In a briefing paper the ASI's regulation fellow Tim Ambler examines the populist demands for financial stability and security though increased regulation. The question the paper poses is whether existing regulation mitigated the 2008 financial crisis, had no impact, or exacerbated it. Answering this question is the key to deciding how we respond to the crisis. The paper's main conclusion is that improving regulation will not provide more than modest help in future. The important thing is that the Bank of England, the FSA and the credit agencies do the jobs they are supposed to do more effectively.
In this think piece ASI policy director Tom Clougherty outlines his reaction to the Chancellor's pre-budget report of November 2008, arguing that Alistair Darling's so-called 'stimulus package' is really a manifesto for wasteful spending, record levels of government borrowing and public debt, and higher taxes in the long term. He argues Darling should instead have announced a substantial rise in the personal allowance balanced by public spending restraint.
This briefing, published in advance of the Chancellor's 2008 pre-budget report, calls for the personal income tax allowance to be raised from £6,035 to £12,000 for all UK taxpayers. This would take 7 million people out of paying income tax altogether, and ensure no one earning the minimum wage or less would pay income tax at all. It would be equivalent to giving the average worker an extra £1730 per year in gross pay, making them £100 per month better off. This policy could be implemented at a cost of £18.9bn to the Exchequer – a sum which should not require increased government borrowing.
Dr Eamonn Butler argues that the crisis was not caused by a "failure of capitalism" and points out that market economies will flourish if politicians and regulators act responsibly.
Perhaps one should be relieved to learn that regulators have failed to come up with any plans on how to use their new powers granted by the Regulatory Enforcement & Sanctions Act that came into force yesterday.
The Financial Times reports that BERR – the Dept for Business, Enterprise & Regulation – had received no plans yet from the 27 national regulators allowed additional powers under this new legislation. Originally intended to streamline business regulation across the board, the Act actually provides powers for regulators to impose hefty fines on those who do not conform to a raft of regulations. [Cont']
Dr Eamonn Butler believes that the archbishop's criticism of the market is misplaced and that it is governments and regulators that are responsible.
In this think piece – originally written for Whitehall & Westminster World – ASI policy director Tom Clougherty explains what he would do if he were prime minister for a day. In a nutshell: reduce spending and scale back government, reform public services, and cut taxes. Would it really be that hard?
Ian Powell (pictured left), the newly appointed chairman of PWC, Britain’s largest accountancy practice, warns that our competitiveness is seriously damaged by a combination of increased regulation and uncertainty over taxes. Accountants are one of the main beneficiaries of excessive regulation – many businesses are obliged to employ them to advise on how to comply with the plethora of new regulations issued by national and EU authorities.
In the longer run, however, over regulation shackles GDP and, in turn, accountants’ fee income from audit and consultancy services. It is therefore highly significant that PWC’s chairman is saying enough is enough. Referring to the threats posed to the UK economy Powell observes, “The quantity and scope of regulation combined with the level of uncertainty and complexity in this country’s tax system are particular causes for concern”.
Meanwhile, yet another hedge fund - Krom River – announced it was relocating from London. In this case, the winner was Zug in Switzerland (pictured right). Mounting tax bills and Switzerland's more conducive regulatory regime, which was recently overhauled, were given as the principal reasons for the move. [Cont'd]
True to form, the BAA leviathan, which owns and operates seven airports in the UK, is predictably resisting the Competition Commission’s recommendation that it should be broken up, and an element of much needed competition finally injected into the monopoly it has enjoyed since the business was privatised in 1987.
Accusations of ‘flawed’ analysis and other jibes favoured by lobbyists are thrown at the Competition Commission’s 290 page report, but in truth, the Commission’s robust assessment highlights the company’s lacklustre vision with regard to planning capacity, its poor standards of service and its high-handed snubbing of its main customer base: the airlines.
Combined with a score of other criticisms this explains BAA’s abysmally poor position in the Airport Council International league table of airport operator performance. Indeed, perceptions of BAA have sunk so low that the company must win the duffer’s prize for the least favoured business currently operating in the UK.
BAA plc was created as a dominant monopoly by government. And it ranks as probably the foremost monopoly in Britain. No less than 91% of all passengers flying in and out of airports in the South East fly through one of the company’s three airports that encircle the capital, not to mention its 84% share of airport passengers in Scotland. [Cont'd]
Privatization - Reviving the Momentum calls for a new wave of privatizations, which could net the exchequer in excess of £20bn. Given the worsening state of the economy and the increasing tightness of the public finances, the report notes that such an inflow of funds would be very welcome. In addition to the revenues generated for the government, a new wave of privatizations would also deliver significant operational benefits. Previous privatizations have delivered a wide range of improvements, including increased investment, lower prices, greater choice and better service for customers – as well as underpinning billions of pounds worth of economic activity. The leading privatization candidates identified by the report include the Royal Mail, Channel 4, BBC Worldwide, Scottish Water, Northern Ireland Water, Glas Cymru, the National Air Traffic Control System, as well as government stakes in British Energy and the Nuclear industry.
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