Monthly Archives: June 2012

Oh dear, oh dear, oh dear.

What did Paxman say in 2007 about the standard of journalism these days?….
“In this press of events there often isn’t time to get out and find things out: you rely upon second-hand information-quotes from powerful vested interests, assessments from organisations which do the work we don’t have time for, even, god help us, press releases from public relations agencies. The consequence is that what follows isn’t analysis. It’s simply comment, because analysis takes time, and comment is free.”

It seems the easily lead BBC has been bounced by Labour into making a rash claim about Boris Johnson having an undeclared meal with Rupert Murdoch.

The BBC’s report is hilarious and beyond parody…presumably it was a cadet journalist at the BBC’s school of journalism who published it inadvertently in a fat fingered frenzy of anti- Tory/Murdoch  animus…surely?

Boris Johnson’s failure to declare he had dinner with Rupert Murdoch has sparked a call for an inquiry by the London Assembly Labour group.

There have been no declarations in the mayor’s register of interest and hospitality or the mayor’s reports to the London Assembly.

On 25 May, the mayor said all his meetings with News International had been declared.

Labour group leader, Len Duvall said: “This is extremely serious….truly scandalous….jaw-droppingly arrogant, especially at the height of the phone-hacking inquiry.”

Details of the dinner emerged after a Freedom of Information request by the Political Scrapbook website.

Except apparently all the details were on Boris’ mayoral website over a year ago……

As Guido says:
‘The Beeb are covering this, but seem to have missed this quote from a Boris spokesman: “Details of the meetings have been published on Mayor’s website for the best part of a year.”’

Careless, very careless…but then any old tripe will do as ‘news’ if it paints both Tories and a Murdoch in a bad light…they can always apologise later in very, very small print.

The last post was somewhat short and interesting…this one is going to be long and dull and worthy.

The Beeb loves to quote Balls and the Labour Party mantra that Osborne has robbed the poorest in society in order to pay for a tax cut for his millionaire chums by lowering the top rate of tax.

The BBC may or may not have done an in depth analysis of the top rate tax cut to 45%….and may have declared it a wizard wheeze….whether they have or not is irrelevant as it is pretty much now ‘conventional wisdom’ for BBC presenters to suggest that the cut is unfair and ruinous for the economy.

Just how true is that?

And just how much of the UK tax revenue is generated by the top 1% so often pilloried by the Occupy scallywags?

The IFS says: In fact, it is not clear whether the 50% rate will raise any revenue at all….. at some point, increasing tax rates starts to cost money instead of raising it…..a revenue-maximizing tax rate corresponds to an income tax rate of 40%. So, according to these estimates, the introduction of the 50% rate would actually reduce revenue.

But setting top tax rates is not just a matter of maximising revenues….. It also reflects society’s attitude to extreme affluence.

“The significance of the 50 per cent income tax rate is less the paltry sum it might raise (or cost) than the substantial hit on high earners it represents.”　

In other words it’s all about appearances and politics not monies generated…and a Labour friendly BBC seems not too inclined to dispel the myths.

In 1978 the top 1% paid 11% of the income tax total.

In 2012 the top 1% paid 27.7% of income tax.

1% on a 50% tax rate paid £47 bn….27.7%

34% on a 40% tax rate paid £57 bn….34%

50% on 20% tax rate paid £17bn….10%

(There is also an anomalous 60% rate for income between £100,001 – £114,890)

So 1% on a tax rate of 50% will pay £47bn…whilst 1% on a tax rate of 20% only pay £0.34bn….in other words the top 1% pays 138 times more tax than people on 20% pay.

Not only that but once National Insurance contributions are taken into consideration the top rate of tax is 58%….one of the highest in the developed world.　

One of the favourite bug bears of Balls and the concerned BBC presenter is VAT…..as we all ‘know’ VAT hits the poorest hardest doesn’t it?

