Tax

The news was full of the story that 1 million people will pay £100 fines for submitting their tax returns late yesterday.

Except they won’t.

I did some research on tax penalties a year or so ago. The data here all comes from my report on small company administration (around page 50). It is all based on parliamentary answers. These showed the following with regard to penalties issued for corporation tax over a number of years:

Vast numbers of penalties were waived: they were simply for returns not due, or that could not be traced.

But staggeringly of those due, almost no recovery was made. Years worth of unpaid penalties were outstanding at each year end.

That’s the price of not having  enough staff to collect debt at HMRC. But just think what could have been done with that money if it had been collected. And without a shadow of doubt if HMRC had kept on top of this issue much more could have been collected than was, and cost efficiently too.

In the meantime, assume that due to mismanagement at the top of HMRC the £100 million opportunity for the state that lat payment penalties represent at this moment will just be more money squandered away.

 

This weeks ‘scandal’ at the Student Loan Company, where a director who appears to be an employee has been paid through a personal service company has excited lots of attention. I know there will be more similar stories: I have been called about them.

But I’m not interested in the stories of the people involved; I am more interested in the systemic issues. There are two of these. The first is the problem that small business tax is too complicated and fails to reflect the economic reality of the way in which many small businesses work. The second is that the government through H M Revenue & Customs and Companies House is simply failing to collect the tax due from small companies.

I deal with the first here. I wrote the following in 2007 when H M Revenue & Customs had lost its last major anti-avoidance case against the use of a small limited company to both receive the income of what was claimed to be a disguised employment and which then split that benefit between a husband and wife. I wrote then:

The Arctic Systems case has been widely reported, but much of the comment made upon it has been high on emotion, but low on analytical content.

I wrote on this case, and as a result was challenged to produce a suitable response. That I have now done. The full paper is available here. The summary says:

This paper analyses the way in which the owners of many small limited companies reward themselves and members of their families out of the income that their labour generates for those companies. This is particularly relevant in the light of the recent House of Lords ruling in what is known as the ‘Arctic Systems’ case. The paper shows that many of these arrangements do constitute tax avoidance because the rewards paid do not much the underlying economic substance of the transactions that are taking place.

In the interests of promoting tax justice for all taxpayers HM Revenue & Customs have a consequent duty to promote new arrangements that will encourage tax compliant behaviour in this sector. Tax compliance is defined as paying the right amount of tax (but no more) in the right place at the right time where ‘right’ means that the economic substance of the transaction accords with the declaration made for taxation purposes.

The paper does then show that this problem is almost insoluble whilst these businesses are operated through the medium of small limited companies which were not designed for and are unsuitable for the type of activity they undertake.

As a result this paper proposes that:

1. A change in company law to allow the re-registration of small limited companies as LLPs. An LLP is tax transparent: its income is taxed as if it belongs to its members even though it is a legal entity that is separate from them for contractual purposes;

2. The introduction of new capital requirements for the incorporation of limited companies undertaking trades, and over time forced re-registration of those that do not meet that standard as LLPs;

3. The introduction of a new investment income surcharge at rates broadly equivalent to national insurance charges that would have the benefit of reducing the incentive to split income, restore the taxation balance between income earned from all sources and allow a reduction in the base rate of income tax without adding substantially to the burden of administration for taxpayers since those liable will, in the vast majority of cases, already be submitting tax returns;

4. Create new, economically justifiable and verifiable standards for splitting income in LLPs so that the risk of legal challenge to such arrangements will be substantially reduced whilst recognising the significant role that the partners of those who supply their services through owner managed corporate entities play in the undertaking of that activity.

If this were done then:

a. The administrative burdens for many small businesses would be reduced;

b. The certainty of the arrangements under which they can operate would be increased;

c. The rewards that they rightly seek to pay to those who contribute to the management of these companies from within domestic relationships will be rewarded, but within appropriate constraints;

d. The attraction of freelance status in tax terms would be retained;

e. The current injustice that sees income from labour more heavily taxed in the UK than income from capital would be eliminated in large part without prejudicing the required favoured status of pensioners;

f. The incentives for tax planning would be reduced, so simplifying tax administration;

g. The tax yield might either rise, or a reduction in the tax rate might result.

