The Pin Factory Blog

Yes, it really is true. Tax competition (and that includes the existence of tax havens) does indeed lead to tax policieis which promote growth: by lowering the rates that can be charged. No, really, the OECD says so.

Aoril 15th is Biofuels Day. A cause for celebration, or one for sadness and recrimination? 

Yes, if course you must obey the law. It's just that we're not going to tell you what the law is, so you won't know if you're breaking it. Cute, eh?

A useful guide to sorting the celebrity surgeons from the snake oil merchants. Similar constructs could be made for many areas of life. 

How the Chinese press reported the passage of the Olympic torch relay. Nothing like fair and honest, eh? Nothing like at all. 

Needs repeating again: manufacturing in the rich world has not been hollowed out, it is not in crisis. 

And finally, if a scientist were to get a tattoo, what sort of tattoo would it be? 

Despite attempts by Gordon Brown to cover up the continuing proliferation of quangos under his leadership, the Sunday Times has revealed the truth: "13 out of 16 Whitehall departments failed to reduce their spending on quangos and seven departments created new ones, with more in the pipeline this year."

This is despite Brown claiming in 1995: "The biggest question … is why our constitution is over-centralised, over-secretive and over-bureaucratic and why there is not more openness and accountability. The real alternative is a bonfire of the quangos and greater democracy."

Brown's 'bonfire' has gone the same way as his predecessor Tony Blair's claim to consign them to the "dustbin of history". Part of Brown’s initial appeal in when stepping up to lead the Labour Party appeared to be his dislike for unelected bureaucracy that undermined democracy. However, as the signing of the Lisbon Treaty (i.e. EU Constitution) has shown, his words were all bluster and held no real value. Thus, the growth of quangos under successive governments is still undermining British democracy.

The cost to British taxpayers is now truly astonishing. An investigation last year by the Sunday Times found that a total of £180 billion was being spent on them, equivalent to £3,600 a year for every adult in Britain. Whether siphoned through tax or directly from industry, the amount of money tied up in bureaucracy is staggering. Laughable at a time in which everyone is feeling the pinch.

Is your money well spent? To get the answer simply visit the British Potato Council. Did you know it was the year of the potato?

88. "The gap between rich and poor countries is growing larger, meaning that global poverty is growing worse."

This is usually recited parrot-fashion as a mantra: "The rich are getting richer, the poor are getting poorer, and the gap is widening." In fact the rich are indeed growing richer, and in most places outside Africa, the poor are growing richer too. Historically the gap has never been narrower, though civil wars have held back progress in Africa.

Prof Paul Ormerod has measured the Gini coefficients which reveal income disparities, and shown that since World War II the world has become more equal, not less. Common observation shows the same. After the Second World War there was a handful of rich countries, mainly in Europe, the US, and the former dominions. The rest of the world was dirt poor, with most of their populations struggling to survive on subsistence farming.

Since then Japan joined the rich club, followed by the Asian quartet of South Korea, Singapore, Taiwan and Hong Kong. Then came the little tigers, including countries such as Thailand and Malaysia. Then economic growth came to some of the countries of South and Central America. Most recently and most spectacularly, China and India have surged ahead.

Last year saw more people lifted out of poverty than in any previous year in human history. Fundamentally we now know how to do it, by enterprise and trade. Instead of trying to implement socialist-style 5-year plans, with governments directing aid-assisted industrial growth, most countries now try to get the conditions right for their businesses to get ahead on their own.

Poor countries can turn their low wages to economic advantage by producing lower cost goods to sell to the rest of the world. The money thus gained can be re-invested in expansion and development, and the wages gradually rise. This roughly mirrors the way in which the rich countries did it.

Yesterday I held forth at the same dispatch box that cradled the notes and timepieces of great orators like Edmund Burke and brilliant wits like Oscar Wilde. I was at Trinity College Dublin to debate arts subsidies.

Inviting state-subsidized students and academics to reject state subsidies is always a lost cause, but I made the case that subsidies corroded true art. They centralize what should give us diversity. They bureaucratize what should be free-sprited. They tax the poor for the delight of the rich. And they give us, not Shakespeare and Chopin, but an unmade bed and the Millennium Dome. On the other side, my usually bone-dry friend Dr Sean Barrett argued that arts spending was tiny, and better than most of what government does with our money.

But I wonder if Ireland's economic woes will make taxpayers there less inclined to fund any kind of state spending. After years of boom, house prices have fallen around seven percent in Dublin (some say the final fall will be three or four times that) and the unemloyment lines are growing.

Ireland's boom started, like Britain's, following a radical tax-cutting and public-sector reform programme But then Euro membership turned the real boom into an inflationary boom. Now a rising Euro makes it harder for Ireland to sell abroad and get through these hard times. Euro membership has been a euphoric drug. But now Ireland's suffering the hangover.

The rural community of Lunt is considering changing its name because of vandals who repeatedly deface the village sign...

