The Telegraph has declared today that:
Oops! There's a £100 billion hole in Jeremy Corbyn's tax plans
This all comes down, quote literally, to Jolyon Maugham's blog in which he declared (without quite clearly ever having read my work) that he could not see how there could be a £120 billion tax gap and then claimed that Jeremy Corbyn had said he could collect it all even though if Jolyon had, again, read my work on which he is relying he would have noticed that I had always said that no more than £20 billion was recoverable.
Jolyon - and so the Telegraph - based his claim on this statement in Jeremy Corbyn's tax manifesto, for which I have no responsibility at all:
Three things. First, it is normal to explain large numbers in terms people can relate to: so, £2,000 a head.
Second, it is true that this money is taken from us all.
And then, thirdly, we come to the critical phrase:
And we can address this
Now Jolyon is a barrister; he should know a thing or two about words. And he should know then that in politics there is a massive difference between "we can stop this" and "we can address this". The first is an absolute. The second implies a plan of action.
Let's put this in another context. Suppose we were discussing murder statistics and there were 1,800 a year. It would be quite fair to say "that is five a day". And a serious politician would never say "we can stop this" but could and probably would say "we can address this" and set out how they might do so. The aim would be to reduce the problem: the words imply that because everyone knows that it cannot be solved.
But Jolyon said something different: he said those words mean that Jeremy Corbyn said £120 billion could be recovered. He did not ever mean that.
How do I know? Well if he had thought that was possible his close friend and colleague John McDonnell MP would not have needed to write in the Guardian yesterday under the title:
Jeremy Corbyn would clear the deficit — but not by hitting the poor
He could just have said 'job done'. But he didn't, of course.
So Jolyon is wrong. And so are the Telegraph. Both found a scoop where there was no story to tell. Because I had always said there was only £20 billion at best to collect, and Jeremy Corbyn never implied otherwise as far as I can see.
Thanks for reading this post.
You can share this post on social media of your choice by clicking these icons:
You can subscribe to this blog's daily email here.
And if you would like to support this blog you can, here:
The only sensible response to ‘how are you going to pay for it’ is ‘by spending the money’.
You expand the tax due by spending – in the same way that if you want to breathe out, you generally have to breathe in first.
Tax is a flow variable measured in £s per annum. And that is as different from £s and miles are from miles per hour.
I know he’s only a Tax QC but you’d think he could recognise turnover when he sees it.
So by austerian logic, if you need a student loan, you shouldn’t go to university. If you need a mortgage, you shouldn’t buy a house. They seem to forget that there is a difference between spending and investment. The correct response is that the anti-Corbyns are starting from the wrong end. You need to START with where the money will go and what it will achieve. THEN look at the cost to see if it is worth it.
The second line of argument is that Government spending is some sort of a black hole. This is a complete logical fallacy. If the Government spends money, it goes straight back into the economy. You may dislike where it goes, but it doesn’t disappear. It is tax breaks for the wealthy that cause money to disappear.
The third line of argument is that Government spending is always incompetent. Certainly it can be. But if you made the same sort of generalisation about those of a different gender, skin colour, or sexual orientation you would deservedly get into trouble. Any system can go wrong and the correct response should be to address the problems specific to the system. But perhaps I am prejudiced, since I worked for a Government-funded body that on a modest budget has so far supported research leading to 29 Nobel Prizes, including 8 this century.
The comparison with murder statistics is misplaced. People know that murder is not going to be eliminated entirely. The general public’s knowledge of tax gaps, however, is virtually non-existent. If they see a headline figure of £120bn (especially in the current climate), next to comparisons with the NHS budget, next to a per capita breakdown for the famous “every man, woman, and child”, without any qualification, then in my view there is a clear inference that most, if not all, this sum can be collected.
Even if you do not accept this, you must surely accept that – due to there being such a massive differential (6 times) between the alleged Tax Gap and the amount you say is recoverable – that there should have been a caveat in the manifesto explaining that. For someone who has campaigned on being an honest, straight talking guy, Corbyn has clearly been disingenuous here.
Finally, your insistence that you never said that the entire £120bn could be collected, whilst possibly correct, may have looked better if you had announced that fact as soon as the Corbyn team started throwing around the £120bn figure without qualification. As it happens, you are now having to defend yourself because the £120bn figured has been rumbled by JM and others, and it’s making you look defensive. This could have been avoided with a timely announcement that, actually, only £20bn can be recovered.
I would have thought it obvious I accept none of that
I am defending myself against no one
Jolyon made something up and got in the Telegraph as a result
He should know better
I think all this would have been avoided if corbyns statement had been clearly and reviewed by Rm or someone who knew something about tax. At best it’s lazy drafting at worst is misleading
No, it’s just obvious
Unless you want to misread it
Richard – on two other blogs you were debating with Tim Young around whether PQE creates an interest burden for the BoE – this all started when Tim joined a discussion you and I were having. You asked Tim the question how does PQE create a new interest bearing reserve.
I think Tim didn’t clearly explain his point, and as a result you haven’t had a chance to reply to it clearly. I wanted to clarify what I see as being the issue, as I’m interested in your response (and I hope you don’t mind me hi-jacking this post to do so).
According to your description of PQE a public sector body will sell bonds to a private bank, and those bonds will instantly be bought up by BoE (through a special purpose subsidiary created for the purpose).
I’m assuming:
1) That the BoE will loan the funds to this subsidiary (thereby creating new broad money, as happens every time a bank makes a loan).
2) That when the subsidiary transfers funds to the private bank to make the purchase of bonds, the corresponding transfer of CBR to that bank’s account with BoE will be newly created CBR.
This is exactly what happens with QE, and I’m assuming it will happen with PQE too. This creation of CBR increases the quantity of CBR in the system as a whole. That CBR has to sit somewhere in the system, i.e. in the reserve account of a private bank with BoE, earning interest.
Increasing the quantity of CBR in the system was, of course, one of the purposes of QE (though a secondary purpose, if you believe the BoE literature).
If PQE works like this, this is where new interest-bearing reserve comes from. If PQE doesn’t work like this, that would be fascinating.
For me (can’t speak for Tim), this is not a cricism of PQE – I just like to be absolutely clear on exactly how it would work in practice.
I have now addressed this issue http://www.taxresearch.org.uk/Blog/2015/08/16/pqe-gilts-and-the-cost-of-borrowing/