The challenge in creating such a system is significant because it requires cooperation across government departments, but far from insurmountable. It is part of the challenge of creating an enterprise culture that meets the needs of the UK in the 21st century, and that is a challenge that any government needs to meet.

As I note at the end of the paper, suggestions and comments are welcome. But please do read the paper first and not just the summary.

That invitation still stands: the problem remains. I remain sure I have offered a viable alternative. I know it was well read and discussed in the Treasury at the time. Is this the time for change?

Those wanting to know how HMRC approved the Student Loan Company deal should read this comment.

People are wondering how HMRC haven’t spotted the tax avoidance at the Student Loan Company.

Let me explain why. It’s because HMRC deny there is such a thing as tax avoidance. I have shown it may be £25 billion a year. And that tax evasion may be £70 billion a year. The latter accords with World Bank data, as I have shown.

But HMRC persist in arguing that tax avodiance is only a couple of billion a year and that tax evasion is half or less of my estimate – even claiming there is almost no problem with moonlighters and ghosts in the economy to reach their conclusion.

Well their data is wrong. It’s not just wrong – I believe it is fraudulently wrong: if you start your estimate from tax returns submitted ignoring the fact that tax evaders don’t submit tax returns of course you knowingly get the wrong answer, and that’s just what HMRC bosses demanded their data do to make their own case for their efficiency look better and the case for cutting staff to keep their bosses happy look stronger.

But f course, if you can choose to ignore tax avoidance in your own data you can also ignore it when it stares you in the face. And that’s what they’ve also done. Which is why HMRC is in the mess it’s in and why we end up with a tax system that lets the top paid off their tax liabilities. And only strong leadership at HMRC will change that. I have little confidence we’re going to get it.

I posted part 1 of this yesterday.

Here’s part 2:

Thanks to The Renegade Economist.

I’ll be spending much of today at the funeral of my oldest friend.

I mean oldest because Jack Ray was 95 when he died, and I don’t know anyone older than that right now.

But oldest too because I have known Jack for over 40 years, and there aren’t many people, family apart, I’ve engaged with for that long.

Jack was a very powerful influence in my life. We met because he built an amazing model railway, and he needed people to run it. I went along out of curiosity and he gave me a hobby for life: I still read railway history and build model railways.

My interest in business started because I read those railway histories. They opened a curiosity about what business does, how and why that continues to this day. I wouldn’t do what I do but for Jack.

But he was so much more important than that. When I was 14 he told me to write. In fact he told me writers change the world.

Jack wrote. He changed many people’s lives as a result. He coached, inspired and encouraged me. No one had believed in me like that before he did. No one had bothered about what I thought and wrote as he did. And no one corrected, challenged and demanded better like Jack did – almost without his realising it.

And he was also quite simply a friend – someone to call on, whose advice was worth heeding, and who always had time for a story, a laugh and a shared appreciation of life.

I’ll miss Jack.

Farewell my friend.

The furore about the use of a personal service company to supply the services of the director of the Student Loan Company is appropriate.

It is virtually impossible to see how this man should not have been on PAYE at source: he was very clearly in a master /servant relationship under a contract for service and as such what was called Schedule E tax has to apply.

But it didn’t. He is likely to have taken part in three tax avoidance activities:

a) He has transferred his income to a third party (the company) to save tax

b) He has probably recategorised the income as investment income (a dividend from the company) to save the tax due on employment

c) He may have deferred paying himself the income to delay paying tax.

The IR35 rules should have stopped this. They did not.

Graham Aaranson’s general anti-avoidance principle won’t go anywhere near it.

No normal employee would be allowed it.

