The results to last week's Fun Online Poll were as follows:
What caused the global financial crisis which has seen the UK mired in recession for the last seven years?
The global land price and credit bubble, mortgage backed securities etc. - 81%
UK government deficits of a few percent of GDP in the years before the crisis - 5%
People under 25 claiming benefits rather than looking for a job - 4%
Other, please specify - 10%8
Correct. So treat the cause, not the symptoms.
Which is the opposite of what UK governments (of whatever party) have been doing for the last seven years.
* Taking away benefits from the under-25s is something the Tories are doing quite ruthlessly (aka 'bayonetting the survivors). Despite the fact that most of them were still at school back in 2007-08 and thus can be absolved of any blame.
* If government deficits were a minor or secondary cause, then why have they run a cumulative total deficit of over fifty per cent of GDP over the last seven years? (considerably higher than what Labour was doing until 2008).
* Seeing as the land price/credit bubble was the actual cause, why have UK governments done their level best to prop up house prices and prop up speculation and banks by depressing interest rates?
Strikes me, they are making things worse and just delaying the inevitable. Perhaps until 2025-26?
Muslim migrants have been in the news a lot recently. History shows that they are not very good at fitting in Western/non-Muslim countries and tend to stay "within their own communities", so we can assume that Muslims prefer to live among other Muslims.
So fair enough, people are fleeing the war zones (I know that I would), but that's only part of Syria/Iraq. Surely your easiest option is to move to a more peaceful area in Syria/Iraq; your next option is move to a neighbouring Muslim country; your next option is the easy overland route to a Muslim country further afield (from the Atlantic to Pakistan, if you gloss over Malaysia/Indonesia).
So why are so many of them taking the most difficult journey across continents and oceans to north-west Europe, where they will never fit in anyway? And yes, that is more or less a rhetorical question.
So that's this week's Fun Online Poll.
Vote here or use the widget in the sidebar.
Monday, 31 August 2015
The results to last week's Fun Online Poll were as follows:
From the Guardian
The city’s festival is vast, exuberant and intoxicating – and a giddy opportunity for price gouging that almost every business in town takes advantage of. It is the perfect capitalist model: the owners of assets such as hotels and restaurants skim off large profits, while the people who make those profits possible – the performers sweating in the city’s aircon-dodging venues – walk away penniless.(1)
Take the Ibis, a budget hotel, in the city centre. It makes no bones about its “dynamic” pricing model, with a digital screen facing the street showing the latest shocking room price updates. Last week it was like the Shanghai stockmarket, just with soaring prices rather than collapsing ones. I don’t recall the exact figure, but on the Saturday it was asking above £230. This for a hotel that charges £35 a night for advance bookings at other times of the year.(2)
Not far from the Ibis, I was lucky to get a seat for one of the triumphs of this year’s festival, a theatre production called 1972: The Future of Sex. It’s the third time Wardrobe Ensemble has played at Edinburgh, and even after great reviews and sold-out performances, it will barely cover its costs.(3) One of the group’s actors, Ben Vardy, told me: “We broke even in our first year, and made a small loss in our second. We will turn a small profit this year because it has been very, very successful. But when I say profit, I mean under £100 each.”(4)
The business model for the creative industries is broken. For every performer at Edinburgh working for nothing, read musician on Spotify or writer on the net.(5) Providers of content make peanuts, while the controllers of the infrastructure, such as Google, walk away with extraordinary profits.(6)
It was ever thus, some might argue, although the internet has allowed businesses to extract profits with a precision previously not possible. How can we transfer some of the wealth grabbed by, say, hotels in Edinburgh and hand it to the people who generated it? A city-wide tax on hotels and restaurants during the festival, the money redistributed to performers? Utopian, probably, and in any case illegal under our tax regime.(7)
(1) Well, yes, if you can run a business where you make money as a result of people who are prepared to work for nothing, that is.
(2) What else is it going to do? Hotels across the country vary their prices based on demand. London is cheap at weekends, the Cotswolds cheap on weekdays, coastal places rise in summer.
(3) Maybe if you're selling every ticket, you need to consider raising your prices?
(4) So clearly, they recognise that it doesn't make much money, but keep on doing it. Maybe like lay preachers and people who sing in choirs, it's more about doing the thing for fun. Of course, the other thing in all of this is that these festivals are more about business than pleasure. You hold a festival, you can get various media people from the BBC or C4 to take a trip to the festival to see your show, maybe be impressed with your work and commission you to write something for them, for real money.
(5) The business model isn't broken, because Edinburgh has hundreds of shows being put on. Spotify has 200,000 songs uploaded every day. There's no shortage of people making stuff, which is all we want. And historically, going back to 1980s synth bands, 1930s dance hall bands or 19th century choir festivals, almost no-one made money. People mostly did their thing for pleasure and to perhaps make some beer money. The change today is that people are now doing this with making their music globally available and making a few quid from YouTube adverts. The people who are most upset about this aren't those people but the old gatekeepers of promoting artists in the old media, and the artists who had the big company backing. They really don't like that all these small artists can have access to distribution and sell product instead of them.
(6) Google? I thought this was about Spotify? What infrastructure do Google control? Not the internet, the world wide web, the fibre-optic cabling or any of the domain registration stuff that makes up the net. Google have mostly been rather unsuccessful with making money off artists. Their profits come from people searching for funny cat videos and getting served an ad.
(7) You don't even need anything this complicated - you just charge business rates to hotels that get a financial benefit, and charge the local people who get the benefit of art on their doorstep and spend that on the festival, which is what Edinburgh does already, to the tune of something like £4m per annum.
Saturday, 29 August 2015
Here's a simple diagram showing how VAT reduces economic activity (assuming a certain fixed level of costs) and sketching in the receipts from VAT (about £100 bn) and PAYE/corporation tax. This assumes that the overall average rate paid by employees (income tax and NIC), company and business owners averages out at 40%. So mathematically, PAYE and corporation tax receipts etc are about £200 bn and total tax paid by the VAT-able sector is £300 bn:
Now, what happens if we got rid of VAT but left other tax rates the same?
Output, in units, increases by one-fifth and the 40% average rate, now applied to a much larger tax base, would raise about £281.25 bn (if my geometry is correct). So although VAT taken in isolation is £100 bn a year, getting rid of it would only mean total revenues falling (a 'cost' from the government's point of view) by £20 bn.
For sure, I have made a lot of assumptions here, the higher the fixed cost line, the more dramatic the effect and vice versa. But even if the fixed cost line is set to zero, total receipts would only fall from £300 bn to £240 bn, a dynamic 'cost' of only £60 bn.
And the 40% is just an overall average rate, the average rate for low earners will be lower, but all those extra jobs means millions off the dole queue into low paid jobs at least, and the welfare savings is well in excess of 40% of the extra money they earn.
Perhaps we can split the difference between £20 bn and £60 bn and call it £40 bn?
Headlines like this just remind us that share prices have little to do with the real, productive economy.
If you are looking to invest in shares in the future, this is good news, if you own shares and were hoping to sell in the near future, this is bad news. But the whole thing is a sideshow.
People flatly refuse to understand that there's no natural or economic law that says that private sector businesses, whether quoted or not, have to have share capital at all.
The model, which we can use for illustration, is the Limited Liability Partnership ('LLP').
* The assets side of the balance sheet, i.e. what it owns, looks exactly the same as a company with share capital, but instead of 'share capital' it just has 'members' capital'.
* Each LLP can pretty make up its own rules, but the general idea is that profits would be divided up between members according to how much real cash they have actually put into the business (plus undrawn profits from earlier years).
* Instead of the business being owned by 'shareholders' it is owned by 'members'.
* Instead of each shareholder getting a cash dividend of so many pence per share with the rest of the profits being reinvested, the LLP's profits would simply be apportioned between members according to how much hard cash they have paid in.
* Instead of buying shares in the business from existing shareholders, people just pay in cash to the LLP. Instead of receiving dividends or selling shares when members need cash, they just withdraw cash/capital.
* Instead of each share being entitled to one vote at meetings, you would get one vote for each £1 or £100 you have invested.
* Instead of wild fluctuations in share prices, no member of an LLP would make or lose a fortune overnight.
