So, after an excruciatingly long delay, we are finally to be allowed to have our say about who we wish to govern us. Commonsense would suggest that we are overdue for a change of government. But given the increasing disenchantment with politics generally, an electoral system currently weighted against the Tories and the relatively small differences in real policy proposals between the parties, anything is possible. Attitudes (not even hard policies) on a few key issues may well prove decisive.
The Conservatives seem to have hit on one topic which resonates with people: the latest National Insurance increase. Here's another suggestion: if they were to break ranks on the apparent shared belief among political elites that present policies to limit greenhouse gas emissions are both necessary and effective, they are likely to tap into a deep vein of scepticism about the greening of politics among the mass of voters.
Now, given the carefully crafted image as a party deeply committed to environmental issues (which includes a puzzingly distate for both nuclear power and airport expansion) any volte face at this stage would be both difficult and surprising. However, the enthusiasms of the Cameroons are not shared by all Tory MPs (although, to be fair, the next batch of candidates might find them more to their liking). The man and woman in the street, meanwhile, are unconvinced that the planet is facing a crisis, while seeing green taxation as just a politically-correct way to separate them from a higher proportion of their earnings. Any party which shows it is willing to question the orthodoxy and think again might get a useful electoral boost.
With the starting gun now fired for next month’s General Election, there will be widespread debate about public expenditure cuts – a near certainty given the colossal £167 billion projected public sector net borrowing (PSNB) deficit for 2009/10. Last year, the social security budget is expected to have cost £164 billion, along with a further £23 billion for the related Tax Credits.
Given Total Managed Expenditure (TME) of an estimated £643 billion for 2009/10, pre debt interest, it is clear that social security – the UK’s largest public sector programme – could yield very sizeable savings. Once the high cost of pension provision is stripped out, which – depending on the methodology used - accounts for around a third of the budget, cuts will probably be sought from the remainder of the social security programme.
Some commentators have advocated a ‘Route One’ approach by simply abolishing some benefits or by scaling back Child Benefit entitlements. The more scientific approach is to operate a top-down policy and specify a budget that must be met each year until 2014/15.
Of course, it is very difficult to forecast the precise costs of social security payments, especially with rising unemployment and uncertainty on take-up levels. But, in setting the annual budget, the relevant Secretary of State should be held responsible for delivering it.
The most sensible way of achieving savings is by imposing a shrinkage policy right across the budget – but with the pension element being exempt. If Incapacity Benefits were, for example, reduced by a modest 2% per year – and entitlement were limited to only the most deserving 97% of applicants – net savings of well over 3% should be generated annually from this component of the budget.
Apply this methodology across a social security programme costing c£100 billion per year, pre pension provision costs, and do you not achieve material savings?
Gordon Brown has decided to make his National Insurance rise, “a tax on ordinary families" in his own words, one of his hundreds of stealth tax rises, the defining diving line of the election. After Mandelson finally nailed the coffin of Labour’s relationship with business last week, this final ‘come back’ attempt has left Gordon and Labour in full view, caught on the wrong side of the line.
Gordon’s election argument is that we should not risk the recovery. George Osborne’s and the Conservative Party’s tax cut will directly benefit seven out of ten families and indirectly helps us all, but Gordon notes that it will lower government revenue by around £6 billion, and thus he argues, take money out of the economy.
Fundamentally, Gordon must answer how the tax cut would take money out of the economy. Unless his vision of the economy is severely impaired, so that it includes only the actions of government and not the people (I wouldn’t put it beyond him), his argument is a manifestly illogical and economically illiterate.
If Gordon were re-elected, and came knocking at your door, and the door of your employer, to collect his national insurance tax, he would take money out of your pocket and that of your employer. He would thus take money out of the economy.
Now it is true that the government would then spend this money. They might channel the funds (that he seized from you and your employer) through layers of bureaucracy (wasting it inefficiently along the way), and then ‘invest’ in a big government scheme that is probably not needed, makes the problem worse and creates new problems, is over budget beyond belief, and infringes on your fundamental freedoms. Gordon will have employed people, may have developed some capital, and hence would have undertaken some economic activity.
However, Gordon’s economic activity comes at a steep price. Remember that Gordon has to take money from you and your employer. Any of Gordon’s economic activity comes at the expense of that which you and your employer would have spent that money on instead. It is an unseen opportunity cost, the loss is that which might have been. Had the tax not been collected, you and your employer would have had more money to save and spend. These actions would have led to economic activity too.
