JP Floru: f.a.o. George Osborne: Hong Kong’s HK $71.3 billion budget surplus

By JP Floru

At a dinner in London two weeks ago, Hong Kong’s Chief Executive Donald Tsang unwittingly rubbed the Coalition Government’s inadequate tax policies in fellow attendant Vince Cable’s face (or, more precisely, he would have done so, if Vince hadn’t been late). Tsang happily elaborated on the HK $6,000 cheque the Hong Kong government is going to send to each one of its 6 million permanent residents aged 18 or above. Hong Kong currently has a HK $71.3 billion budget surplus.

The HK $71.3 billion budget surplus is after all possible public works and other spending plans have been taken care of (Hong Kong’s government spending is 18.6% of GDP). And the HK $6,000 cheque is not even the complete story: in addition, 75% of salaries’ taxes will be waived, subject to a maximum of HK $6,000 per taxpayer.

JP Floru: Families from my ward are fleeing from the 50p tax rate

By JP Floru

Residents in my ward (Hyde Park, City of Westminster) are fleeing abroad to escape from the 50p tax rate. I have heard similar stories from fellow councillors for areas such as Kensington, Knightsbridge, Pimlico and Mayfair. The people who are fleeing tend to be British citizens, therefore, people who pay their UK taxes in full – as distinct from non-doms, who have a lesser incentive to leave. The houses are bought by foreigners who are either non-doms, or who will use the place as a pied-à-terre. In other words, people who do not pay income tax. The shortfall in the nation’s total tax-take will ultimately need to be paid by those remaining: you and I.

My information is purely anecdotal. I know of four families from my ward who have fled in the last six months. Suddenly a woman from the St. John’s Church Choir disappeared. When I saw her back many months later, she said they had moved to Switzerland. Her husband runs a language school business. When I asked a mutual friend for news about Mr. & Mrs. G.C., the friend told me that they now lived in Guernsey. Mr. G.C. used to be the Chairman of the Conservative Ward Committee about ten years ago. Yesterday, at an event in my ward, I heard that family S. had just moved to Singapore. Another lady, Mrs. R.K., told me that she and her husband now live in Switzerland. I am sure many, many more are leaving, but I do of course not know them all.

JP Floru: The 50p tax rate destroys jobs for some of the poorest in society

By JP Floru.

In the last two days, I twice heard anecdotal evidence of how the 50p tax rate reduces the number of jobs at the bottom scale of the ladder, and increases welfare payments.

A person I met last night, a trendy West Londoner who at one time supported New Labour, explained how she had just fired her cleaner as, with the children leaving the house, and the 50p tax rate, she thought it no longer necessary and affordable. She used to pay the cleaner’s wages and social contributions in full.  The new part-time cleaner is paid cash in hand. The old cleaner is now claiming housing benefit and unemployment benefit.

A friend from Kent told me two days ago that she had just fired her part-time gardener, as she could not longer afford to employ him as a result of the 50p tax rate.

JP Floru: Riots - allow self-defence of property

JP Floru is Head of Programmes at the Adam Smith Institute.

State action is usually less efficient than private action.  To libertarians the police’s ineptitude in dealing with the riots did not come as a surprise.  We saw how freely organised individuals – notwithstanding their limited brain power – got the better of the multibillion state apparatus of law and order.  There is nothing surprising about individuals being faster and more lethal than state enforcers.  Let us use private individual action to counter the rioters: allow individuals to defend their own property.  

Self-defence is legal.  You can defend yourself, others, and your property - provided that the force used is reasonable.  This raises two questions: (1) what is reasonable; and (2) should the reasonableness threshold not be lowered in the self-defender’s favour?

Most will desist doing anything out of fear that they themselves may end up in the dock: if your force is judged to be unreasonable you will go to prison.  Shooting someone, or inflicting serious injury will usually be deemed unreasonable. 

JP Floru: Immigration - When Socialism becomes National

By JP Floru

When the state starts doling out money on a vast scale, you have to limit the number of recipients.  A welfare state is therefore inherently tribal – its survival depends upon a ‘to us, but not to them’ - attitude.  People are herded into groups to exclude others – and merit is rarely the criterion to qualify.  One could say that a welfare system is inherently anti-social. 

So it is no surprise when socialist thinkers start to defend caps on immigration, so hand-outs can be limited to one specific tribe.  It is of course not affordable for a country to hand out money to all the poor of the world or to anyone flying into Heathrow. 

As a taxpayer I am frankly not interested what the tribal characteristics of a benefits scrounger are.  To me, a scrounger is a scrounger, irrespective of his race, sex, nationality, social background.  I myself am an immigrant.  Since I arrived on 2 October 1994  I, and many like me, have not lived one single day off the state.  Quite the contrary: I get out of bed to work every day, and am coerced into parting with a big chunk of my pay to people who decide to stay in bed.  I am frankly not interested to know the passport or the colour of that healthy chap who stays in bed at my expense.  The only thing I am concerned about is that he should not get a penny.

