... in Northern Ireland. Spotter's badge to Paul Lockett for this one.
As background, as we all well know by now, in Northern Ireland, they never went through the rigmarole of replacing Domestic Rates with the Community Charge ('Poll Tax') and then replacing that with Council Tax like in the rest of the UK. Instead they revalued all residential land and buildings as at 1 January 2005 and replaced the old Domestic Rates with a fiscally neutral 'Progressive Property Tax' of about 0.7% of the capital value as at that date.
So this is pretty similar to what I have been suggesting all along. Another thing which I have been suggesting all along is to alleviate things for pensioners (who are the biggest stumbling block with any kind of land tax reforms) by allowing them to defer the tax to be rolled up and repaid on death or a subsequent sale.
Lo and behold, from the BBC (3/3/10):
Pensioners in Northern Ireland are to be able to defer rate bills until they die or sell their properties.
New legislation, outlined by Finance Minister Sammy Wilson, will allow those who are struggling to meet mounting bills in retirement will benefit most. A reduced rate of interest will be charged. Assembly members backed the law, which comes into effect in April.
"Deferment is not a new relief or allowance and importantly does not represent free money," Mr Wilson said, "It will however allow pensioners to roll up their rate bills at a concessionary rate of interest, generally until their death or the sale of the property."
Of course, you might wonder why capital values for NI Domestic Rates purposes are capped at £400,000, but you have to remember that the Inheritance Tax threshold is currently £325,000 (the tax on the excess is 40%, but that is only paid once a lifetime, i.e. on death) and it would be a tad unfair to make the 'top slice' of the value of more expensive homes liable to both Domestic Rates and to Inheritance Tax.
But wouldn't it be better and simpler to scrap Inheritance Tax and simultaneously abandon the £400,000 cap, which would mean increasing the rate to about 0.8% to make up lost IHT receipts? To soften the blow of an 0.1% increase for people in cheaper houses, you could also scrap the TV licence fee and increase the rate to 0.9%, and having gone that far, and assuming that part of the purpose of such a tax is to encourage 'right sizing', why clobber people who do the decent thing with Stamp Duty Land Tax? Again, you could scrap that and make up the lost receipts by hiking the rate to a nice, round 1%, chucking in Capital Gains Tax and Insurance Premium Tax for good measure.
One good, simple tax to replace six complicated bad ones with very few winners or losers. For sure, the purists say you should tax land values not buildings, but because a tax is always borne by the least elastic factor, a tax on buildings always acts like a tax on the land element rather than the building element, and in any event, any residual tax that falls on the building can be compensated for by child benefit, welfare and pension payments, a generous personal allowance for income tax etc.
Monday, 31 January 2011
... in Northern Ireland. Spotter's badge to Paul Lockett for this one.
After the obligatory carol singing and bilateral lull in the fighting at Xmas, the cows have resumed hostilities. This month's themes seem to be 'squashing' and 'escaping on the way to the slaughterhouse':
Bavaria 4 January 2011: Nach Angaben der Polizei in Kempten half der Mann in den Mittagsstunden seinem Bruder, der den Hof betreibt, Gatter im Laufstall der Kühe zu versetzen.
Als der Landwirt den Stall für kurze Zeit verließ, hörte er plötzlich seinen Bruder schreien. Der 46-Jährige war von einer Kuh mit dem Oberkörper gegen ein Gitter gedrückt worden. Dabei erlitt er so schwere Verletzungen, dass er mit einem Hubschrauber in ein Krankenhaus geflogen werden musste.
According to police reports, a man was helping his brother rearranging his cow stall. When the farmer briefly left the stall he heard his brother screaming. A cow had squashed the 46 year old against the railings. He was very badly injured and flown to hospital.
According to this splendid compendium of animal attacks from around the world, the man was nearly killed.
Germany 5 January 2011: Ein Fleischrind wollte offenbar einmal ganz allein hinaus in die weite Welt galoppieren und sprang beherzt über die Hofmauer seines Besitzers... Weiter ging es durch viele Gärten. Dabei konnten Zäune, Pflanzen und Gartenmöbel das mutige Rindvieh nicht stoppen, sondern wurden beiseite gefegt. Im Wohnzimmer eines touchierten Hauses ging ein Fenster zu Bruch...
Einem zusätzlich zur Hilfe gerufenen Landwirt gelang es, das Fleischrind kurzfristig mit einem Blasrohr zu betäuben. Nachdem der Ausreißer wieder etwas munterer war, konnte er unversehrt zurück in seinen Stall gebracht werden. Der entstandene Schaden von mehreren hundert Euro wird vom Besitzer übernommen.
Cow jumped over the farm wall, smashed up a few gardens and broke a window before being captured. The owner spent several hundred Euros in compensation for damage.
Switzerland 8 January 2011: Um 16.30 Uhr am Freitagnachmittag (07.01.2011) begab sich ein 58-jähriger Landwirt auf seinem Bauernhof in Siblingen – zwecks Schlachtselektion - in ein Freilaufgehege von mehreren Munis (jungen Stieren).
In der Folge geriet der Mann zwischen zwei Munis und wurde von diesen an die Stallwand gedrückt. Dabei zog sich der Schweizer Verletzungen zu, konnte sich aber noch aus eigener Kraft aus dem Freilaufgehege befreien. Die Rettungskräfte wurden durch Nachbarn aufgeboten.
Der verletzte Landwirt mußte vorort von der Ambulanz behandelt werden und wurde dann mit einem Rega-Helikopter ins Spital geflogen.
Farmer was selecting young bulls for slaughter. Two bulls ganged up on him and squashed him against the wall. The farmer managed to break free. He was given first aid by the ambulance crew and then taken to hospital by helicopter.
Carinthia 12 January 2011: Ein 300 Kilo schwerer Stier hat am Mittwochvormittag auf der Schnellstraße (S37) bei Sankt Veit an der Glan "gewütet". Das bullige Tier war in Sankt Donat beim Abladen von einem Anhänger geflüchtet. Es hatte seinem Besitzer (42) einen Tritt versetzt und war über einen Zaun auf die Schnellstraße gesprungen... Der Bauer musste mit einem doppelten Rippenbruch ins Sankt Veiter Krankenhaus gebracht werden.
A 300-kg bull was captured after breaking out of a trailer and running amok on the main road. The bull escaped by kicking his 42 year old owner and jumping over a fence. The owner suffered two broken ribs and was taken to hospital.
Austria some time in the last month: In Krottendorf im Bezirk Weiz ist Donnerstag früh ein 300 Kilogramm schwerer entlaufener Ochse von einem Polizisten erschossen worden. Das Jungtier war am Weg zum Schlachthof auf der B 72 vom Anhänger "geflüchtet" und zu einer Gefahr für den Verkehr geworden.
Gegen 08.40 Uhr wollte ein 29-jähriger Mann aus dem Bezirk Graz-Umgebung seinen zehn Monate alten Ochsen von Haselbach zum Schlachten nach Weiz bringen. Das Tier dürfte die Querverstrebung im Anhänger verbogen haben und über die Seitentür ins Freie gelangt sein. Es lief auf eine Wiese und ließ sich nicht mehr einfangen. Der 29-Jährige verständigte die Polizei.
A 300-kg ox escaped from a trailer and was endangering traffic. The 29-year old owner was taking the ten month old animal to slaughter when it managed to free itself and jump over the side door. The owner contacted the police [who ended up shooting it dead].
And then: Ein entlaufener Jungstier hat Donnerstag früh auf der B 115 in Ternberg (Oberösterreich) einen schweren Verkehrsunfall verursacht. Eine Person wurde leicht verletzt, an zwei Autos entstand Totalschaden. Das Tier war einem Landwirt entkommen, der von einem anderen Stier schwer verletzt wurde.
Kurz vor 5.30 Uhr wollte eine 49-jährige Autofahrerin in Ternberg einen anderen Wagen überholen. Als sie sich bereits auf gleicher Höhe befand, stand plötzlich der Stier auf der Fahrbahn. Die Lenkerin konnte gerade noch bremsen. Ein nachkommender Wagen aus Admont (Bezirk Liezen) krachte aber gegen ihr Auto - dabei wurde die Beifahrerin verletzt - und erfasste auch das Tier.
Nachdem er mehrmals quer über die Straße gelaufen war, konnte der sechs Monate alte und rund 400 Kilo schwere Stier schließlich in einem Wald "gestellt" werden. Einfangen ließ er sich aber nicht, es half nur mehr ein Schuss aus dem Narkosegewehr.
