An entirely vain hope but here goes anyway

We are undoubtedly all going to have the most hugely enjoyable slanging matches over this upcoming European Union referendum. But would it be possible, we ask politely, that such arguments stay with what is in fact true rather than just wander off into whatever sort of nonsense makes rhetorical sense? For we do think that we're more likely to end up with a reasonable policy in the end if we do in fact continually refer to reality rather than whatever phantasms sell a particular position. And please note, some of us here have very definite opinions on this matter, perhaps opinions not to your taste. But we'd still prefer to walk through, talk through, what is rather than what is not.

Which brings us to this remarkable claim by Sir Victor Blank this morning:

As a member of the EU, our companies are able to sell, without barriers and tariffs, to a market on the UK’s doorstep of 500 million people. They need only abide by one set of regulations covering the entire, vast and complex region. Our biggest trading partner is the EU. As a non-member these same companies could be obliged to negotiate with each individual country they sell to within the EU. One set of rules would be replaced by a possible 27, not to mention payment of duties.

There is absolutely no truth to this whatsoever. The EU is a customs union. This means that once over the import rules into the EU, goods and services are then subject to just the one set of rules and regulations: those of the EU's single market.

Entirely true, Brexit might mean that UK exports to the EU then faced import duties, they would indeed need to meet the rules of those 27 countries. But those rules would be as they are today: instead of one set of rules covering 28 countries ourselves included, it would be one set of rules covering 27 countries not including ourselves. Our leaving will not break up that single market at all, even if it produces a hurdle that must be leapt before entering it.

As up at the top, various of us here have various views about the EU and all who sail in her. But could we please make sure that whatever arguments are used by either or any side actually have at least some grounding in reality?

The current rules about trade into the EU are governed by EU law, one law for all. This will remain so whether Britain stays or goes: there will still be just the one set of laws about who may trade what and how over the borders of the EU.

Could someone let us in on what the problem is here?

That people, of whatever background, chromosome arrangement, melanin enhancement or any of the other ways that we distinguish between people, should be both allowed and encouraged to do what they want with their lives we consider to be the basis of a free and liberal society. Not just the basis, but essential to having that freedom and liberty in fact. But we do find ourselves rather puzzled at times:

Women still face unfair barriers to reaching senior levels of the Labour party, according to the Fabian Society, which found that just one in 10 of the party’s top staff and one in six of its council leaders are female.

The leftwing political thinktank said women make up 36% of Labour’s councillors, 30% of constituency party chairs, 16% of council leaders and 11% of the most senior Labour staff – defined as the executive directors, regional directors, the general secretary, and the leader’s chief of staff.

Labour has increased its proportion of female MPs to 43% through the use of all-women shortlists. But the Fabian study found that in areas where there is no positive discrimination, representation of women falls away.

In a survey of members, the researchers discovered female respondents reporting higher dissatisfaction with intrusion into their personal life and high costs of standing for office.

Just what is the problem here?

An MP earns three times the median wage. We know of no job in the UK which pays three times median wage which is not difficult to gain. Any and every job which offers such rewards takes effort and determination to ascend to. And if people decide that that effort isn't worth it, that there's other things to do in life rather than try to grab the brass ring then so what? That's the mark of a free and liberal society that everyone gets to make that decision for themselves.

Good luck with that Jeremy, good luck with that

It's not unusual to find people arguing that the State should be given near fascist (in some cases, actually fascist) powers over the economy: but only if the right people are in charge. The right people being defined as those who would use those oppressive powers in only the manner that those proposing the powers desire. The usual answer to this is that that's not quite how democracy works. If you don't want your enemies (ideological or actual) to have such powers as the electoral cycle turns then you're really no business arguing that your folks would do just fine with them. Shuffling all the Social Justice Warriors off into the Bedlam they need to recover is admittedly appealing. Yet we do not recommend such precisely because such powers might be used against us, those who froth at the mouth over the joys of free markets and voluntary cooperation, in the fullness of that time and variance of who the public elects. Better that none have such powers, eh?

