One year of the Coalition government

The good

Clear commitment to deficit reduction. Absolutely essential to have a stable basis for business and economic growth.

Commitment to take people earning under £10,000 out of tax. A positive incentive to move from benefits into work.

Cuts in company taxes. Vital if the UK is to remain competitive against low-tax countries.

A Swedish-style school system with private providers and state funding that follows parents' choices. Could bring real choice, competition and innovation into the bureaucratic state education monopoly.

Scrapping quangos and bureaucracy. Good to get rid of pointless cost. But there is still a lot more to get rid of.

Scrapping ID cards. Most people in Britain think that nannying by the state is far too pervasive.

Student loan scheme. Students should pay the cost of their higher education, which boosts their lifetime salaries. the combination of higher fees and loans (repaid only by higher earners) is a good compromise.

Moves towards a negative income tax. Replacing a mishmash of different state benefits, the Universal Credit should make sure that the poorest people aren't facing effective 'taxes' of 90% when they earn a few pounds more.

The bad

Higher taxes. Some are needed to help balance the books. But the rise in Capital Gains Tax will drive investment abroad, as will the Bank Levy, the new tax on oil exploration, and the 50% tax on higher earners that was inherited from the last government.

Bail-outs. Britain is not a member of the Euro, but has still chipped in to the bailouts of Ireland, Greece and Portugal. It's surely better to countries to face the realities of overspending and Euro membership.

The ugly

Reversing the Forestry Commission sell-off. It looked feeble – and the country's biggest landowner monopoly is an environmental disaster that needs to be broken up.

Abandoning NHS reform. This may be the price of patching up the coalition spat over electoral reform. But it would be another lost opportunity to bring new ideas into this unmanageable 1.4m-strong monopoly.

And still to decide

The localism agenda. Good to see a government saying that power should move from London down to local communities and indeed to individuals themselves. Making it a reality, though, will be a lot harder.

Commitment to stop more powers leaching to the EU. A positive stance – but a forlorn hope?

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Britain's Conservative / Liberal Democrat coalition government is a year old. So how is it doing? Not very well right now, one has to admit. But then this period after the national referendum on electoral reform – demanded by the Lib Dems as part of the price for their partnership with the Conservatives – was never going to be happy, whichever way it went. Humiliated in the referendum and in the local government polls last week, leading Lib Dems have hit out at their coalition partners – and demanded more say on policy in order to placate their own rank and file – many of whom are deeply unhappy about what the coalition is doing, particularly its rush to cut public spending in order to stem Britain's ever-burgeoning debt.

Looking at the mess that Ireland, Portugal and Greece are in, the fact that the coalition is aggressively pursuing a deficit reduction programme must be a positive move. So is its plan to take people on incomes below £10,000 out of tax entirely, which will encourage people off state benefits and into work. That idea, interestingly, was pushed on the coalition by the Lib Dems, who got it from 'flat tax' enthusiasts like the Adam Smith Institute. And the Conservative side of the coalition has plans to introduce something like a negative income tax. Meanwhile, some state benefits and higher rates of civil-service pay have been frozen, quangos have been scrapped, students face higher university fees, the extravagant school building programme has been reined in, corporation tax is being cut. To economists, and to the international markets, this financial prudence all looks very positive too.

However, deficit reduction has come at the cost of higher taxes, such as a rise in Value Added Tax, a 50% tax on higher earners, and a rise in capital gains tax – demanded by Lib Dem Business Secretary Vince Cable – that most Conservatives think will damage business and prove counter-productive. A new windfall tax on oil exploration has had oil and gas firms threatening to close down production – further evidence that to grow its way out of debt, Britain needs to compete on the basis of lower taxes, rather than higher.

One of the coalition's most interesting moves – very much a Conservative idea – is to transform Britain's state schools into a Swedish-style system, where private companies or charities can set up and run schools, so getting choice, competition and innovation into education. The finance would still come from taxpayers, but it would follow parents' choices, rather than being directed by officials. If Sweden is anything to go by, this could bring real and positive reform into state education.

But a similar 'internal market' structure in healthcare – allowing private providers to take over services presently run by the state National Health Service medical monopoly, and having family doctors rather than central officials decide where the money goes – may fall victim to the unhappiness of the LibDem rank and file. The NHS may be an unmanageable 1.4 million workers strong, but the British public have a strong attachment to its principle of free (at the point of use) healthcare and the LibDems in particular don't want to touch it. This would be a sad loss; monopolies are never efficient, and a break-up of this vast state monopoly is long overdue.

