Say no to neo-mercantilism!
The Treasury, high on pre-budget coffee fumes, has floated the idea of removing tax relief on foreign investments on international ISAs. To the Treasury, this would increase investment in British companies, reviving our ailing capital markets and support equities. To everyone else, this would decimate wealth and growth opportunities. We hope that this is the Treasury launching kites and seeing what does not fly - without a doubt, this policy would slam straight back into the ground.
Not only is this an unpleasant return to mercantilism, the idea that we get wealthier by just keeping our money in the economy rather than from consumption and trade, but it would wallop households at a time of acute financial uncertainty.
Let’s step back and look at why this policy should be consigned to the shredder.
Individual Savings Accounts (ISAs) provide a tax-free account of up to £20,000 in tax savings for equity, bonds, and fund shares, and they have proved immensely popular. In 2022, ISAs had a market value of £741.6bn, with £459.8bn of that being in stocks and shares ISAs. This forms a solid base for participation in British capitalism and a core component of our financial and relatively high wealth.
No wonder the Treasury is hungry to divert a lot of this money into Britain’s markets.
However, by essentially tariffing international investment and outward FDI, British ISA holders will be left much worse off. As HMRC data shows, it’s everyday Brits who would be most affected. Over 6 million holders of ISAs are in the £10,000 to £20,000 income bracket, and a further 4.8m are in the £20,000 to £30,000 bracket, too. Those on low salaries, who use their ISAs as safety net pools of cash, or the almost £1bn a year withdrawn to buy a house, will be hit hardest.
Additionally, the scheme would create yet another barrier to the efficient allocation of capital. By removing tax relief on foreign investments ISA holders would be artificially incentivised to invest into less efficient UK firms.
This would be reasonable in a world without international trade, but when the UK imports 33 percent of all its goods consumed, it’s a bad idea. Investment in German cars, French wine and American oil will bring far greater gains, in terms of quality of product and price to UK consumers than investment into UK based alternatives. But this is exactly what such a policy would encourage. Free trade, allowing for the efficient allocation of capital not only within but across nations, has improved standards of living across the globe, it's what made Britain rich in the first place. Policy today should be encouraging this process, not restricting it to score political points.
If the Treasury wanted a more British focussed financial product, they would do well to listen to UKFinance’s call for a British ISA, and advertise it widely. With UK households only holding around 11% of their assets in equities, compared to much higher percentages in the G7, this would be a fantastic opportunity for British savers. However, a tariff led approach to investment simply will not work. As ASI Senior Fellow Sam Bowman has pointed out, “The FTSE 350 is up 6% over the past five years. The S&P 500 is up 80%.” Why invest in Britain, when the world is giving much better returns?
The Treasury’s intention misses the fundamental causes for the lack of investment in UK equities markets, and instead looks for a quick fix which is destined to calamitously explode. We know that there isn’t enough liquidity in the system for firms to list in UK markets. Placing a tariff on outward FDI would only temporarily address this. Shortly after coming into effect, we would see a substantial bubble, inevitably set to burst when this capital floods the market and is poorly allocated.
What the UK needs to do to address weak equity market performance is to take a serious look at reforming the supply side of the economy, addressing cumbersome planning regulations that stop real business growth, sky-high energy bills which push ever larger bills through post boxes and then SMEs into bankruptcy, and the loathsome salaries that skilled workers can expect.
Liquidity is only one spoke of Britain’s mangled wheels. Indeed, liquidity is the result of well-functioning markets, not the other way around. Fixing our capital markets will take more than one poorly-thought out policy.
Finally, the big question is, how would this be enforced? It sounds, in the words of one financial stakeholder I spoke to, like a complete nightmare to manage. Whether retrospective, or going forward, the enforcement mechanisms would be byzantine, full of loopholes, and ultimately too expensive and ineffective.
As Adam Smith himself said: "The proprietor of stock is properly a citizen of the world and is not necessarily attached to any particular country. He would be apt to abandon the country in which he was exposed to a vexatious inquisition in order to be assessed to a burdensome tax and would remove his stock to some other country where he could either carry on his business or enjoy his fortune more at his ease."