JP Floru: Time to defeat Bob Crow: will Cameron or Boris grab this Thatcher Moment?

By JP Floru

There is great political capital to be had from defeating Bob Crow’s RMT union. Crow’s sudden, pointless, and highly ineffective strike yesterday was aimed at complying with the requirement that a strike be commenced within 28 days of announcing it. If Crow had not announced a strike, Transport for London would have brought a High Court action to declare the strike illegal and next week’s strikes would have been prevented.

A large part of the 2,750,000 tube users are inconvenienced when the RMT goes on strike. This time the £40,000-salary, 35-hours working week drivers are unhappy because one of theirs has been fired over alleged abusive behaviour to colleagues.  

Tube strikes have a highly disproportionate effect, as this conflict illustrates. It is the natural leverage public sector quasi monopolies benefit from. One can use other transport but that’s much slower, so it’s not really comparable. 

It’s time for a standoff to defeat this militant trade union once and for all. The recipe is simple: the announcement that a driverless tube will be developed. This is not rocket science: we already have it for the Docklands Light Railway. Entirely automated metros already exist in cities like Copenhagen, Kuala Lumpur and Dubai. A large number of cities have some of their metro lines fully automated. What are we waiting for?

Fear of a quasi continuous strike? Weigh this inconvenience against the massive voter support which will be the inevitable reward of any politician who tries to defeat the unions. The RMT is bound to go bust if they go on striking for too long. So victory for the travelling public is a virtual certainty.

Announcing a driverless tube would ensure Boris’s victory in next year’s mayoral elections. But alternatively, Cameron could also claim his Thatcher Moment – by making trade unions financially liable for loss suffered by third parties as a result of strikes. It is not acceptable that third parties who have nothing to do with an employer-employee conflict have to suffer financial loss. Changing the law would once and for all do away with the disproportionate leverage trade unions hold. 

JP Floru: Poor savers make rich pickings

By JP Floru

Self-reliance must rank in the top three Conservative values; perhaps together with producing growth and taking care of our nearest and dearest (I’m open to suggestions for even better Conservative values, and am looking forward to the Comments below!).

Key to self-reliance is saving.  Call it frittering away.  Beavering away.  Saving for your old age.  Or yes, THRIFT, the age-old home makers’ wisdom, much derided by champagne socialists.  Self-reliance is the opposite of socialism, for socialism means the socialisation of spending.  For socialists it is always somebody else who pays, preferably an anonymous state.  The added bonus being that widely dispersed contributors don’t tend to whine too much. In a multi-billion pound state spending spree it is difficult to know how many pennies are yours.

Fleecing savers was second nature to the last Labour government.  Deceptively called ‘making the rich pay’ (many savers are in fact not very wealthy at all), it brought us the raid on pensions and means testing.  Given those two factors, the BBC’s money programmes’ never-ending promotions for pension saving verge on being dishonest advice. 

JP Floru: Will the Freedom Bill actually retain the Database of the Innocents?

By JP Floru

It's high noon for those who want biometric data of innocents removed from police databases. This morning the Protection of Freedom Bill Committee will meet for the line by line discussion of the Freedom Bill. 

The Freedom Bill is to undo the abolition of a raft of civil liberties by the last Labour government.  Sort of.  Where the last government enacted the retention of DNA of anyone ever arrested – irrespective of whether they were later charged of convicted – the proposal today is to keep only... part of it.  And to make it all a lot more bureaucratic.

DNA profiles of an estimated 800,000 innocent people, including children, are currently kept on the database.  The Bill proposes that biometric material (DNA, fingerprints, etc. ) of people arrested for minor offences who are not charged and not convicted, is to be destroyed as soon as possible.  But those who were arrested for a serious offence, but are subsequently not charged, will see their DNA kept for 3 years...with a possibility to extend for another 2 years.  In other words: the DNA of people who were apparently innocent will still be retained by Big Brother.

JP Floru: Our wealth creators are off

By JP Floru

Britain may have been declared open for business, but according to today’s FT hedge funds are leaving as fast as they can (£).  And it’s not just financial companies.  Back in December Cadbury announced that it is moving its headquarters to Switzerland.  In February Pfizer announced it was closing its research factory in Sandwich because it is no longer competitive.  The largest leavers of 2010 include: WPP, Shire, Informat, Aberdeen Asset Management, Ineos Runcorn UK, Hendersons Ireland, Charter, Regus, Brit Insurance, Wolsely, McDonalds (European HQ), UBM, Kraft Foods, Gallaher, Experian, Catlin, Hiscox and Shell.  In 2010 a survey by HM Customs & Excise showed that one in five UK companies have considered leaving the UK for tax purposes.

