Taking a glimpse at the Rothschild Bank

Emmanuel Macron is the youngest President France has ever seen, stamping his name into the fabric of political history. Although he is considered by many in France as the best of a bad bunch, his victory at the mere age of 39 is undeniably impressive. As a British bystander, taking a loose and yet concentrated interest in Macron’s campaign, I couldn’t help but notice the constant repetition of that same description: “former Rothschild investment banker”. It was as if his association with the Rothschilds was more significant than his time working in a senior position in Mr. Hollande’s staff, or, as Minister for Economy under Manuel Valls.

Having heard some rather far fetched conspiracy theories concerning the Rothschilds’ ability to manipulate global affairs, I thought it would be interesting to have a closer look at the bank’s history and how they operate. For lack of wanting to entertain internet conspiracy – as some would now considering we have a former Rothschild banker as French President – I have steered clear of any David Icke type sources. Lizard shape shifters aside, the Rothschild story remains an interesting one.

Mayer Rothschild

Originating from Germany, the Rothschilds became a prominent family, establishing banking and finance houses in 18th Century Europe. Mayer Rothschild (1744 – 1812) sent his five sons to live in various capital cities across the continent. When in Frankfurt, Naples, Vienna, Paris, and London they set up individual banking establishments under the Rothschild name. Effectively, the Rothschild bank was the first of its kind to work across international borders. By lending to governments helping to finance war operations the family was able to accumulate bonds and support additional wealth from a vast array of different industries.

In true aristocratic fashion Mayer Rothschild wanted to keep his empire very much within the family. This required a certain amount of inbreeding between cousins. It has been reported that four of Mayer’s granddaughters married grandsons, and one poor girl married her uncle.

Of Mayer’s four sons, Nathan Rothschild (1777-1838) was the biggest success. Based in London, Nathan was the pioneer of international finance. Soon establishing himself as the central bank for Europe. He monopolised Europe’s financial systems brokering for kings, bailing out national banks, and funding the development of infrastructure that sparked the beginning of the industrial revolution. In this time he established the bank we know today as N M Rothschild & Sons Ltd. England’s seventh oldest bank in continuous operation.

Nathan’s major benefactor came when he took an enormous gamble during the period of the Napoleonic Wars. In 1811 N M Rothschild & Sons managed various subsidies that the British government sent to their allies and loaned them the funds they needed to pay their army. Effectively Nathan was single handily financing the British war effort. At the same time, however, unbeknownst to the British, he was also funding Napoleon Bonaparte behind their back.

His gamble came when the war was coming to its crescendo in 1815 with the battle of Waterloo. Nathan’s network of couriers reported the grave losses being faced by Napoleon to the British government. As the information did not come from their own scout the British were sceptical of this report and rejected it as mere fallacy. Instead they were convinced the British were on track to lose the war. Seeing an opportunity, Nathan Rothschild enhanced these rumours and sold all his bonds on the English market in light of the Brits’ apparently grave future. After such a loss British bonds would be plummet in worth. His influence surged a panic in financial England with a mass selling of bonds that quickly resulted in the collapse of the London stock exchange.

Knowing that the British were actually on course to win the war, the Rothschild network began to start buying back British bonds at record-low prices. Two days later Wellington received the news that Napoleon had in fact suffered a crushing defeat. British bonds went back up in price and the Rothschild bank was in complete control of the London stock exchange.

Nathan’s cunning manipulation of two warring factions and the British financial elite paid off in almost immeasurable amounts. As of 2015, the British government was still paying back the money owed to the Rothschild family from the Napoleonic period. That is a lot of debt.

Today, the Rothschild bank is one of the world’s largest independent financial advisory groups specialising in private wealth, asset management, and merchant banking. The family, like many who maintain such a high level of wealth, are involved in charitable pursuits across the globe. Their main office aside from London is based in in Switzerland; the Edmund de Rothschild Group.

There are those that claim the Rothschilds still maintain a monopoly over Western financial markets through their control and ownership of the world’s central banks. These are denounced by any officially trusted financial source with such claims usually being attributed to the anti-Semitic nature of the discussion. For example, Rothschild & Sons reported a net revenue of 423.8 million GBP in 2015 when Morgan Stanley racked up a huge 37.95 billion USD revenue in 2016. The difference here is significant.

The Rothschilds remain an extremely tight knit and yet influential player in the financial game. With only around 2,800 employees their affairs are handled by very few. With such responsibility so thinly spread it is not surprising their work is handled with a serious amount of discretion.

Considering the way they revolutionised international finance the Rothschild family history is remarkably interesting – the even after only having scratched the surface here. Will Macron bring this Rothschild investment style to the French economy with the same success? Only time will tell.

Budget 2017: Social Care Forgotten

“Over a million of our elderly aren’t receiving the care they need and over £6 billion will have been cut from social care budgets by next March. I hope the honourable member begins to understand what it’s like to wait for social care stuck in a hospital bed, or for other people having to give up their work to care for them.”

