Taking on tax
The heated public debate about tax avoidance and the role of offshore tax havens now risks generating considerable heat and precious little light (“In pursuit of the $21 trillion”). It has allowed a distorted world view to emerge that seeks to explain away the debt and deficit problems of many western countries not in terms of government spending being too high, but in terms of affluent individuals and successful enterprises not paying their “fair share.” Squeezing yet more money from the private sector would, so the argument goes, allow the state sector to continue to grow.
The reality is that the overall tax burden is too high and the UK tax system is far too complicated. Having allowed our tax code to expand to around 17,000 pages, it is little wonder that lawyers and accountants are in great demand.
The solution is not to launch an assault on international financial centres, which play a vital role in facilitating investment and trade. Nor is it to believe that companies can be obliged to cough up yet more cash without the effect being felt by, for example, pension funds and shareholders. Instead, we need a tax system which is simpler and flatter and to recognise that state spending has come to account for far too high a proportion of our overall national income.
Mark Littlewood, director general of the Institute of Economic Affairs
Look east In her important article, “Does Eastern Europe Still Exist?”, Anne Applebaum gives a simple but critical answer: no. I cannot agree more. Eastern Europe does not exist anymore in three senses. It has ceased to exist as a symbol of backwardness and the weakest link of the European project. It does not exist because the countries of the region have developed differently. It does not exist because the EU’s old divisions between east and west, big and small member states, and rich and poor countries have been replaced by the divisions between north and south, eurozone and non-eurozone member states, creditor and debtor countries. A further sense in which Eastern Europe no longer exists—and here I probably differ from Applebaum—is that Eastern Europe could not be a model for the transformation of Southern Europe. Eastern European success depended on several factors that are absent in the south today: a passion to break with the past; optimism about the future; and willingness to imitate western models. Ivan Krastev, chairman, Centre for Liberal Studies, Sofia
Energy alternatives Dieter Helm’s article was characteristically thought-provoking and challenging to all of us engaged in policymaking (“Stumbling towards crisis”). He is right to say that affordability for consumers is the “much-ignored golden rule” of energy policy. But the market structure he identifies is not only a barrier to much-needed new entrants and investment, it is also fundamentally anti-competitive, allowing the Big Six energy companies to arrange their businesses in a way which enables them to sustain high and rising profits whatever the level of their final prices to households and small businesses. Reforming the energy market to break their stranglehold, as Ed Miliband and I have proposed, would not just facilitate better price discovery, allow all market participants to compete on an equal footing and encourage more investment, but also keep prices efficient and protect consumers from unjustifiable increases to their bills. Caroline Flint MP, shadow energy secretary
I have considerable sympathy with Dieter Helm’s view that we are ‘stumbling towards crisis’ in UK energy policy (Prospect, April 2013) but if we follow Helm’s prescription we will at best end up in exactly the same place in a few years’ time, and less globally competitive to boot. It’s time to break that cycle and inject some genuine imagination into the debate. Like OFGEM and the ministers he criticises, Helm is working from an underlying narrative and set of assumptions which are narrow and flawed. He provides a classic economist’s analysis of the market. Economics has some value in understanding the global context of this sector, and in challenging some of the too-easily-made assumptions about the benefits of energy efficiency, for example. However, it’s weak in valuing long-term trends and suggesting ways to manage the serious global and local political risks which dominate this sector, and Helm is also guilty of assuming that energy markets will always be structured with a relatively small number of large producers supplying energy to very large numbers of passive consumers. The unpredictability of the global market means it is simply prudent to invest in a portfolio of emerging technologies. This does not mean picking winners, but it does mean looking beyond short-term auctions of capacity as proposed by Helm: these always favour incumbent technologies and will systematically result in us losing international competitiveness (you don’t need to pick winners to realise this, simply to study history). On the other hand, since at least the 1970s the UK has an appalling record of inefficient government investment in new energy technologies and we need to rethink how we do this. One