How little is spent on foreign aid.

That thing we always get told about? That we\’ve all promised to spend 0.7% of GDP on foreign aid? And aren\’t the Americans bastards for not doing so?

Interesting point made:

A pop quiz: What’s the largest U.S.-based international relief and development organization?

It’s not Save the Children, and it’s not CARE — both terrific secular organizations. Rather, it’s World Vision, a Seattle-based Christian organization (with strong evangelical roots) whose budget has roughly tripled over the last decade.

Basic numbers are here.

Take out the govt aid they deliver and they\’re on about $700 million a year. That\’s about 0.005% of GDP through one charity alone.

That doesn\’t get counted though….for the pledge is about only the spending that is forcibly removed from pockets via taxation rather than what people might freely give of their own.

This\’ll be interesting

MILLIONAIRE philanthropist Matt Stockdale has launched an energy company to slash bills and cut out the middleman.

Not-for-profit At Cost Energy will buy gas and electricity direct from wholesalers and offer savings averaging £320 per year.

Give it a few years, then see what the price difference is.

A non-profit might have lower prices than for profit firms. Or the desire to make profits might lead to greater efficiency, meaning that the for profit firm both makes profits and offers lower prices.

There\’s no insistence, in either theory or practice, that it will work one way or the other.

Aren\’t we lusky that we live in a country with a market in forms of business organisation like this, that people can experiment and see which works in which industry, at which time, and with which management?

What\’s wrong with Nick Clegg

I basically believe people are born good. How can you think anything else when you see the innocence of young children?

Rampant stupidity.

If we were all nicey nicey from the git go then socialism would work.

We\’re not all such nicey nicies from the git go which is why capitalism works. Because it channels those distinctly not nice parts of the average human personality, greed, self-interest, selfishness and even jealousy into activities that benefit others.

Double the tax on spirits!

A bottle of Bells whisky could rise from £14.79 to £23.73 while Gordon\’s gin, another favourite of middle-class drinkers, would increase from £12.79 to £21.17.

Hmm….three reasons being given for this. The first is to \”curb binge drinking\”. Yes, I too have seen the gin and tonic set rioting and vomiting in the streets.

The second is to raise money. Yes, there really is a Laffer Curve and yes, it applies to excise duties just as much as to any other tax. I\’d simply love to see the calculations that people have done on how much extra revenue this might raise. Especially in a country where it is entirely legal, indeed, it\’s a legal right, not just a permission that can be withdrawn, to purchase alcohol in other lower tax jurisdictions (one of which is only 26 miles away, accessible by £1 return trip ferry deals at times) and bring it home to drink. The third though is much, much, more fun:

MPs called for a return to the level in 1983 when the duty on a litre of pure alcohol was 11 per cent of the average male weekly manual wage, compared with 5 per cent in 2002.

OK, so, there\’s something magical about tax rates as they were in 1983 as a percentage of the average male manual wage. Quite what it is I\’m not sure but let\’s run with that.

So what is the implication that all tax rates should be such? I think you\’ll find that the personal allowance would have to rise substantially, that the NI contributions limit would have to rise substantially as well. Council tax would need to fall…there\’s been, even over those 25 years, really a very large movement in taxes as a result of fiscal drag.

If anyone knows of a good place to find the figures for this I\’d be grateful. Would be interesting to see what the effect on total tax collections would be if we did move back to 1983 tax rates as a percentage of the male manual wage.

Girls are ready to have children at 14

So says Hilary Mantel.

The 57-year-old novelist said that society ran on a \”male timetable\” which dictated that women should have babies at an older age.

\”Having sex and having babies is what young women are about, and their instincts are suppressed in the interests of society\’s timetable,\” she said.

I can\’t say I\’m wholly convinced by her reasoning but the basic point seems sound. It is certainly possible to have children at 14 and in a physical sense that\’s pretty much it. Our own society hasn\’t, for a millenia or more, thought that quite so young was the right time. A year or two later perhaps for marriage (but then I seem to recall that English marriage ages have almost always been later than those of many other societies). There are plenty of others where physical ability to have children has been seen as the right time to have children.

