Government policy is to force the poor to be poorer

The Resolution Foundation tells us that the poor are budget constrained. That’s not all that much of a revelation but they’ve built a whole report around it. They gussie it up a bit of course but that is the central message.

In these troubled times poor folks haven’t been saving much. Well, yes, that’s what generally happens. In fact, that’s why the general assumption about any demand stimulation that might be done should be pro-poor. The poor spend all their money, the richer tend to save a portion. So, if we desire to have more demand in the economy it should go to the poor so that it is spent, not saved.

To complain about this point that is so well known seems a little odd to us. However, there is one little point in there which we think worth emphasising:

Second, the cost of certain items (most obviously food) has risen for many: promotions have been reduced and cheaper items are harder to obtain.

Food promotions - BOGOFs, three for twos, this product cheap this week only, these are pro-poor. This should be obvious given that observation that the poor are budget constrained. At which point we have government policy on the matter:

The popular “buy one get one free” and “three for two” deals will be banned in supermarkets in a drive to help the nation lose weight, although smaller stores will be exempt.

The government is demanding that the poor be poorer. We can’t help but think that this isn’t a reasonable aim of government policy. Actually, we’d mutter that it’s somewhere along the spectrum from misguided through to an aggression upon the poor.

But then as Bernard Levin spent those decades pointing out there’s little so dangerous as the Single Issue Fanatic. The groupthink about obesity is leading to this absurdity, that government is actively insisting upon taking the crusts out of the mouths of poor babes and children.

There is no Great Stagnation

We might not think that this is a big deal but it is a symptom of one:

Britain’s pothole crisis has been branded a national scandal by MPs and prompted residents to resort to graffiti in a bid to make councils fix craters plaguing local roads.

But JCB has come up with a solution: a three-in-one pothole-repairing machine that promises to fix decaying roads in record time.

The PotholePro is a new digger-like device that the company said can fix a pothole in less than eight minutes - four times faster than existing methods and at half the cost. At that pace 700 potholes a month could be plugged.

The symptom being that this is how economic growth happens.

Yes, lovely big things like electricity, the internet, even HS2 and windmills everywhere, have their effects. But even they are not growth in and of themselves. It is not even true that economic growth is, only, the ability to do new things. Often enough it is as here the ability to do old things that little bit better, using fewer resources to get the job done. Those big technologies do indeed allow new things to be done but their much larger effect is upon enabling us to do those old things more efficiently.

This also being why that grand planning from the 30,000 feet of Whitehall doesn’t work well. Because it’s simply not possible for 650 PPE graduates to work out whether a new pothole repairing machine is even desirable let alone how it might be done if it were. Meaning that a planned system wouldn’t even allocate the resources to find out let alone produce such a machine.

A useful little reminder that economic growth is, in large part, just the day to day grind of doing all the old things that little bit better. Something that politics and direction by politics simply does not achieve.

Kafka’s Mass Vacillation Programme

Not for the first time in this pandemic, the government is making bold claims and failing to deliver.  When the Pfizer vaccine was approved, we were told five million cases would be delivered and used by the year end.  In the event, it was less than one million. As my colleagues’ “Worth a Shot” Briefing Paper showed this week, “Britain’s vaccination programme is being hampered by an excessively centralised, command and control approach that has rebuffed help from the private sector, the armed forces and volunteers.” But for once the problem does not lie with our leaders setting out bold ambitions but with our Kafkaesque bureaucracy getting in the way. 

The Medicines and Healthcare products Regulation Agency (MHRA) has been blamed for delays but this turns out, according to a release on 8th January, not to be the case.  After approving the vaccine, the 1925 Therapeutic Substances Act requires it to test every batch. The manufacturer’s tests are the same as those by the government’s National Institute for Biological Standards and Control (NIBSC) but they only take four days and are conducted in parallel.

On December 31st, Jonathan Van-Tam, deputy chief medical officer, said: “the only thing that is going to slow us down is batches of vaccine becoming available”. He blamed that not on any shortage of the vaccines themselves but of the vials to put them in.  When we ordered 100 million doses, it seems no one thought of the vials.  

