Sunday, April 21, 2013

Not Waving But Drowning

Apologies for lack of posts. Denham Senior has been hospitalised with a serious heart condition and blogging has therefore moved to the back seat. But today's report from the Royal College of Nursing just has to be clocked.

According to their latest survey, NHS nurses are still "drowning in a sea of paperwork". Nearly one day in five is spent filling in forms, ticking boxes and ordering supplies. RCN general secretary Peter Carter says:
"These figures prove what a shocking amount of a nurse's time is being wasted on unnecessary paperwork and bureaucracy. Yes, some paperwork is essential and nurses will continue to do this, but patients want their nurses by their bedside, not ticking boxes."
Yes, indeed. And visiting Dad in two NHS hospitals over the last several weeks we've been able to study the process up close and personal.

The first stop was a large acute hospital just beyond the M25. It suffers all the usual problems: decrepit buildings, huge financial deficit, and a chronic - and I do mean chronic - lack of parking for visitors. Admission even for blue light emergencies like Dad is via a 12 hour plus trolley wait in A&E, and once finally admitted, care is in the hands of those overstretched uncontactable doctors. The nurses spend huge amounts of time behind the counter filling in forms rather than being out on the ward with patients, and you virtually have to book an appointment for one to stop by your bed. The whole impression is of an operation struggling barely to keep its head above water.

The second stop was one of Britain's top specialist heart hospitals, and it is much more impressive. What's done there in terms of heart surgery is truly world class, and its clinical staff are the business. The doctors are top notch, and the nurses do real nursing (Dad even attempted to take one home with him). Morale seems high, with junior nurses actually on first name terms with the top consultants. True, it's clear that staffing ratios are higher than in the general hospital, but much more striking is the excellent attitude and commitment of staff members.

Yet even here, the nurses told Dad they have a complaint. It isn't the hours, or the inconvenient shifts, or the stressful sometimes stomach-churning work, or even the pay. Their number one complaint is excessive paperwork. And even though they don't let it interfere with patient care, we watched them filling in great piles of paper in every spare moment.

So what's it all for? Why do we need all this paper?

Back in the dark days of the Commissariat, much of it was to satisfy the central planners that patient pathways were being rigorously followed, that prescribed risk assessments were being fully documented, and that every bedpan could be duly accounted for. Or rather, to provide a full audit trail which could be filed away to protect bureaucratic backsides in the event of a system malfunction.

But surely we're now three years on from all that. Surely we don't need all that now?

It's not that Jezza Hunt isn't aware of the problem. He's told us before of the million nursing hours a week spent on form filling rather than caring for patients. Of the nurse who had to fill in a 22 page form and 10 additional forms to get a desperately ill patient admitted to a trauma ward. And of the Hospital Trusts who have to report to, and comply with, 60 different regulatory, licensing, commissioning and public scrutiny authorities. Why, he's even ordered a review of NHS bureaucracy.

But he's attempting to tame a monster. The NHS is far too big, and the bureaucracy far too entrenched, for one single weedy minister to prevail.

The only way of getting on top is to break it up, give us choice and competition, and allow the hospitals themselves to find ways of managing their own affairs. They must be held accountable for results, not for how many boxes their nurses have ticked.

Wednesday, April 10, 2013

More Jobs As Welfare

Watch the vid (if you can) and then check out the bile in the YT comments

For those of us who believe Margaret Thatcher rescued Britain from a 50 year spiral of economic decline, the bile still directed at her from the left is hard to stomach. Surely these people can now see how there really was no alternative. Surely they realise that the vast majority of us are much better off because of the changes she bulldozed through. And they must at least understand that our public services have benefited from our higher level of general prosperity.

But no. Just as the Greeks blame the Germans for their economic reality check, much of Britain still blames Thatcher.

One of the most emotive charges against her is that she vindictively crushed the miners and smashed their communities into dust. That she provoked them into a strike and then refused to countenance any settlement other than their abject and unconditional surrender - a surrender immediately followed by mass closures and redundancies.

And it's certainly true that the numbers of mines and miners were slashed under Thatcher. in 1980 there were 211 coal mines and 230,000 miners. By 1990 the numbers had fallen to 65 and 57,000 respectively (see here).  We can see why the mining communities felt as if they had been punished by the nasty vengeful Tories.

