The Guardian reports this morning that:
Jeremy Corbyn is to propose a tax on big technology firms such as Facebook, Google and Netflix, to subsidise the BBC licence fee as part of a sweeping range of measures to reform the British media industry.
Here we go again: another crass suggestion of a hypothecated tax from Labour. I have written extensively in the past about why hypothecated taxes are not the answer for the NHS. Now we have another such proposal, for another populist cause. And it is just as bad.
That's firstly because it's time Labour learned tax pays for nothing. Tax recovers the money - the public money that the government alone can create - that the government spends into existence. Subscription to the narrative implicit in Labour's argument that nothing can be done by government unless tax is raised first is to subscribe to the entirely neoliberal line that there is only ‘taxpayer's money' and that then what government can do is entirely down to the ability of the private sector, and it's tax payments. Since that destroys the entire logic of Labour this line of reasoning is a wholly self-destructive logic for it to follow.
Secondly it's because this logic makes BBC funding entirely dependent on a bad thing happening. And what is the sense in that? Tax bads, by all means. That is a wholly appropriate use for tax. It is a market correction. But whatever you do don't make good things dependent upon perpetuation of the bad. That's just crazy.
But Labour seems not to have noticed.
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When will they ever learn? Despair 🙁
knowing what the bbc represents,well for me its the establishment,then looking at labour which used to represent socialism why on earth would they support the bbc on anything? selling it is the answer!
In the past I would have backed a return to the TradBBC of the 1970s where some dissent was allowed as long as it was on programmes that no-one watched. It’s too late for that, COMbbc should become voluntary subscription only. It’s a commercial channel in all but name so let whose who want it, pay for it.
But what can you expect him to say when he and McDonnell have chosen to take their advice from people of the neolibetal faith? I enjoyed Bill Mitchell’s 3 part extended critique of Labour’s proposed fiscal policy in which you got a number of mentions. Do the Labour Hierarchy not read these blogs?
I presume not
One wonders what they do read 🙁
Buzzfeed and other ‘woke’ publications presumably. Economic policy isn’t sufficiently sexy or Instagrammable.
Balanced Budget and hypothecated taxes and ‘diagonal use’ = political pollster guff (we will tax X, raise the funds, and spend over at A or B ). Groan 🙁
Further agree with RMs perspective, the point of taxing ‘bads’ is, in the end, to stop so much of the ‘bad’ happening. Thus the bads ‘tax revenue’ should go down over time as it succeeds. Guv gets less and less money, as the ‘public purpose’ for your tax succeeds. Such bad faith towards the 500,000 new Labour members and the voters. Is that all we have? Groan 🙁
Totally agree Richard. Tax hypothecation is like mugging in a lift – wrong on many different levels. Please continue to attack the concept wherever and from whomever it rears its ugly head.
One could despair.
Or emigrate.
………………or go on holiday as I am doing tomorrow.
See you all soon.
Enjoy
Before any election Labour will need to convince me, and probably many others, that they are no longer wedded to neoliberal economics. I have already made a personal commitment to not vote for any party that espouses this nonsense ever again.
They have much convincing to do….
Agreed. I’ve recently left the party mainly because of this. Personally I’d rather Labour lose the next election than win, mess it up by adhering to neoliberalism and make progressive policies look bad for another generation.
I half suspect that is the point of the existence of the Labour Party – an establishment stooge pretending to be progressive.
Liarbour has always been the Judas goat of British fascism, Corbyn, like Wilson in the early 60s is lipstick on a pig. No partei willing to participate in un-democratic FPTP elections is worth voting for, only boycotting.
Why not read the whole of Corbyn’s MacTaggart speech and see if you think he is espousing neo-liberalism?
Jan – His speech makes the assumption that taxes raised from working people or corporations are necessary to fund government expenditure. THAT IS a neoliberal paradigm, propagated by Thatcher in 1979 and drip-fed to people for the last 40 years. The idea that a sovereign government that issues its own non-convertible currency is fiscally constrained by what it can raise from the non-government sector, either through borrowing or taxing its own money back is actually preposterous if you think about it for more than one second.
Who issues the sterling circulating in non-government hands? If you think it’s WH Smith, Homebase or the Big Money Corporation, you’re wrong. It’s the government. Government spends in order to tax, not the other way round.
Corbyn is adopting the position that the early explorers assumed – that the sun rises and sets every 24 hours as it orbits the earth. It sure looks like that, and on most days it doesn’t matter that you have it the wrong way round, except when the day comes when you are planning a trip into space, when suddenly it becomes rather important.
If you are planning on running an economy, it helps to understand how money works.
