Civitas Blog

After Brown’s £2.7 billion bailout over the 10p tax debacle, the multiple taxes on motorists are now coming under greater scrutiny. In the early years, the majority of attacks directed against the Labour Government were the introduction of stealth taxes. That criticism no longer applies. A doubling in vehicle excise duty on ordinary family cars fails to achieve what any ‘decent’ stealth tax would do: creep into the family budget, bite a little chunk out of it and sneak it back to the Treasury, preferably without the public noticing. The ruse will probably be discovered months later but by then is relegated to a mere bullet point in a Tax Payers Alliance briefing. They are not meant to generate newspaper campaigns against them. So the Government’s tax strategy appears to have de-cloaked and, although it has taken on a green mantle, it does not appear any less ugly for it.

Is summer now the season for publications pushing increased government intrusion into private conduct? The warm air has been accompanied by the somewhat chillier sensation of the release of two reports with some joyously Orwellian titles: The Politics of Public Behaviour from Demos and Creatures of Habit? The Art of Behavioural Change from the Social Market Foundation. From the mechanisms discussed in both these titles, it seems that the aspiration to get the state more involved in people’s lives remains as strong as ever among many policymakers, but combined (perhaps dangerously) with fresh research into behavioural economics.

Yesterday evening, I attended the Fabian Society’s debate ‘How can we defend the inheritance tax?’ although it might have been more aptly labelled a strategy meeting on how to set-up a pro-tax alternative to the Taxpayers Alliance. For when I had a chance to speak, the only one present to deny the explicit premise that inheritance tax was morally justifiable, the room itself seemed briefly to close in on me. While responses to my argument were never less than polite and well mannered, the initial incensed glares from the front of the room gave the impression that in a less civilized age I could have wound up being sacrificed inside a giant wicker construct of George Bernard Shaw.

There has been speculation in the press that the National Offender Management Service, brought into being only three years ago, is going to be scrapped in an attempt to insulate the newly formed Ministry of Justice from the incompetence of the past. NOMS is a fairly typical example of government failure: costing billions of pounds and barely making a dent in Britain’s obese re-offending figures while antagonising public service unions for no good reason.

Via Daniel J. Mitchell at Cato, we learn that the last seven years has seen a climb in total taxation the equivalent of ten pence in every pound:

‘What developed nation has taken the biggest steps in the wrong direction since the turn of the century? The answer is not France, Germany, or Sweden. The United Kingdom has that dubious honor. Government spending has jumped from less than 38 percent of GDP in 2000 to more than 45 percent of economic output today. That is the largest increase among OECD nations, and the United Kingdom now has a bigger burden of government than Germany.’

Before long, many of us will be sitting on Adam Smith. The Bank of England has just launched a new £20 note bearing an image of the Scottish philosopher and inventor of economics, writes Dr Peter Heslam.

It isn’'t clear whether the Chancellor, Gordon Brown, had anything to do with the decision. – He is a Smith enthusiast who is proud to share his birthplace of Kirkcaldy. In any event, it is a remarkable choice, given the way Smith’'s ideas are often associated with precisely what is wrong with the global economy today: its relentless, unethical pursuit of the free market, to the detriment of humanity.

Perhaps if the truth were known we wouldn’'t be so surprised. After all, Smith argued that the economy could function in the interests of all only if it was held in check, both by the state and by morality. In fact, he insisted that it could not thrive apart from a culture steeped in virtue.

He was also the first serious thinker to suggest that there was a solution to global poverty. It was not charity, philanthropy, state power or any other top-down or paternalist strategy; it was the freedom of the individual to pursue their own economic self-interest. Only this –directed as it was by the ‘invisible hand’ of Providence –had the capacity to unleash the human creativity necessary for economic prosperity.

Smith went further. The very aim of human society, he said, should be ‘universal affluence’ through the creation of wealth. This would put the economy at the service of human beings, rather than vice versa, liberating people from the prison of poverty and scarcity that was the inevitable consequence of the subsistence model that had dominated human history.

It was not the Make Poverty History campaign of 2005, therefore, that first inspired the public to think that something could be done about global poverty. It was Smith'’s book The Wealth of Nations, published in 1776 – a time when, even in the West, most people were poor.

Smith'’s own hand in economic affairs may now be invisible, but if we are to address contemporary global poverty, the ideas he articulated are worth revisiting. The new £20 in our pockets will be a reminder to do so. In this way, it may exert a greater influence for the good of humankind than through its purchasing power alone.

