Thursday, 30 September 2010

Terribly Botched Suicide Bid Of The Week

From The Daily Mail:

A driver who crashed his car into a new £200 million shopping centre in a failed suicide bid is being sued for more than £200,000 for the damage he caused.

James Williams drove his Ford Puma into Cabot Circus in Bristol at around 100mph but amazingly survived the crash after a passing doctor administered first aid at the scene. The 25-year-old, who was left with a permanent limp as a result of the smash, pleaded guilty to dangerous driving and causing criminal damage and was jailed for 21 months in July last year.

After being released from prison he is now being sued for £213,115.76 by the Bristol Alliance Partnership, which owns the shopping centre - which opened just months before the crash. The amount includes £115,000 for replacing wrecked windows, £50,000 for temporary support and consultants' fees of £40,000...

Not sure whether to laugh or cry...

From The Shields Gazette:

The last Government calculated a general mortgage interest rate for the [subsidy for mortgage interest for low income households], based on the Bank of England's base rate, plus one per cent. This was fixed when the base rate was high and stands at 6.08 per cent. But because the base rate has since plummeted to 0.5 per cent, the Government is lowering the [Support for Mortgage Interest] to 3.63%. The Department of Work and Pensions said the SMI was never intended to pay off any of the capital, just the mortgage interest.

A 78-year-old, from South Shields, who does not wish to be named, is now worried she'll lose her home. She said: "I haven't dared work out how much extra money I will have to pay just yet – I'm scared to. I only got the letter on Tuesday, saying what was happening, everything is going so quick.

"I don't know where they expect me to get the extra cash from, I'm cutting it fine as it is with my pension payments. I really am concerned that I'm going to end up losing my home. It's not as if anyone will want to employ someone of my age."

She's 78 and she still has a mortgage? Or did she take out a second mortgage very late in life?

Outbreak Of Commonsense

... at the BBC:

OK, let's be clear, nobody is suggesting we all start smoking and drinking more - or at all - for the good of the country.

But those who do partake should note that because they are typically reluctant to give cigarettes and alcohol up, they do provide a very good source of income for the Treasury.

Alcohol contributes some £14.6bn to UK tax revenues, and smoking around £10bn.

Simon Clark, director of campaign group Forest, which defends the rights of smokers, says with tongue slightly in cheek: "During the recession you can indulge in one or two so-called vices like smoking and drinking in certain knowledge you will be raising money for the public purse and enjoying yourself at the same time."

Some go further, suggesting smokers do the country a favour by dying early and not drawing a pension - helping ease the demographic timebomb of an increasingly ageing population.

Others, however, point out that the cost of treating smoking and alcohol-related diseases amounts to billions of pounds. Mr Clark claims the money the Treasury raises from smokers far outweighs the potential cost to the NHS.

Mr Clark of FOREST is of course spot on correct, and the use of the word 'claims' is rather duplicitous, but hey.

Blogger Government

MW recently asked me if I had sorted out my financial services policy as Financial Services Minister in his Government. Here is my first draft for comment. Lola.

The Bloggers Government: Financial Services Policy

1. Basic Principles.

The State has no business in business and money. It has a small responsibility conferred on it by the electorate to carry out some work as insurer of last resort and lender of last resort.

All EU directives will be ignored and the rest repealed.

The central principles behind these proposals is responsibility. Caveat Emptor and Professional Responsibility will be guiding principles.

2. Central Banking

The role of the Bank of England as central bank is abolished. It will set rates of interest with reference to its own demands for the Official Currency.

3. Interest rates

Will be set by the money markets, not the central bank.

4. Money

The legal tender laws are abolished.

The Pound Sterling will continue to exist and be offered by the Bank of England as the Official Currency. It will be the official currency of government. Its rate of exchange will float. It will be backed by adequate bullion reserves. It will be kept honest by competing domestic money and the absence of an official exchange rate.

5. Financial Regulation

a) All the existing regulatory regimes are abolished.

b) All deposit protection schemes are abolished

(All statutory deposit protection schemes will be abolished, but in the event of insolvency or breach of capital ratios by any licensed deposit taker, depositors (as defined) will be given priority of repayment, and any agreements as to security between bondholders and the deposit taker will be subjected to claims of depositors. Debt for equity swaps will be the preferred method of recapitalising banks.)

c) All compensation schemes are abolished.

6. Banking

Deposits into banks will be the property of the depositor.

The freedom to issue money will be returned to the people and by association, banks, to use if they wish.

It is expected that 100% secure bank deposits will be backed by 100% reserves of bullion. It is also expected that Banks will offer accounts with higher rates of interest that are not 100% reserved. Customers will be made aware of this and will be able to choose the level of risk and reward with which they are comfortable.

Banks will be encouraged to seek commercial insurance for depositor protection. We anticipate that market forces will compel banks to do this.

Limited liability will not be available to the owners or senior managers of any bank that seeks to do business in the UK.

7. Insurers

All the current reporting requirements will be abolished. It is anticipated that accounting standards will rise since auditing accountants will have 100% responsibility for their work and will not be able to escape professional responsibility. The State will require professional institutions to undertake that auditors have sufficient resources to underwrite this responsibility.

Auditors will be personally liable for any losses suffered by third-party investors up to a maximum of the amount by which the company's net assets were overstated." (e.g. as should have been the case with E&Y/Equitable Life). This same discipline applies to all auditors of all financial businesses, for example banks, intermediaries, fund managers etc etc.

8. Specialist and International Institutions engaged in financial engineering.

All regulation is abolished, but the shield of limited liability will unavailable to such institutions.

9. Retail Intermediaries

Intermediaries will have two categories, independent and other. Independent intermediaries will be the clients agent, other will not. It is anticipated that market forces and competition and self interest will drive the establishment of representative institutions to promote and regulate these categories.

10. Disclosure

The single regulation that will remain is that of full disclosure of costs and charges, rates of interest – both APR and flat rates and any other factors that deduct money from client money or are taken.

It is anticipated that the various industry grouping will set up their own bodies to regulate this as it will be in their self interest to do so.

11. Pensions

All final Salary pensions will be phased out. The sole means of pension saving will be in money purchase schemes. This will ensure that members are not ripped off by arbitrary actuarial calculations when moving jobs (a big friction in the labour market) and that real savings are made to fund pensions, which will provide more proper capital for investment. At the same time the tax relief on schemes will reinstated recognising that pensions are deferred pay, meaning that benefits when taken will be taxed as earned income. Contribution levels will be set at a maximum annual of 25% of NAE (or 100% of Citizen's Pension - see MW on LVT). There will be no minimum retirement age.

12. Collective Investment Schemes (unit trusts, OEICs, Investment Trusts, ETF's etc)

Rules and Regulations will remain roughly as they are but repsonsibility will be transferred from the State to self regulation. All compulsory compensation schemes will be abolished (moral hazard) but it is expected that good companies will combine together to provide some mutually protective accreditation which will include investor protection - commercially funded. ISA's and PEPs and EIS's and all that stuff will all be scrapped. But since the dividend tax credit will be reinstated (and CGT has been replaced by LVT) this will not matter. Investor decisions will not be distorted by tax considerations.

How come she's allowed to say this... oh, I see.

From the BBC:

The Conservatives failed to win an overall majority at the general election because of electoral fraud, Baroness Warsi has said. The party chairman told the New Statesman that Labour benefited from the alleged fraud. She said it happened with at least three seats but would not say where.

A Labour spokesperson said the allegations were "unsubstantiated" and urged Lady Warsi to share any evidence she had with the authorities. Lady Warsi said: "It is predominantly within the Asian community."

UPDATE, re JuliaM's comment, they are all at it, here are the top five Google hits in no particular order. As you will see, a disproportionate number of the guilty parties appear to have 'Asian' names:

Lib Dems and Labour

"D-Day"?? "Hiroshima" more like!

From City AM:

D-Day for Ireland as yields rise

THE full cost of the 2008 banking crisis in Ireland will be laid bare today with the republic’s government expected to admit that bailing out Anglo Irish Bank will exceed €35bn (£30.2bn) – more than 20 per cent of Ireland’s GDP.

Ahead of today’s announcement, detailing the extent of a fresh recapitalisation, embattled Irish Prime Minister, Brian Cowen, yesterday conceded that Ireland had no choice but to act.

