The truth about Thatcher and the steel industry

There’s an old saying: “A lie told often enough becomes the truth”. It’s one ‘comedian’ and former Socialist Workers Party member Mark Steel should know well, it comes from Lenin after all, and he certainly seems to be taking it to heart.

Steel’s recent piece for The Independent is titled ‘You can’t just shut us up now that Margaret Thatcher’s dead’. Oh, that we could! Steel has, after all, built a career out of the sort of dated, unamusing jokes about Thatcher that guarantee you steady work at the BBC. Personally I don’t know why the Indy hasn’t given Tim Vine column inches to opine on deindustrialisation, at least he’s funny.

And it wasn’t long before Steel broke out the Big Lie: “in 1980 Margaret Thatcher’s government shut down most of the steel industry, as part of her plan to break the unions”. You hear this argument a lot, as though repeating it will make it true. But a look at the facts shows that it isn’t.

In 1955 the British steel industry was working at 98 percent of capacity. But, over the following years, this declined as a result of its failure to adopt new methods (such as the basic oxygen steel-making process and continuous casting) and increased steel production in other countries. By 1966 just 79 percent of capacity was being utilised.

The following year a large chunk of the British steel industry was renationalised (it had been nationalised for a few years in the early 1950s). In 1970 the new British Steel had a record output of 23.8 million tonnes (4.7 percent of the world total, down from 25 percent in 1929).

But the industry was now being run for political rather than economic ends and massive over-manning and consequent low productivity became endemic. By 1977 output had actually fallen to 20 million tonnes (3 percent of the world total). By 1978 British Steel was operating at just two-thirds capacity. And by 1979, British steel workers were a third less productive than their French competitors and 40 percent less productive than West German steel workers.

In the fiscal year 1978-1979 British Steel lost £309 million. This rose to £545 million the following year, one in which workers struck for six weeks for a 20 percent pay rise. They got it, but my dad, who worked in a steel works in Sheffield at the time, said that by the time they went back to work their foreign customers had gone elsewhere.

In 1980-1981, British Steel lost a staggering £1 billion on turnover of £3 billion, earning itself a place in the Guinness Book of Records. By contrast the output of Britain’s small private sector steel industry doubled between 1967 and 1979, from 3 million tonnes to 6 million tonnes.

Between 1967 and 1974 employment in the British steel industry fell from 250,000 to 197,000. And by 1990 it had fallen again by 74 percent to 51,000. But other developed countries also saw drastic declines in employment in their steel industries in the same period. In France, for example, employment fell by 70 percent, while in the United States it fell by 60 percent. Even Germany lost 46 percent of its steel workforce.

What happened to towns like Sheffield or Corby was not part of some Thatcherite vendetta and instead was part of a general trend across the industrialised world. It happened in the Rhur Valley and Ohio, was Maggie Thatcher responsible for that too?

And given that the British steel industry’s problem was chronic over-manning, which caused low productivity, it is, sadly, fantasy to suggest that there was some painless cure that didn’t involve a reduction in employment.

Indeed, in the following years British Steel recovered. Whereas in 1976-1977 it had taken a British steelworker 15 man hours to produce a tonne of liquid steel, by 1986-1987 it took just 6.2 man hours and that year British Steel turned a profit of £177 million on turnover of £3.5 billion. When the company was privatised the following year it had made a profit of £410 million on turnover of £4.1 billion. By 1997 British Steel was the most profitable integrated steel company on the planet.

So British Steel was not shut down by Thatcher “as part of her plan to break the unions”; it was privatised because it was an economic basket case. Like the coal industry it was dying by the time she got elected.

This is the truth behind the Big Lie. That industries like steel and coal were ravaged is true. That it was painful for those involved is also true. But that it happened simply because Margaret Thatcher wanted to “break the unions” is false.

But maybe I’m missing the point with all this. That was certainly the opinion of some people I spoke with recently when I explained the advanced state of decrepitude the coal industry was in when Thatcher took over. “Oooooooh facts and figures. Go on then, how many miles have you walked in pit boots?” said one. Another said I was “someone who tries to hide behind certain facts and figures without giving the whole truth of the situation”.

