Tuesday, September 30, 2008

So, how does this wealth creation lark go then?

Via Sadie, I found an interesting post by Chris Dillow, who makes a very good critique of a post by Fraser Nelson that is a complete pile of tosh.

What Fraser is saying that these rich people are jolly good because they contribute a gigantic proportion of the total tax take and that this therefore means that Nigel Lawson was the most redistributive chancellor ever. He then talks about the good old Laffer curve and how reducing taxes on the rich makes them pay more tax.

Chris basically points out that the rich paying a greater proportion of the total tax take can simply be a sign that wealth distribution is very unequal.

Of course, at this point the right generally like to start talking about wealth creation and how this inequality creates wealth and just means a much bigger pie. So, to counter this I would like people to refer to the following graph (taken from this report):

Lawson's tenure is marked in blue, I've added marks in red to in order to mark the figures I'm about to refer to. I'm using the wider context of 1960 - 1980 and 1980 - 2000, this seems fair enough since Lawsons tenure began early on in the second period.

So, let's compare GDP per capita for the wealth creating 20 years after 1980 with the more equal but supposedly less productive 20 years before the 80's. In 1960 the figure (in 1995 £'s) is £6,000 in 1980 the figure is £9,000 meaning a 50% increase in wealth in this 20 year period. By 2000 the figure is at £13,500 which is of course a 50% increase on 1980.

Obviously, economic growth between 1960 and 1980 was about the same as growth between 1980 and 2000, the whole idea that these tax cuts for the rich lead to "wealth creation" is a myth. The rich have taken a larger share of the country's wealth at the expense of everyone else.

Monday, September 29, 2008

Why the Lib Dems aren't the Answer

Over on LibCon at the moment the resident Lib Dems are having a bit of a recruitment drive, suggesting that the Lib Dems are the true home for socialists and for the liberal left more generally. Naturally, I disagree with this viewpoint.

Reasoning seems to be along the lines of:

  • Labour are generally a bit of a busted flush, they've let us down and implemented some very authoritarian policies.
  • The Lib Dems are commited to a large number of goals similar to socialists, in particular the commitment to easing taxes on the poor while increasing them on the wealthy.

First, I reject utterly the idea that Labour are a busted flush. This years conference did a lot to renkindle the flames. In particular two very important statistics, first education spending per pupil has more than doubled under Labour, second the number of people who have to wait more than 6 months for NHS treatment is down from 284,000 in 1997 to virtually no-one. Despite the current anti Labour mood music Labour have actually done a good job.

Second, we come to the Lib Dems themselves, some people wonder why people display tribal loyalty to Labour rather than making judgements based on policies. I would say this is due to a trust Labour have built up that the Lib Dems no longer have, people expect politicians to disappoint but at least remain true to their values, the Conservatives cut taxes Labour help the poor. The Lib Dems in government are an unknown quantity, no one's sure what they'll do.
In my view the Lib Dems don't help their case through their inconsistency, the party is made up of a combination of Social Democrats and more traditional Liberals. Currently the classic liberals seem to be in ascendancy, meaning tax cuts and a smaller state, but you don't have to go back far to see the Lib Dems backing poicies to the left of Labour. They seem to be very much followers of fashion when it comes to policy, for example they originally said that the government's road tax measures on gas guzzlers were too tame and put forward a £2,000 road tax for gas guzzlers, more recently Nick Clegg is on record as being in favour of eliminating the tax altogether. Until the Lib Dems pick their ground and stick to it I think they'll have a hard time winning over tribal Labour voters.

Finally, I'll come to my personal reasons for disliking the Lib Dems and that is their policies of efficiency savings on government spending and cracking down on tax evasion. I take the view that such promises should never be taken seriously. These two policies are no brainers, a government would be mad not to implement them. Savings are, in my view not something that can be achieved easily with the levers available to a Minister and are threfore not to be trusted as serious policies.

So, all in all then, nice try, but no cigar.

Tuesday, September 23, 2008

Fisking a Mad Tory

Some Tory PPC has been going on about New Labour being too left wing. I thought a good fisking is in order.

