Friday, February 28, 2014

Tories playing the man not the ball is likely to backfire

In a blog on the Conservative Home website today Tory cheerleader Mark Wallace writes about "the horrors that a Miliband government would bring. ". And what "horrors" are they? Could they be any worse than those brought to us by this incompetent, uncaring, foolish Tory-led administration? I very much doubt it. The reason Cameron has failed so abysmally is not because he has been held back by the LibDems. They have largely been compliant. No. The reason is that they have a warped ideology and frankly don't know what they are doing. The venal combination of trying to do the wrong things and doing them badly. The badger cull is emblemic of this. Wrong thing to do, based on selectively chosen science while ignoring real experts and utterly bungled in execution. 

Ed Miliband has gently taken command of a once divided Labour Party and united it. The Blairite/Brownite divisions are a thing of the past. He has also significantly modernised the Party and removed the last remaining blocks on its credibility as a potential Government. Meanwhile the Conservatives still tear themselves apart over Europe (especially) the economy etcetera. Etcetera. Divided parties don't win elections.

Ed is a social democrat, or a democratic socialist if you like. But he is no ideologue and the "Red Ed" charge is as preposterous as it always was. Ed articulates well the benefits of a mixed economy and he has a good team behind him. He is also, self-evidently, a decent man. His slight geekishness and occasional social discomfort is unlikely to be a block to his election once the public get to know him. The more they get to know Ed the more attractive the prospect of him in Downing Street will seem. The Conservatives think that they can win by playing the man not the ball. It could backfire on them.

Friday, February 21, 2014

Why do ill-qualified non scientists make so much noise on ClimateChange - on both sides of the debate?

There is rather a good blog on Conservative Home today by Peter Franklin saying we should be more trusting of scientific experts.  

Indeed we should  (mostly) "trust the experts" - which is why the Global Warming debate is so sterile. Climate change is highly complex and the study of it requires deep and expert scientific knowledge. It is not a subject for the layman. And yet because denial of Global Warming has become a totem of right wing credentials (why?) we have a plethora of those prepared to tell us all about it. And why it's some sort of Lefty conspiracy. From Nigel Lawson to James Delingpole, from Nigel Farage to Owen Paterson the Right unites to rubbish Global Warming. And their scientific credentials to to do this? Zilch.

How this has happened I've no idea. True the early warnings of how man was damaging the planet and it's climate were spread by some politicians of the left. Al Gore the classic example. But that didn't, or shouldn't , have meant that it was a Left/Right divide subject. Even a non scientist should be able to see that it is facile to have Climate Change divisions with the deniers on one side saying its bunkum and the Greens on the other saying we're doomed. The truth, of course, rests somewhere between these extremes and it is only the deepest most thorough application of science that will eventually tell us where. We are not there yet by a long way. Until we are is there any chance we could cut our the stridency ? I doubt it ! 

Sunday, February 16, 2014

We don’t need to choose between flood protection and HS2 and other projects. Just measure their costs and benefits better.


I graduated with a BA (Hons) in Business Studies in 1970 which, to save you the math, is 44 years ago. Virtually everything that I studied on that course is relevant today – indeed more relevant because most of what we learned was unencumbranced with the MBA bullshit that was later to infest this area of study! In the Economics part of the course we covered the subject pretty thoroughly and in a linked area we looked at private and public investment. The latter was particularly interesting as unlike the former social considerations were uppermost.

The social (including environmental and other consequences) impact of private investment projects has been seen to be increasingly important in recent times. That said the main consideration has to be the potential returns over time for private shareholders. They are businesses after all. But for public sector investment it is different. Here return on capital and profit potential are far less important than the total benefits (and costs) of proceeding with a scheme. This is where, on my course all those years ago, Cost-benefit Analysis (CBA)  comes in – and it still does. The definition of CBA in Wikipedia seems to express what it is rather well:

“In CBA, benefits and costs are expressed in monetary terms, and are adjusted for the time value of money, so that all flows of benefits and flows of project costs over time (which tend to occur at different points in time) are expressed on a common basis in terms of their "net present value."