Sp the real question is, why was a boss? Why was a special arrangement made for a person on high income unavailable to the rest? What is this bias towards abuse being seen yet again in HMRC towards those with wealth?

If HMRC did approve this then heads should roll, again. Not because it is a personal service company; they happen, but because this arrange should never have been approved.

 

This is a video just released of me talking a couple of weeks ago with Ross Ashcroft of the Renegade Economist about the state of the UK economy and how to rescue the failed discipline of economics.

I’m pleased to note that at least one major economist realises that public debt owned by the central bank of the government that issued that debt isn’t debt at all.

The economist is Paul Krugman. The economy he wrote about is Japan. Japan has public debt of about 220% of GDP – way, way beyond anyone else’s debt. Except as Krugman noted in 2010:

Oh, and about that debt; it’s not good — but net debt is about 100 percent of GDP, not 200, because the BOJ holds so much of it.

Precisely. When you own your own debt it’s no longer debt at all.

Now that needs to become part of the mainstream narrative.

Over the last week I’ve been arguing that the government gilt purchases made under the quantitative easing programme effectively cancel that debt. Being realistic, as the IFS predict, we’re running big enough potential deficits over the next few years to mean there will in practice be no capacity to resell this debt. The reality is that as money supply is falling but for quantitative easing we could not also resell the debt. So for all practical purposes it’s cancelled. That means in net terms over the last seven years from 2005 to 2011 inclusive we’ve borrowed a little under £35 billion a year in net terms, and that is less than we did in each of the years 2005, 2006 and 2007.

Do long as the banks do not lend this situation will persist. Bank lending has been the way we’ve made the money that the country needs to keep the economy going. As long as banks don’t lend, and that looks likely to be for some time to come since without an increase in one of consumer demand, business investment or net exports their lending is bound to fall, then it will fall to government to both fill the gap in the economy that they create by their inaction and at the same time create the money that’s needed to keep the economy going. So, I can pretty confidently predict that if, as the IFS suggest, the government deficit will be £120 billion next year, £99 billion the year after that and £79 billion in 2014-15 then you can be pretty sure that quantitative easing in those years will be £85 billion, £65 billion and £45 billion respectively leaving net borrowing at around £35 billion a year. Total government debt despite the deficit will, therefore, be no more than about £750 billion or so in 2015 which will be, give or take, about 50% of GDP, a figure that will be vastly lower than elsewhere in the Eurozone in particular. And we won’t have inflation as a result because, as a consequence of the actions of this government which have pushed almost 3 million people now o9nto unemployment, with that figure bound to rise over these years, wage inflation pressure will be virtually non-existent whilst the collapse of demand in the Eurozone will tkae the pressure off other prices too.

It’s pointless arguing about the opportunities that this provides to this government: it is clear  that this government only has the main of destroying the state sector and public well being. It will do this for doctrinaire reasons whatever the economics of the issue. So the question is what opprtunity does this provide to Labour?

First, it has to tell this story. Politics is about telling credible stories about how the world works. This one is such a story.

Second it has to claim credit for it. Labour created quantitative easing.

Third it then has to say the debt crisis is not an excuse for all that has happened: there has been no debt crisis. The pain we’re going through and the much greater pain to come is not and cannot be justified by the economics of this situation: they will have been imposed by Tory choice.

Fourth, we could then plan a very different economy. We could then plan to borrow for growth. After all, we’re hardly borrowing at all now. Net borrowing of just £35 billion a year by the government is not enough net borrowing to meet the demand of pension funds for UK government gilts to underpin the pensions of baby boomers now retiring in ever increasing numbers - and it is those gilts that are actually used to pay those pensions. So the government may actually need to borrow more to meet the demand for gilts.

What might it do with the extra lending? Well, it could invest in the Green New Deal for a start, making this country much less dependent upon carbon fuel and much more fuel efficient in the process. That would provide a massive rate of return on the spending incurred in the future, and help our long term exchange rate. And it could build all the hospitals, schools and other infrastructure we need without recourse to PFI. It could even build the flood defences we need – to stop the Wash and 50 miles inland flooding, for example. We could also build the social housing that is so obviously and desperately needed in the UK; housing that would pay for the interest on the borrowing with the rents received.

