The Pin Factory Blog

Lord Turner of Makebelieve is at it again. In contrast to the sensible proposals for Basel III from the Americans (higher capital requirement for riskier businesses and real world bonuses), Lord Turner wants banks to make “living wills" which would cost them serious money in the short term and have no benefit in the long term. Turner wants them to volunteer to pay more tax. Whatever banks may say now, the “living wills" would only come into effect after they were dead which tends to limit decision making capacity and those coping with the then situation would not be bound by the wishes of a board stupid enough to bankrupt the business. More likely the then government would have rescued any major bank from death anyway.

Unsurprisingly, the banking industry and their advisors are refusing to swallow Turner’s medicine.

Lord Turner is, once again, leading the way to the asylum and no one else will follow. He is simply delaying progress on Basel III, something that his boss, our PM, is already grumping about.

The American proposals for variable levels of capital requirements would be simplified by breaking up our largest banks, something we should do anyway to let competition back into the system. That would also achieve Turner’s objective for simpler legal structures in a sane and practical manner.

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.

Do you think DfID solely uses taxpayers’ money to help the poor overseas? Think again. A new report from International Policy Network shows that the Department for International Development (DfID) has spent nearly £1bn on spurious ‘communications’ activities since 2000, with £140 million spent this year alone.

The research documents how DfID is channeling millions of public money through a select coterie of NGOs to fund ideological “awareness" and “advocacy" activities, which support DfID's (erroneous) view that state-funded social services are the best way to tackle poverty.

In other words, DfID is using taxpayers’ money to spread its own political propaganda in the UK. Much of this money never gets near the poor and needy. This is not just harmless guff: thanks to DfID funding, Voluntary Service Overseas (VSO) was able to persuade the Gambian government to ban all-inclusive package holidays. That hardly helps foster economic development.

DfID is also using public money to set up fake charities to peddle its own agenda. Connections for Development (CfD) received start-up funding of over £600,000 from DfID to represent black and ethnic minorities “on issues relating to international development." If the need for such a charity is so pressing, how come it has to rely on the government for 100 per cent of its funding?

Overtly partisan organizations that have little to do with development are also cashing in on the DfID payola. The Trades Union Congress (TUC) has received over £1.2m since 2003. Most of this money has funded TUC lobbying, new staff and even an “international buffet and wine" event in London.

This kind of spending reveals a worrying disregard for democracy on the part of the government. It is not right that public funding should go – frequently without tender - to unelected and largely unaccountable bodies to promote ideological views on development.

It stinks, and the next government should not hesitate to take an axe to it.

Last month, the Office of Fair Trading announced that it has – once again – pressed its nuclear button by referring the local bus sector to the Competition Commission (CC). This decision will not exactly put fear into the minds of the five UK bus companies who dominate the market – Stagecoach, First Group, National Express, Arriva and Go-Ahead. For many in the City, CC enquiries are normally of little interest – they are often dominated by its members poring over out-of-date figures and proposing remedies that are consistently ignored.

Of course, for Stagecoach, the CC – and its predecessor, the Monopolies and Mergers Commission – is a second home. Legendary tales of bare-knuckle competition in Darlington, Thanet and Carlisle will be long remembered. Yet, the fact remains that privatisation of the bus sector has brought considerable benefits, although some rural dwellers would vehemently disagree. In recent years, bus fleets have been modernised, partly due to environmental factors, whilst travelling numbers in major population centres are holding up well.

It should also be recognised that solid bus revenues have helped finance the bids for railway franchises: without them, there would have been precious few bidders for these franchises. Stagecoach was the first credible rail privatisation bidder – for the South Western franchise, whilst National Express – the key bus operator in the West Midlands – has been very active on the railways. Its spectacular over-bid for the East Coast main-line franchise will not be forgotten.

To be sure, 10%+ operating margins on UK bus operations outside London are attractive. But the reality remains that the reform of transport markets would be far better directed elsewhere. The BAA/Heathrow shambles remains unresolved. And, on the railways, urgent action is needed to sort out the much-criticised franchise system and to bring Network Rail under greater financial control.

Are these issues not more important?

Having finished 6th form at James Allen’s Girls’ School where I received A-levels in Politics, Economics & English, I am honored to be taking a Gap Year placement with the ASI. Following this I intend to go backpacking before heading off to university where I hope to study PPE at Oxford or Government and Politics at LSE.

I have spent the last two years ranting to uninterested classmates and left-leaning teachers about the wonders of capitalism and a government’s innate ability to squander money and complicate any economic difficulty. I’m therefore very happy to work at a place where my views are supported and I have the ability to voice them. In such an economic climate I think it’s incredibly important that Britain does not turn to the government in hope of economic and social salvation. Today’s government has created an untamable national debt as taxpayer’s money is wasted in unprofitable uses, a bloated public sector weighed down with bureaucracy and a slow and steady erosion of citizen’s freedoms. All of this suggests that no government - be it Labour or Tory - can hope to make Britain a better place without dispensing with megalomania and handing economic and civic freedom back to the public.

In my spare time my interests include eating and lying in bed, djing, taxidermy and learning to crochet.

A portable toilet for women that fits in a handbag.

There seems to be no limit to the cruel and unusual punishments that Britain's government can dream up. Now the Business Secretary Lord Mandelson wants to disconnect internet users who download copyrighted material. The interesting thing about this current proposal is that those it is supposed to protect, such as musicians, are universally opposed to it, and have written to the Times to say so.

