The Pin Factory Blog

Last week, the Daily Mail has a front-page headline that said, “Sir Fred’s affair: why we do have a right to know”. This is a sentiment that I’ve heard a lot when people are talking about super-injunctions. People have the right to know this, people have the right to know that, and so on.

But none of us have a right to know anything about any private individual. Our rights are just not the issue. The issue is about whether someone who knows something about someone else is free to say it. It’s all about the individual’s right to freedom of speech.

And I take a pretty hard line on this: the law should not be used to prohibit anyone from speaking the truth. Yes, there is a strong case for preventing the media reporting information about private individuals that has been obtained illegally. But beyond that, freedom of speech trumps other considerations.

Of course, I couldn’t care less which footballer has been sleeping with which z-list celebrity. And I’d much prefer to live in a society where other people didn’t care either. But my tastes don’t matter. Freedom of speech does. End of story.

Ultimately, Eamonn is right: if you live in the public eye, you shouldn’t do anything that you’re not prepared to see reported in the News of the World. It might not be fair. It might be a sign of cultural degradation. But that's the way it is. The lawyers don't get a say in the matter.

The people are revolting; we can be fairly certain that that is probably how the majority of politicians view the populace below them. In much the same way that the Parliamentarians of the late 18th Century viewed the North American colonists, especially after a particularly truculent tea party in Boston. The colonists wanted something in return for the taxes  the Crown was asking of them, specifically, representation in the English parliament, while the Crown was attempting to usurp this by forcing tea upon them. The act of throwing the tea into Boston Harbour is now synonymous with rebellion against higher powers abusing their positions to enslave.

A few weeks ago a new call to arms was raised by Rick Santelli in his now ‘infamous’ conversation with other presenters on CNBC where he exposed the true feelings of many in the US to President Obama’s bailout. He ended his piece by calling for a Tea Party in Chicago to protest against the bailout and the uncontrollable government spending. As such, there have already have been some protests across America, but now forces mobilizing for a larger event on Tax Day, April 15th 2009, Nationwide Tax Day Tea Party. Yet to reach the non-violent heights of 1773 it can only be a matter of time before money starts moving away from the shores of the US, as businesses and individuals look to keep their property safe from the tax collector.

It is rare for violence to flare in relation to taxation, especially in these modern times where capital is fluid and can be moved at the touch of a button. The coming financial revolution will not be one that is characterized by violence but by outflows of capital moving away from overbearing high tax, wasteful countries. The bailouts are a characteristic of wasteful spending: the purchasing of bad debts and even worse businesses. The time has come to starve the pigs at the trough.

NB. Our blogging contributor and friend Andrew Ian Dodge is organizing the Tax Day Tea Party in Maine, click here or on Facebook for more information.

Allister Heath is firing on all cylinders in today's City AM, proposing a realistic way of avoiding a repeat of the 2008 and 2010 bank bailouts:

It is looking as if there is now serious support for a new special administration regime for banks that will include automatic debt-equity swap procedures to impose losses on bondholders in going concerns and recapitalise banks automatically. This would be a great move, strengthening the City while improving stability. Some in the Bank of England are also looking kindly on proposals to create special storage deposits, which would be separate from regular current accounts. The former would be truly safe but pay no interest; the latter will pay interest but be riskier, with depositors becoming preferred creditors in the event of a crisis with limited, if any, deposit insurance. Let us see exactly what actually emerges but the thinking has become much more sophisticated. It would allow much more market discipline to be reintroduced into the system, reduce moral hazard and protect taxpayers.

The lesson from the past two years has been that governments will always try to protect large bondholders at the taxpayer's expense. A full overhaul of the monetary and banking systems is needed in the long-term, but in the short-term the objective should be to put in place mechanisms that avoid government bailouts by burning bondholders without creating systemic collapse. Debt-to-equity swaps would have avoided the need for the Irish bailout, and would probably prevented the political rush to bail out the banks in 2008. They're not perfect by any means, but we need a realistic firewall against bank bailouts and Heath's proposals might be a good place to start.

A recent publication by the Vancouver-based Fraser Institute argues for the introduction of flat tax in Canada, convincingly showing that the move would make the tax system both simpler and more lucrative. They call for a 15-per-cent flat tax, which would save a significant amount of time, energy and money, estimating that the current multi-rate progressive federal and provincial tax system costs the country around $30 billion per year.

The report argues that the current system is impeding Canada’s economy, constructing strong disincentives for working hard, saving, investing and engaging in entrepreneurial activities. These findings chime with those of the Adam Smith Institute: we have made similar arguments in both Flat Tax – The British Case by Andrei Grecu and in A Flat Tax for the UK – A Practical Reality by Richard Teather. Of the latter, Allister Health, the editor of The Business, wrote the following:

Rarely has a think-tank publication been this influential so quickly. Its arguments have been dissected by the UK Treasury, are well known among the Shadow Treasury team, have had an influence on some parts of the Liberal Democrats and were even adopted by several minor political parties.

