Monday, January 31, 2005

UK productivity growth- another Labour flop

In the nearly eight years since Gordo took over the economy, our productivity growth rate has slumped to 1.5% pa. Over the previous eight years- under those hopeless boom and bust Tories- it was 2.5% pa. That may sound a small difference, but over time it builds up. It means that the average British family is already nearly £3,000 pa worse off.

This isn’t how it was supposed to be. No, you remember, back in 1994 he reckoned we were falling way behind the pack in terms of productivity, but that he could get us back on track by pumping us full of neoclassical endogenous growth steroids.

Unfortunately once he got to the Treasury, we found out that the steroids comprised nothing more than the usual voluminous plans drawn up by various boffins, and tinkering. And he’s tinkered with just about every lever he could find around the place. Some of the levers were a bit rusty because they hadn’t been used since the great days of the National Plan and flowerpower. Others had never been used at all, but the mandarins were keen to give them a whirl.

One result has been the ballooning DTI budget, which is fast approaching £5 billion incinerated annually. But he’s done plenty else besides, like pumping hundreds of millions into the R&D subsidies now lining the pockets of pharmaceutical company shareholders, setting up crackers training schemes like the one to teach thirteen year olds to be entrepreneurs, and massively increasing regional aid, which has never produced sustainable growth anywhere.

As usual, it’s the productive bits of the economy that are squeezed to pay for it all. Just like the lunatic Selective Employment Tax introduced by the Wilson government, which taxed the growing service side of the economy in a Canute-style attempt to prop up the declining manufacturing sector. Penalising dynamism and sheltering inefficiency didn’t boost productivity then, and it isn’t doing so now.

Governments are just no good at outguessing the markets on what is required to boost future productivity. They aren’t even any good at managing productivity in things like the NHS and education, which are directly controlled by the state.

So the Tories’ promise to drastically scale back and refocus the DTI on competition policy may not immediately push our productivity growth back to where they left it, but it will certainly help.

Sunday, January 30, 2005

Davos egofest

Further to this morning's dispeptic post about life at the trough, I have been spluttering my way through some of the accounts of festivities at Davos.

I particularly savoured the excellent David Smith's account of Gordon Brown's stately Davos progress (Times Online - Newspaper Edition:). Smith was chatting to Gordo, when..."we are interrupted. It is Bono, here for his bilateral meeting with the chancellor. The politician in his dark-blue suit and pink tie and the rock star in leather flying jacket and wraparound sunglasses hug one another as enthusiastically as long-lost cousins. "

They go on to...no, I just can't- you'll have to read the squirming details for yourself.

Just remember- we're paying for this.

Our rulers: snuffling in the trough

The usual crop of stories today about our rulers spending other people’s money to treat themselves.

A billion pounds of taxpayers’ money has been spent on makeovers for the government’s head office accommodation (Telegraph News Revealed: we pay £1bn to make life better for bureaucrats –subscription required). Now, as stock market investors have long known, the performance of most companies is inversely proportional to the opulence of their head offices. Thus Tesco, Britain’s top retailer, still operates out of a nondescript industrial estate in the sticks of Hertfordshire. Whereas the once mighty Sainsbury, under the disastrous stewardship of New Labour favourite Sir Peter Davies, moved its HQ into a glittering glass palace in central London. You get the idea.

And then we have those expenses and freebies. The Telegraph reports on some Labour MP who’s racked up the fifteenth highest Commons expenses claim at £145,000, and has also spent loads of time junketing round the world at the expense of others (Prince's accuser comes under scrutiny – subscription required). They’ve singled him out because he’s been highly critical of the Royal Family’s expenses. But in reality, they’re all at it, as the article suggests.

Fact-finding missions to five star hotels, hot-air conferences in winter sunshine resorts, ‘representing Britain’ at sports finals, ‘goodwill ambassadorships’, ‘observer missions’ by private jet and limo, free use of holiday villas, cheap mortgages- we’ve become only too aware that our leaders will freeload on anyone who’s prepared to sign the cheque. Even if the cheque signers are under investigation by the tax authorities or the police- as long as they can hold a pen, they can sign the chit.

And of course, the upfront costs of our political institutions have rocketed under Labour to a reported £1.3 billion a year, an increase of 80% since Tony got in. As the Times reported (10 November 2004):

“Just under half the extra outlay can be put down to the running costs of the elected institutions set up by Labour since 1997 — the Scottish Parliament, the Welsh Assembly, the Northern Ireland Assembly, the Greater London Authority and the London Mayor. Labour also created the Electoral Commission to oversee elections.

