"I confronted our bureaucratic tax system — and lost"

A true tale of woe from yesterday's City AM:

I am very much a spreadsheet girl. I keep meticulous records of income and expenses, and treat deadlines as sacrosanct. Yet every year, some disaster strikes, and I am left crying on my living room floor, surrounded by invoices and receipts.

This year, I filled out the return (thank you spreadsheet), only to be confronted with the shock of a tax bill that was 50 per cent higher than I had planned — and budgeted — for. 

Why? Because of HMRC's "payment on account" system. On 31 January, those filing returns are required not only to pay any tax due on the previous tax year (in this case, 2018–19), but half their projected tax bill for the current year (2019–20).

HMRC essentially looks at your total tax bill, assumes next year's will be broadly similar, and demands half of it upfront before the tax year is even over.

1. That rule has been in place since Self-Assessment started for the 1996-97 tax year. It is not a new rule.

2. If you get your return a bit earlier and the liability is less than £3,000, HMRC will collect last year's tax liability via your PAYE code for the next year and by definition there are no payments on account. Which is a pretty sweet deal - you pay the tax for the year ended 5 April 2019 in twelve instalments between April 2020 and March 2021.

You have to pay approx. half the income tax "before the tax year is even over"? So what?

3. As the writer herself says "I can, the HMRC website tells me, reduce my payment on account. But if I get it wrong and underestimate what I am likely to owe, I will be charged interest — at 3.25 per cent. (If I overestimate, HMRC will eventually return the additional tax, without interest.)"

4. Employess will have paid 10/12 of their total liability by this stage in the tax year, so the self-employed are at an advantage, not a disadvantage.

In six weeks, the spread of the coronoavirus will stop.

From the BBC:

20 January - 291 cases
30 January - 7,711 cases

That's a compound growth rate of 39% per day.

7,711 cases x (1.39 ^ 42) = over 7 billion, or pretty much the entire world population. 42 days = six weeks.

Death rates are currently at about 2% (assuming the Chinese government is telling the truth, lolz). These diseases tend to become less and less fatal as they spread. SARS was much more deadly at first, but then fizzled out and disappeared and/or just merged into flu generally, so the final death rates from coronavirus will be not much worse than the death rates from the colds and flu that go round every year anyway. And the rest of us will be immune.

US court passes comedy sentence

From City AM:

British trader Navinder Sarao who was responsible for the so-called flash crash in 2010 has been sentenced to one year home incarceration. Sarao was arrested in 2015 and pleaded guilty to illegally manipulating the stock markets.

The sentence, which was handed down by a Chicago court yesterday, was thrown into doubt after lawyers said it would be unenforceable (1) outside the US, according to The Guardian.

Following recess, Judge Virginia Kendall of the northern district of Illinois, was satisfied Sarao would only be allowed to leave the house in a handful of circumstances (2). 

1. Of course it is not enforceable if Mr S is outside the UK.

2. I got the impression that Mr S is a computer geek who is perfectly happy staying at his parents' house 24/7, he now has a good excuse when his Mum tells me to go outside and get some fresh air or meet a nice girl. He probably punched the air and shouted "Yes!". Unless Judge Kendall ruled that his Mum can decide what those circumstances are?

3. Mr S was entirely innocent anyway, so this is a neat way of letting him off the hook.

This would have sounded more plausible if they'd mentioned it five or ten years ago...

From Midlands Connect:

* Revealed for the first time, 73 stations on the existing rail network stand to benefit from improved passenger services as a direct result of the capacity released by HS2, including 54 stations with no direct HS2 services;
* Evidence submitted to the Oakervee HS2 Review by Midlands Connect;
* High speed line will take long-distance rail journeys off the existing network, providing capacity for new routes, as well as faster and more frequent local and inter-regional services;

And so on and so forth (they seem to be repeating the same basic argument over and over).

Quite clearly, HS2 was never about improving the London-Birmingham connection, which was absolutely fine. Trains every 20 or 30 minutes, sub-2 hour journey time and a reasonable ticket price (compared to some routes on English railways).

Somebody calculated that even at the original £20 - £30 billion estimate (ha!), it would be cheaper to demolish Birmigham and just rebuild it half an hour closer to London on the existing line.

Hooray for local public transport and local passenger trains, of course. If they had advanced this as their original reason for building HS2, people might have bought it, but to suddenly "reveal for the first time" at this late stage in the game seems a bit desperate.

This all reminds me of the reasons trotted out for introducing ID-cards, every few months they'd think up a new one to see if any of them stuck. None did, and the scheme was quietly shelved.

I've spotted another alarmist propaganda fail on Skeptical Science

From Skeptical Science:

They say that the following is a 'Climate Myth':

Earth's current atmospheric CO2 concentration is almost 390 parts per million (ppm). Adding another 300 ppm of CO2 to the air has been shown by literally thousands of experiments to greatly increase the growth or biomass production of nearly all plants. 

