Joyous, another global plan written by the entirely clueless
The Guardian tells us of something called The Shift. An international plan for how housing must be dealt with:
Here’s how rocketing rents and unaffordable house prices can be fixed
Leilani Farha
Well, we have ideas about that too.
We have the chance to guarantee the human right to housing – rather than a real-life game of Monopoly. We must take it
Human rights law isn’t the way we’d do it though. The full proposals are here. Including this one which we think is remarkable. So, remark we will:
1. States must ensure investors in residential real estate comply with human rights by
ii. requiring a human rights impact assessment be carried out by parties prior to a purchase of property or its sale or by the owner before upgrades and renovations are undertaken. These assessments must be made available to all residents and where negative human rights outcomes are indicated, tenants must have access to recourse mechanisms;
A human rights assessment is required before the landlord comes around to paint the place. Note that it’s not if he doesn’t - but if he does.
The rest of it is at about that level of silliness too. But underlying the foolishness is a grand and terrible mistake. It’s all about how the current stock of housing is to be regulated. There is nothing that we’ve seen in there about how the stock of housing should be changed. Which is, as they say, problematic, for the way for tenants to gain power over landlords is not thorough bureaucracy but supply. If there is housing demand of x and housing units up for rent of x plus 1 then tenants have power over landlords. So, the task is to increase the amount of rental housing - all housing in fact - available so as to put power in the hands of the consumer, not the producer.
Or, more simply, the assumption is made that housing is a zero sum game, that there’s some fixed amount and we must manage relations within that limit. Nonsense, entire ludicrosity. It’s entirely possible to change the supply of housing and thus relations within that market. And increasing that supply tips those relations further toward the renter and away from the landlord.
The proof is The Shift Directives, which I am launching today in the European parliament. These are the world’s first set of international recommendations that challenge the financialisation of housing head on, using human rights standards to lead the way forward. Drafted in consultation with leading experts, the directives guide governments and investors on timely issues such as short-term rental platforms like Airbnb, student housing, the banking sector, and “renovictions” – the process of renovating a property in order to raise the rent.
Among those leading experts apparently not one single one who can even recognise a market, let alone grasp subtleties like supply and demand. Which, when discussing the housing market would seem to be a bit of a handicap.
Abject piffle but no doubt there will be some who attempt to push it forward.
As we've been saying for some time
Lionel Shriver reports on what people believe against what is true:
In part I, I speculated that most Britons would overestimate the size of the UK’s black population (according to the Office for National Statistics, about 3 per cent). I was right. Respondents hazarded that 20 per cent of the UK was black — a proportion seven times greater than reality. (One in nine respondents thought 30 per cent of the UK was black; they were wrong by an order of magnitude.) As for Muslims, Brits’ median guess was 15 per cent of the adult population (true: 4 per cent). For Asian adults, Brits went for 17 per cent (true: 7 per cent). Add these figures up (52 per cent), and Britons hazily perceive that more than half the adult population comprises ethnic or racial minorities. The correct proportion is 13 per cent.
As we’ve pointed out several times mass immigration is a recent thing in these isles, meaning that the non-white population veers markedly younger than the indigenes. At the 2011 census, for example, the non-white share of the population among the over-80s was 4% or so, markedly different from that of the population as a whole and even more so of the youngest cohorts.
This is not to say that immigration either matters or does not. Rather, to point out that those shouting about the under-representation of certain groups at the top of society aren’t in fact comparing like population with like. The leaders in near all fields (perhaps pop music and sport apart) are drawn from those rich in maturity and years - at least we generally hope so. So the correct comparator is the population mix in the age cohort, not that of the society as a whole.
Similarly:
But Brits’ estimate of how many compatriots earn more than £100,000 a year — 20 per cent — is crazily high (true: 3 per cent). Britons also imagine that 5 per cent of their fellows make more than £1 million a year (true: 0.04 per cent, statistically zero), a misapprehension probably borne less from optimism than resentment. Alas, the number of rich folks who can be squeezed to finance free everything for the rest of us is disturbingly wee.
The reason we can’t just tax the rich to provide everything nice is that there aren’t that many rich people and in aggregate they’ve not got that much money to be taxed - certainly not enough to pay the bills that some would pile up.
That is, much about the world makes much more sense if you’ve a reasonable idea of what the world actually is. Reality, we hope knowledge of it inveigles itself into modern politics. Well, we can hope, can’t we?
