Madsen Pirie on Platform sets out his manifesto for Britain

To transform Britain permanently, the next Government should start by taking the lowest paid out of income tax and replacing council tax with a local sales tax

Anyone who supposes that a dozen years of Gordon Brown’s vandalism can be put right by tweaking a few policies and running things rather more efficiently is mistaken. The parlous state of Britain requires a jump-shift in policy rather than an improved continuity. Proposals which lie beyond the box of the commonly acceptable might not make for good election manifestos, but they could mend a broken economy and a broken society.

My Adam Smith Institute colleague, Dr Eamonn Butler, detailed in his book, The Rotten State of Britain, how bad things have become, and how the optimistic promises of 1997 failed to bring results. The UK, once a model low tax economy now ranks amongst the heavily taxed ones. The pensions system, then the envy or Europe, now faces an unfillable black hole. Where we were promised “education, education, education,” we have lower social mobility and more children leaving school without any meaningful qualifications. In place of the comparatively free society we enjoyed, we now have a society of snoopers, with severe restrictions on our freedom of speech, of assembly, and of the right to peaceful protest.

The counterpart of this critique is a programme of action to set Britain back on the path to prosperity and progress. This week the ASI publishes Zero Base Policy, setting out a shopping list of 33 proposals to put things right.

At the top is tax and the economy. People who earn just over £6,000 pay income tax. This is half the minimum wage and less than a quarter of the average wage. Taxing with one hand means we hand out benefits with the other. There is a word for this: madness. The ASI call is for the low paid to be taken out of income tax altogether, with a threshold for them of £12,000 a year.

Higher up the income scale there is a plethora of rules, qualifications, exemptions and allowances that have doubled to over 10,000 the pages it takes to explain them. The ASI call is for the upper threshold for the 40% rate to be raised in stages to a level at which nobody pays it. This would achieve a single income tax rate of 20%. The government will immediately demand to know what spending cuts will for this, but the answer is that it will pay for itself. More revenue will be raised under the ASI proposals because the tax base will expand massively. Not that there are no savings to be made. Our estimate is that efficiency savings and the cessation of unnecessary programmes could raise at least £100bn.

The highly unpopular Council Tax should be replaced by local sales taxes and locally set business rates, with local budgets requiring electoral approval before they take effect.

Civil liberties are not so far gone that they cannot be saved. We call for a one-year Judicial Commission to review them (in public) and make recommendations. Meanwhile, terror laws should be limited to suspected terrorism, and public surveillance restricted to police and security services only.

The chance for the biggest difference lies in education. It could be the ‘council house sales’ of the next government if it gives parents the right to spend the state educational allowance at any school which is non-selective and charges no additional fees. This is the highly successful Swedish model which so rapidly gained mass support that its opponents abandoned plans to repeal it. It must also be made much easier to start and run new schools, so they can proliferate rapidly as they did in Sweden.

Narcotics remains a controversial area, but it is not controversial to say that current policies have failed. The calls for ‘tougher action’ are calls to do more of what we already know does not work. Addictive narcotics should be medicalized, made available for free consumption at high street clinics subject to medical examination and supervision. Recreational drugs should simply be legalized, subject to restrictions on their production and sale. These simple measures would eliminate a large proportion of UK crimes, and curb the violence of drug gang turf wars.

There are more radical proposals in the ASI shopping list, but right at the end is a call for MPs of English constituencies to constitute the English Parliament, meeting in the Palace of Westminster, choosing a First Minister, and exercising the same powers as those of the Scottish Assembly.

The ASI list is innovative and far-reaching, but it does offer a chance to undo the damage inflicted over the years, and to transform Britain permanently. We do not expect all of them in the first term of the next government, but a start could and should be made.

Published on conservativehome here.

Blog Review 840

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That Czech sculpture. As in the earlier blog, it's all a most fun scam that's been played. Anyone want to speculate on whether the politicians and bureaucrats will see the funny side? Show they have a sense of humour?

Less amusing: unreason is now the basis for legislation.

What if this stimulus might have negative effects? Like, damage long term growth? Something which is far more important than a couple of years of below trend output.

"It takes a heap of Harberger triangles to fill an Okun's gap." Yes, but how many is a heap?

A good example of what long term growth actually means using refrigerators as that example.

On how to spot a bubble and what to do when you do.

And finally, new dictionary entries.

Entropa

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Whether or not it's good art, the Entropa installation by Czech artist David Cerny is pure genius. The Czech Republic should be made permanent holders of the EU Presidency.

