Archive for octobre, 2010

Spending Review – Fairness & Hope

lundi, octobre 25th, 2010

Nick Clegg, the deputy prime minister, should have done better than just airily dismissing as nonsense, the conclusion of the independent Institute for Fiscal Studies (IFS) which contradicts the claim of the Treasury that overall the tax and benefit measures in the October Spending Review are progressive.
The first IFS analysis in August which took account of a wide set of benefit reforms already announced by the Coalition Government, concluded that the impact of all tax and benefit measures yet to come would reduce the incomes of lower income households more than that of higher income households, except for the richest 2% (see also Categories/Chairman?s Blog/Fairness in the right hand index column). Therefore, these tax and benefit changes were considered regressive rather than progressive across most of the income distribution.
Now, when the new measures announced in the October Spending Review are added to the original IFS study, its original finding is said to be reinforced. Its analysis continues to show that, with the notable exception of the richest 2%, the tax and benefit components of the fiscal consolidation are, overall, being implemented in a regressive way. The IFS considers this as not necessarily unfair as the perception of fairness depends on the individual concerned and their personal circumstances e.g. the level of income, whether in work or on benefits etc. However, there are already a lot of people, some seemingly desperate and at the bottom end of the income scale, who are already protesting via comments to blogs on the Internet in an ugly and often semi-literate, class war-orientated and confrontational manner.
There is a need for the prime minister and his deputy with their otherwise considerable communications skills, to move this debate on from the no-win Regressive versus Progressive stage towards how they will promote future growth in the economy, together with the associated development of the hoped for work opportunities, particularly in the poorest, de-industrialised and jobless regions.
There will be some mismatches between the skills of such job seekers and those required for new jobs e.g. in the Green energy sector which is being provided with extra development funds. The key technologies for e.g. wind, solar and nuclear power do not even create manufacturing jobs in the UK but currently have to be imported from the European Continent. (Although Siemens are said to be going to approve this week a plan to build a British factory for a new generation of offshore wind turbines after receiving government assurances on £60 million for port development. The factory will employ 700 workers.) Any job creation from exports requires products and services with a competitive edge with major deficit countries such as the US and the UK wanting to export to counter weak demand from their own consumers, in common with e.g. Germany and Japan (both with home consumers unwilling to spend), all addressing the same fast growing emerging economies such as China. In addition, there will be competition from sometimes better educated and /or skilled job seekers from the more eastern parts of the European Union and outside. Ex-public sector workers are also not necessarily a natural fit to the private sector unless e.g. they are included as an integral part of the private outsourcing of former public services. There is a need for an overhaul of training schemes to help reduce long-term joblessness.
A key difference between the proposed Labour austerity programme of cuts versus tax rises in the ratio of 60/40 compared with the 70/30 of the Coalition, is that the latter considers the more you tax, the more this acts as a disincentive to new business start-ups, investment, growth and associated job creation in the private sector. There has to be a more positive vision than the mantra of Labour that cuts too soon and too deep will harm a fragile recovery. Indeed, whether the economy has recovered or fallen into recession again will not be officially apparent until sometime after the event, when the appropriate statistics for growth are made available.


mercredi, octobre 20th, 2010

An anti-immigrant wind is also blowing in Germany it seems and Chancellor Merkel has had to modify her position somewhat after e.g. angrily rejecting the claim of French President Sarkozy that she was also thinking of (as in France) a similar return to Romania of problematic, Roma traveller families from their shantytown-type settlements (a sensitive issue given the still relatively recent German past). It was only this summer that the multicultural German football team which comprehensively defeated England in the World Cup in South Africa, was celebrated in Germany as emblematic of a young country enriched by decades of immigration, the latter encouraged particularly from Turkey to meet critical labour shortages following the Second World War.
Now, however, Germany is debating the role of its 4 million Muslims and a recent opinion poll had 55% of Germans considering Muslim immigrants a burden costing the country much more socially and financially than they have contributed economically. Another poll published in Bild the largest circulation tabloid, showed 66% of the public believing that Islam does not belong in Germany. It has not helped that there are reports of German Islamic militants, the children of first generation immigrants, receiving training as terrorists in Pakistan and Afghanistan with several also recently reported killed by American CIA-operated drones. Mrs Merkel has now, therefore, been moved to tell her Christian Democratic Union (CDU) members at a party conference that Islam in some of its forms is not compatible with German law and that tolerance must stop at e.g. forced marriages and honour killings, which are not considered part of basic German culture. Of course Germany is not alone in being caught up in a wave of anti-immigrant feeling that is developing across Europe, with far-right and /or anti-immigrant political parties now also in e.g. Holland, Austria, Norway, Sweden, Denmark, France and the UK.
Even on the religious front, the Catholic Church is concerned at the diaspora of some 27 million Christians (including 6 million Catholics) spread across the Middle East and which is moving to the West, reflecting the difficulties encountered in their daily lives from the rise of political Islam, as the influence of Islamic fundamentalists increases. They are also under pressure in the Philippines, India and Pakistan. Above all, such Christians are put into a rather precarious situation of being considered as non-citizens when Muslim extremists mix religion and politics and do not accept their right to freedom of religion and conscience. The Vatican trusts, however, that working together with what it sees as still a vast majority of more moderate Muslims to combat such religious extremism, the Christian faith can continue to prosper in the Holy Land at least.
Considering the rather lax attitude taken to controlling immigration to the UK in the most recent past, taken together with the promotion of Islamic Turkey for membership of the European Union (EU), the view from France is that the UK needs to reflect more on what sort of society it wants for the future and to reaffirm its common cultural heritage with Europe. Certainly the Coalition government has already set stricter limits on immigration from outside the EU and which in the current economic slowdown, can more easily inflame emotions in areas where immigrants are competing for limited low-cost housing and jobs.

