Yet more nonsense about corporation tax

Yesterday I was muttering about how the lies being told about corporation tax were bending the minds of even respectable establishment figures. Today I find that we've a similar problem whereby we've some deeply uninformed commentary on the tax paid or not paid by Thames Water.

Thames Water sparked fury yesterday when it announced it will not pay corporation tax for up to a decade. Britain’s biggest water supplier has already been berated for racking up more than £1billion in unpaid taxes. But as it reported soaring profits after the summer heatwave, finance director Stuart Siddall said: ‘It will be seven to ten years until we pay tax.’

Hmm. Why is this then?

Thames Water can delay tax payments under government rules as it invests large amounts on new pipes and sewers. Its planned £4.2billion ‘super-sewer’ under London means it will not be due to pay tax for years.

Ah: the complaint is therefore about an obvious and essential part of any tax system that is trying to tax profits. Which is, of course, that you only try to tax profits. Which produces a problem when someone invests in something.

That problem being that you've got to have some method of making an allowance for what has been invested. Say, just for the sake of argument, that £1 billion is invested in something. And there's £100 million in "profit" coming from that investment. can we then decalre that that £100 million is the profit that we should be taxing? Well, no, we can't, because someone has had to put that £1 billion in at the start. That's a cost: there's no real, economic, profit until that £1 billion has been paid back first. Only then, after the costs of doing whatever it is have been paid is there in fact a profit that can and or should be taxed.

There are various possible methods of doing this, making this allowance, and the law as decided by Parliament does so through the use of capital allowances. Leave aside the details of how it works but this is what is being done. Ensuring that it's only actual profit that is taxed, not the repayment of the initial investment.

And do note again that there has to be some method like this in the tax code: without it there would be very much less investment. And what worries is the following:

Labour’s Margaret Hodge, chairman of the Commons Public Accounts Committee, called it ‘deeply unfair’, saying Thames Water – which is owned by an Australian consortium – had an ‘obligation to pay their fair share in tax’. Tax accountant Richard Murphy, who helped expose tax avoidance by Starbucks, said: ‘The reality is that much of this will never be paid. ‘They are never going to stop spending money on infrastructure, which means they will probably never pay tax. Companies like this have to say when and if they will ever pay tax.’

At least one of these two knows all of this but is still wibbling nonsensically about it. And at least one of these two has also been calling for more infrastructure investment as a method of getting the economy growing. So to complain about the tax structure that encourages infrastructure investment does seem a little odd.

But to my larger complaint. We're being told an ever more fantastical series of tales about tax absolutely none of which have any grounding in reality. There is no possibility of having a tax system on profits that does not make an allowance for investments made. So why is there this spreading of fear, uncertainty and doubt about the tax system which makes this essential allowance?

Should it be a crime for a business to make a loss?

This is an interesting little example of the pernicious effects of the lies that are told in certain forms of campaigning. We've a proposal that there should be something called a corporate ASBO. Sure, it's a personal suggestion but it is also from the head of the Howard League for Penal Reform.

So, I would like government to think about introducing a corporate anti-social behaviour order. ASBOs are in the process of being replaced by various other civil orders by the government but for the sake of simplicity, I shall call my proposal the corporate ASBO. The important point is that individuals and big corporations should be equal before the law. The last Labour government introduced the Serious Crime Prevention Order but this focuses on the more serious end of corporate crime, applying to individuals who have already been convicted of crimes such as money laundering or credit card fraud.

The corporate ASBO could be handed to registered companies engaged in anti-social behaviour. An appropriate threshold, in line with orders pertaining to individuals, would be required to ensure the ASBO is not used in a vexatious manner. The ASBO would be targeted at corporate actions that are deliberately socially harmful, cause distress or nuisance or annoyance.

It would not target legitimate business, even business that some might see as unpalatable (for example pay-day loans or betting shops). The purpose of the ASBO would be preventative – identifying low-level behaviour and seeking to prevent it increasing in frequency or seriousness.

I have no opinion on this and my intention here is not to develop one. Rather, I want to look at what has prompted this proposal:

Contrast a child playing his music too loudly and too often that annoys the neighbours to Starbucks which announced today that it has no tax obligation this year. The effect on the public services and on the social fabric of so many of the biggest companies managing by sleight of hand to avoid paying billions of tax is incalculable.