"Any [Anglo Irish Bank] failure would bring down the sovereign," he said...

Ireland’s cost of borrowing, which reached a record high of close to 6.8 per cent on Tuesday, was again at near-record levels yesterday.

Fiona Bruce shows how it's done

Comfortably ahead in this weeks Fun Online Poll, and deservedly so:

History reasserting itself

Until the second quarter of 2009 (i.e. quarter 10), the current house price crash had been tracking the previous one very closely, then New Labour hurled everything they had at it, and managed to stall things for a year or so. As much as the Lib-Cons would love to continue propping up house prices, it appears that there's not enough left in the kitty* so the pattern seems to be reasserting itself.

The blue series shows quarter-on-quarter price changes from Q1 1989 onwards; the red series shows quarter-on-quarter price changes from Q1 2007 onwards. The post-1989 crash continued for another few years after the end of that chart, but rises and falls were no longer so spectacular.

Source: Nationwide's UK House prices adjusted for inflation (choose from the drop down box labelled 'UK series').

* They are resorting to far more bizarre strategies, such as depressing interest rates, which is merely a random transfer of £30 billion a year from 'savers' to 'borrowers' (with their chums at the banks being able to double their profit margins).

Wednesday, 29 September 2010

Silver Shoe-Buckles

Edmund Burke, from Reflections on the French Revolution para 87:

Are all the taxes to be voted grievances, and the revenue reduced to a patriotic contribution or patriotic presents? Are silver shoe-buckles to be substituted in the place of the land tax and the malt tax, for the support of the naval strength of this kingdom?

Separated at birth (2)

This isn't MW, so I hope I don't completely de-format his blog.

However, whilst I can't argue with the ease of confusion between Miliband Jnr and Edgar Bug, I do wonder if the new Leader of the Labour Party may have to give up his day job selling pasta sauce:

Jesse Wallace aka Kat Moon née Slater

Boodledug suggested her for the sharpest eyebrows competition. Here's the best picture I can find, but hers are just the wrong way round - proper sharp eyebrows have to be higher at the 'ear' end than at the 'nose' end. So actually, if she swapped the left and rights ones over, they'd be world class...

Zebedee: Didn't actually have eyebrows.

Anon (comment 3) submitted Zebedee for the 'sharpest eyebrows' competition. Hmm. I'm not sure what level of reality we're operating on here, but make up your own minds...

Pervez Musharraf

Has anybody else noticed that whenever there's news from Pakistan, it is invariably really bad - Bhutto assassination, terrorist attacks (in Pakistan and in India), corruption, failure to deal with flooding, cricketers taking bribes to lose matches etc?

More to the point, is it a coincidence that this has all happened in the past two years since Pervez Musharraf threw in the towel? You didn't hear much from Pakistan - and certainly nothing terribly bad - during the eight years that he was in charge. He even managed to keep his sense of humour despite the numerous attempts to assassinate him.

Is it possible that he was - by Pakistani standards - a genuinely enlightened leader? I'm a pacificist and a democrat, but I always liked him and see no reason to change that opinion. Slightly more controversially, is it possible that people in some countries (particularly Islamic ones) just aren't ready for democracy? Will they ever invite him back, I wonder?

Just askin'.

Plus ça change...

"We will ensure that there is no further transfer of sovereignty or powers over the course of the next Parliament."
Those were the exact words of the coalition agreement. Now, something that the EU has never managed to do is take away from the UK Parliament and Courts jurisdiction over contract law. That isn't going to stop them trying though, hence the Ministry of Justice (run by Euro-enthusiast Ken Clarke last time I looked) is now obliged to ask you your view on having an EC directive on contract law.
"A Directive on European Contract Law could harmonise national contract law on the basis of minimum common standards. Member States would be able to retain more protective rules, subject to compliance with the Treaty. It could also be foreseen that the resulting differences are notified to the Commission and then published to increase transparency for consumers and businesses operating across borders."
From the EC Green Paper.

"Posen: We need QE to start again"

From City AM:

QUANTITATIVE EASING (QE) must be restarted if Britain's bankers are to avoid persistent high unemployment and economic stagnation, Bank of England Monetary Policy Committee (MPC) member Adam Posen said yesterday.

In a speech delivered in Hull yesterday, Posen was the first MPC member to call explicitly for a second round of QE, which he described as "The Royal Mint issuing 502 pence in coins and exchanging them for five pound notes held by commercial banks". His comments put him on a collision course with fellow policymaker Andrew Sentance, who has been calling for slightly lower subsidies to the banking system since June.

Posen argued: "It is right for both long-term stability in the City and short-term performance for banker's bonuses."

He warned that policymakers’ well founded fears of inflation should not lead them to settle for weak growth in the banking sector or in house prices: "The risks that I believe that we - bankers, land owners and politicians alike - face are the far more serious ones of sustained low house prices turning into a self-fulfilling prophecy, and/or inducing a political reaction that could undermine the commercial banks' long-run stability and prosperity.”

Posen has not yet voted for further monetary loosening but said that his vote at the next meeting was pretty much a foregone conclusion.

"Although we find Mr Posen’s analysis sobering and plausible, the reactions to Charlie Bean's 'Spend, spend, spend!' speech suggest that we are losing the propaganda war, and that it will take further back scratching and palm-greasing before a majority of MPC members is to support a QE extension," said Barclays Capital’s Simon Hayes.

Eagle-eyed Pedant Of The Week

The Bank of England have tee'd up a short video to explain how they are going to try and keep the Home-Owner-Ist bubble going at your expense (I will return to the substance of this later on). If you watch the text at the bottom of the screen carefully, you'll notice an awful typo at about 14 seconds in (click to enlarge):

Spotter's badge, Devo (comment 5 here).

Deeply Gratifying Google Searches

Things people say that just aren't true.

Hole Of The Week

In today's Metro.

Fearne Cotton's Eyebrows

For the benefit of those who voted "I've never heard of any of them" in this week's Fun Online Poll, here's Ms Cotton, who's on the telly a lot.

Tuesday, 28 September 2010

Kate Winslett's Eyebrow(s)

Kate Winslett, our English Rose who's never afraid to get them out for the lads cameras, is a trailing third in this week's Fun Online Poll, so just to even up the scores a bit, here's a picture of her in 'sharp eyebrow' mode. I must confess that on closer inspection, her right hand eyebrow is a tad sharper than the left hand one, but hey...

Is that the 'before' photo or the 'after' photo?

From yesterday's Evening Standard, click to enlarge:

Separated at Birth

Ed Milliband

Edgar Bug

Burka Ban Fun From Around The World

The excellent Newsnow website has set up a new category for Burka Ban. Here are a few headlines to whet your appetites:

Italy: Berlusconi ally brings anti-burqua bill in parliament.

Ireland: Catholic schools ban full Muslim veil.

Australia: Muslim women rally against burka ban

Mr Corporatist Shill speaks

Allister Heath in CityAM:

IMF is right... The IMF is upbeat for 2011, predicting growth of two per cent. It makes it clear that slashing the deficit and controlling public spending is the only way forward to avoid a sovereign debt crisis. While squeezing state spending will slow growth (1), the IMF is confident that liberating resources for the private sector (2) will ensure that the recovery continues strongly.

More emphasis should be given to reducing public sector compensation wage premia (3) and achieving savings in benefits through better targeting (4), it argues, policies that will be music to Osborne’s ears as he prepares for next week’s party conference in Birmingham.

1) No it won't.

2) Let's never forget that in 2009-10, public sector salaries and pensions were £169 billion; the total cash cost of welfare and old age pensions was £217 billion and subsidies and other payments to supposedly 'private sector' organisations were £281 billion. If we are serious about reducing government spending, then this is the first place to look - cut all this by half, and hey presto, the annual deficit of £150 billion-odd would be more or less eliminated.

There's no need to worry about strikes or anything, because those private organisations that are providing useful goods and services would not be affected and their workers are largely non-unionised. What's not to like?

3) Sure, only a third of public sector workers are 'front line'. So we can sack a couple of million with no detrimental impact on 'front line services', which are mainly provided by lower paid public sector workers anyway. Thus this automatically reduces average public sector pay. So let's get on with it.