I agree with your political and economic analysis
On the subject of hypothecated taxes/taxing bad behaviour I did think that it would be a good idea to tax the industrialized food/take-away/food advertising industry in a way that was linked to the incremental poor diet-related costs that the NHS faces (or to provide a subsidy for healthy food/healthy food promotion).
This might concentrate their minds a bit more on formulating food that isn’t so harmful and not mindlessly striving to get people to eat more and more of it!
Reasonable idea or hypethecation idiocy ? 🙂
Nothing wrong taxing “bads” as long as you do it because it’s bad and not to “fund” an alternate good. While making that abundantly clear to the electorate.
Politicians need get some moral fibre and to stop playing games with people’s lives or just do some basic research.
I think we should get ready for a split in the Labour movement as it’s traditional values are about to be canned. Idly, I would suggest there could be a social democratic breakaway such as in Scandinavian countries where there are health co-payments or insurance payments that, while not taxes, do go toward the health care being provided. The other breakaway would be in the direction of a fully comprehensive welfare state with the elimination of any ethic of personal family or local responsibility.
What?
I find the last comment bizarre
Jang Sung Taek, who is, unfortunately, never idle (I assume a pun and no spelling mistake) ,
‘Such as in Scandinavian countries where there are health co-payments or insurance payments that, while not taxes, do go toward the health care being provided.’ 🙂
Yes, I could go for that (you could add union/insurance unemploymeny payments). Socialist Denmark is not quite the world of the Guardian reader who has never been there, it is true. As it happens, I accept you argument that the mechanism: ‘markets’, need to be distinguished from from particular forms of ‘capitalism’ they operate within including, in this case, (Samuelson’s term) the ‘mixed’ version in Denmark circa. 1945-2000.
‘The other breakaway .. ‘ 🙂
The insurance industry would love you for this. But why not go the whole hog?
– make children pay for education,
– make victims of crime pay for policing
– etc.
Hey, why bother having a civilised state at all? Long live the libertarian ideal. Of course there will be losers but that would be good. The lucky few need someone to point at and shout “looooooserrrrrrr”.
Hypothecated taxes may be anathema to `those in the know` but to the average punter they sound like a commonsense idea.
It`s all very well being purist about matters economic but maybe sometimes espousing a line which will connect with the average punter (and probably not cause any big time damage if it were inaugurated) could be a canny move.
No way!
Doing the wrong thing is always doing the wrong thing
I’m sort of hoping that Labour have taken a page out of the Tory playbook. Not by taking on any of their policies, of course, but the way in which they claim they will do one thing when attempting to get into power but then actually do something entirely different when actually elected!
Richard,
“Doing the wrong thing is always doing the wrong thing.”
This times a thousand.
At one point, sailing to close to the worlds edge was considered to be a bad idea.
At one point burning witches was considered acceptable.
And, today the public believes that tax funds stuff. It is a really nonsensical idea when you really think about it, Why would the government, who controls the money we use, need that same money from us in order to function? Such nonsense!
But the brainwashing starts from a young age…. at school, kids are taught that third world countries are poor because the country has no money to pay for public services, for instance, neglecting to tell them its more to do with corruption and war.
@ brian faux
“Hypothecated taxes may be anathema to `those in the know` but to the average punter they sound like a commonsense idea.”
Just because the vast bulk of individuals live in a sort of “Stone Age” society in regard to their understanding of economics and monetary systems doesn’t mean you have to accept living in that kind of backward and disfunctional society.
Brian Faux – Not sure if your surname is meant to be ironic in this context but I must echo Richard’s point here. Imagine if you would a discussion taking place between two potential space explorers… one believes that the sun goes around the earth, once every 24 hours, rising in the East and setting in the West. The other insists that whilst that looks like the case, and that everyone else assumes that to be the case…..the reality is that the earth goes around the sun once every 365 days. He would be laughed at and scorned. He would be regarded a fool. “You only have to look out your window every day to see the truth! -You don’t believe your own eyes!” He would also not be able to raise a penny for his exploration, whereas explorer 1 has all the funding and support from a grateful nation who cheerily send him off on his journey to impending death. Arguing the sun orbits the earth, because others believe it, shows the weakest of intellects and a backbone of jelly.
I think it is the baggage from long ago where a labour administration had to borrow from the IMF, whatever the facts, that is what is in the public consciousness. Also, the general meme that Labour is good at spending other people’s money and that silly note about how ‘all the money had been spent’.
It will require a step change across so many dialogues to rid the electorate’s views and I see no hope of that happening, never in the present climate.
If they tried to tell the facts regarding the origin of money, tax and spending (I mean spend and tax of course!) they would have an uphill battle.
Dammit, what’s so wrong about taking on a struggle
Do we just curl up and given in to neoliberalism instead?
Don’t socialists care any more?
“Don’t socialists care anymore?”
Socialists….?
