Nov 2009 18

Non-job of the week 1

Fiona McEvoy Burning Our Money

Marginally fewer public sector jobs advertised on the Guardian site this week, but nevertheless, a hearty 540 dominated by middle-management and executive positions.

Runner-up this week goes to an advertisement from the DWP for a non-executive position on the Healthy and Safety Executive, earning a cool £16,371 for “up to” 30 days per year. So a starting fee of almost £550 per day of head-scratching and analysing new ways of over-complicating the lives of employers? Nice work if you can get it…

First place however must go to Lambeth Council who’ve taken out an advert for “five exceptional candidates” for the post of Locality Play Officers, Project Manager – Play Pathfinder and…:

“Play Strategy Manager
£37,851 – £40,506 pa

These are exciting times for play in Lambeth. With a strong historical commitment to children's play, we manage the largest Adventure Playground provision in the UK. In 2007, we launched our first Play Strategy, highlighting our ten-year vision for play. We have since secured over £3.5 million of external funding, including Play Pathfinder status, to support the local play offer. Do you have the drive and commitment to join the Play and Sports Unit, working with our key partners to develop a world-class play provision for children and young people in Lambeth?”

Just to mitigate against any backlash here, no one is suggesting for a second that children shouldn’t have play provision and that we should do away with parks and adventure playgrounds – we all know they serve their purpose, but this is a prime example of government turning something primal, natural, common-or-garden into some obscure discipline or genre that requires strategy, squadrons of officers and consultants, and ultimately an unnecessarily huge wodge of taxpayers' cash to back it up. Has play ever needed a strategist before now?

Without trying to prompt a violin solo, didn’t it used to be that when your imagination failed you, you opted for the local park and its climbing frame or monkey bars? Or failing that (if your luck was in) pop over to a nearby ‘Jungle Gyms’-type indoor set-up? It always seemed to suffice, but now we have teams of adults on impressive salaries trying to dream-up and implement new ways for children to play.

If local government co-ordinates play, then all of a sudden it becomes costly, bureaucratic and regulated. And we can be sure that where the Play Strategy Manager begins their work, there will soon be a Play Strategy Assistant or a Deputy Play Director jumping on board. We might not yet be bankrolling the salaries for officers responsible for ‘slides and smiles’ just yet, but if a facility first invented in 2007 is already attracting five new additional positions, it’s a fair bet that this will snowball.

Nov 2009 18

Big And Inefficient 6

Mike Denham Burning Our Money

We all know our public sector wastes squillions, but just how inefficient is it? How does it look against public sectors elsewhere in the world?

There are a number of studies that have attempted to answer such questions. One of the best known was published by the European Central Bank in 2003 – Public Sector Efficiency: An International Comparison, by Afonso, Schuknecht, and Tanzi.

The ECB study seeks to compare the outputs of government with their costs. The costs comprise the share of government expenditure in GDP, which is straightforward. The outputs are more difficult to measure, but include a wide range of indicators, from economic growth and stability, to health and educational outcomes (see paper for more detail).

These calculations are done for 23 industrialised OECD economies, and comparisons made.

Overall, the study finds that the most efficient government sectors are those in the US, Japan, and Switzerland.

The UK is by no means the worst, but lags way behind the leaders. Indeed, if our government could achieve the same level of efficiency as the three leaders, we could now save roughly £140bn pa relative to the current level of UK government spending. Which would go a long way towards digging us out of Mr Brown's fiscal hole.

And the study gives a very interesting insight into the relationship between efficiency and size. And guess what – it turns out the most efficient governments are also the smallest.

Here's a chart we've put together comparing each government's efficiency score with its cost as a share of GDP (note: the efficiency scores relate to 2000, and the GDP shares are averages for the previous decade):

As we can see, efficiency tends to decline quite markedly as government gets bigger. On average, for every 10 percentage point increase in government's share of GDP, efficiency declines by 15-20% (the estimated parameter says 16.6%, but we can't be that precise, especially since this is a simple linear regression).

The bottom line is that if you want to have big government, you have to accept a high degree of inefficiency (aka waste). In our chart, the very biggest government belonged to Sweden, and its efficiency levels were correspondingly abysmal (interestingly, over recent years Sweden has been slimming down its bloated public sector, partly through those school reforms we hear so much about).

