The Three Most Important Facts About Tory Economics 51

1) From 2010 to 2017 Corporation Tax in the UK reduced drastically from 28% to 19%

The UK now has notably lower corporate tax rates than most other large developed countries

On top of which HMRC has a particularly accommodating attitude to corporate tax avoidance.

2) But the corporations have not put any of the cash from this massive tax cut into investment

3) Rather all of the corporation tax giveaway has gone straight into the pockets of the rich, through massive executive pay increases and shareholder dividend increases.

I am sorry I could not find a more up to date version than 2015 of that chart, but it has got no better, and it illustrates well how since 2010 the corporation tax rate cuts in the UK – the green line – have resulted in a ludicrous explosion of dividends to earnings compared to international norms.

So the Tory corporation cuts have done nothing to help the wider economy at all, but simply lined the personal pockets of the already rich. It has almost no effect in stimulating the wider economy, and to reverse the cuts in corporation tax to pay for public sector investment is both prudent and likely to be effective in boosting economic growth.

Allowed HTML - you can use: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>

51 thoughts on “The Three Most Important Facts About Tory Economics

  • Tony_0pmoc

    Craig – go and have a chat with Professor Bill Mitchell if you haven’t already. He lives in Australia – and when not playing guitar he is also one of the few economists in the world, I have any respect for. He also travels about a lot..As you know the Australians – you probably also know Bill Mitchell. If you don’t you should. He is The Academic Elite on the Subject of Economics. Take John Ward with you too (he definitely needs an education – he’s like Maggie Thatcher in drag – but otherwise a seriously brilliant bloke)

    “Modern Monetary Theory … macroeconomic reality”


    • Percy

      Also good are Michael Hudson, Steve Keen, and Richard Werner.

      I would not count as good Ann Pettifor, since she talks to talk until asked what we should do about monetary reform. At which point the answer is, to paraphrase, same as today (banks should continue to create money out of thin air) but more ethically. Which is lunacy, doomed to fail. She can only be banking shill.

    • J

      Many thanks for that recommendation Tony. Greatly enjoyed reading a few articles by Bill Mitchell and will add his blog to my regular reading. Informative and thought provoking.

  • Kempe

    Maybe I imagined it but when the SNP were proposing to cut corporation tax by 3p below the UK rate it was regarded as a good thing which would attract investment.

    • defo

      Tax rate counts for nixie Kempe, if everything is off shored.
      Competitively cutting corp tax leads to everyone losing (except the corps & their shareholders) in the long run.
      Maybe you did imagine it though, I don’t remember seeing it in any manifesto.
      I can’t be arsed looking, but i’m sure Fred….

  • Malcolm Reavell

    Of course not, the Laffer curve has been proven to be false. The tax breaks given to the producers/ owners of the means of production are not reinvested. Why should they? The reaction is just, “Great, I’m now getting bigger returns from the same costs of production. Why increase output? Nobody is demanding more stuff.” The effective way to stimulate production is known to be demand, not supply, led. Put more money in the hands of the consumers and let increase in demand encourage production. That is, give the tax breaks to the wage earners. It also means that people can afford the resulting increased output, which supply led demand doesn’t.

  • Loony

    Oh dear. It matters little what the rate of Corporation Tax is as large companies do not pay it anyway. In the extreme they simply hold it offshore. Although it is a US example look at Apple they hold $250 billion of cash offshore – this effectively sterilizes the cash, crushes the velocity of money which in turn crushes economic activity.

    Of course they do not put this money into investment as the money is sterilized. They prefer to sterilize the money as there are no investment opportunities in the real economy.. How can there be with zero interest rates?

    They borrow against these cash piles to finance share buybacks which reduces the outstanding shares, thereby increasing earnings per share. Executive compensation is normally calculated on earnings per share and hence a few people make out like bandits.

    Higher earning per share means potentially higher dividends. Without dividends then with cash rates at zero and bonds at zero or negative you destroy all pensions in quick time. Strange to see this blog advocating the destruction of all pensions and consequent penury of all pensioners (except government pensioners) Strange to see this blog advocating for financial apartheid.

