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Douglas Carswell's Blog

18 NOV 2014

Why the Coalition can't fix the public finances

The Coalition came together to fix the deficit. After four years, the deficit is still running at over £100 Billion a year.

Rather than narrowing, the gap between what the government spends and what it takes in tax actually grew in the first half of this year.

Why? Because like every other post-war administration, the Coalition counted on being able to balance the books not so much by cutting back on state spending, but through higher tax revenues.

Fixing public finances on the back of more tax take only works if you are able to take more tax. In the first half of 2014, tax revenue grew less than expected, leaving government borrowing £5 Billion higher than over the same period the previous year.

Lower than expected tax revenue is because of higher tax thresholds, according to some. Although there are more workers, many of the new jobs pay less, suggest others. I don't disagree with any if that.

But might we be seeing something else happening, too? Could the fact that tax revenues are not increasing the way the Treasury assumed herald a more profound change in the nature of the tax base itself?

If a government wants to raise resources, it needs to tax wealth creation. In the last century, wealth in Western economies – to put it crudely – came from factories. So the state tended to tax factories and the vast payrolls of employees who worked in
them.

In the twentieth century, wealth is increasingly a question of intellectual property. And how do you tax that?

A factory in the mid twentieth century was relative immobile.  It was pretty difficult – but not impossible - to relocate a manufacturing operation from one high tax jurisdiction to another low tax jurisdiction. Intellectual property tends to be as mobile as an email.

This year in Britain, almost 30 percent of total income tax revenue will be paid by 1 percent of the population. And rather like IP, that 1 percent tends to be pretty mobile, too.

Could it be that we are starting to see a change in the nature of the tax base? Instead of thinking of the tax base as something solid and dependable, might it be something that can flow across the boundaries of tax jurisdictions?

Governments will, in the short term, respond to this by trying yet more transnational tax arrangements to try to stop the tax base moving. I suspect that in the longer term, we might need to respond to this by changing the way that we tax. Instead of taxing production, we may have to shift the burden of taxation towards consumption.

If we are to balance the books in future, governments might need to rely less on raising the tax take, and instead try to live within their means.


13 NOV 2014

Britain needs a new business model

How is Britain to pay its way in the world? Carry on as we are, and we won't.

Its thirty years since the UK government last ran a balanced budget. Since then our governments have piled borrowing upon borrowing. Public debt has doubled over the past four years, with the Coalition incurring a further £100 Billion this year alone.

Britain today is better at buying things that other countries produce than at producing things others want to buy. Our balance of payments data – the difference between what we import and export – looks dire. Selling off London real estate to balance the books won't work forever.

We need to change Britain's business model.

Hosing cheap credit at the economy might create growth. But it is growth based on over consumption and debt. It means we build lots of shopping malls but not enough factories.

UK plc's business model today depends heavily on importing cheap labour. So much so, in fact, that per capita GDP has been falling.

This cheap credit / cheap labour model is subsidised by the state. Government not only conjures up cheap credit for the banks, they use the tax credit system to publicly subsidise low wages. The government is borrowing billions in order to help big corporate interests keep wages down.

This is not free market capitalism, but crony corporatism.

If we are to maintain our living standards in the years ahead, things need to change. The massive pull of capital and productive output to Asia and elsewhere could be an opportunity for us. It means tens of millions of middle class consumers willing to buy things from us.

Instead of a crony corporatist energy market, we need to allow capital and innovation to cut the cost of energy, as has happened in North America. We need real bank reform and a government willing to take on the vested corporatist interests holding Britain back. Rather than remain inside the world's only shrinking trade block, we need free trade deals with the world.

Our future prosperity depends on it.


11 NOV 2014

Commons farce - and a diminished government

It was when government ministers started mouthing insults across the Commons chamber that I knew they were in trouble.

Yesterday's extraordinary scenes in the House of Commons might not have shed much light on the European Arrest Warrant. They did reveal some uncomfortable truths about the way we are governed.

Thirteen days ago, the Prime Minister solemnly promised that our elected representatives in the House of Commons that "there will be a vote" over the European Arrest Warrant. He made it clear that this would happen "before the Rochester by election" on 20th November.

Yesterday was the day that that was supposed to happen. Except it didn't.