It’s a curious argument to suggest one can get a better view of “the whole truth of the situation” by walking around in “pit boots” rather than looking at the entire industry and the economy as a whole. But then these people were from an area heavily affected by all this. For some the strength of that experience, reinforced by repetition over the years, has compromised their ability to examine the issue rationally. This is not to ignore what they say; experience is valid and should be recorded as such, but it should not be mistaken for analysis.

Perhaps Mark Steel isn’t being deliberately dishonest and this applies to him too. I’ve no idea and little inclination to find out. But you can’t blame a guy who trades on hating Margaret Thatcher for giving his routine one last airing. After all, when Maggie Thatcher died so did half of Mark Steel’s act.

I am indebted to the article ‘The British Iron and Steel Industry Since 1945’ by Alasdair M. Blair

This article originally appeared at The Commentator

Party over? It never got started

Insensitivity: An effigy of Lady Thatcher is paraded through Trafalgar Square during a party held after the death of the former British Prime Minister

The lady’s not for burning

I was wrong.

It does a man good to say that once in a while, so there you go.

Coming from Sheffield I’d always heard that when Margaret Thatcher died “they’ll have to install a turnstile in the graveyard due to the amount of people entering it with their dancing shoes on”. Then came the internet.

The Facebook page ‘We’re having a party when Thatcher dies‘ has over 6,000 likes and another, ‘Is Margaret Thatcher Dead Yet?‘, has nearly 40,000. Given this I’d come to think that the day after Lady T popped her clogs I’d be picking my way to the tube station in the morning stepping over people passed out in party hats. I wrote that “people in places like Sheffield will be celebrating Margaret Thatcher’s death”, even that “the streets of Sheffield will flow with ale.”

And they didn’t. Instead 800 trouble makers, that’s 800 nationwide, many of whom wouldn’t have known Maggie Thatcher from Teri Hatcher, smashed some stuff up.

In Brixton ‘revellers’ trashed a branch of that well known exploiter of the workers, Barnardo’s. Last weekend saw a party in Trafalgar Square which, especially given the anticipation over the years, was a total washout. The revellers brought an effigy but couldn’t manage to set it on fire prompting the wonderful observation: “The lady was not for burning.” And Sheffield was quiet.

I should have suspected that the promises of wild celebrations were overdone. After all, I’ve written before about how Thatcher is actually the most popular post war British prime minister. The Guardian reported that “On the day of her death, half of all respondents, 50%, told the pollster that they look back on her contribution as a positive one for Britain. That is 16 points more than the 34% who say she was bad for the country.” (Ouch, that must have hurt!)

A YouGov poll found that “Opinion gradually becomes less positive as you go northwards, but not drastically so – even in the North 49% have a positive opinion of Thatcher, 35% negative.”  28 percent regarded Thatcher as a “good Prime Minister” and 21 percent as a “great Prime Minister” (the best laugh I had all week was a northern leftie I know explaining that these people meant great in the sense of important, not ‘really good’). The finding is repeated across the country, according to YouGov “Only in Scotland is the balance of opinion negative”.

The YouGov poll found that Thatcher is regarded as “the greatest British Prime Minister since 1945” in every region except Scotland and London where she is pipped by another Conservative, Winston Churchill. It also found that in every region except Scotland more thought that “Margaret Thatcher’s period as Prime Minister” had been “Good for Britain” than thought it had been “Bad for Britain”.

Again, in every region except Scotland more thought that Thatcher’s period as Prime Minister had left Britain “Economically better off”. In every region the most popular view was that she had left Britain “More respected in the world” and a place with “More opportunities for women”.

In the Commons Glenda Jackson blustered “A woman? Not on my terms!” But then the question of whether you’re a woman isn’t decided on Glenda Jackson’s terms and, as the YouGov poll also found, most women disagree with her: 51 percent of women said that Thatcher left Britain a country with “More opportunities for women” against just 14 percent saying “less”.

