24 March 2009

The Bill of Wrongs

Jack Straw launched a consultation paper on the proposed Bill of Rights yesterday and in doing so offered up a document which summarises New Labour's arrogance, hubris, authoritarianism, megalomania and downright stupidity in one place.

In the interest of fairness, I will acknowledge that this is a consultation document and therefore not official policy, but the really stomach churning sections aren't in the proposals, they're in the assumptions surrounding them, particularly in the press release accompanying the document[

The paper lists some of the responsibilities we have, and asks if some should be explicitly stated in a single document, including: obeying the law ...

Straight out of the trap, we have a masterpiece of stupidity. What is the point of a law which tells you that you have to obey the law? If you didn't already know that you have to obey the law, then presumably you'd think this new law is optional too. Maybe we should add another law which says you have to obey the law which says you have to obey the law.

...participating in civic society through voting and jury service

So compulsory voting is on the agenda. Very handy when low turnouts are threatening the government's authority. Even the most innocuous of statements are at odds with New Labour's track record:

We believe it is important that people know their rights and their responsibilities.

Well yes, one of the fundamental principles of the rule of law is that people should be able to understand the obligations that the law places on them, but the sheer weight of legislation enacted over the last twelve years, particularly the constant revisions, has rendered that pretty much impossible. A perfect example of the problem was detailed at the "Usefully Employed" blog[
2], which is written by a barrister who presumably has to wade through the legislative sludge on a daily basis. The press release goes on to say:

We also believe that there could be merit in bringing together rights such as free health care...

The phrase "free healthcare" is a misnomer. It isn't free of cost, it is just that the cost isn't paid at the point of use. Now, lots of people think that "free healthcare" is a good idea, but that doesn't make it a fundamental right. To try to make a fundamental right out of what is rightly a matter of political policy is offensive to democracy, particularly when it depends on using other people's money to satisfy it. Of course, it is a nonsense too. We have never had completely free healthcare. Prescriptions, eye care, dentistry, etc. have to be paid for, in part of whole, at the point of use. Even if those things were free at the point of use, for all healthcare to be free at the point of use, the state would not be able to limit the care it provides, not matter how expensive it is or how unlikely it is to be successful. "Free healthcare" would be impossible to satisfy as a right, unless the government outlawed all healthcare other than that delivered by the state.

I've no desire to unpick the main document page by page, as it isn't much different in substance to the original implications which I criticised when addressing the Falkland Islands constitution[
3]. The key problem now, as then, is that this proposal goes beyond the rightful territory of a constitutional document, which is specifying negative obligations (things the government mustn’t do) and begins to introduce positive obligations (things the government must do), which should be a matter for the electorate of the day to control. In essence, the government is trying to entrench elements of its own manifesto in constitutional law so that future governments are limited in their ability to reverse those policy decisions. That is undemocratic.

The one section I do want comment on specifically, because it speaks volumes about the government's mentality, is this comment on page 42[

The measures in the current Welfare Reform Bill are based on the simple idea that support should be matched with responsibility. They seek to renew the partnership between the state and the individual

Only a government drunk on power and completely out of touch with its purpose would ever publicly describe the relationship between the state and the individual as a partnership. It should never be viewed as a relationship of equals; the role of the state is to serve the electorate. Maybe they'll go the whole hog and rename Civil Servants as Civil Partners. Maybe we'll all be made to go through a Civil Partnership ceremony to promise to love, honour and respect them, although, as the press release suggests making it a responsibility to treat public sector staff with respect, it seems the government is planning to do that on our behalf anyway.

Dominic Grieve dismissed the proposals as "pap" [
5] and I don't think I can improve on either the accuracy or the succinctness of the description.


23 March 2009

Constitutional Reform

I've been following the comments on electoral reform over at Musings on Liberty [1][2], and it's got me thinking in a bit more detail about exactly what roles parliament should be performing and the least disruptive way to reform it so it performs its core functions well. The key as I see it is to establish what is needed from the executive and the legislature and seek to establish a system which ensures that each is well placed to fulfill its purpose.

I believe we need an executive which broadly represents the wishes of the electorate and is able to exercise a good degree of internal oversight, but is stable enough to perform its day to day functions without being torn apart by factionalism. In most respects, the executive should be like the board of a well run company; it should reflect a variety of opinions and allow for disagreement, but always within the context of ensuring that the day to day running of the company is not compromised.