At which point we have this rather plaintive cry from Jeremy Warner (or perhaps the subeditor who wrote his headline), someone we usually rather agree with:

If the state must meddle, it should do it better

Given the pedigree of those who do go into politics and other forms of "public service" that meddling never will get better. The answer is therefore as we have long suggested. Yes, there really are things which need to be done and which only the State can do. Said State should limit itself to only those things covered by that intersection and refrain from doing things which can be done by the State but do not have to be done, and also avoiding those things which do need to be done but which will not be well done by the State.

Limiting government to what it must do seems suitable given the limited skills and talents of those who govern us.

Marianna Mazzucato, wrong again as so often

Marianna Mazzucato is the right sort of writer for The Guardian: as the Daily Mash puts it, that newspaper is wrong about everything, always. So, here she is telling us that it's very important indeed that government spend lots of lovely money on the area that Professor Mazzucato thinks important:

Growth is determined by strategic spending on areas that increase productivity, which in the UK is still below the OECD average. This includes investing in training, education, research and development, and state-of-the-art infrastructure. So while there has been a boost to some infrastructure spending, the lack of vision on what kind of economy we need for sustainable long-term growth means there has been little discussion about the direction of growth.

Growth is most certainly produced by investment spending, this is entirely correct. But as Matt Ridley has pointed out, it does rather depend upon who does that spending:

In 2003, the Organization for Economic Cooperation and Development published a paper on the “sources of economic growth in OECD countries” between 1971 and 1998 and found, to its surprise, that whereas privately funded research and development stimulated economic growth, publicly funded research had no economic impact whatsoever. None. This earthshaking result has never been challenged or debunked. It is so inconvenient to the argument that science needs public funding that it is ignored.

There's not much of a case left for government spending on such things after that, is there? Which leaves Professor Mazzucato's argument where it always has been, a justification for the EU to determine what is researched via research money funneled through the EU. Which is why, in our opinion, the EU funded her research in the first place.

Ten initiatives to help young people: 3. Redressing the age imbalance

Several analysts have made the point that there is redistribution from relatively poor young people to comparatively affluent older people, and have suggested that this is unfair.  Politically, the elderly have more clout because there are twice as many of the over 65s as there are of the under 25s, and they are twice as likely to vote.  This means they are four times as effective in voting terms, a fact that politicians have taken account of. Popular perception of the circumstances in which pensioners live is somewhat out of accord with modern reality.  The image of a woman with a blanket over her shoulders, huddled over a fire and wondering if she can afford to toss another stick onto the flames does not accord with present day reality for most pensioners.  Some 86% of pensioners live in households with assets in excess of £50,000.  The average income of over 65s is £15,400.  A young person working on current minimum wage for a normal working week earns just under £13,000.  Yet the young person is taxed while the older person is guaranteed a triple locked pension that will rise with inflation, or average earnings, or 2%, whichever is the highest.  On top of this comes a winter fuel allowance, a Christmas bonus and a free bus pass.

It is doubtful if this can be sustained in the long term.  Government will not end the triple lock in this Parliament because they made a manifesto pledge not to, but for the next Parliament they should consider reverting to indexing pensions in line with the consumer price index, as used to be the case.  This would enable them to reduce taxes on low-paid young people.

A proportion of pensioners do live in straitened circumstances, and even though their pension would rise to keep abreast of inflation if it were indexed to the CPI, some would need additional help.  If the government did abandon the triple lock in favour of rises with price inflation, they might need to establish an Emergency Relief Fund to deal with older people in poverty.  Government might choose to contract out to charities the task of locating such people.

The measure would, without doubt, give government the slack it needed to ease the taxation of low-paid young people, giving help where it was most needed.

