How do we wrestle fairness from a rigged economic system?

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The problem in a nutshell – and this cartoon was drawn in 1972! [Image: Alan Hardman]

It’s terrific when an article makes you think.

Why Capitalism needs unemployment, by Cheltenham & Gloucester Against Cuts, tells us that unemployment is used as a weapon against the workers – with the threat of it used to force pay cuts on employees, while we are told to fear inflation if unemployment falls.

So fatcat company bosses win either way, it seems.

The article commented on Margaret Thatcher’s ideological mentor, Milton Friedman, who “understood that low levels of unemployment give confidence to workers, who can fight for better pay and conditions. When they’re successful, the profit margins of capitalists are reduced, causing them to put their prices up in response“.

We know this happens; we have seen it many times. Some may argue that it is different from cases in which shortages of particular commodities push up their prices and the prices of products that are made from them – but, with fuel prices as the only notable exception, have you ever seen prices drop after these shortages end?

The system is rigged to ensure that working people stay poor, either through pay cuts during high unemployment or inflation in low unemployment; meanwhile the employers and shareholders ensure that they stay rich, by sharing out extra profits gained by keeping pay low or by putting up prices.

What do they do with this money?

The answer, it seems, is nothing. They bank it in offshore tax havens and leave it there. This is why, we are told, Britain’s richest citizens have more than £20 trillion banked offshore at the moment.

That’s more than £20,000,000,000,000! Enough to pay off this country’s national debt 18,000 times over and still have plenty to spare. Enough to solve the problems of the world, forever. It is, in fact, more money than we can comfortably imagine.

It is doing nothing.

Faced with this knowledge, there can only be one logical question: Why?

Why rig the system so that ever-larger sums of money pour into these offshore accounts, if nothing is to be done with it? Where is the sense in that?

The only logical answer appears to relate to its effect on workers: Keeping the profits of their work away from the workforce means they are kept in misery and servitude to the ruling classes – the parasitical board members and shareholders.

There are knock-on effects. Taxpayers are hit twice – not only are they forced to grapple with ever-more-hostile pay offers, but their taxes pay for in-work benefits that subsidise corporate-imposed pay levels; they support people who have been forced into unemployment unnecessarily and the silly make-work schemes that are forced on those people by the Department for Work and Pensions, under threat of sanction.

It’s a protection racket. There should be a law against it. And this begs the next question: Why isn’t there a law against it? How can this corrupt system be dismantled and what should replace it?

That’s a very good question, because the other cosh being held over our collective heads is the possibility that firms will move abroad if new laws in this country threaten their massive profits. This is where an international agreement between nations or groups of nations would be very useful, if it was carried out in the right way – a Transatlantic, or Trans-pacific, Trade and Investment Partnership, perhaps.

And what do we see? Plans for such agreements have been put together and they do the exact opposite of what they should – tying the workers into ever-worsening conditions. This is why the TTIP, currently being pushed on the European Union, must be rejected – and why bosses will do anything to ensure it succeeds.

This is the situation. It seems clear that nothing will change it for the better until somebody has the courage to stand up to these manipulators (who were probably schoolyard bullies back in the day) and say enough is enough; change is coming – do what you will.

Tax evasion and avoidance is already a huge issue here in the UK; perhaps we need to make a criminal offence of manipulating the economy – with prison sentences for bosses who put their prices up purely to retain high profit margins when their salaries are already dozens of times higher than those of their workers.

But what else is needed? How can such a mechanism be brought in without scaring off business? Or should we let them go, and put something fairer in their place? Ban them from trading in the UK unless they conform to the new model?

These are ideas that need exploration – by many people, not just a few.

What do you think should happen?

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The benefit debate is a diversion – that’s why it will go on and on

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How many of you tuned into the last episode of Benefits Street on Channel 4, and stayed on for the debate that followed?

Quite a few, I reckon.

They were worth watching, but the feeling that was left with this viewer (and I’ve been reviewing television for 20 years or more) is that we are talking ourselves around in circles – led by politicians with a vested interest in perpetuating the discussion.

They don’t want a solution. They want us to keep going over the same ground – which they have laid out for us with very specific limits – and they want to concentrate our anger about this issue so that we blame, not the people responsible – the tax dodgers who put money into tax havens that could be invested in British industry, the private landlords and low-paying bosses who are subsidised by the benefit system and the bankers who caused the economic crisis a few years ago – but the people who have been forced onto benefits through no fault of their own and are being persecuted for it by a punitive system that penalises them for failing to find jobs that really do not exist.

