We agree with The Guardian entirely here

It is true that folks, we humans, value agency. We prefer to have what we decide we’d like to have rather than what some other person thinks we should have that is:

Giving people cash rather than food parcels would empower them

Well, yes:

Which would you prefer: a shopping bag of items you didn’t choose, or the money to buy what you need?

Quite so.

We do praise food banks often enough but that’s not because they are a perfect solution. Rather, the British government is so staffed with those Rolls Royce minds that it is incapable of handing out free money in a timely and useful manner. The major reason for the use of food banks is, after all, that the benefits haven’t turned up.

This proof that we live in a second best world doesn’t change that value of agency though. As the Census Bureau over in the US has been pointing out for decades much of the American welfare state is valued, by the recipients, at less than it costs to provide. The system of food stamps for example, leads to a black market (of arguable size). The standard rates being $1 of restricted money on a debit card being worth 50 cents of unrestricted money that can be spent upon anything. The major purchase, or at least the modal, with the 50 cents being diapers (nappies to us Brits).

This is also why supermarkets work better than ration shops, why the car is more highly desired than the integrated public transport system and so on. Humans like choice because, as is the great insistence of the liberal idea, we all have slightly different ideas about what constitutes the good life.

In fact, we agree with The Guardian so much here that we insist this should be expanded across all of life. There should be no council housing nor social - pay housing benefit instead so the poor can choose their own housing. The NHS must be entirely reformed in the sense of abolished. The access should be to the medical treatment of our choice, not what someone thinks we should get. Schooling needs to be, at the very least, a voucher system so that again it is we out here who make the choices.

For, as is said, agency has value. So, the entire system must be reformed so as to maximise that value, that agency. Government might well end up financing things for some to all of the population but it shouldn’t be providing any of it. Because, as with food, agency has value.

That this isn’t what The Guardian means at all doesn’t change the basic point now, does it?

Gove’s New Planning Bill

Britain’s planning system, which mostly dates from 1947, needs reform. Robert Jenrick’s 2020 Bill had worthy ambition: more houses, clearer rules, less paperwork and faster process.  The average development currently takes five years to get to a final decision.  It had support from many, including this Institute, but a number of local authorities, who deal with the lion’s share of this business, and Tory MPs took against it. The new Secretary of State, Michael Gove, dumped it, consulted widely and we can expect to see his version early next year. 

The central error, a not unfamiliar one, was Whitehall’s attempt to interfere in local matters.  Local councils were seen as the bad guys, blocking new housebuilding, and the developers, who incidentally contribute to Tory party funds, were the good guys who should be allowed to build wherever they liked. 

Let us hope that Mr Gove has learned three lessons: local councils are the good guys who should be helped collectively to deliver what the country needs, local decisions should be made locally and, thirdly, the fewer the tiers of government involved, the faster, cheaper and more democratic the decisions will be.  

In my parish, a farmer suddenly decided a public footpath was not a right of way and blocked it off.  The Parish Council objected and the District Council agreed.  The farmer appealed to the County Council and the appeal was denied.  The farmer, who has more money than sense, then appealed to the Planning Inspectorate which, remarkably, has a whole department dealing with trivia of this sort. The inspectors are based 200 miles from the footpath and were not keen to do any inspecting.  Finally, one did and after a three day hearing. and a few months for mature consideration, sort of rejected the appeal, except it is not a final decision. Due to some legal, and trivial, technicalities, the door has to be left open for the farmer to appeal further. The whole process has taken more than seven years so far.  

One swallow does not, of course, make a summer and 90% of footpath appeals are dealt with by the Planning Inspectorate (when they get that far) in 18 months or so, as are 90% of tree preservation orders, high hedge and hedgerow appeals (p.47).  Planning decisions would be quicker and more certain if no more than two tiers of the hierarchy were involved, using a clearer set of rules. Footpaths, trees and hedges should be decided by Parish Councils, with appeal to the District Council.  Developments, up to a developed value of, say, £10M, should be decided by District Councils with appeal to the County. Some higher level would be needed for County and unitary authorities with appeal to the Planning Inspectorate. 

