On Bullshit

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Marianne shared this excellent link today. In the article, Henry Scowcroft (a communicator for Cancer Research UK) argues that economics communicators should be more like science communicators and, well, communicate.

I’ve blogged before that economists, accountants, politicians, tax bods and so forth, need to speak plain English, stop obfuscating and let the people who are affected by decisions understand decisions made in their names. We shouldn’t be afraid to stop experts and ask them to explain their terminology. This stuff should be simple.

Sure, some communication is at a very high level and techie, such as in academic media or at a conference, but I’m talking about when these people turn up on Newsnight, in the papers, in your local pub or similar. At that point, they should respect the audience and think about what message they’re trying to get out.

If you don’t own the knowledge, you can’t inform the decision and you can be bloody sure that someone else without your best interests at heart will clue themselves up and get involved instead.

The only message most ‘communicators’ are giving at the moment is that these difficult things are just too darn complicated for you poor little children. We’re going to have a few talking heads talk above your understanding just to show you with jolly long words that you really don’t get it. You’d best toddle off now and let the grownups carry on with the adult stuff.

And that isn’t on. Invariably this is your money, your body, your country. You’re not children (unless you are, in which case, hi, sorry for the swearing!) Everybody needs to challenge the experts to be more accessible, because there really are some amazing communicators out there, whether they’re a physicist, a doctor, an economist or whatever. Seriously – here Brian Cox explained quantum theory to a bunch of celebs and he made it so simple. Everyone can either do that, or get out of the way for someone who can.

Next time you see someone chucking long words around like bullshit artillery, ask yourself what their goal is; because if it isn’t to communicate, it’s almost certainly to hoodwink or rip you off.

And then pull out your bullshit shield of obstinate scepticism. (This looks and sounds rather like just saying ‘why?’ a lot, to the casual observer.) Once someone has offered to communicate with you, make them do just that. Close the door, sit them down, and jolly well interrogate them until you are happy that either you understand enough to form an educated opinion or enough to know that you really don’t care.

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Rental agent fees

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My personal first choice of charity to support is usually Shelter. They do amazing work. Many people think that they work with the homeless to get them under a roof, but in fact many of their campaigns are to make the housing market fairer for those already in a home.

Current campaigns, for instance include building more affordable housing, fighting the incredibly unfair bedroom tax and dealing with rogue landlords.

But I have noticed that some people are tweeting about a campaign that they currently have to end letting agent fees. This tweet from @KellyMarieLD is a good example:

1 in 7 renters who used a letting agency paid more than £500 in fees. Sign @Shelter’s petition #endlettingfees http://t.co/Mzbjth4HUO

— Kelly-Marie Blundell (@KellyMarieLD) July 2, 2013

This particular campaign, I think, is ill thought through.

Let me just be absolutely clear: estate agents are indeed not a nice lot, are venal and generally a dishonest, short-termist, hateful bunch of BMW Mini-driving oiks.

But regardless of how much we dislike them, they perform a role (however inefficiently) in the process of linking the UK’s 9 million privately renting tenants with their landlords. They perform various services for the landlords, such as showing prospective tenants round flats  (compact and bijou, Mostyn, compact and bijou), performing credit checks, gathering references etc. They might do a generally slapdash and awful job of this and charge an absolutely scandalous amount for it, but that’s a separate matter. The market has driven itself to the bottom and stayed there for many years; but these services are provided, however badly. And for that, these bottom-feeders do require some recompense.

Unfortunately.

At the moment they are paid by the tenants. The market has set the rate for these services, however high and profiteering that may be. This is the value that the market has set on the agents’ time and effort.

Now Shelter feels that these fees are totally unfair and should be made illegal.

But if the tenant doesn’t pay them, the agent will still want to be paid and the only other party in this contract is the landlord. But the landlords themselves are a profiteering bunch of capitalists. What they will do with costs is incorporate them into their financial model, add an uplift for opportunity cost of that money and raise rents accordingly.

The landlord, rationally, will spread this over the normal tenancy (probably 12 months), but not give a discount after this.

The result of Shelter’s proposal, I suggest, is likely to be an increased overall cost to anyone renting more than 12 months, who will effectively be paying those inflated fees on an annualised basis, but to the landlord instead of the agent.

