Alex Salmond: An Obituary
I am saddened at the death of the onetime leader of the Scottish National Party, Alex Salmond. He will be remembered as one of the most adroit politicians of his time.
He was a contemporary of mine at St Andrews. He was maybe a year or two behind me. At that time, I think he was the SNP. He was certainly active in promoting its cause, though any contact I had with him then was rather fleeting.
Some years later, when John Smith was Leader of the Opposition, I was invited up to Edinburgh to do a TV debate in which several of us would put questions to Smith, himself a Scot. A few days beforehand, I was phoned up by Alex. ‘Oh Eamonn,’ he gushed, as if I were his lifetime friend — I told you, he was an adroit politician. ‘I see we are both on the panel with John Smith. It will be good to see you again and we can catch up.’
Of course, I remembered Alex’s name, but I could not put a face to it. I wasn’t sure we had even met. But I thought that, when I turned up in the studio, I would probably recognise him instantly. Unfortunately when I got there and this person in a St Andrews graduate tie rushed up to greet me, though I reasoned it must be Alex, he was to all intents and purposes a complete stranger. I don’t think he had made any impact on me, or on student politics in St Andrews, at all. But of course in the meantime, he was building the SNP into a formidable party that would eventually take office in the Scottish Parliament, despite the whole constitution of that body being written (by Labour’s Gordon Brown and his colleagues) to prevent that.
Indeed, his remarkable political and debating skills were what made the SNP and got it, and him as First Minister, into government in Scotland. When he eventually stood town, the party pretty well imploded, and he had to come out of retirement to rescue it. Only Nicola Sturgeon was later able to hold it together, though of course she and her party were eventually overwhelmed by her many faults.
After the John Smith event I met Alex many times at conference and across the floor in debates. Though I did not share his politics, such meetings were always a pleasure, and his engaging personality, interest in other people, lovely use of language and powerful intelligence shone through. But he too had his faults, which would cause him much grief and put him at odds with his party and his successor.
The last time that I met him was at a service in Glasgow Cathedral to mark the planting of an olive tree to commemorate the victims of the Arandorra Star, a ship carrying German and Italian internees during the Second World War, which was torpedoed by a German warship. He was First Minister of Scotland at the time. He gave one of the most brilliant speeches I have ever heard. It was educated, knowledgable, at times amusing, never political, and pitched absolutely perfectly to the feelings of the largely Scottish-Italian congregation and to the dignity of the occasion.
But then, as I say, he was one of the most remarkable public figures and speakers of our time.
Happy Birthday Maggie
Two Tory prime ministers saved their country from the edge of ruin in the Twentieth Century. One was Winston Churchill, who saw off the threat of hideous Nazi fanaticism, and the other was Margaret Thatcher.
She inherited a nation with an appallingly high strike rate and an appallingly low growth rate, a country at the mercy of bully-boy trade union leaders and with state industries and services that failed to deliver an acceptable quality despite their enormous costs.
She left a country prosperous and self-confident once more, one that had regained its place among the world’s leaders. She was accused of gutting the coal industry, yet Labour’s Harold Wilson closed more pits than she did. She was accused of hollowing out UK manufacturing, yet it rose during her term. It decreased as a proportion of total output only because the service sector boomed as never before, bringing the UK away from subsidized outdated industries into modern ones that could make their way in a competitive world.
She didn’t take power away from the unions. Harold Wilson and Edward Heath had both been defeated in the attempt to do that. Instead she redistributed union power downwards from the leaders to the members, giving them the right to elect leaders by secret ballot and to vote before taking part in strike action.
She turned the loss-making state industries into successful private businesses that paid taxes instead of consuming them. She gave parents choices in education and allowed state schools to opt for independence from local authority controls.
With her US colleague Ronald Reagan, she toughened up the UK’s response to Soviet expansionism, and ultimately saw its downfall as it collapsed with its subject peoples yearning for the freedom and prosperity enjoyed by the West.
