Month: February 2011

 

          I was sent an interesting email this week. It came from someone who knows how the changes at a particular  quango are going. It makes worrying reading.

          The bottom line is that spending goes up in the short term in order to achieve a closure of a quango and the transfer of duties elsewhere. 14 administrative  staff lose their jobs, but 7 new management grade staff are recruited, along with three adminstrative staff hired in another location. As a result the early years costs include redundancy and pension payments that more than wipe out the small staff  savings.

          The public sector ought to have a huge advantage. It can offer continuity of employment, in return for asking flexibility about duties. The traditional civil service regularly switches people within a given department from one area to something very different. Sometimes staff are switched between departments, as recently happened over the change of Competition responsibilities between Culture and BIS.

           The same should apply to quangoland. Taxpayers do not want to be paying redundancy payments, and then  hiring fees within a similar organisaiton owing to organisational changes. The main mechanism for bringing public spending under control should be cutting recruitment. As people leave, others from within the public sector should be offered promotion if the job is essential or the post should be abolished and any valuable part of the work reassigned.

        The Cabinet Office needs to get a grip. We do not want big reorganisational costs with the cost savings delayed for several years or never materialising.

       The remorseless langauge of cuts reflects three differing realities. In some cases new budgets are tough and require actual cuts that are not popular. In other cases, like this one, the cuts themselves are expensive, leading to worrying redundancy payments and special pension contrbutions. In a third set of cases the cuts are political, as a bad public sector management wants to make a point by doing something damaging. I read in some places that I do not think there are any cuts. As I always point out, there are indeed cuts, despite public spending going up every year for 5 years in cash terms.

 

            A favourite nursery song gives topical Labour  advice to Ministers:

“If you go out in the woods today,

You’re sure of a big surprise.

If you go out in the woods today

You’d better go in disguise”

          I am a tree hugger. I like trees. I love looking out at a wooded vista. I think trees planted in towns and cities take some of the severity off the urban landscape. I favour keeping woods and trees where possible.

          I also understand the strong feeling  we share, that some of the great woods are part of our common inheritance. They date back to times when commonland offered poorer citizens the chance of augmenting their incomes. As a boy I picked bluebells and primroses from commonland woods in the spring, and took home blackberries for a pie in the autumn. In our new regulated world I would not dare do those things today.

          I do not have that same strong sense of national ownership and enjoyment with some Forestry Commission Plantations. The Forestry Commission was the body which in various places cut down old deciduous mixed woods, and replaced them with carefully farmed conifer plantations. If I ever venture onto Forestry Commission land I keep to the authorised footpath or bridleway. I would expect some official to pop out of a concealed hut somewhere and fine me if I stooped  to pick a wild flower or wandered off the approved track. I might end up being  accused of crushing  underfoot some protected beetle or fungus which an expensive consultancy study had revealed.

                I am a convinced tree saver, but I am also an economic realist. There are occasions when Planning authorities need to grant development permissions which entail cutting down some trees to make space for new homes or factories. In such cases it is good if the Council requires the developer to place at least an equal number of new trees in appropriate places in the development to replace those lost. Such development should not take place in heritage forests, which are already protected by planning law and other special designations in many cases.

                 Listening to the wild debate in the Commons on Wednesday I despaired of any rational approach to this problem. So many seem to think private sector trees are not as beautiful or useful as public sector trees. Others wrongly think every private owner of trees harbours the desire to cut them all down and build, or intends  to block all rights of way and close all car parks in and near the woods.  Thinking the worst of all such people, they also think the law is not strong enough to enforce the clear public wish that all rights of access should be preserved where Forestry Commission woods are transferred on lease to private managers.

                  I think we need our heritage and amenity woods, and should expand them as this government says it wishes to do. We also need more commercial woods, run with profit and growth in mind. We import far too much of our timber. The Forestry Commission has left us very reliant on imports for most of our needs. Harnessing more private capital and management might help bring about a larger and more successful timber industry in the UK.

