Principles Of Canadian Municipal Finance (And Why A Land Value Tax Is Inferior)

Published by Anonymous (not verified) on Sun, 20/05/2018 - 11:00pm in


Canada, Housing, tax

 Canadian Local Government Revenue As A % Of Total GovernmentThe funding of Canadian municipal governments is not normally thought of as interesting topic; even Canadian fixed income investors are not particularly excited about it. However, there are two side issues that are of general interest. The first question is: what happens to Canadian municipalities if the housing bubble pops? (As a spoiler, not very much.) The second question is the feasibility of a Land Value Tax (LVT) which is a concept that gets some people on the internet very excited. I will then outline why a LVT is inferior to the Canadian property tax system (which is not that different than the American system for that discussion).

Canadian Municipal BasicsIn interests of brevity, I will focus on how the Canadian municipal government system differs from that the United States. (Since I never saw opportunities to look at sub-sovereigns elsewhere, I will not discuss the comparison to other countries.)

The big difference for government finance between Canada and the United States is that Canadian provincial governments have much bigger economic footprints than American states. Canada has a larger welfare state, and it is largely implemented at the provincial level. Furthermore, Canadian provinces do not have balanced budget laws (which would make implementing the welfare state at the provincial level impossible). Modern Monetary Theorists would argue that the welfare should be implemented at the Federal level, but the Canadian Constitution trumps economic common sense.

When we drop to the municipal level, I believe that Canadian municipalities have less independence than is the case for American municipalities. For example, the Quebec government unilaterally decided to merge municipalities as a move towards cleaning up administration in the early 2000s. (The citizens revolted, and a number of those mergers were unwound.) I believe that most American states lack the authority to do anything similarly obnoxious.

Municipalities exist within a legal framework set by the province, and revenue raising has to be using specified means. (The British North American Act divided up the revenue pie between the Federal and Provincial levels of government.)

Details obviously vary across the country, but as in the United States, property taxes are a major source of municipal revenue. (Taxes for schools and utilities like water or garbage collection would be at this level. I think that school tax rates are linked to property tax rates, but might not be included in the property tax numbers in the chart I show below.) To distinguish a property tax from a Land Value Tax, a property tax is levied on the value of both the land, as well as the buildings on the land.

Property taxes are based on an assessed value. In my municipality, there is a periodic reassessment of property values (every few years) based on market pricing, plus you will get your assessment bumped up if you foolishly do major renovations (which I am about to do...). Since all property transactions are registered by the municipality, they have a very good idea what prices properties are transacted at. My feeling is that the assessed property values are pretty good estimates, but with a tendency to be slightly low (across the board). Having the assessed values being somewhat below the true market price is a useful way to keep the number of challenges to assessments limited. The only way the market value of your property is far below the assessed value is that you have some serious hidden defects. However, most homeowners know enough to not run to the entity that has the power to condemn properties as unfit for human habitation to argue that their assessment needs to be lowered because of mould on their  house's framework.

Since the assessment is close to where everyone feels the market price is, I'd argue that the tax is viewed as fair. (As a spoiler, this is no longer the case for a Land Value Tax.)
Less Cyclical than the United StatesCanadian municipal finance rules are straightforward. The municipality just follows the given algorithm.

  1. Determine the sum of all assessed property values in the city.
  2. Figure out how much property tax the city wants to raise.
  3. Divide (2) by (1) to get the tax rate.

