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It’s official: smaller state and welfare reform leads to jobs record

16 April 2014

16 April 2014

The British jobs miracle continues, with unemployment now down below 7 per cent and employment at an all-time high of 30.4 million. This is the level that Bank of England Governor Mark Carney said he’d consider raising interest rates – a milestone chosen because, only recently, it seemed as if we’d take years to reach this point. Now we’re past it.

It’s a reminder: economics is a very blunt art, and economists are often no better than the Met Office. They can be surprised when the economy goes right, as well as it goes wrong. It was the failed, Keynesian, stimlus-worshiping economic model that led Ed Balls to declare accuse George Osborne of entertaining a ‘fantasy’ when the Chancellor said total jobs would rise even after he’d cut 300,000 public sector jobs.

As it turns out, Osborne was underestimating. The below graph shows how Osborne kept getting his forecasts wrong on jobs – each Budget, he underestimated just how well the British economy was doing. Jobs upgrades

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And the graph at the very top shows a basic conservative truth: smaller state means more jobs, more prosperity, more social cohesiveness, greater fairness and a stronger country. But this doesn’t happen automatically. The UK jobs miracle is happening mainly due to radical welfare reform – the type Labour ducked in office. Iain Duncan Smith decided to assess the two million incapacity claimants, to see what type of work they were capable of going. The number in IB (or equivalent) now stands at a 20-year low.

When the Bank of England was trying to work out why it underestimated the strength of the jobs recovery, the Monetary Policy Committee identified welfare reform. The minutes from its January meeting show:

‘A tightening in the eligibility requirements for some state benefits might also have led to an intensification of job search.’

It’s the missing link. Under Labour, record numbers of people in work were celebrate as an end in itself – but most of the increase was accounted for by immigration. So more jobs did not mean less poverty – not if a quarter of Glasgow and Liverpool were still languishing on the dole at the peak of a boom. This time, it’s different. The welfare reforms are restoring the see saw link between jobs and dole queues. The below is, perhaps, the most graph in which the coalition government should take the most pride:


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Show comments
  • CadmanArcher

    I don’t understand this job graph in the uk. I only understand red color represent public sector job and black color represent private sector represent and yellow represent total average of job.

  • Monkey_Bach

    If there are so many people in paid work why is direct tax revenue from income tax and similar tanking? If the economy is doing so well work-wise why aren’t the coffers of the treasury overflowing? I’ll leave readers to work out the answers to those posers.

  • Chris Hobson

    Europe has not listened though.

  • Retired Nurse

    I’d point out that Big Issue vendors have to register as ‘Self Employed’ with HMRC in order to claim Working Tax Credits and Housing Benefit.
    They don’t show up as ‘unemployed’.
    I’ve only recently become aware that Germany’s economic miracle uses the same kind of dodgy statistics too…their ‘Hartz IV’ scheme uses forced ‘Workfare-type’ employment, and over 1 million people are on contrived benefit ‘sanktions’ as we speak! https://www.youtube.com/watch?v=0lSxYVrD51o

  • Doug Key

    There is an assumption that less jobs in the public sector means that the public sector and slimmed down and ex-public sector workers are getting new jobs in the private sector.

    What has happened is that many of those jobs have moved from the public sector and been contracted out to the private sector. The jobs have not disappeared they have just shifted from public to private. More often than not it is the same staff and where the private sector have made efficiency cuts they have not produced efficiencies and staff who have been made redundant have been re-employed to do their own jobs as contractors.

    The upshot is that any of figures quoted do not give a proper picture of what is happening in the jobs market. For example if you transfer all of the frontline staff into the private sector and you keep the higher paid managers on as clients then the average wage of the public sector goes up and the private sector goes down. The cost to the public sector remains the same and the public sector needs to cut services in order to generate higher margins and profits for the shareholders. This results in a lack of proper service development and the service degrades until whatever government is in decides to take it back in house.

    There is little evidence to suggest that smaller public services or welfare reform are working. They might be but we have no real way of testing the assumptions while politicians and the statistically illiterate keep just quoting numbers out of context.

  • Raw England

    Why do you think its a good thing that 10’s of millions of suffering English people are being FORCED, viciously, into a lifetime of low-paid, undignified work as immigrants inexorably takeover/destroy their nation?

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  • Rillian

    Unemployment is only down because all the jobs have been shared out and subsidised with Tax Credits and Family Tax credits.

    Its all a sham. I am an employer.

  • AndrewMelville

    Cut benefits more and make them only temporary. Watch Britain thrive. Repeat as necessary.

  • Smithersjones2013

    Oh dear that Nelson thinks that reducing the number of people employed directly by the public sector equates to a ‘smaller state’ demonstrates what a bunch of dimwitted liberal elitists are now employed by the Spectator.

    Unless the reduction of staff is as a result of the government giving up activities then the state is the same size. The smaller state is about Government giving up power not the government reducing its payroll.

    PS And much of that first graph could be explained by government simply outsourcing jobs from direct government employees to the private sector contracts which is all very well but chances are it will save the taxpayer little in the short term and nothing if not cost more in the medium to long term (once the companies control all the knowledge of undertaking the function). One only has to look at the disaster of government IT record to see this.

    Some ‘miracle’. Just more dodgy accounting…….

  • ohforheavensake

    Fraser- got to admit there’s something rather heroic in your continued attempts to write on economics. You don’t really understand the subject, but yet you persist.

