Adam Smith Institute

London's Mayoral election is getting plenty of coverage but the local elections taking place in 155 council areas across England and Wales the same day have generated far less interest. As yesterday's Daily Telegraph noted:

Council elections never attract much interest. Average turnout in local polls since 1996 has been 35.4 per cent. And those who do vote tend to treat the election as a miniature referendum on the national parties, a megaphone through which to shout at Westminster.

The reason is straightforward. People don't think that the composition of their local council is going to make very much difference. Indeed, it's hard to think of any developed country in which local government is weaker than here in Britain. As the Telegraph continued:

Schools and hospitals are largely run from Whitehall. The decree on fortnightly recycling came, in effect, from the EU's Landfill Directive. Three-quarters of council budgets come from central government, the highest proportion in Europe.

This is a shame. Local government could be a useful bulwark against excessive central government. When power is diffused it is limited. Localism creates an 'exit-option' similar to the one that exists in the market – if people don't like the policies of their local authority, they can move to another one and take their taxes with them. That creates competitive pressures to keep charges down and improve standards.

Localism also allows for greater experimentation. Councils can learn from each other and move towards better delivering better services. When power is centralized none of this can happen. There is no 'exit-option' short of leaving the country and only one reform can be tried at a time.

Counties should exercise the same powers as the Scottish Parliament.* People often say that local councils are not competent to exercise such powers, and that if they did it would result in a 'postcode lottery'. But I'd say that these powers are precisely the ones that should be left to local government. They couldn't do worse than Whitehall. And besides, centralization has itself given us a 'postcode lottery'. If local authorities were free to tailor polices to local needs, there would probably be less divergence in outcomes than under the one-size-fits-all approach.

* Healthcare and social services, education, housing and planning, transport and local environmental issues, among several others.

Sir Malcolm Rifkind spoke at the CPS this week about The Unfinished Business of Devolution. I wasn't there to hear it, but ConservativeHome has a good write-up here.

Rifkind is right that the West Lothian Question – the constitutional anomaly that means Scottish, Welsh and Northern Irish MPs can vote on issues that only affect English voters, while their own constituents are governed by devolved institutions – needs to be addressed. It's a basic issue of fairness. Tuition fees, the ban on fox hunting and foundation hospitals were all forced through Parliament by non-English votes, even though they only applied to England.

Rifkind is also right that his proposed solution, a grand committee of English MPs who would consider, amend and vote on English-only legislation, is better than the fudge Ken Clarke's 'Democracy Taskforce' is considering. But it still doesn't go far enough – it lets an unrepresentative government continue to control the policy agenda.

I think there are two options. The first is to establish an English Parliament, as I recommended in this ASI Briefing. It need not amount to gross over-government or excessive cost as Rifkind fears. The new English Parliament could be made up of all the existing English MPs in the UK Parliament, sitting in the House of Commons for 'English sessions'. This parliament would elect its own First Minister who would appoint a cabinet to exercise the devolved powers (existing government departments would simply be transferred from the UK government to the English one).

The second option is more radical and localist. Rather than have devolved powers exercised by an English Parliament, you could shift authority closer to the voters and put counties in charge (as I suggested here). Parliament would then be free to focus on the real affairs of state like foreign policy, security and defence – which is what it should be doing anyway!

Either way, it's important that the devolved authorities set their own taxes and spend only revenue they themselves raise. That discourages profligacy, rewards efficiency and increases accountability.

As Rifkind says, it's about time we dealt with the unfinished business of devolution.

Remember when Her Majesty's Revenue & Customs lost disks containing information on 20,000 people, including their bank account numbers and health details? Of course you do. Remember all the other dozens of cases where people in authority have 'lost' the data that they collect on us? Probably not.

But fortunately the Open Rights Group have been cataloguing them here.

There is, for example, the 5,123 patients' medical records that were on a laptop stolen from a Black Country hospital. Though that pales into insignificance alongside the NHS warning last month that perhaps 1.7m records have been dumped in skips, lost in the mail, left on stolen computers, pinched from doctors' lockers, or forgotten in the pub.

Also last month, a laptop was stolen from a Royal Navy officer. It contained information on 600,000 people, including their passport numbers, National Insurance and bank details.

Then last November, the Department for Work and Pensions lost yet another computer disk containing personal and fnancial details of 40,000 Housing Benefit claimants.

I don't know about you, but I just don't trust officialdom to protect the information it holds about me and other people like me. If there was one knock-down argument against the national ID database, the Open Rights Group list of failures is it.

Iain Martin points out the latest glories on offer:

Daily, ministers unveil the latest interfering scheme to tackle a problem either real or imagined. All 14-year-olds are to have their exam results and personal records placed on an electronic database which will follow them through life. It will cut down on fraud, say officials, who neglect to ask if employers have been hit by an epidemic of employees pretending to have a B in GCSE Maths when they actually were awarded a C. So what do civil servants really want to do with all this information? In the Whitehall mind, more data means a better decision, so there must be a use to which it can be put. Officials will think of something.