The city will need to take into account property tax rates in nearby municipalities, but that is about it.
The flexibility of the tax rate means that changes in house prices alone have no effect on property tax revenue. (There are other channels, noted below.) If assessed house prices rise by 10%, they just cut the tax rate by 10%. This means that homeowners just need to look at the tax bill (and scream); the assessed property value is there for entertainment purposes only.
This means that Canadian municipalities are not going to be crushed by falling house prices by themselves (which is different than what was seen in some American municipalities). There would be some forced austerity at the local level, but it would be small potatoes. A housing development boom does help municipal finances, via new developments raising property values, as well as the Orwellian "Welcome Tax" (a tax paid when buying a house). Those positive factors would reverse, but it would not force widespread retrenchment. In a deep recession, the worry would be about the provinces, and whether they are "too big to fail."
(In any event, attempting to short Canadian municipals seems like a suicidal trade. Very few institutional investors trade the things, and so one would face extreme short squeeze risk.)Is the Property Tax a Good Tax?Before I get to the Land Value Tax, I want to first discuss the desirability of its close cousin: the property tax. My discussion here is extremely Canada-centric -- although I would argue that the situation is not that different in the United States. For other countries, there are differing institutions and political constraints. In interests of space, I am not going to discuss all issues with the tax, rather a more practical question: is it possible to greatly increase the property tax?
The first problem is constitutional, that appears applicable to both Canada and the United States. Property taxes are levied at the municipal level, and that is the wrong level of government to get a massive revenue boost. Us Keynesians who want "big government" don't refer to municipal governments -- as they do not provide much in the way of welfare state coverage. If we increase municipal governments, rich municipalities will get even more services relative to poorer ones. If your objective is to even out economic opportunities across the country, this makes the problem worse. (Another practical issue is that this would have to be implemented by municipal politicians. If you want to run as a municipal politician on a "let's raise property taxes" platform, expect to get less votes than the Marxist-Leninist candidates.)
The macroeconomic problem is that property taxes have no counter-cyclical properties. They tend to be flat across the cycle, and so they will not help counter-act recessions, nor are they particularly good for inflation control. Municipal governments are too small to apply Functional Finance principles to, but we need to worry about Functional Finance for aggregate behaviour.
Finally, the key problem is that property taxes are levied with no strong link with the capacity to pay. If you want to get theoretical about it, you are levying a tax on a stock, while incomes (and taxes) are flows. Believers in 19th century economic theory might believe that "economic rents" are constant over time, whereas casual knowledge of capital market behaviour tells us that it has to vary with time (assuming it exists..).
The basic law of taxation is that you can't get blood from a stone. No matter what your personal political animus against the stone is, it just ain't happening. Property taxes fight against that principle.Insignificance of Property Taxes In General Revenues For Big Governments Canadian Property TaxThe chart above shows percentage of "real property taxes" in total revenue for the General Government sector (which includes contributions to the Canada Pension Plan, which are indeed taxes). (As a disclaimer, this data set from Statistics Canada is new, and I am unsure about the details. It may be that some of the local government taxes are levied based on property values, and might be lumped in with property taxes.) As can be seen, it is a small number.
In order to help personalise the issue, I will discuss some back-of-the-envelope numbers for my local municipality. If you have a single earner household that has not bought an insanely large house, the property taxes would drop to about 10% of all taxes paid at an income level somewhere below $100,000. For those of you not familiar with our funny-money currency, $100,000 is a solid upper middle class salary -- more than a junior financial analyst, but probably less than what a competent plumber is making right now. (Since homeowners are often married, the ratio more generally would depend on how income is distributed.) Since all-in marginal income tax rates in the People's Republic of Quebec is around 50%, the importance of property taxes rapidly collapses as incomes rise above $100,000.
Let us imagine what happens if the property tax were doubled? For this hypothetical household, it's a 10% rise in the total tax bill. An annoyance, but survivable. (Since property taxes are not deducted at source -- and the typical Canadian household has almost no financial assets -- such a move would be psychologically painful in the short term for many. However, since many people roll their property taxes into their mortgage payment, the effect might get smoothed out.) 
However, this no longer the case for seniors. The Canadian system has dealt with the problem of senior poverty by letting them putter around in their houses. This is achieved by giving them a minimal Canada Pension Plan (Quebec Pension Plan) and Old Age Supplement (plus need-based transfers). They can survive on low pre-tax incomes since they pay little taxes (mainly the value-added tax). Raising property taxes is a direct assault on their limited fixed incomes.
In other words, raising property taxes will be a mosquito bite for the rich, and you will end up liquidating the class of senior citizens. "Why do you hate old people?" is the correct response to anyone advocating a massive increase in property taxes. Anyone with knowledge of Canadian seniors is that they are ornery, and taking them on politically is suicidal.
I lived in England, and I grasp the historical tribal class divide between land-owners and renters in European politics. From what I have observed in England, it seemed to me that this distinction was breaking down. In Canada (and the United States), that binary division does not fit the political facts on the ground.
I grabbed the following quote from the summary of this Statistics Canada study: Income from owner-occupied housing, 1969 to 2011

From 2006 to 2011, home ownership rates increased from 27% to 35% among 20- to 29-year-old households, and from 67% to 71% among households aged 70 or older.

