The Pin Factory Blog

The London 2012 Olympic Games have been a triumph of wastefulness, nannying government, corporatism, deceit and incompetence. Our writer Lawsmith asks, how could our political class have gotten it so wrong?

The first and only time I've met Boris Johnson was when we were on our bicycles at the traffic light at the bottom of King William Street in the City. I stammered: "Uh, good morning, Mr. Mayor." Play it cool. After a brief (and awkward) exchange, he pushed off, away from my sight and into eternity.

Months later, as the tangible effects of the Olympic Movement's month-long occupation of central London started to make themselves felt, my thoughts once again turned to my cycling buddy. After reminding yourself for a moment that Boris once gave some constructive criticism to the city of Portsmouth by saying it was "too full of drugs, obesity, underachievement and Labour MPs," and that barely two months ago he referred to the BBC – which, like that brainchild of the Blairite Labour Party, the 2012 Olympics, is state-run – as “corporatist, defeatist, anti-business, Europhile and… overwhelmingly biased to the Left”, I take the view that BoJo -- currently the Games' biggest cheerleader -- would be doing one thing, and one thing only if he were in opposition (if he were so inclined).

He would tear the government, the media, and anyone even remotely associated with bringing the Olympics here to shreds.

In his absence, others have tried. Most have failed to make a dent. Dominic Lawson, writing for the Independent, fired the opening salvo of reason against Olympics fever last month — writing a fairly broad-brush piece which covered most of the general criticisms of this circus (cost, inconvenience, armed police), he scored his best points at the ‘leftist’ BBC's expense: "[news coverage of the Games] really does make one feel as if this is North Korea,” he wrote, “rather than a country supposedly characterised by individualism and nonconformity."

Read this article.

Let’s say that I’m a manufacturer of any product. Let’s take pins, as a good Smithian example. There is an oversupply of pins in the market, due in part to domestic and overseas producers being able to manufacture pins more efficiently than before. As a result, prices for pins fall. This means that consumers are able to buy pins more cheaply. Because many pins are used in further stages of manufacturing such as clothes production, prices of clothes fall as well.

This means that consumers are able to buy more or better quality clothes or, by keeping their spending on clothing the same, divert the surplus into other areas of consumption or better yet, to save the surplus thus generating capital formation and future growth.

Some pin manufacturers will find that their concerns are no longer profitable at the new price level. This means that they must either reduce their own costs of production or go out of business. However, pin manufacturers going out of business should not be looked upon in a negative light as their resources can be redeployed more efficiently elsewhere and to satisfy other demands for consumption. If the reductions in cost are caused by foreign producers able to supply pins more cheaply, we should see this as a demonstration of comparative advantage and the benefits of free trade to all.

It may well be that the overseas pin manufacturers are in developing countries which benefit enormously from the additional employment and economic growth created in their economies. Of course, this is only the case if overseas pin manufacturers weren’t subsidised and protected by their own governments but the fact that they may be does not justify my government in doing so.

Let’s take another situation. I’m a dairy farmer, and the price which buyers are willing to pay for my milk falls. I realise that I can no longer make a profit in dairy farming. Do I accept that I should redirect my land, capital and labour into another area where I could make profit? No, it seems instead that I should exploit a bizarre political situation where farmers are somehow held up as sacrosanct and in which many people believe that we need to be self-sufficient in food production (as if the UK is somehow preparing for a future autarky).

Instead, I disrupt the supply chains of dairy processing plants and launch a campaign attacking supermarkets and other purchasers of milk in an attempt to force them to either reduce their profit margins, punishing their shareholders who are likely to be the pension and insurance funds of British savers, or – more likely – pass the additional costs of artificially increasing the price of milk onto consumers via other means.

Moreover, instead of accepting that I am imposing a cost on all consumers which they may not all wish to pay, I protest and instead revert to using political and lobbying techniques in an attempt to coerce purchasers of my milk to raise prices. Fortunately, politicians have so far resisted the temptation to interfere too far, or rather too much further, into the marketplace. Instead of redirecting resources to different forms of production which consumers may now be able to afford, I attempt to redirect their spending decisions whether they like it or not.

It must be added, of course, that there are gross distortions in the marketplace. Interventions in the shape of the CAP on the supply side and the various mechanisms by which government drives integration in the retail sectors on the demand side must be viewed as contributors to the way in which the industry is structured. As we must continually point out, if there is not a free market then there cannot be a market price reflecting supply and demand – in other words a ‘fair’ price.

