Budget compo: and, yes, Miliband - again!

With the Budget looking to be one helluva political set piece drama, it's time for C@W to predict the content.  She's gonna do something big, but what?  Over to you all.  Compo question: which levers will Reeves pull?  

(I have always reckoned that simply adding more bands at the upper end of the Council Tax meets all the political and technical tests: it's fast, 'progressive', virtually impossible to dodge.  If that isn't one of her measures, she's even madder than previously thought.)

AND of course it all leads to heightened leadership speculation.  AND as you all know, I have long championed the notion that Miliband's prospects are a great deal better than most people say - in that Doomsday aspect, if not for keeping his job under Starmer.  Right on cue, here's Guido: 

The Times picks up on rumours that Ed Miliband is a viable replacement for Starmer come the PM’s defenestration. As Guido reported back in September the Energy Secretary went on major manoeuvres after the PM tried and failed to remove him from post at the Phase 2 reshuffle. He is blamed by senior figures in Labour for a series of inflammatory briefings whose aim is to undermine Starmer. No surprise then that with Keir’s possible end on the horizon someone has decided to start whispering Miliband’s name in hacks’ ears…

I agree.

ND

Angela Rayner: some observations

The Angela Rayner Stamp Duty thing is manna from Heaven for the floundering, ineffectual Badenoch; and great stuff for Kremlin-watchers as we see Starmer digging mantraps for himself, and Wes Streeting desperately trying to appear compassionately on Rayner's side, even as the whole world knows she's been set up by the Labour faction that is determined Streeting himself will succeed Starmer, possibly even quite soon.  

Thus far, the matter has been discussed in rather pedestrian binary terms:

• she's a serial tax-avoider and residence-flipper - and a monstrous hypocrite to boot: or
• her personal affairs & backstory are sad, and legitimately complex (*takes out onion*), and this has led her into an understandable error: but look, she tried to get advice, she's been let down, and it's just all very human.

Personally, I suggest there's another strand to this: she's not particularly literate (lack of education, or brainpower, or both) and can't work through the HMRC guidance for herself.  

She wouldn't be alone in this.  Some of us are fortunate enough in the education and/or brainpower department to be able to make sense of relatively clear HMRC guidance (and a myriad other potentially overpowering bureaucratic verbiage one might meet in the course of a lifetime, e.g. the reams of forms on probate).  But that's just irrelevant for very many folks - however much effort HMRC et al put into wording stuff as clearly as possible - because increasingly few people have any worthwhile level of analytic verbal reasoning.  

Of course, the truly troubling bottom line is that this is evidently no bar to reaching some of the highest levels in the land.  And as noted before with the ignorant cretins at the top of Reform, this leads to one or both of two dire consequences: (a) very bad decisions by the politicians themselves, and (b) leaving them fully at the mercy of the Civil Service - another source of bad decisions - when their own limited analytic powers are overwhelmed.

In the next day or so we'll look at a politician to which none of the above applies: Darren Jones ...

ND

Paying for care - tax rises incoming with bucket loads more statism

 Well to be honest the dinner was a pretty rubbish affair all round and now we face the bill.

The Covid bill, which is going to entail more and more to be spent on Healthcare as the Country ages and with worse health outcomes. Plus the nurses and doctors who deserve 15% pay rises, them too. 

Having seen the leaks from the Government that they are going to raise National Insurance, one of the most invidious taxes that hits both employees and employers, to pay for Social Care. 

Where is the capitalist and market answer from the Government? Surely the obvious solution is to create a subsidised insurance group, Government owned, that people could pay into and indeed have different level so potential care. This way if Tarquin is very worried about the family home, he could top up the insurance to make sure it did not get sold to pay for care. 

To me, why should the Government take this whopping amount of money to subsidise the middle class to keep their inheritance. It is another rubbish policy choice, rewarding the old (who don't pay NI anyway) and the middle class (who could afford the care). It is not great for high earners as they actually pay the NI and it will mean another drop income for them, when they already pay 37% of all taxes. 

What has happened to the British government over the last two decades, it has totally switched to always seeking more central power and tax raising. The Blair government's spited inheritance continues to affect us to this day. 

