Defender of the 1%

For me the biggest shock of Jimmy Carr’s tax “efficient” Barrymore moment has been discovering Rufus Hound has 628,440 followers on Twitter. I didn’t realise, give or take Alan Davies, that such a non-funny comedian could be so popular *.

Rufus Hound’s support for Jimmy Carr has been fun though. If you didn’t know any better you’d wonder when he said Jimmy “is a very nice man who works incredibly hard and has donated loads of money to good causes” if he was defending a paedophile caught with his cock in the cookie jar. And when he said “He's done absolutely nothing illegal”, that simply sidestepped the issue here which is fairness.

But, hey, that’s dead heavy, serious and highlights the intellectual vacuity of C list celebs whereas this is all about cheeky, cheeky comedy chappies who never lick the arses of more popular bods to get regular gigs.

Like am sure there’s no serious points to draw from this about how in tax terms Jimmy Carr exemplifies how in Britain today there is very clearly one law for the rich and another for the rest of us, that we most certainly aren’t all in this together or that there is clearly a lot of wealth out there not being fairly taxed, which is a shame because doing so would pay for the kind of vital public services that save and change lives.

So yeah, Jimmy Carr, funny fella. And presumably, every other “edgy” comedian is already having words with his or her accountant.

In the meantime, so what could the £168m Jimmy Carr and others actively chose to place ina tax shelter have actually bought if it was taxed fairly i.e. at 50% i.e. £84m? Well £41.5m would buy a brand new Edinburgh secondary school, but is only enough to buy a chunk of a £150m new sick kid’s children’s hospital. Iz zat all? Never mind, am sure us plebs will pick up the rest of the tab.

Oh hang on, actually we’re picking up all of the tab cos we’re PAYE and don’t choose to pay accountants to finesse our finances, facts that to me imply the 1% rich are fucking scum that deserve to be publically spat on then horse raped.


* I wonder if this is an English thing of liking wet, inoffensive, bland, terribly ambitious but dim, smirking no-marks. Yesterday Tom O’Connor, today Rufus Hound, etc.,

Augean Stables

So that’s a Spanish bank bail out then. Lovely. Except it reminded me of this blog post written in 2009 (!) called “Are the Spanish banks hiding their losses?” What was/is so good about this post is how the author shows how one of the 2 big Spanish banks appeared to take an overly optimistic stance when it came to declaring losses on its US mortgage book, the implication being its “loss hiding culture” was probably company wide i.e. it applied to its Spanish operations as well.

Old news? Nope because this year it had become increasingly hard to reconcile the Spanish unemployment rate with the much lower rate of mortgages going bad that the Spanish banks were collectively willing to declare. Alongside this were other suspicions about how Spanish banks were artificially propping up house prices, again to minimise their losses. When confronted with this kind of stuff in April, the Santander CEO declared “Anyone raising this problem as one of the issues for the Spanish financial system is saying something stupid.”

There you are then. Except, alongside this you had Bankia restating its annual accounts for 2011 in a way that turned a Eur309m profit into a Eur4.3bn loss before taxes.

To be fair the Spanish government does finally appear to be aware of the credibility issue surrounding Spanish bank accounts, hence independent outsiders have been brought in to establish how much capital the Spanish banks need before the bail out gets doled out. Except, outsiders already audit Spanish banks so they can produce annual accounts; they’re called accountants.

So what makes this lot any different? Err, they’re management consultants as opposed to bankers or accountants, which is kinda confusing. Like are accountants no longer fit to audit banks, are current annual reporting requirements that inadequate, are Big 4 firm Spanish accountants bent? Am sure all of these things will be examined at length and in great detail.

Back in the real world, there are a couple of things to consider. One is the extent to which a blind eye appears to have been turned towards the general dodginess of Spanish bank accounting practices both at a Spanish and at an EU level. Practically, this left the Spanish government playing catch-up, placing sticking plasters here and there as new problems emerged. The consequent Spanish and EU failure to sit down and sort shit out once and for all led to a drip, drip dripping away of confidence and credibility that I’d guess means the bill now in the process of being paid is far bigger than it would have been say 2 years ago (compare/contrast with the last British government's approach of bank recapitalisations and the introduction of an Asset Protection scheme to draw a line under potential, future losses).

