Tuesday, 30 November 2010

"But I believe in this and it's been tested by research...

... that he who fucks nuns will later join the church."

Lyric from Death or glory by The Clash, if you're wondering.

University Tuition Fee Tomfoolery

David Cameron, in today's Evening Standard:

Unlike our predecessors we won't patronise the public by pretending there's a bottomless pit of money we can dig into. There isn't, and that means difficult choices need to be made. The public subsidy for higher education is massive — this year the Government will spend around £5 billion on teaching costs in English higher education alone — and in the context of spending restraint it cannot be exempted from cuts.

A lot has been said in recent weeks about what is in the interests of students, but this government is also responsible for the interests of taxpayers — and at a time of real financial hardship, a time when we have no choice but to make cuts across public spending, I don't believe it is right that we ask those on low incomes to pay taxes to prop up an unaffordable university funding system that they are not benefiting from directly.


Seems fair enough to me, sure, soften the blow by paying students a grant or a Citizen's Income, give them low interest loans so that people from poor families etc can go (which is sort of what the Lib-Cons are doing).

But that '£5 billion' figure reminds me of something else I read today, what was it.... ah... here we go:

Schools, employers, the food and drink industry and communities themselves are being urged to do their bit to make the nation healthier. Ministers said they wanted to tap into the potential of all of society in setting out their public health plans. Projects being promoted include everything from bike training in schools to voluntary cuts in salt and fat content by food manufacturers.

Councils will get a ring fenced budget to coordinate the push in England. This pot, which will be handed over from the NHS, will total at least £4bn a year from 2013, the government's public health white paper, Healthy Lives, Healthy People, said. It will be accompanied by the transfer of local public health directors from the NHS to local government.


It's funny how the money has run out for something half-way sensible, like universities, but there's plenty left over for these entirely made up schemes. As a taxpayer, I'm not keen on over-subsidising other people's university courses, but I'd rather pay for that (which does have some overall benefit to society, and maybe my kids will benefit from it) than this quango shite which is clearly of no benefit at all to anybody apart from the quangocrats running the scheme.

We own land! Give us money!

I spotted two examples of this type of shroud waving today.
-----------------------------
From The Shields Gazette:

FINANCIAL help could soon be at hand for hard-up South Tyneside homeowners who bought their council property under the 'right to buy' policy.

A Decent Homes programme is being carried out by South Tyneside Homes, with the aim of improving all social rented properties under the ownership of the council. Improvements include external work to blocks of flats and maisonettes, many of which contain leasehold properties. A number of residents living in these blocks are homeowners who will benefit as a result of the value of their property increasing.

But those homeowners, the majority of whom took the opportunity to buy their council home more than a decade ago, face significantly increased service charges to meet the cost of the improvements. Now South Tyneside Council is to make available discount loans of between £750 and £30,000, to help ease the financial burden on leaseholders.

---------------------------
From BritishBuilder.co.uk:

Cutting VAT on domestic repair and maintenance work would help bring the one million empty properties across the UK back into use, says the Federation of Master Builders (FMB) during the 17th National Empty Homes Week. Turning empty properties into homes would help tackle the growing housing crisis with five million people on social housing waiting lists as well as the 90,000 people living in temporary accommodation

Brian Berry, Director of External Affairs at the FMB said:

"Recent research commissioned by the FMB from the London School of Economics reveals that there is capacity within existing towns and cities to create all the new homes the UK needs and that reusing empty properties is one of the instruments to help fulfill this aim. However, the current rate of VAT is acting as a disincentive for owners of unused properties to bring them back into use. Often it is cheaper to simply demolish and rebuild as new build is VAT exempt.

"Cutting VAT on domestic maintenance and repairs would not only mean many empty properties are brought back into use but would help boost an ailing construction industry by helping to create much needed jobs and apprenticeships for young people. Communities would also benefit too as getting rid of neglected properties would help create better local environments by helping to reduce crime and create demand for local services.

"With house building at its lowest level since 1924 bringing empty homes back into use is a sensible way to help meet housing needs of every community around the UK and cutting VAT on domestic maintenance and repairs would make sure that this happens."


He's (probably) right about the number of vacant homes and the overall benefits of them being done up and somebody living in them etc; he's even right about VAT being The Worst Tax, but he is way off piste if he thinks that reducing VAT on domestic repairs (which is probably not possible under EU law) would get very many properties back into use (surely, there are plenty of builders who'll work cash-in-hand on smaller projects, so there's no VAT, PAYE, nothing), what's needed here is The Stick, not just The Carrot.

If people can make profits by owning land and buildings and leaving them vacant or derelict, then people will do it - the most famous example being Battersea Power Station.

The War On Spider Plants: Endgame?

I took pity on the last spider plant to survive the February onslaught of snow (the one in the front left hand pot of the photo' I posted in July) and repotted it. It did very well over the summer, but by last weekend, the freezing weather had not done it much good at all. Let's see what happens once it's been buried under an inch of snow for a day or two.

Splendid

From The Telegraph:

While the Irish rescue removed the immediate threat of "haircuts" for senior bondholders of Irish banks, it leaves open the risk of burden-sharing from 2013 on all EMU sovereign bonds and bank debt on a "case-by-case" basis.... Yields on 10-year Italian bonds jumped 21 points to 4.61pc, threatening to shift the crisis to a new level. Italy's public debt is over €2 trillion, the world's third-largest after the US and Japan.

"The EU rescue fund cannot handle Spain, let alone Italy," said Charles Dumas, from Lombard Street Research. "We we may be nearing the point where Germany has to decide whether it is willing take on a burden six times the size of East Germany, or let some countries go."

Italy distanced itself from trouble in the rest of southern Europe early in the financial crisis, benefiting from rock-solid banks, low private debt, and the iron fist of finance minister Giulio Tremonti. But the crisis of competitiveness never went away, and the country has faced a political turmoil for weeks.

If Portugal and Spain have to follow Ireland in tapping the EU's €440bn bail-out fund – as widely feared after Spanish yields touched 5.4pc – this will put extra strains on Italy as one of a reduced core of creditor states. The rescue mechanism has had the unintended effect of spreading contagion to Italy, and perhaps beyond. French lenders have $476bn of exposure to Italian debt, according to the Bank for International Settlements.


H/t, Devo at HPC.

"Councils in charge of healthy lifestyle drive"

It's amazing to think that some people thought the Tories would be any different to Labour, although bansturbatory policies probably go down very well with a small majority of voters or whatever political persuasion. From the BBC:

Councils are to be put in charge of encouraging healthier lifestyles under plans to be unveiled by ministers.

Local public health directors will be moved out of the NHS and into local government as part of the shake-up. The government believes the wider remit of councils in areas such as housing, transport and leisure puts them in a stronger position to tackle smoking, drinking and obesity in England.


And so on an so forth ad infinitum.

Monday, 29 November 2010

Deeply Gratifying Google Searches

I'm not sure what I did to deserve just making it onto the first page of Google search results for Wills & Kate (out of 1.3 million results), apart from doing a cut and paste job on the front page of The Evening Standard, but hey, it's all good.

Fun Online Polls: The Euro-zone and The Big Freeze

On a very good turnout in last week's Fun Online Poll (thanks to all 131 people who cast a vote), the result was:

Which country will the EU 'bail out' next?
Portugal - 78%

Spain - 11%
Italy - 2%
Other, please specify -3% (Belgium, Greece and the UK were suggested).
None. Financial stability in the Euro-zone has now been guaranteed - 6%


I use the term 'bail out' loosely of course, Ireland appears to be even more firmly under the EU cosh than before. It's a bit like taking a loan from a 'doorstep lender' or paying the Mafia for 'protection'. Suffice to say, the whole Euro-experiment is crumbling at such a rate that Angela Merkel has already started denying that 'they' will double the size of the nominal amount available to the EFSF (currently €440 billion) to be able to 'bail out' Spain if needs be.
--------------------------------------------
Much hilarity ensued last February when local councils ran out of salt, grit etc after it had been snowing for a couple of days. They've been forecasting snow for the whole of the UK for over a week and it's already hit large parts of the country (even though I've only seen a few flakes fall in London so far).

So that's this week's Fun Online Poll: "When do you think your local council will run out of salt and grit?"

Vote here or use the widget in the sidebar.

Currency wars: No news is... er... no news.

Here are the charts for USD and EUR for the past three years (against a basket of currencies).

USD is still bumping along the bottom where it was three years ago, which is far lower than it has ever been in the last twenty years. Can anybody think of a good reason why it was so much higher in late 2008, early 2009? EUR slid nicely in 2010 (once the whole Greek/Euro-zone bail out tomfoolery kicked off) but it is still higher than it was ten years ago - between early 2000 and mid-2002, it was in the range between 0.8 and 0.9.
To sum up, not much excitement here at all. You can safely ignore what you read in the papers.

