Matthew Sinclair: How to avoid the dangers of Root Canal Conservatism

Matthew Sinclair is Director of The TaxPayers' Alliance. Follow Matthew on Twitter.

When I was reading Stephan Shakespeare’s fascinating recent article about people’s perceptions of “left” and “right”, some advice he once gave me about polling started to ring in my ears. If you’re trying to work out how people can be persuaded, make sure you are isolating the views of the persuadable. It is easy for the results of an aggregate poll to be dominated by those who already agree or will never agree.

In the case of this particular set of poll results I wondered whether people attached worse names to “right” than “left” because conservatives tend to be happier and therefore, particularly as they are also often older, less likely to call those they disagree with names.

Matt Sinclair: Tax reform without tax cuts is a political disaster; tax cuts without reform a missed opportunity

Matthew Sinclair is Director of The TaxPayers' Alliance. Follow Matthew on Twitter. This is the third of three blogs on today's TPA report recommending a 'Single Income Tax'. See earlier contributions from Matt Sinclair on a Family Transferable Allowance and Matthew Elliott on the general principle.

This week has seen the launch of the 2020 Tax Commission’s final report, outlining and calling for a new Single Income Tax. The report contains more than that plan though. It also provides a detailed study of the economics, ethics and politics of tax reform. And when it comes to the politics there are some useful lessons for any politician looking for a popular tax policy.

The first is that people don’t like paying tax. When asked if ‘people like me’ should pay more in tax, 73 per cent disagreed in a Guardian/ICM poll in June 2010. That might sound obvious but it is actually quite profoundly important.

The Tax Foundation has estimated that the country where the tax system leans most heavily on the rich, based on the ratio of the share of taxes of the richest decile divided by their share of market income, is the United States with a ratio of 1.35. Britain’s ratio is 1.20. By contrast, Denmark’s ratio is 1.02 and Sweden’s is 1.00. The large states in Scandinavia, that many social democrats would like to replicate, here can’t rest on taxing the rich but have instead been based on getting more revenue out of the broad mass of the population with a less progressive tax system. And even there they are in retreat.

If 73 per cent of Britons aren’t willing to pay more, then politicians can’t build a really big public sector that will last. Try to feed a Viking state with an Anglo Saxon tax system and you’ll have Gordon Brown’s fiscal disaster. The old Treasury rule of thumb does appear to hold true and 40 per cent of national income is the ceiling on the sustainable share of public spending in national income.

Matt Sinclair: A Family Transferable Allowance would cut the couples penalty and let families keep their own money

Matthew Sinclair is Director of The TaxPayers' Alliance. This is the second in a series of articles based on the TPA's 2020 Tax Commission proposals. Matthew Elliott contributed the first part eartlier today. Follow Matt Sinclair on Twitter.

There are currently two quite thorny policy challenges facing the Government. First, they have means tested Child Benefit in a way that is quite hard to enforce and creates very high marginal deduction rates for many middle class families. The reform is still a mess even after a second try at getting it right at Budget 2012. Second, many conservatives want to do something about the couple penalty but are struggling to convince Liberal Democrats and some within the Conservative Party. I think that a single measure – proposed in the final report of the 2020 Tax Commission – might be able to satisfy both of those needs: a Family Transferable Allowance.

At the moment, a single earner family loses out in three ways: one earner tends to earn less than two in the market; for a given level of household income they are more likely to fall into a higher tax bracket; and they only get one Personal Allowance.

Lower market incomes if you stay at home are only fair. People should be making a simple trade-off between the amount they can earn, and the value they put on that money, and the value they put on being at home. That means there is an appropriate incentive to work.

The problem is that the tax system exacerbates that and unfairly penalises those families that rely on a single earner. The charity CARE has estimated that the difference is enough that a one-earner married couple on the average wage are in the sixth decile while a single person on the same income is in the ninth decile. Correcting the inequity is partly a matter of changing the marginal tax rate schedule. With a proportionate income tax like the Single Income Tax recommended by the 2020 Tax Commission, if you earn twice as much, you pay twice as much, so single earners won’t be pushed into higher tax brackets. That still leaves the Personal Allowance though.

