Thursday, April 23, 2009

Budget 2009 - Part 3: Invest to Grow

New Labour has brought us the historically brief age of consumer debt. If you borrow money so that you can be more productive then that is fair reason to be in debt provided the increased productivity more than services the debt. Eventually you get to the point where the surplus replaces the debt for future investment.

You don't get much of that with government spending. Their job is mostly to deal with things that are necessary but not profitable enough for the private to have a go at. The Post Office/Royal Mail and Network Rail are such money sinks.

Investing to grow is fine provided that the money goes into projects or systems that increase productivity. When it comes to governments think transport, communications and such like that encourage employment or make doing business easier.

Poor IT projects doomed to failure, ID cards and 10 year old car trade-in schemes to name a few are places where our money is being flung at where they aren't necessary and offer no return on investment.

The government have now 'discovered' areas for efficiency savings. Isn't it amazing how such things don't exist when an opposition party suggests them? By saying that they didn't exist is exactly the same thing as the government saying they are spending our money perfectly with no waste. Don't believe any government that ever says that. When the pressure is on, somehow, they will always show up and prove them wrong.

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Wednesday, April 22, 2009

The Budget - Part 2: Top Rate Income Tax

Populist and political is this measure. 50% income tax on earners of £150,000+ per annum could make gains on the public coffers but it isn't assured. What's been created is a stronger incentive to find a loophole. The rich are great with accounting (the gap between rich and poor gets perpetually wider as the rich know how to protect their wealth and the poor do not).

Mark these points:
1. Don't think this will do for the treasury what they'd have you believe
2. The move is far better politics than it is economics
3. You don't need to feel extra appreciative of the rich, they won't be coughing up much as it'll go into capital gains, pension funds and the like

If you're going to tax the rich properly then you can't have these various rates knocking about. If you are going to have your wealth in this country (go to high and they could move of course) then all of it, however it is dressed up, should be taxed at a consistent rate so you know what you're getting. Of course the best bet is going by Fred Harrison's land value tax.

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The Budget - Part 1: Borrowing

Everything you needed to know why Labour cannot be voted into power in the next General Election came about today.

What does their manifesto mean? Nothing. Income Tax rises.
What do their forecasts mean? Nothing. Growth wrong, unemployment wrong...
What do their measures mean? You can deal with it your finance shortages later.

The Chancellor is out by a massive 15% on the expected borrowing of the 2008-09 financial year on a prediction he made 6 months ago (£90bn rather than £78bn). If he can't predict the level of borrowing, which he enjoyed full control over, in the past 6 months with any accuracy then it is unthinkable that he can predict with will happen to GDP which is subject to only his influence and not direct control.

Do not believe a word of it. We will be lucky if Alistair Darling only pollutes our economy to the tune of an extra £175bn in the 2009-10 financial year. Variance to the magnitude of his last prediction would take it over £200bn. You have been warned.

Then there's the question of the price of that future borrowing. People don't just lend the government money. They buy bonds and gilts which promise future returns. If there is no trust in the Chancellor and his vision of the economy then they are going to expect bigger returns on their risky investment in the government.

With only a few shaky calculations at this early juncture we can see ourselves harbouring 100% GDP of public debt rather than the predicted figure of 79% for the parliament after next. A crazy peace time situation.

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Sunday, April 19, 2009

Logic Flaws in Responsibility

I have to wonder if I would spend less time 'Brown bashing' if he didn't make it so easy. In response to the anger surrounding Damian McBride he says:

"I take full responsibility for what happened, that's why the person responsible went immediately."

Um, if you take full responsibility for something and the person responsible gets sacked, then there is only one thing that can happen to you...
Anything short is not taking full responsibility, obviously.

Queue more eye rolling.

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Sunday, April 12, 2009

The Times and fishy VAT figures

The problem with reading anything in April is that there's always a shadow of doubt that even the well reputable are fooling you. Reading today that, of all papers, The Times is making a nice concession to Alistair Darling on his VAT rate cut.

Now, as a pricing operations person, I can reliably tell you that implement this temporary cut is nothing but a complete pain in the arse. As a consumer with disposable income it has not influenced my spending in any real way. My main vice is books with VAT at 0% anyway.

The move was criticised at the time because:
1. Prices were nose diving anyway
2. The value of the decrease was so infinitesimal small it really wasn't worth the bother

News that the cut may have actually worked sound certainly be listened to but also paid close scrutiny.

First job: Who's the source?
Ok, that will be the Centre for Economics and Business Research (CEBR). Seemingly an independent consultancy. Good for the the first part at least. Now... oh oh:
"We interpret what is really happening in their business and in their environment to provide clear projections and forecasts for their future."
That's a problem. No one does that, at least not with any accuracy and moral decency.

Second job: Vested interest? (No pun intended)
A Google search for 'CEBR VAT' reveals this opening headline: "VAT must be slashed to avert crisis, warns CEBR." This is in The Telegraph dated 12th November 2008. And they were insisting on a 5% cut rather than 2.5%. So in order to validate that their own warnings were correct it could be argued that it is in their interest to prove not only that the cut worked, but a bigger cut would have worked better.

Final job: Methodology?
Sadly, nothing on their website about this. So I'm going to have to go by David Smith's article and assume that it is a comparison against the last recession in the '1990s. Alarm bells ringing, varibles everywhere. I'll open to being proved wrong here but I very much doubt that they could have collected enough quality data to be able to isolate all the varibles to establish which ones, either individually or (much more realistically) in combination, are triggering better performing retail sales than compared to the last recession.

The biggest obstacle in assessing the impact of the VAT cut is that it is totally dwarfed by the huge factor that is the base rate of lending which stood well over 10% last time compared to 2% and lower since the VAT cut came into effect.

So before we begin to write history and conclude that the VAT cut worked (stop chuckling) lets find evidence from a source without a vested interest in the result and some incredibly robust methodology isolates the monstrous varible of the base rate.

Sources: TimesOnline, Telegraph, Mortgages.co.uk, CEBR

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Saturday, April 11, 2009

Political Cynicism

Whether Hazel Blears likes it or not, cynicism of the political process (and indeed, politicians) is well founded and necessary. Stories like that broke of characters like Damian McBride over the weekend prove that we can't just trust them and leave them to their own devices.

It is a great shame that advisers to Downing Street don't have enough faith in the good work that they have done over the past 12 years. The need to resort to a slur campaign tells you everything you need to know about a party running scared with 12 months to save their bacon.

We have the media and enough public interest to uncover the dirt. Leave mud slinging to the children, aye?

Of interest: Guido Fawkes, Iain Dale

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Sunday, April 05, 2009

This is why the Home Secretary worries me

Two things:

"Will not hold up in the court of public opinion"
This was in reference to the unfathomable pension sum granted to Fred Goodwin. Politicians are much more likely to end up here than bankers. But he have to thank her for letting us know that such a venue should matter.

Quotes like
The minister says she is "just about 100% sure" she did not claim for it, sources have revealed.
and
But Ms Smith said "not all of the expenses" outlined in the newspaper were correct, sources told the BBC.
Are very disturbing things to read about a minister responsible for our safety. If such uncertainly reigns over something she is entirely in control of (invoicing the tax payer) then what state is the office in?

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Thursday, April 02, 2009

History is big. Really big. It must be...

I've just read that Gordon Brown has a Phd in it. That's the scariest thing I've learnt this year.

Not much else to say it this post other than getting to label it 'Gordon Brown' and 'History' made me chuckle inside.

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