Tim Ambler
Tim Ambler is now retired from London Business School where he was a member of the marketing faculty teaching and researching the measurement of advertising and marketing performance, including especially neuroscientific techniques in order to get behind the rationality which screens out respondents’ real brain processes. He also published, usually with Francis Chittenden, researches into the development of EU and UK government regulations. Books include The Sage Handbook of Advertising (2007, co-edited with Gerard Tellis), Marketing and the Bottom Line (2000, 2003), and Doing Business in China (2000, 2003, 2008, with Morgen Witzel). A Fellow of The Marketing Society and the Australian Marketing Institute and previously Joint Managing Director of IDV, now part of Diageo plc, he was involved in the launch of Baileys, Malibu and Archers and the development of Smirnoff vodka worldwide.
Since retirement he has taken up music composition primarily vocal. Some choirs, notably Westminster Cathedral and the London Festival of Contemporary Church Music have been kind enough to perform a number of anthems.
Dominique Lazanski
Dominique is a digital policy and strategy freelance consultant and works on digital policy for the TaxPayers' Alliance. She has spent over 13 years in the Internet industry with many of those years working in Silicon Valley. She has a long held interest in public policy and participatory government. She has written and spoken on digital issues over the years from a free market and entrepreneurial perspective. She holds degrees from Cornell University and the London School of Economics and is working on her Phd.
On communists and tax freedom
On my way into work yesterday morning, I stumbled across a passage of Thomas Paine's American Crisis with which I identified. "Universal Empire," Paine wrote, "is the prerogative of a writer. His concerns are with all mankind, and though he cannot command their obedience, he can assign them their duty."
A sensible observation, for the nature of political speech - written or otherwise - has much more in common with decree than it does with mere suggestion, and this is precisely why it can be so hostile sometimes. Polemic is almost exclusively made with the express intention that someone, anyone, should obey it; that it is the mind of the hearer which governs whether the statement is enforced, rather than the will of the utterer, does not change the intent of the thing (rarely, if ever, have I heard a politician suggest that it would be perfectly reasonable for anyone to oppose the particular policies he or she champions).
And while our democratic society gives us the freedom to decline, the power of such speech — indeed, all speech — is still latent, bubbling just beneath the surface waiting for convenient facts to arise. Whether a particular group of people find a particular statement reasonable is likely to be based in their particular circumstances, and a suggestion which a large number of people happen to find reasonable is rather more likely to become policy than one which a large number of people find unreasonable. See the Great Pasty Reversal for evidence of a recent iteration.
This annoying problem of consent is why libertarians are so often frustrated with politicians: where the core of anything which can legitimately describe itself as a liberal belief is non-coercion, such an idea can only be translated into policy through legitimate democratic means. It is therefore necessary to wait for circumstances to turn in one's favour, for people to drink your particular flavour of Kool-Aid, before one can hope for political change.
Without wishing to portray myself as a socio-political Nouriel Roubini (anyone with a good reading list or financial adviser could have deduced the same), I and others like me now believe that the time when liberal principles can do the most good for our country is now: a year and a half ago, I wrote that European democracy could destroy itself through the over-provision for social welfare, at the time thinking that this would likely take place through the election of extreme right- and left-wing elements such as occurred in the late Weimar Republic.
I also suggested that it would very shortly become clear that Western governments would find themselves in a position where they could not meet their obligations, throwing the legitimacy of that same welfare-state model into question. Both of these have now come to pass with Greece, and there is a high degree of likelihood that similar consequences will come to pass elsewhere, in a very real and immediate way.
This is where Tax Freedom Day, which took place yesterday, comes in. Tax Freedom Day is an enormously useful — and remarkably effective — rhetorical tool to show how government makes life in difficult times just that little bit more difficult. It illustrates in real terms the central liberal criticisms of government: it is too large, too out of touch, too inefficient, too unfair. As a rhetorical tool it aims to convince, not to intimidate. It is meant to invite discussion, not threats and vitriol. Unless, of course, you're a reader of the Morning Star, in which case any opinion - no matter how crude - is fair game.
Yesterday the Morning Star, a broadly Communist rag which once served as a party organ of the Communist Party of Great Britain, rode swiftly and alone into battle to spearhead an underwhelming assault from the far left on Tax Freedom Day, straining to remind us that we really do owe the state for everything from the food on our tables to the roofs over our heads to, indeed, our very lives.