There has also been a 75 per cent rise in MPs’ salaries and allowances, a 40 per cent rise in the cost of House of Commons facilities and administration, and a 71 per cent rise in local government representation and management costs, with big increases in the allowances of councillors a key factor.”

We don’t want this nonsense of course, as the public makes very clear- not just through the no vote in the referendum on Prescott’s North East regional assembly, but also the plummeting turnout at elections. And in a free market, less demand would result in less supply. But politics is hardly a free market- more like a classic oligopoly, with the customers being exploited by a small number of entrenched first-past-the-post producers. Their response to falling demand is to blame the customers- for not wanting more…er…umm…democracy.

I suppose the Tories are at least promising to reduce the number of Westminster MPs- at present we have more than all the US senators and congressmen combined- for a fifth of the population!

But snuffling pigs rarely vote to have the trough downsized.

Saturday, January 29, 2005

Government waste: the James Review

I’ve now read the Tories’ own waste review, the one that comes up with a savings figure of £35 billion. Unfortunately, a very large chunk of the total comprises the supposed savings identified by Gershon (see earlier post). As the Times commented:

“The James document…contains a potentially crucial flaw within it. Of the £35 billion in savings that the Tories insist they could secure, some 60 per cent, or £21 billion, comes from pocketing the money that will allegedly be drawn back by the Gershon recommendations. This is a contestible assumption. Sir Peter attempts to reduce the running costs of public administration, not eliminate a range of programmes. His savings would come from ‘back office systems, procurement, transaction services and policymaking functions’. He would, for example, cut costs by ‘ending multiple buying by many purchasers from a single supplier’. That money could be handled more effectively is indisputable. Whether the savings will be of the magnitude Sir Peter envisages is more dubious. His is a supersize version of the efforts made by Sir Derek Rayner for Margaret Thatcher. That drive cut the cost of running Whitehall by just 0.4 per cent” (leader, The Times, 22 January 2005).

As described on the Reform website, there is a world of difference between chiselling away at costs, and addressing the fundamental structural problems with our public services.

We need to put the customers in charge, not the politico-bureaucrat-producer cartel. Parents need to choose the schools for their children, and patients need to choose their healthcare providers. The only sustainable role for the state is in setting minimum safety/fair dealing standards, and subsidising those who are genuinely unable to pay their own way.

BBC soap crisis

It may have escaped your notice that the audience for the BBC’s East Enders is collapsing as the punters switch in droves to ITV’s Emmerdale, an everyday story of sheep-shagging somewhere up North (Times Online - The Hatchet quits).

Our state broadcaster has a dismal record when it comes to soaps. Who could forget El Dorado- the massively hyped tale of glossy ex-pats living in a purpose built (with huge amounts of licence payers’ money) village in Spain. It was so dire it had to be pulled after a couple of episodes, the properties probably being divvied up among the governors.

Commercial TV is much better. Apart from Emmerdale, they’ve kept the incomparable Corrie in robust health for nearly four hundred years. In fact, commercial TV is much better at popular telly generally. It’s because they have to start from what the customer wants rather than some kind of inward looking bureaucratic horse-trading.

Ah yes, you say, but that’s just pandering to our lowest common denominator. As Lord Reith was wont to say, ‘the punters don’t know what they need to watch’, or words to that effect. The BBC has that sacred duty to inform and educate.

Hmmm. You probably need to cast your eye over the schedules. These days, once you’ve got Sky, it’s very difficult to find much on the BBC that isn’t available commercially. A detailed scientific assessment reveals that…ooh…well over 90% of the BBC’s output is merely aping what’s already available on the commercial channels.

What’s more, the BBC does it all at a level of cost and inefficiency that makes the old Soviet system look like a beacon of excellence (for a jaw-dropping recent example see Telegraph News BBC taxis cost £33,000 a day).

The BBC Charter is up for renewal in 2006. The whole shooting match needs selling off, raising a chunky sum to pay off some of our ballooning national debt, and reducing future taxation by £3 billion pa.

Friday, January 28, 2005

Lottery tax blown on underperforming athletes

Much grinding of teeth over the news that Team GB’s medals at the Athens Olympics cost £2.4 million each in terms of lottery funding (Times Online - Sport). This was because large dollops of cash went to hopeless also-rans in sports where Britain hasn’t won medals since the days of chariots of fire- the ones run by Boudicca, that is.

But this is just one more example of how Lottery funds are chucked around as if they’re free money. Like the vast piles now being earmarked to shovel onto the next Great Fire of London, otherwise known as the 2012 Olympics.

