Saturday 31 January 2015

Selective Use of Data

From the Telegraph

Public attitudes are changing in Germany - as well they might when a small city like the 180,000 population Saarbrücken can boast 100 brothels and a sprawling branch of Paradise.

That's like thinking that Calais has a serious alcohol problem because of all the warehouses selling booze.

Friday 30 January 2015

House price indices vs average house prices: Another little mystery solved.

What has always puzzled us is how HM Land Registry can confirm on the one hand that the average price paid for a home in the UK in December 2013 was £250,000, but on the other hand, the headline figure in their January 2014 report is 'only' £177,766 (pdf).

(If you download their price paid data for 2014 and take a simple, mathematical average of all recorded selling prices for England & Wales in that year, it is in fact £259,000).

For a very detailed explanation of how the various indices and averages are calculated, see this fine summary by Acadata.

To cut a long story short, the ones called 'Index' (Nationwide, Halifax and HM Land Registry) are just that; they have a hypothetical starting point adjusted up or down for observed price changes.

Or as HM Land Reg put it so succinctly:

1.5 Calculating the standard average price

The standard average house price is calculated by taking the average (geometric mean) price in April 2000 and then recalculating it in accordance with the index change back to 1995 and forward to the present day.

The key word here is 'geometric mean' (which is two words). This is always lower than the mathematical average because of the way it is calculated; and the wider the gap between values at the top and the bottom, the bigger the difference between geometric mean and mathematical average.

So while the geometric mean is a useful indicator, falling some way between the median and the mathematical average, it is completely useless if you are trying to work out the total value of all UK housing. For that you just need the mathematical average.

Hence and why, Savill's recent estimate of the total value of all UK housing of £5,750 billion (average £205,500 x 28 million units) looks perfectly reasonable, even though their estimate of the average value of a unit of social housing (£79,252) looks on the low side to me.

(All of which backs up my assertion that if you wanted to raise £200 billion a year in LVT, that averages out at 3.5% on the potential 2014 selling price of each home.)

To the untrained eye, it would appear that a flat costs more than a semi-detached house.

From page 4 of HM Land Registry's December 2014 House Price Index (pdf):

Average prices by property type (England and Wales)

Detached - £279,298
Semi-detached - £167,069
Terraced - £134,226
Flat/maisonette - £170,822

The relative prices of detached, semi-detached and terraced houses are pretty much in line and as you would expect.

But why is the average price of a flat higher than the average price of a semi-detached?

Simples, it's Von Thünen's law of rent, which factors in transport/travel costs.

People make a trade-off between convenience (living near the centre) and comfort (having a nice big garden), regardless of income. So you end up with flats in city centres and houses in the suburbs, with people being prepared to pay pretty much the same in £-s-d for either.

To exaggerate this effect further, the bigger the city, the bigger the trade-off between convenience and comfort; so the bigger the city, the more flats there will be.

So most flats are in the centre of the biggest cities, where the convenience premium is highest and most houses are in smaller towns and cities and at the outer suburbs of larger cities.

Or put it this way, they are not comparing the price of a flat with the price of a semi-detached house on the same street; they are comparing the price of flats in the centre of large cities (where land is very expensive) with the price of houses in smaller towns and cities and the outer suburbs of larger cities (where land is much cheaper).

Pro Tip

From the Telegraph

Thousands of Virgin Media broadband customers are being transferred to TalkTalk and will lose their email address, a move that has infuriated customers.

Virgin Media is in the process of transferring 100,000 non-cable broadband and home phone customers to TalkTalk. These customers will have 12 months to adopt a new email address.
However, customers who choose to move to a different provider instead of TalkTalk will have only 90 days to change their email.

Tim Palmer, a Virgin customer from north London, said the move would cause “huge inconvenience” to his family, which uses the email address as a login for internet banking, online shopping and other services.

This is why I recommend that people get a domain name for their family, doesn't matter what it is. You could just have or Then you create a email addresses for each person (e.g. and and forward them to the real email that it's going to. Costs about a fiver a year, but it does mean that you keep your email address for life. If you stop liking your internet provider, you just sign up with someone else and switch your email to the new address.

The best tax is one you don't have to pay

From the same "Moneymorning" as the last post:

Take the recently completed Vauxhall Tower by Vauxhall Bridge. It is Britain’s tallest residential building – 50 storeys high – and it holds 223 flats. But drive past at night and there are absolutely no lights on.

This is becoming a big social problem. London property is already unaffordable for most locals. The average wage in London is just above £40,000. The average London house price is £580,000. Anger about this is mounting every day – and it only increases when people see so many flats sitting there unoccupied.

Whoever wins the next election will have to find new ways of increasing the tax take. Some kind of property tax looks inevitable. Mansion tax or no, an easy and politically expedient target will be to tax homes that are left vacant – Islington council is already talking about it.

Labour have obviously ducked the more logical policy of simply increasing the Council Tax bands up to £2M and beyond, because that would hit the middle income voters who support them as well as the rich voters that don't. However, increasing the tax on empty flats and houses would mainly hit non-residents who don't vote. So the new higher bands could first be introduced for empty properties only, then perhaps extended to second homes that aren't let out as holiday lets and so are empty most of the year.

I wonder if any of Labour's policy wonks read "Moneymorning"?

Thursday 29 January 2015

This could be interesting

In Moneymorning, Dominic Frisby writes:

There are now 54,000 homes planned or under construction “in the priciest areas of the capital”. Most will cost “close to or above the £1m mark” and most are two-bed flats.

but the same areas last year, just 3,900 homes were sold for more than £1m. That would put potential supply at almost 14 times annual demand.

I should say, not all of the 54,000 properties planned will necessarily be built, and not all will come to market in 2015. (The statistic comes from data company Lonres, researchers Dataloft and buying agents PropertyVision, by the way.) But there is still a surfeit of supply. What's more, many of the 3,900 places that sold in 2014 for £1m or more were houses or had more than three bedrooms. What’s coming to market are two-bed flats."

Who is going to buy these properties, and who is going to live in them?

Families don’t want two-bed flats. ‘Normal’ people can’t afford £1m-plus properties. Even buy-to-let won’t work – factoring in service charges, you'd have to be taking in £40,000 a year in rent to make a £1m property worthwhile. That's a lot for a two-bedder. So you’re left with very successful, upwardly mobile young people in their 20s or 30s. But will that sort of person want to buy some bland new build that feels like living in a hotel? Of course not. He or she will want somewhere groovy in Shoreditch. And like most British people, Londoners prefer period properties. They’ll buy new builds if the price is right. But it isn’t. In many areas, new builds are at least as expensive as period homes per square foot – and they come with higher service charges.

So who’s buying? Well, as Charlie Ellingworth of Property Vision puts it, many new builds are marketed at “unsophisticated” foreign investors."

I’m not suggesting foreign buyers in London will disappear. They won’t. And the overseas market is affected by all sorts of factors beyond anyone’s control – the currency markets (think of the rouble), capital controls, capital flight, capital repatriation and so on.

But markets ebb and flow. The equivalent new-build-for-foreigners market in Manhattan is already seeing a marked slowdown. And the main problem is that even by the standards of London property, these flats are hugely overpriced.

So, we have oversupply. The big question is, will the prices come down, as the "supply and demanders" say they will, or will the flats just stay unsold?

The Fenians Won't Like this...

Caption under Telegraph photo here:

"Snow covered graves at St Joseph's Church in west Belfast, as an orange weather alert is announced in Northern Ireland"

Wednesday 28 January 2015

Tax-free... apart from all the tax he paid.

Emailed in by MBK, The Guardian at its self-righteous best:

Peter Mandelson received £400,000 tax-free in cash last year from a company he owns, accounts filed recently at Companies House reveal.

The company, of which he is the sole shareholder, gave the former secretary of state a loan for that amount in the financial year 2013/14 – a move described by a leading tax campaigner as likely to have been motivated by tax avoidance.

Salary payments or dividends from a small business are liable for tax under UK rules, but in the case of a loan to a director – provided a certain minimum rate of interest specified by HMRC is charged – the borrowing is not liable for tax. The official interest rate that applied at the time was 3.25%...

Richard Murphy, a chartered accountant and director of Tax Research UK, said Mandelson’s use of loans raised questions.

“How to extract cash from small companies whilst paying as little tax as possible on the way is a massive part of the UK tax avoidance industry,” he said, “Directors taking loans from companies they own is one way in which this is done, which has been widely condemned in the past when done by footballers and others.

