Wednesday, November 24, 2010

Layer 385 . . . Ireland, Tax Piracy, IMF, Shock Doctrine, Terrible Neighbours, the PFI Racket, Nick Clegg, Social Mobility and New Fangled Progressives

Royal wedding date set for 29 April

Prince William and Kate Middleton's wedding will take place on Friday 29 April at Westminster Abbey

Exciting. Not.


Things are hotting up again on the economics and financial front. Shit hitting the fan big time in Ireland. Polly Toynbee's column gives an excellent overview:

 Ireland shouldn't get a penny until it gives up its tax piracy

Cameron says he is being 'good neighbours' with the Irish. Why, when they have been such terrible neighbours to us?

Yet again the western world teeters on the edge of calamity caused by the bank-lending extravaganza that fuelled the great property bubble. Europe holds its breath. Will the market predators be halted at Ireland, or might the rating agencies knock down all the dominoes one by one, first the weak countries, then the strong? Meanwhile a Europe-wide fiscal tightening panic may yet bring about the very thing it seeks to prevent, as democracy once again falls under the wheels of finance.

What lesson has George Osborne learned since he penned a paean of praise in the Times in 2006, "Look and Learn Across the Irish Sea"? He wrote: "Ireland stands as a shining example of the art of the possible in long-term economic policymaking ... Capital will go wherever investment is most attractive. Ireland's business tax rates are only 12.5%, while Britain's are becoming among the highest in the world." Low taxes are the answer, he said.

He claims he is being "good neighbours" with our cousins across the Irish sea. What he does not say – perhaps embarrassed by all that previous praise – is that the Irish have been exceptionally bad neighbours to everyone else.

Ireland's corporation tax is 12.5%, the UK's is 28%, dropping to 24% in 2013, and the US rate is 35%. Ireland has played the beggar my neighbour, race-to-the-bottom tax game for many years. Quite why the EU tolerated this is a mystery when a fortune was poured from Brussels to Dublin to pay for a spectacular modernising infrastructure over the years. A few other large companies recently decamped to Dublin from London, advertising giant WPP for one: these are mainly virtual moves for tax purposes only, since virtually no staff go over – and certainly not the board.

But, in the view of Richard Murphy of Tax Research UK, the corporation tax rate is only a fraction of the true story, a flag to signal to global companies that they will get a phenomenal deal with an Irish relocation. Ireland's real shame is not that, like the UK, it mistook its property boom for a never-ending cash machine. What is unforgivable is its shameless status as Europe's greatest tax haven, helping to cheat tax from the world's treasuries for decades.

Ireland allows Google, Facebook, Microsoft Corp and many others to shunt profits around subsidiaries so that they escape even Ireland's own low tax rate.

Ireland allows them, quite legally, to pass the profits on to other tax havens that levy no corporation tax at all, paying only tiny sums in passing: Google put 92% of its billions of worldwide non-US profits through Dublin, and it paid Ireland just £18m.

This is a pure tax haven, with the laxest tax regime in the EU, with no controlled foreign companies rules (to limit deferral of tax).

So why is Ireland not required to put its tax affairs in order and stop cheating all those neighbours now coming to its rescue? IMF doctrine demands countries squeeze the breath out of their people with punitive cuts – and they like low or, even better, no taxes.

The IMF's purgative is an ideological brew; it learns no lessons. When its patients get worse and near death, as Ireland has done after its first terrible dose of cuts, the fund calls for more leeches, mercury and arsenic. That is, of course, the same pre-Keynesian medicine Cameron and Osborne prescribe for us. There is a week before a final settlement: will the rest of Europe really hand over their money without demanding Ireland abandons tax piracy and joins the civilised world?


Yes - classic IMF 'Shock Doctrine' prescriptions and demands. For more on the IMF and the shock doctrine outrage, just type 'shock doctrine', IMF, Naomi Klein, disaster capitalism, etc into the Oxzen search box at the top of this page.


The bill for PFI contracts is an outrage. Let us refuse to pay this odious debt

The great racket that was private finance now robs the taxpayer of billions that should be spent on nurses and teachers

by George Monbiot

You've been told that nothing is sacred; that no state spending is safe from being cut or eroded through inflation. You've been misled. As the new public spending data released by the government shows, a £267bn bill has been both ringfenced and index-linked. This sum, spread over the next 50 years or so, guarantees the welfare not of state pensioners or children or the unemployed, but of a different class of customer. To make way, everything else must be cut, further and faster than it would otherwise have been.

This is the money the state owes to private corporations: the banks, construction and service companies that built infrastructure under the private finance initiative. In September 1997 the Labour government gave companies a legal guarantee that their payments would never be cut. Whenever there was a conflict between the needs of patients or pupils and private finance initiative (PFI) payments, it would thenceforth be resolved in favour of the consortia. The NHS owes private companies £50bn for infrastructure that cost only £11bn to build, plus £15bn for maintenance charges.

In 1997 the British Medical Association warned: "The NHS could find itself with a facility which is obsolete in 10 or 20 years' time, but for which it will still have to pay for 30 years or more." No one's celebrating being proved right.

If a hospital no longer requires the services it contracted to buy, tough.

The cost and inflexibility of PFI is an outrage, a racket, the legacy of 13 years of New Labour appeasement, triangulation and false accounting. At first sight, it looks as if nothing can be done: contracts are contracts. What I'm about to propose is a wild shot, but I hope it deserves, at least, to be discussed. I contend the money we owe to the PFI consortia should be considered odious debt.

Odious debt is a legal term usually applied to the endowments of dictators in the developing world. It means debt incurred without the consent of the people and against the national interest.

PFI was a Tory invention but became a Labour doctrine.

There was no democratic mandate for this policy, which appears to have arisen from secret talks with companies.

Secrecy surrounded the whole scheme. To this day, PFI contracts remain commercially confidential. You can't read them; MPs can't read them. We don't know what we are being stung for or whether the costs are justified. But there are some powerful clues.

In Coventry, for example, NHS bosses originally sought £30m of public money to refurbish the city's two hospitals. When the government told them it was "PFI or bust", the refurbishment plan was dropped in favour of a scheme to knock down both hospitals and build a new one – with fewer beds and doctors and nurses – at an eventual, corporate-friendly cost of £410m. A report commissioned by the local health authority found that the scheme had been "progressively tailored to fit the needs of private investors".

To get their new buildings or services, public bodies had to show that PFI was cheaper than public procurement. The system was rigged to make this easy.

Desperate public bodies were gulled and outmanoeuvred with the blessing of central government, which sought only to keep the corporations off its back and the liabilities off its balance sheets. Was this a legitimate means of loading our schools and hospitals with debt? I don't think so.

But where else do we go with this? I've been warning about inflexible PFI contracts since 1998. I've wasted months on this mission, trying to understand and explain the most complex issue in public life. For all the good it's done, I might as well have gone fishing.

Now I see corporations squatting like great cuckoos on our public services, while officials pour the money that should have been spent on nurses and teachers into their widening bills. Yes, I'm bitter. Yes, I'm clutching at straws. Have you got a better idea?


If anyone's interested in reading more evidence that Nick Clegg's just a Tony Blair clone, then just read this column he wrote for the Guardian yesterday:

For old-fashioned progressives, achieving income equality was the ultimate goal. For us, it is increasing social mobility

Nick thinks he's a new-fangled 'progressive', when in reality all this guff about social mobility and equality of opportunity is the same old New Labour bollocks.

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