The point is, once we understand that our borrowing is now already under control we can then talk about what we really want to do with the economy. And because of quantitative easing, whether it was planned to achieve this outcome or not does not matter, our borrowing is now under control. And in that case we can plan for the sustainable growth in jobs we need.

Now of course as employment would rise quantitative easing may cease to be possible as the risk of inflation would then be real. I accept that. But that doesn’t matter. By the time that became an issue those then in work would be paying enough additional tax to make sure we need not need quantitative easing anyway. A virtuous circle of debt reduction would have been created.

All this is possible: we just have to realise that quantitative easing has delivered the solution to our debt problem. Why are we waiting?

International Tax Review is carrying an exclusive interview with whistleblower Ruedi Elmer in which he talks about his experiences as chief operating officer for Swiss bank Julius Bär at their Cayman Island office. Elmer was dismissed in 2002 after he challenged the bank’s senior management over their failure to enforce normal compliance procedures.

In the interview Elmer talks about his bad treatment by his former employers:

“I was abused as a compliance officer and some criminal clients were not disclosed to me by the local management,” says Elmer. “I was threatened by management and told if I took the bank to court, the bank would ‘finish me’.”

Astonishingly, the Swiss government sided with Julius Bär in trying to suppress Elmer, and to their great discredit, various parts of the Swiss media also aligned with the bank. According to International Tax Review:

“Elmer believes that after the Swiss authorities ignored the abusive practices he had brought to their attention and put him in prison instead, a campaign was run against him in the Swiss media.

“They called me a mentally sick person being full of revenge,” he says.”

Elmer’s actions have involved him in huge personal costs, not least imprisonment in 2010. He nonetheless seems confident that this has been worthwhile, though talk about the end of banking secrecy remains just that, talk:

“While Pascal Saint-Amans, the incoming OECD head of tax policy and administration, has declared that banking secrecy is over, Elmer believes this will only be true if automatic information exchange becomes the global standard procedure among nations. Elmer does agree that it is important that individual privacy is protected through local data protection laws, but argues this cannot be based on secrecy laws because they are mainly abused by financial institutions, multinationals and the rich who use trusts and companies as vehicles in tax havens.”

You can access the full interview Ruedi Elmer gave to International Tax Review’s Salman Shaheen here.

NB: Reposted from the Tax Justice Network blog with permission

I have noted that when my explanation of why the UK owes much less debt (see also here) than the Tories claim was posted on the Liberal Conspiracy web site some of the right wingers who inhabit that space suggested I could not consolidate accounts. As a result they claim my conclusion was wrong: they said the debt owed by the government could not be cancelled by the fact that the debt was owned by the Bank of England because I ignored the liabilities of the Bank of England to repay the cash it had used to buy the government issued gilts. Well, they are, of course wrong and let me explain why the accounting behind my claim is exactly right.

Let’s start with the government issuing a gilt for £100 million. It creates a loan (the gilt) for £100 million that is a credit in its accounts and it then has £100 million in cash (a debit balance).

In accounting terms this looks like this:

Government Accounts Cash Dr £’m Cr £’m 100 Government Accounts Gilt Loans Dr £’m Cr £’m 100

Then it spends that cash on buying an asset (or a lot of assets!). The accounting then looks like this:

Government Accounts Cash Dr £’m Cr £’m 100 100 Government Accounts Fixed Assets Dr £’m Cr £’m 100

Now there’s no cash. The £100s balance out to nothing. The accounts balance though. There’s an asset of £100 million balanced by a liability of £100 billion for the gilt. There’s just no cash left.

Now let’s suppose the Bank of England does a quantitative easing programme, as of course it has. Let’s look at the double entry of that.

