DD wrote a column for the FT today, headed It is time for debate on how to cut public spending, it kicks off with some vaguely sensible ideas, although rather than calling for a mass cull of the quangocracy, he waffles on about "pay and recruitment freezes for the entire public sector", but it gets interesting here:
But the big numbers are in the departments, particularly the burgeoning welfare budget, currently heading towards £180bn within two years. Much of this is a direct consequence of Gordon Brown’s badly designed, fraud- and error-prone tax credit system...
£180 billion looks about right, but Tax Credits (as evil as they are) only 'cost' £20 billion in 2007-08 (page 8). Let's first remind ourselves why tax credits are so prone to fraud and error and why are they so damaging - it's because they are 'targetted' (i.e. at lone mothers) and because of the savage withdrawal rate (39p for every £1 of gross income, giving a total tax/benefit withdrawal rate for most claimants of 70p in the £1). So far so bad.
"... he has created a system of benefits that amount to welfare for the well-off. But to provide welfare for the wealthy, the poor will pay. So we should target child benefit solely on the least well off, and replace winter fuel payments and other gimmicks with targeted help for poor pensioners."
Ah right. He slags off tax credits (quite rightly, although he appears to have no grasp of the 'cost') and in the next breath suggests that we make Child Benefit targetted and means-tested, a bit like, er, Tax Credits. And as we know, means-testing has much the same effect as income tax - it reduces work incentives. Let's say that Child Benefits are withdrawn for households earning over £20,000 and is tapered to nil once you reach £50,000, that's equivalent to increasing income tax on most earners with children by about 5% (assuming they've got two kids). Even stupider than that is that Child Benefit (being the best type of benefit we have - universal, non-means tested and non-taxable) only 'costs' £10 billion a year anyway, and fraud and error (because of its simplicity) is barely measurable.
The same logic applies to even more means-testing of benefits for pensioners (I agree that they are gimmicky - all the more reason to roll them into a flat rate Citizen's Pension and have done with it).
Y'see, if DD really wanted to do something about "welfare for the wealthy [for which] the poor will pay" but without further means testing and without increasing income tax rates, then maybe he'd suggest reducing the cap for tax-relievable pension contributions from the ridiculous £235,000 per annum to something sensible like £10,000 a year, and use the saving to cut income tax rates or increase the personal allowance. Or maybe he'd suggest reducing council tax on Band A homes and adding a few new bands at the top end, all the way to Z as far as I am concerned.
And if DD really wanted to shave £9 or £10 billion pounds off the welfare budget, how about replacing it with a Citizens Income style scheme, which would reduce fraud, error and administration costs by £9 or £10 billion, while leaving very few worse off* and reducing everybody's marginal tax/withdrawal rate to the basic rate of tax plus NIC?
But he doesn't want to do either of course, this is just Indian Bicycle Marketing.
What's really worrying is that he clearly has no idea about my specialist topic - tax and welfare reform - so what are the chances that he knows anything about the other topics he covers?
* The only group that would really lose out would be unemployed single mothers, but that's a bonus AFAICS.
Thursday, 30 April 2009
DD wrote a column for the FT today, headed It is time for debate on how to cut public spending, it kicks off with some vaguely sensible ideas, although rather than calling for a mass cull of the quangocracy, he waffles on about "pay and recruitment freezes for the entire public sector", but it gets interesting here:
Submitted by Lancashire Lardbucket, "As we're loosening up on the fake charity front may I add my own suggestion? Here's another fake charity I'd never heard of. I give you the Ethnic Minority Development Association! Almost all of their funding comes from the county council and the regional development agencies as well as the UK government... Thieving, backward bastards to a man."
The linked article is well worth a read (the quangocracy at its finest), and the 2008 accounts do indeed show income from the following sources:
Blackburn with Darwen Borough Council - £64,578
North West Development Agency - £25,000
Blackburn College - £23,500
University of Central Lancashire - £3,542
Lancashire Police - £300
Blackburn Rovers - £2,500
Miscellaneous Donations - £2,624
Bank Interest - £1,893
This one was new to me: The Institute of Race Relations. Half their income is from The Big Lottery and the Heritage Lottery Fund (heck knows why they split it up like that) and the other half appears to be legit (see note 7, page 13 of their 2008 accounts).
I'm also rather disappointed to report that Global Cool have finally submitted their September 2007 accounts (after a year and a half) and that they are not a fakecharity at all, but are funded by Man Group plc. Ah well.
It strikes me that when you decide what sort of job you want to do in life, one of the things you think about is working hours - do you want long holidays or short holidays; are you prepared to do shifts in the early morning, in the evening or at night; what about overtime; holiday and weekend work; are you prepared to be 'on-call', and so on and so forth.
We all know that there are plenty of true 9-to-5 jobs and plenty of jobs which traditionally have long hours (or involve shift-work, holiday work etc). So on the whole, people get what they ask for, so what's the problem? Surely, those jobs will pay a slightly higher wage to compensate for the inconvenience? Why does this need to be regulated? If you don't want to work 48 hours a week (and I certainly don't), then just don't become a lorry driver or a junior doctor (about the only two jobs I can think of where your tiredness actually endangers other people's lives, and where I can see a point in having a restriction, practicalities aside).
There. That's that fixed.
From the FT:
Sir, Gideon Rachman’s article on the closing of the Thatcher era (April 28) makes an interesting claim that "Thatcherism has lost the moral high ground" on the basis that the link between "virtuous effort and just reward" has been destroyed through the likes of Sir Fred Goodwin.
Surely the lesson of the last decade could equally be drawn from the spectacle of the British people living beyond their means, encouraged by ever-rising house prices and fuelled by excessive borrowing bestowed on them by improperly regulated banks.
All this with the tacit approval of a government that viewed unsustainable debt-fuelled growth as the end of "boom and bust" and a means to finance excessive public spending, apparently without pain or consequence. A "something for nothing" society, surely?
Time to rediscover "traditional values", methinks.
Aidan Clegg, Cobham, Surrey, UK.
From The Metro:
Religious groups described the Faith Fighter online game as 'deeply provocative' and they should know. After all, they've bene provoking each other for centuries, often with dire consequences.
A Webb, Kent.
Wednesday, 29 April 2009
From The Telegraph:
"Economic recession has the power to do one of two things to a society:
It can either drive people apart, with an increase in distrust between individuals, more naked competition for jobs, a fracturing of community spirit - we witnessed this in the Eighties and early Nineties, and at its most extreme, it culminated in cars and building burning on the streets of Brixton, Birmingham and Liverpool..."
So that's a nasty Tory recession in a nutshell. Whereas a Labour recession tends to be a rather cuddly and wholesome affair:
...[or] the recession could bring neighbours closer and lead "citizens to discover new reserves of courage and kindness... Which end of the spectrum we tilt towards will depend on a decisive factor: the role of the government in valuing volunteering in creating space for local action, and in promoting innovation and experimentation."
Which government doesn't "value volunteering"? (Clue here). How does a government "create space for local action"? Either the space is there or it isn't - if it's occupied by a business or a home then how would turning it into "space" help matters? But presumably she's blathering on about some metaphysical space anyway. How can a government "promote innovation and experimentation"? All it can do is "not discourage innovation and experimentation".
PS, this is all in stark contrast to what The Home Office expect:
Ministers are bracing themselves for a rise in violent crime and burglaries and a shift to far-right extremism as the effects of the economic downturn take their toll, a leaked Home Office report to the Prime Minister says.
Which makes this one look a lot like a typical nasty Tory recession, eh?
After finishing his toast this morning, my little lad said, entirely unprompted and in the context of nothing in particular:
Bang! And Gordon Brown is gone!
Which cheered me up enormously.
From the BBC:
The mother of a 21-year-old student who died after taking the drug GBL has called for an inquiry into why the substance has not been banned... "There should be a formal inquiry to find out why it's been banned in Canada and America, but the UK cannot get its act together and ban it for personal use."