The function of the legislature is quite different. As it is less concerned with the day to day running of the state, it isn't as important to have it functioning as a cohesive body; having wide ranging disagreement and a lack of a clear majority view within the legislature would be perfectly acceptable and in some respects desirable, as it could improve the quality and scope of debate. As the legislature exists to analyse legislation on behalf of the electorate in more detail than the individual members of the electorate would have the time to and therefore make well reasoned decisions more likely, it should have the approval of the electorate, but operate with enough independence that it isn’t simply second guessing what the result of a referendum would be and voting accordingly.

I think this could be achieved with five relatively simple changes to the current system:

1. Elect the Commons via the Alternative Vote.

2. Elect the upper house via the Single Transferable Vote from constituencies averaging approximately 4% of the electorate and returning around twelve members, with half being elected every five years, giving a ten year term for each member. This is the reform of the Lords proposed by the Electoral Reform Society [

3. In addition to point 2, I would also suggest restricting the members of the upper house to one term and barring them from standing for any public office after the completion of that term.

4. Repeal the Parliament Act, so that the upper house has an absolute power of veto over legislation.

5. Require that each piece of legislation has a sunset clause so it has to be brought before the upper house (either automatically after the sunset period, or earlier at the request of the lower house) and be re-enacted at least once every twenty years.

The result would be to give the lower house control over executive power and the upper house control over legislative power.

The use of AV for the lower house should increase the value of votes and remove the incentive for tactical voting, but not be significantly less likely than FPTP to deliver a clear majority, making it likely that those wielding executive power would have the majority support of parliament, while delivering a range of opinions within the minority which would be able to act as a counter-balance.

Steps 4 and 5 would give the upper house control over the statute book, allowing it to reject any legislation proposed by the executive and ensuring that historic legislation is periodically brought before it for review. Step 2 would ensure that the house would be broadly proportional and not subject to wild swings due to temporary changes of public mood. Step 3 would ensure that the members of the house would not be seeking re-election and would therefore be making their decisions without undue concern about being seen to be out of step with potentially ill-considered public demands or media pressure. It may also make membership less appealing to career politicians and increase the diversity of opinion represented.

One of the best descriptions of the separate purposes of the two houses I have come across is that the lower house represents the will of the people and the upper house represents the conscience of the people. That feels right to me; the Commons represents the changing will and potentially knee-jerk opinions of the electorate and the Lords, being free from electoral pressure, is able to offer a check on those immediate desires by considering the issues in detail and potentially saying "I understand why you want that, but when you think about, it's wrong."

I don't remember where I read that description, but I think it sums up the situation beautifully and it's something I’ve started to measure any proposed electoral reform against. Electing the lower house by AV and the upper house by STV, with the additional conditions I suggested, seems to satisfy those conditions well.

Any thoughts?




16 March 2009

Public Sector Spending is Regressive

I realise the headline flies in the face of the generally unquestioned idea that government spending gets the rich to shoulder more of the burden and benefits the poor, but I believe that the headline is true for a wide range of government expenditure.

Consider expenditure on transport infrastructure. If a new railway line or road is built to connect an outlying town to a city, it will generally make that area a more attractive commuter location and house prices will rise as a result. The same effect occurs around schools; the catchment area around a state school with a good reputation will generally have a premium on house prices. In effect, the state school system has a form of selection based on wealth, it is just less overt, as instead of the money being paid to the school, it is paid through the housing market. That isn't, however, the real regressive element. It is the way the housing market impacts on different groups which creates the major regressive effects.

As house prices increase, homeowners see an increase in their net worth; in contrast, people renting their home will find their rents increasing, resulting in them becoming worse off. So, as transport links, state schools, etc. improve in an area, people who own homes in an area will make a windfall gain, but renters will face greater costs. As renters will generally be poorer than homeowners, the overall effect is to benefit the wealthier while disadvantaging the poorer.

This leads me to draw two conclusions:

The first is that the situation could be improved by introducing an approach I've promoted regularly - Land Value Taxation. By introducing a land rent, in the form of a tax on the value of land titles, the regressive nature of public expenditure would be reduced, as those benefiting most from public expenditure would find themselves paying more tax in return.

The second conclusion may appear slightly more counter-intuitive - in order to reduce the regressive effects it creates, the government should provide far fewer services and leave the provision to a free market where the user pays the full cost directly. For example, instead of providing motorways directly, the government could leave the provision of motorways to the private sector or auction off the right to operate motorways to the highest bidder. That would increase the direct cost faced by drivers using the motorways, but massively reduce the premium on the price of houses which benefit from access to the motorways, reducing the windfall gains enjoyed by homeowners, but reducing the extra burden on renters.