She's been suckered by the lies being told by the tax campaigners. She's outraged that Starbucks doesn't owe any corporation tax this year. The campaigners have alleged that this is all because of dodgy dealings over royalties, brand names, margins on purchasing coffee from Switzerland and the like. Whereas in fact the reason that Starbucks doesn't owe any corporation tax is that it hasn't made a profit. Even if all of those allegedly nefarious (and all entirely legal too) activities are added back into their accounts Starbucks still hasn't made a profit in the UK. There's no tax due because there's no profit to tax.

And very much the same is true of all of the other stories we hear about as well. There never was a £6 billion tax bill at Vodafone: that was entirely made up by Private Eye. There never was a deal over it either: the company simply paid the normal corporation tax due on remittance of overseas profits into the UK parent company. Barclay's did not dodge a tax bill on selling off a subsidiary, Gordon Brown specifically changed the law so that no tax would be due on the selling off of a subsidiary. Boots has not dodged tax by loading up with debt: the tax paid has simply moved from being corporation tax nominally paid by Boots to income or corporation tax being paid by the recipients of the interest.

Each and every one of the stories being peddled falls apart on any sort of detailed examination. But enough of these lies are being told that we've thoroughly respectable members of the establishment like Frances Crook insistent that new offences must be invented, new punishments devised, in order to punish those being lied about. Just goes to show that if you lie loudly enough and often enough then you'll be able to convince people of what just isn't so.

I can't help feeling though that there's got to be a better way to run a country than this.


Digital Conversations

Last week I went to an event put on by the Meetup group 'Digital Conversations'. Hosted by the digital agency Reading Room, the theme for the night was "Society, Government and Public Life". Six speakers gave a range of short but varied and interesting talks, bringing together people from digital design, non-profits and the government.

The topics ranged from software design to government snooping via community engagement and smarter government services. It has become cliched to talk about these last two, especially alongside phrases like 'the data revolution' and 'people power'. What's less clear is if these ideas really mean something and in practice help forge better outcomes. In this way it was interesting and encouraging to see what people in a range of different jobs were doing within the intersection of technology and government.

Despite the breadth of topics, certain themes ran throughout the night. One was the use of digital technology to amplify the 'soft' power which citizens posses through traditional civic engagement. Will Perrin from gave his experience of holding government to account using methods from the humorous - sticking council logos on dog mess and blogging them - to the serious - using freedom of information requests to spark a corporate manslaughter investigation into TFL. The ability to use digital to empower citizens was shown to be even stronger within less developed and transparent states. For example, a basic app of the Nigerian constitution has allowed citizens to learn and assert their rights, and has been downloaded over 8 million times.

The event also highlighted the importance of the micro and designing for humans. Websites such as 'What Do They Know' and 'They Work For You' are popular because they take chunks of information and display them in a way which is easy for people to understand, informing and empowering them.

Designers should make sure the systems they create are designed with the user's habits and needs in mind, instead of forcing them to tackle rigid and unintuitive systems. Similarly, whilst the concept of big, open date may be brilliant, it is essential that this data can be manipulated by all. Many potential users aren't programmers or statisticians, and giant datasets which need APIs to navigate them can hinder as well as help analysis.

Government services benefit from this re-imagining. Dominic Campbell spoke about the Patchwork app designed to provide better collaboration within child protection services, and which was designed in response to Baby P's case and the total failure of the incumbent ContactPoint system to prevent it. Despite retaining huge swathes of data on every single child from birth till 18, the expensive system raised serious privacy concerns, failed in its objectives and was ultimately scrapped. In contrast, Patchwork allows professionals to 'group round' children and share information only when necessary and in a way which is clear and intuitive.

It was interesting to see what attendees and speakers thought the future would hold for government. Some ideas were rather libertarian-friendly- for example, the goal of efficient 'invisible' government, which would do things like automatically create and process visa applications with the purchase of flight tickets. It was also encouraging to hear a speaker insist that a world in which 14% of the health budget comes from the sale of narcotics on a government version of Silk Road is not inconceivable!

However, some other ideas - such as government gathering social media data to create a 'community hive mind' -were rather more alarming. Most remarkable was the level of complacency of the organisers and attendees regarding mass government surveillance. One speaker's entire presentation was summed up by a slide saying "NSA am I bothered? Not really LOL :)" Of course, not everybody is going to find the recent revelations earth-shattering, but it is unnerving to hear people working within these sectors have such little regard for civil liberties and privacy concerns.