Matthew Sinclair: Dismal Durban

By Matthew Sinclair

Over the weekend, the major UNFCCC COP17 in Durban concluded.  Climate economist Richard Tol has set out the poor progress at the conference compared to Bali all the way back in 2007.  He writes that the Durban Platform "pledges an agreement by 2015. It replaces the Bali Roadmap, which pledged an agreement by 2009. Once more, the countries of the world agreed to agree at a later stage."  And that the extension of the Kyoto targets to 2015 "creates the diplomatic illusion of having saved the Kyoto Protocol, but all countries that are bound by Kyoto had already adopted unilateral targets that are more stringent. Well, the EU has, and Canada, Japan, and Russia have already indicated that they will not take seriously this part of the Durban agreement."

So despite all the parties taking diplomatic steps forward, and a notional pledge whatever is agreed in 2015 will have "legal force", we are back in the same limbo that we have been in ever since the Kyoto Protocol in 1997.  The European Union presses ahead rationing the use of fossil fuel energy while the other major economic areas that are responsible for the heavy majority of emissions don't.  Every year that passes the world economy is further imbalanced as investment in industrial capacity goes to those places without the targets.  That builds up industries and jobs there dependent on the difference in energy costs and thereby increases the political cost to following our lead and eroding that difference.

Re: The Government is stealing the property of ex-public sector workers

Andrew Lilico argues that the decision to uprate pensions in line with CPI instead of RPI constitutes seizing the property of public sector workers who have accrued pension rights, akin to deciding to "take away their houses or their cars".  There was a major case at the High Court which addressed exactly that issue – between the Government and a number of public sector unions.  The judgement came just yesterday but Andrew doesn’t mention it.  There are a few relevant points that came out of that case.

Even the claimants didn’t claim that there was an outright violation of their property rights here.  The "Claimants disavow any private law claims by the individuals concerned because the relevant transactions must be taken to have occurred on the terms of the individual schemes and the legislation."  All they claim is that some of the "explanatory literature" and assumptions during negotiations between unions and the Government suggested RPI would be used.

Public sector pensions just don’t work in the way Andrew understands them.  They are more akin to benefits, and indeed there is a direct link between how public sector pensions and benefits are uprated with inflation, that people become entitled to by working in the public sector than the sort of claim someone has on a private sector pension fund.

Matthew Sinclair: We can't judge Israel on standards few Western countries would match

By Matthew Sinclair

I worry that Mohammed Amin has fallen into a common trap with his article about how Israel treats minorities. The country quite rightly contrasts itself as a liberal Western democracy against the ugly theocracies that threaten it, and we respond by applying an entirely unrealistic standard when judging whether it fits that description.  Of course we shouldn't support any state unconditionally, but neither should we start requiring Israel to meet standards we would never insist on from our other allies.  With so many deadly threats to its existence, we need to treat the Jewish state fairly.

First he repeats the Israeli national anthem and its appeal to the particular Jewish struggle for a national homeland.  But I don't think a German who sings "Deutschland, Deutschland über alles" has to have one eye on seizing the Sudetenland.  Or an Englishman who sings our national anthem really wants to go crushing rebellious Scots.  They are an appeal to national feeling; to a country's history and tradition.  Israel is a nation built on a foundation of Judaism just as surely as ours has been built on Protestantism and royal power, or Germany was built with a drive to unite the German people.  

Of course, Mr Amin may be happy with that being the anthem, but just uncomfortable people might be required to sing it in order to appear in national sports teams.  But again that kind of controversy is a normal part of the balance between building a common national identity and leaving room for diversity.  The American pledge of allegiance is currently:

I pledge allegiance to the flag of the United States of America, and to the republic for which it stands, one nation under God, indivisible, with liberty and justice for all.

There has been an endless controversy over requiring pupils at school to say those words.  At the moment, the view of the courts appears to be that they are of a "ceremonial and patriotic nature" and therefore don't constitute an establishment of religion and violate the country's constitution.

My guess is that the more conservative readers of this site will be more sympathetic towards the idea of encouraging this expression of patriotism, and more libertarian readers will be uncomfortable with it.  But it is an entirely normal controversy for a Western state and taking the conservative option has never been incompatible with remaining a close friend of Britain.

In the Israeli case we're talking about a proposal from a member of a party which appears to only have four out of one hundred and twenty seats in the Knesset.  Mr Amin is singling Israel out to an absurd degree by treating this as such a big deal now.