Sunday, 28 November 2010

The Laffer Curve, GDP and the rental value of land

Here's the Power Point presentation I've been working on for the past couple of weeks:

Just a prawn in their game

Saturday, 27 November 2010

"Farmer dies after being attacked by bull"

Spotted by View From The Solent in The [Portsmouth] News:

The 58-year-old man, named locally as Ian Rook, was left with life-threatening injuries after one of his bulls turned on him at his farm in Clanfield.

According to local reports, he was badly hurt after the bull tossed him into the air. Police, an air ambulance and an ambulance were called to Manor Farm, North Lane, Clanfield, at about 3.50pm yesterday. The road was closed as emergency services dealt with the scene. Local residents said police told them the road had to be closed off for their safety as the bull was still on the loose.

The farmer was taken to Queen Alexandra Hospital by ambulance, but died in hospital...

Inspector Phil Jones, from Hampshire Force Control Room, said: 'Police are able to confirm a 58-year-old local man died in an industrial incident in North Lane just before 4pm on Friday. The Health and Safety Executive have been notified and are expected to commence an investigation into the circumstances that caused the man's death on Monday morning. In the meantime, police have notified the coroner. A post-mortem is due to take place on Monday.'

He added that the death was not suspicious...

Isobel Bretherton, spokeswoman for NFU South East, said: 'Everyone in the Hampshire farming community will be very shocked at this terrible news and personally I'm very upset about it. Obviously an investigation will establish the causes of this tragedy. Ian was a very well respected farmer and very much involved in the community in Clanfield. He was also involved in local farmer watch schemes. He was a great guy and had a fantastic sense of humour. This comes as a terrible shock to everyone who knew him and is a very big loss.'

Bulls can weigh up to two tons. No information has been released yet about the fate of the bull that attacked Mr Rook.


VFTS adds: "an industrial incident"? Mass-produced bovine attacks? Worryingly close to home.

"Buffalo gores two Kenyans to death"

From News 24:

A wounded buffalo gored a white Kenyan farmer and his guard to death on the shores of Lake Naivasha in the Rift Valley region, local wildlife officials said on Wednesday.

Rick Hopcraft, a third generation Kenyan farmer, was killed when the pair were hunting down the wounded buffalo alongside Kenya Wildlife Service (KWS) rangers on his ranch late on Tuesday. His guard, Paramoise Tinia, who tried to save him was also attacked by the animal and later died of injuries.

A manager on Hopcroft's farm, John Kariuki, said that Hopcraft had also been wounded in a buffalo attack last year just outside his house.

"Cow attack lands Lancaster County woman in the hospital"

Spotted by Joseph Takagi at Penn[sylvania] Live.com:

The cow just wouldn’t moooooooove. Police say a central Pennsylvania woman had to be taken to a hospital after she was knocked down by a cow she tried to shoo off the road.

Southern Regional Police say the woman encountered a cow standing in the road Tuesday night in Conestoga Township, Lancaster County. Fearing the cow would be hit by another motorist, the woman stopped her car and tried to herd the cow off the road, Officer Dianne Carter says.

Friday, 26 November 2010

Friday night gear change - early Xmas edition (2)

I can't embed a YouTube Clip to this, because there isn't one, but those of you who own Bob Dylan's absolutely dire/most excellent Xmas album* of last year can listen out for the semi-tone upwards truck driver's gear change at 2 mins 9 seconds into his hatchet job/idiosyncratic tribute to "Do you hear what I hear?".

See also O' Little Town Of Bethehem

* Is it dead serious? Is it a piss take? Or both or neither? Probably not even he knows.

"Escaped cow caught by police after A52 chase"

Spotted by Pavlov's Cat at the BBC:

An "agitated" cow has been cornered after being chased down a major road by police in Nottinghamshire. The animal broke an electric fence in Bassingfield at 1230 GMT on Wednesday and headed for West Bridgford, leading police on an hour-long chase.

The animal raced along the A52 and charged at officers, then broke through three garden fences behind houses in Eltham Road. The cow was captured and put into a trailer by its owner at 1335 GMT.

Pc Wendy Brown, one of the officers who caught the cow, said: "The animal was extremely agitated and we were considering whether we would need a vet to come out and sedate it. Thankfully we managed to calm it down enough to get it into a trailer. This was definitely one of the strangest incidents I've had to deal with and given the route the cow took it was extremely lucky nobody was injured."


Pavlov's Cat makes the obvious point: "... it was extremely lucky nobody was injured"? Lucky, or just poor planning on the cow's part?

The pyramids collapsing, quick find some new participants bondholders...

Back in July, we asked whether the UK housing market was like an '8-ball' pyramid scheme. The headline "Ireland was just one big Pyramid Scheme" second most viewed over at the torygraph finance pages tells me it's time to revisit this theme.

Now believe or not, lots of people are always trying to start pyramid schemes of one sort or another. Very few ever gain momentum, but every so often one does and can rapidly infect, and then rip apart, entire communities. Back in July we remembered the 'Women Empowering Women' scheme that drove the Isle of Wight to the brink of insanity in 2001, and spread so far it was raised by an MP for Aberdeen in the commons.

When these schemes collapse, the participants higher up the pyramid usually start frantically lending money to new participants believing it will secure them a bigger payout. Of course it seldom does, and the 'friends' they tricked into joining on ticky seldom cough up, if they ever even speak to them again. Which brings us nicely to the article:

"We don't know where the money went," added the trader, half in jest, but half in earnest. "We've been debating it all morning. Cars, flat-screen TVs, Bulgarian properties? Everyone round here used to have a Mercedes. The whole country was a pyramid scheme."

But don't worry folks, if we lend them £7bn, we'll get our hundred and odd billion back in no time. Because that's how pyramid schemes work, isn't it George?

Thursday, 25 November 2010

Killer arguments against LVT, not (76)

I haven't done one of these for a couple of weeks, so I'll base today's episode on an email exchange with Ron who said he could see the pro's and con's of Land Value Tax, but wasn't really persuaded either way and didn't see the fundamental point. I explained that point wasn't taxing for the sake of it, but to prevent public generated value being collected privately and to collect it publicly and to dish it out to all and sundry as a Citizen's Income (so that we are all landlords with a 1/62 millionth joint share of the rents).

He responded with this: "I get the importance of handing it back as citizen’s income and this is one of the things that bothers me about the idea - why trust the state to do this when it manages to corrupt everything else? Do you have an answer to this fundamental problem?"

My answer, which I have now padded out slightly was as follows:

Fair point.

But there are two things that can happen to land rents (and other state-protected monopoly rights).

1. They can be collected privately by land-owners, speculators, banks and corrupt politicians. Even the non-cash benefit in kind accruing to owner-occupiers is a massive distortion, as it encourages NIMBYist behaviour and the woefully inefficient allocation of housing (price rationing only applies to newcomers, incumbents don't have to pay).

2. They can be collected by the government. Maybe the government wouldn't pass it all on as Citizen's Income, maybe they'd spend some on themselves and their friends, but to be honest, it is better for democratically elected people (whom we can chuck out again, to some degree) to spend this money than for a self-perpetuating landowning and banking "elite". In practice we observe that in western countries only a quarter of the taxes they collect are wasted on fripperies (leaving aside deficit spending and bank bail-outs); most of the surplus, after paying for the irreducible core functions of the state, is returned to the public as welfare, pensions, roads, healthcare and education (the last two would be far better funded with Vouchers, but that's just a variation on the Citizen's Income idea) etc.

Further, taxes can be split up into taxes on land and other monopoly rights, OR taxes on output, incomes and profits. The very act of raising taxes from output, incomes and profits makes us all collectively poorer, however efficient the government is at spending, the dead weight cost of simply collecting them is about a quarter of potential GDP, which is simply lost. Nobody gets that lost GDP. Taxes on land have no such dead weight costs, and in marginal situations, even have the effect of stimulating the economy (they keep people on their toes).

Similarly, taxes can be split up into in-your-face taxes (like Council Tax, Inheritance Tax or indeed LVT) where there would be political pressure to keep tax bills down and to spend the money wisely; and stealth taxes (just about all other taxes) which are deducted at source from salaries, added to shop prices etc, and which the government can increase and squander more or less at will. It is only a couple of million self-employed individuals or companies who actually have to calculate and pay over the vast bulk of taxes that are collected.

So even if governments are wasteful and inefficient (and they are), it is better for them to collect and squander land rents than it is to collect and squander income tax. Does it really make much difference whether landlords and bankers drive round in Ferraris and Rolls Royces or whether civil servants drive round in Ferraris and Rolls Royces? Not really.

