The Liberal Leaver

Apologia pro suffragium meum, or, How to Make the Best of Brexit

Ok, I voted Leave. I voted Leave and I rather like Boris Johnson. Friends and colleagues have expressed bafflement and anger. After all, I am not exactly in the leave demographic. I live in North London, have a couple of university degrees, fall into the marketers' AB category and am still under fifty. I am not against travel, trade and globalization. There were many decent and reasonable people on both sides of the referendum, but many remainers are cross and confused about why people voted to leave.

Am I a hate-filled xenophobe? I hope not - I think I am quite a nice person. I married an immigrant. And I believe in the liberal international order, globalization, foreign travel and so on. But I still voted against the EU, because the EU is not really that liberal. The EU is not really the evil bogeyman that some imagine, bent on the destruction of nation states and their way of life. But it's not perfect. It tends to promote producers' interests over consumers, it can be over heavy with regulation, and its trade policies are less than ideal. Its three main economic activities are wholly or partially illiberal (the Common Agricultural Policy, inter-governmental structural funds, and the external tariffs of the single market). I voted to leave the EU because it is not liberal enough.

But we shouldn't let Britain turn in on itself and become isolated and disconnected from the world. Here are some positive suggestions for how we can make the best of Brexit and keep Britain open and successful.



Top Ten Consumer Rip-offs which Government can Fix


Posted 9 October 2016

Now is the season for identifying areas where consumers are paying too much for goods and services. Some of this is driven by corporate greed but also by European and national legislation. In a post-Brexit Britain, the Government (of any political composition) has the power to make things better for consumers and cut back on economic rents. Policymakers and the competition authorities will have their own ideas, but here is the Electoral Calculus Top Ten List of consumer rip-offs which can be fixed.

1. House Prices

As everyone knows, but not everyone admits, UK house prices are too high. This is caused by a lack of supply. There are too few new houses being built. The main culprit is the planning system and planning legislation, particularly the Green Belt rules. An increasing number of people, both young and not-so-young, are having their lives blighted by an unholy combination of town hall planners and environmental activists. Families are living in small and expensive accommodation when they deserve, and should have, spacious and affordable housing.

Government should relax planning rules for new housing and look seriously at weakening the Green Belt rules.

Read the full story: House Prices are Too High.

2. Food Prices

Food prices have been kept artificially high ever since we joined the (then) European Economic Community. This is achieved both by direct agricultural subsidies of £5 billion each year and, more importantly, by tariffs imposed by the EU Customs Union. Economists estimate that UK supermarket prices are 17pc higher because of the CAP [1], costing households about £900 each year.

These high food prices hit the less well-off more than most, and are unfair and unjust. In a case of history repeating, they are a replay of the Corn Laws of the mid 1800s which kept food prices high and hurt ordinary folk.

Now is the time to leave the EU Customs Union and abolish tariffs on food imports, and abolish agricultural subsidies for British farmers. That would make food for everyone cheaper, and reduce some government spending which does more harm than good.

Read the full story: Millions suffer from food insecurity because EU rules keep food prices high – we can now change that.

3. Energy Prices

Gas and electricity prices in Britain are too high, but for two different reasons. One reason is the slippery behaviour of the established energy companies who treat loyal customers badly by putting them on their most expensive tariff. Often called the "standard variable tariff", this penalises customer loyalty, and takes advantage of consumers who don't keep up and scan around for new offers every year.

Windturbines and pylons near Dungeness Nuclear Power plant
Danger – High Prices! Nuclear and wind power are not the cheapest power sourcesPhoto: DAVID ILIFF. License: CC-BY-SA 3.0

The other culprit is the government itself, which interferes in the energy market to increase prices. This is often done in the name of environmental measures to reduce CO2 emissions, but the overall effect is to bump up energy prices substantially today in order to make a small reduction in long-term environmental harm. An egregious example is the planned Hinkley Point nuclear reactor whose high-priced electricity (according to the National Audit Office) will cost consumers £29.7 billion [2].

Government should think hard about its own actions in increasing the price of energy, using a cost-benefit framework. And Competition Authorities should take a closer interest in the energy companies' price structures.

4. Copyright

As we move more towards a knowledge economy, it is increasingly costly that national and international copyright laws have been captured by large media companies. Following intensive corporate lobbying, the length of copyright protection has increased out of all proportion. Although there is a public benefit to fostering creativity, the current law now serves corporate interests more than creators'. The law now gives copyright protection (a licensed monopoly) which extends to the death of the author plus seventy years. It's not clear how that motivates the long-dead author any more, but it certainly helps the big media firms to pick the pocket of people who enjoy films, books and music.

Government should reduce UK copyright protection back to the death of the author plus fifty years, and lobby at an international level to reduce it back to the patent-type duration of twenty years from the creation of the work.

See the full story: Copyright reform from two perspectives.

5. Professions

"People of of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices." Adam Smith's timeless warning [3] is as true for professionals such as lawyers, doctors and architects as it is for bakers and widget-makers. One the main ways that professionals achieve this is by capturing government regulation and erecting barriers to entry into their profession.

These moves are often dressed up in public-interest clothes, such as protecting the public from rogue practitioners, but the real intention and effect is to raise prices and hurt the consumer of professional services.

There is a wonderful speech by the Liberal MP William Cowper-Temple in 1874 attacking the medical profession, which at the time was strenuously objecting to the introduction of women doctors:

"The members of a profession were often unable to consider without bias innovations relating to themselves; and much as he respected the medical profession, he would still say that Parliament ought not to give undue attention to objections which they might raise in matters relating particularly to their own profession." [4]

The Competitions and Markets Authority should be asked to examine the legal, medical and architectural professions from a competition standpoint and make recommendations for legislative change to reduce barriers to entry.

