Blogroll: Adam Smith Institute

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Updated: 1 hour 4 min ago

Hancock's half hour

4 hours 19 min ago

You will have by now noticed that the role of the Secretary of State for Health and Social Care is not to do anything important, like sorting out the NHS, but to provide gentle amusement whilst in transit.

Social care is a favourite. According to Richard Humphries of the King’s Fund, the last 20 years has seen a dozen consultations and green and white papers on how social care should be improved, and funded more fairly, but nothing has actually happened.

The present incumbent has now come up with the bright wheeze that "workers could have their pay docked to pay into a new social care fund". "People who made payments could either have all their future care costs met by the fund or, more likely, would benefit from a cap that would mean they did not have to pay care bills above a certain level."

Workers would be free to opt out of the scheme but those who did would get no benefits. Mr Hancock suggests that "auto-enrolment" for social care would just be a simple extension of "auto-enrolment" for pensions, introduced in 2012 and proving more successful than sceptics expected. But that was because employees got the benefit of employers' contribution. That would not be the case here.

Presumably workers, and everyone else, would be allowed to opt in and out according to their financial pressures at those times. Keeping track of what individuals have contributed, their entitlements, and the entitlements of their partners, would clearly be difficult. Maybe Mr Hancock, who must believe history repeats itself will come up with stamps as the solution.

A person’s entitlement, and that of their partner, would be calculated from the value of stamps purchased and when (because inflation will need to be taken into account). Just imagine how many civil servants will be needed to do these individual calculations on top of tax and pensions.

National Insurance was set up in 1911 with much the same mission, except it included pensions. They wanted to keep it simple with every worker (and employer) making the same contribution pro rata to wages. Mr Hancock no doubt has the same simplicity in mind. But his freedom to opt in and out will complicate matters. In pensions this became “Class 1” and then it dawned on the government that the self employed had to be treated differently so Classes 2 and 4 were born. Class 3 is for voluntary contributions. Labour governments are especially fond of complicating further – notably in 1948 and in the 1990s.

107 years on, HM Treasury are still fiddling with it. Class 2 is merging with Class 4 and white van man is unhappy: he thinks he is paying too much whilst others think he gets off lightly.

The key point here is that the handing out of benefits based on stamps (contributions) was deemed discriminatory. National Insurance is now simply a tax and benefits are part of state welfare available to all according (in theory) to need rather than contribution.

In short, National Insurance is a mess and it should be merged with Income Tax. But that won’t happen soon.

Mr Hancock wants to do it all over again. It will fail (if it ever happens) for the same reasons. The poor will opt out because they cannot afford the contributions but, when the time comes, will demand the benefits in the name of fairness. And based on all evidence of recent history, they will be right to assume government will capitulate and pay.

The rich do have an obligation to take care of the poor when social care is needed. There is a need to redistribute in an advanced economy that can afford it. And it is all becoming a great deal more expensive with longevity, increasing mental health problems and social care increasingly needed by those of working age: “It is notable that over half of these additional cost pressures arise from care and support to meet the needs of working age adults.”

Mr Hancock is wrong though to believe that his department, or local authorities or any other part of government, can run insurance schemes better than the free market can. Insurance companies have looked at this problem and walked away: too expensive as a whole. But the upper end of it, just like BUPA, could well be handled by the free market and that would have a small benefit for social care as a whole just like private healthcare has on the NHS.

The simple and effective way to enlarge the private social care insurance market would be to make the premiums tax deductible. What HMRC loses in tax, government saves on welfare. Then treat social care similarly and in harness, but not merged, with the NHS. Simples.

Categories: Current Affairs

Girl Guides are becoming more unhappy - this isn't a surprise

9 hours 18 min ago

We’ve a survey telling us that Girl Guides are becoming more unhappy as time passes. That is, the newer generations are more unhappy than the older age cohorts were. This is not a surprise, at least some of this will come from the economic and social emancipation of women.

The survey:

There has been a sharp decline in happiness among girls and young women in the UK in the last decade, with the majority of them blaming exams and social media for causing stress, a major survey has found.

Just one in four (25%) girls and young women between the ages of seven and 21 described themselves as “very happy” in the latest girls’ attitudes survey for the Girlguiding organisation – down from 41% in 2009.

This is not an isolated finding, Stevenson and Wolfers have found the same to be true - to some extent - right across the rich world.

The question is, well, why? The answer being that old economists’ favourite, opportunity costs. It has always, for as long as we’ve been measuring such at least, true that men report being unhappy at higher rates than women. The decline in female happiness is really bringing their rate down to that of their male contemporaries. So, why?

It’s hardly controversial that men historically had more life choices than women, that this inequality is either well on the way to being or entirely wiped out now. This should make women unhappier.

Yes, unhappier. For the cost of anything is what is given up to gain that thing. The more choices one has the more is given up by choosing any one mode or method of life. As women’s choices have expanded their levels of reported happiness have declined to those of the men who have always had such a palette of shades to life.

No, this doesn’t mean that any increase in unhappiness is from this cause. But it does mean that we’ve got to be careful about the attribution of any change in these levels of happiness. Strange but true, some of it will be coming from the way the world is getting better.

Categories: Current Affairs

Bernie Sanders and his very silly Stop Bezos Act

Wed, 19/09/2018 - 07:01

Bernie Sanders has proposed an Act of Congress whereby companies get charged a tax equal to the amount of welfare their employees receive. We’re even seeing admiring glances at this idea here in the UK - when a more silly and counter-productive idea is difficult to envisage.

The major effect here will be that those who might gain welfare payments will not get hired. Which really isn’t the point at all now, is it?

Sanders has also been highlighting some of the 19th-century working practices used by Amazon to control and discipline its workforce inside of its fulfilment centres. Sanders’ bill – the Stop Bad Employers by Zeroing Out Subsidies Act, or the ‘Stop Bezos Act’ – would tax employers like Amazon when their employees require federal benefits.

