More exquisite Remainer logic.

From The Independent:

The English are blindly driving Northern Ireland to conflict – the fear is that they are too stupid to care. A return to violence is not a worst-case scenario but an inevitability if a hard border returns, as it will if there is a full Brexit.

OK, why's that then?

Focus is often placed on the sheer difficulty of policing the 310-mile border between Northern Ireland and the Republic of Ireland because there are at least 300 major and minor crossing points.

But the real problem is not geographic or military but political and demographic because almost all the border runs through country where Catholics greatly outnumber Protestants.

The Catholics will not accept, and are in a position to prevent, a hard border unless it is defended permanently by several thousand British troops in fortified positions.

Sounds like a terribly stupid idea to me, it fails for practicality, so whose idea is it?

The EU could never agree to a deal – and would be signing its own death warrant if it did – in which the customs union and the single market have a large unguarded hole in their tariff and regulatory walls.

Jolly good. Let Them sort it out then, not the UK's problem. What if the UK sensibly refuses to get involved with imposing a 'hard border'?
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UPDATE, let's re-write this to state the actual position:

The EU is blindly driving Northern Ireland to conflict – the fear is that they are too stupid to care. A return to violence is not a worst-case scenario but an inevitability if a hard border returns, as it will if there is a full Brexit.

The EU could never agree to a deal – and would be signing its own death warrant if it did – in which the customs union and the single market have a large unguarded hole in their tariff and regulatory walls.

Focus is often placed on the sheer difficulty of policing the 310-mile border between Northern Ireland and the Republic of Ireland because there are at least 300 major and minor crossing points.

But the real problem is not geographic or military but political and demographic because almost all the border runs through country where Catholics greatly outnumber Protestants.

The Catholics will not accept, and are in a position to prevent, a hard border unless it is defended permanently by several thousand EU/Irish troops in fortified positions.

The actual Good Friday Agreement says very little about cross-border trade

George Carty (on Twitter) trotted out a lazy misconception: "Surely the main problem is the Irish border (again) - IIRC we can't be in EFTA and also (as required by the GFA) in a customs union with the EU."

Fraggles points out in the comments: "The GFA does not state that NI must be in a customs union with the EU. It simply doesn't. Who keeps making this stuff up?"
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In such situations, I find it useful to write down what you know, and look up what you don't.
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1. Fraggles is quite correct. The full official text of the Belfast Agreement (as it was originally called) is available here. It's 35 pages long so I haven't read it all, but if you search for the word "border" it shows up ten times, but only as part of the catch-all expression "all-island and cross-border [matters]"; the word "trade" appears once as part of the expression "trade union".

Fact is, the GFA had very little to do with cross-border trade. Somebody who worked for the Northern Ireland Office (or Department or Ministry or whatever it was called at the time) under John Major (Tony Blair picked up the baton and finished off the process after he became PM) confirmed that the main aim was ending The Troubles, duh!

They did this quite simply by stuffing the mouths of the leaders of extremist movements/terrorist organisations on both sides with gold. The UK governments' own bullet points are:

* the creation of a democratically elected Assembly
* the creation of a North/South Ministerial Council
* the creation of a British-Irish Council and the British-Irish Governmental Conference

In other words, creating lots of lovely, well-paid public sector/political sinecures which were awarded to the likes of Gerry Adams and Rev. Ian Paisley etc. Every man has his price. In return, said trouble makers agreed to lay down their arms, and all in all, it has worked very well (at considerable cost to the UK taxpayer, but worth it IMHO).
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2. We know perfectly well that there was only a 'hard border' between NI and RoI because the NI police needed to minimise the amount of weapons being smuggled into NI and/or terrorists moving back and forth.

(Ever since Irish independence, the UK has always honoured freedom of Irish citizens to move to and from the UK (and vote in elections here), and there was never a reason to try and impede cross-border trade.)

The GFA enabled the border to be 'softened' to the point of irrelevance by buying off the terrorists/extremists. The only reason the UK would reimpose it is a resurgence of nationalist terrorism.

So people who say that if there's a No Deal Brexit we'll go back to the Bad Old Days of hour long queues at the NI-RoI border with armed guards and frequent inspections have completely lost the plot.
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3. If you search the full text for the word "EU", the most relevant paragraph is this:

The British Irish Council will exchange information, discuss, consult and use best endeavours to reach agreement on co-operation on matters of mutual interest within the competence of the relevant Administrations. Suitable issues for early discussion in the BIC could include transport links, agricultural issues, environmental issues, cultural issues, health issues, education issues and approaches to EU issues.

I think that Brexit falls squarely under their competence, so what is the British Irish Council doing about it? I haven't heard a peep from them. In fact, I'd never heard of them at all.
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4. More facts:

The population of NI voted by a reasonable majority to Remain in 2016.