To put this another way, the only countries that can afford Big Government are rich countries that can bear the costs of its inefficiency – not to mention the costs of high taxation to fund it. The UK can certainly no longer afford that luxury.

Nov 2009 11

Non-job of the week 8

Fiona McEvoy Burning Our Money

The grand total of government jobs advertised in the Guardian has crept up again this week to 556, with almost double the number of positions in the £80-£100k category compared to last week. There’s clearly an executive drought in the public sector or perhaps frontline redundancies have freed up the cash for a few new ones…

This week’s non-job was selected after being sent over by a supporter and epitomises the sort of misguided recruitment we’ve come to expect from our most vital public service providers.

"Head of Communications
£42252 – £49852 per annum

Our client, an NHS Primary Care Trust, based in east London is looking for a Head of Communications to join their Team. The role will report directly to the Assistant Director of Communications and will be responsible for managing the Communications Manager. The post holder will communicate corporate priorities and performance externally and internally and support the Assistant Director of Communications in developing and continually reviewing the Corporate Communications Strategy.
The post holder will have responsibility for;

- Development of issue focused communications strategies
- Proactive and reactive media relations
- Stakeholder engagement and consultation on key strategic and corporate activities
- Ensuring internal communications is effective and efficient
- Enhancing the PCTs reputation as a local leader of the NHS
- MP and opinion former engagement
- Building relationships with NHS and other partner organisations
- Leading and developing the Communications Manager
- Deputising for the Assistant Director of Communications
The successful candidate will have;
- A degree level or equivalent qualification
- Extensive experiences of working in communications.
- Extensive media relations experience
- Highly developed project management skills
- Experience of working with stakeholders
- Experience of implementing national policy and initiating local policy
- Sound knowledge of internal communications
- Good understanding of corporate identity

Sometimes bullet points work better than paragraphs, and here we have a check list of attributes needed to be a NHS PCT Head of Spin. You may think that our National Health Service should be channelling its resources into things like doctors, nurses, operations and research before spending it on brown-nosing MPs and convincing (deluding) the general public to have blind faith when stories of malpractice surface in the press, but that’s because you’re exactly the old-fashioned sort that needs to have such publicity fed to you to start with. Or at least that’s what the recruiters think. Just imagine what impression you’d have of our hospitals if these reputation managers weren’t hired to ensure you rarely caught wind of the various misadventures that occurred behind closed doors?!

There’s a train of thought that says that if the money that went on flashy executives and surplus (previously unneeded) bureaucrats was spent on what most people would consider to be vital health resources, indeed, if the burgeoning managerial tier within our NHS was stripped back to a manageable and reasonable size and the costs diverted to where they’re actually needed, we might even have a decent service that didn’t require the disaster-management skills of media professionals.

Does it take a brain surgeon to work that one out?

Nov 2009 11

Turning A False Corner 7

Mike Denham Burning Our Money

Not a corner to hurry round

Yesterday, the front page of the Times proclaimed:

Poll shows Britons see good times around the corner

People are more optimistic about the economy than at any time for the past 18 months, according to a Populus poll for The Times today."

Which was surprising, given the tidings of doom carried elsewhere in the same paper: another 5000 jobs axed by Lloyds, 700 cut by Ericsson - along with the closure of their UK research base - a ballooning trade deficit driven by all the cars imported under the government's cash for clunkers scheme, etc etc etc.

And that's before we even get round the corner. Once we see what's waiting for us there, we may well look back on this last Christmas spending splurge with a fond nostalgia. And wonder why we didn't stuff the cash under the mattress.

Last week the IMF gave us its own view of what's round the corner, racily entitled The State of Public Finances Cross-Country Fiscal Monitor. It spells out in horrific detail just what a fiscal mess we're in, and just how far our belts are going to be tightened over the next 10-20 years.

The IMF says that by 2014, the world's major economies (the advanced G20 economies) will have racked up government debt equivalent to about 120% of GDP. By all historic standards that is unsustainable, and will make the world economy extremely vulnerable to an uncontainable further crisis.

Indebtedness on that scale will also generate a significant increase in the interest costs of government debt (ie the yield on government bonds). For every one percentage point increase in government borrowing as a percentage of GDP, the IMF estimates that government bond yields are likely to increase by between 0.2% and 0.6%. Which means we have to pay more and more tax just to pay the interest bill.

