Taxing out talent

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Talent is being forced out of Britain by the twin blows of a levy on non-domiciled individuals and by the impending 50 percent tax rate on incomes above £150,000. The latest to go is reported to be David Landau, a philanthropist who made his fortune selling the advertising paper Loot, and who has given several millions to charitable causes in the arts and education. He has left for Italy. He will not be the last.

George Bull, head of tax at accountants Baker Tilly, warned that half of his US clients were considering leaving Britain because of the "double whammy" of the non-domicile levy and the new 50 per cent tax rate.

The Chancellor, Prime Minister and the Treasury blithely behave as if their new taxes on high achievers will yield the expected revenue without triggering any behavioural changes. They just cannot seem to get their heads around three very simple words: TALENT IS MOBILE.

Governments can tax land which is impossible to move. They can tax factories which are difficult and expensive to move. But when they try to tax talented people they run up against that mobility. The plain fact is that many high-earning individuals are able to move to a friendlier jurisdiction which does not take away most of what they have earned.

Guy Hands, the British head of private equity company Terra Firma, which owns EMI, relocated to Guernsey earlier this year. Many more have threatened to go, including Sir Michael Caine, Tracey Emin, Hugh Osmond – the entrepreneur behind Pizza Express – and Peter Hargreaves, founder of the investment company Hargreaves Lansdowne. Premier League football players including Liverpool's Xabi Alonso and Arsenal's Andrei Arshavin have also identified Britain's tax regime as a problem, raising fears of an exodus of top talent.

High earners do more than create wealth and help generate and sustain jobs; they act as role models to young people, and inspire them, too, to greater ambition and effort. Without these achievers Britain will become a duller, more mediocre place, as those who want to achieve things themselves and to make good in the process will go to do it elsewhere.

The pity of it is that it will all be for nothing. The Treasury will almost certainly raise less revenue, rather than more, as a result of its twin attacks on high earners.

Dr Madsen Pirie has recently authored "101 Great Philosophers".

Immigration policy is a mess

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Funny how politicians leap on bandwagons before an election - first bank bonuses, now immigration. After a few soothing words about how important migrants were for the UK economy, Gordon Brown went on to outline lots more controls to stop them. Should play well among all those Labour voters who defected to the BNP.

The reality is that immigration has shrunk. All those Poles are going home, now that the streets of Britain are no longer paved with gold. Not that Gordon Brown's new 'tough' policy could prevent EU citizens from working here anyway. Migration has contributed billions to the UK economy. Migrants are 60% less likely to draw state benefits.

Home Secretary Alan Johnson admitted that Labour's immigration policy is a mess, and he's right. It has chased one headline after another, ending up with a dog's breakfast of a 'system' that is neither efficient nor just. Immigrants and their families can be detained indefinitely, are not allowed to work or draw benefits – so they end up being exploited in dangerous and underpaid illicit jobs.

The new points system is supposed to rationalize all this; but it has already proved damaging. We do actually need unskilled migrant workers in our businesses and public services. Overseas students are stymied with all sorts of paperwork and no longer feel welcome, choking Britain's reputation in international education. Companies complain of visa bottlenecks and having to advertise for chief executives in job centres so as to prove that no native person can do the job. The Tories want the same, but with caps on. It will be a relief when the election is over and we can (briefly) discuss this subject rationally again.

Dr Butler's book The Rotten State of Britain is now in paperback.

Can Britain learn from China?

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Slowly but surely, economic and demographic pressures, combined with a decline in scientific and educational achievement, will condemn Europe to becoming first a military, then an economic, then an educational backwater, and finally even a cultural backwater. Remember, academic and scientific excellence soon follow economic prowess and China already produces 3 million graduates a year, 250,000 in engineering. In Britain, we can’t even find enough people to teach physics in our schools.

Andrew Neil, 'Britain can learn from China', The Specator (2005).

Cheering news on the gender pay gap front

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There are two ways to take this little snippet of news:

The average pay gap between men and women continued to decline last year, falling by 0.4 percentage points, but still leaving a 12.2 per cent difference, according to the Office for National Statistics.

If that gender pay gap is something you worry about then that is good news: it's getting smaller. As it has been for decades. You can also complain about it, as some did:

A spokesman for the Equality and Human Rights Commission said: “The improvement in the gender pay gap is something to be welcomed and we hope this trend will continue.

