When I look at the pronouncements of Britain's politicians, I am reminded of the last days of the Nazi Reich, with Hitler directing armies that no longer existed across a map that had long since been overrun by Allied invaders.

Health Secretary John Reid, for example, promises "more GPs (family doctors) and more GP practices than ever before", with "entrepreneurial doctors setting up super-surgeries" ... blah, blah.

The reality, of course, is that many GPs are leaving practice as soon as they can. Polls indicate that they're looking forward to early retirement, because they can't stand the stupid paperwork and rotten pay they get from Mr Reid's own department.

Then it's Prime Minister Tony Blair talking about how he's going to widen access to the internet and to "close the digital divide". Quite. That's exactly what he said before he took office in 1997, of course. Eight years later, and we're still waiting.

There comes a time in the life of every government, every leader, when they have been in power too long and start to believe what their officials and spin-doctors are telling them, rather then what the facts say. But of course the officials insulate them from the facts too, so one can see why they get cut off from reality. In the bunker, life goes on. But the rest of us know that the whole thing has become a sham.

The 'black' or undocumented economy is attracting attention. Both our own Office of National Statistics (ONS) and its EU counterpart, Eurostat, have been trying to quantify it. Part of the black economy is criminal in the normal sense of drugs and fraud, but most of it is simply economic activity which is unrecorded to escape tax and regulation. In general, the higher the burdens which those two impose, the greater the temptation to evade them.

Although at first glance the black economy looks like money lost to government finances, much undocumented activity would probably not be worth doing at all if it had to be taxed.

Carl Mortished’s European Briefing in the Times quotes the Italian think tank Eurispes which estimates underground business activity in Italy to be about 27% of the economy. This is roughly in line with the IMF's estimate that about a third of Italian workers are off the books. Estimates for Greece are higher still, as are those for some of the ex-Soviet countries. Excise duties in Britain on alcohol and tobacco are high enough for a flourishing underground trade to flourish. It is quite something in Britain to inspect discarded cigarette packs to see the various languages in which the health warnings appear. America’s black economy is reckoned to be about 9% of GDP, with its small size usually attributed to the lower taxes there.

Of two possible ways to reduce the black economy, one is to intensify snooping, searches and policing, employing additional officers to crack down on fraud. Particular attention is devoted to nannying, cleaning, plumbing and building, since evasion seems to be widespread in such areas.

Another way is to lower the tax and regulatory burden so that it becomes far less necessary or worthwhile to evade it. The ASI follows Adam Smith himself in following the second course. Under his advice hundreds of taxes and duties were abolished or drastically reduced, and the romantic Cornish smugglers became an endangered species.

In the old story the wind and the sun competed to remove a man’s cloak. The force of the wind proved inadequate; then the sun came out and the man took his cloak off. It should be required reading in the Treasury.

On seeing the Times headline:

BRITAIN'S PLAN TO SAVE PLANET FROM QUAKES AND ASTEROIDS

my newsagent commented "and I hope they fix the trains while they're at it."

The NHS has disputed that they are the world’s third largest organization, after the Chinese Peoples' Liberation Army and Indian State Railways. Their press spokesman listed the US Dept of Defense and Wal-Mart ahead of their 1.4m, though George Trefgarne, economics editor of the Telegraph, suggests that the former is really four organizations. Health Secretary John Reid claimed that "The NHS is the world's biggest army for good." Maybe, but Trefgarne also points out that:

Yesterday, the Department of Health also released its annual workforce census which showed that less than half the new employees it hired last year were frontline health professionals. Of the 44,200 whole time equivalent new employees, 7,200 are doctors, 10,500 are nurses and 2,600 allied health professionals. The balance of 23,900 are back office staff, administrators, receptionists, lab technicians and cleaners. However, alternative figures compiled by the Office for National Statistics two weeks ago included some other support staff. These show the NHS hired 69,000 people last year, taking the total to over 1.4m. On that basis less than a third of new NHS employees are engaged in frontline health care.

Tax specialist Richard Teather has written a study of how flat tax could work in the UK. His report, A Flat Tax for the UK - a Practical Reality (pdf), calls for income tax to be simplified into a flat rate tax of 22%, with a tax-free personal allowance of £12,000.

This would take low earners out of tax altogether, while those on below-average earnings would see their after-tax incomes increase by over 12%. The average benefit for the top earners would be 0.5%. The change would lead to a nominal revenue loss of £50b in the first year, but against this would be offset a £12b saving from the abolition of minor reliefs, and large savings achieved when many currently on welfare became earners and spenders instead.

The net nominal loss in the first year is within the £35b of administrative saving identified in the James Review, and a fraction of the £81b savings identified by the Taypayers' Alliance. Teather concludes that flat tax on terms such as these is achievable.

