Tax & Spend (& Kill)

Yet again Labour is at work to raise taxes, no doubt to plunge yet more money into hapless public sector projects.

This time round, it's Capital Gains tax (CGT) that's under scrutiny: according to the FT.com, Alistair Darling "is considering an increase from 10 to 20 per cent in the base rate of capital gains tax for investments classed as business assets, such as holdings in unlisted companies or shares owned by employees." (FT.com, 16 Aug.)

Although to the clueless (and I freely include in this category the entirety of Labour party) this would be a way to tax the "fat cats" of private equity, it will, instead, have the usual "uninted consequence" of dampening even more the ability of small start-ups to attract and retain talented people, and, ultimately, to drive away venture capital investment from the UK.

The reality of the matter (which clearly escapes our erstwhile ministers) is that the very people this tightening of tax rules should affect (the super-rich, mega-millionaires who drive multi-£bn deals) have no "UK domicile" for tax purposes (or can easily obtain that, if the tax burden becomes too much).

The ones affectes are the likes of you and I: ordinary folk, working in excess of 16 hours a day on a business idea, whose only reward (uncertain, and at some point in the future) is in the value of stock options. We are quite unlikely to get domiciled in the Bahamas, and even less likely to afford to hire expensive lawyers and accountants to tell us how to dodge the tax bullet.

Because of the risk, uncertainty of outcome and time delay, the final reward attached to stock options must necessarily be quite high to compare favourable with today's "loss of earnings:" by using the universally accepted Discounted Cash Flow - DCF - to arrive at a Net Present Value - NPV - that one uses to compare a certain outcome today (say, a defined monthly salary and a pension at 60 years of age in the Public Sector and the certainty of not being fired, irrespective of how badly one can screw up) with an expected, but uncertain, outcome some years in the future.

The "unintended consequence" of those tax changes then will be to drive even less people into starting new businesses, driving innovation, and into making Britain an (even) less attractive place to invest into - driving up at the same time the cost of hiring talented people (the lower the value of stock options tomorrow, the higher the salary I want today).
Additionally, VCs and their ilk, when deprived of the kind of returns they expect (given the risk profile attached to their investments) will be even less likely to bother with smaller enterprise (the ones needing between £500k and £2m).

They won't care anyway - they can easily invest in China, India, US, Ireland, or wherever takes their fancy: away from tax-crazy Britain.

Why is it that our politician are so myopic they can't even see across the Irish Sea: there, a significant reduction in the level of taxation has driven the economy onwards and upwards, making Ireland one of the most attractive places in Europe (and the world) to invest and work, and the Irish people have moved from one of the poorest in Europe to being among the wealthiest and happiest (if only the weather would co-operate, we would all move there, wouldn't we?)

And, guess what? The Irish Government has never had it so good, raking in tax revenues at a record rate, and expanding the expenditure in public services at a much greater rate that even our rapacious Gordon "tax-and-spend" Brown, can only dream of.

But, oh, no - Labour still lives in this 70's zero-sum game mentality: if you have success in life it surely must be at someone else's expenses, so "they'll squeeze till you squeak."

Blair Legacy

In little over a month's time, Mr Blair will step down from being UK's Prime Minister, handing over power to Labour's "incoronated" new leader, Mr Brown.

Personally, I am unsure whether to be jubilant for seeing the former go, or appalled to see the latter take over; but that's probably an issue best left for another day.

What I'd like insted to do here would be to publicly express my personal thanks (yes, you've read it correctly: thanks) to Mr Blair, for proving, irrefutably and irrevocably, one of my most fundamental beliefs: one cannot make Public Sector service work by throwing more money at them.

It is, indeed, regrettable that this had to be achieved by wasting several hundred billion pounds - money that we, the taxpayers, could have more efficiently and enjoyably spent on goods and services that matter to us, instead of being poured down the drain chasing "targets" that only matter to policy wonks and to obscure civil servants; but, then again, it was probably inevitable that this had to be done, as, at least once in a generation, this point has to be (expensively) proved again and again, to an uneducated and forgetful voting public.

In fact, a very similar lavish waste of taxpayers' money on irrelevant and apathetic public workers and services had already been undertaken by Labour in the 70's (and elsewhere in the world: the Democrats in the US, various left-wingers across the globe and, surprisingly enough for those who don't know better, by endless centrist governments in Italy) to little or no effect on their efficiency and/or effectiveness.

