Tuesday 30 January 2018

What are the right assumptions?

Much of the reaction to the leaked government report on the consequences of Brexit is entirely predictable.  The report made it clear that on none of the scenarios modelled was there a plus side to Brexit in economic terms; the only question was how bad it was going to be.  Remainers have, of course, seized on the forecasts as evidence that Brexit is a really bad idea, whilst Brexiteers have responded with their usual disdain for ‘experts’. 
There’s some truth on both sides.  As the critics have rightly pointed out, any such report can only be as good as the assumptions made in producing it, and the track record of economic forecasting is not exactly one to be proud of.  Two things on which I have no doubt are that the long term is essentially unpredictable, and that plugging in a different set of assumptions would produce a different range of outcomes.  Despite the inherent unpredictability of some factors, and the fact that the degree of unpredictability inevitably increases as we look further and further forward, I still think that making an attempt at modelling the impact is a better way forward than not even trying and depending on blind faith, which is what some of the Brexiteers would seem to prefer.  That means that any rational debate has to concentrate, first and foremost, on the robustness of the assumptions being made – and those who want to challenge the results need to be able to say why and how those assumptions are wrong.
The fact that an increasingly broad range of economists are coming to similar conclusions is not, in itself, proof that they are right.  ‘Groupthink’ can and does cause such convergence in other fields, and it could be a factor here, but the very existence of a clear and growing consensus should be at the very least a cause for giving the matter a bit more thought.  Merely dismissing anyone who disagrees as an ‘expert’ who therefore knows nothing isn’t a very sound basis for decision taking.  The problem which the Brexiteers have in challenging the report was, for me, summed up by the response of the unnamed Treasury source: “It does not, however, set out or measure the details of our desired outcome - a new deep and special partnership with the EU”.
Let’s be clear – this is a source within government saying that the work done by the government (and not just by the ‘government’ in a generic sense – this was work done by civil servants in the department actually charged with negotiating the outcome) doesn’t cover the option preferred by the government.  In any other circumstances, that would be an astounding admission.  In circumstances where the government has shown a complete inability to define what it does want, however, it’s the only possible result.  How can anyone model a situation which is not defined in terms other than a ‘deep and special partnership’  with no detail of what that means, and when those using the phrase consistently refuse to acknowledge the simple truth that it can only mean ‘less deep and less special’ than the partnership which currently exists?
The simple challenge to them should be this:  OK, you’re telling us that the assumptions are wrong – so what are the right ones?  The day that they can answer that question is the day that it might be possible to start modelling what they have in mind.  But they also need to bear in mind that assumptions that the EU27 will simply allow the UK to have all the benefits with none of the costs might well produce a much rosier outlook in a mathematical model, but they will be less useful as a prediction tool than employing Mystic Meg.

Monday 29 January 2018

Theresa went to Davos

During her outing to Davos, the Prime Minister called for international co-operation to develop ethical rules for the use of technological breakthroughs in areas like artificial intelligence.  For once, I agree with her.  There are many issues on which the sensible way forward is to reach an international agreement on a common set of rules.  It means of course that not every country will get exactly what it wants out of that set of rules; there will inevitably be compromises to be made. 
Nevertheless, having a single set of rules can work very well - up until the point where one country decides to ‘take back control’, to coin a phrase, and demands the right to make its own rules.  And that’s the problem that I have with her proposal: there’s something more than a little disingenuous about a Prime Minister whose only significant policy is that her country should have the absolute right to set its own rules jetting off to Davos to tell an international gathering how important it is that they all abide by a common set of rules.  That neither she nor her advisers spotted the incongruity shows how deeply ingrained in their mind-set is the idea of British exceptionalism.

Friday 26 January 2018

Which wavelength is that, then?

