Christie Malry's own double-entry
Posted by Christie Malry on July 9, 2010 at 12:15 pm
A dilemma from Ritchie in respect of government food policy:
if the Tories want us to believe they are serious on obesity (and they say they do) then either they’re stupid or they think we are
I don't think the Tories are stupid.
Posted by Christie Malry on July 6, 2010 at 10:31 am
Via his Ritchieness, we find a link to a pretty stupid article which aims to make the moral case for taxation.
George Osborne claims that his 'Emergency Budget' is “unavoidable” and “fair”. It is neither. Much has been written about the partiality and opportunism of the first epithet and the mendacity of the second. But perhaps the most significant question has been posed by one of the clauses in Church Action on Poverty's Fairness Test: “Are people contributing tax proportionate to their ability to pay?”
Now, Dr. Jill Segger, the author of this piece has good churchy credentials. So she's more than qualified to write about "fair". But she has, as far as I can tell, no training in accountancy, finance or business. And as a self-styled Labour activist, we should be sceptical about her motives here. This article is quite clearly a party-politically motivated rant which, appallingly, uses ecclesiastical clothes to dress up its message.
During my adult life, there has been virtually no national moral conversation about progressive taxation. Progressive people have permitted their approach to be dictated entirely by the ideological Right.
This is rubbish. Up until the markets crashed, the debate was all in the progressive direction. The Tories suggested very modest reductions in the level of increase of state spending in the 2005 General Election and were soundly hammered for it by both Labour and the electorate, based largely on fears of "Tory cuts". Labour used "progressive" reasoning to introduce a 50% tax rate, a 1% uncapped national insurance rate (where previously there was an upper limit on national insurance), a reduction in VAT and to propose restrictions to pensions tax relief. Far from there being no debate, it has dominated political thinking for almost a decade.
And this can be demonstrated by the following graph, which shows the impact of taxes and benefits on household incomes by quintile. It clearly shows that taxes and benefits are redistributive, or "progressive" if you like.
The rich clearly pay a lot more tax and receive a lot less in benefits. It's the very definition of "progressive".
In default of a socially responsible voice making the case for income tax, it is now almost universally perceived as a burden to be avoided or evaded. Many libertarians delight in presenting it as something approaching an insult to personal liberty. An increasingly consumerist and individualist culture which tends towards indignation at anything it finds personally inconvenient, provides a receptive audience.
This is a distortion. People don't, in the main, mind paying taxes to help those genuinely in need. Only governments of all political persuasions have lazily allowed many people to claim benefits despite not being in need. This is largely because it's easier to stick someone on benefits than to let people struggle. Unfortunately, benefits often then make it difficult for people to care for themselves. They become trapped.
The obsession with relative poverty makes it worse. Because we define poverty in terms of median income, our view of what poverty is changes over time. That means we are institutionalising consumerism - not in the rich, but in the poor, the very people we're supposed to be saving from starvation, cold, poor health or lack of education.
This fatally undermines the very case which makes taxation legitimate. It's one thing to help the very needy. But there's no moral justification to take from one person to give to another, if the recipient is only spending it on consumerist pap. That's simply theft.
Because Labour has lacked the moral courage to challenge such a distorted and solipsistic view, it has always been on the back foot in responding to the Tory policy of tax cutting. Instead of presenting an unashamedly different and ethical approach to the funding of the services of a civilised democracy, it has squirmed and equivocated to its own detriment and, worse, to that of the moral vision of successive generations of tax payers. There are now two post-war generations who no longer understand income tax as being the subscription fee to the decent society.
But, despite much better opportunities and many former problems of poverty having been smashed years ago, tax remains stubbornly high. It's bizarre that someone so closely associated with the church, which had its own system of tithes (at 10%), should complain about levels of taxation that routinely take over 40% of their citizens' national income to spend on itself.
Tax justice – and therefore social justice - requires a radical overhaul of the present system. The proposal to (eventually) raise the point at which income tax begins to £10,000 is inadequate. Those earning less than £15,000 should be taken out of income tax altogether and there should be a far more graduated scale of liability, rising incrementally to the point where excessive salaries are capped by a 100 per cent rate.
