Jul 2007 26

Does anyone have a clue where we’re heading?
Halfway across a severely swollen river is not a good time to let the tiller go. But that of course is precisely what Cap’n Alan Johnson is doing on the good ship NHS. Whereas Commissar Hewitt had it hard about, Cap’n Al has let it go all floppy.

Yesterday he told the Health Select Committee he was junking one of the Commissar’s most cherished but highly contentious policies:

"I don’t believe there is the need for another independent sector treatment centre [ISTC] procurement and there won’t be a third wave.

We will instead move towards greater local determination."

On one level this is good news for taxpayers. The contracts with these ISTCs have been classics of the Simple Shopper’s art, with taxpayers being required to pay whether or not the NHS actually uses the service. Their total cost is £1.7bn, they are on average 11% more expensive than their NHS equivalents, and 20% of their paid for capacity is not used. Brilliant. (Also see here for details of the £1m paid to a Chesterfield ISTC for orthopaedic operations not carried out because patients chose to use existing NHS services).

As we know, the whole DoH programme to get more private companies involved in healthcare has been a shambles of overpayment and poorly designed contracts. Taxpayers have paid through the nose, even if the services are not used or actually fit for purpose.

The scandal of hospital cleaning shows just how bad things can get when you try to manage top-down via boilerplate contracts: with nobody directly in charge on the ground, the critical business of real hygiene on the wards in the hospitals has simply fallen down the dirty cracks in between (eg see here for latest on C.difficile crisis).

And let’s not forget the great money pit that is PFI. When last sighted, the 83 PFI hospital contracts were set to cost us £53bn over the life of the contracts, compared to an actual value of facilities of just £8bn. Indeed, private sector refinancing profits have been so munificent that even the normally placid PAC Chairman couldn’t stop himself spluttering about the "unacceptable face of capitalism" (see this blog and others for details on the mega refinancing gains made by some PFI players).

So Johnson’s been put in to stop the whole thing- private money, contestability, reform, it’s all systems stop.

Obviously the unions are delighted (although not so delighted about the grim outlook for their future pay rises). But should we taxpayers also rejoice?

The answer of course is no. We’re locked into a whole load of expensive contracts designed to support a more open NHS, but Johnson is junking the programme before we’ve actaully seen any of the promised benefits.

Our once in a lifetime opportunity to reach the other shore of real choice and competion has been lost. Taxpayers may be spending £105bn this year on health (over £4,000 per household), but effectively the money’s run out. 80% of Labour’s increased spending has been frittered away on increased costs.

The Tories- even in the increasingly unlikely event they got re-elected- have already bottled out of the radical choice policies that would offer real reform. So there’s absolutely nothing else on offer.

We’re back to drifting downstream.

As we’ve said before, if you can possibly afford it, get yourself private health insurance.

Today.
Jul 2007 25

Production is booming
Quite apart from taxes, government imposes a further huge burden on us in the form of regulation.

One part of this- although only one part- is red tape. Successive governments routinely promise to slash it, but somehow the slashing never seems to inflict much more than a mild scratch. Even worse, the slashing itself spawns an entirely new tax-funded industry devoted to… er, slashing red tape.

So what does it all cost?

The National Audit Office has just published its first review of the present government’s much trumpeted slashing programme (see this blog). And it helpfully summarises some of the key numbers.

Total costs are officially estimated at £31bn pa. But £11bn pa of that supposedly relates to "business as usual" paperwork that businesses would have to do anyway. Which means the net cost of government red tape- the "administrative burden" of government- is officially put at £20bn pa. The government’s target is to reduce that by 25% by 2010.

On this basis, the four worst offenders are our old friends the DTI (as was), HMRC, Communities and Local Government, and the Health and Safety Executive. Together they acount for about three-quarters of all red tape (by cost):


These estimates were cooked up… sorry, put together, by consultants PWC and KPMG, using a survey based approach known as the "Standard Cost Model" (see Report Fig 6), And nice work it is too- consulting fees have so far amounted to £17m (para 2.2).

Of course, the consultants are not the only ones making a living from "slashing" red tape. The government’s own Better Regulation Executive (BRE) is "a dynamic forcetasked by the Prime Minister to minimise bureaucracy for businesses and front–line staff in the public sector and to help charities and the voluntary sector to make a greater contribution to society."

Dynamism, tasking… you’d almost think they were part of the old DTI. Except of course, that was so full of red tape it was abolished. So it can’t be.

Except… I’ve just noticed the BRE (numbers and costs shrouded in mystery) is part of the Department for Business, Enterprise and Regulatory Reform, which… well, blow me down… is just the old DTI with a new nameplate. The DBER is investigating itself: I have a teensy feeling we shouldn’t hold our breaths for action.

