The Pin Factory Blog

As a follow-up to what JP wrote about the bad effects of retroactive legislation, here’s a bit of legal context.

It is a central principle of English law that laws are not retroactive. Because of the Supremacy of Parliament they can be made to be, but it is very rare.

When the Budget is passed our rights are changed, we are subject to new taxes. Lord Rodger pointed out this interference is not retroactive. Real retroactive laws have an unattractive trend, and the Barclays idea fits the bill.

The case of Burma Oil Company v Lord Advocate required the government to compensate the owners of oil fields in Burma that had been torched during World War II. The torching was lawful, but amounted to a requisition of property. The compensation was for the requisition, not the damage – like compulsory purchase. The War Damages Act 1965 overturned the decision, exempting the government from paying.

Although retroactive criminal law is proscribed by the European Convention on Human Rights (ECHR), the War Crimes Act 1991 made it possible to try British citizens for war crimes committed in World War II. It was done because there was no provision to deport war criminals who had not been British citizens in the war, but who had become citizens since.

This Barclays law will not be the first retroactive tax law. The Finance Act 2008 amended pre-existing legislation – the amendments were treated as “always having had effect.”

Although the ECHR protects property, it says:

No one shall be deprived of his possessions except in the public interest ... The preceding provisions shall not, however, in any way impair the right of a State to enforce such laws as it deems necessary … to secure the payment of taxes. 

And the Court of Appeal found that the Finance Act 2008 was lawful because it achieved “a fair balance between the interests of the general body of taxpayers and the right of the claimant to enjoyment of his possessions, without imposing an unreasonable economic burden on him.”

So this proposed Barclays law would be lawful under our own constitution and under the ECHR.

The overriding point for me is that Barclays has effectively been able to contract out of taxation law (even though not to its benefit) and that is a far more dangerous precedent to set than mere retroactive law. A court will never uphold such an agreement – statute always prevails – but in an uncodified constitution such political changes can have large unanticipated effects.

As an example, after the 1868 election Disraeli resigned before going to Parliament and losing a vote; a generation later that was commonplace. Parliament lost its most important function because of a political decision.

This morning the Telegraph ran a story about migrants who claim welfare benefits: 370,000 migrants on the dole. But that headline masks the real problem, which is the availability of welfare. Welfare isn’t being given out too readily because of immigration; welfare is being given out too readily because that is government policy.

If someone offered you money for nothing you would have to be principled beyond the ordinary to refuse the money. But before they are anti-welfare, people are anti-immigration. There is, in most countries, a correlation between high immigration and a small welfare state, as Bryan Caplan has shown. People are only prepared to subsidise natives:

I know we’ve seen this graph a lot of times before, but the point cannot be made enough: immigration has a positive effect on an economy, welfare doesn’t. People who oppose immigration readily conflate the two and see only the bad effect.

As if immigration caused welfare! The poll on the Telegraph website showed 60% saying immigrants should get no benefits, and 33% saying they should get benefits in proportion to the taxes they have paid.  Even if they have worked and paid taxes, people want to stop immigrants claiming benefits. But we know that immigrants contribute more than they take out, taken as a whole group. Sam has written about the net contribution made by immigrants in terms of taxes paid and services used. Immigrants might claim benefits, but they have already more than paid for them. If the Telegraph has a problem with welfare costing money, they ought not to point the finger at immigrants.

Articles like Damien Green’s in the Telegraph yesterday make no mention of this. As with the Migration Advisory Committee report that recently found an “association” (which was said in the report not to be a causative link) between immigration and unemployment, this is an example of the government putting the cart before the horse. Policy does not follow fact, it follows party preference. Even though it might be the case that some immigrants come here and lazily claim benefits, stopping immigrant access to benefits won’t solve the problem. That will be done by stopping benefits. Indeed, if we restrict immigration as much as the government wants to we may start to miss our welfare budget being subsidised by those immigrant who came over here and paid our bills …

A likely retort to this is that those jobs denied to immigrants would, in turn, be populated by the resident workforce.  But we must remember that immigration is about the division of labour. There is no guarantee (quite the opposite) that if we removed all immigrants the jobs they do would still be there to be done by natives. A few facts from the report whence this headline came might serve to redress the balance in this argument:

1. Whilst 370,000 people on welfare originate from without the UK, 5.5 million people of working age are on welfare.
2. 16.6% of working age UK nationals claim a working age benefit compared to 6.6% of working age non-UK nationals.