Additionally the Government should be careful of medical lobbying to raise additional hurdles to foreign doctors practising in the UK following Brexit.

6. Electronic Books

The publishing industry was very keen to avoid the damage that electronic formats caused to the record business. Music, both in physical CD form and as electronic MP3 downloads, is cheaper than ever in real terms. And MP3 is generally a bit cheaper than physical CDs for new releases. The same cannot be said for books and e-books.

Several new books are more expensive as e-books than as hardbacks. Current examples available on a well-known on-line marketplace include best-sellers such as the Harry Potter stage scripts, Robert Harris' Conclave, and Ben MacIntyre's SAS: Rogue Heroes. Why should this be? The creative and editorial processes are the same for both physical and electronic formats. But the e-books do not have to be printed, bound, warehoused, transported and stored.

Somethings looks strange here. How can the electronic version cost more than the hardback?

7. Diesel Engine Pollution

Sometimes consumers pay too much money for something, and sometimes they pay with their health. One bad example is that of diesel engines in cars and vans. After lobbying from the big car manufacturers, particularly from Germany, the EU and British governments jointly pushed to increase the number of diesel engines on the road, giving tax breaks for diesel cars.

Although diesel engines reduce CO2 emissions slightly, they cause a ten-fold increase in the dangerous nitrogen dioxide gas (NO2) which causes thousands of early deaths due to respiratory illness. The UK now has places where nitrogen dioxide levels are twice the recommended EU maximum. A recent study by King's College London on behalf of Transport for London calculated that nitrogen dioxide was the most dangerous pollutant and is responsible for around 5,900 deaths annually in London alone [5].

The car manufacturers tried to cover this up by gaming the emissions tests, which was exposed in the Volkswagen scandal.

The Chancellor of the Exchequer should abolish vehicle excise duty reduction for diesel engines, and think about increasing it to a level above petrol engines until diesel engine air is fit to breathe.

Read the full story: The Diesel Engine Pollution Scandal.

8. Mobile Phones

Although mobile phone rates have come down in recent years, the rates for some services are still extortionate. Data roaming charges can be one hundred times larger than domestic data charges, especially outside Europe.

Shocked people looking at a mobile phone
How much did that call cost?Antonio Guillem ©123RF.com

Even within Britain, there are still some anomalies. For instance, the main four mobile providers (O2, Vodafone, Three and EE) all offer deals which allow calls to "standard UK landlines and mobiles" within the customer's plan. But they all charge excessive "access fees" for calls to other UK numbers. These are not premium rate lines, but everyday numbers like 084 (which is meant to be a maximum of 7 pence per minute) or 087 ("up to 13p per minute"). The mobile companies slap an "access charge" of 45-55 pence per minute on top for their own profit.

Although Ofcom has taken action to make this problem more visible, it has not gone away. There isn't an economic justification for this charge, and the clustering of these excessive access charges suggests the possibility of anti-competitive behaviour. The Competition and Markets Authority should have a look into this as well.

9. Passports and Visas

Even in a post-Brexit world, people will want (occasionally) to leave Britain and visit foreign countries. And tourists and visitors from overseas will want to come to Britain and spend their money here. In both cases, they will be charged some eye-watering amounts by the UK and other governments for permission to travel. These permissions are known as Passports and Visas and have developed recently into a money-spinner for governments.

For instance, a full UK Passport now costs £72.50. That could be more than the price of the flight. And that rises to over a hundred pounds for a "one-week" service. It's worse for foreigners. A standard six-month British visitor's visa now costs about £95 to someone from India or China. And this can rise to over a thousand pounds for more specialised entry permits. Of course, there is no competition to the Passport Agency for these products.

We shouldn't be gouging international travellers whichever their direction of travel. These people are either our own citizens or inbound tourists spending sterling, or business people making trades. The Government should reduce the Passport Agency's fees to moderate levels. Immigration should be a service, not a profit-centre.

10. Free Trade

Not least of the consumer rip-offs is the high prices of goods caused by the EU's single market and customs union. It is the customs union which is the culprit here, because it keeps out cheap goods from the rest of world. This translates into higher prices in the shops for everyone.

Post-Brexit, we can lower our external tariffs and reduce the prices of goods in the shops. This is directly good for consumers because it makes their hard-earned cash go further. It is also healthy for the economy, because it keeps firms competitive. We don't do our own business any favours by trying to protect it behind tariff walls. That hurts consumers first, but also atrophies industry over time as it loses the ability to produce effectively. Tariffs are a lose-lose proposition. We should scrap them.

Read the full story: The most important Brexit negotiator is a spiv MP from two hundred years ago.

Conclusion

These ten rip-offs can all be cured by any Government that has the will to do so. Reform is never easy, but these changes will benefit real people throughout Britain who are getting a bad deal. They are not meant to be partisan – it should be neither left-wing or right-wing to want to see consumers hurt.

In some of these cases, the problem is companies being greedy, with a suspicion of anti-competitive price fixing (e-books, phones, energy tariffs). In some cases, corporate or vested interests have captured the very politicians and civil servants who should be regulating them, and they have got the law written to suit themselves and to hurt the public (copyright, professions, diesel engines). In other cases, it is the government policy which is itself wrong and is hurting the public (housing, food, "green" energy prices, passports, free trade). A wise policymaker is alert to problems closer to home as well as the potential of "market failure".

Leaving the EU allows us to address more of these problems, and politicians of all parties can decide whether they want to be on the same side as 64 million British consumers, or against them.

