Tuesday 31 October 2017

Fun Online Polls: The North-South divide; Fixed Odds Terminals

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

The UK's North-South divide runs from...

Chester to London - 8%
Bristol to Norwich - 76%
Other, please specify - 16%

A low turnout of 50,even though I was away last week so this Poll ran for a fortnight.

Thanks to everybody who took part or left a comment, but I'm with the majority on this. If you've spent half your life in Oop North and half Darn Sarf, you know the difference.
And lo, The Righteous are out in force again:

Gambling addict warns against fixed-odds betting terminals

A recovering gambling addict has warned others about the dangers of using fixed-odds betting terminals in bookmakers. The man, who asked to remain anonymous, said he had lost as much as £15,000 in a day at betting shops in Reading town centre.

The government is conducting a review into the machines, which account for more than 50% of bookmakers' profits. The Association of British Bookmakers said a report suggesting the maximum bet should be reduced from £100 to £2 was "flawed".

You can't even begin to pick holes in these claims and counter-claims, they are one giant hole. I'm not going to waste your time or mine by trying to guess what the actual substance is before picking holes in it anyway. The only fun bit is waiting for Philip Davies to spring to the defence of the betting industry for the eight zillionth time.

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

What 'should' be the maximum bet on fixed-odd betting terminals?

Vote here or use the widget in the sidebar.

Economic Myths: The European Investment Bank

Former UKIP leader Diane James, in City AM:

... at the same time as demanding that Britain must settle its divorce bill before trade can even be discussed, the EU has decided that the UK must wait decades to have what rightfully belongs to us.

Werner Hoyer, president of the European Investment Bank (EIB), has declared that the UK won’t get back its 16 per cent stake in the bank – worth several billions euros – until 2054.

She then treads the fine line between perpetuating myths and debunking them for a few paragraphs.

Point is, the UK government has lent/invested a large sum of money to/in the EIC; and various UK quasi-governmental bodies have received large loans from the EIB. Two large numbers in equal and opposite directions. Minus one from t'other and you end up with a much smaller number.

The loans which the EIB has made presumably have fairly long-term repayment schedules, so it's not unreasonable for the EIB (going with the fiction that it truly is an independent 'bank') only has to repay the UK's original investment/loan/accumulated profits at a similar speed. The UK government bodies only have to repay their loans to the EIB over decades. Again, in the normal course of events, minus one from t'other and the net annual payment is a much smaller number.

So it would be cleaner and simpler to cut out the middleman and to transfer the UK govenrment's investment in and loans from the EIBs (assets and liabilities) back to the UK government, at which stage the whole lot can be netted off and disappears in a puff of smoke. The UK government can't owe itself money.

There will probably still be a net small balance owed by the EIB to the UK government, which we can just chuck into the mix with all the other amounts which the UK owes the EU (membership fees for the next two years) and which the EU owes the UK (UK's pro rata share of value of EU assets, like all the land and buildings in Brussels and Luxembourg).

If you keep doing this long enough, the balance owed in either direction will be chump change and nobody will care.

Monday 30 October 2017

Two and a half cheers for the Adam Smith Institute

I'm surprised that Ben Southwood's article made it unredacted into today's City AM:

Some taxes distort the economy far more than others for every pound they raise for the Treasury. By this measure, stamp duty land tax is the country’s worst – and the chancellor should skip reform and go straight to abolition in this year’s Budget.

Not true, VAT is the worst, NIC is the second worst, but hey...

Stamp duty [sic] now funds three times as big a proportion of the state’s budget than it did during the 1980s and early 90s. It is technically voluntary, but if you don’t pay it when you buy a house, the transfer of property deeds won’t be valid.

That is not actually true; SDLT is triggered when there is 'substantial performance' of the contract, actual legal completion is irrelevant.

In 1993, 42 per cent of properties were liable for it. Today, 73 per cent are, and rates have skyrocketed to 12 per cent at the top. We have a housing shortage in the UK. There isn’t enough floor space to go around in the places people most want to live.

There is no overall housing shortage; by definition there will always be a shortage of homes in places people most want to live.

If housing is freely available then making sure each house goes to who values it most is less important, but when you have a scarce supply, allocating homes effectively is vital. But it is in precisely this market that we have repeatedly hiked a tax specifically on transferring homes. 

The real world effect is fewer people moving, meaning more of us living in areas far from our jobs, crammed into tiny boxes, or with spare rooms we don’t need. This causes more stress, more pollution, and lower economic activity overall. It also results in less of the complementary consumption you get when people move house – removal vans, extensions, decoration, and furniture.

Agreed, although the 'complementary consumption' is not really adding to the economy (broken window fallacy).

Stamp duty isn’t the main cause of the housing crisis, nor is scrapping it the main answer. Building more houses in the places that people most want them is obviously the biggest solution.

Not true; demand for homes in the most desirable areas is more of less infinite; build them and they will come; more people = agglomeration benefits = higher prices etc. Areas with the highest densities/largest number of people have the highest rents/prices, just look at a bloody map.

But this tax is making it worse by stopping houses from getting to those who value them most.


This damage totals around 75p for every £1 raised, according to a recent Australian government review, the findings of which echo what I have found across my research. That’s £10bn worth of wider damage to the UK economy on top of the cost to those actually paying the tax.

Not sure how they work that out; £10 bn is less then 1% of GDP, so you wouldn't be able to reliably measure it anyway. But let's accept it as perfectly plausible.

In contrast, income taxes and VAT do only around 20p of damage for every pound they raise...

Looks about right; if you assume an overall average 45% tax rate. So apply his 20p deadweight costs to total revenues from income tax, VAT, NIC and corporation tax of about £450 bn; the losses from those is easily £90 billion; nine times as much as his estimated deadweight costs of SDLT.

... and recurrent property taxes like council tax do almost no damage at all. In my Adam Smith Institute paper out today, I offer Philip Hammond a solution: scrap stamp duty land tax and fix council tax to replace the revenues. This is a tweak that would not cost the Treasury anything at all, but would replace a hugely damaging levy with a much milder one. 

