Blog Review 841

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A party game: since the millennium, can anyone point to an advance rather than retreat of civil liberties?

So will Gordon Brown get howled down the next time he breaches this Treasury rule?

An update from the Department of Wibble.

This won't last long. An outbreak of common sense in government.

A return to normal, an outbreak of nonsense in government.

If only someone would tell our own harpies. Slavery and sex work are not the same thing.

And finally, we'll miss him when he's gone.

Property bubbles, credit bubbles, and land value tax

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As I explained in yesterday's post, all existing taxes that relate to property ownership, occupation, or wealth generally (Council Tax, Business Rates, Stamp Duty, Inheritance Tax, Capital Gains Tax, the TV licence fee and Insurance Premium Tax) could easily be replaced on a fiscally neutral basis with a flat annual tax on underlying non-agricultural land/location values once prices have bottomed out and stabilized.
 
Average total property values per square yard for each postcode sector are easy to calculate on the basis of actual selling prices and plot sizes as recorded by HM Land Registry. This total value could be split into 4/5 that relate to the exempt bricks and mortar value (probably on the high side) and 1/5 that relates to the location value (probably on the low side), to prevent there being endless appeals that the assessed value of the location value of each plot is too high. Going by long run price-to-income ratios, the fiscally neutral rate when prices bottom out would be in the region of 7% per annum (or around 1.5% of the total market value of each property).
 
Besides raising the money required to cover the core functions of the state – like the legal system, policing, street lighting, and so on – a tax of 7% of capital values in excess of the bricks and mortar value would serve a useful purpose in dampening the cycles of property price and credit bubbles that have plagued the UK economy since the Second World War.
 
These bubbles are two sides of the same coin, of course. Strict planning laws limit the amount of residential and commercial premises, so easy credit fuels rising prices rather than creating additional supply; the increased values are then accepted as collateral for further loans and so on, until the double bubble eventually bursts, tipping the economy into recession or worse.
 
It would be administratively easy to update total property values on the basis of existing sales in each sector each year. If the 7% flat tax were applied to all value in excess of the original bricks and mortar value (adjusted for inflation), i.e. to the bubble element as well as the location value, this would act like a much higher interest rate thereon, and thus dampen down property price bubbles (and hence credit bubbles) as well as sending a "market signal" to existing home-owners that planning permission is being far too strictly rationed.

Guest author Mark Wadsworh regularly blogs here.

Patrick McGoohan, Number 6 in The Prisoner, dies

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Patrick McGoohan, lead actor in the 1960s cult TV series The Prisoner, has died in Los Angeles aged 80.

In the series, which was a surrealist libertarian masterpiece, McGoohan plays an agent in some secret government organization, who has a row with his bosses and wakes up next morning in a kind of fantasy village. It’s a place where everyone is known by number (his is Number 6), rather than names. Nobody knows or imagines anything outside The Village – as the place is called. The maps don’t even show anything beyond it.

It’s always a beautiful day in The Village. Everything there is benign, and faultless harmony prevails. Spontaneous parades and events take place all the time, and everyone seems keen to participate in them. But Number 6 just doesn’t fit in. He does not see why he should follow the strange rules and rituals of the others. He sees no merit in the trivial things they think important. One of them chastises him: ‘You have no values.’ He responds tersely: ‘Different values.’

The analogy with Britain today is chilling. Everyone is expected to fit in, to conform, and to rejoice in their conformity. Those who do not conform are publicly branded as immoral, and are scorned and vilified. But who is more bizarre? Those who follow the mainstream conventions imposed on them by the myopic political correctness of officialdom and the state? Or those who regard all that political correctness as shallow and destructive, and prefer to trust values based on experience and common sense?

As Britain’s values become subverted by the trite, dysfunctional, and bizarre values of the Westminster Village, I begin to feel for Number 6. Be seeing you.

Abstracted from Eamonn Butler's forthcoming book The Rotten State of Britain (Gibson Square)

ISOS: 24 February 2009

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We have set the date for the next Independent Seminar on the Open Society (ISOS), our one-day seminar for sixth-formers. It will run from 10:30am until 4:30pm including breaks and lunch.

ISOS is named after the seminal book: The Open Society and its Enemies, written by the philosopher Sir Karl Popper. It explores the principles and practicalities of an open, free and tolerant society.

