Last drinks on the Circle Line!

The London Lite, a freesheet handed out to hundreds of thousands of commuters ran a slightly different version of this article (from its sister paper, The Evening Standard).

Very helpfully, and in the interests of balanced reporting, it reproduced, on page 1, part of a Facebook page that states the time and place:

9pm, Liverpool Street, Circle Line clockwise, rear of the train.

In case that's not convenient, there's another Facebook group called "One Final Tube Booze Party" that plans to meet up at Liverpool Street "at the top of the escalators at the entrance to the station (opposite Tesco on Bishopsgate) We will make it obvious who we are!" at three o'clock. Or possibly noon-ish, it's not entirely clear.

I have to do some packing today as we're moving next week, so I'm not sure if I'll make it, but best of luck anyway!

Reply from my MP

"Dear Mr ....

Thank you for your letter regarding EDM 1407.

I very rarely sign EDMs* as it [is] unusual for them to be actually debated in Parliament and thus I deem them an ineffective means of producing a debate on an issue. However, I have taken the liberty of forwarding a copy of your letter to the Chancellor ... Alistair Darling MP, so that he may respond to your concerns and outline the government's position on this issue. As soon as I am in receipt of a response, I will be in touch"

* I checked. My MP has signed 2 EDM's in the last year; EDM 486 (seems very sensible) and EDM 1454 (seems totally gimmicky, but fair enough). So the 'very rarely' seems to stack up, at least.

HM Land Registry versus Nationwide House Price Indices

HM Land Registry's April figures published today (end of May!) show:
average price £183,626; monthly price-fall 0.2%; and annual increase 2.7%.

As Growler at HPC points out, this is much the same as the Nationwide's February figures:
average price £179,358; monthly price-fall 0.5%; annual increase 2.7%.

To check this, let's compare HM Land Registry's January figures:
average price £186,045; monthly increase 0.9%; annual increase 6.4%; with Nationwide's November 2007 figures:
average price £184,099; monthly price-fall 0.8%; annual increase 6.9%.

Going back a further three months (just to be absolutely sure); HM Land Registry's October 2007 figures:
average price £184,346; monthly increase 0.1%; annual increase 8.1%.
Nationwide's August 2007 figures:
average price £183,898; monthly increase 0.6%; annual increase 9.6%.

Yup, by and large, this is just a time lag thing. Nationwide publishes the month's selling prices at the end of the month; HM Land Registry then takes two months to update their register. And then takes a further month to publish them.

There must be some messing about with seasonal adjustments - HMLR's average price has fallen by £720 over six months, but Nationwide's by £4,540. The monthly changes are all over the place, of course, but the year-on-year change is pretty much the same for either index, and that's the most important statistic.

"Milliband lies to protect EU (episode 94)"

Christina Speight summarises this whole charade thusly:

This is a classic example of how the EU works! Make all the preparations in detail and in secret, deny their importance and then at the earliest feasible moment spring the agreements on a gullible public as a fait accompli. Of course this means that when surprised in the act national ministers have to - er - LIE! Miliband has done just that!

Said is said.

The 18-year cycle in house prices

From today's Telegraph:

Four times since the 1940s, house prices have rocketed to become worth more than seven times families’ disposable incomes — in 1948, 1979*, 1988 and 2007. In the first three cases, house prices then fell by about 30 per cent in real terms. Why should the current situation be any different? There is no compelling answer, and the statistics are bearing this out. So far this crash is looking sharper than the last one.

*There was no 1979 peak. The correct years are actually 1948, 1973, 1989, 2007 - see chart here. The 1948 peak was a result of genuine housing shortage after WW2, and the normal 18-year cycle was stretched to over twenty years by simple virtue of Labour and Tory governments encouraging home-building in the fifties and sixties, but the basic point still stands.

So who's up for a Property Bubble Tax to dampen the booms and hence cushion us against the busts?

"Revolt grows over planning bill"

Let's look at some different takes on what is essentially the same topic:

1. From the BBC: "A Labour revolt is growing over a bill to take away ministers' and councils' planning powers on major projects like airports and nuclear power stations [and hand these powers to] an independent commission".

2. EUReferendum reckon that power cuts will be become ever-more frequent - this is due to  increasing demand; failure to replace and maintain stuff; Greenie opposition to power stations; the EU Large Combustion Plants Directive and restrictive planning laws. Rather unfairly, the list misses off "NIMBY opposition" alongside "Greenie opposition", but apart from that, fair summary.

3. David Starckie's new book "Aviation Markets", "... the book tackles subjects such as ... how airport slots should be allocated (answer: price)."

4. Lord Howell's energy policy, which amounts to "let the markets decide (not the Greenies)". This has been officially adopted as MW policy - don't tax it any higher than other businesses and for Heaven's sake, don't subsidise it. Sensible gummint oversight, sure, that's a different topic.

As ever, the MW manifesto - which is based on understanding and welcoming free markets and building policies around them - has ready answers to this:

a. As many powers as possible (apart from defence, immigration and the voting age at national elections, basically everything) should be delegated down to local councils. So if, for example, Medway Council decides to allow a local power station to be replaced/upgraded, that will be the end of the matter.

b. Local councils will obtain the bulk of their income from licence fees and user charges and Land Value Tax. And rents from social housing, different topic.

i) If there is demand for an airport, of course the Greenies and NIMBYs will be dead set against it, but as councils in the areas affected by the airport will be able to charge, via auction, around £12,000 per take-off/landing slot, there will be plenty of money coming in. Air travel will still be profitable (if not, the price will drop until it is), and if the receipts are more than enough to pay for the transport infrastructure, install secondary double glazing in homes in the flight path, etc, with a bit left over for other local amenities (to buy off the local electorate), then the airport will be built. Else not.

ii) Of course, some homes will still fall in value if they are in the flight path. At least the NIMBYs will have the consolation that their Land Value Tax bill has fallen. Conversely, with more jobs in the area (Heathrow employs 70,000 people), and remembering that house prices are largely a function of local wages, Land Value Tax receipts might even increase.

iii) Greenies and NIMBYs will object to other things that are essential but that nobody wants near them - for example power stations or waste incinerators and landfill sites. Again, local councils have to make the trade-off; if the potential income from charging fees for allowing sites to be used for landfill (EU-imposed landfill tax is a ludicrous £1m-plus per acre!) or for a waste incineration plant is greater than the potential net fall in Land Value Tax receipts (more local jobs, boosting land values, but they can whiff a bit, depressing land values), then the local council will grant permission for that landfill site or waste incineration plant. Else not.

c. When I say "no subsidies", this includes explicit subsidies (e.g. for wind turbines) and implicit ones. Nuclear power only works because of explicit and implicit subsidies - the most iniquitous being what amounts to a taxpayer funded bail-out for decomissioning and the fact that nuclear power stations do not have to insure themselves against 'worst case scenarios'.

d. As to sensible regulation and oversight, the problem with electricity generation is that we need overcapacity (which the market has no reason to provide) to cope with unforeseen power outages. Part of this can be dealt with by chucking more cables in the North Sea so that we can buy and sell capacity from the Dutch and the Belgians (who are an hour ahead of us - so we can fire up our generators an hour earlier and sell it to them in the morning). Altho' the MW manifesto does not recommend State provision of goods and services, there can be no harm in the State buying up old marginal, barely profitable power stations to provide that 5% of spare capacity that we need as a cushion and only firing them up when all else fails.

e. As a final thought, what about the long-mooted Severn Barrage? As an aside, it's nice to see this being proposed as a source of 'clean energy' (to pacify the Greenies) but being opposed by 'environmentalists', but that's not the main point.

The main point is that I, as a non-scientist, have no idea whether it will 'work'. Not the faintest. In much the same way, the Victorians who first proposed the Channel Tunnel had no idea whether it was really viable. But Thatcher (basically) flogged off the rights to build it to private companies, so for the taxpayer it was win-win. If it works, it'll compete against cross-channel ferries and air transport, if it doesn't, tough, private investors lose money. Either way, at least HM Treasury has banked some money. With the benefit of 20/20 hindsight, in economic terms it probably wasn't worth it. But so what? It's there now, so we might as well use it, and we all benefit from more competition on cross-channel routes.

