A timely way to dismantle the pensions pyramid
An obvious choice, denied to voters
Imagine you were forced to pick between two options: Option one – you give me £10 today for me to safeguard for you, but there is a very high likelihood that tomorrow, when you wish to claim, I will default. Option two – you give me £5 today, and can invest your remaining £5 on your own, again with the assumption being that I will likely default tomorrow.
Whilst it’s hardly a wonderful choice you would surely choose option two, to minimise your losses. However, when it comes to National Insurance Contributions (NICs), the government only gives you option one, and then pretends that you’re safe.
What about if the government offered people both options?
Either; Every employee pays 11%, to be paired with a contribution of 12.8% from their employer. When the employee retires, provided there is enough cash in the National Insurance Fund, they receive a state pension, just as they would have under the existing system.
Or; Every employee keeps their 11% share as income to be invested into a private pension arrangement, and the employer continues to pay a 12.8% stake towards national insurance. The employee waives their right to a state pension, but receives a ‘recognition bond’ that entitles them to slightly less than the value of their employee contribution to the National Insurance Fund to date.
The choice is thus open for every individual to make, and logic dictates that the choices will be made rationally, relative to each individual’s age and circumstances. Most young people, and in particular those who have just started working will certainly be better off taking the private route, even if this means they will not get any personal benefit from the contribution of their employers. Older people, and in particular those close to retirement, who have been contributing to the fund over a lifetime’s work will be much more likely to stay with the national insurance scheme.
Of course, the need for this choice is largely depending on my initial analogy – it assumes that the government is likely to default at some point in the future.
A true national debt worse than Zimbabwe
Unfortunately, this is hardly an unreasonable assumption. The National Insurance Fund is nominally hypothecated for specific expenditure, including pensions. Whilst this means it cannot be easily raided by unscrupulous government departments, it also makes it easier to calculate the black hole in the financing. At the moment there exists a surplus; the amount being paid into the fund is greater than the amount being paid out in any given year. However, because the funds are essentially being spent as soon as they are paid in, and are not invested productively to secure future wealth, the fund is reliant on a young, working population to finance the lives of retirees. This simply isn’t sustainable. The ‘support ratio’ – that of young workers to old retirees is decreasing in most industrialised nations, and ours is certainly no exception.
Particularly once the baby boomers retire, there will be an unfunded liability that simply cannot be fixed by tax rises alone. A report by Nick Silver from the Institute of Economic Affairs demonstrated that, if the same accounting practices that private companies have to use were applied to the government, the national debt would have to include the pensions liability. This would leave Britain in more debt than Zimbabwe, as a proportion of GDP. Claiming it can be neutralised through taxing future generations is unbelievably dishonest – even by government standards. National insurance contributions already amount to a sizable proportion of salary, with knock-on effects for job creation and the wider health of the economy. There are no more pips left to squeak.
A model for reform from across the Atlantic
In the USA, the Federal Insurance Contributions amount to 6.2 % from both the employee and the employer. The Cato Institute proposed allowing the employee to keep and invest their 6.2% privately, whilst using the 6.2% employer’s contribution to fund existing retirees and disability benefit.
This is a higher percentage than other plans have suggested, including the one proposed and then mangled by the George W Bush administration. It is also, not coincidentally, the most effective at securing peoples retirements, and at reducing the burden on taxpayers.
When two US Congressmen introduced a Bill based on the Cato plan, the Social Security Administration (SSA) concluded that it certainly provided the best bang for the buck, and would halve the cost of meeting the government’s liabilities.
The Transition Costs issue
The main difficulty with any reform of government pensions is one of distributing the transition costs. It is frequently argued that one generation needs to pay twice; both for their own retirement, and that of the previous generation.
Whilst it is politically attractive to postpone these costs, to postpone indefinitely is simply impossible. The debt burden created will continue expanding, meaning that the problem compounds over the generations.
