Your daily Eoinbollocks

Posted by Christie Malry on February 6, 2012 at 11:58 pm

Whilst it may mean better results for some of the schools that change status, it will in effect depress results at other schools who lose out on the £300,000 bribe each new academy gets.

Utter cock. Where did he get this number from? There might be some schools that receive LACSEG of that amount, but it's far from being an average figure.

There is £25,000 available to pay for the legal costs associated with conversion. But LACSEG isn't a "bribe"; it's compensation for amounts previously spent by the local authority on the school's behalf.

Is the anti-Academy case so bad that people have had to resort to making numbers up now?

Eoin is an idiot

Posted by Christie Malry on January 31, 2012 at 12:31 am

Whilst a worker on the NMW pays 13% of his income on direct taxation, Tony Blair Associates paid just 3%. That means than a minimum wage worker paid 333% more tax last year that Tony Blair Associates as a proportion of income.

If you compare the tax paid by a company as a proportion of its revenues against the tax rate paid by an individual as a proportion of his/her income, it's hardly surprising you're going to end up with idiotic results.

A company isn't a person. As I heard only this evening, thanks to a great talk by David Allen Green, it's a legal fiction that's given certain person-like qualities, but only in order to enable it to enter contracts, limit the liability of its shareholders, etc.  We tax companies in order to tax their shareholders. But we tax companies on their taxable profits, not their revenues. This is exactly the same way that sole traders and other unincorporated businesses are taxed.

We tax people differently. We tax them on their income, with very little scope for deduction.

So if there's a baddie in this tale, it's the tax system which beats up on the little guy. It's not Tony Blair, who will pay tax on any income he receives personally (possibly in the UK, but possibly not, depending on how he has structured his affairs). 

And it's mathematically dishonest to compare the rates paid and shout that one is higher than the other, without taking account of the actual amounts of tax paid. It takes a superhuman quantity of fuckwittery to actually believe that a minimum wage worker pays 333% more tax than Tony Blair's company. It's simply not true, whichever way you look at it.

Another accounting lesson for Eoin

Posted by Christie Malry on January 24, 2012 at 10:08 pm

The rate of profits made by companies who work in oil & gas are upwards of 44%. This is at the same time as the rates of profit in manufacturing are less than a quarter of that. Clearly, some sectors have a fast buck culture where their rates of profit do not match the work that they are doing. Multinational Companies operating in the UK should have their rates of profit capped at about 25%.

Oh brother. Let's just have a little look at BP's accounts for 2010:

Revenues: $297 billion

Loss before tax: $4.8 billion

Which I calculate to be a rate of loss of 1.6%.

OK, so 2010 was an extraordinary year for BP, given that it had to pay out bilions of dollars to pay for the cleanup of the Gulf of Mexico (see why they have to charge so much now, Eoin?). Let's look at 2009:

Revenues: $239 billion

Profit before tax: $25.1 billion

That's a rate of profit of 10.5%. I give up. Where on earth does he get his idiotic figures from? Clearly not from the accounts or from anything even remotely resembling reality.

Oh, and these are fun:

No employee/er or shareholder should receive a bonus in shares or payments of above £1m in any one year. The Sainsbury's boss for example received several millions in bonuses and shares while the same company hired disabled teenagers to work UNPAID. 

The idea that no shareholder can receive a bonus in shares or payments above £1m in any one year will totally fuck with any large pension fund. They'd have to reduce their holdings to ensure that they didn't receive dividends in excess of £1m, which for many companies wouldn't require that large a holding.

And forcing bosses to receive smaller bonuses will generally mean that they'll seek larger salaries. That makes payment for failure virtually guaranteed.

Ah, but Eoin has a plan:

No worker should ever be allowed to earn 2000% more in one year than the lowest paid worker in the company. The Tories had previously suggested that they might support this during the General Election campaign.

