We're afraid we just don't trust the Fabian Society

That the Fabian Society is always going to insist that Tories bad and spending more - much, much more - of other peoples’ money good is just obvious. To have a report that says that not spending more - much, much, more - of other peoples’ money is going to cause civilisation to collapse in a heap is thus just part for the course.

We can argue against such claims, of course we all can. That special measures introduced for the pandemic get un-introduced at the end of it seems sensible to us, just as the one example. That the special welfare provisions put in place end seems to us no more remarkable than that the pubs are allowed to - eventually - reopen. Special times do indeed lead to special measures and normality is accompanied by the reversal of them.

This is not the Fabian way:

Government failure to maintain the £20 a week Covid top-up payment for universal credit will overwhelmingly hit the incomes of working and disabled people, and put more than 700,000 into poverty, according to a study by the Fabian Society.

That Fabian way being that any increase in spending must become permanent because more spending of other peoples’ money is good, d’ye see?

The thing is we just don’t trust them. From their actual report:

Poverty is measured as 60 percent of median contemporary income, after adjusting for housing costs and size of family. Note this is a different measure than we used in our previous report Double Trouble (for that study we used a fixed-line measure of poverty rather than a poverty line based on changes in median income, to avoid the perverse situation where rising unemployment leads to a fall in the cash value of the poverty line).

The reason we don’t trust them? They change their definition of poverty according to what best suits the insistence that more must be spent. Always.

When it is convenient, as in this report, to use a measure of relative poverty to argue for more tax and spend then they do that. When a relative measure would lead to less tax and spend - this being their complaining above about perversity, that when median incomes fall this means that fewer are in relative poverty, or that the relative poverty line falls - then they switch to an absolute measure of income.

This is intellectual casuistry and no, we shouldn’t trust people who do this. Humpty Dumpty is meant to be a joke in a children’s book, not a blueprint for the design of national policy. Sadly, so too is the Queen of Hearts and her efficient manner of dealing with such behaviour only a joke.

The first rule of economics - incentives matter

There is indeed a problem with the development of antibiotics. Far too many bugs are gaining immunity to the ones we use - largely because we use them and evolution happens. Far too few new antibiotics are being developed. This is a problem we’d like to solve because we’d really not want to return to a world in which sepsis is the likely outcome of any surgery.

The problem is one of incentives. It costs hundreds of millions to billions to develop a new antibiotic. The patent which allows that cost to be recouped lasts 20 years from filing, usually about 10 years from approval. But the entire point of having this new antibiotic is that we’ll use it very sparingly as the last resort. Only those infections that don’t succumb to our extant supply will be treated with it. Further, we really don’t want widespread use because that would just encourage that evolution thing to make it not work again.

A system based upon volume sales therefore doesn’t work as a development incentive for new antibiotics.

The answer is, obviously, change the incentives. Some say that therefore drug development, or perhaps just antibiotic, should become a government function. The recent success of that in the development of coronavirus vaccines might show that not to be the path to take. Changing the incentives for the system we know works, those private developers out there, seems more sensible:

And the UK is experimenting with a new subscription-style payment model that pays drug companies upfront for access to novel antibiotics, so decoupling profit from volume sold.

More detail here:

The NHS is offering 2 contracts to pay pharmaceutical companies at the start of their work for access to innovative antibiotics, incentivising them to bring new classes of the drugs to patients across the UK for the first time in almost 30 years.

Of particular interest are antibiotics that can provide alternative treatment options for serious infections, such as bloodstream infections, sepsis and hospital-acquired pneumonia.

The high cost and low returns associated with antibiotic research and development makes it commercially unattractive. This is why the drugs will be paid for by the world’s first ‘subscription-style’ payment model for antibiotics and will be made available to UK patients as soon as possible, potentially as early as 2022.

We do not say that scheme will be perfect - human design never is in this vale of tears. Rather, that the development of antibiotics faced an incentives problem. The answer is to change the incentives. Because, you know, incentives matter.

Reasons for optimism - technological environmentalism

There are many differences between behavioural change environmentalism and technological environmentalism. The latter does not involve us all living more simply, becoming poorer, turning our back on progress, being prevented from doing the things we want to do, and living narrower lives, denied the opportunities to live more comfortable ones filled with new opportunities.

Children might have fun camping out on the streets and claiming that extinction of the race is imminent because we have “destroyed their future,” but the reverse is true. The human race is not threatened with extinction, and their future has been saved, not destroyed. Pointing to the worst-case scenario of the Intergovernmental Panel on Climate Change (IPCC), the Representative Concentration Pathway (RCP) 8.5, environmental activists have predicted massive rises in ocean levels and in global temperatures. The reality is that RCP 8.5 will not happen. We have already done enough and are doing enough to prevent that outcome.