Extending Competition in the UK Electricity Market
Even after recent reductions, the UK end-user price of electricity is high by international standards. In January the price per KWh was 40.7 euro cents, compared to France c€29.1, Spain c€22.0, and the US c€16.3. High electricity prices damage UK competitiveness.
The lack of competition in the electricity market is the main reason for this. And things can only get worse. For years, electricity has been only 20% of the energy market, so there is at least some competition from other sources. Soon, Net Zero 2050 policy implies that electricity will be nearly five times bigger.
The problem stems from the fact that in 1989, Margaret Thatcher only partially denationalised the electricity market. A key element, the National Grid, remained a monopoly structure and the regulator Offer (which later became Ofgem), kept government in control.
Today, both Labour and the Conservatives intend to return electricity to monopoly. Labour’s argument is that we will need a central planning authority, ‘Great British Energy’. This is supposed to save households £92. But how? Certainly not from a reduction in bureaucracy: it seems highly unlikely that this nominally independent but publicly owned authority will replace the 4,000+ Department of Energy Security and Net Zero’s core staff. We can confidently expect greater bureaucracy as well as less competition in the sector under this plan.
To the Conservatives, going green and expanding the power transmission infrastructure are the priorities. The UK presently spends hundreds of millions of pounds in constraint payments to energy generators, simply because the existing grid infrastructure to absorb all the energy produced; with increased reliance on electricity, better infrastructure is needed. But the Conservatives have no coherent plan on how to produce that extra electricity. They talk up nuclear but have made no commitments to any new reactors.
If we are to reduce prices, secure supply and improve customers’ experience, however, we need to complete the original aims of privatisation and introduce more competition within the electricity sector. Here’s how.
The National Grid should be replaced by privately-owned Distribution System Operators (DSOs), which would buy from generators and sell to households and business. Although DSOs would be largely regional, each customer location should be entitled to buy from any DSO nationwide. Fuel poverty payments should be funded by the Department of Work and Pensions, not the operators.
In effect, each DSO would be a regional grid selling direct to consumers anywhere in the UK. They would balance electricity in and out, normally by buying and selling from/to each other, though national shortages/excesses would be traded with IMPEX (buying from/selling to) Europe. IMPEX would also be a grid, buying and selling to UK DSOs and European distribution companies. It would need to balance purchases with sales and breakeven or make a marginal profit.
The best regulator is competition, and with greater competition in the electricity market, the Competition and Markets Authority should take over from Ofgem (but not set prices as Ofgem does).
With these reforms, the original objectives of electricity privatisation — a competitive and consumer-focused industry — would finally be realised. This would give consumers a better deal and boost the UK’s international competitiveness.
We're less than convinced here we have to say
Ultra-processed food (UPF) is directly linked to 32 harmful effects to health, including a higher risk of heart disease, cancer, type 2 diabetes, adverse mental health and early death, according to the world’s largest review of its kind.
The report is here.
Effectively, anything a step up from a raw turnip kills you. Our attitude is rather different, eating only raw turnips would make one wish for death - we all die so why not enjoy the food while we’re here? Yes, we know, not in accord with the world’s currently puritanical cast but there we are.
Given that there’s no good nor useful definition of UPF (this one here includes “cakes” although they’re not, actually, UPF at all but they’re enjoyable so they’re on the list) we do tend to think this is simply a confected hysteria.
However, our real complaint here is the standard of evidence being used. For example:
However, Dr Chris van Tulleken, an associate professor at University College London and one of the world’s leading UPF experts, said the findings were “entirely consistent” with a now “enormous number of independent studies which clearly link a diet high in UPF to multiple damaging health outcomes including early death”.
“We have good understanding of the mechanisms by which these foods drive harm,” he added. “In part it is because of their poor nutritional profile – they are often high in saturated fat, salt and free sugar.
