Saturday, December 30, 2006

Britain finally pays off American Debt

Yesterday (Friday 29th Dec), Britain paid the final installment of the loan it took out in 1945 to finance the re-building of post-war Britain.

According to the Independent, the original loan of $4.34 bn is equivalent of £27bn today. The final installemnt payment was £43m to the USA and £12m to Canada.

Ed Balls, the Economic Secretary to the Treasury, said: "This week we finally honour in full our commitments to the US and Canada for the support they gave us 60 years ago.

"It was vital support which helped Britain defeat Nazi Germany and secure peace and prosperity in the postwar period. We honour our commitments to them now as they honoured their commitments to us all those years ago."

We still owe money for the First World War:

However, since a moratorium on all war debts was agreed at the height of the Great Depression in 1931, no debt repayments have been made to, or received from, other nations since 1934.

The Treasury points out that, at the time of the moratorium, Britain was owed more in war debt by other countries than it owed to America. In 1946, Britain's national debt stood at about 250 per cent of GDP. Today the comparable figure is 36.8 per cent.

250% of GDP!! It puts things in perspective doesn't it. All those doom-mongers who like to predict that Britain will "collapse" under her modest 36.8% of GDP debt (low by historical standards and low in comparison to other developed countries), should reflect on history and on where we are now and stop being so daft.

Thursday, December 28, 2006

Multi-culturalism comes to France - French GPs get Diversity Training....

..... on how to deal with their English patients.

From the Times:

Dr Léopold, 54, is among a growing number of French GPs undertaking a training programme on how to treat the several hundred thousand Britons who have moved to France. The difficulties they face are as much cultural as linguistic.

The programme, funded by the French Federal Association for Medical Training, aims to bridge the linguistic and social gulf that often separates Gallic doctors from their English patients. Participants are given a list of English medical terms and mistakes to avoid, such as confusing the French groin (pig’s snout) with a groin strain, or pile (battery) with piles.

They are also warned about what Marc Bonnel, who runs the programme, describes as “cultural diversity”. “Basically, we have a totally different approach to medicine,” he said.

Consultations, for instance, tend to be longer in France — an average of fifteen minutes compared with seven in Britain

........Dr Bonnel also advises GPs to avoid asking British patients to use suppositories — a common form of medicine in France — and to be aware of what he calls la pruderie anglaise. “I would never hesitate to tell a French woman to take off her clothes on her first appointment, even if she had just come with a cold,” he said. “But you have to be very careful about that sort of thing with English women.”

Begun in 2000, the scheme is proving so popular that the number of courses will be doubled in many regions next year. The need is underlined by British expatriate websites, which contain dozens of messages from families seeking English-speaking doctors.

The courses come at a time when the French authorities are trying to attract doctors to rural areas where the population is rising, partly as a result of the British influx. The Allier council in central France, for instance, last week put up “wanted” posters offering medical students annual grants of up to €18,000 (£12,000) if they agree to practise there for at least six years after qualifying.

Dr Léopold is typical of the rural GPs that officials are trying to cultivate. He has a practice in the village of Le Lonzac in the Limousin region of central France, where he now counts ten British families among his patients. He said: “They tend to be more docile than the French, who are very demanding about when they want an appointment and what treatment they should get.”

I expect their equivalent of the Daily Mail is gearing up for a series of articles moaning "Diversity Training costs French taxpayer Millions of Euros", "But Why can't they Learn French" and "What's wrong with suppositories? When in France do as the French...."

Oh I forgot. They don't have a tabloid culture in France. Isn't that lucky?

Wednesday, December 20, 2006

The Lib Dems

OK, one last thing before I vanish for Christmas.

I thought I'd link to Political Hack's excellent analysis of the Lib Dems. I must admit that since I've become politically active, I've slowly started to realise that they are not quite what they seem and that the public's image of them is incorrect (particularly the bit about it being safe for a centre-left voter to cast a protest vote for the Lib Dems).

Read the full article here.

Merry Christmas

Just wanted to say Merry Christmas to everyone who reads this blog. Hope you all have a great time, get the presents you want and don't put on too much weight over Christmas!

Normal service will be resumed after the festivities.

Monday, December 18, 2006

For Mozart Fans

For all Mozart fans, a new website has been launched. It's a free database of 24,000 pages of sheet music covering all his works plus 8000 pages of critical commentary.

The website owners say they also intend to put 100 original manucripts, 270 letters written by Mozart, and about 2,000 pages of texts accompanying many vocal works, online next year.

To access the site, click here. Enjoy!

Thursday, December 14, 2006

Agreement with France on combatting VAT fraud

From the FT:

On Wednesday Gordon Brown said British and French officials had agreed that the UK could introduce a “reverse-charge” system of VAT on computer chips and mobile phones to fight “missing-trader fraud”, which cost the UK exchequer £2bn-£3bn in 2005-2006.

France had feared the UK plan could export the fraud from Britain to France but found that its own VAT system was leaking more revenue than thought.

.................The reverse-charge system levies VAT only as goods are finally sold to consumers and not throughout the supply chain, eliminating the possibility of missing-trader fraud.
Mr Brown said the UK changes would remove 90 per cent of goods used for missing-trader fraud from the UK VAT system and would be introduced eight weeks after the European Council of Ministers gave unanimous final approval to the changes.

Yesterday a French official said the discovery of a big shortfall in VAT receipts persuaded finance minister Thierry Breton to drop opposition to the British plan. France would study the plan with a view to implementing “something similar” to combat its own fraud problem. The aide said investigators estimated carousel fraud caused a shortfall in VAT receipts this year of €300m to €2bn (£200m-£1.3bn).

I hope this move is successful - most of Europe is leaking money to the fraudsters, and budgets would all look a lot healthier if this was stopped. Of course the fraudsters will then move onto something else - twas ever thus.

Thursday, December 07, 2006

Electricity prices in the EU

Eurostat have released an analysis of electricity prices in the EU plus surrounding european countries, as at 1/07/06.

Here's the table of prices for household customers:

Country Total euros Basic Other VAT
per 100KW Price Taxes

Bulgaria 6.34 5.27 - 1.07
Latvia 6.90 5.84 - 1.06
Greece 7.01 6.43 - 0.58
Lithuania 7.18 6.09 - 1.09
Estonia 7.50 6.35 - 1.15
Croatia 9.38 7.72 - 1.66
Romania 9.48 7.96 - 1.52
Hungary 9.71 8.09 - 1.62
Czech Rep 9.95 8.27 - 1.58
Malta 10.34 9.85 - 0.49
Slovenia 10.48 8.73 - 1.75
Finland 10.99 8.26 0.75 1.98
Poland 11.37 8.82 0.50 2.05
Spain 11.57 9.49 0.48 1.60
UK 11.59 11.03 - 0.56
France 11.91 9.05 1.24 1.62
Portugal 14.10 13.40 0.10 0.60
Slovakia 14.20 11.93 - 2.27
Cyprus 14.26 12.21 0.22 1.83
Austria 14.39 9.80 2.19 2.40
Belgium 14.68 11.36 0.77 2.55
Ireland 14.90 12.85 0.27 1.78
Sweden 15.61 9.75 2.74 3.12
Luxembourg 16.03 13.90 1.22 0.91
Norway 16.43 11.88 1.26 3.29
Germany 18.73 14.10 2.05 2.58
Italy 21.08 15.48 3.68 1.92
Netherlands 21.30 12.40 5.70 3.20
Denmark 24.56 10.72 8.93 4.91

The first thing to notice is that the UK pays very little in electricity tax
(VAT was cut to 5% by New Labour in 1997). Only Malta pays lower electricity tax than us. By contrast the Netherlands and Denmark levy swinging taxes (in Denmark's case the tax is greater than the base electricity price).

Latvia, Lithuania and Estonia enjoy low basic electricity prices because they get their gas from Russia at a deep discount (because they are former Soviet Republics) - how long this state of affairs will last is anyone's guess. Eastern European states in general all enjoy various discounts from Russia and hence pay less for their electricity.

In western Europe, France is notable for a low base electricity price - possibly because their electricity is generated by nuclear power and therefore hasn't been subject to the price hikes gas users have been subject to. Spain too has a low basic electricity price - their electricity generated by a mix of nuclear, gas and renewable (esp wind). Their low price is probably a testimony to how efficiently the Spanish electricity generators run their companies.

Intriguingly, Norway's basic electreicty price is higher than ours - a surprise as they are awash in oil and gas.

