Predictions for 2010

Inspired by Iain Dale's predictions, here are mine:

1. Inflation will reach double digits
2. Conservative victory in the General Election, by >30 seats
3. Britain will lose her AAA credit rating...
4. ... but will regain it by the end of the year after massive cuts in public expenditure
5. The FTSE100 will drop below 4000 before rebounding
6. There won't be a new Labour leader in 2010, Brown will cling on and smear his rivals as the party implodes
7. Sterling will drop below parity with the Euro, and below 120 Yen, but will stay around $1.50
8. Global Cooling will continue, more neutral/negative results will come out, as will a few more scandals, Copenhagen will be swept under the carpet and most politicians will be claiming by the end of the year that they were always skeptical
9. Sebastian Vettel to win the F1 world championship - he'll be the fastest German on the grid, certainly
10. VAT may or may not increase, but basic rate income tax will hit 25% as a temporary measure

- Mystic KoW

Degrees: Supply and Demand

Monday night's Standard/Yesterday's Metro story that the value of degrees has been slashed "by 75%" is hardly surprising, though the Department for Business, Innovation and Skills flat-out denial of it is. Interestingly, the story isn't online for Metro, and the BBC hasn't covered Lord Brown's comments - their last mention of him was a month ago when his review was announced.

The claim is that degrees add some X thousands of pounds of salary per year, and therefore graduates can afford to pay lots for their education. This was clearly true and X fairly large when 5% of the population went to university and graduates went into The Professions. Now the figure is more like 50%, and sending half of the population to university is a stated goal of the government.

As should be fairly obvious to anyone with a grasp of even the most basic economics or intuition about business, hugely increasing the number of graduates in the job market reduces the value of a degree - in fact, anecdotal evidence is that jobs now demand degrees where previously they were happy with A-levels. The simple fact is that the distribution of jobs available is broadly similar to what it's been in the past: a few % of high-paying professional jobs, a large block of office work, another block of services, and then unskilled/semi-skilled manual labour. The salaries are commensurate with the work involved and are unlikely to have changed much in real terms - after all, inflation tracks GDP reasonably closely so any increase in earning power is cancelled out by an increase in costs of living.

The inescapable conclusion is that a degree in 2009 is worth less in real terms than a degree in 1999 or 1989 or 1979. Why is DBIS denying something so obviously true?

- KoW

Google Goes To The Theatre

Another Google Maps failure here, just east of Aldgate/Tower Hill/Tower Gateway:

That isn't the Garrick Theatre, which is between Trafalgar Square and Leicester Square, that's where there was a theatre of the same name stood until it was demolished in 1891.

Yes, the map is showing a building that hasn't existed for nearly 120 years. Score another one for Team Internet!

- KoW

Some you win, some you lose

Great news yesterday for Silverstone - a ten-year guaranteed British Grand Prix, in a contract lasting up to 17 years. It's costing them £12m in the first year, and Bernie Ecclestone got his escalator - rumoured to be a 5% increase per year - but not the 7% or even 10% he'd wanted. Seems fair enough - 5% is a pretty good rate these days, at least until hyperinflation kicks in.

Less great is p53 of this morning's Metro (story not online), with this photo:

Congratulations to Jenson for winning the trophy, less so for accepting Jonah's curse - my money is now firmly on Lewis Hamilton to be the McLaren victor (though I think Sebastian Vettel and Fernando Alonso have a good chance of the 2010 driver's title).

- KoW

Cigarette Taxation: Doing It Wrong

This morning's Metro (p11) has a story with the headline "Children smoke asbestos ciggies". Aside from the recent hysteria over asbestos - it's nasty, that's why we stopped using it three decades ago - this is a rather emblematic failure of government regulation.

The "fake" cigarettes are being sold for 40p/pack - something like what the market would set, as evidenced by the fact that Japan could still sell Mild Sevens for 100 yen/pack a few years ago - yet the UK retail price is around 15x that. Or 20x if, having imposed extra sanctions on retailers, kids are forced to buy from vending machines.