Have you seen one recently ? As rare as rocking horse fewmets in the political arena.
Truly an endangered species.
Labour lost their way shortly after the end of the Second World War. They were subject to what is now called Neoliberal entryism. When it comes to understanding money by no stretch of the imagination can they be called a radical party, the majority of its politicians live a sort of monetary illiterate Stone Age not a Money-Age. They fail to understand the root purpose of money is to act as a caregiving claim that needs to be equitably distributed. They fail to understand which agencies can create it because they don’t understand it’s a balance sheet phenomena with the UK as a sovereign government being able to create money, reserves and cash from thin air without leaving a liability on its balance sheet. They don’t understand the clearing banks do have a liability on their balance sheets when they create bank loan money from thin air they need reserves from government for the payment settlement system. Finally they don’t understand the UK government has a duty of care to regulate the use of money in the economy in the interests of all the country’s citizens as the hyper-inflation of UK houses on and off since the early 1970’s and the huge outsourcing of jobs reveals!
Unfortunately, I suspect all of that is true
they don’t understand it’s a balance sheet phenomena with the UK as a sovereign government being able to create money, reserves and cash from thin air without leaving a liability on its balance sheet.
Schofield, as I’ve pointed out to you before, that is not MMT. That is not what MMT and the MMT thinkers say. What they say are that the money, reserves and cash ARE the balance sheet liability. You probably understand the theory, but it is a serious error to ever talk that way. Others might not. Talking as if and then imagining that money is some free floating magical thingie that is not a balance sheet liability on a correctly drawn up government balance sheet was roughly the way that the “Keynesian” era ignored finance, committed intellectual suicide and transformed into the monetarist fiasco. Keynes of course didn’t mean it that way, but he tended to start the bad practice of talking that way himself in The General Theory (as opposed to The Treatise on Money).
Indeed, money is an IOU and thus always contains a liability – BUT the liability of issuance is to redeem in the same issuance – which the issuer can always provide. If I write an IOU to my children for one hug, then my liability is one hug – which I can always supply on redemption of the IOU. If I present £20 (its IOU) at the bank, the government is liable to redeem the IOU for £20.
In Jeremy Corbyn’s MacTaggart speech I found these three references to funding for the BBC
“One solution to funding public interest media could be by tapping up the digital monopolies that profit from every search, share and like we make.”
Referring to local media: “This important part of the media, and its fantastic workforce, could also be supported by reform and expansion of an existing BBC scheme, which sees ring fenced funding for ‘local democracy reporters’ employed in local papers.”
“In the digital age, we should consider whether a digital licence fee could be a fairer and more effective way to fund the BBC.
A digital licence fee, supplementing the existing licence fee, collected from tech giants and Internet Service Providers, which extract huge wealth from our shared digital space, could allow a democratised and more plural BBC to compete far more effectively with the private multinational digital giants like Netflix, Amazon, Google and Facebook. This could also help reduce the cost of the licence fee for poorer households.”
These items form a very small part of a long and comprehensive speech which I won’t attempt to precis here. People who are interested in what he actually said rather than just the media headlines will, I am sure, go to the original. It can be found on the Labour Party website under Stories.
That’s a hypothecated tax
A view from Scotland
Johnston Press owns the virulently Unionist anti-SNP/Independence Scotsman publication.
But of course if you don’t like that don’t buy it… and indeed its readership has seen one of the sharpest declines in any newspaper in the UK: Johnston have posted a loss nearly 400 million in the last two years.
So…hark the toot of the cavalry under the guise of “BBC – Local News Partnership…”
The BBC is likewise virulently anti-Independence but…you just can’t just not buy it as you would the “Scotsman” because of course not paying your licence fee is illegal.
So now the Johnston Press is subsidised by the BBC… i.e. anti-Independence Corporate media is now effectively within the same legal financial franchise pertaining to the BBC.
Independence supporters are thus being made by law effectively not only to subsidise an anti independent BBC but now also to subsidise an Anti Independence corporate press as well.
And now Cobyn:
“…This important part of the media, and its fantastic workforce, could also be supported by reform and expansion of an existing BBC scheme, which sees ring fenced funding for ‘local democracy reporters’ employed in local papers.”
… and Corbyn wants to expand these BBC – Corporate media subsidies.
You don’t have to smell a rat when you can see it up and running.
I think you’re saying that for taxation and economics experts this is hypothecated and bad because it reinforces an unhelpful understanding of how governments and money work. However, politically, taking money back of the big exploiters like Amazon in order to subsidise everybody’s telly cost is pretty smart, isn’t it? Like making a link between getting money back off “charitable” private schools to fund school meals for all – economically that’s not how it works but the simple symbolism is powerful.