The Home Office evidence showed its misuse was low, but "we are concerned that its use appears to be increasing... GBL has a number of legitimate uses, such as cleaning agents, paints and nail polish, and we will consult with the chemical industry and the wider public over the coming months," the spokesman added.
Top stuff there. As we all well know, once a substance has been made illegal, five things happen:
- the price drops;
- criminals don't enter the market;
- fewer people use it;
- it becomes much safer to use; and
- the number of related deaths drops markedly.
Both from The Metro:
I always said that bird 'flu didn't scare me because I am a bloke. But as a male chauvinist pig, I must admit the latest outbreak has got me worried. I think the government is taking things too far by introducing these disease-equality measures.
Bob Harris, Birmingham
Why are Britons in Spain 'expats' but Poles in Britan 'immigrants'?
Tuesday, 28 April 2009
Go visit www.ukcarscrappagescheme.co.uk for a bit of a giggle, it's got a 'blogroll with links to 'Other UK car scrappage scheme blogs' and everything.
At least, I think it's a spoof. Surely it can't be serious!?
Ross has produced a handy Q&A on Mexican Swine 'Flu, which includes this:
Mexico is right next door to the United States, is there any means by which we can blame America for the crisis? Not yet but researchers are investigating various possibilities.
Tim W reports that The Graun made a half-hearted attempt, which he dismantled here.
Here's my attempt:
"The USA imposed a free trade agreement (NAFTA) on Mexico, which prevents the Mexicans from protecting and developing their fledgling economy. As a result, Mexicans are reduced to meeting the Americans' instatiable appetite for basic agricultural products. The USA deprives Mexico of the capital required for investment in modern hygienic farming methods, so Mexican pig-farming is very labour-intensive, which exposes the workers to a high risk of intra-species infection."
As this is a lefty theory, I haven't bothered backing this up with any facts or evidence (thus making it all the more difficult to refute).
I'm pleased to report that out of the hundred people who voted, 74% are happy with their existing car and 17% don't own a car and don't intend to buy one.
It's a bit worrying that only 3% intended to buy a new car soon anyway, which equates to about 600,000 new car purchases (3% x 20 million cars on the road) which is only about a third of the number of new cars purchased in recent years, but we can add to that the 6% who said "It will persuade me to trade in my old car for a new one (which I wouldn't otherwise have done)", which brings expected sales back up to about 1.8 million, which is about the average for recent years. It's also quite surprising that 6% of us drive second hand cars which are worth less than £1,000 (the true value of the voucher), so well done you.
It'll be interesting to see whether which is more accurate - the government's estimate that 300,000 people will claim the voucher or our own findings that it will be more like 1.2 million (5% x 20 million).
Full results here.
Moving on, you can look up how much MPs claim in second home and staffing allowances here. I haven't analsyed it in depth, but if you add those costs to the basic MP's salary of £60,000-odd, it appears that most of them receive a total of well over £150,000.
So this week's Fun Online Poll asks: What's a fair total 'package' for Westminster MPs, including salary, second home and staffing allowances?
Not being a monster, I voted for £40,000, all-inclusive, but as this is an 'free vote', I've included a range from £nil all the way up to £160,000.
Monday, 27 April 2009
Number two out of one million (and number three as well).
One aim of the taxation of land values is of course to keep land values low and stable (no booms, no busts). The spurious objection to this is that businesses need high land values because they can use it as security for loans* and that households need high land values because it enables them to 'build up wealth'.**
Land values are a residual figure (total property value minus cost/value of bricks and mortar, which is a fairly constant figure), so simple maths says that land values rise and fall far faster than total property values. UK property values have fallen around 20% from their late 2007 peak, and Knight Frank published a report a couple of weeks ago confirming that UK land values fell by around 50% in 2008. As a property bear, I reckon property prices will fall another twenty per cent before they bottom out, which means that land values will have fallen by around three-quarters overall.
And that's what the economy is supposed to be based on? Land values, three quarters of which was pure 'bubble' value? What's the economy based on now that the bubble is bursting? Not very much, that much is clear.
* The counter-argument to this is of course that the amount that banks can lend is a function of how much spare cash people can deposit with them, which in turn is a function of how well the economy is doing. Collecting £1 in taxes on turnover or profits has significant deadweight costs and reduces total output by considerably more than £1, but collecting £1 in tax from land values has no deadweight costs as land is fixed in supply. So by shifting taxes from wealth creation to land values, the economy would do better, so banks would have more money to lend to businesses, who in turn would have less capital tied up in land values and hence considerably more cash to invest in market research, product development, training, plant and machinery, marketing and so on.
** High house prices are a negative sum game; what the owner calls 'wealth' is merely the flipside of somebody else being prepared to go heavily into debt to pay for something that has artificial scarcity. We can't all get richer by selling houses to each other at ever higher prices, but we can all get richer by investing in training and education (of ourselves or others) or in growing businesses.
From The Metro:
A mother of two has died after taking the drug ecstasy at home. The unnamed 31-year-old was admitted to hospital shortly after collapsing when she took the drug at her Blackpool home in the early hours of yesterday. Lancashire Police believe a lethal batch of ecstasy tablets may be in circulation on the Fylde coast and urged the public not to take them.
Following the article on the BBC that I mentioned earlier, comes this from The Metro:
Ministers have backed down over plans for a centralised database of email, telephone and internet data. Home Secretary Jacqui Smith said there were "absolutely no plans for a single central store" of communications data...
From the BBC:
Plans to track all e-mails sent, all phone calls made and all internet pages visited in the UK are being unveiled by Home Secretary Jacqui Smith. Ministers say the move is needed so police and the security services can investigate crime and terrorism...
The data can be accessed by police on request but the government said it planned to take control of the process in order to comply with an EU directive and make it easier for investigators to do their job.
It strikes me that they have absolutely no idea what they are playing at.
Sunday, 26 April 2009
Here's an excerpt from page 453 of the paperback edition of 'Harry Potter and The Half-Blood Prince'. To set the scene, Aragog was a vicious giant spider. Professor Slughorn has attended his burial with the sole purpose of sneakily harvesting some spider venom, but has to make Aragog's only half-human friend think that he actually cared:
"Farewell, Aragog, king of arachnids, whose long and faithful friendship those who knew you won't forget! Though your body will decay, your spirit lingers on in the quiet places of your Forest home. May your many eyed-descendants ever flourish and your human friends find solace for the loss they have sustained"
From what little I remember of O-level Eng Lit, that doesn't seem to 'scan' properly. Here's my attempt:
Farewell King Arachnid! Aragog, dear pet!
Whose long and faithful friendship those who knew you won't forget.
Though your body may decay, your spirit will live on
In the quiet places your descendants call their home.
May they flourish in the Forest; may your human friends find solace
For the loss they have sustained but they will long remember yet.
As suggested in the comments to my previous rant, I contacted the police about the cars parked on the single white line in front of my drive (the traffic warden having told me he only had the authority to ticket cars that are parked in a marked bay without a permit, but not those parked outside a marked bay, whether with or without a permit). They slapped a £30 fine on the first car that did it, and the local bobb-ette popped round a couple of days later and was very sympathetic.
The next time it happened, the police told me, disappointingly, that they can only ticket cars that are parked on yellows and that white lines are local council jurisdiction (who are the ones in charge of the traffic wardens, who turn a blind eye to parking-on-white-lines, natch) . As a tax adviser, I appreciate a loophole as much as the next man, but the whole thing strikes me as a bit counter-productive to say the least.
So, until I have a better idea*, I have to wiggle out of this (bearing in mind it's a narrow one-way street and there are usually two builders' vans parked on the other side). Note the complete absence of a car in the marked bay to the left of my drive:
* I'm old fashioned so I prefer reversing into my drive rather than having to reverse out again.
Saturday, 25 April 2009
OK - the Tories have made some very modest proposals for reforming the way in which primary schools are run.
Good, bad or indifferent, it would be interesting to know what the proposals are, seeing as of how the Tories are almost certainly going to win the next General Election. But, instead of outlining the Tories' proposals and then allowing the present government or teaching unions to respond (in the interests of 'balance'), we get this.