Sir John Cowperthwaite had the right idea:

Cowperthwaite took the lesson to heart, and while he was in charge, he strictly limited bureaucratic interference in the economy. He wouldn't even let bureaucrats keep figures on the rate of economic growth or the size of GDP. The Cubans won't let anyone get those figures, either. But Cowperthwaite forbade it for an opposite reason. He felt that these numbers were nobody's business.

Something of a sadness that those bureaucrats with the right ideas, like Sir John, were only allowed to operate in colonial outposts rather than here at home. 

In the course of this piece bewailing the State of the Nation (yes, we do get the standard "the rot set in with Margaret Thatcher") John Gray makes one point that I fully agree with:

We should junk the idea that state services should always be run as businesses; this has left public services struggling with debt and fixated on targets. It would be better to hive off some functions from the state altogether while accepting that others should be managed on non-market lines. We should be ready to give back autonomy to institutions. Devolving power has become the catchword of the hour for the opposition parties, but it involves more than giving schools and hospitals more discretion to decide their budgets. It means leaving them free to manage themselves whether or not the result is efficient.

Similarly I'm entirely happy with the idea that certain functions should be hived off from the State. The detailed management of the education or health care systems, as an example (and I would argue that that "discretion" urged would best be met by simply slapping a voucher on the back of everyone and letting them go take their pick).   

But really this is simply covering old ground. There are certain things that only the State can do and thus they are the things that it must do. Just about everything else can be left to a free people to work out for themselves. The only argument any of us is really having is which of those two classes does any specific subject or activity fall into? My answer might be more minimalist than yours but it's informed by more than either ideology or simple cynicism.

Give the pig's ear being made of the criminal justice system, one of those things that the State must do because only it can, why would we want them to do anything else which we might usefully do for ourselves? 

Centralisation kills is the message of a new paper (should be here by the time you read this) from the Centre for Economic Performance. Centralisation, in this sense, meaning the setting of standard national pay rates.

What the authors did was look at the quality and productivity of nursing across the country, this being measured by the percentage of those admitted to hospital after a heart attack (AMI) who died in the subsequent 30 days. As we're all told so often of the connection between (relative) poverty and bad health we would expect the rates to be higher in poor areas. Quite the contrary: the richer the area surrounding the hospital the worse the survival rate. The reason for this is that nurses' wages are set centrally, to be the same (with very little geographic variation) right across the country. However, wages in general are not the same across the country: 

Pay for nurses and physicians in NHS hospitals, which provide almost all hospital care in the UK, is set by a central review body that sets pay scales in which there is limited regional variation. The variation that exists does not fully reflect the wages differentials in the external labor markets in which the staff are employed. Regional pay differences are considerable in the UK. For example, female white-collar wages in North East England are about 60 percent lower than in Inner London and these persist after controlling for human capital characteristics and other factors.

It isn't that wages are too high in low wage areas, but that they are too low for nurses in high wage areas. This leads to both a shortage of people willing to do the job itself and hospitals relying upon agency staff who are not constrained by the national pay scale: but agency staff are, by the very nature of their shift by shift employment, unlikely to know the systems and hospitals as well as permanent. The end effect is: 

A 10 percent increase in the outside wage isassociated with a 4 percent to 8 percent increase in AMI death rates.

That is, where hospitals cannot pay the going rate for trained staff because of the national pay setting, people die. All in the name of equality no doubt, for a job's worth the same amount of pay where ever it is to some people. The only solution to this is to abolish such national pay rates and allow local employers to pay what they need to attract the staff they desire.

All of which rather puts into perspective the current wrangles over national bargaining for police pay, other public sector workers, even the negotiations with civil servants and doctors. We shouldn't be having such national problems because we shouldn't be having such national negotiations in the first place. For centralisation of pay bargaining kills people.

My true love sent to me: eleven pipers piping. It might refer to the eleven loyal apostles. But who - in the title of Brian Montieth's excellent little book on Scotland's finances - will actually pay the piper?

The bill is rising. Over the last nine years, the Scottish Executive's kitty has roughly doubled, from £16bn to over £30bn. A lot of the money, of course, comes from the Barnett Formula, which provides for public spending being about a sixth higher in Scotland. It was devised in the 1970s to help solve some Cabinet disputes, but as Milton Friedman said, there's nothing more permanent than a temporary government programme.

The Scots enjoy better-funded public services as a result, including free university education, and free care homes for the elderly. And of course they pay their police better than do the English. It's amazing how much you can achieve - on someone else's money. But how much more we would all achieve, if we were allowed to keep more of our own, and spend it efficiently on what we actually wanted, rather than inefficiently on what politicians thought we ought to have.

My true love sent to me: ten lords a-leaping. This probably refers to the Ten Commandments, but lords today aren't exactly leaping to do anything, particularly to reform the House of Lords.

