An honest money maiden speech

Oh happy day: an MP who gets it

In the coalition, we have a Government ideally suited to be conservative to preserve what is good, but radical to change all that is bad. If we are to have a once-in-a-generation, fundamental review of the role of government, let us also examine government's role in the system of money and bank credit.

Telegraph: EU 'to vet British Budget before Parliament'

From The Telegraph:

David Cameron faces a major row over the “budgetary surveillance” demand when the Prime Minister attends his first EU summit next Thursday.

Britain was isolated during a meeting of an “economic government taskforce”, chaired by Herman Van Rompuy, the EU President, last night.

Mr Van Rompuy and the European Commission have tabled plans that will require all of Europe’s governments to discuss their budget plans with other EU finance ministers and officials before they [are] presented to national parliaments.

“A government presenting a budget plan with a high deficit would have to justify itself in front of its peers, among finance ministers,” said Mr Van Rompuy.

“There would still be time to adjust plans before the final budget plans are presented.”

I am of course opposed to budget plans with high deficits, but Britain's plans aren't any of Mr Van Rompuy's business.

The proposal is especially offensive since the UK is outside the eurozone. Indeed, Britain is in competition with the eurozone. How can it possibly be in our national interest to show our hand to our competitors?

Miron: The Decline of Newspapers Shows Capitalism is Working

Yesterday I blogged about the slow death of traditional newspapers.

Today I discovered a piece by Jeffrey Miron for Forbes - The Decline of Newspapers Shows Capitalism is Working:

The staff of the Federal Trade Commission has released a draft discussion paper titled "Potential Policy Recommendations to Support the Reinvention of Journalism." The draft suggests that government should "support" journalism because:

existing newspapers are struggling to find a sustainable business model for the future.

This call for government funding will horrify defenders of the First Amendment, since such funding would inevitably pressure newspapers and other media to soften their critiques of government.

And the entire document is bizarre because it seems to regard the decline of traditional newspapers as something that policy should prevent. This view exhibits a fundamental misunderstanding of capitalism, which works because failure of outdated industries allows resources to flow to more productive uses.

One would think that a government agency devoted to promoting competition would understand that point.

Quite.

The authors of the document acknowledge that "care must be taken to ensure that government support does not result in biased and politicized news coverage", but they are either naïve or disingenuous to suggest that such politicisation can be avoided.

The report outlines "a variety of proposals ... to allow further government support for journalism through either indirect or direct means":

• Establish a “journalism” division of AmeriCorps. AmeriCorps is the federal program that places young people with nonprofits to get training and do public service work....
• Provide a tax credit to news organizations for every journalist they employ. This could help pay the salary of every journalist....
• Establish Citizenship News Vouchers. Citizenship news vouchers would allow every American tax payer to allocate some amount of government funds to the non- profit media organization of their choice....
• Provide grants to universities to conduct investigative journalism

They've also thought of innovative ways to fund this increased expenditure:

• Tax on broadcast spectrum...which should result in a fund of between $3 and $6 billion.
• Tax on consumer electronics. A 5 percent tax on consumer electronics would generate approximately $4 billion annually.
• Spectrum auction tax.
• Advertising taxes...a 2 percent sales tax on advertising would generate approximately $5 to $6 billion annually.
• ISP-cell phone tax...consumers could pay a small tax on their monthly ISP-cell phone bills to fund content they access on their digital services. A tax of 3 percent on the monthly fees would generate $6 billion annually.

The mind boggles. Even without the risks of politicised news coverage, any sane person would be shocked by the arbitrary nature of these taxes, the support for vested interests, and the inevitable bureaucracy that would be involved. It is astounding that these ideas are being considered.

It is equally astounding that people believe the current economic system in the US and Europe is 'free market capitalism'.

The truth about David Kelly before 2073?

Melanie Phillips reports that there may be a fresh inquiry into the mysterious death of UN weapons inspector Dr David Kelly:

the new Attorney-General Dominic Grieve has let it be known that he may order an inquiry to look again at the assumption that Dr Kelly died by his own hand. At the same time, the Justice Secretary Ken Clarke is said to be considering a request to release the medical files relating to the scientist’s death.

This is all very much to be welcomed as potentially shedding light on an intensely controversial event that has grown ever more murky as the years have rolled on.

It was especially puzzling, for example, that, as was revealed earlier this year, Lord Hutton quietly ensured the evidence relating to Dr Kelly’s death was to remain a classified state secret until 2073.

I've written previously about the extraordinary decision seal the records for 70 years. As Phillips explains, a certain amount of secrecy is to be expected, but the closure of post mortem reports is deeply suspicious:

Given that Dr Kelly had been closely involved in the most sensitive of intelligence work, it would not be surprising if certain evidence given to the inquiry in closed session was to be kept secret in order not to compromise security sources.

But Lord Hutton went much further than this and classified all the medical and scientific records connected with Dr Kelly’s death, the post mortem report and photographs of his body.

This inexplicable secrecy can excite only suspicion that the authorities have something very bad indeed to hide.

Phillips concludes,

Maybe, in the end, the truth will turn out to be more prosaic. But let us hope that Messrs Grieve and Clarke are not deflected from their intention to lay this disturbing episode finally to rest.

Telegraph: Britain to emulate Canada

I was delighted by an article in yesterday's Telegraph:

George Osborne is planning to eradicate Britain's budget deficit by emulating Canada, where borrowing was brought under control within just three years by spending cuts of 20 per cent.

