So why won't luvvies put their money where their mouths are?
One possible answer is that they’re cheap. But we could never say that about Britain’s most distinguished thespians and artists. Of course.
The actual answer is also more interesting:
It’s not the first time that directors have bought the shop window. Quentin Tarantino owns two theatres in LA, including the Vista. And back in 1970, avant-garde maestro Jonas Mekas co-founded the Anthology Film Archives in New York, which is still electrifying the edges of movie culture.
In the UK, some film-makers have had a go. Here in Scotland, for example, Jeremy Thomas, who produced Bernardo Bertolucci’s The Last Emperor and David Cronenberg’s Crash, co-owned Edinburgh’s Cameo Picturehouse for a while, and even Tilda Swinton and I got into the world of projectors and popcorn for a bit with our Brigadoon-like pop-up The Ballerina Ballroom Cinema of Dreams.
But with cinemas struggling or closing in several cities – Bristol, Edinburgh, etc – why haven’t UK-based directors bought some of them?
We’ve already ruled out that obvious answer, they’re cheap. So, what is it?
Then there’s the fact that part of the UK’s cinema circuit isn’t purely a private sector endeavour. Networks such as Picturehouse, Vue, Everyman and Curzon are all showing aesthetically bold movies like The Zone of Interest, but beyond them there are cinemas that receive some public funding – from the BFI via the National Lottery and the Film Audience Network or local councils, for example.
These sums are small and not secure – council funding is particular is disappearing – and to access them cinemas and arts centres often become charities. You can donate to them but not invest because they don’t exist to make a profit. They do specialist seasons and, at their best, film education, so are not purely commercial organisations. The result? The film exhibition scene in many UK cities is broader and richer than equivalent towns and cities in the US.
There’s another way to describe that and it’s “crowding out”.
There are things that people would do, unaided and off their own bat. But which they don’t do if government is already doing them. That is, government action crowds out those private actions.
This idea is hotly contested of course - those in favour of government action on all sorts of things like to stoutly deny that crowding out can ever happen. Government is only ever additional to private efforts, it does not replace. For that argument makes government action look better, bolsters the arguments for government acting. Those less enamoured of bureaucrats like to point up the crowding out effects.
But here we have it from the belly of the beast. The reason luvvies don’t support little cinemas is because government already does it. So, if we stop the taxpayer having to support little cinemas then the luvvies will indeed support them instead. Rather a win/win there for everyone.
It’s also proof perfect that we can shut down the Arts Council entirely and save a £billion a year in the process. For that spending only crowds out what would happen privately anyway.
We mean, sure, we should do that anyway, but nice to have another arrow of an argument in the quiver, no?
No, devolution alone won’t fix poverty in the North East
Poverty in the North East
The North East, as everyone knows, was once a powerhouse of coal mining, shipbuilding, and manufacturing which fuelled the nation’s growth and prosperity. However, the decline of traditional heavy industries, coupled with shifts in global trade patterns and technological advancements, decimated the region's economic foundation.
The repercussions of this industrial decline have been felt far beyond the factory walls, affecting the social fabric of the North East. Unemployment soared, and the ripple effects of job losses exacerbated into poverty and deprivation.
Now 54.6% of all homes in the North East are classed as deprived in one or more of the four dimensions used to measure deprivation in the UK. And the problem with deprivation is that it casts a long shadow. The poverty that the North East grapples with is intergenerational, and very difficult to combat.
The problem with poverty:
This is not complicated. Poverty is bad. Beyond the loss of potentially productive workers due to poor health and education, poverty had wide ranging social and psychological impacts. Not only does mental health suffer under poverty – which then circles back to reduced productivity, but social cohesion is harder to achieve.
But the issue in the North East isn’t in getting people to understand the problems with poverty – it’s in understanding that poverty in the North East is repetitive. It is intergenerational.
What is intergenerational poverty?