UKTI can deliver an easy quarter billion pounds

There are two schools of thought about United Kingdom Trade and Industry (UKTI), the quango intended to help UK exporters and investors inward to the UK.  Supporters say it repays its £529 million annual cost in added value for UK GDP many times over.  Critics say it is top-loaded with fat cats, ineffective and a dead weight.  It has been in operation for 30 years or so but the coalition government took such a positive view that they seriously up-scaled its budget in the light of its 2010 target to double exports to £1 trillion by the end of the decade. At that point export growth was trundling along at 3.5% p.a.  With the up-scaled UKTI what can we now expect?  You guessed it: 3.5%.  (Office for Budget Responsibility forecast).  Exports are likely to increase 33% over the 10 years to £630 billion – a far cry from the £1 trillion target.

I am submitting detailed evidence to the Parliamentary Select Committee that is now looking at UKTI, but the bottom line is that the Chancellor should face reality and halve the UKTI budget to £265 million.  

The main recommendations are:

1. UKTI is top heavy: it needs more field workers doing what SMEs want and fewer HQ time-wasters. Cutting the HQ from 500 to around 50 is a necessary move, not because it is ultimately the right answer but because it is the only path to discovering how big an HQ is really necessary.
2. UKTI has now become a stand-alone executive agency, but UK field (advisory) staff should be integrated with Chambers of Commerce in a similar way to overseas staff within FCO posts.
3. Inward investment is largely be a matter for overseas posts and should be driven from there. The UK benefit from inward investment should be assessed on long term net value added, not the immediate effect on jobs and cash flow.
4. Potential UK exporters should be put in charge.  They should be asked what help, and especially contacts, they want, not be told how to do their business.  This should be communicated directly to overseas posts.  Overseas posts should then communicate back directly to the originators showing what action has been taken or why it has not.
5. UK-based trade advisers should work with potential exporters to improve the quality and clarity of their requests, but they should only be copied in – not be separate, and fallible, links in the chain.
6. OMIS and other statistical reports and surveys should be charged at much higher rates with potential users advised of the fallibility of this approach. Successful exporting and inward investment are a matter of overseas personal contacts, not paperwork.
7. Measuring UKTI performance by the number of UK contacts allegedly made and/or the number of exporters assisted should also be abandoned. The metric that matters is the value added by UKTI, not the achievements of the exporters themselves or other factors such as the Olympic Games.
8. The IT system should be refined to the simplest possible to allow exporters, those in overseas posts and advisors directly to access the status of their own projects – though such a project must start very small, given the government’s dismal track record in IT projects. UKTI can use this information to determine how many staff are needed in overseas posts and the UK and dynamically adjust resources accordingly.  

To read the full select committee evidence, read below.

[gview file="http://www.old.adamsmith.org/wp-content/uploads/2015/11/Submission-to-BIS-Select-Committee_2.pdf"]

We are ruled by idiots

A crucial economic distinction is between a complement (no, not a compliment) and a substitute. For example, it is often asserted that more pornography leads to more sex crime: we are indeed primates and thus potentially subject to the "monkey see, monkey do" cause of action. That would mean that pornography is a complement to sex crimes: one aids in causing the other. However, as it happens, the rate of sex crimes has slumped in these past couple of decades as pornography, of ever greater detail and possibly vileness, has become ever more available. We must therefore conclude that the two are, generally and upon average, substitutes. Urges are expended upon the one meaning that less of the other happens. It is, of course, absolutely vital that public policy manages to make this distinction. For the problem is the sex crimes, not the pornography. Thus we should not ban the one in order to reduce the incidence of the other, the real problem. This has been violated by our rulers as this reduction in the real problem also applies to child pornography, as we've noted here before. Yet child pornography is highly illegal in order to reduce the number of sexual crimes committed against children.

