Don't raise Companies House fees, no, absolutely not
There is a proposal that we should deliberately, with malice aforethought, screw over new company formation because criminals exist. This is not a sensible proposal. Criminals do exist, they need to be dealt with but let’s do this at least, not most, cost to the economy, eh?
Fee for registering a company to increase tenfold under plans to tackle economic crime
Companies House considers charging up to £100 to fund new role fighting flow of dirty money
One little note is that if we make it more expensive to register a company then doing so becomes less attractive to those merely trying to legalise an operating business and makes no difference to the criminals who would abuse the system. We’d deliberately tip the system in favour of the criminals and their vast profit margins that is.
Companies House, the corporate register, is considering the increase in charges as a way of funding new responsibilities to tackle illegal activity that it is gaining under laws going through Parliament. Registration fees currently start at just £10.
The agency is poised to receive beefed-up powers and responsibilities that will require it to police the information submitted by companies and directors, ensuring that it is accurate.
It is part of changes proposed by ministers to stem the tide of dirty money flowing into the UK after new scrutiny in the wake of Russia’s invasion of Ukraine.
Just no.
The deeper point here is that we not just desire we positively gasp for people to both set up new businesses and register them. For this is what produces economic growth - new entrants into the markets. Therefore we want this process to be as simple as possible and as cheap as possible. There is good reason why the time taken, the costs, to register a new business looms so large in the varied economic freedom and ease of doing business listings. For as soon as the costs - whether of time or money - of such formation or registration become appreciable that entire process becomes constipated. To the point that in many economies the process near doesn’t happen at all, there is no movement.
Yes, entirely true, a very simple and very cheap system does indeed allow criminals, money launderers, sanctions busters and the rest to partake. That’s to be dealt with in one of two ways.
The first is simply to shrug and accept it as a cost of having that vibrant new creation system. The second is to treat it as what it is, which is criminals engaging in criminal activity. Something that both can and should be dealt with - but not at that cost of losing the creative vibrancy. If we need a team of accounting sleuths then fine, let’s have a team of accounting sleuths. But let’s charge that cost to where it should be - on policing. Not an extra fee upon the law abiding engaging in this activity, but from the general societal resources we devote to policing.
A second way to approach this is that all economics happens at the margin. So, why do we want to dissuade some - for that’s what margin means, there will be some dissuaded - from setting up legitimate, legal, taxpaying businesses by raising the fee to do so? We don’t, so we shouldn’t. We do want to stop people abusing the system, entirely true. So do that too. But don’t fund the one solution by creating the other problem.
Just no. It is indeed politically appealing to assume that “business” should pay for business. But the people being charged here will not be those abusing the system. Instead we’ll be levying a charge on something we desire to happen - legal registration of business activity - and thereby dissuading it from happening. That’s just not sensible.
So, let’s not do it.
If a little knowledge is a dangerous thing.....
…..then believing the wrong thing is worse:
…..after Mr Hunt's earlier decision to reinstate the planned corporation tax increase from next year.
Writing in this newspaper, Mr Malthouse said that companies simply pass on tax to consumers, stating: "They just price it in as an overhead, so consumers pay tax for them when we buy their goods or services."
This is simply untrue about corporation tax. Now, whether it’s Mr. Malthouse who believes this untrue thing, or the reporters here, Mssrs. Malnick and Diver (respectively, Sunday Political Editor and Whitehall Correspondent of the Telegraph) doesn’t particularly matter. If we’ve such senior establishment types believing something that is wrong then we’ve a problem. For the policy agreement that comes out of an establishment that believes wrong things is going to be, well, wrong, isn’t it?
It is true that corporations don’t pay tax. They might sign or hand over the cheque but any and every tax makes the wallet of some live human being lighter. There are, after all, only us and our wallets out here to carry the burden of a tax. No, a legal person like a corporation is not a live human.
The study of whose wallet gets lighter is that of tax incidence. With corporation tax there are the usual three groups who might get their wallets lightened. The capitalists, the consumers and the workers. Those are the three groups in play here, so it’s some combination or mixture of them.
To try to pin corporation tax upon consumers we have to assume that corporations both set prices and also leave profit on the table when they do so. For it is only possible to raise your prices if you have the power to do so and also that you’ve not done so already.
Players in a competitive market do not have the power to raise their prices unilaterally, viciously greedy capitalists who do have that power in uncompetitive markets will already have done so. A change in corporation tax rates does not, directly, lead to a change in prices to the cost of consumers.
