Monday, 30 April 2012

Fun Online Polls: Subsidies and this Thursday's elections

On a very high turnout, thank you to everybody who cast a vote, the result in last week's Fun Online Poll was as follows:

Do you regard subsidies for wind power development as a good deal?

No - 96%

Yes - 3%
Other, please specify - 0%

So stick that in your pipe and smoke it, you subsidy junkies!

NB, Nick Drew questioned the reliability of the findings of a similar survey here.
This week's Fun Online Poll will run until Thursday evening, for obvious reasons.

Vote here or use the widget in the sidebar.

The Daily Mash on top form

From The Daily Mash:

Two teenage girls who fell asleep while sunbathing on a rural road were airlifted to hospital after they were hit by a car.

Samantha Schermanhorn and Kaylie George, both 13, were reportedly struck by a vehicle driven by Samantha's 19-year-old cousin. They were lying down on the Beaver County, Pennsylvania, street on Sunday afternoon.

Indian Bicycle Marketing: Austerity

Just as a refresher on how this works:

From The Telegraph (a right-wing, Tory-supporting newspaper):

The shock fall in output is a blow for Chancellor George Osborne, who has come under intense pressure over his austerity drive, with most of the government's cuts yet to come into effect.

Mr Osborne said: "it's is very disappointing news and it is a very tough economic situation," but the Government must maintain its austerity measures and make sure "we don't deliberately add to borrowing". He added: "I think if you ask the British people should we borrow and spend more in a debt crisis, I think you would get a very clear answer that would be a disaster for Britain."

From The Guardian (a left-wing, Labour-supporting newspaper):

Analysts embarrassed by getting their forecasts wrong rubbished the official estimate that GDP declined by 0.2% in the first quarter. But a couple of tenths of a percentage point either way would make no difference to the big picture, which is of an economy flat on its back. Output is lower than it was in the third quarter of 2010.

Osborne's central economic gambit – that, by cutting business tax and regulation and convincing the markets he was serious about tackling the deficit, he would clear the way for growth – has failed miserably.

From a superficial reading of these two articles, you might be lulled into thinking that the UK government had actually cut spending - the right-wing press says it and the left-wing press says it, aren't they supposed to say the opposite of each other and leave the reader to make up his own mind?

Nope, because they both support the same oligarchy.

The actual facts of the matter are as suggested in City AM (which has its own agenda - it is propaganda funded by financial services and land owners):

What is most depressing is that the double-dip (if that is indeed what it is) will wrongly discredit austerity, even though the state remains incredibly profligate. The budget deficit in 2011-12 was a massive £126bn, down just £10.9bn from the £136.8bn the year before. The national debt is still rocketing: public sector net debt at the end of March 2012 was £1,022.5bn (66.0 per cent of GDP) compared with £905.3bn (60.5 per cent of GDP) at the end of March 2011. Current spending rose in cash terms from £604.8bn to £617bn in 2011-12.

The OECD says UK public spending was 49.8 per cent of GDP in 2011. Public sector net borrowing remains at a catastrophic 8.3 per cent of GDP. All of this remains utterly unsustainable – yet the public have wrongly been told that the UK “is tackling its debt”. Osborne has been a disappointing chancellor – but not for the reasons cited by the left.

Sunday, 29 April 2012

Ceteris paribus

From Wiki:

A ceteris paribus assumption is often fundamental to the predictive purpose of scientific inquiry. In order to formulate scientific laws, it is usually necessary to rule out factors which interfere with examining a specific causal relationship.

Under scientific experiments, the ceteris paribus assumption is realized when a scientist controls for all of the independent variables other than the one under study, so that the effect of a single independent variable on the dependent variable can be isolated. By holding all the other relevant factors constant, a scientist is able to focus on the unique effects of a given factor in a complex causal situation.

So, for example, if we want to find out whether treacle is more viscous than water, we take two identical containers, and fill one with treacle and the other one to the same depth with water; at the same temperature and height above sea level etc; we place an identical object on the surface of each liquid; release them at the same time; and then we compare how long it takes each object to reach the bottom of the container.

If you fill one container 50cm deep and the other one 100 cm deep; if you drop a ball-bearing into one liquid and a flip-flop into the other; or if you carry out the water experiment in the International Space Station high up in orbit and the treacle experiment at sea level, then the result will be meaningless.

Which brings us to the time worn KLN at comment 18 here:

Why should Mr X in a 2/3 bed house with reasonable size garden, growing his own veg to survive, pay more than his neighbour, a family of 4 all working adults, in a 3/4 bed on a slightly smaller plot of land?

The 'dependent variable' in this case is each household's LVT bill. The questioner keeps two variables constant - the fact that both plots are in the same geographical area and both are being used for residential/hobby purposes - and makes the reasonable assumption that the real 'independent variable' is the plot size (see footnote), so why does he change at least four other variables as well?
* Household size
* Number of working adults
* Number of bedrooms
* The use to which the garden is being put

These are irrelevant and the only way to do a fair comparison, and thus obtain a meaningful answer, is to keep these constant. I gave the following examples:

* "Why should Mr X in a 2/3 bed house with reasonable size garden, growing his own veg to survive, pay more than his neighbour, Mr Y in a 2/3 bed on a slightly smaller plot of land next door, growing slightly less of his own veg to survive?"
Answer: because Mr X occupies more land.

* "Why should a family of 4 working adults in a 3/4 bed house with reasonable size garden, pay more than their neighbours, another family of 4 working adults, in a 3/4 bed on a slightly smaller plot of land?"
Answer: because the first household occupies more land.

* "Is it fair that Mr X in a 2/3 bed house with reasonable size garden, growing his own veg to survive, pays exactly the same as his neighbours, a family of 4 all working adults, in an identical 2/3 bed on the same sized plot of land?"
Answer: yes, because both households are occupying the same amount of land.

You can then make up your own comparisons, remembering always that only one factor may be varied, and then you decide on which plot the LVT would be higher and ask yourself whether this seems reasonable: perhaps Mr X's neighbour is a farmer with a 2/3 bed house with a hundred acres of land, who grows so much veg that he has a huge surplus that he can sell at a profit to buy other things, for example. Who would pay more LVT and would this be reasonable?

Footnote: Actually, it is planning permission which is the independent variable - if Mr X would love to extend his house to 3/4 bedrooms, sacrificing part of his large garden in the process, but planning laws prevent him doing so, then it is quite possible that the LVT bill on the smaller plot with more generous planning permission would be higher, but let's gloss over that.

.. and they both lived happily ever after.

Moiré interference trousers

Explanation here. Picture from the Daily Mail.

Saturday, 28 April 2012

Edgar The Exploiter

Economic Myths: The value of shares is "capital"

First things first: I am in favour of free market economics, capitalism, private ownership of businesses and so on. The cheerleaders for rent-seekers in The City keep pushing the propaganda that the only way to achieve this is by having companies owned by shareholders, and the shares to be traded on The Stock Exchange:

That was obvious during the privatisation of British Telecom in 1984. Only a few thousand people in the UK owned shares. Downing Street aides figured that, to sell an £8bn company like BT, people would need educating. They visited the stock exchange to discuss circulating a leaflet. The stock exchange folk suggested printing perhaps 5,000. It was shockingly complacent: the government side had in mind a first run of 1,000,000 – with more to follow.

It is because of Big Bang, and the privatisation that it was able to bear, that we now have not thousands, but millions of shareholders with a real stake in the UK. That led to a huge change in attitudes towards business, and turned us, for the first time, into a capital-owning democracy.

Meanwhile, London bounced back as the world’s top financial centre. True, many City firms were snapped up by foreign firms, including many Americans who enjoyed looser regulation here than in the US. But the key for any industry, not just finance, is not who owns it but where the jobs and value are being created. Big Bang ensured the answer was – London...

People say Big Bang created a “loadsamoney” culture that persists today. No. (big fat lie - see point 11. below) It simply allowed more people to exploit new opportunities and profit from them.

This is lies and propaganda from start to finish. All of this could have been achieved much more efficiently without companies issuing shares. The far better way would have been to adopt the building society funding model.

1. The 'assets' side of any business is what it is: buildings, plant, machinery, stocks, patents and goodwill and so on, that would remain unchanged but there is no need for the net assets of the business (after deducting liabilities and borrowing) to be split up into shares and for those shares to be owned/freely traded by investors. It is far more transparent and efficient if the net assets are financed by deposits.

2. Taking AstraZeneca at random (being the first company on the list of FTSE 100 constituents where most people would have a vague idea of what they actually do), it has a market capitalisation of £34 billion, divided into 1.27 billion shares worth currently £26.80 each. The LSE page for AZN publishes infinite amounts of detail about how the share price has changed, like the fact that those shares have fluctuated between £24.54 and £32.18 over the last 52 weeks - but nowhere does it mention the company's actual results or link to the company's financial statements.