But we all want the benefits bill to be zero
Jonn Harris presents us with what is meant to be incontrovertible evidence that there’s something wrong with the current polity:
Welfare policy was driven by austerity, which was so drastic that an estimated £37bn was cut from benefits spending between 2010 and 2021.
Spending on benefits is lower. That’s just proof that there’s something wrong, a decade of Tory austerity, etc etc.
Except a lower benefits bill is proof of no such thing. For we all desire that the benefits bill be zero, precisely and exactly zero. Where folk might differ is the reason for it being zero.
Imagine a world in which no one needed benefits. Well paid and fulfilling work was available to all, no one had any problems that prevented them from doing such work (yes, we know, fantasy, but bear with us for the purpose of the argument). This would be a wondrous world and one in which the benefits bill would righteously and gloriously be zero.
It’s also possible to posit one in which we just leave the poor dying in the streets as if this were the Georgian Era come back to haunt us. That would not be a wondrous nor glorious reason for a benefits bill of zero.
But both situations would mean that zero bill. Meaning that we cannot take as provative that a reduction in the benefits bill is a bad thing. It could be that the need for benefits has declined.
As, you know, it might have done since 2010. Back when the unemployment rate was nudging 8% and today it’s under 4%.
Please note that we are not insisting here that the benefits bill is the right size now, or was then, or that either were wrong. We’re commenting merely upon the logic being deployed. It simply is not true that we can just point to the amount of money being spent upon a problem and start shouting that if it has declined then something is wrong. For it is indeed possible that problems actually get solved and therefore need less money spent upon them.
The why of the declining bill is the important point, not the size of it.
Congratulations to the EU - sanctions on the most fungible oil
Yes, yes, we know, something must be done and something must be seen to be done. It’s just that deliberately crafting sanctions so as to only impact the most fungible part of the supply is more than a little odd. Ineffective even - even if it does mean that something is being seen to be done:
EU bans majority of Russian oil imports
Huzzah, we are saved - or Europe is and can hold its head up among the community of nations again. Except for the little details of course:
Since the invasion of Ukraine on February 24 the EU’s 27 member states have paid Russia a total of €56.5 billion for energy, providing vital revenue for Putin’s war machine. The lion’s share, almost €30 billion, is accounted for by crude oil supplies.
To cut off the cash to Russia, the EU had planned to ban all oil imports by the end of this year but the talks have stalled over the impact of shutting off pipeline oil to landlocked countries and fears of soaring crude prices.
The compromise plan, agreed at a dinner last night, will exempt imports delivered by pipeline.
The row pivots on the Soviet-era Druzhba, or “friendship”, pipeline which brings oil from Siberia to eastern Germany, Poland, Slovakia, Hungary, Slovenia and the Czech Republic.
Ah. Ship bourne oil can be moved anywhere in the world - adaptable things, ships. So, what will happen is that the EU will get its oil notfromRussia. The Russian oil will now flow to whoever would originally have bought the notfromRussia oil but now can’t have it because the EU does.
The end effect here - as it always will be with something as fungible as oil - is not very much. Russia will make around and about the same income from oil exports, the world will consume around and about the same amount of Russian oil, it’ll just be a few tanker crews away from home for longer.
Of course, the oil coming by pipeline is not fungible in anything like the same sense. So restricting pipeline access to the EU market really would reduce Russian oil revenues (and produce the odd problem within the EU too). Which is what wasn’t done.
So, the sanctions are on the most fungible, “redirectable”, part of the oil flow and nothing is to be done about the part that might have had a significant effect. But something was seen to be done and that’s the important part of politics, isn’t it.
The End of End-to-End Encryption
WhatsApp, the instant messaging service with more than 1.3 billion users worldwide, uses end-to-end encryption as a security feature. When you send a message, the content or data in it is encrypted, which means it is turned into an unreadable code that can only be mathematically deciphered by those who have the secret key. End-to-end encryption provides the strongest level of trust and security as only the sender and the recipient have the key, so even the owner or programmer who designed WhatApp cannot read the messages. If your message is intercepted by a third party, the message will remain illegible gibberish. Modern encryption is tough to break because the number of possible keys far exceeds the number of guesses that even today’s fastest computers can make in a reasonable time. It is a cheap, safe and secure method of data protection. Hence, Whatsapp users can, at least for now, be reassured that only the intended recipients can read the messages. The same goes for many other services, such as Zoom, Microsoft Teams and FaceTime.
Unfortunately, the Online Safety Bill, which has already passed its second reading in the House of Commons will force companies to compromise on these security features.
