Saturday, 12 April 2014

Jeremy Browne: The curious case of the MP who doesn't know what party he is in

This week we've heard a lot from Jeremy Browne, the ex-Lib Dem Foreign and Home Office minister, who now has a new book out. I like Mr Browne, he's one of the more sensible Lib Dems in parliament but he's confusing me with some of the things he's saying.

His book and statements are a brilliant vision of a Liberal Britain, and if there was a party which represented this view I think I would be one to sign up. He seems to think he is in the Liberal Party, the continuity Whigs. Unfortunately, that party disappeared in name in 1988 and had disappeared in liberal ideas many years before that. I don't think Mr Browne has mentally adjusted to it.

The 70's Liberal party was a centrist party between old Labour and old Tories, wedded to the post-war consensus. When the radical Tories of the 80's came in  and Labour sped to the left, the Liberals seemed closer to the moderate Labourites and the newly formed SDP. That's why the Liberal-SDP alliance was such an easy match.

The true Liberals had no home but the Liberal party, but maybe had not recognized that the Liberal party was not truly a Liberal party any more. They went along with the merger forming the Lib Dems.

People like Jeremy Browne and the Orange booker's tried to bring back truly Liberal ideas to the party, but the vast majority of members are more centrist or lean to the left. The Dem part of the party is much larger than the Lib part. I've talked before of the identity crisis at the heart of the Lib Dems - which drives it to the centre. Mr Browne is not reconciled to that, and so will continue to smash his head into a brick wall.

If he really wants a Liberal future there is no alternative but to form a new party: the 'True Liberals'. I'd be tempted to join. Liberal economically and socially.

Squiffy.

Saturday, 5 April 2014

The Laffer Curve: Proven twice this week

The Laffer curve is named after Arthur Laffer and is a curve describing tax rates versus tax take. Here is an example.


The principle is as follows: If you tax at 0% there will be no tax taken. If you tax at 100% nobody will bother to work, and so no tax will be taken here too. In between these two points there will be tax taken for certain tax rates, but the key is to find the rate which generates enough revenue without destroying the inspiration to work.

One of the underlying essences of this curve is that tax will change people's behaviour, so any calculations made when deciding to increase or decrease a rate of tax need to take changes of behaviour into account. The bigger the change in tax, the bigger the effect, and the greater likelihood of calculations being wrong.

The Labour Party has pledged to bring back the 50% tax rate, after the coalition reduced it to 45%. There were disagreements on the projected effect of the reduction in the tax rate. The Tories said it would likely have no effect or as maybe reduce revenue by as little as £100 million. The Labour Party said it would cost £9 Billion. We now have the figures. For 2012-13 £40Bn was taken from the top rate. For 2013-14, when the rate was reduced to 45%, the tax take was £49Bn. A whopping £9 Bn increase.

It's counter-intuitive, but remember the effects of behavioural change.

A similar change has happened to Capital Gains Tax. It was 18%, but the coalition has increased this to 28%. In 2011-12 the tax take was £4.3 Bn, it has now dropped to £3.9 Bn or a 10% fall. Again, it is shown that a higher rate of tax of tax doesn't necessarily bring in more money. For something like CGT it is very easy to change behaviour, you merely hold on to your assets for longer!

Looking at the economics, it's pretty clear that 45% is better than 50% for income tax, maybe 40% is even better. For CGT, it's clear that 18% is better than 28%. Sometimes lower rates bring in more money.

If the economics are clear, then we must look to the politics. Why would a party want higher rates if it brings in less money? Symbolism is the only answer, it's a statement of what is acceptable and what isn't. To me, that's the same old ideology of old socialism, I'm much more interested in what works!

So bring on the tax cuts (as long as they raise money).

Squiffy.

F1: Talking points

We've had two Grand Prix and are in the middle of the Bahrain G.P. Yesterday in one of the press conferences, Adrian Newey (Red Bull) laid into the new regulations. He said that fuel saving was for sports car racing, and that in F1 drivers should be flat out full time. Bernie Ecclestone and Luca Di Montezemolo (Ferrari) have also had a go, saying it's the wrong direction for F1.