Stuff and nonsense, and the Murphmeister really should know better.

Taking Mandy and his personal company together, he has to pay about £225,000 tax in total to end up with that magic "tax free" figure of £400,000.

It is because of a crude but effective anti-avoidance rule that says if a company 'lends' a shareholder £1, it must pay 25p quasi-advance corporation tax (known as Section 455 tax) just as if it had paid a dividend in the good old days when we had advance corporation tax i.e. withholding tax on dividends.

(This rule does not apply to loans to employees who are not shareholders, i.e. from a football club to a player, there are different anti-avoidance provisions for that).

The company can only make the loan and pay the Section 455 tax out of post-corporation tax profits, so it collects £625,000 in bribes and bungs fees for services rendered, pays 20% corporation tax, leaving £500,000. £100,000 goes towards the Section 455 tax and £400,000 is lent to our hero.

Now, the overall rate Mandy pays is 'only' 36%, compared to normal employment income (basic rate overall 40.2%, going up to 53.4% for additional rate taxpayers, which is what Mandy would be), but hey.

Tuesday 27 January 2015

Pensions. (I am lost for words)

I detailed a colleague to be our Auto-enrolment Guru. Here's his latest analysis.

Various Trade reports in the financial press, coupled with murmurings and press releases from corporate and stakeholder pension providers, suggest the future for Auto-enrolment is far from rosy.

Legal & General are pushing to have “Opt In Members” excluded from the legislation,  Now Pensions and Scottish Life are saying the costs are getting higher and Aviva (who have taken over Friends-Life) and saying the regulatory cost cap and Pension Regulator funding contribution is going to make pension provision for small schemes uneconomic.  In principle this will leave NEST to be the sole provider and much of their overhead costs are met by Central Government anyway.

The Peoples Pension scheme has set their fee at 0.5% AMC; for funds under management,  Now Pensions is 0.3% Plus £18 pa per member admin charge and NEST is 0.3% plus 1.8% admin fee on all funds

Industry Talk suggests most pension providers saddled with firms forced to enrol with less than ten members will be totally uneconomic to take under their wing  and many are not prepared to state that their schemes will meet pension regulator approval and planning to reject  access to schemes with 50 members or less. They  calculate based on National Earnings of 21,000pa  and assuming late staging date pension premiums totally 8%, that small size firms of ten people will produce £16,800 of pension premiums  per annum.

That equates to the Peoples Pension charging £84.00 per annum per firm, Now Pensions £230.40 and NEST £352.80

Although the funds under management will rise, providers are quick to point out that the “Fraud Levy” of £230 will be applied to providers, not employer firms, and the “Pension Regulator “ is yet to decide what charge to levy on the industry for its increased role in policing the legislation and issuing Certification. It seems the overheads will exceed the benefits and pension providers are not now prepared to offer any guarantee that their scheme will comply with the requirements  of the regulator and aim to suspend auto-enrolment in 2016.

Maybe our research is wrong..?

BBC or Daily Mash?

"Elevators travelling distances of more than 500m [1,640 ft] were not feasible as the weight of the [steel] ropes themselves become so large that more ropes were needed to carry the ropes themselves."

Answer here.

Let's see whether he actually learned anything...

... and if he did, whether he puts that knowledge to good use:

PROFILE: Alexis Tsipras

■ Born in Athens 1974.

■ Holds a degree in Civil Engineering from the National Technical University of Athens.

■ Conducted post graduate studies in Land Surveying and Planning.

Monday 26 January 2015

Fun Online Polls: Danish Kroner & TV election debates

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

How much longer will Denmark peg its currency to the Euro?

Minutes - 3%
Hours - 2%
Days - 32%
Weeks - 23%
Months - 19%
Years - 10%
Forever - 11%

Those who voted minutes or hours have already been proven wrong.

FWIW, now that the ECB has gone mad, I voted days. We'll see.
Hot topic du semaine, the televised leadership debates.

According to the BBC, the story so far is that originally OFCOM decided, on the basis of votes cast, to add UKIP to the traditional Big Three.

Fair play to Cameron, he knows that if he can rope in the loonie left (the Greens) to offset the loonie right (UKIP) he will stand a much better chance of being seen as the sane, middle-of-the-road option. So he threw his toys out of the pram and threatened to take the ball i.e. himself away.

So OFCOM caved in, and the Greens were added to the list, along with the SNP, on the basis they poll as many votes as the Greens, and as a counter-point to the SNP, they added Plaid Cymru.

At which stage, quite rightly, "The Democrat Unionist Party... indicated it will be writing to the BBC and ITV to ask why it is not being included when it is the fourth largest party at Westminster in terms of numbers of MPs."

Again, from Cameron's point of view, if he wants to represent himself as the sane option, chucking in another right wing nationalist party DUP (alongside UKIP) to offset the two left wing nationalist parties (SNP and PC) seems like a good bet.

But it's a democracy and not up to him, so who would you like to see on the podium?

Vote here or use the widget in the sidebar.

Sunday 25 January 2015

The bizarre maths of supermarket price wars.

We know that if supermarkets were simply to agree to charge the same prices, this would be an anti-competitive practice or collusion and against UK law (whether it's a civil or a criminal matter or an administrative one, like fines for not submitting your tax return on time is unclear to me).

But it appears that there is no bar to one supermarket agreeing to match its competitors' prices.

What Tesco do is give you a voucher saying "£X off your next shop. Today your comparable grocery shopping would have been cheaper elsewhere, so here's the difference back." Sainsbury's do much the same IIRC (it's a few weeks since I went to Saiusbury's).

I got one from Tesco for £2.88 today. By force of habit I checked the long receipt to make sure all my multi buy discounts were there and after I'd loaded it into the car, I cross checked my shopping list to make sure I'd bought everything.

I noticed I'd forgotten to buy Dentyl, so I popped back in. Dentyl normally costs £3 a bottle, but they had it on special offer for £1.65, so I bought four.

It strikes me that I actually did myself a favour here; had I remembered to buy Dentyl the first time round, the notional of £1.35 saving per bottle would have been deducted from the notional £2.88 overpayment and I would have got less or nothing on the money off voucher.

So the correct strategy must be, first go in an buy all the stuff at regular prices, maximising the value of your money off voucher, and then do a second round where you buy all the stuff which is on sale, or 3-for-2 or 2-for-1 or whatever.

If there are two of you, you would just put the normal price stuff in one trolley and the special offers in the other trolley and pay separately.

Yes, this adds to the cost and hassle of shopping, but assuming you waste five or ten minutes going round and queuing up again, that still justifies getting an extra couple of quid on your money off voucher, I think.

Saturday 24 January 2015

KLN bonanza

In the comments to an article entitled "Homeowners explore ways to avoid looming mansion tax in UK", KLNs abound. In particular, one Geoffrey Gardiner writes:

Property taxation in the UK is on the occupier, not the owner, as the default rate is lower than if. like the Americans, one taxes ownership. Is it intended that the mansion tax should be on owners not occupiers? That requires a completely new tax department. If it is on ownership are joint tenants or tenants in common (such as husband and wife) to be taxed relative to the value of their shares? What if the property is long leasehold? Is the tax to shared between the lessee and the reversioner? Is a mortgage to be deductible?

None of these points have been mentioned by Miliband, presumably because his knowledge of property law is zero.

As pointed out in the article, the tax lowers the value of the property as the tax is effectively rent. All property taxes are in truth a way of nationalising without paying compensation (1). An annual tax of £3,000 should lower the value by around £100,000 in present circumstances. (2)

One can tax by reference to a property value, but the tax has to come out of income or some cash flow, such as from a sale, for no power on Earth can convert a house into food, heat, lighting or clothes for old age pensioners. The state is mainly by taxation appropriating part of the income (GDP) of the nation and the tax on property, despite its name. falls on the income of the tax payer. If he does not have the income he has to sell to someone who is capitalising income, that is saving.(3) The mansion tax will precipitate many sales as owners decide to trade down.(4) That will raise prices at the lower, aggravating the problems of first time buyers.(5) There is a limit on property taxes, the net annual saving of the personal sector (4).

1) in which case income tax is nationalisation of labour

2) so making the property more affordable. That's good, isn't it?

3) Poor widow bogey

4) Your evidence for that is?

5) Yeah, right, how many first time buyers are in the "just under £2M" market? Human shield.

He's probably right about Miliband, though.

Friday 23 January 2015

I was surprised to see this in The Times

Emailed in by MBK.

