Wednesday 28 February 2018

Today's Guest Post was emailed in by a Home-Owner-Ist.

Displaying the complete lack of self-awareness that is typical of Home-Owner-Ists, Mick McK emailed me as follows:

Well Mark, remember how you reveled in the tax attacks on landlords? We warned what would happen and you still loved the attacks. You were overflowing with glee. Hope you're proud!

More than 120,000 British children will be homeless this Christmas, says charity

Homelessness In The UK Needs To Be Tackled Now

Rough sleeper numbers in England rise for seventh year running

Number of homeless people sleeping on streets in England hits highest level on record


In the real world, Home-Owner-Ism leads to homelessness, by definition, that's the whole point. They like having plenty of visibly homeless pour encourager les autres; it keeps tenants in abject fear of being evicted, so they make sure that the rent gets paid first. It's a bit like the assumption that Tories like(d) a bit of unemployment because it keeps wages down.

If you can be bothered to read the articles he linked to, not a single one says that a modest reining in of the favourable tax treatment for BTL landlords has led to an increase in homelessness.

Even if we accept that there has been an increase in homelessness over the past two years, Mick McK offers no explanation as to why there was already so much homelessness before then, when BTL and rental income was given very favourable tax treatment.

'Nuff said.

Tuesday 27 February 2018

Faux Lib shill gloriously missing the point.

From City AM:

DEBATE: Should tech firms be taxed on revenues, rather than profit?

Sir Vince Cable:

These large, mainly technology focused firms have been cheerfully manipulating where their profit is booked to pay minimal tax in the UK for many, many years now.

The Treasury is looking at a new tax that would be levied on these firms’ revenue, rather than profit, which is an extremely robust step – but probably one that is necessary in the current environment. A revenue-based system of taxing these firms could be used, in the short term, as a rough proxy for their economic activity and act as a strong disincentive to tax dodging in our country.

However, this is something of a stop-gap measure. In the long run, we need a proper international agreement to create a more suitable taxation arrangement that properly captures the amount of tax firms should be paying and where they should be paying it.

Note how he is being quite nuanced about it, and I have to agree.

In their published worldwide group accounts this small handful of multinationals are reasonably honest about how much profit they make in total (to keep the stock markets happy). What they can fudge to the n-th degree (and there is no scientifically right or wrong answer) is where those profits are earned. Assuming that corporation tax is a less bad tax, the only rough and ready way to work out in which country they earn their profits is to assume that profit is a certain fraction of turnover. All you need to do is multiply turnover (advertising revenues) from any country by that fraction, then multiply that by your corporation tax rate.

Countries with national and local/state profit taxes (USA, Germany) apply this method in real life and it 'works'. It is not, strictly speaking, a tax on turnover like VAT, it is a way of apportioning net profits between different geographic areas.

So if one group has a worldwide profit margin of 10%, turnover in your country of £1 billion and your country's corporation tax rate is 20%, the assumed profits are £100 million and the corporation tax thereon is £20 million (effective rate 2% of turnover). Perhaps another group has a worldwide profit margin of 30%... then the effective rate is 6% of turnover, and so on. Amazon is still in the loss-leading phase, so the effective rate of tax on turnover would be something like 0.1%.

Here comes the shill who addresses the wrong question and makes two fundamental mistakes:

Russ Shaw, founder of Tech London Advocates and Global Tech Advocates, says NO.

There is no doubt that the biggest multinational tech firms have a responsibility to contribute a fair and adequate level of tax to support the UK’s public sector. Britain’s infrastructure is a pillar of the tech ecosystem which has helped these businesses to flourish.

But officials have to recognise the positive contribution tech giants make to the thriving technology sector and critically in supporting the UK’s startups and scaleups. Just last week, Microsoft announced that it will be investing £14m and opening a new startup accelerator in the heart of east London.

In recent years, investments in tech have reached record levels, and employment in the industry has expanded rapidly. It is therefore an imperative that we ensure the UK remains an attractive destination for large investment. We must protect the digital economy by signposting the UK as being open for business and ensure that our tax policies encourage growth at a time where other European cities are gaining in appeal.

We cannot threaten prosperity by deterring world-leading tech firms.

1. These big companies are like machines that hoover up money from around the world. Clearly, they would prefer to pay the lowest amount of tax possible (same as any sane person), but as long as the overall rate is less than 100% of (unearned) profits, they are happy to hoover. They couldn't care less how the tax is calculated, they couldn't care less whether it is a "fair and adequate level of tax to support the UK's public sector" or not. Who's to say whether Vince's proposed way of working out the corporation tax bill is "fair and adequate"? The government just wants to pluck feathers with the minimum of hissing.

2. Having hoovered up the money and paid some tax, these groups have to decide what to do with it. Pay massive salaries? Pay dividends? Invest in start-up businesses? That's their decision. Having special rules that apply to a handful of multi-nationals has no bearing on whether it's a good idea for them to invest in start-ups in the UK (to whom those rules would clearly not apply) or not.

Monday 26 February 2018

OK, Norway/EFTA option it is then.

Faced with an unexpected narrow majority for Leave in the Referendum, The Powers That Be adopted a simple strategy, make such an unholy mess of it that all but the most hardcore Leavers throw in the towel and say, sod it, let's just stay in. This strategy appears to be working, but only marginally.

My preferred option would be unilateral free trade, that's nice and simple, but it's unlikely that a UK government would ever do something that simple and obvious. As a democrat, I've got to accept that there was only a narrow majority for Leave - we have to respect the 48% as well as the 52% - and a lot of those will have voted Leave out of sheer bloody mindedness in response to the endless Project Fear crapola, which was obviously without substance.

