Grace on light

Grace Hopper explains a nanosecond. The inimitable jgc provides print-out-and-keep nanoseconds for you.

Oh no, I'm agreeing with Alan Johnson (mostly)

On the Gary McKinnon extradition case, specifically:

But Labour former home secretary Alan Johnson criticised the decision and claimed Mrs May had made a decision which was "in her own party's best interests but it's not in the best interests of this country".
He said: "Gary McKinnon is accused of very serious offences. The US was perfectly within its rights and it was extremely reasonable of them to seek his extradition."

Well yes, this is clearly Mrs. May trying to get back in the public's good books. But you know what? Alan Johnson is bang on. We may feel that a potential upper limit of 60 years for McKinnon's actions is excessive in UK terms, but there's no denying that the US was well within its rights and the boundaries of reasonability in seeking his extradition.

Let's see who Gary McKinnon is:

Gary McKinnon (born 10 February 1966) is a Scottish systems administrator and hacker who was accused in 2002 of perpetrating the "biggest military computer hack of all time,"

He's not an idiot savant living in his parents' basement. You can't hold down a sysadmin job if you're a moron. Sure, social ineptness is possible -- indeed, generally regarded as a plus -- but you've got to know what you're doing and be well organised. I'd totally believe a mild Asperger's Syndrome diagnosis, but again that's not exactly uncommon in the world of IT. And what about what he is claimed to have done? (I haven't been able to spot protestations of innocence and refutation of the US authorities' claims).

The US authorities claim he deleted critical files from operating systems, which shut down the US Army's Military District of Washington network of 2,000 computers for 24 hours. McKinnon also posted a notice on the military's website: "Your security is crap". After the September 11 attacks, he deleted weapons logs at the Earle Naval Weapons Station, rendering its network of 300 computers inoperable and paralyzing munitions supply deliveries for the US Navy's Atlantic Fleet.

He may just have been "looking for UFOs" but he seemed to be willing to cause substantial chaos along the way.

The dominant reason for stopping the extradition was McKinnon's "depressive illness". I'm sure he has legitimate depression, but I expect the ten years of fighting extradition has been a substantial contributor there. Maybe we can regard the process as the punishment, but I can't help feeling that McKinnon has got away with a series of serious crimes mostly because of a general UK anti-American feeling.

Michael Meacher - mendacious scumbag. Again.

What's wrong with this headline: Starbucks pays £8.6m tax on £3bn sales? If you have no idea, you too might be the Labour MP for Oldham West and Royton:

Michael Meacher, the Labour MP for Oldham West and Royton, who has campaigned against companies that use tax avoidance techniques, said: "HMRC should be having a look at this, especially since they keep saying there should be a crackdown. This has been going on for years and there are many companies involved.
"The fact they have paid 0.3% tax on their turnover is utterly scandalous. If they didn't think they could get away with it, they wouldn't dare do it."

I realise that you may be too pig-ignorant to be able check the details, Mr. Meacher, but you will find that corporate taxes are levied on profit, not turnover. VAT is rated on sales, but most Starbucks products seem to be zero-rated so that's irrelevant (Update: Mr. Wadsworth points out that although the food products are zero-rated, most of them become VATable when catered, so Starbucks is indeed pouring VAT money into the Treasury). So, if by "getting away with it" you mean "comply fully with UK law and pay all due taxes" then yes, they do...

So Starbucks is fraudulently jiggling its accounts and is funnelling all the unpaid tax into the pockets of its executives? Apparently, "no", and "no":

There is no suggestion Starbucks has broken the law and the company's worldwide tax rate was 31% last year, compared with an average of 18.5% for multinationals. However, it paid an average of 13% on overseas income, one of the lowest rates in the consumer goods sector.

So it's paying most of its tax where it's based. Fair enough.

There's also the not insignificant point, mysteriously omitted from the Guardian, that a hefty slice of that turnover will be going in employee wages (on which income tax, employer and employee NI are levied) and business rates. Which, for some reason, is not counted as "tax" by Mr. Meacher's reckoning.