There is a big myth in politics, and it is this: that New Labour really was new. That it was a truly centre-ground party that had radically abandoned the leftist ideologies of yesteryear that had led the country into the mire of the late 70s. Fitting then that the party's theme song Things Can Only Get Better should have been by a group called D:Ream. Because now we've woken up from the dream of Blair to find ourselves in a country that at heart is testament to deeply leftist politics.

Deeply leftist politics? I've been seeing a country where criticising a director's right to his annual 15% inflation busting pay increase is considered politics of envy, where talk has been of "light touch" regulation has been the fashion.

The tax burden is actually higher now than in 1978 (at 36% of GDP, compared with 33% three decades ago). We now boast a civil service of half a million - about the size of Sheffield. That includes a cut in the size of our armed forces from 238,550 in 1978 to 73,290 today. Yet it does not include all the jobs that have been pushed off the public-sector books by being recategorised under a plethora of agencies and trusts. And we are facing huge national debt - a financial position that is closer to the 1970s than we'd like to think.

A 33% tax burden is a little hard to believe for 1978 with a publicly owned gas and electricity board, British Leyland, British Telecom and British Rail, UK Public spending gives a figure of 42.9% for public spending and that would either mean the tax burden figure is woefully inaccurate or the government was seriously spending beyond it's means.

As for our armed forces, I've found a news story here that indicates that the MOD currently has 215,000 people in it's employ, I'm really not sure where she's getting her figures from, but they seem more than a little off.

While we're on the subject of defense spending, a few % of GDP figures:

1978 = 5.679%
1997 = 3.091%
2008 = 2.819%

So the Tories cut defense spending by 2.6% (they nearly halved spending) whereas Labour cut it by 0.2% of GDP (around a 9% cut). As a final point, it's worth noting that public debt as a % of GDP is around the same level it was in 1997 and had come down from a far higher figure by that point.

SNIP - Boring Bit - SNIP

It's a real shame. An opportunity missed. New Labour could have delivered the dream and truly changed Britain for the good - if only its control-freak instinct could have been resisted. Even now, Labour politicians talk of "empowering people". But the very fact that it is Whitehall granting people these so called "powers" over their own lives, which were theirs to begin with, reinforces Whitehall's dominance.

Giving a school "power to innovate" is simply giving it permission to apply to central government to avoid a barrage of unnecessary Whitehall restrictions, for a limited period. That's not empowerment - it's centralisation in disguise.

I'm not sure what to make of this bit, I can't offer any clear criticism but I would say this. All governments like to say they dislike central planning and bureaucracy but as DonPaskini pointed out a while ago, the Tory frontbench is rather lacking in hard headed technocrats with the expertise required to cut back the bureaucracy. There is no reason to believe the tories can do any better than Labour on this score.

As the credit crunch begins to bite in the high street and bastions of the financial world fall like dominos, the grim reality now dawns that, once again, the country's been spent out by a leftist government. Once again, it will take hard-headed, sensible, centre-right politics to sort it out.

The credit crunch is the consequence of letting the ideas of rightwing intellectuals rip, liberalisation of the financial sector is an idea with right wing origins, why should followers of this flawed set of ideas be the ones to sort it out?

Will Gordon Brown retreat further back to his deep-left core at his party conference speech tomorrow, and reach for the "capitalism is bad" vote? If he does, he will be disowning any success he may have presided over in the City. But even if he does not, the nation just does not have the time or money for any more pseudo centre-right. The D:Ream is over. Things are getting tough, and it's time for the real thing.

Possibly just personal opinion, but there really is no deep left in the Labour party no more. The LRC who whould probably count as the hard left would like a little more national ownership, higher taxes for high earners and stronger unions but this is not particularly more left wing than previous Old Labour governments. And the thing about capitalism is it works in theory, it just doesn't work in practice.

Talking of academies, I attended the opening ceremony of the new Brightstowe Academy, in Shirehampton, Bristol, this week. The previous school (Portway) had struggled for years, but the Oasis Trust came in and gave it a new birth.

I was struck not only by the energy and vision of Oasis, and the head, Julie Winterman, but also by their sensitivity to what young people need and want. Perhaps the most striking part of the day was seeing how many of the things that really made a difference didn't cost anything. One girl told me how, when Oasis took over, they were all put into houses, in their school, and had inter-house competitions.