The effect on the economy would be enormous; studies show that the aspects of the tax system that the flat tax would remove, namely high rates and exemptions, are precisely those that cause most economic damage. The resultant increase in economic activity, and reduction in distortions, would create jobs and so benefit current non-taxpayers as well.

It would, says Teather, "take the brakes off the economy." Given the speed with which flat tax has been spreading among the new members of the EU, with Poland only the latest in a long line of countries which have opted for it, several of the older EU members have begun to study the idea. These include Germany and the Netherlands.

The new Adam Smith Institute report is a further blow against the creaking and cumbersome current system, and in favour of the one which combines greater fairness, greater simplicity, and greater opportunities for economic expansion.

We should spare a sympathetic thought this Easter for Jacques Chirac. The French president is facing several unpleasant facts. One of these is that the EU is no longer a projection of France, or a vehicle for enlarging French influence in the world. The addition of new members has diluted not only French voting power, but French influence. Not only is French no longer the main language of the EU at official level, but French policy no longer prevails as it once did.

In a recent speech M Chirac railed against 'ultra-liberalism' as "the communism of our age." His problem is not that globalization threatens French farmers and manufacturers with cheaper goods from China and India, but that the new Eastern EU members threaten them from inside the EU. The barbarians are already inside the gates.

The EU Services Directive, the target for much of his apoplexy, offers the prospect of a vast internal EU market in services as well as goods, pretty much as was intended and promised. France, backed by Germany, both with unemployment levels in excess of 10%, is alarmed at the prospect of Polish plumbers and architects competing with French ones. M Chirac claims to have had the directive withdrawn, but Tony Blair disputes this, and points out that qualified majority voting will decide it, with unanimity not needed.

President Chirac needs to persuade his voters that France still pulls the EU strings, or their May 29th referendum may vote down the EU constitution. The latest polls show the 'no' majority increasing, but not yet to a level that time and EU spending cannot put right. All the same, if it goes down it will confirm that the French dream of a united EU, led by France, standing up both economically and politically to the USA, has faded. And it will have been internal, not external, forces which dispelled it.

Post-war Germany had an economic miracle. So did Hong Kong, Japan and the Asian tiger economies. China, it could be argued, has experienced one since Deng Xiaoping took over after Chairman Mao. What are the ingredients that make a miracle possible? The Lex column [subscription] in the Financial Times reminds us of what Mancur Olson said.

In The Rise and Decline of Nations (1984) he showed how the operation of interest groups can impede economic progress. At a period of turmoil such as in revolution or war, these associations lose their ability to defend their members’ interests at the expense of society, or to inhibit competition and innovation. This makes the miracle possible.

The 'Thatcher Revolution' in Britain overturned the power of vested interests by pushing through elements of monetarism and privatization, but it took a remarkably strong-willed leader. Countries more used to coalition and consensus would find that harder, but it could be argued that globalization brings the upheaval which undermines the entrenched interest groups and makes rapid economic progress possible. It is arguably better than war or violent revolution. Some of the countries which rapidly emerged from decades of communist rule have proved fertile ground for economic transformation.

The turmoil is unsettling, to say the least, and threatens comfortable and traditional ways of life protected by rules which preserve and entrench the status quo and the prevailing economic distribution. There will always be votes in support of the established order. But the rewards of change can be great, too. The wealth acquired by economic transformation can be used to combat malnourishment, poverty, and disease, to raise standards of education and health, and to bring access to more of life’s opportunities.

For good or ill, the world seems to be going through such a period.

One of the good things about the gradual but remorseless break-up of the old Soviet Empire is that we can finally correct a lot of illegal and improper 'privatization.' It gave the word a bad name!

Not a line you would expect from the Adam Smith Institute. But the privatization that we pioneered in Britain in the 1980s involved taking basket-case state monopolies, making them competitive, and allowing the general public to acquire some meaningful ownership in them.

The 'privatization' in East European and Central Asian countries such as Ukraine and Kyrgyzstan, by contrast, involved giving the state monopolies to the friends and relations of their thuggish pro-Soviet rulers.

Sure, neither Ukraine's Leonid Kuchma nor Kyrgyzstan's Askar Akayev were as repugnantly unsavoury as some local dictators. But extolling socialism while your family chomp cigars bought out of straight theft rather tends to get people's backs up.

I talked to Ukraine's new liberal Finance Minister and Deputy Prime Minister at our recent investment seminar. They plan to take the worst cases of 'privatization' theft, re-nationalize them, and then privatize them properly involving the whole population. It's the right thing to do. Let's hope the new government of Kyrgyzstan come asking them for advice.

