Monday, 31 December 2012

Rational Policy Making Vs The NHS Cult

Here’s an uncomfortable fact for you. Did you know that the unit cost of providing healthcare is rising at the rate of 9-10% per year? That means that for the NHS to deliver the same standard of healthcare next year as it has this year it will either have to spend 9-10% more or find ways to work 9-10% more efficiently. The alternative is that the quality or amount of care provided by the NHS will shrink by the same amount. This is a policy fact, not a political point. It cannot be made to disappear by a rousing speech about “saving our NHS”.

For whatever reason, the British are squeamish about discussing the cost of healthcare and even more so about discussing the ways in which it can be delivered. It is the ‘state religion’, as one ex-Chancellor quipped. As I have found to my cost on a number of occasions, if you raise this question in polite society you are accused of wanting to sell the NHS and to leave the poor to die of Victorian diseases. The problem is that the question is real, and that response simply ignores it.

By far the most popular policy would be to simply increase health spending by the required amount. Well, the NHS currently costs around £100bn per year. So that means finding £110bn next year, £121bn the year after and so on. Because the costs are rising so much faster than the general rate of inflation (around 3%), eventually the money to do this runs out. That’s pretty much the point we are at now, what with that massive unsustainable public deficit that people keep banging on about. The increased spending option no longer exists.

A different route, which was half attempted earlier this year by the coalition, is a structural change in the way healthcare is delivered. Suppose that instead of the government being the provider of healthcare (e.g. actually running the hospitals) it was simply a purchaser? In theory*, private companies would compete against each other to provide the cheapest and best service which the government would then pay for. It would still be free at point of use, so nobody would be denied healthcare because they were poor. How could anybody object? Well they did, and all because they heard the words ‘private’ and ‘NHS’ near each other. I put it to you that this is not a rational way to make policy, and is storing up even bigger problems for the future.

My general point here is that there is a very real need to address the challenge of healthcare costs today, particularly as we have an aging population which is going to make it even more expensive to deliver healthcare, and require it to be funded by a relatively smaller tax base. When you hear a politician say that they will ‘defend the NHS’ or keep it ‘free of market forces’, ask them how they will address the cost problem. I bet you they have no answer. Well, we need one, and we need it soon.  

*In reality this might not work quite so smoothly, for a number of reasons that I don’t have the space for here. If you are interested, let me know and I’ll write a separate post on the subject.

Thursday, 27 December 2012

The State of Play

Since writing a review of the year is too much of a cliché, but an excess of mince pies and brandy has sapped my imagination, I’m going to look at the prospects for the main political parties as we enter 2013. Oddly enough, none of them look on top form, but there are interesting trends to note and things to watch out for. As we shall see, we could be in for a fascinating year.

The Liberal Democrats

Oh dear. David Cameron once said that his favourite political joke was Nick Clegg. Well, Nick’s merry band of sandal wearers is now in such a bad way that pointing and laughing seems almost like bullying. In a recent by-election they actually managed to come eighth, the worst result in their entire history. The idea that a party whose voters generally choose it because it represents ‘none of the above’ could ever retain their support in government has been exposed as ridiculous. I have no sympathy.

That said, they are as cheerful as lemmings as they march towards their certain doom. The party is not tearing itself apart as you might expect. Their conference showed a remarkable degree of unity, and a desire to get on with the serious business of government (bless). The probable result of this is that they will continue to hold up their side of the coalition deal for as long as possible. Facing absolute devastation in the event of a general election, and with a party that wishes to be in a functioning government, Nick Clegg will stay the course. The same could be said of the captain of the Titanic, but there we go.


Superficially, this has been a pretty good year for the Labour Party. A well received conference speech silenced many critics of Ed Miliband’s leadership, who had previously written him off as a looser and a weirdo. The government’s extraordinary budget induced nervous breakdown resulted in Labour building up consistent opinion poll leads, which if translated into votes at a general election would see them in government with a comfortable majority of around 100.