The vote share of the two biggest Unionist (broadly, pro-Leave) parties in the 2017 General Election was 46%, against 40% for the two biggest Nationalist (broadly, pro-Remain) parties.

So a bit of an uncomfortable contradiction there!
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5. We know that borders are artificial, but a line has to be drawn somewhere and compromises made.

The UK is not a single political unit, there is a whole hodge-podge of territories which are 'British' for some purposes but not others (Isle of Man, Channel Islands - both use GBP and have same titular head of state - Gibraltar, Falkland Islands etc). Scotland is autonomous in some respects and has a fairly powerful Assembly (which they cheerfully refer to as the Scottish Government), Northern Ireland has a similar Assembly, which spends most of the time trying to get itself shut down again. And we manage just fine.

Similarly, there isn't actually a neat line round the Member States of the EU. There is a whole hodge-podge of territories which are in the EU for some purposes and not in the EU for other purposes, full list here. Gibraltar is on this list as well. And they manage just fine.

I'm thinking, surely it is not that difficult to think up some fudged arrangement whereby Northern Ireland falls into the categories of half-in, half-out of the UK and similarly half-in, half-out of the EU?

Where there's a will there's away. Problem is there is absolutely no will on EU side to do something sensible and Mrs T May is being held to ransom by the fairly extremist DUP.
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6. Cross-border trade is very important to the NI and RoI economies, making up about 5% of either side's GDP. I'm not sure if cross-border workers are included in that.

But NI or RoI trade with Great Britain (i.e. the rest of UK) is several times greater than trade between themselves.

Which stands to reason. Although the island of GB is a bit further away from RoI than NI is, the population of GB is thirty times the population of NI and fifteen times the population of RoI.

Reader's Letter Of The Day

From City AM, in response to this article:

It seems that the EU has a paranoid concern that unless it keeps Northern Ireland under its control as a kind of buffer zone, it will have to erect something like a Maginot Line of defences along its side of the Irish land border to keep out undesirable products such as US-style 'chlorinated chicken'.

Why should that be? Is there any good reason for the EU to assume that once we have become a third country, we will automatically become a hostile power, determined to use that weak point in the EU's external frontier to flod the EU Single Market with non-compliant goods?

At present, the UK has domestic laws which implement Single Market rules, and it is that UK domestic legal arrangement which is effective in keeping non-compliant goods out of the 0.1 per cent of UK GDP which is carried across the land border into the Irish Republic and the rest of the EU.

So why should the EU not be satisfied if the UK now pledges to pass and strictly enforce laws expressly designed to prohibit the carriage across the land border of any goods which the EU deemed unacceptable?

Dr D R Cooper

The Irish border - tail wagging the dog.

Far too much attention has been paid to this issue, for example from The Sun:

The issue of the border between Northern Ireland and the Republic has been a stumbling block to Brexit talks

The whole thing is nuts. The underlying logic is that any country with a land border with an EU Member State must also be or become an EU Member State to avoid the 'hard border' issue.

I don't see why the Irish-Irish border is of any more significance that the Swedish-Norwegian border, or the German-, Austrian-, Italian- and French-Swiss borders.

Put it another way, just imagine The Republic of Ireland had only recently become an EU Member State and the UK never had been - whose problem is it to sort it out?

'Everything is all right, offshore and out of sight'. As the Song Goes!

You just have to admire the new, Irish economic miracle highlighted by the 2017, Major Foreign Holders of US Bonds figures here:

I must admit that the once common Japanese, then Chinese, consumer electronics goods around my house have been quietly, unnoticed, replaced with the ''Made in Ireland" logo. Only the Kerry Gold butter in my trendy, new red fridge (made in Cork), still has the Chinese moniker on it. 

These figures clearly demonstrate Ireland's growing industrial muscle in the world. Thank god its not all banking fraud and corporation tax 'avoidance' this time Enda? Isn't it Enda?Enda?

Nobody move or the Irish farmers get it!

Emailed in by MBK from The Independent (the Irish one):

On Thursday week we will know if Britain is going to stay or leave the European Union...

No we won't. The referendum outcome is not binding on the government, and precedents tell us the most likely outcome is a fudged renegotiation and another referendum even more rigged than this one. Even if the government respects a Brexit outcome, it will be years before anything changes.

And if Britain decides to go - Irish farming will be the first in the firing line. Britain has 64 million people and is the world's fifth largest economy. They are also hefty net contributors to the EU budget with a contribution of £13m last year. CAP, which still accounts for 37pc of the EU budget, and could take a big hit if Britain leave [sic].

Fair point. Subsidising our own landowners is insane, subsidising land owners in other countries is beyond insane. So that's a modest win for us.