Gordon can only sustain his argument by claiming that he will spend your money better than you can. So, either he has no understanding of the economy or he is showing his true Socialist stripes. The latter case is no more promising. Whilst Gordon’s tax rises may be stimulating his own activity, the net result is destruction.
It is not just that Gordon Brown is wrong to say that tax cut will take money out of the economy, he is also wrong to think the tax could stimulate the economy. Taxes disincentivise economic activities, drive the productive and mobile away, and take money out of the productive sector of the economy. The only way to deal with the economic mess Gordon has got us into, of stagnant growth and astronomical debt, is to stop over spending and go for growth with tax cuts that will stimulate wealth creation, boost our economic competitiveness and support job creation. Gordon’s stance confirms the death of New Labour.
Shadow Home Secretary Chris Grayling’s remarks regarding the right of Bed & Breakfast owners to reject gay couples may have been homophobic, or they may have been an ill-judged attempt to cater to a bigoted religious group. [Ed - I really don't think it was either. Grayling was just making a common-sense statement regarding the rights of people running businesses in the their own homes. More broadly, this whole thing can easily be looked at as a private property issue.] However, they should have been an expression of faith in a society that would never accept such bigotry.
Without equality or anti-discrimination laws, liberals would like to think that people would boycott any institution that tried to discriminate on race, gender or sexuality. In the case of a Bed & Breakfast that banned gay couples, they would very quickly go out of business through lack of custom and popular public pressure. In the case of the BNP, activists to combat their racism abound. Even the furore over Grayling’s remarks attest to this effect. Liberals trust the people to enforce equality and tolerance.
Statists on the other hand assume that the government should take on this responsibility, creating and enforcing laws that compel all institutions to not discriminate. This is either because they think government is merely enforcing the view of the people, or because they do not trust the people to do it. I suspect it is the latter.
Some decades ago, when bigotry was more widespread, liberals would have argued that discriminating institutions would lose out to institutions that based their decisions on merit alone, proving the equality of homosexuals, women and other ethnicities, and the superiority of tolerance. Statists would have placed their trust in government rather than the free market to shatter the view that bigotry could be at all acceptable. However, in terms of banning discrimination within government itself to set an example, both liberals and statists would have been agreed.
Since then, the precedent for tolerance has been established, and the attitude of the majority has changed. If we live in a broadly tolerant society that cannot abide bigotry, which I believe we now do, equality laws should be redundant. After all, there is no need for a law that prevents something that could no longer exist. We should trust in the people to enforce equality – it would be the true test of a society, and the ultimate victory for equality and tolerance.
Washington and New York aren't typical of America, of course, but travelling through these cities, I am surprised by how unpopular Barak Obama has become. Even among Democrats (and there are a lot of those in both cities). The mood is one of disappointment, and promise unfulfilled.
Odd, you might think, given that Obama has successfully steered through the passage of the healthcare bill, his flagship measure, in the teeth of Republican opposition. But frankly, that again is just a promise, and people actually want to know how the measure will impact on them before they start cheering too loudly. And while the one success is merely promise, the failures are real. Obama's economic package was sold on the basis that unemployment could soar past 8% without it. Well, it's already done that, standing at about 10%. The signs are all around. The overseas wars seem to be carrying on as strongly as ever. No change there.
Perhaps the most significant disappointment, however, is that Obama promised to break the mould of partisan, Republicans vs Democrats politics. Sick of Washington's name-calling political culture, that was something that thousands of independents wanted to hear. But the healthcare debate became a straight fight between the parties, and Obama seemed quite unable to get minds to meet. Indeed, his measure seems, to the independents, to have made partisan divisions worse.
And it is independent-minded citizens who are behind America's astonishing Tea Party movement and all those Town Hall meetings. Ordinary citizens, just fed up with politics and politicians, wanting to get them out of their hair. It's a powerful national movement that has taken the politicians unawares.
Is there a message here for David Cameron? His Big Society concept seems a refreshing alternative to the Big Government obsessions of politicians from all sides. A society in which the power of self-determination is returned to citizens. It would be a powerful election slogan, like Obama's. And the lesson is that, if elected, he actually has to deliver this thing that independent voters are yearning for. If it turns out to be business as usual, his government won't last the year.
As I've said here before I'm not averse to a change in the regulations covering finance. But do note the other half of my point, which is that it is "change" in regulation, not necessarily more regulation nor even is it less. There are two sadnesses about what is being suggested for new financial regulation. The first is that everyone is saying that change must mean more having entirely forgotten Kingsley Amis' point that more will mean worse.