Look at the way David Cameron leapt forward with fistfuls of cash to pay for flood relief when Tory heartlands were affected, saying that money was no object and Britain is a rich country. We’re rich enough to look after the playing fields of Eton, but not our poorest citizens, according to his mentality. Property is worth more to him than people.

Why? Because the people who send their children to Eton are the people Cameron hopes will elect him (he can’t be re-elected; he didn’t win the 2010 election) in 2015. The unemployed are less likely to vote for him – in fact they are less likely to vote at all. It seems there is something about being rejected by society that instils a sense of listlessness and despair in the human psyche. People ask themselves: Why bother?

There are solutions, but it is cause for concern that we are not hearing about them from our MPs and politicians. Journalist Owen Jones came out with the clearest plan during the debate on Channel 4 last night, and it is well worth quoting in full.

He said: “Firstly let’s make it clear – work does not pay in this country. We hear that as a mantra, when most people in poverty get up in the morning and earn that poverty.

“We’re talking about people milking the system. Let’s talk about the low-paying bosses who are being subsidised with in-work benefits because, in the seventh-richest country on Earth, they won’t pay.

“If we’re talking about getting people into jobs I actually think we need to talk about solutions here. One in six workers in the last two years have claimed Jobseekers’ Allowance at some point; that’s a lack of security.

“What we need firstly is a massive house-building programme that would reduce the amount spent on Housing Benefit which, by the way, is not going into the pockets of these tenants – it’s lining the pockets of private landlords charging rip-off rents. If we build housing, it would create jobs and we would stimulate the economy as well.

“It goes the same with the need for an industrial strategy because what successive governments have done, and it started in the eighties, is let the secure jobs go to rot, if you like. Now, other countries like Germany, what they’ve done is had an industrial strategy. Instead of saying, ‘Hands off, let the market decide,’ they’ve said, ‘Actually we want to create jobs in renewable energy.’ Now we’ve just seen the floods; we’re going to have a lot more extreme weather, so let’s have an industrial strategy to go and create renewable energy jobs, giving people secure, dignified jobs, taking on the environmental crisis.

“These are solutions… We’ve got to change the debate we have at the moment where the real villains of the piece, like the tax dodgers who get away with not paying £25 billion a year in tax, like the private landlords and the low-paying bosses milking our welfare state, like the bankers who caused the economic disaster – they get away with it, but all we ever hear about is kicking people at the bottom.”

Absolutely right. And that’s all we’ll hear about it for the foreseeable future, as well. We won’t hear about returning to a full-employment society (which is perfectly possible), because that means the greedy rich will have less money for themselves in the short term.

In the long term, ensuring that there are properly-paid jobs for the most people, so they do not have to claim benefits, means that there is more money moving around the economy – and money makes money. The parasites – who are making a fortune unsustainably by working people hard and paying them poverty rations – would be just as rich in the long run, but they cannot bear to consider the possibility.

One has to consider whether they want to force people into poverty, just to make their own wealth seem more remarkable – the poverty trap as ego-trip, if you like.

But we won’t hear about that because it is politically inflammatory. Far better to set the lower classes against each other, laying blame on each other for problems that are caused by different people entirely – and laugh all the way to the offshore bank.

If I had to describe Britain to a foreigner, I would ask them to imagine a person being robbed outside a public lavatory, by the mayor of his town, while council workers started demolishing the building; the rich are destroying our public services and mugging us at the same time.

Very soon, the same people who are mugging you will be asking for your vote…

… while blaming you for problems they have done nothing to solve.

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Public and private debt reach record levels under ConDem Coalition

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Household debt in the UK has reached a record £1.43 trillion, according to the BBC. What a marvellous achievement for Gideon George Osborne to put next to his already-record public net debt of £1.212 trillion (excluding interventions) or £2.184 trillion (including them).

If you’re surprised at that, don’t be – he needs to pretend that there isn’t any money so he can cut any services that are still left in the public domain after the fire sale of the last few years.

The Tory plan was always to increase private debt. Of course it was – if you cut public spending for people on the breadline, then they go into debt. Why do you think Wonga.com’s owner Dawn Capital is such a prolific contributor to Tory Party funds, with £537,000 in known donations this time last year?

The rich are shielded from debt problems in the same way they are shielded from taxation, thanks to the way our tax laws have been rewritten in their favour – all their money is safely tucked away in tax havens and can’t be touched.