The same applies to the Severn Barrage. An MW-led gummint will steamroller local opposition* and auction off a thirty year lease on permission to build and operate it (to be shared between all the county councils on either side of the estuary). If it works, great. Even if it doesn't, so what? Part of the lease agreement will be that if it doesn't, the winning bidder has to demolish it again. And if it works (in terms of 'it generates electricity') but fails (in terms of 'it doesn't cover its interest costs'), then so what? Once it's built, it will provide us with plenty of electricity at negligible marginal cost.

* Of course, something will be built to compensate local surfers for the loss of The Severn Bore.

"Labour cash crisis could bankrupt party leaders"

This article in The Guardian is very detailed and highly technical, but the headline is a pretty accurate summary...

H/t Tim W.

Why not take part in LabourHome's fun online poll "Labour's debts - would you help?"

UK real house prices falling at 16% per annum

Per page 3 of the Nationwide's May Survey:
Average price October 2007 = £186,044
Average price May 2008 = £173,583
£173,583 ÷ £186,044 = 0.933
1 - 0.933 = 0.067 = 6.7%
6.7% ÷ 7 months x 12 months = 11.5%

RPI inflation = 4.2%
11.5% + 4.2% = 15.7%

"Consumers struggle to save"

"Encouraging people to save" via tax-favoured savings schemes - TESSAs, PEPs, ISAs, Child Trust Fund, Individual Savings Account, Pension funds (and depending which bunch of morons fails to lose the next General Election, either Lifetime Savings Accounts or Savings Gateway) - is one of those mantras that economically illiterate politicians like to trot out when they can't think of anything else interesting to say.

UK banks* love this, of course - people are so bedazzled by the thought of earning interest 'tax free', that instead of doing the sensible thing and paying off their mortgage as fast as they can, they commit some of their disposable income to 'saving'. Banks of course are just middlemen - they pay depositors 5% and charge borrowers 6%. So a 'responsible saver' with a large mortgage and some money in an ISA is in fact paying the bank 6% interest on debts he could have paid off in order to earn 5% on money that he could have used to pay off the mortgage ...

Let's face it, this is all crap.

The economically literate person will pay off debts and/or save (i.e. spend less than they earn) when they are working, and will run up debts and/or use up savings (i.e. spend more than they earn) when they aren't working (i.e. while studying, unemployed, at home with young children or in retirement). The 'cost' of foregoing £1 of spending when you are earning is far less than the 'benefit' of being able to spend that £1 when you aren't. That much seems uncontentious.

Similarly, some people are naturally cautious, and end up dying with £[loads of money], they have saved too much. Others fritter away each pay-cheque within a day or two and spend their last days alone, shivering in a council flat, they didn't save enough. That's just human nature, which no amount of social engineering can change.

There is a balance to be struck here - glossing over the natural desire to leave a few bob to your children or grandchildren, or to have some rainy day money - the ideal savings rate (taking the population as a whole - bearing in mind that people at different stages in their lives will be saving and dissaving at the same time) that would maximise the utility of each individual (and hence to society as a whole - society merely being the sum total of all of us) is thus, to the nearest whole per cent, absolutely nothing, nil, zero, nix, nada, niente, rien**.

* Yes, the Nationwide is a building society not a bank, but their 'research' is what sparked this off.

** The fact that with a growing economy, The People as a whole become wealthier with time is another topic.

"Brown urges increased oil supply"

This is complete and utter madness on so many levels! What sort of cloud cuckoo land does The Goblin King live in?

Although the UK is over 90% self-sufficient in oil, we only produce 2% of the world's total output. Even if by some miracle, North Sea Oil companies managed to 'turn on the taps' and increase production by 25%, the Middle Eastern countries would only have to reduce production by 2% to negate this. Overall effect on global oil prices - zero.

Vince Cable deserves a kicking as well for his asinine comment if he were chancellor he would wait before making a decision on the 2p fuel duty rise - but added he could not see an easy way to pay for scrapping it. A rise in pump prices from 90p per litre (average for the past few years) to currently £1.15 means extra VAT of 3.75p per litre, anyway, so assuming HM Treasury have done their sums correctly *falls about in mirth* then they should be looking at a 2p reduction in fuel duty.

Funnily enough, Friends of the Earth director Tony Juniper may actually have a point when he says "The government should be developing urgent plans to wean us off our addiction to fossil fuels - not increasing UK oil production.", but not because of all this Global Cooling crapola, but because we are basically putting ourselves at the mercy of some pretty malevolent states.

"Man guilty of police wife murder"

Yup. It woz the husband wot dunnit, just like the electrician said...

"Students had hints before exam"

Bless 'em. These kids clearly take Rule 2 very seriously indeed.

"1.8m cannot pay mortgages"

"Nearly four-fifths of homeowners had no insurance to protect their income – and pay their mortgage – if they lost their job" according to totally unbiased research by major insurance company Axa.

Did they, er, do any research into how many more homeowners would be struggling if they had to pay for a hugely expensive (and fairly useless) payment protection insurance in addition to their mortgage?

"Now bins need legal guardian"

No comment.

"Graduate hat throwing ruled dangerous"

No comment.

Lies, damn lies and independent research

According to a department of Bristol University "individuals in the non-profit sector are significantly more likely to donate their labour, measured by unpaid overtime, than those in the for-profit sector."

According to the CBI and Axa "The gap between sick days taken by workers in the public and private sectors has widened to a record level ... with the average public-sector worker taking nine days off compared with 5.8 days in the private sector."

Besides, unless you are doing shift work and are being paid by the hour, there is no such thing as 'unpaid overtime'. In an office hierarchy, this is called 'brown-nosing your way up the greasy pole'. In the public sector it's called 'catching up on the all the stuff you sort of haven't got round to doing yet somehow, oh shit, there's a quarterly deadline looming'.

"UK could be wine region by 2080"

What sort of a f***ing stupid headline is that?

Monday's FT cheerfully reproduced the press release for a book entitled "The winelands of Britain: past present and prospective", full of words like "could" (used three times), "forecast", "in future", "according to", "climate models suggest", "by as much as" and "by 2080".

Yeah, and by then, pig-bat hybrids might fly.
............
In the same section (bottom of page 2, print edition), they summarise the press releases from:

1. Druglink Magazine as did The Sun, but without the breathless headlines, or indeed, the useful comparative figure for total admissions relating to legal drugs. So that's The Sun - one, FT - nil. Drugscope seem honest enough, but a glance at their accounts shows that they are (disappointingly, but predictably) largely state-funded.

2. Hometrack, under the misleading headline "House prices fall 1.9% in May". Wrong, house prices fell 1.9% in the year to May. In any event, their prices are based on the contributor's opinion on the achievable selling price for each of four standard property types in every postcode district. So that means pretty much f*** all.

3. The Local Government Association, titled "Calorie warnings sought for drinks". The summary contains the outrageous claim "drinkers do not realise the contribution of alcohol to getting fat". Er, are we not familiar with the expression 'beer gut'? Have we never watched darts on the telly? Least said, soonest mended on that one, I think.

4. Last but not least, "Personal carbon trading favoured". Yeah, favoured by deluded MPs ... Oh God.

In summary, a crock of shit.

"Cocaine victim numbers surge"

Shock! Horror!

The number of cocaine users admitted to hospital has more than quadrupled in eight years, it was revealed yesterday ... gasps The Sun breathlessly, ... The worrying statistics point to a dramatic rise in the drug’s popularity over the last decade..

It then continues with some hard facts ...
Cannabis poisonings nearly halved during the same period. Good stuff. Why is that not worthy of a headline?

The Government figures reveal 740 people needed emergency treatment after bingeing on cocaine during 2006/07, compared with 161 in 1998/99. Wot? Out of maybe half a million users, 740 overdoses? I'd guess that the bulk of these relate to crack-cocaine anyway, which is a truly vile drug, not the good old Bolivian marching powder that merely turns you into an arrogant arsehole and makes your nose bleed. Even if this guess is wrong, it's not much of a message is it "Kids! Don't do cocaine! There's a one-in-a-thousand chance you'll overdose if you take it regularly for a year! And going by these stat's, zero chance that you'll die!"

The majority – 629 – were men and their average age was 29. Yeah, so? Cocaine is taken predominatly by relatively wealthy men in their twenties, any fule kno that.

... the number of cannabis users needing treatment fell from 171 to 96 – and heroin overdoses fell from 1,962 to 1,530. Isn't that something to celebrate - out of one or two million cannabis users, only 96 needed treatment? Ditto heroin, with 300,000 users?