Wednesday, December 06, 2006

Poles flock to join UK Trade Unions

Duncan Campbell in the Guardian:

More than 200,000 Poles have registered to work in Britain since the EU expanded, and the actual number now working here is thought to be much higher. Many have found that employers try to pay them lower wages than British workers and take advantage of their ignorance of employment laws. Now unions, particularly those that recruit from the catering, security and building trades, are reporting a sudden growth in membership and involvement.

"This is very significant for the trade-union movement," says Brendan Barber, the TUC's general secretary. "It's not enough any more to think only about traditional workplace organising. We have to see what unions can do to reach out to vulnerable workers and find out how well they get their rights enforced."

............"People have a feeling of being lost when they arrive," said Paulina Tomasik, the 24-year-old secretary of the new Polish-speaking GMB branch in Southampton. Ms Tomasik, who moved to Britain from Radom, sees the union as playing a crucial role in helping Poles adjust to life in Britain: "It's not easy when you don't have a place to live and you don't speak the language very well. Some agency workers are paid £120 a week and then told they have to pay £80 in rent. When one person objected to this he was sacked by text message."

Many Polish workers in the catering trade are also realising that they can easily be taken advantage of. One Polish waiter in Southampton recounted how his management took a percentage from all the tips paid by credit card and were refusing to pay them extra for working Christmas Day or bank holidays.

Ross Murdoch, a GMB project coordinator, said that when a public meeting for Polish workers was held a few weeks ago in Southampton, "we were expecting around 20 to come and were amazed when 130 arrived". The Polish branch was swiftly formed and similar projects are planned for Swindon, Slough and Brighton, where there are large pockets of Polish workers.

The experience has been mirrored around Britain. Groups in Bristol, London and East Anglia have contacted unions for advice and help. In Glasgow the Transport and General Workers' Union set up a Polish branch after holding a meeting attended by 150 Polish workers. "We have recruited several thousand into the union nationally," said Andrew Brady of the T&G in Glasgow. He described the influx of Poles into the union movement as "a shot in the arm".

Links have also been established with Polish unions, and the North West TUC brought over a national organiser from Solidarnosc to give advice on employment rights. The TUC now attends job fairs in Warsaw, and many unions have Polish-language websites and application forms. Discussions are also under way about whether to allow Poles to join unions before they arrive in Britain and pay dues when they have started work.

This is a very welcome development - it should end exploitation. Solidarity between indigenous workers and Poles will make the work playing field level. I hope these Poles will vote Labour too in local and EU elections (they arn't eligible to vote in general elections) - after all they owe the Labour government a debt of gratitude for letting them in, in the teeth of prejudice from the opposition.

Tuesday, December 05, 2006

Doubts grow about Eastern Europe's Flat Tax model

From Businessweek:

Doubts over the flat tax are being voiced not just by voters but also by economists, drawn to the subject because of its current vogue, who have found that it does not have all the benefits that its proponents claim.

An International Monetary Fund (IMF) working paper published in September argued that previous debate over the tax "had been marked more by rhetoric and assertion than by analysis and evidence."

Supporters of the flat tax often deliberately confuse the impact of moving to a flat system with the impact of cutting tax rates or simplifying the system. Often the switch to a flat system involves cutting and simplifying, but these are separate issues from the tax rate.

Looking at the impact of moves to a flat system in the region, the IMF economists found that this did not increase revenues unless the tax was set at a high level, such as in Lithuania and Latvia.

Behavioral effects such as improved incentives were usually not enough to compensate for a cut in overall tax rates, contradicting the hypothesis by the economist Arthur Laffer that revenues would increase as rates were cut. "Behavioral responses may have mitigated the revenue loss, but in no case does there appear to have been a Laffer effect," the researchers found.

The IMF examined the only significant exception, Russia, but found that improved tax collection there was more a consequence of fast economic growth and improved enforcement than of the move to a flat system in 2001.

The impact of the flat tax on incentives is in any case ambiguous. Cutting marginal tax rates will increase incentives, especially for those at the lower and upper ends of the income scale. However, some taxpayers may be less motivated to work harder if average tax rates fall because they will more easily achieve the standard of living they aspire to. Many others, of course, are salary earners and cannot work harder in any case, regardless of whatever tax incentives are offered. Extra revenue from incentives offered to entrepreneurs is likely therefore to fail to match the reduced revenue from the majority of taxpayers if overall rates are cut.

In conclusion, the IMF paper argues that flat taxes may not be suitable where the fairness of the tax authorities is less in doubt, where there is no need to signal a shift to a market economy, where tax compliance is better established and tax administration more effective, where income tax is more important in revenue terms, and where the presumption of the progressivity of marginal rates is more entrenched.

This would imply that rather than Western Europe coming to embrace the flat tax mantra, it is Central and Eastern European states that will adopt a progressive system as their economies develop.

This is even more likely given the pressure that the new EU member states will come under to close their budget deficits. Flat taxes can only work politically if they are set at a low level. However, government spending in this region is still very high. To finance this and at the same time meet the budget-deficit convergence criteria to adopt the euro, Central Europe would have to set flat taxes at a rate that would harm the middle class and constitute electoral suicide.

Sunday, December 03, 2006

The Importance of the Team

A new ICM poll in the News of the World reports that on the question "Who would make the best Prime Minister" voter preferences were 29% Gordon Brown, 25% David Cameron, 8% John Reid, 5% Ming Campbell, 14% None, 19% Don't Know.

It's encouraging for Labour not least because 37% opted for Labour politicians. Both Gordon Brown and John Reid will be in the next Labour government cabinet, and voters will no doubt be reassured that there are two Prime Minister-quality politicians at the top.

A crucial part of Labour's ability to get back into power in 1997 after 18 years was the fact that the team surrounding Blair had so much depth - Brown, Dewar, Cook and others - it reassured the public that Labour had the abilities in place to govern. In particular there was a "buy one get one free" aspect to the Blair-Brown partnership, most explicitly in the 2005 election. The public seem to like this. They are reassured that everything is not dependant on just one person and that government can function even if the prime minister is out of action.

I think that in the next election Labour should continue to pursue this "team" theme with Gordon Brown and John Reid. Reid handled the summer airport plot very reassuringly in Blair's absence, and having a strong team should contrast well with one-man-band that is the Tories.

Friday, December 01, 2006

Another reason not to smoke: Polonium poisoning

From an Op-Ed in the New York Times:

WHEN the former K.G.B. agent Alexander V. Litvinenko was found to have been poisoned by radioactive polonium 210 last week, there was one group that must have been particularly horrified: the tobacco industry.

........The industry has been aware at least since the 1960s that cigarettes contain significant levels of polonium. Exactly how it gets into tobacco is not entirely understood, but uranium “daughter products” naturally present in soils seem to be selectively absorbed by the tobacco plant, where they decay into radioactive polonium. High-phosphate fertilizers may worsen the problem, since uranium tends to associate with phosphates.

In 1968, the American Tobacco Company began a secret research effort to find out. Using precision analytic techniques, the researchers found that smokers inhale an average of about .04 picocuries of polonium 210 per cigarette.

........A fraction of a trillionth of a curie (a unit of radiation named for polonium’s discoverers, Marie and Pierre Curie) may not sound like much, but remember that we’re talking about a powerful radionuclide disgorging alpha particles — the most dangerous kind when it comes to lung cancer — at a much higher rate even than the plutonium used in the bomb dropped on Nagasaki. Polonium 210 has a half life of about 138 days, making it thousands of times more radioactive than the nuclear fuels used in early atomic bombs.

We should also recall that people smoke a lot of cigarettes — about 5.7 trillion worldwide every year, enough to make a continuous chain from the earth to the sun and back, with enough left over for a few side-trips to Mars. If .04 picocuries of polonium are inhaled with every cigarette, about a quarter of a curie of one of the world’s most radioactive poisons is inhaled along with the tar, nicotine and cyanide of all the world’s cigarettes smoked each year. Pack-and-a-half smokers are dosed to the tune of about 300 chest X-rays.

Is it therefore really correct to say, as Britain’s Health Protection Agency did this week, that the risk of having been exposed to this substance remains low? That statement might be true for whatever particular supplies were used to poison Mr. Litvinenko, but consider also this: London’s smokers (and those Londoners exposed to secondhand smoke), taken as a group, probably inhale more polonium 210 on any given day than the former spy ingested with his sushi.

So now you all know - stay away from the ciggies if you want to avoid Litvienko's fate!

