Economics

Cllr Ian Parsley’s humorous take on the Pre Budget that never was

See http://ianjamesparsley.wordpress.com/2009/12/10/lies-damned-lies-and-spending-plans/

Society

Is There Such a Thing as Society?

The infamous “no such thing as society” interview given by Prime Minister Margret Thatcher to Women’s Own magazine, October 31, 1987:

I think we have gone through a period when too many children and people have been given to understand “I have a problem, it is the Government’s job to cope with it!” or “I have a problem, I will go and get a grant to cope with it!” “I am homeless, the Government must house me!” and so they are casting their problems on society and who is society? There is no such thing! There are individual men and women and there are families and no government can do anything except through people and people look to themselves first. It is our duty to look after ourselves and then also to help look after our neighbour and life is a reciprocal business and people have got the entitlements too much in mind without the obligations, because there is no such thing as an entitlement unless someone has first met an obligation [...]

It would be ignorant to say that there is no such thing as society. Society is the purposeful actions of all the individuals who participate in it. As such it is simply the sum of all its parts. Delve a little bit deeper and you will see that is in fact the most liberating and fulfilling invention of mankind discovered by the use of reason. The ability for man to cooperate and pursue his ends is society. Working within the societal structure of mutual co-operation to facilitate exchange of goods and services, you get the additional benefits of friendship and a sense of belonging or togetherness. This is often hailed as one of the greatest benefits of living and cooperating together.

The principle of the division of labour that allows us to avoid providing individually for all our goods and services, shelter and warmth, with the necessary impoverishment this would mean for the majority (and probably death), make us what we are as human beings. We are lifted out of the survival of the fittest war of all against all.

The Darwinian nightmare is not writ large in the human species as it seems to be for most other life forms.

Mrs Thatcher was taken out of context, as can be seen when you read the full text of the talk. However I suspect she, or her speech writers, displayed little understanding of the true benefits of the discovery of mutual human co-operation. I think they were also of the school of thought that would quite rightly argue for less government, as is Cameron, one of her successors. However she did not have much of an idea of what to put in its place. The transition from a government-run, welfare-providing, rule-making, centralised decision-making society to individual responsibility, local-community-led society is quite a painful process. To be smoothly transitioned to a society more compatible with liberty, I fear warrants only a constructivist approach to getting top-down government out of our lives and to rebalancing responsibility away from government and to the individual and the family. Cameron is spot on the money with regard to this.

Consider these extracts from “The Big Society” speech by David Cameron our aspiring PM.

I believe that in general, a simplistic retrenchment of the state which assumes that better alternatives to state action will just spring to life unbidden is wrong. Instead we need a thoughtful re-imagination of the role, as well as the size, of the state.

And:

The size, scope and role of government in Britain has reached a point where it is now inhibiting, not advancing the progressive aims of reducing poverty, fighting inequality, and increasing general well-being. Indeed there is a worrying paradox that because of its effect on personal and social responsibility, the recent growth of the state has promoted not social solidarity, but selfishness and individualism.

This is an extremely important point. Absent personal responsibility and the mutual bonds that bind us together through the universal division of labour fall away. The selfish, those who do not take individual responsibility, the person who says he has a “right” to a job, a house, an income etc, these people believe others must provide for them. This is selfishness in its extreme, if they are fit and ready to work. We all suspect that with 2.7 million people on Incapacity Benefit, there is extreme selfishness and little societal / individual responsibility at play. In war, enemies have tried their best to bomb the hell out of us and incapacitate as many of us as possible, but I suspect in 1945 there were not 2.7m people incapacitated in the UK!

[T]he re-imagined state should not stop at creating opportunities for people to take control of their lives. It must actively help people take advantage of this new freedom. This means a new role for the state: actively helping to create the big society; directly agitating for, catalysing and galvanising social renewal.

If this means encouraging tax breaks of social entrepreneurship or social action schemes then bring it on, as this will truly bring benefit to society and strengthen the bonds of individual responsibility. If this means some arbitrary intervention to make one class of person better off at the expense of another, his project will be doomed to fail. It all seems to be positively pointing to the former.