References


The most important Brexit negotiator is a spiv MP from two hundred years ago


Posted 25 September 2016

He was only in parliament for four years in the 1820s, and for a rotten Irish borough. He had a record of dodgy stock-market dealing around the time of Waterloo. His name is not very well known, and he has been dead for nearly two centuries. But David Ricardo had one big great idea which has lasted through the years. It has been described as one of the few propositions in the social sciences which are both true and non-obvious.

And this idea will affect almost all aspects of our Brexit negotiations both with the EU itself and with other countries around the world.

The idea is simple, though paradoxical at first glance, and everyone who is interested in politics and Brexit should take a few minutes to get to know it.

The idea demonstrates how trade between two countries will help both of them. In can be (and often has been) expressed in economics jargon, but let's skip that and start with a specific simple example.

Imagine a hypothetical world with two countries. Let's call them Rexland and Scanzia. And, in this world, there are only two products – automobiles and blankets. Both countries make each product. The countries happen to be at different stages of development and Rexland is better at making both products than Scanzia.

We can represent the productivity of workers in the two countries with this quick table:

RexlandScanzia
Automobiles42
Blankets9660
Producitivity: annual output per worker in each country and industry

So Rexland workers are more productive than Scanzia workers in each industry. A Rexland car worker can make four cars a year, compared with only two cars from a Scanzian worker. And in blankets, Rexland workers are 60pc more productive than their Scanzian peers.

It looks like trade between these two countries would be pointless or dangerous. You might expect that Rexland would export both cars and blankets to Scanzia, damaging that economy and receiving nothing in return. But that would be wrong.

Both sides will benefit and flourish from trade. Here's how it works.

Suppose just one Rexland worker switches job from blankets to cars. The initial impact on the Rexland economy (annually) is that they have four more cars and 96 fewer blankets. But now let trade enter the picture. Let's suppose that the two countries trade together and the market "exchange rate" is 27 blankets per car. Then Rexland can export its four extra cars, and receive 108 blankets (108 = 4 × 27) in exchange. This more than makes up for the "lost" 96 blankets, and Rexland ends up as gaining by 12 blankets overall.

But have they just exploited the naive Scanzians with unfair trade terms? Not at all – Scanzia wins too. In Scanzia they need to retrain two car workers to be blanket makers. Initially they lose four cars (annually), but gain 120 extra blankets. When they trade with Rexland they pay 108 of those blankets to import the replacement four cars. They are also gainers to the tune of 12 blankets.

Both parties have benefitted and both are better off in terms of goods consumed.

Comparative Advantage graphic
Comparative advantage: As if by magic, both sides gain. But there are no tricks.©2016 Martin Baxter

In economic terms, Rexland has a competitive advantage in both industries because its workers are more productive. But Ricardo's idea is to look at a different concept of comparative advantage which basically means comparing the ratios of advantage to find the best, or least worst for each country.

Rexland
productivity
Scanzia
productivity
Rexland
advantage
Scanzia
advantage
Automobiles4220.5
Blankets96601.60.625
Relative advantage and comparative advantage

The "advantage" is just the ratio of productivity between the two countries. Rexland's advantage is bigger than one in each industry, because it is more productive in both of them, but is higher in automobiles. So Rexland has a comparative advantage in cars. Scanzia's advantage is less than one in each industry (because it is less productive overall), but is higher in blankets. So Scanzia has a comparative advantage in blankets. So Rexland should export cars to Scanzia and import blankets in return.

This always works, no matter what the productivity rates happen to be. There will always be some industry, even for a weak and unproductive country, at which it is least bad. That is the industry where it has a comparative advantage. This is Ricardo's great insight. Trade will always help, because everyone is (relatively) good at something.

The result can be rigorously proven to be true under more realistic assumptions than this simple example, such as having multiple countries, several industries, diminishing returns to scale and generalised utility (happiness) functions. In economic terms, we can show that:

There will be economic changes to each economy. These are summarised in this table:

Industry with
comparative advantage
Industry with
comparative disadvantage
PricesRiseFall
ProductionRisesFalls
EmploymentRisesFalls
Utility (happiness)Rises
Economic changes following trade

The detailed picture is mixed and does require some workers to change industry, either by re-training or generational change.

But any worker/consumer in both countries can be better off. They have more of whatever they desire (either cars or blankets). There are twelve extra blankets for each transferred worker in Rexland, and six extra blankets per retrained worker in Scanzia.

That is the genius of comparative advantage.

So with free trade between the two countries:

Politics gets involved

But the car workers in Scanzia complain about unfair overseas competition. The Scanzian Minister for Industry, whose cousin runs a large loss-making car plant, decides to take action. Protection is needed for the nascent Scanzia auto industry, he says in a speech at the factory. It can only grow to be strong if sheltered during its growth phase from harsh international competition. Plant workers give him sustained applause.

To begin with Scanzia imposes an import duty (tax) of a certain number of blankets on each imported auto. Effectively, economically the taxed blankets are destroyed (or at least lost to the traders). The import tax is set at the rate of 4 blankets per car.

At the current price, trading would be uneconomic. Let's suppose that the exchange-rate price increases to 29 blankets per car (pre-tax) or 25 blankets per car (post-tax). Rexland receives 100 blankets (post-tax) for its four cars, which leaves a net profit of only four blankets. Scanzia importers pay 116 blankets (116 = 4 × 29) for the cars, leaving them with a profit of four blankets too.

Trade is still worthwhile and productive but less than before. The key points are:

But it gets worse. Over in Rexland, a combination of green pressure groups and trade unions are arguing against cheap foreign imports ('dumping') from Scanzia, which are putting Rexland blanket-weavers out of work. There are also concerns about labour and environmental standards in Scanzia, which do not meet the high level of Rexland legislation in this area and lead to worker exploitation by unscrupulous importers. After a high-profile campaign by the Daily Rexlander supported by opposition politicians, the government imposes a 10pc import levy on blankets.

