Friday, 6 March 2015

Oh, so now they notice?

From the BBC:

The Serious Fraud Office (SFO) is investigating the way the Bank of England lent money to banks during the financial crisis, the Bank has said.

The Bank commissioned its own inquiry last year, then referred the matter to the SFO. Liquidity auctions enabled banks to access extra cash during the credit crunch that followed the collapse of Northern Rock...

As the financial crisis bit in 2007, the Bank launched a new type of liquidity auction - called long-term repo open market operations - whereby banks were allowed to put up a wider range of assets as collateral against the three-month loans. These assets included government bonds and mortgage-backed debt securities...

The exact focus of the SFO investigation is unknown, but BBC business editor Kamal Ahmed believes it may want to find out whether the banks exaggerated the value of such collateral to makes themselves look stronger, with or without the knowledge of Bank of England officials.

Surely we all knew this anyway?

The whole thing since 2007 has been a freebie for the banks and a blatant bank bail out at taxpayers' risk and expense. If the banks' assets had been worth what they told the Bank of England they were worth, then they wouldn't have been insolvent/illiquid and hence the bail out would not have been necessary in the first place.

The question answers itself: the Bank of England must have known that banks were overstating the value of their assets, end of discussion.

"The Gift" by Velvet Underground...

... turns out to be based on a true story, which had happened a couple of years before the song was recorded.

The only real embellishment was that in the song, Marsha's friend Sheila tries to break open the box by stabbing it with a sheet metal cutter and accidentally kills Walter. In the true story, Reg Spiers managed to arrive safe and sound.

Seems like a strange thing to be boasting about.

From The Telegraph:

David Cameron said that a future Conservative government will "keep mortgage rates low" so that homeowners can "go to bed with real peace of mind". The Prime Minister said that maintaining low borrowing costs would be the first priority of the Conservative's housing policy.

He attributed Britain's historically low interest rates of 0.5 per cent, set independently by the Bank of England, to the Government's deficit reduction program...

"When confidence falls, mortgage rates can spiral, homes become unaffordable, and families risk losing the roof over their heads. That was the risk Britain faced in the last recession. But this Government came to office set in place a long-term economic plan and showed the world we were managing our economy and as a result, mortgage rates have stayed very low..."

He said that a family with a £120,000, five-year fixed rate mortgage are spending £155 a month less than they would have been in 2010.

"This has made a real difference to families across our country. Instead of couples having agonised conversations about the mortgage payments late into the night, people are going to bed with real peace of mind because our long-term economic plan is working."

Notwithstanding that...

a) What's good for borrowers is bad for savers.

b) The current low interest rate environment is a global, long term trend. If anything, the 1970s and 1980s are looking more and more like a blip and what we have today is pretty close to 'normal'.

c) Low interest rates could be a result of weak economic activity as much as sensible economic management.

d) The Lib-Cons have reduced the annual deficit slightly, but have managed to nearly double the overall accumulated national debt since 2010; and it is the overall national debt which influences interest rates.

e) The absolute level of interest rates is nigh irrelevant, all that matters is changes. Once you have taken out a mortgage, clearly you benefit if rates go down; if you have savings you lose income; and if you want to buy a home in the near future you gain nothing because house prices rise inversely with interest rate falls. If you are saving up for a deposit, you are running to stand still at best.

f) What about the 'peace of mind' that job security, economic growth, a decent welfare system etc could provide? So what if people are 'saving' £155 a month in interest relative to 2010, if real wages had increased by their long term average of about 2% or 3%, then the average household would have gained a lot more than £155 a month.


From the BBC

Drivers in England will get 10 minutes' grace before being fined if they stay too long in council-owned car parking spaces, the government has announced.(1)

It is one of several changes, expected to take effect later this month, which include new restrictions on the use of CCTV cars issuing automatic fines.

Communities Secretary Eric Pickles said he wanted to end the "war on drivers". But councils said many already allowed 10 minutes' leeway and raised concerns about the safety of other changes.

The changes include:

• guidance for councils reminding them they are banned from "using parking to generate profit"(2)
• a right for residents and businesses to demand - by a petition - that a council "reviews parking in their area"(3)
• new powers for parking adjudicators so they can "hold councils to account"(4)
• protection to stop drivers being fined after parking at out-of-order meters(5)
• a ban on the use of CCTV "spy cars" except in no-parking areas such as bus lanes and near schools(6)
• Mr Pickles said: "We are ending the war on drivers who simply want to go about their daily business.(7)

1. Why? You've paid for parking for an hour, why should anyone expect to get another 10 minutes? You'll just end up with people stretching their time to 1:10 and then thinking they can have a few more minutes "I was only just over the time". The current view of a lot of councils, of an unofficial grace period seems more sensible.

2. Car parking charges are about allowing lots of people to park, and preferably, about penalising people over the normal time to encourage churn. But that's not related to how much it costs to build and run a car park. Take the money, give the residents a cut in their council tax. Simples.