You don’t need to go far from the newspapers to find some sensible analysis of the figures. On Jonathan Portes’ blog, Not The Treasury View, he compares the results of the government report to the most recent Labour Force Survey, and the results are fascinating:

1. migrants represent about 13% of all workers, but only 7% of out-of-work claimants;
2. migrants from outside the EEA represent about 9-10% of all workers, but about 5% of out-of-work claimants
3. foreign nationals from outside the EEA represent about 4.5% of all workers, but a little over 2% of out-of-work benefit claimants.

And Matt Cavanagh did great work on the Today programme this morning explaining that only 2% of the migrants who claim are not entitled to do so – that’s 1/1000 of people on benefits. He also pointed out that migrants are less likely to claim benefits than British people. And despite those few on benefits, “migration is overwhelmingly good for the economy.” Immigration isn’t the problem; the problem is the size and administration of welfare. 

Whig also wrote about this yesterday.

Harold Macmillan was Chancellor of the Exchequer for one year in 1956. Although the budget speech he delivered was a fairly tepid bit of Keynesian tinkering (famous, almost, for introducing Premium Bonds) it did contain some wisdom about the usefulness of economic data:

…some of our statistics are too late to be as useful as they ought to be. We are always, as it were, looking up a train in last year's Bradshaw [train timetable].

When it comes to the unemployment figures, this is always worth remembering. There is a lag between the event and the data; when you see a politician on the news the day that new figures are released trying to blame the latest crises in the Eurozone, it’s a lie. Causes in an economy persist; some are latent for a long time, other become apparent more quickly.

Likewise, people who quote data from a certain period in order to show correlations or connections are not to be trusted. When assessing Thatcher’s economic performance, people often look at the GDP growth figures from 1982/3 – 1988/89, and it is an impressive array; but when you factor in the recession that occurred in 1908/1981 the average takes a downward turn. This is also true when you factor in the recession at the end of Thatcher’s time in office.

A great example of the misuse of statistics in current debate is executive pay. As Allister Heath points out, it is often forgotten that current pay rises relate to the performance of the company in the previous financial year, not the current one. This is a trap that MigrationWatch has fallen into. Yesterday they claimed that there was a correlation between rising youth unemployment and rising EU A8-country immigration. They further said that if there wasn’t a causative link between rising immigration and rising youth unemployment it would be a “remarkable coincidence”.

Read this article

At Southward Crown Court Michael Peacock was found Not Guilty on six charges brought under the Obscene Publications Act 1959 today. The fact that he was prosecuted at all is illiberal, and has provoked understandable consternation from legal commentators such as David Allen Green.

The charges brought were based on DVDs he sold. The offence is to sell “obscene” things. And the test of obscenity is whether the DVDs will “deprave and corrupt persons who are likely, having regard to all relevant circumstances, to read, see or hear the matter contained or embodied in it.”

When Lady Chatterley’s Lover was tried in 1960 it was under the same act. The barrister prosecuting asked the jury if it “was the sort of book you would want your wife or children to read”. The jurors sniggered. That trial was won by Penguin using the defence in the act (attributable to Roy Jenkins) that it was “justified as being for the public good on the ground that it is in the interests of science, literature, art or learning, or of other objects of general concern.” The book was of obvious literary merit, as testified to at trial by people such as E. M. Forster and Bernard Levin.

However, that defence is not available to films unless there are “interests of drama, opera, ballet or any other art, or of literature or learning.” That pornography can be part of this is contentious; and I don’t think this formed part of the defence. Details can be found on the blog of one of the lawyers involved. The prosecution and defence agreed that Mr Peacock owned and sold the DVDs: the issue was one of obscenity. He was being tried for depraving and corrupting people. Under CPS guidance acts of fisting, urination, and BSSM, which were on trial here, can all be considered depraving or corrupting.