The key point about CBA as a tool in project evaluation is that it requires that values are placed on consequences where the effect is not necessarily easy to determine in monetary terms. So, for example, the actual monetary cost of a construction project ought to be forecastable with a reasonable degree of precision. However the social cost of (for example) the disruption during the construction phase is much more intangible and assumptions have to be made. A project that we looked at in some detail was the construction of the Victoria Line in London and the CBA that was carried out on it:

Victoria Line 

You get the general idea of the approach from this brief summary. Which brings me to both HS2 (the High Speed rail line going North from London) and to capital expenditure on flood protection projects – both very much in the news at the moment. 

The first thing to say is that it is intellectually bereft of reason to say that we should either do one or the other of these projects as if capital rationing is such that we can only afford to do one! Nonsense. In an economy the size of Britain's, particularly in the context of a European Union which not only supports infrastructure projects but often part-funds them, every project must be looked at on its own. So this sort of thing in a letter in the Daily Telegraph is drivel:

SIR – Looking at the photographs of storm wreckage along the east coast and up the Thames, it seems that the proposed HS2 money would be better spent on flood defences to prevent the catastrophic flooding of London in the future.

Save London rather than a few minutes’ journey time.

Kate Foster
Malvern, Worcestershire

In short if the CBA for both projects is positive then by definition they can be afforded and ought to proceed – all other things being equal. But let me emphasise that it is essential that the cost of intangibles is fairly assessed. For example HS2 involves a huge number of Compulsory Purchase Orders – people and businesses (etc.) will lose their homes to make way for the line. The compensation paid is only part of the cost – what about the social and personal costs to those whose lives are disrupted? They must be properly calculated in so far as it is possible to do this. This does not mean that the line should not proceed – far from it. Every railway line since the early nineteenth century to today has involved disadvantages to those who live on the planned route. But these disadvantages can be assessed, and must be.

In The Netherlands the massive Delta Works were constructed at huge capital cost but the overall benefits unquestionably exceed the costs. Similarly with the Thames Barrier in London. Cost-benefit Analysis techniques helped prove the cases for these projects and they are essential for HS2 and are being used – as you would expect. The same applies to the potential capital projects for the creation of effective flood defences so that, like the Dutch, we actually protect our citizens in future.

My argument here is for more science and more calculation and less emotion. This may seem a tad callous for two projects which really do affect people’s lives and which have oodles of emotion in them. But if we look not at the macro level, where complexities get lost, but at the micro-level where real and intangible costs and benefits can be assessed we have a better chance of actually doing the right thing! 


Saturday, February 01, 2014

It's not the role of the Tax system to punish the wealthy and penalise success

At the Fabian conference a week ago, which I attended, Polly Toynbee said that the 50p tax rate should return even if it doesn't bring in much revenue. Since then many others on the Left have been using the construct that it will "increase HMRC receipts" (or some such). This is of course true. But it isn't the point. Studies suggest, as Paul Johnson of the IFS actually said at the conference, that the overall effect of having a 50p top rate of tax compared with the current 45p rate is neutral. Some go further and say that overall government revenues would actually reduce. Which is why some Labour peope are using the "increase HMRC receipts" evasion. So is it the role of taxation to punish the rich? Moral grounds if you like. I find the idea repugnant.

I pay my taxes and always have. I do this willingly as my obligation to society. I pay them for things I don't need, like education or maternity care and hundreds of other things Government spending looks after. I accept that on the margin I pay 40% (not 45% - I'm not in the 1% !) because it seems morally right that if I can afford it, which I can, I pay more than someone who can't. But I am not being punished for this fact. That would be punishing me for having been more successful (financially) than someone else - why would you do that? 

If it can be shown beyond doubt that the 50p tax rate has no fiscal benefit compared with the 45p rate then Labour should drop the idea. Because it would be vindictive to go ahead with something that discriminates against success with no benefit at all other than some rather unworthy feeling that you have bashed the rich. That would bring politics into disrepute. And it would be bad politics as well. In the 1950s the top rate of tax was something like 90%. I always though this iniquitous and still do and governments gradually came around to the idea that it was as well. But where you draw the line (what the tax rate range should be and at what levels the bands should be drawn)  is problematic. The challenge is to find the system that maximises revenues and honours the principle that richer people should pay more taxes. That principle is important but it does not mean the the driver is punitive - it should be pragmatic as well as being perceived as fair. But not punishment.