Some 50pc of Irish beef goes to Britain in trade worth €1.1bn per year. Britain buy 60pc of our pigmeat worth €3.3m per year. Ireland also buys heftily from Britain, importing €3.8bn, against exports of €5.1bn. Of course people will argue, with some justification, that Ireland and Britain have always traded, long before any EU.

So why would we stop buying it all of a sudden..? We buy food and drink from all over the world, from EU and non-EU countries alike.

But the real rub here, and it is still not taken properly on board by many people engaged in this debate, is that if Britain leave [sic], our trade arrangements with them will have to be fixed via Brussels and the other member states.

Aha, so the Eurocrats would punish the Irish to teach the UK a lesson. Whose fault would that be? FFS.

Nobody move or the border gets it!

From The Guardian, after some vacuous drivel from Gordon Brown which is not even worth taking the piss out of:

Enda Kenny, the Irish prime minister, has said that a vote to leave the EU would lead to the return of some form of border controls at the border with the Republic. Speaking at the University of Ulster, he said:

"The re-establishment of customs checks on the border, or indeed of any customs arrangements, would be a regrettable and backward step for North-South trade and cooperation...

"We are standing here today less than 50 miles from the United Kingdom’s only land border. Can anyone credibly suggest that nothing would change if that became the western border of the European Union? We remember when it was a hard border. We remember the delays, the cost and the division. One of the most beneficial effects of the peace process and our common membership of the EU has been the virtual elimination of that border."

There was a very open border between Ireland and Northern Ireland/UK until The Troubles, 1970 or thereabouts, when neither country was in the EEC. Ireland and the Irish retained preferential treatment after it/they demerged from the UK in (the 1920s or 1930s? Never really clear to me), for most purposes, they are still treated on a par with full UK citizens (Irish passport holders have the right to vote in UK elections, certain tax advantages etc).

Both countries joined the EEC as was at the same time in 1973.

The armed police, border controls persisted until the 1990s when the worst of The Troubles had died down again (thanks to The Peace Process i.e. massive bribes and diplomatic spadework by John Major, with Tony Blair riding in to get the glory).

To thank the EU for this is laughable. I'm sure it did no harm, but it deserves little or none of the credit. For once, the Yanks were a moderating force in all this.

The Fenians Won't Like this...

Caption under Telegraph photo here:

"Snow covered graves at St Joseph's Church in west Belfast, as an orange weather alert is announced in Northern Ireland"

"Irish President Michael D Higgins in historic UK visit"

From the BBC:

Irish President Michael D Higgins has been welcomed to the UK by a keen local archaeologist at the start of the first state visit to Hadrian's Wall by an Irish head of state.

Later he is due to visit Stonehenge and Glastonbury in the south west of the country - two more historic firsts.

Ahead of the trip he said his interest in British history was at an all time high, but warned there was "significant work" to do before he had visited everything in the guide books.

His trip comes after the Queen became the first British monarch to visit Leighlinbridge Castle and St Kevin’s 6th-century monastic site in the Republic of Ireland three years ago.

Then Sinn Fein did not attend, choosing to spend the day paintballing instead, but on Tuesday Northern Ireland's Deputy First Minister Martin McGuinness, a former IRA commander, will take the afternoon tour at Windsor Castle, duration approx. 5.5 hours.

"Landowners resolve Simply Red hunting rights dispute"

From the BBC:

A dispute between two landowners over the right to hunt former members of Simply Red on an estate in County Donegal has been settled.

The terms of the agreement were confidential, although it is believed that the parties agreed that neither would set traps or snares for the fugitive musicians, Mick Hucknall and Chris De Margary.

Money's too tight to mention

Glenmore bought Glenmore Lodge near Ballybofey in 2005 for an estimated 1.3m euros ( £1.09m).

However, in December 2009, a neighbour, Mr Wilde of Cloghan Lodge, went to court claiming that Glenmore had been interfering with his right to hunt Simply Red members who had gone to ground in the area. Mr Wilde said the previous owners of Glenmore transferred those rights to his father.

However, Glenmore said they bought all the sporting rights when they purchased Glenmore Lodge from Thomas Mackie and alleged Mr Wilde had been interfering with and had first laid claim to those rights since that time.

So Beautiful

A full hearing of the case had been due to begin at Letterkenny Circuit Court on Monday, but after a number of hours of talks, legal representatives told Judge John O'Hagan that agreement had been reached.

Judge O'Hagan congratulated both parties on coming to an agreement and said it was the sensible thing to do.

The Right Thing

"Whichever of the parties ends up with their heads on the trophy wall will have done the right thing."

Mr Hucknall and Mr De Margary were not in court and are believed to be leading a largely nocturnal existence somewhere on the Glenmore Estate.

