Thursday, 29 September 2011

Splits and schisms

It’s not often that I find myself agreeing with Peter Black, and it always causes me to pause for thought when it happens.  But I think he’s right to be dismissive about Peter Hain’s latest comments about a possible split in the Lib Dems.  (Actually, I'd probably say that anyone who is dismissive about almost anything Hain says these days is more likely to be right than wrong, but I'll stick to the specific here.)
There is a long tradition amongst politicians of seeing splits in everyone’s party but their own, and as often as not it’s based on the assumption that what is most important to the observer is also most important to the observed.  But interpreting the motivations and drivers of others through our own blinkers is never going to be the best way of predicting what those others might actually do.
From Hain’s increasingly tribalistic viewpoint, being ‘not the Tories’, and never under any circumstances working with the hated enemy, is a major driver of politics.  But it isn’t what makes the Lib Dems tick.  It doesn’t unite them in the same way that it appears to unite Labour.
I wouldn’t go as far as Peter Black does in saying that the Lib Dems “…are not a loose coalition of individuals but a party held together by common values and a coherent philosophy”.  Apart from anything else, the words ‘coherent philosophy’ are not ones I would generally use in the same sentence as Lib Dems; but I’m quite convinced that he’s right in saying that there’s more that holds them together than pushes them apart.
Foreseeing a split along lines which just might be favourable to Labour is to lose sight of those things which the Lib Dems share.  But it’s an approach which isn’t restricted to Hain and the Labour Party.
I feel the same way when I see some nationalists predicting the inevitable split of the Labour Party into its Unionist and Nationalist wings.  Certainly there are differences of opinion within the Labour Party about how far and how fast devolution should progress, but the constitutional status of Wales is no more the most important internal dividing line to Labour than is the question of not being Tories to the Lib Dems.  There is more holding the different strands of Labour together than there is pushing them apart.
I suppose that seeing splits and schisms in other parties makes good headlines, even if it's really just a bit of nonsense.  But there are two other things that worry me about it as an approach.

The first is the idea that the machinations of parties and politicians is what politics is about, rather than offering a choice between alternative futures.  It’s a very poor substitute for actually presenting an alternative and persuading people to support it.

And the second is that it looks like an attempt to define one party in terms of another - in effect, another way of avoiding real debate about substance.  Better, surely, to seek to define yourself on your own terms than allow yourself to be defined on someone else's.

Wednesday, 28 September 2011

But where's the ploughshare factory?

Many of the jobs being lost as a result of the cutbacks at BAE systems are the sort of skilled engineering jobs which are key to maintaining a manufacturing capacity at a time when so many manufacturing jobs have been exported to the Far East as a result of untrammelled globalisation.  And the job losses will be a heavy blow for the individuals and communities concerned.
The losses are, however, an inevitable result of cutbacks in military expenditure, which underlines two important points.
The first is that cuts in public expenditure don’t only affect jobs in the public sector.  Listening to some members of the government, one would believe that it’s only the ‘bloated’ (one of their favourite words) public sector with its ‘gold-plated’ (another favourite term) pensions and conditions which is being cut, and that cuts to the public sector are entirely necessary to restore the public finances.  In practice, there is a much higher degree of interdependency between the sectors than that.
And the second is that it is not possible to cut back on military spending without there being an impact on jobs and the economy – and I say that as one who has regularly and consistently called for a scaling down of the UK’s military expenditure.  ‘Swords into ploughshares’ is a two-part process; the second part is as important as the first, but is completely missing from government strategy.
I can understand the reaction from trades unionists and politicians, which has been to criticise the cutbacks and seek protection for the jobs, but it’s the wrong reaction.  What we need isn’t protection of jobs producing military hardware, but a planned and managed switch of those jobs into peaceful manufacturing.  Looking only at one side of the equation is short-sighted.

Tuesday, 27 September 2011

It's an ill wind...