Up in the Alps, they are laughing their heads off.  Well, not everyone:  the international School in Geneva has twice the number of applications as there are vacancies; and there is now an acute shortage of detached houses.  In mid February David Hiler, Geneva Finance Minister, told the British-Swiss Chamber of Commerce: "We won't tell people not to come, but there is no more space".  Many hedge funds are apparently moving to Malta.  Monaco recently introduced legislation especially to attract hedge funds.

So, I have to raise a question, which I thought I would never ask in my life: What Is The Government Going To Do About This?   Is it in Britain’s interest to see the tax take drop?  Is there any difference between some politicians’ stated aim of wanting to refocus the economy away from the financial sector, and the disastrous policy of “picking winners” in the past?  Remember how those "winners" invariably turned out to be losers? 

To be fair, the Coalition has tried.  They cut corporation tax and are introducing a one-in-one-out system for new regulations which impose costs on businesses.  Other measures are in the pipeline.  But is that sufficient, in the light of the hedge funds’ flight? 

The hedge funds’ flight is mainly caused by European, rather than UK regulations.  The nefarious effect of the Directive on Alternative Investment Fund Managers is well-documented. 

Then the question remains:  why did we agree to those?  When will we bring the perpetuum mobile of EU power grabbing to a halt?  Or are we still in the good old sclerotic Foreign Office mindset of “any agreement is better than no agreement at all”?  Where is the handbag?

The only positive side to this is that I am looking forward to enjoying some friends’ guest rooms in sunny Malta.

JP Floru: Ed Miliband prescribes more socialism to cure the squeezed middle

By JP Floru

“More of the same”, was Ed Miliband’s remedy to tackle the growing income inequality which has befallen the “squeezed middle”.  In his keynote speech to the Resolution Foundation this morning he robustly defended  tax credits, benefits, the minimum wage, and continentally-inspired business models.  Some people never learn.

According to the Resolution Foundation low-to-middle earners’ share of household income has been falling since 1977.  The squeezed middle are typically those who earn just too much to enjoy benefits.   They amount to 11 million adults in 6 million household – or 1/3 of the working population.  As a category they are often ignored: where the poor and the middle classes have always found a voice, the squeezed middle have not.   Electorally, they are pretty vital to any party wanting to gain a majority.

The central assertion – that for this group the household income went down as a percentage of the whole for the UK – shows us where the wind is coming from.  That poverty is relative and not absolute is the cornerstone of contemporary left wing thinking.  Through the left’s glasses,  John is poorer because Mark is getting richer faster, not because John can’t afford food anymore.  This translates in a contemporary fashion for income and health inequality.

Be it as it may, there is ample evidence to show that this group is indeed not doing very well.  It typically takes them 23 years to save for a house deposit, as compared to 7 years in 1977.  And house ownership is going down fast.

The spokesmen of the Resolution Foundation emphasised the independent nature of its research.   It is headed by Gavin Kelly, who was Downing Street's Deputy Chief of Staff between 2007 – 2010.  Also neither  the members of the Resolution Foundation’s commission on Living Standards, nor the organisations supporting its work, strike me as centre right in any form or format (though I may have missed one or two).  But let’s not quibble:  the Commission’s work over the next 14 months will be in the limelight and we have to keep an eye on it.

Red Ed offered more socialism to help the squeezed middle, oblivious to the fact that socialism is probably the cause of the squeeze.  A robust attack on cuts  and a defence of benefits, state jobs and continental-style business models showed him true to form.  He adroitly evaded the implication of tax rises under a future Labour government. 

The decreased share of wages of the squeezed middle is perfectly explainable by free market forces.  An increase of the total labour force by increased female participation and mass migration offers an incomplete explanation as countries which do better saw similar social change.  The more satisfying explanation is that our overburdened production model  can simply not compete with the developing world.   The Resolution Foundation denied this on the basis that most jobs of the squeezed middle have no international aspect (hotels, bars, health and education,...).   It did not occur to the Foundation that international competition in any one activity will permeate throughout society.   

The West’s most effective export products has been jobs for quite a while, and the squeezed middle are evidence of that fact.  To keep the low paid jobs in existence in this country, wages go down.  Those in highly specialised and therefore highly paid jobs will see less competition from the developing world.

Making higher earners pay more will not do the job – they will simply flee, taking jobs, wealth and business with them.    The answer lays in making the pie grow for all by becoming competitive again. 

JP Floru: Don't fight discrimination with discrimination

By JP Floru

Hearing Trevor Phillips live is always a bit of a treat.  He did not disappoint at Policy Exchange on Tuesday.  The man oozes integrity.  He is not an extremist, clearly well-intentioned, trying to better the world.  Yet I disagreed with him – as it seems that the method used to fight discrimination is itself discriminating.  And yes, we can do much better – if we return to the age old practice of equality before the law.

