Hold the horses: the OBR covers us in manure

The Office for Budget Responsibility has produced an alarming new report about the state of the public finances. They offer projections over 50 years, mainly 2024 to 2074, which seem to suggest that the economy will be faced with insurmountable debt and a disastrous state of public finance. The main factors they consider are the impact of climate change, demographic change, the growing cost of health care and the cost of maintaining massive public debt.

Don’t panic.  These are projections, not predictions, and a projection simply takes a present trend and follows it outward.  Some of the startling figures projections, particularly those related to climate change, are based on wild guesses.   The projections assume no changes in policy of any kind, no changes in the pattern of economic production, the same social codes, the same consumer behaviour, and so on. This is the same process that led the Times in 1894 to write that “in 50 years, every street in London will be buried under nine feet of manure.”   As a prediction, it’s horse manure.

 

Preparing for another pandemic

The first Hallett report on the management of a pandemic is disappointing.  It’s wordy and over-blown, but that’s not the main problem.  Consider this central, first recommendation for action:

“Recommendation 1: A simplified structure for whole-system civil emergency preparedness and resilience

The governments of the UK, Scotland, Wales and Northern Ireland should each simplify and reduce the number of structures with responsibility for preparing for and building resilience to whole-system civil emergencies.
The core structures should be:
• a single Cabinet-level or equivalent ministerial committee (including the senior minister responsible for health and social care) responsible for whole-system civil emergency preparedness and resilience for each government, which meets regularly and is chaired by the leader or deputy leader of the relevant government; and
• a single cross-departmental group of senior officials in each government (which reports regularly to the Cabinet-level or equivalent ministerial committee) to oversee and implement policy on civil emergency preparedness and resilience.”

The idea behind this seems to be that the way to be effective is to give the responsibility squarely on the busiest, most senior figureheads possible. That is hopelessly naive – and it’s what led to the effective dereliction of duty when the Prime Minister couldn’t be bothered turning up to routine meetins of COBRA.  Picture the scene.  Nothing more happens for 25 years, and then we get hit again.  What will those high-level, cross-departmental groups have done in the meantime? They’ll take it seriously at first.  Then it will become more routine.  There’ll have been at least two, possibly three, new governments, and far more responsible ministers.  There’ll be changes at the level of supporting departments.  Senior staff will retire.  And someone, someone, won’t treat this as a priority any more.

The crucial test of any administrative structure is not what happens when everyone has good will, competence and commitment. It’s what happens when things go wrong.

The second complaint: Hallett thinks that our government isn’t centralised enough.

“It is therefore necessary to place in charge the only government department that has the power and authority necessary to take the lead – the Cabinet Office. It has the decision-making power of the Prime Minister and the oversight and ability to coordinate the activities of the whole government.”

This is absurd – and dangerous.  Hallet complains about ‘groupthink’, but her proposals are a recipe for more of it. In the pandemic, decisions were highly centralised.  That’s one of the principal factors which led to the single-track policy, assuming that this disease would be like flu.   People who knew how to identify the spread of disease, people who knew local areas and local systems for distribution, were sidelined.  And later, when new evidence emerged to say that the official advice (Hands-Face-Space) was off-beam – because the disease was airborne, not mainly spread by droplet – the ‘leaders’ couldn’t bring themselves to change the advice.

We’ll get on to issues about the conduct of the response in due course, but that’s for a later report.

An uninspiring election

I’ve said almost nothing about the election that’s currently taking place in the UK. The parties have not been sufficiently interested to want to engage in debate on any of the issues I happen to think, however eccentrically, are important: issues like primary care, social security, housing, access to law or schooling.

Two things are getting in the way.  The first is the contention that everything in a manifesto has to be fully costed.  I find it baffling that everything has to be costed: none of the parties seems ready to say directly, ‘these are our values’, giving a sense of purpose or direction for the period they propose to be in office. Specific costings may be good for two or three months, but then an incoming government will need to look at conflicting claims about priorities and their objectives will have to be revised, manged and reconsidered.  The convention on manifestos is mainly important because they lead to an effective veto on revision by the Lords, and the more limited the commitments, the less will be certain of passing.

