Telegraph.co.uk: The wide gaps in the pre-Budget report

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Old Teaser

Written by Dr Madsen Pirie

Alistair Darling’s pre-Budget report revealed several huge gaps. For a start, the gap between what the government takes in and what it puts out has widened to £178bn. The Chancellor’s optimistic forecasts for growth after next year are not shared by City experts, some of whom put the future gap as a further £70bn higher than Darling says he expects.

There is another significant gap - between what the government says it is doing, and what will actually happen. This was very evident on the hot-button item of the one-off super-tax on bonuses. It sounds like bringing, what Labour call, the 'greedy' bankers to heel, but the small print indicates that it will not apply to any bonuses written into contracts, and will be limited to discretionary ones. Given that the effective tax rate would be above 100 per cent if the banks paid out the new 50 per cent surcharge, and the recipients paid out top rate income tax and National Insurance on top, it looks much more likely that many discretionary bonuses will be foregone for a year, with larger bonuses written into subsequent contracts to make up for it. This is political rhetoric largely empty of substance.

The biggest gap of all is between the government's strategic response to the crisis and what most expert opinion, here and abroad, thinks it should be doing. The government is obsessed with keeping up spending, thinking that a Keynesian-style stimulus is needed to prevent any recovery from being stillborn. The money raised from the middle classes in extra taxes is not being used to bring down the horrendous debts the government has incurred. It is being used to fund yet more spending, with increases announced in popular areas calculated to appeal to Labour voters.

In fact the biggest crisis facing Britain now is that overhang of debt. There is a real possibility that the UK could lose its top credit rating and be forced to pay much more to service its existing debt and future borrowing. The Conservatives, to their credit, recognize this. There have to be cuts - big cuts in spending - especially in the fripperies of politically correct but unproductive public sector activities. In place of spending increases there should be huge reductions, and in place of tax increases on jobs and enterprise, there should be targeted reductions to boost both growth and the tax revenues which follow in its wake. The government had a chance in the PBR to start to repair the nation's finances for the future. Instead one is left with the suspicion that they looked only six months ahead to the election, and left the hard decisions for afterwards.

Published on Telegrapgh.co.uk here.

CNBC: UK Unveils Bank Bonus Tax

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Old Teaser

Published on CNBC here.

Telegraph.co.uk: Nestle's Kit Kat goes Fairtrade

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Old Teaser

Written by Harry Wallop

Some economists, notably the Adam Smith Institute, claim Fairtrade distorts the market by setting a price floor, and encouraging suppliers to increase production. This in turn produces excess supply forcing down prices for suppliers not part of the scheme.

Published on Telegraph.co.uk here.

Telegraph.co.uk: Can a libertarian be a Conservative?

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Old Teaser

Written by Dan Hannan

First-past-the-post tends to produce a two-party system; and in any two party system, both parties will be coalitions. The Conservative and Unionist Party was founded in 1912 as a merger between the Conservatives and those old Whigs who, having rejected Home Rule and the Leftward drift of their party, sat under a confusing variety of names: Liberal Imperialists, Liberal Unionists and so on. It is thus heir to both the Tory and Whig traditions. It contains libertarians and authoritarians, radicals and conservatives, forward foreign policy types and non-interferers, ideologues and pragmatists, churchgoers and atheists. This ought hardly to need saying, but observers still like to confect “rows" out of the fact that Conservatives sometimes disagree one with another.

This weekend, I have observed the full spectrum of the modern Conservative Party. Last night, I spoke at the Christmas party of the never-sufficiently-to-be-praised Adam Smith Institute, which feeds the sacred flame of liberty within the conservative coalition. Today I am back in Cameron country: the quiet, patriotic, undogmatic shires that shaped the young Tory leader, first speaking to the Lower Sixth at Bradfield, and then doing a branch function at Cold Ash. (Sorry for the light blogging yesterday: I was having what the late Roy Jenkins would call “Wather a mouvementé day").

Among the libertarians at the ASI party was the hugely entertaining blogger Devil’s Kitchen (warning: if you are squeamish about strong language, don’t follow that last hyperlink). As you will see, the Devil has a low opinion of traditional Tories. I suspect the feeling is mutual: undoctrinaire Tories regard ideological libertarians as slightly mad. But here’s the thing: it’s a problem in theory rather than in practice.

Set aside a couple of slightly recherché issues, such as drugs. On the biggies – school choice, Euroscepticism, tax cuts, welfare reform – we all agree. And the reason we agree is that the current state of Britain is so far removed from what either a conservative or a libertarian wants that any disagreements can be comfortably postponed. It’s as though you were driving from London to two adjoining streets in Aberdeen: almost the whole route would be identical. As my old history tutor used to observe, the differences between Tory and Whig can safely be deferred to after the grave.

Published on Telegraph.co.uk here.

Digital Britain is mad and bad economics

4 December 2009

A new report from influential think tank the Adam Smith Institute (ASI) has attacked the government’s Digital Britain white paper – the inspiration for the Digital Economy Bill currently working its way through Parliament – describing plans to intervene in the digital communications industry as “both mad and bad economics”. The report’s author, digital media and communications expert Eben Wilson, put his case bluntly:

“Over the past twenty years, this thriving commercial sector has very rapidly created a vast engineering infrastructure at no cost to the taxpayer, and has generated large amounts of tax revenue in the process. It is hard to think of a better example of something the state should simply stay out of.”

The ASI’s report – Digital Dirigisme – covers the full range of issues addressed by the Digital Britain white paper, arguing throughout that the digital communications industry is characterized by rapid and unpredictable change, which governments and regulators simply can’t keep up with. As a result, their interventions will invariably do more harm than good.

The report goes on to criticize the government for not taking public concerns about the security of personal data seriously enough, describing their approach to this issue as “bland” and “disappointing”. The report suggests that personal identity and all data associated with it should be defined in law as private property owned by the individual. Any use of that personal data without the owner’s consent would thereby become unlawful.

The report also accuses the government of ignoring a “dinosaur in the room” by failing to address the taxpayer-funded BBC’s market dominance, which it says crowds out other commercial players. The report proposes a radical programme of phased privatization of the BBC, coupled with progressive cuts in the licence fee.

ENDS

Digital Dirigisme – A response to Digital Britain is published by the Adam Smith Institute, 23 Great Smith Street, London SW1P 3BL. A PDF of the report can be downloaded for free at http://adamsmith.org/images/stories/digital-dirigisme.pdf

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