The guidance on the meaning of “deprave” is “to make morally bad” and on the meaning of “corrupt” is “to render morally unsound or rotten, to destroy moral purity or chastity, to pervert or ruin”.

The defence in this case was magnificent. Against the charges about the things done to people’s testicles they argued it was like getting a piercing; against the extremity of the contents (and some of it is really extreme) they point out that people don’t start watching the most extreme things, they build up to it. Charges of whipping being obscene were countered with examples of whipping being used in films at the cinema and being part of religious practice.

They also made the point that the jury have not been depraved or corrupted by seeing the material in court, and so it is absurd to think that someone who sought out the material for purchase would be. That the words deprave and corrupt had different meanings in 1959; that it does not mean shock, but moral degradation.

And that is where this law become illiberal. It is an act that would have people jailed for differing in their sexual practice from others, on the basis that those differences are deemed to indicate lesser moral principles. It is an obvious moral solecism to suggest that voluntarily watching certain things can “turn you obscene” in the prosecution’s words. Don’t forget that homosexuality was still a criminal offence when this law was passed. To an observer this trail raises some topical legal issues.

First is the state of jury trials. It is hard to avoid the assumption that jurors today are far less willing to pronounce a moral judgement like this on someone where the possibility of prison is involved. Tony Blair, who overturned double jeopardy to help ensure a conviction in the Lawrence trial, was in favour of trial without jury in some cases. Notably this was blocked by the House of Lords.

As a point of legal principle I would be horrified if someone could be convicted of something like this without the decision of a jury. The core principle of a common law system is that it marries the law as written with the changes in prevailing social attitudes – clearly demonstrated by the Chatterley case, the fact that it is hard to secure a murder conviction in assisted suicide cases, and the overhaul of the law on marital rape in the 1990s.

Second is the compatibility of this act with Human Rights legislation. Under the Human Rights Act we have a right to Freedom of Expression; but it is a limited right, and can have restrictions or penalties as are prescribed by law and are necessary in a democratic society, in the interests of national security, territorial integrity or public safety, for the prevention of disorder or crime, for the protection of health or morals …

The test for this is neatly summed up in four bullet points from the CPS guidance:

• Is there a legal basis for the restriction?
• Does the restriction have a legitimate aim?
• Is the restriction necessary in a democratic society?
• Is the restriction proportionate to the legitimate aim to be achieved?

The legal basis is the Obscene Publications Act. So that’s a yes.

But the others, on a common sense basis, and to any classical liberal, should obviously be answered no. No it is not legitimate of the government to aim to prevent people being morally corrupted by something they choose to watch; no it is not necessary to protect public morals for the same reason.

It is good news that this was a not guilty verdict. Although that doesn’t affect the Freedom of Expression point it has meant that the CPS will be reviewing their guidelines for prosecution; and if there is enough public attention the act may be repealed. Sometimes laws such as this fall into disuse. I’ve mentioned assisted suicide, but the better example is abortion. There are still restrictions in the statute on abortion, but these are not adhered to – much to the chagrin of pro-life campaigners. At the time of passing the bill the Wilson government was only trying to prevent back street abortions, not to give people unfettered access to abortion. But social attitudes have changed. Abortion is now seen as a fundamental part of a woman’s freedom.

Since the Obscene Publications Act we have seen the decriminalisation of suicide and homosexuality, and the legalisation of abortion; the definition of rape was changed to include marital rape; theatre censorship was ended; and most recently blasphemy laws were repealed.

It may be that this case is part of a liberalising process in the law. Let’s hope so.

In the weeks after the UK government extended its limits on the number of low skilled workers allowed to come to the UK from Bulgaria and Romania, there is evidence piling up from Alabama, USA, to show that immigration helps the local economy, contrary to the assertions of governments.

The new law in Alabama requires migrants to have their papers available to show on request at all times.   If they can’t do this, they are arrested.   Last week a German executive was arrested.   As a consequence, Hispanics are leaving in large numbers. Part of the law was repealed recently, but police officers are still obliged to detain people who are suspected of being in the state illegally. And now the results are being seen.