Intemperate words from Jeremy Corbyn yesterday, bellowing across the dispatch box, in response to a budget that has been greeted with widespread disappointment and which made no mention of social care, despite the continuing crises in the system.

Days before the budget, 90 MPs, over a third of whom are Conservatives, wrote to the Prime Minister demanding cross-party action on social care, telling the PM that “the need for action is greater than ever.” Perhaps the plea did not find its way next door to number 11.

Repeated failures

None of the government’s half-hearted attempts to close the care-funding gap have been successful.

Early this year the Financial Standards Authority criticised the Better Care Fund in the harshest possible terms, saying that it had “failed to meet any of its objectives.” The Local Government Association recently said that the Fund “has lost credibility and is no longer fit for purpose.”

The Social Care Precept enabled local authorities to choose to raise council tax to help fund social care. It has been widely adopted by desperate councils. But because the precept depends on council tax, and therein property values, many decried it as benefiting poorer areas least, ironically those areas where local authority funded care is most necessary.

The chancellor would likely point to the £2 billion ring-fenced for social care in this year’s Spring Budget, to be spent over the next three years, some of which has already been allocated to councils. This, coupled with the Precept has seen social care funding rise by 3% this year, an increase of £556 million, the first year on year increase since 2009/10.

However, as funding is increasing so is demand, and the latter is still outstripping the former. By 2019-20, The King’s Fund estimates that social care will still face a funding gap of £2.5bn, despite these measures to increase funding. With a current average of 5,000 new requests for care every day in England, this is as daunting as it is understandable.

Councils on the brink

Separate research by the Local Government Association predicts that caring for the elderly, other vulnerable adults and children, will consume almost 60p out of every £1 of council tax by 2020, a 41p increase since 2010/11.

The LGA is sounding the alarm that the costs of social care are taking more and more money away from day-to-day services, such as repairing potholes, keeping streetlights on, parks clean and so on. Councils could be forced to ration essential services if the care-funding gap persists.

The way councils raise money is also undergoing a radical change. The largest source of central government funding; the Revenue Support Grant is being phased out. In return, councils will retain more of the money raised through business rates, from 50% in 2015 to a targeted 100% by 2020.

However, the changes to business rate retention were not included in the Queen’s speech, nor cited in the budget statement this week, leaving councils uncertain about how concrete this measure is and how they will be funding services in years to come.

Bigger thinking

Addressing the immediate crises in social care will require additional funding. However, the long-term solution for elderly social care provision in the UK requires deeper thinking. The endless, circular arguments about social care funding are reminiscent of many debates in our country when it comes to social services, where any form of insurance scheme is anathema.

One of the fundamental goods of the NHS is the ability to receive all manner of treatment without any form of point of use payment, this is a social service provided by general taxation, akin to policing, firefighting and national defence.

We could choose to fund social care through central taxation, as we do with the NHS. But can we honestly say with confidence that this would ensure sustainability and drive up outcomes long term? When answering this we should pay attention to the current crises faced by the NHS itself.

When it comes to social care, other options should at least be open to consideration. Our society and ways of life have changed. We all know that we are living longer and unlike in bygone eras, it is rare for elderly relatives to live with their sons and daughters. Because of these deep societal changes and others, we need to think rationally about the best way to fund social care, not with the sole aim of cutting costs, but to improve services, make the system sustainable and a guarantor of dignity and wellbeing in later life.

Another option to fund care services in the future is to move towards an insurance-based model. Take the example of the ultra-liberal, egalitarian Netherlands, where insurance schemes for social care, run by not for profit agencies, are compulsory. However, even systems like those in the Netherlands, which combine compulsory insurance and central taxation, are encountering their own funding shortfalls.

That familiar green glimmer on the horizon

Poor economic performance and the fact that care funding has already been increased – however lacklustre that increase has been – may have led the chancellor to believe he could ignore social care, as so many chancellors and minsters have in the past.

Phillip Hammond’s attitude may have been buoyed by the announcement that the long awaited green paper on care and support for older people will be published by summer 2018. Indeed the timing of the announcement, two days before the budget, was probably a pre-emptive defensive manoeuvre. For some time now, the green paper has been the go-to get out of jail free card for any minister or prime minister facing a grilling on social care.

Hope then, springs eternal. Truly effective policies are what everyone desires from the green paper. Accomplishing the shared goal of improved care, which is sustainable and affordable, will require data driven decisions, original approaches and perhaps just as important; political will and personal courage.

Government “Investing in Small Businesses” is a Farce

A recent press announcement reported that Scottish Enterprise, the main economic development agency funded by the Scottish Government, has £15.2 million investment in Aquamarine, a wave energy company that went bankrupt last year. This follows a £16.3 million investment in Pelamis, another wave energy company, which was biggest write-off in the agency’s 25 year history.

One thing you can guarantee is that if the government has to fund it, it’s not worth funding.

To most people the idea of Government giving grants to small businesses is relatively benign. Why not give the little guy a leg up to compete with the big boys?