The second problem is the obsession with personalities – the delusion that we are voting for a Prime Minister.  Wake up: this is not the way our system works.  If you voted for Cameron in 2015, you got May.  If you voted for May in 2017, you got Johnson. If you voted for Johnson in 2019, you got Truss and Sunak. There’s an obvious defence for Starmer against the criticism that he was campaigning  for Corbyn to be Prime Minister: no-one in our country should ever assume that they’re campaigning for a leader.  You vote for a party, and a party is a team.

I part company with most parties when it comes to  priorities.  The Labour Party has adopted a slogan long associated with the political right-wing, that security is “the first duty of any government.” That formula runs back to Thomas Hobbes and Adam Smith. It’s a common rhetorical ploy to claim that one thing is so essential that it comes before everything else – the Greens make equally strong claims about climate change, the Club of Rome used to do it about finite resources – and they’re just as invalid, for the same reason – no government in the world does just one thing.  There are lots of other preconditions for the continued existence of a society which could just as plausibly be claimed – health, education, family life, international cooperation, economic growth, action against poverty, and so on. Defence is only one duty of many. I don’t think there’s any government in the world that doesn’t think it is also responsible for economic policy, and nowadays the vast majority of governments around the world have social policies extending to health care, education and cash assistance. Are these really less important than defence? Let me offer an older principle, which is also to be found in Hobbes:  Salus populi suprema lex – the welfare of the people is the highest law.

I’m not going to try to write a manifesto here, but if you look at the previous entry on my blog, you’ll find a plausible substitute. Policies for health, education, housing and social security are all discussed in my book, How to fix the welfare state.

 

How to fix the welfare state – a short introduction

Two years ago, How to fix the welfare state was published. We have an election coming up, and many of the issues that I discuss in the book will come up during political debates.  I’d like to think that the book could offer some foundation for those arguments, but bitter experience says it probably won’t.

I was looking at other material online, via the University Press system, when I came across a description of my book, and discovered that it wasn’t the material I had sent to the publisher.  Someone had obviously decided not to use the abstracts I sent in, and replaced them with gobbledegook. For example, the abstract of the last chapter now reads: “This chapter focuses on the condition of the welfare state. It notes the claims of welfare wasting money and of being undermined by fraudulent claims. The arguments for personalisation are well-meaning as the option of choice becomes available in public policy. … ” This has no direct relation to anything I’ve written, and that third sentence there makes no sense to me at all.   I’ve raised this with the publisher, but in the meantime I’m going to post the abstracts I submitted here, in the hope that anyone who’s looking for the material would prefer to judge it by something that’s minimally coherent.  If you’d like to know what basis there is for the arguments that follow – they’re all in the book.

How to fix the welfare state: abstract

The book discusses a range of issues in the British ‘welfare state’. Chapters outline the structure of services, the impact of some false and misleading narratives, and the problems that need to be addressed. Many aspects of the dominant policy narratives, such as personalisation, marketisation, when to opt for private provision or the influence of individualism, have created further problems, and diverted attention from the main issues. The book points to a range of different issues, including questions of size, centralisation, co-ordination and complexity. It points to the ways that the services have gone wrong, and makes suggestions about what they need to do to get things right.

Chapter 1: Introduction

This introductory chapter covers:
* Arguments for welfare
* The criticisms made of the welfare state from the right wing
* A brief history of social services, considering the Poor Law and after, and
* The plan of the book.

Chapter 2: Social security

Key points 
Social security provides money, to be spent in a commercial market.
Money can be brought together from different sources. It doesn’t have to be done by one benefit.
Social security is provided for many reasons, but its main purpose is to provide some secure income.
Positive developments
Most of the cost of social security currently consists of benefits offering a secure but only partial contribution towards income. Earnings-related pensions, Child Benefit and benefits for disability were all developed after the welfare state’s foundation.
Where policy has gone wrong
Some degree of selectivity is necessary, but the process is liable to fail in some cases and to leave gaps in others.
Lumping benefits together doesn’t make them simpler.
Benefits don’t have much to do with work. Tying social security to employment services has been to the detriment of both.
What to do instead
A secure income can have many components. The benefits package can be made of smaller, more specific benefits.
Benefits need to be less conditional, and more predictable. More could be universal.

