into the front lines as cannon fodder, those who thought they were safe in the middle are starting to get uneasy and those at the top are doing all they can to stay as far behind the lines as they can. When will it stop?
A more ambitious, imaginative government might actually have a serious industrial strategy, and be quite happy to invest in (non-vanity) capital projects to help boost productivity (thus negating the “stealing from our children” line as they will benefit from a positive ROI). Especially at such low interest rates!
Furthermore, cutting corporation tax and begging companies to relocate here feels like a sell based on cost (which is indeed a race to the bottom, and open to being outflanked) and says very little for the Tories’ belief in the ‘product quality’ of the UK or their ability to improve this product.
Instead, apparently ALL public borrowing is bad (not private mind), and we are seeking to run a surplus inclusive of capital spending. And almost no-one is calling that out as being absolutely barking.
Such is the strength and pervasiveness of the austerity narrative, where black is white and “securing our future” is achieved by retrenchment rather than growth.
I agree with that retrenchment point
But that is at the heart of the rentier economy
Your second point is similar to that made by Paul Mason, as was covered in a recent Guardian or Observer review of his new book.
Paul Mason said that the population misunderstands austerity and think that it is a temporary correction before economic benefits are, once again, widely distributed. The reality, he claims, is that the middle classes should look to Indian and Chinese income levels to understand the Intended trajectory.
As a Labour campaigning point, a serious industrial policy that avoids the austerity trajectory would have broad appeal.
Never mind Corbyn Richard, I wish it was YOU we were voting for……damn it, there I go again. I’ll shut up.
That’s not going to happen!
I don’t know why not. You have strong conviction that your ideas are right for this country. Why would you not now proceed into a life in politics? No disrespect, but you are the ultimate armchair critic – always spouting forth about how you have all the answers and everyone who disagrees with you is a neoliberal sophist, but I find it rather strange that you appear to be too cowardly (for want of a better word, and again no disrespect) to attempt to put all of this into action. If Corbyn does get in, you should go and talk to him and get yourself onto the next by-election; let’s see you DO something, rather than just always talking it, comfortable in the knowledge that as long as you only talk about it no one will ever be able to prove your big state thinking wrong.
If I felt my holding political office would effect change I would go for it
I never have
But to say I do nothing is a bit rich
I did speak alongside Jeremy Corbyn yesterday on some of the technical issues he raised
You also somewhat miss the point that the skills of thinker and politician are not the same and the tempremants required for each are different
I won’t raise it again but I hope that Corbyn keeps in touch with you and is all ears.
The powers that be must know that there is an end to this speculative selfish approach. Where will they retire to with their ill gotten gains.
It does not take a genius to see such a destructive force cannot continue without stress on an enormous scale amongst many of us.
So they keep gathering and collecting and holidaying at our expense. Our Young will not be able to afford higher education which is a sort of leveller, so how will that play out. But I don’t want a French reign of terror, can’t we have a purposeful gentle revolution, that will wrest control from smug uncaring manipulators. It failed at the election because of the slim difference of the parties. Silly old dreamer I am.
Even gentle revolutions against wealth and power give rise to quite violent opposition
Apologies, I retract the “do nothing” part of that, that was unfair and not intended.
But I would then just add that your first line is surely an admission of defeat; despite your passionate conviction you don’t see how you could get people to buy into your vision; seems strange if it is so obviously right. Oh well, let’s see if Corbyn gets in and manages to persuade us that tax and spend, big, wasteful Government and an unsustainable welfare state are the answer to all our problems.
I can assure you the last thing I feel is defeated
I don’t believe becoming a politician advocating a single party would be a positive for you anyway. With the current media climate we are living in, the public are to easy to look at any article, seeing what persuasion the paper is and putting whatever is written in said article down to bias tripe. That’s why you should stay independent so your research has more credibility to both sides of the right and left of politics. The only thing I’d suggest, and I’m not naive enough to think you don’t wish the same, is for you to get far greater exposure so more people are aware and listen. I share your research on twitter regularly but until your work can be as mainstream as The Daily Fail and The Scum etc, people will always believe the rhetoric spouted, for the government, in those sorry excuses for news producing papers.
Do you think you can effect change by only appealing to people who hold the same views?
Do you really think people cannot be persuaded to change their views?
Jeremy Corbyyn is indeed a rare breed of politician.
In fact he exemplifies what I suggest every politician should be like, in it for the good and to serve others, rather than any form of personal gain or self glorification. He makes a lot of good arguments to back up his policies, e.g. in the Middle East and his support for real and meaningful talks, as nothing of any real worth was ever achieved through violence.
I’m glad that some of your ideas are now getting a very public hearing Richard and long may this continue.