Brexit Aftermath: Printing Money, or Taxes?

I notice that recently (just before the tactical nuke went off) a bright spark amongst the Graun writers opined that there was not much for it than for Labour to "pivot to Revoke" (everyone has to 'pivot' these days - so much more delicate than U-turning or just plain changing your mind: and a lot more dignified than flip-flopping.)  This is in keeping with Polly Toynbee declaring 'civil war', as she has done in her bid to beat Owen Jones in the hyper-ventilation stakes. 

So, as the armies head off doggedly to Philippi, we are left to wonder about post-Brexit strategy - notwithstanding our musings earlier in the week as to whether Cummings/Johnson even has one, beyond a GE at any rate.

Aside from dealing with short term issues and civil commotion of various sorts (not so easily brushed aside in reality, I well realise) the question will surely arise: to print money, or to tax?  Nations have been perennially been confronted with this issue in times of War (Polly's coinage, not mine) and its aftermath.  It seems to me that (a) there is a very strong anti-tax camp within the Tories (rather like 18th & 19th century America, in fact - they always printed money); (b) Keynsian spending is getting a new lease of life in several quarters; and (c) even McDonnell hasn't sounded too bullish on tax, and the Corbyn-Left are toying with something called Modern Monetary Theory which seems to absolve them of the need to do anything so atavistic as smashing the rich with a supertax.

I freely admit to knowing nothing about macro-economc theory (even as I reckon to know quite a bit about practical micro-economics).  But I well recall how our good host Mr CU predicted Quantitative Easing last time around (and, for good measure, the £/$ collapse from 2.10).  

What do the highly knowledgeable, or even the more modest, C@W readers reckon (i) Boris / Javid; and (ii) McDonnell have up their sleeves for us, in the event they have their hands on the levers of power next year?

ND

Where should you flee Brexit too if you are a Capitalist Corporation?

So this is easier than you may think to decide. There are five major considerations that any company has to take account of:


Regulatory Environment, Tax, Employment, Language, EU exit potential


For the first, this is how seriously a country takes enforcement or regulatory rules and therefore how much time and effort you will have to put into pretending your company is operating there.


This is quite a hurdle, Ireland for example are saying you have to have significant operations in-country to count. This is not surprising, given how close to death Ireland came in the 2008 Financial crash.


What this means is that very few countries are able to offer the light regulation (this means a brass plate address a la the Cayman Islands). The EU Countries that do are Malta and Luxembourg. Neither of these places really wants large movements of people to them.


Of the other major Countries, Germany, Ireland, France, Holland, Iceland and Lithuania  offer a more challenging regulatory regime, but at least you could actually move people there. Here though both Employment and Language come into play. Ireland apart language is a real issue and notably in France employment issues too - not point being a capitalist company if you can't sack the staff or only hire contractors. The employment element rules out most countries.


Then of course, France and Holland may exit the EU themselves, so why move there for only a temporary escape.


So when it comes down to it, there is only really Luxembourg, Malta and Ireland as serious places to go. Luxembourg ins hands down as many financial services funds are already domiciled in Luxembourg to pay no tax. of course, if you have actual people and business to move then there is Ireland but there regulations mean that is a long process that you really should have started already.


For how long though will the EU put up with Luxembourg offering its companies and UK companies a no-tax jurisdiction within the heart of the continent? Also, when the Financial Transaction tax hits, how much will that hurt the EU trading companies - why bother moving now only to come back later?


As a final thought, due to the above I fully expect to see Luxembourg and Malta veto any moves towards allowing UK passporting or other deals with the EU. They will push for hard Brexit all the way as for them it is a one-way bet.

The Squeaking of the Pips

Rather worrying for many people is this latest report into the ongoing heavy handedness of HMRC. They are increasingly picking on professionals, people living in the South East and the self-employed to investigate. It seems from the Telegraph's FOI request that they are looking at over 100,000 people extra per annum.