Mr Cameron's own whips engaged in a straight forward deception – and were brutally caught out.

Rather than allow a vote on the European Arrest Warrant, the government whips put forward a meaningless motion to facilitate a lot of hot air discussion. But without any vote on European Arrest Warrant. How the government whips must have chortled at their own cleverness as they thought up that wheeze, eh?

Since the House of Commons no longer has the power to decide if we sign up to the European Arrest Warrant, whips decided to avoid having such a vote at all. Cunning, eh?

But then Speaker Bercow, doing precisely what a Commons speaker ought to do, made it clear that the Commons had been had. The vote that might follow, said the Speaker, would not be about the European Arrest Warrant. There was uproar. A contemptuous fury was directed at the government benches by their own side.

As Theresa May's share price visibly plummeted, Yvette Cooper's soared.

If, she told the House, ministers could not be honest with MPs about the business before the House, let us vote down the business of the House. In the vote that followed, the government came within five votes of defeat.

Yvette wasn't finished yet, either. Clearly one to do her homework, she used a Commons device to try to close down Theresa May's Mickey Mouse "debate".

Caught on the hop twice in the same debate, government whips scurried in and out of the chamber. They were panicking, desperate to get everyone back to the Commons. They even summoned the Prime Minister back from a banquet.

Thus did David Cameron hurry back to the House of Commons to quash debate on a subject where only a few days previously he had promised a vote.

This administration is not in trouble because it nearly lost a vote. Nor because its ministers mouth insults across the chamber when they fear defeat. Nor even because David Cameron can no longer be taken at his word. Nor merely because of the whips office's serial deception.

They are in serious trouble because are unable to see that any of this is wrong.


05 NOV 2014

We should be wary of the Transatlantic Trade and Investment Partnership

What should one make of the proposed Transatlantic Trade and Investment Partnership, or TTIP?

"Hurrah!" was my first reaction. What could be better than free trade between hundreds of millions of people on both sides of the Atlantic? Think how much better we might all be if that network of specialisation and exchange called the free market were to stretch from California to the Carpathians.

Alas, as so often where big government is concerned, things aren't quite what they seem. You see TTIP isn't really about free trade.

If it were, then there would be remarkably little to negotiate. If it was legal to sell something in Idaho, it would be legal to buy it in Essex. No regulation. No tariffs. Such a trade agreement could be done and dusted in a day.

Instead what TTIP does is extend the European Single Market model to transatlantic trade. This would mean that rather than freeing up trade, rules would be introduced whereby it is only possible to produce and sell things if they comply with a single standard.

Far from greater economic freedom, under such a system producers start to need permission to produce things. Note how every aspect of economic life the European Single Market touches gets swathed in red tape.

Worse, since permission is needed to produce and sell things, every vested interest begins to lobby to have the rules written to their advantage. Instead of big businesses trying to persuade willing customers to buy their products, they spend their marketing budgets paying lobbyists to rig the rules against the competition and the customer.

It is precisely because the various vested interests are trying to cut cozy deals behind closed doors through TTIP that the negotiations are taking ages.

TTIP is not about free trade. It is crony corporatism at its worst.

Of course, if Britain was to leave the EU, and the cozy corporatist cartel called Brussels, we could have genuine free trade agreements. Not only with the EU and the United States, but with China, India and much if the rest of the world.

"But we need to be in the EU to strike such deals", claim the various vested interests. Nonsense. Trade does not depend on the might of your public administration or the grandeur of your technocrats.

Trade happens when a person in one country produces something that someone in another wants to buy. That holds true weather you are in a country of over one billion people or under a million. And it explains why tiny Iceland now has a free trade deal with China.


04 NOV 2014

This Chancellor is all talk

The European Union is in danger of "pricing itself out of the world economy", George Osborne.

I agree. But what has our Chancellor of the Exchequer done about it?

One reason manufacturing firms in Britain and the EU find it harder to compete is due to rising energy prices. The EU has imposed an energy policy which encourages energy companies to generate so called "renewable" energy. Because this cannot be done as cheaply as burning fossil fuels, renewable energy has had to be subsidised, pushing up energy costs in the round.