The Senator is right to push Amazon on this.

No, he’s not, it’s a very silly idea indeed. Here’s the write up, here’s the bill itself.

If an employee of a large company gets welfare then the company is charged that welfare bill. Idiocy.

First, the assumption is that SNAP (food stamps), Medicaid, school lunches and Section 8 housing (the programs mentioned) are subsidies to the employer. They’re not, all are paid upon the basis of income, not work status (some SNAP excepted). Thus they don’t lower wages and cannot be subsidies to employers. Quite the contrary, they raise the reservation wage and thus are anti-subsidies to employers. A simple test of this, abolish those benefits and wages will rise will they?

It’s also true that such benefits are granted upon household circumstances, not individual. So, that single mother of the sick child is never going to gain employment if an employer is on the hook for the Medicaid bill, is she?

But as ever weirdness and foolishness cross the Atlantic so it won’t be long before we have more applauding this idea. Better to stamp on it right now than wait. It’s a very silly idea indeed - but then we’ve election season over there which is why it’s being suggested in the first place.

Categories: Current Affairs

But the BBC shouldn't be competing with Amazon and Netflix

Tue, 18/09/2018 - 07:01

The BBC is gearing up for another raid upon our wallets:

The BBC is fighting against American streaming giants with "one hand tied behind its back", Lord Hall will say, as he as he warns of a future of television without British shows.

The correct answer is that the BBC can go boil their heads.

Outlining the scale of competition, he will reference studies which found Netflix is spending $8bn a year on content, Amazon is spending $5bn, and Britain’s public service broadcasters combined, including the BBC and Channel 4, are spending £2.5bn.

“Beyond the steps the BBC may take, Britain also needs to do more to support the broader PSB ecology,” Lord Hall will say.

“It cannot be right that the UK’s media industry is competing against global giants with one hand tied behind its back.

We pay taxes so that the BBC can make all those programmes. There is an entirely respectable theory behind this idea, that of public goods. For complex reasons, but reasonable ones, markets unadorned don’t produce perhaps enough of such public goods. That’s the argument in favour of government either promoting their production or actually producing them.

And yes, that actually is the argument in favour of the BBC and its tax funding - yes the licence fee is a tax, Gordon Brown finally admitted it. It’s also the only valid argument in favour of the BBC and its tax funding.

The argument being put forward here is that those market actors are producing lots and lots of what the BBC would or could produce. The BBC should therefore gain more resources (oh yes, this is leading to an insistence that they should gain more of our money) so as to be able to compete. But that’s a violation of our original justification for the BBC, isn’t it? That we’ve a public goods problem here, that the market isn’t producing enough.

We cannot say it’s a public good, therefore tax financing, and also say that we need more tax because the market is producing lots of those now no longer public goods.

Yes, quite, the BBC can go boil their heads.

Categories: Current Affairs

And to think that some want the utilities to be renationalised

Mon, 17/09/2018 - 07:01

Dependent upon who we decide to listen to we’re told that somewhere between many, most and all of the people would like to see the utilities renationalised. This might well not be a good idea. As our examplar we’ve Stornoway. An area sufficiently remote that it has only the one energy supplier.

You know, a place with, inside our national at least vaguely competitive market, that monopoly that nationalisation would bring:

Smith says that every year he called his supplier, Scottish Gas, to get a better deal, and each time was told that there was only one standard tariff in his area.

Their predicament highlights the obstacles faced by energy customers who want to switch, despite rules to open up competition.

The Smiths, and some other residents in the Scottish town of Stornoway, have been trapped on a single, pricey, standard tariff for years after wrongly being told they neither qualify for cheaper deals nor have the option of changing providers, because Centrica – which owns British and Scottish Gas, and supplies one third of British households – is the only gas supplier to the island.

As we continually point out it is that very competition between suppliers which lowers prices and thereby insists that suppliers are unable to exploit consumes over much. And as we see here in the absence of such competition there is the claim of over much exploitation.

At which point there’s not a great deal left to the case that we should insist upon the one monopoly supplying all the tens of millions of us in order for us to gain a better deal, is there?

Categories: Current Affairs

Venezuela Campaign: tragedy of hyperinflation

Sun, 16/09/2018 - 16:01

Hyperinflation in Venezuela has reached astonishing levels, making life extraordinarily difficult for ordinary people and causing immense economic damage. Inflation is currently running at some 200,000 per cent and is projected by the IMF to reach 1 million percent by the end of the year.

The effects of hyperinflation at such levels are extreme, and radically different from the levels of 2% or 3% experienced in Europe in recent decades. Money becomes almost entirely worthless shortly after one receives it. There is no point in saving as the value of savings is wiped out, and thus little is invested. There is also no point in lending money as interest and capital repayments soon become valueless. Instead there is capital flight, as ordinary people are desperate to get their money out of a worthless currency. What people receive in pay does not keep up with the ever-increasing price of goods.

Using the salary of a full college professor as a benchmark, in the 1980s it took around 15 minutes of earnings to pay for one kilo of beef. In July 2017, this professor needed to work for 18 hours to pay for the same quantity. In mid-2018 he must work longer still, in the unlikely event beef can be found.

Prices are increasing at an ever faster rate. A large coffee with milk cost at least Bs.S.80 (Bs. 8,000,000) in Caracas on the 11th of September 2018, 78% more than the price of week before, and double what it cost 15 days ago and 220% more than five weeks ago.

It is evident that hyperinflation is caused by the government printing more and more money. Venezuela’s monetary base – the amount of money printed by the government – increased by an extraordinary 30% in one week alone at the end of August. The move by the regime to remove 5 zeros from the currency and place greater emphasis on its Petro cryptocurrency (since revealed by a Reuters investigation to be largely imaginary) seems to have been a smokescreen for even greater money-printing.