idea, pioneered in Denmark as long ago as the 1980s, is to drive investment in new technologies from the demand side rather than the supply side (i.e., let the market decide (in a way that reflects technology development and deployment cycles) rather than a few civil servants and experts). By starting small, and incentivising communities to invest in technology at human scale, the Danes created a context in which one of their industrial sectors has grown to control almost 50% of the world market for wind turbines. We also need to escape from the typical economist’s (lazy) assumption that everyone is merely a consumer in this market. If I have a solar panel or two, I am a producer of electricity. If everyone in my town insulates their home (or is paid to switch off one or two lights at times of peak demand) we have had the same impact on the energy system as building a small wind farm. Rather than treating this as a pain because their models can’t cope (which is typically the default position of the utilities, regulator and Treasury towards these activities) why don’t we give some thought to structuring the market so these activities are properly valued? This potentially turns a number of economic analyses (such as Helm’s analysis of energy efficiency) neatly on their head. This kind of approach is entirely within the political capability of OFGEM and ministers, as well as low cost. At a basic level it might involve creating market structures which will support incentives for demand reduction or contribution to supply (i.e., the community able to switch their lights off should be able to receive equivalent rewards to the company building a wind farm or nuclear power station). These structures would ultimately need to be supported by changes to the way information is shared and, over time, to the infrastructure of the distribution networks – but an awful lot could happen for minimum capital investment. Such changes might look challenging from today’s cultural perspective, but in a market defined differently, they are both simple and natural, provide a clear role for a regulator, and the benefits will outweigh the costs. Treating individuals as producers and contributors to the energy system rather than consumers also has obvious and potentially very positive effects for other areas of policy, such as social inclusion, political engagement and citizenship, as well as encouraging enterprise. This is a vital area for the future of the UK, and it’s encouraging to see Prospect featuring it in a Special Report. I do hope, however, that you can succeed in broadening the debate beyond one between technology champions and start to bring some more imagination and vision to bear. Matthew Rhodes, managing director of Encraft
Scots strike back There are two traditional lines of argument taken by unionists against the eminently reasonable proposition that Scotland would be better off governing itself (“There’s more to life than being a Scot”). One is the “fear” argument—that Scotland is too wee, too poor or too stupid to do so successfully. Here, Douglas Alexander adopts the other traditional approach, which is to suggest that Scotland taking responsibility for its own government is a retrograde act, and somehow denies the common humanity shared by Scots and English people (with no mention that it is also shared with, say, happily independent Slovaks or Estonians). For some reason that escapes me, this argument is never applied to Ireland—surely Douglas earnestly wishes it would return to the union soon? Next time Prospect mentions the Scottish constitutional question, let us hope for something better than this very cauld kale het up. Gordon Logan, Prospect website
The usual replies? Heaven forbid that primatologists express any tolerance for religion without AC Grayling popping up to correct them (“Apes and atheism”). But I’m a little surprised by his announcement that “most atheists”—I assume he includes himself—are not now interested in metaphysical debate with religion, but are only animated by its malign social consequences. This very welcome news seems not yet to have percolated to the other paragraphs of his article, where he still, with mysteriously grounded certainty, treats religion as if it were a self-evident untruth. If we’re not wasting our time with arid Punch and Judy over God’s existence, then Grayling will need to stop talking as if he had access to some delicious well of righteous certainty, and to start behaving like what he is, one speculative ape among a whole species of us. And if we are paying attention to faith’s very varied consequences in human societies, it would be nice to see from him something better than the cartoon history in which religion always stands for misogyny, fear, authoritarian misery. He says it wearies him to trot out “the usual replies.” The same is true at the receiving end. Francis Spufford, author of “Unapologetic”
