Adam Smith Institute

In Westminster, the speculation over Gordon Brown's leadership continues to mount and polls continue to plunge (according to YouGov, only 18 percent think he is an asset and only 15 percent think he is up to the job), the first round of the challenge draws ever closer, and Miliband is waiting in the wings.  Since the humiliating by-elections defeats, with a 17.6 percent vote turn around in Crewe and Nantwich, and a swing of 22.5 percent in Glasgow East, the cracks within the Labour Party have begun to emerge and a showdown now seems inevitable.  Some such as John McDonnell are already demanding to test Brown, and his most likely adversary Miliband refuses to deny a Leadership challenge, has made subtle attacks, cancelled a foreign trip and held what many are calling a 'farewell' party.

This is all very suspicious behaviour from the man who says he 'always supported Gordon's leadership, and from a party that loves to use covertness to bring about change (e.g. Gordon's Stealth Taxes). It is always possible that Miliband's actions are a poorly timed coincidence, but as some of his colleagues have begun to label him as a self-serving egotistical backstabber who is damaging the party, one can only conclude that Brown's leadership is deeply under threat. Only time will tell how Brown's premiership ends, however one doesn't have to be a fortune teller to guess that Brown will be down and out before a second term; either through regicide or in 2010.

Even if Miliband took the helm of Labour, would he be able to steer the party away from catastrophe at the next election? Or, is the death of Labour upon us?

To be continued...

The 22 percent swing of Glasgow East from the Labour Party to the Scottish National Party (SNP) is a clear sign that the former is heading for a massive defeat at the next general election. Listening to Des Brown MP, Secretary of State for Scotland, on the Radio 4 yesrerday left little hope that they know how to dig their way out of the current situation. Policy after policy has been anounced, only to be retracted, due to the simple fact that the policies center on taxing people more, for the most part hitting hard working families the hardest.

Gordon Brown is now heavily wounded heading into Labour’s Party conference, where there is likely to be stalemate in getting policies past the National Executive Committee (NEC). As such, there is little original to be written about that side of the story.

More interesting than the government’s defeat, is the to consider the position of the victors. The talented Alex Salmond unites a still ideologically divided Party. When recently up in Scotland unveiling the Adam Smith statue, I was able to discuss with a cross-section of interesting people the state of Scottish politics. The general consensus was that given increasing Scottish independence, the SNP divide would become more pronounced, resulting in a likely split along left/right lines. If that is the way things are heading it will be interesting to see how it unfolds.

It would be good to see Scottish politics enthused with clear forward-looking policies. Currently, the SNP is able to do this on only a few prominent issues. That said, this is certainly more than can be said for the Labour Party at present.

It will surprise no one that I’m not a fan of the 130 demands that unions handed to Gordon Brown last week.  Most, if not all of them will hurt far more people than they help. Requiring the adult minimum wage for apprenticeships and 18 year olds, for example, will certainly not encourage companies to hire young folks (which probably explains why they also want some companies to be required to guarantee apprenticeships.  Hooray for solving the bad results of one policy with another bad policy!). The fact that anyone seriously thinks that running train companies as not-for-profits will be better for customers is also mind-boggling. 

The funniest item on the list, however, is definitely the call for tax deductions for union membership.  That’s right- they basically handed the prime minister a list of expensive demands, and then said “oh, and our members want to pay less taxes, let someone else do it.”  Not that this is unusual for labour, but this just seems like a particularly flagrant declaration of that philosophy and demand for pork.  Though Brown has rejected many of the propositions, it is likely that at least some will pass.  As Auberon Herbert once asked, “how should it happen that the individual should be without rights, but the combination of individuals should possess unlimited rights?” Good question… how indeed?
 

Greg Mankiw has a piece in the New York Times about what policies politicians should pursue if they wished to chase that all important economists' vote. Well, perhaps not all that important in terms of the number of votes to be gained, but still interesting in outlining what he sees as uniting the profession (to a large extent at least).

Number one is free trade (or we can be picky and say "freer" trade) which is, at least around here, entirely uncontroversial. Similarly the legalisation of drugs and opposition to farm subsidies. They're really aspects of the same point, after all, as is leaving oil companies and speculators alone. While markets aren't perfect, they are usually better than what politicians try to put in their place.

