The Pin Factory Blog

As David Cameron promised before the election, the ‘bonfire of the quangos’ has begun. 177 of these bodies are for the chop, 4 will be privatised, and another 129 merged. In addition, 94 are still under review, which if scrapped could take the total number of abolished quangos to well over 250. If we include the other 129 mergers, then the Coalition could get rid of nearly 400 quangos.

Already the quangocrats are squealing about their jobs going up in flames. Baroness Deech, a former chairman of the Human Fertilisation and Embryology Authority attacked the decision to scrap that body. She told the Today programme: ‘It was trailed, and it's raised great dismay.’ I don’t think the public will be complaining about no longer having to fund these pointless bodies and the vast reams of people they employ, often on outrageous salaries. The scrapping of Quangos should provide billions of pounds worth of easy and popular savings for the government.

While I welcome the Coalition’s decision, there are still numerous pointless bodies that have survived the chop. 350 quangos have been approved to stay on, with bodies like the Food Standards Agency, which was in line to be scrapped, surviving the cull. We can only hope that these will be abolished at some point in the future.

In the mean time, the remaining quangos should be fully accountable to Parliament. As well as this, sunset clauses should be put in place for the remaining quangos so that they have to justify their renewal to Parliament after a certain period of time. Such legislation would ensure that the surviving quangos would become more democratically accountable and that they do not outstay their welcome if they become outdated. But all in all, this is a good start by the Coalition.

The other night I watched Michael Mcintyre’s Comedy Roadshow on BBC iPlayer. You can watch it here.

I was enjoying the programme until right at the end (scroll to 41:50) when the comedian Kevin Bridges, who was making a joke about God coming to earth, lumped George Bush and Robert Mugabe together as the worst examples of humanity – the people who would run away from God.

I did a double take. Was he seriously comparing George Bush to Mugabe in terms of evil? Where these seriously the two worst people that came to mind? Evidently, they were.

Bush may have passed the Patriot act destroying civil liberties, he may have gone to war in Iraq and Afghanistan, and he may have run up huge deficits through spending, but Mugabe he ain’t. Mugabe is a genuinely evil tyrant who has run his entire country into the ground for racist reasons, and who now rules as an unelected despot crushing any democratic opposition. The two men aren’t even worthy of comparison.

Ultimately, this worrying window into the left’s bizarre world view is given a prime showing via our state broadcaster, as if there is something funny about George Bush and Robert Mugabe being likened to one another. Somehow, I think a joke comparing Barack Obama to Joseph Stalin wouldn’t have made the cut.

What’s worse still is that the public is forced to pay for such views to be broadcast via a poll tax, or ‘TV license’ as it is commonly called. The BBC is meant to be politically neutral, but instead the public is paying for democratically elected right-wingers to be compared to murdering despots. If the BBC wants to broadcast such views it should do so in a marketplace where people are free to opt out of paying for the BBC’s services.

Examples like this reinforce the case for the license fee to be abolished and for the BBC to be privatised. It cannot expect to take our money and then use it to propagate a slanted worldview. The BBC must adapt and compete in an open media market: It cannot go on being the loudest voice of authority in the broadcast media simply thanks to its government-enforced monopoly.

It seems like it’s back to the future for Red Ken, who wants to return our economy to the stagnant mess it was in the 1970s. A few days ago the Evening Standard carried a story about Ken Livingstone’s call for an 80% tax rate. He wants those earning over £200,000 to pay a 60% rate of income tax and those earning over £1,000,000 to pay an 80% rate.

Clearly such a policy would be self-destructive. No one would pay such extraordinary rates of tax, tax takes would fall, growth would slump and tax evasion would rocket. It would mean that the government punished success and aspiration with nothing to show for it. If anything, the government should be looking to remove the 50p tax rate, which raises little extra money, damages growth and send the wrong message to Britain’s businesses.

Even worse than this economic illiteracy is the way Ken has presented the tax as an attack on bankers. In fact, the vast majority of people earning over £1 million are businessmen and entrepreneurs who invest in this country. Attacking them and the wealth they create would hurt businesses in need of investment and capital at this critical time.