    Here’s a long, and very detailed post, from an actual, real economist, on the reasons that you’re wrong. Feel free to contact me if there’s anything you don’t understand-

    http://niesr.ac.uk/blog/fiscal-policy-plan-and-recovery-explaining-economics

  • dado_trunking

    800,000 new = old, public = private education sector jobs created, blah di blah di blah. Does anyone still care about these nonsensical stats?
    .
    Honestly?

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  • Tom Tom

    This is BS. The reclassifications of CFE College payroll as Private Sector worked to redefine. Then we should consider staff in Academies and Free Schools and how they are categorised. This fiddling numbers is pathetic and real schoolboy stuff but it amuses the peasants. No doubt they will boast about how Britain uses more Units of Capital per unit of output than other OECD countries

    • the viceroy’s gin

      Do us a favor and break out these numbers. I’d be well interested.

  • HookesLaw

    ‘each budget he,’ ….was wisely cautious.

  • flaxdoctor

    Nice one Fraser! As partner for the use of Wales as a measure of area, now we’ve got the Met Office as THE yardstick for failure. Inspired!

  • athelwulf

    What part does the black economy play? Presumably it is still active in a relatively high-tax regime. Is it measureable in any way?

    • xyz xyz

      People who were part of the black economy and claiming JSA, child tax credit and housing benefit are now claiming to have a job so they do not have to move out of London now that the benefits cap has come in. If you work 16 hours a week you can still claim more than the benefits cap and will not have to move. See BBC Panorama 7/4/2014 on iplayer for full details.

      • HookesLaw

        All 670,000 of them?

  • DonQuixote

    Leaving aside the obvious fact that correlation doesn’t imply causation and the question of whether Osborne’s policies (under which debt is still growing exponentially) can accurately be described as “austerity”, will the author accept that simply totaling the number of jobs with no regard to whether they are part-time/full-time, whether they are on zero-hours, whether they provide scope for career advancement (etc.) is a stupendously blunt metric of the success of the coalition government?

    Take a look at the Help to Buy scheme and tell me this isn’t a stimulus-induced, debt-fueled recovery! The growth in jobs is due to the unprecedented flexibility of the labour market because of globalisation/immigration.

    • HookesLaw

      How is the debt growing ‘exponentially’ when the deficit is falling?

      • Des Demona

        Because there is a difference between Government debt and the deficit.

        • HookesLaw

          Debt is a product of the deficit – if the deficit is falling which it is then the debt cannot be growing ‘exponentially’.

          • Des Demona

            Government debt is currently around £1.2 trillion – up from around £690 Billion when the coalition took over. Those are hard and fast figures – not the rather abstract ”deficit’ – which these figures dwarf in any event..

            • Inverted Meniscus

              Yes they are hard figures but to suggest that the structural deficit is merely ‘abstract’ and thus inconsequential by comparison is both misleading and inaccurate. The vast structural deficit bequeathed by Gordon Brown has had a huge impact on UK finances requiring the (thus far wholly inadequate) curtailment of public expenditure and increased taxes. This deficit is estimated to have reached £62 billion plus during 2006 and thus cannot be blamed wholly on the global financial contraction which followed. Also, the economy had contracted by 7.4% by the time the Coalition took office and in the absence of material spending cuts, the consequent decline in tax revenues, largely irreversible public spending commitments and huge servicing costs for existing debt there is little wonder that total debt has risen. The rise in total debt can be laid at the Coalitions door to the extent that insufficient vigour has been applied to cutting public expenditure. That said, the economy is now growing faster than any comparable western economy, employment is rising and the structural deficit is reducing. It is a far from perfect recovery but the alternative and indeed the suggestion that Labour would have borrowed less, beggars belief and is not worth serious debate.

              • Des Demona

                Well if you don’t think it is worth serious debate, and believe that ”austerity” had nothing to do with stifling the economy (despite the OBR saying it did) leading to increased borrowing, then who is anyone to argue?

                • Inverted Meniscus

                  Useful word ‘austerity’, it implies unnecessary hardship and cruelty for the ‘Left’ whilst in reality it is simply ‘living within our means’. The suggestion that we could somehow borrow and spend our way out of recession is ludicrous. In particular, the old saw about ‘spending money on infrastructure’ as if that would instantly transform the economy and precipitate unlimited growth. The ‘left’ never has and never will understand the basic premise of investment which is that it is only worthwhile when the financial benefit accruing from an investment must exceed the cost of making said investment in the first place. By 2010, a £160 billion structural deficit and a 7.4 % contraction of the economy leaving us the worst placed of any major western economy after the global financial crisis leaves little margin for doubt on that score. As I said, the Coalition has little to be proud of but its legacy will be infinitely better than had we entrusted the economy once again to the spendthrift lunatics and economic fantasists of the Labour Party.

                • Des Demona

                  Austerity was coined by Osborne I believe?
                  If you think the idea that you can borrow and spend your way out of a recession is ludicrous then there would be a lot of Americans around in the thirties who would disagree with you.
                  Have you any evidence that investment in infrastructure doesn’t give a greater financial benefit? Or is all the billions were supposed to add to the economy with HS2 a pack of lies?
                  Your argument appears to be that no matter how rubbish the coalition is (and on that we are in full agreement, their performance has been dismal) Labour would have been worse. Well, that’s an opinion only but you’re obviously entitled to it.

