The commentators I read online seem mostly to think David Laws should not have had to resign - here for example is Matthew Parris. The arguments run along the following lines:
- he shouldn't have to resign because I agree with his views on public spending cuts
- he shouldn't have to resign because he was entitled to keep his relationship secret
- he shouldn't have to resign because he could legitimately have claimed more money had he chosen to arrange his affairs differently
- he shouldn't have to resign because he's a millionaire who didn't need the money
- he shouldn't have to resign because the regulations are wrong
Interestingly, no one has defended the argument that Laws' partner is not his partner under the terms of the regulations. In his statement, he said "At no point did I consider myself to be in breach of the rules which ... defined partner as ... 'one of a couple ... who although not married to each other or civil partners are living together and treat each other as spouses'”. Perhaps not, but he must have been aware that his interpretation was tendentious. He could have asked the Standards Commissioner in private for a ruling on this point. This moving interview is unambiguous about the depth of the relationship.
Only the second of the arguments I list merits consideration. And the answer is simple: Laws' should have stopped claiming the money in 2006 when the regulations were changed to forbid payments to partners. I doubt very much that this would have attracted intrusive comment. Or he could have made the relationship public and made a legitimate claim. What he was not entitled to do was ignore the regulations.
Tuesday, 1 June 2010
Sunday, 16 May 2010
A fairer tax
The ConDems tell us that they want taxation to be fairer. It is widely assumed that they will increase VAT, perhaps to 20%. But the Office for National Statistics has reported that VAT as a percentage of disposable income is paid disproportionately by people on lower incomes. The ONS explains that "those in higher income groups tend to channel a larger proportion of their income into savings and mortgage payments, which do not attract indirect taxes".
I suggest that instead of a VAT increase, the government should introduce a tax on mortgage interest payments (more precisely, i suggest a tax on all personal secured loan interest) at the same rate of VAT. This would have the following advantages:
- it would compensate for the regressive nature of VAT
- it would tend to suppress the sort of house price bubble Vince Cable warned about in a Commons question in 2003 (this question has been cited to support the false claim that he "predicted the crisis").
- it would raise relatively little money now, with interest rates so low, but increasing amounts as the economy recovers and interest rates rise. So it would give the markets confidence that the deficit will be reduced, without imperilling the uk's fragile economic recovery.
- the tax would be paid by mortgage borrowers currently enjoying a windfall gain from the extraordinarily low interest rates brought in to boost the economy.
It would be easy enough to collect, simply by making secured loans, including mortgages, unenforceable unless they are registered with HMRC.
I suggest that instead of a VAT increase, the government should introduce a tax on mortgage interest payments (more precisely, i suggest a tax on all personal secured loan interest) at the same rate of VAT. This would have the following advantages:
- it would compensate for the regressive nature of VAT
- it would tend to suppress the sort of house price bubble Vince Cable warned about in a Commons question in 2003 (this question has been cited to support the false claim that he "predicted the crisis").
- it would raise relatively little money now, with interest rates so low, but increasing amounts as the economy recovers and interest rates rise. So it would give the markets confidence that the deficit will be reduced, without imperilling the uk's fragile economic recovery.
- the tax would be paid by mortgage borrowers currently enjoying a windfall gain from the extraordinarily low interest rates brought in to boost the economy.
It would be easy enough to collect, simply by making secured loans, including mortgages, unenforceable unless they are registered with HMRC.
Pay up Pompey
I posted this on Matt Slater's blog:
>>>
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Portsmouth fans want to enjoy good results, like the FA cup win a couple of years ago, and disclaim all responsibility for the financial misdeeds that financed those results. But the two go together.
The proper thing for a fan to do is to withdraw support from a team that has stolen its success. Yes, I know that a true fan can't switch allegiance. But imagine if your wife stole large sums of money. Would you applaud her as she paraded the bling she'd bought with it? I disagree with Matt and everyone else who wished Portsmouth all the best for the FA Cup Final. They deserved to lose.
The PL and the FL need to take responsibility too. The priorities should be to stop leveraged buyouts and to stop uncontrolled debts to HMRC. So there should be a rule to stop any team starting a season in the leagues with debts above a certain proportion of their turnover. And a rule to stop any team starting a season in the leagues owing payments to HMRC that are more than 3 months overdue. There would have to be an exception to the first rule allowing teams with large pre-existing debts to continue, subject to a stringent agreed schedule of repayments.
