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The case against Rupert Murdoch

By
Richard
 – 02/05/2012Posted in: Blog, Featured Articles

Rupert Murdoch (picture World Economic Forum)

Passing judgement on Rupert Murdoch appears to be today’s fashion, and this blog is not one to shirk a challenge.  His dislike of the EU is well-known, as are the anti-European opinions of his newspapers, as is the eurosceptic influence he has had on British politics, but those are not grounds on which to denounce him.  Anyone is entitled to an opinion, even – or perhaps especially – if those opinions are ones with which this blog disagrees.  And why should someone who owns a newspaper not put their opinions in the paper?  And why should politicians running for election not pay attention to what the newspapers are saying?

If there is a case against Rupert Murdoch here, it lies not in his opinions or behaviour, but in his scope.  His share of the news market grew too large for the health of British democracy.  But that is a criticism not of Rupert Murdoch but of the regulations and regulators that permitted it.

A healthy democracy requires pluralism of opinions in the media, and pluralism of opinions in the news reporting.  If a media company gets too large, that pluralism is threatened.  This is true of the Murdoch empire, but it would be true of any other newspaper or media proprietor, too.  Perhaps Mr Murdoch can be criticised for other aspects of the way he has run his company, in view of the widespread allegations of criminality among the journalists and editors he employed, but that would be outside the scope of this website.

What this website can criticise Rupert Murdoch for, though, is the way he has organised his company’s finances to avoid paying his fair share of taxes.  A network of company subsidiaries in offshore jurisdictions such as the Cayman Islands and the British Virgin Islands (how can any business need as many as 62 separate subsidiaries in the BVI?) shuffles his liabilities for tax around, reducing the overall tax rate to 6 per cent, or $324 million in taxes on $5.4 billion profits over a 4 year period in the last decade.  No law has been broken, but that’s the point: the law should not allow it.

On the plus side, Rupert Murdoch himself appears to agree.  Here is his tweet on 29 April: (@rupertmurdoch):

Social fabric means all. Must wake up before coming apart more. That includes closing tax loopholes for rich people and companies.

Let’s hope that he means it.

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The House of Lords is a mess

By
editor
 – 01/05/2012Posted in: Blog, Featured Articles, UK

The House of Lords

The House of Lords is a mess.  It brings together in one place party political nominees (often former MPs), acknowledged experts on particular issues, descendants of drinking buddies of long-deceased monarchs, and a smattering of Anglican bishops, to sit in judgement on legislation.  We are supposed to think that this is the exercise of democracy.

Little wonder that the Liberal Democrats in government want to change the system.  A chamber that is supposed to revise and improve legislation has in fact revised and improved very little.  We look back at a series of legislative errors – the Dangerous Dogs Act, all those changes and changes back to the structure of the NHS – not to mention a relentless centralisation of political power in Whitehall and the weakening of the ability of parliament to control the executive.  In all this, we ask, what exactly has the House of Lords revised or improved?

If it ain’t broke, don’t fix it, may be a good maxim (or, in the more parliamentary language of Viscount Falkland, “When it is not necessary to change, it is necessary not to change”), but in the case of the House of Lords, it is necessary to change.  The second chamber works neither in theory, nor in practice.

This is not to say that all changes to the House of Lords are necessarily for the better.  Particularly not when one looks at the proposals put forward by the government.  House of Lords reform is a mess, too.

The proposal from the coalition government is for a chamber of 300 members, with 240 elected and 60 appointed to serve for a single term of 15 years.  A joint committee of both houses of parliament thinks there should be 450 members, and has suggested various changes to the proposed transitional arrangements.

However, a sub-committee of that joint committee hates the government’s proposals and calls instead for a constitutional convention to think the issue through again.  In particular, the rebels are concerned to ensure that the primacy of the House of Commons remains unchallenged, and fears that an elected House of Lords will become too assertive.

