Young, single, but not free: the EU market for financial services

The EU has been increasing its role in financial regulation over the last four decades. At first, the main focus was on promoting trade within the union in a way compatible with the four freedoms: the free movement of goods, services, capital and people. As part of this agenda, the EU prohibited member states from introducing certain forms of regulation that inhibited free trade in services and the free movement of capital. Attempts to promote consistency of regulation tended to involve a process known as ‘mutual recognition’. In other words, member states were broadly free to develop their own regulatory frameworks within which financial institutions operated; companies from one member state could then operate freely in other member states whilst being regulated by their home state. In discussing how regulation at the EU level has become detached from the original founding principles of the EU, this chapter will focus on the regulation of insurance services, though there will also be some discussion of other nonbank financial service

Ethics in Economics: Lessons and Themes for Further Development from Oeconomicae et pecuniariae quaestiones

The 2018 Vatican document Oeconomicae et pecuniariae quaestiones examines the relationship between ethics and economics in the context of contemporary issues in finance. The relationship between ethics, business, finance, and economic life in general is a major theme of the document. This paper explores these themes in greater depth examining the importance of the virtues, education and culture in promoting an economy that serves society. It then applies a proper Christian anthropology of the human person to problems of political economy in relation to the regulation of markets and, in doing so, tries to unify the different topics discussed in the document and situate it more clearly within the tradition of Catholic social teaching and the role of the state that is posited in that teaching

Should the Universal Church support a universal basic income?

In a letter published on Easter Sunday 2020 and issued to “Brothers and Sisters of Popular Movements and Organizations”, Pope Francis suggested that we consider the provision of a universal basic income. Addressing the problems of people without regular incomes he said: “Street vendors, recyclers, carnies, small farmers, construction workers, dressmakers, the different kinds of caregivers: you who are informal, working on your own or in the grassroots economy, you have no steady income to get you through this hard time...This may be the time to consider a universal basic wage which would acknowledge and dignify the noble, essential tasks you carry out. It would ensure and concretely achieve the ideal, at once so human and so Christian, of no worker without rights.” This statement received a huge amount of attention. This was not surprising given that the question of a universal basic income is widely discussed in the secular world. It is perhaps the first time any Catholic leader has indicated support for such a policy. Indeed, if this idea were to be part of the formal body of Catholic social teaching, it would be a significant innovation. A universal basic income is an income given to all citizens by government, funded from taxation. It is universal in that it is given to all individuals even if they are members of well-off households. It is also unconditional. Its payment is not linked, for example, to a requirement to be available for work or contingent upon some misfortune such as illness or disability. It may or may not be given to children or to the parents of children in respect of their children. Questions addressed in Catholic social thought and teaching that relate to public policy can sometimes be issues of principle. For example, withholding a worker’s wages is a form of stealing which offends the common good, human dignity and distributive justice. Catholic social teaching argues that the state should have mechanisms that prevent such actions and provide redress. Other issues can be practical matters on which reasonable people exercising prudence may come to different conclusions. And views on such issues may be contingent on time and place. For example, whether the state should provide an income to the unemployed directly rather than supporting the family, civil society institutions and mutual aid organisations in that function is a question to which there is no definitive answer that applies in all times and places. Nevertheless, prudent decisions about such things still take into account the principles of Catholic social teaching. The question of the universal basic income therefore needs to be considered in principle and in practice. The purpose of this paper is to investigate these ideas