Well no not in fact so says the IFS……

‘VAT in fact is a smaller share of expenditure for poorer households in the UK, since goods subject to zero or reduced rates of VAT are mostly necessities such as food and domestic fuel. So, if lifetime income and lifetime expenditure are equal, as they will tend to be (the main difference being bequests given and received), VAT must actually take up a smaller share of lifetime resources for lifetime-poor households, and in that sense it is progressive.’

So that is another BBC/Balls myth that bites the dust.

Victoria Derbyshire was today banging on about tax avoidance…is it immoral? etc…however she would have been better to spend her time looking at the rates of income tax levied on us than the dodgy accounting schemes dreamt up on the Channel Islands……What does the HMRC have to say about the schemes?….

Changes to tax planning/avoidance/evasion

2.7 Behavioural responses are also expected around tax planning, avoidance and evasion. It is useful to sub-divide these behavioural responses into three groups:

The impact of these types of behavioural effects on other tax revenues is smaller than in the case of labour supply responses as they have much less effect on productivity and consumption.

The impact on the level of GDP

2.13 The impact of the behavioural responses on the level of GDP vary by type of response: labour supply responses such as reduced hours or effort will have a direct impact on GDP as they reduce the amount of economic activity in the UK. The impact of increases in tax planning and avoidance on GDP will be much smaller (than loss of GDP due to higher taxes) as they do not necessarily impact on economic output.　

To answer the question as to whether Osborne’s proposed cut in the top rate of income tax to 45% will be more effective at raising revenue than the 50% rate we can look at the HMRC study into this…..some of which has been cherry picked and is spread out below for you to digest at your leisure…enjoy……but it basically says the cut is the right thing to do….the tax yield from the 50% levy will be less than predicted….and possibly negative…ie making less revenue than before the rate was raised to 50% by labour.

The Exchequer effect of the 50 per cent additional rate of income tax

The 50 per cent additional rate of income tax was introduced on 6 April 2010. It was the first increase in the highest rate of tax in the UK for over 30 years, and was expected to yield around £2.5 billion.

The evidence contained in this report has also been used to inform the Exchequer estimates for the Budget 2012 measure to reduce the additional rate of tax from 50 per cent to 45 per cent.

The analysis shows that there was a considerable behavioural response to the rate change, including a substantial amount of forestalling: around £16 billion to £18 billion of income is estimated to have been brought forward to 2009-10 to avoid the introduction of the additional rate of tax.

The modelling suggests the underlying behavioural response was greater than estimated previously in Budget 2009 and in March Budget 2010, decreasing the pre-behavioural yield by at least 83 per cent. This result is also consistent with that contained in the Mirrlees review, and suggests the additional rate is a highly distortionary form of taxation.

The conclusion that can be drawn from the Self Assessment data is therefore that the underlying yield from the additional rate is much lower than originally forecast (yielding around £1 billion or less), and that it is quite possible that it could be negative.

This conclusion is supported by wider academic literature which generally suggests a greater behavioural response than was included in the Budget 2009 and March Budget 2010 estimates. Evidence from the U.S. suggests the behavioural responses could be even higher, with an even lower yield.

The conclusion is also consistent with the view that international labour mobility has increased in the last 15 to 20 years as both legal impediments and general migration costs have been reduced, which means the adverse affect of high rates of personal taxation on both inward and outward migration to the UK and tax revenues can be significant.

The report also describes how the impact of introducing the additional rate may extend well beyond the direct Exchequer impacts. In particular, other things equal, high tax rates in the UK make its tax system less competitive and make it a less attractive place to start, finance and grow a business. The longer the additional rate remains in place the more people are likely to consider it a permanent feature of the UK tax system and the more damaging it would be for competitiveness. This suggests the negative impact on GDP may increase over time, and therefore the direct yield (and revenues from other tax bases) might fall over time toward or beyond zero.

The impact of the additional rate on behaviour

2.2 Understanding the behavioural response to the introduction of the additional rate of tax is particularly important as it is generally accepted that individuals with higher incomes are more responsive to changes in tax rates,

There are two main types of labour supply responses:

1. A reduction in the number of hours people work or the amount of effort they make

. A higher tax rate reduces the reward for working. This means individuals have an incentive to work less and take more leisure time (the substitution effect). It also impacts negatively on entrepreneurship as it reduces the incentive to start, finance and grow a business.