That would be a kind interpretation of what one trader had to say about the possibility of a further economic collapse.  Too kind, in fact – far too kind.
It’s unclear whether he’s as central or as influential as he makes out, but I suspect that he’s only saying what many others of those involved in the ‘markets’ are thinking but have more sense than to articulate so publicly.  There will be many of them who have been placing large bets on a negative outcome for the Eurozone in the hope of enriching themselves and their clients at the expense of ordinary working people in countries such as Greece.
So what?  What’s wrong with a little flutter, whether on the horses or on the markets?
The problem arises when the act of betting starts to affect the outcome of the event on which the punters are betting.  In horse racing, it doesn’t matter how many people back the favourite; the amount of money bet on a particular horse will not affect that horse’s performance directly.  (It may encourage dishonesty or nobbling, of course, but that’s an indirect effect). 
In the money markets however, the betting directly affects the outcome.  This isn’t a case of a quiet wager between friends about where prices will be tomorrow or next week; these bets are made by trading in the instruments, and that trading affects the price.  If enough people bet on a particular outcome, then that outcome becomes more likely.
Supporters of the financial markets would argue that the outcome in fact reflects the collective wisdom of the experts in the field.  From that perspective, it’s a bit more than a mere gamble, because it’s about predicting what is likely to happen and planning to benefit from that outcome.  So, if collective wisdom says that Greece is going to default, then protecting themselves and their clients from the effects of that is just doing their job.
It is the fundamental untruth behind that apparently reasonable line which the comments of this one trader expose so clearly.  The betting on a Greek default isn’t driven by collective wisdom at all, but by naked self-interest.  They want Greece to default so that they can make money as a result.
The question for the rest of us is why we allow the financial system on which our daily lives depend to be run in such a fashion.  Why do we allow capital to remain as king?

Friday, 23 September 2011

Legislation and delivery

The comments made by Sir Emyr Jones Parry on the Welsh Government’s legislative programme have been extensively reported.  And it’s no surprise that some critics of the current government have been quick to seize upon the comments as justification for their stance.
It’s hard to disagree with the suggestion that integrated cycle paths may not be the most relevant response to the economic problems being faced by Wales.  And it’s equally hard to disagree with the suggestion that the Welsh Government’s legislative programme shows a certain lack of imagination and willingness to use the new powers devolved to the Assembly.
But reality, as always, is rather more complex than that.
I don’t know to whom in the four parties Sir Emyr spoke during the referendum campaign about how they would use the new powers, but I may have been involved in responding to the question on behalf of one of them, when giving evidence to the Convention.  (And, thinking back to what we said, probably not the party which gave him half an answer!)  It was a point that he was very keen to raise during the Convention’s hearings.  It was – and is – a valid question to ask at one level, but it wasn’t – and still isn’t – that easy to answer.
Even with the new powers, the situation in Wales remains one where specific powers are devolved under a multiplicity of different Acts and Orders, and no-one really knows exactly what the Assembly can and can’t do until a specific proposal is put forward and examined in detail by the lawyers.  It’s quite different from the situation in Scotland, where everything is devolved unless otherwise stated, and it makes it quite difficult to put forward a detailed legislative programme without a lot of legal work in advance.
Plus, from my point of view in trying to respond to his question, the new settlement wasn’t what I really wanted anyway.  It would have been much easier for me to say how I would use the powers of an independent Wales; what can be done within the current system is necessarily a compromise for those of us who want to see Wales as a member state of the EU.
At another level, it’s also a very one-sided question – it suggests that those who wanted powers devolved had to say how they would use those powers, but those who felt that the powers should stay where they were had no need to provide a similar justification for their opinion.  As I recall, Sir Emyr suggested that it was arrogant of us to ask for more powers without providing such justification.  But the argument for where powers should sit is not – certainly from a nationalist viewpoint – predicated on how they will be used.
Returning to the substance of Sir Emyr’s criticism, I’ve commented before that I thought that all of the manifestos for this year’s Assembly election were lacking in imagination, but in the case of new legislation, that would inevitably be the case for any party trying to put forward a legislative programme which was entirely achievable within the current settlement.
The more important question is the extent to which we judge a government on its legislative programme compared to the extent to which we judge it on its delivery performance.  Governments exist to do rather more than pass new laws – there’s far too much of a tendency to respond to any situation with a proposal for a new law.  It shows the sort of macho responsiveness so beloved of politicians, but often more can be done – and more quickly – by using existing legislation creatively and imaginatively.
Assuming that one can adduce a government’s priorities, and then judge that government, purely by considering its legislative programme doesn’t seem to be a sensible approach to me.  In the field of economics, delivery is more important than new laws at this stage. 
And it is on delivery rather than on legislation which we should judge the current Government.  Judging them on the content of their legislative performance may well give them a very negative score, but it is letting them off the hook on the far more important issue, which is their poor performance in delivery.