An escaped bull caused a serious traffic accident. One person was injured and two cars were write-offs. The animal escaped from a farmer who had been injured by another animal. Later on, a woman driver was trying to overtake a car when she came face to face with the animal. She managed to brake in time but the car behind her crashed into her, injuring the passenger and hitting the animal.
After the 400-kg bull had run across the road a few times, it hid in a forest. It could not be captured, so was shot with a tranquiliser dart.
Austria 16 January 2011: Mit schweren Verletzungen hat eine Landwirtin (48) die Attacke einer Kuh auf ihrem Hof in Enzenkirchen (Bez. Schärding) überlebt. Samstagabend war die Frau damit beschäftigt gewesen, die Tiere im Laufstall zu melken.
Dabei wurde sie plötzlich von einer als gutmütig bekannten Kuh mit den Hörner angegriffen und gegen die Stalleinrichtung gedrückt. Die Bäuerin wurde im Bereich des Oberkörpers und der Arme verletzt und ins LKH Schärding eingeliefert.
A farmer's wife (aged 48) was milking her cows when a cow, hitherto considered docile suddenly attacked her with her horns and squashed against the wall. The woman suffered injuries to the torso and arms and was taken to hospital.
Bogota 20 January 2011. Sure, this one isn't Central European at all, but there's a splendid video of a bull attacking a drunken spectator.
Salzburg 28 January 2011: Gerade noch einmal vom Schlachthof davongekommen ist eine Kuh am Freitag. Das Tier hatte beim Verladen in Bergheim den Transporteur niedergestoßen und das Weite gesucht.
Die Kuh rannte auf die Lamprechtshausener Bundesstraße. Ein Team von Gut Aiderbichl versuchte, sie einzufangen. Mit einem Narkosepfeil wurde die Kuh schließlich betäubt. Sie legte sich anschließend auf die B156. Die Flucht hat sich letztendlich gelohnt. Das Tier darf nun auf Gut Aiderbichl weiter grasen.
A cow had a lucky escape on Friday. It knocked the farmer down when being loaded and made a run for it. The cow was shot with a tranquiliser dart on the main road. Her efforts were worth while as she is now back on the pasture.
On a high turnout (thanks to everybody who took part), last week's Fun Online Poll results were as follows:
Is the Bank of England owned and controlled by the UK Government?
No - 51%
Yes - 42%
Other, please specify - 7%
It's a conspiracy, maaaan! Some of the comments were things like "It's run with startling efficiency by and for a strata of self-serving, cretinous, ####wits", and I agree that the BoE is run largely for the benefit of the banks; but let's not forget that the UK government itself is in thrall to the bankers, which is why UK politicians are desperate to pursue Home-Owner-Ist policies, i.e. keeping house prices as high as possible, which enables banks to lend three times as much money on the same tired old houses, and thus make three times as much profit.
But, for the benefit of the nay-sayers, the Bank Of England is in fact part and parcel of the UK government (if you look at the legal position and the fact that the BoE dutifully pays any profits it makes to HM Treasury and so on); they are one and the same thing - the fact that the whole system is geared up to pandering to the Home-Owner-Ist alliance and not the interests of the wider population suggests to me that one is in control of the other.
And it's not some 'shadowy élite' we are talking about: the Home-Owner-Ist élite do this quite openly - paying themselves billions of pounds a year in bonuses without shame; MPs gaily flipping their 'second homes' for a nice tax-free profits; ex-Prime Ministers merrily accepting £500,000 a year jobs with merchant banks; whole countries (like Ireland) being held to ransom in order to repay wealthy international bond holders etc etc. We know exactly who they are.
Just for a bit of light relief, this week's Fun Online Poll is "Which is your favourite supermarket?"
Vote here or use the widget in the sidebar. You can vote for more than one if you want. If you wondering why I chose those ten (and not Lidl, Netto, Budgens) is because I chose the top ten supermarkets by market share according to this source.
Sunday, 30 January 2011
Bruce trotted out the old mantra here:
This rather assumes all that equity in houses is down to house price rises... But actually some equity is the original deposit and some is what's been paid back in real cash. In times such as these of low/no house price inflation, most or all the equity is made up of the above.
That statement is simply not true, or at best it relates to the exception rather than the rule.
To save adjusting for inflation, I downloaded the inflation adjusted average house prices since 1975 from the Nationwide. I assumed an initial deposit of 20% of the house price and a repayment mortgage over 25 years with an average interest rate of 6% to give us the cash expense side of things.
But those mortgage repayments serve two purposes: they pay off the loan and they provide you with somewhere to live. The average rental income of an average UK house is (say) £8,000 a year (being the average from the RPPI less £3,000 annual 'running costs', i.e. things you wouldn't have to pay if you were a tenant), so as I included total mortgage repayments (including interest) as an expense, I deducted the value of the rental income/the rent you saved by buying not owning.
Thus it appears that there are very few people for whom it is true that "housing equity = deposit + total mortgage payments". In fact, if you bought before the year 2000, the net cash cost of buying a house has been less than zero so far - you'd have been better off buying than renting even if house prices now fell to £nil, so having a lot of 'equity'* is just lots and lots of icing on the cake.
People who bought since 2003 are suffering a loss (they would have been better off renting and saving up the difference between mortgage repayments and rents). Click to enlarge:* I use the term loosely - this generation's 'equity' is merely the next generation's extra debt burden, it's not real wealth any more than the value of a slave is 'wealth'.
From the BBC:
Mr Balls' comments came during an interview on The Andrew Marr Show, as he said Chancellor George Osborne was in denial on the need to switch from the economic policy of "crushing spending".
The major parties have clearly decided to co-ordinate their strategies: the Tories portray themselves as the party which wants to cut government expenditure and Labour portray themselves as the party which wants to increase it. So just for completeness, let us remind ourselves of the severity of those Tory 'cuts', shall we? Here's a handy chart from page 17 of the 2010 Spending Reveiew (click to enlarge):And for the avoidance of doubt here's what the current government says in paragraph 1.15:
Even after these spending cuts, total public spending (Total Managed Expenditure) in 2014-15 will be higher in real terms than in 2008-09. At 41 per cent of GDP, this will be around the same level of public spending as in 2006-07. Spending on public services in 2014-15 will be higher than 2006-07 levels in real terms.
Hat tip Autonomous Mind, EU Referendum and no doubt dozens of others.
Saturday, 29 January 2011
From the BBC:
The government has pledged it will act if commercial operators rush to exploit a subsidy aimed at encouraging homeowners to generate their own solar electricity.Setting aside the fact that solar is a gigantic waste of money right now in the UK, what is the problem with commercial operators running all the subsidised solar production, rather than households? If the purpose of the scheme is to get solar energy then whether it's done by Sid and Doris Bonkers or Evil Capitalists Inc makes little difference, because with a limited budget and defined subsidies, you're going to get the same amount of solar energy.
The feed-in tariff scheme was launched last April.
It promised a typical household earnings of £800 a year and savings on their bills of £120.
Energy Minister Greg Barker said he was worried industrial scale projects could eat into the scheme's budget.
What occurs to me is that it's simply a way (along with the dozens of ways that Mark has pointed out) of the government doing absolutely anything possible to prop up the housing market. Because the effect of offering people 9% on sticking some solar on their roof is that they spend £10K more on their house rather than £10K into a company building something that makes life even better.
Today I have been protesting about the 'cuts'.
I went to work in my private wealth creating and tax paying business - in support of the 'cuts'.
Posted by Lola at 20:17
The eternal fall back of the Home-Owner-Ists when opposing the idea that we tax incomes less (or not at all) and tax land values instead, is 'The Poor Widow Bogey', which had its most recent outing e.g. here:
jaffa said... You all seem to forget the old 85+ pensioners who live in a house they bought and paid for 40 years ago out of their earnings. They have no income so are unable to get a mortgage of any sort, they have no cash all spent/inflated away. So where do they get the dosh from to pay this bill that lands on their mat..?
If you apply common sense to this, as I did at length here, you'll know it's not really an issue.
To cut a long story, assuming a given required total amount of tax revenue (a large chunk of which is used for paying old age pensions and NHS costs for the elderly, let's not forget), it makes little difference whether we keep it simple and collect LVT of about 6.5% of the total current market value of all UK land and buildings and make pensioners pay as well (allowing them to roll up and defer the tax if they so wish), or whether we exempt pensioners main residences completely and apply a rate of 8% to everybody else.*
We can think up any number of transitional or relieving provisions, it's just a question of working out which one has the least bad unintended consequences. I personally am not too fussed what we do, this is politics not economics.
So for future reference, I have added a new widget to my side bar called The Poor Widow Bogey, which links back to the earlier detailed post and to which I will refer people in future to save me explaining this again and again and again and again. And again.
