To continue the Singapore-on-Thames theme of the last few days, the Guardian had an article yesterday that, it transpired, was pretty much dominated by my opinions on this issue.
The initial focus was in Dyson. I won't replicate what was said there. I will warn that the comments simplify some of the technicalities, necessarily. They are however appropriate and fair.
The real key issue was, however, this:
Singapore's fiscal system has been lauded by a number of senior Tories and business leaders who have been promoting Brexit. Both Theresa May and Philip Hammond have threatened to turn the UK into a low-tax economy —the Singapore of the west — if a deal with the EU cannot be found. Jacob Rees-Mogg's investment firm, Somerset Capital, has operations in Singapore as well as the Cayman Islands tax haven.
But Murphy said it would be hard for the UK to replicate the Singapore model. “More than 80% of people live in government-owned housing so it does not need to tax people, it just charges rent. And many of its largest companies are also state-owned so, again, local taxes on profits do not matter as much as they do in the UK, because the government gets a large chuck of local profits anyway. It can offer low taxes and not have its revenues threatened. This is fundamentally different to the UK, where the government is dependent on tax.”
And that means Singapore-on-Thames is not possible. Tory lead Britain can not replicate what looks very much like the socialist economic infrastructure of Singapore. In that case those who think this is the model to copy are wrong: not only can't we copy it, the conditions that make it appear desirable are ones no one in the UK is likely to want to replicate. Singapore-on-Thames is, then, just another Tory delusion.
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Not only that but the government is run by the Lee family and they never allow any criticism, they run a sham democracy and Singapore is one of the most unequal countries on the planet. Can’t Wait!
You summarise it well
Singapore is a sham democracy and very unequal? Well in that case I see the appeal for the right; we’re 2/3 of the way to being like it already. And now they’re thinking of bringing in martial law if the UK crashes out of the EU, they can suppress any dissent and we’re 3/3 there.
Singapore = managed economy (& always has been).
Tories – incapable of managing a fish n chip shop (& always have been)..
Richard, isn’t there a certain delicious irony here though? The promotion of Singapore as a model for the UK to follow when it has, as you say, a socialist economic infrastructure.
How can the free market anti-public sector zealots of the UK right possibly want a country where over 80% of housing is provided by the state, instead of their beloved market?
And where many of the largest companies are state owned?
Presumably they want to ignore the bits of Singapore they don’t like, but cherry pick the bits that do appeal to them? Low taxes, an authoritarian regime and the following attitude to social security: “Singapore does not implement any unemployment benefits system dedicated to helping the unemployed. It is because the government considers the best way to assist individuals who are retrenched or unemployed is to help them seek re- employment instead of handing out financial support such as unemployment benefits.”
Sounds rather like Universal Credit does’t it?
So that’s why they like the Singapore model.
This is confusing. You say above that the UK Government is “dependent on tax”. But you said just a few hours earlier, in your blog on the “top taxpayers” list, that “government spending is not dependent on tax receipts”.
Which is it?
If it cannot raise tax it cannot control the inflation resulting from spending and so it is dependent on tax
This is a fact
Let’s not pretend otherwise
I presume readers have some ability to work things out
The government spends first and taxes second
But if it has to tax to control inflation then it is dependent on tax still
There is a difference though in inflationary effect between money created and spent on things of substance, ie productively, and money created and spent frivolously. I’m saying not all govt. spending is inflationary therefore. Does this make sense or am I missing something?
I am not sure the difference is meaningful
Largely because I am not aware of frivolous government spending
Ah, point. Frivolous bank creation of money as loans then. Say, mortgages on properties. Creating the money to build the property would be productive, in my view, assuming the amount involved was proportionate by general consent, but creating money to buy the property once it was built wouldn’t be producing anything. It, and subsequent mortgages over time on the same property, wouldn’t be productive. Could we call them frivolous, then, and suggest that these monies are what need to be taxed out of the economy to prevent inflation? Or are they removed from the economy through the process of loan repayment?
Ah…
But are mortgages frivolous?
I think it all depends on the sense you are using words in.
I believe chartalism, which so far as I understand things MMT accepts, means that the government must collect taxes to make the government money the common money of all. The government can only spend it’s dollars if it’s dollars are the common currency so that people are willing to give goods and services to the government in return for that money. In that sense, I think you might say that the government “depends” on taxation because without it there is no reason government money could be used to purchase any real goods or services.
On the other hand, once the use of the common money is established, the government has no need to worry if it might have a deficit in normal circumstances because when it spends it creates it’s own money. Only when inflation happens does it have to withdraw money from the economy by running surpluses.
So as I said, I think it all depends on what exactly you mean by “depends on”.
Richard & @ Angus Young
Afraid I must agree that “dependent on tax” is dangerous. It’s true as outlined, but not as most people know it.
So in that sense – and also of the wartime ‘dangerous words cost lives’….
If we are marketing – and, I suggest, we need to be – that we spend and tax, then I fear that ‘dependant on tax’ should be qualified.
Of course it may have been qualified, but unquoted in the Grauniad.
But in my opinion, to get the message across, that marketing needs us to be absolutely relentless in suggesting that only after incisive questioning, should we ever commit to any dependence on tax.
Not out of dishonesty but out of trying to ‘market’ and reverse the outlook.
Hmmmm
I’m too honest for that
Nothing gets produced, society doesn’t get to have more houses. It finds itself paying for the same ones over and over over time.