I suppose to some extent, a lot of people who are sticking with Leave are doing it because
a) the EU has revealed its true nature, playground bully from Hell and
b) because they enjoy watching the UK government squirm.

Staying in clearly isn't an option either, that just puts us back to square one, and who knows what vicious treatment the EU will mete out if we go back begging to stay in after all.

Therefore, I personally have decided to bow to those greater minds who really have been looking at this in a fair and dispassionate way for a longer time than I have and think we should try to rejoin EFTA (if they'll still have us), also known as the Norway Option/flexcit, stay in the EEA, and fudge everything else. Given how useless our government is at negotiating, at least we are going for a known known.

Will it be perfect? Depends on what you view as perfect. Will it keep Leavers and Remainers equally un/happy? I would guess so.

Or put it another way, had Cameron come back from his last gasp failed attempt at renegotiation in early 2016 and said "Fuck it, that's it, we are triggering Article 50 right now and applying to rejoin EFTA" I personally would have been over the Moon. I don't see why the context changes that.

Or, even more hypothetically, let's imagine the UK had just stayed in EFTA back in 1973, I guess most people would be happy with the status quo, a few Federalist nutters would be clamouring for full EU membership; a few rabid outsiders would be calling for us to leave EFTA and go it alone, but I doubt that I or the vast majority would be that bothered either way.

Sunday 25 February 2018

Killer Arguments Against LVT, Not (436)

What is particularly irritating about all these KLNs is that they are not based on facts or reason, even though the Homeys pretend they are. Even if you could sit Homeys down and carefully rebut their objections, they wouldn't say, ah well, good point, I suppose my KLN is baseless. They will just invent another one and would have no qualms about completely contradicting themselves (as the commenters do below).

Emailed in by MBK from The Times, from the comments to an article headed John McDonnell says Labour backs levy on land to replace council tax:

GK: They really are flying the Marxist flags high this week. Will WC 19th February 2018 go down as the week the Socialist Party finally unveiled their true intentions?

John McD clearly said that it would be a replacement tax. One in, one out. Maybe Labour intend to collect more from LVT than they would have done from Council Tax, so what? How is that more "Marxist" than the Tories regularly nudging up the main rate of VAT, something which a Labour government (to its credit) has never done?

Another cyclist: The fairest form of local taxation was the Community Charge - every person who used council services paid for them. Why should two people living in a large house pay more than two people in a small house? Both use the same council services.

A Poll Tax is inherently regressive and difficult to collect, so 'honest' souls would end up overpaying to compensate for those who wriggle out of it. For a given total revenue, the average household would be paying as much in Poll Tax as they would be paying in LVT. The big differences being that LVT is inherently progressive, easy to collect and encourages more efficient use of land and buildings.

Christopher Sheldrake: I have a large garden, it's actually large enough to build a second house on. This was obviously what was originally intended because there is a missing number between us and one of our neighbours.

However, there is zero chance of the council agreeing to give us planning permission to build another house (They even refused a detached garage because they thought the intention was to turn it into a house - it wasn't). So, can McDonnell please tell me how we are supposed to make our garden more "productive" to avoid Labour's squalid Land tax ? The answer is we can't, the council won't let us...

That's a valuation issue, clearly, the valuation system has to be consistent with the basic concept of 'optimum permitted use'. If there's no planning for a second home, then the extra large garden would only incur minimal tax. Observation tells us that people value the first 100 sq yards of back garden or the first one or two off-street parking spaces very highly. The additional price/rent that most people are prepared to pay for anything more than that is minimal (diminishing returns to scale), so the extra tax on the would also be minimal.

... This is nothing more than a tax grab which will, quite by coincidence, of course, not hit Labour Lovies [sic] in Islington with their small gardens, nor their supporters living in council or Housing Association flats.

Bollocks. The LVT on homes in Islington will be very high. how high the LVT-inclusive rents for social housing would be is - and always was - a political decision.

colinus: That's the London vote gone. Carry on McD.

Wahey! That's the equal and opposite argument! He recognises that LVT on homes in London will be a lot higher than Council Tax. Caveat One - it's set at a national rate, which is not clear from the article. Caveat 2 - over half of people in London are tenants and won't be affected.

Toby Jones: What is the difference between taxing land and taxing property? Does it mean that a tumbled down property on a valuable piece of land is presented with a large bill...

Yes, obviously.

... but a central London luxury Penthouse has low tax on the basis that it sits on land along with 35 other flats and they all share the land bill..?

Nope, 80% or 90% of the value of a London luxury Penthouse worth £1 million is land/location value, so it would pay very high LVT. The value of inner-London land is so stupendously high, you can divide it by 36 and still have a very high land value per unit. That's why a pokey flat in outer London costs the same as a normal family home in the suburbs of most other British towns - and would have a similar LVT bill.

Why would you take land values as the basis when the value of the property is 1) more able to be estimated and 2) A more accurate sign of ability to pay.

Because land value is the best measure of benefits received from society in general and/or burden placed by the occupant on society in general; the land/location value of housing is far easier to calculate; and taxing land/location value encourages improvements rather than discouraging them. Pure land value has nothing to do with "ability to pay" of any particular individual household but a) neither does total building/land value and b) they are both good indicators of "willingness to pay" of all households in the area.

drunk and disorderly Brexiter: I tried to have this explained to me by advocates but their answers ranged from outrageous to stupid.

I asked what an elderly person living in a large house should do if they can't afford the LVT based on the value of their property. Considering they probably bought the house when it was worth far less and its current value was completely out of their control...

