ja_mageia

I think we all know that I'm slightly out of step with many of you: I think climate change is happening and that we ought to do something about it. However, when I watch the politicians stumbling in the dark as they attempt to do something I'm quickly reminded that it's normal for the political process to produce something which is worse than doing nothing.

As Lexington in The Economist notes there's a new suggestion in the US about what to do. Sensibly the idea is to do away with the entirely pork laden and counter-productive measures that have already passed the House and do something more sensible. Instead of cap and subsidise, have cap and dividend. This raises the price of carbon emissions, yes (which is the whole point) but returns the money raised by auctioning them all to consumers in the form of a dividend.

It would be simpler and easier to do this by imposing a carbon tax but that is regarded as a political non-flyer, sadly.

Then we're told about the details. In the trade part of the cap and trade thing (trade being an essential part of a cap and trade system, as the phrase indicates) the legislation would deny most opportunities to trade. More specifically, it would deny speculators from trading the permits (seemingly entirely unaware that speculators both provide liquidity and accept risk): and yet there could still be speculation but it would be pure speculation, without either providing liquidity in the real market nor accepting risk.

Some time ago some of us at the ASI (in our secret underground lair at which we sacrifice socialists and statists to our statues of Adam Himself, Bastiat and Hayek, as you know) were pondering this very point. A properly designed cap and trade system would be the best solution. Then we pondered on the politicians we actually have, rather than those we would like to have, and quickly concluded that a carbon tax would be better, giving less opportunity for said politicans to get it wrong: and in the absence of that perhaps nothing was better than whatever we would get.

Can't say there's been all that much to change that conclusion as yet.

In September, Power2010 asked the public to come forth with the democratic reforms they wanted to see at the next parliament. The response was huge; over 4,000 proposals were put forward. These ideas were whittled down by a representative sample of the population, and any securing above 50% support are now up as a shortlist of proposals on their website. Until 22nd February, you can vote for the changes that mean the most to you. Following this, the 5 most popular demands will form the Power2010 Pledge. This will be taken to all those standing for election, with a request for their own pledge to clear up politics.

There are some great suggestions on the shortlist such as 'Scrap ID cards and roll back the database state', 'English Votes on English Laws' and 'Expand the Freedom of Information Act'. The only way to ensure that the ideas that appeal to you make the final pledge is to vote for them. The campaign has brought about ideas from people across all backgrounds and party ties, and by keeping the suggestions limited to ways of enhancing democracy there is little political bias.

The number of parliamentary candidates that will take up the Power Pledge remains to be seen, but the more that those who care about parliament's health support the campaign, the better. Making it clear to parties where the public stands on civil liberties and transparent government is perhaps one of the best safeguards against the situation disintegrating further.

Click here to find out more.

At first, of course, they were intended to protect us from the power of absolute monarchs. In time, though, Parliament replaced the monarch as sovereign; but these same rules worked equally well at restraining politicians too. Ministers knew that they were only the temporary custodians of the public trust; and that their power was checked and balanced by MPs, the civil service, and the courts.

Indeed, the monarchy itself became one of these balancing institutions. It may seem bizarre in a democracy that the monarch is notionally the head of the government, the church, the peerage and the army; but the reason we keep it that way is not so that monarchs can wield power, but so as to keep unlimited power out of the hands of politicians. For most of the time, our monarchs have had a better grasp of the mood of the people, and of the importance of their rights and freedoms, than have ministers: so this has proved a useful arrangement.

The key constitutional role of monarchs today, then, is to stop politicians from usurping power and turning themselves into an elected dictatorship. But the Queen – perhaps confusing the exercise of this role with political interference – has allowed precisely that to happen. With Magna Carta, the Queen’s distant ancestor agreed to fundamental principles such as our right not to be held without trial, and to be tried by a jury. Yet in her own reign (starting perhaps in 1971 with internment in Northern Ireland, but escalating fast in the last dozen years) these rights, and more, have simply been signed away.

The constitutional role of an unelected, hereditary monarchy must be limited. But it does have a constitutional role, and must exercise that role as a necessary counterweight to the otherwise unbridled power of an executive that – through its majority and its patronage – is in complete control of Parliament. It is time for both Palace and Parliament to initiate a genuine public debate on that role, and on when and how the monarchy should legitimately intervene to ensure that the rights and civil liberties of the people are preserved.