First it creates the cash:

Bank of England Cash Dr £’m Cr £’m 100 Bank of England Promise to repay account Dr £’m Cr £’m 100

Remember that this is a bank making cash out of thin air. It has effectively ‘printed’ cash. So it has created £100 million in cash, which is a debit entry in its books. What’s the matching liability since you can’t have anything but double entry in the accounts? Well, it is, of course, a liability and for ease I’ve called it the ‘promise to repay account’. Why? Because that’s what it says on a bank note: the Bank of England promises to pay it. It’s that promise that represents the liability. The fact that if someone went to the Bank of England and asked for repayment of their £10 note they’d be given another one does not change the promise to pay. £10 is owing – but it’s payable with the money that’s just been printed. That’s what legal tender means: it’s cash made out of thin air. The liability will not be paid: it’s pure gain, but that’s what happens when you make cash out of thin air. This then is a very different liability from the government’s gilt. That will be repaid, in cash. And it carries interest. The Bank of England will never repay on its promise and the liability carries no interest.

Now let’s suppose that the cash that has been created is used to buy the gilts the government has issued. It’s pretty simple double entry. It looks like this:

Bank of England Cash Dr £’m Cr £’m 100 100 Bank of England Promise to repay account Dr £’m Cr £’m 100 Bank of England Gilt asset account Dr £’m Cr £’m 100

The cash has gone: it has been paid to the previous owners of the gilts. The two 100′s balance out to zero. That cash has now entered the economy and left the Bank of England.  That is how the cash enters the economy in a quantitative easing programme.

The net result is that now the Bank of England owns £100 million of gilts (the debit balance) matched by a liability of £100 million in the ‘promise to pay the bearer’ account which will in reality never be paid.

Now what I have then suggested is that we should consolidate the resulting accounts of the government and Bank of England since the government owns the Bank of England. Let’s look at what the accounts look like before we consolidate. The government accounts now look like this:

Government Accounts Fixed Assets Dr £’m Cr £’m 100 Government Accounts Gilt Loans Dr £’m Cr £’m 100

The government has £100 million of assets and owes £100 million in gilts.

The Bank of England accounts look like this:

Bank of England Promise to repay account Dr £’m Cr £’m 100 Bank of England Gilt asset account Dr £’m Cr £’m 100

The Bank owns £100 million of gilts and has made a promise to pay £100 million.

Now let’s be clear about what happens when you consolidate: you cancel out trading between the consolidated parties but as I have ignored interest for ease there is no trading to get rid of here. And second you cancel assets and liabilities owing between the consolidated entities, which are the government and Bank of England in this case. What is cancelled out? Well it’s the gilts: they are debt after all. The government owes £100 million to the Bank of England in this example but since the Bank of England is owned by the government then it is like owing debt to itself – or if you like, it’s like a husband owing a wife when they agree they really share all their property in common. So it can simply be cancelled out.

The net result is that the accounts really look like this. The two gilt accounts balance each other out to zero and we’re left with:

Government Accounts Fixed Assets Dr £’m Cr £’m 100 Bank of England Promise to repay account Dr £’m Cr £’m 100

So the government has now got assets paid for with a promise to pay – it’s printed the money to pay for the asset. It’s used the subterfuge of owning the Bank of England and printing money to achieve the result but let’s not deceive ourselves, this is the result. But, as I have explained, it can do that precisely because there is both no risk of inflation now because of the state of the economy and because the economy needs that cash – there is a shortage of cash at present that is threatening to close down economic activity and create deflation if this new cash were not created by the Bank of England now.

So, what’s the conclusion? First, the double entry works: the critics are simply wrong. They forgot there’s an asset. Incidentally, it doesn’t also actually matter if it was spent on the running costs of the NHS instead for double entry purposes; there would still be a debit. I use an asset to indicate it’s better that liabilities are matched by assets and that the current account be balanced if possible. That’s the logic of the Green New Deal. But I stress, either way my double entry works and my critics are guilt of doing single entry accounting – which is always a mistake.