Roll up and defer, that's what most LVTers say. If the value is completely out of their control, then that's a bit of a clue bat that the gain is entirely unearned. See the equal and opposite KLN: "I have worked hard to improve my home and shouldn't be taxed on my own efforts". Er, income tax?

Apparently that person should sell and buy something smaller...

If they don't want to roll up and defer, can either buy something smaller in the same area, or something the same size in a cheaper area, or indeed something much larger in a much cheaper area.

So - ignore the nastiness of uprooting someone against their will for the moment - I then asked what it would do to property prices for first time buyers if elderly people kept buying up small homes. The response to that was silence.

The price of the sort of homes that young couples would like to buy - family homes - will clearly fall, as there will be more of them on the market. That also saves them the hassle of moving again in a few years if/when they have kids, win-win.

Economic Myths: Immigration and economic growth

City AM is a cheer leader for landlords and banks (it's the newspaper equivalent of the Taxpayers' Alliance). It has consistently been in favour of liberal immigration policies for foreign workers, which gives us a bit of a clue a to who benefits most from immigration of foreign workers. NB, I am heartily agnostic on the issue and have no strong view one way or another.

But, like the right wingers who insist that reductions in tax rates always lead to higher tax revenues overall, they have jumped the shark with this:

Economists have repeatedly warned that a government can either have economic growth or it can have net migration reduced to the tens of thousands.

It cannot have both.

Woah, woah, woah! If that were true, then overall global GDP growth would always be zero. It would increase in immigration countries and fall in emigration countries in equal and opposite measure. That is clearly not the case, and I doubt that any serious economist has ever said anything quite as stupid as that.

Friday 23 February 2018

Satire copies satire

VIZ, September 2014, spoof advert for an 'off-road' vehicle with the slogan "Primary school halfway up a fucking mountain? No problem."

Newsthump, February 2018, spoof article titled "Range Rover launch new 4×4 for people whose local Waitrose is halfway up a mountain".

I find this paragraph strangely hypnotic

From The Sun:

The other fatalities, five men and two women, were Panneerselvam Annamalai, Rishi Ranjeev Kumar, Vivek Baskaran, Lavanyalakshmi Seetharaman, Karthikeyan Pugalur Ramasubramanian, Subramaniyan Arachelvan and Tamilmani Arachelvan.

The world would be a better place if we'd never had to read it, obviously.

Thursday 22 February 2018

That was the Cow of the Week that was.

From The Daily Mail:

A runaway cow that avoided captivity for weeks died Thursday after it was caught and put on a truck to be taken to a farm, a local official said.

The red Limousin beef cow fled Jan. 23 as it was to be transported to a slaughterhouse. It gained celebrity status as it defended its life and freedom, tricking searchers, swimming from island to island and roaming a lake-filled region near Nysa, in southwestern Poland.

Bartosz Bukala, a spokesman for Nysa authorities, told The Associated Press that the cow had been captured but died while being transported to a local governor's farm where it was to be kept.

Local internet portal said a team of five, including a veterinarian, moved early Thursday to capture the animal, valued at some 5,000 zlotys ($1,500,) near the village of Siestrzechowice. It took a few hours and three shots of sedatives before it was put on a truck, but the animal died there, apparently from stress, the report said.

Might as well have left her there, in other words.

"Queen of the South keeper crisis after goalie hurt by cow"

Spotted by Paul F at the BBC:

A Scottish Championship club is facing a selection headache after its reserve goalkeeper* was hit by a runaway cow. First choice goalkeeper Alan Martin is out with a thigh injury with Jack Leighfield standing in.

Queen of the South's Sam Henderson, 19, hurt his shoulder in the incident on his father's farm. Henderson was on the bench for last weekend's draw with Morton and was expected to do the same against Dunfermline on Saturday. However, the accident has meant he is facing a race to be fit.

* I think that young Sam was the reserve reserve goalkeeper. The actual reserve goalkeeper is Jack Leighfield (who happily has not been injured, by a cow or otherwise), but hey. So what the club now needs is a reserve reserve reserve goalkeeper to tide them over.

"Migration figures: Highest number of EU nationals leaving UK in a decade"

... screams the BBC:

The number of EU citizens leaving the UK is at its highest level for a decade, figures from the Office for National Statistics show. It estimates that 130,000 EU nationals emigrated in the year to September, the highest number since 2008.

Oh dear, so our European brothers and sisters are voting with their feet like the Remainers threatened they would and the Leavers hoped/promised they would? I suppose some of the wilder forecasts made by either side prior to the Referendum will actually happen, if only by coincidence.

I wonder who'll do our nursing and harvest our vegetables instead...

Meanwhile, 220,000 EU nationals came to live in the UK - 47,000 fewer than the previous year. Net EU migration - the difference between arrivals and departures - was 90,000, the lowest for five years.

OK, nothing to worry about then. This is all as fatuous as Nixon's comment that "The rate of increase of inflation is going down."

Saturday 17 February 2018

Cow of the week

Cow escapes on way to slaughterhouse, smashes through metal fence, breaks arm of man trying to catch her then swims to safety on island in lake

H/t James Higham

Friday 16 February 2018

Killer Arguments Against LVT, Not (435)

From the BBC:

A plan to raise council tax on second homes in the Yorkshire Dales could affect 3.4 million householders across the UK, it has been claimed...

According to the Yorkshire Dales National Park Authority there are about 1,500 second homes in the Dales - more than 10% of the housing stock.

It argues second homes "deny a home to a permanent resident and push up prices" and increasing tax would "help attract and retain families to live and work in the area"...

If the government agrees, there would be a charge of £8,500 a year on a Band D property...