In fact, it seems that physically printing money is beyond the means of the regime. As Venezuela’s banknotes are printed abroad, they have to be imported at significant cost to the government, which has led to severe shortages of physical cash. Since 2014, the number of active ATMS has plummeted to around 9,000, while card readers have multiplied.

The regime is printing money because it has little other means of staying afloat. It has largely destroyed the private sector through nationalisation and price control. Oil output is at its lowest level in more than 50 years and foreign reserves are at the same level as 1974 and plummeting downwards.

Regime supporters and cronies get privileged access to foreign currency at preferential rates. A small group of Venezuela’s elite, also known as the ‘boligarchs’, have made billions ouf of unrealistic exchange rates which are deliberately rigged to make astronomical profits in currency transactions. But ordinary citizens, 90% of whom are suffering in extreme poverty, have no alternative to spending much of the day searching for food with a currency that by the hour is worth less and less.

Venezuela’s economic woes remain a cautionary tale about how foolish policies lead to economic ruin. Venezuela is a country with vast natural resources, but it has resorted to printing money to try and make ends meet. This is economic mismanagement of the highest order.

More information on the Venezuela Campaign can be found on their website

Categories: Current Affairs

It's fun how the Venezuela explanation has changed, isn't it?

Sun, 16/09/2018 - 07:01

Those of us rich in maturity will recall when Venezuela was the next great hope of the progressive left. David Sirota, Mark Weisbrot, Owen Jones, Jeremy Corbyn, Syriza, the Podemos lot, all were united in insisting that this vastly greater government control of the economy and the distribution of its rewards was the way forward for us all.

That has, to be fair to all of them, rather run into that brick wall of reality. They’re no longer all saying that we all should be doing it that way.

But the explanation now is that obviously, that’s not socialism nor even progressivism. The story now is that it’s simply a kleptocracy.

Well, OK, that at least has the merit of being true.

But it then runs smack into that brick wall of reality again. So, we grant the government vastly greater power over the economy and the rewards available in it. How do we stop that becoming a kleptocracy? The answer that we are pure as they are not does not work. For the moment we do grant that power then the kleptocrats will infiltrate and then become the government, won’t they?

Think of this the other way around for a moment. All such progressives do indeed insist that if and when the capitalists gain control then they are akin to kleptocrats, the monopolists will simply rip off the people. We liberals agree actually, which is why we’re so insistent upon there being competition to limit if not expunge that ability.

OK, if people gain the power to rip everyone off then they will. Or, the power to do so will be colonised by those who wish to.

Thus that argument that the Bolivarian Revolution has been colonised by the kleptocracy isn’t a useful excuse, for it’s the original granting of that power to government which causes the kleptos to colonise said government.

Don’t want the government to be run by thieves? Then don’t grant government that power that thieves find so attractive that they’ll work to become the government. This works whichever brand of thieves you care to worry about, crony capitalists or socialists.

Categories: Current Affairs

Mssrs. Sanders and Varoufakis want to tell us where it all went wrong

Sat, 15/09/2018 - 07:01

Bernie Sanders and Yanis Varoufakis are insistent that the entire global economy took a serious wrong turn some 40 odd years ago. Therefore progressives must gird their loins and fight to overturn the extant world order.

We disagree, obviously enough, for we’re liberals and that world out there took a more liberal - classically liberal - turn those decades back. We disagree on theory that is.

However, we also disagree on the basis of empirical reality. The great claim of the progressives was always that they cared about, concerned themselves with, poverty in a manner in which classical liberals did not. We were the ones accused of preferring theory about liberty and freedom over the pernicious effects they had as a result of an uncaring attitude towards reality.

Well, yes, except think of the effects of that last 40 odd years of this New World Order. Absolute poverty has fallen from some 40% of humanity to under 10%. The best predictions we’ve got are that it will entirely vanish by 2030. This has indeed been brought about by that neoliberal globalisation which is being so complained about.

We do think the grand problem is and has been that absolute poverty. We revel in the fact that is has fallen and is falling. The idea that we should change horses just as the finish line comes into sight strikes us as absurd.

Global economic policy of the past 40 years, that system so being whined about, has just produced the greatest fall in human poverty in the entire history of our species. We cannot see that this is a failure requiring a change in policy. Mssrs. Sanders and Varoufakis disagree - what say you?

Categories: Current Affairs

The ASI at Tory Conference: Rebooting Consumer Capitalism, Cannabis and Saving 1 Million Years of Life

Fri, 14/09/2018 - 16:49

As usual, the ASI will be tackling vital but often neglected issues at this year’s Conservative Party Conference in Birmingham. We're hosting three events inside the secure zone (that means to attend you'll need a conference pass): one on Sunday and two on Tuesday.

Our Sunday panel (4pm-5pm in Exec Room 2 of the ICC) asks what lessons the UK can learn from abroad on reforming our approach to cannabis. With the coming legalisation of medical cannabis following public outcry over the plight of children being denied access to life-changing treatment, Canada legalising recreational cannabis, and increasing calls for the UK to follow suit, we’ll be examining the arguments for parting ways with prohibition that international experience provides.

The UK’s prohibition of cannabis jeopardises children’s safety, encourages gang violence and leaves millions in the dark about what they’re taking. This approach has failed and the public know it. More Britons support a legal, regulated cannabis market than oppose it. We will ensure evidence, not hyperbole, guides the debate around recreational and medical cannabis legalisation. Chaired by our resident vice expert Daniel Pryor, our speakers are George Freeman MP, Crispin Blunt MP, VolteFace’s Paul North and Hanway Associates’ George McBride. For more info, click here.