The leagues were quick enough to bring in the rule about footballing creditors. So why are they sitting on their hands regarding the other financial problems hurting football?
Tuesday, 27 October 2009
Bankers' Bonuses
Bankers, including me, are paid out of all proportion to their contribution to society. This is because a good banker makes a lot more for his employer than a less good one, and that amount is, at least in his employer's expectation, more than it costs to employ him. To put it simply, it's an artefact of the capitalist system.
Similar considerations apply to professional footballers: footballers are less likely to precipitate a global finanical crisis, but on the other hand are paid a larger proportion of the money they bring in.
There has been much criticism of the bonus system in banking: in fact the system worked well in the crisis, enabling banks to slash staff costs by greatly reducing bonuses. In the resulting fall-out, banking salaries have tended to increase as banks seek to retain staff in a recovering financial market. Salary is now a larger fraction of total "compensation", so there will be less flexibility to cut costs in the next crisis.
It's been suggested that it would be better to pay bonuses in deferred shares, i.e. shares that cannot be sold for some number of years after they are awarded. Banks already do this, and it doesn't work to deter risk-taking. It's reasonable to suppose that one of the reasons Lehman Bothers failed is that the Dick Fuld, the Chairman and CEO, was unwilling to accept the takeover deal on offer at a late stage from the Korea Development Bank, because it would wipe out the value of his shareholding. It would be better to pay bonuses partly in convertible preference shares, because they would retain value if ordinary shareholders were wiped out but subordinated creditors were paid.
George Osborne now says he wants to stop British High-Street banks - including their investment banking divisions - paying cash bonuses above two thousand pounds this year. Of coure he's in opposition this year, so this is pure posturing. But if his proposal were to be implemented, any remaining staff in those investment banks good enough to get jobs elsewhere would do so, because bankers, like most other people, are not anxious to work for an employer who is not able and willing to pay the market value for what they're doing. Does he think bankers are so worthless that this would not be bad for the banks concerned? If so, he should say so.
There's a lot wrong with the global financial system. It might be possible to do something about it by means of co-ordinated international action. Successful reform would reduce the amount that bankers get paid. It would also very likely reduce the contribution of banking to the British economy, which governments of both parties have made it a policy to pursue. If that's what Osborne wants, he should say so, and put forward coherent proposals to achieve it. Until then, he should keep quiet.
Similar considerations apply to professional footballers: footballers are less likely to precipitate a global finanical crisis, but on the other hand are paid a larger proportion of the money they bring in.
There has been much criticism of the bonus system in banking: in fact the system worked well in the crisis, enabling banks to slash staff costs by greatly reducing bonuses. In the resulting fall-out, banking salaries have tended to increase as banks seek to retain staff in a recovering financial market. Salary is now a larger fraction of total "compensation", so there will be less flexibility to cut costs in the next crisis.
It's been suggested that it would be better to pay bonuses in deferred shares, i.e. shares that cannot be sold for some number of years after they are awarded. Banks already do this, and it doesn't work to deter risk-taking. It's reasonable to suppose that one of the reasons Lehman Bothers failed is that the Dick Fuld, the Chairman and CEO, was unwilling to accept the takeover deal on offer at a late stage from the Korea Development Bank, because it would wipe out the value of his shareholding. It would be better to pay bonuses partly in convertible preference shares, because they would retain value if ordinary shareholders were wiped out but subordinated creditors were paid.
George Osborne now says he wants to stop British High-Street banks - including their investment banking divisions - paying cash bonuses above two thousand pounds this year. Of coure he's in opposition this year, so this is pure posturing. But if his proposal were to be implemented, any remaining staff in those investment banks good enough to get jobs elsewhere would do so, because bankers, like most other people, are not anxious to work for an employer who is not able and willing to pay the market value for what they're doing. Does he think bankers are so worthless that this would not be bad for the banks concerned? If so, he should say so.
There's a lot wrong with the global financial system. It might be possible to do something about it by means of co-ordinated international action. Successful reform would reduce the amount that bankers get paid. It would also very likely reduce the contribution of banking to the British economy, which governments of both parties have made it a policy to pursue. If that's what Osborne wants, he should say so, and put forward coherent proposals to achieve it. Until then, he should keep quiet.