According to Lord Coe and the other promoters of this grandiose folly, the use of Lottery funds means that the Olympic bid will not need to tap taxpayers. Well, London council taxpayers, yes, they’ll have to pay- through the nose and probably for ever- but they’re ruled by Krazy Ken, so Coe and his friends can hardly be blamed for that.

What doesn’t seem to be understood is that the state’s cut from the Lottery is tax, just as much as the taxes on fags and booze and telly watching are tax. They’re all voluntary taxes to be sure, but they are taxes nevertheless.

The difference from most taxes is that the Lottery tax is hypothecated for spending on various ‘good causes’, rather than being dropped into the general exchequer pot. The Lottery allocates 28% of ticket sale revenue to ‘good causes’, and since it began, this has amounted to £16 billion. In addition, the government has taken another £7 billion as duty. The punters get left with just 50% as prizes- much lower than virtually any other flutter, including those run by guys with broken noses and lots of gold jewellery.

Hypothecating a tax to fund the pet enthusiasms of our totally unaccountable Great and Good is a textbook recipe for waste, and the long list of soppy projects already funded is much too painful to rehearse here. The thought that it might now get used to drag us into an open-ended commitment to throw a disruptive party for our underperforming athletes, showboating politicians, and preening media types is bringing on one of my turns.

Thursday, January 27, 2005

Government waste: the Gershon Review

At long last I’ve summoned up the energy to read the Treasury commissioned Gershon Review (‘Releasing Resources for the Front Line’). You know, that’s the Review that allows the government to claim they’ve identified £21 billion of public sector efficiency savings that can be redirected to front line services. And to rubbish the Tories’ rival James Review, which comes up with £35 billion of savings.

Crikey- it’s even more vacuous than I’d imagined. To start with, only about half the trumpeted ‘savings’ are actually savings in the sense that you or I might understand the word. That is cash savings we could choose to have returned as tax cuts.

No, to Gershon, ‘savings’ encompasses government departments changing how they allocate their unchanged spending. For example, the Department for International Development undertakes to ‘substantially raise support for the next International Development Association
(IDA) replenishment round.’ Sorry, come again? How does substantially raising (almost certainly costly) support for something, make savings?

This kind of bureaucratic deckchair rearrangement doesn’t constitute savings in any normal sense of the word.

But even the so-called ‘cash releasing… recyclable elements’- ie the real savings- are little more than vague aspirations. One widely quoted example is the Department for Education and Skills undertaking to make £1.3 billion of savings by enabling ‘frontline professionals in schools, colleges and higher education institutions to use their time more productively…through workforce reform, investment in ICT and reducing administrative burdens.’ No word on how this ‘enabling’ is to be achieved in the real world, still less measured.

It is true that the report gives a figure of 70,000 for the planned Civil Service reduction. But again, the detail reveals that this is little more than a set of aspirational efficiency targets doled out to the various departments. There is no analysis of what functions might need to be dropped. And anyone who has watched Yes Minister will know the many ways that Civil Servants can be redefined as non-Civil Servants at the stoke of a quill pen.

To cap it all, the report reckons that ‘implementing the efficiency programmes will require upfront investment…and the Government…will be providing assistance…both through temporary administration cost flexibilities and via allocations from the £300 million Efficiency Challenge Fund.’

Holy Cow! In order to pursue this raft of hopeless wishful thinking, we’re actually going to have to shell out even more!

I’m sorry, I need to lie down.

Wednesday, January 26, 2005

Airbus subsidies- not a great way to fly

According to the FT (22 January- subscription required), UK taxpayer support for the new A380 super-jumbo so far amounts to £780 million. Since the project provides 8,000 jobs, this amounts to a chunky £100,000 subsidy for each job.

Successive British governments have burned eye-watering piles of our cash on the bonfire of the aircraft industry. From Brabazon to Concorde to Airbus, they’ve swallowed the industry line that these projects are vital to the future of Britain’s technological base. Funding cannot be left to the private sector because…well, we all know the City is too shortsighted to recognise the terrific investment opportunity they represent, and anyway a lot of the benefits are spin-off, which cannot be captured by individual private investors, and…and…yes of course, the aircraft factories are based in high unemployment areas so really the subsidies are a form of social welfare.

The politicians like to present these subsidies as investment in some white-hot technological future, which unless we stump up will migrate overseas, making us all worse off. Gordon Brown’s massive R&D tax credits are a classic case. But the supposed investment in the aircraft industry has never knowingly produced any return to taxpayers.

