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"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

Nothing on offer

Written by Steve Bettison | Saturday 22 March 2008

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And so it continues. The debate between those who favour tax cuts and those who say they do yet will not offer them is not leaving quietly. Should the economy worsen over the coming 18 months there is little doubt that between now and the next election this debate will intensify, especially if the Conservative assume power after 2009/10.

The reason that this issue needs addressing is that public opinion now shows a majority believe taxation levels are too high and that large amounts of public spending are wasteful. The taxpayers of the United Kingdom are beginning to feel uneasy about how well prepared they are to face a downturn in the economy. They now want some of their coerced investment in UK Inc to be handed back as the promised returns haven’t realised. Yet despite these demands there is little on offer.

The Conservatives need to develop principled arguments that can be used to support limited tax cuts in their first term should they become the majority party in Westminster. They need to focus on alleviating the crippling income tax and National Insurance burden on the low paid and making Britain a leading place to create wealth through a reduction in taxes on business. By encouraging economic growth this way they can tackle the massive debt they are likely to inherit through improved receipts (see: the Laffer Curve). In conjunction with a reform programme centred on cutting public sector waste they could have the country back on its feet in no time.

Aping the government's promises will not aid any necessary recovery. The public is looking for leadership on this issue, a leadership that would take a well set out risk or two so that we do not have to suffer for any longer than is necessary. Yet from Westminster all that we are offered is indecision, is it any wonder we are increasingly turning our backs on the ballot box.

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Common Error No. 68

Written by Dr Madsen Pirie | Saturday 22 March 2008

68. "Great inequalities of income cannot be justified."

Inequalities of income do not need to be justified. The economic rewards in market-oriented societies are not supposed to be just. They reflect the economic worth of the goods and services provided, and in no sense correspond to our notion of justice or moral worth.

It might not be "fair" that a dedicated nurse earns so little, when a popular entertainer can pocket millions by recording a few songs. It is not supposed to be fair. The point is that, vital and worthwhile though the nurse's services are, they are performed to few people. The popular entertainer, on the other hand, performs a service which millions of people are prepared to pay for. The economic reward is greater because he or she satisfies greater numbers. There is nothing fair or unfair about it.

Attempts to replace the rewards given dispassionately by the market with ones corresponding to our scale of values lead to disruptions and shortages. If we pay social workers more than truck drivers because we think they are "worth" more, this will cause a surplus of social workers and a shortage of truck drivers. The wages of truck drivers will no longer attract sufficient numbers of ambitious youngsters into the profession, whereas more will go into social work than are needed.

Wages tell us what certain jobs are worth and if we try to set them arbitrarily we lose the spontaneity and self-correcting mechanisms of the marketplace. The prospect of high incomes attracts people into certain types of economic activity which bring widespread benefits, and rewards usually come to those who provide popular services. Income inequalities, far from being bad, are what encourage more people to undertake activities there is a demand for. The prospect of high incomes spurs people to ambition and achievement, and to bring benefit and satisfaction to other members of society in the process of attaining them.

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Into the red

Written by Philip Salter | Saturday 22 March 2008

With the news that the Green Party’s London mayoral candidate Sian Berry has urged her backers to give their second preference votes for the current mayor Ken Livingstone and visa versa, it is worth taking a look at what the Green Party is offering London.

Here are a few of the policy ideas straight from Berry’s website:

  • “I would use the Mayor's planning powers to require all new large business developments to provide affordable premises for small enterprises, amounting to at least 50% of the total trading space.”
  • “As Mayor, I would ensure all public employers pay their workers a living wage of £7.20 an hour and roll this out to cover companies who want to get contracts with public bodies as well. And then I'd shame any private employer who refused to follow suit.”
  • “Closing London City Airport and using the land as a new Green Industries Park to encourage new enterprise in the growing environmental sector, especially manufacturing.”
  • “As Mayor, I will have solar panels up and running on 100,000 roofs by 2015. And I will give free loans to householders, community groups and businesses to make use of new, clean energy technology.”
  • “A 20 mph city-wide speed limit on all but a small number of major routes, will bring a dramatic improvement in road safety and help smooth traffic flow.”
  • “Demand the write-off of housing debt so London can get building social housing again.”