ISOS achieves this through a crammed programme of household-name speakers – including politicians from all sides of politics, national media personalities, think-tankers, economists, and business leaders.

Previous speakers have included, George Osborne MP, Andrew Marr, Yasmin Alibhai-Brown, John Whittingdale MP, Boris Johnson MP, Andrew Neil, Paul Ormerod and many, many more.

If you are a student or teacher and would like to attend this event, please visit the ISOS section of the website here.

Madsen Pirie on Platform sets out his manifesto for Britain

To transform Britain permanently, the next Government should start by taking the lowest paid out of income tax and replacing council tax with a local sales tax

Anyone who supposes that a dozen years of Gordon Brown’s vandalism can be put right by tweaking a few policies and running things rather more efficiently is mistaken. The parlous state of Britain requires a jump-shift in policy rather than an improved continuity. Proposals which lie beyond the box of the commonly acceptable might not make for good election manifestos, but they could mend a broken economy and a broken society.

My Adam Smith Institute colleague, Dr Eamonn Butler, detailed in his book, The Rotten State of Britain, how bad things have become, and how the optimistic promises of 1997 failed to bring results. The UK, once a model low tax economy now ranks amongst the heavily taxed ones. The pensions system, then the envy or Europe, now faces an unfillable black hole. Where we were promised “education, education, education,” we have lower social mobility and more children leaving school without any meaningful qualifications. In place of the comparatively free society we enjoyed, we now have a society of snoopers, with severe restrictions on our freedom of speech, of assembly, and of the right to peaceful protest.

The counterpart of this critique is a programme of action to set Britain back on the path to prosperity and progress. This week the ASI publishes Zero Base Policy, setting out a shopping list of 33 proposals to put things right.

At the top is tax and the economy. People who earn just over £6,000 pay income tax. This is half the minimum wage and less than a quarter of the average wage. Taxing with one hand means we hand out benefits with the other. There is a word for this: madness. The ASI call is for the low paid to be taken out of income tax altogether, with a threshold for them of £12,000 a year.

Higher up the income scale there is a plethora of rules, qualifications, exemptions and allowances that have doubled to over 10,000 the pages it takes to explain them. The ASI call is for the upper threshold for the 40% rate to be raised in stages to a level at which nobody pays it. This would achieve a single income tax rate of 20%. The government will immediately demand to know what spending cuts will for this, but the answer is that it will pay for itself. More revenue will be raised under the ASI proposals because the tax base will expand massively. Not that there are no savings to be made. Our estimate is that efficiency savings and the cessation of unnecessary programmes could raise at least £100bn.

The highly unpopular Council Tax should be replaced by local sales taxes and locally set business rates, with local budgets requiring electoral approval before they take effect.

Civil liberties are not so far gone that they cannot be saved. We call for a one-year Judicial Commission to review them (in public) and make recommendations. Meanwhile, terror laws should be limited to suspected terrorism, and public surveillance restricted to police and security services only.

The chance for the biggest difference lies in education. It could be the ‘council house sales’ of the next government if it gives parents the right to spend the state educational allowance at any school which is non-selective and charges no additional fees. This is the highly successful Swedish model which so rapidly gained mass support that its opponents abandoned plans to repeal it. It must also be made much easier to start and run new schools, so they can proliferate rapidly as they did in Sweden.

Narcotics remains a controversial area, but it is not controversial to say that current policies have failed. The calls for ‘tougher action’ are calls to do more of what we already know does not work. Addictive narcotics should be medicalized, made available for free consumption at high street clinics subject to medical examination and supervision. Recreational drugs should simply be legalized, subject to restrictions on their production and sale. These simple measures would eliminate a large proportion of UK crimes, and curb the violence of drug gang turf wars.

There are more radical proposals in the ASI shopping list, but right at the end is a call for MPs of English constituencies to constitute the English Parliament, meeting in the Palace of Westminster, choosing a First Minister, and exercising the same powers as those of the Scottish Assembly.

The ASI list is innovative and far-reaching, but it does offer a chance to undo the damage inflicted over the years, and to transform Britain permanently. We do not expect all of them in the first term of the next government, but a start could and should be made.

Published on conservativehome here.

Blog Review 840

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That Czech sculpture. As in the earlier blog, it's all a most fun scam that's been played. Anyone want to speculate on whether the politicians and bureaucrats will see the funny side? Show they have a sense of humour?

