Torynomics 38


There are times when I feel a total disconnect from the mainstream media. Political commentators appear almost universally to have concluded that George Osborne’s speech yesterday was a success, that he has “Grown up” or “Come of age”. Am I alone in thinking that Osborne sounded like a petulant public school prefect? I spent the entire speech thinking “arrogant little shit”, and I would be astonished if quite a few other people did not hink so too.

The incessant repetition of “We are all in this together” struck me as amateur in both concept and delivery. It also brought the thought that multi-millionaires like Messrs Cameron and Osborne are rather less “in it” than ordinary people. If that were not true, of course, he would not have needed to insist so hard on the opposite. The fact that the rich may have to wait up to five years for exemption from inheritance tax seemed to me less than a huge sacrifice on their part: in contrast to public sector workers, who are expected to take a pay freeze, and working people who are expected to retire later – both to finance the massive subsidies paid to bankers. The Conservatives are no better than New Labour in seeking to hide their determination to let bankers’ obscene salaries and bonuses continue, hidden behind a smokescreen of hypocritical rhetoric.

You may be surprised to learn that personally I believe that the public sector should be kept to below 40% of GDP, which is to say that it should be cut by over 25%. That makes me more radically anti-state than the Tories. There is a huge amount of waste in public expenditure, especially in local government.

My solutions are more radical. The local government system suffers from a disconnect between provision and finance. It is admministered locally but financed centrally. Your council tax only accounts for a tiny percentage of the council’s expenditure, so the ability to relate performance and provision to cost is lost on the taxpayer/voter. At least 80% (100% in wealthy areas) of all local services, including education, should be funded through wholly variable local income tax. National income tax would be correspondingly reduced and council tax abolished. Up to 20% central government subsidy might be paid to poorer regions.

If voters were paying 15% of their income in tax to the local authority, they would take much more interest in local government, and wonder why they were paying for over-inflated and almost completely useless social services departments, and why the deputy manager of the leisure centre was on £85,000 pa. I can think of no single change which would lead to a more radical reduction of government expenditure.

The other major change would be smaller, leaner public services which simply go on with delivering the service direct, with minimal administration. This is the opposite of what the Tories would do. In particular, we need to cut out the whole complex administration of “internal markets” within the public services, where vast arrays of accountants and managers spend their wasted lives processing paper payments from the government to the government.

Let me tell you a true story which is an analogy for the whole rotten system. As Ambassador in Tashkent, I had staff from a variety of government departments – FCO, MOD, DFID, BTI, Home Office etc. In addition to which, some staff sometimes did some work for other than their own department. This led to complex inter-departmental charging, including this:

I was presented with a floor plan of the Embassy building, with floor area calculated of each office, corridor and meeting room. I then had to calculate what percentage of time each room or corridor was used by each member of staff, and what percentage of time each member of staff worked for which government department. So, for example, after doing all the calculations, I might conclude that my own office was used 42% of the time on FCO business, 13% of the time on BTI business, 11% on DFID, etc etc, whereas my secretary’s office was used ….

I then would have to multiply the percentage for each government department for each room, lobby and corridor by the square footage of that room, lobby or corridor. Then you would add up for every government department the square footages for each room, unitl you had totals of how many square feet of overall Embassy space were attributable to each government department. The running costs of the Embassy could then be calculated – depreciation, lighting, heating, maintenace, equipment, guarding, cleaning, gardening etc – and divided among the different departments. Then numerous interanal payment transfers would be processed and made.

The point being, of course, that all the payments were simply from the British government to the British government, but the taxpayer had the privilege of paying much more to run the Embassy to cover the staff who did the internal accounting. That is just one of the internal market procedures in one small Embassy. Imagine the madnesses of internal accounting in the NHS. The much vaunted increases in NHS spending have gone entirely to finance this kind of bureaucracy. Internal markets take huge resources for extra paperwork, full stop.

The Private Finance Initiative is similarly crazy; a device by which the running costs of public institutions are hamstrung to make massive payments on capital to private investors. What we desperately need to do is get back to the notion that public services should be provided by the State, with the least possible administrative tail. The Tories – and New Labour, in fact – both propose on the contrary to increase internal market procedures and contracting out.

