It's always the same with these bureaucratic cash targets

The thing that is the same being that hitting the bureaucratic cash target becomes the priority, not actually spending the money in a reasonable or value adding manner:

More than two thirds of Britain’s aid budget is being given to organisations such as the EU and the World Bank to help meet official targets, despite billions of it going unspent for years, an investigation has concluded.

MPs found that £6.3 billion of Britain’s aid budget is being handed to major agencies to help hit the Government’s target of spending 0.7 per cent of the nation’s income on overseas aid.

Their report found that a growing proportion of the money is set aside for future spending, which means it goes unspent for an average of two years.

The amount committed to major organisations that has yet to be spent has increased from £1.5 billion in March 2010 to £3.7 billion in March 2014.

It was never sensible to adopt the target in the first place. And as we're now borrowing that money to immediately hand it off into the bank account of the international bureaucracy we really shouldn't be trying to achieve it now.

Raising the NI threshold would have cross-party support

In Wednesday’s Budget we saw the personal allowance threshold rise again; starting April 2016, earnings up to £10,800 will be tax-exempt. The coalition knows that raising the personal allowance is a politically popular idea (not to mention good public policy). It’s great to see them inch slightly closer to taking minimum wage earners out of income tax all together.

But given how in-tune they are with the tax relief this policy provides to low earners, it’s hard to make sense of their decision to ignore the National Insurance threshold, which currently sits well below the personal allowance threshold at £7,956/year. 

Especially when it would be politically popular to address it.

A pre-Budget poll from YouGov asked Conservative, Labour, Lib Dem and UKIP respondents which policies they would support or oppose if the Chancellor were to announce them on Wednesday. The policy that received the most support (83%) was raising the personal allowance threshold to £11,000, followed by “raising the National Insurance threshold, so it is no longer paid by the lowest earners”, which received 71% support.

It gets even more interesting if you break it down by party. On NI, both Conservatives and Lib Dems supported the policy with a 75% majority, followed closely by Labour at 72%. UKIP brought the average down slightly, but with a significant majority still favouring the policy at 68%.

Getting the poor out of tax has strong cross-party support and the Chancellor should, in theory, be able to implement changes to the NI threshold without extreme push back from any opposition parties. Yes, the coalition should be credited for their reforms to the personal allowance, but now is hardly the time to go soft on a bad tax that continues to hit the poor hard.

Non-payment of BBC licence fee accounts for 10% of prosecutions

The BBC is responsible for more than one in 10 criminal prosecutions. Culture Secretary Sajid Javid reports that 10% of magistrate court cases are for non-payment of the BBC licence fee. Non-payment is a criminal offence, punishable by a fine of up to £1,000. Every week about 3,000 people are fined for non-payment, and about one person a week is jailed for non-payment of the fine. Women make up about 70% of those prosecuted and convicted, and half of those jailed for not paying the fine. When people fail to pay other utilities, such as energy companies, they are guilty of a civil offence, not a criminal one, and they cannot be prosecuted and fined for falling behind with their payments. Civil action can be taken for recovery, but without fines and jail terms.

Several newspapers have had reporters visit magistrate's court to describe what goes on. They all tell harrowing stories of frightened, distressed people, mostly women, facing fines they cannot pay under threat of imprisonment if they do not. Many are single mothers, many on benefits. They have not paid the licence fee because they cannot afford to. The sum of £145.50 per year is huge for a young mother struggling to feed and clothe children. Many weep in court, unable to pay the fine for the same reason they couldn't afford the licence fee; they don't have the money.

Everyone with a TV, except the over 75s, has to pay, whether or not they watch BBC programmes. If people fail to pay for other services, such as a Sky subscription, for example, the service is withdrawn without them being taken to court and fined.

In 21st century Britain we should not be dragging helpless women through courts and fining them, or making their lives more wretched than they already are by putting them in jail for non-payment of those fines. It should be a civil, not a criminal offence, and should be dealt with by withdrawal of the service rather than by prosecution. The technology to do this is relatively simple.