But the strike and its aftermath didn't appear out of a clear blue sky. There was a lot of history.

To begin with, coal mining had been in steep decline for decades before Thatcher, and employment was only around one-fifth of its peak. Just in the previous 20 years the number of both mines and miners had fallen by two-thirds, with most of the cuts taking place under Labour governments. In fact there were more mine closures and job losses under Harold Wilson than under Margaret Thatcher.

And that's because British coal mining was inefficient, uncompetitive, and increasingly expensive. It may have fuelled the industrial revolution and Victorian Britain, but much cheaper alternatives were now available. The industry was only kept going by being taken into state ownership and propped up by massive subsidies, including rigged prices for supplying our coal-fired power stations. Taxpayers and electricity consumers - including our vital manufacturing industries - were being forced to pay through the nose for one of life's essentials.

On top of that, by the 1980s the miners had established for themselves a shameful record of industrial blackmail. There had been two prolonged national pay strikes in the early 1970s, necessitating extensive power cuts and a three day working week imposed to eke out supplies. The entire nation had suffered at the hands of the miners and their militant union bosses, and by bringing down the Heath government in 1974 they had shown its successors who was really in charge. They had lived by the sword, so could hardly complain when it was turned back on them.

The reality was that by the 1980s, the British coal industry had become too expensive and too unreliable to survive.

Of course, in the romantic fantasies woven by people like Billy Bragg, none of that matters. Thatcher's crime was to destroy the lives of miners and their families, and - according to their myth - to do so with the cruellest of capitalist smiles playing across her lips. If she'd possessed one ounce of humanity she would have supported the miners and nurtured their noble way of life. She'd have found the money to keep the jobs going by taxing the idle rich.

We've blogged before about public sector jobs as welfare, and by the 1980s most mining jobs had become precisely that. They had become economically unviable, and increasingly depended on taxes and subsidies grabbed from the rest of society. Moreover, whereas five-day-coodinators and most of the other public sector non-jobs are at least safe occupations, mining is not. We were subsiding people to do dirty and dangerous work that we no longer needed.

The tragedy is that so few of these ex-mining areas have developed alternative sources of prosperity. Decades after the mines were closed, unemployment remains high and for far too many, one form of welfare dependency has been replaced by another. As we've blogged before, we think the solution is to radically improve tax incentives in those areas - something we'll come back to.

PS We've met St Billy several times on BOM - start here.

Monday, April 08, 2013

Bring Me My Pot Of Gold

We've got stacks of these

The fundamental reason we have to cut the welfare bill is because we can't afford it. At 16% of GDP and growing, we simply have to get a grip. And of course, the decisions are difficult, and the consequences for some individuals can seem harsh. But we just can't go on as we are.

Or can we?

Over the last week we've heard a lot about pots of gold that could pay our welfare bill without having to inflict cuts on the poor. Here are three of them, all heavily promoted by our friends at the BBC:
  1. If the government would just swallow its Plan A pride and get people back to Plan B work, the welfare bill would fall and there'd be loads more tax revenue coming in. The problem would solve itself.
  2. We could reverse the tax cut for millionaires, using the extra revenue to safeguard benefits.
  3. We could clamp down on corporate tax avoidance and get tens of billions more revenue. 
Pot One - traditional Keynesian pump-priming - is a seductive idea, but as Andrew Lilico points out today, with the government stuck on a £120bn pa deficit it doesn't offer a credible way forward. In effect, we've already been trying Plan B ever since the Crash and it hasn't worked. 

As for the idea that increases in public spending can be self-funding through their impact on GDP and tax revenues, that's akin to plans for a perpetual motion machine. Estimates of the actual impact vary, but the Office for Budget Responsibility reckons that an extra Pound of public spending boosts GDP by between 60 and 100 pence, depending on the type of spending (capital spending works much better than welfare spending). But since the amount that comes back as tax revenue will be less - perhaps 20 to 40 pence - the government's deficit is left 60 to 80 pence higher.  There are no magic pots of gold here.

Pot Two sounds even more attractive to most of us - reverse the millionaire's tax cut and pay the welfare bill without whacking the rest of us on incomes below £150k. 

