Huzzah, The Guardian's just noticed that government is running out of other peoples' money

This is proof that it’s not just socialism, but expansive government that does that running out of other peoples’ money:

There is a scene in The Simpsons in which Ned Flanders enthuses about the joys of tax. Asked by his son what taxes pay for, he exclaims: “Everything!” – from policemen and trees to sunshine. I have always been a Ned in this regard and have argued that tax is one of the great social goods. But, as I filed my self-assessment return last week, I found myself grumbling. It isn’t so much that the bill was relatively high, but that I could no longer work out what exactly it was paying for. NHS waiting times are soaring. The social security system is leaving families destitute. It is a feeling surely familiar to many in Britain now: the tax burden has never felt heavier, yet the public services they are meant to fund have rarely been worse.

One possible answer is that government is simply trying to do too much. Another is that much of what government does is being done inefficiently. For the observation itself it entirely true. Taxes are, as a percentage of everything, the highest they have been in many a decade. And we don’t seem to be gaining all that much wondrous and joyful from our payment of them.

So we’ve this consumer resistance going on - why should we pay so much tax for not so much?

One answer is proposed here:

We are told on repeat that public services are unaffordable. Really, there are plenty of ways to fund them – it is just that a populist press and most politicians do not deem it legitimate. This is already being challenged outside Westminster: look to Scotland, which last month announced a tax on high earners to protect public services.

Introducing a one-off 1% wealth tax on households with more than £1m would garner fevered Daily Mail headlines but it would also generate an estimated £260bn, more than enough to cover a year’s funding of the NHS and social care spending.

Well, no, the suggestion is that a 5% tax on wealth, raised at 1% a year for 5 years, will produce £260 billion. Which would be about a, roughly, 4% increase in tax revenue over that period. Hands up everyone who thinks a 4% rise in revenue is going to sort out the British public sector?

Quite.

Which brings us back to the base observation. We’re already paying about as much tax as anyone reasonably expects us to be willing to hand over. And those public services still need their maw crammed with extra cash. We’re going to have to have a smaller state, aren’t we? Given that absolutely no one at all is interested in having a more efficient one.

Of course you can have infinite growth on a finite planet

This assertion betrays a woeful lack of understanding of the the most basic economics:

On one side of the divide is a growing cadre of environmentalists and left-wing economists who argue you can’t have infinite growth on a finite planet and the crunch point is fast approaching. They claim the corporate and political imperative to continually expand the economy is pushing mankind to the brink of Armageddon.

It’s a ludicrous assertion.

Sure, there’re a limited number of atoms on the planet. We can’t, while staying here, use more than that number. No one doubts that. But that’s not what economic growth is.

GDP is not minerals - or anything else physical - processed. It’s value added. The limit to GDP is therefore in knowing how to add value. Therefore, while physical resources are obviously scarce - there’d be no subject called economics if that were not so - it is not physical resources which limit economic growth. It’s knowledge.

The assertion that we cannot have infinite growth on a finite plant fails at this most basic level of understanding therefore. For it’s simply not grasping what economic growth is - an increase in value add.

Of course, some take this even further, Jason Hickel seems to have said that we should have degrowth so that we can then have socialism which seems a bit absurd.

Even leaving that sort of thing aside the agreed finity of the size of the planet is not an argument for the finity of the size of the economy. Simply because the thing we measure as the economy, as economic growth - GDP - is not physical . It’s value, not stuff. So, how can a limit to the amount of stuff be the limitation?

The IPPR has just disproved Keynesian deficit spending

We’re reasonably sure this isn’t what they meant to do but there we are.

One of the joys about economics is that it has to add up. If this is happening here in the economy then that over there must also be. One can then check and see whether the first is indeed going on by looking for that second that is, or is not. Equally, if we declare that this one thing is true when moving this way then it will also be true when running the other.

The IPPR wants to tell us that government borrowing to “invest” (the ““ is because it’s extraordinarily rare that govt does invest, rather than spend to pleasure voting blocs) doesn’t have much effect upon things.

Don’t take my word for it. The International Monetary Fund’s chief economist last year wrote: “The magnitudes of the effects [of fiscal tightening on inflation] appear to be small.” Economists from the Bank of England and the Bank of International Settlements also find very limited impact of extra government borrowing on inflation, if any at all. Recent experience also illustrates this: the US government had a significantly higher deficit than the UK last year, and yet it saw inflation fall to a lower level than we did.