Unfortunately, the health bureaucracy has more inefficiencies. The Sun on 6th January reported that Public Health England did not do deliveries on Sundays.  Lucky that the original three man Sage Committee bearing gifts, and guided by the science. did not try to deliver on a Sunday.  The NHS front line is short of doctors and nurses but many of the pharmacies and recently retired clinicians who volunteered to help are getting no replies to their applications.  According to BBC Look East (7th January), those who are provisionally accepted face 15 hours of online form filling before they can make the first jab. Matt Hancock agreed (House of Commons 7th January) that wielding a hypodermic did not really require proof of diversity awareness or terrorism policy or many of the other 21 tests, but the mid-level NHS manager who appeared on the programme clearly disapproved of their withdrawal and, one suspects, would be in no hurry to do so. 

The Prime Minister rightly announced, also on January 7th, that the military would assist with distribution and, because the NHS had been objecting, he had Simon Stevens, the NHS CEO beside him when he said it. “Army logistics chiefs have been brought in to use “battle preparation techniques to help us keep up the pace”, he said. Given the pressure on the NHS to treat the massive surge of new variant cases, it would have been better to turn the whole vaccination programme over to them but that would have been throwing their rattle out of the pram.  As it is, the military will simply be advising on the Herculean task of getting the vaccines from Wrexham across our emptied road network to the vaccination centres. 

According to the Vaccines Minister: “Working together, day and night, they will ensure our vaccines are going into arms rather than sitting on shelves. UK forces will use techniques borne out of decades of experience of getting things done in some of the toughest conditions imaginable. They’ll bring the bravery and brilliance they shown [sic] in places like Iraq and Afghanistan to these shores.”

The North Norfolk constituents are, on average, the oldest in the country and the number of infections, amongst the over-80s, tripled in December, so it is not surprising that it is yet to have anywhere that can do a jab.  It has a hospital in Cromer, and cottage hospitals in North Walsham, Wells and Holt, but none of those have been selected.  Instead, vaccination centres at Sheringham and Aylsham should be operational by 15th January.  

Then there is waste.  The MHRA limits distribution: “Currently the MHRA directions do not allow for the re-distribution of the Astra Zeneca vaccine from the PCN [Primary Care Network] designated site to other practices for administration within the practice.” Similarly for Pfizer.  So if there is a surplus, it cannot be taken to another practice that needs it. A practice can take doses to a single care home in its area but if it turns out there is a surplus, it cannot return them to the original PCN designated site nor to another care home nor to vaccinating its own staff or patients in its own area.  The unused doses have to be destroyed. [1] Local Medical Committees are restrained in their comments on orders from above but in this email: “We are aware that it is illogical and frustrating, however, this has been determined by MHRA and we need to wait for them to change their directions.” 

That was not expected for some time, but in fact the advice was withdrawn the next day! 

One should not carp.  Huge numbers of good people are doing their level best, under difficult and once-in-a-lifetime circumstances, to treat patients and save lives. Perhaps the most remarkable feature of the first wave was the way front line clinicians simply threw out pettifogging rules and did what needed to be done. In normal times, those changes would have taken committees many years.  The NHS may not have too many managers but it certainly has too many people saying “no”.  I had to discharge myself from my last two sojourns in a major NHS hospital trust, or I would still be there. The Prime Minister and the Health Secretary may have a clear view of what needs to be done but they still have two major problems: failing to clear Kafka’s action-blockers out of the way and failing to plan well and in good time. It looks like the first of those is beginning to happen but the second remains a problem.   

[1] Email from Norfolk and Waveney Local Medical Committee “Oxford AstraZeneca vaccine - movement restrictions”, 6th January.  

Reasons for optimism — Vaccines

For most people 2020 was a terrible year. The coronavirus pandemic, the excess deaths, and the economic shutdowns made it so. For some it made the future seem bleak, because the vast borrowing governments undertook to help alleviate the hardships caused by the containment has left a vast overhang of indebtedness that must somehow be addressed, and might constitute a burden that will hold back future generations.

Yet for science 2020 was a good year. There were the SpaceX launches of their Falcon rockets and Dragon vehicles. There were major discoveries by archaeologists and paleontologists. Biochemical engineers created new enzymes that can break down plastic bottles within days. Other successful space launches included the Solar Orbiter and NASA’s new Perseverance Mars rover. China executed a moon landing to return lunar rocks to Earth, while Japan brought back samples from an asteroid.

The big scientific event of the year, however, must be the fast-track development of innovative vaccines to combat the coronavirus by giving immunity to recipients. A process of development and testing that normally takes five to ten years was completed for several vaccines within a single year. Messenger RNA vaccines, as well as more conventional ones, were able to be developed very quickly, and proved cheap to make and mass produce.

