Further, Faster, Narrower, More Targeted

Raising the personal tax allowance is a great idea. Too many low income earners are paying tax at the same time as receiving benefits - needlessly pouring tax money into the leaky Treasury bucket. But as ever, how to fund the tax break is the £64bn question.

This change brings the opporuntity to begin trimming many public spending programmes to make them more narrowly targeted. As a result, taxpayers will begin to trust the government to cut taxes rather than merely cut public spending.

Currently, there are many cases where the link between the burden of a tax and how the money is spent is unnecessarily indirect. This is no accident. As explained previously by Kristian Niemietz, the proponents of 'tax and spend' deliberately design policy and related spending programmes to favour a proportion of undeserving recipients without appearing to tax them directly. These are usually called 'universal' or 'comprehensive' programmes. This political strategy not only preys on greed amongst the 'sharp-elbowed' middle class, so that they'll welcome the policy behind the spending; but it also preys on their fear that abandoning the policy and cutting spending will not translate into lower middle class taxes. 

On that basis, the government only ever spends more, and either borrows or raises taxes to do so - a vicious circle we need to break.

Eurocratic Mathematics

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So, they've bailed out Greece again. This time investors took shorter 'haircuts' and the European Central Bank will pass its profits on Greek bonds (yeah, right) to national central banks so that it "may be allocated by Member States to further improving the sustainability of Greece’s public debt." If all goes really well (uhuh), this €130 bn 'lifeline' should mean that Greece will still owe the world 120% of its GDP in 8 years time.

To ensure Greece takes the requisite fiscal pain, it is to be permanently monitored  - the sovereign equivalent of house arrest. But the Greeks won't mind the ankle bracelet, as they've had one before. Five years after the 1893 default:

"foreign pressure led Greece to accept the creation of the International Committee for Greek Debt Management. This committee monitored the country's economic policy as well as the tax collection and management systems of Greece."

In fact, Greece has been in default for about half the time since achieving independence from the Ottomans. It's the country's part-time job. And I'm sure the latest reprieve won't rid Greece of its feeble system of political patronage, either. History is doomed to repeat.

So of course the numbers are all rubbish. This is Eurocratic mathematics, the bunting on the facade of a single Europe.

I'm sure we'll all get used to it - unless, of course, they cut Greece loose...

Image from Demonocracy, hat-tip, ZeroHedge.

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.