Sadly this attitude belies a basic lack of understanding of market forces and the role of the investor on a free market.

The purpose of an investor is to try to predict – from all of the potential projects and producers they can possibly choose from – which ideas are most likely to be successful. Consumers have to make choices over what to buy with their limited resources out of every product available to them, so what they buy is a pretty good indication of what they value. Most consumers are money oriented and always on the lookout to save a dollar.  Small business owners need to apply various trending techniques to engage with their value-oriented customers by offering freebies, after sale services and also by issuing discount vouchers. The huge increase in usage of vouchers has given massive impetus to online shopping.

Managing to guess correctly what people are going to want in the future is no easy feat, and doing it well is providing an invaluable service by limiting waste through overproduction of things people don’t want. Resources go on advancements which people decide, of their free volition, improve their lives.

If an investor chooses wisely then they will receive a more generous a return on their investment, and vice versa. This means that people who make good decisions with financial resources become more wealthy and have more resources to invest in projects, while those who make bad decisions will soon find themselves out of pocket with less capital to squander on wasteful investments. In this way the market has a natural mechanism for allocating resources to good custodians of those resources: people who excel at spotting a good idea.

It’s a beautiful system because the only way investors can grow their wealth is by making it available to the community. If they decide to spend it instead it goes to someone else, if they hide it under a mattress their wealth will stagnate, and if they save it in a bank someone else will lend it out on their behalf.

Government simply does not have “skin in the game” and therefore is likely to allocate money along political lines rather than those which serve the preferences of average individuals.

There remains a prevalent belief that the enlightened self-interest of investors who stand to gain from investing will be insufficient to inspire the rich to part with their money, and so there is a necessary role for Government to step in as an investor. This, in fact, was one of the central doctrines of John Maynard Keynes who believed that markets, left to their own devices, were likely to suffer from a chronic lack of investment as-such because they were inherently unstable, and so there was really no rational basis for making investments in long term projects.

If entrepreneurs who do have “skin in the game” are unwilling to risk their hard-earned pennies on a potential failure then the government certainly has no place playing poker with the hard-earned pounds of the tax payer.

Fundamentally, the idea that small business will always be at the mercy of large conglomerates is largely a left wing myth. Yes, in several ways big business has the advantage – they can buy inputs in bulk for cheaper giving them economies of scale, they can avail themselves of large advertising campaigns, they can (regrettably) lobby the government for special privileges, contracts and unearned advantages, and may have other privileges, but they are at a disadvantage in at least one important respect. The larger a company is the more difficult it is for any one individual or group of individuals to keep a handle on all the relevant information necessary for making good decisions in the interests of the entire body. Large organisations tend to chunk down into smaller bodies of up to 150 people, and then these bodies have to be coordinated from the top down.

Because of this, some areas of the body are likely to be running more inefficiently than others, and changing the protocols of production over a mass scale may be slow, and slower still the larger scale the production is. Picture the relative difficult in changing the course of an oil tanker as opposed to a number of smaller, more agile crafts. Small agile businesses – which may not be able to compete with Goliath competitors as a whole – can still chip away at sections of their markets by being more in touch with consumer preferences on the ground. They can cater to niche preferences with personalised services and superior, custom-made products, while Goliaths produce standardised products for mass consumption. A good selection of Davids and Goliaths will give consumers the best choice. A large company may be in many markets, while a David only needs to monitor a few, and can monitor them with precise clarity owing to the small scale of their operations. A number of Davids can chip away at a Goliath from all angles and even bring him down if he gets too complacent.

Sometimes people worry that large corporations will just buy out successful small businesses to prevent this from ever happening, but even those worries are misplaced. If David has a great product, and Goliath has a large infrastructure and access to larger markets, absorbing David’s product into his company can only help a far greater number of people get access to whatever advancement might otherwise remain a niche product.

All this is not to say that there is nothing government can do to even the playing-field for start-ups. There are many ways the Government can help small businesses compete with large established conglomerates, and in doing so help increase the number and quality of option available to consumers, but these do not involve handing out tax payer money to pet projects. Making it easy for small businesses to hire people without too much (or any) form filling and bureaucracy will save them time and money consulting experts, simplifying the tax code will stop them having to employ expensive accountants, and stripping back the regulatory structure so that rules are intuitive and easy to comply with will save a heap on lawyers. Big businesses can afford to have these employees on staff, small businesses often cannot.

When anyone can start selling and hiring the moment they have an idea for an innovative new business we will soon see a renaissance of people “pulling themselves up by the bootstraps.”

A National Investment Bank? Come off it Corbyn

It seems almost everyone thinks that the Tories have this election in the bag. With the latest ComRes poll giving the Tories 50% of all votes, it’s not hard to see why. But perhaps there is good reason for this. Labour leader, Jeremy Corbyn is not just a friend to controversy, he also seems to flirt with very silly ideas. One of many is the idea of a national investment bank, which he says would enable £500 billion worth of investment in infrastructure and industry. This would allegedly create one million new jobs, which might seem like a nice thing until you remember that unemployment in the UK is now hovering around 5% – the best it has been in a long while.

