Half a million public sector employees have lost their jobs in the UK since the present government came to power. Fortunately the booming private sector is taking many of them in, and the culling of ten per cent of a business’s work force can occasionally be healthy. But the austerity drive that led to these job cuts was conceived in ignorance of the fact that intangible fixed assets are created by and embodied in ordinary workers and contribute to economic growth more consistently and over a longer period than plant and machinery. This is one of the implications of the discovery that intangible asset investment, which is erroneously excluded from the GDP estimates, add more than 0.5% to 2012’s private sector growth, previously thought to be flatlining.
The present government saw these sacked public sector workers as expense items but some of them at least must have been capital assets. One wonders if the fall in staffing at border control, customs, immigration, and tax department HMRC, from 100,000 to 55,000, could have included the person who knew how to verify that international corporate transfer prices conform to a fair Capital Asset Pricing Model. It was not just last year that multinational corporations discovered the trick of rigging their transfer prices, even if it seemed such a novel concept to this government that Mr. Cameron announced it at the World Economic Forum at Davos. His audience of hard-nosed CEOs must have been taken aback by his naive belief that this tax dodge had only just been thought of. If we now have to do sweetheart deals with the likes of Starbucks and Goldman Sachs, mediated by the tabloid newspapers, is this an advance over the old method? And anyway, if GDP is 10% higher than thought have we been setting our tax collection targets way too low? Time to reinvest in HMRC, one of those high-return intangibles.