In the United Kingdom, former Simply Red members are a protected species and may only be hunted by members of The Royal Family.

"Australia ban nine players for not drinking before Ireland game"

From the BBC:

Australia have suspended nine players for one match for not drinking in midweek before Saturday's win over Ireland.

Wallabies coach Ewan McKenzie acted after "a group of players made the decision to go to bed early instead of consuming inappropriate levels of alcohol".

He said Australia's "manly conduct" standards had been compromised.

A further six players were given a verbal warning for downing a few swift pints and being back at the hotel before midnight.

UPDATE: Newsthump did much the same article the next day

Fun Online Polls: Irish universities; motorway lanes

Thanks for your input here, I emailed my son the link and that is the end of that.
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This week, yet more bansturbation: persecuting people who stay in the middle lane on the motorway.

The full article is at the BBC, which is surprisingly even-handed, e.g. "Motorways are currently the safest roads in the UK..."

Newsthump took it to one extreme and reported that there were calls for middle-lane hoggers to face the death penalty while The Daily Mash took the other tack and reported that the middle lane was voted the "best lane".

I know that there is a lot of fancy maths involved with variable speed limits and so on - it is better to drive at an average speed of 60 mph all the way than to be alternate between 40 mph and 70 mph or more - but AFAICS, if the national speed limit is 70 mph and you are doing 70 mph (or the same speed as the cars ahead of you if slower), then it can't possibly matter which lane you are in.

[For sure, I can see good reasons for lifting the national speed limit to 80 mph or even abolishing a formal upper limit and having a variable speed limit decided from minute to minute by the clever mathematicians and motorway engineers, but let's stick with 70 mph to illustrate the point.]

Seeing as I have every intention of bowling along at 70 mph or thereabouts, to save me the faff of arriving behind a lorry or a pensioner, or somebody approaching pension age in a Mazda MX5, waiting for a safe gap, indicating, overtaking, waiting until I'm a safe distance ahead of the lorry, dropping back into the slow lane and then repeating the whole f-ing exercise half a minute later, I'd rather stay in the middle lane, thank you very much.

But what does everybody else think?

Vote here or use the widget in the sidebar.

Fun Online Polls: Chemtrails; a Master's degree in Irish history

The response to last week's Fun Online Poll was as follows:

Chemtrails: do commercial airlines deliberately add barium, aluminium, polymers and radioactive material to their fuel for Purposes Unknown?

No - 67%
Yes - 26%
Other, please specify - 7%

The number of people who reckoned there might be something in this had hovered at about ten per cent until a couple of days ago, but then there was a late surge of people voting "Yes", as a result of which we ended up with a good turnout of 138 votes. Maybe somebody linked to it or something?

Thanks to everybody who took part. As it happens, I bumped into the man behind Critical Thinking (who had inspired the poll) on Saturday, I put the various objections to him but he was having none of it and came up with plausible counter-counter-arguments to all my counter-arguments. I'm still not convinced, but hey.

Top comment, from the poll:

Spadger: The only fuel additive I know of is a commercial product called Prist, added to standard Jet-a1 fuel for small high flying jets, such as the Lear, it is an anti-icing and biolgical inhibitor for cladosprium resinaii, the so called diesel bug used to prevent fuel filters from blocking by ice or bugs.

It is Diethelene glycol monomethyl ether. I don't know what happens when you burn it, it can be purchased ready mixed but as airliners don't need it and as it is an added cost, don't use it. I have only ever used it in aerosol can form, added when refuelling.
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My oldest son has finished his degree in economics at Munich (nope, he did not manage to convert them all the Georgism) and now wants to tack on a Master's degree in early 20th century Irish history.

He's been offered places at Dublin, Belfast and Coleraine (County Derry), the tuition fees seem to be the same in all three places and he asked me which place sounds best. I don't have a clue about universities in general or Ireland in particular, so I'll throw this one open to the crowd.

Cast your vote here, preferably with an explanation of points for or against.

Killer Arguments Against LVT, Not (233)

Spotted by Richard Henley Davis in the Irish Independent:

The last refuge of battered middle-class Ireland is under fire.

Calm down, then. What is all the fuss about? Your family home is being threatened. The Government has appointed the noble army of taxmen as the enforcers.

Like all Home-Owner-Ists, the writer mounts several arguments, none of which has much merit and which cancel each other out:

None of that softly softly local government enforcement stuff that floundered in the case of the household charges debacle. This time it is the jackboot method. The taxman can cut off the family home tax at source. You will never have to send it to them because it will be snatched from your pay packet. They will do it this way because they know you cannot afford to pay the tax.

Righty-ho, they hope that the tax will raise a paltry €500 million, i.e. €110 per resident, or the equivalent of about one or two per cent on income tax (i.e. like increasing the basic rate of income tax from 20% to 21% or 22%), the bulk of which is deducted directly from your wages. Would there have been the same hysteria if they'd done that? I guess not.