Yet despite the press and political interest the research has engendered, there remain obstacles to its implementation. The much discussed Huckabee FairTax, while superficially attractive, is not the answer and may be distracting from the sounder proposals that could be implemented by governments on both sides of the Atlantic. In the UK, as in many other countries, the research is there and politicians are engaging in debate; the next stage is for them to stick their necks out and argue the case.

Anders Hutin, one of the chief architects of the much vaunted Swedish schools reforms claims that the Conservatives are missing a crucial ingredient in their proposed attempts to recreate the Scandinavian policy phenomenon. Profit. In an article for the Telegraph, he explains that about 75% of the new 'free schools' created after the reform are profit-driven. By leaving the 'revolution' to non-profits and parents, Hutin points out that the emphasis will be on increasing waiting lists, as they mark out the desirability of a school. For-profit schools on the other hand are more likely to see every pupil as a potential new source of income, and will expand their capacity in order to accommodate them.

Michael Gove, the Shadow Schools Minister, despite recognising the desperate need for liberation of the state-funded schools sector, seems afraid to be seen to be privatizing state-run education, even though it is a continuation of Lord Adonis' Academies scheme. If these reforms are so central to the Conservative agenda, as Cameron keeps claiming, it is only right that the full extent of their intentions are made clear. Hopefully, the rapidly approaching conference will shed some light on whether or not Gove will make the right call on for-profit 'free schools'.

The Conservatives should certainly not be so complacent as to hope that their reforms can act as merely the next stage in liberating the state-funded supply of schools. As Sweden showed, it takes time for the grassroots revolution to take root, and if it progresses too slowly, the entire venture could be scrapped or stalled by a future administration. Gove's reforms will need all the boost they can get if they are to be both successful and lasting. Once they are established and recognised as an invaluable policy, the likelihood is that even Labour will cease to oppose the use of profit, much as their Swedish counterparts, the Social Democrats have done. Regardless of the political reality, Hutin explains that Britain is perhaps best-placed to benefit from the reforms that he designed, due to the high demand and extraordinary lengths that parents will go to in order to secure a good place - although this offers hope to reformers, it is a savage indictment of state education in this country.

If you’ve been following Made in Chelsea, you may have had the thought, “Where are their parents?”. The answer is more than likely Saint-Tropez.

The truth is that anyone who is physically able to do so may have children and, for the most part, may raise them with a free hand. The state does not purport to know who will be a good birth parent, and does not attempt to stop anyone from reproducing. Curiously, though, it places severe restrictions on those who would adopt. This raises the question, is the state’s monopoly on adoption legitimate? Is there any real difference between being “unqualified” to adopt and being similarly hopeless but nonetheless giving birth to a child?

Were we to poll, one might expect to see strong support for restrictions on, say, sex offenders adopting at the same time as strong disapproval of the state preventing people with genetic diseases from reproducing. Perhaps the logic is something like a natural rights theory of property: I have produced that child, she of my genetic material, you cannot raise her in a Platonic (Huxleyan?) state institution. This doesn’t really make sense, though; no one considers children to be actual property, not even Locke. The difference between birth and adoption seems more one of intuition than substance. Children who remain with their birth parents are no more immune to mistreatment than are adopted children.

Both demand to adopt and the number of children waiting to be adopted remain high. The stumbling block appears to be government regulation. The adoption process is notoriously slow, with a minimum time frame of six months; some families wait four to eight years to adopt. Part of this may be that direct adoption is banned except in cases where adopter and adoptee are related, and that extensive background checks and court dates are required before an adoption can go through.

Does it seem like someone with a child sex offence conviction should be able to adopt young children? Absolutely not. At the same time, allowing children to languish in foster care for years while there are plenty of reliable, caring people who would love to adopt them seems bizarre and cruel. The current system demands liberalisation. Might pregnant women be allowed to choose adopters? Might adopters be allowed to pay to adopt? A lot to think about, to be sure.

The European Commission has delayed making a controversial announcement which could see the state health plans of one Member State paying the costs of patients who opt to be treated in another EU country.

The idea of the plan was that British patients, say, could travel to Spain or Hungary for their treatment, as many do - with Britain's National Health Service picking up the tab. Part of the argument for this is that some countries have more efficient healthcare sectors, with shorter waiting times, for example, and EU citizens should be able to benefit from the competition between them. Following the case of Yvonne Watts, who had a hip operation in France and sent the bill to the NHS, Britain's High Court ruled that the NHS should pay for treatment abroad if patients otherwise had to wait too long. Quite right, I would say.