Home ownership is not the mark of the ultra-rich; it's 71% of the senior population. Furthermore, there is no guarantee that the renters are poor; luxury apartments and old folks homes are a thing.  It may only be the well-to-do households that can afford to move out of their homes into rental dwellings once they have difficulties getting up and down the stairs. (Admittedly, a class division might be more obvious in the larger Canadian cities, but less of a factor in the smaller population centres.)
Furthermore, rural incomes tend to be lower than urban. However, land is cheap, and there are almost no building code enforcement. Anyone who has been working for most of their life should be able to afford a shack somewhere in rural Canada.
Class warriors might think that renters will be spared. It is likely that in the short term, property taxes will not be passed through into rents. However, it is only possible to squeeze landlord profit margins, but there will always be profits. There will be no rental supply forthcoming at a loss. Large increases in property taxes raise the cost of doing business for landlords, and they will be passed through to renters.
This is what happens when you impose taxes that are not linked to the capacity to pay. You have to go where the money is, and only income flows point us to that location. This is why modern welfare states are powered by income and value-added taxes.
(If one is a free marketeer that wishes to shrink government, a reliance on property taxes helps limit its size. This because you hit pain capacity constraints relatively quickly.)Land Value Taxes: SuboptimalIn addition to the modern revival of Social Credit on the internet, Land Value Tax bugs have arisen from the ashes of dead economic theories. Fans of the proposals are very happy to send you 200 page PDF's that describe its merits. (As regular readers might guess, I did not bother reading any of those 200 page PDF's. I try not to waste my readers' time, nor my time.)
If you live in a jurisdiction without a competently-run property tax system, a Land Value Tax might be a good idea. It may also be easily implemented in ridiculous postage stamp countries like Singapore, or on targeted districts like Manhattan. My comments here refer to the merits versus a property tax, and for countries like Canada that are large enough so that swinging a cat around by its tail does not involve having its nose pass through several border controls.
Taxing land alone would be a straightforward change to the property tax system: we zero out the value associated with the building on the assessment, adjust tax rates accordingly, and send out the new property tax bills. However, no municipality in Canada is crazy enough to do that. Why?
The first problem is that it would be a steeply regressive change to the distribution of tax. In urban areas, plot sizes are relatively uniform within a district, while building values are not. Taxing land alone redistributes taxes from young people living in McMansions to old people who live in bungalows. "Why do you hate old people?"
Within city cores, you will be subsidising high rises (in case any of my readers are liberals, that includes Trump Tower) at the expense of the various low rise support buildings around them. Once again, the rich get richer.
Furthermore. this exacerbates the breakdown between the taxes imposed and the capacity to pay -- which was already a problem for property taxes. Since you are now squeezing the poorer income segments even harder, you will probably have to lower the aggregate tax take.
I had interlocutors on Twitter object to this. Might not development plans change? Sure, if you have a magic want that can costlessly restribute land and buildings. Even if there eventually was a new equilibrium that was in some sense reasonable, there is no assurance that we can get here from there.
There is no guarantee that the high density utopia that Land Value Tax devotees appear to favour would appear. More dense construction practices implies a greater need for local government services. (For example, a high rise with lots of apartments raises the number of tots that show up in the local school.) If the government does not get increased revenue as a result of the development, it is financially suicidal to approve the development plans.LVT Administration IssuesThe next problem with a Land Value Tax is that it breaks the administrative process. We know exactly what people pay for properties -- but the values for land are not observed. Since mortgages are based on property value, there is a large private sector infrastructure for home valuation. This infrastructure keeps property assessments in line with the facts on the ground.
Conversely, in urban areas, land values are purely hypothetical. Almost all transactions involve properties with buildings on them. In my district, my guesstimate is that there was exactly one land deal for sure over the past decade, and possibly a couple more where the houses involved burned down.
Furthermore, as soon as such a tax was imposed. everyone with a couple of brain cells to rub together would throw sand into the land valuation process. At the extreme, every single property transaction would involve a pair of (linked) transactions, with the land given a nominal value of $1, and the building getting the rest of the value. Since mortgages are assessed on both (and lower tax values raises the credit capacity of the borrower), everyone has an incentive to structure deals this way. Since these are the only observed prices, any market-based approach to valuation would have to use them. (Even if a plot of land had no building, people would just slap a pre-fabricated shack on the property to suck up the valuation.)
An idealist might say that the government should pass a law against such abusive tactics. However, the law is what a judge says the law is. Most judges own houses. The government would have its posterior handed to it in court.
The government is stuck with assessing taxes on a purely administrative basis, removed from market pricing discipline. (This will be just as efficient as the tax on windows.) In a big country like Canada, there are three options.

  1. It is a flat tax imposed on a per-square-meter basis across the country. However, if one glances at a map, one realises either that the tax rate would be laughably small, or it would wipe out the farming industry.
  2. It is administered solely at a local level. The problem is that if the local governments control it, the local governments involved would tell the LVT backers exactly where they could put their LVT, and it would not be implemented.
  3. A central government (probably provincial in Canada, courtesy of the BNA Act) imposes guidelines based on broad categories (rural versus urban zoning, etc.)

The final option might attract some LVT fans, but it would be rejected by anyone with any knowledge of politics. The objection is straightforward. Imagine you are in the position of a Democrat living in a blue state. You should be very concerned about the possibility of handing the Republican-controlled Federal government the power to levy an arbitrary tax that can be targeted on the basis of ZIP codes. Unpopular minorities (like English-speaking Quebecers), tend to cluster geographically; giving central governments the power to target people on a geographic basis would raise civil disharmony.
In order to avoid obliterating farmers (a political group that is almost as ornery as seniors), farm taxes per square foot have to be lower than urban land taxes. This creates a massive problem on the border of almost every urban area. If you start of at the centre of a town or city and walk in selected directions, you will eventually hit a border line between a suburban and rural land. The typical case is that on one side of a road is a farm, and on the other side there are houses. Under a property tax system, those houses pay way more tax per square foot. If a LVT were assessed on the value of land, it would be the same as the farm on the other side of the road. In order to avoid obliterating farmers, the administrative rule would have to impose higher rates on the households -- which they could avoid be being zoned as farms. Since practically all suburbanites have tomatoes in their backyards, we would suddenly have pressure to have most of the country declared as rural properties. The central government would suddenly be facing off in court against most of its voters in swing ridings. Good luck with that.Concluding RemarksIf your model suggests that a Land Value Tax is more efficient than a property tax, your model is wrong.
(c) Brian Romanchuk 2018

More BBC Bias as Question Time Panel Tonight Almost All Right-Wingers

Published by Anonymous (not verified) on Fri, 11/05/2018 - 2:29am in

Mike over at Vox Political has put up a piece commenting on the selection of the members of tonight’s panel for Question Time (10th May 2018). You probably won’t be surprised to hear that it’s made up nearly exclusively of members of the right. It includes Alejandro Agag, a businessman; Esther McVey, Tory MP and murderer of the poor and disabled; Chuka Umunna, the Blairite Labour MP, and Chloe Westley from the Taxpayer’s Alliance. The only person, who is probably left-wing and therefore may have something sensible and interesting to say is the rapper Akala.

Mike goes on to remark that he understands the show’s producer is a member of the hard-right BBC Tory hierarchy, and so there’s absolutely no point hoping that the situation will improve in the future. Mike clearly finds it disgusting enough that McVile is on the show, let alone the rest of the right-wingers. He therefore recommends that instead of watching it, you may as well go out instead.

