Ideas for blog posts

Here are a few things which I've scribbled down on bits of paper over the past few days which I vaguely intended to 'blog about at the time but never really got round to it. So as an aide memoire for the future:

1. The normally prudish Sun newspaper showed a Page Three girl who was wearing invisible underwear as advertised by Bar Refaeli.

2. Porn shops in Westminster won a refund/reduction of hefty licensing fees from the council, because they contravened EU Directive 2006/123/EC, which seems like quite a sensible directive on the face of it. All of this raises a lot of interesting questions (economic, legal, sovereignty etc). How do we square Article 12 with licensing of taxi drivers, for example?

3. Supposed right-wing Tory John Redwood musing about how nice it would be if we could go back to the lower tax rates we had when the Chancellor was... Gordon Brown (top rate income tax 10% lower, National Insurance 2% lower, VAT was 2.5% lower etc).

4. The UK is not absolutely useless at everything: shock Britain exports more vehicles than it imports for first time since 1976

5. It appears that they are going to make people criminally liable for death and injuries caused by their dogs, something which I have long advocated.

6. Tory government is close to achieving its pre-election pledge of getting construction of new housing in England down to less than 100,000 a year for the second year running. With the rain stopping play during April and all the Olympic and Jubilee ructions, I'm sure they'll get it down to five figures for the next year. Hoorah! The Hallowed Green Belt is Preserved For Future Generations! But not to build homes on, obviously - just think, instead of having a house with a rental value of £10,000 a year, we could be growing £100's worth of potatoes or something.

7. Queues at Heathrow. FFS. When you think how much human effort and ingenuity it takes to run global air travel: the aeroplanes, the technology, the staffing rotas, coping with the weather, air traffic control, difficult passengers, getting people's luggage on the right aeroplane, killing as few passengers as possible, guarding against terrorist attacks etc, it is amazing how well it works, really. And the UK government can't even organise a few dozen people to sit in booths, open passports, check the face, hold it face down on a scanner and mutter "Enjoy your stay" while chewing gum.

8. I explained recently why the building society funding model, where a company's assets are matched £ for £ with customer/owner deposits instead of shares is a vastly superior way of running a business than having share capital. So instead of a shareholder being paid dividends at the whim of directors; investing in a company by buying shares from an existing shareholder and realising his investment by selling his shares to a third party; a depositor invests directly in the business and withdraws money from the business.

It occurred to me today that this model is also used by Unit Trusts: a UT's net assets are always funded £ for £ by unit holders' funds: you invest in a UT by paying in money, which is invested on your behalf (in shares in other companies, but that is not important), all the income and gains of the UT are credited pro rata to unit holders as they go along, and if you want your money back, you withdraw it from the UT itself, and to the extent that withdrawals are not matched with new subscriptions, the UT just sells some of the underlying assets. So the model does work in real life, it's nothing new or unusual.

9. While looking for something else, I stumbled across a couple of instances of Austin Mitchell MP saying sensible things about Council Tax, e.g. here and here. And about London.

10. UK banks not completely dishonourable: shock RBS repays £163bn emergency loans

11. BobE emailed me this fine piece of Home-Owner-Ist drivel from guess which paper:

Regardless of where you are on the income scale, nobody could ever call your decision to buy a house irresponsible – whatever happens, you need somewhere to live, and swingeing rents usually represent far worse value. For low-earning households to have avoided mortgage debts, they would have had to actively decide to stick with renting; that is, to pay the same, for a worse property that they'd never have any equity in, just on the off-chance that, as a result of a possible downturn, they might be dragged down by the debt. What a bizarre thing to expect of people, when you're preaching a can-do, pull-yourself-up-by-your-bootstraps, aspirational Tory attitude.

12. Jorge emailed to ask whether I thought Iceland should adopt the Candian dollar, I can't say I have a view on that one way or another.

13. Finally, is it just me or do Natalia Vodianova's legs look completely out of scale (in a bad way) in this photo from today's Evening Standard?

"£25 billion spent on alcohol abuse"

They obviously come from Planet Zog.

