Leftists and localism

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Having read a few recent publications from the think-tank Demos, I was struck by the deep problems that leftists have in trying to tune into the latest buzz for localism. A centralized state is deeply unfashionable, so the think-tank that was so influential under the controlling hand of Tony Blair, is treading water in attempting to unite leftist ideology with localism.

For example in the latest paper, A Stitch in Time: Tackling Education Disengagement, the failures of a centralized state are acknowledged: “the approach cannot simply be the standard policy approach of tugging on central policy levers", yet in the next instance calls for the creation of a “national educational policy framework". Apparently, “there is a major role for central government to play in improving how things work at the local level." Yet this is exactly the problem.

This is no criticism of the research itself, but reading it clearly brings to light the tensions apparent whenever statists try to fit their model into the fashion for localism. This circle cannot be squared; the policies of control cannot be localized. Of course, many in the other two parties suffer similar problems, but this caused by the same statist predilections.

So far the most authentic and consistent calls for localism have come from voices on what could be called the libertarian wings of the Conservatives and Liberal Democrats. Unless the Labour Party radically reforms, it will never be the party of localism. As things stand, its ethos is entirely inconsistent with freedom, difference and competition.

Inciting violence

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altRecent announcements from the UK's Home Secretary, Jacqui Smith caused some controversy when she released a list of the 16 people banned from the UK. The main reason why these people had been barred from entering the UK was due to what they had said on a variety of issues. One of those on the list, Michael Weiner (Savage) a radio DJ in the US, is now suing the Home Secretary for damages reasoning that he has been defamed.

The majority on the list are there because their speeches on a broad swathe of issues have been judged to be offensive. Not by society, not by single individuals who have complained, but by a clique within the Home Office. They are now the arbiters of taste and decency, the 'philosopher kings' that rule our society and the firewall that protects us from harm. We are seemingly incapable of acting in a rational way. The Home Office has failed to understand the cornerstone of liberty: free speech.

We all have the right to say what we like, even when the language can cause harm to someone; the rational person though tempers their speech so as not to cause harm. But when we pronounce on issues directly to an audience, we do not know how that audience will react, even when we charge them to act in a certain way. The state can, and should, only step in when actual physical harm is pertained to be about to take place, the state cannot assume that inciting violence through others via speech is in effect threatening a specific person. It is not. The lumpen assumptions the Home Secretary makes is one that slices society into sections pitting them against each other. She and her minions are the ones who are inciting violence and we should begin by ignoring them, as any rational person would.

Public companies and private enterprise

This is far better than making insider dealing a criminal offence (if it is, then so must be insider non-dealing!), which merely serves to incarcerate non-violent people at huge taxpayer expense purely to satisfy macho regulators.

No doubt two “problems" will be raised to rule these wild notions out of court. The first is to parrot that “limited liability" status is a gift from government which needs a quid pro quo. But where’s the gift in a voluntary bargain clearly understood amongst all concerned? The second is a similar argument about tax. But the starting point must be why should a “company", owned by taxpaying shareholders, pay any further tax whatsoever? At the end of the day, however one wraps it up, all tax is paid by individuals.

Fascism as racism is a popular description of the creed of the British National Party – which may well be correct. But the word fascism applies also to a corporate landscape where companies are in “partnership" with government – the latter very much the senior partner. In that sense the UK is already fascist.

So, and increasingly so, is the United States. Indeed in their “Securities Analysis"(1987 edition) one of the classic investments books of all time, Graham and Dodd were able to point to some 75 years of Government-sponsored erosion of shareholder rights, which it called “the euthanasia of the shareholder". Pretty much the same “progress" over the same period, as in the UK. Nowadays, the most important quality of senior business executives is that of a lobbyist – often to promote a monopoly in the relevant industry, or something else that gives executive directors an easy life.

All this is light years away from solving Adam Smith’s “Agency problem" – the separation of ownership and control of a business. How could anyone think that this could be cured by the intervention of another agency – government. And don’t expect, Mr Kleinman, any help from the institutional investors and the major fund managers, both of whom are agents and often PLCs to boot.

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Mark Kleinman, City Editor of the Sunday Telegraph, is worried about the remuneration (including bonuses) of company bosses. Many shareholders are incandescent, but largely powerless to influence the chairmen of remuneration committees – a group whom Kleinman describes correctly as a new category of City pariahs. So what can be done? One suggestion, says Kleinman, would be to make investor votes on remuneration legally binding, but suspects that this may be unworkable; he prefers the idea of making remuneration committee chairmen stand for re-election each year.

I have a far simpler idea; abolish the Companies Act, now almost 1,000 pages long. Radical? Yes, and rightly so. Unlike politicians, companies (or would-be companies) are perfectly capable of drafting sane constitutional documents and shareholders (or potential shareholders) as well as Stock Exchanges are perfectly capable of deciding whether or not to supply funds or approval on the basis of such documents. All we need is contract law; there is no need for Companies Acts at all – indeed it is they that prohibit certain investor votes from being legally binding. Government controls over PLCs include not only their constitutional documents, but also the relationships between directors and shareholders (hugely biased to the former - so much so that the famous Higgs report suggested that one director should have special responsibilities to shareholders. Gee thanks!) Government rules also control the hostile takeover market (again favouring incumbent directors), and what issues can be raised and validated at an AGM. They even influence capital structure; the tax system favours high gearing and risk.