Already UK doctors are whingeing because they know that lots more people would indeed go abroad for treatment if the NHS was forced to pay for it, rather than put up with the sink service they get in the UK. The British Medical Association's Dr Vivienne Nathansan said that if people started travelling for operations there might 'not be enough need' for that treatment in the UK, which could lead to closures. Yes, well that's competition for you, Vivienne.

Meanwhile Nigel Edwards of the NHS Confederation complained that the EU plan was a stalking horse to create a 'free market' in European Healthcare. Oh, if only it were. We're talking about harmonizing state health plans here. If the EU actually created the conditions for a proper, open market in healthcare - one that wasn't dominated by doctors and politicians - I think we'd all be a lot fitter.

Trade unions are an interesting problem for libertarians. Although they are essentially anti-liberal forces, most attacks on trade unions historically stem from the authoritarian Right. Too often the conflict between unions and business leads to many potential subscribers to libertarianism supporting decidedly illiberal business practises, due to a misconception that one can either be pro-business or pro-union.

For a libertarian, employment must be approached in a manner that is independent of the interests and prejudices of either side. Employment legislation inspired by libertarian principles would at once counter the serious business abuses that justify trade unions whilst removing the ability of unions to act as monopolies.

A libertarian believes that human beings should be free to undertake exchanges with each other free from force, fraud or coercion. Trade unions found their origins in defending workers against abuse by business, abuse often supported by the state. A libertarian state that functioned properly would not collude with anti-liberal business practises and would protect people from forceful, fraudulent or coercive practises that might necessitate trades union membership.

But libertarian employment law would undermine unions too. Like most things, labour is a commodity. A job is a contract between an employer and an employee in which the latter’s labour is traded at a given rate for remuneration in wages and perhaps other perks. Despite this trades unions are not seen as what they are in business terms: cartels working to inflate prices (wage costs) by restricting the labour market. While the horrors of the closed shop and the flying picket have (for the most part, student politics aside) disappeared, the fundamental leverage behind a strike is the idea that a union can exercise a labour monopoly and use the threat of withdrawal to coerce employers.

No libertarian system would ban strikes or unions. People are free to associate with each other as they wish and no libertarian would argue that a worker does not have the right to withdraw their labour. What is critical is that a libertarian recognises the right of an employer to replace that labour. In the same way in which a libertarian government would fight monopolist practises on the business side of industry, so it should strive to create a free market in labour. Not only would this be morally right in accordance with libertarian principles, but it would allow the market to adjust British wages back to internationally competitive levels.

Henry Hill is the winner of the 2011 Young Writer on Liberty Award.

The chart above shows the number of deaths per watt of energy produced by various different energy sources. (Data from the World Health Organization, image from Seth Godin, original graphic here.) Coal is by far the worst offender, causing 161 deaths per terawatt hour (TWh). Nuclear power is remarkably safe by comparison, with just 0.04 deaths per TWh. Shale gas also does well compared to coal and oil, with 4 deaths per TWh.

Clearly, there are significant, unfactored external costs to the use of fuels like coal and oil compared to fuels like nuclear power. This does not mean that coal and oil should be banned, though many environmentalists would like it, because they both produce significant real benefits as well – cheap energy is one of the cornerstones of modern civilization. The optimal outcome is not a total ban or a total free-for-all. As with motoring, where some deaths are an inevitable outcome of socially beneficial activity, the optimal number of deaths is greater than zero.

This is a classic case of conflicting property rights: what we need is a situation that can balance the property rights of polluters with those people whose air is being polluted against.

The standard pseudo-market solution is to assign an arbitrary value to each life and tax polluters by a fraction of that, to “price in the cost to society”. But this is a poor approach, because the cost is borne by the individuals who get sick and die — not by society in general or the government, which gets the money.

A free market solution to pollution would, through courts or voluntary agreement, force polluters to compensate the people they pollute against. If the property rights of the polluted-against were upheld, this would lead to a situation where both parties would agree a pollution premium: a middle-point where the polluter is compensating local people enough to continue polluting.

This would have the happy outcome of incentivizing polluters to move away from urban areas. It might also incentivize people who care less about their lungs, like smokers, to move to areas of higher pollution. The big obstacle to this is that the technology for measuring air quality is quite primitive, and probably wouldn’t allow us to find this balance. But this isn’t as significant a problem as it seems: the very fact of these property rights being upheld (even crudely) would incentivise innovation in demarcating property rights, and so on.

