Taxes and Subsidies: Incentives and Disincentives

Like it or not the world is driven by economic activity. Nothing happens unless people buy something, be that a product, service or employees. These economic activities vary in importance to those procuring and supplying them, with the balance point between supply and demand coming when the price for that product, service or employee is agreed between producer and purchaser. However governments have their own idea of how much of each product, service or employee should be procured and they attempt to control this via a number of mechanisms:

  • Banning that activity completely (e.g. selling of drugs that it determines only it should have the monopoly on);
  • Banning that activity as best it can (e.g. sex work);
  • Setting the price for that product, service or employee. This is very dangerous as it moves the economic equilibrium point and always has adverse and unintended consequences (e.g. national minimum wage, energy prices, train fares, etc.);
  • Taxing and subsidising.

When the state doesn’t want an activity to happen, but recognises it cannot successfully ban that activity, then it taxes it. Examples are the ‘sin’ taxes on tobacco and alcohol (the latter I’ve blogged about here). When it does want an activity to happen, but recognises it cannot do that itself, then it subsidises that activity. An example is agriculture.

However, although it is widely recognised that if you tax an activity then you create a disincentive to undertake that activity, the government then taxes anything that it sees happening in sufficient quantity for it to become a useful revenue stream if taxed. The unintended consequence of this is that less of that activity happens (or less of it happens legitimately). Similarly the government identifies activities that people cannot afford to do by themselves (usually due to their excessively high tax burden) and creates subsidies (called grants, tax credits, benefits, etc.) to assist those people.

So let’s take a look at what the government taxes, that is what it is (often unintentionally disincentivising):

  • Employment: Employer’s National Insurance is a tax on employing people, thereby creating disincentives for businesses to employ people until they really have to. Rates vary from 0% to 13.8%;
  • Work: Income Tax and Employee’s National Insurance are taxes on employees, making it costly to work (legitimately). Income Tax rates vary from 0% to 45% (recently reduced from 50%) and National Insurance rates vary from 0% to 12% – maximum of both is now 47% (45% Income Tax + 2% NIC);
  • Spending: VAT is a tax on spending. Spending is the way that we purchase items we need (or just want) which drives the economy and employs people in profitable activity. We are taxed on virtually everything we buy, except a small subset of items that the government deems as essential, such as some food, books and children’s clothing, but not gas, electricity, petrol, diesel, women’s sanitary protection products, incontinence pants, etc. (rates vary from 5% to 20%);
  • Insurance: Insurance Premium Tax is levied on all insurance premiums (6% or 20%);
  • Travel: Air Passenger Duty is levied on each segment that you fly from the UK (ranges from £13 to £188 per flight);
  • Profitable business: Corporation tax punishes the profitable business and creates incentives for companies to employee accounting schemes to minimise their corporation tax burden. Rates vary from 20% to 25%;
  • Earnings from a profitable business: Dividends are taxed with rates from 10% to 37.5%;
  • Digging oil out of the ground: Oil production companies are subject to several separate tax regimes to punish them for their ‘super-profits’. These taxes include Petroleum Revenue Tax (50% on value of oil extracted), Ring Fence Corporation Tax (disallows offsetting losses made elsewhere, unlike for all other companies) and the Supplementary Charge (75%);
  • Pensions: saving for your retirement is free of tax in certain closely-prescribed circumstances – step outside of those criteria and face tax rates from 20% to 55%;
  • Moving house: Stamp duty is levied on buying houses (!) with rates varying from 1% to 7%;
  • Death: Inheritance Tax is levied on dying. So if you haven’t managed to spend the lot before you expire then they take another swipe at whatever you’ve built up for your family (rate is 40%). Obviously government cannot disincentivise dying, but instead creates a market for exploiting loopholes that mainly the rich alone can afford to utilise.

Conversely (and often perversely) government creates schemes that subsidise many activities, again this may be unintentional:

  • Unemployment: I have written on this extensively elsewhere, but even Beveridge, the architect of the modern welfare state, warned against excessive or lengthy unemployment ‘benefits’;
  • Farming: the idiocy of the Common Agricultural Policy is well-documented by many already;
  • Under-performing or failing businesses: the history of nationalising or subsidising failing businesses, in the vain attempt to somehow turn them around by managing them with civil servants, has proven that this approach simply destroys more value than it creates;
  • Marriage: the latest moronic social engineering plan from the Conservatives. ‘Nuff said;
  • Children: while Child Benefit in itself probably isn’t enough to incentivise anyone to have children, the plethora of services provided to parents does create a system which taxes those who chose not to have children more and subsidises those who do have children. More social engineering.

