The Economist is berated by right-wing libertarians on Twitter

An editorial in The Economist has expressed some concerns about the irresponsible pledges being made by the contenders for the leadership of the Conservative Party.

These proposals range from unwise to extraordinarily bad.  Mr Johnson’s tax cuts would be both a waste of scarce resources and grossly unfair.  He would reduce their cost by raising national-insurance contributions, a payroll tax.  As a result the biggest beneficiaries would be well-off pensioners, because payroll taxes fall only on those in work.  The policy is a shameless bribe to the elderly and prosperous Tory party members who choose the leader.

That critique has been rebuffed by neo-liberals on Twitter.  An argument from @_JamieWhyte runs as follows:

What do they mean? How are scarce resources wasted when the government collects less income tax? Does @TheEconomist  believe that private spending is more wasteful than govt spending? I cannot think of any other interpretation of this claim (help, anyone?)

That’s an intriguing argument, because it has implications its supporters may not have recognised.   If tax is a means of financing government, this would leave a deficit (which the Conservative right has consistently claimed it’s concerned about), and the money has to come from somewhere.  To govern is to choose, and this is a distributive decision.  If on the other hand tax reliefs are basically transfer payments – altering the balance of spending power between private citizens – then the same argument made here, that money held in private hands can’t be wasteful, also applies to social security payments, which are another way of doing the same. That can’t waste resources, either.

For most of the last sixty years, however, it’s largely been accepted that tax reliefs are simply a cost to government (the argument was made by Titmuss).  If they’re a cost, they must be justified; and a cost to benefit the rich, imposed at the expense of lower-paid workers, is hard to defend.

The libertarian right usually sees tax relief as allowing people to keep ‘their own’ money. The basic objection to that position is that incomes and tax rates are entirely conventional.  (Note that the defenders of the proposed tax cuts have been commenting that senior policemen and nurses – whose pay is determined entirely by public policy  – should not be subject to higher rates of tax. ) The reason why Nordic countries can sustain higher tax is that the structure of their incomes is different, and conversely the low taxes in Mexico are not compensated for by higher incomes.  No-one should imagine that, if the structure of tax rates was to be fundamentally reformed, their income will ultimately look the same as it does now.  We have to counter the illusion that tax is capturing people’s private incomes.  The distribution of income is not a private matter.

Social policy and interpersonal relations

Screwing my courage to the sticking place,  I have added a new page to An Introduction to Social Policy.  It’s about Social Policy and Interpersonal Relations, and it includes coverage of topics including the body, terminating pregnancy, sexuality, suicide and domestic violence, amongst other issues.

The website is used around the world, but few people have noticed the new page yet – there were 21 visitors last week out of 2,730 for the whole site.  The new page covers  potentially sensitive material, and  I’ve been acutely aware that what I write has to be useful for people in a variety of cultural settings.  I’d appreciate feedback.

What’s wrong with the idea of opening the NHS to US traders? Plenty.

There’s been a lot of discussion about the potential for a trade agreement with the USA and its possible impact on the NHS.  “I think everything with a trade deal is on the table,” Donald Trump has said.  “When you’re dealing in trade everything is on the tabl,e so NHS or anything else, a lot more than that, but everything will be on the table, absolutely.” The response of those who want there to be such an agreement has been to say that it won’t matter – a “storm in a teacup”, one IEA spokesperson commented. US firms are already providing services in UK health care.  Services can be provided by a range of providers; what matters for the consumer is that the NHS continues to offer services that are free at the point of delivery.

This view may be disingenuous, because there is a strong financial incentive not to see the problems.  It is certainly mistaken.  The usual complaints from the left are that profit-making firms are extractive, and that competition consumes resources.  Either might be true, but the problems run much deeper than that.  There is now abundant evidence of what happens to public services when ‘competition’ or part-privatisation is introduced.  I have just had a paper rejected which makes the arguments in some detail – admittedly it’s too tendentious for an academic journal – but I can sketch out a couple of points here.