* People who are hoping to inherit a large house might take the superficial view and say they prefer the latter solution (and people who aren't will prefer the former) but actually that's not necessarily the cleverest thing to do; assuming they intend to sell the house as soon as they get their hands on it:
Imagine you are in line to inherit a large house in the next few years - although there'd be no LVT in the interim, would you rather inherit something with an annual LVT bill of £16,000 (8% x £200,000) or with an annual LVT bill of £13,000 (£200,000 x 6.5%)? The selling price of the former will be (say) £60,000 less than the latter (assuming the annual difference of £3,000 is capitalised at 5%), so that's a one-off cost of £60,000.
Add to this, the fact that the NPV of the LVT payments on the houses that you and your fellow heirs are living in (let's say three heirs, who pay an extra £2,000 a year each if LVT were 8% and not 6.5%), that's an additional capitalised cost of £120,000, so the total cost is £180,000. We could add on further costs for your own children etc, but let's skip that step.
We compare that £180,000 extra one-off cost with how much the accrued LVT would be, assuming £13,000 a year, i.e. if you expect the elderly relative to live another 14 years or more, you prefer the total exemption method (whereby pensioners pay £nil and everybody else pays 8%), and if you expect the elderly relative to die before then, you actually prefer the 'everybody pays 6.5%' method.
From the BBC:
People looking for a new house are being told they could save thousands of pounds by buying one that is made in a factory. A new report says prefabricated homes are very different to those of 60 years ago. They last longer, buyers can get a mortgage on them and they are 10% cheaper to buy, the report says...
According to the Royal Institution of Chartered Surveyors (Rics), such units can cost far less than conventional houses. Chris Goodier [of Loughborough University] has completed a report about the market. In a report out this week, it said that a basic home unit could now be purchased for as little as £30,000, plus the land.
The £30,000 figures is probably accurate. As we well know, the actual cost of building a three-bed semi (bricks and mortar cost plus share of roads, utilities etc) is somewhere in the region of £50,000 to £70,000 (depending on whom you believe), a large part of which is the cost of red tape etc. There's no reason to assume that pre-fab houses are of lower quality than traditional bricks and mortar houses (aren't bricks and mortar 'pre-fabricated'? It's all a question of where the bits and pieces are assembled into the shape of a house).
The key is the throwaway remark at the end, "plus the land". The actual production cost of the land itself is of course precisely zero, it's just there and always has been, the problem is the monopoly price of land. Land in desirable areas is limited because there is a limited amount of land in desirable areas; and where there is plenty of land, i.e. at the edge of existing towns and cities, we have something called The Hallowed Greenbelt.
Round my way, for example, you can snap up a two-bedroom static caravan with permission for normal residential use, the actual build cost of which is probably somewhere in the region of £30,000, but the monopoly price of the patch of land on which it stands and the hankerchief sized lawn in front of it adds a cool £95,000 to the price. At a rough guess, that plot is ten yards by ten yards, so that's £950 per square yard:
Spotted by JuliaM in the Richmond & Twickenham Times:
Richmond Park has long been known for its herds of majestic deer. But the regal creatures could soon be sharing the green space with some newcomers from across the border - in the form of a herd of Highland cows.
Royal Parks and Natural England are hoping to introduce small numbers of cattle across areas of Richmond Park as part of a plan to improve its biodiversity...
Docile breeds such as Highland cattle will be chosen to ensure park-users will be not be affected.
Here's what a 'docile breed' looks like:Best of luck with that.
Friday, 28 January 2011
I rather enjoyed this article from CiF, which sort of confirms all our worst suspicions about how incompetent the Lib-Cons are at reducing government spending and what a bunch of whining time wasters these quangista are.
Thursday, 27 January 2011
From The Evening Standard (much better value now it's free):
More than half the public, 53 per cent, think the economy will get worse in the next 12 months, compared with 24 per cent who think it will improve - a negative "optimism index" of minus 29, the worst for nearly two years.
Conservative support crashed five points in a month from 38 to 33 per cent. Labour increased its lead by four to 43 while the Lib-Dems climbed two since the student fees row, to 13 per cent.
AFAIAC, the Lib-Cons are every bit as bad as Labour, just in subtly different ways. But above all else, I'm a democrat. Eight months ago, the Lib-Cons got a decent majority at a General Election - about sixty per cent of the popular vote; the deeply unpopular outgoing Labour government got about thirty per cent - they were elected to serve for the next five years and that is the end of that.
Former South African President Nelson Mandela is recovering from a collapsed lung and could be released from hospital as early as Friday, a source close to Mandela told Reuters on Thursday.
From the Evening Standard:
The man in charge of the taxpayers' shareholdings in high street banks today warned that any break-up (1) of Royal Bank of Scotland or Lloyds would damage their value. (2) "There would likely be a diminution in value," Sir David Cooksey, chairman of UK Financial Investments which looks after the taxpayers' £67 billion stake in the banks, told MPs on the Treasury Select Committee...
Budenberg also said bonuses for chief executives and key staff were vital in keeping top talent and to maintain value at Lloyds and RBS. (3) He told the committee: "I understand that it is very difficult to justify the sort of bonuses paid at these banks. (4) But if we want to sell these shares, we have to make sure the banks are able to retain top talent. We believe it is essential to maintain high quality management at these banks. They will effectively determine the outcome of value at the banks."
... The taxpayer is currently sitting on a paper loss of around £9 billion for its RBS and Lloyds shares. (5)
1) It is never clear what 'they' (whoever 'they' are) mean by 'break up':
a) Some mumble along about splitting up 'investment banking' (which is hugely profitable for the insiders, they are all con-artists and spivs, separate issue) from 'retail banking' (which is where all the losses were made, i.e. reckless lending on over-priced land and buildings). What really did for them was the inter-bank lending, whereby banks bought each other's mortgage backed crap, but that can be fixed quite simply making it illegal for banks to invest in or lend to other banks. Which is dead easy to implement and actually quite effective. No break up required!
b) Or do they simply mean splitting banks into smaller banks, i.e. Lloyds back into Lloyds, TSB, Halifax and The Leeds? If there are lots of competing smaller banks, it is in theory better for the general public, but the question is how many competing banks you need to maximise the benefit for the consumer - is it four, six, ten, twenty? Who knows? And the more competing banks you have, the more duplication there is of admin costs, which benefits nobody.
2) Hang about here. I'm a taxpayer and a bank customer. They could quite easily maximise the value they get for me qua taxpayer (to the extent that the government doesn't just piss the proceeds up the wall anyway) by e.g. merging Lloyds and RBS and withdrawing banking licences from Barclays, HSBC, Santander and Standard Chartered. But then my losses qua consumer would far outweigh the benefit I get qua taxpayer, wouldn't they (not to mention the losses suffered by investors in those other banks)?
3) The geniuses who got us into this mess? The simple fact is that running a bank isn't that difficult and does not require superstar salaries. The Nationwide has been managed rather less badly than most banks, and their entire board of directors took a total of £8 million in salaries and bonuses for 2010 (see 2010 accounts, page 66) and their 18,350 other employees were paid £584 million between them, i.e. an average of £32,000 each. which is a decent wage, but chicken feed compared to other banks, such as...
RBS, where the "aggregate remuneration of directors and other members of key management" was £48 million (2009 accounts, page 346) and its 183,700 employees (page 108) were paid £9,635,000,000 (page 281), an average of £52,450 each.
4) No it's not 'difficult'. Taking off a wet suit in a telephone booth is 'difficult'. The word he is looking for is 'impossible'.
5) The £67 billion is a sunk cost, the £9 billion paper loss is a sunk cost. The previous government almost certainly overpaid - they could have let the banks sort themselves out at zero cost to the taxpayer with debt-for-equity swaps - but what's done is done. They've lost £1,000 of my money already, and I see no reason to throw good money after bad. If they now make a paper loss of £9 billion (or £67 billion) but structure these banks in such a way as to minimise the costs to consumers (who are synonymous with 'taxpayers') by more than £9 billion (or £67 billion), then go for it, say I.
Having been caught out telling porkies over the Gerry Adams saga, our Prime Minister is the gift which keeps in giving (Hansard, Col 287):
The Prime Minister: My hon. Friend has a huge following in all parts of the House. The point he makes is important: it is that whatever your plans to encourage growth in the economy-we have the lowest corporate tax rate in the G7, we have abolished Labour's jobs tax, and we are investing in science and skills, all of which are necessary-without a plan to deal with the deficit, they are nothing.
Labour had planned to increase Employer's and Employee's National Insurance contributions by 1% each from 6 April 2011 onwards, which is what the Tories referred to as 'Labour's jobs tax' in the run up to the 2010 General Election.
