Most of yesterday's comments on the first 100 Days of the coalition concentrated on the severity or the cuts and the chemistry between the coalition members. The mistake Liberal Democrats in government are making is that, in the interests of that chemistry, they are defending all that the coalition does. Whilst, as the junior partner, they cannot over-rule the mistaken policies undertaken by the majority, rather than giving acquiescence, which appears dishonest and damages Liberal Democrat credibly, they should concentrate on presenting to the public those achievements and aspirations for which they were elected. These are considerable.
In the field of constitutional reform the achievements are massive. We have a fixed term parliament - an end to hundreds of years of unfairness where one of the runners is in charge of the starting gun. There is to be a referendum on electoral reform which, if passed, will enable electors to vote for the candidate they most favour without letting in the candidate they want to stop: another massive step forward which will greatly reduce if not eliminate the need for negative voting. There is, at last, to be a completely or mainly elected second chamber, and it's to be chosen by a proportional voting system.
The need for these basic reforms in a society that claims to be modern and democratic has been evident for a least a century, but neither of the other two parties has done much about them. Now, with Liberal Democrats in government they are likely to happen.
In the area of civil liberties Labour's proposal for compulsory identity cards has been abandoned, the Human Rights Act is to be retained and the wings of the surveillance society are being clipped. In the law and order area so beloved of Conservatives and Labour in the past the Daily Mail agenda appears to have been abandoned and a more rational and reforming approach to the punishment and rehabilitation of wrong-doers adopted.
We have a long way to go in achieving a fair society but the raising of the income tax threshold and the introduction of the pupil premium are steps in the right direction.
It is arguable that constitutional reform and the preservation of civil liberties are, in the long run, more important than the mishandling of the economic situation. Of course I'm aware of Keynes's famous acknowledgment that "in the long run, we're all dead," and I regret the distress that premature cuts are likely to cause the bottom twenty per cent of our society, and Liberal Democrats in government should be pressing to ameliorate such harm. But a reform of the system, rather than panic measures to avert an immediate alleged crisis, are what Liberal Democrats should see as our ultimate goal. This is a difficult priory to "sell" to the public, but we must try.
Thursday, 19 August 2010
Friday, 13 August 2010
Cameronian cuts cursed - official!
Yet another article from the Financial Times, Future generations will curse us for cutting in a slump, this time by the distinguished economist Robert Skidelsky and former Treasury official Michael Kennedy, argues the folly of the government's slash and burn economic policy. Liberal Democrats should be dissociating themselves as far as politically possible from this barely hidden agenda of ideologically motivated cuts.
Wednesday, 11 August 2010
Two vigorous campaigns?
Regular readers, if there are any, will have noticed that there haven't been many posts recently. This is because I'm very much occupied in having holidays (walking in Wales, enjoying sunshine in Margate and walking in France) and, with another ex-teacher of economics, writing the answers to the questions in an economics text-book. Thus when not away on holiday my head is reeling with such concepts as profit maiximisation and matching Marginal Social Costs and Marginal Social Benefits.
However an item on the 6 o'clock news on Radio 4 yesterday compels me to abandon these frivolities for a while and come back to blogspot.
David Cameron has announced a vigorous campaign to reduce benefit fraud. He claims that this deprives the Treasury of over £5bn each year. However," experts" claim that most of this is the result of error and maladministration and only £1bn is due to actual fraud. Nevertheless, £1bn is a lot of money and we must applaud a campaign try to reduce if not eliminate it and bring the culprits to justice..
However, the same news item pointed out that the Treasury loses £15bn per year on tax evasion. Yes, tax evasion, not avoidance. The government actually encourages tax avoidance for what it sees as good causes such as personal savings by such schemes as ISAS and and charities through Gift Aid, and many of us take advantage of these. But tax avoidance, like benefit fraud, is illegal.
As a deficit minimising as opposed to profit maiximising government, economic logic dictates that the government should now put 15 times more effort into tracking down and reducing if not eliminating this tax evasion and bringing to the culprits to justice (which, in my view, should involve community service rather than a seat in the House of Lords.)
I look forward to it.
However an item on the 6 o'clock news on Radio 4 yesterday compels me to abandon these frivolities for a while and come back to blogspot.
David Cameron has announced a vigorous campaign to reduce benefit fraud. He claims that this deprives the Treasury of over £5bn each year. However," experts" claim that most of this is the result of error and maladministration and only £1bn is due to actual fraud. Nevertheless, £1bn is a lot of money and we must applaud a campaign try to reduce if not eliminate it and bring the culprits to justice..