There is no system, anywhere, that is wholly public, any more than there is a system that is wholly private.  The NHS has had an uncomfortable relationship with the private sector, but its successful functioning relies mainly on two pillars: that the private sector is small and select, and that the services are sufficiently integrated to ensure that really serious cases can be taken over by the national service.  Both of those are at risk from creeping commercialisation.

The fundamental problem in any mixed system is that commercial providers get to choose what they cover; public providers, committed to meeting the needs of a population, do not.  Commercial providers select those areas of operation which they are undertaking to provide – that is how markets work.  That means that in general they will select those activities which deliver the best return per unit.   It follows that some things will be left out; when they are, the public services will have to deal with them as provider of last resort.  (Take a simple illustration, delivering post and parcels.  If private firms can subcontract for the profitable bits, they choose the easy runs – between major cities, or within busy areas.  In the case of private health care, that has generally meant a preference for relatively low-risk elective surgery, while long term psychiatric or geriatric care don’t attract the insurers or the services.)

Taking those points together, that must also mean that public services have a higher cost per unit than the private services – the difference is built into the process.    Politically, there are constant complaints that public services don’t work as well as private ones.  Of course they don’t; they have to take on the bits that private providers leave behind.

That’s the unavoidable part of the problem.  Some other things follow in the wake of that structure.  They may be avoidable, but they are still difficult.

  • There is a continuing incentive for private providers to cut corners – skimping on service, paying less, holding to the letter of complex contracts.
  • The public sector has to develop processes for sub-contracting and compliance, which are expensive and uncertainly effective.
  • When private providers get it wrong, and services collapse, the public services have to pick up the pieces.

There’s obviously a lot more to be said about competitive structures, but that’s why I started out trying to write a paper on it rather than a blog entry.

One way to resolve the problems of means testing – just make the details up

I’m definitely slowing down; it’s the nearly the end of May and I’ve still got seven hundred pages to work through of the CPAG handbook.

I’ve been struck this time by something I really ought to have noticed before now, which is the system’s gradual, creeping dependence on imaginary money: ‘notional’ income,  earnings or capital, ‘deemed’ income, treating loans as income, attributing to people the benefits they haven’t claimed, ‘underlying’ entitlements, treating payments that are owed to a claimant as if they had actually been paid, and so on. For those of you who habitually don’t spend their time curled up with the Handbook, here are a few examples:

If your main work is self-employment but your earnings are low, your UC may be worked out on higher earnings than you have.  (p 119)

You may be treated as having notional income if … you work free of charge or for less than the going rate ( p 129)

If you fail to apply for income to which you are entitled without have to fulfil further conditions, you are treated as having it from the date you could have obtained it. (p 451)

Capital (unless it is disregarded) is assumed to provide a set rate of income – called ‘deemed income’ (p 477)

You may be treated as having notional capital if:

  • you deliberately deprive yourself of capital in order to claim or increase benefit
  • you fail to apply for capital which is available to you
  • you are a sole trader or a partner in a business which is a limited company (p 501)

You are treated as having ‘notional earnings’ if it is not possible to work out your actual earnings from employment or self-employment when your claim is decided (p 564)

Student loans for maintenance count as income if you could get a loan by taking ‘reasonable steps’, even if you choose not to apply for one.  (p 871)

The basic principle is that if people’s income is too complicated, too unstable or too uncertain to declare, the process of means-testing is going to plough on regardless.  They may not actually have any income, but we can still pretend that they have one. It’s a wonder that we’ve not thought more about make-believe food.  It’s the obvious answer to foodbanks.