This is the coup-de-grace, in which she reveals herself to be an economic halfwit and where her political opportunism is most shameless. £15,000 is easily enough to live on comfortably and is therefore beyond the point at which we should expect individuals to contribute to society. The moral basis for taxation is that it provides for those who cannot provide for themselves. It isn't there to provide for those who choose not to work, or who choose to spend their money on frivolous things instead. And I'm staggered that any commentator could contemplate a 100% tax rate and expect to be taken seriously. It's ridiculous.
Happily, not all Quakers are economic morons. The late, great Jack Powelson tried single-handedly (and mostly in vain) to convince other Quakers that free markets were consistent with - indeed, essential to - the Quaker faith. The Quaker Economist, now run by Loren Cobb, but sadly not much updated these days, is a goldmine of clearly explained, free market thinking and is still very much recommended over a year after Powelson died.
Posted by Christie Malry on July 1, 2010 at 10:21 am
O frabjous day! Ritchie gets all triumphant over the FSA/FRC report on audit, observing that the FSA has pointed the finger at auditors, claiming that the profession had not been sceptical enough about the financial firms it audited in the run up to the banking crisis.
He concludes:
What can I add? Except the likes of Prem Sikka, Dennis Howlett, Francine McKenna and I can all say “we told you so”.
Well, you could add that you are a bunch of dupes. You've been had.
What else did you think the FSA was going to say? The FSA is an organisation hanging under a death threat - in the Conservative manifesto was a plan to reform financial services, which was a promise to deliver on their earlier plans to abolish the FSA. So they're clearly going to say whatever it takes to pin the blame on somebody else.
The fact is - the FSA failed. Dismally. It was the regulator with responsibility for monitoring and reviewing banks. And it catastrophically failed to prevent the banks from taking excessive risks. Nor did it do anything to prevent borrowers from overextending themselves on consumer debt, also within its remit. And now, pathetically, it is trying to say that if only auditors had told it there was a problem earlier, then it might have spotted that it needed to take action.
That's just not good enough. As regulator, it should do whatever it takes to ensure that it delivers on its objectives, without any excuses. If auditors really weren't doing their job, then the FSA should have sought additional information from banks. We can only conclude that the FSA was clueless and inadequate.
The ICAEW's recent report on bank audits notes:
Dialogue between auditors and banking supervisors was not consistently good enough before the crisis, with the regulator not placing sufficient value on such dialogue.
Sorry, Ritchie, but that doesn't look like auditors failing to take their role seriously to me. It looks like a shambolic, incompetent regulator.
As if more proof were needed, the EC Green Paper on corporate governance in financial institutions states:
Generally speaking, the recent financial crisis revealed the limits of the existing supervision system: in spite of the availability of certain tools enabling them to intervene in the internal governance of financial institutions, not all supervisory authorities, either at national or European level, were able to carry out effective supervision in an environment of financial innovation and rapid change in the business model of financial institutions.
I'm not surprised that the four stooges have fallen into the trap laid for them by the FSA, but I am disappointed in them. It's simply a lazy and inadequate explanation to pin the blame solely on auditors. And it's a hypothesis that simply isn't borne out by the facts.
Posted by Christie Malry on June 2, 2010 at 11:18 am
The Coalition has declared war on overpaid civil servants, as part of a Conservative manifesto pledge to publish the salaries of high earners in the public sector. They published a big list of people who earn over £150,000 per annum (the list has been repackaged by ConservativeHome - thanks!)
Eventually, the plan is to use every legal means necessary to make civil servants earning more than the Prime Minister the exception rather than the rule. However, this does raise an interesting question - will this mess up their much-cherished defined benefit pension plans?
Well, dear reader, you don't need to shed any tears for our overpaid tax-guzzling brethren. They're already well taken care of, thanks to a little provision in the civil service pension plan rules which allows them to look back up to thirteen years[p.21] to cherry pick the best years of their career to use as their 'pensionable earnings'. So any mandarin forced to take a pay cut today will have plenty of time to quit their jobs in time to cash in on their overinflated pensions, largely paid for by the likes of you and me.
Still, in due course, as those civil servants on the older pension schemes retire and younger civil servants are admitted only into the career-averaging scheme, the costs of providing them with pensions should come down. Slowly.