Far from trying to stop this, the Chancellor and his neighbour in Downing Street, have been at the forefront of calls for more stringent renewable energy targets. Only last week, the PM reiterated his commitment to a policy that will push up energy costs.

Another reason why European business is struggling is the blizzard of red tape and regulation. Has the Chancellor done anything about this?

On the contrary, George Osborne has been pushing for the Single Market to be extended. Given that excessive regulation has been introduced under the auspices of the Single Market, extending the Single Market to services will increase the regulatory
drag on UK firms.

The Chancellor might complain about the extra burdens imposed on business. It is, of course, his own department that has been forcing firms to act as unpaid tax collectors. Even relatively small firms are now required to report their tax returns in real time. Great for a tax hungry Treasury. Not such good news if you are a firm trying to keep your costs down.

As so often with this administration, the Chancellor seems to think that it is all about making the right noises. 

For four years, the Chancellor has relied on cheap credit and a fiscal stimulus to generate economic growth.  Thus far he has done almost nothing to address the problems of competitiveness that he now pays lip service to.  


30 OCT 2014

Heir to Blair? This lot are more Ted Heath

Not since the 1970s has Britain had such a mediocre government.

Cast your mind back to that sun-lit May morning four years ago. What was it that the Coalition promised us, and what has actually happened?

"We'll come together in the national interest to sort out the public finances", Clegg and Cameron told us. Since that press conference in the Downing Street garden, our nation's public debt has almost doubled. If getting government borrowing under control was really what brought them together, they have taken their eye off it. Government borrowing last month was ten percent up on the year before.

Ministers pushed through costly NHS reforms. None of it has actually improved health care. Many folk cannot get to see a GP, and no one seems to be in charge.

Energy policy continues to be built on expensively subsidised renewable targets. To meet our renewable obligations, poorer people have been priced out of heating their homes. Businesses have been made less competitive and there are fears a winter blackout.

Instead of cutting immigration, it's back up to where it was under Gordon Brown. Our armed forces remain over stretched and under resources. Localism, which was supposed to give local people decide on planning, turns out to be a sham. Using the language of the free market, ministers intervene in the economy in the interests of crony corporatism.

"But what about the government's welfare reforms?" you ask. "And what about Michael Gove at education? Surely ministers have got some things right?"

To be fair, not even Ted Heath's government got everything wrong. Yet a lot of this administration's welfare reforms were in fact pioneered by that uber Blairite minister, James Purnell. Much of the rest, such as universal credit, has yet to actually happen.

As for Gove at education, he is no longer at education. Rather like Ted Heath and the unions, this government runs shy of vested interests.

Just as Ted Heath promised a radically new approach to the economy, Clegg and Cameron promised a different kind of politics. Last week we saw government whips use the same old Westminster tricks to sabotage the Recall Bill. A measure designed to allow voters to hold MPs to account will do nothing of the sort.

On Europe, at least Ted Heath had the virtue of consistency, even if he was consistently wrong. Mr Cameron has flipped from Heathite acquiescence to mere flops.

First ordered his own MPs, on a three line whip, not to vote for an In Out EU referendum. Now he puts the prospect of an In Out vote, and the faux offer of real change, at the heart of his re-election bid.

A few months ago, Number 10 told us they were opposed Jean Claude Junker as European Commission President. A couple of weeks ago, he ordered his MEPs to vote for the Junker Commission. How long before he tells us he was against Euro Arrest Warrants all along?

Of course, there is one big difference between this administration and that of Ted Heath, and that is the economy. Output is up and unemployment is down. But so it seemed under Ted Heath during the Barber boom, too.

They might not call it that, but with the government spending £100 billion a year more than they take in tax, we are living through the largest Keynesian spending stimulus in our history. Record low interest rates mean a massive monetary – as well as fiscal – stimulus. Like the Barber boom, will it last?

Osbrown economics may yet turn out to be little more than reheated Heathism.


26 OCT 2014

European Arrest Warrant - justice and credibility on the line

MPs will soon be asked to vote on whether to opt back into the European Arrest Warrant.

Although European Arrest Warrants have been use since 2004, due to the way that various EU treaties have been revised since, it is necessary for the House of Commons to vote to keep us in. Failure to do so will mean an end to Euro Arrest Warrants in Britain.