Both the Chilean privatised scheme, now considered an almost unmitigated success, and the American plan, as scored by the SSA, create costs as younger generations stop paying into the government scheme, but older generations continue drawing money out from it. In Chile, these shortfalls were met by the sale of government assets – a solution that is no longer available in the UK context. The Cato plan notes that some will be ‘recaptured’ by the increased corporate tax revenue as a result of the use of private pension money in the capital markets. However, the fact that the employers will still be paying NICs is of most help in meeting the shortfall.
Furthermore, it is important to note that the sudden increase in the shortfall within the first 10 to 20 years predicted under the American plan is largely the result of people claiming on their ‘recognition bonds’. This cannot be called a new loss for the State, for two reasons.
Firstly, this represents money that was already owed. The only difference is that the government under this reformed scheme is choosing to be more honest about it, and so is settling it upfront, rather than pretending it doesn’t exist, which ultimately will cost twice as much – The SSA in America estimates costs of $6.5trillion as opposed to $12.8 trillion if the problem is left to fester.
Secondly, the recognition bonds don’t have to represent the full value of the employee’s contributions to incentivise them enough to switch onto the private scheme. People will generally prefer a guaranteed, tradable bond in their name, to an I.O.U from the government that is potentially payable at a later date. Also, this reflects the fact that the government has incurred the opportunity costs of not having that money in the National Insurance Fund, where it can finance government borrowing until the employee retires – this cost can reasonably be passed on to the individual who has acquired their money sooner than expected.
Greater Returns for the people
The benefits of pension privatisation are undeniable. The Chileans are certainly richer as a result of their privatisation scheme. This is despite heavy regulation that accompanied the scheme in the early years, which forbade, for example investment in foreign equities. As Chile’s economy has developed, more opportunities have arisen, and even greater returns can be realised with less regulation being necessary. The plans from America have highlighted this trend too. The projections are much more favourable when regulation is looser, for example allowing a greater percentage of peoples’ money to be invested in stocks, as opposed to bonds. Nonetheless, even with a 50/50 split between bonds and stocks, the SSA scoring looked favourably on the financial returns of the Cato plan.
Those who invested in private pensions have comfortably produced returns more than three times greater than state pensions, because of the efficiency with which they are invested. It is because of this that most people will be better off, even if they have to sacrifice the share of NICs paid by their employers. Furthermore, Michael Tanner of Cato noted that notwithstanding the fall in the value of the stock market over the last year or two, an employee who started investing 40 years ago would still have done much better had they invested privately than had they relied on Social Security – had they been given a choice. This plan is a sustainable way to give them that choice.
To be a name, not a number
However, the benefits of this plan extend beyond the greater financial gains possible for employees to provide for their retirement. It actually redistributes the power to control their retirement from Whitehall to the people. Those who benefit most are clearly the poorer members of society who are far less likely to have built up other retirement assets. This plan presents a great opportunity for people who otherwise wouldn’t have done so to build up real wealth, not merely an allowance from the government to keep them alive in their old age. Crucially, this is accumulated in peoples’ own names – not in the form of a nameless I.O.U from the government tied only to a national insurance number. This represents a way for people to build up tangible property of real value.
Conclusion
Rather than trying to sweep the problem under the carpet, as Bernie Madoff did with his Ponzi scheme, government must cut the Gordion Knot, and dismantle the pensions pyramid with direct action, before it is too late. The best form for that to take is by offering employees a choice, and allowing them to invest a sizeable portion of their NICs privately. However, this still leaves current retirees, and those soon to retire, protected by a State scheme that is adequately funded. Furthermore, the burden for extricating ourselves from an unsustainable scheme is borne relatively evenly through the generations.
Robin Hood Tax: why 350 economists are utterly wron
The Tobin Tax, which is now dubbed the “Robin Hood Tax” in an attempt to increase its appeal, has attracted the support of “350 economists from across the world”. They have written to G20 leaders calling on them to introduce a financial transactions tax on speculative dealings in foreign currencies, shares and other securities.
This assembly of opinion calls to mind the letter sent to The Times in March 1981 and signed by 364 economists. They denounced the Conservative governments anti-inflation policies, saying they would never bring economic recovery. The 364 represented one for every day of the year (yes, they got that wrong, too). It is now a matter of record that what they said was impossible occurred soon afterwards.