Intriguingly, he ends his post by saying that he’s going to be down the pub trying to do something constructive. This may possibly be planning the launch of a balanced debate show on social media.

If a truly balanced political/ topical issues panel show like Question Time on TV, and Any Questions on the radio does get going, then it’s bound to worry the BBC even more. The mainstream media is worried now that increasingly more people are taking their news from social media, indeed of sitting down and watching the corporate, right-wing biased material they pump out. You can imagine just what kind of explosion will happen at the Beeb if they suddenly find that more people are watching the internet’s answer to those two shows: there will be more huffing and puffing in the media about how the consensus is being destroyed and politics more fragmented, because people are watching the parts of the internet they agree with. This, I think, is a particular problem for the Beeb, as it’s the national broadcaster and so likes to consider itself the former of the nation’s opinions. Just like the various pompous Tory broadsheets, the Times and Torygraph. The result of this will be more scare stories about fake news on social media. And if the panel show is on RT or another foreign-owned station, they’ll try and work up a scare about it being a source of evil foreign propaganda.

The presence on the panel of a member of the Taxpayer’s Alliance is another example of the Beeb’s Tory bias, as I got the impression that it’s basically a kind of ventriloquist dummy for the Conservatives. It’s supposed to be independent, but a friend of mine told me he’d looked at their leaders, and found that they were all members of the Tory party. Those that weren’t in jail for dodging taxes, that is. Thus, it isn’t even remotely independent in reality, but this doesn’t stop the Beeb pulling them regularly on news programmes and claiming that they’re an independent group. This is presumably in the same way that Laura Kuenssberg and the rest of the Beeb’s news team are unbiased. As unbiased as Nick Robinson when he edited out former SNP leader Alex Salmond’s full answer to his question when reporting on his speech about the Scots referendum.

The Beeb is increasingly showing its right-wing bias, despite the snotty answers it gives those who dare to write in to question this. And as it does, more people are going to log on to the alternative news sites. Mike’s suggestion that a truly balanced topical issues show like Question Time might be on the way on social media sounds very interesting, and just the thing we need to replace the Beeb’s own biased programming.

RT Video Shows the Awkward Facts about Safid Javid

Published by Anonymous (not verified) on Thu, 03/05/2018 - 4:45am in

This is another short, excellent little video from RT. It states that its about the uncomfortable facts the media is trying to cover up about this son of a bus-driving dad. When he was working for Deutsche Bank, his annual salary was £3 million a year. He voted 16 times against a tax on bankers’ bonuses. He was responsible for a speech vilifying Momentum as the ‘hard-left Fascist group’. ‘Hard left’ and ‘Fascist’ are contradictions in terms, as Fascism is far right, whatever Tories and American Republicans try to argue. Momentum is actually neither. It’s traditional centre left, Labour’s traditional post-war political stance before the destruction of the social democratic mixed economy and the welfare state under Thatcher. Oh yes, and he was responsible for the government’s failed promises to the Grenfell victims, and just this week warned that the government was about to break another one. They weren’t going to be rehoused any time soon. So much for Tweezer’s claim that they’d all be rehoused within twenty weeks, and it would be a top priority.

In short, Safid Javid is another massively overpaid, corporate banker. Like Rees-Mogg he votes consistently for the benefit of the rich, his own class, and cares nothing for those beneath him. Which includes the victims of the Grenfell Tower fire.

He and the rest of the Tories should be sent a message through the council elections tomorrow that people are sick of them, their contempt for ordinary people, their own monstrous, unrestrained greed and their vile treatment of the poor – the victims of Grenfell fire, the members of the Windrush generation they’ve deported, and just about everyone their policies have attacked and reduced to insecurity and misery – the unemployed, the disabled and those on low incomes, who are now having to choose between eating and paying the bills. Vote them out!

Will Brexit mean a ‘race for the bottom’? – 17th May, with Margaret Hodge MP

Published by Anonymous (not verified) on Wed, 18/04/2018 - 8:25pm in

Will Brexit mean a ‘race for the bottom’?

6-7.30pm, 17th May
Goldsmiths – PSHLG01
Register here

One of the many uncertainties that surrounds post-Brexit Britain concerns its regulatory and fiscal model. The Treasury’s own forecasts recognise that “leaving the European Union could provide the UK with an opportunity to regulate differently across social, environmental, energy, consumer and product standards”, while the possibility of a low-tax, small-state economy has been touted by government figures as a ‘threat’ that can be used against the Brussels in negotiations. David Davis has dismissed fears of a ‘Mad Max dystopia’, but there are serious anxieties as to whether a ‘race for the bottom’ on tax and regulation could ensue, especially in an effort to satisfy the City of London.

How seriously should we take these fears, and what are the alternative models that are available to Britain outside of the EU? This event will explore the dangers of seeking national ‘competitiveness’ on tax and regulation, and weigh up some of the alternative futures that are available to the UK. It will consider the ideological and sectoral forces pushing Britain towards a ‘race for the bottom’, and seek to identify what the countervailing ones might be.

This event is jointly organised by the Political Economy Research Centre and Tax Justice UK.