OK, why?

1. CO2 enhanced plants will need extra water both to maintain their larger growth as well as to compensate for greater moisture evaporation as the heat increases. Where will it come from? In many places rainwater is not sufficient for current agriculture and the aquifers they rely on are running dry throughout the Earth.

That's their lead argument?

It's not actually true. Plants lose water and absorb CO2 through stomata in their leaves, which open or close to optimise the trade off between losing water and absorbing CO2. All things being equal, with higher CO2 concentrations, stomata don't need to be as big, meaning plant loses less water for a given CO2 intake; or absorb more CO2 for a given amount of water loss.

That's the theory, at least, backed up by what happens in a controlled environment (pumping CO2 into greenhouses). What happens in the real world?

From The Conversation (the rest of the article goes along with the 'consensus'):

Land plants are absorbing 17% more carbon dioxide from the atmosphere now than 30 years ago, our research published today shows. Equally extraordinarily, our study also shows that the vegetation is hardly using any extra water to do it, suggesting that global change is causing the world’s plants to grow in a more water-efficient way.

Skeptical Science's arguments 2 to 6 might be true, untrue or unproven, but 1 is a bad place to start!

Weird proportions

My £3,456.96 Honda CRX III "Del Sol" ca. 1996

Basic car £1,050, plus another £2,406.96 on various bits and pieces and labour:

MOT fail type stuff
ABS sensors (salvage) - £100.00
Rear trailing arm rubber bushes - £66.00
Rear trailing arm (new) - £64.38
Rear trailing arms (salvage incl. shipping from USA, ordered in haste/anger and not actually needed) - £76.10
Catalytic converter - £33.95
New clutch kit - £102
Fitting the above stuff incl. brake pads/discs and tracking - £1,119.39
Replacement number plate (original one fell off on the motorway) - £21.00

Not so essential but nice to have
Wiper blades - £24.00
Interior light cover (salvage) - £10.00
New floor mats - £32.90
Leather steering wheel cover - £15.00
New stereo - £105.00
Clip-on cup holders - £20.00
4 x Uniroyal Rainsport 3 tyres* and balancing - £219.22
MOT and new front windscreen** - £397.98



All I need now is a working aerial mechanism, as it doesn't retract properly, which is not cool. And a bit of welding on the rear arches. Maybe replacement rear panels and a respray..?

* It came with two 'budget' front tyres and two OK rear tyres, one of which was irreparably punctured last month. With the new tyres, the steering and handling has gone from 'pretty awful' to 'pretty good actually'.

** The windscreen wasn't badly damaged, but with a million tiny scratches, it looked nearly opaque when the sun was shining on it at a certain angle. Which was disconcerting to say the least.

Fender was guilty of what, exactly?

From The Guardian:

The guitar maker Fender has been fined £4.5m for price fixing by the UK's competition watchdog as part of its clampdown on the musical instrument industry.

The Competition and Markets Authority imposed the penalty on Fender Europe for breaking competition law by preventing online discounting for its guitars. It is the biggest fine issued in Britain for this type of price fixing, which is known as resale price maintenance.

The funny thing is that there used to be a Resale Price Maintenance Act. Under that Act, the Courts would have intervened on behalf of Fender against the discounters, precisely the opposite of what they are doing now.. 

UK supermarkets clubbed together and had this Act overturned back in 2001, and rightly so IMHO. DBC Reed would hotly disagree.

If a company has a monopoly, especially a government protected one or a monopoly over "essentials", then I can see an argument for government intervention, like price caps for mains water.

But Fender don't have a monopoly on electric guitars and electric guitars are hardly "essentials". They don't even have a monopoly on the iconic Telecaster and Stratocaster shapes - other manufacturers have been making copies for decades, some of which are qualitatively better than Fenders for a lower price.

And if Fender don't want to sell their guitars to somebody - for whatever reason - then under the general "freedom of contract" concept, I don't see why they should be punished.

The state/private divide

Anecdote: I was with the Ukippers at Westminster several years ago, lobbying our MPs. When it was finished, we discussed what we were doing next and I told them I was off up to St Pauls to give the Occupy people a bit of support. Those who expressed an opinion said I was bonkers, either you're right wing or you're left wing.

I didn't see a contradiction. The elements of the EU I don't like is the corporatism and the general meddling in people's lives; I agree with the Occupy people that The One Per Cent are taking the piss. Many incorrectly assume they were 'anti-capitalist" and some were, but if you think about it, the Occupy movement was anti-corporatist (mainly anti-banks).

My view on all this is quite simple and coherent, there is:

a) "the state" or "society" (that which belongs to everybody and/or nobody), and

b) the private sector (private businesses and what people get up in their own homes or their own business premises).

All developed states/societies do fairly similar things and have similar values, we just have to accept that. Czechoslovakia split into two and each half continued doing pretty much what the predecessor country had been doing.

