Daily Mail: Soaring public pensions must be frozen, not gold-plated

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Old Teaser

23 March 2010

Written by Harry Phibbs

Eamonn Butler, Director of the Adam Smith Institute, proposes in his new book, The Alternative Manifesto, a radical approach. ‘We should stop future gold-plated pension commitments stone dead and start afresh,’ he says.

‘The fairest and most economical option would be to close all public sector final salary schemes to new recruits entirely, and move those workers to what is now the norm for those already in pension schemes in the private sector - at least the norm where people have any pension at all - namely defined benefit plans, where the worker and the employer both pay into a pension pot which on retirement pays out whatever the pot allows, regardless of past salary.’

Published in the Daily Mail here.

The Stage: Vouchers for all ‘a better way to subsidise the arts

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Old Teaser

23 March 2010

An £11 voucher, distributed to everyone in the UK to invest in an arts event of their choice, would provide a better means of government cultural subsidy than the arts councils currently do, according to a new report by a free market think tank.

In the Adam Smith Institute’s briefing paper Arts Funding - A New Approach, David Rawcliffe suggests members of the public could each be given an annual non-transferable voucher, worth £11 at current funding levels, that arts producers could redeem for cash.

According to Rawcliffe, this would reduce administration costs and spread subsidy more fairly across the country, and “diversity and competition would flourish”.

Rebuffing the suggestion, a spokesman for Arts Council England commented: “The idea of giving everyone an £11 voucher to spend on the arts completely overlooks the role of the subsidised arts as a breeding ground for talent and innovation, and their role in feeding the commercial sector.

“This proposal would destroy an arts offer that brings pleasure to millions, is the envy of the world and is central to this country’s long-term economic future.”

The ASI is not affiliated to any political party, but was a key influence on Thatcherite economic policy.

Its executive director, Tom Clougherty, said: “I don’t think government should be subsidising the arts at all. I don’t like the bureaucracy that’s involved, I don’t like the way it distorts art for political ends and I particularly don’t like the way it means less wealthy areas subsidising London and less well-off people paying taxes to subsidise entertainment for the rich.

“In my view, art should, if at all possible, be funded through ticket sales and philanthropic donations.”

Published in The Stage here.

FT:We should not be saved from our stupidity

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Old Teaser

21 March 2010

Written by Dr EamonnButler

It is very hard to play the game of life – or of capitalism – when governments keep changing the rules. Which they do every time they fear that one of the players might actually be losing. It does not matter if the players’ loss is down to their own folly; the politicians still rush to turn them into winners. They do not want voters harbouring grudges. But in making sure that everyone wins prizes, they sap the very incentives that drive our social and economic progress.

The point came home to me after I had invested my worldly wealth in Icesave, mesmerised by its 7 per cent interest rates (remember those?). I knew this rate was probably too good to be true and that I was taking a risk. Not a total risk, because Icesave was registered in the UK, so the first £35,000 was guaranteed by the government’s Financial Services Compensation Scheme.

In the event, when Icesave failed, taking my money with it, Alistair Darling, chancellor of the exchequer, generously sent me a cheque, not just for £35,000 but for every penny I had so foolishly invested. More amazingly, he even threw in the interest.

I wondered why cleaners in Cleethorpes, or road workers in Reyk javik, should pay higher taxes to spare me from the results of my own greed and stupidity. Iceland’s citizens, in street protests and an overwhelming referendum, insisted that they should not do so. But generosity comes easily to politicians, who of course can be generous with other people’s money, even though it shoots a hole not just in incentives but in the public accounts too.

The same happens at the European Union level. Why should the Greeks bother to remedy their notorious corruption and fiscal alcoholism, when it is obvious that the taxpayers of other countries – including Britain – will ultimately be forced to bail them out? What sort of example does that set to other spendthrifts?

Parents know that you need to set clear rules and stick by them. Kids may scream, but they will accept the consequences of their actions if the rules were clear at the outset. Indulge their tantrums and it is mayhem. Yet our leaders imagine that they can fudge the basic principles of capitalism, indulge (on taxpayers’ money) whoever screams about the results, and still maintain a thriving, functioning economy. They are mistaken.

The rules need to be sensible, too. The banks did not fail because there was too little regulation but because there was too much, most of it inept. The regulations did not stop banks from expanding so fast they created megabanks that smothered the last breath out of competition – the best regulator. While the Financial Services Authority busied itself writing “customer care” guidelines, it seemed unaware that these monster monopolies were cheerfully gambling away those same customers’ savings on various arcane financial wheezes.

The regulators should have been making sure that the banks did what it said on the tin – telling savers how safely or how riskily their cash was being invested. But when customers are told that they are safe and warm in the feather duvet of regulation, they do not bother to check the bona fides of their banks. They just snap up those 7 per cent interest rates.

Politicians and regulators have created a looking-glass world in which they suspend reality and gull us into doing stupid things, and then compensate us when we do. Years of easy credit prompted the banks to take wild risks, but they were bailed out when it all went wrong. When inflation was rising, Gordon Brown, Mr Darling’s predecessor, simply changed the measure, making the Bank of England ignore the property boom under its nose. The boom created buy-to-let millionaires but, when it exploded, the Bank simply pushed mortgage rates down to near zero, bailing them out too.

