Monday, 31 March 2014

Homeys close ranks!

Texted in just now by fellow Homey-watcher MBK, from City AM:

City A.M., London's most popular business newspaper, today announces that its editor, Allister Heath, is to leave the company.

Heath, 36, is to join the Daily Telegraph as deputy editor.

Mr Heath has already pre-submitted his next half a dozen articles, in which he confuses the proposed Mansion Tax with a tax on wealth or with Francois Hollande's 75% top income tax rate; points out that the UK has the highest take from property taxes; and explains away obscene bonuses in the City of London as being "performance related".

The Daily Telegraph board has grunted its tweedy approval and asked the idealistic young chap - ever so politely - whether he might refrain from suggesting that planning constraints might not be an unalloyed good.

He'll learn, the young chap, he'll learn. Give him enough money to pay the deposit on a five-bed detached in the Home Counties and he'll soon see the benefits of keeping planning laws just the way they we like them... as to his crazy notions about having further runways at Heathrow or Gatwick... he'll learn.

Fun Online Polls: British troops in Germany & Michael Stipe's Jaguar

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

Would stationing 3,000 extra British troops in Germany make any difference to Russian expansionism in Ukraine?

Yes - 2%
No - 21%
Oh come off it, did somebody really suggest that? - 76%
Other, please specify - 1%

A reasonable counter-question, and the answer is yes:

Britain should station 3,000 troops in Germany to avoid appearing weak in the eyes of 'resurgent Russia', says former Army chief
* Lord Dannatt says troops would underpin diplomacy with Russia
* He said the West must not be 'weak in resolve and muscle'
* Retaining 3,000 troops in Germany would show Britain is 'serious'

Go figure.
For a bit of light relief, this week's Fun Online Poll:

"Which model Jaguar would Michael Stipe out of R.E.M drive?"

Use the widget in the sidebar.

Daily Mail on top form

Spotted by MBK:

Married bank worker stole £2m then spent the lot on call girls: £1m went on ONE Thai escort

Wot? He spent the lot on call girls..?

Ah, no of course not, just most of it…

[His wife], a maths teacher, is understood to be 'devastated' by her husband's actions, which she found out about just before Christmas. The marital home, a large £400,000 four-bedroomed townhouse on a smart new estate, is up for sale.

Sunday, 30 March 2014

Economic Myths: Capital is internationally mobile

This is half of a larger over-arching economic myth, i.e. "We can't have corporation tax because capital is internationally mobile".

I've already covered the fact that corporation tax is, by and large and if so only inadvertently, not a tax on capital, duh, it is a tax on profits however they arise*, so let's do the second half.

(* This does not make it a good tax - far better to have zero tax on normal business profits, earned income and return on real capital, of course, and a much higher tax on rental and monopoly income of course - but at a low flat rate of about 20% on everything, it is far from the worst tax).

From e.g. here:

The question of who bears the burden of the corporate income tax is important and controversial.

Proponents of higher taxes on business argue that these taxes mostly fall on firm owners and thus redistribute income from ‘rich to poor’.

Critics object that higher taxes on profits will not be borne by capital because capital is internationally mobile, with the burden of higher corporate taxes will be shifted to immobile factors of production, in particular labour.

If their bleeding heart, crocodile tear logic were true, then owners of "capital" have nothing to fear from corporation tax as they are passing it all on to somebody else, and if not they can evade it by moving their "capital" abroad.

I suspect that the real objection is because the burden of all nearly all taxes - be they corporate or personal - are shifted to the least mobile factor of all… the rental value of land.

Even if we take the extreme, simplistic view that all corporate profits are derived from "capital" then we can draw up a list of sources of/reasons for corporate profits, and consider how "internationally mobile" are. The seven broad and overlapping categories which immediately spring to mind are:

1. Reclassification of self-employment income as corporate profits.

Let's imagine a bloke who started out as a sole-trader plumber, painter and decorator who has built up a good reputation in his area, has got two dozen employees, a dozen vans and all the tools etc, if he ends up paying income tax/NIC at 42% and 47% of his profits but doesn't need to spend it all, he'd be well advised to transfer his business to a limited company so that he only pays 20% corporation tax on the profits which he doesn't need to take out as dividends or salary to fund his lifestyle.

Although he could move his vans and tools at the drop of a hat, he can't take his customer base and his employees with him, so his business is not mobile in the slightest, he can try and expand his catchment area to the nearest few towns, and that's about it.

2. Paper profit shuffling crap

Agreed, to some extent large corporates can deem their turnover and profits to arise anywhere they like, i.e. wherever they get away with paying least tax, by mucking about with transfer pricing, reclassifying dividends as interest, setting up letterbox companies, rewriting contracts so as to downgrade a taxable branch or subsidiary to a non-taxed "representative office". This changes nothing on the ground in the real world. The business is where it is, it is just the profits which magically appear somewhere else. That's a whole separate topic, which generates more heat than light.

And of course bank balances can be shifted from anywhere to anywhere in the world but that changes little or nothing on the ground either, we also observe that most people prefer having a bank account or a mortgage with a bank from their home country anyway. Many people will move savings or mortgage from one UK bank to another to get a bit more/pay a bit less interest, but few will use an overseas bank.

3. Rental income - access to markets - customers

Retailers especially need to have the best sites, i.e. where they get the most customers, i.e. where most people have the most access to the site, which could be in the middle of town if there is enough parking space/high enough population density and/or in out of town retail centres with good transport links and plenty of parking. A few hundred yards either way can make a huge difference.

The rental income element is a huge chunk of business profits. The total rental value of UK commercial land and buildings is £90 billion a year (£60 net rent and £30 Business Rates) against total corporate profits of about £160 billion. About half the the rental income is included in corporate profits (because a business is owner-occupied or because the landlord is himself a corporate), so the true split is non-land profits of £115 billion and land profits of £90 billion (albeit taxed at higher rates due to Business Rates).

4. Rental income - Access to market - labour and raw materials

An employer needs labour and raw materials.

With retailers, the pool of potential employees is directly proportional to the number of potential customers. Then there are highly specialised employers who are all fishing in a smaller pool of potential employees, which is why we see agglomeration or hubs - all the banks are in the City of London, the high tech businesses are at Silicon Roundabout or in the M4 corridor, car manufacturing is (or was) all in the Midlands etc.

Formula One is, along with golf and tennis, the most truly international sport, but half of all constructors have their main base in the UK, and all within a small arc across the south and east of England.

Even if a business breaks new ground and e.g. Honda sets up a brand new assembly site near Swindon, after a while, you will find that there are a lot of good, trained car workers and sub-suplier businesses in that area. So if another manufacturer wanted to set up a new plant in the UK, the obvious places to start would be in the Midlands or near Swindon so that he can poach workers and sub-suppliers rather than starting from scratch.

And if you want to make steel, the best place to make steel is somewhere near where the coal mines and iron ore mines are. If you make oil rigs, then Aberdeen was a good place to be for the last forty years, but if and when the oil runs out, those businesses will re-train as oil-rig dismantlers and then the whole industry will vanish.

5. Goodwill, brand name, customer loyalty etc

Some brand names are known all over the world (Rolls Royce, Coca Cola, Manchester United etc) but many businesses only have a brand name in one single country or even in a much smaller area.

So McDonalds is known world-wide, Greggs is UK-wide and while Percy Ingles has a baker's shop on most high streets in north-east London, but people anywhere else in the UK have never heard of them.

The advantage of this brand name depends on how internationally mobile their customers are. So if you like McDonalds (the world's best public toilet operator, if nothing else) and you are in a strange land, you are quite likely to visit one. If you like Greggs and are in a different town in the UK, you will visit a Greggs if there is one. And if you are from Leytonstone and like Percy Ingles and happen to be a few miles away in Walthamstow, you will visit the Percy Ingles in Walthamstow.

This is where UK retailers have often come a cropper. Marks & Spencers or Tesco means a lot in the UK, so a new M&S or Tesco branch anywhere in the UK will immediately attract business. Their management then get big headed and think they can apply their business model in other countries and so far have always fallen flat on their faces and lost huge amounts of money.

So this type of "capital" in its widest sense has to be slowly built up by trial and error, and is a kind of self-generated rental income.

6. Intellectual Property Rights

These are capital (the result of earlier investment in skilled labour) up to a point, and can be exploited anywhere in the world.

So a pharma company can sell its whizz-bang new drug anywhere in the world. But no pharma company is going to say "We will only sell our drugs in countries with a low corporation tax rate", they will simply sell as much of it in as many territories as possible (probably using price differentiation, i.e. selling at higher prices in rich countries and at lower prices in poor countries, which then requires enforceable contracts preventing reselling in the grey market).