When those responsible for designing government systems (and ultimately the use of citizen's information) seem not to perceive potential abuses of state power and trust, it is hard to be enthusiastic about new government initiatives. With tech companies tightening security and encryption in response to Snowdon's revelations, I don't want well-meaning and forward-thinking designers to be asleep on the job, and dismissive of questions about the proper power balance between citizens and the state. This aside, it was really good to see such smart and engaged people talk about the exciting work they do.

islington council.jpg

This is all so depressingly obvious about censorship of the internet, isn't it?

It was only last week that I was musing, elsehere, on the subject of the censorship of child pornography. Not that I'm against such censorship but rather than the methods that David Cameron insisted on using were somewhat dangerous. For he was insisting that ISPs and search engines had to be the people who barred people from finding such images. Rather than the more freedom loving and liberal process of hunting down and punishing the little scrotes who create, distribute and consume such imagery. I worried, gently, that at some future time perhaps this same tactic would be extended to other subjects. Oooh, I dunno, political extremism perhaps, racism, depending upon who is in power perhaps feminism or, if the House goes the other way, anything deemed anti-feminist.

Little did I know:

The government is to order broadband companies to block extremist websites and empower a specialist unit to identify and report content deemed too dangerous for online publication. The crime and security minister, James Brokenshire, said on Wednesday that measures for censoring extremist content would be announced shortly. The initiative is likely to be controversial, with broadband companies already warning that freedom of speech could be compromised.

Ministers are understood to want to follow the model used to crack down on online child abuse. The Internet Watch Foundation, which is partly industry-funded, investigates reports of illegal child abuse images online; it can then ask service providers to block or take down websites. The prime minister, David Cameron, is understood to favour a similar model for terrorist content. A government-funded body, possibly within the counter-terrorism referral unit, will order companies including BT, TalkTalk, BSkyB and Virgin Media to block websites, according to industry sources.

Could somebody please remind me why we don't rise up and slaughter them all? It's only taken them a week, a short 7 days, to go from finding a method to control something we all abhor, that child pornography, to applying that method it to an Englishman's birthright, that free speech that insists he's allowed to make a fool of himself by expressing his most deeply held prejudices. And yes, extremists do indeed have free speech just as us more moderate types have. Subject only to the usual two caveats, those of libel and of incitement to immediate violence.

And the reason we run the system this way is because there is no possibility of determining what is allowable extremism and not allowable extremism that is not just the outcome of personal prejudice on the part of that person doing the determining. Thus the only possible method of preservig any semblance of freedom and or liberty is to allow all speech, in all its glorious cacophony, and prosecute those who are either libellous or incite immediate violence.

And what really worries is that you'd expect Tories to understand this sort of point. But apparently not....



UK growth: Nice, but unreal

Britain's Chancellor of the Exchequer, George Osborne MP, is smiling like a Cheshire Cat. Today the Office for National Statistics (ONS) said that the last quarter's economic growth in the UK was the strongest in more than three years,  with expansion in services, construction and manufacturing. It is the third quarter in a row that output has grown; in the last quarter of 2012, output fell by 0.3%, but in the first, second and third quarters of 2013 it grew by 0.3%, 0.6% and 0.8%. It seems easily probable that over 2013 as a whole, the UK economy will have grown by a healthy 2%+.

The figures are likely to boost confidence, and that itself may stimulate recovery. And a growing economy makes it much easier for the government to balance its books, or at least to reduce its annual borrowing, even if the prospect of actually repaying Britain's record peacetime debt is still remote. And we should remember that, thanks to years of stagnation, the UK economy is still 2.5% smaller than its 2008 peak.

I am not sure I believe the figures – growth estimates are notoriously unreliable and survey data suggest that things are growing a good deal more slowly. But whatever level it is, this growth is the wrong kind of growth. It is not growth based on getting the fundamentals right, and on people actually investing in thriving businesses or selling exports of greater value. Not growth based on 'rebalancing' as the economists and politicians rather obscurely call it. Rather, itt is fake growth based on government and household borrowing, and shoring up what Tom Papworth, in an ASI paper this week, calls 'zombie' businesses that are living of subsidies and low interest rates, rather than contributing much of value to the economy.

