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Clegg – deserving all the failure that awaits him in his future

Apr 112011

Clegg seems to have got just about everything on NHS reofmr wrong. According to the Guardian:

Clegg said GP practices would have to meet a “whole series of tests” before being allowed to take on commissioning functions.

He seems to think GPs want this responsibility – they don’t, it’s being forced on them.

“I have been very clear we are not going to allow GP consortia who are not ready to take on these commissioning functions if they are not ready by the 2013 deadline,” he said.

But the PCTs will have gone anyway – so there’ll be a massive management void.

“You clearly set in motion a whole series of tests to make sure they are able to take on those responsibilities.

So my first response, above.

“If they are not, they will not, and then alternative arrangements would need to be made. Asked whether the government would reconsider the plan to scrap primary care trusts, Clegg said there was no point having a “pause” in the legislation unless there was a proper rethink. “I think it’s a good thing that we are listening,” he said.

Listening to what? The panic button going off, often?

He sought to play down party divisions by insisting that neither ministers nor his own party wanted to “reopen the Pandora’s box of the basic design” of the bill – giving GPs more financial responsibility, reducing bureaucracy and giving local authorities a greater say in the way the health systems works.

Oh yes they do – it’s the design that’s the problem.

While NHS reforms were necessary, “the devil lies in the detail” of the legislation, Clegg said.

Like no one knows what it is – but the money is being spent anyway?

“Everybody agrees it is right to put more financial responsibility in the hands of GPs who know the patients best, but how you do that … the devil lies in the detail,” he added.

No they don’t – I don’t want my GP to have the conflicts of interest this Bill introduces.

And nor do I want the NHS privatised.

Let’s be blunt – this man deserves all the failure that awaits him in his future.

The core mission – by Greg Barker

ConDems, Conservatives Comments Off

Apr 052011

This says all we need to know about the Tories:

It says all we need to know, I am afraid, about their Lib Dem allies.

The aim is to outdo Thatcher.

The aim is to slash.

The aim is to liberate business.

The aim is to make the wealthiest wealthier.

And forget the rest.

That’s all it’s about.

Dixons says its profits fall is the fault of government cuts – Osborne please note

ConDems, Conservatives, Economics 1 Response »

Mar 302011

It’s been an article of faith for right wing economists that the private sector is constrained by government. The only reason it cannot flourish, they have argued, is that it is priced out by an inefficient state sector. Just cut that state sector activity, they say, and watch the private sector rush in to fill the space, and flourish. That will, they argue lead to unrestrained growth.

Osborne buys the argument hook, line and sinker. It’s the gamble he’s staking our well being on.

Some of us have said, loud and long, that this is – shall we be polite? – pure bunkum? In a recessionary environment (and we’re in one) by definition there is masses of space already available for the private sector to do whatever they want – there are cheaply priced resources going spare all over the economy. There’s nothing holding them back – least of all government. Indeed, we / I argue, that it’s government spending that keeps companies going in this situation when they themselves clearly have no clue what they want to do becasue they seem incapable of generating demand for the goods and services they supply which must, as a result, not be meeting market need.

And who is being proven right? Well, not the right – as today’s announcement form Dixons – long a bastion of the CBI with its clarion calls for government cuts ringing out frequently over the economy – proves. As the Guardian reports:

The boss of electricals group Dixons said that government cuts were having a “chilling effect” on consumers as wilting high street demand for flatscreen TVs, sofas, jewellery and even takeaway pizzas pointed to deteriorating confidence.

John Browett said public sector workers were sitting on their hands as they waited to learn if they would keep their job. “There has been a bit of a pause in the market which we think is the result of the way people are reacting to the government cutbacks,” he said. “At the moment many government employees are in consultation and this is having a chilling effect on expenditure on bigger items.”

So government cuts cause business to retreat – just the inevitable consequence Keynesian economics predicts. And that’s exactly why the CBI was so stupid to demand them. And why Osborne is so stupid to do them.

But on he goes, destroying the economy in his wake, safe that his own future will be secure, and as a good neoliberal, what else matters?

Business passing its tax bill to ordinary people – with the help of George Osborne

ConDems, Conservatives, Corporation Tax Comments Off

Mar 222011

From the Daily Mail this morning:

Following the ‘corporate roadmap’ published by the Treasury in the autumn, Osborne could also introduce exemptions on profits from intellectual property and, crucially, exempt a large portion of overseas ‘finance income’ from corporation tax.

Many UK-based multinationals are already bending the rules by setting up financing subsidiaries in low-tax jurisdictions.