Council tax as it currently stands is regressive and based on outdated values, hitting deprived parts of the country disproportionately by taking no account of the rapid and unbalanced house price changes since 1993. It would be easy to make it more progressive by linking it more coherently to property rental values.

Woah! How did that get past the Homey censors at City AM!?! It's clear that they'd lap up the bit about scrapping SDLT, they must have overlooked the sting in the tail.

That would take from those who have gained the most from the booming housing market, but these owners would be the ones to directly benefit from lower stamp duty when they sold. Essentially, it would lower the cost of moving home, without significantly disadvantaging either homeowners or the Treasury. When surveyed, people typically rank stamp duty as one of their most hated taxes, right up there by inheritance tax.

I'm not sure people hate SDLT that much; it's a one-off hit every couple of decades and you move on with your life. But Inheritance tax is the next most obvious tax to toll into a reformed Council Tax (by which he actually means Land Value Tax, although he daren't say it) or else it is a double charge on valuable homes/land.

The people are not always right, but on this one the chancellor can get a win, win, win: make the electorate happy, rebalance the country, and boost productivity by addressing the housing crisis – all without creating any hole in the Budget.

Except that people appear to hate Council tax most out of all taxes, duly whipped up by the whole Home-Owner-Ist lobby.

The bit he misses is that, yes, removing SDLT would increase the number of housing transactions; with the desired effect that older people/low earners would be more likely to move out of more productive areas allowing younger/more productive people to move there, that's where the estimated £10 billion boost comes in. Making up the revenue shortfall with a reformed Council Tax would easily double the effect, so it is not that it does "almost no damage at all", but actually boosts the economy; it has negative deadweight costs.

Sunday 29 October 2017

How to make attractive cities.

Very good YouTube video that asks the question, what does it take to build a beautiful city? The short answer is balance. The right balance between development and planning regulations that preserve and enhance our shared environment.

As we all know, where there is an optimal balance, there is a laffer curve to measure it. In the case of development, that's best measured as aggregate land rents. see here

So, in order to align the incentives of the state to make sure they produce a framework of laws, rules and regulations that maximises those rents, they should be collected as public revenue to be spent on services or redistributed as a Cititzen's Income.

Saturday 28 October 2017

Joined up government

From the BBC:

Five offshore PFI companies paid little or no corporation tax during a five-year period despite making profits of nearly £2bn, the BBC has learned.

The five companies specialised in lending money through Private Finance Initiatives (PFI). They own hundreds of public assets including schools, hospitals and even police stations. The BBC has also learned that a small number of big offshore companies are currently on a buying spree.

I know that the whole PFI thing was a corrupt taxpayer funded giveaway and deliberately intended to make massive losses for the government/taxpayer in exchange for political party donations and cosy jobs post politics, but on a practical level, how can they get away with it?

Their 'tenant' is the government! Can't the government qua tenant just withhold 20% tax at source (like any other tenant of a non-UK registered landlord is supposed to do)? If the poor PFI companies think they've been overcharged, well it's up to them to submit proper accounts and tax returns.

Tesco accounting fun: A new broom sweeps clean? We've seen it all before.

I've seen this pattern a hundred times before. The recent Tesco saga is a good illustration of the overall pattern:

1. Somebody (Terry Leahy in this example) is in charge for years and years and the business appears to be doing very well.

Guardian, April 2011:

Tesco, Britain's biggest retailer, has reported record profits of £3.8bn – more than £10m a day – but admitted that it needs to do better in its core UK operations. Results for the year to end February, released on Tuesday, showed the bulk of Tesco's 12.3% profit increase came from its growing Asian operations.

Total group sales were £68bn and in Britain sales grew 5.5% to £45bn, with trading profits ahead by 3.8% to £2.5bn. But the performance was not good enough, Tesco's new boss Philip Clarke admitted…

As a matter of fact, Tesco had been resting on the laurels of its super-cheap land acquisitions in the 1990s and early 2000s for far too long. To cut a long story, Tesco makes a lot of money by simply renting out shelf space. The rapid expansion dried up in the late 2000s when land became very expensive again, but of course there was still plenty of existing shelf space to rent out.

2. As we found out later, Tesco had been flattering their profit figures by treating advance payments of rent for shelf space as earned in the year it is received/agreed instead of "spreading" it out over the term of the agreement. This is just a timing thing, if the supplier pays £100 for a five year deal, you can book £100 profit in Year One or you can book £20 a year profit in each of Years One to Five. Given a large number of such transactions, it doesn't really matter which approach you take as long as you are consistent. By Year Five, you would still be booking £100 a year profit, it's neither here nor there whether that represents Year Five receipts of £100 or time apportioned £20 from Year One, £20 from Year Two etc.

The interim new boss didn't have the nerve do the obvious thing and was soon booted out again.

3. The next new boss (Dave Lewis) and his team did have the nerve to do the obvious thing and blew the whistle on their own business, which led to the so called accounting scandal. From the BBC October 2014:

At its simplest it appears that profits were "booked" early - ie moved into the first half of the year. At the same time, expenditure on costs associated with the deals was delayed. Now, this can be done in any number of ways, some of which may have been used by Tesco.

Suppliers pay retailers for promotions that could mean more of their product being sold. Payments can be made for better positions on shelves, for visibility on "plinths" at the end of aisles where customers are more likely to see products, or for two-for-one offers.

One senior figure in the grocery industry said there was evidence across the sector that payments are sometimes taken unilaterally from suppliers. The payments may be disputed later, and a refund or new agreement made later in the second half of the year. By then, the original payment has been taken as revenue...

The clever bit is that past profits were revised downwards with the inevitable result that future profits would be flattered. If you revise earlier accounts using the "spreading method" then reported past profits fall and it is inevitable that the income will simply be recognised in future years instead.