His objection to the Israeli Government's demand that it be recognised by the Palestinians as a Jewish state is even less reasonable.  He is right that the demand is a relatively new one but it is being made for a reason, and Israel was established as a Jewish state for a reason.  As a place where Jews could defend themselves against the oppression and murder they had faced for centuries before its founding, not rely for their lives and liberty on the strength and goodwill of other peoples who had proven unreliable (sadly that includes us).

Israelis are now legitimately concerned that the Palestinians will recognise the State of Israel, but not relinquish their claim on it.  That the conflict will continue with a state in the Palestinian territories as a staging ground for an attempt to take all of Israel-Palestine, rather than the basis of a lasting peace.  It doesn't mean that the Jewish state can't find a home for many non-Jews as it does now.

Israel deserves to be treated fairly.  To be judged by the same kind of reasonable standards we apply to our other allies, while allowing them a proper freedom to make their own decisions as a sovereign democracy.  Using a domestic controversy over sporting teams being required to sing the national anthem, or an eminently reasonable request that their status as a Jewish state is respected, as a pretext to start threatening their status as friends and allies would be unjust and unworthy of us.

Matthew Sinclair: George Osborne can't let energy intensive industry down at the Autumn Statement

Earlier this week, over five hundred workers at the Lynemouth aluminium smelter found out that they were losing their jobs.  Their employer, Rio Tinto Alcan, said that "the smelter is no longer a sustainable business because its energy costs are increasing significantly, due largely to emerging legislation".  If the Government is serious about sustained economic growth then George Osborne needs to ensure that bad climate policy doesn't dump many more people out of work.

The jobs lost at existing plants that close will only be a fraction of the total put out of work by climate policy driving up energy costs.  Closing a significant facility and giving up on the established networks of suppliers, skilled employees and customers that have often built up around it is a big step that most companies are reluctant to take.  It often makes many more people unemployed in the wider economy than the headline number that work there suggests as a result.  And companies will be far more willing to redirect new investment, as there aren't the same sunk costs.  Tata Steel have said that the carbon floor price puts their £1.2 billion programme of investment in the UK at risk.

In a new report out today we've set out why the carbon floor price creates particular problems for energy intensive industry.  The largest energy consumers already pay up to 10 to 25 per cent more for energy here in Britain than their rivals in Germany, and 60 to 75 per cent more than in France.   The carbon floor price alone will add another 10 per cent to their energy costs by 2020.

Matthew Sinclair: Taxes on motorists are squeezing the towns, suburbs and rural Britain

Politicians have often called Fuel Duty a green tax when they are trying to sell hikes but, when pressed, the Treasury tends to admit it is just another way of raising revenue.  The motoring taxes certainly raise a lot of money.  £31.5 billion in 2009 and rising.  Outside the dense public transport networks, enabling a quick door to door journey, that are only economical in the cities, people need to drive.  They need to drive to get to work, take the kids to school and access services and that makes them a captive market that politicians can easily rinse.  

Motoring taxes are wildly excessive.  Our research today shows that you can't justify them looking at the cost of building and maintaining the roads and the contribution that road transport emissions are expected to make to climate change.  Excessive motoring taxes are now £293 per person, per year.  And people in rural areas like Maldon are hit hardest, we estimate they are paying £566 over the odds each year.  Some campaigners try to justify that by coming up with all sorts of evils - from accidents to noise - that motorists should apparently pay for on top of regulation, in a way no one else does.  But it doesn't stand up to much scrutiny.

Drivers get a dismal deal when it comes to public spending too.  It is accepted as a matter of course that road projects which offer a far better cost to benefit ratio will be cancelled while rail projects go ahead - even leaving aside the question of whether we're funding the right rail projects, and there is every sign that inequity is only going to get worse.  There is no sign of the ambitious Conservative strategy for the roads now that built the M25 back in 1986.

But ignoring the motorist will come back and bite politicians.  The strength of feeling that has propelled Robert Halfon MP's petition over 100,000 - calling for rises in Fuel Duty to be scrapped - shows that. Lots of people in the marginal suburbs and small towns that decide elections want a better deal.

Matthew Sinclair: DIY Tax Transparency

By Matthew Sinclair of The TaxPayers' Alliance.