3. If AZN were funded by deposits instead, there would be no need for any of this. The total deposits would add up to whatever AZN's shareholders' funds/reserves happen to be, which we can find out from their most recent accounts, which is $21.7 billion.

4. So if AZN were funded/owned by deposits/depositors instead of shares/shareholders:
* each shareholder would be credited with just over $17 for each share he owns and that $17 would be a very stable figure.
* That is your share of the real capital.
* The difference between the £17 (£11) per share real capital and the share price of £24 or £32 is not real capital, it is just random transfers of wealth which serve no purpose whatsoever, do not represent real wealth and certainly do not help to finance it (if anything, it does the reverse).
* The results for the first quarter of 2012 shows profits of $1.76 billion, which is a return of 8 cents for every $ invested.
* There would be no need for the directors to have a separate dividend policy, all that happens is that for every $1 you have on deposit, 8 cents is credited to you as your quarterly profit share.

5. If you are confident that AZN will continue to do well (compared to its peers) you put money on deposit with them ('buy'); or you leave your deposit + profit share untouched ('hold'); if you need cash, you can withdraw as much of your deposit + profit share as you like ('sell').

6. Sure, there may be short-term situations triggered by a bit of bad news when too many people rush to withdraw, in which case the directors can announce a freeze or limit on withdrawals, or levy a penalty charge on withdrawals, so for every $1 on deposit, you can withdraw 80 c and the other 20 c are forfeit, until the matter is resolved or the business is broken up and/or sold, but this is no worse than when trading in shares is suspended. And it is certainly far better to have invested $17 directly into AZN a few months ago and now to have $18 or $19 on deposit, than it is to have bought shares second hand for £32 which are now worth only £27

7. The upsides of this form of funding/ownership are that investors would pay a lot more attention to what really matters: actual profits, cash flows and net assets.

8. This is what leads to the most efficient allocation of real capital (buildings, machinery, patents etc). If another pharmaceuticals company is earning quarterly profits of 10 cents per $, then some people will withdraw money from AZN and deposit it with that other company. To finance these withdrawals, AZN will sell off or shut down its less profitable operations until the residual return on its core activities goes back up to 10 cents and it all evens out.

9. And none of this needs thousands and thousands of analysts and middlemen to manage people's savings, all creaming off their percentages. When you are deciding where to invest your savings, you just scan down the list of companies and look for those with the highest returns; assuming that most companies in each sector show similar returns, you then just spread your risk by depositing small amounts with lots of different companies to achieve diversification.

10. This would also be good for employee ownership. Instead of people earning money and then investing in shares directly, or more likely indirectly via pension funds or unit trusts etc, with all the costs, random transfers of wealth and lack of transparency, your employer could set up a deposit account for each employee and pay their salary into that (debit salary/expense, credit deposits). If you want to draw your whole salary each month, then do so. If you like the idea of taking a stake in your employer, you just draw a bit less and roll the balance forward.

11. "That all sounds splendid, Mr Wadsworth," the audience shouts "so where's the catch?" The catch is exactly the "loadsamoney" culture which the City cheerleaders deny exists. If AZN were depositor funded, it would only be a matter of time before some bright financial wizard came along and told depositors that they could make a fantastic windfall gain by converting to share capital: for every $17 (£11) you have on deposit, you will be given a shiny new share which you can sell for £27, no questions asked.

There would be no change to the net present value of the business, or of your stake in the business, but instead of you having to wait patiently for $5.44 cents (£3.40) to be added to your deposit of $17 (£11) each year, you would be able to take the next four-and-a-half years' worth of dividends all in one go (4.7 x £3.40 = £16, plus your £11 deposit = £27) by simply selling one share. Which is tantamount to saying that whoever buys your share has to wait four-and-a-half years until he actually breaks even again, and if that's not a "get rich quick" scheme I don't know what is.

12. I am still mulling over quite which policies a government could adopt to encourage all this. The knee-jerk response would be to simply retain corporation/income tax on the profits of businesses with publicly quoted/traded share capital and to abolish it for all other types of business (sole traders, partnerships, LLPs, depositor-funded, family-owned private limited companies etc), of course plc's would be free to convert to depositor-funded status if they so wished for no penalty; the shareholders just have a toss up between a higher net income in future or hanging on to their windfall gain now. The only tricky bit is how to deal with UK operations of foreign plc's, that's where you either get awful distortions or stupid loopholes.

Friday, 27 April 2012

We own land! Give us money!

From The Daily Mail:

NewBuy aims to help buyers onto the housing ladder by allowing them to buy a new home with just a 5 per cent deposit because the housebuilder and Government back the loan.

But it is already on the rocks after housebuilders backing the scheme say buyers are being priced out, as they can’t afford their mortgages. NatWest offered the best initial rate when the scheme was launched on March 12. This was 4.29  per cent for a two-year fixed-rate and 4.99  per cent for a five-year fixed-rate. However, its new two-year deal is 4.79  per cent and the five-year deal 5.49  per cent. This means a buyer of a £150,000 home who missed out on the lower rate on the five-year deal would end up paying £44 a month more, or £2,640 extra over the five-year mortgage...

Mike Farley, chief executive of housebuilder Persimmon, says: "There’s nothing wrong with the concept of NewBuy(1), but to make it work we need a lower rate or people will be priced out. The rates are around 6  per cent and are so high people won’t be able to afford the repayments.(2) I could understand the rates being so high if the lender was taking on all the risk, but that is not the case.(3)"

He said the homebuilder has managed to sell only 70 properties through the scheme so far.(4) Persimmon and other builders signed up to the scheme are to meet this week to discuss their next steps.(5)


1) There is everything wrong with it. The clue is the fact that the name of the scheme is two words joined together with each word capitalised, a traditional NewLabour gimmick.

2) First time buyers could easily afford to pay 6% interest or 10% or 15% or anything else, because that's only one part of the equation - the more important part is the actual loan amount. If Persimmon dropped the price of their homes by half (i.e. waived most of the land value element), then buying one of their homes with a 10% interest mortgage would be a pretty good deal. But as a true believer in Home-Owner-Ism, he sees the selling price as a fixed quantity and works backwards from that in deciding what the interest rate 'should' be.

3) He thinks that he can charge as much as he likes for his crappy houses, and banks respond in kind by suckering people in with low interest rates and then turning them into mortgage prisoners. At least with a normal protection racket you can shut up shop and move elsewhere, eh?

4) This is what we've come to expect from all the similar schemes dreamed up by previous government:

The [HomeBuy Direct] scheme was announced on September 2, 2009 - but it took until March this year for it to open for business. But so far demand has fallen some way short of the early hopes. The government wanted to help 18,000 families - so far, it has helped just 215.

5) No doubt their next steps will be to persuade the government to set up a taxpayer-backed scheme to subsidise mortgage prisoners who want to trade up to a bigger mortgage, maybe they can call the scheme NextSteps or something?


Marginal costing

Just to illustrate the usefulness of doing comparisons 'at the margin', if you want to stock up on cans of lager and the supermarket has two special offers, "15 cans for £12" and "20 cans for £15", the long way of calculating which is cheaper is:

£12 divided by 15 = 80 pence
£15 divided by 20 = 75 pence

Which involves two divisions and remembering your first answer. If you know from experience that a can normally costs around 80p, the easier method is to deduct one offer from the other, i.e.

£15 minus £12 = £3
20 cans minus 15 cans = 5 cans

You the divide £3 by 5 cans and arrive at 60p per can, which is clearly cheaper than 80p , so the 20-can offer is better value.
It wouldn't have been too difficult to calculate this the long way round, but this method helps a lot if the two special offers involve very odd figures, such as "18 cans for £13" and "24 cans for £19". Dividing those two and remembering the first answer is a lot trickier than dividing £6 by 6 cans = £1 per can, so the first offer is a lot cheaper.
This may seem a bit mundane, but it is always the margin which matters, i.e. if some regulation or tax change comes in, don't worry too much about how it will affect big corporations or very successful businesses, worry about the impact on smaller businesses, start ups and those which are hovering at break even point. So you can cheerfully ignore anything the Confederation of British Industry says, as they represent large businesses and are actually quite happy if small business are struggling, it's far more important to listen to the British Chambers of Commerce or the Federation of Small Businesses.

"Kill me and redistribute resources," expert urges.

From The Guardian:

The world's most renowned eco-fascist has called for a massive reduction in the number of himself and for natural resources to be redistributed from himself to people who aren't quite so irritating.

