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First Reflections of 2019

Last Reflections of the Decade

16 September 2019

It is little surprise that Twickenham and Richmond Park are the constituencies that have most inheritance tax payers in Britain.

The are full of middle class houses and inheritance tax is a tax almost exclusively paid by the middle class.

The world has an oligarchical class of business owners with fortunes of over a $100 million apiece. They are not remotely affected by inheritance tax.

Their wealth will be held in trusts, charitable foundations, limited partnerships and offshore corporate entities.

All that inheritance tax does is made sure that a middle strata of businesspeople to challenge the oligarchy can never emerge, from Britain at least.

The only way out is to go to the City for assistance and that takes a lot of nous.


If you are so fired up against those who live in that type of constituency then replace this dreadful tax with a gifts receipt tax that raises the same amount and be done with it.

Otherwise, let parties like the Brexit party, with "no to inheritance tax" as a central plank of their policy, take you to the cleaners at the polls.

Redistributors can be seen as the other side of the same coin as robber barons - taking from others what is not theirs rather than achieving for themselves - and claiming moral superiority along the way.

Inheritance tax is not a fair tax.


Labour is the "death tax" party but more than one party may end up being labelled that way.

The Brexit party, seeing the mess the Conservatives got into over social care charges at the last election, is trying to outflank it.

Labour seats are its main target.

That is why the Dilnot Report was more sophisticated as a social care solution. It avoided bear traps.

Truth be told, if George Osborne had abolished inheritance tax and halved capital gains on taking office we would have a 5% bigger economy now and greater tax revenues from multiple emergent firms.

Competition is good but we do not have competition; we have oligarchy letting government squeeze out competition for it.

That thinking has not changed since New Labour and it is time it did.

12 October 2019

One of the reasons that the headline rate of a gifts receipts tax to replace inheritance tax could be as low as 7% is because if you give your money away early enough you are not going to be taxed. If you are a named recipient, tax would be harder to sidestep.

Charities, trusts, companies and partnerships should pay the gifts receipts tax, too, just as they do stamp duty.

13 October 2019

One of the myths of contemporary times is that all capital should be productive, maximally productive even. A farming business owned by private equity is unlikely to eliminate pesticide use. The lazy capital of a family owned farm can.

Let us not kid ourselves that rich people are the problem; it is the overly exploitative businesses that a few of them own.

Such businesses handed over to relatively faceless managers are going to be no better; they are simply going to be more institutionally motivated with nastiness hidden behind corporate speak.

'Inequality' is a very loaded term because the user is trying to define a moving target. Taxing the owner of an 'inequality generating machine' though is not going to solve much; it is taking a cut.

Either you tackle the machine or you do not and one of the ways to do so is to tax the machines with large economies of scale at a higher rate that everyone else. If they are really sound they will still win in the marketplace; if not the competition has a better chance against oligarchy.

The way capital markets are structured, the owners of a large business that has a declining market share nearly always suffer a relative decline in wealth.

It may be hypothetical but would we want all the stud farms in Britain or Ireland or France to sell out to private equity because of a wealth tax? Of course not. There is vastly more competition in the sector than there would be if it were owned by the state or private equity.

13 November 2019

The best stump speech from any source this election, with plenty of energy, was made by Boris Johnson today in a Midlands factory making the black electric taxis used in London, whose development he encouraged as Mayor.

Cambridge will welcome the enhanced AI research opportunities that will flow from the speech.

14 November 2019

It has to be said that under Jeremy Hunt procedures in the NHS tightened up considerably and waste is virtually absent.

Under the last year of Theresa May and on into Boris Johnson's time there has also been a movement away from the strange obsession introduced by Labour from about 2004 to close hospital beds as if new community clinics would mysteriously spring up to replace them with expertise intact from day one.

Now there is a renewed but not exclusive emphasis on hospitals again and they do need some extra funds for general purposes in addition to capital allocation.

It is now five years since I started to take an intense interest in AI for automotive uses but have found a strange reluctance to engage fully with it in the industries perhaps because, in practice, AI is much less useful in offroad capable vehicles used offroad and we have the best offroad vehicle manufacturer in the world.