There was some mixture in the picture. In every region the dominant view was that Thatcher had made Britain a “Less equal society”. This is undeniable. People at the top got very much better off and people in the middle got a bit better off but people at the bottom also got better off, just not by very much. When Simon Hughes put this charge to her in her bravura farewell performance as Prime Minister in November 1990 Thatcher replied:

“People on all levels of income are better off than they were in 1979. The hon. Gentleman is saying that he would rather that the poor were poorer, provided that the rich were less rich. That way one will never create the wealth for better social services, as we have. What a policy. Yes, he would rather have the poor poorer, provided that the rich were less rich. That is the Liberal policy.”

As I wrote last week: “Those who profess to hate Thatcher have committed the error of taking something they believe (or claim to, I’m not convinced many of them are actually serious), repeating it loudly and often to other people who also believe it, and assuming from this fusillade of confirmation that everyone else thinks it as well”

It would be wrong to say that there aren’t people out there who deeply loathe Thatcher and all she stood for. But it certainly seems that my friend’s dance floor won’t need waxing so often.

This article originally appeared at The Commentator

The left hated Thatcher because she thrashed them

Margaret Thatcher, 1925 – 2013

On Gee Street in London there is a Stafford Cripps House named after the post war Labour Chancellor. In Fulham there is also a Stafford Cripps House which contains a Clement Atlee Court named after his boss. In East London there is the Kier Hardie Estate, named after the first Independent Labour MP. In Clapton there is a Nye Bevan Estate named after the former Labour minister.

So I was baffled when, today, my various inboxes, feeds, and walls were swamped by left wing friends asking how bothered I was by the passing of Margaret Thatcher. One or two seemed rather put out when I responded that I wasn’t massively. As someone who could be considered a ‘Thatcherite’ I believe in the individual not an individual. I’ll leave the veneration of Dear Leaders to the left with their crumbling municipal buildings.

At 87 Margaret Thatcher lived a long life. Insofar as we can tell about the private life of this most resolutely political of people it was also a rather happy one. The daughter of a provincial, middle class shopkeeper, born during the Depression, she went to Oxford, became a chemist, and then became a lawyer. Elected to Parliament in 1959 after a decade of trying she rose against incredible odds to become the first female leader of a major British political party in 1975 and Britain’s first female Prime Minister in 1979. She was accompanied every step of the way by her beloved husband Denis.

Her period in office was marked by internal division and conflict of a degree not seen under any other prime minister of the century. Thatcher took on the Labour Party (three times), the Argentines, the National Union of Mineworkers, and crushed them all. By the time Thatcher left office even the Soviet Union and its miserable communism were history.

But in 1988 Thatcher gave her famous Bruges Speech in which she stated “We have not successfully rolled back the frontiers of the state in Britain, only to see them re-imposed at a European level with a European super-state exercising a new dominance from Brussels.” For the European federalists, including many in the Conservative Party close to Thatcher’s predecessor Ted Heath who had never forgiven the grocers daughter for beating the grocer, this was a step too far.

In 1990 Thatcher was finally brought down, not by a bunch of troublemakers rioting in Trafalgar Square, but by her own Europhile backbenchers, angered by her refusal to sign up to a single European currency. History has proved Thatcher emphatically right.

She brooded on this betrayal in retirement but, judging by her memoirs, she was fully aware of just what she had helped achieve, even if she was typically modest about it. She had taken Britain from an increasingly chaotic, sclerotic, and socialist place, to a place which was on the up again. Internationally she had restored some of Britain’s old standing and seen off the communist threat.

Both in Britain and abroad, with the help of her great ally Ronald Reagan among others, she had shown that the inevitable, onward march of socialism was nothing of the kind.

And, perhaps most uncomfortably for her detractors, she was popular and remains so. She won three elections on the trot. In 2011 a YouGov poll for The Sunday Times placed her firmly at the top of a list of post-war British prime ministers with a whopping 27 percent, more even than Winston Churchill.

The sainted Clement Atlee, architect of the welfare state, nationaliser of industries, and namesake of a court in Fulham, limped home with just 5 percent of the vote behind Tony Blair and, mysteriously, Harold Wilson. The much-vaunted street parties celebrating her demise might be rather more thinly attended than the guests have convinced themselves.