    None of this has anything to do with domestic UK politics and everything to do with the global tyranny of Central Bank orthodoxy. You may as well subscribe to David Icke and blame lizards it would be equally as realistic as blaming UK politicians.

    • K Crosby

      What’s the point in investing in production when the resources it needs are diminishing and existing production has been exported to neo-colonies in the US slave empire? The last forty odd years have shown that profits have come from fascism, not making things.

  • Pete

    One thing I remain unclear about is that although CT rate has been lowered since 2010, actual returns have increased. Is there any explanation for this I can use to appease those who have pointed it out to me with their usual condescension!

    • Ross

      There’s a pretty obvious one; the economy is larger and consequently there is more corporate economic activity on which tax is due. This modest economic has been bought with a massive QE scheme, and interest rates having been kept at record lows for nearly a decade.

    • Loony

      Small companies do not have the flexibility of large companies and have to pay Corporation Tax. The lower the rate the more small companies you will have. 100 Companies paying £100 gives you a higher tax take than 10 companies paying £200.

      If you want to destroy small companies and want a lower tax take then raise Corporation tax. The benefits are enormous – a lot of the companies will never be formed and as any fool know you cannot prove a counter factual and you also get to moan about rich companies not paying any tax.

    • Shatnersrug

      The government has expanded the money supply by £435 billion. It hasn’t gone back into the economy so it ends up as profit and then invested in highly inflated land and property.

      People don’t understand what tax is sadly.

      We don’t pay tax into a big pot that the government then spends – when tax is collected the money is literally deleted. Governments either borrow on the money markets or create new money directly – often a combination of both – this is nothing new.

      • defo

        ” this is nothing new.”

        It is to most of the population ‘Bill’, and sadly, even if you told them a hundred times they would still glaze over.

        ps Picard has nothing on you. ‘Make it so’ pfffft

      • Percy

        It’s like a battery.

        The positive terminal is money being created, through debt, whether government or private debt. All money (except hard cash) is debt. Actually, it could be simply created debt free by government spending but debt slavery is the form of neo-feudalism we live under.

        The negative terminal is money being destroyed, either through taxes or by paying off debt. Taxes do serve a useful function, in that they create a demand for the national money. The give imaginary numbers in a computer a perceived value amongst the users. Of course, taxes are also supposed to be used to stimulate desirable economic activity, and vice versa. But as the excellent graphs show, as usual, the rich are just exploiting the money system for their own benefit.

        Money reform is for me, the absolutely key issue of our time. have good proposals.

        • nevermind

          Unless financial institutions and regulators base the creation of values/money on a sustainable basis, without creating assets out of thin air, or create mechanisms that can invent values and packages of values our societal regulations and society will carry on in the rapacious, exploitative ways that are eroding the fabric and equilibriums in our life.
          our fresh water supplies, our runaway soils, deforestation and an insatiable greed mainly by those who already have much are not going to improve our monetary system or the life’s of our children.

    • K Crosby

      Nominal tax receipts depend on enforcement and other things like fraud, theft and false accounting.

  • Ben

    During an interview on Fox & Friends, host Pete Hegseth asked Farage “how the borderless world that London lived in for so long — led by globalists — contributes to the ability for our enemy to infiltrate us and attack us.”

    “A lot of people have abused the word refugee,” Farage complained. “The British government, when they were pushed by people like me a few years ago, said they would use the power to stop people who have fought, for example, in Syria from coming back into our country. Over 400 known jidhadi fighters from Syria have come back into Britain and we’ve only stopped one.”

    “I hope that [British Prime Minister] Teresa May goes a lot further,” he continued, “and says that not one person who has fought in Syria will be let back into our country.”

    According to Farage, a growing number of Britons now supporting putting Muslims in internment camps.

    “This is now the third terrorist incident that has happened in my country in the space of as many months,” he explained. “And the mood that I get now is we want some real action. We don’t just want speeches.”

