He even had a “golden rule” that public spending over the economic cycle should balance income – except for investment.

It all sounds very prudent. After all, surely paying for some toilet rolls for the health service, which might be used up in a few days, is different from investing in a new hospital, which might be useful for 100 years.

The concept is borrowed from the private sector. Company profits are income minus expenditure, but investment does not count as “expenditure” here, because if you spend £100 million on a new factory, you then have an asset which is the factory, which is worth £100 million. The £100 million has not been used up and removed from the balance sheet, but simply converted to a different form.

Similarly, in the public sector, spending £100 million on a new hospital does not use that money up. It simply converts the asset to another form. After buying the hospital, the NHS then owns an asset – that hospital – that is, if you like, “worth” £100 million.

In an accounting sense, public sector investment is similar to private sector investment. And it is different from consumption/ revenue/ current spending. The fact that accounting-wise, they are the same, is what makes Mr Brown’s spin so effective.

There is a crucial difference though. When the private sector invests, it expects to make a profit. That factory will be used to manufacture goods, which will be sold at a profit. The hospital, on the other hand, will not make money (unless it takes private patients).

Now there is no reason why the State cannot make true “investments”. If it invests in an IT system that improves efficiency and reduces spending on administration, for example, that is private-sector style investment. There are reasons for believing the State is generally less effective than the private sector at making profitable investment, but it certainly can make such investments.

But the point is that the public sector confuses the two. Spending money on a new hospital or a new school might be very worthwhile, but they are not “investment” in the true sense.

When politicians talk about “investing in public services”, they are conning you.

Image by Gage Skidmore via Flickr

Newt Gingrich, fresh from his victory in South Carolina, has now been anointed by the British media, at least, as the front runner in the race to be the US Republican Presidential candidate.

And it does seem that his campaign is now taking off like a rocket.

People have been hearing about doom and gloom, deficits and economic disaster, for years now. They want to feel they have a future. Politicians on both sides of the Atlantic have noticed that.

In the UK, the Governor of the Bank of England says we should cheer up because

There is no reason to despair… All crises come to an end.

Meanwhile, in the US, Mr Gingrich said that

exploration of the universe would inspire the country’s young to feel “part of a generation of courageous people who do something big and bold and heroic.”

In the UK, Mervyn King reckons that “something will turn up”, and in the US Newt Gingrich proposes to send a man to Mars.

I guess that sums up the difference between the UK and the US really.

Meanwhile Mitt Romney was left floundering and claiming he supported NASA too. (NASA is a big employer in Florida, the next primary battle ground.)

And that sums up the difference between Mitt Romney and Newt Gingrich. The one a calculating tactician, aiming for the centre ground because of a tactical decision that that is the way to win the most votes. And the other a politician who, love him or loathe him, speaks from his gut instinct.

I know which I prefer – and it isn’t the squidgy middle ground spin merchant. We have one of those ourselves. His name is David Cameron and he is frankly pathetic.

We in the UK have been there, seen it and bought the T shirt. If you are an American Republican, take it from me. Mitt Romney is another David Cameron, and you don’t want to go there. Really.

Go for it, America. Who knows where Newt Gingrich would take you, and the world. But it would sure be fun.

In just 3 years, real household incomes have fallen by some 5 per cent – one of the biggest squeezes since the 1950′s, since the records began. Household budgets are approaching a state of emergency and the government needs a rapid response.

If that wasn’t so shabby, it would be funny. Mr Clegg is a member of the government that deliberately decided to close the deficit by raising taxes rather than by spending less. He cannot escape responsibility by pretending to be in opposition.

We need the government – of which Mr Clegg is deputy leader – to start tackling Britain’s bloated State.

Since the Liberal Democrats are way off to the Left in British politics, presumably he doesn’t want that.

The proposed tax cuts … would be funded by new levies on the wealthy.

Ah yes, by tax increases then.

Mr Clegg is not the taxpayer’s friend. He is an old-fashioned Socialist who believes the government should grab more from the successful and give more to the idle.

But this is a Tory-led government after all. So it seems they too believe in raising taxes to pay for protecting the public sector.

