Mark Wadsworth

Why you shouldn't base a business-model on bubble values (part 94)

2009-11-12T14:48:00.006Z

From The Times:

British Midland (bmi) may struggle to raise the £95 million in funding it needs to keep flying because potential buyers for its Heathrow landing slots have become thin on the ground...

In the airline’s most recent accounts, its directors warned that uncertainty over the slot sale cast doubt on the company’s ability to continue as a going concern next year. This has sparked fears about the future of the UK’s third-largest airline and Heathrow’s second-largest operator...

Bmi’s most valuable asset has been its 11 per cent of Heathrow landing slots. The airport has been so congested in the past that slots traded for huge sums of money. Continental Airlines paid $209 million for four pairs of slots two years ago, but today recession-hit carriers are cutting back rather than seeking to expand.

Until UK airports and British Airways were privatised about twenty years ago, nobody paid much attention to the inherent value of landing slots. The government of the time just handed over most of the slots to British Airways, rather than parcelling them up with the airports or the sensible option, retaining them as part of the state's assets.

Commonsense, and real life, tells us that the value of the slots is a balancing figure, i.e. the money an airline can earn from each flight minus its normal operating costs. The normal operating costs can be competed away so are a fairly stable figure but total ticket sales fluctuate a lot depending on current economic conditions (and/or fear of terrorist attacks), so the value of the slots fluctuates disproportionately.

What exacerbates the fluctuations is that slots are a semi-artifically rationed monopoly right (the only way to increase supply is to buil more airports, and the NIMBYs aren't having that, of course), which enhances their value even more. And the net present value is inversely proportional to prevailing borrowing rates. In other words, the value of the slots is a function of the super-profits that airlines can earn, and then some.

These value fluctuations don't affect those airlines who originally got the slots for free (and haven't used them as security for loans), but airlines who borrowed money to buy them are now in big trouble.

Would it not have been better for the state to take the sensible option, retain the slots and auction them off each year or every six months? The airlines would never bid anymore than next year's super-profits, so would never have been able to get into such debts; in bad years, the price will be bid down, so in the bad years airlines save money and still remain profitable.

The auction proceeds could be used to pay for the external costs of air travel in places round airports, i.e. noise pollution, extra congestion on roads and railway etc. Or to put it crudely, bribe local NIMBYs into accepting that collectively, we are better off with airports than without them.

What's not to like?

"David Dimbleby injured by bullock"

2009-11-12T14:22:00.002Z

Over at the BBC.

The 71-year-old was loading a bullock onto a trailer at his farm in Sussex when it reared, resulting in the presenter being briefly knocked out...

Thanks to AC1 for emailing me this.

"Police get 93-page guide to cycling"

2009-11-12T11:06:00.002Z

Over at The Metro. Enjoy.

Economics Thought Experiment Of The Day

2009-11-12T08:45:00.001Z

One idea espoused by more rabid free-marketeers when discussing the banking system is the idea that banks should/should be able to issue their own currencies, e.g. as suggested by Financial Services Minister Lola in the comments to one of yesterday's posts:

Returning to commercial banks the right to issue their own currency would make them more 'prudent' and to switch from gaining deposits on 'rate' to gaining deposits on 'security'.

1. I always find it helpful, before we reinvent the wheel or propose something radical, to look at what actually happens. If you think about it, commercial banks can and do issue their own currencies when they raise money by issuing bonds (which historically are a far more important source of funding that issuing shares). The following does not really apply when a bank raises money by taking ordinary bank deposits.

2. The main practical difference between two different currencies are that they pay different interest rates (for a variety of reasons the relevant one, for the purposes of this discussion being the fact that some countries are better or worse credit risks); and that their relative values fluctuate, i.e. EUR 100 a year or two ago was worth GBP 60 and now it's worth GBP 90.

3. If a good bank like HSBC and a shit one like Lloyds Group both issue bonds for GBP 100 nominal value next week, the market value of each, on the date of issue will be close to GBP 100. But Lloyds Group's bonds will have to pay a much higher interest rate than HSBC's because they are, at present, a worse credit risk.

