Sunday, 29 March 2009

MPs' second homes? This is where the big money is.

For some reason my mother used to think that I should become an actuary. I didn't, but this is really fascinating stuff. Ladies and Gentlemen, I present the Lothian Pension Fund actuarial valuation as at 31st March 2008!

Here's the Executive Summary:

The results are presented in this report and summarised below.

The Fund’s objective of holding sufficient assets to meet the estimated current cost of providing members’ past service benefits) was not met at the valuation date. The funding level was 85% (compared to 85% at 31 March 2005) and there was a funding shortfall of £524m.

Without anticipating an element of future equity out-performance, the ‘gilt-based’ funding level would be 65% at the valuation date, and there would be a shortfall of £1,579m. The Fund’s financial position at the valuation date is illustrated graphically in the chart below.

The employers’ average future service contribution rate as at 31 March 2008 (ignoring the past service shortfall) is 17.1% of pensionable pay. Assuming that a funding level of 100% is to be targeted over a period of 20 years, the common employers’ contribution rate is 22.5% of pensionable pay. These figures take advance credit from outperformance of the Fund’s assets relative to gilt yields on the valuation basis, as set out in the Funding Strategy Statement. Ignoring this credit for outperformance the funding position would be 64%, and the common contribution rate would be 42.0% of pay.

The actuary makes various assumptions. One is that mortality rates will probably improve - there'll be nae bevvying in the new Scotland. But on the other hand, "the increase in childhood obesity may result in a decline in longevity in future generations." Lose some; win some, as the actuary would put it.

So all of those local authority "non-jobs" that we read about in the press a week or so will ago actually cost the Lothian taxpayer 22.5% on top of the quoted salary. Plus employers' NI of course. The rate was 19% at the last valuation three years ago. But note also that the actuary assumes that the fund will make a future "outperformance" over the returns available from gilts. But should that not be achieved:

the common contribution rate would be 42.0% of pay. !!!
And this is all based on the fund valuation as at 31 March 2008. I see that the actuary says that employers' contribution rates would have to be 25.3% were he to use market data as at 13th February this year.

I conclude that the Lothian council taxpayer is screwed. Like the rest of the UK.

Saturday, 21 March 2009

No bailout, even for Dunfermline!

That should be the message, both from London and Edinburgh:
SNP ministers are preparing to organise a multi-million-pound bail-out to save the troubled Dunfermline Building Society, The Scotsman has learned.

It is understood the Scottish Government is prepared to pump a significant sum into the embattled mutual – possibly as much as £25 million – if this can be done legally and without breaking the rules of the devolution settlement.

Of course, this is clever politics from Salmond:
For them, this is a "win-win" situation. If ministers succeed in keeping DBS viable as a independent Scottish institution, they will have proved the Scottish Government has the ability to spark change for the better in financial organisations. If they fail, they will claim they were hamstrung by the devolution settlement and put immense on the UK government to bail out the troubled building society.
But a bailed-out DBS wouldn't really be independent, would it? The government, Scottish or British, would pull the strings.

At some point it will become clever politics for someone to say "No!" We haven't reached that point yet but we're probably getting there. If the banking crisis had happened six months earlier it's quite possible that Ron Paul would be President of the United States and Messrs Brown and Salmond would be looking very, very silly.

Friday, 20 March 2009

No bailouts!

Andrew Lilico is correct. HBOS and the Royal should been allowed to go bust. And I say that as someone with an HBOS ISA account.

Kevin Dowd explains why at the recent Libertarian Alliance Chris Tame Memorial Lecture:

Call to disband all police forces in Scotland

That was the headline in the Herald today. Of course, that's not what they actually meant:
The head of Scotland's policing watchdog has called for a radical restructuring of the country's eight forces to create one single police service.
Who exactly is this "watchdog"? It turns out that he's nothing less than:
The former chief constable of Lothian and Borders Police
Isn't this typical of the state sector? Respond to legitimate concerns by appointing an insider as "watchdog". Far from amalgamating our police forces we should consider making them truly accountable to the public. That means electing Chief Constables. Note the plural.