That is, borrowing to spend is not very stimulatory.

Hmm. But then that means that borrowing to spend is not very stimulatory. Or at very least there has to be some ‘splainin’ done as to why it is when it isn’t.

But if borrowing to spend isn’t stimulatory then we’ve just disproven one of the major planks of Keynesian economic management. That fiscal policy, the widening out of the deficit, solves recessions. For if we say that fiscal policy isn’t stimulatory then that is what we’re saying, fiscal policy isn’t stimulatory.

Which is interesting, no? And will IPPR recall this next recession and not tell us that government should borrow more to spend? No, we don’t think so either.

Can the leopard change its shorts?

If the panthera is Ms. Harman perhaps not. The latest from the Fawcett Society, where Ms. Harman is newly installed as El Jefe:

Women of Bangladeshi and Pakistani heritage in the UK are earning on average almost a third less an hour than white British men, a pay gap campaigners say “should be causing national outrage”.

An analysis of pay data also reveals that mixed-race women and women of Black Caribbean heritage take home a quarter less money than their white male counterparts.

The Fawcett Society publishes the figures on what has been designated Ethnicity Pay Gap Day 2024.

Now, Fawcett is doing something that we really, really, don’t like. Which is issue the press release, get the story into the newspaper, before releasing the actual report. So it’s not possible for people - people like us - to check the figures in their report. Not until the news cycle has turned and the press release has done its job.

However, here it’s obvious enough. Those pay figures are “blended”. That is, they are of all workers, full time and part time. Part time workers get paid less per hour than full time. So, if we observe across sub-populations that have different rates of part time work we’ll get a very skewed understanding of pay differences. So much so that this has even hit Wikipedia:

In June 2009, Sir Michael Scholar, head of the UK Statistics Authority, wrote to Harman to warn her that different headline figures used by the ONS and Government Equalities Office with regards to pay differentiation between men and women might undermine public trust in official statistics. The GEO's headline figure was 23%, which was based on median hourly earnings of all employees, not the 12.8%, based on median hourly earnings of full-time employees only, used by the ONS. Scholar wrote: "It is the Statistics Authority's view that use of the 23% on its own, without qualification, risks giving a misleading quantification of the gender pay gap".

As we’ve noted more than once in fact.

But if even Wikipedia is rapping you over the knuckles for your misuse of statistics then really, perhaps you shouldn’t be doing that?

So, we do not have a definitive answer to the headline question. It might well be possible. But in the case of Ms. Harman it appears that no, new job but no new shorts. She’s still using the wrong, misleading but convenient to her politics statistics. Aren’t we all surprised?

Now subsidies enter their insanity phase

We think we’ve got this argument correct here. It has to be only think because the outcome is so absurd as to make us think that we might not be right. But if we are then we seem to have entered the era of insanity over subsidies.

So, the ferry to the Scilly Isles. A new one or three is/are needed. The company that wishes to buy them, which runs the ferry service, applied for a subsidy so as to engage the services of a British shipyard to build them:

First, they spent years trying to unlock the required £50 million in state aid from the Levelling Up fund, which would have necessitated ordering a ship from a British dockyard.

That didn’t turn up so instead they adopted Plan B:

But their application failed, so instead the company took a £33 million loan from NatWest and put out a tender to build one new passenger ferry and two freight vessels. In September, it selected the giant French shipbuilder Piriou to complete the contract.

OK, seems reasonable enough to us. Yes, we are against such subsidies and yet we’re also old enough, long in the tooth enough, to know that they are going to happen in something like shipbuilding. But if the subsidy isn’t offered then obviously Plan B:

In a letter published last week, but sent before Christmas, Shapps expressed his anger to Robert Francis, chairman of the Isles of Scilly council. The defence secretary, who also doubles as the government’s shipbuilding tsar, criticised the ISSG for not picking a UK shipbuilder (he did not name Harland & Wolff directly) to build its new fleet.

The idea that we have a shipbuilding Tsar seems a little Romanov to us (perhaps noting that that didn’t turn out to be a very good governance system) but it’s the insistence that is being made here that really confuses.

You cannot have the subsidy which would necessitate - and also cover the extra costs of - using a British shipyard but you must use a British shipyard anyway?

