The anti-Robin Hood

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In very general terms, when an individual’s earnings rise faster than prices, he or she feels better off, but when prices rise faster than earnings, he or she will feel worse off. At its core, the pensions triple lock was designed to ensure that people wholly dependent on the state pension would never suffer from the latter situation, because the annual increase is tied to the higher of earnings and prices, with a minimum increase of 2.5%. Over time, it is a system which guarantees that pensioners will never feel worse off, and should generally feel better off. And, with a few caveats, it’s worked; it's one of the few 'successes' of the last thirteen years of Tory government but instead of boasting about it, they seem determined to run away from it. It has lifted significant numbers of pensioners out of the poverty into which they were driven by the Thatcher government’s decision to break the link between earnings and pensions.

The argument for ‘reform’ seems to be driven by at least two different ideas: firstly, that it is wrong that pensioners should uniquely be protected from the government policy of driving down living standards; and secondly, that it is in some way ‘unaffordable’ to ensure that pensioners are protected from falling living standards. In principle, the argument that falling living standards should apply to all is not without some validity (although, as I’ve noted previously, there is a big unanswered question about what the relationship should be between the level of pension and the level of average earnings, an issue which politicians seem keen to avoid since it exposes the relatively low level of UK pensions to scrutiny) but it’s a diversion from the real question, which is why we accept a situation where the government of the day sets out, entirely deliberately, to reduce people’s living standards. Encouraging working families to look enviously at the level of pensions increases is a neat bit of ‘divide and conquer’ politics which diverts attention from the question of why people should have to accept reduced living standards in the first place. (Not all people, of course – blaming pensions for the plight of the many is also a diversionary tactic to draw attention away from the way in which wealth is increasingly concentrated in fewer and fewer hands.)

‘Affordability’ is another piece of diversionary sleight of hand: those arguing the case are doing so because they want to cut taxes (in ways which just happen to benefit the most well-off) and have convinced themselves that they need to cut pensions costs in order to do so. (There are alternatives available, even within that artificial straitjacket which ties government spending to tax income.) They see pensions only as a ‘cost’ and not as a means of ensuring a decent life for the oldest members of society, a viewpoint which translates into seeing pensioners themselves as a cost rather than full citizens. It’s worth noting that those so keen to restrict the level of pensions are never going to be wholly dependent on the state pension themselves. MPs enjoy a generous pension scheme of their own and the state pension will represent only a minority portion of their retirement income. The same is true for many others of us, of course; but when dealing with the minimum level of pension, the starting point should always be to look at the position of those who are totally dependent on that income. If the result of that is that the full state pension is also paid to some who, it could be argued, do not ‘need’ that income, then a properly progressive tax regime can and would reclaim a proportion by taxing their other income more. That would, however, involve taking money from those most able to afford it – the demand for changing the triple lock is about ensuring that money is taken, instead, from those least able to afford it, in order to reduce taxes on those who can.

It's a reverse form of the English folk hero, Robin Hood – instead of taking from the rich to give to the poor, they want to take from the poor and give to the rich. It’s depressing that the self-styled party of working people, Labour, is so unable and unwilling to put the argument for fairness, preferring to echo the Tory arguments about sustainability which encourage ordinary people to see each other as the enemy.

Hiding the fiscal facts

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Nation.Cymru carried a piece yesterday about the response by Transport Secretary Chris Grayling to a claim by Plaid that Wales isn’t getting its fair share of infrastructure spending. 

The claim that Wales doesn’t get its fair share is a long-standing one, and I suspect that it’s true although it isn’t quite as black-and-white an issue as its sometimes presented.  It appears to many of us in the west and north of the country that the allocation of capital spending within Wales is as unfair as the allocation of capital spending between Wales and England; there seems to be the same concentration on the south east, in and around the capital city.  But merely looking at share of capital expenditure in relation to percentage of population is an over-simplistic way of doing the calculation.  As an example, we know that the cost of building a mile of road will depend significantly on where that mile of road is built – it will cost more in the centre of Cardiff than in the middle of Powys, for instance.  But the difference in ‘cost per head’ of population living in the area will not be in the same ratio as the difference in absolute cost; and neither will the calculated economic benefit.  In addition, the timescale for many infrastructure projects is lengthy; what looks like an unfair share in one year can potentially end up looking very different over many years.  Fairness is an elusive concept when it comes to sharing out infrastructure investment.

