The truth hurts

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It is about time politicians and the public wake up out of their coma. Dan Hannan tells some home truths about the NHS and suddenly politicians across the country are required to swear allegiance to that great behemoth.

The NHS has always caused much controversy. Clearly all sides of the debate are guilty of taking individual cases and extrapolating general truths from them, yet the reality is that in both theory and practice the NHS is an awful system for providing healthcare.

Let us not forget that because we have the NHS:

- it is only the very wealthy who get a truly world-class healthcare as it is only they who can afford to pay twice.

- politicians are interferes in the way we choose to live ours lives – and increasingly so.

- healthcare is rationed – and increasingly so.

- public money is wasted on ineffective pseudo-medicine.

- 250,000 people are still waiting more than 18 weeks for treatment.

Of course, the US healthcare system also needs reform, but instead of looking across the Atlantic, Obama could learn a thing or two from the Cato Institute. And as a matter fact, so could most of our politicians.

Reform certainly, but cuts will still be necesssary

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In that speech to Demos on Tuesday, George Osborne told us that “we face a choice between progressive reform with the Conservatives and front line cuts under Labour." This is how the Tory leadership wants to fight the battle over public services, and this message will be at the heart of their election campaign.

It’s true that reform of the public services is desperately needed: as Osborne pointed out, the United Kingdom currently ranks 76th out of 134 countries in terms of public service efficiency. And it’s true that the Conservatives have some genuinely radical and exciting policies to improve the situation.

But, as Daniel Finkelstein explained in The Times last month, the full rewards of public service reform may not be felt for years, or even decades. The fiscal crisis will not wait: government borrowing is set to total £700bn over the next five years, and there is a real risk of the UK’s credit rating being downgraded. An incoming Conservative government will have no option but to cut spending sharply and severely.

Even when the potential efficiency increases are realised, they will not balance the budget. The Conservatives’ most radical proposals are limited to education, which makes up less than 6% of central government spending. Even substantial improvements in the delivery of bigger budgets like welfare and health would not be enough. There will have to be a reduction in service provision as well.

The Tories are right to be finding ways that public services can “do more and cost less". And if the voter buys it, the message of salvation without sacrifice may be a winner at the election. But in reality cuts will have to come, and frontline services will have to be reduced. As a nation we must face up to fact that every penny spent by the government is a penny that must be found from taxation. We must ask ourselves what level of public provision we want, and where our priorities lie. We cannot pretend that efficiency reforms are the whole answer; we must make the case for a smaller state.

Unions out of control

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After over a week of striking on the National Express East Anglia (NXEA) rail line, we seem to be in worse situation than before. During last weeks strikes, only 100 out of the scheduled 1,800 trains ran, causing huge amounts of travel chaos and wasting many worker hours, as tens of thousands of commuters were late for work. All too often commuters are attacked from both sides, by the government and the unions, when it comes to rail travel.

The RMT’s Bob Crow has blamed National Express for the problems:

This strike has been caused by greedy National Express bosses who have soaked up £2.5bn in taxpayer subsidies in the past 10 years and who have milked every penny out of this franchise while offering their staff peanuts this year,

The average salary for a train driver in the UK is £35,000 – not quite ‘peanuts’ as Bob Crow would like us to think. This is reminiscent of Alan Duncan being ‘forced to live on rations’. However much the unions are given, they always seem to want more without any consideration for the impact for the disruption. With so many in the private sector having faced wage cuts and redundancy in the past year, it is madness for the unions to be demanding wage increases for shorter working weeks.

Currently, disproportional levels of union control in the labour market are artificially forcing prices up for consumers who have no other options but to pay. At the same time, top-down inefficient government intervention is burdening the taxpayer at incredulous rates.It is time for the public, politicians and the private sector to make it clear that enough is enough.

Billion dollar policies

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Some interesting statistics.

Bonuses, wealth and progress

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John Kampfer’s criticism of the FSA’s decision not to issue binding restrictions on bankers’ bonuses is deeply unpersuasive.

Having reminded the reader that the economy’s doomed, regulation’s brilliant and Fred Goodwin’s greedy, he starts his argument by complaining that:

Britons have long displayed a curious deference to people who are paid far beyond their worth.

Who is Kampfer to decide how much an employee is worth? Is an open labour market, competing for workers on the basis of their productivity, not a better determinant? Britons have indeed displayed an acceptance of the pay arrangements agreed between private firms and their workers, and rightly so. Next is the inexplicable statement that:

The only argument ever used for our largesse is the usually fictitious "brain drain"

Why on earth should the payment that a bank makes to its employee (nationalised banks excluded) be considered “our largesse." It is the largesse of the owners of that bank, and it’s nothing to do with us.

With reference to the brain drain, he then asks:

Would a finance director at, say, Salford or Southampton really up sticks and head for Stuttgart or Stockholm if he or she was told they were overpaid?

Well, simply, yes.

Then follows the most patently untrue statement of the lot, that:

Excessive wealth has not produced an incentive to improve the nation's lot.

Wealth (‘excessive’ or otherwise, whatever that term means) has been the incentive for countless improvements to the nation’s lot throughout our history. From Arkwright to Branson, the entrepreneurs, businessmen and professionals of this country have been driven by the lure of wealth to innovate, produce and employ.

Bonuses are a good way to attract and retain the best talent, and encourage efficient behaviour among employees, generating profit for firms, and wealth for the nation as a whole. More importantly, bonus schemes in the private sector are voluntary arrangements between firms and their employees – the government has no business intervening. There is no reason, beyond envy, to stop them.