Dr Peter Heslam is director of Transforming Business at Cambridge University (www.transformingbusiness.net)

Some deep-seated problems, including high crime, falling education standards, unsustainable immigration, the low quality of the NHS, and rising welfare dependency are not being properly confronted by our political leaders. In particular, political discussion of public services like health and education still seems wedged halfway between the age of collectivism and a more consumer-friendly alternative.

Discussions are taking place across the political spectrum about the next steps and Recalibrating the Right is our contribution. It argues that we need to re-think the guiding principles of a free society, the obligations we owe each other and the traditional values we should uphold in order to discover the beliefs we should embrace in the immediate future. What's good about our country - and there's plenty to admire - and what's gone wrong? How can we come together to fix the problems that our political leaders are afraid to confront? What should be the relationship between a people and its government?

The first chapter sets out the guiding principles for reform and we are publishing it online to give our supporters a chance to contribute to our emerging work. We invite anyone who is interested to contribute their thoughts before the draft is finalised and published as a book. There are two ways to contribute: you can email us at this address or you can comment via this blog.

Whether it’s the prospect of a rain-filled Bank holiday week-end or that of endless televised football games during the imminent World Cup, the newspapers today make particularly depressing reading.

Two domestic news stories stand out as a testament to the period in office of a party whose record will one day mark it as having been among the most destructive of the once great institutional fabric of this nation.

One of these stories concerns health; the other pensions.

There is a superb comment piece by Jamie Whyte in yesterday’s Times which draws attention to a problem with the entire philosophy underlying Gordon Brown’s approach towards the role of the state in the provision of services.

‘Suppose Gordon Brown were to make a legal reality out of the rights he proclaims at Labour Party conferences. Suppose he guaranteed everyone “the highest standard of free healthcare”, “the best start in life” and all the rest…', Whyte invites us to imagine before remarking: 'This may sound like Utopia [but] ‘in fact it would be serfdom.’

The buoyant economy New Labour inherited from the Tories in 1997 gave it and the country seven ‘fat years’. Instead of prudently managing national resources during this period by cutting public debt and addressing long-term infra-structural problems in housing and pensions, New Labour went on a public spending-spree. Billions were poured by the government into countless pet schemes to end ‘social exclusion’, increase social equality, and generally improve standards in public services.

The Chancellor proudly boasted of his fiscal prudence and ability to outguess the IMF on what national growth would be. The economy was safe in his hands, he smugly reassured doubters on several occasions, and the country, or at least those employed in or maintained by the public sector from whence comes New Labour’s core electoral support, never had it so good with the result there have been three successive electoral victories for New Labour.

But now the worm has turned, ,and, as with all cases of over-indulgence, the price will be for the revelry a nasty hang-over the following morning. Today’s Times reports that, with lower economic growth forecast for from the IMF whose accuracy the Chancellor looks as if he will be obliged to accept this time, the Exchequer faces a coming crunch when it will be forced to decide between raising taxes or decreasing public spending. This is a Hobson’s choice that is going to discomfort the government as it well as its core supporters whichever option it take. As Patience Wheatcroft remarks in her column in today’s Times, ‘the party’s over’.

And what has the country had to show for this massive spending spree?

Very little.

Recently published statistics from the ONS show the government has, in the last eight years, failed signally to meet its cherished target of reducing social inequality. Likewise, as reported in today's Times, figures recently revealed by the Higher Education Funding Council and the Department for Education show it has been no more successful in its much vaunted campaign to increase the participation rate in higher education of state sector pupils, which has gone into decline and which annually wastes half a billion pounds from the high drop out rate it has manufactured, or to reduce truancy rates which, despite a massive £$1 billion being sunk into this venture, have risen by a staggering 43% since 1997. Meanwhile, it is reported , again in the Times today, that the country faces a massive shortage of housing stock created by the unwillingness of successive government’s, but of none more so than the present one, to relax planning controls.

Truly, the country is in a mess. The only consolation for those who would like to see some kind of retribution visited on those primarily responsible for it is that, through his lack of progress in solving the present budgetary crisis of the EU during his current Presidency of it, the Prime Minister’s stock there has fallen to an all-time low, probably scuppering forever his chances of being able to forge out a future career for himself there, as used to widely thought he had his sights on, after stepping down from the Premiership to make way for the Chancellor. The deserved penalty the latter will have to suffer is surely stepping into predecessor’s shoes just as they are starting to pinch. He shall surely inherit the wind, just as we all certainly shall as a result of his government’s profligacy.

