Reader's Letter Of The Day, Nearly

From today's FT:

Sir, John Plender is wrong to suggest that the ratio of public sector debt to gross domestic product could be reduced by the Bank of England writing off the gilt-edged stock it has acquired through quantitative easing...

No part of the national debt has been suspended as a result of QE, and none would therefore be cancelled by making any element of the QE transactions permanent. For central banks are state institutions, and debts owed between different arms of the same government are a nullity for the sovereign debt aggregates.

What has happened, in all countries undertaking QE, is that a significant slice of sovereign debt held by the private sector has been switched from long-term bonds to cash or near-cash instruments, all of which remain very much part of the national debt. The immediate effect of each QE instalment is a ballooning of commercial bank reserve balances with the central bank...

Andy Thompson, Worcester Park, Surrey.

All good stuff, that letter would have scored 10/10 on his description of the facts. I disagree with his conclusion that "QE has been, I think, an entirely appropriate policy instrument in current and recent conditions", but that's his opinion and he's entitled to it.

The bit that perturbs me is the following from the first paragraph:

... although he is of course quite right to note that such action would make the Bank itself insolvent.

Of course the bloody Bank of England is insolvent, it has been from Day One, it was originally set up to do the bookkeeping for when the English government decided it was a good idea to borrow money from people to invest in the Royal Navy to try and gain control of the high seas and ultimately build a trading empire (in which they succeeded most successfully).

And whatever the history of any Western central bank, they are by and large merely a branch of government, and most Western governments are - on a pure balance sheet basis - totally insolvent and always have been, because they owe, at today's date, far more than they have in assets. Their real assets are the ability to collect taxes in future and a small part of those taxes will be used to repay the national debt.

You can take the whole thing with a pinch of MMT salt anyway - when governments borrow money, it is the same as spending more than they collect in tax or 'printing money', and when they repay the national debt (as even the crappest Western government has been known to do from time to time), it is the same as collecting more in tax than they spend (which is 'unprinting money'). So, for example, an annual tax of 10% on the value of outstanding national debt would see it 'repaid' in ten years.

Does nuclear need subsidies (2)

Further to my recent post, from yesterday's FT:

Hitachi's purchase of the Horizon nuclear power project in the UK has propelled the Japanese engineering group into a new and uncomfortable role: as the owner of an entire atomic-energy enterprise rather than a simple contract reactor builder.

After returning some of Horizon’s cash to its current owners, the German utilities RWE and EOn, Hitachi said it would have paid £670m for Horizon’s land, organisation and building rights – about twice what most analysts had expected.

The 'organisation' is worth naff-all, and the land itself is worth a couple of million at most. The real value is in the vague outline planning permission to build a couple of nukes.

Now, RWE, EOn and Hitachi between them are the experts, they know how much it costs to build and run nukes (including interest on money invested), so all they then need to know is the likely selling price for their electricity, and the estimated net profit is pure rent/monopoly income, and that bit has an estimated value of £700 million.

IF you set up a spreadsheet with the following assumptions:
- £5 billion cost of building a 1,600 MW reactor
- running 75% of the time (i.e. 18 hours a day)
- fifty year life (not unreasonable, there are working nukes nearly that old), and
- average selling price of electricity £70/MWh (which means that out of every 15p you pay for a unit of electricity at home, the generator gets 7p, heck knows where the rest goes).

THEN the IRR is 15%, which is more than the 10% you'd normally expect, but nuclear power generation is very risky - not in terms of safety, but in terms of political risk - so fair enough.

Here's the subsidy bit: that £70/MWh is decided by the government/the regulator, and let's agree that it's a fair return on investment. Everything above that is pure profit/rent, paid for by electricity users. The discount rate for the pure-profit/rent element is much lower, let's call it 10%, so every extra penny on a unit at home (one kWh) is £10/MWH, and every extra £10/MWH has an NPV in today's money of £1 billion over the fifty year life of a reactor.

So I guess that is what Hitachi was gambling on - it was prepared to pay £700 million for the off-chance that they can stampede the UK government into agreeing a price of rather more than £70/MWH. In this instance, it was RWE and EOn who collected the subsidy, the question is, why is the UK government handing out subsidies to power companies, in particular ones owned by Johnny Foreigner like this?

One only has to say "Dame Shirley Porter" to see the mind numbing hypocrisy...

... says Bob E, who spotted this in The Telegraph:

Conservative councils [in central London] are planning to build hundreds of "middle-class" affordable homes for nurses and teachers in Britain's most expensive neighbourhoods...

Today they will submit their plan for a pilot scheme of 300 homes on a new "middle-class" estate to the Communities Secretary, Eric Pickles. The councils say many working families on average incomes struggle to afford homes in central London, where a typical family home costs £1 million.

Officials from Mr Pickles’s department are believed to have worked with the councils on their plans. The councils’ business case states: "Home-ownership is increasingly unaffordable except to households on very high incomes, and families on middle and lower incomes are being driven away from the area."

Being fair to Dame P, in the end, she did actually stump up £12 million personally "in settlement of the surcharge for her role in the homes for votes scandal", which was basically Conservative councils in central London (like the one she led) flogging off existing council housing at huge discounts to potential Conservative voters.

It's a nice house and everything, but I think my wife would struggle to get her car into the garage.

Spotted at Rightmove:Bricks and mortar rebuild cost/value, £120,000 - £150,000, maybe? Annual rental value of location, £15,000 or thereabouts.

Tolerance

Spotted by Bob E in The Globe & Mail:

"There’s an epidemic of obesity in our society. ... We want to do something to turn back the clock," OMA [Ontario Medical Association] president Doug Weir said in an interview... "If we want to keep health care sustainable in the province, we have to do something," Weir said.

In a policy paper in this month’s issue of the Ontario Medical Review, the OMA said the success of anti-tobacco campaigns shows that there is now more tolerance for what may be perceived as manipulative or coercive measures.

Fun Online Polls: QE and airport expansion

The responses to last week's Fun Online Poll were as follows:

Would it make any big difference if the UK gilts held by the Bank of England were cancelled?

No (the correct answer) - 53 votes
Yes (the wrong answer) - 23 votes

So well done, seventy per cent of you. The other thirty per cent ought to stop reading and believing what other people think and read up on some basic bookkeeping.

If you want to understand any productive business (cars, films, dentistry, plumbing, whatever) then there are thousands of things you need to know about or have experience in, and I doubt that anybody knows everything about any of them. Banking, on the other hand, is a pure paper exercise, you start with blank pieces of paper and write numbers on them. You are allowed to write as many positive numbers as you like, provided somewhere is prepared to accept the corresponding negative, and provided you are prepared to accept your original bit of paper going round in a circle and ending up as a negative number on the other side of your balance sheet.

Money is not a thing in itself, it is a unit of measurement, and without there being somebody somewhere who wants to borrow money* (i.e. is prepared to be in debt) then 'money' cannot come into existence. If you take all the financial assets (including the cash in your pocket) and all the financial liabilities, it always nets off to precisely nothing.

* Even in a system where the only legal tender is gold coins, 'money' cannot exist until somebody wants to borrow a gold coin and somebody else is prepared to lend him it. In that split second, a new financial asset and a new financial liability have been created out of nowhere (the number of actual gold coins in existence stays exactly the same).
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Yesterday, James Higham asked which would be the best place to build new runways in the south east of England (assuming that this is necessary or desirable, let's skip that debate).

So that's this week's Fun Online Poll.

Vote here or use the widget in the sidebar.

Great minds think alike

From last week's Evening Standard, which I forgot to post at the time:

Plans to turn Luton into a huge four-runway “England airport” are unveiled today as the latest possible solution to the crisis in aviation capacity.

The scheme’s backers claim that, of the capital’s six airports, only Luton has good enough UK-wide links to make it a nationally accessible hub.

The town is next to the M1 and on the high-speed Midlands rail line to St Pancras as well the Thameslink route to central London and the south coast.

London architects Weston Williamson said that if the multi-billion-pound plan went ahead there would also have to be a new road linking the M1 and the A1, as well as a new “Crossrail 2” with a 25-minute journey time to Euston.

We debated this at length a while ago, and if you think through the arguments, Luton (or thereabouts) is the ideal place for an airport.

We can rule out due east and due west of London because the prevailing winds mean that planes have to either fly over central London and/or turn sharply just after take-off or before landing. That leaves north (Luton) and south (Gatwick).

Gatwick is fine for people in London/South East (it's sort of the South East's equivalent of the Humber Bridge) but Luton is much better for the vast majority of the population which lives to the north or west of London, it is close to motorways etc and trains go into London every ten minutes.