So yes, in the fight against poverty, inequality, social breakdown and injustice I do want to move from state action to social action. But I see a powerful role for government in helping to engineer that shift. Let me put it more plainly: we must use the state to remake society.

Cameron’s main contention is that the closing of the income gap between the highest and the lowest sectors of society provides a better society.

So the evidence suggests that up until the late 1960s, the expansion of the state to advance social justice was not only well-intentioned and compassionate, but generally successful. However, even in this period, it’s important to look at the complete picture. Some state extensions helped tackle poverty, others were less effective. Some did so while encouraging responsibility and local pride at the same time others undermined these virtues.

Since 1997,

the state continued to expand under Labour, our society became more, not less unfair.

He goes on to say

In the past decade, the gap between the richest and the poorest got wider. Indeed, inequality is now at a record high. The very poorest in our society got poorer – and there are more of them. The incomes of the bottom ten percent actually fell by £6 per week between 2002 and 2008 before housing costs, and £9 per week after housing costs. The number of people living in severe poverty has actually risen – not fallen, risen – by 900,000 in the past ten years.

I have to say, I hope this part of the speech is political posturing as who cares how rich the rich get as long as the bottom section is rising, everyone is indeed benefiting.

Cameron then poses a good question that we would all love to know the answer to:

How is it possible for the state to spend so much money, to devote so much energy, to fighting poverty – only for poverty and inequality to win the fight?

Part of the answer is as follows:

We have surely learnt that it is not enough merely to keep funding more and more generous tax credits. Indeed, the harm that means-tested benefits do to work incentives is beginning to undo the good they do in raising people’s incomes.

As the Institute for Fiscal Studies observed of the Government’s approach:
“Its current strategy of increasing … [means-tested] child tax credit is effective at reducing poverty directly, but its indirect effect might be to increase poverty through weakening incentives for parents to work.”

Payment under Cameron will not be by right, but by performance. Hallelujah!

Responsibility of the individual will be placed at the centre of a Cameron agenda:

as the state continued to expand, it took away from people more and more things that they should and could be doing for themselves, their families and their neighbours. Human kindness, generosity and imagination are steadily being squeezed out by the work of the state. The result is that today, the character of our society – and indeed the character of some people themselves, as actors in society, is changing.

Cameron recognises the value of education: those with better educations will do better in a globalised world. So there is self governing status for schools and much more parental involvement:

when you are paid more not to work than to work, when you are better off leaving your children than nurturing them, when our welfare system tells young girls that having children before finding the security of work and a loving relationship means a home and cash now, whereas doing the opposite means a long wait for a home and less cash later; when social care penalises those who have worked hard and saved hard by forcing them to sell their home, rather than rewarding them by giving them some dignity in old age; when your attempts at playing a role in society are met with inspection, investigation, and interrogation, is it any wonder our society is broken?

And here lies the rub.

The paradox at the heart of big government is that by taking power and responsibility away from the individual, it has only served to individuate them. What is seen in principle as an act of social solidarity, has in practice led to the greatest atomisation of our society. The once natural bonds that existed between people – of duty and responsibility – have been replaced with the synthetic bonds of the state – regulation and bureaucracy.

Our alternative to big government is the big society.

But we understand that the big society is not just going to spring to life on its own: we need strong and concerted government action to make it happen.

The policy prescriptions are a wealth of initiatives, backed by strong legislation to devolve the current powers of the state to the smallest local unit: neighbourhood empowerment:

Where neighbourhood empowerment is not practical we will redistribute power to the lowest possible tier of government, and the removal of bureaucratic controls on councils will enable them to offer local people whatever services they want, in whatever way they want, with new mayors in our big cities acting as a focus for civic pride and responsibility.

This decentralisation of power from the central to the local will not just increase responsibility, it will lead to innovation, as people have the freedom to try new approaches to solving social problems, and the freedom to copy what works elsewhere.

[...]

Galvanising, catalysing, prompting, encouraging and agitating for community engagement and social renewal. It must help families, individuals, charities and communities come together to solve problems.

We must use the state to remake society.

We must use the state to help stimulate social action.

If Cameron can achieve all of this he will be advancing the tradition of the Great Manchester social reforming Liberals such as Cobden & Bright. He will also be working in the tradition of Gladstone. One of those Great Manchester Liberals, Richard Cobden said:

Peace will come to earth when the people have more to do with each other and governments less.

