From April, HM Revenue & Customs (HMRC) will be able to demand a security from companies when the taxman considers there is a “serious risk” that the business will try to dodge PAYE or National Insurance Contributions (NICs).

As they say:

Tax officials added that the “amount of tax at risk, the employer’s previous behaviour and other risks” will be used to determine the size of the security, but it will typically be either four or six months’ worth of income tax and NICs.

About 400 companies are expected to have to provide a security in the next financial year, HMRC said.

As a way of dealing with serial offenders, can’t see anything wrong with it. However, such schemes do have a habit of expanding. And if it did expand it wouldn’t be a good idea.

For one of the major sources of working capital for young and small companies is indeed that float that you can dig out of delaying payments to the taxman. Perhaps you shouldn’t do it, perhaps it’s even naughty, but it is still true that it’s a major source of working capital.

Asking for a bond of course doubles that hit on working capital. Instead of being able to slide a payment that might be due in three months time out to 6 months time, you’ve got to come up with the 6 month payment right now. Even that it’s a bond, not an actual payment, doesn’t change much as it’s still a hit to your credit rating or how much you can borrow elsewhere.

I remember being absolutely astonished in California. Having set up and started a business we were then told by the sales tax people (so equivalent of the Vatman, not PAYE but still similar) that we had to put up a bond for the amount of sales tax we expected to collect in the next three months.

Yes, of course, legally it’s the State’s money, we’re just collecting it on their behalf. Yes, absolutely, they have a right to it. But what does it do for business formation when you deliberately increase the amount of capital a start up must have by pre-charging the taxes that might be due three or four months down the road?

There’s entirely another way of looking at this. Being a bit lax on credit ratings and payment terms for taxes on small and new companies is an explicit subsidy to their working capital. And we do all agree that getting capital into small and new companies is something this country isn’t all that good at, do we? And that possibly there’s even an argument that government might have a role to play here?

Even if we don’t all agree with that description, we do all agree that many people say that is a problem, yes? In fact, there are many people who say that Government should be even more explicit in such subsidies: by, for example, making grants and low interest loans to such small and start up companies.

And here we have just such a scheme, even though it operates rather under the radar. The problem is, of course, those who take serial advantage of this laxness which provides the subsidy.

Perfectly happy with the idea that the serial offenders get it: not all that over joyed about the idea that it might be gradually extended until the subsidy vanishes and we start demanding that all start ups require even more capital than they do at present.

Facebook, on the other side of the pond, may or may not be worth $100bn, but either way it doesn’t matter. Eye instead the company’s S-1 filing with the US securities and exchange commission, and the key figures that stand out are that it took seven years to create a company with $3.7bn in revenues and $1bn in profit. No wonder, then, that from nothing Mark Zuckerberg may have amassed a fortune that, give or take, is worth $1bn for each of his 27 years of age. The growth may, or may not continue but, in an era where the media business is supposedly in decline, out comes one man to create an online environment that is so popular that it is becoming the make-or-break environment for other media brands, whether it is the games company Zynga or the all-you-listen-to Spotify.

Then ask, why does nothing like this happen in Britain: why is this country unable to create a globally significant disruptive media or internet business?

Err, both Bebo and Friends Reunited were home grown weren’t they?

It’s true that neither went on to multi-billion flotation but they were indeed globally significant and disruptive (the latter of more than one marriage so I’m told).

And that is only to look at the social media world, without even considering the rest of the internet or computing world.

So I think we can dismiss the “Brits don’t create anything” part. However, there still might be a problem in the financing stage: and I wouldn’t be hard to convince that this is so. The US has a vast industry of venture capitalists desperately searching for exactly this next adventure that can be financed through the growth phase. They’ll happily pump in billions upon billions to grow a company to size. Our own home grown such funds just aren’t of comparable size. Millions, yes, tens of millions even, but that’s not sufficient to grow to global size. Might get you a nice local positions, a UK one, but not global.

We need, in short, more and larger venture capital funds.

Not a new analysis of what ails the UK economy of course: been done to death over the years in fact. It’s just that it’s not exactly a politically acceptable answer, is it?

A mortgage is a debt (more formally, it’s the security for a debt). Gold is an asset.

Terrible mistakes have occured over the centuries when people get these things confused.

He said he had not benefited from his wrongdoing as the sum he had stolen from JC Flowers was less than the bonus, or profit share, he had forfeited when he was sacked.

Didn’t work but interesting argument all the same.

The Prime Minister added: “In the spirit of this healthy competition with France… If France goes for a financial transactions tax, then the door will be open and we will be able to welcome many French banks to the United Kingdom and we’ll expand our economy that way.”

“If France wants to be so mindbogglingly stupid about it then we’ll take advantange of having a mark at the table, don’t you worry.”

