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Matthew Lesh: The radical neoliberal programme which can revitalise the Conservatives

Matthew Lesh is the Head of Research at the Adam Smith Institute.

As the flus from last week’s Conservative Party Conference slowly fade, it is worth turning our minds back to a conference that we must never forget.

It was the autumn of 1980. The country was facing economic turmoil. Decades of Keynesianism was taking its toll with high inflation and low growth.  But there was a leader, a radical neoliberal, who refused to accept the status quo or allow the doomsters to take her off course.  “You turn if you want to, the lady’s not for turning,” Margaret Thatcher told Conservative Party Conference.

Thatcher unashamedly spoke not just of policy change but creating “a new independence of spirit and zest for achievement”. She called her administration “one of the truly radical ministries of post-war Britain”.

Boris Johnson’s party conference speech last week has been lauded for its political nous: get Brexit done, and fund the NHS and other public services.

This makes a lot of political sense, particularly for the party’s ‘Go Midlands, Go North’ strategy: the plan to win northern Leave working class areas who traditionally voted Labour Party.

But Johnson’s spending is frustrating to many free marketeers, who have traditionally found their home in the Conservative Party. Boris speaks of a “dynamic enterprise culture” and the Conservative Party’s history in pioneering “free markets and privatisation”. But so far there has been little meat on the bone, while the party is giving up its reputation for fiscal conservatism by committing to big-spending plans.

Politically, this approach undermines support from economic liberals in London and the Southeast. This danger is heightened by the likes of Sam Gyimah’s defection, signalling the acceptability of the Liberal Democrats to Tory economic liberals. With the Lib Dems also winning over the likes of Chuka Umunna there’s a danger the two main parties are seen by voters to leave the centre stage to the Liberal Democrats — and leave governing alone to the scrap heap of history.

To get a strong majority, Boris needs to win both Chelsea and Fulham as well as Stoke-on-Trent. He needs to be able to hold up his economic credentials to win back Remain-voting Conservatives voters – not just give them another reason to abandon the party.

But this balancing act is nothing new. Thatcher, despite some reforms to childcare and housing subsidies, oversaw a huge increase in social spending. She declared that the NHS is “safe with us” and bragged about “enormous increases in the amount spent on social welfare to help the less fortunate”. David Cameron similarly declared that the NHS is “safe in my hands,” while cutting taxes, introducing free schools and reforming welfare.

Thatcher and Cameron balanced public spending with undertaking fundamental free market economic reform to boost the economy. To ensure the Conservative Party remains a broad coalition, it is important that Boris’ free market rhetoric is given meaning. There needs to be some meat on the bone. The Conservative Party will be much weaker if it does not have a serious economic policy offering that creates a clear distinction with Labour.

On the political left, while many may disagree with their approach and ideas, there is undeniably a radical reimagining of policy and a clear agenda: a four day work week, shutting down private schools and nationalising industry.

Some on the Right have chosen to respond to the emboldened Left by adopting parts of their agenda in the hope of placating and preventing the worst. But, as Theresa May’s premiership displays being Labour-lite and adopting policies like the energy price gap, or nanny state policies like the sugar tax, simply does not work.

The Neoliberal Manifesto, a joint project between the Adam Smith Institute and 1828 released last week at the Conservative Party Conference, presents a positive vision for Britain’s future. In the past, the word “neoliberalism” has been twisted by those seeking to manufacture a strawman on which to blame every societal ill.

But it doesn’t have to be this way. Neoliberals are champions of freedom. We want government to protect and facilitate your ability to flourish; we believe in the power and ability of each individual; we believe in doing what is most effective; we are optimistic about the future; we support market intervention to address specific issues but reject paternalism; we are cosmopolitan and outward-looking to the world.

The manifesto calls for a liberal, free market approach to trade that encompasses cutting tariffs and pursuing deals based on the principle of mutual recognition. It declares that need to reform Britain’s outdated planning laws to allow for the building of more houses to fix Britain’s housing crisis. The manifesto also calls for a simpler, fairer tax system by getting rid of stamp duty and allowing capital expenditures to be expensed in full immediately.

On migration, it calls for a liberal system that brings the most talented people to our nation. On education, it explains the need for more choice. On innovation and technology, it calls for an optimistic approach defined by permissionless innovation.  It also calls for a liberal approach to drugs and personal choices, a compassionate but cost-effective approach to welfare, and addressing climate change without sinking our economy.

Many of these ideas are radical, and today can be expected to receive a mixed reception. But we think that our politicians should lead from the front, not the back. These policies are not designed with the idea of what may or may not be popular today, but rather setting the agenda for the future.