House builders, for example, have been boosted by the government's Help to Buy Scheme, and by several other fiddles designed to make mortgages more easily available. Indeed, the days of the 95% mortgage – one of the symptoms of what got us into this mess – are back. That is one reason why construction soared by 2.5% in the third quarter. The services sector expanded at a healthy 0.7% in the quarter. At least part of that is genuine, created by the resurgence of Britain's important financial services industry. But a lot of it is services bought in by a government that spends half the nation's income – and by households that are borrowing more again. When interest rates are rock bottom, borrowing makes perfect sense. Saving, of course, does not. But without savers, there are no funds available for rational investment  in the viable businesses of the future.

It was low interest rates, loose money and excessive borrowing that created the boom-bust cycle that burst in 2008. Is anything different now? Rather than enduring the hangover after the party and picking ourselves up, we have opted to down a few more pain-killing doses of money and credit. We all want the recovery to be true; and we can all think up reasons why it might be. But we wanted the pre-2008 boom to be true, and look what happened then.

Now just what would we do without the Resolution Foundation?

This might be my favourite research finding of recent times. It comes from the Resolution Foundation who are worrying themselves over the incidence and persistence of low pay in the UK economy. Specifically, they're interested in working out who starts on low pay (less than two thirds of median hourly wage) and then manages to escape said low pay. At which point they tell us this:

Moving onto a higher wage remains a huge challenge for the low paid. While significant numbers do manage to move up the pay ladder, there are still far too many who remain trapped at the bottom, or who fall back onto low pay having escaped momentarily. Furthermore, many low paid workers struggle to earn more unless they switch occupations, sectors or in some cases move from small to large organisations.

Well fancy that.

One of the examples they use is of cleaners. And their research finding is that people who remain cleaners for a decade do not move up out of low pay but those who do switch lines of work have a better chance of escaping that low pay.

You could knock me down with a wet flounder at this point I tell you.

You mean that people who remain in low skill low productivity jobs don't start to earn higher wages while those who move to higher skill higher productivity jobs do indeed earn more? Are we going to have to rewrite the textbooks here or something?

Or should we accept this as the most mind-garglingly obvious point about how wages are determined in a market economy? Your choice but what a hole the absence of the Resolution Foundation would put in our understanding of the world around us, eh?

We're really not running out of resources you know

Despite what various people like George Monbiot tell us, no, we're really not running out of minerals. He tells us today that:

To service this peculiar form of mental illness, we must wear down the knap of the Earth, ream the surface of the planet with great holes, fleetingly handle the products of that destruction then dump the materials into another hole. A report by the Gaia Foundation reveals an explosive growth in the pace of mining: cobalt production up 165% in 10 years, iron ore by 180%, a 50% increase in nonferrous metals exploration between 2010 and 2011.

So I go and look at the Gaia Foundation report where I am told the following:

As can be seen, the main metals have a remaining lifespan of between 12 and 50-odd years. However, there is no doubt that new technological developments will allow access to new areas in the future, deeper in the ground, and with likely increased consequences for ecosystems and communities – as can be seen with oil and gas. Recycling policies will also largely determine how much reserves are available. One can argue that the huge amounts of metals contained in discarded electronic items constitute reserves in themselves (the so-called “urban mining”). Contrary to fossil fuels, metals are never consumed, they are merely dissipated and they have an endless recyclability.

And this is, to use the precise technical term appropriate here, entire bollocks. For example, they tell us that the mineral reserves of bauxite, the ore from which we extract aluminium, have a remaining life of 27 years. This is true, they do. But this does not mean that bauxite will only last 27 years. For they have entirely misunderstood what mineral reserve means. It is not the amount of a mineral that is left. It is not even the amount of a mineral that we know about that is left. The best definition, in everyday language, of a mineral reserve is the working stock of mines currently in production.

The correct phrase to describe the minerals that we know about, where they are, how we would process them, that we can process them using current technology and at current prices is mineral resources. Please note, this doesn't require new technologies, nor higher prices. This is just the stuff that we know where it is but we've not got around to mining yet. And the really annoying thing is that the Gaia Foundation is indeed using the correct data source, the US Geological Survey, but they seem to have forgotten to read the document properly. After all, it is an entire two pages long:

World Resources: Bauxite resources are estimated to be 55 to 75 billion tons

Or about three hundred years' worth. And even that's not the correct figure of total availability either. As the USGS goes on to point out:

the United States and most other major aluminum-producing countries have essentially inexhaustible subeconomic resources of aluminum in materials other than bauxite.

For example, I could get you alumina (the aluminium oxide that we extract from bauxite) from the fly ash left over from burning coal. And there's even a producer in China that does exactly that.