Tuesday, 17 March 2009

St Patrick's Day

View on the way to work:

Originally uploaded by David Farrer

View from the window:

Originally uploaded by David Farrer

View on the way home:

Originally uploaded by David Farrer

Centralised Britain

Or rather, not centralised!

One of my clients in Edinburgh is registered with Entrust, a government body that deals with landfill sites. The organisation doesn't have or use any such sites but probably did years ago. It doesn't cost anything and all we have to do is send in a "nil" return each year. Perhaps membership may be useful in the future.

Anyway, today we received the annual return together with a letter that says:

I write to you that following a strategic review of its operations, ENTRUST's Board has decided to relocate its offices from Acre House, Sale to Leamington Spa. In reaching this decision, the Board has considered the requirement for ENTRUST to more effectively serve the needs of its stakeholders and has taken into consideration a number of important factors, including:

Allowing ENTRUST to be more centrally located in the United Kingdom to provide an enhanced service to its stakeholders

But they're now less centrally located in the United Kingdom. The mid-point of the island of Great Britain is around Kendal in Cumbria. Including the offshore islands it's in Dumfriesshire. In Sale they were already in the South, now even more so. Private companies can locate wherever they want, but government organisations shouldn't be concentrated in the expensive southeast. No wonder folk up here vote SNP.

Monday, 16 March 2009

Useful Idiot of the Week

The award goes to Charles Cotton who is reacting to this news:
Large companies could be forced to reveal the pay gap between the salaries of male and female staff, under plans being considered by the Government.
It's clear that the next step will be compulsory changes in pay scales. And what does Mr Cotton have to say?
"There is a business case for ensuring all employees are paid fairly and equally according to their skills and contribution, not their gender or any other irrelevant attributes.

"But this case is likely to be harmed not helped by blunt legislative measures at a time when businesses are struggling to stay afloat."

If there's a "business case" for doing something then business people will do it anyway. Why should anyone else be involved? And are "blunt legislative measures" OK if the economy recovers. I note that Mr Cotton is a spokesman for the Chartered Institute of Personnel and Development. My own company employs just one person - myself. I can't afford to employ a personnel manager. But the companies that can will generally be able to absorb the costs of these changes. Some small companies will be wiped out. Is that the plan?

Sunday, 15 March 2009

The Royal Bank

Speaking at the Lib Dem conference, Vince Cable spoke about the Royal Bank crisis:
The collapse of the Royal Bank of Scotland would have wiped out the budget of an independent Scotland, the deputy Liberal Democrat leader said.

Vince Cable said the RBS balance sheet was 15 times the size of Scotland's gross national product

Well, let's see. I recommend looking at Calum Cashley's response:
Vince Cable, old buffer of the Liberal Democrats and former Glasgow Labour councillor, has claimed that the RBS balance sheet was 15 times the size of Scotland's Gross National Product, implying that this makes Scotland too wee or too poor to be independent.

How does he know that? Owing to the complexities surrounding the estimation of GNP no official GNP estimates currently exist for Scotland (penultimate page). The best you can get is GVA - doesn't have the international earnings component of GNP - Scotland's was £98.5 billion in 2007, a per capita GVA for Scotland of 96% of the UK's. The oil industry had a GVA of £30 billion (not included in Scotland's total).

RBS's balance sheet was standing at £1.9 trillion at the end of 2007 - will be substantially less now - one fifteenth of which would be £126.67 billion, so to make Cable's calculation work you'd have to have £28 billion of overseas earnings for Scots (including Scottish companies) - or we can have our oil back, thanks. It's quite possible that Scots earned that much elsewhere in the world. Quite possible and totally unimportant. The UK GVA in 2007 was £700 billion short of the balance sheet value of RBS' assets - that means chuffle all either, all the money for the bank bail-out is borrowed, the UK can't afford this bail-out just as the US can't afford the money being stuffed into its banks.

I hope that Calum doesn't mind my copying so much of his post, but I'm rather fed up with the unthinking claim that an independent Scotland would necessarily be unable to support itself.

Now, I enjoy counterfactual history as much as anyone. Allow me to indulge.