Those who profess to hate Thatcher have committed the error of taking something they believe (or claim to, I’m not convinced many of them are actually serious), repeating it loudly and often to other people who also believe it, and assuming from this fusillade of confirmation that everyone else thinks it as well.

These people can often give you a list of reasons they hate Thatcher, lists which are often so suspiciously similar that you have to question how many are the product of original thought and how many are just being parroted to feign an opinion. Most of them, from the mass unemployment to her supposed destruction of Britain’s industry, are easily dealt with.

But the truth is that she would have been disliked intensely no matter what she did. Owen Jones wrote recently that “Thatcher hate is not kneejerk anti-Toryism, after all, there will be no champagne corks popping when John Major dies, and there was no bunting on display to celebrate the deaths of Ted Heath, Alec Douglas-Home, Harold Macmillan or Anthony Eden.”

But remember that in 1948 Nye Bevan, one of the most venerated and overrated figures in British political history, said, “No amount of cajolery, and no attempts at ethical or social  seduction, can eradicate from my heart a deep burning hatred for the Tory Party.  So far as I am concerned they are lower than vermin.”

Remember also that Bevan didn’t say that about a Conservative Party containing right wing ideologues like Thatcher, Norman Tebbit, or Keith Joseph. He said it about a Conservative Party which contained such Keynesian, welfare-state-loving, consensus-supporting politicians as Harold Macmillan, R. A. Butler, and Alec Douglas-Home.

The left disliked Thatcher because she was a Conservative. It hated her because she thrashed them.

Margaret Thatcher is one of only two British prime ministers to coin an ‘ism’ and unlike the other, Blairism, Thatcherism actually meant something. This is why whether alive or dead she will live on. Her ‘ism’ will be a much more permanent monument than the grey, decayed concrete boxes named after various Labour no marks.

This article originally appeared at The Commentator

Heavens on Earth: Exploiting human ingenuity

The social sciences provide few controlled experiments; there is no Cern Laboratory for sociology or economics. But the 20th century provided something rather close.

The impoverished, war-torn Korean peninsula was split in two, the North trying communism and the South opting for capitalism. After 60 years South Koreans are on average three inches taller than North Koreans and live 12 years longer.

Germany and its capital city were split down the middle in 1945, the west going capitalist and the east going communist. The architects of the Workers’ Paradise in the east had to build walls to stop the unappreciative proles escaping to the west to be exploited. And then the Workers’ Paradise collapsed.

The results of these experiments have proved problematic for statists. In recent years the economist Ha-Joon Chang has become popular on the left for arguing that the economic success of West Germany and South Korea relative to their eastern and northern neighbours is not because of a lack of state intervention but because they had just the right kind of intervention in just the right amount. For Chang there is nothing inherently wrong with a Gosplan, you just have to make sure you have the right boffins drawing it up.

In his new book, Heavens on Earth, JP Floru utterly rejects this argument. He takes eight case studies, from Britain’s Industrial Revolution of the 18th and 19th centuries to Singapore’s journey to prosperity, and argues that the spectacular results achieved came from the release of market forces. Where Chang prescribes intensive government involvement in the economy, Floru recommends that politicians and bureaucrats set up a solid legal framework then get out of the way.

Economically speaking, the source of the increase in wealth these countries experienced was increasing productivity, the production of as much with less or more with as much. The increase in the quantity of goods and services available for consumption which this permits is the essence of increasing wealth.

The Theory of Comparative Advantage, outlined by David Ricardo 200 years ago, extends this worldwide. As a unit a country will grow rich if it produces goods or services for which the inhabitants of other countries are willing to exchange the goods and services they have produced. And countries will see their terms of trade improve the more efficient, or productive, they are.

Floru’s argument echoes that of Douglas Carswell’s recent book The End of Politics, its central feature the ‘Hayekian Knowledge Problem’. Economics is, as Alfred Marshall wrote, “a study of mankind in the ordinary business of life. It examines that part of individual & social action  which is most closely connected with the attainment and with the use of material requisites of well-being”.

It is not, as much mainstream neo-classical economics would suggest, the study of the allocation of given resources among known ends via some identified production function. It is, in fact, the study of the process of the discovery of all these things; resources, ends, and means.