Second, the economic logic is right: the national debt has to be stated net of quantitative easing gilt repurchases or the figure is simply mis-stated.

Third, this radically changes the whole economic narrative, completely. But that’s another blog. The point here is that technically I have to be right.

Having said which, I know the assets repurchased may not have been paid for at the price they were issued at: I accept that’s leakage in the matter but it does not change the fundamentals of the argument one iota, it just means that the banks pick up some subsidy on the way (which fact will, I suspect surprise no one). But we still have not got debt of £1 trillion. Very soon we’ll have national debt of less than £700 million and what is more we’re only borrowing about £35 million or so a year on average.

And we need to recognise that if we’re to have an honest economic debate.

Last week a wrote a blog explaining why all the data being published about government borrowing is wrong. We haven’t right now got government borrowing in total of about £1 trillion; we have instead, I argued, because of the Bank of England’s quantitative easing programme got government borrowing of about £725 billion.

In December the UK money supply fell by 1.4%. (Table A2.1.1 here). In other words, more was being repaid to banks as loan repayment than they were lending. The consequences are painful: business has less to spend, consumers have less to spend, demand falls, and we all head for recession. That’s hardly surprising given that we have relied on commercial banks to create our money supply through their lending and we know that they’re failing on all their lending commitments. So, the banks would drive us into recession if we left them to the job of creating money right now, and since this fall in money supply would also lead very quickly to deflation which has the effect of reinforcing recession because people defer sending as they think things will be cheaper in the future the outcome is really pretty bleak.

Which is why, of course, more quantitative easing is inevitable. Larry Elliott reckons it will be £75 billion and very soon and I tend to agree.

Today the IFS said the government will borrow £124 billion this year. Let’s assume they’re right and plug that number into my forecast, also allowing for the £75 billion of QE announced in October and the £75 billion now anticipated and we get this overall borrowing data:

Year Net borrowing QE Net £bn £bn £bn 2005  35,736  -  35,736 2006  35,543  -  35,543 2007  37,182  -  37,182 2008  66,368  -  66,368 2009  147,878  200,000 -52,122 2010  147,686  -  147,686 2011  124,000  150,000 -26,000 Average  7 years  34,913

Remember the basis for this calculation: since the Bank of England is buying government debt which has no chance whatsoever of being resold to the market and the Bank of England is wholly owned by the government that debt is effectively cancelled once bough by the Bank of England. The only proper accounting for this debt is to recognise the government can’t and does not owe itself this money and as such it should be cancelled out even if it technically still exists.

The net impact is that this year the government will not borrow at all: it will repay £26 billion of debt. And it can do that because the only effective economic activity keeping the economy going is government spending and that spending needs to be financed by the creation of new money made out of nothing by lending – as all money is made (remember that fact – if you doubt it, read this).

Now we happily live with banks creating money to fund private sector growth if it happens and don’t panic about it. We should be just as relaxed if the government is doing that if inflation is unlikely as a result. And there is no chance of inflation as a result of this activity right now. That’s because there is so much slack in the economy we have real wage deflation – so there is no chance of this extra money reversing that. Of course green quantitative easing would eliminate that risk entirely, but it’s practically zero anyway.

So what does this mean? Well, actually government debt is falling right now: yes, I mean that.

And it also means we can afford to run a deficit. Indeed, we can’t not afford to run a deficit.

And it means that because that’s true the only spending that could possibly need cutting is that which we can’t afford to fund net of QE, but since over the last seven years borrowing net of QE will have been less than £35 billion on average a year or less than 2.5% of current GDP and not a person thinks we can’t afford to fund that we actually have no need for a programme of cuts right now. And nor will we do so until such time as employment rises and the prospect of real wage growth returns, which seems a distant prospect at present.

In that case the whole Tory economic narrative is wrong: we can afford the current deficit and must spend at current levels to ensure unemployment falls, wages rise and tax revenues increase to clear it unless we want to keep printing money for good. Since I’d rather people worked than print money I’d go for that stimulus option now. And to do that I would, I admit, have to borrow more. But when net borrowing is negative right now of course we can and should borrow more when the cost of doing so is near enough nothing: net real interest rates are about zero or even negative for the government at present.