My apologies but this is something that really does bug me about the ecocatastrophists. They continually use mineral reserves to mean all that is left. That's nonsense: reserves are what is left in the mines we're currently operating. Resources are vastly larger than this and total availability is some orders of magnitude larger than this again. I am unable to identify a single mineral or metal that we have any chance of running out of for the next half a millennium. And I do wish that the environmentalists could grasp this point.

The Modern Slavery Bill is going to be absolutely appalling

I know that I shouldn't giggle over such things but the revelation that the three "slaves" recently found were in fact the remnants of a Maoist commune well known to social services (indeed, housed by the local council) does provide a certain amusement as we see various leftish types suddenly running away from the story. However, now onto something a great deal more important. Theresa May and various campaigners are going to use this to try and pass an extremely bad law about modern slavery. And it's worth our all complaining very loudly about this now, as the bill is being drawn up, not later when it is too late.

That May is going to use this story as a basis for her new law is obvious here:

We still don’t know the facts behind the case in London this week. Details are still emerging, the investigation is ongoing and must be allowed to take its course. Whatever the outcome, the one positive is that it has raised awareness of the issue of slavery in the public and media mind. The first step to eradicating the scourge of modern slavery is acknowledging and confronting its existence. The second is accepting it is the responsibility of us all to abolish it once and for all. Because modern slavery is an affront not just to the dignity and humanity of the individuals crushed by it, but of every single one of us. Tackling this abhorrent crime is a personal priority for me.

As well as improving the way victims are identified and supported, I want to prevent future victims. And the best way to protect and reduce the number of victims is to disrupt, convict and imprison the criminal gangs behind much of the modern slave trade. That is why I have made combating trafficking central to our Serious and Organised Crime Strategy and a priority for the new National Crime Agency. And it is why I am introducing a Modern Slavery Bill to consolidate and strengthen legislation. The Bill will be the first of its kind in Europe. It will increase the maximum sentence for trafficking offences to make sure the worst perpetrators get a life sentence. It will introduce trafficking prevention orders to restrict the activity of offenders when they are released so that they cannot cause further harm. And it will create an Anti-Slavery Commissioner to hold everyone involved in stopping this crime and helping victims to account.

The link is not just obvious it is explicit. And given that all of us are indeed against slavery why would anyone at all complain about the idea of a Modern Slavery Bill?

Well, allow me to introduce myself, Tim Worstall, someone who is very much against what I am certain will happen to this bill. For what is going to happen here is what happened with the Poppy Project and their research into sex slavery. What led to Dennis MacShane's absurd claim that there were 25,000 sex slaves in the UK. They're going to lie to us to bring in the most draconian laws.

Yes, I know, strong stuff but bear with me a moment. As I've mentioned elsewhere there are two meanings to the word "trafficking". Here I explained them in the context of sex slavery:

...the two meanings of “trafficking” that are used in the debate. Those two meanings are as follows:

1) The transport of unwilling people (usually women, but of course can at times be either men or children) into forced prostitution. This is of course illegal everywhere: it’s repeated rape just as a very start. It is also vile and we should indeed be doing everything possible to stamp it out.

2) The illegal movement of willing people across borders to enter the sex trade. Strange as it may seem there really are people who desire to be prostitutes. People would, other things being equal, similarly like to be in a country where they get a lot of money for their trade rather than very little. Given these two we wouldn’t be surprised if people from poorer countries, who wish to be in the sex trade, will move from those poorer countries to richer countries. And such is the system of immigration laws that many of them will be unable to do this legally: just as with so many who wish to enter other trades and professions in the rich world. You can make your own mind up about the morality of this but it is obviously entirely different from definition 1).


We might paraphrase the two definitions as the “sex slavery” definition and the “illegal immigrant” one. I would certainly argue that the first one is a moral crime crying out to the very heavens for vengeance while the second leaves me with no more than a heartfelt “Meh”.

In terms of slavery of the first type, whether sexual or not, of course I'd be, along with everyone else, delighted to have strong and effective laws to fight it. Something we do actually have of course: slavery is illegal and anyone caught enslaving anyone will indeed go to jail. However, I'm entirely unhappy about having strong new laws about the second type of trafficking. Sure, people who smuggle illegal immigrants can be and should be punished as and when caught. But that's the crime there, not slavery.