Now things are difficult. The most a Scanzian importer can pay for a car is 30 blankets (30 is the natural price of cars in Scanzia without trade, since workers make 30 times as many blankets as cars). But the car import tax is 4 blankets, and the blanket import tax is a further 2.6 blankets ( 2.6 = 10% × ( 30 − 4 ) ), leaving only 23.4 blankets for the car exporter. But the minimum price for cars in Rexland is 24 (natural price of cars there), so the trade would make a loss.

Trade now has stopped completely. Both countries and their consumers are worse off.

Back in the real world

In the real world, free trade is under attack from both left and right. Both US Presidential candidates have sounded doubtful about free trade, and in Europe opposition to the US-EU free trade TTIP deal is growing.

Countries can't expect to export in every industry. It's impossible to export everything and import nothing. But every country can export something and import something. And doing that leaves everybody better off. Trade is a swap, and a swap that benefits both sides.

That is the secret of Brexit negotiations. The UK should have as low tariffs as possible. If other countries put tariffs on British goods, they are hurting themselves as much as Britain. British trade negotiators don't need to look for special favours from the other side – just their own self-interest. If the other side can't see that, then we need to remember that even our own tariffs and trade barriers leave us worse off. So we shouldn't impose any of our own. David Ricardo is our negotiator.


The Diesel Engine Pollution Scandal


Posted 10 September 2016

Fans of Yes Minister may remember the episode when Jim Hacker and Sir Humphrey try to understand chemistry using Latin and Greek. They also had trouble with the basic concept that two dangerous substances could form an safe compound. Chemistry can also go the other way round, and two safer elements can form a more toxic compound. One such nasty is nitrogen dioxide (or NO2) which is a compound of nitrogen and oxygen, two commonplace gases in the atmosphere. Nitrogen dioxide is highly toxic in large doses but importantly also causes long-term health problems as an air pollutant, including aggravated asthma and respiratory infections.

The main producers of nitrogen dioxide are diesel engines in motor vehicles. There is an important difference between petrol engines and diesel engines. Diesel engines produce about ten times more NO2 than petrol engines, emitting about 620mg/km compared with 60mg/km for petrol [1].

But there is another difference between petrol and diesel engines — diesel engines are a bit more efficient than petrol and emit 15pc less carbon dioxide (CO2) [2].

Bank holiday weekend traffic jam on the A31(T)
Now every third car has a diesel engineCredit: Jim Champion CC

Policymakers in both the EU and Britain have given a high priority to reducing CO2 emissions, as part of tackling long-term climate change worries. Egged on by European car manufacturers, there was a big push for diesel engines across Europe in the late 1990s. Several European countries reduced the fuel price of diesel below petrol. Britain did not. But in his 2001 Budget, Gordon Brown reduced the annual 'car tax' (vehicle excise duty) for diesel-engined cars compared with petrol engines.

And consumers went for it. The number of diesel cars in Britain increased from 2 million to 12 million between 1994 and 2015 [2], [3].

But there were some safeguards. EU rules put limits on the nitrogen dioxide that diesel engines could emit [4]. It wasn't very tough, since it allowed diesels to emit three times more NO2 per kilometre than petrol (180mg/km compared with 60mg/km), but at least it gave some comfort. That is, until September last year when the Volkswagen scandal broke. Then the world discovered that the manufacturers had been gaming the laboratory tests, and the true emissions were more than three times higher than the limit (620mg/km rather than 180mg/km) [5]. So diesel engines are actually pumping out ten times as much toxic nitrogen dioxide as petrol engines.

London Marylebone Road: NO2 pollution
London Marylebone Road: NO2 pollution (rolling annual average)Source: DEFRA [6]

We can see the effect of this in air quality data from the government's air pollution monitoring stations. They are set up round the country and monitor a number of pollutants, including NO2. This is measured in micrograms per cubic metre (μg/m3) and the recommended EU standard is a limit of 40μg/m3 for the annual average. Looking at the results from London's busy Marylebone Road [6], the level has been consistently more than twice this limit for the last twenty years.

And these abstract numbers represent the early death for thousands of our citizens. Research conducted by King's College London on behalf of Transport for London [7] calculates that nitrogen dioxide emissions are more dangerous than fine soot particulates, and are responsible for around 5,900 deaths annually in London alone. The biggest contributor to this mortality is "NO2 London sources" — mostly vehicle diesel engines in the capital.

The European rush to reduce CO2 to address long-term climate concerns has produced real short-term pollution problems. It's time to abolish the vehicle excise duty reduction for diesel engines and consider whether it should be increased until manufacturers can reduce NO2 emissions.

Let's take a deep breath and fix the bad air.

Acknowledgement

Electoral Calculus would like to acknowledge Morland Sanders and Channel 4's Dispatches programme [8] which was one of the first to break open the diesel engine scandal.

References


House Prices are Too High


Posted 4 September 2016

UK House Prices are too high. Buying a home of your own is increasingly unaffordable for young people. For first time buyers, the average house price is over five times average annual earnings [1]. That is a big increase on thirty years ago, when the ratio was only around three times earnings. In hotspots like London the ratio is close to ten.

These high prices make it hard for people to get started on the housing ladder. Everyone suffers from moderately-paid public sector workers all the way up to skilled well-paid professionals. Housing is expensive and increasing out of reach.

