The Not So Green Belt
There are few policies in the UK which bring about as much controversy as the Green Belt. These vast areas surround many major UK cities, and are hailed by their supporters as bastions of environmentalism. Yet to many the benefits of the Green Belt are questionable, and the externalities of reduced housing and increased congestion raise doubts on the efficacy of the policy.
In the case of the Green Belt, the opportunity cost of a supposedly environmentally sound policy is vast swathes of land which could be used to solve Britain’s housing crisis. In fact research from the ASI estimates that for London ‘one million homes could be built on just 3.7% of Green Belt land,’ meaning that if the Green Belt has (if any) positive environmental impact, it must outweigh the distortion that it creates on the UK housing market to be even remotely justifiable.
Yet whilst some areas of natural beauty may exist, 37% of land around London is used for high intensity farming, carrying with it detrimental environmental impact, not to mention the vast swathes of land dedicated to private golf courses. This is far from the enchanted forest depicted by many Green Belt supporters.
Further, with employment becoming increasingly centred around London, more and more people are forced to commute further out from London because of the Green Belt. This consumes immense quantities of oil, and creates clouds of emissions, further diminishing the limited environmental benefits of the Belt.
If the environmental benefit is doubtful, why does the Greenbelt continue to persist?
For a politician campaigning on credentials of environmental activism, showing support for a physical green space is far more likely to persuade the average voter than any talk of arcane emission standards or other more effective policies. The narrative of ‘green good, building bad’ put forward by activist groups clouds the debate into one of emotion, rather than of facts. This isn’t even mentioning the upward pressure on constituents’ houses prices creating an incentive for politicians to appeal to local supporters, rather than the national, or even global interest.
Thus we must seek to change the narrative to one which favours logic and tangible improvement to society, rather than one that rubs politicians ego’s and improves electoral chances in order to save both our housing market and environment together.
Tim Edwards is the winner of the 18-21 category in our Young Writer on Liberty 2020 competition.
Therapies to cure Post-Pandemic Depression
The Chancellor is surely looking for antidepressants. Austerity and higher taxation, as German Chancellor Bruning demonstrated in 1930, are fatal prescriptions. Conversely, and this still surprises left-wing politicians, nobody gets rich just by spending money: one must distinguish “good” public investments, like autobahns, which work, from the “bad” like the UK’s £13bn. expenditure on wood fired power stations, which emit more CO2 than coal-fired. Hitler took the credit for autobahns, which undoubtedly helped lift Germany out of depression, even though they began in the decade before he came to power: “By December 1941, when wartime needs brought construction to a halt, Germany had completed 2,400 miles (3,860 km), with another 1,550 miles (2,500 km) under construction.”
The concept of return on investment does not work for public expenditure, such as infrastructure; so how does one distinguish good from bad? Three tests should be applied: is it capital expenditure on long term assets, is it essential, and is it good value for money, a test HS2 conspicuously fails? A depression is a relatively good time to carry out essential capital expenditure. Interest rates are low, labour is plentiful and will cost a lot more when the economy revives.
Large companies can, and should, take care of themselves but there are four other antidepressants in his medicine bag:
Tax reduction and incentives
Reducing regulation
Responsible banking
Private sector financing
Thus the Taxpayers’ Alliance proposed five tax cuts: employer and employee national insurance, abolishing capital gains tax and significantly raising both investment allowances for corporation tax and the bar on property stamp duty. This Institute has made similar proposals, specifically business rates and the ‘Factory Tax’. Everyone will propose their favourite tax cuts but those selected should be few, targeted and show clear antidepressant effects, for example a general rule that no business in its first five years should pay taxes, e.g. business rates, until it generates at least twice as much profit as the levied tax. Furthermore, following Brexit, no business should pay taxes on its first five years of export profits. It seems unlikely that generalised tax cuts or incentives would boost trade and industry or be affordable by the Exchequer.
Relative to some countries, e.g. France and Italy, the UK has a competitive advantage in setting up business, hiring and reducing staff. But improvements can be made, e.g. Philip Ross’s June 16th letter: “reintroduce fees for tribunals so we’re not faced with unfair dismissal claims by ambulance chasers and chancers [..and..] entrepreneurs’ relief at 10 per cent”. Formal de-regulation is a legal mares’ nest which is why it so rarely happens; in any case, we promised Brussels we would not do so. Simpler is to advise the enforcers to do as many already do, namely help rather than harass. Fill in the forms themselves or turn a blind eye to any minor transgressions that do not endanger health or safety.