The large manufacturing base established on the back of immigrant labour is reducing fast:  Honda has the capacity to build 300,000 cars a year having in the state an estimated investment of $1.4 billion. Two of the plant’s workers have now been stopped under the law.

There was a loss of 2,700 construction jobs from September to October – a 3.2% drop. And the drop for the last year is 7%. This is partly the result of Alabama’s construction industry undergoing a huge boom up to 2007 – as exemplified in the manufacturing capacity of Honda. Some readjustment was inevitable. But it is partly because of the said amendment to Alabama’s immigration laws that deters workers and, in turn, depresses industry.

In agriculture the effects are indisputable. Crops are rotting in the fields due to a labour shortage. Farmer Brian Cash was employing 64 people; the day after the law was passed that dropped to 11. Now there isn't one, and the estimated loss of crops to Mr Cash is $100,000.

Alabama’s reasoning for passing this law is much the same as the Home Office’s reasoning for restricting the number of Bulgarian and Romanian workers coming to the UK, and for having the Seasonal Agricultural Workers Scheme – a quota for the number of seasonal unskilled workers that can come to Britain. The apparent idea is that restricting immigration results in more jobs for natives and residents, as per the latest Migration Advisory Committee report. But now Alabama is losing construction work, and tomatoes are rotting on the vine. This in turn will push prices up: both of labour, and of food.

Unemployment is the result of the recession; limiting immigration will not solve that. And the lesson from Alabama is that it might make it worse, for us and for decent salads everywhere.

Just as we are about to see a large export of highly educated British citizens to the other side of the world, we are going to bring in fewer people to study here. Australia is currently enjoying a commodities boom. Mining is expanding as minerals are exported to China, and construction projects are benefitting from this as infrastructure projects grow. But there is a shortage of 20,000 engineers in Australia. These will come from South Africa, India, and Britain.

So as we export trained engineers to Australia, and they export commodities to China, you would expect us to see an opportunity: Britain could use its large education sector to train people from all over the world, bringing in large amounts of investment and skill. It would then be part of a new, growing market, attracting wealth to its major cities – and it could keep some of the best of the graduates to work here. Right?

Wrong. We are making it more difficult for people to get a student visa in a bid to keep total immigration low. And as of April 2012 we are going to abolish the Post Study Work Visa. This has already had an effect: MBA applications to the University of Manchester’s Business School are down 18% in anticipation of that.

France has taken a similar approach. And all those students will end up in places like Spain, whose immigration policy is still liberal. Or worse, they will go to Australia. After seeing a drop in applications of 25% Australia reinstated students’ right to work, and sped up the application process. And they’ve just made it easier to get a Post Study Work Visa, as well as allowing people to stay for longer after studying. We are making ourselves uncompetitive in an international market. We will be neither training the mobile workforce, nor attracting them to come and work here.

Immigration limits rely on the zero-sum fallacy that the amount of labour in a market is fixed. That is the reasoning behind the UK’s limits on the number of agricultural workers allowed in from Bulgaria and Romania – to protect British jobs. But it is not fixed, it is flexible: as the market grows so does the demand for labour. And the market grows through the expansion of the population which, in turn, is afforded greater flexibility to innovate, work hard, be more productive, and discover new opportunities.

As I wrote recently, the economics of immigration is based on the division of labour. It only benefits the economy in the long run and can be shown to boost real wages of residents and nationals. Short term negatives, whilst the market adjusts, are more than compensated for by the long term benefits. John Bercow got it right in the Independent in 2005:

Immigrants are incoming assets … in a global economy, their labour is vital both to tackle severe skills shortages and to fill long-term vacancies. Immigrants are not taking jobs that British workers could fill, but jobs which British workers are unable or unwilling to do … the idea that immigration is an intolerable burden on the taxpayer and the welfare state is baloney. Immigrants give far more than they take. It is estimated that they make a net contribution to the economy of £2.5bn …

And it is the same with students. As the economy becomes more global we trade more and more with other countries; as China imports minerals from Australia, generating a construction boom, demand for British engineers increases. And just as that point we decide to stop training engineers, and to stop letting them stay here post study, in order to “protect” British jobs. It’s as if London was buying lots of wheat from East Anglia, who then banned Yorkshire men from coming to help get the crop in. East Anglia would lose out, especially if London could just buy the wheat from Wiltshire, or on foreign markets. And the Yorkshire men would go and work in Wiltshire (or wherever) whose crop would be harvested quickly, increasing their productivity, making them more competitive when it came to selling the wheat.