All of George Osborne’s vaunted savings proposals yesterday would not add up to 10% of the saving from simply scrapping Trident. Ending imperial pretentions is a must for any sensible plan to tackle the deficit.

The Tories have adopted one plan I advocated in Norwich – tax breaks for start-up firms. One of the reasons for the failure of British entrepeneurship is our insistence on taxing firms even as they struggle to first establish themselves. George Osborne has only proposed a two year break on employment taxes – I propose a much more radical five year exemption from all taxes – but at least he has noticed the right problem.

All state personal payments should be means tested. It is time to slaughter the sacred cows of the welfare system. Lloyd George’s old age pension saved us from the horrors of the workhouse system and brought a sense of entitlement and dignity to working people, but after precisely a hundred years it is time to move on. Peculiarly, if all state benefits are means tested, it will remove the stigma. Many pensioners, including some close to me, take the basic pension but refuse to apply for income support. If all state payments were made through a single income tax assessment procedure, the stigma problem could be tackled. So would the nonsense of the Duke of Westminster’s entitlement to a state pension and child benefit, and the billions spent in recycling money to and from the middle class via the state.

There would still need to be a cut-off age at which the State no longer expects people to work -though retirment should be voluntary, not compulsory for those still able and wanting to work. Here the Tories are insensitive. It is a national disgrace that the difference in average life expectancy between districts in the affluent South of England, and inner city areas in our older industrial cities, can be as much as twenty years. In parts of Glasgow men struggle to live to retirement. There is also the law of unintended consequences here – any increase in retirement age will bring an immediate and major increase in those claiming incapacity benefit, the Tories’ favourite bugbear. The solution is to make it easier for people to continue to work voluntarily, and means test all payments. But the entitlement to retiire at 65 should remain until the benefits of increasing good health have reached all workers, not just Tory voters.

I hope that offers some food for thought. I also hope that it does something to remove the continuing misimpression that I am left wing….


38 thoughts on “Torynomics

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  • Dick the Prick

    Too right. I was chatting with my Labour oppo at a town hall not disimilar in size or wealth than the average (although marvellous building) and quite openly stated that Osbourne’s a lightweight who has all the charissma of a fart.

    I guess it’s a modern thing that we’re supposed to be engaged by politicians, that they’re supposed to be media savvy, dynamic, inspirational when all that’s needed really is a clinical mind and a social consciousness to do what they feel to be right. I’m fed up with being wooed or bought – just a bit of bloody hard work would cheer me up.

    As per local government – well, 25% cuts would make very little difference to anyone. All over the country bin men have been shafted, legal departments swamped over the equalities legislation brought in by the Harridan Harperson. Local government has been used for purposes which are neither relevant, beneficial, helpful or cost effective. Parish councils are almost bloody irrelevant as some wise arse has decided that Area Forums, Neighbourhood Management Groups or some other such piece of shit are to be used to ‘engage’ the public. Sod engaging them through fancy arse gimmickery – publicize the council meetings, publicize parish council meetings – get local politicians out on the streets.

    The whole thing is just utter bollox and fannying about with the curtains or cushions is still gonna leave the house stinking of shite.

  • brian

    sounds sensible, except isn’t the differential in life expectancy at least partially self-inflicted?

    if I wash down the deep fried mars bars with special brew I probably won’t make it to retirement wherever I live. carrots washed down by tap water would be just as affordable I suspect.

    besides a longer life expectancy to go with living in the south east of england might be considered more of a punishment than a reward.

  • Neil Criag

    It shows what an age of overgovernment we live in that cutting the government take to 40% is radical. I can’t disagree with your suggestions. I would also like to see corporation tax cut to Ireland’s 12.5% – which has been the primary reason for Ireland gouing from 2/3rds to 4/3rds our standard of livuing in 20 years.