Their modern successors call for the tax to be levied at 0.05 percent, which they say makes it a tiny tax that will raise big revenues of $400bn. This is indeed a substantial amount, representing more than half of the profits of the worldwide banking industry ($788bn in 2006). They also say that it will hit only the rich, since it will not affect the retail banking sector.
This fails to recognise that taxes are always passed on to the customer. Many of these financial transactions are done as insurance, to guard the value of contracts against possible adverse currency changes. The notion that an industry will blithely accept the confiscation of half its profits belongs in fantasy. Banks will pas it on, and ultimately it will fall on those with mortgages and loans, changing foreign currency, or saving in insurance or pension funds.
Capital will be made more expensive if this tax ever comes about, hitting the ability of poorer countries to raise investment funds. Fortunately the tax is not likely to come about, since it would require the agreement of every tax jurisdiction to make it work, and the record of international consent, as illustrated by the stalled World Trade talks, is minimal.
Without that consent, traders would simply move to where it was not levied. The “Robin Hood Tax” might look superficially attractive, but it would do profound damage to the world economy and, far from hitting “the rich”, it would be the world’s poor who suffered most. This could be one reason why Bank of England Governor Mervyn King described it as “bottom of the list” of options.
If campaigners want to spend charitable funds on these campaigns, they would be more effective in calling not for higher taxes, but for the end of the protectionist tariffs that prevent poorer countries from selling their goods.
Published on Telegraph.co.uk here.
Royal Mail: Universal Failure
Some months ago I was asked to comment on a BERR paper about “The Future of the Universal Postal Service in the UK”. The first paragraph said “The Government is firmly committed to the universal postal service; the ability of 28 million homes and businesses across the country to receive mail six days a week, with the promise that one price goes everywhere”.
That single sentence stopped me in my tracks. Essentially, anything within that paper from then on, seen from the point of view of rational economics, has to be balderdash. (I had a look later – most of it is).
Now, as the rumblings of the unions about Royal Mail reforms in working practice threaten, again, to break out into open warfare after the “Christmas truce”, the national press is, again, reporting that the universal postal service is under threat.
This debate is interesting, not because of the arguments, but because there shouldn’t be any argument at all that the universal service is a nonsense. It breaks all tenets of successful business enterprise and is in dire need of reform. So why does a government department with that label insist on continuing with it?
If you were offered a shareholding in a national enterprise with a long-standing asset base, trained workforce, and dedicated management you might invest. But if you were then told that it had to sell its products at the same price to everyone, and any price changes needed government approval, you would rightly be leery.
Price controls and regulation are pathogenic to enterprise; pricing flexibility and product innovation make enterprises learn and grow. The Royal Mail is a marvelous case study in the pathogenesis of failure. The universal service rule is 170 years old – time enough for numerous effects of its pathology to emerge. Here are just three killer mechanisms:
1) The match of revenue to costs is wildly askew.
170 years ago the postman in a rural area would have been paid about five pence a day. Delivering fifty letters by hand and on foot would have made the post office 45p in margin. That would have paid for his uniform, his local sorting office and its staff and a contribution to the long distance postal network.
On a rough estimate, today’s postman costs around £150 a day in wages, tax, van depreciation and other costs such as uniform and staff support services. He needs to deliver upwards of 500 items to earn that amount of revenue. Are there ten times as many homes? Is ten times as much mail delivered per household? Of course not.
The loss of multi-day and weekend services, the introduction of post buses, the reduction in sorting offices – all of these things tell us that the internal arithmetic of the universal service is cock-eyed.
2) Innovation simply has not taken place.
The Royal Mail’s Post Office operation is a bizarre business – or perhaps it should be a bazaar business – as anyone who goes into a Post Office knows. It offers a diverse range of products and services, mostly delivered at their point of issue by expensively trained human beings fiddling with sticky bits of paper. There appears to be no rationalization of the service processes. The queuing, the fiddling about with stamps and stickies, the puzzling over forms and handing over of cash are all endemic to a not-very-efficient output system that generates thousands of small payments.