4. Dave Lewis then went for broke and wrote down the value of all the land Tesco had overpaid for in the late 2000s. From The Guardian April 2015:

Tesco has crashed to the biggest loss ever recorded on the UK high street, slumping £6.4bn into the red as a result of huge writedowns on the value of its property portfolio and stock.

Dave Lewis, the chief executive parachuted in to mastermind a turnaround last year, described the loss as a “big significant number”. But the former Unilever executive insisted the supermarket was on the road to recovery after a tough 2014 in which it suffered a £263m accounting scandal and the exit of the former chief executive, Philip Clarke, following slumping sales and profits.

“This patient is okay … Our job is to allow it to be healthier. There is nothing critical about its finances,” he said.

The point being that if you are going to report a large loss, you might as well report a loss of staggering proportions and get it over with. The numbers are so huge that people just remember "big loss" and not quite how big it was.

5. Hey presto, David Lewis can blame everything on their predecessors, portray themselves as honest and contrite businessmen and sit back will all those write downs are quietly written back up again and the "spread" income from earlier years boosts future profits.

From City AM, October 2015:

Tesco has resumed its dividend for the first time in three years, after reporting a 667 per cent increase in pre-tax profit in the first half of the year.

Profit before tax rose to £562m from £71m this time last year. Operating profit was up 67.4 per cent, from £515m to £885m.

6. I don't wish to discredit Dave Lewis who might well be a retail genius, but the only way to find out whether this turnaround is real, is to wait until he retires in a few years' time and see whether his successor does the same thing - revise the last few years' profits downwards, play the honest and contrite businessman etc.

Friday 27 October 2017

Strange words to use in the context

Via @MisanthropeGirl, from North West Georgia News:

A Floyd County farmer was killed Wednesday morning when a cow he was trying to move knocked him up against a fence, resulting in massive chest trauma. Floyd County Coroner Gene Proctor said Nathan William Parris, 72, of 2056 Cunningham Road was pronounced dead at 11:04 a.m. after reaching the Redmond Regional Medical Center emergency room.

Doesn't "knocked him up" suggest "got him "pregnant"?

Thursday 26 October 2017

"Fifty of 'em"

Says James Higham who spotted this in The Telegraph:

A herd of 50 cows ran riot through suburban streets after escaping from a nearby farm.

The animals stampeded down roads in Trafford, Greater Manchester, to the astonishment of residents...

With great embedded video.

Sunday 22 October 2017

Cognitive dissonance in action

If you want to see cognitive dissonance in action, watch the Conservative party try to develop popular housing policies without contravening its loyalty to developers, landlords or free market fundamentalism. says Matt Wilde in the Guardian.

However, he goes on, in true Guardian fashion, to produce an example of a housing benefit claimant paying an exorbitant rent for a grotty flat as evidence that the rental market has failed and that rent controls are the only answer before trotting out the following (unsupported) untruth.

But (the smallness of the pre-Thatcher rental market) was largely because most people could either afford to buy or had access to council housing, so there simply wasn’t a great demand for private rented properties. That demand had to be artificially created – largely to the benefit of wealthy investors, certainly not in favour of the state or the tenants.

If you want to see cognitive dissonance in action, read The Guardian on anything to do with housing. They are quite capable, as above, of completely ignoring how the housing market actually works, while producing their pet theories as to how it can be made to work better. They completely ignore that the bottom end of the rental market, which is dominated by social housing and housing benefit, works differently to the rest of the market. At the bottom end, as Mr Wilde points out, social housing rents kept private rents low: why pay a lot for a privately rented flat if you can get a council flat for less, but also, as he fails to mention, the positive feedback of housing benefit inflates rents in the private sector ( 1. the level of HB is set by the the average rent demanded -> 2. the average rent demanded is set by what the tenants can afford to pay -> 3. what tenants can afford to pay is set by the level of housing benefit they receive -> back to 1.) If HB was capped at the sort of rents that Generation Rent are suggesting,

The campaign group Generation Rent argues that a living rent should be no higher than 30% of the average income, and propose that controls could be set according to council tax bands. By capping rents at 50% per month of the home’s annual band, they would be brought more in line with people’s earnings.

then landlords would be forced to lower their rents to that level or have empty properties.

That, and more social housing, would sort out the bottom end of the market. As to the rest of it, why should the government intervene to help out relatively wealthy middle class tenants?

Saturday 21 October 2017

Welease Bwian!

From The Daily Mail:

Steel barricades are being erected on the coast today ahead of Storm Brian sweeping into Britain tonight, bringing 70mph winds and more than two inches of rain as the half-term holidays begin.

The wild conditions, caused by a 'weather bomb' over the Atlantic Ocean, are expected to cause widespread travel chaos with the worst weather forecast across southern and western England and West Wales tomorrow.

Defensive barriers have been put up in the Cornish town of Fowey - where Dawn French owns a £5million clifftop mansion - by the Environment Agency on roads most likely to be swamped as Storm Brian arrives.

Thursday 19 October 2017

The explanation is probably the same as last time.

From The Independent:

Real wages across the UK declined for a sixth consecutive month in August. Growth in pay packets continued to lag behind a jump in inflation triggered by a dramatic fall in the pound since the UK voted for to leave the EU.

Official data on Wednesday showed that basic wage growth was 2.1 per cent during the three months to the end of August when excluding bonuses, unchanged from the previous three-month period and marginally higher than the 2 per cent pencilled in by analysts, but well below inflation.

Figures earlier this week showed that inflation had hit a five-year high of 3 per cent in September, piling fresh pressure on the Bank of England to raise interest rates next month...

“Pay packets are taking a hammering,” said TUC general secretary Frances O’Grady. “This is the sixth month in a row that prices have risen faster than wages. Britain desperately needs a pay rise. Working people are earning less today in real-terms than a decade ago...”

Wednesday’s data also showed that job creation across the UK is continuing, albeit at a slightly slower pace. The number of people in work rose by 94,000 during the period, about half the increase in the three months to July but still a relatively strong rate of growth.