On average, each adult in the UK owes £28,489. Some owe much more than that, though. Yr obdt srvt doesn’t owe a bean to anyone, despite being very poor, so that’s already £28,489 to be spread among everyone else. Mrs Mike isn’t in debt either.

The BBC report cautiously suggests that the record debt level “might increase concerns that the UK’s economic recovery [you know, the one they keep talking about on the news and in Parliament as if it actually exists] is based on increased borrowing, rather than growth sustained by rising incomes” – which of course is correct.

According to The Money Charity, total net lending by UK banks and building societies rose by £1.9 billion in September 2013 – that’s just in one month.

Over the four quarters to Q2 2013, they wrote off £3.67 billion of loans to individuals. In Q2 2013, the daily write-off was £7.61 million.

Based on the latest available data, every day in the UK 285 people are declared insolvent or bankrupt – that’s one every five minutes; 84 properties are repossessed; 1,447 people lost their jobs and eight people became unemployed for more than 12 months; 141 mortgage possession claims are issued and 113 mortgage possession orders are made; and 431 landlord possession claims are issued and 319 landlord possession orders are made.

The benefit system helps nobody. It has been redesigned specifically to push people further into debt – the cap on benefit rate increases to one per cent per year means people are two per cent worse-off for every year it continues, while inflation remains at current levels.

It is in this atmosphere that words written in this blog more than a year ago come back to haunt us all: “What do people do for money when the State fails them and they can’t get work? They fall into the debt trap.

“High-interest, doorstep lending to poor people is Britain’s latest – perhaps only – boom industry. In other words, the government’s sick benefits regime is forcing the poor into debt to organisations that will take away everything they have left, in order to make up payments on a loan whose interest rate they probably made up on the spot.

“And when they’ve taken everything, what do you do then?

“Do you really want your kids to starve?”

If the economy is in recovery, why does it still feel like recession?

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Path to prosperity? If the economy has been growing for the last nine months, why has food bank use almost tripled during the last year?

No doubt Gideon George Osborne will spend the next few days (if not weeks and months) crowing about the figures from the Office for National Statistics that say the British economy has grown for a third successive quarter.

He has already tweeted, “This shows that Britain’s hard work is paying off & the country is on the path to prosperity.”

The construction industry has grown by 2.5 per cent on the previous quarter, with house builders buoyed up by Gideon’s Help to Buy scheme, which offers (unsupported) mortgage guarantees to buyers and lenders. He has promised to divert £12 million to this, but has not said where he will find the money.

Critics have warned that this is simply creating another housing-fuelled debt bubble that will burst in a couple of years’ time, leaving even more people in debt than after the financial crisis hit us all.

Has this growth generated work for electricians, plumbers, plasterers, roofers? If so, are they being paid fairly? These are the people who will take their disposable income back into the wider economy, for the benefit of other businesses.

Production (including manufacturing) and services are both on the up as well. The BBC report says nothing about retail. But if this good news is true, why is the Department for Work and Pensions determined to expand its Workfare scheme, as laid out in a Conservative conference announcement and by an article reblogged here.

Shadow Chancellor Ed Balls welcomed the signs of growth in the ONS report but warned: “For millions of people across the country still seeing prices rising faster than their wages, this is no recovery at all.”

He is right, of course. Look at the rise and rise of food banks, which have seen a massive rise in attendances from even working people – whose wages simply don’t cover the cost of living. Benefits are, of course, being cut back by our “compassionate” Conservative-led government.

They say there’s no money for it but – if the economy is surging back into growth – where are all the tax receipts from the big corporates that are profiting?

Oh yes – they’re safely closeted in the tax havens that Mr Osborne kindly opened up for them. Ordinary, working, and poor people have to use their own limited funds to pay off a Conservative-run national deficit, presumably because Tories think the rich, who caused the problem, shouldn’t have to pay for services they don’t use.

And the Institute of Directors’ chief economist, Graeme Leach, warned that there are “strong headwinds” restricting the possibility of further growth, including “debt and inflation” which are “rising faster than earnings”.

That’s right. Only yesterday, Yr Obdt Srvt was talking with a gentleman who – despite having a full-time job – has fallen so severely into debt that he has had to cut his expenditure down to nothing but taxes, the vital utility bills (water but not heating), and rent. He has no budget for food and faces the possibility of having his belongings, such as his car, repossessed – and even eviction.

Is he on the path to prosperity, Mr Osborne? Of course not. This report is merely further proof that you were lying when you said, “We’re all in it together” – as you did (again) at the Conservative conference.