Why are many services not franchised to other outlets, for example travel agencies to obtain your passport? Why aren’t there machines that weigh your parcel and vend the paid-for stamp that you put on before sliding your parcel into the sorting bags? Why isn’t the Post Office the largest provider of on-line services in the country – even via terminals in its own post offices? Why do we not all pay for all such services on a debit card (even one provided by the Post Office itself)?
Innovation has simply not happened, except perhaps for the most arcane and obtuse mail pricing structure; what other organization would get away with charging £1.78 to do something and make you buy tokens in £1, 50p, 2 x 10p, 1 x 5p, 1 x 2p and 1 x 1p denominations to achieve a result? The answer lies in the third pathological influence below.
3) Interests protect their position as failure happens.
The Royal Mail has, in my view, been failing for decades; essentially since the 1960’s when mechanized services became the norm. As a business model, the idea of hand-delivering physical product everywhere at the same price is clearly nonsensical. On the way, it also missed out on its biggest chance of success – the internet and on-line delivery of services. It has allowed this competitor to enter its market and hasten its decline. As it has declined, its workforce has been holding on to its privileges by using collective worker power and government patronage over its monopoly status. This has ossified the way it operates, unable to manage its way out of its past, surviving only on actual and regulatory subsidy which only help to make its operations.more sclerotic The Royal Mail desperately needs its “Wapping” moment as happened to the printed media.
So why do politicians cling onto their silly romanticism about the Royal Mail and its Universal Service. Essentially, because they look at the problem the wrong way; seeking to see what can be “done” about it, rather than what needs to be undone. Politicians love to be seen to be practicing discretion and judgment with the appearance of great wisdom. In doing so, they pander to misguided consensus; that postal services should be available to all, that post offices should be kept open, that the elderly and poor somehow rely on the post office, that stamps are important, that prices need to be controlled. All of these things are badly judged and unwise. They allow the Royal Mail labour force to become part of the institutional fabric resisting change (while in fact promoting their own financial interests) and they prevent the Royal Mail from finding out what is for.
The parliamentary Business and Enterprise Committee recently produced a report called “Post Offices – Securing their Future” – an enquiry into the future of the Post Office. Perceptively, the report asks in its third paragraph “What is the Post Office for?” and declares: “This may seem a strange question to ask, but it goes to the heart of the actions needed to sustain a modern network.”
Precisely, and politicians are the last people to decide what those actions should be. All they do is cost us more and more money trying to save a failed institution.
The wide gaps in the pre-Budget report
Alistair Darling’s pre-Budget report revealed several huge gaps. For a start, the gap between what the government takes in and what it puts out has widened to £178bn. The Chancellor’s optimistic forecasts for growth after next year are not shared by City experts, some of whom put the future gap as a further £70bn higher than Darling says he expects.
There is another significant gap – between what the government says it is doing, and what will actually happen. This was very evident on the hot-button item of the one-off super-tax on bonuses. It sounds like bringing, what Labour call, the ‘greedy’ bankers to heel, but the small print indicates that it will not apply to any bonuses written into contracts, and will be limited to discretionary ones. Given that the effective tax rate would be above 100 per cent if the banks paid out the new 50 per cent surcharge, and the recipients paid out top rate income tax and National Insurance on top, it looks much more likely that many discretionary bonuses will be foregone for a year, with larger bonuses written into subsequent contracts to make up for it. This is political rhetoric largely empty of substance.
The biggest gap of all is between the government’s strategic response to the crisis and what most expert opinion, here and abroad, thinks it should be doing. The government is obsessed with keeping up spending, thinking that a Keynesian-style stimulus is needed to prevent any recovery from being stillborn. The money raised from the middle classes in extra taxes is not being used to bring down the horrendous debts the government has incurred. It is being used to fund yet more spending, with increases announced in popular areas calculated to appeal to Labour voters.