According to the article, Stansted would then be in the way of the Luton flight path and would have to be shut down, which is a shame because it's a nice little airport, but hey.

Showing Off Time..

I have had a report that I co-wrote with Tim Ambler published by the Adam Smith Institute.

You can read it here.

I have a new hero(ine)...

Doing a bit of idle web surfing whilst on hols I came across this lass, at Mises.org.  Luckily as I am old enough to be her grandad, I am not stricken by lust, but I am moved to tears by her passion. It seems there is hope in the younger generation.

"Does nuclear need a subsidy?"

Tony Lodge, author of this fine pamphlet in today's CityAM:

But what price should Britain be prepared to pay for new nuclear plants? If a strike price – the guaranteed price paid for electricity from the plant when completed – is anywhere near the £140 per megawatt hour (MWh) required by offshore wind, we should be surprised if EDF didn’t line our coast with nuclear plants, like France in the 1960s, 70s and 80s. But this is an absurdly high price. Anything close would rightly destroy nuclear’s low cost reputation and, with it, the case for new nuclear. After all, £140 per MWh is more than double the current market price, and the Department for Energy forecasts that electricity prices will fall over the long term.

A challenge for the government is to make the strike price negotiations as transparent as possible. EDF has now increased the cost of each proposed reactor at Hinkley in Somerset by 40 per cent to £14bn in total*. Why? The outcome of the strike price negotiation risks saddling householders and businesses for a long time to come with further costs – the subsidy for low carbon power is to be financed by the consumer. This is why transparency and parliamentary scrutiny will be vital. Strike price plans mean that, when the market price for electricity is below the level agreed with EDF, all UK energy consumers will be liable for subsidies to top up the difference.

But does nuclear need a subsidy? Two 1,600MW reactors, operating at 90 per cent efficiency over a 50 year lifespan, could generate £88bn in cash at an average market price of £70 per MWh* (which was the government’s median projection for nuclear power last year, making it the cheapest on offer); £126bn at an average price of £100 per MWh; and £163bn at £130 per MWh. These are very large returns on a £14bn capital outlay, recognising the need to count in running costs, contingencies and profit.

* As it happens, his figure of £14 billion appears to be very pessimistic, word on the street is that Westinghouse will build you a 1,000 MW reactor for $1 billion, but even if you multiply that by seven for the usual British incompetence/corruption, nuclear is still economically viable. The author hints that EDF just plucks the figure out of the air in order to justify a higher price/MWh.

** He cheated a bit here, the £88 billion is calculated thus: 2 x 1,600 MW reactors x 24 hrs/day x 90% capacity [not "90% efficiency", whatever that is] x 50 years x £70/MWh. But the £70 is a negotiated figure, so if it turns out that they can only be run at full capacity 75% of the time, the price would have to be £84/MWh and the £88 bn looks perfectly reasonable.

They own land! Give them money!

Spotted by Robin Smith in The Telegraph:

Business rates are the third biggest outgoing for local firms after rent and staff costs*. As a very direct and visible tax demand, unsurprisingly, such bills aren’t that popular with business...

The engines of economic growth aren’t found in the corridors of Whitehall but in the foundries of great local British companies. The best thing Government can do to help such businesses is to provide them with a stable economic environment. This is why we want to protect local firms from soaring tax bills.

* The article was written by Brandon Lewis MP, Minister for Local Government, so true to his calling he starts off with a Big Fat Lie. The biggest costs on businesses are PAYE (£234 bn), VAT (£102 bn) and corporation tax (£37 bn). Business Rates are a mere £26 bn. Anybody with five minutes to spare can look this up in the Public Sector Finances Databank.

Rents (actual cash rents, mortgage repayments or the cost of capital tied up in land ownership) must be two or three times as much as much as Business Rates, i.e. about £65 bn.

You can make up your own mind whether wages and salaries are really a cost to the business at all - as far as I can see, a business is a joint venture undertaken by owners and employees, the bit which the owners get is called 'profit' and the bit the employees get is called 'wages' but really it is the same thing (we don't consider 'profit' to be a cost to a business, do we?), but for the sake of this discussion, let's pencil in wages (net of PAYE) of another £400 billion a year.

So, glossing over the point that all that happens when you cut Business Rates is that rents go up - the people calling for reductions in Business Rates are the usual suspects - and businesses do not benefit one iota, what he really means to say is "Business Rates are the sixth largest outgoing for local firms after staff costs, PAYE, VAT, corporation tax and rents."

Killer Arguments Against LVT, Not (Farming edition)

A hysterical commenter at Left Foot Forward, who is ostensibly a hard-core Socialist but may on closer inspection be a Poor Widower In A Mansion, asked...

"How will you handle agricultural land so as not to inflate food prices?" To which I replied "All easily solved if you apply common sense... The rent of farmland, and hence the LVT is dictated by food prices and not vice versa. In any event, the rental value of farmland is so low that the tax would be less than the income tax etc which farmers currently pay. This all stands to reason, or else tenant farmers would not be able to make a living.

Economics is not his strong point, and he made this bold assertion: "So basically, you're willing to accept a huge rise in food prices. The values I have seen proposed for farmland would cause, cause a 50-60% rise."

OK, simple economic logic is not good enough for him - the question can be answered by comparing the prices which three different farmers charge for their output; an owner-occupier; a tenant farmer who rents from a private landlord; and a tenant farmer who rents land owned by the government (Crown Estates is run by the government, not by or for the benefit of the royal family). Land rent and tax is the same thing, so to all intents and purposes, we could say that the government lets him have the land for free on the condition that he pays an annual tax equivalent to the rental value.

They all charge the same prices, obviously. Taxing the rental value of farm land, even at 100%, would put the first two farmers in the same position as the third farmer and there would be no change in prices.
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But sod economic theory, let's look at actual numbers, they are dwindlingly small:

1. Going by Defra's figures for 2009 (the most recent available), total consumer spending on food in shops is £65 billion a year, and that income/turnover is shared as follows:

Agriculture and fishing - £7 bn
Food and drink manufacturing - £ 25 bn
Food and drink wholesaling - £9 bn
Food and drink retailing - £24 bn.

So out of £1 you spend in the shops, farmers only get about ten pence. Even if farm gate prices were to increase by half as a result of tax changes (which they wouldn't) and assuming competitive manufacturing, then that would merely mean that retailers' and wholesalers' share of total income would go down by a tenth (these sectors are the closest to being a monopoly, and so bear all costs and rake in all super-profits) and prices paid by consumers would stay constant.

Even if that extra £3.5 bn extra income for farmers were magically passed all the way up the chain to consumers, then shop prices would only go up by five per cent as a result. Seeing as we are constantly being told that we throw away at least a fifth of the food we buy, then maybe the result would be that we buy slightly less and throw away slightly less. Nothing terrible would happen.

2. A fair LVT system would mean that no productive business would pay more in tax than it does now, so how much tax does the farming sector pay? That £7 bn income is taxed at an average rate of say 30%, so that's £2.1 bn tax. There are about half a million farmers and farm workers who live in a quarter of a million houses paying £1,500 council tax, that's another £0.4 bn, with maybe as much again for Business Rates on agricultural buildings, let's call it £3 bn a year, all in.

3. That £3 billion is more or less equally offset by agricultural land subsidies, which were £2.3 bn a year in 2009.

So in net terms, farmers and farm owners paid net £0.7 billion in tax.

4. In the interests of fiscal neutrality, our starting point is thus that the current tax take (income tax, NIC, Council Tax, Business Rates) net of farm subsidies is only £0.7 bn a year.

a) To raise that much in LVT, all you'd need to do is put a flat tax of £2,800 a year on each farmhouse incl. outbuildings, or a flat tax of £16 per usable acre per year (or some combination of the two), and have done with it. Thus reinstating 'Agricultural rates' which we had for about three centuries without anything terrible happening.

b) The average annual market rent is £50/acre for arable land and £35/acre for pasture land, so £16/acre in 'Agricultural rates' looks perfectly reasonable. Income and gains from forestry is currently more or less tax free (although they still have to deduct PAYE from wages) and receives little in cash subsidies. The rental value of forestry land is practically nothing, £5 or £10 per acre per year perhaps, so that'd continue to be exempt.

c) Or, to save bickering over whether a particular house qualifies as a farmhouse or not, or carping over whether an outbuilding is used for 'farming' or for 'food processing and manufacturing', it's even easier just to exempt the bare land itself, charge tax on all the land used for farm buildings at full LVT rates and pay farmers and agricultural workers their normal Citizen's Income/Pension, which would net off to receipts of about £0.7 billion a year, which is exactly the same as what they are paying now (from 3. above).