As can be seen from the few examples above the UK has created a taxation system that creates some unfortunate economic incentives and disincentives. These all distort the market, whether they intend to or not. That we discourage employment and encourage unemployment alone should make us question the sanity of this system; and surely the continually high level of unemployment is evidence of this. Similarly taxing successful businesses and subsidising unsuccessful ones can only encourage the wrong behaviour (witness the legal use of tax avoidance to minimise corporation tax and the subsequent idiotic moral outrage at this natural consequence).

While we let government distort the market in the way it thinks benefits its electorate* then the economy will never operate freely, employing all, feeding all, benefiting all. We will forever be slaves to these idiots, few of which have ever run a successful business.

*note use of word ‘electorate’ – the fools who vote them into power – not citizens, the poor schmucks who pay for them and their ideas.

The Thieving State (Or Why You Shouldn’t Complain About UK Booze Prices)

The UK Government charges ridiculously high levels of tax and duty on us. If you don’t believe me here’s an example.

So you want to buy a cheap bottle of spirits – maybe whisky or vodka (two of my favourites). Your budget is £12.

Firstly you need to subtract VAT at 20%, which the retailer has to account for to HM Revenue and Customs. On £12.00 this is £2.00, leaving £10.00 for the net cost of the product. But before the retailer, wholesaler and manufacturer can enjoy this revenue they have to subtract alcohol duty from the product. For spirits this is £28.22 for a litre of pure alcohol.

Assuming a 70cl bottle contains 40% alcohol by volume (a.b.v.) the alcohol duty due for your bottle is £7.90. This leaves only £2.10 for the manufacturer, wholesaler and retailer to share between them and earn profits on. That’s £2.10 of a product that you’ve paid £12.00 for, only 17.5% going to the people adding value and delivering a little bottle of joy to within your reach. Whereas the government, at the stroke of the Chancellor’s pen, reaps £9.90 for doing nothing. Oh, hang on, they do something: they add bureaucracy at every step of the supply chain in accounting for VAT, and at the manufacturer (or importer) for alcohol duty, thereby reducing those businesses’ profits even further.

This is a parasitic relationship.

However, it gets worse…

Consider how much you have to earn to pay for that £12 bottle of spirits?

Let’s have a look at someone on National Minimum Wage of £6.31 per hour, as an example, assuming they work 37.5 hours per week. This would result in gross wages of £236.63 per week (£12,338.30 per annum). On this they and their employer would pay 13.6% PAYE tax and NICs (employers and employees National Insurance Contributions). An employer has to pay them £13.89 for them to buy a £12 bottle of spirits, which only £2.10 goes to the businesses supplying it; therefore from all that economic activity to earn wages, make the spirits, package, ship and display near to this worker’s house, £11.69 goes to the government – 84.9% overall tax rate.

Now let’s consider someone who’s on the average UK working wage, currently £447 per week (September 2013, ONS). Their effective tax rate, from what it costs to employ them, is 26.7%. This means their employer has to pay them £16.36 for them to buy a £12 bottle of spirits, of which only £2.10 doesn’t go to the government. So from overall cost to the employer of £16.36 only £2.10 isn’t tax, an effective tax rate of 87.2%.

Finally let’s look at a salary of £40,000 per annum, which is about the salary of a tube driver. Their employer has to pay out a whopping £19.93 for their employee to be able to buy a £12 bottle of spirits, of which only £2.10 isn’t tax. So the government collects 89.5% of this money.

Note that the above calculations all include the tax-free allowance within their assumptions. If you just consider an additional cost to your employer for them to pay enough to earn a £12 bottle of spirits (a pay rise, as it were) the impact is far worse (this is the marginal rate).

  • National Minimum Wage: employer needs to pay £16.70 for employee to buy £12 bottle of spirits – effective tax rate 87.4%.
  • Average earnings: employer needs to pay £18.21 for employee to buy £12 bottle of spirits – effective tax rate 88.5%.
  • £40,000 per annum: employer needs to pay £22.73 for employee to buy £12 bottle of spirits – effective tax rate 90.8%.

Incidentally, this is why £10 bottles of spirits (70cl @ 40% a.b.v.) are impossible to find now. Only 43p would be available for the manufacturer, wholesaler and retailer, the other £9.57 going to HMRC – a tax rate of 95.7%. The employer of a tube driver on £40,000 per annum would effectively be paying a tax rate of 98.7% for his employee to buy a £10 bottle of whisky.

In summary, don’t blame the shopkeeper who has sold you the booze, or the wholesaler (or distributor) they bought it from, or the manufacturer (or importer): these people all created and added value in getting that bottle of joy into your hands. However the Chancellor of the Exchequer does nothing but remove value from the supply chain and the economy. At the stroke of a pen.

Blame the government.

Always blame the government.