Making an English Parliament work

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I was surprised to read on ConservativeHome that 60 percent of Tory members surveyed did not agree that there should be an English Parliament. Odd since opinion polls tend to suggest that a majority of the public would back the creation of an English Parliament, while the Tories would probably benefit most from the existence of one, since their support is concentrated in England. Perhaps a sense of British patriotism explains the result of the survey, or perhaps it's just not representative.

Either way, I myself whole-heartedly favour of an English Parliament. As it stands, the UK's lopsided devolution severely disadvantages England. Scottish, Welsh and Northern Irish MPs can vote on issues that only affect English voters, while their own constituents are governed by devolved institutions. This means that legislation can be forced through Parliament by non-English votes, even though it only applies to England. Throw in the fact that the English are relatively under-represented in parliament anyway, and you are dealing with a basic issue of fairness.

That said, I don't want hundreds of new politicians, thousands of new bureaucrats, and millions spent on an ugly new building to house them. But there are a couple of ways around that - firstly, you could simply have the English MPs already elected to Westminster sit for part of the week as an English Parliament, with their own executive. Alternatively, if you are going to start electing the upper house anyway, the House of Lords could become a unicameral parliament for the UK, while the House of Commons becomes a unicameral parliament for England.

Either way, there is a further step that needs to be taken if devolution is to work properly: the various home nations should be responsible for raising the money they spend themselves, which is to say they should be fiscally autonomous. This could be accomplished fairly easily – if the UK parliament retains the right to set and collect VAT and National Insurance, and everything else was devolved, the sums more or less work out.

Tax simplification: the case for a land value tax

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Adam Smith considered the topic of taxes on agricultural land (which he called 'the ordinary rent of land'), houses ('house-rents') and residential land values ('ground-rents') in The Wealth of Nations (Book 5, Chapter 2) he concluded that:

Ground-rents, so far as they exceed the ordinary rent of land, are altogether owing to the good government of the sovereign, which, by protecting the industry either of the whole people, or of the inhabitants of some particular place, enables them to pay so much more than its real value for the ground which they build their houses upon… Nothing can be more reasonable than that a fund, which owes its existence to the good government of the state should be taxed peculiarly, or should contribute something more than the greater part of other funds, towards the support of that government.

The same logic applies today. But although local government administers or oversees most of the 'good government of the state' – a concept we would today describe as 'core functions' such as policing, street lighting and refuse collection, and the protection offered by land registration, the legal system and planning controls – and thus contributes to a large extent to non-agricultural land values, local authority finance and property taxation remain very contentious issues.

As it happens, however, the various taxes that relate to property ownership or occupation and wealth generally (Council Tax, Business Rates, Stamp Duty, Inheritance Tax, Capital Gains Tax, the TV licence fee and Insurance Premium Tax) raised around £70 billion in the fiscal year 2007-08, approximately the same as the cost of those same core functions. There is a clear case for simplification and rationalization here.

Property values and transaction volumes are currently falling rapidly, and as a result total revenues from these sources are expected to fall by £15 billion. However, going by long-term price to income ratios, once property prices bottom out, the above taxes – a bizarre mixture of poll taxes, jealousy surcharges and transaction taxes – could easily be replaced in their entirety with an annual flat tax of around 1.5% on the capital value of non-agricultural property. Even better (for reasons that I will explain in another post), you could replace them with a slightly higher annual tax on underlying land/location values – i.e. the capitalized value of 'ground-rents'.

Guest author Mark Wadsworh regularly blogs here

Blog Review 839

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Just another reason why a great splurge of Keyensian stimulus spending won't in fact work.

Identifying the partisan hack rather depends upon your definition of partisan hack.

A warning for those tempted into journalism. Make sure you check what the other people are going to be writing about on the same subject.

What super-contangos can tell us about the oil market.

Speaking truth to power.

The truth about how you might help one less fortunate then yourself: invest in them.

And finally, how to waste energy.

Politics and debt

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David Cameron and the Conservatives launched a poster campaign yesterday morning that highlighted how the nation’s newborns were being saddled with crippling debt due to the economic mismanagement of this country at the hands of Gordon Brown. Launching the pamphlet, Labour’s Debt Crisis the Conservative’s claim the the net government debt this country will be laden with by 2013-14, is somewhere in the region of £1,084,000,000,000. And as there will be roughly 63.6 million people in the UK by then, this amounts to the figure of £17,031 per person.

