Saturday, December 31, 2005

Runaway Debt Train

The government's Enron accounting continues:

"GORDON BROWN has secured a £21 billion victory after the Office for National Statistics ruled that the Chancellor does not have to take the Network Rail bailout on his books. The ONS issued a statement showing that it had upheld its controversial classification of Network Rail as a private-sector body despite reforms that have tightened the Government’s control over the railway network’s debts."

As you will know, this outrageous book fiddling has been going on ever since Byers confiscated Rail Track.

"At issue this time was the Railways Act 2005, under which the Department for Transport (DfT) took over the Strategic Rail Authority’s liabilities in relation to its £21 billion support for Network Rail’s borrowing."

Everybody knows that Network Rail debt is effectively government guaranteed- if it wasn't there's no way it would attract AAA ratings, and the financial markets would demand an immense price for taking it, particularly after the Byers grab. As the Chairman of Merrill Lynch EMEA debt capital markets said when the debt was first issued: "Because of the [government]support, Network Rail can be seen as a quasi-sovereign and compared to other high grade public sector credits". In other words, it's UK Government debt in all but name.

Of course, we all know why Gordo wants it off the books- he'd blow his Golden Rule for debt issuance otherwise (see our previous painful posts). But as well as being criminally transparent, it's also expensive. For a start, our debt financing costs are higher because all that artificial structuring and pretence means we're paying more than we would issuing straightforward government bonds.

And then there's the damage it's doing to our railways. In dreaming up and imposing an entirely artificial governance structure involving a non-profitmaking company limited by guarantee, the government has created a shambles. Longtime critic Christian Wolmar says: "It is being increasingly recognised that the whole pretence of NR being in the private sector is costing a lot of money and has led to a situation where it cannot be adequately policed." NR cannot actually do much without consulting their government paymasters and guarantors, but for the purposes of the Enron fiction they must pretend otherwise.

In continuing to classify Network Rail as a private sector entity, and thereby allowing Gordo to keep its debt off balance sheet, the Office for National Statistics is turning itself into the Arthur Anderson of national accounts. True, you can make a technical argument that NR is not under "the control" of government, inasmuch as its directors are in some theoretical sense "independent". But let's get real: you must follow the money, not the organogram. Gordo has gamed the system, just like those good folks at Enron and Worldcom.

The only one who emerges with any credibility is the Comptroller And Auditor General. He may sound like the Witchfinder General, but he was the only official who- to his great credit- refused to play ball. So in his Parliamentary accounts the NR finances are consolidated into government.

It's just that they don't count for Golden Rule purposes.

Picture: Upbeat Recordings

Thursday, December 29, 2005

I Have A Very Bad Feeling About This...

We all know Defence procurement is an ongoing money inferno, but I've only now gritted my teeth to start exploring it properly.

First stop is the National Audit Office's Major Projects Report 2005. This examines MOD's top 20 equipment projects and reckons they will "meet Key User Requirements but at a cost of £29 billion, some 10 per cent higher than the expected cost at approval."

10%? Why, that's a trifling £3bn. Hardly worth recording. Hmm.

Closer inspection throws up some slightly more concerning items. First, the cost over-runs are in addition to delays totalling 375 months, or 31 years. If we'd had that kind of delay in 1940 the Spitfire wouldn't have arrived until after we'd got flared trousers.

Second, under increasing scrutiny, you can tell that the MOD is now playing some kind of numbers game: they keep down the headline over-run number by the simple expedient of ditching some of the specs. Thus the Future Joint Combat Aircraft had £659 million lopped off. We're not told why, so it may now be using leftover bits from the Austin Allegro: the lucky pilots will find out when they enter joint combat.

But the most alarming project is the Nimrod MRA4 (Maritime, Reconnaissance and Attack Mk 4). This mother is now 89 months behind schedule- seven and a half years- and seems to be costing upwards of £2bn. During the most recent year its cost ramped up by a further £215m, despite the fact that MOD cut the order from 18 to just 12.

What on earth's going on? Spyflight provides an intersting insight:

"The most controversial decision taken by BAe in their study to determine the design for the MRA4, was to refurbish and reuse the fuselages of a number of old Nimrods for the new aircraft.

A delay was caused when they tried to attach the new wing to the old fuselage. The old MR2 wings and fuselages were constructed before the days of CAD / CAM and were built in jigs and then mated by tradesmen hammering & filing the metal to fit as necessary – as a result each fuselage was slightly different, in some cases by up to 4 inches (!). Consequently, when a new wing designed on CADDS5 and manufactured with great precision was presented to the old fuselage, unsurprisingly it didn’t fit. It also probably didn’t help that the re-lifted fuselage was designed on a different CAD system, CATIA, and that the teams had used one fuselage to establish certain datum points and then discovered that the first fuselage they worked on was subtly different....etc, etc"

So the whole deal is being cobbled together from parts of old Nimrods, which as every plane spotter knows, were themselves cobbled together from old Comets, which as we also know were those "jetage" contraptions lashed together in haste so we could beat the Yanks, that then kept blowing up and plunging into the Med. And if we knew the truth, we'd probably discover the Comets were themselves built from bits of old Lancasters, maybe the Dambusters.

Makes you wonder how often we taxpayers are paying for the same bits of recycled kit over and over again.

Picture: Spyflight

Commissar WoolAss Hails Efficiency Triumph

Local Government Minister Phil Woolas has announced that 'councils are set to surpass the target of £1billion gains by the end of 2005/06 - and deliver efficiency gains of almost £1.9 billion instead!!!'

And what's more, he has a massive spreadsheet to prove it. Did you know for example that Milton Keynes- I can scarcely believe this myself- has already saved £1,758,821? And they plan to save a further £3,529,933 by...well, some time in the future.

So does that mean Council Tax bills are heading down? Er...well, not exactly. It's more to do with optimising inputs and outputs, sort of thing.

But at least councils are on target for meeting Gordo's announced £6.45 billion of "efficiency gains" by 2007/8.

So that's another box ticked.

Even if we have had to create a few more non-jobs along the way.

Picture of Commissar WoolAss: New Zealand History Net

Non-Job Report

The splendid Tax Payer's Alliance has just published its Annual Non-Job Report, by Peter Cuthbertson. As you may know, the Report is based on an analysis of public sector jobs advertised in the Society section of the Grauniad. As the Report says:

'When reading Guardian Society, one is torn between repugnance at the individual case and horror at the sheer number of them. One ‘Deputy Youth Offending Team Manager’ is a tragedy, a thousand is the Guardian Society section.'

But a valiant effort, which uncovered nearly a billion pounds worth of new public sector jobs, at an average salary of £35,509 – "a staggering £9,995 more than the mean private sector wage".

Most useless looking jobs?

Director of Understanding and Enjoyment- New Forest (£50,000 per annum plus benefits)

Street Scene Outreach Officer- Enfield Council (£24,114 to £25,602)

Regional Culture in Rural Development Manager- East Midlands (£29,000 to £32,000)

Community Compost Development Officer (£23,739 to £25,857)

Co-ordinator, Local Area Structures and Arrangements Framework- Wolverhampton (£34,566 to £39,303)

International Affairs Coordinator- Greater London Authority (£27,489 plus interest-free season ticket and bicycle loan).

Peter Cuthberston is now under heavy medication for post-traumatic stress.

Picture: Thinking Out Loud

Friday, December 23, 2005

How To Make £6m A year

The BBC reports:

"A postman who stole hundreds of cheque books enabling him to live a life of luxury has been jailed for six-and-a-half years. Dido Mayue-Belezika, 34, from Camden, north London, was behind a £20m fraud."

As we all now understand, with jail sentences you halve the announced figure. So six-and-a-half years actually means three-and-a-quarter. Which comes out at £6,150,000 pa.

Nice one Dido.

Of course, in some ways he was unlucky. He got caught, whereas 77% of offences go by with nobody getting caught.

So to be strictly correst, if you're contemplating your own £20m theft, the true bottom line in terms of your expected annual return is £20m divided by 23 percent of 3.25. Which actually comes out at £26,750,000 pa.


Picture: BBC News

Probation Service

We're all outraged by the horrific murder of John Monckton on his own doorstep, especially now we know that his killer was a dangerous paroled prisoner. Who's responsible?