4) The easiest way to reduce cash welfare payments is to keep basic entitlements much the same (OK, cut them a bit for 'single mothers') and reduce marginal withdrawal rates from their current 70% to 100% range down to something humane (no more than 50%). The Laffer Curve tells us that the cash cost of welfare will fall even though the incomes of those in low paid jobs will rise. What's not to like?

And the IMF are a bunch of shysters anyway, sod them and what they say.

Killer arguments against LVT, not (69)

There was another fine article on Land Value Tax in The Guardian yesterday, which linked to an earlier article in The Spectator (of all places!), the comments sections of which provide us with a wealth of economic illiteracy to fisk at a later date.

But I'll pick up on these two from The Guardian anyway:

1. Peitha: "... the argument being advanced is that LVT represents a tax on (sometimes unearned) wealth but if the tenant is having to pay it when he does not himself own the asset then clearly it isn't a tax on wealth at all."

a) Epic fail, nope, neither nor. Pay attention at the back: Land Value Tax is a tax on 'consumption' of land and/or a user charge paid to [the government as democratically appointed representative of] society in general for respecting/protecting your right to exclusive possession of a scarce resource whose value is created entirely by that self-same society in general.

b) Never forget that tenants already pay Land Value Tax. It's just that the tax is collected privately by the landlord (who in turn pays a bit of income tax on it, fair enough).

2. Peitha (again): "LVT penalises anyone who stays in their property for an extended period... because the rate of rise in land values historically outstrips the rate of rise in wages over an extended period, so unless the % LVT is to fall to bring the two back into line the tax becomes increasingly onerous the longer you stay in the same property... Try running a few numbers."

a) That's factually correct - land prices rise slightly faster than wages over time, and no serious economist disputes that.

b) But the comment turns logic on its head: the land value taxers say, why should we allow landowners to collect an ever increasing share of an ever increasing GDP for absolutely no input on their part? Surely it is better to scrap existing publicly collected taxes (income tax, VAT etc) and collect the land rents that are currently privately collected? Economically, everybody would be a tenant, but everybody would also be a landlord (the bulk of government spending is redistribution in one form or another, whereby a Citizen's Dividend is the easiest and best way of doing it, together with paying off the National Debt).

c) Peitha's argument appears to be that it is better for people to pay ever larger amounts of income tax, VAT on their ever increasing pre-tax incomes as well as ever increasing land rents out of their post-tax incomes, which would have the observed result that most people's net disposable incomes after tax and housing costs, i.e. their living standards, rise much more slowly than GDP growth generally, possibly staying flat.

d) We ran the experiment in the 19th century of what would happen if we had very low income tax and phased out existing taxes on land values: of course the economy grew, but the gains to the huddled masses were minuscule compared to the gains to the landed gentry. So I'm afraid that's not really an option either.

And we need "think-tanks" to tell us this..?

Obsidian stated the bleeding obvious back in May (and I'm sure he wasn't the first).

From today's Metro:

Supermarket chains would pocket a £700 million windfall if minimum pricing for alcohol was [sic] introduced, new research suggests. Tesco, Britain's biggest supermarket chain, stands to reap the most rewards, according to the Institute for Fiscal Studies. The think-tank looked at the effect of a 45p minimum price for alcohol [sic] and said it would benefit retailers more than the public purse [well, duh]...

It prefers higher taxation which would raise more money for the government [double duh].

Red Ed

Monday, 27 September 2010

Spend, spend, spend!!

Male Chauvinist Pig Of The Week

From last week's Daily Mail:

Support groups have expressed concern after an ugly woman was ordered to 'face the wall' by a library worker in north London. A male member of staff told Ayala Ochert that he was concerned she would 'offend others'...

"Coleen Nolan feared she would have arm torn off by crazy pony"

Spotted by Anti-Citizen One in The Daily Mirror:

The 'This Morning' and 'Loose Women' presenter, 45, was at the stables near her Manchester home on Friday afternoon when she saw a big ginger pony called Ade had his head collar caught on the lock of a stable door. Coleen, who has been signed off sick from her TV commitments this week, said:

"He was clearly distressed so I tried to lift the collar free. But he reared up with all his strength, crushing my hand. I thought he was going to pull my fingers off or yank my arm out of its socket. I think he would have done it too but the door smashed open, freeing my hand. I knew my fingers were broken. The middle one was hanging half an inch lower than the others. The doctor said I was lucky not to have lost my fingers. Instinctively I popped it back in the socket, though it was still pointing at a strange angle."

Or that was her excuse, anyway.

"It was literally jumping up and down on her back."


Joanna O'Malley, 38, was driving with her husband and two children towards Tom Long's Post from Rodborough when her problems started. "We were watching as a mother cow was trying to cross the road with her calf. Every time the mother went across the cars closed the gap and the calf wouldn't cross. She kept going back to get the calf," explained Mrs O'Malley, who lives in Minchinhampton.

"I made the decision to walk in that direction to stop the traffic way back up the road. I know you must never approach a calf or get in between it and its mother but, in my opinion, I was quite a distance away. It was an error of judgment. As I walked over I was looking at the queuing cars wondering which driver to ask to wait a moment. Then the mother saw me on the same side of the road as her baby and came thundering towards me. I started to run in my flip-flops, stumbled and decided the safest thing to do was roll up in a ball and wait. I could hear her behind me and then felt her pounding on my back with her hooves."

Among the queuing drivers who witnessed the incident was Matt Turner of Hyde Garage in Minchinhampton. "The cow just dashed towards her like a rocket," he said. "It was literally jumping up and down on her back."

Comedy Death Of The Week

From The Metro:

The multi-millionaire owner of Segway has died after accidentally riding one the two-wheeled machines over a cliff and into a river below, it has been reported...

Fun Online Polls: Commuting & Eyebrows

There was a very good turnout in last week's Fun Online Poll (133 took part, multiple choice, thanks to all who took part), results as follows:

Which is the least stressful way for you to get to your current place of work?

Driving by car - 56 votes

Walking or cycling - 25 votes
Taking the train - 16 votes
Taking the 'bus - 6 votes
Other, please specify - 4 votes ('jogging' and 'motorbike')
I work from home, am retired or currently unemployed - 37 votes

So stick that in your pipe and smoke it, Greener Journeys! The twattish thing is that I might just as well have asked "How do you get to work?" and the answers would have been much the same; so really I could have asked "Do you choose to the least stressful mode of transport to get to work?", a question which is barely worth asking...
Fiona Bruce was back on telly again yesterday (I've not noticed her for a while) and has inspired this week's Fun Online Poll: "Who has the sharpest eyebrows?"

Vote here or use the widget in the sidebar.

"This is a news website article about a scientific paper"

Spotted by Roy D in The Guardian, who adds "More comedy when you follow the links at the end of the article."

Joined Up Home-Owner-Ism Of The Week

Steven_L linked to a diatribe in The Telegraph at my previous post. As the article points out:

Even before the current crisis hit, this presumed "right" to home ownership was under threat. According to the last English Housing Survey, owner occupation fell from 70.9 per cent of households in 2003 to 67.9 per cent in 2008/9.

Yup. That's Home-Owner-Ism at work for you: rabid NIMBYism; a decade of reckless lending and its aftermath (quantitative easing and artifically depressed interest rates, i.e. robbing savers to subsidise borrowers); low taxation of property income and gains combined with savage taxation of labour and enterprise; selling off councils houses at significant discounts; and to a lesser extent the massive public sector deficits that they are piling up - all have inevitably led to a decline in the level of owner-occupation, exactly as planned by those who are really behind it all.

But does the article suggest reversing any of these policies? Nope. Another survey reveals yet more DoubleThink:

According to a survey conducted by the National Housing Federation, 34% of middle class parents with kids aged between 20 and 30 would like to see house prices stabilise, while 28% would rather see values fall in real terms, in order to help their offspring get on the housing ladder... The research also revealed that 82% of middle class parents want more pressure on the banks to help first-time buyers, for example by increasing the availability of high loan-to-value mortgage loans.

Right. So 28% are clued up enough to realise that falling prices are the best way of improving their children's chances of becoming an owner-occupier without becoming over-indebted, and by subtraction, 72% aren't.