After reading this speech by Cameron and appreciating his deeper understanding of society than Margaret Thatcher, I realise that, like Cobden, he will be a great social reformer: he deserves our support and encouragement in this project.

Society

Demand for £50 notes ‘fuelled by lack of faith in banks’ – Telegraph

Via Demand for £50 notes ‘fuelled by lack of faith in banks’ – Telegraph:

Demand for £50 notes has risen sharply during the recession because the public has lost faith in the banks, the Bank of England’s chief cashier Andrew Bailey has suggested.

The suggestion is that more people are hoarding cash, rather than depositing it with banks, after the whole banking system was on the brink of collapse post-Lehman.

Which tends to reinforce Prof Jesús Huerta de Soto’s reform plan, explained by Toby Baxendale here and James Tyler here.

Further Reading

Economics

The Errors of Posen, New MPC Recruit

Norma Cohen in the Financial Times of 26 October 2009 wrote:

Britain’s economy cannot recover unless its damaged banking system is restructured, the newest member of the Bank of England’s monetary policy committee warned on Monday night.

For a short moment, I thought we might see the Cobden Centre’s proposal for bank reform discussed intelligently! I publish the usual warnings that when you read it, you will find that the Emperor has no clothes. I will also be showing you that the world is not flat, but it is in fact spherical.

Posen quite rightly contends that we need to “fix” our banking system. This fix seems to be more banks. We have between 8.5 and 13.26 banks per million people in the Group of Seven countries. I do not see the connection with this earth shattering proposal to create more banks and new economic prosperity. It seems to rest on just having more lending channels.

I will stick with the banking proposal mentioned above, which is based on sound legal principle and robust economic theory.

Separately, however, he scotched suggestions that the £175bn devoted so far to quantitative easing in the UK – the vast majority of which involves gilts purchases rather than corporate bonds – could sow the seeds of future inflation, dismissing supporters of such a view as “nutters”.

If the Bank could create inflation easily under such circumstances, and if the majority of market participants and households believed that – not just the nutters – then we would be halfway home,” said Mr Posen.

Posen will certainly deem the Cobden Centre as “nutters” as we have opposed the terrible, unjust effects of QE. The last time I wrote fully on this matter was here.

In simple terms, new money introduced into the economy never enters it evenly. Indeed, it first goes to the bankers who organise to both sell and buy the bond and the bond holder who receives the newly minted money. In possession of this purchasing power, they may pay off a bit of debt which will make lenders think there is more liquidity to lend.

This means projects which were marginal and, more than likely, do not have much hope of survival come into existence. When this happens broadly, it is called a “boom”. This is a distortion of the capital structure and will only sow the seeds of a new bust. Thus Posen has no Theory of Capital. In the second section of this article I explain in more detail why you need to have a good theory of capital and a working understanding of the structure of production.

Conversely, recipients may go out and buy something with this newly-minted purchasing power. This will bid up prices. This will slowly but surely ripple through the economy and at each point in time, the next spender / purchaser down the line pays that little bit more for goods and services. Now, those on fixed incomes, pensioners, people on the dole or low incomes tend to spend less frequently. This means that they will pay, more than likely, the higher prices. Thus, we have a wealth transfer from the poorest in society to the richest in society.

For people interested in social reform as we are at the Cobden Centre, a stealthy transfer of wealth from the poorest to the richest is exactly the wrong thing to be achieving.

Also, when QE hits the banking system, as we have seen from our contributor Gordon Kerr’s brilliant article, the banker will create a credit derivative from this transaction and book up to 30 years’ profit to his P&L for doing so.

This is another reason why banks are now showing record recovery profits and our political masters are allowing this to go ahead.

I always ask readers who doubt what I say regarding QE to ask themselves, “if QE is so good for the economy, why not carry it on and end world poverty now?” Mr Posen is in the infamous company of the likes of Gideon Gono. This is the Reserve Bank of Zimbabwe supremo who in his book “Casino Capitalism” gloriously savours how all the best governments in the World have now followed his lead in printing money (another name for QE) so he must be right!