Thursday, 22 September 2011

Controlling policy, or refusing planning consent

The argument put forward by the UK Government for not devolving planning control over large energy projects to Wales seems to be based largely on the statement that “We believe that a streamlined planning system that minimises delays and ensures investor confidence is best delivered through a unified planning system for major infrastructure for England and Wales together”.
The basis for that ‘belief’ is unstated; presumably, it’s so obviously true to them that it doesn’t need stating.  (Although the statement does display their keenness to look after the interests of 'investors' rather then residents.)  It won’t be so obvious to others though, particularly since the same logic is not being applied to Scotland.  If a unified system works better for EnglandandWales than two separate systems, why would the same not be true for a unified UK system?
The same issue of the Western Mail contains a contribution from Owen Smith MP to the letters page, deprecating the suggestion that Wales should have its own cricket team.  His logic appears to be that “In cricket, as in so many aspects of life, we are stronger together”.
Again, it’s presented as some sort of self-evident truth; but why would the same not be true in the field of rugby, say?  Doesn’t consistency of argument require the author to advocate the abolition of the WRU?
The common thread between the two questions is an innate (small c) conservatism; what exists today should continue to exist.  It’s based, at heart, on axiom.
The way in which the energy decision has been portrayed is a more serious issue.  The Welsh Government hasn’t really proposed the devolution of powers over energy policy, although that’s what the story suggests.  The debate is simply about planning control over energy projects - that is not at all the same thing.  It’s more about having the right to say ‘no’ to specific projects than about taking responsibility for developing and implementing a sustainable energy policy for Wales into the future.
I’d be much more supportive of the Welsh Government’s position if Welsh Ministers were to formally ask for full devolution of energy policy rather than just planning control.  I suspect, though, that they may be more than a little frightened of the responsibility that would accompany that.