Chapter 3: The NHS

Key points
The NHS offers a form of insurance, providing medical care to anyone.
Despite the dominance of hospitals, general practice is at the heart of what the NHS does.
The need for public health has been highlighted by recent experience.
Positive developments
The NHS has moved away from long-stay institutions and focused on medical care.
General practice has been greatly improved.
Where policy has gone wrong
Private markets cannot fill the gaps. They depend on producers having choices, and that leads to exclusion.
Health is public as well as individual. Reducing everything to the personal level compromises the aims of health services.
What to do instead
The health service has to provide different levels of service: decentralised general services, more specialised work for larger areas, and highly specialised centralised provision.

Chapter 4: Social care

Key points
The shift from health care has left services that are fragmentary, insecure and often expensive.
Residential care has grown because it is an effective way of providing intensive services, but not all residents need that.
Domiciliary care has been based in a flawed model of ‘personalisation’ – and a catastrophic assumption that it won’t be sustainable.
Care in any setting depends on continuing personal relationships.
Positive developments
This service did not exist when the welfare state was founded.
It was created as part of the movement away from long-stay institutions. It has its failings, but at least it has made it possible for some people to continue to live in their own homes.
Where policy has gone wrong
Personalisation has never lived up to its promise; it only works for some.
Creating something like a market in social care is no guarantee of choice.
Markets offer commodities; people who need care need something different.
What to do instead
The clients of social care need people with time and skills, not a shopping list of the tasks that workers will fulfil. Both residential and domiciliary care will need teams of carers who can offer a personal service to clients.

Chapter 5: Education

Key points
Education depends on a process of development, not on any set quantity of knowledge.
Disadvantages can be cumulative.
Positive developments
The welfare state secured free secondary education. Later developments made this comprehensive, and greatly expanded higher education.
Where policy has gone wrong
Equal opportunity is not enough; in an unequal society, it becomes the opportunity to be unequal.
Students don’t necessarily ‘catch up’ by being taught faster.
The problem of low attainment is not about how schools are managed.
What to do instead
We need a stronger focus on human development. This would include a major emphasis on primary and elementary education, a review of the secondary curriculum, and reconsideration of the structure of assessment to allow for appropriate final stage qualifications.

Chapter 6: Child protection

Key points
Most families raise children well enough. Some don’t.
Child protection is a residual service, for children where family fails.
Some things can still be done for every child. The residue of children requiring protection can be reduced but not eliminated.
Positive developments
Preventative work scarcely existed when the welfare state was founded; services could only react after the event.
Where policy has gone wrong
Some families are poor, but that is not the same as saying they are not good families.
It is not true that dependency is passed on from generation to generation.
What to do instead
Children need protection. Part can be done universally, but unavoidably part must be done individually and personally.

Chapter 7: Housing

Key points
People have to live where they can. If there are not enough houses, some people will live in unfit housing, some will have no home of their own; and some will be physically homeless.
Positive developments
The legacy of post-war policies has been a greatly improved and expanded housing stock.
Social housing continues to provide essential, good quality housing to those who cannot afford adequate housing within a market-oriented system.
Where policy has gone wrong
The housing market does not work in the way that free-marketeers imagine.
The issues of tenure and affordability disguise the real issues: access and deprivation.
The problems of the housing system are structural, not the result of individual failings.
What to do instead
We need a substantial, continuing increase in the stock of housing, in order to ensure access and adequate standards.
A programme of regeneration is needed to save towns and regions that have been marginalised.

Chapter 8: Employment services

Key points
The level of employment is mainly dependent on the economy, not on individual effort.
At their best, employment services offer support and training to help people engage with the labour market; but they cannot create jobs or guarantee decent employment.
Positive developments
Where macroeconomic policies have been applied, they have greatly diminished the level of unemployment.
Where policy has gone wrong
‘Active’ labour market policy shifts the burden of unemployment to the people who experience it.
Incentives are not a simple matter of comparing benefit levels with wages.
The standard microeconomic analysis, presenting unemployment as a matter of personal choice, is an ideological prejudice, not social science.
Employment services have suffered by being muddled with benefits.
What to do instead
Unemployment is a waste of human resources. We need large numbers of people in a range of professions. Government can, and should, create jobs. It can do this through expanding public employment.

