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 Nestlé £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.

Wastewatch: Ken Pisses Away Another £100,000

Mrs T and I were perambulating through Trafalgar Square earlier this week when we noticed that the water in the fountains had turned a rather distressing shade of urine. Initially we put this down to severely incontinent tourists, but then we picked up one of Ken's many propaganda leaflets at the Tube station.

'St Patrick's Day parade and festival, opened by Ken Livingstone. A free day out for all the family.' We'd missed the festivities, but the green dye dropped into the fountains had lingered on.

One, this was not 'a free day out'- it was funded by London's taxpayers, at a cost of at least £100,000 (assuming it was no less than previous years).

Two, even setting aside the bombing of Harrods, Bishopsgate, Canary Wharf etc, why exactly do London taxpayers need to 'celebrate the Irish Community's unique contribution to life in the city'? We don't do the same for the English, say. (Mrs T agrees- even though she's half Irish).

Three, why does Ken get to throw all these parties at our expense anyway? It was only a couple of weeks ago that he threw that party where he laid into an Evening Standard reporter.


Making It Up As They Go Along: £5 billion City Academies

The Labour dominated Commons Select Committee on Education and Skills has issued its report on secondary education. It says:

'We are concerned that some of the Government's flagship policies are based on unexamined assumptions and are not accompanied by measures to test the relationship between cost and effectiveness. The Government hopes that its commitment to diversity and choice will raise standards in secondary education. This cannot be achieved without a rigorous assessment of what works and what does not. Many of these initiatives are expensive (for example, the projected £5 billion that will be spent on 200 Academy schools), yet the evidence that emerges from these programmes is not always properly evaluated and lessons learned before further public funds are committed.'

It's a pretty good commentary on the whole New Labour government. A blizzard of half-baked intitiatives, most of which have to be later abandoned or hacked beyond recognition. But not before taxpayers have parted with another huge pile of cash.

Wastewatch: £259 Million On Duff Chinooks

The Ministry of Defence has been severely criticised over an order of eight Chinook helicopters, costing £259 million, which remain grounded because of technical problems.

MPs on the Public Accounts Committee said the affair was "one of the worst examples of equipment procurement that the committee has seen".

In truth, this is just the latest in a long line of arms procurement fiascos, for which nobody ever seems to carry the can.

Thursday, March 17, 2005

Moving to Typepad

Dear Reader

Burning Our Money has now set up home at Typepad.

New link to site:

Burning Our Money

Hope to hear from you there.

Best wishes


Wednesday, March 16, 2005

If Blogger was the NHS

Blogger turns out to be very similar to the NHS- free at the point of use, but wildly unreliable.

So under advice from Colonel Blimp I've decided to switch to what I now understand to be the BUPA of blogging- ie Typepad.

I'm annoyed about all the posts and links I've already got on Blogger, but I can only blame myself. A free service sounds too good to be true, and guess what- it is.

At least with Blogger I can move on without being forced to pay for a service I'm no longer going to use.

Unlike the NHS.

TV station for fifteen grand

Alex Singleton has posted on the Adam Smith Institute’s recent Politics and the Media seminar.

At the seminar, John Lloyd of the FT pointed out that much news coverage- and indeed much formal politics- is now part of the entertainment business.

Actually of course, it’s even worse than that- it’s the failed entertainment business. Does anyone seriously imagine that Tony would now be PM if Ugly Rumours had managed to become the next Rolling Stones? No, he’d still be wearing that sparkly jacket, strutting around in the spotlight wiggling his bum at us.

Which…er, is pretty well what he does every day.

Failed Jaggers, failed Dylans, failed Bonos, failed actors, and failed exotic dancers. Showbiz for ugly people means we’re ruled by a bunch of third-rate wannabes.

Alex somehow misses the evening’s most interesting point. Eben Wilson told us how some mates of his had bought a satellite TV station for just fifteen grand. Fifteen grand!

Well OK, that only gets you a twelve-month slot on a satellite- maybe position 739 on your Sky box, squeezed in between sex and shopping. You’ve then got to fund all the content, and somehow attract an audience.

But still…fifteen grand to reach nearly ten million living rooms.

If we can have all those God channels, why not say, an Adam Smith channel? Specifically to host free market, anti-statist content from all those people who never get a look in on mainstream British telly.

I’d certainly add it to my favourites.

(I tried to ping Alex's post, but my ping was 'rejected due to questionable content'. Quite right too- ASI readers would not wish to be exposed to Tony's wiggling bum.)

Tuesday, March 15, 2005

Boateng cashes in

Paul Boateng's appointment to a plum government sinecure in the South African sunshine has been greeted with widespread accusations of cronyism. Despite the fact that nobody else was invited to apply, Boateng reckoned: 'I have been appointed as a result of a process that has been used before by previous Labour and Conservative governments . . . I think the important thing is that for me it is the fulfilment of a lifetime's passion and conviction.'

Disgraceful of course, but par for the government course.