October 13th was her birthday in 1925, and next year will mark her centenary. Happy 99th birthday, Maggie. You restored the nation’s belief in itself, a belief it may someday recover. Your legacy of achievements will be remembered long after the leftist wokerati lie forgotten in the dustbin of history.
Keep renaming the groupuscule, Mateys
After all, it works for everyone else, doesn’t it? Keep pumping out the same - usually bad - idea but under a variety of names and people will think there’s a groundswell of support for the - usually bad - idea. The reason this has to be done for the bad ideas is because the good ones gain support simply from being expressed. “Oh, yes, why didn’t someone think of that before?”
This same old threat is always levelled over any check on the soaring wealth of the richest in Britain, but research shows that rich people rarely follow through. An LSE report published in January, Tax Flight? Britain’s Wealthiest and Their Attachment to Place, strongly suggests they are going nowhere.
That report is from Andy Summers.
A study of HMRC records by Arun Advani, David Burgherr and Andy Summers following the last cut to non-doms’ tax relief shows that, despite the threats, just 5% left – and the ones who did leave were those paying the least tax in the first place.
Oh, that’s Arun Advani and Andy Summers.
A report published this week by the Centre for the Analysis of Taxation showed how an “exit tax”, which is imposed by almost all G7 countries, could bring in £500m a year.
Centre for the Analysis of Taxation?
Dr Andy Summers, Associate Professor at LSE and Director of CenTax, said: “Charging CGT on people who leave the UK is not about punishing them for leaving. It’s simply saying: ‘you need to pay your bill on the way out’. Most of the UK’s international peers already do this, and there is no reason why the UK couldn’t as well.”
Dr Arun Advani, Associate Professor at University of Warwick and Director of CenTax, said: “Tax flight happens less than most people think, but does happen. If politicians are worried about emigration, they could follow Australia, Canada and many other countries by taxing the gains of people who leave. It’s a policy choice to let them emigrate tax free.”
Gosh. We are finding a wide range of intellectual opinion here, aren’t we?
Back a bit, that idea of a 5% wealth tax backed by an exit tax. The one we said was tantamount to theft:
Arun Advani among others. That was the tax everyone 5% of their wealth idea and if they try to leave then take it anyway. Something that one of us derided as simple theft when discussing it with the Treasury Committee.
And the IFS report which suggests an exit tax:
Stuart Adam, Arun Advani, Helen Miller, Andy Summers
We’re really having a good old survey of different opinions here, no?
OK, so Arun Advani and Andy Summers find themselves forced to publish their idea for an exit tax under a wild variety of different groupuscule names. That they have to do that is one of those inclinations - not proofs, just an inclination - that they themselves think it a bad idea. For why would they do that if it was so obviously a good one that the first clear statement of it will bring general agreement?
By their tactics ye shall know them, eh?
As far as we can tell there are exactly two people in the country - Andy Summers and Arun Advani - who think an exit tax is a good idea. Or, perhaps, those two and a rotating cast of their mates. We can’t help but think that a slightly wider evidence base could be a good idea.
Tim Worstall
Sure we should count government assets - but also government debts
Much is being made of the idea that if government borrows to invest therefore that is different from government borrowing to spend. Which is true, obviously. Therefore we should be including the things government invests in on the balance sheet, as well as the borrowing government has done to do that investing. Seems reasonable enough. Mark Carney:
The debate over new fiscal rules is therefore as welcome as it is overdue. It makes little sense to ignore the nation’s assets when calculating the national debt, particularly when some initiatives — such as the National Wealth Fund — are expressly designed to do what they say on the tin, namely build national assets.
We do bump up against a few problems. What politics designs something to do and the actual outcome aren’t quite the same thing. So, we need to include the value of those assets when they’re up, running and paying back not at the point that the plan is declared. Further:
The Office for Budget Responsibility (OBR) has warned that successive Labour and Tory governments have found it “particularly difficult” to deliver quick and meaningful increases in capital spending, even when budgets are increased substantially.