However, the same news item pointed out that the Treasury loses £15bn per year on tax evasion. Yes, tax evasion, not avoidance. The government actually encourages tax avoidance for what it sees as good causes such as personal savings by such schemes as ISAS and and charities through Gift Aid, and many of us take advantage of these. But tax avoidance, like benefit fraud, is illegal.
As a deficit minimising as opposed to profit maiximising government, economic logic dictates that the government should now put 15 times more effort into tracking down and reducing if not eliminating this tax evasion and bringing to the culprits to justice (which, in my view, should involve community service rather than a seat in the House of Lords.)
I look forward to it.
Saturday, 24 July 2010
Our Giant Banking Crisis - what to Expect
Anyone with15 minutes to spare and a serious interest in the world economic crisis should read this article by Paul Krugman and Robin Wells in The New York Review, 13th May, 2010. Here are a few quotations as tasters:
...too much debt is always dangerous.
...the Depression looks much more like the product of excessive private sector debt than like the government failure of monetarist legend
...the aftermath of financial crises tends to be nasty, brutish and long.
...the long term cost of financial crises is less when countries respond with strong stimulus policies, which means that failure to do so risks damage not just this year but for years to come. (My emphasis)
...there's obviously a strong case for a return to much stricter regulation...(but)..the ideology used to justify the dismantling of regulation has proved remarkably resilient...the financial industry's political power has not gone away.
I hope you're tempted.
...too much debt is always dangerous.
...the Depression looks much more like the product of excessive private sector debt than like the government failure of monetarist legend
...the aftermath of financial crises tends to be nasty, brutish and long.
...the long term cost of financial crises is less when countries respond with strong stimulus policies, which means that failure to do so risks damage not just this year but for years to come. (My emphasis)
...there's obviously a strong case for a return to much stricter regulation...(but)..the ideology used to justify the dismantling of regulation has proved remarkably resilient...the financial industry's political power has not gone away.
I hope you're tempted.
Thursday, 22 July 2010
Out of the mouths...
When, as a result of the terrorist attack on11th September 2001, the US , with craven British support, invaded Afghanistan, our school debating society happened to be having one of its " Round Robin" discussions. One boy in the Lower VI said the Americans shouldn't be invading, but sending aid. Another commented that the appropriate action should not be a "war on terror" but a police operation to catch criminals. Since 17 year olds are a bit sensitive on these matters neither would have been pleased to be called a "babe" or a "suckling," but if young people in a relatively obscure secondary school can see these things, why can't the first class brains in the White House and Pentagon? (The President of the time may not have had a first class brain, but then and now there should be plenty among the presidential advisers.)
Now the British Government has decided to increase aid to Afghanistan by 40%. Whilst this is to be welcomed it is clear that the purpose of the increase is primarily military rather than humanitarian - a ploy to facilitate the withdrawal of British troops. As such the money should come from the defence budget rather than the aid budget. It is wrong that the poor in Africa and Asia should be deprived in order to extricate the British government from a mess of its own making.
Be that as it may, a massive point in Cameron's favour is that he shows far more determination that either Blair or Brown to get British troops out.
Now the British Government has decided to increase aid to Afghanistan by 40%. Whilst this is to be welcomed it is clear that the purpose of the increase is primarily military rather than humanitarian - a ploy to facilitate the withdrawal of British troops. As such the money should come from the defence budget rather than the aid budget. It is wrong that the poor in Africa and Asia should be deprived in order to extricate the British government from a mess of its own making.
Be that as it may, a massive point in Cameron's favour is that he shows far more determination that either Blair or Brown to get British troops out.
Tuesday, 20 July 2010
A sinner that repenteth
There's an excellent article by Ed Balls in yesterday's Guardian which clearly states the Keynesian position. If you're not yet convinced it is well worth a read. Just a pity that Balls wasn't quite so openly enthusiastic about it when he was an influential part of the government.
Saying one thing in government, than another in opposition (or vice versa in the case of the Liberal Democrats) does little to enhance the reputation of politicians or increase respect for the democratic process. It is now nearly three months since the election, but there is as yet little sign of the promised "new politics" - alas, just the mixture as before.
Saying one thing in government, than another in opposition (or vice versa in the case of the Liberal Democrats) does little to enhance the reputation of politicians or increase respect for the democratic process. It is now nearly three months since the election, but there is as yet little sign of the promised "new politics" - alas, just the mixture as before.
Monday, 19 July 2010
No graduation without taxation?
