Search Result for quantitative easing — 442 articles


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Tax Justice

Tax Us If You Can. A report for the Tax Justice Network published in September 2005 setting out its manifesto for action. Richard Murphy was one of the principal authors of the report.

The Price of Offshore. A report produced for the Tax Justice Network showing that offshore tax havens cost the governments of the world $255 billion a year in lost taxation revenues.

Closing the Floodgates A report for the Tax Justice Network on behalf of the Leading Group of Nations on how the massive tax losses by developing countries could be stemmed. Substantially written, and edited by, Richard Murphy it contains key chapters explaining how tax avoidance takes place.

Fiscal Paradise or Tax on Development? A discussion of tax haven activity for the Tax Justice Network and presented to the Special Committee on Globalisation of the Belgian Parliament 14 February 2005.

The Extractive Industries

Ghana‚ EITI - Delivering on the Promise? A report written for ISODEC in Ghana highlighting the problems with the first EITI report published in that country.

Extracting Transparency. A report for Global Witness, the Publish What You Pay Campaign, Transparency International and others on the need for an International Financial Reporting Standard for the Extractive Industries.

Digging for Justice. An article from Accountancy Magazine, December 2005 on the need for an International Financial Reporting Standard for the Extractive Industries.

Making It Add Up. A report on the Extractive Industries Transparency Initiative for Save the Children and Global Witness and presented to the World Bank conference on the EITI February 2005.

Country-by-country reporting

Country-by-Country Reporting. An article for the Tax Justice Network giving ten reasons why country-by-country reporting by major corporations is so important if we are to have a fairer world.

Location, Location. An article published in March 2004 in Accountancy magazine, the journal of the Institute of Chartered Accountants in England and Wales, about Richard's proposal for a new International Accounting Standard to tackle tax avoidance and evasion.

Reporting Turnover and Tax by Location. The proposal for a new International Accounting Standard referred to above, published in 2003 by the Tax Justice Network and the Association for Accountancy and Business Affairs.

Tax havens and secrecy jurisdictions


The current economic crisis

In place of cuts. Published by Compass, this is a comprehensive analysis of the UK Tax system and offers a straight forward set of proposals which would start to make it fairer. The report was written by George Irvin, Dave Byrne, Richard Murphy, Howard Reed and Sally Ruane.

The Green New Deal. Joined-up policies to solve the triple crunch of the credit crisis, climate change and high oil prices written by the Green New Deal group of which I am a member.

The Cuts Won't Work. The second report of the Green New Deal Group which argues that cutting public spending is the last thing any economy needs when in a recession.

The Great Tax Parachute. Written by Richard Murphy for the Green New Deal group. As the public are told by all the main political parties that large spending cuts are inevitable, the Green New Deal Group show that real alternatives exist. This briefing reveals, for the first time, that the public deficit could, in fact, be substantially offset by a range of progressive measures on tax.

Green Quantitative Easing. A paper by Richard Murphy and Colin Hines exploring the whole issue of quantitative easing and suggesting that because the first round of quantitative easing was captured for the benefit of the finance industry any new round must be very different with cash being spent into the economy to create a Green New Deal nationally and locally, with the only debt to be repurchased being PFI debt, to remove once and for all the legacy of that appalling system of finance.


The fundamental flaw in PFI can be overcome by People’s QE

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The supposed advantage of PFI is that the risk of contracts going wrong is passed from the government to a contractor.

There are two flaws with this. First, many contracts fail to transfer this risk: in other words cost over-runs are still borne by the government. In that case PFI can best be called an expensive con-trick by contractors on the government.

The second flaw is that in the rare cases when the risk is actually transferred from the government to the contractor, as has happened in the case of Carillion, limited liability lets the contractor fail and pass the risk on to stakeholders throughout society. In that case PFI can best be called an expensive con-trick by contractors on society.

I have long argued there is an alternative. It is, of course, a National Investment Bank funded by People’s QE (which I originally called Green QE).

It really is time for Labour to say so. After all, it’s what helped Corbyn get the leadership, so why won’t he talk about it now?

The FT admits it: Corbyn is coming

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The FT is running a most amusing feature today:

It's amusing because of the hysteria that lies just below the surface within it.