Analysts fear that the parliamentary struggle to reform the Lords against all this opposition will consume so much time and eat up so much political capital as to wreck much of the rest of the coalition government’s programme.  But the Liberal Democrats, having failed to reform the electoral system for the House of Commons, are determined to press ahead.  Their commitment to democratic reform demands it.

But what their commitment to democratic reform does not demand, mind you, is a referendum on the subject.  The introduction of AV was put to a referendum – these important and potentially irreversible issues should not be decided by the political class alone.  But the latest, equally important, reform of the constitution is something for parliament on its own, even though the promise of a referendum would also rapidly cut through much of the parliamentary squabble.

I think the Liberal Democrats have learned from the experience of the AV referendum that it is easier to get people to vote against change than to vote for it, when the people who are supposed to be in favour of change are also bitterly divided among themselves.  There is no obvious and serious injustice that can be traced to the current make-up of the House of Lords (just as there was not in the case of the electoral system), just a long-running and low-level unfairness.  Corrosive to our democratic life, yes; fuel for the Yes campaign in a referendum, probably not.

This website’s proposals for reform of the House of Lords can be found here.  An indirectly-elected second chamber would satisfy the principle that no-one should hold office in a legislature without being elected to it, it would respect the primacy of the House of Commons, and it would act as a brake on centralisation.  But there is zero chance at present of the government dropping its own mistaken proposals in favour of Federal Union’s much better ones.

A constitutional convention that considered all aspects of the legislative process and the machinery of government might have reached a better outcome than the haggling between the Liberal Democrats and the Conservatives.  But such a convention was not written into the coalition agreement in May 2010 and will not be written into it now.  I think that we will simply limp through the current parliament arguing over this modest and not very well-guided reform – which might or might not make it to ratification – in the hope that a future government and parliament can propose something better.  What a mess.

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Shackled to a corpse

By
editor
 – 10/04/2012Posted in: Blog, Featured Articles

Daniel Hannan MEP (picture Mises Youth Club)

A familiar argument from the anti-Europeans is that Europe is the wrong choice, that the rest of the world is a better economic bet from Britain than the EU.  For example, here is Daniel Hannan in this week’s Spectator (£):

In the year we joined, western Europe accounted for 38 per cent of world GDP. Today it’s 24 per cent, and in 2020 it will be 15 per cent. Far from joining a prosperous market, we shackled ourselves to a corpse.

But it is wrong to say that Europe is in decline, but rather that it is not growing as fast as the rest of the world.  But that is expected.  There is more scope for less-developed economies to grow more rapidly because they can learn from the experience of richer countries, adopting their technologies and their methods of organisation to catch up, economically.  This is why so-called emerging markets are attractive to investors.

In particular, countries such as China and India have opened up their economies to market forces and international trade, and are growing very fast as a result.  This is something to be welcomed, not criticised.  As a result, we can say positively that it is a good thing that the developed world’s share of world GDP is in decline.

And let us go further.  Look at things from the Indian or Chinese perspective.  Not only is the western European share of world GDP in relative decline, so is the British share.  It was 4 per cent in 1973, today it’s 3.5 per cent and in 2020 will be 2.5 per cent.  Daniel Hannan is asking China and India to shackle themselves to the British “corpse”: why should they do that?

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Another corporate tax dodge

By
editor
 – 05/04/2012Posted in: Blog

This is, I suppose, the time of year for things to come back to life, and stories of corporate tax avoidance are among them.  It is reported this morning that online retailer Amazon pays no corporation tax on profits in the UK, despite sales revenue of more than £3.3bn.  Is a company of that scale really operating at a loss?

For the answer, we follow the trail to Luxembourg, where Amazon has its European headquarters.  In Luxembourg, Amazon generates revenue of €7.5bn (£6.5bn), produced by a staff of 134.  In the UK, however, 2,265 people produce a revenue of only £147 million, which amounts to 0.13 per cent of what their Luxembourgeois colleagues each manage.

