The visa and the sausage

The policy making process is a messy business. It is widely and fairly quoted that “laws, like sausages, cease to inspire respect in proportion as we know how they are made.” Think tanks sit at the very start of the policy process – writing recipes for politicians to feed to the public (as well as writing recipes for the public to feed to politicians). However, polices can become adulterated as they are funnelled through the sausage machine of government.

Some policies are just bad ideas – such as the creeping reintroduction of incomes policies, which dramatically and unequivocally failed in the 1970s – but some good policies fail in their implementation. At least one is failing because nobody knows it exists: the Tier 1 Exceptional Talent Visa for tech.

As Sam Shead explains at TechWorld:

As part of an effort to get more of the world’s best tech entrepreneurs and software engineers to come to the UK, prime minister David Cameron announced last December that the government was going to allow Tech City UK to endorse 200 of the 1000 slots. At the time, Cameron said more overseas talent was needed if the UK wanted to overcome the skills gap that exists in the tech sector.

The Tier 1 Exceptional Talent Visa should be a fast-track for tried and tested entrepreneurs to enter the UK, but even though Tech City UK has been free to endorse entrepreneurs since April, the policy is struggling to get off the ground.

The failure is largely the result of so few people knowing the visa route even exists. I’ve spoken with plenty of entrepreneurs, recruiters and lawyers – all of whom are needed to make this policy work in practice. Most haven’t heard of this visa route and none has the information required to understand the process. There is plenty of blame to go around but Tech City UK and UKTI probably deserve the brunt of it.

The failure of the Tier 1 Exceptional Talent Visa tech demonstrates how government departments and quangos are falling short in their job of communicating policy to so-called stakeholders (for want of a better word). We can’t rely on MPs to spread the word. In a recent poll commissioned by The Entrepreneurs Network it was discovered that they are largely ignorant of current policies to support entrepreneurs.

Based upon the evidence (and my cosmopolitan biases), fiddling with the Tier 1 Exceptional Talent Visa doesn’t go nearly far enough in liberalising the immigration system. But before this great battle of ideas is won – which will encompass cultural as well as economic clashes – every failing policy is a setback.

Philip Salter is director of The Entrepreneurs Network.

On Ed Miliband’s new tax on tobacco profits

Ed Miliband has decided that there should be higher taxes on the profits of cigarette companies. The argument being that smoking costs the NHS money and that thus some cash should come from the one activity to cover the other. However, that activity of smoking already more than covers the public costs associated with it. As is helpfully pointed out here:

Estimates for the amount spent on tobacco in the UK in 2011 range from £15.3bn to £18.3bn. The cost of smoking to the NHS is put at between £2.7bn and £5.2bn.

The Treasury earned £9.5bn in revenue from tobacco duties in the financial year 2011-12.

When even The Guardian is pointing out the mathematical difficulties with a Labour Party leader’s promises then it would be fair to say that it’s not really going to fly, wouldn’t it?

And that is rather the point about smoking. The activity is already sufficiently taxed that it pays for all of the public costs associated with it and more (and that’s to ignore the fact that shorter lifespans as a result save the NHS money). There are substantial private costs of course: but public taxation isn’t the correct way to deal with such private costs either.

Why Miliband is wrong on energy policy

This article was originally published in the Young Fabian’s quarterly magazine, Anticipations (Volume 18, Issue 1 | Autumn 2014).

On this we will agree: the corporate monopoly dominating the UK energy market needs to come to an end. Currently, British customers have a total of six firms to choose from in the energy market, all of which offer very limited price distinctions.

And those prices keep going up. Since 2010, gas and electricity rates have risen by three times the rate of inflation (10.2% between 2010-2013). Quite rightly, the Big Six are constantly under attack from very political party in the UK for over-charging customers and raising retail prices, even when wholesale costs fall. With such little competition in the energy market, mega-firms can charge extortionate prices, and customers have no choice but to pay the bill.

Another point of agreement: a change in government regulation is key to breaking up this monopoly. Both Labour and Conservatives acknowledge that government regulations, like Ofgem, aren’t holding the Big Six accountable for what they charge customers. Over the past few years, party leaders have come up with new variants of the Regulatory State to combat the problem. Most recently (and most misguidedly) Ed Miliband has advocated for a government-mandated freeze on energy prices, which would force firms to fix their prices for 20 months, regardless of future changes in market conditions.

Why is this misguided? Let’s put aside Miliband’s refusal to acknowledge the costs that are loaded on to energy companies by the state (ie: requirements to source energy from renewables), which in turn, gets pushed onto the customer and focus on a second, more important point: Miliband’s policy proposals reinforce the energy monopoly.

It’s near impossible to create a market monopoly without help from the ultimate monopoly; that is, competition in the market place is so often drowned out, not by competitors, but by the state.

The energy sector is a prime example of well-intentioned government regulation gone awry. The sector is regulated so heavily, through both onerous compliance requirements and heavy taxation, that it is near impossible for any budding energy firm to compete with the Big Six. In its effort to stop energy firms from over-charging customers, the state has effectively regulated all competitors out of the market, re-enforcing the monopoly it was trying to prevent.

The bureaucratic, slow-moving nature of government bodies means that they are not equipped to understand or anticipate the unpredictability of market prices on energy. The security of energy supplies, complexities of long-term contracts, and real commodity costs are often dismissed by politicians who have made unsustainable, politically motivated promises to voters. Whilst the Big Six have no incentive to bring energy prices down when they can, a Labour prime minister would have no incentive to bring the prices up even when he must.