I'm just glad he's out of his job as Chief Secretary to the Treasury. That job used to be about knocking heads together in the spending departments to stop them burning every last bit of our money. It required a tough grey accountant, like John Major, who was Chiefie under Lawson.

A flamboyant lightweight like Boateng just doesn't cut the mustard, and sure enough he's presided over our biggest ever peacetime explosion in public spending.

Plus, against some pretty stiff competition, he was by far the most irritating member of Blair's cabinet.

Goodbye Paul, and good riddance.

Monday, March 14, 2005

More on Budget bribery

The Times has another piece today on the likely bribes Gordo will lay down this week. They guess £2-3 billion, although I still think £4 plus- to top Ollie's bid- is more likely.

More interesting are the numbers produced by Jonathan Loynes at Capital Economics on the longer term liabilities we taxpayers now bear. The Times says:

'Putting a hard number on the true scale of the potential liabilities from PFI is tricky; there are lots of grey areas. Still, Mr Loynes comes up with a plausible total of £60 billion — a hefty 5 per cent of GDP.

On top of this, he highlights how any long-term assessment of the country’s solvency should also take into account £500 billion of unfunded liabilities for the future pensions of public sector workers — and a vast £1,800 billion liability for future state pensions for the rest of us.'

Scary enough, but his figures for pension liabilities are actually lower than those I've posted previously. I reckoned £690 billion for public sector pensions (Watson Wyatt calculation), and £2.5-3 trillion for state pensions (my calculations).

Sunday, March 13, 2005

Confessions of a doorstep virgin

Look, out here in the Blogosphere we know all about the Tories- they’re the stupid party, right? They’re the ones that should be so much bolder about cutting taxes, privatising health, education and the BBC, and cracking down on the EU and all those other bad guys. They’re the ones blessed with the one true philosophy of life and liberty, so why the hell don’t they exploit it?

Of course we know why- because they’ve been scared witless by the triumph of Third Way niceness, and the risk of being branded I’m Alright Jack NHS trashing nasties.

Drained of conviction, they really didn’t deserve to win in 1997 or 2001. And we don’t really think they deserve to win this one either.

It’s just that…God, can you seriously contemplate another five years of this lot? Another five years sitting here in pyjamas railing against the enveloping chaos, but having absolutely zero power to do anything?

No, I’ve decided I’ve got to do something practical right now. It can’t wait. So for the first time in my life, I’m getting involved in the grubby compromises of the formal political process.

But exactly what to do? Join the Lib Dems, like so many others round the leafy glades of Surrey? Hmm…more tax than even New Labour, sinking further into the dark protracted abyss of the European project? Etc, etc. I don’t think so.

UKIP? Kilroy? Not without some serious drug abuse.

Which is why I’ve bitten the bullet. I’ve been out doorstep canvassing for the…yes, yes, OK, the stupids.

And you know what? It’s riveting. Much more upbeat than I would ever have imagined.

To start with, it’s much more organised than I’d expected, and the widely trailed Voter Vault, provided free by the US Republicans, really seems to do the biz.

The reception on the doorsteps is generally quite warm. Most people are very willing to tell you what they think, and I definitely haven’t been shouted at, spat at, punched, or had attack dogs set on me. I even got a cup of tea.

So what do the real flesh and blood people say?

First, and encouragingly, there is a universal loathing of Tony and the legions of New Labour. I know I was in the Home Counties and being targeted by the Vault, but even people who admitted voting Labour last time can now barely bring themselves to discuss them.

Second, the issue that comes up most often (by far) is not that tax and spend thing I’m so concerned about, not health or education, not even law and order.

It’s immigration.

For a sensitive soul like me, that’s a shock, reinforced when the old hands tell me that immigration was not an issue in any of the last few elections. This is the bitter legacy of New Labour’s incompetence in totally losing control (notwithstanding the contrary result from the packed studio jury on last night’s Channel Four debate).

Other hot issues are school discipline, and law and order. But I’m pleased to find that tax is bubbling under, just outside the top three. Especially the highly visible Council Tax.

All of which chimes very well with the Tory ‘pledge card’ that we handed out. It says:

‘Lower Taxes
More Police
Cleaner Hospitals
School Discipline
Controlled Immigration’

The pledges didn’t do much for me when I first saw them, but there’s no doubt they hit the top four doorstep issues. Someone’s been thinking about all this.

The only bad news for the Tories seems to be poor old M Howard. Why anyone should think Chuck Kennedy would make a better PM is beyond me, but that seems to be the way quite a few people see it. Others just say they ‘have a few questions’ about MH, without always being sure what they are.

My fellow canvassers were circumspect. There’s loyalty to Howard, a man who took the controls when the ship was disappearing into a black hole, and who has at least got them heading in the right general direction again. Even if the speed is only warp factor 0.000001.

Anyway, I’m no longer just sitting alone in my pyjamas.

For good or ill I’ve lost my virginity.