Enthusiasm to engage with AI in healthcare has come up in the fastlane meanwhile and though I am not going to venture into this area, which is more about personal data than the dominance of concepts that you get in automotive, I do think that AI must always cede plenty of space to clinical judgement and not impede it.

After all, if there have been hash ups in the NHS and healthcare, or at least waste of money, over the past 15 years, it has tended to be in IT projects or pursuing unrealistic expectations about what data collection can do.

After all, applying AI to road sign recognition is, at present, a lot less error prone than applying it to historic healthcare data haystacks.

15 November 2019

Well done Boris Johnson saying he will shelve the reduction in the corporation tax rate from 19% to 17%. This from a source that has nothing against business.

You cannot expect individuals to set up in business when the standard rate of income tax is higher than the standard rate of corporation tax. It is bad enough them knowing they have to pay inheritance tax and capital gains tax when corporations do not pay the former and in practice do not pay much of the latter.

In the eighties the corporation tax rate was 45% and the income tax rate 33% but no one sensible is suggesting we see these rates again.

Nor will you get an enterprise economy if high street banks never lend just against capital but only with income cover for interest. Income can evaporate overnight, capital you stand ready to lose because you are an entrepreneur is less likely to.

Nearly every small housebuilder is Britain has quit the market in the past dozen years. That kind of entrepreneur was never interested in becoming a residential landlord with the type of income based strategy banks suggested to them - before they quit making loans on bankers' judgement entirely on the high street.

Banks are now almost entirely useless except to make pleasant conversation with the staff and make transfers of money.

Since 2007-2008 central bank policy has been to avoid further bank failures not to allow banks to finance the public beyond mortgages and consumer credit.

If a Brexit permits Britain to adopt different central bank policy from Europe this will be a good thing.

20 November 2019

The way a market works is that if there is a demand suppliers will step in to fill it.

It does not need government to favour a tier one of suppliers.

If a big company goes off in a huff smaller ones step in to supply instead or its peers do.

We need to redesign the structure of taxation without this old-fashioned stuff of hitting individuals.

Another 2 per cent on the standard rate of corporation tax and abolish tax relief on interest payments and you have enough money to abolish inheritance tax, the most unpopular tax in Britain, and pay for the implementation of the Dilnot report on social care.

Those at the smaller end of business might also then feel that those with economies of scale did not hold all the cards preventing them from competing or even entering the market.

22 November 2019

Even Tony Blair knew to offer headline cuts in personal taxation to win elections. Gordon Brown clawed them back and more through raids on pension pots and other stealth taxes.

Taxes like council tax are paid with what people have left over.

Net tax rises have a depressing effect on the economy which is why, for all the risks, the three biggest economies in the world scarcely use them.

Labour's increases in taxes will amount to 4% of GDP using their own figures and nearly 7% using independent ones.

Such amounts will plunge Britain into the biggest recession it has ever experienced.

The Conservatives have won the economic argument by Christmas gift. Boris Johnson is freed to concentrate on his core messages.

10 December 2019

If you play Monopoly and all players tacitly understand that after a certain point none of them will buy any more properties, houses or hotels from the bank/government but will buy them from one another, at discounted rates or by swapping properties if necessary, then the game can go on for hours, five or more.

If players madly rush to buy from the bank/government, liquidity is quickly drained from the collectivity of players and though some Amazonian will win, a healthy trading environment of give and take cannot exist and the game ends soon enough.

In the past decade it has not been whether a business is run by the public sector or private sector that has truly mattered - both have been very wasteful and dismissive of the public anyway.

No, governments, central banks and big businesses have tacitly and not so tacitly conspired to drain money from the personal sector and small business sector, including by taxation, so that they are illiquid and short of both money and savings and so that a healthy trading environment cannot exist for them, to the profit of administrative convenience and oligarchy.

After they take out the ordinary players, they come for those with houses and hotels (until they come to a hotel owner clever enough to trump the Amazonian), who are not to blame but rather the system of the game itself.

Worrying about the public or private divide, about which people are entitled to differing views, always was a diversion to keep people occupied.

The winners can keep their gains but let us have a game with a different system in the next decade.