Take the Concorde fiasco. The original estimate of UK taxpayer support, made in the early sixties, was £75 million. By the time the project hit the buffers in the seventies, the cost had escalated to about a billion. There was no return. Indeed, there were no paying customers, the few planes that were produced having to be given away to British Airways.

Now if instead, that one billion had been invested by the shortsighted City- say in the UK stock market- it would have produced a massive return. The stock market has gone up thirty fold since the mid-seventies (even allowing for its abysmal performance under New Labour), so British taxpayers would be sitting on £30 billion- quite a nice nest egg, even by the standards of our current fiscal black holes.

Against that background, the sight of Tony junketing down in Toulouse, coming out with the usual twaddle about giant steps are what we take etc, was enough to have me reaching for the in-flight sick bag.

Monday, January 24, 2005

Great thoughts from Master Minds

"Little else is requisite to carry a state to the highest degree of opulence from the lowest barbarism but peace, easy taxes, and a tolerable administration of justice: all the rest being brought about by the natural course of things." - Adam Smith

"State interference in economic life, which calls itself 'economic policy' has done nothing but destroy economic life." - Ludwig von Mises

"Everything that is really great and inspiring is created by the individual who can labour in freedom." - Albert Einstein

“There is an invisible hand in politics that operates in the opposite direction to the invisible hand in markets. In politics, individuals who seek to promote only the public good are led by an invisible hand to promote special interests it was no part of their intention to promote.’ - Milton Friedman

"[The man of system] seems to imagine that he can arrange the different members of a great society with as much ease as the hand arranges the different pieces upon a chess-board; he does not consider that the pieces upon the chess-board have no other principle of motion besides that which the hand impresses upon them; but that, in the great chess-board of human society, every single pieces has a principle of motion of its own, altogether different from that which the legislator might choose to impress upon it." - Adam Smith

"The three stages of government: If it works, tax it. If it still works, regulate it. If it stops working, subsidize it." - Ronald Reagan

"See, when the government spends money, it creates jobs; whereas when the money is left in the hands of taxpayers, God only knows what they do with it. Bake it into pies, probably. Anything to avoid creating jobs." - Dave Barry

"There is no such thing as a good tax." - Winston Churchill

"The hardest thing in the world to understand is income tax." - Albert Einstein

"The usual socialist disease: they have run out of other people's money." - Margaret Thatcher

"To be controlled in our economic pursuits means to be... controlled in everything." - Fredrich Hayek

"A society that puts equality ahead of freedom... will end up with neither." - Milton Friedman

"Giving money and power to government is like giving whisky and car keys to teenage boys." - P. J. O'Rourke

"Power tends to corrupt, and absolute power corrupts absolutely." - Lord Acton

Sunday, January 23, 2005

Public unmoved by Tory tax promises

As expected, the Tory promise to cut taxes has totally failed to register with the public. Today's YouGov poll ( see Times Online - Newspaper Edition) records that 25% think taxes would go up under the Tories and only 22% expect them to come down, with the rest expecting no change.

The Tories need to be much bolder, and definitely more eyecatching. Nobody's suggesting tax cuts on the scale of Bush's first term, but four months before an election the empahasis should surely be on what taxes will be cut and by how much. Not a huge wodge of dull accountancy calculations that produce the disembodied answer '4'. It doesn't convey anything to people in the world beyond Westminster, and it sounds really measly. Gordon Supersize Brown doesn't wipe his bottom on such trifling numbers.

Saturday, January 22, 2005

NHS endangers us all

The NHS has decided it's OK to risk my Dad's life. It's making me very angry.

He's eighty and has a cardiac problem for which he was due to see a consultant in mid-January. But his appointment was cancelled at short notice, and rescheduled for the end of June! That's right, a six-month postponement of an appointment for which he'd already waited once.

His GP protested, aware that just before Christmas Dad had blacked out. The hospital would surely fit him in pretty soon. And they did reconsider, but only to the extent of bringing the appointment forward by two weeks: a 21 week delay from the postponement, instead of 23.

Now these waiting lists are right at the heart of the government's hugely expensive NHS programme. The Department of Health website (see Achieving shorter waits ) proclaims "clear targets for reducing inpatient and outpatient waits: by March 2004, a maximum outpatient wait of 17 weeks...by December 2005, a maximum wait of 13 weeks." Indeed, according to the DoH, things are already going pretty swimmingly- "by March 2003, only...64 patients were waiting longer than five months for an outpatient appointment."

