EURO 2012
Only three games in, and already the tournament is producing some surprises. First, 10-man Greece missed a penalty that would have put them 2-1 up against hosts Poland. Then Russia produced some scintillating football to thrash the Czech Republic 4-1. And then this evening Denmark beat favourites Holland (and my tip to win) 1-0, their first victory over the Dutch in 45 years.
What about all that stuff about human rights in Ukraine? That's for politicians, I'm a football fan.
Walter Blotscher
Saturday, 9 June 2012
Friday, 8 June 2012
SYRIA (3)
I have to say that I don't understand the West's position on Syria. Given Russia's and China's veto-wielding rights in the U.N. Security Council, they should in my view let them take the blame for what is happening on the ground (which is pretty grim and getting worse). What they shouldn't do is allow Kofi Annan or anybody else to come up with ever more complicated and unrealistic plans for a ceasfire, monitoring force and/or other non-military options. President Assad is not going to respect bits of paper, as I said a month ago.
I know that diplomats like to diplome, so to speak. But this is an example where diplomacy is not going to work.
Walter Blotscher
I have to say that I don't understand the West's position on Syria. Given Russia's and China's veto-wielding rights in the U.N. Security Council, they should in my view let them take the blame for what is happening on the ground (which is pretty grim and getting worse). What they shouldn't do is allow Kofi Annan or anybody else to come up with ever more complicated and unrealistic plans for a ceasfire, monitoring force and/or other non-military options. President Assad is not going to respect bits of paper, as I said a month ago.
I know that diplomats like to diplome, so to speak. But this is an example where diplomacy is not going to work.
Walter Blotscher
Wednesday, 6 June 2012
IMAGINATIVE THINKING
What do you do with the old nineteenth century urban prison, when it is replaced with a state-of-the-art new one on a greenfield site out of town? That was the question in 2006 facing Horsens, a pleasant city of some 55,000 people in east Jutland. Prisons are, after all, perhaps the ultimate niche activity, so it is difficult to think of alternative uses. Demolition is one option; but that leaves a big hole right in the middle of town, which creates problems of its own.
Horsens' solution was to turn it in a cultural centre, with a prison museum, conference centre, and - above all - a place to give concerts. Plans were disrupted by the financial crisis; but the project finally got underway this evening with a concert by Metallica, one of the world's biggest rock bands (and of major interest to Danes, since the drummer is Danish). 40,000 people turned up to celebrate; Tom Petty and the Heartbreakers are due next week.
My old university town Oxford in the U.K. had a similar problem in the 1990's, though the prison there was part of the even older mediæval castle, which is a listed building. Part of it was preserved as a museum, and another part was turned into a hotel. It's amazing what you can come up with if you put your mind to it.
Walter Blotscher
What do you do with the old nineteenth century urban prison, when it is replaced with a state-of-the-art new one on a greenfield site out of town? That was the question in 2006 facing Horsens, a pleasant city of some 55,000 people in east Jutland. Prisons are, after all, perhaps the ultimate niche activity, so it is difficult to think of alternative uses. Demolition is one option; but that leaves a big hole right in the middle of town, which creates problems of its own.
Horsens' solution was to turn it in a cultural centre, with a prison museum, conference centre, and - above all - a place to give concerts. Plans were disrupted by the financial crisis; but the project finally got underway this evening with a concert by Metallica, one of the world's biggest rock bands (and of major interest to Danes, since the drummer is Danish). 40,000 people turned up to celebrate; Tom Petty and the Heartbreakers are due next week.
My old university town Oxford in the U.K. had a similar problem in the 1990's, though the prison there was part of the even older mediæval castle, which is a listed building. Part of it was preserved as a museum, and another part was turned into a hotel. It's amazing what you can come up with if you put your mind to it.
Walter Blotscher
Tuesday, 5 June 2012
SAVERS AND BORROWERS
Historically low interest rates (this is Denmark, not Greece) are terrific for borrowers such as myself, who have seen the cost of their mortgages fall over the past four years (mine will fall again this coming 30 June).