So if they can sell the drug in the UK paying 20% corporation tax, this does not discourage them from selling it in the USA paying 40% tax, because the net profits in the USA are still incremental extra profits.

7. Real actual capital that arises as a result of real investment

Yes, physical plant and machinery can easily be moved around the globe, and even if not (too large), such capital constantly has to be replenished out of new income, so it might happen that a company allows its asset base in one country to be eroded and starts investing/creating new capital in another country.

But again, it is a constant process, a company can only create capital in the first place if he has access to skilled labour and raw materials. The Antarctic is the only territory which is not part of a nation-state and has no taxes of any kind whatsoever as there is no nation-state with the right to enforce them, but so far, very few businesses have decamped there because nobody lives there and nobody wants to live there.

8. Question

Having examined the evidence, how "internationally mobile" are all these things, even if we are prepared to accept that they are all capital in the first place?

Friday, 28 March 2014

Daily Mail on top form

Slowly, slowly catch the monkey… if you can find him: Leopard gets given the run around by tricksy marsupial

They don't even say what the tree is worth or how much it's gone up in value.

UPDATE: A couple of hours later they re-wrote the headline, joke's over, nothing to see here, move along.

"Smoking bans increase number of reviews into the effect of smoking bans by 10%, study says"

From the BBC:

Laws banning smoking in public places have had a positive impact on the number of reviews of their effects, an international study in the Lancet suggests.

Researchers found no evidence of a 10% reduction in premature births or severe childhood asthma attacks within a year of smoke-free laws being introduced, but realising that few people would scrutinise their work too closely, decided to make the claims anyway.

'Puzzling Evidence'

Researchers can obtain funding more easily if they manufacture evidence justifying the smoking ban ex post facto. Researchers who report that the smoking ban has had no impact apart from smokers succumbing to colds and flu' more often are liable to have their funding cut off.

The research team actually managed to obtain funding for simply thumbing through 11 previous studies from North America and Europe and then cobbling the purported results together.

Inevitably, the spokesman for an important sounding body like "The Royal College of Obstetricians and Gynaecologists" was all too ready to confirm that smoking bans benefitted adults and children.

'Take me to the river'

This is one of the first large studies to look at how funding for research into anti-smoking laws in different countries and states is affecting the amount of statistics about the health of children living in those regions being collated, discarded as inconclusive and then fabricated.

Laws that prohibit smoking in places commonly frequented by children, such as bars, restaurants and workplaces, have already been shown to protect researchers from having to do any proper research and admitting to their funders that the ban had made no discernible difference.

In this study, taxpayers' money was squandered at the University of Edinburgh, Maastricht University, Hasselt University in Belgium, Harvard Medical School and Brigham and Women's Hospital.

'Psycho Killer'

The researchers stared bleakly at a large stack of paper containing data on 2.5 million births and almost 250,000 hospital attendances for asthma attacks in children before deciding they might as well just make something up.

Dr Jasper Been, lead study author from the Maastricht University Medical Centre in The Netherlands, said the impact of funding for research on children under 12 was revealing a lot about the supply-demand curve for such research.

"But," he added, "While the quantity of studies has increased, as we would expect, the quality of them has never been lower."

Thursday, 27 March 2014


Tourism is a surprisingly large part of the London economy, so I always try to be helpful and friendly to tourists so that they go back to their country and tell their family and friends how nice the natives are (ha!).

So what I often do is to ask the person taking a picture of their companion(s) whether they'd like to get in the shot and I'll take the picture of the whole group, which most tourists like (I don't look like the sort of person who'd run off with their camera/mobile phone, so they usually say 'yes').

[It's always nice when you're a tourist somewhere and somebody offers to do it for you, although they usually forget that if there is a church spire or something in the background, they are supposed to shift the camera angle so that it appears to be growing out of somebody's head. Or that's what is says you should do in all the books.]

Anyway, on the way home, I espied an old Chinese guy taking a picture of his wife in front of some London landmark or other, and as is my wont, was just about to ask him when I noticed that his wife (who had had her back to me thus far) was wearing a full face mask, a bit like this:
That wouldn't have been so bad, but she was wearing a wide brimmed hat and had the collar of her nondescript anorak pulled up as well.

Dude WTF? How was he even sure it was his wife? When he proudly shows the folks back home his holiday snaps, how will they know it was his wife?

Or maybe they were taking stock photos for poor Chinese people who can't afford to go on holiday in London but would like to pretend they have done.

Who knows..?

Capital, just capital!

The Daily Mail gives us another two examples of how hard-pressed, hard- working home-owners can increase the value of their land and buildings:

Knock down a building and get planning permission for something bigger

Get the government to spend everybody else's money on improving the railway network

Have any of these landowners actually added anything to their own "capital";, i.e. the buildings and improvements on their own site?

Methinks not. Some of them will have paid for the railway indirectly through their taxes, but many won't, and tenants are paying those taxes too.

"That's neat, that's neat, that's neat, that's neat...

... I really love your tiger feet."

"Thanks, but your tiger's genitals aren't bad either."

Make up your mind, love...

From the BBC:

Dame Sally blamed the way weight was being portrayed by the media and clothes industry.

"I have long been concerned that being underweight is often portrayed as the ideal weight, particularly in the fashion industry.

"Yet I am increasingly concerned that society may be normalising being overweight. "Larger mannequins are being introduced into clothes shops and "size inflation" means that clothes with the same size label have become larger in recent decades.

"And news stories about weight often feature pictures of severely obese people, which are unrepresentative of the majority of overweight people."

Dame Sally also reiterated her belief that a sugar tax may be necessary to combat obesity…

So by putting about horror stories about really fat people, the media are lulling slightly fat people into thinking they're normal… and what effect do all these air brushed size zero pictures have?

Unfortunately the article does not say what new taxes and regulations she would like to see to combat "skinniness".

That OFGEM Consultation in Full


There is evidence that customer switching has been falling over recent years despite increasing prices and significant savings available for consumers that change supplier. There was a significant spike in switching in late 2013 but it is not clear whether this trend will be sustained, and we note that the switching rate has materially decreased in January 2014. Crucially, consumer trust has fallen significantly in recent years with the last survey showing that 43 per cent of consumers did not trust energy suppliers, an increase of 4 percentage points from the previous year. 

I've been on various price comparison sites for electricity and while there are savings for switching, the amounts barely warrant my time and trouble calling someone, changing my direct debit and so forth.

Previous analysis suggested that incumbent energy suppliers in both electricity and gas all have a relatively high proportion of customers who never or rarely engage in the market. These suppliers are able to charge higher prices to these "sticky" customers whilst making cheaper deals available to more active customers. 

So, some customers can be bothered to switch on a regular basis and others can't. If some customers can switch, how is this not a functioning market?

Previous analysis showed evidence of weak competition in the market due to aligned pricing strategies of the six larger suppliers. Ofgem would stress that it found no evidence of explicit collusion between these suppliers. But tacit coordination can have the effect of reducing competition between suppliers and worsening outcomes for consumers.

The Assessment has found further evidence of possible tacit coordination and indeed that this pattern of behaviour may have become more entrenched over recent years. It has found evidence of strong alignment of pricing announcements, in both timing and extent, as well as a pattern of suppliers raising prices more rapidly and to a greater extent in response to an increase in costs than they reduce prices in response to a fall in costs. This is a sign of a lack of competition. 

Well, as the energy companies are all buying from a commodity market the prices are going to stay pretty much the same. Gas isn't like cars where you can buy Suzuki gas or Rolls-Royce gas with each special properties. It's just gas. If someone's flogging it for 10 dollars a cubic litre, you can't flog yours for 11 dollars a cubic litre.

And it's a sign of real competition. You see it when Tesco and ASDA decide to have a price war over petrol or oranges. One announces a price fall followed by someone else doing the same. In the cloud hosting market you see the same thing. Amazon drop the price of EC2 servers and Microsoft announce something a week later.

Many stakeholders highlighted barriers to entry and, particularly, expansion in energy markets. These include low wholesale market liquidity, credit and collateral requirements, suppliers’ pricing strategies, regulatory barriers and reputational risks. While there has been recent growth in new entrants who now have a 5 per cent market share, there is no evidence of sustained expansion at a scale which would provide a disruptive competitive threat. 

I've checked these companies on the price comparison sites and again, they aren't much cheaper than my current supplier. Certainly not to the point where I can be bothered switching.

