Tag: david cameron

British Military Cuts, Conservatives, and Neocons

Yesterday, Prime Minister David Cameron announced Britain’s biggest defense cuts since World War II. The cuts affect the British military across the board.

The Army will shed 7,000 troops; the Royal Navy and Royal Air Force will each lose 5,000 personnel; the total workforce in the Ministry of Defence, including civilians, will contract by 42,000. The Navy’s destroyer fleet will shrink from 23 to 19. Two aircraft carriers – already under construction – will be completed, but one of the two will be either mothballed or sold within a few years. Whether the one remaining flattop in the British fleet will actually deploy with an operational fixed-wing aircraft is an open question. They’ve decided to jettison their Harriers; a technological marvel when it was first introduced, it has a limited range and a poor safety record. In its place, the Brits still intend to purchase Joint Strike Fighters, but not the short take-off and vertical landing (STOVL) version.

And right on cue, Max Boot argues in today’s Wall Street Journal, following the Heritage Foundation’s James Carafano’s example, that fiscal conservatives should not use these cuts as an example of how to reign in deficits. According to Boot and Carafano, military spending is off-limits. Period.

But as I note at The Skeptics, most Americans do not buy into this argument:

In Boot’s telling, Cameron’s decision inevitably places a heavier burden on the shoulders of American taxpayers and American troops.

But why should Americans perform a function for other governments that they are obligated by tradition, law and reason to perform for themselves? Defense is, as Boot notes, “one of the core responsibilities of government.” I would go one better: defense is one of the only legitimate responsibilities for government. So why does Max Boot think that Americans should simply resign themselves to take on this burden, doing for others what they should do for themselves?

I suspect that he fears that most Americans are not comfortable with the role that he and his neoconservative allies have preached for nearly two decades, hence his preemptive shot across the bow of the incoming congressional class that will have been elected on a platform of reducing the burden of government. True, the public is easily swayed, and not inclined to vote on foreign policy matters, in general, but as I noted here on Monday, it seems unlikely that the same Tea Partiers who want the U.S. government to do less in the United States are anxious to do more everywhere else. And, indeed, such sentiments are not confined to conservatives and constitutionalists who are keenly aware of government’s inherent limitations. Recent surveys by the Chicago Council of on Global Affairs (.pdf) and the Pew Research Center (here) definitively demonstrate that the public writ large is anxious to shed the role of global policeman.

Click here to read the entire post.

A Clever British Campaign against Higher Capital Gains Tax Rates

Here are a handful of the posters being used in the United Kingdom to fight the perversely-destructive proposal to increase tax rates on capital gains. (for an explanation of why the tax should be abolished, see here)

Which one is your favorite? I’m partial to the last one because of my interest in tax competition.

But this isn’t just a popularity contest. With Obama pushing for higher capital gains rate in America, it’s important to find the most persuasive ways of educating people about the damage of class-warfare tax policy.

By the way, “CGT” is capital gains tax, and “Vince” and “Cable” refers to Vince Cable, one of the politicians pushing this punitive class-warfare scheme.

Dishonest British Budgeting…Just Like We Do It in America

According to news coverage, United Kingdom Prime Minister Cameron is imposing deep and savage budget cuts. I was interviewed by the BBC recently, for instance, and asked whether 25 percent spending reductions were too harsh. And here’s an excerpt from a New York Times story that is very representative of the news coverage.

Like a shipwrecked sailor on a starvation diet, the new British coalition government is preparing to shrink down to its bare bones as it cuts expenditures by $130 billion over the next five years and drastically scales back its responsibilities. The result, said the Institute for Fiscal Studies, a research group, will be “the longest, deepest sustained period of cuts to public services spending” since World War II. …Public-sector unions are planning a series of strikes. Charities — which Mr. Cameron has said should take over some of the responsibilities now held by the state — say that they are at risk of collapse because they are so dependent on government money. And the chief executive of the Supreme Court, the country’s highest, said she did not know whether the court would be able to function at all if its budget were cut by 40 percent.

To be blunt, this type of analysis is completely false. There are no budget cuts in the United Kingdom, at least in terms of total government spending. Instead, the politicians are measuring cuts against some imaginary baseline, which is the same scam that happens in Washington. So if spending increases by 4 percent instead of 7 percent, that is characterized as a 3 percent budget reduction. The chart shows what is happening with overall government spending in the United Kingdom. Notwithstanding phony stories about budget cuts, spending in Prime Minister Cameron’s first year is climbing by more than 4 percent – twice as fast as needed to keep pace with inflation.

This doesn’t mean that Cameron isn’t doing anything right. There is a two-year pay freeze for bureaucrats, for instance, which is at least a small step in the right direction. But the Tory-Liberal Democrat coalition is not a good role model for those who want limited government and fiscal responsibility. There are promises of spending restraint in future years, but those belong in the I’ll-believe-it-when-I-see-it category. Spending is supposed to increase by less than 1 percent in next year’s budget, for instance, but politicians are very good with tough talk of fiscal discipline in future years. But if we judge them by what they’re doing today rather than what they’re claiming will happen in the future, Cameron’s policies leave much to be desired.

The tax side of the fiscal equation is even more depressing. There is small reduction in the corporate tax rate, but otherwise there is considerable bad news. The new government is leaving in place the new 50 percent top tax rate imposed by Gordon Brown as an election-year class-warfare gimmick. It is boosting the capital gains tax rate from 18 percent to 28 percent. And it increased the VAT rate from 17.5 percent to 20 percent.