11 March 2009

More Rent Seeking from the Film Industry

Every time the music or film industry tries to get politicians to beat-up the public for them and politicians line up to oblige, it brings home just how corrupt our political system is. The motion which has been signed by eleven MPs from across the political spectrum attempting to criminalise the use of a video recorders in a cinema is a perfect example [1].

The argument in favour of the motion uses all the typical grubby strategies:

It trots out the uniformity argument - because it's common for it to be a criminal offence on the continent, we should make it a criminal offence too. Well, if that's the way it's going to work, we might as well do away with parliament and any sense of self-determination and meekly follow the international average.

Then the British Video Association mouthpiece trots out the comment that "It's very strange that the government will not change the law. The film industry makes a lot of money for Britain and we are not, unlike some others, asking ministers to bail us out." Ok, so now it seems that because the government is throwing money at some industries, it makes other industries think that if they don't take money, they can demand some legislation of their choosing instead. The comment ignores the fact that the whole mire of copyright legislation is in effect a bailout for the film industry. The difference is that instead of the money being taken by the treasury and handed back out as a subsidy, the government simply grants a monopoly to the film companies which allows them to collect the subsidy directly from the consumer as monopoly profit.

The most nauseating comment in the piece is the usual accusation that "The trade in copied films is known to fund other types of organised crime, including human trafficking and drug dealing." I don't know whether the BBC have regurgitated an industry press release without thinking about it, but the argument is stupid. It at least made some logical sense when it was supposed to be terrorism that was funded by unauthorised copying, because terrorism is a loss making activity. Human trafficking and drug dealing, on the other hand, are activities that people get involved in because there is profit to be made from them. The implication that they might cease to be viable if they weren't propped up by sales of illicitly copied films is laughable, especially when an increasing proportion of those illicit copies are shared online with no cash changing hands. On the other hand, the trade in authorised copies funds organisations which lobby politicians and offer them inducements to introduce draconian rent seeking laws, which sounds at least as unappealing as funding illegal activity.

I'm glad that the response from the government was opposed to the motion, I just wish the wording had been a lot stronger.

1. http://news.bbc.co.uk/1/hi/uk_politics/7936852.stm

10 March 2009

The Net Neutrality Quandary

Net Neutrality is an issue on which I'm completely torn. Take, for example, the UK government's proposed amendments to the EU Telecoms Package[1]. The original proposed wording was:

The national regulatory authorities shall promote the interests of the citizens of the European Union by inter alia: applying the principle that end-users should be able to access and distribute any lawful content and use any lawful applications and/or services of their choice

The UK government proposal would amend that to:

...by inter alia: applying the principle that there should be transparency of conditions under which services are provided, including information on the conditions of access to and/or use of applications and services, and of any traffic management policies

My gut reaction is to favour the original wording; it is the completely open nature of the internet which allows me to rant on here and know it will be accessible to anybody with an internet connection. On the other hand, I look at the proposed amendment and that seems reasonable too. If there is a competitive market and one supplier wants to offer a service on the basis that it provides access to a limited number of websites and there are customers who are happy with that, what right have I got to tell them that they can't do business on that basis? In any other market, that would be a clear restriction of free trade, something I'm instinctively opposed to. In the main, it wouldn't seem to make much sense for an ISP to operate on that basis anyway. By blocking access to a range of sites, they would be offering a poorer product to the customer, so they would have to find some way of making it correspondingly cheaper.

Having reflected on the issue for a while, I think that, rather than mandate net neutrality, freedom of choice and flexibility would be better served by using common carrier type protection for those ISPs which act as "dumb pipes." In much the same way that, if Royal Mail handles a parcel containing something illegal, it isn't held liable, but someone knowingly bringing the same item through customs is, those ISPs which act as non-discriminatory conduits for information should be guaranteed that they won't be held liable for material transmitted by their customers, but those ISPs which offer a restricted service should be treated as broadcasters and be held responsible for the information they transmit. That would provide a strong incentive for ISPs to maintain neutrality without legally restricting their business model. As an aside, I acknowledge that Royal Mail's protection from liability isn't due to common carrier protection, but the principle is similar enough for the purposes of this comparison.