AC Grayling repeats the canard that Giordano Bruno was burnt at the stake for supporting Copernican cosmology. Bruno was in fact condemned for his supposed religious heresies. His belief in the plurality of worlds—not itself inherently Copernican—was mentioned in his trial, but was not central to it. Bruno’s execution was barbaric and shames the Catholic church. But this desire to make him a martyr for science is a fantasy, and exemplifies the neglect of facts that “new atheism” seems often to instil in otherwise careful minds. Philip Ball, author of “Curiosity”
Surviving for now Josef Joffe correctly emphasises the centrality of Britain in European rivalry since 1453 (“The 500 year war”). He argues further that the country made the repeated mistake of incorporating Prussian and German power into coalitions against other countries, so as to preserve a “balance of power,” which Joffe calls a “strictly mechanical concept.” He argues that Britain should have foreseen the future German threat. But until 1870, France was the hereditary enemy, with the largest army in Europe, not Germany. Palmerston remarked that “we have no eternal allies, and we have no perpetual enemies. Our interests are perpetual and eternal.” One perpetual interest is survival in the short and medium term, for which a balance of power can be vital: the next century can take care of itself. Kathleen Burk, professor of modern and contemporary history, UCL
Hardly absurd I take issue with Philip Ball’s assertion that it is absurd to teach cursive handwriting (“Curse of cursive handwriting”). It encourages children to allow their writing to follow the flow of thought more easily. Two of my sons (aged six and four) are at infant school and learning cursive script. Neither boy has any difficulty distinguishing between the print in the reading books and the “school writing” they use when forming their own letters. My children have not been taught two different systems of writing; they have been taught a single method that allows them to commit thoughts to paper. I have many concerns about the UK education system—cursive script is not one of them. Katy Peters, Guildford
Alright for some Garrison Keillor’s article on living to a hundred is an insult to the rest of us old geezers who do not have his wealth, his circle of friends, his social network beyond friends, and all the other props to maintain his self-esteem (“A century old”). Most of us make do in reduced circumstances, small pensions, friends dead or demented, children in far away cities and nobody with airfare for the visits, non-existent public transportation as is typical in America which forces us to stay at home, sit on the sofa and watch daytime television. How long, oh Lord, how long? Charles Beye, Massachusetts
Not just teenagers I left adolescence behind roughly five years ago, which is why it was confusing to read about behaviour you call typically teenage—risk-taking; short-termism; consuming dangerous or illegal things; being affected by your peer group—and to find it so familiar (“Myth of the teenager”). Most of the 20-somethings I know would admit to at least a few of these. Molly Pierce, London
A saving grace Thank God you are not God, Michael Morpurgo (“If I ruled the world”). You seem to have overlooked the concept of Divine Mercy, and could have sent down manna from heaven in the form of portable solar-powered room heaters to help us freezing sinners cope with the ice age. Garreth Byrne, Prospect website
Look east In her important article, “Does Eastern Europe Still Exist?”, Anne Applebaum gives a simple but critical answer: no. I cannot agree more. Eastern Europe does not exist anymore in three senses. It has ceased to exist as a symbol of backwardness and the weakest link of the European project. It does not exist because the countries of the region have developed differently. It does not exist because the EU’s old divisions between east and west, big and small member states, and rich and poor countries have been replaced by the divisions between north and south, eurozone and non-eurozone member states, creditor and debtor countries. A further sense in which Eastern Europe no longer exists—and here I probably differ from Applebaum—is that Eastern Europe could not be a model for the transformation of Southern Europe. Eastern European success depended on several factors that are absent in the south today: a passion to break with the past; optimism about the future; and willingness to imitate western models. Ivan Krastev, chairman, Centre for Liberal Studies, Sofia
Energy alternatives Dieter Helm’s article was characteristically thought-provoking and challenging to all of us engaged in policymaking (“Stumbling towards crisis”). He is right to say that affordability for consumers is the “much-ignored golden rule” of energy policy. But the market structure he identifies is not only a barrier to much-needed new entrants and investment, it is also fundamentally anti-competitive, allowing the Big Six energy companies to arrange their businesses in a way which enables them to sustain high and rising profits whatever the level of their final prices to households and small businesses. Reforming the energy market to break their stranglehold, as Ed Miliband and I have proposed, would not just facilitate better price discovery, allow all market participants to compete on an equal footing and encourage more investment, but also keep prices efficient and protect consumers from unjustifiable increases to their bills. Caroline Flint MP, shadow energy secretary
