(Almost) until the pips squeak

The Lib Dem conference offered some excellent ideas yesterday. The best was to raise the income tax threshold to £12,500; this will make employment more profitable than benefits; it will go a long way towards enriching the poorest; it will be a significant removal of government from the lives of millions of people.

Then in his next sentence Danny Alexander said that if we are all in this together then those with the broadest shoulders ought to bear the greatest burden. But we are 95th in the World Economic Forum’s low tax rankings; down from 4th in 1997. We already pay a lot of tax: the Lib Dems are looking for rhetoric that avoids Wilson’s mantra – tax the rich until the pips squeak – but that is increasingly what it looks like they want to do.

In a recent article, Allister Heath outlines some vital facts for this discussion:

A huge share of the tax take and hence of the money used to fund the NHS, schools and welfare is accounted for by a tiny minority on high incomes. The top one per cent of taxpayers (roughly speaking, those on £150k and above) will pay a record 27.7 per cent of the total income tax take in 2011-12, according to HMRC (they earned 12.6 per cent of total income, down from 13.4 per cent five years ago). This has increased from 26.6 per cent the previous year, 21.3 per cent in 1999-2000, 14 per cent in 1986-87 and 11 per cent in 1981-2. History tells us that cuts to the top rate actually increase the share of tax paid for by the rich; there was no need for Gordon Brown’s raid.

The rich already bear the greatest burden. And it isn’t just those people labouring for the £150,000 a year. The very rich make the biggest contribution:

The 14,000 people on £1m a year or more will pay £14.2bn in income tax this year. They will contribute almost as much to the exchequer as the total paid by the 13.93m people earning up to £20,000 a year, who will fork out £14.9bn. Those on £1m or more now pay 45.5 per cent of their income in income tax, up from 35.7 per cent in 2008-09.

Howe cut the top rate from 80% to 60%; Regan from 70% to 28%. These were successful policies. We are already taxing the rich too much.

More sinister than this was Alexander’s plan to catch tax avoiders. There are 2,500 extra jobs in HMRC; he is promising to collect £7 billion more in tax this year. All that money could be used productively, but instead it is going to be stolen to keep Lib Dem delegates clapping. This new team is going to focus on the top 40,000 taxpayers and, in his own words, the government are going to find them and their money. But look up at the figures from Alister Heath: 14,000 rich people already give as much as 14,000,000 not rich people. Disincentivising those 14,000 could cost the 14,000,000 dear.


It’s RBS, Stupid

Reams of paper have been used to design a safety mechanism for the UK banking sector.

Given that the near collapse of the UK banking system took place in 2008, there is a strong feeling that the Independent Commission on Banking’s (ICB) 363-page Final Report deals with yesterday’s problems.

Two further general observations are warranted about the Report.

First, as Eamonn and other ASI bloggers have noted, it accorded disappointingly little priority to promoting competition. Regrettably but perhaps understandably, given the size of the existing banks with which any newcomer would be competing.

Secondly, many would argue that the central problem is not the banks themselves but some of those running those banks that needed massive subsidies simply to survive.

After all, HSBC is still powering ahead. Admittedly, its enviable status is mainly due to heavy Asian exposure. And, if memory serves, Lloyds did pretty well under the prudent management of the late Sir Brian Pitman.

Not surprisingly, the Government reacted to the ICB’s Final Report by aiming for the long grass. Conveniently, it homed in on 2019, the year when Basle III – with its much higher capital requirements - kicks in.

In the intervening eight years, the Treasury will focus on Royal Bank of Scotland (RBS), the owner of the NatWest and of up-market Coutts. Its unprecedented collapse featured prominently in Alistair Darling’s fascinating memoirs.

RBS received an astonishing £45.5 billion investment from the Government.

Its shares now trade at just above 20p, compared with the Government’s average c50p entry price – the taxpayers’ paper loss is now approaching £30 billion. Selling down this 83% stake now seems years away.