Although the original intent of the Bill, which promises to prevent users from being exposed to harmful content such as terroism and child abuse, is a noble one, the Bill has wide-ranging implications on security features like end-to-end encryption.
Clause 103(2) of the draft legislation allows the Office of Communication (OFCOM) to issue a notice requiring service providers to use ‘accredited technology’ to identify child abuse content, whether communicated publicly or privately. Clause 92(4) then makes it an offence for the provider to give ‘information which is encrypted such that it is not possible for OFCOM to understand it, or produces a document which is encrypted such that it is not possible for OFCOM to understand the information it contains’. Schedule 12 of the Bill further stipulates that failure to comply can lead to fines of up to £18 million or 10% of global revenue.
The regulatory framework and the penalties will necessitate companies to weaken encryption in order to intercept communications and avoid violating the duty of care placed on them. Lawmakers have claimed that the Bill does not remove the end-to-end encryption as it simply requires companies to install ‘encryption backdoors’ to allow ‘exceptional access’ to law enforcement agencies. This is however technologically impossible, as end-to-end encryption by definition does not allow third parties to hold the key to encryption.
It is easy to miscategorise the issue as a classic dilemma between privacy and security, but the truth is that the Bill promotes neither. There is not a backdoor that will only let the ‘good guys’ in. Creating a backdoor for law enforcement will also create an opening for criminals and hostile actors to exploit. In 2015, Juniper Network Inc. discovered an unauthorised code in their firewall ScreenOS that allowed hackers to decipher encrypted information to gain access to the network of their customers. A probe into the cause suggested that there was an intentional flaw in the encryption algorithm Dual_EC, which was deliberately designed to include a backdoor enabling the US National Spy Agency to eavesdrop on overseas clients of Juniper. The opening has rendered the system vulnerable to cyberattacks. The lesson to learn from this incident is that any backdoor in the encryption algorithm is a security risk.
Adding to security risk is the extremely broad discretionary power given to the Secretary of State. The government might assure the public that email services, at least for now, are exempted from the Bill. However, clause 174(9) empowers the Secretary of State to add or remove services from the exemption list, so the scope of the legislation might broaden in the future. This will create a chilling effect; service providers who are currently exempted might opt to weaken encryption to conform to the potential effect of the Bill in the future.
The Government promised that the Online Safety Bill would deliver their manifesto commitment to make the UK the ‘safest place in the world to be online’; but in actuality the legislation undermines both privacy and security, leaving individuals and companies vulnerable to data leakage. By compelling the removal of end-to-end encryption, the Bill effectively spells the end of private conversation. As UN Special Rapporteur on freedom of expression David Kaye said, ‘national laws should recognize that individuals are free to protect the privacy of their digital communications by using encryption technology’. The Online Safety Bill in its current form does not promote safety. It needs to be re-drafted to be compatible with end-to-end encryption.
Theodore Ka Fai Fung is an intern at Adam Smith Institute. Currently a law student at King’s College London, he is a strong advocate for holding the government accountable. Throughout his internship, he researched into the impact of the Online Safety Bill on encryption, as well as the effect of the electronic monitoring of protestors proposed in the Public Order Bill on civil liberties.
The basic economic structure is really quite important
Leave aside the details for a moment. Sanctions, busting of them, all of that. We’d also not try to claim that current day Russia is some laissez faire paradise. We can though still make a useful point about the really basic economic structure:
Pakistan is set to import two million metric tonnes (MT) of wheat from Russia with cash payment
Russia is a wheat exporter. Which is a startling change from earlier decades of course. When one of the grand obsessions of the international food trade was where is the Soviet Union going to import its wheat from?
Again, we do not claim that Russia is currently a free market paradise. Nor do we think that Tsarist Russia was one of those either. And yet both Tsarist Russia and the current day one are major gain exporters. The Soviet Union was a major grain importer.
The Soviet Union also had a thoroughly planned and scientifically underpinned food production system with no even hint of any market influences. So much for planned food production systems without either market prices or market incentives.
As varied types wibble about how government must do more to plan and support British farming that’s a lesson that’s well worth recalling.
No?
The TaxPayers' Alliance is correct
As so often, the TaxPayers’ Alliance has correctly analyzed what the government should be doing to redress the cost-of-living crisis. Instead of the Rishi Sunak largesse of handing out sacks of money that will ultimately have to be funded by taxpayers, he should, say the TPA, refrain from taking their money in the first place, but leaving it in their pockets instead.