Again though, the numbers don't stack up. According to the official HMRC analysis, increasing the top rate of tax from 40% to 50% raised much less than the £2.5bn pa originally promised by Labour. HMRC says:
"The conclusion that can be drawn... is that the underlying yield from the additional rate is much lower than originally forecast (yielding around £1 billion or less), and that it is quite possible that it could be negative. This conclusion is supported by wider academic literature which generally suggests a greater behavioural response than was included in the Budget 2009 and March Budget 2010 estimates. Evidence from the U.S. suggests the behavioural responses could be even higher, with an even lower yield."
The problem is that golden geese no longer hang around waiting to be plucked: faced with a punitive hike in tax rates they find ways of reducing their taxable income, possibly flying away entirely. Between 2009-10 and 2010-11, faced with a tax hike from 40% to 50%, they reduced their incomes by 25%:

Moreover, the longer-term damage to the economy is likely to be even greater, as entrepreneurial types leave for sunnier, lower tax climes. And as the economy suffers, revenue from other taxes also sags. HMRC says:
"High tax rates in the UK make its tax system less competitive and make it a less attractive place to start, finance and grow a business. The longer the additional rate remains in place the more people are likely to consider it a permanent feature of the UK tax system and the more damaging it would be for competitiveness. This suggests the negative impact on GDP may increase over time, and therefore the direct yield (and revenues from other tax bases) might fall over time toward or beyond zero."
In today's globalised high mobility economy, higher tax rates for millionaires are very far from being our pot of gold: in fact, they can easily turn out to be the exact opposite.

Pot Three - clamping down on tax avoidance by the likes of Starbucks - is widely trailed, and also sounds painlessly attractive to the rest of us. Because according to some estimates, the tax gap between what big companies ought to pay according to the spirit of the law, and what they actually pay, runs into tens of billions annually.

But once again, the reality is somewhat different. According again to HMRC, the tax gap for companies is only around £4bn pa, which while worth having, is nowhere even close to the £200bn plus we spend on welfare. Moreover, tax avoidance is an exceptionally grey area, and one man's tax avoidance is another's perfectly legitimate protection of shareholder interests.

And that pesky globalised economy makes it virtually impossible for one country acting alone to do much about it. Indeed, over the long-term governments may well have to phase out their taxation of multinational companies altogether. They may have to rely on taxing company earnings only when they distributed back to their own resident shareholders (which is how it was done originally back in Victorian times).

So three pots of gold that turn out to contain little but wishful thinking.

The only way of making welfare affordable is to cut it. Or more specifically, to tighten up on eligibility and to focus what cash we can afford on those who need it most. The painful choices are unavoidable.

PS Going back to that global savings glut and the role of those high saving Chinese, I was fascinated to read this account in the English version of the People's Daily. Not so much for the story itself, but for the accompanying list of the PD's most popular articles. Nothing to do with savings, or lack of welfare provision, or say, the shenanigans next-door in North Korea. No, the most popular article right now - complete with pic - is "Bogus sexy cop charged":
"A model who impersonated a police officer, posting sexy photos of herself online, has been given a suspended jail sentence at Fengtai district court for cheating and bluffing, which damaged the image of government officials, the Beijing Times reported Tuesday. The woman, 23, surnamed Wang, posted sexy photos on her microblog in July, including one in which she was pulling on black stockings while wearing a police shirt. She also wrote that as a policewoman, she has so much pressure because she has to dine with government officials every day."
Do they have April Fools Day in China? What would the Great Helmsman have said? What isn't clear is whether the article is meant as a warning to other microblogging bogus sexy cops, or whether the PD thinks those government officials need to chill. Of course, our own cops are perfectly capable of cheating and bluffing all alone without any help from bogus ones - as we've seen in the Mitchell case.

Saturday, April 06, 2013

Incompetent And Reckless Bankers

"An apology is due for the incompetent and reckless Board strategy; merely apologising for having failed to plan for an unforeseeable event is not much of an apology."
The Parliamentary Commission on Banking Standards has given the HBOS Three a richly deserved public roasting:
"In the view of this Commission, it is right and proper that the primary responsibility for the downfall of HBOS should rest with Sir James Crosby, architect of the strategy that set the course for disaster, with Andy Hornby, who proved unable or unwilling to change course, and Lord Stevenson, who presided over the bank’s board from its birth to its death. Lord Stevenson, in particular, has shown himself incapable of facing the realities of what placed the bank in jeopardy from that time until now."
The Commission reckons none of the three are fit and proper persons to work in the UK financial sector, and given the disaster they've visited on us, they should rightly be broken to the ranks. We trusted them with our savings and they gave us financial Armageddon.