Perhaps the most positive and remarkable thing about the coalition, though, is that, despite all the bickering, it has so far held together. Both Conservative and Liberal Democrat sides have committed themselves to stabilising the public finances, seeing that as the only way to provide a sound basis for business and economic growth. They have committed themselves – unusually – to a five-year government, by which time they think those policies will be working demonstrably. At the same time, the LibDems are bringing in a more liberal attitude on social issues, with less nannying and intrusion in everyday life. If the coalition partners can get through their present spat, which they probably soon will, it could turn out to be one of Britain's most reforming and most successful governments.

The good, the bad, and the ugly (Click to read)

Now let the Scots vote on PR

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In last week's UK elections, the pro-independence Scottish Nationalist Party took control of the Scottish Parliament, and campaigners for a new voting system, the Alternative Vote, were thoroughly routed in the public referendum on the issue.

It's now time for a referendum in Scotland. No, not on whether the country should go independent. But on the Mixed Member Proportional Representation voting system that is used there. After all, this system – and the PR system used in the Welsh Assembly too – were foisted on the public by the politicians. There were referendums on devolution, but not on the voting system that would be used to elect the new bodies.

When the first Scottish Parliament was chosen, it was clear that voters did not fully understand PR there, with its constituency elections and regional lists voting – though they may understand it better now. But the fact is that the whole complicated scheme was concocted by the politicians then in office to keep things pretty much as they were. (It didn't exactly work, as the rise of the SNP shows, but then most political schemes don't exactly work.)

Apart from tiny areas in central Edinburgh and Glasgow, every constituency in Scotland and every constituency in Wales, along with almost all in England, rejected AV in the referendum. One has to wonder whether the Scots and the Welsh, if actually asked what system they wanted for their own devolved governments, would chose the systems we have now. For my part, I don't much like constitutional changes, like the choice of voting system, being decided by the politicians already in power. Nor even by simple majorities in a referendum where only a minority of the electorate actually choose to vote. But the latter is definitely better than the former.

The consent of the governed

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I've had a lot of trouble thinking about anything interesting to say about AV. On both sides the campaign has been unconvincing and, frankly, boring. The "No" camp has stuck to simple and predictable lines of attack such as: first past the post is "clear, simple and decisive," and AV is "undemocratic and... much more complicated than what we have." The "Yes" campaign was only marginally more interesting when it attempted to inflate the issue's importance with hyperbolic rhetoric: Nick Clegg accused the Tories of a vast, intergenerational right-wing conspiracy while Chris Huhne made a hollow threat to sue. How cute.

Despite the best efforts of the belligerents, I still struggle to care. The facts are these: the referendum will not end debate on electoral reform, since the twin bugaboos of proportional representation and reform of the House of Lords lurk still in the wings. Nor will the referendum, regardless of outcome, make our system "more democratic"-- not that this would be a good thing, since for seventy years "more democracy" inevitably meant more bureaucracy, unsustainable deficits and a lot of unwanted, oppressive and inflexible laws, with negative implications for day-to-day life. So why on earth are Libertarians talking about AV at all-- which seems, by comparison, such an inconsequential issue, a procedural tweak of a right we exercise for thirty seconds every five years?

Because libertarian ideas, despite the impressive arsenal of philosophy available, have failed to penetrate cosmopolitan consciousness. Libertarianism today is a victim of being born within a successful system that (i) was historically quite stable; (ii) had governments able to derive long-term legitimacy from welfare programmes; and (iii) was capable of guaranteeing security through military force.

Under these conditions, we have developed a broad, common, self-reinforcing, and very naff body of thought known as the conventional wisdom that, per J.K. Galbraith, "accommodates itself not to the world that it is meant to interpret, but to the audience's view of the world," its key feature being that "it has the approval of those to whom it is addressed," and at any rate a framework within which libertarianism, qua critical ideology, does not fit. This is because, Galbraith wrote, "There are many reasons why people like to hear articulated that which they approve. It serves the ego... (it) is a source of reassurance... (and) it means that others are also hearing and are thereby in the process of being persuaded," creating the basis from which misadventures like the AV referendum might be launched. Because of this conventional wisdom is difficult to overcome through the application of philosophy: "Ideas", he added, "are inherently conservative. They yield not to the attack of other ideas but... (only) to the massive onslaught of circumstance with which they cannot contend."

This conventional wisdom is, in this way, quite repressive; and this is part of the reason that libertarians should feel left out of the AV debate. Despite being given the illusion of a choice between "Pro AV" or "No AV," on reflection the libertarian discovers that the choice is an impossible one, since accepting the referendum as a legitimate discussion requires acceptance of the conventional wisdom, a welfare-state logic he traditionally rejects. As put by Marcuse, "Under the rule of a repressive whole, liberty can be made into a powerful instrument of domination"; the freedom to choose is rendered useless when outside forces dictate what may be chosen, and "Free election of masters does not abolish the masters or the slaves."