While not every action she took was immediately popular, Thatcher’s agenda transformed the country for the better and proved a politically successful formula across three general election victories. Cameron similarly won a majority after undertaking difficult decisions.

If the Government does not have an offering for people who want lower taxes and the state to live within its means, they risk unexpected losses.  Johnson can follow in the footsteps of successful leaders with his own liberal, free market agenda.

Real Estate, and Personal Injury Lawyers. Contact us at: https://westlakelegal.com 

Neil O’Brien: How to rebalance Britain’s unbalanced economy – by levelling up, not levelling down

Neil O’Brien is MP for Harborough.

Even Brexit, it turns out, is about location, location, location. Ben Ansell, an Oxford professor, has found that in wealthier areas, where the price of a house averages £500,000, 70 per cent voted to remain. Poorer areas, where the average house price was £100,000, were an exact mirror image, with 70 per cent voting to leave.

Like a disclosing tablet, the EU referendum highlighted the different economic experiences of different places over recent decades: booming London and the most prosperous home counties voted to Remain, as did Scotland, the next richest part of the country. The reviving cores of our large cities did likewise. But smaller towns and cities, the countryside and coastal places voted overwhelmingly to Leave, as did Wales.

In response, Boris Johnson recently set out his ambition to “level up” poorer areas in a fantastic speech in Manchester. It’s the right thing to do – and it makes political sense too. The 2017 election saw us losing ground in wealthier-but-Remainy areas, and gaining former Labour seats in the midlands (and north) which we’d never gained before. We have huge potential to win in seats where people have felt taken for granted and left behind for many decades.

The economic case for levelling up is clear too. There are no G20 countries which have a more regionally imbalanced economy than the UK and are also richer than the UK. Conversely, all large countries that are richer per head than the UK have a more balanced economy.

In other words, a more balanced economy is a stronger one. In a highly unbalanced economy, resources like land and infrastructure end up overloaded in some parts of the country, and under-used in others, which is costly and wasteful. Given that workers (particularly lower skilled people) don’t simply move away from their families in the face of local economic problems, having greater distances between unemployed workers and job opportunities may well compound problems matching people to job opportunities. There might even be compounding mechanisms: if some areas have high unemployment that can lock in patterns of worklessness.

But to bring about a more balanced economy, there are two big lessons that the Prime Minister must draw from previous successes and failures.

First, the crucial thing is to attract private sector employment – particularly jobs that are knowledge and investment-intensive. The work of academics like Enrico Moretti and think tanks like the Centre for Cities shows how gaining “brain jobs” in the private sector has a much bigger multiplier effect than just moving public sector jobs to an area.

Tax breaks for inward investment can be very effective in attracting in new investment, which is why most other countries offer them. Within the UK, probably our most successful ever regional intervention was Margaret Thatcher luring Nissan to Sunderland with a mix of investment tax breaks, lobbying and the offer of cheap land (an old airfield). It’s now one of the most successful plants in the world.

When people think about regeneration, they often start with plans for a new tram or shiny cultural facility, which tend to be popular, and can indeed help growth in areas that are already motoring along. But such investments aren’t going to do much for areas where the economic engine has rusted up and needs restarting. Detroit famously built a fancy monorail intended to fight its economic decline: but in a city where every factory was gone it remained largely unused, drifting through a city that looked like it had been bombed flat. Without private sector investment, there’s no demand for it or anything much else.

Second, different things work in different places and a different set of policies are needed for our towns than our city centres. During the 1970s and 1980s the “inner cities” were a byword for decline. But in recent decades capital cities and the centres of other larger cities have outperformed other areas, right across the world. The shift from a manufacturing to a professional services economy (plus the growth of universities) revived the centres of our cities.

There are still many problems to solve in our cities, but the places that have struggled the most in recent decades have been rural areas, smaller towns and cities, and the outer parts of large cities (even outer London). Places on the coast and places without a university have suffered particularly badly from a brain drain. Labour have tried to capitalise on their discontent with glossy ads like their film “our town”.

What to do for towns is even trickier than helping big cities grow. Though there are trendy small towns from Hebden Bridge to Hay-on-Wye, simply copying ideas from big cities, like “culture-led regeneration”, is often a recipe for failure in small towns.

Improving connections between city centres and towns might help – Tom Forth has highlighted just how bad we are at this in Britain. The Prime Minister’s new fund to help regenerate town centres is a good move and will make them more attractive. We should do things like re-examine funding historic funding formulas for government spending on science, transport and housing, which are still heavily geared towards supporting London and other areas that are already growing fast. And we should offer devolved economic powers to counties, not just big cities.
The more we can use free market mechanisms to help poorer towns, the more likely we are to succeed.