\”But society isn\’t yet ordered with that kind of flexibility,\” she said in an interview in today\’s Stella magazine.

\”We were being educated well into our twenties, an age when part of us wanted to become mothers, probably little bits of all of us. Some were more driven than others.\”

That, however, does strike me as being true. I was talking to a friend who is a professor in the US and he was making the point that American academia seemed almost deliberate in the way that it made it difficult for women who wanted children to climb the greasy pole. High School, first degree: you\’re 22 when you finish. A PhD adds another 7 years (yes, really, 7 years over there now). 29….then there\’s a few years of post doc work, then another 4 or 5 before you find out whether you\’ve been granted tenure as an associate (or is it assistant?) professor. So you only find out whether you\’ve got a stable job (and pre-tenure jobs in American academia are very much not stable, it\’s up or out all the way) in your mid to late 30s. Just when fertility falls off a cliff.

This is an extreme case yes, but there\’s a point to it as well. No, I\’m not thinking that the solution is free full time child care for everyone either. Rather, that our near obsession with the formalities of qualifications needs to be changed. Instead of \”you must do x years here and y years there\” in order to be considered qualified for a job, how about \”take this test. Are you qualified\”?

That would go some way to reintroducing the flexibility that I think we rather need in the job market and society as a whole.

Put it another way around, on the male side, without bringing in the complicating factor of children. I wouldn\’t say that I was particularly qualified to teach economics at, say, A level standard. But I think I might make a decent fist of it all the same. Indeed, much as I hate those under about 25 I could imagine pottering off to do exactly that for a couple of years say. And if the thought of me teaching the little darlings is too much for you, consider that there are many others out there without formal qualifications who would be able to make a decent fist of teaching their own subjects of expertise.

Put that block in the way of having to have a teaching post graduate course under the belt though and I\’m most certainly not going to do it. As many others won\’t. As Shuggy has said (and he is a fully trained and qualified teacher) the only thing of value in that year was the 6 weeks or so classroom practice. The rest of it was drear and lightly warmed over bad sociology.

All a bit wandering this, sorry. But we do seem to have a near tyrany of qualifications rather than the more correct attempt to measure ability or capability. And I think we\’d be better off if we moved more to the latter than the former.

The difference between wealth and poverty

I\’m sure others will be pointing this out but:

\”The power of nature has again struck our country,\” Bachelet said, declaring six of Chile\’s 15 regions \”catastrophe zones\” in the aftermath of the 8.8-magnitude quake…..\”This is a catastrophe of immense proportions, so it will be very difficult to give precise figures,\” Interior Minister Edmundo Perez Yoma said. Officials later said at least 300 people had been killed…..The total value of economic damage caused by the quake is likely to range between 15 billion and 30 billion dollars, a US risk modeling firm predicted.

Compare and contrast:

It was the second major earthquake to hit the Western hemisphere in seven weeks after more than 200,000 people were killed in Haiti last month by a 7.0-magnitude quake.

Thae Haiti quake was less than a tenth of the strength and yet the death toll was around 100 times worse. Haiti\’s GDP was around $7 billion before the quake…..it\’s entirely possible that there wasn\’t actually $30 bilion of damage that could be done to the poor benighted country.

Perhaps it\’s wrong of me to try and make political (political in the grander sense, not just mere party politics) points while people are still under the rubble  in both countries.

But this is one of the reasons why we really don\’t want to fall into the Deep Green trap of thinking that material wealth isn\’t important. As and when disaster strikes, which it will, material wealth means that people live. It\’s a bit of a bugger rebuilding, boring recreating what already existed: but that\’s a fuck sight better than having to dig 200,000 graves, don\’t you think?

Idiot stupidity at Compass once again.

Here.