Say what? This is January 2005, and my Dad's just been postponed by...er, over five months. And I thought they said the target since last March was going to be 17 weeks, whereas even after appeal, we're looking at another 21 weeks. What's going on? Can't the commissars even manage their own tractor production statistics? Somebody's definitely slipped up because I should have thought the detailed rules for setting waiting times would have said something like "the appointment must be within 17 weeks, although the official clock will be reset at zero if an appointment has to be postponed- just as long as the new appointment is no further ahead than another 17 weeks". That way, the targets would be met even if some patients ended up waiting for ever. Or at least until...well, you know...until the problem resolved itself.

Don't you just want to grab someone's throat?

We'll have to go back to the hard-pressed GP and ask if he'll have another go. But my guess is he's only got so much bureaucratic capital with the hospital, and he's got to share it around amongst all his patients. I bet he has no effective levers he can pull. So in reality, our choice is either to wait and hope for the best, or to pay and go private. Which is fine if you can raise the funds, but tough on the bulk of the population.

Of course, if we do go private, the logical thing would be to see the same consultant my Dad was seeing under the NHS. Because he knows the case, he's got a good reputation locally, and my Dad liked him. He'll just be doing his best amid the shambles of the NHS, and we have direct knowledge of other consultants who've contracted out altogether because they just can't take any more targets, change management programmes, and general box ticking. Can you really blame them?

In my personal experience, the NHS has serious form on killing people through neglect. We won't go into the traumatic details here, because you've only got to look at the statistics. The last time I checked, Britain was at the very bottom of the G7 league table of male heart disease survivability (which measures the percentage of males first diagnosed with heart disease who are still alive five years later- a good reflection of the quality of treatment they receive). In fact, international stats show the overall NHS record on what's known in the trade as "preventable mortality" is appalling. The Wanless Report (remember that?) defined preventable mortality as "preventable had appropriate medical knowledge been applied". Which is as stark as it gets.

We just cannot go on entrusting our lives to the world's largest bureaucracy which may not apply appropriate medical knowledge- particularly now it's headed by an aggressive Scottish communist who's dying for a fag.

We know a million deaths are a statistic, but you only have one Dad.

Friday, January 21, 2005

Pathetic Tories

This week saw the Tories launch their better-value-lower-taxes manifesto. It took place at the opulent Institute of Directors and was notable mainly for poor old Ollie Letwin being forced by some dark media type to walk up the grand staircase. The telly cameras were positioned at the top so were able to zoom in on his distressing bald spot. The parallel with his policy announcements hardly needed to be spelled out, and the downbeat message was reinforced by the choice of venue, the IOD being the notorious old boys club that fired Ruth Lea for being too stridently free market.

The substance of the manifesto was pathetic. Despite getting that company undertaker bloke to run up a bumper book of facts on government waste, all Ollie could come up with was a promise to let us off four billion of the near half trillion that Gordo plans to grab from us next year. That’s about a quid a week each. No wonder he looked like he was attending his own funeral.

Now Letwin seems a decent enough cove, quite bright too by all accounts. He does come across as an unworldly Oxbridge don, but Jeez, rather that than a second rate polytechnic lecturer from the University of Social Inclusion (which is what we’ll get when Milburn becomes Chancellor in a few month’s time- you read it here first). Yet after months of huffing and puffing about waste and the scope for lower taxes, what came out was pretty well indistinguishable from Labour.

The Tories used to be a contender. Now they stagger towards a third disastrous election like a punched-out middleweight, lolling real close to the other guy in case they get hammered out of the ring completely. Competing with the present lot on the basis of who’s least managerially incompetent just isn’t what we want our politicians to be doing.

‘Choice’ is New Labour’s spinword of choice for the noughties. In their mouths it means nothing. Politicians of the centre-right should show they are the real promoters of choice by somehow finding the bottle to offer us a proper choice on tax and spend at election time.

Thursday, January 20, 2005

Shouting at the telly

I’m starting this blog on medical grounds. My wife has had enough- well, more than enough actually- of my telly/wireless/newspaper rants, and has threatened to kill me unless I curb them. Which is fair enough.

She’s particularly fed up with hearing me sceaming at some report of fresh local empowerment initiatives/choice targets/priority facilitation action zones/transgender transmogrification credits etc etc ‘who the effing eff is paying for all this?’

So I’m hoping this blog will do the trick. I can offload here, and imagine there will be a whole great load of surfers who have nothing better to do than to hear what I find out about burning our money.

It could save my life.