How to abolish universal credit

An inquiry in London is asking how Universal Credit can be replaced.  I’ve previously supported calls to ‘pause’ or stop its roll-out.  Unfortunately, with more than two million people enrolled, we’re well past the point where it can be stopped or cancelled in its present form. The most important change passed when UC moved past its previous focus on unemployed people and started to enrol other people with a wide range of needs.   Most people who are unemployed cease to be unemployed within a few months, but longer-term claimants are much more likely to be chronically sick or disabled.  They need stable, secure protections. Universal Credit is not good at providing them, because of the  fluctuations in the level of support provided, but the support cannot just be removed while a new system is sorted out.   Transfers from existing benefits can be stopped, but new enrolments can’t be – there have to be benefits available for sickness, unemployment, low earnings.

What can be done, then, to deal with this catastrophe?  Forget the easy, unified solutions; that’s how the mess was made in the first place.  The only practical approach is to start to dismantle the system by moving to new, compartmentalised benefits dealing with the principal contingencies.  Start with invalidity, or long term sickness: it needs to be removed from the principle of work-testing, because the whole point of the provision is that it is supposed to deal with people who it’s not reasonable to expect to work.  Most of the regulations introduced for ESA or UC  have been screamingly inappropriate.  Think about child care; it may be best to take it out of the benefit system altogether.  The changes to Pension Credit are new – couples where one person is still of working age can transfer back to the pension system with no loss.  Housing Benefits are still largely in place – they won’t be for long, and local authorities have been losing expert staff, but the long-heralded abolition of Housing Benefit for pensioners hasn’t happened yet, and that system could keep going.

I’m not going to go through every aspect of the benefit in the same way, but the principle should be clear.  Whenever  you have a complicated problem, the way to deal with it is not with a single, complicated answer.  To deal with an unmanageable  problem, break it up into slightly less complicated ones; break those up in turn into smaller ones, and keep going until there’s a group of problems that it’s actually possible to deal with.

This is, of course, the opposite of what Universal Credit was supposed to do.  The approach is made a little easier by the fact that Universal Credit is not, and never could have been, a unified system: it already has compartments for different aspects of the service (unemployment, employment, housing and so forth).  The system can’t be abolished overnight.  It has to be taken apart piece by piece.

Sumption on the rule of law

While Jonathan Sumption’s Reith lectures offer some food for thought, some of his claims are  questionable.  This is from this morning’s lecture:

Democracies operate on the implicit basis that although the majority has authorised policies which a minority deplores, these differences are transcended by their common acceptance of the legitimacy of its decision-making processes.

Well … up to a point, m’lord.  It’s true that democracies depend heavily on legitimate processes in order to deliver legitimate outcomes. But it’s also true that those processes are not enough in themselves to ensure legitimacy.  Majorities, and apparently legitimate processes, authorised policies by Hitler and Mussolini.  Sumption cites James Madison in another context; this is what Madison has to say about majority rule:

It is of great importance in a republic not only to guard the society against the oppression of its rulers, but to guard one part of the society against the injustice of the other part. Different interests necessarily exist in different classes of citizens. If a majority be united by a common interest, the rights of the minority will be insecure…. In a free government the security for civil rights must be the same as that for religious rights. It consists in the one case in the multiplicity of interests, and in the other in the multiplicity of sects. The degree of security in both cases will depend on the number of interests and sects … In a society under the forms of which the stronger faction can readily unite and oppress the weaker, anarchy may as truly be said to reign as in a state of nature, where the weaker individual is not secured against the violence of the stronger …

It’s fundamental to democracy that the rights of minorities are protected; if they are not, it is no longer a democracy.

Sumption’s view of the legal process, oddly for someone in his position, veers at times towards an ideal.

Law is rational. Law is coherent. Law is analytically consistent and rigorous.

If law was rational and coherent, it would be predictable.  We should be able to state with confidence what the law is as soon as we have seen an unequivocal statement in a statute, without waiting for confirmation from the courts.  Look at Sumption’s own comment on a Supreme Court decision:

The majority’s reason, however dressed up, was that they didn’t approve of the power that parliament had, on the face of it, conferred on ministers. Three of the judges thought that it was such a bad idea that parliament could not possibly have meant what it plainly said.