My worry is that they will use everyone's instinctive hatred of that first definition to impose horrendous punishments for that second definition. As an example, here's one of the things they are planning:

The Home Office announced that powers will be introduced to help police ‘hunt the assets of traffickers’ and give some of the money to the victims. The money will be used to help victims of modern slavery return home. This measure might end up in the modern slavery bill announced early in August by the Home Secretary, Theresa May. The modern slavery bill is expected to increase the conviction rate for traffickers in the UK, which is currently one of the lowest in Europe. Powers to recover overseas assets already exist in the Proceeds of Crime Act but they are not effective and the amount of seized money is very low compared to the scale of serious and organised crime.

Under that first definition of trafficking I'd have no problem. Under that second a great big girt problem arises. Because "trafficking" now means illegal immigration we thus end up with a law whereby the government can take the financial assets of someone who employs an illegal immigrant. You think this won't happen? Believe me, this is exactly what will happen. Such an extension of confiscatory powers will indeed lead to that sort of thing: it's inevitable.

At this point of course I need to show that they are indeed going to be using that wider, more inclusive, definition of trafficking rather than the one that really does mean slavery. Ms. May:

I have asked Anthony Steen, chief executive of the Human Trafficking Foundation, to undertake a series of overseas visits to look at how we can improve our approach both domestically and internationally.

That foundation says this about sex slavery:

Trafficking for Sexual Exploitation: The scale of trafficking for sexual exploitation remains largely unknown worldwide since its very nature demands secrecy and reliable statistics are therefore not forthcoming. In the UK, there are some clues as to its scale. For example, in a recent ACPO report, 2,212 brothels were identified in London alone, and the police estimate that up to 50% of those working in the brothels may have been trafficked. Traffickers take virtually all the earnings from their ‘slave’ and move them around the country so they are not associated with any particular area.

This is at the Dennis MacShane, Julie Bindel end of loonieness on the subject. As Operation Pentameter found out, after every police force in the country tried to search out and find sex slaves they found not one single case in the entire country that they were able to prosecute for the crime.

That is, the police went looking for slavery, type 1 definition of trafficking, while this foundation is using the type II definition of illegal immigration (or, to get to that 50% number, simply of immigration, legal or not).

Oh, and Eaves is involved. They were the people behind the Poppy Project. Which, laughably, claimed that evidence of foreign born women working in brothels in London was evidence of trafficking. Guess all those foreigners working in The City are slaves then, eh?

Just to make this entirely clear here. These campaigners (and that includes May here) are going to use our revulsion of the type I trafficking to pass extraordinarly severe laws against the type II stuff. Up to and including life imprisonment and confiscation of all financial assets. Yet it is only type I that is in fact slavery. Type II is more normally defined as the employment of an illegal immigrant.

Anyone really want life imprisonment for employment of an illegal immigrant? Someone who, entirely of their own volition, tried to make their lives better by breaking the law to come to this country is now going to be defined as a slave?

OK, by now everyones' certain that Worstall has lost it. Seeing something that just isn't there. Ms. May again:

Some victims do not even recognise that they are victims or have been trafficked.

She's certainly arguing for a pretty extensive definition of trafficking if there are people who don't actually realise that they have been enslaved.

Fortunately, there is in fact something we can do about this. We can insist that the law, whatever it actually says will be done to the modern slavers, should in fact only refer to slavers and trafficking. We can do this by insisting that the bill use the United Nations definition of trafficking:

Article 3, paragraph (a) of the Protocol to Prevent, Suppress and Punish Trafficking in Persons defines Trafficking in Persons as the recruitment, transportation, transfer, harbouring or receipt of persons, by means of the threat or use of force or other forms of coercion, of abduction, of fraud, of deception, of the abuse of power or of a position of vulnerability or of the giving or receiving of payments or benefits to achieve the consent of a person having control over another person, for the purpose of exploitation. Exploitation shall include, at a minimum, the exploitation of the prostitution of others or other forms of sexual exploitation, forced labour or services, slavery or practices similar to slavery, servitude or the removal of organs.

That will restrict everything to the type I definition of trafficking and I think all of us are reasonably happy with the idea that people who enslave others should indeed have the book thrown at them. And, of course, by their actions we shall know them. The more those preparing this bill whine and bitch about how it's all more complicated than this, that the definition needs to be wider, the more we shall know that they're not in fact talking about either trafficking or slavery at all, but instead about illegal immigration.

