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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

High taxes don't pay

Written by Steve Bettison | Saturday 08 December 2007

Denmark is often looked at as a society that is somewhat fairer and more equal than ours. This view is mainly due to an economic system fundamentally based on very high levels of taxation and generous welfare payments. However, the Danish system is sometimes referred to as "flexicurity" since it has a uniquely liberal approach to hiring and firing which has allowed the country to produce growth figures of some 3.5 percent in 2006 whilst approaching full employment. Nonetheless, this approach still isn't without its problems. There seems now to be a brain drain occurring, with Denmark having to face up to European (as well as global) tax competition.

In key areas such as the highly skilled they are suffering from a shortage. This is highlighted by The Confederation of Danish Industries' estimation that through the end of 2005, the workforce had shrunk by around 19,000 Danes, mainly through them leaving the country. This outflow is not being matched by the inflow of foreign workers, which tends to lower levels of skill. One of the key reasons for this brain drain is the high taxation that highly skilled workers have to pay to keep the lavish welfare system going. Faced with paying 63 percent of their own income to the government, many understandably decide to leave and take advantage of the lower rates around Europe.

Unless something changes, the Danes may be facing growth figures of only around 1 percent for the 5 years from 2009 onwards. The obvious approach to this problem is to lower the tax rates to more competitive levels, attracting Danes back and enticing in others as well. The Danish only need to look to London to see how lower taxation on high earners can promote growth. Alternatively though, we could always ship over those on the left who love the Scandinavian model of taxation and welfare. Then they can pay the tax bills.

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Joke of the Day

Written by Jokesmith | Saturday 08 December 2007

When I was younger I hated going to weddings. It seemed that all of my aunts and the grandmotherly types used to come up to me, poking me in the ribs and cackling, telling me, 'You're next.'

They stopped doing that when I started doing the same thing to them at funerals.

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Power lunch with Barbara Young

Written by Dr Eamonn Butler | Saturday 08 December 2007

barbara_young.jpgBarbara Young, Chief Executive of the Environment Agency, was our guest at a Power Lunch in Westminster this week. She's had a difficult few months dealing with the physical and political results of widespread flooding in the UK – two major inundations in just a few months.

By any standard, the floods were unusually bad - maybe a one in a hundred years event. Though the worry is that they might get more frequent due to climate change. But one in a hundred years events do occur (roughly every hundred years or so, in fact) and you can't necessarily say that they herald a change. A hurricane just a few years back devastated New Orleans, and everyone started talking about climate change. But even in the 1960s, forecasters knew that a hurricane of a certain strength and a certain trajectory would do that. There were plenty of hurricanes over the next forty years, but only one got lucky. A sign of climate change? Hardly. And don't forget that a hurricane devastated Galveston a century earlier.

But if things really are changing, we are in a mess. One of the things that made the floods so devastating was that nobody seems able to take charge. The water companies control the pipes and sewers. Local authorities are in charge of logistics. The Environment Agency has other functions. When there is a national emergency, we could use smoother and more co-ordinated systems.

Meanwhile, the 55,000 flooded houses that are being refurbished after the floods are being restored to - their original condition. Why don't the insurers use it as an opportunity to flood-proof them while they're about it? Maybe it's because Barbara Young's government colleagues have regulated them all senseless.

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Book of the week

Written by Booksmith | Saturday 08 December 2007

ursulas_story.jpgIf you need a stocking-filler, look no further than Model turned Tory Leader's Wife turned Novelist Sandra Howard. Well, not her personally, but her new novel Ursula's Story (usually £12.99, our price £9.74+P&P). Ursula's ex-husband is all over the tabloids as he marries a government minister. Her young children are excited at they meet half the cabinet. But what effect does it all really have on them, and can she get them through it?

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Fighting the wrong fight

Written by Rachel Patterson | Saturday 08 December 2007

The two leading democratic presidential candidates, Hilary Clinton and Barack Obama, have begun a war sure to last through the primary season and into the nominations. While fighting over policy and personality, many attacks concentrate on their respective plans for universal healthcare. Clinton criticizes Obama, claiming that his plan will fail to cover everyone in the nation. Obama argues in return that her plan will also leave some out. The New York Times thinks neither of the plans goes far enough, approvingly citing an economist who thinks people should be fined for not having insurance.

These policies, and the fights and commentaries that stem from them, indicate an unfortunate trend in politics – a faith in the abilities of the government and the idea that programmes like universal care will mean more freedom, not less. Many falsely view government provisions as a release from economic hardship, rather than an intrusion into individual choice. Obama should be defending his plan because it allows people to opt out, not in spite of it.

The Democrats are fighting over the wrong issue, and pandering to the belief that the success of a government programme rests on the number of people forced to abide. One would think that the voters of a party meant to be the champion of individuality should be wary of any policy which forces all citizens into anything, and candidates from a true party of freedom would argue over the openness offered by their programmes, not the coercion.

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Blog Review 439

Written by Netsmith | Friday 07 December 2007

Mirable dictu! It would appear that a large majority of the British public actually do understand the points about free trade. Now all we have to do is get the politicians to understand....

 Gary Becker poses an interesting question . Why is tax evasion actually so low?

Teaching economics through popular music . An example: In this excerpt, Coolio suggests that he would rap for no money. Draw a representative labor supply curve.

