WHO makes these silly rules? (2)

By signing the imfamous Article 8 of the FCTC, the UK agreed to:

"... recognize that scientific evidence has unequivocally established that exposure to tobacco smoke causes death, disease and disability."

On this basis we agreed (emphasis mine):

"Each Party shall adopt and implement in areas of existing national jurisdiction as determined by national law and actively promote at other jurisdictional levels the adoption and implementation of effective legislative, executive, administrative and/or other measures, providing for protection from exposure to tobacco smoke in indoor workplaces, public transport, indoor public places and, as appropriate, other public places."

So different nation states implemented different smoking bans. Some, like the UK, went the whole hog other took a more relaxed approach, much to the annoyance of WHO. So the 2008 guidance on implementation of Article 8 sought to clarify what WHO really meant: (again, emphasis mine)

"[Article 8] creates an obligation to provide universal protection by ensuring that all indoor public places, all indoor workplaces, all public transport and possibly other (outdoor or quasi-outdoor) public places are free from exposure to second-hand tobacco smoke. No exemptions are justified on the basis of health or law arguments. If exemptions must be considered on the basis of other arguments, these should be minimal. In addition, if a Party is unable to achieve universal coverage immediately, Article 8 creates a continuing obligation to move as quickly as possible to remove any exemptions and make the protection universal."

Pesky thing this national law, isn't it? Luckily, Andrew Lansley hasn't been ordered to ban smoking in private homes and cars. The guidance states:

Public education campaigns should also target settings for which legislation may not be feasible or appropriate, such as private homes.

So Lansley's 'Tobacco Control Plan' proposes the following 'Big Society' solution:

"We will encourage local areas to create networks of local smokefree ambassadors at a community level to encourage people to make their homes and family cars smokefree."

So no big government snoopers, just 'Big Society' busybodies.

Like a Universal Inheritance... for existing homeowners.

Tim Leunig gives his idea about auctioning off planning permission another outing in the Local Government Chronicle.

As part of the growth review, the government is considering “Community Land Auctions”, based on my CentreForum pamphlet “In my back yard”. Under this approach, local councils capture the rise in value when they rezone agricultural or industrial land for housing, creating a big incentive to support development.

It works like this... Having decided which land can be developed, the council [buys it off farmers for slightly above its agricultural value and] auctions it to developers, keeping the difference between the price named by the original landowner, and that paid by the developer. There is no risk to the council - if no developer wants the land, there is no sale and the original landowner retains the land.

A typical 57 hectare farm in the south east - where housing is most needed - is worth around £1m as a farm, and over £100m for housing (even more in housing hotspots). Most farmers will sell their farm for five times fair value, and many for double fair value, which is, after all, a £1m windfall. (I will sell my house for £1m more than it is worth, if any reader wants to buy it!). The council therefore makes at least £95m per farm, which comes to at least £50,000 per house. That is far greater than the incentives currently proposed.

If Horsham DC allowed housing on one average size farm, they could halve council tax for four years. That, surely, is a winning electoral prospect. More radically, were Cambridge to allow a million new houses near the city - like America’s Silicon Valley - it could give current adult residents around £700,000 each. Again, that should be a vote winner.

Ho hum. This plan to 'halve council tax for four years' sounds like windfall gains for existing homeowners. Why not tweak the plan to make it more like a proper Universal Inheritance thusly:

1. Councils buy the land and auction it off, making a cash profit (same as under his plan).

2. Councils can keep (say) a fifth of the cash profit for placating local NIMBYs, and the other four-fifths is pooled nationally.

3. The amount pooled nationally is then divided up between all UK-resident British Citizens who get married each year (or all UK-resident British Citizens who reach the age of 25, or whatever) and handed out in cash, earmarked for the cost of their first home.

4. The amount each new couple receive would be about £50,000 (using his figures), which they can use to buy an ex-council flat Up North, or as a 25% deposit for a semi-detached in most of England or a ten per cent deposits on a rather nice new 'executive villa' near Cambridge, that's entirely up to them.

More bollocks about bollocks

From The Metro:

Man's testicles 'bitten off by girlfriend'

A man has had to have his testicles surgically reattached after his girlfriend allegedly bit them off.

