Friday, 31 October 2014

Air Passenger Duty and rent seeking

The rent-seekers have decided to keep up their attack on Air Passenger Duty, with the Faux Libs at City AM are happily regurgitating as Gospel truth:

The annual £3bn APD take is significant, but robust evidence now exists which highlights that a reduction to the tax would be revenue neutral. Independent PwC research has shown that scrapping the tax would stimulate the creation of 60,000 jobs and lead to £16bn in additional growth, and therefore be self-financing.

APD is first and foremost an economic matter. However, there is also a question of fairness that should be considered. We feel passionately that, for families and for ordinary travellers, the tax is regressive and damaging.

Families receive no “break” on child fares as they do for other goods and services, and a family of four now pays an average of £52 in APD to travel to short-haul destinations, and £284 for long-haul destinations.

We know that Heathrow and other London airports are running at full capacity, demand for slots vastly exceeds the availability and the airlines ration flights by bumping up prices accordingly. Their ticket prices have nothing to do with their actual costs, a large part of it is scarcity value i.e. rent.

So as long as the APD merely takes a chunk of the rent element of ticket prices, no harm done, it does not discourage activity or investment in the slightest. Or else those airports would not be running at full capacity, would they? The same does not necessarily apply to regional airports.

But that £3 billion figure does not reconcile with the headlines figures he bandies about ("£284 for long-haul desinations"). According to Wiki, there are 240 million passenger movements in the UK each year, i.e. 120 million get on a plane and 120 million get off. If APD were a straight per-passenger duty, it would be £25 per person per round trip.

A per passenger duty is a stupid idea of course, a per plane tax is better and the best designed tax would only claw back some of the rent element, so it would be set differently at different airports.

The rent element is highest at Heathrow and other London airports. Going by Wiki's figures, to raise £3 billion, all you would need is a £4,000 tax on each aircraft movement at Heathrow and (say) £2,000 at the other London airports (Gatwick, Stansted, Luton and City). Flights to or from any other UK airport would be completely tax free.

So a round trip to and from Heathrow, assuming average 150 passengers per plane, would work out at £53 per passenger (£4,000/150 x 2) per round trip. There is absolutely no need to distinguish between short and long haul flights, the value is in the slot, and if this encourages airlines to use Heathrow only for long-haul, well so much the better. (Further, aircraft noise is a nuisance, but why would you care whether the airliner roaring overhead is headed to Manchester or Manchuria?)

This would completely demolish their Faux Lib wailing, and they can chuck their stupid PwC 'research' in the bin. IF such a tax did have a negative impact on economic activity, then we can easily measure this - are these airports still running at full capacity? IF yes, then clearly the number of flights has not gone down, so the tax has had no negative impact. AND the chances are that other airports would move closer to full capacity.

Reality check: Heathrow airport charges the airlines about £20 per passenger (£40 per round trip) and this raises £1.5 billion income, double that and there's your £3 billion.

Thursday, 30 October 2014

Traffic lights and drugs

Oh dear, those pesky facts and real life evidence from other countries getting in the way of blind prejudice again...

Exhibit One

London Assembly Tory transport spokesman Richard Tracey said:

“Every year Londoners waste over 170 million hours sitting in traffic, costing London’s economy £4 billion. Many of these journeys in our city are unavoidable.

"But rather than hurting motorists with ridiculous charges and taxes, we should look at innovative ways to cut congestion and make traffic flow more smoothly. Turning off traffic lights at night, like they do in parts of Europe and North America, is one measure which would boost the economy and help the environment.”

Exhibit Two

There is "no obvious" link between tough laws and levels of illegal drug use, a government report has found.

Liberal Democrat Home Office minister Norman Baker said the report, comparing the UK with other countries, should end "mindless rhetoric" on drugs policy. He accused the Conservatives of "suppressing" the findings for months.

Prime Minister David Cameron said the research did not offer "specific conclusions" and said he did not "believe in" decriminalising drugs.

It strikes me that there are so many well-documented real life experiments in most things from so many different countries, there's little room for airy-fairy debates any more. It's just a question of choosing the ones with the best outcomes.

That goes for speed limits, traffic lights, education, the health, immigration, the tax and welfare systems, legalising/criminalising drugs and prostitution, you name it.

Economic Myths: Repayments of principal and interest

Banks are primarily balance sheet exercises. When they grant somebody a mortgage to buy land, they just 'split the zero' into an asset (the loan out) and a liability (the money which the vendor gets credited to his deposit account). This is about eighty per cent of all banks' assets and liabilities.

The banks then have to show that the value of their assets (mortgage principal) exceeds the value of their liabilities (all the deposits). As we will see, this is actually irrelevant.

(The banks then make real profits by charging mortgage borrowers more than they pay depositors. So really they are just being paid to act as debt collection/risk pooling agents for people who have sold land.)

Most mortgages are based on the borrower paying a fixed total amount in interest and repayments of principal for the next twenty-plus years. Once a loan has been granted, this is all that really matters to the borrower and this is all the bank really cares about as well.

So for example, you borrow £100,000 for 4% fixed over 25 years, your monthly repayments are £533. You get statements at the end of each year showing that the amount of principal is going down, which is nice, but pretty irrelevant. What really matters is how many more years to go.

But you can work backwards from the £533. It doesn't actually make any difference whether that is a £100,000 loan at 4%, a £75,000 loan at 6.9% or a £50,000 loan at 12.1%.