It seems that my previous characterisation of Mr. Meacher as a mendacious git was spot on...

UK Muslims not as polite as Irish Muslims

After the other week's Muslim protest at Google's HQ in Dublin, today we had 10,000 UK Muslims protesting at Google's HQ in London on the same topic - they were more direct in what they thought of Youtube hosting the video than the Irish group were.

Posters such as "Muslims Campaign For Global Civility" were, I think, quite well put. "Larry Page supports Terrorism" and "Eric Schmidt supports Terrorism", perhaps less so. I didn't spot any "Sergey Brin supports Terrorism", perhaps because it's widely recognised that Sergey Brin is Batman. "Don't they teach manners in Google?" of course begged the response "Maybe, maybe not, but they're certainly very keen on freedom of expression"

One Sheikh speaker commented:

Organisations like Google are key players and have to take responsibility for civility. You can't just say it doesn't matter that it's freedom of speech.

Oh, but you can. You can. You can argue about whether that's necessarily true, or a good idea, but it's quite possible to say that Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press, for instance.

I do however wonder how useful protesting outside Google HQ on a Sunday might be; I don't expect many Google staff are around then. They're probably all home, or out at church...

It does however seem that certain people's free speech is less important than others':

When asked where where the women attending the protest were, one protester replied: "Right at the back".

Banks as IT firms?

Mr. Worstall is arguing that banks are just IT companies with more money than the average:

But there is a very real sense in which a consumer bank should not really be regarded as a financial institution at all. It's a computing system which happens to do finance. Which means that the computing guys should probably have a great deal more influence over the management of the bank.

It's an interesting idea. I can see a couple of flaws but they are in the practice rather than the theory.

Mr. Worstall quotes the collapse of the RBS branch sale to Santander as an example of how pivotal IT is to whether banks can make their business work. It's certainly true that modern banking floats on computing, and in particular having robust (and secure) interfaces to data feeds, exchanges, other financial entities, and various web-based consoles for customer operations. If any of them go down for an hour or so, the bank can be looking at a big crimp in its operations.

The biggest difference between a bank and an IT firm, however is regulation. IT firms can do more or less what they want, modulo respecting privacy and data protection laws. Banks are regulated by their host country's government, various quasi-governmental financial regulators (Bank of England, FSA in the UK or Fed, SEC, FDIC in the USA for instance) and additionally local regulations in each country or market in which they operate. A good deal of bank IT beyond interfacing to other systems will comprise tracking, logging and measuring to ensure, and to be able to demonstrate, that the bank and its staff are complying with these various restrictions. There's also accountability to shareholders, which is much more direct in the case of a bank - they can lose huge sums of money in a very short time, either via incompetence or fraud, and so the major shareholders will want good visibility into the risk carried by the bank at any one time. By contrast, money loss in IT firms generally comes via poorly negotiated contracts and appears relatively slowly.

The major problem with turning a bank into an IT entity, however, is the matter of who's in charge. The financial rainmakers who rise towards the top of banks are notorious for having huge egos, brash personalities and a robust approach to inter-personal relations. Successful IT CEOs tend to have something of the introspective geek left in their personality. Those are two very different personalities, and there's only going to be one way that the reporting relationship will end up (well, OK, 3 if you count 'dismissal' and 'harrassment lawsuit'). Banks are always going to end up headed by obnoxious bankers, and IT are always going to be their whipping boys one way or another.

Which, incidentally, is why banks are so often victims of IT screw-ups - bankers are generally unable or unwilling to build and work with the IT department structure that actually aligns their interests. They end up getting IT yes-men who can play the political game but don't get the job done, or regular geeks that could make things work but can never persuade the bankers to part with enough money and power to make it happen.