Trying to make phone calls over the internet used to be messy and fairly impractical. Instant Messaging software and webcams worked OK, but the person you wanted to call had to have the right hardware and software. They were no alternative to the real telephone. What was lacking was the ability to phone someone who just had an ordinary landline or mobile. Skype, a computer program, came along and let you make calls through the computer to ordinary phone numbers, but there's something that doesn't feel quite right about making phone calls through a computer.

But internet phone calls have finally come of age. I made my first real internet phone call yesterday. It wasn't through software but through a Voice over Internet Protocol (VoIP) phone that plugs into an ordinary broadband internet connection. The phone looks, feels and works like an ordinary telephone. I called the USA (1.5p a minute) and the call quality was as good as calling on a British Telecom phone. I have to pay a line rental (£7 a month) but I do get an incoming London phone number, which is nice. If I spend a week overseas, I can unplug the phone, plug it into an internet connection there and still get my calls. (Or divert them to my mobile.)

There are downsides. Internet connections aren't always reliable. Due to government regulations, you can't currently phone 999 from a VoIP phone. And, unless you're on cable, you have to have a BT phone line in order to get broadband. So a VoIP phone can't replace your existing phone. But it is useful if you want a second line.

It's great to see technology helping to increase competition and reduce prices.

The ASI website has over five times as many readers now as it did just eighteen months ago, keeping it well and truly the highest-read think tank website in Britain. But the site is creaking under all the content, so it's time for it to be redesigned and reorganized. Work is still progressing, but we thought we'd give you a quick peek at the new design...

Allders, the British department store group, has gone into administrative receivership. 1850 jobs have already been lost. In some towns, Allders was a key retailing institution. Isn't it wrong that the company, which was founded in 1862, should disappear?

Receivership is a nasty business, unpleasant for everyone involved. But, long-term, it is socially beneficial process. It takes resources that are distributed inefficiently and redistributes them to people who can use them better. Over the past decade and a half, Allders expanded from 11 to 45 stores, but 40% of the revenues came from the original Croydon store. Twenty of the stores, known as Allders at Home, were total disasters. The head office was hugely overstaffed, and the first thing the administrators did was to make 130 head office staff redundant. In 2003, the Daily Telegraph described Allders as "the country's most boring department stores".

The administrators have sold 24 of the Allders stores to Allders' competitors, like Debenhams, BHS and Primark. Thirteen stores were closed this week without buyers at present due to lack of interest. Three, including the flagship (but tatty and dilapidated) Croydon store, remain trading under the Allders brand for the time being. The administration process continues.

The alternative to selling the company's assets to the highest bidders would be for government to intervene and give Allders a helping hand. It could be argued that Allders is merely facing short-term problems and needs some breathing space. In reality, government support rarely achieves this sort of turn-around. Instead, the drug of government money becomes addictive and constant injections of cash are required. It is much better to have the redistributive process of receivership. It's survival of the fittest, but it is that process which benefits shoppers - and society - the most. And even the loyal shoppers in Croydon, where the store is a real institution, might be pleased - rumour has it that the capitalist collective known as John Lewis wants to move in.

The London papers report a new UK government ruling that insurance companies are not going to be allowed to use the results of genetic testing in order to make a judgement on whether or not to insure people.

If so, this is very bad news for people who buy insurance. Because folk who are worried that they might die young, or suffer some long-term debilitating illness, will immediately get themselves tested. Then, if their fears are confirmed, they will pitch up at an insurance company demanding cover. And the insurer, kept in ignorance of the real risk, will end up writing some very bad business to a lot of people.

Which in turn means that insurance premiums will go up, even for people who are at low risk and who choose a healthy lifestyle. Or insurers will just stop offering life or long-term illness cover entirely.

If politicians think it's important to help high-risk people, then fine: but they should pay for it, after public debate. What they are trying to do is to foist this "social cost" on to private business. And when you try to push market players around like that, you do more harm than good. Civics is the business of government, not the business of business.

Today's London Evening Standard features a poem written by the Adam Smith Institute Poet-in-Residence, Madsen Pirie. The poem is a submission to the Scottish Arts Council. The council is giving a £30,000 "Creative Scotland" grant for someone to write poetry about this summer's G8 meeting in Gleneagles. Here is Madsen's submission:

"I think the G8.
Is great;
But to get an Arts Council Grant,
I'd probably need to take a different slant."

That £30,000 Arts Council grant can't be far off.

The ASI Blog has been shortlisted for the Guardian newspaper's political weblog awards. You know we're the best, so click over to their site and vote for us.