Intergenerational poverty occurs when poverty persists from one generation to the next. Children born into deprived circumstances face barriers to accessing essential needs (such as stable housing) and opportunities (such as quality education) which constrains their prospects. In the North East Child Poverty Commission’s most recent report, 35% of babies, children, and young people live in poverty, and 11% in very deep poverty. This helps perpetuate a cycle of poverty and marginalisation.
Material poverty serves as a formidable barrier to upwards mobility. With factors such as a lack of stable housing, an inability to meet fundamental needs and one in ten households in the North East being classed as “food insecure”, harming a child’s growth and future wellbeing.
Educational poverty, characterised by limited educational resources, feeds into lower academic achievement which limits future economic opportunities.
Cultural poverty is a socially sensitive topic, as those referencing it could fall into the trap of blaming the poor for their conditions, but it is a crucial factor. When people face barriers to opportunities for a long time they might start to believe that they can't improve their lives. This feeling of hopelessness feeds into the younger generation by making their dreams feel unattainable and curbing their opportunities.
These are just a few of the many limitations that are passed onto the next generation. The cascading effects of intergenerational poverty only serves to exacerbate inequality over time.
A new approach to fighting poverty:
If, as I think everyone should, you read the NECPC’s report ‘No Time to Wait’, you begin to understand the scale of the problem facing those trying to fight poverty.
The report itself makes for harrowing reading. Reading the words and experiences of those who deal with poverty every second of every day is eye-opening, and the plethora of statistics on the topic is heartbreaking.
Now, if you were part of a charity or organisation actively working to combat poverty on a daily basis, witnessing the potential of bright children being limited by circumstances beyond their control would likely be disheartening. Additionally, observing the limited impact of government policies in addressing these challenges would likely lead to high levels of frustration and disappointment.
Which makes the solution proposed by these organisations understandable.
Devolution, from the point of view of those calling for it, will finally allow these charities and organisations the power to make a real difference and help save the futures of hundreds of thousands of children.
The dangers of devolution:
The hope of the organisations calling for devolution is that giving more power to councils and regional bodies will result in the regional policy they want.
However, expanding devolution by granting councils increased powers and authority could lead to a proliferation of politicians. While many politicians undoubtedly work with commendable intentions, their actions may become influenced not solely by the pursuit of fostering growth. Additional objectives such as securing re-election and upholding a consistently favourable public image may become the main focus of their work.
More bureaucracy and politicians will not lead to the dramatic fall in poverty that these charities and companies desire. Instead, it will gum up the system, hindering the fight against poverty and further constrain the North East.
This is all without mentioning the elephant in the room that in 2004, 77.93% of the North East voted against devolution and a regional assembly.
Alternative solutions:
There are alternative solutions to fighting poverty, rather than devolution.
Local authorities and mayoral offices have an opportunity to collaborate. If the combined authorities of the North East pooled their funding to help finance a cross-sector initiative they could help fight poverty. By engaging charities, schools and even businesses a comprehensive plan to take on poverty from multiple angles can be drawn up. Then, the pooled funding from various local authorities and mayoral offices can be used to properly finance a cross sector comprehensive poverty action plan.
Schools play a crucial role in addressing poverty. By collaborating with local authorities to provide the necessary resources and engaging with the business community, schools can facilitate work-based learning opportunities and mentorship programs that prepare students for the demands of the local economy.
The involvement of charities can significantly enhance the reach and impact of any efforts to fight poverty. Charities in the North East have spent decades fighting poverty, generating a deep understanding of the specific needs of vulnerable people and can provide targeted support and services. By collaborating with local authorities and businesses, charities can access additional resources and expertise to amplify their impact.
The involvement of businesses is essential for sustainable poverty alleviation and economic growth. Businesses can contribute by creating job opportunities, providing training and skills development programs, and investing in local community initiatives.