I saw the benefits in action: the opening event was finishing and hundreds of young people were getting ready to storm out of the marquee. Chaos looked certain to ensue.

The head took the microphone. "I know which house is the winner of the behaviour competition," she said. (Or something similar.) "But if you don't all behave and leave in an orderly fashion, that might change." Hush fell. And several hundred teenagers filed out in order.

Good buildings and excellent facilities are important - but won't make a school. A good head, organisation and vision cost nothing, but are priceless. Here's to future success at Brightstowe.

The last bit, I would say is more a salute to Labour. Under Labour, teaching has become a far more desirable profession among graduates, our improvements have meant that the teaching profession has been able to attract far more talent. A good head, organisation and vision depend on being able to attract talented people to the profession, the reason talented people have been attracted to the profession is because of the extra funding Labour has put into education.

If these are the so called "New Tories", they seem to be full of cliches, devoid of ideas and in absolute denial of the good Labour have done in 10 years of office.

Hat Tip: Labourhome

Tuesday, September 16, 2008

Defending ID Cards Part 2, Identity Management

It's been a while, but once again I'll try to write a defense of ID cards, this time taking a look the way government agencies look after their data and what advantages an ID card scheme could bring. I do realise that I've not yet touched on Civil Liberties issues, I'll be addressing that issue next.

As it stands, the database state is not omnipotent, it's actually a bit thick. Different departments know different facts about you, but there is no easy way to tie these various bits and pieces together. Further to this, there is no easy way for a state agency to check that the information it's been given is correct. Identity documents might work here, but there are often easily forged and very few act as concrete proof of address, there are also similar problems with the actual issue of these documents in the first place. Time for background checks are often tight, especially when the request is for something of a high volume nature.

The check that is performed for the ID card combines an interview with a background check and a check against existing biometrics for duplicates. It's not perfect, but it's a stronger and better check than anything else. At this point the system would assign a unique reference number in order to unqiuely identify that person. Once a record is present on the national identity register it means that a check can be performed with a similar level of strength in a matter of seconds using a card fingerprint combo.

The advantage this gives to government agencies is twofold, first whenever you have to confirm your identity, the process will be faster and harder to fool. It'll no longer be able to give a false address, or impersonate someone else. This will mean that any future government IT project (carbon credits for example) will be able to use an out of the box customer identification system with built in checks to assist in identifying and preventing fraud.

The second is that it will be far easier to cross check data against that held by other agencies. As an example of the benefits of this kind of cross checking, the audit commissions data matching progamme identified £140 million in benefit fraud and overpayments. Rolling out this kind of checking across government departments could lead to considerable savings by pre emptively identifying problems such as overpayments.

Overall, rather than being viewed as an expensive white elephant, there is a good chance that an ID card system will, in the long term lead to cost savings.

Monday, September 15, 2008

A closer look Citizens Income

Those pesky libertarians love the idea of a citizens income, the basic idea is that you scrap all current benefits, tax credits, housing benefit etc and replace it with a single income guaranteed to all citizens. Another fan is Chris Dillow, a blogger who commands a fair deal of respect across the political spectrum. Often devoid from the discussion is the actual cost of implementing such a scheme, so I thought I'd try and crunch the numbers. This is all a bit "back of a fag packet" estimates from different places and such, but not a million miles off I'd reckon.

Let's start with a basic idea for a system, and make a few assumptions on the numbers. I'm assuming a UK population of 61 million, of this 80% are over the age of 16. I'm choosing an income level that should just about give a roof over your head and food on your table, so I'm going to say that Citizens Income will be £6,000 a year tax free for those over 16, £3,000 a year will be paid to the parents/guardians for those under 16.

On these calculations the cost of a citizens income before administration costs is £329.4 billion, £292.8bn for adults, £36.6bn for children. Quite expensive, but let's compare it with existing spend on this graph (courtesy of Labour Left Forum).

I'm assuming that this is "social protection" and therfore £161bn, therfore a Citizens income would cost over twice as much to implement, £168.4bn more in fact. If plonk this on top of the existing 587 million government spending we are left with a figure of 755.4 billion. As a percentage of GDP this is 54.7% (assuming a £1.38tn GDP), far higher than the current figure which is around 42.5%.