RCP 8.5 assumed a continued increase in coal-burning, whereas coal-fired power stations are being phased out, their place taken by the much less polluting gas-fired stations, and by non-emitting renewables such as solar, wind and nuclear. This process is increasing, with oil use declining from a peak, and set to be phased out, first as a transport fuel, then as a power generator. Vehicles in future will not use fossil fuels or emit the carbon and pollution they generate.

A number of technological innovations are assisting the process. Cultured meats will cut down on the number of cattle and the greenhouse gas methane they produce. Genetically modified crops produce more food on less land, without needing the concentrations of fertilizers and insecticides that would otherwise be needed, or the depletion of rainforest land. Tree cover has increased in many countries, and will increase as less land is needed for food, and new tree strains are developed, including faster-growing versions of big carbon absorbers such as white oak and horse chestnut.

New and efficient forms of carbon sequestration are being developed, with the aim of achieving a net carbon reduction over the century, rather than simply curbing its increase. Some involve it being stored in the oceans, some in deep caves. Innovative techniques for converting it into fuel or feedstock show promise, but are not yet at a commercially viable stage.

The upshot is that we are not facing extinction, or even RCP 8.5. The most likely outcome might well be RCP 2.6, the least damaging of the IPCC four scenarios. Under that circumstance the temperature rise would not reach 2C before it began to decline. These are circumstances well within our power to deal with, and ingenuity might make that ever easier than it seems now. 

There is a profoundly conservative assumption by some that the present status quo must be preserved at all costs, and that we must all take drastic and immediate happening to stop it changing. Not everyone shares that view. Some take the view that things change, and that coping with the change is a more reliable and achievable goal that trying to stop it.

Who? What! Us?

The argument in favour of a technocracy shielded from the whims of politics is that the technocrats will get the technical details right in the absence of political pressures. That does assume that there won’t be politics within the technocracy and among the technocrats, obviously. Also, that people with technical knowledge end up taking the technocratic positions.

At which point the latest from Brussels on vaccines.

Sorry, but the reality is a little more complex – and not quite such a stunning UK victory.

True, Britain got a month’s head start on the EU by approving the Pfizer-BioNTech vaccine at the start of December, and then AstraZeneca’s at the end of that month. It had to accept the terms offered by the pharmaceutical companies, however, both in paying a higher price per dose, and by waiving their civil liability in the event of adverse effects.

Yes, this is by a journalist but it’s clearly the story they’re telling themselves internally. This is where we get to test that claim to technocracy - liability. For it’s an entirely standard part of a vaccination program that the manufacturers are shielded. This is why the decision to shield them here, this is why there’s the vaccine compensation fund. The vaccine will kill some few people and will damage some still small but larger number.

No, not might, could, but will. Doing anything to 500 million people will damage some and kill some smaller number. That’s just the way reality works, it would be true of asking people to cross the road or spend an extra 5 minutes in bed. The benefits, overall, of vaccination are so great that this is just a cost that we have to bear as a society. Or even, a cost that some few of us will bear directly and the rest of us compensate for financially - however much money doesn’t make up for everything.

That the technocrats of Brussels didn’t know this is the indictment of the system. After all, if we’re not gaining the benefits of the technical knowledge then what is the purpose of a technocracy?

It is possible for the idea to work. This discussion with Kate Bingham shows how. Select an actual expert and give them the freedom to do expert things and it does indeed work. Politics being the process by which the expert is selected, the boundaries of the necessary freedoms determined. But of course those experts are not found within the political system in normal times which does rather kill the technocratic case more generally.

This sounds remarkably like a self-solving problem

It’s possible that this is all true and yet even if it is it doesn’t sound like a problem:

The results are pretty bleak. You’ll have heard a lot about the extra saving going on during lockdown. People not being able to spend on holidays or restaurants has led to a staggering £125bn in extra savings. But this report crucially notes that not everyone is racking up the cash. Pre-Covid, 10.7 million of us were over-indebted or had low savings. That has now risen to 14.2 million.

The generational aspect of this is huge. Overall, the number of financially vulnerable adults rose by 3.7 million (or 15%) to 27.7 million. For those aged 18-34, the rise is 40% while it has actually decreased among retirees. There’s some rubbish written about income inequality having soared during the pandemic (it hasn’t, although the savings increase has been top heavy since it’s the rich who splurge on holidays). However, I’m increasingly worried by the prospect of an unequal recovery in the coming months with the rich and old out consuming while unemployment rises and the young (particularly, poorer parents) are left to struggle with higher debt. That’s not a society building back better, it’s one growing apart.