Tuesday, November 28, 2006

Tories resort to Graphology

From the Times:

Relations between Gordon Brown and his Conservative shadow reached new depths of animosity yesterday after the Tories cited handwriting analysis claiming that the Chancellor’s judgment is flawed.

George Osborne, the Shadow Chancellor, said that he had hired a handwriting expert to analyse Mr Brown’s character — and the conclusions were far from flattering.

We await with bated breath to see what Osborne's astrologers and tarot readers have to add to this. No doubt they'll claim that Brown's Moon clashes with Mars or something and casts a shadow on the chancellor's character!

This is classic Osborne - he won't attack on economic policy (possibly because he struggles to understand it). Instead he thinks Graphology is the thing to impress the public.

Isn't it lucky he's not Chancellor? Imagine him in a meeting with Mervyn King.

King: Post neo-classical endogenous growth theory indicates that the gap between savings and required investment determines the rate of growth in the capital-labour ratio and .....

Osborne: Sorry, to interrupt. Can you handwrite that? I need to consult my graphologer!

Friday, November 24, 2006

Pub Alcohol sales drop in the year since licensing easing

From Bloomberg:

Alcohol sales in U.K. pubs, bars and clubs have fallen since the government eased restrictions on opening hours a year ago and drinking habits have barely changed, a trade group said.

The volume of alcohol sold in licensed establishments fell 2 percent in the year through September, according to the British Beer and Pub Association, which represents more than half the pubs in the U.K. Food sales are gaining, the group said.

On Nov. 24, 2005, Prime Minister Tony Blair introduced the biggest change in U.K. drinking laws since World War I, allowing pubs to apply for a license to serve alcohol all day and night. The government said longer drinking hours would make towns safer and consumption more measured. Critics including the opposition Conservative Party, judges and doctors said it would fuel ``binge drinking.''

...........The biggest change has been the disappearance of the ``last orders'' rush, when drinkers hurried to buy drinks before closing time, according to pub groups. By law, they had 20 minutes to finish their drinks before they had to leave.

"You don't get anything like the rush you used to,'' Jim Clarke, finance director at J.D. Wetherspoon Plc, which owns 629 pubs in England, said. "It makes it much more pleasant.''

The government's aim was to reduce the number of fights that took place as city centre pubs all ejecting drunken customers onto the streets at the same time.

"There appears to be a genuine spread of closing times, bringing an end to the old madness of everyone being thrown out onto the street at the same time,'' Licensing Minister Shaun Woodward said in a statement.

Some police forces have reported falls in the level of alcohol-related crime. Sussex police, whose beat includes the seaside resort of Brighton, said 1,000 fewer people had been injured in alcohol-related violence since the law changed. Greater Manchester Police said actual bodily harm cases were down 0.8 percent.

Anecdotally, there seems to have been a subtle change in drinking habits: people are going to the pub later, after they've had their dinner, and there is no longer any pressure to gulp the alcohol down or binge. Drinking on a stomach lined with food and simply slowing down the speed that alcohol was drunk probably resulted in the volume drunk to reduce.

Good on the government for pushing through this change instead of caving to the opposition's silly argument which went as follows: "Last orders has caused a surge in rushed and binge drinking, therefore we must keep it at all costs!"

Monday, November 20, 2006

Derivatives - an accident waiting to happen?

Interesting piece from Morgan Stanley analyst Serhan Cevik:

Driven by the global liquidity cycle and investors’ growing risk appetite, the notional amount of exchange-traded derivative instruments increased from US$2.3 trillion in 1990 to US$14.3 trillion in 2000 and then soared to US$84 trillion in the first half of this year. According to the Bank for International Settlements, annual turnover recorded an astounding surge from 510 million contracts to almost 7 billion contracts over the same period. However, this is still just a small part of the pool of synthetically created financial products, most of which are actually traded over the counter. Indeed, the data compiled by the International Swaps and Derivatives Association show that the outstanding volume of over-the-counter credit derivatives increased from US$3.5 trillion in 1990 to US$63 trillion in 2000 and over US$283 trillion this year. Put differently, the total amount of exchange-traded and over-the-counter structured financial instruments ballooned from 27.3% of global GDP in 1990 to 772.8% this year.

Highly leveraged positions have started turning into a futile game of musical chairs. In today’s global network of financial markets, almost everything becomes interdependent and correlated, diminishing the advantage of portfolio diversification. Take, for example, the breathtaking rise of the hedge fund industry. In 1990, there were only 300 hedge funds in business, increasing to 3,000 by the end of the decade. On the latest count, however, the number of hedge funds reached over 10,000, with approximately US$1.5 trillion worth of assets under management. Although that may still look small relative to the rest of the investment community, hedge funds employing risky derivatives strategies to enhance returns already account for 45% of emerging-market bond trading volume and 55% of all credit derivatives trading in the world. In other words, the rise of hedge funds, driven by cheap financing, is behind the explosive growth in structured products and massive flows to emerging markets. However, as the number of players searching for arbitrage opportunities has kept increasing, seeking alpha via highly leveraged positions has started turning into a futile game of musical chairs. Indeed, as competition has squeezed returns, the number of failed hedge funds increased from 4.7% of the funds in operation in 2004 to 11.4% last year.

His last point is important - the sheer number of hedge funds in existence are competing away any advantages hedge funds may have had over ordinary funds. But ordinary investors continue to pour money in, believing they can get better than average returns. It's quite possible that much of the growth in M4 since 2003 has been lending to hedge funds rather than households. Central bankers are worried. At the meeting of the G-10 central bankers on the weekend, Jean-Claude Trichet, President of the ECB said that "There is an under-pricing of risks in general in financial markets,'' and that he and his G-10 colleagues "don't exclude the possibility that there will be a re-pricing of risks,'' though the central scenario was that the process would be "`orderly, smooth and progressive.'' .

Saturday, November 18, 2006

The First Female Leader of France since Catherine de Medici?

Ségolène Royal won the nomination to be the Socialist candidate for president with over 60% of the vote.

She has a good chance of winning as she's one of those unusual politicians with cross-gender appeal; women identify with her, see her as a role-model and aspire to become like her, while the men find her attractive.

I hope she defeats Sarkozy who is a little Napoleon (and remember the trouble Britain had with the original Napoleon). Royal also marks a more definite break with traditional French politics than Sarkozy (who after all has been in government in both the finance and interior ministries but has made precious little difference to addressing France's malaise).

Andrew Hussey did a very revealing profile of Royal for the Guardian in July. It's worth reading in full, but here are some excerpts:

In concrete terms, she has campaigned on local issues that affect real people - education, child-raising, anti-porn laws, the environment - rather than any of the big abstractions which still dominate political discourse in Paris. 'Segolene represents us, the ordinary hard-working people of France who are trying hard to keep things together,' I was told by Anne-Cecile, a mother of two and creche-worker in the lower-middle-class part of Paris where I live. 'She knows that times are tough for people like us, and she wants to help. She is not like the men with all their big speeches.'

............As I trailed Segolene through the stands in Nantes, I was struck by her stern manner. Close up, she doesn't look like Audrey Hepburn at all, but she does have something of the stern, posh sexiness of Margo from The Good Life.

He concludes,

No one knows yet whether Sego is, as her detractors put it, empty and doomed like Marie-Antoinette or, as her admirers hope, a real force for change, as potent as Delacroix's painting of Marianne, the bare-breasted heroine who is an eternal symbol for radical change to all French people. From what I saw in Nantes, my hunch is that Sego is rather closer to the very English figures of Margaret Thatcher and Supernanny, which means that if she ever does achieve power we might indeed see a truly revolutionary force at work in France.

Wednesday, November 15, 2006

EU considering proposals to impose controls on emissions on all flights into Europe

The EU announced yesterday that they were preparing draft proposals to impose emissions controls on all flights into the EU. Under the proposal, airlines would have to meet emissions targets by Jan. 1, 2011, for all flights in and out of Europe. To encourage other countries to introduce similar measures, the union would drop its emissions requirements covering the return leg of a round-trip flight if those countries also adopted pollutions caps for
airlines. Airlines will be included in the EU's carbon trading scheme.

The draft proposal will be presented to EU Heads of Governments in the Council of Ministers on December 20th. The Council will debate the proposal and then decide whether to go ahead.

Because practically every airline on earth flies into Europe, this proposal would cover them all in one fell swoop. It solves the problem of Europe making huge efforts to cut emissions only for these efforts to be cancelled out by the Americans, Chinese and other recalcitrant countries. It should mean the burden is shared and the chances of meaningful reductions in emissions more likely.

