From The Telegraph:
Buckfast sales in Scotland surged 40 per cent after Nicola Sturgeon introduced alcohol minimum pricing, according to an official analysis that prompted more warnings her flagship public health policy had backfired...
The Tories said that minimum unit pricing (Mup) had prompted drinkers to switch from cheap drinks such as cider - the cost of which rose substantially - to stronger beverages like Buckfast. The price of the tonic wine was unaffected by Mup's introduction in May 2018 as it costs around £8 per bottle, more than 50p per unit of alcohol.
One might almost think that producers of the stronger stuff had a hand in this misguided legislation, as it sets a barrier to entry to cheaper competitors...
Tuesday, 15 November 2022
Tee hee
Posted by
Mark Wadsworth
at
12:49
13
comments
Labels: Alcohol, Barriers to entry, Scotland, Taxation
Tuesday, 13 February 2018
"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.
Posted by
Mark Wadsworth
at
14:15
3
comments
Labels: Barriers to entry, chartered accountants, Fraud, Regulations, Rent seeking, Theft
Thursday, 11 August 2016
Insane subsidy of the day
From The Daily Mail:
* Uber and other ride-sharing services will be allowed to operate legally [in Queensland]
* Taxis will be allowed to charge surge pricing and will receive $20,000
* QLD Premier announced a $100 million industry assistance package
* Queensland is the fourth Australian state to legalise ride-sharing apps
* The move is expected to anger anti ride-sharing app campaigners
The only reason why taxi licences had value was because they restricted supply, raised artificial barriers to entry, thus pushing up prices for passengers and destroying jobs etc. If the government realises its mistake and changes the rules, why on earth would they compensate the people who have unfairly benefitted in the past? The mind boggles.
-------------------------------------------------
For the benefit of Striebs, this is anathema to left-libertarians; such compensation is the opposite thereof, i.e. rent seeking and wasting taxpayer's money all rolled into one.
I can sort of see the "left wing" argument for subsidising particular activities if at least it increases output and employment or ensures security of supply (although on closer inspection, other factors usually outweigh the apparent gains), but such a subsidy achieves nothing, it does not increase the number of taxis or passenger journeys one iota and costs the taxpayer money so fails from a left-wing perspective as well as from a "libertarian" perspective.
Similarly, I support the "libertarian" case for removing barriers to entry and increasing competition, although this is usually not a left-wing cause (thus putting the lefties in a dilemma - do they want to restrict supply/boost incumbents' wages with permits; or increase supply with subsidies?)
Taxi driver bleating also reminds me of a terrible KLN: "But I paid for my house out of taxed income!" No you didn't, you paid for it out of the money you were saving on rent; by and large, taxi licence holders have collected more in extra income than they ever originally paid for their licences (bearing in mind they were originally issued for low or zero cost).
Posted by
Mark Wadsworth
at
14:14
35
comments
Labels: Barriers to entry, left-libertarianism, Rent seeking, Subsidies, taxis
Saturday, 16 April 2016
Trade Unions, productivity and wages: cause or effect?
PaulC156 left some interesting comments on an earlier post, to wit:
1. Stagnant median hourly pay in the US over the last few decades coincides nicely with the steady erosion of unionised labour in the States:
http://www.epi.org/publication/ib330-productivity-vs-compensation/.
2. Strong unions improve productivity. Plenty of evidence in a six nation study here:
http://cep.lse.ac.uk/people/vanreenen/lecture_notes/handbook_metcalf.pdf
3. Though not good for profitability… some good anecdotal on the UK motor industry from this article by Professor David Bailey of the Aston Business school here:
http://www.birminghampost.co.uk/business/business-opinion/uk-car-output-up-down-9902855.
4. CEO compensation is inversely correlated with stronger union presence:
http://econpapers.repec.org/paper/ehllserod/19865.htm
On the facts, I don't dispute any of this, but I question which is cause and which is effect.
From general knowledge, there are certain industry-specific factors which say which people are more likely to belong to a trade union (in the traditional sense) or a guild (for example the British Medical Association, the Institute of Chartered Accountants, the National Farmers Union etc).
a) The employer is a large employer and especially a monopoly employer/provider.
b) The business can't go bankrupt (because it is state-run or has a monopoly).
c) There are fixed pay scales.
d) Workers are highly skilled and/or less easily replaceable.
e) There are barriers to entry to that job, profession or business.