Paul Ehrlich, Bing professor of genocide at Stanford University in California and author of the best-selling Population Bomb book in 1968, goes much further than the Royal Society in London which this morning said that physical numbers of pontificating idiots were as important as the amount of natural resources consumed.

The optimum population of Earth – enough to guarantee the minimal physical ingredients of a decent life to everyone – was exactly one professor fewer than whatever number everybody else calculates, said Ehrlich in an interview with the Guardian.

"How many self-righteous dickheads you support depends on lifestyles. We came up with a maximum of zero because then you can have big active cities and wilderness without some twat harping on about cities being bad for the environment but living in the wilderness being worse. If you want a battery chicken world where everyone has minimum space and food and everyone is kept just about alive you might be able to support in the long term about 40 or 50 billion people. Luckily, we only have 7 billion. So we have to humanely and as rapidly as possible move to professor shrinkage.

"The question is: can you shoot me in the head without a disaster, like my blood staining this fancy Persian rug? Probably yes. But if I go on at this pace, there are going to be various forms of disaster. Some maybe slow motion disasters like people ignoring me more and more, or catastrophic disasters because somebody kills innocent bystanders when he blows up my house, there could be a collateral damage, but for humanity as a whole, certainly a price worth paying."

Ehrlich, who was described as alarmist in the 1970s, a boring twat in the 1980s, a fascist in the 1990s, a complete wanker in the Noughties and a total tosspot last week, says none of his predictions have proved correct and admits he was unduly gloomy about humanity's ability to feed over 9 billion people.

"We have 1 billion people hungry now - about a thousand of those are denied the basics because of my own over-consumption. They are going to have to be fed on more marginal land, from water that is purified more or transported further - unless of course somebody throws me off a bridge," he said.

"None of the predictions [in Population Bomb] have proved correct, we're all still here forty years later, aren't we? At that time I wrote about climate change. We did not know then if it was warming or cooling, but we thought f- it, it sounds scary and will help book sales. We thought it was going to be a problem for the end of this century. Now we know it's warming, or possibly it's cooling, or both and a problem for the beginning of the century; we didn't know about the loss of people being left alone. Things have been coming up worse than was predicted. We have the threats now of vast epidemics of government-sponsored bullshit.

"I have a grim view of what is likely to happen to my children and grandchildren. I'd guess that somebody will bump them off as well just in case they have inherited the do-gooding genocidal gene. Politicians can control the financial mess we are in but they don't have control over the systems of the planet that provide me with a platform to spout my tedious, patronising views, those are deteriorating and it will take us a long time to turn it around unless you stab me to death now. It's hard to think of anything that will pop up and save you from my tedious ramblings except the guillotine. I hope something will but it really will be a miracle."

Non-white parents care about their children's education: shock

From the BBC:

One in four pupils at independent schools in the UK is from a minority ethnic background, data suggests.

A census for the Independent Schools Council shows 74.5% of pupils (280,671) are from white British backgrounds and 25.5% (95,904) are from minorities*. The census also shows overseas pupils make up 5.2% (26,376) of the pupil population in its schools - 37% of these are from Hong Kong and China. This is a rise on 2011, when the census counted 24,554 non-British pupils.

The census for 2012 - completed by all 1,223 of the ISC's schools - does not detail whether pupils from minority ethnic backgrounds are British or foreign nationals. But if boarding pupils (who will account for many of the 26,376 overseas children) are removed, the proportion of minority pupils rises to 28.5%, suggesting the majority of these pupils are British nationals.

What puzzles me is that these two numbers do not add up to the total number of pupils at private schools, which is a smidge over half a million, as stated later on in the article.

Thursday, 26 April 2012

Killer Arguments Against LVT, Not (213)

Rather out of context, in the comments at Tim Worstall:

IanB: This reminds me of attempts over at Mark Wadsworth during lively discussions about the Land Value Tax, where I’ve tried to explain that a valuation isn’t the same as a value. Nobody can get anywhere with economics if they don’t understand what value is. And very few people actually do.

To which the ever reasonable Richard Allan replied: "IanB you’re totally ignorant of economics in general and LVT in particular. Please don’t do this to yourself."

IanB then proved Richard's point with this: "I presume this is based on my having some knowledge of economic theory developed later than the mid nineteenth century..."

Which is about stupid as a GCSE physics pupil dismissing Isaac's Newton's theories as stuffy old 17th century nonsense. Yes, I'm dimly aware that some of Newton's formulations had to be tweaked ever so slightly in very minor respects, but by and large, not much has changed on that front and calculus still works etc.

1. Turning to the point in hand, yes there is a difference between 'valuations' and 'value'. If you ask various estate agents what they would try to sell your house for if you wanted to move within (say) six months, they will make all sorts of wild valuations, and most vendors tend to go with the agent who gives the highest valuation. If your house is on the market for more than six months, clearly the estate agent's valuation was higher than the value, which is whatever it eventually sells for at that point in time at which it is sold.

2. None of this is particularly relevant to LVT. The economy neither functions on the basis of values nor valuations, it works on the basis of prices, and LVT is just one element of the total price of occupying land.

3. In the UK we have a tax called Business Rates which is pretty close to LVT. It is calculated at about thirty per cent of the estimated open market rent of each building*. Subject to lots of stupid exemptions, the tax is payable whether the building is vacant or occupied, whether owner-occupied or tenanted, and whether the actual rent paid by the tenant is lower or higher than the estimated rent. Unlike with income tax on rental income, there are no deductions for interest costs or running costs.

4. Are these estimated rents 100% accurate? Are they heck as like. But they are accurate enough in relative terms, i.e. a bigger office block will have a higher estimated rent than the smaller office block next door; a shop on the high street will have a higher estimated rent than one on a side road; a factory in a good area has a higher estimated rent that one in a worse area etc etc, which is the main thing.

5. The point is that (except in some very marginal areas), the Business Rates on any particular building (or part of a building or area of land) is less than the total rental value of the building minus annual running costs. So it will always be possible to make money by owning that building, because the selling price of the building will adjust up or down so that the return to the investor is 'enough' to justify him buying it (or not selling it). And whoever is prepared to own the building will be happy to rent it out or occupy it himself.

6. It is not the case that investors and businesses have fled the areas with high Business Rates, a tax which has been on the statute books pretty much unchanged for over four centuries. Take a look around the UK and you will observe that if anything investors and businesses are fleeing areas with low Business Rates and it is blindingly obvious to all but a Home-Owner-Ist or Faux Libertarian why this is.

7. Ergo, if we simply applied Business Rates to residential land and buildings (and scrap a corresponding amount of other bad taxes, such as VAT and National Insurance), we would observe much the same thing happening. Buildings would still be occupied and the tax would be collected, given the political will. We would just have to be a bit more careful about ensuring that Domestic Rates on homes in very marginal areas was nothing or next to nothing, which is one big mistake they make with Business Rates.

8. Will some people in some houses in some areas not be able afford the Domestic Rates on that house? Of course. Does that mean that the rental value of those houses has been over-estimated? Of course it bloody well doesn't. If BMW can sell swanky cars for £100,000, then that is what they are worth and that is their value. The fact that most of us can't afford one, or wouldn't waste money on one even if we could is completely irrelevant.

9. But will people who are unwilling or unable to pay the tax still be able to sell their houses to somebody who can afford the tax and is willing to pay it? In 999 out of 1,000 cases, yes of course. Even if the rental value has, on some objective level, actually been over-estimated? Still yes! Because the tax is only part of the cost of owning that house, the other half is paying off the mortgage. So it might well be that a lot of houses end up being sold for less than their current 'value' (or indeed 'valuation') but at the point in time at which they are sold, that is their market value.

10. From that point on the new owner pays the total monthly bill of mortgage repayments plus tax, then clearly, that total bill is a very close approximation of the total rental value of that house (or else he wouldn't be paying it, he would have bid the purchase price down a bit more; or somebody else would have offered a higher price etc). This is the beauty of the system - the price that the house was sold for was the true market value of the house (when you take the pre-existing LVT bill on that house into account) and therefore... the LVT bill on that house will also be the market value tax rate (when you take the price paid for the house into account).

11. Of course, there will be a far larger number of people who are perfectly happy to stay put, because the LVT they are now paying is less than the VAT and National Insurance they were paying. For this vast majority of people not much changes, and a sufficient number of them will trade up to buy up the houses of those who wish to trade down - that is what happens in a free market, prices adjust up or down to ensure that stuff is put to its optimum use.

PS, John at comment 12 and Jim at comment 13 were both right. What they describe is basically Business Rates.

* Morons/smart arses will point out that the official multiplier is 45.8%, but as the tax is payable by the occupier on the estimated rent net of the tax, the effective rate is thirty per cent or so.