Mainly thanks to their fancy new computer system, Connect. My worry is that Connect actually allows the fishing expeditions that the Government and Revenue say are illegal. After all they get bank statements and Land Registry information, decide that a person cannot afford their house purchase and then begin an investigation.

How is that not a fishing expedition?

I am not sat here saying people should not pay tax; after all I personally handover eye-watering sums PAYE every month. Still once a year I get asked for more for some spurious reason post handing in a self-assessment form; it always feels like a stick-up as the process and reasoning are Byzantine but failure to comply ends in a court summons and CCJ in short order.

What to make of this in the medium term though, HMRC is desperate for revenues now, what is it going to be like in the UK after the next election? The Government will be very short of money and stuck with a massive structural deficit that will require big tax rises and a larger tax take from the taxpayers.

But I fear that as you try to make the pips squeak as Labour and Conservatives are want to do, you drive away the desire for wealth creation. After all, if you can't hold on to it what was the point? The situation, for doubters, is similar to pensions today - with the State pension much safer, albeit a lower level, than the Private sector pensions which have been taxed to death, people are saving LESS for their retirement and pushing the burden more onto the state - which can be seen in our deteriorating public finance and vast increases in pensions payments over the past 4 years.

I don't know where this ends, but the future is not rosy for taxpayers or the Government.

Business Rates reform to be ignored again?

One of the most annoying things about Politics at the moment is that with an election coming up and the rise of 4-party politics, there is complete dropping of all sensible discussion about long-term matters.

A good example of this today is business rates - a system currently designed to keep high streets empty or full of charity shops. Wherever you live in the Country, you are exposed to the detrimental effects of this policy.

Many Government look at this and just run away, the reform is likely to be negative for the Government tax take so there is no interest. Parallel discussions about the need to equalise the tax take from online and high street companies also then get annoyingly ignored.

Meanwhile hand wringing about a billion here or there to Brussels dominates or the impossibility of future funding for the NHS. These are of course real issues to, but it seems to the exclusion of all else. Reform of the Income tax system would fall into this category too - too hard to deal with and no votes in it.

It has then made me think that this position will get worse, the current polls point to another coalition or minority Government next time - one ht eon hadn, great, less law made is for the better. On the other hand, bad, hard decisions kicked into the long-grass ad infinitum. Frustrating.

UK Self employment - nothing to be pleased about?

To continue yesterday's theme, here is a view expressed of the Left in the Guardian of late.

I can quite see from the links there that there must be some correlation to people seeking to keep benefits and not wanting or being able to do jobs to become 'self-employed' as a way of keeping most of the benefits. This would account for a big jump in the self-employed whilst a the same time the benefits bill is not dropping. To this extent perhaps employment is not so healthy.

On the other hand there are many figures suggesting that income from self-employment has dropped. This may be linked to the above if you look at averages, but also it corresponds to key tax issues - such as the few business that turn over more than £80k which would mean they paid VAT.
As an example of this there was the hairdresser named and shamed in 2013 by HMRC for not declaring income.

Either way, it is an interesting thought for me. I am all for self-employment as part of self-empowerment. But with the way the tax and benefit system has been structured, it either seems to be a route to access benefits or a route to dodge taxes; neither of which is a very good result for the Country as a whole.

The unemployment/wages conundrum

(Apologies for the slight break in service, both Messr's Drew and Cityunslicker have been travelling a lot over the last week...normal service now resumed. Thanks to Mr Q. for filling in, pity he was again overlooked in the re-shuffle)

So today we have good employment numbers, with unemployment down to 6.6% (Germany is at 6.5%, USA at 6.3%, Canada 7.1% , Holland 7.2%, Sweden 8.3% France 10.4%, Italy 12.4%). The UK is well placed in the Western world in terms of unemployment rates overall. The levels have come down significantly in the past year and continue to do so. With a 4% probably around the lowest  any economy could sustain (even China has over 4% and Japan too), the UK is on track to get back down in the next few years to the trend rate of 5.0%.

Which is great news for the Government. However there is a big BUT coming. Wage growth has fallen back again to only 0.3% this month. There is simply no pressure on employers to have to pay more for their staff, even if supply is tighter, clearly in many sectors this is not enough to actually engender any wage inflation.