Last month the Government revealed drug-related hospital admissions had soared by more than a third since 2002. Many of the 215,447 admissions were for legal drug overdoses or accidental poisoning. So, er, by these figures, illegal drugs caused about 3% as many admissions as legal ones? And even legal drugs only accounted for 2% of all admissions (approx. ten million). Hardly a f***ing epidemic, is it?

H/t EUReferendum, who makes further very interesting points.

Reader's letter of the day

In today's Metro (I can't find it online) on the topic of the 'Christian' Registrar who refused to marry gay couples:

What branch of Christianity does Lillian Ladele belong to that condones the joining together of heterosexual couples in unholy matrimony by an unordained woman in an unconsecrated building? Does she not warn her clients that they are going straight to hell if they consummate their sham of a marriage?

Rob Schwarz, London

I have no idea whether this is sarcastic or not, but the logic works either way.

Personal Carbon Allowance

Are they completely mad?

Tim Yeo MP (Sussex South), who is a Conservative and thus ought to know better, was on the BBC today saying how such a system would be better than 'carbon taxes' because they 'hit the poor'. The general idea is basically, to inch us a little bit closer to the Surveillance State by giving people an electronic card that they have to swipe every time they pay a gas bill or fill up the car. Under their bureaucratic dream scenario, people who don't use up their personal carbon allowance would be able to sell the unused bit to someone who needs it.

Complete and utter bollocks, of course. If (and that's a big 'IF') it were agreed that it were desirable to reduce our CO₂ emissions, then, as I have said before...

I would seriously consider increasing taxes on fossil fuels (demand is quite price inelastic) and dishing this out to all UK residents as a part of the 'Citizen's Income/Citizen's Pension' system. Those who use less than average will gain, those who use more will lose, but the overall pressure will be that people use less (and spend a bit more on insulation, warm clothes etc); our oil, gas and coal will last that much longer and it will hopefully help our balance of payments a bit.

Of course all this Kyoto nonsense, "binding legal targets" and trading of "carbon credits" is a load of crap and will no longer be necessary.

1. The point about price elasticity is that even if domestic fuel bills and petrol prices were to double in short period (oh, they just did) then the amount that people will consume will not fall by half, it might fall by a couple of per cent. Their scheme will not affect total consumption either - people will use up to their 'personal allowance' and assume that it's cost free.

2. Do politicians expect people to vote for them, and in exchange be forced into this sort of bureaucratic surveillance nightmare? (What happens if you fill up you car and realise you've forgotten your card?) Well, clearly politicians do think that we'll still vote for them, and we probably will - that's the frightening bit.

3. The only acceptable form of rationing is price rationing - it's called free markets. Have they forgotten the disaster caused by government-imposed food rationing after 1945? And if there are external costs (like road maintenance) then sure, cover this with a tax on petrol. But it needs go no further than that.

4. Of course taxes on petrol and domestic fuel are far too high anyway, on top of underlying prices being an an all-time high. So my solution wouldn't work either, politically or economically, but it has the merit of simplicity - at least you can look at the idea and dismiss it fairly quickly.

How to pass exams

1. Don't start attending lectures and think that you are learning for learning's sake. Start thinking about the exam from the first minute of the first lecture. The point of studying is to pass exams and get qualifications, if you happen to remember something later on, then great, but that's a bonus, not a feature.

2. If the exam is internally set, suck up to your lecturers from day one and try and wheedle out of them what the exam questions will be. You have to be a bit subtle about this, i.e. ask leading questions like "If this topic comes up in the exam, what is the best way of approaching it?", if the lecturer goes into a long spiel, then assume the topic will come up, if he says "Oh, this is just background stuff" then it won't. Of course this doesn't work for externally set exams.

3. Keep your notes up to date, read the chapter from the book before and after the lecture, while it's fresh in your mind, try and condense each lecture down to one or two pages of A4. If there's anything that's not clear, ask the lecturer about it the next week. At this stage, he will be impressed at how keen you are and, if you are lucky, will tip you off whether or not that topic will be in the exam. Don't kid yourself that you'll have time to come back to it later.

4. Most courses are divided into one topic for each week. Get hold of past exam papers and analyze carefully how often each topic comes up and work out the usual structure of the exam - is it answer any four from eight? Is it one compulsory and then three from seven?

5. Let's say (for sake of example) that's it's any four from eight; there are twelve possible topics; of which three nearly always come up and nine come up half the time, you actually only have to revise the main three topics and three others (i.e. half the syllabus) to be fairly sure of being able to answer four questions. i.e. out of the regular topics, you'll be able to answer two or three questions, and of the other three topics you choose, you should be able to answer another one or two (this strategy can blow up in your face, of course, maybe do three topics plus four to be on the safe side - it's not an exact science).

6. If a topic seldom comes up, then even if you like it, don't bother revising it. If there is a topic that usually comes up but you can't make head or tail of it, don't bother either. An exam hall is no place for actually thinking - you should be on auto-pilot by that stage.

7. Everybody has their own tricks how to revise. I like to condense my lecture notes down to a couple of pages, then condense that down to a few lines, then condense those few lines down to a few mnemonics. I also find doing practice exams, in real time, very helpful, not just jotting down key points but actually writing out answers long-hand. And then marking it objectively. But each to his own.

8. Try and get a half-way decent night's sleep before the exam, wake up early-ish and drink at least one litre of coffee. Be there well on time (do a dry run the day before if necessary). Keep revising until you get to the door of the exam hall and they tear the notes from your hand. It is amazing how much you can memorize in a short space of time once the pre-exam adrenalin has totally kicked in. You'll have forgotten it all half a day later, but by that stage, who cares?

9. The coffee is important, because not only does it keep you alert, after an hour or so you will be bursting for the toilet. Say to your body "You are not going to the toilet until you have answered half the questions" it is amazing how much this speeds things up.

10. Read the exam paper from front to back before you start - this is trite but v. important! - and work out which questions you are going to do. Some people like 'problem' or 'logic' questions; some people prefer 'Discuss', which is a bit more demanding than 'write down everything you know'. I once did an exam (four our of eight) and chose four out the first seven. The dead easy question was right on the back page and I didn't see it until right at the end. Bugger.

11. Space your time. If it's three hours, four questions of equal marks, that's forty-five minutes per question. The first few marks on each question are the easiest, after a while you get bogged down, after forty minutes or so, move on to the next question. Keep an eye on the clock.

Similarly, there may be a compulsory question worth forty marks and three optionals worth twenty marks - get out your calculator (always take a calculator) and type 60 minutes x 3 x 0.4 = 72 minutes, then make sure you spend 72 minutes (one hour and twelve minutes) on the first question. And then pace yourself for 36 minutes each for the next three. Adding odd numbers like this to a random start time of (say) 10.45 am is in itself quite tricky, so it's best to actually jot down somewhere visible 10.45 (start), 11.57 (start Q2), 12.33 (Q3), 1.09 (Q4) and 1.45 (end). If the last gap looks too long or too short, go back and check your figures!

12. Write clearly and neatly, leave a line or two empty between paragraphs (the 'ticking zone' - markers abhor a vacuum and will fill judiciously positioned blank lines with ticks), especially handy if you remember something later and need to squeeze it in. Don't start a new paragraph one or two lines from the bottom of the page - the paper's free! - turn over and start on the next page. Leaving lots of blank space is v. important with calculations, don't start on a right hand page, leave that blank so that you have two facing pages for workings. Often you get to the end of the workings and the answer is clearly wrong. At least you have space to re-work the answers in the gaps and arrive at something sensible.

Do not use Tippex in an exam. Cross out neatly with a ruled line, move on.

13. Let me restate The Golden Rule - an exam hall is no place for thinking. The only mental effort that should be required is to decide which questions to do, timing and so on. Everything else has to be on auto-pilot. If you can't answer the questions in long hand in auto-pilot mode in the required time in the peace and quiet of your own home, then don't imagine you can do it in panic-mode in an exam hall. I once had a weird experience in an exam, watching myself writing out, very neatly, a text-book answer to a text-book question and realised that I wasn't actually thinking, it was just pouring out, the same as when you play a tune on an instrument and your mind starts to wander ...