I completely disagree. If F1 is anything it's a showcase for the latest in automotive technology as well as the best drivers. Engine development had become stagnant, frozen spec V8's providing roughly the same power each year. This put the emphasis on aero-dynamics, hence keeping Adrian Mewey happy. To be relevant in the modern age there needs to be ways to reduce fuel usage, but we had got to ridiculous state that extra fuel was being used during braking to send exhaust gases through the diffuser to generate extra downforce. How is that relevant?

Bernie Ecclestone is unhappy because it's not loud enough, apparently, though there are rumours that by driving down the price of F1 he could buy it back from CVC. It certainly isn't as loud, but I think it's great to be able to hear the tyres squeal. From Melbourne we could actually hear when Bottas hit the wall and the subsequent deflation of his tyre. Fascinating. Maybe a little louder, but we'll get used to it.

Luca Di Montezemolo is unhappy because....his cars still aren't winning, and their engines aren't particularly fuel efficient. Alonso's getting restless.

Let's just tackle the argument about fuel saving having too much effect on racing. I've not noticed it too much so far, maybe tomorrow it will have a bigger effect but we have had this for years anyway. Teams would always under-fuel the cars in order to save weight and the fuel save to make it to the end, so nothing new there. The Bahrain 2010 GP is on TV at the moment, Martin Brundle just mentioned that some teams will have to use lean settings for fuel usage while Renault is the most efficient. As I say, it hasn't changed!

It's quite apparent that the Mercedes team have stolen a march on the other teams and have done a great job, and it may be a walk over. That is pretty much always the way at the beginning of a new era, see 2009, 1998, 1989 for previous rule change seasons. That's the real reason that all these people are complaining, they've not done a good enough job, their advantages have been removed.

The new regulations should be shouted from the roof tops. The new cars are achieving pretty much the same speeds and lap times, but on a third less fuel, and with heavier cars. Pretty amazing. Let the F1 geniuses do their work and the cars will get lighter, the capacity of batteries will increase, the recovery systems will improve. In a few years we can reduce the fuel usage even further, imagine what this technology could do for everyday cars. I know that hybrid systems have been around for a while, but F1 really puts a turbo under it so to speak!

That's why it was completely the right decision to move to these regulations, and next year will be tighter than this, and we'll get used to the sound.

I'm loving it.

Squiffy.


Friday, 14 March 2014

Tony Benn: RIP

Today it was announced that Tony Benn had died at the age of 88. Sad, but he had a good long life even if the last year or so was a bit sickly. As someone who I would always disagree with politically, he was someone you could respect because he was articulate, thoughtful, unbending and not driven by the latest fads or opinions.

The two ends of political ideology start from two points of human outlook. Some people think that things could be done a lot better, have a vision of a kind of utopia and then try to fashion laws and movements to try to change people to create the new ideal. Other people also think that things could be done a lot better, but don't think that it's possible to change human nature. These people will try to use human nature to nudge society in the right direction.

If you can read between the lines, the utopians sit on the left of the political spectrum, while the human natur-ists (no, not the nudes) sit on the right. Which is why communists and socialists, like Tony Benn, believe in nationalisation, command economies, incomes and prices policies and believe it can be achieved. Even when the whole weight of the evidence shows that it does not work. As a current example, take a look at Venezuela, after years of socialism and a command economy, people living in a country with a quarter of the world's oil cannot buy toilet paper.

People on the right believe that competition and human instincts aren't wrong and can be used to drive society forward. Though there must be regulations, and safety nets for the poor.

The majority of the world has come to the capitalist view, even after the financial crash, but there's still a lot of people around who believe in the utopian view, like Tony Benn and the young Owen Jones. They're just plain wrong, the evidence shows it doesn't work. Just like with creationists, you'll have fun arguing until you have to bang your head against a brick wall. They'll say that it's not been tried in its pure forms, the media or outside factors destroyed the experiment - but that's just human nature!

That's also why people on the right respect the ones on the left - we understand what they want to achieve - we just don't believe it can ever work. I suppose it explains the visceral hatred of those on the left for those on the right, because they see us as trying to dismantle and destroy the utopian ideal.

Anyway, back to Tony Benn. A great orator, and a great democrat (he wasn't a communist). He renounced his peerage so that he could be elected to parliament. And being a great democrat he saw the EU for what it is, a huge anti-democratic bureaucracy run by an elite. That is the one thing I really agree with him on.

So, Rest In Piece Comrade,

Squiffy.

Monday, 10 March 2014

F1 2014: Nearly here

We've now had the first three tests and the first Grand Prix of the season will be starting in 5 days time. It's time to look at the prospective teams and drivers.