The development of tiny transistor radios killed the radio licence in 1971. Now laptops, tablets and smartphones make the BBC licence fee increasingly difficult to sustain. Many watch TV on portable devices instead of TV sets. They watch programmes on Catch Up and iPlayer. Many do not watch BBC programmes at all. Clearly an alternative way of financing the BBC has to be found. That will take time, but before then non-payment of its licence should be a civil, not a criminal action, and we should stop letting the BBC hound helpless people through the courts.

We can identify George Monbiot's problem

It's not just that he's often factually incorrect, nor that he races off after the wrong rabbit all too often. It's that he's in the wrong society:

It just doesn’t compute. Almost every day the news is filled with stories that look to me like corruption. Yet on Transparency International’s corruption index Britain is ranked 14th out of 177 nations, suggesting that it’s one of the best-run nations on Earth. Either all but 13 countries are spectacularly corrupt or there’s something wrong with the index.

Yes, it’s the index. The definitions of corruption on which it draws are narrow and selective. Common practices in the rich nations that could reasonably be labelled corrupt are excluded; common practices in the poor nations are emphasised.

This is not so. We, collectively, here at the ASI have considerable experience of both life and business in other parts of the world. Including places where the first question about doing anything is "So, who do we bribe?". At least one of us has offered, as professional advice, the point that "If you don't know who to bribe in that country don't bother trying to do business in that country".

The truth is that the index is correct, not just that the terms and definitions being used favour us. Britain really is a remarkably uncorrupt country by the standards of the rest of the world. And that is where we think that Monbiot's basic problem comes in.

George desires to be a warrior for social justice. Heck, he is a warrior for social justice. He just happens to suffer from the problem of coming from a country that actually already possesses a modicum of social justice. There's therefore little in the way of social warrioring for him to do.

We do not claim, heavens above we don't, that Britain is perfect nor that there's not dodgy dealings in corners of it. but imagine how frustrating it must be to devote one's life to the theory that the entire structure must be overturned on the basis of that social justice and yet come from one of the few places that has actually managed to achieve a general level of that justice?

Economic Nonsense: 30. In economic downturns government can boost growth by increased spending

The problem with this is that in economic downturns the government often does not have the money to do this. In a downturn tax receipts tend to go down because there is less economic activity. With less being earned, less tax is paid. If government wants to expand its spending it will need to raise more in taxes or borrow more, neither of which are good at stimulating recovery and growth. If, during times of economic growth, government builds up a reserve surplus, then it might have the resources to do things such as infrastructure projects when a downturn comes. Unfortunately governments rarely do this. When money comes in, the pressures are on them to spend it, and if they spend it during the good times, it is not there any more when the bad times come.

Tax taken and spent by government is money that cannot be spent by the private sector. The goods and services that people might have bought, or the investments made possible by their savings do not take place if the government has taken the money to spend on its own projects.

Some commentators say that in a downturn businesses and private citizens are simply not doing the investing, and therefore government has to step in and do some of its own. There might be very good reasons why people are not investing in a downturn, and they are even less likely to invest if government has raised their taxes or by borrowing money to pay for its projects has raised the cost of borrowing.

There are things that government can do to make investment more attractive and encourage more businesses to start up or to expand. It can lower Corporation Tax; it can tweak Capital Gains Tax; it can give small and new businesses a holiday from National Insurance contributions. All of these are on the supply side, where the effort is needed, rather than on the demand side subject to all of the above caveats.

Even if the minimum wage doesn't hit jobs it hurts the poor

There is a big debate over whether minimum wage increases cause unemployment. A majority of papers say it does, and a bigger majority of the best papers, but there is also lots of evidence that it doesn't always. And we must bear in mind that bodies like the Low Pay Commission are well aware that big hikes are dangerous so they intentionally advise for smaller ones, with the disemployment effect firmly in mind. The debate rages mainly because the minimum wage is such a live political issue. Its proponents see it as an anti-poverty mechanism without the potential stigma of benefits. Its opponents think it risks jobs; better to be employed with a low wage than not employed at all.