                • Inverted Meniscus

                  The reference to the USA in the 1930s is highly misleading because despite huge spending by Roosevelt unemployment remained high and the economy stagnant. It was the British which followed a cost cutting policy which recovered far more quickly. Indeed, it was the advent of the Second World War that produced full employment and prosperity in the USA. Yes I do know how to analyse an investment and I suspect HS2, like the channel tunnel before it, will proceed for strategic and political reasons rather than sound economic principles. Let me guess, you work in the public sector and have know knowledge or experience of wealth creation and running a business

                • Tom Tom

                  FDR spend the first 6 months DEFLATING the US economy. Adolf Hitler revived the US economy just as he revived Germany

                • Des Demona

                  Actually I work in the ”red in tooth and claw” capitalist sector.; I’ve run businesses, created businesses and know how to spell ”no”
                  Next.

                • Inverted Meniscus

                  Whereas on a previous occasion you have claimed to be a teacher. Whatever next?

                • Des Demona

                  Huh???? Please point out where I have ever claimed to be a teacher? Should be easy as I guess all my posts are available on disqus.
                  Or you can admit to just making stuff up?

              • Tom Tom

                DEFICIT is simply PSBR ……..but FUNDING is what matters

          • Smithersjones2013

            The government are still borrowing over £100 billion per annum. Now if they borrow £99 billion next year then the deficit is falling. The debt is still growing faster than at anytime in peacetime prior to the economic crisis

            • Tom Tom

              NO !!! Borrowing is FUNDING not Deficit

          • Tom Tom

            WRONG! You must look at FUNDING not SPENDING…….you have no comprehension of Capital Account

    • Reconstruct

      You’re writing from London obviously. Very clearly London has a serious and systemic property problem, but please don’t think that extends to the rest of the country. With few exceptions, that problem doesn’t extend much outside the M25. Among the bigger risks to this economy is precisely that Bank of England chooses to address London’s property problem by raising interest rates for the rest of the economy. Rather, that particular problem is best addressed by simply sharply raising taxes on London property transactions.

  • E Hart

    You really don’t understand anything, do you? Low wage jobs will do little or nothing for our economy. The process is straightforward. The principal employs a subcontractor who employs a peon. The result is a low value, low mobility economy and low value-added enterprise. One, saves money; two, makes money; three, subsists. The only way out of your economic cul-de-sac – given that any wage inflation will lead two to make less money and pass on the cost to one – is cheap credit. Once that tap goes on, three is up to its eyeballs in serving debt on a salary that leaves little margin for anything else. You are advocating economic inertia as any hope of building aggregate demand is stymied by the modus operandi and “theology” that underpins it. The lag in productivity and under-utilised capacity will be a constant drag on the economy. In short – it’s precisely the economic model that has served us so ill over the last 30 years. Without realising it you are supporting and advocating an idiotic poverty loop. As this rate, you can expect domestic service with tied accommodation to be one of the biggest growth areas in the economy. I’m sure you’d wholeheartedly support that without understanding where it leads. When you factor in lower tax receipts from corporations and individuals (many of whom don’t earn enough or require tax credits), the picture is pure Dorian Gray.

    • Reconstruct

      Say’s Law – look it up.

      • E Hart

        You look it up! While you’re at it, look up Keynes’ comprehensive debunking of it as well.

        • Reconstruct

          ‘Comprehensive’? You mean his confused and really rather silly theory of capital?

  • http://www.twitter.com/jmedwards Jamie Edwards

    I’d like to see some graphs showing wage growth, productivity, hours worked rather than “people who have a job”, which I think is a pretty sloppy indicator and therefore (on its face, at least) makes it far fetched to proclaim “smaller state means more jobs, more prosperity, more social cohesiveness, greater fairness and a stronger country”.

    • Count Dooku

      I don’t have a chart but I can give you a quick summary. Productivity is still down from the 2008 peak which is what you would expect as GDP is yet to fully recover while employment is up. Hours in aggregate and per worker are up massively. Both full time and part time employment are up.

      Wage growth has been subdued and even falling in real terms. Effectively workers have priced themselves back into work. This makes sense from an economic point of view and ties into the subdued UK capex rate. I suspect that as unemployment falls further and firms compete for workers, we will see higher wage growth. Higher wages will mean employers will need capex to increase productivity and investment will rise to match while the employment rate flattens out.

      In the mid to long term we will return back to trend productivity growth.

      • http://www.twitter.com/jmedwards Jamie Edwards

        > Hours in aggregate and per worker are up massively. Both full time and part time employment are up.

        That’s good news. What’s your source for the data?

        • Count Dooku

          ONS. It’s good news on the surface but not fully as people are working more to produce the same stuff.
          Wage growth wont recover until we become more productive.

          • Reconstruct

            I think there’s also evidence of companies substituting labour for capital, which, of course, in the short term shows up as poor labour productivity. Repairing the capital cycle depends on a) fully restored confidence and b) a non-moribund banking system. The unwillingness to wind up the zombie banks is a genuine problem.

            • Count Dooku

              Yes, that was the point I was making in the second paragraph. Capital is being sacrified for cheaper labour (on the margin of course).

              I came at it from a different angle though (micro) as I see it as the capital/labour substitution going in the reverse once firms start to compete for labour and wages rise.

              You are looking at it from a macro/confidence point of view. Both are most likely correct but for me, micro >> macro (too many unknowns). :-)

              • Reconstruct

                Agree with you on micro >> macro. Where possible, macro should start with a Dupont-style analysis of the whole economy. I do it, which is why I figure the substitution is going on.

                • Tom Tom

                  So what is RONA in Nursing Homes, Hairdressing, Public Transport, Insurance……? You are way too theoretical

          • HookesLaw

            On the other hand wage restraint has preserved jobs and saved companies having to recruit on the upturn. Companies have been hoarding large sums which are available for investment.