Which is why I can't take the whole concept of negative equity and the corresponding 'threat tio the health of the UK banking sector' seriously. Psychologically, it can't be a nice position to be in, and it only really matters if you want to move home (apparently a lot of banks allow you to 'port' negative equity anyway).

So if you have a £100,000 mortgage @ 4% on a home 'worth' only £75,000, all the bank would have to do is write the mortgage down to £75,000 and increase the interest rate to 6.9%. That's you out of nequity.

Although the bank's balance sheet would look a bit weird (liabilities now exceed assets), it doesn't actually make any difference to anything in the real world.

"Why is there so much support for the Marysville shooter?"


There was a throwaway sentence in yesterday's Metro suggesting that this was happening, but I assumed it was a typo. Turns out it's true.

From My Northwest

Among the balloons and flowers tied to the chain link fence outside Marysville-Pilchuck High School are these: a white wrestling shoe; a youth football team photo, with one player encased in a red-marker heart; and a candle covered with a plastic cup bearing the name "Jaylen."

They are all tributes to Jaylen Fryberg, the popular 15-year-old freshman who texted five friends to invite them to lunch Friday and then gunned them down at a table in the school's cafeteria…

Wednesday, 29 October 2014

Holiday photos

About twenty years ago, I decided that photograph albums were boring. Even worse is having to feign interest when somebody shows you theirs.

(Since the advent of electronic cameras and mobile phones with cameras it has got far worse, because people don't come back with one or two rolls or film, they come back with hundreds of pictures which you are supposed to view on a tiny screen.)

But I had to do something with our first holiday snaps. So I stripped it down to the bare essentials - a few photos of me and Her Indoors, the train tickets, the receipt from the hotel, the entry tickets to a museum, the front page from the a gallery brochure, a couple of postcards etc - and put it all in a 40cm x 50cm clip frame. The rest got junked.

And I have kept going ever since and now have nearly a whole wall covered in these collages:

This has three main advantages.

1. It fills the original purpose of "keeping those treasured memories alive". You can look at pictures of your kids when they were small and cute etc.

2. If anybody asks where we went on holiday, I can just take down the frame and present it. If the person asking was just doing it out of politeness, they can pretend to look at the collage for thirty seconds or so, say something like "Ooh, that looks lovely." and pass it back with no offence meant and none taken. If they are really interested, because perhaps they have been to the same place or are considering going there, we can have a proper chat.

3. It cuts down on arguments over things like which year we went where, how many times we have flown with EasyJet, how many aquariums we ever have visited, whether we went somewhere for a long weekend or a whole week etc. All you have to to is go over to the wall (standing on the sideboard if necessary) and look.

"Badgers lose Court of Appeal legal battle"

From the BBC:

Badgers have lost a legal battle at the Court of Appeal against being culled. The Badgers' Association had accused the government of letting the latest pilot culls go ahead without an independent expert panel (IEP).

At a special late night session, the two badgers who had survived the journey from the West Country out of the seven who set off, asked three judges to rule there was a "legitimate expectation" that the expert monitors would be put in place.

But Lord Justice Davis, Lord Justice Christopher Clarke and Lord Justice Bean dismissed their case. They backed an earlier decision by the High Court that ministers had not broken rules in permitting a cull without scrutiny by an independent scientific panel.

The badgers were then taken out into the courtyard and shot,

Round the clock of silliness

From City AM:

Business groups have slammed politicians for failing to take action on energy supply shortages, despite 15 years of warning signs... Spare capacity will be close to four per cent, compared with around five per cent last year and 17 per cent three years ago.

Dan Lewis, energy policy adviser at the Institute of Directors, commented: “This has been in the offing for 15 years, and it really didn’t need to happen.” He called on the government to “start thinking hard about how to find renewable energy we can realistically integrate at a reasonable rate”

The acute lack of spare capacity is because a lot of perfectly good coal and oil fired power stations were forced to shut down in the last few years. Blaming it on not having enough "renewable energy" is completley bonkers. That's like giving your car away and explaining to your boss that you're late for work everyday because they haven't invented teleportation devices yet.

I used this circular argument in the comments here yesterday for a joke, but it appears that even relatively pro-market groups like the IoD can't see through it.

And what's this?

An energy department source told City A.M.: "Labour simply didn’t invest in the energy infrastructure we need. Under Labour, the energy system was creaking but we’re turning that around with £100bn investment and more than enough reserves this winter."

For sure, the government has to play a role in all this (pollution and safety standards, and without the government, the National Grid would never have happened, being a natural/land monopoly), but it doesn't need to invest a penny in power stations.

Isn't that what private companies are supposed to be doing? There's plenty of demand for electricity and it can be produced profitably provided the government doesn't interfere too much and taxes sensibly (i.e. on the natural monopoly element).

Preparations being put in place include plans to incentivise businesses to reduce energy demand. Lewis commented: “Now they are actually proposing to pay people not to work. It’s the last thing the economy needs.”


And yet again!!!

Dear God, will it ever stop?

Tuesday, 28 October 2014

And once more for the crowd....!

They're coming thick and fast now...


Also here, if you want to comment.

"We won’t face winter electricity blackouts, insists energy minister"

From The Evening Standard:

Fears that the UK is facing a winter of electricity blackouts were dismissed by the Government today.

Energy Minister Matt Hancock insisted the lights would stay on despite the country facing its biggest energy crunch in years.

But he accepted the need for emergency planning including potentially firing-up mothballed power stations or asking factories to close.

It came as a report from the National Grid revealed Britain may need the emergency measures if we are hit by extreme weather or an international energy crisis.