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

Government announces re-think on supermarket reform

Written by Dr Eamonn Butler | Tuesday 14 June 2011

"Mr Speaker, following the government's consultation on its proposals to reform the grocery industry, we have been pleased to take on board most of the recommendations of the Supermarket Future Forum. In particular:

"The commissioning consortia that purchase groceries on behalf of consumers will be required to have a transparent governing body and to explain how money is being spent on groceries and why particular groceries have been bought. Commissioning consortia will now include a much wider range of grocery and retail professionals. Multi-professional advice will be required before any groceries are bought on behalf of consumers. Consumer wellbeing boards will have greater powers to require commissioning consortia to explain how their purchasing decisions promote the wellbeing of consumers.

"The National Grocery Commissioning Board will set the parameters for choice and competition in all parts of the grocery industry. A Citizen's Panel will report to Parliament on how well that mandate has been implemented.

"The National Food Regulator's role in relation to competition will be diluted. Instead of promoting competition among supermarkets, its primary duty will be to support collaboration and integration among different grocery outlets. Private grocery outlets will not be allowed to 'cherry pick' customers from others, and the government will not seek to increase the number of supermarkets.

"The Secretary of State will remain ultimately accountable for the grocery industry. The Secretary of State will be given a strong and clear duty to involve customers in the organisation and management of supermarket chains.

"The Food Commissioning Board, the outcomes frameworks for the grocery industry, local commissioning bodies and others will all be used to help reduce food inequalities.

"Independent, expert grocery advice is needed at every level of the system. All local authorities and public food and grocery bodies must cooperate to improve the delivery of groceries.

"Mr Speaker, these changes will deliver the modern, dynamic grocery industry we all want, and will lead to a better-fed country. I commend them to the House."

View comments

Educational isolationism doesn't work

Written by Anna Moore | Tuesday 14 June 2011

UCLWhat’s the best way to stop drug running in your backyard? Probably not a fence that can be scaled in 18 seconds flat. At an average cost of over £1.5 million per km, the U.S.-Mexico border wall has been pilloried in the British press as “an expensive white elephant”. What an outrageous example of racist American isolationism, one might say. I would tend to agree, but the phenomenon is not uniquely American. The Home Office’s recently announced immigration reforms seem more like a political ploy to xenophobes than sound policy. They also dangerously encroach upon freedoms of movement and action.

Take for example cuts in the number of student visas issued. Monday’s Home Office statement claims, "We expect our new student visas policies to lead to a net reduction of around 230,000 student migrants over the full term of this parliament, from 2011 to 2015."

The whole circus seems bizarre. Where does the 230,000 target come from? It was 400,000 in March before public outcry, and the drop makes the number look arbitrary. Is the government trying to find the optimal point between liberal rage and conservative frustration, ahead of the 2015 election?

No one is directly hurt by the presence of foreign students. Anti-immigration advocates argue that each foreign student admitted means one British student rejected. Well, sort of, but admissions does not exactly work like that. Students are compared against one another as a pool, so it is the most qualified applicant who is admitted. Indeed, international admissions are typically more competitive.

If the argument is that unqualified British students ought get spaces before qualified foreign ones, then all I can say is that I favour competitive universities. The quality of an institution depends upon getting the best people, regardless of from whence they come. Yale and Harvard will continue to outstrip Oxbridge in international rankings if the Home Office insists upon treating world-class institutions like a primary school sporting event, in which everyone gets a prize.

Foreign students pay unsubsidised tuition, contributing more than £2 bn in fees each year. Eliminating this revenue can only harm British students: foreign students’ fees allow British universities to fund projects and expansion they could never afford on government grants and domestic tuition alone.

Most troubling is that the “need” for a government limit only exists because the supply of and demand for foreign students exceeds what government deems appropriate. The limit places an unnatural ceiling on foreign intake, in effect distorting the market. Universities should be free to offer places to whomever they like, and students should be free to pursue educational opportunities outside their home countries. This would be more just, and it simply works better.

