Ritchie caught lying again

Posted by Christie Malry on April 12, 2015 at 2:41 pm

He's caught bang to rights:

There are three things to say about Osborneā€™s long term economic plan.The first is he did have one. It was based on imposing austerity. It failed. We had a recession.

This just isn't true. A recession is defined as two successive quarters of negative growth. And we simply haven't had two successive quarters of negative growth at any time in this Parliament.


Read elsewhere 12 July 2012

Posted by Christie Malry on July 12, 2012 at 11:37 pm

The ACCA's Deputy President offers up some views of the future of the accountancy profession.

ACCA’s chapter looks to the future, and details a number of emerging pathways for the next generation of accountants, in the context of six key areas. These include ACCA’s history and background; its current vision; future trends and emerging pathways; integration of ethics into the ACCA qualification framework; integrated reporting; and the impact of technology on education and learning.

Riveting stuff, eh? I'd really hoped for a lot more insight, instead of this rather drab 'vision'.

Over at the Touchstone blog, they're reviewing the impact of benefits and taxes on household incomes. This is one of my favourite ONS publications and I've drawn some conclusions from it before (eg here, here, here). I find their conclusion, that a "strategy for reducing inequality and poverty that doesn’t raise taxes and increase benefits and services looks as if it is starting off with a massive disadvantage", to be a non sequitur.

In CityAM, Goldman Sachs analyses the economics of the Olympic games. They report that "the London 2012 Olympics are expected to make a profit (in the sense that revenues will exceed the day-to-day cost of running the Games), but this will still leave the UK with a significant bill for construction and other ancillary costs". They note that hosts tend to win more medals. So, if this is your objective, hosting the games can repay handsomely. However, Goldman Sachs fails to appreciate that we pay the bills while individual athletes get the glory. How is that fair? Also on the theme of the Olympics, Archbishop Cranmer has an angry swipe at the proposals to ban all sorts of everyday items from the arenas. Including chips. And Puffles provides an enormous list of all sorts of things that are wrong with the Games. Is this really what the Olympic spirit would demand?

I really enjoyed reading about Tom Paine's very clever daughter and his other very clever daughter.

Skip Licker recalls a dead soldier and how that cemented in him the view that war must always be the last resort. And that's why he is so angry to see Tony Blair re-emerging.

And finally the London Review of Books laments the sorry tale of Paul Krugman's failed attempts to become a real political pundit.

Magic money trees revisited

Posted by Christie Malry on March 21, 2012 at 9:48 am

I had some good, challenging feedback on my post on the magic money tree. So here, in more detail, is why i think the schedule is so idiotic:

  • The schedule appears to include the value of public services received. But can we trust these valuations? It's unclear how they've been calculated.
  • Even if the valuations are right, it's very misleading to include them. An individual's income is in cash, so it's misleading to show income in cash, tax deductions in cash but to add back public services at fair value. Alternatively, the tax deductions could be valued at fair value too, by recognising the opportunity cost of depriving an individual of his money. 
  • There's no real indication that the public services are actually what an individual wants. Imagine that you're robbed in the street of £10. It's no consolation to be given a voucher for a lobster dinner "worth" £30 instead if it's not what you want.  Even if you're hungry.
  • An individual doesn't really have more than he started off with. At the end he has much less cash but some 'vouchers' for state services. That means he now may be unable to buy things he really wanted to buy because those vouchers can't be bartered.

Many of these concerns may be applicable to the 'personal tax statement', depending on how the government finalises it. Assuming that it ever does.


I have found the magic money tree

Posted by Christie Malry on March 11, 2012 at 8:46 pm

This truly needs to be seen to be believed. For I have located the mysterious magic money tree, on which all socialist economics is based. Turns out it was lurking in the bowels of the Office for National Statistics all this time.

This shows how the average household earns £30,924 a year, which is topped up by cash benefits of £5,448 a year. After paying indirect and direct taxes, the average household is left with £24,400 of post-tax income. But the state then delivers non-cash benefits in kind such as schooling and the NHS, which add back £6,636 to our average household. The net result is a total "income" of £31,036, which is more than our household started with!

Answers on a postcard, etc. etc.

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.

Reasons why Eoin Clarke should stay well away from tax issues

Posted by Christie Malry on October 17, 2011 at 8:13 pm

The Tories raise extra taxes of £240,000,000,000 off ordinary people while Vodafone pay tax of just £1,400.