Innovations in vaccine technology bring the prospect of eliminating some of the ancient scourges of humankind, and give humanity the edge in rapidly responding to new threats that come along. It took centuries to render smallpox extinct, and we are now on the threshold of doing the same for poliomyelitis, after which will come malaria.

That we have shown the ability to achieve a rapid response to a most dangerous threat is a sure ground for being optimistic about our ability to do so in future. The experience of the covid pandemic has sharpened our response should it be needed again. We will never render human beings disease free, but we can respond to diseases with an ever-increasing array of tools with which to combat them.

What everybody knows sometimes just ain't true

We have a ringing call to action in The Observer:

Inequality. Everyone agrees it’s bad. Everyone agrees that the pandemic and lockdowns have exacerbated inequality. And everyone agrees that something must be done to reduce it.

The thing is, about these things that everyone knows, is that what everyone knows sometimes just ain’t true.

As far as we do know - we’ve not the full and accurate figures for this fiscal year, 2021, as yet - inequality today is lower than it was in 2008. We also know why this is so. Inequality does reduce in recessions.

The richer among us gain more of their incomes from profits than the poorer among us. Profits are the part of national income that really crater in recessions. Further, the income of the truly poor is largely determined by the benefits system. Something that doesn’t reduce payments in a recession. Thus the gap between the richer and the poorer reduces in recessions - inequality falls.

From that we can make a prediction about inequality in this year. It will have fallen again.

We’re entirely willing to agree that poverty - measured as not having much stuff, rather than the relative poverty measure of having less than others - might well have increased over the same period. But inequality and poverty are different things.

Given that inequality has fallen - as best we know of can infer at present - then the rest of that demand becomes a little difficult really, doesn’t it? For if what everyone knows is wrong about the increase then possibly everyone’s wrong about the necessity of decreasing it?

Because they can

The Times gives us some calculations about the price of goods from Apple. Those in the UK are rather higher than those in the US. It appears necessary to tell people why this is so:

Martyn James, consumer expert with Resolver, the complaint handling website, said: “I can’t find one justifiable reason for these differences. The goods are likely to be made in the same country so this shouldn’t have an impact on price. It looks like profiteering.”

Well, we can tell you why this is.

Because they can.

Producers of anything will charge what they think they can get away with. This is as true of the labourer supplying their time as the capitalist corporation providing electronics. People are greedy and also lazy - not in pure senses, but in that they’d prefer to get more for having had to put in less.

So, if it’s possible to charge a higher price then so they will. The reason for higher UK prices is because it’s possible to charge higher prices in the UK.

In more general terms what limits this ability is competition. That’s the great moderator of the ability of producers to raise their prices. This is why closed shops were so popular among the workers who were members of them, it enabled competition to be reduced and prices to be raised. So too cartels among companies. Competition being, again, the thing that limits said power.

Apple charges higher prices in the UK than it does in America. Why? Because there is less competition in the UK economy than the American. Once the problem is properly understood the solution becomes obvious - increase the competition here, allow more of it, and the prices will equalise, won’t they?

It's amazing how disinformation persists among the tax campaigners

Tax campaigner here has a meaning, someone who insists that someone else should be paying lots more taxes. That is, after all, the cry of most of the Tax Justice this, Tax that and so on.

Today’s example is from The Ecumenical Council for Corporate Responsibility - or perhaps their sideshow, Church Action for Tax Justice . They have a report out insisting that the tax system is most unfair. Their international example is Zambia and its copper exports. The Big Bad International Capitalists are misinvoicing and thus spiriting money that should righteously be taxed out of the country:

There are a number of different mechanisms but two common practices that are alleged to have taken place in relation to Zambian copper are abusive transfer pricing, and trade misinvoicing. [16] The first of these involves the mining company in Zambia selling its copper to a related company in another country, usually a tax haven. When these two companies are both subsidiaries of the same multinational company then the price for the transaction is meant to be set by an “arm’s length principle” in which the cost of sale is the same as it would be on the open market between two unrelated companies. Abusive transfer pricing occurs when in reality the mining company sells the copper to the company in the tax haven at an artificially reduced cost, thereby avoiding, if not evading, paying tax in Zambia. The company in the tax haven then sells on the copper at a much inflated price but also pays little tax because the country in which it is located is a tax haven. In this way, the Zambian Revenue Authority is deprived of much needed income.