North Yorkshire County Councillor John Blackie said: "Put simply, firms will pack up and the local young families running them will move away and find their livelihoods where work is available for their skills. It happened in 2001 when foot and mouth blighted the Upper Dales."

Tuesday 13 February 2018

Corporate governance, short-termism and shameless greed neo-liberalism... and Carillion.

They do the hard work so that I don't have to!

At Flip Chart Fairy Tales, a good summary of 'what went wrong' at Carillion*, seguing into a general discussion about how to diagnose short-termism and whether its ill-effects are even measurable.

At Stumbling & Mumbling, a riposte:

We have some more empirical evidence here. Let’s say that stock markets were too short-termist. In such a world, we’d expect them to under-price growth stocks and pay too much for stocks that pay high dividends. 

Generally speaking, though, the opposite has been the case. For most of the last 30 years, high-yielding shares in the FTSE 350 have out-performed lower-yielding ones: the main exception came between 2003 (when tech stocks were under-priced) and 2010**. And the FTSE Aim index – which contains many “growth” stocks” has horribly under-performed the All-share index since its inception in the mid-90s. 

This tells us that stock markets have generally paid too much for growth and too little for dividends. They have been too long-termist, not too short-termist.

Of course, managers can be as irrational as the rest of us. But it’s possible to be too long-termist as well as too short-termist. The biggest problem with corporate governance – as highlighted by Carillion - is not that bosses are too short-termist, but that they have too much power to plunder firms for their own private gain.

Warming to his own theme in his next post:

One feature of neoliberalism is that restraint in the pursuit of self-interest is now absent. Bosses lack Smith’s “impartial spectator” which tells them to hold back, and instead feel no compunction about jostling others. They are content to plunder customers, pensioners, sub-contractors, workers or future workers.

Among her many claims for expenses, Glynis Breakwell, Vice-Chancellor of Bath University, claimed £2 for biscuits. Many of us would not have done so, thinking it too petty-minded to bother. Neoliberals, however, not only are petty-minded but don’t mind being seen as such by others...

And there’s the rub: where they think they can get away with it. My story here is not just about morality. Perhaps there never was a golden era of benevolent paternalistic bosses. What’s happened since around the 1970s is that the restraints upon bosses – from law, social norms and trades unions – have diminished. The problem isn’t just greed, but power.

* On the topic of Carillion, a look at their 2016 accounts is an eye-opener.

Page 92 "consolidated statement of changes in equity" shows that opening net assets were £1,016 million, to which they add reported profit for the year of £129 million and deduct £83 million of dividends and a £440 million increase in the pension scheme shortfall (plus/minus various other bits and pieces) to arrive at closing net assets of £730 million.A massive fucking loss, in other words.

They were honest enough to disclose the pension scheme shortfall, but why on earth was this not treated as an expense in the year, meaning an overall loss before tax of about £311 million? In which case, cancel the dividends and directors' bonuses for a start, methinks.

Page 93 "Consolidated balance sheet" is even more damning.

Gross assets were inflated by £1,670 million of "intangible assets" which is completely made-up numbers, they are worth nothing, in which case the balance sheet would have been negative overall (deduct £1,670 fantasy assets from reported net assets of £730 million).

What are these "intangible assets"?

They are accounting alchemy which enable you to book future profits before they are even earned. When you get a nice juicy PFI contract, with annual costs of £1 million and guaranteed income of £2 million, running for 25 years, you have actually landed £25 million in easy profits. So you sell this contract to somebody else for the net present value, let's say £15 million.

I met a former colleague who works for one of these sharks, who do nothing but buy and sell PFI contracts without ever lifting a spade. Each year, the company which has bought the contract books £1 million actual cash profit and writes off £0.6 million, 1/25 of the £15 million paid in advance, net income £0.4 million.

To what extent Carillion were selling contracts to themselves by doing an Enron with shell companies I do not know, but the end result is the same. And then they would trot along to the willing bank and borrow (say) £10 million secured on the £15 million fantasy asset and use it to pay bonuses and dividends. Pension scheme didn't get a penny, or course.

If that seems a bit esoteric, it is no different to taking out a second mortgage to "release" increases in "equity" in your home. The value of the home is just the net present value of the rental income. You can either collect/enjoy a bit more rental income/value every year in future, or cash in today, borrow against it and spend it all in advance.

Car hits school

From the BBC:

A car crashed into the front entrance of a secondary school at the height of the morning run.

The black BMW was seen driving "at speed" around the car park of Fir Vale School in Sheffield at about 08:25 GMT before it hit the building.

Two men, aged 23 and 20, have been arrested on suspicion of dangerous driving and causing criminal damage.

Inevitably, they were driving a BMW.

"When people of the same trade meet together... the conversation ends in a conspiracy against the public"

In the light of that Adam Smith misquote, let's cast a wry eye on this self-preening article in City AM:

There is no need for a “Hippocratic Oath” specifically in relation to tax, as McDonnell called for, since chartered accountants already ensure that taxpayers – individuals, companies, and others – pay the right amount of tax due under the law. In this way, we help reduce the tax gap by supporting good tax compliance.

Of course, it would be naive to hope anyone would take this purely on trust. Which is why, in addition to being subject to legal requirements, chartered accountants and members of other professional accountancy bodies are also required to follow a professional code of ethics...

But what is rarely mentioned is that almost a third of registered tax advisers are not members of any professional body. This means they are not required to follow any ethical or professional standards at all. If politicians truly wish to get tough and raise standards, ensuring that the high bar set by the chartered profession is applied across the board would be a good start.

Sub-text: raise barriers to entry by "regulating" everybody who isn't a Chartered Accountant, who nobly "self-regulate".