This is not particularly the fault of the EU, but leaving the EU does provide some opportunities to make it better. The primary problem is political – many older voters benefit from high property prices, and resist moves to lower them. For that reason, house price inflation is much like the weather – everyone talks about it, but nobody ever seems to do anything.

The typical Georgian architecture of Bath, Somerset, as viewed looking north-west from Bathwick Hill
Green and pleasant, as well as urbanPhoto by DAVID ILIFF. License: CC-BY-SA 3.0

Although there are a plethora of schemes at the edges to help subsidise first-time buyers, the main cure to high prices is to increase supply.

Let's look at the elephant in the housing policy room. Agriculture takes up 78pc of all our land use, and built-up areas are only 12pc of the available space (only slightly more than the 8pc of the UK land covered by lakes and rivers) [2]. This blog has already argued [3] that leaving the EU is a great opportunity to cut farm subsidies and food price supports in order to reduce supermarket prices. Another key advantage is the opportunity to move land from agricultural use to make it available for urban development. In other words, to build on farms and the "Green Belt". That's not to say that we should build-up over all of the country, but just that the balance needs to change away from 78−12.

The Green Belt was introduced in 1947 when "planners knew best", but has been criticized since [4] for pushing up house prices, making new developments further from cities, and not providing high-quality recreational areas. It's time to look again at it.

References


Copyright reform from two perspectives


Posted 28 August 2016

One consequence of leaving the EU is that we can liberalise our copyright laws. This policy should have cross-party support, so to avoid any political bias and appeal to all readers, the arguments in favour are presented from both a left-wing and a right-wing point of view. Readers may choose which to read.

End the James Bond rip-off

Modern corporate greed takes many forms -- ranging from offshoring jobs to ducking out of paying taxes. But a particularly nasty form is when large multi-national corporations are effectively given tax-raising powers over ordinary people. Up and down the country, thousands of shoppers every day are forced by law to make small payments to multi-national media companies who have done nothing to deserve them. This is a high-street rip-off that has been made worse by the EU.

The scam operates through the copyright laws, which are meant to help authors and songwriters get a bit of money each time someone buys their book or music. These laws have been around for hundreds of years, and used to be pretty fair. The artist got rewarded up to their death, and a bit beyond for their heirs. But big business in the EU and the US has lobbied hard to change these laws and make them unfair, so that the corporations get bigger rewards even after the person who did the real work is long dead.

Sean Connery in Amsterdam, filming Diamonds are Forever
James Bond: licensed rip-offNetherlands National Archive

In 1993, the EU gave in to lobbying from fat-cat media bosses and extended copyright payments to seventy years after the death of the artist. Seventy years is a long time. That could easily be over a hundred years from when the book or music was written. This change doesn't do the artist any good since he or she has long-since passed on. But it does the media companies a lot of good. They had a lot of works that were about to go out of copyright, and this gives them a juicy windfall. And this windfall is paid for by the rest of us, every time we buy a book or song whose author died between 1946 and 1966.

Many well-known books are more expensive because of this corporate rip-off. All the James Bond books (Ian Fleming died 1964), Winnie the Pooh (AA Milne, 1956) and Chronicles of Narnia (CS Lewis, 1963) are caught in the trap. Also hit are detective Lord Peter Wimsey and children's classic Doctor Dolittle. Readers young and old are paying more for these books because of this unscrupulous law.

The good news is that by leaving the EU the government can change the law back to what it was before the EU meddled with British laws. The whole country will be behind the government to help make reading cheaper.

Intellectual Property Wrongs

Copyright protection, like patents, is a temporary private monopoly given by governments to encourage innovation. But like all monopolies it attracts economic rent-seekers who want money for nothing.

Following successful lobbying by the main media companies, both the EU and the US extended copyright monopolies in the 1990s from the author's death plus fifty years to the author's death plus seventy years. These monopolies deprive the public, other artists and creators of new opportunities to enjoy and build on the earlier works, and imposes an effective tax on consumers of the works.

The incentive effect on the original creator is modest indeed. He or she is long dead and will not get any of the benefits. The author's estate might benefit their offspring, but why should they continue to be rewarded for so long after the death of their parent or grandparent. We don't expect to reward the descendents of other occupations — heart surgeons, teachers and coal miners — for work their ancestors did in the past. Copyright monopolies must be temporary and should not long outlive their work's creator.

The comparison with patents is instructive. Patent protection lasts only up to twenty years, compared with copyright protection which could easily be five times as long. Governments have resisted the lobbying attempts of patent owners much more fiercely than those of copyright owners. Not coincidentally, governments spend a lot more on patented products such as medicines, than they do on copyrighted products such as books and music.

Portrait of Milton Friedman 2004
Milton Friedman: knows economic rights from wrongsFriedman Foundation for Educational Choice

The recent laws are a clear example of rent-seeking behaviour from the big book and music publishers. The noted free-market economist Milton Friedman argued against the US Copyright Term Extension Act on 1998, calling opposition to it a "no brainer". They benefit no-one, execept those corporations, and impose costs on the rest of the economy.

Governments, including the UK, have signed up to the Berne Convention which imposes a minimum floor of fifty years from the death of the author. But the government is free to roll back the EU directive which increased that to seventy years. This would liberate a number of celebrated authors from the dead-hand of private monopoly, including writers George Orwell, George Bernard Shaw and Aldous Huxley, poets Dylan Thomas and Sylvia Plath, and even (as a historian) Winston Churchill.

This policy costs nothing and benefits consumers and the economy. It's the brainy thing to do.



Millions suffer from food insecurity because EU rules keep food prices high. We can now change that.