On Tuesday, we’re spoiling you for choice by having two panels occurring simultaneously from 4pm-5pm. First, we’re partnering with Octopus Investments for a session on rebooting consumer capitalism in the ICC’s Executive Room 8. There is growing public sentiment that the retail energy market isn't working, water firms aren't delivering, rail franchising is failing, and broadband availability is too low. These industries affect nearly everyone in their daily lives. Competition should be at the heart of any solution. Streamlining the sector regulators could minimise producer capture, cut bureaucracy and simplify regulations. The innovation spurred on by Open Banking could spread to other sectors if consumers are given more power over their data. Various reforms to the rail franchise system can promote a greater role for on-track competition, delivering on the promises of choice and better service.

We will discuss the most effective reforms that could restore the public’s trust in these vital sectors, and consumer capitalism at large. Chaired by our Head of Research Sam Dumitriu, speakers include John Penrose MP, Chris Hulatt of Octopus Investments, Bim Afolami MP, Fingleton Associates’ Eleanor Mack, and Oliver Wiseman (Editor of CapX). For more info, click here.

The second Sunday panel focuses on Britain’s vaping revolution and how we can save over one million years of life with the right policy reforms. Vaping is at least 95% safer according to Public Health England, and current evidence suggests that it doesn’t act as a gateway to smoking. But reduced-risk nicotine products could be even better. Whatever your view of Brexit, it presents us with an opportunity to become a world-leader in liberalizing e-cigarette and reduced-risk tobacco products regulation.

Right now, the EU’s Tobacco Products Directive limits choice, drives up costs, and severely restricts the ability of vaping companies to advertise their products. Current advertising restrictions are especially harmful: many smokers simply haven’t been exposed to what vaping actually is, or readily accept the myths that surround it. Plain packaging rules prevent firms from inserting information on switching to less harmful products into cigarette packets. All of this is up for debate and has the potential to be changed. At Party Conference, we would therefore aim to discuss the arguments for taking a liberal regulatory approach to e-cigarettes and reduced-risk products for the sake of public health, as well as consumer choice. Confirmed speakers include Martin Cullip of the New Nicotine Alliance, UKVIA’s John Dunne and the ASI’s Daniel Pryor (author of our recent “One Million Lives” report). For more info, click here.

Be sure to join us for what promises to be a fantastic conference!

Categories: Current Affairs

Adult Care: Please don’t complicate things further

Fri, 14/09/2018 - 15:42

The Commons’ Health and Local Government Select Committees got together to help Whitehall address one of its favourite areas for prevarication: namely what to do about adult social care.  Their joint Report, “Long-term funding of adult social care”, was published at the end of June but widely ignored by the media. The Minister, Caroline Dinenage, responded with an undated letter indicating they had nothing to say until their Green Paper appears this autumn.

The Report has six pages covering 33 conclusions and recommendations.  Nine key issues emerge:

  1. Surprisingly, the shortfall is modest relative, say, to the NHS: “£2.2–£2.5bn.” in 2019–20. (para. 20). But far more funding will be needed in future. (paras.73 and 88).

  2. Care should be available for all adults, not just the elderly. (para 38). Also surprisingly, about half the adult care budget goes on those of working age.

  3. We should aspire “over time towards universal access to personal care free at the point of delivery.” (para. 42) But “accommodation costs should continue to be paid on a means-tested basis.” Needless to say, the Citizens’ Assembly (big focus groups) favoured “free at the point of delivery”. Furthermore, the need for personal care now should be extended to include “preventative” social care. (para 77).

  4. “Risk pooling—protecting people from catastrophic costs, and protecting a greater portion of their savings and assets.” (para. 44). This is widely agreed in principle but no one has yet found a viable solution. This Report trails a few ideas but comes to no conclusion.

  5. “People are generally willing to contribute more [in taxes] to pay for social care if they can be assured that the money will be spent on this purpose.” (para. 46 and 93-95). This assertion is fallacious as the TaxPayers Alliance has demonstrated. “Earmarking”, as hypothecation is called here, is not acceptable to HM Treasury but it does seem to work, in the form of insurance, in Germany.   

  6. The cared-for should be able, as in Germany, to elect to receive cash to distribute to carers rather than the funding going to the caring organisations. State-funded caring should be extended to voluntary, usually family, carers.  The cost of this is not quantified. (para. 78).

  7. Paras 89-91 make suggestions as to how local authorities can develop new income streams to provide plenty of money for social care and everything else.

  8. At the national level too, the Report’s proposals would make things more complicated: “Much of our evidence suggested the need for national revenue raising options to be considered alongside, or instead of, existing or reformed local government funding arrangements. Given the scale of the funding challenge facing social care, many submissions also argued that a combination of different revenue-raising options will need to be employed.” (para. 84)  Some may regard these local and national money trees as optimistic.

  9. Given the interdependencies between the provision of health care, social care, and also public health, we recommend that in its discussions of future funding settlements the Government should consider all these in the round. (paras. 100 - 107). “The concept of a cross-party parliamentary commission currently has the support of more than 100 MPs from all English political parties.” (paras 119-132).

This last conclusion is really the most important. Whatever the Green Paper will say, the debate will degenerate into party politics and it will not include the NHS. Above all, we need a non-partisan, intelligent analysis of health and care provision, taken together, balanced against what we can afford.

Good as this Report is in a number of respects there are three major concerns:

  1. Armies of carers will be needed to cope with the much wider, but undefined, provision of care recommended by this Report, e.g. all age groups, preventative, free at the point of delivery. Given today’s staff shortages, low pay and unemployment, and reducing immigration, the Report should have addressed how many are needed. That said, there are ten times more people employed in the NHS than in adult social care, so switching resources from the former to the latter is worthy of consideration. And the Department of Health and Social Care has not published any strategy on the topic since 2009.

