Picking Losers

More regulation to cut red tape?

The Telegraph reports today (24th October) on the Government wasting billions of pounds by inefficiently regulating the economy. For example, it costs more than £2 billion for the Health and Safety Executive to comply with the regulatory burden. Most departments and government agencies are reportedly putting plans in place and setting targets on how to reduce the waste.

A party-politicised House of Lords

While we are stuck with big government, an important check on the power of the executive is an independent second chamber. Although the undemocratic nature of the House of Lords is much derided, it is noticeable that their Lordships have provided much more substantial and well-reasoned opposition to the worst excesses of the current government than has been provided by the Commons. This is quite significantly related to the fact that many of their Lordships do not owe their positions to conformity with party policy.

Gerrymandering of health services

Most examples of picking losers are normally quite subtle. Very often, the offending policy is well-meaning, and the harm unintentional. But the abuse by the Labour Party of their control of the levers of power to steer funding towards Labour constituencies and away from Conservative and LibDem constituencies is blatant, intentional and vicious.

The ghost of inflation

For the past decade, the West has been relatively immune to price-/wage-inflation, despite significant expansions of the money supply and movement of various national balances from credit to debit, thanks to the deflationary effects of competition from emerging nations such as China and India. This has bred a complacent attitude that all it takes to control inflation is interest-rate policy designed to keep a cap on price-increases. The lessons of the twentieth century, which showed clearly that money supply was linked to inflation, that government interventions that caused an imbalance between the natural levels of saving and consumption were connected to the "boom-and-bust" trade cycles and that inflation, once started, could be very hard to stop, have largely been relegated in the concerns of policy-makers. Wage competition from immigrants, price competition from the East, and regular tweaking of inflation indices and interest rates are enough, so the theory goes, to make the old disciplines unnecessary.

It is probably this complacent consensus that explains why there has been so little comment on the inflationary aspects of the current dispute over NHS wages. There has been much sympathetic coverage of the below-inflation wage offer that has been made by the Government to NHS workers. They are deemed to be justified in their complaints, because a below-inflation wage offer is, so the analysis goes, a real-terms cut in wages. Nevermind that NHS wages have gone up, sometimes massively, above inflation in the last few years. And critically, nevermind that the corollary of that argument is that public servants should always receive pay offers that are no less than the current rate of inflation.

If employees feel that a pay offer in line with inflation is no increase at all, and therefore a minimum offer, then what happens as inflation creeps higher, as is happening? Wage offers track or exceed price-increases, which feeds the inflationary spiral. This is exactly back to the territory of the 1970s, and yet no one seems to have noticed.

Anti-social services

Government intervention is always frustrating, but when it inflicts direct damage on people's lives, it is an altogether more serious and contemptible matter. Yet, this is happening on a regular basis to British families. We learn today of the Williams family of Newport, whose family was ripped apart by social services for no good reason.

And this is just the tip of the iceberg. As Danny Finkelstein has highlighted, Camilla Cavendish of The Times is fighting an honourable battle to expose the large number of occasions when travesties of justice such as this are inflicted on innocent people by representatives of government. But she admits it is an uphill battle, as she is so often prevented by the law from reporting on abuses of the law.

Gordon and the red-tape hydra

Gordon Brown has pledged to "cut red tape" for at least the third time this year, according to the Telegraph. This might seem a strange thing to criticise on pickinglosers, but we do so, not because it would be a bad idea, but because we don't believe he even knows what that means.

When you look at the detail of the story, what he has actually done is to ask the FSA to cut red tape by 25%:

  1. How does one quantify "red tape cuts"? In what units is this measured? It's a popular concept, borrowed from Australia I believe, but utterly meaningless. "88.2% of statistics...."
  2. Why only the financial services sector? Does the rest of business (or life in general) not count? The Telegraph reports that "the Chancellor will also say he wants the Department of Trade and Industry to focus on the global promotion of the financial services sector, and in particular the City of London." Can you get a much clearer case of government preferential treatment? And do we believe foreigners are going to use the City because the DTI goes around promoting them, or because they gain a competitive advantage from doing so? How many foreign businessmen in whom the City would be interested do we think are not aware of the City and its services already? Enough to justify regular trips abroad for DTI ministers and civil servants, apparently.

Apparently Ed Balls likes to be called the "City Minister". I didn't know they were allowed to make up their own titles and roles. And how disturbing is it that the man responsible for the detail of economic policy that affects all of us, designs it with particular consideration of how it affects the City. Is it inconceivable that there may be circumstances where the interests of the City and of the broader economy (or industry) are not aligned? If so, who is going to be the winner when hard choices have to be made? Still, Ed should be alright with a nice juicy City job or multiple non-execs once his political career is over. As both Ed and the country will be better off when that day arrives, perhaps we could agree that it is brought forward. Next election, perhaps?