This is the only sane economic policy option we have. All that’s stopping us taking it is the completely false story that a) we’re borrowing more than £100 billion a  year when we’re not and b) that debt is rising when this year it will not.

And yes, I’m aware how bizarre this will sound to many people. But just remember that Schopenhauer absolutely right when he said that truth goes through three stages. In the first stage, it is ridiculed. In the second stage, it is violently opposed. And in the third stage it is accepted as self-evident. We’ll be at stage 1 with this idea right now. I give it a couple of years to reach stage 3.

I admit I have not read all the IFS Green Budget, published this morning.

This is the core of the fiscal forecast:

You can ignore pretty much everything more than three years hence – no one has a clue in any economic forecasting model what will be happening by then. So just look at the three years up to the next election and you’ll see Osborne will still be piling on the debt using his definition of debt, as I’ve always predicted. To put it another way, the IFS think his whole economic strategy will have failed, completely. So by 2015 George Osborne will have no story to tell the electorate.

But it will be worse than that. We’re already suffering in the UK and that is before, as the Guardian notes:

The IFS warned, however, that work on repairing the £114bn “black hole” in the government’s finances had only just begun. It said that 75% of the deficit reduction programme was still to come, including 88% of the benefit cuts and 94% of the reductions in departmental spending.

SAo there is misery upon misery to be poured on the UK and all to no avail: the only reason for that misery is that supposedly it repays the deficit.  But it isn’t. And it won’t. So it’s pointless. It’s a tale of wanton destruction of lives and well being all for no purpose. And none of it is necessary. Why? Because we’re not suffering that level of debt at all.

That’s the next blog.

As Larry Elliott has noted this morning in the Guardian another round of  quantitative easing is now almost inevitable as money supply has fallen in the UK, again. Expect £75 billion next week. That will be £350 billion in all.

The outcome is simple: another £75 billion of government debt will be purchased by the Bank of England. And as I explained last week, this debt will never be resold. There is no chance of that. And this means that for all practical purposes the debt repurchased is cancelled. So far from having about £1 trillion in debt as was so loudly trumpeted by the government only a week or so ago the actual debt will pnly be about £650 billion after this issue, and the average government borrowing will, after tis repurchase, have fallen to less than £40 billion a year over the last seven years – the average rate (near enough, and lower after allowing for inflation) that was being incurred before the crash.

In that case shall we stop saying we have a debt crisis? It’s very clear we have not.

And shall we stop saying that we have to stop spending to ensure our children can repay the debt when it is only growing very modestly at most?

And shall we stop talking about the growing debt interest payments when at least one third of them will now be paid straight back to the government?

And shall we then talk about what we can afford to do when it so clear that we do not have a debt crisis at all?

And shall we call the Tories bluff for lying about a problem that did not exist?

Because that way we have a new political narrative which right now we have not got.

Giles Fraser has undoubtedly redeemed himself since leaving St Paul’s. As he says in the Guardian this morning:

The task of the church is to comfort the afflicted and afflict the comfortable. For far too long the posh bits of the church have comforted the comfortable and allowed those struggling on in poor parishes to comfort the afflicted. The Church of England has never had much stomach for afflicting anyone (except, of course, homosexuals).

With a few tents and shedloads of determination, those who have huddled outside the cathedral in the freezing cold have acted as sentinels for an idea of social justice that can be found on almost every page of the Bible but which the church has too often lost sight of.

Which is why the American author Chris Hedges has posed the challenge thus: “The Occupy movement is the force that will revitalise traditional Christianity or signal its moral, social and political irrelevance.”

Well said that man.

Now will the Church and its members realise that their role is a 168 hour a week one, not just a nice warm glow on Sunday morning? That’s the challenge for the CoE. It’s not the Church on Sunday bit they find hard: it’s making their understanding of Church relevant to work on Monday that’s the challenge for them. And they’re failing still at St Paul’s.

