Thursday, 25 April 2013

Labour want to build houses

Labour have had a good idea! It's very rare and should not go unremarked. They want to take some of the money used to pay Housing Benefit, about £24bn per year, and use it to build new homes instead. This is the brainchild of Liam Byrne, shadow work and pensions secretary.

Liam Byrne: "There's no money left!"

They seem to have noticed that the government pays out the £24bn every year and this money just siphons off into the pockets of landlords, both public and private. If they used it to build instead they would end up with something tangible to show for it.

If public land were used that money could pay for a quarter of a million very nice houses to be built. Then the HB claimants could just live in them free of charge!

One slight problem that might have escaped Liam is that there are actually 5 million households claiming HB. So if his cunning plan were put into action then 0.25m families would have nice houses and the other 4.75m would be homeless. Oops! Back to the drawing board Liam.

Wednesday, 17 April 2013

Using gold and silver as money

I was responding to a post on John Redwood MP's blog and I liked my response so much I decided to reproduce it here. He was asking for thoughts on using gold as money, so here are mine...

Paper money must be considered a temporary currency. One day the value will fall to the cost of the ink and paper. Sterling lost 95% of its value during the 20th century and I see no reason not to suppose it won’t do the same during the 21st. (In Zimbabwe they found that no matter how many zeros they put on a banknote it wasn’t worth enough to cover the printing costs! The Zim dollar was abandoned.)

Only worth the paper it's printed on; yes really!

So forward thinking individuals are rightly looking for a better store of value and medium of exchange. Gold and silver seem to fit the bill. It’s true you cannot eat them, but they are durable, divisible and have a guaranteed scarcity. Silver would be more useful than gold actually because gold is too expensive for small transactions. You could buy a car or house with gold but the morning paper would cost a near-invisible fleck.

The US state of Arizona just last week made gold and silver coins legal tender. Their lawmakers openly admit that the paper dollar is not long for this world and some preparation is a good idea. Being legal tender means there is no sales tax on it and no capital gains tax, thus it is suitable for use as a medium of exchange.

In the UK we have a VAT exemption for gold (perhaps the only good thing Gordon Brown ever did!) but not for silver; and no CGT exemption for either. This is a good start but more legislation is needed to “monetize” the precious metals.

I believe that moving to a physical precious metal currency system would usher in an era of economic prudence. There are techniques we could use to move from paper sterling to PM coins quite seamlessly. After the necessary tax changes we could “back” paper sterling with silver at a sliding discount, eg first back it at 10% of current value then gradually raise the rate until one day the backing would be one-to-one. Then we should promptly start using actual physical coins and bars (for larger amounts) and reject paper as untrustworthy.

A bi-metallic system with gold for savings and silver for transactions seems like the best idea to me. There’s an old saying: Gold is the money of kings; silver is the money of gentlemen; barter is the money of peasants and debt is the money of slaves. We should aspire at least to be gentlemen.

Monday, 15 April 2013

Thatcher: Hero or zero?

Amazing really, she became PM more than thirty years ago and left office more than twenty years ago and yet still she arouses strong emotions. Contrast with the more recent John Major who is largely forgotten. It is said she polarized everyone - you either loved her or hated her. As a politician this is fine provided slightly more people love you than hate you.

In the film, portrayed by Meryl Streep, she was shown ending her days friendless in a dingy flat. Turns out she was living in a suite at the Ritz, receiving homage from the great and the good, like a potentate until the last, even if she was ga-ga; a suite she didn't have to pay for thanks to the enduring generosity of the owners of that hotel.

Some want to dance on her grave. This is not totally unreasonable. She harmed a lot of people beyond forgiveness. She is viewed as having shut down the coal mining industry, the steel industry, the ship-building industry and great swathes of manufacturing. There were vast job-losses and many of the blue-collar communities built around the pits or the mills or the docks never recovered. There were suicides and aging workers were on the scrapheap for life. They cannot be expected to forgive or forget.

However, back then, there was this thing called the British Disease. It was militant trade-unionism. The State owned the commanding heights of the economy: power-generation, car-making, ship-making, telecommunications, aircraft-making and the largest airline itself. This gave workers a direct tap into the tax-payers' wallet. These firms did not have to make a profit; all losses were simply picked up by the government. In that kind of zero-risk environment naturally the workers held the government to ransom - more money, better terms, or we turn off the lights, freeze transport, and stop the dead from being buried. Mrs Thatcher moved these businesses into the private sector and put then into an environment where they could go bust. It was sink or swim. And plenty of them sank. Coal-mining, ship-building, steel-production all went to the wall - effectively, although they still exist in a vestigial form even today. Others though, took off and have never looked back. (Well, BP looked back a bit, but they're over that now.)

Mrs Thatcher was the cure to the British Disease. Blaming her for the downside is a bit like blaming your oncologist for your hair falling out. Yes, she did it, but did she have much choice? Of course she could have let the country sink below the waves. We were on the path to national bankruptcy. The previous government had gone cap-in-hand to the IMF (ie, the Americans) to borrow money to support the value of the pound. (Hadn't they heard of quantitative easing?!) So the future was clear when she came to office: kill the trade unions or they would kill the country.

