CNBC: Tom Clougherty speaks about Royal Mail privatization and its implications for Gordon Brown on Strictly Money

Slug path

asi-in-the-news/asi-in-the-news/cnbc-tom-clougherty-speaks-about-royal-mail-privatization-and-its-implications-for-gordon-brown-on-strictly-money

Joomla-id

3439

Old Teaser

Published on CNBC here.

Radio Five Live: The Richard Bacon Programme

Slug path

asi-in-the-news/asi-in-the-news/radio-five-live-the-richard-bacon-programme

Joomla-id

3438

Old Teaser

Click here to listen to Tom Clougherty as Prime Minister for a day in a discussion and phone-in on Radio Five Live. (Starts 2:07)

Daily Express: Tax freedom day blow

Slug path

asi-in-the-news/asi-in-the-news/daily-express-tax-freedom-day-blow

Joomla-id

3431

Old Teaser

Britons won’t start earning for themselves until June 25, the latest date since 1984.

Theoretically, this year’s Tax Freedom Day – the date when we finish paying our tax burden for the year – is May 14, the earliest since 1973.

But the Adam Smith Institute think-tank warns that this does not take into account Gordon Brown’s runaway spending deficit. If that is factored in, Freedom Day does not fall until June 25.

Without Mr Brown’s spending deficit, Tax Freedom Day is early this year because tax revenues have plummeted and VAT has been cut.

The think-tank’s director,­ Dr Eamonn Butler, said: “Under Brown’s stewardship, the annual deficit went from near-balance in 1998 to more than three per cent in 2007 when the economy was growing strongly.

“Now the Chancellor is forecasting a 13.3 per cent deficit. Young people have the right to feel very angry because they will be carrying the burden for years to come.’’

Published in the Daily Express here

Tax Freedom Day 2009 falls on 14 May

For Release: SATURDAY 2 MAY 00:01

But you'll have to work until June 25 to pay off Brown's borrowing binge.

Tax Freedom Day, the day in the year when the average Briton has earned enough to pay his annual tax bill, will fall on 14 May this year, according to independent think-tank the Adam Smith Institute. This means that for 135 days of the year, every penny earned by the average UK resident will have been taken to support government expenditures.

This is the earliest Tax Freedom Day since 1973 – on the face of it, good news for taxpayers. But there is a downside: the traditional Tax Freedom Day measure only reflects the money actually raised by the government in taxes, not the full amount it spends. If the government deficit is factored in, Tax Freedom Day does not come until 25 June (the worst figure since 1984).

This gap between Tax Freedom Day based on actual revenues and Tax Freedom Day based on government spending is now the widest it has been since the early 1970s – and possibly since World War II.

According to Gabriel Stein, Chief Economist at Lombard Street Research who calculates Tax Freedom Day every year, the figures indicate a bleak future for British taxpayers:

"Running up deficits can be described as a form of deferred taxation. The effect will be that when the economy recovers – as it will eventually do – the UK tax burden is likely to rise much faster than would otherwise have been the case and Tax Freedom Day is likely to creep later and later in the year."

 Moreover, the reason that Tax Freedom Day will arrive so early in 2009 is not so much that the tax burden has been dramatically reduced – although the temporary reduction in VAT is certainly significant – as it is that tax revenues have collapsed due to the sharp downturn in the economy. Dr Eamonn Butler, the director of the Adam Smith Institute, commented: 

"It's nice to see Tax Freedom Day come early, but our research doesn't leave me optimistic. Under Gordon Brown's stewardship of the economy, the government's annual deficit went from near-balance in 1998 to more than 3% in 2007. And that was when the UK economy was growing strongly. Now the Chancellor is forecasting a 13.3% deficit. Young people have the right to feel very angry, because they'll be carrying the burden of these mistakes for years to come."