"Mini tornado strikes Rugby"

From The Metro:

The Middle School inter-house rugby final between Thoresby and Barry was briefly interrupted after a high penalty kick by Verity, JA was blown several hundred yards into somebody's front garden.

"It was amazing!" reported Satterthwaite, TB who had been watching from the sidelines, "It was almost as if the ball was never going to land. Ever!"

Hobbs Jr was despatched down to the groundsmen's shed to obtain another ball. By the time he returned, the gusts appeared to have subsided and Mr Milne decided that play should continue. Barry duly won the match 19-13.

Opinions on the school bus back into town were divided on whether or not Winehouse, AC had passed the ball forward to Jackson, PL in the closing moments while Mr Milne's chased a dog from the pitch. But then again, it wouldn't have made any difference to the final result.

"Six-year-old children attracted to cigarette adverts"

The Metro rehashes some of the most outrageously fraudulent research ever:

Children as young as six are falling for cigarette adverts as tobacco companies use ‘colourful and slick’ packaging to entice them, according to a cancer charity. They were drawn to the packets ‘without having a full understanding of how deadly the product is’, Cancer Research UK said.

Youngsters aged six to 11 were asked to describe what appealed to them about brand packaging. "It makes you feel like you’re in a wonderland of happiness," said one. Other responses – which were filmed by the charity for an anti-smoking campaign – included: "The pictures actually look quite nice. Ice cubes and mint", "It reminds me of a Ferrari", "Is that the royal sign?" and "Yeah. Pink, pink, pink".

Ho hum.

I thought that cigarette and tobacco advertising had been banned years ago? In any event, like the vast majority of smokers, I have had children of my own, and I can faithully report that none of them ever has showed any interest in smoking in general or tobacco packaging/advertising in particular, apart from the obligatory second-hand anti-smoking lectures faithfully delivered by my little lass. Who also tries to lecture me that it is better to take the train than to drive a car because of global warming, but who is first to ask whether she can be driven to school by car when it's raining (it's a five or six minute walk).

Of my two adult children, one of them became a social smoker at the age of 18 or 19 and the other one genuinely does not like smoke or smoking (I'm sure he's tried it). For sure, four children is not a representative sample, but I suspect it's a lot more representative than CRUK's sample.

Wednesday, 25 April 2012

"Gohirio penderfyniad am drwydded eglwys"

From the BBC:

Councillors have deferred a decision on whether to grant a licence for a city centre church next to a pole dancing and strip club. The Reverend Haydn Dennis wants to set up the York Place Baptist Church next to the Bellissima club in York Street, Swansea. A spokesman for Thomas-Bellis Leisure Ltd called the plan "brazen".

More than 1,000 opponents have signed a petition. A report discussed by councillors on Wednesday said the Swansea-based applicant "proposes to use the premises for relevant entertainment which may include: singing, praying, preaching and soliciting donations. The applicant intends to use the premises between 08:00 and 11:00 on Sunday morning and for one hour each evening Monday to Saturday."

The solicitor for the applicant said the church intended to restrict their services to preaching and praying only. The petition opposed to the plans was submitted to Swansea council. In a separate letter, the club's manager, wrote: "There are deep practical objections to this proposal and a concern for the right to privacy of our members who hardly want to bump into the town's do-gooders and nosey-parkers when they are leaving our premises."

He also highlighted in his letter the council's policy which says "as a general rule," a presumption will be made against licensing a church if it is near a "place of worship of the female form". He told BBC Wales: "To have the effrontery to put it next door to my lap dancing club - how much more brazen can you get?"

"Gordon Brown was in 'unbalanced state of mind' when he 'declared war' on me"

From The Daily Mail:

Rupert Murdoch today recalled when an 'unbalanced' Gordon Brown 'declared war' on his media empire after [it switched] sides to support the Tories at the last election. Mr Murdoch, appearing before the Leveson inquiry, dismissed claims that Mr Brown had ‘roared at an aide for 20 minutes’ as a 'colourful exaggeration'.

But he did recount in detail listening in to a private telephone conversation between the former Prime Minister and a civil servant. The 81-year-old media mogul recalled how Mr Brown asked "Do you know what's going on here?," when the front page of the Sun was published declaring support for David Cameron in September 2009.

Mr Murdoch, 93, said the civil servant replied "I was not warned of the exact timing, I'm not aware of what they're saying, but I'm sorry to tell you Gordon, that Aussie bastard will support a change of government if there is an election."

Mr Murdoch, 105-year old NewsCorp chairman, said that he subsequently hacked into Mr Brown's email account and found an email declaring "Well, that wrinkly old f- has declared war on the government. We have no alternative but to declare war on him."

The 117-year old Mr Murdoch chuckled as he recounted the scene between Mr Brown and his wife later that evening, filmed using a secret camera which Scotland Yard detectives had installed for him in the master bedroom at No 10.

We own Land

Give us money

"Engagement champion"

The following advertisement was in this morning's Metro:

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* has their finger on the pulse – and knows everyone from the post room to board room;
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For clarity, the advertisement only showed the tinyurl, not the link to the relevant page on the organisation's website.

Hunt sabotages self

Tuesday, 24 April 2012

Rubbish conspiracy theory of the day

From Metro's readers' letters:

The In Focus feature about generating hydrogen gas from water using the Sun's energy quotes academics hailing the news as an important step towards ending our reliance on fossil fuels (Metro, Mon).

I fear that a more realistic prognosis of the future of hydrogen generation using solar power would be that some oil company is going to buy the patent to the technology and bury it so deep that we won't hear of it again until we've depleted all the fossil fuels and completely destroyed the environment.

Aliaksei Holik, Cardiff.

I've heard this one before and it doth not make sense.

1. Oil extraction and refining isn't that stupendously profitable. The ten biggest oil companies in the world have a market capitalisation of $1,500 billion, about three times that of Apple. They have to make huge and risky investments and spend a fortune on maintenance etc. Why would they bother with deep sea drilling if they own a patent which will produce oil-substitute products from sunlight and bacteria/water/fresh air/whatever?

2. The real big earners from oil are the countries which collect tax from motorists on the fuel - but even if cars ran off something else, these countries could get the same amount of revenue by taxing the substitute fuel or road-user charging - and the money from extraction licences. So if anybody is doing any buying and burying, it would have to be an organisation like OPEC.

3. Let's assume that the net present value of all OPEC's future oil revenues is £1 quadzillion. If a new technology threatened to wipe out that value, then OPEC would have to pay something approaching £1 qzn for it (if the patent holder did his sums and haggled properly). So let's say that OPEC have bought and buried some breakthrough patent for £0.5 qzn. What happens if another patent holder comes along with a different patent? The first £0.5 qzn is a sunk cost, and OPEC would, yet again, have to pay something approaching £1 qzn to buy and bury the next patent, and so on, once they have bought and buried the third patent, they will be deep in minus territory so it's not even worth starting. It's like paying a blackmailer a small amount of money, he'll just keep coming back for more.

4. From the point of view of OPEC, the same applies to oil (or gas) discoveries anywhere else in the world. The competition they face from oil in the USA, the North Sea, off the coast of Brazil, the Falklands etc. will put just as much of a dent in their earnings, and when oil is discovered in these places, oil companies are rushing to bid for the licence to extract it.

5. Motorists and oil companies may be fairly reckless as to oil running out or the environment being ruined (whether that is the case is a separate debate) but it is certainly not their stated intention to achieve this. When Lord Browne and Tony Hawyard had their appointments with the school careers officer, they didn't tell them that their personal ambition was to wreck the environment and deplete natural resources and wait for the careers officer to recommend that they apply for a job with an oil major as the best way of achieving it. I assume that they studied engineering, geology, organic chemistry or economics or something and then found that the best paid and most interesting jobs they could get were with oil majors.

6. UPDATE Blue Eyes in the comments points out that patents are usually only protected for twenty years, so OPEC would not only have to acquire the patent but also bind everybody involved in developing it into very long term confidentiality agreements, destroy all workings papers and results etc, which is nigh impossible nowadays.

So the way I see it, OPEC will be pretty miffed if and when somebody develops such an alternative technology, but in the long run, there is nothing they can do about it. Oil companies won't be too fussed, because we can safely assume that it would take ten or twenty years for people to replace their cars and lorries, which is roughly the same period over which they can amortise/use up/wind down their current investment in all the rigs, refineries, tanker ships etc. and invest in the new technology instead.

Monday, 23 April 2012

'Tis the Devil's work

From the Daily Mail:

As any responsible parent knows, the Royal Mail has introduced a vile new hazard into the upbringing of teenagers. It is inordinately difficult to keep an eye on just what they are receiving in harmless looking envelopes.