Much as we all want to come out of this recession as soon as possible, we must take note that it is only by entrepreneurs making things that people want, better and cheaper, creating more wealth than existed before, that we will be able to climb out of this Labour Party induced mess. Lower burdens on the productive class are the only sure policy initiative for doing this.

Society

Britain’s Business Community – Your Country Needs You!

Chris Neal explains how the reports of the Centre for Social Justice and Conservative Party policy are converging in a direction which tends towards Cobdenism: people having more to do with one another and the government less.

The Centre for Social Justice’s 2007 “Breakthrough Britain” report identifies five pathways to poverty: family breakdown, economic dependency and worklessness, educational failure, addiction and serious personal debt. This seminal work has led to the development of over 190 policies to reverse social breakdown.

The CSJ’s influence at the 2009 Conservative Party Conference was evident with their policy recommendations influencing much of the modern Conservative approach unveiled in Manchester. Decentralisation, Social Action, Accountability, Housing, Welfare Reform, Family, Law and Order, Schools, Skills, Re-training, Apprenticeships were among the topics on the main agenda for this Conference and it was clear that Breakthrough Britain had permeated Conservative Policy on each. Iain Duncan Smith has shown great courage in tackling issues of social justice head on with his team at the CSJ and was rightly acknowledged by David Cameron who said about IDS in his Conference speech “I am proud to announce today that if we win the election he will be responsible in government for bringing together all our work to help mend the broken society.”

David Cameron vowed to devolve power to communities in his landmark speech to the Open University on 26th May 2009 and this again was underlined in Manchester. Empowering local people and communities to take control or as Iain Duncan Smith puts it “Our approach is based on the belief that people must take responsibility for their own choices but that government has a responsibility to help people make the right choices.”

This all makes great reading and when combined with Tory promises to sweep aside great swathes of bureaucracy and quangocracy would have been music to the ears of ‘Manchester Liberals’ such as Richard Cobden. But are we ready for this as a Nation? Has society become too reliant on economic dependency and worklessness after 12 years of top down government? Are some of the poorest Britons now so emasculated and devoid of aspiration that they won’t be able to adapt to a less intrusive state, one that encourages enterprise and personal choice?

The modern Conservative message makes a lot of sense and could doubtless see the revival of our Nation’s fortunes. Prosperity based on production rather than spiraling debt and replacing a culture of instant gratification with one of hard work and thrift. A Government committed to rewarding social responsibility, families, savings and enterprise. Government can create the framework but unless corporately we embrace the opportunities on offer all the elegant oratory heard at the Conservative Conference and the profoundly accurate conclusions made by the Centre for Social Justice will amount to nothing.

David Cameron in his Conference speech on Thursday 8th October spoke about opportunity “I know how lucky I’ve been to have the chances I had. And I know there are children growing up in Britain today who will never know the love of a father. Who are born in homes that hold them back. Who go to schools that keep them back. Children who will never start a business, never raise a family, never see the world. Children who will live the life they’re given, not the life they want. That is what I want to change. I want every child to have the chances I had.”

Opportunity has been missing for the poorest in society and they need more than a lottery ticket to escape poverty. I am not talking just about the children growing up now but the preceding generation, the so-called NEETS and NINJA’s. They are entrenched in economic dependency with no motivation to work as frequently they are better off financially by staying on benefits. Many aren’t interested in working even when offered the opportunity, as the old saying goes “you can lead a horse to water but you can’t make it drink”. Well they certainly know how to drink but they have never been led to water! What would happen if real opportunity came crashing in on their lives? Opportunity in the form of skills training, mentoring and micro venture funding. The opportunity to begin apprenticeships without formal qualifications. Opportunities that can build respect, self esteem and encourage ambition. Some would respond and through hard work begin to benefit from the change in their circumstances, in turn maybe their success would rub off on others.

Top down state solutions do not work as public servants have to tick boxes for ministers and are not free to react to individual needs. Those of us in the business community however are unencumbered by bureaucracy therefore allowed to think laterally and react appropriately to individual needs. Stop for a moment to consider your own situation and how you might be able to contribute. I was inspired by the Get Britain Working Campaign to set up local Job Clubs and can testify first hand the good that comes from people getting alongside one another when facing the difficulties bequeathed by unemployment. I have introduced a second strand to the Clubs where those prepared to start their own ventures have the opportunity to be mentored and even funded by members of our local business community. Mentoring in itself is socially cohesive creating friendships between people whose paths would not otherwise have crossed. This is more a case of leading someone to water and having a drink with him! Could you start a Job Club in your community or support budding entrepreneurs?