The ideal welfare system is a basic income

The British government spends more on welfare than it does on anything else apart from healthcare. The benefits system is arcane and unwieldy, a mish-mash of disparate attempts to address different social problems in a piecemeal fashion. It creates perverse incentives for those on it, such as people stuck in a ‘benefits trap’ where they lose almost as much money in benefits by working as they are earning, and distorts entire markets by inflating prices, as housing benefit does to the housing market.

Most people agree that the system is broken, though solutions differ. The Universal Credit is a fundamentally good idea that is failing because of the difficulty of implementing successful piecemeal reforms to a system as complicated as benefits in the UK, and will ultimately probably not succeed in the way its architects intend because it doesn’t go far enough. Other aspects of the government’s welfare policies, like the work programme, are completely wrong-headed – telling other people how to live their lives is a bad idea because the government is extremely ignorant. That ignorance doesn’t change just because the person being told what to do is on benefits.

The ideal welfare system is a basic income, replacing the existing anti-poverty programmes the government carries out (tax credits and most of what the Department for Work and Pensions does besides pensions and child benefit). This would guarantee a certain income to people who have no earnings from work at all, and would gradually be tapered out according to earnings for people who do have an income until the tax-free allowance point, at which point they would begin to be taxed.

For example, we could set a basic income of £10,000/year by using a cut-off point of £20,000/year, and withdrawal rate of 50%. The basic income supplement would be equal to 50% of the difference between someone’s earnings from work and the £20,000 cut-off point. A person with no earnings would get a basic income of £10,000/year; a person who earned £10,000/year would get a supplementary income of £5,000; a person on £15,000/year would get a supplementary income of £2,500; and a person on £20,000 would get nothing (and begin paying tax on the next pound they earned).

These numbers are representative: no need to tell me that £10,000 is too low or too high. What matters is the mechanism.

This has also been called a Negative Income Tax, usually by advocates on the right like Milton Friedman, but language aside the concepts are basically the same. As a side-note, I think basic incomes that are not tapered out are a complete waste of money, redistributing lots of money to people on high and middle incomes unnecessarily. It amazes me that this anti-progressive approach seems to be popular among some on the left. The exception would be if this flat-rate payment replaced the entire welfare state, as Tim Harford mentions in his column today and Charles Murray proposed some time ago.

Like the current benefits system, this would provide a safety net. But ‘benefits traps’, where people lose as much in benefits as they earn from work, would be eliminated. A basic income system like this would be at least as clear as the PAYE income tax system is, and substantially clearer than the current benefits system. The dog’s breakfast of welfare schemes that currently exist – all to address the symptoms of poverty, rather than the root – would be abolished, and with it the jumble of unanticipated and often undiscernable interactions between schemes that lead to perverse outcomes.

Best of all, a basic income is the least paternalistic welfare scheme possible. Instead of pushing would-be computer programmers into work as Poundland assistants, a scheme like this would leave decisions entirely up to the individuals involved. The discovery process that each of us is engaged in would continue, and now without mass decision-making by a central state authority.

I don’t know what amount a basic income like this should actually be set at. That would be an interesting and useful debate — what do we need for a basic standard of living? What appeals to me is the principle. Ditching most of the DWP, creating a welfare system that never discourages work, and letting people live their lives as they choose? Now that’s a welfare programme I could get behind.

Chart of the week: RBA attempts to talk dollar down, markets push it up

Summary: RBA attempts to talk dollar down, markets push it up

What the chart shows: The chart shows the Australian dollar exchange rate against the US dollar as well as on a trade-weighted basis

Why the chart is important: Over the past few years, central banks have taken a renewed interest in exchange rates. This is partly because of concerns that other central banks may be engaging in what the Brazilian Finance Minister Guido Mantega in 201 called ‘currency warfare’, ie, attempts to drive down their own currencies in order to gain a competitive advantage; and partly because they try to do it themselves. In theory, a central bank can always push down the exchange rate of its currency, since it can print and sell unlimited amounts. In practice, it is somewhat more difficult. Over recent months, Governor Stevens of the Reserve Bank of Australia, and other RBA spokesmen, have tried to talk down the Aussie dollar. The currency has come down from 96.7 US cents per Aussie dollar in late October to 91.4 (and from 73.3 to 70.2 in a trade-weighted index). However, and the exchange rate has shown itself more resilient than the RBA would like, showing that there is a limit even to what central banks can do against the market..