Reforming Law and Order: Drugs Reform

It seems that it has been a very, very long time since I have posted on the subject of solutions to the UK's current fiscal crisis. My posts on the subject of reform have been mostly well received by readers, but I am not sure that this proposal will please many. However, it is perhaps the most simple reform that I have proposed, and would play a very significant role in cutting the costs of law and order, and would make the UK a significantly safer place as well.

My proposed reform may have you spluttering in your coffee. It is very simple. It is to legalise all drugs. And I mean all. I was hoping to be able to show you a video called 'Breaking the Taboo' to convince you of many of my arguments, but it has puzzlingly stopped being made freely available, and attempts to watch it describe is as a 'Private Video'. Although the film is focused on the US, the arguments made in the film are far more widely applicable. The film presents a persuasive argument in favour of drugs legalisation, and features some somewhat surprising supporters; Bill Clinton, Jimmy Carter as well as many other senior politicians. The argument is simple, and that is that the 'war on drugs' has long been lost, and the cost of the war is greater than the benefits. It is both a financial and moral cost that is discussed. Wired offers a good summary of the film:

Breaking the Taboo is straightforwardly honest about its message from the start -- the war on drugs is futile and misguided, and it makes people's lives miserable. It makes its points clearly: the drug war has devastated South American countries; it has devastated poor communities in the US; it's given rise to a huge prison-industrial complex in the US; countries that have approached drugs as a health problem and not a criminal one, like Portugal, the Czech Republic or the Netherlands, have fewer problems with organised crime and addiction. It's even narrated by Morgan Freeman, giving it that warm tone of reliability (Gael García Bernal narrates the Spanish-language version).

They're not new points, but then the whole point of Breaking the Taboo is that it's for people who may not have heard these counterarguments made so succinctly and matter-of-factly -- that's what the title of the film is referring to, the proposition that speaking about drugs as anything other than a problem that needs to be wiped out with force is a taboo topic among much of mainstream society. It heavily features the 2011 Global Commission on Drug Policy, the organisation which released a report declaring that the war on drugs had "failed", something made more notable by the number of former high-ranking public officials it included in its ranks -- including three former presidents and one former prime minister.

The views expressed in the film mirror many of the views I have held for a long time. For example, the US prohibition of alcohol provides a case study of the impacts of drug prohibition; it launched an organised crime crime wave. Al Capone was not fiction, but fact. This is from Wikipedia and, although requiring additional citations, the account conforms with more reliable sources I have seen:

Organized crime received a major boost from Prohibition. Mafia groups limited their activities to prostitution, gambling, and theft until 1920, when organized bootlegging manifested in response to the effect of Prohibition.^[67] A profitable, often violent, black market for alcohol flourished. Powerful criminal gangs corrupted law enforcement agencies, leading to racketeering. In essence, prohibition provided a financial basis for organized crime to flourish.^[68]

Rather than reducing crime, Prohibition had transformed the cities into battlegrounds between opposing bootlegging gangs. In a study of over 30 major U.S cities during the prohibition years of 1920 and 1921, the number of crimes increased by 24%. Additionally, theft and burglaries increased by 9%, homicide by 12.7%, assaults and battery rose by 13%, drug addiction by 44.6% and police department costs rose by 11.4%. This was largely the result of “black-market violence” as well as the diverting of law enforcement resources elsewhere. Despite the hope of the prohibitionist movement that the outlawing of alcohol would reduce crime, the reality was that the Volstead Act led to higher crime rates than were experienced prior to prohibition and the establishment of a black market dominated by criminal organizations.^[69]

Furthermore, stronger liquor surged in popularity because its potency made it more profitable to smuggle. To prevent bootleggers from using industrial ethyl alcohol to produce illegal beverages, the government ordered the poisoning of industrial alcohols. In response, bootleggers hired chemists who successfully renatured the alcohol to make it drinkable. As a response, the Treasury Department required manufacturers to add more deadly poisons, including the particularly deadly methyl alcohol. New York City medical examiners prominently opposed these policies because of the danger to human life. As many as 10,000 people died from drinking denatured alcohol before Prohibition ended.^[70]

The current state of the 'drug war' mirrors the prohibition era, and this is one of the points made in the film 'breaking the taboo'. The cure is doing more harm than the problem. Support for legalisation is appearing from the most unlikely sources; for example, just recently, I found an article in the Spectator which argued that the only way to end the horrendous violence engulfing Mexico is to legalise drugs, even making the comparison with the prohibition era. Putting it very simply, prohibition of drugs creates crime, and criminalises large numbers of people who would otherwise likely remain law abiding. As well as the social costs, drug prohibition is very, very expensive. This is a point made in a recent report by the Transform Drug Policy Foundation (TDPF).

