Sometimes making something a right is the wrong way to provide it

There is really nothing new here, it’s just a good exemplar of an old point:

The Consequences of Treating Electricity as a Right

This paper seeks to explain why billions of people in developing countries either have no access to electricity or lack a reliable supply. We present evidence that these shortfalls are a consequence of electricity being treated as a right and that this sets off a vicious four-step circle. In step 1, because a social norm has developed that all deserve power independent of payment, subsidies, theft, and nonpayment are widely tolerated. In step 2, electricity distribution companies lose money with each unit of electricity sold and in total lose large sums of money. In step 3, government-owned distribution companies ration supply to limit losses by restricting access and hours of supply. In step 4, power supply is no longer governed by market forces and the link between payment and supply is severed, thus reducing customers' incentives to pay. The equilibrium outcome is uneven and sporadic access that undermines growth.

Some things are indeed rights and not only should but must righteously be supplied to all. Civil liberty, equality before the law, property rights. Somethings are badly provided if they are rights and therefore should not be such - health care, education, electricity, housing, food and so on. The difference being that old one of negative and positive rights of course.

Do note that even if something is not to be provided as of right there’s still plenty of room for government aid in that provision. It’s just that the how of the aid needs to be carefully thought about. Rather than a food ration perhaps a cash handout to purchase food with and so on. Rather than a housing ration financial support to purchase housing services to those who need it.

Another way to put this being that rights really are different - therefore it’s necessary to be highly selective about what is determined to be that right.

This is casuistry up with which we shall not put

The Institute for Alcohol Studies wants to tell us that while an increase in booze taxation would indeed be regressive it wouldn’t be really. For, if the money raised were spent on the National Health Service then it would be the poor who gain more from the extra spending, even as they pay more because of the extra taxation. This is casuistry and we’ll not allow it:

Raising alcohol taxes does not disproportionately affect poorer households, once the effects of the potential additional funds generated to plough into the NHS are taken into account, according to a study.

Although the research acknowledged increasing duties on alcoholic beverages may hit the most economically deprived proportionately harder than the rich, it claims this is outweighed by how the poorest benefit more from increased healthcare spending.

The report by the Institute of Alcohol Studies (IAS), has prompted calls for the Treasury to increase alcohol duties – known as one of the so-called “sin taxes” alongside sugary drinks and tobacco – in next month’s budget to combat binge drinking. The research challenges long-held concerns that alcohol taxes are regressive.

The research - a far too grand name for this perversion of the language - is here.

Regressive taxation is when the poor pay a greater portion of their income in this tax than richer people do. Raising booze taxation meets this standard of what regressive means. Thus higher alcohol taxes are regressive and that’s that, no twists and turns change it.

Higher NHS spending - assuming that it’s not just on the diseases of the rich - will be progressive, we can agree upon that. So, it is indeed possible to say that taxing the poor more - a regressive move - and spending more, in a more progressive manner than the regression of the receipt of income, is overall progressive policy.

But that still leaves us with the taxation part being regressive. For, obviously enough, it is possible to have some progressive form of taxation to pay for the spending and thus make the overall policy stance rather more progressive.

Note that all of this is entirely independent of whether you think there should be more tax on booze. Or more spending upon the NHS. Or even whether the tax system, the benefits and spending one, should be more progressive, more regressive or anything else.

Taxing alcohol is regressive taxation. That’s just what it is, whatever the casuistry of those urging us to pile imposts upon the modest pleasures of the working man. The IAS can go boil their heads on this one.

Funding Institutional Care

Archie, Bertie and Charlie are all elderly and require full-time institutional care: food and accommodation, supervision and security (they need to be kept in) and visits from family and friends. Archie is the lucky one: he has his own bedroom and his institution is dedicated to making his stay as pleasant as possible. Bertie shares his bedroom with five others who keep him awake at night with snoring and strange noises. The staff try to be kind but it is clear they don’t think he should be there. Charlie shares his bedroom with just one other and they get on well. The staff, on the other hand, are dedicated to making his experience so disagreeable that he will not wish to return once he leaves.

Archie’s stay would cost a paying customer an average of £93 per day without nursing or £130 with full-time nursing. Local authorities can achieve lower prices. Bertie costs £400 and Charlie costs £103. Suppose England has Archies, Berties and Charlies. HM Treasury would save £510M a year by putting all the Berties and Charlies in the same type of institution as Archie and they would be better off there too.

Unfortunately the Bertie and Charlie institutions, namely NHS hospitals and HM Prisons, are nothing like as underfunded as Archie’s, the local authority social care institutions. NHS hospital beds are full of elderly people who should be in residential homes and our prisons likewise could reduce overcrowding with a more imaginative re-location of their older inmates. The government is cutting off its nose to spite its face by the gross underfunding of adult social care.

Looking more closely at the figures:

• In 2019, the average number of “bed-blockers”, i.e. NHS hospital patients who should have been discharged, was about 4,500 per day.

• The average cost of prison to the state is £37,543 p.a. per prisoner or £103 per day. There are about 1,700 prisoners aged 70 or over in England and Wales, one of them (in January 2019) aged 103. How likely is it that these old folk, locked in secure homes, would escape and ravage the community?