But the way they are processed is also important – they’re engineered and marketed in ways which drive excess consumption – for example they are typically soft and energy dense and aggressively marketed usually to disadvantaged communities.”
The bloke with a best selling book claiming that UPF is killing us all is used as independent proof of the fact that UPF is killing us all. And then there’s this:
In a linked editorial, academics from Brazil said UPFs were “often chemically manipulated cheap ingredients” and “made palatable and attractive by using combinations of flavours, colours, emulsifiers, thickeners and other additives”.
They added: “It is now time for UN agencies, with member states, to develop and implement a framework convention on ultra-processed foods analogous to the framework on tobacco.”
That editorial is here. “Carlos A Monteiro, professor,” Ah. Carlos is the guy who invented the very idea that UPF is killing us all.
It’s possibly necessary to be slightly delicate here, but two folk who are heavily invested - to be that delicate - in the idea that UPF is Bad, M’Kay? are to be used as independent proof of the idea that UPF is Bad, M’Kay?
We are less than impressed by that standard of evidence to be honest with you.
Especially since this is the proof being used to insist that the United Nations should be put in charge of banning cake and insisting we all subsist upon raw turnips. To be fair we cannot think of any level of evidence that would convince is of that. If people desire to eat cake until they pop like a weenie on an overheated grill then good luck to them - it’s their path from cradle to grave, not anyone else’s. We are, after all, liberals around here. But even so we really do think that perhaps these puritans should be putting just that little bit more effort into independent and convincing evidence.
Really not quite grasping the economic basics here
Jonathan Reynolds, Labour’s shadow business secretary, said the UK should be willing to apply “trade remedies” - tariffs - if it is found that Chinese brands have gained an unfair advantage over their European peers.
Asked about the issue at the MakeUK manufacturers conference on Tuesday, he said: “There are some sectors where I look at just the sheer overcapacity that’s coming out of China and I worry that is inconsistent with how a healthy, global market economy should operate.
“Where there is a concern that we’re not facing free and fair and healthy competition, we’re right to use trade remedies as an answer to that.”
This is not just to dunk on the Shadow Secretary, we expect the current one to make much the same sorts of points. And all likely contenders too. Simply because politics just hasn’t - 248 years after it was first properly pointed out in Wealth of Nations - caught up with how trade works. Nor, even, the most basic point about who the economy is supposed to work for.
The claim here is that the Chinese government has been taking money off Chinese citizens and giving it to Chinese car making companies. As a result those Chinese cars are subsidised and thus cheap to us Britons.
That is the claim. The next step is where the lunacy comes in, in the reaction. For now the claim is that we must tax ourselves for buying these cheap, subsidised, Chinese cars. That’s what a trade tariff is. So too would be any system of quotas or other restrictions upon those cheap cars being imported. It’s a tax upon us Britons.
Or, just to point up the lunacy, China is taxing its citizens so we must tax ourselves in response.
The entire point of trade is that we get to put our hands on the things made by Johnny Foreigner - those things that we desire of course, those which are cheaper, or better, or simply more desirable than we can make them ourselves. That’s not an aberration, that’s the point.
Even more basic, the point of an economy is consumption, not production. So, if someone’s offering cheap electric vehicles - however produced, however financed - the correct answer is “Please send a second shipload. Pretty Please”.
The Chinese government is, as a result of its actions, getting Chinese car companies to ship us cars. Each coming with a cheque attached signed by the Chinese taxpayer. We get the car and we get the free money. The political response is that this is dreadful and cannot be allowed.
Foreigners sending us free money is a bad idea that must be stopped. Now do you see why politics is such a lousy way to run the place?
Torture the Green Economy statistics enough and they'll confess to anything
We’re told that the green economy is a very good thing, growing fast, highly productive and all that:
The UK’s net zero economy grew by 9% in 2023, a report has revealed, in stark contrast to the 0.1% growth seen in the economy overall. Nevertheless, the report pointed out that strong future growth from green businesses was being put at risk by government policy reversals, lack of investment and competition from the EU and US.
