Giles Wilkes, who was a special adviser to Vince Cable and chief economist at CentreForum, is now a leader writer at the Financial Times (which usually charges an online subscription). One of his recent editorials has been transferred to the free blog section so we are able to bring it to you.
Labour should be wary of giving credence to a very suspect number.
The £93bn figure now routinely used to evaluate the scale of “corporate welfare” in Britain is badly misleading. If the Labour Party is to re-establish its economic credibility, it needs to give the number a very wide berth.
First of all, the very concept of “corporate welfare” is tricky and question-begging. When applied to individuals, welfare is easy to understand – it means payments from the state provided on the basis of need.
On the other hand:
The various sums of money now routinely called “corporate welfare” are very different. They are not income top-ups for companies, doled out because the company has convinced the government that it is needy.
…
How is this £93bn reached? Here, it is necessary to link to the paper from which the £93bn figure springs, written by Kevin Farnsworth of York University and called “The British Corporate Welfare State”. The bulk of it breaks down as follows:
- Subsidies and grants: £14.5bn
- Corporate tax benefits: £44bn
- Transport subsidies: £15bn
- Energy subsidies: £3.8bn
- Procurement: £15bn
None of the numbers above match the concept of companies being granted income supplements.
The article deconstructs the argument in some detail, so it is worth reading in full. Giles concludes:
The loose logic and hasty mathematics behind this £93bn corporate welfare number are a pity, because they mask what is still an important debate. While there is far too glib a distinction between the corporate sector and the rest of society, it is true that less scrutiny is applied to corporate reliefs than normal spending. Perhaps John McDonnell, Labour’s new shadow chancellor, will find some savings to make here. But there is no surer way of wrecking his credibility than to pretend £93bn sits ready to be plucked from corporate pockets.
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42 Comments
This one was discussed a fair bit back on another thread:
https://www.libdemvoice.org/susan-kramer-responds-to-john-mcdonnell-speech-47706.html#comments
Basiucally Wilkes is right but misses a few things.
Procurement doesn’t even count, as it’s like saying you are giving your window cleaner welfare, by paying for a service.
Wasn’t Ed Miliband on about trying to cut rates for small business? Is that not a subsidy?
And it’s better to subsidise business to provide a service, than to run it in state hands. Everything has improved since privatisation and outsourcing.
This seem to be a silly dispute in semantics. To one person these are “corporate welfare” to another “corporate reliefs”, but whatever you call them the corporations who receive them gain some benefit from them.
If the procurement figure is the profit companies make from what the government buys then that can’t be seen as a subsidy. Giles Wilkes states, regarding the corporate tax benefit – “The largest component comes from capital allowances, the motivation for which are to encourage companies to invest more”. This is therefore the government paying corporations to do certain actions because the government believes it is beneficial. A bit like giving tax incentives to married people. It is a political decision. Giles Wilkes puts the £7bn VAT relief on new buildings in this category.
The £5bn for roads could be seen as a corporate benefit if they caused the damage to the roads and are not paying enough in road tax to pay for their share of the damage their use of the roads is causing.
I can’t see any reason why there should be VAT exemptions on air tickets. Then there is the £3.8bn energy subsidy. Who is getting this? Giles doesn’t say. Why are they getting it?
There is £1.4bn paid to companies as matching finance for them to invest in regions the government identifies as being a priority. And there is nothing wrong in that.
Our position should not be: all these are justified or all of these should be scrapped. It should be: do we thing they are encouraging corporations to behave in the way we want them to? If the answer is no, then we should call for them to be scrapped.
Stimpson, here you go again. All the tired old Tory arguments for outsourcing etc. Whenever the “evidence” for such gains is discussed, it is usually shown to have used biased figures. I accept that the Farnsworth research threw as many things under the label “Corporate Welfare” as they could find, so it is very much a miscellany. However, Michael BG makes good points here.
Another example of Corporate Welfare. Though this time John McDonnell is in favour
http://www.bbc.co.uk/news/uk-politics-34427289
@Michael BG
“I can’t see any reason why there should be VAT exemptions on air tickets.”
But if VAT were charged then it would be the passengers would picked up the cost. How can that be “corporate welfare”? Or would you say that the fact that (most) food is zero-rated as regards VAT represents “corporate welfare” for Tesco, Sainsburys and Asda?
And what about Airline Passenger Duty? If that were scrapped and air tickets were VAT standard-rated, would that make you more or less happy?