Chapter 9: Equalities and human rights

Key points
‘Equality’ is about the removal of disadvantage. ‘Equalities’ refer to specific disadvantages.
The disadvantages can be cumulative.
Positive developments
The services described here, and the principles on which they are founded, were hardly thought of at the time of the foundation of the welfare state.
Where policy has gone wrong
Human rights outline the bare minimum; citizens need more than that.
What to do instead
Legal redress is fundamental to justice, but it only goes so far. The law has to be clearly stated, and legal protection has to be accessible and affordable.

Chapter 10: Public services

Key points
Public services are guided by public policy. They work to different criteria from private services.
Universal services can be available to anyone; some are available to everyone.
Positive developments
At a time when public services have been eroded or privatised, some have gone against the trend: charges for prescriptions and eye tests have been removed in Scotland, charges for museums were introduced but then abolished, several areas have introduced bus passes for older people and those with disabilities, there are planned extensions of free school meals and transport for children.
Some private firms have recognised the case for free public access.
Where policy has gone wrong
Markets sometimes fail, and market provision is always incomplete. That is tolerable in some fields and not in others.
What to do instead
Some services are better taken out of the private market. The more this can be done, the greater the security the welfare state will offer.

Chapter 11:  Towards a stronger welfare state

The concluding chapter considers issues more generally, reviewing
* Misleading trends – choice and personalization, privatisation and marketisation, individualisation
* General problems: problems of size, centralization, coordination, practical capacity, and cost
* Approaches to reform.

A submission to the Green Paper on PIP

In line with my previous post, I’ve sent a short submission to the Green Paper.   I’ve found it impossible to relate the issues around PIP to the questions asked in the consultation.

The central points in the submission are these:

  • The primary aim of PIP is to raise persistently low income, not to meet extra costs.
  • There have been other benefits designed to meet extra costs.  PIP is not one of them.
  • Personal Independence Payment does not and cannot duplicate the work of the social care services.

I have argued that the Green Paper should be withdrawn and reconsidered. I’m fully aware that, given the way consultation responses are processed, this response will disappear into the ether and the points it makes will probably not even be acknowledged.  I felt regardless that this had to be said.

A copy of the submission is available here.

 

Defining hate crimes

The Hate Crime and Public Order (Scotland) Act 2021 has attracted a great deal of criticism, much of it missing the point.  The Act does three things.  It consolidates existing laws about hate crimes, while abolishing the ancient offence of blasphemy.  Second, it extends protection from “threatening or abusive” behaviour to a number of protected characteristics, including religion, gender identity, age and disability.  (Race and sexuality were already protected under previous legislation.) Third, it takes the idea of public order into the private sphere: in a world where people can send messages to thousands from the comfort of their living room sofa, the old definitions of public space don’t work any more.

The Act has some clear defects.  The most obvious, following  Joanne Rowling’s furious exchanges with online trolls, is its failure to protect women from abuse.  Only slightly less obvious is the question of reasonableness: the police have already been inundated with thousands of complaints that presumably seem reasonable to the complainers but not to people who don’t share their world view.  (There is some reason to believe, too, that many of those complaints are vexatious – aimed at making a political point, rather than offering evidence of threat.)  A third is that the offence of ‘stirring up’ hatred relates specifically to groups: threatening or abusing an individual person on the basis of their character or identity is left to previous legislation.

Another problem, which is regrettably intrinsic to the subject, is that threats are often delivered obliquely.  Holocaust denial has been a common route; the world ruled by shapeshifting lizards less common, but nevertheless a cause for concern.  The idea that it’s somehow acceptable to go to a random kosher delicatessen and ask about conduct of the Israeli  Defence Force comes close.  That’s not, however, a reason not to legislate – it’s proof that protection is needed.

Some of the criticisms, however, are illegitimate.  One is the idea that responding to threatening or abusive behaviour is beyond anyone’s competence.  Another is the argument that this is an infringement of ‘free speech’.  Freedom of speech is not a right to say whatever one pleases, and it never has been.  I’ve reviewed the arguments about this in a previous blog, so I won’t repeat it all here.  In UK law, common restraints on free speech have included laws about public order, libel, blasphemy, incitement and conspiracy. Whether speech is restricted or not depends on what is said, where and when.   Words can kill.