Conservationists have supported wind farms as a renewable source of energy which does not damage the environment like the burning of fossil fuels. They must be overjoyed to read about the new power station that will put 36 wind turbines on a 2,000ft-high plateau in the Monadhliath Mountains on Dunmaglass Estate. The developers, Renewable Energy Systems, have issued a 300-page environmental impact study on the plans.

The study states that up to 11 golden eagles could be killed in collisions with turbines and suggests that the wind farm, covering 4 square miles, will have a long-term impact "on the potential of this area as a nursery ground for future replacement breeding birds in the region". It says that the 360ft turbines, higher than Big Ben, will be visible from Loch Ness and from the Ptarmigan visitor centre in the Cairngorm National Park, some 20 miles away — before concluding that the proposal will have "few adverse environmental effects".

Fortunately some good comes from the proposal, apart from the admittedly expensive wind-generated energy. Dunmaglass is the Highland holiday home of Sir Jack Hayward, a Bahamas-based property developer, who will make an estimated £9 million for letting Renewable Energy Systems build on his land. The developers are set to make profits of more than £120 million.

The economic shape of Europe is much in the news following criticism of the proposed European Services Directive. The proposal put forward by José Manuel Barroso, President of the European Commission, seeks to open Europe’s market in services to internal competition. It is strenuously opposed by France and Germany, with Jacques Chirac calling for it to be scrapped to protect the 'European social model.'

Now it is reported that supporters of competition have backed off, to prevent a 'no' vote in the French vote on the EU constitution. The 'social' model emphasizes collective responsibility, regulated labour and product markets, with high taxes to fund a generous social safety net. The competitive 'American' model stresses individual initiative, flexible labour markets, low taxes, and minimal regulation.

Gordon Brown wanted to combine the two, talking of a 'third way.' Irwin Stelzer assesses his achievement. In practice his contribution has been to raise taxes and regulation in the UK, taking it somewhat away from the American model and some way towards the social model. The government's share of the economy has hugely increased under his direction. It is not a third way but a mid-way, on the road from a flexible, competitive economy towards a protected and regulated one. There is still some way to go, but the UK economy is closer to the European model than it was.

The new EU members from Eastern Europe have arrived to stir the pot. Anxious to achieve growth, they have opted for the flexible, free-market model, with its low taxes. Many of them have embraced flat taxes. There thus remain two models, with Britain still in the 'market' group, but only just. The chart shows the two groups.

What would you do if you owned shares in a company with a divided board? Suppose the CEO and the Chairman publicly contradicted each other about the aims of the company and its future strategy? Suppose they constantly tried to undermine each other to the press, and the subordinates of each regularly leaked damaging stories about the other?

You’d get out, of course. But how do you sell shares in a country?

A thoroughly disgraceful piece appears in the Times this week. It is by John Grieve Smith, author of There is a Better Way: A New Economic Agenda for Labour, and advocates global taxation. Its basic argument seems to be that individual countries might implement low taxes, so they must be stopped by having taxes set at a supra-national level. He says that:

The Treasury's antipathy towards tax harmonization in the EU, and the Chancellor’s advocacy of "tax competition", might seem robust expressions of the belief that taxation is solely the prerogative of sovereign governments. But they ignore the fact that increasing tax competition would not only limit the ability of governments to set taxes at higher levels than their neighbours or competitors, but would also drive down the general levels of many taxes — a one-way route to harmonization. Encouraging tax competition would make it increasingly difficult to finance the standards of public services that the electorate now expect.

Any electorates which "expect" those standards of public services can no doubt vote for the taxes required to sustain them. Others might think that high taxes are often associated with bloated bureaucracies and waste, and that lower taxes might encourage governments to think lean and to seek value for money on behalf of their electorates. It is quite surprising to see a leftist economist saying out loud that people who want low taxes must be stopped from having any influence on events.

He nods approvingly at a currency transactions (Tobin) tax and a carbon tax, both to be levied and collected on a global basis, otherwise "market operators would find ways to avoid, or minimize, the impact." The idea that taxes should be levied on us by others with no control by ourselves, and no ability to escape from them, is a repugnant one. Shorn of the need to secure funding by agreement, there would be little restraint on spending by international bodies. The EU has shown how easy it is to spend money like water when you are not accountable to an electorate.

The author joins a long line of people who think that their view about how our money is spent is better than ours, and who therefore want to prevent our opinions from having any effect.

The death of John De Lorean reminds us of when governments spent taxpayers' money on "picking winners" that they hoped could regenerate depressed areas. In strife-torn Northern Ireland, they picked the DMC, the impractical stainless-steel gull-winged car featured for humorous effect in the movie Back to the Future.