Er, what?

Vodafone paid just £1,400 tax on profits of £3,500,000,000 accounts filed last week showed.

What?? Vodafone didn't file anything last week. Perhaps he has been snooping through individual accounts filed at Companies House, but unless he's prepared to tell us which one it's going to be pretty difficult to corroborate these figures and/or point out the errors in his analysis. Certainly the figures of £1,400 and £3.5bn don't tie in to anything in the group accounts, and I can't see any obvious UK holding company at Companies House that has recently filed accounts that this could be.

HMRC Tax Officials have described Vodafone's holding company in Luxembourg as an elaborate tax avoidance structure. 

Sure they did. But HMRC settled the case because they knew it would never fly under European law.

Vodafone pay knock down taxes in havens around the world and avoid liability for tax due to share write-downs. This is the murky world of corporate greed at its worst.

This is nonsense. The real reason Vodafone pays tax at a low rate is that it has brought forward losses not previously recognised that it will now be able to utilise. It also got a whopping great credit to the tax line because of the settlement with HMRC. It's nothing to do with tax havens and share write-downs, whatever those might be. Eoin has written a load of gibberish here. It probably goes down well with his knuckle-dragging lefty chums, but it has no basis at all in reality. He should stop writing about tax because he doesn't know what he's talking about.

Ordinary families struggle with a tax burden while Vodafone escape.

The average family pays £1,400 a year in Council Tax.

The ONS says that this figure is in fact £1,165 per household per year, with £165 being paid on average in Council Tax benefit. So Eoin has overstated it by £400 a year 1.

The average family pays c.£2,000 a year in VAT.

Again, the ONS says that this figure is in fact £1,843 per household. Eoin's nicked another £157 2.

The average family pays £4,200 a year in Income Tax.

The average family pays £330 a year in tobacco/alcohol duties.

ONS says £4,737 3 and £620 4. So, by understating these two, we're probably back in agreement in total. 

The average family pays £330 a year in Green Taxes

I'm not sure what he's lumping in there. I couldn't see anything that looked close to Green Taxes.

That's more than £8,000 tax.

OK, but we've always had council tax, VAT, income tax, tobacco and alcohol duties and green taxes. Where are these 'new taxes' that are clobbering 'ordinary people' to the tune of £240bn a year?

Now there are just shy of 30 million income tax payers in the UK. And there are approximately 26 million households 5. So, how on earth does he arrive at £240bn, a sum equivalent to £8,000 for every income tax payer in the land and £9,230 for every household? £240bn is fast approaching half the entire tax take of the UK, so the very idea that the Coalition could have found ways to increase taxation by this amount should have alerted Eoin to the fact that he was taking a one-way trip into fuckwittery.

At the danger of repeating myself, Eoin really should stop writing about tax because it's quite clear he doesn't know what he's talking about.


  1. Table 14, cells L54-L55
  2. Table 14, cell L64
  3. Table 14, cell L51
  4. Table 14, cells L65-67
  5. Table 14, cell L11

Billionaires and secretaries revisited

Posted by Christie Malry on October 16, 2011 at 10:49 pm

In this post, I argued that the claim that billionaires pay tax at a lower rate than their secretaries is bogus. I referred to figures from the Office for National Statistics to show that the poorest 40% of the population actually 'pay' tax (including indirect taxes) at a negative rate. The idiotic rhetoric that wealth flows upwards, very popular among #ukuncut types, simply cannot be the case in a world where the richest 60% contribute to a welfare state from which the poorest 40% benefit.

However, as Guy points out, the figures I have used include state pension payments made to the retired.

Ever happy to please my readers and correspondents, I've reworked the figures from the tables for non-retired households only. And they give the following results. If you want to check out the numbers for yourself, they're at this Google Documents link.

So, Guy's hypothesis is correct: the state pension does provide generously across the income distribution. However, it's clear that, even excluding it, the poorest 20% do not contribute to taxation once their cash benefits are taken into account, and the next decile contributes only very modestly. While the picture is not as stark, it's still true that the poorest in society are looked after by the richest, and that the richer you are the higher the rate you contribute. The Krugman claim is demonstrably false in the UK and you should shout it loud and often. Or if you don't want to shout, you can always share this post with your friends and enemies - some links to help you do that are at the bottom of this post. 