09 March 2009

The Forgotten Single Taxer

Most supporters of the idea that Land Value Taxation should be the sole source of government revenue view Henry George as the forefather of the movement, to the extent that supporters of the idea are widely referred to as Georgists. While it is clear that George's impact in America was huge and did more to bring the ideas into the public consciousness than anybody else, there was an Englishman who was born almost a century before Henry George who promoted the same ideas and has been almost completely forgotten, even amongst those who share his beliefs.

His name was Thomas Spence and he was born in Newcastle-on-Tyne in 1750. He dedicated his life to spreading the idea that the only just society is one in which all people have equal access to natural resources and enjoy the freedom to do as they please with their own property so long as they do not infringe the freedom of others. His work resulted in him being imprisoned on charges of high treason for seven months, before being acquitted. Following his death, some of his followers continued to meet as The Society of Spencean Philanthropists, which resulted in four of the members also facing charges of high treason, as well as an Act of Parliament being passed to outlaw all societies or clubs calling themselves Spencean or Spencean Philanthropists.

His seminal lecture, The Real Rights of Man [
1], contains some gems which are still as pertinent today as they were over 200 years ago, such as

society ought properly to be nothing but a mutual agreement among the inhabitants of a country to maintain the natural rights and privileges of one another against all opposers


the right to deprive anything of the means of living, supposes a right to deprive it of life; and this right ancestors are not supposed to have over their posterity.

His proposal, as laid out in his Constitution of a Perfect Commonwealth [
2] was to put the overall control of land in the hands of parishes, which would rent out the land to the highest bidder, use the funds to pay for public services, pay a small levy to national government and share the remainder equally between the residents of the parish as a dividend. No other taxes would be levied.

In the 21st Century, I don't believe the process of leasing out land to the highest bidder or constraining rent collection to the parish level would be practical, given the dense and extensive urban development we have and the amount of expenditure which is spent centrally on nationwide infrastructure. However, I imagine the proposal would have made much more sense in the 1700s and the underlying principles are still as sound today as they were then.

My favourite paragraph of Spence's writing comes from The Real Rights of Man, when he describes his ideal society:

There are no tolls or taxes of any kind paid among them by native or foreigner, but the aforesaid rent which every person pays to the parish, according to the quantity, quality, and conveniences of the land, housing, etc., which he occupies in it. The government, poor, roads, etc. etc., as said before, are all maintained by the parishes with the rent; on which account all wares, manufactures, allowable trade employments or actions are entirely duty free. Freedom to do anything whatever cannot there be bought; a thing is either entirely prohibited, as theft or murder; or entirely free to everyone without tax or price, and the rents are still not so high, notwithstanding all that is done with them, as they were formerly for only the maintenance of a few haughty, unthankful landlords. For the government, which may be said to be the greatest mouth, having neither excisemen, customhouse men, collectors, army, pensioners, bribery, nor such like ruination vermin to maintain, is soon satisfied, and moreover there are no more persons employed in offices, either about the government or parishes, than are absolutely necessary; and their salaries are but just sufficient to maintain them suitably to their offices. And, as to the other charges, they are but trifles, and might be increased or diminished at pleasure.

I think there is plenty in there for any libertarian or geoist to agree with.



06 March 2009

Why Scottish Banknotes are Riskier

As David Mundell is using a private member's bill in an attempt to give Scottish banknotes the same status at Bank of England notes [1], I thought it might be worth addressing some of the misconceptions surrounding banknotes, especially David Mundell's idea that "A Scottish tenner is as just as good as a Bank of England one."

The crucial difference is that Scottish bank notes are issued by private sector banks, whereas Bank of England notes are issued by the central bank, which puts them on a very different footing.

Scottish bank notes are a historical anomaly. When the Bank of England was given the monopoly on the issuance of Sterling notes, a concession was given to the Scottish banks so that they didn't have to withdraw their notes from circulation. They were allowed to issue notes without specific backing, up to the level of their average circulation for the year up until 1 May 1845, a level which applies to this day. The banks also issue notes well in excess of this level, but the additional notes must be backed 1 for 1 with reserves at the Bank of England, so those notes in effect are as good as Bank of England notes.

According to RBS, out of a total of £1,500m of Scottish notes in circulation, only £3m are issued on the basis of the original concession [2], so it is only a tiny proportion of the total, but none-the-less, it does mean that, in effect, Scottish notes are riskier than Bank of England notes. If one of the note issuing banks were to fail (and not be bailed out by the government), the Bank of England reserves relating to their notes would be less than the total notes issued. Only if that original £3m concession were withdrawn, resulting in all Scottish notes being backed 1 to 1 with Bank of England reserves, would Scottish notes truly be equivalent to Bank of England notes. Until then, part of their value is in effect an IOU from a private organisation and that is something which I don't believe warrants the status of a legally enforceable currency.