Maria Georgina Topp appeared in court accused of carrying out the gruesome attack on her partner Martin Douglas, which is said to have taken place in the early hours of the morning following a drunken night out, reports The Mirror.

Mr Douglas dialled 999 following the incident and was in so much pain operators were unable to understand what he was saying. He needed emergency surgery and was required to spend several days in hospital recovering from the injury.

Paramedics contacted police once they had seen the extent of Mr Douglas's injuries and Ms Topp was arrested and charged with grievous bodily harm.

A Northumbria Police spokesman told the newspaper: "At around 4am on Friday, February 18th, police were called to a report of an assault. Officers arrested a 43-year-old woman on suspicion of assault. A 45-year-old man was taken to the Freeman Hospital for treatment to injuries to his arm and groin area."

Looks like she bit off more than she could chew.

The New Localism proves to be devastatingly effective...

From the BBC:

Plans to turn down planning consent for 150,000 affordable homes by 2015 will be achievable, due to changes to England's planning system, says a committee of MPs.

It said axing "regional spatial strategies", targets for houses and other developments, drove a "stake through the heart" of the planning system. The committee said planned new homes blighting the countryside have dropped by an estimated 200,000.

The government says "top down" targets failed to protect the green belt and its plans gave councils a "clear political incentive" to turn down new builds.

Regional spatial planning strategies, introduced by Labour, set out non-development plans for nine English regions over 15-20 years. They included restrictions on house building as well as developments that would be locally unpopular even though they were strategically important - like mineral extraction and waste treatment sites and accommodation for Gypsies and Travellers.

Communities Secretary Eric Pickles described the new rules as "Whitehall's grip on local planning policy" when he announced they would be introduced in July 2010 and said they would prevent housebuilding.

'Simple choice'

The communities and local government committee said that, since that announcement, fewer houses were due to be built.

"With the figures for new house building contained in local authorities' plans already estimated to have reduced by 200,000... we conclude that the government may well be faced with a simple choice in deciding whether to build more homes than the previous government, or to pander to NIMBYs and Greenies in decisions of this kind," it said.

The Localism Bill, currently going through Parliament, scraps the regional strategies and hands decisions on new homes to existing owner-occupiers. But the report said "transitional arrangements" should be introduced in the meantime, to prevent new homes being started during the "hiatus in planning"...

Planning Minister Bob Neill said: "It was under the last government that house-building rates fell to their lowest peacetime levels since 1924. Regional targets clearly succeeded in not building the right number of homes in the right places. Top-down targets achieved their aim of alienating the public and undermining support for new housing. Under the coalition government's reforms, councils have no clear financial incentive to build from the New Homes Bonus. Latest figures from the National Housebuilding Council and from the Office for National Statistics already show a surge of pessimism from a construction industry which will probably never recover."

Morbidly Obese One still doing his best to f*** everything up for everybody else...

Those who are interested in IDS' welfare reforms might remember that one of the flies in the ointment is that Council Tax Benefit is not being rolled into the Universal Credit (although that had originally been the plan).

The much vaunted 'maximum withdrawal rate' of 65% is a nonsense of course; if you're earning anywhere near enough to live on, your marginal rate is 76%. If Council Tax Benefit remains in its present from, the marginal rate goes up to 81%. Anyway, on with the show...

From Local Gov:

Council tax benefit is due to be cut by £480m by 2013 (1), with rules to be set by local authorities in the future, as part of the DCLG's on-going localism agenda (2).

If Mr Pickles wins the argument, universal credit could dovetail with other council tax benefit systems, potentially leaving some claimants still paying the theoretical 90% tax rate (3), which Mr Duncan Smith is seeking to abolish by guaranteeing workers £3.50 for every £10 they earn (4) ...

A spokesperson for the DCLG said: 'The Government remains committed to localising Council Tax Benefit from 2013-14 (5), and reducing its costs by 10 per cent (6). Full consultation on the system of local council tax rebate schemes will be undertaken in due course. This reform is part of the decentralisation agenda. It will create stronger incentives for councils to get people back into work (7) and so support the positive work incentives that will be introduced through the Government’s plans on Universal Credit.'(8)

1) Excellent. Let's scrap the benefit entirely and just reduce Council Tax in Bands A and B accordingly (most claimants live in Band A or Band B homes anyway). That simplifies things and reduces the high marginal rate problem.