Further, from the point of view of potential first time buyers (or a new business), the future stream of LVT payments is not really a cost at all, because it depresses the price they have to pay for their first home (or first commercial premises) in equal and opposite measure (while the income tax/VAT saving is a real saving).

And finally, in the light of all the Greek/Irish bail out shenanigans, don't forget that the secondary advantages of LVT are that it would keep land prices very low, so there'd be no house price and credit bubbles. We are seeing day by day and week by week what happens when these bubbles burst - the Home-Owner-Ist "élite" just help themselves to another few trillion dollars and walk away laughing and the rest of us are stuck with huge income tax bills and national debt for the rest of time.

"UK concern over EU plan for new migrant benefit rights"

This particular downside of EU membership, i.e. that Johnny Foreigner is entitled to turn up in the UK demand a council house and sign on the dole, has been a latent problem for a decade (and I've been mumbling about it ever since I did EU law on my LLB course), but is now coming to the fore. Heck knows why the EU want to extend this to EEA members like Iceland and Norway (who are not in the EU).

As regular readers may know, I am thoroughly in favour of 'Universal Benefits', but one caveat has always been that it's for UK-resident British Citizens only; Johnny Foreigner is only entitled once he has lived here legally and supported himself financial for five or ten years [or whatever] and has qualified for a British passport under the usual rules.

How to deal with British citizens who live abroad, especially with regard to old age pensions, is a thorny - but separate - issue.

Oh noes! We are going to be farted to death!

The story was featured on Radio 4 this morning, but I can't find on the BBC website yet, so this write up will have to do:

The UN's weather agency has used the press release announcing its annual report on greenhouse gas levels to raise the spectre of rising temperatures triggering the rapid release of methane, a powerful warming gas, that could accelerate climate change. The announcement comes on the eve of the The United Nations Climate Change Conference to be held in Cancun, Mexico, from 29 November to 10 December 2010.

The WMO's 2009 Greenhouse Gas Bulletin report is published today (24 November).

The report highlights that methane levels have been rising since 2007 but cautions that the cause of this increase is not known. "The reasons for renewed growth of atmospheric methane are not fully understood, but emissions from natural sources (from northern latitudes and the tropics) are considered potential causes," the report states.

Typically around two thirds of methane comes from direct human emissions and the balance from natural sources such as permafrost. Large quantities of methane are locked away in permafrost which could be released as it melts. Methane is thought to contribute around one fifth of the greenhouse gas warming effect...


And so on an so forth, you get the gist.

Wednesday, 24 November 2010

It's a bit long-winded, but the conclusion is excellent

From the Institute for Fiscal Studies/Mirrlees review of UK taxation, Chapter 16:

16.4 Conclusions

The taxation of property [a term incorrectly used to refer to 'land and buildings'] in the UK is currently something of a mess. As we have seen when considering the practicalities involved in implementing an ideal system, up to a point that is understandable. But it remains both desirable and feasible to clear up much of the mess. Out conclusions can be summarised thus:

* There is a strong case for introducing a land value tax. The priority should be to use it to replace the economically damaging business rates system.

* Council tax should be reformed to relate it more closely to actual property values: levied as a proportion of up-to-date values with no cap and no discount for unoccupied or single-occupancy properties. We have called this a housing services tax to reflect its underlying economic rationale as a tax on housing consumption to substitute for VAT.

* [bullet three is arcane to the point of being gibberish]

* Finally, stamp duty land tax should be abolished and the revenue replaced as part of the housing services tax (for domestic property) and land value tax (for business property).

This is a radical set of proposals, and the changes would need to be phased in carefully. But this is also an area where the current practice is a long way from an economically rational and efficient system. Stamp duty and business rates defy the most basic of economic principles by taxing transactions and produced inputs respectively. Income tax and capital gains tax create a significant bias in favour of owner-occupation.

Meanwhile, council tax is indefensibly regressive and, thanks to spineless government refusal to undertake a revaluation, we find ourselves in the absurd position that tax bills are still based on relative property prices in 1991. Over time, this arrangement will some to be seen as more and more untenable. At some point, some government will have to grasp the challenge of making the case for intelligent.

-----------------------------
1. The 'housing services tax' they refer to is a copy of the new system of Domestic Rates in Northern Ireland, i.e. a flat 0.6% per annum on up to date capital selling values, which they would have instead of Council Tax/Council Tax Benefit. The include a chart on page showing that only owners of houses worth £500,000 or more (which is the top five per cent of houses by value) would be more than a couple of hundred quid a year worse off. An excellent place to start.

2. Stamp Duty Land Tax is 3% on sales of homes for £250,000 - £500,000, and 4% on sales of homes for more than £500,000. If there's a sale every twenty years, it costs owners of houses worth more than £500,000 about 0.2% a year on average (i.e. £1,000 a year for a £500,000 home; £2,000 a year for a £1m home etc). To replace SDLT, we'd need to increase the 0.6% rate by +/- 0.1% a year (on all properties).

3. They don't mention Inheritance Tax in the chapter, which is 40% on the total value of most assets (in particular housing, cash and quoted shares) in your estate above the threshold of currently £350,000-odd. Let's assume this is payable once every forty years, to replace this would mean hiking the rate by another +/- 0.1% (on all properties).

4. Owners of second homes would be a bit miffed with all this, so it'd only be fair to scrap Capital Gains Tax on land and buildings liable to the 'housing services tax', for much the same reason as the arguments against SDLT. This would mean hiking the rate by another +/- 0.1%.

5. At this stage, owners of expensive houses and/or second homes can be pretty satisfied with the outcome - what they lose on the Council Tax swing, they more than win back on the SDLT, IHT and CGT roundabouts.

6. But owners of the vast majority of houses that aren't liable to 3%/4% SDLT every time they are sold, which are beneath the Inheritance Tax threshold and/or which are not second homes would end up one or two hundred quid a year worse off with an 0.9% rate. So let's just go the whole hog, round up the rate by another 0.1% to a nice round 1.0% and scrap the TV licence fee instead (currently £142.50).

Job done.

Well Stone me...

It's only taken Lord sodding Turner 10 years to realise something that some of us have known and been banging on about for 25 bleedin' years.

Gordon Bennett. What next? What next bloody sudden insight will these corportatist cretins have? eh? What?

It's like pumping more air into a balloon that has burst...

Reuters, 3 May 2010:

Markets reacted skeptically on Monday to a record 110 billion euro ($145 billion) bailout for Greece, with investors doubting it would offer more than temporary relief to a euro zone shaken by divisions and saddled with high debt.

Despite Sunday's agreement by European finance ministers on an unprecedented three-year loan package, the euro fell as markets questioned the ability of the Greek government to push through new austerity measures pledged in exchange for aid and worried other euro states may be vulnerable.


FT, 22 November 2010:

Jens Larsen, chief European economist at RBC Capital Markets, said: “The market reaction [to the Irish bail out] tells us that the eurozone debt crisis is far from over. The market is unsure of how events will unfold, which explains the muted reaction today.”

... Using Greece as an example again, the omens are not good. Greek bond yields fell from a peak of 12.45 per cent to 7.24 per cent within days of the shock and awe announcement. But they have steadily risen since and are now trading near their peak, at 11.69 per cent.


Of course, we don't know what interest rate Greece would be paying in the absence of a bail-out, the Big Unknown being whether they would have left the Euro-zone or not, but hey.

We own land! Give us money!

From CityWire:

With millions likely to suffer financial difficulty in meeting their mortgage repayments once interest rates start to rise, the Building Societies Association is calling on government and the housing industry to look at new ways to prevent these struggling homebuyers from being pushed over the edge and suffer repossession of their homes (1) – before disaster strikes...

The most important of these rescue schemes is undoubtedly Support for Mortgage Interest, a state benefit which pays mortgage interest (but not the capital) when a homebuyer becomes unemployed. Borrowers who find themselves in this situation can claim mortgage interest for up to two years at the ‘official’ mortgage rate of 3.63% after 13 weeks of unemployment on loans of up to £200,000. This meets most homebuyers’ outgoings as the average mortgage borrower pays around 4% for their borrowing with many paying as little as 2.5% or less (2)...