It's amusing because underneath the hysteria the truth is told. Take this, for example:

Capitalism is not working for the under-40s, so they’re voting for socialism.

And this not of reality:

Many will have little option but to pay more [tax]. “In the long term, there is little that can be done to reduce this burden, unless people consciously work less hard, move down the jobs ladder or emigrate”

It's also amusing because it clearly thinks it is addressing a real possibility.

And it's amusing for what it predicts.

Let me look at those things.

Labour will increase corporation tax rates

They will. And rightly so. Even big business is bemused at the absurdly low rates it is being offered whilst it is sitting on enormous cash piles that they have no idea what to do with, barring lending it to the government. Of course they should pay more.

Labour will increase capital gains tax rates

I sincerely hope so: it is absurd that the highest capital gains tax rate is 28% and that is less than most people pay when NIC is included on their pay. The income tax and national insurance rates should be aligned.

Labour will abolish CGT entrepreneur's relief

I hope so: I explain why, here.

Labour will increase income tax rates

At the the top end that is appropriate: we have a regressive tax system. It's time that was corrected.

Labour will crack down on tax avoidance

That's a problem?

Labour would introduce a financial transactions tax

Stamp duty on shares has not stopped London being the epicentre of global financial markets, at cost to the country as a whole. Deal with it.

And then there is some nonsense:

Labour would push down the price of UK gilts

Hang on: that would mean interest rates rose. Isn't that what markets want?

But, haven't you noticed that UK national debt has increased massively since 2008 and this has not happened?

And hasn't the FT noticed QE?

Let alone People's Quantitative Easing?

The article is really very confused when it comes to these issues.

As it is on:

Labour nationalising

Yes, the railways, the NHS and PFI.

The first favours FT readers: they commute.

And they are all very popular. Just as is Labour's housebuilding pledge. And why? Because they represent efficient use of government money in meeting need.

I think we can conclude that FT readers are only interested in this when it suits their own portfolio's needs, whatever else they might say.

But the best but if all is the simple underlying message - the FT is taking Labour very seriously indeed.

On interest rates, growth and the need for the most massive rethink

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The FT has reported that:

The Bank of England says “further modest increases” in interest rates are likely as it tries to bring inflation down to its target of 2 per cent in the next few years.

This comes after the Monetary Policy Committee left rates unchanged despite inflation increasing to 3.1 per cent in November. As the FT continued:

Markets expect the BoE will raise interest rates up to twice next year, once in May and a possible second time towards the end of 2018, bringing them from their current levels of 0.5 per cent to 1 per cent by the end of the year.

Before noting:

Though borrowing would become more expensive, 1 per cent would still represent a historically low interest rate level and could still encourage households and businesses to borrow and spend.

And suggesting:

The committee believes the UK economy cannot grow much faster than 1.5 per cent a year without pushing up inflation. As a result, the bank’s outlook for the economy and living standards remains weak — leading members to stress that more interest rate rises are likely to become necessary.

Three comments seem appropriate.

The first is that it seems increasingly absurd that the MPC is only worrying about inflation. In part that's because the country could do with some to assist those in debt manage the burdens they face. It's also because the measure is simply so crude, failing to take into account so many impacts on the economy arising from issues over which the MPC has no real control, whether by interest rate changes or by conventional quantitative easing. And it is because the goal is now so contradictory when it is believed that we must have growth to see an increase in real wages and yet any sign of growth must be snuffed out at birth by an interest rate rise for fear of inflation. What the policy inevitably means is we are doomed to stagnation in living standards.

Second, this suggests that the Bank of England badly needs a better measure for economic targeting, but this has to be set by the government: it is not for it to set in isolation. The logic of using interest rates to manage inflation is so now so hopelessly inappropriate for the UK economy (and the vast majority of the people who live in the country) that urgent change in policy priorities is overdue if the cycle of guaranteed despondency in which we are stuck is to be broken. Charles Adams has suggested that targeting increasing median income makes sense and I have a lot of sympathy with that.

Third, the idea that the Bank of England, or anyone else, has the foresight to forecast growth next year for the economy when there are so many massive headwinds facing the country undermines their credibility at present. More caution, a little more wisdom, and a demand that the government play its role with fiscal policy to which the Bank might lend a hand, might have been appropriate, I suggest. But that's not what we got from a body dedicated to conventional wisdom. In which case a minor revolution in thinking is required.

