The cost of bureaucracy

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I always knew that this was true, true at least to my own prejudices, but someone's now gone and actually proven it. We're often told that bureaucracy in hte spending of public money is neccessary, and essential manner of protecting the taxpayers' funds. But it can be that the  cost of the bureaucracy doing the protecting is higher than the value of the protection:

...we show that the $40,000 (Canadian) cost of preparation for a grant application and rejection by peer review in 2007 exceeded that of giving every qualified investigator a direct baseline discovery grant of $30,000 (average grant).

The bureaucracy used to filter the funds to those researchers deemed worth exceeds the costs of simply giving the money to all researchers that apply.

Which leads to an interesting game that can be played. What we see here is that the cost of administration is higher than the produce of that administration. We're not saying that "frontline services" need to be cut, not at all. We're purely stating that at times and in places the cost of selecting who gets the public money and how is so high that we can simply dole it out without doing any such selecting. We'll get, in fact, more front line servies (in this case research) for the same money. The only people who would lose are the administrators themselvesand we'll all weep a bitter tear for them now, won't we?

The game is of course to see which other similar bureaucracies we think we could abolish and get this benefit from. More services for the same money?

As a start I would propose the Regional Assemblies.  Large numbers of the quangos (The Dairy marketing bods for example, the Arts Council maybe?). Much of the NHS oversight panels and management boards. The BERR.

Well, make your own lists, this really could be a game for all the family. Which parts of the bureaucracy would make us better off by their abolishment?

Politics: cut it out

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In an article for the Independent Vince Cable calls on David Cameron to admit what public services he will cut. Mr Cable writes:

This is a time for grown-up debate. The deficit is too big and the public is too cynical of politicians to be taken in by vague, unspecific, promises. The only way forward is to identify, explicitly, areas of government activity which will have to be cut right back. My party has already identified several specific cuts – like the ID card scheme; the NHS IT project; "baby bonds"; refusing unlimited taxpayer subsidies for nuclear power. We believe that there now has to be a serious debate about how to scale back the reach of tax credits; ballooning public sector pension commitments, especially to "fat cats" (like MPs); gross military overstretch; the promise of access to universities for half of all young people; and much else.

In order to have Mr Cable’s grownup debate, first the people of this country need to be treated like adults. As Tom Cloughrety convincingly argued on this blog last month, the country could be run effectively for £70 billion per year.

In truth Mr Cable is part of this political machine that needs dismantling. His positioning against the Conservatives is just not convincing. Does he want the Conservatives to cut public services or does he want them to say that they will cut public services?

The political parties talk to the people like poisonous divorced parents manipulating, bribing and failing the child at every turn. We of course need a different type of politics, but much better would be just less of it.

On this day: 1993

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On this day in 1993 the Conservative government officially declared that the recession was over.

Blog Review 942

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We have evidence of Laffer Effects stemming from tax rates here. Rates over 40% seem to lead to slowing growth in tax revenues.

On the strange case of Braxton Bragg and the perils of corporatism.

It's finally happened, we can now openly and legally call MPs thieves.

It is apparently government policy that only one shag per week should be subsidised. Including, bizzarely, if you are colour blind.

There is no suich thing as "fair pay".

Why you might be happier living in Al Capone's prison cell than your modern home.

And finally, interesting graphics.

The way we're ruled today

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I realise that not everyone shares my distaste of the European Union  nor my deep and abiding suspicion of all who sail in that ship of state.  However, a little story about why all should be worried.

One of the problems we have with the State itself, the very conception of it, is that  if it is possible for it to dole out benefits to favoured groups then those who would benefit pay attention and lobby to become favoured groups. Such benefits will be concentrated and the losses will be, to each person outside the favoured group, small. Thus there will be little pressure for the favours not to be granted.

This becomes even worse when the losses will be, in Bastiat's phrase, those things which are not seen. People are pretty good at spotting the loss of something they once had and terrible at spotting what they never got.

Having two layers of the State just makes such problems worse of course. The European Parliament has just voted to extend copyrights on sound recordings:

Performers and record producers could enjoy increased royalties after European lawmakers yesterday voted in favour of an extension of copyright protection from 50 to 70 years.

Leave aside the rights and wrongs of copyright itself, that's a story for another day. Leave aside the rights and wrongs of this extension as well. And consider solely that this very proposal was considered, carefully, in this country as recently as 2006. In the Gowers Report. And soundly rejected as an unwarranted enrichment of some to the impoverishment of others. This was a benefit that should not be doled out to such a favoured group. Copyright is a mechanism to increase the amount of innovation and given that no musician ever has declined to record a piece of music because they won't be getting royalties 50 years later the extension would not increase innovation. But it would limit what later artists could do with earlier recordings, thus in fact reducing innovation.

