"Council bids to run post offices"

Fundamental to the whole debate about the survival or closure of rural post offices is the question, are post offices...

1. Businesses like any other, which should not be getting subsidies and have to survive or fail like any other, or

2. Providers of 'merit services', like child nurseries or public libraries, i.e. services that would be provided by private businesses if demand were there, but which ought to be subsidised/publicly provided to make them available to more people. In the case in hand, we do have to at least consider old people who refuse to get involved in internet banking and so on and may not be able to travel miles to the next nearest bank or cash machine etc.

3. Public goods, i.e. a core function of the State like law'n'order, protection of private property rights or defence, for which there is no real free-market solution, and which must be paid for out of general taxation.

If the answer is 1, then of course Post Offices should not get subsidies, end of debate*.

If the answer is 2, then remembering that the state is lousy at actually running anything, this is a case for local taxation, i.e. there should be a separate line on your council tax bill showing your share of the subsidy paid to the local Post Office, and of course the council should also publish details of how much subsidy each individual Post Office receives. Then every council tax payer can make up his or her own mind whether it's worth it or not.

If your answer is 3, then I'm afraid you haven't understood the question.

* Yes, I know that EUsceptics like to blame the closure of rural post offices on the EU, who are officially against state subsidies (unless it involves French farmers or German banks, of course) but all-in-all I am against subsidies as well, so there! If council tax payers are happy to pay the subsidy, then this is no business of the EU!

Alcohol, licensing and sensible taxes

With all this blah-di-blah about the UK's fine and ancient tradition of binge drinking, let's look at some numbers:

1. Total alcohol duties are around £8 billion a year* (table C4), with as much again for VAT. That's £16,000 million.

2. There are about 60,000 pubs in the UK, paying an average of £300 for a licence to serve alcohol. That makes £18 million, i.e. bugger all compared to alcohol duties and VAT. The forms are ridiculously long and complicated, of course.

3. There are basically three places where you can drink - at home (which causes no bother to anybody), on the streets (which is up to local councils to allow or forbid under local by-laws**) or in the pub (which causes little bother in itself, it's outside the pub and on the way home where things can turn nasty - violence, vandalism and drink driving etc).

4. The turnover of all UK pubs is about £15 bn, or 60,000 x £250,000 a year. The VAT on that is somewhere over £2 bn, or £40,000 per pub.

5. Good taxes are more like user charges, and help balance the interests of different parties, in this case, publicans, drinkers and local residents.

6. So why not scrap VAT on alcohol - whether sold in the shop or in the pub - and fundamentally reform existing licensing laws? We should allow local councils to auction off the licences for market value instead! If an average pub no longer has to pay £40,000 in VAT, it can happily bid at least half that much for a licence - maybe much more - and stay in business. For people who drink at home, causing no bother to the general public, booze gets cheaper, of course.

7. For every additional hour opening time in the evening (which is what causes the perceived problems) a higher rate would emerge, via the auction process. So the pubs that shut at 11 o'clock end up paying (say) £20,000, those that shut at midnight end up paying (say) £30,000 a year, and so on. The local council can use that extra £5 million income (average 200 pubs x average £25,000 licence) to pay a bit of overtime to policemen to sort out the troublemakers, catch the drink drivers and to ambulance crews to get people to A&E; as well as clearing up the broken glass and other minor acts of vandalism***.

8. We then also have a simple and fair way of measuring and dealing with the 'external costs' of binge drinking. Local councils can say exactly what the licence income is and have a pretty good idea of the direct costs.

9. And of course, from a libertarian-but-considerate-smoker's point of view, local councils should also be allowed to auction off a restricted number of smoking licences, say one for every four pubs in the area. If that increases a pub's takings by one-third, they'd be worth at least £10,000 a year****, so that's another half a million quid for the local council for sweeping up cigarette butts and so on.

* That £8 bn is considerably more than the cost to the NHS of £3 bn for alcohol related injuries and illnesses.

** The same general principles could be applied to supermarkets and off-licences of course - if a local council is happy to allow drinking in the street, it can auction off 'off-licences' to local shops.

*** Let's say four hours a night overtime for 50 additional police officers/medics x £50 per man/woman hour x 365 nights a year = £3.7 million a year, with £1.3 million left over for clearing up broken glass and so on.

**** Average turnover per pub £250,000 x one-third = £80,000, on which gross margin 20% = £16,000

Misplaced loyalty (and that's putting it mildly!)

Here's Dennis Cooper's letter on the Tories' ultimate act of treachery on 5 March 2008, so far printed only in The Scotsman. The only other person to cover this story was Vindico.

"Assembly members' 8.3% pay rise"

This sort of crap prompts me to sum up a few basic facts:

1. There are core functions of the state such as law'n'order, protecting private property rights and defence that by definition cannot be delegated, however well or badly the state does it.

2. Apart from that, the state is pretty lousy at everything it does, in particular as a provider of services (health and education - which should be replaced by taxpayer funded vouchers).

3. Every layer of government adds another layer of waste, corruption, meddling and inefficiency.

4. There are a few things that have to be done or decided or harmonised at national level, let's say immigration, declaring war, signing treaties, the basics of criminal law and legal system. And (being realistic about it) collecting fuel/alcohol duties and a 20% flat rate income tax* to pay for core functions, old age pensions and health and education vouchers. Apart from that, I can't think of much else.