“Then there is the £3.8bn energy subsidy. Who is getting this? Giles doesn’t say. Why are they getting it?”
Why don’t you look back at some of the recent articles on LDV where I and others have demolished this dodgy £93 billion? There’s lots of detail out there. From memory this is what the Government is paying people to decommision nuclear power stations. So according to Labour, employing people to sort out the mess left by state-run industries is “corporate welfare”!
Michael BG
“Giles Wilkes states, regarding the corporate tax benefit – “The largest component comes from capital allowances, the motivation for which are to encourage companies to invest more”. This is therefore the government paying corporations to do certain actions because the government believes it is beneficial.”
This is where Wilkes is wrong capital allowances are not to “encourage companies to invest more” they are to reduce scope for tax manipulation in the processing of corporation tax. He is probably looking at the matter from the other angle, if they were abolished it would act like a massive tax on private investment but the core purpose is to ensure that corporation tax is a profits tax, which is its stated purpose.
As for the £3.8bn remembering back to the discussion (I read it after the fact so I may have missed something), Farnsworth had identified £2.3bn (60% of his ‘subsidy’ figure) as a subsidy for decommissioning nuclear power plants. It looked as if (I don’t think a nuclear expert was in the discussion) he has calculated this on the basis that he know that energy companies had seen extensive privatisation and had therefore assumed (though apparently not checked) that the nuclear industry that was being decommissioned was private. It looked (from what Simon could see, and no one seemed to be able to provide evidence to against that view) as if it was the costs of the Magnox reactors which are still publicly owned.
Wilkes accurately picks up the £238bn figure as it is not entirely clear what is being counted in that figure. As I said on the previous thread there is a risk of people who don’t know what they are looking taking figures of money paid to an outsourcing firm as part of processing salaries/payment and assuming that they are a payment to the firm not being administered by the firm. It is like suggesting that if I sell a house for £204k with an estate agent fee of 1% this does not mean that the estate agent has a turnover of £204k when it is actually £2k.
There is an issue that Farnsworth is a sociologist and it looks like he doesn’t understand the topic he is writing about. In addition to this there are pressures on academics to produce sensational material to get ‘coverage’ I suspect the lack of understanding of the underlying detail combined with the pressure to be sensationalist has resulted in a completely inaccurate figure. He has tried to walk the position back from the initial sensationalist position. The figure is clearly nonsense, everyone should stop using it and start talking about specific issues there are concerns about, it will be much more useful.
Interesting, it seems the figures for “corporate welfare” don’t include the subsidies, grants and reliefs, the government explicitly hands out to the third-sector…
I think what many are forgetting is the context in which “corporate welfare” is being discussed and the agenda’s of various parties. Taking the Guardian article – referenced by Simon Shaw – that goes on about the £93bn, it would seem that fundamentally the gripe is that seemingly profitable companies aren’t paying enough Corporation Tax or have through various legal but questionable practices, been avoiding paying VAT and/or Corporation Tax (ie. tax on profits attributable to business in the UK).
As Giles in his article notes, the government has a few ‘levers’ such as the use of the tax and reliefs, which it can use to encourage particular types of behaviour, hopefully, the intent of the government is to improve our society’s wealth (and I use wealth in its broadest sense to include intangibles). Hence, the questions we need to be asking is whether the various incentives are both serving a purpose and that purpose is delivering to our society.
@Psi
“It looked (from what Simon could see, and no one seemed to be able to provide evidence to against that view)…”
Surely Simon should provide evidence to back up his own assertions instead of others being called on to prove a negative, which doesn’t seem very fruitful.
As Farnsworth has pointed out in the FT blog comments, Wilkes (like some commenters here) has misunderstood Farnsworth’s research (that’s if he’s even read it) and attributed plenty of views to him that he has not actually expressed. From the horse’s mouth :-
http://www.theguardian.com/commentisfree/2015/sep/28/corbyn-business-corporate-welfare-taxpayers
Given Wilkes’ experience as Vince Cable’s “special” adviser, it would certainly be interesting to know whether he (or for that matter Farnsworth) would use the phrase “corporate welfare” to describe the selling of state assets at a knock-down price to wealthy investors who claim they’re going to be in for the long haul but then sell on at a huge profit at the earliest opportunity…
@Stuart
“Surely Simon should provide evidence to back up his own assertions instead of others being called on to prove a negative, which doesn’t seem very fruitful.”
I did, here on LDV, three weeks ago. Look it up.