    “And if there is not action, the calls for internment will grow,” Farage added. “We have 3,000 people on sort of a known terrorist list. And we’re watching their actions. But a further 20,000 people who are persons of interests, namely they’re linked by some way to extremist organizations. Unless we see the public getting tough, you will see public calls for those 3,000 to be arrested.”

    Farage admitted that the move “might alienate decent fair-minded Muslims.”

    Later in the morning, Daily Mail columnist Katie Hopkins also told Fox & Friends that “we do need interment camps.”

    According to The Guardian, the FBI considers Farage as a “person of interest” in the investigation into President Donald Trump 2016 campaign and the Russian effort to influence the U.S. ”

    Sorry to inject a matter outside the Murray bubble.

  • Loony

    Just in case there is any doubt there is no way out.

    Through a variety of mechanisms you have a lot of sterilized cash – sterilized cash crushes economic activity. You also have a lot of cash because you have printed a lot.

    If you try to do anything to un-sterilize the cash and if you are successful then you will unleash a tsunami of cash. This will rapidly result in hyperinflation and the complete destruction of the economy and the impoverishment of all of the citizens in the economy.

    In the Weimar Republic smart Germans got their cash out. This time around there is nowhere to go as the situation is the same everywhere.

    Live like this for as long as possible or die (mostly literally). It is a simple choice. Tony Blair was a liar: There is no third way.

      • Loony

        Ah yes the person so skilled in generality and so unskilled in specifics.

        The person that despite voluminous and non contested evidence refuses to accept that a Jean Michel Basquiat’s painting sold for $110 million.

    • Salford Lad

      Cash can be converted to real wealth in a heartbeat, by investing in bullion. The other alternative, which is not as mobile, is to invest in land or real estate.This is apparent if you care to count the number of high rise construction cranes in the landscapes of our major cities.
      Real estate is a no-brainer investment in the UK, if you have a net inflow of 300k people per year.No need to worry about rent returns , Housing Benefit is guaranteed.
      Another means of looting the State and taxpayer.

    • Hieroglyph

      There is an interesting take on this by Paul Craig Roberts. He argues that two thing are occurring. First, that goods and supplies are pretty much at a stable level. Second, that the supply of money has increased exponentially. According to this thesis, this is the perfect recipe for stagflation, and is essentially what occurred in pre-War Germany. I apologize if I have misrepresent this argument, but this seemed to be his contention. He goes on to argue that the reason we haven’t seen stagflation is because the increased money supply isn’t going to the ‘masses’ – it’s going into housing assets. Thus we see ridiculous price increased, way beyond what is reasonable. The housing boom is, essentially, masking stagflation. One may assume that this can only ever be temporary …

      I am quoting this because it’s interesting, economics isn’t something I ever studied. I will say this though, many of the old Reagan-ites are proving articulate and intelligent opponents of neoliberal economics, and neocon wars, which I personally am finding very interesting. They are right wing, pro-capitalists, who I’d certainly not vote for. But they are at least showing some signs of intelligence, and no little bravery, in opposing the neoliberal hegemony, which is to be applauded – the same way I applaud Corbyn for doing much the same thing. One may reasonably disagree over policy – but these neocons are utter lunatics, who are leading the US to ruin. Glad it isn’t only the left that sees it.

      • Michael McNulty

        Adam Smith said, “The natural tendency of the markets is to always equate the price of a commodity with its value.” That is, you can’t buck the market [forever]. All that QE money must surely burst through into the main economy in a crippling hyperinflation, and many of those multi-million dollar mansions will become too expensive to run and will be deserted to become ruins.

        As well as inflated property prices real inflation hides itself elsewhere such as the over-priced stock market; gold; jewelry; art (some modern junk sells for millions and the good stuff for scores of millions); executive toys like marque cars, helicopters, jets and yachts; and executive pay and bonuses.

        Gold is a silly price but that reflects the weakness of the dollar and its price is rigged much lower than it should be. In a free market it would cost probably $6,000–$10,000 per ounce. That’s how worthless the dollar is now, only backed by war.

    • Percy

      I have no idea what ‘sterilised money’ is. Would you care to define?

