Today's glaring non sequitur

We’ll admit to being more than a little puzzled by one of the claims being made here. That young people are being hard done by and require subsidy. Well, perhaps, perhaps not, that’s arguable. It’s this little bit:

Then millennials came along. Born between 1981 and 2000, with the oldest now pushing 40,

We cannot think of any useful manner of classification that has 40 year olds as young people. There are grandparents out there still below that age. Without some near terminal level of infantilisation we really do have to consider people entering their fifth decade as being adults.

This part though doesn’t puzzle us it’s just the standard evidence of not thinking:

Wealth taxes make sense.

The argument being used is that young people need subsidy, wealth taxes would largely be paid by older people therefore they make sense. But that’s bad logic. Whether or not we wish to tax a particular activity or state of being depends upon whether we wish to tax that activity or state of being. Whether we wish to subsidise some group is equally dependent upon whether we wish to subsidise that group. The two decisions are entirely independent of each other.

To claim that wealth taxes are a good idea because the young - or more accurately the middle aged - require a subsidy is a complete non sequitur.

Happy (sort of) Tax Freedom Day!

Tax Freedom Day is a measure of when Britons stop paying tax and start putting their earnings into their own pocket. For 2020 we’ve estimated that every penny the average person earned for working up to and including May 29th went to the taxman—from May 30th onwards they are finally earning for themselves. 

British taxpayers have worked a gruelling 149 days for the taxpayers this year. More than in any year under New Labour, and one day longer than last year. Britain’s tax burden is moving in the wrong direction.

Government tax choices fall on UK Taxpayers, this year they will fork out £773bn—representing 41.17% of net national income. 

Unfortunately for Britons, this Tax Freedom Day cannot yet take into account the tax costs of measures taken to tackle COVID19. All borrowing is a form of taxation deferred and the hundreds of billions of pounds borrowed to tackle this viral threat will only begin to be borne in future years and as the government begins to unlock economic activity. 

Tax Freedom Day remains over a month later than in the USA, and the UK has fallen behind Canada where their Tax Freedom day was on May 19 this year.

In April 2020 we commissioned Survation between 15th - 16th April 2020  to undertake a nationally representative online poll of 1,001 UK adults (margin of error +-3.1%) to investigate the financial impact of the lockdown, views on developing an economic recovery and lockdown exit plan, and tax policy after the lockdown.

There is popular support for reducing taxes after the lockdown to help boost the economy and jobs. Younger cohorts are the most supportive of tax cuts after the lockdown. Almost three-quarters of respondents (72%) think that the Government should reduce taxes after the lockdown to try to increase economic growth and jobs, while fewer than one-in-ten (8%) disagree with reducing taxes.

Of those aged 18-34, two-in-five (44%) “strongly support” lower taxes after the lockdown, compared to just one-third (33%) of those over the age of 65.

Fortunately there are some tax and regulatory changes, that we set out in a recent report Winning the Peace, that would boost growth post-lockdown and the pay packets of Britons right across the country:

1. The UK Government should respond to dire warnings on unemployment by immediately raising the threshold for employer’s National Insurance to £12,500.

2. Abolish the Factory Tax, by allowing for the immediate full write off on capital investments, to encourage business investment. ASI estimates show abolishing the factory tax would boost investment by 8.1 percent, and labour productivity by 3.54 percent (£2,214 per worker) in the long-run.

3. Governments across the UK should abolish stamp duty (in Scotland the Land and Buildings Transaction Tax). Britain’s most damaging tax, Stamp Duty destroys 75p of wealth for every pound raised. 

As our very own Dr Eamonn Butler puts it:

“Borrowing in a crisis is easy, making sure we balance the books and stop passing the buck to the next generation will be the hard bit. An economic recession and even the possibility of a depression cannot be ruled out. There will be calls for grand plans and spending like the clappers, but what we’ll actually need is the economic freedom to make choices for ourselves. We’ve all seen the damage in recent weeks of Whitehall deciding what’s good on our behalf. 

“As we remove short-term restrictions we also need to remove the long-run burdens of government on transactions, investment, employment and our access to goods and services. We should not risk turning the last few months we’ve lost into a whole lost decade.”   

Happy Tax Freedom Day!

We think this is absolutely fascinating

The Financial Times is attempting to pull together the numbers necessary to judge upon national reactions to and policies about the coronavirus. In the course of which we get this:

The UK has suffered the highest rate of deaths from the coronavirus pandemic among countries that produce comparable data, according to excess mortality figures.
The UK has registered 59,537 more deaths than usual since the week ending March 20, indicating that the virus has directly or indirectly killed 891 people per million.