It is ridiculous that 42% of all major housing development appeals, and 36% of minor ones (house extensions), to the Planning Inspectorate are successful. Either the rules for approval/disapproval are insufficiently clear, or the District Councils are incompetent or the Planning Inspectorate is making up the rules as it goes along. The Planning Inspectorate’s “official statistics” are pre-occupied by the time taken to reach decisions, with no analysis of the reasons for allowing the appeals or rejecting them which is precisely what we need to know if the local authorities’ performance is to be improved.  The Jenrick Bill was supposed to address the first of those but failed to do so.  Monitoring local authority performance is a matter for the Department for Levelling Up, Housing and Communities (DLUHC, previously known as the Ministry of Housing, Communities and Local Government). It is not the job of the Planning Inspectorate. 

The Planning Inspectorate costs £64M p.a. (Annual Report p.68) with 759 people employed (p.94) but there is no analysis by department nor any analysis of decisions reached or the reasons.  It is therefore not possible to estimate, from the Annual Report, the savings that would follow from trimming the Planning Inspectorate’s responsibilities as outlined above, namely removing local issues. 

While developers claim that they are slowed down by the planning bureaucracy, many of the delays are caused by the developers themselves.  Four tricks of the trade should be removed by the new Planning Bill: 

The first is the “shadow application”.  Here the developer knows what he wants and what will be approved.  His application is for the latter but, instead of starting work, the applicant submits a stream of further applications, with real and bogus rationales, until the approval is close enough to his original intention.  A local builder in North Norfolk kept submitting applications for the same site until the Council forgot to include the affordable housing requirement in the approval. 

The second is the “fork in the ground”.  The permission usually states the date by which building work must start.  But putting a fork in the ground is enough to qualify, so the applicant does just that and then waits for inflation to make the applicant’s investment more attractive. The fork in the ground, and land banking are sensible responses to the uncertainties of the current planning system where the rules are simply not clear enough.  Government needs to address both sets of uncertainties, delayed starts and planning risks, together. 

The third is “everlasting applications”.  Here the applicant ignores the approved plans and builds what he wants.  Eventually the District Council will lose patience and issue a demolition order.  First the applicant appeals on the grounds that, if the plans for what was built had been submitted, they should have been approved so all that is now needed is to rubber stamp the plans of the actual building.  If that fails, a fresh (marginally different) application can be made every few months, each of which the Local Authority legally has to consider.  That can continue indefinitely. 

The fourth is the “money game”.  District Councils have limited budgets for contesting appeals and lawyers are expensive. If the District Council looks likely to be low on the money or appetite for appeals, the applicant can outbid it, and some do.  It’s a bit like poker; if you have a poor hand but your opponent cannot afford to “see” you, you will win. 

And of course, all those ploys delay building the actual houses. 

Finally, we have the conundrum of how the DLUHC can achieve its goals for the right numbers and types of new housing in the right places. The primary estimates should be bottom up, not top down.  Volunteering is preferable to imposition. Districts should propose to Counties and counties to the DLUHC.  In the probable event the totals are less than needed, some negotiation will be required. Given the amount of local authority funding that comes from central government, that influence might be enough but more may be needed.  The new Bill should include a “self-balancing housing planning fund” administered by the DLUHC. 

Local authority proposals would fall into three categories: acceptable, those from authorities persuadable with incentives and those from the obdurate.  The last category should fund the incentives needed for the second category. NIMBYism should have a cost. 

In summary, government should be sceptical of developers’ claims that bureaucracy should be blamed for building delays and that they should be given more help. Of course, building market price, affordable and social housing has to be economically attractive to developers or they just won’t get built. On the other hand, planning rules should be streamlined and clarified, and local authorities armed with better sticks to ensure prompt compliance.  If more than 10% of appeals succeed, DLUHC should discover whether the rules are insufficiently clear or the original authorities were incompetent (or worse). The numbers and types of housing needed should be achieved by the DLUHC using a self balancing housing planning fund.  