Welcome to back-to-front economics.

The case for a property tax back in 2007 was stronger. At the time the residential property market was in a frenzy. House prices were out of control. The Fianna Fail government refused to hose the flames. Instead, it fanned them.

Bertie Ahern's government and the FG/Labour opposition flirted with the mad idea of reducing stamp duty on houses, allowing property prices to go berserk. Instead of introducing a property tax to cool the market and to raise revenue, Taoiseach Ahern and finance minister Cowen let the market rip -- encouraging developers, bankers and buyers to push prices to lunatic levels. A property tax then could have helped to prevent a crash later.

Instead we had our crash.

FF were in charge in 2007, and the Irish were presumably whooping to the rafters about all the lovely 'capital gains' they'd made. If anybody had proposed such a tax at the time, there would have been howls of outrage about people being denied these lovely unearned windfall 'capital gains' in future. And now the government is FG/Labour and they are doing, belatedly, what should have been done years ago? So what. Better late than never.

Today, the bombed-out market needs nurturing. Last week the Central Statistics Office (CSO) released figures showing that property prices had fallen by 56 per cent in Dublin and by 50 per cent elsewhere in the country since the 2007 peak.

And what do the FG/ Labour boys propose to do to remedy the slump in the fortunes of family homeowners?

You guessed it. At a time when all barriers to house ownership should be removed, when the case for the abolition of stamp duty is strong, they have opted to suffocate the dying invalid. A moribund property market is being locked into the mortuary.

So in Ireland 2007 a Fianna Fail/Green government threw petrol on a blazing housing inferno. Then in Ireland 2012 a Fine Gael/Labour Government nukes the ashes -- just in case there is any sign of a few emerging embers. Back-to-front economics rule okay?

Why does it need nurturing? The FF government did a decade of 'nurturing' and see where it got them. It drove the house price lending bubble, they made a maniac decision to guarantee the Irish banks, the banks duly went pop and now taxes have to be increased to pay for it all. Faced with a choice of stifling the economy even further with higher income tax, or 'nuking the ashes' and taking a small step to try and dampen such bubbles in future, what makes more sense?

The Government is making a serious mistake.

No it's not.

The Irish property market is not a normal asset class. It is skewed badly. It is perverse, irrational, dysfunctional, inconsistent.

Correct, that's what happens when a boom turns to bust. These booms come along every 18 years and the earlier you start heading off the next one, the better.

It is impossible to value a house in present conditions when activity is at an abysmal level.

Bollocks. Rental values are fairly stable and relative values are easy to establish.

Some families own their houses outright, while their neighbours are in negative equity.

So? Relevance? That's like saying that an alcoholic shouldn't pay booze duty because he's deeply in debt. Or is he trying to say that the responsible middle class drinker who has one glass of wine after a meal shouldn't pay booze duty but the alcoholic should? What's his f-ing point?

And should the couple who have paid off their mortgage be liable for the tax while their neighbour is granted a waiver?

Nope. A proper LVT would be indifferent to such matters. Giving a waiver for the indebted would be to indirectly subsidise debt, which is what get them into this mess.

The family two doors down may have a lower income than either. Should they be granted a waiver? Should the elderly be given waivers?

The low income family, nope. If you want to give Poor Widows In Mansions an exemption, deferment option, discount or a higher state pension, feel free to do so.

Should those who have bought the same house paying 9 per cent stamp duty -- a property tax -- in the boom years be made to pay another property tax today?

WTF does that have to do with it? Stamp Duty is borne by the vendor, if you paid 9% Stamp Duty then the price was 9% lower than it otherwise would have been, not an issue.

Did they borrow money to pay the original stamp duty to the government?

Irrelevant. If people over-stretch themselves well, some of they might fall on their faces. That's what's called 'taking responsibility for your own actions'.

Many of the victims of the reckless bank lending in the property boom are likely to be hit on the double, now emerging as victims of the bust when their devalued asset suddenly becomes a taxable liability.

True, the bankers always win out; in the boom years they get the bonuses, in the bad years they get the bail outs, and it's always the hard working people (in the old-fashioned sense of going out to work or running a business for a living rather than the modern sense of 'is a home owner') who get shafted. But, given our (unfortunate) starting point, what's worse - making hard working people, who perhaps didn't over-stretch themselves pay more income tax, or making the over-stretched land speculators pay more property tax? It was ultimately the latter's fault, so they'll end up paying. Seems fair enough to me.

And so on, blah blah, hard working hard pressed middle class Poor Widows In Mansions whose main and hard earned asset bought out of taxed income is now under siege from an army of surveyors yada yaya etc etc.