On The Stupidity Of Bureaucracy

I recently tried to pay my company’s quarterly VAT bill to Her Majesty’s Revenue and Customs (HMRC). As I used the compulsory method and logged onto the ‘Government Gateway’ website I discovered that I couldn’t submit a VAT return. In a panic I called the HMRC office that deals with our returns (only 16 minutes negotiating their phone system and on hold before I spoke to a human). There I discovered yet another travesty of bureaucracy.

Some background:

We moved our company offices in March last year. I asked our accountant, who is registered with HMRC as our ‘tax agent’, to change our VAT registration address, but they weren’t allowed to. Although this was stupid I have now discovered that the actual process verges on ridiculous.

As time progressed I continued paying the quarterly VAT via the Government Gateway website without any issues. However, earlier this year I tried to change the VAT registered address online. To do this you have to register separately for the ‘Change Business Address’ service on Government Gateway, even though I’m already registered to pay VAT and PAYE.

When you register for any new Government Gateway service they send you an authorisation key in the post. So guess where that went? Yes … to the old address!

This would have probably been ok but for another bureaucratic organisation: Royal Mail. They cannot setup a redirect on a shared office, as ours was previously, and so this post was never delivered but instead returned to Government Gateway; subsequent VAT post must have been sent back to HMRC too.

So despite the fact that I’ve been paying the VAT as expected on each quarterly date they registered us as a ‘lost business’. This is despite:

  • our address being online on our website
  • our address being correct at Companies House
  • our address being correct at HMRC to pay PAYE
  • them having my mobile telephone contact details

Finally in their completely inadequate ‘tracing’ process they sent me an ‘update contact details’ form to my home address. This lay unopened, like all my HMRC post, for a couple of months.

When I did discover it I completed the form and sent it off, receiving a new VAT registration certificate at our new address last month. However, because we were registered as a lost address we were switched to six-monthly returns, so a VAT payment is not due this quarter (after all the panic). When I explained that I have £90,000 to pay the nice chap on the phone said “well you’ll have to wait” – so that’s about £250 interest we’ll make! Also there are also no penalties as we’ve been paying VAT to date and it’s HMRC who changed our status.

Just how stupid is this system?

  1. You need to change your business address?
  2. No, you can’t do this online even though everything else is without registering for the ‘change address’ service
  3. When you register we’ll send you the key you need to your old address

The chap at HMRC was surprised that I hadn’t registered for this important service already: how often does he think businesses move? This was our first address move in nine years! And who would honestly expect that changing address for VAT would be so difficult? Weirdly HMRC allows you to change the business address for paying PAYE and other taxes online without this convoluted mechanism: the same government department!!!

Now the astute among you will know that HMRC was formed in 2005 by the merger of HM Customs and Excise (who dealt with VAT, customs and excise taxes) and Inland Revenue (who dealt with company and personal taxes). This merger was sold to parliament as a method of making 12,500 job savings by then Chancellor of the Exchequer, Gordon Brown. Obviously little actual integration has occurred in the intervening eight years, even though all payments and returns are made through the Government Gateway.

This is yet another demonstration of the stupidity of bureaucracy, especially in government.

By the way, I’m not suggesting that this process is ‘accidentally’ used as a tax avoidance mechanism!

An Eloquent Brand of Revolution

Russell Brand has caused yet another disturbance in the Twittersphere with his recent appearance on Newsnight. Many question why a mere comedian should be afforded the gravitas of a one-on-one interview by Jeremy Paxman. The obvious answer is his obvious intelligence and eloquence, but he is interesting beyond his showbiz facade.

I know many people dislike Brand, with his airy-fairy bohemian language, over-gesturing, crudeness and simplistic belief in socialism; personally, I like him. I’ve watched his material for years, seeing past the flamboyant performance art of his stand-up comedy to the intelligent foundations beneath. And, importantly, he makes me laugh – a comedian’s raison d’être, after all. Several years ago I arrived in Edinburgh for a few days at the Fringe, walked up those never-ending steps from the dinginess of Waverley station into the majesty of Princes Street, to be greeted immediately by Russell Brand and his entourage walking past. He noticed that I’d recognised him, smiled and said “Wotcha mate!” In that passing second his joie de vivre was contagious.

But Brand is more than just a former addict-turned comedian. Here he was in front of Britain’s toughest political interviewer mocking democracy and promoting revolution; even Paxman looked shocked. Brand rightly pointed out that voting is useless, it changes nothing: “why be complicit in this ridiculous illusion?”. He then railed against the inequity in society and linking this to the self-serving political elite. He boasted of never having voted, to which Paxman used the political-establishment line of ‘if you don’t participate then you have no say’; Brand decried this mantra as the con-trick that it is.