In a perfect world, states only do things where the benefit exceeds the cost/burden (provide public and merit goods, welfare/pensions, regulate or break up monopolies etc). There are plenty of examples. And there are plenty of counter-examples: HS2, tobacco control officers, foreign aid payments, Help To Buy etc.

To the extent that the state does things, they should benefit (or burden) everybody as equally as possible. That is the only way to maximise the value that a state can add (which they clearly can, as the alternative is anarchy or warfare); and the only way to maximise people's personal or economic liberty. The freedom of people not to be slaves is more valuable than the freedom of a minority to own slaves.

As far as possible state should not do things which only benefit a particular group of people (like immigrants getting favourable treatment under New Labour) or things which only burden a particular group of people (like immigrants being treated like crap by the Tories). Or give favourable treatment to those hereditary welfare claimants, the Royal Family. You can't favour one group without there being an equal and opposite (though often invisible) burden on everybody outside the group.

The state shouldn't really do things that only benefit owners of a particular type of asset (like land or IP) or a particular type of business (mainly FIRE sector). But where practicalities say it has to (private land ownership/occupation; protect IP under the Treaty of Rome; banking), then it should claw back those benefits in tax payments (aka Land Value Tax, taxes on IP income or a Bank Asset Tax).

In a perfect world, every state school would be "excellent" but the situation is inherently unstable. Some schools will always be better than others (vicious and virtuous circles) so people don't all get the same benefit, depending where they live. The good schools increase local land values, so again, LVT will level this playing field.

Most businesses do not get any special treatment, so they should be paying a lot less tax. The tax system should not be biased against employees and productive businesses, who have extra taxes imposed on them (NIC and VAT respectively).
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The basic logic applies to everything.

Democracy is good ("a terrible system, but much better than any of the alternatives"), but with First Past The Post, most people live in safe seats so their votes are nigh worthless. So I support some form of PR (such as multi-member constituencies), that way everybody's vote has a similar weight.

A welfare state is part of parcel of what states do. Some people take the piss (see endless stories about people on disability benefits posting photos of themselves in the gym on Facebook) and some are denied welfare (see endless stories about people being persecuted under Universal Credit rules). So I support Universal Basic Income for all.

In the private sector, parties are not always of equal bargaining power and do not have access to the same information. So we need some level of statutory rights for employees to level the playing field between employee/employer and between good employers/bad employers.

But you have to be careful about going too far - that results in bad employees taking the piss; or act as barriers to entry - in relative terms, things like maternity leave (or a bad employee taking the piss) are absolutely no problem for large employers but can be make or break for small employers. If you go too far, the playing field becomes less level again.

Same goes for consumer protection, by and large it works, but as Lola has posted often enough, in some sectors (financial services) it is form filling for the sake of form filling to keep bureaucrats in work. It's a huge burden for small businesses and not such a burden for larger ones (once you've got FSA authorisation, other businesses pay you to use your registration) and of course, no barrier at all to the real fraudsters who don't bother with the forms, or just lie on the forms. The costs of this far outweigh any possible benefits and it's a kind of barrier to entry (unlevels the playing field).

I'm perfectly happy with same-sex marriage, but also I don't see the problem with that cake decorator in Northern Ireland refusing to do the cake for a gay wedding. Marriage is a "state" thing, and there's no reason for gays to be treated as second class citizens; a private business is a private business and they can turn down any customers they like, even for petty and small minded reasons. And the gay couple can shop elsewhere.

As to personal liberty, if something isn't actually or potentially harming a third party, it should be allowed. Taking drugs in your own home or business premises is fine - but not driving under the influence of drugs. Breast feeding in public is fine, as is wearing a burka. Some people (including me) find one or the other (or all) of these things objectionable or offensive. Tough, it's none of our business, we have to live and let live.

And so on and so forth.

Here endeth today's lesson.

"One in five UK businesses ‘financially stressed’, says KPMG"

From Accountancy Today:

One in five UK businesses are "financially stressed", according to new research from KPMG's restructuring practice.

The practice analysed the filings of all UK businesses with revenues over £10m in the five year period to the end of 2018. Trading performance, profitability, cashflow, liquidity and debt leverage were all analysed to produce a score to identify financial stress and distress among these businesses.

What KPMG fail to mention is that their rapacious audit fees (monopoly rent) are a major contributor towards their clients' financial stress, taking one or two per cent of turnover on average.

Killer Arguments Against LVT, Not (478)

KLN: "Valuations and collection will be a very complicated."

Well, firstly, no they won't. We can get 90% of the way to Land Value Tax by tweaking Council Tax (and Business Rates) valuations to reflect relative values and use the existing collection mechanism, which will be easier because owners will be primarily liable, not occupants/tenants.

And complicated compared to what, exactly?

LVT would be a good replacement tax for Council Tax, Capital Gains Tax, Stamp Duty Land Tax and Inheritance Tax, just to get the ball rolling.