The first bit is boilerplate Homey:

Labour’s proposal for a mansion tax, under which all properties above a market value of £2 million would be subject to a levy, is a third way in taxation...

The real purpose is political. This is not a tax on property so much as a tax on the southeast of England. Of the 95,000 homes in the UK that would qualify, 95 per cent of them are in London and the southeast. The whole of Britain north of, and including, Birmingham would pay little more than 2 per cent of the total.

This is taxation as pure political calculation.


But then he lets loose with this, it's hard to disagree:

Not that I wish to discredit the notion of an impost on property. On the contrary, the case for taxing property more heavily than we do in Britain is persuasive.

Unlike income, property is hard to hide and a levy upon it correspondingly difficult to evade. It would generate a lot of money from foreign owners who are contributing little to the exchequer. Revenues would usually rise with prosperity and if the volatility of the housing cycle were flattened a little by heavier taxation, then so much the better.

The case is intellectual as well as practical. The state takes £700 billion a year in taxation and that sum should ideally be collected according to a principle that is widely agreed to be fair. Income, which is directly earned, should be taxed lightly and a party by the name of Labour ought to be the most vocal proponents of low income tax.

The bonanza of house price inflation, though, is not income that I have genuinely earned. It is a reward that, in JS Mill’s arresting image, falls into my mouth as I sleep. There is a case for returning to the principle that informed Lloyd George’s “people’s budget” of 1909. This is an argument that, with enough time, can be joined and won.

Taxation in Britain has no such philosophical order... Only 5 per cent of the tax take comes from land and buildings.

The beauty of the green and pleasant land as a taxable asset is that it retains its value because there is a fixed supply of 60 million acres and the maker has stopped making it. The windfall gains from land are often the result of public infrastructure development, which should be taxed. A levy of 1 per cent on the land would yield £50 billion. Once the deficit had been cleared, income tax could be cut by a third or corporation tax abolished.

A truly radical Labour party would have been making this case for years... The place to begin in policy terms is not a crude, cliff-edge mansion tax but a revaluation of the council tax that is still, absurdly, calculated on 1991 prices.

As to the wailing about Mansion Tax or SDLT or LVT or anything else being "a tax on London", well that's because they are taxes on land values and land values are highest in London, or on various beaches along the south coast. You might as well say that income tax is a tax on London because people have the highest wages there.

Savill's did a breakdown this month; the total value of all UK housing is currently £5,750 billion (which includes a very low estimated market value for social housing units of £72,000 each).

Housing in greater London is one-quarter of the total, and the South East is another one-fifth, so between them, you'd expect about half of taxes on land and buildings to be raised from London and the South East.

Those two areas generate 'not enough' in Council Tax but 'too much' in SDLT (people in those areas also probably pay or generate 'too much' income tax but 'not enough' in VAT, to be honest). If you treat the £1 or £2 billion Mansion Tax as Council Tax Bands I to M it nudges their share to roughly 45% or a half, or whatever, so big deal.

It's nice to see the 1% = £50 billion calculation mentioned, I helped launch that one.

Short List

I watched the last episode of Maps: Plunder, Power and Possession yesterday, and another short list sprang to mind:

Continents whose names don't start and end with the letter "A"

Or for an even shorter list:

Continents whose names don't start and end with the same letter.

Class and Media

From the BBC

Singer James Blunt has clashed with Labour politician Chris Bryant about diversity in the arts after the MP said the singer was part of a public school educated elite "dominating" culture.

The singer, who was educated at Harrow, said the politician was a narrow-minded "classist gimp" who was motivated by the "politics of jealousy".

Politicians, he said, should celebrate success wherever it came from.

First of all, I think Chris Bryant is talking nonsense when he says that a public school educated elite is "dominating" culture. Even looking narrowly at the top of the charts, 8 of the top 10 albums were made by people who went to comprehensive schools (Coldplay and Pink Floyd are the exceptions). Citing Benedict Cumberbatch and Eddie Redmayne as Oscar nominees ignores the fact that the Oscars only pick British films featuring posh people and that neither film bothered the Top 20 grossing films last year, which starred people like Martin Freeman (comp), the Inbetweeners (mostly comp), Gary Oldman (comp), Hugh Bonneville (private), James McAvoy (comp), Sir Ian McKellen (comp), Sir Patrick Stewart (comp) and Andrew Garfield (private).

Outside of that, there's so much else that people can choose to see. In terms of music, TV and film, we have enormous choice. I watched an Indonesian martial arts film at my local multiplex that was the 136th highest grossing film last year. It's not like there's a tiny number of choices for me (and honestly, historical biopics rarely appeal, posh boys or otherwise).

There is clearly a bias towards private school educated. But I've not seen much evidence of doors being opened for people due to those connections (unlike say, politics).

It may just be that the posh kids can stick it out for longer before getting a real job. Acting isn't really a very sensible career path to follow. It might look rich on the surface, but that's only because we see the winners and not the losers. In most cases, people trying to be successful are burning through money and most never make it. So, posh people doing more of it is a good thing. Maybe they get lucky and get a role and we get some entertainment. But if they don't get the role, they destroy the family fortune, which is also fine.

Thursday 22 January 2015


As I said two months ago:

We see the same thing happening with Ebola, there's a nasty outbreak every decade or two, then it all quietens down again.

From the BBC, today:

There has been a "turning point" in the Ebola crisis, with cases falling in the three affected countries, World Health Organization officials say.

Just eight cases were detected in Liberia in the last week down from a peak of 500-a-week in September. Guinea and Sierra Leone have also seen falls.

The WHO said the figures were the "most promising" since the outbreak started.

Another one of those car-vs-house stories

From the BBC:

A car crashed into a house in Sheffield, damaging the property but injuring no one.

Salma Zahid, who was in the house, said: "I heard such a big crash. It was like an earthquake."

An interesting simile; if I could be bothered, I'd track down a first hand account of an earthquake where somebody says "It felt like a car had hit the building".

Wednesday 21 January 2015

OK, let me try to explain it again.

Last week, City AM carried the usual blah blah saying that high house prices are the result of a lack of supply:

The UK, and particularly London, is in the midst of what should be seen as a housing crisis. According to LSE professor Paul Cheshire, new build houses are about 40 per cent bigger in the Netherlands and 38 per cent bigger in Germany than they are in England. And yet housing goes for 45 per cent less per square metre in the Netherlands and, in Germany, prices did not rise throughout the entire 1971 to 2002 period.

A new paper from the Adam Smith Institute lays the blame at the door of the Green Belt. Despite the fact that 90 per cent of the UK is undeveloped, with half of the remainder gardens, Britain is hamstrung by rules hindering development in the places where people most want to live – around successful cities, particularly in the South East.

A reader's letter a couple of days ago referred to an "iron law of economics: if you increase the supply of something, the price goes down".

It's kindergarten Faux Lib economics though. An article in the same paper a couple of days ago looked at actual hard facts. Always start with facts and work backwards to the conclusion. Or establish that there isn't a conclusion, they are just random facts:

London’s population is forecast to hit its highest-ever level this year, surpassing its pre-war peak of approximately 8.6m. Yet it remains one of the least densely populated major cities in the world, according to research by LSE Cities, based at the London School of Economics...

By Burdett’s calculations, London is 30 per cent bigger than it was when its population last peaked in 1939. Even if London’s population density grew, it would bring with it a raft of benefits. If everything is nearby, cars are used less, for example.

LSE Cities’ research finds that holding family income and size constant, petrol consumption per family per year declines by 106 gallons (401 litres) as the number of residents per square mile doubles.

A higher population density can also facilitate a more diverse range of businesses and services than lesser ones can – such as hospitals, airports, theatres, and museums.

So that is the reason why housing in London is so expensive.

It has five time the population of other conurbations in the UK, as well as having most airports and relatively easy rail or car travel to the continent. So there is "a more diverse range of businesses and services etc".

So, glossing over the debate whether we should build outwards at a low density or increase density in the middle (they have much the same effect), what happens if we build more housing in London?

1. People who are currently 'priced out' will move there.

2. So the supply of housing goes up, but the number of people and hence demand for housing goes up pro rata and the effect cancels out.

3. There will be an even more diverse range of businesses and services.

4. So the cost of renting housing and commercial premises will go up even more.

If this were all not true, then the highest house prices would be in the Scottish Highlands and Islands and houses in London would cost tuppence ha'penny.

