More manifestos

Manifestos are out from two more parties, neither of which had any seats in the last Parliament.   One was from UKIP, offering a combination of policies designed to appeal to readers of the Daily Express:  lock up criminals, support for “beleaguered” drivers and self-employed people, get rid of foreign aid, more police, criminalise breast ironing (I didn’t know what that was, either), stop funding devolution and how dare anyone say we’re little Englanders?  The other was from the Women’s Equality Party, whose eight point plan for a ‘caring economy” is presented as “challenging the myth that social justice and equality  are somehow separate from our economy.”  They want equal pay, universal child care, integrated health and social care, more accountability for inequality and lots of policy reviews.  It all seemed well-reasoned and very sane,  but maybe that’s because I read it immediately after the UKIP one.

The Green Party manifesto

While the Green Party manifesto is not likely to make much of a contribution to British government in practice, there are two big things to say in its favour.  In the first place, it’s mercifully concise.  Second,  it doesn’t just give us a shopping list of policies: it starts off each section with a statement about general direction and principle.  A manifesto isn’t just a list of policies: voters want to know, and are entitled to know, how a prospective government would go about judging and making decisions on the matters it doesn’t yet know about.  That, realistically, covers far more decisions than any manifesto could possibly anticipate, and that’s what the Greens are telling us.  Other parties take note.

There’s a commitment to a greener economy, but I think we’re supposed already to know what that means.  The specific policies  on ‘the economy’ are mainly concerned with tax and benefits (the foundations of a Basic Income), but the manifesto doesn’t have much to say about how the economy works or how it will change.  Apart from membership of the EU, the main commitments are to public services in health, housing and education, public engagement, environmental protection, human rights and ethical foreign policy – mostly policies that wouldn’t have been out of place in a Labour party manifesto in the days before Blair.

 

 

Flying a kite: a convertible personal tax allowance

This is a partly-baked idea, based on reform of the Personal Tax Allowance.  It would allow people to take the allowance in cash rather than by setting it against their liability for tax.  The current allowance of £11500 is worth £2300 (that is, 20% of the allowance) to everyone who pays income tax.  If it was possible to convert it to a cash payment, it could benefit many more people.

In round numbers, there are about 65 million people in the United Kingdom.  30 million (24 million people of working age, 6 million pensioners) of them get the personal tax allowance.  For most of these taxpayers, tax and allowances are calculated at source, so the benefit is invisible.  The cost to the Treasury is something in the region of £70 billion.

If 30 million people receive the allowance, 35 million don’t. 15 million of them are 19 or under, so there are roughly 20 million adults (both pensioners and people of working age) who don’t currently get the benefit of the Personal Tax Allowance.  The proposal is simple:  to make it possible for those people to elect to receive the equivalent cash value of the allowance (that is, £2300 pa, just under £200 per month).

The idea may be off the wall, but it’s not outlandish: it asks for nothing better than what is already received by the other 60% of the adult population.  The only net beneficiaries would be people with incomes lower than the tax threshold.  About 6 million of them are people over 65 on lower pensions, 7 million are adults of working age receiving benefits, and the remaining 7 million are either people on low pay or non-workers.  There is no obstacle to people in work receiving the same option – there would be no net cost, apart from the mechanical administration of the payment – but there is no financial advantage for people who are already in receipt of secure incomes to make the switch.

The basic model should be easy to operate.  A tax year runs roughly from April to March.  Records of tax allowances are already kept for everyone with a National Insurance number.  People who wanted to convert their tax allowance into a cash payment would need to make their election in good time before the tax year – the obvious deadline is the time of the submission of tax returns by the end of January.  A person who made that election would then have a tax allowance for the forthcoming year of zero. No further administrative test is necessary.

Many Basic Income schemes have suggested that the Personal Tax Allowance should simply be abolished.  I think it’s important that there should be a choice, for three reasons.  First, PAYE works, and it works for millions of people.  Getting rid of it would complicate people’s lives and breed resentment; it would also more than double the administrative burden.  Second, there are some people, especially self-employed workers, for whom a zero tax allowance would be difficult to manage or live with. Third, choice matters in its own right. If the choice proved popular among workers, it could pave the way for other, more ambitious schemes; we can cross that bridge if we come to it.

This scheme could all get more complicated, but it’s important to avoid that.  Changing back and forth between PAYE and cash payment, week by week or month by month,  would be complicated and could be error-prone.  Disregarding the payment in means-tested benefits would be inequitable, because if the benefit is allocated continuously for at least a tax year, some people would have the payment and others wouldn’t; and if it’s not allocated continuously, there would have to be a complex set of mechanisms to cope. People who owe back tax typically get an adjustment in their tax allowance; if people do not have a full personal tax allowance they should not be eligible.