Looking at Britain as a whole, chronically low investment rates are a big part of our long-term productivity problem. We should cut taxes on business investment across the whole country, and make the UK’s capital allowances among the most generous in the world (at present they’re among the least).

But to level up poorer areas we should go further, and have even more generous tax breaks for investment there, where the problem of low investment and low productivity is most severe. We should also empower the Department for International Trade to take part in the same aggressive tax competition for inward investment that countries in Asia, the US, and our neighbours in Ireland do so successfully. And we should use those tools to encourage inward investment into poorer places.

More generous capital allowances would help lagging regions anyway, even if introduced across the board. While manufacturing accounted for around a quarter of productivity growth nationally since 1997, it provided 40–50 per cent of productivity growth in poorer regions like Wales, the West Midlands and North West. Manufacturing requires roughly twice as much capital investment as the rest of the economy, so an investment-hostile tax system hits poorer places harder.

Ever since the referendum, there’s rightly been renewed focus on how to help poorer places. Helpfully there is decades of evidence about what does and doesn’t work. If we can join up an energetic new Prime Minister with the bit between his teeth, plus a new agenda for left-behind places, then we can really get things moving.

Real Estate, and Personal Injury Lawyers. Contact us at: https://westlakelegal.com 

What Next for the Federal Reserve? ‘Printing’ Cryptocurrency?

Westlake Legal Group usd-2874026_1280-620x349 What Next for the Federal Reserve? ‘Printing’ Cryptocurrency? The Federal Reserve The Fed Technology rtp real time payments Private Sector Front Page Stories Front Page Economy cryptocurrency central bank Business & Economy banks Banking

The Federal Reserve is rightly a bit of a hobgoblin for us less government types:

“The Federal Reserve System is the central bank of the United States. It was founded by Congress in 1913 to provide the nation with a safer, more flexible, and more stable monetary and financial system.”

Yes.  Because when I think of government – “a safer, more flexible and more stable” anything leaps to mind.

The Fed is also a hobgoblin because – as with all things government:

“Over the years, its role in banking and the economy has expanded.”

When you have government – you have mission creep.  Because – the entirety of human history.

The Fed is ultimately a hobgoblin – because it allegedly exists in some quasi-independent “Fourth Branch of Government” nether world:

“The Federal Reserve, like many other central banks, is an independent government agency….”

Which means…The Fed doesn’t seem to actually be constitutional.

The Constitution creates – three branches of government.  The Executive, the Legislative and the Judicial.

Which means one of two things:

Someone in one of those three branches – has to have direct oversight over The Fed…and can directly order it to do things.

Or…

The Fed is unconstitutional.

Congress cannot create an independent fourth branch.  You have to amend the Constitution to do that.

Attempts by less government types to at least rein in The Fed are always welcome – and have occasionally occurred.

Meet Kentucky Republican Senator Rand Paul.

Dr. Rand Paul: Time for Congress to Pass ‘Audit the Fed’:

“S. 148 would require the nonpartisan, independent Government Accountability Office (GAO) to conduct a thorough audit of the Federal Reserve’s Board of Governors and reserve banks….”

Yes, please.

Because – speaking of The Fed’s “role in banking and the economy” expanding….

Fed to Launch Real-Time Payments System in 2023:

“The Federal Reserve announced Monday it would create and implement a system that would allow consumers and businesses to send and receive money instantaneously by 2023.”

Well that certainly sounds like something the private sector – not the government – should be doing.

Oh look – the private sector is doing it.

Meet North Carolina Republican Congressman Ted Budd.  Who recently, rightly penned:

“In 2015, the Federal Reserve realized this problem needed to be addressed, and to their credit, they encouraged the private sector to develop a solution to the deposit/access time gap.

“Four years later, through American innovation, a real time payments (RTP) system came to fruition and currently reaches over 51 percent of the demand deposit accounts in the country. This allows immediate payment and withdrawal for consumers.”

The United States’ international banking system – is what we’re talking about here.  Because the US banking system – is international.

It ain’t easy to get an entire international banking system – fully online with instantaneous coin availability.

Yet here the private sector is – doing it.

Let’s extrapolate this time frame, shall we?

In four years, the private sector has delivered instantaneous money availability – to half of us.

Which means in another four years – give or take – the private sector will have delivered it…to all of us.

Four years from now – is 2023.

