In today’s newsletter:
The proliferation problem
The real reason your electricity bill is so high
JD Vance’s flawed case against GDP
Dr Christopher Snowdon is the Head of Lifestyle Economics at the Institute of Economic Affairs
Of all the problems facing Britain, nothing could be less pressing than making it more difficult to open a betting shop. A third of them have closed since 2019 when the government effectively banned fixed-odds betting terminals. Hundreds more are shutting their doors this year as the bookies cut costs in response to huge tax hikes imposed by Rachel Reeves.
In 1970, when Andy Burnham was born, there were 15,644 betting shops. At the start of this year, there were 5,669. Mr Burnham nevertheless announced on Tuesday that he wants to stop their “proliferation” by ending Aim To Permit. Enshrined in the 2005 Gambling Act, Aim To Permit obliges local authorities to allow new gambling businesses to open so long as they do not conflict with the three licensing objectives: preventing crime, ensuring fair and open conduct, and protecting children and vulnerable people. Under the current system, to quote the Gambling Commission, a local authority’s decision “cannot be based on dislike of gambling, or a general notion that it is undesirable to allow gambling premises in an area”.
The Gambling Act is one of the few slivers of liberalisation that this country has seen in the 21st century, but moral objections and personal prejudice are now firmly back in fashion. Gambling’s fiercest opponents can’t bear to be reminded of its existence, hence the campaign to drive it from the high street and ban its adverts. The anti-gambling lobby is piggy-backing on genuine concerns about the rise of “dodgy vape shops” and suspiciously empty barber shops, but these issues have nothing in common. Money laundering, tax evasion and the sale of illicit tobacco are already illegal whereas betting shops and amusement arcades are legitimate, highly regulated and heavily taxed businesses. So long as they meet the licensing objectives, they should be left alone.
If Mr Burnham is serious about tackling dodgy vape shops, he should cancel the tax on e-cigarette fluid due to be introduced in October which is bound to stimulate demand for illicit products. If he really wants to help legitimate retailers, he should lift the burden of regulation by, for example, cancelling plans to introduce plain packaging and a retail display ban for vapes. Enforcement of the law is not enough. The government also needs to look at the incentives.
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IEA Podcast: Director General Lord Hannan is joined by Editorial Director Kristian Niemietz and Christopher Snowdon to discuss Andy Burnham's crackdown on vape shops and betting shops, how Britain should pay for social care, and J.D. Vance's attack on GDP and economic growth, IEA YouTube
This week on Economic Affairs
News and Views from the IEA
Energy
Britain has the most expensive industrial electricity in the developed world, despite gas prices sitting marginally below the international median
Renewables subsidies, hydrocarbon taxes, and hidden backup and grid costs, not gas, are the real drivers of the UK’s electricity prices
UK energy consumption is down 29.2% from its 2005 peak; industrial energy consumption has fallen 45.3% since 2004
The total cost of net zero and energy-related subsidies is estimated at £585 billion
New briefing from the IEA by David Turver sets out how energy policy has driven Britain’s Great Stagnation
Two cheers for Andy Burnham. Christopher Snowdon, the IEA’s Head of Lifestyle Economics, writes in The Critic on Andy Burnham’s promise to strip red tape from government procurement rules.
Snowdon’s piece traces how “social value” became a legal obligation over the past decade, from the advisory language of the 2012 Public Services (Social Value) Act through to the mandatory, weighted criteria introduced by Theresa May’s Social Value Model and Rishi Sunak’s 2023 Procurement Act. He notes that under the current rules, firms bidding for government contracts must demonstrate commitments ranging from tackling inequality to creating green space, regardless of whether such goals are within a normal firm’s control.
He welcomes Burnham’s move to strip out non-economic outcomes and scrap social value requirements for contracts under £1 million, but points out that Burnham has simultaneously raised the social value weighting to 20% for contracts over £5 million, and simply replaced the old political priorities with new ones built around “British jobs.
Christopher Snowdon, Head of Lifestyle Economics, writes: “Two cheers rather than three, then, but a measurable improvement.”
Why Does Britain Have the Most Expensive Electricity in the Developed World? Andy Mayer interviews David Turver on his Great Stagnation chapter on Britain's energy crisis, IEA YouTube
Why JD Vance is wrong about GDP. Valentin Boboc, the IEA’s Senior Economist, writes in CapX on the case for GDP as a measure of economic output.
Boboc’s piece responds to Vice President JD Vance’s new book Communion, which argues that GDP is a poor measure because it treats a $6 punnet of “inferior” American strawberries the same as pricier Japanese ones. Boboc argues this criticism targets a claim no economist actually makes, since GDP has never been presented as a measure of national welfare.
He traces the “beyond GDP” alternatives, from the UN’s Human Development Index to the Happy Planet Index, and shows they correlate with GDP at 0.89 to 0.98, making them largely redundant tribute acts to the measure they’re meant to replace.
Valentin Boboc, Senior Economist, writes: “The best case for GDP is that it is easy to compute, standardised and lets us compare countries and periods.”
Is the Global Trading System Broken? Daniel Freeman interviews Soumaya Keynes on her book How to Win a Trade War, covering the collapse of the rules based trading system and the case for and against tariffs, IEA YouTube
What is quite clear about left wing thinking is that it doesn't understand incentives? To me this means that they don't understand anything at all.