Sadly, this week we witnessed yet another extension of state power and still further tax hikes. Having initially resisted a windfall tax on energy companies and then spent a few weeks procrastinating about it, the government has finally decided it has the wisdom and insight to determine which businesses are making "excessive profits" and therefore to tax them differently.

The tax will only go some of the way to funding the government's latest spending commitment to assist with the cost-of-living crisis. It seems we have now gone way beyond a Keynesian approach to spending – every year seems to bring exceptional problems, apparently justifying ever greater government spending, with it now being over twenty years since any government balanced the budget.

Some fear we may now be experiencing a repeat of the 1970s. Perhaps we will have to learn the lesson again that high taxes, substantial state intervention and heavy-handed regulation are not a recipe for prosperity, growth and long-term poverty relief.

The Chancellor did say that he would encourage those who do not really need the rebate on their energy bill to donate it to charity. If you can manage without the energy handout and would like to see it used instead to educate and inform people across all walks of life about how free markets can solve economic and social problems, then please do consider donating some or all of it to the IEA. You can donate here, and I promise we will put your funding to good use.

Last week was my last at the IEA for a while as, after twelve years in the role, I'm taking an extended summer break, returning to work on 12 September. I look forward to coming back refreshed and recharged to continue our vital efforts to win the argument for freedom and voluntary exchange.

In the meantime, my excellent team at the Institute will continue to work tirelessly to produce quality research, argue our case on the national media, and educate students and young people about the incredible power of free markets.

Thank you for all the support you give the IEA team in promoting the free market case. Have a great summer and I look forward to catching up with you all in September.

Mark Littlewood
Director General, Institute of Economic Affairs

AN ODDLY UNCONSERVATIVE APPROACH

On Thursday, the Chancellor Rishi Sunak delivered a statement on cost of living support, which included plans for a temporary windfall tax on oil and gas giants – a policy the Labour Party have long supported. 

The government claims the tax will help pay for a generous package of financial help for households across the UK, including a £650 payment to eight million of the lowest income families.



Writing for The Telegraph, IEA Director General Mark Littlewood questioned "the maddening behaviour of the Government" when it comes to developing economic policy, in particular the windfall tax on gas and oil companies, which he argued is part of an "oddly unconservative approach to solving problems". Read here.

Quoted across the media, including in The Guardian and on BBC World News, Mark said: "The worst way to make policy is to oppose something half-heartedly in principle, then procrastinate and finally change position as a result of political expediency. It is painfully obvious that in the battle of ideas, the government enters the arena wholly unarmed."



Immediately following the statement, Matthew Lesh appeared on TalkTV to give his assessment of the measures. He criticised the government for losing sight of its own principles: "We're not seeing conservative free-market solutions to the cost of living crisis, we're seeing more interventions and more taxes!" You can watch highlights here.



IEA Energy Analyst Andy Mayer travelled to an Aylesbury pub to take part in GB News' Farage at Large show. He called the 'energy profits levy' a "partygate distraction tax" and quipped that "Rishi Sunak is the most successful socialist Chancellor this century".

Speaking about the windfall tax on Times Radio, Andy warned that it will have a negative impact on investment, and that it appears the Labour Party is winning the battle of ideas. Listen to highlights here. 



Writing for The Telegraph, Andy noted that "free marketeers want neither windfall taxes nor special treatment" and that the government should "stop wobbling and stick to its principles." 

He also wrote for CapX, and appeared on BBC Radio 4 and talkTV to discuss the potential impact of a windfall tax on investment in North Sea oil and gas.

You can read the IEA's full response to the statement here.

TERMINAL PROBLEM?

The liberalisation of air travel has been a great economic success story. It has democratised travel, with flying no longer reserved for the better-off. However, as a new IEA paper published this week argues, the system of allocating take-off and landing slots remains an island of central planning in an otherwise liberalised sector.