Apprenticeship failure

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Figures released show youth (16- 24) unemployment nearing figures of one million and some have already begun to foresee this causing serious social unrest as happened in the 1980s. With such a stark reality for the future of British youth employment it is shocking to see such a poorly misguided and lacklustre input from the government.

In my opinion, one of the most effective and beneficial approaches to youth employment is the apprenticeship scheme. For those who do not wish to enter full-time higher education, it allows a gradual transition period between work and employment, teaching valuable skills and trades as well as life skills such as organisation and time management.

Apprenticeship schemes are not only beneficial to young people, they allow firms access to a labour force that is willing to learn and can be trained specifically for many jobs. If approached properly they can provide a highly trained loyal workforce for years to come. These schemes are beneficial to both parties, meaning that government intervention should be kept to a minimum. This is not the case, as the recession has impacted upon youth employment Labour have jumped on the ‘apprentice bandwagon’ in their usual vote-grabbing fashion.

A government launched website aimed to increase the number of apprenticeship places has failed on an impressive scale. So far just 1,185 out of 18,000 places have been filled on government schemes. There is no need for the government to fiddle with this aspect of the labour market with top-down, unrealistic, quotas and application schemes. Left to the firms and individuals, the most efficient result would be obtained, benefiting all. As the youth labour market currently stands, the government is acting as more of a hindrance than helper.

If it really wanted to give young people the best start in society it would reduce benefits to school leavers, which currently act as a disincentive to find work. Only by allowing firms to offer incentives to young people can this valuable section of society be mobilised to its greatest capacity.

Top-up fees: Just and efficient

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David Papineau argues in The Times against lifting the cap on top-up fees, as Lord Mandelson has been suggesting recently. Apparently, he fears that if the government were to do so, “our proudest universities will quickly turn into rich kids’ colleges."

The present, state-subsidised system of university funding is regressive: hard-working taxpayers from all sections of society, two-thirds of whom do not hold a university degree, subsidise the exploits of relatively affluent students. Obtaining a university degree is not a necessity or a trial, it is a fantastic experience that boosts lifetime income by almost 60%. Those who derive the benefit from the education should pay for it – the students themselves.

Papineau protests that if students are made to pay the full cost of their education, “universities will become the preserve of the rich," and that “a system of means-tested bursaries … won’t solve the problem." Well, if government continues to provide low-interest loans covering tuition fees and living costs for all those who can’t afford the education outright, as they intend, then why should the poor be excluded? If a university education is worth what it costs, then given sufficient credit, people will be prepared to pay for it.

Giving universities the flexibility to charge the price they want for an education will also raise standards. Universities will have to compete for their students: striving to excel, saving money where necessary, targeting students with a variety of demands and reacting to a changing marketplace.

The current system is unjust and inefficient. Raising the limit on top-up fees is a good step towards the free-market university education system that would move the burden of cost from taxpayer to consumer, and improve quality across the board.

August 14 1765

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August 14 was celebrated throughout America as the happy day, on which Liberty arose from a long slumber.

The progressive train to nowhere

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The smoke and mirrors of politics were on show on Tuesday at Demos, where David Cameron's right hand man, the Shadow Chancellor, George Osborne MP gave a speech claiming that the Conservatives were now the torch holders of progressives politics. The ideal being that the Conservatives would reform public services, rather than cutting them (the reforms being sufficient enough to reduce costs). This, in itself, is to be the measure of progress. Progressivism is now being embraced by the conservatives: either this is the politics of triangulation or the air being cut off to conservative brains.

Progress is to realise the folly of government intervention of the past 70 years. It is to realise that for the UK to turn itself from being a debt riddled, inefficient, morally bankrupt, ill-bred and unhealthy nation public services need to be radically reduced in size, not tinkered with at the edges. After the elecion of the Conservative administrations we'll have progressed exactly nowhere. Government will still be in excess of 40% of GDP, debt will still be a weight towering over us and politicians will still be grappling with whether we are responsible enough to do x,y and z. What the conservatives should be proposing is a dramatic reduction in business taxes/regulations to increase growth, reducing the tax burden on the poorest and ensuring that the state is withdrawn from much of public life. That is how we progress rather than wallow and regress as this current crop of politicians want us to.

From 1945: "In the interests of the nation and of the world, we earnestly urge all progressives to see to it - as they certainly can - that the next Government is not a Conservative Government but a Labour Government..." Where has the alternative to big government gone? There is no one offering us a way out of this era of indebtedness and wasteful spending and as such our progress will be continually held in check by the political class.

Obama and Europe

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European opinion leaders just don’t get it. Instead of celebrating president Obama as the new messiah they should put all their bets on failure for both them and us. The man in the White House is keen to emulate the European social democratic model.

An excellent article in the WSJ observes that the very European welfare state has been subsidized by the American taxpayer for half a century. It was only thanks to the very expensive American defense umbrella that the Europeans were able to ignore military expenditure and instead spend like mad on welfare.

It was the strong American consumer demand, driven by free market economics, that provided an excellent market for European products - but perhaps not much longer. If president Obama gets his way both enormous benefits for Europeans will vanish.

As Jeff Durstewiz concludes:

The great irony here is that the European model American leftists envy couldn’t survive without the despised cowboy counterpart. If the U.S. economy weakens because of increasing regulation, heavy-handed unionization, and higher taxes and debt to support an expensive social agenda – all policies Mr. Obama and the Democrats in Congress are pushing hard – it will hurt Europe.