Corbyn’s idea seems even more preposterous when you also consider the current national debt of 1.6 trillion. But the idea of a National investment bank is not just unnecessary, it is foolish. The track record of the idea is really rather shocking. Tony Benn’s similar National Enterprise board in the 70s threw money at all kinds of wacky things. From British Leyland motors, to British leather, money was spent where it would create no wealth. Meanwhile private industries in the tertiary and quaternary sectors grew and those industries that Benn’s National Enterprise Board tried to protect simply fizzled out.

There is no reason that a rebranded version of Benn’s failed project would do any better. It would just lavish taxpayer’s money on projects run by those with political connections, creating arbitrary jobs in Labour seats. And even if you concede that the National Investment Bank’s job creation is a good thing, the kind of jobs that it aims to create are not going to help the kind of people who need helping. Gone are the days when building roads required hard unskilled labour. The kind of people who are likely to be employed to build infrastructure nowadays are engineers, operators of technical machinery, and other skilled and educated individuals who are unlikely to be unemployed.

A national investment bank has the potential to really hurt private investment too. The enormous amount of borrowed money required to pull it off would mean issuing extra bonds, which in normal times means competing with private firms for investment funds. Private firms would have to pay more to borrow, or re-consider their own investments – meaning less private capital spending on factories, machine tools, training, R&D, and housing. So when the government borrows to fund its own investment, private investment has to fall. Occasionally government investments are worth it, but boondoggles like the Millennium Dome are de rigeur. When even the most switched on venture capitalists find it difficult to pick sound investments, technocrats with no commercial experience are likely to find it impossible. Because of this, the national investment bank is not just unnecessary, but completely unworkable.

Rupees, Pounds, and Pints

As a Brit, I love a good bargain, and a bargain in the Mediterranean sun is better than any other. There I was on a recent trip to Italy seeking such financial relief, only to be left retorting the impotence of my home currency. Political risk in the UK is seeing the pound creep ever lower against the dollar and the euro. The pound is now 0.4 per cent lower against the former and down 0.2 per cent against the latter. What was once a crisply chilled (albeit frothy) cheap beer abroad has become a distant memory. Escaping London prices has never been so difficult. All this has me begging the question: Will we ever get our so very British pound to once again go the proverbial extra kilometre? How should we expect the resurgence of the pound to come about?

The rhetoric surrounding Brexit since the referendum has been somewhat limited but none the less consistent. The word uncertainty has never been so prominent on the English tongue, and this uncertainty, specifically economic, is born from British political risk. As a member of the single market one is able to trade freely with 31 different states (including four non-EU states) with the main benefits being the free movement of resources e.g. people and goods, resulting in great efficiency and security. You know where your materials and labour will come from and that they can be brought together without too much hassle.

Upon leaving the European Union the UK steps into the unknown. The security and efficiency of the single market will be left behind. This is not to say that it cannot be found elsewhere, it is just we don’t know exactly where Britain will find such security and efficiency. Or even whether such economic comfort can be mirrored in, for example, the World Trade Organization (WTO).

In an effort to reassure the government’s wide economic prospects, The Chancellor, Phillip Hammond, has visited India to discuss possible future trade deals with our friends from the Commonwealth. On the face of it India may seem like an investor’s goldmine. It is the strong hold for growth in the South Asian region with their GDP for this year being measured by the World Bank as 7.6 per cent and rising to 7.8 per cent in 2018.

Philip Hammond with Sushma Swaraj, External Affairs Minister

But trade deals involve politics, and politics inevitably introduces complexities beyond mere statistics. A trade deal with India could throw up various conflicts of interest for a government that is supposed to be delivering on the will of the people.

Currently, only 1.7 per cent of British exports go to India in comparison to the 44 per cent that is sent to the EU. As a destination, Britain is last on the top five list of countries India exports to. The stronghold developed during the British Raj has very much depleted and yet the legacy of colonial rule is something many Indians still feel very strongly about. Realistically, our position for bargaining is not as strong as Theresa May would like to make out.

Phillip Hammond wants to offer India further sales of the UK’s financial services, our second biggest export to the EU after IT and Telecoms. British financial services have always been internationally regarded with London seen as the world’s leading financial city, however, such sales wouldn’t come without a cost. Immigration and working visas are a hot topic for the Indian government who will want to push for freer movement of Indian workers to the UK. A cost that would undermine the main reason why many of those on the leave side voted as they did: to tackle and reduce migration.

The conundrum of maximising economic growth while satisfying national political demands has never been so tricky. The government’s initial efforts with India do well to highlight this. British economic hopes took a further blow after the Financial Times reported officials have rendered the possibility of a deal obsolete. Negotiations with the EU will continue for at least two more years. In the meantime, our position in said negotiations could be damaged by the Chancellors failed efforts for pragmatic economic discussion outside the EU.