Nevertheless, the attempted use of political means to artificially inflate prices above the market rate – to create an ‘unfair’ price rather than accept that rate is a troubling and problematical response. What makes farmers special and privileged above other producers in the economy? Farmers must recognise that they must serve consumers and not the other way around. 

Next month the ASI hosts its annual event, The Liberty Lectures on the 23rd August from 2-6pm. An afternoon of lectures for students only [but we'll be putting everything on Youtube as well — ed.], that aim to introduce them to big ideas they might not otherwise encounter. This August, the conference will cover economics, history and politics, with lectures on four big ideas that can help how we view the world.

'Only Individuals Choose' – Dr. Anthony J. Evans

A discussion of the use of individualism as an approach to social sciences. As opposed to a conventional perception of Economics as being something akin to Newtonian Mechanics, Anthony will put the case for doing away with an overreliance on models.

'Public Choice Theory' – Dr. Mark Pennington

Going within the black box of government, Mark will put forward the Public Choice School case for considering the role of incentives in public institutions.

'History as the Story of Liberty' – Dr. Stephen Davies

Eschewing the conventional narrative of history, Steve persuasively argues for a conception of history as a struggle between ruling and ruled classes.

'Causes of the Next Financial Crisis' – Jamie Whyte

Many see us as in a post-crisis state after the turmoil of 2007. Rather than just being in a slump, Jamie will argue that we are merely in the eye of the storm. The solutions to the last crisis which politicians are now putting in place are setting us up for an even bigger fall.

If you would like to attend, or you know a student who might be interested, please RSVP to events@adamsmith.org.

We look forward to seeing you there!

UK unemployment is falling, hours worked are increasing, while output is still stagnant (or even decreasing). What does all this mean? How can the private sector create more jobs, while the total output it produces is still stagnating or even decreasing? Some economists seem puzzled by this saying that one set of data in this case is wrong. Even though this might be true as one of the two parameters is misleading, there are deeper explanations for this prevalent occurrence in the past few months.

It is not surprising that the first reaction on the market is a decrease in productivity (see graph below) as more people employed are actually producing less. This can partially be explained by an increase of hiring due to the Olympic Games, since none of these people are creating value or output growth for the economy, but nonetheless have paying jobs.

Source: ONS, Labour Market Statistics, July 2012, pg. 8

Lower wage growth would suggest that unit labour costs are decreasing which is making workers cheaper and more likely to find work. However, looking at the graph this doesn’t seem to be the case. But the question still remains: what is driving productivity down?

If we turn to statistics, we can blame the faulty data reporting and faulty measures of economic activity such as the GDP, or the way we define employment. However, we always use this data and if it serves as a sort of a benchmark in good times, there is no reason why not use it in bad times. The efficiency and precision of the indicators is a debate for itself, but I leave this for another time.

As for employment, personally I would always rather look at the employment-population ratio, an indicator that paints a much more precise picture of economic activity since it takes into account people leaving the workforce, which usually biases the unemployment figures downwards. In that perspective, the labour market isn’t improving, it’s still in distress.

The second explanation for a temporary drive in employment compiled with a stagnating output can be seen in the manifestation of the government’s job policies. While the British government is going head over heels to try and bring more people into work, their programs of incentivising employers to hire more workers are an example of a severe labour market distortion. No wonder productivity is rapidly falling. Employers hire people only to get the government benefit. There is no economic incentive for an employer, apart from the government subsidy he receives. The additional worker won’t create new value; his or her marginal product is very likely to be diminishing.

And since these programs are only at their beginning stages, productivity is likely to become even worse in the years to come. So what’s the point of the policy? Simple, it shows good numbers and thus relaxes the pressure on the government. The fact is that this is just another ‘Potemkin village’ designed to skew the public opinion into showing that the government is actually doing something to help the economy. But here’s the catch – whatever it does, it only hurts the chances of recovery.

The public is bemused into thinking that the government must address the market failures created by reckless bankers or the finance industry. That wasn’t the issue at all; market failures were in that particular case created by a series of government initiated policies.  Ranging from the distortions on the housing market, the credit market, the banking risk, the overall systemic risk and even the European contagion – all these areas were cramped by excessive risk taking which was supported by the regulatory environment and policy decisions.

The market (i.e. the people engaged in interactions and decision-making) simply reacted to the vastly distorted signals sent to them. So the proper way of fixing this can only lie in the market itself, as long as its recovery signals aren’t being distorted. Having the government subsidize employers to hire more people simply to increase head count, or having the government force banks to reach lending targets to SMEs or pre-determined ‘winners’, are exactly the type of wrong and distorted signals that are preventing the recovery.