They really are all the same. Only UKIP believe in low taxes and small government.

Image by HM Treasury via Flickr

The Chancellor, George Osborne – Unsustainable Spending

The national debt has now officially passed £1 trillion. (There is room for debate around exactly when that happened, but the official figures say it is now.)

A Treasury spokesman said:

That our national debt has reached more than £1 trillion simply shows the unsustainable level of spending this country built up over the past few years, and shows why it is critical for our nation’s future that we deal decisively with the deficit.

So far spending under the current Tory government is UP. So if Labour’s spending was unsustainable, what can you say about the Tories’ spending?

Remember, you or your children are paying.

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Help Yourself – But Please Don’t Take More Than £26,000

The Alice in Wonderland nature of our politics has been exposed again today.

The Government wants to restrict the total benefit available to a household to £26,000 per year. That is, apparently, the average wage earned by working households after tax.

Now you might think that quite a modest proposal. Households on benefit are living off other people’s taxes. Stopping such households getting more in benefit than the AVERAGE taxpayer household is getting in wages, sounds pretty tame. It will apparently affect only 67,000 families.

In fact, in a sane world, we would be arguing about why the Government did not go further. Perhaps capping benefits at the minimum wage for example. The minimum wage is £6.08 per hour, or £12,646 per year. You would need two earners on the minimum wage to equal that proposed £26,000 cap – and that’s before taking into account the taxes they would pay.

Many millions of people in this country will be angry today at the very idea that there are 67,000 households getting more than £26,000 per year of other people’s taxes.

Labour, however, were against the proposal for other reasons. They thought it too tough. They backed an amendment proposed by some Church of England Bishops who wanted to exclude child benefit from the calculation.

That amendment would in effect increase the cap to £50,000.

It would be hard to find a more telling signal that the Church of England does not care for decent hard-working poor people, struggling to pay their taxes.

The Lords overall passed the amendment. Iain Duncan Smith, who seems to be one of the few sane people in our politics, has vowed to reverse the decision in the Commons. We must hope he succeeds – but we must also recognise that this measure can only be a very small start in the process of slashing back the welfare state. Britain’s taxpayers have had enough.

Image by focus on aperture via Flickr

It seems that Amazon’s sloppy attitude to security continues.

I have a Kindle app on my android phone. It works just like a Kindle would. You can buy and download books from the Amazon Kindle store, and read them on the phone. Despite the small screen size, it is surprisingly usable.

So far so good. Except that the whole thing has a serious security issue.

When you activate the Kindle app, you have to register it to an Amazon account to download books. At that time you enter your Amazon user name and password.

Once you have done that, your phone is registered to your Amazon account, and you can buy books. You do it with Amazon’s “one click” ordering process. One click means just that. You find the book you like, then click the “buy” button. The book is bought. Simple as that. No need to enter your Amazon user name and password again.

Woah? You what?

That’s right. If somebody steals your phone, they could download 500 books just for the hell of it without any password. Sure, your phone itself has a password if you are sensible. But lots of people aren’t.

Worse, if you accidentally touch that “buy” button – which is quite easy to do on a smartphone touch screen – the book is bought. It would be so very easy to buy a book by mistake.

You cannot turn this feature off. Even if you turn off one-click ordering on your Amazon account, it remains enabled for your Kindle app.

Apparently the new Kindle Fire tablet is to get a software update to fix this security flaw. There is no mention of the app getting one though.

I guess this is just an extension of Amazon’s general lax attitude to security. Almost alone among retailers, they make you register your credit card with them before you can make purchases. Modern e-commerce sites ask for your payment details each time. This time, though, the extent of the laxness is breathtaking. In so many ways, Amazon are great. When it come to security, they are dinosaurs.

Image by OECD via Flickr

Viktor Orbán, Prime Minister of Hungary – Under Attack from the EUSSR

The EU seems to have declared war on another of its errant member states.

This time it is Hungary. Hungary needs financial help from the EU to stave off bankruptcy. But the EU is refusing to help, until Hungary repeals some new laws that allegedly contravene EU “law”.