You will note that I said superficially. Ed Miliband has now been ‘leading’ the Labour Party for two years. When he started out he set up a policy review which, starting with a blank sheet of paper, was to devise the policies which the Labour Party was to present to the British public. Two years and £1 million later, and that sheet of paper is still blank. His Shadow Chancellor has argued that the government’s economic policy is all wrong, and been rejected by the voters for his troubles, despite the continuing dire state of the British economy. When the Labour leadership does come up with an idea, it tends to be of the half baked variety, and is quickly forgotten. That well received conference speech brilliantly glossed over the fact that the Labour Party currently has no program for government, no agreed direction (‘one nation’ is a slogan, not a governing philosophy), and not a great deal of time to develop either. They are currently basking in the reflected glory of the government’s entirely predictable mid-term blues. Enjoy it while it lasts boys.

The Conservatives

This is where all the action in British politics is right now. In terms of party politics, the single most important event of the year was when Nick Clegg blocked the boundary review, effectively making it much harder for the Conservatives to win the next election. Harder, but not impossible. I’ve shown you how weak the underlying position of the other parties really is, and David Cameron can see this too. The path is open for a Blair style bid for the centre ground, made by a party that seems competent and yet in tune with the general mood of the British public. Cameron is still the sort of leader who could pull this off. His problem is that his party seem to disagree, both that he should be the leader, and that a bid for the centre ground is the path to success. A large group of Tory backbench rebels has coalesced this year, seemingly vetoing anything they consider unsound, which coincidentally is anything proposed by David Cameron that they don’t consider right wing enough.  

This is about to get a whole lot worse. If one thing unites and excites these rebels more than anything else in the whole world, it is a venomously hostile attitude to Europe. As luck would have it, circumstances have conspired to force Mr Cameron to actually have a European policy, which will probably (unwisely) involve some kind of in/out referendum. We could well be treated to a bitter factional fight between the Tory leadership, who as a rule are in favour of staying in, and their near fanatical activist/backbench base, about a subject that does not excite voters in the slightest. This is how John Major’s government imploded. Cameron has serious political skills, but it is going to take all of them to avoid this happening. Baring the inevitable unforeseen events, this is going to be the biggest political story of 2013, and although the public don’t care yet, the stakes are very high indeed. Should be fun.

Friday, 21 December 2012

When Jingoism Goes Bad

All but the most heavily sedated amongst you will have noticed that something has gone a bit wrong with the economy in recent years. It has gone so wrong that even our leaders in Westminster have been informed, and they have told us that they want to make economic recovery the government’s number one priority. You would think that this desire was shared by the people of Britain, who are the ones which are suffering, after all. The evidence sometimes suggests otherwise.

Yesterday, Transport Minister Simon Burns caved in to a local campaign and ruled that the Port of Dover cannot be sold to foreign owners, despite those prospective owners offering to inject £10 million immediately, followed by £1 million a year for five years into the local area. This is investment that the area, which suffers high levels of deprivation, desperately needs. Surely, if investment of this level is to be turned down, then the local objections must have been compelling, right? Prepare to be disappointed.

We learn from the Ministers rejection decision that the objections raised concerned “security, immigration and its [the ports] historic significance". We can immediately write off the concerns about security and immigration as obviously idiotic. UK law, regulation and enforcement would still apply to the port if it were in private hands, just as they do now. Nobody was proposing selling off the border agency, only the port they were policing. This leaves ‘historical significance’. It is here that the whole affair becomes embarrassing.

Historical significance boils down to something like ‘Dover is a symbol of British pride. We won’t let it fall in to the hands of dastardly foreigners’. The campaign was led by that well known maritime transport expert Dame Vera Lynn. Dover’s Conservative MP, Charlie Elphicke was actually happy to give the following quote:

 “The port of Dover is the gateway to our nation and should be forever England as much as Stonehenge and Buckingham Palace. The whole community is absolutely delighted that it won't end up owned by the French or the Chinese or anyone else”

What magnificent economic logic we see displayed there. What difference would the nationality of the corporate owners of a port make to the gateway of the nation? Well, they’d pay to spruce it up a bit for one thing. Britain benefits hugely from foreign investment, usually with no complaints. Do people think that if the port facility was sold off then some foreign country would dismantle the white cliffs of Dover? Perhaps they think that the immovable port could somehow be outsourced? Or, more realistically, are we looking at a case of self harming jingoism?