82% minus 72% = 10%, so 10% simultaneously want prices to fall and for the banks to continue reckless lending in order to prop them up again. Weird.
Another maths point is that the majority commanded by the Home-Owner-Ist coalition appears to be crumbling: if 28% of homeowners want prices to fall, that's 67.9% x 28% = 19% of all households, to which we can add the 32.1% who by definition are renting privately, living with their parents or in social housing* who probably want prices to fall as well, or are at best indifferent, making a grand total of 51.1% who have no great interest in rising prices.

* Which is why Home-Owner-Ist politicians in New Labour and the Lib-Con coalition are so keen for the Right To Buy social housing to continue, and for their to be all manner of 'shared ownership' schemes, in order to persuade as many tenants as possible to buy into the Home-Owner-Ist ideology.

The gimmick behind shared ownership is pretty evil. What you do is 'buy' ten percent and pay a subsidised rent on the rest; as and when you have a bit more cash to spare, you 'buy' another ten per cent and so on. So in economic terms, it's in your interests for prices to fall (so that you can snap up the subsequent fractions for lower amounts), but psychologically, you want prices to go up so that you have more 'equity' in the home (without which you will not be able to borrow ever larger amounts of money to buy up the other ninety per cent).

Joined Up Government Of The Week

Paul Lockett points out that the two main EU banking regulations simultaneously discourage and encourage reckless banking.

Man Widdicombe submits EPCs and Business Rates as an example of damned if you do and damned if you don't.

Witterings From Witney has evidence to suggest that the Lib-Cons' much vaunted quango cull is a case of meet the new boss, same as the old boss.

The Boiling Frog thinks that The Queen ought to have a word in somebody's shell like.

Independent Ramblings explains how journalists - not content with the VAT exemption enjoyed by newspapers but not online content - want ISPs to subsidise their own customers.

Sunday, 26 September 2010

Houses Of The Holy

Cross posted at Nourishing Obscurity:

Today, let's look at the relationship between house prices and earnings in the various regions of England & Wales. A simple scatter graph with an auto trend line shows a relationship, which might be skewed by the one in the top right hand corner (London), so let's try that again without London (click to enlarge).

Yup, definitely a correlation.

So let's plot the house price-to-income ratio for the ten regions of E&W, in order of increasing 'gross' incomes (the lower series, double line). As you can see, the trend line for that series slopes upwards slightly (so in areas with higher incomes, house prices are disproportionately higher).

You can flatten off the trend line by deducting an amount to represent bare minimum living costs excl. housing costs of £5,500 per capita (this figure arrived at by trial and error, but seems reasonable enough) to arrive at 'disposable' income. The result is the upper series (bold black line). I can suggest a couple of reasons why the South West ratio is so high*, but I'm not immediately aware of any reason for the East Midland ratio being so low. Click to enlarge.

What conclusions do we draw from this, if any?

How about this:

i. There are no massive regional differences in the standard or quality of housing, so it must be fair to say that the main driver of the price differences is the extent to which regional incomes exceed a basic level of spending on other necessities (i.e. £5,500 per capita in this case).

ii. The rent or mortgage payments for an 'average' household in any area will be x% of the value of the house or flat, or y% of that household's gross income minus £5,500 per person.

iii. We also know that income tax/National Insurance are calculated as 43.8% percentage of your gross income above an arbitrary amount of £6,064 per annum.

iv. Your rent or mortgage is just a payment to live in that home in that area, of course, but if you live in a higher income region, a large part of what you are paying for is the fact that it is easier to find a high paying job in that area. Similarly, income tax/NIC increases the more you earn; it is the 'rent' that you have to pay for the right to go about your trade or profession.

v. We all know that income tax/NIC are 'publicly collected taxes' (boo! hiss!), but if rents and mortgages are calculated on more or less exactly the same basis, are they not just 'privately collected taxes'? It's fair enough for a landlord to charge you for what he provides (a roof over your head, repairs etc.) but isn't he also charging you for 'stuff that havs nothing to do with him' or even worse 'the right to work'?

vi. In other words, while it is conceptually easy to scrap 'publicly collected taxes' you can never get rid of such 'privately collected taxes'. We already have Land Value Tax, it is just that it is collected privately (in non-cash form in the case of owner-occupiers).

vii. There will never be such a thing as a 'tax free' society - the only question is whether LVT should be publicly collected** and spent on things that benefit us all (like scrapping income tax, NIC, VAT and so on, let's get rid of the taxes that we can do something about), or whether we ought to allow it to be privately collected.

* A high proportion of second home owners; a slightly higher proportion of pensioners that rest of UK (so GVA per non-pensioner is higher), rabid NIMBYism and the fact that it's just a nice place to live, with the beaches and everything.

** Yes of course there'd be exemptions or discounts or a deferment option for pensioners.

Saturday, 25 September 2010

Tories to merrily press ahead with Labour's hated tax on home improvements jobs

Yesterday's newspapers were full of articles saying "Rejoice! The Tories aren't going to push through Labour's planned Council Tax revaluations and rebanding, which would have meant that some households pay up to £320 more a year!"

All propaganda, of course...

1. There's no evidence to say that Labour would have done this (they were as Home-Owner-Ist as the current lot) and even if they were planning it, there's no evidence to say they wouldn't have chickened out, yet again. And what about all the people who might have ended up paying less in Council Tax? Not even the most rabid Tory Home-Owner-Ist newspaper has claimed that Labour wanted to increase overall Council Tax revenues of currently about £23 billion a year.

2. In the same breath, these newspapers don't mention that the Tories want to increase VAT to 20%, which they claim will increase VAT receipts by £13 billion a year. As a matter of fact, it's more likely to increase unemployment by a quarter of a million and raise very little, but never mind that.

3. Neither do any of these newpapers mention the fact that the Tories have every intention of pressing ahead with Labour's planned National Insurance increases. Direct.Gov rather coyly states that "The government has announced that the employee, employer and self-employed rates of National Insurance contributions (NICs) will increase by 0.5 per cent from April 2011 in addition to the 0.5 per cent increase announced [three years in advance] in 2008."

4. What they are actually saying is that Employee's and Employer's NIC will each go up by 1%, in other words the total tax burden on wages will go up by 2%. Which on a static basis would increase National Insurance revenues by about £10 billion a year (or else it will put another couple of hundred thousand people out of work and raise nothing, all depending on elasticity of supply and demand).

5. To summarise, the Tories are going to try and increase revenues from the main taxes on jobs - VAT and National Insurance - by a princely £23 billion a year, i.e. the increase in these taxes is pretty much the same as the entire revenues from Council Tax. Another way of increasing tax revenues by £23 billion a year, with far less damaging effects on the economy, and in a far more honest fashion, would simply have been to double Council Tax. Not much chance of that happening though.

Friday, 24 September 2010

Friday night gear change

Def Leppard's "Let's get rocked". A totally gratuitous semi-tone up at 4 mins 20 seconds, long, long after the song had become boring.

Train 7: Elephants 0

From The Metro:

A speeding Indian train killed seven elephants who were crossing a set of tracks in West Bengal. The herd was hit while attempting to help two calves that were trapped on the tracks near Binnaguri in the Indian state of West Bengal.

Hey elephants! You're not doing it right! Or try the old "Hey look at me! I'm Ganesh!" trick. Or something.

Killer arguments against LVT, not (68)

I've just rediscovered this brief exchange over at HPC (comments 20 and 21):

Capitalist: I don't go for this land tax Georgist nonsense. Nor taxing wealth*. Two wrongs don't make a right. The real problem lies with having interest rates set by a group of bureaucrats and government support for fractional reserve. Remove those problems and the rest disappear. The market would have solved the asset pricing problems had interests risen, as you would expect them to do in a credit crunch.

Drewster: Not true. The American writer Henry George wrote his treatise on Land Value Tax in 1879; but the Federal Reserve was only founded in 1913. Land value bubbles existed long before central banking**.

Yup. LVT opponents will resort to any lie, any distortion and any generalisation; and to be able to counter this stuff, you really have to know your stuff and be on your toes, which Drewster clearly does and is.

* The Home-Owner-Ists are keen to portray land 'ownership' as just the same as any other form of 'wealth' (which it quite patently isn't) just to muddy the picture.

** See here for a reprint of an article from 1902 which mentions the bubbles/busts in the USA in 1837, 1857, 1875 and 1893, i.e. the good old eighteen year boom-bust cycle.