But what if that's a false dichotomy. Let's assume it doesn't hurt jobs—let's assume that all of the minimum wage is instead passed along to consumers. Does the benefit from higher wages outweigh the cost from higher prices? A new paper (pdf, up-to-date gated) says 'no':

Low-wage families are typically not low-income families. The increased earnings received by the poorest families is only marginally higher than by the wealthiest. One in four families in the top fifth of the income distribution has a low-wage worker, which is the same share as in the bottom fifth. Virtually as much money goes to the highest-income families as to the lowest.

While advocates compare the wage levels to the poverty threshold for a family to make the case for raising the minimum wage, less than $1 in $5 of the additional earnings goes to families with children that rely on low-wage earnings as their primary source of income. Moreover, as a pretax increase, 22% of the incremental earnings are taxed away as Social Security contributions and state and federal income taxes. The message of these findings is clear: raising wages wastefully targets the poor contrary to conventional wisdom.

Turning to who pays the costs of an increase in the federal minimum wage through higher prices, the analysis reveals that the richest fifth of families do pay a much larger share (three times more) than those in the poorest fifth. This outcome reflects the fact that the wealthier families simply consume much more. 34 However, when viewed as a percentage of expenditures, the picture looks far less appealing. Expressed as a percentage of families’ total nondurable consumption, the extra costs from higher prices are slightly above 0.5% for families at large.

The picture worsen further when one considers costs as a percentage of the types of consumption normally included in the calculation of state sales taxes, which excludes a number of necessities such as food and health care. Here, the implied costs approximately double as a percentage of expenditure. More important, the minimum-wage costs as a share of “taxable” annual expenditures monotonically falls with families’ income. In other words, the costs imposed by the minimum wage are paid in a way that is more regressive than a sales tax.

That is: most of those on the minimum wage are not earners for poor families; the goods produced by minimum wage workers make up a large fraction of poor households' budgets; raising the minimum wage, even if it doesn't cut jobs, hurts the poor more than it helps them.

What joy in The Guardian letters page

Mark Lynas exaggerates a little but is generally correct here:

Climate change is real, caused almost entirely by humans, and presents a potentially existential threat to human civilisation. Solving climate change does not mean rolling back capitalism, suspending the free market or stopping economic growth.

That "potentially existential" is the exaggeration. It's something between not a problem and a large problem. Meaning that yes, we probably would like to do something about it even if only on the grounds of insuring ourselves. Very much the Matt Ridley point in fact (not surprisingly, as the Good Viscount has informed us on the matter and we have been able to inform him on certain points).

Then we come to the Guardian letters page in response to Lynas. Much spluttering that of course capitalism must be defeated etc. And we're also set a challenge:

Immense changes to the economic system must be made over the next few years, and the blame game gets us nowhere. If Klein’s belief that “corporate capitalism must be dismantled’” is wrong, it is up to the right to show how the new measures required can work under the present system.

OK, how's this for a plan?

We carry on rather as we did in the 20th century. Roughly the same rate of economic growth, roughly the same demographics (we need the growth rate to reduce fertility and thus get the demographics), roughly the same rate of globalisation and increase in international trade, roughly the same rate of increases in energy efficiency, reduction in costs of solar and so on and on. There's also that insurance bit and as we've got to get tax revenue from somewhere let's have a carbon tax and reduce the taxes on a good thing. Say, increase the allowance before paying payroll taxes (national insurance for the UK, FICA for the US etc). This will in fact solve the problem. (Maybe we might try to miss out the communism and the two world wars bit though.)

No, really, it will. For what we've described there is A1T, one of the scenarios that the IPCC itself uses to forecast climate change. And A1T really is just a straight line projection of the trends of the last century across the next. The carbon tax is simply adding the major recommendation of the Stern Review to our mix as that insurance policy. Under A1T climate change is not an existential problem, it's not even a major problem. In fact, by the end of the century it's not even a problem at all.