And then on BBC’s Newsnight, its flagship TV news platform, Brand advocated revolution! He didn’t go into detail about how this revolution would happen (thankfully, as advocating violence to enact political change is illegal under the various Terrorism Acts), but was adamant that this was the only way to change society radically. Personally I don’t agree, but I do share his belief that democracy isn’t going to help the state abandon its ways.

At this stage I agree with much of Brand’s enthusiastic critique of society. However, as many other libertarians would agree, it all goes wrong here. As you would expect, if you know anything about him, Brand then espouses as the saviour of humanity “a socialist egalitarian solution based on the massive redistribution of wealth, heavy taxation of corporations and massive responsibility for […] any company exploiting the environment”. His policy to reduce inequality we need to tax corporations hard, ‘catching’ tax avoiders, and all the usual Marxian dialectic and faux-logic (“profit is a filthy word because wherever there is profit there is also deficit”) short of putting evil capitalists up against the wall come the glorious day.

So Brand is intelligent, why socialism? I believe there are a few options on this…

1. He’s taking the piss? His eloquence and political solutions are just his own performance art, and he’s parodying Wolfie Smith.

2. He honestly thinks this is the best solution?

3. He, like many who make their living in the public view, recognises that saying you believe in socialism is the easiest way: you appear caring and cuddly, albeit ignoring the evidence of the vast social, economic and political inequities that socialism brings. (Why anyone thinks that being proud of believing in socialism is any better than believing in fascism is beyond me: they are the same evil ideology separated by relatively few characteristics).

As a libertarian, I share his anger at the political class, the inequality in society, and damage to the environment: he is right to see the existing system as the fault. However, I disagree vehemently with him as to the solution. Only voluntary trade (‘capitalism’ if you will) can improve this. Without the individual’s self-interested actions we would live in a society where the bureaucrat controls our lives, deciding our job, pay and conditions. Why would anyone think that Whitehall can make decisions about my life better than me? This is idealistic nonsense: to decry the status quo and then think that ‘administrators’ could control the economy better than millions of self-interested individuals. The inequalities that Brand so dislikes still exist after 70 years of our glorious welfare state, so why on earth would one think more statism would change that?

Brand is right, a revolution is coming. However it’s not a socialist revolution, despite his support for neo-socialist groups like the anti-capitalist Occupy movement. The rising wealth in China, India and Africa, all due to international trade, is creating a new class of educated young, people whose parents struggled in poverty. Even Bono has come to the realisation that trade not aid is needed to lift Africans out of poverty. This wealth and education, along with the international awareness that social media has brought, will create a desire amongst those not enjoying it to participate. Unfortunately this new-found approach to individual voluntary action isn’t shared by all.

In the UK we have created a society where school leavers expect work to be given to them, or free money if nobody thinks them worth employing. That entrepreneurial spirit required for growth is lacking in many in the UK, despite attempts by the BBC to promote it with such successful pro-business franchised shows as The Apprentice and, more importantly, Dragons’ Den. Sadly many of our youth have been left behind, indoctrinated by state education that society (i.e. government, i.e. the taxpayer, i.e. them and their parents) owes them a living. As Simon Kelner in the Independent says: “His call for revolution may be Spartist nonsense, but Brand definitely articulates a strain of thinking among a growing number of young people who feel disenfranchised, disenchanted, disengaged and, most important, disinterested in the idea that politics can change the world.” While Brand recognises the anger of these left isolated from the productive world around them, he misses the cause.

It is a shame that Brand hasn’t recognised voluntary transactions, free trade, as the greatest route away from the inequality that he rightly despises; that the state that he advocates more of as being the root cause of much of that inequality. Imagine the fireBrand in action, convincing the youth, if he understood and believed in the coherent, egalitarian philosophy of libertarianism.

In the meantime we must just be glad he’s arguing against established politics, politicians and democracy. Come the glorious day…

Nelson Mandela: Saint or Sinner?

With his failing health and impending 95th birthday Nelson Mandela is once again at the forefront of world attention. The world is bracing itself for the inevitable news and the world’s press are jostling for position outside his hospital to report that news. Barack Obama stated this weekend that he wouldn’t visit the ailing Mandela as it would appear just a photo opportunity and would invade the family’s privacy; instead Obama took his photo op at Mandela’s cell on Robben Island, stating he was “deeply humbled” to stand there. Such is the kudos of Mandela that world leaders are keen to touch his sleeve, albeit only metaphorically now. Jonathan Freedland’s article ‘When Nelson Mandela goes, the global village will lose its elder‘ sums up many people’s view on this elder statesman. However, many on the political ‘right’ have always argued that Mandela was a terrorist and so was rightly punished. The facts, for a libertarian, are (ironically) slightly less black and white, with Mandela’s struggle against an evil state taking on three main phases.