Some of these categories overlap and some are mutually exclusive. They also operate on different levels (employees vs employers or industry vs customers). But to give some examples:
Historically, the first trade unions were local guilds, higher skilled people who could club together to try and exercise a bit of monopoly power and raise barriers to entry. If you look at the progression to trade unions, it was the higher skilled trades first and domestic workers were the last to be unionised, which never really took off. Higher skilled people are by definition more productive than unskilled people.
In London, buses are run by competing private companies (although regulated by the TfL) and the Tube network (a monopoly) is run by TfL (a government body) directly. Each bus company sets its own pay levels but train drivers are paid pretty much a flat rate. So bus drivers are less unionised than train drivers.
Doctors are very expensive to train up or poach from abroad, the NHS is a state-backed near-monopoly provider, so all doctors are in the BMA (as far a I am aware) and they negotiate from a position of strength.
The importance of pay scales is, if you know that you get paid the same as thousands of co-workers (more likely in large organisations and the public sector), there is no harm in putting up a united front and asking for a collective pay rise. If pay is set individually according to each worker's skills, experience and working hours (more likely in small businesses), it is every man for himself and less likely to be unionised.
The importance of the employer having a monopoly position is, if he doesn't, pushing for higher wages will bankrupt him, as happened to some extent with the UK motor industry in the 1970s or 1980s; all that happened was cheaper cars were imported from abroad. If the government had imposed an import ban on motor vehicles, then the British motor industry - and trade unions - would have survived (producing crapper cars for higher prices and paying much higher wages).
Stock Exchange rules and the Companies Act mean that larger companies have to pay for an audit whether they like it or not; although auditing is not particularly difficult, it can only be carried out by Chartered Accountants (although Certified Accountants rank equally in law, they are brushed off as second class). This is bureaucracy for the sake of bureaucracy, so those at the top can cream of rental income and impose a strict hierarchy and lengthy training period on new entrants who want to get their snouts in the trough.
There is a limited amount of farmland so there is a limited number of farm owners, they can club together to form the NFU and put pressure on the government to keep the CAP subsidies flowing. Farm workers on the other hand are relatively easy to train up, it is part time and seasonal work and they are unlikely to be unionised.
The importance of collecting rental income/monopoly profits is that it frees up plenty of your time for campaigning, organising and putting pressure on the government to rig things in your favour. Which is why the most vocal groups are people like pensions companies, who live off the tax breaks nominally given to savers.
As a slightly separate topic, the pay of senior people tends to be much higher in businesses which collect 'rent'. So Chartered Accountants (as explained above), home builders/land bankers; oil and gas companies, banks and insurance, entertainment companies, top footballers etc. Top executives skim off some of this rent from their shareholders; if they can depress wages, this boosts profits so gives them more to skim off.
To sum up, it is not that trade unions or guilds lead to higher productivity and wages, it is that higher skills/wages/barriers to entry/profits (whether in the 'free market' or in a monopoly or state-backed organisation) are the fertile ground on which trade unions and guilds (BMA, ICAEW, NFU etc) can flourish.
Posted by
Mark Wadsworth
at
11:12
13
comments
Labels: Barriers to entry, Economics, EM, Logic, Rents, Trade Unions
Monday, 26 October 2015
Generic drugs and barriers to entry
From Fiercepharma:
... a compounding pharmacy has stepped up with its own alternative to the med--at about $1 per pill, a tiny fraction of the cost of Turing Pharmaceuticals' brand, which runs $750 per tablet after a widely publicized 5000%-plus price increase.
Imprimis will have its work cut out for it to market the compounded meds, however. After the meningitis outbreak linked to the New England Compounding Center, new regulations tightened up on distribution of compounded drugs, which aren't specifically approved by the FDA. Compounded meds can only be dispensed on specific prescriptions for specific patients, rather than distributed in bulk as FDA-approved products are.
The company's pyrimethamine-plus-leucovorin combination can be ordered directly, an Imprimis spokesman said, with a physicians' prescription. Imprimis Cares is designed to streamline that process.
There's the hook - without FDA approval you are still on the back foot.
As we know, the corporatist EU loves licensing stuff, "in the interests of consumer safety and to ensure high uniform high standards" no doubt, because it is so expensive getting approval it shuts the little guys out of the market.