Public sector jobs boom

As has been widely reported, the ONS has revised up its figures for public sector employment. It says:

‘From 1991 to 1998, public sector employment fell every year, with an overall reduction of 815,000 for that period. From 1998 to 2004, public sector employment rose every year and is now 583,000 (11 per cent) higher than in June 1998. It is still, however, below the levels of 1991 and 1992. In the year to March 2004, employment in the private sector rose by 119,000, compared with a rise of 146,000 in the public sector.’

The ONS numbers are a year out of date: I estimate another 150,000 public sector jobs were created in the last 12 months, taking the total increase since 1997 Q2 to 725,000 thousand.

We hardly need to spell out again why this is the road to ruin, but it is interesting to compare New Labour’s achievement with the job creation record of previous socialist governments.

Amazingly it turns out they’re already streets ahead of both Wilson and Callaghan. The dismal 1964-1970 Wilson government managed just 550,000, and even the almost terminal 1974-1979 Wilson/Callaghan lot only clocked up 570,000.

What’s more, we know that Blair’s existing spending plans will give us at least another three years of expansion. At the end of which they will have created at least 1.2 million public sector jobs.

Revolutionary heroes everywhere must be proud.

Friday, March 11, 2005

Thursday, March 10, 2005

Lies, damned lies, and productivity gaps

One of Gordo’s boldest claims was that he would fix Britain’s productivity gap (see previous post). By applying a good dose of that post-neoclassical endogenous growth thing, he would ‘raise the rate of UK productivity growth over the economic cycle, improving competitiveness and narrowing the productivity gap with the USA, France and Germany.’

And that gap was reckoned to be huge. He said that in 1996, the last full year under those hopeless boom and bust Tories, our output per worker was about 25 per cent lower than France, 30 per cent lower than (West) Germany, and an eye-watering 40 per cent lower than the US.

But he had a plan to fix it: more innovation, more enterprise, more investment, more competition, and more skills.

Sounds sort of right, doesn’t it.


It soon became apparent that what this actually meant was more public spending, more of those impenetrable tax credits, more bureaucratic interference, and more- many, many more- commissions, reports and general bumph.

He doubled the DTI annual budget to its current £5.8 billion, pumped hundreds of millions more into R&D tax credits, and in the last Pre-Budget Report alone reported that he’d commissioned a host of new reports from Mssrs Leitch, Hampton, Graham, Lambert, Cave, Kelly, Wood, Bellis, Latham, Wyn Griffith, Graham, Snyder, McKillop, and Morris. He also reminded us of some previous contributions from the great and the good, including the Myners, Sandler, Barker, Miles and Higgs reports.

That’s an awful lot of trees, for someone so committed to Kyoto.

Has it done any good?

According to the latest PBR:

‘In 2003, UK output per worker was 29 per cent lower than in the US (compared with 30 per cent in 1995), 13 per cent lower than France (22 per cent in 1995) and around the same level as Germany (8 per cent in 1995). The difference is greater on an output per hour basis. To produce the same output, UK workers work 14 per cent longer hours than German workers and 29 per cent longer than French workers.’

So apart from the sclerotic Europeans sinking back, there's little change. All that money, all those trees, all that energy I expended shouting at Gordo on the telly- no change.

In fact, since the PBR, the Office for National Statistics has revised the numbers again (Feb 2005- here). The latest version reckons our output per worker is now above Germany, and less than 10 per cent below France.

In truth, the numbers are all over the place- they get revised all the time and the cumulative revisions are big. For example, since 2002, when the ONS took over the calculations from the (presumably incompetent) DTI, the 1995 figures referred to by the PBR have been reduced by 5.4 per cent for France, 7 per cent for Germany, and a stunning 9.4 per cent for the US.

Chucking loads of money at a target you can’t measure. That’s…well, that’s very New Labour I suppose.

But you might have thought that someone- maybe that nice Mr Balls- could have warned G at the start about the statistical minefield he was entering. He could have said that measuring productivity across countries is fiendishly complex because of:
  • Difficulties on the output side, for example well known problems measuring GDP. The problems may get worse as economies become more 'weightless', with economic value residing in ideas and computerised transactions, rather than physical goods.
  • Productivity measures rely on splitting changes in volume and quality from price inflation. In a steel plant for example one can use a measure of the number of tonnes of a given grade of steel per worker. But identifying similar measures in, for instance, the output of a television station is difficult, since changes in quality of the output are also at work. In general productivity is harder to measure in services than manufacturing.
  • International comparisons use Purchasing Power Parity exchange rates, to remove the impact of sudden changes in market exchange rates. But PPP rates are estimates, not actual rates, so introducing a margin of uncertainty.
  • Output per hour, rather than per worker, is arguably the best measure of productivity. However, there are particular difficulties with hourly data.
Oh…crumbs, I’ve just realised I lifted that whole section from Gordo's 1998 PBR. Would you believe it- he did know about the statistical problems with these comparisons, and went ahead with all that expensive interventionism anyway.


The reality- as far as the shaky stats allow us to say- is that there is only one major economy significantly ahead of us in the productivity stakes. It is the US, which is ahead of everyone (see for example the work of Mary O’Mahony at NIESR).