If you want to see "complicated", click the above links to the relevant legislation. Council Tax (Local Government Finance Act 1992) is a model of clarity and brevity compared the other three acts.

Council Tax raises more revenue than the other three taxes combined with about one-tenth as much legislation and practically zero compliance costs. And it's not just legislation. Those three minor taxes require endless further guidance and an intrusive bureaucracy - and generate high fees for lawyers and accountants.

There are whole books written on these three taxes - how many books are there on Council Tax? Pretty much none. Your land and buildings are assessed and you just pay it. Don't want to pay so much? Then move somewhere cheaper.

And a proper Land Value Tax Act would be a about half the length of already brief Council Tax and Business Rates legislation put together. Instead of all the discounts and exemptions, there'd only be the roll-up option for pensioners. And I suppose a clause to say that local councils can introduce as many discounts and exemptions they like, provided they bear the full cost (either by spending less or imposing a precept on "everybody else").
-------------------------------------------------------------------
(Stamp Duty on share sales is another dreadful tax, but it would seem appropriate to make up the shortfall from scrapping it by increasing the corporation tax rate so that costs and benefits cancel out).

"How to win back Northern voters" by Keir Starmer

From City AM:

Meanwhile, the start of Labour’s leadership contest has revolved around winning back Northern voters, with candidates scuttling to distance themselves from ties to the capital.

Frontrunner, and Holborn and St Pancras MP, Sir Keir Starmer was quick to point out in a recent interview that while he was born in London, that he in fact grew up in Surrey.

Great one-liner in The Next Step, Season 7 Episode 2.

Finn: "I have a photogenic memory."

Before anybody can correct him, he follows up with...

"All my memories are really good looking."

FlyBe Nonsense

This sounds like utter guff to me

https://www.bbc.co.uk/news/business-51093934

The number of passengers it carries pales by comparison with better-known budget carriers such as easyJet or Ryanair.

As a company, it is only a tenth as big as collapsed holiday firm Thomas Cook, so there is little prospect of a government bailout.

But those who habitually choose Flybe see it as a vital service, because it reaches the places that other airlines fail to touch.

"Mainland UK doesn't understand how vital Flybe is to Northern Ireland," tweeted one regular passenger, Jason.

"As someone who travels with them frequently for work, Flybe's collapse would be a disaster for the NI economy.

"If this happens, Belfast City Airport will have only four flight routes. FOUR."

I'm going to suggest here that "Jason" is a PR guy for FlyBe in disguise. There's a cute trick at the end there. It mentions how many routes Belfast City Airport will have. What it doesn't mention is that there's also Belfast International Airport.

Easyjet alone fly Belfast to Bristol, Birmingham, Manchester, London, Newcastle, Glasgow and Edinburgh. OK, they're going to lose the direct service to places like Cardiff, but it's only another half hour from Bristol Airport to Cardiff.

And if this was so critical to people on this route, FlyBe wouldn't be in trouble, as they'd be falling over each other to snap up tickets rather than there being Belfast to Cardiff seats available next week for £140 return.

Despite Jason's heartfelt words, there are a number of other locations that owe just as much to Flybe in terms of connections to the wider world.

Cornish holiday resort Newquay, for one, has no direct rail services from London for much of the year and the journey takes about five hours. But Flybe can get you from London Heathrow to Newquay airport in little more than an hour.

Yeah, but it isn't "little more than an hour". You've got check-in time, parking, baggage, security, and all sorts of crap when you land at Heathrow. Then time from Heathrow to London on the Heathrow Express. Call it 3 hours door-to-door. And really, most of Cornwall isn't 5 hours, because go slightly east of Newquay and there's St Austell which runs direct trains to London in just over 4 hours. Other than a few people who want to go to their holiday homes, what's the critical link for Cornwall and London that can't wait 4 hours?

And if you live in the Isle of Man, Flybe's service can literally be a lifeline.

The airline has a contract with the government to transfer NHS patients from the island to medical facilities in Liverpool when they require treatment that cannot be provided closer to home.

And Easyjet also fly there, so just use them. Or get someone to schedule private jets. The Isle of Man aren't a British problem.

Small wonder, then, that Ben Bradshaw, the MP whose Exeter constituency includes Flybe's base, has spoken of the "valuable connectivity" that the carrier provides.

In fact, he described the airline as "a strategically important business".

Thanks to Flybe, Mr Bradshaw's constituents can fly from Exeter direct to a variety of destinations including Amsterdam, Paris and Geneva - places that would otherwise be accessible to them only after a lengthy trek via other places.

A lengthy trek? It's about an hour from Exeter to Bristol Airport that flies to Amsterdam and Paris.

Freelance art director Sarah Ward, who divides her time between London and Cornwall, is another Flybe frequent flyer. She tweeted that she would have to move house if the airline ceased to exist.