There has been evidence of increasing average profitability in the six larger suppliers over the last four years. The Assessment has not come to a conclusion as to whether excess profits are being made but notes the recent increases and questions the suppliers’ contentions that five per cent is a fair margin. It also notes that there is variation in profitability amongst the large suppliers, and that there has been no clear evidence of efficiency improvements that might be expected in a strongly competitive environment.

While the evidence of profitability is not conclusive, the rise over the last few years allied to no clear evidence of increasing efficiency is indicative of a possible lack of effective competition. 

Really? 5%? I'm pretty sure you can tuck money away in bonds at about 3.5%, so 5% hardly seems like that much of an excessive return on investment.

But OK, let's strip out that 5% profit margin. Let's imagine no profits at all. That still doesn't account for the 37% rise in the past 3 years, does it? So, why have bills risen in that time?

And that's what this exercise is really about - it's not about a serious investigation into these companies because the report contains nothing but suggestion about their activities. It's a political exercise to keep the blame on the electricity companies to distract attention from the government having an utterly failed energy policy.

"Sir, I think I've spotted the enemy, sir...

... over in that forest, trying to hide among the trees."

"Are you sure? How can you tell it's them?"

"Easy sir, they're wearing
high-viz jackets over their uniforms. Health and safety, sir. Battlefields are pretty dangerous places, y'know."

"My God! I'd forgotten all about that! I let the men out in camouflage! Top brass will have me court martialled for this!"

Viz magazine nails it!

Outbreak of common sense

The much vaunted Savage Tory Cuts are no such thing of course, this is largely shroud waving. Here's an example to warm the cockles of the heart

From the BBC:

Councils in England are using public health budgets to fund other services, the British Medical Journal has said. Local councils in England took over responsibility - and funding - for public health last April.

The BMJ says Freedom of Information requests reveal a third have stopped at least one public health service, with money being spent on other services such as parks and leisure instead...

The BMJ report says it found "examples of councils reducing funding for a wide range of public health services, including those for substance misuse, sexual health, smoking cessation, obesity, and school nursing".

Public health funds had been diverted to other areas including trading standards, citizens' advice bureaux, domestic abuse services*, housing, parks and green spaces, and sport and leisure centres, it said.

The caption at the top of the article says "Measures to tackle smoking and drinking come under the public health remit" which is complete and utter rubbish, because that's not what public health is. Neither is obesity.

Public health is refuse collection, inspecting food outlets for cleanliness, tackling vermin, making sure the sewers work, testing immigrants for TB, teaching children to cross the road safely etc.

So it seems to me that local councils are spending less on nannying and more on the sort of stuff we expect them to do.

Amen to that, brothers!

* They don't read each other's memos any more. From another of today' articles by the BBC:

Thousands of people are at risk of harm or even murder because of widespread police failure in England and Wales to tackle domestic abuse, a report says.

Reader's Letter Of The Day

From City AM Forum:

Re: The only way to really cut spending is to reengineer the state, yesterday

The cost of government is the net burden on taxpayers.

Simplifying our tax and benefits system by scrapping all means-tested, conditional or contributory benefits, and replacing them with a citizens income, would reduce costs and lower the overall tax burden.

This could save at least £10bn a year, and would also remove crippling rates of withdrawal (which create welfare traps). Saving money and getting people back into work: what’s not to like?

Given that it would only be payable to UK citizens, it even circumvents EU benefit rules.

Name withheld

That looks exactly like the sort of letter I would have written... only it wasn't me. The point being that if everybody gets the same Citizen's Income, the net cost to the average/median household is precisely zero.

Wednesday, 26 March 2014

"Four Lions"

From Wiki and The Guardian:

Four Lions (2014) is a British dark comedy film following two lions and their two cubs from Sheffield, South Yorkshire, England. The lions become radicalised and hatch a plot to carry out suicide bombings at a zoo in Copenhagen.

They are Omar (Riz Ahmed), who is deeply critical of Western society and imperialism; his dim-witted friend, Waj (Kayvan Novak); Barry (Nigel Lindsay), a bad-tempered and extremely rash convert to Islam; and the naive Faisal (Adeel Akhtar), who just likes eating freshly slaughtered giraffes.

The lions successfully infiltrate the lion enclosure and Barry recruits a reluctant fifth lion, Hassan (Arsher Ali). Unfortunately for them, their plans are thwarted when the Danish zoo kills them all to make way for Hassan:

"Because of the pride of lions' natural structure and behaviour, the zoo has had to euthanise the two old lions and two young lions who were not old enough to fend for themselves," Copenhagen zoo said.

"The two youngest lions would have been killed by the new male lion Hassan as soon as he got the chance."

Indian Bicycle Marketing

From The Guardian 12 October 2013:

Labour will be tougher than the Tories when it comes to slashing the benefits bill, Rachel Reeves, the new shadow work and pensions secretary, has insisted in her first interview since winning promotion in Ed Miliband's frontbench reshuffle.

The 34-year-old Reeves, who is seen by many as a possible future party leader, said that under Labour the long-term unemployed would not be able to "linger on benefits" for long periods but would have to take up a guaranteed job offer or lose their state support.

Adopting a firm party line on welfare, the former Bank of England economist stressed that a key part of her task would be to explode the "myth" that Labour is soft on benefit costs, and to prove instead that it will be both tough and fair.

From the BBC 26 March 2014:

MPs are set to vote on plans to introduce an overall cap on the amount the UK spends on welfare each year. Welfare spending, excluding the state pension and some unemployment benefits, would be capped next year at £119.5bn.

The idea, put forward by [Tory] Chancellor George Osborne in last week's Budget, would in future see limits set at the beginning of each Parliament. Labour leader Ed Miliband has backed a welfare cap but some party backbenchers are expected to vote against the plan.

At last! Two bits of sensible health advice from the BBC.

Have a nice lie-in every day

Sleep loss may be more serious than previously thought, causing a permanent loss of brain cells, research suggests.

In mice, prolonged lack of sleep led to 25% of certain brain cells dying, according to a study in The Journal of Neuroscience.

Don't play football

The Football Association has apologised to the widow of a former England striker who died after suffering brain damage from heading heavy leather footballs.

"Gwyneth Paltrow to separate"

From the BBC:

Hollywood actress Gwyneth Paltrow and celebrity vegetarian Gwyneth Paltrow are to separate after more than 10 years of trying to juggle their careers as a Hollywood actress and a mollycoddling Earth mother, the women have said.

Paltrow, 41, and Paltrow, 41, announced the split on the blog run by the ditzy diet specialist in a post titled Conscious Uncoupling.

"It is with hearts full of sadness that we have decided to separate," the self-appointed supermum wrote.

The film star, who shot to stardom in films such as Se7en and Sliding Doors, and the macrobiotic blogger have two children - Apple, nine, and Moses, seven. A spokeswoman for the actress confirmed the split, the Associated Press news agency reported.

In a separate message on her own website, the actress said they had "come to the conclusion that while we love each other very much, I am a bit tired of this woman's endless self-promotion of herself as a lifestyle guru on the back of my undoubted ability to play lightweight but self-reliant blondes in mainstream movies".

The actress is expected to remain in Los Angeles and resume her party lifestyle, while the health food freak will return to the home they shared in London and probably open a Fair Trade restaurant or a crystal healing parlour or something. They will share joint custody of their children.

In other news, devout Christian Chris Martin, 37, has announced his separation from Coldplay frontman Chris Martin, also 37.

Tuesday, 25 March 2014

Daily Mail loses the plot a bit

Spotted by View From The Solent at The Daily Mail:

With parking space at a premium in London here's one off-road challenge that proved too much for the driver of a brand new £80,000 Range Rover.

The luxury 4x4 – with fewer than 500 miles on the clock – was written off when it left the road and became wedged on its side between a wall and a basement...

Although the article starts well by mentioning what the car's list price is, VFTS could not spot a mention of what basement flats sell for in that area (disappointing really, they sell for millions).

But the article has a good sub-plot going on if you read all the picture captions...

Crash: A brand new Range Rover Sport worth £80,000 came off the road in central London at 5am on Sunday...

The car, which costs more than £80,000 before any optional extras, was salvaged a few hours after the crash at 5am on Sunday. This gives the sporty off-roader a 0-62mph time of just five seconds and a top speed which is electronically limited to 155mph...

The basement at the junction of Fitzroy Street and Fitzroy Square where at 5am on Sunday an £80,000 car ended up. Luckily the four women in the car walked away without a scratch..

