McDonnell should not forget People’s Quantitative Easing

March 9, 2016

John McDonnell proposed People’s Quantitative Easing shortly after Jeremy Corbyn was made leader of the Labour Party. It might have been wiser at the time to promise nothing controversial because the party establishment were in a state of shock at Corbyn’s win and were hostile to radical economic policies.

McDonnell has since gone quiet on the idea. However, the concept appears to be gaining traction as Adair Turner and Martin Wolf have each recently advocated “helicopter drops” for monetary policy, as an aide to the sluggish world economy. The helicopter drop is an idea of Milton Friedman whereby the central bank would print off cash and give it directly to the general population.

McDonnell’s idea is to use money created through Quantitative Easing to invest in infrastructure rather than buying government bonds. The latter has had the effect of boosting the stock market without boosting capital investment by the listed companies. In fact, the low interest environment has often resulted in companies borrowing money to buy back their own shares rather than investing in expansion. In America, Apple has issued bonds to pay dividends to share holders, in order to avoid bringing home their foreign earnings. As long as it stays abroad they don’t have to pay tax. This wasn’t the intention of the policy. Read the rest of this entry »


Miliband should intervene in the sale of football rights

March 9, 2015

In the sale of football TV rights, capitalism is acting against the consumer, against the companies, against the clubs. The only beneficiaries are the tiny number of top-rated players.

The recent 70% increase will by-pass everyone else and go directly to these players. So if Radamel Falcao gets £300,000 per game now, he can look forward to £510,000 per game next year. However, his talent will not increase by 70%. His productivity will not increase by 70%. The fans will not receive a 70% increase in benefit. This is the dysfunctional way the market works, in football rights.

The buyers of the rights, BT and Sky are uninterested in football itself. They want to sell TV in order to bundle telephone and broadband into the sale.
Football is unique as an anchor for the sales of these other products. But because fans have no other way to enjoy their team, the prices gets forced up by the commerce of phone, internet, TV. This is not healthy competition that drives down prices for consumers, but unhealthy competition that drives them up.

It has got so bad that most people are forced to go to the pub to watch a game of football, because they can’t afford it at home. Dads used to bond with sons over this game, but not anymore. Read the rest of this entry »


George Osborne’s £7.8m tax break

April 28, 2014

The investment community were expecting an ISA cap as the main feature of George Osborne’s budget, so they were as surprised as everyone else by the annuity policy. The budget was greeted with good cheer. Not only did the cap not happen, but the annual investment limit had been raised to a whopping £15k, without the Labour party seeming to notice. What a coup!

So let’s just see how the ISA breaks down. Let’s imagine a baby called Gideon junior comes into this world to a wealthy family, who immediately open a junior ISA, and deposit the maximum £4k per year until he is 16. He then gets an inheritance and he deposits the maximum £15k per year until he reaches the retirement age of 68. How much tax free wealth will he have by that time?

Financial advisers calculate future returns as being either 3%, 6%, or 9%, depending on how optimist the client is, of future returns, or interest rates. Using the 6% figure, Gideon junior would have £107,458 by the time he reaches 16. With £15k a year added, at 6% compound interest, by the time he is of retirement age of 68, his ISA would have grown to £7,811,662. Read the rest of this entry »


The Dutch and French state railways are buying our rail franchises

February 26, 2014

The railway that passes our constituency office in Bethnal Green and Bow is owned by Abellio, the Dutch state railway company. Am I alone in thinking this is somewhat surreal?

We put these franchises out to tender because we wanted the private sector to provide their management know-how. It turns out that this company is not private sector but is the state sector of Holland. So rather than having the British state running British railways, we have the Dutch state running British railways, because they outbid the private rail companies, presumably because they have better management know-how. Read the rest of this entry »


PISA is a half measure of education

December 4, 2013

In this country parents don’t choose to live in poverty in order that every penny of the family finances can provide one child with the best possible education. We do not sacrifice all leisure and play in order to spend every waking hour and minute on extra homework. Nor do we threaten our children with our own suicide, when the child looks likely to fail an exam. Asian parents, on the other hand, apparently do.

In the UK, we want our children to grow up as rounded, happy individuals. The purpose of school is not simply about passing exams, but also for building character. It may be easier to get a child through an exam if we teach by rote, but we also want our children to have curiosity, creativity, and a sense of adventure. These qualities are not easy to measure, but are essential for a successful life.
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Milibandism and the TV football market

November 24, 2013

Sky‘s dominance over televised football was recently shattered by the entry of British Telecom into the market. On the face of it, this competition should be exactly what our country needs, to bring down the outrageous expense of TV, as a small but significant strike against our cost of living crisis. However, the market for football rights is dysfunctional, and Sky may already be trying to undermine competitive pressures [link]. That’s why Milibandism needs to be applied.

If BT and Sky were competing for customers on equal terms and with equal products, then prices would naturally fall. The problem is that they can’t have an equal product. One or other will have the football rights and the customers will go straight to that provider. Therefore, the two companies will compete ferociously to buy this content, pushing the price up to astonishing levels, and wiping out the advantage the consumer would have gained through their competition.
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£23bn scandal of London’s housing bubble

October 1, 2013

According to the Bank of England, each year since 2010, £23 billion of foreign money has poured into the London property market. One would think that this is a good thing for the economy, but most of these foreign buyers have never been to London, or at least have no intention of spending any time here.

It’s all about the preservation of wealth. The residents of unstable oil-rich countries fear the Arab Spring. The residents of China and Russia fear their governments. All are looking for stability. It has become the fashion to “park” money in London. It’s what wealthy people do when they don’t trust the banks, they “park” their money through the purchase of an asset, as a store of value. In this regard, the London property market has become a gynormous piggy bank.

In 2011, Regent Street was valued by The Crown Estate at £2bn. Each year a multiple of over 11.5 times this in ordinary homes is being snapped up. That’s the equivalent, each single year, of Oxford Street, The Strand, Fleet Street, High Holborn, Trafalgar Square, High St Kensington, Old Bond Street, Berkeley Square, Park Lane and Knightsbridge, and more. That’s just one year.
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