The Confidence Fairy

George Osborne has presented himself as the “Iron Chancellor” willing and able to make the tough decisions required to see-through the Tories “long term economic plan”.  With an Election 80 days away it’s time to assess his track record in this regard as he is now promising (with some glee) another 3 years of austerity, as he tries to achieve a budget surplus in by 2018. Osborne believes the winning narrative goes like this: Labour wrecked the economy, we inherited unsustainable debts, we then embarked on un-popular but necessary polices to restore confidence in the UK economy and bring down the deficit, these policies took time to work but supported by monetary policy (QE) the plan is now paying dividends.  One would have to be a dumb fish to swallow this story hook line and sinker.

Taking the bait

Not Your Bucks hands off the Vodafone windfall

I have been a trenchant opponent of multi-national corporations who see no need to pay UK corporation tax mainly because this behaviour is anti-competitive.  Amazon and Starbucks and other businesses have been free to grow their unprofitable companies to the detriment of our own domestic businesses.  I strongly believe that multi-national corporations must operate on a level playing field or be ‘red carded’.
This week we have a slightly different tax avoidance story that has got everyone excited.  Vodafone are about to realise a £84bn windfall on the sale of their 45% stake in Verizon Wireless, their US partner.  Not a bad return on the £20bn invested in 1999.  Our cash strapped government and specifically the House of Commons public accounts committee can’t wait to get their hands on some of the loot and ministers are already dreaming up ways of spending these unplanned revenues.  However, before they all get too excited there is a suspicion that the company is going to manipulating the rules to avoid capital gains tax.

Mondeo Man Trap can win Cameron the next election

The tide has turned on the British economy; after the tsunami of the credit crunch we have been beached on the mudflats of no/low growth of for four years.  There have been moments when it seemed the after-shocks would create move waves, the Euro crisis being the most obvious risk.  There have even been moments when recovery seemed to be ebbing our way only to evaporate into the stinking sands of a flat-lining growth.  In December last year I blogged that we were at the beginning of the end and amazingly I think I called the low water mark correctly and 8 months on the sparkling waters of recovery our flooding in bringing relief to many parts of our economy. 

Low water - but the tide is coming in!

This change in the tide is very welcome but growth is still weak and localised.  Most of the benefits are being felt in London and its hinterland and only in pockets outside the south east of England.  More worrying our neighbours in Europe are still up to their knees in thick mud and going nowhere fast.  With a new governor at the Bank of England and only 20 months of the coalition government to run people in high places can't afford another false start, they need a full spring tide to come flooding in to all parts if our economy. 

The Full Monty on Osborne's economic policy

In the five years that have elapsed since the global financial crisis  erupted in the summer of 2008 living standards in the UK have dropped sharply (in 2008 a single person earning £13,000 would have reached the minimum they needed to get by. if their wage had risen in line with average increases, they would now be earning £14,000 – which is roughly three thousand short of the £16,850 salary needed to cover the same basic standard of living today).  During this period we have had two governments who have been  attempting to nurse our broken economy back to health.  In  the first two years of the crisis we had the 'fag end' of a long running Labour government, who had little stomach for the fight.  The only Labour minister who came out of this period with any credit was Alistair Darling the who, despite constant interference from Gordon Brown (self styled saviour of the world), did an excellent job of first aid on a patient that was dead on its feet.  His sensible approach to encouraging consumption through sales tax reductions and the motor car recycling scheme combined with a massive blood transfusion of QE made sure that Britain survived the trauma of an imploding financial services industry and the cataclysmic effect this had on credit markets and the tax take.  The rest of the Labour government were in shock as they watched 13 years of neo-socialism unwind before their eyes. 

Old Dogs New Tricks

The UK's higher education minister, David Willetts (Nickname - Two Brains) is entreating the over-60s  to go back to university and retrain because they will have to work longer. Willetts pointed out that age limit on student loans had been lifted, making it possible for older people to go back to studying. He said: "Education is such a good thing – it is not reserved for younger people. There will be people of all ages who will want to study. There is great value in lifelong learning."  His comments were prompted by report found that the country’s future economic success depends on the skills and contributions of older workers.  Some pension specialists think that few 60 year old's will think that a three-year university degree costing £27,000 is a good investment, but its not the money that's the problem..

