"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
The current postal strike brings back bad memories. The union-dominated economy of the 1970s was – with a few exceptions – laid to rest by the Thatcherite view that customers were paramount. What should be done as Royal Mail, like the coal industry of the 1980s, inexorably declines on the back of competition for the delivery of mostly unwanted junk-mail and by the surge in e-mail?
Yet, Royal Mail has access to c.27 million addresses – no other UK company can boast such customer access. Surely, even the Royal Mail’s management should be able to run a decent business from that legacy. Once another ‘solemn and binding’ agreement has been cobbled together, privatization of Royal Mail should proceed apace.
Central to any valuation is the Universal Service Obligation, parts of which date back to the venerable Rowland Hill of 1840s Penny Black fame. The principle of the geographic uniform postal rate that he set still endures. Even the Hooper Report failed to recommend its abolition. Why should letters posted in say Penzance for Helston cost the same as those posted in Penzance but destined for the Shetlands Islands?
Surely, some type of simple zoning charge could be introduced to reflect much higher transport costs to faraway places. After all, charges for water – arguably a more vital product – vary substantially throughout the country as South West Water’s customers know only too well.
Full privatization of Royal Mail would attract interest despite the combination of the march of e-mail and ongoing industrial relations problems, not forgetting the infamous c.£10 billion pension deficit. The latter – by comparison quite small beer - should be added to the existing £1 trillion plus public sector pension deficit. Certainly, Holland’s TNT and Germany’s Deutsche Post would be interested along with some private equity funds.
Is public patience for Royal Mail finally running out?
Good old Labour. In an attempt to make Britain a safer and better place to be, they have devised yet another way to terrorise the public into ensuring that we never, ever commit even the most minor of crimes. Beware you fare-dodgers and council tax shirkers, for under an extension of the Proceeds of Crime Act you too can join the ranks of Drug Baron and SuperPimp by having your home raided, cash confiscated and assets frozen. However, it won’t be the bobby breaking down your door, it will be a new army of power-crazy councils, quangos and agencies.
Alan Johnson is expected to announce the measure next week. Sneaking it in through a Statutory Instrument, there will be no need for MPs to debate the issue, and so bodies such as Local Councils, TfL and the Royal Mail can expect to use these powers independent from police control fairly swiftly.
However, Labour instructs us not to panic. Each empowered body will receive ‘financial investigators’ trained and monitored by a quango. This is a very good thing apparently, because they become “less reliant on more traditional law enforcement agencies" like the pesky police. Quite right, why should someone trained in upholding the law decide when the right time to confiscate somebody’s wealth is, when a faceless bureaucrat would do so much more eagerly? We are assured that this extension shall not be exploited or abused; presumably in the same way that anti-terrorism legislation has not been used to rifle through bins and deny school places. The move will also boost the fight against crime and free up police time, although the memo neglects to mention if it will also increase bureaucracy, direct resources towards hunting petty offenders and increase paranoia amongst citizens every time they fail to ‘touch in’ with their oyster card.
It would be quite easy to assume that most bodies given these new powers will scarcely use them, deciding they should focus on their real jobs and that if a criminal deserves to have assets frozen that is a matter for the police. However, the promise of a cut of the confiscations may just be alluring enough to encourage use of the POCA left, right and centre.
These new measures are draconian, invasive and rather unnerving, threatening each and every one of us with having our means of survival cut off for the slightest misdemeanor. It seems that no act is too low, no sum of money too small for Labour to try and plug the deficit with it.
Germany plans to do it, Japan has already done it, France plans to do it, and even the states where the only true alternative to a de facto social democratic government is a pure socialistic one – Denmark and Sweden – are at it too. I am here referring to the fact that these countries are all cutting or intending to cut taxes as a way of boosting domestic production and employment rates. By lowering taxes the government lets taxpayers keep more of what is theirs, while also promoting private investments. In contrast, the British government has found its own way to 'boost' productivity: unlike everybody else, it is hoping to do so by increasing income taxes.
Either the British government has defied logic and found that the optimum of the Laffer curve is attained by increasing (already high) taxes, or it has begun digging its own fiscal grave. By and large, the tax increases are the result of the British government’s inability to prioritise among public expenditures, as well as to satisfy notions of economic “justice". This is not the time for such fancies.
It is highly unrealistic of the British government to believe that people who are set to be hit by this tax will sit back and do nothing. People earning the kind of money required to pay 'super-taxes' have one striking thing in common: they are extremely mobile, not only domestically, but globally. The lucky winners of one of the highest marginal taxes in the world would probably not mind paying it for a year or two, but after a while they will start to look around to find better offers. Britain is looking like an increasingly bad choice.
[W]e may have to temper on-going tax competition between some states which tilts the balance; where capital in mobile sectors pays less and less and labour is hit more and more.
Mario Monti, Former EU internal market and competition commissioner, 'Europe warned on tax in single market drive', Financial Times
The antidote might be found here.
The Trade Union Congress (TUC) is calling for the UK national minimum wage to be increased to £6 an hour from October 2010. In Scotland a government committee suggests the public naming and shaming and an increase in fines for employers who break the minimum wage. While in Jersey the Employment Forum has outlined plans to increase the minimum wage to £6.20. The sound of breaking windows fills the British Isles.
The timing of this is awful - not that there ever is a good time to outlaw jobs - but with unemployment set to continue to rise into next year, those at the margins will of course be adversely affected by restrictions on employer and employee. There is no getting around the fact that minimum wages create unemployment; there are few more obvious truths in economics. Murray Rothbard retorted to those that suggested the minimum wage has no effect on employment to ask why they didn't put it up significantly higher; their lack of response was telling. The marginal level that we live with discriminates against the most vulnerable, forcing them into the disabling clutches of the state.