Another is how this modifies interpretations of the current situation that focus exclusively on government debt. Spain had a debt fuelled property bubble to be sure, but a private sector led one; the Spanish government was by comparison a global model of fiscal probity. So rather than debt, I reckon the main parallels to draw between Spain, Greece and Italy concern the significant contribution the behaviour of their political and economic elites made to their current woes, be it institutionalised Greek tax dodging, Italy’s general bentness or Spain’s overly optimistic bank accounts. Note how in every case these issues cut across both the public and the private sector. Note also, give or take Berlusconi being got rid of, how bail outs don’t directly address them i.e. the European debacle is going to continue for the foreseeable future with presumably Portugal and Italy next in line.

Who dat

Watching Paul Krugman bitch slap Jon Moulton on Newsnight was fun. Like for all Jon Moulton, rightly, made his (public) name speaking vast amounts of common sense about Rover as the Phoenix debacle took shape, it turns out he’s a pro-austerity fella and as such deserved all he got. One wee thing that confused me though is the way he keeps getting introduced/described as a venture capitalist, because my understanding is he’s not.

Like calling Moulton a venture capitalist is like calling a dentist a gerontologist. So sure a dentist and a gerontologist are both medical fellas, but they’re ones with very distinctive specialisms/areas of expertise, who do different things and use different tools. Similarly, whereas a venture capitalist typically focuses on early stage businesses and typically, besides commercial savvy, provides technical expertise related to what it is a business does as well as equity, yer man Moulton is better described as a private equity bod, who targets well established concerns e.g. Reader’s Digest, and provides/inflicts generic financial engineering alongside commercial savvy. Plus, his deals typically involve oodles of debt with a cheeky wee bit of equity on the side.

Rather than pedantry, the nomenclature being used matters. A lot. Back before the credit crunch crunched private equity became one of capitalism’s more evil, unacceptable faces, one dominated by multi-millionaires who paid less tax than their cleaners and who couldn’t attend a black tie do without protestors barracking them as they rolled up in their respective Aston Martins, Ferraris, Bentleys etc.,. And while that was here and then, over in the US right now there’s a wee, politicised debate about the worth of private equity prompted by the fact Mitt Romney made his fortune in it.

Ahhh, I’ve answered my question about howcome private equity people are now being called venture capitalists by the mainstream British media haven’t I? It’s a way of involving them in public debate whilst avoiding debate and disassociates them from what was previously said and thought. Plus, venture capital is a much more moral, credible and legitimate activity – the strike rate for venture capital investments is much lower than it is for private equity i.e. venture capital really does involve the risk taking that provides one of the major justifications for economic inequality. Plus, venture capitalists genuinely do help bring new things to the table, Facebook being an obvious example, a media thang that’s in as sharp a contrast with the investment made in Reader’s Digest by Jon Moulton’s company as it’s possible to find. So perhaps rather than be inaccurate the BBC etc., should use a new label in line with how these guys are now being presented, howzabout they call Jon Moulton et all, the bearer’s of God’s golden balls of economic common sense?

Except, getting some accuracy into the chat would also highlight private equity’s current problems (though funnily enough not ones that apply to venture capital to anything like the same degree, which stem from the fact we’re in a credit crunch.

This is because the private equity model and private equity profits are predicated on the ready availability of credit; the more private equity borrows to leverage a deal and the cheaper it borrows, the more profitable it is. Unfortunately, since late 2007/early 2008 there has been a step change in the availability of credit and the terms on which it’s lent. Basically, it’s far harder for private equity investors to buy up a company and make money primarily on the back of swapping expensive equity for cheap credit. Instead, they have to work a damn sight harder and be more creative i.e. they actually have to add value.

