Posts Tagged ‘Dan McCurry’

John Mills, tax and dishonesty

07/06/2013, 08:41:55 AM

by Dan McCurry

On the issue of taxation abuse, we need to move on from the oversimplified distinction between legal avoidance and illegal evasion.

At the moment some avoidance has shocked people, while other avoidance, such as my tax free savings, is not an abuse. In order to sort out the difference between good and bad avoidance, I suggest people concern themselves with whether the avoidance was dishonest or not.

In the case of George Osborne’s complaint about a Labour donation, we need to ask, was John Mills dishonest in his method of avoiding tax in this donation? If he was, then Labour is in trouble, if he wasn’t then we are not. Mr Mills chose not to sell the £1.5m of shares and give the cash to Labour, as that would have been taxed as a capital gain. By giving Labour the shares, then Labour will be taxed on the dividends, but only liable to the capital gains if they are sold.

I have some of my savings in an ISA as a tax efficient method of building a pension. I can invest £11,250 per year in my ISA and this will be exempt from taxation both on the dividends and on the capital gains. The same applies to a donation I might give to charity that can be given with “Gift Aid” so that the tax paid amount is passed on to the charity. Is that dishonest? No.

This is quite different from the case of Jimmy Carr who passed his money to an Isle of Man, company who then provided him with same amount back but called it a loan. A loan isn’t taxable, so he avoided tax. Now, any sensible person would describe that as completely dishonest, but because tax law is based on a set of rules, he wasn’t prosecuted.

Criminal law is a different set of law and can take precedence if policy makers wish it to. If the authorities wished to prosecute him for fraud, they could have done so, but if they had, then they would probably have to prosecute everyone else who has done similar, and that is a prospect that can be frightening to the people who run this country.

Fraud is when someone commits a dishonest act which makes a gain for himself, or a loss to another.

The other problem that exists with tax is that countries tend to have bilateral treaties with each other.

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Ed Miliband needs to tell us what he stands for

04/06/2013, 09:55:11 AM

by Dan McCurry

So YouGov tell us that Ed Miliband is regarded as “honest but untrustworthy”? What to make of it all? I’m sure his speech on Thursday will sort out all the confusion. What I think he need is to show us what he stands for.

There has been recent comment about whether Labour should reveal it’s policies, with Alan Johnson arguing that Miliband has already “shown too much leg”. Others, including myself, argue that a lack of openness creates a lack of trust. We’re both right and wrong. The confusion is in the distinction between policy, and aims/values.

The media always demand to know what the policies are, but the public want to know what the aims and values are. Policies are a list of promises while aims and values represent what we care about and what kind of a world we want to live in. It’s our aims and values to stick up for the small guy. It’s the aims and values of the Tories to stick up for big business and lobbyists.

Both parties try to present aims and values through slogans. The Tories say “We’re all in this together”, while Labour talk of “One Nation”. The Tory slogan is better because it’s about their intention to reduce the deficit. Ours was created as an attack on Tory hypocrisy, but has since been shown to mean little else.

It seems to me that Ed Miliband is forever working on the manifesto, instead of communicating what he stands for. Welfare is an obvious example. He chose to rise to the bait when Cameron challenged him on welfare, but then failed to put a lid on things when the “bedroom tax” got out of control.

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Ed’s handling of Europe is eroding trust in his leadership

20/05/2013, 02:08:20 PM

by Dan McCurry

In 1997, Tony Blair won an election by occupying the traditional home ground of the Tories. In 2010, Gordon Brown fought off the Tories by creating a clear dividing line between us and them. Today, Ed Miliband’s strategy is less easy to define, but I contend that it involves avoiding debate with the Tories. This is not good. This can be extremely damaging.

Miliband said at conference 2012: “The Labour party lost trust on the economy. And under my leadership, we will regain that trust.” I don’t think he has increased trust in the Labour brand. In some ways it has been damaged since he made this speech.

The Tories have a far more coherent economic policy than we do. Even though the whole world agrees that we were right and they were wrong, they have a clear offer and we have a confused one. Ed Balls and Rachel Reeves did a terrific job of explaining the difference between austerity and Keynesianism, but our commitment to a Keynesian offer has been vague and tentative. This is in contrast to Gordon Brown who confronted and contrasted Tory policy with our own Keynesian plan.

Most of the debate on the economy is over now, and people have a settled view of the parties. It’s likely that we are returning to positive growth, although few would attribute this to the government’s policies, so it is questionable as to whether they will benefit at the polls, even if the feel-good factor returns. Trust, in general, is likely a more important issue at the next election.

The problem with trust is that it is a two-way relationship. Would you trust someone who doesn’t trust you? Of course not. Would you trust a politician who won’t tell you his policy? Of course not.

How about a politician who won’t tell you his policy, because the other guys will attack it, and he thinks that you are incapable of sifting the arguments? No, you wouldn’t take kindly to that either.