We assume Great Nation stature in times of adversity and maybe this deep recession will manifest the legendary but dormant British qualities of cooperation, courage, determination and hard work to overcome looming economic and social bankruptcy. David Cameron’s vision of a modern Conservative Britain deserves to succeed and we must take responsibility to make it happen.

I would enjoy hearing from anyone who might consider forming a Job Club: please use our contact form.

Further Reading

Economics

Why Budget Deficits are Bad for the Economy and Why Sir Samuel Brittan is Wrong

Toby Baxendale exposes flaws in the economic thinking of the left, indicates the dangers of deficit spending and points to a better way to fund welfare while stimulating genuine commercial investment.

Published in the FT on Friday the 2nd of October under the title “A cool look at the current deficit hysteria”, we find an article by a respected economist saying that there is nothing to worry about running a deficit at the present and predicted size. Our predicted budget deficit of 12.4% of GDP in the current financial year, gradually declining to 5.5% in 2013-14 is no big deal. Coupled with the public sector debt itself, we see it leveling out at 76% of GDP. Sir Samuel says “Debt ratios of this size are historically far from unprecedented. In the Victorian period the ratio was nearly 200% and almost reached that level again in the early 1920s. In 1956 it was just under 150 per cent.” He goes on to add, “the debt was gradually reduced from the peaks mentioned above without any heroic gestures.” In a classic Keynesian tone, he concludes “The big error of the current discussion is to confuse the budget balance of individuals and companies with the government budget balance, which needs to be in deficit so long as attempted savings exceed perceived investment opportunities. Gordon Brown more or less understands this, and I wish he would use his talents to explain such fundamentals instead of stirring up an outdated class war.”

For our international readers, Gordon Brown’s speech to the Labour Conference 2009 was a class war-laced speech worthy of some of the most envy driven and hating sections of the Left. The full text is available here, if you want to take yourself back to the start of the last century. I presume this is what Brittan refers to in the last quote.

Also deficit spending — living beyond our means — in the language of the left is “investment.” There are 5 references to this type of activity in this speech. I recall a timely quote to remember from Ludwig Von Mises in Human Action (Scholar’s Edition), Page P.737:

At the bottom of the interventionist argument there is always the idea that the government or the state is an entity outside and above the social process of production, that it owns something which is not derived from taxing its subjects, and that it can spend this mythical something for definite purposes. This is the Santa Claus fable raised by Lord Keynes to the dignity of an economic doctrine and enthusiastically endorsed by all those who expect personal advantage from government spending. As against these popular fallacies there is need to emphasize the truism that a government can spend or invest only what it takes away from its citizens and that its additional spending and investment curtails the citizens’ spending and investment to the full extent of its quantity.

How is Wealth Created?

As I have said on this web site before, wealth is created on the factory floors, in the boardrooms and in the offices of people making their factors of production — land, labour and capital — work better for them in satisfying the needs and requirements of their consumers. Invariably, this means those factors need to be brought together in better combinations or made more productive. The latter is the most common way and this almost always needs savings — i.e. forgone consumption — to invest in the newer, more productive processes.

Governments do not create wealth, they can only take it from A and give to B.

What does an Interest Rate do?

As I have said before on this web site:

Simply put, you value more highly present goods of the same quality and quantity than you do future goods. Furthermore, the value of future goods diminishes as the length of time necessary for their completion increases. This sets up a price differential between goods now or goods later. This price differential is called an interest rate.

In reality it is also the rate of profit in the economy, as it is these saved resources that are the only source of future funding for investment and the associated return on that investment. So it is arguable to say that this is the most important metric in the economy.

To underscore this, it is the saved resources of all the economic agents in society that produces the goods and the profits of the future. The return (interest) on the savings can only be the additional component that allows the additional investment in making the production structure — all those activities mentioned above going on in factories and offices — that will produce the new goods and services. The rate of return on these savings must in-fact be the rate of profit of that which is lent to enterprises.