We've said before that planning doesn't really work

In fact we’ve said twice, just recently, that detailed planning of a society doesn’t work. Now we’ve that thrice:

The energy sector has derided the EPC system – which rates homes from A to G – as “not fit for purpose”. The grading is based on bills, not on carbon output, meaning it can punish people for installing heat pumps and incentivises the use of gas over electricity. Inconsistencies in the system mean that homeowners can pay thousands of pounds for work that they later find actually lowered their EPC rating.

Tom Spurrier, of the UK Green Building Council, an industry body, said: “We have currently got a metric that incentivises gas because it is cheaper.” If you install a heat pump, which is powered by electricity, your EPC rating may fall.

If you spend - substantial amounts - of money to make a dwelling less polluting, less likely to broil Flipper in the fumes of that last ice floe, the government’s measurement system records that dwelling as being more polluting, more likely to broil Flipper in the fumes of that last ice floe.

Why?

When the EPC system was designed in 2007, electric generation was very different. Ten years ago, using electricity produced more than twice as much carbon as gas; now, it is half that of gas.

“In terms of overall net zero, we need to switch as much as we can to electricity,” said Mr Spurrier. But because the EPC system has not changed, it incentivises homeowners to do the opposite.

The measurement system is 14 years out of date at a time of vast technological change. Well, it’s either that or our rulers are drooling incompetents, a sad state of affairs that would be but one that does have to be considered.

Note what this does not mean, that there is nothing that could - to leave aside the should for a moment - be done to deal with climate change. This crafting of glaringly stupid and detailed rules is clearly beyond state capacity. But we do have other tools available. Like, say, just the one simple switch for the entire economy, the carbon tax. Levy that Pigou Tax at the social cost of carbon and allow our one great economic calculating machine, the market economy itself, to chew through the implications.

This being why Bill Nordhaus has his Nobel, because this is what he said we should do. Why Nick Stern is the Right Hon for telling us so in his Review, why 93% of surveyed economists insisted this was the solution. True, they didn’t all recommend this because they thought that the British civil service were too stupid to handle anything else but the recommendation does cover that possibility.

If - if! - anything needs to be done about climate change it needs to be the one, simple, thing. On the basis that the taxeaters just aren’t capable of managing anything more complex than the one simple thing.

It’s long been said that the British civil service is a concentration of Rolls Royce minds. Which could even be true but then there is always that horses for courses thing. We’d not use the similarly named car to negotiate tricky chicanes or a back country road at speed, however comfortable they are on a wide straight highway. Best to limit both of them to where things are simple, eh?

Detailed planning leads to a certain amount of cross purposeness

We’ve mentioned before that detailed planning leads to certain problems. Another little example here.

Wet wipes and ketchup sachets could be banned in England under plans to tackle plastic pollution, the Government will announce today.

Well, yes, sachets for sauces, vile things. Stick a multiuse bottle of something on the table, a far better idea. Except:

The European Commission is to ban the use of refillable bottles and dipping bowls of olive oil at restaurant tables from next year.

From 1 January 2014, restaurants may only serve olive oil in tamper-proof packaging, labelled to EU standards.

Tamper proof is a synonym, of course it is, for single use and single portion servings.

We could mutter something about it only being olive oil that the EU is talking about but no, that’s not in fact true. Or perhaps that this is the glory of Brexit, that we can switch from one insistence to another.

But we’d point to that problem with detailed rule making. The material of choice for a small single serving of sauce is going to be a plastic of some sort. By definition it’s single use. Insistence upon single portion serving is insistence upon plastic. That detailed planning then leaves us with this problem - how do we have single serving sauces without the only rational packaging for single serving sauces?

Or perhaps clipboard wielders in comfy offices should stop trying to determine how society ketchups its chips and get on with something useful? Like, perhaps, not being clipboard wielders in comfy offices?

We hear that there are hungry who need feeding, homeless requiring shelter, even the naked who need clothing. All tasks where human labour could more usefully be directed perhaps? Although, given our own opinions on the usefulness of those who currently govern from their comfy offices this will leave all of us starving, freezing and out in the open.

Stasis isn't a good look for an economy - nor a civilisation

The Public Accounts Committee tells us that losses on lending to Greensill could have been avoided:

Taxpayer losses linked to the collapse of Greensill Capital could have been avoided if the state-owned British Business Bank had not conducted "woefully inadequate" due diligence and the Treasury had shared more information, a damning report has found.