First in the firing line is the Probation Service who failed to keep tabs on him. As Christine Glenn, chief executive of the parole board, says:

“If the parole panel had known he was going to be living in London he would never have been released. They (the probation service) not only put him in London, they put him very close to the exclusion area.”

And now we learn that the Probation Service has completely lost track of another bunch of paroled murderers, rapists and arsonists. They might be outside your frontdoor right now.

What on earth's going on? A glance at the Service's Annual Report confirms the worst. It costs us £1bn pa, yet its top priority is not "Protecting the Public From Harm". That's only number two.

No, the Probation Service sees its top priority as the spectacularly opaque "Contribute to the Building of an Excellent NOMS". That turns out to be the usual buraucratised internally focused gobbledigook. And it gives due consideration to organisational "diversity targets", "excellence", "leadership", and- hah!- "reducing bureaucracy".

But the most revealing phrase is this:

"The aim will be to demonstrate that interventions has acquired a real and visible competitive edge enabling it to compete successfully against voluntary and private sector providers."

Well, why? If voluntary and private sector providers do it better- as they often do- why not let them get on with it? Indeed, why not reallocate some of the Probation Service's budget to them?I mean we punters don't really care who's doing the job of keeping us safe. Just as long as somebody is.

But of course, blaming the Probation Service is missing the point. They've been giving the impossible task of managing a bunch of villains with an average reoffending rate of 60% (73% for under-21s). And despite the government's announced target to reduce this by 10%, there is absolutely no sign we have the faintest idea how to do it.

As we've blogged before, the only thing we know actually works is prison. Sad maybe, but true. Reform's excellent chart above tells the story (BCS stands for British Crime Survey and the line shows the number of crimes measured by that survey).

Yes it costs- 40 grand pa per prisoner. But I'd rather be safe.

And come to think of it, if we wound up the Probation Service, that would pay for another 25,000 prison places.

Happy Christmas.

Thursday, December 22, 2005

Skills Industry

For at least a century British governments have been obsessed by our supposed "skills gap". Addressing it forms a key part of Gordo's Productivity Programme, with £9bn pa of taxpayers' money being dished out through the Learning And Skills Council. But a recent National Audit Office report gives a rage-provoking insight into the whole business.

The spending is justified primarily on economic grounds: "up-to-date skills are essential if employers are to maximise their productivity". Yet, as the report reveals, despite all that money, public provision of skills training- largely delivered through further education colleges- remains unappealing to most employers.

And it's not because they don't believe in training. In fact, Britain's employers are estimated to be spending well over £20bn a year of their own money on it. No, 'the main reasons cited for not making more use of publicly funded training is perceived lack of relevance and flexibility of courses to companies’ training needs, perceived cost, and the image of college staff as academics rather than business-focused trainers.'

Instead, employers go for internal training, and commercial providers:

'Private training companies have a number of advantages over further education colleges, which make it unsurprising that they are the natural choice of many employers:
  • they understand, or are perceived to understand, the needs of business better;
  • they usually specialise and develop expertise in one area, and gain a lot of experience in tailoring their particular expertise to different companies’ needs;
  • it is a well established part of their culture to ‘sell’ their product by helping employers to see its benefit to the business;
  • they are not expected to respond to government and community priorities unless they choose to tender for Learning and Skills Council programmes.'

Well that all sounds fine. The private providers do what the customers actually want (rather than what the Learning and Skills Council thinks they ought to want), the employees get training that's fit for purpose, and the employers pay for it. Why doesn't government just get out of the way, and save us taxpayers £9bn pa. Brilliant.

Ah. It turns out that the Learning And Skills Council and the further education colleges aren't keen on that approach. So much so, they've come up with an alternative rationale.

Forget skills training. The real need for tha £9bn pa is to put right the grotesque failure of our schools to teach everyone the 3Rs:

'England has a large number of adults without this minimum skill level. Unless this problem is addressed, it will continue to have a serious impact on the pool of labour on which employers are able to draw...The Department therefore considers that there is a clear rationale for focusing public subsidy on improving the literacy and numeracy skills of adults and supporting them to gain a first qualification.'

And that's the blunt truth: the government's "skills" programme is largely required to remedy the deficiencies of our state schooling system.

Now, if only we had some more private training providers at the school-age level....

Picture: Paxman History Pages

Wednesday, December 21, 2005

Burning Our Money...No, Really

It was a miracle that nobody died in the Buncefield disaster. But apparently that was no thanks to the Health and Safety Executive.

According to Hemel Today, 'it was revealed this morning that the Health and Safety Executive had visited the oil depot in the autumn to examine fire safety and how prepared Buncefield would be to deal with a fire but reported 'no undue concerns' at that time'.

HSE deputy chief executive Justin McCracken told a press conference: "The last inspection was specifically focusing on issues of preparation for dealing with fire." He added that on the "specific" areas they had looked at, "nothing came out which caused us undue concern".

Which is obviously very concerning. So we've taken a closer look at the HSE itself.

The Executive describes its "mission" as being "to protect people’s health and safety by ensuring risks in the changing workplace are properly controlled". According to its Annual Report, it costs us over £200m pa, and employs 4,000 staff. But it turns out only a third of them are "frontline staff", the guys that actually go out and poke around in the muck behind oil tanks, say. The remainder are just more paper jockeys.

And they're needed to produce the vast number of reports the HSE generates. The Annual Report alone has 127 pages, and lists rafts of key achievements in all sorts of vital areas like gender and ethnic balance among staff, devolution, work around a vast range of issues with no end of stakeholders, and of course"Strategic Enabling Programmes".

Preventing explosions at oil storage facilities comes under the HSE's 'Major Hazards Strategic Delivery Programme'. And following accepted government practice, they've set up a target. Not for reducing massive explosions per se, you understand, but for 'achieving a sustained reduction in the level of precursor incidents occurring in these industries over the period 2004-06.'

Now this might have sounded OK when the Target Committee dreamed it up. But just like all those NHS targets, it will almost certainly have had unintended consequences. Because the target on which those few frontline staff now focus is not the actual elimination of massive oil depot explosions, but the reduction in "precursor incidents" (or "Relevant RIDDOR" as it's called in HSE bureaucratese).

All of which probably explains why the oil depot, the emergency services, and presumably the HSE themselves only had contingency plans for "one or two" of the tanks blowing up: not the catastrophic domino effect that obviously- and predictably- took place.

Now I don't know about you, but I think I'd sleep more easily in my bed if the HSE dropped their reports, their strategic enabling, and their precursive targets, and concentrated instead on using some common sense.

I'm going out first thing to buy a tin hat and a biological suit.

Jobs For The Badgers

Spotted among today's small ads, new job opportunities for Mr Badger and his chums:


Ben Bradshaw, Minister for Animal Health and Welfare, is seeking to make appointments to a new stakeholder advisory body to help Defra develop effective bTB control policies. Candidates will need to demonstrate...the ability to create buy-in from stakeholders and other interested parties and to represent the views of those parties.'

We can presume badgers are at the very top of Ben's stakeholders list.

Applications close on 31 January. Then a selection period...what should we say, three months? Might be a bit tight, given that "appointments will be in accordance with the principles of public appointments based on merit and equal opportunities, with independent assessment, openness and transparency of process".

And then the successful candidates will need to get on board, so that's pretty well up to the summer holidays...not much point starting then, so kick off next autumn perhaps. Agree terms of reference, draw up a programme of work, commission research studies...let me Christmas might be pushing it. And then six months to get the research findings...consultations- another six months or so. Draw up a "Next Steps" meetings. Ah, well, perhaps not meetings, what with all those Badger Rights people...perhaps a media campaign. Yes that's it, a professional media campaign should surely get some buy-in. Might cost a bit, but worth every penny...

Meanwhile back in the real world, the Tenant Farmers Association has joined all the other farming "stakeholders" in anguished disbelief at the lack of leadership shown by the Government in tackling bTB's rampant spread:

"As a result of the Government’s failure in this area, bovine TB has spread rapidly throughout the country. We lay the blame for this at the door of the Government which has failed to take the action required in order to stem the level of disease.