Unless we attract the top international talent and allow it to study here and work we will not be a part of the global market. Global demand for high-level education is huge, and people working in a global economy will be willing to pay.
As it is we are going to lose our skilled graduates and potential students to countries like Australia, which is all too aware that the wealth it is earning from the commodities boom is only going to increase as the gap in its labour market is filled with our engineers. If we stop supplying engineers Australia will look elsewhere. Or train them themselves under their newly liberalised visa rules.

In 2009 the UN calculated that only 3% of people live outside their country of birth. There is huge potential waiting to be discovered. Michael Clemens explains, with the example of migration from poor countries, why we all benefit from migration:

emigration of less than 5 percent of the population of poor regions would bring global gains exceeding the gains from total elimination of all policy barriers to merchandise trade and all barriers to capital flows.

Clemens also points out that the American population has quadrupled since 1914, and much of that was due to immigration; but America has remained the leading economy in the world. Indeed, Reinhart and Rogoff tell us that America’s share of world real GDP increased in the same time period (1914 – 2008) from 18.93% to 21.41%. Immigration didn’t damage America; limiting it might be damaging Britain.

When governments criminalise something they incur costs and lose revenue. The losses, therefore, are twofold.

Take the example of drugs. We make no duty, or VAT, on drugs; there are no drug companies paying corporation taxes, and no employees paying income tax. No shops or cafes are appearing on high streets. It isn’t a nice side-line for small pubs and off-licences.

And, the government has to pay the astonishing costs of policing the vast black market they have created, and then prosecuting the few people they do manage to catch, and then jailing the ones who are found guilty. And there are the border controls to pay for, and the NHS for people who overdose. And the effects of the crime that happens because of this black market probably lose the government more revenues.

This doesn’t make much sense. The rule of thumb is that prohibition costs money and limits opportunities. And this is equally true of immigration. Banning immigration is as silly as banning drug use: it doesn’t achieve what it says it will.

There are costs for border controls, detention, tribunal and appeals, policing, endless Home Office and Border Agency officials to do the administration – all spent to keep out people who would improve the economy.

And there’s more. We learned last week that the cost of detaining and deporting illegal immigrants has increased by 50% in four years. That is the wholly expected result of John Reid’s announcement four years’ ago yesterday that there was going to be a crack-down.

Detaining and removing illegal immigrants cost £35.5 million in 2006-07 and £51.7 million last year. The total cost since 2006 is £273 million. Small beer the anti-immigration Right would say. And that is true enough. We aren’t going to pay off the deficit by saving £200 million over four years.

But what about the lost revenue? We know that migrants diversify the labour market, allowing more specialism, enabling resident workers to earn more money – and to avoid doing the menial jobs they would rather avoid. We know that they contribute more in taxes than they use in services. We know that they make a significant contribution to GDP growth.

But the protectionist policy of limiting migration doesn’t stop there. If you come here legally to work the government requires you to have a minimum salary of £13,000 in order to bring any dependents over – such as your spouse. This is now being increased to reduce family migration by between 40% and 60%.
Despite the fact that a fifth of all the growth that occurred in 2004 and 2005 was solely attributable to immigrants, the government is making it harder for people to come here with their family.

All of this will lead to a reduction in people who would be net contributors to the economy, either through taxes, labour diversification, or contribution to growth. There is a slow recognition that banning drugs causes more problems than it solves. Hopefully people will be able to see that the same is true of restrictive immigration laws.

Henry writes the blog for Mulberry Finch.

The Immigration Minister Damien Green has announced that employment restrictions on Bulgarian and Romanian nationals will be extended until 2013. This is in response to a Migration Advisory Committee (MAC) report that says removing the restriction will lead to more migration here from these countries and displace resident workers in low skilled jobs. It is also said that this will have a "negative impact" on wages.

