Tag Archives: welfare

If we leave the EU we mustn’t be another Norway

Amongst those who want the UK to leave the EU there are those who say “Look at Norway, we can have the same arrangement with the EU as they do, a simple free  trading agreement”.  This is profoundly wrong.  The European Economic Area (EEA)  countries  of which Norway is one have to take on most of the more obnoxious burdens of the EU  whilst being excluded from EU decision making . This is unsurprising because the EEA was born of a desire of the European Free Trade Area (EFTA) to integrate with the EU.

EFTA was founded in 1960. The founding members were Austria, Denmark, Norway, Portugal, Sweden, Switzerland and the United Kingdom. Subsequently Finland became an associate member in 1961 (becoming a full member in 1986),  Iceland joined in 1970, Liechtenstein 1991 (previously its interests in EFTA had been represented by Switzerland).

EFTA gradually lost its members as they joined  what is now the EU.  The United Kingdom and Denmark joined the European Economic Community in 1973, Portugal joined  in 1986., Austria, Sweden and Finland joined the EU in 1995. This left only Switzerland, Norway, Iceland and Liechtenstein.

Negotiations between the EFTA nations and what was then the European Community  (EC) for a closer relationship came to fruition in 1992 when the  EEA Agreement was agreed by  negotiators of EFTA states and the EC members.  Switzerland rejected the agreement in a referendum,  but later signed bilateral treaties with the EU which have much the same effect as the EEA Agreement.  (http://eeas.europa.eu/delegations/switzerland/eu_switzerland/political_relations/index_de.htm )The rest of the EFTA members signed. The EEA Agreement came into force in 1994. The full text can be found at   http://www.efta.int/legal-texts.aspx  (click on the EEA link and open or download the PDF file).

EEA membership requires that subscribing states have to accept the “four  freedoms” of the EU: the free movement of goods, persons, services, and capital among the EEA countries as well as those comprising the EU.  This the prime reason for not joining the EEA or having a bilateral relationship with the EU similar to that of Switzerland.  These “ four freedoms” mean amongst other things that  EEA members cannot meaningfully control immigration, protect their economy, prevent foreign takeovers or  freely engage in any new taxpayer funded  subsidy  for  which is judged to interfere with the market (article 61).

The forced adoption of the “four freedoms”  is reason enough not to join the EEA or anything like it.  However, there are further sovereignty removal horrors. EEA members have to adopt EU law in the areas of social policy (article 67), consumer protection (article 73), environment (article 73), company law(article 77) and statistics (article 76) and surveillance (article 108). In addition, article 78 states “The Contracting Parties shall strengthen and broaden cooperation in the framework of the Community’s activities in the fields of:

- research and technological development,

- information services,

- the environment,

- education, training and youth,

- social policy,

- consumer protection,

- small and medium-sized enterprises,

- tourism,

- the audiovisual sector, and

- civil protection”

The EEA states  are not required to make the type of contribution required of EU members  to Brussels nor do they receive any funds from the EU.  However, they are  forced to follow the judgements of the  European Court of Justice,   they have to pay a membership fee towards “community cohesion, that is, they are required to subsidise the poorer EU states. (article 82).

The EEA states have no formal position within EU institutions such as the Council of Ministers, the EU Commission or the European Parliament.  Hence, EU decisions are made without their official involvement. In addition, the EEA states are required in practice to abide by the European Court of Justice’s rulings (article 105). However, there is a joint committee comprised of EU and EEA representatives (article 90).

If  the UK joined the EEA, in theory   they would not have to participate in these  areas of EU policy

“Common Agriculture and Fisheries Policies (although the Agreement contains provisions on various aspects of trade in agricultural and fish products);

Customs Union;

Common Trade Policy;

Common Foreign and Security Policy;

Justice and Home Affairs (even though the EFTA countries are part of the Schengen area); or

Monetary Union (EMU).”  (http://secretariat.efta.int/eea/eea-agreement.aspx)

However,  as we have consistently seen since Britain joined in 1973, the EU has constantly found ways of  expanding their powers either by stealth or through new treaties which are never resisted in the end even if national referenda reject them because the elites of all the EU and EEA countries are  committed Europhiles .  A  referenda rejects further EU integration; the elites arrange for another referendum  to get the “right” result  or produce a new Treaty  which is the rejected treaty in a new guise and then find an excuse not to hold a referendum on it , normally along the lines that it is not a constitutionally important treaty.

If  the UK is to regain its sovereignty it needs to withdraw completely from the EU for two reasons. First, if we accepted EEA membership or something like it, we should still be so heavily linked into the EU (and would almost certainly become more heavily involved as the EU expanded its remit), that the British political elite would always be able to argue that we were so much part of the EU we might as well go the whole hog and become full members. That argument would have resonance  with Europhiles, the resigned  and those who have no strong opinion either way about the EU. The second reason is that even as it stands EEA membership would deprive the UK of massive amounts of sovereignty including the most important of all sovereign powers, the ability to control who lives in a country.  If we are to leave,  the UK should deal with the EU and EEA countries as we do with any country outside the EU and EEA territories.

How easy would it be for the UK to leave? Article 50 of the Treaty  runs:

1. Any Member State may decide to withdraw from the Union in accordance with its own constitutional requirements.

2. A Member State which decides to withdraw shall notify the European Council of its intention. In the light of the guidelines provided by the European Council, the Union shall negotiate and conclude an agreement with that State, setting out the arrangements for its withdrawal, taking account of the framework for its future relationship with the Union. That agreement shall be negotiated in accordance with Article 218(3) of the Treaty on the Functioning of the European Union. It shall be concluded  on behalf of the Union by the Council, acting by a qualified majority, after  obtaining the consent of the European Parliament.

3. The Treaties shall cease to apply to the State in question from the date of entry into force of the withdrawal agreement or, failing that, two years after the notification referred to in paragraph 2, unless the European Council, in agreement with the Member State concerned, unanimously decides to extend this period.

4. For the purposes of paragraphs 2 and 3, the member of the European  Council or of the Council representing the withdrawing Member State  shall not participate in the discussions of the European Council or  Council or in decisions concerning it. A qualified majority shall be defined in accordance with Article 238(3)(b) of the Treaty on the Functioning of the European Union.

5. If a State which has withdrawn from the Union asks to rejoin, its  request shall be subject to the procedure referred to in Article 49.

The assent  of the EU is required for a member to withdraw with an agreement in place, but withdrawal  without an agreement can take place after two years. However, the  Article does state that but  ”  the Union shall negotiate and conclude an agreement with that State, setting out the arrangements for its withdrawal.” This seems to assume that an agreement will definitely have to be reached.  There is a possible ambiguity there which might be used to invalidate the leaving without agreement clause or at least   delay Britain  leaving while the matter was argued  out.

There would also be great scope for further prevarication. For example, the British Europhile elite would be happy to string things out in the hope that political  circumstances would  change to allow them to fudge any leaving agreement to tie Britain back into the EU and the agreement of the EU parliament  might  well be withheld  if any proposed agreement  deviated seriously from the shape of the  Norwegian or Swiss agreements.

But assuming Britain could leave after two years without an agreement,  it would still mean Britain being tied in for two years, during which period the EU could cause Britain a good deal of economic harm because  in principle  they could pass whatever new laws they wanted including those directed at Britain with malign intent,  and Britain would still be bound by EU laws for the two years. Or there could simply be administrative action.  Take immigration. There could be a deliberate policy to drive as many immigrants as possible into Britain within the two years.