The second though is much more important: those legislators actually proposing either changes or more financial regulation don't understand what it is that they're trying to regulate. Thus the regulations proposed are worse than not changing them. An example from the US:
First, Dodd’s bill would require startups raising funding to register with the Securities and Exchange Commission, and then wait 120 days for the SEC to review their filing. A second provision raises the wealth requirements for an “accredited investor” who can invest in startups — if the bill passes, investors would need assets of more than $2.3 million (up from $1 million) or income of more than $450,000 (up from $250,000). The third restriction removes the federal pre-emption allowing angel and venture financing in the United States to follow federal regulations, rather than face different rules between states.
That last would not be a good idea, the middle one isn't really all that important but the first would kill venture capital stone dead. People do really not get all excited about a new company, scramble around to build a plan and then go on holiday for three months while bureaucrats ponder said plan. It's really rather the opposite: if the plan's a good one it will attract financing quickly and by the end of 120 days people are already working away, building things and collecting paycheques for doing so.
Specifically, one of the things we need to take into account is while 10 years ago it may have taken years to build a company, companies are now built in a matter of weeks. So this 120-day waiting period is frankly ridiculous. I have companies with tens of thousands and hundreds of thousands of users that are built in a matter of weeks. They’re generating actual dollars of revenue, creating jobs, investing in real estate office space, capital equipment, etc. If they had to wait 120 days to actually apply for the ability to obtain financing it would absolutely just crush that market.
So Senator Dodd intends to eviscerate the funding mechanism for new and innovative businesses at exactly the time when the US needs more funding for new and innovative businesses to create new jobs and get the economy moving again. All because he operates under the delusion that business operates at the same glacial pace as bureaucracy.
All of which leads to the conclusion that while we might indeed desire changes in the regulations covering finance we'd rather like such changes to be done by those who actually know something about finance. Which, clearly and obviously, means we'll have to lock the politicians out of the room while the adults discuss what changes there should be, doesn't it?
On Thursday, Liam Byrne MP, Chief Secretary to the Treasury illustrated his failure to grasp basic economics. He claimed on the Today programme that "when National Insurance has gone up in the past, actually, employment has risen". This is probably true. It is entirely possible that employment can rise despite the cost of employment increasing - the reasons for this may include strong and steady economic growth. Whilst the cost of employment rises, the increasing profits of employers mean that they can afford to absorb these costs and continue creating new jobs, or at least not get rid of existing ones.
However, Byrne then claimed "there isn't an automatic link between raising National Insurance and unemployment". When prompted not once, but twice as to an explanation for this, he simply cited his "observation" that past NI increases had been followed by increases in employment. This is astounding. To even imply that an increase in the cost of employment can lead to an increase in employment is beyond belief, but to rule out the opposite correlation between the two without acknowledging any other factors is senseless.
Anyone with an ounce of sense, let alone the entrepreneurs and business leaders so frequently cited in the recent National Insurance debate can tell you why an increase in National Insurance, by increasing the cost of employment, damages the chances of creating new jobs at the best of times, and may even put existing jobs at risk when the economy is shaky. For a Labour party nominally committed to jobs and economic recovery, this is either hypocrisy of the worst kind or sheer stupidity.
Seamus McCauley is horrifed by the effect of online targetted advetising upon politics. Essentially, it's possibly to target such advertising so precisely that only the losers from a particular political proposal will see the ads. So instead of everyone considering said policy, only those who would suffer are alerted to it and of course, only those who would lose from it are likely to start shouting about how it shouldn't happen.
Seamus thinks this is a horrible idea:
But as soon as parties start targeting just those who lose out...well, no policy will be allowed to have any losers at all. Or even any perceived losers, potential losers or possible losers. Every policy will have to be good for everyone, or good for everyone that ad targeting is sophisticated enough to isolate.
At a time when hard decisions have to be made this will mean entirely bland decisions.
Me personally of course I think this is an absolutely marvellous idea. Quite blindingly wonderful in its implications for the political system. For of course there are very few policies indeed which benefit everyone. Defence of the realm, the existence of a functional legal system, low and easy taxes to pay for them...our own namesake had something to say on this point didn't he, that this was all that was required to carry a nation from barbarism to opulence?
Other than those three necessaries, there really aren't all that many policies that benefit everyone. Thus government will be dissuaded from having any policies than those three. Who would have thought it, the minarchist State brought to you by online advertising technology?
