Sadly, all too many don't understand business rates

Business rates are not perfect as they rely upon the rentable value of the building, not the land it is upon. But they are the closest we've got to a good tax, a land value tax. Meaning that if we're going to have a debate about rates and the current revaluation then it would be a good idea if we all understood them:

April’s new business rates will be the final nail in the coffin for many small shops. A re-evaluation means that overall high-street retailers will need to find an estimated extra £125m to pay increased rates (according to business rent and rates specialist CVS). This lumbers the average small shop with an extra £3,663 added to its rates bill and, as I can attest, there aren’t many that are going to be able to pick up their pricing guns with a devil-may-care shrug and get back to work.

No, in anything other than the shortest of terms it will be landlords who pick up £125 million less in rent a year. For rates are incident upon said landlords and their rent, not the occupiers of the premises. We know this very well- those 80s special development areas were free of rates for a time, rents rose as a result.

 If you happen to be trading in a property hot spot (and, indeed, your brilliant business may have contributed to the success of that place, as in Southwold and Port Isaac, areas with notably good independent shops that will be hit by rate hikes), or big brands have arrived and now surround your enterprise, then your valuation goes up and you find yourself catapulted out of the small business relief zone.

Yes, that's the point. There's a limited supply of land in those hot spots, taxing that land is the least distortionary tax that we have. It's a good tax. And note what is being taxed - that the other people around that property are adding value to it.

But the revaluation works for the online retail giants. According to CVS analysis, the nine Amazon distribution centres in England and Wales will be able to knock £148,000 off their property tax liabilities this year (despite annual sales in excess of £6bn). Similarly, fashion retailer Boohoo gets 13% knocked off the bill for its distribution centre in Burnley; so it goes on.

Quite so, this is what we want to happen. There's a limited demand for chi chi shopfronts in Burnley and there's lots of land. Thus we tax the use of low value land more lightly than the use of high value land.

 So the true value of the high street remains undervalued, fiscally and culturally. 

Which is to miss the point so badly it's like watching England try to pass the ball on the weekend. The exact thing which is being taxed is that value of the High Street. Because that's how the tax is calculated, the value that being on the High Street adds to a particular property for use as a retail or any other business use.

And if we're not going to understand these basics about business rates then we're never going to be able to have a reasoned discussion about them, are we?

Shock Horror! as Burmese women employed at legal age on legal wage

Another of those stories telling us how appalling things are in the sweatshops of the world:

Children as young as 14 have been employed to make clothes for some of the most popular names on the UK high street, according to a new report.

New Look, Sports Direct’s Lonsdale brand and H&M have all used factories found to have employed children, after several major brands switched their production to low-cost factories in Myanmar. Workers told investigators that they were paid as little as 13p an hour producing clothes for UK retailers – half the full legal minimum wage.

Labour rights campaigners say that the use of children in factories supplying household names is the result of a “race to the bottom”, as brands chase ever lower labour costs.

This is of course part of the race to the top instead. For, as Paul Krugman, among others, has pointed out this is how that whole thing of industrial development and rising incomes starts out. We've even mentioned this before.

The report itself, if read closely, also tells us that things are not quite as that opening paragraph makes out:

Brands have had some success eliminating child labour from their main supplier factories in recent years, but as wages have risen in countries such as China, companies are increasingly moving production to cheaper markets, including Myanmar, where children can legally be employed for up to four hours a day from the age of 14.

The allegation is that 14 year olds are being employed.

All the factories investigated employed workers below the age of 18.

And the problem is?

Researchers found wages below the full legal minimum at factories supplying Sports Direct, Henri Lloyd, New Look, H&M, Muji, Pierre Cardin and Karrimor (owned by Sports Direct).

The lowest wages of just 13p an hour were found in factories supplying H&M, Karrimor, Muji and Pierre Cardin. The day rate for those workers was £1.06. Myanmar’s labour laws permit factories to pay newer workers at reduced rates.

People of legal age to be working are making wages which it is legal to pay them. Hmm.

Now, do we all wish that incomes in Burma were higher? Sure, we sure do. But it's worth noting that GDP per capita is some $3 a day. And whatever else we might want to talk about we should all realise that average wages across the economy simply cannot be higher than GDP per capita.

So what exactly is the solution here? Again, a close reading of the source article (and Krugman above explains in more detail) tells us what does happen:

The low labour costs in Myanmar have encouraged international brands to switch production from more expensive countries and between 2010 and 2014 exports tripled to £787m. There are now more than 400 factories in the country, employing 350,000 people, 90% of them women.

That's 350,000 people earning more than they would get following a water buffalo through the paddy. Sounds like an excellent idea in fact.

but as wages have risen in countries such as China, 

20 years ago we were hearing exactly the same stories from China. Now we're not. The reason? Because economic development has taken place. And no, it was not because of the various labour rights NGOs, it was simply because we bought the things produced, they became more productive in producing the things we want to buy.