If Britain left without an agreement after two years we would be in a much worse situation than simply announcing we will leave and leaving immediately. That would be technically illegal in terms of  the Treaty agreement, but whatever the Treaty says the reality is that if a state as large and wealthy  as the UK announced its withdrawal without conditions, the EU would accept it because they could do nothing to prevent it and imposing sanctions against the UK would be counter-productive because the UK runs a large trade deficit with the EU. Moreover,  any sanctions against the UK would ruin the Republic of Ireland, another EU member.

Membership of the European Economic Area is  a poisoned chalice.  Resist the temptation to drink from it.

Japan and The Big Society

The response of   Japan to the triple  disaster of a massive  earthquake, gigantic  tsunami and nuclear  power failure  has been surprising. One of the most advanced industrialised states  and the third largest economy in the world has struggled desperately to deal with what is admittedly a dramatic and unusually devastating multiple disaster .  Not only has there been no clear resolution of the  nuclear power station problem  after several weeks, but the response to the distress of those who have lost their homes and all the conveniences of a modern state has been strangely inadequate.  People have been left with not only no homes or power, but without food and clean water.  In the worst affected areas even the legendary honesty and social discipline of the Japanese has begun to break down with looting. (http://www.telegraph.co.uk/news/worldnews/asia/japan/japan-earthquake-and-tsunami-in/8395153/Japan-earthquake-Looting-reported-by-desperate-survivors.html)

Is the inadequacy of the Japanese response simply a result of the scale of the disaster or is there something within Japanese society which has caused the lack of  useful response?   The scale should certainly not be underestimated because the tsunami alone damaged hundreds of miles of coastline to a reported depth of ten miles in some places and the toll of those dead is officially put at 10,000 and the missing at 17,000 as of  25 3 2011 (http://www.telegraph.co.uk/news/worldnews/asia/japan/8405619/Japan-earthquake-death-toll-passes-10000.html).  Moreover, the on-going problem of the damaged nuclear plant must be  a tremendous distraction for the Japanese government. Nonetheless, it does seem rather odd to the outsider that the response to the provision of basic necessities to the dispossessed has been so slow and patchy. It argues for at best a lack of reasonable planning for civil disasters of which there is a high probability. Japan is part of the Pacific “ring-of-fire” earthquake zone and tsunamis are a regular feature of the area. It might be argued that building nuclear power stations in a notorious  earthquake zone   is not the brightest thing to do, but Japan has little by way of natural energy resources so it is possible to see  why they have done it. What is less easy to see is why they should have built stations close to the coast with the obvious danger of a tsunami following an earthquake or even a tsunami overwhelming the station on its own.  

If there was a serious  lack of civil disaster planning why would that be?   After all, the Japanese are famously good at paying attention to detail and behaving in a disciplined social manner.   Perhaps the answer lies in the very social cohesion which has meant that  the development of  the state has been much more restricted than it is in most developed countries.  Japan has a population of 125 million, approximately twice the size of that of  Britain.   The Japanese budget for the present year is  less than £700 billion (http://www.reuters.com/article/2010/12/24/us-japan-economy-idUSTRE6BN0FQ20101224?pageNumber=1). The British Government’s projected  spend for the coming financial year is £710 billion (http://www.telegraph.co.uk/finance/budget/8403115/Budget-2011-graphic-Spending-income-tax-shortfall.html).  Japan spends less than the UK on public provision despite have a population twice as large. This means that the proportion of public spending is very low compared with most developed economies, the Japanese GDP being around £3.2 trillion of which the state spends  less than 25% .  Compare that with UK public spending which is pushing 50% of GDP.  

The surprisingly  low level of  Japanese public spending in itself means that the capacity of the state to deal with major disasters is severely limited.   This difficulty is amplified by the very high Japanese National Debt  which is approximately twice GDP.  Servicing this takes up a good deal of the Japanese government’s budget.   Money for public projects is in short supply and  it is a moot point whether Japan can be said to have a welfare state (http://www.onejerusalem.com/2007/10/14/japan-no-welfare-state/). If you fall out of work or ill in Japan and you are without the support of your family or friends, you can rapidly become  destitute.

Why is Japanese state spending so low?  Most probably it is  a continuation of traditional Japanese social relationships where support comes from  not only family and friends, but the general neighbourhood  and,  in the case of large Japanese companies at least, the organisation of  a person’s life around the place of employment. There is nothing abnormal about such development because it is precisely what happened in other industrialised countries before the state grew large.  Moreover, for many Japanese after  1945 the security offered by a fully-fledged welfare state was  largely substituted  by the giant Japanese companies who offered a job-for-life and  organised an employee’s life around the  business.  Although the job-for-life  culture has suffered considerable degradation in the past twenty years,  it stood in the way of the expansion of the state.

There is an important lesson for Britain and other developed states here. Japanese society is organised broadly as Cameron’s Big Society is supposed to be organised, with the state standing back and individuals forming a nexus of social-help. The problems this creates are only too obvious.  Japan has insufficient state capacity to deal with dramas such as it is currently experiencing or to provide for those who fall by the economic wayside. More generally, the insecurity which prolonged economic weakness produces – Japan has arguably been in recession for twenty years – will tend to make people less and less willing to think of the common good  if the support mechanisms they rely on are  informal and local.  

There is no question that there is often considerable waste in public spending . However, too little public spending is a greater evil than too much (provided the spending does not overwhelm the economy)   because too little leaves no spare capacity  to deal with either chronic problems such as long term unemployment or sudden disasters such as earthquakes or tsunamis.

Film reviews – Inside Job

Documentary

Director Charles Ferguson

Narrator Matt Damon

Released 2010

Run time 1 hour 48 minutes

http://www.sonyclassics.com/insidejob/site/#/cast

The last time I felt so angry coming out of a cinema was after a viewing of  The Smartest Guys In the Room, the story of the Enron scandal.   In the case of the Inside Job,  it was not that I was  given much by way of new facts, for I know the story it told  only too well.  Rather, I became angry simply by watching the grotesque drama which led to the present global financial disaster unravel from its beginnings; a  story well flavoured with recordings of the main players in the catastrophe either showing their reckless disregard for society at large before the recession arrived or trying to justify their behaviour afterwards in the most contemptible  and frequently risible fashion. (Watch out  for Prof  Frederick Miskin  explaining why he resigned as Governor of the Federal Reserve Board when the going got tough. His reason?  That he had to go back to his university to revise a textbook).  To that was added the dismaying knowledge that nothing has really changed since Lehmann Bros went down in 2008, with  the bankers who caused the financial disaster  still pocketing vast amounts of money, most of it provided by taxpayers.  There are some outrages which never  cease to shock no matter how familiar they become. This is one of them.

Those who have seen The Smartest Guys in the Room  will have a good idea of the approach and tenor of Inside Job. For those who have not, imagine a Michael Moore documentary without Michael Moore.  There are no cheap tricks, no exhibitionist presenter; just  mercifully jargon-free explanations of technical financial instruments and interviews quietly conducted by the director which allow the virtuous to express their outrage and the guilty to hang themselves with their own words and behaviour.

The film concentrates primarily on the American experience,  but there is no harm in that because the USA  is both an exemplar for what happened in much of the developed world and was arguably the prime driver of the global crash because of its globally dominant economy, although Thatcherite Britain needed no encouragement to tread the same criminally reckless path.

The film leads us through the story of the wilful creation of instability in the global financial system.   Jimmy Carter  began the process with the Deregulation and Monetary Control Act  (1980) and  Reagan followed it  up with the Garn–St. Germain Depository Institutions Act (1982). These  Acts allowed  Savings and Loans associations  (equivalent to British Building Societies) to behave like banks without being subject to the then  tight regulations  (the Glass-Steagall Act from the Depression) which divided investment banking from institutions taking deposits on a retail basis.  This resulted in colossal losses in the late 1980s and early 1990s with a great deal of US taxpayers’  money being used to rescue to rescue the situation.  This  gave the green light to the unscrupulous who believed, broadly rightly, that if any financial institution was large enough, it would be bailed out by the US taxpayer.