The one single proposal worth celebrating was the one to bring the UK into line with just about every other European country (except Ireland) and exempt dividends from overseas subsidiaries from UK corporation tax (pdf), which has always been part of the MW manifesto, e.g. point 2 here.
Seeing as the UK gives credit for overseas withholding taxes and underlying tax (in most cases), the additional UK tax burden is a paltry £1 billion or so, but it is no end of administrative hassle and a deterrent to locating a holding company in the UK. Being an attractive location for holding companies generates considerably more than £1 billion of 'invisible export' income, so that's a win-win.
Let's not forget that the UK scrapped withholding taxes on dividends back in 1999 (which is the other half of the equation, so fair play to them, Labour have done a few things right over the years) and the proposal (see the same pdf) to restrict tax relief for interest costs dovetails nicely with all this (and is also in the MW manifesto, of course), which is still more generous that the rules in most other European countries.
Ultimately, the best way of sorting all this out would be a further radical simplification and simply disallowing interest as an expense and not taxing the recipient on the income (which I believe some other European countries already do), but hey.
"The majority of children on adoption waiting lists are of Black African, Caribbean or Mixed Heritage"
Discuss, using as many of the keywords in the 'labels' box as possible.
UPDATE: Here's the article to which Dave H refers (or one very similar to it).
Friday, 24 April 2009
Sold: one June US T-Bond at 124-06.
From The Metro:
Professor Ian Gilmore, president of the Royal College of Surgeons, told MPs that the number of alcohol-induced deaths was up to five times the official figure of 8,000.
Why stop there, you twat? Why not say "up to ten times" or "up to a hundred times"? Has it ever crossed your mind that the true figure might be, er, "less than" the official figure (you'd expect any 'official' figure to be in the mid-range of possible estimates), which is itself prone to being revised upwards by a factor of four, of course.
His example illustrates The Golden Rule* that subsidies do not make things cheaper, they make them more expensive.
Working out who gains from the subsidy is usually easy; the interesting bit is identifying who ends up paying for it and who ends up paying the higher price.
* Of course there are exceptions to this, but it's a good working assumption.
The comments to my two recent posts on this suggest that the scheme is a gimmick that won't make the slightest bit of difference (which may well be A Good Thing, all things considered).
In the interests of doing a bit of rigourous field research, I've put my previous Fun Online Poll on hold for now, and I'd like to know, How will you respond to the 'car scrappage' scheme? (or use the widget in the sidebar).
From The Metro:
So the government will give me £2,000 part-exchange on my old car? If I could afford a finance deal on a new car, why would I run a banger in the first place?
Which is pretty much what everybody else said when I posted on this yesterday, bearing in mind it's only £1,000 that the 'government' (i.e. the taxpayer) pays anyway, not £2,000.
Thursday, 23 April 2009
This post is sponsored by Online Keno for money.
* Hmm. Should there be a comma between "sexy" and "blonde"?
It turns out that it won't be a £2,000 voucher after all, the 'government' (i.e. the taxpayer) pays £1,000 and "the car industry will have to contribute £1,000 to the grant ... Larger and more expensive cars already tend to carry discounts of around £1,000 – meaning that half of today's £2,000 grant will already be priced in for many vehicles." (see e.g. The Graun)
In other words, the much vaunted £2,000 is now £1,000. So the vouchers would only be taken up by people who own second hand cars worth less than £1,000 (or else they'd sell their car and put the proceeds towards a new one), of which there are probably a fair few (a million? half a million?) but they are hardly the people who can afford to or wish to buy a new car, or else they wouldn't be driving round in an old banger*.
But The Sun newspaper is happy, the motor industry seems to be happy and it will cost the taxpayer very little. What's not to like?
* For avoidance of doubt, I drive an eleven year old car that cost me all of two grand last year and serves its purpose handsomely.
Having read several newspapers and watched a couple of hours of telly since yesterday's Budget, the two aspects that got the bulk of the coverage - in roughly equal measures - were the 50% tax rate and the plans to double overall government borrowing over the next few years.
The 50% tax rate is a stupid jealousy surcharge that won't raise much money (if at all) but a minor niggle in the grander scheme of things (seeing as there are loads of people in the UK with an overall marginal tax rate in excess of 50% anyway), the really important and/or terrifying bit is the planned government borrowing.
Maybe, just maybe, the 50% tax rate will in fact increase tax revenues by a couple of billion a year, WTF has that got to do with the planned borrowing of £700 billion? There's just no comparison is there? That's an average borrowing of £20,000 per taxpayer that's all going to have to be paid back in future (or eroded by inflation).
From The Metro:
A clown has been told he cannot wear his giant comedy shoes during his act because they breach health and safety rules...
Wednesday, 22 April 2009
From Alistair Darling's Budget Speech of today:
"When the world economy was plunged into deep crisis in the 1930s, the response, both nationally and internationally, was too little and too late. This failure to act turned a serious downturn into a prolonged depression. We will not repeat those mistakes again."
Bought: one June US T-Bond at 125-01.
A vast majority of respondents (71%) think that the government should spend less than 30% of GDP, and a further 21% think that 30% is reasonable.
UPDATE: Neil Craig's Fun Online Poll also showed 66% voting for 29% or less, with a weighted average of 28%.
(FWIW, I reckon 20% is 'about right' as that is the maximum that the government can raise from ground rents, licence fees, user charges etc. Any taxes above and beyond that (i.e. on turnover, incomes, payroll or profits) just stifle the economy, and the deadweight losses always far outweight the 'benefit' of the spending/redistribution.)
Anyway, were they listening? I'm afraid not. They've cheerfully admitted that on top of the huge existing tax burden, they'll be borrowing between 8% and 10% of GDP for the next four years!!
What I'll have to look into is how a 3.5% fall in GDP (which inevitably leads to a fall in tax revenues) can possibly lead to a 10% budget deficit (assuming level spending)? Even at a marginal tax rate of 100%, a 3.5% fall in GDP would only lead to a 3.5% deficit. Hmm.
OK, one gimmick I was half-expecting was for the government to pinch one of the Tories' ineffective but cheap* and eye-catching ideas, namely to scrap tax on interest income for basic rate taxpayers. So that's the topic of this week's Fun Online Poll, would you prefer a gimmick like that or would you prefer to be paid a decent interest rate in the first place?
* Interest rates have fallen significantly since this was first announced, so the static fall in revenues would be considerably less than £1 billion, not the £4 billion quoted.
"House sales jumped 40% in March", blares the headline to this BBC article.
Reading on, "...when the figures are adjusted for seasonal trends, they ... show a rise from 54,000 to 61,000, a jump of 13%... Property sales are still at their lowest levels since the early 1970s and are still less than half the level seen in March 2007."
H/t PhD In Bubbles.
See also yesterday's BBC spin, "Inflation measure turns negative".
Reading on ... "The Consumer Prices Index (CPI), fell in March to 2.9% after February's unexpected rise to 3.2%, the Office for National Statistics (ONS) said. The official CPI figure is still well above the government's target of 2%".
As Little Professor pointed out at comment 20 here:
"See the BBC headlines from 2007, when RPI was running at 4-5% but CPI was around target:
UK inflation rate lower at 2.7%
UK inflation rate rises to 2.8%
UK inflation holds steady at 2.1%
UK inflation rate eases to 1.8%
UK inflation rate stays at 1.8%."
Tuesday, 21 April 2009
Bought: one June US T-Bond at 125-28 (to close this morning's position).
The article is a real let down, but I bet somebody was waiting years for the opportunity to write a headline like that.
Just when you think it can't possibly get any madder, from the BBC:
Special advisers are providing a vital link between parents and schools, the Training and Development Agency says. The agency says parent support advisers or PSAs offer help from running settling-in sessions and workshops to accompanying parents to meetings.
The TDA is overseeing the introduction of PSAs across England, following a pilot scheme in 20 local authorities. The TDA says there are currently 2,254 advisers working to support parents and their children in 7,608 schools.