Before then and since then various commentators have said similar things to me – do a google search on something like “£93 billion corporate welfare” and you’ll find lots.
But for me the biggest condemnation of the dodgy Farnswoth £93 billion was actually in the Guardian’s On-Line comment area. When a follow up article by Farnsworth was put up 8 days ago, http://www.theguardian.com/commentisfree/2015/sep/28/corbyn-business-corporate-welfare-taxpayers , the really interesting thing was reading the posts from Guardian readers (Yes, that’s what I said!). Overwhelmingly they were able to see through Farnsworth’s idiocies and pointed out his errors.
Why can’t you do the same, Stuart?
Stuart
“Surely Simon should provide evidence to back up his own assertions instead of others being called on to prove a negative, which doesn’t seem very fruitful.”
Just to clarify. I was summarising, I’m not going to repost a whole comments section that people can look up. The phraising may have given you some doubt but from what you can read Simon was making the case on the basis of publicly available information not speaking as an expert in the history of UK nuclear power.
That isn’t asking to prove a negative it is taking the available information drawing a conclusion. It is reasonable to ask those who disagree to construct a stronger argument.
@ Psi
I would hope that we wouldn’t want the government to pay for the decommissioning of nuclear power plants that were privatised. However if the government still owns them their decommissioning costs have to be paid by the government.
You state that capital allowances are necessary to prevent tax manipulation. This does not seem a good reason for having them, alternatives should be explored. Having them to encourage investment is acceptable to me.
@ Simon Shaw
I don’t understand why the government would want to reduce the price of air tickets by giving a VAT exemption on them. I don’t understand why Airline Passenger Duty would have to be scrapped if the VAT exemption was scrapped. Keeping both would just increase the cost of air travel and as liberals who want to decrease the amount of travel I would have thought we would think it was a good thing.
Michael GB
“You state that capital allowances are necessary to prevent tax manipulation. This does not seem a good reason for having them, alternatives should be explored”
The alternative is too allow companies to simply use their accounting depreciation, but this would cause companies to adopt accounting policies that gave charges as early as possible. On one hand companies would pay less tax and on the other companies accounts would become less useful to those relying on them.
If people want to tinker to encourage fixed asset investment it should be done via another regime.
Personally I would favour looking at trying to move tax to wards disbursements away from profit in an attempt to reduce the tax advantages to getting bigger. I haven’t worked out how to do it without too much complexity though.
@Psi
The point is that Simon was not making any claim on the basis of information – he was making an assumption, as I think he even admitted at the time. Why should others have to disprove everything Simon comes out with?
@Simon
“But for me the biggest condemnation of the dodgy Farnswoth £93 billion was actually in the Guardian’s On-Line comment area.”
Hmm, perhaps we shouldn’t bother with academia at all then, and simply rely for all our information on the people who comment on newspaper websites. That would certainly save our kids a lot of money! I wonder if you noticed that many of the comments are the work of the same two or three people.
Actually I wonder if you bothered to read the comment by “Suffolk Jason”, or if you skipped over it when you realised it wasn’t by one of Farnsworth’s attackers? He said :-
“The level of discussion btl is pitiful. The author makes the point that welfare for individuals is (quite rightly) scrutinised with a fine tooth comb. Corporations are also supported by the government. The author is suggesting that this support should also be scrutinized. The conclusion could be that all corporate support is excellent value for money. The conclusion could be that some of the support should be ended. The conclusion could be that support should be diverted from one type of support or sector to another. Is this so difficult to understand?
Apparently it is, because Farnsworth’s critics here and on the Guardian website are all attacking the same straw men. Farnsworth has never claimed that all the reliefs and things he lists amount to direct subsidies or giveaways; he has never claimed that the things he lists are all bad things; he has never claimed that this money is easily available for diversion to other spending. In fact he has explicitly said the complete opposite of those things, so arguments about (for instance) whether capital allowances are a good thing or not are spectacularly irrelevant.
Don’t you think it’s important that we discuss the extent to which the state supports corporations, Simon? And if you do, what sort of number would you put on it?
Stuart
“The point is that Simon was not making any claim on the basis of information”
He quoted the report:
“Energy subsidies: £3.8bn … the dismantling of Britain’s nuclear power stations cost the public £2.3bn in 2012-13 alone.”
Simon says:
“That’s NOT a “subsidy or tax break”; it’s a payment to contractors to sort out a problem left by what were, of course, nationalised industies.”