The experience of  the Savings and Loans scandal did produce  legislation to regulate anew the homes loans industry with   the Financial Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA).  That Act had one great flaw: it gave the two quasi-state mortgage granting bodies  Freddie Mac and Fannie Mae a  responsibility to support mortgages for low to  moderate-income families. That drove  the sub-prime lending.

The greatest  breach in the regulatory wall occurred in 1999. In 1998 Citi Group was formed by the merger of the bank  Citicorp and financial conglomerate Travelers Group . The only problem was that the merger was illegal under the remaining provisions of the Glass-Steagall Act which forbade any one institution from acting as any combination of an investment bank, a commercial bank and an insurance company.  Citi Group did all three . But  Citi Group were given a temporary waiver to allow them to dispose of their conflicting business in an orderly fashion.  Happily for them and sadly for the rest of the world, they were never required to make the disposals because in 1999 the  Gramm–Leach–Bliley Act (GLB )  repealed the parts  of the Glass–Steagall Act of 1933 which regularised Citi Group’s position and opened the way for any other US financial institutions to follow suit.

The final nail in the economic coffin was the failure of the regulatory bodies  such as the Securities and Exchange Commission (SEC)  to take any meaningful action against the newly freed  financial monsters .

The film does two other things well.  It explains the complicated  method by which deregulation was exploited by banks and their ilk and graphically shows the incestuous traffic between  politics and finance  and the way that academic economists have been all too willing to compromise their integrity by becoming hired pens for whoever is willing to pay them.  

How did sub-prime lending  and the general derivative mania become so rampant? Well,  there was the boost given by  the Recovery and Enforcement Act of 1989 mentioned above, but that  could not  cause the reckless lending to spiral  completely out of control. That required  the  Gramm–Leach–Bliley Act. After that anything went.  Dealers could create derivatives to effectively make a bet on anything.  

Most devastating to economies was the creation of Collateral  Default Obligations (CDOs)  and Credit  Default  Swaps (CDSs). The beauty of these  for financiers was that they effectively allowed a seemingly unending shuffling of responsibility and risk to someone else. With CDOs the relationship between borrower and lender changed dramatically. In the old days the borrower obtained a loan and paid it back to the person who made the loan. With CDOs the lender sold on the debt to a third party who bundled up various loans –  be it a mortgage, credit card spending or some other loan – with of widely varying quality and called it a CDO. This CDO could be sold on to investors, frequently with an AAA rating by one of the main credit ratings agency who were paid by – yes you have guessed it – the people selling the CDOs to investors.  To make the business even more opaque, CDSs were created to insure against losses arising from defaulting CDOs, effectively a form of reinsurance.   The final act in this fantasy world was institutions insuring CDOs they thought were junk with CDSs.  This meant they were compensated  when the CDOs failed while the buyer of the CDOs lost.   

Eventually the game of financial musical chairs had to stop and Lehman Bros  came crashing down to signal the advent of the worst global recession since the 1930s.  An interesting claim in the film is that Lehman’s was allowed by the US government to fail because the financial officers of the Bush Government did not understand the international implications of Lehman’s failure, most notably in Britain where the administration rules are radically different from those  in the USA and resulted in Lehman’s London offices being immediately closed. .

As for the nexus of  vested influence, this includes politicians, bankers, lobbyists, academics and credit rating agencies. One of the most telling sequences in the film is battery of senior personnel from the three largest credit rating agencies Standard  and Poor, Moody’s and Fitches – who consistently valued worthless or near to worthless  derivatives as AAA – testifying before Congress that their ratings are “only opinions”.  Closely running them up for dissimulation, is Scott Talbott, leading lobbyist for the Financial Services Roundtable, a man sharing with Dr Pangloss a belief that everything is for the best in the best of all possible worlds.  Particularly striking is the predominance of ex-Goldman Sachs employees in US government posts, men such as Henry Paulson,  Larry Summers and Robert Reubin.  It is worth wondering what the US government’s response would have been if Goldman’s not Lehman Bros had been the first US banking bottle to fall off the wall.

If you think Obama has made a difference, think again. He has employed a host of people from the financial world with  hands still dirty from their involvement in the genesis of the financial mess,  many of whom have served in the previous administrations which presided over deregulation.  This went right to the top of his financial administration. He chose as his Secretary to the Treasury  Timothy  Geithner , a protégé  of George W Bush’s  Secretary of the Treasury Hank Paulson, a  man who was up to his armpits in the ideological swamp of deregulation, while  the current director of the White House National Economic Council is Larry Summers who was Clinton’s Secretary of the Treasury when the  Gramm-Leach-Bliley Act was passed  – Summers greeted the Act by saying  “This historic legislation will better enable American companies to compete in the new economy.” In addition,  Obama  successfully nominated Bush’s choice for  Chairman of the Federal Ben Bernanke  for a second term as Chairman.  Plus ca change….

The most contemptible  excuse given by politicians around the developed world for the present financial debacle is that no one saw it coming. This is a blatant lie.  The film parades a baker’s dozen of people  in positions prominent enough to have  their voice heard by those in power who did warn of what was coming;  people like Nouriel Roubini (Professor of Economics at the Stern School of Business),  Raghuran  Rajan (when he was chief economist of the IMF) and  Christine Lagrade (French Minister of Economy, Finance, Industry and Employment). 

The coda to the film is the stark fact that none of the people chiefly responsible for the financial meltdown  have either faced criminal charges or had the vast fortunes they made during the period removed.  That applies not only in the USA but Britain, where provision exists to remove limited liability from company directors where they have failed to behave responsibly. The only people who have lost are as usual the less well off.

Universal distraction

When was the last time that your politicians concentrated seriously  on British domestic issues?  Unable to recall? I’m not surprised because increasingly British politicians spend  their time involved with matters foreign.  This is partly because the ever more comprehensive media coverage of world events drives politicians to at least express opinions on every catastrophe, natural or man-made, in the world, but it  also  occurs because it is politically convenient. One week it is a war; the next a flood or earthquake; the following week a mining disaster; the next a famine.  There is always somewhere in the world which can be relied on to provide the diversion.

The political convenience has several aspects: it provides an opportunity for politicians to posture on what they fondly imagine is a world stage;  it  acts as propaganda for the liberal internationalist politics to which all leading British mainstream politicians subscribe and most importantly it  provides a distraction from  problems  at home and the domestic policies of governments and parties, policies which are generally at odds with what the mass of the population believes and wants.

The mainstream media generally supports the liberal internationalist creed of  the politicians and they are happy to pump out as much international coverage of turmoil and disaster as they can get because it both makes compelling viewing and they can always present this as evidence that “we are all part of  one world” with the politically correct add-on, implied or overt,   that “we”  should do something to alleviate matters. As a tasty coda the media will, whenever possible,  try to imply that “we”, that is, the developed world in general and Britain in particular, are to blame for what misfortune is being covered.  The real “we” is of course not the British people but the British elite.

Tied into the national political class are all those who are involved  at the international level. This includes the British public servants involved with international matters; politicians engaged at the supra-national level such as MEPs; British  bureaucrats attached to the likes of the EU, NATO and the UN and all its agencies;  NGOs including charities and multinational companies.  All of these have a vested interest in at least seeing that the status quo is maintained and,  in the case of the politically motivated who subscribe to “one worldism” and large multinationals,  it is in their interest to see that Britain have  its sovereignty diluted as far as possible.