Only 225,000 low income households on benefits qualify for SMI. According to the government, more than half of those are pensioners eligible for pension credit (3) and about a third are lone parents or disabled people on income support. (4)

Only one in six is unemployed and receiving job seeker's allowance. This is because most homebuyers are disqualified from SMI because a partner’s income is taken into account. In effect this means that if the partner earns around £5,000 or more, then the couple is not eligible for mortgage interest benefit. Anyone with savings of £16,000 or more is also ineligible...(5)

What trade body the Council of Mortgage Lenders has long been lobbying for is reform which would allow SMI to be paid in proportion to the loss of income. For example, if the person who is made redundant earns £40,000 a year and the partner earns £20,000 then SMI should be paid at two-thirds of the full amount (6). Expecting the couple to pay the mortgage in full on just one third of their former earnings is totally unrealistic...


1) And who did the reckless lending and piled all this debt on people? The banks. And who did the reckless borrowing? The very people now hoping to be bailed out. And who stampeded people into that reckless borrowing? The Home-Owner-Ist 'house prices can only go up' Mafia. [extra sentences inserted at request of Dearieme in the comments] Which 'industry' was largely responsible for the house price/credit bubble and the subsequent recession? The banks. And in economic terms, who 'owns' the land and buildings occupied by 'struggling homeowners'? The banks. Continued page 94.

2) They cheerfully admit that even the new lower 3.63% rate is too high - the excess amount clearly goes towards repaying the principal element of the mortgage.

3) Why do people take on mortgages so late in life that they haven't paid it off by the time they retire? Why do people stop working, knowing that they still haven't paid off their mortgage? Did maybe some of them demand their right to large wodges of tax-free cash simply for being a home owner (referred to as 'mortgage equity withdrawal')?

4) How did these people manage to raise the deposit and qualify for a mortgage in the first place (see point 1)?

5) Yup, if you 'own' a house worth £200,000 with a £200,000 mortgage and have no savings, you are home free (sic). If you were a bit more prudent and bought a house for £160,000 with a smaller mortgage and have salted away £16,000 in cash for a rainy day, you get nothing. Cash isn't king any more - land is.

6) In other words, not only do the reckless get priority over the prudent (see point 5) but this is a kind of upwards redistribution towards former higher earners who didn't salt any money away. If we are to have redistribution, let it be downwards, or even better, flat rate and universal. If we can't afford to pay it to everybody, then we can't afford it.

"We are just a phone call away"

Sue has spotted a splendid new EU propaganda website, so if you're up for it, ring them up on the number 00800 6 7 8 9 10 11 and give them some hassle.

Candle light vigil for zero victims

Spotted by RM in the Daily Express:

SCOTLAND’s largest police forces have been criticised after hosting politically correct candlelit vigils for sex-swap crime victims. Strathclyde Police hosted a “Transgender Day of Remembrance” in its Glasgow headquarters despite plans to shed 800 staff in the face of a £128million budget deficit...

Strathclyde Police statistics show that there have been no homophobic murders or attempted murders since officers started recording hate crimes... Force officials refused to say how many people turned up for the events, but a similar event at a HIV clinic in Sheffield, Yorkshire, was recently cancelled due to a lack of interest.

Tuesday, 23 November 2010

The complete and utter insanity of believing a single word that the banks say.

1. OK, to give us a feel for this, total lending by UK banks, primarily to UK borrowers, is about £2,232 (which I worked out here), which is about one-and-a-half times annual GDP.

2. Ireland is pretty similar to the UK in terms of house prices or GDP per capita and so on, its GDP in 2008 was about €200 billion, times current EUR/USD exchange rate of 1.36 gives us a GDP of US$ 272 billion, times by one-and-a-half to give a fair estimate of total Irish domestic lending/borrowing of $400 billion.

3. We then have to add on Irish government debt of another $160 billion or so (60% of GDP excl. bank bail outs), total $560 billion.

4. We'd expect a lot of that to be financing by Irish domestic investors. If the amount of finance from non-Irish sources is as high as in the UK, rounded up to a third, we'd expect total non-Irish lending to Irish borrowers, banks and government to be in the order of $190 billion; of that, half will be from the 'shadow banking system' (i.e. nothing more threatening that pension funds, insurance companies, sovereign wealth funds and rich people generally) and half will be from other banks.

4. So that brings the total amount which non-Irish banks lent to Irish borrowers, banks and government down to something in the region of $95 billion, of which a fifth (allegedly) is from UK banks, i.e. $19 billion, call it £12 billion, in round terms. Even in the case of a 50% Irish house price crash and a partial default on government debt, the losses suffered by UK banks would be less than half that, which is a lot of money to you or me, but only about a quarter of one per cent of total UK bank lending (see point 1) or less than one year's bank bonuses.

5. Well, that's what commonsense says.

6. But the world's banks scented another bail out and hyped those figures up a bit, according to a chart in today's FT (summary on CityWire), UK banks have $149 billion 'exposure' to Ireland, European banks have $509 in total, and total Irish borrowing from abroad is $731 billion in total. So UK bank 'exposure' to Ireland is being wilfully overstated by a factor of six or seven.

7. I'm not going to bore you with the arcane accounting rules that enable them to inflate that $190 billion borrowing (from point 4) into $731 billion borrowing (from point 6), but take it from me, those are arcane accounting rules at work that have little to do with real life, i.e. if you took the difference of $731 billion minus $190 billion, you'd find that Irish banks had invested an equal and opposite amount outside of Ireland, and the chances are that Irish banks have 'invested' that missing $541 in non-Irish banks (quite possibly sub-prime crap from the USA, UK bank bonds etc, who knows?).
------------------------------
UPDATE: From this morning's City AM:

Arturo De Frias of Evolution Securities has crunched the numbers. Under his worst case scenario in Ireland, with unprecedented write-offs, RBS could lose up to £7bn; Santander and BBVA would suffer lesser hits from Portugal (just €4.5bn in the case of Santander under the Armageddon scenario). This wouldn’t be that bad...

That £7 billion for RBS looks 'about right' to me, even the FSA, cheerleaders for the banking system admitted that "The exposure of Royal Bank of Scotland and Lloyds Banking Group to the Irish economy is “not at all worrying”, Financial Services Authority chairman Lord Adair Turner said yesterday... RBS and Lloyds, through its acquisition of Edinburgh-based HBOS are the banks most heavily involved." This is still a bit more than what I pencilled in in point 4, but hey.

Wills and Kate Tomfoolery

"Rivelpoor plopelty malket set fol infrux of Chinese buyels, deregation says"

Flom The Rivelpoor Dairy Post:

RIVELPOOR’S plopelty malket courd be set fol a massive injection as Chinese palents rook to snap up apaltments fol theil chirdlen whire they study in the city.

A top Chinese deregation flom Shanghai visited Rivelpoor yestelday to discuss murti-birrion pound legenelation prans – with the oppoltunity fol investment the main topic. The gloup met councir readel Joe Andelson and Rivelpoor Vision chief executive Max Steinbelg, and visited the watelflont and the city’s noltheln dockrands, ealmalked fol the massive £5bn Rivelpoor Watels deveropment.

Ml Steinbelg said: “We discussed a numbel of oppoltunities about investing hele in Rivelpoor. Thele was a rot of discussion about lesidentiar oppoltunities hele as many mole students come to study and make theil caleels hele.”

The Chinese gloup was red by the man lesponsibre fol pranning and deveropment arong the entile rength of the Huangpu Livel. Yu Ri is plesident of the Shanghai Livelbanks Autholity and chailman of sevelar films chalged with dliving othel majol plojects.


H/t Dlewster at Housepliceclash.

There's an app for that

There were two similar articles in The Metro this week, Tenants face being thrown out of their homes if they get richer and Council tenants could lose their homes if they get a job under new reforms.

From the first link:

New renters will be offered fixed-tenancy agreements of as little as two years and could be evicted after that period if they become better off, housing minister Grant Shapps said.

He insisted the reforms would be fairer than the existing system, which sees 5million people on the housing waiting list while others have homes for life which they can pass to their children without means testing. ‘When a tenant goes to renew their contract, they will have to let their local authority know if their financial circumstances have changed,’ Mr Shapps said.


[runs out of room screaming, calms down, returns to keyboard]

This can all be dealt with much more simply. Once we have adopted the MW patented system that welfare claimants and lower earners are paid their Citizen's Income in full, but are given a PAYE code without a personal allowance (i.e. a BR or 'emergency' tax code), so if they earn as much as the personal allowance, the extra tax paid and the CI received net off to nothing in cash terms, it would be a doddle to simply scrap the entire system of trying to collect rents, council tax and then overlayering those with means-tested Housing Benefit and Council Tax Benefit.

Because of the way the numbers work, it would be fiscally neutral to give social tenants who are low earners (or potentially low earners) a PAYE code saying that an extra 20% income tax has to be deducted (i.e. a K-code), which would then be channelled via HMRC back to local councils (this can't be rocket science, it's like Student Loan Deductions, only without any need for particular precision).

