Liberal Vision

Of God And Socialism

In the spirit of Christian harmony, the Archbishop of Canterbury has joined the Pope in publicly stating his support for a ‘Robin Hood Tax’. This is perhaps a curious development given the plush residence and sartorial garments of the latter whilst the former leads an organisation once described as ‘the Tory Party at prayer’. I digress.

The Archbishop’s intervention is very much in response to the continued presence of those incoherent trustafarians outside St. Paul’s and the upcoming G20 summit in Cannes.

In his FT (£) article he claims that “many people are frustrated beyond measure at what they see as the disastrous effects of global capitalism…” Of course, I acknowledge that the Archbishop isn’t calling for the downfall of capitalism a la Karl Marx but the notion that an ethical and moral interest in the financial world stipulates greater government intervention or taxation is wide of the mark.

Indeed, one shares the sentiments of those who bemoan the privatisation of profits and the nationalisation of losses (crony capitalism if you like) but the idea behind the financial transaction tax – “Robin Hood Taxes would take from the richest in society and give it to those who need it” – is economically illiterate. It is built on shaky foundations as the wealth of the rich in society is not derived by exploiting the poor.  Although capitalism may not leave individuals perfectly equal, it is perfectly moral. Indeed, some may say that it is the most impressive anti-poverty device ever created – despite what Oxfam contend.

Supporters of the Robin Hood Tax must understand the absurdity of George Osborne declaring Unilateral Financial Disarmament in the absence of a global agreement. All that would do is place the UK banking sector at a competitive disadvantage for the sake of indulging in populist attacks on bankers. And anyway, such a tax will simply be transferred to the consumer.

In a period of entrenched hostility towards capitalism, only the foolish would neglect the tremendous amount of good generated by capitalism. It is the only economic system that maintains individual liberty whilst at the same time raising living standards. The system may be driven by self-interest but as Adam Smith says in The Theory of Moral Sentiments, that does not negate the empathetic qualities of the individual:

“How selfish soever man may be supposed, there are evidently some principles in his nature, which interest him in the fortune of others, and render their happiness necessary to him, though he derives nothing from it except the pleasure of seeing it.”

Maybe those Christians who believe in the morality of capitalism can take comfort in that as well as the old saying, ‘there are only two places on Earth where socialism can work; in Heaven where they don’t need it and in Hell where they already have it’.

Leslie Clark is an atheist.

Errant Knight – a red in yellow clothing?

Further to my earlier post “Bunch of disgruntled Lib Dems resort to Plan B” – I have now received three emails, all effectively asking whether the London Liberal Democrats have declared UDI from the rest of the party? I’m certain they haven’t. The Lib Dems in our capital work hard and quite brilliantly – often in “non benign” circumstances.

But London Lib Dems now have a problem judging from the emails I have received. Cllr Stephen Knight (one of the Guardian letter signees)  appears at least to be using his position as a London assembly candidate to promote the national economic proposals of the campaign group Compass (openly boasting about the fact that “prominent Lib Dems back plan B“) that is aligned to our opponents.

This is a group explicitly hostile to our coalition Government that describes itself as “open primarily to people who are eligible to be Labour members” and “building a bridge to the 200,000 or so people who have left the Labour Party and to many more who have never joined” …

The London Liberal Democrats are a valued and crucial part of the party. I assume they will be talking seriously to Mr. Knight . It is he after all who is promoting himself in the Guardian letter as “Leader, Liberal Democrat group, London borough of Richmond, No 2 on Liberal Democrat List for 2012 London assembly elections” .  (Though I note, to date, he has not mentioned the Guardian letter on his website).

Of course we all know that the party contains a broad range  of views  and yes I really do believe in free speech and debate but my complaint (and those who have emailed me) is about Mr Knight’s conduct – specifically that he is using his official candidate status to promote a Labour front group.

In my view he should be suspended immediately as a GLA candidate for the party pending further investigation. This investigation should be serious and deliberative, but also swift. I would like to know if, when he was being selected, his literature made clear his fundamental opposition to the coalition economic policy?  During his selection interview how did he answer any questions about areas of policy he disagreed with?  I can not see any other option than for disciplinary action if there is any doubt that his opposition to the coalition was not made clear at the time.