Rt Hon Dame Margaret Hodge MP, Chair of APPG on Responsible Tax

John Christensen, Chair, Tax Justice Network

Robert Palmer, Executive Director, Tax Justice UK

Inga Rademacher, Associate Lecturer, Goldsmiths, University of London


This event is free to attend but registration is required. Please register via the form on this page.

The post Will Brexit mean a ‘race for the bottom’? – 17th May, with Margaret Hodge MP appeared first on Political Economy Research Centre.

Jacob Rees-Mogg and Tory Self-Delusions

Published by Anonymous (not verified) on Sat, 31/03/2018 - 7:08pm in

I found this little gem in the ‘Pseud’s Corner’ column of an old copy of Private Eye. Amid the usual, very pseudish remarks from football pundits and cookery writers comparing that last goal by Arsenal to Julius Caesar crossing the Tiber, or literary types extolling the virtues of their last excursion around the globe, where they took part in the ancient tribal ceremonies of primal peoples, was a truly astounding quote from the Young Master. This is, of course, the current darling of the Tory party, Jacob Rees-Mogg, who declared.

“I am a man of the people. Vox populi, vox dei!”

This was in response to Andrew Neil questioning him about the influence of public schools on British political life.

Rees-Mogg probably does see himself as ‘man of the people’. He’s in a party, which considers itself the natural party of government. Decades ago, the Tory ideologue, Trevor Oakeshott, tried to justify the overpowering influence of the middle classes by saying they were the modern equivalent of the barons who stood up to King John, in providing a bulwark against the power of the state. True in some case, but very wrong when the middle classes are in power, and the state functions as their servant.

Rees-Mogg has never, ever, remotely been a man of the people. He’s an aristo toff, who has made his money from investment banking. He holds deeply reactionary views on abortion and homosexuality, which are very much out of touch with those of the genuinely liberal middle and lower classes. And he has always represented the aristocracy and the rich against the poor, the sick, and the disabled. He began his political career in Scotland trying to folks of a declining fishing community that what this country really needed was to keep an unelected, hereditary House of Lords. In parliament, he has continued to promote the interests of the rich by demanding greater subsidies and tax cuts for them. For the poor, he has done nothing except demand greater tax increases on them, to subsidise the already very wealthy to whom he wants to give these tax cuts, and voted to cut welfare services and state funding for vital services. No doubt he genuinely believes all that Thatcherite bilge about making life as tough as possible for the poor in order to encourage them to work harder and do well for themselves.

Personally, he comes across as quiet-spoken, gentlemanly and polite. But he is not a man of the people. He hates them with a passion, but clearly thinks of himself as their champion and saviour against the dreaded welfare state.

Let’s prove him wrong and throw him out of parliament!

May’s Speech to Rich Tory Donors: This Is What the Lollards Warned You About

Sunday is the Christian holy day, so I thought I’d include here a particularly relevant piece of radical Christian polemic against the rich and powerful and their neglect and oppression of the poor from the 15th century.

A few days ago Mike put up a piece reporting Theresa May’s speech at a fundraising banquet for rich Tory donors. To get in, you had to pay £15,000 for a ticket. The long reign of Thatcherite neoliberalism in this country has led to a massive transfer of wealth from the poorer sections of society – the working and lower middle classes – upwards to the extremely rich. Thatcher, and her fanboys and -girls – have cut and privatised benefits and services to the poor, with the specific intention of making the bloated rich even richer, though tax cuts, massive subsidies, and exploiting the very state industries, that they have privatised and sold to them.

The Lollards were a proto-Protestant sect of the late fourteenth and early fifteenth century, who followed the teachings of the Yorkshire priest and reformer, John Wycliffe. Wycliffe was disgusted by the corruption of the church and society in his day. He advocated the Bible in English, holy scripture as the only source for religious authority, clerical marriage and proper concern for the poor. And he and his followers were bitterly critical of the friars, as they were generally perceived to have neglected their vocation of teaching and preaching Christianity to focus on serving the rich for their own material gain.

The text here is ‘The Perversion of the Works of Mercy’, which inveighs against the way Christ’s commandment to feed, give drink, and clothe poor people, and visit those in prison, as well as other holy works, have been so corrupted so that those, who feign moral rectitude and Christian charity now spend their time doing this for the rich and powerful instead. Here’s an extract. You should be able to understand the late medieval spelling and vocabulary.

Hou Sathanas [Satan] and his children turnen werkis of mercy upsodoun and discyven men therinne and in here five wyttis.

First Crist comaundith men of power to fede hungry pore men. The fiend and his techen to make costy festis and waste many goodis on lordis and riche men and so suffer pore men sterve and perishe for hunger and other myschevys. Ye, men that feynen hem [them] ful of charite and religion gadren proper goodis to hemselven and festen dlicatly lordis and laides and riche men and suffer here pore brethren begge for meschef and fare ful harde.

Crist comaundith to yeve drynk to thrusty [thirsty] [men] and wymmen. The fiend and his techen to puveye high wyn and spised ale and strong for riche men and lordis to make hem drunken and chide and fighte and foryete God and his lawe, and to suffer pore, that han nought of hore owene and may not labore for febilnesse or sikenesse and blyndenesse drynke water and falle in feveris or ellis perische.