14. I personally have no truck with 'checking your own answers at the end'. You sometimes come back to the first question two hours later to check it, and you can't make head or tail of your own answer. If it's wrong it's wrong, by that time you are mentally frazzled and are in no state to check anything. I used to have a macho pride in finishing exams half an hour early and walking out of the hall early to demoralise the opposition, but actually that's daft.

15. If it's multiple choice and you aren't sure, then just guess - that way at least you have a one-in-five chance of getting it right. Leave it blank and you've potentially wasted a mark.

16. Do not take the exam paper out of the hall with you. It's over and done, you'll only waste time torturing yourself about whether you chose the right questions and so on - in exactly the time when you should be revising for the next exam, or getting pissed, assuming it's your last exam of the season.

17. Some lecturers may actually think that you care about their topic. If there is a chance that they will be useful to you later on (are they on the exam review board or disciplinary committee? will you be having them for other courses?), then keep them 'warm'. If not, then do no more than give a friendly nod for the next few weeks, followed by a curt nod, and soon they will have forgotten you existed. And you them.

Coalition of the willing (3)

After a hard day out and about, I return to Ye Olde Interwebbe and am pleased to see that the fun online poll now shows 62 people voting in favour of scrapping of all these silly bans and only 43 voting to retain, and indeed probably extend them.

Education vouchers (2)

As regular or occasional readers of this 'blog may be aware, some of my main hobby-horses are:
a) education vouchers;
b) recapturing power from Brussels and returning as much responsibility to local councils (bypassing Whitehall entirely);
c) scrapping VAT and Employer's National Insurance and introducing a flat tax with a generous personal allowance; and
c) replacing existing property-related tax with Land Value Tax.
I'll try and draw these threads together in this post.

As any fule kno, the way we measure value and the way we keep score in a free-market economy is £-s-d. We also know that people respond to incentives - if central gummint sets loads of meaningless targets, then armies of box-tickers will be created to produce the forms to prove that those targets have been met, which leads to all sorts of unintended consequences. If the only target were £-s-d, then at least we're all playing by the same rules.

There's also politics to deal with. The large-state socialists will hate the idea of education vouchers, as it means relinquishing control (and money, and lots of remunerative quango chairmanships for party hacks) to the private sector. Similarly, the Tories are a front-organisation for the land-owners (home-owners are just pawns in this game) so they hate the idea of Land Value Tax ("Wot!? A tax on unearned wealth? How dare you!"). A scrupulously honest small-government government would deal with this with three simple rules:

Rule 1. We will disband the DfES and simply give each local council £7,000 for every school-age child living in the area (total spend approx. £70 billion p.a.). It will be up to local councils to decide, by trial and error, what is the 'correct' amount of the education voucher.

Rule 2. We will scrap all existing property taxes and replace them with Land Value Tax (bung in Business Rates and we're looking at about £60 billion p.a.) to be collected by local councils and retained to cover their own expenditure (if there has to be redistribution between richer and poorer areas, it is up to the Local Government Association to decide a formula, not central government).

Rule 3. We will phase out the £70 billion education grant over the next seven years. Councils will have to make up the shortfall by spending more wisely. That £70 billion is conveniently just about enough to make up for the revenue shortfall to central government from scrapping VAT etc, once you take dynamic effects into account.

NB - current local government-controlled tax-funded expenditure is about £130 billion.

Right. As we know, Land Value Tax is the best form of local taxation because it puts the onus on councils to spend money on things that add value (see Lyons report, para 7.68). We also know that houses in the catchment area of a good State school are worth up to £200,000 more than those outside it.

For sure, this is an extreme case, let's assume that £100,000 is a fair extra price to pay. In cash terms, what is the value of a good state school? Let's assume you've got two kids, and private school fees would cost you £10,000-plus p.a. So if you're paying 6% interest on an additional mortgage of £100,000, that costs you £6,000 p.a., so you are still ahead of the game. Flipping back to the 'break-even table', let's assume that Local Borough Council A takes Rules 1 to 3 to heart and plans ahead and decides to offer local residents schools vouchers of £6,000 each. As long as 30% of the children in the area take up the vouchers and move into private schools, the deal is cost-neutral from the point of view of the council.

Now ... consider parents of young children choosing between buying a house in Local Borough A (which offers schools vouchers of £6,000) and Local Borough B (which is behind the curve and does not offer vouchers), how much more are they prepared to spend on buying a house in local borough A, bearing in mind that their housing costs consist of mortgage plus Land Value Tax? Logic says, they're prepared to shoulder an extra £6,000 (same as in real life) only this time, that extra £6,000 is split 50/50 between extra mortgage costs and Land Value Tax. In other words, the nominal house price is only £50,000 higher, rather than £100,000 higher, than in Borough B.

But the extra £3,000 LVT that the newcomers are prepared to pay will paid by all 70,000 households in that borough (=£210 million), which will compensate the council for the pending loss of schools grant of 30,000 school-age children x £7,000 (=£210 million)!

So the optimum trade-off will be reached fairly quickly. And that is what free markets are about - the trade off between income and expenditure; between cost and value - the fact that the optimum is reached where value exceeds costs, but the fact that any excess will be competed away (in this case by neighbouring councils).

Coalition of the willing (2)

UPDATE 24/05/08 - the online poll over here is currently standing at 24 'ayes' and 23 'noes', most heartening indeed! Why not drop in and have your say?

Education vouchers (1)

One question on everybody's mind must surely be "How much 'should' the education vouchers, that are proposed by UKIP and some elements in the Tory party, be worth?"

I don't believe in 'should'; the issue is getting the most bang for the taxpayer's buck. I have rounded the number of pupils in the State and private sectors in the UK to the nearest million, and rounded the current cost per State pupil to the nearest £ thousand and arrive at the break-even table below, starting off with the current position where 10% of pupils are privately educated:
In other words, if the government/local council introduced vouchers worth £1,000, and at least an extra 140,000 pupil were to shift from the State to the private sector, there would be no net cost to the taxpayer. If this works, the government/local council can then try vouchers worth £2,000 - provided a further 190,000 move, then there is still no net cost to the taxpayer - but each time pupils move across, the overall quality of children's education goes up.

Of course, a perfectly valid viewpoint is that the cost to the taxpayer should come down as the cost to the parents goes up, but we'll come to that later.

Quango of the week

The Purple Scorpion takes a look at The Woodland Trust...

Quote of the day

From today's Times (scroll down):

Marston's, the brewer behind Pedigree ale, has distanced itself from industry moves to ban the Chancellor from every pub in the land ... “If Mr Darling has got money in his pocket, he's welcome in our pubs, preferably if he brings some mates,” says Derek Andrew, head of Marston's Inns & Taverns. "Assuming he's got any mates,” adds Ralph Findlay, chief executive...

Does Ralph read The Daily Mash, perchance?

Persimmon - feel the fear!

Persimmon have come up with a raft of 'moving options' which are broadly similar to Redrow's, the main difference appears to be that Redrow will 'pay' your Stamp Duty Land Tax, legal fees and a 5% deposit but Persimmon will, effectively, give you an interest free mortgage on one-quarter of the property.

This still all looks a bit like mortgage fraud to me.

"Statistics blunder over pensions"

Ooops! The ONS multiplied average weekly private pension incomes by 12 and not by 52 to arrive at annual average, previously stated as an average of £2,115 per annum for a couple.

So, they didn't think to check the PPI's 'Pension Facts', which says that median weekly private pensions for a couple were £172 a week, back in 2005-06?

Tee hee. Having said that, neither did I. My bad.

"Daredevil snapper risks life to get perfect shot"

Give that man a medal or something.

UPDATE: The same rocks are shown here from a different angle. The drop between the two rocks is 'only' about 20 feet or so. In other words, pretty terrifying.

Israeli tourist of the week (2)

Continuing my occasional series, news just in: "Tourist Strips In Protest At Wolf-Whistles" (complete with a photo' of a woman's back. Hmm. We all know what they look like. According to Sergeant Peter Masters of the New Zealand police "She's not an unattractive-looking* lady")

In other news, "Britain has the fifth largest Jewish population in the world"**. According to the BBC, 'secular Jewish women' "have had on average only 1.65 children". From an anecdotal point of view, in my long and boring life, I have only met four avowedly 'secular Jewish women' (isn't that a bit of a contradiction in terms?) who, on average had 2.25 children. So maybe I meet the wrong kind of 'secular Jewish women'?