The TDPF report commences by pointing out that no cost benefit analysis has ever previously been undertaken for legalisation of drugs, and yet assertions have been made as if this were not the case. The upshot of this policy is summarised here:

Despite the billions spent each year on proactive and reactive drug law enforcement, the punitive prohibitionist approach has consistently delivered the opposite of its stated goals. The Government’s own data clearly demonstrates drug supply and availability increasing; use of drugs that cause the most harm increasing; health harms increasing; massive levels of crime created at all scales leading to a crisis in the criminal justice system; and illicit drug profits enriching criminals, fuelling conflict and destabilising producer and transit countries from Mexico to Afghanistan. This is an expensive policy that, in the words of the UN Office on Drugs and Crime, has also created a raft of negative ‘unintended consequences’.

My intention is not to reproduce every point in the report, but there are some examples that I would like to highlight (note, they are conservative on the costs of prohibition, and conservative on the benefits of a legal and regulated market), such as their calculation of savings under four scenarios (p.7):

Scenario A: 50% fall in use, net benefit = £13.943 billion
Scenario B: No change in use, net benefit = £10.834 billion
Scenario C: 50% increase in use, net benefit = £7.724 billion
Scenario D: 100% increase in use, net benefit = £4.616 billion

These are just for heroine and cocaine legalisation and regulation, and their estimates are indeed very, very conservative (e.g. they exclude costs of the large contribution of the UK government to global enforcement of prohibition). Further, although there are often attempts to suggest that legalisation will increase usage, this is argued without evidence. Indeed, since the Misuse of Drugs Act of 1971, intended to stop the use of drugs, this is the outcome (p.11):

The report makes the point about increased usage very strongly, with this section quoted below just one example:

The proposed deterrent effect is poorly supported by empirical research. The Science and Technology Select Committee report in 2006 on the drug classification system ‘Drug Classification: Making a Hash of it?’60 stated that:

“We have found no solid evidence to support the existence of a deterrent effect, despite the fact that it appears to underpin the Government’s policy on classification. In view of the importance of drugs policy and the amount spent in enforcing the penalties associated with the classification system, it is highly unsatisfactory that there is so little knowledge about the system’s effectiveness”.
The Government rejected this finding and responded with:

“The Government fundamentally believes that illegality is an important factor when people are considering engaging in risk-taking behaviour. The exposure to criminal sanction, in particular through sentencing, influences perceptions and behaviours. It believes that the illegality of certain drugs, and by association their classification, will impact on drug use choices, by informing the decisions of dealers and users. Imposing penalties on the offence of possession is intended to deter use, particularly experimentation by young people. Whilst the Government accepts that there is an absence of conclusive evidence in relation to the deterrent effect of the existing classification structure, there is some evidence from the Offending, Crime and Justice Survey that the deterrent effect of harsher sentencing was greater among those admitting to the supply of a Class A drug, compared with other offences. The Government will consider ways in which the evidence base in the context of the deterrent effect can be strengthened.”61

However, in the field of evidence-based policy making what the Government ‘believes’ is neither here nor there, and there is notably no evidence provided to support the ‘belief’ of the system’s effectiveness as a deterrent (it was not made clear which evidence from the Offending, Crime and Justice Survey was being referred to). In the absence of this or any other credible evidence, this ‘belief’ can only remain an untested assumption.

The report accepts that estimating future use under a legalised and regulated scenario is difficult to calculate, for example with different effects and impacts according to the type of drug, and different impacts upon sub-types of population etc. However, although they give the scenarios, they consider the increased usage scenario for heroine as unlikely, and their discussions certainly point in this direction. I will not make my argument here, and will leave their conservative assumptions in place, but I think the most likely outcome would be a significant reduction in use of drugs like heroine, and an increase in the use of drugs like cannabis (used as an alternative to alcohol). Much would depend though on the nature of the regulation for each drug, and I broadly agree with the regulation scenarios they give in the report for each drug type.