Save our Post Offices (whatever the cost)

David Cameron and the Daily Telegraph think we should subsidise rural Post Offices to keep them open, even though 800 of them get fewer than 16 customers per week. It's funny how people who preach about competitiveness forget about their principles when it is their voters or their readers that would benefit from ignoring economics.


Yet another effort by the Government to "go commercial" is failing. £10m was spent on an internet accommodation service which produced just over 400 hotel bookings this summer, reports the Telegraph. What a surprise. When I book a holiday, the first place I think of looking is the website of the national government.

Government should provide for its citizens only those things that they need (not want) and that are not provided by the market. I hadn't noticed a shortage of travel websites, had you?

Nuclear meltdown

Back in the 70s, government picked a real winner: nuclear power. It was going to produce, they promised, power "too cheap to meter".

We know how that turned out. Rather than being too cheap to meter, nuclear turned out to be first too risky to privatise, and subsequently too expensive to run. Post-liberalisation, British Energy had to be baled out when it was revealed that they couldn't even cover their running costs, let alone their vast capital, risk, waste disposal and decommissioning costs at the prices delivered in a competitive market.

The long malign arm of the Environment Agency

As reported by the Telegraph, but strangely not available on their website, the charity Inter Care has been forced to shut down its operations by the Environment Agency (EA). Inter Care sends unused drugs from the UK to African hospitals. The EA has ordered them to suspend shipment because they may be breaching European Union regulations on waste disposal. Clinics in Africa are now running short of drugs as a result.

You can pick your enemy in this story. Maybe the fault is the European Union, for legislating in such a way that it would prevent something as beneficial as this. Or maybe it is the fault of the EA for excessive pedantry in the application of regulations. Experience of the EA would strongly suggest the latter, but experience of the EU would suggest the former. Is this the perfect confluence of two of the most sclerotic government bodies in the world? The perfect bureaucratic storm?

Cottage hospitals next for the chop

Following on from the item on birth centres, we now learn that upto eighty cottage hospitals may be facing cuts. As per birthcare, it's not the cuts themselves that are necessarily the problem, but the fact that this is no economic choice, in the sense of matching demand to supply, but a bureaucratic choice. NHS managers have calculated that these facilities are the ones that will be least missed. How do they know? There is no market in healthcare, so there is no way for people to reveal their preferences.

The multifunction carbon tax

I don't know if this is exactly a case of picking losers, but it certainly falls into the category of stupid policy assessments, and they usually end up with more losers than winners. Anyway, it is so stupid that I had to post about it.

I have just watched a recorded episode of Newsnight (from Tuesday, 3 Oct, I think) in which Susan Watts, their Science Editor, made the following pronouncement:

"David Cameron's new green Tories could use a small carbon tax both to pay for new technologies and to raise revenue to let them lower taxes elsewhere."

Age and reason

Age discrimination is self-defeating. Companies that employ less suitable people simply on the basis of their age will do worse than companies that employ the most suitable candidates regardless of age.

But that is not the same thing as saying that age and experience are not often relevant to someone's suitability for the job. Legislation trying to prevent companies from discovering the age of job applicants is not only bound to fail, but also ought to fail (Daily Telegraph, 26 Sept 2006, p. B7).

NHS Indirect

Someone in Whitehall decided that the most efficient way of dealing with out-of-hours medical enquiries was to have a centralised phone enquiry system (NHS Direct), rather than doctors on call. This would save money and make doctors' working hours more civilised. Unfortunately, remote diagnosis is not easy, or else the doctors on call would have been handling most of their calls in this way. Not surprisingly, this change has not reduced the number of patients who cannot be diagnosed over the phone. They therefore have to go somewhere. We now discover that where they are going is to the Accident & Emergency (A&E) services of their local hospital (Sunday Telegraph, 1 Oct 2006, News. p.8). There were an extra million visits to A&E in 2005/6 than the previous year. An A&E consultant has estimated that over half of those visiting A&E could have been dealt with by a GP.

Amazonian myths

David Miliband wants Westerners to buy the Amazon rainforest (Sunday Telegraph, 1 Oct 2006, News, p.2). We need to ensure that there is a balance between urban and industrial development to provide the goods that people demand, agricultural development to provide the food that they demand, and undeveloped areas to provide the ecological services (such as carbon dioxide absorption) that we need and the habitat to support the biological diversity that may yield untold benefits in the future. Property rights are an important way of encouraging protection of assets. In that sense, a proposal to introduce property rights in rainforests should be welcomed.

Gordon Brown's idea of devolving power

Gordon Brown has come out in favour of devolving power. But his idea of devolution is a little different to ours. Ideally, power should be devolved to the individual. (Actually, ideally the individual, not the government, should have the power in the first place, but we have to start from where we are.) Markets are devolution of power to the individual, who can use his "dollar votes".