Risk is determined by uncertainty. The failure of a bilateral between the UK and India leaves Britain even more uncertain about the harsh realities of life outside the EU. The economic risk surrounding Brexit will continue to build until we find some concrete positives results regarding negotiations or talks beyond Europe. Trying to deal with Brussels, consider the British electorate, and open up to the rest of the world all at the same time will be the hardest political economic task undertaken this century.

India hasn’t dampened the markets’ mistrust in the pound and the British economy moving forward. It will most likely be years before we can determine our currency so proud once again. What is worrying is the realisation that historical links and so called old friends do not necessarily pave the way for bilateral development. Something the government like to emphasise as a foothold for British influence across the globe.

As risk increases, life in the pound will continue to become more expensive. The price of a cold beer has never been so complicated, nor uncertain. As summer roles around, we continue to wait for an economic reprieve.

Sponsored Post: Tips for playing online slots

Online slot games are pretty simple to play but, everyone can sometimes benefit by getting a better understanding of the game they love. Slots are the most popular among online casinos as well as land based. Let’s face it, they are downright addictive. The fact that huge jackpots can be won from the comfort of your own living room makes them even more appealing than ever before.

With winning money being a big part of the appeal, getting in on a few tips and tricks to better insure your chance of leaving your computer a winner would probably make your day. Well, I am about to make your day for you by first telling you that the higher the bet the more likely you are to win.

With that said you are probably wondering why I am telling you to bet a lot of money right off the bat. Well, it is simple really. With slots, the more money that is bet on it, the more pay-lines become open. You could possibly double or triple what you bet in the first place.

The next thing that I am going to tell you is that you should stick to slots that fit into your budget. Knowing when to cut your losses and walk away will keep you from going broke. Another way to keep from breaking the bank is to set a certain amount of money aside for gambling and NEVER, EVER touch any other money during gambling. Even go as far as to NOT using any of your winnings from previous rounds to bet with. Doing this will guarantee that you leave the game with money in your pocket.

Looking out for online slots that offer bonuses such as free spins is another great way to get ahead of the game and make bank if you are lucky enough to get a match up on your free turn. If not then you didn’t lose anything. In a sense, this puts you ahead in the game because that is one turn closer to the jackpot.

It is important that you know that some slots are predetermined in what order the items land per so many turns and how much they pay out. You may want to try to avoid any slots that seem to be rigged. You could on the other hand learn the predetermination of each that you find to be rigged and know just when you are going to hit the jackpot.

What’s it like going to the job centre in modern Britain?

At the beginning of September, I found myself in need of a job. I was a civil servant on a fixed term contract which ended a couple of months prematurely, this without a doubt left me on the back foot but I wasn’t overly concerned; I figured I could get a job easily. I was wrong.

After four weeks of juggling job hunting, volunteering for Activate UK and spending every other waking moment wondering how I was going to pay the bills, I had to make a decision that the foolish prideful me never wanted to have to make. I needed help and so I went to the Job Centre to sign on.

My reasons for not wanting to go straight away were ridiculous. I worked with a lot of claimants in my voluntary work, I had no problem being associated with them, I saw myself as no better or worse than any of them. The problem for me was the DWP staff, I have read one too many horror stories of employees in the Job Centre treating claimants with disdain, horrific stories of sanctions and other such mistreatment; I am not saying that such things do not happen, but I want to write about my personal experience of going to the Job Centre and hopefully I can help someone else in a similar situation to mine reach the same conclusion as me far sooner.

I applied for Universal Credit online, after spending fifteen minutes on some rather cruddy online form I was told my application could not be processed online and I had to call a number (great start right?), I then rang the number, click a few dozen options on the automated system, to then be told this is the incorrect number to dial and I should claim online. At this point I started thinking how ridiculous this was, someone who is just trying to help is having to jump through pointless hopes just to speak to a human being. Slightly discouraging to say the least. Eventually after much googling I found the correct number and got to speak to a human, an actual human! I took about 40 minutes of some rather odd questions and then I eventually got an appointment at my local job centre, hurray!

I went to my appointment dressed in an open collar shirt and I sat down and looked around at the 20 or so people sat with me, bar a few exceptions most were dressed similarly to me; certainly not the stereotypes in tracksuits and hoodies. I went to meet my careers coach, Stuart and instantly all my previous expectations went out the window. Stuart didn’t grill me, he didn’t treat me like a second class system and more importantly he didn’t judge. Every question he asked me was centered around one thing, finding out about me as a person and towards the end of our meeting he said he had the perfect job for me. He slide over an A4 piece of paper and said “This isn’t you dream job, but it pays more than claiming and they are looking for someone exactly like you”. Ten minutes later he had spoken to the employer and secured me an interview and we joked that this could turn out to be the quickest turn around ever at the JC+, before I could go to the interview though I had to go back the next day to the “group signing” so I could actually be paid my benefits.