Adapting the old song

“If you go out in the woods today

You’re sure of a big surprise

If you go out in the woods today

You’ll find them full of lies”

 

               Roughly half of all the money spent is in the public sector, and half in the private sector.  Around one fifth of all the public money spent is borrowed.  The other fourth fifths comes from taxing the private sector.

                Most people now agree we cannot carry on borrowing at the rate we are to pay for all that extra public spending. There are two choices on how to stop the borrowing. The first would be to cut spending. The second is to take more tax from the private sector.

               The Coalition government has ruled out cutting the amount we actually spend on the public sector – indeed, they want it to go up a little over the next five years. This is presented as cuts, because it entails cutting  previous plans to increase spending. In a few areas it entails actual cash cuts, and in more areas cuts after allowing for general inflation. Bad management or politically inspired  management will ensure there are some unpopular cuts in some areas. In other preferred programmes like overseas aid, EU contributions, health and pensions it entails real increases. In an area like Health because the increases will be much smaller than the service is used to, there could well be tensions.

           That means that all the reduction of the deficit is planned to come from increased tax revenue. Some is going to come from increased tax rates. The government has put in place or confirmed higher rates of Income Tax, VAT, fuel duty and others, and has lowered Income Tax thresholds for higher rate tax. The bulk of the required increased tax revenue is forecast to come from the proceeds of growth.

               This simple arithmetic will dictate the politics of the next few years. The squeeze will be most intense on the private sector, as it struggles to find all that extra tax revenue and faces those higher tax bills. Nonetheless the public sector will feel hard done by, as the contrast with the spend and borrow more years will be sharp.

               All rests on growth. If the economy starts growing at above its trend rate of growth and sustains that until 2015 the strategy will succeed. If  growth continues to disappoint, and it turns out the government has not done enough even to recreate the old trend rate of growth that was so damaged by the experiences of the last few years, the deficit will stay obstinately high. Getting to an above average rate of growth with badly regulated banks and with a rising tax burden is not going to be easy.

              The sad truth is we all have to take a hit as the country stops living 10% beyond its means. The current plan is the private sector takes more of the hit. That’s why the Governor of the Bank of England made such a gloomy speech about real incomes last week. If the private sector hit is too big the recovery will be weakened.

 

                  Yesterday the Minister for Europe told the Commons that the EU is going our way. He believes that EU Ministers generally now understand that too much law and regulation is holding back enterprise and job creation across the continent. He looks forward to a rosy future, where the advantages of a common market outweigh the disadvantages of all that EU regulation, as the EU awakens from its lawmaking nightmares and grows up believing in freedom.

              I disagreed with him. Even if more ministers do now think as he says, they have not told their officials, or if they have told their officials, the officials have no intention of implementing their views. The EU is in regulatory and lawmaking overdrive. The pace and volume of financial servioe and banking regulation is  ferocious. The new work on economic governance and surveillance is intrusive. The criminal justice bandwaggon rolls on.

             I had a bad day yesterday. In the morning I was required for one of many Statutory Instrument Committees. Most detailed UK law now takes the form of a Statutory Instrument. The Act of Parliament which we spend a lot of time over is usually lacking detail. The detail, the things that really bite, comes in  the SIs which follow. These only get a maximum of 90 minutes debate. There can be a single vote on a take it or leave it basis. There is no opportunity to amend or improve.

               Yesterday 18 MPs were invited to approve 67 pages of regulation called  “The Investment Bank Special Administration Regulations 2011” and  three pages of “The Investment Bank (Amendment of definition) Order 2011”. Most MPs like new regulations, so  there was no question of the Opposition opposing these.  One backbench Conservative member, Adfam Afriyie, asked good questions about why suppliers to bankrupt Investment banks under these new regulations would  be required to carry on supplying  if the Adminsitrator told them to. The Opposition asked a few intelliegent questions. After 37 minutes another 70 pages of regulation was safely on the Statute book.

         Was I happy with it?  No I wasn’t.  Why didn’t I take them through the regulation with a fine tootth comb? Because there was no point. The SI could not be amended, and was clearly going to pass. When I have done so in the past nothing has been changed or improved.

