[Closed] Tories threaten to suspend the Lords over Tax Credits

But if you did want to still use Tesco as an example. Tax credits were introduced in 2003. How many billions has tesco made in the last 12 years. All while having its staffing costs partly paid by the taxpayer

[url= http://www.redmayne.co.uk/research/securitydetails/financials.htm?tkr=TSCO ]i'd guess 20-30 billion in pre-tax profits by the looks of this.[/url] - and [url= http://www.theguardian.com/business/2009/apr/21/tesco-record-profits-supermarket ]this,[/url] which suggests 3.1bn profit in 2009 and 2.8bn in 2008

this year's loss was a bit of a shock, although they still booked trading profits of £1.4bn

so no tears for poor old tesco

....if we take £25bn as a ballpark for Tesco's cumulative profit over 12 years, that works out to roughly £4200 per employee per year. Basic working tax credit is £1960 per year

Wonder how much they have paid in tax per employee (Corp tax, business rates, income tax, NI, VAT etc). I'd be willing to bet the government hasn't done badly out of the deal.

Wonder how much they have paid in tax per employee (Corp tax, business rates, income tax, NI, VAT etc)

I don't know. Maybe you should ask the appropriate authorities in Luxembourg, where they're apparently based?

I'd be willing to bet the government hasn't done badly out of the deal.

Well if you're willing to bet on it, then that's as good as fact. Please ignore all my previous posts 😆

Hang on - if its indefensible, eliminate it then?

Then when you/we have, what are the implications...

One thing I can agree on is that there should be no taxpayer subsidies to earnings

Are you IDS in disguise? 😉

So after we eliminate profit, where does the investment come from? Where will the government raise their money from?

Yunki, are you proposing that governments set thresholds for the maximum returns that private enterprises can deliver?

Who said eliminate profit?

So after we eliminate profit, where does the investment come from?

A bit melodramatic there THM. We're not talking about tractor production in the Ukraine

Over the last 30 years the proportion of company profits paid as dividends to shareholders has increased enormously. Funnily enough - who'd have thunk it - as the proportion paid to the majority of their staff (not the ones at the top, obviously) in wages has shrunk.

Nobody is saying that profit is wrong. What we're saying is that the distribution of that profit needs to move back towards those who are, after all, creating it.

Beauty of the free market though isn't it Binners

Tesco (profit rapists and poverty wages) making a loss, Aldi and Lidl (first retailer to pay all staff living wage IIRC) go from strength to strength.

There are a couple of points within this debate I'm struggling to understand, mainly because I don't have time to research them:

If investors require a return on investment and tax credits hadn't existed to support earnings, would investors have accepted a lower return or would prices have been forced up to compensate - i.e. is government subsidising investors or consumers?

Did we end up with tax credits because the minimum wage became the maximum wage (as feared by some commentators prior to min wage introduction) where an absence of fixed min wage might have forced some wages higher otherwise?

Pondering what implications these points have for workers post tax credits.

Over the last 30 years the proportion of company profits paid as dividends to shareholders has increased enormously.

No it hasn't, in fact its done the opposite, essentially since the 60s.

Indeed old bloke - key questions.

sorry yunki - cap not eliminate profits? who decides the cap?

Any evidence for that THM? A quick google suggests you are talking nonsense.

Yet the likes of Tesco, at the same time, expect us to believe that they can't afford to pay their staff a living wage, and this needs to be subsidised by the taxpayer. While still paying dividends to shareholders on their massive profits, of course

Waitrose employees get a share of company profits, as well as staff discounts (as do Tesco employees, but the Waitrose discount is greater and uncapped).

Shop at Waitrose.

Unfortunately, most people will always strive to pay as little as possible for the goods that they want.
This forum is a shining example.
Everday people post up "PSAs" of links to cheap goods (often from companies known to be huge corporate tax avoiders).

Well done.
You really are doing the public a massive service.

no grum made it up, why?

"love a bit of nonsense me"

no grum made it up, why?

So why not just post it?