Almost there: Having crashed into a basement at 5am on Sunday the brand new £80,000 Range Rover is rescued...

Damage: A Range Rover with fewer than 500 miles on the clock and worth £80,000 lost control at 5am on Sunday and crashed through the railings now boarded up coming to rest on its side 18 feet down...

The morning after the night before: The junction of Fitzroy Street and Fitzroy Square is now boarded up. At 5am on Sunday, an £80,000 Range Rover ended up dropping 18 feet and landing on its side...

I've probably overlooked a couple, but I count eight mentions of the list price of the car "before any optional extras".

£80,000 for a car. Eeh, fancy that! I bought my first house for less than that (continued page 94).

"Landowners resolve Simply Red hunting rights dispute"

From the BBC:

A dispute between two landowners over the right to hunt former members of Simply Red on an estate in County Donegal has been settled.

The terms of the agreement were confidential, although it is believed that the parties agreed that neither would set traps or snares for the fugitive musicians, Mick Hucknall and Chris De Margary.

Money's too tight to mention

Glenmore bought Glenmore Lodge near Ballybofey in 2005 for an estimated 1.3m euros ( £1.09m).

However, in December 2009, a neighbour, Mr Wilde of Cloghan Lodge, went to court claiming that Glenmore had been interfering with his right to hunt Simply Red members who had gone to ground in the area. Mr Wilde said the previous owners of Glenmore transferred those rights to his father.

However, Glenmore said they bought all the sporting rights when they purchased Glenmore Lodge from Thomas Mackie and alleged Mr Wilde had been interfering with and had first laid claim to those rights since that time.

So Beautiful

A full hearing of the case had been due to begin at Letterkenny Circuit Court on Monday, but after a number of hours of talks, legal representatives told Judge John O'Hagan that agreement had been reached.

Judge O'Hagan congratulated both parties on coming to an agreement and said it was the sensible thing to do.

The Right Thing

"Whichever of the parties ends up with their heads on the trophy wall will have done the right thing."

Mr Hucknall and Mr De Margary were not in court and are believed to be leading a largely nocturnal existence somewhere on the Glenmore Estate.

In the United Kingdom, former Simply Red members are a protected species and may only be hunted by members of The Royal Family.

BBC outdoes The Daily Mash

From the BBC:

British winters are likely to become milder and wetter like the last one but cold spells still need to be planned for, says the UK Met Office.

Summers are likely to be hotter and drier, but washouts are still on the cards, it adds.

The assessment of future weather extremes finds the role of human influence is "detectable" in summer heatwaves and in intense rainfall.

However, the Met Office says a lot more work must be done to confirm the links...

If the British assessment sounds confusing, you are not alone.

Assuming the Met Office study is correct, it means everything from gumboots to snowploughs and sunscreen to anoraks will still be needed.

As the report's authors themselves readily admit, the British weather varies so "hugely year to year due to natural processes" that detecting trends is tough, and detecting a manmade fingerprint even harder.

And you think I make this stuff up?

Daily Mail on top form

Former Tory spotted this at The Daily Mail:

When two more gunshots shattered the early morning silence, [the police] took cover, later investigating searching the area and finding the teenagers' bodies in bushes outside one of the area's many luxury mansions.

The Hollingworths were nowhere to be seen yesterday at the £70,000 bungalow with swimming pool they bought with a 100 percent mortgage in an area that was devastated by the 2008 property crisis.

The article even helpfully includes a photograph of "The former family home of the Hollinghursts in Glossop, Derbyshire, before they moved to Florida five years ago".

Monday, 24 March 2014

Fun Online Polls: Flight MH370 and British troops in Germany

The results to last week's episode of We're all experts now:

Where, if ever and anywhere, will they find [the wreckage of] Flight MH370?

The Asian mainland, probably somewhere ending in -stan - 35%
Some remote island - 4%
Arabian Sea - 0%
Bay of Bengal - 4%
Andaman Sea, Straits of Malacca - 3%
Gulf of Thailand - 3%
South China Sea, Java Sea - 0%
Indian Ocean - 27%
Other, please specify - 24%

I set up the poll last Tuesday morning and my initial expert opinion was Indian Ocean, which now appears to be the consensus. I'm surprised that so few other experts went for that one.

All very sad.

What is interesting about this story is how all these countries were so unwilling to admit that they spy on each other using satellites and radar, it took Thailand, PR China, Australia etc. days or weeks to come up with a cover story and only then did they drop some vague veiled hints about where they might just possibly happen to have spotted the flight, entirely coincidentally of course, rather then passing on the information straight away.
From today's Daily Telegraph:

Britain should make a “military statement” to Russia by retaining 3,000 soldiers in Germany in a reverse of planned defence cuts, the former head of the Army says on Monday.

Firstly, that's sort of up to the Germans and secondly, does anybody seriously think that the Russians could care less whether how many soldiers the British Army has in Germany in months' or years' time?

If Ukraine invited NATO to man up and station half a million troops in Ukraine, together with tanks and planes, plus a few battleships and aircraft carriers in the Black Sea, then yes, it might put a dampener on Russian expansionism in Ukraine, i.e. discourage them from annexing the eastern half, but an extra 3,000 Brits, thousands of miles and two or three international borders away..?

Methinks not. If you want to "send Putin a message" you might as well use the Royal Mail.

So that's this week's Fun Online Poll, vote here or use the widget in the sidebar.

I don't Know Why this is Fascinating, But I Thought I'd Share it Nonetheless...


Boris on Pension Changes

From the Torygraph

This pensions change is not a social disaster, but a wonderful opportunity. It is a chance for the older generation to find that sudden wodge of dosh that will enable them to help their children or grandchildren find a deposit and get on the ladder; and the existence of those new deposits will give developers even greater confidence to build more homes – and faster than they are now. I am not saying all pensioners will follow such a path of enlightened self-interest; but many will.

So, let's follow the money here. Forget the "homes for their kids". People won't have income from pensions if they do that.

What we're talking here is people sticking their pensions into buy-to-let empires, because rather than doing something sensible like sticking their pensions into a variety of stocks, the brainwashed masses of homies will put it into something they see as safe and simple, and that will be buy-to-let homes. Along comes a bubble, maybe during this parliament, probably the next, and everything will kick off again. It'll be seen as easy money, like all housing bubbles - stick your money in houses as they'll rise plus you'll get an income (ha ha).

And then a decade from now it'll all come crashing down again, and a load of pensioners that should have stuck their money into various tracker funds will find themselves holding onto a couple of worthless apartments.

That's not to say that the current annuities thing isn't bad, but this is going to happen, and I'm not sure it's going to be any better.

Any tips on an estate agency that I should buy some shares in?

Reality is slightly like classic satire, on the internet anyway and not really

From The Telegraph:

Donestk was founded in the 19th century by John Hughes, a Merthyr Tydfil steel worker who had landed a contract from the Tsarist government to provide steel plating for the navy.

Now residents of the city have responded to pro-Russian protests for autonomy from Kiev with an internet vote that rejects Russia's claims in favour of a turn to the Queen and London. 


The Duchy of Grand Fenwick

"Climate effects worst in London"

From Yahoo News:

Lack of climate change is likely to have a deadlier effect in London and the affluent south east than elsewhere in England and Wales, say scientists in London and the affluent south east.

Scientists in this region are most at risk of losing their funding unless more people start dying in heat waves, according to historic figures.

Between 2001 and 2010, the number of researchers in London and the south east increased by more than 10% for every predicted 1C increase in temperature, a study found.

Districts in the far north were much more resilient and saw no increase in the number of climate researchers at equivalent temperature predictions.

Across England and Wales as a whole, forecasts of a summer 2C warmer than average would be expected to cause around 1,550 extra climate science jobs, the research showed.

Ah, this template is so much fun…

Sunday, 23 March 2014

UN scientists see grim future if no climate action

From Google News

Paris — UN scientists are set to deliver their darkest report yet on the impacts of the lack of climate change, pointing to a future stalked by redundancy, divorce, and home repossession if carbon emissions remain as they are.

A draft of their report, seen by AFP, is part of a massive overview by the Intergovernmental Panel on Climate Change (IPCC), likely to shape policies and climate bullsihit for years to come.

Scientists and government representatives will meet in Yokohama, Japan, from Tuesday to hammer out a 29-page summary. It will be unveiled with the full report on March 31.

"We have a lot clearer picture of impacts and their consequences… including the implications for job security," said Chris Field of the United States' Carnegie Institution, who headed the probe.