Last time we had headlines like this, somebody delved a bit deeper and worked out that wages for existing jobs were increasing as normal, in line with inflation but that all the extra jobs tend to be lower wage jobs, which drags the overall average down.

Which sort of makes sense; if a local manufacturer pays good wages, then people have extra money to spend on coffee, dragging average wages down You wouldn't expect loads of coffee shops to open up first paying low wages and then magically a manufacturer to set up business there, dragging average wages up

This effect also explains why UK productivity/productivity growth is so low. The reverse applies in France, which has much higher unemployment, but average productivity of those actually in work is much higher than in the UK.

The Germans have a different mentality and score well on both counts, of course, but then again, they have ghastly anti-capitalist measures like explicit and implicit rent controls, which is why they are all so desperately poor.

Wednesday 18 October 2017

Reader's Letter Of The Day

The Evening Standard published three scathing letters on the subject of the proposed reduction in Stamp Duty Land Tax "to help hard-pressed first time buyers get on the property ladder", including mine:

There is no doubt about it, a stamp duty cut will feed directly into higher prices, as a seller can increase the price by the amount of the stamp duty reduction, leaving the first time buyer no better off. Exactly the same has happened with Help to Buy, which the large builders have admitted is the main reason for their recent profitability.

Rather than pumping ever more money into the private land market, we would be better served if Help to Buy was scrapped and stamp duty and regressive Council Tax were replaced with a flat Land Value Tax, which is both progressive and efficient.

Mark Wadsworth, Young People's Party

Some Tories ne-e-early get it.

Tim Montgomerie in The Sun:

A YOUNG person from a town or city that has seen its main industry close has two choices – if you can call them choices.

Choice one is they move to London or another prosperous part of South East England. They’ll get a job but half their earnings will be spent on commuting and on renting, in all likelihood, a small room in a shared, cramped flat. Given the house prices in Europe’s financial hub — pushed through the roof by Russian, Chinese and Middle Eastern money ­— the chances of our young person ever owning their own home is about as high as a female getting paid the same as a man at the BBC.

The alternative youngster is staying in the post-shipbuilding, post-coalmining, post-steelmaking, post-post office community of their upbringing. As post offices, libraries and other amenities close, high streets become low streets ­— filled with bookmakers, payday loan outlets and second hand clothes shops.

That ugly choice wasn’t spelt out by Labour’s Jeremy Corbyn but by Ruth Davidson, the Scottish Conservative leader. By winning seats in June’s election, she can claim to have kept Theresa May in Downing Street — albeit only just.

Davidson has earned the right to be heard by her party — and in an essay published on Saturday she called for a “bold”, “ctrl-alt-delete” reboot of capitalism and an end to the hardships many vulnerable Britons can see no end to.

She is not an opponent of the economic system that has produced so much prosperity across the planet over recent decades. She correctly declares that “the world is a richer, healthier, better educated and more equal place than at any time in my lifetime” because of free markets and free trade.

But if life is better for Chinese shipbuilders, it’s not better for British shipbuilders. If life is better for inventors of robots, it is not better for the workers replaced by them.

When only 19 per cent of British adults think the next generation will be better off and half think their children could be worse off, it is not surprising that a politician such as Mr Corbyn, who promises a change of direction, is more popular than a Prime Minister who promises to be “strong and stable”...

[Ruth Davidson] targets CEOs who get high pay awards but run unsuccessful companies. Also in this kickboxer’s sights are companies such as Amazon for not paying fair taxes or wages. Then there are the new monopolies who use market dominance to crush competition and cheat consumers.

Some right-wingers will complain that Davidson sounds like a Lefty, but that would make Adam Smith a Lefty, too. Smith, like Davidson, was a Scot and his writings of 250 years ago are seen as the first and best guide to the benefits of free enterprise.

But as Davidson argues, much of what he wrote is forgotten by those capitalist fundamentalists who claim to be his heirs. Smith, after all, attached words such as “mean and malignant”, “sneaking”, “vile” and “falsehood” to the behaviour of some business people of his time.

And the British people, such as Smith, Davidson and Michael Gove — who has encouraged a distinction between the “deserving and undeserving rich” — are not against all business people.

They see some wealth as merited, some not. Eight in ten, for example, happily accept that inventors of products and services deserve their money. Only 17 per cent, however, say the same of top bankers. Only three in ten see property investors and chief executives as deserving of their wealth.

And the people are largely right. Banking, property and corporate pay markets are distorted by central bank policies such as quantitative easing and by government policy such as planning controls and banking bailouts.

Ruth Davidson recognises that if Mrs May does not cut back the favours that give capitalism a bad name, voters may turn to a politician like Corbyn. If he wins power, it won’t just be the undeserving wealthy who are closed down. His taxes and regulations will produce the biggest closing-down of modern times.

The bit that neither they, nor Corbyn, nor most of the great British public understand (or do understand, but only mention en passant) is the distinction between "rent" and "monopolies" (bad) and proper free market liberalism (good). They try and tip toe round the topic, because following that line of thought would lead to the realisation that "Neo-liberalism" is just the tip of the Home-Owner-Ist iceberg; and that while taxes on output and earnings are bad, some taxes are actually good (or at least a lot less bad).

Tuesday 17 October 2017

Fun Online Polls: LVT vs Wealth Tax; the North South divide

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

3% of £80 is more than 0.5% of £100. So what would raise more revenue - Land Value Tax or a general Wealth Tax?

Land Value Tax - 94%
A general Wealth Tax - 6%

Thanks to all 33 who took part, a low turnout but an arcane topic.

I would have thought the maths was obvious, but I got some real grief from two acadamics/communists/Homeys (their stand point was not clear) on Twitter who demanded that I refer them to a 'study'. I asked them what they thought the figures were and they refused point blank to even give a hint as to what they thought the numbers might be. They just insisted I was wrong.

For sure, my numbers are rough and ready, but the principle stands.

1. Land and buildings are at least two-thirds of total household 'wealth'. The net cash is negligible (one man's mortgage is another man's deposit) and the rest is largely shares/pension funds.