The price of a pack has roughly doubled under Labour, with the inevitable result of creating a black market. Initially this was people bringing a few packs back from France or non-smokers getting duty frees, but the government started cracking down on that smuggling. That raised the stakes, and the immense taxation raised the possible profit margins, which caught the interest of organised criminal gangs. Now we're warned of "tab houses" where cheap unregulated cigarettes are being sold without the state's oversight. Smokers have been driven out of social environments and hence out of scrutiny.

What did you expect would happen?

This is exactly the same mistake that was made with the "war on drugs" and, while I don't support legalisation, I can't see good arguments for punishing addicts. If you want to stop people from smoking, piss off, it's their choice, not yours.

But, if you're really insistent on meddling, first you need to control the supply - not through legislation and force of arms, because that can never work and has never worked, but by licensing, quality control and allowing manufacturers to compete; cut-throat competition will drive down prices and make the margins unattractive to criminals. That mitigates the problems of people selling asbestos as filler material and means you're not punishing addicts for being addicted. Public education on the dangers of smoking - and I don't mean huge labels and shock campaigns - was good, but everyone knows that smoking is bad for you and now such ads provoke contrarian bloody-mindedness. The main plank, of course, needs to be to consider smoking (and, one might argue, drug-taking) as a medical issue and treat it through the NHS.

Give people the means to stop being addicted and they will generally try. Attempt to force them and you will fail miserably. As we've seen and can see now.

- KoW

Metro Journalists Cannot Count

The front-page story on today's Metro contains some absolutely ridiculous numbers. They try to put the £850bn total of taxpayer support to the banks in terms of other spending, saying

The figure is more than the entire NHS budget, almost three times the annual defence budget and more than five times what Britain spends every year on transport.

This is complete nonsense. £850bn is not "almost three times" the defence budget, it's closer to thirty times it!

The 2009 budget is here, on the Treasury website. Chart 1.1 on page 12 (the 18th page of the PDF, just to be annoying) shows a total budget of £671bn (against total receipts of £496bn, but what's a £175bn overspend between friends?). £850bn is nearly twice the total receipts, and a quarter more than the budget.

Of the budget, defence gets £38bn, transport £23bn and the NHS £119bn. If "the figure" were £117bn or £131bn (other numbers mentioned in the article) then the comparisons might hold - we have already spent more than it costs to run the NHS for a year or the armed forces for more than three years. Including the guarantees/liabilities adds nearly 90% of GDP to the country's balance sheet - so much for the "golden rule" of debt not to exceed 40% of GDP!

As an aside, £850bn is around 20 months' defence spending for the entire planet put together.

- KoW

Climategate: Review Announced

Yesterday afternoon, the UEA announced that their independent review of the CRU will be conducted by Sir Muir Russell KCB FRSE, a distinguished physicist, civil servant and former principal of the University of Glasgow.

The terms of reference for his review are much broader than previously indicated, and include that he should

determine whether there is any evidence of the manipulation or suppression of data which is at odds with acceptable scientific practice and may therefore call into question any of the research outcomes

which is what is needed, not merely a whitewash over data security policy. This review fulfills all of my wish list points from Wednesday, and so I hope you'll all join me in wishing Sir Muir all the best and looking forward to reading his review next spring.

- KoW

Heads start to roll... but not very far

The CRU has just announced that Prof Phil Jones is stepping down until after the Independent Review. So, nearly two weeks after his position became untenable, he's been put on Gardening Leave.

Before anyone gets too excited, though, that link also contains Prof Trevor Davies' (Pro-Vice-Chancellor for Research at UEA) description of the Review - it:

will address the issue of data security, an assessment of how we responded to a deluge of Freedom of Information requests, and any other relevant issues which the independent reviewer advises should be addressed

That isn't good enough.

Prof Jones stands accused of blatant academic fraud, conspiracy to withhold data, deleting data subject to FoI requests, and generally falling below the standards of conduct expected of a scientist... yet those terms of reference would allow the review to "exonerate" him based on nothing more than an INFOSEC policy review.

The Review needs to be beyond reproach and truly independent: no IPCC or UEA connections, probably no climate scientists at all, given Prof Wegman's social network analysis of the field. There are plenty of respected academics from fields such as physics, engineering, chemistry and mathematics. They can, and must, provide sound analysis of the data handling at the CRU and whether - as some have claimed - (allegedly) faking results and smearing rivals is "business as usual".

- KoW