So far, that bond yield increase has been headed off by the extreme weakness of the global economy and the highly accommodating monetary policy implemented by our central banks (eg the Bank of England's outright purchases of gilts - see here). But just wait until those measures go into reverse.

Action has to be taken. The IMF recommends getting government debt back down to a maximum of 60% of GDP by 2030 – ie relative to the world economy, debt has to be halved. Which is an enormous undertaking.

And for the UK, the IMF's analysis is even bleaker. Because our fiscal deficit is so much worse than most other countries, we will need to make just about the biggest cuts in borrowing anywhere in the developed world – only Japan will need to do (slighty) more.

To put some numbers on it, the IMF says that over the ten years from 2010 to 2020, our government will need to improve its so-called "primary balance" (ie its current income – mainly tax – less its current spending, before interest payments) by a staggering 13% of GDP. In cash terms, that's getting on for £200bn.

Now, let's just make sure we all understand what that means.

If the government tries to achieve the improvement by increasing taxes, it will need to jack them up to the kinds of levels that really do cause revolutions. For example, doubling the standard rate of income tax, doubling VAT, and doubling fuel duty – all at the same time – would still not raise enough (see HMT Ready Reckoner here). And that's without taking into account the highly damaging impact such tax rises would have on enterprise, employment, and future growth.

Which is why we strongly favour reductions in public spending. Even though that won't be easy either- the IMF's figures suggest public spending will need to be cut by over a quarter from where we are now.

Of course, the hope is that we will be bailed out by economic growth. If the economy grows enough, as the government projects, then some of the extra tax revenue we need will be generated "painlessly", without the need to rack up tax rates or imposing big public spending cuts.

Indeed, there are those who argue that if government just holds its nerve, then confidence will return and the economy will grow itself out of the current mess. At one bound we will be free.

But just ask yourself how likely that is.

Interest rates cannot be held at their current low levels indefinitely. And when they rise back to more normal levels, indebted households are going to find life very difficult. Christmas splurges and flash new motors will be a thing of the past.

Moreover, if the government fails to tighten fiscal policy as much as the bond market expects, confidence will evaporate and bond yields will spike up even further than the IMF suggests.

Just yesterday, the credit rating agency Fitch warned that of all the leading sovereign borrowers, the UK's AAA credit rating is most at risk. That's because it's the UK that has to make "the largest budget adjustment". Fitch says "our stable rating outlook [for the UK] reflected our expectation that the UK Government will articulate a stronger fiscal consolidation programme next year." Translation – we expect the incoming Conservative government to make some serious spending cuts straight off the bat, and to spell out a quantified plan for getting the UK's debt back below 60% of GDP soonest.

As we've blogged many times, our public finances have been wrecked. The government hugely overspent during the bubble years, and now we must pay for it. However you look at it, we must expect a pretty difficult decade ahead.

Of course, not everyone spends their time perusing IMF Staff papers. And maybe it's better that people don't dwell too much on what's really round that corner.

But we do expect our Chancellors and Shadow Chancellors to grasp the severity of our fiscal problem, and to produce serious plans for dealing with it.

Alarmingly, we've still to be convinced that Mr Osborne's team has got the measure of the task.

PS The IMF is about to publish another research paper we'll be blogging, on the design and use of fiscal rules. As regular BOM readers will know, we've long argued for the third fiscal rule – a limit on public expenditure. It has been specifically rejected by both Labour and Tories, largely we think because politicos don't like to be restricted in that way. It will be fascinating to see what the IMF says.

Nov 2009 05

Update On Welfare Fraud 0

Mike Denham Burning Our Money

The same old picture

The Department for Work and Pensions has just slipped out its annual estimate of welfare fraud (summary table above). Overall, it reckons overpayment due to fraud and error is now running at around £3bn pa, or 2.2% of benefits paid – an increase on last year's 2%.

That's bad enough, but as we've blogged before, some benefits are much more prone to fraud than the overall total suggests.

For example, Housing Benefit (annual cost £17bn) has a fraud and error rate of around 5%. And despite constant assurances of a crack-down, there has been virtually no improvement over time:

When we last had a good look at Housing Benefit, we discovered a highly expensive shambles, with the Simple Shopper paying way over the odds to some very canny private landlords.