Best of all, it would rebalance the relative price of dangerous fuels, like coal, against safer fuels, like shale gas and nuclear power. Currently, nuclear power isn’t really viable as a free market fuel source – it requires massive government subsidies for the initial investment. With a "free market environmentalist" mechanism that puts respect for property rights at its core, this could change — relative to coal and oil, nuclear may become quite competitive. Shale gas, cheap and relatively clean, would probably become even more invested-in than it is now. And the real costs of pollution would be mitigated to an acceptable level. There's no need for complex regulation and arbitrary "social" taxation. For an energy industry that bears the costs of its pollution, all we need to do is recognise property rights.

Generally positive on tax…

• Cutting the 50p tax rate to 45 percent is a step in the right direction, but the Chancellor should have scrapped this altogether. The danger is that the 45p will become a permanent rate. The government should commit to scrapping this new top rate tax before the next election.

• Raising the personal allowance to £9,025 is also very welcome. The government should raise its target from £10,000 to £12,400, which would lift minimum wage earners out of tax altogether.

• The government’s commitment to merging income tax and national insurance is very encouraging. Britain’s tax code is absurdly complex and tax simplification should be one of the government’s top priorities.

• The ‘tax receipt’ idea could make a big difference. By making spending more transparent, people will be better able to hold the government to account for its fiscal policies. With a bit of luck, these tax receipts could sow the seeds of a small government revolution as more people realise how wasteful government spending really is.

• The additional cut in corporation tax is a good, pro-growth measure that will boost Britain’s economic competitiveness. But it should go further – competing with large countries is not enough anymore, and a corporate tax rate higher than 20% is still too high. Furthermore, the new and/or expanded allowances and tax credits the chancellor announced will increase complexity and run against the general theme of tax simplification.

But there are a few negatives on tax too…

• Raising tobacco duty by 5% above inflation is petty, vindictive, and possibly self-defeating. Such taxes are already extremely regressive, hitting the poorest the hardest. Moreover, high levels of tobacco duty are already encouraging smuggling and counterfeit cigarettes. Cigarette smugglers will be very pleased at today’s duty hike.

• Reducing the 40p rate threshold will mean that only basic rate taxpayers will benefit from the personal allowance rise. Up to 300,000 people will now find themselves upper rate taxpayers as a result. This will hit single-earner families particularly hard.

• The General Anti-Avoidance Rule is a bad idea. It leaves far too much latitude for bureaucratic discretion. It adds another layer of complexity on our labyrinthine tax code. And it is an affront to the rule of law. Radically simplifying taxes is a much better way of ensuring people pay their fair share.

• Raising Stamp Duty Land Tax on homes worth more than £2m is a politically-motivated sop to the Liberal Democrats. Taxes like stamp duty are damaging because they discourage transactions and gum up markets. They also raise very little revenue.

The budget is weakest where it strays into industrial policy…

• Was the tax credit for animation, video games, and high-end TV production designed just so the Chancellor could make his ‘Wallace & Gromit’ joke? These are unquestionably attractive, wealth-creating industries, but the government should not be picking winners and advantaging politically-favoured businesses over less fashionable ones like this.

• In promising to fund superfast broadband in 10 British cities, the government is creating a role for itself where it just isn’t needed. Over the past two decades, the private sector has delivered (and continues to deliver) a vast digital infrastructure at virtually no cost to the taxpayer. It is hard to think of a better example of something the state should simply stay out of.

• The Chancellor’s call for increased airport capacity in the South East is a good thing, but it is worth remembering that the politically-motivated rejection of such airport capacity has been explicit government policy up until now.

• The various credit, business, and construction support schemes contained in the budget are misguided, and will do little except preventing markets from adjusting to changed economic circumstances, as they must if we are to return to robust, sustainable growth. Nevertheless, these schemes are probably small enough to be dismissed as pointless gimmicks rather than serious market distortions.

The macro outlook is worse than the chancellor is letting on…

• The growth forecasts the chancellor announced still look implausibly optimistic. The public sector, financial industry, and housing/construction sectors all boomed unsustainably in the 2000s, and must probably contract further as the economy rebalances. We are weighed down by debt, and the deleveraging process has barely started. So in the absence of significant and radical supply-side measures to boost growth in the rest of the economy, it is hard to see how these forecasts can be met. And that’s before you even consider the sizeable downside risk posed by the eurozone crisis and our still-fragile banks.

• The government’s borrowing costs are low not because of the chancellor’s fiscal rectitude, but rather because the Bank of England is directly intervening in the gilts market to reduce borrowing costs via quantitative easing, and because things in the eurozone are even worse than in Britain. The economy may be getting better, but the overall macro-economic picture remains far worse than the chancellor is likely to admit. 

• Finally, it is worth remembering that for all the talk of austerity Britain, the government will still borrow £126bn this year. That’s £14.5m an hour, every hour, all year long.