Reprinted from Dr Butler's new book The Alternative Manifesto (Gibson Square Books).

The last Conservative administration under John Major used to agonise about passing too many regulations. They even set up a taskforce to reduce it. Tony Blair replaced that with a “Better Regulation Taskforce” and better turned out to mean more – the flow of new regulations doubled. No surprise there.

Although two thirds of the regulatory burden in money terms arises from EU-sourced regulations, less than one third of the number of regulations are due to the EU. In other words, the UK afflicts about 200 regulations on itself which the rest of the EU consider unnecessary.

Both the Major and Blair governments claimed they would reduce the stock of existing regulations. In both cases, the Whitehall machine ground down the suggestions to the point where some administrative simplification was achieved, some groups were consolidated (e.g. fire regulations) and a very few regulations were nullified, perhaps five a year compared with the 250-300 new ones. Both governments emitted positive noises about deregulation and called for suggestions. The IoD was one of the organisations that responded with a list, a little list, of regulations that would not be missed, that never would be missed. 258 of the IoD’s suggestions were, in October 2009, batted into the long grass. Just 11 would be “taken forward”. And I wouldn’t hold your breath on those.

The government claims that regulation is a net benefit but their numbers take alleged benefits for the voting public and then subtract the costs to business. Having business pay for welfare is attractive to the Chancellor but it is covert taxation. Business, in bearing the cost, becomes less competitive and less productive. The unions are happy in the short-term but they have learned nothing from the London and Liverpool docks.

As regulation drags Britain down we can at least have a little fun at Whitehall’s expense. Each month ASI will publish a recent daft regulation which we do not need even if the mandarins think we do. Watch this space.

So far...

1. Mandatory parenting needs assessment – ASBOs
2. The Building (Local Authority Charges) Regulations 2010

Other Euro members, especially those in the Mediterranean region, are seeking to distance themselves from Greece. The quaintly-named Socrates – not the moody Brazilian football star of the 1980s but Portugal’s current Prime Minister - has sought to differentiate his country from Greece. Not surprisingly, Spain is also getting very edgy. Given that its economy is more than four times the size of Greece’s, any serious weakening in its bond yields would be a profound worry.

There is an element of déjà vue here. After all, the shares of virtually every quoted UK bank, except HSBC and Barclays, were persistently undermined by sellers over a period of months; subsequently, these banks were bailed out by the Government. And in Barclays’ case, as Wellington said at Waterloo, ‘it was a damned near-run thing’.

For the UK, of course, memories abound of its humiliating – and forced - withdrawal from the ERM in 1992. Having prudently remained outside the Euro, the UK’s role is now more passive. Instead the focus will be on Germany’s Bundeskanzlerin, Angela Merkel, and France’s Finance Minister, Christine Lagarde. They may need to sanction substantial financial support if the Greece crisis worsens – or if Euro contagion occurs. Furthermore, the IMF may intervene.

Worrying times certainly. But is there not a loud message here for the UK whose Public Sector Net Borrowing is due to be £178 billion this year – with a similar figure for 2010/11?

Although many make the case that poorer people can’t afford a place at university under the current system, they seem to overlook the other ways in which university could be paid for. To answer this question we need only look overseas.

Through a combination of higher fees, loans and philanthropy, American universities are able to offer poorer students the opportunities within a system of private universities. For example, a student whose parents earn under £30,000 would find themselves fully funded at Harvard. Even those with a family income of £90,000 would only pay £9,000 per year in tuition.

This goes some way to explaining why so many intelligent British students are crossing the pond in search of a superior, cheaper degree. The British university system has a lot to learn. If universities were delinked from state subsidies they could become more dynamic and student focused, forced to improve or face a loss of students, and eventual closure. Given that students already want be treated as consumers – protesting at places like Manchester University when they feel they aren’t being given value for money – the time is right for change.

Students that complain about having to pay for degrees have a very shortsighted view. Their argument that they don’t want to come out of University with £20,000 of debt seems to pale into insignificance when the education received could result in significant future earning. Yet the students are asking for those without this future privilege to pay for their education. It is time they stopped eating from their table.