  2. Add to those new carers at higher pay rates, the proposal to pay voluntary (family) carers. How many elderly couples now get along only because one cares for the other?  The Report does consider financial sources but, somewhat naively, accepts the Citizens’ Assembly view that people will happily pay more provided it is earmarked. The UK, with 23 different kinds of tax already, is at a 50 year high level of taxation. As the TaxPayers Alliance has demonstrated, when citizens say they’d be happy to pay, they mean for others to pay. The TPA demonstration took the form of asking passers by to put a ball in the “yes” box if they agreed that they should pay more tax or put the ball in the “no” box otherwise. Those putting their balls in the “yes” box were then offered mobile phones connected to HMRC so that they could increase their contribution immediately. None did.

  3. Whilst the Report makes interesting suggestions for increasing the funds available from local authorities, it would be much simpler to abolish the involvement of the Ministry of Housing, Communities and Local Government, which plays no part in social care, and put funding with policy in the Department for Health and Social Care.  The Department for Education pays for schools so why shouldn’t the Department for Social Care pay for social care? Sharing those costs with local authorities is complex, would it be better to pick up the whole bill unimpeded by the ‘Office for Health and Care Sustainability’ recommended by the House of Lords? That would make the necessary interchanges with NHS England far simpler. Furthermore, the individuals’ contributions to their own care costs would need to be consistent across England and therefore set by the DHSC.

In conclusion, this Report further complicates what is already a very complicated matter.  It hits the nail on the head when it says: “Given the interdependencies between the provision of health care, social care, and also public health, we recommend that in its discussions of future funding settlements the Government should consider all these in the round (para. 107), i.e. the DHSC should do what its title suggests.


Categories: Current Affairs

Yes Mr Jones, this is how democracy works

Fri, 14/09/2018 - 07:01

Owen Jones is complaining about how democracy works. This perhaps isn’t all that great an attribute in someone operating as a political activist.

Since the Tory government’s imposition of austerity a decade ago, councils have lost about half of their central government funding. As supposed compensation, they have been allowed to keep more of their own revenue. Planned changes may give prosperous areas a huge advantage over poorer communities by allowing them to raise more money through council tax and business rates, while having fewer social needs.

Assume that this is correct - not usually a pass we’ll give Owen. OK, what would we expect under a Tory government?

Yes, quite, we’d expect such an election result to favour those who voted for it. That’s really rather what democracy is about isn’t it? That those who gain power as a result of votes hand out sweeties to those who voted for them?

Thus a Tory government leads to those Tory areas coughing up a little less in taxation to pay for those traditionally Labour areas. Shrug.

Further, it’s not obvious that this is unfair even if it is democratic. Because one of the grander moves of New Labour, under Blair and Brown, was that those traditionally Tory areas should be handing more substantial amounts of their tax revenue over to those traditionally Labour voting areas. Those who gain power hand out sweeties to those who vote for them.

Under Labour local government finances were indeed reorganised in favour of those poorer areas. An election happens, the people have changed their minds, the policy changes. And what else should be one when the people have changed their minds in this manner?

Certainly, there are entirely useful arguments against such policy changes. But they all contain that underlying distaste for the people changing their minds - you know, hope to negate the democratic bit of democracy?

Categories: Current Affairs

Why we might not want the State to be running things

Thu, 13/09/2018 - 07:01

The British state has been in charge of basic schooling for well over a century now. The grip upon the university sector has been tightening over this time period. This may not have been a good idea:

Andreas Schleicher, OECD's director of education and skills, said that while young people in England are increasingly entering the jobs market armed with a degree, many graduates remain unable to cope with even “basic” maths.

"Some people with degrees don't have the right skills - numeracy and literacy,” he said.

"You would label them as overqualified, but they may not be overskilled." Mr Schleicher went on: "I am not talking about somebody doing advanced mathematical analysis or reasoning, these are pretty basic numeracy skills.

"And you ask yourself a: how people could leave the school system with those skills, and b: then how can they make their way not only into, but even out of, higher education with a degree."

No, this isn’t about private schools and all that, the split in the British education system. Rather, we’ve a system in which the State has people in its educational clutches for 16 years and they leave unable to do sums. Yes, 16, because we start at 5, you’ll be 18 leaving school if you’re going on to university and then 3 years there.

From which we can draw one of two conclusions. The first being that, well, if after 16 years these people cannot do sums then they’re really not cut out for any form of academic education in the first place, are they? Meaning that the expansion of the universities wasn’t that good an idea, nor perhaps the raising of the school leaving age from 13 if we’re to be reactionary about it. Or, the only other alternative, if the raw talent is there but after 16 years the State can’t manage to foster or fertilise it then we’d better get some other education system pretty sharpish, hadn’t we?

Yes, sure, there are arguments in favour of the State provision of education. But all of them do rather rest upon the assumption that said State will possess at least a basic competence at the task to hand. Given the absence of any evidence to this effect all of those arguments do rather fail, don’t they?

A government insistence that education must be gained seems reasonable enough, possibly tax financing of it. But given that government seems to fail that very test of education being gained perhaps not direct provision of it. After all, vouchers for everyone might gain us university graduates who can do sums, an advance upon the current situation.

Categories: Current Affairs

The astonishing idea that the NHS brand should be marketed abroad

Wed, 12/09/2018 - 07:01

It’s not April 1 so we’ve got to take this story seriously. We can see merit in the export abroad of the skills inside Britain’s medical sector - after all, it’s something that happens already, large numbers of foreigners do come to private hospitals here for treatment. But the export of the NHS itself, well

The NHS is to be exported across the world as part of efforts to boost investment in Britain post-Brexit, under controversial new Government plans.

Hospitals and heath watchdogs will be encouraged to set up franchises in dozens of countries, with profits ploughed into supporting the health service.

The NHS will be asked to target up to £7bn of opportunities a year over the next decade, in a bid to share expertise and increase investment in frontline services.