The moral of this story is that government thinking is not joined up, even within HM Treasury.  The green paper on adult social care is now overdue by several years, there is no sign yet of the “urgent” cross-party talks on the subject and the budgets are set in isolation with little regard for the best outcomes for individual frail, elderly people.

Tesla shows why China grows quite so quickly

Something we’ve noted more than once before - China is probably the most free market economy in the world at present.

Clearly, this is using free market in a fairly specialist sense - a communist shading into merely authoritarian government isn’t usually thought of as that. However, it is true, in the sense that is being used. People, organisations, are able to start new economic activity there faster than they are anywhere else. Take the example of Tesla. Their China factory:

How Elon Musk Built a Tesla Factory in China in Less Than a Year

Their German factory:

Tesla has been ordered to stop work on its German factory, in a win for environmental campaigners.

A court ruled that the electric car company must stop clearing forest land near Berlin to prepare for the construction of the facility, its first so-called "gigafactory" in Europe.

Planning permission has not yet been granted on the site, and a complaint has been brought by a local environmental group, the Gruene Liga Brandenburg (Green League of Brandenburg).

The German process started in November, thus has 8 months left to match the Chinese experience. And one third of the time into the process they’ve not cleared the land, not cleared the courts and not cleared the planning process.

Something which rather neatly explains the different speeds of growth. Economic growth is, obviously enough, the outcome of doing new things or old things in new ways. The speed of economic growth is determined by how fast you can do new things, old things in new ways. We in the already rich countries place significant barriers in the way of people doing those new things. Therefore our economic growth is slower than it could be, slower than it might be in other places.

Note what we’re not saying, that there should be no such controls. Well, not here, not now, we’re not. Instead we just want to make, again, the point that everything has costs whatever the benefits that may also flow from the same thing.

Regulation slows economic growth simply because it slows down the rate at which people are able to do new things. This is a cost that has to be kept in mind when considering any proposal for regulation. It might even be true that proper consideration of all those costs, when set against the benefits, will lead us to putting fewer regulatory constraints on our children getting richer.

We'd better get on with abolishing the BBC tax

The Chairman of the BBC tells us that if the licence fee tax is abolished and the institution moved over to a subscription fee arrangement then:

He argued that a move to a subscription model would mean a loss of earnings for the BBC that would lead to popular programmes being axed and that the introduction of Netflix-style payments could result in the loss of public service programming in a race to attract paying viewers.

We are being told two contradictory things. That the BBC would stop producing unpopular things in order to chase ratings and also, at the same time, that the BBC would stop producing popular things which bring in the ratings.

Looks like we’d better get on with the subscription model then. Who wants to leave several billion pounds a year of public money in the charge of someone so terminally confused?

The government's agenda

Commentators have speculated on what might be the ideology that drives Boris Johnson’s government since its December election victory. They ask if it will be pragmatic, free market, or ‘one nation’ Toryism. Most seem convinced that it will strive to consolidate the support of the new Tory voters who ‘lent’ their votes to deliver Brexit, and maybe to reject Jeremy Corbyn and what he stood for, and to help Boris Johnson break through Labour’s ‘red wall’ by doing so.

Even though we are still early into the new government and the new cabinet, there are clear signs that point to the direction it will take. It will be tightly controlled from 10 Downing Street. Not since Peter Mandelson established total control of Labour's output in the 1990s have the actions of individual ministers been subject to such close oversight. The No. 10 machine has objectives it seeks to achieve, and wants to control the levers that must be pulled to successfully bring them about. The PM's top adviser, Dominic Cummings, knows where he wants the country to go, and is putting in place the mechanisms that will enable it to be taken there.

The ideology that can deliver on its election promises and help the government to be re-elected is one calculated to improve the country and the lives of its citizens. It is a problem-solving approach that will attempt to put right as many things that are perceived to be wrong in modern Britain as it can. It will identify the areas in which what happens falls short of what is sought or expected, and introduce measures designed to fix those shortcomings.

Commuter train journeys are in some cases overcrowded, unreliable and expensive, so the government will bring in. measures to improve them. Many young people cannot afford to start on the pathway to home-ownership because there are not enough affordable homes in places where people want to live. The government will take steps to redress this by increasing the supply of housing to address the shortfall. NHS waiting times, whether for GP appointments, A&E treatment, or hospital treatment, are seen to be too long. The government will act to shorten them. Parts of the UK have not shared in the economic success of Southeast England. The government will seek to have them participate in the economic expansion of the nation.

There is a whole series of problems, most of them real, but some perceived rather than real. If the government is to address these systematically and successfully, it needs to avoid virtue-signalling, showy initiatives that sound good and attract media coverage, but which fall well short of what is needed to fix the problem. What are needed are real, practical solutions that work in the real world, ones that enhance choices and opportunities rather than attempt to impose grandiose top-down schemes.

The UK does have problems, and could use a government whose ideology is to fix them. It now falls upon right-thinking people to research policy initiatives that can enable them to do that successfully.

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.