Profits are funnelled through these ‘treasury’ divisions, and are subject to lower rates of tax when the cash is moved back ‘on shore’. Richard Murphy, director of Tax Research UK, fears that tomorrow’s-Budget will ‘legitimise’ these ‘grey areas’.

The opportunities for major corporations to avoid ‘significant amounts of tax’ are likely to ‘ proliferate’ over the coming years, he argued. Not only will this dramatically increase the burden on ordinary workers, but it also creates even more obstacles for smaller companies, which generally don’t have the know-how or resources to exploit tax loopholes.

It’s fascinating that the Mail want to cover this angle – and sought me out to do so.

This is a significant shift in their thinking – and no doubt that of middle England, which they are often seen to represent. The idea that big business is synonymous with the interests of middle England is now seen as farcical: they are opposed. Nowhere is that more obvious than in the tax arena.

The only intertest group in the UK being offered tax cuts right now is big business.

The only people whosde income subject to tax is being reduced is big business.

The only people guaranteed to pay less as a result are big business.

Even those who will be lifted out of income tax tomorrow will not enjoy this advantage. They’ll be paying more VAT and losing benefits: they’ll almost certainly be worse off over all. But big business alone marches on with more in its pocket – more to spend on privatising our public services at cost to us all.

Osborne’s cynical ploy is staggering.

Yesterday the economics of the playground, today the verges of madness

Auditing, ConDems, Small business 7 Responses »

Mar 172011

I missed this letter in the Guardian on Tuesday from Philip King, CEO of the Institute of Credit Management, but it’s well worth noting:

The business secretary announced on 4 March that small firms will no longer have to produce independently audited accounts in a measure he believes will save 42,000 businesses £40m per year. I’ve always respected Vince Cable and have no doubt of his commitment to helping small business, but such a move demonstrates a naivety that verges on madness. I agree with him when he says that “one of the barriers to growth is the burden of regulation ‚Ä¶ it takes up time and stops business growing, and that means our economy does not grow”. That is why the ICM supports the reduction of red tape. But please can we understand that producing accounts is not “administration” and neither is it unnecessary red tape.

Far from helping small businesses, the move is more likely to damage a company’s access to credit, therefore restricting growth and in fact adding to their costs. The government needs to get away from this idea that reducing red tape will always mean reducing costs to small businesses. Businesses extend credit to one another based on the trust that comes from knowing that the company is financially viable, and one of the essential proof points is a set of audited accounts.

Banks too look to lend on the basis of sound financial data, so limiting the amount of financial information available will do more harm than good. The government must stop sending mixed messages. If it wants small businesses to drive the economy, this is not the way to do it.

Precisely.

But the neoliberals who think all government is bad and all regulation a burden continue their march towards……..well, the verges of madness.

And yet more evidence is provided of the economics of the playground dominating thinking in the Treasury, BIS and elsewhere.

Clegged out

ConDems, Conservatives 5 Responses »

Mar 042011

Barnsley said it all: the Lib Dems come sixth after a Labour landslide with UKIP beating the Tories into thrid place.

People hav had enough, already. Those who can’t face Labour (and some never will) are voting for the right wing extreme, but almost no one can face voting for the coalition partners.

Remember what Mervyn King said – that whoever was in power now will be out of office for a generation? It looks like it.

Oxford and HMRC data proves that the corporate tax gap is £12 billion – as I said, three years ago

ConDems, Conservatives, Corporation Tax, Tax avoidance, Tax gap, Tax justice 30 Responses »

Mar 032011

I have referred already to the Oxford report on corporation tax, just published, and Robert Peston’s reaction to it.

There is however another important point to pick up, and that is that the data confirms I was right all along on the scale of the corporate tax gap.

As Oxford note:

Within each sector there is evidence that, as a proportion of trading profit, the tax liabilities of the largest 100 companies are generally lower than for other companies.

So, on average large companies are paying tax at less than the 21% at which small companies pay tax.

Then note:

Independent companies pay just over 10 percent of UK corporation tax. By far the largest share of corporation tax is paid by companies that are part of multinational groups, with a similar proportion from UK-owned and foreign-owned groups.

By ‘independent companies’ they mean companies that are not part of groups – which means UK small companies in other words.

And

The top 1 percent of all companies pays 81 percent of UK corporation tax.

In fact, based on graphs in the report it seems 90% of tax is paid by 10% of companies.

Corporation tax paid in all in 2009/10 was £36bn. It was £43bn in 2006 when I did my research for The Missing Billions for the TUC.