I have to emphasise that the TDPF report is filled with caveats, is restricted to the impacts of just two drugs, but I also have to emphasise that it is very, very conservative. I very strongly urge you to read the report if you have any doubts. Excepting the moral panic and emotive arguments, legalisation of drugs is the single easiest reform that could be made to save significant amounts of government expenditure. However, as the film 'Breaking the Taboo' identifies, drugs policy is hard to separate from rhetoric and moralising. This is the problem of the idea of being 'soft' on drugs. However, the problems of drugs is largely a problem of illegality, rather than a problem of drugs per se. I am sure that many readers will have doubts, and concerns. For these readers, I cannot do justice to all of the arguments in a post, and I would urge you to read the report, and also try to see 'Breaking the Taboo'. It has never been the case that the arguments for legalisation and regulation were not compelling; it is just that, until recently, they were never given wide airing. It has taken 40 years of failure in the 'war on drugs' to finally allow the arguments some traction.


Note: If you want to understand the arguments for drugs legalisation in a less weighty format, I strongly recommend Ben Elton's humorous book 'High Society'. Although a comedy novel, he also very clearly presents the arguments in favour of legalisation, which he weaves in amongst the narrative. It may not be a 'serious' book, but the argument made is nevertheless serious.

Note 2: I changed my mind on discussing my own views on the impact of legalisation and regulation on usage and will give one example of my reasoning, with the case for regulation of heroine by making it available as a prescription. For current addicts, this would see the addicts switching from buying from illegal dealers to obtaining the drug on prescription, which would be cheaper and safer. As a result, the heroine dealers would be put out of business. As such, the availability of heroine to potential new users would be restricted to people who were willing to actively seek a prescription. It seems that someone one day saying to themself that they would like to take heroine is quite unlikely. Even if a person did, for some odd reason, decide to start taking heroine, they would be advised of the risks and addictive nature of the drug before starting.

By contrast, for anyone who has encountered the world of illegal drugs, the ease of access and the 'culture' of the 'drugs world' is a world apart. It is easy to see how people are exposed to, and eventually try drugs like heroine. For an addict, selling drugs, and actively encouraging new users can help support their own habit through dealing the drug. Under the prescription scenario, I suspect there might be some exceptional and rare cases of existing addicts introducing new users, but this would result in far less new addicts than having people actively encouraging new use, for example by existing addicts who can use new users to pay for their own habit. I suspect that, as addicts recover (and without illegality they would be in the 'system' and availability of help would improve), heroine use would very rapidly decline to a small number of long term addicts.

Note 3: I welcome comments, but would ask that you try to make yourself familiar with the details of the pro-legalisation arguments before doing so.

The Fiscal Cliff

It is hard to ignore the big news of the moment, which is the US fiscal cliff. For those who are not from the US, this is a summary from the Congressional Budget Office (CBO):

• A host of significant provisions of the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (Public Law 111-312) are set to expire, including provisions that extended reductions in tax rates and expansions of tax credits and deductions originally enacted in 2001, 2003, or 2009. (Provisions designed to limit the reach of the alternative minimum tax, or AMT, expired on December 31, 2011.)
• Sharp reductions in Medicare’s payment rates for physicians’ services are scheduled to take effect.
• Automatic enforcement procedures established by the Budget Control Act of 2011 (P.L. 112-25) to restrain discretionary and mandatory spending are set to go into effect.
• Extensions of emergency unemployment benefits and a reduction of 2 percentage points in the payroll tax for Social Security are scheduled to expire. 

From the same article, this is the projection of the CBO:

CBO’s Baseline: Taking into account the policy changes listed above and others contained in current law, under CBO’s baseline projections:

• The deficit will shrink to an estimated $641 billion in fiscal year 2013 (or 4.0 percent of GDP), almost $500 billion less than the shortfall in 2012.
• Such fiscal tightening will lead to economic conditions in 2013 that will probably be considered a recession, with real GDP declining by 0.5 percent between the fourth quarter of 2012 and the fourth quarter of 2013 and the unemployment rate rising to about 9 percent in the second half of calendar year 2013.
• Because of the large amount of unused resources in the economy and other factors, the rate of inflation (as measured by the personal consumption expenditures, or PCE, price index) will remain low in 2013. In addition, interest rates on Treasury securities are expected to be very low next year.

 The current situation is summarised here (sorry, it's long):

WITH the clock ticking toward a New Year's time bomb of huge tax increases and spending cuts, US politicians are working to keep America from tumbling off the so-called fiscal cliff. 
 
