A lovely example of why politics is bad at economics
Let us imagine, just for a moment, that this climate change thing is really big and important. So much so that we’re going to subsidise people moving from internal combustion engines over to electric vehicles. No, no, don’t worry about whether all that is true or not, necessary or a good idea. That’s just the set up. We’ve got to shift that transport sector and we’re going to do it via subsidy.
Andy Burnham is preparing to raise tariffs on Chinese electric cars as part of a closer relationship with the EU.
The Prime Minister will visit Friedrich Merz, the German chancellor, in Berlin on Thursday before a UK-EU summit in November, which is expected to secure deals on youth mobility and food and drink.
Mr Burnham is likely to urge Mr Merz to pressure Brussels so that British firms can benefit from EU defence loans and industrial subsidies.
But the chancellor is expected to warn Mr Burnham this will not be possible unless the UK raises tariffs on Chinese electric cars from 10 per cent to the EU’s 45 per cent.
The move would make the cars much more expensive and risk infuriating Beijing, which expressed “serious concern” at the prospect of tariffs earlier this week.
Upsetting Beijing is not one of those things that worries us and we’re really very “Meh” about acceding to the desires of the EU. But look where this application of politics to matters economic gets us - gross insanity.
The answer to climate change is that we both subsidise electric vehicles and also that we tax electric vehicles at a rate of 45%. That the political process would even consider this - this before how we all know there will be those who think it a good idea - shows, precisely, why politics and good economics just do not mix.
Thus, of course, our long stated insistence that politics needs to keep out of the economy as much as is humanly possible. For the interventions always do end up with nonsense like this. Both pulling and pushing at the same time when the actual answer is just leave the damn thing alone.
If we desire everyone move to EVs then allow in cheap EVs. If we don’t desire everyone be in EVs then stop subsidising EVs. But subsidising and also taxing out of the market the same item is insane.
Tim Worstall