Posted by
Mark Wadsworth
at
13:46
7
comments
Labels: Barriers to entry, big pharma
Tuesday, 7 July 2015
Cronyism Rules OK?
From here:
I quote:
1. Pick a field where you can establish a monopoly – such as Mexican billionaire Carlos Slim who from 2010-2013 was ranked the richest person in the world after taking control of the country’s entire telecommunications market.
2. Expand as quickly as possible – Amazon has eschewed early profitability to becoming the “everything shop” and as a result investors have poured money in.
3. The worst place to do business is really the best – it is easier to dominate emerging markets due to the lack of competition and potential for growth.
4. Take risks with other people’s money – do all you can to encourage investors and then gamble their money rather than your own.
5. To get rich you need to own your own business and property rights – Bill Gates’s Microsoft at one point had a 95 per cent share of the operating systems market, protected by intellectual property rights.
6. Spin complex laws into gold – set up in industries bound by such convoluted regulation – for example agricultural subsidies and banking regulation - that it is easy to bend the rules as nobody understands [them] anyway.
7. Establish business networks – telecoms networks and shipping networks have created a lot of billionaires’ fortunes as they can squeeze out all competition.
No. 6 is my favourite...
Generally that's all about Private Enterprise, not Free Enterprise.
Posted by
Lola
at
09:47
2
comments
Labels: Barriers to entry, Corporatism, monopolies, Protectionism, Rent seeking
Tuesday, 16 December 2014
Unsurprising Headline Of The Day
From The Daily Mail:
Taxi company Uber's low-cost carpooling service, UberPOP, is set to be banned in France from January next year, the government said.
The ruling comes after hundreds of taxi drivers blocked roads around Paris to protest what they claim are its unfair business practices.
… er, causing a massive gridlock isn't an "unfair business practice"? Sounds like typical Gallic shittiness to me. The only thing that's surprising is that the French weren't the first to ban Uber.
The new law tightening regulations for chauffeured rides will effectively ban the UberPOP service as of January 1st, Pierre-Henry Brandet, spokesman for France's Interior Ministry, said.
'Currently, people who use UberPop are not protected if there is an accident. So not only is it illegal to offer this service but for the consumer there is a real danger,' Brandet told the BFM television network.
We've heard this one before and it is completely irrelevant, it's a "Killer Argument Against Uber, Not". If the Frogs want to make it a law that it's illegal to drive a car without insurance for all passengers, paying or otherwise, well that's absolutely fine*. But how the driver and passengers first establish contact is completely irrelevant.
Also on Monday, the city government in New Delhi banned Uber from operating in the Indian capital after a passenger accused one of its drivers of rape…
New Delhi Police said they were considering legal action against Uber for failing to run background checks after it emerged the suspect was arrested for raping a woman three years ago but was later acquitted.
That's collective punishment is what that is.
The Indians might as well find out what mobile network the driver was using and shut that down as well, find out where he bought his last tank of petrol and arrest the pump attendants for aiding and abetting etc.
* IMHO this requirement for insurance is a load of nonsense. It makes sense if only a small minority have cars, but nowadays, we are nearly all either car drivers, passengers some of the time and nearly all of us are pedestrians some of the time, so we're all paying to insure each other and ourselves. Compulsory mass insurance is what governments do (however dressed up or disguised), so they might as well run it centrally and universally. That cuts down admin overheads, paperwork and saves on enforcement costs.
It's the same logic has having one national fire brigade. The fire brigade isn't really there to help the poor fool who sets fire to his own house, it is there to protect the poor fool's neighbours. Those neighbours don't need to worry about organising somebody to put out the fire, or getting sued for trespass, the fire brigade does it for them. Whether the government then wants to recover costs from the poor fool is a separate topic.
Posted by
Mark Wadsworth
at
18:33
5
comments
Labels: Barriers to entry, France, Taxi driver
Monday, 15 December 2014
Barriers to entry
Emailed in by MBK from The Sunday Times readers' letters:
As architects, we can only get work with many of the housing associations if we take the risk of working for nothing up to the point when planning approval is granted for a scheme. Otherwise, there is no chance of getting on board a new project.