2. We know from the French that there approx. 1% wealth tax rate was driving wealthy people abroad, which is why Macron wanted to exempt everything except land and buildings. By exempting non-land 'wealth', he reasonably expected to increase overall tax receipts (to howls of outrage from Homeys and Socialists alike).

3. Politically of course, you can only apply a wealth tax to the 'wealthy' so there is an arbitrary threshold of EUR 1 million or something, pushing potential receipts down much further. Imagine the outcry if they had abolished the threshold and made everybody pay on everything.

4. Applying a wealth tax to cash is madness anyway, there's already income tax on interest income from cash savings (ha!) and a stealth tax on cash savings called 'inflation'. Applying wealth tax to shares is also madness, as dividends are gains are usually taxed. The more cash and shares you have, the more tax (income tax, inflation tax and capital gains tax) you pay. That's quite enough tax.

5. Unlike the critics, I have at least prepared one wealth tax return, back in Germany in the 1990s. Their wealth tax was about 1% p.a. with a high threshold, at the last count it raised about EUR 5 billion a year whereas their very modest Domestic Rates (Grundsteuer) raises EUR 20 billion a year, which is a small fraction of one per cent of what houses are worth.

6. In the UK, the closest thing we have to Land Value Tax is Business Rates, which works out, coincidentally, to about 2% - 3% of what the land and buildings would sell for. Council Tax/the TV licence fee are a distant poor cousin of LVT (being very regressive) and those two between them raise £30 billion a year, less than 0.5% of what houses are worth.

7. The closest thing we have to 'wealth tax' is Inheritance Tax which raises a modest £4 billion a year, assuming a death/inheritance every 40 years that implies an annual rate of about 1% on the value of 'wealth' over a relatively low threshold (£325,000). Those above the threshold own a disportionate amount of 'wealth' (probably at least half of all of it) so an annual wealth tax of 1% on all 'wealth' would raise maybe £10 billion a year.

8. The real world also tells us that most countries have some sort of tax on land and buildings; very few have 'wealth taxes' in the narrow sense, which gives us more clues. Not that academics/communists/Homeys have ever put much thought into this.
A recent article in The Daily Mail on the North-South divide said that it started when the Vikings invaded in the north east; they got as far as a line from London to Chester, with our greatest King ever (Alfred) holding the line to the south-west. The modern A5 road, which in turn runs along an old Roman road between their two major outposts (pushing the origin back even further) is the modern border. From south-east to north-west, in other words.

That's all news to me. As a born Northerner who's lived in London half his life, I always assumed that that the true north-south divide runs diagonally in the opposite direction, from Bristol to Norwich, from south-west to (slightly more) north-east.

(Watford Gap is pretty much where the two lines cross, giving it extra significance.)

In the south there are more Tory MPs, higher house prices, smug Home-Owner-Ists and rent seekers*, drier and sunnier weather, lovely country lanes for driving on, more arsehole drivers on the motorways, flat countryside with no lakes or mountains, containing London and a few little towns.

The north is the opposite; more Labour/SNP/Plaid Cymru MPs, cheaper houses*, more people with proper jobs, terrible weather, fewer good driving roads (A66 excepted), courteous drivers who stick to speed limits, dramatic valleys and mountains, rivers and lakes, dotted with medium sized towns.

* The BBC published some good stats on inflation-adjusted house prices since 2007 today, the line between 'winners' and 'losers' is pretty much Bristol to Norwich.

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

The UK's North-South divide runs from... Bristol to Norwich or London to Chester.

Vote here or use the widget in the sidebar.

If only we could get Jeremy Corbyn The Adam Smith Institute to understand about capital

From here, on the topic of Uber:

Because they've all been making great gaping losses as they start up, meaning that they've needed capital to exist. And that's the problem with cooperatives, the only capital, by definition, that is available to them is what the workers are bringing to the table themselves*. Uber has swallowed however many billions it is and still makes gargantuan losses.

My reply:

In principle you are correct and Corbyn is wrong anyway, but Uber is a very poor example.

Most of the money they raised was spent on advertising (the same goes for all these intermediary companies). Uber's actual app works fine but is just one of many dozen such apps which work just fine. Uber's main spend was on somehow securing a quasi monopoly position (footnote 1) by bombarding us with advertising, which is not capital at all, it is a monopoly position (or 'land' to use David Chester's classifications).

Footnote 1) Clearly, passengers want to use the app with most drivers and drivers want to use the app with most passengers, and it is far more efficient if everybody uses the same app, or marketplace. So being Number 1 gives you a huge advantage. but simply owning the marketplace and skimming off from buyers and sellers is not contributing to the overall functioning of the market, it is hindering it.

Inevitably, a Faux Libertarian wades in:

A 'quasi-monopoly' is not a monopoly at all. Its not even close to a monopoly.

All Uber's done is promote its brand - like every other business that's ever existed.

Sure, advertising is not capital - but the brand is.
1.Uber doesn't 'own the marketplace' for ride-sharing.
2.Uber developed the app - shouldn't they get a share of the wealth that people using it create?
3.Uber maintains the app - so shouldn't they get a share of the wealth that people using it create to support maintaining the app?

(1. Clearly, Uber does own the 'marketplace'. Uber IS the marketplace.
2 and 3, straw men arguments. Return on capital or payment for services provided is different to monopoly super-profits.)

To which I replied:

So you simply refuse to acknowledge the existence of 'agglomeration benefits'? Do you not grasp that Uber's actual capital (their clever software) is no probably better or worse than dozens of competing app's which have fallen by the wayside, simply because there is no point being number 2 or 3 in the market? It is what's called a natural monopoly. I suppose you could short circuit this and deny that any monopoly has ever existed anywhere, because they all required some modicum of business acumen or luck to get them started.

* On the facts, the original argument is weak anyway. Uber has spent $1 billion on advertising over the past few years and has signed up half a million drivers. That's a few $100 per driver per year, a trifling sum compared to what drivers spend on cars, depreciation and other running costs.