* Instead of people wasting oodles of time analysing share price movements, they would be scrutinising the actual performance of the business, which is far more important.
* Instead of businesses being valued at the discounted net present value of expected future profits, a business would just be worth roughly the same as its total assets.
* Investor returns, per £ invested would be much higher. Let's say that for quoted companies, the shares are worth three times as much as the actual assets in the business and the overall return on those shares is five percent (dividends + reinvested profits). Instead of paying £3 for £1's worth of assets in the hope that you will get your £2 back from the company and a return of 15 pence per share, people would just pay in £1 into a quasi bank account with the LLP and be credited with 15 pence profits every year.
* As mentioned, each LLP can have its own rules. Clearly, if there is a sudden downturn in expectations for a particular business, then investors might rush to withdraw their cash/capital, thus speeding up the demise of the business (which might be a good thing). In which case, an LLP could be entitled to simply suspend withdrawals in the same way as trading in some shares can be suspended. Or the LLP simply makes a write down for expected future losses, so if you paid in £1 and there's a huge loss (past or future) which will wipe out half the asset base, then 50p is simply written off your balance. This is still a lot better than buying a share for £3 and seeing it fall in value to 50p.
* When a whizz bang start up floats on the stock exchange, then of course the founders will sell out for a multiple of what the company's assets are actually worth, no harm in that, it incentivises start ups. With an LLP system, when a private LLP goes public, those founders would just make it clear that for every £3 people pay in, £1 goes into the business and the other £2 goes into the founders' pockets. That is, in cash flow terms, absolutely no different to what happens now, just a bit more honest.
* The only downside I can see is that it will be more administrative faff running such quasi bank accounts than just updating a shareholder's register. Again, each LLP can make up its own rules, so for example, it could say that people can only pay in or withdraw cash/capital once a month or on four specified dates in the year with a few weeks' notice. It is all perfectly do-able.
We know that this is a much better system, but current owners will always vote against it because they can make a windfall gain at that point in time when their business is first quoted on the Stock Exchange, just like the building society flotations of the 1990s. It's a beggar-thy-neighbour rent seeking policy where profits are transferred from future owners to current owners. That's the only 'law' that I can see operating here - people are stupid and greedy.
Friday, 28 August 2015
From imdb and imdb:
Adapted from the bestselling novel by author John Green, the coming-of-age story centres on JJ 'Jake' Gittes, a sixteen-year old private detective who specializes in matrimonial cases.
He is hired by his enigmatic neighbor Margo, who suspects her husband Hollis of having an affair. After Margo takes him on an all-night adventure through their hometown, JJ does what he does best and photographs Hollis with a young girl
Margo suddenly disappears - leaving behind cryptic clues for JJ to decipher. When her husband is found dead, Jake is plunged into a complex web of deceit. The search leads JJ and his quick-witted friends on an exhilarating adventure that is equal parts hilarious and moving.
Ultimately, to track down Margo, Quentin must find a deeper understanding of true friendship - involving murder, incest and municipal corruption all related to the city's water supply - and true love.
*DBC Reed says that this one has a Georgist sub-plot: "Chinatown = struggle to divert water to supply new development. Good film too. There is an academic paper that demonstrates that Americans nowadays accept the film's version of the Owen's River takeover as the bare unvarnished truth."
Somebody at the BBC has decided to have a go at writing an Onion style article.
In this study, researchers looked at 3,694 15-year-olds based in Bristol. They found the more young people identified with the goth subculture, the higher their likelihood of self-harm and depression.
The goth movement - with its emphasis on black clothes, heavy black make-up and sometimes gloomy music with doom laden lyrics - has been attracting adolescents for many years.
But for the original and best, see for example here.
Thursday, 27 August 2015
I was drafting a couple in my head, but then I saw this at the Facebook LVT page.
Gemma Seymour knocks various Faux Lib, Homey and waffly Georgist assertions out of the park:
"The obvious implication is that land is, morally speaking, a commons—anyone can use it, nobody can exclude anyone else."
This is utter nonsense. Of course we allow a license to exclude, for which the licensee must pay back to the community the value of that license. This is the whole *point* of the reclamation of economic rents.
"There is no obvious limit to what government is entitled to make me do."
Again, rubbish. There are very clear limits on what government actions may be considered legitimate.
"The argument for the efficiency of land taxation depends on the government that imposes it distinguishing the site value of land from the value that is due to [the owner's] action."
Which anyone even marginally familiar with current property tax valuation practices knows is already the current practice. This is a non-issue.
"I am an anarchist rather than a Georgist."
How absurd. There is no such thing as "anarchism". There is always a power structure. The human brain is incapable of forming trust relationships beyond Dunbar's number, and all civilisations of any complexity require abstraction of trust—government.
Great, saved me the bother.
... they don't do maths.
From some some special pleading by the Scottish Retail Consortium aka Scottish Commercial Landlords Consortium:
3. The retail industry contributes around £2 billion in taxes per year in Scotland across the top five taxes of VAT, income tax, national insurance, business rates and corporation tax. Of the £2 billion, retail contributed close to £700 million in business rates...
5. In 2005, business rates made up around one-third of all taxes borne by retailers. By 2014 this had grown to nearly 50 per cent.
Have I missed something or are they deliberately lying?
They sat they pay £2,000 million in taxes, of which £700 million is Business Rates. That means Business Rates make up about 35 per cent of their total tax bill, not 50 per cent. So the share has gone up from "around one-third" to about 35 per cent, in other words "not at all".
And I find it baffling that they focus so much on Business Rates. Their single largest tax bill is going to be VAT. Total UK VAT receipts are over £100 billion a year; total Business Rates receipts under £30 billion. And if it's not VAT, then it will be PAYE. Business Rates will be a distant third and corporation tax will be an even more distant fourth.
Or put it another way, even their £2 billion total is highly suspect. According to this, total UK retail sales alone are about £350 bn a year, £58 billion of that is VAT (paid directly to the government or paid indirectly as input tax which their suppliers pay to the government). Scale that down for Scotland and that's about £5 billion. Even if we politely ignore input VAT, the total they pay directly will be more than half of that, call it £3 billion?
Either way, we have to assume that they pay about four times as much in VAT as they do in Business Rates.
(H/t Thomas Hall and Lola).
Wednesday, 26 August 2015
From The Evening Standard:
Labour leadership frontrunner Jeremy Corbyn would push for women-only public toilets to be introduced to curb sex attacks, he has said. The Islington North MP, currently the bookies' favourite for the party’s top job, made the comments while launching his campaign against sexual harassment.
“Some women have raised with me that a solution to the rise in assault and harassment in public toilets could be to introduce women-only facilities. My intention would be to make going to the bathroom safer for everyone whether in the pub or on a train.
"However, I would consult with women and open it up to hear their views on whether women-only make-up sessions in night clubs would be welcome – and also if piloting this where harassment is reported most frequently would be of interest."
British Toilet Police recorded 1,399 sexual offences in 2014-15 in Britain’s toilets and washrooms, an increase of nearly 300 on the previous year and a new record.
From City AM:
... [Morrisons supermarkets] is paying the price for its scatter gun approach to buying convenience stores. Last week, it emerged Morrisons is considering a sell-off of its 150-strong M Local estate to a consortium of investors just months after closing 23 shops...
Had it moved into the market earlier and picked stores in better locations at competitive prices, then it could have been better placed today, Jonathan de Mello, head of retail consultancy at Harper Dennis Hobbs, told City A.M.
“The main challenge facing the sector is the fact that it is becoming increasingly crowded, and Tesco, Sainsburys and M&S Simply Food – given first mover advantage – were able to cherry pick the best sites.
"[Morrisons’] desperation to build a critical mass of convenience stores to catch up with the competition led it to over-bid for sites in order to secure them – often with Tesco and Sainsburys only bidding to push up the price as much as possible.
“Average turnover of an M-Local store for example is circa [sic] half the average turnover of Tesco Metro – a function of poor site selection. This issue was compounded by the high rent being paid in order to secure the site – leading to very low or negative margins. Morrisons are right to dispose of their stores at this stage given this, and need to start afresh once they have stabilised their core supermarket business,” de Mello said.