5. To sum up, anybody who says that it would make a big difference if we scrapped farm subsidies and replaced existing taxes and collected the same amount in LVT instead is an idiot. Fact is, it wouldn't make much of a difference, and whether farmers' overall tax bills go up or down slightly is uncertain. In fact, they'd probably go down, or at least, it could be easily engineered to achieve that, by scaling down the figures I suggested in 7 a).
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Footnote re agricultural subsidies:

We are often told that supermarkets have such monopsony power that farm gate prices are pretty much cost-price. I suspect that farmers' costs include the value of their own labour, but farming itself is not particularly profitable. Therefore, we can assume that in the absence of farm subsidies, the rental value of farm land would be more or less nothing.

Actually, it's ever so slightly more than nothing, because most of the £2.3 billion in subsidies pushes up rents. If we multiply up land use statistics from here by average rental values from here, the total rental value of all UK farm and forestry land is about £1.7 bn a year.

We can also safely assume that the £1.7 bn rental value is merely the two-thirds of the agricultural subsidies which accrue to land owners (supermarkets get the other third by pushing farm gate prices down to below cost.

"It was premeditated, not panic"

... says our spotter, Sarton Bander.

From Yahoo.com:

GAZA CITY, Gaza Strip (AP) — A panicking cow killed a Palestinian man who was trying to slaughter the beast on Saturday during the Muslim celebration of Eid al-Adha, a Gaza health official said.

Muslims around the world slaughter sheep, cows and goats during the four-day holiday that began Friday to commemorate the sacrifice by their Prophet Ibrahim — known to Christians and Jews as Abraham.

But accidents are common as people frequently buy animals to slaughter at home instead of relying on professional butchers. The festive atmosphere surrounding the site of the slaughtering also tends to make the animals fidgety.

In addition to the death, Gaza heath official Ashraf al-Kidra said that 150 other people were hospitalized in the Gaza Strip with knife wounds or other injuries caused by animals trying to break away.

Being entirely fair, he did publish his own address, even though that was probably stupidity rather than an act of defiance

"Miss University of Arkansas, 21, faces losing crown after getting arrested for UDI"

From The Daily Mail:

A newly crowned Miss University of Arkansas found herself in hot water after it has come to light that she was arrested for marking a unilateral declaration of independence for Arkansas and inviting Louisiana and Mississippi to join a breakaway confederation of states just weeks before her pageant victory.

All contestants in the annual event are required to sign a contract in which they promise that they do not seek to reignite the Civil War which ravaged the country in the 1860s.

Sarah Gafvert, 21, signed the form to enter the competition prior to her September 26 arrest, and she had informed pageant organizers about the incident before she was crowned last Sunday, according to her attorney, Bo Morton.

"Miss University of Arkansas, 21, faces losing crown after getting arrested for IUD"

From The Daily Mail:

A newly crowned Miss University of Arkansas found herself in hot water after it has come to light that she had a small 'T'-shaped device, containing either copper or progesterone, inserted into her uterus just weeks before her pageant victory.

All contestants in the annual event are required to sign a contract in which they promise that they are not using the most effective type of reversible birth control.

Sarah Gafvert, 21, signed the form to enter the competition prior to her September 26 arrest, and she had informed pageant organizers about the implant before she was crowned last Sunday, according to her attorney, Bo Morton.

"Savile police to arrest up to a dozen 'household names' within days"

From The Daily Mail:

Police are on the verge of arresting up to a dozen household names accused of sex abuse but missed an incredible seven chances to trap paedophile Jimmy Savile while he was alive, it has been revealed.

Scotland Yard is to act 'within days' as it emerged the pervert DJ abused at least 300 people because he was allowed to rape and sexually assault victims unhindered for decades. A source close to the investigation would not deny that Dyson, Bosch, Sanyo and Domestos were among the names concerned.

Emily Blaithwaite, 43, a housewife from Croydon told reporters: "I don't think I ever met Jimmy Savile. But I'm happy for them to take my Dyson if it helps clear up these heinous crimes. And it makes my skin crawl to think that I left my children alone in a room with that Sanyo flat screen. Who would have thought that such an innocent looking device would do something like that?"

Mr and Mrs Blaithwaite bought their 3-bed family home for £85,000 in 1999 and it is now worth over £300,000.

"I blame the Catholic church," added Mrs Blaithwaite "They knew what those priests were doing and I bet they helped cover up for Savile. He's one of them, isn't he?

Fairly Short List

Thanks for all the submissions to the previous Short List: "Pop groups which had so many line up changes that the ex-members were able to reform the more-or-less original band under a different name while the official version of the band was still in existence".

Sobers: Buck's Fizz and OBF

Tim Worstall: Yes and ABWH

Kevin The Chimp: Sugababes and Mutya Keisha Siobhan

DBC Reed: The Drifters and The Five Crowns

John Band: The English Beat and The Paul Collins Beat. He adds: "From 1965 onwards, Beach Boys albums were made solely by Brian Wilson and studio musicians, while the Beach Boys touring line-up featured everyone else and no Brian."

Former Tory: Wishbone Ash and Martin Turner's Wishbone Ash
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Slightly off on a tangent, I'd also like to mention the Michael Schenker group in its 1980 - 82 line up, which included Graham Bonnet, Cozy Powell and Don Airey, all of whom were ex-Ritchie Blackmore's Rainbow. Two decades later, Michael Schenker briefly employed another ex-Rainbow singer, Doogie White. It would have been fun if he'd simply called his band Michael Schenker's Rainbow

At the moment, he appears to be reforming The Scorpions with Francis Buchholz and Herman Rarebell.

One man has secured his Olympic Legacy

Spotted by Bob E in The Daily Mail:

Lord Coe is set to scoop a multi-million pound windfall from selling his private business to an advertising company that played a major role in the Olympics.

The former Olympic gold medallist and head of the organising committee for the 2012 Games could stand to gain almost £12million over the next four years from the sale of his management consultancy firm, the Complete Leisure Group Limited.

The buyer, Chime Communications, is an advertising and public relations group founded by Margaret Thatcher’s former spin master and 1980s PR mogul Lord Bell.
The agency raked in more than £30million from a number of contracts during the Olympic Games.

Given that former MP Lord Coe owns more than 90 per cent of the shares in the group, he will walk away with millions. Foreign Secretary William Hague is also set to benefit financially, as he is a minority shareholder in the venture.

"Cow stuck between a rock and a hard place in Baslow"

Spotted by AK Haart in the Matlock Mercury:

A specialist animal rescue team were called when a highland cow became lodged between a tree and some rocks yesterday.

The unit from Matlock joined firefighters from Chesterfield to aid the animal, which was near a riverbed off the A621 at Baslow. The crews were called at 12.49pm and managed to free the beast by 3.59pm.

As our spotter points out, "Not a dramatic one unfortunately." Fantastic headline though.

Cinema Takings Dented By Crap Films

From The Telegraph:-

DVD rentals and cinema takings collapsed in the three months from July to September as people “watched the Olympics instead”, according to the Office for National Statistics.
Output in the “motion picture” sector fell 9.4pc in the quarter, the steepest decline in more than five years, and – along with a drop in online shopping – was the clearest evidence of the impact the Olympics had on economic activity.

Firstly, If you look at BoxOfficeMojo, the most reliable source of movie box office, you see that July 29, August 3-5, and August 10-12 were all actually quite good, with August 3-5 being the biggest box office week of the year at the cinema, and compared to previous years, higher. August 10-12th was low, but when you look at the films, you had a nothing of any significance showing except The Dark Knight Rises which had already played itself out.

I'm not sure about DVD rentals, but let's bury this "everyone was watching The Olympics" nonsense. Most weekdays, the audiences for the Olympics were around 1 million higher than Eastenders (around 9.5m compared to Eastenders 8.5m). The Saturday night broadcasts were 9m and 12m, not far off, on average, what Strictly Come Dancing gets. The only exceptions were the 100m final, the closing ceremony and the opening ceremony, two of those were on a Sunday, which isn't a big DVD rental night.

The main problem was that the movies were poor. Once The Dark Knight Rises had run out of steam, you didn't have much else. There was the sleeper hit Ted, but most of the kids films didn't fare well. The other big action movies sank and none of the kids movies set the world alight. Offer up some lousy products, don't be surprised if people don't take them.

