ja_mageia

The government has announced that the default retirement age will be phased out by October 2011. The default retirement age permitted employers to retire workers at the age without justification, and is an exception to United Kingdom labor law, which prohibits employers from making employment decisions on the basis of age and forces them to provide justification for dismissing a worker. Personnel groups and those supportive of the elderly cheered the announcement, while business groups such as the Confederation of British Industry expressed concern about the law. There is merit in both reactions.

The decision to scrap the default retirement age reflects the growing need for Britons to continue working later, given that people are living longer and healthier lives. The average British male aged 65 today can expect to live past the age of 82, and the average 65 year-old female is expected to live even longer, until the age of 85. This is a full five years longer than elderly Britons lived in the 1970s. The retirement age, however, has failed to increase in commensurate fashion, and these lengthy retirements require substantial taxpayer support. In light of this problem, the spirit behind the decision to scrap the retirement age is encouraging, and the benefit it is hoped to bring to the strained public budget is welcome.

Yet there exists another side to the coin as well. The default retirement age allows for a certain degree of flexibility in that it permits employers and employees a chance to reevaluate the employment contract, and to terminate it if it is not beneficial to one party. The law does not force workers to retire, and is merely a mechanism that alleviates the burden of labor market regulations. When the changes go into effect, employers will be more constrained, and will be forced to undergo a costly firing process to eliminate redundant or underperforming elderly workers. The semblance of at-will employment that is permitted to exist under the current law will disappear.

Sixty-five is certainly an inappropriate retirement age for many Britons, but the law as it exists now encourages this. Yet instead of further regulating the market, the government could relax the regulatory requirements of firing a worker, whether they be elderly or young, which would, in turn, lessen the risk of hiring a new worker. The decision of when to retire could be made entirely by the individual, without any government interference that encourages sixty-five as the appropriate age. As we have discussed before, we could divorce retirement from the collection of state benefits altogether. In any case, the government’s changes are a welcome start to a much-needed national discussion of how to cope with Britain’s ongoing demographic shift.

As individuals, businesses, and even governments tighten their belts, the Kraken beast that is the European Union continues to feed. With a budget of 141 billion euros in 2010, and evidence that it is struggling to spend all the money it currently has, The European Commission and European Parliament strangely thinks that an EU budget of 1 percent of GDP is 'inadequate'.

Despite this spending challenge and the state of EU economies, the EU is not only failing to cut back but there exists significant demand for a bigger budget. It can only raise this money through greater payments from the member states, or by collecting its own taxes. The latter option is becoming an increasingly plausible threat as many desire the introduction of indirect European taxes, higher contributions from national VAT, excise duties on CO2 emissions and charges on the financial sector amongst many possible revenue streams.

The first point to reiterate is that the needs for these additional funds is highly questionable. Secondly, the potential implementation of additional taxes, without a significant consent from the governed is highly worrying. Thirdly, if the EU acquires this power to raise revenues, then the bureaucratic machine will decide how much to raise. The EU project has already expanded to significantly restrict the liberties of member citizens. The EU has imposed over 70% of the UK’s regulation costs since 1998, impinged upon our sovereignty in an anti democratic manner and has had a share of grand yet damaging schemes such as the Common Agricultural Policy. With the ability to tax, its expansion and the threat to liberty will only increase.

Derk Jan Eppink’s campaign, Say no to EU Tax whose objective is that there be “No introduction of direct EU taxes or increase in national VAT contributions to the EU” and to “Restrict the EU budget to no more than 1 percent of European GNP, for more efficient use of the existing means”, is highly welcome. Paul the octopus with predictive powers might be fashionable, but the Kraken needs repeated harpooning before it grows a new tentacle and sinks the ship.

An annotated edition of Adam Smith’s legendary The Wealth of Nations has recently been published. ASI director, Eamonn Butler, wrote the foreword. The subtitle of the edition is plain but true: The Economics Classic. Adam Smith, the father of economics, essentially created the study with this book. The most fundamental observations and assertions Smith expresses in the book are still relevant and remain the foundation of every microeconomics class. Every student and scholar of economics knows the famous quote, “It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest.” This edition highlights such fundamental concepts that are useful to everyone

Eamonn Butlers’ foreword highlights the relevance of Smith’s groundbreaking ideas and stresses how it was a catalyst for change in economic thought. Mercantilist ideas of zero-sum trade and wealth were erroneous and harmful to everyone. Smith, as outlined in the foreword, had tremendous influence on policies that have dramatically increased the wealth for all. The treasure of an unhampered market is its ability to help those who need it most, while rewarding those that supply it.

The Lewisham head teacher, Marks Elms, of Tidemill Primary in Deptford, was paid a total of £204,303 last year (the press has misrepresented this as it does not all relate to a single year). The basic figure is £82,714 and he received a further £102,955, covering two years for his work in City Challenge, a ‘highly targeted drive to crack the cycle of under-achievement among disadvantaged children in primary and secondary schools’.

The uproar over this has been compounded by the self-important comments of the general secretary of the ATL teachers’ union, Mary Bousted, who said that the key issue when it comes to pay is ‘fairness’.

It is not a case of comparisons. What someone’s salary ought to be is a matter of subjective value. What somebody’s salary is can only be determined by negotiation between parties, informed by market forces. As it stands, we have to put up with having ivory tower dwellers spouting how much of taxpayers’ money should go on services providing for them. There is no ‘ought’ about it. The ‘is’ should be determined by supply and demand. Parents interviewed on Elms’s salary seemed to think he deserved what he got – the work he’d done for their children seemed reason enough. To compare his salary with that of investment bankers, graduate teachers and cleaners is meaningless; it serves only to highlight the distorted economic system which fuels comments such as Bousted’s.