The Public Accounts Committee, which scrutinises public sector spending, has said the bank was "insufficiently curious" about where the money it lent was going and accepted too much information provided by Greensill in its application for Covid support scheme cash at face value.

It’s entirely possible to avoid direct losses by the simple expedient of never doing anything. That does then raise the risk of suffering significant losses from not having done anything. The balance between an economy, or civilisation, in complete stasis and one where everything done is an entire and whole mistake and waste being one that has to be struck. For that stasis isn’t a good place to be.

So, we’re willing to cut a certain amount of slack here. The entire point of those covid loans schemes was that they were being done in an emergency. So, doing it right now was more important than making sure that every pound was being sent to entirely and wholly the right place. As with, say, sending out food in a famine. We’d all far prefer that some greedy guts got two portions of beans, everyone got one, than a more careful approach where most got one and some none. Sometimes just flooding the zone is the right answer.

At which point, to return to our more general view of governance. The British civil service, the British government, has proven itself incompetent at the task of handing out free money. We’d better, therefore, stop asking them to do the difficult things like planning how to save the planet, planning how the economy should work, planning the type of cars we should use, planning, in short, how to bring peace and light to the Earth. Because if they can’t get the first line of the cheque right, the bit just after the “Pay to the order of” then why would we trust them with anything else? Or even ask them to do anything else?

Unkind, perhaps, but drivel's not a good starting point for a policy decision

We must, apparently, do much more recycling:

The UK must scale up recycling of materials for low carbon industries or risk facing a critical shortage of key metals, a new report warns.

The projected use of lithium, cobalt, silver and rare earth elements by the UK’s low carbon industries over the coming decades is set to soar. China controls 60% of global mine production and 40% of rare earth metal reserves, raising fears of a significant threat to the supply chain for businesses.

But the thinktank Green Alliance said the UK could limit the threat by building up domestic recycling of valuable materials and reducing energy use.

Why, yes, by “reducing energy use” they do mean that you’ll have to walk and if you can’t get there by walking then you’ll not get there. Why do you ask if they do?

The problem with this, as with all other such claims about how we’re all about to run out of everything, is that it’s based upon drivel. The purest, most wholesome, drivel. As detailed in this free and usefully short book of ours.

The story is that if we go green then:

UK demand for certain critical raw materials is set to soar as a result of the move to a net zero carbon economy. Under its current transition strategy, it is likely to use up double its fair global share of known reserves of some critical raw materials by 2035, and this could increase to as much as five times its fair share by 2050. We have assessed ‘fair share’ based on the amount of known reserves available, divided per head of population.

Those who pay attention will know that reserves aren’t a useful measure of anything other than reserves. In their background paper - yes, we checked - they define their counting as:

UK critical raw material demand is calculated cumulatively from 2021 and compared to known global reserves (the amount estimated to be economically and technically recoverable), based on United States Geological Survey data.

Yes, drivel.

Mineral reserves are not what there is out there to use. There’s no even connection between those two things, what can be used and reserves. Reserves are what has been proven to be there, to a high legal standard, and can be extracted using current technology, at current prices, and a profit made from doing so. It costs a lot of money to prove all of this so people only do it for deposits they are, or about to, mining. The useful definition of reserves is therefore the stock at mines.

This bears no relationship at all to how many other mines we might be able to have, other minerals we might extract from, what happens when prices change or how much is actually out there. There’s just no connection at all.

So, the claim here is that the UK must start doing lots of very expensive recycling - for if it were cheaper than digging holes we’d already be doing that, as we do with many other metals - because, well, apparently because the Green Alliance know jack about the subject under discussion.

Ignorance and drivel not being the way to decide upon public policy to our mind. But then perhaps we’re just picky on that point.

The GA say to us that:

We conducted the analysis based on known global reserves and understood the definition we were using, including discussing it with our Circular Economy Task Force member Colin Church who is CEO of IoM3. Nowhere in the report do we claim that it is not possible to find further reserves. Rather, we are using this analysis to indicate that by failing to limit rises in future demand, the UK will either use more than its share or drive up new mining. Both scenarios lead to us causing detriment to other countries, including lower-income mineral exporting countries, in terms of environment & social impacts as well as potentially making it harder for other countries to scale up green techs.