Thankfully, a brief surge in this kind of waste (and the subsequent abismal display of incompentence and general useleness) was sufficient to wake up voters to reality and swing them back to more sane, market-oriented policies.

Not so this time - partly due to a particularly benign global economic environment, partly due to Mr Blair's quasi-hypnotic power of persuasion, but mostly due to the pathetic state of the Conservative party, it has taken the best part of ten years for the British public to start asking questions about the sanity of showering tens and hundreds of billions on unreformed, inefficient and largely useless public sector services.

I still remember being infuriated, at the time, by all the talk about public sector being "underfunded" - this was mostly from people who failed to realise that the use of "under-" (or "over-," for that matter) requires a standard comparison metric to be meaningful: a service, or business, is under- or over- funded only relative to its stated goals, and a generally accepted industry best practice.

But this was, rather conveniently, lost in election speeches and on the tabloid-reading electorate who lapped up New Labour's New Truth.

Well, all this is history now: we all now know (even Sun readers) that it is not for want of money that public sector is incapable of delivering half-decent services, with anything approaching a minimum level of respect for its users.
All the extra investment has been gobbled up in ill-thought (and worse implemented) titanic IT projects (most of which have either floundered in spectacular fiascos or are running several billions over budget, years behind), equally titanic (and equally over-budget and years late) construction projects and, naturally, in inflated pay rises for public sector workers.

Who have not, as any sane private sector employer would have done, been asked to work harder, longer or, simply, using a bit more common sense: they were just gifted with pay rises, without any regard for individuals' competence and merits.

And as we all in the private sector, running our businesses, well know there is nothing like this to sap the dedication and motivation of the best workers, and reinforce the worst ones' conviction that working hardes is for fools.

God bless the Scots!

It took 10 years' of pathetic display of incompetence, but even in Scotland voters gave a good kicking to Labour's tax & spend policies.

I don't know (and, not being Brit, not much care) as to whether this will eventually lead to independence for Scotland (if this is what the Scottish people ultimately want, so be it) - what it really gives me a great sense of hope that, despite Labour attempts to "drug" the proud people of Scotland with handouts, benefits and pointless welfare initiatives, they got the kicking they so richly deserve.

I now feel a lot better about those £1,500 a year of my taxes (this is true of every taxpayer in England) that are funding some Scot's welfare subsidy - go ahead, mate, enjoy it: you deserved it!

Postscript
I was in Edinburgh over the Easter weekend and I was absolutely blown away by the beauty of the city and the kindness and warmth of the people there - we will definitely be going back with my family, we are all really looking forward to a tour of the great Scottish castles.

And, I suppose, it also helps the fact that I'm in absolute love with the Scottish accent - my only regret is that I'll never be able to fake it ;-)

"No Policies"

They just don't get it, it is such an alien concept to Labour that, when one tries to explain to them that the State cannot regulate every single aspect of people's lives, their first reaction is "yes, but you are not proposing any policy!"

Well, that was the whole point, wasn't it?

The latest example was David Cameron's assertion that thousand of ASBOs, countless police targets; an avalanche of new laws; and, generally, a legislative hyperactivity; were doing nothing to make our society more secure - in fact, by clogging the system and drowning the police and the judiciary in mountains of paperwork, they were causing more harm than good.

So he suggested removing all the bureacracy and meaningless ministerial targets, setting clear guidelines, streamlining the criminal code, and then expecting people to follow those guidelines by acting responsibly. Or else.

To me, that sounds sensible stuff - if you want someone to act responsibly, you must give that someone some responsibility; or they'll never ever learn how to.

Take ASBOs, for example (those are "Anti-Social Behaviour Orders:" essentially, restraining orders placed mostly on mis-behaving youths and banning them from being out after a certain time or being in certain areas or associating with certain people).

They are hailed by the Labour Government as a big success and one of the main means they have reduced local crime and vandalism.

Perhaps.

However, it recently emerged that, far from being scared by them and cowed into leading a quiet and tranquil life as moody teenagers, actually many of these "looting youths" see ASBOs as a badge of honour and they actually seek to get them and then brag about it (whilst at the same time, happily breaking them all the time, because there are obviously not enough police resources to keep tabs on them all).

And similarly for police targets: excellent idea, in theory; in practice, they require such huge effort and time wasted in paperwork that, effectively, the very existence of targets causes a drop in police productivity.