I have considerable sympathy with Dieter Helm’s view that we are ‘stumbling towards crisis’ in UK energy policy (Prospect, April 2013) but if we follow Helm’s prescription we will at best end up in exactly the same place in a few years’ time, and less globally competitive to boot. It’s time to break that cycle and inject some genuine imagination into the debate. Like OFGEM and the ministers he criticises, Helm is working from an underlying narrative and set of assumptions which are narrow and flawed. He provides a classic economist’s analysis of the market. Economics has some value in understanding the global context of this sector, and in challenging some of the too-easily-made assumptions about the benefits of energy efficiency, for example. However, it’s weak in valuing long-term trends and suggesting ways to manage the serious global and local political risks which dominate this sector, and Helm is also guilty of assuming that energy markets will always be structured with a relatively small number of large producers supplying energy to very large numbers of passive consumers. The unpredictability of the global market means it is simply prudent to invest in a portfolio of emerging technologies. This does not mean picking winners, but it does mean looking beyond short-term auctions of capacity as proposed by Helm: these always favour incumbent technologies and will systematically result in us losing international competitiveness (you don’t need to pick winners to realise this, simply to study history). On the other hand, since at least the 1970s the UK has an appalling record of inefficient government investment in new energy technologies and we need to rethink how we do this. One idea, pioneered in Denmark as long ago as the 1980s, is to drive investment in new technologies from the demand side rather than the supply side (i.e., let the market decide (in a way that reflects technology development and deployment cycles) rather than a few civil servants and experts). By starting small, and incentivising communities to invest in technology at human scale, the Danes created a context in which one of their industrial sectors has grown to control almost 50% of the world market for wind turbines. We also need to escape from the typical economist’s (lazy) assumption that everyone is merely a consumer in this market. If I have a solar panel or two, I am a producer of electricity. If everyone in my town insulates their home (or is paid to switch off one or two lights at times of peak demand) we have had the same impact on the energy system as building a small wind farm. Rather than treating this as a pain because their models can’t cope (which is typically the default position of the utilities, regulator and Treasury towards these activities) why don’t we give some thought to structuring the market so these activities are properly valued? This potentially turns a number of economic analyses (such as Helm’s analysis of energy efficiency) neatly on their head. This kind of approach is entirely within the political capability of OFGEM and ministers, as well as low cost. At a basic level it might involve creating market structures which will support incentives for demand reduction or contribution to supply (i.e., the community able to switch their lights off should be able to receive equivalent rewards to the company building a wind farm or nuclear power station). These structures would ultimately need to be supported by changes to the way information is shared and, over time, to the infrastructure of the distribution networks – but an awful lot could happen for minimum capital investment. Such changes might look challenging from today’s cultural perspective, but in a market defined differently, they are both simple and natural, provide a clear role for a regulator, and the benefits will outweigh the costs. Treating individuals as producers and contributors to the energy system rather than consumers also has obvious and potentially very positive effects for other areas of policy, such as social inclusion, political engagement and citizenship, as well as encouraging enterprise. This is a vital area for the future of the UK, and it’s encouraging to see Prospect featuring it in a Special Report. I do hope, however, that you can succeed in broadening the debate beyond one between technology champions and start to bring some more imagination and vision to bear. Matthew Rhodes, managing director of Encraft
Scots strike back There are two traditional lines of argument taken by unionists against the eminently reasonable proposition that Scotland would be better off governing itself (“There’s more to life than being a Scot”). One is the “fear” argument—that Scotland is too wee, too poor or too stupid to do so successfully. Here, Douglas Alexander adopts the other traditional approach, which is to suggest that Scotland taking responsibility for its own government is a retrograde act, and somehow denies the common humanity shared by Scots and English people (with no mention that it is also shared with, say, happily independent Slovaks or Estonians). For some reason that escapes me, this argument is never applied to Ireland—surely Douglas earnestly wishes it would return to the union soon? Next time Prospect mentions the Scottish constitutional question, let us hope for something better than this very cauld kale het up. Gordon Logan, Prospect website