Yet I wonder whether it's really appropriate to exclude retired people from this analysis. Retired people can still be poor, and their age means that it can be difficult, impractical or downright impossible for them to work. The welfare state provides for them through the mechanism of the state pension. So should we really be excluding a significant transfer of wealth from those who work to those who do not? I'd welcome your thoughts.

Lies, damned lies and Richard Murphy's claims about the tax rates paid by the rich

Posted by Christie Malry on October 2, 2011 at 7:47 pm

This is Ritchie ranting about inequality:

That’s why the top 1% of income earners in the UK have the lowest overall tax rates in the UK.

Like Eoin, Ritchie doesn't give a source. And that's most likely because it's untrue.

When talking about overall tax rates, people normally mean income taxes as a proportion of total income. On this basis, we can refer to my earlier blog post on this subject, in which we produced the following table. The figures are derived from an ONS publication. The ONS doesn't produce figures for the income earned by the top percentile of earners, but we do know that they pay a phenomenal amount of income tax - 27.7% of all income tax paid by taxpayers in this country.

So, on the traditional basis, the richest 10% pay direct taxes at a rate of 25.3% and the poorest 10% pay direct taxes at a rate of 12.0%, under half that of the richest. The rate paid by the richest 10% is higher than all other deciles, making Ritchie's claim demonstrably false on under the traditional view of tax rates.

Looking at overall taxes paid (including indirect taxes such as VAT, beer/wine/spirits duties, gambling taxes, tobacco taxes and the like), the poorest 10% pays taxes of all kinds at a rate of 43.3% compared to the richest decile's 33.6%. While it may be these numbers that Ritchie is basing his case on, it's a weak argument. This is because so much of the income earned by the poorest 40% derives from the benefits system rather than earned income. When we factor in benefits, the effective overall tax rate paid by the poor is negative, meaning that they're net recipients of other taxpayers' money rather than net payers of tax themselves.

It's right to look at the tax and benefits system in the main like this because accountants need to look at the substance of a transaction rather than its strict legal form. The substance of this particular transaction is that rich members of society help poorer members of society through the redistributive actions of the tax system. Only pedants and lawyers would disagree.

There's an argument to be had as to whether it's desirable to tax the very poorest members of society and then give it back to them in benefits. But it's an unavoidable truth that the tax and benefits system does indeed redistribute money from the rich to the poor, making it a grotesque distortion to claim that the very rich pay a lower overall rate of tax than the poor. They don't. 

The tax paid by billionaires and secretaries: the view from the UK

Posted by Christie Malry on September 26, 2011 at 9:31 pm

Krugman points us towards a table that, in his view, proves that quite a lot of billionaires do pay a lower rate of tax than their secretaries.

And we’re not talking about one or two exceptional guys, either. Look at the IRS data on returns for the 400 highest incomes in America (pdf) — specifically, Table 43. If you look at the numbers since 2004, you’ll see that in a typical year between 30 and 40 percent of those super-high-income players paid an average tax rate of less than 15 percent; most of them paid less than 20 percent. Bear in mind that for the very wealthy the payroll tax — the main burden on working-class Americans — is trivial, because of the cap on Social Security and the fact that it only applies to earned income. And what becomes clear is that the Obama/Buffet claim is absolutely, totally true.

It may be true to Krugman in America, but it's definitely not true in the UK, no matter what tax campaigners would have you believe. And we know this because of a very helpful publication produced by the Office for National Statistics called The effects of taxes and benefits on household income. Table 14 of this document shows, by decile, incomes and direct and indirect tax payments, so you can work out for yourself whether the UK tax system is progressive 1.

At first glance, the figures are mixed. The poorest decile pays direct taxes of £1,113 on total income (including benefits) of £9,275, an effective rate of 12.0%, whereas the richest decile pays direct taxes at an effective rate of  25.3% 2. However, when you add in indirect taxes, the poorest decile pay total tax at a rate of 43.3% 3 compared to the richest decile's 33.6% 4. So, on a total tax basis, there's an argument to be made that the poorest decile pays a higher tax rate than the richest decile.

It's a weak case - when most people talk about tax rate, they mean income tax, not all the other forms of tax. Remember, indirect taxes include all sorts of sin taxes such as gambling taxes and tobacco/alcohol duties. These will obviously be regressive on the poor, but the case for them not being so is very weak.