The reference for this happening is this War on Want report, which itself references some research done by the Centre for Global Development. Done by Alex Cobham for the CGD in fact.

The problem with this is that the claim was shown, by Maya Forstater, to be an entire nonsense soon after it was first published. Which is one of the reasons - so we’re told at least - that Alex Cobham no longer works at CGD but runs the Tax Justice Network instead and Maya went to work for the CGD for a time.

The claim was that Glencore exported copper from Switzerland at a much higher price than it exported it from Zambia. Thus billions going missing. Reality was that Glencore, occasionally, exported a few or a few tens of kilos of copper from Switzerland as samples. The hundreds of thousands of tonnes leaving Zambia went at world prices. The samples - because this is how customs declarations work - included the cost of the copper plus the price of the courier services delivering the few kg. That, literally, was it, in toto.

Copper plus the price of DHL is higher than copper without the cost of DHL. From which the entire tale of billions going walkabout is woven.

Even though this has been disproven, the CGD has withdrawn the report (and Mr. Cobham has, ahem, moved on) The tale still persists though, doesn’t it? An absolute and complete untruth is still a rallying cry for more tax.

There are other problems with the report as well but we’ll leave those for another day. Except for just the one observation, question perhaps.

The claim is made that an NHS nurse pays a higher average (ie, as a percentage of her total income) tax rate than some people earning tens of millions a year. We don’t agree that she does - the report relied upon doesn’t handle corporation tax properly - but let’s just run with the idea that she does indeed do so. What should be the answer then?

Well, why not call for lower taxation of people on smaller incomes? As we do around here in fact, as we have done for decades and as we’ve even aided in making occur with the rise in the personal allowance. That is, why is it that Justice in this field always seems to mean more tax rather than less?

There's modern slavery and then there's modern slavery

We do not pretend or imply that conditions on Brazilian cattle farms are wondrous nor even desirable. We would though like to point out that £8 a day isn’t slavery.

Brazilian beef farms ‘used workers kept in conditions similar to slavery’

Workers on farms supplying world’s biggest meat firms allegedly paid £8 a day and housed in shacks with no toilets or running water

The point is repeated later in the piece:

In August 2019, government inspectors found nine unregistered workers clearing pasture on the Copacabana farm in Mato Grosso do Sul state were being paid £8 a day, the report said. They lived in improvised shacks made of logs, plastic, palm fronds and corrugated iron without toilets, kitchens or running water.

Here’s the thing. The average Brazilian wage is about 2,500 reals a month. The minimum wage is 1,045 a month. £8 a day is, for a 22 day working month, £176 a month, at current exchange rates that’s 1,272 reals a month.

It is entirely true that £8 a day isn’t something that anyone in this country is going to get out of bed for. But that’s because we’re all lucky, lucky to be born into an already rich country. As Branco Milanovic is known to point out, the largest single determinant of your lifetime income is which country were you born into? Brazil is, still, a markedly poorer country. Thus wages are lower.

Considering solely the wages being discussed here, for that’s the point we wish to make, paying above the local minimum wage is not evidence of slavery, whether we try to use the modern definition of slavery or not. It is evidence of the poverty of the surrounding economy.

At which point we can suggest a solution. The way to increase the incomes of the global poor is to buy products made by poor people in poor places. Now that Britain has the freedom to actually do this perhaps we should organise matters so that more of us can, tariff free, buy more Brazilian beef? That would make both us and those workers better off which sounds like a nice outcome of a plan, doesn’t it?

DHSC: Highlights from MI5

Victoria Street. Early March 2020 

“Humphrey” 

“Yes Minister?” 

“Everyone is saying we have to do something about this pandemic thingy.” 

“Don’t worry, Minister, it’s all in hand. Our world beating Public Health team have a plan.” 

“Good.  I’m told the Korean and Germans have got things under control with a test and trace system.” 

“No, no, Minister, we don’t need that.  We’re not the snoopers they are. We will lock everyone in their own homes so no testing and tracing will be needed.” 

“Starting immediately?” 

“I’ve been in touch with the PM’s office on your behalf. The Jockey Club have asked them to hold back until after the Cheltenham Gold Cup.” 

One month later 

“Humphrey.  The hospitals are all complaining they’ve got no protective equipment and they are running out of beds. Where’s this plan?” 

