Monthly Archives: June 2016

Thoughts on Post Brexit Scotland and NI

Source: SCOT goes POP!

There has been a lot of talk in recent days about devising a model that would allow Scotland, Gibraltar and possibly Northern Ireland to remain part of both the UK and the EU.  Here are a few reasons why that is very unlikely to happen –

1)  Even if England and Wales received Greenland-style exemptions from the treaties, the United Kingdom itself would almost certainly have to remain a member state of the European Union – and it has just voted to Leave.  Continued membership would arguably only be a technicality, but the triumphalist Brexiteers still wouldn’t stand for it.

2) It would be almost impossible to resolve the dilemma of whether Northern Ireland should be in the UK’s “EU zone” or “zone libre”, because its government is split.  The DUP are likely to take the view that leaving the EU is a UK-wide decision and that Northern Ireland – regardless of how it voted – must leave along with the rest of the UK.

3) In many ways, Scotland would become a de facto independent country anyway.  To reverse the catchphrase of the American revolution, you can’t have representation without taxation, and so if only Scotland and Gibraltar were contributing to the EU budget, it logically follows that the Scottish and Gibraltarian governments would control the UK’s vote in the Council of Ministers, and would also be responsible for determining the UK’s negotiating position on future treaties or treaty amendments.  That’s an enormous power that has thus far been reserved for sovereign governments, and in practice would presumably be wielded by the Scottish Government in consultation with Gibraltar (given the huge disparity between the populations, it’s hard to see how Scotland and Gibraltar could be on a completely equal footing).  Can anyone imagine London agreeing to that?

4) There would have to be a real border between Scotland and England.  That would be the case even if Boris Johnson gets his miracle “Norway minus” deal – because even that would involve restrictions on freedom of movement, but only within the UK’s “zone libre”, ie. England and Wales.  So movement between Scotland and England would have to be controlled just as much as movement between England and France.  People will understandably be inclined to think – if all this is going to happen anyway, what is the point in Scotland not becoming formally independent?

 

Post Brexit Game for Ireland – On Like Donkey Kong

donkey_kongSo , what a momentous week this was. Ireland through to the second round of the Euro championships, revisiting the heady days of the 1988 one, which heralded a new era of self belief and might even have helped with the national psyche for the real tiger times. Oh, and Brexit. Followed by the certainty of a second Scottish referendum.
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Some stylised facts on household waste collection (Charges)

20557Creeping up on us is a pay by weight scheme for household waste collection.  Im assuming here that most people think that reducing waste overall and increasing recycling are Good Things. This development  has seemingly gone under the radar of many, and when implemented from July will no doubt be a shock to the system. Allegations of massive charges have spurred a government scarred by the water debacle to threaten capping charges, which in turn raises the possibility of companies pulling out. So what do we know about the economics of waste collection?  Continue reading

Who’s exposed, and how much, to a Brexit – trade version

Remember – the argument is thus “Johnny foreigner, weak willed chap as he is, is so dependent on exporting his goods to the UK that we can thumb our noses at him, insult him, walk from his club, and he will still be nice to us. No gumption these foreigners.”

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(Site) Tax the bejazuz out of them…

Take a walk, or the Luas,  down Abbey street, past the Jervis Center (converted from a major hospital back in the 80s), down towards Heuston Station.   Get off at Heuston, and walk, weather permitting, back up the quays, the north quays in particular. I have been travelling this route , along that axis, since the late 1990s when we moved from leafy south Dublin to ineffably leafier north Kildare. What strikes me, and I warrant would strike anyone, is the sheer amount of vacant land. In some cases these plots have become overrun with  fully-grown mature shrubs, city gardens of buddleia and willow and hazel.  A particularly large plot is, with irony that would make Myles Na GCoppaleen bilious with envy, right beside the land registry. Google Maps tells me that this plot alone is some 50,000 sqFt.  Another plot, derelict also, is beside the pubic appointments commission, some 40,000 sq ft.  Smaller plots abound, such as a 20,000 sq ft plot on ushers island. So these three together have 100,000 sq ft of land. Right in the city center, serviced, accessed and ready to go. They have lain idle for years.  At 1250 sq ft  per apartment and allowing 15% for overage (curtain walls, entry etc) theres room for 70-80 apartments each story, and at 10 stories…well.

The same story persists in Cork, limerick, Galway, sligo, Tralee, every large and medium sized town. We have land lying idle. At the same time, we have managed a feat unique to world history. We have simultaneously a housing shortage and a massive amount, numbering in the hundreds of thousands at the upper end of estimates, of empty houses.  Rents are at a level never before seen even at the height of the madness, and that is with some degree of quasi-rent slowdown or control in place. Pity the renters when the brakes come off. We have 2000 children in emergency accommodation, homeless. This is a scandal and an affront to our humanity. But, we have a committee. So thats ok then.