But there’s another Much Bigger problem. As we’ve already mentioned, red tape comprises only one part of the regulatory burden. And it’s unlikely to be the biggest part: that comprises the burden of the regulations themselves.

The British Chambers of Commerce produces a well-known annual running score of the broader regulatory burden: the Burdens Barometer:

"The BCC Burdens Barometer is compiled in partnership with academics from the London and Manchester Business Schools. The ‘Burdens Barometer ‘ calculates the compliance cost to business since 1998 of new regulations. It is calculated using the Government’s own Regulatory Impact Assessment (RIA) figures which means it reflects the Government’s own generally conservatively estimated costs. It has been calculated at £10 billion in 2001; £15 billion in 2002; £20.6 billion in 2003; £30 billion in 2004; £38.9bn in 2005; £50.27bn in 2006 and £55.66bn in 2007."

So using the government’s own conservative estimates, the BCC calculates the burden has increased by £55.7bn pa just since 1998.

And it sure wasn’t zero before that: indeed according to the NAO report, seven out of the 12 most onerous bits of regulatory legislation were enacted by the last Tory government (especially the Employment Rights Act 1995, and the Town and Country Planning Act 1990- see report Fig 9).

On that basis, the government’s estimate of £20bn red tape cost doesn’t come close to capturing the whole regulatory burden. That’s at least three or four times bigger.

So will the "targeted" 25% reductions even be noticed? You know the answer.

The NAO looked at other countries that have already tried the same thing, and the story is universal: proud government boasts that its reduction targets have been met sit alongside a real world where the victims don’t see a blind bit of difference (report Appendix Three).

In its own understated way, the NAO condemns the whole exercise as a total waste of time and money:

"2.21 There is, therefore, no guarantee that a 25 per cent reduction in administrative burdens will lead to a noticeable change in the resources that businesses devote to complying with regulation. Administrative burdens are likely to be a relatively small element of total cost to business of complying with regulation (Box 2). As it is difficult to establish the impact of regulation on productivity, there is no benchmark for the level of reduction needed to deliver an increase in productivity levels. Equally, there is no benchmark for the level at which the benefits of regulation to business would start to diminish as a result of reductions."

Let’s hope the PAC gives the clowns in charge of this outrage a roasting. I’m booking my seat now.

Meanwhile all we taxpayers have got is yet another expensive government bureaucracy and yet more consultant fees.
PS For the avoidance of doubt, yes, BOM wants to see less red tape, but through a radical downsizing of government, not redesigning a few forms
Jul 2007 25

SmallbluebinThis week we turn our gaze away from Tower Shamlets and the other one party states of East London and cast our watchful eye on the South West for our non-job of the week.  Gloucestershire County Council has applied for a spin doctor for their waste department.  Yes, rubbish needs PR.  In their advert they laud their “excellent” status in waste management – so they have to spend thousands of pounds of your money telling everyone how great they are.  So, from the Guardian jobs page we give you our non-job of the week from Gloucestershire County Council:

Community Liaison & PR Officer (Waste)

£22,293 – £28,221 per annum
Waste Management Unit, Shire Hall
Full-time: 37 hours per week

You will not find a better time to join our waste management team. Judged "excellent" by the Audit Commission, waste is seen as one of the authority’s highest priorities. We have an ambitious change programme focussing on diverting waste from landfill, increasing recycling and composting, changing householder behaviour, and the delivery of new waste infrastructure in partnership with our district council colleagues.

In order to deliver our programme it is vital that we communicate and consult extensively with a wide range of organisations including the local and national media, community groups, elected representatives, and residents. That’s where you come in. You will be self-motivated and enthusiastic, with excellent communication skills and a determined approach to getting your point across.

You will be educated to at least degree level in a relevant subject, and will be able to demonstrate experience gained in a marketing, community liaison, PR, or journalism role.

Jul 2007 25

F10157b_5

For far too long the language and rhetoric of international trade
agreements has been depressingly mercantilist.  If one country agrees to
reduce its protectionist measures it is talked of as a "concession" and
a "sell-out", whilst politicians and diplomats who dogmatically cling
onto their ridiculous trade policies are saluted and commended for
defending their country’s interests.  Even the most basic understanding
of economics would be enough to realise why such talk is not only
fallacious but hugely damaging. 

Trade, as Adam Smith so famously pointed out, is a non-zero sum game -
trade is not a fight for a finite, fixed supply of wealth where one
country’s gain is another’s loss, but a wealth creating process, that
allows us to benefit from the resources, skills and specialisation of
other countries.  International trade benefits both trading parties,
leading to better allocation of resources and so lower prices and higher
incomes.  That one country wishes to "protect" its borders from the
benefits of trade is no reason for us to deprive ourselves of these
benefits.  The fact that one country chooses to throw rocks into its
harbour is no reason to throw rocks into ours. 