“Owing to an unfortunate concatenation of circumstances beyond our control, Minister, the virus is not the one we had anticipated. We will make bed space by sending all the DTOCs - that’s the bed blockers, Minister - into care homes.” 

“Even if they are infected with the plague.” 

“You have to make difficult decisions, Minister, but you can say you are doing so with a heavy heart.  And thanks, by the way, for getting supplies of PPE from, if I may be so bold, unlikely contacts of your associates down at the club.”  

One month later 

“Humphrey. Jeremy Hunt is still going on about test and trace. Maybe he’s right?” 

“Yes, I think your decision, Minister, not to commission the necessary technology, may possibly have been on the obverse side of optimal.” 

“My decision?”  

“Civil servants, merely advise, Minister. But all is not lost: we can have a world beating system up and running in a month.  You remember you appointed Lady Harding to do nothing at the NHS? She has mobile phone leadership experience, she was at Oxford with David Cameron and, as a rider of racehorses, is used to doing things at speed?” 

“Excellent, Humphrey, just the person we want. And ordering 100 million vaccine doses was excellent too. We don’t know when we’ll get them but shouldn’t we plan the distribution and jabbing for when we do?” 

“If I may say this, Minister, with the deepest respect, your suggestions sometimes verge on the hasty. You do realise we have a plethora of impediments demanding our closest and immediate attention. We have no doses today, so a distribution plan today would avail us nothing.” 

Six months later 

“Good news, Minister, the Pfizer vaccine has been approved and is immediately available.  The Today Programme want a Minister to discuss your rollout plan.  To spare your blushes, I had a word with my opposite number at the Department for Business, Energy and Industrial Strategy. They are good on planning and have several ministers with nothing much to do. They’ll send someone along and we can just announce that we have 800,000 doses now, five million by the year end and there’s finally light at the end tunnel.” 

“But without a distribution plan, Humphrey, there’s no hope of five million jabs by the end of the year.”  

“No one else knows that and it will give cover while the new minister comes up with one.” 

One month later 

“Humphrey, I have had to admit to the media that we’ve only done one, not five, million jabs. Luckily the Oxford vaccine has now come on stream and they say they can deliver two million doses a week with immediate effect. So I’ve announced we’ll vaccinate the 13 million health workers and over 80s by mid February.  How about that for a shot in the arm?” 

“Very droll, Minister.  How did you work it out?” 

“One million in December and two million times the six weeks from when the Oxford vaccine became available.” 

“Oh dear.  I fear that was verging on, if I may say so, the jejune.  Indeed, jejune seems to be busting out all over.  Forgive my little joke. You may not be aware of four problems: when we ordered the 100 million doses, we didn’t order the 100 million vials to put them in.  All the NHS doctors and nurses are over-stretched dealing with the new peak Covid cases so they cannot take on jabbing as well.  There are 30,000 recently retired doctors and nurses but they have to complete 21 forms each and the NHS doesn’t have the staff to check them. Finally, using the army, which could sort this out in the blink of an eyelid, is unacceptable to the NHS.  You must realise, Minister, that the NHS is our national religion and must emerge as the hero.  We cannot have the army taking any of their credit.” 

“Phew!  It all just shows we should have had a plan.” 

“True, Minister.  It’s a pity you decided against having one.”    

Wages aren't a distribution thing, they're a supply one

The High Pay Centre has its annual whine about how much CEOs get paid. As part of which they say the following:

Luke Hildyard, director of the High Pay Centre, said: “These figures will raise concern about the governance of big businesses and whether major employers are distributing pay in a way that rewards the contribution of different workers fairly.

But wages aren’t a distribution thing, they’re a supply one.

Given the complaints about the government currently - vaccines, track and trace, PPE and so on - it shouldn’t be difficult to grasp the idea that competence in managing large and complex organisations is scarce. Both scarce and valuable in fact. Thus there’s competition to gain access to those with those scarce skills.

That is, paying someone more than they can gain for going and working elsewhere. The entire race and game is about accessing the supply of those rare and valuable skills. As is also true of all the other skills, talents, labour and so on that make up the rest of the labour supply to those very same organisations.

To talk about the “distribution” of wages in a company is to be looking at the problem through the wrong end of the telescope.

This before we get to the point that it is, after all, the shareholders’ money and who the heck is Luke Hildyard to tell them how they must dispose of their own property?