One is leading to rapidly declining productivity, and the other is making banks lend money to businesses which already have enough of it, thereby completely excluding the ones that actually need it to expand their productive activities. To paraphrase Arnold Kling and Nick Schultz from their excellent book From Poverty to Prosperity: “markets often fail, that’s why we need markets.” 

There is only one way of resolving the issue of declining productivity and competitiveness, and it’s not an employment subsidy, it’s a labour market reform.

George Osborne’s announcement that laws banning Sunday trading will be suspended for 8 weeks is a welcome one, and he is right to point out that this will be beneficial to business. It will be convenient for consumers and create jobs for the unemployed. But he should be making them permanent.

Many arguments to protect Sunday trading laws have rested on the notion that they protect worker’s rights. Opponents of repeal have stated that employers will force existing labourers to work extra days. This assumes that the supply of jobs is fixed, and longer shifts must be filled by the same stock of employees. But there is no reason this should be the case - more shops being open for longer would mean more employment opportunities, particularly of benefit for students in full time education. This would allow them to gain experience and supplement their income. When youth unemployment figures are looking ever more depressing, now seems a better time than any to support a permanent suspension of the law.

A revolution in internet shopping (which is available 24 hours, every day) has put bricks-and-mortar shops on an increasingly uneven playing field. What the internet can not offer, is the sort of convenience that the local high street can.  Claims that we already have enough time to shop will fall upon deaf ears amongst those who work unconventional hours and can find it hard to get shopping done around their jobs. Those with less flexible schedules, often the sort of things these laws are said to protect against, are the greatest victims in this case. Reform can mean that customers can tell businesses when they want to shop, not politicians.

If there is to be a loser from these changes, it will be small, independent stores. This may be the case, but that does not justify the government stepping in to protect them, when consumers would prefer to do business with larger stores, which often offer a better range of products at lower prices. What smaller stores can offer on a Sunday is a shopping experience. While other forms of entertainment are not prohibited under trading laws, shopping is, and this is to the detriment of those who enjoy shopping as an experience.

Many, including the Adam Smith Institute have been arguing to let shops open on Sundays for decades (one report is nearly as old as I am). Politicians should not allow law to be dictated by scripture or by those who wish to put protecting the currently employed before the needs of those who have no jobs at all.

The Financial Services Authority is due to pass into oblivion at the end of the year and not before time.  Now according to Patrick Jenkins and Caroline Binham (Financial Times 19th July), goaded by public furore, it is going to step up its investigation into Libor manipulation. Some may think that is better late than never. The FSA is now, finally, about to pursue more companies and “more individuals will also be studied as a result”. This is the wrong way round.

Conduct is a matter of personal responsibility: penalties for malpractice should fall on culpable individuals. Only then should their employers be considered for further penalties. The public has been outraged by the lack of personal prosecutions in the banking sector. As our report “Simple Rules for Complex Systems: Streamlining the UK’s Financial Regulation Regime” published last week, puts it: “There is the confusion over whether individuals should be penalised, or their employing firms. In the Libor case, for example, the Barclays fine really only hurts the shareholders, who are completely innocent; whereas the wrongdoers retain their bonuses and, in many cases, their jobs. Penalties would be much more effective if they were targeted at individuals and not firms, except where the regulators and prosecutors can show that almost all the management were involved.” 

Fining the Royal Bank of Scotland, as seems likely, would be especially ridiculous as it would merely transfer funds from one public purse to another.

It was only on the 6th July this year that the Serious Fraud Office decided to investigate whether any crimes had been committed.  In other words, they have finally got around to investigating whether they should investigate.

All this is more than a little late.

The FSA failed to intervene and detect the manipulation in 2008 when the British Bankers Association was sufficiently worried to conduct an investigation.  That turned out to be a whitewash with Barclays’ compliance people not bothering to show up.  The point, though, is that the FSA should have conducted the investigation then, not the bankers’ trade union.

In 2011, the FSA reassured Bob Diamond, we are told, that they had been looking into Libor since 2009 and there was nothing much to worry about.  We now know that the 2008 “investigation” and the eventual revelations this year were all down to digging by US and Canadian regulators, not the FSA.  Note that the Barclays fines by US regulators were twice as high as those imposed by the FSA.