The most obvious and most immediately important result of this is that it is landlords who pay business rates, not tenants. Therefore all this talk about changing rates so that tenants have their burden alleviated is nonsense.
Corporation tax though - we’re now left with capitalists (ie, shareholders) and workers. In the first instance obviously the tax impacts upon the capitalists. They’re gaining a smaller percentage of the value add, the profit. It’s what happens next that matters.
For as Adam Smith pointed out there is an average level of profit. Mathematically there must be, obviously. Capitalists chase higher than that level - except when they don’t, investing at home anyway, that one mention of “invisible hand” in Wealth of Nations - and so if, by taxation, we’ve lowered the return in one jurisdiction then more of that capital will be invested elsewhere.
The determinant of the general level of wages in an economy is the productivity of labour - that in turn determined by the amount of capital added to labour in that economy. Less capital leads to lower productivity, to lower wages across the entire economy. The workers carry some part of the burden of the corporation tax therefore. Entirely reasonable estimates for the UK economy have that worker part of the burden at 50% or so of the weight of the tax.
The only even slightly arguable point - among economists that is - in the above is that 50%. Some will argue it is lower, some, including us, possibly higher. The Nobel Laureate, Joe Stiglitz (along with Tony Atkinson) once determined that for small economies and concerning foreign investment the rate is well over 100% - the wages losses to workers are greater than the tax raised. But the general logical process there is simply standard, known and true.
It is also true that we here have a slightly different version of the Good Society to tout than many others out there. But this isn’t about what makes a free and liberal society, that desirable end goal. This is a simple and factual point and if our rulers just aren’t in accord with reality then they’re not going to rule well.
The burden of corporation tax falls first on capitalists and then on workers. Only once we get simple things like that straight will we be able to create a sensible taxation system.
In which we disagree with Stella Creasy
Ms. Creasy wants to tell us all that we must invest in more childcare.
……but because our economy and our society won’t thrive if we don’t end the motherhood penalty that is keeping women stuck in a nightmare. Childcare is a vital part of the national infrastructure, and those failing to invest in it are the real anti-growth coalition: there can be no solution to the cost of living crisis engulfing the UK until the problem is tackled.
At which point we repeat the point we’ve made earlier. It does not grow the economy, nor in fact change anything very much, if one group of women go to work not caring for children and another group of women come into work to care for those children. Yes, more money is moved around but that’s all - we’ve still the fact that x number of children are being taken care of by y number of women.
We can replace the word “women” with “people” if we wish it still doesn’t change anything.
It is only if the work done by the women not caring for their children is worth more than the childcare that this process is generally wealth or value enhancing for the society as a whole. Fortunately, we have a method of working out the value of work - the wages paid for it.
If the wages paid to those women who work while parking their children are greater than the costs of the parking then this is indeed value enhancing. If those wages aren’t then it is not - indeed, can be value subtractive.
The end result of this is that far from Ms. Creasy’s call, that society as a whole must subsidise childcare we want to do this the other way around - entirely abolish all subsidies to any childcare whatsoever.
Well, that’s the economic answer at least. We agree that social considerations and so on could arrive at a different answer. But it is indeed true that the economic arguments around childcare are that there should be, must be, no subsidy. Precisely because the childcare that requires subsidy is value destroying for society as a whole. The work being done instead of the childcare isn’t worth enough to pay for the necessary childcare for that work to be done. Therefore it is the childcare that should be done, not the work. By, of course, those economic arguments.
Entirely true but not going far enough
Emma Duncan tells us something that is entirely true but which also doesn’t go far enough:
Using the WID to compare us with our peers produces an even more surprising result. Britain is less equal than France on four of the key indicators, but on all six it is more equal than Germany, the country that most of our progressive elite (people I tend to agree with) want us to emulate. When you look at the wider picture, we do remarkably well. Take the world’s largest economies: America, China, Japan, Germany and Britain. Our country is the most equal on all measures except the share of wealth owned by the bottom 50 per cent. On that one we are in the middle, with Japan and China more equal than us. (I’m leaving out India, the world’s fifth-largest economy, because it’s too poor to be a useful comparator. Even so, by five of the six key indicators, India is more unequal than Britain is.)
Britain is most certainly not uniquely unequal that is. But we do need to go further than this in two particular ways.