The 41% publicly-owned Lloyds did derive some benefit: the ICB reined back on its interim proposals for further divestments beyond the 632 branches earmarked for disposal under Project Verde.

More worryingly, given the impending Eurozone crisis, further taxpayer support for the banking sector cannot be ruled out.


We should be more like Sweden!

Yes, I know, it's so easy to make fun of Polly Toynbee's constant mantra that we should be more like Sweden. It's become almost like Peter Simple's Mrs. Dutt-Pauker: so much so that I'm sure Polly has picked up on the joke herself and uses her "we should be more like the Nordics" line as an in joke.

Well, I would if I'd ever been able to discern that she's a sense of humour and I fear that, as with Magie Thatcher, that's just not one of the human attributes she has. Still, I'm happy to say that we really are becoming more like Sweden:


As you can see, levels of inequality in the two countries are converging. Please note, this is after all of the things we try to do to reduce inequality, after all of the taxing and the welfare spending. So of course as the UK becomes ever more like Sweden Polly must be getting happier, no?

And of course we are continuing to get more like Sweden in other ways. Free schools are very much modelled on Sweden's highly admired system of such free schools. Corporation tax is being cut, just as Sweden has a low corporation tax: it's the standard economics of taxation that corporate taxes are more damaging to growth than consumption taxes for the same revenue raised. VAT has been raised for the same reason: we've not reached Sweden's 25% as yet but better to have the less damaging tax all the same.

Just one thing more to do then, one more thing to bring us really into line with that icy social democratic paradise that is Sweden. Well, OK, if you insist, two. We have to abolish inheritance tax and also the national minimum wage. Sweden has neither. And as we really are told that we must be more like Sweden we should do these two things as well.



We need competition in healthcare

healthcareMany of the misleading and paternalistic arguments against reform of the NHS are the same arguments which were used to oppose the privatisation of the utilities in the 1980s. Some opponents argue it will reduce standards, others dislike the idea of any profit being made and still others are enthralled by the idea of a benevolent state monopoly looking after us. Amidst the chaos of such confused logic and regressive thinking, the interests of patients and taxpayers have been sidelined.

Yet what is actually being proposed, allowing businesses and charities to compete with NHS hospitals, is far less radical than the privatisations of the 1980s. But it is a step in the right direction. People who believe in the intrinsic value of liberty should always support more competition as it means greater freedom of choice over consumption options. It is unfair to deny patients the right to choose another healthcare provider if they feel it will give them a better service. It becomes tragic, when we see the appalling conditions experienced by many elderly patients as shown by the Care Quality Commission’s recent report.

The increase in specialisation within the NHS itself that further competition would promote would drive up standards. Private firms or charities delivering especially good care in a particular service such as hip-replacements will drive NHS hospitals to shed their uncompetitive services and focus their resources on areas where they believe they have a competitive advantage. This should reduce wasted costs and increase the quality of choice for consumers.

If we are happy for our very important water, gas and electricity supplies to be no longer in the hands of a state monopoly, then there is no compelling reason why our healthcare should also be. If we have accepted that the profit motive is the basis for innovation, investment and progress in all other markets, then why shouldn’t we harness that in healthcare? Why should we not allow profit making and competition with state-run services if it drives the search for more creative and cost effective health services? Why should we be content with the status quo when Singapore’s system with substantial private sector involvement delivers superior outcomes for 3% of GDP compared to the UK’s 9%?

If we believe in liberty, if we want to see rising standards and if we want lower costs, then we should support more competition in healthcare.

Adam Memon won second place in the 2011 Young Writer on Liberty Awards.