[url= http://www.theguardian.com/commentisfree/2015/apr/26/capitalism-woes-tesco-meltdown ]A pretty good assessment of the modern 'Tesco' business model[/url]

[i]This is how too much of business works in 2015. The justification of capitalism is not that it enriches the top 0.1% and the wealth trickles down. Its justification is that a plurality of companies experiment in solving human problems and so create worthwhile value, which capitalism can do better than any other system. Tesco went wrong because of a very particular British ownership and financial architecture that places no value on this social, human mission but sees its duty as only to maximise the share price for a floating body of shareholders[/i]

[img] [/img]

Here's the first graph I found. I think it's from America so maybe it's radically different here but I doubt it. I'll leave you to guess which line is which.

May be wrong on this but if the graph above is just for American companies it may be distorted by the tens of $trillions that US companies are holding offshore from wholly their owned operating companies - until the profits are repatriated to the US no tax is paid, so companies just hold the reserves out of the country. I think that's just the way their tax system works i.e. profit can be booked but isn't taxed until the money is bought onshore... hence the increase in profit and decline in tax paid.

In our tax system, I think a different accounting treatment applies whereby company profits from offshore subsidiaries are subject to UK tax irrespective of whether the money is brought back to the country and disbursed to shareholders or not.

sorry yunki - cap not eliminate profits? who decides the cap?

I dunno.. The same people who decide minimum wage, benefits caps, tax brackets..?

Somebody sat down and decided that a middle aged family can exist on a minimum of x, surely that same body could work out what the sensible minimum would be for a corporation?

An economist of some description?

Dividend payouts have been in long term decline - until very recently.

How often did you read about yields or dividend discount models in the FT? Since the 60s, an increasing level of profits has been re-invested back into companies (tick) and or used to fund M&A (??) or share buy-backs. The 80s and 90s in particular were about growth and capital appreciation, not income. Companies that paid out (apparently) ever increasing amounts to shareholders were considered stodgy and boring.

Interesting and as consequence of the Tories' policy of artificially distorting interest rates, dividends have been back in fashion with a vengeance - look at the performance of income funds and companies that pay 6-7% dividend yields. They have rocketed...

Reference to the FT - check
Lack of any evidence - check
Use of jargon - check

We're just missing a haughty put down and we'd have a full house.

[url= http://www.thedailymash.co.uk/news/business/government-powerless-to-intervene-in-non-banking-industry-20151020103119 ]Meanwhile.... back in the real (non financial sector) world....[/url]

Cap Profits? What criteria would be used for what a profit should be? Don't get it.

you will be waiting a while....

Google Robert Shiller and his LT data on the US market as a starter. Late 19C companies typically paid out mid 70%s, by the 1950s/60s this was 50-60%, early 2000s 30%s etc, last data plot 40.111839% to be precise

Quote respected data source and academic from Yale (check. Shiller has built a LT model based on dividends in the US and a recent criticism included

Dividend payout ratios for U.S. companies are lower now than they used to be, with a greater share of U.S. corporate profit going to reinvestment.

Hmmm...

Its the same in this country too. Look....

[img] [/img]

Oh... hang on a minute....

It doesn't have the increase in staff wages. I presume its the same as the directors pay index. Which explains why tax credits are no longer needed. They must be leading the life of bloody Riley those Tesco shelf stackers.

Cap Profits? What criteria would be used for what a profit should be? Don't get it.

Well the standard argument for not increasing wages is that it would mean price increases.. sooo errr, what's wrong with using company profit to increase wages instead?

seems pretty simple, but I'm a painter, not an accountant/economist so I'm not blindly and inherently [i]utterly obsessed with gain and growth[/i]

Binners - now, directors' pay is a different thing altogether!!

But while there has been a LT decline in wages/GDP - high 50%s to low 50% with some volatility in between over past 80 years or so - its higher now that it was in early 80s and mid 90s

Of course, what those stats ignores is the changing nature of GDP but that's another story

teamhurtmore - Member
"One thing I can agree on is that there should be no taxpayer subsidies to earnings"
Are you IDS in disguise?

I'm more of a capitalist than you may think. 🙂

However I don't like the way corporate structures promote amoral practices.

I strongly believe that no system is sustainable if the workers who ultimately produce the wealth are not properly rewarded. Earning enough that they don't have to fear loss of their shelter or scratch for food is a minimum requirement. If they have more, then they consume more, which benefits Tories big and small.