It is essentially a dummy’s guide on how to financially cripple the capital and by consequence the country. Scary stuff.

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Blog Review 543

Written by Netsmith | Friday 21 March 2008

Were the Russian privatisations of the 1990s as bad as some say? Perhaps not, given that they're now well functioning and profitable companies.

Most interesting to see how policy is actually made at the EU level. Don't expect to even be allowed to stay in the meeting if you're not adhering to the party line. 

Sadly, policy at the national level doesn't seem to be much better organised. 

A most amusing story about a vociferous Darwinist attempting to view a creationist film. 

The latest internet campaign seems to be gathering strength. 

Well, at least they're looking for the answer, even if we were hoping they already knew it. 

And finally, perhaps not quite the right day, but new verses of a religious manner come to light. 

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Time for a change

Written by Tom Bowman | Friday 21 March 2008

educationpic1.jpgAccording to a report in the Times, "soaring numbers of parents are lying about where they live to get their children into leading schools." It's hardly surprising. Almost twenty percent of children are denied a place at their first choice of school. In some parts of London, that figure rises to fifty percent. Few things will be as important to a parent as getting their child into the right school, so it's little wonder they are prepared to lie. The tragedy is that we have a system which forces them to do it.

Britain has a severe shortage of good school places, which means children frequently have no option but to be assigned to a school by their Local Education Authority (LEA), even if its quality is low.

There are two reasons for this shortage. The first is the 'surplus-places policy' which prevents popular schools from expanding if there are unfilled places in another local school. That's like the government preventing a good restaurant from laying more tables, because the bad restaurant next door has spare places. The second reason is that it is very difficult for people outside the public sector to establish new schools to meet demand.

Sweden does not have these problems. There, parents can send their children to any school of their choice (whether state or private) and these schools are eligible for government funding on a per-pupil basis. Good schools expand, poor schools close and, crucially, new schools are easy to establish. They just have to meet a few basic requirements: they must not charge additional fees, and must accept pupils on a first-come-first-served basis.  The latter requirement rarely has to be invoked, however, since most children now find places in their first choice school.

The UK school system is plainly in need of a radical overhaul. See our report Open Access for UK Schools for more.

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Common Error No. 67

Written by Dr Madsen Pirie | Friday 21 March 2008

67. "Some things, such as health, should not be provided for gain."

Why not? If gain will motivate people to supply necessary goods and services, then it can be a useful way of ensuring supply. All goods and services cost something, and the prospect of gain is a good way of encouraging people to produce them. Price, as an indicator, tells them where to direct their activities. Where prices are high, people produce because profits can be made; and in producing, they alleviate the shortage which caused those high prices.

A genuine market in such things as health would put resources where they were needed. Enough people would go into health care to meet the demand for it. It would settle at a level that people were freely prepared to pay for. For decades Britain has spent less per head through its NHS than have its partners with larger private health sectors. People spend more themselves than they will do through taxation.

This is not because the British NHS gives better value. On the contrary, it achieves poorer results overall. Britain has less scanners per 1,000 of population, less renal dialysis units, less kidney transplants, and less of almost every objective measure. It also has higher early death rates on many major illnesses.

Food might be thought even more important, but imagine what the food situation might be if most people were dependent on government supplied food, financed out of taxation, run by the bureaucracy, and available only from approved supply outlets. Even though food is important, the private market is much more capable of guaranteeing us the appropriate supply than would a state-planned system.

If we want a society in which even poor people have adequate healthcare, there is a better way than mass state provision. It is to ensure that quality healthcare is widely available, and that resources are provided to give poorer people access to it.