View comments

HMV must adapt or die

Written by Victoria Buhler | Monday 13 June 2011

HMVWhat was the most dangerous evil to come out of Pandora’s box? Classical texts point to greed, envy, and the relentless pursuit of power. Modern tabloids would suggest lust. I am convinced that of all the evils, Nostalgia exerts the most corrosive influence on human happiness. Nostalgia, or the false romanticization of the past, breeds an aversion to change. Of course, change may not always be good, but an unwillingness to at least be open to change is always bad.

Consider HMV. The high-street retailer, which offers CDs, DVDs and other entertainment products, has faced steeply declining profits as a result of competition from internet shopping and supermarkets. A couple of days ago, HMV secured a £220 million loan from lenders that included state-backed institutions such as RBS and Lloyds banking group. The loan in itself is not bad; the company can use this opportunity to dramatically reconfigure its business model and emerge in a more competitive form. If HMV once again becomes profitable, the shareholders, the lenders, and everyone else involved in the deal benefits. The dialogue surrounding the circumstances of the loan issuance, however, was worrying.

Romaticization began with puff pieces like one in the Guardian entitled ‘Would you miss HMV?’ which included maudlin reminisces such as ‘there is nothing like owning a record’ and ‘its been really sad seeing stores close down one by one—I don’t want HMV to be next'. There are some things worth preserving, but the sort of sentimentality that portrays HMV as a British national treasure is silly at best and destructive at worst.

Consumers clearly do not value HMV that highly. HMV is not going out of business because of a sinister-investment banker-driven-plot-to-destroy-all-that-is-good-and-wholesome-in-the-world. HMV is going out of business because the majority of consumers prefer to purchase their CDs/DVDs online at lower prices (or illegally download them) rather than travel to a store and pay more. Some people might prefer the latter experience, but not enough to support the current massively expensive operating model. Either HMV will have to downsize, streamline, and reinvent in order to serve this niche consumer base, or it must exit the market entirely.

The demise of HMV as we know it does not mean the end of entertainment, but rather a transition towards new forms of entertainment distribution and consumption, as demanded by the consumers. For the true CD lover out there, you will still be able to buy CDs, just as you can still buy a gramophone. Given the limited demand for gramophones, you have to shop online or in a specialty shop rather than in a massive gramophone complex on Oxford Street, but the option is still there. So it is with CDs. If consumers demand a good or service, the market will provide it – even if it’s obscure. But if they don’t, no one should be forced to subsidize its provision for the sake of nostalgia.

View comments

Lessons from Southern Cross

Written by Jan Boucek | Monday 13 June 2011


The financial woes of care home operator Southern Cross offer a salutary lesson for reform of the NHS. Southern Cross is the UK’s largest operator of care homes, looking after some 31,000 residents. It has run into problems due to an onerous rental bill and is seeking to avoid bankruptcy by a combination of selling some homes, laying off staff or renegotiating rents.

Unsurprisingly, the GMB union is calling for the government (ie: taxpayers) to rescue the company. To his credit, Business Secretary Vince Cable has ruled that out.

The problems of Southern Cross are of some concern but they don’t warrant any takeover by the government – a bailout by any other name. That would surely lead to an inexorable takeover of the industry by the government if, as and when other operators may find themselves in difficulties. That, in turn, would leave the country with yet another monolithic and lumbering enterprise unable to chop and change with changing circumstances as each such circumstance becomes a major political event.

No, much better to let the fate of Southern Cross be determined by the normal process of business evolution. The company may emerge leaner and smarter, existing competitors may benefit while new entrants may find an easy way into the market. All will have learned a great deal from the experience of Southern Cross. The whole issue will probably be resolved in weeks or months with the costs borne by private risk-takers – lenders and shareholders.

By contrast, a monolithic state provider of care homes would never come to grips with changing conditions. Costs would be shoved onto taxpayers and inadequate “reforms” would drag interminably through committees, hearings, consultations, legislation and election campaigns. The finer points of meal management will feature regularly on Question Time.

Try this exercise to see the difference. Here’s how the Guardian described the Southern Cross saga as it currently stands:

Southern Cross is fighting to stave off bankruptcy as it struggles to meet an annual rental bill of £230m. It over-expanded during the boom under the ownership of Blackstone, the US private equity group.