And this week's revelation that in some areas an extraordinary 40% of households are now in receipt of housing benefit makes us even more concerned. When taxpayers are subsidising that much of the private rental market, rents are inevitably being inflated way beyond their true level. No wonder it's costing us so much.

Given our dire financial straits, the entire welfare needs serious pruning. A big reduction in fraud losses should be one of the benefits.

Nov 2009 04

Non-job of the week 3

Fiona McEvoy Burning Our Money

Well last week there were almost 500 public sector jobs advertised in the Guardian, this week there are over 500 (526 to be precise!) and a distinct overuse of the word ‘champion’ as various councils and quangos seek to hire armies of highly paid cheerleaders to ‘motivate’ their frontline workers.

In second place this week is the West Midlands Police Authority who’re looking for a ‘Community Engagement Officer’ (salary; £25,731 – £31,146), and if you think that sounds like it might be something close to a police officer then you'll be disappointed. Full sentences are pretty redundant in the world of quango job descriptions, replaced by a clusters of buzzy words, so if I said ‘focus groups’; ‘discussion’; ‘networks’; ‘innovative’; ‘community’; ‘partnership’; and ‘activities’, then you’ve probably pretty well got the gist of this post. They don’t mention catching criminals or preventing crime but then why would they?

Coming in at number one though we have the now notorious London Borough of Tower Hamlets who’ve taken out two almost confrontationally big adverts in the paper, one of which calls for a new:

“Head of Clean and Green
£57,111 – £59,982

The Clean and Green Service is a new and innovative function, we're looking for a dynamic, experienced manager who can unify services to deliver corporate objectives, has expert knowledge of the issues, practices and principles associated with delivering front line services – including everything from refuse collection and recycling to parks management, graffiti removal, and streetworks. You will effectively lead and develop these vitally important functions, motivate staff to exceed their expectations and improve customer perception and satisfaction by guaranteeing high-quality, efficient, effective and economic services. We'll be looking to you to champion our vision to deliver localised services, encourage partnership working, innovation and continuous improvement”.

A new function? It must be pretty groundbreaking if it warrants the use of the word ‘innovative’ twice in the same paragraph. But hold on a second, who on earth within this local authority is sat dreaming up ‘new functions’ when we’re in the middle of a recession still and councils are supposed to be cutting costs/trimming away fat? And that’s a pretty whopping salary for the head of a ‘function’ that they’ve never needed before!

This person will be unifying various existing functions by the sounds of it, motivating the underlings (that’s a given), championing the vision and ‘improving public perception’ – presumably by press releasing a few pictures of people clearing graffiti/emptying bins etc every now and then.

The key to this job ad is really in a conspicuous phrase that epitomises this sort of new-fangled public sector position – the person hired will be responsible for ‘continuous improvement’. What is continuous improvement? If you continually improve, won’t you reach perfection at some stage, from which point there is no longer any improvement to be made? No no, not possible, because roles like ‘Head of Clean and Green’ will always self-perpetuate. Even if this time next year the borough had rows of immaculate streets, graffiti-less walls and a futuristically efficient recycling set-up, if you were to ask whether the Head of Clean and Green’s work is done, you’d get a plethora excuses to justify their continued presence at the authority and be told of the many more improvements that can be made whilst the role's defenders simultaneously try to dazzle you with these past achievements.

The Head of Clean and Green has sprung fully formed from the head of Zeus and is here to stay, but the question we must really ask is, for all this outlay and the invention of this new ‘Clean and Green Service’, will taxpayers really see any true, measurable impact on the environment they live in? Sadly, either way, you can guarantee this post and its supporting service will be here to stay.

Oct 2009 28

Non-job of the week 1

Fiona McEvoy Burning Our Money

Almost 500 government jobs are featured on the Guardian jobs site this week, with a particular rise in the number of positions advertised in local government.

Not sure ‘spoilt for choice’ is really the right term, with a Benefit Maximisation and Take Up Manager in Liverpool in the running for this week’s non-job, alongside yet another Equalities and Diversity Officer at Lambeth Council, but this week’s dubious accolade goes to a position at Tower Hamlets Community Housing:

“Community Development Co-ordinator
£42,000 per annum

The East End is proud of its community spirit and its amazingly diverse heritage, our one community is home to many communities. But working in the East End is also a challenge – a challenge that we have decided is best met by us working together.

