To put the lunatics in charge of the asylum makes admirable sense. They are the market for its services. They know where the straitjacket pinches. The Commissioner in Lunacy may think that he knows better, but the sum total of their knowledge must be more than he, cocooned in some distant office, could conceivably deploy. The Treasury pays lip service to these principles, but it always expects to know best, and better, certainly, than the two million customers for its tax credits who seem to have been sent the wrong amount of money. These credits were Gordon Brown’s invention, based on an idea that his factotum, Ed Balls, had brought back from America. The tax system, they believed, could be operated like a two-way vacuum cleaner, adapted so that it could blow as well as suck. Money could move in both directions through the sturdy old PAYE machine, and employers would be left to make it work. The proud inventor pushed out variants in every direction — credits for pensioners, credits for children.... Quite soon we would all be dependent on his credits for our marginal income. Enough of the money he sucked from our wallets would be blown back to us to buy his party a perpetual payroll vote. It is not working out as he intended. The machine is playing up and the market is resistant.
Give it back, it’s mine
The first sign of trouble was an advertising campaign, with a picture of a five-pound note and a slogan: ‘Pick it up, it’s yours.’ This was meant to promote pension credits. Half the people who would be entitled to them had not bothered to apply. How baffling. Didn’t these people know what was good for them, or didn’t they realise that other people knew better? Were they so deranged as to think that struggling with a lengthy form and answering intrusive questions wasn’t worth a fiver? Now the Treasury needs a new slogan: ‘Give it back, it’s mine.’ It has been paying out far more credits than it now thinks it should have, and it wants the money back. Fat chance. Its efforts will do nothing to secure the payroll vote. What looks like an elegant system to a promoter in a distant office looks very different to the customers who have to cope with it, at home, without advice, in their spare time, as best they can. He should respect the sum total of their knowledge, After all, they have to live in his asylum.
Blessing the rich
A view from inside the walls reaches me from Bedlam Asset Management. One of the inmates (let me call him Tom o’Bedlam) writes to say how well the credits suit him, though not in ways that the Chancellor intended: ‘Most of those on the receiving end are terrified at earning too much, so are happy to take sub-normal wages or work on the “black”, as do my legions of domestic staff. Tax credits for single mothers are another useful side-earner. They make excellent tenants and it is easy to arrange for their government cheques to be paid straight to me, their landlord.’ What Tom likes best, though, is the blessings that go with his farm: ‘Value Added Tax is a levy on almost everything the poor buy. We porkers don’t pay it.’ This tax on equipment, buildings and repairs can be reclaimed: ‘Every two months Her Majesty sends me a fat cheque.’ She also lets him off the excise duty on diesel or petrol. He need only say that it is for farm use. His other farm, in Europe, loses even more money and is even more remunerative. One day, Tom thinks, the poor who support him will notice. Bedlam knows best.
Watch the birdies
Bid up, cheer up
Shares in London are at their highest level for three years or longer — this, so the MPC now thinks, might cheer consumers up — but the hot stock of the moment has come to New York and is called Baidu. Registered in the Cayman Islands, Baidu controls a company registered in the Virgin Islands which has a deal with the Chinese promoters of a variant of eBay, the on-line auction house. Shares in Baidu have been changing hands at a multiple of 2,000 times its last year’s earnings. You might think (though not if you are an MPC dove) that the mood of the market is quite cheerful enough already.