The Bank of England (BoE), rather like the MoD, tries very hard to fight the last war and does that very well. Inflation, however, is unlikely to be an issue for some years to come and interest rates can be expected to hover around zero. As the first word in the name implies its Prudential Regulation Authority (PRA) is more concerned with minimising the bank’s risk and zipping up banks’ pockets rather than with encouraging trade and industry to go out and prosper. The last war was indeed about keeping banks solvent but this one is about getting the economy back on its feet.
The Chancellor’s spritely 17th March announcement of government backed Covid loans was assisted by the BoE lowering interest rates and capital requirements as well as putting a brake on dividends and cash bonuses for senior bank executives. Yet customers were met with bureaucracy and box-ticking with only 20% initially getting the loans they needed. The Chancellor came to the rescue with 100% guarantees but the point here is that the non-empathetic attitude of the banks was counter-productive. Unless the BoE, in its fatherly way, inspires banks to re-discover their traditional role as long-term supporters of small businesses, they will, as they did last time, demand their umbrellas back when it rains, as it surely will.
The last item in the Chancellor’s medicine bag is the most important: only the private sector itself, not government quangos, can cure depression. Venture capitalists and business angels back their judgment with their own money, their long-term involvement and their experience. Given the importance of start-ups and SMEs, business angels matter more initially; venture capitalists come into their own as businesses grow. Government to date has ignored all that and set up myriad quango schemes which early stage entrepreneurs are supposed to find their way around. After going through all the hoops, they usually find self-important committees dashing their hopes. Even if the entrepreneurs had time to explore the maze, these quangos show no evidence of producing the right answers.
Earlier blogs proposed recycling government funding from the national (UK Research and Innovation, UKRI) and London quangos as well as local quangos (Local Enterprise Partnerships and Growth Hubs) to topping up business angel investments. The simplicity of one nationwide scheme that would not require the entrepreneur to divert attention from building his or her business would be a major bonus in itself. The degree of top up could vary by region, e.g. more for the north, by sector or domestic vs. export, according to government priorities without the need for many different schemes. And evidence for its potential is provided by the long-running BBC Dragons’ Den series.
Another issue arising from the earlier analysis is the confusion in the current quango-led system between encouraging new private enterprise and public investment, e.g. in universities and infrastructure. UKRI funds both new private enterprise and academic research: in its self-evaluation an extra arts PhD rates alongside a commercial technology start-up. LEPs fund transport infrastructure and new businesses out of the same pocket. They should be treated quite separately with new private enterprise funded locally and academic funding left to universities. In short, we do not need UKRI, and its sub-quangos, at all. Similarly LEPs mostly fund public infrastructure projects but also small private sector initiatives. The former should be returned to local government and the latter taken over by whatever scheme replaces quangos playing Santa Claus.
The big difference between quangos delivering private sector support and the private sector itself doing so, is that venture capitalists and business angels are not just pontificating, they are betting with their own money. That is why HM Treasury should trust them more than quangos. Maybe there are private sector-led solutions other than the business angel top-up scheme. Now would be a good time to tell the Chancellor about it. And, of course, anything radically new should be piloted before being rolled out nationwide.
Depression is hard to cure. It will need a combination of therapies: essential value for money public investment in the true sense of the word, targeted tax incentives, relaxed regulation, banks with their customers well-being as their priority and incentivising the private sector. It is no coincidence that stimulating one’s own creativity is an important depression therapy.
The unseen cost of furlough and corporate welfare
Rishi Sunak was right to quickly put in place the furlough scheme we currently have. To not have done so would have been to risk many well functioning companies collapsing as a result of the restrictions the government had put in place. Doing so helped avoid an unemployment crisis that would have swamped the Universal Credit systems, and most importantly, risked the livelihoods and security of millions of families across the UK.
However, as lockdown restrictions are lifted, we cannot allow the furlough scheme and other means of corporate welfare to become the enemy of the ‘new normal’ that we all seem to be always talking about.
The scheme was very successful at freezing the economy, as was its intention. But as the thawing begins we should not expect the economy to be the same as it was before lockdown, nor should we want it to be.
Even without some of the restrictions that will remain for the foreseeable future, such as social distancing, consumer habits will have drastically changed. A poll last month suggested 27% of people are less likely to travel by plane. 20% per cent are less likely to go to the cinema. 26% are less likely to dine out. And despite a notable minority in the last few days, 34% said they are less likely to attend large public events.
While these are only stated preferences in a survey, both the continued threat the virus poses as well as the effect of experiencing a new way of life for some months will undoubtedly change what people decide to spend their money on and how those goods and services will be delivered to them.