Tax after coronavirus – evidence to Treasury Select Committee inquiry

• Neither changes in environmental factors nor changes in working practices are having a significant effect on public finances or the efficiency of the tax base. • Overwhelmingly, the major factors leading to pressure on public finances are arising from demographic trends. The Office for Budget Responsibility’s (OBR) reports on such matters are becoming ever-more bleak. • This problem arises because of decisions that could have been, but were not, taken from the early 1990s onwards. However, government policy since 2010 has exacerbated the problems caused by population ageing, and the current government has made things worse. This has been made clear in the OBR’s Fiscal Sustainability Report. • The fiscal situation is so serious that it is highly undesirable and probably impossible for all adjustments to fiscal policy to take place by increasing taxes. • Radical fiscal decentralisation and tax simplification would be desirable. Decisions should also be taken to reduce unjustifiable spending promises such as the triple lock on pensions. • Our tax system is incoherent and far too complex due to years of the tax system being used to make political points or respond to vested interests. • A range of radical tax simplifications and abolitions is proposed. Some of these would lead to more revenue being raised. • A wealth tax is wrong in theory and would be impossible to implement in practice. There are aspects of the tax system that allow certain forms of actual and imputed income from wealth to remain untaxed. These issues should be addressed directly, and there should not be a tax specifically on wealth. • The arguments concerning the corporate tax base and globalisation are over-egged. Corporation tax receipts continue to rise and the so-called “tax gap” has narrowed to the lowest levels recorded. However, there are reforms to corporation tax which could be considered on their own merits. • The Digital Services Tax has no merit and is a tax on innovation. It should be withdrawn. • Given the dire state of the UK tax system following the Brown/Osborne era and the perilous state of the public finances as a result of a number of short-term decisions being taken, it is necessary for the government to put “ideas” and “principles” above interests and articulate a clear tax policy. As many elements of reform as possible should be enacted simultaneously to avoid reforms being picked off or made more complex in response to lobbying

Price ceilings and financial markets

Until recently, UK financial products markets have been free of price controls for a number of decades. However, the government has recently brought in caps on the cost of short-term consumer finance (payday loans). The government had previously rejected such price control for good reasons. The evidence from overseas suggests that restricting consumer credit can drive the market underground or lead vulnerable consumers to complete financial breakdown and thus make all credit and financial services difficult to access in the future. The UK government is also introducing controls on pensions charges. Again, this is happening after such controls were rejected and despite evidence that the market was working effectively. The government concedes that it is likely that price controls will inhibit new entry and competition in the industry. One government agency suggests that the price cap might become a ‘target’ for providers who might otherwise have priced their products lower than the cap. It is clear from the development of the charge capping agenda that the proposed regulation will be driven by political rather than economic consideration

Federal Britain - the case for decentralisation

The United Kingdom’s current devolution settlement leads to unrepresentative government and has an inbuilt bias towards ‘big government’. This situation is exacerbated because nations with devolved government are over-represented in the UK parliament compared with their population, when it might be expected that they would be under-represented. • The UK has the most centralised government of the G7, as measured by the proportion of revenue raised by sub-central government. In the UK, only 5 per cent of revenue is raised locally, compared with 50 per cent in Canada and 13 per cent in France, which is the next most centralised country by this measure. • Measured by the proportion of total government spending undertaken by sub-central government, the UK does not fare quite as badly. However, it is among a group of three countries in which between 20 and 30 per cent of all government spending takes place at sub-central central government levels – this is much less than the G7 average. A further indication of the degree of centralisation in the UK is the fact that, in 2011, local authorities had over 1,300 statutory duties laid down by parliament. In other words, local government has substantial spending responsibilities, Summary xv but very often these involve fulfilling statutory obligations. • There are a number of benefits from decentralising government, e.g. it promotes greater experimentation, better matching of services to local preferences and greater competition between providers of governmentfunded services. • Theory is confirmed by the evidence. Fiscal decentralisation is associated with higher national income, better school performance and higher levels of investment. In particular, the decentralisation of revenue-raising powers has a stronger effect on performance than the decentralisation of spending. The evidence suggests that increasing the local share of taxation from 5 per cent to 20 per cent (still low by G7 standards) could raise GDP per capita by 6 per cent. With especially low levels of revenue decentralisation, and as a large country, the UK is in a particularly good position to gain from transferring powers and revenue-raising responsibilities from central to local government. • The UK needs to reform in two areas. Firstly, a federal state should be created with Scotland and either the rest of the UK (RUK), or England, Wales and Northern Ireland separately, becoming nations within a federal union. The federal government should have a very limited number of powers including defence, foreign affairs and border control and a small parliament and executive. No other proposed solution to the ‘English question’ can provide the same stability or beneficial Summary xvi economic outcomes. Secondly, there should be radical decentralisation of powers within Scotland and RUK to local government. The principle that should be followed is that of ‘subsidiarity’: this does not mean central government pushing powers downwards while keeping ultimate control. Rather, control should be at the local level unless functions cannot be performed locally. Current UK government proposals to devolve powers to cities do not deal with the problems identified by this research and may well exacerbate them. • Federal states have a tendency towards centralisation, the US being an important example. Centralisation would be prevented by requiring unanimity among the parliaments of all the individual nations as well as agreement of the federal parliament before any further powers were passed to the federal (UK) level. • Within the federal nations, responsibility for the following should be transferred from national government to the local level: environmental policy; working-age welfare; education and health; granting of permissions for and regulation of natural resource exploitation; lifestyle regulation; policing; and housing and planning. Local authorities could join together to provide some functions, such as policing, where local geography or other circumstances make that desirable. In addition, there should be complementary reforms to promote autonomy for individuals, families and civil society institutions, especially in relation to health and education. Summary xvii • Except for working-age welfare, which would be largely financed by government grant but administered by local government, all local government functions would be financed entirely by local revenue streams. These would come from user charges and from some combination of the following, to be determined at local level: taxes modelled on the current council tax; land value taxes; taxes on business property; natural resource levies; consumption taxes; variation in income taxes; and tourist taxes. • Two crucial principles must be applied when implementing these proposals. Firstly, revenue must be raised by the layer of government that is undertaking spending. Secondly, one layer of government must not bail out the debts incurred by any other layer of government. To prevent the problems seen in the euro zone, the central bank would not accept Scottish or RUK (or English, Welsh and Northern Irish if appropriate) bonds as collateral in monetary policy operations