Red Bull
The Red Bull team have had a traumatic pre-season. The car looks great, but is very tightly packaged, as you'd imagine from Adrian Newey. The Renault engine has been very problematic. Initially unreliable, they had hardware and software issues. They fixed some of the hardware issues but the software still had bugs.

Even when the engine was more reliable, the tight packaging of the car led to fires and frequent stops on track. The first test was a disaster, the second and third showed brief spells of the old Red Bull but were more often punctuated by stops and red flags. It really was and is a crisis. Most people have written them off, I think the first few races will be difficult but they will probably turn it around mid season - but by that time I think it will be too late to fight for this year's championships.

I expect that Sebastian Vettel will be more troubled than usual regarding the reliability but will have the measure of Daniel Ricciardo. This season we will really see what the current champion is made of.

Mercedes
The new Mercedes is looking very good. The engine looks like the best of the three, and has shown reliability and speed. There have been a few issues for the team, but it looks like the problems occurred when they were really pushing the car. The Red Bull never really got that close. Both drivers managed to do several race distances and had good pace.

I think the most fascinating aspect to this season will be who comes out on top between Hamilton and Rosberg. Last year was close, and I think this year will be closer. I think Lewis will be the fastest over the year, but with Rosberg grabbing quite a few victories and pushing Hamilton hard. It will be difficult for the team to manage. I expect Mercedes and Hamilton to be champion by the end of the year, if not Hamilton then Rosberg.

Ferrari
I think the Ferrari looks ugly this year with its really squashed nose. The car has been very reliable in testing, and has shown reasonable pace, but it looks less drivable than the Merc and there are serious rumours that there are problems with fuel usage which could see the cars drop down the order.

It will be fascinating to see whether Alonso or Raikkonen comes out on top. I believe that Alonso will be more consistent and may win a few of the races, but will become annoyed by another year not being able to realistically fight for the championship.

Lotus
The Lotus is intriguing with the double tusk nose. Another Renault runner, it has had a difficult pre-season, missing the first test and sitting out lots of time with issues in the second and third tests. We don't really know the pace and I'm not sure we will until the season has set in a little.

It's Grosjean versus Maldonaldo at Lotus and I know which one my money will be on. Grosjean showed speed at the end of last year and Maldonaldo is too inconsistent. Whether either will get a chance to shine this year will be difficult to say.

McLaren
The McLaren is looking better than last year, although the front of it makes it look like someone who's taken a lot of cocaine! Running the reliable Mercedes engine helps, and they looked good in the first and second tests, but seemed to not move forward as much as the other teams by the third test. So it may get them podiums but maybe no wins.

The team has a new fast rookie in Kevin Magnussen and he was looking very confident and fast. I believe we may be about to witness a re-run of the 2007 Alonso/Hamilton scenario where the rookie is shown to be faster than the experienced World Champion. Although given Button's laid back attitude I don't think there will be the same fireworks. Which one comes out on top is difficult to say!

Force India
Another Mercedes runner which looked good in testing, albeit not as quick as the Mercedes and Williams, this should be a good year for the team. Nico Hulkenburg is back and I think the combination should be great with some giant killing performances. I expect Nico and Sergio Perez to be fighting with the Ferraris throughout the year. I expect Hulkenburg to have the measure of Perez.

Sauber
The Sauber was very twitchy in testing but proved to be reliable with the Ferrari engine. It did the largest amount of laps in one day, but went off on several occasions, due to the poor fly by brakes. I think they will struggle to show the same pace as late last year. I also think the driver line up is weak. Sutil should come out on top but it could be either.

Toro Rosso
The Toro Rosso seems to have chosen the wrong time to go from a Ferrari engine to Renault, and have said they are one month behind schedule. The car has been only slightly more reliable than the senior team's due to the greater cooling. It's another ugly car due to the sex toy like front nose.

I'm not sure whether we can see who will do better between Daniel Kvyat and Jean-Eric Verne, though this must be JEV's last year at a guess.

Williams
The Williams is looking fantastic, which I think is marvellous. Last year was dire by their standards, but this year they are fast and very reliable. In fact, they may just have an edge on the Mercedes which should be interesting fro Felipe Massa and Valteri Bottas. I really hope that they do have a good car, I would like to see the team battling at the front on a regular basis.

