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 CuraƧao, 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?