And I could carry on, talking for example about the literally thousand of new laws introduced by Labour over the past 10 years: each one of them perhaps excellent and laudable, yet their collective effect causing such confusion, so as to reduce the effectiveness of the judiciary system overall.
And that not according to some opposition MPs or libertarian activist, but to some very senior judges.

I believe the time is now right to reverse this lamentable state of affairs and recognise that the State cannot regulate and oversee over all of society's activities: people don't always eat as healthily as we would want them to, they don't seem able to quit smoking, they are not always as good parents as we would wish them to be, and they not always seem to want to work as hard as we'd expect them to.

Well, maybe that's life and one should accept it.
Or maybe they would behave more responsibly, if, instead of treating them as toddlers throwing tantrums, we were to give them the opportunity to learn and accept their individual's responsibilities.

So, yes, less policies. Or no policies at all.

And that's exactly my point.

Blowing it

Apparently, the self-styled "prudent" and "knowledgeable" Chancellor of the Ex-chequer, Gordon Brown, blew £2bn (that's 2,000 million British pounds - no less!) by selling off UK gold reserves at the bottom of the gold market.

And it's not like we can blame bureacrats or grubby, greedy investment bankers: pretty much everyone (from Bank of England officials, to City traders, to consultants) tried to talk him out of his idea of selling off the family gold.

Alas, Mr Brown being a true Scotsman firm in his beliefs and values (or a stubborn, "stalinist," pig-headed and arrogant autocrat - depending on who you listen to) would not be so easily diverted from his chosen path.

That resulted in a net loss, for the taxpayer, of around £2bn - a loss, no doubt, that our taxes have been funding since.

This coming just shortly after the revelation that that one other of Mr Brown's most famed acts (the so-called "pension raid") was taken against the advice of experts and industry bodies (most notably, the CBI) would dent, one might think, Mr Brown's own assertiveness in depicting himself as a "competent" Chancellor.

He doesn't seem to think so, though.
Nor apparently, do share this view his supporters - who (rather amusingly, I must confess) keep stating that "experts were consulted," forgetting however to add, yes, they were indeed consulted and they all told Mr Brown that what he planned doing was complete nonsense.

I also find rather amusing that the ONE choice he is quite rightly praised for (giving indipendence to the Bank of England to set interest rates) is also used by Mr Brown to assert his own "competence."

In reality, what he did was to essentially say: "politicians cannot be trusted with such choices as setting interest rates and, generally, making sound economic decisions. I am thus excusing myself from this responsibility, and am asking someone who seems to have a certain grasp on the matter to do it on my behalf."

Fine, right. No quibbles with it.
What I do quibble with, though, is the fact that one then, 10 years on, goes on to say: "Hey, look at the folks at the BoE - how well they've done to steer the economy clear of recession. I asked them to do it for me, and look how good the economy is (despite all my tax & spending, by the way). Surely, that is because I am a competent fellow."

That, I was once taught at school, would be called a "non sequitur," marked with a red pen in any essay.

It would be a bit like I'd claim myself a genius of the DIY because I hired a good builder and the extension's roof, 10 years on, hasn't yet collapsed on our heads.

And that against all evidence to the contrary, proved by countless (albeit non-fatal) DIY disasters I committed because of my not listening to others' suggestions to leave it to the professionals.

Prime Minister Brown - can't wait for it: what a wonderful material for this blog he promises to be!

Throwing a tantrum

Sometimes I feel like an alien just landed from Mars, such is my utter incapability of figuring out what really the point is...

Take, for example, the recent news from the Times (as reported by the BBC) that Dr Boston, chief executive of the Qualifications and Curriculum Authority (QCA), is advocating scrapping exams for the 11- and 14-year-olds.

This follows, by only a couple of weeks, an announcement that 4- and 5-year-olds would be "assessed" prior to entry to pre-schools.

Now, let's get this straight. The Government is actually proposing to assess a child's abilities on the basis of some assessment criteria (no doubt, thought up by some highly experienced and knowledgeable academic) at the age of 4, but is happy to consider scrapping exam test for older children (and replacing them with 'random samples').

As I said, I really do struggle in seeing the point.

For a start, what is the point of assessing 4- and 5-year-olds? who will benefit from it? what will the use be? what are we doing with the ones that turn out to be dimwits? what about those who would score highly? shall we fast-track them to GCSE? (well, given current standards, they might actually pass them!)