And this is exactly what is going to happen under the not-so-new Lib-Con government. For sure, the Lib-Cons hiked the threshold slightly, but it's the marginal rate that does the economic damage as much as the total tax burden.
The Labour opposition MPs are so bloody useless that none of them picked up on this.
From the BBC:
Australia's Prime Minister Julia Gillard has announced a new tax to help pay for devastating floods that she says will cost A$5.6bn ($5.6bn; £3.5bn) in reconstruction.
Ms Gillard said the 12-month tax, starting from 1 July, would be levied on those earning A$50,000 or more, and those affected by floods would not pay.
"We should not put off to tomorrow what we are able to do today," she said.
Oh dear oh dear oh dear. Any sort of logic or justice or matching costs with benefits has gone out of the window here.
Seeing as it as very easy to identify who will benefit from the reconstruction works (land owners in affected areas), wouldn't it be fairer (let alone make more economic sense) to ask exactly those landowners to contribute - maybe in proportion to the amount of benefit that each individual landowner will get? We could call it 'land value tax' or something.
If anybody can explain to me why it is better to pay for this reconstruction by clobbering a random selection of individuals who won't particularly benefit (in this case, above average earners in the rest of Australia), then I would be delighted to hear.
Wednesday, 26 January 2011
As I said here, "Of course imports (or exports) as a percentage of GDP are higher in the UK than in the USA or the Eurozone, because their economies are five times as big (five times as many people), but that was on the basis of three random figures* and basic logic.
Just to see whether this stacks up in real life, I have now taken the time and trouble to harvest the relevant figures for GDP, an average of exports/imports (referred to as 'trade') and population from the fine OECD website** and prepared a chart of the trade-to-GDP ratio plotted against population (click to enlarge):
The correlation between trade-to-GDP ratio and the logarithm of the population is 0.60***.
The chart for trade-to-GDP ratio plotted against GDP looks much the same. The correlation between the debt-to-GDP ratio and the logarithm of GDP is also 0.60*** (click to enlarge):Ah well, at least we know.
* One of which is open to debate as to its accuracy. The UK's and the USA's trade-to-GDP ratios were stated correctly at 32% and 16%, but the figure given by the FT for the Euro-zone was 16% but according to the OECD it's 41%. I suspect that the OECD merely added together country figures without netting off intra-Euro-zone trade. Twats.
** I used figures from 2008 for consistency, choosing GDP and import/export figures expressed in terms of USD/purchasing power parity/current prices. Luxembourg, with a population of less than half a million has a trade-to-GDP ratio of 161%, which is completely off the scale, probably exaggerated by all the cross-border trades routed through it for tax reasons, so I excluded that otherwise tip-top country.
*** I decided to chuck out the figures for the Euro-zone and recalculate the correlation of the trade-to-GDP ratio with the logarithm of GDP or population, which is 0.60 in each case. The correlation with the actual GDP or population is only 0.37 and 0.27, i.e. much lower, which were the figures I gave originally.
The delightful Laurie Penny grinds out a splendid article using the CiF template. It is almost poetry in the way she effortlessly strings together every leftie half-truth she can think of.
She warms up the crowd by bunging in a good old fashioned untruth under Myth 1, i.e. "In recent years, both men and women have found that their working hours have increased...", but let's skip to the fun part at Myth 2:
Myth 2: Men work harder, longer hours than women
Men do work longer hours in many industries – but only if you subscribe to the view that paid work is the only work that counts. Women's unpaid caring, childrearing and domestic labour contributes tens of billions of pounds to this economy...
It is quite true that women do most of the housework (whether that's 'fair' or 'unfair' depends on your point of view. I find that Ricardo's Law of Comparative Advantage applies here as much as anywhere else) BUT...
a) Who says it's unpaid? Most couples pool their income and/or share expenses, and on a rough and ready basis, I would hazard a guess that women who do little paid work and most of the housework benefit from stuff like, ooh, rent or mortgage payments, utility bills, weekly food bills etc to just the same extent as their husbands (who by definition, must be paying for all this). Quite how they split the bit that's left (to the extent that there is any left), I do not know, but isn't that up to each couple to decide for itself?
b) If you're a proper hardcore feminist, why stop at "caring, childrearing and domestic labour"? Why not add: "provide sexual gratification to an uncaring and thankless brute of a husband"? Apparently proper call girls charge over a hundred quid a pop for full sex, and that's with a condom, so if you multiply it all up, that's probably about fifteen per cent of GDP or something, and must vastly outweigh the value of a bit of vaccuuming or something (which women largely do because they value cleanliness far more than men do).
From the BBC:
The prime minister told MPs Mr Adams had accepted a role as "Baron of the Manor of Northstead"... To laughter from MPs, he added: "I'm not sure that Gerry Adams will be delighted to be Baron of the Manor of Northstead. But nonetheless I'm pleased that tradition has been maintained."
However, a spokesperson for Sinn Fein said that Mr Adams' only communication with the House of Commons had been a letter of resignation to the speaker.
The most likely explanation is that they are both lying, of course, which still leaves us none the wiser...
UPDATE 27 Jan: From the BBC:
House of Commons Speaker John Bercow has ruled that Gerry Adams has been disqualified from Parliament. Earlier, Downing Street had apologised to Mr Adams after the prime minister said he had accepted a Crown title...
Later on Wednesday, Mr Adams said that when he was told of Mr Cameron's remarks it was the first he had "heard of this development". In a statement he said the claim that he had accepted a crown title was "untrue" and that he had "simply resigned". "I am an Irish republican," he said, "I have had no truck whatsoever with these antiquated and quite bizarre aspects of the British parliamentary system."
This morning, around 07:21:
After new evidence of "unacceptable and offensive behaviour" towards women, Sky Sports pundit Andy Gray has been sacked. Sports writer for the Daily Telegraph Jim White, and Katie Simmonds, lawyer with the specialist sports practice FrontRow Legal, discuss whether the sacking was justified.
To paraphrase (you can listen to it for yourself by clicking around a bit here):
Jim White made the usual stupid bloke-ish comment, as in "Most women don't understand the offside rule, ha ha!" or something, and Ms Simmonds came out with the usual shrill harpy whining about how disgracefully Andy Gray had behaved and why Sky did the right thing by sacking him.
The BBC interviewer (May well have been Sarah Montague), then explained that Andy Gray was thinking about suing for unfair dismissal, and the lawyer woman butted in to explain the difference between 'unfair' and 'wrongful' dismissal.
The interviewer then moved in for the kill and asked the lawyer woman whether she thought that Andy Gray had a case for unfair (or wrongful) dismissal; the lawyer lady was forced to do a 180 and say something like "Well, I'd be happy to advise him and set out his options [etc.]", to which the interviewer responded "But two minutes ago you said that Sky were quite right to sack him, and now you're saying that he has good reasons to start suing them for unfair (or wrongful) dismissal? Make up your bl**dy mind!" and ended the interview there and then.
PS, this story might have lost in the retelling, and obviously the interviewer didn't use a swearword.
Disclaimer: I do not much of like their politics and have no personal sympathy for Gerry Adams etc etc, but hats off to his spokesman, from here:
Under procedures dating back to 1642, MPs are forbidden from formally resigning their seats. They must apply for a position of profit under the crown, which automatically disqualifies them from being a member of the House of Commons. Under those rules, Mr Adams has to apply to the Chancellor of the Exchequer to become Crown Steward and Bailiff of the Manor of Northstead. The other office is Crown Steward and Bailiff of the Chiltern Hundreds, a role currently unavailable as it is held by former Strangford MP Iris Robinson...
The rules, available on parliament's website, suggest that the problem cannot be solved by appointing Mr Adams to the role, regardless of his own wishes. They state that an MP wishing to retire must apply themselves to the Chancellor of the Exchequer.
A Sinn Fein spokesperson has told the BBC that Mr Adams has no intention of doing so. He said: "It's a non-issue from our perspective. He submitted his resignation and that's it. He's stepped down from that position. He certainly didn't apply for the Stewardship of the Manor of Northstead."
Tuesday, 25 January 2011
Andrew Sentance, a member of the Bank of England's interest-rate setting committee*, as reported by the FT:
Moreover, Britain is particularly sensitive to rising demand elsewhere because imports account for a much bigger percentage of gross domestic product than they do in the US or in the eurozone, where inflation readings are lower. British imports are about 32 per cent of GDP compared with 16 per cent for the US and eurozone.
“In a highly integrated global economy, demand pressures can be less easily contained within national borders,” Mr Sentance said. “They can spill over and affect neighbouring countries,” he added.