Now, we're generally believed to be on the right so perhaps that answers the letter writer's question? Or perhaps, because this isn't actually an answer from the right but is one from the climate establishment it doesn't qualify?

Or, of course, there's the possibility that all of those shouting about climate change and the necessity of deconstructing capitalism and markets either have not read or have failed to understand the basic documents that lay out the concerns in the first place. That would be something of a pity, of course it would, but it wouldn't be the first time various lefties have decided to ignore reality.

Economic Nonsense: 29. The economy should be based on co-operation rather than competition

It is competition that makes the economy work. Producers compete with each other to supply consumers, and consumers bid against each other to decide who buys. When goods are in short supply consumers bid up prices, sending a signal to producers to produce more and thereby redress the shortage. Competition allocates resources efficiently. The same steel that makes a bridge cannot also make a ship, and resources are allocated where they achieve most value and where they command the highest prices. Competition for workers drives up wages. It is competition throughout the economy that motivates people and sends the signals that tell people how to improve their circumstances.

If people attempted to base an economy on co-operation, it is difficult to see how they would know what to. Without the signals sent by competition in prices and resource allocation, they would not know what to produce, in what varieties and to what standard. The experiment with the socialist economies of the Soviet Union and its satellite states was an attempt to plan by co-operation instead of competition, and it failed miserably. State factories were inefficient and outdated and they produced shoddy goods. Shortages were a feature of everyday life.

State officials attempted to estimate needs and to instruct factories to produce goods accordingly. They had no knowledge of what people actually wanted. In a competitive economy, producers vie with each other to guess what the public will want, so that they can profit by producing it. In a co-operative economy they do not compete with each other, so some official or committee has to make the decision, with little at stake if they got it wrong, which they often did.

There is nothing wrong with competition. Misguided ideologues tried at one stage to eliminate it from schools, and some still do. In fact competition spurs people to improvement. It is usually friendly, with people looking to the achievements of others to see how they might improve their own lives. It is a fact of nature just as much as is the empathy we show towards others. Competition works, and it is a force that improves lives. In an economy it is essential.

Logical Fallacies: 19. Wishful thinking

https://www.youtube.com/watch?v=Z-R8tPr7Ab4  

In his penultimate video on logical fallacies, Madsen Pirie takes a look at 'wishful thinking'.

You can pre-order the new edition of Dr. Madsen Pirie's How to Win Every Argument here

The minimum wage is too high, much too high

We've the sad news that the minimum wage is being raised yet again:

The national minimum wage will increase by 20p an hour to £6.70 from October, the government has announced.

The changes will benefit more than 1.4 million workers.

And will disbenefit some unknown number of workers who will lose their jobs. True, a modest rise will leave only a modest number losing their jobs but as they therefore lose 100% of their income that's still quite a large effect. However, we also have another report today:

The number of young people from ethnic minority backgrounds who have been unemployed for more than a year has risen by almost 50% since the coalition came to power, according to figures released by the Labour party.

There are now 41,000 16- to 24-year-olds from black, asian and minority ethnic [BAME] communities who are long-term unemployed – a 49% rise from 2010, according to an analysis of official figures by the House of Commons Library.

The effects of a minimum wage will be hardest felt where that minimum wage actually binds. Among the young and untrained and among those who are unfavoured for any other reason (like, here, perhaps ethnicity for all that we would desire that there is no such discrimination). Which make this news about the new minimum wage even worse:

The hourly rate for younger workers will also rise, and for apprentices it will go up by 20% - or 57p - to £3.30 an hour.

Yes, of course the correct minimum wage is a rate of zero. But we're unlikely to win that argument but at least we can argue for a rate that doesn't do so much damn damage to the least favoured portions of our society. The minimum wage discriminates against those black, asian and minority ethnic youths. Indeed, such discrimination was a stated reason for the introduction of the minimum wage in the United States back in the times of Jim Crow. It's actually a racist government policy. We should therefore end it.