There is a serious point here. Investment in infrastructure like the Port of Dover is vital if we want to begin growing the economy again. Real people’s jobs and prosperity depend on us taking mature and adult economic decisions. Sadly, the decision making process in Dover more closely resembles this:

Monday, 17 December 2012

An Armed Society Is Not Free

“A well regulated militia being necessary to the security of a free state, the right of the people to keep and bear arms shall not be infringed.”

So runs the Second Amendment of the US constitution. This is the reason that firearms are freely available in the United States. If, like me, you believe that the ready availability of guns enables tragedies like what happened on Friday, then you must be willing to seriously address the moral arguments for a gun owning society.

The US was founded by an armed revolution against an undemocratic government. The Americans won their freedom by fighting for it, a fact that was recognised by George Washington in his 1790 State of the Union Address. The “well regulated militia” referenced in the Second Amendment were the armed Americans which he had led to freedom. If they had not been armed then they would still be subject to tyranny. It seemed logical that US freedom depended on this ‘common defence’ against overbearing government.

It is 2012. The time has come to make the case that the conditions which required an armed society no longer hold true. This is not because the idea of freedom is no longer important. It is because an armed society is impinging on the freedom of its members, who cannot in any meaningful sense be said to have a defence against their government through their possession of small arms, yet must live in fear of the consequences of mass gun ownership.

Consider the weapons that are available to US citizens. In some jurisdictions it is legal to own fully automatic assault weapons (e.g. the Colt M-4). These weapons are devastating in a school, or in a cinema. But does anybody seriously think that they provide any form of defence against the means available to the US government? The last US citizens who tried to find out were the Branch Davidians at Waco in 1993. Small arms were of no use against armoured vehicles. In the modern world, freedom from overbearing government can only come from democratic control of that government by the governed. There are no other realistic means available.     

In 1941, in a speech which echoed round the world, President Roosevelt defined freedom by four simple points. Free people can worship as they please, speak as they wish, live without the ravages of deprivation and be free from fear. Yet today it is fear which stalks the United States. The fear felt by parents who leave their children at the school gates, knowing that others who have done the same never saw their children again. The attempt to ensure a free society by arming its members has reached the point where the freedom of those members is actually diminished. Seen from this perspective, gun control is consistent with US liberty. We can only hope that this can be recognised before the next mass killing.       

Monday, 10 December 2012

Why Are They Smiling?

In last week’s Autumn Statement, the Chancellor basically admitted that his economic policy has failed on its own terms, i.e. the national debt is not going to fall in the time that he had planned. In a previous post I argued that I am unable to say with any authority whether a better policy is open to him in economic terms. Today I want to look at the politics surrounding his austerity program, because the public reaction to the failure is somewhat counter intuitive, to say the least.

As a rule, the British public is unforgiving of politicians. We tend to distrust them and, especially in the wake of the expenses scandal, assume the worst about their intentions. Combine that with the very serious argument against the Chancellor’s economic policies and you would think that we would be ready to throw him out of power at the first available opportunity. Yet this does not seem to be the case.

The message that George Osborne wants us to hear is that the coalition inherited a huge mess from the previous administration, and that it is taking longer than expected to clean up. He wants us to think that although it is hard going with him in charge, Labour would be even worse, and that they cannot be trusted with the economy again. What is interesting is that despite the dire economic circumstances many of us find ourselves in, the evidence suggests that we are taking him at face value.

According to a Yougov opinion poll, conducted after the Autumn Statement, more people blame Labour for the cuts than blame the coalition. A majority believe the cuts to be necessary, indicating that Ed Balls’ “too far too fast” Keynesian argument has failed to get through. Only 24% of those polled think that the economy would be doing better under Labour, and 38% think it would be weaker. The general feeling seems to be that the situation we are in is bad but it is Labour’s fault and Labour cannot be trusted to fix it.

This is a disastrous result for Ed Miliband’s party. Right now, in the middle of the Parliament, is traditionally the time when public disaffection with the governing party is at its highest. The economy looks set to be the central issue of the next election (assuming no large scale war breaks out) and yet the public do not want Labour to go anywhere near it. The consistent and intellectually coherent Keynesian argument that Ed Balls has spent two years setting out has basically been rejected. They are no closer to winning back the public’s trust on the key issue of the day than they were when Gordon Brown was Prime Minister.