If the law was consistent and rigorous, it should be the case that the Supreme Court would deliver consistent, clear thematic judgements – but even when  they say they agree with each other, they can’t bring themselves to say the same things.

More fundamentally, if the law was consistent and rigorous, whether or not people’s interests are protected shouldn’t depend on whether or not they contest it.  Courts routinely rubber-stamp oppressive orders relating to debt simply because the debtors don’t make a submission. The big utility companies notoriously can afford to play the odds – losing a few cases they don’t seriously argue about because they routinely win so many without an argument.  The law, as Sumption says, has certain biases: “in favour of individual rights and traditional social expectations “.  But it also has a ferocious bias towards people who can afford to hire lawyers.

 

The public mood is swinging against Brexit

Views in the UK are polarised.  It is difficult to draw any clear message from the pattern of voting in the European elections, but the graph – prepared by the BBC, seems to mark a strong shift against Brexit.  You wouldn’t know it from the BBC’s Brexit coverage; I am listening now to a Radio Scotland item which is telling me that the Brexit Party romped home in the election.  Clearly, they didn’t.

The denial of votes to EU citizens on election day is another national disgrace; it will be the subject of legal action.  The assault on the rights of EU citizens goes rather beyond the 3.6 million people from the rest of Europe resident in the UK – or even them plus the 1.2 million UK residents in other European countries.  UK citizens are European citizens, too.  The formal census figures are out of date, as usual, but the population of the UK in 2017 was  roughly 66 million, and 90% are British nationals.  A further 5.6 million currently live abroad, of whom 1.2 million live in other EU countries.  We should perhaps discount 1.9 million people from Northern Ireland, because their rights are guaranteed if they so wish it by the Irish government, but that still leaves us with 57.7 million British nationals in the UK, and 5.6 million outside the UK, whose rights to European citizenship are being withdrawn.  In the 2016 referendum, 17.4 million people voted to leave the EU.  If we assume that all of them can be said to have consented to the loss of their rights, that still leaves 46.9 million other British citizens who are being denied their fundamental rights on the basis of that vote, and more than 50 million people when we consider European citizens from other countries living in Britain.

 

The Special Rapporteur condemns the British government’s ideological destruction of the welfare state

The final report on the UK by the Special Rapporteur on Extreme Poverty and Human Rights is damning: “much of the glue that has held British society together since the Second World War has been deliberately removed and replaced with a harsh and uncaring ethos.”

The report is in Microsoft Word format, which may make it inaccessible to some, so here is a PDF version. Here is a taste of what he says:

The Government has made no secret of its determination to change the value system to focus more on individual responsibility, to place major limits on government support and to pursue a single-minded focus on getting people into employment. Many aspects of this programme are legitimate matters for political contestation, but it is the mentality informing many of the reforms that has brought the most misery and wrought the most harm to the fabric of British society. British compassion has been replaced by a punitive, mean-spirited and often callous approach apparently designed to impose a rigid order on the lives of those least capable of coping, and elevate the goal of enforcing blind compliance over a genuine concern to improve the well-being of those at the lowest economic levels of British society. It might seem to some observers that the Department of Work and Pensions has been tasked with designing a digital and sanitized version of the nineteenth century workhouse, made infamous by Charles Dickens, rather than seeking to respond creatively and compassionately to the real needs of those facing widespread economic insecurity in an age of deep and rapid transformation brought about by automation, zero-hour contracts and rapidly growing inequality.

I suspect that those of us who live here have become hardened to it, so that it doesn’t seem quite so bad as it does to an external observer.  Certainly many of the underlying problems have gone on for decades – I remember findings in the 1980s, from the Policy Studies Institute, that half the families on benefit were running out of money most weeks.  The retrenchment of social security in the 1980s and 90s, and the ‘welfare reforms’ after 2000, have all added to the problems.  The sad truth is that we left behind the principles of the welfare state long ago.