Economist Diane Coyle has noted that migrant workers in the UK tend to be either very highly skilled or low skilled, which suggests that they are filling gaps in specific areas of the labour market, not taking jobs from the native or resident population. And Bryan Caplan explains that by doing low-skilled work migrants enable more productivity in the native labour force.

Caplan argues that the native workers don't have to spend time doing daily, menial chores and are free to focus on improving their skills, and working harder. And this increases wages.

The MAC themselves say,

Many empirical studies find no statistically significant impact of migration on the employment levels of non-migrant workers.

Whilst recognising that there is no long-term negative effect of migration on native work, that it increases productivity, increases the employment rate, and increases economic growth, the MAC report does say:

during economic downturns, new immigrants have a small negative short-run impact on the employment rate of natives.

But there are no short-term solutions. This is not a short-term policy. Unemployment won't suddenly fall because we stop productive labour coming into the country. As the MAC admits itself, the "impacts would be small in comparison to the ongoing adverse impacts of the recent recession."

They even say that the extent to which keeping the controls will help the labour market is "subject to considerable uncertainty."

The explanation for why we should lift this restriction is the division of labour. Let's take the example of a restaurant.

If the chefs had to order supplies, lay tables, serve plates, look after wine, wash up AND do the cooking then the food would be bad and the chefs exhausted. By employing waiters and cleaners, and using food suppliers, the restaurant becomes more productive - it can do more things in the same amount of time, and the chefs are able to spend more of their time cooking and improving their skills. And at the end of the day there is still enough time for them all to go home and relax. Or revise for the exams that will get them their next better-paid job.

It's the same with an immigrant work force. As Bryan Caplan says, "immigration encourages natives to specialize in jobs where they are especially productive - and sub-contract their other jobs to the new arrivals."

Henry Oliver writes the blog for Mulberry Finch. 

On the Today programme recently, Tim Considine, professor of energy economics at Wyoming University, said that as shale gas production has increased from 1% of total gas production to 20%, the price of natural gas has halved in America. Among its other “considerable benefits” he listed lowering business gas bills, lowering the cost of electricity, increasing the demand for labour, raising tax revenues.

With inflation running at 5%, another recession looming in Europe, and energy price rises dominating the news, shale gas should be ascendant, especially since Cuadrilla Resources announced a finding of 200 trillion cubic feet of gas. But the energy minister recently said, “We do see shale gas as a game-changer in places like the US, but we don’t see the same potential here in the UK at the moment.”

After some small tremors near the drilling site the government has suspended Caudrilla’s operation. It seems, as Philip Johnston in The Telegraph suggests, that we are being kept in the dark about cheap energy.

It isn’t just America that has seen the benefits of shale. China’s National Energy Administration are planning to auction off blocks of gas for exploration and development. But the only thing Chris Huhne talks about is the chance of a glass of tap water catching on fire. Indeed, he told a fringe meeting at conference that shale gas wasn’t going to happen here.

But the race for energy is on. China Petrochemical Corp spent $2.1 Trillion gaining oil and natural gas reserves. Meanwhile we are still obsessing about renewables. In huge wins for the green lobby across Europe, there are bans and moratoriums in France, Germany and England. Instead thousand of wind turbines are being put up, state-subsidised, backed by coal-powered stations. Last year the costs of subsidising renewable energy topped £1 billion. That was an annual cost of £13.50 on an electricity bill, up from £7 three years earlier. Instead of pursuing policies that could halve the cost of gas, we have doubled the costs of electricity subsidies in three years – without reducing carbon output.

Indeed, we are not only paying £20,000 per wind turbine, but because of the variability of wind the amount of electricity they produced fell last year. We are paying more for less. And this is happening whilst nearly a hundred years of energy supply sits un-fracked in Lancashire. And that is only the first discovery.

Shale gas produces 40% less carbon than coal per unit of energy. By running their buses on gas Bejing solved their smog problem. Wind turbines are constantly backed by coal – so the reduction we are paying for in nil. As Matt Ridley points out one shale gas well in Pennsylvania will produce as much electricity as eight wind turbines in its first ten years. And whilst on-shore wind is three-times as expensive, off-shore is nine times as expensive.