* That's not just a double-negative but a tautology, I'm afraid. He has jumbled up the terms 'good-looking' and 'attractive'.

** As to who beat us to places 1 to 4, see here.

NHS Fuckwittery (9)

Shock! Horror!

Under the heading "Hospital alcohol admissions soar" comes this factoid: Alcohol was the main or secondary cause of 207,800 NHS admissions in 2006/7, compared to 93,500 in 1995/96.

Let's crunch those numbers:
1. Total NHS admissions approx. 10 million per annum.
2. Total spending on NHS in 2006-07 = £82 billion.
3. £82 billion ÷ 10 million x 207,800 = £1.7 billion* (assuming that average cost of an 'alcohol related admission' is the same as the average cost of all admissions)
4. Total alcohol duties collected in 2006-07 = £8 billion (from Tab C4), plus 50% for VAT = £12 billion.

So I think this is the usual BBC-Nulab alliance softening us up for yet more bansturbation. Wouldn't a more appropriate headline have been something like "Nulab drives nation to drink"?

* The Institute of Alcohol Studies reported that the cost was £1.7 bn back in 2004 (see page 8 of this), so this looks about right. Yes, there is such an Institute! All I can say is, I have been studying the effects of alcohol very closely for over a quarter of a century, and I am still none the wiser, heck knows what sort of breakthrough they're hoping for.

"Working classes have lower IQs"

Higher Education Minister Bill Rammell [came out with the inevitable] "These arguments have a definite tone of 'people should know their place'."

Correct! I know my place, and that's in an office doing tax planning, I'd be an absolute disaster on a football field, in a car repair workshop or in an operating theatre.

Is Bruce Charlton not stating the corollary of the blindingly obvious - that people with higher IQs (or other innate abilities) tend to get to the top, and that most such traits (be it IQ, sporting ability, musicianship etc) tend to be hereditary?

Would it help to allow the 'working classes' to take more exams like this?

Coalition of the willing

Let's look at a list* of some of the main things have been made illegal (or might be made illegal) for no good reason (whether such a ban is actually enforced or not in practice is by-the-by) and the two most stupid traffic regulations:

Smoking in pubs and clubs
Drinking alcohol on public transport
Smoking cannabis
Fox-hunting
Patio heaters
Plastic carrier bags
Taking ecstasy tablets
Brothels
Traffic lights
National speed limit on the motorways and major roads
-----------------
Update:
Allow handguns for sporting purposes
Scrap ID card scheme, national ID database and interviews for passports
Allow local councils to subsidise post offices via a precept on Council Tax, subject to local referenda
Allow trading and collecting ceremonial swords
Allow shops to use pounds and ounces
-----------------
The reason why 'they' get away with it is because the majority of people don't smoke (either tobacco or cannabis); the majority of people don't work in or admit to visiting brothels; didn't used to go fox hunting and so on. But surely, a majority of people would like to at least some of these bans lifted (those particular bans that affect them personally) or to see more humane traffic regulations? OK, there may well be a minority who don't do any of these things, who don't mind being stuck at traffic lights and who are basically total kill-joys, but let's ignore them for now.

To sum up, would there not be any mileage in a political party saying that they'd lift all these stupid bans and regulations, in one fell swoop - lock, stock and barrel?

For sure, there may be hippy dope smokers who support the fox-hunting ban; there may be women who hate traffic lights and quite like plastic carrier bags but have a moralistic aversion to brothels; there may be those who used to enjoy lighting up in the pub who believe (erroneously) that ecstasy is a dangerous drug - but have we not reached the tipping point where all these narrow groups could declare an armistice and all do their own thing and let others get on with doing their own thing?

* Please leave a comment if I've missed anything important off the list!

UPDATE 24/05/08 - the online poll over here is currently standing at 24 'ayes' and 23 'noes', most heartening indeed! Why not drop in and have your say?

"CML predicts 7% house price fall"

Firstly, won't this sort of prediction become a self-fulfilling prophecy? What's the point of buying a house, paying 6% interest and suffering a 7% capital loss if you can rent a house for a typical rental yield of 4%?

Secondly, in calculating this, presumably all they did was stick a ruler on a graph and extrapolate - according to the April House Price Index published by the Halifax/HBOS (one of the CML's largest members), prices are down 5.3% since their peak in August 2007. 5.3% ÷ 8 months x 12 months = 8%.

Finally, although the recent past is usually a good guide to the near future, the recent past is not a good guide to the distant future, which is the mistake that Prof Stephen Nickell made, who a few months ago solemnly swore that house prices would rise at 1.5% a year faster than earnings for the next 18 years*. Has he resigned his cushy taxpayer-funded job with the 'National Housing and Planning Advice Unit' in shame? Nope, thought not.

* 9.3 ÷ 7.07 = 1.32, the 19th root of 1.32, =1.32^(1/19) = 1.015

Sensible planning regulations

AFAICS, the death toll and destruction in Burma and China were not really the result of 'natural disasters'; but of a total and abject failure of planning regulations and building controls.

If you build lots of homes on a low-lying coastal flood plain in a region prone to cyclones, you are asking for trouble. Ditto allowing non-earthquake proof buildings to be built in an earthquake zone.

See also New Orleans, Indonesia etc.

Where's my f***ing umbrella?

I took the bloody thing to work last Thursday and left it by the filing cabinets to dry. I couldn't find the bastard thing at home over the weekend and it's nowhere to be found at work either. F***!

If anybody knows where it is, please leave a comment.

£3-sodding-99 that umbrella cost me.

"Jobs needed for 'sick' Britain"

The killer fact in this article is as follows:

However, some claimants have high expectations of what they might earn should they return to work. Of the minority who said they would like a job, about a third of men and one in six women said they would need at least £300 a week after tax to make it worthwhile coming off benefits and going in to work. That would mean a job paying around £20,000 a year.

There's a sore misunderstanding on the part of the BBC. These people do not have "high expectations", what the claimants are referring to is the fact that the welfare payments they receive are so generous and the withdrawal rate is so high, that mathematically they would indeed need to earn a gross salary of £20,000 to be significantly better off.

You can check this for yourself using DWP's Tax Benefit Model Tables. Long term IB is about £20 per week more than Income Support, so a single person over 25 on IB living in council housing has net out-of-work income of around £80 after housing costs (Table 2.1a). Assuming travel and work-related costs of £20 per week, to achieve the same level of net income when in work, they would need a gross income of £190 (Table 1.1a).

Does this make work worthwhile? Nope. Could this be fixed at the stroke of a pen? Yes - just reduce the generosity of out-of-work benefits a bit and reduce the marginal withdrawal rate a lot, and Bob's your uncle!

"MPs to vote on abortion limit cut"

In my 'Libertarianism & pragmatism' series, my reply to David Bergland's question "What should government policy be toward abortion?" was "Provided a woman can look a doctor straight in the eye and tell him that she really doesn't want the child, then she should be allowed to have an abortion, as easily and early as possible to minimise distress and to enable her to get on with her life."

There are two sides to this, as ever. If it is broadly agreed that 'late' terminations are A Bad Thing, then by all means, reduce the upper limit, but, as a quid pro quo make it much, much easier for women to have an early termination, the easier and earlier the better AFAIAC.

Update: Video of Mad Nad was here but it's disappeared again, ah well.

"Games consoles not green enough"

Zeina Al-Hajj, Greenpeace's International Toxic Campaign co-ordinator has said "... whether or not it's a toy, we do not want these chemicals in our products."

Ms Al-Hajj, why don't you just exercise your right not to buy them and f*** off and leave the rest of us alone?

Jumping H F***. Sure, there's nasty stuff in most electronic equipment, but the total volume is negligible, surely? How many grams of nasty stuff is in the average home?

1984 (10): The Surveillance State (2)

Phone calls database considered.

"Surveyors warn of home sales fall"

Hey! Surveyors! How about recommending that vendors drop their prices a bit? That'll get the market moving again.

"Taxpayer pain too much - Cameron"

The Chameleon gets half marks for this blinding insight.

He gets marks deducted for this "sharing the proceeds of growth" nonsense; there's potential for annual spending cuts of up to £100 billion; I see no need to drag this out any longer than necessary.