Thousands of new green companies were founded in 2023 and overall the sector was responsible for the production of £74bn in goods and services and 765,000 jobs, according to the report by the Energy and Climate Intelligence Unit (ECIU) and the Confederation of British Industry (CBI).
Super, great. But there’s a confusion there. If this is all a very good thing, growing fast, highly productive, then why do we still have those demands for subsidy?
The answer is that the numbers are being tortured. In the actual report itself we’re told:
The net zero economy spans a number of new and emerging sectors, such as renewables, carbon capture, or green finance, as well as more traditional, established sectors, such as manufacturing. The latest CBI Economics analysis shows that these businesses contributed £74 billion in Gross Value Added (GVA) in 2022-23, which is equivalent to 3.8% of the UK economy – larger than the economy of Wales (£66 billion). They also supported 765,700 Full Time Equivalent (FTE) jobs, equal to nearly 3% of total UK employment. Their contributions include the value generated by their own activity (£25 billion) and their employees (218,500 jobs) as well as the wider economic contributions they supported through their expenditure with suppliers and the expenditure of their employees on goods and services. In essence, due to these wider spillover benefits, for every £1 million in GVA contributed by net zero businesses, nearly £2 million more was added through these wider economic contributions.
Ah, no, that’s not the way GVA works.
GVA is attempting to give us something like GDP calculations but for some portion, region or other subset of that national economy. GVA is therefore worked out the same way as GDP but for that subset. This means that what people spend upon housing, clothing, food, as a result of this subset of the economy is not included in the GVA of the subset - for the housing, clothing, food, would turn up in those other subsets if we were to analyse them. As, when we calculate GDP we do not include those run on effects. For, obviously, if we included the run on effects in GDP of each sector then we’d be double, triple, multiply counting every sector and end up with a GDP that is hundreds of times larger than reality.
We’re fine with people doing economic analysis of the green economy. In fact we’d welcome it if people did. We’re really very sure indeed that the result will be that green economy jobs are less productive than the rest of the economy. For the obvious reason that the green economy is attempting to solve externalities - those things not included in market prices nor our market price based measures of the economy like GDP or GVA. As the value of the output - lower emissions - is not in our measures of output, but the working hours to achieve them are then we run into the productivity measurement equation. Value of output at market prices divided by hours of work put in to gain it.
Exactly because we are trying to solve externalities by our green policies then and therefore green jobs will be less productive.
As we say, we’re absolutely fine with, even look forward to, economic analysis of the green sector. While we wait for that we can reject political fluff jobs like this.
So we've tested government doing the investing and it's a crock of....
….umm, shinola? Or is it the other one?
There is a logical argument stating that government should be doing the investing for us. Government can - because it has the backstop of being able to charge future generations of taxpayers to pay back the loans - borrow more cheaply than near any private organisation. Therefore profit from investing should be higher. It’s also true that government has all those Rolls Royce minds to decide upon what should be invested in. And thus the insistences from the likes of Professora Mazzucato, Professor Richard J Murphy and every politician eager to get their hands on the spending taps that, really, government should be doing the investing.
Well, it’s a logical argument but as with all such it does need to be tested against that reality outside the window:
Four district councils in London’s commuter belt have accumulated debts worth a collective £4.2 billion, or about £10,000 per resident, on property investments, many of which have gone awry.
Woking, Spelthorne and Runnymede, all in Surrey, and Eastleigh in neighbouring Hampshire have the highest debt-to-income ratios in the country. The four owe debt between 700 per cent and 1,500 per cent of their annual income, according to the Chartered Institute of Public Finance and Accountancy.
Woking is already effectively bankrupt, while both Eastleigh and Runnymede have been the subject of notices from central government concerned about their financial health. Spelthorne has yet to receive a similar warning, but in 2022 KPMG, its auditor, warned that the council’s decision to borrow £225 million to purchase three Heathrow properties in 2017 was unlawful, a ruling that Spelthorne contests.