Officials hope to turn the UK's national health service into a global brand, in the same way that the BBC gains significant income from its commercial BBC Worldwide arm.

We think that people might be believing their own propaganda here. That the NHS is a world beating health service, the Very Wonder Of The World.

Actually, as all of the varied rankings show from the Commonwealth Fund through to WHO, it’s a pretty average to bad health care service. Here in Europe it’s one of the worst when we consider avoiding “mortality amenable to health care.”

What pushes the NHS up the rankings is the way the rankings are constructed, offering high marks for equality of access, free at the point of use, equitable financing and so on. The rankings reflect, as they always will, the prejudices of those constructing the rankings.

But all of that which is considered admirable about the NHS is based upon the idea that it is health care free at the point of use funded by the British taxpayer. Everything else about the NHS, standards of treatment, effectiveness of them, waiting times and so on are lower than average to pretty bad at best.

What’s the one thing we cannot export? Or at least we rather hope no one tries it - that funding to provide health care free at the point of use using the resources of the British taxpayer. So, what is this NHS that we’re going to be exporting then? There’s not really an NHS to be exported, is there?

We can hope we suppose. That this is all a plan. Within that financing structure there are dedicated and skilled people doing excellent work. By exporting those skills and expertise to where the financing structure cannot exist we should be able to prove that, somewhere, within the NHS is an actually world beating health care service.

Then all we’ll need to do is free those skills and expertise from that straitjacket of that financing and management system and we too will have an excellent health care service. For we’ll have in front of us how good British health care can be when operating in competitive markets abroad.

Sadly, however good this idea we don’t think that there’s anyone Machiavellian to have thought this through properly. Instead they really do think that foreigners will line up to gain access to NHS treatment even if they’ve got to pay full market prices for it. Not a bet we would count on ourselves.

Categories: Current Affairs

Even High Street retailers don't think there should be an Amazon tax

Tue, 11/09/2018 - 07:01

As we're all aware there's a campaign going on to tax physical retailers more lightly, to tax the internet ones more heavily. This is dressed up as being levelling the playing field, the reality is that the High Street landlords would prefer business rates to make less of a dent in the rent they can charge. It's purely a special interest pleading that is.

Not even all High Street retailers agree with it:

The chairman of John Lewis has ­rejected growing calls for online retailers to be hit with a so-called “Amazon tax”, instead urging traditional players to adapt more quickly. 

Sir Charlie Mayfield said he “struggled” with the belief that internet companies should be penalised because they have managed to carve out a leaner business model.

Quite so, Internet retailing is using less of that scarce resource that is high footfall retail space. Quite why they should be taxed more because of this is unknown. Unless, obviously, you're a landlord watching your rents go down.

After all, if a new technology means you need less steel to build a car - something that's been happening for decades now - we don't then insist that you should pay more tax because you're using less steel, do we? 

Further, our entire aim in this economy of ours is that all business models become leaner over time. That's how we advance, by being able to produce the things we desire while using fewer resources to do so. That meaning that we've now the resources to do new and extra things - we're richer in short.

Business rates reform in the face of internet retailing isn't in fact about retailing at all, it's about landlords and their rents. Let's not forget that while this campaign continues.

Categories: Current Affairs

Killing the planning system will indeed save the High Street

Mon, 10/09/2018 - 07:01

There is, obviously enough, a certain amount of special pleading here but they're right all the same. Our problem being that we face uncertainty and therefore planning simply cannot be the solution:

A coalition of retailers, landlords, councils and pubs has called for planning laws to be torn up so that abandoned shops can be turned into cafes, galleries, gyms and other businesses that could help rejuvenate Britain’s decimated high streets.

Empty units in the middle of towns and villages are often hard to let ­because it can be difficult and expensive to get permission to change their use. For example, a unit used as a hairdresser’s needs permission to be changed into a nail bar.

As we may have noted the basic technology of retail is changing. Instead of the footfall on the High Street being the determinant of success it's that traffic to websites which is. Some 16
% or so of retail sales now take place on that there internet rather than through physical shops. We might thus reason that we've an excess of those physical shops for our retail needs.

So, what should we do? Those High Streets, to what use should they be put? Which is where the problem is. We don't know. No one knows, there's not a single person with even a hint of a Scoobie. No entrepreneur has cracked it, no expert has been able to tell us all what to do next.

Which means that asking the bureaucracy for permission to do whatever is ludicrous. For if the people who actually do things don't know then the paper shufflers are going to be entirely clueless, aren't they? Given that we really don't know then what criteria can possibly be used to allow or not in conformity with some plan? For what the heck is the plan itself? 

We've only the one method of dealing with said uncertainty. People go try stuff and see what happens. Much of it will be dire, some if not most will fail but through that process of experimentation we'll find whatever match there is between those physical assets and the desires and wants of human beings. Maybe it's that people go live in all those buildings and buy online. Perhaps it's services which are notoriously difficult to feed down a fibreoptic cable. Could be we just stick holograms of people in the streets and call it thriving.

That is, our only possible response to uncertainty of what to do is a free market. For that's the only system which does allow that experimentation which zeroes in on that match between assets and desires.

We don't know what to do, you don't know what to do, the bureaucrats haven't a clue. So, while we all try to experiment to find out why are we asking the bureaucrats for permission?

Categories: Current Affairs

Venezuela Campaign: a state of ill-health

Sun, 09/09/2018 - 12:51

Hugo Chavez talked a lot about caring for the poor and sick, enshrining the right to free healthcare in the constitution and spending large sums on importing Cuban doctors into new healthcare facilities. The initial impact was promising: life expectancy rose, and infant mortality declined. But this did not prove sustainable. From 2008 onwards the inefficiency and corruption associated with the new programmes, combined with wider economic problems, would reverse these small advances, with the situation getting worse year by year.