We’ve that interesting problem that it’s d’md near impossible to actually build anything in Britain so we’re likely to find out that the costs of having built are rather higher than the value of what is built that can be put on that balance sheet. The £300 million the planning application for the Lower Thames Crossing has cost is most certainly a cost but it’ll not be an asset that produces revenues in the future and so is not a positive to put on the balance sheet.
There’s even that basic logical problem that if something were vastly profitable to build then the private sector would be clamouring to do it already. If government’s necessary we’ve at least a presumption of the idea that it’s not going to be one of those vastly profitable things.
But, OK, brush all of these away. Assume them away, as economists so like to do, in order to have a look at the underlying model. We should have a proper government balance sheet, showing both assets and liabilities, positives and negatives over time. Cool. We do, already, sort of have this in the Whole of Government accounts. So why aren’t we just using those?
Because if we do bring those whole of government accounts, properly constituted, to the forefront of the national debate then the financial markets are going to shriek in fright and head for the hills. Because those whole of government accounts, properly constituted, include the truly vast, trillions of pounds, bills for the things we’ve already promised ourselves. Unfunded public sector pensions, unfunded state pensions, the costs of the NHS as an increasing ageing population passes through it on that one way road. The asset to offset those is the future tax revenues that can be squeezed out of a captive population. Which is, absent immigration, shrinking and shrinking quickly.
That is, properly looking at the state assets, state liabilities, gives us a very much worse picture than the way we currently do things. Which is why people generally mutter and pass on to easier subjects when the use of whole of government accounts is mentioned.
Sure, we should include both assets and liabilities on the state balance sheet. It’s just that given the way the politicians have been spending promises this past century the outcome is not just worse than is generally known it’s worse than most will even believe.
Tim Worstall
Exit taxes are a terrible idea - they remove the limit on taxation
The idea of exit taxes is raising its ugly head again. This time it’s in an IFS report. But that’s from Arun Advani and Andy Summers, which makes it very like the last time an exit tax was suggested - by Arun Advani among others. That was the tax everyone 5% of their wealth idea and if they try to leave then take it anyway. Something that one of us derided as simple theft when discussing it with the Treasury Committee.
Theft because retroactive changes in taxation are theft. Think of that idea so happily used in political philosophy, the social contract. Well, contracts are things offered and then agreed to or not. If that overall contract on offer by a country is not to the liking of someone offered it then they can leave - not sign that social contract. Insisting upon changing the terms and not allowing that exit is, as we claimed, that theft.
No, it’s not possible to say that people should not be able to escape the social contract of their current citizenship. At least, not in a country accepting a million immigrants a year it isn’t - if inward mobility is fine and dandy, even, as some would say, a moral duty then the same must apply to outward.
Moving from moral to pragmatic, exit taxes on those with any money are going to make sure that the incoming are unlikely to be those with money. Which, in a country that runs a large current account deficit is not a good idea- we do actually require, need, incoming capital. Taxing those leaving is going to reduce those coming.
But for us the gripping hand argument against exit taxes is that it increases the ability to tax. Of course, that’s exactly why those proposing it want it. So that they can ramp up taxation. And they’ll ramp up taxation on you too.
There’s an idea that if the rich can be forced to pay more tax then and therefore the tax burden on the rest of us will be reduced. Aha, aha, no, this isn’t the way politics works. Government, the state, politicians, will spend the heck out of however much they can get ahold of. That’s why we’ve tax and spending at post WWII highs right now and that spending class is still whining about an austerity that never happened. If the political system can squeeze more tax then it will not only do so it will spend it all. Which is the very reason for those calls for a 5% wealth tax, an exit tax.
If those an increase in taxation will bite upon can reject the new social contract and leave then that limits the bite that can be put upon the rest of us. Which we think is good. We think limiting the bite that can be put on the population is a good idea in and of itself.