We are looking for someone who can create links, networks and delivery models to meet our communities' needs first and foremost. Someone who can bring people together to increase understanding and promote harmony. Someone who understands the issues of those who live in social housing, someone who can create opportunities for improving health and wellbeing, for improving opportunities for employment and training and for improving educational attainment not just for our young people but for the whole community.

You will need to be an adept negotiator, able to align key community development strategies for the three Housing Associations and also build strong and effective partnerships with a whole array of key stakeholders.

Consequently you will need to have high level communication skills, the ability to balance conflicting needs and priorities and be able to meet the demands of a challenging workload”.

The vagaries of public sector job descriptions are somewhat notorious, but “someone who can bring people together to increase understanding and promote harmony” has to go down as an absolute classic. Whichever wordsmith put this one together clearly missed their calling as a lyric writer for Eurovision entrants…

In all seriousness though, this is a hefty salary for such an ambiguous facilitator role. “Creating opportunities for health and wellbeing” – well don’t we already support council-run leisure centres and pay for healthcare on the NHS? “Improving opportunities for employment and training” – erm…Jobcentre Plus? “Improving educational attainment” – schools/teachers/Learndirect anyone?

So £42k per year to act as a signpost, pointing individuals to other organisations, bodies and institutions, oh , and all whilst retaining the spirit of the East End of London, so presumably it helps to whistle ‘My Old Man’s a Dustman’ as you work.

In truth, the almost impenetrable verbiage used here makes it nearly impossible to decipher what this position involves on a practical day-to-day basis, and if you think you’re suitable for the role, then the chances are you’re already working elsewhere, co-ordinating/spreading harmony in some other community. How ever did we survive without you?

Oct 2009 28

The Government Inspector 2

Mike Denham Burning Our Money

Ofsted are coming – we're doomed!

Autocratic regimes always employ legions of government inspectors. Their job is to tour round the various outposts of the centralised state and put the fear of God into local bureaucrats – to remind them who's boss.

It was back in 1836 that Nikolai Gogol wrote his classic comedy (pic above) about how the Czar's inspectors terrorised the officials of provincial towns in Russia. The play's joke is that the government inspector actually turns out to be a conman, who finally scarpers with his bribes and the mayor's daughter. But its underlying truth is that the inspection regime does nothing to contain the endemic corruption and inefficiency of the Czar's local officials.

Gogol could write virtually the same play today in Brown's Britain. In councils and schools and hospitals throughout the land, bureaucrats and frontline staff quake at the prospect of a visitation from the inspectors. The inspectorates now cover all aspects of local services, employ many thousands of inspectors, and have budgets running into hundreds of millions (for more details, take a look through the TPA quango report).

One of the most high profile inspectorates is Ofsted. It costs us £228m, has a staff of 2700 (2007-08), and is headed by Christine Gilbert, the wife of ex-Labour minister Tony McNulty.

According to Ofsted's website:

"We inspect and regulate to achieve excellence in the care of children and young people, and in education and skills for learners of all ages."

Which gives it an extraordinarily wide brief. It now inspects and regulates not only schools, but also "colleges, initial teacher education, work-based learning and skills training, adult and community learning, education and training in prisons and other secure establishments, and the Children and Family Court Advisory Support Service (Cafcass)". Not forgetting childcare services (aka prosecuting members of baby-sitting circles), and childrens' social care.

Ah yes, childrens' social care.

We blogged the appalling case of Baby P several times (eg see here). Ofsted was centrally implicated, having awarded Haringey childrens' social services excellent marks virtually at the same moment Baby P was dying.

It subsequently turned out their inspection had been little more than an elaborate box-ticking exercise, largely carried out by those actually being inspected. At the end of which, Ofsted praised the council for providing “a good service for children”, and improving their "life chances" - a sickening testimony to the uselessness of their inspections.

So how have they responded?

Well, by increasing the number of boxes that require ticking of course. According to those at the sharp-end, since the Baby P case, social workers have been submerged in a deluge of new bureaucracy. The chief executive of the British Association of Social Workers says:

“What social workers are having to do 80 per cent of their time is serve a bureaucratic machine, which actually has nothing to do with good social work and has everything to do with keeping a really ineffective inspection regime operating in a way that does not support really effective work with children and families.”