As for scrapping exams, I can see why teachers are doing somersaults of joy at the sole thought: it was the only glimmer of accountability for a profession that has been remarkably left untouched by centuries passing.
The fact that now parents had a more reliable (and objective) metric to measure a teacher's perfomance (as opposed to relying simply on the darlings' comments) must have kept the entire profession on the verge of nervous breakdown.

We, the normal people, those who measure ourselves daily against competitors, the market reality and customer expectations, know all too well what it means to be accountable, to have one's performance assessed against (and, usually, by) peers and to accept the possibility of failure.
Teachers, academics, and public workers in general, live in this rose-tinted world where performance is optional, no objective assessment of one's capabilities is ever possible (or even considered acceptable) and where one's career progression is based on seniority, political acumen and connections, but never on ability or achievement.

Objective exam tests (with all their shortcomings and the disgraceful "dumbing down" sham so shamelessly exercised by Blair's officials) were a means (albeit a timid one) for parents, and other stakeholders, to assess, on a supposedly objective basis, a school's performance and a teacher's abilities - unconstrained by the individual pupil's abilities.

It was too good to be true, and it was only a matter of time for the lethargic, yet powerful and (lest we forget it) Labour-funding, teachers' establishment to fight back to try and revert to "good old days."

It may be too late, however: we, the parents, have now tasted the forbidden fruit of knowledge, and may be quite unwilling to let go of it...

Time 2 Lv ?

So it looks as if, after many disappointing starts and outright failures, we have finally found the solution to the problem of illegal immigration.

Yep, the Home Office cracked it - a stroke of genius or the result of long hours of analysis and extensive consultants' studies, we are not given to know - but it is at long last with us: the ultimate solution in forcing illegal immigrants to face up to their despicable behaviour and convince them to abandon their ways (and the Country) for good.

And it was all so obvious; we had been staring at it in the face for years, and yet nobody realised how powerful this would have been - it took the indefatigable dedication, professionality and inventiveness of the Home Office staff to figure this one out.

So, starting from an as yet unspecified (but we all hope imminent!) date the Home Office will start sending text messages to "foreign visitors" (apparently, "bloody immigrants" was deemed too strong a language) reminding them that their visa is to expire and they should make preparations to leave the UK.

I can already picture them: scores of illegal immigrants, all of them anxiously peering at their mobile phones (was it a text? is it Abdul at the pub, or the Home Office? should I open it?) and then rushing off on the first Piccadilly tube heading off to Heathrow, without even bothering packing up...

Maybe not.

A more sane person (read: someone not working for the Home Office and not desperate to find some ways to make it look like they are actually doing something) would have had a few doubts about the scheme.

For example, given that they do not even know the names of most illegal immigrants, how on earth are they supposed to know their mobile number?

And even of those whose names are known (the mind springs to the 7,000 "foreign criminals" whose files were left to rot in boxes in some Home Office basement) they are hardly likely to be on some sort of computer system so as to enable automatic sending of those messages.

I can already see scores of "temporary" Home Office employees, sitting at their desks and furiously typing the texts to thousands of foreigners....

The other pitfall being, obviously, that mobile phone companies (being just a tad more astute than the Home Office) are quite unlikely to give a contract rental to people without the necessary paperwork - hence, most of them will have pay-as-you-go contracts (critical for them to manage their prostitution ring or crack dealership or whatever else it is that foreigners get into when in UK - I personally started two businesses, both of them engaged in legal activities, I hasten to add) which make them just a trifle difficult to trace back to the real owner.

Hence, even assuming the Home Office to be vastly more efficient than we know it to be - even assuming that they can actually trace a mobile number to a "foreign visitor" overstaying her welcome - even assuming that the computer system in place, in a complete break with tradition, will work as intended - it is rather obvious that even the more anxious of the illegals, wanting to go beyond just having a laugh at the Home Office and its hapless Minister and just delete it, can simply take out the SIM card, throw it in the Thames and buy a new one at the nearest Tesco store, all for a tenner!

In the meantime, we, the taxpayers (yes, sadly, despite being a foreigner I do pay taxes and a shedload of them - in fact, a lot more since bloody Gordon decided to squeeze Middle England's pips) will be facing a bill of several £m's completely wasted in a useless scheme.

It is in days like these that I start to believe in the Original Sin - there is, in fact, no way I can have racked up enough evil deeds in my life to deserve such a desperately superficial and hopelessly incompetent bunch of dimwits to govern the Country I live in.