The losers, naturally, are those who have saved and invested prudently and now are picking up the tab for everyone else. Instead of letting the pain fall on those who took the biggest risks (as in the case of Lehman Brothers), politicians and regulators have slowly painted themselves into a corner. The cost is: unemployment, a falling pound, a yellow card from the EU and public debt of £23,000 per man, woman, child and infant.

In the coming election in Britain we do not need simply a different bunch of politicians. The UK – and the western world – needs an alternative politics. We need leaders big enough to admit that they cannot airbrush out our mistakes, and that attempting to do so simply destroys the mechanics that make capitalism work. But if someone does not address the fiscal alcoholism that is affecting our judgments, we will all end up in the economic gutter, while the risk-takers of China and the Middle East pass us by.

Published in the FT here.

The Times: SchoolGate: The universities crisis: is abolishing the cap on fees the answer? Should all university courses cost the same?

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Old Teaser

Written by Sarah Ebner

Lord Patten's comments follow on from a new report, out just a few weeks ago, by James Stanfield, a fellow of the Adam Smith Institute and of Newcastle University's E.G. West Centre, which is privately funded.

Dr Stanfield also called for the cap on fees to be abolished, and claimed that they completely distort the system.

The cap, he said, "artificially increases" the demand for university places, and even makes students value their education less, because they're not paying the full price for it. As you can probably tell, it's a very market-driven analysis.

"What politicians don’t realise is that tuition fees ought to send important signals about the relative value of different university courses, and help to co-ordinate the interests of students, universities, and future employers," he wrote. "By dictating what fees may be charged, the government is severely retarding the natural development of higher education."

Dr Stanfield goes further than Lord Patten, calling for all direct public subsidies of higher education to be scrapped. He says that the government's current subsidy simply "taxes the poor to help the rich get richer" as well as "crowding" out philanthropic involvement. Instead he calls for funding to be channelled though a new and expanded student loan programme. The new loans, he said, should be targeted at those most in need financially. - the wealthier should only be able to have a set percentage of their fees as a loan.

Although Dr Stanfield's plans are more extreme than Lord Patten's, both have a similar argument at their core - that it's wrong for all degrees to cost the same, whatever their quality, whatever the subject, wherever they are taken, and however much they help students to get a job afterwards.

Published in The Times here.

BBC: More students, but who will pay?

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Old Teaser

Written by Sean Coughlan

There have been calls for the scrapping of any kind of limit and the creation of a completely free market in fees. A report for the Adam Smith Institute says that setting an upper limit for fees creates an artificial demand for places.

Published on the BBC here.

guardian.co.uk: Adam Smith Institute's proposals could mean curtains for UK theatre

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Old Teaser

Written by Lyn Gardner

Plans by the rightwing thinktank to replace arts funding with a voucher system could kill innovative theatre stone dead

Imagine a world in which there was no government subsidy for theatre-makers. It would be a place where art responded entirely to the demands of the market. Such a theatre would probably look much like the West End. Hang on a minute: it wouldn't, because from Les Miserables to The Caretaker, from Jerusalem to Enron, several West End shows emerged out of subsidised theatre. So, in fact, what this theatre landscape would look like is endless productions of Oliver! or Dreamboats and Petticoats. Except it couldn't be that either, because although those shows might be entirely commercial propositions, those who created them – the writers, directors, designers and actors – learned their trade in subsidised theatre and then transferred their skills to the commercial marketplace.

All three political parties are currently courting the arts while being careful to make no promises about what will happen to funding after the election. The Tories' Jeremy Hunt is working hard to wipe the memory of the 1980s when the then Conservative government made clear its dislike and distrust of the arts, and theatre in particular. Remember Norman Tebbit and Theatre Centre? Hunt recently laid out a vision for the arts that included increased donations from philanthropists and the building of endowments, while making it quite clear that "philanthropic giving should not be a replacement for state support".

But will such thinking continue to hold sway after the election if the Tories win and implement savage cuts in public spending? It shouldn't, according to the rightwing thinktank the Adam Smith Institute, which, in a report published on Monday entitled Arts Funding: a New Approach argued against all government subsidy of the arts and suggested that if it does continue, the Arts Council should be abolished to save its (currently falling) administration costs. Author David Rawcliffe proposes a new system of funding in which artists would no longer be subsidised, and subsidy should be distributed directly to consumers: everyone in the country would receive a yearly non-transferable voucher (at current funding levels, worth £11) that they could then spend on the event of their choice. Arts producers would exchange the voucher for cash. He argues that "the arts council system of government support for the arts is an outdated, centrally-controlled, bureaucratic nightmare that is expensive, unfair and ineffective. The objectives of arts subsidy would be fulfilled far more efficiently by a post-bureaucratic solution that empowered citizens, and compelled the arts establishment to meet their needs. A voucher system is exactly that."