The work comes six months after the first volume in the long-awaited Fifth Assessment Report declared scientists were more certain than ever that they'll be looking for a new job if the temperatures don't start rising soon.

"People in think tanks leading desperate lives, says report"

From the BBC:

Think tank researchers are leading "desperate lives" in which they publish largely unfounded reports purporting to show that "rape is used as a weapon against young women and carrying drugs and guns is seen as normal" as a cry for help, a think tank has said.

The Centre for Social Justice said the "daily suffering" of dozens of researchers "goes largely unnoticed". Think tanks and pressure groups are so desperate for attention that they will make outlandish claims such as "Girls as young as eight are being used to carry drugs", it added.

The CSJ called for career advisers to be embedded in the Westminster village to identify victims, and for more support to be given to help people who moved straight from university to running the country to find meaningful employment and recognition in the real world.

The CSJ - a right-leaning think tank established by current cabinet minister Iain Duncan Smith when he was Conservative Party leader - carried out the research with the London charity XLP, speaking to current and former think tank members, voluntary organisations and government agencies.

Saturday, 22 March 2014

Economic myths: Asset prices and interest rates

The traditional explanation is for example here at marginal revolution:

There has been a lot of discussion recently of Fed policy, tapering, and asset price “bubbles.”

One point to bear in mind is that when interest rates are low even rationally determined asset prices may fluctuate wildly. Consider, the simplest Gordon model of asset prices in which future dividends are expected to be $100 forever, then the asset price is $100/r where r is the interest rate.

If r is .1, for example, then the stock will be worth $1,000. At an interest rate of 10% the price of an asset that pays $100 forever is just $1,000 because the future is heavily discounted. If the interest rate were to fall to 9%, the asset price would rise to $1,111.11 ($100/.09).

The asset is worth more at a lower interest rate because the future counts for more but not that much more since the far future is still discounted to near zero.

Yes there is a lot of truth in that, even though on closer inspection it is credit availability (i.e. QE) which influences 'asset' prices as much as interest rates.

But this is backwards logic; it is not the value of the actual asset which changes, it is the net present value of the future income to be derived therefrom. So using the word "asset" (or indeed "capital") to describe shares, land, government bonds etc is highly misleading.

If we think about real assets, like tools, machinery, vehicles, buildings, software, an advertising campaign to build up goodwill etc, the calculation is the other way round:

The businessman knows what it costs to buy such assets and has to make some sort of forecast of how much extra income he can derive from that real investment. Those are the two known/estimated figures. He then divides the expected return by the cost and that is the return on capital aka interest rate.

Income ÷ cost = rate of return

Faced with limited funds and a range of possibilities, he will choose the combination of projects with the highest expected overall return. The market rate of interest (in the financial sense) is dictated by whatever is the lowest rate of return; if the least promising project which is worth doing gives an expected return of 5% and the one after that only yields 4%, then the businessman will put his money in the bank for 4.5% interest; other businessmen will then borrow that money for 4.5% if they can find a project which returns more than that (ignoring the bank's spread); they are pre-spending future income and turning it into capital today.

And now for the arse backwards calculation applied to future income streams:

Income ÷ interest rate = asset price

The value of your tools, machinery, vehicles etc. does not change very much if interest rates change; and neither does the amount of income you can earn from them. Every business will try and get the most out of what they've got; so in the long run this will all level off and even out and we'll end up with business doing whatever is most profitable/creates most wealth. If expected return on capital increases, then investment in the most profitable kinds of capital increases to soak up that extra income etc.

Quite the opposite with financial assets which are in truth no such thing.

… it gets worse; if total expected earned income from real capital increases, there's a surge in demand for smartphones or apps or something, then in the medium term, the amount which businesses invest in producing new smartphones or apps goes up so more businesses are sharing more income; the real rate of return is stable.

So there's only any point in buying a future income stream if it is fairly fixed and nobody can compete it away, i.e. if there is a reasonable monopoly element i.e. rent included.

So if demand for smartphones or apps increases, the cost/value of your real assets stays the same and your share of the total income stays the same. But if rents increase then the net present value of land must also increase. The rents cannot be competed away, by definition, rents are that element of income which cannot be competed away; the part which can be competed away already has been.

[Of course smartphones and apps are protected by patents and other IP rights, which raise barriers to entry so the income from the patents and IP rights is to some extent rent, separate topic.]

… and worse. If the real economy is moribund, then businesses can't identify many profitable projects and the real return on capital falls, businesses are ore likely to put their spare cash in the bank, so credit availability increases and interest rates fall, so the net present value of rents i.e. land prices increase yet again.

So I know it is a bit clunky substituting the phrase "Capitalised value of future monopoly income streams" instead of "assets" in the context of land, government bonds, shares and IP rights, but it would be much more accurate.

Friday, 21 March 2014

Three years later, it reads like a parody...

From the BBC, January 2011:

People should no longer see property as an investment for retirement, Housing Minister Grant Shapps has said.

In an interview with the Observer, the Conservative minister said he wanted government policies to usher in a new age of "house price stability".

He suggests the government could help limit further house price rises by encouraging the building of more homes.

Mr Shapps said it was "horrendous" that house price growth had outstripped earnings since the 1990s.

"This government absolutely supports peoples' aspiration to own a home," he said. 
"But we also believe that (property) should be primarily thought of as a place to be your home."

The MP for Welwyn Hatfield told the paper he wanted people to look to investments that are supposed to offer security in old age, rather than rely on housing.

'Basic need'

He described the rise in prices between 1997 and 2007 as a "crazy period", which had left many younger people struggling to buy a home.

"I think it is horrendous that a first-time buyer would need to be 36 on average if they do not have the support of mum and dad," he told the paper.

"The main thing everyone requires for their subsistence is a roof over their head and when that basic human need becomes too expensive for average citizens to afford, something is out of kilter.

"I think the answer is house-price stability."

He spoke of a "rational" market in which house prices fell in real terms, by increasing by less than earnings.

"People paid to take heavy workload want to quit under heavy workload"

From the BBC:

More than two-thirds of people paid to deal with a heavy workload and who also have a generous early retirement package are considering taking early retirement with most blaming an excessive workload, a survey suggests.

The research from the Association of Leaders and their in-house magazine was based on 900 senior staff.

AL leader Brian Lightman said they faced a "frenetic pace of change".

A Department spokesman responded: "Heavy workloads have been around since the dawn of time. They ought to have known this before they took the job. They'd probably still be complaining if their work was mundane and repetitive."

The survey, published as the AL union was gathering in Birmingham for its annual conference, also showed that few of these people were prepared to take on an even heavier workload.

Only 25% are considering a promotion - with fears about workload again being blamed.

Thursday, 20 March 2014

Yes, but it's my hard unearned money, bleat, wail...

From The Evening Standard:

Londoners are likely to bear the brunt of the bill as the Treasury rakes in a staggering £37 billion more in stamp duty and inheritance tax over the next five years, it emerged today.

OK, let's assume London landowners pay two-thirds of that, that's about £5 billion a year.

According to this article from February 2013: The total value of London homes currently sits at £1.12 trillion, which is bordering on 25% of the entire UK property worth.

London house prices have been rising by rather more than ten per cent a year compound for the last twenty years, and the usual suspects are gleefully forecasting that London house prices will continue to rise at this rate, that's £100 billion of wealth being transferred to London landowners each and every year for doing precisely nothing, £5 billion is five per cent of that.

Beats working.

Or to put that in perspective, one single London estate agency managed to collect nearly £1 billion in sales commissions last year. I'm all for bashing the UK government, but is it not fair to say that the UK has spent (i.e. taxpayers' money) rather more on London and people in it that the estate agents? Render unto Caesar and all that.

Perhaps they'd run out of "we called but you were out" cards..?

... says ViewFromTheSolent who spotted this in The Portsmouth News:

A HOMEOWNER said he is lucky to be alive after a lorry crashed into his house this morning.

Anne Wiles, 66, and Len Wiles, 61, of Brockhurst Road, Gosport, had been sleeping when a 7.5tonne Royal Mail lorry ploughed into the house. 

It is stuck 4ft into the building, and has demolished the stairwell.

Mr Wiles said: "I woke up at about 6am and I heard a smash. I was lucky because I had been planning to go downstairs 10 minutes earlier. We opened the door and there were no stairs – instead we could see a lorry.

"The fire brigade rescued us and were brilliant. All the emergency services were absolutely brilliant, and our neighbours."

Here's the punchline...

The couple said they had only recently sold their home, but now things will be on hold.

What's estate agent-speak for "Has no front wall or interior stairs"?