But of course, when it comes to incompetent and reckless bank strategies, the HBOS Three were hardly alone. It's now clear that during the bubble years large swathes of the banking sector were following a similar course. And even worse, it didn't end with the Crash.

Take Britain's most important bank. For the last four years it's been pursuing a strategy which by all previous tenets of sound banking practice has been reckless in the extreme. It's pumped up its balance sheet with assets of dubious long-term value, repeatedly glossed over its failure to achieve its key performance objective, and has just replaced its failed CEO with an outsider who, far from calling a halt, seems set on behaving even more recklessly.

Yes, the Bank of England now owns one-third of HMG's dodgy National Debt (purchased at the top of the market and denominated in a rapidly devaluing currency), has spectacularly failed to keep inflation down to 2%, and has headhunted a new Governor who's ready to let rip.

Our savings are being incinerated at an alarming rate. Since the Bank cranked up its QE printing press four years ago, the interest rate on High Street savings accounts has averaged under one-quarter of one percent. Over the same period the Bank has delivered an inflation rate well in excess of 3%, even higher than its official target of 2%. As a result the real value of your savings account has plunged by nearly 14%:

Just like HBOS, we trusted them with our savings, and they've repaid us with incompetence and recklessness.

What's that? They intended all this? They intended to crank up inflation and to whack savers? You mean... they've behaved even worse than Stevenson, Crosby and Hornby?

You know, now I come to think about it, you could be right. Here we are with a deeply indebted government, busted banks stacked high with dodgy assets, and millions of households who have borrowed more than they can ever afford to repay. A good dose of inflation would help them all, clearing their debts, and getting them back into the spending mood. Savers suffer of course, but hey, if savers won't spend their money, then they only have themselves to blame if they lose it to those who will.

The reality is that if you're sitting on a UK savings account today, you are a mug. All around the world central banks are intent on stoking inflation higher. The Fed and the Bank of England have been doing it for a while, and this week the Bank of Japan joined them: in the words of the FT, they have "opened the floodgates".

And it's not difficult to see why. The Japanese have had two decades of very sluggish growth, and the western economies now seem to be facing the same thing. The idea of a global savings glut has taken hold, with Chinese households now reportedly saving 50% of their incomes rather than recycling their soaring earnings back into consumption. China exports far more to the west than we export to them, which has the effect of sucking spending power out of our economies. The Chinese refuse to let their currency rise to its correct level, so they run a huge balance of payments surplus. The money comes out of the pockets of western consumers, into the hands of the Chinese central bank, and is then parked in US Treasury bonds and other financial assets back in the west. Rather than spending it, the Chinese just sit on it.

In the circs, nobody wants to see western savers also sitting on their cash - their patriotic duty is to spend it, and if they won't spend it, then they should not complain if it gets confiscated via inflation.

Of course, as world inflation cranks up, those Chinese savers will also lose. The real value of China's overseas assets will be eroded, and because of their fixed exchange rate, higher inflation outside China will spill over into China itself. Sooner or later the Chinese authorities will be forced to let the currency float up to its correct level - which is almost certainly part of the western agenda here.

But none of that is going to help UK savers. Ever higher inflation is on its way, and they cannot expect High Street interest rates to keep pace. Not for the first time, savers are being sacrificed to The Greater Good.

PS What would I do? Very tricky, but you need to get that cash into assets that have at least a chance of  protecting you against inflation: index-linked, equities, gold, and property. The problem is that prices are already pretty high across all those areas, and that old standby of Index-Linked National Savings Certs is no longer available (I wonder why).

PPS Long-time Labour insider Dennis Stevenson was of course the man Blair put in charge of choosing the People's Peers (see this blog). He brought his customary arrogance to that role, and not much seems to have changed. Once, long ago in a previous life, I attended a business lunch with him. He was keen that we understood he had the ear of the then PM, and he came across as... well, arrogant.