Inviting more skilled immigrants is a little more controversial: it's a planning of the jobs market. Better perhaps to simply remove restrictions and allow that market to be free as we argue the others should be. Taxing the use of energy does indeed make sense if you've bought into the concerns over carbon emissions.

The one that might most surprise those outside the hallowed halls where economists tread is to raise the retirement age. When 65 was set as the age for the state pension (social security over there) that was about the average lifespan: it was indeed thus a reasonable form of social insurance, insurance against the idea that you would outlive your rational level of savings. Now that lifespans are well over a decade longer (and prospective lifespans for those who have already reached 65 much longer again) raising this age makes great sense: even if not to most politicians.

Unfortunately, there aren't enough economists to make up an important voting block so we're unlikely to see them pandered to in this manner: might I suggest though that given that economists are the experts on these matters, that politicians at least start to listen to them?

The last suggestion is a little different: that spending upon economic research should be increased. Yes, it's special interest group time again, when talking to politicians make sure to mention that your own group, your own interests, should have more of other peoples' money.

But then that just proves that economists are human, right?

Benjamin Disraeli, Prime Minister in 1868 and then again from 1874-1880, famously described Britain as:

Two nations between whom there is no intercourse and no sympathy; who are as ignorant of each other's habits, thoughts, and feelings, as if they were dwellers in different zones, or inhabitants of different planets. The rich and the poor.

Increasingly, that seems to be as true now as it was then. Fraser Nelson picks up on the same point in an excellent blog over at the Spectator CoffeeHouse, writing about 'Prime Scotland' and 'Third Scotland':

Prime and Third Scotland are half a mile apart in some places, but the two nations don’t interact. Somehow along the way, we – as a country - learned to look the other way: to worry about climate change, but not the poverty just a few miles down the road. To think that the taxes Labour charge somehow promotes a more cohesive society, when in fact it’s pouring petrol on the flames. State handouts may have been the cure to post-war poverty, but it’s the cause of 21st century poverty as we see in Glasgow East.

That really gets to the heart of the issue. It is years of socialist-inspired policy that has that has created or, at the very least, accentuated these problems. Welfare handouts and punitive income taxes have robbed people of the will to work and destroyed their self-sufficiency and self-respect. State education has left generations of children unable to read or write properly, and with little ambition and even less opportunity. Poorly designed council estates have descended into crime-ridden slums, with ordinary people terrorized by gangs as the police stand idly by.

I fear it's going to take real commitment and many years of hard work to turn things around.

We are living in a material world, and I am a material girl, or uh… MEP?

David Cameron’s decision to expose the expenditure of his MEP’s has been met with mixed reactions. Some Conservative MEP’s have allegedly reacted badly. In a publication that was leaked to the BBC, they outlined what they thought of Cameron’s desire to seem more transparent. Apparently, the expenses plan would be “counterproductive” and break European Parliament rules.

If Cameron’s proposal were carried out, Conservative MEP’s would have to publish a full account of their expenditure to an independent accountant under European Parliament allowances, twice a year.  Moreover, Conservative MEP’s would have to reveal the names of any members of their family that are employed by them, their salaries and publish details of any other staff paid from public funds. Also, they would only be able to receive bonuses that add up to less than 15% of their annual salary and they would have to repay any surpluses from their own salaries. This does not seem like a lot to expect.

Our MEP’s are elected to influence policies in Europe for their party; they are not elected to use taxpayers' money to pay for lavish dinners, hotel suites and their staff. The fact that a minority of Conservative MEP’s are daring to complain about these measures is outrageous. It is totally hypocritical. Public funds should be spent on worthwhile schemes rather than to ensure MEP’s can fly first class.  The government continually increases taxes; there may be less need to if our taxes were prevented from going towards paying for your MEP’s second home in Brussels. David Cameron's plan will make it much harder for MEPs to abuse their constituents in this way.
 

David Cameron’s now famous speech in Glasgow on Monday essentially covered two topics: the need to accepting personal responsibility and the government’s role in judging moral behavior.

His first point is dead on. As he said,

Some people who are poor, fat, or addicted to alcohol or drugs have only themselves to blame… We talk about people being ‘at risk of obesity’ instead of talking about people who eat too much and take too little exercise. We talk about people being at risk of poverty, or social exclusion: it’s as if these things… are purely external events like a plague or bad weather. Of course, circumstances… have a huge impact. But social problems are often the consequence of the choices people make.