According to the New York Times, the Americans are already getting very agitated. We should expect massive pressure from them to abort this. But hopefully Europe will resist - we'll never make a difference to global warming if airline emissions are not tackled on a global basis.

Tuesday, November 14, 2006

Carrier Bags

I only found out yesterday that the Republic of Ireland had a carrier-bag tax, and decided to find out a bit more.

The levy was introduced in March 2002, and is 15 cents per bag (about 10p) . The results were astonishing - they had used about 1.2 billion bags a year, but this fell to just 85 million bags - a 93% reduction.

Plastic bags are one of those products that are, at the same time, both very handy and a nuisance (in that they hang around for ages, blow about the streets and clog up land-fill sites). They are also an oil derivative and as oil is a scarce resource, perhaps we shouldn't be wasting it on bags.

The Scottish parliament looked at putting a levy on them in Scotland and you can find their report on this here. Amongst other things, the report says:

After taking set-up and administrative costs into account, the food retail industry would benefit from net cost savings from a bag levy. Savings would come from having to buy far fewer plastic carrier bags that are given away for free, while sales of 'bags for life' and bin liners would increase.

However, this would not be the case for non-food retailers. Evidence from the Republic of Ireland from those retailers that switched to paper bags (mainly 'high street' non-food retailers) suggests that greater storage space and more frequent deliveries are now required. This has increased overhead costs for material purchase and transport by over four-fold.

There are also different consumption patterns between food and non-food. For the former, people often shop regularly and can thus plan to take reusable bags with them. For the latter however, it is often an impulse purchase. Overall, retailers feel it would be fairer if all bag materials (not just plastic) and all businesses (small or large) were levied UK-wide.

In terms of system needs for compliance, it is envisaged that larger retailers will find this easier, having computerised systems and greater resource available. There will be a cost associated with administration of the levy, but experience in the Republic of Ireland suggests that the effects were generally positive or neutral. In general, costs are considered modest and, in some cases, are less than the savings the retailers enjoy from buying fewer lightweight plastic carrier bags. Although there have been some reports of problems with increased theft, it is understood that, after an initial rise in theft, retailers state that levels returned to those before the introduction of the levy.

The report concludes that it's not really worth Scotland going ahead with the levy without the rest of the UK, and recommends alternate approaches in the meanwhile, such as voluntary agreements from retailers to promote reusable bags. The UK government has no plans to introduce a levy.

I understand that a Mori poll a while back showed that 63% of Brits were in favour of a levy - but as always with these things, people tend to be in favour in theory, but not in practice.

I must admit that personally I like plastic bags and collect them to bag my rubbish. But I guess if we want less plastic rubbish clogging up Britain we should look at reducing use and I think we should follow the Irish example.

Sunday, November 12, 2006

The problem with Jon Cruddas

Headline in the Telegraph yesterday - Labour heartland turning to BNP, warns Cruddas. Another headline putting Labour and the BNP in the same sentence, and implying that the BNP's rise is Labour's fault.

In the article they write

But yesterday Mr Cruddas admitted: “The BNP thrive in areas where people feel forgotten by the mainstream parties.

“There are signs that the fascist party is becoming a home for many disgruntled former Labour voters."

But how true is it that it's disgruntled Labour people turning to the BNP?

Here's the results from a recent by-election in Rotherham:

Rotherham MBC, Rotherham West Ward
Labour 1024 (44.3% +3.8%)
BNP 606 (26.2% + 26.2%)
Ind 538 (23.2% -15%)
Con 146 (6.3% +6.3%)
LibDem (Did not stand -21.3%)

The 44.3% that Labour got was respectable. And the 40.5% that Labour got in the previous election was respectable too - Labour voters plainly didn't switch to BNP. Instead the BNP vote came from the collapse in the support for the Independent candidate, the no-show from the Lib-Dems and the very poor showing from the Tories.

You could only spin this as "disgruntled Labour people switching to the BNP" if you believe that the Labour vote "should" be 70.5% of the vote. But this is impossible in any multi-party democracy. Maybe Mr Cruddas believes that because the ward is working class at least 70% should vote Labour. This is old-fashioned romantic nonsense about what the working class should think - in reality there will be a range of political beliefs in every single economic stratum of Britain, and there always has been.

The BNP is a problem - but it's a problem for the whole of Britain. It's about the failure of the two other opposition parties to make any mark in some parts of Britain, leaving Labour the sole mainstream party to battle the nutters (in some parts of Britain these nutters are the SNP or PC). In some of the wards that the BNP gained in Barking in May, the only parties on the ballot were Green, BNP and Labour, which is not much of a choice. We should be asking Why and pushing the other two parties to pull their weight in tackling the BNP and making sure that their candidates are on the ballot on every ward being contested. What's needed is a co-ordinated cross-party strategy against the BNP.

It's not just in "Labour" areas the BNP is massing, they are present in Tory dominated Epping Forest and in parts of Herts - but you'd never know this from the press. That's because people like Jon Cruddas are making this just about Labour - and in doing so, he is damaging the party. By constantly putting "Labour" and "BNP" in the same sentence, he gives the impression that the Labour voters are so cretinous that they fall for BNP rubbish at the drop of a hat. If you were a floating voter, would you want to join such a dumb tribe? No, you'd prefer to associate yourself with that nice clean Mr Cameron, or those nice middle class Lib Dems. But it's the 21st century, and Labour is actually more than the working class. We're the party of aspirant people who want a job and a home, and economic stability and Labour voters are not cretinous and largely resist the urge to switch to the BNP.

I respect Jon Cruddas' work on the ground in tackling the BNP - but in his speeches he is hyping the BNP, giving them the oxygen of publicity, (which they are thrilled about). At the same time he's giving the impression to floaters that Labour people are brainless nasty people who could go BNP at any time - and the Telegraph is thrilled as they can do another headline with Labour and BNP in the same sentence. If Cruddas becoming Deputy Leader means this is the impression he constantly gives out in the next election, then we're dead in the water. It's decent floating voters who will decide the next election, not the BNP.

I hope he's more careful about the speeches he gives and takes more trouble to see how they can help the BNP on the one hand and used as ammunition against Labour on the other. If he can't do this, sorry, he doesn't deserve to be deputy leader.

Saturday, November 11, 2006

American Mid terms - Chinese Reaction

While most of the planet was overjoyed at the Dem gains in the American mid-terms, it turns out one country was not - China.

According to Bloomberg, on Thursday Zhou Xiaochuan, chairman of the People's Bank of China, told the press that China intended to continue diversifying it's foreign reserves. Just in case people didn't the message, he repeated it on Friday in Frankfurt, saying

they would ``stick to the existing policy'' of reducing the share of U.S. assets it holds, because of ``safety, efficiency and liquidity.'' When asked whether China is selling dollars, he said: ``No.''

This means putting new money directly into non-dollar currencies (while keeping the existing reserve where it is), and China has been doing this since about 2003 - so why the song and dance now, especially just as their dollar reserves (held mostly in US Treasuries) hit the $1 trillion level?

It's because they are nervous of the Dem control of Congress and wish to fire a shot across their bows. Charles Schumer a Democrat Senator, has been sabre rattling about China's trade surplus and "under-valued" currency for a while. In 2005, he and Senator Graham (Republican) tabled a bill that proposed to slap a 27.5% tariff on Chinese goods if they didn't revalue the yuan within two years. The Chinese responded by revaluing the yuan by 2.1% in July 2005, and easing the peg to the dollar - the yuan now moves against a basket of currencies (the make-up of the basket is unknown). After a trip to China in March 2006, Schumer and Graham shelved the bill for a further six months to give the Chinese more time - and the yuan has been slowly strengthening against the dollar since.

It's not known if Schumer and Graham are serious about their bill, or whether it is just a useful tool to pressure the Chinese. Tariffs and protectionism would be a bad thing, and would hurt America as well as China. The Dems tend to be associated with protectionism (notwithstanding Clinton's NAFTA and other ground-breaking trade deals). The Chinese are clearly worried, as the Dems now have enough votes to pass their bill and they've decided to do some sabre-rattling of their own. On the other hand, the Bush administration was clearly negligent in letting it's spending get so large that they had to borrow from the Chinese to the tune of a trillion. No one should be that dependant on a foreign lender.

Hopefully the Dems will exercise caution and not take punitive measures against the Chinese. And hopefully they will cap US spending and bring the deficit back (which should solve the whole issue of having to borrow abroad so much).