In an appeal to her local MP, Derek Thomas, she asked: "What are you doing to protect such vital infrastructure?"

Well, move house then. Figure out a way to work from home. Move job. You're the insane one with a 250 mile distance from home to work and depending on one airline. You did this.

If an airline goes out of business, no other operator automatically takes over their routes and there is no guarantee any would.

But hang on, this is a "vital link" to the country, but no-one can even fill a plane every day? Maybe, actually, they have a load of marginal routes like Belfast to Cardiff that most people just don't care about flying very often. Maybe it's a crap business that government should let go to the wall.

Killer Arguments Against LVT, Not (477)

From City AM:

Transport for London (TfL) is considering funding the £3.1bn Bakerloo line extension with a tax on landowners. The proposed works would extend the line from Elephant and Castle to Lewisham via stations on Old Kent Road and New Cross Gate. 

However, the project has been left unfunded with no indication from central government that it will foot the bill. It was revealed today by New Civil Engineer that TfL is considering taxing landowners along the proposed route to pay for the line as they would likely benefit from increased property values from the extension...

The Centre for London and the Adam Smith Institute think tanks said the landowner levy would make sense. 

Adam Smith institute research associate Charlie Paice said: "Rather than relying upon central government handouts for infrastructure investment this land levy will mean that those paying are the ones who stand to benefit as the value of their properties go up.

"If land owners aren't prepared to pay for a project which will further increase their property values – then why should they expect taxpayers from the rest of the country to stump up their cash?"

Good arguments FOR. Now let's see the KLN:

However, the low-tax lobby group the Taxpayers' Alliance (TPA) took a drastically different view.

Harry Fone, TPA grassroots campaign manager, said: "Imposing levies on homeowners who had no idea of the proposal when they bought would be deeply unfair."

OK, let's rephrase that: "Income tax hikes on people who had no idea that their taxes would be used to subsidise landowners elsewhere in the country when they started their current jobs are perfectly fair and reasonable."

Daily Mail on top form

From The Dail Mail:

Helen Hancock, 39, was found dead alongside 48-year-old company director Martin Griffiths at a property in the upmarket village of Duffield just months after she walked out on her husband...

Detective Inspector Steve Shaw of Derbyshire Police told the court the couple were discovered at the £400,000 detached property in Duffield, Derbyshire, the early hours of New Years' Day.

Shit PR by Boeing

From The Evening Standard:

Planes giant Boeing was humiliated on Friday after hundreds of internal emails showed staff fraught with concerns over possible design flaws on the 737 MAX, saying the doomed jet had been “designed by clowns”...

According to documents released to Congress today, Boeing employees repeatedly raised concerns internally about design issues, with one person involved saying software had “piss poor” design and was “doomed”.

“This airplane is designed by clowns who in turn are supervised by monkeys,” the employee wrote in April 2017. Another employee involved in the jet’s development wrote: “Part of me wants to see it fail so we can say WE TOLD YOU SO. That’s kind of sick of me, huh.”

That seems pretty damning to me, you'd think that Boeing would just keep quiet and pray for lenience.

But no:

Boeing apologised for the messages. “The language used in these communications, and some of the sentiments they express, are inconsistent with Boeing values, and the company is taking appropriate action in response.”

Exactly not.

Those emails are entirely consistent with Boeing's (lack of) values, as evidenced by the subsequent 737 disasters and botched cover-up attempts. Boeing shouldn't be apologising for the messages, they should be apologising for the crimes (that were exposed by the messages). The "appropriate action" would be to never cut corners like this again and listen to their engineers' concerns in future.

Fun With Numbers - worked example

Re my earlier post, here is a worked example showing that you can use the quadratic formula approach to work out what non-decimal base a calculation is in.

(Update: Rational Anarchist developed this technique independently and posted a worked example a few minutes ago in the comments to the earlier post. So this is a Newton v Leibniz type spat...)

Problem

"15 x 36 = 642. This doesn't work in decimal/base ten. What base is it in?"

Solution

You express the first part as: (x + 5) x (3x + 6)
You multiply those to get: 3x^2 + 21x + 30 (expression A).

You express the second part as: 6x^2 + 4x + 2 (expression B)

You subtract expression A from expression B and get:
3x^2 - 17x - 28 = 0

You solve this using your preferred method.
Using factorisation, you get (3x + 4) x (x - 7) = 0

So x (the base) could be -4/3 or 7. The base must be at least 7 because the highest digit in the original calculation was "6", so rule out -4/3 and try with 7.

Check

You have to convert the given equation from base 7 to base 10 and see if it works.

Base 7................Base 10
15.......................7 + 5 = 12
36......................(3 x 7) + 6 = 27
642....................(6 x 49) + (4 x 7) + 2 = 324
15 x 36 = 642...12 x 27 = 324

Sorted!