After wasting the first 200 words of the article dwelling on a somewhat improbable semantic interpretation of the term "Tax Freedom", an unnamed editor of the paper admonished us that "the tax you pay isn't subsidising vacationing tax collectors' Cuba Libres and frozen daiquiris on the beach in Barbados. [what?] It's funding your roads [privatised in France]... street lights [massively energy-inefficient, the bane of amateur astronomy]... old people's lunch clubs [a nice thing to do but query whether you really need a government for that] ... ambulances [privatised in the United States]... (and) crisis teams. [again, what? Robert Downey Jr.?]"
Because of tax's ubiquity, the paper argued, no-one escapes the requirement to pay homage: "if you are an average person [I try not to be], you were born using its revenues [wrong - private], are taken care of throughout your life using tax-financed resources [also wrong, so far] and you are likely to be buried or cremated using municipal facilities" [planning for it to be wrong: Viking longboat, Nova Scotia, huge party. Everyone's invited].
What's more, the Star adds, paying taxes is not just practical, but super-fun, too. "We actually enjoy working collectively," the paper writes, arrogating to itself the responsibility of speaking for all its readers, "to provide the things we all need" -- no mention on whether the computer servers hosting their website were provided gratis by fellow comrades-in-arms. They continue: "That's what human society is all about. Working together, living together, and playing together."
Yet despite this the Morning Star spent little time, one measly paragraph, those two sentences reproduced above, informing us how much the average leftist enjoyed paying taxes, enjoyed spending the taxes of others, and no space at all on why they do not voluntarily give up fully all of their income to the state. I suspect it is because there is that pesky word in English which is used, not wrongly, in all cases where there is a complete surrender of freedom to ruler from the ruled. We return again to Paine, who wrote that "Britain, with an army to enforce her tyranny, has declared that she has a right (not only to tax) but to 'bind us in all cases whatsoever', and if being bound in that manner is not slavery, then there is not such a thing as slavery upon this earth."
Yet, improbably, the Morning Star drove on. "To the Adam Smith Institute," they wrote, "we send this message... if you don't like it, all you free-market, anarchistic, individualist, solipsistic entrepreneurs, why don't you all bugger off into a corner... (while) we'll get on with building a decent society that cares for everyone in need and hopefully get rid of parasites, exploiters, and, most especially, the Adam Smith Institute."
We all know the history of Communism, and its record when it comes to dealing with dissent; so, with this, I offer no more. What the article says about the state of current thinking in the British far left is another question — the answer to which I shall leave entirely up to you.
[While we're on the topic of the Morning Star, this letter to the editor is a classic — ed.]
Our long-nailed mandarins are granting privileges to bakers and caravanners
A year ago I attended a seminar on space travel. Some of the libertarians there couldn’t wait to leave socialist earth. Sadly, while space travel is still in its infancy, some of us will have to do with a caravan. Is the government’s volte-face on VAT on caravans good news or bad news? Static caravans will only be taxed at 5% instead of 20%. And the pasty tax has been abandoned altogether. Should we rejoice? Or not?
Governments giving privileges to specific industries or people was very prevalent in the Middle Ages. One of the reasons why the industrial revolution took place is because this sort of preferment went out of the window around the time of the Glorious Revolution. No longer were trade, monopolies and tax privileges in the gift of politicians. Individuals were (at least theoretically) treated equally before the law. The Rule of Law — with laws the same for everyone, predictable, and not at the whim of politicians — was one of the greatest export product the Anglo Saxon world ever produced. The insights and choices of billions of individuals began to steer the economy, instead of the preferences of politicians.
One place where this freedom delivered prosperity was Hong Kong. Its landscape, people, and environment were very much the same as the rest of China. Yet it boomed while China remained static. In Hong Kong, the rule of law was applied equally, not in accordance with the whims of long-nailed mandarins or Confucian officials. Occasionally, this equal treatment needed reiterating: in the 1960s, Hong Kong's Financial Secretary John Cowperthwaite (the man behind the Hong Kong miracle) fended off attempts by industrialists to obtain preferment again and again. Two Cowperthwaite quotes on industries seeking preferment:
“I must confess my distaste for any proposal to use public funds for the support of selected, and thereby, privileged, industrialists, the more particularly if this is to be based on bureaucratic views of what is good and what is bad by way of industrial development”.
“I am afraid that I do not believe that any body of men can have enough knowledge of the past, the present and the future to establish “development priorities” — which presumably means procuring some developments as being good and prohibiting others as being bad”.
Or, to quote a certain Mr A. Smith from K. (who, sadly, is not a special advisor): “People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.”