Speaking of nervous countries, an American blogger le-enfant-terrible, had this to say about Syria's foreign currency manoeuvres;

Throughout the year Syria has been transitioning from the dollar to the Euro. In February it switched its international transactions to Euros and by July it had switched over half of its central bank's currency reserves. Other articles indicated that before the end of the year Syria would stop pegging its currency to the dollar (in favor of some basket of currencies).

The Syrians are clearly worried that any dollar reserves parked in Treasuries would be in danger of being frozen by the US at George Bush's whim, and are taking steps to protect their money. I wonder how many other countries are doing the same.

Friday, November 10, 2006

Do women fancy Gordon?

Well Maryam D'Abo, ex-Bond girl (below) said she did on This Week. Diane Abbott lit up talking about him (Portillo looked miffed) and I too am, um, a fan! Poor Andrew Neil looked puzzled. What about David Cameron, he said.

Here's the thing - women hate men who love themselves (Blair). Ditto men who are too slick (Cameron), and men who pay too much attention to how they look (Cameron). Blair comes across as self-centred and Cameron comes across a little camp (he may win the pink vote). Also Cameron's eyes are too small.

Diane Abbott has said she thinks Brown may have a Mr Rochester thing going for him, right down to the near blindness and awkwardness, a mix of strength and vulnerability. Someone who'll keep you safe, won't cheat on you, but at the same time needs rescuing and looking after. It's an ancient stereotype - Mr Darcy in that other great novel had a bit of that too. (And of course men are completely puzzled as they don't really get Jane Eyre or Pride and Prejudice at all).

Thursday, November 09, 2006

Implications of the American mid-terms

Well the results are mostly in, and it looks like the Dems have taken both houses of congress (though it may take a while to confirm Virginia).

How does this affect us? Lots of ways, big and small. The Dems are less likely to go for the new world trade agreement so close to Gordon Brown's heart, especially with a slowdown in the US economy next year. The EU might have to pursue bi-lateral agreements with India, China and Brazil instead.

The Dems have also pledged to end Bush's ban on the states negotiating their Medicare drug bill down when they buy in bulk. (All other health care systems negotiate this, including the NHS). Drug stocks, including stocks like Glaxo, have already dropped in price anticipating lower revenues, but this measure should save the US govt a lot of money, helping with their deficit.

The Dems also plan to restore lapsed legislation that require tax cuts or spending increases to be offset with spending cuts or tax rises. This too should help the deficit and restore confidence in the US system. The dollar is likely to rise as a result.

They plan to reverse Bush's limits on govt funding for stem cell research. Britain had been doing well out of the Bush ban, as researchers came here instead, so this is not quite so good for us.

The Dems may also take a greater interest in climate change and energy policy (they plan to investigate the Bush administration's energy plans). If they decide to introduce a fuel tax (for energy security reasons as well as climate ones), there would be several consequences; the commodity markets will likely panic about falling American oil demand and the oil price should tumble; this in turn should reduce the revenue for places like Russia and Saudi, making them more amenable; and it should make it easier to pursue climate change policy here in Britain, if we can point to American action. There is an obstacle - the American public is hostile to the idea, and the Dems might wait two years till they've safely got the presidency before doing anything.

Finally Iraq - Rumsfeld has been sacked, and it looks like Bush is manoeuvring to accept any recommendation from James Baker III to exit Iraq. This will benefit Britain - it will free up troops for Afghanistan, it will help Labour if we're gone from Iraq before the next election. Obstacle - Blair might find it hard to swallow the "cut and run" scenario - in which case he'll probably have to leave before it is implemented. There is time for him and others to get their heads round this - the Baker report doesn't come out till January.

Was Iraq the cause of the change in Congress? It's tempting for our media to conclude so. But Brits on the ground in places like Georgia are saying it was more disgust at overspending/pork-barrelling, and at the hypocrisy of religious conservatives. One said that Rush Limbaugh was the Republican equivalent of Michael Moore in this election, putting moderate people off. We'll never know - all politics is to some extent local and unfathomable to outsiders.

Tuesday, November 07, 2006

Monday, November 06, 2006

Farm Subsidies

Gordon Brown writing in the Times today about the prospects for a fresh world trade deal, , fleshes out what he thinks the deal will look like:

Europe should now go considerably beyond its initial offer of a 39 per cent cut in agricultural tariffs. It even could go beyond the 51 per cent currently mooted. Similarly, America could and should go beyond a 53 per cent cut in trade-distorting domestic support for its farmers. Brazil could and should go beyond its pledge to reduce tariffs on industrial goods, with India responding on services, and all of us contributing to an aid for trade.

He is signalling that under his premiership, CAP will be drastically reduced. Farmers (and the French!) should be afraid. Brown is likely to be a much tougher negotiator than Blair, and unlike Blair has no sympathy for countryside matters/farmers, who don't vote Labour in any case.

Saturday, November 04, 2006

Matthew Parris

Matthew Parris has written a desperate article in todays's Times, pleading for a challenger to Gordon Brown to come forward, saying

What has Mr Brown done to deserve their quiescence?..... I still refuse to think it inevitable.

It's worth remembering that it was Parris who started the press speculation about Alan Johnson as Labour leader, with an article in June, entitled, How the postman will deliver knockout blow to Gordon Brown. Of course this was just wishful, delusional thinking - after all what does a Tory like Parris know about Labour, or indeed the qualities required for leadership?

Speaking of Parris delusions, he also wrote an article last December entitled, The Force is with David the Unruffled , declaring,

The Tories’ hour has come. .... Cometh the hour, cometh the Dave

It may take longer for that delusion to burst, but it will. Parris is a bit nuts, and people endorsed by him should think, what's wrong with me?

Friday, November 03, 2006

The Stern Report

It's been a few days now since the Stern Report was launched, and the terms of the whole green debate have changed.

The Stern Report was commisioned by Gordon Brown in the summer of 2005 after the Gleneagles summit (at a point when David Cameron still believed in the Tory manifesto he had just crafted for the general election) - the reason being that while the govt had set Africa and climate change as the main topics of discussion at the summit, nothing got achieved on the climate change front due to obstruction from the Americans. As the Economist put it, the report was more about politics than about economics—specifically, the politics of getting America involved in the global effort to mitigate climate change.

By focusing for the first time on the economic consequences of not tackling climate change, Stern appears to have gone some way to achieving his objective. The report was covered in the Washington Post, the White House issued a press statement saying they welcomed it, and partisans got stuck in, the Daily Kos in favour, and the editorial in the New York Sun, predictably against. Australia (who haven't signed the Kyoto protocol) also covered it in some detail - ABC news had a piece on it, and the Australian Labor party also waded in (they support Kyoto).

Everyone responded pretty much as expected - apart from the Tories. They seem to have forgotton their "Green Tory" theme from their conference (it seems an age ago doesn't it?) and reverted to type. Tory supporters and activists loudly denounced the science and rejected having to pay any green tax on websites like the BBC's Have your say .

On the Newsnight debate on the Stern Report, they were represented by that old warrior Nigel Lawson, who immediately expressed doubt that climate change was taking place at all and claimed that all the green taxes to date had made no difference to people's behaviour (untrue - the volume of petrol consumed in Britain hasn't grown since the 70's despite the population increasing sharply, thanks to fuel tax incentivising the car manufacturers to concentrate on smaller cars and fuel efficient technology).

Conservative Home gave prominent position to Lawson's subsequent sceptical speech on climate change to the Centre for Policy Studies. It was as though the whole "Green Tory" business had never happened. And this despite the Stern Report being welcomed by the CBI and other business groups.

Why put Lawson up for the Newsnight debate - why not a Cameroon, like Zac Goldsmith (why has Goldsmith been so silent on this subject)? And if Lawson is now setting the terms of the Tory climate response so sceptically, what happens to Goldsmith's report when it is published? (And is it any point in him publishing, can he do a better job than Stern given that he lacks Stern's economic credentials?) Cameron having his chauffeur following his bike may be a metaphor for their entire green project.

What happens next? The government will press ahead with nuclear power for energy security reasons, as well as climate ones - Goldsmith is known to be against nuclear; should be fun to see the Tory response! The government is seeking to put climate change on the EU's agenda during the German presidency, which begins in January 2007, with a view to getting a pan European deal on flights - possibly VAT on airline fuel, or an airline tax). The EU is pretty good on climate - carbon-trading was pioneered by the EU and the summit held in the first half of 2003 yielded the Biofuels Directive, which meant that from 2005 the petrol you buy is cut with ethanol (2%), and diesel is cut with bio-diesel, and from 2010, it will be 5.75% - given the volumes consumed across the EU, it's a pretty big substitution. An attempt will also be made to get Son of Kyoto started to get a new international agreement.