Now a couple of things follow on from this. One is what in fucking hell was a high profile private equity boy i.e. a player in an entire industry/asset class predicated on borrowing as much as possible as cheaply as possible, doing arguing against the use of cheap debt to ease the economic misery of tens of thousands of people. Seriously. Like private equity loading a business up with debt so half a dozen people can buy more Tuscan villas is a good thing whereas government borrowing to build necessary infrastructure that also cuts unemployment is bad why exactly? And to borrow Paul Krugman’s chat about how economies differ from households, my liability/debt is your asset i.e. the holes in British bank balance sheets that taxpayers subsequently filled were partly punched into them by private equity boys who made personal fortunes as a result.

The other thing, of course, is that if I was a venture capitalist, “ahem” private equity investor, I’d be smart enough to realise the cheap credit days are gone for the foreseeable future so would be looking elsewhere to make my millions.

I know, if we can’t cut the cost of the debt that’s integral to the private equity business model, lets look at influencing other costs, most obviously labour. And hey presto we’ve just had another “venture capitalist” Adrian Beecroft i.e. no he isn’t he’s a private equity bod who just happens to give money to the Tories, producing a government report recommending changes to employment law geared almost entirely to cutting labour costs in ways that (a) would have a significantly adverse impact on what lots of people earn and (b) would consequently increase the tax credit subsidy employers already receive.

So the view of leading “venture capitalists” is that only private equity should be allowed to borrow big, with the taxpayer taking the risk, and that taxpayers should also hand over even more money than they already do to “venture capitalists” via the tax credit subsidies paid to the recipients of shit wages in the companies they buy so they can get even more Aston Martins, Ferraris, Bentleys etc.,. Alternatively, howzabout spades start getting called spades and private equity, private equity.


A July 24th P.S. -  the distinction between Private Equity (was leveraged buyout as a mate minded me) and venture capital clearly matters in the US if not here judging by the attempts now being made by venture capitalists there to disassociate themselves from Mitt - he was private equity not venture capital , geddit! - Romney.

Ad Astra

"Too much recent debate has focused on tax and spend rather than on supply-side reform. This is particularly true in the area of labour market regulation."

The joke that is Dr Fox (the Tory not the DJ) is at it again calling for labour market reform i.e. trashing more employment rights, because ….. because …. am no sure really (1). What I am more sure about is that there’s all sorts of reasons why doing so is a bad thing with the biggie right now involving the Vauxhall Astra.

As is periodically the case a multinational car company, in this instance General Motors, has realised its got excess productive capacity. To address this it’s planning to permanently close down some factories. Unfortunately, according to one industry commentator; “(t)he over-capacity is in Germany but I don't think they will get two closures past the board without a fight from IG Metall … (i)f they do go for two plant closures in Germany I think there will be an industrial relations war. They might be able to manage one [closure] without a massive strike. So they need another elsewhere and that is where Ellesmere Port – the home of the Astra - comes in."


Now just chew on that for a bit; the Vauxhall plant at Ellesmere Port is at risk of closure some time during the next few years not because of productivity or any shit like that, but because its easier and cheaper to close factories here than in Germany i.e. British workers could well lose their jobs because industrial relations and employment laws are already significantly more “employer friendly” here than they are in Germany. So dull stuff like reality indicates more labour market “reforms” i.e. the destruction of even more employment rights, is a bad thing.


But, as a mate immediately responded when we were discussing this, Britain is a more attractive destination for new foreign direct investment (FDI) as a result, which is true I guess, ish, give or take some caveats like (1) a race to the bottom in labour costs is something Britain can never win (2) any FDI gained would have to outweigh what is lost to be worth a damn, with this taking into account, in the case of Ellesmere Port, all the surrounding supply-chain companies that also go under as wella s the increase in benefit costs, (3) expensive labour that’s hard to make redundant isn’t necessarily a bad thing because it creates an incentive to make creative and profitable use of it e.g. hire and fire is about doing the same only cheaper, hire and not being able to fire is an incentive to innovate and (4) there is the fuck-up that was Silicon Glen where the FDI seen as a panacea to all our post-industrial ills, instead turned out to be the usual crock of footloose multinationals travelling the globe looking for sucker governments/government agencies dumb enough to waste the taxpayer fivers needed to justify setting up some substandard plant only ever intended to run as long as it took to find the next mark.