Killer Arguments Against LVT, Not (246)

Roger Evans, a Tory councillor:

Jenny Jones proposed a land value tax, to shift taxation from income to wealth, and to encourage the use of derelict land.(1) I pointed out that this would lead to pressure for denser, more profitable housing and commercial projects,(2) with less amenity space (3) - not a very green proposal. It would also in effect be a tax on London, as land values are so much higher in the capital,(4) shifting more money out of the city to the rest of the UK.(5) Professor Travers also noted that the tax would hit people living in fashionable areas whose properties had hugely increased in value.(6) Those who were earning low wages would be forced to sell up and move.(7)

1) Yippee, very sensible, what's not to like?

2) Is the man really that stupid? That's why we have planning laws; the tax is, by definition, based on optimum permitted use, and given a fairly fixed population, even if there is denser development in some areas then there will be less development somewhere else, such as on The Hallowed Green Belt.

3) Most amenity space is owned by the local council, why would the council pressure itself to build on such land? For a start, it has in itself no rental value (because access is free) and secondly, parks add enormously to the rental value of surrounding houses, so overall rental values are higher if ten or twenty per cent is set aside for public parks etc.

4) ??? You could say that income tax is a tax on London because wages are highest there. Simple fact is, rental values are highest in London, so saying that a tax on land values would raise most money from where land values are highest is pretty idiotic, it's simply not an argument.

5) London only appears to be so wealthy because it sucks up money from the rest of the economy; Ms J Jones clearly proposed that other taxes be cut which would benefit London in equal and opposite measure; and as it happens, the proposal was for London infrastructure to be funded by taxes on London land values; or for taxes on London land values to be spent on London infrastructure, so this argument is again complete bollocks.

6) Good to see Poor Widows making their appearance, isn't it?

7) And? The Tories hate low earners don't they? They're quite happy to take away their benefits and for high rents and house prices to filter them out of nice areas, why is LVT any different, it merely speeds up the process a bit, that's all. It's just that in true Homey self-contradictory fashion, they hate low earners who don't own land but are rather in awe of low earners who own valuable land.

"Coalition breathes new life into rotting corpse"

From The Sun:

FORMER Conservative Prime Minister Margaret Thatcher’s right-to-buy policy changed the face of Britain – and gave millions of families the chance to pay much higher rents or claim Housing Benefit to rent ex-council homes from RTB landlords.

Now, three decades later, the coalition Government want to breathe new life into the rotting corpse of the Thatcher housing revolution.

Here, the Morbidly Obese One spells out how his plans will help "rent seekers" - David Cameron’s term for those who "want to be able to rest on their laurels and have the housing market make money for them".

He also vows to stop Labour councils taking credit for this lunacy.

MANY people’s greatest ambition is to own their own home, which is a excellent proof of how we have knocked any real ambition out of people. Young, hard-working families, people who accept they have no choice but to play by our rules. The triers and the strivers and those who put something in deserve to get something out will get nothing; the lucky few in social housing will be given a massive subsidy to get them hooked on the drug of rising land values. In reality, they'll just end up with bigger debts, but the banks will be happy at least.

Mrs Thatcher knew all about aspiration. And crushed it. Her right-to-buy revolution transformed us from a nation of owner-occupiers to a nation of Home-Owners-Ists.

By the end of the 1980s, more than a million extra people had a place on a council house waiting list to call their own. Yet in recent times, the dream of the next generation has been dashed. During 13 years of Labour rule the lowest rungs of the property ladder were simply sawn off as this once great country was sucked into a whirlpool of house-price driven debt.

"Street cleaner falls through hole in the ground as pavement collapses"

From The Daily Mail:

Council worker Kelvin London was shocked when the earth gave way while he was cleaning the pavement in Great Yarmouth, Norfolk this morning. As big paving slabs gave way, the sweeper tipped on its side.

Mr London said: "It suddenly went down and tipped to one side. When I got my senses together I was in a big hole so I got out quick as it was a bit worrying."

The street cleaner managed to clamber out a side door, unharmed.

He must have had a nasty shock and everything, but that hole is nothing compared to the one which appeared in Guatamala.

At least he worked for his pension

Submitted by Bob E.

Some commenters are suggesting that it is "a bit ripe" for a Lord to be suggesting that people work for their pension, and are demanding to know what contribution he has made and what he might or will be doing to justify getting his state old age pension … aside of course from the contribution he makes as a Life Peer, turning up to those arduous sittings in the House of Lords with only the prospect of the daily attendance fee to take the sting out of it, which some might perhaps consider "contribution enough", especially when they see what other sterling service Lord Bichard has already provided to his community.

Which is to say "stop carping and whining, Lord Bichard has already put in his shift doing service for the community – that is why he was made a Life Peer".

He became Chief Executive of Brent Council in 1980 – the year of his 43rd birthday - and continued in that role until 1986, before leaving Brent to do service as Chief Executive of Gloucestershire County Council – a much bigger and harder task.

He fulfilled that role until 1990 when he was plucked from Gloucestershire to undertake a national role as Chief Executive of the Benefits Agency, which had just been established. He carried that responsibility out until 1995 when he moved on to the Department of Employment, which was then merging with the Department of Education to become the super big Department for Education and Employment (DfEE) – agreeing to be Permanent Secretary of that monster organisation.

It was while undertaking this service that he was made Sir Michael Bichard in 1999. Not surprisingly by the time 2001 – the year of his 55th birthday - rolled around, and yet further changes to the machinery of government were taking place, and with DfEE being unpicked again, Sir Michael decided that he had done his shift and entered "retirement", leaving the civil service BUT in the same year accepting the position of Rector of the University of the Arts in London and the Chairmanship of the Design Council.

He also found the time to be non exec Chairman of RSe Consulting between 2003 and 2008 and take on the role of Chair of the Legal Services Commission in 2005. And he was of course Chair of the Inquiry into the Soham Murders in 2004. In 2008 Sir Michael dropped the majority of his post retirement activities to concentrate on being Director of the Institute for Government, only leaving that role in 2010 when in the year of his 64th birthday he was made a Life Peer.

There is no public evidence for it, but it is said that all Lord Bichard has to show for his long, well into "retirement", service to the community, are public service pensions which provide him with of £120,000 per annum. And his well deserved state old age pension will top that up nicely.

So, go easy on the "what right has this ****** got to suggest that pensioners have to do community work to qualify for their pension or lose it", diatribes, OK?

Short List

Nobody guessed the answer to the previous short list but one (Ariel Sharon and Hosni Mubarak). Prince Johan Friso is in a coma but is unfortunately not a former Middle Eastern leader.

Today's Short List: "Pop groups which have had so many line up changes that the ex-members were able to reform the more-or-less original band under a different name while the official version of the band was still in existence"

"Screaming teenagers flee cinema in horror as bungling staff show Madagascar 3 instead of Paranormal Activity 4"

From The Daily Mail:

* Teenagers as young as fifteen at Friday evening screening at Cineworld in Nottingham
* Instead of terrifying horror movie, projectionists put on tedious kids' caper
* Boys say their girlfriends had been 'horrified' and 'questioned their manhood'
* Staff have apologised and offered full refund and complimentary tickets to all viewers who can prove that they are aged 18 or over

The Tories show us how to "reward marriage"

From The Daily Mail:

Thousands of people earning more than £50,000 will lose some of their pay if they move in with a new partner who has children, accountants have warned. Tax experts at Deloitte said the ‘bizarre’ anomaly was the result of government plans to claw back child benefit from homes where at least one resident is a higher earner.

The changes are due to come into force in just 10 weeks, and the Treasury has been forced to insist they remain on track despite hundreds of thousands of families affected being in the dark that they will lose money from January 1. Letters are due to be sent to those affected by HM Revenue and Customs next week...

Under the changes, if one person in the home earns £50,000 or more, the entitlement to child benefit will be gradually cut. If anyone earns more than £60,000, they will lose child benefit all together [sic].

So they're preening themselves for having reduced the (spiteful) 50p tax rate to a marginally less spiteful 45p, but as a quid pro, they are increasing the marginal tax rate on above-average earners by another twenty or thirty per cent (the maths is tricky); bringing in a whole new raft of bureacracy; and as a bonus penalising people who try and make a second attempt at marriage.

Life copies satire

My spoof article of six months ago:

Work unpaid or lose all your state pension for three years - this is the new message from the government to the long-term retired. Employment minister Chris Grayling said he is convinced a new 'work for pension' scheme would help to reduce Britain's £100 billion pensions bill.

From the BBC today:

Retired people should be encouraged to do community work such as caring for the "very old" or face losing some of their pension, a peer has suggested.

Lord Bichard, a former benefits chief, said "imaginative" ideas were needed to meet the cost of an ageing society. And although such a move might be controversial, it would stop older people being a "burden on the state".