The ferry company is an independent one, quoted on the London Stock Exchange no less. And a minister thinks it right to bully - even insist - in this manner? There’s something about storming the Winter Palace that sounds like a useful solution there.

But now the lunacy:

He also expressed his concern that the company was planning to increase fares to help cover the costs of the new fleet. A one-way ticket — currently advertised at £83.90 — may hit £100 as a result.

The minister is stating that the more expensive, British, shipyard must - sorry, should - be used and the argument being used in support of this contention is the price rises that would result from using the cheaper, non-British option?

Yes, we know, politics doesn’t have to be logical, usually isn’t. But really, you must use the more expensive supplier to reduce consumer costs? How about we try for a politics that isn’t actively insane?

That this is all about the Scilly Isles (yes, it is pronounced that way) is just icing on that cake.

As an argument this does not, in fact, work

Apparently VAT on school fees will have no effect:

But Sir Keir told LBC Radio: “We have obviously looked at reports on this and all the reports show that it’s unlikely that parents will take their children out of schools.”

He added: “I have looked at this question of will it lead to children leaving private schools and going to state schools and the answer to that, on all the evidence I’ve seen, is no that it won’t. This is the VAT paid by schools, they don’t have to pass this onto the parents, they can do it in other ways.”

So, the claim is that substantially changing the price of private schooling will lead to no change - at all - in the demand for private schooling. Or, as we can also put this, demand for private schooling is inelastic with reference to price.

Except when we say inelastic we don’t actually mean no change, we mean not much change:

A good's price elasticity of demand is a measure of how sensitive the quantity demanded is to its price. When the price rises, quantity demanded falls for almost any good, but it falls more for some than for others.

If your claim fails even Wikipedia’s explanation of the point then it really is possible that your claim is not true.

That second claim is even more silly. VAT is a tax upon consumers. The only way that it can ever fall on anyone else is if demand for the good changes and so shareholders, the capitalists, end up carrying the cost as consumers desert the item and so the business shrinks. Not that private schools have shareholders to dump it on but that’s another matter. The only way that the VAT is not passed on to parents is if price elasticity is large.

What determines how much prices actually rise and, therefore, how much of the tax burden is borne by consumers rather than retailers? It is the sensitivity of demand to prices, a concept that economists formally refer to as the “price elasticity of demand”.

If demand is very sensitive to prices, known as demand being highly “elastic”, then retailers will be very reluctant to increase prices despite the tax, because demand will decrease by a large amount, and their sales will decline dramatically. Under these circumstances, they will prefer to raise prices by a small amount only, bearing the most of the burden of the tax.

….

In contrast, if demand is highly insensitive to prices, or highly “inelastic”, then retailers will readily increase prices because their sales will decline by only a small amount. That means consumers will bear almost all of the burden of VAT.

If elasticity is low - or actually zero, as claimed - then yes, folk won’t take their kids out of private schools. But if elasticity is low - zero as claimed - then the 20% VAT will be passed along to parents. They’re the same statement.

It is not possible to have a Shroedinger’s Elasticity, where it’s high for one part of the argument - non-passing along of VAT - and also low to zero at the same time, no change in demand.

Of course, our pointing this out isn’t going to make an iota of difference given that the idea is really driven by a hatred of any parent not using the state propagandisation service for their children but that’s another matter.

Umm, what competition for green investment?

We do grasp that the incentive to invest determines how much is invested.

Labour’s independent energy advisers have warned the party against watering down its £28bn green spending plans in advance of its promise to create a zero carbon electricity system by 2030.

Experts at the climate thinktank Ember, which provided the independent analysis underpinning Labour’s green targets, said growing international competition for low-carbon investment from the US and EU could leave the UK lagging in the global race for low-carbon energy.

But that strikes us as complete nonsense.

Pretty much by definition low-carbon energy is a domestic economic resource. We can’t - or at least don’t - pack it into ships or shovel it down pipelines and even interconnectors are hugely geographically limited. Renewable energy tends to be produced domestically to be consumed domestically. That’s just the way it is.

So, what global race? Sure, it might be a good idea that China gets more windmills than Britain does, might be a bad idea. But it’s not one of any grand importance in the sense that if they get more then we can’t have more.

It’s actually rather the other way around. We’d be perfectly happy if J Foreigner does all the hard development work, the subsidising of the stuff that doesn’t work quite yet, then we install as and when all the kinks are worked out.