Had drivers had the nous or initiative to set up their own app and just all sign up to it, it would not have required any massive advertising campaign. The spend would not have been a few $100 per driver per year, it would have been a one-off cost share of less than $100 and running costs would not be 20% - 30% of fares, it would be 2% or 3%, like any normal payment handing charges.

By default, every passenger would use their app because there wouldn't be anything else. So less 'capital' (i.e. money) would have been spent. What Uber was really spending on was persuading drivers and passengers to sign up to something which they could have done themselves for virtually no cost (had they had the nous and initiative, which they didn't), hoping to harvest the agglomeration benefits for themselves in future.

Saturday 14 October 2017

Yeah, but whose back garden?

From The Daily Mail:

* Kieran Evans was given keys to 'iKozie' home in Barbourne, Worcester after it was air-lifted into a back garden

*Thee 186sq ft (17.25sq m) space includes bedroom, kitchen, bathroom 'module' and an entertainment zone

* Project, believed to be first of its kind in world, is aimed at solving Britain's homelessness and housing crisis

The article doesn't say. At a guess, it's his parents' back garden and there's more to this than meets the eye.

Car hits house

Couple have lucky escape as reckless driver crashes through side of their house as they slept in their bed

Friday 13 October 2017

Idiot argument of the day.

While many of his points are sound, Mark Littlewood jumps the shark with this:

...for example, try to imagine government food vouchers being redeemable at McDonald’s.

??? The government issues food vouchers all the time. They are coins and notes, or their electronics equivalent, redeemable in McD's and just about anywhere else.

"A cost effective solution to the nation's ongoing housing crisis". Not.

More glorious nonsense from The Daily Mail:

This stunning tiny 28-foot-long [mobile] house could be a solution to the housing crisis using a space-saving design without losing any home comforts...

Those 'tiny homes' (as beautiful as they are) require a fair bit of land, maybe 50 sq yards. They're only 'cheap' if you buy or rent a bit of land in the middle of nowhere. Try buying or renting 50 sq yards of land where housing is expensive and you are back to square one.

A block of flats with several storeys only uses ten or twenty square yards of land per flat, ergo they are cheaper than 'tiny homes', despite being a lot bigger, once you factor in the price you have to pay for the land.

But that doesn't help people wanting to rent or buy a flat. If you build higher, that doesn't reduce the selling price/rental value of the flats, it just increases the price payable for the land.

Rinse and repeat.

Thursday 12 October 2017

Daily Mail on to form

GP, 34, who was accused of beating his ex-wife and shoving a DIRTY NAPPY in her face during a heated row in their £569,000 home is given a warning over his conduct

Wednesday 11 October 2017

Another one of those "vehicle hits house" stories

From The Daily Mail:

A couple had a lucky escape when a van ploughed into the front of their thatched cottage. Val and Steve Fossey were about go to bed when they found the white van embedded in the front of their 16th century listed cottage in Bedfordshire.

The vehicle had careered round a bend before crossing a grass verge, going through a hedge and ploughing into their home. A 34-year-old man was arrested at the scene on suspicion of being unable to drive through drink or drugs and is in police custody.

1. This happens far more often than you think. Top tip - don't live on the outside of a bend or at the end of a T-junction or cul-de-sac.

2. On a philosophical level, is it really a 16th century cottage? It's clearly in the 21st century. In the 16th century, no cottage was ever struck by a motor vehicle.

3. Sadly, the Mail does not tell us the cottage's potential selling price.

Fun Online Polls: Brexit, Catalonia and the French wealth tax reforms

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

Which of the following applies to you...

Pro-Brexit; pro-Catalan independence - 78%
Anti-Brexit; pro-Catalan independence - 7%
Pro-Brexit, anti-Catalan independence - 11%
Anti-Brexit; anti-Catalan independence - 3%

Good, I'm with the intellectually coherent majority on this. Thanks to all 99 who took part.
Re my post of yesterday, this week's Fun Online Poll is about maths and logic:

"3% of £80 is more than 0.5% of £100. So what would raise more revenue - Land Value Tax or a general Wealth Tax?"

Vote here or use the widget in the sidebar.

Tuesday 10 October 2017

The New Economics Foundation land value database

They've ground out the sales figures published by HM Land Registry to come up with this.

All it needs is your postcode and it will tell you an approximate selling price per sq m of land where you live.

The estimate for mine came up within +/10% of my own estimate, so well done! Not sure how much use it is, but it does illustrate that valuing urban residential land is pretty easy.

One step forward, one step back...

From The Independent:

Emmanuel Macron’s administration will propose a tax on luxury yachts, supercars and precious metals in France’s 2018 budget.

Lawmakers will propose amendments after critics attacked the President’s move to scrap the wealth tax in France. Mr Macron abolished the tax, which has been seen as a symbol of social justice for the left but blamed by others for driving thousands of millionaires abroad.

The wealth tax, introduced by the Socialists in the 1980s, was levied on individuals with assets above 1.3 million euros (£1.2 million). Initial plans were to replace it with a real estate tax but yachts, luxury cars and jewellery were supposed to escape.

"The idea of the wealth tax reform was that there should not be a brake on contributors to economic production, that we suppress taxes that deter investors," Richard Ferrand, leader of the Republic on the Move parliamentary group, told Ouest France. "Taxing real estate wealth is compatible with this, but goods such as yachts, luxury cars or precious metals do not contribute to the productive economy either."

Unusually for me, I praised Macron for replacing the general wealth tax with a land value tax; what the idiots have now done is reverse that for a complete non-reason: "goods such as yachts, luxury cars or precious metals do not contribute to the productive economy". Those things are very much part of the productive economy. People produce them, needs are satisfied, people get paid wages etc. There is no fundamental qualitative difference between inflatable dinghies and super-luxury yachts.