4. If Lloyds Group's credit rating tanks even further, the market value of all their bonds in issue will go down; if it recovers, the value will go up, and if the interest rate is high enough, the market value will go above nominal value. So you might pay GBP 100 for GBP 100 nominal next week and be able to sell them on for GBP 110 in a few months or a year's time.

5. So, somebody who invests in the bonds issued by a UK bank that are denominated in GBP, is to all intents and purposes investing in a (slightly) different currency to GBP. As and when the holder wants to convert his nominal GBP 100 of bonds back into hard cash, coins and notes, in the future, he will find that the market value could be anything between GBP 0 (if the bank has lost a lot of money and the bonds are 'junior' or unsecured debt) and a lot more than GBP 100* (if the banks credit rating is good/has improved and/or the interest rate is higher than future interest rates on similar quality bonds).

6. That's exactly the same as investing in bonds issued by a foreign government; if you invest GBP 100 today, the amount that you get back in hard cash in future will go up or down, depending on how that country's economy is doing, how high government debt is, how high their interest rates are in future and so on.

Just sayin', is all.

* For comparison, some building society 'Permanent interest bearing shares' that were issued when interest rates were very high, and which still pay 13% interest are worth about 150% of nominal value, even those issued by wrecks such as Halifax (now part of Lloyds Group)

Economic Myth Of The Day

2009-11-11T21:08:00.004Z

From The Torygraph:

"[Mortgage] Lenders, as a whole, do not have enough funding for mortgages to help promote the economic activity that will help lift the UK out of recession."

The article was posted on the HPC Blog, and I commented thusly:

"... why is there this general perception that mortgage lending stimulates the economy?

All it does is mean that more borrowers are paying more interest to more depositors. If the depositors are from abroad, then interest payments are going abroad, which reduces the money we can spend. If it is all domestic, then it's a break even at best, and probably mildly negative (more people working in banks shuffling paper etc)."

There are so many things you can spend money on, you can invest in your education; a business can invest in market research, product development, plant and machinery, staff training and advertising; people could withdraw money and invest in new shares, enabling companies to repay borrowings (thus helping to deflate the credit bubble in an orderly fashion); heck, people could withdraw their money and spend it (remembering that businesses vastly prefer £1 income to £1 loan). All of these things stimulate the economy, or put it on a sounder footing.

There are very few things you can do with money that do not stimulate the economy, but borrowing to the eyeballs to bid up house prices again is certainly one of them. Even physically burning money is better for the economy, as it is like cancelling government debts, so lifting the future tax burden a bit.

Answers on a postcard.

Fun Online Poll Results: What are we missing?

2009-11-11T13:49:00.005Z

Last weekend's Fun Online Poll asked "Which is the better way to help businesses?". I normally wait until a hundred people have voted, but so far 73 have chose "Cut Taxes" and nobody has chosen "Bail out the banks, in the hope they'll increase lending", so I'm going to call it early.

Which begs the question, why on earth does our government insist on bailing out the banks time and time again? I would assume that this is a desperate measure to prop up house prices, or possibly because our government is so dumb they think that the banks are important, or maybe even because the members of this government are hoping for well-paid non-jobs with UK banks after they get voted out next year.

Sure, the existence of a banking system (payments, direct debits, cash machines) is vitally important, as is the general idea that banks match savings with borrowing to the mutual benefit of all concerned. But banks are just middlemen, and have very little capital of their own. So if one lot go out of business, the staff, the branches, computer networks etc are still there; and the savings and the mortgages are still there, so why not let somebody else come and have a go?

For a real life example, see the transfer of most of B&B's assets/liabilities to Santander a year ago. Sure, somebody has to face up to the losses (which are already there), but they can be divvied up between reckless borrowers, bondholders and shareholders, there's no point burying our heads in the sand.
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Moving on, this week's Fun Online Poll asks "What should income-related benefit withdrawal try to achieve?"

In case that sounds a bit technical, what I mean is the fact that somebody on Income Support etc loses £1 in benefits for every £1 he earns; and households on Tax Credits lose around 70p in Tax Credits/PAYE for every £1 they earn. Those are "income-related benefits withdrawal" rates of 100% and 70% respectively.