But there was another point in the Minister’s response which caught my attention.  He said “I do not think that the Welsh can ever claim that their money is siphoned off to pay for the rest of the country, given the amount of support from taxpayers elsewhere in the UK that goes into Wales...”.  This is, of course, the standard unionist line about taxpayers in England subsidising Wales out of the goodness of their hearts.  It is, though, as over-simplistic as the idea that fairness in infrastructure investment is as easy to work out as spend per head.  The problem is that we simply do not have figures which are accurate and comprehensive enough to determine whether there is a fiscal transfer between England and Wales let alone the size of that transfer; such figures as we do have are inevitably based on estimates and often arbitrary assumptions about the way expenditure should be split.

The GERW figures published two years ago were a useful attempt to analyse income and expenditure for Wales as part of the UK, despite the fact that they were misused by some who attempted to present them as being in some way relevant to the concept of an independent Wales.  There are, though, always going to be problems with such figures.  To take one example, any analysis of expenditure in or on behalf of Wales will assume that Wales needs to pay a percentage of the costs of central administration of government activities.  This is not unreasonable in itself; clearly where the UK Government provides services from which Wales benefits then, under the current constitutional arrangements, it is entirely sensible to apportion part of that cost to Wales.  But it’s worth asking what then happens to that money – assuming that it’s spent once and gone isn’t the whole story.  The reality is that that expenditure largely goes on salaries, and the people receiving those salaries mostly live in England.  The personal tax those individuals pay on their income and on their expenditure (VAT, fuel duty etc.) is then all counted as English revenue based on residence.  Given that probably around 30-35% of all private income (on average) ends up going straight back to the Treasury in tax, every £million spent ‘on behalf of Wales’ but not actually in Wales only costs the Treasury a net figure of around £650,000 - £700,000.  And that’s without the multiplier effect as the people providing the goods and services purchased by those individuals then pay their taxes and buy goods and services themselves…

Now, within a unitary state, none of that really matters.  It’s just a question of book-keeping because there is ultimately one Exchequer and one big cheque book.  But it does matter when people start talking about ‘siphoning off’ and ‘subsidies’, because the truth is hopelessly obscured.  There’s another aspect to what Grayling said as well – every time unionists like him talk about subsidising Wales they effectively undermine their own case for the union, which is that we pool and share.  Still, I suppose that I shouldn’t complain too much about that.

Queuing up to be demonised?

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One of the ways in which the rich and powerful elite in any state preserve their power and wealth is by managing the perceptions of those not in their number in such a way that they blame each other for their comparative lack of power and wealth, rather than blaming those who hold that power and wealth.  At it’s simplest, it’s a case of divide and rule.  And the more that they can divide, the longer they can rule.  It’s a job which is made easier if enough people are sufficiently discontented with their lot.

So they blame the poor for their poverty and the unemployed for their lack of work, and encourage the working population to see the least well off as scroungers and layabouts, the solution to which is to cut their benefits and make it harder for them to feed themselves and their families, so that they become less of a burden on ‘hard-working families’.

Or they blame immigrants for taking their jobs and houses, encouraging those same ‘hard-working’ families to believe that it is due to immigrants that schools and hospitals are overcrowded and underfunded so that they themselves can’t get an adequate education or health service which meets their needs.

Then they blame the EU.  If only the taxes of those ‘hard-working families’ weren’t being sent to those horrid Eurocrats, we’d have more than enough money to provide a decent health service and well-equipped schools.

And then they blame the elderly.  If only the money of ‘hard-working families’ wasn’t being used to subsidise the pensions and care needs of all those old people, just imagine how much easier it would be for the younger people to get on the housing ladder and enjoy the increasing level of affluence which their parents’ generation enjoyed.

And people are taken in.  A compliant media – with its own vested interest in the status quo – peddles the same lines day in and day out, while one group after another is demonised and punished for taking money away from those ‘hard-working families’.  And in the meantime, the richest 1% becomes ever richer, accumulating a greater and greater proportion of the national wealth; this is assumed to be ‘normal’ and anyone challenging it is a dangerous enemy.

