Excellent work by the ONS

From This Is Money:

Property in the priciest area of England and Wales cost a huge 25 times as much as in the cheapest spot, according to a new interactive map from the Office for National Statistics.

It shows that one square metre of floor space, an area about the size of a red telephone box, costs £19,439 in the salubrious London borough of Kensington and Chelsea. 

However, in the valley region of Blaenau Gwent, South Wales, the same amount of space costs just £777. Use the interactive map below to see how much a square metre of property costs in your local area and how it compares

I'm not clever enough to embed the interactive map, but it seems accurate enough to me. It's too coarse grained for proper LVT or Council Tax revaluations, because it's at local authority level and in many local authorities there is too much of a difference between the most expensive and cheapest areas, but where I live it's pretty much equally expensive all over the council area, so I can use that to illustrate the point.

It says just under £5,000 per sq metre. On that basis, our house should be worth about £650,000, a tad more than we paid for it three years ago. Seeing as typical build costs for a new build are £1,000 per sq metre, that means that the value of my house is 80% location value and 20% bricks and mortar, a percentage we can apply to the rental value to arrive at the location element/site premium.

All of which puts paid to the KLN that working out the site premium is difficult.
-------------------------
Via Josh Ryan-Collins:



Which sort of illustrates the point that as land and buildings are such a huge proportion of national wealth, there is no point having a general wealth tax, you might as well just tax land (secured on the land and the buildings thereon). Seeing as you can apply a much higher rate to immobile land than 'mobile' (or easily hidden 'wealth'), that means overall you can raise more money more efficiently by exempting all other forms of wealth. There's also the point that most other wealth is used to generate income, and that income is taxed, so most other wealth is already taxed, albeit indirectly.

Which neatly deals with another KLN, and the squealing from the lefties for a general 'wealth tax'.

ONS WAS is rubbish.

As a follow on from the FT article on the Mansion Tax below, one of the other things it also brought to light is a dispute about the ONS methodology.

The results were based on the ONS Wealth and Assets Survey, which has come in for criticism recently by US and French academics who allege that it does not sufficiently record the assets of the most wealthy households. Professor Thomas Piketty, the author of the best-selling book Capital in the 21st century, said the survey was “particularly bad at measuring the top part of the wealth distribution of the UK”.

The ONS plans to respond to these criticisms on July 18, but said in a statement yesterday that its results came from “a large sample survey specifically designed to collect information on all aspects of individual and household wealth for all private households across Great Britain”. The wealth survey retains the official quality-assurance Kitemark of a “national statistic”.

Here is what the IPPR had to say in its 2013 paper "Property and Wealth Taxes in the UK"

The IPPR wealth tax model allows us to consider the impact of a property tax, with some important limitations. The Wealth and Assets Survey (WAS) data that underpins the model does not capture the value of residential properties that are owned by entities other than private individuals and households.

It is difficult to ascertain the proportion of residential properties owned by companies and trusts, but HMRC stamp duty statistics show that the share of properties whose buyers were not private individuals tends to rise with property value.

For example, two-thirds of properties bought for more than £2 million in 2011 in the UK were purchased by companies or trusts, compared to around 10 per cent of properties worth less than £500,000.

It is also likely that a relatively large share of high-value properties are owned by foreign nationals who are not permanently resident in the UK and are therefore unlikely to be captured in household surveys. In the ‘prime central London’ market, where the majority of high-value properties are located, foreign buyers accounted for more than half of property transactions in 2010.

Furthermore, the ONS puts total (net) UK property wealth at £3.4trn. Even allowing for £1.3trn in mortgage debt, this still puts them some way off the £6.3trn residential property is now reckoned to be worth.

While it's easy to have some sympathy with the ONS, it's figures are relied on in the debate surrounding inequality and tax policy. But, it seems as though they may have grossly under reported the true levels of wealth disparity in the UK.

"Fall in crime in England and Wales may be exaggerated"

From the BBC:

A study of crime trends in England and Wales suggests the fall in offences recorded by police may have been exaggerated.