De Lorean was a Detroit executive who dreamt of creating a sports car. In the mid-1970s Britain's Labour government gave him £55m to set up a factory in Belfast. It was never a valid scheme. Even Mrs Thatcher threw in another £30m trying to save it. Two years later, the receivers were sent in.

This £85m wreck was just one in a series of disasters caused by governments thinking that they were somehow better at identifying successful future businesses than the professional investors who do it every day.

De Lorean was the last romantic failure Mrs Thatcher would finance. And subsequent governments have inherited her skepticism. They still use public money to boost places and sectors (small business, say). But the memory of De Lorean prevents them from throwing cash at particular businesses. Perhaps at last, our politicians have learnt something?

On March 22nd 1765, the Stamp Act, imposing taxes on newspapers and legal documents, was passed by Parliament. This prompted Benjamin Franklin to make the legendary comment, "In this world, nothing is certain but death and taxes."

Danny Kruger is one of the Conservatives' more able parliamentary candidates. But he was forced to pull out of the fight in Tony Blair's Sedgfield constituency after being savaged by left-wing columnist Polly Toynbee for saying we need "creative destruction" in public services.

Nevertheless, it is Polly, and not Danny, who is the stupid one, according to brainbox journalist William Rees-Mogg in today's Times. Because, as he points out, the phrase "creative destruction" was popularized by the leftish Austrian economist Joseph Schumpeter. It describes only the cyclical process of renewal and growth in the modern economy.

His view was that the new is always built on the demolition of the old; railways replace stage coaches, automobiles replace the horse and buggy, electricity replaces gas lighting, and so on. This process he referred to as "creative destruction". It is essentially benign.

So Danny was just making the point that we need radical reform in health, education, welfare, and the rest. Without a bit of "creative destruction" nothing will change, and public services will continue to be stuck in their ways, costing too much and delivering too little, too badly.

As Poland became the ninth European country to adopt simplified single-rate income tax, the move to examine the British options for a flat tax gathers momentum. Now the Times and the Spectator join the long list of publications which have reported on the flat tax revolution, and suggested it might be time to consider it for the UK.

The low single rate has an impressive record in yielding increased revenue, while simultaneously reducing the tax burden on individuals and businesses, and thereby encouraging growth and investment. The Times reports that:

Slovakia, which introduced a flat tax of 19 per cent last year, announced this week that it was negotiating 260 inward investment projects, of which the 30 closest to completion would bring £1 billion of investment and 15,000 jobs. The country will soon become the highest manufacturer of cars per capita in the world, overtaking Germany, having persuaded Volkswagen, Peugeot and Kia to set up factories.

Having tried initially to prevent low tax competition through ‘harmonization,’ other EU members are now being forced to examine whether they might have to follow the low tax route in order to remain attractive to investment and industry.

Tim Evans of the Centre for the New Europe puts it succinctly:

Western Europe should embrace, not spurn, the flat-tax revolution… The flat tax means in this age of globalization that Europe can compete in terms of job creation and investment. Europe faces a choice: go on stagnating with high taxes, or renew its economies and go for growth.

It will not be taken up in Britain under this Chancellor, but his successor has an opportunity to put Britain firmly in the low-tax revolution. It begins to look increasingly likely that this might push its way onto the agenda.

Jad Adams has exposed in the London Times the background to decisions by the Local Government Ombudsman.

A case that I recently took to the Ombudsman involved a change in a planning order. He ruled that changes were completely beyond his powers, despite the Council having admitted in writing to me that the change was of critical importance to me. The Planning Officer wrote apologizing that "you were not made aware of this critical change to the application" and that "you were not given the opportunity to express your concern (with regard to the provision of fences and the protection of your privacy)".

Amazingly, the Ombudsman eventually ruled in favour of the Council on the purely technical grounds that he had no power to challenge the discretion of Planning Officers over changes to planning applications.

Have you ever heard such nonsense? My constituency MP is trying to persuade the Minister to amend the legislation to allow the Ombudsman to deal with changes in planning applications. Cynic that I am, it does not make me very hopeful.

Jad Adams points out that while the Ombudsman's office is staffed with so many ex-local government officials, it is not surprising that they find in favour of complainants in only 1.6% of cases. Like medics they close ranks; unlike economists (such as me), who publicly and healthily disagree, sometimes violently!

The latest threatened disaster is a giant volcano. A BBC documentary showed how this could cause mass extinctions, as similar ones may have done before. This comes hot on the heels of a pandemic of avian flu which scientists tell us could claim two million lives in Britain alone. Some scientists warn that another ice age is overdue, although many more have persuaded governments to commit billions of dollars against the disaster threatened by global warming.