Oh no it's not. There are good arguments for giving communities a say in how subsidy is distributed, and which artists and projects should receive it (the Arts Council has shown an interest in South American models), but Rawcliffe's suggestion that "the definition of good art would be that which people wanted to see, or that which private patrons wanted to fund" turns art into a kind of popularity contest. Such an approach to funding would kill our thriving and innovative theatre culture stone dead – the same theatre culture that gives such a good return on the investment it attracts.

In a world where government subsidy is abolished, our cities and towns would be full of crumbling, empty theatre buildings. People would lose their jobs and the local economy would suffer. The brilliant Drum in Plymouth and the Mercury in Colchester would be unable to make theatre for and about their local communities. Rural touring circuits would break down and companies such as Complicite and Kneehigh would disappear over night. Maybe the Royal Shakespeare Company and National Theatre would survive in some form if they could attract enough philanthropic support, although of course their education work in schools would have to go. And ticket prices would probably have to rise substantially – a seat for the new Simon Stephens play might cost £100. Only there would be no new Stephens play, if the donors didn't like the sound of it.

Arts Funding: a New Approach may, of course, never be adopted as Conservative party policy, but its very existence at this delicate pre-election time is a sharp reminder of Tory antipathy towards funding for the arts and their deep suspicion of artists.

Published on guardian.co.uk here.

CNBC: UK's Conservatives to Win Marginal Constituencies?

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16 March 2010

Published on CNBC here.

CNBC: UK's Conservatives Gain Ground: Polls

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Old Teaser

Published on CNBC here.

CNBC: UK's Conservatives Gain Ground

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Old Teaser

Published on CNBC here.

Times Higher Education: Taxpayer beware: The hidden costs of public funding's helping hand

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Old Teaser

Written by James Stanfield

The academy should be brave enough to seek donations directly from individuals, rather than relying on the fruits of state coercion, says James Stanfield

While much of the current debate on higher education has focused on what is seen, namely the immediate benefits of government spending and national planning, it has tended to neglect what is not seen - the hidden costs and unintended consequences of these interventions.

First, there is no evidence to suggest that there is any economic benefit to the nation as a whole from the Government transferring £14.3 billion each year from taxpayers' wallets to students and universities.

Second, neither is there any evidence to suggest that the public benefits associated with spending £14.3 billion on higher education will be higher or somehow better than the public benefits associated with taxpayers spending £14.3 billion themselves.

Third, while many are convinced that the annual subsidy is helping to create a more equal and just society, it is impossible to escape the fact that part of this subsidy represents a transfer of income from those on lower incomes to those who will soon be on higher incomes.

Furthermore, it is clear that government subsidies and the manner in which they have been distributed have resulted in a significant number of hidden costs and unintended consequences that were not part of the Government's or universities' original intention. These include: undermining the autonomy and independence of private institutions; crowding out philanthropic donations; the disruption and distortion of the pricing system; confusing academic, professional and vocational education; the rationing of university places; restricting private investment from home and abroad; crowding out for-profit institutions and entrepreneurial talent; restricting competition and innovation throughout the sector; and qualification inflation.

One hidden cost that is clearly relevant concerns the widespread rationing of university places. As the whole point of transferring £14.3 billion from the taxpayer to students and universities in the first place was to encourage more higher education and not less, it would appear that this intervention is now having exactly the opposite effect.

In fact, when taking into account all the other hidden costs and unintended consequences of government subsidies and political interference, it becomes clear that they all involve (in one way or another) the distortion and the restriction of the natural growth and development of higher education, making it less efficient and less responsive to the needs of students and the business community. Therefore the £14.3 billion public subsidy to higher education is restricting and distorting the growth and development of one of the UK's most important service sectors. In short, the public subsidy is now doing much more harm than good.

While universities would celebrate if their public subsidy were doubled overnight, one wonders how they would react if told that instead of expecting the Government to confiscate money from the public on their behalf, they must now be prepared to appeal to the public directly. As universities have been happy to demand public subsidies from the rich and poor alike, then they should have no problem with appealing to these same people on the doorstep.

In principle, this method of raising funds is the same as the existing system in which universities use the Government to confiscate the funds from the taxpayer using the tax system. The key difference is that while one method is voluntary, the other depends on the use of force, and instead of the funds being transferred from the taxpayer to the Government and then to each university, they would now be transferred directly from the public to each university. This method of fundraising would at least appear to be much more democratic, as it would allow people to decide whether they wish to make a donation.

The ability of each university to collect sufficient funds from its local communities would now depend on its ability to convince local people, and especially all non-graduates, why and specifically how they will benefit each year from making an annual donation.

If universities are correct in their claims that they provide widespread and remarkable public benefits, then as long as they can provide the necessary evidence, those collecting the money on the doorstep can look forward to a warm and generous response. Three cheers for evidence-based policies.

Postscript : James Stanfield is a fellow at the E.G. West Centre, School of Education, Newcastle University. He is author of the Adam Smith Institute report The Broken University: What is Seen and What is Not Seen in the UK Higher Education Sector, published on 4 March.

Published in Times Higher Education here.