The reason is not that the workers in Luxembourg are more than 700 times more productive, but that Amazon has organised its corporate structure in such a way as to ensure that the profits are declared in the lowest-tax jurisdictions.  This is legal, but it can’t be right.

This website argues that profits should be declared (and taxed) where they are earned and not where tax lawyers can contrive them to end up.  That way, different countries can set their own tax rates, preserving a national power rather than creating a European one, without stealing tax revenue from each other.

There is an argument that tax rates should be harmonised, which appeals to people who want to avoid the possible downward effects of tax competition, but which also creates a centralised decision about tax rates rather than a decentralised one.  What both of these arguments have in common is that they reject the notion that taxation is a matter of national sovereignty, recognising that taxation of cross-border companies is something that different countries have to address together.

If we don’t do this, and insist instead on retaining the notion of national sovereignty in the context of tax, the people who benefit are the people who run those international companies.  They can manipulate their corporate structures to transfer profits from one jurisdiction to another, thereby gaining a competitive advantage over companies that are loyally based in one country only.  And the people who want to cripple small domestic businesses in this way have the cheek to call themselves patriots!

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Punished for telling the truth

By
editor
 – 05/04/2012Posted in: Blog

Ed Davey tells it like it is (picture DECC)

An interview with Lib Dem cabinet minister Ed Davey in the New Statesman this week has provoked an astonishing reaction.  He comments on the experience in government of dealing with the EU and with the other member state governments within it:

“In due course this government might well turn out to be seen to have been more constructive, more engaged and indeed more pro-European than its Labour predeces.  It’s not just Liberal Democrat ministers but Conservative ministers who are really engaged with their European counterparts.  Some of the relationships that he [Cameron] is building are very important. What the coalition government is showing time and again is that by engaging with Europe you actually look after Britain’s national interest more effectively.”

The two points he makes here will be familiar to regulars on this website: that engaging in the EU makes more sense than standing outside it; and that the last Labour government’s pro-Europeanism fell far short in practice of what it promised in theory.  So far, so uncontroversial.

But if we turn from the New Statesman to its weekly, right of centre rival, the Spectator, we find it reported that Conservative ministers in the coalition government are angry.  They want William Hague to slap him down.  But why?

It is a reality that government ministers have to engage with their European counterparts (they would have to do so, even if Britain were not a member of the European Union).  The upset can only be that they don’t like this being pointed out.  They are appealing for votes from that portion of the British public who don’t like the EU and would rather comfort those voters in their delusion that Britain can do without it than confront them with the truth.  It has been pointed out before that for the Tories to chase after UKIP voters is a dead-end, but the message has evidently not yet got through.

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When panic-buying makes sense

By
Richard
 – 01/04/2012Posted in: Blog

A petrol station closed by panic buying (picture Mike1024)

The queues outside petrol stations last week tell us something important about the way politics is conducted in this country (or, for that matter, anywhere else).  The lesson is that panic-buying sometimes make sense, which means that the purpose of politics is to prevent the panics.

The origin of the scare was the possibility of a strike by tanker drivers.  There are 2,000 of them, members of the Unite union, threatening to strike at Easter in a pay dispute.  The result would have been a shortage of fuel at the UK’s petrol stations, which in turn would have brought almost everything to a halt.  A similar interruption to supplies in September 2000, caused by protestors against the price rather than by a strike, came close to bringing the country to a halt.

Jonathan Powell, the prime minister’s chief of staff at the time, has written:

“The public never realised quite how close we had come to shutting the country down on 13 and 14 September 2000. Ford had been about to close its European operations; hospitals were about to shut down for lack of fuel; and cashpoints were about to run out of money. We were considering taking 1920 emergency powers to run the country. The blockade broke down just in time.”

Faced with this prospect, how to prevent such chaos?  One idea was to get people to stock up in advance, another was to reassure people that there was no risk of a shortage.  The former would have seen many people through the strike, were there to be one: supplies could have been preserved for those people for whom the need was greatest.  The latter would have freed up more supplies in any case, rather than ending up with large amounts of fuel uselessly sitting in the tanks of cars that were only ever used a little: the average car needs to fill up little more than once a month.