But what about insider trading? Simple – deal with it in the company constitution. To allow such trading, says Richard Epstein ,the constitution can provide that “if you want to deal in the shares of this company please understand that every employee and director is entitled to trade on inside information to their heart’s content. If you do not want to trade with us you are free to buy shares in our competitor which does not allow the option".

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Blog Review 979

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This is interesting: how long will Ford want to have as the company union the union that owns the competition?

The scams and scandals of yesteryear just don't seem to stand up against their modern competition, do they?

It would appear that ID cards are not entirely a home grown nonsense.

"You know you are in trouble when Germany's 45% tax rate looks attractive".

As ever, we must remember to look for that which is not seen.

Amazingly, it seems that government do have problems in trying to spend money.

And finally, a great political joke.

Public sector pay

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Earlier this week on Comment Central, Daniel Finkelstein noted that contributors to ConservativeHome's 'Star Chamber' seem to be having trouble identifying any substantial cuts to make in public expenditure. He also said, " I have always argued that there has been a tendency on the right to be flippant about how easy it is to control public spending."

He may be right. Controlling public spending probably is pretty difficult, given the nature of democratic politics. After all, even when Margaret Thatcher was prime minister, public spending grew at an average of 1.2 percent a year in real terms – and she was accused of savage cuts.

But that doesn't mean that cutting spending is impossible. Nor does it change that fact that – given the dire state of Britain's public finances (the government is now overspending by £20m per hour, twenty-four hours a day, seven days a week) – cuts are absolutely necessary. The question is where to start.

My top candidate would be public sector pay. As Mike Denham has pointed out on the Taxpayers' Alliance's Burning Our Money blog, as of April 2008:

  • Average pay in the public sector was £582pw, compared with £574pw in the private sector.
  • Median pay in the public sector was 13 percent higher than in the private sector.
  • The median public sector pay had risen by 49.6 percent since 1997, compared with 48.8 percent in the private sector.

However, over the course of 2008, private sector pay fell by 1 percent, while public sector pay went up by 4 percent – so the gaps are now much wider. Furthermore, those figures do not take account of the other benefits – like gold-plated public sector pensions, for instance – that workers in the private sector can only dream of.

Total public sector pay is currently running at £160bn. If you were to cut it by 10 percent immediately, and then freeze it in real terms, you'd save around £60bn over three years.

Reform's recent report Back to Black made some more nuanced suggestions. Freezing all civil service salaries would save approximately £166m this year, and £169m next year. If no civil service bonuses were paid, around £25m a year would be saved. Alternatively, switching the civil service to a four-day week and cutting their pay by 20 percent would save £2bn a year. Reducing the pay of doctors (whose pay has rocketed in recent years) and NHS managers by 10 percent would save another £1.3bn a year.

There is no shortage of other options.

Stamp duty: The truth

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Following recent revelations that some MPs have been claiming stamp duty on second homes as parliamentary expenses – notably Theresa Villiers (£10,350) and Kevin Brennan (£10,200) – and bearing in mind that when Labour sold their Westminster HQ back in 2006 they avoided a £210,000 stamp duty bill, it is perhaps time to concede that the politicians haven’t got it all wrong: perhaps this is a tax we shouldn’t be paying.

Whilst avoiding this tax would appear to have been standard practice in Westminster, in the rest of the country revenue raised by stamp duty on residential property had increased markedly under Labour, soaring nearly eight-fold from £830 million in 1997/98 to £6.5 billion in 2006/07. This has been partly due to a move away from a single rate to a tiered system and partly due to an increase in house prices. Put into perspective, the Stamp duty land tax (SDLT) is currently increasing at five times the rate of UK salaries. Annual gross income in the UK rose by 54.3% between 1997 and 2007, whilst the stamp duty bill on the average UK property rose by 289.2% in the same period.

Raising the thresholds in line with house prices would be a good start as would a tiered rate system where consumers are only taxed on the proportion of their property value that exceeds the stamp duty threshold rather than the current system which levies a higher rate on the entire value of a property when a band is crossed; this places distorting pressure on prices in order to remain with a particular stamp duty band. It also induces people to sell their house at a particular price within a lower band on the condition that the purchaser buys the contents of the house at a fixed price and other such unusual behaviour.

As the average UK house price have increased, more and more people are drawn into a system that taxes a necessity as a luxury.

Blog Review 978

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This idea that the State should finance political parties. The Incumbents Protection Act don't you think?

No, this really isn't the Great Depression Mk II.

Climate change already killing 300,000 people a year? No, not really.

Any objective measure of poverty shows that capitalism is an outrageous success.

Taxing height and why a political philosophy is not a smorgasbord.

Creating 200 jobs is not the same thing at all as employing 200 people.

And finally, meet the Devenish-Phibbs family.