  • Count Dooku

    The British labour market has shown amazing flexibility in the downturn and long may this continue. This is a triumph of simplifying employment regulations that make us the most flexible labour market in Europe now.

    The cut in Corp Tax is also helping massively. WPP, Hitachi and now Starbucks are moving their European HQs to the UK as we are tax competitive. Inflation is down, GDP is growing, unemployment is down and finally real wages are growing.

    More to be done on govt spending and housing but this is a great job so far by Osborne on the economy.

    • James Allen

      But with an astronomically high public deficit and debt. Good jobs figures don’t hide the fact that we’re seeing another debt-fueled consumption boom that is storing up yet more trouble for the future.

      • Count Dooku

        Household debt as a % of GDP is falling. Homeowners are still injecting record levels of equity into their homes by taking advantage of low interest rates. The current recovery is not debt fuelled at this moment. You would expect consumer spending to rise with unemployment falling and a much bigger population.

        Don’t worry about the private sector and households, they will look after themselves. I completelly agree with you though that Osborne should be cutting spending much faster. And looking to abolish the Town & Country Planning Act.

        • HookesLaw

          But we have seen the propaganda where Osborne’s cuts are as they are. Imagine the bad politics of steeper cuts. We are already seeing scare stories born of the NHS constraints.
          Having said that I am impressed with 300,000 and rising, public sector job losses.
          Sadly right wing loons for their own self serving reasons are not willing to credit Osborne.

          • Count Dooku

            There’s a reason why doctors advise you to remove plasters quickly. Numerous polls have shown that the public think Osborne is cutting much faster than he is.

            If you will get stick for doing something you aren’t actually doing, you might as well press on with it. Especially when it’s the right thing to do.

            • the viceroy’s gin

              This will be the ultimate reason the Cameroons are dumped soon. They lied from the get go. There was no austerity, not even to Darling levels, other than the poisonous tax increases Osborne brought on, yet they chose to run one of their typical marketeering campaigns fantasizing that there was. Now they’re stuck with the political costs and none of the economic benefits, due to the faux “austerity”.

              • southerner

                Exactly. Ducked all the major decisions and we will pay the price for it as a result for many years to come.

              • Makroon

                Cutting ‘twice as fast’, in the teeth of global economic recession and near default in the Eurozone would have pushed us into a real depression – not the Labour faux recession, which they swear is ongoing ….. as any fule kno …. with the possible exceptions of you and Fraser Nelson.

                Still, a nice juicy depression might have destroyed the UK, and ushered in the demagogue, which I guess you would have enjoyed.

                • the viceroy’s gin

                  …you’re just making excuses for the lying marketeering campaign your Camerluvvie heroes put out. Goebbels would be proud of them, and your excuse making for them, lad.

                  You see, if what you have to say is true, then that’s exactly what your Camerloon pals should have said, and not the “austerity” lies you’re trying to explain away now.

                  And the resulting marketeering campaign, as nicely detailed in your second paragraph and now being spewed forth by the Camerluvvie lemmings: “It could have been worse!”

                  This is why your boy is going down, lad. He’s a clueless, unprincipled, lying, careerist, political hack.

          • Makroon

            Have another look at Mr Nelson’s chart – it shows that public sector employment has fallen by 600K since the election.
            After BrownBallsDarling raised public sector employment by 300K between 2008 and the election, in a futile attempt to stoke their electoral support.

      • Reconstruct

        I suppose if you keep repeating this often enough to yourself, you’ll end up being able to ignore the publicly-available data. More fool you.

        First the trade deficit: the latest data (up to Feb) shows the trade deficit was actually down 7.4% yoy. More, in proportionate terms, it amounts to a piddling 3.8% of exports. In international terms, this is utterly negligible, almost a rounding error, and compares to an average of 8% so far this century. So much for the trade deficit.

        Now let’s look at whether the growth is debt-fuelled. Well, not by the private sector it isn’t: in fact, bank loans to the private sector fell by 1.52% yoy in Feb (latest Bank of England data), whilst deposits rose 2.1%. The private sector now has a net deposit with the banking system of £140bn, which is up £75bn on the year.

        It gets extremely tedious correcting assertions which are plainly and obviously false, when the same data is available to everyone. Worse, repeating these falsehoods loudly enough and often enough, and fools elsewhere will begin to believe them. And among them are likely to be idiot policymakers.

        • HookesLaw

          ‘More fool you.’ — correct, but the only way these people can join the dots is to live in a fantasy world

          ‘It gets extremely tedious correcting assertions which are plainly and obviously false,’ — you said it in spades but the loony right wing nutjobs are no better than socialist thickos.

          Oh and congratulations on being polite – I cannot manage it.

          • telemachus

            Hooky
            If you go down the middle of the road you get hit by traffic from both directions
            *
            I keep saying to another aimless fool round here
            Nail your colours to the mast

        • Makroon

          Excellent post. However, the strident Kippers on here are not fools, they just don’t understand basic economics, and are led astray by their demagogic “leader”.