– More here in the Daily Telegraph

When even Paul Krugman comes out against them (to add to Greenpeace, ourselves, FoE, WSJ, the Royal Society, in fact, everyone who has ever looked at the issue) then yes, biofuels are indeed a scam. Sadly, there's not much we can do about it here as the European Union are the only people not yet onboard and they make the rules.

How wonderful (if true, naturally), the about to be General Secretary of the Labour Party won't take the post because he's worried that said Party is about to go bankrupt. 

On the other side of the divide, Osborne seems to be thinking sensibly about macroeconomics. 

Newspapers versus readers: or how we get the newspapers that we actually desire, rather than what others think we should desire. 

To some extent (and only to some) it's misleading to talk of the "US" housing market crisis. As with the preceeding boom, it's very much a regional affair. 

Further proof that if you owe enough then it's someone elses' problem, not yours. 

And finally, translation errors and wouldn't it be wonderful if all doctors were this forthright?  

The Barnett formula, which allocates UK government money to Scotland, has become a source of real resentment in England. Its effect is that Scottish residents receive over £1300 more government spending per person per year than their English counterparts. The disparity is not easily explained by different levels of wealth – the North-East of England is poorer than Scotland, but receives less government funding. Yet successive governments have stuck to the formula, claiming it shares out public funding on the basis of need.

But now Lord Barnett, the former Treasury chief secretary who devised the scheme, has dismissed these assertions in an interview with Holyrood magazine, saying Gordon Brown is simply too scared too overhaul it for fear of upsetting Scottish voters. Lord Barnett went so far as to say that it was not really a formula at all, that there was "nothing scientific" about it, and that he concocted it "almost on the back of an envelope" based on "approximate" populations figures in the 1970s. It's a pretty damning display of honesty, isn't it?

Lord Barnett is absolutely right to call for a thorough review of the system of allocating funding. The system is certainly unfair to English taxpayers, and I don't think it does much for the Scottish either. The fact that the Scottish Executive only spends money that is allocated to it – rather than having to raise revenue itself – entrenches high public spending, encourages waste, and discourages fiscal responsibility, as well reducing accountability.

The most sensible solution is to make Scotland fiscally autonomous. According to my own back-of-the-envelope calculations, the Scottish Executive could easily finance all devolved spending if it set, collected and kept the proceeds of income tax, corporation tax and VAT, and took a share of North Sea Oil Revenues. One additional bonus of such a system would be the introduction of tax competition within the UK. If Scotland cut its corporation tax rates to Irish levels, for instance, it would put a lot of pressure on the Westminster government to follow suit.

The SNP administration at Holyrood is known to be keen on the idea, so watch this space.

87. "People should not be allowed to adopt children unless they meet the highest possible standards of parenthood."

The problem with this is that most parents probably don't meet the highest standards of parenthood; they are likely to be average or near average. Nobody wants to have children adopted by bad parents, but by insisting on the highest possible standards we severely restrict the number of possible homes they might go to.

Children adopted into almost any sort of family do far better in life than those raised in institutions. On measures of educational attainment, employment, crime, mental illness, the adopted ones do better. Despite this the state seems to prefer to keep them in institutions rather than let them be adopted by less than perfect families.

Arbitrary and bizarre standards are used to justify refusal. In recent years these have included not allowing a mixed race couple with children to adopt a mixed race child. The grounds given were that the family was so well-adjusted and happy that the child would gain no preparation for the racism it might encounter later. Another middle-aged couple were turned down because they had too many books in the house, and the officers thought the child would not therefore have a "normal" upbringing, presumably meaning that it might grow up too posh for its own good.

Despite a huge number of people wishing to adopt, there are also huge numbers of children awaiting adoption. Of course it is right that children should be protected from abuse, and that careful screening should eliminate anyone involved in paedophilia or violence. But the standards sought from prospective parents seem to go far beyond the protection of children, and seek conditions not met in many families with children of their own.

The situation is such that many of those wanting to adopt now go abroad to find children, while thousands of UK children remain in institutional care.

With the economy souring and budgets getting tighter, people are cottoning on to fact that, often, the government's inflation figures do not seem to correspond to real life. The reason for this is the way inflation is calculated – by measuring the price of a basket of particular consumer goods.

On the one hand, yes, the basket reflects what we actually buy. We spend more on TVs and cars than we did in 1950, so the weights of all these things have risen. But it's only an average: reflecting what the whole nation buys, on average. It may not reflect individual circumstances.

Older people, for example, spend much more on heating than the average. And things like that have risen in price fast. They spend less on clothes, cars and computers, all of which are getting cheaper When you look at the basket of goods they actually buy, you find that the rate of inflation they suffer is nearer to 9.6 percent than 2.6 percent.

The same is true of homeowners, who have seen sharp rises in council tax and higher mortgage payments. And they are more likely to buy services than less well-off people, and those have risen in price too.  This is why the middle classes rightly complain that inflation seems much higher than the Chancellor and Prime Minister advertise.