Tax rises to come

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People are understandably angry about the MPs' expenses scandal, which has been dominating the headlines for the past few weeks. However, it is arguable that the sums in question are, in the grand scheme of things, pretty minor, and that people's fury would be more rationally directed elsewhere – like, for instance, at the raft of tax rises which have come in this year, or are set to come in between now and 2011. This is where the real theft is going on:

• The uniform business rate – which constitutes a major burden for many struggling businesses – has just gone up by 2%. It was originally going to rise by 5%, but the chancellor has agreed to let businesses spread the additional 3% over the next two years.
• Taxes on alcohol and cigarettes went up by 2% in April, while fuel duty is set to rise by 2p per litre in September, and then by 1p per litre above inflation in April 2010.
• VAT is due to rise from 15% back to 17.5% at the end of the year.
• From April 2010, people earning between £100,000 and £150,000 will see their personal allowance phased out, effectively creating two narrow income bands (£100,000–106,475 and  £140,000–146,475) where tax is levied at 60%.
• Also from April 2010, a new 50% tax rate will be charged on incomes over £150,000.
• In April 2011, the higher rate (40%) tax relief on pension contributions will be abolished, and employee and employer National Insurance Contributions will both rise by 0.5%.

Of course, these are just the tax rises they've been honest enough to tell you about, and given the dire state of the public finances, it could get much, much worse. The government is planning to borrow £175bn this year and £700bn over the next five, to add to the £1.5trn of government debt we already have. The upshot of all this is made clear by the National Institute of Economic & Social Research, who say that without spending reductions, the basic rate of income tax would have to go up by 15% to get government debt below 40% of GDP by 2023.

Socialists highlight "offensive" candidates

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An article published recently on Euractiv reports the Party of European Socialists' publication of a list of 12 "conservative, liberal and right wing" candidates who are "at risk of being elected" to the European Parliament.

To quote: "The list contains candidates who, it is claimed, variously deny that the holocaust ever happened, dispute the existence of climate change or hold 'other offensive or absurd' views."

Now, leaving aside the fact that mature adults should be free to vote for whoever they choose in a democratic election, it is undeniable that the vast majority of people would indeed find holocaust denial offensive. But what I find far more disturbing is this easy conflation of holocaust denial with questioning of the received wisdom on the drivers of climate change. It has become the norm now for sceptics to be labelled as climate change deniers, in an attempt to place them outside the pale.

However, on this as so many other issues, it is ironic that the only directly elected institution in the EU is so far out of step with the views of those who it purports to represent. This is one of the reasons why many voters are Eurosceptics. The benefits of a single market, free movement of citizens and an unprecedented era of cooperation between countries who were regularly at war with each other are very real but often taken for granted. More visible, unfortunately, are things such as the CAP, the unaccountable and Byzantine Brussels bureaucracy and the continued progress of a highly precautionary environmentalist agenda which does little for European citizens while stifling innovation and growth.

Martin Livermore is the Director of The Scientific Alliance

Broadband throttling

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It would seem that BT broadband users might actually be getting less download speeds they thought they were. Long suspected by many of their customers, it seems BT does not actually give the correct speed for their cheapest packages the BBC reports. The BBC is irked because its affecting their iPlayer, paid for by a licence fee that should mean it can be accessed easily.

BT is not alone:

Mr Weller, from uSwitch.com, said BT was not the only internet service provider trying to cope with growing demand by throttling back speeds.

I am not surpised. I use two 7mbs lines, one in central London and one in Maine USA. They seem to have rather different actual speeds. At least users now know that their suspicions look to be well founded.

Dan Hannan on the financial crisis

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Regulation is what caused the current crisis. It replaced a culture of conscience (“is this the right thing to do?") with a culture of compliance (“is this within the rules?")

Dan Hannan, British politics is turning Continental, The Telegraph

Blog Review 781

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Netsmith's not all that sure that those coming out of the rubble of communism quite understand contracts yet. You have to take the rough with the smooth.

The difference between cap and trade and carbon taxes explained with an added bonus. Why politicians will choose the worse option.

Placing the blame for the financial crisis right where it arguable should be: with government.

GM hasn't been brought down by that crisis: people have been predicting it for at least 20 years.

How the campaigns starting against the e-cigarette show that the smoking ban wasn't about second hand smoke at all.

Rather, it all seems to be about allowing the prodnoses and killjoys to control the populace.

And finally, a new way to get rich.