Of course, it will be argued at this point that a citizens income will be far easier to administer than the current myriad of benefits. Looking at the costs, the figure for DWP administration is around 6 billion based the following figures (source):
  • 402 million for the administration of child benefit
  • 1,083 million for the administration of the NI system
  • 241 million for the administration of disability benefits
  • 57 million for the administration of pensioner benefits
  • 2062 million for the administration of benefits to working age people
  • 2,160 million for corporate & shared services
On the assumption that a 75% cut in costs (£4.5 billion) could be achieved, this would give a total spend of £750.9 billion cutting state spending to 54.4%, a saving of 0.3% of GDP. In my book, not exactly a massive saving.

What I would conclude from all this is that a citizens income would require a massive increase in state spending. Far from shrinking the state it would lead to a massive increase in state spending. Further to this its worth pointing out the many issues a citizens income wouldn't address, for example care services would require a separate system. It also wouldn't take into account geographic variations in the cost of housing. What I would conclude from this is that at society's current level of wealth, a citizens income doesn't seem to be an especially viable option and is unlikely to give any massive gain to society.

Wednesday, September 10, 2008

Sarah Palin, a gift not a problem

The Republicans have been spinning John McCain's running mate like mad, everything right down to what kind of glasses she wears. Another more major one doing the rounds is how she's going to cause serious difficulty to the Obama campaign. What a crock is all I can say to that. Sarah Palin is a gift to the Obama campaign, she's bonkers!

Take her views on abortion: I'd Oppose Even If My Own Daughter Was Raped. My copy of The Political Brain (It's great,if you haven't, read it) points out that around 75% of Americans disagree with this viewpoint and support a more balanced view on abortion.

Again on the subject of marriage, I wouldn't be surprised if most Americans have a similar viewpoint. They may be fond of traditional family values, but it's serious stretch to go from that to believing that forcing your 17 year old daughter to marry the man who got her pregnant. Surely most people don't consider that "family values".

She may talk proudly of her views, but she's like the obnoxious bore in the pub, loudly expressing her views for all to hear. No one really agrees with her, but everyone's too polite to tell her to shut up. The Obama campaign shouldn't be polite, they should make it quite clear what they think of her and her views. Almost everyone will thank them for it.

Tuesday, September 09, 2008

Polly Toynbee is great..

I would just like to say, that I think Polly Toynbee is great. I like her articles I like the issues she addresses. The right has built up criticism of her to the level that there's almost a "sensible lefties don't like Polly Toynbee" attitude. What a bunch of crap, I like her writing and feel no embarrasment about that.

Today, she is right on the money.

Monday, September 08, 2008

Rethinking Protectionism

I commented on this post on a Lib Dem blog a zillion years ago, today I found out it got nominated for an award on LibDem voice. It's managed to stir me into finally writing something.

What is worrying me about this kind of post is that it's a sign of a very simplistic view of international trade being a popular, widely held viewpoint. The Lib Dems obviously aren't alone, most political parties view protectionism as inherently bad and free trade is inherently good. The problem with this viewpoint is that it ignores some of the complications within these arguments.

When people think of protectionism, what comes to mind is "beggar thy neighbour" policies that by their implementaion have seriously disrupted the trade of neighbouring countries. What is not so well reported are the enormous successes that occured as a result of protectionism, Nokia became the globally recognised company today due to serious restrictions on capital market access, Toyota and Honda are the result of policies designed to nurture developing industries and the industrial development of the US owes itself to protectionist policies.

Further to it's development advantages, there is the price stability argument to consider. In the perfect free trade world global food prices would depend on the world supply of food, this would be subject to fluctuations based on supply. Due to the nature of food production, suppliers are likely to be slow to adapt to pricing signals and therfore highly volatile. The result is that many farmers are likely to be unable to sustain their business since they will not be able to plan for the volatile prices.

The point I'd like to make here is not that protectionism is always a good thing, just that it should not be rejected out of hand as a policy idea. My view is that many developing countries could do with more flexibility over the setting of such policies and that occasionally, even in developed countries it is worth the government intervening for purposes of redevelopment and preservation of industry.