Pinched from Robin Smith's 'blog

A bit late in the day, but hey:

Liberty Corner Shop

I promised Gregg a guest post a while back, which I am still drafting in my head.

As an interim measure, I shall link to his new site, the Liberty Corner Shop, perhaps there's a T-shirt there that grabs your fancy or something.

Let's round off the evening with a nice little fakecharity ...

A sad story in today's Daily Mirror:

A charity was fined £30,000 yesterday for failing to protect a care worker stabbed to death by a paranoid schizophrenic.

Crazed Ronald Dixon, 39, knifed Ashleigh Ewing, 22, 39 times in the chest only months after threatening to kill the Queen outside Buckingham Palace. The psychology graduate was sent on a visit alone to his rented flat in Heaton, Newcastle, on the last day of a six-month probation with Mental Health Matters in 2006....

*wearily*

Stop right there. Download the 2009 accounts from the Charities Commission website. Cut and paste therefrom as follows (click to enlarge):


Right. Now who do you think will end up paying that £30,000 fine?

*/wearily*

As JuliaM might say...

... I hope they both lose.

Re-announcing the same old policy...

From this morning's CityAM:

US PRESIDENT Barack Obama yesterday pledged to halve a record 2010 budget deficit by the end of his first term in office, but made tackling double-digit unemployment his immediate priority with a spending plan that risked public ire and a rough battle in Congress.

Ho hum, you might think, this sounds a lot like the vague promise to halve the UK deficit in 4 years that our own Labour government made last year. Is The Gobbler really that influential..? So I duly Googled the phrase obama+halve+defcit, and to my amazement most of the hits relate to a pledge that Obama made a year ago, shortly after taking up office.

He's made a piss-poor job of it so far, if I may say so.

Well duh...

From the CityAM:

Myners: 50pc tax rate won't raise much

THE government has "significantly reduced" the level of revenue it expects to generate from the new 50p income tax band, City minister Lord Myners admitted yesterday. In a tacit recognition that high earners will find ways to evade the higher rate of tax, Lord Myners said he was doubtful the Treasury would haul in the £1.1bn estimated for 2010 or the £2.5bn earmarked for 2011.

"We have made adjustments for the behavioural consequences of the new higher rate of taxation and have accordingly significantly reduced the anticipated tax take," he said during a Parliamentary debate. "But we still believe it will be beneficial."

The City minister's comments confirm warnings by the Institute for Fiscal Studies and accountants that the government's calculations of the amount an increased levy on people earning more than £150,000 will yield are inaccurate. Financial advisers say many of the two per cent of the population falling into the category will find ways to dodge the 50 per cent rate – either by pumping up this year's pay, storing up part of next year's salary in a company account or leaving the country.

Lord Myners said Labour's commitment to the 50p rate was not "ideological". It would be lowered as soon as economically possible, he added.

Even if they are right, and the 50p rate will raise £1bn or £2bn more from higher earners (a pittance compared to the £178bn projected budget deficit), it's still one heck of a gamble - the whole exercise may be well be revenue-negative in the medium term, seeing as a lot of high earners who move abroad might not come back; and those who were thinking of coming to the UK might be put off it even for years after the 50p rate has been scrapped again; and for every high earner, there is the associated coterie of receptionists, PR people, admin staff, butlers and chauffeurs, all off the dole queue, paying PAYE and spending their money in the shops etc.

Help from an unlikely quarter

There was a nice article in today's Evening Standard, written by one of The Priced Out Generation, which in turn refers to a book by David Willetts MP (and I'm hardly his biggest fan) entitled "The Pinch: How the Baby-boomers Took Their Children's Future — And Why They Should Give It Back".

As we all know, the Tories are happy to complain about the massive public sector debts that the government has run up - despite not having any clear commitment to doing anything about it - but are usually silent about the fact that the extra personal debt that a young family has to incur to 'get on the property ladder' are far, far higher than their pro rata share of that government debt. What might be especially galling for the Tories is that they invented Home-Owner-Ism as an economic philosophy, but a Labour government did it so much better.

Anyways, his book got a fair write-up in The Torygraph (of all places!):

... pensions schemes and property booms have concentrated wealth and power in the boomer generation, and encouraged by the government and banks, “they borrowed as if there were no tomorrow”. However personal saving rates – the amount saved as a percentage of disposable income – have gone into the negative.

“[That is] almost unprecedented for any large western economy — and that in turn now imposes a heavy burden on their children,” Mr Willets said, “A young person could be forgiven for believing that the way in which economic and social policy is now conducted is little less than a conspiracy by the middle-aged against the young... I do not believe that this is because the boomers are unusually bad and selfish,” he said. “I think it is rather that we have lost sight of the importance of the contract between the generations that holds any society together. The breaking of this contract is above all what is broken about our society.”