UK banks building societies and UK branches
and subsidiaries of overseas lenders would have a
remuneration cap imposed. A low compensation
ratio would be set at around 15%.32

Note 32 says:

32 The compensation ratio is the
percentage of an institutions net
revenue allocated to staff pay

Well, we all know we can play games with the definition of \”net\” revenue.

As a way of tackling flagrant high pay, shoring up
bank balance sheets and providing a level playing
field across the banking sector.
During the boom years investment banks set
aside between 45% and 65% of their net revenue
to pay staff before calculating profits or paying
out dividends to shareholders.33 The latest round
of payouts have had a compensation ratio of
nearer 30–40% as banks try to convince politicians
and the public that they can self-regulate.
High staff costs lead to diminishing profits and
dividends as well as lower capital reserves.

Oh, right…..and this is a giggle:

It
also puts huge pressure on less profitable institutions
– for example the 2009 compensation ratio
for UBS is 81.2%, which is unaffordable in the
long term.34

Err, yes, we like this. Unsustainable in the long term means they go bust. This is what is suppoed to happen to \”less profitable\” institutions.

But let us ask ourselves what they really mean by only 15% of net revenue to be spent on staff. And I\’m even going to make it really, really easy, and use gross revenue figures for other companies, not net.

As we noted earlier today the staff as a percentage of revenue at the Work Foundation is 77%. So to get that under 15% everyone who works there must have an 80% pay cut.

Hey, works for me.

Or perhaps we might use The Guardian. Staff costs are something like £178 million on turnover of 498 million. About  35% then. So, only a 60% cut in pay to all who work for The Guardian then. My, won\’t they be relieved.

(Best part is that freelancers like myself don\’t count as staff costs, we\’re cost of goods. So they take a pay cut and we don\’t tee hee!).

So, err, anyone think that Compass thought this through before making their suggestion? Anyone at all?

And, of course, we can take the lunacy even further. Here we have a left wing campaigning organisation insisting that, by law, the workers should have a lower share of the production of the sweat of their brows.

Neil Lawson\’s a ringer dumped in there by the Illuminati, isn\’t he? There to make the left look stupid?

A comment on a piece I did

So I write at The Register on how manufacturing hasn\’t declined. In the comments there is this:

\”I worked here and….\” \”I have a mate who…\” yeah right – your insights are so much more knowledgeable than the blokes who put the original figures together. Post 701196 – we may not make the bullets but BAe (British and the 2nd largest defense contractor in the world) make all the clever things to fire them.

As a percentage of GDP (in 2007), UK manufacturing was 23.4%. France (the country that \’supports\’ it\’s manufacturers) was only 20.6%. Our GDP itself was also higher. I know you will all whine that 2007 (the most recent reliable figures I could find) are before our anglo-saxon created crash. But three years ago you still wouldn\’t have believed it (but don\’t they have Citroen!?) The percentage of our economy that is manufacturing may have been shrinking over the past 40 years (mainly due to the rise of the financial sector), but as the graph shows, the value of what we do manufacture has still increased well ahead of inflation.

My Dad worked in a factory all his working life. It was shit. Given the choice he wishes he had worked on a computer colouring in like I do, or serving lattes in Starbucks to people who make money in the city. Who the f*ck do you people think you are, sat infront of your comfy computer getting misty eyed about factory life like some 21st century William Morris.

Of course we don\’t dig coal anymore. We don\’t need to. It\’s a shit job. With little profit. Let the Chinese kill themselves down a mine getting it out.

Yes, educate children to a higher standard, encourage opportunities for communities that have not adapted to the closure of local industry. These criticisms of policy are valid but please, don\’t try to make me think we want those polluting, life shortening, dull, exhausting industries back.

Only the f*cking middle classes believe the bullshit about a hard days work being any kind of pleasure for a working man. Banging in hot rivets or coding software for banks… which do you prefer? Pricks the lot of you. Give it all up and get on a plane to China and work in a ship builders there mate if you love manufacturing so much.