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Insuring your nose

Written by Tom Clougherty | Friday 21 March 2008

Wednesday's Times carried the news that Ilja Gort, a Dutch wine producer, had managed to insure his nose and sense of smell for £4 million with Lloyd's of London. The article revealed that Ken Dodd's teeth are insured for the same amount, while Bruce Springsteen's voice is valued at £3.5 million, and Heidi Klum's legs go for the bargain price of £1.15 million.

The serious point here is that there are very few risks that we cannot insure ourselves against, which rather undermines the argument that only the state (and not the market) can provide 'welfare'. In reality we could take out health insurance, long-term care and incapacity insurance, unemployment insurance, and so on. We could save into private pension accounts, and we could put money aside to cover minor healthcare expenses. And for majority of us, doing this would be less costly than the taxes we currently pay to fund the state alternatives. Needless to say, with government removed from the equation, we would get a better return on our investment too.

Of course, that isn't to say that there would be no role at all for the state in such an ideal, free-market system. Most of us would surely be happy to see government tax revenues fund the truly disadvantaged so that they too could take advantage of this 'welfare market'. But that's a radically different vision of government from the one that prevails at the moment.

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Saving the health of the nation

Written by Tom Clougherty | Friday 21 March 2008

This week I attended the launch of Saving the Health of the Nation, an excellent short film from the Stockholm Network which looks at the failings of the National Health Service and introduces the idea of Health Savings Accounts as the most promising route for reform. The film features contributions from Stephen Pollard, president of the CNE, James Bartholomew, author of The Welfare State We're In and an ASI welfare fellow, as well as Dr Eamonn Butler, our own director.  

You can see the film online by going to the Stockholm Network video player, then selecting documentaries and clicking on 'Saving the Health of the Nation'.  

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Blog Review 542

Written by Netsmith | Thursday 20 March 2008

The excellent and surprising value of mobile telephones on the lives of the poor.

A very different take on the current financial markets turmoil. 

Should we be concerned about falling asset prices? Well, if we're interested in redistribution of assets, possibly not. 

An invaluable (if not exactly new) guide to hedge funds. 

Churchill the first man to walk on the moon according to British schoolchildren? This statistic explained. 

Advocacy groups can make life difficult: suing a school board for allowing pupils to escape failing schools and when that succeeds, sue them again for n9ot allowing pupils to escape failing schools.... 

And finally, bad song lyrics coming out of trading rooms. Well, it's not as if they've got anything else to do at present, is it? 

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A strong and ineffective touch

Written by Philip Salter | Thursday 20 March 2008

csr.jpgDespite encouraging Conservative policy positions on cutting regulation, its stance on Corporate Social Responsibility (CSR) is rather less impressive.

Speaking at the launch of the Conservative Report, A Light But Effective Touch, David Cameron claimed: "We will only get tax and regulation down... if business plays its role in being responsible... I want low taxes and a low regulation economy, but we won't get that unless we reduce the demands on the state." However, the answer is not to transfer responsibility from the state to business, but from the state to individuals.

The proposal in A Light But Effective Touch is for the introduction of Responsibility Deals: "a mechanism that enables companies to collaborate more effectively with other groups in society to address issues of common concern in a coherent and focussed way." Although the report claims that much regulation is already in place, it admits that new regulation will be necessary.

In his foreword, David Cameron states that: "The Conservative Party has always been the party of business: we instinctively understand and appreciate the vital role that businesses play in creating the jobs, wealth and opportunity on which all else depends" and writes of a "post-bureaucratic age in which the state does less, but does it better." Yet when it comes to business regulation, "less" and "better" are more or less the same thing. The report claims to favour the free-market, but also demands that it be "shaped to provide not just products and services, but social and environmental goods as well." Regulation by another name.

Clearly this is a response to a societal trend. But if businesses want to push in this direction it should be an entirely voluntary matter, one that the government takes no part in. In reality much social and environmental policy that goes under the name of CSR does little to help society or the environment. However, if businesses see it as expedient to engage in projects to increase prices, attract more customers and the best workers, then it is entirely their "business". Ultimately, they don’t owe responsibility to society or government, but to their shareholders.

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