Ultimately, a cross-sector initiative to tackle poverty in the North East of England can lead to tangible benefits for the region's economy, bolstering the region's competitiveness and attractiveness for investment.
Summary:
Concerns over poverty, its ever-worsening condition and fears that more could become trapped in poverty are sound concerns that should be seeing wider attention and action. But the answer is not more devolution. The answer lies with a comprehensive plan, designed by experts in a cross-sector initiative to allow the North East to grow and flourish, without staying forever supported by the state, or becoming oversaturated with politicians.
Professor Hayek to the white telephone please, Hayek to the white telephone
Steering the UK economy out of the inflationary storm would always require unusual finesse, but the task would be easier if the Bank of England governor had an unemployment number he could trust.
The problem, highlighted by Andrew Bailey in a recent hearing, stems from deeply flawed labour market data from the Office for National Statistics, led by national statistician Sir Ian Diamond.
It’s possible to work merely with management consultancy platitudes - you can only manage what you can measure for example. Which is, in fact, the complaint being made here. The desire is to manage inflation, for that it’s necessary to have the employment numbers and therefore we desire to have those so that we can manage.
We can and should go back a step into theory. Which is that economies are big and complex and therefore we’re simply never going to have those numbers to the level of detail required for that pinpoint management. This is the rock upon which all clever macroeconomic schemes founder. Not only don’t we know, we can’t know.
For example, we really don’t know how many people there are in the country. Observations of, say, sewage volumes (with, admittedly, some heroic assumptions about diet and so on) are rather at odds with any counts of National Insurance numbers or Census counts. Certainly, anyone who tries to insist we know to within better than 5% either way is on very dodgy ground indeed. OK, maybe 3%.
It’s not just this number either. It’s all the numbers we collect have those error bars. Which means that attempting to fine tweak to within those error bars is going to be a nonsense.
Yes, obviously, a 10% fall - or a 5% increase - in recorded GDP is something to take note of, even panic about. Inflation of such sizes and so on. But in that pointillist detail required by the more ambitious macroeconomic management schemes we’re really just out of luck on that information front.
Sad, but there it is. Which does mean that economic management needs to rely upon the things that can be done. Set up the basic systems properly and leave be. Make sure that incentives are good, the rule of law is tolerably enforced, we’ve not a bureaucracy descending upon economic activity like piranhas upon a corpse, taxes are easy and so on. The outcome becomes something not managed, for that’s impossible, but emergent from the correct set up of the system in the first place.
A little bit of news for Mr. Pennycook
We have what might be called a testable proposition here:
When it comes to housing affordability, we really must get away from the over-simplistic notion that ramping up the supply of new housing will fully resolve the affordability crisis affecting many parts of the country.
Harvard University recently had a report out:
Rental markets are rapidly cooling after a period of significant overheating. Rent growth has almost completely stopped, following historically high rent increases in both 2021 and 2022. In the third quarter of 2023, rent growth plummeted for professionally managed apartments to just 0.4 percent, down from 15.3 percent in early 2022, according to RealPage (Figure 1). While rents slowly rose across property classes, the pace of growth was under 1 percent in the third quarter of 2023 for lower- and higher-quality apartments alike.
This abrupt deceleration was geographically widespread, with rents even falling in some markets. In the third quarter of 2023, rents for professionally managed apartments dropped year over year in 32 percent of the 150 markets tracked by RealPage, including many in the West. Just 1 percent of markets posted rent growth of at least 10 percent in the third quarter of 2023, a sharp turnaround from the previous year when rents in half of the markets increased at that rate. While the slowdown is a welcome change for renters, asking rents still remain well above pre-pandemic levels. Some of the deceleration may be explained by the large number of new units that have come online and pushed up vacancy rates. After hitting a pandemic low of 5.6 percent in late 2021, the rental vacancy rate was 6.6 percent in the third quarter of 2023, according to the Housing Vacancy Survey. The rise in vacancies has been even more pronounced in the professionally managed apartment sector. In the third quarter of 2023, 5.5 percent of these units were vacant, above pre-pandemic averages and more than double the all-time low of 2.5 percent set in early 2022. Vacancy rates in this sector rose fastest in the South, reaching 6.3 percent in the first quarter of 2022.