How effective is that "self-regulation"..? From The Daily Mail:

Britain’s big four accountancy firms have been savaged by MPs who have accused them of “feasting on the carcass” of collapsed construction giant Carillion and collecting more than £70 million in the process...

Veteran Labour MP Frank Field, head of the Work and Pensions Committee, said: “The image of these companies feasting on what was soon to become a carcass will not be lost on decent citizens. The former directors of Carillion are, unlike their pensioners, suppliers and employees, alright.

“These figures show that, as ever, the Big Four are alright too. All of them did extensive – and expensive – work for Carillion. PwC managed to play all three sides – the company, pension schemes and the Government – to the tune of £21 million and are now being paid to preside over the carcass of the company as Special Managers.

“It was perhaps telling that, with their three fellow oligarchs conflicted, PwC were appointed to this lucrative position without any competition.”

According to information published by the committees, KPMG has banked £20.2 million in fees since 2008, PwC £21.1 million, Deloitte £12 million and EY £18.3 million.

So 'not very' and yet again, we are presented with evidence that they are actually thieving scum.

Monday 12 February 2018

Big scary numbers!

From City AM:

Water companies have hit out at Labour after the shadow chancellor John McDonnell described the industry as a "national scandal". Labour attacked the water industry today, saying the private sector was handing out "scandalous" amounts in dividends, which have totalled £13.5bn since 2010...

Divide £13.5 bn by eight years and by 27 million households and (say) 3 million businesses, that's an average of about £50 a year, one-third of the cost of the TV licence. I can't get too upset about that.

But compared to my annual water bill (rates not meter) of about £500, that seems quite a chunky dividend. Most competitive businesses pay about £1 or £2 in dividends for every £100 of turnover, not £10. If Labour were really worried about this, instead of making token gestures, they could simply cap prices at a few per cent below current levels, dividend halved, perceived problem solved.

And in the blue corner:

Michael Roberts, chief executive of industry organisation Water UK, has condemned McDonnell's attack on the sector, saying that private companies have invested heavily in water networks and have brought down costs for consumers.

Roberts said: "It's wrong for Labour to suggest that our water system is broken. Water companies secure capital provided by lenders and shareholders, who need water companies to make a return in order to finance significant improvements to the industry. He said that the water sector was "starved of cash" under public ownership, and that private firms have invested in reducing leakages, and have improved water quality.

Change the record, mate. Water companies were privatised nearly thirty years ago, you've had plenty of time to sort it out. Dividends are paid after deducting interest costs, so that's double counting. Further, borrowing money ("to fund investment") while continuing to pay big dividends is Carillion territory. Re-invest your current profits first, if there's nothing left to pay dividends, then so be it.
Also from City AM:

Renters in the UK paid out £51.6bn to landlords last year, the highest rent bill on record.

The UK's rental bill rose by £1.8bn in 2017, according to research published today by Countrywide. The estate agency group said the rise was driven by an increase in the number of renters, and rising rents; the average cost of a new let rose 2.4 per cent year-on-year to £958.

Two-thirds of that is location rent and that IS a "national scandal", not so much that tenants are paying it, but the fact that private landlords are collecting it.

Either way, we're not talking about £50 a year from every household, but £6,000 a year being channelled from every "asset poor" househol to a small minority of "asset rich" households.

And what does Labour have to say about this? They dared mention LVT briefly in their manifesto but beat a hasty retreat once the Homeys co-ordinated their strategy and started mis-describing it as The Garden Tax.

Sunday 11 February 2018

Another one of those "car hits house" stories.

Driver, 22, critically ill in hospital after crashing Toyota Auris into a house while being chased by police

"I'm sorry, can I do that again?"

Watch the first forty seconds of this for a breathtaking display of insincerity. Apologies that the sound is so quiet, you'll have to turn it up to the max to hear it.

Saturday 10 February 2018

Short list

"Female athletes whose surnames end with "-ke" who became in/famous for being good looking rather than winning anything of note"

I can only think of two.

This one and this one.

Friday 9 February 2018

"The Darkest Rush Hour"

From Wiki and Wiki:

The film commences in May 1940, on the last day of British rule in Hong Kong in late 1997.

The opposition Labour Party in Parliament demands the resignation of Detective Inspector Lee of the Hong Kong Police Force for being too weak in the face of the mysterious crime lord Juntao.

Lee tells Conservative Party advisers that he wants Sang, Juntao's right-hand man as his successor and manages to escape. Sang does not want to become Prime Minister as he is busy recovering numerous Chinese cultural treasures stolen by Juntao.

So King George VI must choose the only other man whom other parties will support: Winston Churchill, whom he presents as a farewell gift to his departing superiors: Chinese Consul Solon Han and British Commander Thomas Griffin, the First Lord of the Admiralty.

Tip top house price porn

Via The Daily Mail, Zoopla' new app...

Britain is home to more than 750,000 property millionaires. Fancy finding out when your home will hit the seven figure mark?

I got "2024", in case you're wondering. My neighbour's address scored "over £1 million" and recommended opening a bottle of champagne. It didn't say how often though.

Thursday 8 February 2018

"Nationalisation vs privatisation: the public view"

Here's what DBC Reed linked to in the comments to the previous post on the topic (click pics for links):

It's not as revealing as the previous one we looked at:

Discussion here.

Suffice to say, any serious debate about whether something should be run by the government or private businesses doesn't include waffle about the private sector being more efficient or 'customer focussed', they usually are.

The government is pretty crap at running all but the most simple things, agreed.

But would you really want competing private police forces, or competing private land registries?

