Liberal Democrats call for tax cuts

After years of being to the left of Labour, in calling for higher taxes and being the party worshipping the religion of ecologism, the Liberal Democrats have made another swing now - closer to the "Liberal" roots of this unusual third party in British politics (which once had a proud tradition of being more classical Liberal/less government, but which merged with a centre-left faction of Labour disenchanted when Labour went Marxist/Trotskyist in the early 80s).

Liberal Democrat leader Nick Clegg (nicknamed "Cleggover" after telling tales about the number of sexual conquests in his life) announced on Thursday that if elected, the Lib Dems would cut government spending by £20 billion to fund wide ranging tax cuts for low to middle income earners. Although he'd raise tax on high income earners, and assuming I'm bizarrely in this category, then there is no way in hell I'll vote Lib Dem. However, still announcing less state spending is at least new among the big UK parties, although the ways to do it are unconvincing. I doubt £20 billion will be saved by scrapping ID cards, cutting the number of MPs and not expanding nuclear power.

Sadly this rebranding is still dripping with the envy of the left, and full of green taxes which wouldn't be so bad if there was any substance to the call for less state spending. The truth is to cut state spending the Lib Dems have to be tough on the whole state sector, that means slashing subsidies for all sectors of the economy, tightening welfare and encouraging people to make their own choices for health and education, not the current statist behemoths. The Liberal Democrats in the past decade have become the party that many of old Labour have gone too, and it is full of busybodies whose views are given free range in The Independent, as the paper of the ecological finger pointer. Unless the Lib Dems can show a consistent vision of less state and less government in peoples' lives it wont be anything more than a younger version of new Labour. Meanwhile, nowadays it just looks like the 3rd playing political whore, ever looking for a market that the two dominant parties isn't looking after - but straddling the far left against the war in Iraq and the liberal right for lower taxes isn't going to cut it.

Taxpayer can bear no more!

So says no less than UK Chancellor of the Exchequer Alistair Darling!

In an interview with The Times he has said that UK taxpayers are at the limit of what they are prepared to pay for "public services". Well, that's not going to stop him taking more money from my pay packet assuming I get another pay increase this year and a bonus. Nope, can't see my taxes being capped.

Of course what this is about is that the UK Treasury is in a rather dire state. On the one hand, the British government continues to be profligate with its state sector, the most recent profligacy being the nationalisation of Northern Rock, a building society that had clearly loaned too much to too many who couldn't pay them back. It also is running a substantial budget deficit, £24.4 billion in the three months to June alone. National debt (government debt) threatens to rise above 40% of GDP and there is now talk of borrowing to pay for current spending, not just capital investment in hospitals, schools, defence and transport. On top of that tax receipts are down, as the economy slows down.

In short, the newLabour reputation for fiscal prudence is looking badly damaged. The solution it chooses? Borrow more.

During the good times, the UK government didn't run budget surpluses - which it could have to lower debt and build a buffer of financial capacity to borrow during bad times. No, it continued to pour money down the enormous fiscal black holes of social spending, subsidising more housing, little used (and extraordinarily well used) railway services and the every hungry NHS.

So, whilst the Keynesians out there aren't worried - they always advocated borrow, spend and hope, the truth is that more borrowing is going to hurt.

Borrowing more means the UK government is competing with others for credit - given how tight credit has become for businesses and homeowners, this will only exacerbate the problem. In short the state sector will be competing with the private sector for credit. This only makes sense if you think the state sector can spend money better than the private sector, which is dubious at best. So expect interest rates to rise, further hurting businesses and mortgage holders (and so further dampening down house prices).

Secondly, borrowing more, particularly from offshore, will be inflationary, as it pumps more money into the economy.

There is, of course, the demographic timebomb contained within the UK national debt. The £640.5 billion of national debt consists of 44.2% of GDP, and this is at a time when the population is progressively aging, putting a higher strain on an already undercapitalised "national insurance" fund (which is no more a fund than any other Pay As You GO tax funded system) for pensions and the NHS.

So with credit tight, housing prices (and much of the private sector savings) heading downwards in most of the country, fuel and good prices soaring, the trade union movement is also starting to be restless. Calling for state sector wage increases well above inflation, naturally not giving a damn about the rest of us who would be forced to pay for them.

The Daily Telegraph editorial on Saturday does suggest a different approach, which is simply to do what householders and businesses are doing in a recession. Look for efficiencies in government spending. When the government spends money it is taken from elsewhere, taken from consumers and businesses. So when it is spent on wasteful activities that generate little return it is destructive to the economy.

For far too long the answer to problems in the UK has been to ask the government for money, and the new Labour administration has obliged. It is time for the Conservative Party to out the waste of government, and to wage war against it. Some simple questions could be asked of all government spending by those in control of it:
1. Will the spending genuinely generate more money for taxpayers than was taken away?
2. Would taxpayers voluntarily cough up funds for this spending if given the choice?
3. What harm would happen if this money wasn't spent at all?

Those are questions politicians of the British Labour Party seem unable to ask, it's about time they were.

Free trade could ease global recession

In a couple of weeks time the Doha round will stagger on. If the governments of the EU, USA, Japan and poorer countries were rational actors they would treat this as an opportunity, a huge one - to inject some growth into the world economy. The Daily Telegraph tells how important this is.

It would be a chance for the price of food to be relieved by multilateral agreement to abolish agricultural export subsidies, to end non-tariff barriers on agricultural trade, and move towards decreasing tariffs and domestic subsidies. That requires the EU, Japan and the US - whilst Barack Obama seems distinctly unenthused.

It would be a chance for developing countries to respond in kind by reducing their tariffs and non-tariff barriers to manufactured goods and services. That requires India, Brazil and African states.

However there isn't much chance for optimism. In the US, the Democrat led Congress is in protectionist mode, and in the EU Nicolas Sarkozy as EU President is really not interested at all. Meanwhile, the Observer reports how Oxfam and ActionAid are showing their socialist colours, with little interest in the Doha round. It also presents Haiti as an example of how liberalising agricultural trade can go wrong - which of course, ignores the truth that without EU, the USA and Japan liberalising as well, and without the rest of the economy opening up, then Haiti was only going to be half successful.

EU bureaurats strangle consultation

When the EU engages in "stakeholder consultation on the Commission's smoke-free initiative" you might think it would at least allow a smokers' lobby group to participate.

No. According to the Daily Telegraph's Simon Clark the European Commission has no interest in the views of smokers. Liberal? I think not.

"World's worst building" getting minor upgrade

Not PC described it as such, as has the Daily Telegraph and Esquire magazine.

It's the Ryugyong Hotel in Pyongyang, which is itself an empty shell. It is a concrete monstrosity, it has no utilities or rooms. Construction started in 1987 as a showpiece against South Korea, the host of the 1988 Olympics (which the USSR and China, North Korea's then allies, refused to boycott), construction stalled in 1992 after US$750 million had been spent on it, and the aid flows from the USSR (and the USSR itself) had disappeared.

According to the Daily Telegraph, a handful of top floors are to be refurbished at considerable cost. I wonder how this will happen, given it has no elevators and rumour has it that it was so badly designed and built (by North Korean state "companies") that the elevator shafts are not plumb (so elevators are out of the question using those.

The reports of "refurbishment" are most likely to be the use of the structure for telecommunications according to the Daily Telegraph report. This is surely the building that would be one of the first to get demolished when this enslaved country is finally freed.