Posted 21 August 2016

One of the worst things of the EU is the Common Agricultural Policy or CAP. And two of its key effects are positively harmful to poorer people in this country and abroad. It makes food more expensive in shops and supermarkets, which acts as a regressive tax which hurts most those with the least cash. It also restricts agircultural trade with countries outside the EU, which include many less developed countries whose farmers are kept poorer because of it.

Let's look at the details. The CAP has three main legs: direct subsidies to farmers, artificial rules to keep food prices high, and restrictions on food imports from outside the EU.

The direct subsidies are fairly well known. European farmers receive around £50 billion of subsidies a year, most of which goes to the largest farms. The big net recipients are France, Spain, Poland, Greece and Ireland. The UK pays in to the CAP around £5 billion annually, slightly more than it gets back [1]. The direct cost of CAP subsidies is £78 for each man, woman and child in the UK.

The Government has recently said that agricultural subsidies will continue to at least 2020. This has relieved some short-term political pressures, but the longer-term considerations point to a change.

Sunset over European wheat field
Time for the sun to set on agricultural price support.Photo: Dreamy Pixel, 2013

These subsidies are despite agriculture making only 0.7pc of Britain's total GDP [2]. Less than one pound in a hundred. And it takes up a lot of space on our otherwise crowded islands. Agriculture and forrestry occupy a staggering 78pc of land use in Britain [3]. We are devoting three-quarters of all our space to an industry that is economically insignificant. And that mismatch comes with a real cost to people. Housing costs for everyone are high because so much land is reserved for agriculture, and so little land is available for people to live in. Land is a scarce resource and should be sensibly allocated. As well as housing and offices, current agricultural land could also be used for recreational purposes - everything from football pitches to paintballing forests, theme parks and golf courses.

Agriculture also creates a dull and monocultural rural environment, with a loss of wildlife diversity and increased use of chemicals and pesticides. That isn't illegal, but it is not something that deserves a subsidy equal to half its total profit.

New Zealand abolished all farm subsidies in 1984, and have had a flourishing agricultural sector since then.

But worse, much worse, than the direct subsidies are the indirect subsidies through high food prices. Economists estimate that UK supermarket prices are 17pc higher because of the CAP [4]. This is a cost of around £900 per household each year. And this cost falls most heavily on those who are least able to bear it. Everyone needs to eat, so food costs are a larger part of the weekly shop for the less well-off. A recent report from the Food Foundation [5], based on UN data, shows that 8.4 million people in Britain have some food insecurity, and 4.7 million of those had "severe food insecurity". In simple lanaguage this means that people are sometimes going without food, for a meal or for a day.

If we abolish the artificially high food prices of the CAP we will do a great deal to ease this.

People of all parties should be able to support this reform. The Corn Laws of the mid-nineteenth century were overturned by working people coming together along with the moderate Tory PM Robert Peel, who took on the vested interests of the big landowners. So these modern day Corn Laws can be swept away by new PM Theresa May, who said in her first Prime Ministerial statement [6]:

"I know you’re working around the clock, I know you’re doing your best, and I know that sometimes life can be a struggle. The government I lead will be driven not by the interests of the privileged few, but by yours."
Let's end the folly of high food prices which cause so much misery to so many.

References


The House of Lords is an Affront to Democracy


Posted 8 August 2016

British democracy is among the best in the world. We can look autocrats and dictators straight in the eye and proudly point out the comparison between our British freedom and their repression. Our democracy has many strenths including fair elections, lack of gerrymandering, an active civic society and a free press. But in one respect it is as poor as some of worst authoritarian regimes – the House of Lords.

The House of Lords is not elected. Its members are appointed, mostly by the Prime Minister of the day. And that is the wrong way around. The people's representatives should choose the government, not the other way. The House of Lords used to be filled with aristocrats, but they have mostly departed to leave a chamber of appointees instead. The recent scandal over David Cameron's "Lavender List" of cronies just highlights the democratic failure of the second chamber [1].


© Parliamentary copyright. Reproduced with permission.

Opinion polls have repeatedly shown a majority of the British people in favour of a wholly or mostly elected House of Lords [2], [3], [4], but nothing gets better. With now heavy irony, the preamble to the Parliament Act 1911 declared:

And whereas it is intended to substitute for the House of Lords as it at present exists a Second Chamber constituted on a popular instead of hereditary basis, but such substitution cannot be immediately brought into operation.
The real reasons why there has been no progress in 105 years is that the politicians are against it. The party leaders, and especially the Prime Minister of the day, enjoy the powers of patronage of making appointments. This is close to outright corruption. They are bribing appointees by offering them what should not be in their power to give. The power to choose the British people's representatives should be with the people, not anyone else.

Electoral Calculus has explored the motivations of the key players in detail and why they will never back real reform.

The only realistic way forward is to have a referendum on Lords Reform. The EU Referendum has shown there can be a large disconnect between what the professional politicians prefer and what the British people actually want. The House of Lords is the most striking example of that divergence – politicians want to keep it as grubby bauble and toothless talking-shop, but the people want it reformed and democratic.

We should have a referendum to make the House of Lords elected. Only that can override the vested interests at Westminster. And the people will surely echo Cromwell's speech to the Rump Parliament of 1653:

"You have sat too long for any good you have been doing lately... Depart, I say; and let us have done with you. In the name of God, Go!"

References


A majority of voters favours retaining single market membership


Writes John Joseph Boylan, Posted 30 July 2016

The UK was always ‘semidetached’ from the EU. We had opt outs from the Maastricht Treaty including not joining the euro, and from Schengen (thanks to much maligned John Major for that). One of his ‘bastards’, Michael Portillo argues [1] that this meant a referendum was unnecessary – even though he is a sceptic. Clearly it divided the population and Brexiters won 52%−48% over Remainers.