Posted by Christie Malry on May 20, 2010 at 10:08 am
Goldfish have a pretty bad reputation as animals go. It's commonly held that goldfish have no memory at all and therefore treat every experience as if it were their first. Perhaps if you live in a plain bowl, that's a good thing. Of course, like most perceived wisdom, it's false - goldfish actually have much better memories.
Perhaps then, they might care to help out Tory backbenchers, who seem to be having a goldfish moment. They're up in arms at the very idea of increasing the rate of capital gains tax (CGT) from its current 18% to 40% or even 50%.
Do you think they've forgotten that CGT used to be set at the marginal rate of income tax? Assets that were held for more than just short-term trading qualified for taper relief, meaning that CGT could be as low as 10%. Then private equity hit. People didn't much care for billionaire private equity bosses paying only 10% tax, so Gordon Brown swept away the taper relief regime and replaced it with a flat CGT rate of 18%. As a special benefit for retiring entrepreneurs, gains on sales of businesses less than £1m still qualify for the 10% rate.
For people holding assets long term, Brown's changes were bad news - they meant an increase in tax of some 80%. Also, asset prices were no longer indexed to strip out inflation, meaning that individuals will in future pay tax in inflation gains, which seems grossly unfair. Conversely, for people who speculate, the changes were brilliant - they now paid 18% instead of perhaps as much as 40%.
There's no reason why the taper relief regime and inflation indexing couldn't be brought back. These changes would mitigate a lot of the problems of a higher tax rate. The system wouldn't be perfect, but it would be a lot better than ignoring taper relief and inflation altogether. Can't we have this debate? Or have the Tory backbenchers really forgotten how we used to do things in the past?
Posted by Christie Malry on May 9, 2010 at 10:27 am
Ritchie writes a small novella on the subject of neoliberalism. It includes this little nugget:
The Tories are a part of the anti-democratic process that seeks to take power away from the vast majority in the interests of the minority for good. Their record on the unions was just the start.
Writing just two days after the Tories have just achieved 10,700,000 votes in the general election that they are anti-democratic is simply mad. They campaigned on the basis that there is no major change needed for our first past the post system and they were very popular at the polls. They are easily the largest party in Parliament. This is democracy - the only thing "anti-democratic" about it is that it produced a result Ritchie doesn't like.
As for his claim to be proud to work for the TUC, the trade unions are - by their very constitutions - bodies that exist to benefit the minority at the expense of the majority. You only have to listen to a union leader for a few minutes before they're talking about the deal they want to cut for "their" workers, regardless of the impact it might have on customers, suppliers, investors or the general public. They are anti-democratic.
The fact that Ritchie thinks they work in the public good is irrelevant. After all, his opinions can be challenged - on this website at least.
Posted by Christie Malry on May 4, 2010 at 10:56 am
Imagine you're a plumber. People ask you to come sort out their plumbing jobs. Some of them might be complicated and need several weeks of work, where you're doing nothing other than working for that one customer.
Now imagine you're an IT consultant. People ask you to come sort out their IT jobs. Some of them might be complicated and need several weeks of work, where you're doing nothing other than working for that one customer.
What's the difference here, really? The answer is... IR35.
In the former case, it would be normal for the plumber to set up a service company. That company would do all the work for customers, using the plumber himself as the only source of labour. We wouldn't think twice about such an arrangement. Indeed, such arrangements used to be fairly commonplace in IT consulting too. But IR35, a little bit of government legislation, put a stop to it.
Government was concerned that some service company arrangements were being used to avoid tax in situations where the substance of the arrangement was really that of employer-employee. So IR35 was dreamt up for certain occupations to put a stop to this naughty avoidance.
In the ten years since it's been in force, people have complained that it has unfairly pushed the boundary between employment and self-employment too far. Common sense working arrangements, such as working at a client site, are no longer possible in some circumstances because they would trigger IR35 and deem the consultant to be an employee.
I don't support aggressive tax avoidance, but it's obvious that IR35 has upset a good many acceptable arrangements merely to stop a few bad ones.
The Conservatives, having initially and incomprehensibly backed IR35, now seem set to ditch it if they win. Vote Labour and you'll get more draconian, ill-fitting illiberal tax laws.