There is nothing that ensures someone will stay in a miserable state more than blaming someone or something else. Indeed, if the fat, the poor, or the addict does not take responsibility, then why would he or she do anything to fix the problem?

The second point Cameron makes is a bit trickier. He said that “society has been too sensitive in failing to judge the behaviour of others as good or bad, right or wrong, and [it is] time to speak out against moral neutrality.”

This brings up an important question: when should the government make such judgments? Generally, the government should let people live their lives as they choose. However, the welfare and health systems as they are subsidize bad choices and unhealthy behavior. Perhaps it isn’t the government’s job to dictate our moral code, but it is certainly not its place to pay for our bad behavior with heavy social and fiscal costs.

This week’s Economist warns that America could have the infrastructure of a third world country within a few decades if does not change course quickly.

Thomas Friedman wrote in the New York Times that America, more than Iraq or Afghanistan, is in need of a better-functioning democracy that can work to solve the big issues.

Each year, the federal government collects 2 TRILLION dollars in taxes. State and local taxes push the total amount of taxes collected even higher. Sadly, while infrastructure crumbles and the economy goes to the pits, the government wastes billions of dollars on useless projects and subsidies—and spends far more than the two trillion it takes in.

This situation is not wholly unique to America. The UK sends a ridiculous amount to the EU each year and gets little in return. Meanwhile, consumer confidence is at a 26 year low and housing prices have fallen for the ninth consecutive month.

What should the government do? 1) Focus spending where it is absolutely necessary. 2) Eliminate wasteful spending. 3) Get rid of useless subsidies and entitlements. 4) Get rid of protectionist regulations and tariffs. 4) Lower taxes.

Following the various scandals about how MPs spend our money on 'expenses' for running second homes in London. Westminster is abuzz with ideas on how to ensure that parliamentarians keep their snouts in the trough without precipitating quite so much public outrage. The simple solution would be to pay themselves more and cut out the expenses scam entirely, but there never seems a good time to raise MPs' salaries, and this is certainly one of them.

One idea that's doing the rounds is that MPs should be given a flat rate £40,000 to help with second home costs. The idea is that this would leave less scope for abuse of the system.

But it would still abuse taxpayers. £40k for 646 MPs comes to £25,840,000, which is a fair chunk of change.

But look around London. It's getting to be a good time to buy property. According to my friend James Wyatt of John D Wood, there are quite posh riverside developments looking for buyers, in London SE1, SE11, SW1, SW3, SW6 and SW11. One bedroom flats here go at around £350-£400 per week, plus utility bills and council tax.

So call it £500 per week. That works out at £16,842,142. In other words, we could give every MP his or her own London flat, everything included, and still have £9,000,000 in change from the expenses plan that our great leaders are discussing. I think we should do it. Mind you, if we cut the number MPs by about half, we'd save even more money...

In the wake of the floods that have devastated Midwestern America, a recent CNN headline read "Insurance not required, FEMA told flooded town."  Long story short, a number of people blame the government for their failure to insure their homes against floods because the government did not require them to do so.  They "said they felt misled about the risks of not having flood insurance," and thought that the risks were "miscalculated." As a result, legislation is now being introduced to require that all people living in levee-protected areas have flood insurance.
   
The problem here is not that FEMA did a bad job or that the levees were improperly built. They were designed to withstand a hundred-year flood, and this one was simply bigger than that.  There is no reason to think that the risks were miscalculated; even events with very small probabilities will happen sometimes.  No, the problem is much deeper.  The problem is that people are relying on the government to make their decisions for them; they live in a levee-protected town, but will only make the decision to buy flood insurance if the government tells them that they absolutely must do so. 

This psychology of dependency, in which "the government" is responsible for anything bad that happens, is one of the most insidious results of a big government.  If people did not expect the government to have full knowledge of possible disasters, perhaps more than 28 of the families in the flood zone would have taken the responsibility on themselves.  Individuals should be thinking about their lives, their futures, and the risks that their various decisions might entail.  The floods were a tragedy, a natural disaster beyond the predicted levels, and were no one’s "fault," per se.  Nonetheless, freedom requires responsibility, and blaming the decision not to purchase flood insurance on the government only furthers the psychology of dependence that led the unfortunate victims of this flood not to consider insurance in the first place.

