Gasp! UK Bank Enables Mobile Money Transfers!

The comments under the Guardian's piece on Barclay's mobile money transfer app tell you everything you need to know about the pace of innovation amongst UK retail banks ;-)

Image from JISC infoNET.

Government Is Right To Sublet Its Empty Offices

I was concerned to see Private Eye denouncing government plans to return empty government office space to the market, via sublets if necessary (Eye 1307, HP Sauce). That suggests a view that the government should simply keep paying the rent on its empty office space, creating a false property market, rather than reducing its rental exposure and using the savings to, say, reduce public borrowing.

The Eye says landlords are yet to agree to sublets, and quotes a letting consultant as warning that "throwing even cheaper subsidised office space into the market will only serve to make life even more difficult for existing landlords struggling to find tenants." Others apparently complain that "this latest wheeze will also threaten the viability of existing business incubator schemes, such as the Leeds Met University-backed QU2...". 

Poor old landlords! It's almost as if they're in the property business.

Like any other tenant, if the government did not try to sub-lease empty rental property, it would be missing the chance to mitigate its loss on the rental and distorting the property market. A free market should see rental prices for empty space falling to the point that someone takes the empty space.

I get the point that the government shouldn't subsidise private business tenants. So the rental on the sublets should cetainly be at commercial rates. But if that commercial sublet rental is lower than the headline rent due to poor market conditions, you can't really call the difference a subsidy to the sub-lessee. It's a loss (but not as big a loss as there would be if the government didn't bother to sublet at all). 

Furthermore, if subletting vacant space undercuts a university incubator scheme that is funded with public money, then the benefit of subletting is not only that it covers some of the Treasury's rental exposure, but also that it saves public money that would otherwise have been spent by the university. In turn, the university should get rid of its empty space. But even if the university scheme were privately funded, it should have to compete with cheaper commercial rents on sublets across town. That's a feature of a free market.

Of course landlords - and lettings agents - are going to be upset by the idea of sub-lets at lower rentals. But that's a feature of a falling rental market. Why wouldn't they try to resist such negotiations? So long as they're being paid the rent by one tenant, they may as well leave the building empty and try to rent other vacant space. That doesn't mean the government has to play along, and ultimately the landlords know that empty rented space amounts to false demand. Whether they persist in keeping the building empty in the hope that the market recovers by the end of the lease term is up to them. Again, it's a free market.

But the wider reality is that if landlords don't either accept lower rents or allow tenants to cover their rental obligations on empty space, then private tenants will be losing money and have to charge customers more - or face going out of business. For public sector tenants it would mean paying landlords instead of repaying government debt.

I know what I'd prefer. Let the landlords take the pain - it's their business.

It's A Dog(matist)'s Life

The great challenge for political parties in a democracy is that they exist primarily to solve their own problem: how to get a majority of their candidates elected to govern the country. Solving citizens' problems is not their fundamental aim. In fact, the problem of how to get elected is so remote from the day-to-day problems encountered by the country's citizens as to render the internal activities of political parties more or less irrelevant to how our problems actually get solved. The world is too complex for the answers to lie in some political party manifesto, far removed from the activities of market participants and even civil servants. So political parties have to persuade us of their distinctiveness and their relevance. They have to convince us that they could solve our problems, if we would only vote them into power and leave them there. Trends reveal that this process, and party politics itself, is doomed.

Declining participation rates in general elections demonstrate that we don't really value the outcome of our formal electoral processes. And the relentless pursuit of MPs over their expenses demonstrated that, in the UK at least, we don't think much of our formal political representatives either. Instead, we're turning to more direct means of shaping our society bottom-up, through informal facilitators like 38 Degrees, well-organised charities or other single interest groups. We want our politics unbundled, like travel or music. Eurocrats in Brussels also admit to a rise in 'informal institutions' within the fiendishly complex framework of the European Union, and European academics point to 'networks' as the source of "informal processes of economic regulation and institutional change". This cuts both ways. National governments are relying on global businesses to act as 'private sheriffs' (e.g. to enforce their user terms to shut down Wikileaks) and big businesses lobby governments to control our behaviour when it suits them.

So party-political dogma provides a particularly poor lens through which to view this world and solve its problems. It collides with the trend towards each of us having our own personal political manifesto - charting our own, pragmatic path.