We tend to think that’s been cobbled together. At least we hope it has been. For look what is actually being said there. If we buy something from foreigners then that’s bad for foreigners.

Just to twist the knife a little, from their report:

Some processes also exacerbate water scarcity. Brine‑based lithium extraction in South America requires 500,000 gallons of water per tonne of lithium, in a region already suffering water stress.

Brine is salty water, those South American brines are much saltier than seawater. They cannot be and are not used for other things - largely because they kill any plants or animals they are applied to. One of the salts in that salty water is a lithium salt (salt can be the stuff we put on our food, but also a large number of chemical compounds). The way that 500,000 gallons of water is used to process the lithium is that we take the lithium out of the salt water.

That is, we don’t use 500,000 gallons of water to get a tonne of lithium, we clean 500,000 gallons of water to get a tonne of lithium.

Basing public policy on this sort of drivel just isn’t going to make us a richer and happier nation. Who knows, perhaps we could start basing what we do on some knowledge of reality? Or is that too much to ask?

Never, ever, forget the tax wedge

The famed Laffer Curve is an observation about reactions to changes in the income that can be acquired through offering labour out into the market. It’s only a subsidiary use of that observation that some strive toward a target income, others more affected by marginal gains, which concerns taxation rates. The tax is a trigger for those income changes, but the observations would be true if there were some other factor changing income due from that labour.

That we use it to talk about the tax wedge - the difference between pre-tax and post-tax prices and reactions to them - just shows how important the tax wedge is when considering reactions to prices.

At which point something which we don’t think is true:

Currently at $150 per kilowatt hour, once battery storage falls to $100 per kilowatt hour, petrol and diesel cars will become uneconomic.

The untruth here is ignoring that tax wedge. As we’ve pointed out before the IMF claims that petrol and diesel are correctly - to within pennies a litre - taxed in the UK currently. Electric cars are, using the same calculation, distinctly undertaxed. For the correct taxation is not just about CO2 but congestion, VAT, accidents and so on.

This before we get to the political reality that government currently loves that £35 billion -ish a year from fuel duty and is going to replace it with another tax on the same activity if and when all is electric.

That is, the $100 claim is for untaxed electric as opposed to heavily - even if by one calculation correctly - taxed ICE. The correct comparison should be between electric as it will be taxed and ICE as it is taxed. Our estimation here - admittedly, using the ASI calculator of a wettened thumb held up into a following wind - is that it’s unlikely that electric vehicles ever will be cost competitive with internal combustion engines. Not when we include the tax wedge, which is the only way to properly evaluate such things in the real world.

Batteries plus £35 billion a year in tax are not going to be cost competitive with ICEs plus £35 billion, nor batteries without tax against ICEs without tax.

Given the estimation method here we do welcome more accurate calculations and if the facts do change we’re entirely willing to change our minds on this. We think it unlikely we’ll have to.

The difficulty of governing a society in any detail

Three little stories from just one issue of one newspaper:

Shell is planning to finally scrap the complicated Anglo-Dutch structure that critics say has been a drag anchor for years.

It would shift the firm’s centre of gravity decisively from The Hague to London, completing a process started in 2005.

The second:

The Church of England is facing questions over its role in converting hundreds of asylum seekers, including the Liverpool suicide bomber, to Christianity in an attempt to help them avoid deportation.

The third:

Female prisoners should not be forced to live with “big, brute rapists who have decided to identify as women”, a former minister has said.

Dutch law places significant barriers to stock repurchases through the dividend tax imposed in that country. Folks can - and do, obviously - get around that simply by leaving.

Apostasy is a crime carrying the death penalty in certain Muslim countries and the end result can be informally applied in some other majority Muslim places. Apostasy as a method of not being sent back to such places can have its attractions.

Rules about gender and prison places can be gamed - so, they are.