The FSA grumbled about Barclays management style but that is beside the point.  Clearly the Libor rigging required more than one bank so the management style of any one of them is neither here nor there.  Indeed, a sensible regulator faced by an uncooperative regulatee would immediately suspect that said regulatee was hiding something and redouble its enquiry.

The FSA’s approach to bank regulation has been useless.  They have only come to life when prompted by public opinion or North American regulators.  Chairman Lord Turner of Makebelieve was appointed to invigorate the FSA following its dismal lack of performance in the run up to the 2007 financial crisis.  In all fairness some improvements have been made and that includes personal prosecutions for insider trading, but not in the banking sector.

In the new, post-FSA order, the Bank of England with its subsidiary the Prudential Regulatory Authority, will recover responsibility for policing the banks.  Sir Mervyn King will be leaving and Lord Turner has been rumoured to be his successor.  Heaven forbid.

To date, many of the arguments for increasing parental choice in education and allowing a diversity of provision have focused on a number of practical arguments such as the need to improve the performance of failing government schools, the need for additional school places and the general desire to ensure that all children can benefit from the best schools available, irrespective of income or location. These arguments originate from the “what matters, is what works” school of politics where ideological principles are no longer relevant.

However, while this evidence, results or outcomes-based approach can be very persuasive, it may not be sufficient if the proposed reforms are to win widespread support amongst both politicians and the general public. According to Nobel Laureate James Buchanan, evidence of “what works” must be supplemented with a vision of the liberal ideal that attempts to capture the minds of people.

Consider, for example, the suffragettes who were campaigning for the right to vote at the start of the twentieth century. Their case for reform was not based on any evidence which showed that extending the right to vote to women would guarantee a better election result than the existing voting system. In fact, many opponents of the reforms (mostly men, but not exclusively) warned of the perverse consequences and the chaos that would follow if women were allowed to vote on the important and complicated matters of national government.  Instead the suffragette movement were campaigning for a fundamental freedom and a basic human right – the freedom and right of women to vote. A voting system based upon universal franchise was therefore deemed to be superior to one which was based upon a restricted franchise, irrespective of the results or outcomes of subsequent elections. In this example the evidence-based approach was clearly of limited use and, in fact, it could be argued that those who attempted to appeal to evidence had completely misunderstood the nature of the problem and the key issues at stake.

This same line of reasoning could also be applied to the current debate in education. An education system in which all parents have the freedom to choose would be deemed to be superior to the current system which continues to restrict these freedoms. Any appeal to evidence or what works would therefore be dismissed as irrelevant.  Buchanan refers to the repeal of the corn laws in the 19th century as a successful example of when evidence was supplemented with a vision of the liberal ideal to help gain support for proposed reforms. If we were to heed his advice then a national campaign for the repeal of the school laws, which restrict freedom in education is now required.

A campaign for freedom in education would be based on the principle that it is parents and not politicians who are ultimately responsible for their children’s education - a responsibility which can only be carried out if parents are free to choose the nature, form and content of education which their children receive. Parental choice or freedom in education therefore is not desirable simply because it may help to improve the efficiency of failing government schools. Nor is parental choice in education simply the latest policy reform that will go out of fashion in a few years’ time. Instead, it is important for the same reasons that religious freedom or freedom of the press are important - because they are both recognised as basic human rights or fundamental freedoms, which deserve to be respected and protected at all costs.

A vision of the liberal ideal in education would therefore recognise that the responsibility for educating children cannot be transferred to others; nor can it be side-lined or placed behind other considerations. Instead, it is the key principle upon which the whole education system is based. This means that governments must not in any way restrict, undermine or distort this important relationship between parent and child and the natural growth and development of education. As a result, it will not be the role of politicians to dictate which schools children should or should not attend or how much parents should invest in their children’s education.  This will, once again, be the responsibility of parents. Nor will it be the role of politicians to dictate who can and cannot set up and manage a school.

The liberty to teach and the freedom to educate must be respected and it will ultimately be parents who decide if a new school will flourish or not.

While politicians have previously argued that education was far too important to be left to ignorant parents and the chaos of the market, they must now be prepared to admit that education is far too important to be left to politicians. Politicians must have the humility to recognise that their own personal views on what works on education are completely irrelevant. After all, what does any politician know about the detailed and very specific circumstances of each and every pupil and parent across the UK?