They are comparing excess deaths - the deviation from the norm expected at this time of year. Thus this includes those killed by Covid-19 and also those killed by the health service - in any place - essentially being closed to anything not Covid-19. As they say it’s the best approach - although we ourselves make no claim for their specific numbers - to get a handle on the overall effectiveness of the battle against.

Given the information it is then necessary to try and work out why? In the case of a pandemic the first place to look, we submit, would be at the health care system. Either and at the delivery of health care itself or the system supposedly preparing for public health and pandemics. That second would be Public Health England and we’ve not heard much either from them or about their performance here.

But rather more importantly, Britain is unique in its delivery of health care. No one else has anything quite like the National Health Service - this being something we are told so repeatedly that it has become the national religion. OK, so suppose it is, unique and entirely different. This evidence of it performing worse than any other system would be good reason to think through whether we actually want to have a system so unique, wouldn’t it?

What we think absolutely fascinating is that even if the FT is correct, that the British outcome has been worse for some reason, the one that absolutely won’t be examined is whether the NHS, by its design, made that be so. It’s a religious matter, d’ye see, not one subject to evidence or examination.

Can't we all be Keynesian about this?

This may have been more than a little impolitic but can’t we all agree on one thing?

Environmental advocates have reacted with outrage after a provincial energy minister in Canada said that coronavirus restrictions on public gatherings make it a “great time” to push on with a contentious pipeline project.

During a podcast hosted by the Canadian Association of Oilwell Drilling Contractors, Alberta’s energy minister Sonya Savage was asked about the Trans Mountain expansion project, which is under construction despite despite fierce opposition from environmentalists and some Indigenous groups.

“Now is a great time to be building a pipeline because you can’t have protests of more than 15 people,” Savage said.

“People are not going to have tolerance and patience for protests that get in the way of people working. People need jobs and those types of ideological protests that get in the way are not going to be tolerated by ordinary Canadians.”

Her comments prompted disbelief and indignation among environmentalists.

It is a standard application of crude Keynesianism that troubled economic times are exactly when we should go build all that lovely infrastructure. You know, the multiplier effect and all that. Even - as Krugman with the alien defence system even if aliens don’t exist - that spending upon something entirely wasteful and useless still makes us richer because Keynes.

Now the insistence is that it does matter what is built. We agree - it does matter what is built. The what, the why, the wherefore, they always matter. Even if we accept - which we usually don’t - the existence of that multiplier it still does matter what is built and whether it is useful in and of itself.

Which is very cool - we now need to examine each and every idea for government spending as to whether the thing being spent upon is worth having in itself, it is no longer enough to just shout “Stimulus!” Or at least that would be true if these people were consistent and perhaps we should hold them to being so?

An Australian-style co-payments system for healthcare

Britain's love for the NHS must not blind us from the systematic faults during this crisis. From the difficulty in sourcing and delivering personal protective equipment, to the ill-fated discharge of Covid-positive patients to care homes — something is not right with our supposedly perfect system.

Even during normal times, the NHS can struggle. A perpetual complaint is the many days, if not weeks, it can take to get a GP appointment. Many of us who use it, many who work in it, find it totally dysfunctional. But it doesn’t have to be this way.

Those clapping every Thursday night in support of the NHS should speak to foreign visitors. 

The NHS too often levels down. It refuses to acknowledge anything outside of itself. There are plenty of other countries out there, developed and Western, that provide timely and universal access to healthcare. There are plenty of friendly countries to learn from. 

During this crisis we have heard much about Germany. They have a decentralised, insurance based system. While this may be a better model for the UK in the long-run, as long as there is healthcare for those who cannot afford insurance, it will be difficult to jump to this system in a single leap.

Another alternative is Australia’s world leading mixed public-private system. Australians who visit and live in the United Kingdom cannot understand why they cannot simply book an appointment at any GP practice at any time. At home in Australia they can opt for a fully state funded appointment (“bulk billing”), or pay a small fee to see a private GP which is subsidised by a state supported co-payment. This means practically anyone can access quality healthcare in a timely manner.

In this country, people with a range of incomes have to pay for their housing, food, gas, electricity and clothing. All of these are basic human needs, provided at various qualities. For those struggling, we give them cash payments but do not direct how they spend the money. But somehow we have become obsessed with the false promise of healthcare that is perfectly fair and evenly distributed irrespective of the ability to pay.

The priority should be ensuring that everyone has access to a minimum standard of healthcare — not that everyone has access to the same, but lower, level of care. Our goal should be to lift the quality of healthcare for everyone, not to bring those at the top down. This can be achieved with a co-payment system, in the Australian mould, that provides broad swathes of people access to high quality, private healthcare. This would both take pressure off the public system and provide much greater patient choice. This means everyone ends up with a higher standard of care.