One out, one in.

Obnoxio bids us a fond foul mouthed farewell, comments not enabled.

Ho hum. I have therefore checked Statcounter and promoted the 'blog which a) gave me the most hits in the past day or so and which b) wasn't already in my Top Twelve Blogs widget into that hallowed space. Which happened to be UK Newsnetwork (Contributors Angry Exile, The Filthy Engineer, Goodnight Vienna et al). Best of luck with that.

One thing of note in Obo's post is this: "I can't deny that it's been gratifying to see upwards of 10,000 absolute uniques month after month." I'd always assumed that Obo's was a 'bigger' 'blog than mine because he was much higher in all the rankings, and I don't know which source he was using, so for the record: according to Statcounter, my monthly 'unique visits' have been fairly stable at 15,000 to 20,000 since January 2009; according to Sitemeter my monthly 'visits' (as opposed to 'page views') were between 14,000 and 16,000 since September 2009 (they only go back a year); and according to 'blogger stats (accessed via 'design' in your dashboard thingy) my monthly 'pageviews' are in the order of 30,000 to 40,000.

So now we know.

The Wit & Wisdom Of The Morbidly Obese One

The BBC mentions something that I didn't see in the article in The Metro:

[The] Local Government Secretary... said the key thing was the relationship between the upper and lower bands of the tax (1), and they were roughly the same as when the tax was introduced. "I've always argued against a revaluation because we know from what happened in Wales that it tends to hit poorer families (2).

So let me get this straight:

1) Council Tax is a highly regressive tax - the tax on the smallest/cheapest homes is set by law at one-third of the tax on the most expensive, despite the fact that the household incomes of those living in the smallest/cheapest houses is probably only a tenth as much as the household incomes of those living in the most expensive - and they have every intention of keeping it that way, which "tends to hit the poorest families"...

2) They could of course make Council Tax more proportional to household incomes by making them more proportional to property values (taking this as a very good proxy for household income), and, AFAIAC, just exempt the main residences of pensioners entirely (who otherwise have to go through the whole means-tested Council Tax benefit rigmarole), which would by definition reduce the tax burden on "poorer families" but nope, they would prefer to force them to pay more than commonsense dictates in order to reduce the tax burden on those at the top.

(And even if they didn't change the amounts due in each band but merely re-shuffled homes between bands in such a way as to be fiscally neutral, this would inevitably make Council Tax slightly less regressive. Three quarters of all homes will have changed hands at least once in the last nineteen years, and a new purchaser's income is a fairly fixed proportion of the price paid at the time of purchase).

So the triumph of Home-Owner-Ist Double Think is to use the self-imposed regressivity (if that's a word) of Council Tax as an excuse for not making it more progressive. Genius.

The Daily Mail can always be relied on to peddle the same Home-Owner-Ist garbage, but mentions some interesting statistics:

Officials at the Government's Valuation Office Agency, an arm of HM Revenue and Customs, have collected information showing that 2.8 million homes have one bedroom, 6.8 million have two, 10.8 million have three, 2.8 million have four and 520,000 have five.

That adds up to 23.7 million homes (which presumably includes social housing) and presumably relates to England & Wales - the Valuation Office Agency says "the council tax valuation lists online [contain] the council tax bands of the 23.2million domestic properties in England and Wales." so that's a tolerable margin of error.

But I suppose the Daily Mail's rant about 'council snoopers' is quite justified. There's no need for physical inspection in 99.9% of cases, because actual selling prices as recorded by HM Land Registry since 2000 should be quite sufficient for a rough and ready tax like Council Tax.

Doth not compute

From The Metro:

A dentist who hid a pen camera in a changing room to film two women getting undressed has been suspended...


Who gets undressed when they go to the dentist? Not the patients, surely, and I know that dental assistants usually wear a white coat or something, but surely they just wear that over their normal clothes?

Another day, another reckless throw of the dice (37)

The Tories are now getting into their stride and/or have finally discovered New Labour's manual 'How to keep a house price bubble going'. This is only the third throw on their watch and a fairly pathetic one at that, but hey:

There will be no revaluation of council tax bands in England during this Parliament, the government has pledged. It means there will be no rise in local taxes for householders based solely on the increased value of their homes.

The man who is so smug and fat it makes you sick to look at him said: "We have cancelled Labour's plans for a council tax revaluation which would have hiked up taxes on people's homes. Hefty council tax bills are a constant financial worry for many people. Today we are setting their minds at ease, and protecting the interests of the less well-off in particular who were the hardest-hit from Labour's council tax revaluation in Wales."


Constant 'Financial worries' are things like losing your job, getting behind on debt or mortgage repayments, rocketing gas and electricity bills caused by green tomfoolery.

And as you can see he is - without a shred of evidence - playing a version of The Poor Widow Bogey - claiming that the cuddly caring Tories wouldn't do a revaluation because "the less well-off" would be hardest hit, for which there is not a shred of evidence. Funny how nobody mentions all the properties in Wales which moved down a band or two, isn't it? If they really wanted to help the 'less well-off' then what they could do is make Council Tax a teeny bit more proportional to property values, like cutting the tax in Band A by half and doubling it in Band H or something.

More Burka Related Tomfoolery

From The Metro, an Islamist complains about the burka ban at Burnley College:

"People should be able to wear what they want – this is the beautiful thing about our society, to be able to wear what you want. This choice and diversity is why our country is so great. We have this equality of opportunity and we have this real tolerance."

Which is why these people want to infiltrate and overthrow Western society, I suppose. Stuff like 'freedom to dress as you like' and 'women going to college' are probably fairly high up the list of 'stuff that they would like to get rid of''.

Thursday, 23 September 2010

Headline Of The Day

From the BBC: Montana woman fights bear with courgette

Before you ask, she defended herself with a courgette; she didn't attack a bear which happened to be carrying a courgette.

I'm surprised people still fall for this New Labour clap trap

Rather surprisingly, a Tory sympathiser over at HPC said this:

Check the numbers Mark - yes, spending under Labour continued to climb steadily, despite the recession; but the sudden and dramatic budget deficit was largely down to an implosion in tax receipts, well in excess of the amount you would expect; were the collection of tax revenues proportionate to GDP.

I always check the numbers before I say anything, but just for clarity, total tax revenues according to the Public Sector Finances Databank (Excel, Tab C4) were as follows:
2007-08 £516.0 billion
2008-09 £508.0 billion
2009-10 £479.7 billion

That's a reduction of seven per cent over two years. Out of that £36.3 billion fall in revenues, nearly half relates to the fall in corporation tax receipts of £10.6 billion (a fall of 22%, i.e. the amount that banks used to pay) and the fall in Stamp Duty Land Tax receipts of £6.2 billion (a fall of 44%, which is what you'd expect if the number of property transactions falls by nearly half).

According to The Guardian, GDP fell by six and a half per cent in the first year of the recession and has barely picked up since, so the fall in tax revenues was more or less exactly proportional to the fall in GDP.

So the idea that the £150 billion-odd annual deficits they are running is all down to the recession is nonsense (OK, stick on £5 or £10 billion for additional unemployment benefits if you really must) and I'd say that tax revenues held up surprisingly well.

Lying Home-Owner-Ist Shit Of The Day

From The Daily Mail:

What Vince said... and his real message

By Edward Heathcoat Amory

What he said: '(I want) to shift the tax base to property and land which cannot run away and represent, in Britain, an extreme concentration of wealth. I personally regret that Mansion Tax did not make it into the Coalition Agreement.'

What he meant: When I proposed the deeply unpopular Mansion Tax plan (which would hurt pensioners more than City speculators) before the election, I was forced to water it down. Now I can mention it without getting into trouble, because everyone knows that the Tories would never let me do it.

Vince is a politician like any other. Why would he deliberately propose something that would be 'unpopular'? It was Home-Owner-Ist propaganda like this that made it unpopular, not the underlying logic.

And why would it "hurt" pensioners? Commonsense tells us that if we are to replace income tax, VAT with Land Value Tax or a Progressive Property Tax, we'd have to exempt pensioners (or give them massive discounts or deferment or something or other) to have the faintest hope of making it stick. But City speculators, the whipping boys du jour, would lose out three fold:

1. They probably live in million pound houses. And I suspect that there are a lot more City speculators (and Russian oligarchs, Arab oil barons, Chinese Party functionaries etc) in million pound houses in the UK than there are pensioners.

