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* TALKING POINT, BY JULIAN JESSOP
* TAX WHACK
* CRUNCH TIME
* THE HAYEK MEMORIAL LECTURE
* MAKE THE BREAKTHROUGH!
* YOU'RE INVITED


As I write it’s still not known whether the UK will be exiting the Brexit transition with a new free trade agreement (FTA) with the EU, or 'no deal'. Frankly, I’m almost beyond caring. (Almost.)

Some sectors would be affected much more than others, but there is now little difference between the likely macroeconomic impacts of 'deal' and 'no deal'. Even the pessimistic analysis ([link removed]) by the Office for Budget Responsibility (OBR) suggests that 'no deal' could reduce GDP by just 2 per cent in 2021, relative to an FTA.

Of course, in normal times a 2 per cent hit would be huge. But now, it would be lost in the fog of Covid. Indeed, the UK economy would fare much better in the OBR’s increasingly credible 'upside scenario' for the virus, even if combined with 'no deal', than in their 'central' forecast with an FTA.

Either way, the UK economy should benefit from a reduction in the Brexit uncertainty that has undermined confidence and held back investment. I hopefully won’t have to spend as much time playing ‘whack-a-mole’ to debunk 'Project Fear' stories, or explaining why state aid is bad and why imports – even from the EU – are actually a benefit.

In the meantime, I’ve explained why we don’t need tax rises to pay for Covid in an IEA briefing ([link removed]) on the state of the public finances. But this isn’t a green light to abandon fiscal responsibility altogether.

[link removed]

Even if the impact of Covid is not as bad as feared, the longer-term fiscal challenges (notably from an ageing population) are as great as ever. And even if the government doesn’t face the same financial constraints as a household, increased state intervention and high public spending still has other costs, including the poor allocation of resources and the risk of runaway inflation.

Talk of tax rises also refuses to go away. The UK’s Wealth Tax Commission ([link removed]) has (unsurprisingly) come out in favour of a UK wealth tax. There are decent arguments for and against (mostly against, in my view), but linking this to the pandemic is muddled. We’ve essentially 'paid for Covid' by borrowing from private investors at negative real interest rates, which is already a tax on the 'wealthy'.

[link removed]

The Treasury has also announced a consultation ([link removed]) on VAT and the sharing economy. It would of course be wrong for a big company to be able to avoid charging VAT simply by splitting into smaller business units that fall below the £85,000 threshold.

Nonetheless, it would also be wrong to force a self-employed taxi driver to charge VAT just because they happen to get most of their customers from an app. The same applies to someone who occasionally rents out their home.

This looks like yet another attempt to squeeze revenue from a relatively new and thriving part of the digital economy. It would clearly work against the interests both of small businesses and consumers, who would inevitably end up paying higher prices.

Whatever happens with Brexit, it seems my game of 'whack-a-mole' will continue, and the mallets of the IEA will be needed more than ever!

Julian Jessop
Economics Fellow, Institute of Economic Affairs
TAX WHACK

In an article for City AM, IEA Director General Mark Littlewood drew attention to changing attitudes towards public debt among those on "the left" in the last decade – from claiming that it wasn’t a concern to insisting it is a problem that requires an immediate fix.

As Julian mentioned, this week the Wealth Tax Commission's Final Report ([link removed]) recommended a "one-off" wealth tax to help foot the Covid-19 bill.

But as Mark warned, wealth taxes are "counter-productive, risk flight of brains and money, and are extremely difficult to administer".

[link removed]

Mark added: "There are many bad features of the UK tax system which need fixing, but the absence of a wealth tax isn't one of them". You can read Mark's full comment here ([link removed]) , and his opinion piece here ([link removed]) .

IEA Director of Communications Annabel Denham unpicked the Wealth Tax Commission report in an article for Reaction, arguing that: "We are not just talking about cash in the bank, but people's homes, their worldly possessions, their retirement savings. It isn't soaking the super-rich.. it is a measure that would affect one in six adults." Read the piece here ([link removed]) .

[link removed]

It begs the wider question: are tax rises needed to pay for Covid-19? How bad a state are the public finances in? In a fascinating new IEA Insights hosted by Mark, Julian Jessop and IEA Senior Academic Fellow Professor Philip Booth discussed and debated how concerned we should be about government borrowing. Catch up on the short video here ([link removed]) .
CRUNCH TIME

The Brexit negotiations are getting closer to the wire, yet sticking points remain over fishing rights, the level playing field, and how a deal will be policed.

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The IEA's Head of Regulatory Affairs Victoria Hewson appeared on Sky News ([link removed]) to discuss the possible outcome of the negotiations. Victoria argued that the reason the trade talks have been so thorny could be down to the EU's "aggressive" opening position.

Over on the IEA blog, Alexander Temerko, director of Aquind Ltd and member of the IEA’s Advisory Council, argues that fisheries are not worth sacrificing a post-Brexit deal over. Read the piece here ([link removed]) .