Again, the core reason for this is the increase in self-employed workers. This can skew the statistics, as self-employed people on the whole earn less than employed people. Reality of course tells me something different. Self-employed people are able to claim all sorts of expenses and costs, as well as potentially take cash in hand payments. Many industries with high earning workers like IT have gone almost entirely to a self-employment consultant model. The companies gain great labour flexibility and reduced taxes. The workers lose rights but gain in taxes and flexibility too.

This may well be the model of the future, however it also leads to downward pressure on wages as a per day rate or per hour rate is hard to negotiate on an individual basis - after all, this is why Unions rose to prominence in the first place!

Also some very under-employed people are likely to call themselves self-employed for their own needs of self-esteem.

No doubt overall there is more work available as the economy grows, but how this is shared out and how much tax people want to pay on their earnings is there for all to see.

Excessive Powers for the Revenue

For evidence that being in power goes straight to politicians' heads, look no further than plans to give the Revenue the right to seize 'unpaid taxes' direct from bank accounts.  Oh, they protest, we are only after a minority of people - and There Will Be Safeguards!

Seeveral years ago I sold up from a company of which I was part-owner.  It was a complicated transaction, and I found myself in disagreement with the Revenue over the tax I owed - the disputed amount was a six-figure sum.  The matter took nearly 2 years to settle, but it was handled professionally enough (though not expeditiously), resulting in my side of the argument prevailing.  Even then, I didn't much enjoy the accountant's bill for the effort involved.  What, do we suppose, would have been the situation if HMRC had wielded the power to grab first and *discuss* later ?

I think we can guess accurately enough: we know these people of old - the ones who use anti-terrorist legislation to enforce litter laws; the council officials who can say: "We make no apology for using all the powers Parliament has given us".

There is estimated to be between £5-10 billion at stake in disputes with HMRC over just the simpler personal 'tax-avoidance schemes', never mind the more complex and corporate ones.   Perhaps there isn't much sympathy with Jimmy Carr et al in such matters: but the additional amounts under the general heading of 'money the Revenue would like to get its hands on' must dwarf this amount.  An initial gravy-train for accountant and lawyers, no doubt (compensation for cutting the Legal Aid budget?) - but shortly thereafter it will reduce the UK to a cash economy, and the boom will be in offshore accounts and capacious mattresses.  VAT revenues will plummet and the domestic banking sector will implode.  No foreigner will go anywhere near a UK-based bank.

Think carefully, Genius George.

ND

Tax has to be taxing these days!

Ed Milliband speaks to Vince Cable

Is it just me or has the UK gone totally potty? Years ago, not that many, there was a consensus that you could tax the rich, but pushing it too far would be counter-productive. Now we just have more outrageous proposal after more outrageous proposal - with all the Political parties joining into say how much the rich should pay.

Think of the poor people on benefits they say - what of them. The thing is, its the maths that sticks in my craw. Say one earns £500,000 a year, a princely sum for a banker. and sadly, a few multiples of my own hard earned crust. Already this is taxed at over 50% in its entirety. So take home is somewhere near £250,000, but not quite.

Now if you have this kind of income you could have thought about buying a house at 4x your earnings at about £2 million. You may even have been able to rent your pre-richness property too, or bought a small place in Spain. Now the proposal is to tax this at £20,000 a year, maybe even £100,000 if the plan really is to raise £2 billion (OK so this is an uncosted Labour gimmick, but here we are they are nailed on to win the next election).

Plus you would have bought your house, paying a whopping 7% or £140,000 in stamp duty. Then you have council tax and your rather expensive £1.5 million mortgage at say 5%, so a mere £80 thousand a year in outgoings and upkeep.

So worst case scenario and even on £500,000 a year you could not live in a £2 million house. Even then a well paid FTSE100 executive could not do it. You would have not money left to live or feed your family. Even with a mere £20,000 tax your actual take home is going to be £10,000 a month - is loads, but blimey, its getting on for a total tax rate of 80% - this is before VAT, APD, Insurance taxes, MOT's etc.

