torsdag 28 februari 2019

Brexit fiasco a national disgrace

The economic case for Brexit was never put, because of the incompetence of Minford and his associates. Short of full-blown communism, it would be difficult to devise a worse set of policies than those at the heart of the EUʼs trade and economic policies: CAP, VAT, the tariff wall and the Euro. The so-called four freedoms are in reality a way to ensure that skinflint employers and greedy landlords can pay the lowest wages and charge the highest rents. Employment Rights are a fig leaf and do nothing for those on the edge of the labour market.

However, CAP and the tariff wall are a useful source of pocket money for the dukes and lords whose rental income would have been hit. Since the same people are the leading Tory grandees, they were bound to insist on it being replaced by a home grown version of the same thing, which is what has happened. On top of that there is a clueless Chancellor who is taken in by surfaces appearances and does not appreciate how much of the headline yield from VAT disappears in costs and losses. To cap all that, there is a Labour Party which is asleep and dreaming Marxist dreams.

Whilst there is a good case for remaining, the support for remain among the better informed section of the population would not have been anything like as much as it was if the flaws in the EUʼs policies had been appreciated and sensible post-Brexit alternatives thought about.

Without no sensible post-Brexit strategy, the entire point of Brexit disappears, since the egregious EU policies are replaced by home-grown versions of the same thing.

The whole episode is a national disgrace which reflects badly not only on the politicians but on the British public at large, above all, on those who are meant to be the more intelligent and better educated section of the population. Remainers - the Guardian and FT were leading offenders - were too busy arguing for remain to get their heads around the need to ensure that the worst of the EU policies were dropped and sound policies put in their place.

tisdag 26 februari 2019

Brexit is losing its point

I am coming to the conclusion that Brexit is becoming an irrelevancy. After the announcement by Gove - a leading Brexiter - of new UK food tariffs to replace the EUʼs, I am coming to the conclusion that Brexit is becoming an irrelevancy. What is the point of it?

The EU has been running four egregious trade and economic policies from its outset: CAP, VAT, the tariff barrier and the Euro (fortunately the UK avoided the latter, but the fact that it even exists is proof of the incompetence of those responsible for the those policies). It is becoming evident that the leading supporters of Brexit are intent on replacing the EU policies with home-grown versions of the same thing. It is as if a prisoner is told he is free, but remains in his cell, and is then required to pay for his food and lodging in the jail. Such a Brexit is all pain and no gain.

The ERG - this includes J Rees Mogg - and Economists for Brexit, should have raised their voices in protest when Gove announced his proposals for the tariffs, which have not been denied. Labour and the left should have raised voices in protest on the basis of their own principles. Economists for Brexit have not helped the case through their claim that British agriculture and manufacturing would be destroyed.

As regards agriculture, it appears that there has been no rigorous study, ie based on a Ricardian analysis, made on this subject, not by DEFRA, nor by any think tank, nor by any academic institution, nor even the National Farmers Union. Such studies as have been made are inadequate, since, like the ESRC one, rents are regarded as an input cost, or in the case of that by the NFU, rents and imputed rental incomes are rolled up into the category of farm profits. This is astonishing, considering that many universities, including Oxford, Cambridge, Newcastle, Reading and Bangor, have departments of agriculture and agricultural economics well equipped to crunch the numbers properly and predict what would happen if cheaper food from outside the EU became available.

If nobody in authority knows what to do with the freedom Brexit gives, and the EUʼs dysfunctional policies are replaced with UK versions of the same, what is the point of it?

måndag 25 februari 2019

Post Brexit agriculture

Uplands farming seems to be most at risk from Brexit. The land will not, of course disappear. The uplands, and, indeed, the landscape as a whole, should be regarded as a national resource which needs to be managed for a variety of objectives.
  • to maintain, and preferably increase, opportunities to earn livelihoods; 
  • to enhance its aesthetic value; 
  • to enhance its biological diversity so as to support native species; 
  • to protect downstream areas from flooding; to make a contribution to the carbon sink; 
  • sustainability. 

This needs to be done is such a way as to ensure that the enhanced rental values resulting from public investment are efficiently recovered for the exchequer. Although the sums of money involved are relatively small, this strengthens the case for land value taxation on agricultural land. However, it should not be forgotten that present taxation gives rise to an artificial margin where land which could support economic activity in the absence of tax cannot do so if such activity is subject to taxation. In these situations, tax is the deal-breaker.

The question that arises is whether DEFRA is up to the task.

söndag 24 februari 2019

Will Brexit destroy British farming?

Will Brexit destroy British farming if it is not protected? Remainers say it. The National FU says it‒but then it would, wouldn’t it? The leading Brexit economist, Minford, has said it. What is the truth of the matter?

Agricultural rents are in the range £50 to £200 per hectare. Faced with a general fall in farm gate prices, the worst land, by definition marginal land, goes out of agricultural use and rents of all other land must fall. The cut-off point comes where rental values drop to zero. This is standard Ricardian theory.

Some agricultural land will obviously go out of its present use, but the questions are how much, and what other uses will replace them? I have not seen any analysis of the problem, neither by Brexiters or Remainers. In the absence of any sound analysis, all there is on both sides is blind speculation.

The apparent dearth of well-publicised and solid information is a mystery. The calculations are not the kind of thing that can be done on the back of an envelope, but many of the country’s think tanks and academic institutions, including both Oxford and Cambridge Universities, as well as the NFU and DEFRA, have the resources to do the work. When making forecasts of impending disaster, there is no excuse for not producing supporting calculations which would give an indication of the extent of the damage.

tisdag 19 februari 2019

Very bad Brexit news

The bad news is that Gove has announced that food tariffs will continue after Brexit. This should not come as a surprise since the National FU has always made sure it has the ear of British politicians. It shows that the battle for sound economic policies is only just beginning. Getting out of the EU was only ever a first stage, since the vested interests still remain to be faced down and put in their place.