In fact the biggest crisis facing Britain now is that overhang of debt. There is a real possibility that the UK could lose its top credit rating and be forced to pay much more to service its existing debt and future borrowing. The Conservatives, to their credit, recognize this. There have to be cuts – big cuts in spending – especially in the fripperies of politically correct but unproductive public sector activities. In place of spending increases there should be huge reductions, and in place of tax increases on jobs and enterprise, there should be targeted reductions to boost both growth and the tax revenues which follow in its wake. The government had a chance in the PBR to start to repair the nation’s finances for the future. Instead one is left with the suspicion that they looked only six months ahead to the election, and left the hard decisions for afterwards.
Published on Telegraph.co.uk here.
The BBC: Auntie or Floozy?
The revelations concerning the expenses charged by top BBC executives are but the latest in a series of blunders and scandals that seem to beset the corporation. Its image was badly dented by disclosures that it encouraged quiz show callers to make costly calls even after the prizes had already been awarded. Nor was it helped by its handling of the prank calls by Jonathan Ross and Russell Brand, by disclosures that it had made a documentary seem more significant by altering its chronology, or by misrepresenting an apparent row involving Queen Elizabeth.
The bloated expense claims will be taken by the BBC’s critics as further evidence that it cannot be trusted to handle the cash it receives from taxpayers with any sense of responsibility, and that ways of funding it alternative to the licence fee must be found. Certainly some of the claims raise eyebrows. The BBC’s top executives average over £200,000 per year in pay, with many of them earning more than the Prime Minister, yet some of them still find time to claim 70p parking meter charges. And some of their expense claims bear witness to a lifestyle that most of their licence-fee payers can only envy.
Most people struggle with public transport, making the best they can of buses and trains, yet two BBC personnel between them clocked up over £10,000 on taxi bills over a three month period. The BBC defends this, saying that taxis are “more convenient and cost-effective” than public transport. Most people would agree with this, though unable themselves to spend public money on satisfying that convenience.
The claims may not be as exotic as some claimed by MPs, but the same principle is at stake. The public does not like to see those funded by taxpayers living it up while ordinary people have to struggle to get by. It is seen as a bad indicator when a business organization allows bloated expense claims by its personnel, and the same is true of the BBC. Coming after revelations over the huge sums they pay their celebrities, the public is beginning to think that their money is being passed around in buckets. Greater accountability and alternative methods of funding have just moved higher up the agenda.
Published on Telegraph.co.uk here.
A proposal for solving the pension crisis
We need to wean people off the state pension. It’s a giant Ponzi scheme that sooner or later will become bankrupt. There used to be five working age people supporting each pension; now there are two, and in the future that number will shrink. It cannot go on.
However, we can’t just scrap it. Too many people have based their future plans on its existence, and it is too late for them to make up for its removal. To tell a 50 year old that they won’t get a state pension is unfair: they’ve worked for thirty years expecting it, and not prepared for a world without it. But I see no reason why we should not tell a 20 year old that they won’t get a state pension, as they have all the time in the world to make their own arrangements.
I have been considering a phasing out approach. Anybody over 60 gets a full pension; anybody under 20 gets no pension. The rest of us see our pensions tapered away at a rate that equals 2.5 percent per year off retirement. Thus, the 50 year old would get almost two thirds of a full state pension, and would have 15 years to make their own arrangements to supplement that amount. I would get slightly less than one third of a state pension, but would have three decades to prepare for a world where my state pension was meagre.
There are two problems with this approach, as I see it. The first is that young people would have to pay in to a system from which they did not benefit. This would generate some understandable resentment. However, we cannot refuse to implement changes on the grounds that certain groups will in the future not benefit where those in the same group but in a previous generation did benefit. That argument, often deployed by students to oppose tuition fees (“You all got a free higher education, so it is unfair to deny it to us”), is the quintessence of Conservativism: a fundamental opposition to change. That same argument, 100 years ago, would have cut the other way: old people benefited from a system into which they had not paid; one generation was being taxed where the previous generation was not. That did not prevent the state pension being created and nor should it have.