That leaves the general public who are constantly being asked by politicians and mediafolk  to concentrate on matters over which they have no control and frequently no interest in.  This results either in a disengagement from politics generally or a bemused and increasingly stunned concentration on foreign happenings to the exclusion of what is happening or not happening under their noses.  It is at best a modern version of bread and circuses.

The upshot is that British politicians are increasingly able to ignore what  Britain needs and what its people want.  Mass immigration goes unchecked;  the EU moves with increasing speed to rob Britain of her remaining sovereign powers;  Britain is still involved in illegal wars and our politicians show a worrying appetite for more of the same; the coalition Government  purely  for reasons of crude party politics causally calls a referendum (without any minimum turnout) to change Britain’s voting system from one which generally gives a clear electoral decision to one guaranteed to saddle her with more or less perpetual  coalition government ; ever more repressive laws are passed both giving the state and police more powers ;  political correctness is enshrined ever more deeply  in official British life; our armed forces are driven into an ever smaller and more misshapen remnant of what is needed to defend Britain; there is a continuing failure to ensure Britain’s future energy supplies;  Britain’s ability to feed itself is rapidly diminishing;   England remains without a Parliament unlike the other home countries; English taxpayers money continues to massively subsidise the Celtic Fringe;  British taxpayers money is cavalierly given to foreigners, most substantially through Aid;  UN funding and to the EU while British public services are culled;  the mania for privatisation goes on,  most tragically in the NHS; a housing shortage on a par with that after 1945 is developing; Britons on even average incomes are finding it impossible to raise children in decent comfort; the genuinely poor are increasing raidly; British politicians continue to behave corruptly and venally despite the Parliamentary expenses scandal  and the bankers who brought Britain to her present dire financial state remain not only unpunished, not one having even had their limited liability removed let alone criminal charges preferred,  but scandalously continuing to draw grotesquely high pay and promoting the same time of insanely risky investment behaviour which caused the present financial turmoil.

Those are the most important issues Britain faces . They are being ignored by  Britain’s politicians who increasingly are powerless actors on a stage delivering the words and actions of others.  The British public are left as a helpless audience knowing that no matter how loud they boo the show will go on.

Market economies and the illusion of choice

One of the prime arguments for introducing business practices, private money and private business into public provision is that it improves choice. British citizens, increasingly referred to as consumers or customers rather than patients, passengers or any other appellation which emphasises the public nature of the provision, supposedly want choices of schools for their children and to go to the “best” hospital or to enjoy the “superior” service coming from private companies with public provision contracts such as those running the railways or utilities such as water or gas.

Take the case of the privatised railways. Before privatisation all a passenger had to do was buy a ticket and get on a train. The only thing the passenger had to consider was whether there was a time or date restriction on the ticket. Now, the passenger has to not merely worry about time and date, but whether he or she is getting on a train run by a particular company – how many people have been on an intercity train when the ticket inspector has got into a dispute with someone who has bought a ticket for the train’s destination but it is the wrong ticket for that particular train? The customer is also besieged by a bewildering array of pricing, far more than was on offer when the railway was state owned.

I doubt whether the average passenger welcomes either the multiplicity of carriers or ticket prices. A person can have too much choice. Human beings want some but not a vast amount, which merely becomes confusing. If you want to travel somewhere you do not want it to be a demanding exercise in both finding out what the cheapest fare is and ensuring that the terms of the ticket are not inadvertently breached.

Does market competition produce greater choice even in a “free market”? There is a good argument to say it does not. The natural tendency of a free market is to produce reduced competition. Governments of all colours in countries which have a large free enterprise component to their economy recognise this by maintaining anti-monopoly legislation. (What are called free market economies are in fact state regulated economies and regulated in the most fundamental way, ie the prevention of increase of market share beyond a certain point).

But anti-monopoly legislation only prevents the worst anti-competitive excesses. There is still very wide scope for anti-competitive forces, especially in capital intensive and technologically advanced industries – think Microsoft and operating systems or airliners in a market of two or three suppliers.

But the process is a general one. Even enterprises which are not innately capital intensive are affected. Retailing is a good example. A hundred years ago department stores were still in their infancy. Supermarkets and shopping Malls unknown. The vast majority of purchases were made from small, privately owned shops or from open air markets. Most of the shops specialised in a narrow trade.

Today we have far fewer shops and markets. Supermarkets and Shopping Malls abound. The chain stores of at most a few dozen companies become ever more pervasive. There are many fewer specialist shops. The private retailer is assaulted from all sides by the large multiple-store retailers and increasingly succumbs as the public is seduced by the immediate temptations of price and convenience without regard to the social long-term consequences of what they do. The privately owned shop does not even have to be in the immediate vicinity of a giant chain store to suffer. It merely has to be within reasonable driving distance of the chain store. The consequence is that the poorer areas of larger towns and cities and country villages and small towns are denuded of their shops. The choice of the poorer residents of such places is tremendously reduced. The wealthier do not of course care about this because it has no direct effect on them. They have the wherewithal to either live in areas well serviced by stores and services or can afford to drive to the large supermarkets or have goods delivered from far afield. Such developments fall within the remit of government. It is not for Government to operate supermarkets but it is within their remit to prevent commercial behaviour which is anti-social.

What constitutes choice anyway? Is it, for example, having more shops offering a smaller range of products or fewer shops offering a greater range of product? In practice fewer shops will mean reduced variety of product as well as service. But what of all the choice in giant supermarkets you say? Do they not have a much greater range of product? Surely they provide more choice. They may provide a greater range in one place but that is all.

The advent of industrial-style agri-farming, the bringing in of increased amounts of imported food from around the world and introduction of new manufactured foods may give the impression of greater choice, but is an illusion. The number of varieties of staple fruits and vegetables has been massively reduced, as have the various breeds of farm animals.

Of course, the providers of anything which sells can always say “If people didn’t want it they wouldn’t buy it”. But that begs the question of what alternatives are available. If only three types of washing powder were available doubtless they would sell massively more than any one brand does now. That does not mean they are more popular merely that people have to have such a product and were forced to buy one of the three brands available. Such restriction of choice is increasingly commonplace . We fool ourselves if we buy into the laissez faire economics  = more choice.

Most people cannot make provision for the future

Cameron’s  Big Society is predicated on the idea that people are generally able to provide for  themselves.  This is clearly not the case in vital  areas such as healthcare, education and pensions, not least because most people do not earn enough to pay for such things for themselves and their dependants.  Nor, particularly in the case of saving for old age, is it reasonable to expect most people to do so wisely even if they can afford to invest.

To expect the vast majority of human beings to be expert enough in financial matters to make wise private investment decisions is absurd,as absurd as expecting every man to be his own lawyer. Therefore, all but a few of us will turn to supposedly expert advisors for advice. The problem with such people is twofold: they often have a vested interest  in selling or promoting a particular product and even when they do not, they are frequently bad judges of the financial future. (If investing was easy and certain for the so-called experts, all financial institutions would be permanently hugely successful).

When someone sells you a private pension plan or insurance, he does not do it out of the goodness of his heart. He does it because he earns a commission or fee from it. As the pensions mis-selling scandal of the Thatcher years showed, that incentive drives many, probably most, financial service consultants to sell the product most beneficial to their income rather than to the customer.

The customer can also get misled if he takes reputedly independent advice, whether this be from a self-described independent financial adviser or out of the financial pages of newspapers and magazines or investment newsletters. The advice given may be anything but independent. Unbeknown to the client, an advisor may get a commission for recommending an investment and media share tipsters often have no scruples about recommending shares which they know to be poor performers, either because of direct inducements from the companies or because they work for a company which gets business from the sharetipped. Share tipsters can also make a profit by “ramping up” a price in shares they hold by recommending it or depress a share by criticising it and then buying at the depressed price.