There are potential benefits from Brexit because the core EU trade and economic policies are fundamentally unsound. But if the UK government is just going to perpetuate all the same rotten EU policies then the country suffers all the disruption of Brexit but gains nothing.

If the public do not get to see the benefits there will be hell to pay. As for farming, New Zealand showed the way in the 1980s. There was initial disruption but the industry adapted and is, if anything more successful as a consequence.

The difficulty with achieving change in the UK is that the country has no plausible opposition party at the moment, which means that there no institutional means of expressing discontent. The possible centrist independent party merely offers the prospect of more of the same.

fredag 15 februari 2019

EU vacuum cleaner regulations

Now corrected (perhaps), thanks to Dinero who spotted an error in the original source for overall electricity consumption.

Overall annual electricity consumption in the EU is 3 million Gigawatt hours ie 3E6 x 1E9, a total of 3E15 watt hours. Source (the decimal point has been omitted from the graph, hence the earlier mistake)

According to this blog, 19TWh would be saved by the maximum power regulation for vacuum cleaners ie 1.9E13 watt hours. I make that saving about 0.7% of the total EU electricity consumption, but it is easy to go wrong with teras and gigas. However, this came to me from Mark Wadsworth, which suggests that the figure is in the right ball park.

ʻWe use a fair bit of electricity, about 400 kWh a month, my online thingy tells me. Let us assume we spend half an hour a week vacuuming. Our vacuum cleaner is 2,200 watts. 

ʻHalf an hour per week = 1.1 kWh, times 4 and a third = 4.7 kWh per month 
= about 1% of our usage. 

ʻLet us assume that the most efficient cleaner uses half as much electricity for same effectiveness 
= reduces our usage by 0.5% 

ʻHouseholds consume about 40% of all electricity (a guess on my part) 

ʻ0.5% x 40% = 0.2% = one-five hundredth; not one-hundred thousandth. i.e. not absolutely nothing, but a very small something.ʼ

It is so small that one wonders why anyone was bothering about it. In terms of reducing carbon emissions (assuming that to be a worthwhile goal), the biggest and most silent contributor has been appliances steadily getting more energy efficient, whether by market forces or EU diktat.

Is LVT really such a hard sell?

People are more emotional than logical and the process of paying LVT would feel different to some of the other taxes it would replace. People would notice the payment more and object. 

Perhaps, but one of the issues with other taxes is that the INCIDENCE of the tax is not necessarily the person nominally responsible for payment, as taxes are passed along.

The incidence of PAYE Income Tax and NI is on the employer and forms part of labour costs. It is functionally equivalent to a payroll tax. This means that employers are under pressure to reduce labour costs by replacing workers with capital even though it results in a worse service, or no service at all, and is, in reality, uneconomic. Supermarket self-service checkouts are an example. Alternatively, the employee taxes are passed on in higher prices.
It does not stop there, because these taxes cut into employers' profits, resulting in less being collected in other taxes including property taxes (UBR) and Corporation Tax.

It is a similar situation with VAT. Retailers attempt to absorb some of it in order to maintain volumes of sales. That why cuts in VAT, which sometimes occur, are not fully passed on in price cuts.

It is extremely difficult to establish the true incidence of taxes. In the long run, all taxes are passed on to landowners as they cut into rent. This was first noticed by the French Physiocrats but is also a corollary of Ricardo's Law of Rent. The problem this causes is that locations where business would be viable in the absence of tax are incapable of sustaining business activity under the present tax regime. Thus, the taxes amplify regional economic disadvantage and are one reason why regional economic imbalance is so intractable.
LVT would be paid as it is now, by monthly instalments. In the case of leaseholders, the tenants' share could be added to the ground rent and the entire tax paid over by the freeholder. It would no more be noticed than any other regular payment made by standing order.

onsdag 13 februari 2019

Donald Tusk not the greatest theologian the world has ever produced

‘I am not sure that Mr Tusk is the greatest theologian the world has ever produced, and is a little bit confused about the difference between heaven and hell’, was Rees-Mogg’s response to Tusk’s comments on the place in hell for Brexit politicians. Nicely put.

torsdag 7 februari 2019

Independent Scotland in the EU? #2

If it ever came to pass, you could expect lorry queues on the A1 all the way back to Newcastle and on the M6 to well south of Carlisle. But, as one bright spark asked, ‘are Rotterdam, Hamburg, Antwerp (Europe’s biggest ports) really far away? They’re just across the North Sea.’

Harwich to Hook of Holland is 8 hours sailing time. That is the longest practicable distance whilst avoiding having to spend a night on the ship, though ships on this route have sleeping accommodation. Harwich to Esbjerg is 18 hours which leaves 6 hours to service the ship for the return voyage ie a round trip can be made within 48 hours.

Now look at the sailing times from Leith
  • Rotterdam 28 hours 
  • Hamburg 37 hours 
  • Antwerp 32 hours 
  • Leith to Esbjerg (the shortest route) 30 hours, but Esbjerg is out on a limb. 

Whatever the route, then, it is more than ‘just across’. It adds to transport costs and pretty much rules out RoRo. Scotland could barely generate the traffic for a container port the size of Felixtowe or Southampton, which means it would be a feeder. And once goods are in a container and loaded onto a 20,000 box carrier, the cost of distance is trivial.

From which it can be concluded that an independent Scotland in the EU would suffer from problems of logistics.

tisdag 5 februari 2019

Brexit makes the plagues of Egypt seem trivial

Polly Toynbee has reached new heights in this piece, with makes the Ten Plagues of Egypt seem like a Sunday School party compared to Brexit. Or is she parodying herself?

Ricardo’s Law in brief