Scenario A:

An RBS in an independent Scotland isn't allowed by the English authorities to take over NatWest. The Royal continues being a smallish conservative Scottish Bank and Fred the Shred leaves the Clydesdale and moves to London to perform his miracles down there.

Scenario B:

Somehow the Royal does buy NatWest and finds itself in a battle with Barclays to purchase ABN Amro. The English authorities are annoyed enough at the Royal being so big and put pressure on the Dutch to go with Barclays. A short while later it's Barclays that's going down the plughole - perhaps even under Sir Fred's leadership!

Scenario C:

The Scottish Government has appointed yours truly as Governor of the (Central) Bank of Scotland. I persuade Prime Minister Cashley that Scotland shouldn't have a Central Bank! A libertarian monetary policy is introduced. It is made quite clear in advance that the Scottish Government will not bail out any company, including banks. Depositors wisely spread their money around. Local savings banks are restarted and prosper. "Know Your Customer" means playing golf with them, not creating a database. More and more banks offer gold-backed notes. In such a climate it's unlikely that a Scottish-based bank would get bogged down in the bizarre world of derivatives and credit default swaps. But let's suppose that somehow the Royal has done just that and goes pear-shaped. What then?

What happens then is that Prime Minister Cashley says: "Nothing to do with us, Gov" and "Not a penny from the Scottish taxpayer. You ken noo..." The world's financial community is shocked and Scotland is traduced in the international press.

But two years down the track things are different. England and the USA have poured trillions into bailing out their fractional reserve banks and all to no effect. Their public finances are in ruins. And Scotland? Well we're sitting pretty. Everyone now sees that it was the others who were out of step, not us. The Scottish financial regime is seen as the soundest in the world and we all live happily ever after.

See you leftie!

It's good to see Za-Nu Lab being hoist with its own petard:
I don't speak Glaswegian: Labour chief in racism row after 'Can you translate that' remark to Scottish activist

Saturday, 14 March 2009

Will Russia invade Scotland?

Jeff Nyquist's latest piece is interesting:
The Russian intelligence services have long tracked economic, financial and demographic changes in the United States. Russian analysts know that certain trends lead to political crisis. Such trends include ethnic balkanization, an ideological split in the ruling class, rising indebtedness, economic collapse, and declining moral standards. A country like the United States is ripe for civil war. If this should happen, foreign powers would intervene and the country would be split along geographical lines: California and the West would fall under Chinese control, Texas and the south would go to Mexico, and Russia would lay claim to Alaska. “It would be reasonable for Russia to lay claim to Alaska,” says Panarin. “It was part of the Russian empire for a long time.”
Those symptoms seem remarkably familiar to us in Britain, do they not?

Ethnic balkanisation is going to be a huge problem in the UK. And I'm thinking of Bradford, not Bannockburn. The economic and moral problems are just as significant here as in the US. I am certainly not the only blogger who fears civil war in this country. It's not at all clear who would win a battle fought between the state and the people. Or rather between the tax-consumers and the taxpayers. Scotland would not be able to sit that one out.

Although I do have some sympathy with the cause of Scottish independence I find the SNP's old-time anti-NATO stance to be worrying. The Freedom and Whisky master plan remains valid. These islands need to be defended collectively against foreign aggressors. It's very naive to think that for us all wars are in the past. If the Russians take Alaska, why not Aberdeen? And we don't even have Sarah Palin...


Neil Craig writes about the "Liberal" Democrat conference:
Taken all in all the LibDems Conference get their funding overwhelmingly from the state, some via middlemen. This perhaps explains why all of the motions under discussion involve more regulation, government spending &/or taxes & none of them endorse anything the founders of liberalism would have recognised as such.
The trouble is that it's not only the "Liberals" who are illiberal, that's true of all of the mainstream parties here in Scotland. The same's the case almost everywhere else of course. Except, that is, on the Internet. It's like a parallel universe out there. Politicians, newspaper journalists and television presenters are running around like headless chickens with no clue as to how to deal with the economic crisis. But the truth is out there.