The Nuclear Decommissioning Authority is working on 17 sites (according to their business plan to 2018). Work/planning is taking place on:
Dounreay
Hunterston A
Chapelcross
Sellafield LLW Repository
Springfields
Wylfa
Capenhurst
Trawsfynydd
Sizewell A
Bradwell
Berkley
Oldbury
Harwell
Hinkley Point A
Dungeness A
Winfrith
The privatised power stations are:
Dungeness B
Hartlepool
Heysham 1
Heysham 2
Hinkley Point B
Hunterston B
Sizewell B
Torness
You state Simon was “not making any claim on the basis of information” perhaps you could provide information to refute the above. Your previous line of ‘you’re wrong and I don’t have to provide any evidence’ is not actually an argument.
re: Farnsworth article – “The author is suggesting that this support should also be scrutinized.” [Stuart]
This was one of the things I noted in the article, whilst Farnsworth made the suggestion, he gave no evidence that existing levels of scrutiny were insufficient or inadequate, he merely focused on the level of ‘welfare’ and trying to link this to say that a reduction in Corporation Tax was unnecessary and potentially further ‘welfare’, without understanding that as Corporation Tax is a tax on profits, hence it is a mechanism by which a government can encourage companies to declare their profits in Britain rather than overseas (remember a tax haven is only a jurisdiction that has low/favourable rates of tax).
From my experience companies are subject to similar levels of scrutiny as individuals and have their books audited. So to me the only area that we need greater visibility of scrutiny is on the government’s expenditure, namely is the incentive etc. actually delivering the desired benefit. So for example, has the distortion in the building industry created by zero VAT on new build and standard rate VAT on refurbishment actually been beneficial in terms of delivering homes where people want them.
Sadly there are serious points to be discussed unfortunately as can be seen by this (and the previous discussions) when someone provides a wildly inaccurate number the whole discussion becomes skewed. Some people on here are desperately trying to defend nonsense figures because they pander to their prejudices.
Farnsworth, as has been pointed out, is not an economist. He is a sociologist and as a result has done things like picked up what he terms “reduced VAT” in industries where demand in fairly inelastic so actually the extra cost of increasing it will fall on the consumer not the produced. He has found numbers that will give him tens of billions of pounds to his headline figure and thrown them in with no real understanding what they mean.
There is a sensible discussion to be had but only once the discussion is on figures that at least are in the realms of sanity.
The other worrying thing about this discussion is the number of people who were willing to sign up to the idea that there is a “subsidy” or “welfare” if the government doesn’t take 100% of something. The Wages that workers in this country don’t pay in tax and NI are not “welfare” provided by the government. This is a very odd form of Marxist thinking that is quite worrying how easily people seem to accept it, when it offers them a chance to support their prejudices.
We own what we earn, businesses own what they make, and we all contribute through our taxes to support a functioning state, that does not mean the state should own everything.
“The other worrying thing about this discussion is the number of people who were willing to sign up to the idea that there is a “subsidy” or “welfare” if the government doesn’t take 100% of something. …” (Psi)
Psi, your last point is quite interesting, I wonder how many here believe in Magna Carta and the rights it bestowed yet fail to appreciate that the reason for Magna Carta was because the King DID regard all earnings of the Barons as his!
Roland I agree, I think a lot of people haven’t thought through their positions beyond ‘it’s a short term argument in favour of my prejudice.’
I would also draw the comparison that one of the arguments used by liberals over the years for taxation of Land was that land’s value is not something that you “earn” therefore it is an appropriate to focus taxation on it. The flip side of this is that someone’s wages are something that they should ‘own’ so it is better to focus more tax at the ‘unearned’ value than at the ‘earned’ value of wages.
‘But screw that, this argument lets me say things that will “bash” “the rich,” init.’
Sadly the interesting points are lost, there are many things we should be properly discussing, as it is only through sensible discussion that the positive alternatives will emerge. Why use VAT as the incentive on building, what are the perverse incentives? What is the effectiveness of the subsidies we have? Is the value of the tax loopholes worth the complexity of the system? How could we implement a LVT? Could we replace Corporation Tax for different incentives? How do we want to ensure certain levels on income?
There are many incentive skewing arrangements in the system which there could be a better liberal alternative. Both Tories and Labour have very bad ideas and need to be confronted but it seem like people are more interested in having an emotional spasm to express their dislike of a perceived ‘other’ rather than have a sensible discussion about how things could work.