Just as the private sector has finished solving the problem, The Fed – in the name of “solving” a problem already solved by the private sector – will begin creating a whole slew of new problems.

Because that’s what government does.

Government-expanding Obamacare was supposed to increase health insurance access – and reduce premiums and deductibles.

Obamacare killed insurance for ten-plus million Americans – and doubled premiums and tripled deductibles.

The Fed’s plan – is Obamacare for the banking industry.

For yet another reason: Obamacare was designed – to kill the private health insurance sector.

The Fed’s RTP system – could very well kill the private sector RTP system.

In reality, there can be only one RTP system.  For the real time payments to actually be real time payments – every bank will have to be on the same system.

And as we’ve seen since time immemorial – when government and the private sector butt heads…government wins.

And as we’ve seen since time immemorial – that’s an awful outcome.

The government competing with the private sector – is like having a baseball umpire…also pitch for the opposing team.

You have the guy calling balls and strikes – calling balls and strikes for himself.

Guess how all judgement calls going forward will go?

For those too young to remember, we used to have phone books – in which you looked up phone numbers.

The White Pages contained residential numbers – the Yellow Pages business numbers.

We less government types have long had The Yellow Pages Rule:

“If you can find it in the Yellow Pages – government shouldn’t be doing it.”

Economist Steve Moore – is a really bright dude.  He gets all of this – and highlights yet another huge problem with the concept….

Why the Fed Shouldn’t Compete With Private Banks

“No private firm can safely charge as low a price as the Fed or absorb high costs.

“The Fed has an obvious advantage in any venturing into activities now conducted by private lenders: It has effectively the lowest borrowing costs in the world because the full faith and credit of the U.S. government stands behind it.

“The Fed can’t go bankrupt and by its enormous size and stature is the behemoth in the banking universe.”

It’s like competing with Communist China.

The Fed can obnoxiously warp the marketplace to its advantage – in about a million different ways.

Congressman Budd’s bill – doesn’t prevent The Fed from doing getting into the RTP business.

What Budd’s bill does do – is require The Fed to examine how much private sector damage they’ll do if they do this.

Which is certainly a very good idea (for the entirety of government).

Hint: The prospective damage is HUGE:

“It…could cost Americans who are already struggling to live paycheck to paycheck approximately $100 billion over the next five to seven years in unnecessary overdraft and penalty fees.”

But while we’re waiting for Congress to not be Congress and pass Budd’s bill….

President Donald Trump and his Office of Management and Budget (OMB) – can likely require The Fed to do for what Budd’s bill calls.

That is – if we’re going to thankfully, finally end the unconstitutional charade of The Fed’s alleged independence.

For me, I’ll take whatever oversight I can get – any constitutional way I can get it.

So here’s to Budd’s bill.

And here’s to President Trump – trumping Budd’s bill.

The post What Next for the Federal Reserve? ‘Printing’ Cryptocurrency? appeared first on RedState.

Westlake Legal Group usd-2874026_1280-300x169 What Next for the Federal Reserve? ‘Printing’ Cryptocurrency? The Federal Reserve The Fed Technology rtp real time payments Private Sector Front Page Stories Front Page Economy cryptocurrency central bank Business & Economy banks Banking   Real Estate, and Personal Injury Lawyers. Contact us at: https://westlakelegal.com 

Neil O’Brien: Corbynomics – and why it means that your house, business and savings don’t really belong to you,

Neil O’Brien is MP for Market Harborough.

What is Corbynomics? It goes without saying that it’s a much more extreme economic programme than Labour have ever had before. And that government will spend, tax and borrow more. But Labour have a lot more damaging, half-baked and dangerous ideas.

No-one is thinking about them at the moment, but the scary thing is that within weeks these ideas could be affecting your house, your pension and your job.

For me, the most frustrating thing is that Labour have identified various important issues, but their proposed “solutions” would make matters worse. Let’s look at a couple of examples.

Seizing 10 per cent of all large companies’ shares

Lots of people, including me, worry that current corporate structures create pressures that make managers behave in a short-termist way, squeezing investment to hit short term profit targets and dragging down productivity growth. I’m concerned that publicly quoted firms are beholden to increasingly transient shareholders, interested in immediate returns. They certainly invest far less than privately owned firms who can take a longer-term view.

But my answer to this would be to change the tax treatment of investment, and increase capital allowances so that there’s no disincentive to invest.

Labour’s answer, in contrast, is to forcibly transfer 10 per cent of all companies shares to create a sort of employee-ownership-at-gunpoint.

