Category: Politics and economics

Spot the difference

According to the Treasury, “in 2015-16 income inequality fell to its lowest level since the mid-1980s.”  This is from the Treasury’s paper on the distributive impact of the budget:

This, on the other hand, has just been circulated on Twitter by Alison Garnham of CPAG:

This is what the Treasury thinks is happening after the budget, reviewing income in percentage terms:

And this is what the IFS thinks:

As they ask in Private Eye: I wonder if they are related?

A free textbook on economics

I don’t usually post about a book before I’ve finished reading it, but this one is going to take me a time to get through and it’s worth sharing.  The Economy is a free online textbook on economics, produced collectively by CORE, an international group of economists who are concerned about the way that economics has become detached from the real world.  The word cloud in this image is the way they indicate their priorities in the preface.  (My own reservations about economics as a discipline can be found in an article in the Real World Economics Review published last year.)

I’m not going to endorse everything in the textbook, because there are various issues in the way economists think about their subject that  I’ve been critical about. I’ve got far enough into the textbook to be able to make reservations about indifference curves, the subject of the third section, or the applicability of game theory, the subject of the fourth.   (My criticisms of those methods can be found in my book on Reclaiming Individualism).  I do want, however, to welcome the approach, the accessibility of the document, and the determination of the team to make the text available to everyone.

Further note, 29th March 2018.  I have at last got to the end of the book.  There are various points where I’d raise issues.  Some of them are deficiencies in the discipline of economics itself (for example, the narrow perspective on democracy, or the curious lack of material about poverty).  Some are based on questionable selections: examples are the acceptance of the idea that there is an equilibrium to be attained in the labour markets, or the treatment of lending and borrowing as a principal-agent problem.  Some issues could be improved; despite genuflections in the direction of policy, it’s not informed by the literature on public policy.  There’s only one section where I’d recommend students to steer clear, and that is the discussion of inflation and unemployment.  It fails to disambiguate – that is, to recognise that the concepts are used differently by different economists – and the result is a muddle.  Its assumption of a relationship between unemployment and inflation, in the teeth of the evidence, derives from a basic failure to understand that inflation describes a relationship between money and markets, not an independent phenomenon.

Not austerity, but a purposeful aggravation of inequalities

A report for the EHRC identifies the impact of ‘austerity’ policies since 2010.  The cumulative effect of policy changes has been disproportionately to affect people on low incomes, women, people with disabilities and minority ethnic groups.  This is not about austerity, which has always been a misnomer.  Austerity means spending less; this is something quite different.

The negotiations about Brexit aren’t addressing key issues

Although the EU has been behaving badly about the Brexit negotiations, they have reason to complain about Britain, too.   They’re right, first, to say that Britain’s position papers are too vague to be any use.  Britain offered 16 pages on trade, for example, recently supplemented by another 11 pages on continuity.  It’s not difficult to know what a successful trade agreement looks like.  The agreement with Canada, CETA, runs to nearly 1600 pages.  What  the UK had to do – and it’s had 15 months to do it in – was to begin with those 1600 pages, identify which terms are acceptable to Britain (they are all, after all, already acceptable to the EU), and then work on the differences.  That would still be a lot of work, but at least there’d be a meal on the table rather than a bowl of twiglets.  Britain can hardly complain that trade is  not being discussed if they’ve not offered any points for discussion.

The EU negotiators are right, too, to identify key issues besides trade: citizens’ rights, Ireland and treaty obligations.  The UK’s concerns are difficult to decipher; the latest position paper relates to the confidentiality of official documents, which suggests that government ministers are more concerned with covering their backs than they are with getting on with the business. Where the Commission is behaving badly is to say that nothing else gets discussed.  The EU also has treaty obligations.  Article 50(2) states that

the Union shall negotiate and conclude an agreement with that State, setting out the arrangements for its withdrawal, taking account of the framework for its future relationship with the Union.

Whatever happens about the bill, the EU has no right to refuse to discuss the future relationship.