Having shamelessly rewritten the statistics to quadruple the number of alcohol related NHS admissions, they now throw this crap on the table:

The £25 billion bill is made up of NHS costs of £2.7 billion, crime costs of up to £15 billion and loss of productivity of up to £7.3 billion, the Department of Health report said.

The NHS £2.7 billion I have already covered. £15 billion for crime breaks down into shoplifting (see below) and fights outside pubs (which I covered here). And that loss of productivity is not a loss to the economy; a hangover is part of each person's cost of drinking in the evening (covered here)*.

Here's the gummint's killler proposal:

The report suggested ... off-licences be prevented from displaying alcohol near check-outs.

*sigh*

Sensibly run shops always have Highly Nickable Items (small, tempting and/or high value) either: at the counter (sweets, batteries, condoms); behind the counter (cigarettes, spirits); or within eyeshot thereof (the fridge for lager and cider); or on the top shelf (porn mags are very expensive and exactly the sort of thing that teenagers want to steal - this is not just prudishness).

So if we implemented this proposal, the cost of crime (and the amount of under-age drinking) would go up; or have they already borne this Unintended Consequence in mind - if half your alcohol is being stolen, you'd stop stocking it?

* In the same way as not doing overtime is part of the cost of leisuretime.

Non-distortionary taxes

From an article in today's Scotsman comes this nugget:

... [house] prices north of the Border are continuing to rise – due in part to the oil price spike fuelling the Aberdeenshire market ...

Which set me thinking about "least-bad" taxes...

When they first discovered oil under The North Sea, the government did not hand out free drilling licences willy-nilly; it basically auctioned them off. Oil companies (who are experts in these matters) made estimates of future oil prices, extraction costs, added a profit margin; worked out the net present value thereof; and submitted bids. And the best bids won. (The full story is of course far more complicated than this, but let's just go with it for now).

Alternatively, the government could have given away the licences for free (to Party donors and in exchange for offers of directorships for ex-Ministers, no doubt).

Those are your two basic options - auction off licences for "market value" and use the revenues to cut other taxes, or trade them for money and favours. To me, the auction must be the preferred method for allocating the licences - it raises money for the Treasury without depressing economic activity, i.e. without reducing the amount of oil extracted*.

This sort of auction is a "non-distortionary tax".

Now, to extract oil, you don't just need a drilling licence, you need a shedload of money for oil rigs, boats, pipes, helicopters and for employees to run the show. And those employees have to live somewhere. So they all bought or rented near e.g. Aberdeen, so the secondary beneficiaries were local landowners, who could sell for higher prices or let out for higher rents. So the employees need higher salaries, so the profits of the oil companies, who are taking all the financial risk, go down.

Now, if you are agreed so far that auctioning off the licences is a non-distortionary tax, why not go one further and skim off a land value tax from local landowners? A large part of that land value relates to the value of the oil - but while the oil companies have to stump up for drilling licences and take all the financial risk, the local landowners just sit there and make capital gains.

Wouldn't a land value tax on such landowners also be a "non-distortionary tax"? The selling prices or rents that they can achieve will go up whether there is a tax or not - it's not like a landlord could tear down his building to avoid the tax (as it is a tax on land values, so the tax would be due either way). And so landlords would be keen to let out as much space as possible, and other people in the area (who don't work in the oil industry) would be more amendable to selling up their houses and moving elsewhere (to avoid the higher land value tax); this would depress rents and house prices, so oil workers wouldn't need such high wages so the auction value of the drilling licences (next time they came up for auction) would be even higher, and so on.

A sort of negative Laffer-curve effect, if you will - it's like a balloon with water in it. If you squash it on one side, the water (in this case the unearned profits) just go to the other end - what you have to do is squash in at both ends simultaneously (but not so hard that it bursts, obviously).

* A smartarse would no doubt say "If the oil companies didn't need to spend money on licences, they'd have more money to spend on oil rigs". Superficially true, yes. But oil companies do not have a fixed amount of money - as long as profitable opportunities are there, they can raise as much capital as they need. Similarly, would a smartarse apply this argument if oil were discovered under his own back garden? I doubt it. So if the North Sea oil belongs half to the United Kingdom (and half to Norway) would smartarse approve if the oil were just given away to multinationals? I hope not.