2. They make money from lending other people money to buy million pound houses. Or they are estate agents who make money by selling people million pound houses.

3. They can't avoid the tax in any meaningful way.

What's not to like?

As an aside, if these 'City speculators' are thinking of buggering off to Switzerland, don't forget that Switzerland also has a number of different property taxes, which amount to something vaguely similar to Vince's proposed Mansion Tax. It's the stupid 50% super tax that's the killer (which raises £3 billion a year, allegedly) and swapping this for a Mansion Tax (which Vince expected would raise a paltry £1 billion or something) seems like a no-brainer to me.

Sometimes you've got to scroll down for the best bit...

But I'll save you the bother. From The Daily Mail:

... a barman at the Bugle, who refused to give his name, said: 'I had nothing to do with [setting fire to some books]. I smelt the smoke so I went outside to put it out. They took my mobile phones, some empty boxes the phones had been in, some CDs and DVDs... and all the tea towels.

PS, apparently this amounts to "inciting racial hatred". Doesn't the BBC constantly broadcast footage of people in Islamic countries burning effigies of western politicians and/or flags of western countries?

UPDATE: far be it for a responsible blogger like to make it easy for people to track down the video on YouTube but it's worth watching for the classic line "Has anybody got a match?"

The Wit & Wisdom of SOLACE (Society of Local Authority Chief Executives)

From the FT:

All tax returns – both of companies and individuals – should be made public and listed companies should lose the right to appoint their own auditors, according to local authority chief executives.

At a time of huge public spending cuts, the move would help close the £42bn gap that HM Revenue and Customs says exists between the amount of tax that should be collected and the amount actually paid, the Society of Local Authority Chief Executives said on Wednesday.

It would also ensure that the greater transparency over spending now being demanded of the public sector was matched by similar transparency over how the money is raised, Derek Myers, chairman of Solace’s management board, said.

Mr Myers, chief executive of Kensington and Chelsea, one of the top performing councils, said local authorities had no problem with the coalition’s demand that every line of expenditure above £500 should be published, along with council salaries...

In case you're wondering, Kensington & Chelsea is a hardcore Tory-run council.

The New Feudalism (2)

From the BBC:

A new not-for-profit lending scheme is being unveiled aimed at giving manageable loans to financially excluded people. A pilot scheme has been set up in the West Midlands called My Home Finance, in the hope of diverting people away from borrowing from loan sharks. However, the interest being charged is higher than the maximum by law that credit unions can charge. It will charge 29.9% APR in the pilot scheme, rising to 49.9% APR in April...

My Home Finance has been set up by the National Housing Federation (NHF), with 10 branches opening as part of the pilot project... The pilot scheme is being launched by Work and Pensions Secretary Iain Duncan Smith on Thursday. The "vast majority" of the set-up costs for the scheme have been met by the Department for Work and Pensions, according to the NHF. There has also been input from local housing associations and the Royal Bank of Scotland.

Please note that all of the parties involved are branches of government or are controlled by the government and financed by the taxpayer - the National Housing Federation is just the umbrella lobbying body for Housing Associations, who are in turn creatures of legislation and financed by the taxpayer (whether they do a better or worse job at providing 'affordable' housing than local councils is a separate issue), and this whole concept of 'living within your means' appears to have been lost in the mists of time.

Debt For Equity Swap Of The Week

From City AM:

BLOCKBUSTER is set to file for Chapter 11 bankruptcy as early as today, but the iconic video chain will live to see another day after cutting a debt-for-equity swap with its creditors.

Billionaire investor Carl Icahn and other senior bondholders will swap their debt for all of the company's stock, while providing a $125m (£80m) loan so the chain can operate during bankruptcy.

Under the proposed plan, senior bondholders would convert about $630m of debt into equity of the restructured company. The other bondholders are expected to be wiped out completely. The plan will allow the company to continue operating, although it is expected to close hundreds of stores and invest more in online video rental, putting it in direct competition with Netflix.

For the dozenth time, this is all tried and tested stuff, which would work just as well for banks. Most bank bonds are trading at considerably less than par value (depending on the issuer, the security, it's 'seniority' compared to other bonds, the interest rate payable on them etc). All a debt-for-equity swap does is crystallise these latent losses, it doesn't actually cause them.

"Vince Cable turns his guns on home owners"

The Daily Telegraph actually picked up on that bit of Vince's speech and has done a Daily Mail-style counter attack (i.e. misinterpret what he said, and then attack that):

Middle-class home owners would pay higher taxes under radical plans outlined by Vince Cable, the Liberal Democrat Business Secretary.

In a speech at his party's annual conference, Mr Cable called for the "tax base" to be shifted on to "property and land". He said it was far harder for people to dodge property taxes than income tax. The wealthy increasingly are moving their affairs offshore to avoid the new 50p rate on earnings.

Mr Cable expressed concern over the "extreme concentration of wealth" among those who own property. His comments will alarm middle-class home owners who have seen council tax bills double over the past decade.

George Osborne, the Chancellor, is likely to reject plans for higher property taxes and the Conservatives are already attempting to cap council tax bills. The speech is likely to add to the growing friction between the Business Secretary and Mr Osborne.

Oh dear.

When Vince referred to "extreme concentration of wealth" he did not mean "middle-class home owners", no sir. He meant people like the Duke of Westminster. And you'll note that Vince didn't ask for "taxes to be increased" he asked for "the tax base to be shifted".

I don't know what sort of topsy turvy Home-Owner-Ist world the Daily Telegraph live in, but I'd assume that "middle-class home owners" and "the wealthy [who] are moving their affairs offshore to avoid the new 50p rate on earnings" are mutually exclusive.

Vince probably supports the 50p rate, but apart from that he and the DT are agreed on this point: the super-tax has led to evasion/avoidance therefore the super-tax has the effect of increasing the tax burden on everybody else (Laffer Curve and all that).

So all thing being equal, if you were a "middle-class home owner", you'd prefer Vince's Mansion Tax (which somebody else pays) to the 50p super-tax (which indirectly increases the taxes on you).

Wednesday, 22 September 2010

Shroud Waving

I'm not sure what level of reality the Evening Standard (or whoever it was who knocked up the press release) is operating on here:

Up to 82,000 households could lose their homes because of changes to housing benefit rules, it was claimed today. A survey of private landlords by London Councils found that 60 per cent would refuse to lower rent so their tenants could stay on (1). Many said they would rather evict the tenants or refuse to renew the tenancy when it came to an end (2)...

In his Budget, the Chancellor imposed caps of £400 a week for a four-bedroom property (3) and £250 a week for a two-bedroom home. Ministers had suggested changing the rules would force private landlords to lower their rent.

But London Councils said the new caps would lead to even fewer homes being available.(4) More than 25 per cent of landlords said they could just decrease the number of properties they rented to tenants on benefits (5). Housing experts warned that tenants would either be made homeless, forced to move into overcrowded accommodation or have to move to cheaper boroughs, (6) putting pressure on services such as schools... (7)

Campbell Robb, chief executive of Shelter, added: “We are extremely concerned that so many of London's landlords say they will evict tenants who fall into arrears, while some will stop renting to claimants altogether... [the move would] add to the already significant levels of homelessness and overcrowding in this city (8)”.

1) Well they would say that, wouldn't they? And what about the forty per cent who would reduce their rents?

2) That's their choice - drop the rents to the new arbitrary figure chosen by the government; drop the rent even further so that a non-subsidised tenant can pay it; or leave the property standing empty. And Land Value Tax would discourage that last resort.

3) As I've pointed out before, we rent a nice four bed house in a nice area on the outskirts of London for a shade under £400 a week.

4) How many houses will be demolished as a result of this? None? So how does he work out there'd be fewer homes available?

5) The new maths: sixty per cent won't drop their rents, but 'more than 25 per cent' will reduce the number of properties that they rent to Housing Benefit claimants.

The old maths: a third of landlords (i.e. sixty per cent minus 'more than 25 per cent') are charging less than the new rent caps anyway, to which we add to the forty per cent who will drop their rents and we get "most landlords will quickly adjust to the cap, and rents payable by non-Housing Benefit claimants will fall slightly." What's not to like?