Such is the power of the ideology which the current political and economic system has created around itself.  It’s built on the lies and deceit of the few and, above all, the gullibility and compliance of the many.  For how long do we allow it to continue?

Outraged - but at what?

Tweet Two Tory AMs have taken to the media today to express their outrage at the level of redundancy payments being made by Welsh public bodies.  Given that this follows a report by an Assembly Committee, I can understand why the Committee Chair was given such prominence; what was less obvious to me is why the only other AM quoted was another Tory who isn’t even a member of the committee concerned.  There are eight members of the committee, only two of whom are Tories.  Have the others lost their tongues, or could this just possibly be a bit of deliberate selection by the Western Mail?

What the report left me less than clear about is what exactly the AMs concerned – all of them, not just the Tories – think should change here.  Drawing attention to apparently large figures to attract headlines is easy.  Encouraging others to feel equally outraged is equally easy.  But what is the actual problem, and what solution are they offering?

Presumably, the arrangements for voluntary redundancy were freely negotiated between staff and employees – are the AMs arguing that the Welsh Government, or the Assembly through legislation, should interfere with or in some way constrain the rights of either or both parties to negotiate such a scheme?

The report particularly focuses on the payments being made to higher paid staff, but any scheme which bases the size of redundancy payments on salary and length of service will inevitably favour higher-paid staff.  Are the AMs suggesting that long-serving higher-paid staff should be excluded from the schemes, or made subject to some other, less generous scheme?

Maybe they’re suggesting that there’s nothing wrong with the schemes, or with the selection of the people for redundancy, but that the way in which the schemes have been applied has been over-generous.

Or perhaps they’re suggesting that the staff concerned should not have been made redundant at all.  They might be right on that, in some cases at least, but that would sit strangely with a position where AMs of all parties are also calling for ‘greater efficiency’ and ‘reduced management overheads’.  I’m sure that some of the same people have also criticised public bodies for keeping senior people on the payroll even after their roles had been abolished, although I can’t immediately trace the press reports from the time.

It looks like just another part of a continued overall assault on the public sector and those who work in it.  That wouldn’t be at all unexpected from the Tories; what is rather less expected is that is that all the other parties who’ve signed up to the report are so keen to join in.

Most organisations find from time to time that their requirements have changed and that there is an impact on the numbers and type of staff employed.  The point of redundancy schemes is that they aim to ease the transition and maintain the goodwill of those affected by change.  Under almost any scheme imaginable, those with the highest salary and the longest service are likely to receive the highest pay-outs.  That is a feature, rather than a flaw, in the process.

I’m no fan of the size of the pay differential between the highest and lowest paid staff in organisations, whether in the public or the private sector.  But merely criticising the numbers of pounds attached to the outcome of processes based on that differential looks like simple headline-chasing rather than addressing the underlying unfairness and inequality.

Taxes we don't notice

Tweet One of the first things that the previous coalition government did in 2011 was to increase the standard rate of VAT from 17.5% to 20%.  In later years, they increased the point at which people started paying income tax, claiming that this was helping the lower paid in particular, although the main beneficiaries were actually those on higher incomes.

Any switch of taxation from what people earn (income tax) to what they buy (VAT) will almost inevitably have the effect of increasing the proportion of taxes paid by those on the lowest incomes.  But when they need to raise money, politicians tend to prefer indirect taxes in the belief that, after the initial shock of any increase, people notice them less, and resent them less, than a line on a payslip showing how much of their hard-earned cash is being sent to the Treasury.  They’re probably right in that assumption, but taxing people in a way that they don’t notice isn’t at all the same thing as taxing them in a way which is fair.

This story in the Independent, showing that the outcome of this approach to taxation is that the less well off pay a higher proportion of their income in tax when all the taxes are added together should therefore come as no surprise to anyone.  (Apparently, though, it does to some.)  We will never get a progressive taxation system unless the burden of taxation is shifted away from indirect taxation to direct taxation on income. 