Given these dull points drawn mostly from reality, you could still try and debate whether more labour market reforms would have a net positive effect on FDI. Or you could stop being a dick and spell out the impact they definitely would have, which is they’d fuck over the existing working poor. You see the “irony” in Britain is that the poorest paid jobs with the worst employment conditions are actually those most at a remove from and immune to global competition. To give some examples, you can’t outsource cleaners to an Indian call centre nor, unless the minimum wage really, really, REALLY gets ramped up, will we see robots stacking shelves in Tesco any time soon.


Rather, fucking over employment rights is essentially about fucking over the already low paid. Morally, this is a very bad thing. Economically, given tax credits and all that, in practice introducing any measures that would give the already low paid yet another fucking other would primarily increase the benefits and subsidies taxpayers already give employers i.e. the main beneficiaries here would be company owners.


Speaking of which a private equity boy who funds the Tories also argued for more labour market reforms. Funny dat. In the meantime, in-between the chuckles, Ellesmere Port provides a litmus test for assessing the economic benefits British employment law and industrial relations already convey. If Ellesmere Port does get closed it’ll also be interesting to see how this is reported e.g. will the fact it was because it was easier to close it than its German counterpart dominate the headlines I wonder?


The other thing about Dr Fox is that his intervention is apparently supported by the lovely chancellor. There’s lovely, i.e. in the aftermath of a financial crisis what the fuck is the economic benefit of drawing attention away from things other than finance (1)?



(1) Apologies, these were both rhetorical questions. Labour market reform is nothing more than bigoted Tory dogma. There is no meaningful economic argument for it in a British context right now, which in turn calls into question the technical as well as moral competency of those supporting it.


A quick P.S. so there's two articles on Ellesmere Port on the BBC website. Neither mention the disadvantage its at compared to the German alternatives.

A May 17th P.S. That was excellent news about Ellesmere Port getting the work, totally excellent news. A quick digression - given the chat about a new drachma being worth half a Euro, if the Euro broke up, and the Franc, DM etc., reappeared, the strength of the DM would render German exports wholly uncompetitive - digression over. So was the Ellesmere Port decision a victory for flexible working? Am sure that was certainly a factor, however, I reckon the decider was the fact making things here rather than in Germany functions as a dirty, great big strategic currency hedge.

Budge-this

My favourite budget bit so far is “We are also taking the opportunity to rebuild Britain’s reserves, which had fallen to historically low levels. I can confirm our gold holdings have risen in value to £11 billion. This does not include the 400 or so tonnes of gold sold a decade ago for £2 billion, and which would now be worth six times that at over £13 billion pounds.” i.e. Gordon-the-gold-seller-Brown, you are one seriously useless fucktard.

The 7% new stamp duty rate on £2m plus houses combined with the new 15% rate if you bought them through a company is also awfy cute the way it tells Bob Geldof and co they can try and dodge the stamp duty us plebs pay if they want by buying via a company, but it’ll cost em’more if they do.

In the background to this though and the next few budgets is the supposed reality the Fitch rating agency spelled out when they issued the following chat to explain their decision to move Britain to “negative outlook”: “The triggers that would likely prompt a rating downgrade are … : -- Discretionary fiscal easing that resulted in government debt peaking later and higher than currently forecast;” (then 2 other triggers are mentioned, one is “blah blah blah” and the other “ya de ya de ya”).

Now Fitch is very clearly using jargon to mask an assertion of ignorant and very debateable prejudice. Negative outlook? That’d be them saying we think certain factors means that a downgrading of Britain’s credit rating has become a real possibility, which matters because markets respond to changes in outlook as well as actual ratings. And for both a negative move typically sees governments having to hand over more tax payer fivers to cover its debts. Discretionary fiscal easing? Hmm, that’s quite a cute one really; discretionary? That’d be what a budget is. Fiscal policy? That’d be about taxing and spending.