Of course imports (or exports) as a percentage of GDP are higher in the UK than in the USA or the Eurozone, because their economies are five times as big (five times as many people).
Think about it: if you looked at the import-to-GDP ratio of a single individual, it would be close to 100% because he spends all his cash income (from 'exporting' his labour) on stuff produced by somebody else (consumption of your own labour, like doing your own cleaning, cooking, changing your own light bulbs is not usually measured in GDP).
Conversely, the import-to-GDP ratio of the whole world is by definition 0% because we don't import anything from the Moon or from Mars (a physicist could argue that metal atoms were 'made' in the heart of distant suns, so when we mine them, they are thus imported from outer space, but let's gloss over that).
Somewhere in between the two extremes, the UK is only one per cent of the global population, so we can only make 68% of the stuff we want, whereas the USA or the Eurozone are five per cent of the global population, so they can make 84% of what they want, and so on.
We also note that if his rule of thumb "Large economies don't have inflation" were true, then larger economies like the USA or China would never have inflation? Yeah right. In any event, the main reason that inflation in the UK is so high at the moment is because our currency fell by about a quarter a couple of years ago and higher import prices are still feeding through, end of.
Disclaimer: personally, I would love interest rates to increase and/or inflation to go down, but that's not the case for a lot of people.
* One day we'll look back and laugh at the idea that a small group of political appointees were given the power to decide the optimum interest rate is, and laugh even harder at people believing that they had the power to enforce it on the real world.
Has it occurred to any of the readers of this 'blog to wonder why banks have not, for a long time, printed either the name of the payee against cheque numbers or the name of the payer(s) against credit numbers when they produce statements. It's not as if this information is not readily available in an electronic form - the payer's bank has to know who the money is going to so that they can pay them the money and the payee's bank, in the case of a credit, has to know from whom the money is coming- so why not put it on the bank statement?
The only reason I can think of is that, if they did it routinely, they wouldn't be able to charge you for doing it, but then it's not a service any of my banks has ever offered me.
Posted by Bayard at 19:35
FinancialAdvice.co.uk asks: Would a mortgage cap kill the property market? and conclude thusly:
There is strong talk in the city of a mortgage cap being introduced by the Bank of England with a suggestion that a minimum deposit figure could be as high as 25%. While there is no doubt that introducing a cushion between the value of any property and the funds forwarded from mortgage providers would reduce the chances of a property crash in the future it could also kill the property sector stone dead.
1. Clearly this is nonsense, it would not 'kill the property market stone dead'. In olden times people had the 'luxury' of being able to/having to pay 25% deposits, because house prices were much lower, so it was easier to save up that amount.
2. But let's assume that their underlying assumption is correct, i.e. that it is perfectly reasonable to expect first time buyers ('FTBs') to take out 100% mortgages rather than 75% mortgages. This would also result in higher house prices, so FTBs are assumed to be able to pay 100% of a higher amount rather than 75% of a smaller amount.
3. Now, if young people who would have a big mortgage either way, and have to cope wit loss of income when Mum has kids etc can afford to service mortgages that are at least a third higher, wouldn't this apply in spades to older home-owners who have paid off most or all of a mortgage that was smaller to start with?
4. Methinks yes.
5. Which leads to me to one of my cunning plans for paying off the National Debt of approx. £1,000 billion in one fell swoop, instead of dumping the burden of past spending excesses on future income taxpayers, namely this:
a. Work out total net housing equity after deducting mortgages, which according to this article is £2,900 billion (after deducting o/s mortgages of £1,250 billion).
b. £1,000 billion divided by £2,900 billion is 34%, so we then just allocate 34p of National Debt for every £1 of housing equity (i.e. if your house is 'worth' £150,000 and your mortgage is £50,000, then your share of the National Debt is £34,000). The average extra loan-to-value ('LTV') imposed on existing home owners would average out at 17% (half of 34%), which is a lot less than the extra 25% LTV (at least) which they expect FTBs to be able to shoulder (as well as the future income tax bill).
c. Yes of course you can make infinite tweaks here, like giving credit for people who paid a big deposit and/or have paid off a lot of the original purchase mortgage out of taxed income; not giving a deduction for mortgage equity withdrawal; indexing up the original cost for inflation and so on, in which case the rate might be 100% of the adjusted lower equity amounts, details, details.
6. Apparently 83% of that 'housing wealth' is owned by people aged 45 or over, so this seems fair enough: those who spent it have to pay it back.
7. The DoublePlus Good news is that no future government would dare do deficit spending if at the end of every fiscal year they had to tell home owners that their mortgages had just been bumped up by several thousand pounds. For example, the Lib-Cons are planning on over-spending by £160 billion this year, which equates to another 8.4% of net housing equity (i.e. continuing the example above of somebody who owns a home 'worth' £150,000 with an £84,000 mortgage, his share of that deficit spending is £5,500).
What's not to like?
The giveaway in a BBC article featuring the word charity is when a government spokesman provides a rent-a-quote at the end agreeing with the charity's suggestions and saying 'more must be done'. Today it's the Alzheimer's Society's turn for special pleading:
The home support given to people with dementia and their carers is an "absolute travesty", a charity says.
The Alzheimer's Society study - based on feedback from carers, health workers and patients - said the problem was causing unnecessary admissions to hospital and care homes. The authors called for better training for staff and access to services in England, Wales and Northern Ireland.
The government said the charity was right to highlight the issue... [etc etc]
Righty-ho, let's look at their accounts available via the Charity Commission.
They have income of £23 million a year from 'Grants and contracts' and 'Trading turnover and subsidiaries' and (reading between the lines a bit) most of that income is from e.g. local councils and the NHS for providing care.
So not only are they a fakecharity in the ordinary sense of the word and are trying to persuade the government to give them yet more money (fair enoughski), and assuming that they are not stupid enough to describe the care that they themselves provide as "an absolute travesty", the sub text of all this is that they are trying to squeeze out competing providers as well.
Monday, 24 January 2011
This is Elektro Kevin playing guitar:
I'm no judge but I think he plays very nicely, keeps his wrists straight and all that. The Jack Daniels bottle on table and the orang utan* on the couch are nice touches.
* Her Indoors informs me that 'orang utan' means 'jungle people'.
Thanks to everybody who took part in last week's Fun Online Poll, results as follows:
Which factor has more impact on the rent that a landlord can charge?
What tenants are willing and able to pay - 86%
The interest that the landlord has to pay - 14%
Good. Eighty-six per cent of you chose the correct answer. I'd be interested to hear why anybody thinks that the amount of interest that landlords have to pay is a factor.
After yesterday's long and tiring thread, I establish that a lot of people (honourable exceptions: Lola, Bayard, Former Tory, and one of the Anon's) will believe any old nonsense they read in the papers or which politicians say, and confuse anything with anything.
The core assumption behind that post is that the Bank of England is a UK government department; it is owned by the UK government; it is controlled by the UK government and Banking Acts passed by the UK government; its senior officials are appointed by the UK government; the UK government decides what the inflation target is which the Bank of England has to achieve (ha!); it has to pay its profits to the UK government (i.e. to HM Treasury) and so on and so forth.
But a couple of people (here and elsewhere) genuinely seem to believe that it isn't. I sha'n't waste your time with links to all this, because no doubt there are conspiracy web site which maintain that the Bank of England is a privately owned and independent company. The fact that the Bank of England is run for the benefit of a narrow clique (i.e. bankers, landowners etc), or that this same narrow clique tells the UK government which monetary and fiscal policies to adopt is a separate issue.
So that's this week's Fun Online Poll: "Is the Bank of England owned and controlled by the UK Government?"
Vote here or use the widget in the sidebar.
Sunday, 23 January 2011
This is JR's post recent post to which I am referring.
This is the first paragraph...
A government trying to manage an economy is rather like a child trying to play that game of placing a number of small ball bearings into a series of slots on an enclosed board. The game proceeds by nudging or shaking the board in different directions to try to tempt each ball into one of the slots. If you nudge too hard or in the wrong direction you dislodge some of the balls you have already placed in the right holes. Success depends on administering the right series of shocks in the right directions to complete the task. Too much force will wreck it. Too little will not achieve it. There may be some way of calculating the right forces, but in the real world it comes down to experience and judgement, to trial and error.
Now, there is nothing more terrifying in my world than a politician stating that the government 'manages the economy'. It is the confession of a latent leaning to 'central planning', which all us Austrians know is doomed to failure.
Generally I like Mr R (H-O-ism excepted) and anyone who cannot sing in Welsh cannot possibly be all bad. He runs an outfit called Evercore which does some of what I do in a similar way, so that's good. But this post somewhat riled me, and I was rather caustic in my comments.