OK, so you've got an apprentice on £2.60 an hour and he works 9-5 for 40 weeks a year. That's a salary of £4,160 per annum. That would mean the boss can earn no more than £87,360. Is that realistic for a large engineering company, or would any prospective candidates make sacking all apprentices their first priority just so they can earn a bit more money?

His grand plan would see the total annihilation of every apprentice programme in the country, dumping loads of half-trained youngsters out of their jobs and onto the street. What a masterstroke!

Eoinomics: pre-distribution

Posted by Christie Malry on January 16, 2012 at 9:53 pm

Pre-distribution. The single (non) word that Eoin thinks will win Labour the 2015 election. So what is this big idea?

Essentially, the jist of Pre-Distribution is that you fix the way capitalism works before profits & incomes are made, and that way you have less redistributing to do at the other end. Take rail fares for example. During the New Labour years, the prices of rail fares were permitted to rise 5% over the rate of inflation. That often meant rail fare increases of 10%+. Under Ed Miliband's leadership, the maximum rail companies would be permitted to raise fares above inflation would be 1%. This would dramtically reduce price increases and thereby make the burden of transport costs easier for commuters. By making customers fork out less you enable them to keep money in their pockets and thereby help them cope with the cost of living crisis. Whereas subsidising transport costs, capping rail increases does not.

Eoin has managed to spectacularly miss the point here. The cost of rail depends really on two things: the quantity of services that need to be provided and the amount of investment that's needed to preserve and enhance the rail network. And this cost can be paid for in two ways: by recovering it from passengers through ticket prices or from general taxation.

If you cap rail fare increases, ceteris paribus, the amount of money to fund the railways will decrease. And this means that either the rail network has to run fewer trains or it cannot fund necessary improvements and repairs to the rail network. Or, most likely, both. Eoin's assertion that "capping rail increases does not [cost]", it most definitely does cost. Either more money is needed from general taxation or the quality of service provision must fall.

The same type of philosophy can be applied to reductions in Corporation Tax. Ed Miliband has said that companies qualifying for low tax will have to sign up to proper apprenticeship programmes or face punitive taxation. In addition crèche providers could be prevented from charging parents registration & reservation fees of hundreds of pounds when capacity at their crèches is not utilised.Can you see a pattern developing? You regulate companies to get it right at the point of pricing and delivery rather than correct big businesses failings by subsidising low wages etc. Whereas Tax Credits to subsidise low wages cost, a Living Wage does not.

The first bit of this is total interventionist meddling bollocks. Government has no authority to fuss about in private businesses like this. And they're totally incompetent at the bits of business they run themselves. They'd be mad to seek to interfere in the business affairs of others, and could certainly not hope to reduce overall costs by doing so.

The idea that a living wage is a free lunch is very dangerous. The living wage would destroy jobs. Maybe not today, maybe not tomorrow, but some day - and for as long as the living wage remains in force - it will destroy jobs. Some of them would end up being mechanised. Some would get exported to China or India. Some would end up being done by other people already working. But while we cry over redundancies, we never shed any tears for those jobs that were never created in the first place. And a living wage would lead to vast numbers of businesses seeking to place jobs elsewhere, in countries where the living wage legislation doesn't apply.

So this is the big idea that will win Miliband the 2015 election? I really don't  think so...

Eoinomics: still bleating on about Vodafone

Posted by Christie Malry on December 30, 2011 at 8:32 pm

The huge profits amassed by Vodafone should have been viewed as a problem by Labour. We should have been concerned. But of course a New Labour principle was that we were 'okay with the filthy rich'. This principle led to a policy of Low Taxation. Tories reading will more readily recognize these as Tory principles in operation, not Labour ones. There was most clearly a detachment from core Labour values in pursuing this principle.

For the love of God, will someone please nail the facts to a baseball bat and then use it to bludgeon Eoin about the head until he accepts some basic facts about Vodafone.

Vodafone doesn't earn all of its "huge profits" in the UK.

Therefore it's totally right and proper that it doesn't pay tax on all of its "huge profits" in the UK.

Got me so far?