For a graphic representation of what I mean, see here.

Vote here or use the widget in the sidebar.

Yes, that's "Jane's", not "Janes", "James" or "Jones"

2009-11-11T12:28:00.003Z

From Jane's

Responding to questions from committee members at an open hearing on 10 November, Sir Bill Jeffrey, the permanent under-secretary for the MoD [Ministry of Defence], said the department may need to write off a large proportion of expenses errors worth GBP268 million (USD448 million) gross, identified by a National Audit Office (NAO) report published in July.

The NAO's review of the MoD's 2008-09 report of accounts found that 14.7 per cent of transactions carried out using the MoD's Joint Personnel Administration (JPA) expenses system were in error. (The JPA handles specialist pay, allowances and expenses for MoD personnel.)

When asked what proportion of the GBP268 million may eventually need to be written off, Terrence Jagger, the MoD's director of financial management, said: "At an educated guess – I'd say considerably less than half of it. GBP268 million is the NAO's estimate of gross error," he added. "Those errors arise from situations where we can't provide satisfactory evidence ... . It may well prove that GBP268 million is an over estimate."

For comparison, there are about 146,000 soldiers in the British Army and one civil servant for every two serving armed force members.in the MoD. My trusty calculator tells me that the average expense overclaim per civil servant was about about £2,680 each in one year alone, but it would be enough to give every British soldier going to Afghanistan a bonus of about £10,000 each (assuming they change shifts three times a year). Or indeed to pay compensation of £500,000 to every seriously injured soldier.

Are we a Police State yet?

2009-11-11T10:26:00.002Z

From The Metro:

A grandfather was arrested in a dawn raid and held in a police cell for six hours - for swearing once in front of a council official. Thomas Catcheside was woken at home by officers, marched to his bedroom - where his wife was still asleep - and ordered to get changed before being driven away in a police van.

The 67-year-old, who admits using the f-word in a row with the official, had his fingerprints and a DNA swab taken*, before being issued with an £80 fixed-penalty notice and released. 'I was frightened and angry. It was so heavy-handed,' said the former lorry driver.

His arrest followed a dispute a few days earlier over 'dangerously slippery' stairs in his communal block of flats in Cambridge. The grandfather-of-five, who is chairman of his local residents' group, has been campaigning for three years for safety improvements to the staircase. But when an official stopped him from following him downstairs to listen to a phone call to a supervisor, Mr Catcheside snapped: "Don't you tell me what I can and can't do in my own f***ing place."

A Cambridgeshire police spokeswoman said: 'We were responding to reports of an assault.'

1. As I've said before, one of the hallmarks of authoritarianism is that the punishment is inversely proportional to the offence, until ultimately any and every form of behaviour can be punished ("ThoughtCrime") on the say-so of a council official, police office or CPSO. "Fixed penalty notices" take us yet further down this slippery slope, as Simon Jenkins explained in yesterday's Evening Standard.

2. There is a separate offence of "wasting police time". Shouldn't the officers concerned be punished for wasting their own time?

* Which they can now retain for six years.

"Up to" of the week

2009-11-11T09:31:00.000Z

From the BBC:

More than 300,000 families use them to save up to £2,400 a year through tax relief on the cost of childcare...

It involves parents sacrificing up to £243 of their salary - before tax and national insurance are taken off - in exchange for electronic "vouchers" which are then paid to Ofsted-registered child carers, from au pairs to nurseries. The Treasury wants to phase out this tax break, which is equivalent to a 31% saving on the first £243 spent on childcare costs each month for basic rate taxpayers, or 51% for those paying the higher rate.

So that really was lazy journalism - all the facts are there in the second paragraph, so you don't need to be a maths genius to work out that the absolute maximum tax/Employee's NI saving is 51% x £243 x 12 = £1,487 a year, and for a basic rate taxpayer it's £904, so saying "up to £2,400 a year" is either downright laziness or deliberately misleading.

The rest of the article is the usually blah, whine, moan special pleading - you must realise that a whole industry has grown up around administering the vouchers, which is exactly what was intended. Wouldn't it be far simpler to just stick an extra £20 a week on the cash-equivalent "nursery vouchers" (that are officially called something else, of course) and have done with it?