 Notes for editors:

1. The original Tax Freedom Day for 2008 was estimated at 2 June, based on figures contained in the 2008 Budget. Yet a year later we find that the day was 22 May – a difference of 11 days. This substantial change in the forecast and estimated Tax Freedom Day is due to actual economic growth and tax revenues being several percentage away from the government's forecasts.
2. Tax Freedom Day shows the total tax paid each year by a taxpayer on average income, including indirect taxes, local taxes and National Insurance contributions, as a percentage of that individual's total income. It is calculated by comparing general government tax revenue with the Net National Income (NNI). The total of all government tax revenue – direct and indirect taxes, local taxes and National Insurance contributions – is calculated as a percentage of NNI at market prices. The result is then converted to days of the year, starting from 1 January.
3. Tax Freedom Day is calculated for the Adam Smith Institute by Gabriel Stein, a Swedish economist who has lived in the UK since 1990. In 1981 he worked in the Israeli Ministry of Finance. From 1982 to 1991 he ran his own economics and public affairs consultancy, Stein Brothers. He is currently a director of Lombard Street Research Ltd.
4. Tax Freedom Day web-site: http://www.adamsmith.org/tax-freedom-day/

Slug path

tax-freedom-day-2009-falls-on-14-may

Joomla-id

3420

The G20 summit: weak, meaningless and self-serving

For Immediate Release

When you read the fine print of the G20 agreement, it shouts 'heroic hypocrisy, unreliable sums, weak promises, meaningless language and self-serving commitments' according to the City financial analyst Miles Saltiel in a briefing paper for the Adam Smith Institute.

According to the paper:

• The headline $1.1 trillion of financial stimulus amounts to just $25 billion of new money.
• The IMF's '$500 billion' and the '$250 billion' in Special Drawing Rights are just an underwriting commitment, with no new cash.
• The '$100 billion' fund for the world's poorest had largely been announced already, and will come from private rather than government sources.
• The extra '$250 billion' for trade finance is mostly a re-hash of old commitments, with less than $25 billion of new money to subsidize trade finance.
• The '$6 billion' to be raised by selling the IMF's gold reserves boils down to a $2 billion trickle over three years.
• The G20's promises to the poorest countries, and commitments to free trade, look extremely weak when the Doha trade round lies derelict.

Saltiel concludes:

"The G20 leaders are more concerned about their domestic problems than their international responsibilities. They turned up in London for a photo opportunity. Their talks convey a sense that there is little they can do to change events. And they are right. Eventually, the world economy will trade its own way out of the current confusion, as it always does."

ENDS

G20 – Less Than Meets the Eye is published by the Adam Smith Institute, 23 Great Smith Street, London, SW1P 3BL. It can be downloaded for free at http://www.adamsmith.org/images/stories/less-than-meets-the-eye.pdf

Slug path

the-g20-summit-weak-meaningless-and-self-serving

Joomla-id

3419

Yorkshire Post: Why taxing the rich could make us poorer

Slug path

asi-in-the-news/asi-in-the-news/yorkshire-post-why-taxing-the-rich-could-make-us-poorer

Joomla-id

3409

Old Teaser

Written by Dr Eamonn Butler, Director, Adam Smith Institute

Hope springs eternal in the breasts of politicians. None more so than Alistair Darling's in his Budget speech.

He conceded that Britain's economy was in a bad way. It would shrink by 3.5 per cent this year, rather more than the one per cent dip he forecast only in November. But hey, every country is in a bad way right now, and by 2011-12, the UK will be growing again at a record, rip-roaring rate of 3.5 per cent. Crisis? What crisis?

Unfortunately, British Budgets tend to unravel pretty quickly. Ever since the £5bn "stealth tax" on pension funds that Gordon Brown somehow forgot to highlight in his 1997 budget speech, and which helped to kill half of Britain's workplace pension plans, people listen to the Chancellor with more than the usual scepticism.

We only had to wait a couple of days before the Office for National Statistics punched a hole in the Chancellor's optimism. It reckoned that the UK economy had just suffered the biggest six-month fall since records began, in 1948, and much more than the Government
had assumed.

