Blog RSS

The Pin Factory Blog

"Little else is requisite to carry a state to the highest degree of opulence from the lowest barbarism, but peace, easy taxes, and a tolerable administration of justice" - Adam Smith

A dereliction of duty

Written by Steve Bettison | Monday 17 December 2007

police_3.jpgLast week on Tuesday evening a mother of two was threatened with violence during a burglary, whilst her husband was away at work. This had happened before in the area, and not just on one separate occasion but on a total of 6 (5 of which happened to colleagues of the mother's husband). The organization which they work for is now looking into arranging their own private security service to guard the property of their employees when they are away. All of this raises a simple question: where were the police?

It is not hard to imagine that the police force in question may have gone out on strike early, but in fact they hadn't. They were doing exactly what every other police force in the UK does, reacting to crime, rather than preventing it. The police force in Britain today does little of what we would demand of them. This modern force, that we allegedly have at our disposal, has become not much more than a political puppet shackled by the minutiae of centralized bureaucracy. This is the main reason why they failed to piece together the obvious pattern emerging in the case of the above burglaries.

The police themselves are culpable of nothing less than a simple dereliction of their basic duty: to protect the public. We want them to patrol our communities and prosecute successfully those that commit crimes. The public of Britain would hardly be in the wrong if they demanded that the police, should they strike, stay out. If other organizations are employing private security services due to the shortcomings of the state run offerings, then let competition burst forth. We could then have communities policed as they demanded and not for some politicians folly, and a reduction in the council tax bill as a service is privatized.

And yes, in case you were wondering, the mother and father in question were Alex Curran and Steven Gerrard.

View comments

A dilemma for the libertarian

Written by Wordsmith | Sunday 28 June 2009

If I deny the authority of the State when it presents my tax bill, it will soon take and waste all my property, and so harass me and my children without end. This is hard, this makes it impossible for a man to live honestly, and at the same time comfortably, in outward respects.

Henry David Thoreau

View comments

A dismal decade

Written by Whig | Monday 04 February 2013

One should 'Never make predictions, especially about the future'. However, it seems pretty certain to me that the next medium-term picture for the UK economy is bleak. There's nothing particularly novel here, but it's worth summarising the position.

From the fiscal perspective, the present government has made appalling progress with deficit-cutting: borrowing has increased, spending is still increasing and whilst growth-destroying taxes have risen the size of the state has not decreased. Apparently only 6% of the public realise that this is the case. Any hope of the UK being able to balance its budget let alone amortize any of its vast debt by running surpluses is years in the future. In the best-case scenario, an outright Conservative electoral  victory in 2015 might bring the time and the will needed to eliminate the deficit but this is unlikely even if that is the result.

Unfortunately, the present government has portrayed the present situation as one of austerity when it is not - what 'pain' is being felt is from the reallocation of spending from one Department to another and to increased interest payments. It might be that a sensible left-wing government actually finds it easier to cut the deficit, like New Zealand's Labour, as they avoid accusations of being Tory 'toffs' or some such nonsense. However, the present Labour Party seem committed to fiscal recklessness, not to mention the dire prospects such a government would have for deregulation and supply-side reform. All the while, the Lib Dems claim credit for 'restraining' the Conservatives from cutting government, as if this were positive. Essentially, the UK's fiscal position seems unlikely to improve any time soon and government will continue to spend around 45-50% of GDP, a position seriously deleterious for growth.

On the monetary front, we seem committed to a policy of inflationism and dis-saving and the incoming Bank of England Governor sounds even more committed to loose monetary policy than the present. Inflating the national debt away may take the burden from politicians in having to make real spending reductions, but it has serious impacts on saving and capital formation and thus future economic growth and risks the formation of new asset bubbles.

Contrary to popular belief, the Thatcher-Major governments of the 1980s did not really reduce the size of the state but instead - in general - restrained its growth compared to the size of the economy. This economic growth was predicated on supply-side reform, particularly in privatisation and increased labour flexibility. The present government has tinkered but has not really delivered any substantial supply-side reform. What happened to the Great Reform Bill? Where is the slashing of Red Tape that we were promised? The 'bonfire of the quangos' was a flash in the pan and Big Government has continued whilst Big Society died.