This was also part of the reason for Tesco doing so badly recently. Their success in the 1990s and 2000s was not so much down to their skill as retailers, but the fact that their crack squad of land specialists had snapped up a load of good sites cheaply in the 1990s and stifled the opposition with various planning ruses.
Tesco executives thought "We are opening new stores and profits are going up. Which means we are better at retailing than the others, and that if we keep opening new stores, profits will continue to go up". This was all hubris. Truth of the matter is, they are no better or worse at the actual 'retailing' bit than the rest of the competition and all they were doing was tapping into the hidden profits which they had already secured back in the 1990s when the best locations were cheap.
Tuesday, 25 August 2015
From The Daily Mail:
For more than 50 years the ‘Jesus Man’ of Bradford walked the streets spreading good cheer wherever he went with a wave and a warm smile. Geoffrey Brindley cut a distinctive figure dressed in his familiar brown robe and sandals with a satchel around his neck.
No one really knew where he was walking to or what he was doing, but this Christian figure somehow brought joy to people’s lives by his friendly demeanour. A ‘gentle and spiritual man,’ he simply brightened the day by smiling at strangers as he passed by...
It's true! When I was a lad, we saw him a couple of times out of the car window on the way home from the shops, and even from that distance, you felt he had given you all a smile and a wave. My Dad claimed that the man had been walking around since time immemorial (which wasn't quite true, the man was only ten or fifteen years into his journey by then) and pondered whether he was The Actual Wandering Monk.
My Dad also said that once when it was really chucking it down, he had pulled up and offered the man a lift, but the man just said that didn't need a lift where he was going.
I always wondered whether I had somehow imagined all this (a bit like small children believing in Santa Claus) and/or that my Dad had embellished one or two chance incidents into an urban myth. Turns out it was true.
From the BBC:
Harriet Harman has said 3,000 alleged "cheats" have so far been excluded from migrating to the UK, with more expected.
The acting Labour leader said: "It is not funny or clever for people from other countries to try to cheat their way into our system," and only people who supported the "aims and values" of the United Kingdom would be allowed to enter.
She was speaking after a meeting with the four leadership contenders. She said the verification process was "robust" and would go on until the "very last minute"...
Under new rules introduced by her party in 1997, residents of other countries could sign up to become British citizens with a minimum of vetting procedures. More than 160,000 people a year took up permanent residence in the UK.
The party said this brought the total size of the population to 64,000,000.
Emailed in by MBK from The Times:
A millionaire lawyer who jumped in front of a tube train was racked by guilt that she “hadn’t been a good enough mother”, an inquest heard.
Sarah Johnson, who lived in a £12.5 million mansion in an exclusive area of London with her husband, a banker, and three young children, died in April this year.
Spotted by JJ in The Estates Gazette:
Let’s take an example. Berkeley Homes at Woodberry Down in Hackney. It has permission for around 5,000 homes. Now you’re the boss of Berkeley Homes, do you A) push the button and start construction on the whole lot or do you B) built out 200-300 units per year over the course of 20 years?
Example A goes a long way to solving the housing crisis in the local area, but also causes the local housing market to burst with a huge over supply of homes and crucially leaves the developer with little or no profit. People forget developers are private companies with shareholders to account to and not philanthropists. So in short it’s B every time.
But A) would not leave developers with little or no profit. The 'profits' he is talking about relate to inflated land prices and not to the overall income of the construction sector. The sub-contractors doing the actual building don't get a penny of the land price gains, but most of them can still make a living from it - if construction output increased, then more actual builders would be able to make a better living from it.
Come to think of it, if it wasn’t for land banking there would be a lot more boom and bust, with prices more volatile than they already are.
Bollocks. Prices would be much more stable but at a lower level, just like any other mass-produced item. So he has just contradicted himself.
Say a developer has 10 sites, all of 1,000 units or so; they’ll build out 200-250 homes per year. That developer will contribute nearly 2,000 units per year. Give that same developer 20 sites instead of 10, their output will double, they’ll still be ‘drip feeding’ homes.
More bollocks. The amount which land bankers drip feed onto the market does not depend on how big their land bank is, it is set at the profit maximising level. We found out recently (h/t Peter S) that for every nine existing homes which are bought and sold, land bankers will drip feed another one onto the market. This ratio has been constant for at least forty years. The amount of land which they have in their land banks is just a balancing figure and of little relevance to output levels.
A few more thousand hectares of so called ‘green belt’ on the periphery of London which isn’t really very green is easy to find. But blaming builders for land-banking is much easier.
Blaming land bankers is missing the target. The reason for all this is the fact that land values are a free gift from society, and in the absence of a tax on them (instead of taxes on earned income to subsidise land values) too many people will be putting too much effort into getting their hands pin the fixed total pool of gains; land banking is just an extreme symptom of the underlying malaise.
Monday, 24 August 2015
The results to last week's Fun Online Poll were as follows:
You will/would you vote for as leader of the Labour Party?
Jeremy Corbyn - he'll make Labour unelectable = 41 votes
Jeremy Corbyn - I might not agree with him, but at least he has principles = 28 votes
Jeremy Corbyn - I agree with the majority of his policies = 3 votes
One of the three faceless soft-centre Tory-lite candidates = 2 votes
None of the above = 16 votes
Other, please specify = 1 vote
I think he's got this one sewn up.
Thanks to everybody who took part.
Something which has been bugging me for years is the Tory notion, subscribed to by the three out of four Labour leadership contenders who aren't Jeremy Corbyn, that the UK has been mired in recession for the last seven years because Labour was running up deficits in the preceding years.
That is the Economic Myth from Hell, if you ask me. Of course Blair-Brown are guilty as charged when it comes to their part in stoking the UK land price bubble and then transferring bank liabilities to the taxpayer, but the Tories have merrily continued this strategy and in any event, the Tories are running far larger deficits than Labour did.
Just as sickening is the Tory notion (again, subscribed to by the other three Labout leadership contenders) that this should be blamed on people now under 25 over-claiming benefits instead of working. Apparently, we can fix the deficit by taking away their benefits; this will magically get them all into jobs; and this in turn will magically put the economy on the road to recovery. That's like blaming a war on dead soldiers and civilians.
But what do you think?
Vote here or use the widget in the sidebar.
From The Evening Standard:
Labour's shadow City minister has said she is "trying not to feel too flattered" after receiving a letter in the post praising her for showing "so much cleavage" during a television debate.
The missive was sent to Alison McGovern following a Channel 4 News debate on June 10, and was posted to twitter by the MP yesterday. McGovern appeared on the news programme opposite Conservative MP Kwasi Kwarteng, to discuss George Osborne's proposed bill obliging governments to run a surplus on their budgets while the economy was booming.
The letter, signed only "JG Hunter", does not reveal the gender of the writer, who claims to be a fellow Labour Party member.
The letter said:
"I'm not sure why you felt it necessary to demonstrate your cleavage so obviously on TV. I can only imagine that it was deliberate in order to attract attention to yourself as the Labour spokesperson or distract male observers from the topic under discussion?
Either way, I'd like to express my thanks for giving everybody something nice to look at."
And I am in the business, so I am entitled to say 'I told you so'.
Posted by Lola at 15:33
From City AM:
This week, fed-up Londoners will be forced to endure two more Tube strikes.
And this despite Transport for London having already offered the unions: a two per cent salary increase this year, inflation-protected rises in 2016 and 2017, a £500 bonus for all staff on Night Tube lines, £200 extra per Night Tube shift for drivers, and the freedom to decide whether or not to work Night Tube shifts at all...
Accepting these demands would require a fare rise of 6.5 per cent or an extra £152 per year for a Zone 1-6 Travelcard. Clearly, this is unacceptable.
The article includes a long list of ostensibly sensible cost saving suggestions, such as driverless trains.
But he is jumbling several quite distinct questions, for example:
1. Are London commuters prepared to pay 6.5% more on their Travelcards in exchange for a 24-hour Tube? Is it worth £3 extra a week on your Travelcard to be able to stay out as long as you like without getting stung for taxi fares home? What about people who work night shifts, this will be a boon to them. Etcetera.
2. To the extent that sensible cost savings can be made, should those be reflected in lower ticket prices or a lower subsidy from the taxpayer?