The overall effect of a tax rate increase on labour supply is negative.

2. A reduction in UK labour market participation

. An increase in marginal tax rates and average tax rates can impact on UK labour participation decisions, including migration (both inward and outward), and retirement decisions. …

Those affected (i) operate in an internationally competitive labour market so are more likely to leave the UK in response to high tax rates; and (ii) are over 55 (the minimum age at which pensions can be withdrawn) so are more likely to retire.

A reduction in real income is usually associated with a reduction in expenditure and corresponding indirect tax revenues.

2.6 It is also worth noting that the Exchequer impacts of changes in migration can be considerable as the Exchequer loses the tax on the individuals‟ entire income rather than just the income subject to the additional rate.

The impact on economic growth

2.16 In addition to their impact on the level of GDP, changes in tax rates can have an impact on economic growth. Other things equal, high tax rates in the UK make its tax system less competitive and make it a less attractive place to start, finance and grow a business. Entrepreneurs and high-skilled workers may find it more rewarding to implement their ideas in other countries. The prospect of less reward for their work effort may also deter top managers of both foreign and domestic firms from investing in the UK. An international comparison of tax rates is contained in Chapter 4.

2.17 The relationship between tax and growth has been extensively studied in research undertaken by the OECD… Their analysis suggests that corporate taxes are the most harmful type of tax for economic growth, followed by personal income taxes and then consumption taxes, with taxes on immovable property being the least harmful tax.

2.18 The OECD’s analysis also highlights that high top rates of income tax may be harmful for economic growth.

2.23 Modern theories of economic growth highlight that higher levels of human capital raise the productivity levels of the workforce both directly and indirectly.

. The indirect effects come through the greater capacity of more highly skilled individuals to raise productivity through “learning by doing”, and through the spillovers that are achieved by passing their knowledge on to their colleagues. More highly skilled workers are more likely to be quicker to identify the potential of new technologies, and to adapt them successfully to the needs of their own business.

2.24 Empirical studies confirm that higher levels of education facilitate the development and diffusion of new techniques and products, thereby boosting economic growth.  One study that surveyed results from over twenty other studies concluded that “there is compelling evidence that human capital increases productivity”. 

Another study that takes account of educational attainment and on-the-job skills acquisition estimates that a 1 per cent increase in human capital raises the level of productivity (output per worker) by between 0.07 percent and 0.19 per cent.7

2.25 High tax rates may affect the amount of human capital available through two channels. One is that they reduce the post-tax returns to human capital, and therefore individuals may invest less in education and training than they might otherwise have chosen. The second channel, already mentioned, is that part of the skilled workforce may opt to live and work in a country where taxes on income are lower.

Empirical estimates of taxation and growth

2.31 Empirical studies provide some evidence that high marginal rates of tax can act to depress rates of economic growth.

Summary of dynamic effects on growth

2.33 High marginal rates of income tax risk weighing on the growth potential of the economy by deterring the most highly productive individuals from living and working in the UK, and through deterring the foreign direct investment that can be an important element in the diffusion of new technologies and techniques. These effects are likely to be modest if those who are liable to pay the additional rate of tax expect that it will be temporary.

2.34 However, if the rate were to remain at 50 per cent for an extended period, there would be a risk that the effects on growth could become more material.

Some bits and pieces to chew on….

1. I think it was Rachel Burden on 5Live yesterday who claimed that the Greeks voting to keep austerity and the bailout package was an illustration of their belief and confidence in the Euro itself and the European Union. Really? It’s not the runt of the European litter clinging desperately to the German milch-cow’s teat and hoping to do so for life then?…which is what will happen…can anyone see these ‘loans’ being paid off?