So non-earners pay nothing, low earners pay a bit, median earners pay a market rent and above-median earners would actually be paying more than a market rent.

It's up to these people themselves to decide whether they are happy to overpay in the good years as insurance against possible future bad years, or whether their income is so secure that they could save money by renting privately or buying their own place to live. Local councils in turn will have every incentive* to attract more employers to the area and instead of giving priority to the needocracy, they'll have every incentive to allocate social housing to people doing low-to-middle paid jobs.

* Assuming that the Tories really do implement the plans to allow local councils to keep the rents that they collect, rather than them being pooled in Whitehall and then dished out again.

PS, I know for a fact that all policy wonks read each others' manifestos, all this was explained in the UKIP Welfare Paper of earlier this year so they can't pretend they're not aware of the idea.

Monday, 22 November 2010

Brian Cowen

"Ministers to extend 'right-to-buy' policy"

Spotted by SW in The Daily Telegraph:

A new era of “Gerrymandering” will be heralded by ministers today as part of a fundamental shake-up of Government moves to create a new generation of Home-Owner-Ists at the taxpayers' expense.

The old “right-to-buy” rules will be extended, the Coalition will announce, so that social housing tenants – those who are in housing association homes as well as those in council houses - will be offered juicy taxpayer-funded discounts after five years of renting them.

In return local associations will be allowed to plough the money they receive back into providing new homes - unless prevented by the Localism Bill, of course - which will in turn be sold off at undervalue, thus ensuring an ever dwindling stock of social housing. The move is part of a package of measures designed to plough on merrily with Labour's Home-Owner-Ist policies. To try and drive a further wedge between the 'better off poor' and those at the bottom of the heap, new council house tenants will no longer be given a council house for life, as these will be required to sell off at undervalue.

Instead, they will get a flexible tenure contract for as little as two years and be given six months notice if an assessment reveals they no longer need the house. With global warming and so on, tenants who haven't found work will be happy to make do with a tent; and tenants who have found work will have a choice: buy the place you live in or be evicted.

Because of the new flexible tenures it is crucial to “right-to-buy” that people are allowed to accrue time even if people have moved home.

Currently some tenants in housing association homes do not get full “right-to-buy” rights for a variety of reasons, mainly because the taxpayer-funded Housing Associations quite enjoy the rush of power that being a large scale landlord gives them. Ministers will today say to housing associations, if you build a home using the new Flexible Rent – that is up to 80 per cent of the market rent - then you must also offer the right to buy.

Grant Shapps, the Housing Minister said last night:

“You will acquire the right to buy at a discount from housing associations. The present system is far too simple. Councils can only charge more rent if they use the extra cash to build more affordable homes to sell off at undervalue to Home-Owner-Ists.

Even in these tough times this Government is determined to find ways to exploit the hopes and dreams of hard working people who want to become Home-Owner-Ists for political gain. The UK banking system also needs to find fresh blood to tap into, and we're offering them the necks of the 'better off poor'. That's why we'll build in ways to help people move from renting to home ownership when the time is right. This will be a continuation of the failed housing policies of the last forty years.”

David Cameron is determined to push ahead with the plans despite concerns from some Liberal Democrat MPs about the affect they will have. But Tory ministers pointed out that Labour had also fundamentally failed those most in need and created a housing waiting list of five million people, so what they were doing was no worse.

Some local authorities will use their new powers to decide who goes on their council house waiting lists to give priority to those who are low-paid and struggling to get a home, rather than automatically allow the jobless and those on benefits to be housed first. The changes to the way councils allocate social housing are likely to be the most controversial. They will be able to decide who qualifies for social housing in their area - taking away the “unrealistic” requirement to accept applications from anyone.

Landlords will now be able to raise funds to build more social housing for those who need it – on top of the £4.5 billion the Government will invest in building up to 155,000 new affordable homes. But under the Localism Bill, it is highly unlikely that any of these schemes will go ahead.

Fun Online Polls: Wills and Kate; EU-bailouts

With a very good turnout (thanks to everybody who took part), the response to last week's Fun Online Poll Wills and Kate have decided to get married: what do you think? was as follows:

So what? 67%
Who are "Wills and Kate"? 21%
It is a great moment for national celebration! 12%


It seems that we're swimming against the tide on this one, as most of the newspapers devote at least a page every day to the topic, which usually include a brief explanation of who "Wills and Kate" actually are, to wit, a celebrity jobless couple from the South of England.
----------------------------------
The EU 'bailed out' Greece in February of this year, which was supposed to sort out 'financial instability in the Euro-zone' once and for all. It didn't of course, because the banks then go hunting for the next easy target, do a bit of rumour-mongering and short-selling, make a nice profit on the way down and then go running to the EU or the IMF for a bail out.

So next on the list was Ireland/Irish banks (the two are now more or less synonymous), who were successfully cajoled into accepting a bail out at the weekend.

These patterns tend to repeat themselves, I just wonder how good are we at recognising them? So that's the topic for this week's Fun Online Poll: "Which country will the EU 'bail out' next?"

FWIW, my money is on Portugal, as it is easier to bully small countries, even though logic says that Spain are in a bigger mess, relatively, having had a far larger land price bubble. If they try this with Italy, the banks might find that they have bitten off more than they can chew, and there must come a stage where we realise that the European Central Bank emperor is not wearing any clothes.

Vote here or use the widget in the sidebar.

Sunday, 21 November 2010

Xmas chair

Like all dutiful parents with school age kids, Her Indoors and I spent this afternoon knocking out Xmas tat for the kids' schools' 'Xmas Fayres'. I was tasked with decorating a wicker chair. Having established that trying to spray it white or sparkly-silver was a mug's game, I stapled three strips of tinsel round the top, it still looked a bit tacky, so The Lass and I went into the woods to snip off some twigs of holly with the bright red berries, which I then tied round the outside.

Result?If anybody else has done a post about Xmas-related tat they've had to make for their kids' school, please leave a link, and we can all have a good laugh at each other's efforts.

"Alcohol from shops ‘should be taxed more' "

From Friday's Evening Standard:

Lives would be saved if alcohol served in pubs was taxed at a lower level than drinks bought from shops, an expert claims.

Nick Sheron, a liver expert at the University of Southampton, suggested that lowering tax in pubs while increasing duty to make supermarket alcohol more expensive would reduce the damage done by excessive drinking.

Dr Sheron, writing in the British Medical Journal, said: “It's not pubs that are the problem, it's people buying the cheapest alcohol and drinking it at home.”


The linked extract is actually a bit more intelligent than the headline or article suggest, as it talks about 'Varying VAT' (which we can't do of course, as it's the EU who sets the rules).

If we are agreed that it is 'better' for people to drink in pubs than at home, the quickest win is of course to scrap the smoking ban (which would go down like a cup of cold sick with the bansturbators); as a secondary issue, if we want people to drink in pubs rather than at home, the key to this is reducing the price differential between the two. Alcohol duty itself does not discriminate between beer from the supermarket or beer in the pub - what makes the big difference is VAT. As I've said before:
-----------------------------
Beer tax is £16.15 "per hectolitre per cent of alcohol in the beer", i.e. the 'beer tax' on one pint is about 40p. The EU imposed Value Added Tax is 13% of the total selling price (or 15/115 of the total selling price). Remember that 'beer tax' is the same whether it's sold in a supermarket or in a pub, but VAT is a percentage of the total selling price!

So if a pint of beer in a supermarket costs 80 pence, and a pint in a pub costs £2.40 (i.e. three times as much), the total tax on the pint from the supermarket is 50p but the total tax on the pint in the pub is 70p. Ask yourself...

1) What would happen if they went the whole hog and scrapped the beer tax entirely in some vague attempt to help pubs, and both supermarkets and pubs passed on the full saving to the consumer* - then the pint in the supermarket would fall to 40p and the pint in the pub would fall to £2. All of a sudden, a pint in the pub would cost five times as much as a pint from the supermarket that you drink at home. Would this help pubs? Methinks not.

2) What would happen if they went the on the other tack and scrapped VAT but increased beer tax to 55p per pint (in the interests of some sort of fiscal neutrality), and both supermarkets and pubs passed on the full tax changes to the consumer* - then the pint in the supermarket would increase to 95p and the pint in the pub would fall to £2.25. All of a sudden, a pint in the pub would only cost two-and-a-third times as much as in the supermarket. Would this help pubs? Methinks it would.

Ergo, if 'they' really want to help pubs via the tax system (rather than just scrapping the smoking ban), it's not the beer tax they should be looking at, it's the bloody VAT, The Worst Tax of All.

* The price-demand curve for alcohol is inelastic, so this is one of the few cases where the consumer bears the bulk of a sales or turnover tax.