Libertarians seek to minimize the existence of masters generally, particularly the state, a goal which currently no major UK political party is prepared to adopt and we are, therefore, only notionally able to participate in mainstream policy debate; free elections of whatever major party will not change the fact that in Britain, the tax-to-GDP ratio hovers around 40%, the state gags private citizens and the media over trivial information and singing Carl Douglas constitutes a hate crime. In this context, the central question for all reform of any kind -- electoral, fiscal, penal, or otherwise -- must be: will this reform emancipate individuals? And if not: what position can we adopt to try to steer public debate in our direction?

The answer is not to lose hope, to keep writing and keep moving; as put by Sam Bowman, to "'stand athwart history, shouting'... Faster!" For everywhere we look-- Greece, Spain, Japan, here in the UK, and even in the United States-- the onslaught of circumstance operates to prove libertarians right: global economic shifts, individual empowerment, demography and the structure of democracy itself conspire together to undermine the foundations of the western welfare state. As the catastrophe unfolds, the conventional wisdom will cling to the old ideas, the quartet will play the same familiar tunes-- "our institutions are sound," "our way of life is sustainable"-- despite a growing recognition from all quarters that Western governments will, one day this century, no longer wield the coercive and economic power to meet the obligations they set themselves in the last one.

In the meantime, however, I suggest getting used to being told you're wrong.

Will no one rid me of this turbulent priest?

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It is a good rule of thumb that whenever the Archbishop of Canterbury makes a political statement, the exact opposite is true. Last week, Mr Williams proposed a updated version of the medieval 'Royal Touch', whereby the monarch's touch alone could allegedly heal sufferers of scrofula.

In a 21st Century update, Rowan Williams has suggested a law which would compel “all cabinet members and leaders of political parties, editors of national papers and the 100 most successful financiers in the UK, [to] spend a couple of hours every year serving dinners in a primary school on a council estate... or cleaning bathrooms in a residential home.”

The principle behind the idea is not a bad one. Society as a whole would benefit from greater levels of personal charity, be it on a personal or organised level: David Cameron's vision of a 'Big Society' in action. But this should not be limited to those at the top of society, unless we want to relegate ourselves back to our Feudal past.

What his suggestion reveals, however, is a far more worrying trend: that of the state being the first port of call for any perceived problem. Is it really Westminster's business to legislate for our morality? Charitable actions enforced by law are no longer charitable nor moral: giving a child a lollipop whilst you're compelled to do so by the force of the judiciary doesn't make you a better person.

The state already appropriates a huge proportion of our incomes – how much is there left to be charitable with? It then proceeds to squander vast amounts of this in the name of various malleable buzz words: 'equality', 'empowerment'. Empirical evidences shows that it is those richest and most successful in society who often provide most to those less fortunate, with Bill Gates being the greatest ambassador of this. How much more does Rowan Williams expect these people to give? I would wager that in states such as the USSR, levels of private charity were negligible.

What the state should be doing is removing, not imposing more legislation. Many of the poorest in society, who are most in need of charity, are in such a position because of an infantilising state which by keeping thousands of people on unnecessary benefits has reduced them to a position of powerlessness.

By removing legislation, freeing individuals and creating the environment for greater prosperity, levels of charity would sky rocket. Until I see Rowan Williams finally dismount his high horse and make a grab for the Toilet Duck, I will continue to ignore him.

Mummy, what are public sector unions for?

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As with a child wondering why the world is so odd, I find myself unable to work out what public sector unions are for.

No, I understand what unions in general are for: they are the banding together of the workers to make sure that the employers do not oppress them. Such freedom of association is just as important in a free society as freedom of speech (although whether unions should enjoy legal immunity from certain consequences of their actions is another matter entirely).

But government is the wise and benevolent looking out for all of us isn't it? At least, among those who purport to support public sector unions it does seem to be. That's why they tell us that ever more of our lives must be determined by government. Yet more regulation , nudging, prodding, of us to do the right thing. As determined by the politicians, those wise, benevolent and disinterested beings who determine what the regulation, nudging and prodding will be.

But if government, politicians, are indeed those wise and benevolent beings, then why should those who are employed by them need protecting from them? And if those who work for government need protection, shouldn't those of us subject to government also be protected? Be allowed, for example, to refuse to perform under the contract we've signed (that "social contract" thing?) as union members are able to without fear of retaliation? To withdraw our labour from the government's remit in protest at their worsening of our conditions? For us general citizenry that would be a tax strike of course, one that should have the same protections as unions members withdrawing their labour.