One thing is for sure - the green agenda is now firmly back under Labour control, and others will have to respond to us. The Lib Dems will bleat about nuclear (as will Goldsmith), other Tories will bleat about green taxes and they will confusedly alternate from climate change scepticism (Lawson) to claiming they are Green Tories (Cameron). And David Cameron may have to resort to making a trip to Antartica to hug a penguin to counter scepticism about whether he really is green.

Thursday, November 02, 2006

Mervyn King's testimony to the House of Lords

Mervyn King said something very interesting at his testimony to the Lords Economics Committee on Tuesday. According to this report from the Independent,

Mervyn King said that the lack of accurate statistics on the size and make-up of the workforce was hindering the bank's ability to set interest rates.

.......Mr King said: "We just don't know how big the population of the UK is because the composition of the population - between young and old, immigrants versus ordinary residents - has changed in recent years.

"It may be that the statistics are not giving an accurate reading." He said rules on benefits for migrants might mean that the claimant count might be understating the level of unemployment. On the other hand, the official measure, based on the labour force survey, might be overstating joblessness.

Of course we all knew that the claimant count didn't contain many migrants because of the rule that they have to pay N.I. for two years before they can claim. But it's very interesting that King thinks the the labour force survey is overstating unemployment.

If unemployment is overstated, then the labour market is tighter than everyone thought and the Bank may wish to put up interest rates. If the figure is correct though and the Bank puts up rates thinking it is wrong, it could send the economy heading downwards. I expect they'll have a very lively debate on this when the Monetary Policy Committee meets next week to decide whether to put interest rates up.

Monday, October 30, 2006

Adam Smith to grace the £20 note

Mervyn King announced yesterday in Kirkcaldy (Adam Smith's birthplace) that Adam Smith was to grace the £20 banknote from next spring. Adam Smith is of course the legendary Scotsman who invented capitalism. He'll be the first Scotsman to be on an English banknote and the first economist. His image is already on the £50 Clydesdale banknote.

According to the Herald, The image will be based on James Tassie's portrait of Smith in the Scottish National Portrait Gallery, accompanied by a scene of pin manufacturing. (see the image top left)

One of Smith's most famous observations in the Wealth of Nations was that, on his own, a man might make a single pin in a day, but by dividing the labour into specialist stages, a small team could produce thousands

Mervyn King also caused a little controversy (among SNP people at least) by saying, "Next year we celebrate the tercentenary of the Act of Union, an act strongly supported by Adam Smith "And we now have a successful and prosperous union between our two countries with a common monetary institution which embodies the ideas not only of Adam Smith and his great friend David Hume, but also the key principles that should govern institutional design."

I'm not sure why it was controversial to say it - next year is the 300th anniversary of the Union between Scotland and England, and Adam Smith did support the union, and his image is going to be on the banknotes to commemorate the event, so why pretend otherwise? As well as a message to Scottish Nationalists, it's also a timely reminder to English people of what Scotland, and Scottish ideas have contributed to the UK.

The only other famous person to have come out of Kirkcaldy is of course Gordon Brown, who also went to the same school as Adam Smith (Kirkcaldy High), though it was a state school when Brown attended.

The Big Bang twenty years on

On October 27th 1986, the City of London was deregulated in what was known as "the Big Bang". Fixed commissions on trading shares were abolished, as was the distinction between taking client orders and executing trades, and the City was opened up and exposed to international competition. This was one of Thatcher's better ideas - prior to the Big Bang, London was dominated by a series of partnerships, and worked on a closed "old school tie" basis. People outside this magic circle found it impossible to break in. As a result, the City stagnated.

In 1985, the London Stock Exchange's turnover was only 1/13th of the then world's No. 1 ranked, New York, and it was only 1/5th of the No. 2 ranked, Tokyo.

Most of the old ossified partnerships didn't survive the fierce competition unleashed, and London became dominated by international firms based in New York, Frankfurt or Zurich.

At the time it wasn't obvious that the reforms would work - the graphs show employment in the City dropping in the early 90's as Major's recession hindered London, but since 1997 the City has not looked back, as the Big Bang reforms were accompanied by New Labour's favourable macroeconomic climate and the sensible light touch regulation of the Financial Services Authority regime introduced by Gordon Brown

As the FT puts it: London is now a truly competitive international financial centre and the people who work in the financial services industry operate in what is probably the nearest thing to a true meritocracy. Nationality and ethnic background are unimportant and employees are as likely to have been educated in Paris, Bombay or St Petersburg as in the UK. “People can be entrepreneurial and they don’t have to be a member of the Accepting Houses Committee [the inner circle of the old City establishment] in order to do business,” says David Verey, deputy chief executive of Lazard in London at the time of Big Bang and now a senior adviser to Blackstone. “But there is also nobody to protect them or bail them out.”

Thursday, October 26, 2006

Blogging Communities

Andrew Brown has a fascinating article on the evolution of different blogging communities. Three types have emerged: the One Blog Centric Community, which is based around a single blogger eg Political Betting; the Topic Centric Community eg Bloggers4Labour; and the Boundaried Community eg LabourHome

Read more on this interesting topic here.

Social Protection Expenditure

Social protection expenditure is spending by the state on health, pensions, unemployment and social exclusion. It's helpful to look at it separate from other government expenditure like defence, subsidies to farmers etc, and Eurostat have helpfully issued a report on social protection expenditure in the EU.

Rather than post the figures for the entire EU, I thought we'd look at the figures for the UK, Ireland and Italy (if you are interested in the other member states please click the link above).

Expenditure as a % of GDP was as follows:

1994 1996 1998 2000 2001 2002 2003
UK 28.6% 28.0% 26.9% 27% 27.5% 26.4% 26.7%
Ireland 19.7% 17.6% 15.2% 14.1% 15.0% 15.9% 16.5%
Italy 26.0% 24.8% 25.0% 25.2% 25.6% 26.1% 26.4%

Ireland's figures look fantastic, but the reason only becomes
apparant when you look at the breakdown.

Table of social benefits by function group in 2003 (as a % of total social benefits)

Oldage/ Sickness/ Disability Family/ Unemploy Housing/
Survivors Healthcare Children ment Social
Uk 44.9% 29.6% 9.4% 6.9% 2.7% 6.5%
Eire 23.2% 41.1% 5.1% 16.0% 8.4% 5.6%
Italy 61.8% 25.7% 6.4% 4.1% 1.8% 0.2%

You can see straightaway that Ireland doesn't spend much on old age
pensions and widows benefits. A corollary of having few old people is that health spending in absolute terms will be lower than in the older countries too, as most healthcare is consumed by the old - and hence their overall social protection spending is lower. They are a young country compared to both Britain and Italy. Nearly 17% of Brits are over 65 and the amount is set to rise to about 25% as Britain's birthrate has been below replacement for a few decades. 11.5% of Irish are over 65 and the percentage is likely to stay where it is as Ireland's birth rate remains above replacement, and has never fallen below.

What would happen if Ireland's birth rate fell - their social protection spending would rise, along with the taxes to pay for it. Their tax regime is a product of favourable demographics (the founders of our welfare state imagined that our demographics would be like Ireland's are now - unfortunately successive generations didn't do their bit). As for the UK - our spending on pensions is likely to become like Italy's - they've solved it by not spending much on other areas like housing - perhaps a taste of things to come here, unless we can reverse the demographic trend.

Tuesday, October 24, 2006

Bookcrossing is about people leaving books around in public in the hope that someone will find the book, read it, and then leave it for someone else to find. The book is registered on so that the progress of the book can be tracked as it moves around. The practice started in America a few years ago and is flourishing around the world, and is simply about sharing books with complete strangers (with a serendipity aspect to it).

Those who release books need to be registered on, in order to get a code identifier for your book, but those who catch them can remain anonymous.

Anyway, I registered in March but only got round to releasing a book into "the wild" on Sunday. I was thrilled to discover from the website today that the book had been picked up by someone called Pam - progress on this book can be followed here. I left my book in a cafe, which I recommend as it is warm and dry, and the book will stay undamaged - I put a label on the front of it, so people knew it wasn't a lost-and-found, and a note inside explaining what it was all about.

