We do hope the new Chancellor, Rishi Sunak, is better at his sums than this
This is slightly alarming:
Crucially for his upcoming Budget, he found a “natural ceiling” on the amount of tax the Government can rake in, and said he sees that as the ceiling for spending too.
“Since 1955 tax receipts, with limited variation and remarkable consistency, have averaged 36pc to 38pc of GDP. In spite of the vast differences between Labour and Conservative members in our approach to setting tax rates, the average tax take has been remarkably similar under Governments of both parties,” he said.
“There appears to be a natural ceiling to what any Government can extract from the pockets of its hard-working taxpayers.
“That to me suggests a simple conclusion: in normal times, public spending should not exceed 37pc of GDP. That is the best estimate of our income as a Government and therefore the best guide to what we can afford to spend.”
The basic idea - there’s only a certain amount of plucking the geese will not hiss at - we agree with. That number being rather more socially determined than by anything else. Different societies do have different amounts of government going on after all. We also agree that the UK hisses at a lower level of government than some other places.
It’s the sums there that worry us more than a little bit. For the tax to GDP ratio isn’t 36 to 38% of GDP, nothing like. Since 2000 it’s been running at 32 to 34%. It is total government receipts which runs at that higher rate, not taxes.
A difference that we’d rather hope the person doing our communal sums understands.
The numbers in climate science really are quite amazing
A couple of days back we noted that the WWF presented us all with some truly remarkable numbers. Or rather, in their report about the costs of climate change, didn’t present the numbers which mattered:
We’re fine so far. They also say that higher emissions will cause more damage than lower. We’re fine with that as a logical assumption, something internal to the case being built. Then they say that higher emissions will cause damage to ecosystem services, these damages will lead to a reduction of GDP from what it would be in the absence of those emissions/damages. All of this is equally fine as a chain of logic. Sure, it may or may not be true but it’s logically valid.
Then they do something absurd. Remember that SSP5 gives higher GDP growth in the first place. That’s the bit they don’t account for. The thing they never do tell us is whether that final, net, outcome of more growth and more emissions is higher or lower than the slower growth and no emissions damage pathway.
This intrigued sufficiently that we’ve carried on chasing them for an answer. Just to recapitulate what we’d all like to know. Faster economic growth, with emissions and damages, leaves us better off or not than slower economic growth without emissions and damages? That is, after all, the information we need to be able to make a decision - assuming that we’re using being better off economically as our tie breaker on the decision.
We’ve asked this in the following format:
1) Using SSP5, deducting the damages from emissions caused problems with ecosystem services, what is global GDP in 2050? Or, if you prefer, global per capita GDP?
2) Using SSP1, not suffering those damages to ecosystem services as a result of emissions, what is global GDP in 2050? Or, if you prefer, global per capita GDP?
Our own assumption is that this must already have been calculated. For how can anyone claim losses in GDP if it hasn’t been? After 72 hours since we first started asking the response is, so far, this:
This query is straightforward but is not trivial to calculate.
They don’t in fact know. Yet not knowing is good enough to claim damages? This is not a recommendation for how people do climate change science these days, is it?
Well, if the government's going to hand out money like a drunken sailor...
It would appear that Norton Motorcycles wasn’t all that good a thing to be spending money upon:
The chair of parliament’s public accounts committee is calling for an investigation into the government’s funding of Norton Motorcycles and has accused officials of “blindly pouring” millions of pounds of taxpayers’ money into the motorbike firm before it went bust.
The background is said to be somewhat seamy:
However, the story is far more complex than that. It is a pile-up that includes hundreds of hapless pension holders, together with unsuspecting Norton customers, staff and even government ministers, who repeatedly endorsed Norton as millions of pounds in taxpayer support flowed into the firm.
All will take a lot of persuading that this is merely a story of a plucky British company that is a victim of circumstance. Their anger looks likely to be directed principally towards one man: Norton’s boss, Stuart Garner.
The excuse from those handing out your and my money is:
A BEIS spokesperson said: “All Government funding awarded to the company was based on the usual processes of assessment and due diligence. At the time these awards were made, our due diligence did not indicate that the business was failing.”
Perhaps a little more diligence might be suggested.
This is not to berate, particularly, the more recent members of government. Much the same has happened whichever flavour has been sitting around the cabinet table. The reason being a point that Adam Smith made.