The dispute between HMRC and Vodafone hinged on whether certain profits earned outside the UK should be taxed as if they had been earned in the UK under the UK's controlled foreign companies legislation. That legislation sails pretty close to the wind with respect to EC law and has needed clarification as to its scope. You can't realisitically expect Vodafone to pay UK tax on its overseas profits without also foregoing UK tax on profits earned here by foreign companies.

But this isn't about some concerted campaign to reduce tax on the "filthy rich". It's about taxing in the UK only those profits that are earned in the UK.

Let's hope that Eoin has made a New Year's Resolution to think before he blogs.

 

Eoinomics and the coalition's approach to closing the deficit

Posted by Christie Malry on December 6, 2011 at 9:45 pm

Eoin isn't happy.

According to the OBR (table T4.7 29/11/11) George Osborne is planning to raise more than £300,000,000,000 in extra taxes this parliament over and above what Labour were taxing people in 2010-11. That in itself will shock many Conservatives but since I'd prefer that taxes were raised as opposed to cuts, I will not take him to task for that. My issue is how George Osborne plans to raise those taxes. If you are going to raise more than £300bn in new taxes it is important that the burden falls on the broadest shoulders right? Well, not according to Osborne no.

According to the OBR, Osborne is planning to raise an extra £96bn in Income Taxes, and extra £92.8bn in VAT and an extra £72bn in National Insurance. You remember National Insurance at the last election was referred to as a 'Jobs Tax' by the Chancellor? He then promised that he would cut this so-called 'jobs tax'. You trust a Tory at your own peril. But, to top it all off, George Osborne has opted to only raise £4.5bn in taxes from profit. Yes, that's right, he'll tax consumers and workers to the hilt but profits escape the hit. Osborne is happy for the profiteers to go on raking in large profits and for ordinary people to foot the bill through taxes.

Like so much with Eoin's work, the precise calculations are hard to verify. I found Table 4.7 but no matter how I jigged and poked the numbers, I couldn't get them to add up to £300m, which is, after all, only £60m per year. Put another way, the growth in taxes from2010/11 to 2015/16 is only compound growth of 4.6% per year, or approximately inflation. So portraying this as a giant smash and grab on the working poor is rather over-egging the cake.

Then we can take issue with his hypothesis that taxes on income hit 'ordinary people' whereas taxes on corporate profits don't. This is an idiotic viewpoint.  Remember our favourite HMRC table, which shows who actually pays income tax. The 1%, much hated by #occupylsx, actually pay 27.7% of all income tax collected in 2011/12. And the richest 25% pay almost a full three-quarters of all income tax. Income tax is very much a tax whose weight falls on the broadest shoulders. Given the 1% rate of NICs on higher incomes, you would expect the distribution of NICs to be less progressive. But VAT, as we've shown before, is progressive on expenditure. Given that it's a consumption tax, it's silly to try to measure it against incomes.

Similarly, the issue of who bears corporation tax is hotly debated, as Tim Worstall often reminds us. But who are these fat cat owners of UK companies? By and large, it's ordinary working people through their pensions and insurance assets. Even if you believe the incidence of corporation tax is the company's owner, taxing companies more would only hurt ordinary people.

And then there's the logical flaw. Eoin assumes that all increases in tax over the base year of 2010/11 must be due to deliberate tax increases. But there are a raft of reasons why the tax take will increase without such deliberate action, including growth and fiscal drag. Or indeed, any successful attempts to reduce tax avoidance and evasion would also increase the tax take.

Isn't it wonderfully ironic that a possible explanation could be that George Osborne has finally cracked the problem of tax evasion, and left-wing commentators criticise him for it? 

HT: Jonathan M

Eoinomics: committing Worstall's fallacy

Posted by Christie Malry on November 29, 2011 at 9:49 pm

Eoin commits an appalling fallacy:

Today's data shows that we are all in the shit together. 80% of families have £25k or less a year.