Sunday, 25 October 2009
A common trap
How delicious is the feeling of fine silicon crystals slipping twixt one’s foot digits -
...like those little silicon bags that come in electronic equipment packaging -
I wore thick silicon gloves - lex Renton, at a sweet factory
No no no. The first two mean "silica". The last means "silicone". All should know better. (The last has more of an excuse, since he's a food writer, but he used up his excuse by writing about "an algae".)
...like those little silicon bags that come in electronic equipment packaging -
I wore thick silicon gloves - lex Renton, at a sweet factory
No no no. The first two mean "silica". The last means "silicone". All should know better. (The last has more of an excuse, since he's a food writer, but he used up his excuse by writing about "an algae".)
Stat rosa pristina nomine
George Osborne, the shadow Chancellor whom I do not admire, shares his name with a character in Vanity Fair. This is by choice: he started life as Gideon Osborne but changed his forename to one he liked better.
The memorable fact about Thackeray's George Osborne is that his creator condemned him to meet his end at the Battle of Waterloo "dead with a ball in his odious bowels". That was in a letter Thackeray wrote to his mother; in the novel itself Osborne ends the battle "lying on his face, dead, with a bullet through his heart."
Did George Osborne (the one who changed his name) not know about the odious bowels? Or did he not care?
The memorable fact about Thackeray's George Osborne is that his creator condemned him to meet his end at the Battle of Waterloo "dead with a ball in his odious bowels". That was in a letter Thackeray wrote to his mother; in the novel itself Osborne ends the battle "lying on his face, dead, with a bullet through his heart."
Did George Osborne (the one who changed his name) not know about the odious bowels? Or did he not care?
Saturday, 24 October 2009
When Gordon Brown Got It Right
I disagree with a lot of what Gordon Brown has done as Chancellor and Prime Minister. But he did get one thing very right - when in 1997 he abolished Advance Corporation Tax (ACT) (with effect from 1999).
In the UK, companies are required to pay Corporation Tax on their profits. ACT required them to pay that tax in advance on that portion of their profits they chose to distribute to shareholders as dividends. The ACT paid was subtracted from the Corporation Tax charged at the end of the tax year.
Payment of ACT was deemed to discharge the shareholders' obligation to pay basic-rate income tax on dividend income. Shareholders not required to pay income tax, including Pension Funds, were entitled to claim back that tax.
So far so plausible, until one spots that the ACT was both set against the company's Corporation Tax obligation, and claimed back by Pension Funds. So despite its name, it acted not as a tax but as a government subsidy for Pension Funds. By abolishing it, the Chancellor not only simplified, for once, the tax system, but also removed a subsidy and so saved money for the public purse. This abolition is what is referred to in those journalistic and political circles which disapprove of government subsidies unless they go to the relatively wealthy as "Gordon Brown's Pension Fund Tax Grab".
And now George Osborne, in his speech to the Conservative Party Conference, has promised to reverse in some unspecified way this "tax grab". He made this pledge in a speech heralding economic austerity for all, including pay freezes in the public sector. Reportedly the pledge got the biggest cheer of the whole speech.
Sometimes I think the Conservatives might not actually be worse than the present lot. Then they kindly put me right.
In the UK, companies are required to pay Corporation Tax on their profits. ACT required them to pay that tax in advance on that portion of their profits they chose to distribute to shareholders as dividends. The ACT paid was subtracted from the Corporation Tax charged at the end of the tax year.
Payment of ACT was deemed to discharge the shareholders' obligation to pay basic-rate income tax on dividend income. Shareholders not required to pay income tax, including Pension Funds, were entitled to claim back that tax.
So far so plausible, until one spots that the ACT was both set against the company's Corporation Tax obligation, and claimed back by Pension Funds. So despite its name, it acted not as a tax but as a government subsidy for Pension Funds. By abolishing it, the Chancellor not only simplified, for once, the tax system, but also removed a subsidy and so saved money for the public purse. This abolition is what is referred to in those journalistic and political circles which disapprove of government subsidies unless they go to the relatively wealthy as "Gordon Brown's Pension Fund Tax Grab".
And now George Osborne, in his speech to the Conservative Party Conference, has promised to reverse in some unspecified way this "tax grab". He made this pledge in a speech heralding economic austerity for all, including pay freezes in the public sector. Reportedly the pledge got the biggest cheer of the whole speech.
Sometimes I think the Conservatives might not actually be worse than the present lot. Then they kindly put me right.
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