The Office for National Statistics said the "rate of reduction" in recorded crime "may overstate" the decrease.

It found police-recorded offences fell by 93%, compared with 17% by data.

Embedded rents

The ONS published a fine survey today, which confirmed what we all knew - that the cost of living in London is higher than elsewhere, even if you exclude rents.

What's nice is that they give a breakdown of the relative price differences in various categories. As I've always said (having observed it in real life but never seen detailed numbers), goods which are harvested or manufactured thousands of miles away and which can be easily transported round the country cost much the same wherever you are - but goods and services which have to be consumed at or near point of purchase include 'embedded rents'. So an item of clothing in Primark costs the same in Oxford Street as in High Street, Anytown (see here or here); but a pint of beer in Oxford street costs £1 more than the UK average.

I reworked the figures in Table 2 to show how much more expensive things are in London (the highest rent area, having the highest concentration of people and transport infrastructure - the two main drivers of rental values or land values) and ranked them from lowest to highest:

Communication - 0.0% (1)
Alcohol & tobacco - 1.6% (2)
Transport - 3.5% (3)
Food & non-alcoholic beverages - 7.2%
Clothing and footwear - 7.2% (4)
Household and housing services - 9.4%
Furniture & household goods - 11.6% (5)
Recreation & culture - 14.1%
Miscellaneous goods & services - 14.4%
Restaurants & hotels - 16.5%

(1) BT and Sky charge the same wherever you are in the country, and in any event it's much cheaper per person doing cabling, setting up mobile phone masts etc in densely populated areas

2) This is off-licence and supermarket stuff; a pint in the pub goes in the category "restaurants and hotels". Further, most of the cost of these is duty and VAT, which are the same all over the country. Strip these out and the underlying difference will be higher.

3) A red herring. Public transport is heavily subsidised wherever you are, how much it costs depends on how heavily subsidised it is, and not on usual market forces.

4) "Clothing and footwear" is the only category with "and" instead of "&" in the original press release (screen shot below). I sent them an email about this.

5) The joker in the pack - maybe people in London just buy fancier furniture?
---------------------------------
The ONS themselves summarise thusly:

At the division level, there is little price dispersion from the UK average for Alcohol & tobacco, with the price level for all regions close to the UK average (ranging from 98.3 for Wales to 101.3 for London). A high proportion of items within this division were affected by the dominance of large retailers who displayed consistency in their pricing across regions...

Greater price dispersion exists in the divisions that include services, including Restaurants & hotels, Recreation & culture and
Miscellaneous goods & services. This reflects the variance in labour expenses in the regions which make up a large proportion of the total costs in the service industry and also the variability in the cost of renting/leasing outlets across the regions... (6)

6) I love the ONS to bits and everything, but they make a silly mistake here. Higher rents do not 'push up' the price of these services - it's the higher price which people are willing and able to pay for these services which 'pull up' rents. Much the same applies to labour costs - where there are more people, there is more specialisation, so everybody is that little bit better at doing a smaller piece of the jigsaw, so everybody earns a bit more so everybody can pay a bit more (relative to more sparsely populated areas).

Here's the screen shot:

Fun Online Polls: Fukushima & The Census

On a high turnout, the results to last week's Fun Online Poll were as follows:

Has the Fukushima catastrophe changed your attitude towards nuclear power?

No. I'm still against nuclear power - 5%
Yes. I'm now more negative about nuclear power - 5%
Yes. I'm now more positive about nuclear power - 29%
No. I'm still in favour of nuclear power - 61%
Other, please specify - 0%

Given the right-wing nature of most of this 'blog's readership, I'm not surprised that a majority are in favour of nuclear power anyway, but I'm (pleasantly) surprised to see that so many, like me, are more positive (or less negative) than they were before. As it happens, there are six nuclear power stations in the earthquake/tsunami zone, so I find the fact that only one was badly affected rather reassuring.

As ever, thanks to everybody who took part.
-------------------------------------
Health Minister Dick Puddlecote highlights another example of the ONS fighting back against the government - in the great tradition of bureaucratic warfare, they are continuing this war despite the change in government.