The first is a general issue which applies across many to most economies. We do not include the provision of government services in our estimations of inequality. Yes, we measure income inequality by market incomes, by post tax and post benefit ones. But it’s very rare to see calculations of post tax, benefit and government services. When we do - both the TUC and the ONS have reported the same sort of number - we see the difference in household consumption between the top 10% of households and the bottom 10% falls to perhaps 4 to 1. That may be too much inequality still, may not be enough to taste, but it’s certainly different from the generally accepted numbers.
The point here being that free at the point of use healthcare, education and so on are sources of consumption. They’re also equally provided across the income cohorts. Thus they equalise consumption possibilities.
This issue being even more important when we consider wealth inequality where even the existence of the state pension is usually not included.
The other issue is specific to the UK. London looms very much larger in the British economy than any one city does in near all others. London wages (and wealth, think house prices) are significantly higher than the rest of the country. London living costs are also significantly higher and it’s not just house prices there - even a pint tends to fall in price as one travels away from the Great Wen.
Measuring UK inequality purely by market incomes, or even by incomes adjusted for tax, benefits and government services, doesn’t capture this feature. We should, really, measure using an internal to the country purchasing power parity adjustment. We all know that £30,000 a year (about the median wage or household income, not accurate but about) buys a very different lifestyle in London than it does in Llareggub. Given that it is consumption inequality which is the only type that can possibly be of any relevance that’s something that should also be included in our calculations. Doing so removes another layer of that inequality that so many complain about.
Ms. Duncan is quite right in her observations. The only problem is that they don’t go far enough.
Some notes on Stop the Squeeze
The latest shouting that taxes must rise - from the highest levels since the 1950s - and there must be more government and we should be as babes in the arms of bureaucrats. Just three points that leap out at us:
Between 2014 and 2019 the number of children living in poverty in the UK increased by 500,000 to 4.3 million, while the number of emergency food parcels distributed by the Trussell Trust charity reached 1.9m in 2019/20 (up from 61,000 in 2010/11).
Both of those cannot be true. Or, at least, are most unlikely to be so. Free food is a reduction in poverty, so more free food means that poverty is lessened. But that count of poverty is being made without including the effect of more free food.
No, really, whatever you think of whether there should be food parcels, food banks - we think they’re an excellent idea, filling in the gaps caused by the incompetence of the State - or not, it’s undeniable that their existence reduces inequality and poverty. So, as here, using their expansion as an indicator of an increase in poverty simply ain’t right.
One option would be to set a goal to reach £15 per hour as soon as possible. The Progressive Economy Forum suggests this can be achieved by 2024/5, with the extra tax revenue government would receive used to compensate small businesses to ensure that the higher wage remains affordable
As we’ve suggested before arguing for an increase in the minimum wage by cackling over how much tax will be lifted from the wallets of the poor disgusts us. Whatever the level that minimum wage should be we think it unarguable that it should be untaxable. Simply because the argument for that minimum wage, whatever level it is, is that this is the minimum that someone should receive for their labour. So, it should be the minimum received then, shouldn’t it? That is, the personal allowance and the minimum wage should be the same number.
This is simply buffoonery:
Wealth has risen from three to eight times national income since the 1980s. Whilst, as outlined above, household income has undergone the largest squeeze since the Napoleonic wars, wealth increased from £8.9 trillion in 2008/10 by £6 trillion to £15.2 trillion in 2018/20, with more than half of the gain in wealth accruing to the top ten per cent of individuals.
The reason why it is is this: expected lifespan has increased from 73 years to 81. Therefore people are, quite rationally, converting more of current income into pensions savings. Which leads to this:
Median wealth was highest for households whose head was aged 55 years to under State Pension age (£553,400); the wealth of this group was 25 times higher than those aged 16 to 24 years.
People are putting more aside to fund their gloriously longer lives and this is now some problem that has to be taxed away?
Actually, that’s not simply buffoonery, that’s a vileness which should be met with a substantial display of the Anglo Saxon Wave. As, in fact, with that idea that the minimum wage should rise so it can be taxed more.
No, we don’t think any of this is a good idea.
As we've said, people aren't thinking here
The Lancet has another of those reports about how climate change is going to murder us all in our beds. There’re the usual mistakes - counting heat deaths but not lives saved from cold and so on - but this rather stands out for us:
Simultaneously, the changing climate is affecting the spread of infectious diseases, putting populations at higher risk of emerging diseases and co-epidemics. Coastal waters are becoming more suitable for the transmission of Vibrio pathogens; the number of months suitable for malaria transmission increased by 31·3% in the highland areas of the Americas and 13·8% in the highland areas of Africa from 1951–60 to 2012–21, and the likelihood of dengue transmission rose by 12% in the same period (indicator 1.3.1).