Now let’s pull this data together. 90% of companies paying 90% of all corporation tax do not pay at the expected rate of 28% but instead probably pay at a rate less than 21%. Of course that’s an extrapolation of what Oxford say, but it seems a fair one based on what they say. So, currently £32.4bn of corporation tax paid is the result of tax charged on large companies at a rate of less than 21% (let’s call it 20.5% – we don’t want to over-egg this) when as Oxford note (and they would not note this unless they thought it reasonable to surmise this) a rate of 28% was expected, irrespective of allowances and reliefs.

So let’s gross up £32.4 billion and see how much tax would have been paid if settlement had been at 28% and not 20.5%, and the answer is £44.3billion. Take off the sum we first thought of – i.e. £32.4 billion – and the difference is £11.9 billion. Which give or take is near enough £12 billion. In fact if I’d assumed the rate was 20% and not 20.5% the gap would have been £13 billion.

In the Missing Billions I said the expectation gap – the difference between the sum we’d expect large companies to pay and the amount they actually pay – was £12 billion a year at the time. And now it’s near enough almost exactly £12 billion.

The fact is the Missing Billions was right all along. And those who have used my data as the basis of their tax protests – saying we’re not all in this together as ordinary people and small business are paying for the abuse big business and banks in particular have unleashed on our economy – can take considerable comfort from the fact that they now have the backing of Oxford University and H M Revenue & Customs data to show that the number they have been using on corporate tax avoidance – the activity that ensures they’re not in this altogether with the rest of us – was right all along.

Thanks Oxford. I appreciate your support.

The question now is – what is anyone going to do about it – because I suspect this will only reinforce demands for action. £12 billion would

The words ‘horse’ and ‘bolted’ come to mind

ConDems, Conservatives Comments Off

Mar 032011

The FT reports:

The UK government has accepted concerns raised by Ofcom, the communications regulator, that more regulation is needed to protect media diversity, insiders said on Thursday.

A new power to order divestments by media owners who are deemed to be too dominant could be included in a new communications act by 2015, they added.

The words ‘horse’ and ‘bolted’ come to mind.

Do they really think we’re stupid enough to accept that this will make their decision on Murdoch acceptable?

Taking Peston to pieces on tax

ConDems, Conservatives, Corporation Tax, Economics, Tax avoidance, Tax gap 25 Responses »

Mar 032011

Robert Peston has looked at the Oxford Centre for Business Taxation report on corporation tax in commentary on his BBC blog and come to some very strange conclusions.

Peston’s main arguments are (and I edit to reduce to this list):

1) Multinationals have contributed 85% of all UK corporation tax revenue over the past 10 years. in 2007 UK owned multinationals paid £16.5bn of corporation tax, foreign-owned multinationals paid £17.7bn, and “domestic groups” paid only £1.1bn. So, Peston argues that without corporation tax paid by multinationals, British multinationals and foreign ones, there would be little revenue at all from this source. So it seems to make sense to encourage them to stay here.

2) However, the research also indicates that as a proportion of trading profit, the tax liabilities of the UK’s 100 biggest companies are lower than for other businesses: unsurprisingly, big companies have the wherewithal to engage in sophisticated tax planning that reduces their tax bills.

3) Even so the biggest 1% of companies pay 81% of all corporation tax. So although in an ideal world, some may want the corporation tax system to be more progressive, in this less-than-ideal world big businesses are making a non-trivial contribution.

4) Although the UK’s corporation tax rate has been well below the average for the G7 biggest economies for more than 25 years, UK corporation tax revenues as a proportion of GDP have generally been well above the G7 average. Peston claims that this provides some evidence, therefore, that lower headline rates which reduce the incentives for avoidance or for relocation abroad increase the overall take from companies.

Unfortunately Peston’s analysis is simplistic, too accepting of the arguments and prejudices in the underlying report and fails to look for the external factors that influence the claims Oxford make, but twhich they have not drawn attention to themslves. In other words I’m arguing he’s reporting and not analysing what they had to say.

To summarise my counter arguments they are:

1) Of course multinationals pay most tax, but there are numerous reasons for this. These include:

a) The UK has the largest financial market in Europe clustering financial, oil, mining and other companies in a way that no other centre in Europe does. It probably has more multinational companies per head of population than anywhere else in the wold. Of course they make a disproportionate contribution.

b) The proportion of profits within the UK economy has risen over recent years. I show this here. Almost all of this will relate t multinational corporations – so unsurprisingly they are paying more tax. But this may not be a cause for celebration – remember this means that labour is getting a smaller share and that means the wealth disparities in the UK have risen. I don’t consider that good news.

c) Multinationals earn more for a number of reasons – first they can exploit developing countries (and I think they do); second they can transfer price to increase yield; third many create monopoly profit by eliminating domestic competition. Domestic companies are disadvantaged as a result. This theme could be developed – and I do not have room to do so here – but the finding is, I suggest unsurprising. The issue is not that multinational corporations pay more – wherever earned – but that they use their power to oppress local competition. That oppression is not necessarily good for the UK economy. UK companies employ more people in all likelihood – and that generates more tax and more added value.