If this really gets discussed seriously it will certainly hammer house prices at the top end. What gets me is that two public or private sector workers on good salaries of say £60,000 each are going to be are going to be taking home a total sum per month of about £8,000 a month.

I have long considered leaving the country, but have not managed to find the right role in the right country as yet, this finishes for me though if I ever succeed in my ambitions, why be successful in the UK - the marginal taxes will be so high that it just won't be worth it. It's scary, the 1970's were supposed to be history, not a roadmap to the future.

The final nail for me is that I have yet to see anyone on the gogglebox try and correct this nonsense, everyone just lies and says they don't have any money and screw those who do. I have my doubts these well paid journalists and politico's have all done so badly; but they dare not speak out against the zeitgeist.

The electric car is coming. But not just yet...

Only last week all the motor press were slamming the [£2,000] electric car subsidy announcement as a "pointless sound bite." Today, reannounced with a bigger subsidy [£5,000] and to include hybrids, it seems last weeks kite flying is out for another float before next week's budget.

If it really is delayed for two years then the whole thing is probably more damaging to the electric car industry than doing nothing. HMG has poor form on making pronouncements that have yet to be thought through, just for the headline. {VED rise - Stamp duty cut - Scrappage tax - New cars discount boost...}. A delay in subsidy, surely only for a complete lack of government funds, will merely put potential buyers off for two years. How does this help the industry? The only sensible reason to wait two years would be to use the intervening time to build the necessary infrastructure to support such vehicles. There was already a special tax break on the Prius,that was so complicated even the dealers couldn't understand how to tell buyers to access it. Will this be any easier? The subsidy already exists in many other countries. China and the USA and Japan. If its offered there, and those countries are also, like Mr Brown, keen to position their countries as world leaders in electric/hybrid/alternative fuelled cars, then why are we waiting? To give them another 2 years head start on top of the decade they have already had?

The scrappage scheme seems to have been been dropped, even though there seems evidence that, amazingly,it works.The growing list of EU countries with scrappage schemes includes: Austria, Cyprus, France, Germany, Italy, Luxembourg, Portugal, Romania and Spain. It sounds Green enough for Gordon. Why so out of favour now? 0.01% of cars sold in the UK are currently electric. People looking to buy a Prius may be tempted by the £5,000 off. Many fleet operators will have a look, if they are looking at cars at all. But not vans though. Poor LDV. No help from HMG, even though they claim to want to become an electric van manufacturer.
And even if there was a brilliant design of electric car,that could manage 500 mile range, 80mph, was available as a family sized vehicle and complied with the tough safety tests available in 2 years time, would there be the power to run them? ND may have a view of 1,000,000 + cars all sitting on charge every night for 4 - 12 hours.

Ultimately I can't see the economic sense in any of this. What have I missed?

Barclays in Tax Schemes Shock ! Furore !

Well, they all get there in the end. Back in October we gave the reason why Barclays was so keen to avoid taking the HMG shilling:

"there’s [a] price to pay for the Darling Dole: banks must forswear promoting and funding ‘tax schemes’. Long the bane of the HMRC, banks have had whole divisions beavering away, on behalf of themselves and numerous clients, corporate and private alike, at wheezes to deprive the government of tax revenues. And none more so than Barclays, whose clever (and entirely legal) tax schemes, particularly on the VAT front, are a significant business line. Some of their wheezes – that trick of avoiding VAT on new computer systems, eh, lads ? – have sent the HMRC into apoplexy."

Finally, Vince Cable – keep up at the back there, boy – has received material from a ‘whistle-blower’ (strange terminology because it’s most probable that nothing illegal or technically improper has happened) detailing some of Barclays’ cunning plans, and almost everyone else has piled in.