It’s prosperity for the greedy few, and austerity for the rest of us.

Maybe you have a different opinion, but ask any average worker on the street and they will tell you that continued wage depression and price inflation, the expansion of the Workfare regime that gives free employment to firms that don’t need it while the workers themselves have to survive on benefits, massive growth in food bank use, and the threat faced by thousands of eviction and the repossession of their belongings are not milestones on the path to prosperity.

How much of the national debt has been faked by tax dodgers?

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Diddled into debt: A corporate tax avoidance scam is conning workers out of decent pay and the government out of tax and NI money, after causing the financial crisis.

“A bank in the UK could lend, say, $1bn to a US bank… generating tax-free income in the UK but a tax deduction in the US – and then simply borrow it back. For the second leg a different instrument could be used that generated tax-free income in the US and a tax deduction in the UK. The banks had simply swapped $1bn, to no economic effect beyond two tax breaks, while quite possibly keeping any mention of the debts off either’s balance sheet. Such tricks – the creation of debt more for tax advantages than any real business need – undoubtedly contributed to huge levels of inter-bank indebtedness that triggered the financial crisis.” – Richard Brooks, The Great Tax Robbery, p86.

If you are not deeply disturbed by the implications of the above quotation, read it again until you are. Richard Brooks is saying that the major banks of the UK, the USA, and who knows how many other countries colluded to hide massive amounts of money from the tax man by claiming – falsely – that it was debt.

The financial crisis happened because the banks could not service the debt they had created – they could not even pay back the interest on it, let alone the debt itself – and so the government was forced to step in and bail them out. So now the government had not only lost the tax it was due from the bank profits that had been hidden by the dodge Mr Brooks mentions, but it had now taken on the fake debt that had been created. The taxpayer was doubly the loser.

Who pays back the debt? Not the banks. Not the large corporations that are also avoiding tax. Not the rich businessmen and women who dreamed up the tax dodges. Thanks to changes in the law and already-existing legal loopholes that have not been closed by the Coalition government, they have been able to park their ill-gotten gains in offshore tax havens, depriving the nation of the wherewithal it needs to fix the problem they created.

Now it seems the government is also being deprived of badly-needed tax money because of the way large firms are structuring their pay packets – to the disadvantage of low-paid workers. The details were in Channel 4’s Dispatches documentary, Secrets of Your Pay Packet, broadcast on October 21.

With more people in work than ever before, the UK should be getting massive amounts more in tax and National Insurance, allowing it to provide the services we expect and pay down the national deficit. But the deficit hasn’t budged. Why?

Because the new jobs are part-time, self-employed or temporary.

Self-employed contracting means you can end up working for less than the minimum wage (you’re paid a fixed daily rate for the job, not the hours it takes to do it, so if it takes a long time to get it done, your pay-per-hour diminishes proportionately – and, as you are self-employed, you’re not entitled to the minimum wage).

Conversely, if you are employed part-time, you can end up working too few hours to qualify for tax or National Insurance (so you don’t get enough credits to pay for your pension later in life and the Treasury doesn’t get the tax money it needs to pay for services and clear debts) and on a personal level you don’t work enough hours to qualify for decent holidays. The company doesn’t pay for employees going on annual leave, potentially saving tens of millions of pounds.

If you work overtime, this doesn’t count towards annual leave, of course. So you can be employed on a part-time contract for, say, three days a week, be asked to work two more days overtime (a full five-day week) and lose out on all the benefits a full-time worker would expect.

The threshold is 20 hours per week. If you work less than that, employers do not have to pay NI contributions which would cost them nearly 14 per cent of pay. So people may work all their lives but never qualify for the state pension.

This is why more people are now in work than before the recession – it’s a cheat by bosses. They’re the ones who pay your tax and NI contributions. If you’re on pay that’s below the new tax threshold, you don’t pay tax. We have the Liberal Democrats to thank for that. It seems like a good deal but in fact it isn’t.

Meanwhile the companies say that cutting down working hours has saved jobs in a hard business environment, while the number of full-time jobs is down and wages have now fallen by 12 per cent in real terms (up from nine per cent, only a few months ago).

It is cheaper for companies to employ more people on shorter hours because they pay less to the government in tax and NI. And they say the “flexible” labour market has been a boost for the country, that having a job is better than having no job, and that it will help people progress.

That is not what we see.

