CPS Corporation Tax Report Reveals Labour Black Hole

This morning’s Centre for Policy Studies report will be worth noting when Corbyn responds to the Budget later. Their new research out today finds that reducing corporation tax from 28% to 20% has helped increase growth and profitability leading to a rise in receipts by 28% since 2011. Labour’s policy is to increase corporation tax to 21.5% to fund £15 billion of extra spending per year. Yet the CPS finds that such a hike would only raise £5 billion, leaving Labour with a £10 billion funding gap. 

Labour have pledged to spend the corporation tax money 11 times already: on the adult skills budget, supporting British steel, ending public sector pay restraint, reintroducing EMA, scrapping tuition fees, extending pension credit, reversing Universal Credit changes, pensions triple lock, social care, the NHS and PIPs. And now the experts say it won’t raise anything like as much as they need. Ammo for the Tories when Corbyn gets up to respond to Hammond…

Gove SpAd Henry Newman New Open Europe Director

Guido understands former Michael Gove SpAd Henry Newman has been appointed as the new Director of the Open Europe think tank. He replaces acting directors Raoul Ruparel, who left last year to work for David Davis, and Stephen Booth, who becomes Director of Research. Brainbox Newman is a sound hire, he has a very strong knowledge of Whitehall and is respected in the Lobby. Before advising Gove he worked for Francis Maude at the Cabinet Office during the reform of trade union Pilgrims. Open Europe is drying out, under Newman expect them to embrace leaving the EU and promote a liberal, outwardly-looking Brexit. Congratulations…

Bank of England Must Stop ‘Depending on Kindness of Strangers’ to Bolster Economy

We’re fast approaching the eighth anniversary of UK interest rates being lowered to 1%. This is unprecedented, as is QE. This “unconventional monetary policy” is having severe economic consequences, argues Brian Sturgess for the Centre for Policy Studies in Stop Depending on the Kindness of Strangers.

In the foreword, Sir Martin Jacomb writes: “The idea that credit should be cheap, that savings are pointless, and that borrowing levels do not matter, is contrary to common sense. Harm is being done to individuals, to businesses and to the next generation.”

Sturgess warns these policies have failed to stimulate economic growth and encouraged ‘zombie capitalism’ and the rebuilding of corporate balance sheets ahead of productive investment, among multiple other side effects, contributing to the kind of unfairness that Theresa May and Donald Trump have both highlighted. It’s time to grow up and return monetary policy to normal, or we could be in for even greater pain.

Content produced and sponsored by the Centre for Policy Studies.

IEA Wonk Could Be Trump’s EU Ambassador

Institute of Economic Affairs advisory council member Dr Ted Malloch is being interviewed by Donald Trump this week for the role of his EU ambassador. Theodore Roosevelt Malloch, to give his full name, is a distant relative of President Roosevelt who Maggie Thatcher once dubbed a “global sherpa” thanks to his decades of work at various economic conferences and institutions. It’s good news for Britain if Anglophile Malloch gets the job, he tells City AM:

“In the UK, Brexiteers can take heart from the victory of another anti-establishment figure. His political sympathies for Brexit could lead him to prioritise a trade agreement with the UK once the country leaves the EU. It will also ensure a stronger US-UK Special Relationship.”

And his views on Brussels are sound too. He told Brexit Central last year:

“The elite that dominates EU decision-making is managerial, bureaucratic and socialist,” he says, “with a view to higher taxation and redistribution of wealth — all qualities the EU elite tout proudly, despite growing populist sentiment among an increasingly economically pressed middle class in virtually every EU-participating country. The US and the UK have cast their lot in the same direction and the Anglosphere will not only survive but thrive…

Would they want the United States to join anything like the EU — a federal superstate that curtails sovereignty? Of course the answer is NO! We wouldn’t want that in any way, shape or form. And the British already decided not to become part of the flawed euro currency and the European Central Bank. So here’s an interesting and novel alternative no pundit is yet suggesting, and I say it only half facetiously: why not hook up our horses together?”