The time for further talking shops, consultation and survey work is over. The TFA calls on the Government to lay out an action plan for the achievement of the goal to eradicate TB over the next ten years."

CAP subsidised or not, I'm sure glad I'm not a farmer.

Picture: Seems Like Old Times

More Facts On EU Rebate Defeat

HMT has given more detail on the true cost of Tony's EU rebate concession:

'In a written parliamentary answer, the chancellor said the estimated annual costs of the rebate concession would be £500m (or 0.09 per cent of public spending) in 2007-08; zero in 2008-09; £1bn (0.16 per cent of public spending) in 2009-10; and between £1.6bn and £1.9bn a year (between 0.23 per cent and 0.26 per cent of public spending) between 2010 and 2013.'

A quarter percent of public spending is highly significant during a period when, as Gordon admitted in the Pre-Budget Statement, public spending will already be under severe restraint.

Given that much of public expenditure is non-discretionary, we can expect serious anguish in health and education after 2008. And of course, further tax rises.

Pensions Rat Trap

Much understandable handwringing this morning about Rentokil's decision to close its final salary pension scheme to existing members.

We've blogged about the pensions fiasco before, and how the government's attempt to de-risk employees' entitlements via a mountain of regulation has had the unintended consequence of persuading employers to walk away from final salary schemes altogether.

But of course, it was Gordo's £6bn pa tax credit grab that turned a drama into a crisis. As the FT reminds us this morning:

'Other employers will be tempted to follow Rentokil. The Pension Protection Fund estimates that British companies have a total pension deficit of £134bn. Up to £40bn of that is accounted for by the FTSE-100 companies, with a handful facing deficits greater than their market capitalisation.'

The vast bulk of that £134bn is attributable to the tax grab: £6bn pa capitalised at 5% is about £120bn.

Thanks Gord. Your pensions tinkering and grabbing has trapped millions in what are effectively defunct run-off funds. We will be squeaking for the rest of our lives.

Tuesday, December 20, 2005

End Of Term Report

"Last term Rufus hit rock bottom. This term he started drilling."

If only the annual IMF Report could be like that. But the reality is the measured language of international financial diplomacy. What you really need is a translation, and luckily for you, Tyler is just the man to give it.

IMF: "Recent deficits, while not an immediate threat to economic performance in a benign world environment, need to be reined in." Meaning: Government borrowing is out of control and if anything goes wrong in the global economy, the UK is f*****.

IMF: "The Pre-Budget Report contains welcome plans for an appropriate adjustment." Meaning: the announced increase in taxes is a small step in the right direction, but there needs to be much more: you ain't seen nothin' yet.

IMF: "The envisaged spending restraint, a critical ingredient of the planned adjustment, will require careful planning." Meaning: Health and Education spending is heading for a massive squeeze: there will be howls of anguish; elections may be lost.

IMF: "A strength of the fiscal framework is a system of auditing by the National Audit Office." Meaning: Gordo can't be trusted with the numbers, especially now they're going wrong, so get the NAO to monitor the whole lot.

IMF: "The fiscal rules are playing an important role in disciplining fiscal policy, although at times this role is overshadowed by peripheral controversies." Meaning: Gordo's cheating- see previous para.

Of course, the IMF's tone may change a couple of years from now. After all, we can remember the last time the IMF really got close to a Labour Chancellor.

Throwing A Sickie

Sick people are a disgrace. They took off 78 million working days last year, and that's on top of those 2.7 million indolent rascals on Incapacity Benefit.

But the real villains of the piece are GPs. Everybody knows they chuck around sick notes like confetti. No wonder the government is determined to make them do better, and we now have a report on the Department of Work and Pensions innovative programme to make them jolly well pull their socks up:

"The Government’s Green Paper ‘Pathways to Work’...outlined plans to provide better support and incentives to return to work for people with health problems or disabilities. It identified the vital role that GPs play in providing advice to patients on fitness for work and providing medical certificates. Further, it pledged to provide a website for GPs on sickness certification and fitness for work issues, to improve the quality of advice provided by GPs."

The Department's solution was to set up an "online learning module...namely ‘Sickness Certification Made Easy". Obviously most of the module comprises detailed instructions on how to fill in Form Dwp2003-04/23-4-572/C/bii-prov (particularly the potentially tricky Section Z47), but there are also helpful sub-modules pointing out to GPs the health benefits of work. What could be more useful to those hard-pressed, but let's face it, slightly dim GPs? We hope our good friend Dr Crippen has taken its lessons to heart.

So how's it going? Well, incredibly, it seems many GPs have not even bothered to look at the new site. And those who have only seem to have spent a hour or so, max, before getting back to the golf course. Quite disgracefully, "most GPs see medical certification as a low profile issue". In fact the researchers only seem to have found 20 doctors who would actually admit to using it at all! And they're not all GPs!


Just what is it that makes our politicos and bureaucrats think they're equipped to instruct our health professionals not only on their responsibilities, but also how they should discharge them? I mean, these are the guys who can't even run the government, let alone serious stuff like health.

And here we have yet another initiative that nobody seems to want except our rulers, and nobody seems to care about. Yet instead of saying that, this Report has 80 pages of suggestions for expanding the whole thing and producing a further even bigger report in due course.

The one piece of info not vouchedsafe at any stage is how much we taxpayers are having to pay for this nonsense.

Monday, December 19, 2005

More Paperwork Sarge

Nick Herbert, the new Tory shadow on Police Reform, has been laying into Charles Clarke's plans for amalgamating forces:

"The Home Secretary has lost the support of police authorities and must now put the re-organisation on hold until the implications for cost, governance, accountability and local policing are properly thought through. His handling of the issue has been appalling, driven to an unnecessarily tight timetable and culminating in a clumsy attempt to bully and bribe police authorities into submission."

The Association of Police Authorities (APA), which includes many Labour politicians, has told its members not to volunteer amalgamations by Dec 23 - the Home Office deadline - without adequate financing. The Government is offering up to £125 million but the APA believes the cost could reach £600 million.'

Herbert of course is the ex-Director of Reform, who have been strong advocates of increasing police accountability to local communities. In that way, there's a fighting chance the boys and girls in blue will put local concerns at the top of their priorities, instead of spending all their time box-ticking for Whitehall. The government's plans for supersized forces will take us further in the exact opposite direction.

The money facts are that Labour have roughly doubled police spending. It stood at £8.3 bn in the last Tory year, compared to around £16 bn this year. And there are nearly 15,000 more police officers, albeit accompanied by an even larger rise in non-combatant civilian staff.

Unfortunately, all that extra form filling (as reported by our splendid blogging coppers) doesn't leave much time for actually tackling crime. So detection rates have fallen- from about 28% to a scarily low 23%. Plus, as we've been hearing more about recently, 999 response times seem to have collapsed- particularly if you happen to be under threat by anyone dangerous.

The only way of turning the tide is to make the police more accountable to us, here in our local crime suffering communities.

Let's hope the Clarke plan is stopped before any more forests are destroyed.

Sunday, December 18, 2005

Trough Snufflings

The Sunday Times reports that Two Jags Prezza, who has presided over a huge increase in council tax bills for the rest of us, may be avoiding paying any council tax himself:

'Last week the Office of the Deputy Prime Minister (ODPM) admitted that he was not paying council tax on his grace-and- favour apartment in Whitehall. The council tax on his official country residence, Dorneywood in Buckinghamshire, is paid by a charitable trust.

Prescott is entitled to claim back the council tax on his home in Hull on parliamentary expenses. It means he is under no obligation to pay any council tax bills on his three homes out of his own pocket.'

Nice. He's a man who clearly knows how to pick his way through Labour's complex welfare system to find the very juiciest morsels.

Which is more than he thinks "working class" families are capable of with respect to choosing schools:

"Middle-class parents are concerned, and rightly so, about the quality of education for their children, which sadly is not the same for working-class parents.

If you set up a school and it becomes a good school, the great danger is that's the place they [the middle-classes] want to go to."

Naturally he opposes Timid Tone's schools reforms, preferring the traditional Labour view that it's much better to impose the same bog-standard rubbish schools on everyone than to risk any "middle class" kids getting an unfair edge.