NB - If the calculation you are given is a division - i.e. "642 ÷ 15 = 36", then you just turn it into the multiplication 15 x 36 = 642" and use the same approach,

Fun With Numbers

I have been thinking about bases other than decimal (such as binary) and quadratic equations. These are normally treated as separate topics, but there are overlaps, and if you think it through, you reach some surprising conclusions.

Whether there will ever be any practical application of this is doubtful, so only read on if you have quarter of an hour to spare. Here goes...

Bases other than decimal

We use decimal numbers (base ten) all the time and I hope that most people are also familiar with the concept of binary numbers (base 2). They used to teach it at school (heck knows why, but it was fun).

If you see the number "11" you assume that it means "eleven", but if you are told this is using binary notation, it means "three". Instead of columns for hundreds, tens and units, you have columns for fours, twos and units.

You can use any base you like, the computer chaps like using hexadecimal (base sixteen), They use digits up to nine and use A for "ten", B for "eleven" and so on up to F for "fifteen" (the highest digit is always one less than the base), The columns are for 256s (16 squareds), sixteens and units. So if "1A3" is a number in hexadecimal, its decimal equivalent is 419.

It's fun writing down numbers in other bases and trying to add, subtract, multiply and divide. It really messes with your mind, if you like that sort of thing.

Quadratic equations

If you are asked to solve something like "x^2 + 2x + 3 = 27" for x, it is quite a faff because you have to use one of the techniques for solving it (preferably this one), and you have to concentrate on not getting confused between x-squareds and x's.

My first breakthrough was to realise that we are all actually very familiar with the quadratic format/concept... because that's how we read and write numbers.

The number "111" (in base ten) means 1 x 100 (ten squared) + 1 x 10 + 1. = 111. Easy.
You can also imagine it as a quadratic equation x^2 + x + 1 = 111, where x = ten.

The number "111" (in base 2) = "7" (in base ten). If you know we're using binary, that's also simple enough. It's a two squared, plus a two, plus a unit.
You can also imagine it as a quadratic equation x^2 + x + 1 = 7, where x = 2

Putting two and two together... to make five

Some maths puzzles give you a calculation that looks odd, such as "12 x 13 = 222" and your challenge is to work out what base this is in. By trial and error, you can work out that it is in base four*. "12" means 4 + 2 and "13" means 4 + 3, the answer is 42 (in decimal terms), which in base four is expressed as "222" (2 x 16 + 2 x 4 + 2).

UPDATE: I have now done a post with a worked example to show how you can solve such "identify the base" problems using the quadratic approach.

So... when you are solving a quadratic equation where the signs before the x-squareds and the x's are positive, solving for x is the same as asking what base it is in!

If I tell you that "2x^2 + 2x + 2 = 42", you can turn that into two very similar problems.

1. You can turn it into "222 in a non-decimal base = 42 in base ten. Which base is '222' in?".

Or...

2. You can turn it into "Solve for x". If you've been following so far, you know that one of the answers must be four... but negative five is the other valid answer.

So there actually two possible answers to the first type of question as well - it could be base four or it could be base negative five.

It is here that my train of thought grinds to a halt. It would be fun to argue the toss with a maths teacher whether he would accept "base negative five" as a valid answer to question 1*.

Apart from that I see no practical use to this concept - could there ever conceivably be a situation in which it is handy to use a negative base, in the same way as the computer chaps find hexadecimal and binary useful?

Answers on a postcard...

* Of course, another answer to the problem "in which base is 13 X 14 = 222 a valid equation?" is "negative one" if you multiply up and solve it using the quadratic equation approach, but while I accept the existence of negative bases, there can be no base one, because the highest digit you can use is one less than the base, in this case zero.

Fun With Numbers

From City AM:

... thanks to a concerted push to appeal to younger buyers, the 111-year-old company has managed to bring the average age of its clientele down by 13 years over the last decade to just 43.

“That means that for everybody who is 60 [buying a Rolls-Royce], you have somebody who is 20,” chief executive Torsten Muller-Otvos told City A.M.

Nope, mathematically wrong and seems unlikely. More likely is e.g. for every 60 year old buyer there are nine 42 year olds; or four 39 year olds.

Killer Arguments Against LVT, Not (476)

Andrew Carey left the following comment under yesterday's post about why replacing Business Rates (and other taxes on businesses) with LVT would help get occupation rates on the High Street back up:

Brilliant by Mr Wadsworth. And unlike the Council Tax equivalent of this you're not at risk of losing your own home if you misjudge the market rent.

OK, let's agree that "losing your own home" is A Bad Thing.

And let's define "losing your own home" as being evicted by a landlord for non-payment of rent or simply because he wants to sell; or being repossessed by the bank because you can't keep up the mortgage repayments (usually because a borrower has lost their job).

(Then there is the thorny issue of people who are prevented from owning a home in the first place; their taxes are being used to fund public services and they are paying off their landlord's mortgage. For every five years they pay rent and extra tax, they have lost a home. Doesn't that count?)

