According to Starmer this morning we are to get inward investment from the USA of £150 billion.
We are, he says, to get 7,600 jobs as a result.
That is one job for every £19.7 million invested.
These must be the most expensively bought jobs in history.
Let's put this in context. At the £37,000 median wage the return to the UK will be £281 million a year
Now suppose a rate of return of at least 8% on this investment, or £12,000 million (£12 billion)per annum.
Knock off the wages, and quintuple them for overheads and multipliers , and where is the remaining £10.5 billion or so going? Straight back to the US, I suspect.
Starmer has been well and truly shafted.
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£19.7 million per job!
And, I’m told, we can’t have a universal basic income. Not even a little bit. Not even £5k per taxpayer, easily funded by abolishing the tax threshold (plus other changes). I fear we’re making the perfect the enemy of the good.
Or perhaps, they’re right, the arithmetic just doesn’t add up. If so, £19.7 million per job!!!!!!!!!
We really can’t afford a UBI Tim. I’ve tried to make it work. It doesn’t.
Under Tim Kent’s UBI proposal to pay everyone £5,000 year, the gross cost would be £5,000 times the 40 million non-pensioner adults eligible, equals £200 billion (£200,000,000,000).
The personal allowance for non-pensioners would be abolished so that workers pay tax immediately at 20 percent, up until £37,700. So, Income tax for someone on £37,700 – about the median UK wage – would be £7,540, leaving him/her £2,540 worse off each year!
Someone on a wage equal to the abolished personal allowance would pay Income Tax of £12,570 times 0.2 equals £2,514, so that he/she would be £5,000 minus £2,514 equals £2,486 a year better off (equals £48 a week)
Meanwhile, someone unemployed and with no other income would receive £5,000 a year UBI, equals £96 a week. Good luck surviving on that!
Someone earning £200,000 a year would pay £1,284 more Income Tax (£72,459 minus £71,175), leaving him/her still £3,716 better off.
RJM in today’s reply to Tim Weeks says that he has done the arithmetic to prove that a subsistence UBI – which is what the rationale of insurance against the precarity (for some!) of modern working life requires – is unaffordable.
That’s true. RJM advocated a subsistence UBI in The Joy of Tax, wherein he also advocated a genuinely progressive tax system. That’s the context in which I too thought subsistence UBI could work. But one only has to do the simple arithmetic – the product of two large numbers – to instantly realise that a subsistence UBI is just impossible, under any realistic progressive tax system.
And if the median wage is now £37,000, as stated by RJM, then a subsistence UBI at 60 percent is £22,000 a year not the £18,000 I used in my own UBI calculation. That makes the gross UBI cost £880 billion a year not £720 billion.
As to Tim Kent’s comparison in his earlier post of the inflationary impact of UBI with the minimum wage, that is just plain preposterous. The minimum wage applies to about 1.9 million workers, while UBI would apply to 40 million non-pensioner adults. And the minimum wage may have improved productivity by raising the morale of the workers receiving it. To equate the two is like saying a tank is the same as a pea shooter.
I am not sure all your maths is right….
Certainly your basic rate figure is not…
# Ian Lovegrove,
I don’t wish to get into a protracted debate, this is not the place. However, to clarify, ……
I am proposing, in the first instance, all taxpayers lose their tax allowance (about £12.7k), and leave the upper, 40%, tax threshold at about £50k. Instead they would be paid £5k, which would be taxable. A median wage earner would lose about £2.5k and gain £4k. So they would be £1500 better off. Someone on £200k would lose about £5.7k, 45% of £12.7k, and would gain about £2.75k (55% of £5k), so they would be about £3k worse off.
It is a progressive change. It’s not a massive change. It is not a total UBI. You couldn’t live on it (by contrast basic universal credit is £4.8k if you’re over 25). But, IMO, it’s a move in the right direction.
P.S. Love the post 🙂
Maybe I am not following the discussion properly, but UBI seems doable to me. We do, of course, need fair tax laws so those whose income is high pay a fair share and we need to close loopholes so they cannot avoid the tax. Here in Canada, although I’m still working, because I am very old, I receive the Canada Pension Plan benefit. Both my work income and my CPP benefit are counted as my taxable income. In addition, as do all Canadians over 65, I receive the Old Age Supplement (OAS). It is paid to everyone over 65 so it’s easy to administer. In my case it’s about CAN$7k/year. However, it is income limited so once I make over a certain amount (can’t recall the amount, maybe CAN$35k) I start paying the OAS back on a proportionate basis. I am lucky enough to have an income high enough that I pay the full OAS back at the same time I file my annual income tax return. Thus, while every Canadian over 65 gets the OAS, which is like a UBI for those over 65, only those on limited income get to keep it. It’s almost cost free to administer because it’s done in conjunction with paying income tax, no means test, no additional policing necessary.
I disagree
See https://openaccess.city.ac.uk/16544/1/2013_Policy_Paper_Financing%20the%20Social%20State-_Richard_Murphy__Howard_Reed_(Social_State_-_Idleness.pdf
Tim Kent in his latest comment has made clear that his UBI proposal would leave all the existing Income Tax bands untouched. The only change would be that the personal tax allowance for non-pensioners would be abolished so that there would be two effects…
All wage earners with wages less than or equal to the abolished personal allowance would pay tax at the basic rate of 20 percent, with a maximum tax payment of £12,750 times 0.2 equals £2,550.
