Global corporation tax. The Biden administration has released plans for a global minimum corporation tax with its “Made in America Tax Plan”. The two pillars of the plan are (a) provisions for allowing countries to tax multinationals based on a company’s sales in that country, and not registered profits (as these can be shifted to lower tax jurisdictions) and (b) an effective global minimum corporation tax, whereby multinationals paying lower than this minimum in a particular country would face a “top up” tax in their home country, reducing the incentive and ability to shift profits to a tax haven. (See Guardian explainer)
~~Rationale. Over the past thirty years, there has been a race to the bottom in corporation tax rates around the world, undermining countries’ ability to raise revenue, and profit-shifting to tax havens has increased (60% of multinationals’ foreign earnings are now channeled through tax havens, compared to 30% in 2000).
Policy analysis. Tax expert Richard Murphy argues in the Financial Times that Biden’s plans are "unexpectedly robust" but would require a comprehensive system of country-by-country profit and tax reporting to work, and criticises the plans for only applying to the largest 100 multinational companies.
~~Fairness for low-income countries. Last month, Chief Executive of the Tax Justice Network Alex Cobham wrote on the history of the OECD talks to date and profiled an alternative proposal for global corporate taxation. In particular, he argues reforms should not grant superior rights to the “home country” of multinationals - which the second pillar of Biden’s plan does - as this disadvantages lower-income countries (World Economic Forum).
~~Not just about tax rates. The Tax Foundation’s Daniel Bunn emphasised the need for a minimum tax base in addition to a minimum tax rate (Twitter).
~~Analysis. For more details, see Ella Nilsen’s excellent summary for Vox, while clean energy writer David Roberts examines the climate-related elements of the proposal in detail.
~~COP26. Biden is expected to announce the US’s ‘Nationally Determined Contribution’ - its emissions reductions target ahead of the UN climate negotiations in Glasgow this year - and try to build international ambition at a climate summit on 22-23 April.
Paradigm shift. The scale and radicalism of Biden’s proposals since entering office have strengthened the argument that a paradigm shift is underway in American, and global, economic policy making. Economist Noah Smith (Noahpinion) argues Biden’s policy reforms are comparable to the New Deal or Reaganomics in scale, and offers an analysis of the “unifying philosophy” of Bidenomics.
UK divests from fossil fuel energy subsidies abroad. The UK government stopped financial support for fossil fuel energy abroad, including through export finance, international aid funding and trade promotion activity.
Fall in number of UK green jobs. Data from the ONS showed the number of people employed in the low carbon and renewable energy economy dropped by more than 30,000 between 2014 and 2019 (paywalled BusinessGreen coverage).
Climate reparations. Lawyer and organiser Harpreet Kaur Paul made the case for “reparative climate justice” in her report for Common Wealth, arguing that countries in the Global North (such as the UK) cannot contribute their “fair share” of climate change action with domestic policy alone. Their responsibility for the bulk of historical emissions entails a responsibility to redistribute money and power to countries in the Global South, who are less responsible for and more exposed to environmental risks. Recommended reparative mechanisms cover climate financing, debt cancellation, trade and company reform, and needs assessments.
No COP deal without debt relief. Prime Minister of Pakistan Imran Khan argued that COP26 will fail without moves on debt relief and climate finance for Global South countries: “I want to travel to COP26 in Glasgow with hope and optimism, showcasing Pakistan’s positive climate actions. However, what is clear to me is that without a strong climate finance deal on the table, there may not be any agreement at COP26 — an outcome we can all ill afford.”
EU fiscal rules. Economist Professor Stephany Griffith-Jones argued the EU must recast its economic governance - including the fiscal rules that bind its members - to enable a just transition to a more resilient and green economy.
Political flashpoint around North Sea oil and gas licenses. Government climate advisers warned UK goals for reducing North Sea emissions are not strong enough and “will hinder the achievement of Net Zero and risk damaging the UK’s authority as COP president”.
~~Stranded asset risk. The Energy and Climate Intelligence Unit’s Richard Black highlighted the misguided economic rationale for investing in fossil fuels, referencing this explainer on stranded assets for Carbon Tracker.
Finance and industrial strategy
Government venture capital. The UK Government’s Future Fund, run through the British Business Bank, is now the largest venture capital fund in Europe, making £1.2bn of convertible loans to businesses. The FT reported that the fund was originally launched in April last year in “an attempt to stop a slew of start-up and early-stage businesses going under as other sources of funding dried up” and that now “the government seems to have a taste for the VC life”.
~~Public equity stakes. Back in December 2020, IPPR and Common Wealth called for public equity stakes as a direct strategy to fuel economic recovery, extending government support to the wider economy to help manage balance-sheet debts, rather than just high-growth start-ups.
Can ESG solve the climate crisis? Tariq Fancy, former chief investment officer for sustainable investing at BlackRock, suggested that free market policies - such as embedding ESG corporate policies across investment portfolios - will fail to solve the climate crisis “not because [free markets] are evil, it’s because the system is built to extract profits.”