Nelson Rolilhalha Mandela was born into a royal family in an already racially-divided South Africa on the 18th July 1918. When young he attended university, training as a lawyer, and became involved in anti-colonial politics co-founding the ANC’s Youth League. By the late 1940s it had gained control of the party in response to the Apartheid laws passed from 1948 onwards by the ruling National Party. The ANC at that time supported a campaign of civil disobedience, including strikes; the government responded violently: in 1950 during one strike 18 black strikers were killed. This was the first phase of Mandela’s struggle against apartheid – the non-violent phase.

However Mandela and the ANC adopted a new approach at the start of the 1960s with the founding of Umkhonto we Sizwe (MK: “spear of the nation”); on this dramatic shift in policy Mandela famously said:

“At the beginning of June 1961, after a long and anxious assessment of the South African situation, I, and some colleagues, came to the conclusion that as violence in this country was inevitable, it would be unrealistic and wrong for African leaders to continue preaching peace and non-violence at a time when the government met our peaceful demands with force.

This conclusion was not easily arrived at. It was only when all else had failed, when all channels of peaceful protest had been barred to us, that the decision was made to embark on violent forms of political struggle, and to form Umkhonto we Sizwe. We did so not because we desired such a course, but solely because the government had left us with no other choice.”

After 13 years of increasingly violent response to peaceful protests the ANC had become despondent and desperate for change. They started a guerrilla campaign against government installations and included many other acts of sabotage. This was the second phase: a violent campaign targeting the government alone. Many libertarians would err at the thought of starting a violent campaign against their state due to the non-aggression principle, however in South Africa at the time it can easily be justified as the state had already initiated the violence both mentally with apartheid laws and physically with the violent response to civil disobedience; this wasn’t initiation of aggression, it was defence against it. Some libertarians may disagree but I believe that Mandela’s response at this time was entirely justified. The South African government declared Umkhonto we Sizwe a terrorist organisation and therefore illegal (incidentally the US government also declared MK a terrorist organisation, undoubtedly as it was in fear of similar events there due to the increasing civil rights campaign).

The question of whether the individual is right to take up arms against their state is a difficult one. South Africa was one of, if not the most, democratic country in Africa at that time, even though only a minority of its people were allowed to vote (or even be classed as citizens). This question challenges the very nature of democracy – as I frequently do – is the legally-mandated government ever really morally legitimate?

Whilst many libertarians, including me, would prefer Gandhi’s adherence to non-violence as the preferred route to liberation I can sympathise with Mandela and his colleagues making the choice they did at that time. The one aspect on which most ‘right’-leaning libertarians will agree is that the ANC’s politics were pretty abysmal: as with many of its regional allies, who it relied on for military support of MK (including ZAPU, FRELIMO and SWAPO), it was aligned with various flavours of socialism and many of its contemporaries were funded by the Soviet Union. The ANC was also closely affiliated with the South African Communist Party at that time.

The third phase of action against the apartheid state was a result of the gradual slide into despotism within MK: it was subjecting recruits to extreme punishment and many human rights violations occurred including executions without due process within ANC detention camps. Umkhonto we Sizwe then extended its military campaign to other targets, including mining rural roads leading to farms, and bombing bars, restaurants and shopping centres. The landmine explosions alone resulted in over 123 deaths and the ANC eventually abandoned it due to its high rate of casualties amongst black labourers. One set of statistics record 230 deaths due to the ANC/MK campaign in the period 1976-1986 with only 10% being members of the security forces; as with the ratio in the general population over 70% of the casualties were black.

As a libertarian I cannot support initiation of any act of violence against civilians and therefore this campaign was abhorrent and immoral (incidentally, to hold democratic voters responsible for their government’s worst excesses is the approach Osama Bin Laden used to justify the attacks against the US on September the 11th 2001). This extension of violence from the state to civilian targets didn’t start until 1976 after the Soweto uprising, where at least 176 protestors, many children, were killed by the police. With respect to Soweto the extension of violence can be seen as an understandable, but not justifiable, reaction.

While the ANC and MK is to be rightly condemned for its escalation of violence the involvement of Mandela with this decision has to be questioned: he had been imprisoned since 1962 and during this period was in isolation on Robben Island with only one visit and one (heavily-censored) letter every six months; with this limited communication it is dubious to hold him responsible for MK’s campaign against civilians.

While I would view Martin Luther King and Mohandas Gandhi as better role models for liberation movements, due to their non-violent approaches, there does come a time when state oppression can only be fought with violent means. In my view Nelson Mandela was right to do this in his time, though his movement’s successors were wrong in their subsequent approach. While I vehemently disagree with the socio-economic model that Mandela and his colleagues wished to inflict on their people I do think that he should be recognised by libertarians for his fight to free the persecuted and effectively enslaved people of South Africa.