Opponents to such a system would scream about the creation of a “two tier system”. But, in reality, we already have a two tier system. A relatively small number can currently opt for healthcare from private GPs and hospitals in the United Kingdom. Because the current two tier system is not encouraged, and indeed it has been positively discouraged by various government policies, those in power can claim plausible deniability that they have allowed the two tiers. 

I have worked in private general practice for over 25 years in central London. If the NHS provided adequate care no one would need to use our services. Many of our patients are not someone wealthy or famous, but a young working person on an average London salary who does not have the time to see a GP near to where they live. They pay our fees because they want to get back to work quickly.  

Many of these patients have never bothered to register with an NHS GP. If NHS GPs were allowed to see their own patients privately (banned since 1948), this could allow a co-payment system which would enable many patients to pay a top up fee to access faster medical care, likely using a remote consultation such as email, telephone or video. NHS dentists and hospital consultants have no such restrictions.

General practice is changing. Younger doctors are not opting for full-time work, but are working part-time in the NHS and privately for providers such as Samedaydoctor or video apps such as Babylon. Since these doctors have made the choice to work this way, it would make sense to not have an artificial separation.

During the pandemic the private sector made their hospital beds available to the NHS. In practice, like the Nightingale hospitals, these beds were not needed. It is time now to build on this form of collaboration and finally to remove the stigma of “privatisation,” whereby the NHS contracts to private providers. 

During the last election campaign the term privatisation was regularly used as a scare tactic to imply that at some point people will be forced to pay for medical care. We have many people in this country who cannot afford to pay anything for additional medical care. The basic ethos of the NHS, universally free at the point of use, should not change. But we do need to have a broader debate about the involvement of the private sector in the provision of high quality healthcare.

Dr Laurence Gerlis is the Chief Executive Officer and Lead Clinician at Samedaydoctor

The problem with this is what Ms Villiers?

We are warned:

British farmers “will go out of business” as a consequence of a trade deal with the United States, former environment secretary Theresa Villiers has warned.

Admitting that she had "great fears" about "unfettered competition between domestic farmers and US imports", she said it would be very difficult for domestic farmers to compete on price.

The bit that puzzles is, well, what’s the warning about? For what is being said is that food from British farmers is more expensive than that from American - and other places around the world. This means that the living standards of us Britons are lower than they would be in the absence of the import restrictions that protect those British farmers.

That statement actually is that the “protections” to British farmers impoverish the rest of us. And when it’s put that way the problem with us all getting richer by their absence is what?

The Welsh outcome is worse, is it?

Back a few weeks there was that interesting sight, the trialling of a meme, in the leftish parts of the national press. The numbers for Covid-19 for England were looking worse than those for Wales and Scotland. The trial was to see whether this could be blamed on the structure of the health care services in the three countries.

NHS England is more market based, has more subcontracting (“privatisation” in the horror stories) and is generally less centrally Stalinist than the other two. It was possible to see chins being rubbed, possibilities considered, could this actually be built up into a story that would reverse this distressing tendency for NHS England to be run on the basis of what worked rather than what was ideologically pure.

We now have more information:

As Britain eyes an end to lockdown, one area is creating a particular headache for public health officials, scientists and politicians: Wales, and especially the old mining communities.

The country has proportionally almost twice the number of cases as the rest of the UK while mortality rates in and around the Rhondda Valley have also been among the very highest in the country.

Across Wales, the latest figures show 409 cases per 100,000 population compared to 262 in England, 273 in Scotland and 247 in Northern Ireland.

As of Sunday, Wales had lost 1,267 people to Covid-19 out of a population of just over three million.

One of the explanations we’re not going to be offered in that leftish press is that the greater centralisation, the lower impact of subcontracting, of NHS Wales has led to this underperformance relative to NHS England.

Odd that, isn’t it? Almost as if some people would prefer to ignore reality and pursue ideological purity at all costs.

A deep and painful misunderstanding about how economies work

There’s a consensus emerging and as with most forms of groupthink it’s the wrong one:

A consensus has emerged that the only route out of the lockdown is with government cash. From across the political divide there is support, offered reluctantly in some quarters, for the idea that only state-funded agencies will have the financial muscle and the will to put the wheels of the economy in motion once the pandemic has receded.

And:

Economists warn that the coronavirus crisis could see a return to the persistent and damaging levels of unemployment of the 1980s, with the jobless rate averaging 10% or more for the next five years.

Therefore government must do something and job guarantees and planning and creating jobs and……we agree that government must do something but we insist that what must be done is less.

At heart here this is a misunderstanding of the basics of how an economy works. We have those human desires and wants, we have scarce resources with which to sate them. What can be sated and how at any one time depends upon tastes, fashions, the state of technology. It is possible, of course it is, to mix and match those varied resources to meet different human desires and to do so in different ways.