The International Monetary Fund piled on even more gloom by predicting that this year's drop in British growth would actually be 4.1 per cent, and that the economy would also shrink next year.

It is all bad news for a government trying desperately to borrow its way out of the crisis while soaking the "rich" by raising the top tax rate to a confiscatory 51.5 per cent.

There comes a time when short-term borrowing turns into a long-term problem. Already, with the increase in the top income-tax rate, the Government is beginning to look desperate.

This is all eerily reminiscent of Denis Healey, the Labour Chancellor of the late 1970s, who promised to "tax the rich until the pips squeak" with rates as high as 83 per cent on income from work and 98 per cent on investment income. In the end, he had to ask the IMF for an embarrassing bail-out.

The trouble with taxes is that raising them above a certain level becomes counter-productive. People will find it economical to hire expensive accountants to avoid paying the full amount. If everything else fails, they may take themselves and their money abroad to gentler tax jurisdictions, as the actor, Sir Michael Caine, just threatened to do.

The Treasury claims that the new 50 per cent rate will bring in £1.3bn next year, but the Institute for Fiscal Studies says it might not raise anything at all, since perhaps 70 per cent of top earners will either evade or avoid it. The Centre for Economic and Business Research thinks that as many as 25,000 top earners may leave the country, costing the Government – and the London financial market – hundreds of millions of pounds in lost tax revenues and investments.

Taking 51.5 per cent of people's earnings sends all the wrong signals. It suggests – absurdly – that the Government is better at spending our money than we are. Higher taxes will simply induce people to spend less and leave entrepreneurs with less for investment, neither of which will help Britain recover.

When Margaret Thatcher slashed the top rate to 40 per cent, high income earners actually paid more, and contributed a far bigger proportion of total revenues, than they had before. Even former Labour Prime Minister Tony Blair denounced the 50 per cent tax rate as "wrong, seriously wrong".

Interestingly, while higher income earners are supposed to bleed for the nation and businesses have been hit by the full force of the recession, government workers and their generous index-linked pensions have been left largely unscathed.

And what of the Conservatives? They are the clear favourites to win next year's election. It would then fall to David Cameron to sort out Britain's debt. Will he have the steel to bring the public finances back into order?

He has spent much of the last few years trying to make the Tories look kinder, gentler – majoring on social justice rather than tax cuts. He's even said that, although the new 50 per cent rate was a "pathetic piece of class-war posturing" rather than sound economics, removing it would "not be a high priority" for any future Conservative government.

Although Mr Cameron may have tried to rebrand the Conservatives, he still shares one of Mrs Thatcher's core principles – that a nation, like a family business, has to balance its books.

He must know that if he becomes Prime Minister and fails to deliver a leaner, sounder, less indebted government, his party will be finished. Even worse, so will be Britain.

Dr Butler is director of the Adam Smith Institute and author of The Rotten State of Britain: Who Is Causing the Crisis and How to Solve It, published by Gibson Square Books, price £12.99.

Published in the Yorkshire Post here

Wall Street Journal: Is Britain Finished?

Slug path

asi-in-the-news/asi-in-the-news/wall-street-journal-is-britain-finished-

Joomla-id

3389

Old Teaser

Written by Dr Eamonn Butler, Director, Adam Smith Institute

The country's only chance is a leaner, sounder and less indebted government.

Hope springs eternal in the breasts of politicians. None more so than in Alastair Darling, Britain's chancellor of the exchequer, as he delivered his annual budget speech to Parliament last week.

He conceded that Britain's economy was in a bad way. It would shrink by 3.5% this year, rather more than the 1% dip he forecast only in November. But hey, every country is in a bad way right now, and by 2011-12 the U.K. will be growing again at a record, rip-roaring rate of 3.5%. Crisis? What crisis?

Unfortunately, British budgets tend to unravel pretty quickly. Ever since the £5billion "stealth tax" on pension funds that Gordon Brown somehow forgot to highlight in his 1997 budget speech and which helped to kill half of Britain's workplace pension plans, people listen to the chancellor with more than the usual skepticism, waiting until the number-crunchers expose the real figures a few days later.