Now that might be over-simplistic, being merely an example of supply and demand (such Econ 101 is just so trite these days) but it seems to work. Build more housing and the price of housing falls. It’s obviously true that some housing is a Veblen Good - we can’t explain Mayfair without that. But housing in general, yes, Econ 101, simplicity, supply and demand, that works.
Build more housing, enough so that the vacancy rate rises, and housing becomes cheaper. Therefore our plan is to do what? Quite, build more housing. Or even, get out of the way so as to allow the people who actually build housing to get on with building more housing.
This appears not to be what some are proposing:
When making a planning decision relating to development arising from an application for planning permission, the making of a development order granting planning permission or an approval pursuant to a development order granting planning permission, a relevant planning authority (as defined in section 85 (interpretation of chapter 1)) must have special regard to the mitigation of, and adaptation to, climate change.
No, that really is from Hansard, something some are seriously trying to put into law. That whether 23B Burnside Drive can be accompanied by the new infill of 23C Burnside Drive must be tested against the climate change impacts. Which, of course, gives every Nimby in the country the opportunity to shriek that a household should remain homeless because Flipper broiling in the fumes of the last ice floe.
This is, to put it mildly, not getting out of the way so that houses can be built and thereby housing be made cheaper. Even if the observation is over-simplistic.
The actual truth about that Econ 101 is that it does work except for the exceptions. Housing, in the general sense, isn’t an exception.
We're glad Polly is finally recognising basic truths
The insistence that rich people won’t move if taxes are increased is, of course, wrong. The question is never whether any, it’s how many taking how much money? However, this is an outbreak of good sense. Finally:
It’s a done deal – just about. Down at the bookies, you can get 14/1 on a Tory majority at the next general election, while betting on Labour to win, the odds are a measly 1/6. If you need any more confirmation that Labour will form the next government, just listen to the clamour of the wealth advisers telling their high net-worth clients that it’s time to pack their Louis Vuittons.
Well, there we have it. People spending their own money (or for the tax types, not spending it) on their own interests according to their own views of the world is proof perfect. Which is, we agree, rather our view of the world.
Most people most of the time do at least attempt to maximise their own utility. They also pay more attention to doing so when it’s their cash - and their benefit - at risk than any other decision making method. Which is why markets work. Also, why - as Polly now finally admits - the market outcome is the correct one. For it is the one that encapsulates the most human thought about what has, is and will happen.
Cool. So, now all we’ve got to do is get more of life subject to those market - own money - decisions and the world will be a better place, right?
Even Polly now agrees.
No, no, you really cannot point to betting markets as being proof of the contention without accepting that more generally about markets.
Market competition for the win then
More people producing things leads to lower prices for consumers - all else being equal of course.
Morrisons has begun matching its prices to Aldi and Lidl as new chief executive Rami Baitiéh mounts a fightback against the German discounters.
The supermarket has pledged to match the price offered by Aldi or Lidl on more than 200 products, offering customers whichever price is lowest. The offer will cover everything from corn flakes and mince to canned tomatoes and baby wipes. Prices will be updated twice a week.
One of the advantages of advancing age is that we’ve seen things happen before. Back a quarter century the big worry about British supermarkets was the uncompetitive nature of the industry. Net margins were up at 6% and the like of turnover - vastly high by international standards. Reports were written identifying triangular areas that one or t’other of the chains dominated and so on. Not much happened.
Then Aldi and Lidl arrived. A different method of retailing, a smaller number of stock lines, different positioning, lower prices. At which point that competition started to eat the market - net margins for the industry are now in the 2 to 3% range. For everyone has had to do, these recent decades, what Morrisons is now doing. Cut prices to consumers to combat said competition.