If people can leave because taxes are too high then that lowers the peak of the Laffer Curve. Which means a revenue maximising government can tax the whole population less harshly. Which is why we’re against an exit tax - it removes that limitation upon government taxation powers.
Do not forget, a revenue maximising tax rate is not a growth maximising one - it’s rather higher in fact. But since we’re obviously not going to get a growth maximising size of the state at least we should be working to lower that revenue raising one so as to close the gap a little. For revenue raising is something politics understands even if growth isn’t. Even the most dullard politician isn’t going to plan to reduce the amount of our money they can spend after all.
Tim Worstall
50 Years On from Hayek’s Nobel Prize
On October 9th 1964, fifty years ago, F A Hayek was awarded the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel, which is treated as the Nobel Prize in Economics. He received it for his work on economic fluctuations, the theory of money, and the interdependence of economic, social, and institutional phenomena. He shared the award with Professor Gunnar Myrdal.
Some of his greatest intellectual breakthroughs came in the field of Political Economy, notably his insight that a spontaneous economy is not an unplanned one. True, it is not planned from the centre by a few directing minds, but it is planned at the periphery by millions of people whose decisions coalesce into an order that has more information and can respond more rapidly than one that is deliberately planned.
Hayek was building upon the observation by Adam Ferguson that some orders are “the products of human construction but not of human design.” Hayek created from this the notion of a spontaneous order containing more wisdom from the multitudes than can emerge from the thinking of a few.
In 1947 Hayek founded the Mont Pelerin Society, a group of classical liberal thinkers who banded together to form a bulwark against socialist totalitarian thought that was spreading across much of the world. Its founding members included Ludwig von Mises, Milton Friedman and Karl Popper among other illustrious scholars.
Hayek’s thought was hugely influential in overturning the postwar consensus, and bringing a revolution that elevated the role of markets and free decision-making. He acted as Chairman of the Adam Smith Institute’s Academic Board and came to visit its team twice a year. Both Margaret Thatcher and Ronald Reagan took inspiration from his works.
The ASI in the year 2000 voted Hayek as the man of the century, preferring a benign scholar whose ideas helped lift millions out of poverty to megalomaniac dictators who murdered millions. Hayek was one of the greatest and most influential figures of the Twentieth Century, and well deserved the recognition he received.
If it’s bullpuckey then it’s bullpuckey, right?
One of the advantages of being quite as arrogant and selfcentered as I am is the ability to label trite trivias after myself and then claim that they’re grand insights into the State of Man and the Nation.
Thus Worstall’s Acuity.
This is an addition, possibly a corollary, lesson of, conclusion from, Gell-Mann Amnesia:
"Briefly stated, the Gell-Mann Amnesia effect is as follows. You open the newspaper to an article on some subject you know well. In Murray's case, physics. In mine, show business. You read the article and see the journalist has absolutely no understanding of either the facts or the issues. Often, the article is so wrong it actually presents the story backward—reversing cause and effect. I call these the "wet streets cause rain" stories. Paper's full of them.
In any case, you read with exasperation or amusement the multiple errors in a story, and then turn the page to national or international affairs, and read as if the rest of the newspaper was somehow more accurate about Palestine than the baloney you just read. You turn the page, and forget what you know."
– Michael Crichton (1942-2008)
Worstall’s Acuity is to do the opposite. If someone’s feeding me bullpuckey on a point I know about then I’m going to assume they’re feeding me bullpuckey on the ones I don’t. This seems only fair and logical and certainly saves a lot of time.
From The Guardian, a report on a report about climate change and environmental limits:
The researchers said global heating was part of a wider crisis that included pollution, the destruction of nature and rising economic inequality.
Economic inequality is not rising. Quite the contrary, economic inequality is falling. The poor parts of the world are growing faster than the rich parts - economic inequality is decreasing. A report here from a decade back and yes, those same impulses have been continuing.
The report itself, rather than the report upon the report, makes the same mistake:
The climate emergency is not an isolated issue. Global heating, although it is catastrophic, is merely one aspect of a profound polycrisis that includes environmental degradation, rising economic inequality, and biodiversity loss (Hoyer et al. 2023).