The stakes in the game of holiday-interrupting brinkmanship are huge. Economists agree the $US500 billion ($A484 billion) in fiscal pain due to kick in as soon as the new year starts will stifle the gathering US economic recovery and send the United States back into recession, spelling bad news for the global economy as well.

Aides to leaders of the Democrat-controlled Senate worked behind closed doors on Saturday morning to fashion a deal palatable to both Republicans, who control the House of Representatives, and the Democrats.

A senior Republican aide said "discussions are under way". He added that details of any deal will not come out until leaders brief their caucuses on Sunday.

Both chambers would need to pass a deal by New Year's Eve. They thus have three days to get done what has eluded the White House and Congress for weeks, and will interrupt their year's end vacation in the process.

As negotiations proceeded, President Barack Obama urged Congress to protect the middle class from higher taxes and lay the groundwork for economic growth.

"We've got to do what it takes to protect the middle class, grow this economy, and move our country forward," Obama said in his weekly radio and internet address.

"Leaders in Congress are working on a way to prevent this tax hike on the middle class, and I believe we may be able to reach an agreement that can pass both houses in time," he added.

Obama met with top congressional leaders on Friday and said Senate Democrats and Republicans would work overtime this weekend to try to head off the fiscal cliff.

The president, sensing a mandate from his re-election last month, wants to raise taxes on the rich but exempt the middle class. Republicans want only to close tax loopholes to raise revenue and demand significant spending cuts in return.

But if nothing is done by the deadline, all taxpayers will see an increase.

The first point to note is the 'cliff' metaphor. It frames the spending cuts and tax increases in terms of something scary; falling off a cliff leads to harm. The use of this metaphor is of itself an argument, and and argument that says the tax increases and budget cuts are a bad thing. Framing the changes in this way also becomes an urgent call to action, and that is exactly what is taking place (albeit with no success so far). Another problem with the metaphor is that it is not actually a cliff:

For one thing, it isn't really a "cliff." The impact of the tax hikes and spending cuts will be felt gradually, over several months, so there will "be plenty of time beyond January 1, 2013 for things to get worked out."

In short, the term 'cliff' is a distortion of the actuality of the situation. The most worrying aspect of this distortion is that it is driving action, and driving hurried action. Although I am completely in favour of action to reduce the deficit, this is absolutely not the way to take action. Instead, what should be taking place is a more measured look at spending and taxation, and how the activity of government is prioritised and how it might be reformed. This is a question of what constitutes the core functions of government, and elimination of non-core functions. I do not give my view here on what those core functions are, as this is a political question, but it is a question that needs to be answered. Having answered the question of core functions, the functions thus identified have to be given priority, and hard decisions made on the allocation of finite resource to each core function, and how the underlying purpose of the function can be retained, whilst reducing the costs of the function (regular readers will have seen examples I have given for the UK where I have taken this approach, e.g. here). It is also about what share of the wealth of a country will be given over to the use of the government, and accepting that the government must operate from tax receipts and not use borrowing to dishonestly bribe the electorate with tax breaks now at future cost and provision of services funded with borrowed money at future cost.

The other point that needs measured examination is the US tax system, which is notoriously complex and unwieldy. Again, the US needs to go back to the core, and ask what taxation is really supposed to achieve. I have written on the UK tax system, but much of what I have written would certainly apply to the US. In particular, just as in the UK, the US tax system has become a political policy tool, rather than a system for collecting x amount of revenue. All taxation systems are in some respects political, but the politics should be limited to the distribution of the burden of taxation, rather than a political tool used for wider political goals. Although the arguments over the 'cliff' are focused on questions of distribution, the real problems of the current system's complexity and distortions are ignored.

Indeed, the entire debate over the 'cliff' is one of political grandstanding, rather than any serious attempt to address the real question that needs resolution; how can finite resource be best collected and used in order for government to achieve its core functions? The word 'cliff' is a problem, as it drives urgency that was never there, and plays to the desire for political grandstanding. I want to be clear here, that I believe that there is an absolute necessity to cut the deficit, but this is not the way to do it. It is urgent, but it is not 'fiscal cliff' urgent. All the term fiscal cliff has achieved is to drive out the mature debate that is necessary to enact real reform. This suits the politicians. Rather than take hard decisions, they can bury issues in messy compromises within the current system instead of facing the more fundamental and difficult questions.

