The problem is incomes, not prices

Tweet Fuel poverty is a term with which we’ve all become increasingly familiar, but I’ve always had a nagging doubt about whether “poverty” is really the right word.  For those on low incomes, it’s accurate enough; but any definition based solely on the relationship between cost and income is always likely to include some for whom the term “poverty” is a misnomer.  After all, draughty old mansions can be expensive to heat as well.

A couple of weeks ago, I heard the term “transport poverty” being used to describe a situation where people spend a large proportion of the disposable income on running their car.  Again, it may be accurate for some – but I’m sure that Rolls-Royces can cost a lot to run as well.

Last week, Peter Hain referred to “food poverty”.  Again, I don’t doubt that some people, particularly the poorest, spend a disproportionate amount of their disposable income on basic foodstuffs.  It would be stretching a point to suggest that better-off people with expensive tastes might also spend a high proportion of their income on food, but it’s at least theoretically possible.

There’s a common thread in all of these types of poverty, though; or rather there is a common thread in the way they are described.  They are invariably portrayed as being price problems – the price of fuel, the price of running a car, the price of food – with the politicians demanding action on prices in response.  But the problem isn’t really about prices at all; it’s about incomes.

Fuel prices in particular are on an inexorable upward trend.  There’ll be variations in both directions en route; but the overall direction over time is going only one way.  And as recent events have demonstrated, demands that food should be both cheap and wholesome are probably incompatible.

I want to lift people out of poverty – all types of poverty – as much as anyone else; I just don’t believe that attempting to control prices in a market economy is ever going to be an effective way of doing that.  The distribution of income between the richest and the poorest is excessive and the gap is becoming larger.  Accumulation of resources in fewer hands; redistribution from the have-nots to the haves - that’s the inevitable outcome of free market capitalism.

Correcting that, and giving people fair access to resources, involves redistributing income, not controlling prices.  I don’t hear many politicians even suggesting that; it’s far too easy to criticise others over prices.  But if we really want to tackle poverty, it has to involve redistribution of income and resources.  Anything else is just empty rhetoric.

There's more to bankers than bonuses

Tweet Bashing bankers is always good fun, and usually something which the victims richly deserve.  The EU proposals to cap their bonuses are hardly likely to prove anything other than popular with the majority of us.  The only surprising reaction to date has been the extent to which senior Conservative politicians have been willing to take the unpopular stance of opposing any cap on bonuses.

I can’t help feeling, though, that merely imposing a cap on bonuses is missing the point.  It’s not that I’m convinced by any of the arguments against a cap – far from it.  

The idea that they will take their banking elsewhere if they don’t get their own way sounds more like an argument in favour than an argument against.  And the suggestion that they are so uniquely talented and able that they need to be paid enormous rewards is surely a joke – these are the same people who thought that sub-prime loans were a jolly good idea, that credit default swaps were a good way out when it went wrong, and that gambling on derivatives with the money we put into our high street banks was perfectly acceptable.

No, none of that does anything to convince me.

Then we have the argument that the banks’ huge profits means that they pay a lot of tax, and we can’t afford to lose that money. That’s bringing us closer to my concern about whether a cap on bonuses is missing the point; because it’s not just the size of the bonuses which concerns me, it’s what they’re being paid for and how that profit is being made.  Capping bonuses doesn’t necessarily do anything to change that underlying activity.

Indeed; there’s a danger that the consequence might be quite the opposite.  If the total bonus available is less, does that mean that they’ll do less to earn it, or does it make them more determined than ever to earn the largest possible amount rather than settle for only half of what might be available?  Might it, in fact, incentivise them to take even more risks?

What few seem to be asking is where these massive profits on which we receive tax income actually come from.  Much of what the ‘investment’ bankers are doing bears as much relationship to the traditional meaning of ‘investment’ as does a fiver on the 3:30 at Newmarket.  It’s more to do with ‘taking a position’, to use their euphemism, on currency movements and ’trading’ in general.  It’s more like gambling than investment.  And if there’s one thing of which I’m certain when it comes to gambling it's that it doesn’t create any money; it merely recycles money.  Every profit is balanced by a loss somewhere else.

But, just like the lottery, the losses are usually spread in such a way as to be almost invisible.  Certainly, there’s an occasional ‘big loser’ to make up for the big winner; but generally speaking, as in most forms of gambling, there are a few big winners and a large number of small losers.  And the small losers from the banks’ casino approach to ‘investment’ are all of us.  That ‘profit’ is merely redistribution, from the many to the few.