Unless their parents can afford to pay of course.

Saturday, December 17, 2005

EU Budget Bonfire Costs Us £100 Bn.

Up all night, only to hand over yet more of our dosh.

As always, the figures are deliberately confusing, spun by all and sundry to suit their own agendas. And as always it's best to stick to cold hard cash, rather than the announced changes to changes.

So for the next seven year 2007-2013 EU Budgetary period, we will reportedly be paying a net £42 billion, after taking account of the new rebated rebate. Which is a shocking increase on the £23 billion for the most recent seven years, as shown in HMT's most recent projections:

You don't need a maths degree to work out that's a virtual doubling. And as Tone told us this morning on R4 Today:

"Of course all member states are paying more. That's the purpose of the enlargement of the European Union."

Er, yes. So as you struggle to work on the Northern Line, or through Taunton's notorious traffic jams, you can at least console yourself with the thought of Warsaw's brand new metro system.

But actually of course, for most of us taxpayers, even that £42 billion is a gross understatement of the cost.

Look carefully at HMT's table. See that line labled "Less: Public Sector Receipts"? That's money HMT gets from the EU to pay for various EU programmes in Britain. It passes straight through the public sector gut without touching the sides, and ends up paying for various UK regional subsidies, and...grr...our subsidised farmers (see previous posts).

So when you do the sums properly from a taxpayers' perpective, you find that the last seven years have cost us not £23 bn, but £50 bn. More than double the headline "declared" EU contribution.

On that basis- grossing up for EU programme spending in the UK- the real cost of Tone's deal to us is almost certainly not £42 bn, but- better sit down- getting on for £100bn!

And as we said in that earlier post- hang on, now I need to lie down- we consumers actually shell out a further massive subsidy to the farmers, reflecting the fact that EU food prices are fixed way higher than the world price. We reckoned the total cost of the CAP to us taxpaying consumers is running at about £10bn pa.

PS At least Gordo's saved us few quid by abolishing goody bags:

'Britain's EU presidency yesterday slapped a ban on summit free gifts to demonstrate its commitment to a new frugal Europe.

A decision to deprive thousands of officials and journalists of the customary bags of presents at summits saved Gordon Brown an estimated £100,000. The presidency only gave gifts to heads of government, and ministers.

A British official said: "It was getting ridiculous. Every presidency was trying to outbid the next in the present market. The last one [the Luxembourg presidency] gave out MP3 players."

"The sight of the entire European press corps laden down with sides of smoked salmon, bottles of Irish whiskey, mugs and double CDs of lute music from the Netherlands seemed a little inappropriate," said Mr Meade, who now has a large international CD collection.
"Sometimes the queues to get the freebies were longer than the queues to hear what the leaders had to say at press conferences."

A nice story- even if we know it's just more smoke and mirrors to distract us from the real bonfire.

Thursday, December 15, 2005

Local Authority Value For Money

Much justifiable outrage today at the Audit Commission's report CPA-The Harder Test. Under its Comparative Performance Assessment, the Commission finds that nearly half of local authorities are failing to deliver adequate value for money. Appalling, as the Cameroonian and others proclaim.

But what's even more extraordinary is that when you delve into the bumpf you find this assessment is based on what the councils themselves say.

The poor old Audit Commission were ordered by Tony and Gordon to get tough with those bloated backsliding local authorities, and have therefore been trying to beef up their inspection regime. So as per, last year they launched a massive consultation exercise with "stakeholders". And guess what- their original proposals have been watered down so much you can hardly taste them anymore.

Thus under the general heading of "Use of Resources", you find that value for money is only one of five indicators, the others being mainly concerned with how well an authority's officials fill in the reams of forms they manufacture. These items were apparently introduced into the scoring, not because the Commission thought them important, but because of pressure from "professional bodies" (ie local authority accountants), and because the authorities thought the Commission's original proposals were "too tough".

But the real cruncher is para 27 in the CPA explanatory handbook:

"27 For the value for money theme, councils produce a self-assessment. This allows them to explain how their costs and performance relate to the local context and their own priorities."

In other words, the test is pretty well meaningless: any self-repecting weasel could come up with any number of fabulous "explanations" which would be more than enough to get four stars.

Couldn't they?

Obviously not. In the case of nearly half our local authorities, even the weasels are failing to give value for money.

We need real fiscal decentralisation, and we need it soon.

Wednesday, December 14, 2005

Cameron Confirms No Euro

In an important speech today, David Cameron has confirmed his Conservatives will never join the Euro.

"Under the Conservatives, the United Kingdom will retain its own currency and interest rates will be set in the United Kingdom, for the United Kingdom."

He also pledged to maintain Bank of England independence, to appoint a new Fiscal Projections Committee- reporting to Parliament, not the Chancellor- to monitor adherence to the Golden Rules, and to strengthen the newly announced independence of the Office For National Statistics by having it too report to Parliament.

These are all welcome steps, which will make it harder for governments to jeopardize economic stability.

What would complete the set- and really make our Christmas- would be to pledge that third Golden Rule to limit the growth of public spending (see eg the Reform proposal).

Come on Mr C- you know you ought to.

Olympics Shiver

Amid all the excitement of today's PMQs, one throwaway remark from Tone sent a shiver down the Tyler spine:

"I assure the hon. Gentleman that not only are we very proud to have won the 2012 Olympic bid, but that we will fund it properly, as the Government should. The amount of money that we will put in will be significant and considerable."

When we last looked at the Olympics lunacy we concluded that the official cost estimate of £4.7 billion could be doubled if we matched Sydney's over-run, or quadrupled if we matched Athens.

We must confess we rather lost heart when London actually won the wretched thing, so haven't had a proper look since. And even those nose-studded anarchists at's excellent Scrap The London Olympics site seem to have given up.

But aside from Tone, we have also been seriously discomfited by recent statements from Red Ken and Tessa Jowell to the effect that projected budgets are already heading towards the stratosphere.

We will be gritting our teeth to take a proper look shortly.

Sorry- Can't Resist It

I know.

It's not big. It's not clever. And it's not funny (well, actually, it makes me laugh).

But I just can't resist blogging leadership races. I'm hopelessly addicted.

So following yesterday's "tough but dignified" LibDem Shadow Cabinet meeting, I'v e started a new blog:

Runners And Riders.

Your definitive formguide to leadership racing. We're kicking off with the Kennedy Handicap, and the Clem Attlee Memorial Stakes.

BOM will continue its work of national importance (as Mrs T somewhat harshly describes it), but most of the fun will probably be had on R&R.

Tuesday, December 13, 2005

Tax Credit Fraud Fiasco

Further confirmation today that Labour's horrifyingly complex benefit system is an open invitation to fraud:

"The identities of up to 10,000 civil servants have been stolen by criminals to make thousands of fraudulent claims for family tax credit in one of the biggest benefit scams seen in Britain.

Ministers have previously played down the extent of the breakdown in security of the Treasury's flagship tax credit payment system and the computerised payroll files of thousands of civil servants employed in jobcentres, which appear to have been targeted by criminal gangs."

The government cannot claim it hasn't been warned. Just a glance at the 60 page instruction book for claiming tax credit should be enough (page 19 reproduced above). But in its excellent recent report Dealing With The Complexity Of The Benefits System, the National Audit Office says:

"Complexity has often been linked with fraud, which is estimated at £900 million in overpayments of benefit in 2004-05... Complexity may be associated with fraud because
complex regulations and separate administrative systems for different benefits reduce the Department’s ability to detect and prevent abuse of the system. Differing qualifying criteria and the need to report changes of circumstance for each benefit received may also contribute."

£900m is an official estimate from the Department of Work and Pensions, and is almost certainly a gross understatement. In any case, we also have to add in "the additional work required to detect and address fraud and error, estimated at £2.6 billion in 2004-05". So even on the DWP's own estimates, we're looking at a bill of £3.5 billion pa.

£3.5 billion pa is the equivalent of 1p off the standard rate of income tax.

Monday, December 12, 2005

Met Spin

Nobody's saying the £3bn pa Met Police have an easy job. Clearly they don't. Our streets aren't as safe as they once were, they face rafts of conflicting priorities from government, and of course, there's that deadly terrorist threat.