Petition Of The Week

2009-11-10T20:46:00.002Z

Over at petitions.number10.gov.uk:

"We the undersigned petition the Prime Minister to stop referring to the EU as "Europe".

The European Union (EU) is not Europe. Europe is a continent containing many countries, most of which are in the EU. The EU does not cover the whole continent, it does not represent the whole of the continent and the British Government's Europe Minister doesn't form policy on the whole continent of Europe.

The Prime Minister, the British government and the EU itself should stop claiming the whole continent for the EU. The EU should not be referred to as "Europe" and the Europe Minister should be called the EU Minister. Similarly, the European Court of Justice and European Court of Human Rights should be known as the EU Court of Justice and the EU Court of Human Rights.

The Prime Minister should issue guidance on the use of the word "Europe", rename the Europe Minister to the EU Minister and petition the EU to name their institutions appropriately."

Via.

FakeCharities: The fun never stops. Ever.

2009-11-10T13:39:00.003Z

From The Evening Standard:

David Cameron attacked the “moral failure” of state-run welfare today as he announced radical plans to use taxpayers' cash to fund charities helping the poorest in society. The Tory leader pledged to match Labour's commitment to eradicating child poverty but said that a Conservative government would use community groups rather than the state to mend “broken Britain”...

Aaargh! The purpose of the welfare state is to keep people above the breadline, no more and no less. If politicians really wanted people to take responsibility for themselves (i.e. stay in a stable marriage, take work when and where they can, save up for a rainy day etc.) all you have to do is replace the entire welfare system with universal flat-rate per-person benefits and restrict income based means-testing to no more than the normal basic rate of tax+Employee's NIC (i.e. currently 31%) or maybe 50% for social tenants (who'd pay an extra 19% of their wages in rent, which enables us to get rid of Housing Benefit and Council Tax Benefit completely), as well as slashing fraud and error and administration costs to a bare minimum, yippee, hurray!

Moving on:

He also announced that he would appoint charity boss Debbie Scott, who runs the Tomorrow's People group, as a Tory peer.

Aren't we already sick to death of the Labour government appointing their friends and acolytes to the House of Lords and then giving them a job in the Cabinet?

And who are Tomorrow's People anyway? What do they do?

In their 2008 accounts, they claim (page 2) that they 'helped' 12,798 'clients' in the year..."Of the total leavers in the year, 3,081 were on a programme where securing a job was the target outcome and 64% of those leavers secured a positive outcome. A further 850 were helped into training or unpaid voluntary work." So they are a little coy about how many of their 'clients' found a permanent job - a couple of thousand, maybe? It is unknown how many would have found a job anyway, of course.

And how much does this cost?

Page 9: Total income £7,452,252.

I've no idea how much it costs getting a couple of thousand people into work, but it sure as heck ain't £7,452,252 (we could check the accounts of a large recruitment agency like Michael Page for a private sector comparative), so what on earth do they spend it on?

Page 17: Wages and salaries £4,320,542.

And who pays for it?

Page 5: Contract income streams continue as previously and include, amongst others, DWP, the Government Offices for London, the North West and the South West, the London Development Agency, and the London Boroughs ofIslington and Lambeth. Donations received include, amongst others, those from Diageo plc, the Laidlaw Foundation, PricewaterhouseCoopers, Esmee Fairbairn, Rank Foundation, Paradise Foundation and Lady Edwina Grosvenor."

Hands up everybody who still thinks that the Tories will be anything more than marginally less-bad than Labour.

Guilty until proven innocent

2009-11-10T10:52:00.002Z

From The Metro:

The drinks industry should have to prove its sponsorship of sporting events does not boost consumption, researchers say. The government should stop sponsorship until the industry proves there is no link between advertising on football shirts and competitions, for example, and alcohol misuse.

"It should not be left to the public to demonstrate sponsorship is harmful but, rather, it should be up to the alcohol industry to show that the practice is harmless," said the joint Australian-British paper.