Update: I nearly forgot. Thanks for the paypal donations from several readers, which I am guessing were inspired by Christmas. I would also like to wish all the readers a happy New Year!

The UK Budget

As you would expect, this year's budget has been followed by a raft of analysis and opining. I thought I would leave my thoughts for a couple of days, to see what emerges as the detail is subject to analysis. I also wanted to see what was said at the Institute of Fiscal Studies (IFS), which tends to offer a more thorough analysis. Paul Johnson, the director of the IFS is underwhelmed with the budget:

Within the tight fiscal constraints, Mr Osborne introduced a range of tax changes, including the reduction in the 50p rate. Despite the range of changes it is hard to see this as the Budget of a truly tax-reforming Chancellor. The hotchpotch of reforms bears as many marks of political expediency as it does of strategic reform.

Interestingly, despite much discussion about the phasing out of allowances for pensioners, Johnson suggests that they will not impact many. Unfortunately he does not detail numbers. James Brown considers the 50% tax rate and the methods for analysis of the impact, but the real impact of a reduction in the rate remains unclear, and perhaps might be described as arcane. I suspect that, with enough effort, the positives and negatives of shifting this rate might be presented equally, dependent upon the side of the political fence that you are sat upon.

Stuart Adams looks at business taxation, tax avoidance and stamp duty. He is critical of the changes in stamp duty, suggesting that for example that it will end up creating avoidance, but also arguing that stamp duty is in any case a 'damaging' form of taxation. The tax avoidance measures, he argues (quite reasonably) will be subject to court interpretation. The change to corporation tax, he argues, will increase the competitiveness of the UK.

I would guess that regular readers will know what I think about this budget. Yet more tinkering around the edges. Although not agreeing with the Independent's general analysis, they did get this point right:

The Chancellor wants Britain to be "open for business", ready to rise with the globalised world economy. He is even taking an extra percentage point off corporation tax. All well and good. But for all the talk of striving and adapting, the reality is that the outlook for the British economy remains bleak and the Chancellor can only tinker around the edges. [emphasis added]

The best that can be said for the budget is that it does not make a bad situation much worse, but still sees profligate spending. Perhaps the most pertinent comment and discussion comes from Jeremy Warner in the Telegraph, who copies an OBR chart into his piece:


He titles the piece, 'Britain's post-war tragedy' and points to ongoing mismatch of government income and expenditure. The chart tells the story. It is a story of bribing the electorate with their own future earnings.

A good example of the idiocy of this budget was the idea of tax breaks for more 'creative industries'. The government thinks that these kind of silly measures make a difference, and will no doubt keep many a bureaucrat and tax accountant busy with analysis of the rules, will see companies distort their business models to fall within the rules, and so forth. Yes, yet a new piece of complexity in the tax system, in which the government thinks it knows the best type of investment and industry to earn the country income (see note at end of post). Of course, the 40 million cost of the new tax breaks mean that there will be higher taxation somewhere else, and I am sure that those who make up for the shortfall for this tax break will applaud the idea. At least, on the positive side, it is a very small amount of money, and spread over the corporate tax base will make little difference.

Overall, for all the excitement in the press about the budget, it is fundamentally 'business as usual' with no radical reform. Sure, there is some tinkering, but to no significant effect. There is still no real sign of addressing the structural problems within the UK economy, and little to address the poor competitive position of the UK economy. I noted a piece in the Telegraph today, which suggested the following:

Ireland tumbled back into recession at the end of last year, dousing political claims that the "Celtic Tiger" has benefited from its tough austerity programme.

I am perhaps unusual in suggesting that real austerity will carry with it a shrinking (apparent, as it was always smaller than it appeared) of an economy. I argue that reductions in government expenditure are the way ahead, but accept that the path will be painful. Government borrowing and spending flatters the size of an economy at a future cost, and only when government borrowing and spending stops do we see something of the real size of an economy. It means that shrinking the rate of growth of government borrowing will see economic contraction. However, this is necessary, as hard as it is to do. The premise upon which this budget is built is expansionary fiscal austerity. It is pure fantasy.

The only real answer is reform to the structure of the economy. Tinkering around the edges will lead to a spiral of contraction, as piecemeal cuts shrink the economy, leading to more piecemeal cuts. It is a strategy that will simply prolong the pain, and in the medium to long term make the pain even worse. However, as the situation stands, there is no real austerity, just tinkering into decline. I have no care for which political party does it, but real structural reform is the only solution. It is simply recognising that the government can no longer afford to pay for everything that it currently undertakes. The longer this tinkering goes on, the greater the debt that will be accumulated, and the worse the situation will become.