Now substitute a few select words to see the ultimate impact from bailing out Southern Cross or any other activity that the government of the day deems worthy.

The United Kingdom is fighting to stave off bankruptcy as it struggles to meet an annual interest rate bill of £50 billion. It over-expanded during the boom under the leadership of Gordon Brown, the Labour government’s Chancellor of the Exchequer.

Yes, Southern Cross is a tough financial workout but it will get sorted in relatively short order with limited long-term impact. Any reform of the NHS that doesn’t include increasing privatisation and decentralisation is doomed to failure.

View comments

Yes it was Maggie

Written by Tim Worstall | Sunday 12 June 2011

Many stories are told about the post war British economy. There are those who still claim that 1976 was the peak year, the gloriousness of all gloriousnesses because that was when we had the least inequality. Those who lived through it as adults are, to put it politely, less than sure that was the case.

Here's another idea though. The problems actually started in the 1930s nd it was only the 1980s that got us out of them.

The retreat from competition in the British economy was triggered by the 1930s crisis but was not fully reversed until the 1980s. Early postwar Britain was notable for cartelisation, nationalisation, weak competition policy, and protectionism.

One Nation Tories and socialists were in power thoughout that time period.

The results of the “Thatcher Experiment” in the 1980s make the case and paved the way for reversing relative economic decline. Competition was much strengthened by ongoing trade liberalisation, deregulation, and discontinuing 1970s’ industrial policy. As competition strengthened, there were major changes in industrial relations which were associated with organisational change, together with divestment and restructuring in large firms.

Despite Maggie being in the Conservative Party the best description of her economics views is "liberal". And these were liberal reforms she brought in and which had the desired effect: increased productivity.

So yes, it is Maggie wot done it.


View comments

There's nothing like a good invasion

Written by Victoria Buhler | Sunday 12 June 2011

The New York Times offers a new growth strategy for countries struggling with stagnant economies: invasion. After all, if you are just willing to lower the starting point enough, you too can enjoy 11% GDP growth! Having your country razed, villages pillaged, and women raped is a small price to pay for the holy grail of economic policy. Oh, the miracle of modern economic statistical analysis.

The premise behind the article’s optimistic spin is this: ‘There is nothing here. Therefore, there must be money to be made here.‘ Unfortunately history shows that the huge fortunes tend to be generated by the wealthy elite who alone have enough capital for the initial investments and start up costs. Furthermore, in this competitive vacuum, the elite can build secure their grasp on monopolies that will continue to restrict competition and distort the markets even after the country recovers.

Nevertheless, apart from the ‘hot-money cowboys’ (what’s Arabic for Abramovich?), there is no doubt that the lack of regulation and unsatisfied demand for goods and services could provide a ripe environment for small-scale entrepreneurship. However, the anecdote about the university students enquiring when American companies would begin hiring in Iraq illustrates the difficulty in fostering that innovative spirit.

Growth is often held as the overarching goal of economic policy. After all, Growth lifts the masses out of poverty, Growth allows future Growth, and Growth may even be able to make a rock that it cannot lift. But despite the benefits of growth in the abstract, a certain overall trajectory is desirable as well. Economic aggregates can be deceptive. Something tells me the Obama administration will not leap for this strategy. It shouldn't.

View comments

So what is it that makes people happy?

Written by Tim Worstall | Saturday 11 June 2011

Much consternation over the pond on what it is that makes people happy. For the OECD has released the "Your Better Life" report and the US isn't top. Surely this cannot be, that there are 16 countries happier than the US?

So I thought I'd have a look through the numbers and see what I could find. The most obvious point is that higher taxes and a larger welfare state don't provide the answer. For other than Hong Kong, just about everyone has those and some of them are less happy than the US. They are not the definitive factor (s) therefore.

So I went and looked at the various measures of economic freedom instead. We can look at things like business freedom, trade freedom, monetary such, investment, financial, the protection of property rights and the lack of corruption. The other measures clearly are to do with that tax and spend stuff that we've already rejected as our explanation. I looked only at those 16 countries which are happier than the US. There are a couple of wobbles, France is an outlier on these figures just as it is for the use of soap or the sale of ladies' razors.