As we’ve said before this is all at the same time as official policy is to expand wetlands, so as to give mosquitoes more places to breed more often and for longer. Again as we’ve said before the Somerset Levels, the Fens, malaria was endemic in both of them. Something solved by draining them at least in part. Now, as the dangers rise we’re to flood them again.
Someone’s not thinking here and it’s not us.
This sounds remarkably wonderful
That society has a safety net is both obvious and wondrous. That folk don’t need to depend upon it is even better:
New green farming subsidies are failing to attract large numbers of farmers, who are instead focusing on food production.
Just 1,000 farmers are signed up to the most basic part of the new £2.4 billion environmental land management scheme (Elms), which will replace the old EU-style subsidies.
The number of farmers signed up to the scheme, which opened in June, is just 1.6 per cent of the Government’s target of participants by 2028.
So there is some scheme to make sure that farmers are not reduced to having to eat their own turnips. Great, we’ve no problem with that safety net. We also insist that it’s even better that very few of them seem to require - except as that insurance - that safety net. They’ve more productive things to be doing with their time and assets. Wondrous.
Except, of course, people are complaining about this. Plans are afoot to increase the sign up. Which is ludicrous.
Think on it. We have unemployment pay to provide a safety net to those who can find no productive use of their time and assets. It’s righteous that we should have such. But we measure success by how few people need to depend upon that, not by how many. We most certainly don’t go out to improve society by insisting that more should qualify for unemployment pay.
Yet here they are, complaining that farmers are being productive by producing food. Then insisting that they must stop doing that, immediately, and live off taxpayer handouts instead.
But then we’ve long remarked on the Establishment’s ability to firmly grasp the wrong end of that ordured stick.
We do seem to have a certain problem here
Those politicians who we depute to deal with international trade for us seem not to know what international trade is, its point nor its purpose. This is indeed a certain problem - for what’s the point of deputing policy making to those with no grasp of the subject under discussion?
Britain’s trade deal with New Zealand risks opening up its beef, dairy and sheep-meat producers to cheaper imports with few compensating benefits, a Commons report says.
The cross-party international trade committee has raised concerns over the elimination of tariffs on New Zealand goods under the free trade agreement, and has called for an analysis of the potential risks to the UK’s food security.
The MPs questioned whether the government has fully considered the “pros and cons” of liberalising tariffs given that its own impact assessment predicted the UK’s agriculture, forestry, fishing and semi-processed food sectors could contract from the increased competition. New Zealand’s beef, sheep-meat and dairy products are generally cheaper to produce.
As Adam Smith pointed out the purpose of all production is consumption. As can be derived from that - and from other logical chains - the point and purpose of trade is the imports. For it is the imports that we get to consume, exports being what we must labour over for other people to consume.
Which is what makes these complaints entirely and wholly barking. For those complaints are that Johnny Foreigner might produce food more cheaply than we can. Therefore we will be able to eat cheaper than if we relied solely upon our own stout yeomen. This is the complaint recall.
The discussion entirely ignores the compensating benefit that we become richer by having this deal. Which, given that the aim of having an economy, heck a civilisation at all, is to make us all better off seems to be rather a blindness in the political vision, doesn’t it?
Now, it’s true, we do rather come from the Continuity Neoliberals part of the spectrum but this isn’t (despite the way we talk of “trade preferences” in this field) a matter of preference or political shading. This is just a simple matter of fact.
The point and purpose of trade is to get our hands - or gullets - on those imports. So to argue that gaining access to cheaper food has “few compensating benefits” is to betray a profound ignorance of the basics of the subject under discussion.
There is much both chortling and agonising over the “Whither Britain?” question currently but we do think that the outcome is going to be rather better - whichever pathway is chosen - if Parliament were rather more heavily stocked by those with at least a vague understanding of the facts.
That’s not too much to ask, is it?
If only Open Democracy could actually grasp numbers
It really shouldn’t be this hard for people to grasp basic concepts. Open Democracy tells us that there are horrors, that we must have rent controls - that best way to destroy an urban environment short of aerial bombing - and eviction bans and PANIC!:
Statistics on private rents published on Wednesday by the Office for National Statistics show rents are rising at their fastest rate since records began, with tenants facing a 3.6% increase.