3. So, NIMBYs can try and get car parks closed down to increase their house prices, presumably.

4. Currently known as contesting your fine in court.

5. I've never heard of this happening, but maybe it does elsewhere. Again, if you threatened to contest it in court, I doubt you'd lose.

6. Why? Someone's broken the law, you want to enforce it as efficiently as possible, don't you?

7. Including drivers who break the law.

I'll try it on with free parking, but if I get caught, it's a fair cop.

Thursday, 5 March 2015

Tip top tokenist Tory tinkering.

From the BBC:

The Conservatives are considering limiting child benefit to three children, BBC Newsnight has learned… It would save an estimated £300m a year - but Tory MP Dominic Raab said it was not purely about cost but could "send a message about personal responsibility"…

Child benefit can be claimed by anyone responsible for a child under 16, or under 20 if the young person is in education or training - though since 2013 there have been restrictions for families where one parent earns more than £50,000 a year. It currently pays £20.50 a week for a first or only child, then £13.55 for other children.

Deliberately ignoring the elephant in the room as per usual.

Child Benefit is (or was) a splendid benefit, it was small amounts of money (nowhere near the average cost of bringing up a cd) but everybody gets it (until recently when it was withdrawn for higher earners). The total nominal payout is about £10 billion a year and fraud, error and admin costs are so small as to be barely measurable.

The cash value is nowhere near the average cost of bringing up a child (the bulk of which is loss of mother's wages) so eases the pain a bit without actually distorting behaviour.

The biggie is Child Tax Credits, up to £53 a week per child plus bits and pieces, which is a total payout of about £25 billion a year, the bulk of which goes to a small number of large families with low or no (declared) income.

For second and subsequent children, the extra cash you get from having another child is £66, which is probably more than the marginal cost of bringing up a second or subsequent child. If a mother is at home and not in paid employment, then the loss off her wages is a sunk cost. So this does distort behaviour quite a lot.

Fraud, error and overpayments are endemic; admin costs are enormous and they put a sadistic amount of effort into clawing back overpayments from randomly selected people. And it is savagely means-tested, of course.

Now, if you chuck Child Benefit and Child Tax Credits in the pot and divide it by the number of eligible children, it comes out to about £55 per child per week (see pages 8 and 9 of the Citizen's Income Trust booklet), without the need for means testing and so on, which seems fair enough to me.

If you want to cap this at three or four children per family/mother to "send a message about personal responsibility" then that also seems fair enough; any 'savings' from doing so are minimal in the grander scheme of things (£1 billion a year, perhaps?) but possibly worth having.

The other good thing about having a flat rate amount of £50-odd per child per week is that it sorts out the so-called gender pay gap, which is actually a mothers-vs-everybody else pay gap. If you means-test it, then you leave the pay gap as it is.

Personal Service Companies and Who Actually Pays Tax Confusion


Now, clearly it cannot be 'right' to pay public servants through personal service companies whilst HMRC cracks down on the practice in private businesses under the IR35 rules.  (Which IMHO just highlight the stupidities of the massively over-complex UK tax code).

But to say that this will raise more money for the government is patently untrue.  All these people are employed by the taxpayer, so any tax they 'pay' is just a discount to Real Taxpayers.  It is just money going round in circles.  True, that if these people have less tax taken off their pay, then this 'extra' money in their pockets - or some of it - 'escapes' from the government.  But since it will no doubt be used to buy goods and services - which are themselves taxed - a lot will still 'go back' to the government.

FWIW I know for a fact the Financial Ombudsman Service employs people through Personal Service Companies.  I have fairly concrete suspicions that the Financial Catastrophe Authority does as well.  So the FSCS will also probably be at it.  These are not outside consultants (like another friend of mine is for the ad hoc work he does for the Bank of England) but people sitting in their offices doing 9 to 5 work, well activity, for them.

Even Guido is on the Bandwagon


And the comments are off.  I wonder why?

The most popular search term on

Predictably enough

Wednesday, 4 March 2015

UKIP's Nigel Farage wants return to policy 'normality'

From the BBC

UKIP would cut the number of half-baked policy announcements but would not set an annual target, Nigel Farage said.

The party wants bar room policies to return to "normal" levels, said Mr Farage, with between 20,000 and 50,000 dog-whistle ideas given publicity.

A UKIP spokesman said last week that bullshit populist ideas should be capped at 50,000 a year.

Mr Farage insisted the party had not done a U-turn, but said the public were sick of talk about caps and targets, until they're not.

Short List

"Advisors to English kings in the Middle Ages who were called 'Thomas' and ended up falling out with the king and being assasinated/executed."

Thomas Becket
Thomas More
Thomas Cromwell

John b adds: Thomas Cranmer

An earlier treasonous - albeit probably fictitious - Tom got off lightly.