Might it be possible to connect politicians to reality?

We were a little surprised at this from the Home Affairs Commitee:

Home Office-held data for the year to September 2021 show that a mere 1.3% of the recorded rape offences that have been assigned an outcome resulted in a charge or summons.4 Recent figures from the Crown Prosecution Service (CPS) show 1,557 rapeflagged cases proceeding to the prosecution stage in 2020/21, down from 5,190 in 2016/17.5

We thought we recalled something that happened in that year - over and above the gross dismissal of the importance of rape as a crime to be prosecuted that is. So we checked that footnote (5) and it’s the CPS saying:

Owing to the impact of COVID-19 on the criminal justice system, the volume of completed prosecutions fell to 1,557 in 2020/21 from 2,102 in 2019/20.

The volume prosecuted continues to be on an upward trend as recovery from the pandemic continues. There were 547 completed prosecutions in Q4 2020/21, 486 in Q3, 306 in Q2 and 218 in Q1. The latest quarter has the highest volume since Q1 19/20 (593).

Oh, right. Yes, we just knew that something had happened that year. Do note that the year being used here is to end-March, so the last quarter of 2019/20 was also covid afflicted.

Of course, it’s possible to point out that they do mutter something, the Home Affairs Committee, about covid down on page 16 but that’s really rather later in any such report than anyone ever bothers to read. Well, except for footnote checkers like us and we have no friends. Evidence of this being an article from Vice magazine which quotes the numbers but entirely misses the pandemic disease qualification.

We’d be willing to lay substantial bets at fair odds that much other newspaper reporting will miss this rather crucial point.

We’re entirely willing to accept that there might be something wrong with rape prosecution. As we’ve said before now there’s always a trade off between prosecution and conviction rates - increase prosecutions and inevitably more marginal cases, harder to prove, will be prosecuted leading to a fall in conviction rates from that prosecution decision. Maybe the current system is wrong at one or another point.

But we would and do insist that before anyone can have a rational decision about such things it’s necessary to start with reality.

The prosecution rate has been rising in recent years. Not, as this committee report makes it look, fallen off a cliff - other than that covid influence of course.

The perils of high pay in public service

Apparently it’s possible to pay those public servants too much:

Simply put, if the United States pays the salaries of the Afghan Army, then there is little benefit from the Afghans collectively organizing to encourage people to join the army and fight for their country. In practice, if the salary is sufficiently high relative to the outside option, people might join but will not fight when it is time to deliver. Indeed, General Wesley Clark, former NATO supreme allied commander, gives the following description of the motivation of Afghan soldiers: "People signed up with the Afghan military to make money...but they did not sign up to fight to the death, for the most part." Contrast this with J.R.R. Tolkien's description of Britain at the start of World War I: "In those days chaps joined up, or were scorned publicly." We think it is reasonable to assume that such peer pressure to defend the country did not exist in Afghanistan.

This implies that the solution for any British Chancellor is to cut public sector pay. In that way only those who truly wished to be there, only those really motivated by the ethos of public service, would be doing the varied jobs.

There’s also another interesting implication to this. Those unions which continually argue for higher pay for public servants - that’s an admission that it is the pay, not the public service, which motivates. That is, that their members are not in fact motivated by that public service idea.

Yes, yes, there are limits to how far this terribly fun idea can be taken. But perhaps we could at least acknowledge that no one can be both a selfless Angel*, doing it for the honour or the service, and also requiring a very much higher pay packet to motivate.

Erratum slip. For “Angel” read “MP” as appropriate.

When did The Guardian descend to outright lying?

Yes, obviously, differences of views, different angles from which to observe the world and all that. But outright lying is a new one on us:

Cost of living crisis: UK benefits plunge to lowest value in 50 years

There is no manner in which that is possibly true.

Pensioners and benefits claimants will see the value of their payments fall to the lowest point in 50 years on Monday, anti-poverty campaigners have said,

It’s simply a lie.