Defending The Indefensible: Letting “The Poor Die In The Street”

How often have we libertarians heard the line: “You don’t want state healthcare? Then you must want poor people to die in the street?” Thankfully most people that we debate with have now passed this childish stage; however based on a recent experience this is not consistent, so maybe we require a brief explanation of why this isn’t true.

Logical Fallacy Or Misrepresentation?

Let’s start with a fact: no, I don’t want the poor to die in the street. But, more importantly, this does not follow from wanting state healthcare. The logic behind the assertion that ‘if A then B’ is false: this is known as a non-sequitur. Another argument also used is that “if you don’t want the NHS then you must want the US system” where it is therefore assumed that the poor die in the street. This uses the same false logic in an attempt to portray the libertarian as a heartless capitalist, which is then used as an ad hominem to ‘poison the well’ against further debate. As I questioned in my previous post ‘Is The State Needed?‘ how many of 200+ countries in the world have adopted the NHS model? As far as I’m aware there are none, so there are still 200+ other countries with various healthcare systems to choose from – why always compare to the US?

Comparison To US Healthcare

Incidentally, I’m not a fan of the US system, though not because of often-false propaganda about perceived outcomes peddled by NHS-idolisers, but because the system is heavily skewed by government and is run more for the benefit of the insurance companies and healthcare providers. These vested interests lobby government and their costs increase year-on-year. Even US conservatives recognise that their system can learn from other countries, as per this excellent abridged speech given by Avik Roy on Health Care As A Right.

In a recent study of healthcare quality the US system came last in a list of seven major industrialised countries, despite having the highest cost. It is interesting that this report ranked the UK’s system second out of seven, with many high scores for care: it would be interesting to see this report reanalysed with new data following the Mid-Staffordshire scandal.

Comparison of seven countries' healthcare by Commonwealth Fund

Comparison of seven countries’ healthcare systems. © Commonwealth Fund 2010

What is noticeable from this analysis is that the UK is sixth out of seven for providing ‘long, healthy, productive lives’; I would have thought this was the fundamental outcome required of a healthcare system. Having personally experienced potentially life-threatening ‘healthcare’ only 9 months ago I am unsurprised at this finding; if I hadn’t been so adamant that a consultant’s conclusion was wrong then I would have taken the medication that he prescribed, which probably would have killed or maimed me. However, as I always say, you cannot extrapolate from one data point. Sadly in the last year there were over 16,000 clinical negligence claims registered with the Compensation Recovery Unit, which one assumes were mostly against the NHS, so negligence is not that uncommon.

What’s So Special About Healthcare?

For the vast majority of us we do not need attention from a formal healthcare system from day-to-day, but for all of us we do need food every day. We all manage to choose a suitable food supplier each and every day and feed ourselves, yet few but the most dogmatic and terminally stupid call for a nationalised food system. Food suppliers have to arrange for raw ingredients to be grown, then prepared and shipped to stores for sale to customers. Although the supply chains for these products are often long and complex, and despite the occasional scandal, few people die from food purchased from private-sector shops or restaurants.

So why do so many believe that healthcare is more important to life than food, for instance, even though it patently isn’t? And why do the same people believe that only the state can safely provide this healthcare? The first point is obviously fallacious when the simple facts are considered: how long can you survive without food compared to how long can you survive without the state-provided healthcare system? Obviously you may rely on medication every day, but in reality once you are prescribed that by a GP that medication is (mainly) provided by the private sector – dispensing chemists and pharmaceutical companies – so this does not support the case that it’s important for the state to run healthcare.

My own view is that healthcare need not be provided by the state: there are plenty of partially or wholly funded privately provided healthcare systems globally that work better than ours. In fact in both of the two comparative surveys referenced in this article the Dutch healthcare system, most of which is privately provided, is regarded as better than the UK’s and US’s systems. As in most countries the Dutch government does interfere with the market somewhat, but this is mainly beneficial with minimal negative impact: it requires health insurance to be mandatory but it also pools risk requiring one fixed-price insurance for all.

Also, as I’ve argued before, if we must have a socialised healthcare system then the French model (often regarded as providing the best outcomes globally) is better than the UK’s, but even their system has significantly higher private funding and provision than the NHS. Why do doctors, nurses and other medical practitioners need to work for the state; for instance most are private in France? Although the French system provides universal healthcare, it is not a single-payer system and the French themselves do not regard it as socialised healthcare.

So simply comparing the UK to other countries dispenses with the myth that only a fully socialised healthcare model, with all health providers working for the state, can work. that’s simply untrue. So what’s the next reason that we simply must have socialised healthcare in the UK to prevent the poor from dying on the street?