Outbreak of commonsense ... at The Daily Hatemail

2009-11-10T09:22:00.002Z

The Daily Hatemail ran one of its regular articles wailing about the £17 billion cost of housing benefit ...

Figures obtained by the Conservative Party last week revealed that one in six UK households is now reliant on housing benefit*. In Hackney, the local authority with the most subsidised housing, 41.9 per cent of households receive the benefit...

The article was posted on the HPC 'blog yesterday, and I went straight into my usual rant:

That £17 billion headline figure is all lies, of course.

Two-thirds of this is money being paid from one branch of state (DWP) to another branch of state (councils or Housing Associations). The real cash cost of social housing is in fact minimal, once you minus off the half of social tenants who pay some or all the rent. One-third of HB is paid to private landlords, and I agree that this should be scrapped - it is a subsidy to land ownership and thus inflates rents and prices without increasing supply. Far better to spend that money on building new social housing.

T'was DBC Reed who actually bothered to read the article, and what amazed him (and me) was that this was more or less exactly what The Hatemail were saying - the piece is actually about the ridiculous amounts of money paid in HB to private landlords (thousands of pounds a week in some parts of London) rather than being a rant against social housing in general, and it concludes with this:

But the system [of subsidising private landlords] remains over-generous. Not only that, it creates a benefits trap: people have a disincentive to get a job or to work more hours.

The best way to slash the £17 billion housing benefit bill would be to adopt a cheap housing policy: build more homes and raise taxes for property speculators, allowing house prices to fall so that more people would be able to afford to buy a home on the open market.

Instead, the Government is trying to reinflate the housing market. What we gain on our houses we will lose through the extra taxes needed to subsidise housing benefit claimants.

That's me told, I suppose.
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On the HPC thread, there followed the usual debate about the cash cost and notional cost of social housing. My view being that it is only the cash cost that is of relevance to the taxpayer (i.e. the interest on the bricks and mortar, repairs, insurance etc minus rents actually paid, net of HB, which is about £30 per week per household on average). The cash cost is therefore probably negligible.

If you want to look at the notional cost of social housing (i.e. to account for the shortfall to the taxpayer that arises because it is let at below market rents) then you would have to base it on the maximum income that you could milk out of allsocial housing on average, i.e. to assume that all social tenants were turfed out and all properties sold off to private landlords and these landlords tried to let them out for the highest amount that potential tenants can afford.

The bulk of people wanting to rent them would be former social tenants, who simply can't afford to pay very much, so the new 'market rents' probably be lower than the headline rents charged by the council/the Housing Association (but possible above the average weekly rent of £30 that is paid currently). The new market rent might be £2,500 per year on average, or £1,000 more than is currently paid.

On that basis, the total notional cost of social housing to the taxpayer might be £4 billion - or 0.3% of GDP. But if you are going to go this far, wouldn't you also have to factor in the notional social cost of people sleeping rough, a million or two pensioners being evicted, entire families being crammed into one bedroom like in Victorian times with all the misery that entails? So even on a notional cost basis, it's a break even.
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Finally, no doubt some Home-Owner-Ist will complain that it is unfair that people who "take responsibility" have to pay £10,000 a year for a mortgage but social tenants can rent a similar sized property for £3,000 a year.

Why is that unfair? If it's such a fantastic deal, why don't they get themselves on the waiting list for social housing?

Don't forget that the capital gains accrue to home-owners more than cancel out the mortgage cost. So a fair comparison would be to imagine that social tenants had to pay £10,000 a year rent but were refunded all the rent that they had paid at the end of the tenancy (or that their heirs were refunded this when they die). That seems a bit daft, so why not continue what we're doing, charge them a rent that more than covers the costs and leave it at that?

* You don't need to be the Conservative Party to obtain these figures, you just do a bit of searching on the DWP website, to find their annual statistics. To sum up, there are 3.2 milion households in local authority/housing association housing claiming HB @ £80 a week on average = £13.3 bn per annum (about eighty per cent of social tenants) and 1.2 million households in privately owned housing claiming HB @ £105 a week on average = £6.5 billion per annum. Which adds up to rather more than £17 billion - the DWP figures say the overall average weekly claim is £81.03 a week. Ho hum.