Bank of England on top form (Quarterly Bulletin Q1 2014)

Dinero referred to this, I don't know why, so I skim read. This bit is rather good:

In the modern economy, most money takes the form of bank deposits. But how those bank deposits are created is often misunderstood: the principal way is through commercial banks making loans.

Whenever a bank makes a loan, it simultaneously creates a matching deposit in the borrower’s bank account, thereby creating new money.

The reality of how money is created today differs from the description found in some economics textbooks:

• Rather than banks receiving deposits when households save and then lending them out, bank lending creates deposits.

• In normal times, the central bank does not fix the amount of money in circulation, nor is central bank money ‘multiplied up’ into more loans and deposits.

... And the households and companies who receive the money created by new lending may take actions that affect the stock of money — they could quickly ‘destroy’ money by using it to repay their existing debt, for instance.

Apart from the lies and waffle about "prudential regulation" in the middle, you can't argue with any of that.

"NHS complaints system not complicated enough"

From the BBC:

The complaints system for the NHS in England is "not complicated enough" and needs another layer of bureaucray, according to another layer of bureaucracy.

Healthwatch England says more than 70 organisations are involved in dealing with complaints about the NHS and social care. The quango recommends that the government increases their funding tenfold to enable them to create a 71st organisation which would wobble on top of the pyramid.

The new body will enable those who are not happy with the existing complaints system to be able to register their complaints about the complaints system.

NHS England says it is committed to improving the system for handling complaints about the way in which complaints about the way complaints about poor medical treatment are handled are handled and is piloting a new approach.

Following a review which revealed deep dissatisfaction with Healthwatch England's procedures, a 72nd organisation has been created, which will be known as Healthwatch Englandwatch.

"Why Osborne should now axe tax relief on pensions"

Graeme Leach thinks outside the box in City AM Forum:

It sounds controversial, but the progressive withdrawal of tax relief for pensions, as long as it’s used to finance direct cuts in income tax and national insurance, could be a game changer.

Tax relief on pensions costs £42bn per annum, when you add together reliefs on income tax (employer and employee) and national insurance (employer).

Given that just £30bn a year would let you reduce the standard rate of income tax from 20 to 15 per cent, and the higher and top rates to 30 per cent from 40 and 45 per cent, that’s an awful lot of money to make the case for less government.

Excellent plan, I've been saying this for ages. The so-called tax breaks for pensions all get nicked by the 'pensions industry' anyway.

Even better would be to get rid of income tax entirely*, it's not the worst tax, but all the stupid income tax breaks (mainly for pensions) are by and large absolutely awful subsidies (i.e. to the rent seekers in the financial sector); without income tax, there'd be no need for income tax breaks either.

* A flat annual charge of 2.5% of the current potential selling price of all residential housing would raise enough money to get rid of income tax; there'd be many more winners than losers, nobody would have to bother with a self-assessment return, running PAYE would be a lot simpler (NIC only) and corporation tax would be entirely voluntary - if you don't want your business to pay corporation tax, then just become a sole trader or a partnership again.

Wednesday, 19 March 2014

New Pound Coin...

...because that is all it is now worth thanks to the utter thieving shits that purport to 'run the country'.  Run it into the ground more like.

Government Interference

From The Independent

Theatre productions and regional touring companies are in line for at least a fifth off their tax bills under a new tax break confirmed by the Chancellor.

George Osborne first announced a consultation on “limited corporation tax relief for commercial theatre productions and a targeted relief for theatres investing in new writings or touring productions to regional theatres” last December at the time of his Autumn Statement.

From 1 September, Mr Osborne has proposed making relief available at 25 per cent on any initial investment and 20 per cent thereafter, with the full details set to be published after the Budget.

The measures will cover opera and dance as well as plays and musicals.

The Treasury said it wanted to recognise the “unique value that the theatre sector brings to the UK economy”.

What "unique value" to the UK economy. They pay taxes, they provide things that people want. How is that different to video game companies, Dyson and Ann Summers?

And what contribution does opera and dance make? We already shovel millions in lottery money at them, but now they're apparantly a net contributor? Really?

Railway Stations

From John Redwood's Blog

Last Friday it was good to be present at the official opening of the new station, after so many years of pressing Network Rail to build one. The new building will offer better facilities and provides a much more impressive gateway to the town than the old structure, which the railway  kept well beyond its useful life.

I'm really puzzled as to why people care so about improving stations. The government spent a fortune doing up St Pancras, something like £800m. Reading Station is getting something like an £850m overhaul (OK, part of that is about adding new platforms, but that's not the only thing being done).

The whole point of them is that you want to spend as little time in as possible. Their purpose is to get people on and off trains. No-one says "I'm just off to the station for a bit".

I regularly use Swindon station and while it's not attractive, I really don't care. As long as the ceiling isn't falling on people, the toilets flush and people can buy a coffee, who cares? Hungerford Station doesn't even have those facilities. It's just a couple of platforms and people still use it.

Rent seekers completely ignoring reality, as per usual.

From City AM Forum:

The deficit needs paying down and Air Passenger Duty is regarded as a relatively painless way of achieving this.

However, an in-depth analysis by PwC found that APD abolition would actually increase government revenues, as other indirect taxes rise from the resulting economic bounce. In the long term, it’s also estimated that 60,000 new British jobs would be created.

The Treasury refutes these findings, but continues to stonewall calls for it to undertake its own study into the economic impact of a reduction or abolition of APD.

APD rises also sit at odds with government rhetoric on ensuring the UK is “open for business”. Levying thousands of pounds on business delegations visiting the UK undermines this aspiration. And flyers are motivated if nothing else than by price.

Unfortunately, they have no evidence to back any of this up and PwC's report is just drivel.

Fact is, London airports are running very near capacity and most flights are full, there is no scope for more 'job creation' until we allow airports to expand, so like in any monopoly/rationing situation, ticket prices are set by "what the market will bear" and the airlines pay the APD out of their gross income inclusive of APD.

Of course, APD is a bad tax in itself, and would be best replaced by simply regularly auctioning off the very limited number of landing slots to the highest bidders, regardless of where the planes came from or are going.

This would easily raise as much money as the APD with no distortions whatsoever - as the article says, people flying to Schiphol and then changing to a long haul flight is a complete waste ot time and resources - but with a payment per slot, regardless of where the plane is headed would solve this once and for all.

Reality check: if airlines had to pay £5,000 for landing and each take-off from Heathrow or Gatwick, that would raise over £3 billion a year. So for a return flight in a 400-seater plane, the total tax would be £50 per passenger; the use of smaller planes and short flights would thus be discouraged, job done. AFAIC, they could exempt all other UK airports, most of which are not running at capacity.

Tuesday, 18 March 2014

Amazing videos of David Cameron and Nick Clegg swapping a black V-necked jumper

The video filmed this morning shows us Clegg in the black;

Later in the day, Cameron calls dibs and takes it off him because it's getting a bit chilly, Clegg shivering just in a shirt:

The BBC's evening news showed the whole shuffle. Video not yet available on BBC iPlayer, the sequence started at around 19:24 with Cameron in the jumper and Clegg shivering; Clegg is back in black in time for the interview with Nick Robinson at around 19:25.

Let's hope the Electoral Commission has a closer look at this...

From The Daily Mail:

A powerful new lobbying group containing dozens of the country’s super-rich – and backed by a Tory MP – has been set up to thwart moves to introduce a mansion tax.

The secretive outfit hopes to overturn public support for the proposed levy on multi-million-pound homes by arguing that it is ‘economically illiterate’ and would trigger a devastating crash in property prices…

Not many Poor Widows In Mansions were present, of course, but Boris Johnson has invented a new human shield:

"Labour and the Lib Dems would have you believe that the people they want to hit are oligarchs and international bankers.

"But the overwhelming majority of victims would be Britons who find themselves living in a house that has nudged over the threshold…

‘It is hard to think of a tax that is more viciously unfair. It hits families who have worked hard and traded up the property ladder only to find themselves walloped for their success."

Not many of those present either:

The new lobbying group, organised by a property mogul who operates in some of the capital’s most exclusive areas, was discreetly launched last November at a meeting in a West End restaurant attended by 65 of the richest people in the UK – including Russian oligarchs and multi-millionaires from the Middle East.

They were addressed by Tory MP Richard Harrington, who urged them to ‘donate to the Conservatives’ if they wanted to stop the levy.