Livingstone went on to say that ‘these are exactly the people who have landed us in this mess,’ completely misunderstanding the financial crisis and failing to realise this tax would hit more than bankers. If we are to blame one single group for the financial crisis, then it is government and central bankers, rather than the City bankers. Some blame does lay with the City, having responded to bad incentives created by governments through market interventions like the Community Reinvest Act, but it is silly for Ken to suggest that it is appropriate to punish them through massive tax hikes.

Ken’s war on bankers is detached from the reality of the financial crisis, and the tools he would use are blunt and would hurt far more than just bankers. He is welcome to maintain his Soviet-lite mindset, but for the rest of us I recommend the freedom and prosperity that only capitalism can bring.

Yesterday at the Lib Dem conference, Chris Huhne announced the government’s new ‘Green Deal’. The Deal will provide 26 million homes with insulation to save them energy and money. Mr Huhne also promised his scheme would create up to 250,000 jobs and by doing so has unwittingly leapt into an economic misnomer.

Mr Huhne has committed the so-called ‘broken window fallacy.’ The broken window fallacy is a common error made in economics, and it neglects the unseen consequences of our actions. Breaking windows does not help the economy through giving glass manufactures more work, but actually means we lose out on the other goods that could have been produced instead of the extra glass. Unlike businesses and workers who earn their revenue through peaceful and mutually beneficial trade, government only takes its revenue from others by force and is by definition a drain on others. To put it simply, the Government cannot create jobs without first destroying others.

Frédéric Bastiat pointed this out back in 1850. He wrote that whenever the government tries to create jobs, “it gives jobs to certain workers. That is what is seen. But it deprives certain other labourers of employment. That is what is not seen.” Bastiat concluded that such job creation programmes were “a ruinous hoax, an impossibility, a contradiction.”

But not only will this fail in its aim to create jobs, it is also likely to have negative unforeseen consequences. An almost identical scheme to Huhne’s proposal, recently implemented in Australia, has proved to be so disastrous that the Australian Senate is conducting an inquiry into the ‘green’ insulation scheme carried out there. Thousands of homes had their insulation installed incorrectly and hundreds burnt down, killing 4 people. You have to wonder why Chris Huhne has gone ahead with a policy with such a disastrous track record.

Mr Huhne may well wish he could create jobs, but he’ll have to trust in the private sector if he really wants to see more employment.

One of the many ‘storms in a teacup’ at the Liberal Democrat conference has been about school choice. Lib Dem members have successfully passed a motion against Michael Gove’s free schools and several lively fringe debates have been had on the subject. The question is why would any party that purports to be liberal reject the idea of giving parents and schools more freedom?

While we may speculate as to why this is, we should note the existing schools system is both unfair and needlessly bureaucratic. Currently, parents who are not wealthy enough to send their children to private schools, have no choice. The central planners at the LGA’s ‘match’ supply and demand for school places, somehow entrusting in Soviet style economic models which have been laughed out of existence elsewhere. House prices reflect the local schools quality, leading to ‘post code lotteries’ and making a mockery of any claims that the system is comprehensive (not that it should be).

Peter Downes, the Lib Dem councillor who tabled the motion seems to be quite happy with this. He says, “"Academies and free schools are likely to be divisive, costly and unfair. They're in the statute book, on the shelf, and that's where they should stay." Downes’ evidently relies on the state to magically provide better schools, arguing that the most dangerous element of free schools is "the idea that the principles of the marketplace can be applied to state-funded education". Downes is clearly rejecting the self-evident way forward in providing greater choice, a concept that was first laid down by Andrew Adonis and is now picked up by Gove and the Coalition. Quite how schools are meant to improve without being subject to the market forces is between Downes and his comrades against the Coalition. No doubt they purport the answer lies in ‘great resources’ (read: more money) for schools.

Without some element of competition or rights to exit from a market (for parents to take their children elsewhere), Britain’s schools will remain in the sclerotic socialist system we have today. Successive ministers in both Labour and Conservative governments have clearly seen that this cannot continue, and have sought the obvious alternative in markets and freedom of choice. The only question is, when will the Lib Dem’s wake up and smell the coffee?

All around you the seeds of the next recession are being sown. While entrepreneurs plant their malinvestments, the Bank of England’s credit hose will make sure they flourish. Thanks to the Bank of England’s monetary policy the next recession is already on its way.