And guess what. Unlike France, Germany and Britain, the US has managed to keep tax and spend down to 30 per cent of GDP. And they don’t seem to need big centrally driven productivity programmes.

Tuesday, March 08, 2005

Art for the economy's sake

Last night I snuck into the ippr debate on ‘why should government support the arts?’ It was held in the super-salubrious top people’s fun palace, the Royal Opera House (cost well over £200 million of mainly public money). Under the chairmanship of Nick Pearce (ippr chief), the heavyweight panel comprised Tessa Jowell, Sir Christopher Frayling (Arts Council chairman), Tony Hall (ROH boss), and Ferdinand Mount (rubicund Times columnist).

Audience members were mainly dressed in arts black, although there was an excellent range of unusual yak skin footwear. Few were paint spattered and it eventually became clear these were not artistes at all, but two or three hundred bureaucrats from the subsidised arts industry (cost £500 million pa direct government funding plus a couple of hundred mill more from the lottery).

Tess kicked off by saying the BBC licence fee would protect us from ‘content becoming prey to unfettered market forces’. We needed only to look at the US to see where that would take us. I could tell she wasn’t a fan of the Simpsons, South Park, West Wing, ER, Desperate Housewives, Pimp My Ride etc, but wondered why she was focussing on the BBC (cost £3 billion pa), rather than the question of arts subsidies generally.

Then she stared at us intently, and slowly intoned ‘what the arts do, and only the arts do, is most important.’ She carried on staring, and said it again, even more slowly. I could tell it was important from the grave nods around me, but…well, what on earth did it mean? Was it perhaps Dada-ism?

I decided it probably was, when she went on to say we need to ‘embed arts subsidies in a more complex narrative of value.’

Much of the debate was similar in tone, but what I gleaned was that there are five key arguments for subsidies:

1. Arts are good for the economy. The creative industries apparently employ two million people and are ‘worth £118 billion a year’. They are growing either twice or four times faster than the economy generally (opinions seem to vary). 29 per cent of overseas visitors come here to see the performing arts.

2. Arts ‘slay the sixth giant- poverty of aspiration, what Bevan called the poverty of imagination.’ It’s reckoned that the arts can motivate underachieving kids, and reform criminals. Tess stressed this is ‘not social engineering, but a social mission.’

3. Arts provide ‘a shared experience’, and are therefore ‘central to our identity and aspirations.’

4. Arts can regenerate inner cities, like the Lowry in Manchester and that converted satanic mill place in Gateshead.

5. It’s the will of the people- “opinion polls” show 70-80 per cent support for the arts.

6. Subsidies permit experimentation.

Umm…you see, the problem with most of these arguments for subsidies is that…er, well, they’re not actually arguments for subsidies. For example, the finance industry is growing faster than the general economy, but nobody thinks we should subsidise that. Why should the arts industry be different? Some guy from the advertising industry said it was because subsidised arts were necessary to feed the…funnily enough, the advertising industry. And there was I thinking admen were fed quite well enough round the plush watering holes of Mayfair.

As for “opinion polls”, and using our taxes to fund impenetrable new dance troupes…

I eventually worked out that the underlying argument is the old public good thing- although we won’t pay individually, we’re all better off with a motivated honest citizenry bound together with those shared experiences etc. So we must pay collectively through taxes. Just like defence or law and order.

Of course, the problem with this approach- ‘mere instrumentalism’ as speakers scathingly called it- is that it leads on to asking whether the arts actually deliver what’s claimed? And even if they do, are they the most efficient way of doing it? For example, we could reduce the social cost of criminality just by banging up more criminals. Teaching villains to hold up sub post offices in blank verse sounds sort of superfluous.

The two best questions from the floor highlighted the non-existent foundations of instrumentalism. A clearly well informed researcher from the University of Kent noted that the evidence was purely anecdotal. To which Frayling reacted like a scalded cat, reading out some waffle that he reckoned proved the evidence was hard. Of course, he was the one who kicked up a terrible fuss just before Christmas when philistine Gordo froze Arts Council funding for three years.

Then- and I never thought I’d find myself saying this- a guy from the ippr asked the excellent question ‘how do you tell how much arts support is enough?’ The by now seriously rattled Frayling blurted out ‘there’s never enough- it’s like the NHS!’

So there we are: even though we can’t measure- or probably even agree on- any of the outputs, the arts need infinite amounts of taxpayers’ money.

Overall, I was struck by how little confidence these people have in their ability to survive in the private sector. As explained in a previous post, Mrs Tyler and I would still go to quite a bit of stuff, even if we had to pay more. Why should everyone else have to subsidise us?

But of course, last night’s bureaucrats are not the guys we actually pay to see. I have no doubt most of our performers and artists would survive and even prosper. However those girls in the yak boots might need to get themselves proper jobs.

Monday, March 07, 2005

Pre-election bribery

David Smith has a good piece on the temptation for Gordo to bribe us with a pre-election budget giveaway. Will he follow Lord Jenkins, who decided not to cut taxes before the 1970 election, with the result that Labour lost? Or Lord Healey, who doled out plenty before the 1979 election, with the result that…er, Labour still lost?