The Guardian is reporting this morning that the number of long term unemployed is now forecast to increase by 750,000 to more than 3.3 million over the next four years.

In 2009 I forecast unemployment of 4 million in this recession. At the time I did not anticipate the rise in the number of self employed we have seen, or the drop in productivity that has also occurred over the last couple of years as employers keep people in work at lower effective rates of pay rather than sack them. But if the number of long term unemployed (not all claiming benefit of course) reaches 3.3 million I think it’s a safe bet that actual unemployment will also rise by more than 700,000 to in excess of 3.5 million, and depressingly, my forecast of 4 million unemployed now looks within the range of reasonable plausibility.

I take no comfort from the fact I may have been right all along.

So Sir Fred Goodwin is now just Fred. I suspect it is a crushing blow to his ego. I suspect he’s a man for whom ego is important. And let me be clear, for him and his family I feel a little sorrow: I don’t revel in other’s hurt.

But I don’t regret the change of heart: the decision to grant Fred Goodwin and others knighthoods and peerages because they commanded the assets of public companies for personal gain without due consideration for others was an error of judgement, although a collective one of which all senior politicians were guilty.

Now it is time to make the gestures and do something much more important, and that is to really move on and change capitalism. Cameron shows no sign of doing that; he just makes the gestures.

Real change is needed. It starts with accountability and transparency. Backing country-by-country reporting would be a serious sign of commitment to that. It moves on to demand that companies are tax compliant – which is  seeking to pay the right amount of tax (but no more) in the right place at the right time where right means that the economic substance of the transactions undertaken coincides with the place and form in which they are reported for taxation purposes.

And it continues by recognising the rights of employees, customers and society.

When business people are rewarded for their responsibility to society and not their greed I will be happier. But we’re a long way from there as yet.

Bloomberg has reported today that:

European soccer ruling body UEFA is asking U.K. authorities to investigate two so-called letterbox companies that helped Porto (FCP)fund a player transfer.

For Gool Co. and Pearl Design Holding Ltd. provided finance for the two-time European champion to sign Brazilian striker Walter da Silvafor 6.2 million euros ($8.1 million) in 2010, according to Porto’s latest quarterly statement.

As banks ratchet up lending requirements, soccer clubs are seeking alternative ways to raise funds, often in return for a share of a player’s future transfer fee, said Sandalio Gomez, who teaches sports management at IESE business school in Madrid. UEFA officials said this increases the risk of money laundering because it’s unclear who owns the letterbox companies, which have mailing addresses in the U.K. and seemingly nothing else.

“We are urging state authorities to look into it,” UEFA Secretary General Gianni Infantino said. “Because we are a private company, an association, we cannot go to a company when it is a letter box saying ‘please tell us who you are and what you’re doing.’ They will tell us: ‘Who are you to ask me?’”

This is a massive problem facilitated by the UK.

Whilst we in the UK offer limited companies for sale for only a few pounds and utterly neglect the need to then regulate or tax these companies – as I have shown to be the case here – then the UK is undoubtedly losing out heavily to tax evasion as I have suggested (my estimate is £16 billion a year) and may, as UEFA seem to be suggesting, provide opportunities for money laundering.

That’s utterly negligent behaviour by successive UK governments and is all designed to ‘save’ costs for Companies House and H M Revenue & Customs whilst ignoring altogether the tax foregone and the massive cost to the UK of the tax foregone and crime permitted.

If we want responsible business in the UK we start by making sure each and every company files its accounts, delivers a tax return and pays its tax. It’s really not too much to ask. But our government refuses to do it. Why is that?

A new campaign has been launched today called Move Your Money.

The logic is simple: if you don’t like the behaviour of the bank you’re with move you money somewhere else.

I am doing just that, and explain why, here (and apologies for quality – made in a hurry!):

If you agree, please move your money.