This year, a report surveyed more than 100 private and public hospitals in Venezuela and found them in shocking condition. 79% have no access to water. 14% of intensive care units have been shut down. More than 80% cannot perform ultrasounds, X-rays, or CT scans. None of the hospitals surveyed had a working laboratory. Failures in infrastructure mean that hospitals regularly have buckets of water on hand, and doctors are forced to use their phones for light because of faulty bulbs or the unreliable electricity supply.

Venezuela’s health crisis is also impacted by the exodus of health professionals from the country. Up to a third of all doctors and half of doctors in public hospitals have left since the crisis began. They are leaving because of rampant violence, hyperinflation and their pitiful salaries of around £10 a month. Even Cuban doctors, who are loaned to Venezuela by Cuba’s government and are paid almost nothing, cannot be relied on. Thousands of them have fled Venezuela alongside normal medical professionals.

Nationwide, 85% of medicines that patients need are in short supply. For those who are suffering from cancer or HIV/AIDS, the number is closer to 90%. Along with their own medicines, hospital patients are also required to bring their own bandages and surgical gloves. Operating without painkillers is common and necessary, as medicines are prohibitively expensive and are usually only available on the black market, at a huge mark-up. Maura, a woman in her 60s who lives on a pension of less than $1 a month, spent around $21 dollars on medical products, including antibiotics for her daughter. Maura and many others have had to ask family and friends for help.

Even being in hospital is no guarantee of safety. Nine-year-old Cesar Torres was admitted to hospital with diarrhoea, but while inside developed several other infections. Due to food shortages and poor hygiene, eating in hospital can also be a health risk. 40-year-old Carla Lopez was being treated for diabetes, but her condition worsened due to her diet of pasta and rice, which was all the hospital could offer. Mothers frequently feed their babies with un-sanitised bottles. Cleaning, insofar as it is done at all, is carried out with water and rags as no soap is available.

Medical conditions linked to malnutrition are on the rise, and Venezuela’s hospitals are unable to cope. Venezuelans reported losing an average of 8kg in 2016, and 11kg in 2017; more is expected as hyperinflation destroys Venezuela’s currency. Around 8 million Venezuelans only eat two meals or less a day. Children under 5 are most at risk during this crisis: the charity Caritas have estimated that half are suffering from malnutrition or are at severe risk. This year, 300,000 children are at risk from death due to malnutrition, according to humanitarian organisations.

Although NGOs such as Healing Venezuela are succeeding in delivering some aid, the government has refused aid from foreign countries, citing security concerns. Venezuela’s Vice-President Delcy Rodriguez has denied that there is a humanitarian crisis, as she claims that this could justify ‘foreign intervention’. Meanwhile, Venezuelans die in droves. Ships sending aid have even been turned back by the authorities.

Venezuela’s current crisis is so immense that it is hard to imagine how deep the suffering goes. When it comes to the country’s health crisis, the scale of this calamity is even more heart-breaking. Although conveyed mostly through numbers and figures, the crumbling of Venezuela’s health system is still a story of individuals, communities and entire cities, swept up in this all-engulfing catastrophe.

More information on the Venezuela Campaign can be found on their website

 

Categories: Current Affairs

One reason to reject the IPPR report is that they're using the wrong numbers

Sun, 09/09/2018 - 07:01

The IPPR has that economic justice report out telling us that we've simply got to uproot free market capitalism because it shafts the workers. Any of which assertions could be true of course, not that we'd agree. However, trying to support such assertions does require the use of the correct numbers. Which isn't, to put it mildly, what is being done.

A little bit of theory. The national income can be split up into the capital share, labour share, self employed or mixed income and subsidies to production and taxes upon consumption. That labour share has been falling gently in recent decades but it's not the profit share which is rising, instead the other two are. There're more self employed people around and we might well have noted that doubling of the VAT rate since introduction.

Within the labour share we can talk about wages and salaries and then the other costs of employing labour. To which there's an importance. A falling share of wages and salaries is entirely consistent with a static labour share. It would mean that we are loading employers with more costs to employ labour. Say, raising national insurance contributions, insisting upon the funding of pensions, an apprenticeship levy and so on. These are costs of employing labour but not wages and salaries, they're part of the labour share but not of wages.

So, the numbers the IPPR wants us to look at are as that chart above. But that's not the labour share, they've used the ONS figures for wages and salaries. If we actually wanted the labour share figures we should use these numbers here.

With an index starting at 100 in the year 2000, wages are up at 166, labour costs at 171.4 and other costs per hour at 211.9. That is, one good reason why wages haven't been rising along with the rest of the economy is because we've been loading other costs onto the price of employing people. Those costs coming out of the labour share.

We're quite willing to agree that the labour share has indeed fallen in recent decades. Also that the wage share has fallen more recently. But we do think it's worth insisting on using the correct numbers so as to examine how an why this is. Barring that mid-70s slump in the profit share there's nothing odd about that cut of the economy today. Thus the solution to that falling labour share might well not be in the profit share. Could, for example, be over in the VAT area, just as a perhaps. Similarly, the wage share might not be to do with the profit share but with the non-wage labour costs imposed by successive governments.

Again, while we've very strong opinions on such - to the point of a pantomime "Oh Yes It Is!" - that's not the point we want to underline here. Rather, if we're to investigate we really must, just must, start with the right numbers.

At which point we'd just make a little note. All of the discussions here start with notes about the labour share and often enough and wrongly with the wage share. Then assume that if the workers ain't getting it then the capitalists must be. Why is that? Perhaps because examining the profit share directly wouldn't tell us that same message. Which wouldn't be politically convenient, would it? For if the bosses aren't getting it and the workers aren't then we'd have to do some real work to find out who is, wouldn't we? That's it's government swallowing the economic growth wouldn't accord with a number of narratives....