It is vital that MPs vote against opting back into the Euro Arrest Warrant.

Why? First and foremost, it's about justice.

Extradition between countries is a good thing. It is in the interests of justice that someone suspected of committing a crime in another country can be sent to that country to face trial.

But before they are extradited, surely it is right that a court considers that there is a case to answer?

We would be appalled if someone could be held on remand in Britain without evidence of wrong-doing. So why are we prepared to have someone carted off to another country without giving a UK court the chance to take a look at the basic evidence?

As one of my constituents has discovered, the Euro Arrest Warrant means that once an application to extradite is received, the process rolls along more or less automatically. You can, for example, be hauled off to France to face trial for crimes you were supposed to have committed there without having actually been to France.

"But" insist Home Office apologists "we need these extradition arrangements to fight terror".

Really? It was perfectly possible to extradite terror suspects before we had Euro Arrest Warrants.

While the use of Euro Arrest Warrants has sky rocketed over the past ten years, only a tiny, tiny fraction of those arrested under the EAW have been accused of anything to do with terror. My local constituent, for example, was carted off because he was believed to have been involved in tax fraud.

Far from being the end of everything we hold dear, opting out of the Euro Arrest Warrant simply means that we would have to revert to the kind of extradition arrangements that existed before, and which we have with all sorts of non-EU states.

Of course the Commons vote won't simply be about justice. It will also be the credibility of those voting that will be on the line.

When the idea of Euro Arrest Warrants was first mooted a decade ago, the Conservative party in opposition opposed the idea. Now in government, many Conservative ministers have, of course, been captured by the mandarinate.

Any Conservative MP who fails to vote against Euro Arrest Warrants cannot make an credible claims to be Eurosceptic.


01 OCT 2014

I don't miss the party whips

I gave up going to Conservative party conferences several years ago. Why? There never seemed to be many Conservatives. The lobbyists outnumber the activists. The fringe debates seemed so sterile.

Compare that to what I found at UKIP's gathering in Doncaster. There was a real buzz. Supporters from all over the country, and all kinds of backgrounds, were genuinely enjoying each other's company. New friendships were being formed all around me. Not a lobbyist in sight.

--

"What do you think of Grant Shapps?" asked a journalist, hoping I might say something rude. I like him, and I've made no secret of my admiration of him in the past. If he has had to say some fairly strong things as Conservative party chairman over the past few days, he is doing it because he is Conservative party chairman.

I know Grant is a thoroughly decent person and have always enjoyed his company. I might have changed parties, but I'm not going start pretending that everyone that wears a blue rosette is bad. Grant is one of the good guys.

--

Government used to be accountable to Parliament, and Parliament once answered to the people. Slowly but surely this has changed.

MPs have lost the power to amend budgets or meaningfully control what ministers do with our money. The executive controls the legislature, rather than the other way round. Political parties have "safe seats", which they treat as fiefdoms to reward A listers and insiders.

The result is that we are governed by tiny cliques, each competing to sit on the sofa in Downing Street – and none of them much in tune with the country over which they preside.

Not so very long ago, to make such observations might have seemed a little wonky or obtuse. Dissatisfaction with the way Westminster works – or fails to work – is now so widespread, even Westminster is waking up to it.

--

Each week, as a constituency MP, I would pick a couple of streets at random – and go and knock on the doors.

"Hello. I'm Douglas, your MP" I'd say. "I'm in the neighbourhood and wanted to introduce myself". I got to make a lot of new friends and drink an awful lot of tea.

During this by-election I've been knocking on many of the same doors again. I've had to say many a polite "no" to tea this time, but the friends are still there.

The internet and iDemocracy will overturn many of our assumptions about politics. But not perhaps the way some pundits imagine.

--

A big part of the problem with Westminster is the whipping system. Party whips hold far too much power. Instead of answering to the electorate, too many MPs end up answering to whips.

Whips are able to influence MPs in all sorts of ways. But their power stems from their one ultimate sanction; they can withdraw the whip.

Withdrawing the whip from an MP means, in effect, that the MP has been sacked. Unless they grovel, they are out and cannot run as a party candidate again.

What if instead of whips being able to sack MPs, MPs were able to sack their whips?