Wednesday, April 03, 2013

I'm Entitled

Yes, we know: we can't judge our entire welfare system on the basis of Mick Philpott. But what we can say is that if it hadn't been for our welfare system, he wouldn't have been able to live like that. He wouldn't have been able to get a living from fathering 17 children. There wouldn't have been any benefit in cramming two entire broods into his 3 bed Council semi to boost his income and his case for a bigger house. The incentive simply wouldn't have been there.

We've blogged the issue of children as meal ticket many times (eg following the Shannon Matthews case). And to some degree it is an inevitable consequence of any welfare system that seeks to protect poor children from the fecklessness of their parents: we pick up the tab because we don't want the children to starve. But we don't have to sit back and accept that such parents can just carry on being as feckless as they like.  

Yet according to the welfare administrators in Derby, there was nothing to flag up Philpott and his domestic arrangements as being a concern. In other words, it was deemed perfectly acceptable for him to carry on taking the money and fathering even more kids. All that mattered was that the kids were not obviously being abused.

Why? Why when Philpott was clearly able-bodied, was he allowed to spend his entire life sponging off the rest of us? Because he wasn't some unfortunate casualty of the recession: come rain or shine, boom or bust, he'd always expected us to support him, and our welfare system did absolutely nothing to stop him. Instead of making the dosh conditional on him, say, clearing the rubbish strewn around outside Mr Mundair's Derby shop (and all those other neighbourhood jobs that never get done) he was just given the money. 

This appalling case highlights once again how the culture of entitlement has ramped up our welfare bills. And lest we forget, welfare spending doubled in real terms between 1990 and 2010. Doubled to over £200bn.

In the case of Housing Benefit, that's grown even faster, nearly trebling over the same period. And once again, entitlement has been driving up costs - the entitlement of recipients not just to a roof over their heads, but to remain in the same subsidised accommodation irrespective of how many spare bedrooms they have. And judging from the outcry over the government's attempt to tighten the rules, that sense of entitlement is deeply felt and shared across large sections of the media. 

Yet the government's rule changes are pretty modest, with prospective savings amounting to less than 5% of the total £24bn bill. They will certainly not result in widows and orphans being cast out into the snow.* As for forcing children of the same sex to share bedrooms, I personally shared a bedroom with my two brothers right up until I finally left home in my early twenties - it was no hardship whatsoever. 

Of course, much of the reporting we get on these welfare changes is filtered and spun by the BBC. The R4 Today programme did a great job of stitching up poor old IDS on Monday, getting him to claim he could live on £53 per week. It later turned out that their case study - a market trader who claimed he only gets £53 per week to live on - was being somewhat economical with the actualit√©, but by then the damage had been done.  And that stunt was only part of the BBC's big campaign against welfare reform, and indeed all Coalition attempts to curb public spending.

Which is hardly surprising, given that the BBC is Britain's biggest tax-funded business. Accountable to nobody except themselves, they are as steeped in entitlement as any Mick Philpott. And they can see that if the rest of us start asking the right questions, it won't be long before their £3.5bn subsidy will be seen as a luxury we can no longer afford. Best to stop such questions being asked in the first place, and hope their guys get back in 2015.

*Denham Senior recalls witnessing the eviction of an elderly widow from her home in the early 1930s. She was carted off to what had once been the workhouse, and her possessions were piled up on the pavement for passers-by to help themselves to. Nobody is suggesting a return to that, or anything even close.

PS How long has the BBC been using our taxes to advertise themselves on YouTube? Personally I find much more to interest me on YT than on the BBC's six (six!) channels put together. Yes, there are ads - ever more ads - but I'd much rather put up with them than the BBC's telly tax... especially when it's being used to advertise on YT. 