The subject has been talked about for decades. Everyone has agreed that reform is needed, but nobody has ever been able to decide exactly what. The trouble is that the House of Lords has actually worked quite well. It has checked the House of Commons, but not been able to override it. The hereditary peers might have been overwhelmingly old, white, posh, bumbling prats, but in fact the system brought in lots of people you never see among the serried ranks of lawyers and political careerists in the Commons - more young people, more women (until recently), more people of all classes (Lord Nelson was a policeman, I recall), more communists, more libertarians...

Tony Blair took a major step in abolishing the heredities - or most of them: these peers are pretty nifty politicians, having had the gene in their families since Tudor times. But that leaves us with a House of Lords that is appointed. This can be good - non-politicians like the medical pioneer Lord Winston bring enormous depth to the House's discussions. And even ex-politicians can bring a lot of experience. But a House full of the Prime Minister's chums is not a delectable prospect.

Nor is an elected House - it will just fill up with the same political lawyers we have in the Commons. If we're going for elections, it needs to be a completely different system, with different constituencies, and radically different rules. Personally, I'd prefer the first 500 people out of the phone book. Or almost anyone, provided they didn't want to do the job.

The Public Administration Committee yesterday called for changes in the law governing peerages. In the wake of the cash-for-honours scandal, they want more transparency and more powers for the electoral commission.

The report is bound to prompt renewed calls for a through-going reform of the Upper House. The current consensus is for eighty percent of peers to be directly elected by proportional representation on a regional party list system, with elections held alongside European Parliament ones.

This consensus strikes me as being one of those that seems like a good idea, but falls apart under closer examination. Firstly, the role of the Lords is to review legislation and protect the constitution and liberties from majoritarian tyranny. It is not obvious that elected peers would be better at this than appointed ones. Indeed, they would probably be worse: less independent and less willing to deviate from their party line.

Secondly, electing peers by party list would do little to reduce the role of patronage. Political parties could easily sell places at the top of their lists, as they have sold honours in the past. More generally though, the quality of people on party lists would probably be lower than that of current appointees. One of the best things about the current Lords is the availability of a wide variety of specialists, who would not otherwise be involved in the legislative process.

A better reform would be to genuinely put appointment in the hands of the Monarch, who would act on the advice of a statutory, independent Appointments Commission, without the involvement of the political parties. At least a quarter of peerages should be reserved for independents, and remaining appointments would be made in proportion to the parties' share of the popular vote in the most recent general election.

A more radical option, which tends to be favoured by libertarians, is to appoint the upper house by lottery – like a legislative jury service – for short terms, perhaps even for single sessions of parliament. It's certainly an interesting idea, but there are plenty of problems with it, and I doubt it's a realistic option.

Another week, and another scandal hits the government. I am almost beginning to feel sorry for them... Almost, but not quite!

The latest trouble comes in the form of the lost details of three million learner drivers by a DVLA sub-contractor in Iowa, USA. The details include names, addresses and phone numbers and the US police say the missing hard drive is unlikely to be recovered.

It just serves to underline why we really shouldn't let the government centralize all of our personal data on one big national ID-card database. How long before a disk or hard drive goes missing, or the system gets hacked? How much proof do we need that the government cannot be trusted?

Of course, it hasn't taken the unions long to seize on the fact that it is a private company that has lost the data this time. Apparently such a dreadful lapse would never happen if the public sector was allowed to do the job.

But hang on, who was it that lost the bank details of 25 million people last month? Oh yes, HM Revenue & Customs.

Funny how short the left's memory is...

In advance of his trip to Edinburgh yesterday to speak to Scottish Conservatives and businesspeople, David Cameron gave an interview to The Telegraph in which he set out his position on the Union, devolution, and the West Lothian question. The following statement sums it up fairly well:

[A]n imperfect Union is better than anything that threatens it. The Union always comes first.

Personally, I am not so sure. If Scotland actually wants to be independent, then why not let them? With the English subsidy tap turned off, the Scottish government would be forced to abandon their socialist tendencies and follow Ireland's low tax route to success (something Alex Salmond, the SNP first minister, has said he wants to do). A recent ASI briefing paper by international economist Gabriel Stein argued that ten years after adopting Irish tax levels, the average Scot would be £6,000 a year better off than his counterparts in the rest of the UK, whereas today the average Scot is £1,700 behind.

That assumes no changes in what remains of the UK. It's a fair bet, however, that with tax competition from north of the border, the Westminster government would start cutting taxes too, boosting economic growth and improving the living standards of their citizens as well. In tax and government, as in all other things, competition is a very good thing.

Of course, we don't actually need Scotland to be independent for any of this too happen. Scotland could become fiscally autonomous within the union (an idea that's becoming increasingly popular), setting their own tax rates and raising the money they spend. Indeed, if we devolved the power to set and collect income tax, corporation tax, VAT, local taxes and other charges and duties, they could easily cover their devolved expenditure right away.

My main worry with Cameron's position is that it may rule out such a course of action on the grounds that it 'threatens the union' – regardless of the benefits it could bring.

While cities such as Glasgow have high levels of incapacity benefit, the overall welfare bill at £3086 per head is actually lower in Scotland than in swaths of northern England.