Wednesday, 21 September 2011

Averages and actuals

The Lib Dems seem determined not to let go of their obsession with the ‘funding gap’ in education, which shows that the total spent on average per pupil in Wales is £604 less than the total spent per pupil on average in England.  It’s as unclear as it ever was how important that gap is, or how much difference putting extra cash into education to close that ‘gap’ would actually make, but that seems to be mere detail to the Lib Dems.
Their simplistic slogan, that for them to support any budget, the budget must show progress towards closing the gap, raises more questions than it answers.  For starters, why – on the basis of what evidence, exactly – is the English average the ‘right’ amount to spend per head?  Where does the idea come from that because England spends £6,200 per head then that is the ‘right’ amount to spend?
And then, how do they want to close the gap, precisely?  The implication which most people will read into their statements (and I’m sure the one that they will want people to read into them) is that they will simply fund each and every pupil by an extra £604 per year.
Job done?  Well, not exactly, for a number of reasons.
Firstly, by any analysis of the figures, London is a special case.  The spend per head in London is very much greater than it is in any other region, more than 50% higher than the ‘rest of England’ average.  It’s more realistic to disregard the London figure, and look solely at the difference between Wales and the ‘rest of England’.  That difference is £412, not the £604 figure oft-quoted by the Lib Dems (or, as they seem to prefer for maximal propaganda effect, ‘more than £600’).  So perhaps we need only increase all education budgets by £412, rather than £604.
Again, not exactly.  The reliance on a high level comparison of averages might be a useful political tool, but it is of much more limited use in actually understanding the numbers.  Averages can sometimes conceal more than they reveal – and in this case, they neatly conceal the fact that the difference between authorities within Wales is significantly greater than the difference between the English and Welsh averages.
Four of Wales’ education authorities already spend more than the ‘rest of England’ average (and two of those already spend more than the English average including London).  If the English average is the ‘right’ amount to spend, why should not these authorities be penalised for spending too much?
And, leading on from that, if there is a fundamental problem – so severe as to make the Welsh Government’s budget unsupportable without action to address it – in the fact that the Welsh average is £412 (or £604; the argument is the same) behind the English average, what about the situation within Wales? 
The difference between the highest spending authority (Ceredigion, at £6,340) and the lowest spending authority (Vale of Glamorgan, at £5,001) is £1,339.  That’s more than twice the size of the headline difference between England and Wales, and more than three times the size of the more meaningful comparison between Wales and the ‘rest of England’.
That internal gap is something which is entirely within the control of the Welsh Government to address; the fact that no-one seems particularly worried about its existence underlines how misleading simple mathematical comparisons can be, unless complemented by an attempt to understand why differences exist and how important they are. 
A simplistic concentration on spend per head is little more than a band-wagon riding diversion from examining the real problems which we have in our education system in Wales, which are far more complex than a simple debate about funding.  It’s playing to the gallery rather than showing any understanding of those problems, or any willingness to get to grips with them.

Tuesday, 20 September 2011

Elusive proof

Science and politics don’t always sit easily together.  It’s tempting to suggest that that is because science seeks truth, whereas political ‘truth’ is always changing.  That isn’t entirely fair though; scientific truth can change as well, albeit not as easily or conveniently as political truth.  The timescale question is probably a more relevant one.  Politicians’ horizons are often limited to the date of the next election, whereas science tends to the longer term view.
Climate change – or more specifically, the anthropogenic element thereof – is an example of the way in which scientists and politicians are driven by different considerations, and on very different timescales.  Seen through the eyes of a politician interested in short term economic benefit, these comments by the MP for Monmouth make some sort of sense.
His core argument seems to be that if one country alone tries to take radical action to reduce carbon emissions, whilst others do little or nothing, then that one country will be seriously disadvantaged economically in the short term.  He’s right; the problem is not with that part of his argument.  (Although the conclusion drawn – that we should not do anything either – is far from being the only possible conclusion from that line of thinking.)
Such reasoning leads to a situation where no-one does anything until everyone else agrees to act as well.  If the science is right on climate change, such a conclusion is a recipe for disaster.  But as long as it doesn't happen in the timescales of any elections which current-day politicians are likely to be fighting...
Underlying his argument is another strand, which goes well beyond the question of unilateral action.  It is clear that he is not convinced about the existence of anthropogenic climate change in the first place, because it hasn’t been ‘proven’ to his satisfaction.  And he highlights a number of issues and statistics which underline that lack of conclusive proof.
In taking that viewpoint, of course, he’s far from being alone, although it’s a view which seems to be more widely held by politicians and economists than by the experts in the field.  And, up to a point at least, he’s right on that as well. 
‘Proof’ of a scientific proposition is an elusive beast, and greater understanding over a period can, and frequently does, lead to refinement or even fundamental change of the basic proposition.  But lack of complete proof is not at all the same thing as complete lack of proof; however, a jump from one to the other is all too readily made.
I’d accept the basic point that the impact of what we’re doing to the earth is not currently fully understood, and that many of the predictions are based on models which make a number of assumptions.  They may be the best possible assumptions, and they may be made by people who’ve spent a lifetime working in the field, but they’re still assumptions.
What we know for certain however is that human activity is adding CO2 and other greenhouse gasses to the atmosphere, and that the concentration of those gasses in the atmosphere is increasing.  The danger behind the thinking of people like David Davies is that we wait until the impact of that is entirely proven before acting – at which point it will be too late.
I don’t unquestioningly believe every prediction being made by the climate scientists; but given a choice of following their advice or that of a layman who happens to be an MP, I wouldn’t choose the MP.