The people willing to pay high interest rates are precisely the people a prudent banker doesn’t want to led to. They’re promoters, builders of castle in the sky - a practice that does rather tend to come crashing down. Now that government is a likely funder of enterprises the very people we don’t want to fund are those asking for that government money.
Partly because of Smith’s very point, partly because of course you’d only go to government if normal market processes won’t fund on the basis of that lack of decent foundations.
That is, the argument against government funding is exactly that used to justify it. They can’t get money elsewhere - quite, so why the heck let them have any?
Give Britons a Holiday
After three and a half years of Brexit chaos and all the anxiety and business uncertainty it is now time for the government to reward the British people for their patience by giving them a holiday.
As we now become global Britain it is important that we give people the opportunity to live this out, to visit far flung places, to encounter and enjoy different cultures. For others, it may be enough just to relax in a sunny climate in the confidence that Brexit is finally done. We can help do this by removing one of the largest barriers to those who want to fly abroad: Air Passenger Duty (APD).
Of course the immediate go to reaction is an immediate shutdown in the style of Ms Thunberg’s ‘How dare you!’ Travelling by plane is evil. We should stop people from flying, either by shaming them or by imposing a tax that disincentives flying rather than actually disincentivizing CO2 emissions.
Yes APD is more about stopping people flying rather than reducing pollution. Currently, APD is charged per passenger in aircrafts that have take off weights of more than 5.7 tonnes or more than twenty seats or passengers - thus private jets are let off. Private jets are likely the vehicle of choice for the mega wealthy who aren't taxed while those in Easyjet are. There are also only two bands in terms of flight distance (and thus approximate CO2 production), below 2,000 miles and above 2,000 miles. This means that a flight to Londonderry to Newfoundland Canada is charged at the same rate as a quick flight from Dublin, Berlin or Paris
APD also takes no account of how much CO2 different planes emit. Therefore, there is no incentive for airline companies to become more efficient. As a result, we do not see as rapid advancement in green aviation technology because the incentives are not there.
Furthermore, the vast majority of flight emissions are produced by a small number of people who fly very often meaning that the tax does little to disincentives their flying but prevents less frequent and less affluent flyers from being able to travel abroad. If you thought APD really was to help stop climate change, you would have to agree that it could almost certainly be doing a better job.
We would be much better off with a policy that incentivizes innovation to be more fuel efficient and less carbon heavy. Thankfully the border-adjusted Carbon tax does just that. Taxing goods on the amount of carbon produced will motivate the aerospace industry to innovate while also being more equitable.
In the meantime, let's scrap the treasury rent-seeking APD and make it cheaper for the British people to enjoy and explore Europe. This is a brilliant opportunity to not only show Britain is still strongly bound to Europe but also to give everyone a bit of respite after the brouhaha of the last three and a half years.
Less is more in climate change, not just fashion
A quite startling piece of prestigitation here, we have proof that less is more. True, this is about the “science” of climate change so perhaps not all that remarkable given the manipulations that take place here.
The claim from the WWF’s Global Futures report is that the effects of climate change will cause significant damage to the global economy:
Loss of nature will wipe £368bn a year off global economic growth by 2050 and the UK will be the third-worst hit, with a £16bn annual loss, according to a study by the World Wildlife Fund.
Without urgent action to protect nature, the environmental charity warned that the worldwide impact of coastal erosion, species loss and the decline of natural assets from forests to fisheries could cost a total of almost £8tn over the next 30 years.
It said the loss appeared to be modest at just 0.67% of global income in 2050, but the estimate was conservative and the total was likely to be much higher should areas like the Antarctic deteriorate at a faster pace, causing greater warming and higher-than-forecast sea levels across the world.
The problem with the claim is that it’s nonsense.
The paper is here. Here is actually what they’ve done.
One possible future is called SSP5. This has high economic growth and also high future emissions. Another is SSP1, this has lower economic growth and also emissions.
We’re fine so far. They also say that higher emissions will cause more damage than lower. We’re fine with that as a logical assumption, something internal to the case being built. Then they say that higher emissions will cause damage to ecosystem services, these damages will lead to a reduction of GDP from what it would be in the absence of those emissions/damages. All of this is equally fine as a chain of logic. Sure, it may or may not be true but it’s logically valid.
Then they do something absurd. Remember that SSP5 gives higher GDP growth in the first place. That’s the bit they don’t account for. The thing they never do tell us is whether that final, net, outcome of more growth and more emissions is higher or lower than the slower growth and no emissions damage pathway.