In a separate poll of more than 1,000 parents the TDA found 42% would not know whom to contact if concerned about their child. The survey found 53% of parents wanted more interaction with schools and 54% wanted a dedicated point of contact.
Didn't we use to have 'class teachers' or something as a 'point of contact'?
Sold: one June US T-Bond at 126-19.
Everybody has their own thoughts on this, most of it waffle, to be honest.
FWIW, I think that Sackerson has just about covered it all in this brief post (with links to more background material!), see especially his reply to mine in the comments.
Monday, 20 April 2009
I am impressed that 95% of people clicked "I have no idea what you are talking about" rather than "Lisa Maffia", the only other option and hence the correct answer by default (it's a line from an irritatingly catchy hit record she had back in 2003, which otherwise had all the subtlety of a toddler banging a saucepan lid, in case you're wondering).
Returning to more serious, Budget-related matters, this week's Fun Online Poll asks what you think is a reasonable level of government spending.
From The Crewe Chronicle:
A FATHER returning to his Crewe home with his baby found it had been repossessed and the locks changed in an amazing blunder by Chelsea Building Society.
Matthew Brooks had just picked up one-year-old Loren from the childminder when he spotted a notice on the door of his house in Benjafield Court. "... we’d been broken into because the Chelsea Building Society had got the wrong house," said Mr Brooks. "I was left in the cold and the rain with a little baby."
The locks on the house had been drilled to gain access and had then been changed. Mr Brooks said the repossession order was a voluntary one for a house further up the street, and the fault was not with the locksmith or the estate agent but with the building society.
From the BBC:
The Liberal Democrats have said they want to cut the amount of income tax paid by most workers by £700 a year. The party proposes raising the threshold at which people start paying to £10,000, with all those earning less than £100,000 paying less.
They aren't the first to nick this idea either (hypocrites that they are, none of their MPs signed up to that EDM, of course).
It's a shame that they didn't also propose scrapping higher rate tax, as in the original proposal, but hey, it's a welcome start ...
The government likes to propagate the myth that 'tax credits encourage work'.
Even ignoring the half of tax credit payments that goes towards encouraging/subsidising unemployed single mothers or is lost to fraud and error, Rab C Nesbitt provides anecdotal but reliable evidence that tax credits discourage work.
I explained why in the comments to his post.
Sunday, 19 April 2009
Thanks to everybody who voted. The response to the question "Who is best placed to decide what to build on any particular plot of land?" was as follows:
The owner of that plot - 65%
The owners of neighbouring plots - 18%
The local council - 10%
Central government - 7%
Which must be the 'correct' answer. I agree there is superficially a tension between the relative interests of the owners of neighbouring plots if we just look at one particular development, which might deprive the property next door of some sunlight or a view*; but it's more interesting to look at the bigger picture, and ask"Where are land values higher - in the middle of town centres (e.g. Manhattan) or out in the countryside?"; then to ask "How high would land values be on Manhattan if the original settlors had not made use of its natural harbours and defences, and instead zoned it as agricultural land, or restricted planning to one family home per acre?"; and finally to ask "Is Manhattan so densely developed because land values are so high, or are land values so high because it is so densely developed?".
This is what we call agglomeration - even in the absence of any planning restrictions or zoning laws whatsoever, 'birds of a feather flock together'. You'd be daft to build a factory on expensive residential land and you'd be daft to build a family home in the middle of an industrial area; an out-of-town retail park will fare much better if there are several different stores, all selling bulkier things like white goods or furniture but sharing a massive car park rather than just one store with its own car park.
You will also notice that in smaller towns, you get a variety of shops and businesses in the middle of town (you wouldn't go there if you could only buy fruit and veg; you are more likely to go there if you can also pop into the butcher, the baker and the candlestick maker), but in larger towns, you find whole streets or areas where nearly all the shops sell the same thing. In central London, you find clothes shops and department stores on Oxford Street; electronics shops on Tottenham Court Road; theatres on and near Shaftsbury Avenue etc. Interestingly, even though each of these uses must have some 'external costs', it must also have 'external benefits', and the rental value of each shop reflects the profit value to the owner/occupier, plus the external benefits and minus the external costs of the neighbouring businesses.
As the rental value appears to increase if you are in the same street as your competitors (or complementary businesses, in the case of smaller towns) rather than decrease; and as the rental values of premises in the same street are going to be broadly the same, the external benefits generated by each occupant must exceed the external costs (or else rental values would tend to nil rather than skywards).
So the 'location value' of any site, being a positive figure, consists to a large extent (I can't quantify this as a fraction of the total rental value, but it it very significant) of the external benefits created by neighbouring occupants
* So all things being equal, the best thing that can happen is that neighbouring land is developed to its optimum use. I know that a couple of regular commenters (Dearieme and Lola) aren't too happy with the thought of new housing blocking the view over somebody else's land that they currently enjoy, but taking society as a whole, their loss is somebody else's gain; if new housing were built (but not 'social' housing, obviously), then instead of one house with a nice view, there's a new house with a nice view and an old house with not such a nice view. Overall, society or the economy is better off. And if they don't want neighbouring land to be developed, the free market solution is not planning restrictions but the farmer offering to sell them the land for the same price that a property developer would offer.
For a bit of light relief, this week's Poll will establish how many visitors are 'down with the kids'.
From last Thursday's Metro:
So the clampdown on alcoholics is a smokescreen to cover up the No. 10 e-mails row (Metro, Wed)? But wasn't the No.10 e-mails row a smokescreen for the MPs' expenses row? And wasn't the expenses row a cover-up for Labour's failure to deal with Sir Fred's pension? And wasn't that a cover-up for Brown's mishandling of the economy? I can't take it any more ...
Keith Devereaux, London NW2
Saturday, 18 April 2009
** Please note: I am not Mark Wadsworth **
Here comes a plan by the government to make use of all the pubs that they've put out of business with the smoking ban:-
The venture, which has financial backing from the Home Office, could see games, music, entertainment and food served up to their 13 to 19-year-old patrons - but nothing stronger than a cola for refreshment.Of course they're interested. If you're running a business and not interested when the government come knocking then you probably should be doing something else. These pub companies could end up making more money than they ever did as pubs.
Three major pub companies are interested in the venture, with the first pilots expected to open in Crewe and Merseyside within the next three months, which if successful could lead to a national roll-out.
The initiative has already received policy support from Government departments including the Home Office, which has agreed to fund early work on one of the first projects.How? Chances are that all they'll do is to encourage kids to just bring their own vodka (bought from a local shop) into the bar to mix it with the subsidised cokes. Or take an e before they go in.
Partnership Projects managing director Andrew Harris, which is behind the pilots, said alcohol-free teen-pubs could help reduce crime, address substance misuse and encourage future adults to drink responsibly.
He said: 'We have done a tremendous amount of research into the concept of a teenage pub including polling youngsters themselves about what they wanted from these new outlets.Adults want soft drinks? WTF? What adults have you been asking? Methodists?
'Basically they are looking for the same services as adults, which means entertainment, games, music, soft drinks and convenience food.'
The new pubs will offer the same services as any traditional public house business except for alcohol and gambling.So, they won't be anything like a traditional public house, then.
Each pub will be run by a local 'not-for-profit company' that will comprise local agencies helped by a shadow board of teenagers.Yeah, sure they will. There isn't a single example of government spending money on something that then resulted in self-financing after. Within a few years (at best), they're back for more. Mostly because government is hopeless at considering things like maintenance costs into the cost of providing a service. Over time, things get steadily worse and worse and eventually the project needs a massive extra chunk of spending.
It is hoped funding will help meet start-up and first-year running costs, which will total up to £60,000 for each venue. The pubs are expected to become self-financing after the first year of operations.
You're going to put "local agency" types in charge of entertainment and expect them to do anything as good as break even after year 1? These were the left-wing wankers put in charge of the entertainment at the Dome and dozens of lottery-funded museums across the country, all of which lost money by the bucketload.