Pushed as it is by unions, the minimum wage is a mask for special privilege. And as such it was infuriating to hear the ludicrous assertions a couple of months ago on the BBC Radio 4 programme Where did it all go Right? that the national minimum wage has been an unqualified success. To have to listen to Michael Portillo and Boris Johnson turning their backs upon logic in favor of a populist bandwagon was too much. In a time of high unemployment combined with dispendious welfare, to suggest that the national minimum wage is having no effect is fantastical.
It is about time a politician or two stood up for sound economics. Given the state of this nation, perhaps we could do with a British Warren Harding to lead this country. Any idea who could rise to the challenge?
The UN general assembly is expected to overwhelmingly condemn the US economic embargo against Cuba today, adding pressure on the Obama administration to abandon its 47-year-old policy.
Since 1960, Americans have been barred from trading with, investing in, or traveling to Cuba. The embargo may have possibly made sense before 1991, when Castro served as the Soviet Union's proxy in the Western Hemisphere, but all that changed with the fall of the Soviet Union. Today, more than a decade after losing billions in economic aid from the Soviets, Cuba is only a poor and dysfunctional nation of 11 million people who pose no threat to America or any other country.
More recently some officials in the Bush administration charged that Castro's government may be supporting terrorists abroad, but the evidence is pretty shaky. It is much more likely that the Bush administration simply wanted the Cuban vote in Florida, than it really believed Cuba was paying the bills of terrorist. As a foreign policy tool, the embargo has aided Castro’s government authority by giving him an excuse for the failures of his socialist programs. He can, and has, railed for hours about the suffering the embargo inflicts on Cubans, even though the damage done by his domestic policies have been far worse. If the embargo were lifted, the Cuban people would be a bit less deprived and the Cuban government would have no one else to blame for the shortages and stagnation that will persist without real social reforms.
If the goal of U.S. policy towards Cuba is to help its people achieve freedom and a better life, the economic embargo has completely failed. The economic effects have made the people of Cuba worse off by denying them low cost food and other goods that could be bought from the United States. Given the current economic situation, lifting the embargo could create just the jump start that the US economy needs. Open markets are the best real way to encourage more personal freedoms and government reform.
Spencer Aland blogs regularly here.
Walking through Oxford Street and looking at this years Christmas decoration is dispiriting. You immediately get the feeling something is missing. The overhead street decoration has no Christmas symbolism anymore; a boring umbrella has replaced the Christmas tree. I kept scratching my head: are there people out there who bother about this stuff?
Well, it seems the PC brigade has struck again. There will be no proper Christmas decoration anymore. I want everybody to be aware that the PC people are now finishing in this erstwhile free country what the Jacobins started and the Nazis took over in the 1930. They were very keen to ban all Christian symbols in public places because they wanted their swastika to be displayed in their place.
These days, we often hear that crosses and other Christian symbols must be tucked away because they might offend the faithful of other denominations, particularly Muslims. And yet I wonder what offends Muslims more: the Christmas trees and Christianity-inspired decorations in our shopping malls, or the politically correct (and often taxpayer-supported) Gay Pride parades which take place in our major cities every year? But I guess that as far as our political elites are concerned, the latter symbolizes multiculturalism, and is therefore acceptable, while the former evokes traditional values, and is not.
It’s a strange world we’re living in.
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Can the Conservatives learn from Sweden's school voucher system?
Another blow for the left this week as the University College Debating Society threw out a motion calling for the abolition of private education. Camden LibDem candidate Jo Shaw and I, opposing the motion, expected to be defeated, but at the end of the debate our calm and precise arguments gave us a 2:1 majority.
Not that the argument is difficult. Scrapping private education would place a huge additional burden on the state – leaving it with larger class sizes, or leaving taxpayers with higher taxes – all to fund the education of wealthier kids who the rest of us aren't paying for right now. And why do it? Frankly we should be growing more independent schools, because they perform better. It's not just that they get brighter kids with more motivated parents. Or that they charge more than the state spends. The fact is that they make their budgets work harder. Pound for pound spent, private-school kids get more face time with their teachers than state school kids, as our report A Class Act showed. No wonder they perform better.
Sure, you have to be well off to send your kids to a private school: rich enough to pay taxes to support the state sector, and then pay for your private schooling. What I would like to do instead is make private schooling affordable for everyone – as they do in Sweden, or in Denmark. Sweden introduced a voucher system in the mid-1990s. It means that if parents take their children from a municipal school and move them to an independent school, that school gets the same money from the government that it would have spent on their state education. No fees, no top-ups, not even extra charges for sports kit are allowed. So all at once, the whole population of Sweden can exercise a choice. And around 1000 new independent schools have sprung up, bringing in new ideas and much more customer focus. Even the municipal schools have had to sharpen their act in the face of this new competition.
The Tories have seen the merit of this system. I hope they will be brave enough to let voucher schools go their own way and allow customers, not civil servants, to say how they want their schools run. For instance, we don't need a massive state curriculum, administered by thousands of bureaucrats – parents know whether or not a school is doing a good job, and if it isn't, they will move and take their voucher funding to another. In fact, we wouldn't need much of Ofsted's lumbering regulation at all. Let schools run themselves, and give parents the financial power to make their own choice. That would revolutionize UK education. for the better
Dr Butler's book The Rotten State of Britain is now in paperback.