Therefore, a future education sector where the rights and responsibilities of parents are both respected and protected will not be planned or directed by central government, nor will it be used to achieve any “national” objectives. Instead, it will consist of a variety of different national and international private, independent, autonomous, for-profit and not for-profit institutions, each with their own specific missions. The needs and desires of parents (and not politicians or governments) will be supreme and the government will be restricted to establishing a regulatory framework that will encourage a variety of different institutions to compete and flourish on a level playing field.

According to Buchanan a vision of the liberal ideal would also be based upon our desire to be free from the coercive power of others, combined with the absence of a desire to exert power over others.  Another Nobel Laureate, Milton Friedman, helps to explain:

Willingness to permit free speech to people with whom one agrees is hardly evidence of devotion to the principle of free speech; the relevant test is willingness to permit free speech to people with whom one thoroughly disagrees. Similarly, the relevant test of the belief in individual freedom is the willingness to oppose state intervention even when it is designed to prevent individual activity of a kind one thoroughly dislikes.

Therefore, this provides a useful test to all those who continue to view parental choice or increasing diversity in the provision of education as an unnecessary evil. Do they have the discipline to place their personal views to one side and recognise that the rights and responsibilities of individual parents must always come first? If they do, then they should be willing to oppose the existing government restrictions which prevent profit-making companies from managing state-funded schools, despite the fact that they may not want their children to attend such a school. From this perspective, a vision of the liberal ideal should be seen as much less self-obsessed and instead much more compassionate towards the private beliefs and the opinions of those who are directly responsible for children’s education – their parents.

For those politicians concerned with the “vote motive”, the fact that most parents are also voters might imply that reforms that increase parents’ freedom to choose in education have a good chance of gaining electoral support if the case for reform is communicated and presented in the correct way.  The time may also be right to launch a campaign for freedom in education because a vision which is based upon liberty and democracy is currently a common denominator of both the Conservative and Liberal Democratic Party. There can be nothing more liberal and democratic than extending the right to choose to all parents, irrespective of their income or location. The following advice from Bastiat should therefore appeal to both parties:

Away, then, with quacks and organizers! Away with their rings, chains, hooks, and pincers! Away with their artificial systems! Away with the whims of governmental administrators, their socialized projects, their centralization, their tariffs, their government schools, their state religions, their free credit, their bank monopolies, their regulations, their restrictions, their equalization by taxation, and their pious moralizations!

And now that the legislators and do-gooders have so futilely inflicted so many systems upon society, may they finally end where they should have begun: May they reject all systems, and try liberty.

An American radio show, Planet Money, got together a group of economists and jotted down a list of policies that they all supported. An eclectic mix: Dean Baker is very much of the left for example and Russ Roberts somewhere to the right of me if such an intellecual position can be believed. It's an interesting list:

1) Eliminate the mortgage tax deduction. OK, we in the UK have done that. Nigel Lawson gave it the coup de grace and quite rightly too.

2) End the tax deduction companies get for providing health-care to employees. It's not tax deductible here: and I think it's a taxable benefit in kind, isn't it?

3) Eliminate the corporate income tax. Not happened yet but we can live in hope.

4) Eliminate all income and payroll taxes. Not yet: but there are a number of plans floating around for a consumption tax. The easiest way of doing which is simply to treat all savings and returns from them as if in a giant ISA.

5) Tax carbon emissions. Yes, we do that. At too high a rate actually.

6) Legalize marijuana. It's not quite legalised but not much is done about it unless you're spotted with a tonne or two.

What I think is interesting is the way in which such wildly disparate economists did agree on these policies. Further, that those that we have adopted are now entirely uncontroversial while the two we haven't as yet would be politically wildly unpopular.

Perhaps it's just another illustration of the way in which when economists are most united in their answer to a question they have the least public influence. I mean good grief, we've got several senior in the Labour Party currently arguing for a return of rent controls. The best way to destoy the housing of a city short of aerial bombing.

I think we've noticed that this summer hasn't been all that good. Farmers have also noticed and a number of crops have suffered from the weather.

The British carrot harvest has only just begun, several weeks late, and when they are pulled, farmers are finding many to be shorter than usual...........But the harvest is not just at risk from the wet, cold and dark conditions – slugs are devouring crops. If they are not burrowing down to chomp on tiny tubers, they have crawled all over infant crops on the surface. Maize – or corn – has been terribly afflicted by slugs.

And this loss doesn’t just threaten the heavenly August sweetcorn season. A Dorset farmer told me how slugs have eaten through large tracts of maize grown as cover for pheasants, so we can expect fewer wild birds in the autumn..........