Some things have to be run by the government. In a proper democracy, we, the people, decides what counts as a crime and what doesn't, and the police are paid to reduce those crimes as much as possible. Not crap like arresting Twitter trolls. That's yer 'customer focus' right there. Would you want one land registry showing you as owning your home but a competing land registry showing that it belongs to somebody else? How would that work?

The other limit of the private sector is where something - if privatised - would lead to blatant rent seeking. Clearly, we can't have competing private land registries, but what if the Tories had really gone mad and privatised it as a monopoly instead? That business would effectively be able to collect Land Value Tax by charging people 'annual renewal fees' and staff would be bribed into transferring titles.

As (I think) Sobers said, there are some things that are better off in the private sector, even monopolies like water - on the proviso that a government regulator imposes serious price caps, quality and environmental standards etc (or in my view, let's them charge as much as they like and tax them at swingeing rates). This applies to all the natural monopolies on the first list (railways and water).

Health and schools are not natural monopolies or the natural preserve of government but there's too much opportunity for rent-seeking. I see no good economic reason for the government to be involved in delivering letters, broadcasting, generating electricity, telephony, banking or airlines. Bus companies are borderline, private companies are fine for long distance but in larger towns they have to be co-ordinated.

Wednesday 7 February 2018

Economic Myths: The costs of moving home are a benefit to the economy.

Estate agents and other assorted Home-Owner-Ists have an irritating argument against Stamp Duty Land Tax. Here's a random example from

“Current stamp duty levels are a tax on free movement in London and it is massively disappointing that the Chancellor has chosen to ignore this. Families who want to buy a family home in London, perhaps moving from one area to another to buy a larger home for a growing family or to be closer to schools or work, are being penalised and many are opting to stay put to avoid paying punitive stamp duty in the £1.5m to £3m price bracket. 

"The upper price brackets of a family home in central London, between £5m and £10m, are being hit with an aggregate of 15 per cent. This has reduced transactions substantially, impacting on the level of tax collected by the Government and is therefore damaging the economy.

"In addition, there is an entire eco-system built around moving house, from removals companies to furniture suppliers, from interior designers to painters and decorators. All these businesses are being hit by the Government’s refusal to reform stamp duty.”

Putting aside the London-centric wailing about people 'trapped' in £1.5 to £3 million homes and the notion that you need interior designers, it is the last bit that rankles.

If those things happen because people are moving home, they are a straightforward cost, they are a loss to the economy. Family A likes plain white walls and Family B likes dark wallpaper. If they swap homes, Family A has to strip the dark wallpaper and paint the walls white; family B has to buy a load of dark wallpaper and stick it up, merely to reinstate the status quo. Net gain to the economy, zero.

It's the broken window fallacy. If the estate agents' argument stacks up, it would benefit the economy if you weren't allowed to take any furniture with you when you move, you'd have to chuck it in a skip and replace it all. More money for the furniture industry! Must be good?!

The real benefit of people moving home is that they are putting land/location value to more efficient use/squeezing more value out of it each time they move.

Let's assume that the two families swap places because Family A lives in town/suburb 1, but most of them have a job/go to school/like to go shopping in town/suburb 2; Family B live in town/suburb 2, but a majority have a job/go to school/like to go shopping in town/suburb 1.

If they swap places, then the two families save in total several hours a day on commuting. They save time, save money, reduce congestion, reduce pollution, have a few more minutes in bed/at home in the evening; are more likely to be at work/school on time etc. Commuting costs ten or twenty per cent of GDP (if you just compare time spent commuting vs time spent at, so hacking it down must be good.

Those are the benefits of moving home, which - we have to assume - by and large outweigh the cost and hassle, or else people wouldn't do it.
All of which is an argument for replacing Stamp Duty Land Tax with Land Value Tax. Instead of discouraging people from putting land (i.e. roads, amenities etc) to more efficient use, it encourages people to constantly weigh the benefits and costs of moving to somewhere more convenient; it increases the benefits of moving and reduces the up front (tax) cost. Whereby an arbitrary tax like that is in itself not a cost - it is the dead weight cost of staying put instead of moving that is a true cost/loss.

The Homeys of course then flip the logic, and wail that Land Value Tax would 'force' people to move home who don't want to. Well duh, it's market forces at work - LVT is only ever as high as it is because some other household is prepared to pay the extra LVT to live there and make the better use of the available amenities.

Monday 5 February 2018

Things which everybody already knew but are presented as news.

From the BBC:

Mothers in part-time jobs are being hit by a "pay penalty" and are often not given pay rises linked to experience, a new study has suggested.

The Institute for Fiscal Studies report found by the time a couple's first child is aged 20, many mothers earn nearly a third less than the fathers. A key factor was women working part-time in motherhood, the report said.

A gender pay gap between graduates has not improved since 1993, despite gaps narrowing for non-graduates, it added.

The original headline and article was much less nuanced and just wailed on about the 'gender pay gap' and highlighted that the 'gender pay gap' was larger for graduates than non-graduates.

Happily enough, somebody then sat down and actually read the report and did a more accurate write up to explain it's a 'mothers pay gap' and how it arises. The point about graduates is that their salaries tend to increase with seniority much more steeply than for non-graduate jobs, so hitting the pause button on pay rises by going part-time will lead to a bigger gap between mothers and everybody else.

Conversely, seeing as so few jobs require much physical strength*, any natural advantage that men used to have is being eroded. (*Call me a chauvinist, but how many female rubbish collectors do you see?) So we'd expect the 'gender pay gap' at the lower end to flatten of its own accord.

On the subject of graduates, also from the BBC:

Many graduates receive "paltry returns" for their degrees despite racking up £50,000 in debt, says the chairman of the Education Select Committee.