In principle this scheme could cost up to £46 billion (20 million times £2300), but there are reasons why it wouldn’t.   First, anyone who is currently getting more than the tax threshold in the course of a year already receives the equivalent benefit.  Most people would remain on PAYE – the main reason for electing for a change would be to secure a more stable income.  Most people who become unemployed pass through unemployment: about half the people who drop out of the PAYE system return within six months.  They will typically keep their tax allowance in PAYE.  So not everyone who receives benefits will be getting a converted allowance.  Second, those who earn but are below the tax threshold already receive part of the equivalent benefit.  Third, most important, the cash payment will have to be offset against benefits for about half the relevant population – that is, pensioners and adults of working age on means-tested benefits.  I’m not going to pretend that the interactions with benefits are straightforward – far too many pensioners who are entitled to Pension Credit don’t actually get it – but it should all mean that the net cost is likely to be in the region of half the maximum, something over £20 billion.  That’s still not cheap, but it’s both practical and much less expensive than many alternative proposals that have been canvassed.

This is a proposal, then, for a relatively small, limited benefit that would be unconditional and easy to administer.  It would mainly work in favour of people who are not well protected in the current system: people on unstable incomes, students, people who are not receiving benefits, people with home responsibilities. The argument for a scheme like this is that it would make a difference, not that it would answer every problem.  It would not settle the problems of the benefits system, and it is not big enough to make any very large difference to poverty.  However, money from one source can be mixed together with money from other sources, and a small benefit like this would make sense alongside other benefits.  It would offer a limited but stable source of supplementary income to many people on insecure incomes, and it would offer some support to people who currently have none.  What set me off on this week was a challenge made by Kathy Mohan to Theresa May in the street: “I can’t live on £100 a month”.  She’s right; she can’t.  We need to make sure that part of the benefits system, at least, is stable, secure, guaranteed and permanent.

The cost is the main reservation.  It’s much less than the cost of many Basic Income schemes, and it’s better targeted – getting money to just the people that Basic Incomes are supposed to reach, and doing it without making any of them worse off.  But there is always an opportunity cost.  I’ve not run the figures, but I suspect putting the same money into Child Benefit would have a much greater impact on poverty than this proposal, which offers more to pensioners with moderate incomes, students and women with home responsibility. On the other hand, it probably compares favorably in distributive terms to current proposals for supporting university students and FE, which will cost over £14bn, but have other arguments running for them.  It’s all a question of priorities.  Nor is this the only half-baked scheme I’ve canvassed on this blog.  Think of this as the glimmer of an idea, rather than a personal recommendation.

I also have to admit to a certain apprehension about putting potentially dangerous ideas into the public domain.  One of my first supervisors, Della Nevitt, once scribbled a back of an envelope calculation in the Ministry for Housing and Local Government and it mushroomed into the Rate Rebate,  Rent Rebate and Housing Benefit schemes, the last one in its day described as the greatest administrative fiasco in the history of the welfare state.  I need to think more about this, and it’s possible that other people can see a lurking catastrophe in the idea I’ve not thought about yet.  I’d be grateful for comments.

The Conservative Manifesto speaks to the shade of Edmund Burke

The Conservative Manifesto, Forward, together, is quite an unusual document.  Yes, there’s a  lot about strong and stable leadership – the word ‘strong’ or ‘stronger’ comes in there 86 times, I counted them in and I counted them back again  – but there’s a lot more, including some ringing declarations of principle.  We are told that

“We believe in the good that government can do.”

“Conservatism is not and never has been the philosophy described by caricaturists. We do not believe in untrammelled free markets. We reject the cult of selfish individualism. We abhor social division, injustice, unfairness and inequality. We see rigid dogma and ideology not just as needless but dangerous.”

“Our National Health Service … is founded on the principle that those who have should  help those who do not. It is a system of solidarity to which we all contribute, not just to help us and our families when we are in need but to protect others in our community when they need help too. This not just expediency: we do it because the support we give each other ties us together.”

“We know that our responsibility to one another is greater than the rights we hold as individuals. We know that we all have obligations to one another, because that is what community and nation demands. We understand that nobody, however powerful, has succeeded alone and that we all therefore have a debt to others. We respect the fact that society is a contract between the generations: a partnership between those who are living, those who have lived before us, and those who are yet to be born.”