Renewables won’t lead to growth. They cost too much and produce too little. Gas is the new coal. The eighteenth century ran on coal; the twenty-first will run on gas. China knows it and America knows it. Russia are so angry that their domination of the gas market is under threat they have been spreading propaganda about the health effects. And whereas renewables cost billions, shale is really very profitable: Halliburton reported a record $6.5 billion in third quarter revenue; in 2001 Devon Energy Corp made a large shale gas purchase, they now have a 50 story office building.

And in response to the claims that fracking is dangerous, early indicators are not as dramatic as the greens who claim that fracking will contaminate water. A recent report by Duke University biologist Rob Jackson showed high concentrations of methane in 85 percent of those that were within 1,000 yards (meters) of a drilling site. But crucially, they did not find any evidence of fracking chemicals in the well water. This was the conclusion after studying 60 wells in Pennsylvania. That state had up 300,000 oil and gas wells before fracking, dating back to 1859. Nor do the figures include abandoned coal-mines, which leak gas.

The debate is far from over. But there are some clear conclusions to be drawn at this stage. Shale gas is significantly cheaper than renewables (see table here). It doesn’t rely on coal-powered back-up generators. It will be a constant, reliable supply. It will produce jobs, growth and tax revenues. The government just needs to get out of the way.

In his speech at the Conservative Party conference David Cameron described his politics as those of Harold Macmillan:

This is a One Nation deficit reduction plan – from a One Nation party.

Macmillan himself took the phrase from Disraeli's book "Sybil" - the Two Nations were rich and poor; but he did not take his solutions to this "problem" from Disraeli. His solution was inflation, which created a supposed boom and then left us all worse off. As Charles Moore points out, all the problems Thatcher tried to solve were created by these policies.

And this is why Cameron's policies will cost us all dear. The One Nation Solution is inflation; inflation is a form of tax, it reduces purchasing power, it distorts the price system. It creates an artificial boom that Hayek described as "a false sense of wellbeing, in which everyone seems to prosper", when what actually happens is that:

inflation can always give only a temporary fillip to the economy, but must not only cease to have stimulating effect but will always leave us with a legacy of postponed adjustments and new maladjustments which make our problem more difficult.

After the inflation we must get back to real money, to honest investments, to sound finances. We must accept that prices and wages were too high, that some of the goods and services we bought and invested in were not viable. We must let the market adjust. If we do not want to face up to this then inflation is seen as the way out.

I'm not predicting hyperinflation. I'm saying that inflation does not create real prosperity. We are trying to solve a problem that was created in part by loose monetary policy with inflation: we are postponing the adjustments and adding maladjustments to an already poor economic situation. But that will only prolong the underlying causes of the problem.

Allister Heath explains brilliantly that by creating more money the Bank of England is going to make consumer inflation worse, not better; that low interest rates and high inflation are contributing to increasing nominal GDP because they make money circulate more quickly (debunking the myth that there is a need to print money); that QE will devalue the pound, increasing the price of imports.

Cameron's is the sort of Conservativism that Charles Cooke has identified as:

that vacuous and peculiarly British concept of “One Nation” conservatism, which seeks to compromise between liberty and safety, and which has largely accepted the post-war settlement as being the foundation of a “civilized” society, despite mounting evidence to the contrary.

This is all part of Cameron modernising the party, moving centre-left, in order to appeal to the New Labour vote that Blair won by moving centre-right. But Hayek's tiger-by-the-tail metaphor for inflationary policies is looking more and more like a good fit for the current situation:

Not only would the tiger tend to run faster and faster and the movement bumpier and bumpier as one is dragged along, but also the prospective effects of letting go become more and more frightening as the tiger becomes more enraged. That one is soon placed in such a position is the central objection against allowing inflation to run on for some time.

It looks increasingly like Cameron's political stance is one that will give rise to further inflationary problems because his "wet" form of Conservativism doesn't want to admit that we need to let the market adjust to our profligacy.