Less amusing: unreason is now the basis for legislation.

What if this stimulus might have negative effects? Like, damage long term growth? Something which is far more important than a couple of years of below trend output.

"It takes a heap of Harberger triangles to fill an Okun's gap." Yes, but how many is a heap?

A good example of what long term growth actually means using refrigerators as that example.

On how to spot a bubble and what to do when you do.

And finally, new dictionary entries.

Making an English Parliament work

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I was surprised to read on ConservativeHome that 60 percent of Tory members surveyed did not agree that there should be an English Parliament. Odd since opinion polls tend to suggest that a majority of the public would back the creation of an English Parliament, while the Tories would probably benefit most from the existence of one, since their support is concentrated in England. Perhaps a sense of British patriotism explains the result of the survey, or perhaps it's just not representative.

Either way, I myself whole-heartedly favour of an English Parliament. As it stands, the UK's lopsided devolution severely disadvantages England. Scottish, Welsh and Northern Irish MPs can vote on issues that only affect English voters, while their own constituents are governed by devolved institutions. This means that legislation can be forced through Parliament by non-English votes, even though it only applies to England. Throw in the fact that the English are relatively under-represented in parliament anyway, and you are dealing with a basic issue of fairness.

That said, I don't want hundreds of new politicians, thousands of new bureaucrats, and millions spent on an ugly new building to house them. But there are a couple of ways around that - firstly, you could simply have the English MPs already elected to Westminster sit for part of the week as an English Parliament, with their own executive. Alternatively, if you are going to start electing the upper house anyway, the House of Lords could become a unicameral parliament for the UK, while the House of Commons becomes a unicameral parliament for England.

Either way, there is a further step that needs to be taken if devolution is to work properly: the various home nations should be responsible for raising the money they spend themselves, which is to say they should be fiscally autonomous. This could be accomplished fairly easily – if the UK parliament retains the right to set and collect VAT and National Insurance, and everything else was devolved, the sums more or less work out.

Tax simplification: the case for a land value tax

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Adam Smith considered the topic of taxes on agricultural land (which he called 'the ordinary rent of land'), houses ('house-rents') and residential land values ('ground-rents') in The Wealth of Nations (Book 5, Chapter 2) he concluded that:

Ground-rents, so far as they exceed the ordinary rent of land, are altogether owing to the good government of the sovereign, which, by protecting the industry either of the whole people, or of the inhabitants of some particular place, enables them to pay so much more than its real value for the ground which they build their houses upon… Nothing can be more reasonable than that a fund, which owes its existence to the good government of the state should be taxed peculiarly, or should contribute something more than the greater part of other funds, towards the support of that government.

The same logic applies today. But although local government administers or oversees most of the 'good government of the state' – a concept we would today describe as 'core functions' such as policing, street lighting and refuse collection, and the protection offered by land registration, the legal system and planning controls – and thus contributes to a large extent to non-agricultural land values, local authority finance and property taxation remain very contentious issues.

As it happens, however, the various taxes that relate to property ownership or occupation and wealth generally (Council Tax, Business Rates, Stamp Duty, Inheritance Tax, Capital Gains Tax, the TV licence fee and Insurance Premium Tax) raised around £70 billion in the fiscal year 2007-08, approximately the same as the cost of those same core functions. There is a clear case for simplification and rationalization here.

Property values and transaction volumes are currently falling rapidly, and as a result total revenues from these sources are expected to fall by £15 billion. However, going by long-term price to income ratios, once property prices bottom out, the above taxes – a bizarre mixture of poll taxes, jealousy surcharges and transaction taxes – could easily be replaced in their entirety with an annual flat tax of around 1.5% on the capital value of non-agricultural property. Even better (for reasons that I will explain in another post), you could replace them with a slightly higher annual tax on underlying land/location values – i.e. the capitalized value of 'ground-rents'.

Guest author Mark Wadsworh regularly blogs here

Blog Review 839

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Just another reason why a great splurge of Keyensian stimulus spending won't in fact work.

Identifying the partisan hack rather depends upon your definition of partisan hack.

A warning for those tempted into journalism. Make sure you check what the other people are going to be writing about on the same subject.

What super-contangos can tell us about the oil market.

Speaking truth to power.

The truth about how you might help one less fortunate then yourself: invest in them.

And finally, how to waste energy.