Whether this is all A Good Thing or A Bad Thing, and if so, what we ought to do about it (liberalise construction and introduce Land Value Tax, please!), or whether it is all irrelevant is an entirely separate debate.
@ Jim in the comments, strictly speaking, the best kind of LVT is based on "site premium" (as explained on KAALVTN) i.e. that part of the total rental value of a home or office or anything else which relates purely to the location.

But most people are unfamiliar with this concept, and simply taking a small percentage of current house prices is a good enough approximation, i.e. for most homes, the site-only rental value is around 3.5% of its current selling price.

It is not a straight line, unfortunately, it's clearly zero % at the very bottom (homes selling for £50,000 and under), rising to about 4% in the upper middle (homes selling for £400,000 - £600,000), then falling again to 2% or lower for multi-million pound homes at the very top. But hey.

Fun Online Polls: Charlie & Danish Kroner

The results to last week's Enquête Amusant were as follows:

Êtes-vous Charlie?

Je suis Charlie - 50%
Je ne suis pas Charlie - 33%
Qui est Charlie? - 17%

Très bien.
So, the Swiss managed to keep the exchange rate for one CHF down to EUR 0.80 for over two years (see article at the time e.g. here), but in the end it was getting too risky/potentially expensive.

Apparently the Swiss national bank ended up with a pile of other currencies equivalent to one year's GDP. Seeing as these currencies can now only be sold for one-fifth less than what they paid for them (in CHF terms), there's going to be some explaining to do.

So that's what we learn time and again, in the long run, currency pegs will be abandoned and exchange rates cannot be manipulated; unless two countries which are economically similar and geographically close together, in which case their currencies would move in line anyway.

The question of everybody's lips now is: How long will it be until the Danish crack and allow their currency to rise relative to the Euro?

(For clarity, Denmark was in the same position as Switzerland, its politicians have decided to depress the value of their currency against the Euro to make it easier for exporters and cheaper for tourists (even though the place is still pretty expensive). They can keep the exchange rate down by printing as much money as the ECB is printing and swapping one for the other.)

So that's this week's Fun Online Poll. Vote here or use the widget in the sidebar.

Page 3

From the Guardian

It may seem misjudged to herald the disappearance of the Page 3 girl as a victory when pornography is probably more easily available than at any time in history. Yet this is a fight that will be won skirmish by skirmish, and the fight against Page 3 has been more than a skirmish. It matters because this is not some small elitist publication but Britain’s biggest-selling newspaper. It matters because it was made to matter through the efforts of brave and resolute women like Clare Short and Harriet Harman, campaigning unflinchingly through 40 long years of sneering and jeering to make people see why it is an outrage in a society that purports to believe in equality between the sexes. It matters because – even when it is subsitituted, as the Sun intends, with more images of airbrushed beauty – it is a reminder to girls worrying about the gap between their own body and some version of perfection that there is an alternative view. It matters because it means that it is now generally recognised that pictures objectifying women – even when she is a willing partner in the objectification – are demeaning and damaging to wider society.

To anyone who thought that this was really just about public displays, think again.  This is, to the campaigners, the first step on a road to further censorship and interference. As it happens, I don't think No Page 3 actually won anything. Naked breasts just stopped being any sort of big deal when you can click a button to see them.

But for a supposedly liberal paper to write that paragraph is particularly insidious. Even if you choose to get naked for money, you shouldn't have a right to, because of how it damages others. How is that any different to the way that some Christians talk about how homosexuality damages society, even if two people do it in private?

And what are they saying about women here? That women will be damaged by looking at other women topless? No-one says that this effect occurs on men looking at handsome muscle men, so what's the Guardian suggesting about women? It seems to me that they're saying that women aren't equal to men. Bit sexist, isn't it?

Tuesday 20 January 2015

"Gordon Ramsay ordered to pay £1.6m after losing legal battle over pub rent"

From The Evening bloody Standard:

Celebrity chef Gordon Ramsay suffered a courtroom nightmare today after a judge ruled he must personally pay the £640,000 rent on a London pub arranged by his father-in-law allegedly using a ghost writer machine.

Ramsay is personally liable for the whole fucking bill because of a deal signed when that twat Christopher Hutcheson ran the millionaire chef’s business empire into the sodding ground.

Milk prices: That was then, this is now.

From the FT, March 2014:

Mark Allen, chief executive of Dairy Crest, one of Britain’s biggest milk processors and maker of Cathedral City cheddar, says: “It is a much better time to be in dairy than for many years”.

Milk producers are luxuriating in a rare combination of rising prices and falling costs, and improving terms of trade between them and the supermarkets and processors.

Even though three large supermarket groups – Tesco, J Sainsbury and Co-operative Food – cut the retail price of 2 litres of milk to £1 this month, it is not the farmers being squeezed this time. Changes to farming contracts, and an improved relationship between producers and retailers, mean the supermarkets are more likely to take the margin hit.

From the BBC, January 2015:

MPs have urged the government to do more to protect dairy farmers from sharp falls in milk prices.

The Commons Environment, Food and Rural Affairs Committee said farmers were being forced out of business every week by factors beyond their control. The remit of the government's groceries watchdog should be extended to cover dairy suppliers, its report said.

The government said it was doing all it could to help farmers cope with the "volatility of the global market"...

BBC environment correspondent Claire Marshall said to keep cattle well fed and looked after costs a farmer about 30p for each litre of milk produced - but most were being paid just 20p a litre.

"Intense competition among supermarkets is also having an effect," she said. "In several supermarkets you can now buy four pints of milk for just 89p."

Farmers have held protests, urging supermarkets to pay more for their milk.



Comment is superfluous.

Monday 19 January 2015

It's my Party

From the BBC

A five-year-old boy has been billed for failing to attend a friend's birthday party - resulting in legal action.

Alex Nash, from Cornwall, was invited to the party just before Christmas.

An invoice for £15.95 was sent by his schoolfriend's mother Julie Lawrence, who said Alex's non-attendance left her out of pocket and his parents had her details to tell her he was not going.

Uh what? If he'd attended, he'd have cost you the same £15.95. Be grateful you had one less 5 year old to watch over.

And £16 each for a 5 year old party? Fill a room full of balloons. They'll be just as happy.

Nick Clegg belatedly calls a spade a spade.

From The Tab:

A vote-hungry Labour party would scrap tuition fees and replace them with a graduate tax.

Ed Miliband’s party plan to cap fees at a maximum £6,000 a year and place an annual levy on wages.

Almost seven million students finish uni with up to £40,000 of debt with less than half will land a graduate level job. According to the Sunday Times, student loans are never paid off in full by 45 per cent of students, leaving a £90 billion black hole by 2042.

From The Metro:

Meanwhile, Mr Clegg admitted he ‘regretted massively’ the furore caused by his tuition fees U-turn.

‘What we have introduced is a graduate tax and I really wish we had called it a graduate tax at the time,’ he claimed.

That's the whole point, which most people missed at the time.

If the amount of the loan repayments are based on a graduate's income, with the unpaid balance written off after a few decades, then that is to all intents and purposes like a 'graduate tax'.

The Tories only changed the system to discredit the Lib Dems because of the AV referendum, keen eyed observers would have noticed that the new system is actually 'progressive', in that graduates on low incomes would pay little or nothing, i.e. less than the previous system, and graduates on good incomes would pay a lot more.

It seems like a shit way of doing things, but that's how it is.

So assuming that Labour write off the nominal amount of loans, and just have a graduate tax of 9% on annual income above £16,910 (as at present), the amount which graduates have to pay will be no different; it's purely a psychological thing and bookkeeping entries.

So fair play to Labour, tactical genius.
@ Mombers. The Universal Credit withdrawal rate is officially 65%, but that applies to income net of PAYE.

If you earn less than the NIC thresholds, the rate is indeed 65%. If you earn more enough to trgger NIC but no income tax, the rate = 1 - (0.35*0.88)/1.138) = 73%. If you earn more than £10,000, the effective taper rate = 1 - ((0.68*0.35)/1.138) = 79%.

UC is supposed to replace Housing Benefit but not Council Tax Benefit. But Council Tax Benefit doesn't exist any more, each local council just invents their own Council Tax Reduction scheme (which is a lot less generous than Council Tax Benefit, rightly or wrongly), whatever the withdrawal rate is, this will nudge the rates mentioned above that much closer to 100%.

Saturday 17 January 2015

"The wood that local people call Fagley Wood"

I was looking at the Google map of where I grew up, and was somewhat perturbed to see that what we all referred to as Fagley Wood or Fagley Woods is three separate woods, called called Bill Wood, Round Wood and Ravenscliffe Wood.