However, as with most things economic, there are two sides to every coin. What is very good for borrowers is not at all good for savers. Indeed, so low are the available returns for savers that it is becoming critical for pension funds that have guaranteed their members a minimum rate of return. A guaranteed 5% a year might have seemed parsimonious ten years ago; but when the maximum available return on Danish Government bonds today is only 2.5%, then that target suddenly looks all but impossible. Some funds may end up going bust.
Another financial headache for the Danish Government to have to think about.
Walter Blotscher
Historically low interest rates (this is Denmark, not Greece) are terrific for borrowers such as myself, who have seen the cost of their mortgages fall over the past four years (mine will fall again this coming 30 June).
However, as with most things economic, there are two sides to every coin. What is very good for borrowers is not at all good for savers. Indeed, so low are the available returns for savers that it is becoming critical for pension funds that have guaranteed their members a minimum rate of return. A guaranteed 5% a year might have seemed parsimonious ten years ago; but when the maximum available return on Danish Government bonds today is only 2.5%, then that target suddenly looks all but impossible. Some funds may end up going bust.
Another financial headache for the Danish Government to have to think about.
Walter Blotscher
Monday, 4 June 2012
THE REPEAL OF THE CORN LAWS
The repeal of the corn laws by the British Government in 1846 was one of the seminal events of the nineteenth century. The basic law had been introduced by the administration of Lord Liverpool at the end of the Napoleonic wars, and provided for a prohibitively high duty on foreign corn if domestic prices fell below a threshold. As such, it was a high measure of protection for the landed interest at the expense of the consumer. In 1828 the all-or-nothing threshold was replaced with a sliding scale; and in 1842, the Government reduced the scale. However, with the industrial revolution really starting to get traction, the basic issue was whether the incomes of a (mainly) aristocratic minority should take precedence over cheap food for the masses flocking to the towns. The general consensus was that they shouldn't; the problem though was that in 1846, most of the masses had no vote, whereas the landed aristocracy dominated Parliament.
The man who cut through this Gordian knot was Sir Robert Peel, leader of the Conservative Party and Prime Minister since 1841. The irony was that although Peel himself came from manufacturing stock (his father was a first-generation baronet who had made money in Lancashire), the Conservative Party in general, and his Cabinet in particular, represented the landed interest in spades. Against that background, Peel decided to resign and pass the baton over to Lord John Russell, the leader of the Whig Opposition, who had announced his commitment to repeal in November 1845. However, after two weeks of dithering, Russell declined to accept what he perceived was a poisoned chalice (politicians were not so greedy to lead in those days), so Peel took up office again. By the following June, the bill abolishing the corn laws had passed through both Houses of Parliament. Almost immediately, however, Peel resigned as Prime Minister, following defeat on another issue.
The repeal of the corn laws was the biggest single reason behind the prosperity of the third quarter of the nineteenth century, and would not have happened without Peel. However, that same act both cost him his political career (he never held ministerial office again and died in 1850 after falling off his horse), and split the Conservative Party, condemning it to 28 years before it again commanded a Parliamentary majority. Although some party contemporaries undoubtedly wished to retain the laws, the driving force behind the split was the opportunism of Benjamin Disraeli, who took the opportunity to - in effect - destroy Peel as party leader, even if the party that he eventually took over was now a rump. In party-conscious Britain, Peel acquired a reputation as a splitter, even though his crime was to put the interests of his country before that of his party, a rare case of true statesmanship.
Indeed on that score, Peel has a justifiable claim to be Britain's greatest ever Prime Minister. Other Prime Ministers have put country before party; Gladstone over Ireland, Churchill over rearmament, Heath over Europe. However, Peel did it not just once, but twice, having promoted Catholic emancipation some years before. Politicians trying to sort out Europe's current problems could do worse than trying to follow Peel's example.