2. Victoria Derbyshire states boldly today that austerity has definitely caused growth to stop and asks a Government minister to explain himself…..however you define growth and GDP spending borrowed money is not growth…there might be more money in the economy…for now…but it has to be paid back…with interest later. Stick to English Lit. Vicki. No idea why we have to have austerity and who caused that problem in the first place?

3. How about the timing of the GP’s report on hospitals delaying operations because of ‘cuts’? Rather fortuitous timing with the GP ‘strike’ this coming Thursday…not saying it was timed to try and make the Coalition look bad but the BBC seemed happy to grasp the proffered opportunity that it gave to talk a great deal about cuts and the ‘disappearing’ NHS. Maybe the GPs will get a more sympathetic hearing from the Public….they hope.

4. Niall Ferguson gave his first Reith Lecture today…..the only time during the lecture that the audience reacted was when he said that the best thing American youth could do was to join the Tea Party….large intake of breath from audience….how many work for the BBC?

5.  I just know someone will comment on the Iron Cross….Life’s too short to photoshop something else in….and the BBC are happy to tell you that should the Euro fail the Fascists are going to take over….so in a way it’s appropriate…the BBC’s careless pro Euro talk has helped keep the Euro afloat and now it could sink us all.  Ironic really….that it is the über Liberal BBC which has laid the foundations for a Right Wing coup…apparently.

New Open Thread as last one has slipped down the order.

Sarah Palin lays into the Old Media who refuse to report the truth.

35 minutes of ‘swivel eyed Rightwingnut’ truth to power.

‘Every citizen can be a reporter…taking on the powers that be.’

There must be a subversive at the BBC, a Right winger who likes to throw the odd spanner in the works of the Leftwing steamroller that is crushing all opposition before it.

The BBC have booked Niall Fergusson as its Reith Lecturer….The first of Prof Niall Ferguson’s 2012 Reith Lectures will broadcast on BBC Radio 4 on Tuesday, 19 June at 09:00 BST.

In an article in the Sunday Times (pay up or miss out) he tells us that ‘The Empire was built on borrowing, but now our (Brown’s?) profligacy has created a timebomb that threatens to ruin future generations’.

He attempts to explain the West’s decline by looking at the reasons for its past success. Personally I believe Socialism is the root of the decline….an ideology which seeks to feather our nests but without paying the cost in terms of work…..they demand more pay but do not in return produce more goods…there is no efficiency, no rise in productivity….it has priced us out of the manufacturing market.

That is by the by, what is interesting in terms of the BBC and its attitudes is what else he says in a BBC ‘Viewpoint’…..

If young Americans knew what was good for them, they would all be in the Tea Party.

In the good, but less likely scenario, the proponents of reform succeed, through a heroic effort of leadership, in persuading not only the young but also a significant proportion of their parents and grandparents to vote for a more responsible fiscal policy.

[We must] alter the way in which governments account for their finances.

The present system is, to put it bluntly, fraudulent.

Public sector balance sheets can – and should be – drawn up so that the liabilities of governments can be compared with their assets.

Here I disagree slightly…it should also take into account realistic forecasts of future growth, either up or down…Brown based his spending on optimistic growth projections….he failed to take into account ‘events dear boy, events’.

But there is also this little aside from a BBC author, note the last bit:

Defining Government Deficit

A government deficit occurs when it spends more money than it receives in income.

Cyclical deficit occurs when the economy weakens during a recession and government income falls because of shrinking tax revenues and increased welfare spending.

When the economy improves, the cyclical deficit turns into a cyclical surplus.

Structural deficit is different from cyclical deficit as it occurs no matter how strong the economy is.

It is debt that has come about as a result of government borrowing. Countries are judged on their ability to pay off this debt on the basis of national debt relative to GDP.

If a country’s debt-to-GDP ratio gets too high, investors will worry that the government will default on the debt. However, it is debt governments can try to control through lower borrowing, spending cuts and higher taxes.

It seems somebody didn’t get the BBC memo….‘Plan B for Borrow’ is to be sold to the Public.