They’ve managed to quote correctly at least:
Private rental prices paid by tenants in the UK rose by 3.6% in the 12 months to September 2022, up from 3.4% in the 12 months to August 2022.
Growth in average total pay (including bonuses) was 5.1%, and growth in regular pay (excluding bonuses) was 4.7% among employees in April to June 2022.
Rents as a portion of income are actually down a couple of percent. Further:
The Consumer Prices Index including owner occupiers’ housing costs (CPIH) rose by 8.8% in the 12 months to September 2022, up from 8.6% in August and returning to July’s recent high.
Real rents, rents adjusted for the general inflation rate, are down around 5%.
Rents falling as a percentage of income, rents falling in real terms, these are not the sorts of things which should spark a panic and the imposition of rent controls now, are they? Except, of course, if you’re from the end of the intellectual spectrum that finds basic concepts too difficult to grasp. Or, perhaps, assuming that the reading audience is and deliberately hoping to confuse.
We can even go further with these numbers. Nominal wages have risen by less than the inflation rate, therefore real wages have fallen. Nominal rents have risen by less than both inflation and the rise in nominal wages. Therefore real rents have fallen more than wages have. Renters are thus better off.
Numbers really aren’t this hard to grasp. No, we assure the arts graduates, they’re that not difficult.
Dr Doom's doom-loop
Nouriel Roubini tells us that one of the big problems hurtling down the pike at us is that the robots are going to steal all the jobs. This is not, in fact, a problem:
Continuing on this path, though, is also bad. Crikey, Eeyore. His chapter on AI is rather by-the-numbers, but it does the job. His first point — that the machines are coming for your jobs, and being educated and middle class is no escape — seems undeniable. His second point is that this “may cause capitalism to eventually self-destruct”. Although not in a good way, if you’re into that sort of thing. He cites a perhaps apocryphal exchange between Henry Ford and the union boss Walter Reuther. “Ford asked Reuther how robots will pay union dues,” he writes. “Reuther replied, how will Ford get them to buy his cars?”
In other words, AI and automation turn capitalism into a vampire parody of itself, preventing the majority from being rich enough even to make the rich richer. The only plausible solutions involve massive amounts of taxation at the top, but that will be a fight. And even then, we will have to figure out how to keep the vast bulk of humanity doing nothing worthwhile, for ever, without going mad or getting depressed. “If we squabble long enough,” he writes, “computers may get to decide how to divide the economic pie. By then, let’s hope they have empathy.”
There is that William Nordhaus paper doing the actual maths here which shows that if this does happen then real wages rise by 200% a year. Not, we think, a grand problem.
It’s also possible to approach this in a more classical manner. Using, say, Adam Smith and Karl Marx - both considered classical economists. From Smith we gain the insight that the purpose of all production is consumption. Or, to consider that, it’s consumption that is the aim, production merely the means of gaining it.
OK, so the robots make everything. They take all the jobs. So what?
We out here, we non-capitalists who don’t own the robots, what about us? Well, either we gain access to the production of the robots - we get to consume it - or we don’t. If we don’t then we still have to produce all of the things that we non-capitalists do get to consume. Because we’re not gaining access to the robot production and therefore can’t consume, therefore we must produce in order to consume. Nothing has changed that is. Or, the alternative, we do get to consume that robot output. In which case what’s the problem? Production happens, consumption does, there’s no problem, is there?
That is, if the robots don’t take all the jobs then the world is as it is right now, if they do take all the jobs - all of them - then it’s not a problem. So, it’s not a problem, is it?
We can add Marx into this mix. His actual prediction - no, not what generations of acolytes and groupuscules have misunderstood - is that true communism will be possible once capitalism has become so productively efficient that it has abolished economic scarcity. That is, when the machines are making everything without having to worry about human labour, that’s what allows us to be a farmer, hunter and philosopher all in the same day. Because it doesn’t actually matter how we spend our time nor the efficiency with which we do so because everything we desire is being made by said machines.
That true communism being dependent upon the robots coming to take all our jobs.
By the way, the reason that Marx and Smith agree here is that the economics that Marx got right he lifted from Smith - another proof that all of economics is either footnotes to Smith or wrong.
If the robots solve economic scarcity then none of us need jobs. If the robots don’t solve economic scarcity then we’ve all still got jobs. There is no problem here.