So the bakers and caravanners have won the day. Good for them: I don’t like taxes being put on anyone. But, really, politicians should stop giving preferential treatment to their friends, and stop punishing those industries of which they don’t approve. Either you charge VAT on everything (allowing for a lower rate), or you don’t charge VAT at all.
Wasn’t this government supposed to fight red tape? Differential VAT rates most certainly add an extra layer of costly bureaucracy upon businesses. An equal sales tax for all goods and services would make clear what the tax is to individuals and dispense with silly side-effects such as having to ascertain whether take-away food is hot or cold to know whether VAT is due; or small people avoiding VAT by buying the largest size at Baby GAP.
But most important of all, equalising VAT would avoid the cringe worthy spectacle of politicians claiming to have bought their sustenance at none-existent pasty outlets. It would be worth it for that reason alone.
Today is Tax Freedom Day 2012
- Tax Freedom Day falls two days later in 2012 as UK re-enters recession
- Austerity measures cut the Cost of Government Day back to 23rd June, seven days earlier than in 2011
The UK's Tax Freedom Day – the day when Britons stop working for the Chancellor and start working for themselves – falls today, 29th of May.
The Adam Smith Institute has calculated that, for 149 days of the year, every penny earned by the average UK resident will be taken by the government in tax. This year’s Tax Freedom Day falls two days later than it did in 2011.*
Tax Freedom Day falls later this year down to a number of factors. The double-dip recession, the VAT increase from last year, our high personal taxes, as well as fuel duty and stealth taxes, all mean that the government is taking a larger share of our hard-earned income. Britain’s tax burden is still too high and tax cuts are desperately needed to boost economic growth.
This year’s corporation tax receipts are a good example of how tax cuts can pay for themselves. There were large increases in tax revenue from onshore corporation tax, coinciding with the government’s cuts to the headline rate of corporation tax. Reductions in the corporation tax rate have brought the government higher revenues as more companies choose to invest in the UK. By stimulating growth and investment, tax cuts really can pay for themselves.
However, our Tax Freedom Day still falls long after the USA’s, on April 17th and Australia’s, on April 4th. Our only comfort is that our tax burden isn’t quite as high as France’s, which will have to wait until July to celebrate its own Tax Freedom Day. With Hollande now in power, that day could get even later in years to come.
Cost of Government Day
Tax Freedom Day only measures the money actually raised by the government in taxes, not the full amount it spends. The government borrows one pound for every four it raises in taxes, so if the full cost of government is considered the Cost of Government day, this would fall on 23rd June.
Last year’s Cost of Government day fell on 30th June, meaning that the government’s austerity measures have reduced the cost of government by 7 days. But, when we take into account the extra two days tax burden, the net effect of George Osborne’s austerity measures is a measly five days net cut in the burden faced by taxpayers. “A lot of work still needs to be done,” says the Institute, “ to bring down government borrowing and the Chancellor must make more tax cuts to allow greater economic growth.”
The ASI's Director, Dr Eamonn Butler, says, "Tax Freedom Day, which the Adam Smith Institute has been calculating for 25 years, is the plainest way to show what the tax burden really is. That is why the Treasury hates it. They of course want to conceal how much tax we pay, which is why they are so keen on stealth taxes."
"But we put in every tax, including stealth taxes – income tax, national insurance, council tax, excise duties, air passenger taxes, fuel and vehicle taxes and all the rest – and show just how long the average person has to work to pay their share of them all. The stark truth is that this burden costs us all 149 days of hard labour every year. That's not how long a rich person has to work – it is the time the average person must labour for the tax collectors."
“In the Middle Ages a serf only had to work four months of the year for the feudal landlord, whereas in modern Britain people have to toil five months for Osborne’s tax gatherers.”
"An increasing number of economists believe that Britain's taxes are too high and are choking off recovery. Some politicians say they need to keep taxes high in order to balance the government's books. But the trouble with governments is that they always spend everything they raise in tax – and then as much more as they can get away with through borrowing. Just as the rest of us have had to cut back, so should the government. The UK economy would be a lot healthier for it." (Here's a video of Eamonn talking about the morality of capitalism.)
Steve Baker, MP for Wycombe, said: "Many congratulations to The Adam Smith Institute for making transparent the cost of government and just how far government lives beyond its means. It's time to ask whether society is well served by such a huge state or whether we wouldn't all be better off with institutions which know their limits.
"A wealth of evidence is currently emerging which suggests we should stop fibrillating and make a near-revolutionary commitment to ending crony capitalism and embracing social cooperation through business."
*TFD was 28th May in 2011, and this year’s date includes the extra day for the leap year. Our yearly estimation of Tax Freedom Day is regularly updated to match the Treasury's most recent figures.