 

Trans: where both sides go wrong

As a social scientist, I’m approaching this topic with some trepidation.  There’s a lot of heat being generated on both sides and people are not just getting things wrong, they’re doing it at the top of their voices.

‘Gender’ and ‘sex’ are inter-related, but they’re not wholly equivalent.  We mainly use ‘sex’ to refer to biological males and females, while ‘gender’ refers, not just to physiology, but to a set of social facts.  It should be obvious enough what a ‘social fact’ is, but the debate has become muddied. We’re surrounded by social facts – things that are true because society is constructed to make them true.  Law, finance, morality and property ownership are all examples of social facts.  Gender is like that, too.  It’s based on a complex and extensive set of norms, developed through a well-established process of socialisation – education, upbringing, shared perceptions and socially defined norms.

The Scottish Goverment got itself in an awful muddle when it assumed that ‘gender’ is subjective and that ‘identity’ is something we choose.  Social facts aren’t subjective – they’re social.  You can present yourself however you please, but it won’t change the speed limit, the amount of money you have in your bank account  or your educational qualifications.  Nor will it change your gender.  That’s something that can only happen after a long, difficult process of re-socialisation, and some people are uncertain it can be done at all.

So, where do the protagonists go wrong?  On the gender-critical side, the protagonists have been driven to a point where they argue that it’s mainly about biology.  Kathleen Stock’s Material Girls is an example. Biology certainly plays a part, but Stock’s reductionism comes perilously close to a denial of gender roles.   I know there’s a school of thought in psychology that holds that everything we do is genetically determined – last week, for example, I came across a completely daft article that claimed that whether or not people have health insurance is down to their genes – but we need to understand that gender is highly socialised.  Take a simple example: in our society, men are more likely to interrupt women speaking than vice-versa.  This is not about biology. The point is that people raised as men have been socialised to behave in a different way to people raised as women.   And we might well note that some of the voices of trans women – people who’ve been raised as men – are still given to speaking over women.

On the other side of the argument, nominally pro-trans, there’s been a tendency to over-simplify in the opposite direction.  The most vocal advocates for trans  claim that ‘trans women are women’.  The underlying assumption seems to be that there are only two categories that matter, men and women.  That leads to the proposition that people who do not fit one binary category must be redefined in terms of its opposite – with the consequence that trans people are expected to perform gender-based roles that may be inconsistent with their circumstances or capacities.  There’s no space left along a wide spectrum, let alone an acceptance that quite a few people find themselves somewhere in the middle.

A valuable report for the Scottish Trans Alliance offers a different perspective.  It considers the experience of people who feel they fit neither category – people who are ‘non-binary’.   The respondents used a wide range of terms to describe their position, but more than 80% were concerned that their gender identity simply wasn’t valid.   The respondents expressed their discomfort about being pressed into the wrong categories: “I find that most services can just about cope with the idea that you are transgender … but being non-binary is still beyond a lot of people’s comprehension.”  Liberals should uphold the ‘dignity of difference’ – but the thing about being different is that people are different because  they’re not the same.   I suspect that, in time to come, the binary position that is being advocated by some activists will be seen as crude, reductionist and failing to represent diversity.

Note that I haven’t said anything about hate crime yet.  That’s for another blog.

 

 

 

Reparations for historical wrongs can’t be fair

I attended an online session recently in which some academics were making a principled argument for reparations for slavery and colonialism.  The argument is simple enough.  Both slavery and colonialism did terrible things.  People are still suffering as a result.  The countries that perpetrated those wrongs should pay reparations to redress the balance.

I understand why people want to make this argument.  There have been historical wrongs, and there is continuing disavantage as a result.  I also think that they are profoundly muddled.  There is no possible way for reparations to be done fairly.