      There is a way out of today’s madness. It is called monetary reform.

      This story of hyperinflation is a load of rubbish. In fact, we already have massive price inflation because of today’s system, where banks can create money as debt by typing into the computer. It is called house price bubbles, or stock market bubbles. You know the cause of the GFC, etc.

      The fundamental issue is that the money creation function has been privatised, and is being abused by the banks to invest in pre existing assets and speculation. Money should be created by government spending (debt free), on useful social functions.

      Banks can still serve as a useful place for you to store your money, transfer your money etc. Loans should be made from existing deposits (as we are told they are), which would prevent bubbles. Essentially separate the functions of money creation and money lending.

      • Ba'al Zevul

        Loans should be made from existing deposits (as we are told they are),

        Told by whom? Offhand, and without Googling, aren’t the banks currently bitching about being told to keep their loans to thirty times their deposits? (while agitating for negative interest on those deposits). You may be allowed to think the banks limit their loans to what they actually have, but I’ve never seen anyone claiming this actually to be the case.

      • PhilM

        Making a stab at this…I think sterilisation means in this instance ‘making it sterile’ because ‘Loony’ makes the point that Apple’s cashpile does nothing but just sits there. However I’m not sure that he can at one point claim it crushes economic activity but then state in the same breath that there are no investment opportunities. The main problem is monopoly if you believe in free markets (which I do not).
        However the whole economic discussion is ‘smoke and mirrors’ because we don’t really know where we are ecologically. Are we slowly building up trouble? Are we near a climate tipping point? Will technology solve our energy conundrum?
        The elites are doubling down on their economic model despite claims that neoliberalism is over because the ‘state’ is back…it was never absent that was the point about neoliberalism…the state as enabler of looting.
        As for the ideas of MMT, I’m pretty certain Bill Mitchell emphasises that MMT is what happens now but it’s obfuscated by the economics profession and the commentariat, which means that the ideas cannot be properly implemented for the benefit of everyone, rather people’s income streams are captured by finance, insurance, and real estate (Michael Hudson’s FIRE sector). In this country the private sector try to capture public money through NHS and education outsourcing. It is a holy f***ing mess and there’s no way out. On that I agree with Mr Loony above.
        I discovered this blog only recently and really enjoy your output Craig…don’t stop…but lose those pounds (memo to self too)!

    • Ba'al Zevul

      You might say our gun laws are vindicated by the fact the attackers had to use knives – limiting the death toll perhaps.

  • DtP

    Point of Order Mr Murray

    Your 2 posts on attacking dads weirded me out.

    Yorkshire beat Lancashire yesterday by 10 wickets.

    The politics to get to an independent foreign office is wonderful. How hard, genuinely, is it to write bilateral agreements? I’m sure not all’s lost on you but if your seniority meant anything, it meant stability. The EU appears to be on a land grab – good luck.

  • giyane

    All construction workers were forced to form limited companies by Gordon Brown who refused to allow us our legitimate expenses when he was in charge. If I have a job at £17 p.h. I receive less than two-thirds after tax and national insurance, £400 p/w. If I have a limited company I set all my expenses against the income of the company and I receive £650 p/w after the CIS tax @ 20% has been re-claimed. This is at infant level Limited company, so big corporation level is presumable equally no-brainer less taxable. New fleets of cars, big dividends, investment, wonderful.

    It’s totally ridiculous that a first world country is running on bankrupt. I would settle on paying tax if the government would settle on stopping colonial illegal wars. We are a fair country and fair people, but unfortunately the leaders do not set a good example, so we refuse to play by their stupid rules. The Tories have broken the social contract between rich and poor, and the result places more and more debt on the shoulders of our children.

    Jeremy Corbyn has to close all the loopholes for corporations to avoid paying tax and then , and only then, will we be what May calls a united society. All she wants is for her friends to evade tax while we slaves pay.