          • James Allen

            I’m afraid you’re the one who doesn’t understand basic economics if you can’t see with your own eyes what is going on. Your mate “Reconstruct” points out that bank loans to the private sector are down… that’s not what we’re talking about. That’s generally a bad sign for an economy… you want companies to be borrowing from banks, it’s a sign of activity. It’s the personal debt – credit cards, mortgages, unsecured loans etc. – that pay for all the consumer goods on the high street that is driving this recovery – and that’s not a sign of healthy economic growth. With ridiculously low interest rates (negative real rates) we’re getting misallocation of capital on an unimaginable scale, with zombie corporations, millions employed in unproductive public sector jobs, zero-hours and other flexible contracts making up much of the record employment figures, rise in minimum wage-paying jobs, consistently higher inflation than wage growth (if you use the right measure, RPI, instead of CPI – assuming you believe the dodgy statistics the Govt uses). You headless chickens following Dave are the real ignoramuses…..

        • James Allen

          What is wrong with you? We’re talking about record levels of personal debt and record levels of public debt, with an economy based on consumption not production (hence no export surplus). You’re the one living in cloud cuckoo land…

          • Reconstruct

            Data dude, show me the data.

      • Tom Tom

        How does a sinking pound reduce inflation ? The Euro is strengthening driving inflation into the floor

        • James Allen

          Yes, I got it the wrong way round. Happens a lot these days….

      • HookesLaw

        where is the economy debt fuelled when people have been using lower interest rates to pay off debts?

        • James Allen

          They only repay debts when the interest rate rises and they’re forced to divert cash from consumption to avert bankruptcy. When interest rates rise we’ll see how sustainable this recovery is…

      • HookesLaw

        A strong pound would be deflationary as it would make imports cheaper.

        • James Allen

          Quite right, I’m not entirely sure how I got that the wrong way round….

    • HookesLaw

      And the kippers want to throw the baby out with the bathwater. Its good to see Farage doing his bit to keep the electric companies in profit though.

      • the viceroy’s gin

        …mark your time, lad. These Speccie lickspittles are joyfully plastering up love notes today, but in 6-8 months time there will begin a full discussion of Camerloonianism. Tell your mate Dave he best strap it up.

        • the viceroy’s gin

          Oh, and he won’t be able to run away and hide, as he did with the EUSSR arguments recently.

          • HookesLaw

            So you have nothing to say about good economic performance.
            Stick to the burning crosses.

            • the viceroy’s gin

              Why discuss the Speccie kids’ witterings, lad? They love Call Me Dave just like you.

              All in good time, lad. All in good time.

            • dmitri the impostor

              Haha, Hooky. How’s life in the hollowed-out volcano? Cat been sick on the carpet? You Tory boys face incineration next month because the people have had enough of all Dave’s sh1te.

            • Smithersjones2013

              Good economic performance? Inflation being driven down by smaller and smaller rises in earnings? Sounds to me like stagflation is setting in if you ask me.

              Under such circumstances it will take decades for people to be as wealthy as they were in 2007. Why do think Nelson has limited his article to this and not the ‘seismic’ change in the economy. Its still a smoke and mirrors recovery.

      • Smithersjones2013

        Thank god then that Dave’s father in law gets all those taxpayer funded subsidies for the windfarms on his land. We wouldn’t want the energy companies to run out of energy now would we…….?

    • Tom Tom

      Crap. MNCs may have an HQ in London but they run their taxes through the Netherlands or Jersey and do not land them in the UK

      • the viceroy’s gin

        …that process is becoming more and more widespread now. The multinationals have noticed that the people and governments don’t care, and will go along with a bit of creative accounting and then some. Well, the people probably care, but the governments are paid to look the other way it seems.

        • Tom Tom

          Delaware is a huge onshore tax haven as is Jersey

      • Count Dooku

        Starbucks are moving their tax domicile to the UK. Same with WPP. Read the statements.

        • HookesLaw

          You are asking for a lot there.

        • the viceroy’s gin

          Caterpillar has taken 85% of the profits from their worldwide parts operation and moved them to Switzerland. This process is accelerating everywhere.

          • Des Demona

            The head office of Boots is a letterbox in Switzerland. Many others too.

          • Count Dooku

            Caterpiller are right to legally dodge the ridiculous 40% US corporate tax rates.

            Why should shareholders that already pay tax on dividends and cap gains be further robbed by the federal govt? Businesses don’t pay tax, only people do.

            TVG I’d have thought you would be all for starving the beast and legal tax dodging. It’s not the govt’s money afterall.

            • the viceroy’s gin

              Caterpillar’s parts operation is located in Illinois. The people and facilities are located in Illinois. Those corporate activities took place in Illinois.

              Now, when Caterpillar moves those profits to Switzerland, without moving any significant operations or plant or equipment there, other than a computer or 2 and a secretary, then it is illegitimate. You surely agree with that simple principle. Whether it’s illegal or not, good luck pressing that point, as it’s a misty vapor. But I’m talking about value and common sense. This doesn’t pass the smell teat.

              Now, relocating operations is one thing. Upping sticks and going to Indonesia is something we all sadly stare at, and have for decades and decades. It’s regrettable, however necessary. This Caterpillar maneuver isn’t that, and you should breathe deep and understand this. It’s nothing close to that. It’s illegitimate for the reason that money isn’t attached to business operation.

              If this type of “dodge” is what you favor, then expect revolution. It will come eventually. This is class warfare and tribal warfare seeding at its finest. I pay and this shyster with the white shoe accounting firm slides it all off to the Caymans? I pay in full and every scrap of my income and every shred of my electronic data is visible to every government on planet earth, but meanwhile somebody else’s buddy simply skims off his domestic cream and tops off his Swiss post office box firm?