The TPA’s three-point plan calls for the proposed income tax cut to be brought forward, the National Insurance increase to be scrapped, and for the green levies on energy bills to be abolished. It’s a bold initiative that would put into people’s pockets some of the money they would otherwise have to hand over to the Treasury. The government itself is a huge cause of the cost-of-living crisis. Its tax burden, the highest since the postwar Labour government of Clement Attlee, is not only making people poorer, it is also holding back the economic recovery the UK needs to make us all richer.
As John O’Connell, the TPA‘s Chief Executive puts it:
"Lower taxes boost the economy, letting people spend where they see fit. You can’t tax your way to higher growth, and you can’t spend your way out of an inflation crisis."
The UK Treasury seems to think otherwise, increasing taxes that will hold back growth when they should be promoting it, and responding to inflation by increasing spending. What the government should be doing is cutting spending by examining what each department does, and cutting back on the non-essentials and low priorities. If they cut spending, they can reduce the burden of taxation.
Chancellor Rishi Sunak is bidding for Gordon Brown’s title of a high tax, big spending Chancellor and, like Gordon Brown, has saddled the public with stealth taxes that many do not realize they are paying.
There is a mindset in the Treasury that thinks they can micro-manage the economy. They cannot, because the economy is not a thing that can be tweaked and twiddled to produce a sought-after outcome. It is a process, one that sees zillions on inputs interacting with each other, and producing an outcome that reflects the real world rather than some elegant model of it.
The TPA’s recommendations are ones that would set free more of the real-world economy to achieve more of the growth that the country badly needs. This is something the ASI supports and is making its own contributions towards.
It's the economic ignorance that's so painful
We seem to be approaching an Online Sales Tax. The arguments in favour of which are based on an entire ignorance of the difference between business rates and such a sales tax. Rates are a tax upon landlords. Sales taxes are a tax upon consumers. Why would we want to switch our tax collections from landlords to consumers? This doesn’t work in any moral sense and it also doesn’t work in basic theory - we desire to tax where supply is most inelastic and therefore deadweights are lowest. There’s really nothing less elastic in supply than land.
But we seem to be getting there:
The companies’ intervention follows the close of a three-month consultation on the measure, which the Treasury has said could be used to overcome an “imbalance” between tax levied on retailers online and those in high streets, by funding business rates cuts.
The Treasury states that the consultation was “exploratory” and that it has not yet made a decision on whether to introduce an online sales tax (OST).
Even the basic consideration there is wrong. Rates are not upon retailers, nor is a sales tax.
That rates are a tax upon landlords is well established. We have pointed it out before here. This is something so well established that even Demos, of all people, manage to get it right:
The economic theory suggests that the burden of business rates and commercial rents on high street businesses is relatively fixed in the long run. This is because any cut in rates leads to an increase in demand for commercial space, as it becomes more attractive and affordable to retailers. In the long-term, this higher demand means that commercial landlords are able to charge higher prices for this commercial space - i.e. an increase in rents. As a result, the long-term effect of any cut in rates is negligible for tenants, as landlords raise rents in response to any reduction in the burden of business rates.
Crucially, the theory appears to be borne out in reality too. For example, Bond et al examined the impact of changes to business rates on 3000 commercial premises in the UK. This research found that: “increases in non-domestic rates put downward pressure on rents, whilst decreases in non-domestic rates put upward pressure on rents.” In other words, the cut in business rates led to higher demand for commercial premises, meaning that landlords raised the prices (i.e. rents) paid by tenants. The empirical evidence appears to match the theory.
So, who is it that doesn’t grasp this?
However, we will continue to consider the arguments for and against an Online Sales Tax which, if introduced, would raise revenue to fund business rates reductions.
That’s the Chancellor, in a Treasury publication. Who both clearly do not understand the above. Rates are a tax upon landlords, sales taxes are a tax upon consumers. Why would we wish to increase the taxation upon consumers in order to provide tax breaks for landlords?
In the absence of some grandly nefarious plan by landlords the only reason we can think of is that the people who are designing our tax system are ignorant of tax systems. Which is a profoundly painful thing to contemplate.
Folk become billionaires by providing needs, do they? Well we never....
There’s much to laugh at here from the Progressive Economy Forum. The insistence that high fuel prices must be battled when it’s been public policy to increase the relative price of fossil fuels as against renewables for decades now just as one example. The calling into the conversation of the horrors of economic rents when the major earners of said rents are - righteously - governments on such fossil fuels.
