Saturday, 22 November 2014

More BtL Joy from the Telegraph

The whole pensions / BtL / annuity dynamic is getting truly ludicrous.

Exhibit 1. The DT indulging in some sensationalist pandering to its 'readers' with this ridiculous claim about 'annuity mis-selling'. Here. I work in this business and the biggest problems with annuities are

1) pension savers not shopping around when all the pre-retirement packs issued by all insurers tell people to shop around and
2) epic government and regulatory failure and especially the lunatic interest rates and financial repression generally.

Then there's these two dillies.

Exhibit 2. Gazumping is back.  Oh great.  So is something sensible being done to make this less likely?

Exhibit 3 Well, not really.

You just wait and see what people will spend their pension funds on when they can get at them next year.

It's not going to end well, is it?

Car vs building

Friday, 21 November 2014

Poor Widows In Mansions In Northern Ireland

Northern Ireland never had Council Tax, they stuck with Domestic Rates, the last revaluation was in 2005 and the rates are about 0.8% of each homes 2005 value (or probably more than 1% of its current value). Sadly, the 2005 value is capped at £400,000, rather than having a higher or no cap and a correspondingly lower rate, but there you go.

They sensibly introduced a deferment option for Poor Widows In Mansions to shut up the Mylene Klasses of this world.

A few years later they did a review of the scheme, Andy Wightman uncovered this fine document:

Analysis carried out by NISRA for the Department in 2008 found there were 132,343 pensioner owner-occupying households.

Since its introduction, there have been 116 applications to the scheme – a take-up of 0.09%.

64 of these did not proceed beyond the initial stages. Of those that proceeded further in the application process, 21 were successful (in terms of a deferment agreement being entered into) and 18 were refused.

Thursday, 20 November 2014

At last, a bit of sensible advice from the Beeb.

Franklin considers snow shovelling to be so dangerous that he advises anyone over the age of 55 not to do it.

Let's factor in a margin of safety and reduce that age limit to 25 or something, you never know. Better safe than sorry.


"Sorry I couldn't make it into work, but the car was snowed in and I didn't want to risk a heart attack."

With a bit of luck, that'll get you out of some forced Xmas shopping trips/picking up relatives trips as well.

Fun with numbers: Outstanding residential mortgages x Standard Variable Rate

We know that total lending has gone up a lot over the last fifteen years (Chart A), but also that interest rates have come down (Chart B). Both of these figures are pretty meaningless; increases in total lending are cancelled out by reductions in interest rates.

The "real" £££ number is the two multiplied together:

Chart C) how much interest the banks can earn, and

Chart D) how much households have to pay in mortgage repayments.

You can draw whichever conclusions you like, but here goes.

Using data downloaded from the Bank of England's Interactive Data page…

The concept of "Standard Variable Rate" is becoming less relevant because of all the introductory teaser fixed rates, but at least there is a consistent series:

If we assume that three-quarters of bank lending to households and businesses is residential mortgages and multiply up by the SVR from Chart B, the total interest charges which banks collect are as follows, apart from the 2007-2008 'blip' just prior to the 'credit crunch':

More relevant is the overall cash flow, i.e. repayments of principal + interest. Assuming a constant remaining term of 20 years, the total annual payments booked by UK banks are as follows; this is the figure which has doubled over the last 15 years:

Wednesday, 19 November 2014

Royal Mail Rent-Seekers

From the BBC

Royal Mail boss Moya Greene told the BBC that increased competition was threatening the company's ability to deliver letters to all parts of the UK - a service mandated by law.

She added that the "cherry-picking" of urban mail routes by competitors "undermines the economics" of its nationwide delivery service.

Royal Mail has long called for the regulator, Ofcom, to consider expanding the Universal Service mandate - which ensures mail is delivered across the UK, six days a week, at one fixed price - so that it includes rivals such as Whistl.
In response, a spokesman for Ofcom said the regulator's own evidence "clearly shows that the service is not currently under threat".