Our point is not that any of these rules are incorrect. Nor that there don’t have to be rules in such areas. If there’s corporate taxation then there must be rules about what corporate taxes are. If a distinction is to be made between an asylum seeker and an economic migrant then rules about which is which have to exist. If the prison estate is split along gender (or sex, use whichever word you prefer) lines then rules there have to be over the definition of gender (or sex) suitable for each part of that prison estate.

Our point is that any such rules will be gamed or avoided over time. Simply because that’s what we humans out here do. We look at the rules constricting us and plot our slides through the thickets. This means that any attempt to rule a society in any detail fails.

For once that path that may be slid along is identified, here comes another rule to block it, then another iteration of exploration, another set of rules, avoidance, rule and so on until:

However, it was during his travels that Mr Koenig realised “just what a source of distress it was to our country.”

“These are not just anecdotal tales of paperwork but something much deeper about the way the state is structured. France remains highly Jacobin - very centralised, interventionist and dirigiste,” he said.

“It belies a lack of trust in the individual whose every move is micromanaged. That creates a huge sense of mistrust among citizens against the powers that be and has seen France descend slowly into a sweet anarchy where nobody respects the rules as they are no longer intelligible.”

Yes, of course it’s possible to make cheap jibes about how none of us actually want to become French. But this is the end result of such stultifying rule making - everyone ignores them. One of us spent considerable time in the late Soviet Union and its aftermath and life was lived in the interstices of those all encompassing rules. Just everything was approached from the aspect of well, here are the rules, so we obviously don’t do any of that and how do we slide by them?

The detailed governance of tens of millions of people just isn’t possible because people are, well, they’re people. They’ll game any such system and the greater the clampdowns the more they’ll - we’ll - ignore the rules as a whole.

That is, the old British system of having few specific rules, a few general principles and enforcement only of the important stuff actually does work. To the annoyance of would be rule makers, papershufflers and clipboard wielders everywhere.

That that’s also a description of a free and liberal society is a useful coincidence but it is that, a coincidence. It’s the system that actually works is the point we want to get across here.

Governments need to rule lightly to rule successfully.

Once more into the breach dear friends - time to sort out low pay again

Polly Toynbee alerts us to one of the unfairnesses in modern life. For once we actually agree with her as well:

On Monday, the “real living wage” – a voluntary scheme – is rose to £9.90 an hour outside London, which equates to £1,930 more a year than the government’s so-called national living wage (NLW).

As we’ve pointed out before there’s nothing wrong with that real living wage calculation, it uses the same underlying logic as Adam Smith and the linen shirt. If the people in a society think that not being able to do - or own - these things makes you poor then in that society, if you can’t, then you’re regarded as being poor.

As we’ve also pointed out, in common with the New York Times back when it knew things, the actual minimum wage is £0. We’re thus not in favour of the idea of a legislated minimum wage any higher than that. It is though true that one exists and that’s the world we currently live in.

At which point to complain about something we’ve shouted about before. Shouted, complained, about to the extent that policy changed.

Back in 2004, 2005, however far back in the mists of time it was, when the Joseph Rowntree folks first started calculating this living wage, we pointed out that the difference between that and the legal minimum wage of the time was near entirely the amount of tax charged to those on low incomes. Every year, as both changed, we made the same calculation and indulged ourselves in making the same point. If we were to lower the taxation of the poor by increasing the personal allowance to that full year, full time, minimum wage then we would have solved the problem being complained about. The post-tax take from the minimum wage, untaxed, would be the same as the living, now real living, wage as taxed.

We wish to increase the incomes of the working poor? Then stop taxing them so damned much.

This became one of those things that took off as a political meme. One of us had significant input into the tax part of a fringe party political manifesto where the idea appeared. Our advocacy here convinced various Lib Dems including a certain Mr. Clegg - aha, aha, to the extent that they’re not or weren’t a fringe political party. The good folks at the Centre for Policy Studies worked on George Osborne and so when the Coalition came together it became policy.

Those decades of fiscal drag that led to part timers on minimum wage paying income tax were reversed. The personal allowance was raised from the £4,000 or so level up to the current £12,570. It took half a decade to get the idea established, a decade following that to get the change fully implemented. That the number is £12,500 plus a little inflation is because that’s what the full year, full time, minimum wage was when the ambition was announced.