Non-uniform fiscal multipliers

Go and read the esteemed Mr. Wadsworth on the fact that the Government "fiscal multiplier" value actually depends on which bit of Government spending you talk about:

Some of these hundreds of things are of net benefit and some aren't, but as these things are difficult to measure precisely, personal opinion seems to take over and stifle any sort of sensible debate. But surely, it is idiotic to argue that the £ benefit for every £1 the government spends is the same, and that there is always a net benefit (just as idiotic as arguing there is always a net loss), regardless of what the government is spending it on?

Read the whole thing; I'll wait...

This point has irritated me no end whenever increased Government spending is mooted, and its proponents say "oh, it's OK, think of the fiscal multiplier!" The opponents say "yes, it's sub-1.0", and the argument rapidly descends into fighting and backbiting. Some Government spending is clearly 1.0+ (most of the law+order budget, as Mr. Wadsworth notes). Some is well under 0.5 (the Department of Education springs to mind). Other spending is almost impossible to measure (the overall cost of maintaining the Navy or procuring Trident, for instance). But you can't simply say "the Government spending multiplier is 1.2" and use that to argue for paying GPs 20% more or funding overseas aid to India.

Oxfam: now experts on economics

Oxfam's head of policy and advocacy Max Lawson, writing in the Grauniad, decries the resistance to a financial transactions tax (FTT aka Robin Hood tax) and offers his thoughts on why the UK should sign up to it:

More prosaically, the likely design of the European tax means it will be paid by City institutions despite the UK's refusal to sign up. The tax will apply to any transactions on shares, bonds and derivatives where one of the parties to the transaction is based in a country where the tax is introduced.

My roommate is going to be manicuring her toenails with a chainsaw. The resulting pieces of keratin, flesh and bone will spray across the room and decorate my clothes. This, according to Oxfam, is a good reason for me adopting the same approach to personal hygiene. An interesting argument, and not one totally without merit - oh, sorry, an extraneous "not" there.

Max doesn't really improve his argument as the article proceeds:

In an age when austerity is failing to bring the public finances under control it is hard to imagine a more spectacular own goal than imperfectly protecting City fat cats at vast expense to the public purse.

OK, so who would be impacted by implementing the FTT within the UK? The Congressional Budget Office seems to think that most of the incidence falls on average investors. Anyone who buys and sells shares, directly or indirectly (for instance, anyone with a private pension) will find their costs rise sharply. I realise this may not be a concern for those with a Civil Service pension, but the remaining tens of millions of the UK population with private pensions may not take so sanguine a view. Anyone with a UK bank account would see their already nugatory interest wiped out as the nightly inter-bank transactions were priced out of existence.

Even if the UK Government were stupid enough to implement this tax (and it wouldn't be), the US and Canadian Governments would happily bin any attempt to implement it, instead welcoming any international business which decided that headquartering or trading within the EU had suddenly become more expensive. Tax income would therefore take a steep dive, and the current advantage held by the UK for international listings (due to the semi-demented Sarbannes-Oxley act in the USA) would evaporate like urine on a hot radiator.

I suspect that the prospect of fairy gold billions from the FTT has blinded Oxfam to the actual real and severe problems with the FTT. No prospective Chancellor is going to go for this idea, given the near-immediate impact it would have on corporate tax income:

Can you imagine the Labour party going into the next election vowing to remain outside a European Robin Hood tax that has elsewhere reined in the markets and raised billions to kickstart economic progress?

If Ed Balls were stupid enough to promise this, and I can't see this happening, I can see Labour being wiped out at the next general election as Government income takes a sharp step downwards and the Chancellor is faced with the unpalatable alternatives of deficit spending (and further damage to the UK credit rating and rising interest payments) or spending cuts. I don't think Oxfam's £12mm income from the Government would last long in such an environment.

So where does Max Lawson get his economic expertise?

Max has worked for Oxfam GB since 2002, firstly in policy support to country programmes, and then in advocacy and campaigns. As part of his country support he has visited and worked with over 25 country programmes across the world. He has experience in organisational development, tax, structural adjustment, aid quantity and quality, macro-economics, governance, agriculture policy, social protection, HIV and AIDS, health, education and water.