Apparently, Theresa May and Donald Trump are “on the same wavelength, I think on every respect”.  Or so said Trump yesterday after their meeting, so it must be true, at least until he says the opposite.  I’m not sure that May will be quite so comfortable with the idea, even if finding someone on the same wavelength as her might be something of a novel experience.  It’s certainly not one to which she is accustomed closer to home – in the cabinet for example.
Having slapped down the Foreign Secretary earlier this week, yesterday it was the turn of the Chancellor to have his words disowned by the boss for daring to express an opinion different from her own, even if she has been unable to articulate what it is that she actually does believe.  I thought that the point which Hammond made – which has provoked such a furious reaction from the Brexiteers on his own side – was an entirely sensible one.  The salient part for me was this:
“So instead of doing what we're normally doing in the trade negotiations - taking two divergent economies with low levels of trade and trying to bring them closer together to enhance that trade - we are taking two completely interconnected and aligned economies with high levels of trade between them, and selectively, moving them, hopefully very modestly, apart.”
The words which seem most to have inflamed feelings on his own side are the ones which I have highlighted, namely:  ‘selectively’, and ‘hopefully very modestly’.  Without those words, I can see nothing to which the Brexiteers could possible object.  It would be a simple statement of fact.  It does, though, state the fact in a way which exposes one of the big lies at the heart of the Brexiteers’ claim that the UK will be able to improve its trading position as a result of Brexit.
As Hammond says, one of the keys to the most successful trading agreements is bringing divergent economies together; but at the heart of the Brexit project is a desire to move convergent economies apart.  It is true, of course, that being out of the EU will allow the UK to negotiate its own agreements with non-EU countries, although such negotiations will inevitably require a seeking of convergence with those countries instead; that’s what agreements are about.  And it also overlooks the little fact that the EU is already seeking to expand its range of trade agreements with non-EU countries in a way from which the UK would also benefit if it were to remain a member of the EU, and using its greater power and leverage to secure, probably, a better deal than the UK alone is likely to achieve, involving more convergence.  But pretending that introducing deliberate divergence between the EU and the UK is a route to improving trading relationships is flying in the face of experience and logic.
I can understand why some might feel that it doesn’t matter if trade suffers a little (or perhaps even a lot) as a result of Brexit; because the key thing is that the UK will no longer have to share any of its sovereignty, and will have the absolute right to set its own rules.  It’s an argument which values that separateness, that specialness, over and above mere economic benefit.  And whilst I might take an opposite view, it’s also an honest argument, setting one ‘good’ against another.  The problem is, though, that it wasn’t what they told us at the time of the referendum, and it isn’t what they’re saying now.  They’re still trying to tell us that having greater divergence will lead to more trade.  The sort of honest assessment of reality put forward by the Chancellor yesterday is just ‘fake news’ to them.  Perhaps May is closer to Trump's wavelength than I thought.

Thursday 25 January 2018

Identifying the devil

The leader of the Conservatives-in-Wales group in the National Assembly has written this week about the lack of political engagement with the National Assembly, as measured by turnout in elections.  It’s true, of course, that there is a low level of participation in Assembly elections, just as there is in local government elections and elections to the European Parliament.  The only elections which regularly attract a decent turnout are those to the UK Parliament, although even in that case, there has been a falling off in turnout levels over recent decades. 
That, perhaps, gives us one clue as to the underlying cause of low turnout; there seems to be something of a correlation between the level of turnout and the perceived importance of the relevant level of government.  In fairness to Davies, he does point out that many people will feel that the low level of engagement is indeed down to the limited powers of the Assembly, even if he then proceeds to identify his own preferred cause, which is a perception that voting will not make a lot of difference because Labour will still win.  I have a lot of sympathy with his view that there is a feeling that voting will change little, although there’s rather more to ‘making a difference’ than merely swapping the ruling party, a conflation which seems to be implicit in the piece.
There was another article on Nation.Cymru last week which also talked about the extent and duration of one-party rule in Wales, and the need for an alternative to the Labour Party.  It made some sound points, but the assertion that “In a mature democracy, power will naturally swing back and forth between parties every decade or so” left me cold, I fear.  I really don’t see why, before it can be considered ‘mature’ (whatever that means), a democracy requires a periodic change of governing party, or even the existence of a viable alternative to the governing party to such an extent that all the opposition parties should come together and form an alternative government, which is the implicit thrust of both articles.
Saying that is not to dismiss the criticism of Labour, much of which seems entirely valid to me.  Wales is governed by a party which seems to be managerialist, lacking in vision, unwilling to move out of its comfort zone, and motivated largely by its own desire to hang on to power.  And the basis on which it regularly seeks re-election has no more substance than a simplistic claim to be ‘not-the-Tories’.  But none of that seems to me to be justification for an alternative which by its nature (a temporary and probably fractious union of dissimilar parties) can have no clear alternative vision, which would be motivated largely by the desire of its prominent figures to exercise power and their belief that they can manage things better than Labour, and would be united only by virtue of being ‘not-Labour’.  It’s hard to discern which is the devil and which is the deep blue sea; it’s not a real alternative at all.
The underlying issue is that Wales is getting the government for which people vote under the electoral system which is in use.  A change in that system to one based on STV would mean that Labour would be less dominant than they are currently (the implementation of which therefore requires the turkeys to vote for Christmas), but on current voting habits would still leave a large Labour group and a split opposition.  It’s possible that such a change would also lead to a change in voting habits as well, of course; it would certainly provide more opportunity for newer and different parties to gain representation in the Assembly, even if at low levels.  But the basic problem remains – Labour seem likely, as things stand, to continue to win the most votes and seats.
I say ‘problem’; but what sort of democracy is it which says that one party regularly winning the most votes in a free and open election is a ‘problem’?  The way to bring about change isn’t for disparate parties to come together to try and form a government which sidelines the Labour party; it is for parties to persuade people of the need for change.  But political debate in Wales seems to be less about alternative visions and more about alternative management teams.
To return to the question of political engagement as measured by turnout – why would anyone believe that voting for a different set of managers would inspire people to participate?