Back in the golden age of the post-war consensus, ‘you’ve never had it so good’ governments routinely and blatantly cut taxes and boosted spending in their pre-election budgets. But eventually it dawned on the rest of us that we were being bribed with our own money, and post-election we’d have to pay the bill. That was unsettling not just for us, but more importantly, the financial markets, which took a real dislike to crisis management of those ballooning budget deficits.

So these days you’d think Chancellors would try to be subtler. Ideally they'd want to give us the feelgood impression that taxes were being cut, or benefits increased, without actually doing very much. What some people call ‘a favourable announcement effect’, although I prefer to use its technical name ‘a complete load of old bollocks’.

And as Smith reminds us, Gordo is a master of this technique. He announces all spending increases and tax reductions at least four times, adds apples and pears, moves the goalposts throughout the match, let’s us have our cake and eat it, and always comes to the dispatch box with a couple of white rabbits secreted up his sleeves. Naturally they later turn out to be stuffed- not unlike the rest of us.

Smith reckons he’ll do the same again on 16 March, despite rumours of an actual £5 billion ‘giveaway’ to trump Letwin’s £4 billion promise.

I’m not so sure.

The IFS recently produced an excellent analysis of pre-election budgets, reminding us of the bribes offered. In 1992, Lamont gave us the new lower rate income tax band. In 1997, Clarke cut 1p off the standard rate. And in 2001, Gordo gave us an increased lower rate band, plus a cut in fuel duty to buy off those troublesome protesting drivers. That time it added up to a £4.1 billion- pretty well what he needs now.

But guess what always happened at the subsequent post-election budgets. Yup. Big tax increases. According to the IFS, G increased taxes by £11.3 billion after the 1997 election, and another £9.6 billion after the 2001 election. And do you notice how the post-election increases tend to be a tad higher than the pre-election cuts?

So I have a nasty feeling that on 16 March G will reach into his pocket for that grubby roll of used tenners, peel off a few, and attempt to slip us a bung.

But we must remember: this is the same man who has presided over a £150 billion increase in our annual tax bill.

And even stripping out the effect of inflation and the general growth in incomes, he’s still caned us. The IFS says:

‘Taken as a whole… government revenues have risen by 2.1% of national income since Labour came to office, equivalent to £26.4 billion in 2005–06 prices. About a third of this increase is the result of tax measures inherited from the Conservatives, about a third due to tax increases announced by Gordon Brown and a third due to other factors. Fiscal drag has increased revenues by £22.0 billion.’

As always, the IFS is very measured, but in my book, G’s accountable for the whole lot. He can’t blame the Tories for tax changes he didn’t have to implement, and fiscal drag (the rise in tax revenue generated by failing to increase tax thresholds in line with growing incomes) is the ultimate stealth tax.

Anyway Gordo’s got another powerful reason for cutting taxes this time. Because he won’t be the one having to increase them next year. In the unlikely event the Tories win, it will be poor old Ollie trying to sort out another fine mess- and finding G’s already shot his £4 billion tax fox. More likely it will be Brylcreem Bounce Milburn having to deal with the nasty stuff, leaving G doing the ‘it wasn’t like this in my time’ bit.

It’s pure win-win.

State broadcaster puffs nationalisation

I really must stop listening to the Today programme before breakfast- my blood sugar level is far too low to cope with such a massive rush of euro-statist-eco-pc-wiffle.

This morning at 6.50 Carolyn Quinn ‘interviewed’ Bob Crowe, head of the RMT rail union, about his plans to renationalise the railways. I actually have a bit of a soft spot for Bob, who on his day is one of our top stand-ups, better even than Arthur ‘you can’t help laughing’ Scargill in his prime.

But public servant Ms Quinn is something else altogether. Her idea of grilling Bob was to enquire politely if he really thought his campaign would succeed. Wasn’t renationalisation ‘an idealistic dream’?

There was no attempt to challenge his wild claims about cost savings and better customer service. And even though we wouldn’t expect Today staff to know anything about such mundane real world details, surely they could have found someone to explain the facts.

Hmm…yeah, and pigs might fly out of my butt.

Roll on privatisation.

Saturday, March 05, 2005

Parris on lifelong learning fiasco

In today's Times Matthew Parris comments on the £50 million blown on the UK e-University (see previous post):

"The demise of an old friend such as the e-university puts us in mind of other old mates we haven’t seen recently. How is the University for Industry doing, Gordon? Remember those speeches about “lifelong learning” and the “individual learning account”? No? Maybe Tony does . . .

'I am also passionately committed to the idea that education must be available throughout people’s lives . . . Only last week, the IPPR published plans to make a reality of the exciting idea of a University for Industry, with people using Individual Learning Accounts to fund lifelong learning . . .'

Words like 'passionately committed', 'exciting idea', and 'IPPR' are a bad combination in the field of public expenditure. And sure enough, nine years on, at God knows what cost, we learn that the "UfI will not be a learning provider. Instead it will act as: an endorser of other providers . . . encouraging them to fill gaps . . . commissioning material as necessary, a broker . . .”