So fearful has Gordon Brown apparently become of having possibly to face Ken Clarke as Opposition Leader at the next general election, by which time he hopes to have taken over from Tony Blair as PM, that he has seemingly called on his friends to spoil Mr Clarke’s chances of becoming Opposition Leader by discrediting his economic judgement.

According to a report in today’s Daily Telegraph, Ed Balls, the Chancellor’s former economic advisor and now his possible successor at the Treasury, has sent an email to the Press Association documenting ways in which Ken Clarke’s judgement has proved misguided. ‘Time and time again’, the Labour MP is quoted as saying, ‘Ken Clarke has been proved wrong on the major economic decisions facing the country’.

Without wishing to enter into the vexed question of how suitable a Tory leader Ken Clarke might make, or how fallible his political judgement is, on several policy issues on which Mr Balls claims Mr Clarke’s judgement has erred, it appears not to have done. Thus, among the various alleged misjudgements of which Mr Balls accuses Mr Clarke is the latter's opposition to Labour’s New Deal and to its policy of tax credits to make work pay. On these two matters, however, Mr Clarke’s judgement appears to have been faultless.

In the same issue of the Daily Telegraph as the report about Mr Balls' email is a two-page centrepiece feature which delivers a searing indictment of New Labour’s record in office and strongly suggests it is Mr Ball's judgement that is unsound not Mr Clarke's.

Entitled ‘Why New Labour’s state machine isn’t working’, this special feature documents how ineffective the present government’s policy initiatives have been judged relative to their declared objectives. Among its initiatives argued to have had little positive benefit, but to have greatly added to costs, are its New Deal and tax credits.

Labour intended its New Deal to increase youth employment. Since it was introduced, youth unemployment has fallen, but, according to the Daily Telegraph feature, not because of it. A National Audit Office report of 2002 is cited which found that only 14% of under 25-year olds who found jobs under Labour gained employment because of the New Deal. Most who found jobs did so simply because the economy grew and would have done so anyway. Moreover, as the Telegraph points out, since New Labour took office the number of under 25’s in receipt of incapacity benefit has increased by 60% and now exceeds the number of this group on the New Deal. Even more damming is the ONS statistic showing there to be today more young people out of work not studying than there were when New Labour came to power. So much for Labour’s New Deal, which has cost the taxpayer between £5,000 and £8,000 for every job found under it.

The effect of New Labour’s tax credits has been even worse than useless. Supposedly designed to help less well-off working families, they have made the tax-benefit system so difficult to administer as to have caused numerous wrongful deductions and misallocations. The latter have been especially painful for the families who have been ordered to repay them after they have spent the credis they had wrongly received. Additionally, the Daily Telegraph feature reports that, as result of their introduction, it has been estmated that a full-time employee on the minimum wage faces a marginal rate of tax of almost 70% after deductions of the credits and national insurance are taken into account. This hardly amounts to a recipe for encouraging less advantaged family members take up employment opportunities to become independent of the state.

The Daily Telegraph feature documents several other areas in which New Labour’s track-record appears to have fallen woefully short of the mark judged against its stated objectives of reducing inequality and poverty, increasing employment, especially among the disabled, and reducing benefit-fraud. In none can New Labour be judged to have been remotely successful, given the statistics documneted cited in the Daily Telegraph feature.

Meanwhile, New Labour has kept piling up the cost of administering the welfare state and introducing more regulations and red-tape that reduce British competitiveness by adding to labour costs.

By the time of the next general election, whoever is PM will have an up-hill task on their hands whoever their opposite number in the Tory Party might be. But whoever the PM is, one fervently hopes that he or she will not allow, on the subject of their party's track-record whilst in office, any more speaking of Balls.

If further proof were ever needed of how much national wealth New Labour has squandered through its profligate public spending policies, one need look no further than to the business section of today’s Times.

It is there reported that council tax bills are due to rise next year by an extra 1.5% just to cover the ever-mounting bill for the pensions of the huge and seemingly ever-burgeoning ranks of the army of retired local authority workers so many of whom have been recruited during New Labour’s term of office.

If you ever wondered how and why taxes could have risen by so much as they have done during this time to so little apparent effect in terms of improved services, here lies the answer.

Trust has figured prominently in the election campaign. Here is a Civitas Online Publication (PDF file) by Peter Briffa that explains why trust in politicians has diminished.

Yesterday’s Times contains a half-page op-ed article by Prime Minister, Tony Blair. In it, he explains why the electorate should vote for his party at forthcoming election rather than for the Tories -- whoops, sorry, I mean for the Conservatives!