The ASI hears the same story from accountants and wealth managers who come to our Power Lunches. People were prepared to pay 40 percent, but the 50 percent rate has crossed a tipping point, and people regard it is unfair and unacceptable. Mike Warburton, senior tax adviser at Grant Thornton, says that, "People are taking obvious avoidance measures because they are not prepared to pay 50 per cent tax.... People were prepared to pay 40 per cent but the Treasury don't seem to understand what drives people."

He says that some are taking pay early, before the new rate cuts in, while others are deferring reward into the future. Still others are leaving the country, and some are giving it instead to the charity of their choice. Considering that those earning £100,000+ also lose their personal tax-free allowance, the new rate will hit some earners ever harder.

The Treasury had earmarked revenue from the increase of £1.13bn in 2010, and £2.5bn in 2011. Now they have "significantly reduced" these expectations, and will undoubtedly have to reduce them again. I predict once again that the actual yield will be below zero in both years, as the new rate will raise less money than the 40 percent rate did.

What, then, is gained? A few diehard class warriors will be pleased to see those with talent and enterprise suffer, and Lord Mandelson's attempt to have Labour campaign as "the party of opportunity" will be undermined. George Osborne said at one stage that he, as Chancellor, would leave the 50 percent rate in place for the time being. It is time for that pledge to be revisited before this ill-conceived and foolish measure does any more damage.

My friend John Baden of the Foundation for Research into Economics and the Environment reminds me that twenty years ago, the National Centre for Policy Analysis in Dallas commissioned a report on Environmental Myths and Realities. Nine of the ten myths focused on the consequences of consumer behaviour. The myths (and facts) included: Americans were especially wasteful (they weren't), packaging was bad (it isn't), recycling is always good (not always), biodegradable is best (not always), America's running out of landfill (twenty years on and it still isn't a problem), and we are running out of resources (er... we have more known oil reserves, for example, than we've ever had).

Twenty years ago, of course, most people were worried about the coming ice age and the population explosion. Today, it's warming, and population implosion – we in Europe are producing children at far less than the replacement rate, and on current trends the population of Russia will be down by a quarter come mid-century.

One of the interesting thing about problems is that they change. And for those that remain, people find fixes to them. As Baden will tell you, you don't run out of material resources when property rights are secure and the market is permitted to work – fostering discovery, substitution and conservation. 'Scarcity,' he says, 'has never won a race against creativity when marketable commodities are at issue.' The stone age didn't end because we ran out of stone, enterprising people just found better things to make tools of. No, the real problem is when people, for idealistic reasons, undermine the market system. Then you find out what shortages and ecological disasters are.

London Mayor Boris Johnson could cut the city's council tax by ten percent without anyone noticing any loss of services, blogs the irrepressible journalist and councillor, Harry Phibbs.

Do we really need to spend £8m a year on the London Assembly, for example? Phibbs would prune the bureaucracy right back, and cut its budget to £1m. Then there is nearly £500k spent by the Mayor's Brussels section. Don't we have MEPs to do that job? And what benefit do Londoners get from the Mayor's International Relations budget? We have a Foreign Office for that, too.

Salaries for 'London stakeholders', whoever they are, cost another £400k. Police liaison (not to be confused with fighting crime) is another £540k. Phibbs would cut another £200k on 'transparency agenda' spin-doctors. And the £100k 'internal communications' budget would go entirely.

Budgets for liaison with central government, public consultations (usually things are decided long before anyone asks the public their opinion), the 'State of London Debate', £1m-worth of business liaison (which businesses regard as just a cumbersome bureaucracy), another £1.3m in business policy, more in policy evaluation, £140k for media monitoring, a £500k 'diversity' programme, £1.7m for 'political advisers' – the list goes on and on. This is a city council, not a world superpower. Some of these programmes are just not needed, many are counterproductive (like the 'sponsorship team' which costs more than it raises), and all could be done more cheaply.

Add it up and Phibbs reckons he could save £93m, cutting the council tax by 10%. And he is not just fantasising: he and his colleagues have trimmed huge layers of fat off the Hammersmith & Fulham Council budget, without losing any essential services.

If only he were working for David Cameron and George Osborne...