I really recommend people try this out - there is something really pleasant and serendipitous about leaving and finding and sharing books with strangers. I hope my book makes it around Britain at least, if not around the world!

Saturday, October 21, 2006

Stamp Duty

When Tata Steel of India buys Corus for £5 billion (assuming that Corus thinks the bid is high enough and doesn't extract even more money from them), they will pay the Treasury £25 million in stamp duty for the priviledge. When Dubai Ports bought P&O, or when Santander Bank bought Abbey National, cheques were dispatched from them to the Treasury for stamp duty in respect of the purchase.

Not only is the LSE attracting a lot of foreign bids for domestic companies, but London also remains the premier choice for foreign firms seeking an International Listing for the first time - If you are an Austalian, South African or Russian company seeking to raise money in a public listing, London is the place to go, and when their shares are bought by investors, a cheque is despatched to the Treasury in respect of the stamp duty. A large proportion of the investors buying these shares on the LSE are foreign firms too eg the American Brandes Investment, CALPERS etc. London is where people go when they seek diversification. All these investors too send cheques to the treasury for stamp duty when they buy shares.

Britain tends to be relaxed about all this foreign activity, in contrast to the USA where they got panicked at the Dubai ports takeover of P&O, which affected Ameircan ports as well as British ones, and banned outright the takeover of Unocal Corp by the Chinese - or France, which got panicky at the very suggestion that there might be a bid for Danone. The reason we're relaxed is because there is something in it for us; all these foreign firms send cheques to the Treasury - if they didn't then what's the point?

The Tories want to scrap stamp duty and meet the shortfall by taxing some other aspect of British life. The want to save Tata Steel some money and dump the cost on some poor Brit. The spurious justification is that stamp duty hinders the City's progress - I'm not sure how they can make such a claim with a straight face when the City is romping ahead of all it's rivals as though it was on steroids. Stamp duty is one of our oldest taxes, dating back to 1694, and has never hindered us (and is not hindering Hong Kong which is now the premier listing exchange for Chinese shares, and where stamp duty was introduced by the British and where it remains). There is no sensible justification for scrapping it.

Thursday, October 19, 2006

Scam anyone?

Only a few weeks ago, we had David Cameron announce dramatically to the Tory conference that his main priority was "N.H.S"! The Tories oppose holding any trust to budget discipline and think they should be bailed out with more cash. They have also promised a whole host of other things - more occupational therapists, more prisons, more border patrols, more drug rehab, more money for social workers, etc etc which implies they’ll spend more than Labour.

Then their their tax commission reports and proposes £21 billion in tax cuts, with no indication how they are to be funded.

And Osborne tries to fudge with vague promise of green taxes to pay to pay for it (which arn’t mentioned at all in the tax commission’s package and in any case would only raise at most about £3bn). And then they say (I'm paraphrasing) "We are not committed to any tax cuts, but we are in favour of some of the proposals and not others, but we’re not saying which” - which recalls to mind the company during the time of the South Sea Bubble which issued a prospectus that said ‘A Company for carrying on an undertaking of great advantage, but no one to know what it is.’

Scam anyone?

Kaletsky bats for Brown again

Another great article from Anatole Kaletsky in the Times defending Gordon Brown's record. Here's a quote:

The after-tax incomes for the top 1 per cent of the British population, which consists largely of financial professionals, have grown faster than ever before in modern history. They have grown far richer under Labour than they did under Margaret Thatcher and their gains have been even more spectacular in comparison with the modest progress of Labour’s traditional supporters in the industrial working class.

..............Why then does the City so distrust and, in my experience, even hate Mr Brown? The usual reasons I hear in the City are either dishonest or useless. Dishonest are the standard accusations heard from the financial media and Tory spokesmen — Mr Brown’s “£5 billion tax raid” has destroyed pensions; intrusive regulation by the Financial Services Authority is making it more difficult for the City to compete; Britain’s 30 per cent corporation tax is driving business to Dublin where corporation tax is just 12.5 per cent. The useless reasons are the ones that are so general as to have little meaning — that he has not done enough to cut taxes, reduce regulation and defend Britain from the encroachment of EU rules.

Financiers just keep repeating the dishonest reasons, even though they know them to be false. Anybody with a thorough understanding of pensions knows that Mr Brown’s “tax raid” was not the root cause of the industry’s demise. Occupational pensions and life assurance were destroyed by foolish court judgments and well-meaning but misconceived regulations under the Thatcher and Major governments. The “tax raid” was actually supported by most business leaders and tax experts, since it paid for a three-percentage-point reduction in corporation taxes and simplified the corporate tax system in exactly the way the Tory tax panel is expected to recommend in its report to David Cameron today.

The FSA is now widely recognised as the most rational and least intrusive financial regulator in the world. As for tax competition with Ireland, this could well drive some institutions to relocate their legal domiciles to Dublin; but that need make no more difference to the City’s prosperity and international status than every hedge fund in London being incorporated in Curaçao, Nassau or Cayman

You tell them Kaletsky!

Sunday, October 15, 2006


I thought people might like to take a look at the web-site For those unfamiliar with it, it lists the price of every home sold in England and Wales from April 2000, and for Scotland from May 2000, onwards.

By law, all home purchases have to be registered with the Land Registry, including the price, and from 2005, under the Freedom of Information Act, the price (but not the name of the owner) is available to the public, and NetHousePrices buys the info and then put it on their web-site.

The web-site is free and all you have to do is type in the post-code (or the street name and city), and hey presto, the street name will appear as a clickable link, showing the average price in the road. Click this link, and you get a detailed breakdown, with the actual address, eg no 22 XYZ Street, the date the sale was completed, the price and the type of home (eg, flat, semi etc).

As you can see, it offers endless possibilities for snooping - checking out what your neighbours paid for theirs, your bosses home, etc. If you are looking to buy, you can check what the vendor originally paid, and check out the value of the street (which means you arn't dependant on the estate agent's patter for info). And if you know your MP's home address, you can look up that too...

Tuesday, October 10, 2006


Much is made by the Tories about how they support marriage, and abhor family breakdown, all of which is accompanied by much shaking of heads at the supposed situation under Labour, and with the prescription that tax rebates should do the trick to keep couples together.

The Labour government famously doesn't prescribe relationships, preferring to leave it to individuals as to whether they should marry, divorce, stay single or co-habit, and tries to treat everyone the same.

So what has happened to divorce under Labour? The above graph shows divorces in England and Wales since 1961. Two things leap out - the rise that takes place after the Divorce Reform Act 1969, which comes into effect in 1971, and that divorces were higher under the Thatcher-Major government than under New Labour.

The Office of National Statistics reports that:

Between 2004 and 2005, the number of divorces granted in the UK decreased by 7 per cent to 155,052, from 167,138. This is the lowest number of divorces since 2000, and the first annual decrease since 1999/2000. This is 14 per cent lower than the highest number of divorces which peaked in 1993 (180,018). The number of divorces in England and Wales (141,750), Scotland (10,940) and Northern Ireland (2,362) have all fallen in 2005 by 8 per cent, 3 per cent and 6 per cent respectively. and that Divorce rates for men and women under 40 have fallen most steeply: by 13 per cent and 12 per cent respectively in 2005. For men aged under 40 the divorce rate of 24.9 divorcing men per 1,000 married men aged 16 to 39 is the lowest since 1988

Interesting, no? I don't think it's a coincidence that the all time high for divorce was in 1993 - a combination of recession, financial stress and negative equity probably put unbearable strains on people's marriages.

Marriage rates are also rising: there were 270,700 marriages in England and Wales in 2004, which is a rise of 590 from the figures in 2003, and 15,100 greater than 2002.

Letting people get on with their lives while providing economic stability seems to be a successful formula.

Saturday, October 07, 2006

Feminists don't wear clothes that prevent them from working

I've been a little irritated by the argument from some muslim women that wearing the niqab is a feminist action. If they'd simply argued that they had the right to choose how to dress themselves, fine. Women who insist on wearing ballerina dresses in public or something unsuitable straight off the catwalk, are also excercising their freedom to dress themselves how they like, but they are not feminists, because you can only wear such clothes if you don't work (the exception being those in the fashion industry).

Women who wear the niqab can't work, they can't even have a cup of tea in a public restaurant. Therefore they can only dress themselves this way if someone else is picking up the bill, either their fathers or their husbands.