23 SEP 2014

Political apathy? Not in Essex

Big political meetings are a thing of the past, we are told. They might have done politics like that yonks ago, but not any more, they say.

Really? Tomorrow in Clacton there will be a full house at the biggest venue we could find. Over 700 people are coming – and they are all local residents.

It won't be some sort of choreographed rally of the party faithful. These are ordinary people, coming to take part in a grass roots meeting.

All 700 places went within the first day – and we could have filled the venue twice over.

Political apathy? Not in my part of Essex.

--

For decades, fashionable opinion formers liked to imply that society was going to the dogs. Modern life is more atomised, they would say. Folk are more lonely and isolated than ever before.

Not in my experience. Over the past few years as a local MP, I've noticed how many community groups have been reenergised.

Why? I suspect it has a lot to do with the internet. Things started to change around about the time we got broadband. Email and social media make it easier to do things together. Administration gets simpler. It's much more straightforward to find out about what's happening in your neighbourhood too. Connections can be made via google, not just serendipity.

Far from bowling alone, Holland on Sea bowls club, as I discovered when I dropped in for tea on Saturday, has lots of new members and is thriving.

--

For years, politics has been dominated by big corporate parties. Why? Only they could generate the brand recognition. They alone could aggregate votes and opinion.

The internet, as I suggested in my book on iDemocracy, is going to change this. The digital revolution creates the space for nimbler start ups. Not only does campaigning change. Many assumptions about messaging are turned on their head.

I am, you might say, trying to put that theory into practice in my corner of Essex. There is still an awfully long way to go until polling day, but thus far I have been struck by how mid90s the Westminster party machines have been on the ground.

----

Our campaign office in Clacton is bang opposite the train station. This means we have a constant flow of MPs and ministers wandering past. My team was rather amused to see one minister arrive in Clacton on the quarter to train – before racing to get back on to the five past back to London.


18 SEP 2014

Essex V the Westminster machine

Whichever way the Scots vote today, things will never be quite the same again.

Either Scotland votes to become an independent country, or – in order to save the Union – Scotland will have been promised what amounts to internal self government, or devo max.

Back in 2009, Daniel Hannan and I co-authored a book called The Plan, which suggested giving each of the different parts of the United Kingdom a form of devo max. What a pity that the option was never even included on the ballot paper.

My old party, the Conservatives, paid lip service to localism, but did little beyond toying with these ideas. By not making the changes, they have rather lost the ability to shape the change when it happens. How very sad.
--

Herds of MPs and ministers are now wandering around Clacton. Balloons are being handed out. Local residents are being told, in friendly yet firm tones, that their views matter.

My own campaign team is made up of the "little platoons". Older folk from Holland-on-Sea take the bus to pick up leaflets. Sixth formers from Frinton put up window posters.

We seem to be holding our own against the big, corporate parties who have descended on us from Westminster. But we need more help. If you are reading this, and are a supporter, please come to Clacton this Saturday.
--

MPs in Westminster, as we all know, are beholden to their party whips. Whips decide who gets made a minister. They select who sits on various committees.

Yet the whip's power ultimately comes from their ability to remove the whip from an MP. Lose the whip, and unless you grovel and get it back, you forfeit the right to stand for your party.

But what if MPs could sack the whips, rather than whips sack MPs? Suddenly the whips might lose their ultimate sanction. Shock, horror – MPs might then begin to represent those that elected them, rather than do the whips bidding.

Come to Clacton – help take on the whips!
----

The jam making season in Essex is here again. I've not, alas, had much time to think about blackberries and pectin.

I have given a pot of last year's quince jelly to help raise funds for my new party at their conference in Doncaster. The label proudly says "Made in Essex".
--

The Scottish referendum campaign also seems to mark the moment when the whole of the United Kingdom at last woke up to a stark, uncomfortable possibility; perhaps that cozy, complacent clique in Westminster, whose business is to govern us, aren't that good at it?

Those in SW1 ignore big public policy questions for as long as possible. Then, when forced to, they make key decisions on the hoof. They fail to think things through. Tactics are mistaken for strategy.

Surely we can do better than this?


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After Osbrown: mending monetary policy

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The End of Politics and the Birth of iDemocracy

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