The correct answer to this is to simply not exempt certain special interest groups from Land Value Tax and to pay them a fair whack in Citizen's Pension, continue to give them 'free' NHS treatment and so on, but hey.

They own land, give them... oh, hang on...

Spotted by Bob E at the BBC:

Housing Minister Mark Prisk said that, "with over three million people relying on the private rented sector for their housing needs, we are determined to attract new players to the market and pull out all the stops to get Britain building".

"That's why we're offering £10bn in loan guarantees to provide up to 15,000 new homes for rent, putting £19.5bn public and private funding into an affordable homes programme..."

Er, we can see a bit of a snag here, sir, you've decided how much taxpayers' money you'd like to throw at them, but they don't actually own any land yet..

"... and why we've identified enough formerly-used surplus public sector land to sell for 100,000 new homes."

Ah, thanks for the clarification, sir. What, with the government having that £29.5 billion to spare and enough land for 100,000 homes, it could of course just build those 100,000 homes itself for under £10 billion, saving the taxpayer about £20 billion, but I'm sure there's a very good reason why giving the private sector three times as much is a better idea. Sir.

Killer Arguments Against LVT, Not (245)

It's not just Poor Widows In Mansions who'd take a hit; replacing as many taxes as possible with Land Value Tax would also wipe out all the extra taxpayer-funded rents which all those MPs are collecting.

Fun Online Polls: Party conferences and QE

The result in last week's Fun Online Poll was as follows:

What was the stupidest idea from this year's party conferences?
Lib Dems: Use your pension fund as a mortgage deposit - 42%
Tories: Any suggestion that the leadership is in any way EU-sceptic - 31%
Labour: Spend 4G licence money on propping up house prices - 27%

So a pretty close run thing there.
-------------------------------
There were howls of outrage from the usual suspects when Adair Turner pointed out that the IOUs which one department of HM Treasury has issued and which are now held by another department of HM Treaury are effectively null and void and that to all intents and purposes it would make no difference to the outside world if these were cancelled. Golden rule: you cannot owe money to yourself.

The very real debts which the government has post-QE is the £366 billion-odd which the Bank of England now owes the commercial banks, i.e. the amount 'paid' for the UK gilts which the commercial banks have left on deposit with the self same Bank of England. But seeing as the banks can't withdraw this (or at least, they haven't done so far), no new money has been 'printed' or 'created' by QE and very little QE money has actually gone 'into the economy'. It's the deficit spending which creates 'money', the method and mechanics of the actual financing of that debt is a separate and secondary issue.

Just to see if anybody at all has been paying the slightest bit of attention, that's the topic of this week's Fun Online Poll.

Please vote using the widget in the sidebar.

Give me all your money and don't ask any awkward questions

A Poet and A Man Of Peace

Ten Years Of Hell. And for what?

Reader's Letter Of The Day

From yesterday's the FT:

Sir, Helicopter money can be disbursed most quickly by cutting value added tax rates, especially in the pre-Christmas period. The greatest multiplier effect within the UK arises from reducing VAT on the sales of services that are labour intensive such as hospitality, repairs and bespoke goods.

Andrew Dundas, Perth.

I'm not sure if it's correct to talk about the 'multiplier effect' (to the extent such a thing even exists) of a tax cut, surely what he means is that VAT pushes businesses close to or past the top of the Laffer Curve. Commonsense tells us that businesses whose gross profits or 'value added' are liable to an extra 16.66% tax before they even think about paying the 40% PAYE or 24% corporation tax are most likely to be in this position.

So assuming constant business income and that all profits are paid out as wages, scrapping VAT would bring down the overall marginal rate down from 50.3% to 40.2%, which would make a huge difference to the business/employees and only a very modest overall fall in tax revenues - the receipts from a 40% are not 40/50 of those of a 50% tax, they would be 43/50 (or whatever).

[Cue idiots shouting: "But the consumer pays the VAT!". Yes, that's what the One Per Cent want you to believe - and even if it were true, why is this A Good Thing?]

To back this up, HMRC have published some handy tables on the tax gap, which shows that in relative terms, the most-evaded tax is duty on hand rolling tobacco (38%) but in absolute terms, the biggest shortfall is with VAT (they collect about ten per cent less than they expect every year = £10 billion a year out of £100 billion).

And of course the lowest tax gaps are for land-related taxes, Business Rates has collection costs plus losses of 1.5%.

The SDLT-gap is given as £0.5 billion, which is about a tenth of total revenues. The collection costs of the old flat 1% rate were famously minimal, because few people bothered evading it, but I'm quite sure that the collection costs of the savage 3% - 15% rates are much higher - it is widely observed that transactions tend to bunch at prices just below the threshold - and from professional experience I'd guess that the 'compliance costs' (i.e. 'avoidance costs') are absolutely enormous. For example, fancy firms of lawyers offer SDLT-saving schemes, for which they charge you a third of the SDLT saved.

* insert title here *

Fun Online Polls: Best of the party conference season

Thanks to everybody who took part in last week's Fun Online Poll. On a very high turnout, the responses were as follows:

What was the stupidest idea from the Conservative conference?

Any suggestion that the leadership is in any way EU-sceptic - 71 votes
Going ahead with HS2 - 39
Swap employment rights for shares - 36
Teach bankers a lesson by cutting welfare - 34
Boris Johnson for PM - 16
Pact with UKIP - 15
Freezing Council Tax - 15

So the Tories' winning entry goes through into the final round, along with the craziest idea from the Labour conference and the most crackpot idea from the Lib Dem conference.

Vote here or use the widget in the sidebar.

They own land! Give them money!

From City AM:

London’s Supersewer is a vital piece of infrastructure, a 24 mile tunnel that will prevent sewage from ending up in the Thames and bolster our capital’s antiquated Victorian system. It is officially called the Thames Tideway Project and is due to start construction in 2015. But it is becoming clear that the human cost of the project will be very high, with hundreds of homes blighted by extreme noise and other problems for lengthy periods.

The answer is not to ditch the project but to compensate the losers properly. The expected cost of the project is some £4.1bn – so generously paying off those affected, and in some cases buying their homes at a premium to market price (and reselling them when the work is finished) would hardly make much of a difference. It would be better to spend £4.2bn, protect affected individuals and speed up the planning process rather than risk the entire project descending into endless controversy.

In general, the UK needs to adopt a far more generous compensation regime for the losers in infrastructure projects. It is the only way to prevent nimbyism defeating all progress while protecting individual rights.

Which losers? Surely the point of infrastructure spending is that there are huge overall gains? So while there will be a few "losers" whose homes have to be e.g. completely demolished etc, why is there no concept of symmetry in the Home-Owner-Ist universe?

The coherent approach is to compare the rental value of all the affected land after the work is completed with the likely future rental value of the affected land if the works are cancelled. And as we know, there will nearly always be a huge overall uplift (whether this is enough to pay for the costs is a separate topic). That uplift is a good subject for taxation, which can be used to pay for the cost of the works and the compensation to the losers (to the extent there are any, which there won't be).

More complete and utter bollocks on QE

From The Telegraph:

Economics truly is a dismal science.(1) Take the apparently ludicrous scheme under-pinning the economy: one branch of the state (the Treasury) is borrowing money from another branch of the state (the Bank of England) and everybody in the City is cheering madly, despite the dangerous circularity of the exercise.(2)

To the uninitiated, this will sound like blatant accounting fraud (3) but I’ve just described quantitative easing (QE), the perfectly legitimate wonder drug that was meant to cure the economy (4) but to which George Osborne is now hopelessly addicted...(5)

Feel free to read the rest if you like if it's the sort of stuff which will reinforce your own prejudices, but I find that it always helps to know what you are talking about before your start speculating as to what the consequences of something are.

1) No it's not, it's fascinating. And because we have so much history from so many countries to compare and contrast, we can pretty much say with certainty was the consequences of any particular economic policy will be, because the chances are, somebody somewhere has already tried it.

2) The government cannot borrow money from itself. It can pretend to do so, but it can't. Those cash flows (or lack thereof) and accounting entries between two departments of the government can be completely ignored, and all we need to look at is cash flows and accounting entries between the government and everybody else.

3) It's only fraud if you are gullible enough to believe in it, which he clearly is and does, therefore he is guilty of perpetuating the "fraud" rather than debunking it.

4) It's the public sector deficits which are supposed to "cure the economy" with all this chit-chat about 'the multiplier effect' and so on. This is also complete and utter bollocks, but a different topic to QE. Those deficits have to be 'financed' somehow, the government finances them by simply spending more than it raises in taxes. The balancing figure has to be accounted for somewhere, whether as a) unpaid invoices or late collected tax payments, b) freshly printed bank notes, c) electronic balances with the Bank of England or d) longer term government bonds.