I expect it to be quite close between Massa and Bottas and am not sure which will come out the winner. I also hope the new surroundings give Massa a renewed vigour which he lost playing second fiddle to Alonso at Ferrari.

Marussia
The Marussia had a slow start to testing, turning up for the last day of the first test but have shown some reliability and with some consistency may be able to snatch their first points of the year. The car looks tidy and so I'm hopeing for some good things.

Caterham
The Caterham has to have some marks for the ugliest nose in F1. With their Renault engine I expect them fall behind Marussia, although they appear to have provided more cooling than the other Renault racers.

The returning Kobayashi is good value, but whether he can show any of the battling overtaking that he's known for will be another matter. I don't know enough of Marcus Ericsson to be able to say.


It should be a fascinating year, and I'm really looking forward to it.

Squiffy.




Friday, 17 January 2014

Much ado Ron Ron

Yesterday was interesting in F1. Ron Dennis is back. He's been quiet since leaving the role of team principal in 2009. But yesterday he was made the CEO of McLaren again, usurping Martin Whitmarsh.

It's been rumoured for a while that Ron and Martin have been at loggerheads. Apparently, Ron wanted to bring back the 2012 McLaren last year when the 2013 model was found to be a dud. He was sceptical of the hiring of Sergio Perez and pushed for his ousting at the ending of last year.

There's been no news on who the team principal will be, but Mr Dennis has made it known that there will be changes. At the meeting at McLaren, the whole staff were present to hear of Ron's comeback but Mr Whitmarsh was not present. If he was certain to remain they would both be there presenting a united front, so one has to wonder! It looks like Ron Dennis will not be on the pit wall, and so who are the candidates?

Possibly, Sam Michael on a temporary basis until a certain Ross Brawn finishes his gardening/fishing leave?

I'll be sorry to see Martin Whitmarsh go, he seems like a thoroughly nice guy but you get marked by your results and McLaren have underperformed for well over a decade.

Interesting times at Woking.

Squiffy.

Ed Miliband: The Economic Big Speech! Err, where was it?

At the beginning of this week we were told that little Ed Miliband was going to be making a big speech on the economy on Friday. Ooh, excitement! Was it going to be embracing the coalition spending plans? Was it going to be a change to business rates? Was it going to be a new prices and incomes policy? Was he going to go for a flat tax system? Was he going to go all out for reflation? Nope. Nothing like it.

Banker bashing. Again. I've lost count of the number of times that he's had a speech on banking. Monthly he seems to change where the tax on bankers bonus is going to focus, I can't remember this month whether it is for new homes, 'creating' jobs, or a new sheepdog for every second house. Never mind that in the next breath he wants to reduce bankers bonuses - which obviously means he'd get less for his latest pet project spending! But don't let economics get in the way of his economics speech!

This time, he wants to create new challenger banks. He thinks the banks are too big. Remind me, who was it who allowed the banks to get bigger? His gang. Who was it who forced the solvent Lloyds to ruin itself bailing out HBOS? His gang. Who was it who allowed Santander to buy up loads of banks such as Alliance & Leicester, Bradford & Bingley ? His gang.

A bit late to start saying the banks are too big now! Never mind bloody hypocritical! Mind you, should we be surprised. Anyway, why does Miliband think its up to the Government to create some new banks. We've already got one big one that we're desperately trying to get rid of. Andrew Neil made the valid point, too, that these banks won't have much capital and so are unlikely to provide large amounts of funding for SME's as required by Mr Miliband. So a load of rubbish really.

Going back to the charge of hypocrisy, earlier this week Mr Miliband found his old note about the squeezed middle down the back of the sofa and decided to read it out again. Everyone knows that if Labour get back in rather than spending cuts there will be tax rises. To get the most bang for your tax increase, it's the middle that gets hit. Labour's usual instrument of torture is via National Insurance. So be very wary of Red Ed's middle-speak, he's no Tony Blair.

So, move along. Nothing to see here.

Squiffy.


Saturday, 11 January 2014

Hypotecation for the NHS? I Danny you're onto something

One of my favourite columnists is Danny Finkelstein, now a Lord. This week he came up with the idea of having a separate tax for the NHS. The reason for this is so that the public know how much we have to pay for the 'free' health service.