Via, MBK, a shock horror from The Sunday Times:
NEARLY two-thirds of people due to retire next year will receive about £116 a week as their new “flat rate” state pension, rather than the full payout, a Freedom of Information (FoI) request reveals today...
The reason many people’s incomes will be slashed is because they have spent time “contracted out” of the state system. Simply put, this means that they paid lower national insurance (NI) contributions during their working life, and this will be taken into account under the new scheme.
If you were in a final salary or career-average pension scheme, you will have paid a lower rate of NI in return for giving up your entitlement to the government’s earnings-related pension top-up. This top-up, called the state earnings related pension scheme (Serps) and later the state second pension (S2P), is currently added to the basic state pension.
If you were in a personal pension or defined contribution workplace scheme, you will have paid the standard rate of NI, but some of it will have been paid back into your private pension pot.
For a start, this has been known for years, and secondly, that all seems perfectly fair and reasonable to me.
Those who 'opted out' must have known that they were swapping a lower state pension in return for a higher private or employer pension. Doing otherwise would be a retrospective subsidy to the 'pensions industry'.
Sunday, 23 August 2015
From an otherwise somber BBC documentary, Britain's Forgotten Slave Owners, this clip brought a wry smile to my face.
Land taxes are seen by many as an infringement of property rights, just as the abolition of slavery was back then. They even had their version of our Poor Widows in Mansions.
Friday, 21 August 2015
From The Guardian:
Responding to complaints from banks that the levy has been raised too often and without warning, Osborne set out a timetable of reductions from 0.21% to 0.18% from January 2016 and 0.17% from January 2017, before reaching 0.10% from January 2021. The levy had been based on global balance sheets, but would from 2021 be focused only on their UK operations.
The bank asset levy is a good tax, so scaling it back is a bad idea but restricting it to UK assets only is a very sensible idea.
The chancellor’s move to scale back the levy, which has raised £8bn since 2010, came alongside a new 8% surcharge on bank profits. Analysts estimated the changes would save major international banks such as HSBC and Standard Chartered almost £1bn in tax a year.
So they are swapping a good tax for a less-good tax. Bad idea.
But in the grander scheme of things, so what? Five years ago, UK corporation tax was 28%; UK banks will now pay 20% normal corporation tax plus 8% surcharge = 28%, so the clock has just been put back five years.
“The proposed changes to the bank levy and introduction of the tax surcharge on banking companies announced in last month’s budget may benefit UK headquartered international banks but will have a disproportionate effect on building societies such as Nationwide,” Beale said.
True. But that is the whole point. If they had done the sensible thing and based the original bank asset levy on UK assets only at a higher rate, this would come to the same thing.
“This represents a missed opportunity to support diversity by acknowledging that building societies are different to banks and to recognise the contribution Nationwide and other mutuals make by lending to the UK economy, and the housing market in particular.”
I read as far as "support diversity". Special pleading. Ignore.
Killer punch line:
The building society said that the impact of the changes to the banking levy and the introduction of a tax surcharge announced in the budget will cost £300m over the next five years. “This is equivalent to the capital required to support about £10bn of lending,” a statement said.
If true, which is questionable, then this is A Very Good Thing indeed, because all that extra lending would just go into higher land prices i.e. transfer wealth from younger buyers to land owners.
From The Telegraph:
[Jeremy Corbyn] has proposed a “People’s Quantitative Easing” scheme in which the Bank of England would “be given a new mandate … to invest in large-scale housing, energy, transport and digital projects”...
Mr Corbyn’s proposals would clash with Article 123 of the Lisbon Treaty, which forbids central banks from printing money to finance government spending. Lawyers warned that a lengthy fight with the EU would be a certainty, and could mean that infrastructure projects end up incomplete.
Traditional QE was introduced by the Bank in 2009, since when it has intervened in the bond market to buy Government debt. Key to this is that the Bank buys bonds from the so-called secondary market - from private investors rather than directly from the Government.
Buying the instruments directly from the state is illegal under Article 123 of the Lisbon Treaty. Richard Murphy, who Mr Corbyn has named as the architect of People’s QE, has proposed “a ruse” in order that the Labourite’s plans not attract the ire of EU lawmakers.
“The bonds have to be sold into the financial markets first, but there is no reason at all why this could not be for an agreed fee akin to underwriting, after which the bonds are, indeed purchased by the Bank,” he has said.
Mr Murphy said that Article 123 was clearly a piece of legislation whose “sell-by date had passed”, and that some fiddle would be required to get around it. But the EU may not look kindly on attempts to bypass its rules.
Whatever the merits or otherwise of Corbyn's suggested projects are (housing is a great money spinner, you'd struggle to lose money on that), Murphy is bang on with that one.
The Bank of England was originally set up to borrow money from the general public and give it to the government to spend on enlarging the navy. It has somehow turned into a 'central bank' over the years, but that is a question of fact and degree.
HM Government, HM Treasury and the Bank of England are all different parts of the same thing. Why would it make any difference which one of them borrows or prints money to finance public expenditure? Who cares what the book debts between different parts of the government are, it all nets off to nothing.
To cut a long story short, if I need money to pay for my loft conversion, it doesn't make any difference whether I borrow the money in my own name; whether my wife and I borrow it jointly; or whether she borrows it and then lends it on to me. Our total household indebtedness and our total household assets are exactly the same. The only relevant question is this: "is it worth getting a loft conversion done?", that is all.
Thursday, 20 August 2015
From the BBC, the article tells you pretty much what the headline suggests.
Looks like the human race got away with it, yet again, much as I expected, most of these Ebola outbreaks seem to fizzle out after a few months.
Which reminds me of this story:
As New Orleans residents warily track another threatening storm, a new report presents the clearest picture yet of deaths from Katrina in Louisiana. Of the nearly 1,000 who died, almost half were 75 or older, according to researchers...
The results present a tragic portrait of elderly residents who may have thought the warnings were a false alarm, who feared that abandoning their homes would lead to looting, or who simply didn't want to leave their familiar surroundings for the unknown.
That's the problem: complacency. If the government subjects you to dire warnings about imminent catastrophe every few years and nothing bad happens, then sooner or later you stop taking them seriously.
Wednesday, 19 August 2015
By Samuel Bowman. There are some excellent rebuttals by the usual suspects in the comments below, but it's basically half baked waffle from the very beginning. Here's my tuppence worth:
1.LVT supporters say that an LVT would encourage more productive use of land. But is this desirable?
No, the point is that LVT encourages more efficient use of land (and existing buildings). I fail to see how that is not desirable. Even if total output initially stays the same, if land and existing buildings are used more efficiently then other costs - for example transport and commuting costs, or the costs of building a new building in a less favourable location while another building in a more favourable location stands empty - decrease, so we are then also making more efficient use of cars, lorries, trains and roads; or building materials and labour. So these resources can be released to grow the economy in other ways.
Land owners already have an incentive to do something with the land – opportunity cost. In other words, if I have an acre of land that I’m doing nothing with, but that I could profitably let a bunch of houses be built on, the cost to me of doing nothing is that house profit. An LVT would just add to this.
But the lucky land owner, under current rules, also has notional income which more than covers the opportunity cost. If money in the bank is earning 2% a year (after tax) and land prices are going up by more than 2% (tax free), then there is no net opportunity cost.
If you look at the financial statements of Persimmon, Bovis Homes and so on, they boast openly that they have land banks with actual or potential planning sufficient to cover ten to twenty times annual output. Fact. If his assertion were correct, then they would not hold onto these land banks.
The value of the one-off uplift when planning is obtained and houses are built is always there and is also drifting quietly upwards without the need for any action, effort or expense whatsoever. What the LVT would do is soak up the notional income and not add to the opportunity cost.
Making every resource we have produce as much as possible isn’t necessarily efficient or desirable... We could tax gold ownership so that it was only used in industrial processes, but that would be crap for people who like looking at gold!
If people are prepared to pay as much for the gold in their jewellery as manufacturers are prepared to pay for gold in electronic components, then both uses are equally efficient for these purposes.
It's the same with land, it would be fatuous to say that only land used for commercial purposes is adding to the economy and that land used for residential is somehow wasted; all the workers and customers have to live somewhere, and the closer they live, the better things work. And as a matter of fact, the enjoyment people get from their homes and gardens has value, just the same as the stuff they can buy in shops.