House supply has all but collapsed. Having built all the houses in the wrong place the market is now building no houses in the right place. Blessed be the market.

houses2Local Authority housing, which up to the early 1990s had accounted for about 30% of the new builds, and from then to about 2010 10% has dwindled to almost nothing. We have, willy nilly and after an economic calamity caused by an overenthusiastic worship of the private housing sector, decided to place all our housing eggs in that selfsame basket.   Words are not adequate, and libel laws too loose, to speak of the folly of this action. Private housing markets in Ireland do not deliver a socially optimal mix of houses. There is a massive market failure. In the face of market failure governments, no matter how much they worship free markets, they intervene.

houses

Houses take time. Take the 5y average of population and a 5y average house build, and from 1970-1995 we had a fairly stable relationship of about 0.5%. A population of 3.5m, a housebuild of 16,000 -17,000. Now that stands at .2%. We have a supply problem. Everybody is aware of this . We are 20,000 housing units short per annum with little evidence that these will be built anytime soon. So we have a supply problem

The leaked draft report from the Oireachtas committee on housing and homelessness , and it is as yet only newspaper reports on a leaked draft, seems to suggest that the politicians only partially grasp this.  The headline issue is one of they decrying the central bank macroprudential actions, the loan to value and loan-income ratios. These, lets recall, were they in place the last boom, would have gone a long way to cool it down. So, the central bank has taken action, appropriate and sensible action, to clamp down on any demand led house price boom. That is their job, and to critique them for so doing is perverse, given they did not do it in the last boom. Thankfully in Philip Lane they have a governor who is I  suspect mostly impervious to the bleating of politicians.

Right now we don’t have an issue with house affordability per se. We have an issue with house availability. Suggestions on reducing VAT, on more sensible (but no less stringent please) standards, all these are useful in terms of making homes more affordable. But that presumes they are built.

We know, we have known for decades, that we have an issue with land hoarding. We need to intervene in the market at the source of failure – one main such is the hoarding, the non use, of land. It is seen as more potentially profitable to hold onto land in hope of its value rising than to build homes. Lets have a sensible and savage land value tax. Planning permission for homes on a plot should result in rapid movement towards utilization. If after a year there is no building on the land a 10% value tax. Every 6months another 10%, and so on. This would in short order sort out land hoarding.  At the very least we would eliminate that element of supply failure from the housing value chain. We can then move to examine the other elements. If, as is claimed, it is not profitable (but might be with freed up land…) to build, then we need to move to social provision, as we did for decades, as an integral part of the mix. It is simply inexcusable, unconscionable, that we have let this fester.

The government have been like a deer in the headlights for years, facing the oncoming train. If they are overwhelmed that’s one thing. If they refuse to move as they are in thrall to ideology, that’s quite another.

 

a longer version of an Irish Examiner column published 11 June 2016

Brexit- Rorschach’s Strategy

A popular argument on “why Brexit wont be so bad, really” goes thus : the UK runs a trade deficit with most EU countries, so it is in their interests to do whatever is needed to keep trading with us.

Its curious, this turning of what is a weakness- the UK not making stuff that it can, much, sell to foreigners, into a strength. Its Rorschach’s strategy in Watchmen. He dies, in the end.

So, what do the trade data tell us.

uktrade

they suggest that this argument is mostly bunk, but whats new in Brexit-land?

The UK runs a massive trade deficit. It runs a services surplus but not enough to offset. The UK imports stuff. The Brexit argument goes ” Heinz and Laurent  would want to sell stuff to us, wot wot, so he wont cut up rough as we walk out the door”

Well, maybe.  The issue is also – will George and Peppa be able to source elsewhere at a comparable price the stuff they get from the EU. Will it do the job the same as the existing ? Look at the massive amount of capital goods imported – this is stuff like precision machinery and factory equipment. There is a reason Germany and France and the Netherlands sell so much of this stuff- they are bloody good at it. Look at transport – thats Beemers, Porches, and Mercs. Will the brexiteers happily swap their 353’s and E220s for lexuses and Chryslers? The assumption seems to be that the consumer or producer seeking materials and goods, that they are infinitely flexible and can switch swiftly and easily.

A more plausible scenario is this : post Brexit, if the UK finds itself outside the EEA (as has been foretold) and in a free trade situation, they will face tariffs on their exports and will have to decide if they wish to have tariffs on imports. Doing so will possibly hurt the exporters – but 90-95% of  French/German/ Dutch exports go to places other than the UK. So it is much easier for them to switch marketing to make up for the small loss of exports to the UK contingent on tariffs than it is for the UK consumer to switch from long habits or embedded capital. Of course, the UK could decide not to impose tariffs, and allow totally free trade, but that is unlikely to be the case. So UK consumers are the junior partner here. And junior partners have low power.

All data here are from the world bank trade database http://wits.worldbank.org/