Silliness from the Lib Dems

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As Labour’s popularity is at an all-time-low, the next general election could prove a real opportunity for the Liberal Democrats to make an impact on the two major parties. So, it’s good to see they’re focusing on the major issues affecting Britain today.

The idea that advertisements should be banned from showing airbrushed models is laughable, and yet this appears to be a serious proposal. Their argument is simple: teenage girls see airbrushed women on TV and strive to reach similar levels of unnatural perfection, damaging their health on the way. Therefore, we must ban advert actresses from being airbrushed. This is illiberal nonsense. I used to buy shaving gel advertised by David Beckham; it never tempted me to to cover myself in tattoos or grow a Mohawk!

Long before TV adverts came around, people would go to any lengths to look attractive and acquire what they saw as the perfect body shape, even if it damaged their health. In 1903, for example, Gladys Deacon had hot wax injected into her face to reshape her nose. It destroyed her face, but nobody considered banning candles. There is clearly a human desire to look good. Banning certain TV adverts is not going stop this.

If they are going to take advantage of the massive political opportunity the polls are currently giving them, the Lib Dems are going to have to up their game and tackle the serious problems facing Britain, rather than raising gimmicky minor issues worthy of a fringe party. It will be interesting to see whether Nick Clegg can take them to the next level.

Internet Explorer 8

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It seems that the ASI website is not displaying properly for Windows users who have upgraded to Internet Explorer 8. With a bit of luck, we'll be able to sort that out over the next few weeks, but apologies for any inconvenience in the meantime. The website is still displaying properly in Safari, Firefox, Google Chrome, and Opera – all of which are available for free download by following the links.

Ten Economic Priorities

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Our latest report – Ten Economic Priorities: an agenda for an incoming government – is released today. In it, City analyist and ASI fellow Nigel Hawkins argues that the next government should draw up a 'Medium Term Financial Strategy' to convince investors that it is serious about bringing the public finances under control and being able to pay off the country's mountain of debt.

The need for such a measure is clear. The government aims to borrow £175 billion this year, and to continue borrowing, until its total debt reaches £1,370 billion in 2013/14 – some 76 percent of the nation's income. And of course, that ignores the £37 billion capital injection into the banks, and the £585 billion of bank liabilities now underwritten by taxpayers. Moreover, the IMF and other leading economists say the government's growth forecasts are far too optimistic. The bottom line is that unless serious action is taken, Britain could go broke.

Hawkins points out that public spending has soared, with the government expecting it to reach £671 billion this year. Extra welfare payments because of the recession could easily drive that figure higher. Accordingly, the report argues for radical, but politically realistic, across-the-board cuts in public expenditure – amounting to real terms reductions of 3 percent per annum over the medium term.

The report also makes clear that taxes have risen substantially on Gordon Brown's watch, and need to be reduced and simplified in order to generate economic growth. Across-the-board tax cuts will not be feasible until expenditure cuts begin to stabilize the public finances. However, swift cuts in corporate taxes, and reductions in other business burdens, are essential in order to boost the UK's competitiveness. In particular, the next government should reduce corporate taxes in order to promote investment, and reduce and simplify income tax and NI to promote employment.

The other seven priorities for the next government are as follows:

  • Closely control the money supply and commit to sound money.
  • Privatize functions such as water utilities, broadcasting, the postal service, and transport.
  • Reduce public sector pension liabilities by closing over-generous schemes to new members.
  • Restore honesty into PFI deals, which are currently not counted on the government's balance sheet.
  • Radically improve the management of public procurement to reduce cost and time over-runs.
  • Overhaul bank supervision, and stress-test the large banks to forestall a future crisis.
  • Progressively reduce government guarantees to the banks and sell its bank shareholdings.

The full report – which is very much worth reading – is available for free download here.

Barclays: £3 billion profits

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The widespread response to Barclays' announcement of £3 billion profits for the first half of the year has been broadly predictable: dismay about suggestions that bonuses might be offered, frustration that many small businesses still have serious difficulties obtaining credit, and a sort of  retributive anger that bankers, vilified justifiably as a factor in the current recession, seem to be back on their feet whilst many struggle during these hard times.

Yet Barclays' did not request support for the government, even if Robert Peston correctly points out that they may have benefitted to a degree from various governmental guarantees and safety nets. Instead, as the global downturn was really starting to bite last summer, they raised £4.5 billion in a rights issue from overseas investors, predominantly in Qatar, China and Singapore. Strong, independent banks will be a vital element in the economic recovery.

On the charge of not providing enough cheap credit, the banks are caught between a rock and a hard place in being urged by government to keep greater capital reserves and be more cautious with lending, whilst also being told to ensure that businesses can get the funding they need to ride out the recession. Furthermore, the high cost of lending is determined by the interest rate of wholesale lending between financial institutions, rather than merely the theoretical Bank of England base rate. Significantly, it is not retail banking from which Barclays is predominantly getting its current profits: profit from this fell 61% to £268m, whilst the amount of written off credit card borrowing soared 92% to £915m. Instead, it is profits at its investment banking division, Barclays Capital, that roughly doubled to £1.05 billion that was a key factor in their positive figures, helped by a gaining former customers of Lehman Brothers.