The Chancellor will announce a "once-in-a-generation" revolution in public spending inspired by Canada in the mid-1990s, when the government turned a budget deficit of nine per cent of GDP into a surplus.

Canada brought public spending under control guided by the principle that people should ask "what needs to be done by government and what we can afford to do".

The story also featured on BBC Breakfast this morning.

I have previously related David Starkey's account of the Canadian experience, and the debate that followed it.

There have been all sorts of ridiculous protests from vested interests here in the UK, who are either ignorant of the unsustainability of the status quo, or determined that someone else will bear the burden. They will say it cannot be done. It is important for the Conservatives to be able to point to a place where drastic cuts were made, which did not cause the sky to fall, but on the contrary revitalised the economy.

That Canada's cuts were made by a Liberal government, combined with the fact that our cuts will be made by a coalition, raises the hope that political consensus in this country will shift, and deficit spending will be relegated to the dustbin of history.

The slow death of the traditional newspaper

Graham Stewart, writing for Critical Reaction, explains the dire financial situation of the major newspapers, and considers Rupert Murdoch's paywall plan:

In 2007-08, pre-tax losses at The Times and Sunday Times reached £50 million. In 2008-09 they worsened considerably, to £87.7 million. Nobody - not even Rupert Murdoch - can continue to sustain this level of loss indefinitely.
...
The Guardian Media Group’s 2008 accounts show a pre-tax loss of almost £90 million. Its national newspaper division, Guardian News & Media – which includes the Guardian, The Observer and the immensely popular (and free) Guardian Unlimited website – made an operating loss of almost £37 million.
...
By contrast, the Telegraph Media Group’s £15.7 million pre-tax loss in 2008 may seem more encouraging. But really, if the country’s bestselling quality newspaper has been running at a significant loss, what hope is there for anyone else?

It would be interesting to see the results for the online segments alone. It won't be long before all but the most technophobic appreciate the benefits of softcopy, and the switch to electronic-only should provide huge benefits for the newspapers in massively reduced production and distribution costs.

At the same time, new devices like the iPad should make it easier for newspapers to make the switch from free online service to electronic subscriptions.

Stewart highlights the market-distorting role of BBC News, which is uniquely able to "levy a nationwide poll tax to fund its operations". He concludes (emphasis mine),

Instead of castigating Rupert Murdoch for charging Times readers a fraction of the price to read online what more than half a million of them are already happy to pay £1 a day to read on paper, we should accept that quality journalism has yet to find a viable alternative way of recouping its losses. It is ironic that many of those who criticise Murdoch for ‘dumbing down’ journalism now accuse him of creating a service which will be more exclusive, catering not for the idle gawper but for those who actually place a financial value on the news they read. In reality, his actions may prove to be what saves quality journalism. Otherwise the future will consist of the BBC and the blogosphere and nothing in between. And that cannot be sufficient for a pluralistic society.

Despite the inconvenience of paywalls, and the obstacles they present to casual linking, I'm inclined to agree with Graham Stewart. The blogosphere is still heavily reliant on the mainstream media for source material. We would certainly be in a worse position if the only British perspective on major events were provided by the BBC.

Conway: The gamblers betting on Britain going bust

More words of caution from Edmund Conway in today's Telegraph:

By many yardsticks – size of annual government borrowing, severity of the credit crunch, depth of recession – Britain is in as deep, if not deeper, trouble than most of those euro members. However, financial markets, like the rest of us, find it hard to focus on more than one thing at any time. Since Greece's near-collapse, they have been fixated on a very specific problem, namely that over-indebted euro members cannot easily buy time for their economies by devaluing their currencies, because they are stuck in the straitjacket of euro membership.

As a result, countries with an independent currency have become refuges of sorts. There is a decent rationale behind this: for a start, the likelihood of our being unable or unwilling to pay back our debts is extremely slim. Britain has not defaulted on its domestic debt since Charles II refused to pay interest on some bank loans in 1672 – the "Stop of the Exchequer".

We have been able to do this because countries with their own currency and monetary policy can usually erode their debts away by generating inflation. Britain has done so on countless occasions throughout history. Markets seem to prefer this "soft" option, perhaps because it leaves a country's destiny in its hands. Moreover, the maturity of British government debt is by far the longest in the world, so we do not have to reissue it year after year. That is why Britain is due this year to issue less debt than Germany, despite the far larger size of the UK deficit.

These, for Mr Osborne, are happy accidents. But they cannot disguise other, more ugly features of the economy. While most investors have happily fixated on Britain's advantages, they have conveniently forgotten the fact that around four fifths of the Government's liabilities are linked to inflation (including both our index-linked bonds and off-balance-sheet nasties such as public sector pensions and the costs of the Private Finance Initiative). Eroding our national debt significantly without cutting back (in particular, state and public-sector pensions) would take a bout of hyperinflation, which would have all sorts of consequences.

A small band of hedge funds is now building up a series of sizeable bets on Britain defaulting. In the past few weeks, they have placed more than $3 billion worth of bets on that precise outcome in the credit default swap market. History – three centuries without default – suggests that they will be proved wrong. But these are unprecedented times. Had Britain joined the euro, it would certainly have shared Greece's fate, and would have been too big to be bailed out.

Avoiding euro membership, however, will not guarantee that Britain avoids default. We cannot afford to be smug for ever.

I recommend the whole article.