And now we’ve all got to do it all over again. For look at Polly’s number there. £1,930 a year. As the minimum wage is currently £8.91 an hour that means the work year is being calculated as 1,950 hours (1930/99p is 1949 an’a’bit) Which looks a little high for the average but isn’t far off that average for full time workers.

OK. So, 1950 hours times that £9.90 is £19,305 for that real living wage. Given that that’s well into the top 10% of global incomes we do think that’s pretty high for a minimum wage but still. The personal allowance for income tax is £12,570. So, 20% income tax is paid on £6,735 a year - £1,347. “Employees’” national insurance starts at £9,568 so the 12% charge is on £9,737 and is £1,168.44. Everything gets worse if we include “employers’” NI which is, as we know, incident upon wages.

So we have this situation where we’re charging £2,515 in tax to those we also insist are only just making it out of poverty for a full year’s work? Further, where we could solve this simply by insisting that the full year, full time, minimum wage is what the personal allowance should be - for both NI and income tax of course.

For look at what happens. The current minimum wage is, for those working hours, £17,374 a year. The current real living wage as currently taxed is £16,790.

We do not, in fact, have wage poverty here, we have tax poverty. The problem is not the wages being paid, it’s the exactions upon them.

Or, as we said all those years ago and won in part - because we were right - and as we’ve got to shout about all over again. If we want the poor to be richer then stop taxing them so damn much.

The only even possibly logically valid argument in favour of a minimum wage - one that, as above, we don’t in fact agree with - is that it’s a moral issue. Society has decided that that’s the minimum, irreducible, value of an hour’s work and that’s that. OK then, that’s the minimum, irreducible, value of an hour’s work then and society doesn’t get dibs on a slice of that in the form of tax.

Both these numbers, the personal allowance (even, three numbers, taking NI and income tax as having different allowances) and the minimum wage are under the control of the Chancellor of the time. One day we’ll have one who does the right thing and makes it clear that they’ve all got to be the same number. The tax allowances are the full year, full time minimum wage, the full year, full time, minimum wage is the tax allowance.

Anything else is building the society on the backs of those we’ve already declared are too poor to fund it and why the hell would we do that?

Conglomerates and the financialisation of everything

General Electric is to split itself up into three companies in a continuation of a process that has been going on for decades more generally - that death of the conglomerate. In a description of why they used to exist we have this:

What’s more, the cash generated by one division could be used to fund research and development in another.

We would not say that what is about to follow is the entire explanation but we would insist that it’s part of it.

Raising money used to be an expensive operation. Stock and other capital markets were not that liquid. Spreads were wide. The pool of capital was not that deep.

As those people complaining about the financialisation of everything have been saying, the financial markets are much larger now. They’re distinctly more efficient. Spreads are vastly lower - we’ve seen one estimate that stock spreads in New York have declined by two orders of magnitude in the last few decades. This is, of course, at least partially a result of High Frequency Trading.

The influence upon conglomerates is that it used to be sensible enough to keep money within a company and reinvest it within the corporate envelope. Thus disparate lines of business with the cash flow of one financing the next. This has obvious costs in that a structure, management, workforce, optimised for one task didn’t necessarily have the skills - possibly the gumption, or even a clue - to run that entirely different line of business. But that cost of running finance across the corporate boundary made up for that.

Now that cost of raising finance is much lower. So too is the cost of paying out past profits to shareholders. So the cost of specialisation has come down - and so we see more specialisation.

This is exactly the flip side of all those complaints that companies are paying out profits as dividends, performing stock buybacks and so on, rather than investing internally. We have more efficient financial markets now so paying out the gains from one line of business to leave individual investors with the capital allocation decision now makes more sense than it did.

As we say, we’d not die in a ditch to insist that this is the only thing that has been going on. But we’d certainly deploy those logical shovels to dig in on the point that this is partially to largely true.

The increased efficiency of financial markets has meant that we no longer have to put up with the inherent inefficiencies of conglomerates. Or at least less so that we used to. We take this to be a good thing as we generally do about increased economic efficiency.