Parris continues:

"Remember NHSU? Stumped? The National Health Service University, silly! “Health Secretary Alan Milburn this week unveiled an ambitious plan to create a National Health Service University by 2003 . . . Mr Milburn said: ‘Every nurse and every doctor, every cleaner and every therapist . . .’ ” (etc) . . . “The university will be modelled on successful corporate universities in the UK and elsewhere and will be delivered as a partnership between the NHS, existing universities and the private sector. We envisage the university being used by 100,000 NHS staff.”

How goes our old friend, the NHSU, Alan? I only ask because I’ve just Googled by mistake into an archive: a two-year-old French news report: “Tony Blair inaugure l’NHSU (National Health Service University) “Lors de l’inauguration de la NHSU, Tony Blair a déclaré qu’elle serait la plus grande université du monde. Cette université s’adresse à l’ensemble du personnel de la sant é qui représente donc plus d’un million d’étudiants potentials . . .”

Plus ça change. Plus ça fizzle out."

La plus grande du monde. That just about sums up the whole shooting match.

Wat may be pinko

Thanks to the excellent Tim Worstall for recommending a look at this site. Although he’s really worried me by suggesting I’m a liberal. Not even closet either.

But, but…surely…how can I be? I mean…I want to hack and privatise government back to basics…get tough with the EU and other criminals…no armistice for magpies…you know, the full metal agenda.

Oh, God…God, maybe he’s right.

I’m sure I didn’t used to be this way. I wish I could stop looking at those subscription-only New Labour websites.

I need help.

Friday, March 04, 2005

NHS tractor production sets new record

Reporting the War of Margaret’s Shoulder, the Times has a useful Q&A on how the commissars manage their hospital waiting statistics:

“Cancellations are only recorded if they are postponed on the day the procedure was due to take place…NHS trusts do not want to appear to be getting worse, so many hospitals look at the next day's list of an afternoon and consider what operations can be delayed. This practice is no secret and chief executives openly admit it takes place.

Are these figures an accurate reflection of the number of cancelled operations?This real number is likely to be much higher because of the way cancellations can be massaged. The other complication for hospitals is the target of getting patients out of accident and emergency within four hours. They either have to be treated and discharged or admitted to hospital and 95 per cent of NHS Trusts are meeting that target, but largely by admitting more patients. There has been an almost 23 per cent increase in admissions in the final three months of the year since 2002. The figure then was 574,983 but last year it was 705,901.

What impact is admitting more A&E patients having on hospitals?The main consequence is the cancellation of elective surgery, but it is impossible to know to what extent as no figures are kept for this. One example can be seen at the Queen Elizabeth Hospital in Woolwich, though, which has had a freeze on elective surgery since January because of the rise in patients being admitted from A&E.

Are waiting times for operations going up or down?It depends how you look at it. It's true that the longest waiting times have been cut, but the average times have only seen a modest decrease.”

As those other commissars discovered so long ago, once you start managing by target you’d better make damned sure you specify and measure every single output. Tractor production can be ramped up to record highs, but that’s not much help if you haven’t specified they should all have engines. Of course, you need a huge planning and inspection staff to manage it all. Oh yes, and time to get everything properly sorted. Thirty or forty years should do it. Probably.

How much easier to put decision-making power directly in the hands of producers and consumers.

Thursday, March 03, 2005

Telly tax here to stay

The government has announced that the £3 billion telly tax will remain in place for at least the next ten years.

Big surprise.

It’s now so egregious that you sort of wonder if perhaps somehow we’ve missed the point and got the whole thing completely wrong. Even a sound free market man like Blimpish has been racking his brains to see if there could perhaps be some reason- any reason- why the BBC should remain tax funded. Alas, he couldn’t find one.

But try this: despite the tax, telly ownership is virtually 100 per cent, showing that we’re consuming broadly the same amount of telly with the tax as we would have done without it. In other words, the demand elasticity for Richard and Judy etc is very low. This is good because it means that the tax is not distorting our consumption pattern by inducing us to dump the telly and…I don’t know, read Dickens, say. That kind of tax driven response would produce what textbooks call a deadweight welfare loss.

So telly tax is a good tax. Unlike most of our other taxes, it raises revenue without incurring a welfare loss.

In fact, thinking about it now, why don’t we flog off the BBC, unhypothecate the telly tax, substantially increase it, and use the revenue to eliminate those tiresome distortionary taxes like income tax and wine duty.

I’d certainly drink to that.

£50 million burned on Internet University

The Commons Education Committee has condemned the government's scheme to teach degree courses over the internet as a 'disaster' and a 'waste of public money'.

The UK e-University cost £50 million but attracted just 900 students when it launched in September 2003, instead of the 5,600 planned. It had to be wound up within six months after it secured less than one per cent of the private sector investment needed to keep going.

None of this prevented its four top directors being handsomely rewarded. According to the the Telegraph:

"Sir Anthony Cleever, who is also the chairman of the Medical Research Council which distributes research grants, earned £70,000 plus a performance bonus of £12,216.