It’s possible they’re right in some of the things they say. But that’s not the way to bet at all - for on the thing we here know about, economic inequality, they are wholly and exactly wrong. They’ve actually got the sign wrong - inequality is decreasing, not increasing. This does not bode well for whatever other bullpuckey they might be trying to sell us.
It is logical, sensible, for us to reject all of this because we know that they are wrong on the thing that we know about.
After all, if you’re presenting a report about the totality of the world you do have to be correct about that totality of the world, no? And if you’re wrong on one of your basic claims then that really does call into question your ability to be right about anything.
Tim Worstall
Why wealth inequality isn’t much of a thing
From a press release by Hargreaves Lansdown but interesting for all that:
If you were to quantify it (wealth that is - Ed) as being the age group with the most assets, it would be those aged 60-64, who have nine times as much as the aged 30-34.
If you were to quantify it as the individuals holding the most assets, those with the top 10% of assets hold £90,000 in the bank, £310,000 of property, and £627,000 in pensions.
The two groups are not wholly the same of course but there’s a very large overlap there.
One point to make is that getting into that top 10% by wealth isn’t all that exclusive a club. Yes, £90k in the bank seems a bit de trop but £300k in equity is a provincial house with the mortgage paid off. £600k in pension is middle ranking civil servant sort of territory. Schoolteacher, senior nurse, that sort of level. This is not an exclusive club. It’s also, as it happens, about the global 1% by wealth that has Oxfam spitting with rage in those annual reports.
The other thing that is obvious is that there are large lifecycle effects in play here. People who’ve paid off their mortgage and saved into their pensions are richer - wealthier - than those just starting that process. Shocking finding, eh?
But there’s more to it than this. D’ye remember Piketty and all that fuss that wealth was now a higher portion of GDP than it used to be? It was 300 to 400% of GDP a couple of generations back it’s now 500 to 600%? This was a terrible thing and taxes must rise substantially to take care of it?
But there’s our explanation. Lifecycle effects in an increasingly long lived population. Back two generations average lifespan in retirement was some handful of years. Now it’s a handful of decades - meaning that rational people save more for those golden years. That rise of wealth to GDP can be described as just the natural outcome of increasing lifespans. Thus not, in fact, something that needs to be taxed away.
But the larger point we want to make. Wealth and wealth inequality have huge, vast even, lifecycle effects in them. Anyone who starts talking about wealth and wealth inequality without including, discussing, those lifecycle effects can be safely ignored. In fact, not just should be ignored but also spanked and sent to bed without any supper. It’s entirely possible that there will still be things to complain about - when isn’t there? - after they’re included but not including lifecycles in an analysis is to be deliberately misleading. And why should we pay attention to anyone lying to us - even by omission - in the first place? All that before we even begin to discuss Frenchmen.
Tim Worstall
The IFS capital gains tax proposals are…..strange
The IFS has some proposals for the reform of CGT. Things like exit taxes, equalising rates with income tax, forcing both CGT and death tax to be paid on the same assets. But it’s more complex than that. Much more complex than that.
These reforms would mean that CGT would sometimes be payable on top of inheritance tax (and, under the second option, at the same time). That is not a flaw. CGT and inheritance tax are serving different purposes – inheritance tax is not a substitute for CGT. On death, if an asset has accrued gains, it is appropriate to tax these just as much as if the asset were sold the day before death, when it would currently be taxed.
As we’ve noted before an 85% tax at death sounds more than a little de trop. 40% IHT and 45% top rate CGT on the same pot of money? Not passing that basic fairness test we think.
Then there’s this:
CGT rates vary across assets. They are lower than tax rates on earned income and, in most cases, income from capital. These rate differentials are unfair and create a range of undesirable distortions.
Thus we get that standard progressive call that CGT and income tax rates should be aligned, be equal even. For why should those who labour for a living be paying a higher tax rate than those who speculate for it? ‘S’unfair, innit?