Note that these local councils did enjoy those presumed benefits. They borrowed from central government at central government (ie, gilts or thereabouts) rates in order to invest into market rate paying investments. With, of course, all that lovely information that government has about what should be done and those very fine, well tuned, minds to make the decisions.
They then lost all that money and have driven themselves bust in doing so.
So, we have now tested this idea that government should be doing the investing. The idea is found wanting when tested against that reality outside the window. This despite having those preferential financing rates, centralised information and fine minds.
The logical arguments fail because even with those advantages they then decide to micturate societal capital up against the wall.
Let’s not have government and politics deciding what to invest in, eh? If only for the societal value of clean, dry, walls.
Why government's a lousy way to do things
A standard argument in favour of government doin’ stuff is that government is eternal - therefore they’re the only people able to take a long term view of matters. To be able to deal with those decades long, even generational, matters that individual lifespans, or corporate ones, simply won’t bring to salience.
Well, OK, it’s a theory, Like all theories - or at this stage of the scientific game, hypothesis - this needs to be tested. The way science works is that we deliberately look around for the evidence which disproves the contention. If we find such evidence - we need only the one piece - then the hypothesis fails. Repeated attempts to disprove that do not disprove gradually move the hypothesis over to being a theory at which point it becomes a useful working assumption for how we deal with the world. Until, if ever, that disproof does arrive.
So, doctor training:
Ministers have dramatically stalled plans to double the number of doctors being trained in England by 2031 in a move that has caused dismay across the NHS, as well in medical schools and universities, the Observer can reveal.
In June last year, ministers backed a long-term plan to expand the NHS workforce and pledged, amid great fanfare, to “double medical school places by 2031 from 7,500 today to 15,000, with more medical school places in areas with the greatest shortages to level up training and help address geographic inequity”. Labour is also committed to raising the number of doctors to 15,000 by 2031.
But a leaked letter written jointly by health minister Andrew Stephenson and the minister for skills, apprenticeships and higher education, Robert Halfon, to the independent regulator the Office for Students, says they will fund only 350 additional places for trainee doctors in 2025-26.
Now, we have noted this before around here. That glorious - and yes, it is glorious - economic liberation of women has led to some run on problems. Female entry into the professions - part of that glorious economic freedom - then runs into things like maternity leave and a predeliction for part time working while the snot-machines are awaiting primary school. Now, because we’re all in with the economic liberation part this isn’t something to bemoan, it’s simply something to deal with.
Over recent decades doctoring has become a majority female occupation - economic liberation again. Huzzah!
Government also takes to itself the power to determine how many doctors are trained each year - or even each decade given the time it takes to train.
An average doctoring working life is some 30 years - out of training at around 30, hitting the pensions cap and retiring at 60. Say, about. Add maternity and part time working to give a decade of less than full time work over that three decades and what’s the result? Other than the wholly welcome result of that economic liberation?
The answer is that we need to be training more doctors. More more doctors than an ageing population requires, more more doctors than a growing population requires. We gain fewer doctoring working hours out of each doctor trained therefore we require more doctors trained. As we say, this is not a problem it’s simply an effect and one that has to be dealt with.
This all became obvious some 30 years back. Government did not increase the number of doctor training places 30 years back. Government’s not a good manner of doing those long term things.
Then it gets worse. Obviously, finally, they agreed that more training places needed to be financed. But now it’s being limited for whatever short term - we assume financial - reason. Which is the whole point of passing those long term problems over to government, that long term things get dealt with in a long term manner, not subject to the short term buffeting of events Dear Boy, events.
We’ve just found our disproof of the contention - hypothesis - that government deals well with long term issues. Therefore the hypothesis fails.
A beautiful theory killed by ugly facts. Again.
Now note how science works here. Repeated assertions that sometimes the hypothesis holds don’t matter. All we need is the one disproof. As science doesn’t actually say but does mean after all even the blind squirrel sometimes finds a nut. Government is good at dealing with long term problems fails as an assertion if we find the one example of government not being good at dealing with a long term problem.
Which does, of course, mean that Mazzonomics is tosh but then we all knew that anyway.