I personally think this is an almost impossible situation for Labour to turn around. If they stick with their current position the public look set to continue rejecting it. Yet how can they credibly change course now, having spent two and a half years making this case? As things stand, George Osborne has presided over the longest economic slump in British history, and probably won the next election as a result. No wonder he’s smiling. 

Saturday, 8 December 2012

Suicide and Social Media

In light of the suspected suicide of the nurse who answered the prank call made by two Australian DJs to the King Edward VII hospital earlier this week, I want to make a brief appeal for restraint to those of you that use social media such as Twitter.

The Samaritans warn journalists that irresponsible reporting of suicide can increase the likelihood that others will attempt it. They advise that any coverage must take care not to simplify the reasons for the person’s death, never to claim that there are ‘positive’ side effects and to avoid any melodramatic or romantic descriptions of the event or its repercussions.

The torrent of complaints and abuse that the Australian radio station is receiving as a result of this call comes dangerously close to breaching all these rules. We do not actually know anything about the nurse in question, or her personal circumstances. There is a simplistic assumption that the prank call was the cause of the suicide, when it is likely to have more complex causes. The way that the public outcry has caused the DJs in question to be taken off the air comes close to providing the suicide with a form of utility, which it categorically did not have. What happened was that two teenagers lost their mother. No justice has been served.

I am bringing the journalistic guidelines to your attention because in the age of Twitter we are all journalists. We all have a responsibility, when publishing on a public forum, to ensure that what we say will not make incidents like this more likely.

If you wish to talk through any issues raised in this post, then the Samaritans are available 24 hours a day, 365 days a year. They can be contacted by phone on 08457 90 90 90 (UK) and 1850 60 90 90 (ROI).

Friday, 7 December 2012

The Autumn Statement, and a Challenge for Economists

This week has been dominated by the Chancellor’s Autumn Statement, a mini budget which set out the economic position of the UK, and the policy consequences. However you look at it, the news is grim. Real terms cuts to benefits, increased taxes in pensions and a bleak outlook suggesting that it will be many years before the economy returns to healthy growth are the order of the day.

I want to take a step back and suggest that, strategically speaking, the statement was actually less than meets the eye. No big change of direction was announced, although the situation is so dire that a shift in course might well be warranted. There are arguments that Britain should be on a different path, and I think it is worth bringing these to your attention, despite my limited knowledge of economics.

The statement itself was broadly speaking a continuation of the policy of economic austerity that was initiated in 2010. The underlying analysis is that Britain is suffering the effects of a debt crisis caused by excessive borrowing in the years leading up to the crash. A bloated and unproductive public sector, funded by borrowing, is dragging the economy down and crowding out productive investment in the private sector. This situation is unsustainable, and public borrowing must be brought down in order to free up resources to invest in the private sector. The spending cuts and tax rises in the statement are an attempt to do this. The problem that the Chancellor has is that the dire growth forecasts indicate that this is not working. As far as I can see, there are two major theoretical alternatives to this policy, which I shall set out below.

The first is that the policy is not working because it is self defeating. When public spending is cut demand is sucked out of the economy. In very crude terms all those sacked public sector workers are no longer spending their wages in local shops, so those shops go bust as well. The fewer businesses there are, the fewer there are paying tax, and the harder it is to pay off the public debt. The answer is fiscal stimulus, i.e. maintain high levels of public borrowing to maintain demand until the private sector recovers, and let this growth pay down the debt. This is the diametric opposite of the UK’s current economic policy.

The second alternative is that the policy is failing because it is too timid. The deficit (let alone the debt) is not being reduced because the measures announced so far are small in relation to the problem. Radical supply side reform and really drastic cuts are needed. This means (and these are random examples from off the top of my head) things like abolishing employment protection to make employing people cheaper, abolishing useless government departments (e.g. Culture, Media and Sport) slashing benefit programs like tax credits and other such policies. Only then will the conditions for economic growth be present.

For once I’m going to admit ignorance. I am not an economist and I do not know which approach, if either, is correct. If anybody does write anything from a position of knowledge in the comments I will, with permission, publish it as a full post. Blog rules apply; nothing over 600 words, assertions must be linked to credible sources where possible, and nothing which requires specialist training to understand. The floor is yours.