And lurking but a thin layer of envelope or brown paper away are vivid images - some captured on light sensitive material - of men and women in various stages of undress engaging in carnal acts. In a cross-party report published last week, MPs warned that a whole generation of teenagers was growing up with their minds affected, their vision blurred and their palms growing hairy - all caused of the images of depravity from which most adults would avert their gaze.

We’re not talking here about mere smut, but the most degraded and perverted sexual acts that warped minds can devise. The number of children freely accessing this material is horrifying. No fewer than four out of five 16-year-olds regularly see pornography in the playground or at friend's homes, while one in three ten-year-olds has similarly viewed images of this nature.

What a wholesale corruption of childhood has suddenly overtaken us — and with what untold consequences. Yet the response of the Royal Mail making this filth available online has been astonishingly irresponsible and even contemptuous. The postal service will this year give parents the chance to open all envelopes addressed to their children and to examine their contents. Big deal!

In any civilised society, freedom comes with responsibility. By refusing properly to police provision of this vile material, the Royal Mail is in effect making themselves complicit in child sexual abuse.

Fun Online Polls: Titanic & subsidies for renewables

Well done to the 91% of respondents who chose any direction other than North West and thus avoided steering the Titanic into the iceberg. I trust that none of you cheated by breaking open the cupboard which had the binoculars in it?
The BBC reported this morning that "More Britons than not regard subsidies for wind power development as a good deal, an opinion poll suggests".

Ho hum. Let's see what real people think.

Vote here or use the widget in the sidebar.

A likely story...

From the BBC:

More Britons than not regard subsidies for wind power development as a good deal, an opinion poll suggests.

Commissioned by trade body RenewableUK, the Ipsos-Mori poll found that 43% see the UK subsidy as good value for money against 18% who do not. Another survey has also found a big majority in favour of renewable energy.

Remind me to run a Fun Online Poll on this to see what real people think, I suspect that RenewableUK might be just a little bit biased and might have asked leading questions or pre-selected its audience.

"Farmer thrown 10ft and repeatedly gored by bull"

From The Daily Mail:

The 69-year-old farmer – who suffered ruptured lungs, 17 broken ribs, a ruptured spleen and damage to almost every vital organ – said: 
"He had come silently through the cows, he was meaning to get me and he got me. He meant to kill me. He spun me 10ft in the air and before I hit the ground he had me again. After that he just bored me into the ground. I could feel my ribs breaking. They were snapping like carrots.

"I put two fingers into his eye but it did not make any difference, he kept on coming at me. He bored at me again and got me behind a wall. I didn’t think I was going to survive. I could feel my lungs filling up with blood and I was gasping for breath.

"Once he had got me behind the wall and kept attacking me I knew the only thing I could do was feign death to survive. He thought he had beaten me. He was still very close to me. I could touch his nose he was so close, but luckily he stopped then because he thought I was dead."

This must be the world's toughest farmer, he - aged 69 - was out of hospital again after two weeks.

Spotted by JuliaM

Sunday, 22 April 2012

Killer Arguments Against LVT, Not (212)

Oliver Hartwich trotted out the tired old lies again in 2006, I don't know whether he's changed his mind since:

  ...most of the arguments in favour of LVT rest on a few axioms that are either highly questionable or outright wrong. First, it is assumed that land ownership does not fulfil any economic function and that, therefore, all income received from owning land is basically unjustified, even unjustifiable.

Of course there has to be land ownership, or there'd be nobody to pay the tax and nowhere to build buildings! Hurray for land ownership! The point is that instead of people who want to own land having to pay large amounts of money to the previous owner or to the bank, they would pay the same amount of money in tax, with a corresponding reduction in taxes on earned income. And nobody said "unjustified". The point is that land rent is entirely unearned in the sense of being passive income; it is generated by the community as a whole; and it can be taxed at 100% at no detriment to the economy.

In practice, however, one could hardly ever separate the incomes from land and from improvements to the land. It would take a government agency and some highly questionable assumptions to determine which part of the value of the land was ‘justified’ and which was ‘unearned’ and thus taxable.

Schoolboy error. This is the easiest thing in the world. Even if you know nothing about rebuild costs and amortised costs, all you have to do is identify comparable buildings in different areas. If the rents for some of them are higher than for others, it stands to reason that the difference can only be due to the location rent. And now to the nub of his argument:

Closer inspection, however, reveals that landowners perform a number of valuable economic tasks. Like the owners of any other factor of production, landowners have to make frequent decisions on what use to make of their property. They decide in which way to utilise their land, which could mean to keep land idle. For one, there is much more land than there is labour to keep all land in use all the time.

Secondly, it can be necessary at times to keep land from the market and wait for a better opportunity to bring it back into use, for example when there is a chance to develop a larger area. These decisions have to be made, and they have to be made by someone who bears the economic consequences. This is the task of the landowner who accepts the residual risk and takes the opportunity costs of withholding land from its most valuable unrealised economic potential.

I'm glad he mentioned 'opportunity costs' because that completely demolishes his own argument.

1. A sensible businessman works on the basis of opportunity costs. In other words, if you've bought raw materials for $1 and the price shoots up to $2 before you've sold them, then you put your selling prices up as if you'd paid $2 for them. And most land speculators use borrowed money anyway. All LVT does is turn opportunity costs or interest costs into tax costs. It does not and cannot increase the total costs.

2. For example, a site with planning permission to build a certain building has a site-only rental value of £50,000 i.e. once the building is finished, the rent you can collect will cover the entire amortised cost of the building and leave you with £50,000 surplus. If you are a land speculator looking to buy that site and interest rates are 5%, then you will bid up to £1 million for it (£50,000 divided by 5%), and once you have bought it, you will be paying £50,000 a year in interest on the £1 million you borrowed. Imagine instead that this site was subject to £40,000 a year LVT. Clearly, the land speculator would only bid up to £200,000 for it, so he will end up paying £10,000 in interest and £40,000 in LVT - his total holding cost is exactly the same.

3. Or maybe you own the site anyway, free of debt, having acquired it for pennies decades ago, and it's now worth £1 million. If you are a sensible businessman, you will at all times bear in mind the opportunity costs of owning an undeveloped site with no rental income. This is however much interest you could earn by selling it and putting the money in the bank, so your opportunity cost of owning that site is £50,000 a year - and that is what you base your decision making on. If the site is subject to £40,000 LVT, then your opportunity cost is only £10,000 and the real tax cost is £40,000, but your total cost is the same.

We can at this stage merge 2. and 3. Perhaps you own a double-sized site, debt-free which you bought for pennies ages ago, inherited last week, won at a game of cards etc, and you sell off one-half for £1 million to a land speculator who takes out a £1 million mortgage to acquire it. Whatever is the optimal use of your remaining half is exactly the same as the optimal use of his half. If the best you can do (restricted by local demand, planning laws or both) is to build a three storey building with mixed retail/residential, then that will be the best thing for the owner of the other half to do as well. The fact that you have no cash holding cost and he has a £50,000 a year holding cost is irrelevant.

4. So as long as the LVT on that site (or each half) is no higher than £50,000, the decision making will not change very much. Yes, this is a bit of an annoyance for land speculators who have bought expensive tax-free land with borrowed money, who lose on both sides of the equation on the day LVT is introduced, but hey. Most land speculators go bust at regular intervals anyway. The point is that the land is still there - and even if the current owner goes bankrupt, the land can be sold off to the highest bidder.

5. It may well be that with LVT, land owners behave slightly differently, but they will behave 'better' rather than 'worse'. On the other hand, it is pretty clear that taxes on income, output, wages and profits ONLY have bad impacts, they have dead weight costs, lead to unemployment, business failure, evasion, off shoring etc etc.

6. The mantra that "land owners perform a valuable service by holding land out of use" was originally invented ages ago by Rothbard and was demolished for the umpteenth time by Fraggle recently.

Saturday, 21 April 2012

Euro slides, sterling surges...

... are not the kind of fatuous headlines you will find on this blog, unlike at Reuters and the Wall Street Journal. Yes, over the last 24 months, EUR has gone up a bit and down a bit in terms of GBP, and at the moment it is 'down a bit':But if you look at a twenty-year chart of each currency against a currency basket, the last few months are just little up or down ticks. It looks as if GBP is finally bottoming out again after its precipitous falls of 2007 and 2008, that's about all that's worth mentioning:

Rents and taxes as a share of UK GDP

This is based on Bryan Kavanagh's chart, which relates to Australia. Rather unsurprisingly, we see that rents have increased from 10% to 18% of GDP and net earned income has fallen from 60% to 46% of GDP over the last sixty years as a result of GDP increasing.