This all supports my thesis that when arguing with a Home-Owner-Ist, the best strategy is to point out that the nice £x00,000 paper capital gain they are sitting on:

a) Is not worth much to them in practice (unless they keep MEWing, but that is a self-defeating strategy, saving up in advance is usually a better way of financing things), and

b) Means that their children would have to shell out an extra £5,000 or £10,000 a year in mortgage repayments just to be able to keep up with (let alone overtake) their parents, they'll be stuck in a one-bed flat until they're forty and there'll never be any grandchildren. It's not just a zero-sum game, it's a negative-sum game, taking the family as a whole, and we would have the first economy deliberately designed so that disposable incomes actually go down over time, rather than going up (which has been the overall trajectory for the past century or two).

Further, it's all well and good the NIMBYs yapping on about "garden grabbing" and "the hallowed greenbelt", but somewhere else some other NIMBY is preventing a house being built for your children, so how do you feel about that? Are your children really the sort of people you'd want to exclude from your own neighbourhood, and it not, why should they be excluded from somebody else's?

Completely Insane Scheme Of The Week

From The Metro:

Flat screen TVs, illuminated signs and brightly-lit window displays could all be switched off - instead of being left on overnight when shops and businesses are closed - as companies respond to the Carbon Reduction Commitment (CRC) scheme.

The scheme will require businesses to record their energy use and from next year, pay by the tonne for the carbon they emit. Around 5,000 firms which use more than 6,000MWh of electricity a year - equivalent to bills of around £500,000 - must register for the energy efficiency scheme between April and September this year.

When the scheme is up and running, the Environment Agency will publish an annual league table of the best and worst performers under the CRC - with the top energy savers getting financial rewards and the worst companies being penalised...

Sometimes I don't know where to start, as I'm not even sure what level of reality these people are operating on. But at least it will boost the Environment Agency's headcount past its current level of 13,000, I suppose.

Biting Sarcasm Of The Week

Prof. Alison Smith gives a potted summary of her own report in The Times:

... public sector pay scales are almost entirely uniform across England. Conditions of service are also negotiated and set at national level. This creates a fine lifestyle for professionals in areas where house prices are a fraction of those in London or the southeast. It makes it easy for schools in the affluent Wirral to hire teachers; more generally, hospitals in the north can find good permanent nursing staff, while trusts in the southeast scramble from agency cover to agency cover. But the positive side stops there...

However, the main thrust of her argument - and this is a good explanation for why certain parts of the UK are far more dependent on public sector jobs than others - is as follows:

Private employers who want a good quality workforce have to match or exceed what people can get in the public sector. (It is not just wages: it is also pensions and job security.) Poor regions and poor cities typically have bad road or rail connections as well as old industries that have died; one of their few, but genuine, competitive advantages should be lower wage costs.

By importing national pay scales for large parts of the workforce, we force local employers to match these. In other words, the way we set public sector pay directly increases private employers’ costs in our poorer regions and reduces their ability to create jobs for local people.

Anyways, the first thing I consciously heard on Radio 4 this morning was Prof Wolf calmly and patiently explaining all this. To give a 'balanced view', they had also invited Sarah Veale (who appears to be the TUC's head of equality and human rights) who had a shrieky whiney voice and constantly interrupted, repeating over and over again some mantra that "National pay scales protect jobs and ensure fair pay" or words to that effect, without stopping to consider that this policy contributes to high unemployment in large areas of the country. And there was me thinking that trade unions were supposed to be against unemployment! D'oh!

More Hedge Fund Sour Grapes

Further to the hedge funds vs Porsche spat I highlighted recently, CityAM has reported another merry tale where a company appears to have outsmarted the hedge funds, who have promptly threatened to take the company to Court:

BIG Brother producer Endemol is involved in a fracas with a powerful group of hedge fund owners. The hedge funds, which own Endemol's £1.9bn debt, have accused the television giant of financial engineering to avoid breaching its loan agreement.

The spat broke out over a complex scheme in which Endemol was buying back its own debt at a discount from the original price and booking a profit on the purchases, thereby inflating its bottom line. The hedge fund owners, including Goldentree Asset Management, Centrebridge Partners and Stanley Advisors, say the scheme has artificially inflated Endemol's earnings by as much as €81m (£70m) – a third of its profits...

In case you're wondering what this means, it is yet another cunning variation on the debt-for-equity swap. Endemol borrowed money by issuing bonds at 100p in the £. If they are trading at less than par, let's say 80p in the £ (because Endemol is seen as not such a good bet or because interest rates have risen etc), and Endemol has a bit of spare cash, it can improve its net assets position (i.e. shareholders' funds) by taking £80 out of its bank account and redeeming bonds with an accounting value of £100. This reduces the assets side of the balance sheet by £80 but it reduces the liabilities side by £100, hey presto, under accounting standards, this is a £20 "profit".

Although the profit is not normal trading income as such, it is definitely a gain from the shareholders' point of view; is in no way "artificial"; and that is the end of that - if the lenders' covenant stipulates certain minimum ratios and the new look balance sheet complies with these, then frankly, what is the hedge funds' (i.e. lenders') problem?