CNBC: Remaking Britain & Cutting the Budget Deficit

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Published on CNBC here.

Banks' defenders win Enterprise Award

Tuesday 23 February 2010

Two influential policy thinkers who defended free-market capitalism in the teeth of the financial crisis will be presented with the National Free Enterprise Award today. Dr Madsen Pirie and Dr Eamonn Butler are President and Director of the Adam Smith Institute, the prominent think-tank which provided much of the intellectual support for the Thatcher government's privatisation and tax-reduction programmes.

The Award, a large trophy in hand-crafted silver, will be handed over at the Institute of Economic Affairs annual conference on the state of the economy, held in the Institute of Directors near Westminster. It will be presented by Professor Stephen Littlechild, the former electricity regulator,who devised the RPI-X formula for regulating rises in regulated utility prices.

The National Free Enterprise Award has a 30-year history. Its lustrous past winners include the airline entrepreneurs Sir Freddie Laker and Sir Richard Branson, hotelier Lord Forte, Nobel economist Friedrich Hayek, politicians Sir Keith Joseph and Margaret Thatcher, Buckingham University Vice-Chancellor Dr Terence Kealey, and financial journalist Neil Collins.

The panel of judges included prominent supporters of free enterprise from various walks of life, and most made Pirie and Butler their first choice for the award. The pair have been much in the news recently for defending bankers during the recent crisis, and pinning the blame on what they see as inept central banks, spendthrift politicians, and incompetent regulators. As Eamonn Butler put it: "The cause of this crisis was the tsunami of paper money that the US and UK kept printing over fifteen years. At first, all of us who surfed on it enjoyed the ride. But inevitably, it crashed into reality and destroyed everything before it."

Pirie and Butler are also critical of the US and UK governments' responses to the crunch, saying that it just conceals the scale of the crisis underneath another wave of borrowing. "But you cannot borrow your way out of debt," they say.

It is a busy week for Eamonn Butler in particular. Total Politics magazine has just voted him one of the 30 Top Political Influencers in Britain, and his new book The Alternative Manifesto – "a twelve-step plan to cure government of its financial alcoholism" – is published on Thursday.

The pair are known for humour as dry as their politics. Butler described his three-decade professional partnership with Pirie as "one of the great double-acts, like Jekyll and Hyde", while Pirie assured journalists that "absolutely no bullying was used on the judges."

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CNBC: UK PM Unveils New Party Slogan

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Published on CNBC here.

The Evening Standard: City Spy: Unsought tips for Mervyn King's ‘Dear Darling’ note

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Now that inflation — as measured by the Consumer Price Index — has risen to 3.5%, Mervyn King has had to write a letter to the Chancellor, Alistair Darling, to explain himself.

Helpfully, the Adam Smith Institute has drafted it for him. “Dear Al, as you are aware, the Bank of England recently printed £200 billion of new money.

“This new cash was used to plug your Government's record-breaking budget deficit, and pumped into the economy via public spending. You also raised VAT by 2.5% at the end of 2009, pushing up retail prices. Are you really that surprised that we are seeing inflation? Lots of love, Merv x.”

Published in the Evening Standard here.

Telegraph.co.uk:Robin Hood Tax: why 350 economists are utterly wrong

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Written by Dr Madsen Pirie

The Tobin Tax, which is now dubbed the "Robin Hood Tax" in an attempt to increase its appeal, has attracted the support of "350 economists from across the world". They have written to G20 leaders calling on them to introduce a financial transactions tax on speculative dealings in foreign currencies, shares and other securities.

This assembly of opinion calls to mind the letter sent to The Times in March 1981 and signed by 364 economists. They denounced the Conservative governments anti-inflation policies, saying they would never bring economic recovery. The 364 represented one for every day of the year (yes, they got that wrong, too). It is now a matter of record that what they said was impossible occurred soon afterwards.

Their modern successors call for the tax to be levied at 0.05 percent, which they say makes it a tiny tax that will raise big revenues of $400bn. This is indeed a substantial amount, representing more than half of the profits of the worldwide banking industry ($788bn in 2006). They also say that it will hit only the rich, since it will not affect the retail banking sector.

This fails to recognise that taxes are always passed on to the customer. Many of these financial transactions are done as insurance, to guard the value of contracts against possible adverse currency changes. The notion that an industry will blithely accept the confiscation of half its profits belongs in fantasy. Banks will pas it on, and ultimately it will fall on those with mortgages and loans, changing foreign currency, or saving in insurance or pension funds.

Capital will be made more expensive if this tax ever comes about, hitting the ability of poorer countries to raise investment funds. Fortunately the tax is not likely to come about, since it would require the agreement of every tax jurisdiction to make it work, and the record of international consent, as illustrated by the stalled World Trade talks, is minimal.

Without that consent, traders would simply move to where it was not levied. The "Robin Hood Tax" might look superficially attractive, but it would do profound damage to the world economy and, far from hitting "the rich", it would be the world's poor who suffered most. This could be one reason why Bank of England Governor Mervyn King described it as "bottom of the list" of options.

If campaigners want to spend charitable funds on these campaigns, they would be more effective in calling not for higher taxes, but for the end of the protectionist tariffs that prevent poorer countries from selling their goods.

Published on Telegraph.co.uk here.

Daily Mail: Historian Niall Ferguson has twice before declared his love for other women

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Written by Ephraim Hardcastle

Latest pensée from Eamonn Butler of the Adam Smith Institute, this one about the Toyota debacle: 'Apparently the problem is that the accelerator sticks on and the brakes don't work. On those grounds, we should have recalled the British government long ago.'

Published in the Daily Mail here.

guardian.co.uk: Channel 4's Royal Mail witch hunt

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Written by Roy Mayall

During the course of the programme we were offered the views of three commentators. There was Richard Hooper, author of a report that provided the basis for Peter Mandelson's suggestion last year that the Royal Mail be part-privatised. There was Dr Madsen Pirie of the Adam Smith Institute, which last year published an article suggesting that the universal delivery obligation should be abandoned. And then there was Jonathan DeCarteret who, in the words of the programme, "helps companies switch from Royal Mail to rival operators".

Published on guardian.co.uk here.