So, who are those people who do so? By definition of the word those who essay attempts to meet desires by combining the extant resources are entrepreneurs. That’s just what the technical meaning is to run alongside the economic definitions of land, labour and capital.

So, we have an excess supply, at current prices, of one of those resources? That’s what unemployment is, more labour than can be usefully employed given the current structure of attempting to sate wants. You see the implication here? We want more experimentation with the employment of that surplus resource. We also want to make sure that actual human needs and desires are sated by the resultant output.

Cool - that means we want more entrepreneurs doing more entrepreneuring. What’s the greatest barrier today to being entrepreneurial? The regulations, licences, permissions, required to do anything new or something old in a new manner. Thus, to get those unemployed usefully back to work we need to reduce those barriers.

We need more free marketry red in tooth and claw, free of the restraining hand of the bureaucracy, because that’s how new businesses that employ people get started.

Sure there’s something for government to be doing in these trying times. Less.

We'd hope that policy making would be a little better informed than this

This is not, of course, a policy maker, it’s Philip Aldrick, the Economics Editor of The Times. But it’s a good guide, as that, to the sort of things that is being said in policy making and influencing circles.

One lesson we have since learnt is that more of the austerity savings should have come from targeting wealth. Taxes that skimmed the froth off asset prices that were inflated by quantitative easing and low interest rates would have spread the pain more evenly.

No, not really. The entire point of QE was to raise asset prices and thus reduce yields. This would push people out along the risk curve in their investment behaviour and thus mitigate the slump. To tax the returns from those rises in asset prices would be to cancel the very effect which the struggle is to produce.

Yes, of course government is like isometric exercise, a lot of effort and going nowhere but we should at least try to not kill the very policy we’re enacting.

This is also a common and mistaken thought:

The highest rate of capital gains tax is 28 per cent, on second homes and private equity “carried interest”, far lower than the 50 per cent top rate of income tax. Even dividends attract more, at 30 per cent.

A familiar structure would be to draw a salary of less than £50,000, taxed at 20 per cent, and take a dividend, taxed at 30 per cent.

This is to miss that there’s a third tax in the mix here, corporation tax. The dividends can only be paid out of post corporation tax profits and it’s a matter of design and policy that the CT plus income tax rate on dividends is about the same as the pure income tax rate upon labour income. The system is deliberately set up to do this.

CT also falls heavily upon the capital value of the ownership of the company. Something that makes £100 a year to distribute is worth more than something which makes £80. If we charge £20 a year in CT to that £100 of profits then we’ve just made the company shares worth less. That is taxation of the ownership of the company, isn’t it?

It’s entirely true that we can - and should- make useful changes to the current taxation system. But it’s rather important that we actually understand the current system before we do so. It’s not entirely obvious that those doing the discussing at present do so.

A call for the return of peasant agriculture

We think The Guardian has made a mistake here. This is from Fridays for Future, the Greta Thunberg thing, calling for changes in the Common Agricultural Policy:

“[We] demand a pathway to climate neutrality for the EU’s agricultural and food sector,” the activists wrote in an open letter published ahead of the virtual meeting. “We need to transform direct payments into payments for public goods. Public money needs to flow into the transition to sustainable, climate-friendly and peasant [sic] agriculture. We need a new evidence-based and just CAP.”

The error being The Guardian’s addition of the “sic” there. For the demand really is that we move back to peasant agriculture, not to pleasant or some other word that has been misspelt.

The entire point of industrial agriculture - we can call it chemical, non-organic, other names exist - is to reduce the amount of human labour required to perform it. The removal of all of those substitutes for human labour will require adding that backbreaking work back in.

The problems with this idea being at least twofold. Firstly, the backbreaking labour. Very few of us indeed wish to do this as evidenced by the difficulty in recruiting people to go pick the fruit and veg crops. You might have seen something in the newspapers just recently about this. Secondly, to go back to us all standing around in muddy fields is to kill off the very idea of civilisation itself.

For if we are all to be growing food there’s no one left to staff the NHS, run the libraries, dance the ballets, put up the phone masts and serve the pints. Don’t forget, back when we did have machine free and organic agriculture some 80% of the population had to be doing that fields thing. Currently we have perhaps 2% - that’s 78% of the population that’ll have to move from doing all those non-farming, non-food things we so enjoy consuming back to providing that winter diet of turnips.

We’ve just spent the last 8,000 years since the invention of agriculture itself trying to haul ourselves up out of the workload that non-industrialised farming imposes. To kill off the results of that effort and return to peasant farming is, quite literally, insane. And if only the call were a typo….