Two of the three items the EU is starting with are, in fact, about that relationship: Ireland, and citizens’ rights.  The Irish border is difficult, but not intractable, because different elements can be separated out and dealt with differently:  for example, Switzerland is not part of the customs union or the EU but is part of Schengen.  Citizens’ rights is much the more complex problem, and neither of the parties has shown any inclination to acknowledge that UK citizens resident in the UK are also currently citizens of the EU, and many will face the same sort of problems with split families, cross-border care, pension rights or interrupted periods of residence that people now in Europe or other nationals now in the UK will face.

Why France is going to reform its housing benefit system

The French government has announced that their system of housing benefit will be reformed this autumn.  The minister, Jacques Mézard, is reported in Le Monde as saying:

We have a budget for APL (Aides personnalisées au logement) of 19 billion euros, a budget for all housing benefits of 30 billion euros, the highest in Europe, with a corollary: not enough housing and rents that are too high.  … For one euro more spent on APL, 78 centimes goes on higher rents.  We have to get out of this perverse system.

When housing benefits were first introduced in the UK, in the form of “Rent Allowance” and “Rent Rebate”, policy makers had been impressed by the French argument for subsidising low incomes rather than bricks and mortar – “aide à la personne” instead of “aide à la pierre“.  As in France, it’s led to higher costs, more complex administration, higher rents and often the exclusion of low income families from decent housing. It was a mistake then, and it’s still a mistake now.

Preventing terrorism

In heath care, it’s long been conventional to refer to two or three classes of prevention.

  • Primary prevention is about implies stopping a person from developing a problem in the first place.  It can be done by
    • changing the environment, which has been been the approach of public health services;
    • changing people’s behaviour.  This is attempted through health education; advertising; legal restrictions, like licensing of pubs; and financial disincentives, like taxation on cigarettes and alcohol; or
    • changing people’s physical condition.  Vaccination is the obvious example.
  • Secondary prevention.  This implies identifying a problem in its early stages to prevent its progression, for example through screening of women for breast and cervical cancer.
  • The third class, tertiary prevention, is not used as widely  as the others, because the category is difficult to distinguish from treatment; it aims to reduce the impact of an illness that has happened, or treating diseases so as to stop them from spreading.  To stop cancer recurring, for example, treatment has to be thorough and comprehensive.

It ought to be possible to extend this classification to other things we need to prevent.  I don’t claim to know much about terrorism, but it seems to me obvious that we cannot describe policing of any kind as the “front line” dealing with the problem.  The front line is primary: the people who occupy it include teachers, religious leaders and the broader public.  Primary prevention would aim to change culture, attitudes and behaviour at the source, through social inclusion, education, and civic engagement.  Community policing and early detection by the security services – the focus of much of the present debate – are forms of secondary prevention.  Control orders or the  “Prevent” programme, which respond to stop committed terrorists from acting on their convictions, are tertiary. The response of successive governments in the UK has been heavily geared to tertiary prevention, and that means that while it can limit the damage, it comes in too late for effective prevention.

The SNP manifesto is out (at last)

The SNP have published their manifesto today.  They don’t pretend that they’re going to be the next government, but they do represent themselves as an active opposition – more, they suggest with some justice, than might be said for some other parties in Parliament.   The principles are clear and strong: they’re opposed to austerity, they want to take action on poverty and inequality, they want to safeguard Britain’s position in the single market and they want to support public services.  They’re unusual in treating social security as a major issue  – sanctions, the rape clause, pensions, the bedroom tax and the benefits freeze.  And, despite the hollow accusations from opposing parties in Scotland about the SNP’s supposed ‘obsession’, there’s nothing here about independence.

The main point of criticism is a matter of style rather than substance: there’s nothing here that couldn’t have been said within three days of the election announcement.  Waiting so long to put out the manifesto tends to imply that it wasn’t seen as much of a priority, and that is a misjudgment.  People need something positive to vote for, and this manifesto has something to offer.

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.

 

 

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.