Of course, there's s a law of copyright, and as long as any law stays around, people should face penalties for breaking it. Traditionally we have used fines, or imprisonment in the more serious cases. And the principle has been that the punishment should be proportional to the transgression. The punishment should indeed fit the crime – but not in the style of the Mikado, which ministers don't seem to have realized was a joke.

In the last decade, however, all sorts of unrelated punishments have been dreamed up – withdrawing welfare benefits, scrapping people's cars, and 1001 (or more) different proscriptions under Anti-Social Behaviour Orders (which can land you in jail without trial if you break one of them).

The mechanics of cutting people off – when innocent people might use the same internet connection – seems about as impractical as Tony Blair's idea of marching young troublemakers off to cashpoints to extract on-the-spot fines. And about as just.

Here's another Mikado-style punishment plan for Lord Mandelson. People who cheat on their mortgages should have their houses demolished. I know one person who would be out on the street, for sure.

Sky News proposes a televised election debate between the three main party leaders, They have written to them, saying that if anyone declines, the debate will go on with an empty chair. That would make them seem frit (if the equal-time laws didn't thwart the plan).

David Cameron and Nick Clegg have jumped at the chance to debate. They have everything to gain from more TV exposure, of course. No answer yet from Gordon Brown, though: he has nothing to gain from bringing himself down from the level of statesman to that of mere candidate. He does not want a debate.

The odd thing is, neither do I. Politicians know that they have to re-connect with the public, but if they think that pontificating on TV will achieve that, they have seriously misunderstood the problem. A TV debate would just reinforce the presidential style of politics that has grown up in the UK. We are not voting for the head of an Executive Branch as the Americans do when they vote for a President. We are voting for Members of Parliament – who are there not just to represent us, but to protect us from a powerful Executive.

A debate would further bolster the role of Downing Street, with all the centralization of power which that entails, at the expense of an already weakened Parliament. The Prime Minister has much of the power that George III did. We ought to be stripping that power away, not boosting it by setting our party leaders up as if they were modern kings. We should be glad to have a majority party that was well managed by an effective leader, however mild-mannered or self-effacing. If the test is that the majority leader has to be a presidential-style superstar whom everyone fawns over, then we have little chance of re-gaining the liberties that the centralization of Executive power have already taken from us.

In his Daily Telegraph column yesterday, Simon Heffer stated that, "As far as one can tell... the subsidy from other parts of the Kingdom (ie, England) to Scotland is currently at least £22 billion a year." This is something you often hear English people saying, much to the annoyance of many Scots, who insist it isn't true. Who is right? Well, the truth – as usual – is slightly complicated.

On the one hand, Heffer is right: Scotland does get 22 percent more public spending per head than England. Indeed, it even gets more spending per head than comparatively poorer areas of England, such as the Northeast. Interestingly, this disparity is not explained by higher levels of welfare dependency in Scotland – if you were to exclude spending on 'social protection' then the public spending gap would rise to 28 percent. It is simply a matter of government being bigger and less efficient north of the border.

But on the other hand, if you factor in Scotland's geographic share of North Sea Oil revenues (about 83 percent), then Scotland pays just about as much in tax as it receives in spending. That isn't to say that public spending in Scotland isn't too high (it is) or that it is sensible to base current spending on natural resources revenue (it isn't) – but those are separate issues.

So perhaps Scotland is – just about – pulling its weight at the moment. However, this should not distract from the fact that it won't be able to for much longer. North Sea Oil production peaked in 1999, and is now declining at an increasing rate. Meanwhile, Scotland's public sector wage bill has risen by 55 percent since 1999, with 1 in 4 Scots now directly employed by the state. Public spending has risen from 50 to 56 percent of GDP in the same period, and on current trends is set to reach 67 percent by 2012/13.

According to the Centre of Economic and Business Research, that would make Scotland the third most state dependent country in the world, after Iraq and Cuba. And what a sad accolade that would be for Adam Smith's homeland!

Hoarders are reportedly stocking up on 100 watt and pearl lightbulbs as the phased EU-ban on their supply comes into force. Like the plastic bag, filament bulbs are an easy target for governments, since we all use them and politicians can be seen to be doing their bit for carbon reduction. But this is gesture politics at its worst. Domestic lighting (for that is all that the legislation covers) does not represent a major component of the UK's carbon dioxide emissions, but it is a soft target.

Many people have criticised the replacement bulbs, the so-called compact fluorescent lamps, despite their lower energy use and longer life. For one thing they will not fit all existing lights, and for another they give a light which is different in quality from the familiar tungsten light. On top of this, they contain mercury, so bringing more of this toxic element into homes just as it has been phased out from thermometers.

But don't take my word for this. Charles Clover, ex-environment editor of the Telegraph now writes a column for the Times. His latest contribution is called Dim thinking behind the new lightbulb laws.

In this, he comments on the reality that many people simply do not like the new bulbs, despite the fact that the head of Osram's consumer products division claims that nobody can tell the difference. Given the lower energy use, it's pretty clear that consumers would be flocking to use the new bulbs if there was no disadvantage. That politicians have to resort to compulsion and manufacturers have to lie to make the change happen speaks volumes. As Charles Clover and others have pointed out, a much more suitable technology is now viable and should soon be available at a more competitive price: the light-emitting diode or LED.

Encouraging the uptake of good new technology is one thing, but forcing people to use a flawed technology which may soon be obsolete does not reflect well on policy makers. But, in the world of environmental politics, few things do.