Of pins and things
Adam Smith’s Wealth Of Nations reference to pin making overshadowed the broader significance of this “trifling manufacture”, which had been “very often taken notice of”. Paucelle (2007) traced Smith’s sources to Diderot and d'Alembert’s Encyclopedie (1755), Duhamel’s Arts & Metiers (1761), and Macquer’s Dictionnaire portatif (1766), all detailing the long-established manufacture of L’Epingles (Pins). Smith used these details to illustrate the direct association of the division of labour with sustained increases in productivity, leading to the wider consumption of the “necessaries and conveniences of life”, and, we now know, to unprecedented living standards in market societies.
Smith also illustrated his observation of the division of labour in the manufacture of the labourers’ common woollen coat. Briefly, it spread markets for many suppliers situated nearby, and far away, rather than confine its benefits to single workshops. Typically, gun manufacturing in the 18th century was highly segmented and, in time, similar sub-divisions appeared in the pin and printing trades too. Steam power, mechanisation and specalised hand-tools led to feeder developments, limited only by the extent of their growing markets. Michael Munger reports that in 1820 there were 11 pin factories in Gloucester, but by 1939 the number in the whole United Kingdom had shrunk to twelve, and by 1978 to only two, using automated and computer-driven pin-making machines, increasing output from each labourer in Smith’s report of 5,000 pins a day compared to modern daily outputs of 800,000 pins.
Smith illustrated the early effects on the division of labour on the gradual spread of general opulence. He contrasted the household possessions and relative comforts of an 18th-century “industrious and frugal peasant” with the scant possessions of “ten thousand” indigenous people of Africa. He commented that these clear differences in everyday living standards were due to “the tools of all the different workmen employed in producing those different conveniences” and to the “variety of labour employed”, with the “assistance and cooperation of many thousands”, in contrast to the singular dependence of each “naked” native on themselves and a few compatriots nearby.
Brad Delong dramatised the stark gap between today’s Yanomamo stone-age, hunter-gatherers along the Orinoco River with modern New Yorkers along the Hudson River, by referring to the availability and access to products. New Yorkers have access to tens of billions of products supplied in complex product chains from across the entire globe, as against only several hundred for the Yanomamo people, limited as they are solely to whatever they can provide for themselves within their tribal territory. New Yorkers, in contrast, have access to the productivity of billions of participants they do not know, nor need to know. The division of labour makes the case for markets where possible.
Gavin Kennedy blogs at Adam Smith's Lost Legacy.
Dr Tim Evans
Dr. Tim Evans has worked for the Adam Smith Institute as Consultant Director from 2008-2012 and in the late 1980s as Press Officer and Senior Policy Consultant. Tim has a PhD from the London School of Economics.
From 1991-1992, Tim was the Chief Economic and Political Adviser to the Slovak Prime Minister – Dr. Jan Carnogursky – and was Head of the Prime Minister's Policy Unit. Between 1993 and early 2002, he was the Executive Director of Public Affairs at the Independent Healthcare Association in London where he oversaw the political affairs and public relations of the UK's independent health and social care providers. And from 2002 to 2005, Tim was President and Director-General of the Centre for the New Europe.
Tim is also CEO of the Cobden Centre, Chairman of the Economic Policy Centre, Chairman of Global Health Futures Ltd, Managing Director of Farsight SPI Ltd, and a member of the Mont Pelerin Society.
Tom Clougherty
Tom Clougherty was executive director of the Adam Smith Institute until Summer 2012. He previously worked as the Institute's policy director, and before that was Research Director at the Globalisation Institute – a think tank focused on trade and development issues. Tom is interested in all things free market and libertarian, but is particularly enthusiastic about the Austrian school of economics.
In his spare time, Tom enjoys eating, drinking, and watching cricket. He has a degree in law from the University of Cambridge.
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Tom Clougherty
Tom Clougherty was executive director of the Adam Smith Institute until Summer 2012. He previously worked as the Institute's Policy Director, and before that was Research Director at the Globalisation Institute, a think tank focused on trade and development issues.
Tom is interested in all things free market and libertarian, but is particularly enthusiastic about the Austrian school of economics. In his spare time, Tom enjoys eating, drinking, and watching cricket. He has a degree in law from the University of Cambridge.
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Tim Worstall
Tim Worstall is the author of Chasing Rainbows: Economic Myths, Environmental Facts. He blogs at TimWorstall.com, the Adam Smith Institute blog and for The Telegraph.