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The case for the City

15/05/2013, 01:30:21 PM

by Dan McCurry

I grew up in the east end after the docks had died. We used to go fishing for eels in the place that is now called Canary Wharf, although it wasn’t called anything back then. These days, when I look out of the kitchen window of my ex-council flat in Bow, this is what I see. Beautiful, isn’t it?

So when people say that there is no drip down effect from financial services, I don’t understand what they mean. If there is no drip down, then who is paying for those windows to be cleaned? For those computers to be maintained? For the sandwiches to be made and payroll to be calculated?

Are they honestly saying that behind every window in that  glittering 3-dimensional city, is a bonus-earning banker, and no one else? I’d say that only one in a hundred windows has a banker, and the others are ordinary people doing ordinary jobs. Those jobs are derived from the wealth created by financial services?

The City hasn’t ended (wiped out) poverty, and maybe that’s what they mean, but no other industrial sector would do that. They may also be arguing that the City has contributed to inequality, due to the very high pay of the few. That is a legitimate point, but it’s not the same argument as “no drip-down effect”. Regardless of this, the people in the City who occupy the lower rungs are highly unionised and are usually paid well. This is an obvious asset to our country.

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We need to make better use of Quantitative Easing

10/05/2013, 07:30:48 AM

by Dan McCurry

George Osborne’s nanny state policy responses are failing our banks and perverting our markets. In the midst of the political rhetoric on welfare and debt, there is one economic policy that the chancellor has implemented which has a genuinely significant impact: Quantitative Easing (QE).

This has had a profound impact on the economy.

The normal way for the money to be supplied into the economy is for banks to provide loans. If ten £1k loans are made for every deposit of £1k, then £9k of new money has been put into circulation. The banks are liable for it if it isn’t paid back, so they have become expert at judging risk. The supply of money makes a good demonstration of the private sector achieving a public good, normally.

The problem is that lending is too slow. As a result there is a lack of new money going into the economy but people are continuing to repay the loans they previously took out. The net effect is less and less money in the economy. If money is the oil on the cogs, then without it, the machinery will grind to a halt.

As a policy response, we’ve had QE. The Bank of England is creating money on a grand scale. Under Quantitative Easing they have so far produced an extra £375billion. In this respect it is the largest nationalisation of private sector service since the 1945 Labour government.  I wonder if George Osborne realises that.

For a long time the banks have been receiving contradictory instructions from government. They must lend more, but they must increase their capital reserves. It’s like telling a schoolboy to spend his pocket money then scolding him for not saving it.

As a result, innovative policies are not only proving expensive but also potentially counter-productive. The government driven Funding for Lending Scheme (FLS) aims to subsidise bank lending for small businesses.

It is bad economics. It has lowered the interest paid to savers, but achieved little increase to the loans given to small businesses. With the state competing with savers, the banks no longer need to attract deposits as they have cheaper source with government cash.

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Clegg not Cable would make the best coalition partner for Labour

07/05/2013, 11:06:09 AM

by Dan McCurry

If Labour are to form a coalition government with the Lib Dems following the next election, then I would rather deal with Clegg than Cable.

I think Vince Cable is trouble. I’m not talking about the right sort of trouble, such as a deep sense of conviction for the need of justice. I mean the wrong sort of trouble, such as being unpredictable, or so anti-capitalist as to be both divisive and ineffective.

What we want from the Lib Dems is to agree on what our policies are and then for both parties to stick to the common line. With Nick Clegg it’s easy to imagine this happening, but with Cable I wonder if it would be so easy.

Maybe it’s that Telegraph sting that bothers me. The one where the journalists flirted with Vince and got him to speak about the “nuclear option”. We greatly enjoyed reading that story at the time, but now I can’t help feeling uncomfortable about the sheer arrogance of someone who fantasises about destroying the government.

Or maybe it’s banking that bothers me? The reason the share price of these banks has stayed so low is due to the fiddling-about of government policy. Mostly quite pointless stuff. This “ring fence” between retail and investment banking has little consensus to it. Besides, it was mortgage lending that caused the crisis not casino stock markets.

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The Tories are creating a Mid Staffs of the criminal justice system

01/05/2013, 04:18:10 PM

by Dan McCurry

The government’s reputation for incompetence shows no signs of abating, as they mimic the management ethos of Mid Staffs hospital and apply it to the criminal defence service.

These are government proposals which are to be applied to solicitors’ firms providing advice in police stations and courts. They propose the removal of choice of solicitor from the service user, in order to create a greater economy of scale and drive down costs. But, by doing so they will remove the competition which drives up standards and establish a local monopoly, rarely the most effective model to promote efficiency.

Consider this scenario. Your son has been arrested after his friend got into a fight. Your son was there when the fight happened, but wasn’t a part of it. However, he then prefers to say nothing to the police, because he doesn’t want to get his mates in trouble. The police interview will be much quicker if the lad makes no comment. The solicitor advises him to speak, but he doesn’t push the issue when the lad objects. As a result, your son refuses to answer police questions and this leads to a £10k trial where the young man is acquitted after he gives his account at court.