Here’s what the real problem is though. Are the French actually so mindbogglingly ignorant and stupid as to think that an FTT is a good idea? Or have they something up their sleeve?

It’s possible that they do think it’s a good idea: economics/finance has never been something that the Enarques quite get. They tend to see politics and the decisions of technocrats as somehow over ruling the movements of markets. Certainly they believe they should and they might even believe they do.

Or it could be that they know that an FTT is a bad idea, most especially one imposed in only one country inside a Single Market with the free movement of capital, companies and labour. But they’ve got some ace up their sleeve: perhaps they’ll use the movement of business resulting from the FTT as an argument for its extension?

Anyone any ideas?

The taxpayer has lost almost £900million on the value of its shares in Royal Bank of Scotland and Lloyds Banking Group amid fears that the backlash against bonuses would damage their performance.

Yah, I know, cheap shot, but wouldn’t it have been better to let Hester keep his shares?

France has added some more rocket fuel to Monday’s already volatile summit of EU leaders by pledging to introduce a 0.1pc tax on financial transactions in August.

Oh to be a property agent in London these days. Brush up on the French lessons and wait for the stampede of Frogs into London to escape the tax.

Whatever financial markets are still in France won’t be by Sept 1 (for of course the French won’t do anything at all in the holiday month of August).

It is of course economic stupidity even if politically astute: but then that’s Sarkozy all over, isn’t it?

Taxman ‘denied £500,000′ as Stephen Hester waives £1m RBS bonus
Stephen Hester’s decision to waive his £1 million bonus will see the Treasury lose out on hundreds of thousands of pounds, estimates suggest.

A bonus to a senior banker is entirely normal practice.
They are diverging from that normal practice and as a result the Treasury is going to lose revenue.

This is, from the way he talks, tax doging. Should be banned eh, should be forced to take the bonus to that thte tax is paid.

Greece is on the verge of a breakthrough in talks with its creditors that could wipe out up to 70% of its debts and alleviate the crisis in the eurozone.

No it bloody isn’t.

They’re on the verge of a deal whereby some of their creditors take a 70% haircut on their debt.

But not all of their creditors take a 70% haircut.

Therefore the total debt will fall by some amount smaller than 70%.

But this is to miss the big point. S&P and its rival Moody’s have a power……What gives S&P and Moody’s such immense power is not their brilliant analysis: it is simply the function they perform. Whether prime minister or CEO, if you want to borrow from bond markets you need a credit report to show investors…….It sounds boring and technical, which is why no one gets wound up about the credit rating duopoly…….Why should S&P and Moody’s earn such vast sums?……. In my working life, the credit-rating duopoly……But not the agencies: since every borrower still needs a rating,……Rather than stick to obscure technicalities, the duopoly……

You do not have to have a rating to issue a bond.

It’s hugely useful to have one of course. You’ll be paying through the nose for the privilege of not having one. But there is no legal requirement to have one at all.

But the real proof of ignorance here is that he seems not to have heard of Fitch. You know, the third major ratings agency? The one that makes up the triumvirate. So that what we actually take is not the Moody’s S&P or Fitch rating, but the two out of three one?

Plus of course there are thirty or forty more around the world, several of them having the same legal status inside the US as the big three (nationally recognised something or others).

To insist that it’s a duopoly is simply to be ignorant of the world one is describing.

And as to this:

The obvious solution would be to take this public service into public hands. Let’s have a ratings agency run by the UN, funded by pooled contributions from both lenders and borrowers. It should be the only one to have preferential access to data from corporates and countries. Let’s make the ratings business a utility, rather than a semi-cartel that intimidates elected politicians and rakes in excess profits. It’s time to break up the bullying double-act.

Is the man insane?

Sirisly? We’re going to put Sarkozy, through the Security Council, in charge of France’s bond rating?

Obama the US one, Osborne the UK?

Fuck me but that’s nonsense.

Especially as those 30 to 40 other agencies would suddenly see their revenues soar as people turned to them for their views. And if they were banned, to the new companies that would replace them.

Man’s a loon.

It would appear that, with the honourable exception of Larry Elliott most of the time, the chief qualification to write on matters economic for The Guardian is to be ignorant of matters economic.

The Deputy Prime Minister will launch today a campaign for a “well-rewarded workforce”, saying that businesses owned by their staff are more dynamic and have higher morale.

He wants to encourage companies to follow the model of John Lewis, the department store group which is owned by its employees and distributes its profits between them.

Mr Clegg’s call for “responsible capitalism” will come as City firms are preparing to pay executives billions of pounds in bonuses, despite pledges from politicians to curb excessive pay and growing hardship among ordinary families. Bob Diamond, the chief executive of Barclays, is reportedly in line for a £10 million payout.