The government last week followed the first strategy, leading to panic-buying, before switching to reassurance and hoping to end the confusion.  Politically, not so good.  But the interest of this website is in the panic.

For, faced with a queue for petrol, what is the rational thing to do?  Most people buy petrol when they need it, expecting that petrol stations will be in stock.  However, the prospect of running out of petrol is worth avoiding: for that reason, if stocks are likely to be scarce, for whatever reason, it becomes rational to buy it in advance rather than to risk not being able to get any.  What that means is that the panic, in itself, becomes justification for panicking.  Behaviour that on the part of the group is irrational becomes rational when looked at from the perspective of the individual.

It is no good appealing to people not to panic.  The task for politicians is to prevent that panic from starting.  Those who have responsibility for the collective interest have to engineer the conditions whereby the pursuit of the individual interest, if contrary to the collective interest, does not break out.  Last week, the British government got it wrong.

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Opening for the Olympics

By
editor
 – 20/03/2012Posted in: Blog

Open late on Sunday? (picture J Taylor / geograph.org.uk)

The government has trailed in the news the idea that the restrictions on Sunday opening for large shops should be relaxed for an eight week period over the summer at the time of the Olympics.  (Read about it here http://www.dailymail.co.uk/news/article-2116909/London-2012-Olympics-Shop-opening-laws-Sundays-eased-The-Games.html)  It intends to propose it in the Budget on Wednesday.

Aside wondering what on earth this has got to do with the Budget (and I thought a eurosceptic Chancellor wanted to reveal his Budget first to parliament rather than anyone else), I am wondering what this really has to do with the government in Westminster.

There is a case to be made that shop opening hours should be subject to restrictions and limitations of some kind.  When shops are open, it has an impact on the wider community – noise, traffic, and so on – and seven day a week opening might make it harder for members of the same family to have time off work at the same time, and there are some people for whom not working on a particular day is a matter of conscience and this something that our society generally respects and tries to accommodate.

There is also a case to be made that limitations on when people can go to work or go shopping are an unnecessary intrusion into people’s freedom, and also that they amount to red tape and a costly burden on business.

It is the role of politics to adjudicate between these competing arguments, but I don’t see why it is the role of national politics to do so.  The impact on a community of having shops open is local, as is the employment that comes from having shops open.  Let each local area decide for itself how it wishes to make the trade-off between busyness and having a day off.  Only the things that need to be decided centrally should be, and this isn’t one of them.

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The next head of the World Bank

By
editor
 – 05/03/2012Posted in: Blog, World

Moisés Naím (picture moisesnaim.com)

The World Bank needs a new manager.  Robert Zoellick is leaving, so the search is on for a replacement.  Tradition has it that the role is always filled by an American (the Europeans have the IMF) but, as a surf of this website will reveal, you are in the wrong place for a determined defence of tradition.

Moisés Naím, writing here in the FT, highlights five mistakes to avoid in appointing Mr Zoellick’s successor, mistakes that have not always been avoided in the past.  Despite its name, the World Bank is not a bank.  It is much better thought of as part of the system of government (or governance, if you prefer a more precise term) and needs to be led accordingly.

This website has warned in the past of a further error.  Again, let us hope that the lesson can be learned here, too.  The concern is not merely that the person appointed be capable and competent, but that s/he can prove it.  The accountability of the post is as crucial as the delivery.  That accountability at the World Bank, as in other global institutions, is often lacking.

Ideally, there would be a UN Parliamentary Assembly of some sort to ratify the appointment – it should not be left to governments alone.  But in the absence of such a global parliamentary forum, the nominee for the World Bank could create one.  By appealing to the world’s parliamentarians, as opposed to its diplomats, a new dynamic could be created both for development issues and for the public’s comprehension of those issues.

