Prof Andrew Baker of the University of Sheffield and I had a piece in Byline Times yesterday:
The argument in our piece is based on the work we did co-authoring the Global Initiative for Fiscal Transparency (GIFT) principles on tax transparency. These laid out fourteen such principles, which have been backed by the OECD, IMF and World Bank, all of whom are partners of GIFT. As we note:
Even the three most basic of the new principles – the right to information on tax measures, inclusive consultation, and attaching clear objectives and estimations of future revenue to tax measures, were breached in the Kwarteng package. In total, 10 of the new 14 principles relevant to last week's announcement were breached.
Is it any wonder that they failed? We suggest not. Our whole argument is here.
Our summary is that it is time that Kwarteng and Truss learned about how to manage tax systems because right now they clearly do not, making the UK look more like a failing state as a result than a country with a properly functioning tax system.
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I’ve heard several City people commenting that the gyrations of sterling and the inflationary environment, along with the government’s fiscal and monetary policies, means the UK now resembles an emerging economy, not a developed one.
As Truss and Kwarteng have completely abandoned Osbornian “fiscal rules and responsibility” with the bailouts they are being forced to make to prevent major social unrest and are loathe to admit that the government and BOE can issue as much money as they like. This of course should be within the constraints of inflation calculations (magic money tree) they are desperate to cover their tracks. They are doing this by saying that although it may appear that the government is accruing massive deficits and a huge increase in the “national debt”, by clinging to the hope of “growth” they can bamboozle the media by saying that the % ratio of debt to GDP will go down. This is irrespective of the billions and maybe trillions of sums that will be involved to prevent a financial and economic meltdown or catastrophe on a far bigger scale than 2007 – 2009. At the moment national debt is around 100% of GDP so if they can reduce this to 95% (some chance) they can crow that their policy has been succesful despite the poverty and anguish that is coming our way.
You could argue that any state where there is a proactively negative attitude towards tax is already a failed state.
Yep – that’s us!
Because of Margaret Hilda Thatcher, many people think of tax as THEIR money. Why shouldn’t they therefore keep it?
This bunch of Tories are the cutting edge of tax denialists – the extreme of the extremists we’ve been dealing with since 1979.
Wasn’t it this lot who invented ISA’s?
I will provide some context and texture to the Byline piece and The Principles themselves for interested readers. https://fiscaltransparency.net/tax-transparency-principles/
The first principle is a high level, general one. It is really about asking what evidence there is a government is committed to providing information about its tax measures, so that voters, taxpayers and other stake holders including market actors, can reach informed judgements on the likely success and desirability of certain tax measures. For anybody believing in and committed to a basic level of democracy that is surely desirable and a very minimum expectation. In this instance, the pattern is obstruction and obfuscation rather than the provision of clear information and explanation. Virtually no accompanying data and just some vague utterances about growth. In other words, the complete opposite of what this principle is promoting is present in the package.
The second principle is about the desirability of inclusive consultation. Here we see the largest package of tax cuts announced in fifty years and one the most radical fiscal events in British history, announced off the back of one two hour meeting with a few limited parties linked to the Chancellor. Again this is the complete opposite of what is alluded to as good practice by this principle.
Principle 3 is about clearly stating and explaining objectives and publishing detailed projections on economic impact and revenue. Well we know the OBR were bypassed, the data accompanying the announcement was minimal, there was no real published projections and no effort to outline objectives, beyond some vague utterances about growth, with no explanation about the pathways or mechanisms through which that would be delivered. Again the inverse of what this principle is suggesting.
Now to put all of that into some sort of context, the first three principles are the most basic and rudimentary. It is hard to imagine what a government performing in a fashion that is more contrary to all of them, would look like. In each case, in this instance the British government not only breached the basic logic of the principle, but did the complete opposite of what is being suggested as good practice.
When we wrote The Principles we envisaged that most governments around the world would show at least some degree, or traces of compliance with all three and only in the most extreme cases of corrupt failing states, would we see a complete breach of all three. Yet in this instance it is almost impossible to reach any conclusion, other than that all three principles are completely and utterly breached. At no point did we think that a major economy would show such performance in relation to the three most basic of the principles. Yet in less than two months since their creation the UK has managed it. That is quite an incredible thing and there is no doubt that both the international and market reaction owes much to this.
Now obviously this is only one fiscal event, but it is the direction of travel signalled by its handling that is the problem. The UK does have some good practice in relation to some of the more advanced principles, but none of that was represented in this particular package and the extreme way in which it breached even the most basic considerations should be a cause of serious alarm for all. Well it is and we can see it is, from the IMF, to Larry Summers to the markets, to the financial press, to tory backbenchers, to opposition parties. Quite simply if you are completely breaching and doing the exact opposite of the three most basic international principles of tax transparency you have a very serious governance problem and are on the way to becoming one of the worst performing governments in the world on tax transparency. That is a warning to all. Yes it was an emergency package, and hopefully a one off, but it set a very disturbing precadent.
Finally the piece is making a veiled point about the underlying causes of this. If plutocracy (governance by and for narrow stratas of wealth and money) is genuinely on the rise and becoming more prominent, and there is much evidence to suggest it is, this kind of rushed reckless tax policy package could become more not less common. Government by Tufton Street is simply the UK manifestation of a wider global trend, pushed by international networks of donors and think tanks. Having international arrangements that can potentially check and constrain the recklessness we have just seen and are all living through is going to become more important than ever. When we wrote The Principles we didn’t expect to see their importance and usefulness demonstrated so vividly and to such an extent within two months in our own country.
That is why the piece was written. Hopefully all of the above is communicated clearly in it, in less than 800 words.
Thanks Andrew
And one final qualification.
If we were being very, very generous to point of bending over backwards, we might say in relation to principle 1, well at least they announced what they wanted to do in headline terms, rather than trying to do it without telling anyone!
Certainly that would be an even more serious breach of principle 1 and we might say there is the faintest, faintest trace of some very minimal compliance with principle 1.
But the fact we are even performing such contortionism and such a conversation about a major western state, reveals the complete and utter absurdity of the situation. A stunning and incredible episode all round.