Nice to see that confirmation that income inequality hasn’t increased - it doesn’t in recessions. The richer among us gain more of their income from profits than the poorer do. As profits are what crash in recessions inequality of income falls during them.

But that inequality of recovery. It’s worth going back to a cod-Keynesian model. During a recession savings rise, cutting into demand and thus compounding the fall in the economy. The solution is for savings to be spent, increasing demand and thus ending the recession. The argument about government deficits and pump priming and all that is simply to accelerate this process.

OK. We also know that the people worst hit in recent times are those in consumer facing services. These being the very things we expect to boom as the lockdowns end and those savings are unleashed into the economy. It’s the very unleashing which increases demand and thus employment and the incomes of those who provide the things being spent upon.

That is, even if this is all an actual problem it seems to be one of those self-solving ones. Assume that we have a recovery and the worry goes away, doesn’t it? Because this is the very worry that a recovery will deal with.

It's not the British Government that's messing with music

We do not say that this couldn’t have been better handled. But we would insist that it’s not the British Government causing the problems here:

My passport would need to be submitted to the Spanish embassy and held there until the visa was processed, causing problems for when I had to travel for other work. Apparently the normal visa cost would be nearer £150, but with the embassy currently open one day a week, the promoter had told my agent the only option would be to pay for the £600 fast-track one.

The concert in Spain, one of the few remaining non-Covid cancellations in my diary, is part of a tour that also takes in recitals in France and Denmark. Pull out of one engagement because the numbers don’t stack up, and risk losing the work in the other countries as well. Too many visas, even at £150 each (and that figure obviously doesn’t include cost of travel to the embassies, the lost work time, or the extra costs to agents and accountants) and it’s clear that your livelihood is going to take a nosedive. Brexit means that musicians now need to apply for a short-term work permit before travelling to work in a number of EU countries, each with their own different requirements.

Just a small hint that we’d pass on. The British passport system specifically allows at least one more than one passport to be issued to a person. Exactly so that one can be floating around the varied visa systems while the other is being used to travel. We’d suggest that people use the part of the system set up to aid with this problem.

Slightly more to the headline point we’d point out that these visa requirements are not things being imposed by the British government. They are, obviously enough, being imposed by the varied ones of the remnant European Union. They are also not new.

True, it’s new that they are being imposed upon Brits. But they have been imposed all along on non-European Union citizens who desire to do that little bit of musical touring across the area. What we are now seeing is the costs imposed upon non-EU musicians plus, of course, the costs imposed upon EU citizens by the barriers to their enjoying music made by non-EU citizens.

This is true of all of the varied limitations and problems being mentioned, like those for oysters, the colour of ink forms are filled in with and so on. It is only now that we’re subject to them for our own exports that we can see the costs we’ve been paying these decades in imports we’ve not been able to have from non-EU economic actors.

Whether this changes your calculus of whether Brexit was a good idea or not is an entirely different question. We simply want to point out that these are the hoops that 6.5 billion people have had to jump through for decades to send us their lovely produce and musicians. These are, that is, the costs we had to bear when we were still EU members, those loss of all of those lovely things.

The real point about climate change is how cheap the solution is

Ambrose Evans Pritchard takes us through the carbon tax as a solution to climate change:

Britain should opt for the Smithian purity of a tax-neutral carbon price, and let others bluster about green deals. That would be the proper showpiece for COP26 in Glasgow, where Adam Smith taught the world.

We’re obviously in favour of such Smithian solutions, even as we’d note that it’s really Arthur C Pigou under discussion. Stick the one crowbar into the price system and we’re done. As to what the price should be:

The Stern-Stiglitz High-Level Commission on Carbon Prices three years ago opted for a range of $40 to $80, rising to $50 to $100 by 2030. That is the global gold standard. But facts on the ground have already run ahead.

“We think $50 will do the job,” said Kingsmill Bond from Carbon Tracker. “Large numbers are a pipedream that makes it less likely to happen. All you need is a realistic signal and markets will come forward with technologies nobody has even thought of.”

Quite so. Bill Nordhaus got the Nobel for suggesting one variant of this, Nick Stern his peerage for another. The revenue neutral carbon tax is the solution to the problem as described.

The thing to really note though is how cheap this is. UK emissions are around the 500 million tonnes a year level. $50 a tonne means $25 billion, or between friends, let us call that £20 billion. Or about 3 or 4% of our current total tax take.