His point 2 is just garbage.
His point 3 is actually slightly interesting, concluding:
We haven’t increased the supply of land. We’ve just redistributed from current land-holders to future land-users. Maybe that’s good, maybe that’s bad, I don’t know.
The 'redistribution' is from today's landowners to tomorrow's workers and businesses, I fail to see how that can be anything other than a resoundingly good thing, especially as most of today's landowners will still be workers or business-owners for the foreseeable future.
Via Peter Smith on FB, some research by Neal Hudson:
The level of private house building is closely linked to credit availability and turnover in the wider housing market. There has been a 10 to 1 ratio between overall market transactions and private house building starts for the last 25 years and it appears to have held firm despite recent policy interventions. The reasons for this ratio are poorly understood...
He then includes a chart showing that the ten-to-one ratio has held firm for a lot longer than that.
I can understand that there would be some sort of correlation between the two, but not as striking as that...
UPDATE: Peter S explains why in the comments. Doh! Wish I'd thought of that.
Over at Comedy Is Free.
Glorious, just glorious.
Tuesday, 18 August 2015
They don't even bother relegating it to half-way down the article:
'Young star' lawyer, 31, who studied at Cheltenham Ladies' College 'was murdered in her £600,000 Harrow home by a 23-year-old mechanic friend'
Prompted by an article in City AM, I did a quick summary (from here) of units sold, plots with planning consent and 'strategic land', i.e. plots where they are likely to get planning permission in the near future.
Total units sold over ten years = 25,124
Land bank in 2005 = 35,304 plots
Land bank in 2014 = 39,412 plots
So assuming typical annual sales of 2,500, they own enough land to keep them going for, er, sixteen years.
The Faux Libs and socialists both insist that if we liberalise planning restrictions i.e. grant these people more planning permission, they will increase output. The Faux Libs blame it on the government; the socialists blame it on the 'greedy developers'. Both sides blame it on the NIMBYs.
It strikes me that Bovis et al have a profit-maximising level of output and they will stick to it. If they get more planning permission for more, they will just park it to one side. Clearly they aren't too worried about planning permission lapsing again after three years, or else they wouldn't be holding onto 18,062 plots which already have planning.
Please also note:
The Group employed 928 staff directly at the end of 2014 and up to a further 3,000 sub-contractors work on its sites on a daily basis. In 2014, the Group legally completed 3,635 homes predominately on greenfield sites.
I have got the impression that it takes at least two man-years to build a house, so some of those sub-contractors will be medium sized businesses (with their own sub-sub-contractors) in their own right. Either way, they have off-loaded all their risks onto their sub-contractors, if they want to curtail supply because of falling prices*, they just lay them off.
* 2007: 2,930 units sold; 2009: 1,803 units sold.
Monday, 17 August 2015
The responses to last week's Fun Online Poll were as follows:
If you had been the US President in August 1945, what would you have done?
Ended the war and allowed Japan to get away with it - 10%
Allowed the war to drag on for another few months or years - 1%
Dropped The Bomb on Hiroshima then given them a couple of weeks to surrender - 52%
Dropped The Bomb on Hiroshima and another one on Nagasaki out of spite - 36%
So a clear winner here, and I was with the majority on this. A good turnout of 77 voters, thank you everybody who took part.
My view is, as the US President, you have to think about
a) what's best for the American people as a whole (and sod the Japanese) and
b) what will get you elected President in a three years' time. Harry Truman was of course not elected President the first time, he took over when FDR died.
This week's Fun Online Poll.
"Who will/would you vote for as new leader of the Labour Party?"
Vote here or use the widget in the sidebar, multiple selections allowed if you're in two minds.
I'm in several minds about this (although luckily I am not registered vote so I'm not losing sleep over this).
On the one hand, he is likeable, has principles and I agree with some of his policies while the other three are just faceless mishmash self-promoting machine politicians. I don't agree with any of their policies for the simple reason they don't actually have any.
But Corbyn's policies miss the point and he will make life more difficult for the Young People's Party by offering superficially attractive solutions to our core voters which will not actually address the underlying issues.
From the BBC:
Bulls have gored seven people to death during festivals across Spain since the beginning of July - four of them over the past weekend. The deaths occurred during bull-running in the streets, not in bullrings. It is an unusually high number of fatalities for such a short period...
Last year more than 7,200 bulls and steers (castrated bull calves) were killed by bullfighters across Spain, the news website El Diario reports.
Sunday, 16 August 2015
… removing a small jungle and a few last sad strips of rotting 'tar paper' from the roof of our shed and replacing it with two layers of 250 micron damp course. Let's see how long it lasts.
The gardening weather gods smiled on me, it was overcast but warmish, just right for this sort of job.
Friday, 14 August 2015
From The Daily Mail:
An individual cash machine can attract a business rates charge ranging between £2,500 and more than £15,000 per year for each machine. The industry as a whole is facing a combined £500 million charge, according to some estimates. The rule about taxing cash machines outside shops as separate businesses was introduced in November 2013 by the VOA, which also ruled to backdate charges to 2010...
But the ACS, which represents over 33,500 local shops across the country including the Co-operative Group, Spar UK and Costcutter, has called on the Government to scrap it and make free ATMs outside shops exempt from taxation.
The ACS said: "We believe that ATMs are a high street enabler providing shared benefits to a range of traders, allowing consumers to access their cash and spend it within their local communities... We therefore believe that the Government should consider removing ATMs from the rating list completely. The benefits of removing ATMs from the rating list would be that more consumers are able to access their cash free of charge and spend it in local shops and high streets."
Exactly, and well said ACS.
The presence of a cash machine on a high street benefits all cash businesses on the high street, not just the shop where it is, so this is spiteful and unnecessary. Presumably, the presence of a cash machine is reflected in higher rental values in the vicinity, so even under normal Business Rates rules, that cash machine boosts Business Rates revenues anyway.
The other trick they are missing is that it is far better to deliberately under-assess rental values and then charge a higher percentage tax rate.
For example, if the government wants to get £6,000 in rates from a shop with a rental value of somewhere between £10,000 and £15,000, it could assess it at £15,000 and charge 40%, resulting in a shedload of appeals arguing for an assessment of 40% x £10,000. If that shop is assessed at only £8,000 with a 75% tax rate, the yield is the same, but as the only thing you can appeal against is the rental value, and as it would be impossible to prove a rental value as low as £8,000 there is no point in appealing.
From The Daily Mail:
Nearly 40 per cent of council flats sold off at a discount in the last 35 years are now being rented out privately to tenants, a Freedom of Information request has revealed.
Responses by 91 councils show they have sold a combined 127,762 council flats and maisonettes since Right to Buy was introduced in 1980, the request by magazine Inside Housing has unearthed. However, of these, nearly 48,000 leaseholders are registered as living away from the ex-council property, which suggests they rent it out privately. This is 38 per cent of all those sold...
Pat Callaghan, cabinet member for housing in Labour-led Camden, told the magazine: 'Over the years, I have seen many of our estates become virtual honey pots for estate agents and landlords.'
Forty per cent is roughly what we already knew, and for a depressingly large amount of those, the local council is now paying 'market rate' Housing Benefit and the banks in turn will be collecting a large chunk of that in mortgage interest, so the whole thing is a massive waste of taxpayer's money and is a piss-poor way of increasing owner-occupation levels, which was the ostensible reason for doing this. It's not just a honeypot for estate agents and landlords, it is a massive freebie for the banks who couldn't earn anything from council housing but can now merrily lend ever larger amounts to enable ex-council homes to be bought and sold.
But hang about, 127,762 is a surprisingly small number, as one commenter points out, that's an average of less than 1 flat per local council per week for the last 35 years.
Yes, that's because only 91 councils responded out of about 300, and this survey only relates to ex-council flats and does not include ex-council houses. The total number of council homes sold under Right To Buy is of course more like 1.5 million.