Monday, April 01, 2013

Recent Bonfires - April Fools Edition

April 1st wind-ups

£4,800 for boob job - "WANNABE glamour model Josie Cunningham shows off her new 36DD boobs - served up on the NHS. Josie, 22, had a £4,800 breast op funded by the taxpayer after telling her GP that being flat-chested was causing emotional distress. The Leeds telesales girl said: “My new boobs have changed my life, now I want to be the new Katie Price". Despite earning just £9,000-a-year in telesales, Josie has made several trips from her Yorkshire home to get used to the celebrity lifestyle in London nightspots. She has also had chocolate brown highlights in her hair to copy busty Katie, begun a collection of Louis Vuitton handbags — and ordered a chihuahua puppy." (Sun 29-3-13)

£90k for prisoner sex change ops - "Two prisoners at a maximum security jail have used human rights laws to force taxpayers to foot the £90,000 bill for their sex-change operations. Both men are serving lengthy sentences at Full Sutton jail near York. Alongside the £45,000 cost of each operation, thousands more has been spent training guards to deal with the inmates’ new identities." (Express 22-3-13)

£16m for fatcat civil servants - "Fatcat civil servants at the Department of Energy were handed more than £16 million in bonuses and payoffs in the past two years. Taxpayers have funded exit packages worth more than £7.6 million since 2011, with some employees getting more than £100,000. And £9 million has been paid out in bonuses in the last financial year. Labour MP Pamela Nash said the payments were an “absolute scandal”. She said: “It is not surprising the Government are not tackling rising energy bills seriously when they can’t even control the bonuses.” (Mirror 30-3-13)

April 1st total - £16,094,800

(The joke being entirely on you)

Saturday, March 30, 2013

Facing Down The Unions

Impartial BBC journos off-duty

It's just like old times. The teachers are going on strike, the Post Office workers are going on strike, and even those most essential of essential workers, the BBC journalists are going on strike. The common theme? They're all employed by the public sector.

As you know, the public sector is the last bastion of British trade unionism: 60% of today's union members are employed in the sector, even though it contains only one-fifth of the workforce. And these unions will strike at the drop of a hat - even while Blair's government was busy ramping up their members' pay. 

Here's the latest version of a chart we've posted before. It shows the number of days lost to industrial action annually in the public and private sectors (the figures are rolling three year averages):

In the private sector, the number of days lost annually has fallen to around 100,000 pa, or roughly 0.004 days per employee. However, in the public sector it's running at 20 times that rate. Moreover, while private sector employees have stoically swallowed pay freezes and tougher working conditions since the Crash, public sector unions seem to think their members are entitled to same rewards as during the time of plenty. There is no acceptance that the world has changed, and hence this fresh wave of strikes.

Of course, the Coalition did impose that two year pay freeze, but as we blogged here, in reality that turned out to be a freeze in name only. Depending on how you measure it, pay increased by between 5 and 10% over the two years, and it's still increasing. Moreover, public employees are already paid getting on for 10% more than their private sector equivalents, on top of which they get those famous index-linked pensions that are simply not available elsewhere. As we estimated in the BOM book, the total reward gap could be as much as 30 to 40%. Even after recent pension reforms kick-in, it will still be well North of 20%. 

But credit where credit's due: the Coalition are certainly having a go at addressing the issue. They have reformed the public sector pension schemes to make them less generous, and although there's more to do, over time their reforms will save taxpayers some serious cash. 

And they are now tackling the issue of progression pay - the automatic annual pay increments received by a substantial proportion of public employees. Virtually unknown in the private sector, incremental scales deliver year-on-year pay rises irrespective of freezes or indeed individual performance. George says:
"We will seek substantial savings from what is called progression pay. These are the annual increases in the pay of some parts of the public sector. I think they are difficult to justify when others in the public sector, and millions more in the private sector, have seen pay frozen or even cut."
Quite right George (and yes, we do realise Chancellors have never enjoyed such increments, and you haven't had a pay rise for three years).

But it's going to be a helluva battle, with the teaching unions already launching an all-out assault on the Gove Line. The Association of Teachers and Lecturers passed a vote of no confidence in him and his Chief Inspector earlier this week, and the NUT is following suit. A protracted series of strikes looks well on the cards.

The Coalition must stay strong on this. Closing the public sector pay and pensions gap will ultimately save taxpayers at least £25bn pa. And although it will obviously be painful for public sector employees, they should understand it's a lot less painful than the Irish solution. There, public employees had to accept pay cuts averaging 15%.

PS Did anyone miss the BBC journos who went on strike last week? It should have encouraged more people to try out Sky News, and I suspect a good proportion will not return. A few more outages like that and even Mr Cam might start thinking about break-up and sale. Let's hope so.