When QE started, what the government did was replace a large chunk of (d) with a large chunk of (c), it did not materially affect the total amount of government debt outstanding. What it did was to replace long term borrowing with short term borrowing, thus reducing the overall average interest rate it pays (but generating handsome fees for bankers involved in the paper shuffling).

If his first paragraph is correct and taken in isolation, then the government is issuing (d) to itself in exchange for (c) which it has also issued to itself, this is a complete nothing of a transaction.

5) Osborne is addicted to QE because he and his mates like deficit spending, which is easier when interest rates are low; he likes low interest rates because it helps prop up house prices (and the author of the article is so stupid that he once claimed that low interest rates "increase the wealth of homeowners" (or words to that effect); and of course because the bankers can cream off their handsome fees and commissions from keeping the plates spinning.

Starbucks 'paid just £120m UK tax last year'

From the BBC:

According to the Reuters investigation, Starbucks generated £398m in UK sales last year but paid no corporation tax. In comparison, rival Costa recorded sales of £377m in the UK last year, and paid £15m in tax, or 31% of its profits...

YPP Treasurer and tax campaigner Mark Wadsworth said "So f-ing what? On net £398 million sales, they will have collected and paid over £80 million in Value Added Tax and probably half as much again in Business Rates (assuming they own their premises). We could double that for all the PAYE they collect and hand over, but then we'd have to make some sort of judgment as to how much of that is borne by the employer and how much by the employee, so let's just call it £120 million in round figures. Whether or not they paid any corporation tax is neither here nor there.

"And if they are tenants, then the privately collected taxes they pay - i.e. the location rent - is probably twice as much as the Business Rates which they'd pay as owner-occupiers. But their coffee is not as nice as Costa Coffee's."

The rapidly shrinking middle class

From The Telegraph:

[The Lib Dems] suggest a one per cent tax on properties over the value of £2 million, which would be paid by the wealthiest 0.16 per cent of property owners.

However, the Chancellor has explicitly ruled out this possibility, saying many middle-class people could find themselves suddenly paying higher taxes.

Somehow I prefer the American meaning of "middle class" which is just about any family with at least one earner and probably most pensioners. I fail to see how you can equate "the wealthiest 0.16 per cent" with "many middle-class people" or vice versa.

Is this a serious problem or just clever marketing?

From The Grocer:

Allotments and gardens represent a very small total area of potato cultivation compared with the 160,000 hectares in commercial production.

However, small plots were responsible for a “disproportionate amount of overall blight pressure” in warm, wet seasons such as 2012, claimed Potato Council corporate affairs manager Maria Ball...

Potato Council chairman Allan Stevenson added: "People should be encouraged to grow their own vegetables to learn about the origins of their food, but the blight risk is real, and it would be preferable if people bought healthy, well-produced potatoes from their retailer, rather than grow their own."

The Potato Council has been working with major horticultural institutions including The Royal Horticultural Society, Garden Organic and the National Society of Allotment and Leisure Gardeners to produce a factsheet to give advice and guidance for smaller growers.

Ricardo's Law in action in the Gaza Strip

There's a video report at the BBC, which explains:

Almost four years after the conflict with Israel, Gaza is enjoying a period of relative calm. That in part has led to a surge in the value of land, with prices more than doubling in the past two years.

Which is what we would expect. When peace breaks out, or a ceasefire seems to be fairly durable, confidence returns, business activity returns and population grows, so the rental value of land goes up.

And who benefits?

A lucky few who happened to be registered as landowners beforehand:

At one of the hotels he owns on Gaza's seafront, I meet Abdel Aziz Khaldi, one of the strip's richest men. To look at, he's not a flash character, more of a middle manager than a multi-millionaire.

But there are a few signs of wealth...

Of course there aren't, because his gain is everybody else's loss.

He says Gaza's fast-rising population and tiny size make land a good investment. He adds that prices are highest in Gaza City, which people believe would be safer in the event of another war with Israel.

Knee Jerk Response Of The Day

From The Metro:

A six-year study by the UK Drug Policy Commission showed most of the billions Britain spends annually tackling illegal drugs is not justified. For cannabis, the commission suggested that amending the law relating to the growing of it, at least for personal use, might go some way to ‘undermining the commercialisation of production’.

And so on and so forth.

The Home Office insisted its approach to tackling drugs is the right one. "Drug usage is at it lowest level since records began," a spokeswoman said.

That's one way of trying to measure the success or otherwise of a drugs policy, even though actual usage figures are largely guesswork. Problem is of course, that countries which legalised e.g. cannabis all saw a slight fall in consumption (to the extent it can be measured etc).

And no doubt Dame Ruth Runciman, chairwoman of this Commission will get Nutted in due course.

The Fuck Of It

Fun Online Polls: Conservative Party conference

Thanks for all your suggestions here. I threw in an extra one from Frankie Boyle's column and those go through to this week's Fun Online Poll.

Vote here or use the widget in the sidebar. You can vote for as many as you like. The stupidest proposal goes through into the final round where it will be pitted against the stupidest ideas from the Labour and Lib Dem conferences (as previously chosen by you).

Georgist experiment

Emailed in by Ben W, from Fox News:

Small government and free-market capitalism are about to get put to the test in Honduras, where the government has agreed to let an investment group build an experimental city with no taxes on income, capital gains or sales.

Proponents say the tiny, as-yet unnamed town will become a Central American beacon of job creation and investment, by combining secure property rights with minimal government interference.

“Once we provide a sound legal system within which to do business, the whole job creation machine – the miracle of capitalism – will get going,” Michael Strong, CEO of the MKG Group, which will build the city and set its laws, told FoxNews.com.

Strong said that the agreement with the Honduran government states that the only tax will be on property.

The Hondurans are (probably) missing a right old trick here. In theory, if they reserve the right to charge rent on the land*, the rent they will collect will be approx. as much as the taxes on income tax, capital gains etc. which they would have collected anyway, or more to the point, as much as those firms would have paid at an equally good location. And unlike taxes on income and capital gains, charging rent has no deadweight costs.

We observe this in real life quite easily. If France puts up its top rate of tax to 75%, then in relative terms, the UK with a top rate of 45% looks more attractive, so rents in Paris go down and rents in London go up, in extremes, by as much as 30% of people's income.

* At its simplest, the government would just build buildings to order, and then rent them out. Or they can sell off the land subject to LVT.

Splendid bit of Indian Bicycle Marketing in yesterday's Sun

From yesterday's editorial:

David Cameron’s Tory conference address was impressive and statesmanlike.

The election battle lines are apparent. On the Conservative side, aspiration and entrepreneurial spirit. On Labour’s side, the debilitating culture of welfarism, with Mr Miliband putty in the hands of union wreckers.

As a matter of fact, the large parties have more or less identical policies on everything; as regards welfare reform, the Tory approach seems to be to give welfare claimants a bit less and welfare-to-work providers a bit more, but that is just nuances.

A left-leaning paper might just as well have written:

Ed Miliband's Labour conference address was impressive and statesmanlike.

The election battle lines are apparent. On the Labour side, hard work and aspiration. On the Conservatives' side, the debilitating culture of entrenched privilege, with Mr Cameron putty in the hands of bankers and large landowners.

Doesn't detract from the fact that they are as bad as - if not somehow worse - than each other.

Reader's Letter Of The Day

I was drafting a post in my head in response to an article in this morning's Metro reporting that the IMF said that the pace of cuts should be slowed down to protect the economy (or words to that effect), but this reader's letter from the FT has saved me the bother:

Sir, Chris Giles points out that if the multiplier of government spending is greater than 1.0, the impact of fiscal austerity is economic contraction (“IMF forecast leaves chancellor in a fix”, October 10).

The implication is that government spending enjoys a uniform multiplier. Surely, the multiplier varies depending on the type of spending? Furthermore, some spending is more likely to end up as value added tax, personal or corporate tax than other spending.

Therefore, is there not any fine-tuning to be done when implementing fiscal austerity whereby, ceteris paribus, low multiplier spending should be cut before high multiplier spending and the best spending is that which enjoys a high multiplier and ends up as taxable income? Applying this level of fine-tuning may bring the UK back to perhaps zero growth from a current estimate of minus 0.6 per cent without adding to the deficit.

Jonty Crossick, London E1.