2) Aka 'NIMBY Agenda'.

3) I don't think there will be a 90% tax/withdrawal rate, unless a local council decides to have a withdrawal rate of 50%. If the rules are unchanged, the rate will be around 81% (which to be fair is a tad better than the 100% rates that exist under current rules).

4) IDS is lying here, it would be correct to say 'guaranteeing £1.90 for every £10 they earn'.

5) Why? Any reason why? Council Tax is a national tax so why can't the rules on rebates be set nationally?

6) See my bullet 1).

7) Maybe so, but it will weaken incentives for people to 'get back into work' so is worse than self-defeating.

8) It won't 'support the positive work incentives', it will 'completely undermine' them you f***ing idiots.

Another day, another reckless throw of the dice (39)

From the BBC:

Councils are to help first-time buyers get on the housing ladder by topping up their deposits.

Five councils are pioneering a scheme aimed at buyers who can afford the monthly mortgage repayments but do not have a lump sum saved up. Many first-time buyers find it difficult to purchase a home because lenders are asking for hefty deposits.

The councils will put 20% of the price in a Lloyds TSB account, with the lender asking for a 5% deposit. The funds will not go to the buyer and the mortgage rate will be lower. The councils risk losing money if a buyer defaults, but they get a generous interest rate themselves...

Madness.

If the council wants certain people to be able to afford a house, it doesn't need to spend or risk any money, it could just give those young people 'struggling to get on the housing ladder' planning permission for a house, which will be worth far more than the the 20% deposit paid.

In any event, I hope this scheme is being paid for out of Council Tax - it will be interesting to see whether it is possible to support the price of a good with a subsidy funded out of the tax on the subsidised good itself.

Killer Arguments Against LVT, Not (100)

The Faux Libertarians and Home-Owner-Ists appear to have stopped providing me with raw material for this series, so I Googled around a bit and stumbled across an exchange over at The UK Libertarian.
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Let's quickly remind ourselves of the position in which the productive UK economy currently finds itself, skip to to the second half of the post (after the dotted line) if you know all this stuff:

* For every £100 gross income, it hands over about £20 rent to landlords (most businesses are tenants, the minority that are owner-occupiers tend to be the least efficient, as they cross-subsidise their notional trading losses with their notional rental income); £40 in taxes (ninety per cent of tax revenues are borne by the productive economy) and £40 in net wages or dividends/profits.

* The most valuable asset of businesses are of course the employees, who have to be paid each month, if they weren't paid they'd go elsewhere, whether you call this a 'cost' or a 'profit share' is a separate issue. Similarly, the taxes and rent that businesses pay are monthly, recurring costs. They can only survive by generating more profits per £1 cost than other competing businesses (who would otherwise pinch the employees and outbid them on the rent).

* Most 'capital assets' (machinery, software, know how, good will, brand names, patents etc) are relatively short lived and have to be constantly replenished, maintained, improved etc. A patent for example lasts for twenty years, but even if indefinite, would lose its value over time (how much would the exclusive right to manufacture Bakelite telephones or 78 rpm record players be worth nowadays?), goodwill can expire like a puff of smoke (Nissan, Arthur Andersen).

* For sure, buildings are capital assets as well, but office buildings and retail premises are a commodity, it doesn't matter who occupies them (they require little in the way of novel or specific expenditure) and industrial units are laughably cheap.

* Land use is entirely dictated by planning rules, you can't just change the use of a building from offices to a pub; or from a hairdressers to a betting shop; or build new industrial units where needed, because the local council know there are a lot of votes to be won from those existing businesses or NIMBY residents who prefer the status quo.

* Local councils have no financial incentive to allow more efficient use of land because all taxes on business (including Business Rates) go to central government.

* On top of that, economic activity is regulated to within an inch of its life by a myriad of overlapping and contradictory rules and regulations.

* Under a full-on Georgist system, where all existing taxes on income, output or profits are replaced with Land Value Tax, the total tax paid by businesses would fall dramatically (from 90% to 20% of all taxes) and the taxes on residential land and buildings would go up accordingly, so for £100 income, they'd pay out £20 in Land Value Tax, maybe £10 in buildings rent and the wages/dividends share would go up from £40 to £70.