And the negotiations formed one of the topics on Live with Littlewood, which this week featured fresh and familiar faces, including CEPOS President Martin Ågerup, IEA Head of Education Dr Stephen Davies, Academy of Ideas Founder Claire Fox, Julian Jessop, the Institute of Directors' Allie Renison, the Commonwealth Foundation's Jennifer Stefano, and arts and entertainment writer Grant Tucker.

[link removed]

Hosted by Mark Littlewood, the show also covered the rollout of the Pfizer-BioNTech vaccine, and asked just when we might be able to revert to the old normal. Catch up here ([link removed]) .

If you're in need of some festive cheer, tune into our Live with Littlewood Year in Review Special at 6pm Wednesday 16th December on the IEA's YouTube channel ([link removed]) (novelty jumper optional).
THE HAYEK MEMORIAL LECTURE

Our Hayek Memorial Lecture has been one of the highlights of the IEA calendar since 1988…and we didn’t want to let the pandemic stand in the way of this marquee event!

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So this year we’ll be mounting a VIRTUAL Hayek Lecture – and we’ll be honouring one of our own.

Acclaimed author and historian – and the IEA’s Head of Education – Dr Stephen Davies will deliver the lecture on our YouTube channel at 6pm on Thursday, 17th December.

Dr Davies, who has presented some of our most watched films of the year ([link removed]) , will analyse the global and domestic response to the coronavirus outbreak and reflect on the lessons we can learn from history as he discusses ‘The World after the Pandemic’.

Dr Davies was previously program officer at the Institute for Humane Studies at George Mason University in Virginia. Before that he was Senior Lecturer in the Department of History and Economic History at Manchester Metropolitan University and he’s also been a Visiting Scholar at the Social Philosophy and Policy Center at Bowling Green State University, Ohio.

You’ll be able to watch the lecture here ([link removed]) .

Be sure to save the date!
MAKE THE BREAKTHROUGH!


The IEA’s RICHARD KOCH BREAKTHROUGH PRIZE 2020/21 – one of the UK’s major economics prizes – is now open for entries.

The essay competition, which carries a first prize of £50,000 – plus student and highly commended prizes – is looking for the best and boldest answers to this question:

In the current severe economic climate, what pro-market, pro-enterprise policy would be the best way of supercharging growth, employment and living standards in ‘left behind’ Britain?

[link removed]

The competition is kindly sponsored by author and businessman Richard Koch, and Dehenna Davison MP, who represents the Bishop Auckland constituency, will join this year’s judging panel. You can see her short introductory film to the competition here ([link removed]) .

Initially, the judges are looking for short entries of 500-1,000 words – where the quality of the idea is more important than the quality of the prose. We’ll then ask the authors of the most promising submissions to develop them into a 2,000-3,000 word essay.

The winner will be announced – Covid permitting – at a prize ceremony in Central London next summer.

Interested in taking part? You can find out more, and register for the competition, at: breakthroughprize.org.uk.

If you missed our Live with Littlewood Breakthrough Prize Special, catch up here ([link removed]) .
YOU'RE INVITED

* Intergenerational Inequality: Do we Need to Close the Gap?

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Join us at 1pm on Monday 14th December for a thought-provoking discussion addressing the perceived divide between the "prosperous" older generation and "deserted" Millennials.

Is "intergenerational conflict" an apt term, or an overly simplistic view of complex changes that have taken place in the last two decades?

Panellists include Madeline Grant, Parliamentary Sketchwriter and Columnist at The Telegraph, Film Director Sophie Sandor, IEA Editorial and Research Fellow Professor Len Shackleton, and Rt Hon Lord David Willetts, President of the Advisory Council and Intergenerational Centre, Resolution Foundation. The event will be chaired by our Director of Communications Annabel Denham.

Sign up to the Zoom webinar here ([link removed]) .

* In Conversation with Douglas Carswell
[link removed]

Our In Conversation series will continue in the new year. On Tuesday 12th January at 6pm, the IEA will be hosting Douglas Carswell, chaired by IEA Director General Mark Littlewood.

Douglas previously served as the Member of Parliament for Clacton, where he gained a reputation as one of the country’s most outspoken and independently-minded politicians. Douglas was Co-founder of the Vote Leave campaigning organisation that supported a Leave vote in the 2016 Referendum. More recently, Douglas has established the Good Governance Project, which seeks to improve the way the UK is governed. He is the author of several influential books and papers and is published regularly in the press.

Douglas will join us to speak on his views and the political landscape more generally. Please join us at 6pm by clicking here ([link removed]) .

Our line-up next year will include: the Rt Hon Baroness Morgan of Cotes, the Rt Hon Jacob Rees-Mogg MP, the Rt Hon David Davis MP and Rt Hon Kwasi Kwarteng MP.

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