Now I know that fees are illegal in Scotland, but have not seen any good studies on the effect on long term rents, compared to the similar time period in England where fees are still allowed.

But I know one thing for sure; those agents aren’t going to do that work for free and in the end the only income stream either the landlord or agents have is the tenants.

Maybe the solution is not to ban the fees, but better regulate landlords and agents, and set some centralised fees to provide equilibrium in the market?

What is wealth?

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My good buddy Michael Story posted the following tweet this morning:

World Income Inequality: The poorest 5% of Americans are richer than the richest 5% of Indians marginalrevolution.com/marginalrevolu…

— Michael W Story (@MWStory) June 6, 2013

Which started a little debate as to what ‘wealth’ means.

Which of these following 4 people do you think is the ‘wealthiest’?

a)      A person who earns £100k per year but due to circumstances has no outgoings. They pay no tax, no mortgage or rent. Their food is paid for. Every penny of gross income is disposable income.

b)      A person who earns £100k per year but due to circumstances has (reasonably) unavoidable outgoings in excess of £100k per year. Their net income is below zero.

c)       A person who has no income but has gross assets worth £1m. They have liabilities (debts etc) in excess of £1m. They must generate income from or divest themselves of assets in order to live including servicing liabilities.

d)      A person who has no income but has gross assets worth £1m. The assets are entirely unencumbered. They have no liabilities. They must generate income from or divest themselves of assets in order to live.

Many articles, including the one linked in the tweet above treat gross income as synonymous with wealth.

They are not.

Wealth is a measure of net assets, not of gross income. To conflate the two is pure hyperbole. Just because one has a high paying job or living in a big house does not make one wealthy.

A story of two taxpayers

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Imagine the following situation: you and your friend work for different companies, you both work hard and for your efforts in very similar jobs have secured mid-tier positions with decent salaries and reasonable but not incredible bonus packages. The bonus packages, as is normal, are linked to the performance of the company overall; to incentivise you to go the extra mile at work.

In other words, you’re just like a large number of people in this country.

The end of the year comes and your firms announce their results. The headline figures are really good, everyone’s worked hard, and profits before tax are very healthy at both companies. You are looking forward to a nice bit extra to maybe pay off some debt, or take the family on a nice holiday.

But your company, unlike your friend’s employer, has bowed to the pressure put on the industry by Margaret Hodge, UKuncut, some press hacks and some left-wing tax ‘experts’. As such, your company has elected to pay more than its fair share of tax. It has not elected to take advantage of any of the perfectly legitimate tax loopholes designed to help companies in your industry. It has not structured its corporate arrangements to take best advantage of legal tax jurisdictions around the world. It has not paid an advisor to help it pay exactly its legal fair share of tax; instead, it has just paid a high headline rate and not sought to minimise this in any way. A large slice of the pre-tax profits go to The Revenue instead of into the bonus pool.

So your end of year pay packet is significantly less than that of your friend. In fact, because, as is normal, the bonus pool targets are industry benchmarked, you don’t get a bonus at all. Your friend, though, gets a lovely bonus. They choose to take the family off on holiday and let you know how nice it is with some pictures on Facebook.

When the companies’ annual results are announced to the market, it is clear that your company and that of your friend have both been really busy, with healthy turnover figures, but that your board of directors has chosen to pass the rewards of your hard work to HMRC, instead of in dividends to the shareholders who own the company.

The shareholders are absolutely livid. Some sell their shares in fury, making the share price go down. Others object at the AGM, causing chaos with the company brand as the shareholders are clearly at odds with their board of directors. Because of the this, the share price falls further.

As is usual, some of your bonus is paid in shares, to incentivise you to hang around longer at the firm. Now your share options are almost worthless. You only get a long term incentive plan payout if the shares rise in value. Instead of adding share value, your company is tanking. Your friend, however, is really pleased. Because of their post-tax results, their share options are worth a healthy sum. When they pay out, your friend pays off their mortgage early and moves to a big new house with a with a nice garden and a lovely new car on the drive. You can’t afford to do that.