It’s The Cost, Stupid!

As the World Health Organisation (WHO) states in its 2000 reportHealth care expenditures have risen from 3% of world GDP in 1948 to 7.9% in 1997. This dramatic increase in spending worldwide has prompted societies everywhere to look for health financing arrangements which ensure that people are not denied access to care because they cannot afford it.

Advocates of socialised healthcare, such as the NHS model, often argue that we individuals couldn’t afford the high cost of healthcare without the state providing it for free at the point of demand. This is patently wrong, as the Netherlands and many other countries demonstrate. The simple exposure of this ad ignorantiam fallacy is to ask the question “so where does the money currently come from?” From us all, of course! The NHS currently costs the UK economy just over £102Bn per annum, or around £1,600 per capita; whilst this is lower than most other countries it is still affordable when you consider that a full-time employee on National Minimum Wage incurs £1,641 in National Insurances and Income Tax in a year. The average working UK taxpayer pays over £4,000 per year in income tax alone (without employees’ and employers’ national insurances or other consumption-based taxes).

Conclusion

No libertarian that I know wants “the poor to die in the street” through lack of healthcare, but we do believe that there are better systems for healthcare provision for us all. We believe that if the state wasn’t taxing us all more than 44% of our income then the vast majority of us would be able to afford better healthcare than we currently receive. The genuinely poorest in society (as opposed to the majority who are unintentionally poor due to the state’s distortion of the economy) could be provided for by voluntary contributions or a significantly smaller tax burden.

I realise that this article will almost certainly be taken out of context by those with political motive to do so, especially with the provocative title I’ve given it. However, we libertarians must never be afraid to fight for what we believe in. The liars who deliberately obfuscate our position must not be allowed to do so, they must be challenged with facts. These facts are:

  • The NHS is not the best healthcare system in the world, it’s not even close;
  • The US is not the only system to compare it to, there are 200+ countries in the world to choose from;
  • If you want a socialised healthcare system there are much better than the UK’s NHS;
  • Funding of healthcare does not need to come solely from the government’s tax take, there are better models;
  • Libertarians want better healthcare for everyone, especially the poor who suffer disproportionately under our system.

So the next time you are challenged that you “want the poor to die in the street” as you do not support socialised healthcare, point out the facts above, correcting your accuser that it must be what they want, not you.

No Longer The Land Of The Free

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“We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness.–That to secure these rights, Governments are instituted among Men, deriving their just powers from the consent of the governed, –That whenever any Form of Government becomes destructive of these ends, it is the Right of the People to alter or to abolish it, and to institute new Government, laying its foundation on such principles and organizing its powers in such form, as to them shall seem most likely to effect their Safety and Happiness.”

– The Declaration of Independence, dated 4th July 1776, signed 2nd August 1776.

Today, July the 4th, is (wrongly) recognised as the anniversary of the Declaration of Independence. This is a momentous day for many Americans as it signals the beginning of their ancestors’ fight to free themselves from the tyranny of British rule: it led to the US Constitution and the Bill of Rights, both important for many admirers of the limited state. I think after 237th years it’s worth reviewing just how well this legal governance framework this has worked out for Americans.

Following my recent defence of the European Convention on Human Rights several libertarians rightly criticised the framework as it only forces the signatory state to grant rights to the individual, whereas the US Constitution declares rights that the government cannot abrogate. For a libertarian this is a significant difference: it declares that the individual is fundamental and the state only has limited powers seceded to it, selected powers that the people allow, and no more. I’m no constitutional lawyer but this instinctively sounds like a good approach. In theory this should limit the power and scope of government to the ‘night-watchman’ state that minarchists prefer. But how does that work in practice?

In reality the US Constitution doesn’t protect any individual as it only defines how the government should work, it is the Amendments to the Constitution that provide individual rights. The first ten amendments, proposed together in 1789 and ratified in 1791, are collectively known as The Bill Of Rights. This is the decateuch for US Constitutionalists and many libertarians, these amendments defining the fundamental limits of the state. However they’re not the only amendments, the list below illustrates some that may be of interest to libertarians:

  • The 11th Amendment protects states from being sued by ‘foreigners’. Ratified 1795.
  • The 13th amendment abolishes slavery – so the concept of ‘life, liberty original Constitution and Bill Of Rights did not extend to all people. Ratified 1865.
  • The 15th amendment stops states from denying suffrage due to race, colour or previous inservitude. But not for gender. Ratified 1870.
  • The 16th amendment allows the federal government to collect income tax. Ratified 1913.
  • The 18th amendment prohibits manufacture, distribution or sale of alcohol. Ratified 1919.
  • The 19th amendment extends suffrage to women, finally. Ratified 1920.
  • The 26th amendment extends suffrage to 18-year olds. Ratified 1971.