If the London regional party doesn’t act swiftly, then we can all do so within the constitution of the party. Lib Dem voters should not be asked to vote under a list system for a man who seems to be a Labour candidate under Lib Dem colours.

Discuss.

Tags: Cllr Stephen Knight, Compass

Plan B is crazy

On Monday, a handful of Lib Dems wrote a letter to The Guardian (itself hardly newsworthy!) expressing “broad support for the Compass Plan B proposals reported in the Observer” the day before. Notwithstanding the fact that these are the “usual suspects”, Lib Dems that have proved very keen to cozy up to the Labour Party, the question remains, does Compass Plan B have anything to say about how we might resolve our economic woes?

Let’s first consider the Compass proposals:

What would Plan B entail in the short term?

• The cuts would be reversed until the economy is growing strongly.
• A new round of Quantitative Easing (money created by the central bank) would be directed to a Green New Deal, to insulate and prepare large numbers of buildings to generate renewable energy.
• Increasing some benefits for the poorest who are then likely to spend any extra income, this would help get the economy moving again.

Let’s look at those first three points in turn:

Reversing the cuts would be a disaster. Firstly, it would send a clear message to the markets that the UK has even less fiscal rectitude than Greece. At least they are implementing an austerity budget, albeit half-heartedly. If we now reverse our cuts, we the markets will panic and our borrowing costs will sky-rocket. And for all those anti-market fundamentalists out there who may want to dismiss “The markets”, in this context “the markets” are all the people who are actually able to lend us money; without them, we will need to find another £150 billion of savings TODAY!

Furthermore, as even the devout Orange-booker Gareth Epps knows, ripping up a budget mid-year and telling the entire public sector to go back to the spending-drawing board would be massively disruptive. It’s not easy to turn the tanker around: in many cases, departments and even whole organisations have been abolished, and staff have already been let go. But in addition workers will be left in an upsetting limbo, unsure of whether their jobs have a future or whether they are only being kept on for as long as the government remains in panic mode.

And is Compass really saying that all the cuts are bad? Has nothing been abolioshed that was not a waste of money?

Frankly, the government would be better off looking for extra unnecesary expenditure and cutting that too, using the tens or even hundreds of billions saved to cut taxes. That really would stimulate demand.

The proposal to reverse the cuts is economic genius compared with the proposal to use a new round of Quantitative Easing (money created by the central bank) to fund a Green New Deal. At this point, a little distinction is worth noting. While QE is inherently dangerous and inevitably inflationary, so far the QE that we have experienced has been used to re-capitalise the banks and encourage them to start lending more. This isn’t good, but it’s not the Weimar Repblic. Credit Easing – making money to lend directly to companies, is probably even more risky. But neither of these are what Compass is suggesting.

No. Compass is suggesting that the government print money to fund government spending. And that, dear reader, is the Weimar Republic. Using QE to pay for a Green New Deal would repeat the greatest mistake in the history of government, which was pithily summed up by an economist, usually referred to fondly among Compass-leaning Lib Dems and even Labour chancellors:

“…Governments, unable, or too timid or too short-sighted to secure from loans or taxes the resources they required, have printed notes for the balance.”

What about increasing benefits for the poorest so that they spend extra? Would this really help get the economy moving again? Firstly, one has to consider where the money is coming from. If it comes from taxes, it’s simply robbing Peter to pay Paul: there is no increase in “aggregate demand”, just a shift of demand from those who earned the money to those who did not. Whatever your enthusiasm for redistribution, don’t pretend that you can re-distribute something bigger!

What if it is funded by borrowing? Well, it may seem superficially attractive if you ignore the points about markets above, but unfortunately, the evidence suggests that people respond by saving more in anticipation of the higher taxes to come, thus killing off any extra growth. No dice, I’m afraid. It’s a non-starter.

Actually, Compass do seem willing to fund some of their spending through increased taxation:

• It would cancel Private Finance Initiative debts, saving the nation £200bn in debt repayments.
• By Introducing a Financial Transaction (Robin Hood) tax on the banks
• The £70 billion in yearly uncollected tax would be closed.

The third is too ludicrous not to brush aside first. The idea that any government is simply ignoring £70 billion in yearly uncollected tax is absurd fantasy. Either it’s made-up fantasy-tax (like the £6 billion that Vodaphone don’t owe the British taxpayer) or there are very good reasons why it’s not being collected, and a Compass-led government would find it no easier to collect that the current one (or the last one!).