Teaching economics by video: in this one , tax competition and its value in keeping pressure on governments to be efficient (replace with "not so grasping" to taste). 

Teaching the economics of fisheries by blog post. It's a Commons problem and will only be solved by that which solves such problems: property rights.

A twist: teaching yourself about bias by talking to economists. 

And finally , pie shops and Cantonese and the wonders of Stenthenge

 

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Brown's economic mirage

Written by Tom Clougherty | Friday 07 December 2007

ugly_brown.jpgFraser Nelson had an excellent piece on the Spectator's Coffee House blog yesterday, arguing that the UK economy is in "a far worse condition than Gordon Brown makes out... his skill [as chancellor] was not in managing the economy well, but in making people believe it had been managed well."

Indeed.

As Fraser points out, most developed countries have had better growth than the UK since 1997, and Britain has actually been the worst economic performer in the English-speaking world. So much for the miracle economy! And thanks to Brown's wasteful public spending we have the biggest deficit in Western Europe, at a point in the economic cycle when we should really have a surplus. Government borrowing has placed a heavy burden on future generations. Inflation is making a comeback. Millions of Britons are economically inactive and dependent on state benefits. The list goes on...

What should be done? I believe overhauling the welfare system is the most urgent task facing the country – done correctly it would reduce spending and increase economic growth, by getting people off handouts and into productive work, as well as having an important social impact. Our recent report Working Welfare provides a handy guide to reform.

Alongside that we need to bring public spending under control, making public services more efficient and cutting government waste (£101 billion of which was recently identified by the Taxpayers' Alliance). Add in a few juicy tax cuts to boost enterprise and strengthen incentives, and you've got a recipe for real economic success.

Doesn't sound that hard, does it?

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Joke of the Day

Written by Jokesmith | Friday 07 December 2007

What do you call a guy with no feet?

Neil.

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A British Bill of Rights?

Written by Tom Clougherty | Friday 07 December 2007

I received an interesting pamphlet yesterday from the Society of Conservative Lawyers. Entitled A Modern Bill of Rights, it contains extracts from the work of various Conservative lawyers on whether Britain should have a 'Bill of Rights' to replace the Human Rights Act (something David Cameron has pledged to do) and on what form such a bill should take.

The problems with the Human Rights Act (HRA), which incorporated the European Convention on Human Rights into UK law, are encapsulated rather well by Jonathan Fisher QC in the pamphlet's preface:

In some instances the recognition of the Convention rights had led to absurd outcomes, whilst in other cases the Convention showed itself to be an inadequate protection against the anti-libertarian tendencies of an authoritarian government.

In a subsequent section, Martin Howe QC elaborates on the Convention's deficiencies. Since it is based on very broadly defined rights and exceptions, he says, with some rights conflicting with others (like privacy with freedom of expression), the Convention requires British courts to make political value judgements. This is anti-democratic (political judgements should be left to elected officials), and also threatens to politicize the judiciary, eroding its neutrality.

They build a good case against the HRA. But how should its replacement, the British Bill of Rights, be drafted? A written codification of our traditional liberties and common law rights (habeas corpus, trial by jury, etc.) would probably be the best option. As Dominic Grieve MP suggests, it should be exempted from the Parliament Acts, so that both Houses' approval would be needed to change it. All legislation would be have to be interpreted in accordance with it. Unavoidably incompatible secondary legislation would automatically be struck down, while primary legislation would be subject to judicial 'declarations of incompatibility' (as is currently the case under the HRA).

Such a system would protect liberty far more effectively than the present arrangement. And because those traditional liberties are so clear, well established and understood in English law, the courts would no longer be forced to make political judgements or encouraged to deliver perverse outcomes. That would be a definite improvement.

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Free-society jazz CD offer

Written by Dr Eamonn Butler | Friday 07 December 2007

songs_for_smokers_1.jpg Yesterday I told you about You Can't Do That! - a jazz celebration of the right to smoke and drink without officialdom poking its PC nose in, from the Boisdale Blue Rhythm Band.

The eighteen smoke-easy classics are bookended by two new tracks deploring the ban on consensual smoking in public, I'm Going Outside, with musing by BBC Jazz Musician of the Year Alan Barnes, and words by playwright Alan Plater:

I'm going outside, I may be some time

It was good enough for Churchill, but now it’s a crime

The puritans in Whitehall say I’m lower than slime

So I'm going outside and I may be some time 

 

They've issued banning orders to the taprooms and clubs 

You can only have a smoke if you’re in Wormwood Scrubs

The wagging of the fingers and the shaking of heads

Have sent us all a-scurrying to the cycle sheds.

And The Last Smoker has music by Boisdale pianist Simon Wallace and words by the great Fran Landesman:

The last smoker stares hopelessly out in the rain

The last smoker is searching his pockets in vain

The smoke police are closing in, their sniffers never fail

If they detect a whiff of smoke, the culprit goes to jail

 

The new people are clean living god fearing folk

They drink nothing that’s stronger than diet Coke...

It's great fun, and normally costs £10. But I've sweet-talked Simon Clark of Forest, the Free Society organization, to offer up 50 copies to our UK and European readers free of charge! Simon will send a free CD (postage paid) to the first 50 UK and European readers (one CD only per household) who email their full name and address to him at contact@forestonline.org . Simon's only keeping the offer open for 14 days, so move fast!

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