John Beaumont, a former professor at Stirling and Bath universities, joined the university from the board of Energis. He was paid £180,000 and a bonus of £44,914.

Elizabeth Selver, the finance director, was at Camelot, the Lotto operator, before joining UKeU in 2002. She earned £95,000 plus a bonus of £33,271. Prof David Unwin, the director of learning programmes...received £40,308 for six months' work plus a bonus of £11,369."

Nice work if you can get it.

Wednesday, March 02, 2005

Poor relief in 2005

The UK government spends over £150 billion annually on what it calls ‘social protection’. Some of this is payment of contributory state pension benefit, but the bulk comprises what we used to call poor relief.

15 per cent of GDP is a considerable burden on taxpayers. What do we get for it?

At first glance, the answer seems to be not much. The EU and the government define poverty as an income below 60 per cent of the median. And on that basis, the IFS says that 22 per cent of the population live in poverty- that is, they live in households with less than 60 per cent of median income, after all benefits, taxes and housing costs.

So we’re spending £150 billion, yet more than a fifth of us remain below the official poverty line. That really doesn’t sound like value for money.

In fact the situation is even worse than that. ONS figures ( the latest for 2002-03) show that before taking account of government taxes and benefits the median household income is some £19,000 (this is known as ‘original income’). 60 per cent of this median original income is £11,500, which we might define as the poverty line pre-government interference. And about 8.5 million households- 17 million people- have original incomes below this level.

Now on my calculations, to move all these people up to the poverty line as defined would cost between £50 and £60 billion. In other words, if government didn’t exist, we could eliminate poverty for well under half the cost of the government’s social protection programme, which itself leaves over 12 million in poverty.

What on earth is going on? We're spending a ton of money yet we haven't eliminated poverty.

Well, some of it is the usual crass inefficiency of government. More fundamentally, we’re suffering the old problem identified by the Poor Law Commissioners in 1834:

“Every penny bestowed [on poor relief], that tends to render the condition of the pauper more eligible than that of the independent labourer, is a bounty on indolence and vice.”

Maybe we wouldn’t put it quite like that today, but we take the general point. Welfare fosters dependency, incentivising able-bodied people to opt out of the labour market. And in key respects, the history of welfare over the last forty years has been a painful relearning of that insight. The poverty trap, which first came to prominence in the sixties, only arose because benefits were set too high in relation to the available wage. That’s when it’s no longer financially worthwhile to take a legit job, so the rational punter goes for indolence in front of daytime telly, coupled with sporadic vice in the black economy.

The no-shit Poor Law Commissioners solved the problem by restricting benefit to bread and gruel in the workhouse. But our namby-pamby post-war consensus rulers simply chucked more of our money at it. By extending the benefit scales they allowed people to earn money without losing too much of their benefit entitlement. The overall cost mounted dramatically as more and more people became eligible for benefit, even when they had incomes way above the poverty line.

Of course, recent governments have been forced to sort of accept this was a costly error. They've sought to cut straight unemployment benefit, so that once again the able-bodied of working age are incentivised to get off their butts and take a proper job. These days it’s called welfare to work, and it finds sharp expression in the virtual freeze on benefits for the childless ‘job-seeker’. According to the IFS, the top means tested unemployment benefit for single childless people over 25 has remained unchanged in real terms for nearly twenty years, despite the substantial general rise in real incomes.

Inevitably, many of the people who used to claim unemployment benefit, now claim incapacity benefit instead. But at least there's now an understanding that this is a problem, rather an unalloyed mark of a civilised society.

Elsewhere, poverty trap amelioration continues to drive up spending. One of Blair’s touchstone pledges is to abolish child poverty, which means targeting welfare payments on parents. However, because parents are almost all of working age, the higher the payments, the worse the poverty trap.

Labour’s solution is the complex system of child and working family tax credits, stretched a long way up the income distribution in order to dampen the loss of benefits as earned income increases. They call it ‘progressive universalism’, another gem of doublespeak. The reality is that households with incomes up to £50,000 and over are now receiving a benefit ostensively targeted on relieving child poverty.

Similar problems apply with the government’s approach to relieving pensioner poverty. The Minimum Income Guarantee gave significant relief to the poorest pensioners. And quite right too. But then it was pointed out to Gordo that it was a disincentive to private saving for retirement. His response was the pension credit, another complex sliding scale designed to ameliorate another poverty trap.

Under New Labour, more and more of the population have been wound into the burgeoning system of official income determination and fiscal churn.

The scary thing is that they’re not finished. Tony’s pledge to eliminate child poverty- while an admirable motherhood aspiration- is going to involve another vast extension to official interference in the market’s determination of incomes. And there’s more to come on pensions.

So what should we do?

I speak from some experience here, having grown up on a (subsidised) council estate, and copped various state handouts, including free school meals. Perhaps because of this I do not agree with those free market bloggers who reckon we should abolish welfare altogether and leave it all to the private sector- ie charity. But I certainly think we could cut back considerably on current spending without going back to the workhouse.