    Beyond that however is the degree to which regulation costs an estimated doubling of GNP. We have electricity, housing & nursery care at 4 times what they would cost without regulation. Regulation costs the regulated 20 times more than it cost government to enforce so the 200,000 health & safety inspectors cost the work of 4 million employees. The EU acknowledged a few years ago that their regulations cost our economy £65 bn annually, probably near £80bn now).

    If we got growing above the world average of 5% there are very few problems which would not be largely solved.

  • Ed

    I didn’t watch the speech, but frankly, aside from conducting a mass puppy slaughter on live tv, it’s hard to know what the Tories could do to lose the next election.

    So trumpeting public sector cuts strikes me as neither here nor there from a pure political angle – from a policy angle, I wonder how wise it is.

    We’re in a liquidity trap currently – the Bank can’t cut interest rates further to stimulate the economy – and fiscal stimulus is therefore the macro-policy prescription to revive the economy. Cutting/freezing public sector pay, however, acts in the opposite direction. So looking ahead 12 months, with George Osborne settling in to No. 11, and it’s time for the pre-budget report. The economy is still in the ditch, and his advisors tell him – George, many of your pre-election ideas will exascerbate the economic problems.

    So the issue is not if Osborne is taking an election gamble, it’s if he’s boxing himself in before the real work begins.

  • dodoze

    Trident? Too right – it needs to go. The cost of this relic of the HMS UK’s illusion of global power has become unjustifiable, irrespective of the moral issues.

    A comment of low life-expectancy as self-inflicted reaffirms the incomprehension of the (relatively) rich of the lives of the poor, who are always judged as responsible for their own condition. Obliged by poverty to spend on calories as distinct from nutrition, seeking oblivion through whatever means to block out the constant message that you have no value in the world, failed by the education system, desperate, angry and frequently criminalised, the lives of the long-term poor are unimaginable to the rich. And it gets cold in Glasgow.

    It is the decisions of the very rich which have created the collapse of the virtual world in which the financiers work. It has been the decisions and influence of the very rich which have been prime in the neo-liberal dismantling of core industries and the silencing of any effective voice for the poor.

    The spiral of the struggle between survival and despair in a world in which you understood, long ago, that you have been abandoned,leaves you with the understanding that you have no power over your destiny: “What’s the difference between a Rottweiler and a Social Worker? – You get your child back from a Rottweiler.”

    Deep-fried Mars-bar and Red Biddy, anyone?

  • mike cobley

    Quoth Craig: “I also hope that it does something to remove the continuing misimpression that I am left wing….”

    Oh no, Craig, say it aint so! 😉

    Well, you have to admit that the majority of the problems that we face, just not in Britain, derive from the policies and irrationalities of the Right. It is their greed and their lust for power and their military fetish which has led us to where we are today.

    Also, while I understand the need to cut back on waste and inefficiency, part of me acutally wishes for bigger, stronger government, ie big and strong enough to protect me from the likes of, say, Rupert Murdoch or BAE. I could go into a song&dance over the gross scam that is PFI but thats common knowledge.

    As to Osborne and the other Tory boys…well, I did sit down to watch the Chris Grayling speech this morning but after being clobbered with a handful of Daily-Mailerite cliches I found myself performing a titanic, jaw-breaking yawn which threatened to turn into an ejecter seat for my brain, desperate to hold on to its last remaining grey cells….dear god, what did Cameron and his bros say when they hit the stage? Set phasers to tedium?

    Anyway, in the spirit of wit and intellectual elan (as an antidote to the Tories soporifathon), here is my summation of the Conservatives Employment Policy (with apologies to Alan Grayson)

    1) If you have a job, don’t join a union or you might lose your job.

    2) If you have a job and you’re in a union, don’t strike or you might lose your job.

    3) If you get fired and claim benefit, accept any job you’re offered or you’ll lose all benefits.

    Ah, the brave new world beckons!

  • Sam

    I actually think we need a far more radical solution along the lines of the monetory reform act proposed by some economists in the US, which would allow national debt to be written off and allow governments to issue currency rather than bonds.

    We find ourselves in the mad position that we need to slash government spending in order to pay interest on money the government has borrowed from banks in order to bail out the banks.