This amuses:
The Competition and Markets Authority last week reported that “mark ups” on prices, the amount added to the costs of something being sold in order to give the seller a profit, by the biggest and most profitable companies have risen from 58% in 2008 to 82% in 2020.
Mark up and gross profit are intimately related. Gross profit being revenues minus the cost of goods sold - and before the payment of wages. So, the result of mark ups rising is that more of the revenue from sales is going to the workers in wages. And progressives are complaining about this?
But our favourite chuckle generator here is this:
As Oxfam’s research showed this week, the pandemic and its aftermath have seen the world’s super-rich become monstrously richer. And it is the owners of the essentials of modern life – in food, energy, pharmaceuticals and tech – that have seen the fastest growth in their wealth, with a new billionaire created every 30 hours.
Isn’t that marvellous? The inventors and producers of new foods - meatless meat perhaps - fracking, vaccines and smartphones get gloriously rich. Even as 97% of the benefits of the technologies flow to us, the consumers. This putting us everyday folk on the right end of the greatest bargain in history. Sure, the guys at Google have a fleet of jets, one estimate has the value of search and email to each consumer at $18,000 a year. Multiply that out by a few billion consumers and who cares how rich the innovators are, it’s us out here making out like bandits.
People become billionaires by providing what folk desire do they? And this is being used as a critique of the one and only economic system that has ever made the average guy and or gal rich, is it?
James Meadway is director of the Progressive Economy Forum
We’d have to grade this as F -. See us after class. For free market capitalism sure ain’t perfect but this essay manages to miss the very point of it.
As we've been saying, stranded carbon assets aren't a problem
For some time now we’ve been pointing out that the worries over stranded carbon assets are overblown. This idea that all those oil rigs and fields and pumps and so on will become worthless and so the globe will face some enormous financial shock as we go green. The reason it’s overblown is that the idea fails to take note of the base climate change problem itself - discount rates.
As the Stern Review went to great pains (hundreds of pages in fact) to point out, the base problem is that we humans value the far future through the lens of market interest rates. As these are up in the 5 to 7% range this means that things which happen 50 years out are of near no net present value. That’s why Stern insists that claimte change must be evaluated using a much lower discount rate.
Assuming that all of this is true then that means that the net present value of those fossil fuel assets out in that future must be somewhere near spit. Therefore even if the value does collapse it will be from not very much to that near nothing. It’s not a problem.
The Guardian reports on a paper which makes exactly the right calculation on this. It being The Guardian of course it gets the conclusion of the paper wrong but there we are, that’s The G for us.
People in US and UK face huge financial hit if fossil fuels lose value, study shows
Strong climate action could wipe $756bn from individuals’ pension funds and other investments in rich countries
It’s the word “huge” there which is wrong.
It’s possible to quibble a bit about the assumptions made in the paper.
Our focus is on the medium realignment, in which the baseline scenario follows IEA’s WEO 2019 current policies scenario, consistent with 3.5 °C median warming in the 21st century.
That’s too high as a baseline, current policy is already well below that. But that’s the assumption they make and the paper still proves that this just isn’t a problem. The reason is this:
We discount differences in expected profits by 6% y−1
OK, we’ve introduced something akin to, close to, market interest rates. We are discounting those future values by the right number that is. The result is:
Overall, the study calculated that individuals own 54% of the $1.4tn oil and gas assets at risk – $756bn.
Global wealth is around the $500 trillion mark. Thereabouts, right sort of order of magnitude at least. The losses therefore look like 0.15% of asset value. That’s the sort of thing the global economy can take in its stride.
The countries hit hardest by losses in the financial sector would be the US, with $283bn at risk, and the UK ($98bn),
American wealth is around $140 trillion at present. UK household wealth some £14 trillion or so. Even if we take off property values the pensions and financial wealth (the paper worries that some substantial part of such losses will be to pension funds) we’re still at about £6 trillion. So, even if doom were to come to pass we’re talking about 1.6% or so of the financial wealth of the UK as a result of the entire collapse of the value of those fossil fuel assets.
Financial markets can vary by such percentages over the course of a week - heck, on exciting days, in mere hours.
That is, by taking the argument seriously, we can see that it’s not in fact a problem. Stranded fossil fuel assets, even if it does in fact all work out like they say it could, are trivial compared to the wealth of the world, or individual nations, or even the British people.
Great, so that’s another thing we don’t have to worry about then. As we’ve been pointing out for some time now.