Garden grabbing

There was an article in yesterday's Times in which the RHS bemoaned the number of people who concrete over their front gardens for parking spaces, the issues being, it reduces 'biodiversity' (I'm not sure what that is, but from the context I'm guessing it's A Good Thing) and that it increases the risk of flooding (water runs off rather than soaking into the ground). Fair enough - and they provide a simple solution - if you want to park cars in your front garden, then just reinforce the area, making it hard enough to park cars on, but allowing grass to continue growing. All good stuff.

Then of course, they smuggle in the statistics that "30,000 gardens are lost to development every year ... In 1997, 11 per cent of housing developments were on land already classified as residential, but by 2006 this had grown to 22 per cent".

That 30,000 figure has to be seen in context of there being 25 million homes in the UK, so it's not a huge figure, and the percentage increase is meaningless - maybe the number of housing developments has halved? Maybe the housing developments on existing residential land tend to be far smaller?

This is all apparently a problem because "In towns and cities, the area of land used as gardens and other green space can be crucial to the survival of wild animals and plants."

Great, because there is a simple solution to this as well - instead of encouraging development on 'brownfield' sites (which includes homes with large garden on to which you can squeeze a block of flats) - allow towns and cities to expand instead - that way everybody gets a bigger garden, there's more biodiversity, everybody wins!

UPDATE: in reply to the comment by Longrider"It hasn't happened yet, but given sufficient pressure and developers will be encouraged to use compulsory purchase to force garden owners to relinquish them", this is AFAICS a total urban myth put about by patron saint of NIMBYs and sworn enemy of the land tax movement, Caroline Spelman MP (Con, Meriden) who claimed that "Worse could be to come, with even harsher planning regulations on the way and the prospect of compulsory purchase of gardens for 'social' purposes."

Does anybody have any real life examples of this happening? The NIMBYs oppose it just as vehemently when a neighbour perfectly voluntarily decides to sell his home and large garden to build a block of flats. If you are concerned about "property rights"', then which right is more important - one landowner's right to replace his house with a block of flats; or a neighbouring landowner's right to prevent him from doing so? The best way to find a compromise between these competing 'rights' is land value tax, but that's another topic.

The article also quotes the Tories as saying "Suburban neighbourhoods risk being 'over-developed' through a proliferation of 'one-bedroom pokey flats' instead of family homes built with sufficient space for parking and a garden, the shadow minister warned."

I couldn't agree more - but the reason for this is because the NIMBYs don't just oppose more concentrated development of urban areas; they don't want to allow people to build on a single square inch of the Hallowed Green Belt either. So where exactly are those 'family homes' going to be built?

"Waste mounts as £100 billion web of quangos duplicates work"

The Sunday Times covers another fine TPA report.

White flight

What triggered our recent move was my fear of being mugged again. So we moved a few miles up the road to a nice, safe, boring area. The downside of this, apart from it being boring, was rammed home today when we went for a 'pub lunch' and my wife remarked that she was the only non-white person out of nearly a hundred diners (I did spot an Indian guy as well, but hey).

That's the downside of white flight - where we used to live, mixed race marriages were the norm*. But surely it's better for law-abiding white people to look at you a bit funny than for the criminal underclass** to look at you a bit funny ... and then mug you at knife point?

* Except for the Pakistanis, of course, they think they're above everybody else, and keep it in the family.

** To be fair, the bastards who did me over were black and white and everything in between, there's no racial angle.

"92 Degrees"

An article in today's Times entitled "Hot under the collar? It's mango madness" (not available online) refers to research saying that in Northern Territory, alcohol-related violence increases in October and November when "daily temperatures at night were highest, humidity peaked and rainfall and hours of sunshine were lowest".

Strange, I thought this phenomenom had been common knowledge ever since the research came out saying that violence increases with temperature up to a maximum at about 92° Fahrenheit (approx. 33° Centigrade/Celsius*) - any hotter than that and people get too lazy to do anything active, so violence then decreases with further rises in temperature, to which Siouxsie and the Banshees referred to in the track 92° (video here, lyrics here) on their 1986 album Tinderbox**.

What goes around comes around, I suppose.

* 92 minus 32 divided by 9 times 5 equals 33.33r.

** One of their worst albums, BTW, the only track that made into onto my iPod is Candyman.

Legal and economic incidence of a tax

As I explained before (compare the first and third diagrams here), the imposition of VAT (or any other turnover tax, such as the VAT flat-rate scheme) on most goods and services has the effect that prices paid by the consumer are increased, the net price received by the producer is reduced, and overall economic activity is reduced. That is why I consider VAT to the worst tax. The diagrams presuppose that both demand and supply are price-elastic.

As we know, there are always special cases, which can split into 'Sin taxes' and 'User charges'. This can be explained as follows:

1. For most manufactured goods, supply is relatively price-elastic and the same basic product is sold world-wide, but there are some where demand is relatively price-inelastic. Good examples are petrol or cigarettes. The oil companies or tobacco companies have to sell their goods for a certain minimum pre-tax price (wherever they sell them) to make a profit. Conversely, if you are a smoker or drive a car, you have to pay up, regardless of how high (or low) the tax-inclusive price is.

As we know, different countries have vastly different rates of duty on petrol or cigarettes, but as logic dictates, the net-of-tax amount that the producers receive is much the same (or else they would stop selling in high-tax countries), so the price of petrol or cigarettes also differs vastly between countries (reflecting higher or lower taxes). Therefore, in economic terms, petrol and tobacco duty is borne almost entirely by the consumer.

Summary: sin taxes 'work', not because they actually discourage smoking, gambling, drinking or driving to any great extent, but because they raise money (which cover far more than the external costs to society in most cases) without affecting people's behaviour or dampening economic activity (except to the extent that people spend more on smoking, petrol etc and thus have less money to spend on 'good' things).

2. The other extreme is where demand is price-elastic, but the supply is fixed, and hence price-inelastic. Most of these examples are where the amount is restricted by the actions of the government. For example, land with planning permission or an existing building; landing slots at airports; the exclusive right to broadcast at certain frequencies; licences for pubs or betting shops or even 'cherished' number plates. The value to the owner is to a large extent driven by scarcity value, and in enforcing the restrictions, the state is maintaining the value of the exclusive rights given to incumbents.

In a truly free market, the only type of rationing is price rationing. Where the state seeks to restrict the supply of something (for good or bad reasons) it only seems fair to make the owners (who benefit from the restriction at the expense of those who are excluded) pay market value in return. Whether we call this 'rent', 'licence fee', 'user charge' or 'tax' is neither here nor there. As long as a tax on such things is less than 100% of the value to the owner, the 'market' is not affected, it merely reduces the re-sale value of that right, not its value in use. In economic terms, the tax is borne by the owner of the rights (see example below*)

Summary: if the government (or society) wants to restrict certain activities (be it developing land, opening betting shops or aircraft movements), then taxes (or licence fees, user charges or rent, call it what you will) on the value of those rights 'work' because they capture part of the value to the owner/user (who, under current law, has usually paid very little to the state** for it), who is thus at least indirectly compensating those who are excluded (from building or buying a house, from opening a betting shop or new airlines who want to break into the market and drive prices down). Such taxes do not depress economic activity.

I did a worked example for airline landing/take-off slots here. This is a nigh-perfect tax - air travel has a lot of external costs (so it can be justified as a 'sin' tax). Similarly, the number of aircraft movements is restricted by the number of airports, and the number of airports is restricted by the government (so it can be justified as a 'user charge').

* Example: taxes on land values. In the UK, when you buy land and buildings, the law says that the purchaser has to pay 'Stamp Duty Land Tax' of up to 4% of the agreed selling price. Some politicians think that if they were to reduce SDLT, this would make buying homes cheaper for young people. Wrong. SDLT merely reduces the pre-tax price that buyers are willing to pay - in economic terms it is borne by the vendor.

Consider the following: imagine that the rate of SDLT were set locally, and one town reduced its rate to zero and another town has raised it to 10%. Somebody is thinking about buying a house for £500,000 in the town that has increased the rate to 10%, so he would have to pay a total of £550,000. A more-or-less identical house then comes up for sale in the town that has no SDLT. How much would he be prepared to pay? Answer, £550,000. So the vendor in the first town only gets £500,000, but the vendor in the SDLT-exempt town gets £550,000 for an identical house. Reducing a tax on an exclusive right granted by the government (the right to own or build a house) merely increases the wealth of those who have already been granted that right in the past (usually having paid far less than market value for it).