So he knows a little about a lot. The Internet, and his numerous biographical snippets, are silent about what he studied at the University of Sussex beyond being an "MA student". I note that he "studied at" but nowhere did they say "graduated from"...

Pun of the day

...goes to The Slog, on Iberian debt:

One thing that puzzles me though is, if you’re only one level above junk and then drop two levels during further downgrades, what are you then? Subjunk? Anyway, it’s all getting rather tense down in Iberia. It’s a subjunctive tense haha.

The Civil Service: how do you spell "accountability"?

It's beyond satire. How did the Department of Transport come up with the figures that gifted the multi-£billion West Coast main line franchise to First Great Western? Nobody knows, because they lost the spreadsheet. After all, it's not like there would have been any formal review process on that spreadsheet; with a mere few £bn at stake, who would care?

I'm honestly not sure which of these is the more depressing:

The PwC report shows revenue forecasts were not correlated with how many passengers could actually fit on the trains.
A DfT spokesman said: "We are not going to give a running commentary on what went wrong."

I imagine not, Mr. DfT spokesman, or you'd never get anything else done. Mind you, if this is representative of your general quality of business, perhaps that would be a good thing.

Honestly, if the Government wants to make a slam dunk against a potential claim for unlawful dismissal by the hapless Ms. Mingay, all they have to do is ask her to produce the revision of the spreadsheet which her team reviewed. I mean, frikkin' heck, does anyone at the DfT understand the concept of "accountability"?

Tax Research UK doesn't like the Laffer Curve

So it seems that Eire's regime of low corporation tax has caused Facebook to locate its EMEA headquarters there and book most of the advertising sales through the country:

The British arm paid its 90 UK-based staff an average of £275,000 each in 2011 while contributing just £195,890 to the Treasury's coffers, according to the firm's latest accounts filed at Companies House.
The website also reported UK revenues of £20.4m, a fraction of the £175m that media analysts estimate the firm made in the UK in 2011.

I'd imagine that if the UK sales staff are managed and paid by a Dublin-based senior Facebook salesweasel, and the sales contracts are drawn up in Dublin, then the UK Inland Revenue is just going to have to suck this one up. Oh, if only the UK had a lower corporation tax rate so that the extra costs and inconvenience to Facebook of this arrangement weren't outweighed by the painfully higher rate of UK corporation tax...

It seems that Richard Murphy of Tax Research UK is not happy about the implications of this:

"The UK is being taken for a ride. Facebook is taking standard practice for these IT companies to a new high, or low, depending on how you look at it. The UK is giving the tax break and the Irish get benefit of all the tax on the sales."

Yup, that's right, Richard. Standard and (this is important) completely legal. If the UK Government wants to encourage corporations to base their legal entities in the UK, all they have to do is be more competitive with Ireland. Perhaps they have decided that the income from less mobile entities outweighs the potential extra income from mobile entities like Facebook, in which case they can just take it like a man (who came up with that saying? men are the biggest bunch of wusses that I know).

But there's more!

Facebook UK's latest figures show that the company charged £15.4m to its 2011 accounts – which can be used to reduce future tax bills – as a cost of awarding its UK staff share options. Murphy said: "That appears to be £15.4m to reward £20.4m in sales. That makes no sense."

Really? That's not £20.4m of sales; it's £20.4m of UK revenue plus additional sales booked through Ireland. It makes perfect sense. Let's suppose that a major bank has IT operations in London and New York. Most of the data processing is done in and for the benefit of New York. An IT engineer in London comes up with a way of improving the utilisation of the bank's servers - from, say, 40% to 50%. That saves the bank $1m dollars per year, but only $100K of that is saved by the smaller UK-based trading desks. The bank pays the engineer a $200K bonus, $100K more than the UK savings. Does that make no sense?

I'm glad that Richard Murphy isn't a chartered accountant or some other profession that requires basic numeracy...