Panorama and HSBC: wasted airtime


Parking emotions to one side, companies percentage of total government tax income has been relentlessly trending down in every major economy for over 50 years. Given the size of savings needed to support the illusion of austerity to the bond markets (but don’t look too closely at booming public sector debt levels), the content of this weeks Panorama was sold heavily as a “look everyone, large amounts of money squirrelled away by the rich here”. Sounded like an interesting perspective, so I recorded it on iPlayer and watched it on the 40 minute train journey into London this morning.

Unfortunately, largely content free. You could summarise it as:

  • A Whistleblower in an HSBC facility in Switzerland leaked account details of many people holding large amounts of money in accounts there
  • Many people ended up coughing up extra tax money to HMRC as a result of the data leak
  • the bank gave advice to wealthy clients to lower their tax bills through schemes designed expressly for this purpose
  • Bank says they’ve reformed such practices
  • another Whistleblower says in her experience, they have not
  • Director at the centre of managing HSBC at the time was ennobled and hired as an advisor to David Cameron
  • more could be done (lots of see saws between the words “Avoidance” and “Evasion”)
  • err, I think that’s it

It then got surreal when the politician interviewed was one widely known as one whose £1.8m trust fund is fed from her fathers company that pays an effective tax rate of 3%.

So, the pursuit of a journalist who could do a thorough job and come out with some compelling (and actionable) story here remains unfulfilled. In the meantime, a few people are watching my question on Quora for which I can find no answer:

What benefits accrue to the UK by permitting large amounts of money to be held offshore in British Crown Dependencies and British Overseas Territories?

Any ideas? I sometimes wish I could get John Lanchester (one writer who is thorough and funny too) to have a crack at answering that.

Ians Brain goes all Economics on him

A couple of unconnected events in the last week. One was an article by Scott Adams of Dilbert Fame, with some observations about how Silicon Valley was really one big Psychological Experiment (see his blog post:

It’s a further extension on a comment I once read by Max Schireson, CEO of MongoDB, reflecting on how Salespeoples compensation works – very much like paying in lottery tickets:

The main connection being that Salespeople tend to get paid in lottery tickets in Max’s case, whereas Scott thinks the same is an industry-wide phenomenon – for hundreds of startup companies in one part of California just south of San Francisco. Both hence disputing a central ethos of the American Dream – that he who works hard gets the (financial) spoils.

Today, there was a piece on BBC Radio 2 about books that people never get to finish reading. This was based on some analysis of progress of many people reading Kindle books; this being useful because researchers can see where people stop reading as they progress through each book. By far the worst case example turned out to be “Capital in the Twenty-First Century” by Thomas Piketty, where people tended to stop around Page 26 of a 700-page book.

The executive summary of this book was in fact quite pithy; it predicts that the (asset) rich will continue to get richer, to the expense of the rest of the population whose survival depends on receiving an income flow. Full review here. And that it didn’t happen last century due to two world wars and the 1930’s depression, something we’ve not experienced this century. So far. The book just went into great detail, chapter by chapter, to demonstrate the connections leading to the authors thesis, and people abandoned the book early en mass.

However, it sounds plausible to me; assets tend to hold their relative “value”, whereas money is typically deflationary (inflation of monetary values and devaluation through printing money, no longer anchored to a specific value of gold assets). Even the UK Government factor the devaluation in when calculating their future debt repayment commitments. Just hoping this doesn’t send us too far to repeat what happened to Rome a couple of thousand years ago or so (as cited in one of my previous blog posts here).

Stand back – intellectual deep thought follows:

The place where my brain shorted out was the thought that, if that trend continued, that at some point our tax regime would need to switch from being based monetary income flows to being based on assets owned instead. The implications of this would be very far reaching.

That’ll be a tough sell – at least until everyone thinks we’ve returned to a feudal system and the crowds with pitchforks appear on the scene.