Personal welfare benefits and corporate welfare benefits share many similarities. Both can often be vitally important and necessary. Both are also a natural magnet for lobbyists, scroungers, and fraudsters. We hear a lot about preventing poor people from scrounging and benefit fraud, which are real issues, but not huge in financial terms. Indeed, perhaps the greatest financial issue with personal welfare benefits is that housing benefit has evolved into what is to a substantial extent a subsidy to wealthy landlords.
We hear less about the lobbyists whose job it is to inflate corporate welfare benefits, to help scrounge more money for finance and industry from the taxpayer than is genuinely warranted, and to argue that the excessive is in fact reasonable. So when people come along and try to tell me that Farnsworth has over-stated corporate welfare, my first thought is “Am I hearing a lobbyist speaking?” My second thought is “So OK, I’m hearing someone like a journalist speaking, so I might be hearing something more objective. Then again, no job in journalism lasts for ever. The good payers are the employers of lobbyists. A CV which includes plenty of journalism favouring the interests of good payers in finance, industry and lobbying could come in useful one day.”
Cynical, I know. But sometimes cynicism is necessary. We often hear the climate change denial lobby bleating that it is the academics and the scientists who have their noses in a trough, while its is the denialists funded by the oil companies who bravely speak unvarnished truths. When we hear this from climate change denialists, most of us know to laugh. Perhaps we should know the same when we hear people deny that companies fiddle tax and over-claim on corporate welfare.
@Psi
He quoted the report:
When you say “the report”, you actually mean an article written by a Guardian journalist, not the Farnsworth report. Have you actually read the original report? Farnsworth does NOT claim that “the dismantling of Britain’s nuclear power stations cost the public £2.3bn”. You might not think it’s important to get these details right, but I do.
“There is a sensible discussion to be had but only once the discussion is on figures that at least are in the realms of sanity.”
That’s fine – Farnsworth has provided a full breakdown of his figures so you’re perfectly free to do your own sums and start the discussion on that basis. Might be more fruitful than simply bashing the efforts of others. Farnsworth is uncovering a great deal of data that has previously not been widely available and for this, and kick starting the discussion, he deserves to be commended.
“The other worrying thing about this discussion is the number of people who were willing to sign up to the idea that there is a “subsidy” or “welfare” if the government doesn’t take 100% of something.”
Just another straw man. I would have thought it pretty obvious that the sort of things being described as tax breaks here are reliefs given to some companies that are not available to others or to individuals. There is certainly a lot of ideological fervour on display here but it certainly isn’t coming from those who defend Farnsworth (none of whom, including myself, have done so without reservations), rather it’s coming from those who seem a little bit uneasy at any light being shone on the issue of socialisation of corporate support at all.
@Stuart – Thanks for the correction. In my comment (7th Oct ’15 – 11:08am) I didn’t double check and mistakenly attributed the Guardian article (http://www.theguardian.com/politics/2015/jul/07/corporate-welfare-a-93bn-handshake ) to Kevin Farnsworth (the academic and author of the research report rather than the journalist Aditya Chakrabortty, who also penned a related article (http://www.theguardian.com/politics/2015/jul/07/direct-aid-subsidies-tax-breaks-the-hidden-welfare-budget-we-dont-debate ).
Just add to my previous comment. I note that in Kevin’s short article (http://www.theguardian.com/commentisfree/2015/sep/28/corbyn-business-corporate-welfare-taxpayers) and his website http://www.corporate-welfare-watch.org.uk/blog-2/ his stated objectives are:
1) to bring corporate welfare into the public debate domain through a discussion and conceptualisation of corporate welfare;
2) to begin to examine how we might ‘account’ for corporate welfare, both in terms of its cost to British taxpayers and its value to private businesses.
Which I note are really an attempt to provide a means to answer the sorts of questions I’ve raised in my comments here, rather than to say “look at how much (taxpayers) money the government is throwing at business”.
Roland,
Good and fair comment! Farnsworth’s actual views and statements have been distorted by both sides for their own purposes., and it is those distortions that most on here have been arguing about (ad nauseum…)
Stuart
“You might not think it’s important to get these details right, but I do.”
Oh, well done a misatribution due to speed of summarising the comments you seemed unable to read. I notice your concern for getting the details right don’t apply to you when accuse others of having simply assumed and not made judgements based upon information.
So back to the earlier point you stated Simon was “not making any claim on the basis of information” do you now accept that he was?
Do you have any argument regarding the substantive point about the £2+bn attributed to nuclear clean up?
“Have you actually read the original report?”