5. Everything else could and should be down to (up to?) local councils - policing, planning permission, licensing laws, transport infrastructure, public spaces, refuse collection, pay rates for public sector workers etc. Sure, local councils are on the fiddle as well, but at least that's only one level of waste and corruption, not four or five, of which the EU is probably the worst. And if any of this costs money, they should fund it out of local Land Value Tax** - if that spending makes an area more desirable, then councils can collect more tax, and vice versa. And if people decide they don't want to have (for example) licensing laws, public transport or restrictions on land use, then they can of course elect a local council which does away with them.

* VAT and National Insurance are the worst taxes, in terms of economic inefficiency, and they are also regressive (see Table 4 of this), so getting rid of them boosts the economy enormously and reduces need for welfare payments.

** And out of rents from social housing, which is currently ring fenced and earmarked so local councils do not currently benefit if they collect more in rent, it all has to be handed over (or is knocked off a council's entitlement to funds from central government). So under this system councils in so-called 'deprived' areas with lots of social housing would have a much larger income base than now, so even less need for redistribution from rich to poor areas.

"Hitler's secret Indian army"

I spotted this on the BBC's most emailed section. Fascinating, if you have a few minutes to spare to read it.

"Ministers boost Diplomas' value"

"Ministers are to increase the value of the highest level of new Diplomas to as much as four and a half A-levels"

Wot? Are they mad? The Diplomas will be worth what universities and employers think they are worth. That might be more or less than four-and-a-half A-levels, it might change over time, they might replace A-levels or they might disappear again just like every other "radical shake-up".

In other news: TRACTOR PRODUCTION UP 300%

"Abbey to push rates up 0.3%"

Via Jack C at HousePriceCrash, this is priceless!

Or unaffordable, depending on your point of view.

Public sector employment & public spending in the UK

In the context of nothing in particular, here's an overview of how things have changed between 1997 and 2007.

Total public spending, is up from 41.2% of GDP to 44.6% of GDP, per the OECD's Economic Outlook, Table 25 (having dipped as low as 37.1% in 2000). GDP seems to be about £1,400 billion, so if spending had remained a constant % of GDP, it would now be £48 bn less. Had it remained at 2000 levels, it would be £105 bn less.

According to this, employment in the public sector (in the narrowest sense) is up from 6.1 million to 7.0 million (column D); but if you chuck in all the para-statals - quangoes, state-funded charities and so on - employment in 'Public administration, health and education' (Column M) it has increased from 6.5 million to 8.3 million.

So what are all these people doing?

The number of nurses and doctors in the NHS has increased by 120,000 (from 400,000 to 520,000). Spending on the NHS in nominal terms has trebled.

The number of teachers in English schools has increased by 36,000, from just under 500,000 to about 530,000, call it 600,000 for the whole of the UK. Nominal spending on education has doubled.

The number of police officers has increased from 126,000 to 140,000.

That means that out of those 8.3 million, there are 1.26 million nurses, teachers, doctors and police officers. To be fair, they need back up staff (cleaners, receptionists, classroom assistants etc) let's be generous and double that to 2.5 million, stick on another 500,000 for DVLA, court system, armed forces, a few people to run dramatically reduced and simplified tax/welfare system, issuing passports and so on, so 3 million seems a reasonable upper figure for public sector (about 10% of all employees). Not that the State should employ teachers and medical staff of course, but AFAIAC the taxpayer should still bear the cost of basic level health and education vouchers to be used in private sector, so the cost would be much the same.

So what on earth do the other 5.3 million other people in 'Public administration, health and education' do all day long? Presumably bugger all. So let's sack the lot

Total government spending is currently about £625 billion. If you knock off £165 bn for child benefit, welfare and pensions, that's £460 bn on salaries and overheads. As a check - 8.3 million employees x average salary £25,000= £210 bn, plus 50% for public sector pension accruals plus 50% for overheads (buildings rent and maintenance and other jollies) = £420 bn, plus £40 bn wasted on PFI, EU membership and so on, seems about right.

So if you sack 5.3 million of them, that would cut public spending by 5.3/8.3 x £460 bn = £290 bn. Giving them all a flat rate Citizen's income of £60 per week would reduce the saving to £275 bn. About £50 bn of current spending is being funded by borrowing, so to balance the books we could still cut taxes by £225 bn.

So in theory you scrap VAT (£77 bn), National Insurance (£87 bn) and reduce income tax and corporation tax (£144 bn + £45 bn) to a flat 20% or so (see Table C4) without even having to worry about Laffer effects.

That's what I call a libertarian budget!

"Darling to revive mortgage securities"

Yet more vain attempts to "revive the housing market" (don't bother, it's all over now) in yesterday's FT. Particulary f***witted is this bit...

"Yet banks have warned that the move could lead to the creation of a two-tier system, which while cutting costs for less risky loans drives up the costs for poorer, less creditworthy customers and those seeking mortgages with higher loan-to-value ratios."

I thought that was the whole point of banking?

Israeli tourist of the week

I'm sure we've all seen this story, but take a closer look at his tattoos...