There is no right time to sell the RBS shares

This is a simple point, but it’s one that some people who should know better seem to keep getting wrong. Share price movements are unpredictable and there is no more reason to think the price of shares will be higher next year than to think that they’ll be lower. Which means that there is no ‘right time’ for the government to sell its RBS shares.

If we thought that RBS shares would each be worth 50p more by Christmas then we’d be buying them now and bidding up the price towards 50p now. The price wouldn’t quite reach 50p because there’s still the chance that we’re wrong.

And indeed that is exactly what happens, and why we can only assume that share prices reflect what we expect them to be worth in the future. Because share prices can go down as well as up, we get a return from investing in the stock market above what we get if we invest in safer assets, like government bonds.

You would think this was obvious, but the BBC quotes:

Ian Gordon, a banking analyst at Investec, told the BBC’s Today programme: “The taxpayer is being short-changed.” The shares could have been sold for a higher price in February, when they were changing hands for more than 400p, he said.

But of course we had no idea in February that they would fall, and we have no idea what will happen to them next. Like the Royal Mail shares they might rise after we sell them off, or they might fall. Or they might not move at all.

BusinessInsider’s Mike Bird makes this point very well, and as well as reminding us that the RBS bailout was always going to be a money-loser, he points the people who think we can just wait and hold on to the shares until they rise back up to their 2008 level to this chart showing RBS’s share price since 2007:

rbs bailout

To be fair, quite a lot of RBS has been spun off so it’s a much smaller company than it was in 2008 anyway, but the point still stands that there is no rising trend that we should be riding, as many people seem to think.

The flipside of all this is that Gordon Brown is equally blameless for selling off the government’s gold at ‘historically low levels’, except to the extent that we might want the government to own gold for other reasons.

So there is no ‘right time to sell’ except to the extent that we do or do not want the government to own shares in the banks, or to try to make money by taking risks. If we don’t want the government playing the stock market, the ‘right time to sell’ is always now.

Replace the House of Lords with a Lottery

Before the House of Lords Act 1999, foolish legislation from the Commons would often be blocked, delayed or amended by wise men that did not owe anything to anyone and would thus be wise and objective in their decisions. Tony Blair was defeated 38 times in the Commons in his 1st year of government. After 1999 the chamber became nothing more than a useless chamber of former party donors who had been given life peerages often at the request of the Prime Minister. Unsurprisingly they would enter the chamber owing the Prime Minister a favour or two and suddenly a lot of poor legislation is being passed without so much a whimper from that once mighty chamber.

While we can all agree the current system is broken, conservatives should recognize the old one is lost, and thus a redesign of the House of Lords should keep the best of the old while discarding some of the more unnecessary inequality of the old system.

My idea is a lottery system, whereby people are, at random, selected to serve as a “Lord” for one Parliamentary session, much like an extended form of Jury service. There would be rules of course- no-one should be forced into it, and those who do accept would have to declare all interests for the purpose of public accountability. To ensure wisdom prevails there should be a minimum age of 45, and anyone who has been closely involved with a political party in the last 5 years should be disqualified. The few hundred who accept will be compensated generously for any time they have missed out of work, and of course because they are all older, this year long task will not take vital time younger people would need in the job market or higher education.

The sheer hassle of such a system will discourage the government from passing excessive legislation to the Lords- and certainly make the legislation understandable for the average laymen who will be serving. The selected group should have the powers the Lords currently have- with the suspensory veto extended from 1 year to 5 years and the formal discarding of the Salisbury Doctrine.

Hopefully this change will result in a conservation of the liberties and property rights Britain still has, and an end to the de facto unicameralism of our current House of Commons.

Theo Cox Dodgson is winner of the Under-18 category of the ASI’s ‘Young Writer on Liberty’ competition. You can follow him on Twitter @theoretical23.                             

Liberalising Immigration is a Win-Win scenario

Draconian immigration rules represent the largest restriction on liberty in the UK today. They restrict the personal and economic potential of millions of people and achieve little in return. How to roll back these limits on freedom? Think tanks have a difficult dilemma. They want to build a reputation as radical thinkers, but at the same time propose moderate policies. Early drafts of this essay argued that Britain should be more open to this or that group, but the truth is that both hard-headed economics and human decency demand wholesale liberalisation.

Immigration restrictions curtail our ability to hire, sell to, befriend and marry the people we want to. People understand this – it’s why people view immigration to their local area much more favourably than on the national level. And they have an enormous economic cost.

The ASI’s namesake argued that the division of labour is limited by the extent of the market. Everyone accepts the case for free trade, but that leaves markets incomplete, because non-tradable services (like haircuts) can’t travel across borders. Freeing people to move where they wish would let people go where their talents would be best used. The productivity of someone with an engineering degree – the amount can achieve with their labour – is many times lower in some areas of the developing world than it is in the UK.