(The last bit of that sentence, unattributed, is nearly a quotation from Burke – Burke wrote ‘the dead’ rather than ‘those have lived before us’, but presumably they didn’t want to imply that the National Health Service was a partnership with the dead.  The first part of the sentence is nearly a quotation from Jacques Delors, but that’s another story.)

In relation to policy, there’s a long list but a  little less meat.  There are ‘no plans’ for further changes in benefits; things will go on as they have.  More money will be spent on the NHS.  There will be a million more homes 2015-20 (that’s 200,000 an year) and half a million more by 2022 (250,000 a year).  All pledges are carefully tied to the life of forthcoming parliament.   But there are also tantalising hints that there might be more coming.  There will be a reform of medical education.There will be a review of taxation, aimed at simplification.  There will be a review of university funding.  They will review access for disabled people.  They will review the operation of the NHS internal market.  I don’t know what any of those actually means, but they could come with a cartful of surprises.  Perhaps the policy makers might take another lesson from Burke:  “the deliberations of calamity are rarely wise.”

 

 

The Liberal Democrat manifesto

The Liberal Democrat’s manifesto is out.  It has the shape and feel of a traditional manifesto, laid out in nine sections, with a shopping list of policies in each.  The sections cover Europe, health and social care, education, the economy, families and communities, green policies, international policies, rights and (of course) constitutional reform.   Housing policies are buried in family and community, but include the significant, and welcome, aim of expanding house building capacity to 300,000 a year.  Benefits are also part of family and community.  Most of the measures, as in the Labour manifesto, are about trying to repair recent damage: reversing cuts to Universal Credit and ESA, unfreezing benefits, abandoning the two-child policy, restoring Housing Benefit and JSA to 18-21 year olds, and of course the bedroom tax.  Among new policies are to separate out employment support from benefits (a good idea) and withdrawing the Winter Fuel Payment from people with higher incomes (a bad one – they should have learned from the fiasco with Child Benefit).  Possibly the most depressing line is that they will “ensure that those using food banks are aware of their rights”.  Food banks are here to stay, then.

Some thoughts on Labour’s costings

The official release of the manifesto has been supplemented by outline costings, identifying, in terms similar to a budget, both expectations of tax revenue and projected expenditure.  (I made a general comment about the Labour manifesto last week.  I had initially thought to write only one comment as each of the manifestos came out, but I’m not the BBC and I have no duty to offer equal time to all participants.  Labour deserve points at least for turning the election campaign to thoughts of policy.)

In relation to tax, most of the money raised is to come from corporation tax, a tax on very high incomes and tax avoidance.  The Institute for Fiscal Studies has commented that tax revenues are uncertain, and that people will change behaviour to reduce their tax liability.  Those points are certainly true, but the same uncertainties infect Treasury budgets, which in recent years have been increasingly fantastical – thumping great savings on benefits like PIP supposed to materialise out of thin air.  The best we can hope for are indicators, and for the most part Labour’s costings are neither unreasonable nor unsound.

The projected expenditure on social security is £4bn, mainly devoted to reversing existing cuts.  The main list of measures is this:

increase ESA by £30pw for those in the work-related activity group, scrap bedroom tax, implement the PiP legal ruling, restore Housing Benefit for under 21s, scrap Bereavement Support Payment reforms, £2 billion of additional funding for  Universal Credit for review of cuts and how best to reverse them, uprate Carers’ Allowance to the level of JSA

I’ve commented on the timidity of these proposals; it’s not about making benefits better, but stopping them getting even worse.  There are seven measures there:  five of the seven imply not new commitments, but reversion to former patterns, and the ‘cost’ is based on the removal of intended savings from the Treasury’s plans.

There is one element in the spending proposals which I’m sceptical about: that is the assertion that increasing the minimum wage will come in at zero cost.  In terms of the economy overall, there’s good reason to think  that increasing the minimum wage generates as much economic activity as  it suppresses.  In terms of the public sector, however, raising the minimum wage has two more specific effects:  it raises the cost of public service employment, because the public services in general and local government in particular are notoriously stingy employers, and it raises the cost of outsourced contracts, because many local authorities have ducked the first problem  by engaging external firms which pay even less for essential services.

Plaid Cymru’s manifesto is based in opposing current policy.

The second manifesto off the stocks comes from Plaid Cymru.  They hope to raise educational standards by paying teachers more, they want more doctors, and the main policy for housing I could see was to improve the situation of armed forces veterans.  They suggest that social security powers could be devolved – as indeed they could, because Northern Ireland has had full nominal control for nearly a hundred years.  They’re a little less ambitious as to what they might do with the new powers: they’re against private contractors, the bedroom tax and the rape clause, but that’s sketched out in a few words.