Those recommending shares or financial products are in a wonderful position: they can tip to their heart’s content without taking any responsibility for their tips. No tipster has a consistent record of predicting successful investments. Quite a few have utterly dismal records over years. Indeed, so poor is their general performance that one might ask whether it is any worse than randomly selecting investments. It may even be worse. As Woody Allen once remarked, “A stockbroker is someone who invests your money until it is gone”.

The Daily Telegraph put the matter of share tipping to a sort of test in 2001. It employed a professional tipster, an astrologer and a four year old child to notionally invest £5000 in the stock market. The professional tipster applied his supposed expertise. The astrologer selected her shares using her star charts. The four year old child chose by repeatedly tossing (at the same time) a number of pieces of

paper in the air with the names of shares written on them. At each toss she caught one. After a year all the investments had lost money, but the four-year-old-child lost least, followed by the astrologer with the supposed financial expert bringing up the rear quite some way behind.

A rational examination of the actual performance of tipsters and advisors could only lead to the conclusion that predicting the future economy is a mug’s game. Why would an expert do worse than a four-year-old child and an astrologer? Well, it could have been a fluke, but an unlikely one as both the child and the astrologer did better. More probably the financial advisor’s knowledge is a positive hindrance. A parallel is with the football pools. Many people have a very considerable knowledge of the form and general state of professional football clubs. Yet these people do not appear to be any better at predicting results than the punter who knows nothing about football and does the pools by putting a pin in the matches or has fixed numbers.

The truth is that no one can guarantee investment for a secure future or even come anywhere near to it. All calls for private provision replacing public in whole or part should be placed in that context.  Not only that but account has to be taken of the great variety of abilities found in a population.   IQ is distributed so that around ten per cent of the British population have IQs of 80 or less.  An IQ of 80 is the level which most psychologists working in the field of intelligence testing judge that a person will struggle to live an independent life in a sophisticated modern society.  Add in the differences in education, social status and wealth and the idea that most people can make their own provision for a pension becomes unreasonable. Take into account the high cost of living, especially the ever rising cost of housing and raising children, and falling pay and  it becomes farcical. 

As for the broader  idea that  individuals should, if they have the means,   pay for their healthcare, education and   insurance to cover periods when they are not working,  to expect all but a small part of the population to do is clearly nonsense when the average annual pre-tax UK  income is around £26,000 with many earning below £15,000.

What shall we do about the old?

The most problematic of all public provision is what to do about the old. The value of actuarial calculations – the statistical analysis of risk based on instances of the risk occurring – made sense for pension calculations when life spans from generation to generation were fairly stable. Because of our ever increasing ability to cure and prevent disease and to provide a more materially certain livelihood for the majority, life expectancy in the future is no longer easily predicted. Even if the wilder extremes of SF are avoided, it is reasonable to assume a significant rise in life expectancy in the next forty years. The rise does not have to be dramatic to make a nonsense of pension provision made today – even a five year rise in the average would have dramatic consequences for pension planning.

A substantial rise in the average lifespan does not necessarily imply some major scientific breakthrough to slow or even reverse ageing. All that would be required is for scientific advances to reduce the diseases which kill many before they reach the average age of death. In other words, more people survive to the ages which are now the average lifespans. It is quite conceivable that within the next 40 years simply reducing early death could extend the average lifespan by ten years.

More dramatically, it is conceivable that science may extend human lifespans substantially beyond their current limits. Work on animals such as mice have resulted in greatly extended lifespans simply by restricting food intake from early in life. If human lifespans are extended greatly all pension bets are off. In such circumstances no meaningful actuarial prediction for pensions could be made for the odds would be that further, unforeseeable increases in life span would occur continuously after the initial scientific breakthrough was made. The fact that such scientific advances are possible in itself makes current pension planning hideously uncertain.

What should we do as a society to plan for the future lives of the old? Let us assume that average lifespans are extended simply through the diminution of early death rather than from any radical scientific discovery, what then? If the average lifespan of Britons rises to, say, 90, over the next 40 years, an obvious move would be to delay retirement. But that raises a problem. Most people could probably work to 70, but beyond that the incidence of severe but non-fatal disease rises steeply. Keeping people alive longer does not at present equal keeping them fitter. More 70+ year-olds means more people suffering from various forms of dementia, crippling diseases such as arthritis and people simply too physically weak to undertake work which could provide an income to support them. Hence, extending the retirement age, for both state and private pensions, is only a partial answer unless science advances enough to massively reduce the infirmities of old age.

It is also true that many people are struggling to cope with their job long before the current age of retirement. People in manual jobs cannot be expected to work to 70 and those in heavy manual jobs or those in jobs which require physical strength and fitness such as grassroots policing, are probably past useful employment by the age of 50, certainly by 55. In principle they can retrain to lighter work, but in practice this is very difficult. People who have spent their lives working with their hands in a workshop or in the open air often do not take easily to working in an office or shop. Moreover, the pay they will get from such “second career” jobs is likely to be low, which is both a disincentive to work and may leave the person unable to support themselves fully.

But even if a person can adapt to new ways or has been throughout their lives in the type of employment which can be carried on into old age, the odds are that they will struggle to remain in employment as they reach late middle age. Employers are prejudiced against the older worker for various reasons. Part of that reason is financial – the cost of employing them is high compared with a youngster – but it is also in large part to do with the adaptability and energy of the young compared with the old. In a time of ever increasing technological change the natural resistance to change and learning becomes ever more of a handicap than it was in the past. Government can pass whatever age-discrimination laws it wants but employers will still find ways to employ who they want to employ without falling foul of the law (short of a law which insists that a percentage of people in an organization had to be in various age categories).

However much as we may like to believe – and I write as a budding wrinkly myself – that experience compensates for youthful enthusiasm, the truth is that all of us become much less receptive to new ideas as we get older, energy falls, physical strength fails, our memory diminishes and concentration becomes harder. Consequently, employers  have good cause for employing younger people in most jobs. Of course experience does count and in some jobs can be valuable well into old age, but in most jobs it does not count for much after the age of 60. Even in “people” related employment, which the older person is supposedly better equipped to handle, experience may be a positive disadvantage. For example, suppose an employer wants to employ someone  serving the public. It may well be that the average customer for the business prefers to be served by someone young and employing the old would be the kiss of death for the business.

The position of the older worker is being further undermined at present by the high levels of immigration, both official and unofficial. Most of this immigration is of the young, much of it young males. These young workers will tend to take much of the work which would otherwise be available for the older Briton. Stop the immigration and employers will be forced to turn to British workers. It is as simple as that.

Even in the most benign likely circumstances – an extension of the average lifespan by five or ten years through the deduction of early death, it is clear that many people will require support for a very long period of retirement or reduced employment. Some of that may well come from private pensions and savings. But clearly for a very large part of the population adequate private resources guaranteed to support someone for 30 odd years will be beyond their grasp. Hence, state provision sufficient to allow people to live in old age is a must.

If great scientific advances are made which greatly extend life we shall simply have to start planning again from scratch. Obviously if average lifespan was increased to, say, 150, the whole perspective of a life would have to change. There are any number of exciting or disturbing possibilities. For example, it might be that only the newly conceived or newborn children could have their lives increased by a new treatment. We would then be in a position where that generation and succeeding generations had the increased life span while anyone born before the treatment became available lived to an average age of 90.