How do we Fund a Deficit?

The Government Bond

If the government has taken less in tax receipts than it gives out in transfer payments i.e. it has deficit, then it will raise the difference on the whole through the selling of government bonds or “Gilts”. These are promises that the UK taxpayer will pay back the bond holder at a date in the future.

It is important to note here that the savings and investment process that ensures that saved resources are put to their most urgent investment needs, as described above, immediately becomes distorted when a government bond soaks up resources to go into the government coffers for spending and not into productive industry. In short, at the very time today when we need our best wealth creators, the owners of all the businesses in this country, to be firing on all cylinders, looking at making themselves more productive and selling goods and services more in tune with the new demands today, in this post-boom world, we have a policy of running a deficit which will starve these wealth creators of the wherewithal to start lifting us out of this mess.

Contrast this with the Corporate Bond

A wealth creator may sell a corporate bond to fund his investment activities.  Thus we must also observe that when you work producing wealth, you create a surplus.

You had capital of £X and, by the end of the year, you have capital of £X + £Y. You can give a return — coupon or interest rate — back to your investor. The merry-go-round can start all over again with a greater level of wealth accruing in society.

With the government bond, capital is taken away form the citizen and the interest is extracted via the taxation system to pay the bond holder. There is no wealth created, only at best transferred to another person and at worst totally destroyed.

When the proceeds of the government bond are issued to people on the dole (2.6m) and people on incapacity benefit (2.7m), capital is completely destroyed and the tax payer then pays interest on nothing!

A Note on Welfare Spending and the Future Funding of Welfare Provision

We currently rob Pater to pay Paul: that is, we fund a good portion of our welfare budget via the on-going issuance of public debt, the need for which has arisen as we are not prepared to live within our means as a nation i.e. less tax is taken than is spent by HMG.

The Rt Hon Ian Duncan Smith MP has produced a report here called “Dynamic Benefits: Towards Welfare That Works” that starts the process of simplifying the system for the claimant and the administrator. This is very welcome and long overdue. It also starts the reversal of the process whereby, over the last 12 years of Labour Government, benefits have become so rewarding — in the sense that if you are on welfare and you take employment, your net pay decreases — there is a great incentive never to get off them. All of this is welcome.

However, what you need to do, in the smallest local regions possible, is create an insurance scheme in a mutual or let the old Friendly Societies — see here for a brief account of their great history — take subscriptions from the people in the area to provide welfare to the people who need it when they fall on hard times. This has the effect of forcing the Society to invest in productive business activities to get a return on their investment to pay any welfare claims.

Contrast a bond paying interest on nothing (no capital) like a government bond with a corporate bond generating wealth (paying interest on capital) which the old Friendly Societies used: the latter is beneficial to the economy because investment takes place. Government spending can only ever be a redistribution.

Summary:

As Ludwig Von Mises says in the Scholar’s Edition of Human Action p770/1:

If government spending is financed by taxing the citizens or borrowing from them, the citizens’ power to spend and invest is curtailed to the same extent as that of the public treasury expands. No additional jobs are created.

So the message I am hopefully giving here, with the best clarity that I can, is that deficit spending totally undermines the wealth creation process.

If the government is urged to step in and spend where the private sector sees no opportunity, as Sir Samuel says, this will only lead to more general impoverishment. Does it need saying that only wealth creators create wealth and not wealth re-distributors, that is, the government?

This gives rise to the notion that a public debt is no burden because we owe it to ourselves. Now in fairness to Brittan, he is not saying this, he is just saying that in the absence of enough opportunities for savings to be fully utilized, then the government should spend instead. I hope in the above I have demonstrated that if funded by bonds (the majority way), then this is in fact a set-back to recovery.

Society

War in Afghanistan

Via The Guardian

At first light last Friday, in the Chardarah district of Kunduz province in northern Afghanistan, the villagers gathered around the twisted wreckage of two fuel tankers that had been hit by a Nato airstrike. They picked their way through a heap of almost a hundred charred bodies and mangled limbs which were mixed with ash, mud and the melted plastic of jerry cans, looking for their brothers, sons and cousins. They called out their names but received no answers. By this time, everyone was dead.