6) Ooh, woe is me, people on low incomes moving to 'cheaper boroughs'! I'm a Land Value Taxer - we earn what we earn and cut our housing cloth accordingly.

7) There's a fixed number of children and a fixed budget for education. Unless these 'private' landlords are prepared to leave properties standing empty, for every low income tenant who moves out, a slightly higher tenant will move in so it'll all even out. Typical NIMBY twaddle, if you ask me.

8) Right. The horror scenario is that 82,000 households move out of the expensive properties in central London and this magically leads to 'overcrowding in this city'?

Spotted by DBC Reed

Buried away in Uncle Vince's speech between the fudge, soundbites and dogwhistling was this:

It will be said that in a world of internationally mobile capital and people it is counterproductive to tax personal income and corporate profit to uncompetitive levels. That is right.

But a progressive alternative is to shift the tax base to property and land which cannot run away
and represent, in Britain, an extreme concentration of wealth. I personally regret that mansion tax did not make it into the Coalition Agreement but in a coalition we have to compromise. But we can and should maintain our distinctive and progressive tax policies for the future.

Tory MEP Tomfoolery


UK Conservative MEP Kay Swinburne has welcomed new rules on EU financial supervision which have been adopted by the European parliament in Strasbourg... "It provides the markets with a common rule book and greater certainty over the key questions of who will regulate what and where. Instead of handing over the keys to the City of London, this deal places it in a kind of European neighbourhood watch programme.

Peer oversight will provide us all with loudhailer warnings when there are macro systemic or particular risks. This package must be seen as the high-water mark of European financial supervision and not the first step towards handing over these powers to Brussels. With this new certainty the financial markets can begin to look to the future."

That's a novel use of the word 'must'. I assume that the sentence really means 'We would like to palm this package off on the voters as...'?

Outbreak Of Commonsense

In Scotland.

OK, this is probably a reprieve (until they work out how to square it with EU law) rather than a finding of not guilty (or 'case not proven' as they say in wee bonnie Scotland as a sort of middle way between 'guilty' and 'not guilty'), but hey.

I'm sure there's a great film in there somewhere...

From The Metro:

A former Conservative councillor slept in the same house as his mother's rotting corpse, an inquest into her death heard. Richard Stewart left his mother in her nightdress for six weeks because he couldn't bear the thought that she'd died.

By day the 63-year-old kept up appearances as a school governor, town alderman and senior Tory, knocking on doors to secure a comfortable majority as county councillor for St Austell Bay, Cornwall, in June 4, 2009. After winning his seat, Mr Stewart performed his normal duties – even explaining to one colleague that he had to leave a meeting because 'Mum wanted to watch Ascot'...

It's a real pity that Anthony Perkins is dead, I can just see him as a Conservative councillor.

The fundamental difference between homeownership versus Home-Owner-Ism

From The Daily Mail (of all places!):

A third of middle-class parents are hoping house prices fall to help their children buy their first home. The research finding highlights the widespread fear that the children of today are facing a lifetime of renting. That contrasts with today's householders, many of whom were able to buy their homes at relatively low prices.

The study, from the National Housing Federation*, also found that nearly 60 per cent of parents feel obliged to give their children money for a deposit. They expect to hand over at least £20,000 to each of their children to get them on to the property ladder - in what is known as raiding the 'Bank of Mum and Dad'.

The research is based on a poll of more than 500 middle-class parents with children between the ages of 20 and 30. They have been the winners of the house price boom over the past decade - but their children are the losers. And they expect that the only chance that their children have of buying their own home is for them to hand over a substantial amount of money.

In 1997, the average home cost £68,500. Today, the figure stands at nearly £168,000. The increase of £100,000 is well ahead of inflation and equivalent to four times the national average salary...

So a third of homeowners actually believe in homeownership - they want their children to be able to afford to buy a house under their own steam, and for their children to take on the risks and rewards of this (the way it should be, and the way it was for the over-forties), even at the expense of losing an illusory paper capital gain themselves. Sixty per cent are clearly Home-Owner-Ists - people who are stupid enough to want to keep the house price bubble going.

If it were up to me, I'd far rather lose £20,000 of the 'value' of my house (which costs me nothing) than have to reduce my savings/increase my own mortgage by £40,000 (assuming I have two children in the 20 - 30 age bracket), but hey, I'm Mr Sensible.

* The National Housing Federation is the umbrella lobbying body for taxpayer-financed Housing Associations, so they are firmly in the "We own land! Give us money!" camp, but let's assume that these findings are broadly correct.

Bono Charity Fun

From The Metro:

An organisation co-founded by superstar Bono to fight poverty in Africa has come under fire for donating only a fraction of its income to charity.

The non-profit One campaign received almost £9.6million in donations in 2008 but handed over only £118,000 to good causes. Figures show that the group also spent more than £5.1million on executive and staff salaries.

One insisted that it was focused on lobbying, not funding charities... Spokesman Oliver Buston said: 'We don't provide programmes on the ground. We're an advocacy and campaigning organisation. There is a rich and vibrant debate in the UK media about aid that doesn't happen in the US media. This was an attempt, perhaps in hindsight not the best way, to get our message across.'

Mr Buston added that One employs nearly 120 people worldwide and so the £5.1million spent on wages would result in an average salary of about £42,500...

Lord Turner is half right

From the BBC:

Bank bonuses contributed to the financial crisis but were not its main cause, head of the Financial Services Authority Lord Turner has said. The chairman of the City watchdog said there was a need to "move beyond the demonisation of overpaid traders". Instead he said "ill-designed policy" had been "a more powerful force for harm than individual greed or error"...

Lord Turner welcomed Basel III rules agreed earlier this month which force banks to increase the amount of capital they hold - including raising the core capital ratio to 7%. The rules have been designed to try to prevent a repeat of the heady credit-fuelled boom seen in the last decade.

Agreed that excessive bonuses are primarily the shareholders' problem.

But he's half wrong, of course - these ridiculously low capital ratios were a symptom of and not the cause of the 'financial crisis'.

The real cause was nothing more complicated that the fact that vast numbers of people have been tricked into believing that buying land or housing and watching its potential selling price increase could make them wealthier. Of course it is possible for small numbers of people to win out from Ponzi schemes like this, but overall we always end up worse off when the bubble bursts.

But it appears that the banks (and their bondholders) bought into the dream that the land price bubble represented real wealth and were prepared to lend ever higher amounts of money secured on it. So it's not so much that they didn't have enough 'core capital', what they had was too many liabilities ('non core capital' i.e. bonds).

In any event, the fact that banks had very low capital ratios in the past can easily be fixed retrospectively by allowing normal market forces and insolvency rules to take over, which ultimately lead to some form of debt-for-equity swap. We're not talking huge amounts either - to get from a core capital ratio of 3% to 7%, all the bank has to do is convert just over 4% of its liabilities into equity.

Does anybody have any suggestions on how we could tweak the tax system to encourage the real economy and dampen house price bubbles?

Tuesday, 21 September 2010

Kirsty's back on TV...

..She's back! Everyone's favourite home-owner-ist and property-porn queen Kirsty Allsop is getting a new show called "Kirsty's Homemade Home" where she encourages the mortgaged masses to make their own blinds and rummage around in skips for stuff to steal from rival home-owner-ists salvage!
She also gives her views on why the UK is in such a dire mess, well worth a read.

Suicidal Syd

From a recent episode of VIZ:

Monday, 20 September 2010

Bank of England Base Rate Fun

Steven_L highlights something which everybody knows - apart from the BBC, of course.

The New Feudalism

I am not Mark Wadsworth.

MW's comment on the Redwood housing post with a flattering comment on my comment made me think I 'should' share with you a central bit of my 'financial planning' advice for clients - 'The New Feudalism'.

Some background. I am what is branded an IFA - but that's not what I do, it's just what is bureaucratically convenient for the reg-yew-lay-ter to label me. We did 'financial planning' before I'd even heard of the idea. I have long thought that essentially we are in the freedom business, in the sense that we make calculations and do things that get our clients financially independent as soon as possible at the lowest cost possible. Behind this is the core philosophy that what we now live under is a 'New Feudalism'.