Privatize universities

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Sir Roy Anderson, Rector of Imperial College London, said the top UK universities, including Oxford and Cambridge, should be freed from state control and allowed to charge students more than the current £3,145 capped fees, and to attract more international students to boost their income.

Why stop there? Before 1919, all UK universities were independent. They should be again. Britain has four universities in the world's top ten, but the league tables are dominated by America's independent universities like Harvard, Yale, CalTech, Chicago, MIT and Columbia. And while we are slipping, America's colleges are rising. They are taking the best brains, and the best students, and are pulling in more cash to fund their teaching and their research. Thirty US universities have endowment funds of over £1bn. Only Oxford and Cambridge come close, but Harvard has five times more cash in the bank than either of them.

But that's how the US system works. The real cost of a university education is not £3,145. It's more like £40,000. And some US universities do indeed charge that amount of money. But they use their endowment funds to make sure that bright students who can't afford fees on that scale are given scholarships so they can get the education anyway. Students are admitted on merit, but supported according to their needs.

As Professor Terence Kealey, head of the (largely) independent Buckingham University, says in an Adam Smith Institute Briefing, that is what should happen in the UK. Instead of subsidizing universities, we should subsidize needy students, so that anyone who is capable of doing well at university has the opportunity to go. I would tell Sir Roy and his colleagues to charge whatever they like – £40,000 if that it what their product actually costs – provided that they make sure no needy student is turned away. Yes, some of the money that is currently doled out to the universities by the Higher Education Funding Councils could be used for those scholarships. Otherwise, the universities will have to go out and raise the money for scholarship funds themselves.

US government enters the car business

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It appears that President Obama’s plea to buy American was not just an appeal to the conscience of the US consumer; it was actually a sales pitch. When he announced the American government’s acquisition of a 60-percent stake in automotive giant General Motors, Obama took on a new title, Car-Salesman-in-Chief. In addition to democracy and the war on terror, America will now be pushing Corvettes and Cadillacs on the world.

Obvious conflict of interest questions arise from this new venture, which in turn lead to concerns about fairness in the marketplace. Automobile manufacturers will undoubtedly be vigilant in watching for instances of undue influence and market manipulation now the US government has a direct financial interest in the industry. Toyota and Volkswagen cannot be thrilled that the same entity that sets US trade policies is now the majority shareholder in their largest American rival.

The Obama administration insists that it will play the role of passive investor with GM—for example, no government employees will be employed by a company in which the government has invested or sit on such a company’s board. Limiting benefits to individuals is one thing, but will the government be able to resist the temptation to help its investment by tweaking a policy here or relaxing a rule there? It seems unlikely that a market can be free or fair when the market regulator becomes a market player. If the skeptics prove correct, it may not be long until the iconic Uncle Sam abandons his legendary call “I want you for U.S. Army" for the shameless plug “I want you to buy a Chevy."

The bald truth

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Adam Smith Institute fellow, Terence Kealey in The Times yesterday on the advantages of age.

Blog Review 780

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Yes, politics has indeed reached this level.

This of course is simply ridiculous. Satire isn't it?

If only we could in fact insist that presenters (and journalists!) were trained in the meaning of these phrases!

If we are indeed trying to find out what does work and what doesn't in alleviating poverty, shouldn't we try this?

Poverty is definitely more complex that some think.

And why don't we try this as a method of paying MPs? Make them rely upon charity!

And finally, the vexing issue of pets in small flats.

Leftists and localism

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Having read a few recent publications from the think-tank Demos, I was struck by the deep problems that leftists have in trying to tune into the latest buzz for localism. A centralized state is deeply unfashionable, so the think-tank that was so influential under the controlling hand of Tony Blair, is treading water in attempting to unite leftist ideology with localism.

For example in the latest paper, A Stitch in Time: Tackling Education Disengagement, the failures of a centralized state are acknowledged: “the approach cannot simply be the standard policy approach of tugging on central policy levers", yet in the next instance calls for the creation of a “national educational policy framework". Apparently, “there is a major role for central government to play in improving how things work at the local level." Yet this is exactly the problem.

This is no criticism of the research itself, but reading it clearly brings to light the tensions apparent whenever statists try to fit their model into the fashion for localism. This circle cannot be squared; the policies of control cannot be localized. Of course, many in the other two parties suffer similar problems, but this caused by the same statist predilections.

So far the most authentic and consistent calls for localism have come from voices on what could be called the libertarian wings of the Conservatives and Liberal Democrats. Unless the Labour Party radically reforms, it will never be the party of localism. As things stand, its ethos is entirely inconsistent with freedom, difference and competition.