Biting back at Bite Back
No, not Dale’s publishing company, but Jamie Oliver’s attempt to mislead the body politic. Big report out:
Are food giants rigging the system against children’s health?
The answer is obviously no but we do need to identify some specific reason that it is that no. Fortunately, Sir Patrick Vallance provides an introduction:
But the epidemic of food related ill health, which grips our nation and starts in childhood, cannot be solved by science alone, it needs policy action. Medical advances to treat type-2 diabetes, heart disease and cancer are progressing fast and save thousands of lives every day, but how much better would it be if these diseases could be prevented? This is the challenge that society faces, and prevention of disease is essential if the NHS is to be affordable and sustainable.
Obesity, in common with smoking and booze, saves the NHS money. This is not just an assertion by us, it’s a known scientific fact.
It is entirely true that it costs money to treat people so rotund they cannot fall over - like Weebles. It is also true that people dying early as they pop their skins like overheated sausages do not then need further decades of treatment on the National Health Service - the costs end when the CoOp picks up the puddle for burial.
Now that is, obviously, a fairly brutal way of putting it. But it’s also true. We do indeed all die of something (well, with the exception of Elijah possibly). We will all get treated - or not perhaps given the queues - by the NHS on that path to the grave. The NHS is also a lifetime healthcare system. Thus the total costs, over the lifetime, depend upon what diseases we get and also the length of the lifetime. An aggressive and untreatable cancer - or a killing stroke or heart attack - at 65 is very cheap indeed. Physical health plus a few joint replacements and 10 years of Alzheimer’s before death at 90 is very expensive.
Again, fairly brutal but also true. And as it turns out on average, across the population, obesity - like tabs and booze - save the healthcare system money, not cost it.
As the entire justification being presented for this intrusion into our diets is wrong therefore the entire intrusion into our diets is wrong. We should - whether we can is another matter given the headwinds this very silly idea has - therefore tell these people to go boil their heads. Job’s a good ‘un at that point.
There are - obviously - other insanities here.
products that are classed as high in fat, sugar or salt (HFSS) and therefore unhealthy.
That’s not even remotely true. What portion of the total diet is those evil substances might cross a line between healthy and unhealthy. All of those substances are absolutely essential in a diet - we die without them - so the presence of them cannot be, in itself, unhealthy.
We’d remind of - possibly reveal - Mrs Worstall’s Dictum: “If the larder’s* full of a balanced diet at the beginning of the week, empty at the end of it, then we’ve all had a balanced diet that week.” Quantities of whichever at a particular meal or component of one do not matter that is.
This is a larger point too - relevant to emissions. Sure, we desire that CO2 emissions go down. This does not mean that each and every component of emissions must reduce, only that total emissions do so. So, say we need to reduce emissions by 98% and flying is 2% of total emissions. It is not true that flying emissions need to fall - only that all others do. Not that we insist that is the correct answer (even as we might think it is) but the logic is correct.
If it is, for health reasons - and not NHS fiscal ones - true that salt, sugar and fat consumption should fall then it’s the consumption of those as a part of the overall diet that does. Not in any one specific piece of food. Therefore it is not true that foods that contain those things which are unhealthy, it is overall diets which contain too much of them which are.
Given that the report fails on these two very basic logical points the rest of it is of no matter. Into the under the desk round filing cabinet with it. Plus, obviously, making sure that the political world also rejects it for the obvious nonsense that it is.
One final little observation in the report that really did amuse us. Apparently Ferrero and Mondelez have business models which are based - respectively, 100% and 98% - upon these unhealthy foods as defined. They’re, umm, chocolate makers.
Sweetie makers make sweeties. We need a 20 page report to tell us this? Apparently some people do but given the factual content in that assertion perhaps we should ignore the opinions of those requiring such information prompts?
*Yes, larder, not cupboards, posh background. So, bite me
So why won't luvvies put their money where their mouths are?
One possible answer is that they’re cheap. But we could never say that about Britain’s most distinguished thespians and artists. Of course.