Look at it this way. You're born. You do education. You go to work. It's just you. If you don't like work you can tell your employer to stuff it and go anywhere. Then you fall in love. Your family think this is great. They rub their hands and tell you that now 'you'll be able to get on the property ladder'. So you do. You buy a house. You get into a huge debt to buy a wasting asset on a piece of land whose price is being inflated like mad by the very people enslaving you - the State, the central bank and the retail banking cartel.

Now they've got you. The Bank's got you, since if you don't service the mortgage debt they'll take your house off you and blight your life for ever. You have keep your job to pay your debt, so your employer's got you and can pay you not quite enough. As you have to have a job the taxman can steal from you through the scandal of PAYE. In other words the State has got you.

This triumvirate of Bank, Employer and State owns your arse. These three weird sisters now control your life. You're on the treadmill.

The trick is to work out as soon as possible that this is the case and then set about getting them out of your life. And for that you need income that is not dependent on an employer and no debts.

If you set about it early enough (and before you ask, I didn't - I made too many mistakes and, to be fair, got trapped by circumstances beyond my control) you'll be free by 50 at the very latest.

Hence Redwood's bit about housing was, well, bollocks.

Here endeth the lesson.

Fun Online Polls: Baroness Warsi & Commuting

On a good turnout (thanks to everybody who took part) in the four days that the Fun Online Poll was running, the results were:

Do you want church leaders to play a greater role in "local communities"?

No thanks - 72%
Not bothered - 19%
Yes please - 10%

So stick that in your pipe and smoke it, Baroness Warsi, along with your 'Big Brother Society'. That's not how we do things round here. If a local church group wants to organise something, then great, I can take it or leave it, but there's no need for you lot to come steaming in offering selected groups additional power/money, that'll just ruin everything.
Man Widdecombe spotted some complete and utter bollocks press release being re-hashed in The Telegraph under the headline Driving a car is more stressful than going by bus, says new research. The Telegraph's original input is this, right at the end:

The Greener Journeys campaign is largely funded by major bus companies and so there are no studies on the stress levels of driving compared with travelling by train.

So that's this week's Fun Online Poll: "Which is the least stressful way for you to get to your current place of work?"

Vote here or use the widget in the sidebar, I'm allowing multiple choice because a lot of people can get to work in more than one way. It's a pretty dumb-ass question, really, because surely most people will choose whichever method is least stressful (taking into account cost, journey time, reliability etc), but hey.

The result from an earlier poll on average commute times are here, in case you're interested in the topic.

Sunday, 19 September 2010


Spotted at Liberal Conspiracy by Newmania:

One interesting question in the most recent YouGov survey* asked people to decide “If the Government did decide to cut back on its plans for spending, which two or three of these would you most like it to cut?”

The answers should give all of us some pause for thought. The results were as follows (people were allowed to pick up to three) :

Payments to international bodies such as the UN and EU 72
Overseas aid 67
Projects to avert climate change 39
Subsidies to farmers industry and the Post Office 18

The armed forces 16
Upgrading Britain’s infrastructure (e.g. roads railways) 11
Welfare benefits and tax credits for poorer families 10
Child benefit 7
The police 3
Schools 2
Pensions 1
Hospitals 1

Seeing as education and health are by far and away the highest spending departments (ignoring welfare, which is transfer payments) and at least a third of their budgets is wasted (i.e. doesn't go within a million miles of 'the frontline'), the total waste in those two departments is actually far higher than in the first four categories, which have much smaller budgets but by definition consist of 100% waste, and possibly more than 100% if you include the damaging effect that they have on the economy.

All very encouraging nonetheless :-)

* The 'recent' survey was actually held in January 2009. LibCon links to this but I can't make it work, maybe you have to register or something. The only reference I can find is the original article in The Sun.

There's no success like failure...

From The British Medical Journal via Tobacco Analysis Blog via Freedom 2 Choose via Leg Iron:

Conclusions Available trials indicate that nicotine replacement therapy is an effective intervention in achieving sustained smoking abstinence for smokers who have no intention or are unable to attempt an abrupt quit. Most of the evidence, however, comes from trials with regular behavioural support and monitoring and it is unclear whether using nicotine replacement therapy without regular contact would be as effective.

[Skip a bit]

The results imply that compared with placebo twice* the number of smokers sustained six months’ abstinence as a result of nicotine replacement therapy. This equates to about an additional 3% of all smokers quitting who would otherwise not have done so**.

This is a similar effect size to treating smokers who are motivated to quit, where 4-5% might be expected to abstain for six months owing to use of nicotine replacement therapy. Previous data suggest that half of those who sustain six months of abstinence will maintain it for the rest of their lives.***

* The relative success compared to the placebo group is only of interest in deciding whether the treatment itself has any effect at all, and not whether that makes the treatment worthwhile. The use of the word "twice" suggests that nicotine replacement therapy is highly effective, but "twice" could mean that 0.1% of all smokers quit and 0.2% of all people using nicotine replacement therapy quite, for example.

** Of course that doesn't mean that 3% of smokers quit, it means that 3% more quit. Let's assume that five per cent of smokers quit for good every year x ten million smokers in the UK = 500,000 quitters. If the number of quitters goes up by 3%, then 515,000 smokers quit, those extra 15,000 quitters are only 0.15% of all smokers, for example.

*** But they tell us that only 2% or 3% of smokers who are "motivated to quit' actually quit long term. So out of ten million smokers in the UK, 250,000 give up permanently, so 3% x 250,000 = 7,500 = an additional 0.075%, call it a tenth of a per cent in round figures.

It appears that the NHS spends £74 million a year on stop smoking services. £74 million divided by those extra 7,500 quitters = nearly £10,000 per quitter.

Saturday, 18 September 2010

Killer arguments against LVT, not (67)

John Redwood, who has described Land Value Tax, possibly accurately, as "a dagger to the heart of property values" on Housing Lobbies:

"The aim of housing policy should be to offer more people the choice and security which ownership brings. For all those approaching retirement it is especially important to lift the need to pay rent for the rest of their lives. The poorest of our society end up paying the most for their housing at the end of their lives when they can least afford it."

Lola steamed in with the financially literate counter-argument:

"False. Owning a house outright has an opportunity cost. The money tied up in the house is money an owner could invest into income producing assets to pay an income. Very roughly a properly set up fund will produce about 4% per annum in your hand for ever. Hence someone owning a 150,000 property (roughly national average house price) is foregoing £6,000 pa by owning. That's £500 per month. Round here you can rent a decent house in a reasonable area for that."

Lola's argument stacks up even better if we assume that the income from these investments were not subject to tax, at corporate or individual level, of course, which would be the case under a full-on LVT system. My take is as follows:

1) You automatically get a mark deducted for using "should" as an argument to support anything.

2) JR was talking about "the need to pay rent for the rest of their lives" as a long-winded excuse to flog off social housing at undervalue to people as a short-term and very expensive way of winning votes and signing more people up to Home-Owner-Ism.

3) Here's an idea - just exempt pensioners in social housing from having to pay rent at all! That way there is neither a need for them to saddle themselves with large debts nor a need for taxpayer-owned assets to be flogged off at undervalue. The loss of rental income is far less than the cash discount that would have to be offered to entice people to buy, so that's a win-win, and I think that "the poorest in our society" wouldn't have much to complain about, especially as there are plenty of other poor people in the queue for social housing - if you flog it off to one group, you deny it to the other.

4) We can apply the same logic to Land Value Tax. It is, in economic terms like paying rent for where you live or your business premises, so we'd all be tenants. But - assuming this were the main source of tax revenues - your old age pension would be paid out of rents collected from others, so in a way we'd all landlords as well - the two cancel out.

5) But if it is a good idea to exempt pensioners in social housing from paying social rent, we might as well just exempt pensioners from Land Value Tax as well (or give them massive discounts/exemptions combined with a higher state-pension, or interest-free deferment or some such fudge.)

6) I'd have caveats to this - it would only apply to pensioner households who only own one home and who use that home as their only or main residence etc, so it would only apply to about one-sixth of UK land values. It would be quite simple to do administratively and the unintended consequences would be fairly minimal.

7) This would be politically motivated rather than good economics, but hey, it deals with the Poor Widow Bogey once and for all.