Things are quite different from the recession of the 1970's, which coincided with my discovery of libertarianism and Austrian School economics. Back then one had to be extraordinarily lucky to come across the likes of Mises, Hayek and Rothbard. Now correct explanations of why the crisis arose are just a few clicks away. But still the establishment doesn't get it. Or perhaps doesn't want to. I wonder if we're going to see one of those paradigm shifts after which everyone will be claiming to have known what was going on all along.

Sunday, 1 March 2009

The Rule of Law and how to protect it

The Belmont Club is my favourite blog. It is far better written and more informative than almost anything in the "Mainstream Media".

"Mainstream"? For how long?

I've been reading a fascinating thread on the outcomes that may be expected from the recent socialist takeover of the United States. The Belmont Club is written by Richard Fernandez, a veteran of the Philippine struggles against tyranny.

He writes:

The mistake most amateurs make when faced with a crisis that may involve violence, etc is to become obsessed with underground activity, illegal actions, etc. Bringing down even a dictator is 95% legal organizing and 5% clandestine work. The reason for this is that most people are too scared or unwilling to break the law and rightly so. So the most effective resistance to tyranny happens when you take the law at its word and demand your rights. Eventually a real tyrant must either yield or show his true colors. We used this ploy time and again to force the crisis. It’s always a lose-lose for the dictator; and an aggregate win for the rebels. I must say though, that the fact that you are acting legally doesn’t mean you are risk-free. If things get bad, there’s really no distinction between acting legally and acting clandestinely because the dictator doesn’t split hairs.

But returning to 21st century America, the only advice I can give is to maximally use the liberties allowed under the law and the Constitution. There’s a lot of space there and I believe it has hardly been used. From the courts, to local politics, to media campaigns, to civil disobedience — there are lots of levers yet to be pulled. I think it would be immoral for anyone to go all apocalyptic on the Republic and take to the hills like some kind of militia group, besides being impractical, because there are lots of things that have yet to be pushed to their fullest legal extent. But there’s another reason for exhausting all the remedies under the Constitution. Afterward.

It will be a hollow to gain a political victory at the cost of destroying the framework you were trying to preserve. One day there will be another party, another political movement, another set of views in Washington. And on that day you want the Constitution whole and inviolate; because that scrap of parchment represents a hard won set of rules which by common consent defines legitimacy.

We are in the path of the storm. Men of goodwill should get involved; they should prepare to pay some price for their involvement. But for the moment, it’s all hands on deck and none below.

Richard is correct. As much as we may want to "string 'em all up" (and justifiably so), we've still got other opportunities available.

As Mr Fernandez says:

take the law at its word and demand your rights
And so, much as I too want to "string 'em all up", I'll be voting in the next General Election. For me it's simple. See who's most likely to defeat Gordon's stooge and vote accordingly.

The Rule of Law - who needs that?

Let's imagine that you're a Cabinet Minister of a country that depends on international trade and finance to pay the taxes that keep it going. Or rather, to pay the taxes that keep your own party going. The one thing that you'd be most careful about was your country's reputation as a bastion of the rule of law.

Step forward Harriet Harman:

"Sir Fred should not be counting on being £650,000 a year better off as a result of this because it is not going to happen," she told BBC1's Andrew Marr show.

"The Prime Minister has said it is not acceptable and therefore it will not be accepted. It might be enforceable in a court of law this contract but it's not enforceable in the court of public opinion and that's where the Government steps in."

I repeat:
It might be enforceable in a court of law this contract but it's not enforceable in the court of public opinion and that's where the Government steps in
This is anarchy, some will say.

Not so. Under proper anarchy we would see the rule of law being rigorously enforced.

Of course Sir Fred has been a prat. Of course the directors of RBS should have reined him in. Of course RBS should have been allowed to go bust. But the law says that he's entitled to his pension, and that's that. God help us all if Harperson becomes Prime Minister.

Rand was right

I really don't care too much whether Ayn Rand was or wasn't a brilliant literary stylist. What matters is that she showed millions of people why freedom is right.

The world is in a mess today because too many people haven't read Rand.