Thursday, 13 August 2015
The four individuals traditionally associated with the Sarcastic Four, who gained superpowers after exposure to cosmic rays during a scientific mission to a local public library, are Mister Sarcastic (Reed Richards), a scathing genius and the leader of the group, who can stretch anything you say into incredible lengths and shapes; the Ironic Woman (Susan "Sue" Storm), who eventually married Reed, who can render herself impenetrable to logic and project negative force fields; the Human Scorch (Johnny Storm), Sue's younger brother, who can generate arguments so fierce that they burst into flames, surround himself with them and fly; and the monstrous Thingy (Ben Grimm), their grumpy but pedantic friend, a former college lecturer as well as a good proof reader, who possesses a superhuman ability to spot mistakes and the endurance to point them all out due to the nature of his thick skin.
I've been doing a bit of thinking about labour relations in the past and the current situation and thought I'd bounce some things around
1) Unions rose in a time of monopoly employers. Employers treated workers badly, employees didn't have many other options, but what they could do is collectively stop working. And at that time, employers also didn't have many other options but the local workforce, so had to work with the workers, as a group to accept their viewpoint.
2) As industrialisation grew, so did trade unions, peaking in the late 1970s. It could be argued that greater automation reduced the union workforce, but the scale of decline has been far greater than just large factories. It has fallen from 12m to nearly 6m and the remaining trade unionisation is nearly all in the public sector.
3) There's a lot of attribution to Thatcher in smashing the unions, but the fact is that membership of unions continued to fall after she left office, as did strike days. They fell under the Blair years with no new union laws.
4) My hypothesis is that the rise in car ownership changed the relationship between management and workers. If you worked in a factory and didn't like the terms, the factory 5 or 6 miles away was now another option. You could just leave and go work for them instead. At the same time, employers could grab employees from further away with skills. The need for a union to resolve your grievances disappears. And so as more and more people got to own cars, more unionised jobs fell.
5) Unions still exist in the public sector because the employer is generally a monopoly.
Re a stupid argument I am having elsewhere, allow me to point out that coins and notes are government debts.
They might be freely transferable, small denomination and non-interest bearing which makes them look different to "government bonds" but in principle they are exactly the same. They record a debt from the government to whoever holds them. The note holder or bond holder has a financial asset and the government (i.e. the taxpayer) has a financial liability. Like all "money" they are not net wealth for the nation as a whole because the asset and the liability cancel each other out.
(I accept, as a matter of fact, that many governments run permanent deficits so some of the notes and bonds are never redeemed, repaid or cancelled, that is a separate issue. It does not mean that they couldn't or shouldn't be.)
a) disputes, as a matter of logic, that this is the correct way of recording them and/or
b) disputes, as a matter of fact, that central banks do not record them as liabilities
is living in cloud cuckoo land.
See for example Bank of England balance sheet here, which correctly shows notes in issue as liabilities.
If anybody genuinely believes that this treatment is somehow 'wrong' then he can get in touch and tell central banks that they have been doing their accounts wrong since the dawn of time and best of luck with that.
Please note: this is a purely mechanical thing and a description of the real world. I am not making a value judgement or taking sides.
- It does not tell us whether governments should or should not run deficits.
- It does not say whether any of this is a good thing or a bad thing.
- It applies equally to "fiat" currency (whatever that is) and gold-backed currency. With gold-backed currency, a bank note clearly was a government liability, if you wanted you could hand it over and the government was liable to give you gold.
- The way in which 'private' banks split the zero into a deposit and a loan is a parallel topic, although the basic logic is the same.
Emailed in by MBK from The Telegraph:
In the latest case involving elderly home owners urged by salesmen to take out mortgages and invest the cash, a couple are about to have their home of 15 years repossessed...
In 2006 Rita and Richard Kauffman turned to their adviser, Mint Financial Services, in the hope of boosting their income. They entered a deal where they tied up £50,000 of savings and topped up the investment by taking out a £195,000 mortgage. The money was used to buy second-hand endowment policies, a form of investment often described as "low-risk" but which has in practice delivered volatile and often poor returns.
The arrangement was supposed to work by delivering returns big enough to cover the couple's mortgage - the £195,000 debt was added to an existing £160,000 loan - plus some spare income.
So they bought the house back in 2000 when they were in their mid-fifties with a stonking great mortgage which they had only paid down to £160,000 by 2006, when they were both at or coming up to retirement age.
And then they increased their mortgage to £355,000? The investment adviser probably was quite reckless, but which bank hands out mortgages like that to people around retirement age? Answer = one that went bankrupt and had to be nationalised.
The irony is that people like this and The Telegraph in particular love blaming the financial crisis on young people and welfare claimants.
Wednesday, 12 August 2015
The Evening Standard has beaten the Mail at its own game. There's nary a mention of this story on the Mail website (yet):
The Surrey home belonging to the murdered Al-Hilli family has been put up for sale almost three years after their tragic deaths...
The £1.185m four-bedroom property is being marketed by Catling & Co and is described as a “substantial detached family house” with an “excellent frontage”.
For some gloriously garbled landlord special pleading, have a look at Say "No" To George, spotted by Thomas Hall.
As Babs says on the Contact page:
I think some of the arguments need to be developed further before significant traffic and inconsistencies need to be checked. For example, in some parts, you say that house prices will drop, and then for first time buyers the argument says that house prices will not drop.
An example of their Doublespeak from the Landlords page:
EVERY OTHER BUSINESS IN THE LAND IS ALLOWED TO OFFSET THEIR TOTAL COSTS AGAINST THEIR INCOME BEFORE BEING TAXED (ON THEIR PROFIT). IF YOU BELIEVE THAT YOUR PROPERTY INVESTMENT IS TO BE TAXED UNFAIRLY THEN JOIN THE PETITION!
So is being a landlord a "business" or is it "investment"? For tax purposes, those are two quite separate concepts:
If it is a "business", then yes, they would get a full deduction for the costs of furniture and interest, but rents would be liable to VAT and net profit liable to Class 4 NIC as well as income tax.
And if it is "investment" then there would be no deduction for any costs whatsoever, the same as dividend and interest income.
I left the following comment on their Contact page just now (15.30 pm, 12 Aug). Let's see if they publish it.
I'm old enough to remember the good old days, when landlords were taxed at much higher rates; rents were capped/controlled; there was plenty of social housing as an alternative to private renting. And for good measure, landlords paid higher interest rates than owner-occupiers and owner-occupier mortgages were capped at two or three times income. And we had Domestic Rates (and before that Schedule A taxation on owner-occupiers as well).
The result of all this was that the number of private renting households fell from 90% at the start of the 20th century to less than 10% by 1990 - with an equal and opposite increase in owner-occupation. This increase in owner-occupation levels was always heralded as a Very Good Thing indeed, and nobody mourned the demise of private landlords as a class. The knock-on effect was a more equitable distribution of wealth, a smaller and more stable banking system and a much smoother economic path.
Having been a landlord and a tenant in my life, I can honestly say that landlords serve absolutely no useful purpose whatsoever and provide nothing of value - as evidenced by the fact that a lot of tenants end up buying the home they were renting and absolutely nothing changes. If landlords were actual businesses (like a hair dresser or a car mechanic or a farmer) then we would not be able to just cut them out of the loop. I can't cut my own hair, fix my own car or grow my own food, but I am perfectly capable of calling the plumber, doing a bit of DIY and sorting out the insurance on my own home.
I suspect that you will hotly disagree with this :-)
Tuesday, 11 August 2015
Driving home this evening I happened to be listening to P.M. on R4. They broadcast an item on cycling in Paris. Apparently the Parisian authorites have decided that cyclists don't need to obey traffic lights. Particularly when turning right against the red. Some sexy sounding French lady explained that this was OK, in fact she felt safer, since all you had to do was take care and be vigilant. They then aired the views of a taxi driver who sounded off on how unsafe this was.
Then came the killer argument. The BBC reporter got on his bike to navigate the Arc de Triomphe interchange where he said something on the lines of , "...despite the 'chaos' the traffic takes care and thanks to the give way from the right rule it all works well. In fact the TRAFFIC LIGHT CONTROLLED JUNCTION ON THE PLACE DE LA CONCORDE AT THE OTHER END OF THE CHAMPS ELYSEES HAS FIVE TIMES THE ACCIDENT RATE OF THE UNCONTROLLED ARC DE TRIOMPHE JUNCTION".
Really, it's so bloody obvious isn't it. Needless to say Eddy bloody Maier didn't get it.
Listen lads, Turn Off The Damn' Traffic Lights.