Walter Blotscher
The repeal of the corn laws by the British Government in 1846 was one of the seminal events of the nineteenth century. The basic law had been introduced by the administration of Lord Liverpool at the end of the Napoleonic wars, and provided for a prohibitively high duty on foreign corn if domestic prices fell below a threshold. As such, it was a high measure of protection for the landed interest at the expense of the consumer. In 1828 the all-or-nothing threshold was replaced with a sliding scale; and in 1842, the Government reduced the scale. However, with the industrial revolution really starting to get traction, the basic issue was whether the incomes of a (mainly) aristocratic minority should take precedence over cheap food for the masses flocking to the towns. The general consensus was that they shouldn't; the problem though was that in 1846, most of the masses had no vote, whereas the landed aristocracy dominated Parliament.
The man who cut through this Gordian knot was Sir Robert Peel, leader of the Conservative Party and Prime Minister since 1841. The irony was that although Peel himself came from manufacturing stock (his father was a first-generation baronet who had made money in Lancashire), the Conservative Party in general, and his Cabinet in particular, represented the landed interest in spades. Against that background, Peel decided to resign and pass the baton over to Lord John Russell, the leader of the Whig Opposition, who had announced his commitment to repeal in November 1845. However, after two weeks of dithering, Russell declined to accept what he perceived was a poisoned chalice (politicians were not so greedy to lead in those days), so Peel took up office again. By the following June, the bill abolishing the corn laws had passed through both Houses of Parliament. Almost immediately, however, Peel resigned as Prime Minister, following defeat on another issue.
The repeal of the corn laws was the biggest single reason behind the prosperity of the third quarter of the nineteenth century, and would not have happened without Peel. However, that same act both cost him his political career (he never held ministerial office again and died in 1850 after falling off his horse), and split the Conservative Party, condemning it to 28 years before it again commanded a Parliamentary majority. Although some party contemporaries undoubtedly wished to retain the laws, the driving force behind the split was the opportunism of Benjamin Disraeli, who took the opportunity to - in effect - destroy Peel as party leader, even if the party that he eventually took over was now a rump. In party-conscious Britain, Peel acquired a reputation as a splitter, even though his crime was to put the interests of his country before that of his party, a rare case of true statesmanship.
Indeed on that score, Peel has a justifiable claim to be Britain's greatest ever Prime Minister. Other Prime Ministers have put country before party; Gladstone over Ireland, Churchill over rearmament, Heath over Europe. However, Peel did it not just once, but twice, having promoted Catholic emancipation some years before. Politicians trying to sort out Europe's current problems could do worse than trying to follow Peel's example.
Walter Blotscher
Sunday, 3 June 2012
DIFFERENTIAL VAT RATES
Value added tax is, as its name suggests, a consumption tax on the value added of goods and services (technically, supplies). It is a "good" tax, in the sense that businesses get relief for their inputs, so no tax is paid if there is no added value (eg because the good sold is unprofitable); contrast that with sales tax, which is applied even if the good supplied is loss-making. Critics of VAT say that the tax is regressive, meaning that it adversely affects the poor. However, this criticism is overblown. VAT is only regressive if rich and poor purchase the same basket of goods and services, and that they do not do. If the rich person buys champagne for £20 a bottle and the poor person plonk for £4, then the tax is regressive only if the rich person's income is more than five times that of the poor person. It is not quite as simple as that, not least because you have to look at everyone's purchases and everyone's incomes; but you get my point.
Under E.U. law, all Member States must have a VAT system (not least since the E.U. budget is fixed as a percentage of Member States' VAT revenues). There is a minimum percentage - 15% until the end of 2015 - but no maximum. Member States are also allowed to have certain categories of goods and services taxed at lower rates; and Governments accede to this, either in order to help certain classes of business (eg restaurants in France) or to deal with the regressive point outlined above. In Denmark VAT is 25% and is charged on virtually everything; in the U.K., on the other hand, the big exceptions have traditionally been food, books and children's clothing, which are zero rated. It has never been clear to me why Brits would starve if there were VAT on food, whereas Danes manage to survive paying 25% on it; but domestic political considerations are not always easy to follow.