I think it's also worth addressing the BBC's comment that:

People who use Scottish notes in England have no legal recourse if they are refused. The only notes that carry the force of law are those issued by the Bank of England.

It's a misrepresentation of the situation, because if shops refuse Bank of England notes, the person trying to spend the money has no legal recourse either. Bank of England notes are legal tender in England, but being legal tender only means that they have to be accepted in settlement of debt. As a shop is only offering goods for sale, there is no pre-existing debt, so legal tender rules are irrelevant; the shop is quite within its rights to demand payment in whatever form it likes, be it Bank of England notes, Scottish notes, Euros, Dollars, gold, Vietnamese Dong or brass buttons.

What makes this proposed law an even more intriguing prospect is that only coins are legal tender in Scotland and Northern Ireland; neither locally issued notes nor Bank of England notes are legal tender, so this law could result in Scottish notes having a higher legal status in England than they have in Scotland!

1. http://news.bbc.co.uk/1/hi/scotland/7926843.stm


03 March 2009

Scottish Parliament to Help Establish Cartels

In an attempt to beat the customer from both sides, the Scottish Parliament has announced plans to fix a minimum price per unit of alcohol sold[1]. From the consumer's viewpoint, this is the worst of both worlds. At least with an increase in alcohol duty, the extra that the consumer pays goes into the public purse, so they should, in theory, get something back in return. With price fixing proposals such as this one, the extra revenue goes to the supplier.

This just strikes me as a cowardly cop-out. The Scottish government is on a puritanical crusade against alcohol, but it doesn't want the bad publicity that would go with an increase in pub closures as a result of increasing alcohol duty, especially in the midst of a recession and so soon after the smoking ban, so it has decided to shaft the consumer by effectively levying a tax on some alcoholic beverages, but allowing the supplier to keep the revenue.

In almost any other market, if suppliers colluded to fix a minimum price, they would be breaking the law and potentially subject to substantial fines, as in the case of the supermarket milk cartel[2]. What is being proposed here is even worse than that. With a voluntary cartel, there is a limit to the damage that can be done to the consumer, as the agreement will always be seriously unstable; there is always a risk of one of the participants breaking rank, or another participant entering the market and undercutting the cartel. With government enforced price-fixing, the consumer is completely over a barrel; none of the participants can break the agreement and nobody can enter the market at a lower rate.

Of course, in the long run, the laws of supply and demand can render this sort of scheme useless. By forcing prices above the natural market rate, you move further up the supply curve, meaning suppliers have an even stronger incentive to sell, so while the price may go up, the rest of the service to the customer may improve to compensate. I wouldn't be surprised to see more drinking establishments opening up (or at least fewer closures), pubs offering free food and nightclubs offering free entry, all with the intention of milking the newly created cash cow of price-fixed alcohol. Unfortunately, the vast majority of political decision making makes no reference to economic realities and unintended consequences.



02 March 2009

The Court of Public Opinion

As if to prove that the adage that hard cases make bad law also applies to government policy, Harriet Harman has waded into the debate surrounding Fred Goodwin's pension with this gem [1]:

"it might be enforceable in a court of law, this contract, but it is not enforceable in the court of public opinion and that is where the government steps in."

Of course it's disgusting that the government think they can sweep aside the rule of law when it gets in the way of their objectives, but what I find even more annoying is the bare-faced hypocrisy. If the court of public opinion says that it is unacceptable for Fred Goodwin to claim his pension, then according to the government, the court of public opinion must be obeyed. On the other hand, if the court of public opinion says that it is unacceptable for MPs to claim lavish expenses for dubious reasons, the court of public opinion is dismissed.

If legal entitlement is a good enough defence for the political hierarchy, then, like it or not, it should be good enough for Fred Goodwin too.

Just to make the situation worse, Jacqui Smith has waded in with[2]:

"There is complete cabinet agreement that there can not be rewards for failure in the banking system or any other part of the business system."

Clearly that doesn't apply to the government, where a financial penalty for failure would be unthinkable.

Charlie Brooker has written a very timely piece about the contempt with which politicians view the electorate[3] and The Daily Mash has taken the opportunity to deliver some excellent satire[4][5].