VAT tomfoolery over at John Redwood's

The patron saint of Home-Owner-Ism trotted out the old propaganda yet again:

Some tax rises can be self defeating. VAT is probably the least bad tax option. Hiking the rates of CGT, Income Tax and profits tax might result in less revenue being collected. It is all too easy to put people off enterprise.

You can drive them or their profits and earnings abroad very quickly. Higher rates of Income Tax and CGT are more damaging to tax revenues and the rate of business investment and growth than higher VAT.


Nope. I left a comment as follows (ever so slightly tidied up):

Wrong. VAT is by far and away the most damaging tax.

1. It distorts massively between VAT-able and non VAT-able businesses (which are mainly those related to banking and finance, or land, i.e. food and housing, i.e. those things that got us into this recession).

2. Corp tax is a tax on the return on capital, but if you are making losses you pay nothing, so it does not eat into the capital itself. VAT has to be paid whether a business is profitable or not, so it eats into capital.

3. VAT acts as a barrier to entry/barrier to growth for new and smaller businesses, because the £70,000 threshold means that a business with a turnover of £69,000 has to leap straight to a turnover of about £90,000 before it even catches up. Further, new businesses tend to make losses in the first couple of years, so it benefits incumbents, see point 2.

4. As a simple matter of observation, VAT is largely borne by the producer, not by the consumer. Consumers cannot magic money out of thin air to pay 2.5% more than they were doing before.

5. One sign of competitive (i.e. efficient, i.e. successful) industries is where net profit margins on sales are very low (5% to 10% is about normal, across all businesses). So very profitable businesses earning more than 5% will become less profitable, marginal businesses with profit margins of 5% or less will be in the danger zone; and businesses in the danger zone, say 1% or 2% net profits will go bankrupt.

6. If you grind the figures, the knock on effect of trying to raise an extra £13 billion from VAT will be that corp tax receipts go down, PAYE receipts go down, unemployment and welfare costs go up. It is quite possible that incremental extra tax revenues minus additional welfare payments is so close to zero as to make this a very dangerous experiment indeed.

7. VAT is imposed by the EU, and as a Tory MP, you might be aware that the EU wants all Member States to harmonise VAT at 20% – to pretend that this is to try and reduce the deficit (which is not going down under the Tories, I might add) is a bit feeble.

8. If we are to try and tax ‘consumption’ rather than ‘production’, taxing the output of enterprise, labour and capital is NOT the way to do it. You have to try and identify something that has value, which people are prepared to pay for but which is not actually ‘produced’ in any meaningful way (and certainly not by individuals who can change their behaviour).

9. So how about a tax on the ‘consumption’ of land? This cannot be created, destroyed or taken abroad, so all you’d be doing is replacing privately collected taxes (ground rents) with publicly collected taxes (Land Value Tax) and reducing publicly collected taxes on output, income and profits accordingly.

Saturday, 20 November 2010

If we can't have it then nobody can have it!

Exactly a week ago, CityUnslicker asked "Irish bailout, why now?" and Spanner Monkey suggested:

Ireland was attracting more businesses to relocate to take advantage of the low tax rates, thereby reducing the tax take of other Euro countries.

By performing the G.Brown vs Lloyds trick of leaking market unsettling rumours to precipitate a bailout (which might otherwise have been less severe at a later date) the consequence is the surrender of control of the Irish economic and financial policies to the EU.

=>No more tax haven.


Which would appear to be borne out by this snippet from the FT:

French, German and European officials told the Financial Times that the tax rate had emerged as a major point of contention as negotiators from the European Union and International Monetary Fund arrived in Dublin to discuss a potential bail-out...

“They need lots of money and we note they have a corporation tax rate that is very low,” the [French] official said. “Supply must follow demand.”

“Without an increase in tax intake, the deficit can’t be reined in,” said a German government official, though he added that the size of any corporate tax increase had yet to be discussed. “That depends on [Ireland’s] financing needs, which are still unclear.”


D'you see what they did there? Ireland does indeed have a deficit, €12 - €15 billion a year, from memory, in the medium term they will have to increase tax revenues and/or cut spending (or just stop promising to bail out the bloody banks). But as I explained yesterday, because Ireland is a small country, cutting its corporation tax rate has the effect of increasing its corporation tax revenues by about €1 billion a year (this trick only works for small countries, I'm afraid).

1. Either the French and German officials are incredibly stupid, and don't know this, or they are doing it because they hope that some of the €24 billion profits that were channelled via Ireland (half of which are on paper and half of which are 'real', for sake of argument) will head their way, which is not going to happen. If the paper profits have to go via the EU, the chances are they will go via The Netherlands or Luxembourg. As to the 'real' profits, see 5. below.

2. As Onus Probandy pointed out when we discussed this yesterday, half of that €24 billion is 'real' profits, and he listed a few well known companies who set up their European head quarters and a bit of actual manufacturing in Ireland, such as "Dell, Google, Microsoft, Sun (now Oracle), Oracle, SAP, etc, etc... These are all highly mobile companies, that will have no trouble moving elsewhere when Ireland has a higher corporation tax rate imposed on them by the ECB."

3. We note that those are all US American companies. The US has a high corporation tax rate (about 40%, being a large country) and US tax laws are very strict, in particular as regards offshoring stuff. It would be quite easy for the US government to tweak the law slightly so that any advantage that US companies can gain by relocating to Ireland is wiped out (by taxing CFC profits), but they don't - because we know that US Americans are historically very pro-Irish (and anti-English).

4. So for these US companies (and Ireland) to benefit, it requires the forbearance of both the Irish and the US government - the whole exercise boils down to surprisingly efficient 'Third World Aid' payments from the USA directly to Ireland, and there's no reason to assume that the USA would be as generous with other EU countries.

5. So if Ireland were forced to increase its corporation rate, these companies, with their €12 billion of 'real' profits might well "move elsewhere", but there is no particular reason to assume that these companies would shift their head quarters to another EU country; it is just as likely that they will shut up shop completely and return to the US, or to PR China or heck knows where.

6. And so the French and Germans would gain nothing; the Irish treasury would lose €1 billion a year; and the Irish economy as a whole might lose €12 billion. The only winners will be the US treasury, but I doubt that the gains to the US treasury would even show up in the statistics, as its economy is sixty or seventy times that of Ireland.

Friday, 19 November 2010

Harry Potter and the Deathly Hallows: Part 1

We went to see this film tonight.

If you've read all the books and seen the other films (and read the reviews of the film itself) you'll know pretty much what to expect. it doesn't disappoint, it doesn't delight, and the ending is a classic - it just stops half way through a scene and that is that.

Highlight: the fact that the actress playing Hermione Grainger is about six inches taller than the actor playing Harry Potter in real life, but he is taller in the books (or at least we expect him to be). So there is a load of Humphrey/Lauren clever camera angle stuff going on so that you hardly notice; unless you look out for it, in which case you have to admit, it's very cleverly done.

Except for the graveyard scene* where Hermione is supposed to lay her head supportively on Harry's shoulder but she forgets to bend her knees first, so it takes her about a minute to get her head into a seemingly natural position.

* Why on earth Harry's parents are buried in a Church graveyard, despite the fact that the wizards and witches in the stories are quite patently not Christians, is not explained.

Cliff erosion/land value related fun

The Daily Mail article has before-after photos showing just how quickly cliffs can be eroded.

Interesting is this bit:

Glancing at the latest [sic] photograph it could be easily concluded that the two properties, a chalet and mobile home, have fallen victim to erosion and plunged into the sea. But the homes off Easton Lane have been deliberately destroyed as part of a landmark agreement to help homeowners cope with losing properties at the hands of Mother Nature.

The homes have been demolished after Paul England and several other villagers secured a lands right promise from Waveney District Council. Mr England was acting on behalf of his two children, Charles and Beth, who owned the two homes.

Under the pioneering deal the England family can move to safe land nearby and still keep residential land-use rights so he can build similar homes under planning law. The agreement, believed to be the first of its kind in the country, was set up as it was feared Mr England would lose all his rights if his land vanished due to erosion over the winter.

As a result the family could knock down their homes as they knew when they purchased new land they could build similar ones again without any planning wrangles.


Aha... before I read that bit, I was going to say that under LVT, homes so close to the cliff edge would hardly pay any, to compensate them for the imminent loss of the bricks'n'mortar value (I doubt whether they can get insurance for that!), but if it is the case that you can pick up the planning permission, which makes up half the value of the house, and take it with you, then there's no reason to give owners of cliff-edge land any discounts, is there?

This bit sticks in the craw: "... it was feared that Mr England would lose all his rights if his land vanished..." We can't have landowners ever losing a penny, can we now?