Crist comaundith to clothe nakyd men and wymmen whanne thei han noght of here owene. Thereto the fend and his techen to yeve costly clothis and manye to riche men and mynstralis and shavaldours {Northern slang for robbers] for worldly name and suffer pore men have nakid sidis and schakynge lippis and hondis for cold that woo is hemwith the lif. Ye, prelatis and men singular religion, that taken the charge to ben procuratouris and dispenderis of pore mennus liflode, clothen fatte horsis with gaie sadlies and bridles and mytris and croceris with gold and silver and precious stonys, and suffren pore men and children perische for cold. And yit these prelatis and newe religious comen in staat of Cristis povert and his apostlis, and techen and crien that whatever thei han is pore mennus goode. Yit riche men closen dede stockis and stonys with precious clothis, with gold and silver and perlis and gaynesse to the world, and suffren pore men goo sore acold and at moche meschefe.

Crist trechith to herberwe [harbour, accommodate] pore men that han non houses ne penby to peye for here innys [inns, lodging]. The fend and his techen to herberwe riche men and lordis with grete cost and deyitte for worldly worschipe and suffer pore men wander in stormys and slepe with the swyn and many tymes suffer not hem come withinne here yatis, and so to fynde many excusacions and coloure this doynge, Ye, ypocritis of privat religion maken grete houses and costy and gaily peyntid more than kyngis and lordis bi sotil beggynge and confessions and trentalise and mayntenynge of synne, and herberwe lordis and riche men, and namely ladies, and suffer more men lie withouten or geten houslewth at pore men or ellis perische for wedris and cold.

Crist techeth to visite sike men and counforte hem and helpe hem of sustenaunce. The fend and his techen to visiten riche me, lordis and ladies in here prosperite and lykynge to be holden kynde [high born] and curteis, and to comforte eche other in synne and to have lustis of glottonye, lecherie and other schrewidnessis; but of pore men that ben beddrede and couchen in muk or dust is litel thought on or noght. Yit ypocritis of feyned religion vistien not fadirles children and modirles [motherless] and widewise in here tribulacion, and kepe not hemself unbleckid fro this world as Seynt James techith; but visite off riche men and wymmen and namely riche widewis [widows] for to gete world muk by false deceitis and carien it home to Caymes’ {Cain’s] castelis and Anticristis covent [convents] and Sathanas children and marteris [martyrs] of glotonye.

Crist techith to visit men in prison and helpe to delyvere hem in good manere and counforte hem bi almes-yevinge. The fend and his prresonen pore men for dette whanne thi ben not at power to paie and traveil night and day and liven ful harde and toylen with trewthe and susteynen wif and children…

From Middle English Religious Prose, edited by N.F. Blake (London: Edward Arnold 1972) pp. 239-41.

Clearly, this is a piece of sectarian polemic, and isn’t entirely fair. Historians have pointed out that the church was suffering serious poverty and neglect the time, which affected many of the lower clergy and monastic institutions, so that they simply weren’t in any position to perform their Christian duties of aiding the poor themselves.

And my point here is not to attack the Roman Catholic church, as I know many ordinary Catholics and Roman Catholic clergy are deeply involved in caring for the poor. But simply to make the point that the issues the Lollards inveighed against are still present and embodied in the Tory party and people like Tweezer. In the Middle Ages, it was the church that had the function of providing whatever welfare services there were to the poor, as well as the personal charity of great lords. But since Thatcher, public institutions and the welfare state – the modern, secular equivalents of these religious institutions, have been run down for the profit of the rich.

And there’s also a distinct religious parallel here too, though it’s with the evangelical Christian Right and their prosperity gospel. Tweezer is a vicar’s daughter, who claims that when she was a child she was a ‘goody two-shoes’. Lobster has pointed out just how many right-wing Christians gathered around IDS and now Damian Greene in the DWP. The evangelical Right in America believe that God doesn’t want you to be poor, for whom they have nothing but contempt. One particularly self-righteous Republican politico – it might have been Ted Cruz – even declared that the poor should be taxed more. ‘Because it’s what Christ would have wanted’. No, and this moron should read the Gospels before opening his mouth.

And I’m still furious at the way a large number of right-wing pastors made it clear that they didn’t care if one Republican candidate was guilty of molesting underage girls. He stood for their values, which were for the rich, and against the poor. And, of course, gays. Which shows how selective their concern over changes and violation of traditional sexual morality is.

These hypocrites have done as much harm to Christianity as Dawkins and the militant atheists. Many of the atheist polemicists are socially conscious people, whose rejection of religion is partly based on the way the religious don’t live up to their ideals. And as history has shown, and these pratts continue to show, all too often the atheists have been right in this criticism.

And in there moral condemnation of the fawning over the rich at the expense of the poor, the Lollards were right. And this text from six hundred years ago shows up the Tory party and its hypocritical supporters in the Christian religious right as it is today.

Another Crisis in the Outsourcing Industry: Capita Now in Trouble

Yesterday, Mike reported on his blog that the outsourcing giant, Capita, was now in trouble. Its share price has apparently halved, knocking £1.1 billion of its stock market value. It has axed its scheme to issue £500 million in dividends to its shareholders. Instead, it intends to raise £700 million, partly by selling off parts of the company, which it needs to balance the books. There are also fears that it will make part of its 67,000 strong workforce redundant as well as concerns for the firm’s pension fund.