Whilst we voted to leave the EU, and that must be respected, it is less clear what we voted to replace this. “Brexit Means Brexit” tells us nothing. Brexiters voted Leave for a variety of reasons [2] and immigration was only the main reason for a third of Leave voters.

There seems to be two alternatives – an EU-lite version which maintains membership of the Single Market and a more radical option which leaves the Single Market and plans to negotiate individual trade deals.

The first option means being part of the European Economic Area (EEA) and remaining in the Single Market [3]. This had all the economic advantages and security but without political integration or the disastrous Common Agricultural Policy.

Traffic light comparison of EU and EEA status
 UK as EU memberEEA nations
Single market participationYesYes
Financial services accessYesYes
Free/low tariff barriersYesYes
Freedom of movementYesYes
Free movement controlsNoEEA emergency brake
Saving on EU paymentNoCirca 50% per head
Independent veto on global bodiesNoYes
Single market acquis (21% of EU law)12% QMV*Most are global rules
Remaining acquis (79% of EU law)12% QMVExempt
Can agree independent FTAsNoYes
Common external tariffAppliesExempt
EU VAT policyAppliesExempt
Common Agricultural and Fisheries PoliciesAppliesExempt
Common foreign/defence policyMix of unanimity
and 12% QMV
Exempt
Justice and home affairs policySelected opt-ins/
12% QMV
Exempt
European Court of JusticeSubordinateExempt
European CommissionSubordinateExempt
Joint and several liability of EU debtsAppliesExempt
Ever closer union appliesPossiblyExempt
Charter of fundamental rightsAppliesExempt
EU science/education programmesParticipatesParticipates
*QMV = Qualified majority voting
© Roland Smith, Adam Smith Institute. Reproduced with kind permission.

This option comes at a price – free movement of people. Immigration to the UK won’t be reduced significantly. The figures show [4] that net migration to the UK in 2015 was about 330,000 or around the size of Iceland’s population. Further, there were more people coming from outside the EU than within it. The British public were misled – not by the Leave side – but by the former Prime Minister David Cameron and current PM Theresa May who say net migration can be reduced to the tens of thousands – fantasy.

The other option is to have individual trade deals with countries around the World [5]. The problem is it would be time-consuming, uncertain and probably not as advantageous as being within the Single Market. It might lead to greater control of immigration but at the expense of economic stability.

The choice is clear: Single Market (with little control of EU immigration) or individual trade deals which is the reverse – more EU immigration control but less economic stability. The public would appear to favour the former [6].

There has been speculation about retaining Single Market access – with a temporary seven year freeze on migration [7]. This has angered the Tory Right who want out of all things EU – though the Foreign Secretary Boris Johnson, seems more favourable to this. Expect more division in the Tory party over the years over the reoccurring problem of Europe.

If Parliament is sovereign – as most Leave supporters say it should be – then they have to accept that the vast majority of MPs supported membership of the EU [8]. You can be confident that an even greater number would support continued membership of the Single Market.

At the end of the day, the UK will probably remain semi-detached from the EU [9]. In the Single Market, but out of the political structures. Many Leave supporters will feel betrayed and many Remain supporters relieved that this whole process has produced limited change.


References


Eight hundred years of trade


Posted 19 July 2016

Some mistake free trade for a dull modern invention which only interests multinational corporations and technocratic economists. But free trade in Britain is older, deeper and more popular. The Magna Carta of 1215 has dozens of sections whose relevance has faded, but only a few that speak directly to us across eight centuries. Shortly after the famous section guaranteeing the right to a fair trial comes another which is less well known:

"All merchants shall be able to go out of and come into England safely and securely and stay and travel throughout England, as well by land as by water, for buying and selling by the ancient and right customs free from all evil tolls, except in time of war and if they are of the land that is at war with us."
[Footnote: The Charter was re-issued in two separate revisions, which dropped several of the "doubtful" or contentious original chapters. In both revisions this Chapter was retained as important and necessary.]

Only substituting "the United Kingdom" for England, this text clearly signals that Britain is open for international trade. It is a key passage putting free trade at the heart of British policy and even character and identity. At heart, it's very simple. If you as a purchaser want to buy something from a foreign merchant (overseas trade), then you should be allowed to. As long as it's a legal something. This is good for consumers by increasing choice and decreasing prices. It is also healthy for domestic producers because it increases competition and keeps them efficient, though they don't always welcome the experience and can oppose the idea.

More recently the Corn Laws (1815-1846) were an attempt to remove the advantages of free trade in grain by imposing high tariffs on grain imports. This harmed consumers of grain (everyone who eats) but benefited producers of British grain (landowners). This harm was worse when British harvests were poor, and the severe Irish Famine of the 1840s is an extreme example of the malign effects of high trade barriers on ordinary people. It was around then that ordinary and working people came to adopt the cause of freer trade, and the Anti-Corn Law League pressure group grew in popularity.

Conservative Prime Minister Robert Peel took on those vested producer interests, many of whom were in his own party, and repealed the laws in 1846. These reforms were continued by the Liberals under Gladstone and formed the bedrock of British prosperity in the second half of the nineteenth century, and were supported by large majorities of the working class [2].

Taking Rocks Out of Our Harbours

Able to go and come safely. A Cypriot container ship at Felixstowe container port.Photograph: Geof Sheppard

Now, post-Brexit, control of UK trade arrangements returns to Westminster under national control. It can seem dauntingly complex, but the basic choices are simple. On one hand there is the whole question of negotiating our trading arrangements with the EU, which deserves separate analysis. But let us look now at the prospects for trade with the rest of the world, which already makes up more than half of our foreign trade.