We'd also know how much the cost was going up each year. Let's just say that he doesn't support hypothecation for other areas, just the NHS. There's a lot to agree with here, transparency being the main reason. As costs increase and taxes went up, the unaffordable path of the NHS would have to b tackled.

Lord Finkelstein is a close friend of the Chancellor, and so who knows? It may be more than a fanciful idea!

Squiffy

Thursday, 9 January 2014

Why does Government mess up IT?

There was an article on the Daily Politics today about Government IT projects. Francis Mause said that they are changing the way in which IT projects occur and that it's improving the situation. I believe him, it could hardly be worse.

The last Government wasted £12Bn on the NHS computer system. I'll say that again. £12Bn. That's mammoth. You have to stand back in disbelief when Labour shadow ministers complain about the £40m misspent on the Universal Benefits project.

For non-IT professionals, I'll give the low down on why IT projects go wrong. The old way of doing projects meant that there would be a desired aim for the project.Project Managers and Analysts would then spend months and months writing requirement specifications, trying to nail down every last item of functionality (what the project should do). When a specification was finally agreed it be outsourced to one of the large IT contractors who would start work on it. After several years, the project would be delivered back and the Government would find out that it didn't do what was necessary.

There would then need to be a re-design, possibly a large one. Maybe there were so many flaws that it had to be completely ditched. Many times the Analysts got some requirements wrong, or needed to add new ones. Political priorities change, new responsibilities get added on. As the end of the project nears it becomes frantic and previously essential features get dropped and scaled down.

This system is called the Waterfall approach, every stage feeds onto the next. The problems are that each stage takes for ever, and you only find out how badly the stage went at the end - several years later.

A new project methodology, called Agile, has changed the way big projects can be tackled. The project starts with little detail and gets broken down into 'stories' and tasks. The stories get fleshed out and implemented in an 'iteration' or 'sprint' which could be a few weeks or nothing more than one month. These sprints contain less than 10 people in the development team, and so there may be more than one team working on different functional areas. At the end of the month, all the implemented stories and collected into a demo and shown.

This way, the project managers and clients can see it develop and point out flaws, or extra requirements and things not liked. The development team can also have a say on what went wrong in the sprint and hopefully make improvements for next time. As time goes by the projects get closer to completion. "Must have" features have to be completed, and "nice to have" are just that. In theory, this means that there should be few surprises, including all the essential features and having been demo'ed to the client throughout.

This latter method is what Francis Maude's team are using. It's certainly better than the old Waterfall method, and its about time.

Although there will be some problems and some money will be misspent, its likely to be much less than before. Let's hope so!

Squiffy.

F1 2014: Carnage

F1 testing will be start in a little over two weeks for the new season. Last season was a bit dull, but the new one is promising to be a bit spicy, and the test sessions are going to be interesting.

This year there are changes to the aerodynamics. The new single raised exhaust will kill the coanda effect feeding the difuser. The front wing will be narrower and the nose cone will be lower, unfortunately this may bring back the stepped nose. The rear beam wing is gone, but the monkey wing will be back.

The biggest change though is to the engine, or power unit, as we will now have to call it. Out go the 2.4 litre V8s, in comes 1.6 Litre turbo V6s. Unlike the V6s turbos of the pre-1989 era, these will not be 1200 BHP monsters. They will develop around 550 BHP, and be limited to 100 litres of fuel, roughly a third less than now. Rather than KERS for 6.7 seconds, there will be two energy recovery systems; one the kinetic energy from braking and secondly the heat from the exhaust gases. These will be deployed for much longer in the lap (I think 33 seconds) but will take 2 laps to replenish.

This is going to be interesting, and that's why testing is going to be fascinating. No one knows which of the three engines, Mercedes, Ferrari or Renault is the most powerful. No one knows how their ERS systems will compare, what about their patterns of usage and fuel economy. It's all new. So, when testing starts we should see lots of problems and blow ups.

This could last into the first few races of the year. We've got used to reliable cars with most finishing the races. This could all change, and many are predicting pandemonium in the first few races. Most commentators think that it should then settle down. I don't think so! There is a reduced restriction of 5 engines per season. Down from 8.

What does that mean? With all the uncertainty and possible blow ups at the beginning of the year, drivers will be running out of engines - maybe by half way through the season. They then get grid penalties. I'm predicting that towards the end of the year most of the grid will have grid penalties and it will cause major controversy! It should be fascinating!

Squiffy.