“The villagers were fighting over the corpses. People were saying this is my brother, this is my cousin, and no one could identify anyone.”

So the elders stepped in. They collected all the bodies they could and asked the people to tell them how many relatives each family had lost.

A queue formed. One by one the bereaved gave the names of missing brothers, cousins, sons and nephews, and each in turn received their quota of corpses. It didn’t matter who was who, everyone was mangled beyond recognition anyway. All that mattered was that they had a body to bury and perform prayers upon.

The Cobden Centre has been established to promote honest money, free trade and peace. If we trade together we have no interest in bombing each other — let us seek peace through unilateral free trade.

Society

The Welfare State in Crisis

There are 2.7 million people claiming Incapacity Benefit in this nation. I often wonder if after the World War Two, did we have more than 2.7m incapacitated civilians on this Island once the soldiers had all returned? I do not know for certain, but I suspect not. Suffice it to say, although 208 British Soldiers have paid the maximum price in the conflict in Afghanistan, we are essentially a country at peace and have been thankfully for a long period of time. Not since the Second World War has the totality of the nation been involved in conflict. So why do we have so much incapacity? With the relentless avalanche of Heath and Safety laws being applied to business, they can for sure not be putting more people out of work by injury. Have the standards of our health service fallen so low over the last 60 years that more people then ever are incapacitated? To all of these, I think not. The majority of these persons who are incapacitated are just plain and simply put, work shy.

In the Sunday Times of the 30th of August, Michael Portillo in this article, said that the intentions behind the formation of the Welfare State were to prevent this abuse of our system by the work shy.

The state “should not stifle incentive, opportunity, responsibility”, wrote Sir William Beveridge in the 1942 report that inspired the post-war welfare state. “In establishing a national minimum it should leave room and encouragement for voluntary action by each individual to provide more than that minimum for himself and his family.

How many of the 2.7m are genuine in their illness? Would it be 100,000, or 200,000, but certainly not 2.7m. Even if it was a cool 1 million people, we would still have 1.7m people who are work shy and scamming the system.

When I sit as a Magistrate, I often see abuse. I was in a domestic violence court recently where we were reviewing a Pre Sentence Report on a young man who had beaten up his 29 week pregnant teenage girlfriend in the High Street under several CCTV cameras. The Probation Service informed us that he was on incapacity benefit but that he was looking forward to the start of the football season so he could resume playing for his local team as this would take up some time. I do not know if it occurred to the probation service that incapacity benefit and a young man playing football to most would not go together.

Let’s be clear, we the taxpayer pay 2.7m people to sit at home and do nothing. This is a good 10% of our workforce that sit on the payroll of the taxpayer and do nothing. People like the above are forcing the tax burden up on the hard working families of this nation of ours. As Portillo says “As a result, taxpayers have spent £346 billion on payments to those out of work since Tony Blair entered No 10.” This is 2 and a quarter of a years worth of income tax for the whole nation out of the last 12 years just on this!

He then goes on to say “It might have been possible for the state to fine-tune benefits in that way in the days when parishes organised relief and every claimant was known to the local poor law guardians. It is much more difficult today in systems that are nationalised and standardised.

But perhaps, at least, we ought to assume that fit young people are not entitled to anything. If a few young men from sink estates are now heroes in Afghanistan, why should we presume that all the others are capable of nothing useful at all?”

A centrally planned benefits system, like anything centrally planned is bound to fail. It fails because it is impossible for a centrally planning body such as a Whitehall department, to know all the facts and all the circumstances of all the people to be able to access who is actually in an incapacitated state. We should do the following;