In 1870 Lysander Spooner wrote a pamphlet The Constitution of no Authority in which he disputed the social contract view of the constitution and argued that it was unable to stop many abuses against liberty or to prevent tyranny. After 237 years it is interesting to see the outcome of this experiment in limiting government.

First, an appropriate anecdote. In 2001 I was in Colorado on business and had been invited to a colleague’s house for dinner with his family. I dropped by the local supermarket, Safeway, to pick up a bottle of wine as a gift to my colleague for his kindness. I searched the aisle that had beer and wine coolers but couldn’t find any wine. I eventually asked the only member of staff in sight, at the pharmacy desk, where the wine was stacked. I was shocked when she said that in their state they cannot sell ‘liquor’ in a supermarket. I asked where I could buy wine, she responded: “the liquor store, next door”. this is just one example of the many weird infringements that Americans accept whilst still believing they live in the ‘land of the free’.

Some other examples of stupidity include:

While these are examples of stupid laws that may concern few people, there are greater evils enacted by the US Government that should worry everyone. Three such examples are Ruby Ridge, Waco and the Kent State shootings.

If you are not aware of these events then here’s a synopsis:

There were many student protests from 1968 onwards, mostly over the Vietnam war. In May 1970 at Kent State University in Ohio the National Guard opened fire on peaceful, unarmed protesters. The guardsmen fired 67 rounds over a period of 13 seconds, killing four students and wounding nine others. Other protests in that period that resulted in fatalities at the hands of police include the Orangeburg massacre and the Jackson State killings. At another University protesting students were bayoneted.

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John Filo’s iconic Pulitzer Prize-winning photograph of 14-year-old Mary Ann Vecchio kneeling in anguish over the body of Jeffrey Miller

In 1992 at Ruby Ridge in Idaho the United States Marshall Service (USMS) attacked a family on their property killing the 14-year son and starting a siege. The next day Randy Weaver attempted to visit his son’s body kept in an outhouse and a sniper attempted to execute him on sight, shooting him in his back. Randy ran back to his house, badly injured, and the sniper shot again, firing through the front door blowing Vicki Weaver’s face off and killing her while she stood holding her 10-month old baby. Although the sniper was charged with manslaughter (!) the case was dismissed.

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Vicki Weaver as seen from a USMS surveillance position on 21 August 1992, the day before her assassination

In 1993 at Waco in Texas the Bureau of Alcohol, Tobacco and Firearms attacked the property of a religious sect and were met with armed resistance; four ATF agents were killed. Following a very public 51-day siege the FBI attacked the compound using military type vehicles (including two Abrams tanks) resulting in 76 deaths including 21 children (24 of the Branch Davidians were British).

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Mount Carmel Center, home of the Branch Davidians, in flames on April 19th 1993 following FBI assault with military weaponry. 76 civilians died in the assault including 21 children.

These are just a few examples of what a Government that has no limits will do to its citizens: sadly the Constitution has failed. While each event described above drew criticism and enquiries, no state official was successfully prosecuted for their actions, though in both Waco and Ruby Ridge some of the citizens targeted were subsequently imprisoned. This is the state in action – protecting its own employees, even when clear wrong-doing has happened, and prosecuting its critics (we see this frequently in the UK with the deaths of Ian Tomlinson and Jean Charles de Menezes as recent examples). One only has to review the list of the White House Horrors during Nixon’s tenure, especially the Huston Plan (including illegal surveillance of, and detention camps for, student protestors), to realise what contempt the state apparatus has for its citizenry.

So on this anniversary let us rightly celebrate the Declaration of Independence, regarded as a great step forward for the people of North America, but let’s not forget it led to the well-intentioned Constitution which has in every measurable way failed to protect the rights of its citizens. The US Government is a ‘democratic’ dictatorship run by authoritarians from one of two ruling parties, who bleat about freedom at the ballot box, but shred individual rights when elected by the feeble-minded and hoodwinked. The US citizen should remember there is “the Right of the People to alter or to abolish” a despotic government; they alone amongst the people of the world have a legal and defined precedent to do this in their Declaration of Independence: it enables them to legally overthrow their shackles. They should peacefully and legally invoke the Declaration’s intent and petition for the winding up of the existing government structure.

I’ll leave you with a thought from Lysander Spooner:

“As long as mankind continue to pay “National Debts,” so-called,—that is, so long as they are such dupes and cowards as to pay for being cheated, plundered, enslaved, and murdered,—so long there will be enough to lend the money for those purposes; and with that money a plenty of tools, called soldiers, can be hired to keep them in subjection.”