NB - SDLT (taken in isolation) is a totally evil tax, I just took this example to highlight how stupid politicians are and to illustrate the general point.

** An airline who pays millions of pounds to another airline to acquire landing slots has paid for it - but they have not paid to the state who issued that permit; they have not paid towards the cost of supporting infrastructure (primarily transport links between airport and nearest city); nor have they paid compensation to people whose houses are in the flight path and suffer noise pollution), they have paid to the previous owner for whom this is an unearned windfall gain.

"Plastic bag policy 'a diversion'"

Wherein this advisor chappy admits that plastic bags are the least of our worries, which any sane person has known for a long time.

What annoys me is this insistence that plastic bags "take about 1,000 years to decay."

That is a Big Fat Lie, or a wild guess at best, what is the oldest plastic bag they've ever found? In any event, plastic bags burn quite nicely in incinerators, if getting rid of them physically is a problem. Or we can make them out of bio-degradable plastic.

Re:assure from Redrow (2)

The original Redrow Reassure deal included the following:

"If a customer comes to sell their Redrow Property [within three years] and gets less than they paid, we will refund the difference up to 10% of the purchase price paid..."

The current Reassure package has been modified - instead of the 10% refund, they are offering to "Pay up to £500 per month towards your mortgage for two years".

Hmm...

Assuming a typical new price of £200,000 what would a purchaser rather have - £12,000 cash towards your mortgage, or a worst-case refund of £20,000?

Have Redrow lost faith in their own product?

By-the-by, isn't this tantamount to mortgage fraud - if you add together £2,000 Stamp Duty + £12,000 towards mortgage + £10,000 for the 5% deposit + £750 towards legal fees, aren't they really selling you a £175,000 home dressed up as a £200,000 home?

Why politicians love Value Added Tax (2)

The British Chambers of Commerce have calculated the gummint has raked in an extra £505 million in VAT and North Sea Oil tax* in the last six weeks as a result of oil price rises.

Annualised, that's £4.4 billlion - or enough the increase the tax-free personal allowance by a further £1,000.

This is a very good illustration of "Why politicians love VAT" items 8 & 10.

David Frost's analogy is rather unfortunate though “Seeing the fuel gauge barely move when you put in £20 is frustrating and only going to get worse." Er, David, you don't actually put a £20 note in the tank, you give that to the attendant when you've finished putting petrol in.

* This is in fact a 20% surcharge on the standard rate of corporation tax that North Sea oil companies pay, making their effective rate 48%. Altho' I have said previously that flat-rate corporation- or income-tax is the second least bad tax, firstly, 48% is hardly 'flat' and in situations like this, it acts pretty much like a turnover tax, the worst tax of all.

Measuring social value

Here's my letter to the FT, sadly not printed.

"Sir,

Your article "New philosophy blurs party lines" (13 May) states "The Tory leader said ministers in his government would take account of 'measures of social value' - the added benefit of having a local GP, library or post office - to promote 'not just economic efficiency but also social efficiency'. But how would this championing of social values be squared with the harsh realities of needing to close thousands of post offices to stem losses of £3.5m a week?"

The answer is simple.

The 'social value', in other words the value to society, of subsidised or taxpayer funded services that benefit any particular locality, can be measured by looking at location values - the additional price that people are prepared to pay for properties in that locality as opposed to one that lacks these services - and hence on local land values. The revenues from a tax on local land values, however measured, could in turn be compared with the cost of funding that "local GP, library or post office".

As long as the proceeds from the tax at least covered the cost of the subsidies, then we would have not just economic but also social efficiency.

In the specific case of post offices, for example, annual losses of £182 million could - should property owners so wish - be funded by an annual land value tax of one per cent of one per cent on UK site-only land/location values (which currently stand at approximately £2,000 billion).

Yours sincerely"

Note: the blanket tax to subsidise all post offices was just to illustrate the sums involved - I explained how this would work in practice here.

"Housing crisis: Mortgage rates at 8-year high"

It's not a housing crisis, though, is it? It's the same number of homes and the same number of people living in them. So I'd call it 'an interest rate shock'.

Are we supposed to feel sorry for people who took out a vast mortgage without asking themselves whether they'd still be able to afford repayments if interest rates were to rise by 2% or 3%? Or show any mercy to the banks who didn't advise their borrowers to do so?

Anyway, this is all good stuff. If typical monthly repayments go up by a quarter (from £800-odd to £1,000-odd) then typical house prices will have to come down by a fifth to maintain any semblance of affordability.

Further, if banks now require at least a ten per cent deposit, that is doing first time buyers a huge favour. You have to look at these insanely 'generous' mortgages as weapons with which FTB's kill each other. Take away the weapons, and FTB's, collectively, will benefit.

Ah well. Nulab will keep chanting the mantra about interest rates hitting 15% under the Tories. It puzzles me what relevance that can possibly have to somebody whose monthly mortgage repayments have just shot up by £200, but hey.

"Man jailed over 36 children claim"

This is a fine example of how pathetic and useless HM Revenue & Customs are administering Tax Credits.

Remember that HM Revenue & Customs are also responsible* for dishing out Child Benefit. I'm no expert, but why don't they ... er ... ask people for the Child Benefit reference number on a Tax Credit claim form?

Or, bearing in mind that the level of fraud with Child Benefit is minuscule**, why don't they get rid of the child-element of Tax Credits and just increase Child Benefit? About £30 per child per week is roughly fiscally neutral.

And to prevent 'baby farming', perhaps restrict Child Benefit to the first three children per family? Remembering always that the largest part of the cost of having children is the loss/reduction in the mother's wages. That loss is the same whether the mother is at home with one child or with ten.

* They took over from the Benefits Agency about five years ago.

** Per the ONS, "For England and Wales as a whole, the Census figure [for the number of children] is 0.9% higher than the number of children claiming child benefit."

"Hints of methane's renewed rise"

Again, whoopee-do!

Average methane concentration in the atmosphere has increased over the last ten years by ... 30 parts per billion.

A billion is one thousand million! Thirty as a fraction of that is 0.000003% (five zeroes after the decimal point). Methane is, allegedly, 25 times more powerful as a greenhouse gas than CO₂. So that's equivalent to a rise in CO₂ of 0.75 ppm (parts per million), and as CO₂ has risen by about 100 ppm over the last three centuries, with no apparent ill effects (apart from The Thames not freezing over any more) what is there to be worried about?

Have I missed something?

Big numbers! Big numbers!

Whoopee-do!

The Goblin King pledges to spend "£200m to buy unsold new homes and rent them to social tenants [and] £100m for shared equity schemes to help first-time buyers purchase new-build homes".

£300 million divided by current average house price of £189,000 is, er, 1,587 homes. That's less than one day's turnover, even in today's depressed market.

Oh, and don't forget the gummint's generous contribution of £30 towards your legal costs if you are threatened with repossession.

At least Norman Lamont had the guts to spend £2 billion on trying to prop up sterling on White Wednesday before admitting failure. Throwing away £300 million to try and reflate a £1,500 billion house price bubble* is beyond futility.

* If house prices were still in line with the long-run average, they'd be worth about one-third less. Total value of all housing is approximately £4,000 billion.

"No rate cuts before 2010"

Screams the FT's headline ... in other words, they'll have a couple of rate cuts just before the next General election.

Swervin' Mervyn has also been hinting for some time that house prices should be included in CPI, in other words, (falling) house prices will depress the headline inflation figure, making their lives so much easier.

Is there anybody who still thinks that the Bank of England is independent?

A case for legalising cannabis

ConHome have kindly published my article.

Unfunded public sector pensions

While tracking down the source of a quote for my previous post, I stumbled across this in Hansard (Column 20/21) from back in 1993:

Mr. David Shaw (Dover) : ... I asked a specific question about the cost over the next 20 years of the commitment to public sector pensions for civil servants and others. I have been told that the unfunded liability, which does not appear anywhere in Government accounts, is £170 billion...

And they thought they had it bad! Meanwhile the liability is six times that and rising.

Imperfect markets

I toddled along to the IEA this evening for the launch of Eamonn Butler's "The Best Book On The Market"*. As usual, if you turn up on the day, you get a couple of glasses of wine and you get to chat to some nice people and eat some very delicious nibbles and a couple of quid off the cover price and the author will sign it for you, the eager purchaser.

Problem is, what dedication would I like ..? I asked him to go for the default option "To ...., don't let the bastards grind you down, signed ...."** and he fluffed it! He wrote "Don't the bastards wear you down" instead.