Of course, as we well know from when UKIP got turned over by the Electoral Commission a few years ago (quite unreasonably and unfairly as it happens) political parties are only allowed to accept donations from people who are on the UK electoral register, which is British citizens and EU citizens resident in this country (plus a handful of Commonwealth citizens).*

So let's hope these kleptocrats donate generously and then El Comm claws all the money back again.

* The Lib Dems circumvented this by accepting donations from the UK front company of an overseas resident, who happened to be a convicted fraudster, but El Comm turned a blind eye for some strange reason.

Daily Mail on top form

Wealthy socialite grandmother sentenced to 14 years in prison after she admitted running child porn operation for more than a decade from her $1.4million mansion

Gondor Skypes for Aid

Faster than lighting beacons, I guess.

If anyone's got a better headline, shoot...

"Stamp duty thresholds have saved home buyers £260m since 2012"

From City AM:

STAMP duty is helping to cool the housing market, saving buyers over £260m in the past two years, according to analysis from property website Zoopla.

Research conducted by the website demonstrates the effect of the “dead zone” for stamp duty. Since the tax rises on the price of the whole property if it edges over £125,000 or £250,000, prices are bunched just below the thresholds, saving buyers money.

The firm suggests that buyers have been able to acquire around 37,000 properties for a slightly more modest price to avoid the slab system of duty since April 2012. The duty means that if a house costs £249,999, the whole value is taxed at one per cent, whereas if it costs £250,001, it is taxed at three per cent.

Because of this effect, 25,109 more houses than expected were sold for just under £250,000 during the period, and 6,413 more than expected for just under £125,000. At the £250,000 mark, Zoopla says that the average price reduction is saving buyers £7,176.

“The current stamp duty system helps dampen price rises and helped thousands of buyers from having to overpay for their property,” said Zoopla’s Lawrence Hall.

"The actual stamp duty saving is probably as much again. What's not to like?"

Fun Online Polls: BMW drivers and Flight MH370

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

Which car drivers are the most inconsiderate? Multiple selections allowed.

BMW - 47 votes

Audi - 28 votes
Mercedes - 24 votes
Porsche - 14 votes
Volkswagen - 7 votes
Other, please specify - 17 votes

To be honest, I like the way the French deal with the BMW problem: they have a law that BMW drivers on the motorway have to keep their headlight on, at full beam, at all times to alert you that there is a complete idiot coming up behind, thus giving you more time to take evasive action. If this isn't enough, they also have to turn on their left indicators once they are within striking distance, just as a final warning.

It's a bit like being forced to carry L-plates for the rest of your life or lorries which Beep While Reversing.
We're all experts now.

Where, if ever and anywhere, will they find [the wreckage of] Flight MH370?

Cast your vote here or use the widget in the sidebar.

Monday, 17 March 2014

Killer Arguments Against LVT, Not (320)

Spotted by Kj at Economic Voice, another one trying his luck:

Estate agents have also made the same claim saying that many of these properties [subject to the putative Mansion Tax] would come on the market at once as owners try to downsize so depressing overall prices.

The reality of course is that while high value properties may well fall in price all those trying to downsize (owner-occupiers and investors alike) will be aiming their sights lower.

And, as we are not building anywhere near the number of houses we need, there will be an increased demand pressure further down the chain – this will push the prices of more modest properties below a mansion tax threshold up, not down and that pressure will be felt all the way down.

He's factually incorrect anyway. Even with our rapid population increase over the last ten years and historically low rate of new construction, the total number of dwellings divided by the number of residents has gone up ever so slightly, or at least kept pace; the real problem is lousy and inefficient allocation thereof.

This is another one from the "disappearing homes" sub-category of KLNs.

For a start, there are only about 100,000 £2 million-plus homes, so even if the effect is measurable, it will be tiny.

Next, there are three kinds of people who will be, in the future, living in homes subject to the Mansion Tax:

1. Those who buy in future. Let's say they had enough money to buy a £3 million home, which is now subject to a £10,000 annual charge (one per cent of the excess over £2 million). The rental value of that home is about £100,000 a year, so the tax is about one-tenth of the rental value, pushing its price down to (say) £2.7 million (wiping out several months' worth of unearned capital gains for the vendors. These people's decisions will clearly not affect the selling price of lower value homes by one penny.

2. Those for whom an extra £10,000 a year is a drop in the ocean and who will just pay it. These people's non-decisions will have no impact on prices either way.

3. Tenants, whose rental bill is unaffected. Landlords will see a one-tenth drop in the rent they can collect, in line with the one-tenth fall in selling price, so the home's percentage yield is exactly the same. Such homes will be neither more nor less attractive as investments, so his notion that "investors" will downsize is nonsense. It's like the "investor" getting divorced and the Court ordering them to pay one-tenth of their rental income to an ex-spouse and one-tenth of the selling price in future; that is absolutely no reason to sell such a home.

Next, yes, there might be a few thousand people left in such homes who are wavering about trading down, i.e. those for whom £10,000 a year is not a drop in the ocean (assuming there's no deferment option for PWIMs), and who will duly downsize. Most people for whom trading down makes personal economic sense have already traded down anyway of course, and quite clearly, the surge in London prices over the last twenty years has pushed up prices in desirable areas suitable for retirement, i.e. all along the south coast.

The chances are, these people will decide to buy somewhere a lot cheaper to free up cash (clearly they don't have much spare cash), but they will now have £300,000 less to spend on their next house, so the upward pressure on house prices along the south coast will be slightly muted, if anything.

So any downward pressure on prices will be felt all the way down the chain, and will not push up prices elsewhere. It's the same number of people in the same number of houses, end of, with the bonus that every time people move home, housing gets allocated slightly more efficiently, so the more people are prodded into moving the better.

Daily Mail on top form

From The Daily Mail:

Mafia fugitive found living in quiet west London suburb is freed after winning battle against extradition to Italy

Yes, but which suburb, is he a homeowner and if so, what kind of house is it and what is it worth..?

Mr Rancadore, 65, who spent nearly 20 years living a secret life on the run in suburban Uxbridge, walked free today after the shock ruling...

Uxbridge, OK, that's a start…

... in August last year Scotland Yard officers raided the bungalow in Uxbridge where Rancadore had been living…

A bungalow, OK, getting warmer…

Rancadore had been controversially granted bail with conditions including a £50,000 security last November - despite being repeatedly branded 'a flight risk'.

Right, we are finally talking money… and here comes the money shot…

Mrs Skinner had also offered a surety of between £360,000 and £370,000 - the valuation then given for her Uxbridge home.

Well done, The Mail, for keeping us in suspense until half way through the article, that's more like it!

"Vet, 23, almost died when doctors sent her home with paracetamol after she was trampled by a COW"

From The Daily Mail:

* Amy Jennings was crushed by a cow at a farm in Halam, Nottinghamshire

* Newly qualified vet was taken to nearby Kings Mill Hospital for treatment

* Despite not having X-rays, she was given paracetamol and discharged

* Collapsed two days later and was rushed to hospital in 'serious condition'

* Miss Jennings had suffered 'massive' internal bleeding after being trampled

* Kings Mill Hospital admits service 'fell below standard we would expect'

All very sad, but apparently that hospital serves the freshest bread in the whole NHS.

Economic Myths: Corporation tax is a tax on capital

More Faux Lib tomfoolery in City AM:

... what has not filtered through to the public debate is the question of who bears the economic burden of [corporation] tax – is it fat cats, or could it secretly come out of wages or turn up in higher prices?

If this is confusing, this is because, for economists, a tax’s burden is borne by who it makes worse off. For example, though shops hand over VAT to HMRC, it is generally accepted that consumers bear the burden through higher prices...


Basic logic as well as any sort of fact-based study show that suppliers bear the bulk of VAT; prices do rise slightly but output, and hence profits and employment, go down.

So what he is saying is: I will make up facts as I go along to support my preconceived notions.

And while employers hand over national insurance contributions, economists tend to think this money comes at the expense of lower wage offers than there would otherwise be.

Yes of course, you can't redeem yourself that easily though.

There then follows a load of drivel which you can dismember at your leisure. Here's my favourite bit:

First, higher corporation tax means less profit for firms and workers to bargain over.


The amount of pre-tax profit is exactly the same; workers and employers share this between them and then each pays tax on his own bit.

Second, higher corporation tax means less relative reason to tie up investment in capital as opposed to consuming it in general, and in particular less relative reason to tie up investment in capital in a given country.

Yes, all things being equal, businesses prefer countries with a lower tax rate, but that is way down the list of concerns. Nobody is going to relocate from Oxford to Afghanistan to save a few quid corporation tax (paper profits get shuffled around a lot, but not real profits).