 

 

Categories: Current Affairs

There's a certain problem with Polly's demand about wealth

Sat, 08/09/2018 - 07:01

We have been telling Polly Toynbee for well over a decade now that Sweden's wealth distribution is more unequal than that of the UK - she won't listen, sadly. It is also quite obviously true that post tax and post benefit incomes in Sweden are more equally distributed than in the UK - although not quite as much more equally as many seem to think. The ginis are around and about 0.25 as to 0.34.

All of which leaves us with a problem with this:

Labour’s sole focus should be closing Britain’s wealth gap

Polly Toynbee

While the super-rich get richer, those left at the bottom are in increasingly dire straits

How can we have a more equal country which is less equal? 

The answer being that we measure the wealth distribution before all of the things we do to correct it, the income distribution after all of those things. And we're never going to get that wealth distribution conversation right until we change the way we measure it.

For we do do a number of things to equalise wealth - the general name for this being the welfare state. It's entirely true that there's pension inequality, some have very much larger private pensions than others. But all gain the state pension which equalises. The wealthy may well have substantial equity in their housing. The receipt of housing benefit, or a below market tenancy, might not be transferable but it is wealth in that same economic sense. But when measuring wealth we only include the private pension or equity, not those public equivalents.

We might think of the Saez and Zucman work on wealth where they capitalise income streams to reach their estimates. Gain £5,000 a year from something and thus it is worth x years times £5,000 as a capital sum. It's a reasonable method too. So, why aren't we applying it to schooling costs? £5,000 a year is a rough guide to what it costs the government to provide free at the point of use schooling. That has a capital value of x times £5,000. A value we don't count.

And the thing is, once we do include all of these things which we do to equalise the wealth distribution we find that we're not in the grip of any explosion in wealth inequality at all. That claimed plague of it being merely an artefact of the manner in which we're not counting what we already do to equalise it.

There is thus a very simple solution to that demand that we've got to do something about wealth. Start counting it properly. Include the value of the welfare state.  Only once we do that can we even begin to discuss whether we should be doing more. Or less, of course.

 

Categories: Current Affairs

Let the car take the strain

Fri, 07/09/2018 - 07:01

Autonomous, truly driverless, cars are obviously going to change the transport network. It's a fun parlour game to try to work out which parts it's going to kill. Actually, not so much a game given that we've the usual suspects insisting that we must spend tens of billions - if we add up all the schemes perhaps hundreds -  on the rail network. For it's the non-commuting passenger part of that network which is going to be murdered in its bed by that new technology:

Volvo has unveiled a futuristic concept car that it hopes will replace short-haul air travel and introduce new safety standards that could put driverless vehicles on the roads sooner.

The Swedish company’s 360c autonomous vehicle does away with the steering wheel and uses the extra space created by electric drive systems to create different cabin layouts.

These can be configured into modes such as commuting, mobile office, entertainment and sleeping.

With a flat-bed installed, Volvo believes its cars can replace short-haul air travel, targeting flights of up to 400km - about the distance from London to Newcastle.

Short haul air travel might well suffer. But it's going to be the train taking the strain. 

Those commuter lines in and out of London, say. No, we're not going to start moving a million and more people a day on the roads, rail has its place there. Long distance travel is still going to be by air whatever the promoters of things like the TGV insist. But that part of the transport network where rail is in competition? Travel - for business and pleasure and of people not freight - in the tens of miles to the hundreds?

Assume, for a moment, that the advertised technology works. What are people going to prefer, that public option of the feeder line to the terminus, change, the fast train to wherever, that switch to local transport again?  Or what is, effectively, one's own private train carriage able to transport you point to point anywhere on Britain's road network? 

Well, quite, and the reason we're spending tens of billions (before the inevitable cost overruns) on HS2 and the like is what? Investing in a soon to be entirely redundant technology?

The argument in favour of government investment is that it will invest in things the private sector won't. It's also the argument against it as well.

Categories: Current Affairs

Those spiralling costs of new drugs

Thu, 06/09/2018 - 07:01

It's not uncommon to hear people telling us that new drugs cost a lot per treatment. Therefore that drug development system is broken. The truth being that it's all rather more complex than that. Or even simpler. The drugs we're developing treat ever fewer numbers of people as we move down the list of problems to be solved. Thus the costs of the development need to be carried by ever fewer treatments. The cost per treatment is thus, whatever our financing system, going to be higher.

There is no way out of this, no way at all

The treatment called CAR-T therapy - has been hailed by scientists as one of the most significant breakthoughs in cancer for decades.

It works by taking a patient’s own white blood cells, and re-engineering them to fight cancer, , before re-injecting them into the body, where they multiply.

Some studies have found that up to nine in ten patients with little hope of survival went into remission after being given such therapy.

The deal struck between Novartis and the NHS is one of the fastest funding approvals in the history of the NHS, and comes 10 days since the drug was licensed for use in Europe.

The treatment would cost a patient around £280,000 privately....

£280k is a fair chunk of change in anyone's money. But why so much?

Around 30 children a year are expected to be given the CAR-T treatment

It's possible to argue - whether we include the opportunity costs of capital for example - but the development of a new drug through to approval costs some $800 million to $2 billion. The current funding system means that the developer has some 10 years after approval of patent protection to try and get that back. The fewer people the drug is given to the more each treatment will cost to try to recoup.

But note that this problem doesn't go away if we change the funding system. It still costs that $2 billion to develop a drug. The cost per treatment is therefore higher, to recoup that investment, however and whoever pays for the development. Even if it's all just tax funded the taxpayer is still spending $2 billion to treat 30 people a year (yes, obviously, the development is one once globally but still the logic stands).

The expense of new drugs is about the expense of developing new drugs. Changing who or how pays doesn't change that in the slightest.

Categories: Current Affairs

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