They also miss the point. Even if the idea is just want to "squeeze the rich", you can raise far more from a straight land value tax than from a general wealth tax because you can apply a high rate to land (which makes up the bulk of 'wealth' anyway) and collect it all (land is immobile). If you treat all 'wealth' equally and thus apply the same rate to all of it, then the revenue maximising rate has to be very low because it is too easy to evade/under declare/hide all the non-land 'wealth', or simply move abroad and take your non-land 'wealth' with you, as many have done. 3% of £80 is more than 0.5% of £100, if you see what I mean

There is no justification for a general wealth tax anyway, of course, but sod principles, it's about 'what works'. If something doesn't 'work', it's a clue that it was a bad idea.

I suppose this could be a clever move by the French Home-Owner-Ist fifth column to minimise the tax rate on their land by equating it with manufactured goods? Who knows?

Monday 9 October 2017

Cattle news round-up

From The Daily Mail (a fortnight ago, I never got round to posting it):

Things got bloody in the bullring on Sunday as two matadors were brutally gored by the bulls they were attempting to take down... After being hooked under the ribs on the right side, Serna even had to be carried out of the ring and rushed to the hospital. Photos show him grimacing in pain and using his blood-covered hand to stop any further bleeding while being evacuated from the bullring.

From The Daily Mail (today):

A man, 33, was fatally gored in the neck as he ran from a bull seconds after he had waived a jumper at the incensed animal during an event in Spain on Saturday.

He was participating in the Fiesta del Toro Revolao when he was pinned to the ground and gored in a field next to screaming onlookers near Valfermoso de Tajuna, in the central province of Guadalajara. In a video from the event, the now [sic] deceased man is seen flapping a jumper at the bull, then sprinting away as it chases him.

Sunday 8 October 2017

Nominal rents index vs nominal wages index, 2005 to 2017

I have been updating The KLN blog (the bulk of which I originally did in 2013) for the past couple of weekends.

The Nationwide last published their chart in 2012, so here's an updated chart showing ONS figures for nominal wages and nominal rents from 2005 to 2017:

Saturday 7 October 2017

Daily Mail on top form

Female teacher brought pupil, 15, for sex sessions at £750,000 home of her council chief executive mother

She also took the teenager to her parents' £750,000 home in Wanstead Park, east London, where she performed sex acts on him and had sex.

The well kept four-bedroom red and white brick Victoria terraced house has a high evergreen hedge at the front.

Friday 6 October 2017

Economic Myths: deficit spending reduces deficits

In this article in Counterpunch, the author states that tax revenues are 26% of US GDP and the velocity of money is seven. Therefore, if the government pays out $1 extra as unfunded Citizen's Income/helicopter money, it will be spent seven times in a year (the velocity of money, a separate Economic Myth); so total spending will be $7 more, generating $1.82 in additional tax.

This is of course mathematical nonsense, but you hear it a lot from left wingers.

Best case,the recipient gets a fresh new unfunded $1 at the start of the year, let's assume that genuinely does increase demand so total spending goes up by $1. The supplier receives $1, pays 26c tax and spends 74c; the next person in the chain receives 74c, pays 19c tax and spends 55c, and so on.

It is a circular calculation, after a year and seven times round, the total tax paid will be 88c, so this deficit has, unsurprisingly, increased the deficit (although not by as much as the original spending). No matter how many times it is spent, it is mathematically impossible to get the full $1 back in tax.

Funny that lefties go along with this sort of thing while denying there is a Laffer Curve - despite they are the same thing (up to a point).

Think about it, in economic or cash flow terms from the government's point of view, it is the same whether you give people an unfunded UBI or an unfunded tax cut. Politically they are different but no matter. So using the left wing logic, reducing tax rates would always increase tax revenues.

Funnily enough, the right wing nutters believe this, even though it is clearly not true. All the Laffer Curve says is that while very high rates of tax on earnings* bring in less revenue than sensible rates; sensible rates bring in more than very low rates. (* The Laffer Curve doesn't apply to taxes on rents, of course).

As per usual, the left and right wing extremists accidentally agree with each other without realising it. And they're both wrong anyway.

Thursday 5 October 2017

More London taxi-based rent-seeking fun

From The Daily Mail:

The number of Uber drivers in London should be capped to ensure 'healthy competition and consumer choice', the boss of a rival minicab app has claimed. Kabbee chief executive Justin Peters called for a limit on the proportion of minicab drivers overseen by one company if Uber overturns a decision not to renew its operating licence.

'Nuff said.

From The Evening Standard:

An "extortionate" rise in licensing fees for private hire car operators in London will force thousands of drivers out of work and close hundreds of cab firms, it was claimed today. Transport for London has approved increases that will see five-year fees leap from less than £3,000 to £700,000 for some operators.

The charges, which last rose in April 2013, depend on the number of cars run by firms. Those with between 101 and 500 will see their licence fee jump from £2,826 to £150,000. Operators with 501 to 1,000 cars will see their bill jump from £2,826 to £350,000 over five years, while those with 1,001 to 10,000 cars will see their fee go from £2,826 to £700,000.

1. TfL is doing a bit of bureaucratic rent-seeking here. It's budget is about £200 for each driver and each car per year for monitoring, which is of course way too high.

2. If it really cost this much (which it doesn't), it would seem reasonable to charge £200 per driver and per car a year. So if anything the charges are too low.

3. A minicab business with 10,000 drivers is only paying £14 per driver per year (£700,000 ÷ 5 years ÷ 10,000 drivers). This is a slap in the face for a business with 1,001 drivers, which has to pay £140 per driver per year (the same calculation applies in every band) and acts as a sort of barrier to entry/growth. The marginal hit from going from 999 to 1,001 drivers is more or less infinity for those last two drivers.

4. Nonetheless, those charges aren't huge, absolute maximum about £3 per driver per week, divide that by a few dozen journeys and it's next to nothing. If they add that to their fares, it is not going to make a measurable difference to quantity demanded, so the claim that this "will force thousands of drivers out of work and close hundreds of cab firms" is complete and utter bollocks.

Tuesday 3 October 2017

Monarch and the monopoly value of landing slots.