A better anaology to my mind than JR's 'nudging the pinballs' is the motor racing 'tank slapper'. This is what happens when you get into a bit of skid and in trying to correct it you over compensate and swerve off in the opposite direction. Then you overcompensate again and again you swerve off, and so on until you spin right round and, bang!, you're in the barriers.
JR's, or any politicians attempts to 'nudge' the economy, always ends in tank slappers, and more often than not, in the crash-barriers too.
From the BBC:
Lie 1: [Nick Clegg] said the collective liabilities of the UK's banks were currently four times larger than the entire economic output of the economy.
Nope. If you are simple minded and merely add up the balance sheets of all UK banks, then yes, their total assets or liabilities appear to be about four times larger than the UK's annual GDP. Notwithstanding that he confuses a 'stock' of money with a 'flow' of money, if you net off all the inter-bank loans (which show up as an asset in the lending bank's accounts and as a liability in the borrowing bank's accounts), you can whittle this down to about one-and-a-half times annual GDP.
And if you pencil in sensible write downs and disposal of 'securities held for sale' (whatever they are), you can get it down to about one year's GDP.
Lie 2: Mr Clegg also defended the rise in VAT, which went up from 17.5% to 20% at the beginning of this month. "The structural deficit was much bigger than we thought [when we came into government] - £13bn bigger (a)," he said. This was the amount of money the rise in VAT would bring to the government, he said (b). "So far, I have heard no answers as to where else this money could come from. (c)"
a) So what? There's at least £200 billion waste in the system, let's shave off a bit of that first. Or for a very quick win, shut down the Dept for International Aid (budget approx £11 billion per annum) or stop paying money to the EU (about £12 billion per annum gross).
b) No it won't. It may well happen that VAT receipts increase by something approaching £13 billion, but if you factor in all the resulting reductions in other taxes and the increase in welfare costs, the net improvement in government finances is closer to zero.
c) How about hiking Council Tax by half, or having an annual Land Value Tax of 0.5% on the current selling value of all UK land (excluding buildings?)
In which we establish that all the propaganda and obfuscation surrounding Quantitative Easing in the UK appears to have worked, and people fail to grasp the blindingly obvious (see e.g. exchange of comments between me and CityUnslicker).
The basic rule is that 'You cannot owe money to yourself', you can only owe it to, or be owed it by somebody else. To give a simple example:
i. You pop out for a packet of cigarettes and realise that you forgot your wallet, so you give the shopkeeper an IOU on which you declare "I [name of address, signature] promise to pay the bearer on demand the sum of £6". You smoke the cigarettes and, were you to draw up a personal balance sheet the next day, among your liabilities you would include that £6.
ii. Let's imagine that the shopkeeper owes his paper boy £6, he knows that the paper boy lives next door to you and knows you well, so he gives the paper boy the IOU, which entitles him to collect £6 from you. You no longer owe the shopkeeper £6, you now owe it to the boy next door.
iii. You happen to be a plumber and are called to fix a leak in neighbour's house, for which you charge £30. The neighbour only has £24 in cash, so he takes the £6 IOU off his son (for board and lodging) and gives you that as well.
iv. You then go home with the IOU in your wallet. That piece of paper has gone full circle and ceases to have any value. It makes no difference to you whether you keep it, chuck it on the fire or tear it up and throw it in the bin. Your debt with the shopkeeper is settled and you have been paid in full for the plumbing job.
Let's apply this logic to Quantitative Easing:
v. Over the years, UK commercial banks had built up holdings of £200 billion in UK government bonds, issued by HM Treasury. That is an asset from the point of view of the banks and a liability from the point of view of HM Treasury.
vi. During the QE program, another branch of HM Treasury, the Bank of England 'bought back' these £200 billion in bonds from the banks, and in exchange the banks were given electronic balances with the BoE. The banks made a modest profit on the deal, because the BoE overpaid slightly, but that is the end of the matter for the banks - instead of having assets of £200 billion in UK government bonds, they had assets of £200 billion being cash on deposit with the BoE.
vii. Again, to take a simple analogy, it makes little difference to an individual investor whether he has £1,000 in UK coins and notes under the mattress; or whether he has £1,000 in a National Savings & Investments account; or £1,000 in UK gilts. Coins and notes; NS&I and gilts are all assets from the investor's point of view; and all are liabilities from the UK government's point of view.
viii. The interesting bit, and the bit which people either can't or don't want to understand, is what the position is between the BoE and HM Treasury.
ix. The BoE website helpfully explains:
In January 2009, under a remit from the Chancellor of the Exchequer, the Bank established a subsidiary company, the Bank of England Asset Purchase Facility Fund (BEAPFF)... In March 2009 the remit was extended to allow the MPC to use the Asset Purchase Facility to make purchases of assets (now including gilt-edged securities) in pursuit of its monetary policy aims.
The accounts of the Fund are not consolidated with those of the Bank. But the Fund is financed by loans from the Bank and those loans are included in “other assets” in the chart above. They account for the bulk of the increase in “other assets” since March 2009.
As it happens, we know that 99% of the QE program consisted of buying up UK government bonds (see link at xiii. below), not mortgage-backed crap like in the USA.
x. The BoE's balance sheet as at 4 March 2009 shows 'other assets' (bottom right hand corner) of £23 billion. Under its liabilities it shows 'reserve balances' of £31 billion, which is money that the commercial banks have on deposit with the BoE (second from the top on the left hand side).
xi. The BoE's balance sheet of one year later, 3 March 2010 shows 'other assets' (bottom right) of £214 billion and 'reserve balances' of £154 billion.
xii. So over a year, the BoE's BEAPFF spent about £191 billion on buying up gilts (£214 billion minus £23 billion) and of that money, about £123 billion (£154 billion minus £31 billion) ended up being deposited by the commercial banks straight back with the BoE. It's a mystery to me where the other £68 billion went (£191 billion minus £123 billion), but that's for another time. Apart from the missing £68 billion, this confirms what I said at vi. above.
xiii. Right, so the BoE's PFF (part of HM Treasury) now has £191 billion of UK government bonds in a safe somewhere. The BEAPFF's balance sheet as at February 2010 ties in nicely with all this. It shows that it is financed by a £200 billion loan from the BoE (Note 11) and that it holds £193 billion in UK government bonds (aka 'gilts') (Note 9). The other branch of HM Treasury which originally issued those bonds still records that £191 billion (or £193 billion or whatever the real figure is) as a liability in its own books, but it's not really.
xiv. Simple logic and basic accounting says that 'You can't owe yourself money' and exactly the same goes for a government department. So, as I commented over at CU's, it doesn't make any difference what happens to the bonds in the BoE's safe. It makes not the slightest difference to anybody outside the government whether they shred them, bin them, burn them, or wait until the maturity date and take them down the corridor to the redemptions department.
xv. if the government adds up its own assets and liabilities, it could (if it so wished) continue to treat that £191 billion as a liability of one department and an asset of another department, but it always nets off to nothing. The main thing is that the £154 billion shown as 'reserve balances' on the BoE balance sheet (which is real money owed to real third parties, the commercial banks, glossing over the fact that they are part-nationalised) is included under 'liabilities'.
xvi. To summarise, the whole thing was smoke and mirrors. QE in the UK was not 'printing money' (although it was run in such a way as to make a couple of billion easy profit for the commercial banks), it did not increase government borrowing (or reduce it) and as far as the outside world, all it did was to shorten the average time to maturity of UK government debt - instead of the commercial banks etc holding £191 billion in government bonds, due and payable in five or ten years' time on which they were earning 3% interest, they now hold a similar amount in 'reserve balances' at the BoE on which they are earning 0.5% interest, which in theory they could (but in practice they won't) withdraw tomorrow.
xvii. Also worth mentioning is the basic idea that one man's financial asset is another man's financial liability. So if you have a £10 note in your pocket, you have an asset. The BoE, which issued that note has a corresponding liability, which is why it shows 'notes in circulation' of £50 or £55 billion as a liability in its own balance sheet (depending on which one you look at).
Has anybody else noticed the giant underpants which flash up (sic) briefly (sic) at the end of the crowd scene (just before the crowd morphs back into the woman's face) at 49 seconds in to the latest confused.com advertisement?
Saturday, 22 January 2011
From The Daily Mail:
[A] woman was left partially paralysed after a romantic encounter went wrong. In the first reported case of its kind, the 44-year-old from New Zealand suffered a stroke after her amorous partner gave her a love bite. She was driven to hospital in Auckland, New Zealand, after she experienced loss of movement in her left arm after an amorous encounter.