Outbreak of common sense in Ireland, sort of.

Spotted by Khards at HPC in The Independent:

THE Government is considering a 'super property tax' for owners of large, expensive homes. Under the proposals, the rate of tax levied would rise with the value of the property, the Irish Independent has learned.

Similar to income tax, the property tax rate would go up in bands linked to the value of the house. That means owners of such houses would pay a higher percentage rate of tax due to its greater value. This 'super tax' would help the Government to sell the property tax to the public as homeowners would clearly see the rich paying more.

So far so good. Here come the "sort of" bits...

It will spark concern among those who already stretched themselves to buy a relatively expensive property, and have already paid stamp duty.

Nonsense. People shouldn't have stretched themselves in the first place; slapping them with a one per cent (?) progressive property tax is no worse than a 1% hike in interest rates; and the Stamp Duty was borne by the vendor anyway, it gets knocked off the purchase price, not added to it.

The Government is moving away from a site-value tax because it would throw up anomalies. For example, two houses -- one rundown and one modern -- on the same-sized site would have the same property tax bill.

That's the point of site-value rating. Why should the person who can afford to buy a house and allow it to fall derelict get a tax break? What would you rather have next to you - a run down house or one in good condition? Presumably the latter. Further, it is simpler just valuing the site/the value of the planning permission as it is the same for each house and requires no internal inspections.

In urban areas, houses on the same road tend to be more uniform -- with the site and the house being, more or less, the same size and value. But in rural areas there are often houses of different sizes and values built side-by-side.

Fair points, which is why site value rating is much easier for urban areas. Farm houses will always be a bit fiddly, again why it's easier to just value the sites.

Although the site-value tax is favoured by economists, the Government is finding it difficult to identify a country in Europe where it is used effectively.

So what? Somebody has to go first, in for a penny in for a pound. The closest comparison is of course Domestic Rates in Northern Ireland which is a flat 0.7% per annum of the value of a home as at 1 January 2005, capped at the first £400,000 (so the maximum bill is about £2,800 a year).

The Irish version is better; instead of expensive houses having their tax bills being capped, they pay more. This actually makes it a bit closer to proper LVT - a flat rate LVT would almost certainly be a higher percentage of high value homes than of low value ones because a larger part of the value of high value homes is the location value. Clever stuff.

There are some splendid KLN's in the comments, hard working families, generations of family memories, a tax on the prudent blah blah. I liked this man's style though:

Irish In NJ: Why is this newsworthy? We pay huge property taxes in the US. It's simply part of owning a house. More than 25% of my monthly payment is towards property tax... it pays for my local schools, the street cleaning, the garbage pick up etc... the bigger the house, the more the land, the more you pay. Simple. Ireland likes to adopt most things implemented in the US... taxes should be no different.

Missing words round

From the London Evening Standard:

The present conservative Spanish government inherited the banking crisis from its socialist predecessor; it did not create it. The previous government allowed the banks to finance a fantasy housing bubble, rather as happened in...

Click and highlight to reveal: Ireland.

"How cutting VAT helped Ireland's hospitality industry"

We've been having a futile argument in the comments to an earlier post as to what would happen if the VAT rate on pubs and restaurants were reduced - would it lead to lower prices, higher profits or some combination of both? I have looked at real life evidence and come to the conclusion that a VAT cut is split roughly one-third in lower prices and two-thirds in higher gross profits. But rather than bicker over hypotheticals, let's look at some more real life evidence.

Three months after the Irish VAT cut for pubs, restaurants and hotels in Ireland, Caterer.com published this fine article:

Since the 1 July [2011] announcement that the VAT rate across the hospitality and tourism sectors was to be slashed from 13.5% to 9%, occupancy has increased, hundreds of jobs have been created and a cautious feeling of positivity has gripped an industry that, until recently, had been struggling to recover from the effects of the global recession...

Consumers are seeing the best value for money in the wedding market with hoteliers able to offer savings of up to €400 (£348) on a typical €10,000 (£8,700) event. But rather than simply deducting the €400, innovative operators are upgrading their customers, throwing extra cocktails or canapés in with the original price.

"You've got to be creative, you've got to keep pushing the boundaries and coming up with new concepts," says Fergus O'Halloran, managing director of boutique hotel the Twelve in Galway, and chairman and director of the RAI. "The more people that are optimistic, the better - that's what it's about."...

Indeed, the Irish Central Statistics Office has released pricing data for August showing that hotel prices are now 1.9% lower than they were this time last year while restaurant prices are down by 1.4%.

If the VAT cut had been 'passed on to the consumer' in its entirety, then we'd expect prices to fall by 4% (109/113.5 = 96%), but prices fell between 1.4% and 1.9% (average 1.65%), so only forty per cent of the cut was passed on (1.65%/4%) and the other sixty per cent of the tax cut went in to higher profits; reduced losses; or turned small losses into small profits etc.