Tuesday 23 January 2018

Boris knows all about the tree

According to media reports, the Foreign Secretary is today demanding that the Cabinet allocate an extra £100 million a week to the NHS.  It’s the sort of thing that Foreign Secretaries do, of course, whenever they’re keen to become popular enough to get elevated to the role of Prime Minister (and when they’re not busy insulting the countries with whom they’re supposed to be building strong relationships).
He does seem to be having a bit of trouble with his arithmetic, though.  Last week, he told us that the £350 million weekly Brexit bonus which could be diverted to the NHS was an underestimate; this week he suggests that the bonus available to the NHS is less than a third of the original number.  But then, since the true number is almost certainly negative – in the early years at least – it doesn’t really matter whether the numbers add up or not.  It also doesn’t matter whether the amount of money corresponds to any identified need or demand; if you’re going to pluck figures from the air, nice round ones are as good as any. 
I don’t know – and neither does Johnson – whether the amount needed by the NHS to provide a decent service is an extra £100 million a week, an extra £200 million a week, or some other figure.  That it needs more to do what it is currently trying to do (and I’ll accept, in deference to one commenter yesterday, that that is based on an assumption that there is an understood definition of what the NHS should or should not be trying to do), seems to be generally accepted, but pulling a figure out of the air is not exactly a scientific approach to government expenditure.  And the idea that an extra weekly sum in about three years’ time after EU payments cease has anything to do with this year’s winter crisis is, shall we say, a ‘creative’ bit of presentation by someone who needs the popularity now, before the government collapses.
In another ‘interesting’ intervention last week, Johnson called for the building of a bridge between the UK and France.  Given his colourful history, there aren’t many people who would use the phrases ‘building bridges’ and ‘Boris Johnson’ in the same sentence, but I’m more interested here in the financial aspects.  No-one can really put a figure on the cost of building a 22 mile bridge across a deep and busy shipping channel with often difficult weather conditions, but it would almost certainly be many billions more than whatever the initial estimate said.
Leaving aside the possibility that the Foreign Secretary has already written off all hope of a Tory victory at the next election and therefore feels free to make outrageous promises which he and his party will never be called upon to honour, I can only conclude that he is admitting that there is, after all, a magic money tree.  The fact that his party came to power in 2010 on the premise that the current account deficit needed to be eliminated by 2015 or else the sky would fall in, and is now saying that it doesn’t really matter if the deficit lasts until 2031, is a pretty strong clue that they’ve known the truth all along.  A government which controls its own fiat currency, such as the UK, can create as much money as it needs to, as and when it needs to.  The only real caveat is that there also needs to be a willingness to raise taxes if the resulting increase in cash leads to excessive inflation.  The point at which that is likely to happen is a matter of belief based on an ideological perspective; it isn’t a number which can be derived by any formula.
If Johnson was really concerned about the NHS rather than positioning himself to succeed May, he’d be demanding the release of extra money now, not artificially linking it to the date of Brexit.  But the NHS, just like leaving the EU, is, for Johnson, more to do with calculating how to serve his own best interests than ours.  The odd thing is how many people fall for it based on the bumbling persona which he has created for himself.