Friday, 16 September 2011

False economies

This story in today’s Western Mail neatly highlights one way in which attempts to cut costs in the short term can backfire and lead to cost increases in the long term.  And whilst this may be an extreme example, I’ve seen other similar cases before.  The public sector is particularly prone to this problem, in its striving to achieve – and demonstrate – open competition and value for money.
I’m not sure that I entirely accept the figures quoted in this example, to be honest.  I find it hard to believe that each of 30 different companies would really decide, individually and separately, to spend £3,000 on bidding for a contract worth only £20,000, knowing that price was a key element in winning.  Spending 15% of the maximum total revenue value of a contract on the sales process looks excessive to me.  The only sensible decision for a company faced with that level of cost and competition for such a small contract is to qualify themselves out and decide not to bid.
And that’s the first way in which an excessively costly pre-sales process can actually push prices up – some of the more competitive and cost-conscious companies will simply decide not to bid.
If we take the figures as correct however, then presumably the procurer – in this case an unnamed local authority – might argue that the £90,000 in costs incurred by bidders isn’t their problem.  They’ve secured the best possible deal for their own authority, and that’s the beginning and end of their responsibility.  It’s a short-sighted viewpoint. 
Every company which spent £3,000 on an unsuccessful bid will be looking to recoup that sum on the business it does win; those pre-sales costs are thus effectively factored in to its prices.  And if they are going to lose 29 out of every 30 bids they submit, that’s an awful lot of factoring in.
It’s also the second way in which open tendering for small contracts can push overall prices up rather than down.
Most companies tendering for business should be expecting to win 1 in 3, or at very worst, 1 in 5, of the contracts for which they tender.  Any lower than that, and their pre-sales costs will start to make them uncompetitive.  A wise public sector procurement process which was serious about wanting real, long-term, value for money would recognise that.  If the rules to which public bodies are working are forcing, or even encouraging, the sort of approach highlighted by this article then they need to be changed.

Thursday, 15 September 2011

Stimuli, jobs, and multipliers

The latest figures for unemployment once again bring to the fore the question of whether the UK Government is following the best economic strategy or not.  And the fact that a different approach in Scotland has apparently led to a different outcome will add to the demand for a change of policy, although I’d be cautious about reading too much into one set of figures – people who claim to have the answer too quickly can all too easily be proved wrong a month or two later.
There are some economists who favour one approach, and others who favour another – it sometimes seems that politicians are vying to see who can come up with the biggest name economists in support of their position.  But ultimately, the question is more a political one than an economic one, and has as much to do with the question of who wins and who loses during the process of recovery as it does with recovery itself.
In that context, recovery through fiscal stimulus rather than recovery through fiscal rectitude will inevitably be the favoured approach of those of us who see economic fairness as an objective, rather than merely looking at the overall bottom line.
There is a danger, though, that in advocating a particular approach we overstate the potential impact.  I don’t doubt that a stimulus, in the shape of spending on government capital projects, will benefit the economy, but the extent of that benefit depends on the multiplier effect, and some of the claims for the numbers of jobs likely to be created from a given stimulus seem to be assuming an extremely high multiplier.
What the size of the multiplier effect is – or even whether there is one – is a matter of some debate, as this article from the Economist demonstrates.  An estimate of between 1 and 2 is probably reasonable; yet some claims for jobs created seem to assume a multiplier of up to 10, a figure for which I can see no substantive supporting evidence.
There seems to be little dispute that an expanded programme of spending has a greater impact than a tax reduction of the same amount – because the multiplier is higher.  Although a temporary cut in VAT might be politically popular, it’s unlikely to have as much effect as investing the same amount of money in capital projects.  Those who are serious about wanting a stimulus should really be concentrating on capital spending rather than tax cuts; concentration on tax cuts looks more like propaganda than economics.
But they should not be overstating the impact of their proposals, particularly in terms of the numbers of jobs likely to be created.  Creating false hopes may look like good politics in the short term, but it inevitably leads to disillusion over the long term.

