Adam Smith Institute

I've just returned from the US, where I spent the last few days in Kansas City, Missouri, at the Cerner Health Conference. Cerner is one of the world's leading healthcare IT suppliers, but they also devote a lot of time and effort to 'thought leadership' and healthcare policy reform. That's why I was there.

One high point was hearing Fred Thompson – the former senator, presidential candidate, and Law & Order star – give the keynote address. I also had the chance to talk to him briefly afterwards. A number of things struck me. First of all, it's no wonder his presidential campaign didn't go well – and I mean that as a compliment! Thompson came across as far too honest and straightforward for that kind of election.

He made the point that politics was suffering from a lack of leadership, and a fundamental dishonesty on the part of the politicians. Absolutely everyone knows that medicare and social security, for instance, are completely unsustainable and will soon either become insolvent or impose an unbearable burden on American taxpayers. And yet no one is prepared to stand up and say that or to propose real alternatives.

True enough. But Thompson also made it clear that the electorate must shoulder some of the blame for this. Voters punish politicians who tell them the truth, and reward those that tell them what they want to hear. In terms of leadership, they reap what they sow.

That being said, the thing that impressed me the most was the audience's reaction to his speech. At one point he said that people needed to stop looking to government for the answers to their problems, and take responsibility for themselves. The crowd of several thousand healthcare professionals burst into spontaneous applause. Can you imagine that happening at a British health conference? No, thought not...

Gordon Brown, the UK prime minister, rearranged his cabinet yesterday. The most headline-grabbing move was to bring Peter Mandelson, a.k.a. the Prince of Darkness, back into the cabinet. Admittedly, that was quite a surprise, not least because Mandelson has already had to resign from government twice, and it's well known that he and Brown don't care for each other (yes, that is putting it mildly).

For what it's worth, however, Mandelson's a talented politician and was well regarded as Trade Secretary and Northern Ireland Secretary. His time in Brussels as Trade Commissioner has been a disappointment for free traders like me, but he probably did the best he could in the circumstances. Assuming he and Brown can keep past differences to themselves (and, very amusingly, the Spectator's James Forsyth doubts that), Mandelson should be a strong addition to Brown's cabinet.

Another, perhaps more important, story didn't seem to get much attention yesterday – Brown's decision to create a new energy and climate change 'super-ministry', headed by Ed Milliband. I think it's a bad move. Energy policy is far too important to the UK's economic security to be lumped in with climate change. An ideological attachment to renewables has already led the government's energy policy deep into cloud-cuckoo land, with serious energy shortages predicted in the next few years. Merging the environmental and energy policy briefs is only likely to muddle Whitehall thinking even more.

It's also worth mentioning that this is not the first new government department that Gordon Brown has created. His first reshuffle set up the Department for Innovation, Universities and Skills and, in October last year, he created a new Government Equalities Office. That means Brown has created three new ministerial departments and abolished none, bringing the grand total to 27 (full list here). So much for government 'tightening its belt'.

Daniel Finkelstein had a great article in The Times yesterday, talking about how the "vast jamboree of special interest groups" present at the party conferences demonstrate the "malignant growth" of the state:

"All around the fringe can be found... public sector organisations holding meetings to persuade taxpayers to give them more money, meetings that are - here's the good bit - paid for by the taxpayers that are being lobbied. Paid for by you, in other words, in order to persuade yourself."

He goes on to list some of the organisations that he came across at the Conservative conference. It takes a full four paragraphs, and that's just a start. As he says:

"I am attempting instead to show how big and complicated the State has become, and just how many parts of it are now involved in protecting their own existence..."

The implication of all this, which Finkelstein realizes, is that talk of government 'tightening its belt' will never amount to much. You need to work out what the government is for, and then get rid of surplus functions.

So what should the British government be doing? For me, it's not a long list:

• Law and order: the state should protect individuals against direct harm from others, and enforce contracts.
• Defence and security: emphasis on the word defence, as opposed to costly foreign intervention.
• Public health: i.e. sanitation and preventing the spread of communicable diseases, not telling people they can't smoke, drink, or whatever.
• Infrastructure: ensuring adequate transport and energy supplies (but leaving provision to the market as much as possible).
• Funding schools: but not running them.
• Welfare: get people to contribute as much as they can, but guarantee a basic income and minimum standard of healthcare.
• Social services: make sure the young, the old and the mad are looked after.
• Sound money: I've lost faith in central bankers so – short of competing currencies – maybe a return to the gold standard would be a good idea.

Confine government to those activities (which are still more extensive than many would like) and I suspect you could get rid of almost all QUANGOs and regulators, half the government departments, and a very sizeable chunk of public spending.

Gordon Brown's rumoured cabinet reshuffle will no doubt bring interesting results after the events of the past few months.