We only had to wait a couple of days before the Office for National Statistics punched a hole in the chancellor's optimism. It reckoned that the U.K. economy shrank 1.6% in the last quarter of 2008, and another 1.9% in the first quarter of 2009 -- the biggest six-month fall since records began in 1948 and much more than the government had assumed. The International Monetary Fund piled on even more gloom by predicting that this year's drop in British growth would actually be 4.1%, and that the economy would also shrink next year, when the chancellor had counted on a turnaround. It is all bad news for a government desperately trying to borrow its way out of the crisis while soaking the "rich" by raising the top tax rate to a confiscatory 51.5%.

Another popular British sport is watching the government default on its borrowing estimates. The last time the government managed to stay within its own budget deficit forecast was in 2000. Recently, the difference between planned and actual borrowing has become spectacular. In his 2008 budget, the chancellor figured he might have to borrow £70 billion between now and 2011. Last week, his estimate was five times that -- £348 billion. By 2013-14 he will need £703 billion of debt finance, twice as much as he forecast just five months ago. Britain would be borrowing for the next 22 years -- and that's on Mr. Darling's heroic economic assumptions, which can't possibly be met.

* * *

Britain's Labour leaders have been keen to blame bankers, particularly American ones, for the country's woes. To some extent, though, Labour leaders have brought this crisis on themselves. They saw financial services, not manufacturing, as Britain's future and encouraged it. Financial wizards left Manhattan for London, attracted by the lower taxes and easier regulatory environment. The City's financial market boomed, contributing 8% of GDP and 15% of all corporate taxes. But Britain's heavy reliance on financial services left it seriously exposed when the banking crisis finally hit.

Add to this the imprudence of the public sector and private households. Over the past 10 years, Britain has grown on the back of government and consumer spending, both fuelled by debt. But while households are now cutting back and paying down their debt, the government is spending and borrowing even more.

There comes a time when short-term borrowing turns into a long-term problem. Britain's government debt is still triple-A rated, but a recent auction of U.K. government paper failed to sell in full and some traders already price it lower than some commercial companies' debt. Britain's government could find it harder and more expensive to borrow the huge amounts it seeks.

Already, the government is beginning to look desperate. Mr. Darling plans to hike the top income tax rate from 40% to 50% (plus 1.5% compulsory National Insurance contributions) on people earning more than £150,000. By scrapping certain tax deductions, those making more than £100,000 would also have to pay higher taxes.

This is all eerily reminiscent of Denis Healey, the Labour chancellor of the late 1970s, who promised to "tax the rich until the pips squeak" with rates as high as 83% on income from work and 98% on investment income. In the end, he had to ask the IMF for an embarrassing bailout.

The trouble with taxes is that above a certain level, raising them is counterproductive. People will find it economical to hire expensive accountants to avoid paying the full amount. If everything else fails, they may take themselves and their money abroad to gentler tax jurisdictions, as the actor Michael Caine just threatened to do.

The Treasury claims that the new 50% rate will bring in £1.3 billion next year, but the Institute for Fiscal Studies says it might not raise anything at all, since perhaps 70% of top earners will either evade or avoid it. The Center for Economic and Business Research thinks that as many as 25,000 top earners may leave the country, costing the government -- and the London financial market -- hundreds of millions of pounds in lost tax revenues and investments.

Taking 51.5% of people's earnings sends all the wrong signals. It absurdly suggests that the government is better at spending our money than we are. Higher taxes will simply induce people to spend less and leave entrepreneurs with less for investment, neither of which will help Britain recover.

When Margaret Thatcher's government slashed the top rate to 40%, high income earners actually paid more, and contributed a far bigger proportion of total revenues, than they had before. Even former Labour Prime Minister Tony Blair denounced the 50% tax rate as "wrong, seriously wrong."

Interestingly, while higher income earners are supposed to bleed for the nation and businesses have been hit by the full force of the recession, government workers and their generous index-linked pensions have been left largely unscathed.