Note that we do not need to charge that much more in tax - revenue neutral is the point here. Instead we just need to shift what we tax.

Assume, just for a moment, that the mithering mob are correct, this is a civilisation threatening problem. To solve it we need to shift - shift, not increase - 4% of our tax burden. That’s really pretty cheap. This does assume, of course it does, that we use the efficient method among those available to us of solving this problem but then that’s rather the point, the carbon tax is that.

Note that the alternative is not to do nothing. Whatever the truth of it all not being a problem in the first place there is no political outcome where nothing is done. There are too many licking their lips at being able to control society for the initial contention to be rejected. Thus we’re left with a choice of things to do.

The end lesson of this being how incredibly cheap a carbon tax is as a solution to climate change. Really, all it does require is that shift of 4% of the tax burden. Again, shift, not increase.

Whether or not the underlying problem requires that is one thing, but to avoid the idiocies that are going to happen if the fools are allowed to plan matters that’s an absolute bargain.

Sharing the spoils, and sharing the loss

“Amsterdam ousts London as Europe’s top share trading hub”, claims the FT, seeing further proof that Brexit was a huge damaging mistake.

Of course Amsterdam hasn’t become “Europe’s top share trading hub”. It has only overtaken London in trading shares in EU-based companies; London’s dominance in trading shares from the rest of the world has continued. Also the data only measures trades that go through the stock market; the off-market private trading between the big market participants isn’t included.

But is this a sign that other EU centres are giving London a run for its money? Are the smaller continental bourses getting better than London and so luring trading away? Of course not. 

“The shift”, the FT notes, well away from the headline, “was prompted by a ban on EU-based financial institutions trading in London”. So it is not that Amsterdam is providing a better or more efficient service, but rather that the EU has indulged in its usual protectionism (or, possibly, a post-Brexit hissy fit), erecting artificial regulatory boundaries to protect the inefficient markets inside Fortress Europe from their competitors.

Brussels’ excuse for putting up the barriers is that they do “not recognise UK exchanges as having the same supervisory status” as their own. Yet six weeks ago EU-based investors were allowed to trade in London, under the Brexit transitional arrangements. What has changed in the meantime? Has the London Stock Exchange slashed its regulation and lowered its standards? Has the Square Mile become the Wild West overnight? Have the ‘Singapore-on-Thames’ rumours come true? Of course not; London’s regulatory system has continued as it did before, yet suddenly the EU refuses to recognise it.

This is childish behaviour by the EU; rather than co-operating, treating each other as grown-ups and mutually recognising working regulatory systems, the Commission is sulking that ‘if you won’t play our way, we are taking our ball home’.

But the EU’s petulism is damaging for its citizens. London still has the expertise, the people and, crucially, the quantity of money managed there to create more efficient, innovative and effective markets. But if trading is spread across various smaller European exchanges, lacking London’s deep resources, costs will be higher and markets more erratic. Price differences will appear between different continental stock markets, allowing wily traders to profit from arbitrage at the expense of private and institutional investors.

By shutting its people out of their preferred market of London, the EU is downgrading them to a second-best service. If pension funds and other investments face higher costs and increased volatility, the ultimate losers will not be London’s bankers but Europe’s workers.

You can't put housing there, it will harm our business!

That we’re all buying more online, less from the High Street, is clearly and obviously true. What gets done about it is the interesting point to consider. Not this:

Signatories of a letter seen by The Times argue that the proposed policy to reverse the decline of high streets “risks putting the long-term health of our town centres at risk for the sake of a short-term stimulus”.

“Putting ground floor housing in a random and uncontrolled manner within high streets does not draw footfall, does not support new businesses, reduces the potential for business growth and will undermine the viability of existing retail, cultural, and commercial activities,” the letter states.

Those who run retail on the High Street are claiming that housing there will diminish their business. This could well be true as well. And yet:

The option to convert shops to higher-value residential uses would have negative consequences such as removing convenience stores from local neighbourhoods, it added.

The claim is then made that other landlords - and the society as a whole - must be poorer in order to protect their businesses. For moving an asset from a lower to a higher valued use is the very definition of wealth creation. Preventing it is making us poorer than we need be.

This is nothing less than an insistence that we be poorer so that they be richer. Now that this is clarified what we do about it is obvious. Allow the conversions of course.

EU Bans English Shellfish

Deafer House 

Marsham Street, SW1 

“Humphrey.” 

“Yes, Minister?” 

“What’s all this about the EU banning the imports of our shellfish?” 