These are people with no experience of running anything in the commercial sector. You think these sorts are going to come round from the other side of the bar, break up a fight and ban the kids? You think they're going to fire barmaids who are chatting to each other rather than serving customers? You think they're going to nail down suppliers to give them a better price on food when they have no financial incentive to do so?
Give it 2 or 3 years and these places will be a disaster. Sadly, that will probably be too late for some pilot reports which massage various statistics to make them seem like a jolly good idea.
Dealing with kids causing trouble starts with parents, and that means getting parents to take responsibility for their kids, and that probably isn't helped by a welfare state which means they don't have to be. Get rid of most of it and you'll sort out crime.
Alcohol abuse? There's a real simple answer to that, and it doesn't take lots of pointless government programmes. Just get the police and courts to actually enforce the licensing laws, and start being much harder on licensees who sell to kids under 18.
A question I've been intending to answer for a while is "What is the true cost of a superfluous civil servant?". As Lola said in the comments:
... did you hear the priceless doublethink remark from the lefty talking head on R4 westminster show this a.m? When told that it will be necessary to lay off lots of civil servants his response was to say that this would cause an increase in state spending as they would all require UB40 payments!! And a reduction in income tax payments!! Not one of the other panellists or the chair-nerk thought to ask him how he came up with this pearl since these laid off people were already being supported by taxpayers.
There are similar arguments that say we can't just sack two or three million meddlers and pen-pushers, because:
a) It will lead to unemployment (so what, the salaried unemployed cost more than the sitting around at home unemployed),
b) Civil servants spend their net salaries on stuff produced by the private sector, so sacking them reduces demand in the private sector.
Although I am quite certain that the overall effect on the taxpaying private sector would be enormously beneficial, it is incredibly difficult to quantify the overall benefit in £-s-d. So it is easier to do a bit of non-financial economics, and imagine a society with only a bare minimum of public employees. Everybody else specialises as a fisherman, an olive grower, a shepherd, carpenter, stonemason, money-lender or prostitute etc, a bit like in the New Testament*.
If the state had then decided that a tenth of these have to be employed in totally unproductive** pen pushing and meddling, then what happens to total output/wealth? It must go down by about a tenth, because a tenth of people are no longer doing anything productive. You can add to that the 'deadweight costs' of collecting one-ninth of the output from the fishermen, olive growers etc, which would be paid to the 'public servants' as salaries (nobody would become a public servant unless their income was at least as much as what they could earn themselves).
Fast forward to today, let us assume that public sector salaries are approximately the same as what they could earn in the private/productive economy, the obvious answer is in fact the correct one - if you sack a public sector worker earning £25,000 gross (ignore the tax they pay because that nets off with the value of the final salary pension promise) then the overall increase in output/GDP will be whatever he can earn in the private sector, which we'll take to be £25,000. Of course this doesn't apply to higher paid civil servants, who'd only find much lower paid work, but hey.
So on the back of the magic fag packet, if current public spending is £600 billion footed by twenty million productive workers*** in the private sector****, that's a current or future tax burden of £30,000 each. If public spending were reduced by the £100 billion savings that e.g. The TaxPayers Alliance have identified, that'd be spending of £500 billion divided by (say) 23 million productive workers, or £21,700 each, a reduction in the tax burden, per worker, of nearly thirty per cent. Or indeed an increase in net incomes of workers of around fifty per cent.
* They didn't have taxes as such because all land belonged to society, or the king, or the tribes in general, so enough rent was collected to fund the basic apparatus of the state and maybe a bit of welfare on top.
** I'm excluding teachers and NHS doctors, nurses, cleaners from 'totally unproductive', as they are productive and their output does have some value - the fact that their output is probably worth less than it costs is a different topic.
*** 'Workers' for these purposes includes self-employed, entrepreneurs, investors etc. Most shares belong to people who are working (or who have worked in the past, i.e. via pension funds and so on), so that nets off.
**** Yes I know there are more than twenty million, but a couple of million are just engaged in form filling, box ticking and so on to keep the regulators happy.
I assumed, back in January when it was really cold, that The Warmenists' Phrase Of The Year would be 'underlying warming trend', as in "Yes, I know it's freezing, but it's only natural fluctuations masking the underlying warming trend".
I Googled the phrase on 2 January and got 2,010 results. A few days later, I got 2,740 results. I thought it would be cool to Google the phrase regularly and then plot a 'hockey stick graph' showing how the phrase had become common currency, but nope ...
... by early March it was back down to 2,410 results and as at today it is only 1,590.
I suppose this must be a case of 'natural fluctuations masking an underlying increase in the number of times the phrase is actually used' or something?
Friday, 17 April 2009
Bought: one June US T-Bond at 125-29 (to close a position).
This week has been mainly about 'not being stupid' rather than 'being lucky'. All in all, I prefer 'being lucky' as a trading strategy.
From their about CQC page:
The Care Quality Commission is the new health and social care regulator for England. We look at the joined up picture of health and social care. Our aim is to ensure better care for everyone in hospital, in a care home and at home.
From FT Alphaville:
Nine UK building societies, including Nationwide, have been downgraded by Moody’s* – some by as much as four notches - amid concerns about their exposure to falling house prices and specialist mortgage loans. The ratings agency said it had made the cuts after conducting stress tests on how mutuals would perform against sharp falls of up to 60% in house prices**. Several societies, including Chelsea Building Society, may even challenge Moody’s on the downgrades.
* Don't forget that the ratings agencies were complicit in the credit/property price bubble by handing out triple-A ratings like confetti for all the 'mortgage back securities' that the banks and building societies were churning out.
** That's bearish, even by my standards. The full article in the FT itself refers to "a base case scenario of a 40 per cent fall in house prices from the peak of the boom", which seems 'about right'.
The first comment says it all:
About 3 years too late. I wonder if they will remember this in 15 years time when the housing market undergoes yet another round of overheating...
Thursday, 16 April 2009
Fernoe at YouTube: "What a brilliant news report. A news report about swearing where they bleep out the swearing. So basically it's a pointless video."
The FT faithfully reproduce a press release from First Direct (who are hardly going to be unbiased in the matter):
Four million homeowners in the UK are playing a waiting game with the property market, watching for the best moment to trade up and cash in on cheaper home-ownership before prices start to rise. According to research from First Direct, these homeowners are now sitting on a savings pot of £20.2bn which is ready to be ploughed into the housing market when the time is right.
Wow! That's a lot of people and a lot of money! All that 'pent-up demand'!!
Er, no it isn't. Karlos at HPC crunched those numbers - it makes an average 'savings pot' per homeowner of £5,050.
Also chucklesome is this:
The survey found that with the property market already showing small signs of recovery, the average Brit expects house prices to start rising steadily as soon as October 2010.
The article is headed "House prices to start rising steadily as soon as October". Well spotted Uncle Tom.
From the BBC, yesterday:
Home births 'as safe as hospital': The largest study of its kind has found that for low-risk women*, giving birth at home is as safe as doing so in hospital with a midwife. Research from the Netherlands - which has a high rate of home births - found no difference in death rates of either mothers or babies in 530,000 births. Home births have long been debated amid concerns about their safety. UK obstetricians welcomed the study - published in the journal BJOG - but said it may not apply universally...
From the BBC, today:
Midwife numbers 'to fall short': Many health authorities are not on track to provide the midwives needed for one-to-one care, figures obtained by the midwives' trade union suggest. The Royal College of Midwives wants one midwife for every 28 births, but says only four Strategic Health Authorities (SHAs) will hit or better this by 2012...
Think about it: if the RCM can persuade women to have babies at home (an act of madness, if you ask me, but each to her own), and home births require more midwife-hours than hospital births (twice as many? three times as many?), then what's the effect on the number of midwives that have to be employed?
* Well, duh, obviously, that's how you define "low risk".
Wednesday, 15 April 2009
The UK press has got itself into a frenzy over one of Obama's turgid and dreary speeches* saying that the recession was nearing an end (well, he would say that, wouldn't he?), for example The Sun...