But it gets worse for the dirigiste French does it not? This factoid is a proxy for the success of freedom and markets and is another nail in the coffin of bureaucratic central planning; traffic lights being bureaucratic road rationing by remote control
(PS. In a previous life I was a highway design Engineer - letters after my name and everything).
The results to last week's Fun Online Poll were as follows:
What were you doing when you heard the news?
Listening to the news - 12 votes
Other, please specify - 11 votes
Top "other" answers:
Bayard: I think I was sawing a piece of wood
TDK: Running away from the Grassy Knoll trying to hide my rifle
It's seventy years since they dropped atomic bombs on Hiroshima and Nagasaki.
So that's this week's Fun Online Poll: "What would you have done if you had been US President in August 1945?"
Vote here or use the widget in the sidebar.
Spotted by MBK in The Times:
Kids Company was facing further questions over managerial and financial misconduct yesterday after it emerged that two children of the vice-chairman were employed by the charity before its collapse.
Sasha and Jamie Handover, the daughter and son of the charity’s vice-chairman Richard Handover, were paid nearly £50,000 per year between them.
From the BBC:
What is the government doing?
Ministers want EU migrants to live in the UK for four years before they can claim benefits. However, without EU treaty change such a move could be deemed discriminatory and breach EU law.
Not a problem, says the government, let's kill two birds with one stone and f--- over some random group of younger people as well, few of them bother voting and those that do certainly don't vote for us.
One option is to implement a four-year residency rule for all benefit claimants. This could mean Britons, even if they had lived in the UK all their lives, from their 18th birthday would be ineligible for the benefits for four years until they reach 22.
The changes would affect working tax credits and housing benefits. About 50,000 UK citizens under the age of 22 receive tax credits. Most of them have children. The proposal is currently being discussed by ministers and senior officials.
And as we well know, it was the 18 to 22 age group which caused the financial crisis... seven or eight years ago.
Monday, 10 August 2015
From The Evening Standard and Wikipedia:
A supporter of Liz Kendall has accused her Labour leadership rivals of carrying out a hurtful "smear test” campaign.
Other leadership contenders suggested that Miss Kendall, 44, had cervical screening to detect potentially pre-cancerous and cancerous processes in her cervix (opening of the uterus or womb). Mr Woodcock said the highly personal rumours circulating in Labour circles were "totally unacceptable" and needed to stop.
Abnormal findings are often followed up by more sensitive diagnostic procedures, and, if warranted, interventions that aim to prevent progression to cervical cancer.
Traditional thinking is that a monopoly means that there is one single supplier of any particular category of goods or services.
It's a fair enough starting point, but then people tie themselves in knots trying to decide how widely or narrowly this should be defined. So there might be only one ferry company between Port A and Port B, but if there is also a road bridge and an airport connection between A and B, does the ferry company really have a monopoly etc. Further, having a monopoly is no guarantee that your business will make super-profits or even profits. Even if you are the only ferry between Port A and uninhabited island B, if there is insufficient demand, the service might well be loss making.
But this is all pretty irrelevant, all that matters to the man in the street is this simple observation:
... in a perfectly competitive market there is a well defined supply function with a one to one relationship between price and quantity supplied. In a monopolistic market no such supply relationship exists. A monopolist cannot trace a short term supply curve because for a given price there is not a unique quantity supplied. As
Pindyck and Rubenfeld note, a change in demand "can lead to changes in prices with no change in output, changes in output with no change in price or both".
That makes indentifying a "monopoly" much easier, you can put "land" at the top of the list. It does not matter how much you sub-divide land or how many million owners there are; a change in demand leads to a change in price with no change in quantity supplied.
Copyrights and patents are another kind of government-protected monopoly. You write one book or invent one thing, the amount of money you can earn from it depends entirely on demand and bears little relation to the effort or skill you put into it.
Having established what a monopoly is, as a separate issue, BenJamin' and I have discussed this to death, whether and what we 'should do' about a monopoly depends on how it arose. Depending on the circumstances, the correct response is either:
1. Do nothing. Who cares if super-rich people keep bidding up the price of Picassos? Copyright periods are probably too generous but patents expire after twenty or so years, which seems fair enough.
2. Reduce barriers to entry, especially if they arise from government regulations (for example taxi driver licences).
3. Cap prices (for example with utilities).
4. Tax away the super-profits (such as a Land Value Tax or imposing a higher tax on copyright royalties).
5. In some situations, it might be better just to nationalise something (for example refuse collection).
UPDATE: Lola points out that refuse collection is no longer 'nationalised', it is taxpayer funded but sub-contracted to competing providers. This is one of the few examples where this works well. But whether such a service is truly nationalised or taxpayer-funded/sub-contracted is a secondary issue in the context of 'monopolies'.
Saturday, 8 August 2015
From The Daily Mail:
Top British retailers were last night accused of making millions from tax discounts on duty-free sales at airports – without lowering prices for travellers.
They examine boarding passes to see if passengers are travelling outside the European Economic Area, which allows them to avoid paying 20 per cent VAT on goods.
But few retailers pass the savings on to customers, with the result that products sold at airports are often the same price as on the high street, it was reported.
Of course. Entirely predictable.
A tax is borne by whoever is less price sensitive (supplier or consumer) and a subsidy accrues to whichever factor of production is most fixed in supply. All these people who say "the consumer pays the VAT" have just fallen for the propaganda.
So the retailer bears the VAT and the retailer benefits from the VAT reduction as above. The actual gross selling price is fairly fixed. Which is also what they noticed when they reduced the VAT rate on hospitality in some EU member states a few years ago. Actual food and drink prices didn't go down much, but output and employment increased significantly.
But the airport owner can charge correspondingly higher rents to soak up that extra profit. So the government claws back some of those higher rents in Business Rates.
Friday, 7 August 2015
From The Scotsman:
That the council tax system badly needs to be overhauled or even replaced is not in doubt... The most progressive option is probably land value tax, where the rate is based on the market value of the land alone.
Along comes a Home-Owner-Ist in the comments with a tried and tested variant of the Poor Widow Bogey:
Rubbish - how on earth is it "progressive" to residents on the legacy value of land. What's progressive about taxing the poor as a punishment for living on a high value inner city site that they can't cash in?
1. They can cash it in. They can sell up. An unearned, windfall gain is an unearned, windfall gain, whether it accrues to a pauper or a millionaire.
2. LVT is a tax on consumption, a user charge, a charge for services rendered by society. You might as well argue that taxes on fags or booze are regressive because poor drinkers and smokers pay more as a percentage of their income than wealthy drinkers and smokers. Which is quite true, they do, but those taxes are - in political terms - sin taxes and so acceptable.
So if 'poor' people want to occupy valuable land, then why shouldn't they pay the same as people who can afford it, the same as poor smokers paying the same duty on their booze as wealthy drinkers?
3. Most 'poor' people don't own valuable land. The richest ten per cent own about half of all land (in Scotland at least) and the bottom fifty per cent own no land whatsoever (i.e. tenants and people whose mortgage debts exceed the selling value of the land under their homes). Most valuable land is owned by people who could easily afford the LVT. That there will be some collateral damage is inevitable.
4. It is difficult arguing with this people who insist that LVT would be regressive. They never say quite what they mean by that. Regressive to incomes? To house prices? To what? And even if LVT in itself were slightly regressive, it wouldn't be as regressive as a Poll Tax (which many Homeys think is a splendid tax) or Council Tax; and the top ten per cent would end up paying close to half of it.
5. Ignoring changes in behaviour, just about ALL taxes apart from Poll Taxes and sin taxes reduce overall inequality by levelling people at the top downwards; and if the money is spent equitably, this levels people at the bottom up. Bugger the clever maths and statistics bit (which is completely above the Homeys heads anyway), less inequality must be "progressive" in the political sense.
6. However, because of changes in behaviour i.e. Laffer effects, some taxes increase inequality. Clearly, the unemployed and low earners don't pay much in VAT and National Insurance but many of them are ONLY unemployed because of those two taxes choking the economy and reducing employment.
7. Land ownership is very concentrated, much more so than incomes. So taxing land reduces inequality much more than taxing incomes, and unlike taxes on income/output (like VAT and NIC), LVT doesn't then choke off the economy and create unemployment.