The Golden Rule is that who bears a tax depends on what is less price elastic (or 'price sensitive'). If quantity supplied is price inelastic (i.e. fixed), the supplier bears most of the tax; if quantity demanded is price inelastic (i.e. for necessities) then the consumer bears most of the tax. The opposite applies to tax cuts, as is the case here. Unfortunately, the article does not tell us the fall in pub prices, which I would expect are even less than slightly more than for restaurants, as going to the pub is even closer to being a necessity.

As Mr O'Halloran explains, the sector maintained its overall turnover by providing more for the same price, rather than reducing prices, which in turn provides extra jobs above and beyond those which would have been lost in the businesses which would otherwise have failed.

Irish Property Tax Fun

The first article from July 2011 is about Ireland's first attempt at a property tax, which was to be a flat €100 per household, i.e. rather less than the TV licence fee in the UK (i.e. a kind of Poll Tax) and which didn't go down too well in certain quarters.

The second article from December 2011 explains that the Irish government has binned this idea, and will have something more similar to Domestic Rates in Northern Ireland (which is a tax of about 0.7% per annum on each house's selling price as at 1 January 2005), albeit only a quarter as high (the average bill will be €312.50). The list of exemptions is so long as to be meaningless and to partly defeat the object:

It is likely that the 400,000 households currently due to get exemptions from the household charge will also be exempted from the property tax. They include those renting houses from local authorities or private landlords and those living in 1,300 ghost estates. And the 18,000 people who are getting Mortgage Interest Supplement from the state to help them pay their mortgages will not be liable."
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But what cheered me up was this bit from the first article:

The minister for the environment says the tax is an interim measure, set at the lowest possible level, and will hold for just two years when... some other form of property tax is introduced. But this is predicated on systems being in place to make that possible ... a register of house sale prices and the introduction of postcodes in Ireland, which [ Limerick University economist Stephen] Kinsella describes as "the absolute bedrock" of a fair property tax.

Either he's been reading my 'blog or great minds think alike. As I've always said, doing the valuations is a doddle, as HM Land Registry has all this information and it is already all computerised and readily useable. Information on selling prices (which we can use as a proxy for rental values, see iv) is also publicly available, and is available at Rightmove (and probably plenty of other places, but theirs works quickest out of the ones I've tried).

For simplicity, let's assume that we replace just about all taxes (except duties and income tax on a narrow class of payments from the government, such as civil service pensions, PFI stuff etc) with LVT. And no doubt HM Land Registry/The Valuation Office would be able to do these workings in a couple of hours, if they haven't done them already...

i. Rightmove allows you to search by postcode district (e.g. NW3), postcode sector (e.g. NW3 5) or postcode unit (NW3 5TY). All things considered, I think it is best to use postcode sectors with a couple of thousand dwellings - that's small enough to give accurate relative values and big enough to have a representative sample of recent sales.

ii. It will tell you the average prices paid for flats, terraced, semi-detached and detached dwellings. I prefer using semi-detached houses, because these are the most homogeneous in size and style across the country.

iii. It will tell you the average price paid over the last 1, 2, 5 or 7 years, it doesn't really matter which one you choose as long as you are consistent - it is only relative and not absolute values that matter. For example, the average price paid for a semi in my sector over the last seven years is £427,000 and over the last year it's £486,000. If the tax in my sector turns out to be £30,000 for an average semi (i.e. £75 per square yard), whether we express the tax as 7.0% of the former or 6.2% of the latter comes to exactly the same thing*.

iv. Purist LVT is on the site only rental value excluding buildings. HM Land Registry know exactly what the size of the plots were on which the average semi-detached houses stand, so in my area, the £30,000 mentioned above can be seen as a tax of (say) £75 per square yard per year (so small houses on smaller plots automatically pay less than large houses on larger plots,and an average house on a 400 sq yd plot pays £30,000). But before we divide by plot sizes, we can fairly easily convert selling prices to rental values of the whole house (including the buildings) by multiplying the selling prices by a percentage.

v. As Sobers has pointed out often enough, it's not enough to apply the same flat % rate to all houses, because the gross rental yield on selling prices of expensive houses in expensive areas tends to be lower than for cheaper houses in cheaper areas. This is because of four further factors:

- Council Tax, which is more or less flat on all houses, so tends to push down rental yields on houses in cheap areas.
- Housing Benefit, which sets a floor on rents in cheaper areas, so tends to push them up
- The costs of maintenance, insurance and depreciation of houses (which has to come out of gross rents after council tax) are much the same wherever the house is (tends to level out gross rents by setting a floor under rents in cheaper areas - if the gross rent doesn't even cover these costs, the house will be abandoned).
Let's assume these effects cancel out.
- Finally, landlords apply a lower discount rate to the location element of the rent than to the bricks+mortar element, because the former tends to increase but the latter depreciates. So the more expensive the area, the larger the 'location element' and the higher the selling price relative to gross rent (and hence the lower the yield relative to selling price).