I actually trust the ONS. For sure, they'll bend with the political wind and publish statistics showing that alcohol-related deaths have trebled in a short space of time (or whatever) but they'll leave coded messages like "Due to a change in the way that the figures are compiled, later series are not directly comparable with earlier series" which is ONS-speak for "These figures are all complete bollocks."

All of which reminded me that I hadn't completed our Census form yet. Happily enough, you were supposed to complete it as at 27 March 2011 (yesterday) so I duly completed it this evening and answered every question with a straight bat. For the 'optional' religion question I entered 'smoker' as previously agreed (for the life of me, I can't remember which 'blogger first proposed this - I'll link if anybody tells me who it was. UPDATE: ViewFromTheSolent reminds me it was Leg-Iron). For 'nationality' I chose 'English' (not 'British') and for 'racial origin' I put 'Other - European' (being a mish-mash of anything between Northern Ireland and Poland).

So that's this week's Fun Online Poll - have you completed your Census form yet?

Vote here or use the widget in the sidebar.

More musings on that "inflation error"

We can track back the origins of this story to page 39 of the Bank of England's February Inflation Report:

Clothing and footwear prices are highly seasonal, falling during sales periods as retailers try to clear that season’s stock and then recovering as new stock is brought in. Due to such changes in stock, identical garments are often no longer available, making it difficult to capture post-sale increases in prices.

It is likely that the previous collection practices picked up the seasonal falls in prices during the winter and summer sales, but did not fully capture the recovery in prices after sales had finished; with CPI calculated from monthly changes in prices, this would have biased down both the price levels and annual inflation rates.

That just does not ring true, and having thought about this, it strikes me that the original inflation figures were in fact correct and the BoE is now frantically trying to shove the blame for the house price bubble onto the ONS.*

Let's first write down what we do know:
i. Clothing/footwear makes up about 6% of the CPI shopping basket;
ii. Clothing/footwear prices had been falling for years;
iii. Retailers practice 'price skimming', in other words, they launch their range at full price (FP) and then the price drops and drops as it goes out of fashion and then what's left is unceremoniously dumped in end-of-season sales (EOSS).
iv. Let's assume for the sake of this discussion that half of items are sold for FP and half in EOSS.

To make the BoE's preposterous claim stack up we have to make two completely unrealistic assumptions:
a) The EOSS discount to full price back in 1997 was only 10%
b) The EOSS discount would have to have increased by 10% of FP every year, in other words, by 2006, the EOSS price would be £nil and by 2009, shops would be paying people £1.80 to take away an item with an original FP of £6.

Here's a table to illustrate the point, click to enlarge:* There has been a long-running feud between the Whitehall/government people and the ONS, and I'd trust the ONS every time. Click the ONS label for some examples (I'm sure there are dozens more).

A Fond Farewell To Table 5(2)

For many years, the monthly Labour Market Statistics published by the Office for National Statistics included two sets of figures for taxpayer funded jobs. Up until the June 2010 edition, the statistics included:

- Table 4, which showed 6.090 million public sector and 22.775 million private sector jobs (as at March 2010), which is highly misleading.

- Table 5(2), which showed 8.285 million people working in "Public administration, education, health" and 22.468 million in "everything else" (as at December 2009), which is the figure that I have always quoted (sure, there are private schools and private clinics as well, but I'd be surprised if they employ more than a couple of hundred thousand people).

The statistics for July 2010 and August 2010 only include Table 4, showing the sanitised lower figure, and no longer include Table 5(2).

Just sayin', is all.

Chris Grayling

The 'Mothers versus everybody else pay gap'

Taken from Table 1 on page 23 of the Office For National Statistics' report The gender pay gap in the UK:
There is always a question of causation and correlation, but we see that although there is a small residual pay gap of 8% (at zero children in the lower part of the chart), single women actually earn slightly more than single men (from the upper part).