However, he added: “If this rate of decline continues it will be another 17 years before women and men will be earning equal pay."

But then I would also say that this was good news for those who worry about the gender pay gap. Only 17 years to close something which has been with us for millennia? How wonderful that is in this world that is simply getting better by the day!

But beneath that snark and flippancy there is a much more important point. Solutions and corrections to the perceived problems of said world do not pop up overnight. Even if we hit upon the magic set of actions they still take time to work through society. So the call to action should not be based solely upon the existence of a problem: it should be based on whether that problem is already in the process of being solved or not before we insist on yet more actions to solve it. So it might be with these gender pay gap figures: whatever it is that we needed to do we've already done, the problem will be gone in a couple of decades and Hurrah! let's go and worry about something else.

We might apply the same logic to other problems: recent decades, those recent decades of that hated globalisation and "neo-liberalism", have seen the greatest reduction in human poverty in the history of the globe or our species. Huge great plans to "solve poverty" are thus not needed: we just need to continue doing what we're doing, trading with our fellow humans as we have been and the problem will solve itself. We have, if you wish, already alighted upon the solution and simply need to carry on as we are.

This isn't, of course, a popular thought amongst those who insist that we must do something, now, to solve all the ills of the world but it is a general truism. Many of the perceived problems are already being solved it's just that time as well as solutions are needed.

Tories getting there on education

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It does not really matter what colour of government reforms our schools, but it must surely be the number two priority after putting the economy to rights. It begins to look as if it might be the blue party that does it. Having embraced the Swedish model, they seem to have quietly dropped the idea of excluding for-profit schools in the mix.

Now comes an announcement from Michael Gove, shadow Schools Secretary, that groups of teachers will also be allowed (and he suggested 'encouraged') to start their own schools. He has been looking at the successful US experience of the Knowledge Is Power Programme (KIPP), which has seen several new schools started by teachers.

We meet quite a few teachers in the Adam Smith Institute through the ASI's programme of school visits, 6th form ISOS seminars, and even our Power Lunches. There is practically a unanimity that talented teachers have their time wasted and their enthusiasm blunted by the acres of paperwork which flow across their desks, and by the need to comply in detail with minutiae set by civil servants who have not entered a classroom since they were children themselves.

It is reported that the recently-formed New Schools Network has already been contacted by significant numbers of teachers keen to take advantage of the new opportunities.

Education will be the key, and new schools are an essential part of its ability to open new doors of opportunity and quality education, especially for students in deprived areas. Some of the current failing schools might well reform and improve once parents can exercise choice of schools, and direct state funds to those they have chosen. Many, though, will fail and pass unmourned into oblivion. Their place will be taken by high quality new schools. Some will be started by entrepreneurs, some by parents, and now, we are told, some by teachers. They bring a knowledge and a commitment that are needed.

This is a very welcome move, and one that suggests that the Conservatives finally have the right policy on schools, and might just have the nous to implement it.

Madsen Pirie's new book "101 Great Philosophers" is now available.

Graduate nurses

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It is the mark of the increasingly backward system of healthcare that we practice in this country that the Department of Health has decided that all nurses need to be qualified up to graduate level from 2013.

The recommendation was made by the regulatory quango, the Nursing and Midwifery Council (NMC) with the Royal College of Nursing backing the move, On the one hand, NMC's defence of this move is certainly surprising in as much as the union are supporting the government determining the qualifications of nurses, circumventing the unions relations with hospitals, their direct employers. Yet on the other hand, the union may be banking on this restriction to nursing decreasing competition and thus increasing wages and the Union’s bargaining position vis-à-vis their indirect employer, the government.

UNISON takes a different line than NMC is worried about this move, for perfectly practical and sensible reasons:

Our concerns throughout have been to make sure that the profession, whether you're a nurse or a midwife, that we're actually reflecting the society that we care for and I think one of the concerns that colleagues have had is about making sure the right emphasis is placed on the care and compassion that nurses give and that shouldn't be solely based on their level of academia.