The actual answer is also more interesting:
It’s not the first time that directors have bought the shop window. Quentin Tarantino owns two theatres in LA, including the Vista. And back in 1970, avant-garde maestro Jonas Mekas co-founded the Anthology Film Archives in New York, which is still electrifying the edges of movie culture.
In the UK, some film-makers have had a go. Here in Scotland, for example, Jeremy Thomas, who produced Bernardo Bertolucci’s The Last Emperor and David Cronenberg’s Crash, co-owned Edinburgh’s Cameo Picturehouse for a while, and even Tilda Swinton and I got into the world of projectors and popcorn for a bit with our Brigadoon-like pop-up The Ballerina Ballroom Cinema of Dreams.
But with cinemas struggling or closing in several cities – Bristol, Edinburgh, etc – why haven’t UK-based directors bought some of them?
We’ve already ruled out that obvious answer, they’re cheap. So, what is it?
Then there’s the fact that part of the UK’s cinema circuit isn’t purely a private sector endeavour. Networks such as Picturehouse, Vue, Everyman and Curzon are all showing aesthetically bold movies like The Zone of Interest, but beyond them there are cinemas that receive some public funding – from the BFI via the National Lottery and the Film Audience Network or local councils, for example.
These sums are small and not secure – council funding is particular is disappearing – and to access them cinemas and arts centres often become charities. You can donate to them but not invest because they don’t exist to make a profit. They do specialist seasons and, at their best, film education, so are not purely commercial organisations. The result? The film exhibition scene in many UK cities is broader and richer than equivalent towns and cities in the US.
There’s another way to describe that and it’s “crowding out”.
There are things that people would do, unaided and off their own bat. But which they don’t do if government is already doing them. That is, government action crowds out those private actions.
This idea is hotly contested of course - those in favour of government action on all sorts of things like to stoutly deny that crowding out can ever happen. Government is only ever additional to private efforts, it does not replace. For that argument makes government action look better, bolsters the arguments for government acting. Those less enamoured of bureaucrats like to point up the crowding out effects.
But here we have it from the belly of the beast. The reason luvvies don’t support little cinemas is because government already does it. So, if we stop the taxpayer having to support little cinemas then the luvvies will indeed support them instead. Rather a win/win there for everyone.
It’s also proof perfect that we can shut down the Arts Council entirely and save a £billion a year in the process. For that spending only crowds out what would happen privately anyway.
We mean, sure, we should do that anyway, but nice to have another arrow of an argument in the quiver, no?
No, devolution alone won’t fix poverty in the North East
Poverty in the North East
The North East, as everyone knows, was once a powerhouse of coal mining, shipbuilding, and manufacturing which fuelled the nation’s growth and prosperity. However, the decline of traditional heavy industries, coupled with shifts in global trade patterns and technological advancements, decimated the region's economic foundation.
The repercussions of this industrial decline have been felt far beyond the factory walls, affecting the social fabric of the North East. Unemployment soared, and the ripple effects of job losses exacerbated into poverty and deprivation.
Now 54.6% of all homes in the North East are classed as deprived in one or more of the four dimensions used to measure deprivation in the UK. And the problem with deprivation is that it casts a long shadow. The poverty that the North East grapples with is intergenerational, and very difficult to combat.
The problem with poverty:
This is not complicated. Poverty is bad. Beyond the loss of potentially productive workers due to poor health and education, poverty had wide ranging social and psychological impacts. Not only does mental health suffer under poverty – which then circles back to reduced productivity, but social cohesion is harder to achieve.
But the issue in the North East isn’t in getting people to understand the problems with poverty – it’s in understanding that poverty in the North East is repetitive. It is intergenerational.
What is intergenerational poverty?
Intergenerational poverty occurs when poverty persists from one generation to the next. Children born into deprived circumstances face barriers to accessing essential needs (such as stable housing) and opportunities (such as quality education) which constrains their prospects. In the North East Child Poverty Commission’s most recent report, 35% of babies, children, and young people live in poverty, and 11% in very deep poverty. This helps perpetuate a cycle of poverty and marginalisation.