    If governments could issue debt-free currency rather than bonds, we could eliminate taxes altogether, maintain public services, and still maintain a private ‘capitalist’ economy.

  • stephen

    Your proposals for local government finance would in effect amount to a massive redistribution away from less well off areas to those which are well off – just look at what the impact would be on deprived boroughs. While I agree with your view that Osborne’s “we are all in this together sentiment” is hypocritical bullshit it doesn’t mean that any such genuine sentiment should be ignored (as I daresay many Tories would secretly like)

    As for your point about wasting times on internal cost allocations you are of course absolutely correct – but this is a problem which is by no means confined to the public sector and is pretty much rife in the private sector as well. What you don’t of course address is what you would put in its place – in the case of your particular example the alternative would be that you would have been made responsible for all the Embassy’s costs and hence the services which were provided, you gave over responsibilities for part of the services and their costs to others – or perhaps you could revert to a model where responsibilites for providing services and their costs are separated. All the alternatives have problems which would need to be addressed.

    I suspect destroying the present management system without any clear though as to how it should be replaced would probably be even more inefficient than the status quo. Craig you are clearly an “anarchist” rather than being left wing or a Tory – you must have found it very difficult being at the FCO.

  • Anonymous

    Craig I agree that there are many systems which are entirely unnecessary but take that away and you take away millions of people in jobs doing unnecessary tasks! I’d like to think you have an alternative for these people.

    However, UK manufacturing is non-existent and the EU is taking further directive in to what we can and can’t produce, who we can and can’t employ, who we can and can’t trade with etc. etc. After 20 years of Labour government the fact is, the creation of bloated systems of local and national government is the only sure fire way to keep every one in employment!

  • Bill

    Craig I agree that there are many systems which are entirely unnecessary but take that away and you take away millions of people in jobs doing unnecessary tasks! I’d like to think you have an alternative for these people.

    However, UK manufacturing is non-existent and the EU is taking further directive in to what we can and can’t produce, who we can and can’t employ, who we can and can’t trade with etc. etc. After 20 years of Labour government the fact is, the creation of bloated systems of local and national government is the only sure fire way to keep every one in employment!

  • cmain

    I’d go the opposite way on means testing which has all the bureaucratic disadvantages of things like internal markets and PFI that you describe. Scrap all the benefits and pay everyone of all ages a decent basic income. (OK, in practice you’d probably still need some additional benefits for a small minority in extreme hardship, but get rid of means testing for the vast majority). Salve the consciences of the rich people who don’t need a basic income by raising their taxes (eg VAT, assuming essentials like food and clothing are exempt, and land taxes).

    Scrap Trident, good idea. After your post yesterday it sounds like we could save a small fortune by scrapping MI6 too, and make the world a better place at the same time.

  • brian

    @dodoze Just got off the phone with my Great Aunts and Uncles in Greece (well one of their neighbours actually, they can’t afford their own phone) to tell them they should be dead by now because they cannot afford to take responsibility for their own lives.

    What’s the Greek for deep fried mars bar and special brew?

  • David

    Am I the only one that can see the easy solution to get us out of this mess in 5 years flat ? Or maybe Im just niave… If I go to the bank and borrow money they will want it back, with interest, why not just tell the banks that they have to repay all the money plus a commercial interest rate within 5 years. If they have to sell some of there assets to achieve that.. well tough, how many hard working people have to sell stuff they dont want to in order to pay bills ?

    As for the welfare state. Its a joke. It needs totally destroying and rebuilding from the bottom up. Shame non of our gutless leaders will ever do it.

    The hard working silent majority will be the people who suffer… once again. Government wont tax the rich and are afraid of the “poor” 3rd generation unemployed ? Well thats because they dont need to work, the state will provide.

    Its all totally infuriating, yet getting angry is totally pointless because no one cares !

  • anon

    Thanks Craig for another bullseye. New Labour have magicked into being hundreds of thousands of government jobs on Keynsian theory, all well paid. But people who actually do things like screw light fittings onto ceilings are ground down by temporary contracts,( my last one lasted six days,) with no travel expenses and nothing to do next week. So a lot less money overall than the minimum wage.