Murdoch’s Leveson statement that Brown phoned him and declared war on his company has been derided by the BBC who like to suggest he is lying….and claim John Major’s statement backed up Brown.

Whatever the phone records show Mandelson says there definitely was a phone call…and other calls Brown often made to ‘vent his feelings’….

Mandelson: ‘There would have been a number of [phone calls]— I mean, Gordon did not hold back in talking to Rupert Murdoch. He did telephone him, he had every right to do so, and when he thought that he was being traduced, as he did, by the Sun, he wanted to give vent to his feelings about that.’

Jay: Okay. You say in your book that Mr Brown was stunned by the news that the Sun had shifted allegiance, and that this grew greater, as it were, over the forthcoming weeks. Was it your assessment that Mr Brown was personally embittered by this?

Mandelson: I think he was greatly upset by it. I don’t think he should have been surprised, but he took these things very personally.

And as for John Major it seems even he may not be quite as honest as he is portrayed…apparently Truth is a grey area for Major

Why mention all this? Because the BBC, happy to call Murdoch a liar, has taken to its bosom its old enemy, the arch political spinner who used to be the ‘liar who took us into an illegal war’…step forward one Alistair Campbell.

The Today website has Campbell as its main story highlighting his claim that Murdoch rang Blair to urge him to go to war quickly….

‘Tony Blair’s former director of communications, Alistair Campbell, has said Rupert Murdoch telephoned Downing Street before the invasion of Iraq, in 2003, to warn of the dangers of delaying Britain’s involvement.‘

Mind you he says he did not actually hear the call himself but he did see Blair’s irritated reaction to the call.

The BBC were happy to take his word that Murdoch made such a call and said such a thing.

It was therefore Murdoch’s fault that we went to war.

Ignoring the fact that it was Blair’s policy to be a ‘Liberal interventionist’…ie go to war to impose democracy on ‘tyrants’ and that it was Blair himself who persuaded Bush to go down this road and not be isolationist…. Blair was already totally convinced about the need to go to war and had already committed Britain, subject to Parliamentary approval, to go to war in Iraq….remember the ‘Downing Street Memos’?

Text of the Christopher Meyer Letter – March 18, 2002 memo from Christopher Meyer (UK ambassador to the US) to David Manning (UK Foreign Policy Advisor) recounting Meyer’s meeting with Paul Wolfowitz (US Deputy Secretary of Defense).

‘1. Paul Wolfowitz, the Deputy Secretary of Defense, came to Sunday lunch on 17 March.

2. On Iraq I opened by sticking very closely to the script that you used the Condi Rice last week. We backed regime change.’

And…Blair and Bush ‘agreed’ on Iraq regime change in private April 2002 Crawford Ranch meeting.

So Blair was fully committed already…and Murdoch phoning sometime in March 2003 could hardly have been influential as the war began on March 20th. It can be assumed the decision to go to war was already pencilled into Bush and Blair’s diaries long before then.

In other words it perhaps could be suggested with some confidence that Campbell’s claims are merely an extension of Labour’s war against Murdoch and an attempt to smear him by association with the Iraq War….note Justin Webb’s attempt to tie Murdoch in with the ‘Neo Cons’ and US Republican Party….‘was he doing someone elses work…lobbying for the ‘Right’?‘

Campbell says ‘I am not saying remotely that there was anything like collusion.’…but he is just ‘putting it out there’…no smoke without fire….the Spinner knows how minds work.

Not only is this a piece of black propaganda but it illustrates the mendacity of the BBC who opt to call Murdoch a liar but present the slippery tongued Campbell’s word as Gospel when it suits their agenda.

A three line comment in Campbell’s diary has been spun into a major story about Murdoch’s attempting to influence government policy (and thereby lying  at Leveson about never asking politicians for anything), and being in league with US Neo-Cons and lobbying on their behalf.

A more ridiculous story it would be hard to find….unless you listen to the Today programme regularly…..though the recent ‘Royal Jubilee Bus Farce’ still must top the bill for most ridiculous story ever to have graced a prime time current affairs programme.