Can we revive capitalism?

Yesterday I went to an interesting event organised by Reform Scotland on ‘The Future of Capitalism’, addressed by Adrian Wooldridge (‘Bagehot’ of the Economist) and Lord Wood.  Most of their recommendations focused on fixing the vices of large companies and restoring the ‘dynamism’ of capitalism through small businesses and worker participation.  I think there are more fundamental issues to address.

The first is: is this still capitalism? It’s a question raised by Tony Crosland in the 1950s, and it’s highly pertinent to the debate.  Our economy doesn’t fit the conventional models of market capitalism in several ways.  Crosland pointed, for example, to the divorce of ownership and control, and the role of the state.  There’s a lot to add to that – for example, the role of voluntary, non-profit and mutual organisations.  (We also have some less appealing non-capitalist elements, such as the survival of pre-capitalist landholding in much of Scotland’s territory – at least 30% is still held by the landed gentry).  We have a complex, diverse, mixed economy, rather than an ideally ‘capitalist’ one.  Measures which aimed to revitalise the economy through a purer form of ‘capitalism’ may well just miss the point.

The second question: is ‘capitalism’ the source of our prosperity?  Many advocates of the market system, and capitalism’s ‘creative destruction’, believe it is; the story is not straightforward.  If we look, for example, at the housing system, people in the UK were able to live in decent housing in most cases through one of two mechanisms: the building societies, which were mutual, non-profit organisations devoted to making home ownership possible, and social housing, mainly developed through local authorities.  Many of our  current problems in that field relate to the ideological destruction of those systems.

Third: is ‘capitalism’ really the source of dynamism in our current  economy?   Successive British governments have been convinced that it must be, and that the key is independent, small business that will grow into larger businesses.  Most other countries are much more likely to have developed large industries through state aid – Mariana Mazzucato’s work on The Entrepreneurial State makes the case strongly.   And in the UK we’re apparently convinced it’s not cricket to do the same.  Our economy may be sinking, but at least we’re playing the game by the rules.

I’m generally suspicious of most analyses of ‘capitalism’.  Like Santa Claus, it’s used as a catch-all expression to explain why some of us get presents and some don’t.  Let’s talk about the  world as it is instead.

The age of criminal responsibility: our legislators leap into action

The Scottish Parliament has agreed to raise the age of criminal responsibility from eight to twelve.  Now there is pressure on the English government to raise criminal responsibility from the age of ten, which is where it’s been since 1963.   Under English law, there are special rules governing children aged 10-14, and there is even talk of raising the age of criminal responsibility to 14.

It’s more than forty years since I studied law, and at the time everyone was confidently saying that the age of criminal responsibility was set to go up any day now. (One social policy textbook of the time said it already had done, because the author had no reason to suppose it wouldn’t have happened by the time the book came out.)   The proposal to raise the age of criminal responsibility to 12 was initially made, if I have it right, by the 1960 Ingleby Committee, nearly sixty years ago.  In England, the Children and Young Person’s Act 1963 raised the age from eight to ten (s.16.1); and then the 1969 Children and Young Person’s Act raised it to fourteen (s.4).  You may reasonably blink at the last part of that, because it never happened.  The Act was passed, but it needed a commencement order to come into force,  and the order was never made – basically, no Secretary of State had the courage to do anything about it.  Eventually the provision was removed by the 1991 Criminal Justice Act, which had a tidying-up provision to cancel laws that hadn’t been brought into force.

I’ve heard it said that making Acts of Parliament is a national sport; no-one should take them too seriously.  It’s a reminder that campaigns can’t afford to stop when the legislation is passed.  It’s also perhaps a reminder of something Churchill once said about another country.  You can always rely on our governments to do the right thing, once they’ve exhausted all the other alternatives.