And persecuting the poor and vulnerable is something only arseholes and porcine fellaters do.

I'm more of a capitalist than you may think.

And I am less of one!

However I don't like the way corporate structures promote amoral practices.

If they do , then they should be criticised and prosecuted, true

I strongly believe that no system is sustainable if the workers who ultimately produce the wealth are not properly rewarded.

Those who supply all the factors of production - of which labour is one - should receive their just rewards. Workers are one of those groups, but they alone do not produce wealth. Furthermore the percentage of output that wages represent has not declined in a way that supports the argument that workers have been shafted. They haven't. There is an argument, however, about relative trends in pay between CEOs etc and the average worker, true.

Earning enough that they don't have to fear loss of their shelter or scratch for food is a minimum requirement.

True (99%)

And persecuting the poor and vulnerable is something only arseholes and porcine fellaters do.

Ok, so cuts to tax credits (and welfare generally) creates losers, by defintion. And the balanced argument put forward by Osborne falls over under scrutiny. Plus the changes provide a disincentive to work for many involved which goes against the basic principle that it is better to work. However, to extend the argument to "persecuting" the poor is simply an exaggeration as basic analysis of recent trends in wages, living standards and income inequality show.

Anyway, perhaps the democratic process is having a desired effect if last night is anything to go by. We shall see.....

Workers can sell themselves to the highest bidder.

[img] [/img]

I strongly believe that no system is sustainable if the workers who ultimately produce the wealth are not properly rewarded.

The issue you raise is the one the Tories are trying to address, employers are relying on tax payers to subsidise wages

Well the standard argument for not increasing wages is that it would mean price increases.. sooo errr, what's wrong with using company profit to increase wages instead?

But (jambas) its not only one (to use economists' jargon) factor of production that is important eg, the workers or the designers or the shareholders etc. [b]Its all of them.[/b] At its simplest this includes land, labour, capital and entrepreneurship - and each will have their own (factor) payment eg, rent, wages, interest and profit etc. The extent to which income is distributed between each is determined by their own supply and demand. No silver bullet or single answer to how that is distributed. But of course if you are the supplier of any of those factors, you are in a stronger position if the demand for that factor outstrips the supply.

FWIW, Jeremy Warner has some interesting historical context in his piece on tax credits today in the (ok, I know...!) Torygraph today

Going from economists' speak to management speak - there are three constituents that a company's management has to satisfy - customers, staff and shareholders. Balance needs to be achieved across all three - you cannot prioritise one at the LT expense of the others

Dividend payouts have been in long term decline - until very recently.

So why has boardroom pay sky-rocketed as they are not producing what they are employed to do, increase shareholder value (I value a fat cheque more than asset growth, I can't spend the asset growth)?

Maybe a legal cap on CEO pay. Those that piss off will be replaced by people who will work for the money on offer, it's the capitalist way (see Polish and Eastern European construction workers for recent examples).

EDIT If you screw people over enough and threaten dire outcomes if those in charge don't get their way eventually there comes a point where bluff will be called as those at the bottom have nothing more to lose. Hopefully it will be a Velvet Revolution rather than the Terror.

That's a good question - and I am genuinely amazed that shareholders have not been more vocal in addressing this. But it should be their responsibility not government's to regulate.

Two possible reasons - shareholders are increasingly passive (possibly more ST too) and linked to that they have been content with the returns from capital appreciation - hence why instead of paying dividends as suggested earlier they preferred to buy-back shares and "repay" shareholders that way.

Hv, governments are poorly placed to determine the level of CEO pay and its likely to be very different depending on the context.

That's a good question - and I am genuinely amazed that shareholders have not been more vocal in addressing this.

Two possible reasons

Nah... you forgot the third....

Despite Fatcha's professed vision of a share owning democracy, it never happened. Shares owned by private citizens have never been lower. They're all owned by the same institutions. As with most of the financial sector, its a boys club, a closed shop. They all sit on the remuneration committees and just sign each others obscene pay deals off, on a reciprocal 'you scratch my back..' principle.

Hence wage stagnation, at best, for everyone except those in the boardroom, who's remuneration has continued to accelerate into the stratosphere, whatever their performance. You can bankrupt a company (or maybe an entire financial system) and still walk away a squillionaire, laughing your tits off.