The banks are handing out part of the profits to the staff. This is bad. John Lewis hands out all of the profits to the staff. This is good.

Is Clegg (et al) really so fucking ignorant that he doesn’t realise that a system of bonuses is equivalent to employee share ownership? Especially as many of those bonuses are in fact paid in restricted shares? In fact, I think I’m right in saying that by law some part of bankers’ bonuses must be paid in restricted stock. It’s certainly how Bob Diamond gets a piece of his wedge.

Do we really have a Deputy Prime Minister who is that thick?

The Deputy Prime Minister will add that companies tend to be run better if workers have a stake in them.

“Firms that have engaged employees, who own a chunk of their company, are just as dynamic, just as savvy, as their competitors. In fact they often perform better. The 1980s was the decade of share ownership. I want this to be the decade of employee share ownership. We need more individuals to have a real stake in their firms, more of a John Lewis economy.”

One proposal under consideration is a “right to request” rule, which would give staff an automatic opportunity to ask their employer for shares.

Mr Clegg has asked Danny Alexander, the Chief Secretary to the Treasury, to incentivise companies by “[looking] at the tax arrangements for employee-owned firms”. A source close to the Liberal Democrats said: “Nick is pushing his Government colleagues for real, early, radical action on this.”

Whatever tax breaks they bring in, guess who are going to be the companies who dive in and take advantage of them?

Yup, the banks. For they already do this, don’t they? Hand out wodges of equity to their staff each year. So if there’s a tax break for handing out wodges of equity then the banks will structure bonuses to meet the demands of that tax break.

This is a tax break for bankers’ bonuses.

Won’t Compass, nef, Ritchie, all those who support the mutualisation of the economy, be happy about that?

Everything is to do with deregulation and the neoliberal bastards. However, let us take one declamatory statement, at near random, and examine how well he knows his stuff.

Unregulated lenders, we now know, pushed millions of Americans into home loans they could not afford. Much-deregulated investment banks packaged those lousy loans up into investments that the nation’s ratings agencies promptly declared to be of the first quality.

Err, no, they didn’t. The ratings agencies that is.

What was done was securitisation, something that Fannie and Fredie were also doing, indeed, what they were set up to do. And Sallie Mae (?) has been doing it with student loabns since forever, credit card receivables are treated the same way etc etc etc.

There’s nothing new or strange about securitisation at all. To be against securitisation is to be against the 30 year fixed rate mortgage for example, and that’s really not a position I would expect Frank to adopt.

But more than this, the ratings agencies did not declare these securitisations to be “investments….of the first quality”. In fact, they did exactly the opposite. They rated different tranches of the securitisations differently: here’s some stuff which is AAA, yes indeed. But also here’s some AA, some A and by the way, this stuff over here is pure dreck, equity option type stuff, really not a bond at all.

It simply isn’t true that all those mortgages wrapped up into bonds were declared AAA.

At which point we could conclude one of two things: Frank has let his rhetoric get away with him which would be the polite thing to say or Frank is clueless on what really happened which is probably closer to reality.

The Budapest government saw borrowing costs soar and the currency plunge as traders bet that international authorities may abandon Hungary, letting it become the first European Union country to default on its debts.

but no article on pensions “reform” would be complete without special mention of Mr Brown’s act of pensions vandalism, when he removed the tax credit on dividends to help fund public spending. Without the abolition of this tax break, many funds would still be in surplus.

Is it actually true though? Anyone know?

Back when he did it it cost £5 billion a year, meaning a capital value of £50-£100 billion or so.

Is that enough to swing the whole system from viability to inviability?

His comments follow the revelation that Barclays has stockpiled billions of pounds of “losses” to reduce future tax bills, despite not having made a loss at group level for over a decade. They also come shortly after the pledge by Bob Diamond, Barclays’ chief executive, for “banks to be better citizens”.

He then goes on to repeat the nonsense he spouted yesterday.

I mean seriously, what the hell is this with ” ” around losses?

As an example: I’ve no idea about the Telegraph’s finances but I’m sure that there are some parts of the group that make losses, other parts that make profits. You get to offset one against the other. That’s certainly true at the Guardian Media Group, is it not?

However, when you start going over tax jurisdiction boundaries then it’s not quite so simple. You don’t get to say well, we made a loss in Spain therefore the tax on our UK business is reduced. The loss in Spain gets “warehoused” until you’re making a profit in Spain against which you can offset those previous losses.

So it’s entirely obvious that you can have losses in an international group, even while having overall profits…..and thus tax credits in places even while having overall profits.

So what is Aldrick doing? Is this simply that he’s got the wrong end of the stick? Or is he being told to write this nonsense?

Paul Ruddock, a hedge fund manager and Tory donor who profited from the collapse of Northern Rock.