A battle over the purpose of financial regulation. In a piece for openDemocracy, Chaminda Jayanetti examined the Financial Services Bill and the Government’s future regulatory framework review, predicting a battle over the future of the UK's financial regulation post-Brexit: "competitiveness" vs supporting the real economy, society and environment.
The new approach to Industrial Strategy. Chancellor Rishi Sunak and Business Secretary Kwasi Kwarteng wrote a letter to UK businesses justifying the shift from Industrial Strategy to the government’s ‘Plan for Growth’.
~~‘Transitioned’, not ‘scrapped’. The Government claimed to be “still taking forward the best elements of the Industrial Strategy, including continuation of existing Sector Deals and reviewing the Grand Challenges and missions through the upcoming Innovation Strategy… The plan for growth is a whole of government approach to that – making the most of our collective strengths right across the whole economy.”
~~So what has changed? Tim Lord from the Tony Blair Institute tabulated the differences and similarities to the 2017 Industrial Strategy in a tweet here.
Work and inequalities
Black youth unemployment rate hits 40%. Guardian analysis of new ONS figures found the Black youth unemployment rate was three times higher than white workers of the same age between October and December 2020.
Sewell Report. The report from the Government’s Commission on Race and Ethnic Disparities has faced an enormous amount of backlash. Strong critiques include: think tank Runnymede’s open letter to the Government from civil society leaders, historian David Olusoga’s analysis of the report’s “historical illiteracy” and economist Jonathan Portes’ criticism of the commission’s methodology.
Improving labour market resilience. The Institute for the Future of Work launched the 2021 Global Labour Market Resilience Index with Whiteshield Partners and Oxford Saïd Business School. The index found the UK had the 12th most resilient labour market in the world, and recommends greater devolution to enable more dynamic responses to inequality, insecure work and devolving vocational training at a local level to fill national policy gaps.
Mapping inequalities in unemployment. Autonomy relaunched its Unemployment Tracker mapping the claimant count across regions in the UK to illustrate the impact of Covid-19 on different ages, genders, regions and more.
Normalising the four day week. One in five small British firms are at least actively considering a four day week. Nearly 300,000 small and medium-sized UK businesses and over 840,000 employees are already working a four-day week and over 1 million UK firms and 3 million employees could move to a four-day week in the near future. (Telegraph)
A post-pandemic plan for the healthcare workforce. The IPPR’s Parth Patel and Chris Thomas outlined what ‘build back better’ should mean for an “exhausted and over-stretched” healthcare workforce, drawing from YouGov polling to inform its practical recommendations.
The case for a longer-term job support scheme. NEF’s Alex Chapman, Chaitanya Kumar and Alfie Stirling explored the ‘transformational role’ the furlough scheme could play in expanding training and education beyond the September cliff edge in Government support. The authors point to the 850,000 jobs at risk of unemployment, loss of hours and loss of pay.
Feminist Futures Programme. Autonomy’s latest post from the Feminist Futures Programme features Helen Hester and Nick Srnicek explaining the directions for research in the field of social reproduction and exploring “various strategies for recognising, redistributing, and refusing certain kinds of reproductive labour”.
Post-Brexit employment rights. The TUC suggested there is a “real risk” of falling behind the EU on workers rights, as the EU is considering initiatives that improve conditions for platform workers and the ‘right to disconnect’, where the UK has no similar legislation on the way. The forthcoming Employment Bill will outline the government’s plans for post-Brexit working standards.
International cooperation, Covid-19 and tax
IMF proposes post-pandemic solidarity taxes. The IMF has proposed an additional and temporary ‘solidarity tax’ to reduce social inequalities exacerbated by the pandemic. Director of the Fiscal Affairs Department told the FT that “a symbolic rise in taxation from those who have prospered over the past year would strengthen social cohesion even if there was not a pressing need to repair the public finances.” The report also called upon policymakers to “consider a temporary Covid-19 recovery contribution, levied on high incomes or wealth”.
New SDRs needed. Lara Merling of the International Trade Union Confederation called upon the IMF to issue special drawing rights to “stave off a debt crisis in developing countries as well as ensure countries are able to afford items of vital importance such as personal protective equipment, vaccines, medicine, and food”.
Vaccines in Cuba. Journalist Cory Doctorow profiled Cuba’s health service and leadership in biotech, including vaccine production, contrasting the country’s approach to pharmaceutical companies in the Global North, on whom he blames the present “vaccine apartheid”. (Twitter thread summary here).
Tax Havens on the Taxcast. Investigative financial journalist Tom Bergin joined The Tax Justice Network (TNJ) podcast discussing his new book on Free Lunch Thinking: how economics ruins the economy, and TJN’s Corporate Tax Haven Index 2021.
Migration
Post-Brexit Windrush? Journalist Dahaba Ali, who has lived in Britain for 17 years, has been denied post-Brexit immigration status. Labour MP Kate Osamor suggested the government’s approach to settled status risked creating another “Windrush-like disaster”.