This economic crisis we have to make better decisions than last time

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Having reviewed this morning's news I am well aware that I will be posting a series of blogs that will suggest the UK economy - and in some cases the global economy is in deep trouble. That's because it very obviously is, with massive political and social implications, which is what matters. As I have said before, there is trouble ahead, and we have a choice. Of course we can succumb. That's always an option. It is the one chosen in 2010. Or we can face the music.

In 2010 I suggested the use of what I then called Green QE, and which has since been renamed People's QE, as the way to tackle recession. Jeremy Corbyn adopted it in 2015. I explained how it worked in more detail here, before he did so. And as I said in 2015, People's QE was the weapon to deal with the next crisis: it was not a policy for the moment when a government could borrow at low or no interest.

If that crisis is coming, and I think it is, then it is worth noting that People's QE is just about the only tool now to hand to deal with it. Yanis Varoufakis said that on Question Time last week (2.25 on).

Please recall that there are ways to address the crisis we're facing. We could face the music, and if not dance, at least get through what's coming our way and come out on the other side in a better place. But to do that we have to make better decisions than were made from 2010 onwards, or we really are in trouble.


It’s time the Treasury listened to the National Audit Office when it comes to government debt

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The National Audit Office published a review of UK debt last week. It was an incredibly important document, and I managed to miss it at first. Its relevance comes down to one key issue. It tells the truth. This is rare on this issue. By this I mean it reports the true level of UK government debt. This is its opening presentation of key facts:

This suggestion that the UK government's debt is £1.3 trillion contrasts dramatically with the Treasury view of debt, which is reflected in this data, issued recently, and which is what the media usually report in their desire to suggest that the UK economy is being crushed by a government debt mountain that is apparently unsustainable and a burden on generations to come:

As will be noted, the Treasury say UK government debt was £1,610 billion in 2015/16 and the NAO suggest it was £1,261 billion.

It is now some years since I suggested that UK government debt data was mis-stated because of the impact of QE, which is the data that reconciles the above two positions. I said in 2012:

The reality is ... that in any proper accounting system that produced a single set of accounts for the government that debt that was repurchased [by the Bank of England under the QE programme] would be considered to be cancelled. That’s because you can’t meaningfully owe yourself money, and yet that is precisely what is happening here. The Treasury owes the Bank of England money but as it in effect owns the Bank of England it therefore owes itself the money and as such the debt has simply been cancelled.

What the National Audit Office is now doing is recognising the truth of what I said back then. Or as I put it at that time ( and I have edited slightly):

QE hides an economic reality, which is that when all the mumbo jumbo is cleared away what is happening is that money is being printed under the QE programme to clear the government’s deficit and that much of the claimed increase in debt is not really being issued at all.

That is precisely what the NAO is now recognising. The UK is not nearly as much in debt as HM Treasury claims precisely because it cannot owe itself money.

That has ramifications. First, it means the whole debt paranoia is wrong. Debt is not rising at the level claimed by the government. This is apparent from this comparison:

This is even more apparent when expressed as a percentage of GDP:

Debt has grown, but by nothing like the amounts the government claims.

Secondly, this then means that the  focus can then move instead towards how to use debt more creatively to solve the issues that we as a country face. As organisations as diverse as the IMF, OECD, CBI and left wing think tanks all say, now is the time for infrastructure investment, especially when (as is the case at present) money is available to the government at negative interest rates.

We do not have a debt crisis.

We do not need austerity.

We do need social housing, new green infrastructure in every constituency of the UK, better local transport, investment in small and medium sized business that banks are not delivering and and end to PFI. All this is possible. And we are in no way constrained by debt from delivering any of these things.

You cannot harm billionaires by raising interest rates, whatever the FT might say

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It takes some pretty perverse logic to produce a headline like this:

The FT does, however, manage it this morning. Merryn Somerset Webb, who is the editor of Money Week, argues:

The desperate attempt to avoid deflation via quantitative easing and record-low interest rates has had horrible side effects, and this observation is hardly controversial. The rich have become much richer; corporate wealth has become more concentrated; soaring house prices have created intergenerational strife; low yields have made all but the super-rich paranoid that they will be entirely unable to finance their futures. Most markets have ended up overvalued (this will really matter one day), while pension fund deficits and a constant sense of crisis have discouraged capital investment — and have possibly held down wages in the UK.