It is thus very reassuring to hear David Cameron talk of unilateral
reduction and elimination of trade barriers, particularly in developed
nations.  The only engine to sustained growth in human welfare is embracing free markets.
The most successful developing countries have been those that have
traded their way out of poverty.  Not only is it economic madness to
deprive ourselves of the benefits of free trade, it is immoral to
protect ourselves from goods from developing nations, as this only keeps
these nations in poverty.  First-world tariff and subsidy reduction
would do more than any aid package ever could to reduce third-world
poverty.

We are not going to pretend that eliminating western protectionism will
be a magic bullet.  To start with, many of the highest trading barriers
are actually between developing nations and many third world nations
continue to pursue infant-industry protectionism, both of which only
hinder the growth of these impoverished nations.  Too often poverty
campaigners simply choose to ignore the protectionism of developing
nations, in fact in a depressing number of cases they argue in favour of
its continuation as it flatters their ideological commitment to the
neo-Marxist school of dependency theory, and so ignore the fact that
such protectionism is often just as damaging (if not more
so) than developed world protectionism.  In fact, the Conservative
Party’s policy review – headed up by Peter Lilley – proposes some
interesting steps to provide incentives to encourage developing nations
to reduce their protectionism, such as providing compensation for lost
tariff revenue.  This again is to be welcomed.

Our fear is that many of these rigorous and noble ideas will simply be
impossible to implement within the framework of the European Union, as
our hands are tied by French farmers and Italian clothes makers and any
new trade agreement would have to be a collective one endorsed by the EU
Commission and every other member, which, as we previously noted, has been making plenty of protectionist noises of late. 

Speaking to a half-empty Rwandan Parliament yesterday, Mr Cameron said:
"Forget the endless, torturous negotiation about getting something in
return [for dropping tariff barriers] … Just do it. We can afford it,
Africa needs it and we will all benefit from it."  A refreshingly clear
and principled statement.  Unfortunately, given that British politicians
in our puppet Parliament no longer control trade policy (unlike elected
members in America, Australia, China, India, Brazil or Russia), it is
difficult to know how such a speech can ever be translated into action,
short of EU negotiation to take these powers back.

Jul 2007 25

Last year, Gordon Brown committed the Government to reduce the total cost to businesses and charities of regulation from £20 billion a year to £16 billion a year by 2010. In response, Whitehall departments have drawn up plans to abolish unnecessary regulations and reform others.

But a National Audit Office survey of 2,000 firms has found that 85 per cent have no confidence that the Government would reduce the regulatory burden as pledged, 75 per cent felt the cost of red tape would actually increase next year and 60 per cent said it was even now holding their businesses back.

NAO director Ed Humpherson also criticised the Government’s method of measuring the burden of regulation, saying that the figures of the cost of red tape were "indicative and not statistically reliable". He described the 25 per cent reduction target adopted by most departments as "arbitrary", and said: "What is clear is that [red tape] is an inhibitor to making business decisions. What evidence there is suggests it makes businesses reject projects that they would like to accept."

This all points to yet another government failure – the burden of regulation is being measured in the wrong way, and so targets to reduce the cost to businesses are more likely to be missed.

There is a better way to go about the worthy task of reducing the cost of regulations to businesses. And if ministers had looked hard enough overseas, they would have found the perfect way to do it. The Canadian province of British Columbia, five years ago staggering under the weight of one of the worst regulatory codes in the country, adopted a simple and successful plan to reduce the burden by a third in three years.

To measure what the regulatory burden was, the provincial government simply counted the number of “regulatory requirements”, which were defined as “a compulsion, obligation, demand or prohibition placed on an individual, entity or activity by or under the authority of a provincial Act, regulation or related policy”.  In plain English, a line for filling your name on an official form is counted as one regulatory requirement. This is far easier than trying to measure cost.

The first count revealed a staggering 382,139 regulatory requirements on the books in British Columbia. Finding a way to reduce this number was not a difficult task.  Each government department had to reduce the number of regulatory requirements it was responsible for by a third over the next three years.  It was a task as simple as reducing the number of lines on a form: halve the number of lines, and you’ve just halved the number of regulatory requirements coming from that form. The results exceeded expectations and went further than the target of a one-third reduction.  By June 2004, there were 237,604 regulatory requirements in British Columbia, a decrease of 38 per cent from the June 2001 total.

Not only do the numbers look good on paper, they are also making a real difference to businesses in the province.  The Canadian Federation of Independent Businesses’ 2005 survey of its members found that more than half of businesses in British Columbia thought that the regulatory burden had stayed the same or decreased in the last three years, the only province in Canada with such positive business opinion.   

If only unnecessary regulatory requirements could be reduced so simply in Britain. 

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