I would suggest that we could counter the objection among younger workers in three ways:
- Firstly, by pointing out that the current system is a lie and that one way or another the state pension is ultimately bankrupt. It is better to taper it out than to reach a crisis point for which nobody has prepared.
- Secondly, by pointing out that they are in many cases paying for their own parents, just as their parents paid things that they benefited from (such as free childcare) which their parents never enjoyed.
- Thirdly, and this is perhaps the best bit, by pointing out that over time taxes will be able to fall, so that as they get older the tax burden will be reduced, meaning that they can finance their (probably superior) private pension out of the difference, and probably still be better off than their overtaxed parents.
The other objection that I envisage is that the state pension provides for people regardless of wealth, and that the poorest are not able to afford a private pension. While I doubt that this is as true as those who make that argument claim (in the pre-pension era millions of low paid people made private arrangements though Friendly Societies, cooperatives and other methods), I accept that there will be a demand for some arrangement to help the poorest. This could be achieved by a means tested benefit (like a tax credit) that was paid directly into the pension scheme of their choice. This would also benefit those unable to work for health reasons or due to caring requirements, and would be applied to those signing on as unemployed.
There would of course be a hard core that refused to make arrangements. As long as the above arrangements were made clear, however, nobody would be able to pretend that they did not know that they might face poverty in old age. But no government will be able to ignore that poverty nonetheless. I would therefore suggest that the mandatory retirement age be scrapped, so that a person has chosen not to prepare for their future – or not to do so adequately –can continue working. There may be a case on anti-discrimination grounds for banning companies from having mandatory retirement ages too. Once people became too infirm to work, they could be dealt with through unemployment and/or sickness benefits.
Before anybody accuses me of being callous I would emphasise that honesty from the outset and a tax credit for the poorest would mean that only those who wilfully refuse to prepare for their retirement will find themselves in this predicament. If this is unpalatable, however, then the alternative would be to compel people to make arrangements: a pension could be mandatory for all workers, just as car insurance is for all drivers.
While some might suggest that not everybody would be able to make an informed choice about pension provision, I find this argument unconvincing – and indeed patronising. With the exception of those who are truly not capable of making decisions for themselves (and these are indeed exceptions and should be dealt with separately), everybody is able to make an informed pension choice, just as they make informed investment choices in other areas of their lives.
Some measure would be necessary to ensure that pension funds were not completely at the mercy of the markets. When I signed up for a defined contribution scheme, my pension provider arranged that in the last decade of the scheme, 10% of my funds would be moved each year from riskier, more rewarding investments to the safest investment vehicles (AAA bonds – which I would hope would mean government bonds considering how casually the rating agencies handed out AAA ratings over the past decade). This should ensure that nobody is caught out by a sudden market slump. It may be necessary to make this sort of protection mandatory.
These proposals are certainly a work in progress. Some of the ideas are not original, though the basic plan to taper the pension away is not one I have come across before. I make them in the hope of stimulating a discussion that may help me revise (or even abandon) what has for some time seemed like a good idea.
From paedophilia to speeding, bureaucrats need a sense of proportion over the risks
Watford Borough Council’s decision to ban parents from the playground in case they are paedophiles are another case of the Bully State gone mad. We’ve seen it in the past week with the Independent Safeguarding Authority (whose .gov web address shows it to be anything but independent), telling piano teachers and others that they ought to get CRB checks, or parents might ask why not.
So now we are living in a Britain where all adults are presumed to be paedophiles unless they can prove themselves otherwise. It’s the precautionary principle gone mad. If you can’t prove something safe, you have to treat it as dangerous. That thinking also gave us the EU’s Reach directive, which prescribed in-depth tests on “hazardous chemicals” – such as salt – before they could be licensed for our use.
Why do bureaucrats act like this? Because there is no upside for them. A business person will take a risk because the chance of failure is balanced by the chance of making a fortune. Civil servants aren’t rewarded with fortunes when their decisions go right, but they are sidelined or barred from promotion when they go wrong. So they focus on stopping the downside, not boosting the upside.