However, most importantly, we should be glad that a bank is making a profit. Firstly, it provides another possible indication that the recession may have bottomed out, gives investors greater confidence in financial markets and shows other banks that profitability is possible with the right strategy even in the current situation. Secondly, it is vital for Britain to have large multinationals making large profits, creating employment and wealth and contributing to the economy. The more companies get in profit sooner, the better off we will all be: Barclays' results should be greeted with relief more than cynicism or resentment.

It has become politically impossible for Barclays' to return to the system of bonuses for short-term performance that was de rigeur a couple of years ago, as Chief Executive John Varley put it "The year is not over - there are five months to go. We will make our decisions about variable compensation at the end of the year. When we do so..... we will behave responsibly." Providing the bonus system is designed to moderately reward cautious, long term growth rather than reckless risk taking, we should all be happy that a degree of prosperity is returning to a corner of the services sector, still Britain's economic powerhouse. Incentivising the creation of wealth, providing it is done responsibly, is exactly what we need.

Should Gary McKinnon be extradited?

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Not many people agree with me on this. Just looking through today’s papers I see I’m up against the formidable line-up of Boris Johnson, Peter Hain, Nick Clegg, and Sting.

No doubt I’m also in disagreement with many readers of this blog, for whom the recent judgement of the High Court may seem symptomatic of much that has been wrong with the British state over the last decade: a loss of common-sense decision-making, an unprecedented erosion of our liberties, and an unquestioning obedience to our American allies.

Wanting to extradite a vulnerable young man suffering from Asperger’s syndrome, who naively poked around military computer systems to satisfy his obsession with UFOs, and faces a possible life-sentence in a foreign prison, may also seem pretty unfeeling. So let me try to explain myself.

Of course I feel sympathy for the man, but that is not enough: this is not simply an emotional argument. Nor, despite the best efforts of indignant newspaper columnists and opportunistic politicians, is it a moral or a political one. It is a legal debate, and it is properly decided on legal grounds.

Those criticising the extradition have generally relied on three arguments, each of which the courts have considered at length:

  1. That the Home Secretary should never have sanctioned the extradition. Section 93 of the Extradition Act 2003 “requires him to order the person to be extradited unless one of the specified exceptions applies, none of which is relevant to the present."
  2. That McKinnon’s syndrome leaves him too vulnerable to be tried, and potentially imprisoned, in the US. The legal argument is that extradition would breach his rights under Article 3 of the ECHR, and so the Home Secretary has a duty not to extradite him. The Court concluded that “a diagnosis of Asperger’s Syndrome manifestly fails to come within the type of conditions that engage Article 3."
  3. That McKinnon should be tried in the UK. The Court held that there were many reasons to prosecute in the US, not least “the location of witnesses and the location of real evidence, where the harm was done" and that “there is no reason for the Director of Public Prosecutions to seek to prevent his extradition by prosecuting him here and he is under no relevant duty to do so."

I am no expert, but the judgements of the courts seem intelligent, considered and faithful to the law. Perhaps for this reason, there has been very little engagement in the media with the legal arguments but plenty of criticism of the outcome.

To those angry at McKinnon’s impending extradition, it is therefore worth asking what they would recommend instead. Should the High Court have put public pressure and personal pity before the honest interpretation of the law? Should the Home Secretary have ignored the clear procedure of the Extradition Act, or over-ruled the legitimate decision of the Court? Surely the answer is no.

Boris suggests that the Home Secretary’s inaction may prompt us to “wonder why we have elected politicians at all." He already knows – we have elected politicians to represent the people in the production of legislation and the business of government, not to involve themselves in the administration of justice. If the law is to mean anything, it must remain the preserve of the judiciary, and, paradoxically, it must be followed by the courts even when it seems unjust. To put its interpretation in the hands of politicians, however good their intentions, and to throw cases open to be determined by the prevailing mood, is a dangerous and destructive step. Even in a case as difficult as McKinnon’s, we must resist its temptation.

UPDATE: Just to clarify my argument in the light of some comments below, none of this is to suggest that the Extradition Act is not in need of extensive amendment, perhaps affording more circumstantial discretion, accounting for medical conditions, and insisting on reciprocity from US authorities. My point is simply that politicians shouldn't blame judges for correctly interpreting bad laws, or arbitrarily intervene in individual cases because of public pressure.

James Freeland joins the ASI

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I am delighted to have the opportunity to be able to experience a think tank as prestigious as the Adam Smith Institute for two weeks. I have completed A Levels in History, Maths and English Literature and have an offer from Brasenose College, Oxford to study Philosophy, Politics and Economics next year. Whilst I have not formally studied any of the three disciplines yet,  I have enjoyed reading about British Political History, Constitutional Theory and of course Competition and Free Markets!