That's the whole point isn't it?

i. It's best to view "the government" as a collectively owned service provider, i.e. just another type of business, and start by looking at the benefit we get for each £1 spent. So it makes sense for a supermarket to replace the flooring in the retail areas every ten years, but it makes no sense to replace it in every warehouse every six months, and so on.

ii. If we start at the most basic level, the £20 billion we spend each year on police and prisons pays for itself a hundred times over, without this everything else would fall apart. The £10 billion we spend on road maintenance and the £5 billion we spend on refuse collection or street cleaning pay for themselves dozens of times over, regardless of how they are paid for.

iii. As per usual, the best way of recovering the costs of these core functions is by charging for the corresponding increase in land rental values, and that is also the best way of identifying spending which passes his simple test: "the best spending is that which enjoys a high multiplier and ends up as taxable [rental values]".

iv. Sure, you can argue that there is waste in the police and prisons budget; that the police sometimes focus on the wrong sort of crimes; that there are some people in prison who are innocent or who ought not be there (all of this is true, although we do not know the precise degree); or that local councils don't always get the best deal with refuse collection companies (on the facts, I think they do) etc etc, these are separate topics.

v. At the other extreme is the one or two hundred billion spent/wasted each year on subsidies to banks; fakecharities; corporatists like welfare-to-work providers, windmill installers, MoD overspend, PFI projects; money paid to the EU, the UN; most third world aid, and so on.

vi. The taxpayer generally simply doesn't get any benefit or value for money for these things, and it is mathematically impossible for anything but a small fraction of this to come back as higher tax revenues. It's also highly unlikely that this type of spending boosts the rental value of land.

vii. And there are plenty of types of spending in between the two extremes, in particular transfer payments like welfare and pensions, which you could argue is not spending but negative taxation or, from a Georgist point of view, this is the dividend that each citizen gets in his capacity as co-owner of a mutual service provider and is thus not "spending" at all, in the same sense as police, prisons, roads, refuse collection definitely is spending. Some things, in particular education, are clearly of overall net benefit (up to a certain age - 14? 16? 18? who knows?) but I believe that standards would be improved if parents were given taxpayer-funded vouchers to spend as they wish. And some things, like the NHS are more akin to a low-cost mass insurance scheme.

viii. Some of these hundreds of things are of net benefit and some aren't, but as these things are difficult to measure precisely, personal opinion seems to take over and stifle any sort of sensible debate. But surely, it is idiotic to argue that the £ benefit for every £1 the government spends is the same, and that there is always a net benefit (just as idiotic as arguing there is always a net loss), regardless of what the government is spending it on?

The Wrong House

From This Is Bristol 17 July 2012:

A POLICE drug raid went disastrously wrong when officers smashed their way into the wrong house. Officers are believed to have been investigating a house in Wexford Road, Knowle West as part of a crackdown on drugs and anti-social behaviour...

From itv.com 11 October 2012:

Police are investigating a mysterious incident in Brighton, in which four men called at an address looking for someone who does not live there - armed with metal bars and a baseball bat.

Officers were called out at 10.25pm last night to the address in Pett Close, Whitehawk. The men had forced a door and were shouting threats to a man, but nobody of that name lives there. On realising that the men left and are believed to have driven away in a silver hatchback vehicle. Nobody was injured and nothing was taken.

Given the number of houses in the world, and the number of botched police raids and criminal attacks, I suppose it is only a question of time until the police turn up at the wrong address to investigate Crime A and arrest some criminals who have also turned up at the wrong address with the intention of committing Crime B somewhere else. It'll be fun in court though.
-------------------------------
UPDATE: PJH suggests this one:

Bungling police officers managed to smash into the homes of two innocent neighbours during a daylight raid until they finally arrested the right man when he popped out of the next house along to see what all the commotion was about.
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Bonus points who can track down the old sketch about two police officers who solemnly inform the woman who answers the door that her husband has died in car crash. When the woman establishes that it can't possibly have been her husband (different make of car etc) and tells them that they've come to the wrong house the officers reply, no, we've already been to the wrong house, this must be the right one.

I could have sworn it was Hale & Pace but I can't narrow it down more than that. Definitely late 1980s or early 1990s.

UPDATE; Adam Collyer remembers. It was Fry & Laurie, clip on YouTube.
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UPDATE: Both PJH and Adam Collyer seem to have stopped blogging, but I'll link to theirs anyway. It's just the done thing.

"Wiltshire woman trampled to death by cows"

From the BBC:

A woman walking her dog in a field of cows in Wiltshire appears to have been trampled to death by the animals, an ambulance service has said.

Great Western Ambulance Service said it was called at 08:38 BST by someone who had found the woman, believed to be in her 70s. Wiltshire Police said "there do not appear to be any suspicious circumstances" surrounding the death in a field in Chippenham.

The woman's dog was also injured*. Arrangements were made by emergency services for a vet to treat the dog.

Look, I'm not a health and safety nutcase or anything, but remember the basic equation: cows + dog = high risk of death or serious injury.

* It's unusual for the dog to be injured, they normally scamper away once they have led their owners into danger.

"Confused tourists looking for Cyprus turn up two thousand miles away in East London"

From The Daily Mail:

• Tourists keep on visiting the new DLR station with the same name

• Locals frustrated at having to keep on telling them where the real Mediterranean island is

Confused tourists are visiting a docklands light railway station called Cyprus after mistaking it for the site of the famous German paratrooper landings in 1941.

Baffled holiday-makers turn up at the station - opened in 1994 - and wander around looking for the beach or the UN peacekeepers who have patrolled the Buffer Zone since 1974. They have "no idea" they are actually near Beckton in the east end of London - more than two thousand miles away from the site of the more famous divided island at the east end of the Mediterranean.

Tourists are turning up every month and asking locals where the beach is - only to be told to get back on the train and head across the capital to Heathrow or Gatwick airports.

The situation has become so bad that business owners in Nikosia and Famagusta are calling on Transport for London bosses to change the name of the east London DLR station to put an end to the confusion.

Dmitri Ioannou, the boss of The Beatles coffee shop in Limassol, said: "Cyprus is one of the most iconic holiday desinations in the world, so people at Transport for London must have known this was going to happen.

"You wouldn’t name a station Buckingham Palace unless it was outside Buckingham Palace and this is costing us business. I think they should change the name of the station," he told Cyprus Today.

"If they had got out it could have been a catastrophe"

Spotted by JuliaM in The Guardian:

Police are searching for suspected rustlers who stole six fully grown elks from a farm in Somerset.

Officers believe the thieves may have used dogs to round the large beasts up and must have had a sizeable lorry. They are particularly keen to speak to anyone who has been offered cuts of elk meat – or even an actual elk.

Fortunately, farmer Paul Richards managed to stop a herd of bison, which roam in the same fields as the elk, from escaping after a fence was cut.

"If they had got out it could have been a catastrophe," said Paul Richards, who raises elk, bison and wild boar for their meat at Woodentop farm, near West Coker.

Outsourcing under the Tories

Spotted by Bob E in The Guardian:

Atos, the company contracted by the Department for Work and Pensions to carry out medical assessments of people claiming benefits, has subcontracted the NHS to carry out its consultations in Scotland in an unusual example of an outsourced contract being subcontracted back to a public organisation.

The decision has prompted questions from MPs over whether it represents value for public money for the state to contract work to a private company, if the company then in turn outsources the work back to the state sector...

Remember of course that the rationale/excuse for asking ATOS to do these assessments was that "We can't trust GPs and people working in the NHS, 'cos they will classify someone as "disabled" at the drop of a pin, so in order to make sure the new PIP "works" we have to establish ahem a "fair and objective test" and get the private sector to administer it" suddenly goes all the way around to "We are paying that private sector provider so much it is now sub-contracting the work back to the NHS" where, if we are to believe what we are told, those tests will be carried out by the very people it was thought shouldn't be let anywhere near them".

But I suppose the NHS staff doing the assessments will have to be told whether they are doing the assessment:
- actual purposes of treatment or for medical reasons,
- under the old softer criteria, or
- under the shiny new PIP criteria for ATOS, in which case the general rule is that everybody is fit and healthy and capable of working.

"Hit-and-run driver collides with six cows"

Spotted by Witterings in The Local:

A drunken hit-and-run motorist swerved off the road and drove into six cows before fleeing the accident scene in a rural area of the canton of Vaud near Montreux over the weekend.

Two cows were instantly killed and another two had to be put down because of severe injuries, police said. A decision will be made on Monday whether to destroy one of the two other cows, which suffered pelvis injuries.

The motorist, a Swiss man in his 30s, was later arrested at his nearby home after Vaud Riviera police tracked him down, according to press reports. A licence plate* came loose from the vehicle in the accident, which occurred early on Saturday morning on the road between Saint Légier and Châtel Saint Denis, a town in the canton of Fribourg.