This procedure can cost thousands of pounds — all at risk — and in some cases it can take many months, if not years, to secure an approval. If the scheme is rejected by the planners, you get nothing. Furthermore, the client can change the brief and mess you around for as long as it likes at no cost to itself, or take a flyer on a problematic site.
This appalling business practice is driving some architects to the wall. Surely everyone should be paid in a proper manner at all times, rather than taking suicidal financial risks to secure work, especially when housing associations claim to practise ethical behaviour at all times.
Adrian Mitchell chartered architect Yelverton, Devon.
Housing Associations are dressed up as private/charitable organisations, but they are nearly all government owned and controlled. So that's a nice trough to get your snout into.
So to ensure that only large firms of architects, who can afford to pre-subsidise the work, get a look in, there's a nice barrier to entry for you right there.
(The whole of architecture is a closed-shop business, so they are all guilty of anti-competitive trade practices, but as per usual, the big ones are disproportionately worse.)
Posted by
Mark Wadsworth
at
14:26
6
comments
Labels: Barriers to entry, Housing Assocations
Tuesday, 5 November 2013
Good article about Big Business and the EU
Re my post of yesterday, from today's City AM Forum:
ONE OF the biggest myths in UK politics is that the free-market and Eurosceptic [sic] wings of conservatism are beholden to the interests of big business. Many mistake a shared desire for a lower tax and regulatory burden for a common agenda.
Yet in reality, some of the biggest divergences in economic opinion occur between these two groups. Established businesses often favour state-led "industrial strategies", with "government investment" into "strategically important industries", and expensive state-led infrastructure projects like HS2 – which pro-market types often oppose.
Further, big business tends to be far more sanguine about our relationship with the EU. Large companies with established HR departments can perhaps afford the EU red tape and social legislation that affect small businesses operating at the margins of existence. Large firms are often more interested in the ability to shape laws, protecting the state grants and "support" that help their businesses.
As such, a Single Market with harmonised regulations and a centralised bureaucracy is less unappealing to multinationals. Many of their leaders have been vocally supportive of continued membership. The Confederation of British Industry's (CBI) report on British EU membership must be seen in this context…
Posted by
Mark Wadsworth
at
10:41
0
comments
Labels: Barriers to entry, CBI, EU, Subsidies
Monday, 4 November 2013
Well, they would say that, wouldn't they?
MHO, the EU was originally a good idea (free movement of people and goods etc) especially when membership was restricted to a dozen or so similarly wealthy west European countries, but over the past twenty years it has changed into a massive horrible bureaucracy which does nothing other than rubber stamp regulations and subsidies on behalf of large businesses and other rent-seekers which act as barriers to entry or growth for small and medium sized businesses but over which larger businesses can easily vault (i.e. corporatism, which is a hybrid of the worst elements of Communism and of capitalism).
So it's interesting to compare and contrast what the various UK business lobbying groups say about the UK and the EU, although they all go along with the general politically correct message that overall it is better for the UK to stay in the EU subject to renegotiation blah blah blah (and none of them seems to have a clear single overall policy).
(And there's a heck of a lot of hairshirt bansturbation emanating from the EU, separate topic.)
1. The lobby group for very large businesses, the Confederation of British Industry is unashamedly pro-EU (and pro-subsidy etc), the only thing they moan about is the Working Time Directive:
The CBI is calling for the debate on Europe to focus on credible options for the UK's future relationship with the EU, warning that half-way house models such as Norway and Switzerland are not the answer.
Ahead of a key debate in the House of Commons on the timing of a potential EU referendum, the CBI is today (Friday) publishing new analysis of Norway's and Switzerland's relationships with the EU and rejects the notion that a similar form of associate membership would work for the UK.
2. The British Chambers of Commerce include more medium sized businesses. They tend to be apolitical but they are a tad more sceptical:
The manufacturing sector is still facing many challenges, but we know from our survey that many firms are enthusiastic, confident, and looking to expand and drive the recovery, as long as there is a supportive environment that fosters enterprise.
The trade figures continue to demonstrate the importance of diversifying our exports outside the EU. While progress is being made, the pace of rebalancing towards net exports is still inadequate.
There is huge untapped potential among British exporters, and the government must do more to help those firms enter new export markets. This will help them to compete on a level-playing field in areas such as trade finance, insurance, and promotion.