My objections rest on four points of concern.  The first question to consider is remoteness.  Do people merit compensation for something that has been done, not to them, but to their ancestors?  To what extent are people responsible for the sins of their parents? Their grandparents? The seventh generation?  This isn’t some obscure philosophical point.  Jamaica has asked Britain to compensate them for slavery – which was substantially abolished in the colony in 1834 (some time after the 1807s abolition in Britain).  Many of the wrongs that have been done to indigenous peoples date from the long nineteenth century.  Some of them happened centuries ago.  African slavers sold their compatriots into slavery in the New World.  Should their descendants be paying compensation to their descendants in the USA?  Where does this end? Where do we draw the line?

Second: who is liable?  If the issue is viewed collectively, the implication is that anyone who has become part of the collective becomes liable for that collective’s past actions.  One of the characteristic features of colonial powers is that often they brought in people from the lands they had colonised.  That’s how populations  of people of South Asian or Afro-Caribbean descent developed in the UK, and Muslims in France or Russia.  If “Britain” is treated collectively for the purposes of reparations, those reparations will come, not from the concealed coffers of perpetrators, but from a population that according to the 2021 census includes fully a quarter of people who do not identify as ‘white’ and English, Scottish, Welsh,  Northern Irish or “British”. About one in six people were not born in the UK.  Should the Windrush generation, and those with a Caribbean heritage,  pay reparations to Jamaica?  Because that’s an inherent part of what Jamaica’s demands for reparations would entail.

The third problem concerns injustice.  Human history everywhere has been marred by oppression.   The East India Company, the Highland clearances, the Irish famine, the treatment of the poor, the dispossession of indigenous peoples, the pogroms, the wars, the genocides – there’s no end to it, and nowhere to stop. The ancestors of the vast majority of people, in almost any country you can name, have been the victims of oppression. It follows from that that any historic reparations will have to be made by or on behalf of the of people who have been the victims of oppression as well as people inheriting from the oppressors – and the inheritors of victims will be in the majority.  This isn’t a bit of “what aboutery”; if it was just that, a partial redress it could still help to correct some illegitimate disadvantage. The problem is much more fundamental.  There is hardly anywhere in the world where the current distribution has not been influenced by injustice, oppression,  exploitation or denial of rights: most of humanity have been treated badly for most of history.  No measures can be taken that are not also in effect measures taken against people whose ancestors have also been the victims of injustice.

Fourth, past wrongs are a poor guide to present injustices. Consider some of the large-scale forced migrations that have taken place in the course of the twentieth century: the partition of India, which displaced twenty million people and almost certainly led to a million deaths; the displacement and exchange of up to 20 million people in Germany, Poland and Ukraine in the period immediately following the Second World War; the mass expulsion and displacement of 1.6 million Greeks and Turks.  We tend to ignore much of this, although it is all relatively recent, either because it is considered less important than other historical wrongs (which should be a source of moral outrage), or  because so much has been done to improve the lives of their children and grandchildren.  If some groups are suffering injustice now, that is surely the responsibility of those who are responsible for addressing that injustice now – and that is a matter for contemporary governments, the people who have the power to redress that injustice now.  The alternative, of course, is to address one form of disadadvantage in the hope that it will reduce other related problems.  If so, what distinction should we draw between people who are the inheritors of historic injustice, people who are migrants from poor countries, and people who are poor now because of indequate incomes?  And what on earth makes us think that we have the knowledge, moral authority, competence or technical capacity to make such distinctions?

There are, then, four fundamental objections to the argument for reparations.

  • People can’t be held morally responsible for the actions of their distant ancestors, either individually or collectively.
  • We cannot fairly distinguish people who are liable from those who are not liable.
  • We cannot fairly take account of historical injustice, as opposed to injustice now.
  • We cannot unmake the history of the world.

There is every reason to argue that people who are treated badly should be treated better.   Wherever people are disadvantaged, there is a case to redress the balance, but that case is based in disadvantage now, not the ill-treatment of the past.  The world is as it is; what matters is what we do next.

 

 

Plunder: the scandal of private equity

A little over two years ago, I wrote a short piece on this blog about the dangerously precarious funding of residential care.  At the time, I didn’t realise how pervasive the financial model had become.  I’ve recently read an account from the USA by Brendan Ballou, called Plunder (PublicAffairs, New York, 2023), which discusses just these problems.  (Full disclosure – I was given a signed copy of the book, by way of the author’s sister. )  Private equity firms have developed a business model which battens on to, and ultimately destroys, profitable businesses – and, when they get the opportunity, privatised public services.  Examples in the UK include not just residential care, but the water companies, rail franchises, energy and health care.