The laws in question relate to the independence of the judiciary, the central bank and the information ombudsman.

Specifically, the Hungarian government has passed laws that mandate judges retire at 62, and others that put the monetary committee of their central bank under government control.

The measure on judicial independence is, according to the Telegraph

widely viewed as a ploy to stack the courts with political loyalists.

It seems to be the measure on central bank independence that has really upset the all-powerful EU Commission however.

“Governments must refrain from seeking to influence their central bank,” said EU economics commissioner Olli Rehn. “Certain provisions in the new constitution are in breach of these principles. This needs to be addressed before we can start formal negotiations on the requested EU/IMF financial system.”

Think about that for a moment. Until 1997, the British government controlled interest rates. Decisions on interest rates were made by the Chancellor of the Exchequer. When Labour came to power, Gordon Brown, to great fanfare, announced that the Bank of England Monetary Policy Committee would become independent and the Chancellor would relinquish control of interest rates.

At the time, it was presented as an attempt to “keep political considerations out of interest rate setting”. That was always an outrageous argument – democracy depends on keeping politics in important national decisions. But the Tories supported the change.

That should have rung alarm bells – when the two “big” parties in Britain are agreed on something, the reason is often that the new law derives from their masters in Brussels. It is now clear that Britain’s old system would be in contravention of current EU “law”.

Now the EU Commission are using the current crisis to impose further central control over member states. Weaker states need financial help – so that gives the Commission leverage over them, and they are quite happy to use that ruthlessly.

Even more outrageous, the EU seems to have hijacked the International Monetary Fund. The help in question for Hungary is a joint EU/IMF bailout. (The EU’s own EFSF had its credit rating downgraded recently because the states contributing the money themselves have debt problems.)

By the way, some of that IMF funding will of course have been provided by Britain, since Britain is a member of the IMF. David Cameron should make it clear that Britain will not support bullying of member states by the Commission. The IMF apparently want an extra cash infusion to which Britain would contribute, so that gives Mr Cameron some leverage. He won’t use it, because he supports the EU himself.

The Hungarian Prime Minister, Viktor Orbán, is coming out swinging.

Mr Orbán said his country was the victim of “international leftists” in Brussels. A zealous anti-Communist, he insists that Hungary’s Stalinist past must be ripped out at the roots.

It seems to be clear to Mr Orbán, at least, that the European Union is basically a repeat of the old Soviet Union that enslaved Hungary for so long. What a shame David Cameron hasn’t realised it yet – or is too cowardly to speak out.

Queen Mary’s Grammar School, Walsall - Only UKIP Want More Schools Like This

The Coalition Government is still dead set against grammar schools.

Labour have been claiming that the Tories want to expand grammar school provision.

Did the Government reply, “Yes, indeed. Grammar schools are the most excellent part of our education system and we want to expand them”?

No, they did not. They “reassured” their socialist friends that the Tory Government too is opposed to grammar schools.

The education department also restated that new grammar schools could not be opened.

“It remains illegal for any new grammar or partially selective schools to open. Admission by ability cannot be extended outside the tiny number of existing selective schools.”

Polls generally show huge support for grammar schools. But only UKIP want to expand them beyond the current 164.  (There are 3,300 Secondary Schools in England.)

As usual, it is the people – and UKIP – against the Establishment Lib-Lab-Con.

Image by Fiesta Movement via Flickr

Ford Fiesta – Fuel Spillage Hazard

My wife’s Ford Fiesta has Ford’s “capless refuelling system”, which Ford claim makes it “almost impossible to put the wrong fuel in your car”.

Well, that’s as may be. But it certainly makes it possible to put fuel all over the petrol station forecourt. I filled the car up this morning, and fuel spurted back from the filler. It splashed on the forecourt, and dribbled down the side of the car and all over the tyre. The same thing happened last time I filled it.

Basically, you have to get the orientation of the filler nozzle just right. If you get it just a little bit wrong, either fuel splashes everywhere, or the pump thinks the tank is full and shuts off the pump.

Operator error by me maybe? Well, the flap that covers the filler has a sticker on, explaining in cartoon pictures the angle at which you should hold the filler nozzle. Obviously I am not the only one who has this issue.