Over-population has passed its best, though some still warn of the catastrophe it will bring. A world stripped of its resources by our own greedy generation threatens a bleak future. Meanwhile money is already being spent on early warning systems to detect asteroids and comets which might consign us to the same extinction they meted out to the dinosaurs. Some want even more spent on preparations to destroy or divert any earth-bound objects. Solar radiation coming through ozone holes might get us before then, as might other cosmic catastrophes. It might be touch and go whether we get flooded before the world runs out of water.

Disregarding for a moment the possibility that these might be elaborate pay claims by scientists, with each group anxious to secure research grants for its own discipline, the question arises as to how we can possibly afford to deal with all of these potential disasters. We can't, of course; we have to choose.

One possible approach would be to nominate what we can reasonably afford, then invite scientific groups to bid for it. They could present their case competitively, with resources being awarded to those who make the best case. There could be an independent panel like the Motion Picture Academy to decide the winner at an annual awards ceremony, or the public at large could vote, maybe eliminating threats one by one in a kind of Catastrophe Pop Idol until the winner was chosen. It would certainly make for gripping television, and generate employment for graphic artists for years to come.

That the present tax system should be changed is obvious: but what should replace it? Those who say "no taxes at all!" receive an indulgent pat on the head at this stage. Unfortunately that is all they get: no government will agree to zero taxes, but they might be cajoled into accepting lower taxes and simpler taxes.

The Times’s financial editor, Graham Searjeant, wants efficient taxes.

Simple taxes that are easy to collect are honest, efficient and can be understood and predicted. The best and most bearable are deducted from a stream of income or at point of purchase, like PAYE or stamp duty.

PAYE (tax on wages collected by employers) has the advantage that it does not come suddenly. Because it is paid in small weekly or monthly installments its burden falls less dramatically. The problem with Council Tax, and with its predecessor the Poll Tax, is that it falls in a lump, with no income stream to deduct it from.

While a local income tax looks better to some, it would in practice be collected alongside national income tax, rather than through an expensive parallel system which duplicated the information collection and the payment mechanism. This would reduce it in practice to a surcharge on income tax to be handed on to local authorities. A local sales tax, US style, is better. People have less objection to paying a few pennies on each purchase than they do to a huge bill received all at once. In practice cash registers calculate and add the tax, and stores send it on to local authorities. Very often food and other essentials are exempt in order to make it less regressive.

The Treasury’s professed aim of "taking account of household circumstances": has led to a nightmare of complexity, handouts and intrusion. Tax credits awarded on the basis of perceived household need require vast amounts on information, form-filling and inspection. They have given us the absurdity which sees some who earn over £50,000 p.a. qualifying for state benefits.

The alternative is to make tax simple and less burdensome, so that people find it easier to pay the tax than to engage in complex avoidance behaviour. The ASI has researched the impact of a flat tax on income of 22%, starting at £12,000. It has also proposed ending inheritance tax, which is levied on already taxed money, causes investment distortions, and raises only 0.7% of total tax. Some will call for a flat tax of zero, just as some call for a year-round temperature of 68°F. Government will not move to a zero tax, but they might be persuaded to move to a 22% flat rate. From there, when it has settled, they might be persuaded to lower it.

Graham Searjeant suggests a tax on credit card transactions, but this would probably be used by governments as an additional, rather than an alternative tax. After all, income tax was a temporary expedient to help finance the Napoleonic wars, and Stamp Duty is about to celebrate its 240th anniversary.

The ASI line on taxes is pretty straightforward: make them simpler, make them fewer, and make them lower.

Our blog of the week goes to Guido Fawkes, a blog detailing "plots, rumours and conspiracies". Today they reveal Gordon Brown's budget plans in full:

With a general election in the air, it was predictable that Britain's finance minister Gordon Brown would be giving goodies to lots of important voter groups. So older people get free travel, motorists don't get stung with a price rise until September, and so on.

And yet, Mr Brown managed to dispense these gifts without raising borrowing still further. The newspapers are asking: "How on earth did he do it?"

The answer is simple. He did it by raising taxes. Not by raising the headline rates of any tax like the Income Tax on earnings or the Value Added Tax on what you buy. But raising various "stealth" taxes again - mostly, those on business.

Each year the Adam Smith Institute calculates Tax Freedom Day - that point in the year when you can say that you have finally stopped working for the tax collectors and at last start earning for yourself. Last year it fell on 27 May. But Tax Freedom Day 2005 will fall on 31 May.

That means that the average British taxpayer spends five full months of the year working for Mr Brown and the Treasury. No wonder they can afford to chuck a few pounds to some key voter groups!