Stereotyping is often at the root cause of racism, bigotry, and discrimination.  We are all at it.  We may for example say, that “Germans have no sense of humour”.  This is wrong because categorising humans into groups is hopelessly imprecise.  It will be unclear who belongs to the group, and not all individuals will have the characteristics we ascribe to it.  And we certainly will not know every German personally.  That example is benign, but endless repetition, goose-stepping and clicking heels in the presence of Germans would land it in a totally different category.  Stereotyping may result in hate and terrible crimes.  People will treat others who they have categorised into a group with perceived characteristics differently.  They will perceive “good” and “bad” groups, and discriminate or prefer accordingly.

Unfortunately, contemporary anti-discrimination policies do precisely the same.  They stereotype – and treat individuals differently, according to a ranking into “groups” and “better groups”.  The stereotyping is done in a scientific way, with statistics.  But that only makes them less imprecise than stereotyping in the pub.  For example: “Black men are three times more likely to be unemployed than white men”.  The fact that this may statistically be correct does not make it exact.  It will still be imprecise to the extent that a large number of individual black men will never be unemployed and should therefore not be categorised, or given legal privileges, with the less fortunate ones.  Categorisation into groups is stereotyping by an educated person.  On the basis of these scientific stereotypes policies are then developed.  These create legal categories of groups of people with “higher” rights. It creates first class and second class groups.  In fact, a wrong is remedied by a new wrong.  It may also create animosity, or even hate, from the second class groups.

Take for example hate crime legislation.  Historically, a murder was a murder, irrespective of the intention of the murderer or the identity of the victim (1).  Nowadays it is apparently more serious to murder certain individuals, than others.  Certain victims count less than others in the eyes of anti-discrimination legislation.

I asked Trevor Phillips this question, and (unless I misunderstood his answer), he seemed to agree with me.  He nonetheless defended discriminating anti-discrimination legislation because “we live in the real world”.  He certainly has a point:  For example, a black suspect is probably likely to be treated differently than a white suspect.  Equality before the law may often be inexistent in practice.  Hence anti-discrimination legislation: because all else failed.   If we see it through benign glasses, the anti-discrimination legislation would act as a signal.  It is a defensible position - but we can do much better than that.

It’s important to point out that it is the categorisation of humans into groups which is the root cause of the problem.  Every individual is unique.  Not one is the same as another.  By allocating individuals into groups we de-humanise – we reduce humans into herds.  Only by treating humans as the individuals they are can we do justice to all.  This is precisely which inspired the historic idea of equality before the law: the state treating every individual the same, without distinction between groups, and without privileges for “higher” or disfavour for “lower” groups.

It cannot be right to fight a wrong with a wrong.  We should not fight discrimination by introducing new discrimination.  Perhaps the traditional doctrine of equality before the law failed because we never tried to explain it very hard.   Yes, it will take a lot of effort and education to explain it to say, those enforcing the law, or to civil servants.  And to individual and private businesses treating people equally irrespective of irrelevant characteristics may also require a lot of educating and convincing.  But we should never shrink back from the enormity of the task.  We must do it because it is right.

(1) The lawyers among you will appreciate that I am simplifying, for argument's sake.

JP Floru: Defending civil liberties is not the same as setting criminals free

By JP Floru

This morning the BBC was at it again.  Always on the lookout for Tory/Coalition Splits, today’s closure of three prisons was used by BBC journalists to rake up perceived squabbles between Tory Modernisers and Tory Traditionalists.

It's time to put something right here.  A fair number of those of us who feel strongly about our traditional civil liberties (such as fair trial, trial by jury, rights of the defendants, habeas corpus etc.) do NOT want to see criminals on the loose. 

According to John Locke it was to protect our property (that is, the ownership of our own person and of the fruits of our labour), that individuals contracted into the state in the first place.  The first (and some would say the only) reason for the state to exist is to protect property.  Limits on government powers protect the individual  against the greatest criminal of all: arbitrary government.  Civil rights in criminal sphere protect individuals against false accusations and arbitrary rulings.

So philosophically there is no divide between Law and Order Tories and Civil Libertarians.  If there is one thing about which all Tories can agree, it is that the state is there to protect property in the Lockean sense.   This does not mean, of course, that the state needs to actually run prisons or monopolise the judiciary – there is wide scope for outsourced prisons and private arbitration.  What it needs to do is to set the framework and to ensure that this framework is enforced – either directly by the state or independently.

It is when the state apparatus abrogates this prime reason of its very existence that Tories can be remarkably united in their condemnation.  If criminals are set loose prematurely I see not many reasons for the existence of the state itself.