It’s necessary to do that calculation ourselves. And the result is that - working from here and page 13 is the important part - the higher growth hugely outweighs the damages. That is, if we’re to work with the idea that higher GDP is a better thing then the pathway that leads to the damages is better, as it produces a higher end GDP. Or, the damages aren’t in fact damages at all, they’re reductions in benefits.
The actual end result of the calculation is that humanity is better off, overall, having the growth and the emissions. Which absolutely isn’t what the WWF is saying to us, not at all. Something that rather calls into question the credibility of the report and the people doing it, doesn’t it?
The overall point here being that climate change is important. So it would be rather better if we were all presented with the true facts about it instead of being fed near casuistry in the form of propaganda.
Who would want to be a GP?
We know two things about the NHS: albeit not comparing like with like, acute hospitals and other secondary providers are much less good value for money than the primary sector and we have a critical shortage of GPs. The two are linked. Many go to A&E because they cannot see their local doctor in less than two weeks or out of business hours. Far more money has been pumped into the secondary sector than the primary, at a cost, some would say, to the health provision overall. “A year’s worth of GP care per patient costs less than two A&E visits, and we spend less on general practice than on hospital outpatients. For the past decade funding for hospitals has been growing around twice as fast as for family doctor services.”[1]
The shortage of GPs is attributable to three factors: too few being trained, too many working part-time, often very part-time, and early retirement. The Blair government ensured that GPs are well paid, so that is not the problem.[2] Too many are reducing their commitment: they do not want to see patients they hardly recognise every ten minutes, or discuss their health choices (diet, alcohol, smoking, exercise, weight etc) as decreed by the Department of Health and Social Care (DHSC) before asking what the problem is, and, least of all deal, cope with the mountain of paperwork, meetings and bureaucracy also demanded by the DHSC.
Last week, the DHSC published their response to this crisis with its “Update to the GP contract agreement 2020/21 - 2023/24”.[3] To be fair, the DHSC consulted widely on the draft and amended it in response to the feedback. The question though is whether it addresses the problem above.
It claims 6,000 staff will be added to the primary sector at a cost, over the next four years, of over £1bn with a big expansion of the funding of ancillary roles (26,000). Coincidentally, there will also be 6,000 more GPs. To see how this comes about it is worth quoting the whole section: “GP trainee numbers increase from 3,500 to 4,000 a year from 2021. 24 months of the 36 month training period will be spent in general practice, from 2022. Together with the increase in trainees, this change will contribute over half of the 6,000 extra doctors working in general practice. The Targeted Enhanced Recruitment Scheme (TERs) will be expanded: from 276 places now, to 500 in 2021, and 800 in 2022, encouraging GP trainees to work in under-doctored areas.
A two-year Fellowship in General Practice will now be offered as a guaranteed right to all GP trainees on completion of their training. It will automatically be offered as part of signing up to GP training. Our shared goal is to achieve as close to 100% participation as possible.” (p.4)[4]
There are various other good bits, bobs and motherhood (like supporting “good employment practices and seeing if they might do something about bureaucracy) and the big increase in ancillary staff will probably add to the pressures on GPs. They have to be managed by GPs and will refer many of their patients to those GPs. The quickest way to get to see a GP in my practice is to see a nurse.
Some of additional measures may be counter-productive: trainees (registrars) in general practice work at a much slower pace and need considerable supervision from GP trainers. Putting one extra trainee into General Practice is not equivalent to putting in a trained GP. Likewise the mentoring scheme: the senior and junior GPs chatting together will keep both of them away from seeing patients.
This contract revision is well intentioned but timid. Even if the NHS could identify future GPs on their first day at university, a decision doctors make after they have qualified, it would take 12 years, i.e. 2034, for the 500 new trainees a year to become 3,000 additional GPs. Importantly the updated contract does not indicate the total GP shortfall in England, nor how that deficit will be bridged. In short, it is not going to change theavailability of GPs in a hurry if at all.
[1] https://www.england.nhs.uk/five-year-forward-view/next-steps-on-the-nhs-five-year-forward-view/primary-care/
[2] https://www.telegraph.co.uk/news/uknews/1516095/Blair-defends-rise-that-put-GPs-on-250000-a-year.html
[3] https://www.england.nhs.uk/wp-content/uploads/2020/02/update-to-the-gp-contract-agreement-2021-2324.pdf
[4] Ibid.