Yes , have you? I ask because you say:
” Farnsworth has provided a full breakdown of his figures”
Which he hasn’t. The energy subsidy figure being an example.
“another straw man”
Which are the earlier ones you have identified?
It is not a straw man to point out that charging 20% tax is not a subsidy on the basis that you could have charged 30%. The only way conceptually that works is if you believe that the state owns 100% therefore anything less is a subsidy.
Psi
Subsidies are relative things… Here is the definition from Investopedia:
“DEFINITION of ‘Subsidy’
A benefit given by the government to groups or individuals usually in the form of a cash payment or tax reduction. The subsidy is usually given to remove some type of burden and is often considered to be in the interest of the public.”
So a tax cut is a subsidy if it benefits one group over another
If the basic rate of tax paid by an individual is 20%, and corporation tax is also 20%, but a company can reduce their tax bill to a much greater extent by claiming various allowances, then that would be a subsidy to business taken from the individual tax payer. I am not sure which direction the subsidy is in, what with national insurance and everything, but it illustrates the point. Certainly as an employee the range of things I can claim against tax is very restricted compared to a company. I wish I could define income minus housing, heating, food and transport costs etc as “profit”, and only pay tax on that…
One of the things I used to be able to claim once upon a time was mortgage interest tax relief – that is an example of a subsidy to mortgage payers from people who pay tax on savings (for example)
But to be honest this has become a truly pointless discussion. The real point is what the actual overall rate of taxation is on business, how this compares with other countries, and whether or not it is desirable to have a low corporate tax rate.
Andrew McCraig
There are two points from what you said. Firstly the difference between Corporation Tax and Income Tax is because they are taxing different things. As others have noted elsewhere on LDV (can’t remember which thread) there is a case to be made for further differences to Capital gains tax and corporation tax to ensure that the effective tax rates of different activities are the same. Corporation tax ultimately lands on people, either employees or owners, to say they have to be the same is odd. Wht not say that Stamp duty should be 20% (a terrifying idea)?
That is not to say your point about the loss if Mortgage Interest Tax Relief is not a valid point, removing it was sold as ‘abolishing a tax break for the middle class’ when in reality it simply redistributed from the middle and lower middle class to the upper middle class (and to the super rich but lets not go there). But that should be seen as a separate policy question and not one that trying to read corporation tax (which I personally would replace) rules and apply them to other taxes.
As to the definition of “subsidy” I don’t think that is relevant to the point I was making. We are talking about subsidy to business specifically. A reducting in VAT has a benefit but, as I said above no consideration has been given as to who the benefit falls on. You can’t just state that a reduced rate of VAT is a business subsidy, it would be if the demand was highly elastic and supply highly inelastic but not if the position is reversed. As a result these numbers should only be used if someone has taken the time to actually understand where the benefit falls.
The problem with this is that as you read the report you can see genuine subsidy each one numbering in tens or hundreds of millions of pounds. You can also see items that are clearly not subsidy numbering in the tens of billions. There are then numbers that could have a split either way and when you dig in have significant amounts that are clearly not (such as decommissioning government owned nuclear power stations).
Andrew McCraig
Contd…
I agree this debate has become pointless as those who look to defend the figure would have been better to have simply said “there are a lot of errors, but that happens, what concerns me is X subsidy” that could then be discussed if it has value.
Instead we have people using the Mott and Bailey argument technique, if there is a discussion over a single item and it turns out that the subsidy is not worth it it is followed be a “this is just a part of £93bn of these subsidies” or if it looks valid you get “this is only marginal but there is another £97bn of subsidy that is like this so most of this will be perks to business” which just means we go back round again on the “not it isn’t look at these 10s of billions that are just bonkers.”
That is before you get the Labour leadership claiming that this and the tax gap can just be picked up and suddenly there is an easy solution to all fiscal dreams. Some of the most effective critique of these figures have been from Labour party members who actually understand that these are not some easy solution.
” The real point is what the actual overall rate of taxation is on business, how this compares with other countries, and whether or not it is desirable to have a low corporate tax rate.”
My impression has been that successive governments have tended to rig the system to encourage companies to establish a meaningful presence in the UK. Hence for example the incentives given to encourage businesses to locate in Wales rather than England. Also given the push towards the “knowledge” economy, incentives have and are being given to encourage companies to do more of their R&D in the UK (which given R&D is more of a profit sink than a profit centre, the rate of Corporation Tax is largely irrelevant). Obviously, by keeping control of migration, you would hope that the presence would result in the employment British people (PAYE, NI & VAT) rather than the simple relocation of people from elsewhere (income taxed abroad hence only benefit from VAT).