And what of the Conservatives? There has to be a general election in Britain before June 2010, and with an 18-point lead in the polls, they are the clear favorites. It would then fall to party leader David Cameron and his colleagues to sort out Britain's debt mountain. Will he have the steel to bring the public finances back into order?

He has spent much of the last few years trying to make the Tories look kinder, gentler -- majoring on social justice rather than tax cuts. He's even said that, although the new 50% rate was a "pathetic piece of class war posturing" rather than sound economics, removing it would "not be a high priority" for any future Conservative government.

But that's because although Mr. Cameron may have tried to rebrand the Conservatives, he still shares one of Mrs. Thatcher's core principles -- that a nation, like a family business, has to balance its books. Already he is calling for a "government of thrift" where civil servants get paid for "producing more with less, not less with more." Like the Iron Lady, he warns of the evils of debt and inflation.

He must know that if he becomes prime minister and fails to deliver a leaner, sounder, less indebted government, his party will be finished. Even worse, so will be Britain.

Mr. Butler is director of the Adam Smith Institute and author of "The Rotten State of Britain: Who Is Causing the Crisis and How to Solve It" (Gibson Square Books), published last month.

Published in the Wall Street Journal here

CNBC: Dr Madsen Pirie on the budget

Slug path

asi-in-the-news/asi-in-the-news/cnbc-dr-madsen-pirie-on-the-budget

Joomla-id

3359

Old Teaser

Published on CNBC here.

Spectator: What to expect in the Budget

Slug path

asi-in-the-news/asi-in-the-news/spectator-what-to-expect-in-the-budget

Joomla-id

3341

Old Teaser

Written by Dr Eamonn Butler, Director, Adam Smith Institute

After a decade of reckless spending, the government’s kitty is bare and its debts are mounting. In November, Alastair Darling said the economy would shrink just 2%, but predicted, Micawber-style, that it would turn up in mid-2009. Well, the economists’ consensus is that it actually shrank 3.7%, and that it’s hardly going to turn up this year at all.

Unemployment’s already 2 million, heading for 3.2 million. That’s a lot more people drawing benefits and not paying taxes. And there’s those expensive bank bailouts to pay for. So the Chancellor is borrowing wildly. Again, the economists’ consensus is that he borrowed £160 billion in 2008-09 and will need another £167 billion this year. That’s a whopping £100 billion more than he anticipated in November. It’s borrowing on a scale not seen since World War II. Then, we were fighting a war. Now, we’re just borrowing to pay off our debts.

The Institute for Fiscal Studies says the national debt could climb to 73% of GDP – 84% if you add the bank bailouts. That’s scary (scarier still if you include the future costs of nuclear decommissioning, PFI schools and hospitals, and civil servants’ gold-plated pensions).

Getting out of debt like that will take years – even if spending is cut back. But with places like Derbyshire putting their council tax up 8.7% and Whitehall’s generous budgets being set until 2011, there’s scant chance of that.

Still, after June 2010 it will be the Tories’ problem, so expect Darling to announce giveaways and gimmicks (like electric cars) now, and large tax rises that bite after the election. But what we really need is to slash regulation and tax on the people who, unlike politicians, can really create jobs – investors and employers.

Dr Eamonn Butler is Director of the Adam Smith Institute and author of The Rotten State of Britain.

Published in the Spectator here

Telegraph.co.uk: The secret life of the 'guerilla gardener'

Slug path

asi-in-the-news/asi-in-the-news/telegraphcouk-the-secret-life-of-the-guerilla-gardener-

Joomla-id

3314

Old Teaser

Tom Clougherty, of the Right-wing think tank the Adam Smith Institute, agrees that the rise of guerrilla gardening is a direct result of the interfering state. "It is absurd the amount of hoops you have to jump through when you are doing something most people would appreciate," he says. "If people want to make their community cleaner and more beautiful, they should be supported."

Published on Telegraph.co.uk here