This is a terrible idea, which would make investment into the UK dry up overnight. After all, if government can steal ten per cent of your shares, what’s to stop them coming back for the rest? Labour protest that the shares are not being stolen – just given to the workers. But that’s a lie, as they also propose that a Labour-run Treasury would take the great majority of the dividends that those shares attract. At the moment, these are owned by savings and pension funds – so the money is ultimately coming out of your pocket.

The total value of the shares stolen by government would be around £300 billion, according to the Financial Times. For comparison, raising the basic rate of tax by one per cent raises £4.5 billion a year, so you can see what a vast tax grab this would be.

Forcing people to sell their properties at a price set by government, and control rents

There are major issues about the balance of rented and owner-occupied property in Britain. We had a long period when the number of properties being moved into the rent-to-buy sector was outstripping the number built, meaning owner occupation fell dramatically. Between 1996 and 2016, the home ownership rate among middle income people aged 25-34 fell from 65 per cent to 27 per cent.

However, in 2015 the Conservative Government reformed the tax treatment of rent to buy and second homes, and in the years since we have seen homeownership rebounding upwards, with both ownership and the rented sector growing in a more balanced way. There are lots more things we could do to grow home ownership.

Corbynista Labour doesn’t really believe in home ownership. They are nostalgic for the world of the 1970s, where around two thirds of households in places like Islington lived in social housing. But they know ownership is popular.
So they have announced the “private sector right to buy”. This will give private tenants the right to make their landlords sell their properties to them at a discount.

In an interview last week, John McDonnell made it clear that government would set the price: “You’d want to establish what is a reasonable price, you can establish that and then that becomes the right to buy,” he said. “You (the government) set the criteria. I don’t think it’s complicated.”

It’s not complicated. But it is deeply unfair. It would be a retrospective raid on people’s assets. People, including some who are not so rich, have invested in property under certain rules, and would have their savings ripped off them, while other people who invested their money in other things would not. This is arbitrary and unreasonable and would I’m sure be challenged in the courts.

Labour would also set rental prices, promising in a recent document that “There should be a cap on annual permissible rent increases, at no more than the rate of wage inflation or consumer price inflation (whichever is lower).”

This is unworkable or will lead to under investment in rented properties. Why spend lots doing up a flat if you can’t charge more for an improved property? We would quickly be heading back to the 1970s, when there wasn’t enough rented accommodation to go round, and conditions were squalid because of rent controls.

Sectoral wage bargaining

With the National Living Wage, the Conservatives have introduced one of the highest minimum wages in the world. For the lowest paid, the National Living Wage plus the cuts in taxes for lower paid people mean that they take home £4,500 more than they did under the last Labour Government – while employment has soared to a record high. We should be really proud of our record.

However, the National Living Wage is still set by an independent body, and as percentage of average pay in the market, so there is a sensible link to what businesses can afford without sacking people.

In contrast, under Labour politicians would just set rates directly. Labour have also pledged to “roll out sectoral collective bargaining”. Labour said it would “fix the going rate” in each industry and “set fair conditions” for the sector. This would represent an end to the system whereby unions negotiate company by company and, instead, give them power effectively to set national standards on pay and conditions. A new government unit would work with unions to bring firms into line.

This means that if politicians or trade unions decide your business is part of a particular “sector” (a pretty subjective question) then you would be in line for a change in wages which your business might simply be unable to afford. The scope for union bullying and endless court cases and demarcation disputes is obvious. In the car industry, wages are high, so a sectoral wage would be high. If I make plastic bits for the car industry but also other industries, is my business in or out of the automotive sector?

Rebecca Long Bailey has also said that “Labour will also legislate to reduce pay inequality by introducing an Excessive Pay Levy on companies with staff on very high pay.” There is no detail on what the rules will be, but the idea of having wages directly controlled by Jeremy Corbyn is likely to deter inward investment.

What do these ideas have in common?

When New Labour left office, a million people had been thrown on the dole, we’d had the deepest recession since the second world war and government was borrowing more than at any time in our whole peacetime history. In the final year alone, they borrowed £7,900 for every family in Britain.

And that was New Labour. Imaging what the country would look like after Corbyn and McDonnell.

Where Corbyn’s ideas really differ from previous Labour leaders is that he doesn’t really believe in the rule of law. Your house, your business, your savings: all these things don’t really belong to you, in Corbyn’s eyes: you have them only as long as the government suffers you to have them, and they can be retrospectively taken away if he sees fit. In the week Robert Mugabe died, we’ve seen underlined just how important the rule of law is. But under Corbynomics, it would be the first casualty.

Real Estate, and Personal Injury Lawyers. Contact us at: https://westlakelegal.com