But, you think, at least you work for an ethical company that chooses to act in a socially responsible manner. You can always feel good about that. Apart from that your employer now has much less cash in the bank so cuts back dramatically on non-core activity, such as its outreach, education and CSR programs. Your friend’s employer has increased all of their CSR, giving more back into the community, to support some social programs that the government austerity measures have axed. Your company’s extra tax paid for a little slice of Trident missile. You feel less worthy about that.

Your friend also likes being ethical and generously donated a large portion of their bonus to charity. You have had to cut back on your charity donations, because fuel has gone up, inflation is rife and frankly, bread is more important than roses. You really would love to help some worthwhile causes, but not this year. This year you’ll have to turn a blind eye & hope your need to heat the house doesn’t cost someone else too much. There’s always next year. Let’s hope that the government is spending that extra tax wisely on things that matter, like A&E departments.

Times are tough. People would love to vote with their money and shop ethically, but in these austerity years people are trimming back. They used to value the ethics of a brand but to be honest simply can’t always afford to do that any more. Instead, they buy the product from your friend’s firm, which because it pays only the legally required amount of tax, can afford to be a little bit cheaper than your company, but still maintain its bottom line. So your sales start falling. It doesn’t matter how hard you work, you’re just not as competitive.

If you even still have a job, that is.

In the mean time, politicians remain ignorant of the real-life effect that their proselytising has and continue to pass judgement on companies that follow the letter of the law, putting pressure on consumer focussed brands to pay more tax than they need to, making large employers uncompetitive.

But your employer was never doing anything wrong; and nor now is your friend’s employer. As the old adage goes, tax evasion is when you do something wrong; tax avoidance is when the government does something wrong.

Rather than change the law and maintain a level playing field between your employer and that of your friend, the politicians remain ignorant of the real-life effect that their words have and continue to pass public judgement on companies that follow the letter of the law, putting pressure on companies that are scared of the negative headlines to pay more tax than they need to. It is a hell of a lot easier for a politician or a hack to pick on the easy target than try to understand real tax law. Tax law is complex. Let’s just churn out sound bites about big brands. let mob justice rule, rather than do any hard work fixing the system.

By doing this, making the public focus on brands they know, they wilfully distract from little known companies like Stemcor, which pays only 0.01% tax. Stemcor, that is, that is owned by Margaret Hodge’s family.

The way to make things fair between you and your friend is to make sure that tax law is simple, that every company can easily pay a rate of tax that reflects their position in the economy, that gives incentives to certain industries and structures that as a country we have chosen to champion, that allows the companies to compete on a level playing field.

Then, when hypocrites like Margaret Hodge or the Guardian start spouting on about what is a fair amount of tax or not, you and your friend’s employers can both tell them to push off and focus on the people who can really make tax fair – the politicians.

Tax law is complex, unjust, and not accessible to all. The only way to fix this iniquity is to change the law. Not to give media time to hypocritical, narrow-minded ignoramuses. Next time someone attempts to lecture you as if they’re an expert on tax, be skeptical and make sure they are actually an expert on tax.

Iron Man 3 is shit

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I was never a huge fan of comic books – they’re just not my medium. I do, though, really enjoy the characters and plots that come from the genre. Like any good sci-fi, the method of slightly twisting the rules of the recognisable world is an easy way of exploring a thought experiment & having fun. Because of this, I really like comic book adaptations. Movies are a medium I enjoy and seeing these larger than life characters on a big screen with big bangs and explosions generally makes me a happy boy.

As long as they’re done well, that is; like Batman Begins, or Iron Man 1, or the 1978 Superman movie. As such, I have been excited for a long time about Iron Man 3, one of my favourite flawed characters, in a techy/geeky franchise – it appeals directly to me. I’d enjoyed Avengers Assemble and had high hopes for this latest Marvel film. Last night I headed out with my flatmate and another friend to see it in 3D.

It was not done well. In fact, it was so poor that they should now take Tony Stark’s silly suit, put the 1983 Superman in it, cover it respectfully with Batman’s redundant black cape & dump them all together in the Marianas trench with Optimus Prime.

If you haven’t yet seen Iron Man 3, this following post is full of spoilers; I would suggest that if you’ve not seen the movie to not read on, but as my recommendation is that you don’t see the film anyway, it won’t matter.

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