Following which she argues that:

The Monetary Policy Committee could dig out a list of excuses not to raise rates despite the last GDP growth numbers being rather better than expected. Raising rates will do harm at some point (asset prices will fall and the indebted will suffer). But not reversing is beginning to look like it could do more harm. Unless, of course, you are a billionaire.

What flows between her headline and the two noted observations does not seem to matter greatly because whilst it is clear that Someset Webb does get the fact that QE creates significant negative social consequences, as I long ago predicted, the essence of her argument is that these can be resolved by increasing interest rates.

In other words, the argument is that increasing the pressure on those who borrow (i.e. by and large those without capital or wealth) by requiring that they pay more to those who lend (i.e. those who have wealth) will somehow reduce social pressure in society and restore well being to the majority and send a lesson on greed to the world's billionaires even though their incomes will be increased as a result, inequality will rise, more who are clinging to solvency by their finger tips will go bust, house foreclosures will increase, and the pressure on social safety nets will increase considerably.

As a lesson in perverse logic this takes some beating. Call it callously incorrect if you like. I think that's about the best term I can come up with.

And in case you want to really know what to do the answer is

a) Introduce a wealth tax

b) Increase top income tax rates

c) Increase the supply of social housing

d) Challenge the legal status of offshore trusts and require at source tax withholding from all payments made to them

e) Increase large company corporation tax rates

f) Create an alternative minimum corporation tax requiring at least 15% payment per annum in a group basis

g) Increase capital gains rates

h) Require that land banks be used or be sequestered at undeveloped value

i) Reform banking to provide people focussed local banking services

j) Provide incentives to save in such banks not available to larger institutions

k) Introduce or extend financial transaction taxes

l) Introduce land taxation

m) Fund a universal basic income.

I could go on but my point is clear: we do not need an interest rate rise to benefit billionaires.

And nor do we need to unwind QE to suck money out of the economy to no productive gain.

Schäuble gets it wrong, even in hindsight

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As the FT notes this morning:

Wolfgang Schäuble has warned that spiralling levels of global debt and liquidity present a major risk to the world economy, in his parting shot as Germany’s finance minister. In an interview with the FT ...  said there was a danger of “new bubbles” forming due to the trillions of dollars that central banks have pumped into markets.

It took him a long time to form that conclusion. And if as a result there are bubbles now then the blame can be firmly laid at his door. I wrote this in 2010:

No one was sure whether quantitative easing would work and no one is sure for certain whether it has worked. We do however suggest in this report that several things did happen:

  1. The banks profited enormously from the programme, which is why they bounced back into profit so soon after the crash – and bankers’ bonuses never went away;
  2. The entire government deficit in 2009/10 of £155 billion was basically paid for by the quantitative easing programme. If you wanted to know how the government met its costs, now you do;
  3. There was a shortage of gilts available for investment purposes as a result of the Bank of England buying so many in the market. Large quantities of funds were invested instead in other financial assets including the stock market and commodities such as food stuffs and metals. The USA also undertook quantitative easing at the same time as the UK, which meant that despite near recessionary conditions commodity prices for coffee and basic metals such as copper have risen enormously. This has impacted on inflation, which has stayed above the Bank of England target rate;
  4. Deflation has been avoided, although the relative role of quantitative easing in this versus the previous government’s reflation policies is unclear;
  5. Interest rates have remained low.

However, one thing has not happened, and that is that the funds made available have not resulted in new bank lending. In fact bank lending has declined almost steadily since the quantitative easing programme began.

The quantitative easing programme might be considered a short term success, but as we note, the benefit has been captured almost entirely by the financial services sector whilst further asset boom and bust cycles are, at least potentially being recreated with resultant risk to the economy. These are undesirable long run outcomes when the real aim is to get the UK economy working again. For that reason we cannot support a further round of quantitative easing in the form used in 2009.