Monday 22 January 2018

Doubling down on the lies

Apparently, Goebbels never actually said that "If you tell a lie big enough and keep repeating it, people will eventually come to believe it.”, although he’s frequently quoted as having done so.  It seems that he believed that truth made for better propaganda.  He did, though, write this: "The English follow the principle that when one lies, one should lie big, and stick to it. They keep up their lies, even at the risk of looking ridiculous." 
It is, of course, unfair to smear a whole nation in such a way, but that doesn’t mean that one can’t find individuals who fit the bill.  Boris Johnson, for example.  The infamous slogan on the side of that big bus has been debunked time and time again, but Boris is like the arsonist who cannot help returning to the scene of his crime.  Last week, he told us that the figure was indeed wrong – it should have been higher.  But then, looking ridiculous is nothing new to Boris, especially if he has some union flags to wave at the same time.
There are, at least, some Tories who seem to have enough honesty to be at least a little embarrassed by such misleading claims.  The Maldwyn MP, Glyn Davies, repeated at the weekend his previous suggestion “Let’s agree to invest £350 million per week more into health and social care” as a means of lancing the damaging sore which the inflated claim has caused.
I don’t know whether that would work or not; it might, but it would also undermine the claim that we can’t find the money for the NHS if we want to, a claim which is central to the government’s policy.  Glyn Davies claims that it would ‘shoot the fox’; but it seems to me it would also be shooting both his government (and himself) in the foot by exposing the other great lie, which is about government finances and what is possible within them – which is why the government is unlikely to follow his advice, preferring to twist in the wind as the bus promise continues to haunt them all.
He starts his piece by saying “The stark reality is that it will never be possible for the NHS to meet the demands of a growing population, an aging population, and the irresistible costly advance of clinical science.” which is a wholly unevidenced assertion based on his, and his party’s, own priors about levels of spending and taxation.  The claim that the government can and should simply add £350 million a week to the NHS budget with no attempt to identify the source of such funds is enough to fatally undermine the assertion.
We can have the health service we want, with or without Brexit (although it’s probably easier without Brexit given the likely damage to overall government finances in the first few years after leaving the EU).  It is ideology, not economics, which prevents that.  Repeated often enough, the big lie that it can’t be done will also end up making the liars look ridiculous.

Friday 19 January 2018

Myths and fairy godmothers

I’m sure that the Prime Minister would have preferred that no-one asked Macron about Brexit at their press conference yesterday.  And her second preference would have been that, if asked, he would have declined to answer.  However, her fairy godmother appears to have gone AWOL for the day (well, actually, she seems to have been AWOL for some time now), and the question was not only asked, but answered in very blunt and direct terms.
Fortunately for her – albeit not for the rest of us - in the parallel universe inhabited by May and her team, this apparent answer isn’t an answer at all; it’s merely a negotiating position.  When the French president says exactly what the President of the EU Commission, the President of the EU Council, and the EU Chief Negotiator have reiterated time and again (in essence, that they too want a good deal with the UK, but they’re not going to undermine the single market to get it), what the Brexiteers actually hear is that they need us more than we need them, and of course they’re going to compromise on the single market rules, it’s just a matter of time and negotiating skill, both of which they believe – despite all the evidence to the contrary – that the UK possesses aplenty.
There is a sense in which the EU team are as deluded as the UK team in this process – the EU team actually seem to believe that spelling out mere facts clearly, explicitly and repeatedly is going to make a difference.  I’m not sure what other strategy they could reasonably be expected to follow, but depending on facts and evidence is doomed to fail when dealing with a UK leadership which remains mired in romantic historical myth.  Insofar as I see any potential benefit coming out of all of this, it is that that myth is inevitably, and at long last, going to be shattered. 