Make the special relationship great again…

Gloomy Wonks are EU-Funded Europhiles

Britain will be “older, more unequal and blighted by Brexit”, according to a gloomy new report from the IPPR think tank. Apparently there will be a decade of disaster and misery caused by the Leave vote. Two things the Guardian didn’t include in their write-up: The IPPR was formerly run by the head of the Remain campaign Will Straw. It is funded by the EU. Probably worth mentioning…

Cable’s Ex-SpAd Giles Wilkes Heading to Downing Street

Usually reliable sources tell Guido that Giles Wilkes, the ex-SpAd to Vince Cable who is currently writing the Lex column and FT leaders, is joining Downing Street in the New Year. He will be covering the corporate governance and industrial strategy policy brief. His appointment shows how far the government has moved on from the free market neo-liberalism of the last three decades…

Nice guy. Big Remainer and Lib Dem obviously. Giles is vehemently opposed to Brexit and tightening up on immigration – so his policy differences with the PM are only on the core goals of Downing Street. As an ex-wonk from CentreForum he can be too clever by half, he was one of the few LibDems who thought tuition fees were the right thing to do, so he has the required classic political awareness and sensitivity of an autistic wonk. Obviously being an “expert economist” and former bookmaker he managed to publicly lose a bet to Guido on the direction of inflation…

His appointment will infuriate the right of the Conservative Party. Wilkes once described tax cuts as “gambling with taxpayers money”. Giles seems not to understand that it is their money in the first place. Mind you he did apologise for calling Guido “innumerate” after he lost that bet to him.

Guido was unable to confirm the appointment at the time of going to pixel despite reaching out to Wilkes.

N.B. SpAds wondering what he will be like to work with can watch him pontificating about SpAds here.

Fight Poverty, Not Ratios

Dan Jarvis is getting a lot of media play ahead of his Westminster Hall debate this afternoon highlighting the government’s shrinking of the cross-departmental civil service Child Poverty Unit from 23 staff down to 10. Jarvis argues that

“We are living through the biggest increase in relative child poverty in a generation. The Institute for Fiscal Studies predict that without changing course we will see a 50% rise by 2020.”

Sounds horrific, child poverty is going to rise by 50% in 3 years! Stop. Look around. Infant mortality has fallen, most health indicators are improving, even childhood obesity has peaked. How can child poverty be set to increase by 50%?

It is a ratio, not reality. As the economy strengthens middle and upper incomes recover at a faster rate than lower incomes – in part because of an unlimited supply of cheap labour from the EU – the ratio between the two rises, so the child poverty ratio rises. Even as household incomes rise for the less well off as well…

The creation of the Child Poverty Act (2010) was one of the last ideological acts of a Labour government that knew it was likely to lose the general election held two months later. It attempted to legislate against inequality, against people getting richer. The numbers show that absolute poverty, real poverty, where you can’t afford necessities, is falling as worklessness falls. Relative poverty, where you can’t afford as much as richer people, is not really falling – this is not a problem. Child poverty is not about ratios. Abolishing the Whitehall bean counters and focusing on work-based paths out of poverty is the way forward.

Labour talk a good game on poverty – it remains a fact that the unemployment rate always increases under Labour governments, this can have the effect of flattering the ratios. The best real child poverty counter-measure is working to support your family. No amount of redistribution, no ratios, no welfare measure can surpass the effectiveness of bringing home a wage to support your family.

Core Labour Vote There For UKIP’s Taking

A report out this morning from the National Centre for Social Research gives weight to the theory that Labour’s core vote is there for UKIP’s taking. 70% of voters in local authority rented homes voted Leave, as did 68% of those in housing association accommodation.

66% of those earning less than £1,200 per month backed Brexit, as well as 53% in Wales, 58% in Yorkshire, 54% in the North West and 58% in the North East.

70% of people who said their financial situation was a struggle backed Brexit, as did 59% of those identifying as working class.

Even 40% of ‘young working class Labour voters’ backed Brexit. The report asks:

“Could there be a re-alignment of party politics along the cleavages identified? Can the Labour Party remain a strong force in working class and low income communities?”

With numbers like these Paul Nuttall will be rubbing his hands…

Minister Slammed Letting Fees Ban Just 8 Weeks Ago

The big Autumn statement announcement pre-briefed to today’s papers is that the government is banning letting fees. This is yet another u-turn by Theresa May – just 8 weeks ago her housing minister Gavin Barwell publicly dismissed the proposal as a “bad idea”. Such a bad idea that May herself voted against it in 2014, and the Tories voted the same policy down again in 2013. Kate Andrews from the Institute for Economic Affairs says:

“The Chancellor can come in and not have to commit any of his own spending to do something that seems like it’s trying to help those who are just managing. But of course this is him skirting around the issue of the housing crisis altogether… Politicians will implement the dumbest policies to avoid actually addressing the issue.”

As the National Landlords Association explains, tenants will still foot the bill:

“Philip Hammond lacks any understanding of how the sector works. Agents will have no other option than to shift the fees on to landlords, but adding to landlords’ costs will only push more towards increasing rents.”

Yet another Miliband policy gimmick pinched from Labour’s 2015 manifesto. The politics make sense, the papers have written it up kindly, but even the minister knows the policy is a dud.