But for the big picture, Dr Helen Evans of Nurse for Reform articulates the attendant problems of grade inflation, increased costs and decreasing standards:

In further nationalising the labour market on the front line of patient care, ministers and the Royal College of Nursing will simply end up sucking in tens of thousands more ancillary workers and lowering standards on wards still further.

The next government has plentiful reform to undertake; it is looking increasingly unlikely that they are not up to the task, but given rising costs and slipping standards, their hand might well be forced.

Extremadura

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You know the government is doing too much when...

Time to transform drug policy

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A heavyweight new report from the Transform Drug Policy Foundation (released this week) has called for the regulated legalization of all narcotic drugs. Under their plans, cannabis and opium would become freely available from licensed, membership-based coffee shops, while cocaine, ecstasy and amphetamines would be available to licensed users from pharmacies. This is an eminently sensible idea.

The Home Office, however, has reacted with a predictable display of willful stupidity. A spokesman told the BBC: “[We have] no intention of either decriminalising or legalising currently controlled drugs… Drugs are controlled for good reason — they are harmful to health. Their control protects individuals and the public from the harms caused by their misuse."

What they clearly don’t realize is that prohibition is not ‘drug control’. In fact, it almost the complete opposite: prohibition means putting drugs in the hands of gangsters and forfeiting any control whatsoever. It means huge profits for criminals, who turn inner city areas into gang-warfare zones. It means the destabilization of drug-producing countries like Columbia. And it means no reliable information on strength or quality for drug users, leading to overdoses and poisoning.

Of course, it also means thousands of drug addicts turning to crime to fund their habit. The government’s own figures suggest that 80 percent of UK crime is drug related, at a cost of some £15-20bn a year. This, again, is directly related to prohibition – around 90 percent of the street price of drugs represents an ‘illegality premium’. Few alcoholics, by contrast, are driven to a life of crime.

Ultimately, the fact that even high security prisons are awash with illegal drugs should make it pretty obvious – even to politicians – that prohibition can never succeed in its stated aims in a free society, and that the only way to minimize the harm associated with drugs is to take them away from the gangs and bring them into the legitimate marketplace. Transform’s report is a welcome contribution to this debate.

I discussed this issue on BBC Radio Leeds yesterday lunchtime. Click here if you want to listen, and fast-forward to 0:36:32.

Best placed to be last

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The French and German economies are both reported to have risen for a second consecutive quarter. It is not the amount of growth they hoped for, but it is enough to confirm that they are out of recession. In fact the countries of the eurozone are now collectively out of recession with a growth of 0.4 percent during the third quarter. Even the EU as a whole, including its non-euro countries, grew by 0.2 percent over the same period. The US and Japan are also out of recession, so where does that leave Britain, "best placed of all countries to face the crisis because of the fundamental strengths of our economy"? It leaves us still in recession, a rather lonely position these days.

The thought in the minds of some analysts is that the worldwide growth might simply be a reflection of the massive stimulus packages which have boosted economies artificially, instead of engendering real growth. The BBC's Nigel Cassidy suggests that "Nobody can even guess what will happen to growth when national governments stop pumping credit into the system." Certainly the amount pumped in by the US and European governments must have had some economic effect, even if the contribution by our own UK taxpayers has not, apparently, been enough to do the job.

Governments hope, of course, that real growth will take place alongside the activity they are stimulating, and that the incentive packages can be quietly phased out as real demand replaces government-induced demand. But since the growth of any kind of demand is proving so sluggish in the UK, there have to be fears that its economy will shrink again when the government's drip-feed is turned off.

It won't be Gordon Brown's problem to solve, of course, but someone will have to tackle the deluge of debt he is leaving behind. There will be cuts, but they will be difficult and unpopular, and are likely to leave his successors disheartened. The real solution is growth, massive and rapid. And the way to achieve that is to turn enterprise loose by slashing taxes and regulations across the board, even if they have to borrow more at the outset to do it.

It could happen, but those wise enough and with sufficient means are already buying gold and reading the Swiss property pages…

Check out Madsen Pirie's new book, "101 Great Philosophers."

Worstall on taxing interbank lending

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So now it's proposed that we should tax the banking system to destruction – the same one that we spent billions bailing out. This is a ruinously destructive course of action that will plunge us all into penury.

Tim Worstall, 'A flaw in the TUC masterplan', guardian.co.uk.