Doctors suspected she had had a small stroke - but could not find any obvious cause. Then they noticed a fading bruise on the right side of her neck - a love bite, also known as a hickey. Underneath the bruise they found the cause of the stroke - damage to a major artery, where a blood clot had formed after the suction of the love bite. The clot had then travelled to the woman's heart, causing the stroke. She then noticed the problem while she was sitting watching television...
So now you know.
Friday, 21 January 2011
I have of course been following this story, which now concludes thusly:
Julian Lawford, 49, pleaded guilty at Exeter Crown Court to causing the death of Harold Lee by careless driving at his trial in December.
Mr Lee, 75, was killed as he walked the cows along a country road near his home in Burtle, Somerset, in August 2009.
Lawford, from Glastonbury, was given a four-month suspended sentence. He was also banned from driving for 12 months.
At his trial the judge, Mr Justice Roderick Evans, told the fireman he was not considering an immediate custodial sentence and released him on conditional bail.
This still seems a bit of a harsh punishment for merely turning on his siren (we never found out whether Mr Lawford was er route to a fire or just turned them on to try and get the cows out of his way, which makes a difference on a moral level, I suppose).
UPDATE: The court of public opinion has spoken (see comments), Mr Lawford got off far too lightly. But at least we know.
PS, I never, ever blow my horn ever, it is the height of rudeness, and if I were driving a fire engine, I would only turn on the siren in a real emergency.
This is in the nature of a question.
First off, this:-
It's the HPC graph on house prices adjusted for 'inflation'.
Now, inflation is a function of money, not prices. Price rises are the result of inflation not its cause.
The 'inflation' used to adjust the graph is official RPI.
But, (and I have not been able to check this) the money supply between 1975 and 2011 has exploded by many times more than we would be lead to believe by the RPI.
So, what may be happening is that capitalism is delivering deflation - more for less each day - whilst the government is delivering inflation - exponenetial growth in fiat money supply. RPI is one minus the other. But house prices are just a component in RPI and their price rise reflects the growth in money supply (as does the price of shares).
FTAdviser Morning News: Property rents drop & Ed Balls appointed shadow chancellor
Posted by Lola at 09:10
Thursday, 20 January 2011
From FT Adviser:
OECD economists speaking at the launch of the OECD's report, Housing and the Economy: Policies for the Renovation, said the abolition of stamp duty would reduce barriers to entry in the housing market. Asa Johansson, OECD economist, said stamp duty should be replaced with an increased council tax where part of the funds went to local councils and part to the Treasury.
She said: "I think stamp duty should be removed and replaced with a property tax based on the value on the house. It adds on costs for people entering the market."
Ms Johansson proposed replacing stamp duty with a yearly tax, similar to council tax but with part of the funds going to the council and part to the Treasury. She acknowledged such a tax would have the most impact on those home owners who are asset rich and cash poor but said a revised taxation system would be fairer as it would not penalise those who engaged in property transactions.
The OECD also urged the government to tax vacant land to incentivise owners to develop the land and build property on it.
Dan Andrews, OECD economist said: "The current property tax base should be updated to better reflect market values. This would provide more incentives to use vacant land which could help alleviate some of the supply side problems in the UK housing market."
Spotted by Jack C at HPC.
Emailed in by Joseph Takagi, a story from The Sun:
COPS suspecting FOWL play are hunting a cockfighting rooster on suspicion of slitting its owner's throat.
Indian police say the "dangerous rooster" is thought to have killed Singrai Soren after being forced back into the ring soon after his last fight.
The animal had emerged victorious, but witnesses said the victim died after the feathered fiend cut his throat with razor blades attached to its legs as he tried to immediately force it into another bout.
Villagers were warned not to approach the animal cops described as "an unknown rooster with black and red feathers".
JT adds: "You could probably use some sort of headline about a man getting killed by his own cock" (which is no doubt the sort of comment that Witterings From Witney would have left).
Wednesday, 19 January 2011
From The Metro:
The cuddly puppy, which was bought by mum Leigh McPherson from Asda to help her daughter Mia learn to speak, sings songs when you squeeze its paw. However, Ms McPherson was left stunned when the creature turned the air blue with what sounded like barrack-room language.
It sang: ‘If you’re happy and you know it f*** with me.’
The 20-year-old single mum from Banbury, Oxfordshire, told The Sun: 'I couldn't believe it. I played it back three or four times. There is no mistaking what Violet is saying. The biggest problem I’ve got now is my friends, who all want to play with Violet because they think it’s hilarious.’
The manufacturer has claimed that the hound is actually saying ‘bark’ but has issued the toy with a new recording, just in case.
PS, the last time these toys were on sale was in May 2010.
From the BBC:
More babies are at risk of being born into poverty because of tax and benefit changes in the UK, a charity says.
A report by Family Action warns that new parents and babies will bear the brunt of cuts to benefits and tax credit support to families....
We can download their accounts from the Charities Commission website. Their total income is £23,111,000, and page 16 tells us that £18,847,000 of this is 'statutory funding' (there's a list of all the local councils and other government bodies who pay for their services on page 25).
FakeCharities disappeared from the radar screen shortly before the General Election, but it seems that they are now going back to their old ways. Presumably the Lib-Cons have now got their own placemen in, er, place and so they are saying things that the government wants to hear again.
You can tell that the government co-ordinates all this, because the BBC are using the old FakeCharity article template, which always conclude, as this one does, with something along the lines of this: "A spokesman for the Treasury said: "The government is committed to reducing the deficit in a fair way that still supports the most vulnerable in society; reforming the welfare system to put it on a sustainable long-term footing whilst preserving key benefits for vulnerable people."
Tuesday, 18 January 2011
Notwithstanding that there is no binge drinking epidemic, 'alcohol related admissions' are not bankrupting the NHS, booze-related violence is not increasing and so on and so forth, from today's Evening Standard (much better value now it's free):
Ministers were accused of “betrayal” today as health campaigners said a new minimum price for alcohol was too low to deter excessive drinking. The Home Office said shops will be banned from selling alcohol for less than the tax they pay on it, resulting in minimum unit prices of 21p for beer and 28p for spirits... Don Shenker, of Alcohol Concern, said he felt “let down” by the minimum price, which is less than half that recommended by a government-commissioned study.
This whole high pricing malarkey, did it work for cocaine and heroin?
Methinks not, if anything, the harm they cause increases when prices increase (more crime, more incentives for drug dealers etc.). Admittedly some drugs like ecstasy tablets and cannabis are quite good value compared to booze and fags, but they are the ones that cause the least harm - whether in spite of or because of the low prices, or indeed whether there is no correlation whatsoever is a separate debate.
See also: Make cigarette packaging plain, government urges.
As everybody knows, since drug dealers weren't allowed to use fancy branded packaging, their sales went through the floor.
De Daily Mail:
Una pareja británica ha sido condenado a ocho meses de prisión y ordenó la demolición de su casa Españoles por el incumplimiento de las normativas urbanísticas.
David y Janet Hartshorn ilegalmente construido una gran casa en suelo protegido, cerca de la localidad de la Costa del Sol de Torrox, un juez dictaminó.
Sra. Hartshorn dijo: "Esta es una noticia terrible. Estoy muy disgustado por esto... La casa fue construida hace nueve años y son personas siendo la construcción de casas ilegalmente por aquí. "
¡Estoy seguro que todo el NIMBYs español está celebrando esta victoria para El Cinturón Verde Santo!
From The Metro: "Sinkhole 20 [metres] wide appears overnight in garden":
From my post of September 2007 (two months after the English smoking ban came into force):
I looked up alcohol licences, and they appear to be only a few hundred pounds a year, depending on size of pub.
So if the council charges £10,000 a year to allow [a pub to have] a smoking licence, only a few pubs would go for it and the council rakes in a shed-load of money for no effort whatsoever, a form of Land Value Tax, if you will.
Everybody wins. The landlord only pays the £10,000 if he thinks he can increase his net profits by at least that much. The smokers win. The local council wins.
And most pubs would remain non-smoking - if all the pubs in any area paid the £10,000 for a smoking licence, then the advantage would be competed away, and some would give up the smoking licence again.
That's that fixed.
Now spotted by Gawain Towler:
[Following widespread flouting of the smoking ban and in view of its dire fiscal situation] The Greek government is planning to introduce smoking licences for wet-led venues* so that customers can smoke.
The cost will be decided based on the size of the establishments and any venue that allows smoking without the licence will be closed.
There is of course the fiscal incentive... The government believes it could bring in “at least” €50m (around £42m) from issuing the smoking licences.
* This appears to mean 'drinking establishments'.
From the BBC:
Plans for a minimum price for alcohol in England and Wales are to be announced by ministers. Shops and bars will be prevented from selling drinks for less than the tax they pay on them.