Gordon Brown's telephone call ...

2009-11-09T22:06:00.004Z

From The Telegraph:

The Prime Minister addressed the mother of 20 year-old Jamie Janes as "Mrs James" and left some words half-finished in his apparent haste.... Jacqui Janes accused Mr Brown of disrespecting the memory of her son. Mr Brown moved to limit the damage by telephoning Mrs Janes to assure her he meant no offence.

T'would have been amusing had he become totally befuddled by this stage and addressed her as Janie Jones.

Alan Sugar

2009-11-09T21:22:00.002Z

Which bloody century do these people live in?

2009-11-09T15:41:00.002Z

From an email from Covent Garden, London:

When it comes to Christmas, we're keeping it old-school. From a giant Christmas tree and reindeer petting for the kids, to carol-singing choirs in full voice, a complimentary glass of mulled wine, festive goodies for foodies and much more. You can also win a fabulous family ski holiday....

Dude, WTF?

Haven't they heard of Winterval, modernity, diversity, Elfin Safety, protecting the rain forests, CRB checks for reindeer handlers, infectious diseases, noise pollution, entertainment licences, binge drinking, the obesity epidemic, co-operation not competition, alternative lifestyles, non-essential flights, the lack of snow due to MMGW..?

Ah well, at least he'll have a job after next May

2009-11-09T13:51:00.003Z

From the BBC:

Ed Miliband has said the UK cannot afford to "say no" to nuclear power as he prepares to announce plans to fast-track a new generation of reactors...

I've lost count of the number of times they've flip-flopped between being pro- and anti-nuclear energy, but at least Ed will have a nice cushy job lined up if he loses his seat at the next General Election, a bit like his former Cabinet colleague John Hutton.

Multi-ethnic racism

2009-11-09T12:30:00.002Z

From The Metro:

Four people have been stabbed in a racist attack by a mob armed with metal poles, bricks and sticks.

Police are investigating the attack after a group of Asian students were ambushed near City University is Islington, north London... Officers were also investigating an incident earlier in the day when a gang of white and black youths shouted racist abuse at a group of Asian students.

Relatively few people will read this

2009-11-09T10:59:00.002Z

From The Metro:

UK workers are most likely to be off sick on Monday, according to new research. Consultant Mercer's study of more than 11,000 workers will confirm the suspicions of most after finding more than a third of sick days - 35% - were taken at the start of the week, compared with just 3% on a Friday...

Outsmarted and outgunned

2009-11-09T10:48:00.001Z

Christina Speight emailed round an article from EUObserver headed Concern over Iceland EU bid as public support tanks.

I pointed that although I could see why Iceland might need a navy, I couldn't understand the public's sudden enthusiasm for tanks.

A couple of hours later, I received her reply: "To put the fish in of course!"

D'oh!

Circular Sudoku

2009-11-09T09:20:00.001Z

The difficult Sudoku in last Friday's Metro looked like this:
I completed it as far as I could as follows (my entries are the underlined numbers). The four missing numbers are two 1's and two 9's but there appear to be two different ways of placing them. Is this accident or design? Is one answer right and another one wrong?

From The Dictator's Handbook, Chapter 7

2009-11-09T07:19:00.006Z

"When living standards start to slide backwards because of your heavy-handed and corrupt regime, you can usually distract people's attention from this (and have a fine excuse to move against 'internal enemies') by stoking up tensions with, and ultimately declaring war on, a neighbouring country. Simples."

Fun Online Poll Results & Bank Bail-outs

2009-11-08T13:05:00.007Z

Thanks to everybody who took part in last week's poll, "Which economic variable do you think most voters care about most?". The results were as follows:

Job security, full employment - 63%
Steadily rising house prices - 17%
Reducing the overall tax burden - 15%*

I'm surprised that only 17% thought that people cared most about house prices, but let's assume that Job security is indeed people's main concern. The way I see it, government's main aim seems to be to prop up house prices, for example by bailing out the banks yet again (or "throwing good money after bad", as it's known in the trade) in the vague hope that the banks will lend this money out to home-buyers.