Material poverty serves as a formidable barrier to upwards mobility. With factors such as a lack of stable housing, an inability to meet fundamental needs and one in ten households in the North East being classed as “food insecure”, harming a child’s growth and future wellbeing.
Educational poverty, characterised by limited educational resources, feeds into lower academic achievement which limits future economic opportunities.
Cultural poverty is a socially sensitive topic, as those referencing it could fall into the trap of blaming the poor for their conditions, but it is a crucial factor. When people face barriers to opportunities for a long time they might start to believe that they can't improve their lives. This feeling of hopelessness feeds into the younger generation by making their dreams feel unattainable and curbing their opportunities.
These are just a few of the many limitations that are passed onto the next generation. The cascading effects of intergenerational poverty only serves to exacerbate inequality over time.
A new approach to fighting poverty:
If, as I think everyone should, you read the NECPC’s report ‘No Time to Wait’, you begin to understand the scale of the problem facing those trying to fight poverty.
The report itself makes for harrowing reading. Reading the words and experiences of those who deal with poverty every second of every day is eye-opening, and the plethora of statistics on the topic is heartbreaking.
Now, if you were part of a charity or organisation actively working to combat poverty on a daily basis, witnessing the potential of bright children being limited by circumstances beyond their control would likely be disheartening. Additionally, observing the limited impact of government policies in addressing these challenges would likely lead to high levels of frustration and disappointment.
Which makes the solution proposed by these organisations understandable.
Devolution, from the point of view of those calling for it, will finally allow these charities and organisations the power to make a real difference and help save the futures of hundreds of thousands of children.
The dangers of devolution:
The hope of the organisations calling for devolution is that giving more power to councils and regional bodies will result in the regional policy they want.
However, expanding devolution by granting councils increased powers and authority could lead to a proliferation of politicians. While many politicians undoubtedly work with commendable intentions, their actions may become influenced not solely by the pursuit of fostering growth. Additional objectives such as securing re-election and upholding a consistently favourable public image may become the main focus of their work.
More bureaucracy and politicians will not lead to the dramatic fall in poverty that these charities and companies desire. Instead, it will gum up the system, hindering the fight against poverty and further constrain the North East.
This is all without mentioning the elephant in the room that in 2004, 77.93% of the North East voted against devolution and a regional assembly.
Alternative solutions:
There are alternative solutions to fighting poverty, rather than devolution.
Local authorities and mayoral offices have an opportunity to collaborate. If the combined authorities of the North East pooled their funding to help finance a cross-sector initiative they could help fight poverty. By engaging charities, schools and even businesses a comprehensive plan to take on poverty from multiple angles can be drawn up. Then, the pooled funding from various local authorities and mayoral offices can be used to properly finance a cross sector comprehensive poverty action plan.
Schools play a crucial role in addressing poverty. By collaborating with local authorities to provide the necessary resources and engaging with the business community, schools can facilitate work-based learning opportunities and mentorship programs that prepare students for the demands of the local economy.
The involvement of charities can significantly enhance the reach and impact of any efforts to fight poverty. Charities in the North East have spent decades fighting poverty, generating a deep understanding of the specific needs of vulnerable people and can provide targeted support and services. By collaborating with local authorities and businesses, charities can access additional resources and expertise to amplify their impact.
The involvement of businesses is essential for sustainable poverty alleviation and economic growth. Businesses can contribute by creating job opportunities, providing training and skills development programs, and investing in local community initiatives.
Ultimately, a cross-sector initiative to tackle poverty in the North East of England can lead to tangible benefits for the region's economy, bolstering the region's competitiveness and attractiveness for investment.
Summary:
Concerns over poverty, its ever-worsening condition and fears that more could become trapped in poverty are sound concerns that should be seeing wider attention and action. But the answer is not more devolution. The answer lies with a comprehensive plan, designed by experts in a cross-sector initiative to allow the North East to grow and flourish, without staying forever supported by the state, or becoming oversaturated with politicians.