From Institute of Economic Affairs <[email protected]>
Subject The hangover
Date May 1, 2022 7:59 AM
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* TALKING POINT, WITH JULIAN JESSOP
* THE HANGOVER
* IN CONVERSATION WITH NIGEL FARAGE
* FREED SPEECH?
* IEA INTERNATIONAL
* iN THE MEDIA
* THiNK 2022

The Bank of England will announce its latest interest rate decision this Thursday, 5 May. The markets expect another quarter point increase to 1.0 per cent. Some fear a half point hike, to 1.25 per cent. I'd be much happier if policymakers did more.

Any tightening in monetary policy could add to the pressures facing households and businesses. But the alternative of allowing inflation to remain higher for longer would be much worse.

This is also the view of my colleagues on the Shadow Monetary Policy Committee (SMPC), a group of independent economists who meet regularly at the IEA to monitor the decisions of the Bank of England’s official Monetary Policy Committee (MPC) and make policy recommendations of our own.

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At our last gathering we were split four ways on the size of the interest rate hike. (We are economists, after all!). But the consensus was an increase of three-quarters of a point, to 1.5 per cent.

There was also a majority view that 'quantitative easing' should be reversed, with the Bank starting the process of active 'quantitative tightening' by selling back government bonds that have been bought under the Asset Purchase Facility. An opening salvo of £10 billion of gilt sales per month was suggested.

This is not an easy decision. Money growth has already slowed sharply, and a further tightening in financial conditions could add to the headwinds from tighter fiscal policy.

Nonetheless, the long period of very loose monetary policy has undoubtedly contributed to spiralling inflation and the cost of living crisis. Indeed, the SMPC has been warning of the risks here for over a year. Members signed a letter ([link removed]) published in the Financial Times on 26 April 2021 calling then for an end to asset purchases.

What’s more, even at 1.5 per cent, official interest rates would still be relatively low (and negative in real terms). The MPC now needs to surprise in order to restore credibility and to help get inflation back down over the medium term. Simply doing what the markets expect would not be good enough.

You can read the minutes of the SMPC April meeting here ([link removed]) .

Julian Jessop
Economics Fellow, Institute of Economic Affairs

THE HANGOVER

On the four-year anniversary of the implementation of Minimum Unit Pricing (MUP) in Scotland, IEA research, authored by our Head of Lifestyle Economics Christopher Snowdon, John C. Duffy and Mark Tovey, reveals the policy has cost Scottish consumers £270m. This is over three times what was predicted, and the equivalent of £59.39 per adult or £71.12 per drinker.

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MUP was introduced in Scotland on 1 May 2018 at 50p per unit to prevent the sale of 'cheap' alcoholic drinks, with the aim of reducing alcohol-related harm. However, there is little evidence the policy has delivered the expected health and social benefits. Instead, it has raised prices at a time when household budgets are being squeezed. The authors suggest the policy should be scrapped.

Christopher Snowdon said:"Now in its fifth year, minimum pricing is a reminder that politicians are often responsible for the rising cost of living."

Read the full paper here ([link removed]) .

IN CONVERSATION WITH NIGEL FARAGE

On Tuesday lunchtime, former Ukip leader and broadcaster Nigel Farage joined IEA Director General Mark Littlewood for our latest In Conversation event. They discussed President Trump, Net Zero, the state of the economy and Brexit.

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Asked whether the nation has taken advantage of leaving the EU, Mr Farage responded that "Britain's place in the world is now stronger," and cited the AUKUS agreement and the vaccine rollout. He agreed, however, that more must be done domestically to rid ourselves of EU regulation.

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Mr Farage was critical of the Conservatives' credentials as the 'party of business' and urged them to return to free market policies. If entrepreneurial Britain fails to go out and vote for the Tories en masse at the next election, "they're doomed," he said.

You can watch the full event on the IEA's YouTube Channel here ([link removed]) .
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FREED SPEECH?

On Tuesday, the board of Twitter agreed to a $44bn takeover offer from billionaire Elon Musk. Some have welcomed the move as a victory for freedom of expression, while other users have threatened to leave the platform.

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IEA Head of Public Policy Matthew Lesh welcomed plans to promote free speech online but reminded City AM ([link removed]) readers that the Online Safety Bill will mute any pledges to end censorship.

Matt also discussed the Bill on GB News. Watch highlights here ([link removed]) .

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In her fortnightly column for Conservative Home ([link removed]) , IEA Head of Media Emily Carver responded to the 'hysterical' reaction from some of Musk's critics.

She reminded readers that many on the Left celebrated Trump's exclusion from the platform, championing Twitter's right as a private company to set its own rules; now, they are calling for Twitter to be run like a public utility.

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In an article for CapX ([link removed]) , IEA Head of Cultural Affairs Marc Glendening argued that increasingly authoritarian attitudes towards free speech offer an opportunity for liberals of all stripes to unite in opposition, and make the case for cultural freedom more widely.

Marc also quizzed Universities Minister Michelle Donelan on the Online Safety Bill at a recent Policy Exchange event. He asked how anyone could believe in free speech yet support a Bill which seeks to eradicate 'legal but harmful' speech. Watch here ([link removed]) .
IEA INTERNATIONAL

The Outreach department journeyed to Prague this past weekend to attend the European Students for Liberty LibertyCon, a two-day conference where we met students and other liberty-minded organisations from around the world.

SFL has a special place in the IEA’s heart, as European SFL was created within the IEA offices.

IEA Head of Outreach Brittany Davis said: "After two years where we haven’t been able to travel and meet people face-to-face, it’s exciting to be able to go back out into the world and make those connections in person again".

iN THE MEDIA

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Positive discrimination... The Financial Conduct Authority (FCA) has finalised rules requiring UK listed companies to ensure that 40 per cent of its board of directors and at least one senior board member are women.