* There'd be no pressing need to tax farm land as it is relatively low value; farm land's value has more to do with fertility than location; farmers would still pay LVT on their farmhouses; and it would take a few years for farmers to adjust to losing their lovely CAP subsidies anyway.
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Bearing all this in mind, following an eminently suggestion by LVT-supporter Richard Allan, Faux Libertarian Rob wades in as follows:

Richard Allen, land is effectively socialised now anyway... If it was expressly socialised then just imagine the restrictions on use that would occur. Rather than investment decisions being taken on the basis of market reality they would be at the whim of a few planner who would no doubt reward those farmers/landowners who flattered their prejudices instead of the farmers that turned the biggest profits.

Owning capital on which one can base production is rather important when talking about making long term investment decisions (which we are here). Even if you give me a 50 yr lease at 25 years old I won't see the benefit of the long term investment I make, so in short I won't make that investment.

You say “it’s possible for land (i.e. the stuff that’s not a product of anyone’s labour) to be owned separately from the stuff that IS a product of labour, even when the latter is standing on the former and an integral part of it”. Aye it would be “possible” but certainly not desirable.

Does anybody have a clue what he's talking about?

The idea that Land Value Tax is 'socialising' land and would lead to even more restrictive planning restrictions is a nonsense. If truth be told, income tax, VAT etc is 'socialising' people's labour, and on top of that come all the regulations, punitive tax on unfavoured industries and subsidies to favoured ones.

And it's the NIMBYs who want land use to be strictly controlled (or 'socialised', to use the Faux Libertarian's expression) - if a local council were entitled to a share of the LVT collected from commercially used land (or indeed Business Rates), then, even if it were to spend that tax on White Elephants, at least it would be more likely to allow more industrial units to be built, shops to be put to their most profitable use etc.

Under LVT, all the other true 'capital assets' - machinery; software; good will; a well trained and motivated workforce; or the buildings in which they carry on their business - would be entirely untaxed, so there would be a lot more investment in all these things.

As to "possible" in his final paragraph, most sensibly run businesses are perfectly aware that of £100 takings, not all of it is profits - £20 goes to the landlord or the bank; £40 goes in taxes; nearly £40 goes in net wages or to suppliers (who in turn pay wages) and a small bit is profits belonging to the owner of the business.

Working out quite how much has to go in tax is very tricky of course, and if you get it wrong HMRC will bankrupt you; under LVT, the total rent/tax burden would fall from £60 to £30 (including buildings rent); it would be a monthly, predictable, recurring expense, and they'd have much more left over to play with, expand the business, re-invest etc.

For sure, there are some owner-occupier businesses who fail to account for notional rents which actually make losses year in, year out. Most of these would quickly realise that they'd be better off renting out their premises to a more dynamic, profitable business, this is called 'creative destruction'. I may be right wing and heartless, but if we are prepared to accept unemployment as a cost of 'creative destruction' is it so terrible that unprofitable hobby-businesses run by land owners are similarly destroyed?

What's not to like?

This week's Poll

Some annual returns stats to help frame the debate:

FTSE All-share 1956 to 2010 12.1% p.a.
UK Value Stocks 1956 to 2010 16.0% p.a.
UK Small Companies 1956 to 2010 15.9% p.a.
UK Inflation 1956 to 2010 5.6% p.a.

UK House prices 1955 to 2010 8.5% p.a. (h/t chefdave)

FTSE All-Share Infl. Adj. 6.2% p.a.
UK Treasury Bills 1955 to 2010 I/A 1.7% p.a.

I haven't got house price increases nor could I quickly find average base or mortgage rates for the same period.

Update:
But, I do maintain, that a house is not strictly an 'investment'. It's a place where you hang your head.

"Moose kicks six-year-old boy in the head"

From The Daily Mail:

A moose has attacked and hospitalised a 6-year-old boy just after he got off a school bus. The large animal kicked young Michael Barnes in the head as he walked home in Anchorage, Alaska yesterday. Witnesses say the moose knocked him unconscious...

The attack comes after a similar attack on an Anchorage woman last Monday. One of the animals kicked a woman in the chest and shoulder at a city park... The Anchorage Daily News reports the moose had been in Town Square Park most of the day feeding on trees.

Francis Maude