The knowledge of how best to produce cars, linen, or financial services does not exist in some one place where one of Ha-Joon Chang’s Platonic philosopher kings can simply go and get it prêt-à-porter. It is lurking somewhere, probably dispersed, in the vast collective brain made up of each individual in the wider economy, and it has to be discovered.

A free market economy is far better at tapping this collective brain and efficiently discovering and coordinating the hidden, dispersed information it contains than a state command system which relies on the brains of a handful of experts. That is the lesson of Korea and Germany.

There is an incredible amount of economic gloom as debts rocket, growth stagnates, and incomes fall in the developed world. But, as the United Nations recently reported,

“The world is witnessing a epochal ‘global rebalancing’ with higher growth in at least 40 poor countries, helping lift hundreds of millions out of poverty and into a new ‘global middle class’. Never in history have the living conditions and prospects of so many people changed so dramatically and so fast”.

Thanks to free market capitalism more people are living better than ever before.

Since at least 1798, when Ricardo’s friend Thomas Malthus predicted a destiny of misery for mankind, there have been people warning of an imminent end to our material progress. But whatever the situation with regard to his material resources, one truly inexhaustible resource man possesses is his (or her) ingenuity, or human capital in the economists’ terminology. A system which allows for the maximum exploitation of this ingenuity, of its discovery and coordination, remains humanity’s best hope for the ever more prosperous future which is on offer.

In 1776 Adam Smith wrote that “Little else is requisite to carry a state to the highest degree of opulence from the lowest barbarism but peace, easy taxes, and a tolerable administration of justice”. JP Floru’s excellent new book performs the vital service of reaffirming this fundamental lesson.

This article originally appeared at The Commentator

Ludwig von Mises on socialists and nanny staters

Still right after all these years

Every now and then you read something written some time in the past and almost literally double take at how relevant it remains. Check out the below – written in 1926 – by Ludwig von Mises in The Nationalization of Credit? from his Critique of Interventionism

“Guided by central authority according to central plan, a socialistic economy can be democratic or dictatorial. A democracy in which the central authority depends on public support through ballots and elections cannot proceed differently from the capitalistic economy. It will produce and distribute what the public likes, that is, alcohol, tobacco, trash in literature, on the stage, and in the cinema, and fashionable frills. The capitalistic economy, however, caters as well to the taste of a few consumers. Goods are produced that are demanded by some consumers, and not by all. The democratic command economy with its dependence on popular majority need not consider the special wishes of the minority. It will cater exclusively to the masses.

But even if it is managed by a dictator who, without consideration for the wishes of the public, enforces what he deems best — who clothes, feeds, and houses the people as he sees fit — there is no assurance that he will do what appears proper to “us.” The critics of the capitalistic order always seem to believe that the socialistic system of their dreams will do precisely what they think correct. While they may not always count on becoming dictators themselves, they are hoping that the dictator will not act without first seeking their advice. Thus they arrive at the popular contrast of productivity and profitability. They call “productive” those economic actions they deem correct. And because things may be different at times, they reject the capitalistic order, which is guided by profitability and the wishes of consumers, the true masters of markets and production. They forget that a dictator, too, may act differently from their wishes, and that there is no assurance that he will really try for the “best,” and, even if he should seek it, that he should find the way to the “best.””

Read the full thing here

The People

File:Bertolt-Brecht.jpg

I’m often struck by how those who most regularly claim to speak on behalf of ‘the People’ are, most frequently, those who hold the people in the most contempt.

Here’s an example of what I mean. Today the Guardian has published an ICM poll showing the gap between Labour and the Conservatives down to just 5%. The Conservatives are up a little, Labour are down a little. Ho hum.

But note the reaction. The comments sections on Guardian pages are usually full of people fuming about the latest evil assault of Cameron, Gideon, and the ConDems on ‘the people’. Yet this empathy with the people vanishes as soon as it appears they might disagree as the following comments show

“If true, this is evidence of the fickleness and irresponsibility of the public even for its own well-being – incredibly depressing”

“I saw a guy on our local ‘Sunday Politics’ segment yesterday who was working as a city street cleaner. When asked, he said he was vehemently anti-EU. What bet he reads the Sun or something such like?”