The recent reports of the UK company that have harnessed quantum physics for a touch screen display show the future of UK industry, much like ARM. Design the tech, license it to far east manufacturers and make more profit per device than they do. Keep innovating and stay one step ahead of the competition. Not look back to some golden heyday when men died at 55 and never saw their kids grow up like my grandad.

There\’s a part of me that would like that comment to replace my article.

Not sending the cheque back mind…..

Polly…..

People want government to do more on most things – controlling immigration, preventing globalisation stealing away jobs to China,

Wow! How does that happen? Do they pack them up in containers at the dead of night, those jobs, and ship them out through Dover?

Or is Polly simply being ignorant again?

But the state can\’t liberate unhappy e-slaves from 24-hour email inboxes, nor stop the bullying blogosphere turning national discourse nastier.

Quite….the government cannot stop me making fun of Polly and her misconceptions.

The rest of it is the usual same old. Governments are incompetent, cannot do what is asked of them, therefore we should have more government.

How fortunate for them

Lads in Birmingham pull less often than lads in other parts of the country.

LADS from the West Midlands are least likely to pull on a night out, a survey says.

They spend the third most time flirting – but fewer than one in six get a result.

Lucky for them really: if they succeed they\’ve pulled a Brummie remember…..

The cost of NHS tourism

So, now we know how much it actually costs.

Immigrants with unpaid NHS bills could be excluded from Britain under proposals aimed at reducing foreign healthcare tourism.

The Department of Health is trying to recover £22 million from foreign nationals who have had NHS treatment in the past two years and not paid their bills.

At one level it\’s a significant sum. £ 10 million or so spondoolicks a year is real money.

At another level it ain\’t. At something like £100 billion a year spent on the NHS £10 million is, umm, let\’s see if I can get the right number of zeroes here…..0.001% of the system cost.

Perhaps somewhere a little above the amount spent on wipes for surgeons\’ fevered brows in operating theatres and very much below the amount pissed away on outreach diversity workers.

No, I don\’t advocate not pursuing them for the money: but it does mean that NHS tourism as a political bugbear ought to be waaaay down the list, somewhere around the importance of whether Sarah and Samantha prefer being on top or not.

You know, something that\’s irrelevant.

Oh dear me Willy

If you start off misunderstanding the very basics of capitalism then of course your prescriptions for making it better are going to be complete nonsense, aren\’t they?

But so should reward be proportional to our extra effort. It is a fundamental part of human beings\’ hard-wiring. The scales symbolically declare that justice is getting our due and proportional deserts.The irony is that capitalism if it is run properly is a means for people to get just that. If they are brilliant entrepreneurs or innovators then it is fair that they should get their proper due desert and make considerable if proportional profits. In fact, inventions are never the result of one individual light bulb moment but the consequence of a lot of social and public investment. Thus a proportion of the profit should go to the state as taxation, as its due desert for having collectively invested in the infrastructure and cumulative stock of knowledge from which invention draws – not least so it can repeat the exercise for the next generation. But the big point is that big rewards are justifiable if they are in proportion to big efforts – because big effort grows the economic pie for everyone. Profit is ethical to the extent it is proportionate to effort and not due to good luck or use of brute power.

No, capitalism is not set up to reward effort. Indeed, if it were, it would be a much less efficient system at generating wealth than it is. Capitalism is set up to reward value generated, regardless of effort. This is why it generates so much value that we all share.

Great effort can be expended in making a scale model of Westminster Abbey out of matchsticks. This is not effort that capitalism rewards. Very little effort might be expended in producing a new piece of software or cats\’ eyes for the roads.

However, cats\’ eyes produce great value and this is rewarded. That scale model might produce a few sniggers and little value: thus no reward.

Two pieces of software might have had the same effort put into them. One produces value for users, the other not. It is the former that will bring rewards.

It isn\’t effort put in which either does or should determine reward: it is value created, however it is done so, which should and does produce rewards. For it is this method that maximises the production of value which is what we all want.