I can see one or other part being an honestly held view: government are people we need protection from thus public sector unions are necessary. But a necessary corollarly to that is that government is dangerous, we all need protection, and we certainly shouldn't be campaigning for it to have ever more power over our lives.

Or that government is lovely and cuddly and we should all welcome its correction of our mistaken ways: in which case there is no need for public sector unions.

Even to argue that government changes party at times and thus sometimes we need the protections of unions doesn't help: for government changes party at times and clearly, at the same time as we need the union protections we all need the protections. Even, as I think is probably true, when the unions don't need their protections the rest of us do and vice versa.

So the existence of and support for public sector unions seems to be an argument in favour of a minarchist state. For if those who work for government need protection from it then we don't want government to do very much so that we all need protection from it similarly.

There is of course a way out of this for those who support both expansive government and public setor unions. That yes, government is lovely and cuddly but that the unions are not there to protect union members. Rather, they are there to extort ever more from government for those members. Which may even actually be true but it's not an argument that I'd want to have to try and defend in public.

On the failures of governments and markets

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Mark Pennington's excellent new book, Robust Political Economy, is out now. We've written about it here and here.

The anti-cuts movement has jumped the shark

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The term “jumping the shark” describes the moment that a TV series becomes a parody of itself, condemning itself to irrelevance. The origin of the phrase comes from an episode of Happy Days where the Fonz jumped over a leaping shark in a surfing competition. In all likelihood, Saturday will come to be remembered as the day that the anti-cuts movement jumped the shark, parodying itself so ridiculously that it can no longer be seen as a serious political force.

Consider the speeches given to the TUC march. PJ Byrne has written a fine article on the errors within these speeches, but even on a superficial level the speeches were ridiculous. Ed Miliband’s invocation of the suffragette, US Civil Rights and anti-apartheid movements only served to underline the speciousness his own cause. Where those groups had fought for freedom against government oppression, Miliband defended community centres and jobs for life in the public sector. The comparison is self-evidently ludicrous. Archbishop Cranmer's headline neatly summed it up: “Ed Miliband: I am Emmeline Pankhurst! I am Martin Luther King! I am Nelson Mandela!”

How unbecoming it was to see the British left, with its roots in honourable struggles for peace, universal suffrage and better conditions for the working poor, now little more than a mouthpiece for public sector unions. So, when did the British left stop caring about the poor and start caring about civil servants? When unions stopped representing the working poor and became a preserve of state workers. Today, only 15% of private sector workers are in a trade union, while 56% of public sector workers are (PDF source). The left can’t claim to be concerned about the poor while it's trying to protect relatively well-paid state workers from redundancy, which is a fact of life for workers in the private sector.

And, of course, there was UK Uncut's “occupation” of Fortnum & Mason and vandalizing of businesses around Piccadilly Circus. As Tim Worstall pointed out, Fortnum & Mason is owned by a charitable trust that donates about £40m every year to charity. Even the “tax avoidance” allegations against Vodafone and Boots are silly – tax avoidance is, by definition, legal. There's a good argument to be made in favour of simplifying the tax code to reduce avoidance, but to blame private companies themselves for acting lawfully is absurd. But the real point was class warfare, which is why the Ritz was also targeted. UK Uncut showed itself once again to be made of spoilt Marxist wannabes.

The campaign against the cuts was always unrealistic, but Saturday showed how much of the anti-cuts movement has lost its grip on reality altogether. The government should worry less about it, and cut faster and deeper without fear.

Making the lesser of all evils even lesser

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We often hear that people are increasingly frustrated and apathetic about politics. However, many socialists believe in the 'democratisation' of institutions, particularly the economy, and even the Conservative party believes that democratising police forces will empower local people.

The problem is that with such widespread apathy, extremist or special interest groups are likely to take control of institutions and then reinforce their position there. For example, student union elections attract tiny turnouts resulting in active far-left groups being more likely to take control. It is no surprise that student politics is so left-wing: once socialists can call on activists to vote time and again, it is very difficult to take them on without trying impossibly to get the apathetic interested. Similarly, even the largest trade union Unite only attracted 16% turnout for its leadership elections.

But if democracy is the least worst form of government, what is the alternative? The answer is less government. In the cases of trade and student unions, the outcomes are fairly irrelevant in that people can always leave them if they are dissatisfied. It is easy to be apathetic: unless people are actively involved, it is much easier to influence outcomes by simply choosing to go elsewhere, by trying to campaign for specific changes, or by creating new institutions ourselves. The level of turnout to elections is therefore fairly irrelevant as people are not at all apathetic about society, being fully engaged in making individual decisions or organising those around them for campaigns and initiatives.