Wednesday, 14 September 2011

The hecklers' accolade

Ed Miliband, I’m sure, knew exactly what he was doing when he spoke to the TUC yesterday – being heckled was just a bonus for him.  His words weren’t really aimed at those sitting in the hall, they were aimed at the television cameras, and the hecklers merely ensured that they made the news.
He, and his party’s strategists, will have concluded in advance that the trade union delegates – in England, anyway, which is where the bulk of them live – have nowhere else to go politically.  It doesn’t matter what Labour do or say, they’re not going to turn to the Tories or Lib Dems; their votes are safe.
Outside the hall, however, Labour need to attract back the votes which Blair attracted in three successive elections, and it is to their prejudices and opinions that Miliband needs to appeal, since – like most politicians – he’s more interested in saying what people want to hear than in offering an alternative vision.
I don’t know whether it will work or not, but the accolade of being heckled by the TUC will certainly do him no harm.  It could almost have been scripted.

Tuesday, 13 September 2011

Consultants for the union

An ex-boss of mine used to say that “A consultant is someone who borrows your watch to tell you the time”; i.e. that organisations hiring consultants do so not because they don’t know what to do, but because they need someone from outside to say it.  Usually because there’s something more than a little unpalatable about the answer.
I suspect that the government decision to set up an independent commission to consider the infamous West Lothian question is following a similar path.  The government know what has to be done, but need someone else – some ‘independent experts’ – to say it first.
There are only three real alternatives available.  The first is to carry on muddling along (with or without a few minor changes), the second is to roll back devolution, and the third is to formalise an England-only rôle in legislation.  The first is probably politically impossible for the current government, and the second is a political impossibility without the consent of the devolved nations – a consent which, in the words of Macbeth, "stands not within the prospect of belief".
That leaves only one realistic logical option open, and any commission which properly considers the question is likely to come to the same conclusion.  I suspect that Cameron and his immediate circle already realise that – and fully understand how difficult it will be to sell the consequences to his own party.  Time for an ‘expert’ review.
It isn’t the conclusion which will be hard for many Tories to swallow, particularly in England; it’s the ramifications.  Wrestling with a legislature which sometimes has to deal with UK issues, sometimes with English issues, sometimes with EnglandandWales issues, and sometimes with or without Scotland and/or Northern Ireland to consider as well creates a situation where drawing up a complete and clear set of rules covering who may vote on what would be a total nightmare.  The obvious and logical answer to that nightmare can be summed up in a single word – symmetry.
A symmetrical approach to devolution – where Wales, Scotland, and Northern Ireland have precisely the same powers devolved to them – would make it so much easier to identify and handle England-only matters; whether by special sittings of the UK Parliament or by a devolved English Parliament is essentially irrelevant.  Either approach implies something very akin to a federation – although it doesn’t have to be called that – and could end up being a fairly stable arrangement for some time to come.
It’s far from being unimaginable that the most radical devolution proposal to be offered to Wales could yet come from an initiative which is aimed primarily at ‘saving the union’, by the most unionist party of them all.  And it’s far from unimaginable that it might even work.