The minimum pricing would work out at 38p for a can of weak lager and £10.71 for a litre bottle of vodka. The aim is to prevent binge drinking, but campaigners say the proposed new rules do not go far enough...
The government is planning to ban the sale of alcohol below "cost price", which is defined as the tax drinkers pay - duty plus VAT...
How is that any different to the sort of shite that Labour came out with, year in year out? As a flourish, they are even proposing a measure that is nigh unenforceable on an administrative level, rather than something nice and simple like increasing alcohol duty (not that I'm recommending this, I'm just saying).
The BBC being the BBC, it has rent-a-quotes from the usual subjects, the BMA, Alcohol Concern, the National Institute for Health and Clinical Excellence and Drinkaware, and no doubt the major supermarkets are cheering to the rafters.
UPDATE: FormerTory in the comments links us to this vox pop:
Tom Logan, a trainee accountant from Peterborough, said: "So what you're saying is, they've fucked up the economy, forced the country to the point of bankruptcy and put my job and my home in jeopardy while at the same time paying themselves a hundred grand a year in expenses and are now telling me I shouldn't be allowed to buy a couple of cheap bottles of wine on a Friday night so I can forget my troubles for a few hours instead of hunting them down and roasting them on a spit like the shit-caked, trough-guzzling pigs that they are?
Monday, 17 January 2011
I've heard this argument a dozen times if I've heard it once, the first time here, when I was still arguing for a very modest reform (to replace Council tax, Council tax benefit, Stamp Duty, Inheritance tax, Capital gains tax and the TV licence fee with a flat tax of approx. 1% on the value of residential land and buildings):
Bill: This idea... has IMO all the the electoral attractiveness of the poll tax (and that is being unfair to the poll tax).
The sheer stupidity of that comment baffles me to this day.
1. He overlooks that the (admittedly deeply unpopular) step of replacing the old Domestic Rates with a flat Poll Tax (aka Community Charge) was a step in completely opposite direction; it was a regressive move, and the people who went on the riots were the people and households right at the bottom who were suddenly several hundred of pounds a year worse off. The large majority of homeowners were a couple of hundred pounds better off, and those in the biggest and nicest houses were presumably significantly better off (good contemporaneous account here).
2. What I was suggesting was neither 'progressive' nor 'regressive' and was about simplification as much as anything; some of those at the bottom would lose their housing benefit, but for eighty or ninety per cent of households, LVT would be much the same as their Council tax (less Council tax benefit, where relevant) plus TV licence fee is now, plus or minus a couple of hundred pounds a year even at the margin (bearing in mind that most Council tax benefit claimants are in the lowest Council tax bands A and B, and so instead, they'd get a lower LVT bill which would be payable in full).
3. In a world where the Lib-Cons think it's OK to take away Child Benefit from a random selection of higher earning households and the EMA from a random selection of low-to-middle income households (a loss of a couple of thousand quid a year each),or where the Lib-Cons can merrily hike VAT by 2.5% and National Insurance by 2% (making working households several hundred pounds a year worse off) I don't think the LVT idea was particularly radical.
4. Those who would gain most would be those with proper wealth besides the inflated value of their house which brings them over the Inheritance tax threshold; those who are thinking of buying or selling a house (who would save the Stamp Duty and/or capital gains tax, where relevant). And bearing in mind that I explained the roll-up option for pensioners, not even they (or their heirs) would be materially worse off in the long run (no Inheritance tax, and the resale value of houses would go up by the amount of the Stamp Duty cut).
5. So even if you could identify people who on closer inspection genuinely ended up paying more in the long run (and there would be some, obviously, e.g. no more 'single adult' discounts as there is for Council tax and many of those in the top decile housing-wise whose house is worth £300,000-plus), these are exactly the people who would not be going on riots, and on a crude political level, I don't see why they would be so much more deserving of public sympathy than e.g. people clobbered by the 50% income tax rate (not that I support the 50% rate, I'm just giving an example).
6. And on an administrative level, LVT beats the Poll Tax (or TV licence fee) hands down: there's no need to track down every adult, you just do the rough and ready valuations and send out the bills. A house can't just disappear, can it?
7. Finally, I'm an enthusiast of universal benefits (like a higher tax-free personal allowance, a Citizen's Income/Pension, health and education vouchers etc). If there really were items of public expenditure which cost a similar amount for each person and benefit each person equally (without flowing straight through into higher house prices, and I struggle to think of any apart from perhaps the cost of running elections), then the way forward is to reduce the personal allowance (or other universal benefits) accordingly, rather than dishing out £x per person universally with one hand and clawing back £x per person universally with the other.
Here we go again. From The Daily Mail:
... families were warned there was little prospect of a lifeline on fuel prices – despite repeated pledges from David Cameron. The Prime Minister has reiterated his desire to introduce a fuel stabiliser to help motorists but that brings him into a public conflict with the Treasury, which does not want to enact the pledge.
Before they invent something new which moderates the effect of fluctuating petrol prices, how about looking at what they're doing to exaggerate them? From that article, a litre of petrol (about one-fifth of a gallon) costs 48p, to which is added 59p fuel duty = £1.07, plus 20% VAT = £1.28 pump price. Let's assume the raw material price fell to 38p, the pump price would fall to £1.164, and if it rose to 58p, the pump price would rise to £1.404, and VAT per litre falls or increases by 2p.
Fuel Duty is in itself a stabiliser, as it does not (necessarily) respond to changes in the underlying price (48p). So if they scrapped VAT, The Worst Tax Of All and increased fuel duty to 80p, prices would remain the same on Day One. So if the raw material cost went down 10p, the pump price would fall to £1.18 and if it rose to 58p, the pump price would 'only' rise to £1.38.
So by a simple tweak to the tax system (which simplifies things enormously for the petrol industry) we can reduce the relative price fluctuations from (in this example) a range of 17.1% to 14.5% .
There's more idiocy further down the article:
1. Mr Cameron said today: 'I do want to see some method of sharing the pain between the taxpayer and the motorist.'
By and large, the taxpayer is the motorist, so what's his point?
2. Treasury Chief Secretary Danny Alexander... did reveal, however, that the Treasury was pushing ahead with a pilot scheme to offer discounted fuel to rural communities in the Scottish Highlands, which could extend to his own constituency of Inverness.
Nice bit of pork-barrel there, Mr A!
3. Underlying the whole article is the assumption that Fuel Duty is a tax on petrol, which of course it is not! It's a rationing device for road usage - total Fuel Duty + VAT is about £40 billion a year and they only spend about £10 billion a year on building/maintaining roads. This is all the more reason to keep Fuel Duty as a flat (higher) figure and scrap VAT.
As to whether we'd be better off by reducing taxes on petrol (thus having more crowded roads, slower and more expensive journeys and higher taxes on everything else, so it might actually be a net cost to the economy) and/or building more roads, those are separate issues.
Thanks to everybody who took part in last week's Fun Online Poll:
Having a nice lie-in at the weekend means staying in bed until about...
8.00 am - 12%
9.00 am - 21%
10.00 am - 27%
11.00 am - 21%
12.00 noon or later - 13%
Other, please specify - 7%
Phew, so I'm slap bang in the middle of that range. Three commenters mentioned times between 6.30 am and 7.30 am because of cats or kids. I'm not sure that counts as a 'nice lie-in', really (but my commiserations nonetheless, and don't forget that in ten years' time you'll banging on your teenage kids' doors at midday telling them to get the f- up already).
That distribution also reminds me of Florence Nightingale's fine words: "To understand God's thoughts we must study statistics, for these are the measure of His purpose"
And lo, to this week's Fun Online Poll.
A. It is widely accepted that house prices fall if interest rates rise, the logic being that selling prices reflect the discounted Net Present Value of the rental value; so the higher the interest/discount rate, the lower the selling price. As it happens, it is quite difficult to find a correlation in real life because there are so many other factors in play (availability of credit being far more important), but hey.
B. Conversely, there are a lot of people who insist that landlords are subject to the same basic rules as any other supplier, and that the rents they charge purely reflect their input costs plus a minimum profit margin (else they go out of business, supply falls until surviving producers can increase their prices to reflect the higher input costs); even more bizarrely, some people insist that the interest they pay is an input cost in the first place.
If this were true, then assumption A. would simply not hold - higher interest rates would lead to higher rents; and the NPV of the higher rent at a higher interest/discount rate would hardly change. Of course, the interest a landlord pays is not an 'input cost' at all, it's a cost of ownership (his expense is the bank's income, separate topic).
So what do you think? Vote here or use the widget in the sidebar. There's no 'other' option this week, as I am just looking at two out of a myriad of possible factors.