Murky is why Mr England put the homes in his children's names. They can't be minors, as minors can't be the registered owners of land in England; if they are adults, then why didn't they appeal on their own behalf?

I'm sure that Ross can put a "Putin is gay" spin on this story...

... see second photo here.

I'm not sure if it's a boy dog or a girl dog, but hey, I'm sure our Putin watcher will find out; if it's a boy dog, he's gay; if it's a girl dog, he's using her as a 'beard', or something.

David Cameron has lucid moment: shock

From The Guardian, spotted by Drewster at HPC:

Responding to Margaret Hodge's wailing about the proposed cap on Housing Benefit...

Cameron replied: "Find me a street in your constituency and let's go down it together and let's ask people earning £20,000, £25,000, £30,000, whether they are happy to be paying towards people whose rent bills are £30,000, £40,000, £50,000 living in central London.

"I think that is more likely, frankly, to lead to social unrest when people find out how much money they're paying in taxes for people to live in houses they couldn't dream of living in themselves." Cameron said housing benefit had risen by 50% in the last five years. "Everyone accepts it's out of control and you've got to take some steps to deal with it," he said.

"We have been chasing ourselves round in a circuit of increased housing benefit, increased costs and all the while not building very many houses. We have had big capital allocations into housing for the last decade, but it has pushed up the price of land – anyone who owns a bit of land outside one of the towns we represent has done very well, but we seem not have built many houses."


Awesome! He actually remembered something from the 'economics' bit of his university degree! The Home-Owner-Ist élite will have to have a quiet-but-very-stern word with him about this.

Full version on Hansard

Shadow Banking Fun

I've been busy until midnight for the past few days doing bits and pieces for my 'second job', so I am slightly behind with posting. I am busily drafting posts, in my mind and on bits of paper, on the vaguely related topics of:

1. The Laffer Curve (and why even a flat tax on incomes is still heading slightly in the wrong direction).

2. Ireland's corporation tax revenues (yes, they collect more in corporation tax than they would with a rate of 25% - 30%, but that is not really a 'Laffer' effect, they are merely collecting corporation tax that would otherwise be paid in other countries).

3. The fact that people on low incomes with some savings appear to be able to earn 20% interest per annum on their savings.

4. A final pop at the DWP's Universal Credit document, the bit about maternity pay (bottom of page 23, pdf).

5. About three more 'Killer arguments against LVT, not'.

5. The Debt Generation, which is like a left-wing book-end to David Craig's Squandered, both of them lay out the facts and talk a lot of sense so the truth, as ever, lies somewhere in the middle (or where the two overlap).

5. Tim Worstall's wildly overstated estimate that the total subsidy to social housing (i.e. by adding in the value of the exemption from location rents) is in the range of £40 - £60 billion. If that were true, then the potential receipts from Land Value Tax - even without cutting other taxes - would be in the order of £300 billion.

6. An article in this morning's City AM, in which the OBR reckon that increasing VAT from 17.5% to 20% will reduce GDP by 0.3%.

7. A tasty bit of Home-Owner-Ist subsidies covered by the BBC: "Lord Freud, one of the ministers for welfare reform... argues that the government was being too generous He now wants to persuade the banks to give people [receiving Support for Mortgage Interest] a cheaper loan rate. "After all, they're being paid by an organisation with a triple-A rating," he says."
----------------------------------
But here's a quick win:

The world's financial regulatory bodies will shift their attention to the shadow banking market in the near future, the chairman of the Financial Services Authority (FSA) Lord Turner has said...

"Although a lot of the problems came from the shadow banking system, most of our response so far has been focused on the banking institutions," he told the news provider.

He said that regulators have got to "really think" what processes could be put in place to keep track of the shadow banking market "so that we don't, in five or ten years time, see a new shadow banking system emerging with new risks".


Pray tell, at which demonic windmills is he tilting? Ah...

In an interview with the Financial Times, [Lord Turner] said that a failure to scrutinise shadow banks, which include money market funds and non-bank investment vehicles, had played a significant role in the run-up to the financial crisis.

So they are not 'shadow banks' at all; they do not take deposits, give out mortgages or loans or run ATMs, they are not doorstep lenders or pawnbrokers, or pay-day loan shops; they are quite simply "money market funds and non-bank investment vehicles".

If you are the Bank of England and are sent monthly returns by all commercial banks operating in the UK - and even if you only work from publicly available accounts, you already know 99% of what you need to know, because the amounts they have lent to banks show up under 'other liabilities' or 'bonds' rather than under 'deposits'.

So these people are in fact the mysterious bondholders which David Malone spent hours tracking down. And these are exactly the same people that our governments are busily bailing out, because strictly speaking they weren't bailing out banks, banks are just middlemen and have little money of their own, they were in fact bailing out bond holders, money market funds and 'non bank investment vehicles'.

So if they really want to find out who these mysterious shadowy people are, our governments could just stop hurling hundreds of billions of pounds at the banks and sit back and wait for them to contact HM Treasury or the FSA asking why the hell has their lovely flow of taxpayers' money stopped rolling in.

Simples!

Thursday, 18 November 2010

Barriers to entry

Here's a nice attempt by the estate agents:

A licensing scheme aimed at protecting home buyers and sellers from unqualified estate agents has been launched by an industry body... The new scheme, which would be available to NAEA members, would offer a licence to members who:

- Hold a recognised qualification
- Are covered by professional indemnity insurance
- Can provide accountant's reports when client money is held
- Take 12 hours of training on the latest developments in the sector each year...

However, there appear to be few exact targets set on how the scheme would be judged as a success or not, apart from increased membership of the NAEA and signs of greater consumer awareness of the licensing scheme...

The NAEA is still calling on the government to legislate and lay down formal regulation, as in the case of solicitors and other professionals in the house-buying industry... In February, the Office of Fair Trading (OFT) gave a largely clean bill of health to estate agents after a year-long study into standards in the industry.

-------------------------------------------------
Being the world's most stultifyingly boring man, I actually ran a Fun Online Poll on this when it was last mooted: "Who will benefit more from the 'regulation' of estate agents?".

Your responses were:

Established estate agents - 96%
Their customers - 4%


'Nuff said.

"Pickles promises people's planning power"

What a splendid bit of alliteration by the BBC! The article continues...

Communities in England will get the power to decide where no shops, offices and homes are to be built, the government will announce.

Under the plans, local referendums will be held, which could force councils to adopt "neighbourhood plans" to block all new developments. The government will also offer financial incentives to encourage the "right kind of development", primarily "none".

Slow lane

Communities Secretary Eric Pickles said this would mean "more people-planning for no new developments and less politician-planning for no new developments... For far too long local people have had too little say in turning down planning applications, and the planning system imposed bureaucratic zero targets by distant officials in Whitehall and the town hall. We need to change things... so there is more direct democracy and less bureaucracy in the system. These reforms will become the building blocks of the Big Society. Except there won't be any building - just blocks, mainly."

Hard shoulder

The Localism Bill, to be unveiled later, says residents can set out an overall plan for no new development in their area, which will then be voted on in a referendum. This will allow voters to decide where no building takes place and that all green spaces should be protected.

Councils will then have to adopt the neighbourhood plans, which would be put on a "fast track" to planning refusal, meaning urgent projects can be turned down immediately. The government is asking for 12 local authorities to volunteer to take part in trials.

Eighty mile tailback

Greg Clark, minister for planning and decentralisation, added: "We want local people to be able to impose their desire for farmland around their home town to remain farmland for all eternity. These reforms offer a scope for self-determination which previously local politicians were keen to impose on their voters' behalf. Localism in refusing planning will create the freedom and the incentives for those places that don't want to grow, not to do so, and for others to suffer the consequences. It's a reason to say 'no.'"

Wednesday, 17 November 2010

Wills & Kate

Unlikely Land Value Tax supporters - The London Evening Standard

From today's editorial on squatters:

At the same time, however, the Government should bear in mind that there are many properties that are left needlessly empty at a time when pressure on the existing housing stock has never been greater. Taking measures to discourage owners from leaving homes unoccupied, at the same time as tightening measures against squatters, would strike the right balance.

Land Value Tax sorts out both problems; if we replaced all taxes with LVT, then very few people would be able to afford to leave buildings vacant; and if they can afford that luxury good luck to them, they are compensating society in full.

It is then only fair for the government to return the favour by booting out squatters within the hour; failing which, the freeholder will be exempt from paying the LVT on that site until they are; the squatters will themselves be liable to pay the LVT, accruing daily with interest (plus renovations costs where appropriate).