It’s economically imperative that economics follows people rather than attempting to tell them what their preferences really are. With scarce resources it’s best for us all in the long run for markets to adapt to changing market conditions. Where it’s not government restrictions harming revenue raising, then it shouldn’t be taxpayers that are propping up bets on ongoing concerns for companies, but private financiers.
Many existing and new firms will benefit and grow as they enjoy new business, while others will shrink and go bust. This is not necessarily a bad thing. It is a process we normally see as some 1,400 firms go under each year as creative destruction replaces old inefficient firms with new innovative ones. Production shifts away from flying people around the world and towards e-commerce, telecommunications and other lockdown growth industries, making it both cheaper and more easily accessible for consumers.
The best way of achieving a recovery from this crisis, as well as dealing with the tab we’ve run up is of course growth. Innovative firms are at the forefront of helping us try and achieve the quick bounce back we are aiming for. Unusual businesses such as Artfinder, an online marketplace for new artwork, have reported a 110 percent increase in new customers as physical galleries have experienced restrictions.
Keeping key talent locked into the furlough scheme for jobs that may not exist in October is not just a huge cost to the taxpayer but also a huge opportunity cost for the value they could be creating in these new roles.
This unseen cost of holding onto the corporate welfare schemes for too long should not be overlooked.
While livelihoods should be secure and the welfare safety net should ensure none slip through, we should nonetheless start helping our economy adapt rather than continue enforced stagnation. Certainly by building on schemes such as The Skills Toolkit, along with greater business cooperation to assess the skills demanded will be a good preliminary in easing the transition. Transitioning towards an Australian “jobkeeper” allowance would, along with the current plans for part time furlough, help ease many furloughed staff back to work while also possibly giving an early indication if the job still exists and avoid a large unemployment shock when the scheme ends in October.
Of course, helping these innovative firms source talent is only part of the picture. Measures such as abolishing the factory tax will make it cheaper for firms to expand their physical capital, while also helping to overcome longtime lagging productivity growth which has held back income growth for years. Such measures will also help ensure that these businesses will be profitable and able to employ many of those who will unfortunately be made redundant in the coming months.
Clearly the challenge is assessing when furlough and other corporate welfare should be removed. It wouldn’t be sensible to remove support when lockdown measures are preventing some businesses from operating, especially when they can quickly revive once restrictions are lifted. But we must also be prepared, especially if some restrictions will still be enforced for the foreseeable future, to accept some failures rather than bear both the fiscal and economic cost of keeping our economy in stagnant stasis, while only kicking the problem down the road.
It will be by helping talent move from idleness, waiting for jobs that may have already died, to new innovative ones that create value that we will help ensure growth and secure livelihoods in reconstruction.
We say no to a future jobs fund, so should all
Yvette Cooper is succumbing to the planning delusion once again. The argument is that automation will put lots of people out of work. This has the merit of being true so far. Therefore there should be some system of support for those put out of work. This is also true so far. But then the leap into the planning delusion:
This time, in the face of a bigger crisis, ministers must go further. We need a new future jobs fund on a much bigger scale as part of wider government support for the economy. The final report of the Commission on Workers and Technology will call for a jobs guarantee scheme to prevent the scarring effects of long-term unemployment for young and older workers – focusing on areas of need such as green technologies.
The entire point about technological change is that we don’t know. The universe of things it is possible to do is c hanging, expanding - that’s what technological change means. We don’t actually know what it is that can be done until we have rung the changes through trying out these new technologies. Further, until those things that can be done have met the consumer we don’t know what it is that we, the people, would like to have done.
We have only one manner of efficiently sorting through these possibilities and desires. Markets. Markets with free entry - anyone can try any combination of whatever - and markets where those who produce something of value get rich - the incentive to do so. That is, our only useful response to technological change is capitalist free marketry.
Sure, there should be a system of making sure those waiting to find out where they will be gainfully employed don’t starve and all that. We have a welfare state and even if we’re less than convinced about the current structure of it the base idea is fine.
But Cooper - and all those supporting this idea - is making that leap to the state being able to identify what of these new possibilities will work. For only then does it make sense that the state determine who is trained for what and how. But no one knows what will succeed.
No, really, no one does. We’ve no idea, even collectively, even among those wise folk in Whitehall. To take just one obvious example, autonomous cars, if they ever properly work, will kill the rail and bus industries. Will they work? Who knows? Or, sticking with the same rail industry, the change in working habits as more have done so from home, will that continue? Are we about to see a 10, 20, 40% fall in daily commutes? No one has any clue - therefore this is something that cannot be planned for.