We see a workforce ground down by the pressure of making ends meet on part-time or zero-hours jobs, making no NI contributions, getting very few holidays, and afraid to challenge the situation because their employers can simply let them go and hire someone else from the huge 2.5-million-strong pool of the unemployed (who are desperate for jobs because the DWP fills their entire lives will bullying and threats about losing their benefits).

We see the government completely unable to cover its costs because its own tax system – written by the ‘Big 4’ accountancy firms that have been responsible for more tax avoidance schemes than any other organisations in the country – actively promotes corporate tax avoidance; and Conservative ministers are totally indifferent to the huge losses they are piling up, because it means they can cut public services, or sell them off to (again) big corporations who will then avoid paying tax on them.

And we see the rich corporates laughing all the way to the (offshore) bank yet again.

The Coalition government has tried to tell us that it must squeeze benefits for the extremely poor, and low-paid working people must work much harder, in order to pay off the debt that – no matter what ministers tell us – neither they, nor the last Labour government, created.

In fact, this has been a story of tax avoidance by the very rich. A huge scam, running for decades, and hidden from the British people.

Are you angry yet?

Sort out the tax dodgers, Labour, then the benefit bill won’t be a problem

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Off-message: If Rachel Reeves had promised to get as tough on tax avoidance in her previous job as she is promising to be on benefits now, Labour might have had more credibility.

A lot of people have been getting their knickers in a knot about Rachel Reeves’ interview in today’s Observer – and rightly so.

In it, she tells us (wrongly), “We are not in an environment where there is more money around,” and says that Labour will be tougher than the Tories when it comes to slashing the benefits bill. She stressed that she wanted to explode the “myth” that Labour is soft on benefit costs.

There are a few myths feeding into these statements. Firstly, the myth that millions upon millions of British citizens are living a life of luxury on benefits, which is, quite frankly, infantile nonsense. Benefits do not pay the ordinary claimant enough to afford huge luxuries and never did. They were always intended to cover the cost of survival while the recipient looked for something better. Anything else is a lie concocted by unscrupulous politicians, that you would be a fool to believe.

Then there’s the myth that the British taxpayer is being defrauded out of a fortune by benefit cheats who are (again) living a life of luxury at our expense. One look at the figures dispels that idea! The fact is that only seven people in every thousand commit benefit fraud – at a consequently small cost to the overall budget – and the amount they receive simply would not support the lifestyle our politicians are suggesting for them.

Let’s move up to a bigger myth – that people prefer to live on benefits than get a job. We’ve now moved from infantile nonsense to dangerous nonsense. The current situation, engineered by the conservatives in both Coalition parties, means there are very few jobs available – around 500,000 at any one time, with 2.5 million people chasing them.

And what kind of jobs are they? How many are zero-hours contracts? How many are part-time? These jobs do not pay more than benefits (“Making Work Pay” – another Tory lie) so anyone taking them will be out-of-pocket.

Meanwhile, the Tories in power have rigged the system so that anyone who does not spend the entire working week pestering local businesses for jobs that they aren’t offering will be sanctioned and will lose their benefit for a period of up to three years! It is entirely disproportionate, considering the state of the economy, and may cost jobseekers a lot more than a few quid a week in the long run.

But this is how the benefits bill will be slashed – by the Conservatives and by Labour, if Rachel Reeves is to be believed. Ministers of any party, living in the la-la land of made-up statistics, will sanction people for failing to work hard enough at securing jobs that don’t exist!

Ms Reeves says Labour’s jobs guarantee will ensure that those jobs do exist but we don’t know that for sure. We do know that she intends to continue Tory policy on sanctions – blindly.

Finally, we have the biggest myth of all – that there isn’t enough money. HM Revenue and Customs just released estimates for the last-but-one tax year (2011-12), suggesting that it failed to collect £35 billion in evaded or avoided tax during that year.

That’s seven times more than the national bill for JSA, and more than 29 times the estimated cost of all benefit fraud. But wait – it gets better! This is only an estimate and it has long been believed that the true cost of the so-called “tax gap” is £120 billion – equal to each year’s national deficit, 24 times the cost of JSA or 100 times the cost of benefit fraud.

Why isn’t our government going after these criminals? Why hasn’t Labour promised to go after them if the Tories won’t?

Simple: Both main parties have been re-writing tax law to make it easier for rich individuals and large corporations to avoid paying tax, and ignoring flaws in tax laws that make avoidance possible.

So for example: In the late 1990s, the then-Labour government removed the tax on dividends that meant companies had to pay tax on profits if they wanted to pay them out to the owners. So for example Arcadia boss Philip Green’s wife Tina, who is technically the owner of the company and lives in Monaco, received a tax-free £1.2 billion dividend in 2005; if this tax had been in place, £300 million of that would have gone to the UK Treasury.