Basically, Mr Blair’s case boils down to two assertions he makes about New Labour’s track record over the past eight years.

During Wednesday’s Budget debate we can expect a good deal of self-congratulation about the healthy state of the economy, but in the Sunday Times David Smith points out some of the figures that might not feature prominently in the Chancellor’s speech:

Britain’s productivity (output per worker) is 11% below the Group of Seven average. The gap is even greater in output per hour.

The latest trade deficit in goods was £57.9 billion, nearly five times the £12.3 billion figure for 1997. The deficit in goods and services was £39.7 billion. In 1997 there was a small surplus of £1 billion.

The Engineering Employers’ Federation has been counting the number of manufacturing jobs lost since Labour took office. It is expected to be about the million mark this week.

Debate about the small proposed Tory tax cuts has focused on the risk that services will have to be cut. But that is not the real issue. Health and education are largely public sector monopolies. Both main parties say they are in favour of ‘choice’, which implies competition (normally seen as the opposite of monopoly), but neither has connected the ‘tax and spend’ debate with the ‘choice’ debate.

The Opposition ought to use tax reform to bring an end to public sector monopoly in health and education. Their voucher scheme for education is a small step in the right direction, but their plans for the NHS are feeble. Most people who go out to work are paying taxes that cover their share of the NHS. But we are forced to pay our share by handing over an unknown amount to the Treasury. Why not give all of us a tax rebate equal to let’s say 80% of the cost of the NHS on condition that we take out a health insurance policy of our choice? We would all continue to pay enough to cover the cost of ensuring access for rich and poor alike, but without being trapped in a monopoly system.

Tax cuts for their own sake don’t inspire anyone. But tax cuts as part of a strategy to restore personal responsibility, end public sector monopoly and create competition that would help to raise standards for all, are a worthy ideal. The Health Policy Consensus Group has proposed how it could be done.

Not content merely to tell us what food to eat, how to raise our kids, how much to drink, why we cannot smoke, and why we should not worry about having our identity under control of the state, the Labour government is now rolling up its sleeves in an effort to grab all that money just lying around:

The government is set to raid £15 billion lying 'dormant' in Britain's bank accounts to raise enterprise and skills in some of Britain's hardest-pressed areas.

Using the billions of pounds languishing unclaimed in financial institutions is to be a key part of Labour's plans to transform run-down inner cities.

Naturally, the financial institutions being bullied into going along with this proposal aren’t happy, as this money is used to fluff up their profit figures. However, since the banks’ profits have been doing so well recently, they realise they won’t have much popular support. The Tories and Lib Dems all think this is a fabulous idea, and their only quibble is how the money should be spent.

It has been long well-documented that there really is no effective opposition in Britain anymore, and as long as this is the case Labour will be allowed to erode the simple foundations of a free liberal society, in this case the idea of private property. For while it is entirely possible that good things will be accomplished with this money, we should remember that unclaimed or not, that money is not the state’s. While the government seems intent on going after the truly unaccountable cash that has been sitting around for years, it could set a dangerous precedent about how we have to explain our financial situation to them in the future. ‘Why yes, Mr Brown, I realize my savings account has been quiet for a while, but I was—yes, yes, you’re right. It’s just I thought—well, sure, good point there, sir. Silly me. I would probably just spend that money on fatty foods or a meaningless bourgeoisie holiday abroad. Please, take it with my blessing as my contribution to the Greater Good.’ Perhaps if Gordon Brown and Labour hadn’t single-handedly decimated this nation’s pension funds, people wouldn’t feel the need to salt away a few bucks for a rainy day in the first place.

(Hat tip to Nanny Knows Best)

Despite all the manifold problems of rising levels of violent crime to have beset Britain since 1997, life has not been too bad for the vast majority of its citizens. In many ways, the period of sustained growth and rising living standards most of them have enjoyed was the legacy of sound public finance that the Labour Government inherited from the previous administration, plus its inspired early decision to place monetary policy beyond the remit of the Treasury.

Moreover, despite having vastly increased public expenditure and taxes to pay for it, Chancellor Brown so far has been comparatively prudent, managing to observe his self-denying ordinance, which he terms his ‘Golden Rule’, not to increase public borrowing over the course of the economic cycle save for purposes of capital expenditure.

Yesterday, Chancellor Brown delivered his Pre-Budget Report which most political commentators interpret as being his attempt to set out his stall as future leader to fellow party members. In announcing in it what he did, Chancellor Brown seemed to throw all previous monetary and fiscal caution to the wind.