That is why we are being softened up for a 20mph speed limit in towns, particularly near schools. Yes, pedestrians are much less likely to be killed at this speed than 30mph. But today we have a third of the child road deaths that we had in 1922, when the national speed limit was 20mph. Why? Because parents warn their kids about traffic. They remove their kids from the risk. What the bureaucrats want to do is to remove the risk from the kids.
But we take risks for a reason. There are benefits too. With a 0mph limit you could eliminate road accidents entirely. But at huge cost to the community.
Why does Network Rail spend billions on train safety systems? Because train crashes are spectacular news, while car crashes aren’t. In 2007 about 24 people were killed on the railways, including pedestrians at level crossings. Nearly 3,000 died on the roads, but that’s less obvious.
Seat belts are another celebrated case. Strapped into their cars (which are advertised for their safety), drivers feel safe. So they drive more riskily, and more pedestrians are killed and injured. We’d be better installing a huge spike in the middle of each steering wheel. Accidents would plummet.
We take risks for a reason. Life would be impossible without it. The idea of a risk-free world is futile. And unless we – parents, children, drivers, and everyone – are exposed to risk, we will never learn to cope with it.
Published on Telegraph.co.uk here.
Lord Stern is wrong: giving up meat is no way to save the planet
Lord Stern, whose 2006 report set out the consequences and costs of various levels of global warming, has now called for humans to stop eating meat. His reasoning is that our farm animals, especially cows and pigs, expel methane, which is 23 times more potent than CO2 as a greenhouse gas, making meat-production account for 18 percent of all carbon emissions. He says that it will become as socially unacceptable to eat meat as it is to drink and drive.
The proposal is not surprising, since it is but the latest in a series of proposed behavioural changes which are claimed to be essential to the planet’s survival. People have been told they must eat locally-sourced food, abandon their cars for public transport, and drastically cut their air travel, among many other ‘essential’ changes. Giving up meat is only another step on the ‘live more simply’ road.
At the heart of the environmental lobby lies an unease at progress and change, and a veneration of a calmer, slower lifestyle. It goes hand in hand with a disregard for the material goods which extend choices in the rich nations, and even for the economic growth which offers the poorer ones a ladder out of subsistence. Although ‘saving the planet’ is advanced as the reason why these lifestyle changes must be implemented, it sometimes seems as if the simpler life is an end in itself, and that global warming is a convenient excuse to force acceptance of it.
Lord Stern, whose 2006 report set out the consequences and costs of various levels of global warming, has now called for humans to stop eating meat. His reasoning is that our farm animals, especially cows and pigs, expel methane, which is 23 times more potent than CO2 as a greenhouse gas, making meat-production account for 18 percent of all carbon emissions. He says that it will become as socially unacceptable to eat meat as it is to drink and drive.
The proposal is not surprising, since it is but the latest in a series of proposed behavioural changes which are claimed to be essential to the planet’s survival. People have been told they must eat locally-sourced food, abandon their cars for public transport, and drastically cut their air travel, among many other ‘essential’ changes. Giving up meat is only another step on the ‘live more simply’ road.
If we give up animal husbandry and eat the vegetarian diet Lord Stern advocates, it would be one devoid of milk, cheese and butter, and the world would have to get along without leather for its shoes or jackets, or wool for its clothes. This is not going to happen, any more than the other ‘essential’ changes.
What will happen instead will be new technologies that solve the problems without behavioural change. There will be emission-free transport, cleanly-produced energy, and minimal-impact production. Human ingenuity and resourcefulness are quite capable of achieving this, and can even be accelerated by suitable incentives.
It is highly likely that animals will be genetically engineered to emit less methane, and highly unlikely that human beings will give up a large part of their diet. The one is easy to do; the other is probably impossible, as well as undesirable. Some in the environmental lobby oppose this kind of technological change precisely because it will make behavioural change unnecessary. It will enable people to live as they want to live, rather than as others think they should live.
But technology will win, and the constricted lifestyles advocated by Lord Stern and others will lose. A look at human development suggests which course is the more likely.