Government, however, is different. Campaigns to influence government decisions are necessarily about how to best spend other people's money. It is also notoriously hard to campaign for change, with the ability to create alternative services crowded out by the fact we already pay for public provision through taxation. We end up becoming disillusioned rather than apathetic, noticing that decisions can be taken at our expense without the ability to refuse or look for alternatives.

Therefore the solution is to return provision of services to the public, not by enforcing democratic structures, but by pulling back government's role and allowing us to experiment and innovate in any way we choose. This policy may be unpopular, but once it is done, it is the people who will be back in control.

Adventures in government lunacy

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Adventures in government stupidity are of course nothing new: but to raising the bar to sheer howling lunacy is more unusual. Even that toxic brew of special interests, bureaucrats and politicians rarely produce something that is outright insane.

Rarely, but not never:

Local authorities will put up the deposit to allow first-time buyers to get on the housing ladder, under a scheme unveiled today. The organisation behind the ‘local lend a hand’ initiative, Capita business Sector Treasury Services, says it will free up social and affordable housing by making it easier for people to buy their own homes. The initiative is initially being backed by Lloyds TSB, and has been piloted by five local authorities, but Capita hopes to get more lenders and councils on board as the scheme progresses.

The local authorities will lodge funds with the lender to cover the shortfall in a first-time buyer’s deposit. This can be up to 20 per cent of the mortgage, so for a typical 75 per cent loan to value mortgage, the buyer would only need to find a 5 per cent deposit. Available funds in each area will be capped, although the council shouldn’t incur any actual costs unless there are problems with the mortgage repayments.

So let us try and get this straight. The world's entire financial system is still reeling from its recent effort to walk straight off a cliff by lending money to people to buy houses they couldn't afford. This lesson having been learned, said financial houses no no longer being willing to lend to people without a substantial deposit, showing that they've some skin in the game, that you don't lend hundreds of thousands to people who have bupkiss, we now have the following bright political solution?

The taxpayers should subsidise these deposits so that when (no, not if) something goes wrong in the future the taxpayers have to pick up the bill? That, having seen what people buying houses they cannot afford does, we should insist that more people should buy houses they cannot afford?

This, this, is why we send our finest minds to Oxbridge so that they may rule over us all?

Somewhere up there the Goddess of Irony is weeping bitter tears into her nectar as not even she had thought of that one.

Look, it's terribly, terribly, simple. If local councils want local houses to be cheaper they should grant planning permission for more local houses. Supply and demand really does work you know and it is the planning permission itself which is the most expensive part of a house these days. No, not the land, not the building, but the chitty allowing you to build on that land. The council even makes a profit issuing permissions rather than losses on paying people's deposits.

With ideas at the above level of stupidity I fully expect both Ed Balls and George Osborne to announce next week that the way to close the deficit is to make cucumbers from Moonlight.

Wages in Wisconsin

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No doubt you will have been watching the Great Revolution in Wisconsin this past week? As the public sector unions decided to rise up en masse against their newly, democratically, elected government?

The one little part of it all that fascinated me was a report from the EPI, a union funded think tank in Washington DC, about how public sector workers weren't in fact overpaid at all. No, not even when we include pensions and days off. Which is really rather a surprise really, that they actually earn less.

For a start, what are they all in a union for if this means that they get paid less?

But the thing is, if you read through the report, everything is about average wages. Well, of course you might say, but then, which average?

You see, when we start to compare wages we really should be using median wages, not mean average wages. Partly because the median represents the position of the average individual, rather than the average across individuals. Partly because wages have a zero lower bound and no obvious top limit, meaning that again the median is more representative than the mean which can be skewed wildly upwards by a very few very highly paid people.

And partly because that last reason there is going to be markedly different between people in the public and private sectors. We know very well that the income distribution is compressed in the public sector: the high paid get nothing like the millions potentially on offer in the private sector.

Now I don't in fact know whether the mean or the median was used here, because the report itself doesn't say. But looking quickly at the source data, it looks to me as if means are being used.

Which is, I think you'll agree, very naughty. We know that the mean public sector wage will be lower than the mean private sector simply and precisely because the wage distribution is compressed in the public sector. Meaning of course that what we'd really like to see is a discussion of medians....you know, those medians which the EPI uses when it's talking about wages in other contexts? Like the ones that bolster its story then?

But hey, don't worry about it, this is politics, right, not statistics or anything important....