It seems to me that Willetts is missing the point, which is that older people from the baby boomer generation are completely unsuited to life a University.  Today's student is a industrious individual - I should know I have two daughters at university - they are hard working, sensible and devoid of any radical opinions.  Speaking for myself and remembering the my first attempts at further education I am sure it would not work.  I would be aiming at doing only 2-3 months work for my finals, this continuous assessment malarkey would not suit at all.  Also the thought of being cooped up with thousands of young people who have no anger or fire in their bellies would be painful, who would I sit around with all night - debating inanely the meaning of life? Also you can't rewind the clock on alcohol - I simple could bear to sip Blossom Hill for three years!

It is clear that the government will be pushing water up hill and to have any chance of success they will need some role models to carry the touch for re-education and on this I do have some helpful suggestions.  The Duke of Edinburgh should be enrolled on a Chinese and Asian studies course to include a residential year.  This will give him the chance to establish whether his warning to British overseas students was prophetic or not. - on a trip to China in 1986 he told them ''If you stay here much longer, you'll all be slitty-eyed''.  The 91 year old followed this up yesterday with further insightful remarks for our Filipino friends.  When opening a hospital he said to one of the nurses: "The Philippines must be half empty - you're all here running the NHS." 

Another candidate role model might be Gordon Brown, who is enjoying retirement having destroyed our economy when Chancellor of the Exchequer.  Might I venture the idea that he complete degree in sociology so that he when he meets normal member of the public he does confuse them ''just a sort of bigoted woman''.    

http://news.bbc.co.uk/1/hi/uk_politics/election_2010/8649012.stm

Taxing time

MPs have been grilling the 'Big Four' accounting firms today - PwC, Delloite, KPMG and E&Y
Tax avoidance and 'planning' account for between a quarter and one third of all revenues that that the behemoths create - and its probably the most profitable work.  PwC made over $7bn in Tax revenues in 2011 and my guess is that the UK is a big chunk of this as we are the centre of the financial world.

When Jane McCormick, UK head of tax at KPMG, says: “Our main purpose is to help our clients calculate and pay their tax.” I start to shake with uncontrollable laughter / anger.  If one of her minions were to say this, in all seriousness, in the privacy of a client's Boardroom Jane McCormick would probably sack them on the spot!

The MPs are generally useless at any kind of investigative cross examination and today was no exception, the smooth talking consultants were able to bat away there piffling question with disdain. Anyway Parliament shouldn't be so smug, the main reason for this booming industry is the appallingly complex tax regime that we have in the West -and the UK is one of the worst.


Gordon Brown was responsible for more tinkering and rule adding that anyone since Pitt the Younger and George Osborne (the worst Chancellor since Tony Barber) has been even worse.  Imagine this, he has made over 400 tax changes since coming into office  300 up 120 down! No wonder the tax accountants are having a field day.  My thanks to the source below published by Conservative Home!!

http://conservativehome.blogs.com/files/taxrises.pdf

The UK guide to tax regulations came in at 5,952 pages in 2001, grew to 9,866 under Labour in 2007, and has been beefed up to 17,795 pages under the coalition, that's a bloody disgrace.

I think its probably accepted that simple and fair taxes are the most efficient.  George Osborne has failed in 3 years to bring forward a single simplification, which could have raise revenue without lining the pockets of the accounting firms.  Worst Chancellor since Tony Barber.

ANOTHER BIG FOUR - can you name them?

Thanks Gordo

My friends on the left are not going to like this but the group affected most by the overall austerity package in the UK —not just in terms of pounds, but also as a proportion of their income—has been the richest.

Those in the top tenth of the income distribution have been hit by a combination of increases to income tax and national insurance contributions, restrictions to pension tax relief and withdrawal of child benefit. Research tells us that households in the top tenth of the income distribution will have lost about 7 per cent of their income as a result of the consolidation package, compared with between 4 and 5 per cent for those in the bottom third of the distribution, and about 3 per cent on average overall and don't forget that welfare payments were increase by 'only' +1% following inflationary linked rises for the last 4 years (during which time everyone else has had declining incomes) to howls of protest!

So to a large extent we really are “all in this together” or rather a quite small % of the population are now paying off the substantial part of Gordon Brown's debts!

See my last blog on this subject

http://getwd50.blogspot.com/2013/01/when-are-you-payingtwice.html

So thanks Gordo!
http://www.prospectmagazine.co.uk/author/paul-johnson-2