The other great concern about pensions is demographic. The population is ageing and the British birthrate is substantially below (around 1.7 children per woman) the replacement level (roughly 2.1 children per woman). The doomsday scenario is insufficient working people to pay the pensions of the old in the future. If we were talking about a demographic change which was going to take place overnight I would be worried. However, we are not. Rather, the demographic effects will be worked out over thirty or forty years. Past experience suggests that society will evolve to make the necessary arrangements. We cannot foresee what the birthrate will be in five years let alone twenty or thirty.

The currently fashionable solution for the future pension bottleneck – importing large numbers of young immigrants – would be no answer in the long term. The young people who arrived in this generation would eventually grow old and would need people of working age to support them which would mean more immigration which would mean more old people to support in the next generation and so on ad infinitum, a literal absurdity because any territory has a limit to the number of people it can support. In other words, confronting the problem of a demographic  imbalance would merely be delayed for a generation or two by immigration.

The most important thing is that we do not put all of our eggs in basket. It would be wise now for the Government to begin a state pension fund into which one per cent of GDP (currently around £11 billion) was put each year.  This fund would not be touched for 20 years at least and would be used to ease any future pension problem arising from a tax shortfall due to a smaller working population.

Does the Welfare State corrupt?

One of the favourite arguments against social provision is that it corrupts the receiver by making them dependent and ultimately damages society by significantly reducing initiative and making people selfish. The facts do not bear this out as a general proposition although naturally  there will always be some free riders in a welfare state. Today we have a society in which the self-help gospel is constantly preached, people work longer and longer hours and most mothers work at least part time. This has produced a society in which the birthrate has dropped well below replacement rate. During the period when state provision was most heartily endorsed as part of the national furniture (1945-1979) the birthrate was above replacement rate. The ability and willingness to breed is surely the ultimate indicator of the health of a society.

But that is not to say all social provision is benign. It is one thing for a society to provide those things which most cannot be reasonably be expected to provide for themselves, but quite another to build dependency into the system. That is what has happened in Britain where more than half the population now draw some sort of public monetary support. Some of those benefits are part of the legitimate armoury of social provision, for example, child benefit, unemployment benefit, sickness benefit and old age pensions. Others are not.

The most pernicious of the current benefits is Working Families Tax Credit, which can be drawn by families with a household income of over £50,000. This is a scheme in a long line of similar ones dating back to the old Poor Law of 1601. It is the granting of state money to those in work. The best known Poor Law example was the Speenhamland System  of the 18th century which allowed outdoor relief to those (primarily agricultural labourers) whose wages fell below a certain level. The result was predictable. Where the scheme operated employers dropped the wages they paid to the level where the Parish (which administered the  Poor Law) made up the wages through outdoor relief to those whose wages were lowered.

The Speenhamland System was a subsidy to employers. So is the Working Families Tax Credit. All it results in is employers paying lower wages. That is not because they are all evil grasping men or women.

Lower wages are forced on all employers because there will always be a substantial number of employers who will take advantage of opportunity offered by any government subsidy to lower their wages. That means all employers must do so to compete.

Apart from the fact that it siphons off  large amounts of taxpayers money, Working Families Tax Credit is a pernicious form of subsidy because it makes employers who employ many low wage workers dependent on its continuance, which obviously cannot be guaranteed. Either a future British Government may decide to abolish it of their own free will or tax harmonisation within the EU may force them to do so.

If it is abolished, such companies will be left stranded because they will have to pay higher wages. Moreover, the subsidy they are receiving now will cause them to be less efficient than they would have been without it. On the other side of the employment coin, families receiving the benefit will also be left high and dry if it ends, for they will have altered their lives according to the income they have received. 

This type of structural dependency has evil effects beyond the economic because it can distort the democratic process. If sufficient people become dependent on a benefit such as tax credits they may make it next to impossible for any party wishing to be elected to propose its abolition because to have such a policy will drive anyone in receipt of the benefit to another party which supports its continuance.

Could Britain be self-sufficient in food?

As the price of food rapidly rises on the world market the question of food security is once again on the agenda  of even the most committed globalist elite,  because in their heart of hearts all elites care about is sustaining their power and privilege and ideology counts for nothing when their position is threatened. As there is  nothing more likely to cause serious public disorder than the threat of hunger, the recent Labour Government commissioned  the  Department for Environment, Food and Rural Affairs (DEFRA) to commission a report which examined the question in depth.  This was published in 2008 http://www.ifr.ac.uk/waste/Reports/DEFRA-Ensuring-UK-Food-Security-in-a-changing-world-170708.pdf

Being a product of NuLabour,  the report predictably concluded that Britain should not try to be self-sufficient but throw in her lot wholeheartedly with the EU and be terribly concerned about the Third World whilst worshipping at the altar of the market and green politics, for example:

“ UK production is of course crucial to our food supply, but it is not on its own sufficient for UK food security.  We should encourage a sufficient volume of domestic  production for the food supply chain as a whole, and that means continuing to encourage a market-driven, efficient and environmentally sustainable farming sector producing what consumers want”.  DEFRA Para 4.22)

Nonetheless, the report  produced a good deal of interesting analysis which suggested Britain might be able to  pinch feed itself at a pinch: “Crude calculations suggest that UK agricultural land could provide more than enough  food from arable production in terms of our daily calorific requirements, in theory making the UK self-sufficient”. (DEFRA report para 4.14).  

This is important because  food security  is along with energy security the most certain guarantee of a country’s sovereignty.  Moreover, energy security is bound up with food security, viz: “As a measure of domestic food security, self-sufficiency does not cover the processing and distribution of food, it does not allow for the imported energy on which domestic agriculture is directly and indirectly reliant, and it does not take account of the resilience of the supply chain.”  (DEFRA report Para  4.15)

How much food does the UK  currently produce?  The DEFRA report says “Currently the UK is 60% self-sufficient in all foods and over 74% self-sufficient in foods that can be produced in this country”.  (Para 4.12). This “self-sufficiency ranges from around 10% for fresh fruit to around 100% for cereals.  (Para 4.15).

60% is high in the modern period. Britain was last self-sufficient in food  in the first half of the 19th century.  With the Empire and a commitment to free trade, Britain’s self sufficiency  had dropped to 40% by 1914 and dropped to nearer 30% in the 1930s (DEFRA  Para 4.12 figure 1).    

Nonetheless,  by  the 1980s Britain produced nearer 70% of her food, partly as a result  of the protectionist measures  such as  the EU’s Common Agricultural Policy, although it is worth noting that the EU restricts as well as encourages. For example, Britain could be more than self-sufficient in dairy products , but is restricted by the EU to producing even enough to meet her own needs viz.: “a phased liberalisation of EU milk production – due to come into full force in 2015 – should help the UK’s dairy farmers. Germany, for example, is allowed under the EU quota system to produce some 25bn litres of milk a year – twice what the UK is currently producing” .  (http://www.guardian.co.uk/environment/2009/sep/20/milk-strikes-dairy-industry-farming) If  Britain left the EU she could put in place her own protectionist policies and produce as much as she wanted of a product for the home market.

Despite the substantial increase (several million) in the UK population in the past  twenty years,  it is  reasonable to assume that a significant increase in UK food production could occur  with the right protectionist measures  and the ever increasing yields of crops and products from animals due to improvements in plant varieties and husbandry  plus the potential of genetically modified (GM) foods.

There could also be a change in land use which would increase food production overall.   Land which is now marginal could be brought back into use and there could be a shift to more arable farming.  Much of the food now heavily imported, most notably fruit, could be produced at home  if was worth the trouble of producing,. Food would become more seasonal – no bad thing – and some foods which cannot be grown here  – citrus fruits, bananas  and son – might become rare, but these could be compensated for by such measures as the  re-introduction of orchards  for the production of the vast  variety of apples, plums and pairs which will grow here .