The point is this. The tinkering will see the problem get worse, but will not leave an economic platform that will leave the country with an economic foundation to build upon. It will leave the country with a legacy of piecemeal cuts that will lead to poor provision of government services which will be determined by immediate political expediency, with no vision and no strategy. Cuts will lead to shrinking of the economy, and the shrinking of the economy will lead to reactive cuts. The government will lose credibility, and there will be ever stronger arguments against cuts. As debate rages, as compromises are made, the economy will continue its relentless decline. 

In the end it is about hard choices. It is about asking what can really be afforded, about what are priorities. In the end, it is about less government, and the government going back to principles. For example, read my post on benefits reform seeks to retain the principles upon which the benefits system was founded, but removes cost and perverse incentives. It presents a challenging and radical reform, and provides a reform that keeps an essential service in place at an affordable cost. I am not proposing that this is the solution, as there may be better answers. However, as I have done, it is necessary to ask questions of how government services are provided, and to what areas. In a country that is poorer than it appears, it is the only solution.

Note 1: Something odd happened with blogger whilst writing the post, so I hope it reproduces ok.

Note 2: I have previously posted on reforming taxation, and I have quoted from the post below:

The same goes for businesses, with capital allowances (13 categories and endless sub-categories), and all kinds of other incentives for businesses to do what the government believes is the 'right thing', such as R&D credits (100% allowance) and so forth. What we have here is the government saying that it knows better than a company how that company should allocate resources. Why? Are the government more knowledgeable about how to run Unilever, than Unilever are? The government seems to believe that it 'needs' to provide incentives. Surely a company knows when it needs to make an investment.

A good example is R&D. The first point to make is that the total amount of tax paid in corporation tax is going to be the same, as any losses made due to taxes not being paid through R&D investments will just be extracted from elsewhere. This means that a company that is not spending so much on R&D subsidises a company that is spending on R&D. The result is that the post-tax profit at the company not investing in R&D are reduced in order to fund the R&D in another company. Why? Why is it that one company is subsidising the R&D of another company?

To make the point clearer, think of it this way, in a simplified form. The government wants 100 units of corporation tax per year and there are a total of 100 identical sized companies paying corporation tax. On average, therefore, each company must pay an average of one unit of corporation tax. Amongst all of these companies, 20 of the companies do a lot of R&D so that they then each get an allowance of half a unit of tax back, making a total of 10 units lost from the 100. What then happens is that every other company must now pay 1.1 units of tax instead. In other words, some companies are subsidising the R&D of other companies.

But R&D is a good thing, right? That is what everyone says......for example, the government says in the 2007 Budget Report:

'Supporting science and innovation which is central to success in the international economy, as global restructuring focuses developed economies toward knowledge-based and high value-added sectors'

Let's examine one of the companies in this example that is not spending heavily on R&D. Let's imagine that they would like to make a sales drive to expand into new markets in Europe. They want to spend considerable amounts of money on developing their brand throughout Europe. The trouble is that they need to keep profits at a certain level to keep shareholders happy. As they are now paying an addition 0.1 units of tax, they are more constrained in their ability to invest in their expansion into Europe. In particular, the reduced amount of profit makes raising the money for the expansion more difficult, as their returns are lower than the companies spending heavily on R&D. The companies spending on R&D get tax relief, but the spending on brand building does not qualify. Even though the expansion into Europe would make them a more successful company, the tax system does not see it that way.

In this example, spending money on R&D (whether a good or bad investment) is considered a better business investment than building an international brand. The fact that both routes might equally create growth, and bring wealth to the UK, does not figure in government thinking. The fact that branding can add significant value to a product (the aim of the government R&D tax allowance is to develop high added value) is irrelevant. Instead of expanding into Europe, the company is instead directed into spending on R&D, which may not be the best approach for the success of their business. The expansion into Europe may the better use of their resource to achieve long term growth and profit, but the government knows better.

In all of this, the single unifying theme is that the government knows better. As such, they know better than you or I as to whether we should drink a pint of beer, or a shot of whisky. They know better whether a business should invest in building a brand or invest in R&D. They have lots of policy advice that says so....