So Fagley Wood as such does not exist but everybody calls it that. I think that most people add the "s" to "Wood" because clearly the whole wood can be divided into three smaller areas, which are nonetheless contiguous. Notwithstanding that Fagley Wood is a daft name for it, because Fagley proper is way off the southern end, why on earth did they bother thinking up new official names?

Which reminds me that my Dad once wrote to the Ordnance Survey people to point out that their map had swapped over the names of two hills up north somewhere (I can't remember where they are or what they are called). So what local people called Hill A was labelled Hill B on the OS map and vice versa. The OS wrote back and told my Dad that it was the local people who had got the names the wrong way round, and they had no intention of changing their map.

All most puzzling.

Friday 16 January 2015

Friday Night Gearchange

Cozy Powell's "Dance with The Devil". Yes, I'm dimly aware that it's a drum solo rather than an actual song, but I'm not sure that's an excuse.

The intro guitar riff is in E, as is the first run-through of the bit which they nicked from Hendrix's "3rd Stone From The Sun". They shift up a full tone to F# at 1 min 32 seconds for the second run-through and crack on regardless, so the outro guitar riff is the same as the first but in F#:

Top comment: Probably the best percussionist ever. No one else came close, except, possibly, my former husband.

Funny story. My first wife sat down behind a drum kit for the first time in her twenties. I explained the basic rules to her and within about half an hour she was playing like an absolute goddess. No idea where that came from, she neither. She could even play along quite happily to "The Crunge".

Killer Arguments Against LVT, Not (350)

The Taxcollector's Alliance have churned out more misinformation in The Times:

It’s not just incomes that politicians have increasingly helped themselves to. The amount that people have had to pay the government to buy a home has hugely increased over the past half century.

According to the building society Nationwide, in 1958 the average house price was £2,050. Stamp duty wasn’t payable until you bought a house for £3,500 — 71 per cent more than the average. Even then it was levied at 0.5 per cent.

If that were still the case today, you wouldn’t pay any stamp duty on homes worth less than £323,000. Instead, even after the reforms made at the autumn statement, families buying the average house today for £271,000 have to write the government a cheque for a whopping £3,550.

a) Does this man not think about what he writes? He describes £3,550 in SDLT when you buy a house to be a "whopping" amount of money. Fair enough, that's his opinion and he's entitled to it. But what about the other £271,000 a buyer has to hand over? Is that a mere trifle?

b) Adjusted for inflation, £2,050 in 1958 is £43,144 today, i.e. close to build cost and the land was more or less free. Two-thirds of the £271,000 today is land value, it is privately collected tax.

c) He fails to mention that for all but the cheapest homes, Council Tax is considerably less than 1958 Domestic Rates would be, adjusted for inflation. Thus completely disproving his next point...

... a YouGov poll late last year showed 72 per cent of the British public in favour of a so-called mansion tax. Given that Labour has already allocated to the NHS the projected £1.2 billion that it will raise, if revenues fall short they will have to either cut NHS spending, or increase the tax. There’s no doubt which option they’d go for.

If the mansion tax is introduced, it will be here to stay and most of the 72 per cent in favour will end up paying the price. We must ensure it’s never allowed to see the light of day.

a) If this were a Poll Tax, then yes, the 72 per cent ought to be worried about it. But the Mansion Tax is an ad valorem tax. So even if it were 1% or 2% of the price of a house, people in average houses wouldn't be paying that much. Just like people on low to average incomes don't pay much income tax (they pay far more in NIC and VAT than in income tax).

b) House prices would fall by the amount of the tax, so future buyers will be unaffected and, after a few decades, everybody will be unaffected. You could argue that some people who inherit in future will be worse off than they would have been, but other people will be better off, so that cancels out.

c) The Mansion Tax or LVT or whatever has exactly the opposite effect to government deficits. LVT shifts taxes from the future to the present (and ultimately, into the past), government deficits shift taxes from the present into the future.

Call me boring, but I actually do worry about government deficits* and the national debt, and I do support LVT over other forms of taxation, so I'm at least consistent.

* I voted Labour in 2001 because from 1997 - 2001, they managed to reduce the national debt as a % of GDP slightly. History proved me wrong on that one.

"Cameron discusses risk of Paris-style attack in UK"

From the BBC:

Prime Minister David Cameron and security chiefs have reviewed the risk of a Paris-style attack in the UK. They agreed that elements of the Paris attacks should be considered when planning future training exercises for the police and security services.

The UK terror threat level remains unchanged at "sévère", meaning an attack is highly likely.

There will be heightened security to ensure activists cannot bring strings of onions into the UK. Mr Cameron has also vowed to give the security services more powers to monitor attractive young women riding bicycles and people discussing philosophy in pavement cafés.

Thursday 15 January 2015

Reader's Letter Of The Day

From the FT:


With reference to your editorial on the dysfunctional housing market, I would agree with the “Too much help for homeowners” but not with “too little for builders”.

With the abolition of the domestic rating system, owner-occupiers of more expensive homes have seen their property tax burden decrease by a significant amount... Some further relief was given to them when 2.5% was added to the VAT rate, to pay for a reduction in the equally regressive Council Tax.

All these savings in tax have fed into house prices, so that landlords, property speculators and mortgage lenders have scooped the income whilst those comfortably on the property ladder have seen their wealth and their ability to borrow massively increase. The rest are not so lucky.

The demise of the domestic rating system had a lot to do with the lack of regular revaluation, so perhaps the Council Tax is about due for replacement now.

So far as builders are concerned, as Shaun Spiers points out, there is plenty of land with planning permission that is not being developed. What builders need is sticks, not carrots.

Property tax reform is the necessary first step to fixing the housing crisis. Land Value Taxation would kill house price inflation permanently and it could be introduced gently by replacing Council Tax on main dwellings on a revenue neutral basis for each local authority.*

LVT on all other land, whether developed or not, (replacing Business Rates) would provide the incentive to build. The Community Infrastructure Levy and Section 106 Agreements do the opposite and should be abolished.

Carol Wilcox, Secretary, Labour Land Campaign

* I hotly disagree on the maths, any new tax should be at a flat national ad valorem rate, same as SDLT, or else it would continue to be inefficient and regressive, but hey.


"Developer's advert boast sparks outrage" says the article in the Evening Standard.

So it should; private developers profiting from public expenditure on transport without contributing a penny. That's outrageous!

Oh, wait, that's not what the outrage is about, it's about the fact that they haven't provided any "social housing". Private profit at public expense doesn't even get a mention.

I suppose that's the norm these days...

The F-Word

When most people think about paying for Government services, they believe this should be based upon the ability to pay. This contradicts what we think is fair when paying for private goods and services. Why the difference?

I believe it is to due the mistaken belief we pay compensation to the Government for the services it provides. The poor therefore need subsiding by the rich. 

The correct view is we  pay (or should pay) compensation to the community for benefits we receive  from it. Out of which, how we best divvy up the proceeds is a separate topic. Take note faux-Libs. 

We earn an income, then buy capital, which benefits everyone. Unlike income and capital, Land, by definition, is not reproducible. Exclusive occupation of productive Land is therefore the main* burden we place upon the community. It is the permission to exclude others that is the benefit we should be paying for. Measured by the market, as the rental value of Land.

It is not therefore a "tax" but a user fee. Which perfectly aligns with the same incentives as drives the rest of our economy. And, joyfully, we get a fair distribution of income, capital and welfare (in the economic sense) as a result.

At its base, Capitalism is all about paying market based compensation. It works because it is fair. When we apply this to landownership, and other negative externalities, we get a fair and efficient way of paying for services we share.

* other burdens, or negative externalities, include State granted monopoly rights, and pollution.

"Employees who enjoy a drink are more productive"

From yesterday's Evening Standard:

Employees who are consume above-average amounts of alcohol are capable of working an extra ten hours per week, according to a study.

Women who knock back at least two glasses of wine in the economy clocked in nine-and-a-half hour plus days during the working week. Men who regularly drink three pints an evening were capable  of the same long hours.

Researchers studied 333,693 people from 14 countries and concluded that an 11 per cent increase in alcohol use enabled people to endure much longer working hours.

Wednesday 14 January 2015

Probably over most people's heads, but here's how I see it.

In some ways, you can envisage the economy as something like the fresh water system.

It starts with little puddles and springs up in the mountains and on hillsides, these flow into small streams, then into larger streams, then merge into tributary rivers which ultimately merge into larger rivers which then flow out into the open sea.