Then there are the UK food exports to toss into the equation.   How much food does  the UK export?   According to DEFRA  “in 2006 the value of food, feed and drink exports was £10.5 billion.” (DEFRA report Para 4.7).  If needed, much perhaps all, of this could be diverted to the home market.

Those are the producer options for increasing food security.  There are also things which retailers and customers can do.  There needs to be little waste before it gets to the consumer in the UK because of our highly sophisticated transport and storage systems.   However,   there are reasons why food  is discarded before it reaches the consumer. Food is lost through the fashion for vegetables and fruit which is uniform  in size appearance. This means that substantial amounts are discarded  or used  for animal feed.   As this fashion for uniform fruits and vegetables  is largely driven by the four largest supermarket chains which control two thirds of the British market (DEFRA Para 4.2), it could be ended by government action if we recovered our sovereignty and left the EU.

When food  gets to the shops, it will be discarded by the retailer in if runs  beyond the sell-by date.   As every student knows,  food can be safely eaten when it is beyond the sell-by date.  Discarding also takes place commonly  when the “best before” date is exceeded. There is even less reason to throw away the food than when the sell-by date is exceeded.    “Sell-by” and  “best before” dates  also cause consumers to throw away food unnecessarily.   If either or both dates were scrapped it would probably  reduce waste significantly.  Those who throw their hands up in horror such ask themselves how it was that the British population was not struck down in vast numbers in the days before  sell-by and best before labelling.

The amount which is thrown away  in Britain is vast: ‘“A staggering £10 billion worth of food is thrown away in Britain each year, a third of what we buy, according to a report published on Thursday.

“More than half of the 6.7 million tons of food that is thrown away each year – enough to fill Wembley Stadium eight times – is untouched and could have been eaten, according to the Government-funded Waste and Resources Action Programme.

“Researchers found that more than £1 billion worth of wasted food was still “in date.” ‘ http://www.telegraph.co.uk/earth/earthnews/3341796/Wasted-food-costs-UK-homes-10-billion.html

There is considerable scope for reducing waste which is equivalent to increasing production.  If food became scarcer or more expensive,   waste at all points in the production – delivery-consumption chain  would  diminish rapidly.

Finally, there is the question of whether  Britons eat more than is good for them. While not subscribing to the “obesity epidemic” panic, it is undoubtedly true that we are on average substantially fatter than we used to be. A glance at photographs and film of 50  or even 25 years  ago readily shows the difference. Probably  as a consequence of less manual labour at work and in the home and changes in diet,  Britons are not only generally taller but better padded now than they were .   However, whatever its reason, there is clearly scope for a reduction in food intake without causing any great harm. It is worth noting that the general health of the population improved during the years of rationing from 1939 onwards. 

Where does all this leave us?  With rationing and the stopping of food exports  we could probably feed the population immediately.   If we already produce 60% of the food we eat and perhaps raise that to 70% with the exports ,  there would be sufficient to keep people from starvation or serious malnutrition.   In the longer term, it would take  a few years to adjust  to producing more (and  Britain would  also have to secure her energy  and fertiliser  supplies),  but once the period of adjustment was over  it looks as though we  could do a little bit better  than “get by at a pinch”. 

Will such an adjustment  it happen? All it requires is the will amongst  our politicians to see that food self-sufficiency is as vital as military forces to the safety of a nation. It is not something which should be left to international market forces.

How should we decide what public servants are paid?

Over the past twenty years a new problem has grown around  public service pay at both national and regional level. The introduction of so-called business-methods into public service has resulted in the employment of people who are not career public servants in senior public service jobs.  These people have been commonly employed on fixed term contracts with considerably higher remuneration than career public servants have enjoyed.  That in turn has caused career public servants to seek similar pay and fixed term contracts instead of being employed on a normal contract of employment which meant that someone was employed until such time as they reached retirement age, proved incompetent or their job vanished. This inflation of pay at the top has caused the pay of public servants below the top level, especially those immediately below, to be pulled up in order to maintain differentials.  

The other difficulty is that fixed term contracts have often resulted in massive pay-offs to get rid of people who either fall out with the politicians they report to or who are simply incompetent. 

That these developments have  run completely out of control can be seen from the following report: “ Phil Dolan, 54, received £569,000 of taxpayers’ money in salary, pension and redundancy payments after leaving his post as chief executive of South Somerset district council. He is now acting as a consultant for other local authorities.

 Two other executives at the tiny council also received more than £300,000 each in salary, pension and severance payments last year.

 It means every resident of the district paid the equivalent of £7 in council tax last year just to fund the three men’s pay packages. Taken together, the payments represent the most dramatic example of local government largesse yet to be exposed. (Daily Telegraph 18 2 2011) http://www.telegraph.co.uk/news/newstopics/politics/8334915/The-council-fat-cat-earning-570000.html

If public pay is to be brought under control and made fair and reasonable in the eyes of the general public, fixed term contracts need to be outlawed in public service and senior public service pay brought back to the levels of twenty years ago.  Fixed term contracts do not, as their supporters claim save money by making it easier to get rid of people. If public servants were on ordinary contracts of employment, un less they successfully alleged racial or sexual discrimination before an Employment Tribunal, all they would be eligible for if they were sacked unreasonably would be ££68,400.  (In theory, a sacked person could take the matter to an ordinary court but  the cost of that together with the likelihood of costs being awarded against the plaintiff if they lost make this unlikely). The settlements received by senior public servants on fixed term contracts commonly dwarf the Employment Tribunal maximum. That being so, as a matter of simple arithmetic it would pay to move away from fixed term contracts.

 Senior public servants would doubtless resist cuts in pay by trotting out the argument that public servants running large departments or councils deserve remuneration equivalent to that of those running large public companies. It is a bogus argument. Those running private companies have to both raise the money to keep the enterprise going and decide how spend the money: senior public servants have an assured revenue stream and merely have the task of deciding how the money is spent.

That is senior public servants. What about public service pay in general? Consider this press report: “Tube drivers, who now earn £31,300 for a 36-hour week, along with six weeks’ holiday a year, a final-salary pension and free travel for their families….The Tube drivers’ salary is almost twice as much as a nurse or an ambulance worker gets for working longer hours on more complex jobs. It is half as much again as a bus driver, who works 50 hours a week, a firefighter, who works a 42-hour week, or a police officer, who works a 40-hour week – each of them doing very stressful work for the payment they get.” The Evening Standard commenting on a prospective tube strike 02.10.02

Driving an underground train on a partially automated system cannot realistically be considered as more skilled, dangerous and stressful than that of a firefighter. Most people would say the Tube driver had the easier job by far. But is the firefighter’s job more stressful than that of a bus driver who has day in day out to deal not merely with London traffic but in many cases has to take fares as well? And what of a nurse or ambulance crews? Is the emotional distress they suffer more of a burden than the fear a firefighter may feel when going into a fire? Going outside public service jobs, a trawlerman’s job is considerably more dangerous than that of a firefighter’s and the ordinary crew member will not earn as much as an Underground driver. In short, comparability is a minefield.

All our experience shows that “fair” job evaluation never works because no one engaged in the employment evaluated can ever objectively agree on their place in the job hierarchy. Hence, even where deals are struck, dissatisfaction soon breaks out again about “comparability”. As for the public, the pay and conditions arrangements of public service workers are generally so opaque that most people can make neither head nor tail of them. The result is an unstable situation which satisfies no one for long and leads to the general public having an unrealistic conception of what public employees earn, both by underestimating and overestimating pay.