It doesn’t even stop there though.  It’s clear that when they win, we lose; but it’s also become clear that when they get it wrong, they still win, and we still lose.  They’re gambling with our money, betting it against us, and doing it all with loaded dice.  And then they want us to be grateful that they give us some of our money back by paying as little tax as they can get away with on their profits and bonuses?  The amazing thing is that so many are falling for it.

The problem with banks isn’t that they’re paying bonuses; it’s what they’re paying them for.  And a cap on bonuses doesn’t even begin to scratch the surface of that issue.

Mob rule

Tweet The proposal put forward last week by the Public Accounts Committee that those who sell aggressive tax avoidance schemes should be ‘named and shamed’ is likely to prove a popular one.  Few of us have much time for those who seek to avoid ‘paying their dues’.  But although I have as little sympathy for them as do most other people, I’m still more than a little uneasy about the idea of officially-backed public vilification.

Like it or not (and I don’t), the reason that there are people prepared to develop and sell such schemes is that there are others who are keen to buy them.  In this case, the sins of the purchasers are at least as heinous as the sins of the sellers.  Besides, none of them are actually doing anything illegal; they are merely using an excessively convoluted tax code to their own advantage.  That may be immoral, in the eyes of many; but it ain’t illegal.

But who sets the standards for morality?  It’s clear that parliament sets the standards for legality (leaving aside the question of being able to abide by those standards themselves!), and for those things declared illegal, the full force of the law can be used against perpetrators.  Public opprobrium is simply a bonus in those cases.

But once we start giving the green light for the media and others to start the opprobrium where there is no illegality, merely a transgression against an unwritten and largely arbitrary moral code, where does it end?  It’s a form of mob rule; and officially sanctioning it makes it uncomfortably similar to some aspects of the former totalitarian states.

Rather than encouraging a process which they are unlikely to be able to control once unleashed, our elected representatives would be more gainfully employed re-writing – and simplifying – the tax code; removing all the little complexities which create the opportunities to avoid tax.  Making tax avoidance schemes illegal, and dealing with the perpetrators under the law, might not be so populist in the short term, but it’s surely more effective in the long term.

Tweedledum and Tweedledee

Tweet Both the Welsh Lib Dems and the Conservatives in Wales have announced proposals of sorts for how they would vary income tax in Wales, if it gets devolved, and in the unlikely event that either party ever leads a government in Wales. At first sight, the proposals are very different; the Lib Dems want to cut tax at the bottom end, whilst the Tories want to cut it at the top end.

The Tories seem to be making some very sweeping assumptions in their proposal, which blatantly conflates "the entrepreneurial" with those paying 40% tax. Whilst there may be entrepreneurs paying tax at 40%, I'd bet that there an awful lot of businessmen and women in Wales who aren't. And I'm absolutely certain that a lot of those paying 40% in Wales aren't entrepreneurs either; they're more likely to be in senior jobs in the public sector.

And there's another unjustified assumption in what the Tories are saying as well, which is that reducing tax on the entrepreneurial spurs them to greater effort and success. What's the evidence for that, I wonder? Whilst I'm sure that there are some who are 'only in it for the money', there are many other reasons for establishing and running companies; and many of those doing so find that they are working long hours for low rewards for many years – or even for ever.

If they really wanted to encourage entrepreneurs, they'd be looking at those who risk everything in the early years (or rather, perhaps, those who decide not to), rather than those who've already made it. And they certainly wouldn't be looking to reward those who've simply climbed their way up the greasy pole in local or central government.

The Lib Dems' proposal suffers from a rather different flaw. Certainly, reducing the tax take from the lowest paid sounds a bit better than reducing tax simply for the higher paid. However, unless accompanied by an increase in taxes for the higher paid (which the Lib Dems seem not to be proposing), then the main beneficiaries will actually be the higher paid.

What both parties are really doing, of course, is pitching their policies at particular groups of voters. Given that the Tories have already and correctly identified that there are only around 117,000 higher-rate taxpayers in Wales it seems a curiously small section of the population to be targeting, particularly since a significant proportion of them probably already vote Tory anyway. For the rest, it will merely confirm the impression that the Tories are a party for the better–off. The Lib Dems are effectively proposing to benefit much the same people, just marketing it a bit better.

