The scams of Malcolm Hardee

Brian Mulligan, of late lamented comedy/music duo Skint Video, read my blog yesterday about the always financially creative Malcolm Hardee, who used to be their agent. He tells me it brought back fond memories of Malcolm “telling venues when they paid us cash that they needed to give us the VAT at 15% – he would say he had forgotten the invoice but would write one out there and then.”

As he was not actually registered for VAT and not entitled to collect it, he used to write down a friend’s telephone number as the VAT number, thus getting an extra 15% on top of the fee, which he then pocketed as well as his agent’s fee.

This was one of the many fine pieces of lateral thinking that Malcolm became known for.

When, on one occasion, he had to send his driving licence to the DVLA in Swansea (one of many, many occasions) they sent him back a new licence in the name of “Malcolm Hardy”. He pointed out the spelling mistake to them and they sent him another licence with the correct spelling “Malcolm Hardee”. But he never returned the first licence. This meant he had two driving licences so, if he was banned from driving and his licence suspended for some dubious motoring offence or offences, he still had what he reckoned was a ‘valid’ licence he could show to police if stopped again – the ‘other’ licence.

When Malcolm’s brother Alex was sorting out paperwork after his untimely death, Malcolm’s phone rang: it was the Inland Revenue rather optimistically asking when Malcolm was going to settle his tax bill. Alex told the taxman that, sadly, Malcolm had died. Their response was:

“You told us that last year, Mr Hardee…”

You can hear Malcolm’s son Frank telling similar stories at Malcolm’s legendary 2005 funeral HERE. If you listen to this, remember that it takes place in a church at a funeral not, as it may sound, at a stand-up comedy club…

(In August this year, the Edinburgh Fringe will include a week of events celebrating the spirit of Malcolm Hardee.)

The distortion of the UK tax system by socialist ideology

For a few months, when I was much younger, I read the Sunday Telegraph.

I stopped after reading an article on the UK income tax system. I could see no logical flaw in the newspaper’s argument, but it made me morally uncomfortable.

The article argued that a tiered system of income tax in which higher earners pay a higher percentage of their income in tax is illogical, unfair and both economically and morally indefensible.

Intellectually, I had to agree with the Telegraph‘s logic. The argument went like this…

In a capitalist system – or in the mixed capitalist system which we have – people are, by and large, paid their worth to the company and industry in which they work and to the country’s economy in general. The ultimate goal is always to maximise profits to the company and to the shareholders. So, with competition from other companies for the better executives and workers, a fair salary is reached for each working person by the workings of the market.

It is morally correct that people who earn more should pay more to the community in taxes. But that ideal and morally correct situation is reached by a flat rate tax on earnings not by a tiered system.

Someone who pays 20% of a £100,000 salary pays far more to the community than someone who pays 20% of a £25,000 salary. They pay according to their wealth. As their salary increases, their tax payments increase. They are taxed according to their ability to pay at the same flat rate. And, of course, it is right that people who earn a low salary beneath a certain amount should pay no tax.

The tiered system we currently have in which people on a high salary may have to pay 40% of their salary while people who earn a lower salary may have to pay only 20% of their salary is not moral, is not fair, it distorts the market forces which create ‘fair’ wages and it is punitive on the more successful workers who should be not discouraged but encouraged.

The fact that some higher earning people may be able to ‘cheat’ the system with clever accountants is not relevant. Distortions like that are inevitable in any system and are the fault of the government’s incompetent bureaucracy – they should prevent those frauds. It does not affect the principle that a flat rate tax system is fair to all taxpayers and the fact that a tiered tax system is fundamentally unfair – a political decision not a moral or economic decision.

If there is a tiered tax system, it distorts the market forces which decide salaries because, if people are losing money for reasons of political tax ideology not for genuine economic reasons, their salaries will have to increase to take account of the loss. Thus you get distorted salary scales.

A tiered tax system makes no economic sense and is morally unfair. It’s object is to blindly redistribute wealth on ideological grounds.

I could not and still can’t disagree with the cold logic of this argument. Yes, someone who earns more should pay more. But why should they pay a higher percentage of what they earn? Taxing higher earners a higher percentage is blind knee-jerk socialist ideology not economics.

I felt morally uncomfortable with the fact I could not fault the logic in the article and stopped reading the Sunday Telegraph because I felt somehow my moral values were being undermined and skewed by cold logic.

This quandary in my erstwhile youth was brought back to me yesterday when I read a report in The Scotsman that RBS, which the taxpayer had to bail out with millions and of which the government owns 83%, was about to pay 100 members of its staff £1 million each in bonuses.

The chief executive of the Royal Bank of Scotland, of course, has been awarded a pay-and-bonuses package worth £7.7 million for 2010. So his 300 underlings getting bonuses of £1 million are merely getting the left-over scraps.

These awards were made at the time RBS was making a £1 billion loss.

Coincidentally yesterday, I also caught up with a small piece in Saturday’s Daily Telegraph about Tony Blair’s Sports Foundation – a charity – which, in its first financial period, made £348,233 of which it spent £33,929 on charitable activities and £37,621 on its staff.

So I am in two minds about high earners and extreme right wing politicians like Tony Blair.