Reader's Letter Of The Day

From yesterday's FT:

Sir, In Screws’ death is final shock horror story (July 8), Matthew Engel states that the News of the World has been walking the fine line between half-truth and lies for 168 years.

That is indeed an acute observation and characterises accurately the kind of reporting employed by the tabloid press when it comes to the European Union. For far too long tabloid papers have been allowed to misreport the EU and the effect of its policies. Newspaper owners and editors, for their own reasons, have gone on misinforming the public with headlines full of myths and sometimes outright lies.

In some cases they have gone as far as to influence government attitudes towards the EU, and the admission from the UK prime minister and the leader of the opposition of the extent to which some papers were allowed to have a stronghold on political classes speaks volumes.

For that reason it is paramount that the inquiry into press industry standards looks, among other things, at the way the press reports on something as important as the UK’s membership of the EU. If we are to clean the press in Britain we may as well rid it of its obsession for euromyths.

Petros Fassoulas, European Movement, London EC1, UK.

Tabloid refers to the paper size, so strictly speaking all English newspapers are now tabloids, except the Telegraph and the FT (IIRC).

Anyway, I quite agree with him, if all newspapers reported accurately what the EU was really like, we'd be out by the end of the year, whether the politicians wish us to stay in or not.* Of course there are good things about the EU, but if it's 20% good and 80% bad, and we can keep most of the good bits and avoid nearly all the bad bits by leaving (at the small cost of the French trying to impose a few new bad bits on us), well what's the problem?

* The Ian B theory is that UK politicians in general and Whitehall civil servants in particular absolutely love the UK being a member state of the EU, because they can use the EU as a Trojan horse to impose their own 'vision' on the great British public using the excuse that it's all about EU harmonisation. He's quite possibly correct, but that's still an argument for leaving, isn't it? As he points out himself, we'd be doing all the other member states a huge favour into the bargain. Win-win!

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?
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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:

Smoking horror statistics - missing figures round

From the BBC:

Women who smoke while pregnant should be aware that they are increasing the chance their baby will be born malformed, say experts. The risk for having a baby with missing or deformed limbs or a cleft lip is over 25% higher for smokers, data show.

Along with higher risks of miscarriage and low birth weight, it is another good reason to encourage women to quit, say University College London doctors. In England and Wales 17% of women smoke during pregnancy. And among under 20s the figure is 45%.

Although most will go on to have a healthy baby, smoking can cause considerable damage to the unborn child. Researchers now estimate that each year in England and Wales several hundred babies are born with a physical defect directly caused by their mother's smoking. Every year in England and Wales around 3,700 babies in total are born with such a condition.

OK, 3,700 babies are born with defects out of 750,000 babies a year. We can minus off a third of those caused by Pakistanis marrying their first cousins, which gets it down to a third of a per cent with defects, call it 2,500 a year.

Question 1: If 17% of women smoke; the overall average risk of a baby born to normal couple having a defect is 0.33%; and the risk of your baby having a defect is 25% higher if you smoke (they cherry picked diseases where the risk is measurably higher, and didn't mention all the defects where the risk is the same whether you smoke or not, but hey), then what are the chances of having a baby with a defect if you:
a) Don't smoke during pregnancy.
b) Smoke during pregnancy.

Click and highlight to reveal answers: a) 0.32%, b) 0.4% (you can guess this answer, one is 0.33% minus a tiny bit and the other is 0.33% plus five tiny bits).

Question 2: How many babies born to mothers who smoke will have birth defects?

Click and highlight to reveal answer: 750,000 babies x 17% smokers x 0.4% with defects = 510 babies.

Question 3: If those mothers hadn't smoked, how many of their babies would have birth defects anyway?

Click and highlight to reveal answer: 750,000 babies x 17% x 0.32% = 408.

Question 4: Deduct your answer from 3 from your answer from 2 to calculate the additional number of babies born with defects as a result of the mother smoking?

Click and highlight to reveal answer: 510 - 408 = 102. It's not "several hundred", is it? There's a wide margin of error here, but I'd politely refer to that as "one hundred", i.e. a tenth as many as babies born with defects due to inbreeding.

A bit like that Hitchcock film...

From The Daily Mail:

A holidaymaker has told how he was blinded after a bird pecked out his eye in a horror attack on a beach.

Animal-lover Michael Buckland, 38, kindly tried to rescue the injured gannet when he spotted it struggling for life. But the terrified bird began pecking at his face - and punctured his right eyeball at least three times with its razor sharp six-inch beak in Gower, South Wales.

His left eyelid was sliced in two and his right eye dangled from his face following the frenzied attack. Now welder Michael has been told by doctors he will never be able to see again through his right eye - but his left eye has been saved...