Pick one of two: free immigration or a welfare state

As we all know Uncle Milt told us that we could have either a welfare state or free immigration. We can't have both: for we'll attract an awful lot of immigrants with a generous welfare state. Bryan Caplan presents a little chart that shows another, supporting, reason for this:


There's a correlation there between places that are racially mixed (yes, I know, human "races" is a misnomer, think of tribes, cultural backgrounds, whatever, but race is a reasonable enough word with that caveat) and having a low welfare state. The thinking is that people are happy enough to build a safety net for "people like us" whoever that us happens to be. But not so keen on putting hands in pockets (or having the State's hands in our pockets) for those who are the other. Thus culturally homogenous places seem happy enough to have large welfare states, societies that aren't not so much.

Which leads us to an interesting place: it's quite obvious that the greatest increase in human flourishing and wealth comes from an open immigration policy rather than a large and all encompassing welfare state. We can move an Ethiopian taxi driver from an income of a couple of thousand $ a year to $30,000 a year just by moving him to New York City. That's something that almost no welfare state could manage. No politically achievable one at least.

So, if we cannot have both a welfare state and also free immigration, but free immigration improves the general human lot more than a welfare state, then shouldn't we get rid of the one we currently have and pick up the one we don't? Have free immigration and not the welfare state?


A libertarian's prayer

Our Hayek who art in heaven;
Hallowed be Thy Name;
Thy free markets come;
Individuals’ will be done on earth as it is in heaven;
Let us keep our daily bread;
And forgive us our trespasses, as we forgive those who trespass against us;
And lead us not into nannying;
But deliver us from socialism;
For Thine is the peace, and the freedom, and the creation of wealth, forever and ever.


[Have a nice weekend – ed]


Can capital punishment ever be justified?

Next Wednesday at four o'clock London time, a man will be executed in the state of Georgia. Capital punishment is an extremely divisive issue that separates even those who represent similar ideological positions on the political spectrum. One is allowed to be undecided, a common opinion being that you wouldn't know where you truly stand until the issue directly affects you in someway. Yet regardless of positioning the issue of capital punishment must rest on a crucial crux- overwhelming evidence that the accused is guilty.

The man in Georgia facing almost certain execution cannot be held in this category, or at least there exists convincing evidence that could potentially call for a revised sentence. Troy Davis has been on death row for nearly 20 years following his conviction in 1989. He was accused and found guilty of killing local police officer Mark MacPhail in Savannah, Georgia. However, in the years following Mr Davis' conviction seven of the nine non-police witnesses have recanted their testimonies, many even alleging that they were subject to police coercion and intimidation techniques during the trial. In addition to this no physical evidence exists that links Davis to the crime.

Amnesty International have taken up the cause for Davis' clemency. Whilst they do not advocate a definite position concerning Davis' guilt they maintain an argument that is there "is room for doubt, there's no room for execution." This is surely something that both the pro- and anti- capital punishment camps can agree on (or at least concede to.)

Considering the enormous consequences of the margin for error in death row cases it seems, at least to me, that granting the state the power to kill individuals is a hugely questionable act, and it is perhaps this point that lies at the heart of my own personal questioning of the validity of capital punishment. Rothbard provides an answer to this concern proposing that capital punishment be initiated only at the victims request, therefore removing the state's overwhelming influence and putting justice in the hands of those that require it. But how do we ask the wishes of the dead? Rothbard proposes that we all, anticipating our potential murders, instruct others of our wishes in the style of a will. He suggests that,

The deceased can instruct heirs, courts, and any other interested parties on how he would wish a murderer of his to be treated. In that case, pacifists, liberal intellectuals, et al. can leave clauses in their wills instructing law enforcement authorities not to kill, or even not to press charges against a criminal in the event of their murder; and the authorities would be required to obey.

Whilst debating the death penalty requires endless time and a limitless word count, cases like Troy Davis' continually arise addressing our need to come up with a definitive answer to questions surrounding the death penalty. If we are to support it guilt needs to be clear, with no possible alternatives. In addition the death penalty should represent justice being enacted between people, not between the accused and the authorities, as a result, I'd argue that Rothbard might be on to something.


Those ever longer working hours

You'll recall how were all worked like slaves by The Man? Capitalism holding our noses to the grindstone, how working hours are getting ever longer?