Just one example. The 1972 state pension for a single person was £6 a week. Upgrade by real value and that’s £80.93 now. The income value - ie, showing how incomes in general have risen over that time - is £150.20 a week. As The Guardian tells us, the new state pension is £185.15 a week, the basic is £141.85. Both of which are, we really are certain of this, markedly higher than £80.93.

How did we get to the point that a major newspaper runs untruths like this? Or, perhaps worse, to the point where the people who write it are too ignorant to understand this point?

Yes, yes, we grasp that it’s “anti-poverty campaigners” who are originally making the statement. But are journalists these days really so innumerate that they can’t see through that statement?

That little window into how the system actually works

We’ve - at least should have - a certain sense of emergency about gaining housing for Ukrainian refugees:

A British family has been barred from hosting Ukrainian refugees because their home has bare floorboards, as council officials start to check Homes for Ukraine accommodation.

One householder was ordered to board up an internal glass door even though it had safety glass, while another was told they would be rejected if they failed to put locks on all their windows.

Council checklists warned against stairs that were "excessively steep", bannisters with gaps that were more than 100 mm wide, looped cords or chains for blinds, low windowsills, poisonous plants or any damp or mould.

The checks being rolled out by local authorities come amid anger from British hosts at red tape that has left some out of pocket after paying overseas hotel bills for delayed refugees. Others are still waiting for applications to be granted after three weeks.

So much for any sense of urgency then.

We should though be grateful for this little window into how the system actually works.

Economic growth is the doing of new things, also, the doing of old things in new and better ways. The speed of economic growth is the speed at which we can do the new things or, again, the old in the new ways. Having an entire army of bureaucrats which delays the doing of those new things, or new ways, slows economic growth.

It’s not just the wasted effort of all that labour which could be put to better uses. It’s the weed and barnacles slowing the entire ship of the economy. The insight we gain from this story is that everything, just everything, is slowed by that army of clipboard wielders.

We are all made poorer, forever, by this system that has been built around our lives and our ability to do anything new.

There has been talk that Brexit would allow us to have a bonfire of red tape. The lesson coming out of the Ukrainian refugee story - that thing we should be grateful for - is that what is actually required is a flamethrower turned on the bureaucracy.

Competition works in markets even without the capitalism bit

A little story from the French railways via The Man In Seat 61:

Competition works, who knew? Trenitalia is now competing with SNCF on Paris-Lyon: Overall bookings (SNCF+Trenitalia) up 20% on Paris-Lyon, up 106% on Paris-Turin-Milan. The average fare paid on Paris-Lyon has fallen by between 23% & 30%.

Note that (1) This replicates the experience in Italy: Competition WORKS for inter-city high-speed, but not necessarily for local/rural/commuter; (2) SNCF is nationalised, but this did not mean low prices. Without competition, SNCF priced to maximise revenue, nationalised or not.

That last sentence misses an important part. SNCF is still pricing to maximise revenue, even with the competition. It’s just that to maximise revenue it has to cut prices and so shift the demand curve.

Still, that is interesting isn’t it? Both SNCF and Trenitalia are state owned organisations. They’re both being forced to compete in markets without also picking up that grubby capitalism bit. The result is that more consumers gain what more consumers desire - that’s what that 106% rise in ridership is.

There’s also that point that such markets don’t necessarily work everywhere for varied technical reasons. Which is fine, not even we, arch neoliberals that we are, insist that all markets, everywhere, are all the time optimal. We do insist they should be used where they are though.

For example, it’s not necessary to sell the NHS to Americans to make it better. We have a sneaking suspicion that wouldn’t work anyway not least because who would in fact buy it? But where markets are possible then let’s have them - they produce that increase in consumer welfare by providing more of what consumers want. Which all sounds very sensible to us to be honest.