EXPERTS last night hailed more “green shoots” of global economic recovery — but warned we are still a long way from beating the recession. Mortgage lending was UP and enquiries with estate agents ROSE (1). In America, banking giant Goldman Sachs reported a 20 per cent rise in quarterly profits...(2)
(1) From that CML press release:
"The number of house purchase loans ticked up in February, according to new data from the Council of Mortgage Lenders**. There were 24,300 house purchase loans worth £3.1 billion, compared with 23,400 loans worth £3.1 billion in January - a 4% increase. But historically activity remains very weak, running at around one-third of the average February total of 76,000 loans for house purchase between 2002 and 2007."
(2) It is true that Goldman Sachs reported profits of $1.8 billion for the quarter up 20%, but ...
Since the fall of Bear Stearns Cos. a little more than a year ago, Goldman has taken more than $20 billion in taxpayer cash through loans, payments and backstops. Goldman's latest bailout coup was a $12.5 billion paid out of AIG's $180 billion government cash infusion.
Until it was fully extricated, Goldman always characterized its exposure to AIG as "immaterial," and that its $20 billion notional exposure to AIG was hedged. Turns out that it was -- through government bailouts that didn't exist when Goldman entered the contracts. Even former New York Luv Guv Eliot Spitzer told journalist Fareed Zakaria on Sunday that he thinks something smells...
I rest my case.
* In which Obama betrays a frightening lack of understanding of fractional reserve banking (or, just as likely, he's just saying this on behalf of his chums at Goldman Sachs), at 1 min 30:
"... the truth is, that a dollar of capital in a bank can actually result in eight or ten dollars of loans to families and businesses ..."
I could explain at length why this is bollocks of course, but just try taking this to its logical extreme - if increased consumer and business indebtedness were A Good Thing, then why not give the banks $1 trillion in 'capital'? Oh, they did that. How about $10 trillion?
** The CML make life easy for lazy journalists accustomed to cutting and pasting by referring to themselves in the third person, I shit ye not!
From the BBC:
More than 2.65 million people in England will be forced to live in overcrowded conditions by 2011, a campaign group has warned. The National Housing Federation says the number will increase by 15%, a rise of 350,000 people, as unemployment soars during the recession...
NHF chief executive David Orr said it was essential to continue building new family homes during the downturn. He said: "To prevent overcrowding reaching epidemic proportions, we believe the government should introduce a house-building fiscal stimulus in the Budget, with around £6.35bn being spent on constructing 100,000 new homes for social rent over the next two years...
The Department of Communities and Local Government said it was committed to major increases in the supply of affordable and social housing to meet the needs of families on waiting lists or living in overcrowded conditions. A spokesman said: "Along with an £8bn programme to deliver more affordable housing, we are providing a range of support to keep up the delivery of the homes this country needs..." The government was "constantly looking" at what more could be done to support the housing market in the current climate, he added."
Just a couple of points:
The National Housing Federation* is not a 'campaign group', it is the umbrella body of housing associations, which are in turn massive taxpayer-subsidised quangos. So it's hardly a surprise that the DCLG is singing from the same hymnsheet.
Why would a fall in incomes lead to 'overcrowding'? It's the same number of people and the same number of homes, isn't it? Provided prices fell accordingly, so that properties were not left vacant (which could easily be achieved by scrapping empty property discounts for a start), it would all sort itself out.
The government is caught in a cleft stick here: do they want to keep house prices up as far as possible? (yes), while at the same time expanding their vast empire of guangocracies and 'social' housing, which all things being equal, would push house prices down again? (yes). But seeing as their doing all this with our money, I don't suppose they care, it just leaves a bigger mess for the Tories to sort out.
* Not to be confused with The Homebuilders' Federation, which is a good old-fashioned industry lobby group, who are perfectly entitled to call for subsidies provided the government tells them to get stuffed.
From The Times:
HBOS, which is part of Lloyds Banking Group, will consider offering a new mortgage to customers in negative equity whose existing deal, such as a fixed rate, is about to expire.
Normally such borrowers would see the rate they pay revert to the lender's standard variable rate (SVR) and would be unable to remortgage if the new loan were greater than the current value of the property as a result of the decline in house prices.
But Halifax and Bank of Scotland, which are both part of HBOS*, are offering the rates on 95% loans to some remortgage customers needing to borrow more than the property value – up to 120% of the value in some cases.
* Allow me to insert the missing words: "Halifax and Bank of Scotland, which are both part of HBOS, which itself is part of Lloyds Banking Group which is 65% owned by the taxpayer..."
Hmm. I'm not convinced that this is the best use of taxpayers' money, but hey...
H/t QG at HPC.
Tuesday, 14 April 2009
From the BBC:
Alcoholics face having their benefits docked if they do not get treatment, under government plans. Minister James [Photoshop] Purnell has announced a review into the idea to be carried out jointly by the Department of Health and Department for Work and Pensions.
That's a clever bit of Indian Bicycle Marketing, actually, what can the authoritarian Tory party do to out-bid the authoritarian Labour party? Hmm. As ever, I wonder, how are they going to enforce this? Will dole claimants be breathalysed at random intervals? Nope - this is actually all just an excuse to hand over more cash to a fakecharity:
A spokesman for drug and alcohol treatment charity Addaction said that, historically, help for people with alcohol problems was under-funded. "We support measures to get treatment to the people who need it, but that treatment needs proper funding to be effective," he said.
The Tories, wary of being outflanked in the authoritarian stakes, show that they can really get to grips with tricky abstract concepts like 'big numbers':
Theresa May said this latest review was "another smokescreen" to "deflect from Labour's failure to get to grips with our welfare system ... Under James Purnell the system has gone into meltdown with more than 100,000 people claiming benefits because they are drug addicts or alcoholics. That's more than doubled from 48,700 since 1997."
Right. Let's assume that one hundred thousand is correct, and that half of those are alcoholics, so there are fifty thousand people getting £3,000 dole a year plus a free council flat, a total cost to 'society' of £300 million. Part of the reason for having alcohol duties (and VAT on top of the duty!) is to cover the external costs, which I suppose includes alcoholics on benefits.
My magic fag packet says total alcohol duties plus VAT is in the order of £12 billion, i.e. if you have a pint in the pub, out of the 80 pence duty plus VAT, 2 pence is needed to fully cover the costs of the people we're talking about. That seems perfectly fair to me, plus if it comes to it, I'd rather give somebody £60 a week cash to drink himself to death (half of which goes straight back to the government as alcohol duties plus VAT, of course!) than pay some meddling busybody quangista £500 plus index linked final salary pension to shove his or her nose in.
UPDATE: in a rather bizarre twist to the tale, the BBC had Antonia Bance on the telly just now, speaking on behalf of Oxfam and not on behalf of the Labour party, saying that this was all a bit harsh.
View from Middle England has a slightly different take on this, also worth a read (via LFAT).
From the BBC:
A charity is calling for a nationwide campaign to protect the UK's mental health after a survey suggested people were growing ever more anxious. The poll of 2,000 adults for the Mental Health Foundation found 77% found the world more frightening than in 1999.
The charity described a "culture of fear" in which the media and politicians fuelled a sense of unease... While the economic climate was seen as part of the reason for the increased levels of fear, the charity said it believed there were other factors at play.
The report said "worst-case-scenario language" sometimes used by politicians, pressure groups, businesses and public bodies around issues such as knife-crime, MRSA, bird-flu and terrorism can have a detrimental effect on people's wellbeing.
Hats off to them for pointing out that politicians are deliberately stoking a climate of fear, a prerequisite of any authoritarian state, but just how flawed was their survey? It's always today's problems that you worry about most; you probably can't remember what you were worrying about ten years ago, and ten years ago you probably couldn't remember what you were worrying about ten years before that (OK, end of the Cold War, that was a biggie). So if they did such a survey every ten years, it would show that we get more and more worried as time goes on (which seems unlikely - by analogy, if Brand X washing powder is constantly advertised as having a 'New improved formula', how crap must it have been decades ago?).