In the above scenario, the legal adviser gets paid regardless and cannot be criticised, on paper. He or she has also generated a fee from a trial. Your son’s A level results are effected by the several months of stress and distraction. You and your son cannot influence whether this solicitor gets more work or not, since there is no longer any personal recommendation. There is no competition.

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Regional VAT, an idea for Ed Balls

22/04/2013, 07:50:07 AM

by Dan McCurry

When I was in Arizona, I kept getting overcharged in the shops. At least I thought I was, until I objected and was told that the extra 7% was the state sales tax. They weren’t including it on the price tickets, because Americans are weird. These days Arizona charges a whopping 9%, compared to Virginia at 5%, and New Hampshire at 0%. There is no strategy between these different rates. This is America. The states just do their own thing.

In the UK we pay 20%, and we call it “Value Added Tax”, because we’re not weird.  Imposed centrally, we apply this tax at a uniform rate across the country, but if we wanted to, we could charge different rates in different regions, while continuing to collect it centrally.

There is a potential serendipity to Labour’s economic policy, when looking at two of the main drivers of stimulating the economy in Labour’s five point plan for jobs and growth: house building and a VAT reduction.

Mass house building is firstly intended to create demand in the economy, but by solving our chronic housing shortage, we reduce our private sector rents, and thereby counter poverty. It all seems so neat that, however, there is a flaw in this strategy.

The area that needs massive house building is London and the South East, but the economy is fairly frothy in this area, so there is not much of a demand problem. Much of the rest of the country doesn’t needs housing, but does have a lack of demand.

So although there are many infrastructure projects in other parts of the country, the stimulus from house building would mostly effect the south east, which is not where it is mostly needed.

The other policy of Ed Balls is to affect consumer spending through a reduction in VAT.

The problem with VAT is that it can be fiddly. When Gordon gave us a 2.5% cut, I don’t think I’m the only one who was irritated at being given coppers in change for my coffee, and it didn’t take long before the coffee price went back up and the vendor pocketed the difference. Retail prices tend to gravitate to round numbers, meaning that VAT cuts need to be substantial to be worthwhile.

If Ed Balls concentrated his VAT cut on the regions that are not getting a house building boost, then he’d probably be able to double the size of the VAT cut. In simple terms, let’s imagine the counties in north of England have their VAT reduced to 10%.

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Getting tough on late payment to SMEs will help build the business wing of Labour’s one nation movement

12/04/2013, 12:15:33 PM

by Dan McCurry

There was an interesting article in last week’s Economist about a speech made by Chuka Umunna to the Federation of Small Businesses, which began with the sleepy audience unengaged, but went on to inspire them to shout, “Hear hear!”

I suspect this was following the announcement that Labour would crack down on big companies that deliberately hold out payments to small companies for months on end.

The article compared Labour’s wooing of small business with the “prawn cocktail offensive” of the early Blair years, when Labour wooed the bankers. However, the crucial difference is that we no longer need to persuade the markets of our commitment to capitalism. This speech was about something altogether different.

Sole traders and small businesses don’t see themselves as in need of the state. Nor has the state previously had much of a role to support them. The Tories believe that the best policy is to actively get out of the way, and they often make passionate speeches boasting of their intention to do absolutely nothing. Chuka disagrees, and he’s right. Small business is absolutely in need of the state, but they mostly don’t realise it, because they don’t know what the state can do for them.

The injustice here is about enterprising people who work hard to build their business, but find themselves continually the victim of the unscrupulous and unchecked greed of powerful companies and individuals. They endure a continual battle to get paid, not because there is no law to protect them, there is plenty of law, but there is inconsistency in the application of the law.

If a man walks into Sainsbury’s and steals a chicken he will be prosecuted. However, if that same man hires a printer to provide a box of leaflets, and doesn’t pay, the police would refuse to prosecute, arguing that it is a civil matter.

This is true even if the purchaser dishonestly intended to avoid payment before placing the order. The printer would have to file a small claim at the county court. There would be no criminal punishment and no mark of bad character against the cheating customer.

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Let the bastards be bastards and builders be builders

22/02/2013, 12:09:37 PM

by Dan McCurry

What character from the history of film and literature most reminds you of an ordinary member of the Labour party?

For me, it’s Michael Palin’s character in the Life of Brian, whose job is to direct prisoners to their crucifixion. “Out of the door, line on the left, one cross each.”

This is a man who has a horrible job to do, but he’s still diligent and treats each prisoner with respect. He’s a nice guy. He cares. He’s the kind of bloke you or I might hang out with. You can easily imagine him as secretary of your local branch. If we brought a motion calling for crucifixion to be banned, the idea would be so radical that he’d initially be shocked, but once he realised that such a thing is possible he would become a passionate advocate.

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