The challenge for political parties to remain relevant is particularly evident from The Red Book, a series of essays from Labour Left, the 'home of ethical socialism' within the UK Labour Party. While I don't care a fig for the Labour Party (or the Tories or Lib Dems, for that matter), I started reading The Red Book to see how an ousted political party might try to improve its relevance in 2012.

What struck me in the very first essay, introducing ethical socialism, is that The Red Book takes a top-down approach, rather than bottom-up. First, the ethical perspective is contrasted with that of other segments of the Labour Party, referred to as "Blue Labour", "Purple" and "the Blairites". Then you and me are discussed as if we're in another room, using the terms "middle-income (A/B) voters" and "poorer voters (C2)". Then come the references to the "political establishment and the wider public" and the claim that "politics is about shaping public opinion, not bowing slavishly to it" (my italics). Finally, comes the admission that "a key Labour NEC member" has derided The Red Book and/or Labour Left "as a 'Peoples' Front of Judea' no less" (the irony presumably lost on the said NEC member):

The introduction continues by asking "how to live the socialist life?" and I've highlighted the inconsistencies in bold: 

"At the outset, it means committing ourselves to living in community with all who share our social space. This means, for the better off socialists, refusing the option of buying out of that society alongside developing policies that challenge the choices of those who do... The vision of a harmonious society lies at the heart of a socialist community: and a socialist community cannot exist where we relate only to those whose experiences mirror our own.

It follows from this that we must treat our fellow citizens with decency and respect.

[and later]

"What is desperately needed is an holistic vision of society where the contribution of all its parts is recognised and treated with dignity and respect."

Surely the requirements to treat our fellow citizens with decency and respect, and to avoid relating only to those whose experiences mirror our own - the 'holistic vision' - should mean allowing rather than refusing others the option to buy out of "our social space"?

At any rate, the socialist path immediately loses its way in a series of essays on the difficult subject of NHS reform. The first (by Grimes) denies the NHS is inefficient, claiming it leads the world (contradicted by research on various measures IEA, p. 82), dismisses the idea that people must take more responsibility for their own health, and challenges the application of market forces - we simply need to spend more money. The second essay (by Taylor-Gooby) concedes inefficiency, accepts some of the recently announced Coalition reforms (claiming they were Labour's anyway), requires people to be encouraged to live more healthily and points to local social health enterprises as a means of increasing the efficient allocation of resources. Finally, Grahame Morris MP fears that the "commercialisation" of public services will open the ideological floodgates, but then reminds his by now thoroughly confused colleagues of the need to restore confidence in public services and the public sector workforce:

"Slow moving monolithic bureaucracies at local and national level need to become more responsive and we must recognise that the move towards the private sector was in part inspired by the refusal of some services to adapt and change. Trade unions and staff associations must become part of the solution to improving services...".

As a pragmatist I would agree with Grahame, but doubt the ability of the entrenched public sector workforce to change from within. The idea of exposing the NHS to competition - even from social enterprise - would seem likely to help ensure change is achieved.

It's just a pity that The Red Book is focused more on pointlessly proselytizing about 'living the socialist life' than drawing helpful conclusions based on hard facts. Presumably it has left the faithful wandering confused among the wards of some figurative NHS hospital rather than focused on improving healthcare.

And therein lies the real message in The Red Book: living a dogmatic life is a terrible waste of time and energy that would be better spent helping to clearly identify problems and figure out how to solve them. 

Facilitators and Institutions Defined

The distinction between 'facilitators' and 'institutions' is a theme that has emerged quite strongly in this blog and is discussed in Chapter 2 of Lipstick On a Pig. In essence, I've defined "facilitators" as organisations that exist to solve their customers' problems; and "institutions" as organisations that exist to solve their own problems at their customers' expense.

To be more specific, I've extracted the following characteristics that I believe mark an organisation as being one or the other. Broadly, these characteristics group into themes of alignment, openness, adaptability, transparency and responsibility.

So, a 'facilitator' is organised to solve its customers’ problems, operates openly, adapts well to changing circumstances, is committed to transparency and takes responsibility for the impact of its activities on the wider community and society.

I update this post from time to time and am interested in any comments you may have.