3. The Institute of Directors represents more small businesses (and tends to be traditional Conservativism) and so are more sceptical still:
Among the IoD membership there will be a broad range of views on EU membership, reflecting the country at large. For some, the free movement of goods and people within a single market is a triumph of our time. For others, the regulatory and financial burdens of membership raise questions about how well the system works - and for whom it is working.
There will also be many people who view the issue as a simple question of sovereignty. The financial crisis, combined with some very real concerns about the politics of Europe, has presented this country with an opportunity to examine the foundations of our EU membership…
79 per cent of IoD members have some form of business link with the EU, and 60 per cent agreed with the statement that "continued access to the Single Market is important to my organisation". However, there is a broad appetite for deep reform. Members cite home affairs, employment law and corporate governance as areas where powers should be repatriated.
4. The Federation of Small Businesses is unsurprisingly the most negative of all (they would like to turn the regulations on their heads so that they place a larger burden on large businesses while exempting small businesses entirely):
Small businesses are often hampered by EU legislation. The flow of regulation on employment, environmental issues, as well as health and safety can discourage businesses from expanding. It can even contribute to their closure.
Our Action not Words campaign highlighted the administrative burdens facing small businesses. We have long called for Europe to 'Think Small First' and consider exemptions, special measures and lighter regimes for micro businesses.
5. I'm not sure how big or small the member firms of the Engineering Employer's Federation are (probably a fair mixture of both) but they are always reliably and surprisingly left wing (some of the stuff they come out with makes them sound like a trade union):
As we once again debate the UK's future within the European Union, EEF has been consulting with manufacturers – across all sectors, sizes and regions across the UK – on their views. And what we have concluded is that manufacturing support for continued membership remains strong.
While there is much that could be improved, the benefits that the EU offers in terms of access to markets, efforts to level the playing field, free movement of people, access to partners and funding for greater levels of innovation are all important.
Posted by
Mark Wadsworth
at
11:54
10
comments
Labels: Barriers to entry, CBI, EU, Lobbyists
Thursday, 8 August 2013
Reader's Letter Of The Day
From The Evening Standard (8 August 2013, page 53):
BY campaigning against the proliferation of betting shops in his constituency, Shadow Business Secretary Chukka Umunna has probably been acting in Gala Coral's best interests.
According to your article, Coral already has two betting shops in Umunna's Streatham constituency, so its former chairman Neil Goulden presumably has every interest in ensuring that no further licences are granted to ensure it market share is not diluted.
Mark Wadsworth, Buckhurst Hill.
Posted by
Mark Wadsworth
at
20:20
2
comments
Labels: Barriers to entry, Chukka Umuna, Corruption, Gambling
Wednesday, 7 August 2013
Sometimes you get what you pay for
From The Evening Standard:
Labour's rising star Chuka Umunna was accused of hypocrisy today for accepting a £20,000 donation from a gambling tycoon while publicly attacking the number of betting shops [in his own constituency]...
Conservatives claimed the shadow business secretary was guilty of double standards for accepting the sum from Neil Goulden, chairman emeritus of the Gala Coral Group, one of Britain's biggest bookmaker and leisure chains.
There are no double standards here. From the point of view of the donor, this is actually entirely consistent and coherent and Chucky was at all times acting in Gala Coral's best interests.
According to the article, Gala Coral already has two betting shops in Chucky's constituency, so Gala Coral has every interest in ensuring that no further licences are granted, thus ensuring that its market share is not diluted by new, competing businesses.
Posted by
Mark Wadsworth
at
16:46
2
comments
Labels: Barriers to entry, Chukka Umuna, Corruption, Gambling
Wednesday, 17 July 2013
Homey In Chief making an idiot of himself by misquoting Adam Smith, yet again
Emailed in by Lola and Mombers, Allister Heath in The Telegraph:
An online sales tax would hit the poorest shoppers hardest
As so often is the case, it was Adam Smith who got it right, even though he was writing in 1776, long before anybody could possibly have imagined the rise of the digital economy...
The world might have changed dramatically in the intervening years but human nature and economic forces have not and big businesses still regularly call on the government to make their lives easier by passing laws designed to crush uppity upstarts. In the most egregious case of this behaviour for a long time, several leading retailers are calling for a new online sales tax to be slapped on those of us with the temerity to buy our shopping online; the rationale, boringly, is to "ensure a level playing field"...