Guido has an excellent post here, on Britain's "Through the Looking Glass Economics". He is absolutely right of course: as the McKinsey study he links to says, Britain is now basically tied with Japan for the dubious honour of being the world's most indebted industrial economy. The government is overspending by £20m per hour non-stop, and yet our allegedly fiscally-responsible Conservative opposition only plans to 'make a start' on cuts and would still leave us with a structural deficit after 4 years of Tory government.

The Think Tanks and Civil Societies Program at the University of Pennsylvania has just released their 2009 Global Go To Think Tanks survey, which ranks "The Leading Public Policy Research Organizations In The World". Once again, the ASI has done rather well:

Top 25 Think Tanks – Worldwide (US and Non-US) ranked no.24

Top 50 Think Tanks – Worldwide (Non-US) ranked no.7

Top 40 Think Tanks in Western Europe ranked no.2

Top 12 International Economic Policy Think Tanks ranked no.3

Top 10 Social Policy Think Tanks ranked no.6

The full report is available here (PDF).

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In recent years, David Boaz and David Kirby have authored a couple of papers for the Cato Institute on "The Libertarian Vote" – that is, on the question of how many American voters can be said to have libertarian views. On their own strict criteria, they found that 14 percent of those polled were libertarians. This is based on the following questions from the American National Election Studies surveys:

• Next, I am going to ask you to choose which of two statements I read comes closer to your own opinion. You might agree to some extent with both, but we want to know which one is closer to your own views: ONE, The less government, the better; or TWO, There are more things that government should be doing.
• ONE, We need a strong government to handle today's complex economic problems; or, TWO, The free market can handle these problems without government being involved.
• We should be more tolerant of people who choose to live according to their own moral standards, even if they are very different from our own. (Do you agree strongly, agree somewhat, neither agree nor disagree, disagree somewhat, or disagree strongly with this statement?)

Only those who said "the less government the better", "the free market can handle these problems", and strongly agreed or agreed that "we should be more tolerant" qualified as libertarians.

However, Boaz and Kirby have also pointed to other polls using less stringent criteria, which found many more people with libertarian leanings. For example, 59 percent of people agreed that they would describe themselves as "fiscally conservative and socially liberal" while 44 percent were happy to describe themselves as "fiscally conservative and socially liberal, also known as libertarian".

Whichever way you cut it then, libertarians are clearly a significant group in the US. No doubt this goes some way to explaining the remarkable success of the tea party movement - some 23 percent of Americans would vote for a 'Tea Party Party' rather than the Republicans or the Democrats, according to a recent poll. But what kind of results would a similar poll in the UK come up with? And would conducting such a poll be worthwhile? I'd be interested to know what readers think.

P.S. Boaz blogged about the libertarian vote on Cato-at-Liberty yesterday.

Cameron is well aware of Britain’s gloomy credit rating outlook, and knows the danger of following Greece into a world of higher interest rates. He should be keen to keep the rating agencies’ day of reckoning at bay (shouldn't he?). When Cameron speaks there is a noticeable lack of drive to transform Britain’s economy. He has demonstrated no passion to remove the government’s stifling hand from the economy, to reform public services, significantly lower the tax burden or slash regulation for small businesses. Similarly, Osborne seems much happier waxing lyrical about micro social-engineering through behavioral economics than tackling heavy issues and leaving a mark on Britain for the better.

If this type of rhetoric continues, we are likely to see a Conservative government overseeing ‘business as usual’. They will tinker at the peripheries of systems and pass reforms to prevent major economic disasters, but do very little else. It seems like Britain will continue to trundle along with a huge public debt, bloated, inefficient bureaucracy, an unreformed political system and mediocre to poor public services. A political elite that feels they know better than the people will continue to make lifestyle choices for us, while Britain’s international reputation and competitiveness will continue to slide.

The Conservative’s middle of the road and unadventurous economic plans may all be part of a scheme to attract wavering floating voters set to become a vessel for radical and effective change if they make it to power. However, seeing the direction that the front bench is leading the party, this is almost certainly wishful thinking.

As readers may have noticed, the ASI website was offline for a while over the weekend while we moved to a new server and installed some technical upgrades. Needless to say, there are still a few glitches that we need to iron out, but normal service should be resumed from now onwards. However, if you spot any problems on the website in the meantime - from missing images to broken links - it would be very helpful if you could email the details to This e-mail address is being protected from spambots. You need JavaScript enabled to view it so that we can make sure they are rectified.