But now that we have this double layer of law making, this pair of chances for lobbyists to gain access to the purses of the citizenry, we are simply and obviously going to see more such successful attempts.

As I say, I know that not everyone shares my dislike of the EU either as it stands or even in principle. But doesn't the fact that the favoured ones now have a twice over chance to dip your pockets engender at least some unease?

Lying liars and the lies they tell

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The past can tell us so much about what may occur in the future. For example we know that we should be wary of a German neighbour who complains that the east wing of his house is too small. Sure enough you’ll probably wake up one morning to find him breakfasting with a bear in your kitchen. The Labour government of 1974-79 proved that they couldn’t handle the economy, creating the ‘Winter of Discontent’ and culminating with the election of Margaret Thatcher. Yet the electorate of Britain were beseeched in 1997 by a young Tony Blair selling a message that things needed to change. ‘New’ Labour had shaken off the shackles of the past and the economy would be ‘safe’ in their hands.

13.5m people voted in 1997 for New Labour. Swept up in the idea that there was a change coming. For second 10m voted and for the third term they were down to 9.5m voters. The change that had occurred over this period seemed, and was widely reported, to be beneficial to the UK. It now turns out that it was a sham, a mirage founded upon debt and stealth taxes. It is such a shame that the voters of these three elections didn’t take time out to study the past.

We are all now subjected to massive amounts of debt. Rather than a swift readjustment to the economy (had banks been allowed to fail) we are all now burdened with paying this off, in a country that has an economic framework that discourages growth. The 9.5m New Labout voters of 2005 are responsible for this economic disaster. They are the ones that handed the keys of Britain’s economy to Gordon Brown. They should be the ones to pay for the costs.

Labour politicians do not, nor will they ever, accept the simple dynamics of co-operation and the resultant ideology of capitalism. So don’t believe them when they come knocking again in around 14 years telling you they’ve changed! They won’t have.

EU political profiler

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Try this EU political profiler. A word of warning: if you are a libertarian there is a high chance they will put you down as a member of the BNP.

Should I stay or should I go?

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Where you could migrate to in order to escape this government's tax regime.

Blog Review 941

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Something to celebrate: only 415 days to go!

And why not celebrate by sending unused shirts to.....

And for the future, could we all try to remember this simple political maxim?

So, did Bastiat actually say this or not? And if he did, where?

What to celebrate for Earth Day? How about capitalism?

This really isn't how to attract hard working foreigners to our shores.

And finally, why you shouldn't trust online polls.

Taxation and the budget

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Taxation is bad; the new budget reminds us of that important truth. Taxation takes their property from people and uses it for purposes other than those they might have chosen themselves. That this is done with state power makes it legal, but does not justify it morally. When two wolves outvote a sheep over the dinner menu, it may be democratic, but that does not make it right.

Taxation involves confiscation and coercion. We should not hide that unpleasant truth. Most of us tolerate taxation in return for the essential services it funds. In an ideal world our defence and judiciary might be funded by voluntary contributions, but in this real world essential services rely on tax revenues.

Taxation should inflict minimal damage on the economy. It should cost a fraction to collect of what it yields. It should come from income streams, taking a little for the public purse when money changes hands in earnings or sales. Taxes on capital are invidious because there is no income stream from which to take them, and they are also stupid because the capital would otherwise generate future income streams of profits, wages and sales.

Taxation should be transparent and predictable, and should fall on people who can pay it. The Adam Smith Institute has long campaigned to have low earners lifted out of income tax altogether, since they have insufficient money to pay it. The fact that they receive tax credits underlies this absurdity.

The new budget raises the top tax rate to 50 percent on high earners. It also increases taxes on their pension contributions, and removes their personal allowance threshold, imposing an effective tax rate of well over 60 percent. The Treasury blithely puts down over £7bn of anticipated revenue from this, but it will not yield that because most high earners will not pay it. At those levels it is worth employing accountants to shelter income. The Treasury will close some loopholes and the accountants will open more.

Some high achievers will go abroad, preferring the more benign tax climate of Switzerland to one which forcibly takes from them nearly two-thirds of what their talents and energies earn them. With them will go the jobs they create and sustain.

If the money taken by government actually provided good things, taxation might be easier to accept, but much of it is wasted, spent in useless ways on worthless projects. The new budget is very bad. It appeals to low sentiments of envy, and seeks its justification in an egalitarian ideology that has no place in the real world. The only comfort in it is that this is the last gasp of a dying government.