              You’re going down the wrong road here. Kill off 100% of corporate taxes? That’s much better than this dodgy business. But “dodging” is a non-starter. I don’t believe Caterpillar followed the law, by the way. I don’t believe the computer and secretary shuffle is going to fly. That 85% skim is clearly illegitimate and will be likely shown illegal. If they can do it then I want in. Don’t you?

              Dump corporate taxes completely and I’m with you all the way.

              • Tom Tom

                Probably a DISC

              • Count Dooku

                Yes corp tax should be scrapped. Businesses don’t pay tax, only shareholders, employees and customers. The whole system as is currently is a farce.

                I will settle for companies legally dodging taxes to starve the govt beast though. Rather that attacking managers for doing their fiduciary duty to minimise costs, you should attack governments that drive firms away with ridiculous tax policies.

                We agree on the principle but I’m happy to starve the state of further revenue.

                • the viceroy’s gin

                  This is a critical point though. Have they been “legally dodging taxes”? They have no fiduciary duty to break the law, remember.

                  I don’t want to wait for the state to wither away. That didn’t work for the last guys who tried it and I don’t think Hayek’s ways will bring that on either, even if he’s more on point. We have to work with the world the way it is and not as we’d have it, and that means we work with an imperfect beast, and work in good faith. As I say, we all understood when the factory was shuttered. It drove the message home and facilitated necessary policy change. It was harsh but it came in good faith. This new accounting scam is coming out of the shadows, and is not of good faith. It’s broken faith. It is a manipulation of faith.

                  Don’t forget the little platoons, for it is they whose faith you and I depend upon. We are lost once that goes.

            • Tom Tom

              Cat – (spelling is “ar” btw) probably utilises a DISC

    • sarah_13

      If Fraser Nelson reads these comments I would just like to say how disappointed I am, as a spectator subscriber, that George Galloway has been invited by the Spectator to debate a scottish yes vote in June. (Apologies I’m sure there is an official complaints procedure I’m just not sure what it is!)

      This is a man who walked out of a debate with an israeli recently. Until he is prepared to debate anyone I cannot understand how you think it acceptable to invite him?! The spectator surely can think of other more suitable individuals to invite, individuals who believe that if they are invited to a debate in a free and open society then they must be prepared to debate anyone.

  • Des Demona

    ”smaller state means more jobs, more prosperity, more social cohesiveness, greater fairness and a stronger country.”
    Rather a sweeping statement – yes more jobs, but more prosperity, social cohesiveness, greater fairness and a stronger country? The figures don’t seem to bear this out.
    You have to look at the nature of these increased ”jobs” They certainly don’t seem to be in the industrial sector where output is 20% below the G7 average and is pretty much stagnant. They certainly don’t seem to be increasing GDP. And many of them are no doubt low skilled, low paid or zero hour contracts.
    More prosperity? Really? You think the average person in the street is feeling that? A tripling of the number of people being referred to food banks? A real average cut in wages by £1600. So precisely what has this magical job creation done for prosperity except supply slave labour so CEO’s can pay bigger dividends to shareholders and continue to suck wealth upwards?
    Greater fairness? Tax cuts for the rich, bedroom tax for the poor. Yeah right.
    A stronger country? Output and GDP still below pre recession levels? The biggest balance of trade deficit forecast in living memory?
    You really need to take off those rose tinted speccies.

    • Count Dooku

      Why are you surprised that if you advertise free food people will claim it? Usual lefty drivel.

      • Des Demona

        Ummmmm….. you don’t just ”claim” it. You have to be referred by social services or other registered organisations in the first place and only in cases of dire need.
        Usual righty drivel.

        • Count Dooku

          Of course social services will refer cases. It reduces the pressure for them to process welfare claims in a timely manner if they can make it someone else’s problem.

          How do you square the fall in the claimant count with increased use of food banks? The answer is simple enough.

          • Des Demona

            Yes the answer is simple. Half of all referrals were the result of benefit cuts. Many were for people in low paid employment who simply cannot afford to live on what they get on pay and benefits.
            But if you want to believe the 160% rise in food bank referrals is because social services can’t be bothered rather than they have no choice then that is of course your perogative

            • Count Dooku

              Benefits have barely been cut. If you are a claimant, unless you fell over the benefits cap (and I dont know why you would be lacking food on 26k post-tax) or currently live in a house massively larger than your needs, you havent seen big changes in your benefits.

              What the govt has done is to limit who can claim benefits, not to massively cut what people are paid.

              • Des Demona
              • Reconstruct

                Benefits may not have been cut, but the more rigorous patrol of ‘free riders’ – which incidentally is absolutely necessary for the long-term viability of any social welfare system – is resulting in delays which the near-indigent sometimes cannot fund. In other words, the problem is precisely a failure of the state. Perhaps the welfare-checks should be outsourced to the private sector, with penalties attached for slow performance.

                Ironic, but utterly unsurprising, that lefties will blame the market for a failure of state administration.

                • Des Demona

                  In many cases welfare payment processing was and is done by the private sector. Capita for example being sacked and almost sued for 18 million by Lambeth council for gross negligence and incompetence.
                  The private sector isn’t the fountain of all greatness sometimes portrayed.

                • Reconstruct

                  I’d barely allow Crapita to be a ‘private sector firm’ in that it is largely the unholy spawn of the sort of cosy corporate/public sector deals which all-too-easily result in private monopolies or oligopolies. Frankly, such firms prove inadequate, they should be sued until the pips squeak. Trading a state monopoly for a private monopoly is not progress, and indeed, is a source of great misery. Personally, I blame all state corporatists for this, starting with the institutions of the EU and working right down via Westminster to local government.