Barclays has some champions in odd places – well, John Varley does anyway, here in the Grauniad, which is also rather coy (is this the best they can do ?) about what the HMG shilling may entail:

“Allowing the government to take a stake in the bank is likely to come with conditions attached. These could include forcing it to … comply with restrictions on its activities” (our emphasis)

But the FT’s excellent Alphaville blog pulls no punches, seemingly because they are miffed at Barclay’s PR efforts to thwart their reportage (and perhaps they didn't get as good a lunch as the Grauniad chaps). They give us

“a little story about Barclays, a bank that in our view could now unravel at frightening speed …all the time it has to continue spinning the line that its balance sheet is somehow less toxic than its rivals … State-interference must be avoided at all costs since that would cost Barclays its lucrative tax avoidance business and also cost Messrs Varley and Diamond their jobs”

What, honest John Varley ? Barclays unravelling at frightening speed ?
Say it ain't so !

ND

UPDATE: it's all getting a bit heavy.
But where is Pesto ? Usually so quick off the mark, with so many banking stories, over so many many months ! What are we to infer ?

UPDATE 2: Alarm over, Pesto has posted ! (but he wants to hug the bankers - and no mention of the big B ...)

UPDATE 3: whisper it softly but they do say that the Grauniad's scoop is still available somewhere on the interweb

ITV can't win by design

Here we go again, ITV has announced another poor set of results. To be fair to them they are actually a big improvement on the past year or two, which considering the current economic climate is an achievement.

However, ITV is in long-term decline and is seriously considering giving up its rights as a major broadcaster by having public service commitments. I don't blame it, every good idea is copied by the BBC and even ITV's best sports coverage (Formula 1) is nicked by the BBC.

The BBC, funded by a poll tax on TV owners, even pays its best stars better and is able to deliver better audiences.

There is no level playing field, even Channel 4 gets taxpayer subsidy to boot. Sky is funded by market means that ITV is no doubt looking into as a possible future.

Of course, changes in the market for TV and in viewing habits set a wider context for ITV's decline and ITV too is guilty of some horrible mistakes like the purchase of friends reunited; but do we want the UK market to be dominated by the Islington literati vs the Murdoch dynasty?

In current circumstances where every penny counts for us all, there is no moral justification for the BBC to have Government funding, as I have argued many times. I hope the Conservatives grab this nettle, scrapping such a hugely regressive tax would be popular and improve the health of the media market and save the private sector. If we people want specialised, quality TV entertainment then they will pay for it voluntarily; as SKY has proved with great success.

More tangential, but by my personal belief, is that the BBC employs hundreds (thousands?) of media studies graduates each year which sustains this market - all at taxpayer expense. This encourages Universities to offer such lightweight courses in the first place. Therefore these people are lost to the productive economy from the age of 17. I don't want less market regulation to re-balance the sector and reduce the artificial demand which hampers private companies and damages the economy.

UK Politics: Tory economic policies

Quick take on this today due to work interfering somewhat with blogging. Sadly I am no Dizzy, Croydonian or Iain able to swan off to the conference for a few days...

Five main ideas stick out:



Inheritance tax threshold to £1 million; a good idea and despite what the Labour party say, it is clear that many more people in the future will be hit by this. Particularly in the South East. I don't see how this helps win the midlands and Northern marginals, but than I am no political strategist.

Moving the Stamp duty threshold to £250,000 for first time buyers; This is also a good idea, a few months ago I would have been critical as it would over-heat the housing market further, whereas this idea may now stop a real property price crash in the current challenging circumstances.

Non-Domicile's to pay £25,000; Where do I sign up to only pay £25k a year in tax? It is a good one-off idea but this is one where no one can be sure of the real amount of money this will raise. It won't put the Non-Doms off living here (cough, tested this idea on one already today so I have clearly tested this as fully as the Tories or Labour have...).

Green tax on aircraft; This idea is just a pure revenue grab like Gordon Brown's APD tax rise. People might swallow this but I hate the concept of stealth taxes and it is disappointing to see it from the Conservatives.

Finally, George Osborne announced that Tory spending plans overall would remain the same as Labour plans for the first 3 years. Oh, yeah? The economy will slow down int he next three years and the Government will receive a lot less tax receipts - so on current spending we are heading for massive borrowing or service cuts. This announcement is a hostage to fortune. One radical way to combat the sow down would be huge tax cuts across the board in the manner of George Bush.

That would be a better and braver plan.

What do you think and what one policy would you have suggested