11 February 2019

Though the term backstop is an unappealing one to use even colloquially for part of a treaty or a political declaration a mechanism to bring it to an end could be a bilateral side treaty between the Republic of Ireland and the United Kingdom that specified that it would end when the parliaments of both nations had voted for it to do so.

This would be a treaty between two sovereign nations. Whatever else the EU is it is not a sovereign nation.

It is possible that the Republic of Ireland would detain the United Kingdom in an arrangement longer than it might have desired but not for ever. Both nations have a strong political interest in maintaining open border arrangements.

The treaty between the EU and the United Kingdom would then need to be modified in advance to remove the perception of veto power lying with the EU.

To terminate the side treaty the United Kingdom would have to seek the approval of one nation not 27.

8 March 2019

It is true that this is a matter best dealt with by a political solution not a legal one but it is not an outlandish concept that the United Kingdom serve notice of a wish to end membership of a customs union as part of a referral to arbitration.

In arbitration it is for the panel to rule whether it has jurisdiction to decide the issue based on the terms of the arbitration agreement. This does not subvert the EU's legal order. If it rules it does not have jurisdiction, so be it. The political problem will have been very clearly flagged up for urgent solution.

What we have read in the press may, of course, be an oversimplification of the issues. It needs looking at again, though.

13 March 2019

It is highly unclear what the outcome and import of the two votes in the House of Commons tonight and tomorrow will be. Once they have taken place it will be clearer.

To date the EU has got the better of the negotiations but it also has made errors.

In the event of the votes resulting in 'no deal' being off the table, for the time being probably, and the U.K. requests an extension, the period we would favour is 21 months.

As that period draws to an end the British government could put an agreement to the people in a general election though it would be under no obligation to do so. For neither the Conservatives nor Labour is a second referendum anywhere near a first choice outcome.

This time everything should go into the pot for negotiation and everything pressed on with in parallel as fast as possible so the end result is a comprehensive settlement.

In our view the EU made tactical errors in phasing the negotiations and holding up discussions on substance to put the U.K. under time pressure. It did result in agreements on money and a fair bit more but lack of visibility on substance, much of which has not been agreed yet, has meant that the withdrawal agreement has been poorly supported. Without ratification the EU's gains remain provisional.

The U.K. is likely to do better in such negotiations but it is clear imposing disbenefits on the U.K. also imposes them on the EU.

How the question of what happens to elections to the European Parliament is handled is perhaps best left to suggestions from the EU.

If an extension were to be short it is clear that the purpose would have to centre around ratifying withdrawal agreement terms, which may be harder than reaching a comprehensive settlement, to reach an early Brexit.

So the purposes of long or short extension differ.

4 May 2019

Sometimes one thinks Brexit has entered its Jardyce v Jarndyce phase. It will be settled one day but normal people just want to get on with their lives unchanged in the meantime. In a way we are in the best place; Britain is clearly not going to be dragooned into closer political union whilst existing relations are not substantially disrupted. Is that as good a negotiating objective as many other outcomes?

Sometimes one cannot help being critical of the 'permanent' government objectives whilst wishing to be sympathetic.

One case was government support of vehicle manufacturers producing diesel engines supposedly in the aid of emissions reductions. The particulates problem and the larger size of most diesel engines - small diesel engines are not that efficient - knocked that one on the head in logical terms.

Much better would have been to encourage small capacity petrol-electric hybrids in advance of a switch to all electric.

Another is trying to bully householders into using condensing boilers. The old fashion 'geysers' for water heating that were around till the eighties were unpopular for a reason - they forever broke down. A condensing boiler is more complicated, costs more, is more carbon intensive in manufacture, breaks down more often, lasts less long and is only more energy efficient on the margins compared with a well managed traditional boiler.

It is all very well policy being 'evidence based,' meaning often an academic study has proved that something is demonstrably possible instead of accepting the weight of professional evidence of practitioners that it will not work in practice very well. If you retire all the people with practical professional qualifications and stock policy making cadres with recent PhDs instead what do you expect?

Forget retrofitting the existing housing stock at the expense of the householder - the walls end up impracticably six inches thicker - but reintroduce more widely available loft insulation grants. Spend much less as a nation by paying more than is done now for electricity produced by domestic solar panels and save on new power stations.