Cancelling all PFIs is nothign more than populism. Indeed, it would be illegal without (and possibly even with) legislation. Effectively, PFIs are a loan – a private contractor gives something to the government (say, a new hospital) in return for a revenue-stream that repays the loan. If HMG starts passing laws repudiating their loans, then it will be treated as a default and Britain will be declared bankrupt. What is more, it will shatter the confidence of investors and prevent the UK ever getting help financing capital projects again.

Finally there’s the Tobin Tax (Robin Hood, it is worth remembering, fought against tax-raising government officials!). There simply isn’t space enough here for this one. Suffice to say that it will simply make it more expensive to lend and borrown money, and so there will be less of it, which means a less efficient economy. There’s much more to say, but where to begin? (Well, maybe that imposing it unilaterally in the UK will simply destroy one of our biggest industries to the benefit of the French and the Americans).

According to Compass,

Plan B would mean that the Government pays down the deficit through growth and spending adjustments only when the economy is in good enough shape to

which is a little like saying that we can’t thrown the ballast out of the hot air balloon until we’ve got the damned thing off the ground!

In summary, then, Compass’s Plan B is, in reality, Plan Crazy. It would massively destabalise the UK economy in both the short and long terms, and cause untonld damage. It is rather a shame, therefore, that a handful of Lib Dem malcontents felt the need to so publically support it!

Tags: Cllr Stephen Knight, Compass, Compass Plan B, Liberal Democrats

Bunch of disgruntled Lib Dems resort to plan B

The Guardian reports today that “Economic plan failing, grassroots Lib Dems say in first sign of revolt” . Well, hardly. It’s a letter in the Guardian stating that a handful of  Lib Dems back the somewhat flawed Compass Plan B. (Hardly Lib Dem 2010 manifesto btw).

Still, the Guardian letter does have some impressive signatures….. “a group of senior Lib Dem figures and former parliamentary candidates”… hmm…Prof Richard Grayson, Ruth Bright, Linda Jack,  Margaret Phelps, Nick Rijke,  Prof Stephen Haseler, Simon Hebditch, Dr Jo Ingold, Cllr Ron Beadle and Cllr Stephen Knight.

Err hang on were these not the very same Lib Dems (give or take the odd person) who back in February of this year signed up to Labour’s policy making process.  To be clear those signing up back in Feb were (drum roll please) ...Prof Richard Grayson, Ruth Bright, Linda Jack,  Margaret Phelps, Nick Rijke,  Prof Stephen Haseler, Simon Hebditch, Dr Jo Ingold, Cllr Ron beadle plus Tim Starkey and Prof John Howson. At the time Prof Richard Grayson said “..Some of these people have expressed concern about the coalition and the direction of the party, some are relatively happy with both and are engaging because they believe in pluralism”… Well it seems clear that it was Starkey and Howson who were the believers in pluralism then.

As Simon McGrath states so brilliantly over on LDV (comments)  “Their excuse for this at the time was that they were going to help convert Labour to Lib Dem policies. It now appears they they have been converted to Labour policies.” Or as Dave Page says somewhat more bluntly (comments)… “nice to see a bunch of self-important party wannabe-slebs shooting us in the foot in public“.  That is a probably rather harsh..Some of these people are bright, genuine, engaging people.. It’s just their approach that sucks and, whatever their intention, they haven’t done the party or, indeed the SLF, any favours today…

..And surely the Guardian headline should read .. “Bunch of disgruntled Lib Dems resort to plan B” . No story there then.

Tags: Compass Plan B, Guardian letter, Liberal Democrats

Gloves off: Littlewood v Laws

Hat Tip: This is surely an event not to missed? Stuff David Haye vs Wladimir Klitschko … This is Mark Littlewood face-to-face with David Laws MP. It promises to be THE interview of the year. Yep that’s right … David Laws has agreed to meet Mark Littlewood for what promises to be a splendid evening of cross examination and inspection.. We can’t wait..

WHERE: IEA, 2 Lord North Street, London, SW1 (door on Great Peter Street)

WHEN: 22nd November, 6.30pm

HOW TO GET A TICKET: email iea@iea.org.uk

WANT MORE INFO: go to the IEA website

Tags: David Laws MP, IEA, Mark Littlewood