Taxes have also gone up, from 30% to 36% of GDP.Sources: Nominal GDP and total taxes from the Public Sector Finances Databank. Total rents derived by multiplying average house price x 5% x number of dwellings plus one-fifth for commercial and farm rents. Average house price as published by the Nationwide. Number of dwellings as published by the DCLG.

Friday, 20 April 2012

The CIA are about to assassinate YOU

From The Daily Mail:

The suspicious death of one of President John F. Kennedy's mistresses just months after his death has sparked numerous conspiracy theories. The latest version posits that socialite Mary Pinchot Meyer, a beautiful divorcee who was close friends with the Kennedys and is widely known for having a lengthy affair with the playboy President, was shot in a cover-up operation by the CIA.

A new book was about to reveal that, in her preoccupation with her lover's assassination and ensuing personal investigation, she may have gotten so close to the 'truth' that the CIA found her to be a threat. As a result, agency operatives staged a shooting to make it look like she died due to a sexual assault that turned violent.

In a disturbing twist, the author of the book of the book Peter Janney was shot dead by an unnamed woman after finishing his manuscript. She pleaded self-defence on the basis that he threatened to rape her. Two investigators later claimed to have found proof that the woman was a CIA operative, but they were tragically killed in a light aircraft accident before they could publish their findings.

The offices of the publisher were engulfed by a freak firestorm shortly after the book was published, killing everybody in the building and destroying the company's computer servers on which the book's text was stored. Then there was then a terrible industrial accident at the printers, when their ventilation failed and every single person in the building choked to death on the solvent fumes normally used to clean inking rollers.

A day later, the lorry taking the finished books to the warehouse was rammed off the side of a cliff by a hit-and-run tank driver who has never been identified. The lorry driver and the books were burned beyond all recognition.

Editors note: I wish to extend my condolences to the friends and family of the promising young journalist Brenda McCarthy, who fell to her death from a tenth storey window shortly after filing this copy.

Outbreak of commonsense

From The Daily Mail:

Millions of people are ‘abandoning’ pensions and turning to tax-free Isas, a major report reveals today.

It accuses Britain of having a ‘failing pension architecture’, which is ‘hugely complex’, ‘unattractive’ and lost in ‘a forest of regulation’. The Institute of Directors’ study says faith in pensions is ‘dwindling’, with soaring numbers switching to the tax-free Individual Savings Accounts.

The latest figures from the Office for National Statistics show Britons put £22.9billion into a pension, such as a company scheme or a personal pension, in 2009 – a decrease on £24.9 billion in 2008 and £25.6 billion in 2007*. By comparison, they put £44billion into Isas during the 2009/10 tax year, according to HM Revenue and Customs. This rose £10billion to £53.9billion last year.

* This must mean individual contributions not employer contributions and net of the tax breaks, as total gross contributions incl. tax breaks are in the order of £80 billion, and the tax breaks are in the order of £30 billion (ignoring contracted-out NIC).

1. The usual justification for the insane tax breaks for pension saving (three-quarters of which are soaked up in fees and commissions) is that "we have to encourage people to save" and by implication "if we didn't encourage people to save, they wouldn't save at all", but this is proven, yet again, to be complete nonsense.

2. Yes, there are some superficial modest tax breaks for saving in an ISA (which are also probably soaked up in fees and commissions, to be honest) but let's gloss over tha, we can safely assume that those people saving into an ISA would have saved anyway even without the modest tax breaks.

3. The stat's show that there is little or no need to encourage a large chunk of the population to save as they'll do it anyway, let's say that's 50% of the working age population. Then there are people who are either spendthrifts or simply have no spare income, they'll never save, regardless of incentives, let's say that's 40% of the population.

4. So the tax breaks (£30 billion) are all spent on chivvying that marginal 10% of the population who wouldn't otherwise have saved into saving (whether pension or ISA or otherwise). The marginal 10% save up £8 billion (£80 billion x 10%), so the cost of the tax breaks is four times the amount saved. And those £8 billion savings might simply represent underpayments on a mortgage, so are not real savings (i.e. deferment of consumption) at all.

5. Even if that £8 billion represents deferred consumption, the purpose of saving up in the good times is to spend it in the bad times. The real benefit from saving is the extra marginal happiness you get from spending £5,000 every year of your life instead of spending £10,000 a year in the good times and £nil in the bad times. It is not an absolute loss, the point is just that the extra £5,000 you could have in the bad times bring you far more happiness than spending £10,000 rather than £5,000 during the good times. It's called 'marginal utility'.

6. So the £30 billion tax breaks increase the happiness (marginal utility) of the marginal savers by perhaps £2 billion (a quarter of £8 billion). That seems like a colossal waste of money to me.

Right, now all we need to do is explain to people that the best form of saving is paying off your mortgage, and even better than that is taking out a smaller mortgage in the first place, job done.

The Dawn of Home-Owner-Ism

From the BBC series about the 1970s, the first 13 minutes of the first programme explains how the rot set in and covers the first boom and bust. As the presenter explains, "A lot of people think that Thatcher created Home-Owner-Ism, but they're wrong, it didn't. Home-Owner-Ism created her." Although of course he doesn't call it "Home-Owner-Ism", he just calls it "it".

Thursday, 19 April 2012

Britain hits its third world aid targets...

... which appear to be somewhere in the Indian Ocean.

Playgroundlaw is back! Or was at least, briefly.

Here's a good one that I got by clicking 'random story'.

I actually believe this theory to be correct. At my school, it was strictly against the rules to try and leave the dinner hall before the plates had been tidied up and a final grace said, then we were supposed to file out in an orderly fashion, table by table as instructed. Which wasted about ten minutes of your precious lunch hour. If you tried to sneak out early by the door at the far end (away the teachers' table) and got caught, you were in big trouble. And you usually got caught, it was a suicidal thing to try.

My tactic for sneaking out early was to march up the dinner hall bold as brass, past the teachers' table, a curt nod to any teacher I knew who happened to catch my eye and then straight out of the big door at their end without any pretence that they hadn't noticed.

Never once did any one of them ever dare to call my bluff, despite I would have been in heaps of trouble if they'd ever bothered, given that "sneaking out of dinner early" was presumably a cumulative offence, i.e. had they ever bothered to check whether I had permission to go early (like a piano lesson) and established that I didn't have and never had, then surely the penny would have dropped that I had been sneaking out early regularly for years.


Stuff in today's Daily Mail which made me smile

1. Al Qaeda terrorist who plotted to blow up subway commuters says he wants a second chance

A second chance at what? Blowing up the subway?

2. Taliban commander turns himself in to Americans... to claim $100 reward on his own 'wanted' poster

'Clearly, the man is an imbecile,' U.S. official says

3. Pranksters 'desecrate' grave of Titanic lookout...

The pranskters took away a wreath which had been laid, which is very disrespectful, but they left some binoculars with the following note:

Dear Fred, sorry for bringing these 100 years too late but better late than never! You said if you had these, you would have had time enough to get Titanic away from the iceberg, so here they are! Luv Francis

Community generated land values (part the manieth)

From yesterday's Evening Standard:

The Nationwide also found that Londoners are willing to pay nine per cent more for homes within 500 metres of a Tube or railway station, compared with seven per cent in 2010. It means that people are prepared to pay £27,000 more than they would for a similar property a mile away.

Robert Gardner, Nationwide’s chief economist, said: "We examined how the proximity to a Tube or railway station impacted on property prices in Greater London after taking account of other characteristics, such as type, size and local neighbourhood. Interestingly, only six per cent of properties in London are more than a mile away from a station. The vast majority of these are in outer suburban areas, where stations tend to be more spread out serving larger catchments."

The best-served boroughs are Westminster*, Camden and Tower Hamlets, where more than three in four homes are within 500 metres of a station. These boroughs are also some of the most expensive in the capital. Havering and Bexley are the least well-connected boroughs, with fewer than 20 per cent of properties within 500 metres of a station. The cheapest homes are those where the nearest station is on the outer reaches of the Metropolitan line.

Now, this is a bit chicken-and-egg, do people move to be near a train station, or do they build the train stations where more people are? It's both, of course. The train lines have to meet in the middle of town, so that is where most stations will be; it is also the most densely populated (whether by people or by businesses), it would be the most densely populated anyway, but having lots of train lines makes it more so.

But ultimately, it is population density which drives land values. Despite what NIMBYs pretend, most human beings are in fact very sociable beings and like being near other people, or at least to have easy access to what other people have to offer, it makes exchange of goods and services easier.

If you bear this in mind, solving Alice's problem is quite simple, and her four "great truths" turn out to be three "great misconceptions" and one truth.

Alice rounds off by saying: "The harsh truth about UK public finances is that the people who benefit from it also have to pay for it."