    • Zed

      Actually giyane, we are also fed this story about how Ariana Grande returned to America, vowing to return to Manchester, and two weeks later we get to see her, along with others, such as Black Eyed Peas and Coldplay, broadcast live on BBC TV, and the entire concert available of YouTube within seconds of being broadcast; hey no problem with music rights today, eh? For example, fancy “Fix You” by Coldplay? Here it is, no royalties need paying at all: and the rest of the gig on You Tube as well.

      No propaganda there eh?

    • K Crosby

      ‘Ow dare you! Britain has no class (or perhaps lots of it, all low, like it should be).

  • fwl

    Consider also:

    1) shareholders pay taxes on the dividends ie a second round of taxation;

    2) many companies pay dividends out of borrowings not profits;

    3) central banks support illusory equity valuations through cheap money (and possibly also through direct intervention and purchases in markets). This is a sort of rich man’s socialism (though it also temporarily benefits recipients of private pensions); and

    4) the capital is all at risk of substantive market devaluation because of 2 and 3, but when?

    What do people think of Labour’s plans for Land Value Tax? The assumption that all land is used and to be taxed on the basis that it is being fully exploited is alarming as is the possibility of a government selling 99 year leases of unregistered land.

  • fwl

    Craig, where does UK stand in relation to Saudi & Qatar in the context of their split?

    What public statements have Saudi & Qatar made re the Borough market attacks?

    From a Qatari point of view (of which I know nothing) attacks are uncomfortably close to their landmark investment?

    In other words what the feck is going on?

    • fwl

      Bloomberg free site providing detailed coverage.

      Sorry for straying off topic. On topic(ish) are there any fans of Douglas’ social credit ideas of 30’s and if so could you explain them in simple terms?

  • Sharp Ears

    I am watching Craig on RT with Prof Mike Berry and Lyndsey German. Fake News is the subject.

  • frankywiggles

    Some will always pop up trying to excuse corporations not paying their fair share of tax. For as JK Galbraith observed: “The modern conservative is engaged in one of man’s oldest exercises in moral philosophy; that is, the search for a superior moral justification for selfishness..”

  • Derek Hamilton

    Add to that the doubling of national debt since taking over from Labour. A debt of just over £800b has risen to £1.8b under the Tories since 2010.

  • John A

    I read somewhere, cant remember the exact source, but I think it was an accounting professor from a university in Essex, so have no means of verifying it, but he claimed that Britain has more accountants than the rest of the EU put together. Sounds plausible to me, from my experience of living and working in more than one European country. Accountants have far more power and prestige in Britain than the EU, where they are employed as bookkeepers rather than CEOs looking for ‘creative’ ways to cut tax bills and who, in the words of Oscar Wilde, know the price of everything and the value of nothing.

  • Geoffrey

    “Growth” at the expense of tax revenue has been pursued recklessly by both Tory and Labour. As a result Debt increases. Gordon Brown doubled it ,and Osborne and successors have almost doubled it again.
    We can’t go on like this !

  • Michael McNulty

    Plenty of wealthy people like the awful Digby Jones like to complain about the standards of education in this country without accepting it’s their tax-dodging which is the main reason we can’t afford proper education. Honest dealers pay their taxes, crooks don’t.

  • Rhys Davies

    Facts… If that phrase does not make you suspicious these days, none will.

    Graph 1 Y axis manipulation – graphic above, the number 19 is very short compared to 30, isn’t 19 less than half of 30? This graph does not show it.

    Next it turns out we are competitive within the G8. But we also need to compete with Ireland, Netherlands, Switzerland, you know, all the countries with lower tax than UK that are not mentioned here.

    A cherry pick? Demonstrated maybe by this rather different ‘global’ data: The title says the data goes back to 1998, why start at 2010, hiding something to make a point? If you have the data for the whole time, it would be interesting to see.

  • Bill Rollinson

    One would have thought the EU would have employed a ‘carpet rate’ across the board, Instead of all the ‘bribery’?
    I would set Corporation Tax at 30% across the board and maintain a strict reign on collecting taxes. If these Companies want to leave, let them, the gap can be filled with Public Sector jobs, they have been rigging the game for long enough, with EU red tape on SME’s adding to their overheads, stifling competition!

Comments are closed.