So essentially, Fitch said in the immediate run up to the budget don’t cut taxes or increase/not reduce spending in ways we don’t like or else i.e. it’s an assessment that can be read as a warning that’s open to interpretation as a threat.

Of course a rating agency would never see things like that, they only ever provide independent opinions based on privileged access to company data after all that others are “free” to choose to act upon or not (similarly, shops only sell guns whereas it’s the psychopathic outsiders who actually use them to shoot their classmates). And yet would a more active, discretionary fiscal policy be a bad thing?

Paul Krugman certainly thinks it wouldn’t, similarly John Kay today talked about how increased public spending on construction in its widest sense would “as the National Audit Office recently observed, be likely to reduce public expenditure over the medium term, not to raise it. The weakness of current – necessary – austerity programmes is that they focus on capital projects and expenditure deferrals because these cuts are easy, even though they are precisely the opposite of what is needed to balance the books in the long term. We need to devote much less attention to headline spending totals and much more to the detailed composition of public expenditure.” Heck, even this joker thought this was a good idea in 2009 cos he’s also mindful of how cos counter-cyclical government spending “leaks” in an open economy such as the UK there’s a need to focus on stuff that doesn’t like building shit. Except, these kind of grounded in facts but still – lets be honest – ideological views are effectively being swept aside by chat like Fitch’s, which is a bad thing.

Fitch’s chat illustrates perfectly the kind of dogma and prejudice that continues to define the terrain on which British fiscal policy is now set and its overall direction. This makes it a clear assault on democracy and, in the view of all sorts of bods, one that is actively shitting on the prospects of both the British economy and the livelihoods of hundreds of thousands of people left unemployed as a result.

Am trying to think how to draw this to a close, howzabout: The budget is shit and all the ConDems should be made to dress up like girly shepherdesses. This is cos government passively accepting the undemocratic constraints on its fiscal freedom private companies i.e. rating agencies, are imposing is a very, very bad thing.

Instead the debateable analytical and moral capabilities of the latter and of the "market" more generaly should be recognised. Thereafter, these external bodies should be held up to more and more aggressive public scrutiny and regulated til they squeal like pigs.

We should also have, because we need it, a huge increase in public sector debt funded public spending on construction. Given the Labour response has been to fixate on the tinkering and ignore the overall thrust of fiscal policy, Milliband and Balls should similarly be ordered to dress up as shepherdesses complete with pink gingham bonnets. There.

Private sector efficiencies

A lot of public sector work is labour intensive. In many cases it involves better terms and conditions than you find in the private sector. Public sector trade union bargaining power is in a different league to what you find in the private sector, which makes it harder to cut public sector costs by hacking back public sector Ts&Cs. TUPE aside, when the provision of services is put out to tender its typically easier for a private sector firm to out-compete its public sector equivalent on cost grounds because, as its labour is cheaper, it usually has a lower cost base. And that’s kind of it really.

To give a practical example, public sector social care providers who help people in their homes are often paid for the time spent travelling between clients whereas private sector care providers providing the same service often aren’t. Instead, the latter frequently spend less time with their clients to meet targets, work free over-time, stress out as they skitter across their patch etc.,

None of the above has anything to do with “private sector efficiencies”. Instead it’s simply the private sector provision of public services and privatisation (and/or the tendering out of services previously provided by public sector bodies) as means of accessing cheaper labour i.e. getting people employed on private sector terms and conditions to do public sector work.

Practically, privatisation now involves a piecemeal, cherry-picking approach that affects one national service here and a range of regional activities there, all the while avoiding any head on political conflict. A recent example of this is the chat about farming some police activities out to the private sector. And again it’s worth reiterating, this is hee haw to do with “private sector efficiencies”, rather it is simply about cheap labour.

Nope I don’t think that was clear enough. Privatising services is nothing, NOTHING whatsoever to do with “private sector efficiencies”. What it is about is getting people to do the same jobs you might find public sector bods doing, but for less money.