Well, yes, except these are the rates currently paid:
The CGT rates on shares are very different from those on non-share assets. Because - as they say - shares are already reduced in value by the corporation tax charged upon the profits of companies. Given this CGT on shares is already well aligned with income tax rates. In fact, for basic rate payers well above.
What this means is that if nominal CGT rates are equated with income tax rates then the CGT charge will be well above income tax rates. Which really isn’t the point at all. So, to equalise actual rates it will still be necessary to have a different, significantly lower, rate for CGT on shares. Equalising rates means different tax rates that is.
Exit taxes are, we think, just vile, so ‘nuff said there.
But where it gets really complex. Quite rightly the proposals take account of the Mirrlees point. That we don’t, in fact, want to tax normal returns to capital at all. Therefore something akin to inflation indexation but set at the risk free return rate. Mirrlees himself suggested the gilts yield which we think too low - the FTSE one sounds better to us. But that’s a detail. It becomes only economic profits which are taxed, not regular returns to capital.
Which in one sense is good yes. We can’t see it being remotely politically possible of course - the shouting when it becomes obvious that rentiers get to live tax free would see to that we think. Yes, it’s - in one sense - wholly economically sensible but we can’t see it being allowed to stand, nor being implemented.
This thought then runs into another problem: Schumpeterian Profits. As that Nordhaus paper points out these are the profits that accrue from entrepreneurial activity - they are not the returns to financial capital from it. Of those Schumpeterian profits near all flows to us, the consumers, in the form of the consumer surplus. Only some 3% sticks to the hands of the entrepreneurs themselves.
Yet note what this proposed tax system does - it taxes those entrepreneurial profits at the highest rates our tax system has. Top income tax rates, or CGT at that same top rate, or if left to the kiddies at 85%.
We end up not taxing at all the coupon clipping bourgeois while dunning the entrepreneurs - those who both make us consumers rich and who also drive the entire system of market capitalism forward - at the very highest rates of the entire system. There’s an error in the reasoning that got us here if we end up with a proposal so gobsmackingly awful.
It is true that we want to tax economic rents. But economic rents and entrepreneurial returns are different things and that’s the distinction that isn’t being made. The solution to economic rents is to go out and destroy the things that allow economic rents to be collected - then we can, righteously, have a lovely low tax rate upon the entrepreneurial returns. Say, zero as a nice starting point for negotiation?
Tim Worstall
Foreign Aid Reimagined
Rachel Reeves plans to cut almost £2 billion from the foreign aid budget. The Chancellor is preparing to let spending on aid fall to 0.5 per cent of gross national income after two years, a drop to a 17-year low. This has aroused Cabinet opposition.
The Adam Smith Institute has already told the Chancellor how to deal with this, but it seems she might not have been paying attention. In my Overton Window piece I pointed out that in addition to the aid publicly provided by the government, the UK should calculate the amount of aid sent in remittances by people to their families in the countries they originally hailed from.
This frequently exceeds public sector aid as a proportion of total aid. The UK’s foreign aid should thus be declared as the sum of public and private aid.
The US is often criticized for giving relatively little in government aid, but the inclusion of private aid makes it clear that it is among the most generous nations in helping those in poorer countries.
The UK could increase the amount of private aid that is remitted to families in poorer countries by allowing it some measure of tax deductibility. This would increase the number sending it, and probably the amount that they send.
Private foreign aid is better in one important respect in that it goes directly to people instead of being filtered through governments and bureaucracies. Private aid is less likely to go to fund space programmes, or to fund gold bathtubs in presidential palaces or to buy tanks. Remittance has been shown to circumvent corruption-induced deadweight loss.
The Chancellor should include private aid in addition to government aid and strive to increase the former by giving some tax breaks to that given through reputable and regulated agencies that transfer funds internationally. It should prove to be an attractive prospect to a Chancellor who is no stranger to redefining things.