So differential VAT rates are allowed; but it is now that the fun starts. Because once you have differential VAT rates, you start having quibbles about where the boundaries lie, as the recent "pasty" row in the U.K. demonstrates. Food, for zero-rating VAT purposes, generally means cold food; hot takeaway food has traditionally been treated akin to restaurant services rather than as a basic necessity, and so has been VAT-able. In the recent Budget, the Chancellor decided to levy VAT at the standard rate of 20% on cornish pasties, a peculiarly British invention, since they are often purchased hot. Enter the pasty lobby, fronted by the Cornish Pasty Association. After a sustained campaign, the Government has now backed down, sort of. If the hot pasty is sold straight from the oven, it is not being kept hot, and so is not VAT-able; if it is left on a rack to cool down, it is also not being kept hot, and so is not VAT-able; but if it is taken out of the oven and kept hot in a cabinet or similar, then it is being kept hot and so is VAT-able. Clear?
If you think that this is complicated, then you should read the history of the protracted litigation in the Marks and Spencer case, dealing with VAT on chocolate covered teacakes (of which M&S used to sell a lot). This went on for thirteen years, and involved two trips to the House of Lords and two references to the European Court of Justice. Food is in general zero-rated, but one exception is "confectionery", which is VAT-able. However, there is an exception to that exception, namely "biscuits". There is then an exception to that exception to that exception, namely biscuits wholly or partly covered with chocolate. Between 1973, when VAT was introduced, and 1994, the authorities treated the teacakes as biscuits, so the teacakes were VAT-able; they then changed their minds and decided that the teacakes were, in reality, cakes, and so should have been zero-rated. The case arose because M&S then claimed back all of the VAT which they had paid on the teacakes for some 20 years.
A salutary lesson in Governmental micro-management, if ever there was one. I eagerly await the case, which depends on defining what "being kept hot" means.
Walter Blotscher
Value added tax is, as its name suggests, a consumption tax on the value added of goods and services (technically, supplies). It is a "good" tax, in the sense that businesses get relief for their inputs, so no tax is paid if there is no added value (eg because the good sold is unprofitable); contrast that with sales tax, which is applied even if the good supplied is loss-making. Critics of VAT say that the tax is regressive, meaning that it adversely affects the poor. However, this criticism is overblown. VAT is only regressive if rich and poor purchase the same basket of goods and services, and that they do not do. If the rich person buys champagne for £20 a bottle and the poor person plonk for £4, then the tax is regressive only if the rich person's income is more than five times that of the poor person. It is not quite as simple as that, not least because you have to look at everyone's purchases and everyone's incomes; but you get my point.
Under E.U. law, all Member States must have a VAT system (not least since the E.U. budget is fixed as a percentage of Member States' VAT revenues). There is a minimum percentage - 15% until the end of 2015 - but no maximum. Member States are also allowed to have certain categories of goods and services taxed at lower rates; and Governments accede to this, either in order to help certain classes of business (eg restaurants in France) or to deal with the regressive point outlined above. In Denmark VAT is 25% and is charged on virtually everything; in the U.K., on the other hand, the big exceptions have traditionally been food, books and children's clothing, which are zero rated. It has never been clear to me why Brits would starve if there were VAT on food, whereas Danes manage to survive paying 25% on it; but domestic political considerations are not always easy to follow.
So differential VAT rates are allowed; but it is now that the fun starts. Because once you have differential VAT rates, you start having quibbles about where the boundaries lie, as the recent "pasty" row in the U.K. demonstrates. Food, for zero-rating VAT purposes, generally means cold food; hot takeaway food has traditionally been treated akin to restaurant services rather than as a basic necessity, and so has been VAT-able. In the recent Budget, the Chancellor decided to levy VAT at the standard rate of 20% on cornish pasties, a peculiarly British invention, since they are often purchased hot. Enter the pasty lobby, fronted by the Cornish Pasty Association. After a sustained campaign, the Government has now backed down, sort of. If the hot pasty is sold straight from the oven, it is not being kept hot, and so is not VAT-able; if it is left on a rack to cool down, it is also not being kept hot, and so is not VAT-able; but if it is taken out of the oven and kept hot in a cabinet or similar, then it is being kept hot and so is VAT-able. Clear?