There’s no sense, then, that Plaid Cymru believes it can offer a new settlement.   They explain:  “this election is about an immediate threat to our nation, our economy and our people”, and complain that “People in Wales are facing a tidal wave of attacks from the Conservatives.”  They’re stronger on complaining about the inundation than they are on offering measures to deal with it, but in fairness, there aren’t enough buckets to cope.

 

Manifestos matter

Policies matter.  In the absence of the political manifestos, the election campaign to date has been reduced to either a focus on personalities, or  on a generalised sense of trust.  Neither of those can be relied on.  People who voted in 2015 in the belief that they were choosing between David Cameron or Ed Miliband – or, for that matter, Nick Clegg or Nigel Farage – were wrong to think that.    In formal terms, the party leaders aren’t on the ballot papers; the names of prospective local MPs are, with their party (and the party might change afterwards).  In practice, the party leaders aren’t what matters – those parties are.  And that’s why there didn’t need to be an election after all of those party leaders had resigned.

By contrast, the policies announced in manifestos have a serious impact.  The reason why pensions have continued to increase was because the winning party manifesto had promised it.  The reason why the government had to change its mind about National Insurance contributions wasn’t because they’d had a change of heart; it was because the policy contradicted their manifesto.  And one of the key reasons why the Liberal Democrats suffered so heavily at the polls in 2015 is that they broke a key manifesto promise.    We’ve had, up to now, a phony war on the doorsteps; candidates who are standing for office haven’t really been able to say what their  party hopes to do, and that means that they have to bang on instead about character or tribal loyalties.  Let’s hope that the belated publication of the first manifesto changes the tone.

The Scottish Conservatives have changed their mind about prescriptions.

The Scottish Conservatives have abandoned their long-held opposition to free prescriptions, and now accept  that free prescriptions are popular and practical.  A Conservative spokesman explained:  “There is no doubt people in Scotland value the idea of free prescriptions. We have listened to them and changed our policy.”

The case for free prescriptions is straightforward.   As things stood before the policy, and as I believe they still stand in England, five out of six prescriptions were exempt anyway – for pensioners, for children, for people on low income, for prescriptions issued by hospitals and for a wide range of specified medical conditions.  There is already a means-test to make sure that richer people pay; it is called ‘taxation’.  Introducing a further means test for people on lower incomes simply adds to the administrative burden.  So people were being subjected to an awkward, complex and sometimes intrusive process which raised relatively little money.

The Conservative announcement has been met with howls of derision by the opposing parties.  The change in policy has described the change of heart as ‘opportunistic’, ‘untrustworthy’, ‘shambolic’, ’embarrassing’ and ‘humiliating’.  I suppose that that reaction might make sense to politicos of a tribal disposition, but credit where credit is due:  the new policy should be welcomed.  This is a triumph of reasoned argument over political prejudgment, and if it is a reflection of the fact we’re now in an election campaign, it’s also a triumph of democracy over ideology.  There is joy in heaven for the sinner who repents.

The IEA condemns the “Nanny State”

The Institute  of Economic Affairs has published an index ranking European countries on a “Nanny State Index”.  The index is based on their ratings on four issues:  the  freedom to smoke, to drink alcohol, to eat junk food and to use e-cigarettes.   Finland is the “least free”; the UK comes second.  The Czech Republic is “most free”.

Many people on the neo-liberal right take a peculiarly restricted view of freedom.  Freedom is usually defined in terms of non-interference.  Hayek argues, in The Constitution of Liberty, that someone does not cease to be free if they are trapped on a mountain (it’s an odd example, but he was Austrian).  On the other hand, their freedom might be infringed if someone sent mountain rescue to help them out without getting their permission first.

The main justification neo-liberals accept for intervention is to protect the freedom of others.  It doesn’t seem to matter that smoking threatens non-smokers, that alcohol fuels violence and accidents or that junk food is aimed at children.  Those arguments might be persuasive in themselves – we hear them a lot – but none of them gets to the heart of the reason why we need public health measures.   Smoking, alcohol and sugar have together been responsible for much of the premature death and disability in the UK – far more dangerous than terrorism, roads, HIV, pollution or anything else we might name.   The freedom that the IEA is defending is the freedom to die early, to be subject to crippling disease, and to have firms pass off poisonous junk on the public because the only freedom that matters is the freedom of the producer.   Public health is not the threat to freedom.  The people who peddle this stuff are.