Those German and Austrian billionaire families which own those two insurgent chains have not done this for our interest. They’ve done it to amass those billionaire fortunes. But the effect has been to lower food prices for all of us. The capitalists competing for our custom is what produces that benefit to us.
Sure, there are alternative ways of attempting to gain this result of an increase in consumer living standards. Venezuela famously decided that the President knew what things should cost and therefore everything should cost what the President said. The result was not an increase in living standards, rather the vanishing of everything from the marketplace.
The standard example in the economic literature of this effect is indeed about the butcher and the baker, it’s not their benevolence that feeds us, it’s their regard for their own self-interest. The particular issue here being that free part of free markets. Which means that people are free to enter the market if they wish - which they have done and to our collective benefit.
Free market competition for the win then.
Markets are forward looking, d'ye see?
No, we are not about to make a claim about the revenue from any changes in the non-dom taxation system. We are though going to insist on how the effects of any changes should be measured:
Labour’s plans for a £2bn tax raid on non-doms are already putting off wealthy foreigners from coming to Britain, international lawyers have warned.
Tax lawyers working with billionaires and multi-millionaires have already noticed a “substantial” drop in interest from overseas clients in coming to the UK, according to Withers.
Labour has long warned that it plans to change the scheme, which allows foreigners to live in the UK without paying tax on their overseas income for up to 15 years.
The party, which is 20 points ahead in the polls, initially said it would abolish the non-dom tax status. However, shadow business secretary Jonathan Reynolds earlier this week suggested Labour would instead “modernise” it and make it less generous.
As we say, we’re not about to insist on any particular fiscal outcome from these changes. We have our suspicions of course - expectations even - about lower overall revenue but those aren’t proofs.
What we do want to insist upon though is how any effects need to be measured once the deed is done. For, as we can see, markets are forward looking. People are making decisions now on what they expect to happen in the future. Thus those expectations of future changes move the reaction back in time to now. So, when measuring the effects of the changes we do not - both should and cannot - start from the time of the actual changes themselves. Rather, we must start from when those changes became likely and therefore affected behaviour.
That is, any calculations of the yield from changes in non-dom taxation need to start a year or two back from today, not from when those changes are actually enacted, nor the tax year in which they first apply. Not because of anything that’s either good or bad about changes in non-dom taxation. But because that’s the only way we’ll be able to measure the effects of those changes upon revenue.
So, stop having government targets then
Some issues really are Simples:
Family meals have become far more fattening since the Government set targets to reduce their calorie content.
The Government has been urging restaurants, supermarkets and manufacturers to cut calories from their foods, either by reformulating them or cutting portion size.
But an official report by the Office for Health Improvement and Disparities shows Britons are consuming more calories than ever in meals and snacks.
The data show family meals now contain 10 per cent more calories per 100g than they did when the programme began recording measurements in 2017.
The volume of calorific food being consumed also rose significantly, partly fuelled by the rise of snacking and takeaways during the pandemic.
The figures show shoppers consumed 25.3 per cent more calories from crisps and snacks in 2021 than in 2017.
If government targets for lowering calorie counts in fact lead to higher calorie counts then the answer is to stop having government targets for calorie counts.
Simples.
This is not just a gotcha, nor an arf arf. It’s a serious point. We have had other examples of the contrariness of us humans out here. Calorie counts on menus have led to at least some people deciding to get more bang for their buck. If this meal is 800 calories, this one is 1,100, they’re both the same price, why not have the one with more calories? Food energy is, after all, one of the things that we eat in order to gain access to. So, thanks very much for the calorie counts on menus, I can now see which is the best bargain on that menu. I’ll have the Fatburger with large fries, thanks.
Micromanagement of us, the people, at this sort of level simply isn’t ever going to work. So, don’t do it.