It was rumoured yesterday that John Hutton may be moved from his position at the Department for Business, Enterprise, and Regulatory Reform (BERR). He was one of Blair’s closest allies before 2007, and recently failed to condemn backbench rebels. So you can see why Brown might have an issue with him.

But it would be a crime against good sense if Hutton were demoted – he's one of the few decent ministers in the cabinet. In his current role he has proved popular with business and unpopular with the unions (often a good sign), and won a few admirers at the ASI when he heavily criticised the Windfall Tax on energy firms.

Here's a better idea for Brown. Abolish BERR (is it really worth £5bn a year?) and give Hutton a better job. After all, right now Brown’s ‘government of all the talents’ seems to be facing one major hitch: there's not much talent on offer.

In his big speech at the Tory conference yesterday, David Cameron said, "Freedom can too easily turn into the idea that we all have the right to do whatever we want, regardless of the effect on others. That is libertarian, not Conservative..."

No, David, it's not. Libertarianism is a political philosophy based on individual rights, personal responsibility, free markets, and limited government. In no way does it imply a lack of concern for others, or legitimate harming them to serve your own interest. Indeed, the paramount importance that libertarians attach to the protection of the individual renders Cameron's statement absurd.

And I suspect he knows it too. After all, back in 2001, he wrote: " I am an instinctive libertarian who abhors state prohibitions and tends to be sceptical of most government action". Now, that sounds like my kind of Conservative. 
 
The rest of the speech? Well, it seems to have been well received. There was good stuff on reforming education, restoring sound money, cutting government waste and reducing corporation tax by three percent. In terms of making him look like a serious man for serious times, it did the job. On the downside, I didn’t like his praise for the NHS and thought using the death of one of his constituents to score a political point was mawkishly tasteless.

Overall: a decent enough speech, but by no means a great one.

When Harold Macmillan was Prime Minister, he was asked what worried him most. Famously, he replied, "Events, dear boy, events".

And that's probably how the Tories feel right now. Their party conference, no doubt planned down to the smallest detail to show them as a government-in-waiting, has been overshadowed by the financial crisis.

So far though, they've made a good fist of it. Shadow Chancellor George Osborne's speech on Monday was, I thought, very well judged. His proposals for an independent Office of Budgetary Responsibility, which would impose a "straightjacket" on government spending and ensure progress towards a balanced budget, are very welcome, and his overall message – that government must tighten its belt like the rest of us – spot on.

My only criticism is that he did not go far enough. Cutting consultancy budgets and government advertising is a good start and an easy target. But I suspect the UK's finances will be so bad by 2010 that a more radical approach to public spending will be required.

There are a few good suggestions on ConservativeHome's Platform here. My own approach would include freezing real-terms public spending, freezing civil service recruitment, and then abolishing the Department for Business, Enterprise and Regulatory Reform, the Department for Communities and Local Government, the Department of Culture, Media and Sport, the Wales Office, the Scotland Office, and all the regional QUANGOs. I doubt anyone would miss them.

Looking at last week's pictures of a grinning, banana-manipulating David Miliband, I can't but help think how Bulldog Britain is ill-served by its Poodle Politicians. They give every impression of being more like B-list celebrities than tough international leaders. And indeed to a considerable extent they are. Few of them have known any career but the stage – politics, media, public relations.

Our juvenile Foreign Secretary for example, did politics at university, then became a policy analyst at the Institute for Public Policy Research, before joining Tony Blair's policy team. Various junior ministries, and now he's Foreign Secretary. You'd have thought that a Foreign Secretary ought to have a little more world-wisdom than that.

Of course, the smell of the political greasepaint and the roar of the media crowd seduce the Conservatives too. One or two of them have actually run something in their lives, but not many. Miliband's opposite number, William Hague, did at least attempt to run the Conservative Party for a while, which must be one of the toughest jobs on the planet.

But as I look at David Miliband I wonder how we ended up entrusting our nation's security and world standing to a method actor. Is he supposed to take on the world’s tough guys and win? We’d be better off with Bruce Willis as Foreign Secretary. And Bruce Willis probably wouldn’t alienate quite as many countries as we have done.

You would expect the week that Britain's embattled ruling party held its conference to be a good one for blogging. Surely there should be loads of new policies to discuss, lots of political skulduggery to mull over? Well, not so far.
 
Indeed, just a few days after a major economic crisis, Alistair Darling, the Chancellor of the Exchequer, managed to give a keynote speech in which he said almost nothing interesting at all.
 
And as for Gordon Brown – who is meant to be fighting for his political survival – the best he has come up with is a pledge that every two-year-old will get a free nursery school place by 2018. Needless to say, that will cost money he doesn't have, and he won't be around to see it through anyway. It's an empty promise.
 
It's also a bad idea. The last thing the UK needs to do is extend the dubious (and costly) benefits of state education to two-year-olds. Children in most countries already start school much later than in the UK, and seem to be better off for it.
 
