Think Pieces

Britain's Borrowed-Time Bomb

Written by | Tuesday 4 January 2011

Britain has managed to preserve its AAA credit rating during the world financial crisis, but its luck will run out unless it gets to grips with the spiralling costs of its welfare state. Its obligations to future pensioners, the cost of free medical care to an aging population and scores of other state benefits are imposing a growing burden that Britain's next generation may prove unable to afford. It might take 10 or 20 years to get to that point, according to analyst Miles Saltiel in his report "On Borrowed Time," published by the Adam Smith Institute.

Raising VAT looks like a self-inflicted wound

Written by | Tuesday 4 January 2011

In a welcome display of its independence, the Office of Budget Responsibility has revealed that the VAT rise due to come into force on January 1 would reduce the UK's gross domestic product by 0.3 per cent in 2011-12. In plain English, that means raising VAT from 17.5 to 20 per cent will destroy some £5bn of economic activity in the next tax year. The reason for this is simple: raising VAT will dent consumer confidence and discourage spending; fewer goods will be sold and lower profits will be recorded.

Tax and spend destroys living standards

Written by | Wednesday 15 December 2010

According to the Director of Demos “the most important question about the state is not how big it is, but what you do with it”. (1) In support he cites John Stuart Mill, but he would have done far better to cite Adam Smith, who argued in The Wealth of Nations that the opposite was true. The lower are overall taxes, the smaller is government and the higher are living standards (as well as liberties).

Time for Ireland to say slán to the euro?

Written by | Thursday 9 December 2010

While Ireland’s economic collapse continues unabated, more and more implausible and counterproductive solutions become reality. Over the course of two years, several bailout packages have increased public sector external debt (that owed to creditors outside the country) to 1,305 percent of GDP.

How to leave EMU

Written by | Monday 6 December 2010

Membership of the Economic and Monetary Union of the European Union (EMU) is ostensibly a one-way street. Once you join the euro area (commonly known as the eurozone), you cannot leave. Yet the 4th December issue of The Economist carries on the front-page the heartfelt plea “Don’t do it” over a picture of a man with a euro coin for his face, just about to commit suicide. This just confirms what anyone interested in the topic already knew – of course you can leave the euro.

Is pain aversion a good basis for the country's economic policy?

Written by | Friday 3 December 2010

This piece attempts to lay out the economic, and moral, arguments for more strenuous and rapid government spending cuts. Further, it makes the case for accepting the consequences of more severe cuts – less prosperity in the short run in return for better prospects for our economy and people in the long run. We may already be guilty of doing too little too late.

The Adam Smith Institute assesses when Britain might go bust

Written by | Monday 29 November 2010

There’s another financial crisis facing the UK, according to the award-winning analyst Miles Saltiel in a report for the Adam Smith Institute, On Borrowed Time. And this time we won’t be able to blame the Americans, or the banks, or anyone but ourselves. Because the next crisis will be caused by us promising ourselves state healthcare, pensions, and other benefits that our taxpaying children just simply won’t be able to afford.

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