The process of really opening up the public sector started under Labour with the Freedom of Information Act.  The MPs' expenses scandal ended for our generation the argument that we could just trust the checks on spending within the public sector.  Since the election, the pace at which spending is being opened up to public scrutiny has increased to an incredible degree.  From councils to Government departments; from the COINS database to council payments to suppliers. We know more and more about how our money is being spent.

It will take some time for the full effects of that transparency to be felt. Journalists and developers are still working out what they can do with it and some of the releases are still a bit of a work in progress.  But we should look at other areas where the principle of greater transparency, that sunlight is the best disinfectant as George Osborne said before the election quoting former US Supreme Court Justice Louis Brandeis, can be applied as well.  One of those areas is tax.  Conservative Way Forward have launched a new campaign for tax transparency with a new leaftlet, which you can download here.  We at the TPA have been looking at this area for a while and have similarly looked at how policy could improve the situation.  Recently we called for a merger of Income Tax with both Employees' and Employers' NI, with a major report on how it was possible, not just to make the tax system more efficient but also to make it more honest about how much people are paying.

But we can't just sit back and demand the Government fix this issue for us.  If we had done that on pay for senior council staff I expect we would still be waiting.  Instead we used the Freedom of Information Act to produce the Town Hall Rich Lists so local people could decide for themselves whether the bosses at their local authority were worth it.  After a few years, all the political parties came round to the idea that this transparency was a good thing and now councils have to report the details on their accounts like companies and other public bodies.

Matthew Sinclair: If NHS standards were the same as our European peers', nearly 12,000 fewer people would die each year

By Matthew Sinclair

Jill Kirby makes a powerful point this morning when she says that as "today's report from the Care Quality Commission shows, romanticising the NHS as a national treasure is ludicrously out of touch with the reality of the health service most of us now experience."  Lots of people have experienced wonderful treatment from talented staff in the NHS and feel a deep loyalty to the institutions that have looked after them.  We shouldn't dismiss that, but neither should we flinch from pointing out how patients and staff are being let down by the failures in the wider system.  You can see that not just in the anecdotal evidence but also if you really put the numbers in context looking at how the NHS is performing over time, and in comparison to other European healthcare systems.  The NHS can do better.

There is no perfect measure of healthcare performance.  We need to get some numbers though if we are to avoid a competition between anecdotal stories of NHS failure on one side, and lurid claims about American healthcare from defenders of the NHS eager to lay into a straw man.  To get away from that kind of sterile debate we've released a TaxPayers' Alliance study today that looks at mortality amenable to healthcare in Britain and three European peers - the Netherlands, France and Spain - since 1981.  No measure of healthcare performance is perfect but this is one, first pioneered in the British Medical Journal, that at least avoids some of the basic problems affecting other benchmarks.

Matthew Sinclair: The political price the Conservatives are paying for embracing the green rip-off

Today my new book Let them eat carbon is out.  It looks at the incredible cost of failing climate change policies; the special interests profiting; the corporate lobbying and taxpayer-funded environmentalist ideology driving it all; the myth of green jobs; and much more.  But what I wanted to focus on here is the politics, and answer one important question: what political price do the Conservatives pay for embracing the green rip-off?

After all, there is a consensus among the three main parties so there are limited options if someone wants to vote against draconian climate regulations.  And as I wrote all the way back in 2006, it might work as a dog-whistle issue for politicians, much more than immigration ever has.  Because even if those who really support this agenda are a tiny minority, that doesn't mean it is a vote loser if everyone else doesn't know, or doesn't care, about the price they are paying.

There are two reasons why the political price for embracing radical climate chance policy is high despite that.  First it means missing out on the opportunity to be the party of lower energy prices and get the kind of electoral advantage conservatives in Australia, Canada and the United States have enjoyed.  Second it is set to put additional pressure on family budgets making the fiscal adjustment feel a lot less like a gentle squeeze and a lot more like painful austerity.

In the United States, cap and trade was a huge boon for Republicans.  The deeply unpopular cap and trade bills wound up activists, couldn't pass the Senate and were then a potent campaign issue in Congressional races.  Democrat Joe Manchin, albeit a candidate in West Virginia, was so keen to distance himself from the legislation that he actually shot the bill with a rifle in a campaign ad.