Stepping backwards

Tweet One of Cameron’s better decisions as Prime Minister was to protect the budget for overseas aid, and to aim at donating 0.7% of national income.  It wasn’t the most popular of his decisions with many of his party’s core supporters, but it was the right decision.

That doesn’t mean that there are no problems with the way some of the money is used.  It doesn’t always have the effect it should, it sometimes ends up in the wrong hands, it can enable some regimes to divert their ‘own’ resources to armaments, and when it’s used to support the purchase of goods and services from the UK it can look more like a subsidy to UK capitalists than aid to developing nations.

Those things, important though they are, and as much as they need to be acted on, are detail; the headline is that the UK is standing by its promise to aid those underdeveloped countries.  In that context, his announcement this week that money from the aid budget could possibly be used to pay for some of the UK’s military activities overseas was astonishing, and a significant step backwards.

He has a point, of course, when he says that economic development is difficult in strife-torn countries and regions (although those are often the places most in need of aid).  Peace and stability are important determinants of economic success.  But paying for troops and military hardware for use by UK forces doesn’t look a lot like economic aid to me.  And if those forces ever get into killing people, it’s hard to see how that would look a lot like ‘aid’ to those on the wrong end of any military action.

It’s true, of course, that ‘peace-keeping’ doesn’t necessarily lead to actual military action, but if that was never even a remote possibility of the role, it wouldn’t need military personnel to undertake it.  If using military personnel to enforce the peace doesn’t at least include the threat of lethal force, why are they needed?

There isn’t a simple black and white cut-off point between peace-keeping and intervention, however different the words sound.  After all, wasn’t the intervention in Afghanistan supposed to be about bringing peace and stability to that country?  I hardly think that particular intervention could ever be classed as ‘overseas aid for development’, though.

Paying for any part of the UK’s military out of overseas aid would be a travesty; it would make a complete nonsense of what was, at the time it was made, an honorouble and brave decision to maintain the economic aid programme at a time of domestic financial hardship.

Red meat and red tape

Tweet One of the important questions thrown up by the horsemeat scandal is the question of the extent to which the food industry should be regulated and monitored. In that sense, there's a parallel with the banking crisis; in both cases what happened was only able to happen because of a 'light-touch' approach to regulating and monitoring.

In both cases, the extent to which the government and its agencies actively monitored what was happening – and the resources available to do the monitoring – were scaled back as a deliberate act by government. Whilst those being regulated were only too glad to be rid of another 'burden' of red tape, and whilst government could argue that reducing that 'burden' was a good thing for enterprise, the effect, in both cases, was to open the door to the crooked and the unscrupulous.

And that's the problem that I always have when I hear politicians – of all parties – bemoaning the amount of red tape and regulation with which businesses have to conform. Whilst there are extreme examples of silly and petty interference, most of the regulation is there for a reason. It protects consumers, the workforce, or the environment.

Trusting businesses to follow the rules when they're not being watched has been demonstrated not to work. There will always be some who see an opportunity and take it. (And I wouldn't be at all surprised to find out, in a few years time, that some of the organisations being feted today as 'successes' are actually up to similar misdemeanours – after all, the UK's banking sector was a huge 'success' until they were caught out).

It probably looks very unfair to those businesses and organisations which follow the rules that they have to be regulated and monitored just in case someone else is cheating, but there isn't really much alternative. Businesses, and capitalism in general, have shown that we cannot trust them to behave, and if we cannot trust them all, we have to monitor them all. And actually, although it may be a pain for those honest people dealing with the regulations, it protects them as well – from unfair and dishonest competition.

The next time we hear anyone talking about cutting red tape and regulation, we need to demand to read the small print.

Independence sometime

Tweet In years gone by, I used to go on the occasional protest march, against a variety of different sins and evils.  There was a chant which was regularly used, and which can be adapted to just about any circumstances.

“What do we want?”  “___*___“

“When do we want it?”  “Now!”

(*Insert here a pithy description of no more than three words.  The answer to the second question is always ‘now’.)

It was a useful catch-all.  Gareth Hughes has already drawn a comparison between that and Plaid’s latest statements.  It’s a useful comparison.  The message is much less straightforward and seems these days to run something like this:

“What do we want?”  “Not entirely sure at the moment – can we get back to you on that?”