I did a bit of digging. Apparently this is a known issue for Ford. They issued Service Bulletin number 64/2007 right back in 2007 – four years ago! – about the issue. They reissued the same bulletin in April 2008.

The Petroleum Enforcement Liaison Group discussed the matter in their meeting on 20th January 2009. (The PELG is a meeting between the Petroleum Retailers Association and the Health and Safety Executive.) The spillage issue is reported under the heading “Spillage Problems Associated with the Refuelling of (some models) Ford Cars”. The meeting decided to refer the matter to DEFRA, as a potential environmental concern. DEFRA have been issuing rules (“Stage 2 VR”) to prevent the escape of petrol during refuelling, and this issue could, say the meeting notes, “negate any benefits of Stage 2 VR”.

So this is a problem Ford have known about for at least four years. They have gone so far as to stick a sticker on the filler flap explaining to users how to use the filler nozzle to avoid spillage. What they have not done is redesign the filler neck to resolve the problem properly.

Ford should be ashamed of their cavalier attitude to the environment and their customers.

Image via Wikipedia

George Osborne – Incompetent as Well as Plain Wrong

More idiocy from the government on child benefit.

You will remember that George Osborne announced some time ago that child benefit would be scrapped for higher rate taxpayers. That was later clarified to mean that any family with at least one higher rate taxpayer would lose the benefit.

And that means all of the benefit. If you go over the higher rate tax threshold by a single pound you lose all your child benefit – which for a family with three children is £2,500 per year.

In other words, this would create a massive benefit trap with a huge spike in effective marginal tax rates to 2500%.

Others pointed out that a household with two earners each just below the threshold – with a household income of £80,000 – would get the benefit. Those with one earner earning just above – with a household income of say £45,000 – would not.

There has therefore been much talk of “fairness”, with the government saying it is not “fair” to give the benefit to the rich, while the Opposition say it is not “fair” to single-earner households.

Chris Leslie, for Labour, said:

We have repeatedly warned that the Government’s current plans to cut child benefit are unfair and highly bureaucratic.

Highly bureaucratic! That really is a bit rich coming from the party that invented the hugely bureaucratic and disastrous tax credit system. But in this case, he’s right – replacing a non-means tested benefit by a means tested one will be bureaucratic.

The amount of hypocrisy flying around from both sides on this is in fact quite stunning. The government talk as if giving taxpayers a bit back in child benefit is very generous of the government. The Opposition talk as if they understand the concept of efficiency, which they absolutely do not. It is hard to avoid the impression that none of them believe any of what they are saying.

But my especial contempt on this is reserved for George Osborne. This is, as I said, a ridiculous proposal in the first place. But even if you accept what he wants to do, there is a much better way to do it.

The tax credit system is an appalling mess. But it exists. So if Mr Osborne wants to means test child benefit, all he has to do is scrap it and add the same amount to the child tax credit.

Tax credits are already means tested, so no new bureaucracy to add. In fact, it would remove the small amount of bureaucracy that is currently needed to administer the child benefit system.

Tax credits are already based on household income rather than individual income, so no anomalies about two-earner versus one-earner households.

Tax credits are not cut off bang when you go above some arbitrary threshold. They are tapered, so as you earn more, the credits are gradually removed. So no benefit trap.

Perhaps Mr Osborne is worried about the political impact of looking like a socialist by accepting the principle of Gordon Brown’s tax credits. That would mean he is hoping to hide his acceptance of Mr Brown’s socialist ideas by messing around with child benefit instead. But even in this case, he could always call the new addition to the child tax credit the “child benefit addition” or something.

What’s not to like, then, from Mr Osborne’s point of view?

There are political objections to Mr Osborne’s plans to means test child benefit. Some (though not I) would even say that child support is wrong anyway and the State should not provide it.

But regardless of those political debates, Mr Osborne’s plans as they currently stand are simply a piece of crassly bad administration. His civil servants should be ashamed of their gross incompetence in putting them forward in that way.

And Mr Osborne should be ashamed of being stupid enough to listen to them.