                • Des Demona

                  I agree with much of that but probably for very different reasons.
                  I understand Lambeth now process applications and payment in house, with staff in more secure jobs, with better training and conditions and are vastly outperforming what went on before.
                  A race to the bottom to see who can provide a service at the least price doesn’t always pay dividends.

                • Count Dooku

                  Of course it pays dividends. It’s taxpayers’ money that goes to providing these admin services. They are not free.

                • Des Demona

                  The price of everything and the value of nothing, I see.

                • Count Dooku

                  You can care all you want about subjective value when spending your own money.
                  When you are spending my own hard-earned taxes you do not have that right.

                • Des Demona

                  I’m not spending your taxes so I have the right to care what I damn well please. If you want to live in a wealthy society that tolerates the shameful spectacle of over a million of its people having to rely on charity food banks to survive then that’s up to you of course.

                • Count Dooku

                  But you are proposing more expensive civil service admit so you are advocating how my taxes and future children’s taxes will be spent.

                  If you care so much for the needy you can always donate more of your income to HMRC.

                • Des Demona

                  If the results are better, leading to increased productivity, less management time on appeals and a host of other benefits from not having to deal with the financial and social fallout caused by the negligence and incompetence of the private sector lowest bidder then why do you think the civil servant is necessarily more expensive? Simply because you think they may be paid more?
                  As for your second ”point” if one can call it that, I have no objection to paying more tax if I believe it is going to benefit society generally. Because it’s a society I happen to live in.

                • Reconstruct

                  Ah, genuinely glad to see you are indeed interested in the price. A cost-benefit analysis might indeed give you a case to make. (Personally I doubt it, but it might.)

                • Des Demona

                  It depends on your definition of price. It seems to me that in many instances ”price” seems to be defined by the headline cost without proper inclusion of more widespread social costs.

                • Reconstruct

                  I’m not disagreeing – counting (ie, putting a value on) the social costs ought indeed to be done where possible, and I take your point that these external costs could turn out to be higher than the ‘costs’ seemingly saved.

                  Where possible this should be done. But always bear in mind that it will, must, inevitably prove a flawed accounting. Partly because your valuation of ‘a society I happen to live in’ will be sketchy and possibly non-countable. But also because of Hayek’s point – that the whole point of markets is to discover information which is discoverable in no other way. Consider the last nine words italicised.

                • Des Demona

                  Hayek is entitled to an opinion, italicised or not. I’d say the whole point of markets is to exercise the law of supply and demand to make profit. Information is a by-product which can be used to increase profit.
                  What then happens to that profit affects the kind of society you live in, for good or ill.

                • Reconstruct

                  Well, I’d urge you to read some Hayek, because he’d introduce you to a much more interesting explanation of what markets are for. You might be surprised.

                • Des Demona

                  I’ve read Hayek and I am surprised. Mainly surprised that one of his main planks of theory – that artificially low interest rates promote artificially high investment – seems completely wrong given our record low interest rates coupled with record low investment.
                  Sometimes an ounce of common sense is worth a pound of economic theory.

                • Reconstruct

                  ‘Sometimes an ounce of common sense is worth a pound of economic theory’ – there you go again, you can add it to your collection of slightly hokey ad hominum appeals you go for. Well, I suppose we all do it, so let it pass. . .

                  Hayek presents a theory of the business cycle, rather than a ‘general equilibrium model’ (trying to keep a straight face at this point). A business cycle will usually climax in over-investment, or mal-investment, which will then involve a painful period of recovery in which investment is indeed low. This stuff happens unless . . . yes, I feel it coming. . . . ‘I have abolished boom and bust’.

                • Des Demona

                  Ah ok so I must have missed the bit when he said ” but this theory on investment and interest rates doesn’t work after a recession”
                  So not much use then really?

                • Reconstruct

                  You seem like a cheerful sort, so I thought I’d reply. Actually, the liquidation of malinvestment is pretty much a staple to every business cycle there has ever been, and it works pretty much all the time. But there are circumstances in which the pain involved is simply intolerable, or, alternatively, there are circumstances when the financial system itself has suffered such damage that no-one fancies the costs of owning up.

                  That’s what we’re going through now. We might, just, come through it, despite the zombie banks: if we do, it is because what dragged them down wasn’t principally their malinvestment in our economy, but rather their spectacular ruinous misunderstanding of credit default swaps – they having never presumably read the 90+ pages of small print that usually went with them. (Don’t get me started – I could go on. . . . )

                  Quite how one exits the ruins of a financial system with significant parts of your economy intact is mysterious: with luck the market (ie, the voluntary protean efforts of consumers and producers) discovers the information needed for the task.

                  What has also been tried is the Keynesian approach. The principal experiment ground in world history for this approach has been Japan over the last 25 years. Although I’m a great fan of Japan (and lived there for three years), it’s hard to see it as a vindication of Keynes.

                • the viceroy’s gin

                  …the cheap Fed and BoE cash is being sent into commodities and the 3rd world. That is investment of a sort, although certainly not targeted at those populations who are enabling that cheap cash flow.

                • Count Dooku

                  Fine, since you have no problem with it I advise you write a check for the appropriate amount to HMRC now. Or are you only for paying more tax when you want others to pay?

                  As you stated earlier, the price of failure by Capita is to be sued by Lambeth for breach of contract. Capita make a loss and the contract should be tendered elsewhere. That is the price of failure in the free market. The price of failure in govt is to get a bigger budget. Just look at the murdering NHS.