The group signing was a bit like an AA meeting, we all sat in a circle (15 of us + two career coaches) and shared success stories and tips about jobs. They told everyone about a course that is being run, you spend a week on the course, get a qualification and then get a guaranteed job at the end, about half of the group signed up to do it and I thought to myself how different the experience is from my initial assumptions. When I went back in to the JC just before my interview, I met again with Stuart and he praised my job seeking efforts over the last few days and we chatted a bit about my interview later on. When I went for the interview I was surprised, that one week training course and guaranteed job was provided by the company now interviewing me! They explained they were new into my area and wanted someone to engage and recruit people from the Job Centre onto their courses and the subsequent job. They offered me the job the same day and I went out for a smoke with Stuart and told him he under sold the job to me. I explained that the pay didn’t matter, but this job is amazing because I can actually help people. I sat on one side of the fence and now I can use that experience on the other side.

My experience on benefits was very different to what gets published in the papers and I think we all need to remember, that the papers are there to sell papers. They will only publish the most outrageous stories because that is what sells. It is not a true representation of what the system is actually like and for anyone in a situation like mine I can only advise this: Unbend your pride as soon as possible and just go. Everyone needs help sometimes and you are a fool if you don’t take it.

CommonWeal are wrong – Scottish land seizures would be disastrous

Public authorities would be allowed to seize land under the “Public Land Value Capture” proposal suggested by Scottish think tank Common Weal think tank. In short, public authorities should have the legal means to purchase land at the existing “use value” rather than at the anticipated future value once planning permission is granted (known as ‘hope value’).

Public authorities would borrow against the future uplift (upswing) in land value from the granting of planning permission to develop the site. This borrowed sum could then be used to fund the master-planning, infrastructure and construction of public-rental housing, while some plots could be sold-off to the private sector at a profit. Either way, the reductions in land costs would eliminate land speculation in the development process and increase the affordability and quality of housing development.

What a grand idea! Let’s do it!

Not so fast

A major reason for the housing prices is overregulation and the difficulty of getting building permits. There are planning and zoning laws, building codes, height restrictions and greenbelt policies to restrict the supply. There are help-to-buy schemes, low interest rates, tax privileges for mortgage holders and other policies to drive demand through the roof. Landlord registration, stamp duty and HMO licensing limiting the number of people who can share a flat push up the price of renting to the sky. And so on and so forth.

That’s why building land ends up being so expensive. And that’s also why those darned developers are making a lot of money – but it’s not money for nothing – otherwise everybody would be jumping in on investing into land!

Let’s take a little peek at the planning performance of the local authorities: http://www.gov.scot/Topics/Statistics/Browse/Planning/Publications/planapps2017annual

For “local” developments, the average time was in the last year about 12 weeks. 3 months will be spent on haggling with the council whether you can build on your land, hoping for the best. That’s not too bad although the time can easily climb to 30 weeks and more, the better part of the year.

For “major” developments, the average time was about 45 weeks, easily a year and sometimes two. (All of these are averages so who knows what extremes hide behind them – at the top is Midlothian with 5 developments and an average time of 96.2 weeks.)

These are just the times spent on the permit itself, not preparing the papers or anything else. If you want to build and you find a piece of land, you still have to wait for months or years for the permit.

The elephant in the planning room

But let’s get rid of a moral issue first: the kind and gentle ability to “compulsory purchase land at existing use value” is nothing else but the power to expropriate. The unfortunate victims of this landgrab will be reimbursed – but don’t expect them to make profit out of their own land or being able to stay on it.

The paper perversely quotes a planning academic: “planning permission is a public gift, restoring to applicants the right to develop land when it is clear that this is in the public interest. Any increase in land values is also therefore the property of the community”. The right to develop your own land was taken away and when and if it is most graciously returned, it is to be considered a gift! Any increase in value for having to go through the bureaucratic hell is to be taken away.

However, the paper strangely forgets that this very law proposal will do away with “applicants” – the purchases will be compulsory. What a tragic attitude in a land that has suffered the Clearances!

This introduces a great motivation for the council to find potentially profitable land, buy it for cheap, kick out the people owning it and sell it off.

It’s all for the good of the people.

Why don’t we just let councils invest?

Public authorities can already invest and if they build more new houses for cheap, what’s the problem?

After all, the process will be based on a careful analysis and with due public consultation… meaning it can take years before even getting to the permit stage. One can only hope that CommonWeal takes these costs into account.

Worse, the council will have to go through the same long permission process as the developers. The paper seems to assume these costs away for some reason. If getting a permit is a simple affair, clearly the greedy developers oriented on a quick buck are doing something wrong. Or maybe the councils are wasting everybody’s time – but let’s think positively.

If the permission process takes months or years, the council will have to jump through the same hoops and expend similar amounts of money as the developers. That assumes the bureaucrats will be efficient and they won’t make the process even slower but let’s remain positive.

This is supposed to be an “extremely safe investment”, as long as the planning permission is granted. If the council does everything as it should, this extremely safe investment will be as speculative as that of those tricky developers. If the application fails, the council will be stuck with the loan. If the costs end up being too high, the council may lose out on the whole deal. That’s how investment works.