Friday, 9 September 2011

More than semantics

The I-word was the subject of much debate within Plaid, over decades, before it was finally adopted as policy.  Prior to that, the approved phrase was ‘full national status’, a phrase coined by Phil Williams because it meant the same thing, but avoided using the dreaded word.
I always felt that the objection to the I-word was more a case of semantics than of substance.  It was long clear – well, it was clear until about 2000 anyway – that Plaid’s aim was to achieve the same sort of status in the world for Wales as that enjoyed by other free nations, such as Ireland, Denmark etc., but the argument was that none of these countries were really and truly independent, they were all interdependent.  ‘Independence’ was not therefore a wholly accurate description.
It’s a good point, and one with which I entirely agree at an intellectual level.  The problem was that the common usage and understanding of the word ‘Independence’ is precisely that state of freedom enjoyed by countries such as Ireland and Denmark, and trying to avoid using the word that citizens of those countries would naturally use ended up looking shifty and dishonest.
If there’s one thing that Dafydd Elis-Thomas has always liked, it’s being controversial.  If he can upset a few, or even a lot of, members of his own party in the process, so much the better.  I don’t doubt for one moment that his comment that Wales will ‘never’ be independent will do both of those things. 
The question, though, is what does he actually mean?  Is he making a substantive point, or is he merely playing at semantics?  If he is simply restating that long-standing intellectual objection to the use of a particular word, then he’s saying nothing at all new, just re-opening a debate which was over and done with years ago.  And people would be getting upset and annoyed over nothing more than a bad attack of semantics.
But this looks like more than semantics to me.  It sounds like a declaration of his intent to continue along the path trodden by Ieuan Wyn Jones, of turning Plaid Cymru into a post-nationalist social democratic party which seeks further gradual devolution with no clear defined end-point. 
There’s nothing at all wrong with having such a party in Wales; there’s a clear rôle for such thinking.  But we already have at least one such party – and arguably up to three of them.  What does another one add?

Thursday, 8 September 2011

Where's the evidence?

The call by a number of leading economists for the 50p top rate of tax to be scrapped is nothing new.  Nor are the dire warnings about lack of competitiveness if we don’t reduce tax rates for the most highly paid.  But where is the evidence in support of that proposition?
Chris Dillow blogged yesterday on the same question, and provided a good rebuttal of the basic claims.  In truth, there is no real evidence that the marginal rate of tax on the highest paid has any real influence on where people live or on where they set up businesses.
Economists sometimes seem to assume that we will all behave according to their models of what motivates us, and will all be continuously seeking marginal economic advantage.  In reality, we are much more complex than that, and decisions depend not just on one single factor, but on a range of issues.
The question we need to address in rebuilding the economy is not whether a particular tax rate is or is not a disincentive, but the overall certainty of a reasonable return on investment, whether of money or of labour.  And that return is not measured simply in financial terms.
At heart, the call for a reduction in the top rate of income tax isn’t about economics pure and simple; it’s about an ideological interpretation of economics, in which inequalities of income are seen as an inherently good thing, based on the assumption that acquisitiveness is the prime human motivation.
It really isn’t the only possible model for human behaviour.

Wednesday, 7 September 2011

Half full or half empty

Whether or not better communications links have the business impact that is claimed is unclear to me.  I’m sure that poor links are unhelpful, but less convinced that good links, in themselves, will make the level of difference often claimed.
When it comes to rail links, I am convinced that better, faster, more reliable links will encourage a shift from road or air to rail, and are worth doing for that reason alone.  The claim that Wales could lose 21,000 jobs as a result of the HS2 link from London to Birmingham and points north is a figure which I’d treat with some caution, though.
As I recall, the French experience with the TGV services was that demand grew faster, and to a higher total level, than any of the advance projections suggested; but that the vast majority of those travelling were doing so for leisure rather than business purposes.  I rather suspect that the UK experience will mirror that - if a network is ever actually built.
And that ‘if’ was my main concern with this story today.  Although those quoted didn’t actually go so far as to say it, it almost seemed that they were arguing against building HS2 at all, because of the possible adverse impact on Wales.  It’s a tempting conclusion from a Welsh perspective – but it would be the wrong one.
The problem with consideration of high speed lines in the UK is that it’s all being done on such an ad hoc basis; there is no master plan, no vision for an integrated transport network linking up major cities across the UK as well as linking with cities on the mainland of Europe.  The result is that there is a danger of pitting areas against each other.  There’s nothing wrong with a bit of lobbying, or even a lot of lobbying, to be first in the queue; but it rapidly becomes destructive if the queue only has room for one.
I think there are good arguments for the link to Wales and the West to come ahead of the northern link, but if we can’t have first place then it’s better to be arguing for an early extension to the queue than to argue against the northern link.  An excessively negative approach could simply mean that we’d all lose in the end.

