Friday, October 12, 2007

Al Gore wins the Nobel Peace Prize

Al Gore's all too predictable receipt of the Nobel Peace Prize has made the Devil very angry. Me too.

For the Nobel committee to be lauding him as some kind of hero for 'spreading the word' just days after a British judge (and I've heard no one say the judge is wrong) looks at his film and says that crucial parts of Gore's narrative don't stand up to scrutiny completely destroys any credibility the prize might have had left. While the central idea that the climate is changing and influenced by humans wasn't challenged that really isn't the issue at stake. Al Gore's film wasn't remarkable for advancing that theory but for the host of alarmist prophecies that he wrapped around it. Those have been condemned in the strongest terms I can think of since the creationists got slammed a few years ago.

The Nobel Peace Prize has been a bit of a joke since Yasser Arafat won it but the prize has also been awarded to a lot of very decent and courageous people. They don't deserve to have their achievement devalued by the prize becoming the "Nobel doing-things-that-lefties-quite-like Prize".

The shocking story of hospital infections

I've written a detailed post for the TaxPayers' Alliance blog setting out the scale, nature and causes of the scandal of hospital infections. The scale and sheer awfulness of the failure, both in Maidstone & Tunbridge Wells NHS Trust and the rest of the health service, is staggering. The cause is political management and the ongoing failure to put British healthcare under the proper control of patients.

More on Inheritance Tax

There have been an absolute storm of responses to my article on Inheritance Tax both in the comments and over at Gracchi's blog. I'll bring a range of the arguments together here. If I've misrepresented any of them I'm sure their authors will correct me. In order to keep this post from reaching book length I've had to boil a few arguments down.

"It doesn't affect that many people"

Gracchi quotes the "only 6% pay" statistic that far too many supporters of inheritance tax put far too much faith in. How can we reconcile that with the Scottish Widow's estimate earlier this year that 37% of households are wealthy enough to be eligible to pay Inheritance.

It's partly a result of rising house prices and the Treasury counting the number of estates rather than the number of households (not very sensible when you're trying to work out how many people are affected). The important question, though, is: which 6%? For an answer look to Lord Lipsey in the Guardian who, in a piece attacking the Inheritance Tax, acknowledged that it is paid only by the "unwise or the unlucky". This isn't, as Lipsey tries to argue in the article, because of unfair exceptions. If exempting businesses and farms is unfair then a fair Inheritance Tax is one that bankrupts countless family businesses.

It will always be relatively easy to avoid Inheritance Tax if you know what you're doing and if death doesn't take you by surprise. The rich are more likely to have expensive advice to avoid the tax both because they are more likely to be able to afford it and their large inheritance tax bill is more likely to justify the cost of lawyers and accoutants that make an effective avoidance strategy possible.

Inheritance Tax may only affect 6% of people but they are not necessarily those most able to pay and, for the small amount of revenue it raises, it causes too many of those 6% too much distress as well as having broader social effects.

"You only want to cut Inheritance Tax to look after the class interests of the middle class" and "if you were in the Rawlsian Original Position you wouldn't want to cut Inheritance Tax"

Look at the results of a major YouGov poll commissioned by the TaxPayers' Alliance (I don't think the full breakdowns are online - I'll try and put them up tomorrow). Particularly reliable thanks to a large, 2162 strong, sample. 65% of the total sample think that the Inheritance Tax is unfair. In the North - where much fewer homes qualify for Inheritance Tax than in the South and London - that number falls to 64%. In both cases the number who think the tax is fair is 10%. There's almost no difference in opinion on Inheritance tax at all between groups with very different chances of having to pay it.

If you want to move off a regional measure look at the socio-economic breakdown. Among the C2DE group 63% think the tax is unfair against only 9% who think it is fair. This is not a tax that people only oppose because they think they are likely to have to pay it. By the Rawlsian logic Northerners and the poor should be even more supportive of Inheritance Tax than someone in the Original Position; they are less likely to have to pay Inheritance Tax than an average Briton.

There is no evidence that opposition to the Inheritance Tax is based upon class interest or selfishness. Can the Left please drop this tired ad hominem?

The results of the TPA poll are backed up by the massive increase in support for the Conservatives following the announcement of their proposal for inheritance tax cuts. If only the very rich 6% pay this tax and people only support it because they are selfish then why, exactly, was a Conservative proposal to abolish the tax so popular among at least some of the other 94%?

"The Inheritance Tax strengthens social mobility by breaking up concentrations of wealth"

This argument really troubles me. To make it you have to have simplified the concept of social mobility so much that it simply becomes "how often do people change status". That is clearly not always a good. If a company director becomes a chronic alcoholic, loses everything and winds up in the gutter there has been a social movement. Is the human suffering somewhat offset by the increase in 'social mobility'?

Apart from petty vindictiveness I can see no reason to support downward social mobility. Instead I support making it possible for people from poor backgrounds to improve their lot in life: Upwards social mobility.

Upwards social mobility is on the decline but the Inheritance Tax doesn't help. To create the conditions for the poor to create a better life for themselves you need to do all you can to encourage good schools, strong families and economic opportunity. The economic opportunity is there, the schools need reform more than money and you don't create the conditions for a resurgence of strong families by placing a particular penalty in the tax system on an expression of the intergenerational bond.