By analogy:

Individual transactions = little puddles and mountain springs

Everything starts with individual transactions. Some are profitable for both parties, some for just one party and some for neither, there's a lot of trial an error involved and nobody really knows. But overall there are benefits when people make these millions of little exchanges or transactions each day.

Similarly, puddles dry up quickly and mountain streams only flow if it has been raining further uphill. They are not always there.

Profits and wages = large streams and tributary rivers

Most businesses make profits. Some people like to split this up into the arbitrary categories of "profits" and "wages" but really they are the same thing. Businesses enter into thousands or millions of little transactions, most of which generate a small profit, some generate losses, but overall, they net off to a profit. Sometimes, a business or a business model fails, the loss making transactions start to outweight the profitable ones and *bang* the business is gone and the workers are unemployed.

Similarly, while some small springs and streams can dry up, overall, the rivers they flow into will usually be getting water from somewhere or other, larger rivers are more predictable.

Rents = the largest rivers which flow into the open sea

If, and only if, there are businesses making profits and workers needing housing, then rents arise.

Like large rivers flowing into the sea, these are the most stable thing in the economy. Such rivers are highly unlikely to dry up, there will always be water flowing in from somewhere or other, they are the most predictable of all. If one business or worker isn't prepared to pay the rent or purchase price, then another one will. If one tributary dries up a bit, another one will still be flowing.

And when the water flows into the sea, it is lost. It turns from valuable fresh water into worthless sea water. Nobody can use it to generate hydro-electricity, drive water mills, drink it, or use it to grow food, for cooking and washing, most indutrial processes etc.

(For sure, we need water in the sea for international shipping and fisheries, that's salt water not fresh water and a separate topic.)

The analogy which regular readers probably saw coming...

The open sea fills the same purpose and provides the same benefits to the nation as private collection or enjoyment of rents. None whatsoever. It just scoops up as much as possible of what everybody else contributes or what's left over.

So if collecting taxes is the same as diverting fresh water, from where should the government collect it, in terms of causing the least damage to the economy and re-cycling the rent (fresh water) back into the economy, or in terms of predictability or the lowest collection costs?

From mountain springs, small streams, larger streams or from tidal estuaries? If you collect water just at the point where it would have flowed into the open sea, it has absolutely no effect on the rest of the water system.

So... should the government be taxing transactions, wages, profits or rents? If it taxes rents i.e. land values, then this simply has no effect on the rest of the economy.

Here endeth today's lesson.

What are the chances of these two getting married?

Rafael Behr

Bar Refaeli

Staff poaching and anti-competitive practices: The bizarre inconsistencies of the US legal system

From CNN, April 2014:

The lawsuit, filed in 2011, accused tech companies of agreeing not to recruit employees from one another as a way to keep wages down, a scheme allegedly hatched by deceased former Apple CEO Steve Jobs...

The lawsuit was originally filed against seven companies. Lucasfilm and Pixar, both owned now by Disney, agreed last year to pay $9 million to settle their portion of the case, while Intuit agreed to pay $11 million.

Separately, Adobe, Apple, Google, Intel, Intuit and Pixar agreed in 2010 to settle a similar Justice Department lawsuit over what regulators said were anti-competitive hiring practices.

The companies had been accused of violating antitrust law by agreeing not to poach each other's employees but did not admit wrongdoing in the settlement.

Fair enough, you might think. This boosts wages at the expense of corporate profits.

But how does that tie in with this apparently equal and opposite decision:

From City AM, January 2015:

One of business’s longest running disputes over staff poaching finally ended yesterday after British inter-dealer broker Tullett Prebon came out on top in its bitter five-year legal battle with US rival BGC Partners.

Shares in the UK broker jumped eight per cent following news that the New York-based broker will pay Tullett $100m (£66m) to settle a litigation suit in the New Jersey Superior Court.

The case concerned BGC’s alleged pinching of more than 80 brokers from Tullett’s US affiliates in 2009, which the UK firm claimed cost it $387m in market value...

The deal also includes a clause that prevents either party from hiring the other’s desk heads and senior management for a year.

This clearly boosts corporate profits at the expense of wages.

Tuesday 13 January 2015

"Why can't the UK build 240,000 houses a year?"

Asks the BBC.

It's the wrong question, actually, but the article debunks most of the standard assumptions. The only one which stands up to closer scrutiny is:

The state no longer builds

Between the late 1940s and late 1950s councils built more homes than the private sector. Right up to the late 1970s local authorities were building 100,000 homes a year. But with the election of Margaret Thatcher in 1979 house building by local authorities fell...

Kate Henderson, of the Town and Country Planning Association, agrees. The current failure to build anything like the numbers from the 1950s and 1960s - when councils were building as many homes as the total house building figure today - shows the private sector is incapable [the rest of the article explains that the private sector is not incapable but unwilling] of delivering on its own, she says.

The article does not mention the fact that the population of England (53 or 54 million) is less than the total number of bedrooms, which is at least 56 million, according to the English Housing Survey.

"Ah yes," cry the Homeys, "But you overlook that there are so many single-person households nowadays!". By implication, we have an too many large homes and not enough small ones (and too few overall).

No I don't, and it's not even true/relevant.

In very round figures, from the English Housing Survey and here we get the following:

Housing stock
Three or more bedrooms - 14 million
Two bedrooms - 6 million
One bedroom - 2.5 million

Three or more individuals - 9 million
Two adults - 5.5 million
Single adult - 8 million

So broadly speaking, if single-person households all lived in one- or two-bedroom homes (mainly flats), there would be nearly enough three-bedroom homes (mainly houses) for each household with two or more individuals.

So if we all right-sized, just about everybody could have their own bedroom, especially as couples usually share a bedroom. So most households would still have a spare bedroom, which is a nice thing to have.

There might not be enough five-plus bedroom houses for families with three-plus kids, but that's a) their decision, b) this situation only lasts for a few years and c) they can always squeeze an extra bedroom or two out of a loft conversion.
The question they are really asking is "Why are house prices and rents so high?" because they think that building more homes would get prices and rents down. As we well know, if you simply build more homes in the right places, then overall average prices and rents go up slightly in the medium and long term rather than down.

(Please note - the BBC does not mention the myth that 'high house prices are all down to immigration' so does not debunk it either. The fact that we have let some of the wrong sort of people in to this country is a separate topic. We've also failed to let a lot of the right people in, if you ask me).

And whatever the question is, the answer is, as it is to most economic 'problems', to reduce taxes on output, earnings and profits and collect government revenues from the rental value of land instead.

Monday 12 January 2015

... cheaper than water

Ah, I fondly remember the good old days of last year, with shock horror headlines like this...

Channel 4 Dispatches find supermarkets selling beer cheaper than water

Today they were clobbering us with this...

Milk cheaper than water: supermarket price war drives down price of a pint

Supermarket price wars have pushed the price of four-pinter milk below that of some bottled waters...

When bought in a four-pint bottle, the price per litre of milk has dipped to 43p, compared to 44p for bottled still water.

If you do the numbers, the pump price (excluding tax) of a litre of petrol is considerably lower, at 32p per litre.

... which all reminds me of the 1985 film Water, the key scene is when Michael Caine has to explain to the disappointed islanders that they can actually sell 'table water' for a far higher price than they could sell the crude oil they were hoping to find.

What goes around comes around, eh?

It must have had the hump.

From News Centre 23:

An out of control camel killed two people in Texas.

The Wichita County Sheriff says a man went into a pen to break up ice in the water trough. A woman who owned the farm tried to close the gate to the area, but the camel was too fast and tramped bot people to death.

The sheriff says the camel was acting aggressively because it was getting ready to breed.

RH emails in much brighter news from the UK:

A WELLAND man has paid tribute to the "absolute hero" who came to his rescue after he was attacked by cows.

Joe Whitehouse, aged 67, was walking his dogs in Castlemorton Common when a herd of the 'spooked' animals approached him. He was rammed to the ground by one of the cows, which kept butting him as he lay prone on the floor...

"The cow continued to come at me and was butting me but Charlotte ran towards and it went away. But then about 20 yards away all the cows formed into a herd and started coming back at us.

"Charlotte ran at them again with her little dog and shouted and they turned and went."

It's usually the presence of dogs which trigger cow attacks, so it is surprising that adding one more dog to the mix finally scared the cows off.

So it's a double-salute to Ms Horrabin for fighting fire with fire and I'm sure we all wish Mr Whitehouse a speedy recovery.

