Archive | May, 2013

Politicians look indignantly at big business

17 May

By Chris Hansell

Photo by graziano88

Photo by graziano88, via Flickr

What happens when politicians are feeling particularly hated and scorned? They have a bash at a group even more disliked and reviled.

This seems to be what took place at a hearing of the Public Accounts Committee in Parliament on Thursday, with MPs taking the collective chance to look indignant at big business.

The issue is plainly stated in the Independent: Google have paid only ‘£6 m in UK corporation tax in 2011 despite generating more than £3bn in advertising revenue in this country’. Now to ensure  there’s no risk of me breaking defamation laws (don’t worry – probably not a strong possibility) I should clarify a few titbits. Google’s Northern Europe boss Matt Brittin says while UK staff are involved in encouraging advertises to buy ad space the actual transaction of buying ad space takes place in Ireland.

What seems to have been at issue at the committee on Thursday is just how much of the ad selling process took place in the UK. Committee chair Margaret Hodge repeatedly talked of whistleblowers who offered payslips showing ‘substantial bonuses’ based on ‘sales’. As Mr Brittin was quoted as saying in the Telegraph “’the UK team are selling, but they are not closing’”. Still, legally speaking it seems that if the ad transaction takes place in Ireland it cannot be taxed in the UK. I’m not a legal expert.

This is not to say it is morally right. If, as Mrs Hodge claims, much of the ad selling process takes place in the UK then I think it is fair that it be taxed here as well. If what Mr Brittin says about selling and closing is true I imagine it would be quite hard for Google to generate the amount of ad revenue without the UK team. This is where the circle closes itself because the only people who can make the tax system fairer and more comprehensive are the people sitting in Parliament and looking aggrieved at Mr Brittin.

On the 17th of June the Prime Minister will host G8 leaders in Northern Ireland. One of the key points of discussion David Cameron says he intends to pursue is the issue of international tax law. Perhaps it’s time Mr Cameron pulls his finger out.

Here’s some extra content I’ve produced relating to the whole tax issue.

Some other articles worth reading on the subject:

Amazon and corporation tax

Google boss to meet Prime Minister

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IMF visit sparks media buzz

9 May

By Chris Hansell

Photo by altogetherfool, via Flickr

Photo by altogetherfool, via Flickr

For the next two weeks the UK will be haunted by a gang of economists from the International Monetary Fund (IMF). The 67 year old organisation has let slip a few surprises in recent weeks, but the amount of media attention on the visit has also left me a little surprised.

At one time our Chancellor may have welcomed the visit, reasonably expecting a public pat on the back and a few positive column inches on the side for his austerity programme. This may not be the case for this visit. The IMF’s Chief Economist, Frenchman Olivier Blanchard, has recently been making comments suggesting the Chancellor needs to rethink his plan and perhaps ‘slow down’ the deficit reduction programme.

To ramp up the pressure on George Osborne the Trade Union Congress (TUC) craftily chose this week to publish a report on the economy. Some of its findings will have pleased union leaders, providing probably enough ammunition to last the entire two weeks of the IMF visit.

The news media have so far stuck to their respective political trenches on the IMF visit, churning out the kind of opinions and observations we have come to expect from each of them.

The Spectator likened the visit to an Ofsted inspection. Spectator blogger Isabel Hardman said IMF reports have tended to be ‘so oblique that anyone occupying any part of the political spectrum can find something to cheer them and something else with which to prod their enemies’. This is obviously intended to undermine the visitors before they have had the chance to say anything, but I find that I must agree despite myself.

The Chancellor will still not be getting my pity though, and the idea that Mr Osborne might feel sympathy for teachers seems a little comical considering the government’s education policy.

In a foreseeable move the Guardian married the IMF visit with the TUC report in an article that labelled the recent comments of Mr Blanchard and his colleagues as an ‘embarrassment for Osborne’. Economics reporter Katie Allen also described the UK economy as ‘flatlining’ and pointed to the IMF’s reduced forecast for UK growth.

IMF growth projections for 2013 and 2014 (Made in April)

IMF growth projections for 2013 and 2014 (Made in April)

The intention here is clear: point to how the IMF has cast doubt on the government’s austerity drive.  The intention of the Independent seems to be much the same in their article. Of course the IMF has spent decades producing forecasts and has often got things wrong. While I agree with the anti-austerity sentiment using IMF figures to build a case may not be the best strategy.