We can then judge the relative merits of Home-Owner-Ism and an LVT system by looking at how many people lose their homes under either system. Whichever leads to the lower number is the better system.
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How rosy is the picture under full-on Home-Owner-Ism at present?

Statistics from The Resolution Foundation show the following:

Safe/not at risk
Owned outright with no mortgage - 28.3% of households (mainly older and pensioners).
Council and Housing Association Tenants - 13.1%.

Total 41.4%. This number will drift downwards if the Homeys have their way. Council housing will be sold off; and there are fewer first time buyers, whose average age and mortgage terms are increasing. Instead of buying at 25 and paying off the mortgage in 15 years (home free in your forties!) like in the Good Old Days of Georgism Lite, they are buying at 35 and paying off the mortgage over 30 years, just before retirement age.

At risk

Households with mortgages 24.7%
Private renters 17.2%
Sub-letting, sharing or living with parents 16.7%

Total 58.6%, a figure which will drift upwards. How many of those lose their homes each year? Difficult to tell, and I don't know. But it's a number X.
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How would things look under a 50/50 Georgist system, with income tax and LVT only (no Council Tax, SDLT, IHT, VAT or NIC etc).

1. At present, only about 3% of people are involuntarily between jobs at any time (and stand to lose their homes). This number would go down with lower taxes on productive activity, so maybe 2% under Georgism. So they could add a 2% "unemployment insurance surcharge" to LVT bills and simply exempt people for a few months if they lose their jobs.

Seeing as the average LVT bill would be about £7,000, as long as one partner is working, the LVT is affordable in nine cases out of ten anyway. And the mortgage arrears that build up while one partner is out work will be lower (because mortgages will be lower).

2. The total amount paid in rent/mortgage plus LVT under Georgism will be considerably lower (thousands or tens of thousands of pounds a year per household) than the amounts people currently have to pay in rent/mortgage plus Council Tax, SDLT, VAT and NIC (basic maths and logic). So there will be a safety cushion built in.

3. Under Georgism, house prices will be lower and being a residential landlord will not be such an attractive option. So a lot of the 34% currently living with parents, sub-letting or renting privately will be able to afford to buy, which greatly increases their housing security (can't be chucked out on a whim and it's just nice to own your own home to decorate or improve as you wish).

(Many of those who currently are prevented from owning their own home in the first place will now own one; a few of those might lose it again. But overall, it's a win.)

4. Pensioners are a non-issue, there would of course be a roll-up and defer option if both owners are over pension age, so none of them will lose their homes. Heirs will inherit less, but so what? The heirs will have been able to buy their own homes long before their parents die so overall most are just as well off (if not better off).

5. There would be more council housing for truly affordable rents, which is far cheaper for the taxpayer than subsidising private landlords via Housing Benefit. (I'd argue it makes an actual cash profit but whether it does or not, it's cheaper than paying Housing Benefit).
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Therefore, overall, housing security (the flip side of the risk of losing your home) will improve quite markedly under Georgism. The current low number of people who lose their homes each year will fall considerably to close to zero. This is not hypothetical. Property tax rates in the USA vary widely, and areas with higher rates have fewer mortgage repossessions.

I fully accept that under Georgism, there will still be some people who budget badly (who would lose their homes under Home-Owner-Ism anyway); or couples who've paid of their mortgage and who both lose their jobs and simply cannot find work during the exempt period (who would have been safe under Home-Owner-Ism). And those people will actually "lose their homes because of LVT".

There will be an outcry in The Dailymailexpressgraph every time it happens. But that number will be a lot lower than whatever the number currently is under full-on Home-Owner-Ism, X. where three-in-five households are at risk of losing their homes. It's the risk of it happening that grinds people down psychologically, even if it never happens to most (although there are plenty of horror stories about no-fault evictions).
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So as per usual, if you think about the slogan and look at actual hard numbers, what appears superficially to be an argument against LVT is in fact and argument in favour of LVT.

That's the spirit! (fixing the High Street)

Emailed in by Lola from Ipswich Star:

The Edinburgh Woollen Mill, in Buttermarket, Ipswich, looks set to be the latest national brand exiting the town.

Large signs have appeared in the store's windows which state: "This store is closing down - all stock must go". owever, the store's message is somewhat contradicted by a much smaller sign underneath which reads: "Subject to landlord negotiation". This is a tactic The Edinburgh Woollen Mill has employed before and used at dozens of stores across the country.

Earlier this year similar signs appeared in the windows of Peacocks fashion store, in Carr Street. But despite having the signs up for most of the year the store, which is owned by The Edinburgh Woollen Mill, still seems to be going strong.

It appears the signs are introduced as a result of annual negotiations of new leases in a bid to strike a better rent deal with landlords.

Retailers are gradually cottoning on to this tactic, in the medium term, it will work, hopefully.