For more on Tax Freedom Day, visit:
http://www.adamsmith.org/tax/

UK Chancellor Gordon Brown introduced his budget speech yesterday with a preamble showing how well the UK economy had been doing. Owing to time pressure he was not able to include and thank all those who had contributed to this strong performance. Here is the section he did not have space to deliver:

In pointing to 50 successive quarters of economic growth, I would like to thank the previous Conservative government under which the first 19 of those growth quarters occurred, and which set Britain on the road to economic success.

I would like especially to thank Margaret Thatcher, who with great effort and courage gave us a flexible labour market and an adaptable economy. This has enabled us to move to high value service industries and adjust to a decline in manufacturing. I thank her especially for doing this despite the total opposition of my own party.

Thanks are also due to British businesses, most of which have struggled to bear the extra load of taxation and regulation I imposed upon them, yet still manage to survive and even to prosper.

The Chinese deserve my special thanks for helping to keep down inflation. By supplying us with low cost products, they have held down prices and helped us avert upward pressure on wages. And their demand for energy has boosted the revenues we derive from our North Sea oil.

Our French and German partners are to be thanked for piling extra costs upon their own businesses, and making ours more competitive by contrast. The investment which has come to Britain instead of to them I particularly appreciate.

And of course I must thank the British taxpayers who have paid all of my stealth taxes and seen their own burden rise. More of them than ever before have been swept into higher tax rates, inheritance tax and stamp duty. Tax Freedom Day now comes several days later as they struggle to pay the government’s increased portion of the economy. I thank them.

Without all of these brave contributions, the UK’s economic success would not have been possible; and I am duly grateful.

Van Horn, Texas, about 120 miles East of El Paso, is about to see more than grazing cattle. Jeff Bezos, founder of Amazon, has bought 165,000 acres there to build a spaceport, reports CNN. The project, known as Blue Origin, is to send into orbit a passenger carrying vehicle which takes off and lands vertically, like a rocket. The first stage will be a sub-orbital hop taking 3 people for a short flight into space.

There is something about space which seems to fascinate these high-tech billionaires. Paul Allen, co-founder of Microsoft, put up the $20m it took to fund Burt Rutan’s SpaceShipOne on the pioneering spaceflights which won the Ansari X-prize last year. Others are clambering aboard.

SpaceX, started by PayPal founder Elon Musk, plans to launch and deploy a military satellite this year using a rocket. The California-based company has conducted much of its testing in McGregor, Texas, near the Fort Hood military base. John Carmack, who made a fortune on "Doom" and "Quake" through his video game company ID Software, owns Armadillo Aerospace based in suburban Dallas. The venture also hopes to launch its own brand of space rockets.

It might be a case that these people are rich enough to indulge their daydreams, but there are other billionaires such as Warren Buffet and George Soros who are not following suit. Maybe having achieved success in one high-tech field, they try their hand in another? There might even be an affinity between IT innovators and space travel, like the one commentators point to between free market, libertarian types and science fiction. It could be that IT pioneers imagine a better world and try to bring it about; and this is why they are backing private spaceflight.

Either way, those of us who can’t wait for space travel to be widely accessible can be grateful that these guys think it a goal worth putting money into.

Poland is the latest country to adopt a flat tax in place of complex tax bands and exemptions. Ambrose Evans-Pritchard reports in the Telegraph that:

Poland is to join the flat-tax revolution sweeping Eastern Europe, switching to a single band of 18pc on income tax, corporation tax, and VAT. Mirosaw Gronicki, the Polish finance minister, said the one-tax-fits-all system would sweep away the country's complex grid of rates and exemptions by 2008.

The Polish centre-left government calculates that the switch from its current top rate of 40% will create sufficient extra growth and compliance to compensate for any immediate revenue shortfall.

Predictably the EU’s traditionalists have objected. Sweden’s Goran Persson and Nicholas Sarkozy, France’s ex-finance minister, have claimed that the EU's big net contributors "are effectively subsidizing the low tax rates of competitors." This is not in fact true, since a flat tax brings in more revenue, not less, in consequence of extra growth and compliance. Slovakia is the most recent country to benefit from this.

In the UK, Chancellor Gordon Brown introduces his annual budget today. Since 1997 he has introduced new tax bands, plus a host of new taxes, and introduced such fearsome complexity that even tax accountants find difficulty in penetrating its arcane rules. Brown himself has invested too much in a tax system understood only by Treasury officials, but his successor will be forced to look very closely at the new system sweeping across Europe.

The ASI will urge the next Chancellor, who may be only 7 weeks away from office, to set up a Treasury working party to study how a flat tax might be introduced in the UK, and how it would affect revenues. It will be difficult for the UK to resist its advantages indefinitely, knowing the huge benefits which will accrue to the major EU economies which step first down that road.

