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A Britain No Longer Great

By Tom Bethell on 6.4.08 @ 12:06AM

This article ran as the "Capitol Ideas" column in the May 2008 issue of The American Spectator. To subscribe to our monthly print edition, click here.

"Sir, let me tell you, the noblest prospect which a Scotchman ever sees is the high road that leads him to England."
-- Doctor Johnson to Boswell, 1763

I would update that by saying that there is nothing that an American in England looks forward to so much as the motorway that leads him to Heathrow. That would be the M25. But you have to worry whenever you take it because the traffic can be so bad that you may miss your flight. If you think freeway traffic is bad here, try the M25 on a bad day.

I go to England fairly often as I have family there -- a brother, two sisters, and my 95-year-old mother. Otherwise I doubt if I would go back. The first thing an American will notice is how expensive it is. Most things are double the U.S. price. Gasoline is three times higher -- now $10 a gallon. And still the roads are clogged. (All prices in this article have been converted to dollars at $2 to the pound.)

The country is far richer than it used to be, London is booming and one of the most expensive cities in the world. One reason is that Tony Blair, prime minister for ten years, knew better than to reverse Margaret Thatcher's key reform -- the reduction of tax rates on capital and income. The new (and still unelected) prime minister, Gordon Brown, seems to have less sense.

The March budget decreed that non-domiciled residents -- who are not taxed on their world-wide income (as they are in the U.S.) -- will be required to pay an annual tax or fee of $60,000 for that privilege. The Sunday Times raised the alarm. The new tax could be high enough to make the "non-doms" pack their bags and leave. It didn't take long. On the day I returned to the U.S. the Financial Times reported that the head of a London "buy-out firm" called Terra Firma was considering whether to "flee the country."

Another tax change: Under the Blair regime, tax rate on capital gains started at 40 percent but went down to 10 percent for assets held for four years. Now, that rate has been increased to 18 percent.

The London newspapers seem much improved. The Internet threatens the hacks' livelihood, so they are working harder. The Financial Times is no longer hostile to markets and is actually worth reading (if you don't mind forking over $3 for a copy). On non-doms, the associate editor of the Times, Anatole Kaletsky, relayed some much needed wisdom:

If Mr. Brown now argues that Britain's system of taxing foreigners must be reformed because it is an international anomaly, he had better acknowledge that Britain's international financial dominance is an unstable anomaly, too....Britain's unique tax system and its success as a financial center are two sides of the same coin.

The new Treasury Minister Alistair Darling -- like Gordon Brown and several other cabinet members he is Scottish; and for some reason Scotland receives far more per capita from the Treasury than England does -- has been hearing about other unintended consequences. Kaletsky added:

The Greek shipping industry is planning to move en masse back to Athens; pharmaceutical companies are preparing to shift expansion plans to Switzerland and New Jersey; aerospace engineers are moving back to France, Germany and Italy, and the museum world is facing demands for the return of artworks loaned by non-doms. Even Moscow is expected to benefit from the exodus as Russian businessmen wind down their offshore operations and de-list their companies from the London Stock Exchange.

If Gordon Brown continues yielding to pressure from the left, he probably won't win the next election. I would say he certainly won't, except that the Tories under their new leader David Cameron seem driven by a single idea: Do nothing to merit accusations of mean-spiritedness toward the poor. As an old Etonian, he is susceptible to such pressure. Lamely, the Conservatives have sought to reassure opinion leaders at the BBC and elsewhere that on no account will they do anything irresponsible, such as promising to cut taxes if they come to power. They will maintain social spending levels, too.

So the truth is that the forces of political competition in Britain have largely been neutralized -- by the Tories themselves.

THE SAME CULTURE WAR that is being waged in the United States is already much further advanced in Britain. Over there, the forces of resistance are negligible, so the cultural revolution has almost completely triumphed. Here there is still a real contest.

The ruling-class embrace of semi-capitalism has brought about the rise in prosperity, but this has been accompanied by mounting social chaos. One of the main indicators is the rise of family breakdown (or non-formation) and out-of-wedlock childbearing. The key enabler of this change has been the transfer of tens of billions of pounds to fatherless households. Only a society wealthy enough to collect and redistribute revenue on this scale can sustain widespread illegitimacy. Without the tolerance of wealth-creation, redistribution on this scale would not have been possible. Traditional families and moral standards were undermined in consequence.

Melanie Phillips, a Daily Mail columnist and a refugee from the left (formerly she was with the Guardian newspaper), wrote recently that the "overclass" has "deliberately and wickedly created over the years a legal and welfare engine of mass fatherlessness and child abandonment, resulting in a degraded and dependent underclass and a lengthening toll of human wreckage."

A couple of sensational crime stories were in the headlines when I was there, illuminating this "welfare engine of mass fatherlessness." The rot beneath the surface became conspicuous.

One involved a 15-year-old girl named Scarlett whose hippie mother had taken her to the drug infested beaches of Goa, a former Portuguese colony on the coast of India. The mother then headed off to other Indian beaches with her other children, leaving Scarlett behind. A few days later the young girl was raped and murdered on the Goan beach.

The amazing part of the story was that the mother had nine children by five men, lives in two trailers in Devon, and receives government "benefit" (welfare) for each child, adding up to about $50,000 a year. Having saved about $14,000, she was able to take eight of her children on a six-month holiday to India, and return, sadly, with seven of them.

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