It is not enough to be competent, it is also necessary to be understood.

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A special case

By
editor
 – 22/02/2012Posted in: Blog

Bailed out: Lucas Papademos, prime minister of Greece

A second bailout loan for Greece has been agreed at a European summit, to stave off imminent bankruptcy for the government with all that implies.  No-one knows for sure what is implied by bankruptcy, but it can’t be good, which is why an agreement, with all its difficulties, has nevertheless been reached.

The financial terms are swingeing, and the political implications are far-reaching.  The national governments and the European Commission have been at pains to emphasise that Greece is a special case, but is this really true?

Greece is not the only country in financial difficulties, even if it is by some distance the worst.  Making Greece a special case is aimed at minimising the consequences if the bailout should fail and Greece is forced to leave the euro (and possibly the EU altogether).  For if investors fear that the euro is not forever, funds will flow from the countries that might leave the eurozone into the supposedly safer countries, with the result that the fears will become self-fulfilling.  By playing for time and lending money out cheaply to banks from the ECB, a Greek default might be contained.  But only if Greece is a special case.

But on the other hand, the problems Greece faces are widely shared.  Or rather, the problems the Greek people face.  Negative economic growth, demands for cuts, loss of hope: these are not confined to Greece alone.  The austerity strategy is a hard road to follow, but it has many travellers.  In this sense, Greece is not special.

There remains unsettled the issue of how to apportion the costs of the crisis.  Overall, these costs are as great as those that might come from a war or a revolution, and dealing with them could be as grave, but this has yet to be tackled seriously.  The first instance of this issue was Iceland, but the overall sums involved were not a systemic threat to anyone: the dispute between Iceland, the UK and the Netherlands was over only GBP 3.4 billion.

Greece, by contrast, requires loans of EUR 130 billion, which makes the Icelandic debt seem small.  But the underlying issue is the same: who pays?  Which Greeks, which Icelanders, or is it which Germans, which Finns?

Federal Union held a seminar last November, jointly with the Wyndham Place Charlemagne Trust, to explore this very question – read the report here – and it was apparent that it is hard to separate this question from the wider issue of European capitalism and how it works.  This second question, unlike a bailout loan, is not one that can be agreed at a European summit but actually needs to be worked through in the processes of European politics.  It is something that matters to all of us, whether debtors, creditors, or simply taxpayers, and there will be no lasting solution to the debt crisis without a solution to this broader economic question.

In the most importance sense, therefore, Greece is not a special case at all.

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Political language

By
editor
 – 17/02/2012Posted in: Blog, Europe

Riga old town

There is a referendum in Latvia on Saturday on a proposal to make Russian an official language.  Around one third of the population have Russian as their first language (compare that with the 6 per cent of Finns who speak Swedish rather than Finnish – both are official languages in Finland).

The story is complicated by the fact that the Russian speakers are, on the whole, relatively recent arrivals, brought to Latvia by the Soviet occupation and settled there now that occupation is thankfully over.  But even if the new arrivals were foreigners or immigrants once, the passage of time changes things.  If people are being born and growing up in Latvia, speaking in large numbers a language other than Latvian in the home, can that language be kept out of public life?

This website has observed before that for everyone in a country to speak the same language all the time is odd rather than normal.  As an ideal, it is the product of 19th century nationalism, and is ripe for replacement with a more sophisticated view of the world.

An extra dimension is added to the debate if Latvia adopts Russian as an official language: would Russian then become an official language of the EU as a whole?  The EU already has 23 official languages, so adding another one would be following a well-trodden path.  As many as 9 million people in the EU as a whole speak Russian as a first language, testimony to the tangled history of central and eastern Europe, which makes Russian a more popular language than 10 of the current official languages.

The difference, of course, is that Russian is not (yet) an official language of a member state, and for officialdom, that might be that.  But this website is more interested in the interests of citizens than the interests of officials, and the case for Russian should not rest on national endorsement.

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