But personally I'd feel a lot safer if they focused all their energies on catching bad guys, rather than trying to convince us how well they're doing really.

Their latest wheeze is a public poll on how they are dealing with terror. There are ten questions like this:

"Charles Kennedy MP, Leader of the Liberal Democrats, 15 July 2005:

‘The speed and efficiency with which this [7 July bombings] was so calmly and professionally handled by the Metropolitan Police and the security services, the transport and emergency personnel, can give us all confidence’.

If London came under terrorist attack again, would you be confident in the police emergency response?


Maybe it's just me, but doesn't m'learned friend call that leading the witness? Ever so slightly.

What's worse is that the poll doesn't even mention the most glaring police failure in the bombings. Which, as we know, was not the magnificent way they responded after the event, but the complete breakdown of their intelligence operation beforehand.

And what will this poll be used for? To tell us that- whatever we might have thought- actually we all have complete confidence in Sir Ian Blair (and can he really be no relation)? The same Sir Ian who was being interviewed on R4 Today minutes before the first of the 7/7 bombs exploded, and was crowing about how the Met was the envy of world in anti-terror policing.

Polls like this are all part of the wider scheme that began with the British Crime Survey (an impressionistic opinion poll whose main purpose is to convince us that, despite the hard stats, the crime problem is not getting worse). Suitably tweaked and massaged they are thought to be most helpful in the battle for hearts and minds.

But we've got more than enough spinmeisters already. Sir Ian should remember what we're paying him for, and get back on the beat.

On The Frontline With Dr Crippen

Unlike most of us who pontificate about the shortcomings of New Labour's NHS, Dr Crippen blogs from gutwrenching heartbreaking experience on the frontline.

The Doc is an NHS GP, and in less than two weeks has told us more about the real issues than any amount of newpaper exposes or official reports. I urge you to read him.

His latest post is the elegantly titled Pissing the Money away. It will make you pull something out.

To Boldly Go...

Tonyscrony Lord Sainsbury's ten year mission is to boldly burn our hard-earned cash on crackpot boffinery that's unable to attract commercial funding. His latest wheeze is to "invest 108m euros (£73.2m) in Europe’s next mission to Mars".

Invest? Is this anything to with the deal two years ago when that extraordinary Prof who looks like Noddy Holder's brother came on TV trying to explain why his tinfoil and elastic band contraption had crashed on landing? It's so humiliating. What must the Martians think of Blighty?

Needless to say, most of the dti's press release comprises sci-fi gobbledigook about Aurora, ExoMars, EOEP-3, GMES phase one, ARTES etc etc. It could mean anything.

But one thing does come over loud and clear- our contibution to all this Dan Dare nonsense adds up to nearly a billion Euros.

Friday, December 09, 2005

Tractor Production Hits Another High

Excellent news comrades! Production of tractors by OGC (the Office Of Government Commerce) has hit another record. Financial Secretary to the Treasury John Healey reports that Central Government exceeded its target for value for money (VFM) gains in 2004-05, with an heroic total of £2.3 bn.

As you may recall, VFM is Brown's programme of savings to be made by government departments and their agencies getting better deals on goods and services they buy, either via direct negotiation with suppliers or joint procurement. Commissar Healey says:

"This is good news for the tax payer as government departments meet, and exceed the £3 billion value for money targets. It is an excellent achievement."

Which is a rather striking contrast to what the Public Accounts Committee said earlier this week. Their worrisome report on Value For Money In Public Services left the distinct impression that the OGC still has much to do.

And indeed, when you try to probe the detail behind the claimed VFM gains, all you find are...well, the usual tractor production statistics- ie no detail at all, other than a series of totals for individual departments.

And the so-called "savings" are all in funny money. VFM gains are defined not in terms of something we can all understand- such as simple hard cash- but as "the optimum combination of whole life costs and quality to meet the customer's requirements".

Which could mean pretty well anything. Particularly when the departments themselves seem to be judge and jury of what the gains actually are.

BBC Promotes Tory Eco-Warriors

As we've posted elsewhere, we wish David Cameron well as Tory leader, even though he wasn't our choice.

For us voting Party members, what he offered was the chance to secure a much softer, "more modern" image, particularly in the media. Early days yet, but it does seem to be playing extraordinarily well.

This morning R4 Today led their news bulletins with a highly approving report of DC's commitment to the environment, and the appointment of his new eco-team, including the "widely respected" John Selwyn Gummer. When the BBC bigs up a Major era retread who once tried to forcefeed his young daughter a mysterymeat burger for the cameras, you know something has really changed.

And DC was also the interviewee for the flagship 8.10 slot with Humphrys, who duly delivered a series of underarm balls. Which for us Tories is all excellent stuff.

Except...well, let's be honest- the only reason the BBC is doing this is because we are taking up their policy agenda, in this case the environment. Our £3bn pa tax-funded state broadcaster is once again abusing its power to promote anti-market policies it approves of. And just because we Tories are now the beneficiaries don't make it right. (For a robust alternative view of DC's position on Kyoto, see Professor Emeritus Philip Stott's excellent Envirospin Watch).

Anatole Kaletsky casts an even darker pall of gloom: "The Tories have chosen the right man – and what a disaster that will be":

'Mr Cameron and his supporters believe that the Tories keep losing elections because of their nasty, old-fashioned image. Their strategy, therefore, is not to fight actively for power by offering a clear alternative to Labour, but to minimise political differences and emphasise their superior manners and style. Mr Cameron represents the victory not of Blairite ideology but of Mandelson-Campbell spin: the ultimate triumph of style over substance.'

Which is precisely why we want DC to be strong. Surely he's not going to be driven primarily by what plays well on the BBC, and we can't believe he will allow himself to be characterised as a policy eunuch as Kaletsky implies.

We need ideas that will change our country. Not more of the same.

Thursday, December 08, 2005

Productivity Meltdown

As that nice Mr Osborne rather unkindly reminded our Roadblock Chancellor on Monday, long long ago the latter said "productivity is a fundamental yardstick of economic performance". And so it is. Improving productivity is the only sustainable path to increasing Britain's prosperity.

And fair play. Gordo and Balls understood that right from the start. In fact they made it a central plank of their economic policy. They ran high-powered seminars at Number Eleven, where top economists were invited to expound on the very latest developments in post-neoclassical endogenous growth theory. They issued weighty reports. They lectured business on how it was missing out on the massive new opportunities they had identified. And of course they tinkered.

Boy, did they tinker. Special subsidies and tax breaks for all kinds of pet schemes they reckoned would boost productivity. Like the hundreds of millions shovelled into Research and Development tax credits, which have undoubtedly enriched shareholders in the major pharmaceutical companies, but which have apparently produced an actual decline in R&D spending. Or the zillions blown on daft training schemes that had to be closed down after they attracted fraudsters. Or...well, we all get the picture.

Anyway, the bottom line is that productivity growth has now fallen to 0.5% pa, compared to around 2.5% pa when Labour came to power- a massive plunge. And according to the ONS, average productivity growth in the eight years since they came to power now stands at 1.4% pa, compared to 2.2% in the previous eight years under those hopeless boom and bust Tories.

Labour have cut Britain's long-term productivity growth rate by more than one-third.

We've blogged about this before (eg see here and here), highlighting two key points. First, among the lies, damned lies, and general fog that comprise productivity statistics, the one undoubted truth is that we're definitely behind one country. That country is the United States, which is at least 25% ahead of us and every other major economy.

Second, the real reason that this and every previous Labour government has tried to plan, regulate, and subsidise Britain into faster growth is because they do not want to follow the only policy that actually works.

In our modern globalised age, the only proven way for governments to foster faster productivity growth is for them to downsize themselves. Less interference and regulation, and most of all, less taxation.

Wednesday, December 07, 2005

Hospital Finance Shambles

The criminally patronising Patricia Hewitt has been trying to explain the hospital finance shambles. This is the deal whereby despite the eye-watering piles of cash stuffed into the NHS, many hospitals are going bust.