I am particularly interested in how free-market theories can be applied practically to facilitate an effective recovery from the current recession, and improve the currently inefficient provision of public services. Something I feel  particularly strongly is that educational reforms under the current government have failed to advance opportunity or decrease inequality sufficiently. Furthermore, there are serious implications to the fact that, regardless of the reality, qualifications are constantly being devalued in the minds of the public and employers. The constant creeping infringement of civil liberties is something that also concerns me. Thankfully ID cards have for the moment been undermined and will not be compulsory, but the advent of  increasingly complex technology means that we must be vigilant about the nature of information stored about us and how it is used.

In my spare time, I enjoy casual games of tennis and golf, and travel whenever possible.

ID cards: still a stupid idea

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In his unveiling of the final design for the national identity card last Thursday, Alan Johnson reminded us quite what a monumental failure the whole scheme has been.

Having last month backed down under pressure from all those with sense (including the public, both opposition parties, airline staff and some in the civil service) and announced that the cards would not be made compulsory, Johnson could no longer sell the scheme as the miraculous, one-shot solution to terrorism, illegal immigration and identity fraud that had been promised. At the great unveiling the cards were more humbly presented as “an important addition to the many plastic cards that most people already carry around."

The chief merit of the new card is apparently that it’s slightly smaller than a passport: useful as “a credit card sized travel document" for journeys within Europe. Doubtless those fed up by the burden of lugging about their weighty, cumbersome passports will be happy to shell out the £30 to buy an ID card, but the rest of us may not be so pleased that we’ve already paid a total of £200m towards the scheme, and are looking at another £5.4bn if the scheme progresses as planned.

When faced by a British public distrustful of big state databases, fed up with grossly wasteful gimmicks and unwilling to tolerate further intrusion into their lives, the government should have scrapped the scheme entirely.

Labour's static society

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New Labour came into power with a host of promises they were going to fulfil. We have seen them fail in many specific areas; health, industry, education, and so on. But one of the overriding ambitions of New Labour was to increase social mobility. Here, they have failed spectacularly.

New labour pledged to break down the age-old barriers within our education system and labour markets, meaning that that anybody could achieve anything they set their mind to in Britain. But through all the spin and policy mismanagement, that final goal seems to have been forgotten, and we are now in worse situation than in 1997.

Jeff Randall has written a damning critique of New Labour's social mobility schemes here. The evidence is clear: social mobility has declined in the last decade. This is in conjunction with a deepening ‘poverty trap’, creating a cycle where families and communities are continually punished by government meddling in the labour market and the welfare state.

By interfering with education, creating low-income quotas for universities, abolishing grammar schools, and ‘dumbing-down’ public exams, the government has only managed to punish high achievers and create false success and disincentives to work for others. This cannot continue. What incentives do students have to study and improve themselves if they know they can pass exams with a minimal score? Such dumbing-down of education soon leads to a dumbing-down of society.

This is an example of what happens to society at large, and to the average family, when governments focus on image, perception and spin, rather than reality.

All is politics, all is politics

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Johann Hari seems to have got a tad confused really:

Far from being some dreamy call to kumbaya, collective political action is the single biggest reason your life is incalculably better than that of your great-grandparents.

Hmm, I don't know about yours but my great grandparents were, well, among them at least, an Irish publican, a Norfolk vicar and a newspaper printer in Leeds. Their lives were, by current standards, harsh, even though they were none of them at the bottom of the economic pyramid. Real incomes per capita have grown, at constant prices, by about three times since 1900. As they started out, in the 1880s, transport was still a horse, a bicycle or a train, no one at all had flown in a heavier than air craft (although grandfather, it has to be said, went on to crash such no less than 8 times): antibiotics of any sort, let alone penicillin, were still decades away. The germ theory of disease was really only just getting going and an infected blister would kill the son of a US President in 1924.

Telephones, radio, the gramophone, each had either only just been invented or were still over the horizon: entertainment was live either at the theatre or (eek!) around the piano in the front parlour. Food was grossly expensive as a portion of income, deficiency diseases were rife. Dentistry had advanced little beyond the barber surgeon and in fact, for most diseases, treatment other than bed rest was non-existent.

Umm, you know what? No, I don't think collective political action is what has made my life so different from that of my great grandparents. I think I'll stick with the more reasonable explanation, that these longer, better fed, more mobile and more healthy lives have been brought to us by that strange mixture of capitalism and free markets that drives so much of the world.

For I can see many parts of the world that have had lots of collective political action and many of them seem to be still lacking food, medical care and all sorts of modern technologies: while I cannot see anywhere at all that has been capitalist and free market for the past century that lacks them.

And as for kumbaya: words fail me as they so obviously did the lyricist.