We can make our arrangements in either of two ways: bilaterally or unilaterally. Bilateral arrangements are normally government-to-government trade deals negotiated between the two countries and then formally agreed. These can be an effective way to agree on and implement free trade in goods and services. But the process can be long, or the other country might not be that enthusiastic.

The alternative is to liberalise trade unilaterally. That means that we allow in imports from the other country, and reduce tariffs on our side. This gives us the benefits of lower consumer prices and increased competition at home. If the other side want to reciprocate, that's fine, but it's not essential. As the old economics joke has it: if they want to put rocks in their harbours, that's their lookout. We don't need to put rocks in ours.

Economists suggest that trade liberalisation tends to benefit the liberalising country [3], [4]. In other words, our consumers and economy benefit more from the lower prices than any reduction in the profits of our producers. The reason that efficient overseas producers also gain is because trade is a positive-sum game and both sides benefit.

We should reject the old mercantilist fallacy that only exports are good and that high tariffs are beneficial.

The Antipodean Model

Unilateral liberalisation is a practical option, which has been pursued recently by developed countries which are not dissimilar to Britain. Both New Zealand and Australia have adopted unilateral trade measures, alongside bilateral and multilateral ones, and have enjoyed strong and resilient growth [5]. Over the last five years, while the Euro zone grew by only 3pc in total and the UK by 8pc, both Australia and New Zealand grew by around 14pc.

The European single market, although it has good advantages for intra-European trade, is bad for trade outside Europe as it also operates as a customs union with a "common external tariff". This imposes both tariffs which make prices higher, and also protectionist rules which prohibit some goods from coming in at all. This is bad for British consumers and also impoverishes developing-market producers in Africa and elsewhere. It also reduces the amount of trade we can do with Commonwealth countries and with the emerging growth economies of Asia.

A concrete example of this folly is the Common Agricultural Policy, which acts as a modern-day Corn Law. This hurts consumers both through the increased taxation needed to subsidise agriculture, but more importantly by keeping food prices high. In addition to the direct cost of £78 per person, economists estimate [6] this policy adds 17pc to everyone's grocery bill. This is equivalent to extra costs of around £900 per household each year.

Our new trade arrangements should look to open Britain to international trade and make sure we are not bound by the Common External Tariff which hurts British consumers. This would benefit everyone in the country, but especially the less well-off.

These measures can enjoy cross-party support in the spirit of Peel and Gladstone. And as Tony Hancock asked [7], does Magna Carta mean nothing to you? Don't let her die in vain.

References


It's the Democracy, Stupid


Posted 27 June 2016

According to a ComRes poll for the Sunday Mirror (26 June 2016), the most important issue for Leave voters was the ability of Britain to make its own laws. Over half of Leave voters (53pc) gave that response, compared with only a third (34pc) who said immigration. The Remain campaign had suggested that sovereignty was not a very pressing issue for most voters, but it turned out to have a strong effect when re-branded as "taking back control".

But the decision to leave the EU can be achieved in different ways, and this further decision will be as important as the original vote to leave. Our new democratic control is going to be very important very soon. Because different types of Brexit are available. One version is liberal Brexit (or "leave lite") which stresses free trade, relatively open immigration and an international outlook. Under this model, we may also keep farily close links to the EU, such as retaining membership of the single market or something similar.

Against that, is populist (or economically illiberal) Brexit which is keener on trade protection, such as steel tariffs, restricted immigration and keeping a clear distance from the EU.

Leave voters were not a homogeneous group, and some of them will lean towards the liberal model while others are attracted by the populist themes. It may not be possible to satisfy all their agendas and the Leave campaign may divide into opposing groups as the negotiation process starts.

The vote to Leave on 23 June only decided the fact of exit, but not the details. The style of exit and the numerous associated decisions still need to be chosen. But one thing is known: control is now back with Westminster. So Parliament and the UK political parties become crucial in determining the outcome. How will or should each party behave?

Boris Johnson, Vote Leave Rally 19 June 2016
The liberal wing of the Brexit campaign? : (from L to R) Steve Hilton, Lance Forman, Priti Patel, Kate Hoey, Michael Gove, Boris Johnson©2016 Electoral Calculus

The Conservatives are naturally liberal Brexiters. This will appeal to the Remain wing as it is closest to the EU status quo. Many prominent Conservative Leavers also have similar views, such as Boris Johnson's Daily Telegraph article (27 June 2016) which gave a very clear statement of the liberal Brexit manifesto. It is very plausible to see a Conservative platform based around these ideas. The new Conservative leader might also be tempted to call a General Election to endorse this view, which could play well in the South and the middle-classes, including with many Remainers.

Although UKIP has both liberal and populist strands, it is possible that its populist wing will win out. This would position UKIP for gains in working-class areas against both Labour and the Conservatives, especially in Northern England. This could ultimately lead to UKIP replacing Labour as the official opposition party at Westminster. But to realise this, UKIP will have to re-focus their message and leadership team.

Labour has a difficult strategic decision to make, which is more important than their short-term leadership crisis. They have three options, but none of them are trouble-free. They can fight the fight to Remain - which would be popular mostly in London, but might lose them the North and the Midlands. Or they could switch to support one style of Brexit or another. A liberal Brexit choice would be attractive to London and the middle classes, but Labour would be fighting there for the same ground as the Conservatives, whilst handing swathes of Northern England to UKIP. Taking the populist anti-immigration stance would be difficult for many Labour MPs, and play badly with their supporters in London and the middle classes. But it is crucial for Labour to make the correct choice. This is a literally existential question for Labour, where failure means they may cease to exist as a significant political force.

The vote on 23 June is not the end of the matter. The political battle has only just begun.


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