Mike in his article notes that the company was responsible for assessing the infamous fitness for work tests, for which the government has imposed hidden targets. One of these is that 80 per cent of reconsidered cases should be turned down. Mike therefore comments that if the crisis means that some of these assessors get a taste of what they inflicted on benefit claimants, this would be a case of poetic justice. He also wonders what the firm was doing when it devised the scheme to issue those massive dividends to its shareholders. Did they believe that the government’s magic money tree would continue to allow them to give heaps of money to their rich shareholders? He also asks other searching questions, such as whether it was deliberately underbidding to get government contracts, and then using the money to help finance those projects it had already won.

Mike concludes

So: First Carillion collapsed. Now both Interserve (remember them?) and Capita are in trouble.

Who’s next? And what will happen to public services while the Tories dither over this crisis?


Capita, or as Private Eye dubbed it, ‘Crapita’, has a long history of incompetence behind it. Way back in the 1990s it seemed that hardly a fortnight went by without Capita turning up in the pages of the satirical magazine. And the story was nearly always the same. The outsourcing company won a government or local authority contract to set up an IT system or run IT services. The project would then go over time and over budget, and would be massively flawed. And then a few weeks or months later, the company would be given a contract somewhere, and do exactly the same thing there.

You’re left wondering how Crapita kept winning those contracts, when it was so manifestly unfit to carry them out. Who did it have on its board? Or was there a deliberate policy by Major’s government to support outsourcing, no matter how inefficient and incompetent they were, because it was private enterprise and so preferred and supported for purely ideological reasons?

In any case, what seems to have placed the company in a very precarious financial situation is the usual tactics of big companies in this stage of capitalism: award massive dividends to the shareholders. This usually goes along with starving the rest of the company of investment, which seems to have been done to. And granting massive, and massively unsustainable pay awards to senior management. There’s no mention of that in Mike’s article, but I don’t doubt that this was done too. I’ve got the impression that it’s just about standard practice across a huge swathe of industry.

This is a financial strategy that has driven far more than one company to the wall. I also wonder if the executives weren’t also trying deliberately to create a debt, so that they could dodge corporation tax for five years. This is one of the tricks Stewart Lansley and Joanna Mack describe in their book on contemporary British poverty, Breadline Britain.

Over the years the outsourcing policy has been in operation, there’s been one crisis after another. The outsourcing companies have repeatedly shown themselves to be incompetent, not just in the case of capita, but also notoriously with G4S and the scandals over the violence and brutality it meted out towards asylum seekers in the detention centres it ran. And, of course, when a whole load of prisoners escaped on their way to court. Or jail.

Private industry has repeatedly shown that it is incompetent to do the work of the state sector. These firms have the disadvantage of having to make a profit for their shareholders, as well as the demands of their management for multi-million pound pay packets. The only way they can afford this is by cutting wages to their workers, and spending as little as possible on the service they are meant to be providing. The result of this has been a series of financial collapses. Carillion was the first. Now Capita and Interserve, another outsourcing company, is in similar trouble.

The only sensible recourse should be to cancel these companies’ contracts, and take everything back in-house. But this won’t be done. I think there’s a problem in that the state sector has been so decimated by the past four decades of Thatcherism, that it no longer has the capacity to run these services itself. There’s also the additional problem that too many politicians and media magnates have connections to these companies, or to firms in a similar position hoping for government contracts. Acknowledging that outsourcing was a failure would damage the interests of these politicos and press barons. There’s also the challenge of actually facing up to the fact that a central plank of Thatcherite dogma – that private enterprise is always more efficient than the state – is absolutely, undeniably wrong. Anybody who makes this point is denounced as a Communist in screaming headlines. You only have to look at the way the Tory press has vilified Jeremy Corbyn for daring to want to renationalise the NHS, the electricity net and the railways. His policies are very far from the total nationalisation demanded by Communists and Trotskyites, but you wouldn’t know it from the frothing abuse hurled in his direction by the Tories and Blairites.

There’s also another problem with calling an end to the outsourcing scam. PFI contracts and outsourcing allow some of the costs to be written off the official government accounts sheet. They’re still there, and we have to keep paying them, but they’re not included in the official figures. It’s why Mussolini used a similar scam when he was Duce of Fascist Italy. Any government that restores these projects to the way they were handled before risks putting millions back the official figures. And if that’s the Labour party, you can imagine the Tories making their usual hackneyed and untrue comments about ‘high-spending Labour’, and then re-iterating the spurious arguments for austerity.

I’ve no doubt that the government will do what it can to shore up the current mess the outsourcing companies are in. But the collapse of Carillion and now the severe financial troubles faced by Capita and Interserve show that outsourcing does not work. And given these companies’ highly checkered history, they should never have been given governments to begin with.

And it bears out exactly the description the author of Zombie Economics used for them in the very title of his book. Outsourcing, and the rest of the Thatcherite economic strategy of privatisation, wage restraint, low taxation and declining welfare are ‘zombie economics’ as they don’t work, but haven’t yet been put it into the grave.

It’s high time they were, and Thatcherite free trade capitalism was abandoned as the failure it so glaringly is.

Merkel Claims May Begs Her to ‘Make Me an Offer’

Remember when the Tories were trying to convince everyone that Tweezer was ‘strong and stable’, and could be trusted to get us a good deal on Brexit? Oh, how times have changed!