If that could be seen in 2010 - and I did see it - the question for Schäuble is why has it taken him quite so long to state what is seemingly obvious when all the conditions for another bust have been laid on his watch?

And why isn't he also laying out the real alternatives, rather than austerity, which seems to be his preferred option? In 2010 I also wrote:

The need to reflate the UK economy has not gone away though: there is an urgent need for action to stimulate the economy by investing in the new jobs, infrastructure, products and services we need in this country and there is no sign that this will happen without government intervention. For that reason we propose a new round of quantitative easing – or Green QE2 as we call it.

If Schauble had any sense that is the option he'd take now. That, though, may be asking too much. If he had any sense a great many things would not have happened as they have, including the destruction of the Greek economy. All we can be grateful for is the fact that his influence might be declining.

A New Deal for Scotland

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I spoke at the  COSLA  conference this afternoon. COSLA represents local authorities in Scotland. This was my second visit to their conference.  It was good to be invited back.

I emphasised during my presentation that in my opinion Scotland needed a cross-party New Deal to ensure it can face the challenges coming its way, with or without independence. There were my speaking notes:

  • The challenge
    • Scotland is at a crossroads
    • Devolved with some economic powers
    • Debating its own future
    • If GERS is to be believed running a strong deficit
    • If trade is to be believed in a good place
    • And I would say sitting on all the fundamental assets that make a modern economy
      • People
      • Education
      • Energy
      • Enterprise
      • Identity
  • The reality
    • There's a crisis coming
    • Externally
      • Brexit
      • A tottering world economy
      • A world without a plan
    • Domestically
      • An economy constrained by Westminster and the South East
      • In need of a plan of its own
      • And having to address the real issue that faces Scotland - that people in the country just don't earn enough because not enough has been invested in productivity in its economy
      • That's the beginning and the end of the Scottish economic crisis
  • There is €33 trillion saved in cash in the world right now (Allianz Global Wealth Report)
    • As they say, this is because the owners of that cash don't trust the financial products available to them in the market
    • These people would rather lose money holding cash then invest it in financial products
    • If you want the surest sign of the failure of current capitalism then this is it
  • At the same time Scotland is crying out for investment
    • To replace PFI
    • To fund new infrastructure investment e.g. rail infrastructure
    • To build new social housing
    • To create the renewable energy infrastructure for the country
    • To insulate existing housing stock
    • Whatever you want to add to the list
  • The question is how can that wall money that can't find a home end up invested in Scotland
  • First it needs a policy
    • To clear PFI
    • To create investment opportunities
      • Of any of the types noted
    • To create a structure for investment
      • Like an infrastructure bank
      • Nationally
      • Or regionally
  • And then it needs a financing mechanism
    • Like local authority bonds
    • Or national bonds
    • At low rates of interest
    • Backed up by government guarantee
    • And People's QE if necessary
  • And some incentives / sticks
    • Like a requirement that pension funds invest 20% of all their new member contributions in investments that deliver new jobs and technology within the UK
    • And the reduction of ISA incentives for useless cash and share based investments that deliver not a penny of new investment into the economy
    • And instead to have tax relief solely for new technology / green / job creation / social housing and infrastructure funds so that tax policy aligns with social need
    • Plus local accountability for the funds invested in this way - and yes, that includes a role for councils
  • And the backstop is People's QE
  • The political assumptions in this
    • I am assuming Brexit because I think we have to
    • I am assuming that there is a broad cross party consensus on the need for investment in Scotland - even though I know there will be difference on the detail
    • I am assuming that there is a willingness to create real economic powers for devolved and local government involvement in Scottish economic development
    • I am assuming Scottish parties will be willing to work together on a New Deal for Scotland on the basis of the threat Brexit and the economic crash it will create will bring to you
  • The political realities of this
    • I know how massive my assumptions are
    • But as someone who's not a Scot and not a party politician I'll say that this scale of vision is what the people of Scotland do, I am sure, expect of you
    • I want Scotland to grasp its own economic future - devolved or independent - and whichever party is in government here or in Westminster - and I can't see how it is going to face the post Brexit world without a plan like this
    • I'd suggest it falls to you to deliver it
  • There is a need for a New Deal for Scotland
    • I'd suggest that together you can make it happen