It is precisely the uncertainty of the future that kills the ability to plan. The greater the uncertainty therefore not the more government must direct labour, as Copper is arguing, but the less it is able to do so.
Exactly the fact that we’ve not the slightest scooby is the reason that planning won’t work.
Trade talks beginning between Australia and the UK are welcome news
Today marks the beginning of something truly exciting: trade talks with Australia.
Our two peoples might be over 11,000 miles apart but in personal terms we couldn’t be closer. We share the Queen as our Head of State, we share a common language, our legal systems are common law based, we share attitudes to life, we have been the victims of each other’s sporting triumphs, our troops have fought and died together in the defence of the world’s freedoms in the face of the most awful tyrannies.
We share a healthy scepticism of pious political promises. A healthy commitment to the maintenance of habeas corpus. And we share a healthy love of accosting our leaders in the street when they’re getting too big for their boots, or telling them off when they step onto our lawns.
Trade is about goods and services, but mostly importantly it’s about people. More than 1.2 million Brits live in Australia, and more than a hundred thousand Aussies call these fair islands home. As our very own Matthew Lesh shows, they integrate and have an impact immediately.
We’ve made it difficult in recent years to live in each other’s countries and it’s had an impact. Surcharges and visa fees, quotas and a lack of recognition of qualifications mean it’s more expensive, more time-consuming and less inviting for Australians thinking of making a move. In the meantime, the USA has made it cheaper and easier for Aussies to study and work in the States with an E3 visa specifically designed for them. It’s worked, more Australians live in New York now than London.
This trade deal is a chance to rectify this. Make it easier for our peoples to start businesses, use bank accounts, and for insurers and marketers and lawyers to work across borders. Make it easier to come and study or do a secondment, or even to start a family. Make it cheaper for doctors and nurses in our health services to come and tend for each other. Make Britain the greatest place for an Aussie to live outside of Oz itself.
Trade is also, or at least should be, about trust. Australia is a modern and developed country that wants for its citizens the same things we want for our people: a safe society built on open and transparent processes, where you trust what you’re buying and have recourse if something goes wrong. We should recognise their regulators are trying to do the same job as ours. If it’s good enough for Australians (whether that’s food, or medicines, or banking, or technology) then it’s good enough for Brits.
When the UK voted to leave the EU, it was Australia that jumped at the chance to offer up a trade deal first and has been most vocal in supporting the free choice of our free people to make their own destiny. That loyalty is being rewarded finally with concurrent negotiations for the UK with the EU, USA and Australia. Our physically closest allies in Europe are no longer put ahead of our personally closest allies further afield.
Today marks the beginning of Britain’s global future. A reminder that a world outside Europe awaits and welcomes us with open arms. They’ve been waiting for a long time. They’ve held the faith. For four long years so have we. It’s finally here. That’s something to cheer.
The unwelcome return to the use of petitio principii in public policy
Given that one of us wrote a standard work on the use and abuse of logical fallacies it’s worth our pointing at the return of one such to the public realm. As that source says about petitio principii:
The fallacy of petitio principii, otherwise known as “begging the question”, occurs whenever use is made in the argument of something which the conclusion seeks to establish…(,,,),,,It might seem to the novice that the petitio is not a fallacy to take for a long walk; it seems to fragile to take for any distance. Yet a short look at the world of political discourse reveals petitios in profusion,…
Indeed so and here’s a glory of an example:
The Institute of Race Relations thinktank said it would be hard to have confidence in the commission’s outcomes.
“Any enquiry into inequality has to acknowledge structural and systemic factors. Munira Mirza’s previous comments describe a ‘grievance culture’ within the anti-racist field and she has previously argued that institutional racism is ‘a perception more than a reality’,” a spokesperson said. “It is difficult to have any confidence in policy recommendations from someone who denies the existence of the very structures that produce the social inequalities experienced by black communities.”
The Labour MP Diane Abbott, a former shadow home secretary, said: “A new race equalities commission led by Munira Mirza is dead on arrival. She has never believed in institutional racism.”
The question we’d like an answer to is how much is racial inequality to do with institutional and or structural racism and how much to do with demographics (the BAME population is rather younger than the non-BAME), status as recent immigrants, the terrors of inner city educational systems, any cultural factors anyone wants to throw in the pot and so on? We’d like to know what is going on and why.
The insistence here is that anyone who does not already leap to the conclusion that it’s entirely structural and institutional racism may not be allowed to even run the investigation. That is, no one not committing the logical error of petitio principii is allowed to ask the question - only those who beg it can be included.