Medellín's Cable Car Miracle
When most people think of Medellín horror stories come to mind. The presence of the infamous Medellín cartel of the 1970s, 1980s and 1990s, an image of a Robin Hood style city with Escobar inflicting his own sense of justice over its citizens, the homicide rate of 266 murders per 100,000 residents of 1991. For many, with the exception of Narcos fans on Netflix, Medellín will have all but fallen off the map. This is a shame because Medellín has made great leaps forward and is now a great example of progress.
This development is thanks, in part, to the city’s cable cars. Medellín is mountainous, much of the crime took place in more remote areas so in 2004, overseen by the mayor Sergio Fajardo, a project began to connect these hard to reach areas with the city centre. The theory behind the project was to promote movement between areas and to encourage firms to set up shop in cheaper parts of Medellín.
This meant adults now had viable routes into the city enabling them to take up jobs that would have otherwise been off limits, preventing them from having to resort to crime for a livelihood. A 2014 report found that employment opportunities have doubled for the Metrocable users. The project also enabled students to travel into the city and receive better education. They were no longer isolated in an area in which crime was more profitable than all else. It meant that gangs were starved of their cash and their workforces. No more lawless areas in once-lawless Medellín.
The results have been spectacular. Since 2004 the murder rate in Medellín has fallen drastically, reaching its lowest point at 19 murders per 100,000 residents in 2017 compared to 266 per 100,000 residents in 1991. As an article from Virgin explains, other improvements such as better air quality and increased tourism have also been enjoyed. The article also cites a study which found that when comparing areas with a cable car to those without: ‘the decline in the homicide rate was 66 per cent greater in intervention areas, and resident reports of violence decreased 75 per cent more’. Although we can’t chalk all of this up to just a cable car, it is important to recognise that this movement towards lower crime rates and other improvements in the area coincided with the introduction of the cable car. For many the cable car is representative of the progress that Medellín has undergone and has encouraged further investment.
The cable car is connected to the metro meaning that it doesn't just leave them at the bottom of the mountain and ensures that the cable car serves routes that people wish to travel. Financed by both the municipality and the publicly-owned Metro de Medellín, the cable car offers a combined ticket with the metro to make onward travel all the more feasible. The first cable car cost around $24m and the second another $47m. But in a country where the economic impact of conflict, terrorism, homicides and sexual assaults still costs around $4,700 per person per year a thirty dollar per person investment by Medellin’s citizens a decade ago seem a prudent crosssubsidy from Medellín’s metro company.
As the areas grow richer and more interconnected, the subsidy can be removed without shutting the area’s people out of economic activity, while crime stays lower forever.
The cable car helped Medellín by both improving social mobility and by inspiring faith in the area and in the government. As Alvarez Correa, a Medellín tour guide put it the cable car serves as ‘a symbol of resurrection or a symbol of hope’. Where formerly the gangs were well unified, the cable car has unified Medellín’s citizens.
Sajid Javid really ought to have a word with Matt Hancock
Normally advising the Chancellor to have a word with the Sec of State for Health is a muttering that someone should tell the latter to stop spending like a drunken sailor. This time around though it’s that the latter should tell the former that there’s some risk to messing with pensions:
Sajid Javid, the Chancellor, is considering plans to limit tax relief on pension contributions to 20pc, as revealed by The Telegraph.
All taxpayers would only receive a flat rate of tax relief – the current level offered to basic rate taxpayers. This will be instead of some receiving relief at their marginal rate of income tax of 40pc or 45pc.
But how much would higher earners lose? Those earning £50,000 or less would not be affected but those who earn between £50,000 and £150,000 would lose the additional 20pc top-up from the Treasury. Those with annual income above £150,000 would lose an additional 25pc relief on all pensions savings.
The thing is, we’ve tested the outer limits of this sort of thing already. And if we’ve tested it to the point that even The Guardian has noted that marginal tax rates are too high then we’ve really, really, tested it, haven’t we?
Ministers have been sent a dossier demonstrating how a shortage of staff caused by medics working fewer shifts to avoid the NHS pensions “tax trap” is affecting frontline care.
The Academy of Medical Royal Colleges, which represents Britain’s 220,000 doctors, has written to the chancellor, Sajid Javid, and the health secretary, Matt Hancock, calling on them to urgently address the pensions tax issue that is causing many of the UK’s most senior doctors to reduce their overtime or leave the NHS altogether.
And:
Senior doctors in the NHS are reducing their hours, turning down extra work and even retiring early to avoid being hit with huge tax bills on their pensions, a report reveals.