But all of those countries are, with the occasional already admitted wobble, freer economically than the US. Higher business freedom, investment, financial and trade. These we could and should lump together as free trade really: free trade internally and externally.

Freedom from corruption is really the rule of law: a corrupt place doesn't have that because the corruption is in itself being paid to undermine the rule of law. Low corruption means the law (whatever it actually is) isn't being subverted. And property rights are, well, they're property rights.

So, now we have it, now we know what it is that makes countries happy, happier than the United States. Free trade, property rights and the rule of law.

Who knew?

View comments

An Englishman’s home should be his castle

Written by Anna Moore | Saturday 11 June 2011

castkeRemember Tony Martin? “An Englishman’s home is his castle”? Martin’s 2000 trial, in which the man was found guilty of murdering the teenaged ne’er-do-well robbing his home, awakened discussion in the UK of self-defence standards. The issue is now in the American press. Last month, Pennsylvania became the latest American state to pass a “castle” law.

Castle doctrine, an American legal doctrine derived from English common law, runs that a person has the right to defend him- or herself with deadly force against an attacker on their property.

Those gun-toting, bourbon-swilling Americans, you may be thinking. Where do they think they are, the Wild West? Here in the UK, we use a far more civilised “reasonable force” standard. Leaving gun control itself aside, though, it might well be time to reconsider self-defence standards in the UK.

At the heart of castle doctrine is a recognition that the individual ought be sovereign over his or her property. As I have earned this pound or built this house, so it is mine to do with as I see fit and, by extension, mine to protect.

Fine, but how about in the real, governed world? Of course, in practice, we are unable to assert an absolute right to privacy, property, and self-defence in modern society. Nonetheless, the concepts are still worth defending and are, to some degree, enshrined in our laws. The police cannot enter my home without one of my permission, probable cause, or a warrant. Castle laws acknowledge that, even within a governed society, the private sphere is—or ought be—just that.

Castle laws are often characterised as bloodthirsty retributive justice. Ideally, no one has injury visited upon them, ever. In giving people the right to use greater force against attackers, though, we do more than merely raise the likelihood that a would-be rapist is harmed. Castle laws raise the perceived costs of crime, thereby deterring it. They also mean that, when fighting for one’s life, a person does not have to spend crucial seconds thinking about whether they will be prosecuted for their means of defence. An attack is already underway. It seems appropriate to locate responsibility for that attack spiralling out of control (if such a thing can be said of an assault) with the attacker, not the victim.

Between Sarah Palin and Glenn Beck, American champions of property, privacy, and self-defence rights can seem a bit nutty to most Brits. With castle laws, though, the Americans might be onto something.

View comments

Vote for Clint Webb!

Written by Tom Clougherty | Friday 10 June 2011

Now, in fairness, I don't think our politicians are quite this bad. Not most of them anyway. But you'll definitely spot enough similarities to find this video an amusing watch on a Friday afternoon...

View comments

Project Volvo shows how out of touch senior politicians were

Written by Junksmith | Friday 10 June 2011


Here is a press release from Volvo, reacting to the news that Ed Balls and other senior Labour ministers called their plot to get Gordon Brown into No. 10 "Project Volvo". Funny stuff:

Project Volvo - it just shows how out of touch senior politicians were.

Leaked documents labelled Project Volvo, revealed today, that outline a plot to unseat former Prime Minister Tony Blair show just how out of touch with reality senior politicians within the previous government had become with modern Britain. The reason for the name 'Project Volvo', according to reports, relates to Mr Brown's apparent character traits of being 'dependable, robust but ultimately dour'.

Clearly before labelling the plot, Labour politicians of the time hadn't acquainted themselves with the Volvo brand in the last decade with cars like the new S60 and V60 bringing a new dimension to the brand in terms of design and driver appeal.

Peter Rask, Regional President of Volvo Car UK, Ireland and Iceland, said: "If only the Labour party had been like today's Volvos - dynamic, agile and innovative - perhaps the UK economy would have been in a better place than it finds itself today!" 

View comments


About the Institute

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

Read more