Posted by Christie Malry on May 4, 2010 at 10:02 am
Ritchie doesn't get it as he turns his mind to markets and education:
Markets can only work when there is choice. By definition that means there needs to be excess capacity. Unless there are vacant spaces in all schools there is no choice. But excess spaces are wasteful in terms of productivity. We can’t afford that waste.
Nor can we afford disparate standards.
We can only afford one system, and one standard. Admittedly, only the best is good enough. But it can be delivered at a lot lower cost than competition could ever offer.
And yet the Tories want to create competition, take resources away from the best state schools and do all this at a time when we can’t afford to do so? That is dogma gone mad.
Er, we already have markets for education. Lots of them, in fact.
Firstly, some parents decide that the state education system is rubbish, so decide to seek alternatives. They either pay for independent education or home-school. As a democracy, this is not something that government can or should do anything about. After all, government administers a public transport system but doesn't forbid private cars.
Secondly, even parents who send their children to state schools tend to supplement the state education with support of their own. They take their kids to football lessons, museums, violin lessons, and all manner of clubs from art through zoology. They help them with their homework and sometimes pay for private tutors. In doing so, they're compensating for the level of service they feel proper parenting should support and what the school can provide. There will always be a gap between school and parenting; the failings of the latter shouldn't necessarily always be made good by the former.
Thirdly, there is - no matter what Ritchie might say - a market for school entrance. For schools that maintain selection, parents try to get their children to meet the selection criteria. Hence the tutoring mentioned earlier, or sudden visits to church every Sunday. Even for schools that don't select, there are still criteria. Desperate (and richer) parents will buy a house in the catchment area. Desperate (and poorer) parents might decide to lie about where they live. It might not be a market as we know it, but it's still a market where suppliers and purchasers meet.
I'd prefer that we had a more honest debate about markets in schooling. Currently we have a phoney system that pretends markets don't exist when they quite clearly do. And the benefits accrue to others, for example people who are lucky enough to have a house in an area with an improving school, not to the school system.
Ritchie's final paragraph is pure tripe. There's nothing in the Conservatives' proposals about taking resources away from the best state schools.
Posted by Christie Malry on May 2, 2010 at 2:51 pm
Labour has been obsessed with introducing ID cards. A solution looking for a problem, Labour has tried almost every excuse in the book to justify them - anti-terrorism, anti-money laundering, anti fraud, to help pay benefits to people, to help pay benefits only to British people, to help access healthcare, etc. etc.
As with so much of government procurement, they grossly underestimated the cost of the scheme both the amount to be paid from taxation and the amounts to be paid by those receiving cards. They overstated what the technology would be able to deliver. And they also disingenuously said that cards would be optional, but that those applying for or renewing a British passport would receive an ID card as well, making them optional only for those with no intention of ever travelling abroad.
Eventually, public scepticism, helped by a very efficient lobbying campaign by NO2ID, meant that ID cards have been delayed indefinitely. And it seems that an incoming Conservative administration will ditch both the cards and the database that it relies upon.
Labour, on the other hand, will take both projects forward again. A vote for Labour is a very unwelcome step towards a police state.
Posted by Christie Malry on April 21, 2010 at 10:49 am
Ritchie rails against the big society:
The Guardian reports that even the Tories aren’t convinced by David Cameron’s “big society” message.
This is unsurprising. The idea is that lots of people should volunteer and take over the role of the state in supplying social services. There will be no law to back this up, no provision to let people have time off work to do this, no compensation for their effort.
It’s a ludicrous idea. It assumes a world in which there is a class of very able people who do not need to work for a living, who want to give and do not wish to consume, and who will make sound judgement for all without direction of control of any sort to make sure optimal outcomes result.
This world does not exist.
It harks back to the time of a rentier class.
To a time when business owners, professio0nal people, medics and so on could spend most afternoons either on the golf course or sitting on the odd charitable committee to pass the time whilst their minions made the profit for them.
To a time of non-working wives.
To a time when mortgages were small.
Hmm. I know a greying accountant who does not need to work for a living, who wants to give and does not wish to consume, who believes he makes sound judgement for all without direction of control of any sort to make sure optimal outcomes result.
Yet that same accountant doesn't believe the rest of us can do what he himself does on a daily basis. How very peculiar.