All good stuff so far, but now he goes completely off piste...
What is most absurd about this whole saga is that retailers who advocate an online sales tax are fighting the wrong battle. While all corporate taxes eventually need to be reformed, there is nothing amiss with the way UK-based online giants such as Ocado or Asos are taxed – yet there is a major problem with how Tesco or John Lewis are being clobbered by Britain's unfair and antiquated business rates.
This is an onerous tax on commercial property which most members of the public are blissfully unaware of and which is accelerating the demise of the high street. The retailers' strategy is all wrong: had they focused on highlighting this and called for lower taxes on stores, they could have put themselves on the side of the consumer, to whom most taxes are largely passed on to anyway...
Because business rates are unrelated to profits, turnover or performance, they are the dumbest of all possible taxes, hurting struggling firms the hardest and pushing many into bankruptcy. Jessops and Comet were still shelling out even as the administrators were being called in.
And what did Adam Smith actually say about tax ..?
Bearing all these things in mind, there are two types of taxation which obtain Smith's recommendations: a tax on luxury consumables and a tax on ground-rents (the annual value of holding a piece of land).
On the subject of luxury consumables, he is adamant about the definition of 'luxury' and of 'necessary.' By his definition, a 'necessary' may vary from place to place and from time to time... Taxes on luxuries, which were to include tobacco, he considered excellent in that no one is obliged to contribute to the tax: "Taxes upon luxuries have no tendency to raise the price of any other commodities except that of the commodities taxed ... Taxes upon luxuries are finally paid by the consumers of the commodities taxed, without any retribution."
More deserving of praise is the tax on ground-rents: "Both ground- rents and the ordinary rent of land are a species of revenue which the owner, in many cases, enjoys without any care or attention of his own. The annual produce of the land and labour of the society, the real wealth and revenue of the great body of the people, might be the same after such a tax as before. Ground-rents, and the ordinary rent of land are, therefore, perhaps the species of revenue which can best bear to have a peculiar tax imposed upon them."
Excise, customs, taxes on profits, were, according to Smith, either expensive to collect, as in the case of excise, or disincentives to produce, as in the tax on profits. He reserves harsh words for taxes which occasion the invasion of privacy, and on the subject of excise he says: "To subject every private family to the odious visits and examination of the tax-gatherers ... would be altogether inconsistent with liberty."
The harshest condemnation of all, however, was for taxes upon labour: "In all cases, a direct tax upon the wages of labour must, in the long run, occasion both a greater reduction in the rent of land, and a greater rise in the price of manufactured goods, than would have followed from a proper assessment of a sum equal to the produce of the tax, [levied] partly upon the rent of land, and partly upon consumable commodities."
Business Rates are of course the closest thing the UK has to a tax on the "ordinary rent of land" - they are paid out of the profits which would otherwise be appropriated by the landlord*.
Business Rates do not cost productive businesses (or the productive part of an owner-occupier business) one penny - they are not "passed on" to the tenant, and the business does not "pass on" one penny of it to the customer either. (For sure, Jessops and Comet were still being asked to pay Business Rates until the bitter end, but what finished them off was their landlords' refusal to drop the rents, rightly or wrongly).
We know this for a fact because the retail price of goods not consumed at point of use are much the same everywhere in the UK, even though Business Rates vary enormously, being next to nothing on a run down High Street and hundreds of pounds per square yard in prime shopping districts. Prices paid for goods and services consumed at point of use vary much more widely, so the gap between prices in London and other regions is much more marked, but that is the cause of high rents/Business Rates and not the result of them.
* Unfortunately, Business Rates are a second-best kind of Land Value Tax because they assessed on the total rental value including improvements rather than just the "site premium", but by and large and except in marginal cases, it comes to the same thing.
Posted by
Mark Wadsworth
at
10:29
13
comments
Labels: Adam Smith, Barriers to entry, Home-Owner-Ism, Idiots, Land Value Tax
Saturday, 11 May 2013
At last, a sensible article on child care costs
From yesterday's City AM Forum:
IT MAY sound incredible given the current political debate, but the UK government now spends more as a percentage of GDP on childcare than all European countries except Denmark. Yet the direct costs to parents continue to rise inexorably...