The benefits to migrants are best illustrated by the lengths migrants are willing to go to to cross borders. Smugglers charge thousands for passage from Libya to Europe, and the journey is fraught with risk, but hundreds of thousands make the journey anyway. Migration lets people escape poverty, war and authoritarian regimes.

The Mariel Boatlift is an example of this. In 1980, 125000 Cubans fled Castro’s regime, landing in Miami. Their liberation increasing the size of the local labour force by 7% almost overnight. But economists found almost no impact on wages and the labour market.

7% of the UK labour force works out to approximately 2.3m people. The government could auction off permanent residency permits to that many people each year. Such a radical policy would be disruptive. It would have costs, losers as well as winners. But the potential benefits are too colossal to ignore – a Britain where not only workers and jobs but husbands and wives, parents and children, potential pub geezers would not be separated by arbitrary borders.

Theo Clifford is winner of the 18-21 category of the ASI’s ‘Young Writer on Liberty’ competition. You can follow him on @Theo_Clifford, and read his blog at

If you think for profit health care is expensive wait until you see not for profit…

One of the battle cries during the set up of the ACA, aka Obamacare, was that for profit health insurers were way too expensive. Because, you know, profit. It’s obvious to all that the profit must make things more expensive, innit? So, a series of cooperatives to provide that health care insurance were set up.

There’s two problems here. Much as we love cooperatives ourselves the obvious feature of hem is that they’ve not got any capital. They thus need to grow into a market position rather than just leap into trying to be a large player in a capital hungry industry like insurance. For their capital comes from retained earnings, rather than having some capitalists providing capital: that’s rather the point of them. That these coops did try to leap in and become large players in a capital intensive market means they’re all going bust.

Nonprofit co-ops, the health care law’s public-spirited alternative to mega-insurers, are awash in red ink and many have fallen short of sign-up goals, a government audit has found.

Under President Barack Obama’s overhaul, taxpayers provided $2.4 billion in loans to get the co-ops going, but only one out of 23 — the one in Maine — made money last year, said the report out Thursday. Another one, the Iowa/Nebraska co-op, was shut down by regulators over financial concerns.

The audit by the Health and Human Services inspector general’s office also found that 13 of the 23 lagged far behind their 2014 enrollment projections.

The probe raised concerns about whether federal loans will be repaid, and recommended closer supervision by the administration as well as clear standards for recalling loans if a co-op is no longer viable. Just last week, the Louisiana Health Cooperative announced it would cease offering coverage next year, saying it’s “not growing enough to maintain a healthy future.” About 16,000 people are covered by that co-op.

Wise observers like Dennis the Peasant were predicting that this would happen. But they’re also not cheap:

Separately, the AP used data from the audit to calculate per-enrollee administrative costs for the co-ops in 2014. It ranged from a high of nearly $10,900 per member in Massachusetts to $430 in Kentucky.

Wouldn’t everyone prefer a few rapacious capitalists trying to rape the citizenry for profit than admin costs per scheme member of $10,900 a year? Further, can you actually imagine a for profit company allowing bureaucracy to balloon out to such an extent?

Securitising Britain’s Future: A free market solution to university funding


When the Coalition Government increased tuition fees from £3,300 to £9,000 a year, it had done so to provide a sustainable alternative that would boost university’s incomes and cut government spending. But there are reasons to believe this has failed. The Guardian reported that the new funding system is likely to cost the government not less, but more money than the system it replaced. It is time to reevaluate university funding, and I propose the following alternative: a system under which students would agree to ‘sell’ a percentage of their future income to their university in exchange for an education.

Under the current system moral hazard occurs since the universities need not worry about its students’ ability to repay their loans. Instead, the government will bear the costs if students default. This is a problem in desperate need of addressing especially considering that an estimated 73% of graduates will not be able to fully repay their loans.

Under the proposed system in which universities own the income rights to students’ future earnings, the incentive structure would be changed as to align the interests of students, universities and society alike. Universities will factor in how much their education will benefit their students in terms of their future earnings. This allows relative prices to convey how much certain professions are, in fact, valued by society. The university would encourage more students to take up careers that are more valued and it could charge less (in terms of percentage points) for the degrees with better prospects than those with worse.

By contrast, universities today charge uniform rates and have an incentive to provide the most appealing courses – which often mean courses that are enjoyable or easy – rather than being actually useful or valuable. The graduates may therefore lack the skills to be productive members of the workforce, despite accumulating large debts. Universities even have an incentive to admit students it knows will not benefit from the course since it will nonetheless receive government funding.

In turn, universities could sell its future income rights through a process of ‘securitisation’, per course or as a diversified portfolio. This free-market solution provides an equitable opportunity to all, since students’ ability to attend university is not depended upon current wealth but future earnings; thus depended upon skill and merit, not money. This system would streamline all stakeholders’ interests and ‘securitise’ Britain’s free and prosperous future.

Tamay is the runner-up in the 18-21 category of the ASI’s ‘Young Writer on Liberty’ competition.