In truth, you can't escape the feeling that Labour has reached the end of the line. After 11 years in power, they are divided, introspective, and devoid of fresh ideas. The big question is, how long will it take them to recover?

Strong book sales suggest I might have to prepare a new edition of How to Win Every Argument.  If so, I will add a new fallacy called "The Robinson Prediction," named after the BBC's political editor Nick Robinson.  This is, of course, a self-negating prophecy.  Self-fulfilling prophecies are well known: if a Treasury minister predicts that a certain bank will collapse next Friday, it will because everyone will rush to take out their money.  Self-negating ones are a little more elusive.  If a leading seismologist predicts that the entire population of Birmingham will perish in a 7.9 earthquake next Thursday, he will probably be wrong because many Brummies will leave the city just in case.

Robinson, who disgraced himself by taking a pro-Downing Street line when David Davis resigned and re-fought his seat on a civil liberties campaign, issued his opinion last Friday that "Gordon Brown no longer appears to be under threat. The cool political climate of the autumn has replaced the heated frenzy of the summer."  Within minutes outraged backbench Labour MPs made it untrue by demanding leadership nomination papers, causing the crisis over Brown's premiership to intensify rather than diminish.  A Robinson Prediction is one that becomes untrue simply because it was made public.  It has one crucial difference from a Michael Fish moment, in that Michael Fish did not actually cause the hurricane.

If you have five minutes to waste, why not go to the ‘policy’ section of the Labour Party website. Click any of the policy issues and you will not be lead down a bewildering path of innovative depth and analysis, but come face to face with a space of vast hollow emptiness, a cavernous non sequitur derelict of ideas. It is not that the ideas are wrong; it is that there are no ideas. These are the fleshless bones of New Labour’s promises.

What is most dispiriting is the ‘Points to Consider’ at the bottom of each page. It is a record of government failure. Formed as a list of questions on each issue, it reads like a primordial plea for policy into the ether of the Internet. For example:

1. How do we keep our economy competing in the world economy and make the most out of the rise of countries like China and India?

2. How should we help more families to build up assets for their children?

3. What more can we do to encourage volunteering?

Luckily we have the answer to many of Labour’s questions:

1. Cut unnecessary red tape.
2. Adopt Fortune Accounts.
3. Don’t. Voluntary groups are undermined by the state.

There are many more simple questions that we have answered, as well as some pointless ones not worth the time of day. This page is the outward manifestation of a government devoid of vision, as has been seen in weak or stolen policies devised on an ad hoc basis in reaction to events, with the smell of unrest leading to retreats and bewildering u-turns.

Tony Blair reinvented Labour. In making them electable he hailed the defeat of the socialism that still runs through the Party. With his departure we have seen a crisis of confidence. The cupboard is bare, the Emperor is not wearing any clothes and virtually everyone thinks they are just plain bad at running the country. It is time, perhaps, for the Liberal Democrats to fully embrace the Gladstonian Liberalism of the Orange Book, challenge Labour for the mantle of second party and in so doing take politics away from the status quo. Wishful thinking?

The iconoclastic Simon Jenkins writes an excellent piece in the Guardian calling for the government to do nothing to stem falling house prices (except reduce government imposed financial burdens on buyers). In the same piece, Jenkins derides the careless remarks of the chancellor, the burden of health, safety, building and employment laws and the lunacies of European tendering rules for undermining the economy.

Quite right, Labour’s tax and regulation regimes are also pushing big business away from these shores:

In the World Economic Forum Global Competitiveness Index, the UK slipped from fourth place in 1998 to 15th place in 2003 and has since been hovering around ninth or 10th. While the index measures everything from infrastructure to education and crime, it says tax rates and tax regulations are the most problematic factors for doing business here.

Also, the energy windfall tax nonsense (see here and here) is refusing to die, with reports that the government is blackmailing energy companies with threats to introduce it. How economically incompetent can a government be? Well, if Hazel Blears is anything to go by... Merryn Somerset Webb has it about right when she postulates - in reference to Hazel Blear’s advice on the Today programme for young couples that are refused commercial loans to go out and buy a house through the gimmicky HomeBuy Direct – that she may be “very stupid” and have “no idea how markets work”.

The recent edition of Imprimis from Hillsdale College, where both Dr Eamonn Butler and I taught in the 1970s, contains the text of the speech John O’Sullivan made when unveiling the statue there of Margaret Thatcher earlier this year.

Sculptor Bruce Wolfe has captured Thatcher at the height of her strength and powers, as she looked in the 1980s when, together with her friend Ronald Reagan, she helped achieve such huge advances for freedom.  O’Sullivan, a former speech-writer and assistant to Lady Thatcher, and editor of her autobiography, points out that she won the battle at home to restore faith in markets and personal effort, while helping to win the big battle abroad to bring down Communism’s evil empire, with all the oppression it had engendered.