Totals, averages, and fair shares

Tweet Monday’s Western Mail carried this interesting report quoting a transport consultant as saying that it would be better on average for the Welsh economy to put all new jobs in Cardiff, rather than attempt to spread them around.  I wouldn’t be at all surprised to find that he’s right.

But averages can hide a lot of important detail.  There’s a danger that governments which are focussed on ‘averages’ and ‘overall’ seize on this type of argument as justification for further economic centralisation, and for allowing ‘the market’ to do what it would like to do anyway.  It’s a lot easier than attempting to exercise some control. 

The question we face if we’re serious about building a better Wales is not simply about how we increase the country’s total wealth, nor even about how we increase the country’s average wealth.  Both of those can be achieved by economic centralisation and greater inequality.  It is rather about how we spread wealth more evenly.  I for one would prefer to have a less than the maximum possible total national wealth if that wealth was spread more evenly, and a less than the maximum possible average wealth if the variation around the mean was lower.  Otherwise we’re just mimicking the UK.

Not necessarily 5% of everything

Tweet When it comes to the way in which governments spend money, “need” - and I put it in quotes because although it’s easy to say, it isn’t at all easy to define – should be a more important driver than equality, a point which I highlighted in this post last week.  Ultimately that assertion is the basis of much of the argument for Barnett reform – Wales has greater need per head on average for those services which are devolved to the Welsh government and should therefore receive a greater share of resources.

It does not mean of course that that greater need is equally distributed across the whole of Wales (similarly, the English average is just that – an average - as well; it varies greatly across England).  It often strikes me as being incongruous, at the least, to see politicians arguing for a reform of the Barnett formula to give Wales a greater share, and then jumping on bandwagons about “postcode lotteries” within Wales when they see inequalities within our country.

Fairness is difficult to define when we look simply at revenue expenditure on devolved matters.  It’s even harder to define when we look at major capital infrastructure projects – such as HS2 for instance.

The call for a Barnett consequential for HS2 has a certain political appeal, supporting the narrative that Wales is losing out, but surely the nature of individual capital projects is that they will inevitably favour some areas over others.  The question of fairness is only relevant when looking at the total of all capital expenditure over a longer period rather than individual projects.

There’s a further complication as well – capital projects which impact major conurbations are likely to be more expensive in terms of £ per mile of road or railway than the same or similar projects in rural areas.  Does that mean that London “needs” more capital expenditure per head than Wales, and that a needs-based distribution should proportionately give a greater share to London?

Or what about the putative HS3?  If a line is built providing fast rail services to Bristol and Cardiff, what proportion of that expenditure should be counted as “Welsh”?  Probably 90% of the capital expenditure would be in England – but that would not reflect the way in which any benefits are shared.

I’m not actually arguing that London should get a greater share of UK capital expenditure; nor even that Wales gets her fair share at present.  But the simplistic response demanding our Barnett share of capital expenditure based on an arithmetical percentage of individual capital projects no more reflects need than does the current Barnett formula.  The question of fairness is far more complex than that.

Equal and fair are not the same thing

Tweet The issue of sharing out government spending fairly, on whatever subject area, is neither simple nor straightforward.  Fair shares are not the same as equal shares – if needs were equally distributed life might be a lot simpler.

Unequal shares are easier to identify and highlight than unfair shares; and putting numbers on the inequality makes a nice headline, which is why politicians are so fond of them.

Take this total non-story from yesterday’s Western Mail.  The Tories have been aided and abetted by the Western Mail in highlighting the unevenness of the distribution of grants for sporting activity across Wales.  But nowhere does the non-story even ask the question about whether this is fair or not.  Inequality is effectively deemed to imply unfairness. 

How far should we take this approach?  If every county in Wales received the exact same amount of money per head of population, I rather suspect that we would then have 22 Freedom of Information requests about the distribution within those counties.  They would show that some villages or towns get more than others – and some politician (choose whichever party you like here) would express his or her shock and horror.

Treating equality of expenditure as though it’s the same as fairness would mean – and I’ll admit that this is a case of “reductio ad absurdam” - that the government could just give us £11.23 – or whatever the right figure is – each and be done with it.