The Observer, getting all het up about the Honours List.

I’m afraid I don’t understand. Why are they getting all het up about making money out of Northern Rock’s collapse?

We want capital to be allocated efficiently. Whatever economic system we have we really do still want that to be done by someone, somewhere. And a vital part of that, in fact the part that capitalism (even, if you prefer, late financial capitalism) does really well is close down the failures. Clears the shite out of the system.

Reallocates capital from unproductive to productive uses.

This is a good thing so why are they getting indignant about it?

I can imagine being upset if a financier drive a perfectly good business into the ground. But recognising that something is shite, selling stock in shite, making apparent to everyone that it is shite as it does in fact turn out to be, shite, that’s a plus to the economy, not a minus.

Or, in this case, I can imagine getting angry at Applegarth but why Ruddock? Ruddock, by his actions, helped to uncover the stupidity that Applegarth was perpetrating.

Given the (apparent) largesse of the German taxpayer to the Irish in terms of the financial bailout, perhaps it’s the least Ireland can do, to send two of its most famous sons to the Federal Republic to say thank you to the kind citizens of Stuttgart, Munich and Berlin for all those euros being repatriated to Dublin, Cork and Galway.

Ignorant twattery.

The money flow is the other way. The German banks lent too much to Ireland….even to the point of setting up a German bank under an Irish nameplate so as to lend lots to all sorts of dodgy characters all over the world.

The Irish government, in the single biggest mistake of the whole crisis, then guaranteed all of those loans from Germany to Irish banks. And are gouging the Irish citizenry to pay it all back.

The Irish are being impoverished to save the German banking system, not the other way around.

In the last 25 years we have allowed banks to balloon in size. Until the 1970s, banks’ assets as a percentage of UK GDP remained steady at approximately 50%. By 2006, after decades of deregulation, banks’ assets as a percentage of UK GDP were more than 500%.

We’ve abolished capital controls you know. Finance has gone international. And as it happens, the City has become the centre of those international financial markets.

You would have thought that someone bright enough to get into Goldman Sachs would have known that. Or perhaps being stupid enough to leave there to go to the new economics foundation explains it.

For example love, we really don’t give a shit about the size of the assets of UK domiciled banks. We’re completely uninterested in the question in fact.

We do care about their liabilities, this is true, but not their assets.

Think for a moment, if those assets were entirely financed by capital we wouldn’t care at all, would we?

Quite, it’s the liabilities which are important, not the assets.

And yes, eurozone sovereign debt would be most welcome collateral, why do you ask? Thus an attempt at a solution could be seen. Get the banks stuck into the greatest carry trade ever and she’ll be right.

However, this doesn’t actually start until the New Year. Yet bond yields have already been falling.

Global funds are gobbling up Spanish and Italian debt on bets that lenders will exploit the European Central Bank’s offer of three-year credit at 1pc to buy sovereign debt, playing the “carry trade” on the yield spread.

Quite, markets are forward looking. Doesn’t mean they’re always right, heavens no, just that they do try to anticipate the future.

France could be stripped of its triple-A credit rating before Christmas, raising new doubts about the survival of the euro, analysts have predicted.

Well, OK.

Analysts said that if France’s rating was slashed its borrowing costs would rise, making it more expensive for Paris to refinance its debt burden in the new year.

Well, sorta but not really.

France has to pay more to borrow relative to fellow triple-A rated Germany: when France borrows over 10 years it pays an interest rate that is at least a percentage point higher than what Berlin pays.

You see, France is already trading at not AAA sorts of prices.

It’s all rather chicken and egg as to whether a change in the rating is what moves prices and yields or movements in prices and yields that are recognised by changes in ratings.

Think of it this way: everyone who buys, or if they’ve already bought decides on whether to hold or sell, French debt is asking themselves, well, are they going to repay? And what does everyone else think about it too?

S&P is asking exactly the same set of questions. It’s just the buyers and sellers buy and sell moving the price, S&P issues a report about it.

Given that France is already trading at non-AAA prices it’s difficult to say that the upcoming report is what changes them. Although ,to be fair, given that markets are forward looking, that the report might recommend a downgrade could have an effect.

However, as always, it’s not quite that simple. For a loss of the AAA means banks holding French debt now have to assign capital to that holding (currently, I think I’m still right in saying, AAA sovereigns need no capital allocation).

And the decision is made on two out of the three (S&P, Moodys, Fitch).

A downgrade would also hit France’s ability to contribute to the European financial stability facility, set up by members of the eurozone to combat the eurozone’s sovereign debt crisis, and provide emergency funding.

That’s definitely true, although the EFSF is already trading at worse rates than the underlying guarantees indicate it “should”, meaning that the markets think it a failure already.