The Dr Seuss problem in public spending plans
If we had some eggs we could have ham and eggs for breakfast, if we had some ham.
Or, the fallacy of the unwarranted assumption:
In a report setting out the case for a vast expansion of GB Energy in the early years of a Labour government, Common Wealth said state-led investment in clean energy would be substantially cheaper than the private sector equivalent – helping to save households money on their bills.
It said renewable investment financed out of Labour’s initial £8.3bn capitalisation would save between £125m and £208m a year on debt interest costs each year – saving up to £1bn in total compared with private-sector borrowing, which is typically more expensive.
Business Green, the media outlet of choice for the subsidy suckers, agrees. Obviously.
It is true that the interest rate on public debt is lower than that on private. For the obvious reason that if the project is mismanaged, or goes over budget, or goes kablooie, or just generally doesn’t work out well then the taxpayers are on the hook for repayment, not the cashflows of the project that has been mismanaged, gone over budget, banged kablooie or just generally doesn’t work out well.
We’ve a transfer of risk that is - for nothing is actually free in financial markets.
OK. But what’s the assumption there that leads to the claimed lower bills? That the public management of the project will lead to the same risk, compared to private sector management, of the project being mismanaged, going over budget, exploding kablooie or just generally not working out.
This from the people who have given us the Scottish ferries - where they managed to bankrupt their own shipyard building the things - and HS2 and Sizewell and, well, you get the picture*. We might even think that similarity of outcome, of risk, might be an unwarranted assumption.
Building things with public money would be cheaper if building things with public money were cheaper. Well, yes, but Dr. Seuss was right you know.
*We particularly relish the national planning system for housing land which produces a shortage of land for housing despite 98% of the country not being used as land for housing.
Why would we want to win this climate change competition?
This looks like good news:
All those stories foretelling a shortage of critical minerals seemed to assume that miners sit on their hands and that technology is static. The greater likelihood is a glut.
There are already as many solar panel factories as could possibly be needed this decade. Hence the drastic deflation in solar prices. Panels are today being flogged in the Global South at $120 per kWp, tantamount to free power. Try selling them a new coal plant without a bribe.
Well, yes, we’ve been known to push that likelihood of a minerals glut ourselves. Lithium mines are already on care and maintenance basis as prices are so low (Core Lithium for example) and cobalt mines aren’t opening on that same price basis (Jervois).
We’ve also been known to mutter over the decades that if solar gets cheap enough then the problem becomes solved. Yes, intermittency is still a problem but if electricity is cheap enough - with a lot of emphasis on enough - then all those dreams of batteries, of hydrogen from electrolysis to fuel cells, or Fisher Tropsch up to petrol and so on, become economically possible. Now, which might win out, even whether any will, we don’t pretend to want to plan. We’re of the market school, recall? Let people try everything and we’ll all do more of what works once it has been shown to work.
However, there’s also this:
The West has woken up to the technology threat from China, pulling slightly ahead last year with combined capex spending of $718bn on clean tech and the mineral supply chain. Clean capex rose 38pc in Europe, reaching $341bn in the EU and to $74bn in the UK – more than France ($56bn), or Italy ($30bn), which might surprise some.
“It is simply a technology battle at this point. There are three key races in clean tech and China is winning all of them,” said Kingsmill Bond from the Rocky Mountain Institute.
“The US and Europe are massively behind but last year was the year they got back into the game. There is an exponential growth story taking place across the leading regions and sectors of the world,” he said.
We’re not understanding this “technology threat”.
Those folks who have invested massively in solar factories are having to slash their prices because so many people entered that race. So, they’re all losing money on those slashed prices. Why would this be a race we’d want to enter? The competition to see who can lose the most money through industrial overcapacity?
We also can’t see it as a threat. Someone is now willing to sell us stuff below the cost of production? Sounds good to us, will they sell us two d’ye think?
What is this technological race and why do we want to lose money entering it?