Ms Hewitt's first instinct is naturally to blame others, in this case hospital trusts in the "healthier and wealthier" parts of the country. "Healthier and wealthier" is clearly all of a piece with those "worried well" wasters she told us had been responsible for the run on flu jabs. These malingering hypochondriacs are the bane of health planners everywhere. And now it turns out they're wealthy as well. They are beneath contempt.

This is actually very reminiscent of the government's well rehearsed approach to the terrifying levels of crime on our streets. As we know, we may think we're being mugged, our children are getting thumped, and our cars are getting broken into, but really it's all in our minds: we have an irrational fear of crime that is not born out by the British Crime Survey (the government's own impressionistic survey of what they'd like to be going on).

But back in the hospitals, the excellent King's Fund tries to unravel what's really gone wrong. The fact is that the new system of payment by results is virtually guaranteed to force some trusts into deficit. Indeed KF reckon it could soon increase from the current 5% of trusts to 20%.
And reading between the lines, it seems highly likely that the reason why the trusts in wealthier areas are worst hit is simply because the local cost adjustments in the central payment formulae are wrong. Following the usual conventions, they almost certainly penalise trusts in Tory areas, and favour those in Labour areas. We don't actually know because the formulae are "opaque".

So what's going to happen? What are these hit squads Pat is sending in to deficit trusts going to do? Can more ops? Turn off the heating? Sack some nurses? "Dispose" of some malingering patients? Close hospitals?

Probably they'll just hire some more accountants and call in the management consultants.

PS If you hypochondriacs out there really want to sweat, check out a spendid- though scary- new blog written by an NHS GP. You can get a consultation with Dr Crippen at NHS Blog Doctor. Appointments do not seem to be required.

Fink Finger

As you may know, we're trying to move on. But there are some good points being made this morning about David Cameron's leadership victory.

Longtime DC supporter Danny Finkelstein puts his finger on something when he says we have witnessed "the triumph of the Smith Square set". Almost all DC's inner circle are graduates of the Conservative Research Department.

Fink reckons there are similar things happening in the Labour Party, with the rise of Balls and the Millibands. 'So the election of Mr Cameron marks an important new stage in British politics — the triumph of the political professional.'

But is this a "good thing"?

'No. It makes politics too inward-looking, robbing it of the experience of others. The triumph of the party staffers has come about because the rules of politics are now so elaborate, the language so obscure, that the “game” can only be played by those who have spent a lifetime studying it. This is not a healthy development.

The Smith Square set should see one of their tasks as being to open up politics to those who do not share their expertise.'

For the first time in a while, I find myself agreeing with the Fink.

One of the things exposed by the contest was the gulf between insiders and outsiders. And in a world of first past the post centrism, its rather unclear how we outsiders get any traction on our insider politicos.

Tuesday, December 06, 2005

Horsing Around

It may have escaped your attention, but Defra have just published their first ever Strategy For The Horse Industry. Yes, you and I might believe the industry went out with the equally famous Horse Buggy Industry. But apparently not.

Our new Minister For The Horse, who may be either Alun Michael or Jim Knight (it's unclear), has galloped into action with a 66 page report. It considers a whole raft of pressing matters from "the status of the horse" right through to "appointing consultants to review and assess the task and make recommendations".

Costs? Ominously the report is silent except for "implementation of this strategy will not come without some costs attached...and Government will need to continue to play its part."


The horse industry's "gross output" (presumably for the roses) is apparently worth £3.4bn pa, with five million people "actively interested". And all that happened without government help.

So why does it need government help now?

Surely nothing to do with banning hunting.

Golden Rules

Yesterday, Gordo took a swipe at the "Growth Rule", the third Golden Rule. We know it from the Tory leadership contest- a formal rule to limit the growth of public spending below the growth of the economy, in order to clear the way for tax cuts. Naturally, he falsely suggested it would involve massive cuts in public services.

Today, the Reform thinktank- whose proposal it originally was- gives us the actual facts:

"Reform’s “Growth Rule” would not lead to cuts in public spending, but affordable spending rises that would also make room for tax cuts.

If departmental spending in real terms was increased by two percentage points below the trend rate of growth of the economy – in line with Reform’s “Growth Rule” – by the end of the Parliament, total public spending would rise by £24.6 billion in real terms.

That does represent a slower increase than the Government’s plans, with the difference being £26 billion by 2009-10. This saving could either be used to reduce borrowing, or to cut taxes. If the money was used entirely to fund tax cuts, £26 billion would allow the basic rate of income tax to be reduced from 22 per cent to 17 per cent, saving a taxpayer on average earnings around £750 a year."

We're convinced by the Growth Rule. Of course we can debate its calibration- in David Cameron's terms how exactly we are going to "share the proceeds of growth". And of course it must be combined with real reform in public services.

But such a rule puts the emphasis on reducing the share of national income going into public expenditure, and provides the essential discipline to operate efficiently within what we can sensibly afford.

Throughout history, politicians unsurprisingly have always preferred unfettered discretionary power to being limited by rules. But history tells us that political discretion and our money is never, ever a good mix.

Mired In Debt

Gordo has now admitted he will be borrowing more than he claimed before the Election.

Between now and the next Election he now reckons he will borrow about £170bn, taking declared public sector debt up to almost £600bn, nearly 40% of GDP. So much for prudence.

But of course, the real picture is much worse than that. For one thing, as pointed out yesterday, his forecasts still factor in some pretty wishful thinking on both the growth of tax revenue, and the non-growth of various spending elements (like social security and debt interest).

More fundamentally, his debt projections take no account of massive off-balance sheet liabilities. George Osborne has done his own sums:

"The UK's total net debt, made up of on and off-balance sheet liabilities, in 2004-05 totalled £1,308 billion or 105 per cent of GDP. By comparison, the UK's official on-balance sheet Public Sector Net Debt was £417 billion for the same period, or 34.6 per cent of GDP. This means that the UK now has off-balance sheet liabilities - where the UK Government is the ultimate guarantor - of £891 billion."

We've blogged this before. Public sector pension liabilities are estimated by Watson Wyatt (Britain's leading pension actuaries) at £690bn. Our PFI liabilities (who did you think was paying for all those PFI schools and hospitals?) add up to £60bn. And then there's all that rail debt, which again, we're guaranteeing. Hence George's calculation.

But actually...pass me the oxygen's even worse than that. As we all become older and more decrepid the ultimate off-balance sheet liability balloons. Last time I did the sums, the capitalised value of our state pensions liability came out at a heart-stopping £2.5- £3 TRILLION.

Gordo is busily maxxing out every credit card we've got. When he stands at the dispatch box yet again crowing about how much more he's going to spend, you'd better work out how you're going to pay for it.

Monday, December 05, 2005

Pre-Budget Report

As always, Gordo subjected us to a blizzard of numbers this afternoon. The idea- familar to us all by now- is that we glaze over and just grasp at his soundbites. Or maybe one of his easy headline grabbing "initiatives" like today's shared equity scheme for housing. The innumerate anti-capitalists at the BBC are particularly keen on such red herrings.

But let's actually look at those numbers. To start with, despite all his chat about stability etc, he's actually increased spending yet again in all years. Unsurprising, given the handouts.

What is surprising is that the increases aren't greater- less than a billion in each of the next two years. The reason of course, is that he's fiddled and fudged the numbers underlying the headline projections so they are now much closer to the wind. God knows what's happening down in the bowels, but what we can see is that he's raided the contingency reserve (about £1bn pa), he's assumed lower interest rates on government debt (about half a bill pa), and he's Enronned social security spending.

What's that last bit? Hmm.. all he says is "the upward effect on spending of higher unemployment and RPI assumptions has been more than offset by revised estimated profiles of benefit claim figures." Which is pretty well what Enron said.

Plus, he's also now making some pretty draconian assumptions about future pay deals in health and education, which he may or may not be able to deliver.

So the spending projections now incorporate even more wishful thinking than they did last time.

As for tax revenues, he did announce increases today in North Sea tax and various other stealth measures amounting to a net £3 bn pa. But despite that, projected tax revenues are down by £4 bn pa over the next couple of years, partly because of the economic slowdown, and partly because he was just too optimistic on revenues in March.

But once again, by the time of the next election in 2009-10, he reckons revenue will have miraculously recovered back to his previous forecast. We've blogged about this before, and it just ain't going to happen.