Well, no, not really:


I can't see that increase in working hours either. So we've one parp in the face of those who keep telling us that we're getting this work/life balance thing wrong. But we can go further too. Market or paid working hours are only part of the work that we do. We all also do unpaid working hours inside the home, so called household production. The cooking, the cleaning, general maintenance and so on. And hours spent on these activities have been falling even faster than those paid working hours.

The net result of all of this is that we are enjoying ever more leisure time: yes, including even commuting and everything, we're getting more leisure than any of the previous generations.

Which is of course just as it should be. As we're generally getting richer (OK, last couple of years apart) then we're choosing to take some of that greater wealth in more leisure, not just chasing after ever more money for shiny gewgaws. Our work/life balance is indeed changing: and it's us doing the deciding about how it shall change which is of course what annoys the people who think they should be telling us what to do. 


Another take on libertarians and localism

Henry Hill is a worthy winner of our 2011 Young Writer on Liberty Award, and I’ve enjoyed reading his three victorious blog posts. But I have to respectfully disagree with his take on ‘Libertarians and localism’.

Certainly, I understand Henry’s point: that since libertarianism dictates only a very small role for government – consisting solely of a ‘legal framework for the defence of rights and property’ – it doesn’t make much sense to have local governments as well as a central one. Under the libertarian ethic, you don’t really want ‘government to be different to suit local wishes’. You just want it to guarantee peace, property and liberty, and then stay out of the way.

But I think Henry misses a couple of important counter-arguments. Firstly, given that the modern status quo is hardly minarchist in nature, doesn’t local government serve a useful purpose? For starters, it would be much easier for libertarians to win control of, or influence over, a local government than a national one. It may also be far easier – practically speaking – to trial libertarian policies at the local level than the national one. The upshot of both these points is the same: given our starting point, decentralized government gives us a better chance of putting libertarian (or at least more libertarian) policies into practice in the real world. To that extent, I’d say the more decentralization of power the better.

Secondly, even if we were living in a libertarian world, there would remain a good argument for having lots of small, competing libertarian governments, rather than a few big ones. The reason is that geographically smaller governments are much easier to escape from than big ones. This ‘exit option’ provides powerful protection for individual freedom – if your government starts to interfere too much, you can just up sticks and move to the jurisdiction of another one. It’s worth remembering too that socialism wasn’t the only political evil of the 20th Century – nationalism had a disastrous influence as well.

Ultimately, then, I’m rather a fan of decentralization. In the real world, I think it provides a good way of advancing the libertarian cause a step at a time. In my libertarian utopia, it provides insurance against governments once again growing too big and powerful. So whichever way you cut it, I say libertarians should be localists.


The CIB Film Festival

The video above is a very good entry by the Taxpayers' Alliance in the Campaign for an Independent Britain's Film Festival. The CIB have put together a competition for videos making a point – seriously or humourously – against the EU. Fittingly, they seem to allow entries from across Europe: it always cheers me up to remember that there are people in every country in the EU who are also trying to get out. In the Rebecca Black era (don't ask), it's a great idea that we need to see more of.

Competition between governments is a good thing, and like Adam Smith's conspiring tradesmen, whenever our leaders meet together it's likely that they're conspiring against the rest of us. And for what it's worth, I doubt the EU can survive the current crisis in any significant form.

Some of that is to be mourned. Free trade and free movement of people are great things, and if the EU makes it harder for British politicians to throw up barriers to those things, that's a big point in the EU's favour. But I'm not convinced that that's what's really going on. Sure, I can move to Spain without much hassle, but for someone outside the EU to come in is a lot tougher. The same goes for trade – free trade within Europe is fine, but that's not what's going to matter in the 21st Century if it means cutting ourselves off from China, India and the rest of the globe. Open borders with Europe are great, but not if it means we have to cut ourselves off from everywhere else. After all, there's a whole world out there.