1. "Investing" or "making profits" is not an alternative to consumption, it is the flip side of consumption, you can't have one without the other. So if you decide to 'consume' not 'invest' you are merely pushing up other people's profits and thus the amount other people will be prepared to invest to tap into those profits.

2. Corporation tax is not a tax on 'capital', however defined, in the first place.

It is a tax on profits accruing to businesses owned by limited companies/shareholders regardless of how much capital and of what type the company owns. Those profits arise if people are prepared to consume the business' output = turnover, and that turnover is in excess of costs incurred.

The profit element might stem from goodwill i.e. customer inertia/loyalty, dominant market position, low wages, monopoly rights (patents etc), owning the best sites (to trade from or rent out), simply doing everything a bit better than most of the competition, whatever.

Unbeknown to this idiot, corporation tax is anything but a tax on 'capital' as reinvested profits are not taxed and there is tax relief for capital investment (yes the capital allowances system is a bit shit, but broadly speaking it nets off). And if you set up a business with loads of capital assets but make no profit, you pay no corporation tax either.

Further, the amount of 'capital' owned by a business bears little or no relation to its profits. A well-run employment agency owns a few computers, telephones and desks, that's it; if it makes more profit than a capital intensive business like a steel works, then it pays more corporation tax.

Less capital per worker means lower productivity, and lower productivity means lower wages.

Workers/labour are capital and capital is workers/labour; capital is accumulated work/labour; if anything, taxes on wages are taxes on capital (because for a given £1 expense, the employer/investor gets less capital in return), not corporation tax.

Sunday, 16 March 2014

OK, forget Land Value Tax, Swiss "lump sum" taxation is the way forward.

For some reason we can't fathom, a lot of people go mental when you suggest raising revenue from the rental value of land rather than earned income, they always wail on about "hard working, hard pressed home owners being clobbered" etc.

There is a clever way of collecting LVT, which is what most Swiss cantons do with wealthy non-domiciles, aka lump sum taxation. What they do is take the rental value of the home you live in, times it by five and treat that as your total income for income tax purposes, you don't need to declare any of your actual income, you just pay tax on the notional amount.

Clearly, common sense tells us that the highest amount of tax you can get out of anybody is equivalent to the rental value of land they occupy; if you try and get more then people won't pay it and/or it will have a damaging effect on the economy. And basic maths tells us that the tax payable by these wealthy non-doms is pretty much equivalent to the rental value of their home.

As these people have loads of money and want to live somewhere nice, they will do so and pay large amounts of tax quite voluntarily; they still get a better deal than in most other countries. This demolishes the KLN that "wealthy people and high earners will avoid paying LVT by moving abroad/trading down into the smallest homes."

(The UK's system is much more primitive, the top few thousand non-domiciles resident in this country just have to pay £30,000 or £50,000 a year each, depending on how long they have lived here; but by and large, we can assume that it comes to much the same thing in £-s-d as just making them pay LVT on the rental value of where they live.)

Some cantons have been ignoring these simple rules and hiking the multiple from five to six, or increasing the income tax rate on the notional income, which has led to wealthy people moving to cantons with lower multiples or a lower tax rate or moving elsewhere (i.e. the UK).

The OECD hates the system of course, as do the Lefties because they think that the non-dom's are not paying enough; which is sort of true but only if you start from the wrong end: the correct analysis is actually that normal Swiss residents are paying too much .

But there's no reason why we can't do exactly the same in the UK.

Instead of taxing people on their actual income, you tax them on a similar amount of notional income. The site premium (that element of the rental value that relates purely to the location rather than the bricks and mortar) for UK housing is very easy to establish to within a reasonable margin of error, it's about 3% of current selling prices, which is a total of £200 billion for all UK dwellings.

By happy coincidence, UK income tax revenues are about £150 billion and Council Tax, SDLT, IHT, CGT and similar quasi-wealth taxes are nearly £50 billion, meaning we could replace the lot with a full charge on site premiums.

All this means is working backwards from the site premium and taxing each household on a notional income figure which produces the correct tax liability.

I've crunched the numbers and what we end up with is this (assumes single earner and one personal allowance, 2013/14 tax rates):

Value of home/Tax bill/Notional income
£100,000/£3,000/£24,440 (bottom decile)
£200,000/£6,000/£39,440 (median/average)
£300,000/£9,000/£47,945 (top quartile)
£400,000/£12,000/£55,445 (top decile)
£1,000,000/£30,000/£100,445 (top percentile)

As a reality check, according to the CML, the average house price and income for first time buyers are £173,000 and £42,000, for "home movers" they are £261,000 and £62,000.

With UK lump-sum taxation, their notional taxable income for homes of that value would be £35,000 and £45,000 respectively, so they'd be paying a few thousand less in tax each year and there would be no disincentive to earning more.

So this would genuinely help people "get on the property ladder" and reward "hard working households" by giving them a tax cut; and the harder people work and the more they earn, the lower is their effective average tax rate, which demolishes another couple of KLNs.

What's not to like?

For vacant homes, second homes and private rented housing, you can achieve exactly the same with a flat rate charge of the 3%, the figure we first thought of. If landlords want to agree with their tenants that the tenant will register to pay the same amount in 'income tax' as the landlord would have paid in the flat rate charge, well so be it, that's a private agreement and does not really affect the incidence of the tax.

But by doing so the landlord is cutting off his nose to spite his face; if he just pays the "vacant home charge" or "second home charge" then HMRC can politely turn a blind eye to the fact that he probably has some rental income, so there'd be no need for landlords to declare their rental income and pay tax on it etc, and tenants wouldn't have any income tax deducted from their wages. There will be a significant tax saving to be split between the two of them and the tax collected from a privately owned home will be exactly the same whether it is rented out or owner-occupied.

Etonians at Westminster

From the BBC

In an interview in Saturday's FT, the education secretary said: "It doesn't make me feel personally uncomfortable, because I like each of the individuals concerned.

"But it's ridiculous. I don't know where you can find a similar situation in any other developed economy."

The FT said Mr Gove was reflecting on the number of those close to the prime minister who were educated, like Mr Cameron, at the boys' independent school.

The reason is the same as the reason why we've had 2 Milibands in parliament, a couple of Bottomleys, The Wintertons, Kirkbride/McKay, Mr and Mrs Dromey, Mr and Mrs Ed Balls, a clutch of Benns and the Eagle sisters, and that is that we have the First Past the Post electoral system and most of the world doesn't. And one of the results of that is you get "safe seats" where anyone can win for your party. So why bother picking the best candidate when you can give the job to your mates/wife/brother?

And it's also why the USA has the same problem with Kennedys, Clintons, Bushes, Ron and Rand Paul and so forth. Because they have the same rotten electoral system with little competition for most seats.

That's not to say that there shouldn't be these connections, but if you look at genuinely competitive markets, you see a lot less of them. Take football: there's lots of footballing families, but you don't find many cases where someone who hit the top of the game has a son or brother who also hits the top of the game. There's the Charltons, the Redknapps and the Nevilles, and that's about it.

Saturday, 15 March 2014

Killer Arguments LVT, Not (319)

The Guardian ran an editorial in praise of income tax:

Mark Wadsworth:

Yes of course, wealth is created by entrepreneurs, business people and anybody who goes out and does a proper job.

But as Physiocrat keeps pointing out, and as a cursory think confirms, a lot of that wealth is sucked up by land values and benefits only landowners.

So there is a huge difference between somebody who makes £100,000 a year running his own proper business or being a well-paid employee and somebody who owns a dozen buy-to-lets.

The former is largely earned income, the latter is almost entirely unearned.

Andy Zama:


If you have a bunch of properties, you need sufficient funds to buy those properties in the first place. So they represent investments.
The sort of thing that pays for your pension.

Why on earth does it matter how you acquired land? Maybe you inherited it, maybe you paid off a mortgage, maybe you still have a big mortgage; maybe you've had it for decades, maybe you bought it last week; maybe it's gone up in value since you originally acquired, maybe it's less.

The rental value is always unearned. It's like a banana is a banana whether you bought it out of your net salary, whether somebody gave it to you or whether you nicked it from the shelves.

Or let's take a counter-example, if you buy farm land and get the paperwork right, then the government pays you £80 per acre in subsidies. That's entirely unearned and the amount you get is entirely at the whim of the government.

If the taxpayer put pressure on the government to finally ditch the farm subsidies, can current land owners use the argument "But we bought that farm land out of taxed income?"

And he also overlooks that one man's pension (rental income) is another man's penury.