2) Let’s be clear about the second point – that large companies pay lower rates of tax than smaller ones. I have argued this previously and it has been denied – but Oxford has now confirmed my findings. But I have made this an issue for good reasons. They are:

a) This reverses the policy direction of successive UK governments. We have decided to have a progressive taxation system – and that continues to be what parliament endorses, and yet that is not what we have got. That creates what I have called an ‘expectation gap’ which rightly gives rise to protest. That this exists is confirmed by the newsworthiness of the story Peston picks upon. The gap is real, and I’ll assess its size in another blog, later.

b) If the intention of parliament is not being fulfilled and the messaging that it is intended to deliver to the UK population and business community that there is a deliberate bias in our tax system to help small business overcome the disadvantages it faces when competing with large business is not being delivered in practice then very clearly our corporate tax system is not working as expected, and that is enough reason to demand change in it.

c) If allowances and reliefs, however legally claimed, bias in favour of banks and large companies then those allowances and releifs are not working as intended;

d) If large multinational corporations pay no more tax tha small local companies, despite the intention otherwise, the evidence of international tax planning is high;

e) As Peston himself says, the evidence that access to expensive advice distorts outcomes is also high – and also evidences that th outcome is not chance, but deliberate and clear evidence of the tax planning that I and others allege takes place.

3) Peston’s argument assume i) progressivity does not matter ii) it’s not achievable and c) if w tried to introduce it then business would leave. All three are wrong. We bias small business because it has additional costs over large business. By implication we now have a tax system that biases against domestic small business. In addition, we have a tax system that may well increase and not reduce inequality – and theRight hate this being said, but inequality harms all in a society. It’s also just not true business will leave the UK. The fact is people are here. Markets are here – including the financial markets tat have nowhere else to go in our time zone – and skilled people are here. Business is not going anywhere else. And for good reason. This is where money can be made. That means we could increase the non-trivial contribution business makes without changing the business dynamic.

4) This is where Peston really shows his lack of knowledge. Tax yield is a three part function. It is:

(Tax rate x tax base) – Tax avoided and evaded = tax yield

I will leave evasion aside now – although it is an issue I will return to soon. The existence of avoidance is already accepted by Peston. It’s the remaining function he shows he does not understand. Countries have a choice on tax base. That’s how they define the profits subject to tax. The UK has chosen a residence basis to 2009 – when this data was valid. Now it is moving to a territorial basis – which is the basis of tax heist George Monbiot, I and others have written about.

Let’s leave the tax hesit aside for a moment and make clear why the UK tax base is so big – which proves why it is not rate that gives rise to our realtively high tax take. The base is big precisely becasue we have included world wide income in the tax base. So we collect more tax and rightly so – which is another issue I will return to soon. Our base gives us a big yield.

The fact that London is in the UK gives us another boost – nowhere else proportionately has the same boost – as I note above. And it’s not going anywhere else, so that’s also a fact to consider. But that’s base again, not rate.

And we should also not ignore the fact that the number of small companies in the Uk has jumped by more than a million in a bit over a decade – giving us by some way the largest number per head in Europe, more obvious tax havens apart. And some of them do pay tax, although the more interesting question (on which more later) is why so few do.

Put these facts together though and Peston’s claim that a low rate works is just pure Laffer curve fantasy and he should know better than that.

The truth is much more prosaic. Go back to Peston’s blog and what he was trying to prove was that Monbiot was wrong to say that the latest Tory reforms on overseas branches, dividends and controlled foreign companies are not a tax heist. And yet Oxford confirm otherwise. Labour, they say, increased corporate taxes in 2008. The Tories have undeniably they say reduced them in 2010 – and that’s before the new rules on offshoring. Add those in and something much more important happens. As Oxford notes, few companies have overseas income but those that do have a lot – indeed the credit for overseas tax was £8.1 bn in 2008-09, the last year for which data is available. To assume that this gave rise to just £100 million of additional UK tax that will be the sum total now lost from changes now made is absurd: it must be more than that, because we’re fundamentally changing our tax base.

The result is Peston is wrong, and maybe very wrong. He clearly needs a crash course in tax. Because on this story he’s bought a line that is utterly misleading, and it’s not the job of the BBC to repeat such things in such unquestioning fashion.