But the political results were even clearer in Australia and Canada.  The Australian centre right Liberal Party and the Canadian Conservatives both campaigned against what they called a "tax on everything", a fair description for carbon taxes and cap and trade.  The Canadian Conservatives won an election with that as the key issue.  The Australian Liberals recovered from what many thought was a defeat for a generation, and managed a similar result to the one that took the Conservatives here four terms, in just one.

Since then the Australian Labor Party have clung to power by their fingernails.  And they have pressed ahead with a carbon tax despite having no democratic mandate to do so (the lack of a democratic mandate is a common theme in climate policy).  The polls give a sense of how it is absolutely killing them.  If an election were held today, Nielsen report that the Liberals would win by a landslide with 56 per cent of the two-party vote.  56 per cent of Australians oppose the carbon price, against just 39 per cent who support it.  And those who oppose the scheme feel more strongly about it.

That is the opportunity the Conservatives are missing out on.  But they are also making their other objectives harder to achieve.  Unilateral climate policy that drives jobs in energy intensive industries abroad will make it harder to get the economic growth that is critical to their electoral fortunes.

Most importantly the fiscal adjustment will feel a lot more painful when combined with expensive climate policy.  The fiscal adjustment is hard enough without also having to pay for billions upon billions in investment to meet climate targets at the same time.  Citigroup expect it will take €229 billion and add more than 50 per cent to household bills, even with greater efficiency (and before paying for all the insulation and double glazing that will take) the rise will be well over 30 per cent in real terms.  It will hit the poor and elderly families who rely on benefits most the hardest, making it harder to keep public spending under control

Of course the main reason climate policy needs to change is that it is expensive and failing. But there is also a lot at stake politically.  The next election could be a lot harder for the Conservatives than it needs to be if they don't insist measures to curb emissions are a lot more affordable.

Matt Sinclair: What does the empirical evidence tell us about the causes of riots?

By Matthew Sinclair of The TaxPayers' Alliance.

There have been a lot of calls to understand the causes of the riots. Unfortunately most of the attempts thus far haven't been grounded in what empirical evidence we have. Mary Riddell for example, says that we shouldn't blame unemployment, cuts or race but poverty and inequality. She talks about the rising wealth of the richest and how "successive British governments have colluded in incubating the poverty, the inequality and the inhumanity now exacerbated by financial turmoil."  Riddell's argument is passionate and powerful rhetoric, but the best study we have on what causes riots suggests almost exactly the opposite.

In 1996, after the Los Angeles riots in 1992, Denise DiPasquale and Ed Glaeser produced a landmark study of the causes of riots, The Los Angeles Riot and the Economics of Urban Unrest. Of course one paper isn't the end the debate, and there is other research, but their extremely high quality study has to be the starting point in considering what has gone wrong.

The evidence suggests that relative poverty doesn't cause riots. The authors report that: "Our cross-national and the 1960s evidence provided little support for the popular notion that poverty is a major determinant of which cities riot."  And contrary to the idea insufficient public spending is the issue: "The size of government is also somewhat positively correlated with rioting, perhaps because community level gains from rioting are higher when there is a greater amount of government expenditures to divide."

Re: Don’t axe this tax, the carbon floor price is the best of a very variable bunch

Robert McIlveen is absolutely right that "those who are concerned about climate change have a responsibility to take the costs of tackling it seriously too."  Not just to ease the burden on families here but because that is the only way we make a helpful contribution to cutting global emissions.  Our share of emissions is tiny and unilateral policy can just drive industry abroad, doing nothing for the climate.  If you really want to reduce global emissions then what Britain needs to do is demonstrate that can be done affordably.  All we're doing at the moment is offering a graphic illustration of how measures like installing massive amounts of offshore wind capacity means piling pressure on families and rendering manfacturing businesses uncompetitive.

Unfortunately he then goes on to describe a carbon tax, like the floor under the carbon price that the Government is introducing, as a relatively efficient climate change policy.  And chastises us for attacking it instead of other measures such as feed-in tariffs and the Carbon Reduction Commitment:

Attacking one of the best carbon policies we have rather than seizing the opportunity to get rid of the worst is an opportunity we shouldn’t miss – but the Taxpayers’ Alliance has.