Jesus H Christ, this isn't funny any more.

Bizarre photograph in The Metro

What were they trying to hide on the left hand side?

Gastric band surgery

Fun Online Polls: Care home fees and News Of The World

Thanks to everybody who took part in last week's Fun Online Poll, results as follows:

Who ought to pay for the long-term care of 'asset-rich' pensioners?

They themselves and their likely heirs - 74%
The taxpayer generally - 20%
Other, please specify - 5%

Crikey it seems like a long time ago since that was the hot topic. Anyway, it's nice to see that I'm with the majority on this one.
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This week, let's do a Trial By Internet. To save time, let's put them all in the dock in one go.

Vote here or use the widget in the sidebar.

Immigration Advisory Service Fun

From the BBC:

The Immigration Advisory Service (IAS) has gone into administration, BBC News has learnt. The IAS, which employs 200 people, has closed its branches across the UK. One employee told the BBC that staff had been told to clear their desks and that administrators were already in the central headquarters in London.

The free service is one of the leading charities giving legal advice and representation to immigrants and asylum seekers in the UK... The Legal Services Commission (LSC), which runs the legal aid scheme in England and Wales, said the IAS's decision to go into administration was "theirs alone".

A spokesman said: "During recent stewardship activities LSC raised concerns around financial management and claims irregularities which prompted IAS trustees' to conclude that the organisation was no longer financially viable. Our priority now is to work closely with IAS and the administrators to ensure clients of IAS continue to get the help they need, whilst safeguarding public money. We are now identifying alternative advice provision in the areas affected and arrangements for case transfer will follow as soon as possible."

From page 12 of their 2010 acounts

Total income declined by 7% from £17,278,000 to £16,093,000. This reduction was entirely due to a decline in income from the Legal Services Commission (LSC), our main funder; by 8%. It continues to account for 90% of total income.

And their page at The Charity Commission website says they have 381 employees, so there.

Roger Bootle On Top Form

Writing in The Telegraph, of all places:

Since 1946, UK residential property prices have risen by almost 12,000pc, equivalent to an average annual compound increase of about 8pc. In real terms, the respective figures are 280pc and 2pc.

But the facts about commercial property – offices, shops and industrial buildings – are less well-known. Over the same period, commercial property prices have risen by only 800pc, or 3pc as an annual average. That means that in real terms, they have fallen, by 70pc in total, or 2pc as an average annual rate. So the ratio of residential to commercial property prices is now about 13 times what it was 65 years ago.(1)

What explains these radically different trends in the two types of property? Residential living space is something that we demand more of as we grow richer. Indeed, even without the current huge tax privileges to owner-occupiers, (2) the proportion of our income that we wish to spend on it probably rises as we become richer. (3)

1) He suggests other reasons for this divergence, but overlooks the impact of Business Rates, which is like Land Value Tax for commercial land and buildings (it's a flat percentage of the total rental value - and what's left is subject to income or corporation tax). If residential land and buildings were subject to the the same tax rates we could replace a huge chunk of taxes on income and output - the calculation is a virtuous circle, as lower VAT or income tax means that people have more money to spend on rent, which increases total rental values, which increases the tax take therefrom, allowing further reductions in VAT, income tax, more or less ad infinitum.

2) Bonus marks for that sideswipe.

3) Yup, that's as predicted by Ricardo's Law of Rent as modified by Henry George: as the economy grows, an ever larger share goes into land rents. If that growth is capitalised into higher selling prices we then get house price/credit bubbles, each followed by financial crisis, recession.

The new North-South divide: there's one on every street.

The Daily Mail compares and contrasts two similar families, both with a gross income of £50,000 in three-bed houses, the only difference being that one family lives Up North in a house 'worth' £200,000 and the other lives Down South in one 'worth' £600,000.

We aren't told how long ago they bought their houses or how much their outstanding mortgages are - the only clue is that the family Up North only spends ten per cent of their income on mortgage repayments and the family Down South spends forty per cent, so the family Up North lives in the lap of luxury and the one Down South has had to cut back on essentials (like gym membership and Jocasta's pony).

But isn't this story played out on every single street in the whole country? Older Baby Boomers have no mortgage at all (unless they were suckered into 'equity withdrawal'); the average bloke in his mid-to-late forties who bought ten or fifteen years ago will have paid his mortgage down to (say) £40,000 but the recent purchaser next door is saddled with a mortgage of (say) £160,000?

So even if all three earn similar wages, and even though all three live in more or less identical houses, the former groups will be living in relative comfort and the young guy will be struggling.

Just sayin'.