As a woman, I am all for equality. With that being said, parts of the recent Equality Bill are just silly and meaningless.

The recent Equality Bill is now allowing 'positive discrimination' in hiring practices. That is, employers can now favour women or ethnic-minority applicants over equally qualified males. This law doesn't require the employer to hire the minority, so if they are both equally qualified what is the point in the legislation? The male could still be hired if the employer sees their personality working better for the job. This is just another example of pointless legislation that causes the state to interfere.

The proposal is said to tackle the ‘problem’ of men dominating industries such as construction. Apparently women only make up 1 percent of the construction workforce. Honestly that doesn't surprise me, nor does it bother me. I don't know too many women who want to work in construction or who are qualified. Strength and physical fitness are important elements in entering the construction field and I'm sure if a woman was interested in this area and did hold the requisite muscularity she could find an employer.

In the end, this part of the bill is a purely symbolic legislation that is unnecessary and intrudes upon private business and also sets a standard that forces employers to categorize people into separate pools such as woman, minority or male instead of evaluating them as individuals, impartially and equally.
 

From EU Referendum via Samizdata, here is video evidence of MEPs fiddling their expenses. They turn up at 7.30am (suitcases in hand) to sign the day's attendence register (so they get paid), and then they're off home for the weekend...

By June 2007, after ten years, many people in the UK had got fed up with Tony Blair. There had been disappointing local election results. There was grumbling about the NHS and education. And there were many leftists in his party who wanted a redder kind of Labour and less enthusiasm for UK involvement in Iraq. And a growing band of MPs who had been passed over for office, of course.

Now Tony Blair must think that handing over to Gordon Brown was the smartest move he ever made. It all started well enough. Faced with many challenges – attempted terrorist attacks in London and Glasgow, Foot & Mouth Disease, and widespread summer flooding – Brown exuded an air of reassuring calm and confidence. Labour climbed to 40% in the polls. A Conservative MP defected. The Opposition seemed unable to land any punches, and reluctant to outline any policies of its own. Labour backroom workers started preparing for an early election.

It was an election that Gordon Brown could have won, giving himself a full five-year programme, albeit with a probably smaller majority. But he wouldn't say yes – and wouldn't say no. Not wanting to allow the Conservative conference to upstage him, he waited a fateful week. By then, George Osborne had announced plans for massive cuts in Inheritance Tax, the election fever smoked out other policy ideas that the public found attractive, and the Conservatives started shooting up in the polls. There would be no Autumn 2007 election.

It made Brown look like a ditherer. Then came Northern Rock. Then the Inland Revenue lost disks containing 25m addresses and bank details. There were funding scandals, with one Cabinet Minister being forced out. Then anger as tax changes came in, ending the 10p starting rate for lower earners. Party animosities turned to open warfare as people jostled for position to replace this dead man walking. [Click 'read more' to continue]

Jeremy Hunt, the UK Conservatives' handsome, dynamic, young (42), wealthy Culture spokesman, was our guest at a power lunch in Westminster this week. His theme was policy for the Google generation. Technological advances – computers, mobile phones, the internet, interactive online stuff – have given people access and empowerment in ways they've never had before. But, think the Conservatives, politics and public policy has not moved on. Sure, you can file your tax form or buy a fishing permit online, but so what?

Contrast that with sluggishness with non-government action. Within minutes of the 9/11 attacks, websites were carrying eyewitness accounts that were as reliable as any that the BBC ran a day later. Within days of Hurricane Katrina, while the US government was still in paralysis, other websites had sprung up, linking the various relief agencies and helping people to track missing friends and relatives.

Technology, in other words, can enable us to decentralize public services and empower private or voluntary groups to deliver things better, quicker, and more locally. It enables millions of people to get involved in service delivery, where before it was run by an elite few. It allows the competition of millions of ideas where before things were decided in Whitehall. It means you don't have to have a top-down social and policy structure. It can be led by the people – what Hunt and his colleagues call 'collaborative individualism'.

They have a point. But how can this bottom-up revolution get started if big state institutions remain intact, crowding out everyone else? How will a thousand flowers bloom if state deadwood keeps out the sun? Time to get out the pruning shears.