On a moral level, correct. Why should a high earner pay more for the same "services" than a low earner? The answer is "he shouldn't", but that is the wrong question because people seem to suffer from the grand delusion that earned income (or private wealth) is a suitable subject matter for taxation.

The real question is: "Which are the most important services which 'the state' (i.e. the people acting in co-operation, with a government to act as referee and final arbiter) provides?" and the answer is: simply existing in a stable form and thereby generating rental values (compare rental values in Dubai with those in Somalia). If we re-think her question in the context of Land Value Tax, it's quite clear that the owners/occupiers of those plots which benefit most from the existence of "the state" are automatically also paying most. Those rents are the natural source of national revenue, in the same way as selling cars is Mercedes' natural source of revenue. it would be insane for Mercedes to give away cars for free and pay its workers by levying an income tax on everybody else in Baden-Württemberg.

There is no real reason why the government (in the narrow sense) should be providing "services" above and beyond the core function of merely exercising its rôle as democratically appointed referee and final arbiter. And the government certainly shouldn't be demanding payment for those extra "services", neither from the recipients and nor from other people who happen to earn a lot of money or have a lot of private wealth.

Think about it: shareholders don't pay cash for their dividends (which would be a nonsense), they just get them in exchange for having financed/helped create the business, in the same way as citizens who abide by the rules all play their part in generating land rental values and so all get a Citizen's Dividend or free healthcare or whatever.

* Cluebat: which three or four people own most of the land in these areas?

Reader's Letter Of The Day

From City AM:

Individuals have rights, but those rights come with consequences. You have a right to smoke and drive booze and live off fast food. But if you then demand free treatment on the NHS, then the rest of us have to pay for it.

It is hardly surprising that a government with such a large budget deficit should try and force government spending costs down. If that results in some heavy handed nannying of people acting stupidly then so be it. Rights won't count for much in a bankrupt state.

Nick Reid

WTF? The anti-smokers keep trotting out this line about non-smokers being forced to pay for "free" healthcare for smokers, but truth of the matter is the other way round. Tax on fags far exceeds any marginal extra cost of healthcare for smokers, and some studies have shown that over a lifetime, smokers cost the NHS less than non-smokers than non-smokers anyway. Add to this all the old age pensions which smokers don't claim. I started mentally drafting a reply to this nonsense and moved on to the next letter:

Smokers pay far more into the NHS than they get back, and in some circumstances are denied treatment because they smoke. Continue the nannying, drive industries out of Britain, and enforce the closure of businesses (like the pubs no longer open because of the smoking ban), and for sure you will very soon reach a bankrupt state.

Pat Nurse

Well done Pat! Saved me the bother.

(Another cunning plan I dreamed up this morning is to set up a Big Tobacco Fund, similar to the Big Lottery Fund, i.e. each packet of fags will show a list of all the "good causes" which tobacco duty is paying for, and all tobacco advertising (once re-legalised) will be emblazoned with slogans saying "For every packet you buy, we donate ten pence to [worthy cause]" and non-smokers will be looked down on as being uncharitable so-and-so's. The plan needs a bit of work.)

Wednesday, 18 April 2012

Good work by the Pensioners' Party

Exhibit One, from The Guardian:

The pain that quantitative easing has caused pensioners and savers should be offset by government compensation, a report by MPs has said. The Treasury select committee recommends that the Bank of England provide an estimate of "the overall benefit and loss" to those groups as a result of the money-printing operation

"Loose monetary policy, achieved through quantitative easing and low interest rates, has redistributional effects, particularly penalising savers, those with 'draw-down pensions', and those retiring now," it said in its report on the budget. "The Bank of England has argued that some of those effects may be mitigated by the increase in asset prices stimulated by quantitative easing. While the aggregate of savers and pensioners may have received some benefit from higher asset prices, there will be many individuals who will not have benefited."

Ultimately of course, the purpose of QE was propping up and bailing out banks. To achieve that, the government had to push down interest rates. All QE boils down to is the government replacing long-term borrowing at higher interest rates with short-term borrowing at lower interest rates; so superficially the taxpayer makes a saving, but the commercial banks were allowed to bank a large part of these savings up front. This has the added bonus, from the banks' point of view, that low interest rates push up house prices, and if house prices are high, banks can trick people into borrowing ever larger amounts of money.

Presented like this, it doesn't sound too attractive, but the banks have harnessed the forces of Home-Owner-Ism. High house prices make us all poorer in the long run (and the banks correspondingly richer), but a large part of the electorate love the idea of high house prices because it makes them feel richer. Who are these people?Chart from the Intergenerational Foundation

Yup, it's the the Baby Boomers born since 1945. The people actually old enough to have fought in World War II don't own that much housing (bearing in mind they have next to no mortgage debt and the figures above show net housing equity after deducting mortgage debt); the Boomers couldn't give a shit about their children taking on crippling mortgages and aren't too fussed about how little their parents have to live on either - they are rubbing their hands in glee at all their lovely inheritance.

So fair enough, the pensioners have been done over, but at least they are organised enough to ask for handouts. But what are the chances of the Treasury select committee pointing out that people aged 40 and under are being done over as well, working out what they've lost in terms of interest on whatever deposits they have saved up, and more to the point, all the extra money they will have to pay out to be able to buy a house at today's inflated prices? And what are the chances of the Planning select committee (if there were such a thing) pointing out that NIMBYism has also driven up the price of housing?
Exhibit Two, a sob story from The Daily Mail:

Walter Harper has lived in his beloved home for two decades — but last July he was forced to put it on the market.
He shared the Luton bungalow with his wife and, after she passed away, his partner, and has watched his grandchildren play there. But he is being forced to move because he owes £110,000 on an interest-only mortgage that he can’t afford to repay. Instead of spending his last days in the house he loves, he will be forced to rent elsewhere.

Mr Harper, 69, first put his house on the market for £230,000. He has dropped the asking price by £20,000 and even if he gets this, he will still lose half of the money paying off the bank. These are savings he desperately needs, as rent is going to cost him almost £9,000 a year.

If he bought two decades ago, at the age of 49, the house can't have cost him much more than £50,000. The article says he had an interest-only mortgage, but why has it crept up to £110,000? A bit of mortgage equity withdrawal, perchance? And yes, his pension lump sum only turned out to be half what he'd been promised, but it still paid out £34,000, meaning he would left with a very modest £16,000 outstanding on his mortgage, which is still a fantastic deal, seeing as the mortgage he was paying was probably a lot cheaper than renting and he's made a £150,000 windfall, tax-free gain on the house.

But for some reason, The Daily Mail see this as a hard luck story (although he doesn't get much sympathy in the comments), while having no sympathy with somebody who's starting out today who's expected to magic a £40,000 deposit out of nowhere and then pay off a £160,000 which will cost twice that by the time it's paid off.

Again, mortgage equity withdrawal is the banks' secret weapon - a lot of the Boomers will be disappointed to find that their parents have already spent it all on themselves. Remember: in the end, the bank always wins (until I'm in charge).

"How dangerous are swans?"

Spotted by Graeme at the BBC:

A man has drowned after being attacked by a swan, which knocked him out of his kayak and stopped him swimming to shore. So how dangerous are these graceful white birds?

Anthony Hensley, 37, worked for a company that provided swans to keep geese away from property. On Saturday morning, the married father of two set out in a kayak across a pond at a residential complex in Des Plaines, just outside Chicago, where he was tending the birds.

One of the swans charged his boat, capsizing it, says Cook County Sheriff Tom Dart, whose deputies investigated the death. Mr Hensley tried to swim to shore but eyewitnesses told the sheriff's investigators the swan appeared to have actively blocked him...

I never really liked swans, too big, too aggressive. When you throw bread to ducks, they all swim up and grab a few, but if there's a swan around, they'll scare off the little duckies and try and grab all the bread for themsleves.

The options: use explosives or burn down the cabin

Spotted by ViewFromTheSolent at Fox News:

It may take explosives to dislodge a group of cows that wandered into an old ranger cabin high in the Rocky Mountains, then died and froze solid when they couldn't get out... Rangers believe the animals sought shelter during a snowstorm and got stuck and weren't smart enough to find their way out...

"There is a lot of snow, and it's hard to determine how many cows are there," Porter said.

U.S. Forest Service spokesman Steve Segin said Tuesday they need to decide quickly how to get rid of the carcasses. "Obviously, time is of the essence because we don't want them defrosting," Segin said.

Segin said officials are concerned about water contamination in the nearby hot springs if the cows start decomposing during the thaw. The options: use explosives to break up the cows, burn down the cabin, or using a helicopters or trucks to haul out the carcasses.