The cost of credit remains artificially low, thanks to the Banks ongoing decision to keep interest rates at a mere half percent. They have been at this level since March 2009, well over a year now. When combined with the £200 billion of quantitative easing – printing money – then we have a lethal economic combination.

In 1940, Ludwig von Mises wrote, "The popularity of inflation and credit expansion, the ultimate source of the repeated attempts to render people prosperous by credit expansion, and thus the cause of the cyclical fluctuations of business, manifests itself clearly in the customary terminology. The boom is called good business, prosperity, and upswing. Its unavoidable aftermath, the readjustment of conditions to the real data of the market, is called crisis, slump, bad business, depression. People rebel against the insight that the disturbing element is to be seen in the malinvestment and the overconsumption of the boom period and that such an artificially induced boom is doomed. They are looking for the philosophers' stone to make it last."

We are already inducing our next boom. So unwilling are our policy makers to address the malinvestment’s from the last recession, they are instead choosing to lurch from credit fuelled crisis to crisis.

In addition to this, the threat of inflation (which our progressive friends should note, adversely affects the poor) looms large over the economy. CPI was 3.1% in August and the far more reliable measure of RPI was at 4.7%, and 4.8% the month previous. Why have interest rates not risen? The Bank has failed miserably in hitting their target of 2% and still the low interest rates and lax monetary policy continue. Unless the Bank gets a grip now, we will continue along the path of inflation and debt fuelled booms, the outcome of these policies last attempt we are still recovering from.

While we may hear a lot about fiscal policy in the next few years, it is our monetary policy, which needs the real scrutiny.

Think back to George Osborne’s budget. Do you remember how often he used the word fair? Do you remember how often he used the word progressive? More importantly do you remember how he added an additional £2 billion to the child tax credit to make sure all those graphs looked the way he wanted?

I wonder if Mr Osborne realises how much of an intellectual concession this is. The terms ‘progressive’ and ‘fair’ are becoming increasingly common in our political vernacular. This wouldn’t be a problem if the words true meanings hadn’t been distorted out of all recognition. For progressive, read statist. For fair, read redistribution.

The corpse of Brownism still haunts the political debate. The 50p tax rate will stay, not because of any tangible benefit it brings, but because of ‘fairness’. Taxes will have to rise to plug the deficit, not cut to ensure growth and greater tax takes in time. Free school milk is to remain despite having no discernable health benefits because of the long shadow that Thatcher has cast over the Conservative party.

Everywhere we look we are told about the terrible cuts to come. These cuts, as we have already outlined on this blog, are practically non-existent. Public spending continues to rise, year on year. What’s more worrying is that no intellectual case is being put forward that cuts are a good thing in and of themselves. The idea that ever higher public spending is an unquestionably good thing is rarely even challenged.

I would like to see the government send a clear message; a message that shatters assumptions. I would cut the top rate of income tax, not to 40%, but to 35%, and I would also lower the bottom rate to 17.5% so it remains half the top rate. This would send the message that the fruits of your labour are yours to keep. It would strike a blow to the politics of class warfare and envy. It would be a rallying cry for economic liberalism, and it would show that the coalition government is not bound by the intellectual chains of the left.

Well, we can all dream, can’t we?

Today the Coalition has announced its ‘EU referendum lock’ bill. The legislation is designed to prevent any more power being transferred to the EU without first having a referendum on the transfer of said powers. While this may be the intention of the legislation it already seems to be falling apart under scrutiny.

The first point to note is that since the passing of the Lisbon treaty the EU has no further need of any treaties (which would trigger a referendum under the bill) due to it’s self amending clause. This makes the bill all but worthless. However the bill will still cover the so-called ‘ratchet clauses’ which allow the EU to erode national veto’s and steadily gain more powers.

Douglas Carswell, Roger Helmer and Bill Cash have all attacked the bill for being largely worthless, and it will be interesting to see what amendments Eurosceptic’s put down later in the bill’s passage.

Carswell has blogged that the Coalition has already failed to stop numerous important powers being ceded to the EU, “since we promised this “lock”, the EU has 1) established a diplomatic corps, which we voted through the Commons, 2) given Eurocrats control over the City, 3) extended the EU arrest warrant, and 4) agreed to an inflation-busting EU budget increase. We've hardly stopped giving the EU more powers since May, have we?”

