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Tuesday, 25 November 2014

A bunch of Hunts

Every now and then, Labour give us a timely reminder of why we should never vote for them.  Today's insult to the intelligence is a bit of class war waged by a man named Tristram. Mr Hunt (apparently a Dr) thinks that private schools haven't done enough to help the state sector, and thus should lose their "£700m subsidy" of business rate relief.

I always resent it when a politician pretends that refraining from taxation amounts to a subsidy, as though they have a God-given right to pillage where they see fit.  Schools (public and private) are exempt from business rates, not so much because they are charities but because they are not businesses.  Education has long been recognised in law as a "charitable purpose" and anything done for a charitable purpose is not a business purpose. To be equitable, business rates should not depend upon ownership, and to apply business rates to independent schools but not state schools would be highly dubious practice, particularly when the independent schools were subject to a different basis of assessment (helping out other schools) than the state schools.

The real iniquity is that this simply passing the burden and responsibility for state education on to the independent schools, or more correctly, on to those who pay their fees. They already pay income tax and other taxes, they pay their children's school fees (saving the state the cost of doing so), they may even make donations to the schools’ bursary fund and now Labour thinks they should prop up failing state schools.

Every school is different, and some independent schools will add up the cost of their bursaries, scholarships and ‘community outreach’ work, compare that to their potential business rates and say, ‘sod it’. The ensuing silence will only be broken by the slow hand claps for the class warriors of the Labour Party.

Saturday, 22 November 2014

Some investment advice

The best investment advice I can offer today with an expected payoff overnight of somewhere between 20% and 48% (depending on your valuation, I'll come to that in a minute) is .....  the National Lottery.

Now the National Lottery is widely regarded as a tax on stupid people, who are usually not that strong at add ups and take aways, so allow me to do the maths for you.

In tonight's draw there is a double rollover jackpot prize estimated to be £10 million, 20 £1 million prizes and 50 Lotto raffle winners of £20,000, whatever that means, in addition to the normal non-jackpot prizes.

Now we know that the last draw featured a £5,905,060 which wasn't won, so the current draw adds £4,094,940 to the jackpot fund.  Now the jackpot is 66.4% of the prize fund after deduction of the prize for 3 balls, which makes that prize pool equal to £6,167,078.  Now we know that the total prize money, excluding the raffle prizes, is 42.47% of total sales and that there is a 1 in 56.6559273965 chance of winning a £25 prize for guessing 3 correct balls, i.e. a payoff of 22.06% leaving a jackpot poo of 20.01% of total sales, so that the total expected sales for this draw will be £6,167,078/20.01% = £30,220,413.

So the UK population is going to spend  £30,220,413. What can they expect back? Well first of all there are the 20 £1 million prizes and the 50 £20,000 prizes giving a payoff of £21 million.

Then there is the the jackpot, which is nominally worth $10 million, but which is not certain to be won.  With 49!/43!/6! possible choices of balls there is a 1 in 13,983,816 chance that any individual player will pick the correct 6 balls, but with 30,220,413 in sales, or 15,110,206 players there is a (13,983,815 /13,983,816) ^15,110,206 or 33.94089% chance that nobody will win, so the expected jackpot is £6,605,911.

Then we can add the prized for getting 3 balls correct £6,667,531 (=15,110,206/56.6559273965*£25), and the other non-jackpot prizes (1-66.4%)* £30,220,413*20.41% or £2,072,138.

That makes a grand total of £36,345,580 against an "investment" of £30,220,413.

Not bad, but it gets better depending on your perception of the value of the good causes, which receive 28% of the total sales.  You may consider that these are just a blight on society, of benefit to a limited minority including the quangocrats who handle the funds, inwhich case they are worthless.  Alternatively you might consider that they represent good value for money and are a public asset to which you are happy to donate.
Take the latter view and you have an average expected payoff equal to 48% of your stake money.  Take the former and you still have a payoff of 20%.

Of course your chances of actually coming out ahead are fairly small (a little better than 1 in 56), but your expected winnings are such that, for once, the argument to buy a lottery ticket is overwhelming to any hyper-rational person.