Yes, we agree, it will be very difficult for any politician to get that across to people. However, we've another example of just this sort of mistake. We've just had a change in the law:

On 1 October 2015 it became illegal:

for retailers to sell electronic cigarettes (e-cigarettes) or e-liquids to someone under 18 for adults to buy (or try to buy) tobacco products or e-cigarettes for someone under 18

Are e-cigarettes a complement or a substitute to teenagers smoking cigarettes, the things which are actually the problem?

More than 40 states have banned the sale of electronic cigarettes to minors, but a new study out of the Yale School of Public Health indicates that these measures have an unintended and dangerous consequence: increasing adolescents’ use of conventional cigarettes.

Using data from the National Survey on Drug Use and Health, the research finds that state bans on e-cigarette sales to minors yield a 0.9 percentage point increase in rates of recent conventional cigarette use by 12 to 17 year olds, relative to states without these bans.

A substitute not a complement, therefore e-cigarettes should not be banned for teenagers it might even be sensible to encourage their use.

And we must then conclude that we are ruled by idiots.

Those of us who do or have worked in and around Westminster have known this for a long time. It's why we expend so much effort in trying to bring the rest of the country up to speed on the matter.

There really is no gender pay gap

As we've been saying for some time now, there really is no gender pay gap. At least, not one of any size that anyone should be bothering to do anything about. It's a motherhood pay gap, most certainly, but then that's just not the same as gender is it? This latest empirical report comes from the US:

A new report from PayScale, a jobs website, takes a stab at this very problem by looking at the gender gap in various occupations controlling for factors including experience, education, company size, and crucially, job title. According to their data, female doctors make 29.2% less than their male counterparts, but that gap shrinks to just 4.6% after introducing the controls. This in part because women are more likely to work in paediatrics, while men are more likely to work in the better-paid field of surgery. A similar pattern exists for lawyers: women make 14.8% less than men, but just 4.1% less on an adjusted basis. Again, there are differences in the types of jobs taken by men and women: 8.7% of female lawyers work for non-profit outfits, compared to just 4.5% for male ones. The pay gap for all workers is 25.6% before such differences are controlled for, and 2.7% afterwards.

We think 2.7% is pretty much the end of the story. And certainly we cannot think of any government work that's ever managed to be any more accurate than that.

In effect, much of the gender pay gap can be thought of as the cost of having children.

Quite: fathers make more than non-fathers among men, mothers make less than non-mothers among women. Whether that's a cultural or an innate feature is another matter: but that's where whatever remaining problem is. And it's not entirely obvious that it's something that's amenable to anything other than the slow change of cultural practices, whichever of those two causes are responsible.

Could the EHRC please stop lying about the gender pay gap? Please?

Yes, another report coming down the pike telling us all that women are so terribly hard done by in this grossly discriminatory and patriarchal society of ours. When the number used to prove this all to us is one that is known to be wrong, one that is in fact a statistical lie. From the EHRC's report today:

The decline in the average pay for men meant that the pay gap between men and women narrowed between 2008 and 2013, from 22.5% to 20%. While average pay for men dropped by roughly £1 per hour (to £12.91), women’s pay fell by 40 pence (to £10.33). The average hourly pay of women in Great Britain in 2013, therefore, remained significantly lower than that of men.

No, this is wrong. And what is more they've all been told that it's wrong, that they're not to use this number. That, in fact, when they are using this number they are, just around and about, lying. Because what they are doing there is comparing the average wages of all men and all women, all part timers and all full timers. And because part timers are paid less (for very good reason) and also 75% of part timers are women that is a horrendously misleading number to use. To the point that Sir Michael Scholar actually berated people for using it some years ago.