Monday 15 January 2018

Leadership responsibilities

Given Farage’s comment before the 2016 referendum on the EU that a narrow Remain victory would be “unfinished business” and lead to a demand for a second referendum, there was a strange and unusual consistency about his statement last week that he was “warming to the idea” of holding a second referendum, even if his motive was more to do with ensuring a complete separation than allowing people to change their mind.  However, consistency and Farage are not concepts which sit together well for long at a time, and he subsequently seems to have reverted to his previous position, which was, in essence, that any vote which goes his way is irrevocable; it can only be revisited if he loses.
The reaction from within his own party underlined what a happy ship UKIP isn’t at present with some saying that his judgement is shot to pieces and some even calling for his expulsion from the party.  The UKIP AM for South Wales Central has become somewhat notorious for making outrageous comments, but I suspect that he’s actually more in tune with the membership of his party than those who would prefer him to be more guarded.  His comment "Why would you run the risk? We've won the vote, why would we put that at risk by having a second one?” neatly summarises the attitude which the Brexiteers (including Farage apart from last week’s brief wobble) have held since the referendum.
Democracy is not, and can never be, a case of making a decision on one day and living with that for ever after; there has to be an opportunity to revisit decisions once taken.  It has seemed since the referendum that the Brexiteers are demanding ever more stridently that those of us who feel the wrong decision has been taken are duty-bound to remain silent and support the result, and that anyone who does not is some sort of traitor.  It’s a fundamentalist, almost totalitarian, approach to an issue which saw the electorate divided almost equally.
The issue is not whether a second referendum is undemocratic or not, it is about what circumstances, in a democracy, should be considered sufficient reason to revisit a decision taken by popular plebiscite.  The Lib Dems have been arguing for some time that the emergence of more detail about what Brexit actually means, and the incorporation of that detail into a deal of some sort provides the ideal opportunity and should be the trigger.  I’d agree that it’s the obvious opportunity, but I’m not sure that it’s sufficient in itself.  The more important factor to me is clear evidence of the sort of change in public opinion which would enable a majority of MPs to argue that holding a second referendum is meeting a public demand rather than merely expressing their own view. 
We’re not yet at that point, although I’d like to think that we can get there.  What doesn’t help, though, is for politicians who would prefer to see the decision reversed to be arguing that there are no circumstances in which there can be a second vote, because ‘the people have spoken’.  It’s as though they want to opt out of any responsibility for opinion leadership and simply wait for people to change their minds unprompted.  They are, effectively, discouraging rather than encouraging a change of opinion.

Friday 12 January 2018

Policy, not money, is the main problem with the NHS

One recent response to the problems of the NHS has been the call for an extra penny on tax to provide more funding.  I don’t doubt that many will find this an attractive idea, and it’s certainly one way of ‘selling’ a tax increase, but I’m not convinced.  An extra 1p on all rates of income tax would raise an estimated extra £5.5 billion a year, or around 3.5% of the total health spend.  That certainly looks like a lot of money (although a cynic like me would point out that it is less than a third of the bonus which the NHS was allegedly going to get from Brexit: that infamous and largely imaginary £350 million a week works out at £18.2 billion a year).
However, I’m dubious about the idea of hypothecated taxation, particularly when the hypothecated tax in question only funds an ‘increase’ in spending.  I don’t trust governments to use the extra cash in the way that those supporting such a tax increase would prefer beyond the first year.  It would be very difficult to prove that the whole of the money raised by the extra penny was actually being used on the NHS, given that the bulk of NHS spend would still be coming from ‘other’ taxes, and the amount of that spend will vary.  And with a total budget of around £147 billion, it doesn’t take many years of a stagnant base budget for the ‘extra’ £5 billion to disappear, even if inflation remains very low.  I’m also not convinced that the problems with the NHS are as simple as a need for extra money (which is not to say that extra money isn’t required).  There are other policy issues as well.
But my main reason for disliking this proposal is that it reinforces and perpetuates the myth that the problem with public services is that the government doesn’t have enough money to meet the needs of citizens.  The prime constraint on the amount of money provided to the NHS by the government isn’t affordability, it is policies and priorities. For all the fine words uttered by ministers about the NHS being a national treasure and ever so close to their hearts, their actions don’t match those words; they choose to follow a policy of reducing overall expenditure rather than one of providing necessary services.  The obsession with balancing the budget is based on ideology, not economics.  And the fact that it isn’t a necessary policy objective is underlined by the continued ‘adjustment’ (i.e. deferral) to the timescale for achieving it.  We can fund a proper health service if we want to, without gimmicky proposals like this one.