If anything, it's the glib use of the word charity that sets alarm bells ringing. If you download the accounts from the MHF's about us page, they only 'fess up to government grants of £372,000 out of total income of £4,274,000 (page 26), so you have to skip back to the notes to find out what their real purpose is. Ah, here we go, top of page 11...
As a founding member of the 'We Need to Talk' coalition of mental health charities we have campaigned hard for improved access to psychological therapies. Our combined efforts bore fruit on World Mental Health day in October 2007, when the Government announced a £170m investment in its Improving Access to Psychological Therapies programme. We were also a partner in the first annual Psychological Therapies in the NHS conference in December 2007...
Let's pick up the trail with We Need To Talk, "a collaboration between five mental health organisations: Mental Health Foundation, Mind, Rethink, The Sainsbury Centre for Mental Health, Young Minds....
Mind received £2,888,000 (page 19) from the Big Lottery Fund, the Department of Health, the Financial Services Authority and the Welsh Assembly (bottom of page 21), sprinkled among the Trusts and Foundations are other government bodies such as Comic Relief, the Lloyds TSB Foundation, and the Northern Rock Foundation (pages 20 and 21), and under Companies and organisations we find the Guardian Newspaper, the Mirror Group, the Royal Bank Of Scotland, and the University of Plymouth (page 21).
Rethink received £32,244,000 (95% of their income) from 'service level agreements' (page 10), which is yet another euphemism for 'money from the government', of course.
Sainbury's seem to be almost part of the government, as I have mentioned before (point 2 here)
Young Minds received £1,283,000 (75% of their income) from 'Grants for projects and services' and 'Contracts for services' (page 19), the bulk of which was from the usual suspects - the Department for Children, Schools and Families, the Department of Health, the Camelot Foundation, the Big Lottery Fund, Rethink (!) and the Lloyds TSB Foundation (page 22).
Just sayin', is all.
Sold: one June US T-Bond at 126-29.
Monday, 13 April 2009
Thank to everybody who voted and to Alice Cook for linking. Most people agreed that "A single derelict house in an otherwise fully occupied street" would, all other factors being equal, be worth more than "A derelict house in a whole street full of derelict houses."
This is borne out by experience and is factually correct, but I may just as well have asked "Which house is worth more - a well maintained house in a street full of occupied, well maintained houses OR a well maintained house in a street with one or two vacant, derelict houses?", the answer is of course the former. Or I might have asked "Which house is worth more - one near the railway station OR one that is half an hour's walk away?", or "Do houses sell for more when interest rates are high OR when they are low?"
Those who visit this site regularly may know where this is headed, or indeed think that I ask leading questions. That's not true actually - I don't work backwards from some personal agenda, I just ask the same questions that I have asked myself over the years (and there are factually correct answers to all this) so that I can explain why I think the way I do.
The point being, that even though people say that they own their houses because 'they have paid for them', a large part of the value of your house does not derive from what you have paid to the previous owner or the mortgage interest you have paid to the bank, it derives from what other people on the same street do with their houses, from local infrastructure and from the state of the economy in general, all factors completely out of the control of the home-owner and down to society in general, whether you see 'society' as a loose collection of individuals or as the legal embodiment of the common interest and collector of taxes to pay for public goods, i.e. the State.
Anyhow, following a spat with Bruno Prior* in the comments to an earlier post, this week's Fun Online Poll asks "Who is best placed to decide what to build on any particular plot of land?"
* Bruno was not happy with the factual evidence that scrapping Business Rates relief for empty properties reduced occupancy costs to tenants as well as reducing the number of vacant business premises, and suggested that, instead of having a tax based on potential rental values, it would be better to "create a system in which, so far as possible, we align the preferences of the landlord and the community" without explaining how the system would work or how it would be better. I found this particularly disappointing as he contributes to/runs an excellent website called Picking Losers, whose motto is "Why governments' attempts to pick winners produce more losers than winners."
This week's episode of the two main parties trying to differentiate themselves by creating a phoney argument over something completely irrelevant was in yesterday's Times:
A NEW political battle over tax breaks for marriage has broken out with a Labour cabinet minister accusing the Conservatives of wanting to penalise children whose parents “have not walked down the aisle”. James Purnell, the work and pensions secretary, has criticised Tory plans to give tax incentives to married couples and those in civil partnerships and pledged to help struggling single parents instead. He claims that Conservative policy would result in children from broken families being “abandoned to poverty”.
This is hardly a "new political battle", I think that most people have made up their minds that that the way that the welfare state favours single mothers is an outrage, to the extent that they take any interest in it at all, the point here is that neither side is actually suggesting changing anything fundamental, because the Tories are talking about the tax system and Labour are talking about the welfare system.
In isolation, the joint taxation of spouses seems a good idea*, but let's not forget that it was the Tories who scrapped this and what they are proposing is a bit of a gimmick really. Let's say seventy per cent of thirty million taxpayers are married and the tax incentive is worth £1,000 per couple. That means the Tories have to raise £10.5 billion from thirty million taxpayers, or £350 each, which they then give back to married couples. Single people end up £350 worse off (which seems a bit spiteful), married couples with two earners end up £300 better off and a married couple with one earner ends up £650 better off. This will not make the slightest difference to the stereotypical single-Mum-on-benefits (the villain of the piece), as she doesn't pay income tax anyway.
Well, whoopie-doo, is all I can say to that. As to the welfare system...
1. The welfare system has looked much the same under the Tories as it did under Labour, even the biggest disaster of all, Tax Credits, is just Family Credit repackaged and made worse. There's no reason to assume that the welfare system will change much when the Tories get back in.
2. The welfare system does not actually discriminate against marriage as such, it discriminates against both marriage and cohabitation, whether a child's parents have "walked down the aisle" or not is irrelevant, the way to get all the extra goodies is for the mother to claim to be living alone.
3. It's difficult fisking the last sentence in the quote as it is pure gibberish. First James 'Photoshop' Purnell talks about children whose parents "have not walked down the aisle" and in the next breath he talks about "children from broken homes being abandoned to poverty". There are plenty of us who think that the welfare system is the main cause of child poverty, as it happens, i.e. ending these lunatic bribes for single mothers would not just save taxpayers' money, it would actually reduce child poverty in the long run.
* Under the MW flat tax/Citizen's Income scheme, it does not make any difference whether you are single, co-habiting or married, so married couples would be free to opt for joint taxation but it wouldn't actually make them better or worse off.
Sunday, 12 April 2009
From yesterday's Metro:
"As a society our collective pursuit of making money reaped its reward and a collapse was unavoidable". He continued: "Did we really think that interest rates, house prices and mortgage offers would go on rising without a limit, like a juggler optimistically adding more and more balls to his act with only the same two hands to catch them?"
It appears that many people geuinely did believe that house prices and mortgage offers would rise without limit, but that misconeption was based on the idea that interest rates would remain low.
From today's Metro:
The Archbishop of York has attacked the "glory hunting" decision to stage two Premier League football matches on Easter Sunday. John Sentamu joined other church leaders in saying the decision to play games showed disdain for the religious traditions of Britain.
From where I'm sitting, it appears that football a strong part of our tradition, which attracts an almost religious fervour. So why is it OK for him to show "disdain" for that?
Our kids chose to watch this (rather than Monsters vs Aliens, heck knows why) and although I was determined to hate it, I found it rather uplifting.
What kept my attention was the way that water seemed to be used as a metaphor for something-or-other; for example: the whirlpool in the river; the first rain-drop that falls on his nose when he realises that his wife has moved on; and the dripping puddles that the hero thought would lead him to his 'spirit guide'. There's then a brilliant scene about half-way through (where he goes to console his daughter, who is sitting alone in the amphitheatre) in which you very briefly see the reflection of the hero in a puddle just in front of the camera - despite the fact that he is dozens of yards away*. But after that the water allusions seem to dry up (pun intended).