We have this vague idea that Javid and Hancock meet regularly to discuss how the country should be governed. Even, so we understand, sit around the same table once a week to chew through such matters. Perhaps, just occasionally, they’d care to note that world outside the Cabinet Room, pay attention to the lessons the real world is trying to teach them?
After all, we do have that evidence that the taxation of pensions can be too high. You know, actual, direct, real time, experience of this. And wouldn’t government by reality be an interesting concept?
We tend to think actions speak louder than words
The Guardian publishes another of these whines about the language that people use:
It’s not at the top of the list, but a fresh reason to resent Boris Johnson surfaced last week in the course of a news story about old cases of child abuse. Last year the prime minister averred that the pursuit of these cases, from the 1970s and 80s and many involving state institutions, was akin to “spaffing” money up the wall. Last week Labour called on him to apologise for the remark after the publication of new police figures indicating the abuse had been more widespread than assumed. The scandal is Johnson’s attitude, of course, but it might be observed as a side note that the word “spaffing”, which was funny for five minutes, has now been categorically ruled out for usage.
The Guardian also publishes the news that Boris is going to approve HS2:
Boris Johnson will give the final go-ahead to the first phase of the controversial HS2 high speed rail link early this week – despite fears over spiralling costs and strong opposition from at least 60 Tory MPs.
The prime minister is expected to make an announcement to parliament on Tuesday approving construction of the line between London and Birmingham, two days before conducting a wide-ranging reshuffle of his cabinet.
Actions and words - we tend to think that spaffing £100 billion and change on a project that shouldn’t be done in the first place matters more than the use of the word spaffing. But obviously that’s just us and our pickiness.
Although we would suggest a deal. The Prime Minister gets to use whatever language he likes as long as he’s rather more careful with our money. Who knows, could be the latest revolution in politics.
Lessons from Ireland
The Irish Election has been a shock to the previous two party system. The former political wing of the IRA (Sinn Fein) secured 24.5 percent of first preferences in Ireland’s system of single transferable votes with Fianna Fáil on 22.2 percent and Fine Gael on 20.9 percent. Sinn Féin registers as the most popular among all but the over-65 age group (those who lived through the brunt of the Troubles). This is up from 13.8% of the vote and only 23 seats in the 157 seat lower house.
The former political wing of the IRA put housing at the centre of their campaign and manifesto - aiming for younger votes part of Generation Rent. They promised a three-year rent freeze, tax credits worth an average one month’s rent and a large state-led building project through local authorities. As the polls showed, it worked and—according to some—almost all roads currently lead to them eventually participating in government.
While it gives warning about how Brexit can quickly drop from the mind of the electorate the key lesson coming from the election is that housing and the desire for change are top priorities for the young (and also bottom end of the middle aged). Housing came in as top priority for 42 percent of 18-24 year olds and 51 percent for 25-34 year olds. The socially liberal policies of Fine Gael - from gay marriage to legalising abortion - have either been forgotten or matters little compared to the state of their material wealth.
Like the UK, the Irish government has primarily used demand side interventions and state-led building efforts. Their Help to Buy initiative may have looked good on paper, but pumped up demand and failed to address underlying supply issues in areas where the housing crisis actually is. Their pledge to build 25,000 new homes each year also sounds like a similar promise -- both failed. These policies not only require vast sums of money but also struggle to deliver.
Now Ireland faces even worse policies from Sinn Fein, with more restrictions on the percentage of social and affordable housing in developments. Of course, it is easier to make the case for further government intervention if you tie private developers arms behind their backs. Complex planning bureaucracy reduces the amount of development, further limiting expansions on supply that is needed to deliver wide ranging real affordable housing for all.
Along with this is the tragic irony that young voters will be shifting the cost of their rent onto those younger than them - as rent controls benefit those already renting at the cost of those trying to get into the market.
So what can we learn from this? Help to buy and government-led building are expensive failures; lifting restrictions on building new homes and extending existing ones are far better. Not only do these changes not cost as much, but they are policies that will deliver far superior results.
The Conservatives cannot rely upon younger voters turning conservative as they grow older if they are still renting (at astronomical prices) aged 45. Thatcher’s dream of creating a nation of homeowners kept the Conservatives in power for years. Pushing forward and going further on efforts to streamline the planning system is the correct solution to the problem and one that will look good not only on the balance sheet but also at the ballot box.