“What have these fannies done within the last 3 months for the electorate to suddenly swing in favour of them? Or is it just another case of dumb floating voters proving yet again that they’re unworthy of a vote?”

“And the British public shows how easily led it is.”

“I despair. Are voters really that stupid?”

“…yes, in a word!”

“Nothing like a bit of flag waving to distract the proles from their woes.”

“If people were willing to think rationally, it would be impossible to reach any other conclusion, but they’re not: they blame immigrants and people poorer than themselves. I know it beggars belief, but they really, really do. You just want to shake the British public.”

This strain of thought on the left goes back at least to Marx. He cooked up the idea that any member of the working class who perceived their interests differently from how he perceived them was suffering from ‘false consciousness’, a miserable notion that has allowed generations of Marxists and leftists more generally to rationalise the divergence between what is and what their theory tells them should be by blaming the people for not behaving as they should.

I remember a poem by Bertolt Brecht;

After the uprising of the 17th of June
The Secretary of the Writers Union
Had leaflets distributed in the Stalinallee
Stating that the people
Had forfeited the confidence of the government
And could win it back only
By redoubled efforts. Would it not be easier
In that case for the government
To dissolve the people
And elect another?

The tragic, pointless waste of communism

The Workers Paradise

On the reading list for my Masters course this week is chapter three of Bukharin and Preobrazhensky’s The ABC of Communism. I considered writing something addressing all the stupid, fallacious, utopian, juvenile arguments it contains but a) there are so many and b) history has already done it.

I would simply say this; it is one of the greatest tragedies in human history that over 100 million lives were snuffed out in the pursuit of this shit.

Labour and the welfare bill

Labour-1957-poster

…and I’ve got some magic beans to go with that

Last week Britain’s coalition government, a bunch of “ideologically-crazed demagogues”, launched a “brutal assault” on “the poor”. Or so said Owen Jones. So what form did this heinous act of heartless, senseless barbarity take? It voted to increase some benefits at the rate that earnings increase rather than at the (sometimes higher) rate that prices increase.

That’s it.

The hysterical tone in which much of the left conducts debate in this country is crippling our ability to have a serious discussion about how to bring under control a government debt which is set to have risen by 60 percent by the end of this parliament even after so called ‘austerity’. Eminently sensible measures on Housing Benefit or legal aid have brought predictions of a “final solution” or the end of justice in Britain.

The simple, central fact of British political life is that the government’s debt is rocketing by £326 million every single day. If even reasonable changes to Housing Benefit, legal aid, or welfare, which consumes one third of all British government spending, generate such apoplectic fury from the left, how on earth are we supposed to make even a start on tackling our out of control debt? It’s a serious question. Too serious, it appears, for the likes of Owen Jones.

But what was Labour up to while the coalition was engaged in this Blitzkrieg on the poor? It was making impassioned speeches and voting for benefits to increase faster than the wages which pay for them.

In truth the divide between those who pay for and those who receive benefits is no longer as clear as it once was. We have always had universal benefits paid to even the rich, hence the spectacle of a journalist from a family on a six-figure income wailing about having her Child Benefit taken away.

But besides that we have another toxic legacy of Gordon Brown. During Labour’s time in office he erected a thicket of benefits so baffling, vast, and labyrinthine that much of the country ended up snared in it. Ever greater numbers of people in work started to receive welfare and, bizarrely, Labour regard this as an achievement.

The thinking behind it was cynical. Like some mob boss in Vegas putting everyone on the payroll so no one would ever grass him up to the Feds, Brown reasoned that if he could play sugar daddy to a sufficiently large section of the British public by showering them with benefits they would never vote him out of office. It’s why the number of British households receiving more in benefits than they paid in taxes rose from 43.8 percent in 2000/2001 to 48 percent in 2007/2008. That, you’ll remember, was a period of economic growth.