Gordon Brown slashed Capital Gains Tax from 40 per cent to 10 per cent in 2000, meaning income that his friends in private equity managed to engineer into capital gains would be taxed at a lower rate than was paid by their cleaners. Not the finest hour for the Party of the Worker!

And towards the end of its term, New Labour started dismantling the rules that guarded against industrial-scale tax avoidance by British multinationals, meaning profits returned to the UK from overseas subsidiaries would be exempt from tax. This created a substantial incentive for firms to send their income offshore.

Before the 2010 election, our old friend David Gauke made a lot of noise about stopping the limitless tax deductibility of interest payments, that had been used by Boots (the chemist) to slash its tax bill. Six months after the election, when he was in a position to do something about it, he was telling everybody the rules would not be altered because business considered them a competitive advantage.

The Coalition brought in tax exemptions for companies’ tax haven branches and for profits parked in tax haven subsidiary companies. Meanwhile, tax breaks for the cost of funding these offshore set-ups, from the UK, are also provided.

Corporation Tax will drop to 21 per cent by 2014, even though there is no evidence that cutting the rate will make the UK any more competitive in world business.

The Treasury’s mission is now to adjust the framework of tax laws to suit big business. The ‘Big Four’ accountancy firms are now well-entrenched in writing our tax laws for us – and they run the most popular tax avoidance schemes. Consultations have descended into a process of agreeing laws demanded by big businesses.

There are clear and irrefutable arguments that reversing these legislative idiocies and closing every other tax avoidance loophole will do far more for the economy than flogging the unemployed to death, looking for jobs that don’t exist.

But I don’t think former Bank of England economist Rachel Reeves will be interested in that. In 1975, an appalled taxpayer wrote to then-Chancellor Denis Healey, complaining that an employee of the Bank (which is supposed to work on preventing tax avoidance) had been giving advice on how to avoid tax. “I wonder if this is really part of the Bank of England’s duties,” the correspondent wrote.

The behaviour of Ms Reeves, the former Shadow Chief Secretary to the Treasury, suggests that she believes it is.

Have the Tories stuck their heads in the sand – or somewhere else the sun doesn’t shine?

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Get your coat, Gideon! If only this photo was showing Mr Osborne departing from politics forever. If he did that, not only do I think the credit ratings agencies would drop any plans to slash the UK’s triple-A rating, we might see an immediate economic upturn as confidence starts to return to British industry!

Just when you think you’ve heard it all, you can always count on Tories to come up with an idea so hare-brained it makes you wonder whether they belong to the same species as the rest of us, or to some bizarre, inbred offshoot of humanity where evolution gave up on them after realising their logic runs backwards in comparison to everybody else.

If you’re wondering what has provoked this rare torrent of invective from my normally mild-mannered keyboard, I’ll tell you:

I was wandering through internet news coverage of yesterday’s events, partly in search of something to write about, partly out of interest in what other commentators had to say about the latest economic downturn (the latest? Have we become so casual about it, so quickly?), but mostly out of a desperate need to find an observation about the situation that hadn’t already been thrashed out in front of Joe and Jane Public a thousand times already.

It was disappointing work and I was starting to give up hope. Mostly I was reading that Gideon was “under pressure” to change his cuts agenda (heard it before!); that he told everyone to get stuffed (again!); that he wants further spending cuts to come into play during 2015-16 (boring! But also psychotic!); that Nick (We’re Sorry) Clegg has admitted cuts in capital spending early in this Parliament were a mistake – but he isn’t going to do anything about it (windbag!); that Boris (Zipwire) Johnson (windbag! Oh– sorry, I got carried away there; forgot I hadn’t actually mentioned what he’d done) has tried to show what a man of the people he is by saying there’s huge potential in the UK, if people are given a feeling of confidence – and then blew it all by talking about a “hair-shirt, Stafford Cripps agenda”. Cripps was a Labour chancellor under Clement Attlee, who tried to use taxes and rationing to control economic growth. I’m a Labour Party member and I didn’t know that, so what chance anybody else has, I don’t know. I do know that, by using that reference, Boris stuck his foot right in his mouth (windbag! No – wind-zeppelin!); and that David (Flashman) Cameron wants to be the Prime Minister who secured Britain’s place in a newly-democratic European Union, or some such nonsense, showing yet again that he is completely divorced from the reality faced by you and me every day.