Other good scenes: his 'abstinence' speech; Uncle Ned busting into the court room shouting "You can't handle the truth!" and the 'letter' he reads from a blank sheet of paper.
* Was this coincidence, CGI or a carefully chosen camera angle?
From this comment
7. Different taxes have different effects. NI [National Insurance] is a tax on employment and therefore deters the use of labour and encourages efficiency and automation. It doesn't put businesses in general out of business, it puts high-labour businesses out of business and encourages low-labour businesses (and the businesses that supply the equipment to reduce the labour, or, to put it another way, increase the productivity).
You could say much the same about the National Minimum Wage, which discourages low value added activities. That doesn't put "businesses in general out of business" it puts certain specific businesses out of business and adds to unemployment; pretty much like National Insurance.
Some may see this as A Good Thing, but quite why completely escapes me.
Saturday, 11 April 2009
Two government funded propaganda bodies have this week called for the government to do what it was going to do anyway:
From The Metro:
Calculations from the New Economics Foundation (NEF) revealed that because of rising consumption of products such as food and energy from abroad, we start "living off" the rest of the world just a third of the way through the year. And because our total consumption is growing and putting increased pressure on ecosystems, the day the UK effectively starts living outside its means is creeping earlier each year... "Uncontrolled growth of financial debt is currently laying waste to large parts of the global economy. An explosion of ecological debt looks set to do the same to a biosphere friendly to human civilisation."
A Department of Energy and Climate Change spokeswoman said: "The reality is we live in a globally interconnected world. As a planet, we must live within our environmental means and it's wrong to look at the UK in isolation... We're leading the way in committing to reduce our carbon dependency by 80%, but what's important is to get all countries committed to change in parallel. This is why we're looking for a global deal in Copenhagen this December."
Please note - The New Economics Foundation receives about £3 million a year from "trusts and foundations, local, regional and national government and through consultancy contracts" (per page 31 to the 2007 accounts) which is about ninety per cent of their total income (see page 35).
From 24Dash.com (itself a propaganda website!)
The Government should channel £30 billion a year of investment into low carbon measures to create a green New Deal, its sustainability watchdog urged today. The Sustainable Development Commission said half of the UK's stimulus package, which should total 4% of GDP, should go on boosting renewable energy and green transport, redesigning the national grid and making homes more energy efficient. Outlining its recommendations for a sustainable stimulus package in the Budget, the SDC also called for low-carbon investments in the public sector and funding to improve green skills...
A spokesman for the Department of Energy and Climate Change acknowledged there was an urgent need for action, as well as "real opportunities" in the low-carbon sector. The spokesman said Government policies were driving £50 billion of investment in the sector between 2008 and 2011, including £5.8 billion in renewables, £10 billion in energy efficiency programmes, £7.6 billion in the grid and £23 billion on public transport and low carbon vehicles... "We agree more needs to be done and we will be outlining further plans in these areas in the summer when will announce how we intend to meet our carbon budget commitments."
Please note - The Sustainable Development Commission is a straight quango (not true fakecharity), which was incorporated as a company limited by guarantee, number 6798740 on 22 January 2009, so it will be at least a year before we can find out how much taxpayers' money is wasted on them.
For the record, when I post charts showing currency movements, these are all against the same 'basket'. Commenters have asked me how I calculate this, so I shall explain it properly and add this post to my 'Quick links' widget in the top right hand corner.
Step 1. I can't be bothered to ascribe relative weights to each country, so I use two currencies from the North American bloc (USD and CAD); three from the European bloc (GBP, EUR and CHF) and three from Asia-Pacific (JPY, AUD and SGD), so the overall weighting is 'roughly right'. I don't include Chinese Yuan or Hong Kong Dollar as I don't trust them as far as I can throw them.
Step 2. Using GBP as a base currency, I download daily rates from the excellent www.oanda.com (starting from 1 January 1990) 'A'.
Step 3. I then adjust the daily value (in GBP terms) of each currency by dividing it by its long-run average value (in GBP terms) 'B'. For example, EUR is currently GBP 0.9021, but its long-run average is GBP 0.7090, so that then goes into the calculations as 1.2724 'C'.
Step 4. For each individual currency, I add up the 'C' values of the other seven currencies (GBP is always 1.00, of course) and divide it by 7 to arrive at 'D', the value of a unit of 'world currency' from the point of view of each individual currency.
Step 5. Each individual currency then gets divided by the value of one unit of 'world currency' to give the final value 'E' that I use in my charts. For good measure, I also add 183-day and 365-day moving averages.
Here's the example of how I calculated the final value 'E' for 10 April 2009 (the actual spreadsheet I use is in rows down, not columns across, of course), click to enlarge:
Just sayin', is all.
Friday, 10 April 2009
As I said on 29 December 2008, when I swapped my AUD back into GBP, "... there is always a distinct possibility that GBP has overshot its 'fair value' (whatever that is) i.e. is undervalued, i.e. is worth buying. It's not like all the other economies aren't going to tank as well."
Although AUD has gone up by 1.5% in GBP terms since then, other currencies have gone down a few per cent, so overall GBP has gone up by a couple of per cent against the basket of major currencies. I shall hereby give myself a pat on the back for calling the bottom to within a per cent or two, as per the updated chart (click to enlarge):
I have no strong opinion as to what happens now, GBP might fall again, it might rise, or, what's most likely, it might just bump along the bottom for the next couple of years.
Even if I did have an opinion, I'd also have to choose another currency to move into, and there aren't any that appear to be as undervalued as GBP at the moment anyway. Further, I'm not keen on converting significant amounts of GBP into another currency as I don't really trust banks any more, not even with sums up to £50,000.
UPDATE: re Dearieme's comment, here's CAD against the same basket of currencies (since 1990, not just since 2007, click to enlarge):
Has CAD touched the bottom of a fourteen year upward trend-line, strengthening at a modest one per cent per year? Maybe, but I wouldn't get excited about one per cent growth per year.
From yesterday's City AM (I can't find the article online so I've scanned it in below):
More than 10m sq ft of City offices is sitting empty in the financial district, the largest amount of unfilled space for five years. This is equivalent to 20 Gherkin buildings, and is putting severe downward pressure on rents and the profits of property companies, according to a survey...
Property firms are facing a growing pressure to lease the glut of empty offices at knock-down rates rather than pay taxes under the "empty property" scheme, which in some cases could be the equivalent to 40 per cent of the rent.
Activity is creeping back into the market as a result Recent deals include 20 Gracechurch Street and Bank of Tokyo Mitsubishi leasing the British Land Ropemaker building. But due to the sharp plunge in property values, British Land missed its initial rent target of £53 per sq ft on the latter deal, agreeing to $46.50 per sq ft plus a 48 month rent free incentive equivalent to just £41.82 per sq ft.
The tax they are talking about is Business Rates, which is a tax of about 40% of the market rent net of rates (so really it's about 28% of the gross rent) that a tenant would have to pay. In a rare outbreak of commonsense, the UK government scrapped an old exemption that said Business Rates would be reduced if the building was vacant.
The economically illiterate (i.e. most opposition politicians) claim that this increases the tax burden on business activity. Nope:
1. Owning an empty building is not really an 'activity' is it?
2. Rents (payable to the landlord, especially that element that relates to the 'location' rather than the physical building) and taxes (payable to the government) are much the same thing, as ultimately they are both a proportion of profits payable to a third party who plays little part in generating those profits.
3. As we see from the above example, scrapping a tax exemption for vacant buildings leads to lower rents payable by active businesses, as well as higher occupation rates (it appears that without the tax, landlords would have been more likely to leave properties vacant), hence more business activity, more employment etc.
The point being, unlike most taxes based on turnover, incomes or profits (which have deadweight costs - they depress business activity and/or drive it abroad etc) taxes on property have, if anything, a beneficial or at worst neutral impact. My main issue with Business Rates is that it is levied on buildings rather than just the land/location value, so there are stories about developers ripping down cheaper vacant premises to avoid the tax - it would be better to have a higher rate of tax on just the land/location value and exempt the buildings value, but that's just details.