"David Cameron warns of legacy of debt"

From the BBC:

Prime Minister David Cameron has urged voters in the forthcoming general election not to pass on a "legacy of debt" to their children.

In a speech launching the first of six themes for the Conservative manifesto, he set out plans to reintroduce the housing policies that were in place during most of the 20th century. He said that these would have the overall effect of reducing the average house price by up to £100,000, with a corresponding reduction in the burden of mortgage debt on hard-working families who want to "do the right thing and get on the property ladder".

This was "fair and sensible" and would not result in "the world falling in". There was an immediate backlash from grassroots Tory voters, who said that the proposals are "extreme and ideological".

Fun Online Polls: Dry January & Charlie

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

By how much will you reduce your alcohol consumption during Dry January?

A lot - 2%
A bit - 2%
Not at all - 14%
Oh, I do wish they'd **** off and leave us alone - 82%

A very good turnout of 131 voters, thanks to everybody who took part.
This week's Fun Online Poll should be fairly self-explanatory: Êtes-vous Charlie?

Sunday 11 January 2015

Almost as if the whole thing had been scripted.

14 November 2014:

This is the time of year that NHS bosses - and their political masters for that matter - start to look at the weather forecasts.

A bad winter can make a huge difference to the health service. A cold snap increases the number of falls and amount of respiratory illness, while the vomiting bug norovirus can take hold on hospital wards.

And this year, the stakes could not be higher. With little more than six months to a general election, all eyes are on how the health service copes, particularly in England.

15 November 2014:

The alert was issued to people across north east Essex after Colchester General Hospital declared a "major incident".

It came after a surprise inspection by the Care Quality Commission (CQC) on Wednesday where the health regulator raised "safeguarding concerns". It also found that staff were struggling to cope with "unprecedented demand".

17 November 2014:

A number of other hospitals in England are likely to be facing severe problems of staff shortages and patient-demand of the scale that prompted the declaration of a major incident at Colchester hospital last week, one of the country’s most senior doctors has warned.

20 November 2014:

Hospitals have reached record levels of crowding, according to official figures which have sparked fears that the NHS is standing on the brink of a winter crisis.

Experts said hospitals were “full to bursting,” with latest quarterly statistics showing hospitals operating at the highest capacity levels recorded for the time of year. NHS leaders said that many hospitals had become so busy that it would take little more than “a gust of wind” to bring some to collapse.

21 November 2014:

Accident and emergency departments in England saw 92.9% of patients within four hours last week - the lowest percentage since April 2013, NHS data shows.

The government sets a quarterly target for hospitals to see 95% of emergency cases within four hours. A&E waits have been below that level since the end of September.

22 November 2014:

The NHS is heading into an A&E crisis even before winter has begun, patient leaders said after figures showed that thousands more people waited more than four hours to be seen last week.

Emergency units are overflowing and thousands of patients are enduring long waits on trolleys because hospitals are too full to admit them, official data showed yesterday.

24 November 2014:

NHS workers, including nurses, midwives and ambulance staff, have staged a four-hour strike in England as part of a pay dispute.

They were protesting about the decision not to implement a 1% rise for all staff recommended by a pay review body. Members of nine unions walked out at 07:00 GMT in England and at 08:00 GMT in Northern Ireland.

25 November 2014:

The Health Secretary has spoken numerous times to urge the public to avoid A&E departments in all but the most urgent cases and turn to pharmacies, doctors’ surgeries and walk-in centres instead.

But speaking during today’s health questions in the House of Commons, he appeared to go against his own advice. Mr Hunt said: “I took my own children to an A&E department at the weekend precisely because I did not want to wait until later on to take them to see a GP.”

26 November 2014:

Senior consultants in the NHS have told ITV News that the accident and emergency service is heading for a winter crisis.

Four doctors say around 50 hospitals are already struggling - and as the winter weather worsens, they predict the crisis will worsen too unless urgent action is taken.

27 November 2014:

Ambulances could be turned away from a hospital to try ease the strain on a casualty department which is struggling to cope.

The Accident and Emergency department at Northwick Park Hospital in north London has been under pressure following the closure of two other A&E units.

And that's just the second half of November, the ante was upped considerably throughout December, when the scripted predicted A&E crises actually happened - despite the fact that the winter weather was pretty mild and there were no terrible flu outbreaks or natural disasters or anything.

Saturday 10 January 2015

Merryn Somerset-Webb only gets it half right

In her blog, Merryn Somerset-Webb makes the case against rent controls.

Anyone who can remember the rented sector under the Rent Act can see that she's right about this. However, she muddles high rents with the nonsense that is housing benefit:

On the surface, it might look as though there is a case for this. Ten years ago, a mere 10% of Britons lived in privately rented accommodation. Today, 18% do. The prices they pay take up, on average, some 40% of their incomes.

That not only inhibits their consumption and their ability to save, but it also means a whopping housing benefit bill for the taxpayer. In 2003-04, 722,000 households in the private sector claimed housing benefit. Now some 1.7 million do (that’s 6.5% of all UK households) and the total bill is around £9.5bn.

Housing benefit is what causes high rents at the bottom end of the rented sector, it is not something that can be made worse by high rents elsewhere. The place for a cap is housing benefit, not rents, a point she fails to make.

That said, it is clear that the UK does have something of a problem in the form of rising demand for rental properties.

If this is what is causing rents to rise, then why are rents falling outside London and the south-east of England? Anyway, she goes on to contradict herself by saying that the high house prices are caused by all the new housing being snapped up by buy-to-let landlords. She then goes on to suggest a raft of Killer Policies for Reducing House Prices, Not, while avoiding mention of two things that would work, LVT and raising interest rates. As the icing on the cake, she finishes with the old chestnut that council housing is subsidised by the taxpayer.

3/10 Ms Webb, could do better.

Seems a bit pointless to me.

I saw an advert on the back of a bus, advising us to store our apples in the fridge to make them last longer, thus reducing food waste.

I think it was this lot, but maybe it was some other quango.

I am no expert on these matters, but it strikes me that most people go shopping once or twice a week and apples will keep for considerably longer than a week outside a fridge, so as long as you just buy enough apples to last you until your next shopping trip or two, you'll be fine.

So the advert is a load of nonsense.

Friday 9 January 2015

Daily Mail on sparkling form

From The Daily Mail:

The two Charlie Hebdo gunmen have been killed in a firefight with French special forces, according to reports in France.

The hostage, named as Michel Catalano, who taken by Said Kouachi, 34, and his brother, Cherif, 33, is believed to have been rescued alive...

Mr Catalano's family were gathered for support at their detached home in the village of Othis as the siege came to an end in Dammartin-en-Goele.

Police were last night stationed outside the property, which has a private swimming pool.

Friday Night Gearchange

This featured in the closing sequence of some Brian Cox ego-fest repeated on telly last Sunday.

The Carpenters "Calling occupants of interplanetary craft", up a shameless semitone after 1 min 6 seconds, a mere one-quarter of the way through the song:

NIMBY's warped view of the role of government

From yesterday's FT letters:

Sir, Your leading article of December 29 (“Britain has nothing to fear but its politicians”) describes one of the greatest threats to Britain’s prosperity as “a dysfunctional planning system, held hostage by local politics”.

This statement gives depressingly little weight to the importance of local democracy. Individual communities should surely not have infrastructure projects forced upon them without sufficient debate and discussion to ensure that any sacrifice in the quality of life they may be asked to make can be properly weighed against any gains to the nation as a whole...

The Lord Hodgson of Astley Abbotts, London SW1.

Dude, WTF?

Whether you are a large state authoritarian socialist or a small state libertarian with some modicum of intellectual honesty, the ONLY consideration is whether what the government does or desists from doing benefits the nation as a whole.

Of course, the "individual community" is part of the nation and their net gain or loss from any infrastructure goes into the overall cost-benefit analysis, but does not merit a higher weighting than that.

e.g. cash cost of Project X is £10, paid equally by all taxpayers and notional cost to (loss of amenity) "individual community" is £1. Total cost £11. If the benefit of Project X to the "nation as a whole" is > £11 + margin of error, it goes ahead, if < £11 + margin of error, it doesn't. Let's say the gross benefit is £15, so the net benefit is £4. It would be insanity to argue that the amenity cost of £1 trumps the £4 overall benefit.
Of course, working out costs and benefits is a matter of judgment. Let's assume that rabid anti-smoking killjoyrs control the local council. They decide to employ a Tobacco Control Officer for £22,000 a year to patrol the high street and ask people to stub it out.