"Without Inheritance Tax you'll get an aristocracy"

I can see two potential problems with aristocracy:

1) They monopolise political power by being the only ones with votes.

2) They create barriers to entry that prevent others getting wealthy.

Neither of these problems seem particularly relevant today. The abolition of Inheritance Tax wouldn't be followed by a restriction of the franchise. Barriers to upward mobility are created by failures of public services and social decline rather than some kind of social stigma against the climber among the business community.

If aristocrats are just people with inherited wealth then I fail to see the problem. Unless you believe in the socialist dogma, proved wrong long ago, that a nation's prosperity is a fixed pie, and the wealth of one is the poverty of another, dynastic wealth shouldn't be a worry.

"Instead of cutting Inheritance Tax you should go for a tax cut everyone will benefit from"

As the Inheritance Tax doesn't raise a lot of money it makes little difference to the possibility of other tax cuts compared to whether or not you control government spending and tackle government waste (academics at the European Central Bank estimate we waste 16% of government revenue by spending less efficiently than more astute nations). If you do have to prioritise, though, I think you need to consider efficiency in a broad sense: which tax raises the least revenue for the amount of social and economic disruption it causes?

If such an index were constructed I think Inheritance Tax would be near the top of the list. While it doesn't affect everyone those it does affect suffer enough that it is not at all worth the paltry amount the exchequer receives. VAT and Income Tax make a lot of people a little worse off and raise enough that you can only make very marginal changes for the money that gets rid of Inheritance Tax. Inheritance Tax affects a smaller group of people directly but it often causes a huge amount of heartache and disruption for them. It also sends political signals that hurt the willingness to save and family values that we should all want to protect.

"The reason is that Leonard must have some incentive to do what he is doing, or he wouldn't be doing it. He wants to give his life meaning when none seems possible, so he continues on his revenge mission, and as well he wants the satisfaction of avenging his wife."

He won't take satisfaction from avenging his wife. He won't remember, won't have the slightest inkling that she has been avenged. That tragedy is central to the story.

He definitely does take meaning from his struggle to avenge his wife just like I'm sure many parents take meaning from knowing that they are going to provide for their children once they are gone. Parents will place quite a value on the estate that gives them such meaning. Taxing inheritance therefore taxes their interests and is a tax on the dead who earned their wealth rather than on the children who inherit it unless you want to argue that income tax is a tax on unearned wealth if the income would otherwise be spent providing for children.

The same TPA poll I quoted earlier also confirms that the elderly are deeply opposed to the Inheritance Tax. 67% of the old think this tax is unfair (11% think it is fair). Apparently they do care what happens after they die.

"[Matt] thinks that it is wrong to tax a virtue- well again I think he is wrong- hard work is a virtue and income tax takes 40% of people's income above a freshhold and more people are taxed via income tax than inheritance tax, would Matt abolish income [tax?]"

This is a ludicrous Reductio ad Absurdum. I think that taxing virtue is a bad thing. As such I think that both taxing hard work and taxing leaving money to your children is a bad thing. However, I am willing to sacrifice that principle at times in order to fund essential services. I accept Income Tax as it appears to make an important contribution to funding services which I think is worth the sacrifice of taxing a virtue. By contrast, Inheritance Tax makes very little contribution to funding services so is not worth the sacrifice of discouraging good behaviour (saving and looking after your children).

Thursday, October 11, 2007

The BBC at its best

I was going to write up responses to the various people who have addressed my post on Inheritance Tax but I've been distracted by an absolutely marvelous evening on BBC2. First Newsnight and then a programme for the Storyville "Why Democracy?" series about a Chinese primary school class democratically electing its class monitor. I've had my fair share of disagreements with the BBC over the years but tonight it has been superb.

Newsnight was at its ferocious best. Three interesting stories covered incredibly effectively:

Gordon Brown is in trouble and the new politics both leaders promised is nowhere to be seen. This section was notable for a brilliant moment from Michael Howard. Discussing the Prime Minister's fortunes with Roy Hattersley he suggests, in the most calm and lawyerly manner imaginable, that the problem for Brown is that he's too much like Roy Hattersley. Magnificent.

Al Gore's documentary got a deserved roasting. A Friends of the Earth speaker defending the documentary looked like an absolute fool trying to excuse Gore's alarmism. The Times has the nine errors that the judge found. These aren't minor, marginal errors but huge flaws in key parts of Gore's evidence. A couple of examples:

"Error one

Al Gore: A sea-level rise of up to 20 feet would be caused by melting of either West Antarctica or Greenland “in the near future”.

The judge’s finding: “This is distinctly alarmist and part of Mr Gore’s ”wake-up call“. It was common ground that if Greenland melted it would release this amount of water - “but only after, and over, millennia.”

Error six

Gore: The drying up of Lake Chad was used in the film as a prime example of a catastrophic result of global warming, said the judge.

Judge: “It is generally accepted that the evidence remains insufficient to establish such an attribution. It is apparently considered to be far more likely to result from other factors, such as population increase and over-grazing, and regional climate variability.”