The methods adopted by these companies include

  • Leveraged purchases: firms and assets are acquired by borrowed money, and it becomes the responsibility of the firm that has been taken over to repay the debt.
  • Further debt. Beyond the cost of purchase, firms are then put into further debt in order to increase the rate of return to the controlling financiers.
  • Leaseback.  The assets of firms are transferred to other companies and the firms are then required to pay rent in order to use the facilities they used to own.
  • Fee structures.  Firms are required to pay further liabilities for services provider by their purhaser, typically including fees for transactions, management, consultancy, ICT and payroll management
  • Tax avoidance.  The returns from this milking machine are diverted through tax havens. If they are submitted to taxation, it is done through the most advantageous tax regime, such as the limited taxes on capital gains rather than taxes on income.
  • Pension funds.  Some firms have raided their pension funds directly – it is a common element in bankruptcy proceedings – but it is also done by directing the  investments made by pension funds towards support for the firm.
  • Nested firms.  It has become common for firms to be owned by other firms.  These structures are opaque.  The effect of separating out each function within a business is to make it possible to cook the books, so that profits disappear through cross-charging.
  • Limited liability.  Many firms which have been drained through these procedures go bankrupt.  The construction of laws relating to bankruptcy and limited liability  mean that those responsible can avoid all liability to meet their debts or obligations.  make it legally possible for subordinate businesses to become bankrupt without leaving any liability to the parent firm.
  • Aggressive – and effective – lobbying.  Ballou makes the point that these firms have bought extensive influence without incurring the duties of transparency and reporting that public firms have to meet.

Most of the options that Ballou considers for reining this in are geared to the pecularities of the American legal system, such as anti-trust legislation; I think they have a very limited potential in the UK.   It seems to me that  we need to consider a number of changes in the law:

  • preventing beneficial owners from claiming limited liability for default.  If the subordinate firm goes bankrupt, the beneficial owner should either be fully liable or themselves go bankrupt.
  • taxing firms on turnover rather than profit.
  • equalising capital gains tax with the rates of income tax.
  • treating pension funds not as a liability, but as something in the unqualified ownership of the beneficiaries.  If you leave your shoes for repair and the repairer goes bankrupt, the repairer is a bailee, and you can get your shoes back. Beneficiaries have to be treated not as creditors but as owners, and the firm as a bailee of those beneficiaries.

I know this falls some way short of dealing with a major, endemic problem, one which has come to threaten not just the public services but, by Ballou’s account, the whole structure of the market economy.  I’d be grateful for further suggestions – I’d be happy to revise this blog, or to return to the subject with better ideas.

This is not the way to develop social care

I was listening this morning to a thoroughly depressing discussion on social care.  A major part of the way the issue has been framed is, apparently, to encourage migration so that migrants can fill the roles that need to be provided.  The other was to point to the supposedly five and a half million people receiving ‘out of work’ benefits, a figure that includes, as far as I can tell, four million people who are either too sick to work, in work on low pay or who already have caring responsibilities, and demand that they provide social care on a minimum wage.  The underlying message seems to be that care is unskilled, and anyone can do it.

If we look at the way that social care is being provided, the picture is very mixed.  The delivery of services has been shaped to match the criteria of commercial markets: individuated services, priced distinctly by activity.  So we get tick-box lists of what needs to be done, masquerading as an assessment: dressing people, cutting their fingernails, brushing their teeth and so on.  Some of the activities are paid for, and counted as nursing care; others are based on reported needs  that, in their nature, are typically out of date.  I’ve argued, in How to Fix the Welfare State, for a different (and admittedly rather more expensive) approach: providing teams of professionals who are paid for blocks of time, rather than specifically costed activities, who within that time can identify and negotiate services with the people who receive them.  To do that, social care needs a professional structure – including training and qualification – and a pay structure that is commensurate with the skills that are required.  We have a long way to go before we get there.