The graph [  ] shows, in increments of 10%, the household income of each decile group in the UK. It is based upon a modified version of the OECD equivalised scale.  Crucially, it is not my data but the government's Office of National Statistics see here. The calculation factors in the number of dependents and the size of the household. Considering that rents are £8,600 & that dual energy bills are £1,400, one can quickly gain the impression that families are struggling worse than ever. With inflation running at 5% 23% Gas, 11% Housing, 8% transport, and wages growing at just 300 pennies a week over the year, life is now very unaffordable for millions.

This is a dismal fallacy, one that I shall attempt to get named 'Worstall's fallacy', in honour of the person who I first saw mention it (eg here).

He's looking at income before benefits, but then totting up all the things that people need to buy from their income after benefits. So he naturally will assume that we're a bunch of Tory baby-eating bastards, because he's deliberately ignored the welfare state, by which we help the very poorest in society. And that's a key mechanism by which the state alleviates the very problems he identifies.

Yet there's more. He has got his income from this table, which the eagle-eyed among you will note is a table of expenditures. He's taken the 'lower bound' information of each decile from the top of the table and multiplied by 52 to arrive at annual income figures. But that's not the average income for each decile. This explains why his graph shows that the poorest decile has income of £0, a clearly ludicrous position.

I appreciate that Eoin wants to show that the poor are poor. But abusing the data like this is hardly the way to do it.

Eoinomics and teachers' pensions

Posted by Christie Malry on November 29, 2011 at 7:36 am

Public pensions are not gold plated, and £6k p.a. is not an unreasonable sum to pay nurses, teachers, doctors, cleaners, firefighters and police personnel in their retirement.

Oh dear.

This is a favourite trick of the left, and it's an extremely devious one. The £6k figure isn't sourced (of course it isn't, this is an Eoin article),  but happily we know it because it's a number unions bring up in pensions debates. It's the average annual pension for a retired member of (some portion of) the public sector pension schemes.

Now, think of a nurse, teacher, doctor, cleaner, firefighter or policeman. You'll probably think of someone who has worked in that area for all of their life. But there are plenty of them that don't. They work in the sector for a bit and then go do something else - perhaps have a baby, or move out of the public sector altogether. When they retire, their pensions are included in the average pension of a public sector worker and, in doing so, drag down the average. So it's daft and totally misleading to just look at the average figure without digging behind it some more.

While many people might think £6k is a fair pension for a career public sector worker, they might be horrified to find out that the true figure is 2-3 - or in some cases more - times that amount. I'm also sure that they wouldn't think it reasonable to pay someone who had worked in the public sector for only a few years that sort of pension. In addition, their answers might have been different if they had been given some information on the size of private workers' pensions.

Finally, I read somewhere that the 'gold plating' originally meant the fact that their pensions are underwritten by the state, and can therefore never fail to be paid; private sector pensions, until recently, had only their employer behind them. Even with new regulations, private sector defined benefit pensions are only guaranteed up to 90% of the benefits and only up to a capped amount.

Yet more Eoinomics

Posted by Christie Malry on October 25, 2011 at 8:47 pm

Household Income has stood still for the last 4 years: The big squeeze.

The graph above shows the 'real' increase in household income since 2007. As you can see the level of disposable income reached in 2007 (Q3) is basically where the nation's household disposable incomes are now. When this autumn's hikes in fuel, transport & housing costs are factored in the actual picture will be even bleaker than that. The pain we are currently going through resembles that of 1979-83, the first term of the Thatcher government when disposable incomes grew just 1.1% in the first three years of her administration.

Eoin is complaining that 'real' (ie post inflation) disposable income has been positive in each quarter since 2007. Now, you can argue about which inflation measure has been used (he doesn't say) or whether fuel, transport and housing costs tend to increase at a rate that's faster than the main inflation measures (they do have a tendency to). But to say that household income has "stood still" is demonstrably false. That's a mathematical impossibility, given that every quarter shows at least some growth.

Is there no beginning to this man's economic ability?