“When do we want it?”  “Ooh.  Difficult one.  Not now obviously – in a decade or three perhaps?”

As slogans go it’s somewhat lacking in both immediacy and the power to inspire.

Of course, it could be just an attempt to be over nuanced.  The problem with over nuanced messages, though, is that they simply don’t work.  (I say that from experience.  I still remember Plaid’s slogan for the common market referendum in 1975 – “Europe yes; EEC no”.  It was an accurate summary of the party’s position, but a disaster in campaigning terms.)

The problem with this latest attempt at nuance, if that’s what it is, is that it’s losing the party all distinctiveness on the constitutional question.  What exactly is the difference between the two statements in each of these following pairs?

1a “Wales is too poor to be independent”

1b “Wales cannot be independent until its economy has been fixed.”

2a “Only continued membership of the UK can bring prosperity to Wales.”

2b “We can’t leave the UK until we’re sufficiently prosperous.”

In each case the first is the line often taken by members of the unionist parties and the second seems to be Plaid’s current position.  But in each case the statements sound, in effect, remarkably similar to me. 

Not only is Plaid now sounding very like the unionist parties on this question, it’s also standing on its head the argument that I (and plenty of others) spent 40 years promoting.  Whereas in the past we argued that we would never be able to fix the Welsh economy until Wales took responsibility for all its own affairs, Plaid now seems to be arguing that we can’t take that responsibility until the economy has been fixed (and inevitably it sounds like that means ‘fixed by somebody else’).

Now in reality it was never as black-and-white as that, of course.  Independence doesn’t guarantee prosperity any more than continued union guarantees continued relative poverty (or vice versa in each case).  But I always generally believed – and still do – that it is much more likely that a Welsh government, with its focus solely on Wales, would address the economic problems better than a UK government driven by UK wide concerns.

Perhaps Plaid are really just trying to say that devolution of some further economic levers to Wales will be enough to achieve that economic turnaround without full independence, although I’m struggling to see where anyone has defined precisely which of those levers are the key ones, and how and where stopping short of full control gives ‘enough’ control.  And even the party’s current approach to fiscal devolution seems to be somewhat timid.

It’s hard to see the latest statement as anything other than a further redefinition of Plaid as a devolutionist rather than a nationalist party; and given that we’ve already got three of those, I’m not convinced that we really need a fourth.

Women, catholics, and the crown

Tweet Given a choice between changing the laws of succession and abolishing the hereditary monarchy completely, I’d choose the latter, obviously.  For the time being that seems to put me in a minority; although that's not a position with which I’m entirely unfamiliar.  Change it is then at this stage – but surely we can do a better job of changing it than seems to be being proposed by Nick Clegg at present?

Abolishing the prohibition on women is one thing, but what about the prohibition on Catholics, atheists, Muslims, and lunatics?  (Actually I made part of that up: there is no ban on lunatics acceding to the throne.  They are however banned from the House of Commons as I recall – along with peers and prisoners.  Whether the ban is effectively enforced is a matter of opinion.)

The current proposals only do part of the job.  Catholics will still be banned, for instance, although I suppose that Catholic women will only be banned once under the new rules, as opposed to being doubly banned at present.  That's progress, of a sort, I suppose.

More important - and more directly relevant to we mere mortals - than the theoretical possiblity that some future Windsor will convert to Rome is the financial question. Because he’s only changing the rules for the monarchy itself, the rules for inheritance of other titles and the lands and properties that go with them will remain unchanged.   Specifically, that means that a female heir apparent will not be allowed to inherit the Duchy of Cornwall.  That will go to her oldest younger brother, – which means that he’ll cop the income and we, the taxpayers, will have to pay the heir the £18,000,000+ each year which the current incumbent of that title spends on – well whatever he manages to spend it on.

If Clegg wanted to do a proper job, he’d also have to deal with thorny questions like the relationship between church and state, and the inheritance of titles and land.  About time too, and better to do a proper job than a half baked one which will end up costing us in financial terms, just so that the current government can give an appearance of being reformers.

Failure to change the rules on religion also makes a very clear statement that discrimination against those who are in the wrong sect of the same religion - never mind those who adhere to a different religion completely or no religion at all - will continue, with the full approval of the current government.