Then I read this, in a Guardian article:

“Osborne is also under pressure from rightwing thinktanks which want him to offer tax cuts to boost consumer spending, with money taken from departmental efficiency savings and deeper welfare cuts.”

Interesting!

– but only because it’s so whacko-Jacko that it could only come from a right-wing think-tank.

Tax cuts to boost consumer spending? Firstly, if you’re thinking that means a cut to the base rate of income tax, please get a grip. They mean more tax cuts for the richest in society – the people who actually have all the money.

(There’s loads of it around, by the way. Oodles and boodles of the stuff. It’s sitting in banks, in tax havens all around the world and also in the Channel Islands. It has to go somewhere, and it’s been going to the rich. That’s what Conservative policy does, whether the Liberal Democrats are hanging on the coat-tails or not.)

The most obvious problem with that is, the richest in society don’t actually need tax cuts to put more money into society. They can pay their way perfectly well as matters stand. Consumer spending won’t budge if they get another fat rebate (remember, the top rate of Income Tax is already dropping by a fat five per cent, and Corporation Tax has plummeted by a quarter since the Tory rabble got into the Treasury).

Behind that is a worse problem – that it implies less money will go into the Treasury, to be spent on public services. As a result, those services will suffer. Starve something and it will wither and die. You can check the truth of that by depriving a plant of water. Before you know it, you’ll have a dried-up stem where your beloved dahlia used to be, and nobody to blame but yourself.

If idiots like George 0sborne do that to public spending, we’ll only have ourselves to blame, because we’re the ones who gave the Tories enough of the vote to allow them to Con their way back into power (collectively, I mean. I didn’t vote for them and I don’t think I know anybody who’ll admit that they did). What will we end up with? A withered economy; shrivelled-up and useless.

But no! They say the tax cuts should be funded with money taken from departmental efficiency savings and deeper welfare (I prefer “social security”) cuts.

Clearly it has skipped their notice that 0sborne has been having a hard time finding efficiency savings within government departments – they were, in fact, pretty much down to the bone when he turned up at Number 11 (if we’re to believe certain commentators, anyway) – so the bulk of the bill will end up being paid from the social security budget.

In other words, it’s yet another attack on the poor.

They clearly haven’t realised – even yet! – that it’s the poor who have been paying for their good times, ever since the Coalition got into power back in 2010. They’ve been propping up their useless economic model with money taken from the most vulnerable of us – in fact, particularly targeting the most vulnerable, presumably in the hope that they will die off before anyone important wakes up enough to realise what’s going on and stand up for them. Sadly, it’s a policy that has worked, so far, thanks to copious support from the right-wing media, who’ve managed to persuade many of the poorer sectors of society that turkeys should, in fact, vote to support Christmas.

It’s mad.

Almost as mad as having a slap-up meal in a swish place like Davos, the day before figures are published showing that the economy you’ve designed has tanked. Again.

Osborne-created tax loophole diddles the UK out of hundreds of millions

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Anglian, avoidance, bill, Chancellor, Coalition, companies, company, Conservative, Council Tax Benefit, Council Tax Relief Scheme, economy, Eric Pickles, George Osborne, Gideon, government, law, Localism Act, loophole, Mike Sivier, mikesivier, monopoly, operating, Parliament, pay as you earn, PAYE, Pickles Poll Tax, politics, profit, retail price index, tax, tax haven, Thames, The Observer, Tories, Tory, utility, Vox Political, water, Yorkshire

A tax avoidance loophole specially created by George Osborne, the UK Chancellor, last year means that water companies have played the system to reduce their tax bills to a trickle.

Some people just don’t know when it’s time to do the right thing.

Look at the three water companies that are paying practically no tax on their huge profits, while yanking up prices every year according to the retail price index and enjoying a monopoly in their areas – according to today’s report in The Observer.

Thames Water avoids tax by offsetting the interest payments on its debts against its tax liability and delaying it by claiming allowances on capital project spending. The company is seeking government support for a £4.1bn project to build a new “super sewer” under the Thames.

Anglian lent £1,609.1m to a subsidiary company in the Cayman Islands tax haven in 2002. This year it was able to pay £478.1m in equity dividends to investors, including its subsidiary in the tax haven.

Yorkshire Water also increased the debt on its books recently, which offsets tax payments.

In other words, all three were able to exploit a new tax loophole, created by George Osborne last year – that’s right, the Chancellor who is supposedly trying to stop tax avoidance has actually been creating more ways for big business to achieve it – to pay as little tax as possible.