Iceland shows how it's done

Ireland is showing us exactly how not to do it. It's instructive to compare that with Iceland (the country, not the supermarket), who were/are in a similar mess following the bursting of the credit bubble. They made the best of a bad job and:

a) Resisted the siren calls (i.e. blunt threats) of the EU.

b) Told the bond holders in Icelandic banks to get stuffed. Very briefly, they ranked ordinary depositors ahead of bond holders, so the little people got their money back and bond holders got very little. That includes a lot of UK local councils, so that's our money we're losing, but hey; we can take all the stupid local council finance guys to court for misuse of public funds, but short of invading, there's not much we can do about the con artists in Iceland; that's up to the Icelandic government to sort out.

The article also mentions that "creditors took control of Straumur, the fourth-largest Icelandic bank", which is another way of describing a debt-for-equity swap, and is the normal way of dealing with these situations.

Follow The Money

This whole 'bail out' thing is getting mighty confusing, even for an accountant like me; Irish banks (who made appalling losses in the land price bubble, the main beneficiaries of which were the Irish Home-Owner-Ist élite, i.e. property developers and politicians) were bailed out by the Irish government and the European Central Bank (part of the EU); current thinking is that the Irish government will in turn be bailed out by the EU itself and the International Monetary Fund.

The EU is using two funds, a €60 billion one (the 'EU emergency fund') to which the UK has to contribute 13% and a €440 billion one (the 'EFSF') to which only Euro-zone countries have to contribute. The UK also has to chip in 4% to the IMF (from memory).

But as we know, banks, governments, the EU, the ECB, the IMF etc have no money of their own, they are just middlemen, who channel money from bondholders, taxpayers or depositors to somebody else. We know that bond holders are not being asked to take too much of the losses on the chin, neither are depositors (but most depositors are also taxpayers, so that cancels out), so ultimately, it's taxpayers - whether Irish, British, or from the wealthier EU countries (France, Germany etc) who are bailing out the bondholders.

But who are these mysterious 'bond holders'?

David Malone must have spent hours or even days trawling through all the accounts and starting with the Anglo-Irish Bank has followed the money upstream, and concludes, in this splendid though rather lengthy post, that rather unsurprisingly:

The bond holders of Anglo Irish are a very good guide to the identity of the bond holders of ALL OUR BANKS. The bond holders being protected, in every nation, on the advice of the banks and financial class, are THE BANKS AND THE WEALTHIEST OF THE FINANCIAL CLASS.

THEY are screwing YOU!

For anyone interested in a very different take on the financial crisis, the failure of the policy of bailing out the banks and what it means for us, the book, The DEBT GENERATION is now finished and shipping.


David Malone appears to be a bit of a lefty, but that still seems a fair summary to me - this is what Home-Owner-Ism is ultimately all about!* Further, the figures for the UK are basically the numbers for Ireland but multiplied by ten i.e. Irish banks needed €80 billion in bail-outs or guarantees; UK banks needed £800 billion in bail-outs or guarantees etc etc.

* Yer average homeowner is not a beneficiary of Home-Owner-Ism at all; these are the foot soldiers, many of whom think that they become richer when house prices rise; or when they prevent the construction of new housing or new infrastructure; or even when Council Tax is 'frozen', but these gains are largely illusory.

Tuesday, 16 November 2010

"Bull jumps into stand at Canadian rodeo"

Forwarded by Pavlov's Cat:
Full article here.

Fun Online Polls: Votes for prisoners, Wills and Kate

Thanks to everybody who took part in last week's Fun Online Poll (a high turnout with 149 votes, but it ran for two days longer than normal). Results as follows:

What do you think of 'votes for prisoners'?

All the more reason to leave the EU (even though this was an ECHR decision) - 41%

I am opposed - 37%
I am not bothered either way - 15%
Other, please specify - 7%


So there we have it. I personally am not bothered either way, but if the issue helps stoke anti-EU sentiment, even if the case was decided by the European Court of Human Rights, which is a quite separate institution, then it's all good.

As far as I can see, as long as we have first-past-the-post, then most people's votes are effectively worthless anyway, so whether prisoners are allowed to cast a worthless vote or not* is neither here nor. Indeed, I lived in Germany for nine years and being a foreigner, wasn't allowed to vote at all, big deal.

* As Leg-Iron points out, it might get a bit icky if all inmates were allowed to vote in the local elections wherever the prison happened to be.
---------------------------------
On a lighter note, apparently a celebrity jobless couple from the South of England, referred to as Wills and Kate by the media have decided to get married at some unspecified point in the future. Our current Prime Minister, possibly the most out-of-touch politician in British history, responded thusly:

"As well as this being a great moment for national celebration, I think we also have to remember that this is two young people who love each other who have made this announcement, who are looking forward to their wedding, and we must give them plenty of space to think about the future and what they are about to do."

How about giving a moment's thought to all the young couples who have jobs and are thinking of 'settling down', and addressing the issue of why they can't afford to buy a house, let alone for Mum to give up work to have kids (unless they are out of work, in which case they would appear to have our Prime Minister's blessing), eh?

So that's this week's (belated) Fun Online Poll: "Wills and Kate have decided to get married: what do you think?"

Vote here or use the widget in the sidebar.

More Passive Smoking Fun

From the BBC:

People who are exposed to the second-hand smoke from others' cigarettes are at increased risk of hearing loss, experts believe. Doctors already know that people who smoke can damage their hearing.

The latest study in the journal Tobacco Control, involving more than 3,000 US adults, suggests the same is true of passive smoking. Experts believe tobacco smoke may disrupt blood flow in the small vessels of the ear. This could starve the organ of oxygen and lead to a build up of toxic waste, causing damage.


But the 'nasty cherry on top of the nasty cake' (TM Frank Davis) is right at the end:

"Hearing loss can often be very frustrating and lead to social isolation, if not quickly addressed."

Uh, the smoking ban and associated pub closures or being forced to stand outside in the cold is 'frustrating' and leads to 'social isolation', fact.

Channel 4 Dispatches: Riding Europe's Gravy Train

Last night's programme was a fair insight into the waste and self-serving corruption that goes on in the EU, none of this was particularly new to me, but it's good to see it broadcast every now and then.

Of mild interest was the section on farming subsidies. From their own summary:

The programme also looks at the system of agricultural payments, which are supposed to help those British farmers struggling to earn a livelihood and continue producing food. Dispatches shows how millions of pounds in grants have ended up going to some of the best known - and richest - landowners in the country.

Well yes, we knew that as well, and we also knew that subsidies paid to tenant farmers end up pushing up the rents they pay; if the tenant farmer spends the money on improvements which then legally belong to the landowner, being part of the land, then clearly the rental value of the farm increases, of which the programme gave a few real life examples.

(Even if tenant takes the money as a straight subsidy, this either pushes up the rents and/or enables supermarkets, who are effectively large urban landowners with a retail division, to bid down the price they pay for agricultural produce, to the extent that a lot of farmers sell milk at a loss, comes to the same thing.)

Apparently some landlords (they singled out The National Trust, although I am sure they all do it), who actually write into the tenancy agreement that the rent is £x per acre, plus 50% of any farm subsidy payments.

But what was surprising is that anybody saw this as surprising, if you see what I mean. If all taxes come out of rent, then all subsidies accrue to rent as well.

The Wit & Wisdom of Persimmon's Chief Executive

From The Telegraph:

Mike Farley, chief executive of Persimmon, the UK's second largest housebuilder, said home buyers were still finding it difficult to secure mortgages, particularly on new homes. "It makes absolutely no sense that some lenders won't offer as high a mortgage on a new home as they will on a second hand house. We need more competition to change this," said Mr Farley.

Well duh.

It makes absolutely perfect sense, partly for the reasons that Drewster explains at comment 2 at HPC; partly because there appears to be a "new house premium" of 5% or 10%, which clearly disappears after a couple of years*, and partly because of the risk that there is subsidence or something which is far more predictable/manageable with older homes.

To use a crude analogy, if somebody buys a second hand car for £5,000, it will lose value at £500 a year, but if they buy a new version of the same model for £15,000, it will lose about £5,000 in value in the first year or two. So if you are in car finance and expect the loan to be repaid over three years, you'd be comfortable lending the the buyer of a second hand car 70% of its current value, but you'd only lend the buyer of a new car 60% of its current value; and if you did offer a 90% new car loan, you'd have to charge a higher interest rate.

And 'more competition' will not have the slightest effect on the difference between new and existing houses.

* FormerTory in the comments reminds us about 'incentives', so what I should have written is: "there appears to be a "new house premium" of 5% or 10%, which clearly disappears after a couple of years; and 'incentives' can inflate the official selling price by another 5% or 10%, which is purely fictitious value that never existed."