Britain needs appropriate, scaled back monitoring of the energy market that removes ‘safeguards’ for the Big Six’s market share and introduces healthy competition in the market place. A less-regulated system where consumer choice dictates the real price of energy would see monthly bills drop. But piling price fixation on top of bad regulations will produce a lot of heat and very little light.

Two cheers for technocracy

Who needs experts? The minimum wage was once an example of the triumph of technocracy, where decisions are delegated to experts to depoliticise them.

The Low Pay Commission was set up to balance competing priorities – increasing wages without creating too much unemployment. If you were a moderate who thought the minimum wage was a good way of boosting low wages, but recognised that it might also create unemployment, the LPC gave you a middle ground position. (For what it’s worth, I’m an extremist.)

That technocratic settlement also allowed politicians to, basically, safeguard against an ignorant public. By delegating decisions like this to experts, bad but politically popular policies could be avoided. Relatively well-informed politicians could avoid having to propose bad policies by depoliticising them.

Other examples of this include NICE’s responsibility for deciding which drugs the NHS should and shouldn’t provide, and the Browne Review that recommended student fees, which had cross-bench support. The old idea that “you can’t talk about immigration” comes from an informal version of this – everyone in power knew that people’s fears about the economics of immigration were bogus, so they were basically ignored.

But that technocratic settlement now looks dead. Labour has now made a specified increase to the minimum wage part of its electoral platform, following George Osborne’s lead earlier this year. That means that voters will have to choose not just between two rival theories about the minimum wage, but two competing sets of evidence about whether £7/hour or £8/hour is better, given a wage/unemployment trade-off.

Whether voters are self-interested or altruistic doesn’t really matter. A self-interested low wage worker would still need to know if a minimum wage increase would threaten her job; an altruistic voter would similarly need to know a lot about the economics of the minimum wage and the UK’s labour market to make a judgement about what level it should be.

And of course the minimum wage is just one of dozens, if not hundreds, of questions that political parties offer different answers to that voters have to make a judgement about.

In practice this does not happen. Voters are very uninformed about basic facts of politics, and are almost entirely ignorant about economics, which almost everyone would agree would be necessary to make the correct judgement about something like what the minimum wage level should be (even if they didn’t agree on which theories and evidence was relevant). Even the use of rules-of-thumb such as listening to a particular newspaper or think tank (ha) will suffer from the same problems.

Voters, then, face a nearly impossible task. Assuming they are bright, well-intentioned, and believed that it was important for them to cast their vote for the party that would have the best policies, they would have to amass an enormous amount of information to make the right decision on all the questions they, in voting, have to answer.

So voters are trapped. They cannot know what minimum wage rate is best any more than they can know what drugs the NHS should pay for. They are, empirically, very unaware of basic facts, but they would find it hard to overcome that even if they wanted to.

Does democracy make us free? Maybe, but it’s the freedom of a deaf-blind man – we can choose whatever policy we want, without any idea about what those policies will actually do. So, if the alternative is more direct democracy like this, maybe technocracy isn’t so bad.

The end of an auld West Lothian song

The Scottish National Party leader Alex Salmond loves causing trouble (as many contemporaries of mine from the University of St Andrews relish as well). He must be grinning, because despite losing the independence referendum in Thursday, he has really put the Westminster politicians in a stew.

Before the vote, to buy off wavering Yes voters, all the main political parties in Westminster signed a pledge to give more powers to Scotland anyway. On Friday, UK Prime Minister David Cameron correctly declared that if Scotland was getting more power, then people in Wales, Northern Ireland – and particularly England, the only bit of the UK without devolved powers – would expect nothing short of the same.

He is right, even if that reality only made itself plain after the more-powers pledge had actually been signed. And having set the idea running, he realizes that he has to initiate a House of Commons vote on English devolution before the June 2015 UK general election.

Labour leader Ed Miliband is currently refusing to back any such plan, calling it a ‘back of the envelope constitutional change’. He has a point: Westminster politicians are remarkably cavalier about how they change the UK’s constitution. A small public company cannot change its rules just on a majority vote of the directors, so why should a large government be able to change its rules on a simple majority in Westminster? But his real concern is to ensure that the large number of Labour MPs that Scotland sends down to Westminster can still vote on everyone else’s business, the ‘West Lothian Question’.

The impish Alex Salmond will be chuckling at the stooshie he has created. Some say we should devolve powers down to the English cities and local authorities. Others say we need a proper English Parliament. A few talk about barring Scottish MPs from voting on English-only laws.

But devolution of power to the local authorities is a non-runner. We have been promised it for decades, but it has never really happened, and nobody trusts that it will now. As for an English Parliament – well, we have seen the expense of the Scottish one (the extravagant building alone cost ten times its original estimate) and its notoriously poor quality (stuffed, inevitably, with failed local councillors and superannuated MPs).

The simple solution to devolution, all those years ago, would have been to form English, Scottish and Welsh parliaments out of their respective Westminster MPs; and have them meet at Westminster in the mornings on their own country business, then together on UK business in the afternoon. Yes, there will be a few arguments about which matters are ‘UK’ and which are ‘English’. But the solution is costless, and without adding an extra tier of government, you get home-grown politicians of some quality deciding home-grown issues. It is the obvious solution for England. And the end of an auld West Lothian song.