Sixes and sevens

Tweet I was somewhat surprised to see the story in last weekend’s Western Mail about Dafydd Wigley giving his support, albeit conditional, to Peter Hain’s pet project, a barrage across the Severn estuary.

The “if” stated by Dafydd (satisfying the environmental objections) is a mighty big one, of course.  It seems to have been more than a little underplayed in the newspaper’s report, which gave a rather more positive spin to his support for the barrage.  Properly evaluated, it’s hard to see how that ‘if’ can amount ultimately to anything other than opposition (although of course Hain himself seems to believe that all of the environmental objections can be overcome by deregistering the Natura 2000 habitat, and pooh-poohing the other objections).

Still, it was clear that ‘in principle’, Dafydd was now supporting the building of a barrage.

The story does rather reinforce once again the fact that Plaid’s energy policy is all over the place.  To summarise:

• On nuclear energy, the party is formally opposed, but any member who disagrees is free to campaign in favour; and a significant proportion of the party’s elected representatives seem to fall into that latter category.
• On wind energy the party is formally in favour, except that all those members who disagree are free to oppose every single proposal to actually build any turbines, and do so with vigour.
• On tidal power the party is in favour of lagoons around Wales instead of a barrage, but it now seems that members are free to support building a barrage instead if they wish.
• On gas, the party is opposed to the negative environmental impacts of building gas power stations, but is not opposed to actually building and operating the stations in the first place.

In summary, the party appears to be formally committed to a future based on renewables, as long as its members are free to oppose all proposals for renewable installations and to support any non-renewable proposals.  Effectively, and regardless of the formally-adopted policy, Plaid's policy on energy is now whatever it's local representatives say it is, and varies from constituency to constituency, depending on what might be attractive to local electors - an approach to policy which is almost indistinguishable from that of the Lib Dems.

Energy policy is central to any coherent environmental policy – Wales needs leadership and direction, and is not getting it from any party now.  Plaid used to provide that leadership, but has moved a long way from its position in the 1970s and 1980s.

Arbitrary numbers and coalition arithmetic

Tweet
I’m grateful to Glyn Davies for setting out so clearly the background to the debate over the number of MPs and their constituency boundaries.

As he points out, at the last Westminster election, the Tories committed to reducing the number from 650 to 585.  This was, of course, a wholly arbitrary number (as indeed is the current 650), but reducing the number of politicians is always a popular idea.  (Whether there are enough electors who believed that the turkeys actually would vote for Christmas to make much difference to the election is another matter entirely.)

Never to be outdone in the populism states, the Lib Dems promised to go further and cut the number to 500.  It’s a nice round number, but just as arbitrary as either 585 or 600.  And of course they never really believed at the time that they would be anywhere near having the power to implement anything that they had said.

In the event, the election was indecisive, and a coalition was formed.  In so far as one can reasonably argue that the manifesto pledges of governing parties represent some sort of mandate for government action, it’s fair to conclude that the electorate had given them a mandate to reduce the number of MPs to another arbitrary number, somewhere between 500 and 585.

So, in the coalition negotiations, they duly agreed on another entirely arbitrary number, this time selecting 600.  Perhaps they thought that was splitting the difference – if their approach to doing hard sums on economic issues is anything to go by, it’s certainly a credible theory and the only surprise would be that they didn’t suggest that 700 was half way between 500 and 585.

It could, of course, simply be another example of how the Lib Dems are a moderating influence on Conservative policies.  If they happen to moderate them even further away from Lib Dem policies, I’m sure that’s just an unfortunate accident.

In any event, it seemed there were some caveats on the whole deal which never actually got recorded in the coalition package.  The Lib Dems’ unstated caveat was that the Tories mustn’t upset them by rejecting a wholly unrelated proposal to reform the House of Lords.  And the unstated caveat of many Tories seems to have been that the changes shouldn’t actually threaten the boundaries or territorial integrity of their own constituencies.  Having equal numbers of electors is fine apparently, but only so long as it’s achieved by carving up somebody else’s seat.

I don’t entirely disagree with the point Glyn makes about the House of Lords’ intervention being a case of making an inappropriate amendment to a different proposal, although it is a point of procedure which will only really interest the anoraks.  It does however look like pretty small beer in procedural terms when compared to the sophistry of the coalition partners themselves.

When all’s said and done, enough turkeys have found their excuse not to vote for Christmas.  Not just yet anyway.