Carney bottles it with monetary policy babysteps

Commenting on Mark Carney's announcement about Britain's monetary policy, Ben Southwood, Head of Macro Policy at the Adam Smith Institute, said: "Mark Carney had the leeway to make radical change here but he's bottled it with baby steps.

"The 'Carney rule', promising low interest rates and the possibility of more quantitative easing (QE) until unemployment is low or inflation rises, is definitely an improvement on the current regime. It gives firms clearer guidance on the future stance of policy, removing some of the uncertainty in the world economy today. I expect it to deal with some of today's demand shortage, and more importantly tomorrow's expected demand shortage.

"But unemployment and inflation come from both aggregate demand (which the bank can control) and aggregate supply (which it has essentially no control over). Since neither of these numbers distinguish between changes in supply or demand, the Bank is still fumbling in the dark with its guesses over whether a change in inflation comes from demand (which means it should react) or supply (which means it shouldn't). This means firms are still left guessing, and it means that uncertainty still reigns.

"What we really need is a truly rule-based system that takes discretion away from nine 'wise men' and uses market forecasts to create real stability. That system is nominal income targeting."

Ben Southwood is available for additional comment at ben@adamsmith.org or 0207 222 4995.

Tax Freedom Day has finally arrived

As of June 2024, this is out of date. Please refer to Tax Freedom Day 2024 for the updated statistics.

Tax Freedom Day falls on 30th May in 2013

Tax Freedom day is pushed back again as coalition fails to cut burden of government on UK taxpayers.

Cost of government day 13th July, two days earlier than in 2012, due to effects of austerity programme

UK residents can rejoice as the Adam Smith Institute reveals that they have finally stopped paying the taxman and started to put their earnings in their own pockets. Tax Freedom Day—the day when the average Briton finishes their stint working for George Osborne and begins to work for themselves, falls on 30th May.

For 150 days of the year, every penny the average person earns is sent to the Treasury, according to Adam Smith Institute calculations. This means that no less of a worker’s year is going to the government than last year, when extra taxes pushed TFD from 28th May to 29th May (including an extra day from the leap year).

Though UK taxpayers can thank policymakers that they will not have to wait until July, like France, to start earning for themselves, they will remain jealous of American and Australian earners, who switch from paying into their chancellors’ bank accounts to their own by mid-April.

Since the government is spending hundreds of billion more pounds than it takes in through the tax system, the cost of government day is not for another month and a half. That is, if we imagined the government did all its spending before households, charities and firms, every pound of expenditure in the economy would come from the state until 13th July.

The ASI calculates Tax Freedom Day by measuring local taxes, direct and indirect national taxes, and national insurance contributions as a proportion of the UK’s net national income—this year that came to 41.5 per cent—before mapping the proportion onto the days of the year.

The ASI's Director, Dr Eamonn Butler, says “Tax Freedom Day, which the Adam Smith Institute has been calculating for 25 years, is the plainest way to show what the tax burden really is. That is why the Treasury hates it. They of course want to conceal how much tax we pay, which is why they are so keen on stealth taxes.”

“But we put in every tax, including stealth taxes – income tax, national insurance, council tax, excise duties, air passenger taxes, fuel and vehicle taxes and all the rest – and show just how long the average person has to work to pay their share of them all. The stark truth is that this burden costs us all 150 days of hard labour every year. That's not how long a rich person has to work – it is the time the average person must labour for the tax collectors.”

“In the Middle Ages a serf only had to work four months of the year for the feudal landlord, whereas in modern Britain people have to toil five months for Osborne’s tax gatherers.”

“An increasing number of economists believe that Britain's taxes are too high and are choking off recovery. Some politicians say they need to keep taxes high in order to balance the government's books. But the trouble with governments is that they always spend everything they raise in tax – and then as much more as they can get away with through borrowing. Just as the rest of us have had to cut back, so should the government. The UK economy would be a lot healthier for it.”

Steve Baker, Conservative MP and member of the executive of the 1922 committee, adds: “Many congratulations to the Adam Smith Institute for once again revealing the shocking truth about taxes and overspending. This doomsday machine of deficit spending, debt and currency debasement will eventually blow up and there is no kindness in pretending otherwise. Politicians who are serious about the prosperity of our country and the wellbeing of the poorest within it should take note.”

END

Contact: Ben Southwood or Geoffrey Taunton-Collins                                                                                                                                                                                                 no: 0207 222 4995

Big Brother and Nanny have been given the boot

The Adam Smith Institute praised the Queen's Speech for what it left out: "The omission of the snoopers' charter, plain packaging for tobacco products and minimum pricing for alcohol are cause for celebration," said the ASI. "Hopefully the government has learned that pushing people around is no way to govern, and paternalism over how much we drink and smoke is better left to the Victorians."

Its President, Dr Madsen Pirie, said "It is good news that there will now be no Big Brother powers for the authorities to spy on our private communications, and good news that there will be no more nanny state powers over tobacco and alcohol.  Their omission is a victory for freedom and good sense."

However, the government is going the wrong way on immigration, said the Institute's Research Director, Sam Bowman: "Instead of clamping down on illegal immigrants and their employers, the government should expand the number of visas available so immigrants who want to work have an easy path to legal residence. If given the chance to work, immigrants pay more in taxes than they use in services and boost economic growth overall. Making life harder for immigrants will not help anyone."

Sam in City A.M.

Summary

Research director Sam Bowman wrote a piece in City A.M. defending the earnings of boy-band One Direction, by way of Robert Nozick's famous 1973 "Wilt Chamberlain" thought experiment.

Read the whole thing here.

Eamonn in the Independent

Summary

Dr. Eamonn Butler's letter, arguing that councils should allow firms to cluster and take advantage of network effects, appeared in the Independent.

Read the whole thing at the top of the pager here.

Madsen in City AM

Summary

Dr. Madsen Pirie debates in City A.M. with Victor Bulmer-Thomas, arguing that domestic policy - not foreign policy - was where Margaret Thatcher had her most important achievements.

You can read the full debate here.

Madsen on the Today programme

Madsen Pirie argues on Today that Thatcher is responsible for having given the individual a stake in the nation, and for effecting a fundamental psychological shift among Britons.

You can hear the full interview here 1hr16mins in.

Christian leaders should encourage voluntary charity not force it on others

Summary

Jamie Whyte writes in the Wall Street Journal that Christian leaders should promote private giving, not impose their moral sentiments on taxpayers.

You can read his full article on WSJ.com here.

What would Hayek do? Four years after the crash, the U.K. is still trying to spend its way out of recession

Eamonn Butler launches a stinging attack in the Wall Street Journal on the mainstream Keynesian analysis of the financial crisis.

You can read his full article on WSJ.com here.

Let's kill the mansion tax once and for all

The proposed mansion tax is a wealth tax, and wealth taxes are among the most pernicious and damaging of all taxes. The proposal is not to tax people for doing anything with a house such as buying it or selling it, but simply for owning it.

One of Adam Smith's canons of fair taxation is that it should be levied in a way that is convenient for the person paying it. A tax on rents should fall when the rent has been collected, he said...

Read the full article on Politics.co.uk here. 

Summary

Dr Madsen Pirie writes on Politics.co.uk on the mansion tax. He argues that it is a wealth tax that is economically illiterate, damaging and divisive.