Whilst I don't think a major economic or fiscal collapse is likely, it is not beyond the bounds of possibility. The Coalition government are not seriously pursuing any of the reforms necessary to bring about economic growth: a proper programme of major fiscal consolidation combined with sweeping supply side reform and underpinned by sound money. Labour's policies score even worse.  In brief, the next ten years and beyond seem to offer the UK prospect of mild (or perhaps more serious?) stagflation.

View comments

A distorted market

Written by Dr Fred Hansen | Sunday 15 June 2008

Among the major perverse incentives that distort the US health care market are the tax breaks for immobile employers rather than mobile employees, and for non-profit hospitals instead of patients. Both tax subsidies are partly to blame for spiralling health care expenditures, making non-profit hospitals richer than their for-profit counterparts in the process.

The majority (60%) of the 3,400 US hospitals are not for profit. The 50 largest of them have increased their net income eight-fold between 2001 and 2006 to $4.27 billion, and the 25 richest earn more than $250 million per year. Originally set up to serve the poor, today poor or uninsured patients are billed the highest charges because they don’t benefit from discounts granted to privately insured and Medicaid or Medicare patients. One non-profit hospital group, Ascension Health, has piled up reserves of $7.4 billion, more than many large publicly traded companies. These tax breaks are ‘drawing fire’.

Nonprofits …are faring even better than their for-profit counterparts: 77 percent of the 2,033 US non-profit hospitals are in the black, while just 61 percent of for-profit hospitals are profitable, according to the American Hospital Directory data. The growing gap between many non-profit hospitals wealth and what they give back to their communities is raising questions about the billions of dollars in tax exemptions they receive.

The exact number for 2006 is estimated by the Congressional Budget Office $12.6 billion in tax exemptions plus subsidies from different government levels worth $35 billion for the whole hospital industry. These numbers show better than anything else what damage is caused when third parties instead of consumers run health care. It also shows a high degree of noble cause corruption: 'non-profits serving the poor'.

View comments

A dog's life

Written by Junksmith | Thursday 27 August 2009

It's a mad world...

View comments

A downward cycle

Written by Dr Eamonn Butler | Wednesday 03 March 2010

There's a tide in the affairs of men, which, taken at the ebb, can land you on the rocks in short order. I am beginning to wonder whether America, Britain and other leading economies are indeed launching themselves onto the rocks.

Anyone who has read their Hayek knows how it works. Central banks hate recessions. So they keep interest rates low. People borrow to buy homes and other assets. The bankers see the bubble and rein back. Borrowers and their banks run out of cash. Governments bail everyone out and print more money. Public debt soars and the currency falls in value. Foreign investors get cold feet. Bankers raise interest rates to restore confidence. Everyone is squeezed, and consumer spending falls. There's a recession. Governments bail everyone out and print more money, and off the cycle goes off again, round and round, until eventually you get stagflation, hyperinflation, and a huge collapse.

Arguably Britain is now on this cycle. The pound lost a third of its value against the dollar over 2008-09, and despite recovering a bit it has fallen sharply again. And let's face it, the dollar isn't in great shape either. The British media say that the fall in recent days has been because of polling fears of a hung Parliament come the election of (probably) May 6. Actually, it is more like fear of Gordon Brown's high-spending, high-borrowing government being re-elected. Investors know that Britain needs tough action to sort out its financial position, and there seems little chance of that if Brown stays in power. One part of me thinks it would be no bad thing if Britain fell weeping into the arms of the IMF. It would be painful, but at least they would sort out the mess and stop the downward cycle.

View comments

A failure of government

Written by Booksmith | Tuesday 08 September 2009

Click here to find out more about the latest publication from the IEA by Charles K. Rowley and Nathanael Smith of the Locke Institute.

In the Afterword to this work, Richard E. Wagner quotes Adam Smith:

“What is prudence in the conduct of every private family can scarce be folly in that of a great kingdom."

Never a truer word...

View comments

A familiar pattern

Written by Dr Eamonn Butler | Tuesday 11 March 2008

darling.jpgIt's getting to be a familiar pattern. Think up some wizard scheme that will buy you a day's headlines. Announce your policy. Enjoy the headlines. Watch with mounting alarm as the Opposition, everyone affected, experts on the subject and the media all point out how unjust and unworkable it is. Try to get yourself out of your hole by getting the civil servants to think up a few ifs and buts that might make the policy more palatable. Press on to the next headline-grabbing stunt.