Thursday 11 January 2018

Deciding on the numbers

There was a report in yesterday’s Western Mail about the evidence given by Professor Roger Scully to the committee of MPs looking at proposals for a reduction in the number of parliamentary constituencies.  In his comments, Prof Scully was quoted as saying “Last year we actually elected slightly more councillors than Scotland did for no particularly obvious reason”.  It’s a statement of fact, of course, but I could equally turn it on its head and say that “Last year Scotland actually elected slightly fewer councillors than Wales did for no particularly obvious reason”.  The second is as true as the first, but the word order of the first implies that the problem is in Wales, whilst the word order of the second suggests that the problem is in Scotland.  My point is simply this – the difference in numbers in itself tells us nothing about what the ‘right’ number is in either case, merely that two different jurisdictions have come to two different conclusions.  The word order which we use to express that difference owes more to our own preconceptions about whether the ‘right’ number should be higher or lower than the current number than it does to any assessment of the ‘right’ number.
It’s a point which is relevant to the discussion about an increase in the number of members of the National Assembly, where I find myself in the curious position of agreeing with the conclusion that there should be more whilst being highly sceptical about all the arguments being put forward to justify that increase.  The underlying problem is that there is simply no objective basis on which to assess how many are needed, and whilst there is some clarity around some of the main responsibilities, the job itself is open to as many different definitions as there are AMs.  Comparisons with the number of members of other legislatures form a part of the argument being put forward, but who is to say – and on what basis – that those other legislatures have got their numbers right in the first place?
My own starting point is this: I’m a long-time supporter of STV as a method of electing representatives, but I acknowledge that constituencies electing 3 or 4 members under STV will inevitably cover greater geographical areas than single member constituencies electing the same total number of members.  Retaining smaller geographical units with more direct and local connections with electors is possible, under STV, only by increasing the total number of members.  So, rather than replacing 40 single member constituencies and five regions with 15 four-member constituencies, I’d prefer something more like 25-30 four member constituencies, and a consequent increase in the total number from 60 to 100-120.
But, in truth, there is no more solid, sound, or objective basis for choosing 25-30 than for the current number of 40 – or for any other number.  I entirely accept that it’s based on a compromise between my own preconceptions about the use of STV, the ‘right’ size for a constituency, and the ‘right’ total number of AMs – just as I believe that much of the debate about the whole issue is based on the preconceptions of others, backed up by an attempt at retrospective rationalisation of the conclusions to which they’ve already come.  They’re just less willing to own up to the fact.
That in turn goes to the heart of the problem in taking the proposals forward.  The lack of any consensus about the ‘right’ numbers, coupled with the politicians’ natural fear about public reaction to an increase in numbers and an unwillingness to argue that proper democracy doesn’t come free (to say nothing of Labour's instinctive aversion to more proportional representation) means that it currently seems unlikely to me that the latest proposals will do much more than join those of previous reports on a dusty shelf somewhere in Cardiff.  Still, we can always have yet another commission in ten years’ time…

Wednesday 10 January 2018

Splitting hairs

At a time when the government has managed to set itself impossible objectives over the most important change facing the UK for decades, the main opposition party, Labour, sometimes seems to be going out of its way to be even more incoherent on the same issue.  Whilst I actually agree with the Brexiteers that remaining part of the single market isn’t really leaving the EU at all (it achieves few of the objectives which they originally set themselves), it’s clear that the short term economic damage would be much more limited.  I had thought that Labour was edging towards that position, but Corbyn has managed to lead them away again, by saying that the UK cannot stay within the trading block.
Technically, what he and those speaking for him are saying is correct; “The single market is not a membership club that can be joined”.  It isn’t, and there is no way of applying to join it as a member.  It’s hair-splitting, though.  It is perfectly possible to continue to ‘participate’ fully in the single market without being in the EU, as Norway does.  It involves accepting the rules of the single market, of course, but that’s ultimately all a single market is – a set of rules and regulations followed by all and enforced collectively.
Obtaining the benefits of participation in the market depend on adherence to, and enforcement of, those rules and regulations, but in saying that “we seek through negotiation to retain the benefits of the single market” without committing to doing that, Labour are effectively suffering from the same delusion as the Tories.  The difference between ‘participation’ and ‘membership’ is mere semantics, but if they want to be pedantic, let them carry on.  The more significant difference is between ‘participation’ and merely seeking to ‘enjoy the benefits’, and until Labour move from the latter to the former, their position will continue to be, in substance, no different from that of the government.