Or as Madsen of this parish repeatedly says, we make poor people in poor countries richer by buying what they make.

None of us are exactly happy at the thought of people living on £2 a day, however much better that might be than the previous choice of being a buffalo soldier. But the question is obviously what do we do about it? The answer being, as Madsen says, we speed that race to the top.

When out looking for clothes, heck, even if not looking for any, check the label. If it says "Made in Burma" buy one, buy three. If we demand more of their production then their wages will rise as has been happening in various places around the world this past 250 years.  We know it works so why not? Spend your money to shape the world to your desires, buy things from poor people and make them rich.

We think this is an awesomely lovely complaint

From George Monbiot:

Alec has claimed that more than 1,000 of its bills are introduced by legislators every year, and one in five of them becomes law. It has been heavily funded by tobacco companies, the oil company Exxon, drug companies and Charles and David Koch – the billionaires who founded the first Tea Party organisations. Pfizer, which funded Bertin’s post at Atlantic Bridge, sits on Alec’s corporate board. Some of the most contentious legislation in recent years, such as state bills lowering the minimum wage, bills granting corporations immunity from prosecution and the “ag-gag” laws – forbidding people to investigate factory farming practices – were developed by Alec.

How terribly naughty, people group together to try to influence the laws that are made, even write draft laws to offer up as to what the law should be.

And do note that a business is just that, a group of people attempting to achieve a task. This is of course entirely different from people grouping together to try to influence the laws that are made, even write draft laws to offer up as to what the law should be:

Lady Worthington was the lead author in the team which drafted the UK's 2008 Climate Change Act. This landmark piece of legislation, which requires the UK to reduce its carbon emissions to a level 80% lower than its emissions in 1990. At the time Worthington was working with Friends of the Earth working on their Big Ask campaign, but was seconded to government to help design the legislation.

Isn't David Cameron a very naughty boy, as George says?

Another funder was the pharmaceutical company Pfizer. It paid for a researcher at Atlantic Bridge called Gabby Bertin. She went on to become David Cameron’s press secretary, and now sits in the House of Lords: Cameron gave her a life peerage in his resignation honours list.

Somehow the two cases are entirely different.


How excellent, so that's climate change dealt with then

Isn't this just wonderful news?

Falling costs of electric vehicles and solar panels could halt worldwide growth in demand for oil and coal by 2020, a new report has suggested.

A scenario that takes into account the latest cost reduction projections for the green technologies, and countries’ pledges to cut emissions, finds that solar power and electric vehicles are “gamechangers” that could leave fossil fuels stranded.

Polluting fuels could lose 10% of market share to solar power and clean cars within a decade, the report by the Grantham Institute at Imperial College London and the Carbon Tracker Initiative found.

As Bjorn Lomborg pointed out two decades ago all that is necessary to avoid the terrors of climate change is that non-fossil fuels become competitive with fossil. As the Ur document of the whole discussion, the Special Report on Emissions Scenarios also pointed out. If our globalised and capitalist society moves away from coal and toward those renewables then we move from the dread A1FI to A1T. The effect of this being, in their own terms, that climate change moves from being a serious problem we must do something about to one that could have been a problem but we've already done something about it.

Do note that this is all within the mainstream of that climate science. Get off coal and onto solar and we're done.

Now, we might want to cavil a little and think that maybe it won't work at night and so on but as we say, this is entirely within the mainstream of standard climate science. Get solar, and or wind, cheap enough and we're really pretty much done. Just sit back and watch as the standard technological and capital replacement cycles move from emitting to non- such energy sources.

And thus we're done.

Oddly, those at the Grantham Institute seem not to realise all of this which is why we need to remind them. As we are. All that we ever needed to do to beat climate change, from those usual and mainstream climate science sources, is get non-fossil power cheap enough. And as their report today says we've done that.

Hurrah, eh?


The European Union might be in for something of a surprise

It is of course entirely possible that the European Union are genuinely expecting this:

Sir Ivan says the European Commission genuinely expects a figure "of the order of 40-60billion euros" for leaving the EU. 

He says senior figures have said Brexit has "exploded a bomb under the multi-annual financial framework" and left a "big hole" in the EU budget.

The bill would most likely include the UK’s share of outstanding pensions liabilities, loan guarantees and spending on UK-based projects.

And they should of course, as we've mentioned before, be met with a certain amount of pushback. For example, loan guarantees are not things which are payable until the loans sour. So they can be left off said table at present. Similarly, future EU spending on UK based projects is not going to happen thus there is no need for us to pay them for that.

However, the large point here is that the EU itself has some capital value. There are parliament buildings (too many of course but still) embassies, office blocks and so on all of which belong to the institution itself. Which we have helped pay for. In fact, as nearly the only country to have consistently been a net contributor to the overall budget we've paid for most of those things.