On the other side of the score card, Mrs Thatcher is generally credited with creating a more equal society. Before her, owning shares was a thing only toffs did. She made it so Joe Public could and would buy into the stock market. She also expanded property ownership by giving public sector tenants the right to buy the houses in which they lived. This though was a transparent attempt to create more Tory voters, effectively by bribery. The discounts offered were so generous that there was no way of using the money to build an equal number of houses to replace the public stock (which suited her of course because home-owners were seen as Tory voters and social tenants Labour-voters.)

Her deregulation of the financial markets both enabled London to become one of two world finance capitals (the other being New York) and laid the foundations for the enormous debt bubble we are currently in, and every miss-selling scandal since.

Looking back, it would probably have been better if we had kept the manufacturing industries and not had the banks. We would have done better to be more like Germany: accommodate the unions by bringing them onto the boards of the big companies and privatise by giving the shares to the workers in the firms, not selling them to all and sundry. Keep the financial sector small because it is essentially parasitic - it produces little and merely redistributes.

She was keen on treating the national budget like a household budget and ensuring that no more was spent than could be afforded. She was much reviled for this at the time, by people who claimed she did not understand macroeconomics. But it is clear in retrospect that she was right. Unfortunately she did not, or could not, lock in a balanced budget for the future. If she had we would not be in the parlous state we are currently in.

So to answer the question posed in the title of this post: hero or zero - both really, perhaps a bit more hero than zero, but only just.

Wednesday, 10 April 2013

Emma West, trial postponed again

Emma West "tram lady" was due in court this week, in fact she was in court, for the 5th time, but again the trial has been postponed - this time until May 10th. This will be the 6th attempt to try her for mouthing off about immigrants on a Croydon tram. This is getting ridiculous.

Friday, 5 April 2013

Immigration from Romania and Bulgaria

The National Institute of Economic and Social Research (NIESR) is all over the media this morning. They have produced a report telling us that the impact of allowing Romanians and Bulgarians unrestricted access to British jobs in 2014 will be limited.

Still cautious after their disastrous prediction that Poland's accession to the EU would result in 12,000 Poles moving to the UK - actual immigration: a quarter of a million in the first year! - this time they are not giving numbers, just bland assurances that everything will be fine.

The report's authors are: Heather Rolfe, Tatiana Fic, Mumtaz Lalani, Monica Roman, Maria Prohaska and Liliana Doudeva. Frankly it's amazing that the NIESR has the cheek to produce a supposedly serious work on immigration with that list of names on it - only one of them (Rolfe) looks remotely British! The others may be British on paper but clearly their ancestry is far far away.Tatiana Fic is Polish; Lalani is a muslim Asian name; who the others are we know not.

The NIESR itself is not what it seems. It calls itself an independent, politically-neutral, research institute, but it is actually deeply in cahoots with the government and exhibits a noticeable left-wing bias. It receives government funding and uses a domain name ( in the gift of the government. Its output must be regarded as tainted.

The facts-on-the-ground about Romanian and Bulgarian immigration to the UK are: the Romanians are already here, and the Bulgarians will be coming. The Romanians especially have been here for years - working illegally. They are able to travel to the UK without problem or paperwork but cannot legally work here without being sponsored by an employer and getting a work permit. The way they are getting around this is the "Italian connection".

Italy has long been the Romanians' destination of choice. In the communist era it was their nearest "free" country just the other side of  Yugoslavia, and the Romanian and Italian languages are similar enough for a Romanian to learn Italian quite easily. There is a large (and lawful, of course) Italian community in the UK and they have been using contacts back in Italy to import Romanian labour to the UK. These Romanians then work illegally in the UK, getting their orders in Italian, the men as builders, fitters, gardeners and other unskilled manual workers; the women as cleaners mainly. They are massively exploited - for them the minimum wage does not apply: £15 for a long day's cleaning work would not be unusual. The women also work in prostitution a lot! (Where at least the wages are quite a bit higher.)

The Bulgarians have a greater affinity with their southern neighbour Greece and have not come to the UK in anywhere near the same numbers as the Romanians. They do not have any equivalent of the Italian connection to ease them into this country. Once they are able to work and claim benefits in the UK this will change. The Bulgarian economy is a basket-case; the poverty is extreme. We will see them in large numbers, as will the other Northern European EU nations. Even if they cannot find work it will be worth it for the benefits.

Clearly opening our country to these migrants will be harmful to us. We have three million unemployed people, plus another two million under-employed or notionally classed as disabled but able to work given a sporting chance. Although one naturally feels sorry for these immigrants who only want to improve their circumstances and are exploited in the UK (generally not by Brits though - an "English employer" is the Holy Grail for illegal immigrants) it is not in our national interest to admit them to the country.