Pupil Premium

dimanche, octobre 17th, 2010

Ahead of the 20th October spending review and to protect politically sensitive parts of the total education budget, the government has responded to accusations of unfairness over their planned child benefit cuts by announcing a £7 billion Pupil Premium. This will be allocated over the same period as the spending review and aims to improve the educational prospects of the poorest children, supporting them up from the socially critical 2 years of age when they risk future exclusion and to the university stage. The total schools budget which normally represents some 50% of the total spend on education will also not be cut.
This pupil premium will target e.g. schools with the highest proportion of free school meals and, therefore, serving the most disadvantaged catchment areas. How the money is to be spent will be left to the discretion of individual school head teachers. Longer term savings in welfare spending are anticipated from enabling such disadvantaged children to catch up and maintain progress with their peers through extra tuition and other early support, thereby increasing their aspiration and hopefully reducing their otherwise over-reliance on state benefits in the future. Of course, with the total schools budget still limited by the restrictions on government spending, this could mean that schools in more affluent areas will get less.

Sir Philip Green Efficiency Review

mercredi, octobre 13th, 2010

The Coalition Government asked Sir Philip Green to examine and report back his findings and recommendations on how its central (Whitehall) departments spend money. His Efficiency Review has concluded in summary that the Government is failing to leverage both its credit rating and its purchasing and property (largest tenant/owner in the Country) scale to full advantage. This reflects inefficiency and waste, mainly due to very poor data (e.g. great difficulty in establishing actual transport costs) and process (e.g. lack of a centralised approach to purchasing, leading to significant price variations for common items across departments and multiple contracts with some major suppliers).
Implicitly acknowledging the political connotations of his report, Sir Philip has subsequently emphasised to the media that he was not looking for job cuts, just how the existing personnel in central government could work better with less. In addition, no total value has been placed on the actual amount of waste identified and/or the possible total saving, although practical examples sprinkle the report such as the 400,000 hotel nights spent in London for central government with a suggested 50% saving from video conferencing and other such solutions. He also questioned whether it made commercial sense to pay suppliers in 5 days (a relic from the last Labour government to help its suppliers through the recession), when the norm is 30 days or more in the private sector. Labour has already countered that government is complex and that more centralisation e.g. of government purchasing, will lead to more bureaucracy and expense and this also runs counter to the Big Society government idea of more decentralisation to local level to reduce cost.
Total central government spend in 2009/10 is put at £670 billion consisting of:
? Benefit & Grants???????????…………..270 (40.3%)
? Procurement (e.g. IT, Travel, Consulting)??166 (24.8%)
? Pay?????????????????……………..164 (24.5%)
? Property (including running costs)?????…..25 (3.7%)
? Other?????????????????…………….45 (6.7%)
Procurement at almost 25% of total spend in Whitehall is then identified as an area where the whole public sector would benefit from a centralised procurement process.
However, in asking the colourful Sir Philip to carry out this efficiency review the government has taken the risk that the media impact of his report will far outweigh the negative aspects of his personal tax affairs. That said, if it was his own business, Sir Philip would also have ensured that any such report by his own staff would not only have quantified the total waste and potential saving but also the required action plan and resources required to achieve an actual target amount.

Child Benefit Cuts

jeudi, octobre 7th, 2010

The government has announced at the Conservative party conference that, as part of their fiscal austerity programme to eliminate the public spending deficit, it is only fair to cut child benefit for those parents considered better-off and, therefore, able to carry a heavier share of the tax burden i.e. those with annual earnings of £44,000 or more and in a higher tax bracket.
However, due to the perverse and socially engineered effects of the current UK tax system, where everyone (whether married or not) is taxed as a separate individual, this would seem to imply that a single mother earning more than £44,000 would lose her child tax credits whilst a household where both parents each earn less than £44,000 for a joint income of up to £88,000, could still retain their child benefits. It has as a result been quite roundly attacked as manifestly unfair although an opinion poll taken immediately after found 85% of respondents in favour and 15% against, roughly in the same proportions as those who would still retain child benefits versus those who would lose out!
Given that the Conservative party in common with its opponents must employ clever political thinkers and analysts, this begs the question that, if it is so easy to pick such obvious holes in this child benefit tax policy, why announce it now during the Conservative party conference and in advance of the detailed programme of cuts planned to be announced on 20th October? One would like to think that this is part of an overall policy to guide public opinion towards the benefits of a tax system which not only provides tax concessions for children but also for the supporting married couples, taxed on their joint income as per the French system for example.
The Conservative party has traditionally supported marriage as a source of stability in society and the prime minister in defending these proposed child benefit cuts has already suggested that married status should be recognised within the tax system. There are of course the arguments of those who say that this discriminates against single, childless individuals and that there is no evidence that homes with two committed but unmarried partners cannot provide as stable a family environment as a married couple. In albeit mainly Catholic but constitutionally secular France, the tax system favouring marriage and children can also be traced back to the need to rebuild the nation after two world wars fought over its soil. Indeed with the almost statutory three children the resulting low level of direct income tax paid is highly attractive to young parents, during their early and generally lower income married life.
With civil partnerships including same sex couples now recognised under UK law, why cannot the tax system recognise marriage and the added costs of raising children during the early, more financially-stretched years? Certainly, Ed.Milliband the recently elected new-generation leader of the Labour party, who has in the past been too busy to have his name on the birth certificate of his first child, has admitted to the press that he is considering marriage to his partner in the future.