Tuesday 9 January 2018

Much ado about little

In an apparent attempt to make a great deal out of very little, there was a certain amount of over-reaction to yesterday’s news about the removal of VAT from the Severn Bridge tolls.  On the one hand, the Secretary of State for Wales declared that this would create "exciting opportunities for businesses and investors looking to make their mark in Wales"; whilst at the other extreme we had dire warnings about an influx from Bristol into Monmouthshire forcing up house prices and putting untold pressure on schools and surgeries.
The economics behind these predictions are sound enough in principle, according to the theories.  Changing the price of something affects the demand for it and people respond accordingly to the stimulus.  But there is another question involved in this, and that’s the ‘reasonableness test’: in the real world, it’s not just whether the arithmetic is correct, but whether the projected final totals look as if they might create the effects predicted.
Let’s do some simple sums.  The difference between the old toll of £6.70 and the new one of £5.60 amounts to a princely £1.10.  Assuming one trip a day, 5 days a week for around 45 weeks of the year (allowing for holidays etc.), someone commuting daily to Bristol would save a grand total of £247.50 a year.  However, assuming a cost per mile of around 12 pence, moving to a location only 5 miles further away from the place of work would eat up the whole of that saving, and end up costing more in travel costs.  If the tolls were scrapped completely, the saving would amount to a more substantial £1500.  That starts to look more significant, and provided that the increased travel distance to work isn’t more than 28 miles, there might still be a small saving, but the greater the extra travel distance, the closer to negligible the saving becomes.
So how many people would really take a decision to move home – with all the disruption and costs involved in doing so – solely on the basis of such a small sum?  Common sense suggests that the number will be low.  That is not to discount the importance of other factors such as a gap in house prices, but in the scale of things, the reduction in tolls is small. 
For businesses, of course, the economics work out rather differently, so Alun Cairns’ claims about the ‘opportunities’ depend on multiplying the effect by the number of crossings for which a business would have to pay.  For businesses involving little travel between Wales and England, the reduction or abolition of tolls makes little difference; they will naturally locate on the side of the estuary whether they trade.  For those needing substantial movements across the estuary, they are likely to locate on whichever side requires least crossings.  Reducing the tolls affects the decision in neither case.
It’s a pity though – I actually wish that the claims being made did stand up to detailed examination.  I’d really like to believe a government could achieve so much in terms of changing behaviour or promoting economic development from such a small change in policy at a comparatively low cost to government revenues, instead of merely generating photo opportunities for ministers.

Monday 8 January 2018

Apologise for what?

Last week, it seemed as though we had government ministers – at both Welsh and UK level – lining up to apologise following the cancellation of routine procedures and appointments in the light of the winter peak of hospital admissions.  I’m unsure, though, what they were really apologising for, let alone how sincere the apologies were.
I’ve talked to NHS managers in the past about ‘bed closures’, i.e. the apparently relentless reductions over time in the total number of hospital beds available in the NHS.  And I entirely take the point that if more care can be provided in the community, and if newer less invasive procedures reduce the length of hospital stays, it should be possible to reduce the number of hospital beds without reducing the overall responsiveness of the service.  I also take the point that, in planning the total number of available beds, it is more ‘efficient’, and a better overall use of resources, to have a smaller number of beds occupied 99% of the time, than a larger number of which a significant percentage will be unoccupied for much of the year.
To put that final point another way – do we plan the number of beds around the average usage, or do we plan around the peak demand (or, of course, at some point in between)?  The direction of policy over many years now has been to plan for a lower number of beds with a higher percentage of occupancy, and that is a policy which has been pursued by both Conservative and Labour governments at UK level, and by Labour governments (including coalitions with Lib Dems and Plaid) at a Welsh level.  All of our political parties are complicit in the implementation of this policy, a point to be borne in mind when listening to opposition criticism.
I’m not going to go into the argument here about whether that policy is the right one or not; there are good arguments both for and against.  It is sufficient here to note that it is, in effect, a policy enjoying a wide political consensus.  It is a policy, though, which has consequences.  We know that there will be a peak in demand over the winter period – it happens every year.  What we don’t know (and cannot know) is the size or duration of that peak; the best anyone can do is to make informed guesses.  The point is that the policy being followed makes it inevitable that the only way to cater for a peak in demand for emergency beds is to reduce the demand for non-urgent admissions, and that’s exactly what we’re seeing happening.  In a rare moment of absolute honesty in an interview yesterday, the Prime Minister actually said of the cancellations “That was part of the plan”.  Cancellation of non-urgent cases when faced with a peak in ermergencies isn’t a failure of the system, it’s a feature.  It’s exactly the way that they have designed the process to work – and it’s the only way it can work.
So, to come back to my original question – what are the ministers apologising for?  The fact that the system is operating as planned?  The fact that neither they nor anyone else knew, or could have known, in advance exactly what the level of peak demand would be?  Making the wrong guesses?  More importantly, if they are not planning to change the overall policy (seeking to set bed numbers as low as possible on the grounds of 'efficiency'), how sincere can the apologies be?
I’m not a fan of the political culture which has developed around demanding apologies for this, that and everything, and hounding individual ministers and politicians until they say the word ‘sorry’; I’m more interested in seeing the relevant policies changed.  It sometimes seems as though that sort of debate and analysis is just too difficult for politicians these days; demands for apologies make a better sound bite.