A long time ago I was on the building regulations advisory committee. When one energy saving policy was adopted I thought 'oh no, all domestic windows are going to get smaller and everything we learnt about daylight factors is, to borrow a phrase, going to go out of the window'.

I suppose a small amount of fuel has been saved, though maybe not if people leave the lights on, less so with boilers and with diesel engines but the outcome of this one has been dull architecture.

So you got a binary. Curtain walling for commercial buildings, because this type of glass can be made energy efficient, and small windows for residential building which at one point verged on the unhealthy. (Windows are getting a little bigger again as glazing becomes more energy efficient.)

I like windows of different shapes and sizes. Without a creative way of addressing them we would not have had Frank Lloyd Wright or Le Corbusier, both prone to giving domestic buildings a lot of natural light, and shade as well when needed. In the photograph above we have an academic building by Sir Hugh Casson from the sixties.

I have not been in this wing. The clerestories do not look like true clerestories but I like the horizontal lines they produce. The vertical slit windows might typically be used in a library. It still looks fresh 50 years on and this type of wall can be made more energy efficient than curtain walling. This is the south facing elevation. Go round to the north side and the windows are much bigger.

We have too much theoretical policy making and too much petty governance but the big things that both the market and citizens are willing to do given some broad guidelines and small incentives, like significantly scaling back the use of diesel for cars in the next decade and expanding the use of small scale solar power generation given its falling cost, are not done.

26 August 2019

As the Biarritz summit commences Donald Tusk asks for new thinking on Brexit.

We have no idea whether Brexit will happen or not. We will find ways to live with any outcome.

The U.K. government, though, is limited in what it can offer due to missing parliamentary majorities.

So it is incumbent on the EU to also make offers, public or behind the scenes.

On a chessboard one should not reject leaving a piece en prise.

The key to this is that the EU will one day have to revise its treaties as it always does so from time to time. At present it wishes to avoid doing so for some time as this would lead to referenda in some countries. However, one day, the need to revise the treaties will overtake this reservation.

So the EU should make two offers:

1) To facilitate Brexit:

The 'backstop' will lapse when the treaties are next revised.

2) To accommodate Remain:

The next revision of the treaties will contain the following: -

The U.K. is exempted from participation in political and monetary union,

The U.K. is exempted from participation in a European army,

Greater democratic accountability will be incorporated in the institutional structures of the EU.


The second is, of course, what David Cameron should have asked for prior to the referendum.

He would have had leverage, too. Get none of these and his government could have sat on its hands as to whether to stay in.

Substantially achieve them and the case for staying in would have been well on its way to having been made.

The EU offered too little in those negotiations. I listened to some fairly high powered representatives at the time.

Now the risk is that the EU will once again offer too little of its own accord to stave off 'no deal' scenarios and some of its members will be cast into technical recession as a consequence.

1 September 2019

We are not being difficult here.

It would be unconscionable for the U.K. to have tied itself into the trading system of an EU that might be radically different after a revision of treaties by means of a subsidiary protocol to an overall agreement.

Already the European political landscape is quite different from what it was at the time of the Brexit referendum in 2016.

Turkey was then sufficiently a potential accession state for it to feature in the Brexit debate. Now the consensus is that its full membership of the EU is off the table.

A revision of the treaties would be the time to put the U.K's relationship with the EU on a different footing. A loose form of associate membership could be embedded in the legal texts.

After all, to be provocative, low skill permanent migration for economic reasons apart, the best part of the treaties is freedom of movement. The single market, more so-so. There are a lot of people who are going to find living accommodation in England very expensive post-Brexit - with ironically the only English speaking places one might go for something cheaper being Scotland, Ireland and Wales. Yet the ability to speak English and a willingness to work are still assets on the Continent for temporary work. So the ability to work there could be a residential safety valve.

For it to be part of a withdrawal agreement, everyone must know a 'backstop' will lapse one day.

When you leave a piece en prise you know you must act and keeping acting in the direction you want to go. If you mess up acting you can hardly expect it not to be taken. The 'backstop' needs to lapse, in all events, by the time of a revision of the treaties for sound political reasons.