* Hardly CSI, is it?

"I've found a suspicious looking number plate. Shall we dust it for fingerprints, sir?"

"Nah, let's just look it up on the computer... ah, here we go. Let's go an arrest a Swiss man in his 30s at his nearby home in Vaud Riviera. Bring the breathalyser kit and some snacks."

"Do you think he'll be hungry, sir?"

"No, I'm just feeling a bit peckish. You drive and I'll eat them on the way there.

"Town's $20 fine for swearing outlawed under First Bloody Amendment"

From The Daily Mail:

A crappy little one-horse town in Massachusetts had its twatty plans to ban swearing thwarted as the state's bitch-faced attorney general decreed that foul language is protected by the fucking Constitution.

Shit hole

Massachusetts Attorney General Martha Coakley is recommending that the shit hole of Middleborough change or repeal a moronic bylaw that prohibits public profanity. The miserable twats in the town approved a proposal this summer that would allow the pigs to enforce the 1968 ban by imposing a $20 fine on people who engage in loud swearing in public.

Tosspots

The proposal came in response to concerns by local tosspots about profanity-laden language used by teenagers and other young people in the downtown area and public parks.

Jesus H Christ

But busybody Ms Coakley said Tuesday the original bylaw appears to violate First Bloody Amendment free speech sodding guarantees, and she called on Middle-bastard to take it off the books or amend it.

Wankers

At a town meeting in June, wankers voted 183-50 to approve a proposal from the police chief Bruce Gates to impose a $20 fine on public profanity.

"Harry Ramsden's-EADS merger cancelled amid political impasse"

From the BBC:

Celebrated fish and chips restaurant Harry Ramsden's and aerospace and defence giant EADS have decided to cancel their planned merger, after talks were thwarted by political deadlock.

It followed days of talks between the Yorkshire, French and German governments to overcome political objections. Yorkshire county council wanted its counterparts to agree to limit their influence in the merged firm in order to maintain Harry Ramsden's strong working relations with Sarson's Malt Vinegar refineries and local potato farmers. The BBC understands that Germany was fundamentally opposed to the deal.

"Once German intransigence became clear - as it did overnight - EADS and Harry Ramsden's had no option but to call the whole thing off," said the BBC's business editor, Robert Peston.

"We are obviously disappointed that we were unable to reach an acceptable agreement with our various government stakeholders," said Harry Ramsden's CEO Marija Simovi.

EADS head Tom Enders said: "A special thank-you goes to Marija Simovi for his trust and partnership. It is, of course, a pity we didn't succeed but I'm glad we tried. I'm not so glad I tried their guacamole though, it tasted like cardboard and was all lumpy."

EADS shares jumped 3% as the news broke. Harry Ramsden's is owned by a private investment company Boparan Ventures Limited whose shares are not listed.

David Cameron: Swim? Country likely to sink without trace!

From The Daily Mail:

David Cameron today admitted that Britain is "on the slide" as he abandoned attempts to paint an upbeat vision of the future despite a grim economic outlook.

The Prime Minister said he came to office at a "grave moment in the modern history of Britain" and it had fallen to him to "say some hard things and help our country face some hard truths".

In a deeply personal speech seen as a fresh attempt at connecting with a few thousand core voters in the stockbroker belt, Mr Cameron drew on the "values" he learned from his late stockbroker father and his landowning father-in-law to set out why he now believes that Britain will never be able to compete in the world.

Mr Cameron told more than 2,000 delegates in Birmingham's Symphony Hall that the coalition was was formed in May 2010 at "a grave moment in the modern history of Britain. And things have got a lot graver since".

He said the government had a challenge "to make an insolvent nation completely bankrupt, to steer our country away from the path to prosperity that all could share, to send out troops into danger while exposing our citizens to terror, to smash the broken society into sub-atomic particles."

The Prime Minister admitted he could not now say "all is well" but he could say: "Britain is basically fucked."

Good job they provided that clarificat​ion - else people might start to think unkind thoughts...

Another one from the desk of Bob E:

Alan Cave leaving DWP

Alan Cave, Contracted Customer Services Director at DWP, is to leave the Department in November and take up a new position...

Go on, have a guess with whom...

Alan Cave, Contracted Customer Services Director at DWP, is to leave the Department in November and take up a new position with Serco...

Now now, before you leap oh so erroneously to an incorrect conclusion ....

Alan Cave, Contracted Customer Services Director at DWP, is to leave the Department in November and take up a new position with Serco outside the Welfare to Work Sector.

See! "Outside the Welfare to Work Sector" so that is all fine and dandy after all then.

Thirty-five back flips

Some things just make me proud to be an American... even though I'm not an American.

Killer Arguments Against LVT, Not (244)

Let us turn our attention once again to Poor Widows In Mansions. The arguments often advanced are that "My council tax pays for local services", that "All services should be paid for by a Poll Tax", that "I've already paid taxes during my working life and/or I've paid into the National Insurance Fund" as well as "Do you mean that my parents will be thrown out of their home, which they bought out of taxed income?".

OK. I realise that the Homeys don't do logic or reason, let alone facts, they are the greediest, most blinkered, spiteful and vindictive bunch going, but let's look at it this way:

1. Let's imagine we go half-way and replace 90% of the tax system with a flat tax on the rental value of land (a bit less than 4% of house prices, at current selling values, Business Rates would remain pretty much as they are) and a flat income/corporation tax of 20%. VAT, National Insurance, Council Tax, SDLT, Inheritance tax, TV licence, blah-di-blah etc all fall by the wayside.

2. Of the £200 billion a year collected in Domestic Rates, pensioner households would be paying about a quarter, or £50 billion a year, i.e. 7 million households paying a median of £5,000 and an average of £7,000 a year.

3. The income tax they pay on their (private) pension income of about £50 billion a year and taxpayer funded pensions of £25 billion a year would be unchanged at 20%, call it £15 billion a year in income tax.

4. What would pensioners households get in return for paying their £50 billion Domestic Rates + £15 billion income tax each year?

a) From DWP's Annual Report and Accounts 2011-12 pp 124 - 125:

State Pension - £74.2 billion
Pension Credit - £8.1 billion
Attendance Allowance - £5.2 billion
Carers' Allowance - £1.7 billion
Bereavement Benefits - £0.6 billion
Plus other bits and pieces like Winter Fuel Allowance, add that up and stick on 4% inflation = £95 billion.

For comparison - all working age benefits added together are only £25 billion a year.

b) Other taxpayer-backed pensions, i.e. public sector, civil service and para-statals like Royal Mail, BA or BT, at least £25 billion a year.

b) Non-cash benefits - mainly NHS and old-age care, reports say that half the NHS budget is spent on pensioners, then there's the cost incurred by local councils on old-age care of about £10 billion. Other sources say that these cost on average £5,000 per pensioner per year, so let's call it £60 billion a year, all in. Chuck in free bus passes and so on under this heading for free.

c) And of course, they get to enjoy exclusive occupation of land with a rental value of a bit more than the Domestic Rates they are paying, call it £55 billion.

5. So they are paying £65 billion a year and getting cash, benefits in kind and enjoying land rents of £235 billion, so they are still getting four times as much out as they are paying in, a net transfer of £170 billion. The Poll Tax idea is a nonsense of course, if pensioners were asked to contribute £5,000 a year each for medical insurance/treatment I'm sure they wouldn't take too kindly to that. And clearly, funding the state pension with a Poll Tax on pensioners is a nonsense as well.

6. For sure, most pensioners have paid tax in the past, too much on their incomes and not enough of their land's rental value, but there we are. By and large, the two would have netted off. And yes, pensioners have some sort of moral right to being looked after, but they knew all along that there was no National Insurance Fund and we are where we are, the simple fact is that today's working taxpayers are making net transfers of over £200 billion a year, all I am proposing is that we reduce this to £170 billion. If pensioners want to reinstate the status quo ante, they can all trade down a couple of bands so that they are only paying £20 billion a year in Domestic Rates and hey presto, sorted.

7. And to those people who say "But my parents will end up being thrown out of their cherished family homes etc" I reply, hey, that's YOUR problem. I am perfectly happy to chip in towards that net transfer of £170 billion to all pensioners generally, but if you want extras for your own parents, then you will have to spend some of your own tax saving on their Domestic Rates.

8. ... or we can abandon logic and facts and just say that pensioners' main residences get exemptions, discounts or deferments. Each local council can introduce its own scheme, as long as they make clear to people which services are being cut back - like shutting down all local schools or hospitals or something.