Robert Halfon will say in a speech on Monday, that between a fifth and a third of graduates take non-graduate jobs, and that any extra returns for having a degree "vary wildly". He will also suggest that too many people are studying academic degrees.

University leaders maintain that a degree remains an excellent investment.

Well duh. There are only so many jobs that really need graduates (precious few, if you ask me). If more people are doing degrees than there are graduate jobs, clearly, for the excess, the whole exercise is pointless, purely in career terms (good fun though). People were saying this twenty years ago when Tony Blair went mad and decided half of school leavers 'should' go to university.

And university leaders would say that, wouldn't they?

Sunday 4 February 2018

Public vs private sector, the same tedious arguments (Part III)

I am finding it difficult to have a sensible debate about where the optimum dividing line between 'government' and 'private sector' is. To my mind, it is fairly clear cut. It is not so much a question of one being better or worse, it is a question of each having things which is does better, and woe betide us if the line is crossed in either direction.

For some reason, people don't want to have the debate. They would rather choose examples where either side has clearly crossed the line (and inevitably messed up) and say "Yah boo sucks! That proves that the government/private sector is better at running things!" Nope. These examples merely illustrate where the line is (or should be drawn).

This applies to right wing as well as left wing commenters, they are both deaf in one ear. To pick a couple of examples from my previous post:

From the right:

Sobers: Nonsense [during the Golden Age of Capitalism] the State owned pretty much the entire 'commanding heights of the economy' during that period (Mines, steel mills, railways, road transport, docks, shipbuilding, power generation and distribution, telecoms etc etc). There was no way the State was merely sticking to building the infrastructure allowing the private sector to grow, it controlled the majority of the economy. And as for doing their best, we all know what happened to the mines, the steel mills, the railways, the shipbuilders etc.

From the left:

DBC Reed: Then there was the brilliant fire fighting system: you insured with one of several companies. They turned out in their falling to bits machines (a feature of privatised bus services too btw) but if the fire spread to non insured houses next door ,the whole row burnt down. Much amusement was to be had when rival crews turned up to adjacent buildings and then fought each other over the fire hydrant (who provided that?) The houses burnt down while they finished each other off.

Bayard does his best to steer a middle path in the comments - to little avail.

AFAIC, Sobers and DBC, despite thinking they are taking opposing points of view are doing no such thing. They are, inadvertently, merely illustrating where the dividing line is (or should be drawn).

Taking Sobers' list:

Stuff like mines, steel mills, ship building, electricity generation and telecoms belong in the private sector. So of course the government messed it all up. There are UK specific reasons why the government got so heavily involved in these (mainly hangovers from WW2).

Transport infrastructure i.e. the actual railways (as distinct from the trains), roads, docks and electricity distribution are not ends in themselves. They are there to facilitate interactions between people, between suppliers and consumers.

The government should either provide them for the benefit of everybody (the private sector), or at least keep its beady eye on private providers because there is too much opportunity for private rent seeking.

These things are run by the state in most countries, and by and large, they lead to better outcomes than the government just shrugging its shoulders and saying that if there's demand for these things then the private sector will sort it out.

DBC gives the example of private fire brigades.

Clearly, the fire brigade is a public service. As I have explained to him half a dozen times, the fire brigade is not there for the benefit of the idiot who sets fire to his own house; it is there for the benefit of his neighbours. Which is why, in most countries, the government runs the fire brigade.

So the fire brigade example does not prove that 'the private sector is bad at running things', it is merely an illustration of something that should be run by the government.

Saturday 3 February 2018

Innumerate fuckwits of the week.

From the Evening Standard, friend of rent seekers everywhere:

40 cab firms go out of business just months after 5,000% rise in fees

1. There are 2,400 cab firms in London, as the TfL lady says, 40 shutting down in a few months is not statistically significant.

2. The 5,000% rise is nonsense. The point is, TfL put the fees up from a token amount to 'real money' (average about £100 per car/driver per year, it would seem).The percentage increase is irrelevant if the starting figure is tiny.

3. TfL's new system is fundamentally flawed of course. The charge per year per cab/driver seems way too high as it can all be automated. Worse than that, they have a banding system:

Those with between 101 and 500 cars will see their licence fee leap by 5,200 per cent from £2,826 to what the LPHCA calls an “extortionate” £150,000. Operators with between 501 and 1,000 cars could see their bill jump from £2,826 to £350,000 over five years.

Clearly, if you are running exactly 500 cabs, the average cost per cab/driver is £60/year, chump change. But increase that to 501 and the average cost is £140, which is clearly a barrier to growth, and will encourage businesses to merge into larger entities which are just below the upper limits, or for businesses which are just above the limit to scale back. See the example of Greyhound cars in the article.

What's wrong with a flat annual charge per cab/driver? That's what the cab people should be campaigning for, not against charges in general. As I explained before, divide £100 per cab/driver per year by thousands of journeys per year, and the added cost per journey is a few pence.

4. A TfL spokeswoman said... the fee rises were “proportionate” after a dramatic rise in the size of the industry over the last five years had greatly increased the costs of overseeing them. The fees will fund extra compliance officers “who do a crucial job in driving up standards and ensuring passengers remain safe”

That's bollocks. For sure, TfL's costs double if the number of cabs doubles, but the cost per cab is unaffected. Is that really the best justification that this multi billion turnover organisation has dreamed up over the past few months?

23 May 2016: HM Treasury analysis: the immediate economic impact of leaving the EU

From HM Treasury Archive, published one month before the EU in/out referendum when Project Fear was working overtime:

A vote to leave would cause a profound economic shock creating instability and uncertainty which would be compounded by the complex and interdependent negotiations that would follow. The central conclusion of the analysis is that the effect of this profound shock would be to push the UK into recession and lead to a sharp rise in unemployment.