Now let’s put that in some kind of context; as I understand it every time someone challenges executive pay or investment banker bonuses, the stock response is if you don’t pay top dollar (emphasis on “dollar” given Britain appears the furthest along the US route when it comes to mad pay for the ruling class in a its not so much a global labour market as it is an Anglo-Saxon model of capitalism with all that says about nation specific labour market outcomes) you don’t get the right calibre of labour.

Cool. So lets apply that same logic to public sector privatisation – if you farm out public sector work to the private sector you’ll be farming it out to employers who don’t pay the top dollar needed to recruit the kind of staff that will provide the best social care for the elderly, checks to ensure illegal migrants don’t get into Britain and so on. Cool(?).

For those winning the tenders the rewards can be incredibly sweet as Emma Harrison’s £8.6m dividend proved. Now for starters she got herself that money helping/exploiting the unemployed through a company being investigated for fraud (how terribly private-sector efficient). But, hey ho. For seconders, though, some hypothetical numbers illustrate how she may well have “earned” it; so assuming labour costs account for say 50% of her former company’s staff base, if she ensured they cost say 20% less than their public sector equivalents (by only providing shit pensions, using contract labour wherever possible, avoiding automatic pay increments and recruiting relatively younger staff, etc.,), then she’d have been able to undercut a rival public sector tender by 10% without breaking sweat or wind.

Except, 10% is a bit much, rather I’m guessing a 5% advantage would be enough cos then she could win the contract AND pocket the difference. Or perhaps the actual figure was 5.7% given her £8.6m appears to have largely derived from the £200m worth of government contracts her company was awarded i.e. in a Superman 3-Richard Pryor type scam 4.3p in every taxpayers pound paid to her company went straight into her pocket. And for what? Am guessing for screwing employees and not much else. Clearly, some of us are in this together more than others.

Feargal the perfect cousin Pt. II: Feargal squeezes a balloon

The thing about the FBI going after megaupload etc at the behest of copy right owners is that it attacked a means of distributing/accessing pirated material rather than the demand.

The internet being what it is, when one thing gets closed down people will quickly find other means of meeting/satiating said demand. And lo a cool mate kindly sent me the link to this article about how even before Kim Dotcom gets done "Anonymous, Decentralized and Uncensored File-Sharing is Booming" .

Now just think about that catchy title and what it means: Megaupload? Identifiable individuals uploading stuff and people who download it leaving all sorts of IP trails. Now? Its increasingly anonymous, decentralised and uncensored.

Another thing is that internet locker companies did and do scrutinise, to varying degrees, whatever gets uploaded to their servers. Plus, with people frequently accessing the necessary links via forums, there's an additional layer of policing by downloaders and forum members. Were or are either of these things perfect? Nope. Good? Probably not. A something that was better than nothing? FoSho and definitely better than anything that's anonymous and uncensored.

So does this rapidly developing situation mean megaupload and its ilk should have been left alone? If honest no not really. But, was it bloody obvious beforehand that this would happen? You betcha (e.g. It’d also be quite cool to get a handle on the unintended consequences of going after easy targets/encouraging people to go underground to get pirated material.)

And were the practical consequences anticipated and planned for? Duh! These are Americans we're talking about, so that'll have been shock and awe plus whatever words of "wisdom" dear Feargal had to say on the subject.

Presumably what we'll see in due course are various cat and mouse attempts to use the law to close down the alternative methods that develop. That and businesses still running with a megaupload style model being awful careful about the jurisdictions they keep their shit in.

But, in the meantime, well the media congolomerates appear to have used their influence over democratic and legal processes to get what they wanted; the creation of an enviroment that's now pushing more and more people towards anonymous and decentralised means of distributing uncensored material.

I reckon this is a bad thing because it's pushing ordinary punters wanting to engage in the "relatively" harmless pursuit of downloading a screener of the latest Hollywood blockbuster towards less savoury characters, places and practices. It will also generate more cash for these other people and places as well, one obvious parallel being prohibition in - you guessed it - America.

As for the media conglomerates, they did what they did because their instinctive approach to anything really is predicated on aggresive recourse to law and dictating to consumers; they appear incapable of building credible business models to meet an obvious global demand. They did this because they are dicks.