Introducing moral hazard

Of course, the council could find it very easy to get a planning permission – after all it’s granting the permission to itself! Since large amounts of money and political futures will be on the line, the council will be strongly motivated to make sure any permits are quick and painless.

This is not a problem if it’s just pointless bureaucracy. But if giving a permission is really such an incredibly valuable and arduous process for a good reason, the council will be motivated to skip all those environmental checks or listening to those pesky citizens, who rarely seem to want new construction. Because now, the council is a profit-hungry developer, too. And it doesn’t need to ask anybody for the land. It can just take it. For a reasonable price, you know.

How will this work out in practice?

The hostile competition option or how to ruin a market

The council will be competing with developers on a market with a limited supply of land. But the council doesn’t have their limitations – it can pick and choose pretty much any land it declares to be useful to itself (a “simplified development zone”). The council could in fact take over any land that is under development. Wherever developers find a good spot the council can just march in and destroy their investment.

Landowners will suffer from an additional source of uncertainty. What if your council decides that it wants your land? What if it just “starts planning”? Who in their right mind would build anything on their land or invest in it if it can be taken overnight – or five years later?

But this is only the small and medium-sized landowners and developers. The large companies and owners – and especially the politically well-connected ones – won’t have a problem with the council. This will lead to more centralisation in the housing market and more entanglement in bureaucracy.

And house prices will go even higher.

The friendly competition option – or how to make lots of money with corruption

But why can’t they all just be friends? The developers don’t need to fear the council. In fact, they can use the council to help them to invest.

The developers will pick and choose a good spot for new housing construction. They don’t need to restrict themselves to landowners who want to sell or offer them more money. The council will work its magic and remove all obstacles – people, properties, paperwork. Then it will sell the land back to the developers who will save time and money on permits and negotiations. The more useful councillors will be invited to give a presentation in Tahiti and everybody will be happy.

Except for the people that wanted to keep their land or make something out of it. Never mind that. Victory for the big guys!

But there’s more. Sub-contracting will “possibly be a procurement process” whereby contracts are given on a case by case basis and with specific contractual requirements for build design and quality. Although this is claimed to benefit small and medium sized businesses, the “specific contractual requirements for build design and quality” will probably mean that only large companies will be able to fulfil them.

Who knew Public Land Value Capture could be so useful? Big developers will be sure to line up to support CommonWeal and their proposal!

Economics Round-Up Summer 2017

With parliament almost ready to return to Westminster after its summer brake, and many things having changed, or not as the case may be over the course of the last few months, now seems like an opportune time to round-up some important economic developments of the summer.

The Bank of England keeps the breaks on 

The BoE has continued its cautious attitude over the summer, keeping interest rates on hold with the prediction that it could be another 12 months before the next rate rise. Governor Mark Carney has more than once hinted that he may support a rise sooner than this, but a survey of economists carried out recently by the BBC found that most did not expect a rise until 2019 believing the Monetary Policy Committee would be reluctant to raise rates during the height of Brexit negotiations.

The Pound has been a major consideration in the BoE’s decision making; this summer has seen some important developments. Since the vote to leave the EU in 2016 the pound has fallen about 15% against the euro. Over the summer, it has continued to slide and is predicted to fall an estimated 10% further against the euro by March 2018. Some economists have predicted particularly dire results for the pound next year, suggesting it could fall as low as $1.25 to the pound and just 96 euro cents to the pound by the final quarter of 2018.

Meanwhile, the Confederation of British Industry has continued its rather pessimistic view of the UK economy. It stated in June that it expected growth to be ‘steady but subdued’ falling to 1.4% in 2018, down from 1.6% in 2017. Economists have also remained rather gloomy over inflation. Their predictions range from it peaking at 2.9% in October this year subsequently falling back in 2018 to it peaking at 3.2% in spring 2018.

The Cost of Living, Wages and Unemployment

The basic cost of living has continued to creep ever upwards over the summer. It has increased by roughly 3% since January 2016 and what it will do over the next few months is uncertain, but with the ongoing Brexit negotiations and the growing uncertainty it is almost certain to rise further. Average annual earning for those in full-time employment have however not kept up with the rise in the cost of living. They sit somewhere between £26,000 and £27,000 depending on where you look: compare this to the average annual earnings in December 2015, £27,500 and the problem for many becomes obvious.

Bearing this in mind, unemployment has continued to slowly fall over the summer. Government statistics put it at roughly 4.5%, a low not seen since the record figure of 3.4% in 1973. Of course, such statistics hide the struggles of the so-called ‘working poor’ whose wages are stagnating behind inflation. Use of food-banks and other charitable aid has risen over the summer too, showing that the figures are not all they are cracked up to be. Of course, they are a mirage anyway. In reality, low unemployment and thus high employment should lead to increasing wages driving inflation. Instead, inflation has taken off and wages have stagnated. This is because unemployment is not actually as low as the government would have use believe. It all comes down to the definition of ‘unemployment’, which counts stay-at-home parents, university students, the temporarily ill of disabled etc. as not being part of the ‘workforce’. In essence, the official statistics hide the fact that there is a huge chunk of the population who are ‘inactive’ workers. It fails to account for the fact that every university student over 18 will require employment upon graduation, that many parents with new-borns will look to return to work. As one statistical analyst told me, ‘official unemployment statistics are a lie; a lie which has only survived as long as it has because it suits the political parties’. With this in mind, if we include these ‘inactive’ workers, the unemployment rate becomes more like 21%… shocking isn’t it?