    I wanted to visit Slimbridge Bird Sanctuary yesterday by found it closed.

    The car park was full of cars, perhaps they are all busy manufacturing estuary slime or counting puffins? The world of real work is suffering a catastrophic downturn which is disguised in the statistics by the figures about the phoney workers.

    We need research, but in a competitive world and China and India chasing our heels, we need REALLY tough decisions to be made, not pre-election flower arranging by these preening parliamentarians.

  • Frazer

    Craig.

    Totally agree and that is why I am planning to retire to somewhere with white beaches,waving palm trees and G&T’s at 10am.

    You are of course, welcome to visit !

  • John D. Monkey

    Frazer

    I’m willing to risk a small wager that you would soon find white beaches, waving palm trees etc. very boring after a while and would long to return to the UK despite all its faults. East, west, home’s best…

    if you done’t, I’m sure we’d all like to visit – but only visit!

  • JimmyGiro

    Abolish income tax; replace it with VAT.

    Abolish expenses, making all office workers pay out of their own wages for stationary; and put 80% VAT on paper. Then watch evolution deal with bureaucracy.

  • glenn

    “Abolish income tax replace it with VAT”

    Great idea. That way, the poorest in society who spend pretty much every penny they make, will be taxed fully on their entire income. What should VAT be, at least 50%, since the entire apparatus of government is funded by it? Result – the poor get a 50% rate of tax.

    The richest in society spend very little of their income – most of their money goes on investments, share purchases and so on.

    Suppose the rich actually spend 10% of their income (the richest will spend a lot less). With a 50% VAT rate, the rich would be taxed at 5% of their income, while the poor get taxed 50% of theirs.

    Wonderful idea. Most equitable, as long as you take the precaution of being well heeled, of course.

  • Roderick Russell

    Craig,

    I see that you have not published my comments in response to Ruth’s question ?” “Who was the best friend of Prince Charles who slandered you?” I fully understand since my issue is not the same as yours, and I had not expected the question from Ruth either. However, please advise Ruth something along the lines of “Ruth, if you want to receive an answer to the question you posed to Roderick Russell, please contact him directly. You have his contact details.”

    I admire what you are doing. I suspect that your publishing your issues has probably resulted in policy modifications that have saved a number of people in Central Asia and elsewhere.

    You work very effectively in your area which is Central Asia and I admire what you do. On the contrary the role of organizations such Amnesty International, The Guardian, etc. who hold themselves out to be defenders of worldwide human rights is absolutely despicable, since their continued silence on my issue only helps the abusers.

    What is this really about? In my case our abusers know that I have never done anything wrong, but they also know that what they have done to my family is so horrible that my telling the truth about what has happened is seen as a major threat ?” so it is all about damage control.

    These crimes, which are being carried out by our own intelligence services, are authorised by the very high establishment. Insiders who leak information to me have suggested that the reason for the extent of the continued cover-up is that royal family members somehow got involved. All I can say for certain is that the perpetrators of these crimes and those who cover them up are frankly evil. And one wonders that I use the word “sadist” to describe them. The cover-up has been very extensive, and those involved in the cover-up must know whom the torturers are.

    Craig, I understand that my issue is not yours, and I will not pass further comment.

    The Authorities should only have two honest responses to the issues I have raised. Investigate these horrible human rights abuses, or prosecute me in open court for the accusations I have made. You will note that they have chosen neither. You will also note that there is considerable evidence to the crimes themselves, and to the cover-up conspiracy

    Roderick Russell

  • gus

    George Osborne, Shadow Chancellor of the Exchequer(2004-Present) has attended the Bilderberg conference in ’06, ’07, ’08 & 2009.

    (see http://en.wikipedia.org/wiki/List_of_Bilderberg_participants)

    What does that tell us? I dunno, but I don’t like the way that the Tories are being pushed by the media as (almost automatically) the next to be in power .

    A tory government with Bliar as President of the EU Council?

    What a state of affairs……

  • ingo

    With a conservative Government in the offing, who would want to be described as leftwing.