It could well be that there are parts of it that won’t work - say, the demand for a valid credit card before getting a jugular stitched up at A&E. OK, that’s fine, let’s not have markets at that specific point then - but let us have them where they are optimal. Say, elective surgery for hip replacements, perhaps that sort of thing.

At the very least let’s do what markets are really, really, good at which is to experiment and allow us to find out what is the optimal arrangement.

Seriously, if markets can improve the Italian train system - with rather less unpleasantness than the last man who managed to make them run on time - then we must be well within the envelope of things that markets can optimise.

Still picking losers we see

Of course, reducing the friction - and thus cost - that the interminable planning system introduces into the economy is worthwhile. Economic growth is the doing of new things, or at the very least old things in new ways. The speed of growth is the speed at which we can do those things - a decrepit planning system therefore slows economic growth.

Yet there’s still a problem with this:

Homeowners who object to new solar panels, wind turbines and nuclear reactors face being ignored by planning officers under a once-in-a-generation overhaul of rules as part of Boris Johnson's energy strategy.

The Prime Minister unveiled a commitment to make it harder to prevent new energy projects from going ahead as part of ambitious plans to slash gas use so the country cannot be "subject to blackmail" by Vladimir Putin.

Part of it is that new housing is just as much a necessity as new energy. It should be the system as a whole reformed, not just for energy. For, if we are now to agree that we cannot delay energy projects through pettifogging detail then why is this not true of all projects?

But even in detail this is still wrong. For by selecting which energy technologies do not have to face the full horrors of the planning system the government is still picking losers. Whatever the new system it should apply not just to the currently favoured technologies, but to all - geothermal, fracking, that new idea of moonlight from cucumbers and so on.

For selecting which technologies are easier to build is again the selection of technologies, isn’t it?

Why do the armed forces let the MoD mess up procurement?

Of the 12 “enabling organisations” that its annual report claims constitute the MoD, procurement is responsible for the largest part of the headcount (30 percent): Defence Equipment and Support (12,136 staff), Submarine Delivery Agency (1,915 staff), Defence Electronics and Components Agency (416 staff), Single Source Regulations Office (Annex F: 38 staff), and Defence Digital (2,400 staff), i.e. 16,902 staff in total.   

Over the years, there have been delays, financial overruns and equipment failures, notably the unusable Ajax tanks discussed in the MoD’s last annual report. The Commons Public Accounts Committee reported in November 2021: “despite numerous reviews of defence procurement over the past 35 years” it “continually fails to learn from its mistakes”. Billions have been wasted. Reforming procurement procedures has proved a waste of time: procurement should be removed from the MoD altogether. In almost any other category, the supplier has to decide what the end user will want, after close discussion, and then provide it at a price the customer is prepared to pay. The intervention of the third party, in this case the MoD, especially one that keeps changing its mind, is guaranteed to create delays and unnecessary costs. 

Some equipment has to be bespoke either because it provides advantage over likely opponents or because purchasing by British armed forces opens the door to international sales or supply. We cannot be held to ransom by a foreign supplier at a critical time. About 40% of MoD purchases are bespoke, i.e. non-competitive, and that is where the problems lie. The 60% open market purchases can be left to the armed forces. 

The British defence industry, which is the world’s second largest arms exporter, should undertake the work and cost of meeting their customer’s needs, just as any other commercial supplier does.  Some fine tuning might be needed: some believe the British defence industry has been feather-bedded by the MoD and could well afford to do their own R&D. Others may think that taking over, in effect, the MoD’s procurement would be too burdensome. Where that proves to be the case, the defence industry can pitch for R&D grants just like anyone else.  

The MoD should also get out of the property business and oil storage businesses. According to its latest annual report, “Defence agreed to contribute land and buildings with housing unit potential for 55,000 homes.” It delivered 11,580 housing units. All land which is not used, and not likely immediately to be used, should be turned over to Homes England. The extensive Defence Infrastructure Organisation, which looks after the MoD estate, and the Oil and Pipelines Agency should be privatised. 

