Engagement is a two way street

4 01 2011

Seems my comment over on Ben Duncan’s blog got lost somewhere, so I thought I’d repost it here, where I can ensure things don’t get…misplaced.

Hi Ben

I’ll start by saying I completely agree that it’s very positive seeing so much political engagement, but I must add I don’t think you’re really helping the situation with your commentary.

Whilst it’s true that pay freezes result in real-term losses of “real” earnings due to inflation, the VAT increase only affects luxury items and not essentials or “reduced” items such as (just for example- *public transport*- which is at 5%)

See: http://www.hmrc.gov.uk/vat/start/introduction.htm#4

I can appreciate you’re trying to help, but as you say- not trying to “bring the office of councillor into disrepute”- perhaps accuracy with respect to VAT is in order? I don’t think scaring people unnecessarily is helpful do you?

Equally, you’re essentially saying “the silver lining” to people’s economic suffering is that your party will gain politically? I often wonder where the green party stand beyond green issues, guess that clarifies it.

Have to say I think it’s a shame that someone who openly encourages “engagement” in political issues would miss an opportunity to engage with a voter in his city.  It’s not the first time either.





Debt costs money and the money debt costs, costs more money

20 10 2010

Cllr. Kitkat has written a post on his blog today entitled “Not worth the panic: This deficit is manageable,” in which he argues, in essence, that since on a couple of specific occasions the UK national debt (as % of GDP) was higher than today, that it’s nothing to “panic” over.  Since he prefaces his argument by implying that comparing figures “arbitrarily” can be misleading, I think his choice of example is somewhat ironic: relating our current deficit to that after two world wars isn’t really an appropriate comparison. I certainly agree we shouldn’t panic- but we should be taking action.

His other point is about interest payments- pointing out that the difference is that we have longer repayment terms than say, Spain.  This misses an important point- the longer we take to pay off our debt, the more the cumulative interest is that we will have to pay in addition.  It is misleading to suggest that if we pay our debt off over a longer time that this will cost the same.

To illustrate: currently, as Jason pointed out, the UK national debt is 71% of GDP, that is to say: one trillion pounds, and he quotes interest rates of “between 3% and 4%”.  Calling that 3.5%, we will be paying £35bn in interest this year.  Assuming interest rates stay the same (which I will expand on in my final point), the interest we would pay solely on the interest generated from the previous year would be £1.25bn.  So just because we can pay our debt over a longer period, doesn’t mean we should.

Finally, the entire argument is predicated on “the key issue with debt”- interest rates.  If they stay at their current levels then, ok, we’ll be paying off the equivalent of our education budget in interest each year, but perhaps that’s “manageable” in some people’s opinions (read: not mine).  However this is not a given- the interest rate on our debt has gone down recently as the money markets believe the government is making an effort to reduce the deficit.  Less fervent measures in this regard could cause the interest rate to skyrocket (EDIT: to illustrate: each 0.1% additional rate of interest is £1bn in interest per year, this means that any new bonds issued will be much more expensive for the government.  The government must perforce raise new debt because we are in deficit).  Equally, the current rates of interest on government gilts are being held down by the Bank of England buying them at cost (quantative easing), however this very policy (printing money to pay for debt) will inevitably cause inflation to rise.

The problem with inflation, is that it devalues the value of bonds, people will sell bonds, leading to higher interest rates on bonds and higher debt interest payments. If investors see inflation is getting out of control, people will not want to hold bonds. Foreign investors will sell their securities and this will cause a devaluation in the currency – Tejvan Pettinger

Ironically, Jason’s analogy about starving the family to pay the mortgage (whilst grossly inaccurate as I hope I’ve explained), is nonetheless an appropriate reason to pay the deficit off quickly- I’d rather tighten my belt than lose my home.  Wouldn’t you?

Points for recognising the inverse reference in the title!

[EDIT – For clarification:  inflation causes the future value of bonds to decrease in real terms.  As such, investors do not wish to hold them as they will take a loss.  They sell them.  In response, in order to finance itself, the government must issue new bonds at a higher rate of interest in order to encourage people to buy them.  This then increases the amount the government must pay on these “new” bonds.  Feel free to correct me if this is a misinterpretation].





Licenses, Teas & Red Herrings

19 10 2010

In response to the recent Argus article “Opponents fight plan for city centre Brighton cafe“, I think it’s important to clarify the approach towards licensing in Brighton & Hove, particularly in the Cumulative Impact Area (CIA).

Let me open by saying that dealing with anti-social behaviour is one of the Council’s major roles in the City, and in my view, one that will only grow, not only because it is clearly the desire of the residents of the area, but for the culture of the City at large.  However, I think it is important to recognise with licensing issues that it is the implementation and the effects of it; the type of business and the intended customers that need to be considered, not the license or lack thereof.

As the commenters on the article quite rightly point out- this is a café, seeking to expand its offering and provide alcohol amongst its other beverages and food.  The objection raised is by a neighbouring bar owner (read: competitor).  I am writing this because I hope that what is clearly uncompetitive behaviour is not sanctioned in an attempt at political point scoring with respect to licensing restrictions.