    The term in itself is redundant, unfortunately, non of the directions tried by humanity have come to much, left, right, centre, not one of them understood that any system on a populated globe has to have a sustainable basis.

    george Osborne will never get above his personal attitudes, he been born with a silver spoon and whether he shoves it up his nose or backside is inconsequential because his rightwing pals, as much as the leftwing leftovers are ALL IN IT TOGETHER.

    Unless we start liking our fellow humna beings again and take decisions together, this continuous pendulum politics will tear the country apart.

    Anarchism is a nice idea, as long as nobody demands personal rights over and above personal responsibilities, sadly that includes taxes paid to look after those not as fortunate as some.

    The old politics, although wriggling in all its usual contortions are dead. I very much agree that all sectors of local, national and international Government services could be slashed to the bone. Tax havens could be made accountable and public perks totally curtailed.

    To say we are all in it and only mean the taxpayers, is very Tory dandy, let them try it and watch them indebt us ever further.

    I wonder how mcuh people will stand before they kick em’ hard.

    I agree with you Gus, its more of a nightmare than a prospect for a new EU.

    great to hear from you Sam, hope your career has been sorted, should you ever be in need of a place in Norwich , let me know

  • Theophrastus

    If local services are funded (almost) entirely from local taxation, won’t you end up with the American situation? The tax intake from poor areas is small, leading to crap schools, poor public service provision, etc etc. which ultimately keep all but the most exceptional individuals in lifelong poverty. To have equality of opportunity, you have to redistribute wealth. I agree with your other suggestions, but I have misgivings about this one.

  • sam2

    @Ingo: I think that’s a different sam, actually; you may have meant me. As it happens, I’m still getting unexplained job knockbacks, and I’ve just been made homeless by an unexpected council tax bill (although I’m supposed to be personally exempt as a jobseeker). Earlier this year, I moved into a dingy student flat to keep the rent low, but it turns out my presence made the whole flat liable and, due to the terms of the lease, I have to pay the lot (3 people x 8 months – 25% reduction). The CAB says it’s genuine loophole and I’m stuck with it. As I can’t now afford a deposit on another flat, I’m back to couch-hopping round various cities and working for favours. (Is that what’s meant by “social mobility”?) At least these other places may have better job prospects.

    I think Norwich is really charming. I registered with an office agency there this summer, but despite being a highly qualified and skilled applicant (I used to train university administrators), they said they had nothing suitable and took me off their books. I’m now applying for Xmas postie jobs; I think I served a decent apprenticeship in July. (Thanks for your training in letterbox technology, by the way – I learned from a master.)

    Notice that I wouldn’t have ended up in this pickle if the unjust and hopelessly bureaucratic council tax had been replaced by a local income tax. Another fine policy call from Craig. He’d certainly get my vote (if I had one)!

  • tony_opmoc

    In a conservative website call FreeBritannia there is this conversation about Pigs…

    The pictures are actually better than the words…

    But these are my words

    “Pigs are obviously far more useful than Turkeys.

    Now that the Turkeys have voted for Christmas, and turned Westminster into a Powerless talking shop, with all important decisions now being made by the EU, we should ask the EU if we can replace our Politicians in the House of Commons with Pigs

    We can argue that, the place is already full of pig troughs, and it would then be serving a useful purpose.

    We could even employ the Ex-Mps to clean up the pig shit and top up the troughs”

    Tony

  • roderick russell

    To: Craig & Ruth,

    Got your message “Roderick, I didn’t censor your comment. Possibly filtered for having too many links?”. I thought you had since I tried to post it twice (last night) and each time I did I got a message saying it was being previewed before posting to eliminate malicious input or words to that effect, and it never appeared. I have just tried to post it again and got this message:

    Craig Murray

    The weblog of Craig Murray, former British Ambassador to Uzbekistan

    Thank You for Commenting

    Your comment has been received. To protect against malicious comments, I have enabled a feature that allows your comments to be held for approval the first time you post a comment. I’ll approve your comment when convenient; there is no need to re-post your comment. Return to the comment page

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