Currently, slots are either "grandfathered' (i.e. used by the airline that has always used it), or allocated by a government-appointed administrator. Author and IEA Head of Political Economy Dr Kristian Niemietz argues that this is "a bizarre anachronism – a hangover from a time when air travel was a nationalised industry – which no longer makes any sense today."

The system weakens competition between airlines, leads to an inefficient allocation of an invaluable resource, and is distorted in favour of well-established incumbents, with the largest airlines receiving an implicit subsidy worth billions. 

Kristian makes the case for a liberal alternative to slot allocation which would mean introducing a primary market for airport slots. That could be done by a simple auction, by congestion pricing, or airport operators could rent out airport slots. 

The paper was covered in City AM, Airline Routes and Ground Services, and the regional press. You can read the paper Terminal Problem? The case for a market-based airport slot allocation system here. 

REPEAT PRESCRIPTION?

Last Sunday, the IEA published Repeat Prescription? The NHS and four decades of privatisation paranoia'  by Dr Kristian Niemietz.



The report chronicles four decades of NHS-related privatisation conspiracy theories, which all centre around the idea that there is "a sinister plot" to dismantle the NHS, sell off its parts to private companies and introduce a dystopian survival-of-the-fittest American-style healthcare system.



But, as Kristian explains, not one of the prophecies has materialised, and the UK still has an unusually state-centred healthcare system. Frustratingly, the hysteria continues to prevent any meaningful debate about how to improve the health service. 



Writing for Conservative Home, Kristian said: "Conspiracy theories about NHS 'privatisation' are the failed prophecy that never dies. We need to start calling out the failed prophets on the 0 per cent success rate of their prophecies."

And in an article for CapX, Kristian notes that since the 1980s the conspiracy theories have been getting wilder and more unhinged. His prophecy is that this phenomenon will "get worse before it gets better".



The paper was also reported in The Sun, and Kristian discussed his research on GB News and TalkTV. 

iN THE MEDIA



Public finances 'a mess'... Public sector borrowing fell more than expected last month and was lower than previously estimated for the latest fiscal year, according to data from the Office for National Statistics.

IEA Economics Fellow Julian Jessop said that despite lower than expected borrowing, the public finances remain in "a mess", and that there are worrying signs higher levels of public spending and tax have become normalised.

Quoted in City AM, Julian said the government should “focus on measures to support economic growth, including easing the tax burden. A recession would have far bigger fiscal costs. A bit more imagination now should therefore pay dividends in the long run.”



Taxed enough... MPs have warned the Chancellor that his planned corporation tax hike will 'destroy jobs' and make the UK one of the most taxed nations in the Western world. 

Quoted in the Daily Mail, IEA Head of Public Policy Matthew Lesh agreed that the hike to corporation tax will make the UK "less appealing" and that it should be reversed. 



Global worthies... This week, the world's business and political elite gathered in Davos for the World Economic Forum. 

In an article for the Express, Matthew Lesh described the event as "everything that is wrong with capitalism", noting that there is "nothing more vacuous and condescending than the global elites getting together annually to lecture the world about topics like climate change, digital trust, and mental health". 



IEA Head of Media Emily Carver also wrote about the Davos conference in her fortnightly column for Conservative Home, which she called "the perfect environment for crony capitalism to flourish", adding that global corporate interests should not be allowed to shield themselves from competition.



Fit for purpose... IEA Editorial and Research Fellow Professor Len Shackleton gave his thoughts on how to create a better labour market in a blog for Smart Thinking. 

He said: "We need lower employment taxes, fewer restrictions on contracts firms and individuals can form, less occupational regulation, limitations on privileges accorded to obstructive trade unions, and a simpler minimum wage system". Read here.

You can find out more about this topic and THINK at thinkiea.com. If you have queries about group discounts or any other questions, please email IEA Head of Outreach Brittany Davis at [email protected].

CALLING ALL STUDENTS!

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] by 17 June 2022. You can find out more here.



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.