Two scenarios have been modelled to provide analysis of the adverse impact on the economy: a ‘shock’ to the economy, and a ‘severe shock’.

In the ‘shock’ scenario, a vote to leave would result in a recession, a spike in inflation and a rise in unemployment. After two years, the analysis shows that GDP would be around 3.6% lower in the shock scenario compared with a vote to remain. In this scenario, the fall in the value of the pound would be around 12%, and unemployment would increase by around 500,000, with all regions experiencing a rise in the number of people out of work.

In the ‘severe shock’ scenario, the rise in uncertainty, the effect on financial conditions and the transition effects are larger. The analysis shows that after two years the level of GDP would be 6% lower, the fall in the value of the pound would be 15% and unemployment would increase by around 800,000.

OK. It's now nearly two years later, so let's mark their 'shock' scenario.

1. Recession? Defined as two consecutive quarters of GDP contraction, nope.

2. Spike in inflation? Over the last ten years, CPI inflation has been as low as 0.2% with occasional peaks of over 4%. It's currently 2.7% or so, pretty much the ten year average. Certainly not a "spike".

3. Rise in unemployment by about 500,000? Unemployment seems to be ever so slightly lower than in June 2016. OK, the unemployment figures are fudged, and there are too many people on crappy 'zero-hours contracts', but it's hard to describe that as a rise in unemployment.

4. GDP around 3.6% lower than it would have been? GDP is now 2.7% higher than it was in Q2 2016. Would it be 6.3% higher if we'd voted Remain? Highly unlikely. Not even the best performing EU economy has grown that much.

5. Fall in value of the pound 12%? GBP = EUR 1.28 in the last couple of months before the referendum. Over the last couple of months, GBP = 1.13. That's down almost exactly 12%. Against USD, GBP fell, but has clawed most of it back again and is down about 5%.

I'll give them half a mark for predicting fall in GBP, although they overestimated it. I think it's fair to give them zero marks for any of the other answers,. Add an extra half mark for neat presentation and that's 1/5.

Their 'severe shock' scenario is a a straight 0/5.
Can anybody see any reason why we should take their recently leaked doomsday forecasts seriously? The ones predicting that the UK economy would grow 0.5% a year more slowly than otherwise if we do a 'clean brexit'?

Friday 2 February 2018

The New Paradigm

Funny how this:

is starting to look like this:

Claiming credit where it isn't due (cognitive dissonance part II)

From the comments to a recent post:


@ Lola "For quicker wealth creation we want more laissez-faire."

Doesn't really match up with rapid post war expansion of wealth creation in the US and Western Europe which happened to coincide with more activist government and powerful trade unionism. That's the trouble with 'cognitive dissonance'. It's always easier to spot in others... ;)


@ Paul156. Nope. You have to correct for inflation, and you have to factor in the false growth created by having to rebuild stuff destroyed in WW2. I found a graph the other day that I can't now find that corrected GDP for inflation...stand by.

Paulc156, being a hard leftie credits the government with the rapid post-war growth, and Lola, being laissez faire, appears to admit that the government did have a larger role, but claims that the growth was either purely inflationary or down to post-war rebuilding (although the USA didn't suffer any damage, it just had to turn production lines from tanks back to cars).

IMHO, there was significant economic growth and development post WW2, but there's no point crediting exclusively 'big government' or 'laissez faire', it was both and neither. For the umpteenth time, "the government builds the roads, private businesses manufacture the cars and private individuals uses the cars" -  in a metaphorical and literal sense.

If the government decides that 'we' need more cars, all it needs to do is expand the road network, have more car parks where needed, ensure traffic runs smoothly. Then people will use their cars more, and will want to buy cars more, and private businesses will build and sell more cars.

If, conversely, the government decides to take over a moribund car manufacturer and just subsidise the production of more cars, then... British Leyland! Even worse, the government sub-contracts decisions on new roads and toll charging to the likes of Carillion or Capita...

The same goes for just about everything. The right way round is the taxpayer funds basic education for all children* (a kind of infrastructure or raw material for the private sector) and thus improves overall average skill levels and the private sector then employs school leavers. Try that the other way round - no state school system, only private education for the middle and upper income levels, and everybody leaves school and goes to work for the government or a nationalised industry?

So the 1950s-1970s were the brief Golden Age of Capitalism because public and private sectors were sticking to their own side of the line (British Leyland excepted) and doing its best. Government stuff (like owning MoD housing and collecting from the MoD, FFS) was not sub-contracted to private companies, that's the worst of both worlds.

The other point is, we had Georgism Lite in those days in most of the developed world, so wealth was distributed more equally and financial crises didn't interrupt everything and put us back ten years every eighteen years forward.

* In turn, this could be done just as well with education vouchers given to parents. This is bottom-up privatisation (like with pre-school nurseries) which provably works, as opposed to top-down privatisation like 'academies', where the council hands over an entire school and million pound budgets to their mates in the nominally private sector (which is doomed to failure, see Carillion and Capita etc).

Thursday 1 February 2018

Wales does "joined up government"

People aged 16 and 17 could soon be able to cast a vote in Wales under plans to modernise elections

Young people under the age of 18 are from today banned from piercing their tongues, nipples or genitals in Wales.

Daily Mash on top form

For f**k’s sake don’t solve the housing crisis, say selfish bastards:

...Hobbs added: “I’ve written to my MP demanding he oppose anything which might help solve this crisis. “Luckily he’s a greedy, parasitic bastard with a massive property portfolio so he totally agrees with me.”