All other taxpayers would have their tax bills increased by £2,550.
Since all taxpayers would also receive £5,000 in UBI tax free, nobody would be worse off. Indeed, every taxpayer, apart from those earning less than the abolished personal allowance, would be better off by £5,000 less £2.550 equals £2450.
In other words, Tim Kent’s tax system cannot claw back more than half of the gross UBI cost.
The Gross UBI cost would be 40,000,000 times £5,000 equals £200,000,000,000 (£200 billion).
The UK’s employment participation rate is 79 percent. Therefore, 31.6 million times £2,540 equals £80 billion.
And the net cost would be £200 billion a year less £80 billion (£2,550 times 31.6 million) equals £120 billion a year.
Therefore, the inflationary impact is unavoidable. It’s worth spelling out the implications of this. Every year there would be an additional £120 billion of notional demand added to the economy, which would raise inflation almost correspondingly, adding about 4 percentage points to the rate of inflation. The extra demand would invoke increased supply, if there was spare capacity to begin with. But once the slack was taken up, the extra £120 billion each year would be wholly inflationary.
In addition, there would be a negative impact on Britain’s chronic trade deficit, again repeated every year.
In addition, if this is not sufficient lunacy, because £5,000 is not a subsistence UBI, the existing benefits system must remain intact. So, there would be a universal system operating alongside a means tested benefits system, with administrative costs for both.
There would be a disincentive effect on those workers earning less than the abolished PA and a further disincentive for those non-waged in receipt of the £5,000 UBI to take up low paid work now subject to the basic rate of tax.
Starmer is not well and truly shafted but the British public are. He will shuffle of into some well-paid posts once he has left Downing Street.
Don’t forget the hidden costs. Loss of sovereignty, the tightening of the grip of US big business, not known for its moral compass, and the likely enabling of authoritarianism through tech surveillance (Palantir, anyone?)
One of the big things to come out of this visit is data centres. Although, as I work in construction, and will directly benefit from these things being built, I can’t ignore the environmental impact and the strain on our infrastructure they will cause. I would rather we spend the money on wind farms and wildlife bridges than on setting up the infrastructure for tech giants to eat the world. Here’s a petition from Foxglove for anyone interested.
https://www.foxglove.org.uk/campaigns/keir-starmer-no-more-tech-giveaways-to-trump/?link_id=1&can_id=d76f96066b490504290e967692300b3d&source=email-re-trump-in-the-uk&email_referrer=email_2892344&email_subject=re-trump-in-the-uk
There is a deal with Palantir in here – they’ve already captured the NHS. Now it is defence.
Remember that this ‘investment’ is just a down payment on the right to extract future rents from the British people and its government.
That’s all it is, nothing more.
Exactly. We have promised them a risk-free environment in which to invest and maximum returns on that investment.
Just focusing on the jobs. Has there been any mention of where will they be located? And when they will be available and in what sectors and at what level?
Craig
5,000 are to be in tne north east, apparently.
The US companies investing basically have huge amounts of Sterling from selling into the UK, so they really have not much else to do with it other than “invest” into the UK. We become a captive test location and if they invent new ways of collecting money, then it is not so much the extra Sterling they will get, but rolling out to the US and other countries that pay with Dollars.
Let’s look at Microsoft for example. In the UK they sell software, computer equipment, services, and they have some data centres. They are paid in Sterling and some of that will be used to pay their UK staff, rent on premises, and data centre costs within the UK. That leaves them with a big chunk of Sterling though (otherwise why would they run a business at a loss?). They can use FX to convert to Dollars, but then someone else has the big chunk of Sterling. They can buy houses for their UK executive staff, or RHD company cars, or UK bling, but ultimately there is little they can do with Sterling except spend it back into the UK economy. In some ways then, this is a zero cost effort for them – but the payoff might be new technology or software that can be used across the World and ultimately earn Dollars, which as a US company has to be their prime motivation.
Interesting…
Bank to ‘Selling England by the Pound’ with the pouds we ouselves created.
Interesting that Prem Sikka has been subject to “he’s 90% wrong about tax, knows nothing about tax and accounting” by Dan Neidle and some of his acolytes on Bluesky. Could you comment?
Yes, it shows they’re frightened by real intellect challenging them so they resort to ad hominem abuse.
Ta, that’s what I gathered in a exchange that resorted to attacking me as well. You are apparently, as is Prem, an idiot who knows nothing about tax.
Did Dan say that? That has been his view since I supposedly knew nothing about the benefit of tax havens, way back, many years ago. The antipathy is largely mutual. Neidle is no man of the people. I am amazed Labour have not made him a peer. He would fit in perfectly.
In a long and very varied working life, I once helped crew a fishing boat. We inwardly invested chunks of gurnard in the seabed economy and got a fine return in crabs and the occasional lobster. Financial inward investment has always seemed to me to be operating on an identical concept!
🙂
7600 jobs? in the context of 34.5 million workers in UK (Statista) it’s piffling.