Tuesday, 6 September 2011

Catching criminals

There’s a certain inevitability about the way in which press coverage of lengthy reports will tend to highlight a few striking points rather than delve into the detail.  This report in yesterday’s Independent was no exception; faced with a 105 page report from the Policy Exchange (available here), no brief summary was ever going to do more than scratch the surface.  (Interestingly, the same report, almost word for word, appeared in the Western Mail as well as in the Independent)
One of the headline figures associated with the story was that “14,500 police officers in Wales and England made no arrests last year”.  It’s an eye-catching figure, but my reaction was to ask ‘so what?’.  Is the number of people arrested really the right criterion for judging the success of the police service?  I’m more interested in levels of crime – preventing and deterring crime is surely a better outcome than catching people after the event.
In fairness to the full report, it takes a much more rounded view of the efficacy of the police service than that one figure suggested, and the most important overall conclusion drawn, to my mind, was that increased expenditure on the police, and increased numbers of staff, have not resulted in a commensurate improvement in performance in terms of crime solving and reduction. 
But would we really expect it to?  There is no reason why crime should be different from any other phenomenon; the marginal cost of a small reduction is likely to get higher as the total falls.  Determining how much we are prepared to pay for a given additional level of further reduction is precisely in the sphere of political debate about priorities.
That doesn’t mean that the police service cannot find ways of doing some things more efficiently or cheaply, of course.  No organisation of that size is without potential for improvement, and the police must be subject to the same level of scrutiny as other services. 
In that context, the report raises some interesting points about civilianisation, and effectively questions whether the investigation of crime requires the same skill set and training (and subsequent salary costs) as those required by uniformed warranted officers.  It’s not the first time that question has been raised recently – there was a suggestion not long ago that the long-standing rule that all police officers of all descriptions have to start as ordinary constables should be revisited. 
The suggestion is anathema to many in the service, but that is not reason enough to reject it outright.  The UK approach to policing – as a single integrated service – is far from being the norm elsewhere.  Many countries have multiple police forces dealing with different issues at different levels.  Rather than concentrate simply on costs and efficiency, it might be better for us to take a more radical look at policing in general.

Monday, 5 September 2011

How much will we benefit?

There seems to be a general welcome for the proposal to build a rail hub at Heathrow with a direct connection from South Wales, but I’m not entirely convinced that it will be as beneficial to Wales as is being claimed.  As with so much else, the devil is in the detail.
Whilst in principle, any improvement in the rail network will help to encourage a switch from road to rail, there have been no hard numbers in the reports which I’ve seen.  I don’t know how many people actually travel from South Wales to Heathrow in the first place, but that will surely be a key factor in determining how many trains run direct rather than involve a change at Reading, and thus how much benefit the proposal brings. 
My guess is that most of those travelling from South Wales to airports in London do so for leisure purposes rather than business purposes – which would make Gatwick a more likely destination.  It also seems that most of the services to Heathrow are likely to involve a change of train; and no matter how good or frequent the shuttle service from Reading to Heathrow, a change of train will always reduce to some extent the number of people choosing rail rather than road.
Linking into the European high speed rail network would be a definite plus, but from the information available to date, it appears that the link to HS2 is a one-way link – good for going north to Birmingham etc., but not for heading east to the Channel Tunnel, leading to a danger that the proposal encourages, rather than supplants, air travel to near continental destinations.
But the biggest claimed benefit is in terms of the boost to the economy, something for which I’ve seen no evidence at all.  Whilst it is clear that poor communications links can put us at a disadvantage, the negative doesn’t prove the positive, and I fear that the business benefits are being significantly over-hyped.
And one final question which none of the reports has answered as yet – is this an English project, which means a largish sum of capital money available for investment in Welsh infrastructure under the Barnett formula; or would I be right in suspecting that it will be regarded by the Treasury as a UK project - from which the Welsh share of the benefits is likely to be considerably less than the Welsh share of the costs?