The fact that married/co-habiting women tend to significantly less than married/co-habiting men is because:
a) men with higher incomes are more attractive to women and hence more likely to be married (pushing the incomes of married men upwards);
b) women with lower incomes are more likely to get married and rely partly on their partner's income; and
c) married/co-habiting women are more likely to have children.
d) taking b) and c) together, there's also the point that women who are 'high flyers' are less likely to want to take career breaks to have children.

As the bottom part of the table clearly shows, the 'gender pay gap' rises the more children are involved. The underlying hourly figures show that men tend to earn slightly more, the more children they have (either because richer men can afford more kids, or because men with more kids have to work harder); and that women with more children tend to earn less, so the gap widens by 5% - 7% for each child.

On the level of a family-unit this is all irrelevant of course, as most couples tend to pool incomes and then the wife decides how it is spent anyway. To the extent that The State should get involved, the quickest fix, on a fiscally neutral basis and without increasing the bureaucratic burden on employers, would be to scrap Child Tax Credits (which discourage single mothers from working) and to roll it into a higher flat-rate, non-means tested Child Benefit of about £30 per child per week for the first three children per family and pay it to the mother. For a mother of two, that's an extra £3,000 a year, which would surely make up the bulk of the 14.9% pay gap.

Sure, people who oppose welfare in principle won't be happy, to you I say this: you were a child once - the extra bit of tax you are now paying to fund this is merely repaying the Child Benefit that your parents claimed for you in the dim and distant past, with interest.

What's not to like?

The Office for National Statistics fights back

From the BBC:

Labour deputy leader Harriet Harman has been criticised by an official watchdog for exaggerating the pay gap between men and women.

UK Statistics Authority chief Sir Michael Scholar said Ms Harman's use of figures was potentially misleading. She had said women were on average paid 23% less per hour than men but the Office for National Statistics (ONS) said the figure was actually 12.8%.

Good stuff, as we all know, it isn't really a "gender pay gap", it's a "mothers earn less because they are more likely to have had career breaks and are more likely to work part-time gap", although it's nice to hear it said.

As I may have mentioned before, the Office for National Statistics is still busily getting revenge for the forced relocation to Wales, a country in which "schoolchildren ... must study Welsh up to the age of 16" (Wiki) which seems a bit of a waste of time.

Thanks to Tim Almond for the tip-off.

Pathetic rebuttal of the week

From today's FT:

Phil Woolas, the immigration minister, defended his criticism of the body’s decision to issue unscheduled population statistics last month. The ONS press release, highlighting a 290,000 increase to 6.5m in overseas-born UK residents in the year to June, prompted front-page headlines...

Mr Woolas insisted on Wednesday the data on overseas-born residents could create a misleading impression, citing the fact that the statistic included 370,000 undergraduates and about 300,000 people born to British armed forces personnel serving overseas.

“The fact that one in nine people in this country were born overseas does not tell us anything about immigration,” Mr Woolas stated.

OK, so excluding foreign students (many of whom overstay their visas or were never legitimate students in the first place) and children of armed forces who have served overseas, it's only one-in-ten residents born abroad (ignoring a margin of error of several hundred thousand), what's the big difference?

Revenge of the nerds

The Office for National Statistics released a report saying that "one in nine British residents was born abroad." Big deal, you may think, either it's true or it isn't, and to me that figure seems about right. Whether we draw any further conclusions from this nugget, and what those conclusions may be are a whole 'nother topic and not something on which the ONS opines.

However, Immigration Minister Phil Woolas has got himself all hot and bothered. Showing a mastery of Double-Think, "... Mr Woolas said he tried to block the release of the figures, which he claims are "neither new nor informative". He says they resulted in the government being accused of "whipping up anti-foreign sentiment when it is the independent ONS who are playing politics"."

So who's playing politics here? The politicians or the ONS? Are they independent or not? And if they are, why did he try and prevent the figures being published, which by his own admission are not "new" although I'd hotly dispute his assertion that they are not "informative"? I'm a big fan of the ONS as it happens, even though their website's search function is rubbish - it's easier finding stuff on their website by going via Google.

So what's behind the ONS' newfound uppitiness .... ah, I see.