That's more than a little unfair. I'm pretty confident that we attacked the feed-in tariff before he did at Policy Exchange, or just about anyone else.  When George Monbiot - hardly a great supporter of the TPA - first called it a Great Green Rip-Off he said the "only body to have called this right is the loathsome TaxPayers’ Alliance".  We have kept it up since, just the other week I was on radio and television attacking plans for a council to invest in solar panels and take advantage of the subsidies.  In my new book Let them eat carbon there is plenty more on why picking losers by subsidising the most expensive sources of energy is a very bad idea, and a discussion of our brush with double cap and trade in the form of the Carbon Reduction Commitment.

But we can't just criticise the worst schemes as they aren't the biggest.  If we did that on waste we would spend all our time writing about police cars painted to look like pumpkins or the EU's £250,000 for a luxury toilet for Nicolas Sarkozy that was torn out unused.  Those stories are important examples of how bad things can get, and you can read our April Fools' Day quiz for more.  But we do also need to look at the big items and write reports about welfare reform and major cuts in spending.  Otherwise we won't be tackling the major causes of the rising burden on taxpayers.

In just the same way feed-in tariffs are an awful waste of money but the total bill could be small compared to the major regulations like the EU Emissions Trading System (ETS) and the Renewables Obligation.  Attempting to shore up the EU ETS with the a floor under the carbon price could also be very expensive.  It could double the cost of the scheme as the Government's target price is around double the current market rate.  The Government claim that the cost will then come down over time as a more stable price encourages investment to lower emissions, particularly in nuclear power.  Unfortunately it isn't likely to work out that way.

Nuclear operators say it isn't enough to get new capacity.  What they really need is protection against financial risks in constructing reactors.  And any emissions cut will make no difference overall anyway, thanks to the way the EU ETS works.  As the IPPR have set out, every tonne of carbon we cut out here in Britain will be emitted elsewhere in Europe.  We will be left paying billions more for no good reason. The only people who benefit will be energy companies, who will make a £7 billion profit according to Credit Suisse, particularly EDF Energy who lobbied for this furiously.

The carbon floor price is a bad policy.  It isn't quite as awful as the feed-in tariff but then we weren't offered a choice between the two.  We have both and I'm arguing for neither.  In the book I talk about an alternative based around technology, adaptation and resilience that wouldn't put the same pressure on families and manufacturers.  But the first step is to stop making the fossil fuels a modern economy runs on more expensive.

Matthew Sinclair: David Cameron needs to reform failing climate change policy here, not try to convince Australians to make the same mistakes

Matt is Director of The TaxPayers' Alliance.

Over the weekend Tim reported that David Cameron has been backing a carbon tax proposed by Julia Gillard - Australian Labor Prime Minister - and fiercely opposed by the conservative Liberal Party there.  The Prime Minister wrote to her that it would "add momentum to those, in both the developed and developing world, who are serious about dealing with this urgent threat."  In other words, the Americans look about as likely to pass cap and trade as they are to proclaim Herman van Rompuy their king.  And the Chinese won't accept binding limits on emissions that are likely to ultimately limit economic growth.  But if the Australians put a carbon tax in place Europe's political class can go on pretending that the rest of the world is just behind them.  After all, even the Climate Change Act 2008 Impact Assessment reported that the "economic case for the UK continuing to act alone where global action cannot be achieved would be weak".  They can only keep up the pretence this isn't a unilateral dead end for so long.

If the Prime Minister wants to get involved in climate change policy he should focus on problems closer to home first.  Just last week the Department of Energy and Climate Change (DECC) published a report which estimated that prices would rise for large energy intensive users by up to 52 per cent by 2020, with a central estimate of a 31 per cent rise.

Matthew Sinclair: The Guardian/Greenpeace investigation isn't convincing. Conservative MEPs have made up their own mind to oppose even more radical EU emissions targets

By Matthew Sinclair

The Guardian released an investigation they have carried out with Greenpeace yesterday evening, which claims to show that the fossil fuel interests have been furiously lobbying Conservative MEPs against a higher EU target for emissions cuts.  Chris Huhne has apparently launched an investigation into who "got to" those MEPs and made them vote the new target down.

The idea that armies of corporate lobbyists are the reason why radical plans to curb emissions don't make progress is a longstanding environmentalist myth.  I devote some time in my new book Let them eat carbon to setting out how that isn't the case, quite the opposite.  But it is worth taking a quick look at the facts behind these latest claims, to set the record straight and give MEPs the credit they deserve.