Compare the essential fiscal promises of the two parties. The Conservatives say ‘Vote for us and you can keep what you earn’; Labour says ‘Vote for us and we’ll take money off someone else and give it to you’

Labour, quite simply, would cease to have any point if it wasn’t for the confiscation of wealth and its redistribution to its supporters. Thus we had the nauseating spectacle of David Miliband, who earned £125,000 for 15 days work as a director of Sunderland, accusing the welfare bill of being “rancid” as he argued for people on an average wage of £26,500 to pay more than the £3,100 per year they already do towards welfare.

Two-time Labour Prime Minister Harold Wilson once said that “The Labour Party is a moral crusade or it is nothing.” It is now worse than nothing. It is a cynical, vote-buying machine, funded with other people’s money. That’s what they trooped through the lobbies for last week.

This article originally appeared at The Commentator

Seumas Milne’s mad wealth tax

And in year two? Er…er…I’ll get back to you…

When the government closes its books in April 2013 it is estimated that it will have borrowed £119 billion in the financial year. That works out at about £326 million pounds added to Britain’s national debt every single day, £13.6 million every single hour, £226,000 every single minute, or £3,766 every single second of fiscal year 2012/2013.

Colossal as that is it represents an improvement on the £4,946 per second that Labour was adding to the debt upon leaving office.

There are some who see no problem with this. And there are those who acknowledge the problem, but think the solution to runaway government debt can be found not in cutting government spending but in raising government income; massive tax rises, in other words.

But where will we find the goose who will be content to sit still and not only be plucked but stripped to the bone to fund our government, without hissing the house down?

Seumas Milne, the Guardian’s resident, privately-educated Stalinist, thinks he has an answer. “The richest 1,000 people in Britain have seen their wealth increase by £155bn since the crisis began”, Milne observes, “more than enough to pay off the whole government deficit of £119bn at a stroke”. Phew, that’s that sorted then!

Except of course it isn’t. For someone so expensively educated Milne appears unable to tell the difference between assets and income, something any first year finance student would be expected to know by the end of their first term.

That £155 billion increase in wealth will be, as the Bank of England reported recently, mostly down to rising asset prices. This will be the increase in value of property, stocks, bonds etc., which are mostly held by the better off.

But how do you tax the increase? Bear in mind that you can only pay tax with cash. If your house has risen in price by, say, £10,000, and, as Milne suggests, a tax of 100 percent was levied on that asset price increase you would need £10,000 cash to pay the tax. But your house increasing in price by £10,000 does not mean that you have £10,000 more cash lying around.

If you do not have the cash to pay Milne’s wealth tax then you will have to swap your asset for cash. You sell your house for cash and pay your £10,000 tax. Then you go and find a new place to live.

There are two glaring problems that follow. First, if everyone tries to swap their assets for cash at once by selling them then their prices plummet. You would see house prices fall and an increase in negative equity; you would see share prices fall and companies have millions wiped from their net worth. Some portion of the asset price increase you intended to tax away disappears.

And, secondly, what do you do next year? Even if Milne’s mad asset tax covered this year’s deficit by expropriating the assets of the rich, those assets are then gone; they won’t be there to tax again next year. But the deficit will still be there.

It doesn’t take much thinking to figure this out, a couple of minutes or so. Is it too much to ask that people like Milne expend a little mental energy before making such stupid proposals?

This article originally appeared at The Commentator

Silly Lily

This picture has become popular among the anti cuts crowd

There’s just one problem; it’s bobbins. Let’s see how…

1 – Are Cornish pasties a ‘working class food’?

2 – There is a tax on Polo mallets, VAT at 20%.

3 – No on was voted in, that’s why we ended up with a coalition.

4 – He ‘Seriously’ wants to see David Cameron and George Osborne beheaded. Seriously? Get a grip.

5 – Sadly most of what the bankers did was perfectly legal and was encouraged by the Labour government who showered the tax receipts of the property boom the bankers created on its clients in the welfare state and public sector.

6 – The working classes are not portrayed as rioters. The working classes were too busy working to go out rioting. It was elements of the permanently unemployed (and probably unemployable) underclass that went ram-raiding for new shoes.

Paul O’Grady is a funny bloke. A political sage he is not.