My starting point is to note that the old grinding financial poverty of popular imagination was long ago consigned to history. By and large, state benefits are already sufficient to buy food, shelter, and clothing, even tellies, videos, and washing machines. The issue with many of the poor is not lack of funds, but lack of ability to manage their own lives. Bigger hand-outs are not going to help.

The implication is that the official EU-inspired 60 per cent poverty line should be revisited. We used to have an informal understanding that 50 per cent was the target level, and we should revert to that. That change would immediately reduce the ‘poor’ from 22 per cent of the population to 14. Which would substantially reduce the extent of the poverty trap issue, and allow us to target benefits much more specifically on those at the bottom who need it most.

I calculate that the cost of bringing everyone up to 50 per cent of the median 'original' income (as described above) would be £30-35 billion. We'd still have to factor in something for poverty trap amelioration, so let's call the total £50 billion. Add in the full £50 billion currently spent on state pensions (some of which is actually non-contributory poverty relief), and you get a total bill for social protection of £100 billion. Saving a full £50 billion off the current bill.

For those that think cutting the poverty line to 50 per cent sounds harsh- nasty even- I’d say it’s realistic. In the absence of a magic wand we need to focus on what’s likely to be practically achievable, not what we might like to see in a perfect world. And remember the state would continue to fund healthcare and education for the poor on top of their cash benefits.

It's also important to remember that while poverty can only be sensibly defined relative to the incomes of the surrounding community, the community that matters most is the local one. Certainly on our housing estate, not having a car, or taking foreign holidays, or going out for meals didn’t feel like any deprivation at all. Exactly the same applied to everyone in the road, and what was going on in the leafy ghettos of the middle class might just as well have been happening in another country.

I’m strongly in favour of paying taxes to support the poor. But we need to strike a difficult balance between heart and head. New Labour has big ambitions, but as usual its policies are hugely expensive and inefficient.

More Balls on the BBC

I’ve just heard Jim Naughtie interview Ed Balls (Today 7.10), the prospective MP. It was mainly notable for Naughtie's amazing slip how he and Ed were going to win the election (mp3 here). But Balls was also good value.

He's certainly come on since that bemusing post-neoclassical endogenous business, and he’s obviously now been to New Labour sound bite school. Best economy in the world, jobs, brilliant public services, vote for Tories a vote for the Stone Age etc.

Anyway, Naughtie asked him about all those stealth tax rises, including National Insurance. Why hadn’t we been told about their plans before the 2001 election?

Balls responded that the government had been completely open- NI was being increased to pay for the NHS.

What? But that was after the election, wasn’t it?

Well, for the usual reasons of bias or ignorance, N didn’t actually ask that. Even though it’s one of the very worst examples of New Labour economy with the actualité.

Here’s Paxman’s interview with the super-slippery Blair before the last election:

“PAXMAN:Why won't you give a guarantee about national insurance?

BLAIR:Because I am not entering into a situation where we start writing a budget.

PAXMAN:Why are you prepared to make a guarantee about income tax?

BLAIR:Because the specific manifesto pledges we made last time on income tax we have repeated.

PAXMAN:But you also gave an assurance on national insurance, not in the manifesto, but Gordon Brown gave it, that the ceiling wouldn't be raised

BLAIR:Yes, but if we end up going through each of the reliefs.

PAXMAN:Why could you do it last time and not this time?

BLAIR:We are. We are making precisely the same tax pledges in our manifesto as we did last time.

PAXMAN:No you are not. With the greatest of respect, last time you promised the ceiling on national insurance would not be raised, or the Chancellor did.

BLAIR:What Gordon Brown was asked was about the abolition of the national insurance ceiling in the context of the 1992 shadow budget. I have been asked this question ad nauseam in the campaign and what I have answered is that we have not clobbered higher tax earners, we have no intention of doing so. But if you start on national insurance, then you are on to inheritance tax.

PAXMAN:I'm only asking about national insurance.

BLAIR:I know but that's where you would end up. What I can't do is sit here and write a budget, I am afraid.

PAXMAN:I am merely asking you why you could give this guarantee last time but you can't give it this time and whether any reasonable person wouldn't suppose that you therefore propose to increase national insurance contributions.

BLAIR:They shouldn't.

PAXMAN:Why not?

BLAIR:Because we are not writing a budget now. We have a record of four years to stand on where we haven't done any of these things. Indeed, we have been careful to make sure that the highest income earners are not put at risk or their incentives reduced. I have no intention of going back on that now.

PAXMAN:Isn't it intellectually incoherent to say what you will do with one tax and not another tax, which is levied on almost the same basis?

BLAIR:No, it's not intellectually incoherent, you are simply choosing what you will and won't say.

PAXMAN:Wouldn't a reasonable person conclude that the reason you don't wish to say it is because you plan to raise it?

BLAIR:No, they wouldn't, because you could go through 250 different reliefs and I can't sit here and write a budget.”

So Mr Balls, that’s just how open you were with us before the last election. Choosing what you will and will not say.