\”It is only fair, they argue, that half a bank\’s revenues should get paid out in bonuses after each year\’s trading.\”

I\’m not aware of any bank that does that actually. I\’m aware of many that have total staff compensation as 50% or so of (net) revenues. But that is total staff compensation, not bonuses.

Oh, and just for a chuckle, can we find an organisation which has a higher staff compensation ratio? Yes, I think we can.

Income of £4.8 million, staff costs of £3.7 million. That\’s a 77% of revenue being paid in staff compensation in 2008.

That\’s also the Work Foundation, prop. one William Hutton.

So what\’s your excuse?

More discussion with Ritchie

\”Which brings me to your long point on FTTs: tell me what the real cost of a 10bp margin is and who will really lose.\”

OK. Taking the numbers you\’ve given me here.

Before the tax we have a 2 bps margin. We add the 0.5 bps tax. We then have a 10 bps margin. Those are the numbers you\’ve given me.

Take one more number. The approximately $30 billion you say such a 0.5 bps tax will raise from the FX market.

Margins have been raised by 8 bps as a result of the tax. That is 16 times the revenues from the 0.5 bps tax. That is $480 billion.

Note that this is indeed already including the effect of lower transaction volumes: for your estimate of the tax revenues already includes this.

All users of the financial system are thus carrying a burden of $510 billion (the tax plus the rise in margins) in order to gain $30 billion in tax revenue.

The losers here are the users of the financial system by some half a trillion dollars. Those who gain, well, it looks to me like the bankers actually. They\’ve got $480 billion in higher margins to play with.

The net effect of this tax therefore is a huge transfer from us the consumers of financial products to the providers of financial products.

Doesn\’t sound what like any of us is trying to do really. Certainly the outcome is exactly the opposite of what you say you\’re trying to achieve.

More on Ritchie\’s sources

Although relatively few in number, large international banks dominate the global FX
market. The ‘economic footprint’ of the CTDL would, in the first instance, fall upon
these large financial institutions that are members of the CLS Bank and the Real Time
Gross Settlement systems (RTGS). There is little doubt that they could comfortably
absorb the levy given the size of their profits, however, they will as far as possible pass
on these costs to their wide range of clients in the form of a slightly higher spread. The
CLS Bank estimates that it settles an average of 200,000 separate transactions (about
half of the global total) every day, which gives some sense of the number of ultimate
participants in the global FX market. The impact of the CTDL on a specific currency
would therefore be dispersed widely throughout the global financial system, with
minimal impact on any one institution.
In further addressing this point we will use the example of a 0.005% CTDL on sterling.
As discussed, the CLS bank processes an average of 200,000 FX transactions every
day. In line with the global picture, we assume that 17.5% of these have sterling on one
side of the trade, which gives 34,000 sterling transactions in the CLS system per day.
However, the CLS Bank settles only around half of all FX transactions, which suggests a
global figure of 68,000 sterling trades per day. Over a year, therefore, we can estimate
the total number of sterling transactions as being somewhere in the order of 17.7
million carried out by tens of thousands of participants. For the 17.7 million ultimate
transactions, the impact of the CTDL would be in the region of $117 per trade, on an
average trade size of a little over $2 million.
For corporations, however, the situation is clearly different. The UK exports somewhere
in the region of $380 billion worth of goods and services per year. Based on the profit
margins of UK companies from 1990 to 2002, we assume an average margin of 10%.30
Ten per cent of $380 billion is $38 billion, which we take as a rough estimate of the
annual profit of the UK’s export sector.

From \”Taking the Next Step\”.

You note that they say that spreads would widen? And that this would determine what the actual incidence of the tax is?

And further, that they then, when talking about the incidence, only talk about the tax itself and not about the effect of the spreads?

This really ain\’t good work you know.

Ritchie\’s ideas on the FX market.

At the heart of R. Murphy\’s ideas about the financial transactions tax is the thought that the tax will widen margins in the foreign exchange (forex/FX) business, well, actually all markets. Wider margins will lead to lower liquidity and thus lower profits for banks and thus lower pay for bankers.