If you think that this is complicated, then you should read the history of the protracted litigation in the Marks and Spencer case, dealing with VAT on chocolate covered teacakes (of which M&S used to sell a lot). This went on for thirteen years, and involved two trips to the House of Lords and two references to the European Court of Justice. Food is in general zero-rated, but one exception is "confectionery", which is VAT-able. However, there is an exception to that exception, namely "biscuits". There is then an exception to that exception to that exception, namely biscuits wholly or partly covered with chocolate. Between 1973, when VAT was introduced, and 1994, the authorities treated the teacakes as biscuits, so the teacakes were VAT-able; they then changed their minds and decided that the teacakes were, in reality, cakes, and so should have been zero-rated. The case arose because M&S then claimed back all of the VAT which they had paid on the teacakes for some 20 years.
A salutary lesson in Governmental micro-management, if ever there was one. I eagerly await the case, which depends on defining what "being kept hot" means.
Walter Blotscher
Friday, 1 June 2012
WIKILEAKS (3)
Wikileaks founder Julian Assange has lost the latest round in his long attempt to resist being extradited from the U.K. to Sweden. The authorities there want to question him in connection with the complaints of two women that he sexually molested and raped them during a trip to Stockholm. He has not been formally charged, denies the complaints and is happy to talk to the prosecutors about the incidents, which he says were consensual. But he doesn't want to go to Sweden, since he fears being sent on to the United States, very keen to get their hands on him because of Wikileaks' leaking confidential documents from U.S. embassies (see my earlier post).
This week the U.K.'s Supreme Court decided 5-2 that he should be extradited. The key legal point was what constitutes a "judicial authority" for the purposes of a European arrest warrant. Mr. Assange had argued that a public prosecutor (who was the person in Sweden who had issued the warrant), was not a judicial authority, and that warrants could only be issued by a judge or a court. The Supreme Court disagreed, thereby upholding the decision of two lower courts. Although the relevant U.K. legislation was unclear on this point, most European states allowed public prosecutors to issue warrants, and it was best to go along with this rather than sticking to a literal interpretation of the English text.
Mr. Assange has the option of appealing to the European Court of Human Rights, but I suspect that he won't get very far with that. And so, at some point, he will be put on a plane to Stockholm, and the next chapter in this saga.
Walter Blotscher
Wikileaks founder Julian Assange has lost the latest round in his long attempt to resist being extradited from the U.K. to Sweden. The authorities there want to question him in connection with the complaints of two women that he sexually molested and raped them during a trip to Stockholm. He has not been formally charged, denies the complaints and is happy to talk to the prosecutors about the incidents, which he says were consensual. But he doesn't want to go to Sweden, since he fears being sent on to the United States, very keen to get their hands on him because of Wikileaks' leaking confidential documents from U.S. embassies (see my earlier post).
This week the U.K.'s Supreme Court decided 5-2 that he should be extradited. The key legal point was what constitutes a "judicial authority" for the purposes of a European arrest warrant. Mr. Assange had argued that a public prosecutor (who was the person in Sweden who had issued the warrant), was not a judicial authority, and that warrants could only be issued by a judge or a court. The Supreme Court disagreed, thereby upholding the decision of two lower courts. Although the relevant U.K. legislation was unclear on this point, most European states allowed public prosecutors to issue warrants, and it was best to go along with this rather than sticking to a literal interpretation of the English text.
Mr. Assange has the option of appealing to the European Court of Human Rights, but I suspect that he won't get very far with that. And so, at some point, he will be put on a plane to Stockholm, and the next chapter in this saga.
Walter Blotscher
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