And as we're cashing out then we'll have that capital value back, thank you very much. Shouldn't lead to the EU having to pay us too much for leaving but it really is most unlikely that the capital value is less than those accruals, isn't it? 

The album dedicated to the works of Adam Smith

It's near a decade now since we here were involved in the statue to Adam Smith in Edinburgh. So wondrous is this that it has now become part of the cover art for a new album. As Paul Walker points out:

"Silent Revolution" by The Benevolent Dictators. The first song from the upcoming album about Adam Smith.

You can listen to the first track here.

Inspired by Book 3, Chapters 2-4 of "An Inquiry into the Natures and Causes of the Wealth of Nations" by Adam Smith 

No, nothing to do with us, not so far as we know. But obviously we're going to feature it, no?

Inquiring minds are interested in how they're going to be inspired by those pages and pages about silver bullion and currency though. Even we find that bit tough going.

So what do we cut to make things better Mr. Chakrabortty?

A claim from Mr. Chakrabortty that government has been hollowed out, that the state just isn't there to save us all when we need it to:

We’re often told that the state and the market have entirely different roles. But meet any number of the people paying the price for Britain’s crash, and you’ll see that they play almost identical parts using similar language and similar bureaucracy. And far from protecting low-paid workers from the depredations of the market, the state wants to hurl more people into it under the pretence that they are shirkers.

None of this fits with how social democrats view the state. Having attended my fair share of Labour and other leftwing political meetings, I know that a staple feature is that some grey-haired man in a jumper will leap up towards the end and launch into a good-hearted defence of the state. Public investment, social security, industrial strategy: all will circle back to the state; all will be met with murmurs of approval.

The sub-head is:

In Britain, after 30 years of hollowing-out, government is now seen as invisible or hostile. And those it no longer helps are facing the awful consequences.

Hmm, can't say we're convinced but let us, for the sake of argument, say that it is.

The thing is, government spending is currently around and about 42% of everything. Outside the disasters of the late 70s, deep recessions like just recently and of course World Wars that's the highest it has been.  

Meaning that one of two things is true. Either there never was a Golden Age when the state stood behind us to catch our falls. Or, alternatively, there was and we now spend the money on things we shouldn't be, leaving none to spend on that crucial service of supporting us in times of woe and dearth.

Let us assume that it is that second, just to stick with Aditya's insistence that there was a time when we had what he desired. We'd be entirely happy to run the slide rule over what government does currently spend upon and come up with recommendations for where it should stop. So as to free up those resources for a proper safety net. 

Why, we might even be able to cut spending enough, and still leave room for that support, to leave more money to fructify in the pockets of the populace. Climate change, the arts, culture, sport, innumerable campaigning NGOs, the EU....the list of things government shouldn't be spending a penny upon is quite long. And we really would quite happily allocate at least some of such savings to the general welfare of those who can cope no other way.

For we're just fine with the idea that there should be a support network so let's stop spending where we shouldn't and redirect to where we should. Including, of course, that fructifying part.


The world is getting better

Although the news seems filled with the crimes, follies and misfortunes of mankind, the data points overwhelmingly to its steady improvement.  More people than ever have access to enough food, better sanitation, & health.  They lead longer, richer, less violent and better educated lives.  Senior Cato Fellow, Johan Norberg, reminds us in “Progress” (Oneworld) of how far we have come.

Consider a ten-year-old girl 200 years ago.  Wherever she had been born, she could not have expected to live longer than around thirty years.  She would have had five to seven siblings, and she would already have seen at least one or two of them die.  The chance that her mother would survive childbirth was smaller than the chance that the present generation will meet their grandparents.
She would have been brought up under conditions we consider unbearable.  Her family would not have had access to clean water or a toilet.  Chances are that they did not even have a latrine; they would have used a ditch or gone behind a tree.  Her surroundings would have been littered with garbage and faeces, contaminating water sources and devastating lives.  Her parents would live in constant fear that she would be taken away by tuberculosis, cholera, smallpox or measles – or starvation.
This little girl would have been stunted, skinny and short, since she lived in a world of chronic undernourishment and recurring famine, where people did not get the energy to grow and function properly.  This would also have halted her brain's proper development.  She would not receive any schooling, and would never learn to read and write.  She would certainly have been put to work at an early age, perhaps as a domestic servant in another family's home.  In any case she would have been blocked from almost all occupations, and would be considered the property of her father, until he married her away, at which point ownership would pass to her husband.  If he beat her or raped her, there was no law banning it…
She lived in a brutal world, where the risk of a violent death was almost three times higher than today.  England had 300 capital offences on the books, and she would see corpses displayed on gibbets.  Torture and slavery were still common.  Peacetime was an intermission between wars.

