Chavez: I am the state

The re-elected Venezuelan president, Hugo Chavez, yesterday announced his plans to nationalise the main telecoms company and the likely nationalisation of a power company. The announcement is part of President Chavez's pledge "to radicalise his administration during his new 6-year term and fully convert Venezuela into a socialist state (FT)."  

Just Wages

The tensions of excess, both in private and public sectors, are starting to display themselves in debates over the just level of wages for various occupations. These debates occur every now and then, usually provoked by a sense of disparity related to imbalances in the economy, themselves created by lopsided government intervention. Not surprisingly, given Gordon's predilections for the City, big corporates and micro-management by an overweening bureaucracy, the focus at the moment is on the remuneration of bankers, business leaders, management consultants, politicians and senior civil servants.

Following the recent announcement of record profits and record bonuses at many of the leading Wall Street and City banks, the Telegraph reports today that the number of public sector staff on six-figure salaries (i.e. > £100,000) has trebled in the past five years, whilst Brendan Barber (general secretary of the TUC, but usually a measured critic of business) has called for a "debate" about "how big and how justified" the rewards of directors of FTSE 100 companies should be, given that they have increased 105% in real terms since 2000, while average wages have increased only 6%. Put another way, these bosses now earn 98 times more than their employees. Bosses of AIM-listed businesses haven't been doing too bad either, some of them being paid over £1m for the first time. MPs' recent claims that they deserve an increase in their basic salary from around £60,000 to £100,000 received mixed press - some people feeling that it was worth paying to get a better quality of politician, others feeling that they didn't deserve a pay increase given their supposedly poor levels of performance and the pay squeeze on other public servants. There was further criticism of the high levels of pay for many public-sector executives (i.e. quangocrats), whose average pay awards are now second only to bosses in the City financial sector. Quangocrats' pay levels have been causing concern for a while now, without any sign of a retreat.

These debates are always characterised by an absence of intellectual consistency. Most participants argue that those they favour should be paid as much as is necessary to get "the best person for the job", whilst those they do not favour should be paid no more than is necessary to fill the post. Some eschew these generalisations for even greater simplicities - people should be paid according to the amount of work they put in, according to their performance / the results of their efforts, or, for the unreformed socialists, according to their needs. Whatever system is used, what unites almost all commentators is that they seem determined to invent their own personal scale of worth, as though it would be possible to devise a just scale of wages that could be imposed from above if only people would recognise the truth of the commentator's personal value system.

What is the truth? How are we to know whether people are being paid enough or too much?

Meeting targets

National Audit Office's report has found that information on whether 12 out of the 14 Department for Education's key targets set by the PM and Chancellor will be met is likely to be unreliable. The monitoring of only 2 targets was approved. The report highlights the fact that the government's announcements regarding improved standard should be questioned, especially when they point out how they have met all their important targets.

Gordon's tax crab

  • The Chancellor has raised taxes by £6bn since the 2005 general election
  • A family pays £200 per year more taxes


  • He promised £200 for every pupil in the PBR but only £20 is new money
  • He promised £36bn for education in the PBR but only £100m is new money

Independent reviews

The Chancellor has commissioned 39 indpendent reviews since 1997 and most of them have quickly disappeared without making any impact. At first it seemed a good idea to bring in outside expertise but increasingly such reviews only justify what the Chancellor has already decided to do. Labelling them as independent can easily be questioned as the support and advice comes from the civil service.   


Yesterday's Pre-Budget Report was another example of Gordon's nannying. Now mothers will receive child benefits even before their baby is born and more worryingly the Government will provide books to children up to the age of 11. The Chancellor should concentrate his efforts on improving the education instead of deciding what books children should be reading.  

Cutting red tape

Tony Blair promised to cut red tape for business by 25% yesterday (28 Nov) in his speech at the CBI conference. In his address today, Gordon Brown is expected to announce reforms desinged to deliver a "more modern, simpler and consistent" tax system. The PM said that bureaucracy cost almost £15 billion a year and they have identified annual savings of £2.2 billion. And Gordon's announcement comes as a response to growing criticism that the tax system has become uncompetitive.


The Olympic bill has risen by 40% since the Games were won last year and its is likely that it will go up even further. The Government must sort out this chaos at once and it needs to get a grip on all the costs and where the funding will be coming from.

The CBI - cheerleader for government intervention, promoter of vested interests, or both?

According to their website, the CBI's mission is:

"to help create and sustain the conditions in which businesses in the United Kingdom can compete and prosper for the benefit of all"

and their policy is:

"decided by our members – senior professionals from all sectors and sizes of business are directly involved in the policy-making process"

In the experience of this author, the CBI are now complicit in the government's ever-expanding intervention in the economy, and listen only to their bigger members. A recent exchange of correspondence seemed to illustrate this attitude. It is repeated below - decide for yourselves.

Gordon and his 8,300 pages of tax law

According to the joint report by the World Bank and PricewaterhouseCoopers (PwC) British companies have to struggle with 8,300 pages of tax law, behind only India, and  the rulebook has doubled over the last decade. This is a clear sign of Gordon Brown's preference for complexity.

The Chancellor has a tendency for making even the best and seemingly straightforward ideas so complicated that they end up in a huge mess.  Most people who would benfit from these initiatives will be faced with more bureaucracy and complex procedures that many of them will give up fighting the system to gain benefits they are entitled to. The tax credit system cannot go unmentioned in this case.  

9 to 5 only....

The BBC reports that the EU employment ministers are meeting this week to discuss the EU working hours law. As a EU rule, the current proposals are complicated - set normal hours, overall maximum hours and the option of opting out. If the proposal will be implemented, they will restrict labour markets. Liberal working hours promote economic growth and lowers unemployment. For example, the UK's economy has performed better than the heavily regulated French economy.

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.

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?

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).

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".

Flat Taxes and Welfare Provision

The Daily Telegraph reports today ("Treasury blocks move to flat rate inflation") that the Treasury has blacked out several arguments in favour of introducing a "Flat Tax" (a single rate of tax across all income levels) in a report on the subject ("HM Treasury Freedom of Information Disclosure - Flat Taxes"). This is of course revealing of Gordon Brown's attitude to simplification of the tax regime (of which the Working Families tax credit fiasco is another good example). But the equation assumed by right-wing proponents of a Flat Tax (such as the Telegraph or George Osborne), namely that Flat Tax is synonymous with low tax, is equally revealing of their interest in the matter.