The report is full of alarming facts and figures on what the money could have been spent on, e.g. 1.8 million nurses. However, I’m not sure what we’d do with all of them, and I don’t think the Tories do either. They don’t really offer any solutions to the mounting debt crisis. In fact, speaking on Sunday Mr Cameron made it clear that he was happy to endorse the continued mismanagement of the economy to the tune of £645bn per year rather than £650bn. So are we to assume that under the Conservatives we shall have the same crippling government debt, and the same debt interest service payments? If so what’s the point of voting for either of them?

Neither party are offering a real solution to this problem. The current government are burdening us all with the mistakes of a few, but then I suppose this is what socialism is all about, sharing the burdens of a minority, making it easier for them to carry on, saving them from learning from their mistakes and making us all pay.  The coming election will do nothing but further entrench the political class and their associates and continue the destruction of productive output. The recession can and will be made longer and harder by the continual involvement of government. For the amount of money they are arguing over, for the solutions they are offering: it’s not worth voting anymore.

Too fat to adopt

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We’ve had Redbridge Council banning smokers from adoption, now we have a couple being denied because the husband is too fat.

Damien and Charlotte Hall are14 years a couple, 11 years married, but unable to have children. They deserve better than this and so does the child that they would have otherwise adopted.

This interview with the BBC shows you that there can be no other reason why they should not be able to adopt.

The Council workers did not even have the gumption to tell them in person. Instead they sent aweak willed letter. Here are some extracts:

I am writing to confirm that we are unable to progress an application from you at this time.

This is due to the concerns that the medical advisers have expressed regarding Mr Hall's weight.

I have discussed this with our medical adviser... who considers that it is important to alter lifestyle, diet and exercise in a sustainable way so that any weight reduction can be maintained in the long term.

I understand that you would like to begin the assessment as soon as possible and while appreciating your reasons for this, I consider it would be more appropriate to begin the assessment once Mr Hall's BMI is below 40.

Leeds Council and everyone involved in this should be thoroughly ashamed of themselves. It is time for the smokers, eaters and drinkers of this world to stand up to these nannying bureaucrats and this unfair discrimination.

How to promote the free market in 2009

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I've uploaded a new 1000-word think piece entitled, How to promote the free market in 2009. It makes the point that although it is easy to get depressed about the way things are going at the moment, the economic crisis also offers an opportunity for those of us who believe in free markets. With people more interested in economic policy than they have been for years, now is the time to persuade them. And for every dyed-in-the-wool socialist out there, I'm sure there are plenty more who would embrace the ideas behind free markets if only they heard the arguments more often.

The think piece outlines five key ways the free market can be promoted in 2009: (1) offer a compelling narrative that runs counter to the 'common wisdom'; (2) oppose Keynesianism and the idea that government can stimulate the economy; (3) expose the government interventions and failures that contributed to the financial crisis; (4) advocate policies to raise productivity and economic competitiveness in the long-term; and (5) educate people about theories and ideas of the great free-market thinkers, particularly those of the Austrian School.

Click here to read the whole thing.

Is Atlas shrugging?

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“Who is John Galt?" This is the opening line to Atlas Shrugged, a novel by Ayn Rand, one in which the world collapses under the weight of an oppressive robber class of politicians/bureaucrats. Fraser Nelson wrote on the Spectator Blog, having linked to a WSJ article, about the similarities of this day-and-age to those in Rand’s fictional world.

The story in Atlas Shrugged isn’t quite the same, the governments of that world appropriate successful businesses so as to enable the redistribution of the profits whereas now they are bailing out unsuccessful businesses. Quite the reverse. With productive taxpayers bailing out unsuccessful business! But the underlying theme of the book is that the government isn’t there to help and in the end it is not only a hindrance but more likely to be the harbinger of failure. Rand draws into her characters the tenets of her philosophy of objectivism and how their selfish disdain for others is ultimately the driver of their success. Though she venerates selfishness to an extreme, it is understandable in the climate of hatred held towards those that achieve.

This book, though not a direct warning to us, holds within it an insight into how those on the left view the average human, and how the average human can be bribed to support their ideals. It’s a future that no rational person would want to live in, not unless they knew the way to Cactus Gulch.

If you would like to further your interest in Ayn Rand then the ASI is hosting an event on February 10th. Dr Yaron Brook, Executive Director of the Ayn Rand Centre for Individual Rights will be speaking for around 45 minutes on Capitalism without Guilt: The Moral Case for Freedom. The event will be from 6pm for 6.30pm, following on Dr Brook’s speech there will be the usual question-and-answer session and drinks reception. If you would like to attend then please contact Philip Salter at events@old.adamsmith.org.