UPDATE: Barwell speaks:

“It is the nature of the job that you have to defend current policy even when you’re working to change it.”

Adam SPLIFF Institute: Legalising Cannabis Could Add £1 Billion to Treasury Tax Pot

cannabisAfter California voted to legalise cannabis, several MPs are backing the Adam Smith Institute’s new report calling for the same. It is a terrible tragedy that people get criminal records and go to jail for smoking something less harmful than alcohol…

Sam Bowman, the Executive Director, said making criminals of otherwise law-abiding  people “makes an ass of the law” and the only sensible approach is to legalise and regulate a product used regularly by millions of Britons. The ASI report: The Tide Effect says the tax revenue could add £1 billion to the Treasury pot and the £50m a year it costs dealing with cannabis offenders could be slashed. Worrying that the ASI is seeking new things for the government to tax…

Institute For Government Slap Down “Wrong” Times Splash

ifg

After their front page yesterday unravelled, the Times have doubled down by reporting that the Institute for Government says Brexit is causing “chaos” and an “existential threat” to some departments in Whitehall. Well, the Institute for Government are not happy with the Times. Their head of research Dr Hannah White says:

“To be clear – this article is wrong to say Institute for Government has warned of an ‘existential threat’ – we reported this as the view of a source.”

The IFG researcher who is quoted in the article, Joe Owen, has retweeted Dr White’s statement that the Times article is “wrong“. Two Brexit doom-mongering Times splashes in two days fall apart – this ‘fake news’ problem is getting worse…

Brexit Inflation and Interest Rate Signals

carney-cpi

The Bank of England’s inflation target is 2.0% – with the fall in the pound inflation is set to overshoot to between 2.5% and 4.5% depending which rune reading economist you believe. When the 2% target is missed by 1% or more Carney has to write to the Chancellor explaining why he has missed his target. He’s been writing those letters for most of his term…

Inflation has now crept up to 1% after knocking along at zero for a while. Even at the extreme end of forecasts inflation will not reach the levels seen before the great taming of inflation in the 80s. (Unless the QE unwinding is a disaster, which is not impossible.) Having read many papers on the subject Guido is none the wiser as to how the world’s Central Banks can go cold turkey from the QE opiate without a very bad come down. In any event, at these levels interest rate policy is now symbolic, market loan rates are increasingly detached from base rates. Firms are not going to make or break investment decisions because base rates are 0.25% or 0.5%.* May is right that we need to see rates rising, to head off inflation and to boost confidence.

Nothing would more clearly signal that the Brexit apocalypse is not upon us than the Bank raising base rates. Normalisation of monetary policy has to happen. Or at least the Bank should signal the beginning of normalisation…

*Fans of reflexivity and paradox will contemplate the post-referendum rate cut with joy. Carney implies it boosted the economy, critics say it was unnecessary. Did it boost confidence that the Bank of England was ready to do whatever or was it a way for Carney to claim credit for his gloomy predictions not coming true?

Centrist Think-Tank Concludes There’s No Progressive Majority

dead-centre

This morning the centrist, cross-party Social Market Foundation held a well attended seminar headlined by Chuka Umunna, Nicky Morgan and Nick Clegg. It felt like a wake for the Labour Party. SMF claims – on the back of research from Opinium – that there’s no progressive left-leaning majority in the country – the majority of voters hold “traditionally right-wing views” that will guarantee a “healthy majority” in the future for the right-wing parties.

The wonks categorised voters’ attitudes into eight political tribes/parties that share very distinctive political views. Despite the majority of voters self-describing as “centrist“, most voters actually identified with centre-right and right-wing political attitudes.

From the report:

On the whole, our analysis makes more cheerful reading for those on the right, than on the centre or the left. The two largest tribes, making up around 50% of the population, hold a range of traditionally right wing views, ofering a solid foundation on which to aim for the 40-42% of the vote which normally guarantees a healthy majority under our electoral system. These groups share a desire to see immigration reduced to below 100k a year and were both solidly pro-Leave in the EU referendum.

The progressive tribes are fragmented, disagreeing on openness to the world and attitudes towards the welfare state and taxation. This is bad news for the current Labour Party as the think-tank finds massive differences between so-called “Democratic Socialists” and “Community” party voter blocs – traditionally known as Labour supporters – while both tribes agree on socialist policies towards capitalism, they diverge on supporting the EU or having an internationalist approach.

SMF also implies that the centre-ground is now being occupied by traditional right-wing politics. So did Cameron succeed in occupying the centre-ground or did the Conservative Party’s modernisers end up pulling the centre-ground rightwards?