For as the banking crisis so depressingly demonstrated - those on the banks trading floors, or in corporate boardrooms are now officially a law unto themselves, accountable to no-one, who can do as they like with complete impunity, and absolutely no consequences

hurray for capitalism!!!

Governments are poorly placed to determine the level of CEO pay

And yet apparently perfectly placed to set what is effectively 'The Wage' for a huge chunk of the countries workforce, at £6.70 an hour?

No inherent contradiction there then eh?

CEO pay could be set at a multiple of the lowest paid worker in the company. If you want to earn obscene amounts of money form your own private company.
As an employee of a large publicly listed company no one is entitled to a huge pay packet, the money belongs to the shareholders / pension funds.
(15 times minimum wage should do it).

Tax Credits were indeed bonkers.

Yes, absolutely, they are bonkers, but unfortunately they are here at the moment. The way we transfer the proper pay of someone to an employee now has to be done in a way which is fair and proper.

I don't think Tax Credits should exist, but the level of the minimum wage should also be higher than it is, and planned to be.

Directors pay is too high, but they can get away with it at the moment because of the government subsidy to their lowest paid workers.

I'm as right wing as they come, eg small government, lower tax. However, this actually means that I think the lowest paid workers should be given even more.

The economy and society is moving to being more service and leisure based. With this a lot of the jobs are not skilled in the same way as they have been previously. Barista vs machine shop worker. We need to make sure that people at the lower end are paid correctly. If it means that a tin of beans is going to be more expensive because we have to pay shelf stackers a reasonable wage, then it means that this is the actual cost of said product. The cost will then be taken out of the top level of salaries. The recent increases in personal allowance are also very welcome.

Governments are poorly placed to determine the level of CEO pay

They are, and the small government part of me doesn't like to see businesses regulated, and think unions are destructive. Unfortunately, where they simply fail to do the right thing in regards to pay at the bottom end, then a proper min level needs to be set. Nothing complicated, just a proper wage.

Stuff doesn't become more expensive, it becomes properly priced. Lower paid workers can afford more anyway, and the money goes from the richer to poorer for a change.

Bit rambling, sorry!

There is an obvious contradiction binners, true. So if Governments "are" poorly placed, they should be doing neither 😉

edit: reread your post hugo

Yes, absolutely, they are bonkers

Not necessarily - they can simply reflect that there is a value to the wider society in a person being employed, or living at a reasonable standard, or giving a safe and healthy home to their kids, that is not recognised by their employer.

It's a complicated picture for sure but dividends are in decline not least due to the fact they are taxed and these days it's inefficient to shelter profits offshore (Mr Junker has helped a lot with this whilst turning Luxemborg into one of Europes most wealthy counties). Dividends will also tend to mirror interest rates, and those are historically low

Very very roughly for every £ less in profits a companies shares will go down 5-8 times (lots of assumptions here of course including whether the investors think the decline is temporary but reducing profits to pay wages sounds permanent to me).

We had/have a supermarket that didn't make profits, it was called the Co-op. Do we shop there ? Is it the most successful business model ? Is it even viable ?

I don't know if they stats quoted here where correct (£30bn now vs £3bn originally) but Tax Credits have gone bonkers in terms of costs (as has "disability benefit" which I calculated the other day must be paid to somewhere between 5 and 10% of our working age population)

We on here are all willing to buy bike bits off the internet most likely from an offshore business, with very limited uk workers and in the case of the German companies a swerve on VAT but we are complaining about cutting tax credits when our behaviour is what is driving down employment and wages ?

I appreciate this is off topic (so feel free to ignore) but who saw the news prices on the Romanian fruit farm workers in Kent who are being exploited by agencies and employers all due to good old EU freedom of movement rules being too easy for companies to abuse ? I'd imagine they'd be entitled to tax credits too.

So who is the enemy here then jambalaya, ninfan, thm etc?
Who should we be chasing to address the problem of inequality?

I think we've firmly established that it's not the poor, the ill or the workers.. We can't touch profit, so it's not corporations..

Is it the stock market that's messing things up and putting all the money in the wrong hands?

In your opinion, who is causing the problem?