The progress was achieved by capitalism, not socialism.  It was done by people prepared to forgo present consumption and to invest instead in technologies that increased productivity.  It is one of the most benign things that people have ever done.  It has uplifted the lives of billions, and is still doing so.  Norberg’s reminder is a timely one.

Perhaps you'd like to write a little letter to the House of Commons?

Or more precisely, a little letter to the Culture, Media and Sport Committee? For it looks very like it will be possible to influence our culture by having a little sport with the media.

The background here is all this fake news being sprayed around the place. The committee is going to investigate it:

MPs are launching a parliamentary inquiry into the "growing phenomenon of fake news".

The Culture, Media and Sport Committee said it would investigate concerns about the public being swayed by propaganda and untruths.

The inquiry will examine the sources of fake news, how it is spread and its impact on democracy.

The inquiry starts here. And your opportunity to inform them here. Their first question being:

What is 'fake news'? Where does biased but legitimate commentary shade into propaganda and lies?

Which is an absolutely fascinating question, isn't it? For example, do we have to ban Polly Toynbee, scrub the web of her presence? She has been declaring to all and sundry for more than a decade that property is hardly taxed in Britain. When, in fact, we get a greater portion of our tax revenues from property taxation than any other OECD country. 11% of revenue as opposed to the average 3% in fact. Or there is that remarkable feat of making five errors of fact in one sentence.

Or to be more general about this, people who claim that rising minimum wages do not create unemployment. This is wrong, even the Low Pay Commission says it's wrong, so should we pulp any editions of The Guardian that claim it? 

Or to be more specific again, if Nick Clegg states that Brexit means, under WTO rules, that Britain must charge tariffs to imports, what should we do? Spank him, ban the story, pin a Pinnochio nose on him?

Does fakery get a special carve out if it's politics? And if it doesn't then that really is going to change our media landscape, isn't it? 

So, we think that several, a number of, people should write in asking these sorts of questions. what actually is this fake news that must be rejected. And, as a bonus question perhaps, how is this going to constrain the future public statements of members of the Culture, Sport and Media committee of the House of Commons - to say nothing of making most newspapers in breach of whatever rules there are likely to be?


Conservatives and neo-liberals must not get into bed with fascism

It should go without saying that most of Donald Trump’s campaign promises and the executive orders of his first week in office are illiberal, unconstitutional, and repugnant. Restricting entry for immigrants, refugees, and US residents based on nationality is probably illegal as well as clearly immoral, not to mention pointless and arbitrary. The Wall™ is, of course, a phenomenal waste of money and resources that may be impossible. It is also pointless. Even mooting the idea of bringing back ‘enhanced interrogation techniques’ should be beyond the pale.

Nevertheless, for conservatives and free marketeers in the US and globally, there seem to be some silver linings to the Trump administration. School choice will be a major part of education policy. There’s generic Republican red meat in the form of tax cuts and deregulation. The next Supreme Court pick will likely be an originalist. Expensive, quixotic, and counter-productive foreign interventions may be as dead as the rest of Hillary Clinton’s career. And, from a British perspective, Trump may represent an opportunity for a post-Brexit trade deal.

As such, Congressional Republicans and market friendly governments should look to work with the Trump Whitehouse, and we should be cautiously optimistic for the libertarian-lite elements of the new administration.

To put it mildly, this response to President Trump is myopic, naïve, cowardly, a betrayal of principle and an abdication of responsibility. Being able to repeal Obamacare is not a fair price for a commander in chief that installs white nationalists in the National Security Council. The possibility of a (probably unfavourable and mercantilist-tinged) trade deal is not a good reason to tacitly accept the erosion of the international liberal order.

Trump’s economic agenda is, overwhelmingly, defined by economic nationalism and populism, not economic liberalism and fiscal conservatism. Any proposed tax cuts are unfunded and combined with a possible spending splurge will increase the deficit by $10 trillion. From both a neo-classical and a Keynesian perspective, this is madness. Mooted deregulation focuses on the wrong areas (targeting environmental regulations rather than, say, occupational licensing and zoning laws). Central bank independence is under threat. Self-destructive trade wars are on the cards, and the leader of the Chinese Communist Party has to explain the benefits of free trade to the purported leader of the free world.

The likely results of Trumponomics will be institutionalised rent-seeking and a capricious cronyist policy of picking winners based on the President’s whims. Multi-national companies are investing in preparations for the fall-out from possible Twitter attacks by Trump. Uncompetitive companies and sectors will be protected, subsidised, and given preferential treatment in a hare-brained attempt to reduce the current account deficit and achieve ‘national self-sufficiency’, which is neither possible nor desirable.

There is an existing term for economically illiterate, authoritarian, and ethno-nationalist governments that trample over the rule of law and value instinct and strength over rationality and co-operation. The opportunity to extend Charter Schools should not blind us to this reality.