“It is not all our shellfish, Minister, just live bivalve molluscs from UK class B production waters that have not been through purification or have not cleared testing.”

“I’m not sure my club serves live bivalve molluscs, still less from class B waters.” 

“I believe there are about 140 species in all. Your club menu may include scallops, mussels and oysters in season, but perhaps not clams or cockles. Whelks and winkles are gastropods, not bivalves, and I doubt your club provides the necessary pins with which to eat them.” 

“Is this just because we are not filling in the EU forms using the right coloured ink?” 

“No, Minister, it is more serious than that. The EU wrote to us last September to confirm that the trade could continue and then, out of the blue, they wrote on 3rd February to indicate its cessation with immediate effect. They are blaming health precautionary grounds.” 

“That’s ridiculous, Humphrey. It’s not just bad faith; it defies common sense. We’ve been exporting oysters to the continent since Roman times with no more ill effects than their own domestic oysters – and they don’t even stop when there’s no R in the month.” 

“Well, the difference is that, under EU regulations, these bivalves have to be purified, i.e. washed, before they are retailed, and their purification plants are all in the EU.” 

“So no risk to health then: we send them to the EU plants, they wash them and eat them.” 

“Minister, I fear you do not quite understand their position: we have to get them into the EU before they can reach the EU purification plants.  When we were in the EU, that did not arise. Now we cannot get them to the plants. Come to think of it, we cannot even send them to Northern Ireland.”  

“That shouldn’t be a problem.  We can wash them in the UK and then send them over.  You said that was allowed.” 

“Two problems with that Minister: we do not have any bivalve mollusc purification plants. It is down to retailers to ensure that mussels and the like are wholesome and we have never had any problems with that apart from the occasional allergy or very rare bad one. Secondly, washing shortens their shelf lives and they would go off before reaching consumers.” 

“Good to hear that what can kill the continentals does us no harm at all.” 

“Not just the continentals, Minister.  Did you know that, during the dreadful Irish mid-19th century potato famine, their shorelines were full of nutritious mussels they regarded as inedible? The blandishments of sweet Molly Malone came 30 years too late.” 

“I’m glad you told me that, Humphrey. What are Class B waters?” 

“I am informed that the seas around Wales and the south-west of England are class B but those around parts of Scotland are class A. My informants are unclear about the other UK contiguous seas, nor who does the classification, nor how we might re-classify class B as class A.” 

“That’s not very helpful. Looks like they are pandering to the Scots.” 

“Yes, Minister, I fear that not even Marsham Street is omniscient. The only information I could find indicated that, under an EU directive, countries were responsible for classifying their own coastal waters and few of them had done so.  That is encouraging. I will seek the answers to these questions.” 

“What does the new treaty say about all this?” 

“It only mentions shellfish twice in its 1,246 pages. The first includes molluscs and crustaceans in its definition of shared fish stocks and the second says UK citizens cannot participate, in any way, in French shellfish farming.  Naturally it does not prohibit French participation in British shellfish farming.” 

“Humphrey, the whole shared stocks concept arises because fish swim about between territorial waters.  How do oysters, not to mention mussels, do that?” 

“I fear Brussels’ understanding of mussels, Minister, is limited to moules frites.”   

“And their understanding of herrings is limited to red ones.” 

“Very droll, Minister.” 

“From what you tell me, the bivalve molluscs EU fishing boats take from UK waters can be imported into the EU but the same shellfish caught by British boats cannot.  How much do EU boats take from our waters?” 

“We know 25% of all French fish catches are from UK waters and 80% of our shellfish catches went to the EU in 2018. I will endeavour to determine EU shellfish catches in UK waters.”  

“Why is the EU doing this, Humphrey? Is this because we wouldn’t give them our Covid vaccines? Or setting up a tit for some tat that we have or might do? Or just punishing us for leaving?” 

“I really cannot hazard an opinion.” 

“We have Lord Frost and all his merry men and women sitting around in Brussels.  Don’t they know? 

“They may well do and may, even now, be preparing a communiqué for our eyes but so far silence.” 

“The new treaty calls itself a Trade and Cooperation Agreement, yet Brussels is blocking the trade that has taken place for hundreds of years, with no notice, and refusing to cooperate. We are their largest customer, importing far more than we sell to them.  Wouldn’t you have thought they’d want to be nicer to us?” 

“We would because we are famously nice but Monsieur Barnier is so used to getting the better of Lord Frost that they see us as dependents. I am sorry to say this, but you are the Minister. What are you going to do about it?” 

“I think I’ll write them a letter.”