Published on Telegraph.co.uk here.
Competition in postal delivery is the solution
The impending mail strike makes it clear how near-monopoly services seem to breed dinosaur unions. The ability to shut down a service ups the ante for the unions. In services where there is a competitive market, customers can turn to other suppliers. Lord Mandelson rightly points out that a mail strike now will turn customers to alternative communications technologies, customers who will probably not return.
Some will turn to other mail deliverers, rather than other technologies, but the problem here is that the Royal Mail does the end delivery, the so-called ‘last mile.’ Other firms such as the Dutch-owned TNT, use Royal Mail postmen and women for the final delivery through letterboxes. This means that the Communication Workers Union (CWU) has the power to shut down the service totally, giving it a massive industrial muscle it has shown itself quite prepared to use.
One reason why this state of affairs has continued is that the Post Office is uniquely exempt from paying VAT on its services, as its would-be competitors have to. This means that a rival has to be 15 percent (and soon 20 percent) more efficient to compete effectively. Most markets are won or lost on much smaller percentage margins than that. TNT has a case pending before the European Court protesting the unfairness and calling for a level playing field. Until then, though, it is effectively priced out.
The strike is about modernization, as postal services have to streamline to take on the challenge of electronic communication. The government and management know that more efficient and automated practices must come if mail delivery is to survive.
It would be a good move now for the VAT rule to be changed, putting a level playing field into place for postal services. This would give firms like TNT the chance to set up end delivery and keep the mail services running despite the CWU shutdown. This would give the customers an alternative to the service which has been constantly interrupted by unofficial action, and which now threatens them with a total stoppage.
The CWU has been intransigent and antiquated because it has the power to be so. If alternative delivery systems were in place for customers to turn to, the union would soon change its behaviour. The time has come for government to rescue its citizens from the grip of an over-mighty union by opening up the field to firms which can compete on an equal basis.
Published on Telegraph.co.uk here.
The Archbishop of Canterbury caricatures consumers and fires at token targets
The Archbishop of Canterbury has urged families to get in touch with “the natural rhythms of the seasons,” and have “a sense of connectedness to natural processes.” Instead of a consumerism which “treats each person as essentially a hole that you have to keep stuffing things into,” he urges “a life that is balanced, that is at home with its material and human environment.” These are fine sentiments, in that most of us would want balanced lives rather than unbalanced ones, and most of us would rather be at ease with the world than at odds with it.
The good bishop moves onto more controversial territory, however, when he mentions specifics, in that he seems to have bought the entire agenda of “token environmentalism”. This is where green lobbyists pick out token targets to vilify, regardless of the actual degree to which they affect things.
So-called “food miles” provide one example. Dr Williams urges us to grow food in our gardens and on allotments rather than importing foodstuffs from places like Kenya. Many of the foods we import could indeed be grown at home, but with much more energy use than is required in warmer countries. Kenya, for example, is effectively exporting sunshine with its food crops.
Furthermore, many foodstuffs are more expensive to grow locally, so we would be banning cheaper foods from poor countries that are desperate to sell us them, simply to tick off token environmental boxes.
Dr Williams also appears to have taken on board the notion that air travel should be avoided to save the planet, and tried to make his own last year flight-free. In fact flying makes a much smaller contribution than do ocean or surface transport. It just makes an easier target for the tokenists. Budget airlines, which they denounce, in fact fly greener by using newer aircraft with engines that use less fuel, and by flying with fuller passenger loads.
Even the bishop’s notion of consumers as holes to stuff things into is a caricature. We all have our values and our priorities, and we express these in terms of the things we spend time and money on. The time spent working for the school bazaar cannot be spent on reading or listening to opera. The money we spend on music cannot also be spent on clothes.
Every action is a trade-off against the things we could have done instead. Of course we look down on people driven by a crass materialism which finds no room for life’s finer experiences, but most people are not like that. They express themselves through their choices, in lives that do indeed balance aesthetic and sensitive experiences with material comforts.
Published on Telegraph.co.uk here.