8. LVT is not a standalone thing. The receipts could be used to fund higher welfare payments (i.e. levelling everybody up with a Citizen's Income) or to reduce regressive/damaging taxes - both of which reduce inequality even further.
Therefore, taxing land values is "progressive" in the political sense and "progressive" in the sense that it leads to "economic progress".
How the fuck anybody can object to LVT on the basis it is "regressive" is a mystery to me.
From This Is Money:
Households today have around four times the level of savings that the typical family had in real terms 40 years ago, new findings suggest.
Taking into account pensions, shares and deposit savings, the level of savings held by a typical family has risen by 294 per cent in 40 years to £145,566, compared to £36,989 in 1975, Lloyds Bank said.
Well duh. People haven't "saved" particularly, i.e. put earned income aside, it is just that "assets" have gone up in value.
1. "Pensions" is too vague a term. Do they just mean shares etc in funded pension schemes or also the net present value of unfunded schemes?
2. I don't know what the FTSE share index would have been in 1975, but since 1985 it has increased by 365%. Quite possibly and probably a 300% increase in real terms since 1975.
3. About 80% of deposit savings are merely the flipside of mortgage borrowing. If one household takes out a mortgage of £100,000 then some other household ends up with a deposit of £100,000.
The Nationwide tells us that house prices have trebled in real terms since 1975; nowadays mortgages take a lot longer to pay off, so we can safely assume that total mortgage debt has more than trebled; so other people's deposits have more than trebled as well.
Meanwhile, 36 per cent of people across the UK in 2015 have no savings, including deposits or investments, while 13 per cent hold savings and investments amounting to less than £1,500.
4. That £145k is nowhere near what the "typical family" has in savings. The median is clearly closer to £1,500. No doubt the usual Pareto Distribution applies: the top two deciles have got an average of £600,000 each and the next three deciles have got an average of £200,000 (or whatever).
From IMDB and Wikipedia:
Armed with the astonishing ability to shrink in scale but maintain their full sized capacity to irritate, Ant-Boy and Dec-Boy rise to fame as actors on the children's television show Byker Grove.
Now adults, Ant-Man (Anthony McPartlin) and Dec-Man (Declan Donnelly) must embrace their inner-hero and help their mentor, Dr Hank Pym (Michael Douglas), to protect the secret behind his spectacular Ant-Man suit from Pym’s former protégé, Darren Cross (Corey Stoll), who is close to replicating it.
Against seemingly insurmountable obstacles, Ant-Man and Dec-Man present shows such as SMTV Live, Friends Like These, Pop Idol, Ant & Dec's Saturday Night Takeaway, I'm a Celebrity... Get Me Out of Here, PokerFace, Push the Button, Britain's Got Talent, Red or Black and Text Santa.
In the meantime, Darren Cross succeeds in replicating the Ant-Man suit and takes over the world.
Thursday, 6 August 2015
Adam Smith Blog, here
I quote (a quote):
All people born in rich countries thus receive a location premium or a location rent; all those born in poor countries get a location penalty. [In a world of low international migration] most of one’s lifetime income will be determined at birth.
Well, that kills off all the anti LVT arguments stone dead, one would have thought. What is true between countries must also be true within countries.
Posted by Lola at 15:19
Using numbers from their investor relations page, I have cobbled together the following chart for your infotainment:
I think that Persimmon are fairly typical for the handful of large homebuilders, you can multiply it up for the others.
Obviously this old trout was always a confidence trickster.
Sometime ago I was momentarily unable to avoid her being interviewed / aka fawned over on BBC and all I could think was 'that looks like one fat conniving old bat'.
Anyone else think the same?
Wednesday, 5 August 2015
From an otherwise sound article in The Guardian, pointing out that until the late 1990s, most people didn't pay much or anything at all for the land underneath their homes (Bayard heartily disagrees on this point but he is wrong). This was the inevitable result of a package of government policies that had vaguely Georgist intentions, although the article does not explain it...
Meanwhile, young people who do not earn enough to afford a large mortgage are caught in a downward spiral of debt.
“Income inequality is the real underlying problem for buyers today,” says Danny Dorling, professor of geography at the University of Oxford. “People can’t save for a deposit so they are forced to rent, but rents are so high they can’t ever afford to save. Rich property investors are simply rubbing their hands with glee.”
It has bugger all to do with income inequality, of course people earn different amounts of money depending largely on how lucky and/or hard working they are but the differences are not that huge. The vast bulk of people of whatever age have a reasonable opportunity to earn at least an average income over their lifetimes.
The inequality in land ownership stems from... inequality in land ownership. End of. And in the absence of land value tax (or some other package of measures) land ownership tends to become more and more concentrated over time.
So gross earned income inequality before housing costs is not that terrible, or even a necessarily bad thing in itself and certainly not the cause of housing inequality. What makes the huge difference is rents, which some households have to pay out of net income after tax and which are collected by other households.
And this is where the vicious circle mentioned by Danny Dorling kicks in. Forget about vague terms like "wealth" and just look at people's incomes after tax minus housing costs or plus rental income.
The Daily Mash does Home-Owner-Ism yet again.
Tuesday, 4 August 2015
From Cambrian News Online:
LOCALS in Llangrannog pulled together to rescue a stranded cow from an unexpected beach break last night (Thursday).
Farmers Geraint and Delyth Griffiths have praised members of the community for their assistance after their 15-month-old heifer plummeted down a sleep cliff and landed on a secluded beach below. Miraculously the cow survived the fall unhurt apart from cuts and scratches, but was stranded on Traeth Bach near Llangrannog for several days.
The family carried food down to her and consulted the emergency services, RSPCA and even a helicopter company while they wracked their brains for the best way to bring the animal to safety. Weather and sea conditions finally allowed local boat owner Mickey Beechey and a team of helpers to recover the cow by sea in a rescue operation on Thursday.
A RNLI crew oversaw the operation and a pair of farm workers held her head and tail above water while she swam more than a mile to an accessible beach, while another boat steered by Gary ‘Pwyll’ Jones assisted.
A crowd gathered to greet her as she arrived at the shore near the village. Her owners were delighted and relieved to see her walk into a trailer for the final journey home, where she started to graze immediately.
Monday, 3 August 2015
So, why aren't Carney and the rest of his crew and international mates also up before the beak?
The responses to last week's Fun Online Poll were as follows:
Abroad. All very grim, all very tricky.
Waves of migrants in the Mediterranean - 44%
Isis and Syria - 16%
Iran nuclear deal - 11%
Grexit or not - 7%
Ukraine-Russia war - 5%
Ebola - 5%
Chinese islands - 4%
Other, please specify - 7% (4 votes)
Going by the headlines, it's the waves of migrants which are people are concerned about most. My approach is the same as on anything else, the UK government should do whatever is in the best interests of the existing British population/electorate as a whole.
It appears that people still haven't quite got the hang of the "Other, please specify" option. Four people voted for it but only one person made a suggestion.
This week's Fun Online Poll:
"What were you doing when you heard the news?"
Vote here or use the widget in the sidebar.
It's a Fry and Laurie one-liner, I think.
Sunday, 2 August 2015
It's rare that I see a film and come out thinking that I haven't just seen a movie, but a film that might just be a classic. I see a lot of very entertaining films, I see films that later turn out to be classics, but I rarely see films that not just blow me away at how good they are, but which I'm sure aren't just a passing fad.
If you don't know the plot, it's about all the stuff going on inside a young girl's head. This has been done many times in cinema. For example: the scene with the little men inside the brain of a man trying to have sex in Woody Allen's Everything You Wanted to Know About Sex But Were Afraid to Ask.
The big difference here is that (and my knowledge of psychology and neuroscience isn't too detailed) the stuff going on in the film seems grounded in a lot of good science. This means it's not trite, but makes the story outside and inside the head feel right.
Film of the year so far, thoroughly recommended.
Saturday, 1 August 2015
We set off from Karlsruhe this morning at 7 am European time, went via Aachen/Belgium and arrived home at 6.30 British time = twelve and a half hours.
If you knock off an hour for waiting in the queues in Calais, an hour and a half for the ferry crossing and half an hour for a detour to the supermarket for milk etc on the way home, I make that an average speed of about 60 mph.