Which sounds spot on. And note the response of Childrens' Secretary Balls, when asked if he would intervene to stop the lunacy:

"The answer to that is no. The idea that social workers who are dealing with complex cases of potential child abuse or neglect wouldn’t be making records or keeping track of what they do doesn’t seem to make much sense."

Yet another here-today-gone-tomorrow politician who apparently knows better than the frontline professionals how they should do their job.

And if by any chance some courageous council might consider ignoring the government inspectors, and backing the judgement of their own people instead, they should expect swift retribution.

In the last few months, two previously well-rated shire counties have fallen foul of Ofsted's rage.

When Surrey County Council failed to tick Ofsted's child care boxes properly, it led to direct Whitehall intervention, with the departure of Surrey's Chief Exec, a string of other resignations, and a stinging public critique of the entire council delivered by the commissar parachuted in to conduct the purge.

Now a similar thing seems to have happened in Cornwall, where Ofsted has condemned local childrens' services for inadequate record keeping, and various other perceived organisational failures. Only this time, the Chief Exec immediately ran out into the market square to confess his council's shortcomings and promise they will obey all future orders without question. Local democracy it isn't.

Mr Cameron promises to take an axe to Labour's inspectorates.

He needs to. We've already suggested scrapping (or at least, hugely downsizing) the Audit Commission. And Ofsted should join it. Total saving £450m pa.

Oct 2009 22

Post staff go on strike 5

TaxPayers Alliance Burning Our Money

The Royal Mail is facing increased competition and a long term decline in one of their core businesses, delivering letters, as people switch to e-mail. Big demand for parcel services from online stores was the silver lining to that cloud. But, the company is losing key contracts from firms like Amazon.

In practice, there has been steady disruption from local strikes targetted to maximise the interruption to services for some time. The national strike may well be the straw that breaks the camel's back for many customers, though. Who will find another firm to deliver their parcels.

It will also be a huge hassle for ordinary people. Even if the union was in the right in their dispute with management, punishing customers and small businesses who depend on the service for that is deeply unfair. But, while the management may not be perfect and it is hard for those outside the process to follow the detail of the dispute, it becomes clear that the union are being far from reasonable when they do things like compare an ordinary working day, getting paid for the hours you work, to slavery.

This strike should simply be cancelled. It is going to hurt ordinary taxpayers who both own the company and depend on its service.

Oct 2009 19

Latest On Real National Debt 1

Mike Denham Burning Our Money

And they thought things were bad then…

The last time we calculated the real national debt – including all those off-balance sheet Enron items – we got to a figure of £1.8 trillion. But that was last year, and things have moved on since then.

Now Brooks Newmark has updated the numbers in a pamphlet for the CPS. He calculates the current figure at £2.2 trillion, or £86,000 for every single British household.

Here's how he gets there:

So the next time some soothsayer tells us our national debt is still low by international standards, we should remember that – our true debt is nearly 160% of GDP, much higher than most competitors on less than 100%.

Except of course, as beady-eyed readers will have spotted, Newmark's figure still excludes a few of the debts we've blogged so often.

First, although most of the Crock and Bradford & Bingley debts are now included in our official national debt, Newmark's total deliberately excludes the liabilities of our two big semi-nationalised banks – RBS and Lloyds. Adding them in would increase our debt by £2.4 trillion, more than doubling the total. To be sure, those liabilities are backed by the banks' assets, which are supposedly enough to cover us. But how lucky do you feel?

Second, Newmark omits the costs of decommissioning our old nuclear power stations, which are a direct liability on taxpayers. When last sighted, we reckoned that amounted to £73 billion.

Third, he (and we) omit the scariest liability of them all – the cost of future state pension payments – ie the old age pension. When we crunched the numbers on that (based on the Turner Report's projections) we came to a nerve-shredding liability of £7 trillion. In truth, the current number is only around half that because the relevant discounting factor for future payments has increased (ie the yield on government index-linked bonds has gone from around 1.5% pa to around 3% pa). So let's call it £3 trillion.

Which means that if we wanted to be really cautious – admittedly not something our present rulers have been much good at – we'd say our real national debt is now in the range £7-8 trillion. Or around £300,000 for every single household.

Oct 2009 02

A Tax Cut To Cut Borrowing 4

Mike Denham Burning Our Money

An old idea explained again

Mr Cameron is reportedly thinking about rescinding the planned tax rise for those earning over £150,000 pa.