Poland’s decision is another mile-marker pointing the way forward.

John Lloyd of the FT (left), Alex Singleton (centre) and TV producer Eben Wilson (right) at the ASI seminar on Politics and the media. John Lloyd explored the consequences of the fact that many media outlets, both print and broadcast, are now part of entertainment empires. Politics has become increasingly treated as part of the entertainment business, he told the ASI audience, with combative display replacing serious informational content.

Eben Wilson examined the notion of public service broadcasting, and found himself unable to understand why it should be treated as a special category, or be provided by those who were thought better than others to say what it was. He expressed the view that a BBC supported out of public funds was a distorting influence on the service provided by the broadcast media.

Discussion among the audience followed the presentations, and continued during the champagne reception afterwards.

An old friend of the Adam Smith Institute, The Honourable Ian Campbell - Australia's Cabinet Minister in charge of Environment and Heritage - is in London for talks with British and other government representatives.

The subject is climate change and Kyoto - to which Australia (along with a number of those who will be coming to the talks) is not a signatory. But, says Campbell, Australia is doing a lot of other things which will arguably help the world climate more than the hugely-costly Kyoto protocol.

Mr Campbell's first stop in London was to see Dr Madsen Pirie (left) and Dr Eamonn Butler (centre) at the ASI HQ in Westminster.

In this article in the Financial Times last week, ASI author Keith Boyfield sets out all you need to know on how to cut down the tide of regulation that is strangling business. His prescriptions come from his 'Road Map to Reform: Deregulation' report for us, which he wrote with the London Business School's Tim Ambler.

First, end the need for 'gold plating' of EU Directives by scrapping EU Directives. If the EU wants a law to tell countries how to behave, it should pass them -- not publish broad statements which then every EU member interprets and enforces differently. And make sure that the impact of all EU measures is properly assessed in advance -- unlike now. Third, give them all sunset laws so we're not stuck with bad regulation forever.

Fourth, make the EU Commission report annually to the Parliament to justify the costs and benefits of its regulations. And set up a team to scrutinise all regulatory proposals before they are formulated.
Lastly, prune the 16,000 pages of EU regulatory law. Who needs them all?

Wind farms in Britain have enemies. They are alleged to kill birds, to ruin scenic views, and to impose higher energy costs on the economy. They have supporters, too, in that they are a symbol (if not a practical aid) of a commitment to renewable energy.

They have other friends, too, reports Mark Macaskill in the Sunday Times.

Some of Scotland’s richest landowners are preparing to share in a £200m wind farm bonanza. Nicholas Oppenheim, the leisure tycoon, heads a list of 20 lairds set to cash in on the switch to green energy by allowing their land to be used to house hundreds of giant turbines.

Oppenheim will earn about £30m from a wind farm with 133 turbines each 125m high on his Eisgein estate in Lewis. John Dalrymple-Hamilton will share in £13m from the 52 turbines on Hadyard Hill, Ayrshire. The Earl of Moray will get £20m from 49 turbines on his Doune estate.

Scotland’s 20 current wind farms will soon add 35 already approved, with hundreds pending, and many of Scotland’s richest landowners stand to make a great deal of money. Their ancestors removed the people and put sheep there instead. Now they are putting windmills on the land. They must be gratified to know that the wind up there blows somebody some good.

This week's quote is by Fraser Nelson of The Business. It is his take on UK Chancellor, Gordon Brown.

Brown does not run the British economy: he just taxes it.

The performance of the Chinese economy. powering ahead for a decade at nearly 10% growth per annum is helping us in many ways. We pay less for Chinese-produced goods, giving us wealth to spare for other things. The downward pressure of Chinese prices has helped to combat price rises at home.

China has become the workshop of the world. It supplies us with our white goods and electronics, as well as furniture, appliances, bicycles and textiles. According to Ted Fishman, author of China Inc., 1% of the whole Chinese economy goes to Wal-Mart alone. China has accelerated the pace at which advanced economies switch to producing more advanced goods and services.

Chinese demand for raw materials has given a major economic lift to suppliers of them, including Russia and South America. Chinese demand for energy has pushed up the price of oil to over $50 a barrel, forcing forward the drive to energy conservation in the West, and the development of substitutes like the hydrogen economy. While China has increased pollution as its economy expands, it is bringing nearer the time when it will be rich enough to produce cleanly and safely.

In China itself, economic growth has already lifted millions out of poverty, and promises to do the same for millions more. China has been moving, as several of its Asian neighbours have done, from being a poor nation to becoming a rich one. In economic terms China has been a success story, and it is a success which has benefitted the world as well as the Chinese.