From City AM:

Shares in some of Monarch's airline rivals jumped this morning after the news that Britain's fifth biggest carrier had ceased trading.

Easyjet, which was reported to be one of a number of parties in talks with Monarch to save the airline, led the way and was this morning's biggest FTSE 100 gainer. Shares were up almost five per cent by lunchtime. Wizz Air was up almost four per cent and was quick to offer Monarch customers so-called "Rescue Fares" to help people stranded in Tel Aviv get back to the UK. Ryanair shares rose 2.64 per cent while Flybe was up 2.2 per cent and British Airways owner IAG was up over two per cent.

According to another article, the increase in value of shares in the other airlines was £500 million (ironically, a similar amount to what Monarch's last owners lost).

Why would this happen? Woolworth's, MFI and HMV went *pop* ten years ago, because retail generally was doing badly (credit crunch and internet competition) and they were doing worst. Did shares in other retailers jump? No. They all had the wolf at the door.

The answer is simple. From The Birmingham Mail:

Rivals have begun circling the carcass of collapsed airline Monarch in the hope of bagging its landing slots as the firm's administrator prepares to carve up its assets.

The likes of easyJet, Wizz Air, Norwegian Air Shuttle and British Airways owner IAG are understood to be mulling moves for the carrier's slots, which span Manchester, Gatwick, Birmingham, Luton and Leeds-Bradford airports, according to people familiar with the matter.

Robin Byde, transport analyst at Cantor Fitzgerald, said that Monarch's assets would be attractive to easyJet in particular. "Monarch assets may enable easyJet to increase frequencies on common routes, gain more attractive year-round and seasonal slots, and generally take market share. On fleets, synergies could be attractive as Monarch currently operates 34 Airbus A320-family aircraft which are compatible with easyJet's fleet."

The allocation of landing slots is murky, historically, airlines got them "for free" on a use-it or lose-it basis.

You can sell them on provided you've actually used them 80% of the time over the past X months, so the liquidators of Monarch only have a short period to sell them before the slots all forfeited. So there's half a billion quids' worth of mini-monopoly slots now to be sold cheap in a fire sale or given away "for free" by the regulators (with a corresponding number of cheap second hand aircraft), hence the increase in the share price of its competitors.

Autonomous Vehicles

There has been a lot of talk about autonomous vehicles, something which I would quite enjoy, and lots of outfits are working on developing one. 
One of their alleged 'virtues' is that they will be 'safer' than cars driven by humans.
Have you noticed how much you use eye contact with other road uses when you are driving or walking around?  There's a junction I have to use on my way home from work and the only way you can ever join the traffic stream is if you engage with a motorist in it by eye contact and they then let you in.  Is that going to happen with robots?  This also applies to pedestrian crossings, or even just some hooray deciding to cross the road randomly.
Apropos of this, Dutch research ( and actions https://www.theguardian.com/environment/bike-blog/2017/sep/22/what-happens-if-you-turn-off-the-traffic-lights ) showed that making it more necessary for road users to engage like this, rather than relying on traffic lights and other traffic management techniques, reduced accidents and made people happier.
Perhaps we'll have to wait for proper autonomous vehicles until they can benefit from Sirius Cybernetic Corporation GPP (https://en.wikipedia.org/wiki/Technology_in_The_Hitchhiker%27s_Guide_to_the_Galaxy#Sirius_Cybernetics_Corporation ) .  If so I don't think I want a depressed one..
Ho hum.

Monday 2 October 2017

Fun Online Polls: Crash for cash; Brexit and Catalonia

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

Certain parts of Birmingham, Bradford, Manchester and Oldham topped the league for Crash for Cash. Do these areas have anything else in common?

No - 3%
Yes, but I'd rather not say it out loud - 63%
Yes, it's… [please specify] - 33%

Of those who had the nerve to say something, six said what I was thinking. But it's probably a complete coincidence. What's worrying is that two-thirds of respondents - me included - don't dare say what they think.

Thanks to all sixty who took part, as ever!
People's views on Catalania's possible independence raise some interesting questions, if you compare and contrast with their views on Brexit.

I'm a small government liberal-cum-troublemaker, so I was all in favour of the Scottish independence referendum and had no strong view either way (it being none of my business); I voted leave in the EU referendum; and I see no reason why Catalonia shouldn't become independent, they've made their views perfectly clear for long enough. That is, I think, an intellectually coherent approach.

The stereotypical lefties are dead against Brexit but are in favour of Catalan independence; the conservative-nationalists were against Scottish independence, were in favour of Brexit and are against Catalan independence. I can see some sort of pattern in either case.

I'm just not sure about the fourth category - people who are against Brexit and against Catalan independence. Putting EU shills* and Spanish nationalists to one side, where do they fit in? Are they left-conservative? Scared of any change ever? The 'liberal metropolitan elite' or those aspiring to be?

So that's this week's Fun Online Poll, just to see how many are in this mystery fourth category.

Vote here or use the widget in the sidebar.

* UPDATE: I think the EU's official statement (h/t @ProfSteveKeen) makes their position clear enough:

Under the Spanish Constitution, yesterday's vote in Catalonia was not legal.

For the European Commission, as President Juncker has reiterated repeatedly, this is an internal matter for Spain that has to be dealt with in line with the constitutional order of Spain.

We also reiterate the legal position held by this Commission as well as by its predecessors. If a referendum were to be organised in line with the Spanish Constitution it would mean that the territory leaving would find itself outside of the European Union.

Beyond the purely legal aspects of this matter, the Commission believes that these are times for unity and stability, not divisiveness and fragmentation.
We call on all relevant players to now move very swiftly from confrontation to dialogue. Violence can never be an instrument in politics. We trust the leadership of Prime Minister Mariano Rajoy to manage this difficult process in full respect of the Spanish Constitution and of the fundamental rights of citizens enshrined therein.

Are they mental? How can a vote not be "legal"? It might not be in any way binding, being more of an opinion poll/peaceful protest, but neither of those are actually illegal, are they?