                • Des Demona

                  I’m afraid any ”point” you are trying to make is lost in your hyperbole and dogma.

                • Count Dooku

                  You say you are happy to pay more tax as this will improve services. I say you should put up and send a cheque to HMRC. It’s not that difficult.

                • Des Demona

                  No. I said I would be happy to pay more tax if I thought it was for the benefit of society in general. You see the distinction? I’m sure you do but decided to ignore it to make your rather silly point.
                  Of course there is always going to be some selfish git who is quite happy to see others pay while they reap the benefits.

                • Count Dooku

                  So, do you think paying more tax will be for the benefit of society in general?

                • Des Demona

                  Any tax is ostensibly for the benefit of society in general. That’s what it’s for. The degree to which it benefits society is dependant on the use to which it is put.

                • Count Dooku

                  Aha! So, if you think tax is meant to be for the benefit for society, pay more tax! Voluntarily!
                  I think tax is theft so I’ll be paying the smallest I can get away with.

                • Des Demona

                  Well as I said earlier there is always going to be those who are quite happy to take out but not put in. Quite happy to use the roads, the hospitals, the schools, the police, the fire brigade, the ambulance service, the refuse collection etc etc etc , all paid for by taxation which you apparently consider theft.
                  So here’s an idea, if you object to taxation then stop using things paid for by the rest of us.

                • Reconstruct

                  Such a silly phrase. Your chances of knowing the value of something are enhanced, not diminished, by knowing the price. Conversely, your chances of knowing the value of something are cut if you profess no interest in the price. Selective ignorance is just that . . . selective ignorance. Good mainly if you actively seek confirmation bias.

                • Des Demona

                  Really? And the price of empathy, compassion, justice, fairness is?

                • Reconstruct

                  Well, I know what you mean, but see below – I congratulate you for acknowledging that there is a cost-benefit calculation to be made in the case you raise.

                  More generally, I’m pretty certain it wouldn’t be difficult to calculate the benefits of empathy, compassion, justice and fairness – indeed, such calculations are made routinely by people deciding whether to open factories in empathetic, compassionate, just and fair (for which substitute stable) countries rather than harsh, uncaring, corrupt and unstable dictatorships. By and large they opt for the former.

                  I’d go further – the more developed an economy is, the more important it becomes that exhibits the virtues you list. Believe me, China has become a lot more empathetic, compassionate, just and fair country than it was 30yrs ago. Not to say there isn’t a long way to go. ]

                  But the general point remains: ‘the price of everything and the value of nothing’ is used – as you attempted to use it here – as a conversation stopper which establishes you on the moral high-ground. And it does indeed manage to do that, even though a moment’s reflection will reveal just how vacuous it actually is.

                • Des Demona

                  Well, no it wasn’t an attempt to claim the moral high ground, it was a rebuttal of the previous posters position that I was incorrect in stating that a race to the bottom on price doesn’t always pay. I think any reasonable would say that premise is self evident.
                  However as far as the values which you agree a developed economy should adhere to, I’d suggest that is more about business adapting to the values of the people rather than business shaping the values of the people.

                • Tom Tom

                  Look where Crapita came from

                • Tom Tom

                  Rarely in fact. Crapita is incompetent and greedy.

        • Ron Todd

          And plenty of people will be adept at persuading or coercing socialist public sector workers or bleeding heart liberal charity workers into referring them.

          • Des Demona

            Yeah because so many people are willing to debase themselves and go through a humiliating vetting procedure for a bag of food. How did I miss that?

            • Graham Davies

              Many of them do choose to do so, actually. They do this by failing to comply with their conditions of entitlement to benefit (for example by refusing to look for work) and end up being sanctioned – from there they try claiming hardship and are referred to food banks.

              • Des Demona

                I’d be interested to see your figures for that claim?

                • Graham Davies

                  http://www.theguardian.com/society/2014/mar/03/food-banks-public-health-benefits-panorama

                  Now, there are many sources out there which highlight the effect of lengthening sanctions have had on the use of food banks. Many of those sources decry benefit reform, but what we are seeing is the effect of extended duration sanctions, which are in almost all cases the fault of the individual claimants affected. In my experience, the number of sanctions is due to the culture of entitlement that has developed over the years and will reduce over time as those who claim benefits will gradually adjust to the increased importance of their obligations.

                  Where it is not their fault, and they have been sanctioned inappropriately, they have the option to appeal internally to DWP and then to tribunal. This may result in their using food banks whilst their appeal is ongoing, and then end up with a windfall once it is decided. Obviously, these people will be included in the figures too.

                • Graham Davies

                  Perhaps I didn’t make myself clear enough. They DO try to claim hardship. Hardship is a form of reduced welfare payment for those who have been sanctioned and many of them will not qualify for it, hence the resulting approach to food banks.

                  The people who are destitute through being sanctioned due to failure to meet with their obligations have left themselves destitute. The labour market is indeed competitive, which is why everyone who claims to be looking for work in order to qualify for state benefits should be encouraged to do so actively. To do otherwise is to consign them to a life of dependency, something which I hope everyone would rather not see.

                • Des Demona

                  Apologies, I misunderstood and thought you were talking in the abstract.

    • Greenslime

      Once you have relearned the discipline of getting up and out in the
      morning, you can then aspire to improve your lot further with a better
      job. It is this aspiration which will drive things upward, not the
      knowledge that if things aren’t in the jobs Goldilocks zone the
      government will say, “Ah, nevermind. Here’s some taxpayers’ money to
      make it better”.

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