However, there is another major problem with the tax campaigners' case. And that's the benefits system. You see, a massive slug of the poorest decile's income derives from the benefit system. Where do benefits come from? That's right - from other taxpayers. So when calculating the effective tax rate, we have to eliminate cash benefits, otherwise we don't get a true picture.

Once we remove cash benefits, we get the following picture:

So we can see that the poorest decile's income of £9,275 comprises £5,388 benefits and £3,887 of income. The cruel state then takes £1,113 of income tax from this income, at an effective rate of 28.6% (again, this is higher than the effective direct tax rate on earned income for the richest decile of 25.7% 5. However, on a net basis, the state in fact gives the poorest decile £1,369. For each of the four poorest deciles, the state gives them more benefits than it takes back in direct and indirect taxes. It's only the richest 60% that are net taxpayers, the rest are tax spenders.

Looking at the figures this way, it's clearly total nonsense to describe this as a situation where the rich pay a lower rate of tax than the poor: the poor don't pay tax, they spend it.


  1. You may access a Google spreadsheet of these data here.
  2. £25,719 / £101,808
  3. £4,019 / £9,275
  4. £34,161 / £101,808
  5. £25,719 / £100,155

The curious poverty of thought on the left over the 50p income tax rate

Posted by Christie Malry on September 7, 2011 at 11:04 pm

Today's FT carried a letter from 20 leading economists, in which they called for the 50p income tax rate to be scrapped in order to boost growth. Unlike the usual ragbag of retards who sign round robin letters like these, this was a high-powered group, including two former members of the Monetary Policy Committee (Julius and Wadhwani) and Bob Rowthorn 1 of Cambridge University (King's College too... normally a left wing hothouse). And, as you might expect, the left wing commenterati went into a tailspin as they responded to it.

Let's start with Owen Jones, who seems compelled to find the most dribbling position on any issue you care to mention. On this, he shrieks in Labour List that 50p simply isn't enough:

Let’s not simply defend the 50p tax band. Instead, let’s push for it either to be increased to 60p, or to take the threshold down from the current £150,000 to £100,000. In a country where if you earn £21,000, you are bang in the middle, decreasing the threshold would still only affect the very wealthiest – the top 2%, to be precise.

Either move would be popular with a public that wants to see the rich paying more. A poll last year revealed that 54% (against 29% who disagreed) wanted the top rate of tax increased to 60p in the pound.

Note that Jones doesn't even consider the economic impact of his proposals. Who cares if it raises less money than under the current income tax bands and could therefore lead to more savage, deeper spending cuts? We're stiffing it to the rich, and it's popular, innit! True, politicians have consistently demonstrated that they're not very good at economics and can't really be trusted with the economy, but that's hardly good cause to do simply what the public wants. They're even less informed and capable than politicians.

He continues:

At a time when working Britons, the unemployed and the poor face being hammered by cuts and – in the case of VAT, higher taxes – the case for the rich to pay more is unanswerable. It is popular and it makes economic sense.

Well, we don't know whether it makes economic sense yet, because the evidence isn't yet available. Would Jones be as sanguine if it were demonstrable that the 50p rate has reduced the overall income tax take or appeared to be harming future job creation?

Next up is Tim Farron, a Lib Dem. He said cutting the rate would be:

phenomenally immoral and send an appalling message to the overwhelming majority of hard-working people in this country.

'Immoral' to take any less than half of the earned income of those on, in international terms, modest high incomes? I've touched before on the topic of what is the 'right' amount of tax, and it's a question that has also troubled perennial thinker and blogger (and occasional Ritchie-worrier) Frances Coppola. But I simply don't believe Farron when he says that incomes over £150,000 must be taxed at 50% or more in order to be moral. He's just yet another Lib Dem tosser playing to the gallery. And he makes no reference to whether the 50% rate is revenue positive (like Jones, it's all about beating up the rich); if it loses revenue then his comments are even more bonkers.

But on this issue, like so many, pole position shall forever belong to wor Ritchie.

Nor is the virtue of growth per se outlined. There is even no evidence given that the government has put growth at the top of its agenda since its actions strongly suggest otherwise, but let’s move on. 