The clan called Conservatives has taken a hesitant step out of the dense underbrush of the dark forest. For months, they approached selection for a new Forest Chieftain using rites dictated by the ruling clan called Labour, supported by a band of Westminster Chatterers. These ancient rites are a zero-sum game of keeping every tree, however diseased, for fear of destroying the entire forest. No tree can be cut or trimmed unless it is “paid” for with equivalent tithes on the people, resulting in a forest that isn’t growing but rather suffocating its demoralised inhabitants.
The rites of the ruling clan and its supporters are daunting. The Oracle Jeremy Paxman demands how 15 billion trees can be cut without diminishing the forest; the Sage Vince Cable claims he’s been warning about this for years; the Upstart Philip Hammond rattles off 10 billion from conifers, 6 billion from oaks, 3 billion from leaf collecting and 2 billion from beyond the swamp; the Apologist Liam Byrne splutters that there is no alternative to the ruling clan’s failed strategy.
Yes, they’re all furiously counting the trees – some old and rotten, others tall and majestic and still others young but struggling to catch any sunlight. Howling wolves and swarms of midges scare the bejesus out of these hapless beancounters who clutch clipboards in the belief that this forest can only be endured, not tamed.
Now, along comes Sunny George Osborne from the Conservative clan with his startling notion that Labour’s increase in workers’ tithes (mysteriously called National Insurance) is a bad thing for clearing and taming the forest. For an instant, a hush falls over the sylvan thickness. But only for an instant; the ruling clan and its fellow-travellers soon fill the air with the sounds of scribbling pencils, clicking calculators and wails of “infidel, heretic”!
Sunny George may not yet be a true believer but he’s showing doubts about the old orthodoxy after wandering close to the edge of the forest where he caught a glimpse of its extent. He saw too many dead trees that need felling, too many overgrown trees that need coppicing and not enough space for young saplings.
With the call to repeal the workers’ tithe increase, Sunny George recognized a healthy forest needs more lumberjacks, tree planters and carpenters. He was soon encouraged by support from beyond the forest that the tithe increase would surely reduce the numbers of these artisans. This support came from what the old guard derided as “busy men” but these lived in seemingly happier places and were fearful of being swallowed by the encroaching forest.
The last time Sunny George suggested cutting tithes, his clan became wildly popular. However, it soon resumed the old faith and the new believers drifted away. Sunny George’s rediscovery of tithe-cutting might re-ignite faith in a better way of taming the forest.
So, after an excruciatingly long delay, we are finally to be allowed to have our say about who we wish to govern us. Commonsense would suggest that we are overdue for a change of government. But given the increasing disenchantment with politics generally, an electoral system currently weighted against the Tories and the relatively small differences in real policy proposals between the parties, anything is possible. Attitudes (not even hard policies) on a few key issues may well prove decisive.
Gordon Brown has decided to make his National Insurance rise, “a tax on ordinary families" in his own words, one of his hundreds of stealth tax rises, the defining diving line of the election. After Mandelson finally nailed the coffin of Labour’s relationship with business last week, this final ‘come back’ attempt has left Gordon and Labour in full view, caught on the wrong side of the line.
Shadow Home Secretary Chris Grayling’s remarks regarding the right of Bed & Breakfast owners to reject gay couples may have been homophobic, or they may have been an ill-judged attempt to cater to a bigoted religious group. [Ed - I really don't think it was either. Grayling was just making a common-sense statement regarding the rights of people running businesses in the their own homes. More broadly, this whole thing can easily be looked at as a private property issue.] However, they should have been an expression of faith in a society that would never accept such bigotry.
On Thursday, Liam Byrne MP, Chief Secretary to the Treasury illustrated his failure to grasp basic economics. He claimed on the Today programme that "when National Insurance has gone up in the past, actually, employment has risen". This is probably true. It is entirely possible that employment can rise despite the cost of employment increasing - the reasons for this may include strong and steady economic growth. Whilst the cost of employment rises, the increasing profits of employers mean that they can afford to absorb these costs and continue creating new jobs, or at least not get rid of existing ones.
The clan called Conservatives has taken a hesitant step out of the dense underbrush of the dark forest. For months, they approached selection for a new Forest Chieftain using rites dictated by the ruling clan called Labour, supported by a band of Westminster Chatterers. These ancient rites are a zero-sum game of keeping every tree, however diseased, for fear of destroying the entire forest. No tree can be cut or trimmed unless it is “paid” for with equivalent tithes on the people, resulting in a forest that isn’t growing but rather suffocating its demoralised inhabitants.