Saturday, 9 April 2022

Honourable action not expected soon


Standard advice for individuals and organisations facing bad news stories is to get all the bad news out at once, apologise profusely, make the necessary changes to what you’re doing, and hope people will forgive and forget. And if really necessary, let a few heads roll. The worst thing one can do is deny the undeniable, justify the unjustifiable, and hope that whoever felt sufficiently motivated to leak the bad news won't go on to leak the worse news. Neither Boris Johnson over the widespread rule-breaking during lockdown, nor Rishi Sunak over his tax affairs, seem to have received the memo.

The idea that the Chancellor’s household could benefit from a tax avoidance loophole which he could have chosen to close but didn’t was bad enough; the revelation that he held a US Green Card visa for six and a half years as a UK MP (one and a half years of that time as Chancellor) is worse, much worse. And his answers to date leave a series of obvious questions unanswered. In the first place, they tell us that Sunak, like Johnson, believes that rules don’t apply to people like himself: having given a binding commitment to be a permanent resident of the US, moving to another country and taking on a position as a government minister looks a lot like extracting the urine. It also suggests a certain lack of commitment to both countries – for how long does one have to be a member of a legislature, let alone a minister of the Crown, before realising that you are, perhaps, no longer a permanent resident somewhere else?

The statement issued on his behalf says that “All laws and rules have been followed and full taxes have been paid where required in the duration he held his green card”. It’s deliberately opaque. If all taxes on all worldwide earnings were paid to the US authorities in accordance with green card rules, that would imply that he paid tax on his MP and ministerial salaries to the US government. The unanswered question is whether that was as well as, or instead of, paying them to the UK Treasury. Either would be astonishing: on the one hand, paying tax twice on the same salary, to two different governments, seems somewhat out of character for a household willing to use tax avoidance measures (people don’t get to be, or to stay, as rich as the Sunaks by paying tax twice over), whilst on the other hand, having a Chancellor setting income tax rates which he doesn’t have to pay himself because he’s officially resident elsewhere would be a very strange state of affairs.

There is another unanswered question about the circumstances in which he then surrendered his green card. The statement says, “Upon his first trip to the US in a government capacity as chancellor, he discussed the appropriate course of action with the US authorities. At that point it was considered best to return his green card, which he did immediately.” The use of the passive is interesting. Whilst obviously intended to give the impression that the Sunaks were being pro-active here, the statement does not tell us which side initiated the discussion, nor does it preclude the other, and probably likelier, interpretation that the US authorities said something along the lines of, “You’re having a laugh aren’t you? Hand it over now.”

In what strange universe could Sunak, or anyone else, have thought it appropriate to continue to hold the card, and claim to be a permanent resident of the US, whilst serving as a legislator and minister of another country? In any functioning democracy, the actions of the Chancellor would be considered terminal for his career as both a minister and an MP. But that would depend on him acting honourably. And given that honourable action by the Chancellor might lead people to expect the same from the PM, it's unlikely that his resignation should be expected anytime soon.


Anonymous said...

Rishi may well have got a few things very wrong, but, for sure, he isn't alone. Perhaps you could continue to explain some of your more interesting economic theories. You know, how borrowing larger and larger sums has no effect on inflation or the exchange rate.

Can't wait. And doubtless neither can the millions of other hard working families up and down the land.

John Dixon said...

"Rishi may well have got a few things very wrong, but, for sure, he isn't alone." Agreed. We have a cabinet full of people who are getting most things wrong. Glad to see you acknowledging that fact.

"Perhaps you could continue to explain some of your more interesting economic theories... how borrowing larger and larger sums has no effect on inflation or the exchange rate" I'm afraid that my ability to explain is severely constrained by your limited ability to understand the words you read. As in: I have never argued that borrowing larger and larger sums has no effect on inflation or the exchange rate, nor would I attempt to, so there is nothing to explain.

What I have said is that creating new money is not the same as borrowing. Whilst the government (for ideological reasons) tries to pretend it is, it is merely a book-keeping exercise. To the extent that the government 'borrows' when it creates new money, it actually 'borrows' from itself; any 'debt' created as a result is an accounting fiction. No-one can claim to be in debt just because their left pocket owes money to the right pocket. Government-created money can cause inflation, but doesn't necessarily do so - it depends on whether, and to what extent, it is in competition for the resources being purchased when it spends that money. If there is competition, then supply and demand says prices rise; it does not say the same if those resources are otherwise idle.

dafis said...

My gripe is not with Rishi or Mrs Rishi. Both he and those politicians now engaging in a mass of swivel eyed criticism need to take a long hard look at the entire fabric of our over complicated tax regime(s) which are riddled with loopholes designed for the extremely rich to exploit, normally with guidance from expensive accountants and lawyers. This is legalised theft managed by an industry set up specifically to engage in diverting moneys that should have been taken in tax, but moved through all sorts of devious loops and hoops into some kind of ring fenced safety. It needs demolishing and I would be quite happy for Rishi and wife to remain untouched until this corrupt facility gets smashed. Given what we have in government and the Opposition I doubt whether that will happen within the next 10 years. We have a House full of spivs and chancers, so no chance !