"We would assess any emerging threat to the service quickly, in the interests of postal users," he added.

The "economics" of their service is that they had this requirement as part of floatation and are still doing it. That's all we care about, not feathering the nests of Royal Mail shareholders. Good to see Ofcom are of the same mind.

BTW If I was a single bloke, I wouldn't bother with home delivery of parcels. I'd send everything to a pick-up point where I can pop in on the way home from work. I suspect it's the future of parcels.

Location, location, location

From The Evening Standard:

One of the world’s most famous advertising hoardings is up for sale for the first time in 24 years.

The prime slot on the Piccadilly Lights, the electronic display at Piccadilly Circus, is on the market after Japanese firm TDK’s contract ended.

Insiders suggested Land Securities, the owner of the celebrated London landmark opposite the Eros statue, could get in the region of £4 million a year for the spot, which measures 21.1 metres by 4.8 metres.

That's a lot of money - and that's only one out of six spaces. And why is the site so valuable..?

Outdoor advertising consultancy Wildstone is advising Land Securities. An estimated 2 million people a week pass the site.

And how do 99% of those people get to Piccadilly Circus? Using public transport is how.

So why shouldn't Transport for London send Land Securities an invoice every year, and charge them (say) 10p for every person passing the six spaces each year, £10 million all in?

Presumably, somebody intended this outcome but who and why?

From The Evening Standard:

The Freight Transport Association estimates that as many as 20,000 delivery drivers have taken early retirement or moved to different jobs since the Certificate of Professional Competence became mandatory in September.

The qualification, a new European requirement, involves 35 hours of training and costs up to £300. Drivers who do not hold it risk a £1,000 fine.

James Hookham, managing director of the FTA, said: “This is the first Christmas when we have had this requirement and many drivers are saying ‘I didn’t take up truck-driving to go back to school’ and just voting with their feet.”

I don't think this is special pleading by the hauliers, the government has been piling stupid regulations on them for years, overall, their complaints are justified.

So what's the point? Who stands to gain from this? The people doing the stupid courses?

Fun With Numbers: Pupil-teacher ratio in English state schools

There are about 7.5 million pupils in state schools in England.

"There are 922 thousand full-time equivalent people working in state-funded schools, this includes 451 thousand full-time equivalent teachers."

Further, "over 1.3 million people work in state-funded schools", which means, for example, that about 40% of the 1.3 million work full-time and the other 60% do half a working week (1,300 x 70% = 910).


a) Slightly fewer than half the people on the schools payrolls are actually teachers. And there is an unknown number of people working in "education" in the wider sense (i.e. all the quangos) who don't actually "work in a state-funded school".

b) The pupil-teacher ratio of 16.7 doesn't seem too terrible to me. In other words, if a full-time teacher spend two-thirds of the day teaching, class sizes would be about 25, which is no different to most private schools.

c) For a given number of employees/expenditure, if they could could get the proportion of teachers up from 50% to 75% and reduce the number of pen-pushers down to 25% (which is normal for private schools), then we'd have 692 thousand full-time equivalent teachers and a teacher-pupil ratio of 10.8, which I think is pretty good (i.e. low) by any sort of standards. If a full-time teacher then only spends half the day teaching, that gives us a class size of just under 22 and reasonably well-rested teachers.

Tuesday, 18 November 2014


From the BBC

The government has been defeated in a Commons vote on the control that parent companies can exercise over pubs.

MPs voted 284 to 259 in favour of an amendment allowing landlords an independent rent review and to buy their beer on the open market.

So-called "tied pubs" are required to buy supplies - often at high prices - from the companies that own the pubs.

Campaigners said the "historic" vote would help "secure the future of the Great British pub".

Of course it won't. We had beer ties for longer than I can remember, in a time when pubs were thriving. You can argue against beer ties on other grounds, like public choice, but it didn't historically close pubs.

But it's splendid news because at least it's a way of proving that high rents made sod all difference to pub closures, and maybe some of those CAMRA numpties might start supporting a reversal of the smoking ban.