                These particular regulations are not that harmful, as I doubt they will ever be used. There is no immediate prospect of an Investment bank needing Administration. The Minister told us that the EU was currently crawling all over this field. Doutbless in a year or two we will need to approve a new SI which matches the EU’s requirements in  this area. In the meantime, this Regulation was made out to give the FSA cosniderable duties in the event of a financially challenged Investment Bank. That too will have to change soon when the FSA is abolished and the Bank of England is left as sole regulator in this area. The Bank  may have second thoughts as it gets into its stride.

                  This SI like many of the modern breed confers very wide ranging powers. A bank can be put into special adminsitration for the old fashioned  reason that it is “unable to pay its debts”. I t can also now  be put into administration  because it is “fair” to do so, or because it is “expedient in the public interest to do so”.

                      Parliament needs a new way of handling this rash of law. Some of us are pressing for SIs to be subject to amendment and proper debate. Until they are, regulating is just too easy. Too many EU politicians are in love with it.  You will rarely read about any of this voluminous lawmaking in the papers or hear anyone criticise it on the BBC. Individual regulations have many parents and few critics. In many cases regulations fail to enforce their stated purpose, and in the worst cases do the opposite of what they wish to achieve.

 

                  My two grandfathers were working class. They both lived in rented accommodation, and earned their living from a skilled trade. They both spent teenage years in the trenches in France fighting for their country.   One, a farrier, had to become a labourer for the electricity company when horse shoeing went out of fashion. The other did move in later life from carpentry and shop fitting to a clerical job in an office. 

                In the 50s and 60s when I was a  child working class attitudes were straightforward. The families did not want to accept charity. It was the father’s task to find and keep a job to pay the rent and the food bills. There was a pride in self help, and in the dignity of labour. A man defined himself by what he did, by his position in life. As the welfare state developed, people were happy to take universal benefits like free health care and the old age pension. They saw these as entitlements, paid for by their National Insurance stamp.  They saw means tested benefits as a kind of state charity they would rather avoid. One grandfather supported the Unions and Labour, the other I think voted Liberal. Neither wanted to talk religion or politics. Both were Church of England, and had imbibed a moral sense from the Christian message. Both liked the NHS, protecting them from the unaffordable doctor’s bills.

             Labour’s history was bound up with seeking to understand and represent such families. Conservatives made a fight of it, often securing the support of working people who thought Conservatives would manage the money and the economy better, which was in everyone’s  interest. The two main parties accounted for the lion’s share of the vote. People on low incomes were called poor. There was an implied distinction in many people’s language between the deserving poor – the disabled or otherwise unfortunate – and the idle poor who simply did not have a sufficient work ethic to do what everyone else did.

           We now look at things very differently. The erosion of the old class language and arguments is good news. We have moved from discussing poverty to discussing deprivation or disadvantage. We have moved from the poor  to the benefit class. We have changed from a country where most think means tested benefits are to be avoided if at all possible, to where many think means tested benefits are a right, and a necessary means of correcting some  of  the social injustice manifest  in income inequalities.

         I have no wish to put the clock back. Much is better today.Not least, we are a much richer society, and can afford to be more generous to neighbours who do not have well paid jobs. Many families who were working class in the 50s became middle class in the 60s, 70s and 80s. Many more attained clerical and executive jobs and the pay and  lifestyles that go with them. Men and women with skills were able to form their own small businesses, and many prospered as they bought their own home, joined the golf club and sent their children to university.   However, if welfare reform is to work one old idea does need to be strengthened. It is simply that all who can work should work, to pay their own bills.

        The recent employment figures show that the private sector has been generating a good number of new jobs over the last year – more than 300,000. They also show that two thirds of these were taken by recent migrants into our country, leaving many people who were born here out of work. We need to ask why this is so. We need to switch more people from benefit class to employment.  The welfare reforms need to ensure that the severely disabled and otherwise unfortunate are generously treated – something we can now afford – whilst there should be strong incentives for the rest to take the jobs that the economy is now creating.