Aside: A notable omission from Kevin Farnsworth’s report is any mention of the 2009 Vehicle Scrappage Scheme. Particularly as (with the benefit of hindsight), it is a textbook case of mutually beneficial “corporate welfare”, ie. at the outset it did appear to be the motor industry asking to be treated differently to other industries, but on final analysis the government gained significantly more than it spent on the scheme. I therefore do wonder if Kevin did have an (unpublished) agenda as he seems to only include examples which didn’t result in an obvious benefit to the Treasury…
@ Psi
“Firstly the difference between Corporation Tax and Income Tax is because they are taxing different things.”
Yes Corporation Tax is a tax on profits and therefore should be higher than the tax on earned income for equality reasons.
“I agree this debate has become pointless as those who look to defend the figure would have been better to have simply said “there are a lot of errors, but that happens, what concerns me is X subsidy” that could then be discussed if it has value.”
Some of have raised particular items. According to the Guardian article £8.5bn could be raised by charging VAT on air fuel. As a liberal I think that raising a further £8.5bn from those who travel by air is better than cutting Tax Credits, Employment and Support Allowance and Universal Credit. Don’t you?
Michael BG
I’m not completely sure but my answer would be possibly.
As a clarifying point the rise would not raise £8.5bn as there will be a fall in demand for air travel. But by how much and if there were other changes that would also have different effects so it is worth bearing in mind.
In terms of whether I would be in favour:
I would want to know why the current rate of air passenger duty and lack of VAT were set, presumably there was a reason and that justification would be good to understand first.
From a personal point of view I would favour more fixed tax per flight and less attached per passenger, as that would further incentivise the airlines to maximise the passenger numbers per flight. As a lot of air pollution and noise pollution will be fixed per flight, rather than variable by the number of passengers, so I would prefer the tax to connect to that.
That is not to say that there are not good reasons why my initial view is wrong so I would be interested to know what other views were on that topic And why we have the current system.
@Psi
“‘another straw man’
Which are the earlier ones you have identified?”
I listed them earlier, clearly labelled. Since then you’ve come up with several more, such as :- “the Labour leadership claiming that this and the tax gap can just be picked up and suddenly there is an easy solution to all fiscal dreams.” In reality Corbyn – whether one agrees with his approach or not – has not said anything is easy, nor has he said that diverting some money from “corporate welfare” or the tax gap is anything more than a part of any solution. (With these sentiments he’s actually saying much the same thing as Lib Dem manifestoes tend to do, as I quoted in a previous thread.)
You keep claiming that you’re after a “sensible” debate but nevertheless spend most of your posts indulging in nit-picking tiny bits of figures here and insulting people.
It is not a straw man to point out that charging 20% tax is not a subsidy on the basis that you could have charged 30%.
It’s very much a straw man because Farnsworth is not saying anything remotely like that. He’s talking about tax breaks and subsidies, not tax rates that apply fairly to all.
David Allen
Your comment seems to have appeared late so I missed it.
“We hear less about the lobbyists whose job it is to inflate corporate welfare benefits, to help scrounge more money for finance and industry from the taxpayer than is genuinely warranted”
When it comes to finance I think much of the benefit shouldn’t be termed “welfare” as it is often accidental monopolistic characteristics. These need to be broken as they were not intentional and there is not a justification for monopolistic barriers in these markets.
Other “welfare” or subsidy as it should be called may have a reason so should be evaluated. But not accidental monopolistic structures they just need to be removed.
Stuart
“most of your posts indulging in nit-picking tiny bits of figures”
Most of my comment on specific figures relates to tax credits that would be £20 billion and one of the largest figures in the report.
Perhaps you consider it tiny but I guess you share that view with Ronald Regan.
Much of what you seem to consider “insulting people” is actually picking up you on making claims about Simon Shaw’s comments which I consider inaccurate and out of order. I notice you still have failed to support your earlier claims. Just conning back with more of the same.
@Psi
“Most of my comment on specific figures relates to tax credits”
I’ve just done a quick scan of the above and the other thread from last week and I can’t see you mentioning tax credits once. Are you posting under multiple aliases? Or are you now confusing tax credits (which have a very specific meaning) with something else?
Much of what you seem to consider ‘insulting people’ is actually picking up you on making claims about Simon Shaw’s comments which I consider inaccurate and out of order.”