Work empowers women because it means they have money of their own, they can choose who to marry or not marry for reasons other than money, they don't have to be nice to this or that man in order to live. Work also opens doors to meeting people from other walks of life, to making friends independent of your family and husband, to making decisions and contributing to the wider society at large. Countries where large proportions of women work - Sweden, Denmark, France, Britain, tend to be more stable. Prosperity and progress depend on women participating in the workplace, not least because it eases the burden on men to earn enough to feed their families.

Feminism has gone hand in hand with throwing off the restrictions of clothing that hinder work. It's no accident that for about a thousand years, women wore cumbersome clothes that prevented work, but since women won the franchise, women's clothes have become lighter and less restrictive. It's no accident that during the First World War, when women manned the factories in large numbers for the first time, cumbersome bustles with their yards and yards of cloth that hobbled you and got caught everywhere were abandoned, in favour of a simple blouse and straight skirt. And after the war, shirts got shorter to ease movement and walking, women started wearing trousers, and these developments not only allowed women to work, but to participate in sport like tennis for the first time (imagine trying to play tennis in a crinoline to understand the change involved).

And during this entire period, you had some women arguing against the vote and against women working, saying that they felt more empowered "working behind the scenes" in the traditional manner. This false argument is being presented again by some Islamic women.

On last night's Newsnight, there was a veiled woman insisting that she was veiled because she wanted people to judge her for herself not her appearance - only it was impossible to judge her for herself as you couldn't see her at all, all you could see was a bundle of cloth topped with glasses that reflected the light - it could have been a plastic dummy with a tape-recording under the cloth. It had the same effect as trying to judge someone in a balaclava "for themselves" - these things are designed to hide identity, rather than let others judge the real person. She also argued that dressing normally meant "wearing skirts that got shorter and shorter", which is nonsense. There is no prescribed skirt length anymore, you simply dress according to what suits your shape, and can easily wear trousers instead if you want - and it's certainly no reason to veil your face.

I'm from the post-feminist generation, and have taken the world of female freedom for granted. I like clothes and make-up and I like having my own money. It strikes me that muslim women who are cloistered behind the niqab are denied all these pleasures. They can't work, they haven't money of their own, they can't mix with people outside their families and communities, they can't look good, they can't even have coffee with friends at M&S. Perhaps the feminist movement needs to be revived to fight to free these women, the way the rest of us were freed in the early part of the 20th century.

Thursday, October 05, 2006

Kaletsky on Cameron's speech

In today's Times:

If Michael Foot’s 1983 election manifesto is now remembered as “the longest suicide note in history”, then Mr Cameron’s speech yesterday could be described as the “longest shopping list in history”. And what would inevitably follow if Mr Cameron became prime minister would be the biggest tax demands in history.

Consider just a few of the spending pledges made yesterday by Mr Cameron in a single speech: to lavish on the National Health Service whatever funding is needed and an absolute moratorium on spending cuts or hospital closures; more border controls and policemen; more support for faith schools; more prison building; more drug rehabilitation services; more defence spending, not just on body armour but also on military salaries, pensions and schools; more subsidies for childcare; more money for social workers and occupational therapists; more special schools. My list of the spending commitments in that one speech could go on and on — and I haven’t even started on the previous day’s promises from Mr Osborne, such as subsidising pensions with even more generous tax relief.

It may be objected, of course, that I am taking Mr Cameron too literally. He was not, after all, delivering a budget speech, with concrete policy decisions, but presenting a prospectus, designed to offer the country a broad sense of the Tories’ new aspirations. Yet this was exactly what made the speech — and this week’s entire conference — so alarming. Nowhere was there any sense of priorities, of the limits to government resources. Never did Mr Cameron hint, for example, that somebody would have to pay for such charming notions as a new childcare subsidy that would be paid not only to professional carers but also to grandparents.

There's a lot more - unfortunately I can't excerpt it all! Click the link and read for yourself.

Wednesday, October 04, 2006

Wholesale Gas prices tumble

From the FT:

Gas was being given away in the UK on Tuesday after wholesale prices plunged following a surge in imports from Norway.

A combination of gas starting to flow through the new Langeled pipeline from Norway and mild weather – which meant less demand for gas for central heating – have led to a temporary glut in the UK market.

Spot gas prices have fallen sharply in the past few days and yesterday that trend continued into negative territory. There were even reports of traders paying up to 5p a therm for people to take gas off their hands.

This unusual situation has not occurred in the UK for a decade, according to energy company RWE Npower, and is at odds with the present environment of high gas prices. Forward gas prices, which energy suppliers use to set their customers’ energy bills, remain higher than their levels of last autumn, having risen steadily in the past three years.

But the influx from Norway should reduce concerns about shortages which will, in turn, bring down forward prices and eventually consumers’ bills.

Energy companies have said they expect to cut retail prices at some point next year, providing forward prices fall for a sustained period

Good news all round I think.

UPDATE on a previous post: On 4/8/06, following the rate rise from the BoE and other central banks, I wrote the following:

I think the central banks of the world are right to raise rates in concert. Much of the rise in oil and gas prices are down to speculation by global hedge funds who move from one country to another looking for cheap finance for their trades (note that oil has increased from $25 per barrel in 2003 to about £75 now - a 200% increase in three years while global growth has increased by a total of just 20% during those three years, which means that something other than demand, which is growth-related, is influencing the price) . Speculation becomes far more difficult for the hedge funds if the entire planet takes away the access to cheap finance.

I'm pleased to note that policy is working beautifully and Brent crude now stands at $59 per barrel. The tumble in oil prices has come as a shock to some hedge funds - the lesson is that you should never fight the central bank, and when you have a dozen or more central banks acting in concert, you should get out of the way, fast.

Tuesday, October 03, 2006

Bob Woodward's book

The Washington Post has published two excerpts from Bob Woodward's latest book, "The State of Denial". The links are below.

The first excerpt, "Secret Reports", gives an insight into behind the scenes thinking on Iraq:

A powerful, largely invisible influence on Bush's Iraq policy was former secretary of state Kissinger.

"Of the outside people that I talk to in this job," Vice President Cheney told me in the summer of 2005, "I probably talk to Henry Kissinger more than I talk to anybody else. He just comes by and, I guess at least once a month, Scooter [his then-chief of staff, I. Lewis Libby] and I sit down with him."

The president also met privately with Kissinger every couple of months, making him the most regular and frequent outside adviser to Bush on foreign affairs.

Kissinger sensed wobbliness everywhere on Iraq, and he increasingly saw it through the prism of the Vietnam War. For Kissinger, the overriding lesson of Vietnam is to stick it out.

In his writing, speeches and private comments, Kissinger claimed that the United States had essentially won the war in 1972, only to lose it because of the weakened resolve of the public and Congress.

In a column in The Washington Post on Aug. 12, 2005, titled "Lessons for an Exit Strategy," Kissinger wrote, "Victory over the insurgency is the only meaningful exit strategy."

He delivered the same message directly to Bush, Cheney and Hadley at the White House.
Victory had to be the goal, he told all. Don't let it happen again. Don't give an inch, or else the media, the Congress and the American culture of avoiding hardship will walk you back

.............In a meeting with presidential speechwriter Michael Gerson in early September 2005, Kissinger was more explicit: Bush needed to resist the pressure to withdraw American troops. He repeated his axiom that the only meaningful exit strategy was victory

The Second Excerpt, "Should he Stay", concerns Donald Rumsfeld:

Cheney had suggested Rumsfeld to Bush in late December 2000. Rumsfeld was so impressive, Bush told Card at the time. He had had the job in the Ford administration a quarter-century before, and it was as if he were now saying, "I think I've got some things I'd like to finish."

But there was another dynamic that Bush and Card discussed. Rumsfeld and Bush's father, the former president, couldn't stand each other. Bush Senior didn't trust Rumsfeld and thought he was arrogant, self-important, too sure of himself and Machiavellian. Rumsfeld had also made nasty private remarks that the elder Bush was a lightweight.

Card could see that overcoming the former president's skepticism about Rumsfeld added to the president-elect's excitement

Sunday, October 01, 2006

Disturbing Echoes of History

Simon Jenkins, going through the Holbein exhibition at Tate Britain, and reviewing it for the Guardian, makes a discovery:

Then I came to the great Barber-Surgeons portrait, dating from the end of Holbein's life. Take away the beard and remove the crown, and out of the picture emerges not Tony Blair but, of all people, David Cameron

Here's a picture of Cameron - judge for yourself. The eyes and shape of the face are the same.

It turns out that they are related. Cameron is descended from James I, who was descended from Henry VII, via Margaret Tudor, Henry VIII's sister. Disturbing, no?