Mike put up a story yesterday, reporting that the German Chancellor has been making jokes at our PM’s expense about her negotiating style. According to die Kanzlerin, all the negotiations between her and May go round in circles, with both of them saying exactly the same things. May will say, ‘Make me an offer.’ Merkel will reply, ‘We don’t have to. You’re leaving.’ At which point May will repeat her first request. Merkel then repeats her reply, and the conversation goes on, round and round in circles.

See Mike’s article at:

Now before we go any further, it needs to be said that domestically Merkel is in a precarious position. She’s hung on to power, but her decision to welcome the wave of Middle Eastern refugees from Syria and North Africa a few years ago has damaged her popularity, and boosted that of the Nazi AfD. I also gather that there are problems about whether or not the SPD will join her grosse Koalition. They joined a coalition with her before, only to find their share of the vote declining as Merkel’s Conservative Christian Democrats took the credit for genuine improvements in the benefits system, which had actually been done by the SPD. The pressure’s on Merkelt to make herself look strong for the voters in Germany.

But this actually shows how weak May is. If this is right, then it shows how May actually doesn’t have anything to negotiate with. As we’re leaving the EU, they don’t actually have to make any concessions to us whatsoever. But the country needs them to, as does May personally. And so her remark to Merkel, ‘Make me an offer’, sounds less like an invitation by a skilled business negotiator in a Hollywood drama to productive talks than begging by a desperate and embattled PM. It also seems to show that May can’t talk, except in clichés she’s learned from the movies. Or had programmed into her by her handlers at Tory Central Office. But the cliché, coming as it does from Hollywood, is there to convince someone that actually she’s a tough negotiator. Perhaps she’s trying to persuade Merkel that she’s going to be able to make an offer Merkel can’t refuse. In which case, she and the Tory hordes behind her are very, very sadly deluded.

May needs an offer, any offer, even if it’s one she has no option but to reject, in order to show the Tory faithful and the voting public that she is able to negotiate any kind of settlement at all. And Merkel is determined to show her the opposite: that she’s in absolutely no position to demand anything.

Thus the Brexiteers, far from leading Britain back into a resurgence of pride and sovereignty, as people like Jacob Rees-Mogg would have us all believe, have actually done the opposite. Repeated studies have shown that Brexit will damage our economy, and the process has left the Prime Minister suppliant and begging before Merkel and the other leaders of the EU.

So much for ‘strong and stable’.

Not that Young Master Rees-Mogg is upset. Mogg makes his money, or a fair part of it, from investments, and so hopes that by going outside the EU and turning Britain into a low tax, low regulated economy just outside the EU, they can make Britain into a colossal tax haven for the global financial industry. No matter that the rest of the British economy, such as manufacturing, and its working people, have already suffered because of the Thatcherite promotion of the financial sector. Mogg’s a true blue, Tory aristocrat, who has consistently voted to give him and his class generous financial rewards, while cutting welfare for the poor, the disabled and working class. This shows his priorities, and those of the Hard Brexiteers that stand behind him. Whatever deal he wants to negotiate will very definitely not benefit anyone, who isn’t a millionaire investment banker.

Nationalisation Is Better: Bail-Out of South East Trains Shows Privatisation Doesn’t Work

Published by Anonymous (not verified) on Wed, 17/01/2018 - 9:48pm in

South East Trains was in trouble again last week, and had to be bailed out by the government. The Labour Party made a statement that this showed the precarious state of the entire privatised rail network, as many of the other train companies could also claim they are in serious financial trouble, and pull out of the contracts.

This isn’t the first time aa privatised rail company has had to be bailed out by the government, or an alternative company found after one of them collapsed. And it shows very clearly that private railways don’t work.

Remember the old arguments for privatisation? State industries didn’t work. Instead, the state was subsidising inefficiency and these companies were a burden to taxpayers. They should be privatised, which would then make them more efficient, because they would have to respond to Maggie’s sacred ‘market forces’. If they couldn’t compete, they should be allowed to collapse. As happened with the mining industry.

Except that it hasn’t worked like that. We are now paying more in subsidies to the rail companies than we did when they were nationalised as British rail. And the service is actually worse than in the last days of the beleaguered nationalised rail network, when it was operating under the Operating For Quality programme.

Privatisation doesn’t work. Nationalisation of essential utilities, like railways, does.

But you won’t find this view promoted in the press, because the billionaires and magnates in charge of it consistently promote the idea that private industry is better, even when it is absolutely obvious that it isn’t. This is because, as businessmen, they see the rail network in terms of its money value to them. The corporate capitalism created by Maggie Thatcher and the Tories means that taxpayers are always bailing out inefficient and failing private firms, while punishing the poor, the unemployed and the disabled. It’s all about giving more money to the rich, regardless of whether the services they provide is any good. Capitalism has to be supported and promoted regardless. And if anyone says anything, then the Tories automatically rant on about the inefficiencies of the state sector in the 1970s, and how wonderful it was when Thatcher sold everything off.

But the failure of South East Trains, and the parlous state the other rail companies are in, show that this argument doesn’t work. It’s time to call end to the private ownership of the railways. They need to be renationalised, and a proper, public service given to the people of the Britain.

Us and Them

Published by Anonymous (not verified) on Fri, 29/12/2017 - 6:14pm in


Budget, Economics, tax

If you’re a government propagandist, the silly season always provides a happy hunting ground. Newsrooms are thinly staffed and there’s little beyond the holiday road toll and bushfires to fill the bulletin until the sports Read more…