This is a massive blow to the credibility of climate change alarmists.

After Dispatches exposed extremism in Britain's mosques the police decided to investigate the programme rather than the mosques. They accussed the makers of distorting the words of the speakers at the mosque. Newsnight explained that all programmes are edited, particularly undercover programmes, and played the clips with their context.

The expanded clips make it pretty clear that Dispatches wasn't distorting at all. Corin Taylor, for the TaxPayers' Alliance, revealed how the police spent thousands investigating despite having received no complaints. This is essential viewing and shows the danger the multi-cultural desire to accomodate with radical Islam can pose to principles like free speech if it is not tempered by a commitment to Western values we should absolutely not be prepared to compromise on.

Next, came an absolute corker of a programme from the "Why Democracy?" series. It featured a primary school class in China electing their class monitor. They had an election with three candidates (a nervous but talented girl and two boys) advisers and speechwriters (their parents), activists (hand picked friends) and a pool of floating voters to chase. At one point one of the candidates had his supporters shout a rival down but they quickly felt bad, tearfully apologised and she was encouraged to have another go. At the end the winner shook the losers' hands and gave his closest competitor a hug. Despite that good spirit the election was fiercely competitive. There was even a clear divide of principle between a relatively democratic and a relatively authoritarian candidate - the two boys.

There was a pessimistic touch to the programme's conclusion as the more authoritarian candidate triumphed by buying his classmates a colourful card for an upcoming holiday but I didn't come away feeling pessimistic. The democracy that the children formed was rough, ready and imperfect. The school itself was clearly exceptional. But the children had demonstrated what has been clear to me for some time: the Chinese can be democrats. Even after decades of Communism the people of the world's most populous nation can show the spirit required for rule by popular mandate to work. Inspiring stuff.

Tuesday, October 09, 2007

Defence spending

Did you hear Alistair Darling announce that he would be increasing defence spending to look after the armed forces working so hard and risking so much on our behalf?

It's true in nominal terms, it's true in real terms, it doesn't appear to be true in terms of a percentage of GDP. With a huge commitment in Afghanistan and new global threats the share of our GDP we spend on the armed forces is still in decline.

The relevant numbers can be seen in Table 1.3 and Table B3:

2007-08: £32.6 billion / £1,404 billion = 2.32%
2010-11: £36.9 billion / £1,630 billion = 2.26%

In strategic terms we are still trying to increase the size of the Cold War dividend. Unless we expect big efficiency savings this isn't sensible behaviour for a nation with big foreign commitments and underequipped armed forces.

Sunday, October 07, 2007

Memento and the Inheritance Tax

To describe my central disagreement with those who support the continuation of the Inheritance Tax I think it helps to borrow a quote from one of the best films of the last decade, Memento:

"I have to believe in a world outside my own mind. I have to believe that my actions still have meaning, even if I can't remember them. I have to believe that when my eyes are closed, the world's still there. Do I believe the world's still there? Is it still out there?... Yeah. We all need mirrors to remind ourselves who we are. I'm no different."

Leonard Shelby, the film's hero, takes pretty much no utility from his vengeance. He is almost immediately dead to the consequences of his actions. However, he still wishes to do right by those he loves. Whatever we think about his seeking vengeance who would quibble with the idea that when we close our eyes the world is still there?

I don't think it is too much of a leap from what happens to Leonard when he forgets whatever he has done to ourselves when we die. Our eyes have been closed but the world is still there. The interests of the dead continue to exist after they have died and should be respected. Inheritance Tax is not a tax on the unearned wealth of the person inheriting any more than income tax is a tax on unearned wealth if the income is to be spent on providing for children. It is a tax on the dead who earned that wealth while living.

Inheritance Tax is a particularly egregious attack on the interests of those who die because it strikes not only at the financial security they wish to provide for those left behind but also at the home that they all shared. The family home is a crucial part of the stability that many people, when considering their own deaths, would want their family to be able to maintain for as long as they felt it necessary. A tax bill of tens of thousands of pounds that forces them into a hasty sale of their home and the fresh trauma of relocation is an alarming prospect to anyone considering the fate of those they care about.

The idea of a tax on the interests of the dead isn't some abstract, academic ethical argument. I think it underlies massive popular hostility to the Inheritance Tax. It is why the arguments of Labour politicians and many left-wing intellectuals continually fail to move the public on this issue. The same utilitarian minds that conceived of happiness economics cannot reconcile themselves to the idea that people care so much about something that will bring them no personal happiness. This is an issue where conservative principles are much more in touch with the intuitive understanding of ordinary people. They don't think that around half of one percent of government revenue - 16% of which the European Central Bank believe is wasted - is worth the price of their family facing additional hardship when they are first unable to look after them directly. Pretty understandable really.

In the end, even if you don't share the outlook of those who consider the world after they have died so important isn't the instinct still noble? Isn't caring so much about something you'll never see humanity at its best? For so little revenue, so little benefit to those public spending is supposed to help, is it worth taking a swipe at this supreme expression of the familial bond?

I don't think so.