The Foreword to Shaping a Fairer Future includes a short discussion of the differences between the earnings of women compared with men. It notes that “women are still paid, on average, 22.6 per cent less per hour than men”. This measure is described in a footnote as the “overall median gender pay gap”. On 11 June I wrote to the Minister for Women and Equality, the Rt. Hon. Harriet Harman QC MP to express concern over the way in which the 22.6 per cent figure had been used in a Government Equalities Office Press Release. In the view of the Statistics Authority this particular estimate, when used on its own without qualification, risks giving a misleading quantification of the gender pay gap. The analysis underpinning this view has been published on the Authority website as a Monitoring and Assessment (M&A) note on the gender pay gap.1 The Foreword to Shaping a Fairer Future helpfully presents estimates for both an overall gender pay gap (22.6 per cent) and a full-time gender pay gap (12.8 per cent). This goes some way towards ensuring that readers understand the difference between these two estimates. However, it would have been clearer had these two estimates been presented alongside each other and accompanied by some explanation of the differences between the two measures. As it stands, the 22.6 per cent figure appears in the Foreword more as a headline estimate of the gender pay gap, while the 12.8 per cent estimate is presented in a different context, to show how the gap widened between 2007 and 2008.

It would be an easy mistake for a casual reader to conclude from the Foreword that if the overall gender pay gap stands at 22.6 per cent and the full-time gender pay gap stands at 12.8 per cent, then the part-time gender pay gap must be considerably greater than 22.6 per cent. Indeed, the Foreword appears to confirm just such a conclusion when it states that 'pay gaps are even greater for part-time workers (39.9 per cent)’. The casual reader would be surprised to learn then that median hourly earnings of women and of men (excluding overtime) are very close, with women’s median pay actually being slightly higher than men’s (by 3.4 per cent).

Sir Michael also wrote to Harriet Harperson on the same point:

I am writing to you about the Government Equalities Office (GEO) Press Release on the Equality Bill, issued on 27 April, which states that women are paid on average 23 per cent less per hour than men. GEO’s headline estimate of the difference between the earnings of women compared with men (generally referred to as the gender pay gap) is some 10 percentage points higher than the 12.8 per cent figure quoted by the Office for National Statistics (ONS). Yet both estimates are derived from the same source, the 2008 Annual Survey of Hours and Earnings (ASHE). Such a difference in headline estimates is likely to confuse the general public. The Statistics Authority is concerned that this may undermine public trust in official statistics.

So, EHRC, this is a horribly misleading manner of presenting the gender pay gap. You've been told, repeatedly, that it's a horribly misleading way to present it. And you've also been told not to do it. So, why are you lying to us all?

Yes, we will accept an apology, no, no need to ritually execute your report writers in Salisbury Square, just correct your reports and, as Mother always told us all to do, when found to be in error, say sorry and promise not to do it again.

Jamie Oliver is wrong in theory here, not just in fact

While banging the drum for his illiberal and unnecessary sugar tax, Jamie Oliver told Parliament the following:

The tax, he said, would “remind [manufacturers] who is boss. And that is child health and the government.

“We should work out who is running the country. Is it businesses – who are profiting from ill health in our country – or is it us?”

More important than the tax itself, he said, would be the message it sent that the government “is willing to fight tooth and nail for public health, and especially children’s health”.

The tax system is not a communication method. We can send messages by fax, letter, email, telephone call and there might even be the occasional telex left lying around. But tax is not a messaging system so that's not the way we send messages.

Secondly, the only people who profit from ill health in the UK are those people working in the NHS who get paid to deal with it.

But over and above all of this is the entirely mistaken theoretical view he has of the place of government. They do not, and we do not want them to, run the country. This has actually been tried of course. There have been governments which tried to determine who produced what, at what price, and then who was able to consume them and in what volume. We usually refer to such failures as Soviet style socialism. It just didn't work: neither in restricting access to the goods that were considered verboeten (for example, Gorbachev's restrictions on alcohol led to hte entire country running out of sugar as bathtub vodka was made) nor in any other conceivable measure of the Good Life.

What we do want government to do is those things which both must be done and which can only be done by government. Given that we're all entirely capable of determining whether we'd like a nice glass of fizzy pop or not, this isn't an area where we need the government's help. Thus the proposition fails, on both theoretical and empirical grounds.