I don’t know whether the distribution of sports grants actually reflects the distribution of need across Wales.  And this non-story does nothing to enlighten me.  What I do know is that “need” is not evenly distributed.  I’d be far more suspicious about the fairness of an entirely even pattern than I am about an uneven one.

I disagree with Nick. Again.

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Nick Clegg’s latest proposal, that the most well-off should pay more in taxation at a time of constraint, is confused and confusing – as well as looking to be calculated to upset his coalition partners.

He has the germ of a point in there somewhere, which is about the inequality of the current economic system.  What he fails to explain at all, however, is why his proposed solution should be “temporary”.  If inequality is a problem – and income and wealth inequality have been steadily growing under successive governments – then why does it only start to become a problem at a time of financial constraint, and cease to be a problem at a time of growth?

The only way that I can see of answering that question is that people “feel” the unfairness more when they are under pressure themselves – which means that what he is really proposing has more to do with changing perceptions them with changing reality.  He is no more serious about really getting to grips with inequality than his coalition partners – or their Labour predecessors.  He just wants us to think that they might be thinking about doing something about it.

The fact that he’s not really proposing any reduction in inequality hasn’t stopped the Tories from responding as though he were.  Their response – “if you tax we rich folk more, we will go elsewhere” – is as entirely predictable as it is lacking in any hard evidence to back up the assertion that a fairer society will drive rich people to move elsewhere.  They make it sound as though we should be grateful for the inequality which allows a few to have hugely greater access to resources than the many.

Labour’s response isn’t much better – the best they’ve come up with is a “yah boo” comment about who voted for what and when.  It’s accurate, but irrelevant.  It’s more again more to do with the perception that they wish to create than with any serious proposal to tackle inequality.  But given the way that inequality increased under Labour, why would we expect anything different?

Controlling lobbyists

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Monday’s Western Mail contained this robust defence of lobbying and lobbyists from – as it happens – a lobbyist.  The article issued a dire warning that democracy itself is endangered by any attempt by government to control lobbying.  A little over the top, methinks.

Lobbying is, as the author says, a long-standing part of our democratic process, and I share his concern that a government proposal which applies only to ‘third party’ lobbyists “will not fulfil its main purpose of increasing transparency”.  That strikes me, however, as an argument for extending the scope of the proposal rather than opposing it.

I understand the concern he expresses about whether a comprehensive proposal might lead to a situation where no group, organisation, or individual could put any case to ministers without having first registered as a lobbyist, and posing the question in that way underlines the complexity of the issue.  But the fact that an issue is complex is not an excuse for ignoring it, which seems to be the desired outcome of the article.

It’s worth getting back to the nature of the concern many of us have about lobbying and lobbyists.  That concern is not about whether individuals, groups, or companies can talk to ministers about their concerns, and seek to promote particular approaches and solutions.  In itself, that is simply a normal part of democracy.  The concern is about fairness and transparency.

Do those who have enough money to spend on receptions, hospitality, and professional PR merchants, and even to employ former politicians and civil servants, enjoy an unfair advantage in gaining access to politicians and therefore in putting their case over and above ordinary members of the public?  And is there a danger that, as a result, policy decisions may be taken which favour those groups rather than the interests of society as a whole?

Politicians do not have to be corrupt to be swayed by regular contact (even if in a social environment with no mention of the policies which the hosts wish to change) to lean in a particular direction.  The whole process is simply relying on the social nature of people.  The government’s current proposals may well be deficient in getting to grips with the issues, but surely there can be little disagreement about their existence.

What threatens democracy is not an attempt to control and regulate lobbying, but the continuation of a situation where it appears that influence over policy can be bought.

Don't follow London

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That the UK Government spends more on transport infrastructure for London than it does on the rest of the UK wasn’t really a surprise, although the extent of the skew was higher than many might have expected.  It gives a rather different context to the oft-repeated claim that Wales benefits from the government’s largesse at the expense of the South East – here is an example of the opposite; the South East benefitting from government largesse at the expense of Wales.

I was far from convinced about some of the reasons being advanced for the mismatch, but there’s nothing wrong, in principle, with the fact that a mismatch exists.  Any attempt to share out spending on the basis of need will always lead to a differential pattern of spending in different areas; the question is not whether differentials are wrong, but whether they’re based on a fair assessment of need.  We should never expect the spend per head to be anywhere near identical across different areas and regions.