Defence Business Services largely deals with payrolls and pensions and should be part of the Director General Finance’s department which would, if the MoD stepped away, come under the command of the Chief of Defence Staff (CDS). The Hydrographic Office should return to its old home, namely the Royal Navy. In addition to the enabling organisations, Annex F of the annual report shows eight additional arm’s length bodies employing 2,947 staff. Three are museums which should join the others under the Department of Culture, Media and Sport and the remainder should become independent charities.  

Taking these two blogs together, it seems most likely that the armed forces would be better equipped without the MoD as a whole, not just procurement. About half the staffing of the MoD is not explained. The Atomic Weapons Establishments (AWE) are only mentioned in a note to the accounts even though they must be significant employers and have been deemed unsafe for the last seven years without the necessary corrective action taking place. The central HQ is also a significant employer. It is not just procurement that needs to justify its existence and place in the chain of command. The AWE, for example, needs to come under the CDS who might actually sort them out.

It's expected return that is the incentive, Dummkopf

The IFS got Nuffield to look at earnings inequality. At which point they note that high earners tend to gain their incomes - more than the general population at least - from business activities. Also, that business activities tend to have lower tax rates than labour incomes. Well, yes, they would:

According to the report, business income – from either self-employment or owning and running a company – accounts for 21% of total incomes for the top 1% of adults and 29% for the top 0.1%, compared with just 9% for the rest of the population at large.

It said business owner-managers could effectively choose to take income out of their company through the form of a salary, dividends, or capital gains – allowing them to benefit from lower rates of tax.

The report pointed to a preferential 10% rate of capital gains tax, called business asset disposal relief, while saying that company owner-managers were able to access tax rates of just 27% on income taken in the form of capital gains.

The reason for this is that incentives are the expected return from an activity, not the actual return. This must be so - the incentive is the driver of the decision to try it, at the point of trying it there is an expectation of what the return will be, not a hard and fast actual return. What gets people to do things is what they think they’ll gain from doing it - again, obviously.

There’s risk involved in going into business. Just to trot out some not wholly accurate but well known statistics - only one in five of new businesses survives to its fifth birthday, VC investors expect 9 of 10 portfolio companies to tank. We’d not want to have to prove this but would at least suggest that the both modal and median experiences of trying to set up a business are money losing - certainly when opportunity costs are included.

Or, an actual number, in Jan 2022 there were 1,560 company insolvencies. A pretty average monthly number and one that only includes those business attempts large enough to bother with such a process.

Imagine we’re trying to design a tax system from scratch. We would want the expected return from innovation to be higher than that from labour. Even if the actual return were lower - we probably could assume a certain over-enthusiasm to carry us over that gap. Given the high risk of not making any money at all therefore the tax rate on money from successful innovation needs to be markedly lower than that on labour incomes.

In fact, given the high risks involved our taxation of innovation income is almost certainly too high. Even if that’s not the point that Nuffield and the IFS are making it is still near certainly true.

Energy Security and Hot Air

The authors of “Energy Security Strategy” seem not to have read the manual provided by a previous Energy Chief Scientific Advisor, Professor Sir David Mackay: Sustainable Energy without the Hot Air. His “sole recommendation is this: Make sure your policies include a plan that adds up!” (p.203) Unfortunately the new Strategy does not. 

The best part is the recognition, at last, of the importance of nuclear to provide the baseload for wind and solar. But Mr Johnson’s arithmetic is dodgy. He claims 95 percent of energy needs will be low carbon by 2030, but Hinkley Point C will be the only nuclear plant planned to be operating by then, contributing seven percent. By 2050, another seven Hinkleys would contribute 49 percent, not counting the unknown number of small nuclear reactors, if demand remained flat. The Strategy expects nuclear to be 25 percent of 2050 demand which implies demand is expected to more than double but the Strategy states “we do know that electricity demand is highly likely to double by 2050”. That has to be nonsense because electricity is only 20 percent of energy now and if energy increases at all, since virtually all energy will be in the form of electricity, electricity demand will have to increase more than fivefold.  