If we assume I’m on totally the wrong track, how then does the inflation we have to tax away arise?
Too much money chasing too few labour resources
With time I have grown very tired of MMT advocates’ theoretical simplifying of this whole thing about (non) “dependence on tax” and then being all indignant and insistent about it.
Do they realise how narrow the margin is between deflation and target inflation?
Even with a reasonable and generous target of 3-4% or more that would still leave a very narrow working margin within which monetary financing could operate.
I invite these people to think about that – and get real.
Like if the govt created money into the economy to build schools and hospitals but we didn’t have the human resources available to build them, and couldn’t get them either?
But pushed up wages to try to get them
” how then does the inflation we have to tax away arise?
Richard Murphy says:
January 28 2019 at 9:50 pm
Too much money chasing too few labour resources”
Yes, that as well as market power and oligopoly pricing which captures the benefit of rising employment and incomes by way of higher prices.
Ultimately that problem requires non-tax solutions.
Agreed
‘This is fundamentally different to the UK, where the government is dependent on tax’
You might be thinking hells bells, a return to the MMT argument, but isn’t it a touch too much to suggest the UK Government is dependent on tax ? I thought we’d agreed that tax was solely used to control inflation, or adjust the wealth distribution ?
If it cannot raise tax it cannot control the inflation resulting from spending and so it is dependent on tax
This is a fact
Let’s not pretend otherwise
There is no common agreement in the MMT community on tax. Do you accept RM version given he has fallen out with the MMT community?
I have no idea what your question means
Obviously Angus, a BREXIT looking like Singapore would be a Highway to Hell.
And of course forced saving! A tax by any other name?
From today’s “Guardian”:
‘The government’s planned cuts to corporation tax look set to cost the public purse billions more in lost revenue than previously thought, according to new analysis.
‘The tax rate on company profits is slated to be cut from its current level of 19% to just 17% by the end of the decade. But even before the planned cuts, the UK already had one of the lowest corporation tax rates in the developed world.
‘An analysis based on HMRC data suggests that the loss of revenue from the planned cuts, initiated by former chancellor George Osborne but supported by incumbent Philip Hammond, could add up to more than £6bn.’
‘HMRC recently raised its estimate for the amount a 1 percentage point increase in corporation tax could bring in for the Treasury from £2.8bn to £3.1bn per year — meaning the plan to cut taxes by 2p in the £1 could cost about £6.2bn.’
Anyone remember Advance Corporation Tax? I once took five very large cheques to the Bank of England one Maundy Thursday evening. The Companies who brought those cheques to our office just after commercial Bank opening hours had expected to benefit from the interest on those cheques during the Easter Bank Holidays. They didn’t. The Bank of England was only too happy to stay open to receive a deposit of well over £100 million – that was 15 or more years ago, when interest rates were much higher than they are today.
But today I don’t suppose there are any Inland Revenue offices which wouldn’t put those cheques into the safe for the weekend – if ever they receive payments by cheques…
And Advance Corporation Tax quit the field at about the same time as I did.
I like the last!
https://www.foreignaffairs.com/articles/2019-01-27/whos-afraid-budget-deficits
This article by Mr L Summers has confused me, not difficult. He contends that MMT needs to have high tax rates to control inflation in the good times. What would be wrong with this if society had the services and economy that they wanted? He also says a lot more about the deficit.
I will try to read it – but am deeply pushed for time
Richard
“I’m too honest for that”
I agree and so too, I would hope to be.
But…
But that is where Politicians have to be salesmen.
And I’ll try and ‘progess’ http://www.progressivepulse.org/ from there in due course….
Another thing about Singapore worth noting is that it is an entrepot economy – a single, giant port functioning as a city-state. It has some local domestic industry but it is uniquely dependent on intermediary trade.
One unique feature that illustrates that point is its monetary policy which is implemented by adjusting the exchange rate rather than adjusting interest rates. No one else does that.
https://www.bloomberg.com/news/articles/2018-04-05/a-central-bank-with-no-key-rate-yes-in-singapore-quicktake
All of which reinforces Richard’s point about Singapore being nothing like the UK. The Netherlands would be the only European example that remotely compares with Singapore’s economy and even that comparison is weak.
There is never going to be any “Singapore-on-Thames” the whole idea is embarrassingly ridiculous.
Entirely agreed
And we are not going to be an entrepot state
We have opted out of that
It’s a point I have often made
Richard,
I read this article with great interest and am a long term fan of your blog.
However, where do you get your data when you cite that “more than 80% of people live in government-owned housing” in Singapore? I just googled “home ownership in Singapore” and it seems as though private home ownership rates at at 91% in Singapore. Am I missing something?
That was based on research I did a couple of years ago
I can not recall the source
This suggests https://www.economist.com/asia/2017/07/06/why-80-of-singaporeans-live-in-government-built-flats there is an overlap – the ‘owner-occupiers’ are state subsidised
State subsidised rather than state owned would be a better term, I agree
But the essence does not change: this is government created and essentially controlled housing
Also worth noting that it’s not quite the deregulated nirvana some suppose. Remember Nick Leeson? Cross the Singapore rules and regulations and your collar will be promptly and firmly felt. Liberal or libertarian it is not.
This, in today, is worth a quick look:
https://www.theguardian.com/business/2019/jan/30/historian-berates-billionaires-at-davos-over-tax-avoidance
Just posted! Great minds think alike…
🙂