Facilitators:

 Alignment

• exist to solve problems that their customers encounter day-to-day as part of wider end-to-end activities (i.e. customers don't 'pay' or 'bank', they make a payment as a single step in a much longer purchase process);

• don't presume to 'own' the relationship with people who use their products, and see customers as the controllers of that relationship;

• accurately define real problems, assess their real scale, identify root causes and implement proportionate, efficient solutions;

• view the world through the eyes and experiences of people who use their products;

Openness

• are prepared to work with complimentary businesses to support their users' end-to-end activities (including linking to material produced by others);

• seek feedback, welcome input and criticism;

• interact well with users in open forums;

• are 'free-rider tolerant';

Adaptability

• are highly adaptable and responsive to criticism; 

• allow ideas to develop from staff and users bottom-up, generating passion and connection amongst them;

• see uniqueness, change and adaptability as a source of competitive advantage;

Transparency

• work to simplify their products and users' experience;

• their terms and communications are clear, fair and not misleading;

Responsibility

• seek to make the world a better place in which to live, addressing the impact of their activities on the wider world.

Institutions:

Alignment

• Exist to solve their own problems at the expense of 'their customers';

• View the world through the lens of their own products (whether goods or services), rather than the activities in which users are engaged when acquiring or using those products;

• Regard themselves as controlling the relationship with users. 

 Openness

• Resist criticism and change – believing that their own processes, judgement and publicity should prevail;

• Impose their own views on staff and 'their' customers, top-down;

• Interact poorly with users (if at all) in open forums, experiencing 'vicious cycles' of adverse publicity; 

•  Are 'free-rider resistant';

• Mandate the use of their own add-on services, even where these are inferior those available from third parties; 

 Adaptability

• See running with the herd, or 'fast-following' as a source of competitive advantage;

• Demand that 'their' customers must become more capable if their products or experiences are to improve; 

Transparency

• Deliberately adopt complex pricing, conditions and 'pressure' techniques in their sales and marketing activities;

• Rely on cross-subsidies to distort the attractiveness of new products;

• Their terms and communications tend to be unduly complex and legalistic;

Responsibility

• Avoid addressing the impact of their activities on the wider world.

Why Should Londoners Help Cut Regional Public Spending?

I confess that I spent a long time ignoring politics and politicians. I didn't even vote, to avoid encouraging them. I figured if I kept perfectly still they'd lose interest and move away. And for a while it worked - John Major's heroically quiet government nearly brought spending down to a reasonable figure of 35% of the UK's output. At that sort of level, the tax burden can be reduced, there's more money for private enterprise, output increases, the government gets more tax revenue at the same rate - everyone wins. Or at least the Australians and the Swiss do (source: OECD, hat tip IEA, p. 47).

But the UK figures turned truly nasty during the noughties, and that certainly grabbed my attention. By 2009, Gordo and his cronies were spending an amount equal to about 50% the UK's output.  That left the UK in a terrible hole, and it's difficult to believe some hail Gordo as an economic saviour. Contrary to his own claim, he didn't put an 'end to boom and bust' - Mr Bust is alive and well and living high on his overdraft. And if you believe Osborne's plans for the greatest spending reduction since the invention of the stylus, he'll only cut national spending to 40% of GDP by 2015. 

But, for Londoners at least, the picture is a lot less depressing when you break down public spending by UK region. The rate of public spending has remained under 40% by regional GDP for London and the South East, while the rest of the country (bar the East at 45%) is way north, so to speak. In fact, public spending in the North-East peaks at a whacking 70% of regional GDP. England is cruising at 50%, while Scotland is at 60% and Wales and Northern Ireland are dragging around a millstone of government expenditure equal to 80% of their GDP  (source: HM Treasury, hat tip IEA, p. 57). 

As mentioned previously, the government is crowding out private businesses in the regions, and strangling their ability to compete, nationally as well as globally. Manufacturing seems to have been hit hardest, but even a local services business will have to compete with the public sector for administrative staff. And if those people don't want to work for the public sector, they may as well head to... London and the South East.

Funny that. And even funnier that Labour attacked Tory plans to reduce regional public spending. Far from risking a regional recession, the policy change was an opportunity for the regions to rid themselves of the cold dead hand of government.

Of course, bound up in this are national schemes that put public funds in the hands of middle-class people who shouldn't have been taxed to pay for them in the first place. You also see regional MPs resisting cuts to those programmes, preying on the middle class fear that they won't lead to tax cuts.

But people seem to be missing the competitive element to all this. Not only do London and the South East benefit from the flow of dissatisfied regional private sector workers and businesses. But there must also be a risk that London-based policy-makers won't persist in trying to administer medicine the regions don't want. I mean, it's hard to get the attention of Ministers and senior officials at the best of times. But when they're under the sort of pressure they are today, well, maybe they just won't get round to doing the regions a favour...