Good. And let us hope his thinking doesn't take too long, because the planned new 50p tax rate will almost certainly cost the government money.

Why?

Well, it's a textbook example of the famous Laffer Curve – the idea that beyond a certain point, increases in tax rates will reduce tax revenue, as individual taxpayers change their behaviour to escape the higher rates. In the words of the Institute for Fiscal Studies, higher income tax rates incentivise taxpayers to "work less, retire earlier, emigrate, contribute more to pension or charity, convert income to capital gains, incorporate, and invest in tax avoidance".

Now, according to the government, even after taking account of those behavioural responses on the part of taxpayers, the new 50p rate will raise £2.4bn pa. But according to the independent IFS, it "could actually cost money".

For one thing, the IFS points out that the government's figures exclude the impact of the higher income tax on consumer spending. That will undoubtedly fall, cutting VAT and other indirect tax receipts "by up to £1.5 billion". Which slashes the government's £2.4bn revenue figure by over 60%.

The IFS has also done its own analysis of experience during the 1980s when the Thatcher government famously cut top income tax rates and saw a substantial rise in income tax revenues from higher rate taxpayers. They identify a much stronger response than the government assumes.

Indeed, they estimate that the revenue maximising marginal income tax rate for those on incomes of £150k and above is just 41%.

Cutting the gobbledigook, the IFS is saying that Thatcher/Lawson's existing top 40% rate is more or less spot on the peak of the Laffer Curve, and any increase is likely to cost the government money.

Here's the IFS's striking chart:

As we can see, whereas the IFS (labelled BSS) places the peak of the Laffer Curve for high earners at a marginal income tax rate around 40%, the government (HMT) places it at well over 50%.

So who are we going to believe? A government which attempted to cover up the unpleasant spending measures built into its own budget, or the IFS, which distinguished itself by exposing those hidden measures?

The new 50p tax for high earners may well appeal to populist politicians, but it is pretty clear it will end up costing the government money. As a result, we will all have to pay more taxes, and we will all be poorer.

Mssrs Cameron and Osborne should have to courage to do what is right for the public finances, and pledge to rescind this perverse tax increase.

Sep 2009 24

Translations in Southwark 13

Matthew Sinclair Burning Our Money

We recently found the document to the right. It is a Turkish translation of their glossy “Equality News” magazine from 2003-04. The latest edition, in English, can be found here and they appear to translate it, each year, into Bengali, Chinese, French, Spanish, Turkish and Vietnamese. Given that the document is twenty pages long, getting it translated into all those languages and then printed will have cost thousands of pounds each year.

The best statistics I can find don’t quite give us the number of Turkish or Vietnamese people in Southwark, but the Chinese appear to be 1.83% of the population and both Vietnamese and Turkish people presumably fit within the dubious category “Other Asian” who are collectively 0.62% of the borough’s population.

We do recognise that sometimes translation needs to be arranged for those who don’t speak English, or don’t speak it well enough to access important services. That means the police and hospitals, in particular, need translators and may need to translate some documents. However, “Equality News” is a dubious propaganda sheet that puffs up various equality initiatives in the area. It probably shouldn’t exist at all, if the various schemes it covers are really of interest to the public the local media will cover them. Mentioning them on the website is a more economical way for Southwark to acknowledge the projects than a glossy magazine. Even if such a document is felt to be necessary, though, this is hardly the kind of thing that really needs translating.

There are a few questions Southwark need to answer on this publication:

1. How many people speak Bengali, Chinese, French, Spanish, Turkish and Vietnamese in the borough?

2. How many people speak Bengali, Chinese, French, Spanish, Turkish and Vietnamese and don’t speak English?

3. How many people speak Bengali, Chinese, French, Spanish, Turkish and Vietnamese and don’t speak English, and want to read Equality News?

4. How many people speak Bengali, Chinese, French, Spanish, Turkish and Vietnamese and don’t speak English, and want to read Equality News in their native language rather than learn English so they can enjoy that fine publication in the original?

Why don’t you write to Councillor Adele Morris, Executive member for citizenship, equalities and communities, and ask? She can be reached at: [email protected] or Members’ Room, Southwark Town Hall, Peckham Road SE5 8UB. We would appreciate it if you forwarded any response you get to us at [email protected].