These were legendary victories, and Hillsdale’s statue of her – the first in the USA – rightly honours a remarkable life and a towering achievement.  O’Sullivan, now executive editor of Radio Free Europe and Radio Liberty recently published “The President, the Pope, and the Prime Minister: Three Who Changed the World.”  The full text of his Hillsdale speech can be read here.

What is all this talk about 'nudging' in politics?

Top figures in the Conservative Party (as well as the Obama campaign in the US) have become very interested in the ideas popularized by Richard Thaler and Cass R. Sunstein.  Apparently, Thaler and Cass  "show that by knowing how people think, we can design choice environments that make it easier for people to choose what is best for themselves, their families, and their society."

Looking at it from a distance, the fact that politicians don't want to appear to be messing around with our lives is a good thing. At present people are fed up with politicians clumsily trying to institute blanket policies to change the way that we live. Instead, politicians now want to unobtrusively nudge us in this direction and that, for our own good, for the good of our families and society at large.

Nudging though is not really anything new. If all the rhetoric is dispensed with, the same questions need to be asked. Will the policy be effective? Does it overstep the limits of state action?

For instance – automatically enrolling employees in savings schemes, giving them the choice of opting out, rather than asking them actively to join in the first place, could, given the right circumstances, be good government policy that does not overstep the state’s boundaries.

On the other hand, Professor Julian Le Grand, a pioneer of this approach, has some utterly illiberal ideas. He wants to require smokers to have a special permit, enforce an 'exercise hour' at work, and ban salt in processed food. That this goes under the anachronistic term ‘libertarian-paternalism’ is surely some sort of joke.

People can still feel a nudge. Although it better than a push, it is still largely unwelcome.
 

In an interview with The Telegraph yesterday, John Hutton, the business secretary, effectively ruled out a windfall tax on energy companies.

Good. I was getting thoroughly sick of the received wisdom surrounding a Windfall Tax on Oil and Gas Companies that said because the public would support it, it’d be a good idea. It wouldn’t. Rather than regurgitating Mill, talk about the tyranny of the majority, or generally waste time by going into details, here are 5 quick reasons why that Windfall Tax would have been a terrible idea:

1. Retrospective action by any government is illiberal. End of.
2. The UK is facing an energy crisis with estimates suggesting £100bn of investment being needed to secure future power generation. Taxing profits is going to make the UK energy market much less attractive for investment. That means prices will get higher as storage capacity, distribution networks, and generation become increasingly creaky. That’s even before the rolling blackouts start.
3. What even is excessive profit? How do you define it, let alone measure it? Companies exist to make profit: it smacks of moving the goal posts to penalise firms for being successful. If you think high energy prices are a result of the energy market being insufficiently competitive then give OfGem a ring. If you want to wreck the economy with higher corporation tax rates, be honest about it rather than spouting this mealy-mouthed rubbish.
4. It’s economic insanity. We need to increase the supply-of and reduce the demand-for energy. A Windfall Tax is only going to do the opposite. How about privatising the remaining utilities and putting the cash into making low-income homes energy efficient instead?
5. The reality of the situation: any rise in taxes will be passed straight onto consumers as price rises. So firms will be annoyed at the tax, investors will be scared off, and consumers still won’t get cheaper energy. Surely after committing political suicide on a seemingly weekly basis even Gordon Brown has the sense to leave this well alone?

ASI Fellow and independent energy analyst Nigel Hawkins was on Radio Five on Tuesday night, discussing demands for a windfall tax on energy companies. He made a series of good points against the idea:

• High energy prices are largely driven by the soaring cost of gas, not corporate greed. If the government wants to protect people from soaring bills, it should forget about windfall taxes and press on with a new generation of nuclear power plants.
• If the government does impose a windfall tax, it would create a strong disincentive for energy companies to invest in the UK. Why bother spending vast sums of money on capital investment, if the subsequent profits are going to be seized by the state? A windfall tax would drive away investment in energy right when the UK needs it.
• While it is true that some energy companies are making record profits, it is also true that they are investing record amounts. It's not just a question of money in shareholders' pockets.
• Last year energy companies paid £8bn in tax, this year they're paying £16bn – so the government has already done well out of them.

I think that last point is particularly striking – why can't the government use those existing revenues to help people out of 'fuel poverty'? Just a thought – perhaps it's because they're fiscally incontinent, and have already spent the money and borrowed a lot more...

Unsurprisingly, Ian Gibson MP (one of the Labour backbenchers calling for the windfall tax) had a different take. He thinks, "there is too much competition around these days" and that, "we need more national control". Amusingly, he even said, "we need a five-year plan, or a ten-year plan, or whatever". What more can I say?