No, let's not. This is classic Ritchie. He blogs incessantly about what the government should do in order to promote growth (eg here, here, here) and criticises Osborne for pursuing policies which he believes won't deliver growth. He even does so in this sentence, by saying that the government's actions suggest they don't really want growth. So how can he legitimately call for these esteemed economists to prove that growth is the right course of action? He's bonkers.

This is a) a marginal tax rate not applied to all income b) not applied to much income derived by ‘talented’ foreign individuals coming to the UK for less than seven years because of the domicile rule and c) I’m told highly avoidable because the same group say almost no one is actually paying this sum. So where’s the ‘punishment?’ Is it so hard if you’re in the top 1% of income earners to make a contribution to the society that gave you that opportunity to profit, enormously?


And where is the squeal of protest from the same group of economists about the poorest 10% in the UK having higher overall tax rates than the group with which they are concerned here?

Well, they do say it's a marginal rate, so it seems a bit churlish to criticise them for it being a marginal rate. The 50p tax rate applies to all income earned here by talented foreign individuals coming to the UK, no matter how long they stay here. The domicile rule has no effect whatsoever on income earned in this country, no matter what left wing commentators would have you believe.

And what's this? Almost no one is actually paying this sum? Doesn't that concede the point that the tax isn't very effective? So why is it so critical to retain it?

The top 1% of income earners already do make a huge contribution to this society. The top 1% of earners pay 27.7% 2 of all income tax, and income tax is the single most significant source of tax revenue. How much more would they be paying in an ideal world - all of it?

The poorest 10% don't have higher overall tax rates than the top 1%. The Office for National Statistics publishes an excellent publication entitled The effects of taxes and benefits on household income, which provides handy tables on incomes and tax payments by decile and quintile. It shows that the poorest quintile pays direct taxes at a rate of 10.2%, the richest quintile at  24.4% 3. Perhaps he means all taxes? OK, the poorest decile pays £1,113 of direct taxes and £2,906 of indirect taxes on a gross income of  £9,275 4, equivalent to a (very steep) effective overall rate of 43%. The equivalent figures for the richest decile are £25,719 and £8,442 on gross income of £101,808, equivalent to an effective overall rate of 25%. However, the poorest decile's income includes cash benefits of £5,388, while the richest decile's income includes cash benefits of just £1,653 (mostly statutory maternity pay, child benefit and the state pension). This means that the poorest decile are actually net tax spenders, not tax payers. It's nonsense to say that their tax rate is higher than the rich, given that so much of their income is due to benefits which are, in the main, paid for by the rich.

In among all this garbage, there is a sole commentator on the left who can hold his head high. Chris Dillow's piece at Stumbling and Mumbling is thoughtful and well-argued (even if he ends up agreeing with Ritchie, which must mean he's got something wrong). 

But I'll accept the implicit challenge in the final paragraph:

Which brings me to my biggest complaint against those economists. To worry so much about the 50p tax rate at a time when real incomes are being squeezed, unemployment is rising and some benefit claimants face real hardship is to display a rather warped set of priorities. 

I disagree. One could use the same argument to criticise any bit of government policy - why waste valuable Parliamentary time on fox hunting bans or smoking restrictions while there are people sleeping on the streets, for example? And there are two serious questions which do rather need to be answered:

  1. Will the 50% rate actually raise revenue?
  2. Is it moral for the government to take 50% of an individual's marginal effort?

This isn't sophistry. If the 50% rate won't raise additional revenue, then as far as I'm concerned it's a left wing conceit that needs to be binned at the earliest opportunity. While we have a significant budget deficit, we must do whatever we can to maximise tax revenues. If that means cutting the top rate of tax, we must do it.

However, we must only do so if we do so morally. For instance, we could cut the welfare bill by killing all the poor. It would be an appalling atrocity that may well trigger invasion by foreign powers and cause riots, but it would work. I don't advocate such a policy as it would be completely immoral. By the same token, we mustn't countenance tax rates that are immoral. My personal view is that it is immoral to take as much as 50% of an individual's marginal effort (I even struggle with 40%).

Instead of feigning outrage, left wing commentators should seek to prove both these points. They must demonstrate that the 50p rate makes an additional contribution to our tax revenues, taking account of actions taken by people to avoid it (e.g. working less hard, never moving to the UK in the first place, leaving the UK for another country, retiring early, etc). And they must argue from first principles why they consider it moral to take half of an individual's marginal effort. Until then, they are merely preachifying to their own flock.