Wednesday 13 November 2013

The power of OPM

Nick's last post highlights well the living fallacy that our politicians thrive under of hiding how much of Other People's Money they are giving away. By forcing private companies to extract taxes on our behalf, they direct the ire of the populace against capitalists, when all the while it is the socialists who are responsible for the rising taxes. It's very clever and from a realpolitik perspective, an excellent play.

Of course, the real truth is worse still. It is not just the energy companies that various Government's have hit with this wheeze;

 - Rail subsidies have been cut, still these are at least subsidies, but by reducing them steadily the Government has instead allowed RPI+1% as minimum increases in rail fares, pushing rail travel to become more expensive than air travel domestically.

- With the introduction and increase of the air passenger tax, air travel too has been made more expensive and the collection of this tax falls on the airlines. So in particular, former national industries are often hit, no doubt the socialists enmity to progress focus' them on such business.

However, it is not just the Government who like the spending on your behalf. Just this week we have seen a private sector case, which will be of little interest tot he high minded, but does get to me! BT Sports have massively outbid Sky for the rights to Champions League Football from 2015 onwards. This huge bid has been portrayed as the first real challenge to Sky since ITV's ill fated ITV Digital initiative. Sky suffered a 10% loss of share price on the back to the loss.

Worse though for punters, is that BT Sport will only offer one match per season per team free to air. So now there will be even less 'free' football on TV. Now of course this is BT's commercial right to try and compete with SKY. However, the massive over-bidding for rights, will mean more costs to watch the sport. Let alone having to potentially buy Sky and BT Services, the actual prices for the sports packages will go up.

Of course, this is a commercial decision that is up to BT, if they don't get the subscribers they will give up. But what it does mean is for 3 years there will be very little free to air champions league and then after that Sky, should BT fail, will be in a better position to not revert to offering more for terrestrial opportunities.

But then again, those football clubs, just like the Government, really do need those extra revenues. At least I can opt out of watching football, it will be harder to live without power.


hovis said...

I find we can all get a bit too hung up on labels. This may be seem tangential but bear with me on this.

I wouldnt use the Socialist/ Capitalist dichotomy asI think it's false. It also hints at old battles and gets us away from looking at actual behaviour and solutions. The fact is there are no free market capitalist out there - even the ones that claim to be are in fact just corporatists.

As you know I see us more as living in a coporatist/soft fascist/plutarchic system. I think this more accurately describes what is going. It is not what the label is that matter but the behaviour behind it.
It heppens that So the revolving door of corporates and regulatory bodies, sponsored reports for governments as well as direct conflicts of interest in government see our own forms of corruption as far more insidious than the out and out graft you see in places like Nigeria. The problem is political, hence economics should revert to being political economy not the fantasy it has become. The problem is political and systemic not economic imho.

Incidentally your BT/SKY observation just reminds me about of my old undergraduate Welfare Economics lectures in that ther can be multiple equilibria in the market with different levels of utility to participants.

hovis said...

Balls to the typos hopefully you get my drift .. fat fingers and slow mind today

Jer said...

"the massive over-bidding for rights".

Or is it?

I don't know, but presumably BT don't think they've overpaid.

The key of course is in your last paragraph, BT have to recoup that money from the willing. The government can just order me to pay, even for an organisation where I would cheerfully level every building they own and massacre the employees.

Bill Quango MP said...

When SKY pitched up, decades ago, they broke the prevailing consensus and transformed UK soccer from a hooligan infested, mud bath into global football's premier showpiece. Fashion, glitz,style, Superbowl style razzamataz over the top.
So a shakeup is not necessarily a bad thing. Certainly caught SLY by surprise, even though it was their very own tactic from yesteryear.

I expect SKY will be much more alert to the long term danger than BBC or ITV ever were.

{Who can forget those early SKY ads for Saturday midday football - Built up like the heaviest of heavy weight boxing matches - A veritable Tyson fight...


[Wigan vs Burnley league cup 4th round. 12.30 }

rwendland said...

On leccy taxes/social-contributions, we should remind ourselves that the UK govt already subsidises domestic proces by about 15% compared to other EU countries. Oh yes. This seems never to be noted in all the journo verbiage in the MSM.

Nearly all EU countries charge standard VAT, at around 20%, on domestic electricity and gas supplies. (The main exceptions who charge the reduced VAT rate are UK 5%, Luxembourg 6%, Italy 10% and Ireland 13.5%. Many EU countries also seem to have some Excise Duty on top of VAT on domestic leccy - I think this is to fund eco projects.)

So perhaps, if we offload the social/eco-contributions from the leccy companies onto general taxation, the balanced capitalist@work would also increase VAT on domestic electricity and gas supplies to the EU average of around 20%? Just watch the UK politicians gag!

CityUnslicker said...

Hovis - I am never going to complain about typo's.

jer - yes my poitn was more they have bid for something with limited insight. If it goes wrong the net result is that we lose something of free utility - not complaining about the market, except that I liked free champoions league on tv...but that is UEFA's choice and I don't get a vore there for some reason.

RWENDLAND - My point is that no one really voted for thsi energy madness, energy policy until very recently would not even make the top 20 reasons of what people vote for. here we discuss it ad nauseam, but in general until the current milligasm, it has been ignored. I don't want such high prices, or the cost moved to gneral taxation, just reduced becuase global warming is not the threat to the UK that these costs we are absorbing would imply.

rwendland said...

On air passenger tax, we have to remember that airlines pay no Excisie Duty on fuel, but buses and trains do. All because of the 1944 Chicago Convention on International Civil Aviation.

So the air passenger tax is just a partial and imperfect rectification of the unbalanced tax situation. Perhaps we should remove excise duty from bus and train fuel instead?

CityUnslicker said...

of course we should, if we can afford it. Which we can't with billions of unfunded infrastrcuture commitments.

DJK said...

Question Time (apologies for early post):

1. Doesn't the Phillipines Typhoon show the need for a UN-sponsored no-strings International Rescue organization?
2. Energy companies! They're just as bad as the banks, aren't they?
3. NHS A&E. Is the National Death Service really safe with the Tories?
4. How would Israel benefit from a peace treaty with Iran?
5. Are you ever too old for a tattoo?

Dimbletie: Autumn shades of brown.

Ryan said...

"The fact is there are no free market capitalist out there"

Capitalism involves seizing the means of production. It is inherently pro-cartel and pro-momopolist and thus anti free market.

However, the answer is not Marxism (the state seizes the means of production) but careful regulation of the free market (everyone can have a share of the means of production) to avoid capitalism.

andrew said...

This is one of the main reasons for having a govt

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