I have no problem with taxing ‘bads’
Just do not link them to funding ‘goods’ because then good things are dependent upon bad ones and that is a crass idea
I think the rhetoric is PR. They know full well that if they start openly making policies based around MMT, the media will absolutely roast them on a spit. The reason hardly anybody knows that the tax-and-spend model is nonsense is precisely because the media won’t discuss it in those terms, and any politician who does is immediately presented as a reckless idiot, and all the usual fantasy talk about ‘hyper-inflation’ and ‘this sort of thing leads to Hitler’ etc runs riot. They’re simply forced endlessly into giving explanations as to how they will ‘raise the money’, so every time they’re criticised for ‘unbudgeted promises’ they have an answer that everyone will understand.
It’s sad, but I fear it’s probably an acceptance of political reality.
The politics is F**ked
And will remain so for as long as we have FPTP.
The Overton window has already been significantly moved to the left. Privatisation is being challenged, nationalisation discussed, social housing is on the agenda etc. Why not keep going? Most people are aware they don’t really understand macro economics. Simply repeating “that’s not how money works” would eventually force the questions on how it does really work. Discussion of reality can only be a good thing.
I agree, and consider Martin Odoni (for those who don’t know him) to be an informed commentator and respect what he says accordingly, but this doesn’t alter the problem that, as a future chancellor, McDonnell entirely fails to convince.
The explanation of how money works in sovereign systems needed to be made two years ago, when Corbyn and McDonnell assumed the leadership. Two years of constant rejection of the neoliberal tax and spend would then not be a surprise to a public largely impacted by cuts to fiscal expenditure whilst deficit reductions forced them into depleting their savings and/or increasing their own deficit. Once you have established your credentials in understanding sectoral balances, and you are able to predict economic outcomes accurately, your stock improves with every new headline about High Street collapse, private indebtedness and local authority bankruptcy. MMT is a lens, not prescription – and that needs to be the message…..or should have been – I suspect it’s way too late for McD to suddenly change his opinion on all this – he’d now look a total klutz. He has expended too much political capital in promising to balance the books over 5 years etc.. to suddenly announce that our deficit is actually way too small, according to MMT.
I tried….
I promise
My reward was to be told from the Dispatch Box that I was not a good macroecomist
Technically the license fee isn’t a tax so i’m not sure why this would be a hypothecated tax. The money would presumably go directly from the tech companies to the BBC the same way the license fee goes directly from individuals to the BBC.
The reality os the licence fee is a tax
No one is actually obliged to pay a TV licence fee – if you are prepared to not watch live TV or anything on the BBC you do not need a licence – I have not had one since 2005.
The same as no one has to pay tobacco tax
But it’s still a tax
The jury is out on hypothetical taxes. I quite like them hypothetically because of the hypothetical transparency new technologies could bring. It would be good to know where money is really spent and on what. Various junkets in Northampton during skeleton services only and such. Aid going to the Congo Desk in Rwanda …
The benefits are usually stated as transparency, public trust and accountability, public support and protecting resources. Until results on ungulate aviation come in though, I’ll side with Richard. This is pigs might fly political posturing that negates much needed discussion on doing and paying for the right things.
The hypothecated tax’s idea tells people that the private sector, corporations, businesses and us as the private taxpayer, are solely responsible for paying for the public sector. Its a continuation of the thatcher lie that governments have no money.
This means that in times of downturn, a neoliberal government can ‘legitimately ‘ make cuts to pubilc services – because the tax take has gone down.
It also means that services that become funded by a hypothecated tax, are ready for privitisation. Imagine an NHS hypothecate tax…. Each month, on our payslips there could be a ‘NHS Charge’ made against our wages…. It does not take much leap of thought to allow swapping this NHS, for say a ‘Virgin Healthcare charge’ – that would be 10% cheaper. Now who wouldn’t jump at this idea?!!
hypothecated tax’s are wrong…. immoral, designed to complete the shrinking the state to something that just manages property rights.
Politicians aren’t ignorant or naive; Corbyn has proposed this through moral cowardice because of Liarbour’s capitulation to the Callaghan-Thatcher gleichschaltung. Want a worthless aircraft carrier or some nuclear missiles? “Keerching””, want a decent job, council house or a care assistant? “Bugger your decades of National Insurance mate, get your relatives to cough up or else”.
It’s reformism that has got us into this mess; more of the same will fail just the same, which is why Liarbour has no credibility with millions of working class people.
Hypothecated taxes at the national level are bollocks. They send out all the wrong messages.
As for the tax that is the BBC Licence Fee, I’d abolish it completely. It’s a regressive nonsense. Just give them a, say, 10-year charter for a set amount of money to increase annually with inflation. To be reviewed/renewed a couple of years before it’s due up. Paid for with Government money.