What Brown's spending plans are still saying is that unless something turns up, we can all expect plenty more tax increases before the next election.

Welcome Back

Welcome back to All New Burning Our Money. We will be starting up as soon as the Tory leadership contest ends, and we have laid DDFL to rest.

As before, our aim will be to prod and probe the giant morass of public spending, spluttering over the worst excesses and trying to find a better way forward.

And scarred by the leadership contest, we'll now be paying particular attention to the antics of our irretrievably conflicted big government politicos. As they try to bamboozle us into accepting the crippling mess they have created, we will be squawking and pecking all the way.

Friday, April 08, 2005

Local Income Tax Grab

Voters in the Lib Dems' target seats across the Southeast should familarise themselves with the proposed Local Income Tax (LIT), and how it would impact them.

Vince Cable and others keep telling us that LIT would be 'fairer' than the Council Tax, gainers would outnumber losers, and the average family would be better off. But that is the national picture. In London and the Southeast the outcome would be very different.

Nationally, the IFS estimates that 49 per cent of families would gain, 27 per cent would lose, and 24 per cent would remain broadly unchanged. As you might expect, most of the losers are in the top quartile of the income distribution. But not all of them. Surprisingly, given all that pious stuff about 'fairness', 1.5 million of the loser families are on incomes below the median. They would lose because they currently receive Council Tax benefit, which the Lib Dems would abolish.

Overall, the IFS estimates a small average net gain of £1.37 per week. Although Cable likes to crow about this, it's nothing to do with the magic of LIT: it arises solely because the Lib Dems would contribute an additional £2.3 billion from general taxation to soften the switch to LIT, thus ensuring gainers outnumber losers. £2.3 billion amounts to half the additional revenue they reckon would flow from their new 50 per cent top income tax rate. So while presenting the net gain as an attraction of LIT, all they're actually doing is to reduce one tax by increasing another.

Bribing us with our own money to accept their pet scheme.

And these are national figures. The big problem for voters in the Southeast is that many of their incomes are significantly above the national average, so many more than 27 per cent would lose out. According to ONS's Regional Trends, average household income in London and the Southeast is about 30 per cent higher than the national average (and before anyone says they don't care about rich bastards in the stockbroker belt, remember that the cost of living is also much higher- housing costs are about 40 per cent above the national average).

Take Guildford. In 2001, the Lib Dems ousted the Tory MP for the first time since 1428, and they are doing their damnedest to retain the seat.

Yet the average household income in Guildford is more than ten grand above the national average- a gap of 35 per cent which puts the average for Guildford in the top quartile nationally (eg see here).

Now, the IFS and others reckon the LIT would need to be charged at an average rate of about 3.75 per cent. So with their higher incomes, the average household in Guildford would be paying about £400 pa more than the national average. And more than their £1300 average Council Tax, which is in itself way above the national average.

Of course, in theory, the point of LIT is that it's a local tax, so given their higher tax base, the local authorities in Guildford would have scope to set a lower rate. Hmm...that hasn't worked with Council Tax, and it's unlikely with LIT. Central government controls the big purse strings, and routinely 'equalises' tax resources between authorities by allocating rate support grant away from affluent areas like Guildford. There's no reason to think a Lib Dem government operating LIT would be any different.

No, whatever the national picture may be, that average hard-working family in Guildford would be worse off under LIT. As would the average family in Maidenhead, Newbury, Reading, and a host of other Tory/Lib Dem marginals across the Southeast.

There is no doubt.

It's just that somehow we have to get it across without making voters nod off.

Wednesday, March 23, 2005

Featherbedding Farmers: £10 billion Every Year

Quite understandably there's huge indignation at the Freedom of Information disclosure that unreconstructed farming toffs, like Prince Charles and the Duke of Westminster, are being featherbedded by CAP subsidies.

But as the Telegraph reports:

'...the major recipients of the £3.9 billion that the British taxpayer pays into the CAP are big companies with little or no link with the land.

Principally, they are sugar and dairy processors, the top dozen of which received more than £10 million each, nearly five times more than any farming business.

One such firm, Meadow Foods, received £25 million, and NestlĂ© £11.6 million, but the others in the top 10 are dwarfed by Tate & Lyle, which received £127 million.

The reason so many food companies receive so much money is that subsidies and import controls make sugar three times the price it is on the world market and dairy products twice as expensive.

To compensate for the higher prices that result from European Union protectionism, companies that export outside the EU are entitled to apply for export refunds that cover the difference between the prices at which they buy and sell.

Producers of processed foods are allowed production refunds for the same reason.'

So to compensate for the inequity of our artificially high food prices, taxpayers have to subsidise foreign consumption of our processed junk foods.

Lunacy on lunacy.

But of course, although our farmers don't get the whole of that £3.9 billion tax transfer, they do benefit hugely from those higher food prices.

The OECD, which every year publishes its aggregate Producer Support Estimate (PSE), says:
'Clearly, in asking how much is spent on agricultural policies, it is crucial to consider overall support, rather than just government payments. Out of the Euro107 billion producer support going to EU farmers in 2002, Euro61 billion came from consumers’ pockets to pay the high prices caused by tariff protection and export subsidies, and €46 billion from tax transfers.'

Euro107 billion is the equivalent of about Euro280 per head. So with a UK population of 60 million, and an average 2002 exchange rate of 1.6, this implies a total CAP cost to UK taxpayers and consumers- ie you and me- of over £10 billion.

And as for paying farmers to 'look after the countryside', why can't they just sell out to investment banker vanity farmers? Unlike real farmers, they won't want to grub out the hedgerows, and they'll be more than happy to pay for ornamental sheep, haywains etc.
And why can't I have a subsidy for looking after my garden?

Unskilled Meddling

The government has published its 'vision for the future' of skills training. It reckons we need to 'invest' a load more because:

'The UK faces a major challenge in ensuring our workforce is equipped with the skills needed to compete in a global marketplace on the basis of high value-added goods and services. Currently countries such as India and China can compete on the basis of lower labour costs. But with around 20 million graduates in China and 2 million new graduates each year in India, those countries are increasingly competing not just on cost, but on expertise.'

As usual, it's impossible to fathom out exactly- or even roughly- how much they actually intend to spend because they spray around all kinds of apples and pears numbers. £1.5 billion, £20 million annually for two years, £1 billion, £1.5 million, £3 could be any or all of those- who knows?

But we do know it's more than we taxpayers ought to be 'investing.'

Because Labour is forever justifying its useless skills programmes on the basis of competitive threats from abroad.

Until recently it was the US, France and Germany. They were reckoned to have much higher skills levels than us, and we needed more public spending and government tinkering.

The problem with this was that once somebody did some proper analysis (see for example this NIESR paper) we found out that the so-called 'skills gap' didn't add up to much- maybe 2-3 per cent of output, well within the margin of error. What's more, the apparent productivity lead once enjoyed by France and Germany seems to be fast evaporating in the post-Euro malaise.
So our rulers have reverted to more generalised arm-waving about the yellow/brown peril out east. I guess it's that vision thing.

Tuesday, March 22, 2005

Industrial Subsidies- Another £30 Million Blown On Manufacturing

According to the DTI, 'the Manufacturing Advisory Service (MAS) has injected over £112 million of added value into UK manufacturing since its launch in April 2002.'

It passed me by at the time, but it seems MAS 'was set up to provide practical advice through 10 centres throughout England and Wales to help manufacturing companies improve their productivity and competitiveness.'

So far, it's cost us £30 million. Real folding money.

And what of that £112 million value added? Was that the real folding stuff?

Hmm....let's see...Apparently it was achieved through zillions of 'responses', 'initial diagnostic health checks', 'events', and 'in depth consultations'.


So how do they know it's £112 million?

'The benefits...are assessed using 7 productivity measures relating to quality, cost and delivery. The impact of these then calculated. The figures for all those firms where projects have been completed...are then added together.'

Yes...that's exactly what I feared.

Coincidentally, there's a John De Lorean memorial posting today on the ASI blog. It reckons these days politicians have learned not to back particular businesses.

Maybe. But not so deep down they still think they know how to run business better than the private sector.

And they're quite happy to put our money where their arrogance is.