This is the real point of the matter, that if powers are to stop being given away ministers must learn to say “No”, “Non” and “Nein”. The successive ‘give away’ of money, power and sovereignty to Europe can only be stopped if ministers have the backbone to pick a fight, and none do. Cameron has always been keen to avoid confronting the European ‘issue’ and the presence of the Europhile Lib Dem’s in the coalition will only solidify this position.

Ultimately Carswell asks “Do ministers take us for fools?” The answer is clearly “yes”. 

Freedom and liberty have always been concepts with conflictions. Isaiah Berlin pointed out these tensions with his work on the two concepts of liberty; positive and negative liberty. Put simply, positive liberty is “personal ability/entitlement to achieve certain ends”, while negative liberty is “freedom from being forcibly prevented from achieving those ends”. For a long time this distinction has proved to be a deep dividing line in politics and amongst those who espouse freedom.

John Rawls, one of the greatest modern liberal philosophers had suggested that all liberties should in fact be both negative and positive. That for people to be truly free, both concepts of liberty must be fulfilled.

When many on the right speak about liberty, they speak of economic liberty. The liberty to dispose of one’s income as one wishes, to keep this income from the clutches of the state; they case it in language of negative liberty. The right correctly places a strong emphasis on the link between economic independence and freedom. But what of those who have no wealth, who are simply the victims of bad luck to put it in Rawlsian terms? If we accept that personal wealth is vital to a person’s freedom, then those who are poorest are not free. If we are to advance freedom, then it should be to those who are least economically free that we should first turn.

What then is to be done? Well, seeing as liberty is a two sided coin, confiscating people’s wealth and simply transferring it to those least well off would also be a breach of economic freedom. There are better ways to help these people. From where we are today the first might be to raise income tax thresholds, something being proposed by politicians today. Doing so lifts the poorest out of taxation and allows them to keep more of their income, increasing their ability to be economically free. We must also consider that those who are least economically free will have no job and no income, and thus getting them a job is vital to ensure their freedom. This could be done in a variety of ways e.g. lowering NI contributions, cutting corporation tax, decreasing costly regulation – any of these things would help to business to boost employment and help these people find the income they would need to be economically free.

Felix Bungay is the 2nd prize winner in the 2010 Young Writer on Liberty.

One thing advocates of liberty are usually least keen to address is immigration. If we look at party politics then we are constantly treated to the spectacle of parties trying to produce the harshest immigration policy to win over the public. Public perception towards immigration is that there is too much of it and immigration is nearly always viewed in negative terms. Politicians can hardly be blamed for following the public’s lead on this. When we couple this with the rise of the BNP then we can see that it is this area that those who espouse freedom must concentrate their efforts to reverse this damaging sentiment towards immigration.

Why should any government be able to deny people the freedom to live where they wish? Should the pure luck of one’s birth place confine a person to remain there? If one is serious about freedom then we must take a stand and say that a truly free nation, both socially and economically free, would have open borders for people to come and leave as they like. This policy already exists within the borders of the EU, and so the logical extension should be to first apply this to other English speaking countries (America, New Zealand, Canada, Australia) and in time to the rest of the world. Such a policy should be pursued in tandem with a pursuit of global free trade, which is itself dependent on the free movement of goods, services and of course, labour.

It should be noted that this is possibly the hardest goal for those who advocate freedom to achieve. It is simply out of tune with public opinion. Wont these people take our jobs and steal our benefits etc etc? In economic terms we have nothing to fear from greater competition in the labour market, this will push up productivity, lower costs help to push down inflation; all things we’ve seen from the much maligned immigration from Eastern Europe.

Altering the public image of immigration must start with how people view immigrants themselves. Immigrants aren’t lazy spongers, but people who embody the kind of rugged individualism that those who are most critical of immigration should embrace. These people are brave economic migrants, willing to work hard and travel the globe in search of a job and a better life for themselves and their family. They should be applauded, not scorned and we should welcome them to the shores of Britain.

Felix Bungay is the 2nd prize winner in the 2010 Young Writer on Liberty