Imperfect markets indeed!

* Which is a jolly good book, having read the first half or so on the train home.

** Scroll down to Column 21. I've got a copy of James Delingpole's "How to be right" with exactly that dedication stashed away somewhere or other.

Ron Paul on the housing bubble

As ever, Ron talks a lot of sense:

"The solution is for government to stop micromanaging the economy and let the market adjust, as painful as that will be for some. We should not force taxpayers, including renters and more frugal homeowners, to switch places with the speculators and take on those same risks that bankrupted them. It is a terrible idea to spread the financial crisis any wider or deeper than it already is, and to prolong the agony years into the future.

Socializing the losses now will only create more unintended consequences that will give new excuses for further government interventions in the future. This is how government grows - by claiming to correct the mistakes it earlier created, all the while constantly shaking down the taxpayer. The market needs a chance to correct itself, and Congress needs to avoid making the situation worse by pretending to ride to the rescue."

H/t Sold 2 Rent 1 at HPC.

"Bradford & Bingley launches £300m cash call"

As I said a fortnight ago, next in line for rights issues are "Barclays, Alliance & Leicester and Bradford & Bingley".

B&B's market cap is currently £900 million, so that's a three-for-one rights issue, heady stuff indeed! OTOH, their 'total assets' were £52,000 million as at 31 December 2007, so £300 million only represents a modest 0.6%* write-down on assets. Will that be enough?

C'mon, Alliance & Leicester**, don't spoil my winning streak!

* Not 6% as I had first thought, whoops!

** Who have just written down their total assets of £79 billion by £192 million, a very modest quarter of one per cent.

Blogrush

I signed up to this* ages ago, and every now and then I click on a title that looks vaguely interesting.

One flashed up just now called 'Prescient haikus', which I couldn't resist following ... only to establish that I had already done so two months previously ... and left the inevitable comment.

* See widget down at the bottom of the right-hand sidebar

The Badger increases personal allowance by £600

Daft buggers, honestly. Why didn't they just do this a year ago? After 14 months of bickering over the 10p tax rate, they are now going to increase the personal allowance to £6,035 from September 2008.

At least this has illustrated the basic battle lines: if you want to help high-earners, cut the rate; if you want to help low earners, increase the personal allowance.

Which is why I believe in a much higher personal allowance and a single rate of tax, as recommended by ... UKIP!

Update: tractor production continues to rise! All hail The Great Leader!

Would this have made you quit drinking...?

Economies and diseconomies of scale

Just in case anybody thinks I was too harsh on Dave The Chameleon, here's a bit of economic theory that they obviously don't cover on the PPE degree at Oxford.

There are 'economies of scale' (EOS) and diseconomies of scale (DOS) to a business; this leads to the concept of 'minimum efficient scale' (MiES) and presumably 'maximum efficient scale' (MxES).

Think about a typical High Street.

1. Some types of business belong to large chains - that's the banks, supermarkets, high street clothes shops, white goods retailers, garden centres etc. These are businesses where there are significant EOS, hence the MiES is large and the market is shared up between a few large players.

2. Some types of business are nearly all small, family, owner-managed, for example, hairdressers/beauty salons, solicitors, cafés/restaurants, corner-shops/off-licences, car repair workshops, tailors, school uniform shops, musical instrument shops, second hand bookshops, launderettes and dry cleaners. These tend to be more specialist/service orientated. So here we have DOS and a small MxES; there is no particular advantage to hairdressers/beauty salons into consolidating into a national chain ... so they don't.

3. Then there is a third category, where the MxES is far larger than the MiES, and EOS and DOS largely cancel out, i.e. these types of business can fall either into owner-managed or national chain (or indeed franchise, which looks like national chain, but is in fact owner-managed). Businesses in this category include newsagents, pubs, pizzerias, burger bars, coffee shops, estate agents, cinemas, record shops, travel agents etc, and Spar supermarkets that are (I believe) a franchise and tend to be barely larger than your average corner shop.

The point of all this is, it is futile to invent rules that favour small shops over large shops. Some types of business will always be small and do not need to fear competition from the majors; other types of business tend to be carved up between a few large players.

You can favour all types of business - and thereby help employees and consumers as well - by deregulating and having simple, flat taxes - above and beyond that, it is best just to leave them to get on with it.

"Minister defies critics on school leaving age"

I have covered this before, but I'll let Alison Wolf have the last word:

"It is one of the most ill-thought-out pieces of education legislation I have ever seen."

Economic illiterate of the day

1. Nick Clegg "... will say that the Lib Dems have abandoned their plans for a 50 per cent top rate of income tax ... but that the 40 per cent should mean 40 per cent, arguing for reducing pension tax reliefs to the standard rate" [good stuff so far, to be fair] "He will also oppose the 'fundamental iniquity' of taxing capital gains at 18 per cent ... which he believes encourages tax avoidance by the representation of income as capital gains and distorts business behaviour. Although he will support reforming the stamp duty system he will argue that there is no reason for prioritising the removal of stamp duty on shares ..."

Woah! Capital gains should not be taxed at all! I admit there is a problem distinguishing between capital gains and income, which could be resolved by having a five-year taper period or something, so that the rate of tax reduces the longer the asset is held. Further, capital gains tax massively distorts business decisions - it discourages consolidation of smaller businesses into larger more efficient businesses - it drives a wedge between willing seller and willing buyer. Either way, it only raises a couple of billion, so however much you muck about, it won't increase revenues much. Stamp Duty on share sales is another wicked tax, for revenues of a couple of billion a year, it is driving business away from the UK to other countries that don't have it, which is most countries.

Nick also waffles on vaguely about "the scrapping of tax loopholes" and using the proceeds to pay for cuts in corporation tax. *Sigh* if there's scope for tax cuts for UK plc, it should be the EU's beloved VAT and the socialists' beloved Employer's National Insurance that should be cut first, but all-in-all, low simple taxes are better than nominally high taxes with loads of loopholes.

2. The Goblin King. Under advice from Imelda Walsh, HR Director at J Sainsbury plc, he "...is expected to signal a significant extension in the right to request part-time flexi-working ... The flexible working proposal has the advantage for Labour of pleasing the unions, which provide more than 75 per cent of the cash-strapped party's funding."

Now, this is clever! He can con people into thinking that this is a cost-free exercise, under which everybody wins; it is not, of course; part-time workers tend to earn less (as well documented) so he can then of course set up a few quangos to enforce all this shit. The name 'Sainsbury' is very relevant of course - Nulab is in hock to Lord David Sainsbury to the tune of £2,238,000 (see note 28, page 21). J Sainsbury plc are getting great value for money - for them, organising maternity leave and shift working is relatively easy, but this will make life a total misery for smaller retailers (as Ian QT pointed out yesterday) and it keeps Nulab's other paymasters, the trade unions happy. 

Economic shite, political gold. And let's judge these Socialists by their own standards, they want money and power and couldn't care less about free-market economics.

3. David Cameron is an Übertwat. On the one hand "Tories promise to cut red tape on small shops" [good, cutting red tape always good] and also "...proposed tax breaks for small shops in recognition of the special contribution they make to communities."

Woah! Stop right there! Politicians who utter the phrases like 'tax break', 'recognition of special contribution' or 'communities' are clearly morons who understand nothing. Shopkeepers are, or should be, in it to make money, not to "make a special contribution". The reason we have so many large chains is, all-in-all, because they are more efficient. 'Picking losers' this is called, politicians always pick losers.

That would be bad enough, but, The Goblin King made his flexi-time proposals (partly) because he "is not keen to be outflanked by the Conservatives, who have already pledged to extend the flexible working right to the parents of all under-18s." (see link in section 2).

So ... reduce red tape on small businesses ... but burden them with flexi-crap? Give them tax breaks ... conditional on filling in endless forms to prove they've made a 'special contribution'?And leave the burden of red tape on large stores unchanged ... but give them the subtle relative advantage that regulations give large business ... whose side is he on?

Again, the Tories are supposed to be the economically literate party, and it seems fair to judge The Chameleon by his own standards ... and to judge him a miserable failure. Perhaps he missed the lecture on "Economies and diseconomies of scale" while doing his PPE degree at Oxford?

On today's form, Nick Clegg appears to be the least-shittest option, and that's saying something.