Tax Funded Propaganda: Capital Punishment

Following posts by S&M and Blimpish, I’ve been trying to think through my own position on capital punishment. I’m still thinking, but meanwhile, surfing has thrown up a number of jaw-dropping items.

For example, the irreplaceable Paul Foot argued in Socialist Review (1995):

‘…there was no correlation at all between the incidence of capital punishment and the incidence of murder.'

No correlation at all.

'Murders were mainly personal or domestic crimes, immune from deterrence. Moreover, there were plenty of American 'mistakes' similar to the tragedy of James Hanratty...a young worker from north London, [who] was hanged for a murder near Bedford on the A6 when (as later evidence proved) he was 200 miles away in Rhyl at the time.'

Later evidence proved? Er...would that be the same cold blooded killer James Hanratty who in 2001 was definitively proved by DNA evidence to have been quite correctly convicted and hanged? Bearing out the brave testimony of the woman he raped and left for dead at the scene forty years earlier. The same woman who was thereafter confined to a wheelchair, having to withstand a constant stream of smear and innuendo from Paul Foot and other woolly-brained abolitionist liberals such as Ludicrous Kennedy?

Sorry, I'll just take another swig of my medication.

Another even more gobsmacking item. We know that our rulers are against reintroduction of the death penalty on standard liberal elite grounds. After all, paying any attention to the 60-70 per cent of us who regularly poll in favour would be…my God…no better than lowest common denominator populism. But what I hadn’t appreciated was how blatantly they use the state propaganda apparatus to shape our views. As a taster, try the National Archives’ Learning Curve site to help school kids with their studies. They have a game:

‘It is 1965. Many people want to abolish capital punishment, although there is still a significant number who want it to remain.

You have to put together a set of statements…which will form a Bill to be passed in Parliament. If MPs are convinced, they will pass the Bill- if not, they will throw it out.’

You then have to select 8 from 16 multiple-choice statements.

Now with forty years of post-abolition hindsight I know that it resulted in a trebling of the homicide rate, rocketing amounts of violent crime, and more dead policemen. So naturally, I picked statements like ‘the numbers of violent crimes will rise,’ and ‘police believe that more criminals will carry dangerous weapons, as the punishments will not be serious enough to stop their actions,’ and ‘life sentences are often shortened and criminals released only to kill again.’

It sounded pretty coherent, so I pressed the ‘Vote’ button and was pleased to see the Bill was lost.

But instead of getting a coconut, I read: ‘No. Your arguments are weak and muddled- you have not convinced people. Capital punishment will be kept. REJECTED.’

And to emphasise my rejection there was a gale of derisory surround sound laughter from the MPs.

I felt humiliated, so re-read the opening instructions. Yes, you guessed it- you can only win this tax-funded ‘game’ if you pick the 8 statements that support abolition.

My complaint is already whizzing its way through cyberspace, although somehow I don’t think I’ll hold my breath.

Monday, March 21, 2005

EU Constitution Cost £100 Million

England Expects has ferreted out the cost of producing Giscard's grand euro-constitution:

'According to the Budget published in the Official Journal ofthe European Union dated March 8th 2005 it cost:

Budget Line 372
Contribution to the Fund for the financing of the Convention on the future of the European Union
Chapter 37 Total

Euro 38 239 968 in 2003
Euro 43 574 000 in 2004
Euro 55 078 500 in 2005

Even with my bad maths that adds up to a grand total of...136,892,468 Euros

Worth every groat I am sure.'

Sunday, March 20, 2005

Future Tax Rises

I've been trawling through the small print of Gordo's final budget to see how he got the fiscal arithmetic to add up, without needing to include those inevitable post-election tax rises.

The answer's quite simple: he's just assumed that somehow he'll get sharply higher tax revenues without the need to raise tax rates. Simple as that.

So income tax is projected to generate £4 billion more next year than would be implied by his GDP growth forecast, and corporation tax a staggering £8 billion more.

4+8= 12...why, that's pretty well the figure the IFS and others are pencilling in for those tax increases.

But...splutter...he can't just do that can he? How's he got the brass neck?

Well, of course, the small print burbles on about fiscal drag, and on the big £8 billion corporation tax figure it adds:

'...above trend growth is expected in 2005, as the remaining slack in the economy is absorbed. Receipts growth in 2005-06 should also benefit from financial company taxable profits returning towards trend, the impact of higher equity prices on receipts from life assurance companies and the impact from of anti-avoidance measures.'

These effects are expected not only to stick, but actually to increase further out in the forecast. So by 2009-10, tax, national insurance, and other receipts are forecast to have increased by no less than 2.3 per cent of GDP, despite there being no explicit increases in tax rates beyond what was announced last week, plus the usual price indexation.

However, as others have pointed out, 2.3 per cent of GDP in 2009-10 will be £35 billion. So instead of the £35 billion spending cuts Labour say the Tories will make, under Labour we'll have £35 billion of extra tax.

A neat equivalence.

And of course it's bitterly ironic that Gordo's got to depend on the City to pull the fiscal fat out of the fire. New Labour have subjected the financial sector to such a torrent of taxation, regulation, and general vilification that it's a wonder we still have a stock market or any financial firms left to tax at all.

Bureaucracy Overwhelms Cops

The Sunday Telegraph carries another front page report on Chief Constables complaining about the tons of extra paperwork Tony's given them. Last week it was Steve Green of Nottingham, this week it's Bob Quick of Surrey. He says:

"It costs a third of a million pounds to train a constable in the first four years of his career, so it does seem bizarre that for nearly 90 per cent of their time they are either doing form-filling and bureaucracy or they are doing lower order tasks that are well below their training and skills threshold.

"Only about 10 or 12 per cent of their time are they doing things that I feel constables should do. We are not tackling the really vociferous, persistent criminals that need to be tackled."

Naturally I'm receptive to complaints of burdensome bureaucracy, particularly when they come from our local Chief Constable. But there are one or two quibbles.

First, what he's told the Telegraph about not tackling crime doesn't square at all with the Panglossian view that accompanied our recent Council Tax demand. There he produced a string of stats showing how responsive the force was and how much they'd reduced crime. Since nobody round these crime ridden parts could recognise that version, I'm pleased to see he's now come out with the truth.

Second, he complains about lack of funds. But he already gets £165 million, for which he provides just 1,944 officers. That's a walloping £85,000 apiece! Where does it all go?

Third, the cops have been complaining about paperwork ever since Dixon of Dock Green. I'm quite prepared to believe it's worse now, but it's something managers in state industries just have to...well, manage.

Roll on elected sheriffs.

And finally, umm, what exactly are 'vociferous criminals'?

NHS: Doubled Spending Still Hasn't Delivered

New Labour has doubled NHS spending in England from £34 billion in 1997-98 to £69 billion now, and the Sunday Times has a long piece on where all this extra money has gone. They report an audit carried out by the King's Fund that concludes:

The bulk of new funding for the NHS is being eaten up by pay increases for staff and other “cost pressures”.

The funding increase left for new hospital services in 2004- 05 was only 2.4% despite an overall increase of 12%.

Figures for new doctors and nurses are overstated because more NHS staff are working part-time.

Waiting lists are coming down but some waits for diagnostic tests for cancer and other diseases are increasing.

MRSA infections are still a “significant problem” for the NHS.

This is no surprise to those of us who believe we need a completely different approach based on privatisation, competition and choice. And with health spending now heading for 9 per cent of GDP, we simply must switch over.

But how do we get there? How do we convince the electorate that breaking up the NHS is the only long-term solution?

Of course, in an ideal world, the Tories would adopt the policy and then use all their powers of persuasion to win the argument.


Unfortunately, my experiences on the doorstep show that, despite everything, the public still believe the NHS can and should be saved.

The Tories may be wimps, but hell, they want to get elected. So they have to confine themselves to generalised attacks on bureaucrats and their promise to revive Hattie Jacques. Well, there is that thing about meeting half the cost of private operations, but even that is interpreted by some as an attack on motherhood.

Public choice theory explains why it's so difficult to shrink the state. Out there on the doorsteps I'm discovering people may want lower taxes, but they sure don't want us to dismantle the NHS.