Quality concerns (1) have led to excessive regulation. On top of the staffing ratios (among the tightest in the world), demanding health and safety conditions, local authority and Criminal Records Bureau checks, we also have the unnecessary and expensive Early Years Foundation Stage. All “early years providers”, whether large nurseries run by businesses, state primary schools or childminders in their own homes, have to follow a structure of learning, development and care for children from birth to five years old, monitored and overseen by Ofsted.(1)
I haven't done any Marshall curves for ages, so here goes. See if you can sketch an alternative third chart where the staff ratios remain unchanged, so costs are still £100 pcpw - but this time, the government gives parents a £50 pcpw 'nursery voucher'. What happens to quantity and price paid?
1) What "quality concerns", pray tell? If you're not happy with your children's nursery, then you take them elsewhere. Effectively, each nursery is inspected twice a day by each parent at drop-off and pick-up times (which are different for different children). So nurseries are more or less under constant outside supervision by people who are paying through the nose and really care. Sunlight is the best disinfectant etc. In a society riddled with scandals and horror stories, when was the last time you read one about a children's nursery?
You read about nastiness in NHS hospitals because that's a take-it-or-leave-it-thing, you can't decide half way through a hospital stay that you'd rather be treated elsewhere. And you read about nastiness in care homes because there is little outside scrutiny, they'd be much better if close relatives visited every day.
2) He only mentions a fraction of the bureaucratic crap you have to go through to open a nursery. I won't bore you with my own experience of ten years ago again, but as it happens I was chatting to somebody recently whose wife works for a nursery and whose mother (or mother in law?) owns and runs a nursery elsewhere and it is quite simply true - the barriers to entry are enormous, once you are up and running it's more or less a licence to print money, but nursery workers are not very well paid and they don't have the option of setting up on their own.
The actual annual cost of complying with these regulations is not huge and doesn't really add to the cost base; the reason they push up prices is because supply is restricted to much less than the market clearing level. You can tinker with the staffing ratios all you like, that will hardly affect the price paid, it will just push up unearned profits (i.e. "rents").
Posted by
Mark Wadsworth
at
11:49
2
comments
Labels: Barriers to entry, Economics, Nurseries
Thursday, 26 July 2012
Government pays people to set the questions, mark their own answers and decide what the prizes will be: shock
Bob E has dug up a few choice morsels/chunks of vomit for our amusement and pleasure:
Exhibit One
The Merlin Standard has been designed by the Department for Work & Pensions (DWP) with providers and representative bodies to help evolve successful, high performing supply chains, and champion positive behaviours and relationships in the delivery of provision. The development of the standard responds directly to concerns raised by providers, especially those not operating as prime contractors, in ensuring appropriate fairness within supply chains.
So who's obtained the coveted Merlin Standard thus far, then, Bob?
Exhibit Two:
A4e
Avanta
Careers Development Group
EOSWorks
ESG Group
G4S Welfare to Work
Ingeus UK Ltd
Interserve Working Futures
JHP Group Ltd
MAXIMUS Employment and Training Ltd
NCG (Intraining)
Pertemps People Development Group
Prospects Services Ltd
Reed in Partnership
Rehab Jobfit
Seetec
Serco
Working Links
Just remind us, Bob, who was 'helping' the DWP draft the rules on who qualifies for getting their snout in the trough?
Exhibit Three:
The Merlin Standard pilot stands out as one of the most unique, innovative and collaboratively structured projects that the Department for Work & Pensions (DWP) is currently undertaking. It aims to introduce a new qualitative accreditation that considers the supply chain behaviours of prime contractors towards their subcontractors. Carley Consult, an SME based in Nottinghamshire, were appointed as contractors to DWP in 2009 to deliver key aspects of the pilot process, including designing the draft criteria and assessment model for Merlin. In aspiring to an industry led solution, the approach has involved key contributions from industry trade bodies, other DWP providers and DWP itself.
The Merlin pilot is subject to wider industry collaboration, through a dedicated Advisory Group formulated by DWP on which Carley Consult participates. The 22 strong Advisory Group includes representatives of the Employment Related Services Association (ERSA), the Association of Learning Providers (ALP), the Association of Chief Executives of Voluntary Organisations (ACEVO), The British Association of Supported Employment (BASE), Faith Action (a third sector umbrella body), local authorities, the Commission for the Compact, and key DWP suppliers.
And, picking one of those assocations at random, who might their members be..?
