Friday, October 19, 2007

That 37% figure in full (well, mostly)..

Inspired by Chris Paul and Iain Dale.

With the recent furore over inheritance tax, an oft quoted figure has been that 37% of households are liable for inheritance tax. The have based this on the following calculation from Scottish Widows (link goes to the cache of the now dead http://www.scottishwidows.co.uk/documents/generic/2007_IHT_new_thresholds.pdf).

You Gov surveyed a sample of the population and found that 37% of people had houses worth more than £210,000. It then made an assumption that these people also had assets of at least £94,290.

The following breakdown was assumed:

£80,636 - Life assurance and pension funds
£28,907 - Non Financial Assets
£30,001 - Securities and shares
£41,838 - Currency and deposits
£7,837 - Other assets

Giving a total of £189,219, the £80,636 figure is discounted since Life Assurance and Pensions are not liable for IHT. This leaves £108,583.

Several financial liabilities are assumed, these are:

£0 - Loans secured on dwellings
£9,652 - Other loans
£4,641 - Other liabilities

Giving a total of £14,293. As if by magic, we get £108,583 - £14,293 = £94,290.

The real question is will this 37% of people really have this much non house based wealth. £41K in currency and £30K in shares. Scottish widows figures are from this ONS report (page 86). But these figures are simply summaries. They have assumed a uniform distribution of wealth, if we take a look at another ONS Nugget we can see that most non housing wealth (71%) is owned by the to 10% of people. Meaning that while the top 10% are likely to have additional wealth which take them over the IHT bracket, most of that 37% with houses over £210,000 are not likely to have wealth that pushes them over the limit.

In conclusion, the maths behind the Scottish Widows report makes a lot of assumptions, it is not the best statistical measure to use.

DISCLAIMER: I haven't broken down the maths as much as I'd like, thats because I'm off down the pub

Tuesday, October 16, 2007

Against Globalisation

I am personally of the opinion that Globalisation in it's current form is a bad thing, it removes power from people's elected representatives and hands it to the multinational corporations. I have become more convinced since I started reading Bad Samaritans by Ha Joon Chang. It takes a detailed look at economic history and puts a new perspective on globalisation as it is currently seen.

It means that I don't like to see people in the Labour party accepting the current consensus on globalisation such as this post from Will Parbury.

My response is as follows:

Nations should not to be forced to integrate according to the neo-liberal consensus often posed by the multinationals, rich nations as well as the likes of the Economist and Anatole Kaletsky.

Nearly all rich nations got where they did using strict controls on foreign trade, working it to their advantage until their industries were ready to compete globally. The electronics division of Nokia made a loss for 17 years before finally turning a profit and this was at a time when the Finnish government considered excessive foreign investment in an industry "dangerous" and put in place incredibly strict measures to resist it. Many politicians in Japan wanted Toyota to give up on cars and return to making automatic looms.

I would urge Will, and anyone else not to be caught up in this supposed consensus on globalisation. Globalisation as it stands is not some amazing cure all for the world's economy, but a set of ideas based on reasoning that looks nice on paper, but doesn't measure up in real life.

Thursday, October 04, 2007

Wednesday, October 03, 2007

Snap Election?

Chris Paul is thinking that a bet on there not being an election this year is easy money. Personally I think Chris may have spoken a little too soon. The Brown bounce is far better than anticipated, the Tories conference doesn't appear to have revived their fortunes. I'd say that gambling on an election would be the safer bet myself.

Of course, if a snap election is called I predict a 100% chance of Iain Dale gloating over his predictions.

PS: On the subject of the Tory conference, Tom at Lets Be Sensible has some amusing thoughts here.

Tuesday, October 02, 2007

Why all this fuss about Inheritance tax?

The Tories are making a bit of a fuss about inheritance tax, personally, I really don't get why this tax is apparently so hated. It affects only six percent of estates and even those middle class families who have seen rising house prices nudge them into that tax bracket will likely only have to pay a very small amount. The arguments usually deployed in against it are also somewhat unconvincing when examined a little more closely.

It only brings in around £3 billion, small change when you consider that the treasury budget is somewhere in the region of £450 billion.
This argument could equally be deployed for most tax cuts, the total tax take is made up of a very large number of "small" amounts. In terms of teachers, doctors, schools and hospitals, £3 billion relly rather a lot.

I've already paid tax earning it, why should I pay tax again
Lets say I choose to spend my paycheck on an iPod, part of the amount I pay will be VAT. Should I not pay the VAT on this purchase? Taxation occurs at various points as money moves about the economy. To attempt to make an rewrite the tax system into one where money is only ever taxed once is close to impossible. To turn the idea that an individual should only be taxed once on their money into a matter of principle falls down on the fact that it is just not practical.

The super rich just avoid it anyway
This is an argument for finding better ways to deal with the super rich, not an argument for abolishing/reducing inheritance tax.

Inheritance is a redistribution from old to young
This is true to some degree, although it would seem to be more a redistribution from old to middle aged. It is also a distribution from rich old to rich young. Inheritance tax means that while inheritors benefit, a porition of an exceptionally large inheritance is used to the benefit of everyone.

Monday, October 01, 2007

In Iain Dales top 100

85th in Iain Dales list. I really was quite pleasantly surprised. It's a strange thing, but being in a top 100 list compiled by a Tory has given this flagging blogger a much needed injection of enthusiasm. I do have to admit that I've let things slip recently and filled this blog with nothing more than a long pregnant pause.

I suppose now would be a good time to admit that I think he has quite good taste in cars, I share his appreciation of Germany and I also read his blog.

A few notables from the rest of the list:
Kerron Cross is entertaining enough, but his blog tends to find itself a bit short when it comes to actual politics.

Chris Paul,
I feel gets the light hearted/serious balance a bit better. I'd say he's my favourite Labour blogger at the moment.

Grim Up North
is another favourite read of mine, entertaining with some very strong opinions. What you might call a "conviction politician". :)

Ministry of Truth, insightful, intelligent, agressive and incredibly verbose. I really admire the Unity cuts through the crap and gets right to the truth of the matter.

And finally.. the dear departed BBF, Hamer's posts were true masterpieces of political comedy genius.