I first came across the idea of a graduate tax during a short "updating course" for teachers of economics held at the University of Bath in the late 60s. Note that this was a "course": the term "in-serice training" had not yet been invented, still less the ugly diminutive INSET. Furthermore the course was content based and therefore valuable. No one presumed to tell us how to teach: we were assumed to know that.
The idea of a graduate tax was floated by a Professor Sandford and interested me so much that I made a little speech about it at a meeting of the then Liberal Party Council. (In those days there was at least the illusion that the views of activists were of interest to the great and good in the party.) Now, thanks to the urging of Vince Cable, some forty years later the concept is to be given serious consideration by the government.
The great advantage of the graduate tax is that it does not burden the student with the burden of a great debt hanging round his or her neck. If the student earns little or no pecuniary reward as a result of higher education, by devoting his or her life to being a super parent, building a home and looking after children, or becoming a missionary priest, social worker or other low paid occupation, then little or nothing is paid. If however, the graduate does gain a pecuniary profit from higher education (and on average we do, to the tune of £100 000 in a lifetime, at today's values) then something is paid to finance future higher education.
The concept of a graduate tax does, however, raise several question,to none of which does there seem to be an obvious answer. Here is my selection:-
1. Should the tax relate to the cost of the education as well as the future earnings? Three year history degrees are relatively cheap as they don't require any equipment other than books. Three year physics degrees are more expensive because they require lots of fancy equipment. Five year courses for medical students are very expensive indeed. And what do we do about post graduate certificates and diplomas, masters' degrees and doctorates?
2. Do we draw a line between Higher and Further Education qualifications which also cost money and lead to higher future earnings.
3. Graduate taxes will produce a stream of income in the future, but the Universities (and HE Colleges?) need money now. The NUS, who support the idea, suggests that bonds should be sold now, backed by the stream of income from the tax in the future.
5. How do we ensure that the stream of income in the future actually goes to the universities (and colleges?) and not just into the Treasury pot?
6. How do we cater for EU students, who I believe have equivalent rights of access to British universities as British students?
7. How do we cope with high fliers who may evade the tax by going to lucrative employment abroad?
I'd be grateful if readers with any views on the above would air them in the comments, and also pose any other problems that occur to them.
The situation is so complex that I can't help wondering if the good old system of free tuition and means tested maintenance grants isn't the best. I know that three or four times as many students go to university today as when Vince Cable did, but then the country is now three or four times richer. If we could afford it then, why not now?
The idea of a graduate tax was floated by a Professor Sandford and interested me so much that I made a little speech about it at a meeting of the then Liberal Party Council. (In those days there was at least the illusion that the views of activists were of interest to the great and good in the party.) Now, thanks to the urging of Vince Cable, some forty years later the concept is to be given serious consideration by the government.
The great advantage of the graduate tax is that it does not burden the student with the burden of a great debt hanging round his or her neck. If the student earns little or no pecuniary reward as a result of higher education, by devoting his or her life to being a super parent, building a home and looking after children, or becoming a missionary priest, social worker or other low paid occupation, then little or nothing is paid. If however, the graduate does gain a pecuniary profit from higher education (and on average we do, to the tune of £100 000 in a lifetime, at today's values) then something is paid to finance future higher education.
The concept of a graduate tax does, however, raise several question,to none of which does there seem to be an obvious answer. Here is my selection:-
1. Should the tax relate to the cost of the education as well as the future earnings? Three year history degrees are relatively cheap as they don't require any equipment other than books. Three year physics degrees are more expensive because they require lots of fancy equipment. Five year courses for medical students are very expensive indeed. And what do we do about post graduate certificates and diplomas, masters' degrees and doctorates?
2. Do we draw a line between Higher and Further Education qualifications which also cost money and lead to higher future earnings.
3. Graduate taxes will produce a stream of income in the future, but the Universities (and HE Colleges?) need money now. The NUS, who support the idea, suggests that bonds should be sold now, backed by the stream of income from the tax in the future.
5. How do we ensure that the stream of income in the future actually goes to the universities (and colleges?) and not just into the Treasury pot?
6. How do we cater for EU students, who I believe have equivalent rights of access to British universities as British students?
7. How do we cope with high fliers who may evade the tax by going to lucrative employment abroad?
I'd be grateful if readers with any views on the above would air them in the comments, and also pose any other problems that occur to them.
The situation is so complex that I can't help wondering if the good old system of free tuition and means tested maintenance grants isn't the best. I know that three or four times as many students go to university today as when Vince Cable did, but then the country is now three or four times richer. If we could afford it then, why not now?
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