That’s not what I was referring to, but in fact I’ve already pointed out some of Simon’s errors – most of which stem from his confusion about the role of the NDA, which in turn comes from him confusing something written by a Guardian hack with something written by Farnsworth himself.
Actually Simon isn’t entirely wrong (nor is Farnsworth – they’re both part right and part wrong on this one), and to be fair to him he never claimed to be an expert on the matter, so I’m not sure why you’re so offended by my pointing any of this out.
Stuart
“most of your posts indulging in nit-picking tiny bits of figures”
“I’ve just done a quick scan of the above and the other thread from last week and I can’t see you mentioning tax credits once.”
Well done, another typo. That was capital allowances which should have been apparent based upon the £20bn figure as it is the figure referred to. But, you do love your typos.
Stuart contd.
As you are concerned that I haven’t mentioned them let’s look at the comments I made on the two discussions of this report (before your 8 Oct 22:20 comment):
30 Sept 08:11 – no specific figure General comment
30 Sept 12:05 – capital allowances
30 Sept 21:59 – capital allowances
01 Oct 08:51 – capital allowances
01 Oct 09:01 – capital allowances
02 Oct 10:16 – no specific figure General comment
02 Oct 10:51 – capital allowances
05 Oct 15:46 – no figure, link back to previous discussion.
06 Oct 09:12 – capital allowances
06 Oct 11:56 – energy subsidy and procurement
06 Oct 19:20 – no figure, responding to your inaccurate comment about Simon
06 Oct 10:08 – capital allowances
07 Oct 10:56 – energy subsidy
07 Oct 11:41 –energy subsidy and capital allowances
07 Oct 16:25 – general comment
07 Oct 22:18 – energy subsidy
07 Oct 22:26 – energy subsidy
08 Oct 10:12 – Capital allowances, Housing/energy.
08 Oct 11:13 – general
08 Oct 16:44 – Transport
08 Oct 21:07 – general
08 Oct 21:16 – responding to you.
So 23 comments
7 general comments with no reference to a specific figure
9 about capital allowances
5 references the energy subsidy/nuclear issue
1 references procurement
56% of my comments about a specific figure relate to 20bn of capital allowances and one comment on 15bn of procurement. 31% related to the energy subsidy most of which was responding to your claims about others.
As I said before you have not actually justified your criticism of others and specifically avoided answer factual questions. Though you seem to have moved on very slightly:
“Simon isn’t entirely wrong […], and to be fair to him he never claimed to be an expert on the matter, so I’m not sure why you’re so offended by my pointing any of this out.”
The point about him not claiming to be an expert was actually the point I made back on 6 Oct 19:20 to which you responded:
“The point is that Simon was not making any claim on the basis of information”
Strange after being repeatedly asked for a justification of your criticisms of others, you have not provided one and simply accused my factual corrections as “indulging in nit-picking tiny bits of figures here and insulting people.”
I think I have given you enough opportunities to live up to certain internet stereotypes; you don’t appear to want to engage with the actual facts so I’ll stop responding to you now.
@”Psi”
“I think I have given you enough opportunities to live up to certain internet stereotypes”
From the author of the two posts directly above – that’s rich indeed. It’s hard to see why you’re so sore at me because you confused tax credits with capital allowances. I’d say it’s an easy mistake to make, but actually, it isn’t.
Dragging the thread kicking and screaming back to its original point, Corbyn had some interesting things to say today in praise of businesses who practise social responsibility, and about using the “corporate welfare” support structure to reward and encourage firms who do so. This strikes me as an exciting theme, and one where frankly we’re about 50 or 60 years behind other countries. It will be interesting to see what detailed proposals he can come up with in this regard – or other parties for that matter. This is exactly the kind of “fixing capitalism” I’d like to see Liberals engaging in more, if they want my vote.
” Corbyn had some interesting things to say today in praise of businesses who practise social responsibility, and about using the “corporate welfare” support structure to reward and encourage firms who do so.”
Well, I wouldn’t hold my breath, there are already some aspects of “corporate welfare” that fall into this category, such as Employee Share Option Schemes, Profit Share Schemes etc. that have had poor take up. Perhaps Jeremy Corbyn will have some ideas about how to make it easier for companies to make the change. I suspect that much can be achieved by simply getting companies to report on stuff, for example one of the things that has come out of the “gender pay gap” debate is that whilst the headline data is largely meaningless outside of an individual company, within the individual company it has caused them the examine and understand better how and why the gap exists within their organisation and hence whether they have missed something.