The usual replies? Heaven forbid that primatologists express any tolerance for religion without AC Grayling popping up to correct them (“Apes and atheism”). But I’m a little surprised by his announcement that “most atheists”—I assume he includes himself—are not now interested in metaphysical debate with religion, but are only animated by its malign social consequences. This very welcome news seems not yet to have percolated to the other paragraphs of his article, where he still, with mysteriously grounded certainty, treats religion as if it were a self-evident untruth. If we’re not wasting our time with arid Punch and Judy over God’s existence, then Grayling will need to stop talking as if he had access to some delicious well of righteous certainty, and to start behaving like what he is, one speculative ape among a whole species of us. And if we are paying attention to faith’s very varied consequences in human societies, it would be nice to see from him something better than the cartoon history in which religion always stands for misogyny, fear, authoritarian misery. He says it wearies him to trot out “the usual replies.” The same is true at the receiving end. Francis Spufford, author of “Unapologetic”
AC Grayling repeats the canard that Giordano Bruno was burnt at the stake for supporting Copernican cosmology. Bruno was in fact condemned for his supposed religious heresies. His belief in the plurality of worlds—not itself inherently Copernican—was mentioned in his trial, but was not central to it. Bruno’s execution was barbaric and shames the Catholic church. But this desire to make him a martyr for science is a fantasy, and exemplifies the neglect of facts that “new atheism” seems often to instil in otherwise careful minds. Philip Ball, author of “Curiosity”
Surviving for now Josef Joffe correctly emphasises the centrality of Britain in European rivalry since 1453 (“The 500 year war”). He argues further that the country made the repeated mistake of incorporating Prussian and German power into coalitions against other countries, so as to preserve a “balance of power,” which Joffe calls a “strictly mechanical concept.” He argues that Britain should have foreseen the future German threat. But until 1870, France was the hereditary enemy, with the largest army in Europe, not Germany. Palmerston remarked that “we have no eternal allies, and we have no perpetual enemies. Our interests are perpetual and eternal.” One perpetual interest is survival in the short and medium term, for which a balance of power can be vital: the next century can take care of itself. Kathleen Burk, professor of modern and contemporary history, UCL
Hardly absurd I take issue with Philip Ball’s assertion that it is absurd to teach cursive handwriting (“Curse of cursive handwriting”). It encourages children to allow their writing to follow the flow of thought more easily. Two of my sons (aged six and four) are at infant school and learning cursive script. Neither boy has any difficulty distinguishing between the print in the reading books and the “school writing” they use when forming their own letters. My children have not been taught two different systems of writing; they have been taught a single method that allows them to commit thoughts to paper. I have many concerns about the UK education system—cursive script is not one of them. Katy Peters, Guildford
Alright for some Garrison Keillor’s article on living to a hundred is an insult to the rest of us old geezers who do not have his wealth, his circle of friends, his social network beyond friends, and all the other props to maintain his self-esteem (“A century old”). Most of us make do in reduced circumstances, small pensions, friends dead or demented, children in far away cities and nobody with airfare for the visits, non-existent public transportation as is typical in America which forces us to stay at home, sit on the sofa and watch daytime television. How long, oh Lord, how long? Charles Beye, Massachusetts
Not just teenagers I left adolescence behind roughly five years ago, which is why it was confusing to read about behaviour you call typically teenage—risk-taking; short-termism; consuming dangerous or illegal things; being affected by your peer group—and to find it so familiar (“Myth of the teenager”). Most of the 20-somethings I know would admit to at least a few of these. Molly Pierce, London
A saving grace Thank God you are not God, Michael Morpurgo (“If I ruled the world”). You seem to have overlooked the concept of Divine Mercy, and could have sent down manna from heaven in the form of portable solar-powered room heaters to help us freezing sinners cope with the ice age. Garreth Byrne, Prospect website