In her weekly Spectator ([link removed]-) column, IEA Director of Communications Annabel Denham argued the proposals could create perverse incentives, and suggested the FCA stick to its core objectives.

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Laissez faire...In an article for The Telegraph ([link removed]) , Annabel Denham assessed Emmanuel Macron’s achievements during his first term, and warned that the UK’s post-Brexit regulatory inertia could see us left behind by a nation previously described as the 'sick man of Europe'.

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Doctors' orders... GPs are to vote on reducing their working day by two and half hours next month. Currently, GP practices are supposed to be open from 8am until 6.30pm daily, and the vote has raised fears that waiting lists could get even worse.

IEA Head of Lifestyle Economics Christopher Snowdon appeared on Good Morning Britain on Wednesday. He explained that "there are lots of economic incentives we could be using" to reduce waiting lists, including paying GPs per appointment rather than for the number of patients registered with their surgery. Watch highlights here ([link removed]) .

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Eco zealots... Green activists often attempt to justify their extreme action by claiming that the government is failing to recognise or respond to the climate emergency. But this is inaccurate, argues IEA Head of Political Economy Dr Kristian Niemietz in an article for CapX ([link removed]) .

Kristian challenged the the climate doom-mongers, noting: "Climate change has been a high-profile issue and a political priority for a long time, and we are already doing a huge amount about it – at a considerable cost".

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Passport privatisation... During a Cabinet meeting this week, Boris Johnson threatened to privatise the Passport Office and the DVLA if they fail to tackle large backlogs.

Matthew Lesh argued on LBC that "if there is a good case for privatisation we should get on with it". Watch highlights here ([link removed]) . He also appeared on BBC Essex ([link removed]) (from 17mins), and was quoted in the Express ([link removed]) .

IEA Editorial and Research Fellow Professor Len Shackleton argued that privatisation of the Passport Office could "modernise and improve" services. Read here ([link removed]) .

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Buoyant tax revenues... New figures from HMRC revealed that tax receipts in 2021/22 jumped to an all-time high of £718bn. Inflation and tax rises have been credited for bolstering the public purse.

Commenting on the figures in The Telegraph ([link removed]) , IEA Economics Fellow Julian Jessop said: "This will give the Chancellor more room to help low-income families struggling with the cost of living without the need for additional increases in tax rates".
IN CASE YOU MISSED IT

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The Swift Half... In the latest episode, IEA Head of Lifestyle Economics Christopher Snowdon spoke to libertarian director and producer Martin Durkin. They discussed the growth of statism, the future of the Conservative party, and the privatisation of Channel 4. Watch here ([link removed]) .
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Healthcare without the NHS... Dr Kristian Niemietz appeared on Darren Grimes' YouTube channel Reasoned to discuss alternative healthcare models to the NHS. Kristian argued it is wrong to blame the pandemic for the NHS's shortcomings in recent years, telling viewers that social insurance systems in Europe have consistently performed better. Watch here ([link removed]) .

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IEA Podcast... In this episode, IEA Communications and Public Affairs Officer Kieran Neild-Ali was joined by IEA experts Kristian Niemietz and Marc Glendening to unpick what libertarianism socialism is, and why both left and right claim to be ‘libertarian’. Listen here ([link removed]) .

THiNK 2022

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We are delighted to announce our third THINK speaker for 2022 is Dr Stephen Davies, who will be discussing 'Crisis of the world order: challenges and opportunities'. Find out more here ([link removed]) .

Dr Steve Davies is Head of Education at the IEA. Previously he was program officer at the Institute for Humane Studies (IHS) at George Mason University in Virginia. He has authored several books, including Empiricism and History and was co-editor with Nigel Ashford of The Dictionary of Conservative and Libertarian Thought.

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You can find out more about Steve, his topic, and THINK at thinkiea.com ([link removed]) . Email IEA Head of Outreach Brittany Davis at [email protected] (mailto:[email protected]) with questions or group discount rates.
FORTHCOMING EVENTS

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Going global... The IEA will host a panel discussion on the topic: UK Global Champions – A Global Britain approach to Trade and Foreign Policy, from 5.30pm on Monday 9 May.

Speakers include: Greg Smith MP, Conservative MP for Buckingham and Co-Chair of Free Market Forum, and IEA Head of Regulatory Affairs Victoria Hewson. Further panellists are still to be confirmed.

This event is invitation only. For more information please contact [email protected] (mailto:[email protected]) .

The Chancellors... On Monday 6 June, the IEA Book Club will welcome Sir Howard Davies, British economist, author, and Chairman of NatWest Group, to discuss his upcoming book The Chancellors: Steering the British Economy in Crisis Time. This event will take place from 6pm at the IEA.

This event is exclusively for IEA Book Club members. For more information on the Book Club please get in touch at [email protected] (mailto:[email protected]) or click the link here. ([link removed])

CALLING ALL STUDENTS!

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We are excited to launch the Economic Thought Leaders’ Symposium at the University of Buckingham from 7-9 September 2022.

The theme for this year’s programme is The Economics of War and Peace. We will discuss topics like trade not war, international institutions, diplomacy and game theory. To apply, please send a CV and cover letter explaining why you’d like to attend, as well as 500 words on promoting the reconstruction of an economy after a war to [email protected] (mailto:[email protected]) by 17 June 2022. You can find out more here ([link removed]) .

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We have launched the 2022 Dorian Fisher Essay Competition. Named after the beloved wife of our founder Sir Antony Fisher, this is our biggest essay competition of the year, exclusively for A-Level and IB students.

First prize will receive £500, with a separate prize of £500 for the school with the highest number of entrants. The deadline for this year’s competition is Friday 29 July 2022. You can find out more here ([link removed]) .

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