This is one of the source documents he uses to reach that conclusion. The IFSL 2009 September newsletter/report.

From 2001 to 2007, spreads in foreign exchange
markets contracted, meaning banks were making less margin. Spreads have
widened since the start of the credit crisis, due to increased volatility, a fall in
the number of dealer desks and increased concerns about counterparty risk.
This has resulted in boosting global banks’ revenue from foreign exchange
dealing.

No, really, that\’s one of his source documents. Lower liquidity *raises* the amount that banks make from such trading. Yet Ritchie assumes that such wider margins as a result of lower liquidity will *decrease* the amount made and thus put pressure on bankers incomes.

It takes a special talent to entirely reverse the logic of your sources really.

Would you buy a used economic policy from these people?

Signatories to a letter in The Guardian.

Andrew Simms, Policy Director, nef

Ann Pettifor, author, The Coming First World Debt Crisis

Billy Hayes, General Secretary, CWU

Dave Prentis, General Secretary, UNISON

Gavin Hayes, General Secretary, Compass

Neal Lawson, Chair, Compass

Prof Gregor Gall, Universityof Hertfordshire

Prof Prem Sikka, EssexBusinessSchool

Richard Murphy, Tax Justice Network UK

Stewart Lansley, author, Rich Britain: The Rise and Rise of the New Super-Wealthy

Sunny Hundal, Liberal Conspiracy

Will Straw, Liberal Conspiracy (eh?)

Michael Meacher MP

Sam Tarry, Chair, Young Labour

(There are a number of names I\’ve left out of course.)

Ritchie\’s comments are open again

So, I\’m trying to, politely, get him to see my point:

“I’m well aware conventional economists do not agree – and they have provided not a shred of evidence, let alone logic, to support their case as yet. They simply say the cost will be passed on to others – but when the customer for more than 40% of all trades in this market is another bank and the number of customers overall is tiny there is no logic in that claim – the consumer is identifiable and able to resist the charge.”

You’re still not grasping the point about tax incidence. It isn’t that people attempt to pass on a tax charge. It’s not about intent, people trying to stick others with the bill.

It’s that changes in behaviour caused by the imposition of the tax have effects on other people.

Follow this logical chain for a moment. Tax is added to transactions. Transaction volume falls (you should agree with this so far as your report actually notes it). OK, what do we know about markets that have lower liquidity? They have wider margins, larger differences between bid and ask.

We very much do see this in financial markets. Shares with large trading volumes have lower spreads than shares with low trading volumes. Currencies with low trading volumes have higher spreads than those with large volumes. Futures, derivatives and so on. Non-standard transactions have wider margins than standard exchange traded ones. This link between volume and spreads/margins is both noticeable and entirely uncontroversial.

So, our tax reduces volumes and increases spreads. So, any and every user of these products ends up paying the larger spreads. Every farmer transferring the risk of his wheat crop via a future pays it, every remittance sent through the FX markets, every pension fund that’s invested in any financial product at all, yes, even people buying euros to pay for beer on holiday.

Sure, each and every one of these users is paying a tiny sum….that 0.5% to 0.005% tax….plus however much the margins have widened. As in my earlier comment, we don’t know how much those margins will widen but we’re, unless you’ve got some startling new result, certain that those margins will widen.

And thus the economic burden of the tax hits each and every user of any financial product at all.

No, not because the banks of the bankers are trying to stick people with the tax. But because the reduction in liqudity makes the use of the markets more expensive for everyone.

Depending upon how much the margins increase that burden of the tax could be higher, possibly many times higher, than the amount actually raised by the tax.

The only way this could not be true is by making the assertion that margins will not increase as a result of the tax. Now you can assert that if you like but it would be an hilariously odd thing to try and assert. And as ever, it would be one of those extraordinary claims that would require extraordinary evidence.

So, allow me to ask a question. Do you think that the imposition of an FTT will widen margins in the financial markets or not?