We're seeing this script being rehearsed again in the debate over the taxation of non-domiciled persons in the UK. The Conservatives (sadly) started it, saying that foreign millionaires living here ought to pay at least some tax. It didn't exactly excite the general public, though anything that does in millionaires is usually reckoned to go down well at the ballot box. And it was too good for the government – still in Brownian mode of trying to fund its tax-and-spend imperative by extracting from taxpayers as much money as it can in as many ways it can devise with whatever penalties it considers necessary – to miss. But of course, the very power of that imperative meant that the HMRC vampires sank their teeth in too far – far enough for non-doms to start consulting their lawyers and saying that they (and their investments) would be leaving the UK for somewhere sunnier and lower taxed.

So the next phase, the extrication phase, has now begun. Spin-doctors have been suggesting that non-doms who have lived in the UK for more than seven years will hardly be affected at all. They'll just have to pay a flat rate of £30,000 pa (which seems like rather a large tax bill to me) – or face paying UK tax on their non-UK earnings (which is undoubtedly even more). Special negotiations have gone on with Washington to try to make sure that American non-doms, in particular, will be able to offset the £30,000 against their US tax bills, sparing them a dose of double taxation. And the art market will be specifically exempted from the non-dom charges ... and so on.

All of this might indeed take some of the sting out of the new tax. It might even convince a few non-doms that the UK government is not in fact a bunch of unscrupulous money-grabbing opportunists who are not worthy of their trust, and that they should stay. It might.  If it does, unfortunately it will do so at the cost of making the tax system even more complicated.
 

View comments

A fantastic boost to nothingness

Written by Steve Bettison | Saturday 16 August 2008

In a recent article in the Square Mile Magazine, London Mayor Boris Johnson chose to endorse Barack Obama, citing the ritualistic epithet, “ it will be the most fantastic boost, I think, for black people everywhere around the world...". It is a natural reaction for anyone swept up in the deification of Obama that they must reiterate this mantra.

Mr Johnson isn’t the only conservative to be immersed in Obama’s wonder; 1 in 3 of the current crop of conservative MPs support him as well. What makes people leave their principled heads in the cupboard when it comes to November’s election?

What Obama brings with one hand will probably be undermined by the other hand and the rest disposed of  by the Democratically controlled Capitol Hill come November should he win. The implied febrile boost to black people will become greatly subdued under many of his economic policies, which look set not to just damage America’s position but almost all of her trading partners as well.

The boost will be fleeting. The grinding poverty associated with barriers to trade will be enduring. A change we can’t believe in and nor should those with conservative principles.

View comments

A fast food tax? Not so fast

Written by Spencer Aland | Friday 04 September 2009

The possibility of a new tax on fatty and unhealthy foods may be very real in the United States and other European countries. The idea behind the new tax is twofold: firstly, countries hope to regain additional costs in healthcare caused by obesity related diseases, and secondly to affect behavior so as to discourage the consumption of fatty foods. More specifically, in the United States the tax would be put into place to fund public healthcare expansion. Is the tax justifiable or is it simply a way increasing government control in the private sector?

Although it may be easy for government officials to sell this idea to the general public by claiming that if fast food is more expensive you will eat less of it, in reality it is a but more complicated. The idea that fast food is a normal good is false. In fact, it has been found in almost all circumstances to be an inferior good, meaning that if the price of that good increases so will the demand for that same good. Inferior goods are unique in that they appeal more to low-income individuals because of how easy they are to access and also because of their price. As low-income individuals are able to increase their income they are therefore able to substitute out of fast food and into better types of food which are more expensive. If the price of healthier foods increases they will be forced to substitute back into fast food; however, if an individual is currently dividing his or her disposable income between both healthy and unhealthy foods and the price of unhealthy foods increases then in order to maintain their current overall consumption they must shift exclusively into fast food and spend no money on healthy foods, therefore increasing demand and consumption of unhealthy foods which are still comparatively cheaper than their healthy counterparts.

A study out of Tulane University confirmed the fact that fast and fatty foods are indeed correlated with low-income areas. The government also knows about the ineffectiveness of altering behavior by taxing inferior goods, but they are easy targets to line their pockets. Attacking a product that everyone knows is unhealthy is politically easy, and it is also useful in pulling the wool over the public’s eyes while government programs continue to creep more and more into the private lives of its citizens.

View comments

Pages

About the Institute

The Adam Smith Institute is the UK’s leading libertarian think tank...

Read more