The British Gas Rip-off

British Gas has again, like so many other energy suppliers spat in the face of its loyal customers by declaring over the summer that it would increase electricity prices by 12.5% on the 15th September this year. Considering the issues surrounding wages and the costs of living, this is less than helpful for many thousands of people. Indeed, it has been the increase in electricity and gas prices both over the past few years and again this year which has largely driven the increase in the cost of living along with housing rents.

Former Liberal Democrat Leader Tim Farron attacked British Gas over the summer stating they they were ‘clearly treating these people like cash cows… as things stand, there will be a lot of people in fuel poverty this winter shivering in homes they cannot afford to heat or even light’. For once, he couldn’t be more right.

The actions of British Gas have brought the Conservative Party’s pledge of an energy price cap back into focus, as they desperately try and sweep it under the carpet. It has shown us, as if we didn’t know already that the energy companies have a total disregard for the people they sell what are, in my opinion, basic modern necessities to. Their actions in August are the reason so many will feel the cold this winter and why the nationalisation lobby is becoming louder.

Brexit: The Continuing Saga……

What has happened here then? Very little. We are virtually no closer to knowing what the world will look like after Brexit as the UK government continues to behave like a petulant child demanding all the sweets and refusing to eat its greens. I presume David Davis has used this summer wisely. While he has clearly gotten nowhere in terms of talks with the EU, I hope he has taken the opportunity to have his head examined in the hope of finding an adult brain. He and others seem to enjoy trading childish insults with the EU while the clock on Brexit and indeed the UK’s economic prosperity ticks towards zero-hour.

The position papers were an own-goal. They admitted repeatedly that the EU single market was economically beneficial to the UK as well as admitting that the UK was unlikely to fully ‘escape’ the jurisdiction of the European Court System.

Of all Davis’s and indeed the government’s beliefs about Brexit, the most idiotic which has surfaced over the summer is their continuing claim that Britain will not have to pay a ‘divorce’ settlement and that upon leaving the EU in 2019, the UK could stop paying into the EU’s coffers. They seem to think that they can just walk away from their commitments. This is the adult world for goodness sake! You can’t just walk away from years’ worth of deals and commitments because you want to. That’s not how it works. All I can say is the sooner the negotiators on our side accept this the better; or I really do fear for our economic future…

Overall, this summer has been far from bright. We are no closer to knowing our future destination, people are still struggling and the predictions show this is likely to continue. A sad state of affairs indeed but, and I say this in full knowledge that I will probably be harangued by the Brexit brigade, we as a nation brought this upon ourselves, ‘as you sow, so shall you reap’.

A Libertarian Approach to Student Debt

Both the Tories and Labour Party have attacked the current higher education funding system for leaving thousands of students in debt that they can never repay. While Corbyn admitted he could not promise to wipe debt, Theresa May has launched a review into student debt and tuition fees. At the moment, fees are capped at £9,250, but come with a punishingly high interest rate of 3%above RPI. This interest begins to accrue from the day that students start university. How can we ensure equality of opportunity for young people of all backgrounds without leaving the next generation of workers in enormous debt?

Reducing Interest Rates

The simple fact is that the loans offered to students are too expensive, with three quarters expected to never repay the full amount. The burden of paying back this debt therefore falls onto the taxpayer, so that those who never went to university are paying for those who did. A true libertarian approach would cut interest rates to be in line with market values.

Senior economic advisor at PwC, Andrew Sentance, argues that 2018 could see interest rates triple, due to high inflation and global economic growth. To charge students an extra 3% above inflation is creating unnecessary debt. This is caused by state intervention rather than the invisible hand of the market.

Diversifying the Market

The UK has one of the highest tuition costs in the world, largely due to an unfree market. Almost half of school leavers now go to university, even if it isn’t the right option. For a genuinely free market to keep costs down, there needs to be a wider range of options.

This can be achieved through the use of apprenticeships or work placements for those who thrive in a vocational sector. Not everyone is suited for university, but many see it as the only option. Furthermore, many courses are charging the same amount despite varying in costs. Different courses should set different prices according to market forces.

Encourage Private Sponsorship

The most effective way to lower costs and the debt burden on students is for the state to be rolled back. Instead, private companies should provide sponsorship and bursaries where they see potential in students. More debt reduction and consolidation companies may enter the market in order to further ease the burden without the need for state intervention.

Successive governments have done a great disservice to our young people in the way they fund tertiary education. Interest rates should come in line with the market and private companies should be given greater freedom to sponsor students. By diversifying the education market for over 18s, overall costs and therefore debt can come down.