So, carrots, maize, pheasants and potatoes all in short supply. What should we do about this?

Ben Raskin, head of horticulture at the Soil Association, who has spent much of his career trying to persuade us of the merits of knobbly veg, says we all must pull together to help the farmers.

“There are going to be shortages of carrots in particular, and those that we do pull might not meet standards on appearance. But it is still important that the supermarkets buy rain-affected produce, and shoppers choose it over imports,” he says.

What?

The fact that British potato farmers have been unable to pick their crop out of waterlogged fields has seen 1,000 tons of potatoes being imported from Belgium a week to cover the shortage.

So would you like a Flemish potato chip with your beer-battered flounder? I think not. But unless the jet stream takes a turn in our favour soon and puts an end to the big soak, that is what you’ll get.

One little detailed point. 1,000 tonnes of spuds a week is, umm, even if it carries on all year, around and about 1% of UK consumption. Small potatoes really.

But look at what they are saying: they've leaped right over the shark and into loonie land.

You can just about make the case that we ought to eat local foods: might taste better, might create some lovely community feeling, bit of healthy exercise digging the allotment even. But we also know that relying on a small geographic area for food leaves us open to serious problems. If, as and when the murrains, floods, droughts and plagues arrive then we're at risk of having no food at all. As countless historical famines remind us.

This so recently invented trade thing, the ability finally, to carry large amounts of food across such geographic regions so that famine as a result of no food (as opposed to Sen's famine as a result of no purchasing power) is an historical oddity. Now that we've finally got this and we've also the murrain and floods (the drought was in the spring recall and the plague is clearly just on the horizon) the answer is that we should not use this trade?

We finally, in the last century and a bit, have produced the solution to localised food shortages and we've now got people insisting that we shouldn't use it? Just munch on the rotten potatoes, the stubby carrots and the drowned maize because....well because why?

The only reason I can think of is that the water's got in between their ears.

Did you know we are all subjects of the USA?  It seems that we are.  A letter from my stockbrokers this morning advised that I had to complete two forms for the US tax authorities stating that I am British and have no US interests.  For the record, I have no US trade or income or investment or any other connection that should rightly be of interest to the US tax authorities but that is not good enough.  I have to prove it.

Apparently if I refuse to complete these forms, required under the US Foreign Account Tax Compliance Act, sanctions will be taken out against my stockbrokers who do have American interests.

The less irritating of the two forms simply asks a series of yes/no questions.  Some ask for a single yes/no responses to a multiple questions.  For example you can only say yes or no in aggregate to “Are you a US Resident or US Citizen or have dual nationality?”.  You are not allowed to say yes to one and no to the others. Some are redundant.  For example for example, having established “no” to all the above, it goes on to ask if one holds a US passport.  Could someone please tell me how one acquires a US passport without being either a US Resident, or US citizen or having dual nationality.

The more vexatious form is the W-8BEN Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding.  Part I requires my name and address, no big deal.  Part II is more challenging as one is required to certify any or all of five things but only if they apply.  How do I know if they apply when I do not even understand what they are.  One of them asks if I am “related” to someone who might pay US tax.  I think I have a fourth cousin once removed in Iowa, but I’m not sure of that. This is all under the heading of “Claim of Tax Treaty Benefits (if applicable)”.

Part III deals with “Notional Principal Contracts”.  I have no idea what they might be and you probably have none either.  The small print asks me to certify that I have, or will, provide a statement that identifies “those notional principal contracts from which the income is not effectively connected with the conduct of a trade or business in the United States.”  This statement may be a long time coming but luckily there does not seem to be a time limit.

Part IV specifies more certification in print so fine I needed a magnifying glass.  The first is to confirm that I am the beneficial owner of “the income to which this form relates”.  What income is that?  As I said at the start, I have no US investments or income.

My stockbroker required the two forms signed and dated and a certified copy of my passport, probably just the page with the photograph but it does not say that.  A visit to the local solicitor is now called for.

Two final idiocies: I signed and dated in the English form but was then told that the form would be returned if the date was not in US format: MM DD YY.  And the bottom line says “For Paperwork Reduction Act Notice, see separate instructions.”

What asylum is responsible for this nonsense?  The UK government cravenly complies with US legal requirements, notably the one-sided implementation of the extradition agreement which was intended for terrorists but did not bring a single provisional IRA suspect back to the UK.  The UK government should make it clear that we are UK subjects and taxpayers and should not be hassled by the US tax authorities.