Exhibit Four
3SC
A4e
Action Deafness
Advance Employment
Advanced Personnel Management
Avanta - incorporating TNG and Inbiz
BEST
Black Country Housing Group
Bromford Group
Business in the Community
Calder UK
Campbell Page
Careers Development Group
Carillion Energy Services
Catch 22
Clarion
Community Links
Crisis
Enham
EOS
Epcot Career Solutions Ltd
ESG Skills Ltd
G4S Welfare to Work
GOALS UK
Groundwork
i2i
Impact 21
Ingeus
International Learning Centre
Interserve
Ixion
Kennedy Scott
MAXIMUS Employment and Training
Mencap
MyWorkSearch
Newcastle College Group / Intraining
Outset CIC
Panda Employ Ltd
Papworth Trust
Pinnacle People
Pluss
Prevista
Prospects
QED-UK
RBLI
Reed in Partnership
Rehab Group
Remploy
RNIB
Sarina Russo Job Access
Scope
Seetec
Serco
ShawTrust
South Bank Employers' Group
St Loye's Foundation
St Mungo's
Steps to Work
The Citizens Trust
The Salvation Army Employment Plus UK
The Wise Group
Tomorrow's People
Turning Point
Twin
Vertex
WISE Ability
Work Solutions
Working Links
YMCA Training
Strip out the ones which are offshoots of government departments, and that list lookes pretty similar to the one in Exhibit Two.
Posted by
Mark Wadsworth
at
14:08
5
comments
Labels: A4E, Barriers to entry, Department for Work + Pensions, Kleptocracy, Quangocracy, Rent seeking
Monday, 23 January 2012
BAAPS
I would like to congratulate The British Association of Aesthetic Plastic Surgeons on their excellent choice of name and acronym.
However, I don't approve of the fact that they are calling for more regulation and a ban on advertising, as we know this is just a way in which existing players in an industry create barriers to entry, thus protecting their own profit margins at the expense of the consumer and of all those who are preventing from setting up in competition.
Just for completeness, here's an example of the advertising they'd like to ban, taken from here:
Posted by
Mark Wadsworth
at
07:24
5
comments
Labels: Advertising, Barriers to entry, Humour, Regulations, Tits
Thursday, 1 December 2011
A damn' close shave...
I often use hairdressers, and especially mobile hairdressers, as an example when talking about taxation or free markets, because, AFAIAA there are practically no barriers to entry. Not if They had their way, of course.
From today's Metro:
A bid to protect customers from potentially fatal visits to the hairdressers has been rejected by MPs. Plans for a state register of coiffeurs were proposed after several instances of severe injuries to customers came to light [examples?].
Tory MP and former hairdresser David Morris had put the bill forward and said: "Hairdressers can use products that are very corrosive, very dangerous and in some instances can cause death. But believe it or not, anyone of us could set up a hairdressers tomorrow and practise and charge money for it."
"Potentially", "can", "could", the favourite words of the rent seekers, whether they're using it as an excuse to ban something or to raise barriers to entry, or even worse, to create a monopoly market for their own 'safer' or 'greener' products in the first place, see asbestos removal, windmills, child car seats, nicotine chewing gum.
No doubt our freedom loving parliamentarians laughed this one out of court...
Despite his plea, MPs defeated the plans by 67 votes to 63.
Yup, by a margin of four votes. G-d bless the 67 MPs who bothered to turn up and vote 'No'.
And as examples of "several instances of severe injuries to customers", what do they present as evidence..?
The family of Tabatha McCourt, 17, from Lanarkshire, claim she collapsed and died shortly after applying hair dye in October (1). And 38-year-old mother Julia McCabe from Keighley, West Yorkshire was left brain-damaged after suffering a similar reaction, also in October.(2)
1) After applying it to her own hair.
2) After applying it to her own hair.
There's a third example in the sidebar to the article of a teenager who suffered scarring after applying hair dye to her own hair.
So that's an epic fail on the policy-based-evidence front. I suppose it's theoretically possible that a hairdresser could stab somebody to death with a pair or scissors or something, but I'm not aware of it ever happening. Sweeney Todd is a fictional character, by the way.
Posted by
Mark Wadsworth
at
10:06
8
comments
Labels: Bansturbation, Barriers to entry, Economics, Hairdressers