Tuesday, 17 April 2012

Norwegian gun nut infuriated by mediocre caricature

Fun With Numbers

From the BBC:

Retail prices in the UK are barely higher than a year ago, according to the government's Retail Price Index.

The Office for National Statistics (ONS) said prices in February had risen by just 0.3% over the past year. There are big regional variations, with prices rising in London, the South East and Scotland, but falling sharply in Northern Ireland and the North East.

Russell Quirk, of online retailers, said retail prices in London were "in a league of their own". "Average prices in England are only in the black due to the strength of London," he said, "If it weren't for the capital, the overall retail price picture would be a lot less pretty."

Also from the BBC:

House price inflation rose unexpectedly to 3.5% in March from 3.4% in February, according to the Office for National Statistics (ONS).

Scotiabank economist Alan Clarke said the central bank faced a tough balancing act. "In the context of the Bank of England, we are not growing and certainly not growing fast enough, and that argues for more QE," he said. "But uncomfortably high house prices are a significant obstruction. So it is not going to be an easy decision for the Bank of England in May."

I was pleasantly surprised to see this in The Sun

Here's their blurb

THE war on drugs has failed and the world must now consider legalisation, a former MI6 chief declares today. Nigel Inkster, a respected former No2 in the Secret Intelligence Service, is the most senior figure yet to call for a review of the world’s narcotics laws...

Other figures backing a rethink include ex-MI5 boss Eliza Manningham-Buller, Sir Richard Branson, ex-Defence Secretary Bob Ainsworth and UK Bar Council Chairman Nicholas Green QC.

- A ROYAL Navy war ship has seized 400lbs of heroin worth £14million from a ship in the Indian Ocean. Its sale would have funded international terrorists.

And they published his actual article next to the editorial. It's a fairly bog standard explanation of why trying to ban drugs is completely pointless and just makes things worse but good stuff nonetheless.

Monday, 16 April 2012

Fun Online Polls: Tory-Labour policies & The Titanic

The overall response to last week's Fun Online Poll, with 120 taking part, was as follows:

Which Labour policies did the Tories oppose while in opposition but enact once in government?
Tobacco display ban - 104 votes
Minimum alcohol pricing - 97 votes
Quantitative Easing - 88 votes
Subsidies for first time buyers - 78 votes
2% National Insurance increase - 70 votes
Big Society Bank - 67 votes
Other, please specify - 13 votes*
None. The Tories and Labour are very different - 0 votes.

It was a bit of a trick question actually, because these are all policies first proposed by Labour (or implemented in the case of QE) but not actually implemented until the Tories were in government, so I'm a bit disappointed at how many people had forgotten about the 2% National Insurance increase or the Big Society Bank (which would have been called something else, but it was to be funded by 'raiding' dormant bank accounts).

* Benj submitted "Tuition fees", I'd forgotten that one. I don't think the Tories really wanted to do this, it was just a spur of the moment thing to completely discredit the Lib-Dems in the run-up to the AV referendum.
Just in case there's anybody who hasn't had enough Titanic-related tomfoolery yet, this week's FOP is a little game.

Pick a direction (not to scale or historically accurate) in the widget in the sidebar and see if you hit the iceberg.

"World's Largest Metaphor Hits Ice-Berg"

From The Onion:

Representation of man's hubris sinks in North Atlantic: 1,500 Dead in symbolic tragedy

Officials of the White Star Line have confirmed the sinking, during her maiden voyage, of the RMS Titanic, the world's largest symbol of man's mortality and vulnerability.


"Let us take a step back from the horror of the tragedy," said Lord Peter Hothcrofte, a British naval historian, "and view it in terms of its grander significance. Simply put, the Titanic was more than a crystallization of the accumulated triumphs of 200 years of Western industrialization wedded to the firm but icy hand of science triumphant. It was a ship larger than any ship need be, which therefore also makes it somewhat of a hyperbole."

Nice bit of DoubleSpeak by our PM

From the BBC:

David Cameron is to praise the record of Tory local authorities in cutting waste and delivering "best value" as he launches the party's campaign for English council elections.

He will say ministers have frozen council tax for two years, made town hall pay more open and given councils more freedom over their finances.

On the facts, it does appear that Tory run councils are slightly less wasteful than Labour-run ones, but how does he square "ministers freezing council tax" with "giving councils more freedom over their finances"?

Mr Cameron will tell party supporters that the Conservatives "run the best-value councils in the country" and have been "leading the way" - as the largest party in the coalition - in helping freeze council tax bills for the second year in a row...

More broadly, he will say the government's decision to raise personal tax allowances for more than 20 million people, increase the state pension by £5.30 a week and cut corporation tax means "every single person" has a reason to vote Conservative.

Yes, "every single person", apart from the teensy tiny insignificant minority who pay National Insurance or VAT. Or does he mean "a reason" singular as opposed to the dozens of reasons for not voting Tory?

Horses are the new cows

From The Metro:

A 53-year-old woman who was found dead in a field near Dartford, Kent was almost certainly killed by a horse, police have said. The woman's body was discovered close to Darent Valley Hospital on Friday morning and her injuries suggested she had been attacked by a stallion.

A spokesman for Kent Police said the death was not being treated as suspicious and that the force was preparing a report for the coroner. "It is believed that a stallion in the field where the body was found may have caused her death," he added.

The woman, from Gravesend, was a patient at the hospital and had been told by doctors that she should go for a walk, reports the Sun. She was apparently found five hours later with the horse standing over her and injuries that indicated she had been repeatedly kicked and bitten. The animal has not yet been put down, but that may change if the authorities conclude it is likely to prove dangerous in the future.

They own land! Give them money!

Bracknell Forest Council is dishing out taxpayer subsidised loans:

Exhibit One:

Would you like to improve the warmth, comfort, safety and security of your home? Are you a homeowner aged 60 or over? If the answer is YES, please read on for some good news...

WE have created a loan that will help you remain in a well maintained home during your retirement and you can repay as much or as little of the loan as you like each month. All this is backed up with the peace of mind that the loan is provided by your local authority on a not-for-profit basis.

Emailed in by Robin Smith.

Exhibit Two

Who is eligible?

Empty Homes Loans are available to owners of empty properties and anybody wishing to purchase an empty property. Applications are processed on a non-status basis, although a credit check is carried out and a very poor credit history may result in the application being declined. Bankruptcy will automatically prevent us from making a loan...

Interest will be charged at 2% above Bank of England rate, subject to minimum and maximum rates (please contact us for a quotation). Your account will also be debited with an annual charge of £15 to cover the cost of loan administration and statements. The loan may be repaid, in whole or part, at any time without penalty. When the loan is completely repaid there is a flat fee of £50.00 for cancellation of our registered charge.

Via SBC at HPC.

Reader's Letter Of The Day

Amazingly enough, CityAM published an edited down version of my rant from last Friday, it's the fourth letter down:

Accounting fiction

The idea that one department of HM Treasury owes another department of HM Treasury £350bn is an accounting fiction. We might as well cancel the gilts owned by the Bank and recognise the commercial banks' loans to the BoE as government debt instead.

Still, the taxpayer isn’t paying interest to the Bank, another department of the Treasury (the Debt Management Office) is. The accounting fiction nets off to precisely nil. The Treasury is not only paying interest to itself, it is receiving interest from itself, it is a zero-sum game.

Rather worryingly, the first letter is from a former member of the Bank of England's Monetary Policy Committee, i.e. somebody who ought to know what he's talking about, who kicks off his letter with this bold statement:

Cancelling the bonds would undermine the credibility and independence of the Bank and leave a huge hole in its balance sheet. It would leave the Bank technically insolvent because it would no longer hold assets to match the substantial sum of money (about 20 per cent of GDP) created under the quantitative easing (QE) programme.


Until recently, gilts were issued, redeemed and interest payments organised by the BoE (a department of HM Treasury). In 1997, these functions were transferred to a new department of HM Treasury called the Debt Management Office, see page 26 here. This makes it easier to sustain the accounting fiction that the DMO still owes somebody that £350 billion, or that those £350 billion in gilts are still in issue - and that conversely the BoE holds real financial assets, but does not change the substance of the matter one iota.

Clearly, if the BoE as creditor were to waive/cancel the gilts, it would have a paper loss of £350 billion, but the DMO would have a paper gain of £350 billion, so for HM Treasury as a whole, the exercise is completely neutral, it would not affect the money supply (a giant fiction in itself) or the taxpayer or interest rates one little bit.

Furthermore, QE in itself did not 'create' money in itself, all that happened was that the UK government swapped its borrowing/repayment terms from long term to short term, it's the same as paying off a personal loan with a credit card on an introductory low-interest rate offer.

So as ever, the question is, is Andrew Sentance lying or stupid?