Dr Eamonn Butler in the FT today.

Greenpeace protesters successfully stopped the flow of oil to around 46 BP stations in London yesterday. It was an effort to convince BP to “go beyond petroleum.” Yet this does little to solve any real problems, instead it was just a publicity stunt for special interest policies and increased the revenue of BP's competitors’ for the day.

The means of communication Greenpeace choose may be more infantile than others, but the central idea of the protest is often vocalized in the media. Voters and non-profits worry about our society’s reliance on oil and its harm on the environment. Common arguments mention how we are sucking our oil dry because of our addiction and obsession. The harm the BP spill had on the environment was indeed horrible, however this is not a reason to push policies dictating the amount and quality of oil allowed into a country.

The fundamental fallacy in the argument is the scarcity of oil. Studies and foundations have been predicting when oil will be completely consumed for a long time. However, these dates given are never correct. Critics of oil as a means of energy sometimes look at only scarcity, not the price system. As oil decreases in supply, the price will rise naturally. There is no need to regulate quantity for fear of overuse. As price increases, there will be more incentive to find undiscovered oil. So, the price mechanism will not only decrease consumption if depletion is near, it will increase innovation.

Greenpeace and others also overlook the importance of innovation. There are clearly the technologies to dramatically decrease consumption, as Greenpeace well knows. However, there are various problems with each of these. Electric, wind, and other popular alternatives are expensive compared to oil. There’s virtue in cleaner energy, but its viability can’t come from policy. It must come from actual changes in consumer preferences and relative prices through innovative technology. After all, the reason we use oil and electricity today instead of kerosene, is not because of policy but because innovative technology created a cheaper alternative. So, instead of vandalizing central London BP stations and shifting demand to Shell stations, Greenpeace should search for ways to make cleaner energy cheaper. It certainly has the resources to do so.

This week, the ACS (Association of Convenience Stores) has welcomed the Government’s decision to review the ban on tobacco displays in retail stores and warned that the proposed reforms would cost £1,800 per store to introduce. Although it’s not guaranteed that the ban will be overturned, if the government does decide to do so they will send out a clear message that they are serious about reducing regulatory burdens and allowing greater personal and business freedoms.

Under the guise of tackling youth smoking and the burden that smokers place on the NHS, the past government had set into motion a ban that would prove both anti-competitive and excessively punitive for small businesses. Worse still, the ban has little justification: in Canada, the introduction of a display ban led to the closure of many convenience stores and no change in youth smoking habits. Hiding the brands and presence of tobacco in shops will not cut down on the amount of underage smokers, and instead fuel the growing market of contraband cigarettes. So there is no factual justification that removing the display of tobacco will reduce youth smoking, but from Canada, clear evidence that the aims of the ban will not be met and will damage small businesses.

Without doubt this ban should be overturned. Amongst the Coalition MPs, approximately a third have a background in business. This is good news: we need a government that supports small businesses and that seeks to remove the heavy load of laws and regulations brought in by the past government. But going further than that, we need a pro-freedom government as well as a pro-business one. We need the end of a nanny state, which seeks to bring in ‘fat taxes’ and hide fag packets from the consumer. And an end to governments telling us what to eat and how to treat our bodies, using damaging legislation and wasteful initiatives to enforce their dictates. The issue of tobacco control and public health is an area that has long been overdue for an injection of proportionality and common sense - let’s hope we see plenty of it in this review.

No cowboy jokes at Dave Davis MP's talk on banking regulation at Civitas today, but a lot of ideas on what to do about our brokeback financial system.

Much of the problem, says DD, came from the authorities' desperate attempts to avoid every crisis – so there were none of the smaller 'forest fires' that would have eliminated over-risky or inept practices. Then there was the implicit government guarantee, which allowed banks to take on massive risks, reward themselves handsomely when it paid off, and leave taxpayers holding the baby when it didn't. Regulators had the power to curb the banks' risks, but they didn't. And they let banks publish utterly opaque accounts that didn't reveal how many risks they were taking, or how highly interlinked they all were.

As for solutions, well, gratuitous new regulation of the Dodd-Frank Bill sort will just add to costs without curing the problem. We need to make it easier for banks to fail – as they do all the time in the US, usually opening up under different ownership a few days later, with depositors' funds protected through insurance. We need living wills, says DD, but ones that make it both public and very clear which assets are protected and not protected in the event of problems. We need a more aggressive competition policy, he thinks, and to separate retail and investment businesses.

I may not be a banking expert – I put my money into IceSave – but the solutions seem clear to me. Bring market principles back into banking. Don't regulate with FSA tick-boxes, which just raise costs and so reduce competition. Regulate with chunky reserve requirements and forget the rest. Have even chunkier requirements on the bigger institutions which pose the biggest systemic risk. Don't try to legislate the structure of banks, but make them tell their customers how safe, or otherwise, their money is. And let's have sound money, so politicians can't get us into the same boom-bust cycles again. Job done.

David Willetts is right to allow more private institutions to become universities. More private universities would widen access and raise standards by increasing experimentation, choice and competition.

University College Union’s (UCU) statement that the reputation and standards at UK universities are at risk is incorrect. In the UK, the case of Buckingham – the first private university set up thirty year ago – is pertinent. Buckingham tops student satisfaction, staff student ratios and career outcomes, while their Business School was recently ranked second in the Guardian’s university guide 2011. More private universities would undoubtedly raise standards.

Also, UCU’s suggestion that private universities threatens academic freedom is preposterous. The opposite is actually the case. As UCU and others have pointed out, restrictive government funding criteria increasingly threatens academic freedom. Private universities take no government money, which allows them greater freedom than universities funded by the state.