vi. We can sweep all these up when converting gross rental value to site-only rental value to a single net adjustment, which boils down to either
- deducting a large figure (i.e. rebuild cost/value) from the purchase price before applying the final percentage, or
- by applying the percentage to the selling price and then deducting a smaller figure (the maintenance, depreciation costs) from the result.

vii. The big unknown is of course what will happen to the rental value of land when all other taxes are scrapped. We'd need to raise (say) £300 billion a year from LVT but the notional site-only rental value of all UK land at the moment is only (say) £150 billion a year. The gimmick here is that a large part of the cuts in taxes on earnings, output and profits of (say) £300 billion will flow straight through into higher rental values. Let's ignore Citizen's Income for now, because this is not an increase in total cash welfare payments/tax reliefs, it's just spreading out existing cash welfare payments/tax reliefs more evenly. So if two-thirds those income tax cuts go into higher rental values, that still gives us a tax base of £350 billion a year, so with an LVT rate of 85% we are all sorted.
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* Let's assume that £30,000 a year is pretty close to the average tax paid by all the households living in semi-detached houses in my sector - less than what recent purchasers or tenants are currently paying/bearing and more than what semi-retired people who bought their houses decades ago are currently paying/bearing.

For recent purchasers, the calculation is thus: one working adult buys a £486,000 house with a 20% deposit and a mortgage of four times income. Gross income is £97,000 on which income tax and Er's NIC is £34,000, Er's NIC is £12,000, VAT is approx. 7% of gross income = £7,000, plus £3,000 for council tax, TV licence, insurance premium tax etc etc = £56,000. If there are two working adults with equal wages, the corresponding figures are 2 x £13,500; 2 x £5,500, £7,000 and £3,000 = £48,000.

Other couples might be paying next to nothing, so the average is (say) £24,000. If we knock off the £7,000-odd Citizen's Income which each couple will be getting from the £30,000 LVT they will be paying, this gives us a tax bill of £23,000 a year, only everybody pays the same or similar.

Continuing the workings for my hypothetical two-earner recent-purchaser couple, after mortgage repayments of £20,000 a year, they have £29,000 disposable income for fun stuff like food, clothing, utility bills, Tube tickets etc. So just to keep our minds active, let's work backwards from that £29,000 figure to see how high your income would have to be to be able to buy in my sector once LVT came in and still have the same living standards.

£29,000's worth of goods and services today will be reduced by the £7,000 VAT = £22,000, house prices and mortgage repayments will be halved to £10,000, plus LVT £30,000 minus £7,000 Citizen's Income, so in future, a couple with earned income of £55,000 would be able to buy, so instead of my sector only being affordable for the top 1% or 2% of households, it would now be affordable for the top 5% or even 10%.

"A bull walks into a pub..."

Spotted by View From The Solent (who still doesn't have a blog) at Sky News:

Drinkers relaxing in a pub in the Irish Republic were shocked when a bull decided to join them.

"The bull managed to escape from the farmers' cattle market," the landlord of the Porter House pub Cyril Rafferty told Sky News Online ""It came down the back alleyway into the delivery area and managed to get into the pub. It was a shock to all of us!"

It is not reported whether the bull then popped in to the china shop next door.

Treasury Tomfoolery

There's been an outbreak of common sense at the Federation of Small Businesses. From the BBC:

The FSB is urging VAT be cut to 5% in the construction and tourism sectors. "Consumer demand is a key barrier to economic growth so such a cut would encourage people to spend in these areas," the FSB said in its Voices of Small Business Report.

The FSB said: "Evidence from other EU countries shows that any lost revenue to the Exchequer by making VAT cuts will be met by earnings from additional demand, jobs and the wider economic activity."

Although the basic EU rule is that the standard rate of VAT has to be at least 15%, it appears that countries can reduce the rate on specific sectors, which is what Ireland seems to have done recently. So far so good. The depressing bit is right at the end of the article:

A Treasury spokesperson said: "Reduced VAT rates of the kind suggested would make a significant impact on revenue. Any claim that a boost to foreign tourism or construction would outweigh these effects would need to be looked at very carefully indeed."

In other words, they didn't give these secondary effects any thought whatsoever when they hiked VAT from 15% to 17.5% to 20%, did they? Even Ed Balls seems to have finally grasped that you cannot keep merrily increasing VAT and expecting overall tax receipts to keep going up, for crying out loud.