The Strategy confuses demand units, or usage, (which should be expressed as GWh) with capacity units (which should be expressed as GW). It uses the latter to express the former when, obviously enough, we need far more capacity than usage to cater for peaks and troughs, especially of the volatile wind and sun. In 2020, usage is 33 percent of capacity in the UK and 37 percent in the USA. 

Storage can provide some shifting of peaks to troughs and hydrogen will be the main means of that but it is not itself a source. Indeed, it is a wasteful form of storage: of the electricity used to make either form of hydrogen, you only get about half back. The Strategy states “we plan to blend up to 20 percent hydrogen into the natural gas grid” which is not a good idea since hydrogen, per therm, costs more than natural gas. 

Electricity security is not just a matter of generation; power lines have to be secure too. Increasingly volatile weather will knock them out more often and responses will need to be sped up but what about the network as a whole? A proposal has been made but not by the PM’s Strategy paper. 

Amongst the various strange claims in the Strategy are “by 2050 all our buildings will be energy efficient with low carbon heating”, “we expect a five-fold increase in [solar] deployment by 2035”, i.e. 70 GW, and “by 2030 over half our renewable generation capacity will be wind”. It would have been better to suggest the first as a direction and explain why the Treasury will restrain itself from blocking that further. The second implies that solar alone will supply about as much as nuclear and the three together will supply more than 100 percent of demand.                                                                                            

The Strategy launches a few more quangos, such as “the £120 million Future Nuclear Enabling Fund”, “the Great British Nuclear Vehicle” and the “Future Systems Operator”.  One can never have too many of them. 

The paper is full of perfectly good, but itsy bitsy, ideas and cost packages but these are not “strategy”.  We need a proper energy strategy that adds up. 

Two things we thought we'd note from the IPCC report

“The global economic benefit of limiting warming to 2C is reported to exceed the cost of mitigation in most of the assessed literature (medium confidence).”

OK, that’s interesting.

In fact, it’s fascinating, Because they’re using their “medium confidence” in 2C to demand that 1.5C be done. That is, they’re using the costings where they think they’re about right to demand what they’re not certain about at all. Which is an interesting misuse of their own calculations, don’t you think?

Our position has long contained two base insistences. One, that we should only do what makes sense. Any action should add more value - or reduce damages - more than the cost of taking the action. In this we are in accord with the Stern Review and the work that led to the Nordhaus Nobel. In fact, this is in accord with simple basic logic - do those things which add value, don’t those that don’t.

The second is that whatever we do we do it efficiently. For humans tend to do less of more expensive things, more of cheaper. So, by using efficient methods we thus gain more of the thing, whatever it is. Political planning has had Germany opening up the lignite mines again, the UK burning American woodchips in Drax and just everyone growing corn to feed into cars not people. Such planning, we can see by the simple evidence of our own experience, does not in fact work. So, market methods with suitably adjusted prices it has to be - again we are in accord with Stern and Nordhaus and 93% of polled economists.

In short, OK, climate change, fine, but for the Lord’s Sake don’t try dealing with it the way you have been. Oh, and don’t try to accelerate it, not until you’ve proven that it’s worth doing so.

We also found this interesting:

Meanwhile, it adds with medium confidence that “the lifestyle consumption emissions of the middle income and poorest citizens in emerging economies are between 5-50 times below their counterparts in high-income countries”.

Emissions are very closely related to standard of living - obviously so in an emissions powered economy. The true meaning of that being that we in the rich world have no poverty - not when there are people out there living on 20%, or 2%, of what we have. And there’s really no arguing with this non-existence of poverty idea either. For the IPCC is indeed the home, residence, of the accepted science of our age, isn’t it?