Friday 5 January 2018

Choosing who represents us

There’s no obvious reason why the EU’s negotiator, Michel Barnier, should not have agreed to meet Nigel Farage.  After all, he’s met with other politicians from the UK, and he is perfectly clear in his own mind that, whoever he might meet for a briefing and/ or exchange of views, there are only two parties to the negotiations themselves, namely the EU and the UK Government.  There is a danger, of course, that once he starts agreeing to meet people who have no influence on, or input to, the negotiations that he might find a very long list of people who’d like to have their tupp’orth.
There is one key difference, though, between the meeting Barnier held with Ken Clarke, Nick Clegg and Andrew Adonis in October and the forthcoming meeting with Farage.  They were clear that they were meeting Barnier to "get a better understanding" about what was going on in the negotiations; Farage seems equally clear that he’s expecting to be doing the talking rather than the listening.
Farage claims that he is going to be representing the 17.4 million who voted to leave.  It’s a claim which is specious at best.  If those 17.4 million had wanted to have a UKIP politician representing them in negotiations, they could have voted for UKIP in the election last year.  They still wouldn’t have got Farage as their representative, of course – he’d already resigned the leadership for the nth time at that point.  That’s academic, though – because only 600,000 voted for UKIP to represent them – the rest of that 17.4 million (all 16.8 million of them) specifically voted for someone else to represent them.
He does, of course, formally represent an electoral region as an MEP – a job he’s been campaigning for 20 years to abolish and which he increasingly performs on only a part-time basis – but most of the people who voted him into that job have clearly turned against his party since the last election in 2014, since there were fewer people across the whole of the UK who voted for his party in 2016 than in his electoral region alone in 2014.
Why someone who has turned his back on any pretensions of leadership and wants his only political post abolished as soon as possible still gets the attention which he does is something of a mystery to many, but it seems to be fostering delusions about the extent of his importance and influence.

Wednesday 3 January 2018

Jam, cheese, and crisps

It sounds a bit like the sort of sandwich which Elvis was reputed to favour, but it’s really about the shape of Britain’s bold new future.  That future is becoming ever clearer thanks to the intrepid threesome of Fox, Gove and Johnson.  Where would we be without them?
It was Fox who told us back in March that the UK would be able to sell “innovative jam” to the French (who currently just happen to be the world’s second largest jam exporters), although he didn’t tell us exactly what an innovative jam is.  Then in December, Gove told us that Brexit means we all need to be more patriotic about cheese, in order to ensure that the price of Cheddar does not go up too much post Brexit.  And then, a couple of days before Christmas, Johnson lauded the sale of crisps to Russia as an example of the UK’s exporting might.
Basing a modern twenty-first century developed economy on jam and crisps and only eating British cheese – what could possibly go wrong?

Tuesday 2 January 2018

Getting to the root of the problem

Last week, the BBC reported on the ‘cost’ of traffic jams to Welsh businesses following an analysis by a private company of 30,500 traffic jams on Welsh roads during 2017.  There is undoubtedly a cost to traffic jams – that is beyond dispute.  There is the direct cost to businesses and individuals of the fuel used whilst vehicles are stopping and starting repeatedly, or even simply operating at below optimal speed.  I’m a lot less certain, though, about the approach to costing the time involved, which is based on some assumptions about the amount of time ‘wasted’ sitting in traffic. 
Merely multiplying the number of hours involved by the salary per hour of all the individuals is a difficult enough calculation in the first place, involving as it must some assumptions about salaries, purposes of trip etc.  But the value of that time to employers isn’t necessarily the same as the cost of it – indeed, if it were, then the viability of employing the individuals concerned would surely be a question which they should be asking.  In theory, any individual spending an hour at work should be generating more – significantly more – income for the employer than the cost of that hour to the employer.  But on the basis of observation and experience, to say nothing of the application of the Pareto Principle, let alone the culture of presenteeism which seems to pervade business, I seriously doubt that the reapplication of the hours involved to other activity would make as large a difference as is being assumed.
Leaving that aside, I’m more interested in the sub-text to this type of report, which is that eliminating traffic jams (presumably by building more roads – the picture of the Brynglas tunnels in the report and the emphasis on M4 bottlenecks gives us more than a small clue to the BBC’s agenda here) would somehow recover all this lost time and turn it into productive and profitable activity.  That in turn implies that the delays and obfuscation by governments in road-building are the ‘cause’ of all this lost time.  It isn’t the only possible conclusion though.  How much of that time is being lost, in truth, not because of lack of road capacity but because of hundreds of individual decisions to drive rather than take the train?  Is this ‘lost’ time all the fault of government for poor planning and execution of road construction, or is it the fault of people and businesses who insist on using roads rather than rail?