The money nets off, one man wins £22,000 and the community as a whole has to pay £22,000 (plus deadweight losses). That is a benefit to the new TCO and a cost to everybody else. Then there is the more difficult question of the value of smokers' rights to smoke and the value of non-smoker's rights to not ever see people smoking; whether there is a positive or negative impact on shopper numbers etc.

But then a more enlightened council takes over and it is established that the overall costs outweigh the benefits and so the council intends to sack the TCO.

If we allow the TCO to apply NIMBY non-logic, we end up with this:

Individual council employees should surely not have council decisions forced upon them without sufficient debate and discussion to ensure that any sacrifice in earnings they may be asked to make can be properly weighed against any cost savings to the local rate payers...

Thursday 8 January 2015

Economic Myths: Deflation leads to a downward spiral

From e.g. Moneyweek:

Ben Brettell, senior economist at Hargreaves Lansdown... adds: “If deflation becomes entrenched and consumers begin to expect prices to fall, it can be dangerous. Spending decisions will be deferred in expectation of lower future prices and economic stagnation could result.

What a load of drivel.

Most of the stuff you buy because you need or want it now, today, this week, this month. You can't just go without food to eat or petrol for your car for a year, even if you are 100% sure that the price of food or petrol will be significantly lower in one year's time.

Consumer electronics is the perfect counter-illustration to this, people have been merrily buying new stuff every year, even though by now most people assume that what comes out next year will be bigger, better, cheaper etc.*

Further, the sort of price deflation they are talking about is minimal, a percent or two a year. If you are planning to buy a new car for £20,000-ish sometime in the next year or two, is that £500 potential saving from deferring your purchase really going to make much of a difference? Methinks not.

This effect can only happen if...

a) You are thinking of buying a speculative asset, such as land. Your total land consumption doesn't change (you are renting instead of owning in the interim) and land rents are not an addition to the economy, they are a transfer.

b) the benefit you'd get from having something for a year is less than the amount by which you expect the price to fall. And I struggle to think of an example for that, it can only apply to completely non-essential things, like a high-powered telescope for star-gazing or something which you'd only use once or twice a year.

UPDATE: now I think about it, this myth is quite similar to the myth that the government can boost the economy by pushing down interest rates. It's the same fallacy in a different guise, and of course has to be perpetuated as an excuse to prop up 'asset' values (i.e. capitalised rent and monopoly income).

* This is not actually true any more, I reckon we have passed the point of peak technology in many respects. Nowadays even Apple can't resist adding on extra bits and extra pieces, none of which really work properly.

Mobile 'phones reached perfection about nine years ago with the Nokia 1110. Everything since then was bullshit, and given how small UK housing is, there's no need for a TV bigger than 40". But most people still believe it.

Reader's Letter of the Day

From yesterday's Evening Standard Letters page

Islamist terrorism in the 21st century

I did this before going to work so clearly it's nowhere near complete. Give me a nudge in the comments and I will update the chart this evening.

Wednesday 7 January 2015

George Osborne: Knows sweet FA about how prices are set

From The Daily Mail:

The Chancellor insisted it was ‘vital [that the fall in the price of crude oil] was passed on to families at petrol pumps, through utility bills and air fares’.

‘The Government is conducting studies of industries like the utilities and the airlines. We are examining if any action needs to be taken,’ a Treasury spokesman said.

How much the price of a) petrol, b) domestic energy bills and c) air fares fall when oil prices fall are three entirely separate topics.

a) Petrol is the easiest. The market is highly competitive, and falls in the price of oil are passed on in lower prices almost immediately (even though demand is fairly price-insensitive).

In round figures

July 2014

Pump price £1.32, knock off VAT = £1.10, knock off 59p fuel duty and 10p profit margin for the transporters/retailers = residual cost of actual oil = 41p/litre.

Crude oil $110/barrel, convert to £ at 1.70, divide by 159 litres = 41p/litre.

January 2015

Pump price £1.10, knock off VAT = £0.91, knock off 59p fuel duty and 10p profit margin = residual cost of oil = 22p/litre.

Crude oil $55/barrel, convert to £ at 1.55, divide by 159 litres = 22p/litre.

b) With domestic energy, it is nigh impossible to calculate by how much prices will fall for umpteen reasons which have nothing to do with the price of oil. Generators also use coal, gas and nuclear; generators and customers are locked into various fixed price contracts, there is little ease of substitution etc, so let's not bother.

UPDATE: VFTS in the comments reminds us that according to Energy UK, only 1% of UK electricity is generated from oil. i.e. in practical terms none at all.

c) Air fares are set according to what the market will bear.

This bears very little relation to costs in the short or even medium term. Some flights are run at a loss because the airlines don't want to forfeit their landing rights (they hope that things will pick up in future); some flights are hugely profitable.

International travellers will pay a lot more to land at a London airport than elsewhere in the UK, even though the total distance flown is much the same, etc. UK travellers have to pay a lot more to fly to a major European city rather than somewhere in the back of beyond.*

If this were not the case, then landing slots at London airports would not be bought and sold for such huge amounts of money. What the purchaser is paying for is the scarcity-monopoly-rental value. Airlines just try to sell as many tickets as possible for the highest price possible using a variety of auction methods (i.e. trial and error).

So the overall impact on air fares will be minimal, although we would expect a modest reduction overall; it will be negligible at London airports and larger at regional airports which are running at two-thirds capacity on average.

* Thanks to the miracle that is the internet, we can quickly establish that flights from Leeds-Bradford to Geneva start from £86 (British Airways); a similar distance flight from Heathrow to Munich starts from £141 (also British Airways).

Tuesday 6 January 2015

Diane Abbott Gets LVT Horribly Wrong

From the Telegraph:

Ms Abbott, a veteran Left-winger who hopes to run for London mayor told World at One: “I’m very surprised John (sic) Murphy is making these boasts. I support the mansion tax in principle but there are to big problems.

“It’s effectively a tax on London – 80 per cent of it will come from London – and there are problems. The super-wealthy plutocrats, who will all think should pay the mansion tax, probably using their lawyers and accountants will evade it.

If you support a Mansion Tax in principle, the of course it's going to be a tax on London. That's where most of the £2m homes are. In fact, if you support it in principle, as a tax on unearned wealth, you'd actually want more of it hitting London and the odd person with a massive country pile in the cheap bits of Wiltshire to not be paying it.

And does Diane Abbott really have any idea what the hell she's talking about when she talks about lawyers and accountants evading it? Unless the government writes some daft loophole, you can't evade owning a house. Where are you going to put it? Under a mattress? Ship it to Monaco? Of course, even if you ship the house to Monaco, you can't shift the valuable bit of a house in London which is the location.

“But you could be a teacher in Hackney literally who bought a house at the beginning of the ‘80s for £50,000 and it’s worth £1 million and climbing. Jim Murphy can’t surely mean he is going to expropriate money from Londoners to win an election in Scotland.”

She said many people bought homes 30 years that were in areas that were unfashionable then but are now “very worried” about the levy, before adding: “Jim Murphy isn’t helping matters.”

Did those people do anything to make them "fashionable"? No, they didn't. House prices in London rose because of things like government improving railways, selling off council houses and spending billions on housing benefit in London.

Just to add on this: there's a myth about how fashion raises house prices, when it's actually the other way around. You have a run down area, government does something like improving the rail line and it now makes it a place that commuters would like to live in. Rents rise because they can now get commuters to rent the place, which means that you get people who can afford to eat at Gordon Ramsay's rather than McDonalds.

"Islamic extremists 'ack websites o' primary school and church in Yorkshire"

From T'Daily Mail:

Islamic extremists 'ave 'acked t'websites of a primary school and a church and replaced their 'omepages with an 'ate message against t'US and Israel.

A group calling itsen X-saad 'ijacked t'sites o' Sowerby Community Primary School and t' Danish Church of 'Ull, both in Yorkshire, and replaced them wi' a sinister Islamic-State style page. Police 'ave launched an investigation into t'acks that were believed to have taken place late last night.

The message that appeared on both websites included a picture of a pint of Tetleys and a cricket bat wi' a red cross through 'em. It is on a black background, similar to an ISIS flag, wi' English writing in red and Arabic script in white.

T'statement reads: 'We 'Ackers We defend our religion, we do not forget we are wi'out limits, we do not believe in t'laws'

Sowerby Community Primary School governor Charles Allen shook 'is 'ead sadly and confirmed that there was nowt queer as folk.