Child Poverty Policy: how to tackle the underlying or systemic causes of child poverty

This brief paper is a response to a Church of England consultation on the causes of and solutions to child poverty. It covers the fiscal situation, housing and tax polic

New Vision: Transforming the BBC into a Subscriber-Owned Mutual

There is a long history of governments and incumbent vested interests restricting competition in broadcasting for their own ends. Those interests have subtly changed the definition of public service broadcasting in a way that seems to serve producer interests rather than being helpful in informing good public policy debate. The current definition of public service broadcasting used by Ofcom is not coherent. The nature of the broadcast market has changed to such a degree that public service broadcasting (insofar as it can be defined) should no longer be delivered largely by one institution. Indeed, we should go further: there is no need for specific policy in relation to public service broadcasting. Niche providers are often better than the BBC at ensuring the broadcasting of good quality content to meet minority tastes. The BBC is clearly most attractive to higher-income white audiences, despite the impression it tries to convey in its marketing. The fact that the market for broadcasting is now an international industry means that many artistic, educational and cultural programmes, which might not have been economic in the past, may now be economic and not need subsidy. Changes in technology mean that the current approach to financing, owning and regulating the BBC is no longer tenable. The BBC should be financed by subscription and owned by its subscribers. It could then determine different subscription models for different markets (including online and overseas). This model has a number of advantages over alternative models of reform: The model is simple. All that is required is to allow people to receive TV signals for other services if they have not paid the subscription necessary to receive BBC services. As such, the reform It would be permissive – it would be seen as allowing consumers to receive for free, or through existing subscription services not funded by the licence, channels other than the BBC. A belief in a market economy should not mean that we are opposed to the evolution of a wide variety of different governance models within the market. It is likely that the model of a subscriber-owned mutual would be preferred to fully commercial models by the majority of nominal owners of the BBC (current taxpayers or licence fee payers) and future owners (subscribers). There is nothing to stop the subscriber-owned mutual from having fully commercial or fully charitable arms for different purposes. This is a common approach for mutual and co-operatives and would also allow the exploitation of the overseas market and a wide array of joint ventures. The BBC should lose its legal privileges and be treated in the same way as all other news and media organisations for competition and other purposes. The government may wish to impose some obligations on the subscriber-owned mutual in relation to the provision of radio, international broadcasting and also, perhaps, the broadcasting of Parliament. However, this would be best done under a freely-negotiated contract with the new mutual or with an alternative provider

Attacks on freedom to speak and pray

This chapter examines various developments in law and practice that have led to the erosion of freedom of conscience and freedom of speech, especially in a religious context

In Focus - the case for privatising the BBC

This book examines the economics of charging for television and the way in which appropriate economic models change with changing technology. It also describes the sociology of bias and undertakes an empirical analysis of bias. Different models of ownership for and finance of the BBC are considered and conclusions drawn