LVT (as opposed to Business Rates) would give landlords the required kick up the arse and accelerate the process. LVT on any high street would be based on average rents being actually paid by normal tenant businesses. For charity shops (which are arbitraging the 80% Business Rates reduction for charities) and vacant premises, each landlord would be asked how much rent they are holding out for (assuming the premises were rented to a normal business) and would pay LVT based on that amount. If they pitch too high, they will be overpaying LVT; if they lowball, then the council can ensure that the premises are actually rented out for that amount and a local business gets its foot in the door.

The theoretical optimum rent (and hence optimum LVT receipts) on any high street is the highest figure that landlords can demand before shops start falling vacant, which leads to a downward spiral. In the real world, the optimum is "a bit less than that".

LVT will encourage landlords to find that optimum:
- LVT will tend to push rents down a bit. A rational landlord is indifferent between a) charging £40/sq ft rent and paying £30/sq ft LVT and b) charging £35/sq t rent and paying £25/sq ft LVT, either way, the landlord nets £10/sq ft.
- LVT will also push rents up a bit. If all other landlords are charging £35/sq ft, fixing the LVT on all shops at £25/sq ft, clearly a minority of landlords will go for £36 or £37, while still only paying the £25 LVT and thus netting £11 or £12.

But so what? If rents fall below that theoretical optimum, at least there will be shops and jobs in the area; the council's loss is local business' gain, and not local landlords' gain.

Presumably, there are some High Streets where the maximum rent that can be demanded is less than it costs to maintain the buildings, these areas are beyond the margin and are very difficult to revive. Reducing other taxes (in particular VAT) would revive at least some of them, which is all part of the plan (LVT could largely replace VAT).

"Cats"

I only go to watch films which get bad reviews because nine times out of ten I am pleasantly surprised and come out thinking "It wasn't that bad, really".  (The last film I watched which got good reviews was "Black Swan" and I would have walked out halfway through if I hadn't been there with Her Indoors who quite liked it. I skipped the two Paddington films because they got good reviews, which was a big mistake on my part, they were both on telly over Xmas and they are great!)

"Last Christmas" is a counter-example, it got mediocre reviews but that's actually a *really good film* in a completely non-ironic way.

I accompanied Her Indoors to see "Cats" (the musical) donkey's years ago, and it was truly dreadful (although again, Her Indoors liked it). With expectations that low, I happily went with her to watch the film version yesterday.

We can file "Cats" along with "Downton Abbey" and "La La Land". Objectively, it is a crock of shit churned out by cynics to fleece an undemanding and unquestioning public. But these films are very well made (camera angles, lighting, sound etc) and if you just sit back, relax and judge it by its own standards (in the rather glorious Odeon Luxe recliner seats), it's really quite enjoyable and I came out smiling.
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Surprise of the film: there are two-and-a-half actually funny lines in the film. James Corden delivers both-and-a-half of them *perfectly* and I actually chuckled out loud each time.

YPP's New Year Message

I'd be grateful if you could take a few minutes to read it.

Thanks. I'm not doing this for fun.

Hypothecated bequests

Everybody is piling in with their opinions on this story. From an economics/accounting stand point, those schools are stupid for turning down the bequests, which were earmarked for paying for school places for "poor white boys".

Perhaps Bryan Thwaites did this for entirely benevolent and altruistic reasons; perhaps he was a downright racist - that is entirely irrelevant.

The point is that such schools usually award a few free places anyway to maintain the pretence that they are charitable institutions, which secures them a very modest corporation tax break and a very hefty Business Rates discount (which will be phased out in Scotland next year). Ultimately, the reason for this is to bump up their grade averages, thus attracting more fee-paying pupils, it's like a loss leader.

We would assume - or hope - that some of those free places would have gone to "poor white boys" anyway, so all the schools have to do is to match the income with the corresponding largely notional expense.

Let's say that in the absence of the bequest, they would have handed out ten free places, five to "poor white boys" and five to "poor non-white boys". The bequest pays for, say, two free places, they just earmark two of them as "Thwaites Scholarships" and reduce the number of other free places awarded to "poor white boys" from five to three; thus maintaining the intended five/five ratio (and banking the bequest for themselves).

If they want to be politically correct and pass on the benefit of the bequest, then in addition to the two "Thwaites Scholarships", they could also award the planned ten free places off their own bat, four to "poor white boys" and six to "poor non-white boys", meaning that instead of five/five it's six/six and everybody wins, including at least one "poor non-white boy".
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To give another example, I vaguely remember a case where a non-white person was prepared to be an organ donor, but insisted that his organs could only go to a non-white person (or perhaps it was the other way round, doesn't matter). The NHS turned him down for being racist.

Equally stupid.

If you are white and on a waiting list for a new heart, the chances are there are some non-white people ahead of you on the list. You aren't going to get that non-white heart, but a non-white person above you on the list will, so at least you move up the list and benefit from the donation, however indirectly.