In my article last Monday, I highlighted changes to the tax laws, brought in by Gideon, I mean Mr 0, that mean companies in the UK pay nothing at all on money made by their foreign branches and may claim the expense of funding those foreign branches against tax paid in the UK. That is exactly what Anglian and Yorkshire are doing, according to the Observer report.

Without knowing where the Thames debt is based, it’s hard to say for certain whether it falls into this category of tax avoidance.

Thames made an operating profit of £650 million last year, and Anglia’s was £492, while Yorkshire’s was £303 million. With Corporation Tax at 26 per cent (they should all pay the higher rate), this means the Treasury failed to collect nearly £376 million from the three companies.

The amount lost to the Treasury from these three companies alone would pay off three-quarters of what the government hopes to take away from people currently on council tax benefit, when local authorities implement their new council tax relief schemes – the ‘Pickles Poll Tax’ – in accordance with Eric Pickles’ Localism Act, next April.

Both Thames and Anglian told The Observer their tax was merely being deferred, and they would have to pay it in full at a later date. Yorkshire declined to comment.

My problem with this is that the UK is in deficit difficulties NOW. We need everybody’s tax money NOW. Not later. By exploiting a loophole in the tax system that the Chancellor irresponsibly created, they – AND HE – are extending the problem.

The absence of any significant tax bills means Thames and Anglian were able to pay out dividends totalling £1.5881 billion. I don’t have the figures for Yorkshire. Ask yourself how many of those shareholders have tax avoidance schemes of their own.

Meanwhile, those of us on PAYE have to pay the full amounts of our tax bills – and our utility bills – no matter what harm they do to our household finances. There can be no deferrals for the working-class citizen!

And what help do our bloated water companies give us?

A drop in the ocean.

Government borrowing: Insanity, explained with nonsense

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The Coalition government has no intention of reducing the UK’s debt burden as it provides an excuse to cut spending on public services and shrink the state. Messrs Cameron, Osborne et al know that, when the public becomes sick of all the nonsense they have been spouting about it, they can hand the mess over to the next government and laugh all the way to the (offshore) bank.

Government borrowing figures for August have been released and the Treasury has been talking nonsense about them. Again.

Let’s start with the facts: UK public sector net borrowing was £14.4bn in August – slightly higher than the same month last year, and therefore the biggest deficit for the month since records began. Corporation tax receipts fell by 2.1 per cent; benefit payments rose by 4.9 per cent.

Barring the effects of one-off transactions like the raid on the Royal Mail Pension Plan that I mentioned last month, borrowing from April to August increased by £12.9bn, or 22 per cent, on the same period last year – to £61.3bn.

The British Chambers of Commerce reckon that at this rate, total borrowing for 2012-13 will be £20bn+ more than estimated by the misnamed Office for Budget Responsibility at the time of the last budget.

Public sector net debt stood at £1.04 trillion at the end of August 2012, equivalent to 66.1 per cent of gross domestic product (GDP) – that’s up from 1.032tr at the end of July, or 65.7 per cent of GDP.

The BBC, reporting on its website, has stated that the figures make it more likely the government will fail to wipe out the structural budget deficit by its deadline – and I think it won’t make a difference whether that’s 2015 (already long-abandoned) or 2017.

The Treasury, on the other hand, is still telling us it is getting the deficit down. Exchequer secretary to the Treasury David Gauke said new figures showing borrowing for 2011-12 came it at £119bn, rather than the OBR’s forecast of £126bn meant the government was dealing with its debts.

This is particularly rich, coming from him. Everybody now knows that the best way for the government to pay down its debts is to tax all the rich Brits who have stashed their cash in offshore tax-havens. Mr Gauke used to work for a tax avoidance firm and his wife is a tax avoidance lawyer. He is exactly the wrong man to lecture us on getting the deficit – the difference between government spending and tax receipts – down.

Some, like Sir Mervyn King, governor of the Bank of England, are now saying that overshooting the deficit reduction target would be acceptable if the reason was slower economic growth across the world, and the government has been happy to play its ‘Eurozone Strife’ card many times in the past.

But I’m not convinced. I tend to agree with The Guardian’s summary of the Coalition’s non-achievements so far, which states: UK exports to the EU have been growing, at least until early 2012; the deepening Eurozone crisis was mainly due to the same austerity policies employed in the UK; therefore austerity should have been cut back and demand revived.

What we’re left with should be no surprise to anyone: Numbers that don’t add up and explanations that don’t make sense.