City Boys Staying in London

surprise

Mark Carney is up in front of the Treasury Select Committee this afternoon where he is going to have to explain why he cut rates and re-started QE prematurely to Jacob Rees Mogg, who thinks “He acted too early in my view. There was not sufficient evidence at that point that further monetary stimulus was needed and there are adverse consequences of abnormally low interest rates as well as beneficial consequences.” As the Citigroup surprise index (above) shows, most City expert economists got it wrong on a Brexit recession. In the last week alone Morgan Stanley, JP Morgan and Credit Suisse have reverse-ferreted on their Brexit recession predictions. None have accepted Guido’s £1,000 wager offer…

fundmanagers-staying

On a similar theme it is worth reading the Centre for Policy Studies analysis out today on the pros and cons of Brexit for the financial services. Just as the consensus on a Brexit recession was misplaced (even Remain campaign financing investment bank JP Morgan has now conceded they were wrong) so too will the “City will lose out to Paris / Frankfurt / Dublin” consensus soon dissolve.  The above chart from Prequin shows that not many Masters of the Universe are keen to enjoy the Frankfurt nightlife…

What the City does want is “passporting”, assurance that the Square Mile’s firms will still be able to trade across the EU. The majority of the City’s exports in financial services (60%) go to countries outside the EU – not surprising when not one of the top 10 financial centres is in the EU. China and India are already choosing to do their capital market transactions in London, these are the growth markets of the future. In reality it is likely that if “passporting” obstacles were to be deliberately constructed, they could if necessary be circumvented by booking trades through EU based subsidaries. Zurich is the biggest financial centre on mainland Europe, it has bilateral deals with the EU, the City will want the same…  

IEA: Osborne’s Living Wage Hits Poor, Young, Minorities, Consumers, Taxpayers

go

George Osborne’s Living Wage is likely to see those it is supposed to help lose out, according to a new report from the Institute of Economic Affairs. The IEA finds that modest minimum wage increases may not cause higher unemployment, but large increases will. Who are the losers? The young, unskilled, minorities and those in the regions:

“Minimum wage increases are always potentially a trade-off, between raising pay for those fortunate enough to keep their jobs and hours against the potential reduction in labour demand. Any significant reduction in demand will hit young and unskilled workers, particularly those from minority groups, hardest. It is also likely to have a bigger impact in some parts of the country than others… the ‘bite’ of the National Minimum Wage has been considerably deeper in Northern Ireland and the East Midlands than in London.”

Higher unemployment is a long-term consequence:

“the longer-run impact of the minimum wage might be to generate larger reductions in employment”

And low-paid earners don’t actually benefit as they lose out in other ways:

“firms such as B&Q and Waitrose have been accused of lowering premium pay for weekends and other ‘unsocial hours’, while Caffe Nero staff seem to have lost the perk of free paninis – showing that minimum wage increases are no ‘free lunch’. Those gaining from pay increases therefore lose out in other ways than jobs or hours lost”

The report concludes that someone ultimately has to pay for any sharp minimum wage increase:

“the cost can only be borne by consumers paying more, shareholders getting reduced dividends, or taxpayers paying more”

The Living Wage might make political sense – it leaves Labour with nowhere to go – but the evidence is it hinders those it is supposed to help…

Vote Leave Chief Launching New Brexit Site, Taxpayers’ Alliance Reshuffles

Vote Leave chief Matthew Elliott is back at Business for Britain post-referendum, and Guido hears he will be setting up a new website called BrexitCentral. Former Lobby journalist Jonathan Isaby is leaving the Taxpayers’ Alliance to join as editor. It sounds like the site will offer plenty of comment and analysis – there is a gap in the market for some proper wonkish insight making sure Brexit means Brexit. It launches in September and Guido wishes them well, readers of this site will no doubt await with interest…

Isaby’s departure from the TPA means a reshuffle in wonk world. Tufton Street veteran John O’Connell, who has been at the TPA since 2009, will be the new CEO, another well-deserved appointment. They’ve also hired Tom Banks, who ran Vote Leave’s ground operation in Yorkshire, as their new grassroots campaign manager. More jobs created by voting to Leave…

May Hires Top IoD Wonk

SPADS

Theresa May has hired Institute of Directors wonk Jimmy McLoughlin to lead Downing Street’s business relations. McLoughlin, who worked on May’s leadership campaign, will replace Cameron’s arch-Remain SpAd Dan Korski. It’s a smart hire – May’s ‘reforming capitalism’ shtick means she’ll need help bolstering relations and McLoughlin is one of the most likeable people in SW1. Here’s the SpAd list as it stands:

Send any further updates to team@order-order.com

Action Dan’s Wealth Tax Plan

Dan Jarvis has written a supportive foreword for a Fabian pamphlet backing a “one off” wealth tax aimed at the rich. The pamphlet attacks hedge funds for their high rates of return available only to rich investors. The left-wing authors have found a new pot of gold to replace the middle-class terrifying mansion tax – which was basically a tax on homeowners in the South East where family homes easily exceed £2 million. The Tories mail-shotted the hell out of the issue to homeowners in the general election…

The evil Fabians’ plan is to levy the one-off tax on those with assets over £10 million or who use “aggressive tax avoidance”. Those with over £20 million in assets will suffer an even bigger expropriation of their wealth. The authors of this plan think this will avoid losing votes as it will hit only the 0.1%. Only the likes of Guido apparently think the super-rich have suffered enough…

The problems with the idea – apart from the immorality of confiscating justly acquired wealth arbitrarily – are manifest and obvious. The type of people who use aggressive tax avoidance strategies (a) don’t admit they do, (b) won’t stay around to see themselves financially gouged. The idea that people who go to the trouble of parking their money offshore will have a change of heart is laughably naive. It will also hit entrepreneurs who build successful companies which bring jobs and taxes to Britain. Why would an entrepreneur choose to base herself in a country that punishes her success?

Why is Jarvis aligning himself with such a crazy, job-destroying, entrepreneur-deterring, unworkable left-wing policy? Could it be he wants to be able to defend himself with a policy shield in a leadership contest when the subject of his donations from hedge-fund tycoons comes up?

Owen Jones’ Think Tank Helps Pay Off Deficit

The union funded CLASS think tank Owen Jones helped found has been fined £1,000 by the Electoral Commission. Unite veteran Steve Hart was stung with the bill after the Centre for Labour and Social Studies failed to deliver not one but two donation reports on time. “Any penalties that are imposed by the Commission go into the Consolidated Fund. This is managed by HM Treasury.” OJ’s band of deficit deniers are forced to help pay it off…

Nanny Osborne’s Tax On The Poor

Nanny George Osborne

George Osborne’s sugar tax extends the reach of the nanny state, it is a punitive, regressive tax that will hit the poorest hardest. The Chancellor told the House: “We understand that tax effects behaviour. So let’s tax the things we want to reduce”.[…] Read the rest

+ READ MORE +



Tip offs: 0709 284 0531
team@Order-order.com

Quote of the Day

Jeremy Corbyn:

“I’m not a defender or supporter of ISIS.”

Sponsors

Guidogram: Sign up

Subscribe to the most succinct 7 days a week daily email read by thousands of Westminster insiders.

Facebook

Updates: Who’s Standing? Who’s Standing Down? Updates: Who’s Standing? Who’s Standing Down?
Tories Mistakenly Share Private Conference Call PIN with Opposition Tories Mistakenly Share Private Conference Call PIN with Opposition
Len and Seamus’s Champaign Celebration Len and Seamus’s Champaign Celebration
Campaign Report: 48 Days To Go Campaign Report: 48 Days To Go
Campaign Report: 49 Days to Go Campaign Report: 49 Days to Go
Listen: Dawn Butler Car Crash Interview Listen: Dawn Butler Car Crash Interview
Manifesto Lookahead: Six Tory Policies in Peril Manifesto Lookahead: Six Tory Policies in Peril
McVey for Upminster? McVey for Upminster?
Watch: Corbyn Crowd Boos and Shouts Down ITV Question Watch: Corbyn Crowd Boos and Shouts Down ITV Question
Coalition of the Others Still Behind Tories Coalition of the Others Still Behind Tories
NEC Swerves Corbyn Loyalty Pledge NEC Swerves Corbyn Loyalty Pledge
Watch: Barry Gardiner Loses It on Sky News Watch: Barry Gardiner Loses It on Sky News
CCHQ Caught on Hop: Not Enough Tory Candidates CCHQ Caught on Hop: Not Enough Tory Candidates
Campaign Report – 50 Days to Go Campaign Report – 50 Days to Go
PMQs Sketch PMQs Sketch
Osborne Quits as MP Osborne Quits as MP
Will Tories Drop MOAB on Corbyn? Will Tories Drop MOAB on Corbyn?
Corbyn Getting Beers in Early Corbyn Getting Beers in Early
Labour Staff Told: No Slogan, No Key Seats List, No Budget Labour Staff Told: No Slogan, No Key Seats List, No Budget
BREAKING: May Calls Snap Election BREAKING: May Calls Snap Election