Note that our critique here is very limited. We’re not even commenting upon whether green is the way to go, we should or should not have more renewables and so on. Only on this idea that there’s a race on and one in which Britain should subsidise more in order to win.

What damn race?

Maybe folk could be consistent?

The High Pay Commission - hint, it’s not a commission, it’s a pressure group - tells us that the inequality of reward for going to work is unconscionable.

The bosses of Britain’s biggest companies will have made more money in 2024 by Thursday lunchtime than the average UK worker will earn in the entire year, according to analysis of vast pay gaps amid strike action and the cost of living crisis.

The High Pay Centre, a thinktank that campaigns for fairer pay for workers, said that by 1pm on the third working day of the year, a FTSE 100 chief executive will have been paid more on an hourly basis than a UK worker’s annual salary of £34,963, based on median average remuneration figures for both groups.

This is where we get those pay ratios of 300:1 and so on from. This is bad, apparently.

And, well, hmm. Several of us here have written books. Some on the subject of economics. Thinking of one specific example, the fee was £1,000. OK. Writer and publisher make their agreement, publisher pays what he thinks it’s worth, writer accepts that valuation and does the work. We have a voluntary and free market arrangement.

Shareholders of a FTSE100 company decide what they’d like to pay their CEO, both sides agree, we have a voluntary and free market arrangement.

M. Piketty writes a book on economics which sells a couple of million copies. Given likely royalty rates that brings in perhaps $8 million (it was with a US press). We have an 8,000:1 pay ratio there between M. Piketty and another labourer in the economics mines. This is also a free market and voluntary agreement.

Which leads to a question for that High Pay Commission. Why is M. Piketty’s reward not at least 20 times more vile than that CEO pay ratio? We know why, obviously - free market and voluntary and none of anyone else’s business. But why do they not decry it, complain of it, demand that something be done about it?

It’s not too, too, much to ask that people be consistent, is it?

Well, that depends really, doesn't it?

This could be true, certainly:

The ‘wonder drugs’ that could fix Britain’s sick note economy

With record numbers out of work, weight-loss jabs may hold the answer

Now whether it will actually be true is another matter.

There are indeed many millions signed off sick but whether something that cures a physical illness will bring them back does depend. It’s possible to take a number of views here. Some might say that government, over the decades, has deliberately parked people on sickness benefits to make the unemployment numbers look better. It’s possible that the modern world really does make so many people so sick they cannot work. Even, we’re such a rich country that what an earlier time might call a minor issue that mustn’t be grumbled over is now a ticket to benefits. There’s even that thought that people are entirely rational. If the lowly paid will face a 60 to 90% (which does happen for many) marginal tax rate between benefits and work income then why bother?

We tend to believe all of those in varying quantity.

Which is, we think, where this becomes really interesting. For cures for some to many of those diseases will reveal that truth to us, won’t it? If the cause of the sicknote changes, not the number of them, then it’s not, actually, a health issue at all. Therefore efforts should be aimed at the other issues. If, on the other hand, economic inactivity through illness declines markedly then we’ve no problems with the incentives in our tax and benefit system.

That is, as we say, what’s so interesting here. We get to find out. What fun.

It's not, necessarily, the NHS

Just one of those little things it’s necessary to point out. A point being made that health care got very much better post-war. Indeed it did. As listed, UK diphtheria cases declined from 65,000 to 53 between 1938 and 1956. This is both astonishing and glorious, a massive reduction in both disease and human suffering - given the 5% or so mortality rate that’s many fewer parents having to bury their children.

Good.

It is also true that this same period saw the foundation and growth of the National Health Service. We can all have whatever view we like on that event.

But it’s not - not wholly and accurately - true that diptheria declined because the specific format of the NHS. For the diptheria rate declined pretty much equally in the US - which as many will note does not have the NHS. In fact, the diptheria rate has dropped pretty much everywhere and as, again, people will point out the NHS is that uniquely British institution.

The same goes on to be true of polio, tuberculosis and many another disease and condition. Medical technology reached the point that these were all addressable problems. And addressed they were in every (rich at least) country whatever the structure of their health care system.

It is possible that the NHS is better than any other health care structure. We don’t agree, for myriad reasons. But the proof that the NHS is better does have to come from proof of the outperformance of the NHS compared to other health care systems - not from the general advance of medical technology itself.

We’re back with Thomas Sowell’s ever so useful question: “Compared to what?”