There is also a lesson here for Wales.  Before we shout too much about all the goodies going to London at the expense of the rest of the UK, we should examine the way in which infrastructure is being handled more locally.  There has been a marked tendency of late for people to call for high levels of spend in the South East of Wales – on things like the suggested metro network and the M4 relief road.

I’m not opposed to the first of those schemes, although the second is much more questionable to say the least.  But there is a danger that in promoting such grand schemes we reproduce in Wales exactly that about which we complain at a UK level, and other parts of Wales get left behind.  Just as we urge the UK Government to take a less London-centric viewpoint, so we also need to ensure that the Welsh Government doesn’t simply take a Cardiff-centric viewpoint.

Weeding out the incompetent

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Most people starting a new job know and understand that there is some sort of ‘probationary’ period, during which their new employer can sack them if they don’t prove themselves.  It’s easy to see why employers want such a condition; judging people on the basis of an application form, cv, and interview is never going to be as effective as judging their actual performance.  And it’s not an unreasonable condition.

But how much more protection than that do competent and effective employers really need?  To listen to some business organisations, the answer is lots.  What they really seem to want is to be able to hire and fire at will, so that they have maximum flexibility with no come-back; the employees are just a resource like any other. 

Sadly, the UK Government has been listening to such views, and has proposed extending the period during which employees are barred from bringing a claim for unfair dismissal from 12 months to 24.

(In passing, it’s interesting to note that the announcement was made by the Chancellor of the Exchequer – since when did he take on the responsibility for employment law?)

In effect, the government are proposing to double the period during which employers can legally sack someone unfairly.  It amounts to condoning unfair action by employers as long as it happens within the first two years of employment.

Why should we tolerate ‘unfair’ dismissal at all?  If the dismissal is fair, then the employer will win any tribunal case.  This proposal bans the reasonable cases as well as the unreasonable ones. 

The argument seems to be that there is a cost to the employer of having to defend any action, and abolishing the right to bring a case will therefore save businesses time and money – but there are surely better ways of weeding out the vexatious cases than simply banning all cases?

I can’t help wondering why anyone would conclude that the way to protect employers from unjustified claims is to abolish the rights of everyone, and simply allow unfair behaviour to go unpunished.  Allowing people to ignore health and safety rules for two years would be a good way of reducing their administration costs as well, but it doesn’t make it a good idea.

It’s another example of the thinking that the way to make business competitive is to give employers more freedom to treat employees as they wish.  Competent managers don’t need that sort of freedom.  We’d be better off ensuring that those running businesses have the competence and skills to do so, and to ensure that they treat employees fairly in the process, rather than simply licensing incompetence.

Tackling the symptoms

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There are some fine words from Nick Clegg in his foreword to the UK Government’s strategy for social mobility.  Fairness, he says, is a society “Where birth is never destiny”, and he goes on to say, “In Britain today, life chances are narrowed for too many by the circumstances of their birth: the home they’re born into, the neighbourhood they grow up in or the jobs their parents do. Patterns of inequality are imprinted from one generation to the next.”  I think it’s fair, then, to judge the strategy on whether or not it tackles that fundamental unfairness.

He has certainly identified a very important point, which is that we live in a society where life chances are determined more by who our parents are and how much wealth or income they have than by any considerations of talent and ability.  As the document itself states very early on, “The income and social class of parents continue to have a huge bearing on a child’s chances”.

The problem is, though, that although they appear to have identified the cause, the strategy seems to vacillate between describing it as causality and correlation.  I suspect that that is largely because the whole strategy is about dealing with the symptoms, and completely avoids any actions aimed at reducing the underlying inequalities; to fully recognise those as being causal would only serve to underline the failure to tackle them.  In short, the basic inequality is taken as a given, and the government plans to concentrate its efforts on trying to mitigate the effects of that inequality.

I’m not against trying to mitigate the symptoms; anything that helps some is better than nothing.  But the result of this strategy, I fear, is that it cannot and will not live up to the worthy words of its sponsor.  Wealth and privilege will continue to give unfair advantages to the children of the wealthy and privileged.