They say that they are doing this to get credit flowing to business, but that can't possibly be true, can it? If the government wanted to get money to business (and hence improve job security) the most effective way of doing it would be to take less off them in the first place, i.e. to cut taxes, surely? Instead of giving the banks another £40 billion, wouldn't it make more sense to give business a tax cut worth £40 billion, and preferably a tax cut that reduces the burden on employment, i.e. not increasing VAT again and reducing Employer's National Insurance?

So that's the topic for this week's Fun Online Poll. Vote here or use the widget in the sidebar.

* Also rans: Reducing the government deficit - 3%; Low and stable inflation - 2%; The strength of sterling - 1%; Reducing the trade deficit - 0%.

"Fireworks safety"

2009-11-07T22:58:00.003Z

There was a public service announcement on BBC2 just now, right after The Thick Of It, saying how dangerous sparklers were, and that there were more safety tips on www.direct.gov.uk.

Enjoy.

My favourite is "Never put fireworks in your pocket or throw them". I mean, it's one or the other, isn't it? Or is it like "having your cake and eating it"?

I also liked "Light at arm's length using a taper". A f***ing 'taper'? When was the last time that anybody lit anything using a 'taper'? I'm not even sure what a 'taper' is. With what do they want us to light our 'tapers'? Another 'taper', presumably?

More 'underlying warming trend' tomfoolery

2009-11-07T20:17:00.006Z

From today's Times:

“The number of people claiming climate change isn’t happening is minuscule, and they have no authority among the scientific community,” [Chris Smith, head of quango The Environment Agency] says. “They are mavericks, not backed up by the evidence.” It is irrelevant, he says, that the world has recently been getting cooler. “You have to look at the trend over 20 years, and that clearly shows global warming. There are alarming new phenomena — the floods here two years ago, the glaciers melting. The evidence is all around us.”

That's on page 44 of the print edition. From a different article on page 47:

Alpine ski resorts have welcomed a first blanket of snow, allowing some to open early and raising hopes of a bumper season despite the economic downturn. In Verbier, Switzerland, where one in five tourists is British, more than a mile of ski runs opens today for weekend skiing. It is the earliest start to the winter season for 11 years thanks to the 50cm (19in) of snow that has fallen this week...*
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While we're on the topic of the underlying warming trend, I'm still number 1 and 2 out of 1,980,000 Google results. Sit on that and swivel, ye warmenists!
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Moving on, Chris Smith doesn't understand basic economics either. It is indisputably true that there are some cliffs on our East Coast that have been crumbling into the sea for centuries, and that in time, houses that were originally built half a mile from the cliff edge will have to be demolished when the cliff finally crumbles underneath them. What's his solution?

Lord Smith is urging the Government to provide money for local authorities to buy cliff-top properties at risk of tumbling into the sea over the next 20 years. “We estimate there are 200 to 250 properties. The local authority would purchase property from the current owner, then lease it back to them. Then, if it gets to a stage where they can’t live in it any more because of the erosion, they would have the funds to move somewhere else. You are talking not just about a temporary flood: it’s the permanent loss of someone’s property through no fault of their own.”

If we expect that a property will fall into the sea in twenty years' time, the value of that house is the NPV of twenty years' rent (say) £10,000 per year, discounted at (say) 5% means the house is worth £125,000. If the owner sells the house for £125,000 and then pays rent of £10,000 a year for twenty years, he will have spent all the original money again and he won't have any "funds" left to move somewhere else - unless the government overpays and/or undercharges, and I don't see why they should be using taxpayers' money to buy 200 to 250 votes.

And it is, to some extent, their fault - them there cliffs have been crumbling for centuries,and whoever built or bought such a property made a trade-off between having a lovely view and a short walk to the beach with the fact that the house won't be there forever (and the the view gets nicer and the walk gets shorter every year, of course). You pays your money and you takes your choice.

* OK, to be fair, the article continues with "The drop in temperature across the Alps comes after a week of jitters in some resorts as people made the most of the unseasonably warm weather of up to 65F (18C) dressed in shorts and T-shirts."