Even in a society where there is a strong natural commitment to public provision, as was the case in the quarter century after WW2, the public servant has a vested interest in working to retain public  confidence. Unless the taxpayers generally continue to think that the money being spent is worthwhile, there will come a time when a government will be elected, as happened in 1979, which will substantially reduce government expenditure and the opportunities for public service. Worse, circumstances can arise as they have done now, where not only the government but also the main opposition party are hostile to direct public provision. Therefore, it is especially important at the present time for public servants to persuade the public that they are both necessary and giving value for money. The best way of doing this is to arrive at a pay structure which is both simple for the public to understand and constructed in such a way to ensure that pay and conditions are adjusted automatically by reference to an objective standard to keep them in line with wages and conditions in private business.

What is needed are criteria based on broad similarities, which the general public can understand and support. Most jobs are much the same in terms of the general demands they make on people – stress, responsibility, intellectual effort and special knowledge or skill. Moreover, those jobs which demand more than the norm also fall into readily identifiable categories. (Anyone who doubts this should try an experiment. Produce a list of twelve disparate jobs of the same general status – all non-management or all management and so on – and which have no emotional plus or minus against them in the public mind – exclude nurses, estate agents etc. Then get people to assess their worth in terms of wages. Most people will judge the value of the jobs to be similar).

Public service jobs are even more readily categorised than the totality of occupations in a society because the range of work in public service is much more limited. In a way the civil service already recognises this because the standard civil service grades cover an  immense variety of job titles. The civil service division of grades into administrative/executive/clerical provide a starting point for the broad criteria mentioned above. These could then be augmented with categories based on danger, stress, responsibility etc. If recruitment becomes a problem in a particular area, the problem can be solved by raising pay through re-grading.

The second problem with public pay is keeping it up to a realistic level. Previous attempts a pay formulae have not been linked to the average male wage and that has been the primary cause of their failure. It has meant that periodically public sector workers have fallen behind private sector workers as governments run into financial trouble.

What is required for all public service jobs is a formula which uses the average male worker’s earnings as a baseline, with the various public service grades being a percentage of the average male worker’s earnings – the percentage could be less or more than 100% depending on the grade of the job. Such a system would mean regular upgrading of pay and avoid the demands for very large percentage increases when pay falls behind.

Should pension entitlements, holiday entitlements and security of employment be taken into account when calculating public sector pay? Only to the extent that they differ from the arrangements of large private corporations. Historically large private companies have offered non-salary benefits very similar to that enjoyed by public servants. That is changing, in particular final salary pensions are rapidly becoming extinct in private business, and any grading of public service jobs should reflect any difference which arises between public and private in the future. However, care must be taken to avoid a situation where public servants cease seeing public service as a secure career. Most of what Government does benefits from having career employees because continuity is a great deal in administrative work, which forms the great bulk of public service employment.

The third major problem is national pay. This is perhaps the most sacred of cows of public service workers and unions, but there is no logic or fairness in such arrangements. If everyone in the NHS receives the same pay for the same job regardless of where they are living, there is in reality no national pay because of the considerable regional differences in cost of living. There are parts of the UK where, for example, teachers earn below substantially below the local average and others where they earn well above the local average. Hence, we have regional pay but quite perniciously the lowest pay is paid inthe highest cost areas. The consequence is that there are often staff shortages in the higher cost of living areas and the quality of staff employed in such areas may be below the standard required simply because no one else can be recruited at the pay levels. The answer is to introduce regional RPIs (Retail Price Indices) – which would include housing costs – and vary wages according to those.

Regional RPIs would solve much of the present difficulty for public service workers in high cost areas. It would not be politically possible to reduce the pay of existing employees, but it could be held static in the lowest cost areas and differential increases given in other areas until regional pay was established. For example, suppose area A is the cheapest area and area Z is the most expensive. Area A gets no increase until its pay level reaches that which matches its Regional RPI, while Area Z immediately gets an increase which raises its pay level to that required by its Regional RPI. Ditto for all areas between A and Z. If their pay is beyond that required by their regional RPI, it remains pegged until pay and cost of living equalise: if below their Regional RPI, they get a rise to match it. As time goes on, the higher pay of the higher cost areas will be balanced by the lower pay of the lower cost areas. There would be no massive extra ongoing expenditure as eventually the lower and higher pay levels would broadly cancel each other out. However, there would be an initial cost because no one will have their pay immediately reduced while some will have it increased substantially.

Much of the problem of regional cost variations could be obviated if the cost of housing was substantially reduced. Government can take the lead by making more housing available in the areas in which it is scarce – see section for detailed suggestions. In particular, a ready supply of housing both to let and buy at reasonable prices would largely overcome the problem of the young who have yet to buy. A middle-aged person who brought their home 20 years before requires far less to live comfortably than someone trying to buy their first property. The latter have near insuperable problems in many places. For example, in inner London, an income of £50,000 would not be enough to buy the most basic family home because a three bedroom property  would be in excess of £300,000 in even the cheapest areas.

The cost of any re-grading could also be offset by reducing the numbers of public servants in some areas. This would naturally meet with resistance from public servants, but if it is done without compulsory redundancies – and it could be – the objection to it is not strong. Staff can be redeployed to other posts and new recruitment to the remaining departments reduced to accommodate them. Attention has to be paid to the age structure of a workforce – no large organisation wantsto find itself in the position of having a sizeable proportion of its staff retiring at the same time – but with an employer as large and diverse as the Government, this should not be an insuperable problem.

Why not simply have wages set by what the market will bear in any particular place? If there is a shortage of nurses in London why not pay them £30,000 if that is what it takes, but only £10,000 if that is a competitive wage in, say, Cornwall? That begs the question of the quality of the recruits you attract and their long term retention. You may get enough recruits at the low rate but they may be of poor quality. There is also the question of motivation once employed. Poor motivation equals less efficient working. Pay should be high enough to avoid those two evils. If higher wages produce greater motivation and ability in the staff employed, the number of staff could be reduced.

The great advantage of adopting a system of broad definitions – tying pay to the average full time wage and Regional RPIs – is that it would be both stable and largely self adjusting. Problems could arise where recruitment becomes an issue. Then, as mentioned above, re-grading might have to occur to raise pay in a particular area of work or region.

All the Public Service Unions and many public servants will instinctively reject what I have suggested because such things as national pay scales and the preservation of jobs are part of the emotional scenery in public service. But public servants do not have a right to determine how many people will be employed by the Government and they should always remember that a public servant must have a necessary and useful function to maintain public support.

What public servants do have is a right to a decent living wage for what they do and to reasonable working conditions which includes the assured opportunity for a career and staffing adequate to carry out the tasks Government sets them. If they start from those two premises they have a much greater chance of achieving their ends than they have in merely maintaining the status quo.

 Above all, it should never be forgotten by the public servant that the taxpayer is the paymaster for all government spending. A statement of the blindingly obvious perhaps, but one which tends to be glossed over by governments who speak as though they are spending their own money  when they talk of “an extra £3 billion for the NHS” or “£200 million to  take crime off the streets”. Public money is not unlimited nor is the level of public spending without consequences for the general economic health of the country.

Most public servants know that there are pluses and minuses in public service and that moving to private employment has its disadvantages as well as being very difficult in areas where private business is not thick on the ground. There is also the example of public sector employees who have had their jobs privatised. They have frequently found that their new conditions of work are inferior to those they enjoyed when in public service. Public servants also know in their heart of hearts that security of employment is still considerably greater in public service than in private business. Consequently, the government has a strong card to play if they choose to play it, namely, continued security of employment in return for the radical changes described above.

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