  1. Immediately send the Incapacity to the local councils as the custodians of the state,
  2. Let the local citizens in each ward choose a voluntary council of wise and impartial people from all walks of life, the “community guardians” in that small local ward area – maybe have a pool of 50 – 100 people who could participate. Perhaps the selection criteria of the Magistrates could be used.
  3. Each week, let the citizens of the ward apply to the voluntary local ward council or community guardians for “their” benefit.
  4. The voluntary local ward council , with all their local ward, street by street knowledge, would more than likely have some intimate knowledge and information about the life style of the applicant, or could easily take soundings and find out if their application is genuine or not.
  5. All the ward based GP’s should as part of their contracts be required to work on behalf of the local community to assess the fitness of someone for work.
  6. The law must lay down strict boundaries within which  communities may be compelled to support individuals and families for  reason of incapacity.
  7. Having knowledge also about what jobs are available in the community and the insights of an on hand GP , they may be less likely to grant benefits to the simply work shy. Indeed they will focus on only those who can not work. They may even elect to spend more on these unfortunate , but in many cases deserving people.
  8. The final reform would be to abolish the central taxation that relates to this provision of benefits and devolve it entirely down to the local ward to levy a tax on its citizens to pay for the incapacity of its people. With the voluntary policing of its distribution, I am very sure this tremendous burden on the hard working people of the UK will fall substantially freeing up masses of new resources to wealth creation.

Enough is enough: social progress requires everyone who can to do something of value for others. This aspect of the Welfare State needs to be reformed immediately

Society

Henry John “Harry” Patch (17 June 1898 – 25 July 2009)

Chris Neal commemorates Harry Patch, who understood the human cost of violent conflict, asking, ‘What must Patch have thought about the loss of life on our streets through knife crime? Young men carrying knives claiming that they only do so to protect themselves, will they heed the words of Harry Patch that no confrontation is “worth one life”?’

Harry Patch, an apprentice plumber, was conscripted aged 18 into the Duke of Cornwall’s Light Infantry and taught how to fire a Lewis Gun. He must have been taught well — as evidenced in the documentary ‘World War One in Colour’ — when coming face to face with a German Soldier he recalled Moses descending from Mount Sinai with God’s commandment, ‘thou shalt not kill’, and couldn’t kill the German. Instead, he shot him in the shoulder, which made him drop his rifle. The German kept running towards Patch’s Lewis Gun, he then shot him above the knee then the ankle. Patch exhibited remarkable clarity of thought in this intense encounter and said of the incident “I had about five seconds to make the decision. I brought him down, but I didn’t kill him.”

Patch himself was injured in the groin from an exploding shell on 22 September 1917 which claimed the lives of three of his friends and comrades. Patch referred to 22 September as his personal Remembrance Day describing the 11th November Act of Remembrance as “just show business”. He kept silent about the War for eighty years only breaking his silence in 1998 for the BBC documentary “Veterans”. He was an ordinary man whose ordinary life was made extraordinary by his longevity and his message of peace.

Before Prime Ministers Questions each week we hear the PM and Opposition leaders name and pay tribute to our brave soldiers giving their lives in Afghanistan or Iraq. Can you imagine a list of names that grew by three thousand a day? Harry Patch fought in Passchendaele where there were around 250,000 British Casualties. He witnessed first hand a loss of life that brings a cold perspective to the cost of war.

British forces evacuated an Iraqi civilian casualty. This man died.

British forces evacuate an Iraqi civilian casualty. This man died.

“Too many died. War isn’t worth one life,” said Mr Patch.

He said war was the “calculated and condoned slaughter of human beings”.

“The Germans suffered the same as we did,” he said.

He understood the human cost, what must then he have thought about the loss of life on our streets through knife crime? Young men carrying knives claiming that they only do so to protect themselves, will they heed the words of Harry Patch that no confrontation is “worth one life”?

Whether the conflict is caused by a lad straying onto another gang’s turf, a nation wishing to impose its will on another, or federalists stealthily emasculating the sovereignty and liberty of member states, Harry’s message is to be heeded.

Richard Cobden (1804-1865) had it right when he said “Peace will come to earth when the people have more to do with each other and governments less”.

Rather than seeking to control one another, we should engage. By encouraging free trade and honest money, we will see peace and social progress.

Harry Patch spent the last eleven years of his remarkable life building bridges of peace throughout Europe, being honoured by those he met and honouring fallen comrades and foes.

Let us seek to perpetuate his memory by continuing to foster friendships. We believe in free trade as a way to develop these friendships: The Cobden Centre will commemorate Harry Patch’s Remembrance Day each 22nd September with a dinner dedicated to free trade and peace.

Do contact us if you would like to attend.