Hey, UK: Meet the New Boss, Same as the Old Boss

As the chart below indicates, the United Kingdom has a large budget deficit solely because government spending has increased to record levels (OECD data). Unfortunately, the new Tory-Liberal coalition government has decided that taxpayers should be punished for all the over-spending that occurred when the Labor government was in charge.

The Telegraph reports that the top capital gains rate will jump to 28 percent, up from 18 percent (the new government foolishly thinks this will result in more revenue). But the biggest change is that the value-added tax will increase to 20 percent. According to Business Week, the Chancellor of the Exchequer (the British equivalent of Treasury Secretary) actually bragged that the VAT increase was good since it would generate “13 billion pounds we don’t have to find from extra spending cuts.” Here are some further details from Business Week about the disappointing fiscal news from London.

British Chancellor of the Exchequer George Osborne increased the value-added tax rate to 20 percent from 17.5 percent in the first permanent change to the levy on sales of goods and services in almost two decades. “The years of debt and spending make this unavoidable,” Osborne told Parliament in London in his emergency budget today as he announced a package of spending cuts and tax increases to cut the U.K.’s record deficit. …“We understand that the budget deficit needs to be tackled but we think the focus needs to be cutting public spending over tax rises,” Krishan Rama, a spokesman for the industry lobby group, the British Retail Consortium, said in a telephone interview yesterday. …VAT has remained at 17.5 percent in every year except one since 1991, when John Major’s Conservative administration raised the rate from 15 percent to help plug a deficit.

The one tiny glimmer of good news from the budget is that the corporate tax rate is being reduced from 28 percent to 24 percent, which is probably a reflection of the strong and virtuous tax competition that is forcing greedy governments to lower tax rates in order to attract and/or retain business activity. There also is a two-year pay freeze for government bureaucrats, but this is hardly good news since a 30-percent pay cut is needed to bring compensation down to private sector levels.

England Is the New France

The chart below shows everything you need to know about why the United Kingdom is a fiscal disaster. Over the past 10 years, the burden of government spending has skyrocketed from 36.6 percent of GDP to more than 53 percent of GDP. Taxes, meanwhile, have remained largely unchanged, averaging about 40 percent of GDP.

Since the OECD numbers show that the fiscal crisis in the U.K. is solely the result of a bloated public sector, the obvious solution is … you guessed it, higher taxes.

David Cameron’s new coalition government has announced support for a higher capital gains tax and is signalling that this will be followed by an increase in the value-added tax.

There are some proposals to curtail the growth of spending, including some pay cuts for Prime Minster Cameron and other political figures, but I will be very surprised if those amount to more than window dressing. The United Kingdom, I fear, has gone past the point of no return in the journey toward becoming indistinguishable from the decrepit welfare states so common in the rest of Europe.

Forget Freedom. The UK Poll Is All About ‘Fairness’

Britain may have given the world freedom as we understand it (see The Liberty of Ancients Compared with that of Moderns by Benjamin Constant), but you would not know it from the last prime ministerial debate that took place last Thursday. The candidates (Conservative David Cameron, Labour’s Gordon Brown and Liberal Democrat Nick Clegg) used the word “freedom” only 2 times. They said the word “free” 5 times, but all in the context of the supposedly “free” goodies, which they promised to lavish on the electorate. Words “responsible” and “responsibility” fared somewhat better (4 times). But the winning words were “fair” and “fairness” that were mentioned 22 times – almost always in connection with taxing the rich. Here is a typical example:

Brown: “But I come back to the central question about fairness that has been raised by our questioner. How can David [Cameron] possibly justify an inheritance tax cut for millionaires at a time when he wants to cut Child Tax Credits? Let’s be honest. The inheritance tax threshold for couples is £650,000, if your house is worth less than that you pay no inheritance tax. What David [Cameron] is doing is giving 3,000 people, the richest people in the country, he’s going to give them £200,000 each a year. That is simply unfair.”

It was Gordon Brown, the current Prime Minister, who increased the top rate of income tax to 50%. Neither Clegg nor the supposedly business-friendly Cameron have proposed to cut that rate. Indeed, “fairness” in British politics seems to amount to little more than taxing the most productive members of society “until the pipes squeak.” Those words were uttered by Denis Healy who was the Chancellor of the Exchequer in the 1970s. It was under his leadership that the UK ran out of money and had to borrow billions from the IMF. It turns out that when you tax the rich too much, they will work less or leave for a more hospitable jurisdiction. Margaret Thatcher and Ronald Reagan understood it. Messrs Cameron, Clegg and Brown do not.



“I would like to see a higher percentage of children educated in the state sector” —?

The mystery man quoted in the title is none other than David Cameron, head of the British Conservative party.

It isn’t that Cameron likes the ineffeciency, social conflict, and unresponsiveness to parents that often characterize state schooling. It’s that he ”would like to see… choice and autonomy and diversity in the state sector.”

I would like to see winged-gazelles, sunny winters in Seattle, and a brilliant remake of The Thin Man series.

We’ll both be waiting a good long time.

Surely the Conservative party has a competent economist who could explain to Mr. Cameron why state schools tend to lack the features we take for granted in the free enterprise sector, and that by nationalizing more of Britain’s independent schools he would simply shrink the number that enjoy the freedoms and incentives responsible for efficiency, diversity, and responsiveness to families.