Before I move on I’d like to tackle one more example. Financial news website this is money has been showing up in my news searches a lot recently (isn’t my life just rock n roll?) so I thought I’d have a peek at what they say.

The website lines up a number of arguments the Chancellor could utilise against the IMF, but one nugget stood out for me. ‘Osborne’s hand has been strengthened by reports that more than forty global companies are considering moving to Britain to take advantage of low corporation tax rates’ the article says. One industry insider tells the website that this could raise £1 billion in tax revenue.

This is not the trump card it seems, and cuts to corporation tax are not really austerity policies. The cut of corporation tax from 28% earlier this year to 20% by 2015 will no doubt cost the Treasury so much a boost of £1 billion will be redundant.

Now let’s get to the point. You might have noticed in the first paragraph I said how surprising I have found all this coverage. Well, here’s why:

That an IMF visit warrants this much coverage confuses me. Don’t get me wrong – as someone well aware of the IMF’s less-than-polished record I am glad they’re being given the kind of scrutiny they should get every day of the year.  What confuses me is that so many news outlets have decided they should all cover the story at once.

A stuffy, Washington based institution that has usually only ever had real clout in developing countries pops in for a look around and it’s in almost every paper. Looking around perhaps it isn’t so confusing. The economic disaster that was Greece planted the IMF in the public consciousness for better or worse. Austerity has put the economy at the heart of the news cycle and everyone has an opinion. It will probably even decide the next general election.

In the meantime the economic debate is still open and despite everything else this at least is something we can be pleased about.

The UK, South Africa and the aid disagreement

7 May

By Chris Hansell

Photo by rabble via Flickr

Photo by rabble via Flickr

Last week a disagreement between the UK and South African governments briefly broke the surface of the UK news cycle. The story trod water for a day or so before being pushed back under by the pressure of other stories.

The disagreement began when our government announced that it would be ending its aid programme to South Africa from 2015. As the BBC reported this costs around £19 million a year, and the feeling amongst the coalition seems to be that middle income countries (as South Africa appears now to be defined) do not need the kind of aid money that poorer, less developed countries do.

Last year the government amicably made a similar decision to end financial aid to India by 2015. The mantra looks now to be that aid is out and trade is in.

But still, the South African government seem to be annoyed about what they say was a lack of consultation before the decision. The problem is that it is difficult to say who is really in the right here.

In the UK the government’s aid budget is controlled by the Department for International Development, which I sometimes think was named so to ensure people’s eyes immediately glaze over when they hear it. Development, for non-politics nerds, is the idea that through lots of complicated schemes poor countries can develop into well off ones like the UK or the USA.

Withdrawing money from a country that’s well on its way to becoming more like us seems like a sensible step. South Africa is considered one of the world’s big up and comers. It is a BRICS country (Brazil, Russia, India, China and South Africa), one of the big players in the developing world.

So what’s the big deal? India and South Africa both have the same problem. They are becoming more unequal. In South Africa the richest 10% account for 51% of the income. India is as bad, with the top 10% of earners taking home 12 times more than the bottom 10% according to The Times Of India. Between them the two countries still account for a large number of people in poverty.

When the UK stops giving aid to South Africa in 2015 this means projects that tackle AIDS or improve maternal healthcare will be left without further support. Will these issues really be solved by then?

Data from Department for International Development via Guardian Data blog

Data from Department for International Development via Guardian Data blog

And, ultimately, should developing countries really want to aspire to be more like us? In the USA the last 30 years have seen the richest 1% have their incomes increase by 275%, the BBC reported last year. In the UK the bottom 90% saw their average incomes improve by less than £2,000 between 1997 and 2007. Factoring in inflation this is a shrink in spending power. Meanwhile in the same period the top 1% increased their average earnings go up by over £100,000 a year, and the top 0.1% saw average incomes rise by more than £500,000.

As Wolfgang Sachs pointed out in the recent 40th anniversary issue of New Internationalist ‘politicians as well as populations in many countries set their hopes on the model of a Western-style consumer economy’. Manybe that’s not what everyone should be shooting for.

Aid shouldn’t be about trying to make countries more like us. It should be about making life better for the poorest people in society. When the aid stops coming in 2015 those who rely on it to make their societies better and their lives more tolerable will be worse off.

Other articles of interest:

Mining in South Africa and the rest of Africa

Guardian Poverty Matters blog

Tim Ballantine's Blog

A desperate attempt to understand the world, using only misconceptions and non-sequiturs

Completely Unravelled

The messiness of life

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