Demanding that an inquiry into what we agree is an important question start with a logical fallacy doesn’t seem like quite the way to run a country to us. Perhaps it’s us that’s out of kilter though, presumably because we have actually read - and one of us written - that book on logical fallacies and are therefore informed upon the matter.
Happy Birthday Adam Smith (maybe)!
Possibly. We know when his birth was registered, and normally that would be a couple of days after the event itself. The registration was in early June 1723, but since the calendar changed in 1750, you have to add a few days, so 16 June seems close enough.
His childhood in Kirkcaldy, a small working port on Scotland’s east coast, was largely uneventful, except for briefly being kidnapped by vagrants. But the local school did give him a good education—a school system which he later praised. It was good enough for him to win a scholarship to Balliol College, Oxford—which he later definitely did not praise. Indeed, he found that the professors there had “given up even the pretence of teaching” because they got paid whether they taught or not.
On his return—the journey took a month each way, on horseback—a family friend arranged for him to do some public lectures in Edinburgh, after which Smith secured a teaching position at the University of Glasgow. There, he wrote a book on ethics, The Theory of Moral Sentiments (1759), which brought him instant fame. Enlightenment thinkers sought a firmer foundation for ethics than the dogma of clerics and commands of kings. Some sought ‘rational’ alternatives. Smith, however, identified morality as a feature of human social psychology. We have a natural sympathy for others. Their pleasure or pain affects us; and we like to please them:
How selfish soever man may be supposed, there are evidently some principles in his nature, which interest him in the fortune of others, and render their happiness necessary to him, though he derives nothing from it except the pleasure of seeing it.
That natural sympathy binds and benefits the whole human species.
On the strength of Theory of Moral Sentiments, the Duke of Buccleuch’s stepfather hired Smith, on a £300 pension for life, to tutor Duke, aged only 12. Taking him on the Grand Tour of Europe, Smith picked up endless facts about different systems of commerce and regulation. He started writing The Wealth of Nations, weaving current and original ideas into a new, systematic, modern approach to economics.
The Wealth of Nations was both an economic treatise and a polemic. It debunked mercantilism, the prevailing system by which countries tried to boost their cash resources by selling as much as possible to others, but buying as little as possible from them. So, they subsidised exports and raised resisted imports.
But both sides benefit from trade, said Smith, not just sellers. The sellers get cash, but the buyers get goods that they value more than the price. What makes a country rich is not the gold in its vaults, but its vibrant trade and commerce. Wealth came from liberating commerce, not restricting it.
The division of labour made free commerce even more productive. Specialist producers can be thousands of times more productive than amateurs. They can produce more than they need, selling their surpluses to buy capital equipment that makes them more productive still. They do this for their own ends, but their actions benefit everyone:
Every individual... neither intends to promote the public interest, nor knows how much he is promoting it... he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention.
This commerce automatically steers resources to where they are needed. Where things are scarce, consumers will pay more, so suppliers produce more. When there is a glut, prices fall and producers switch their effort into more profitable lines. So, without any regulation and planning:
[T]he obvious and simple system of natural liberty establishes itself of its own accord. Every man...is left perfectly free to pursue his own interest in his own way.... The sovereign is completely discharged from a duty [for which] no human wisdom or knowledge could ever be sufficient; the duty of superintending the industry of private people, and of directing it towards the employments most suitable to the interest of the society.
This liberal system benefits the poor most. Smith hated merchants using their political influence to win monopolies, tax preferences, controls and other privileges that distort markets in their favour—today’s crony capitalism. Instead, government must be limited to its core functions of providing the defence, justice and infrastructure that enables commerce to succeed. Leave people free, and the results will amaze you.
Which seems a good message for today. Happy birthday, Adam Smith!
Well, if you don't understand how markets work......
….then you’re not going to be all that good at designing structures to correct what you see as the failures of current markets. This being something the Social Market Foundation is guilty of in its latest report.
Their analysis is that there’s that plethora of lovely infrastructure projects that can usefully be done. They might even be correct there although we’ve our doubts. They then say that pensions money should be mobilised to fund those projects. Long term savings funding long term projects doesn’t seem to be a problem.
But, they muse, large projects are large, so pensions funds should be large so that they can fund large projects:
Urgent pension reforms should be undertaken to give Britain fewer and larger pension funds
with the scale required to make major infrastructure investments. Learning from Australia and
Canada, the UK should pursue a strategy of creating large “superfunds” able to invest in large
illiquid assets. Pension scheme charging rules should be reformed to allow funds of sufficient
size to pay management fees for infrastructure investments.
No, that’s nonsense.
For a start it’s terrible investment policy, to concentrate the risk of a large project into the one pension fund. For diversification is our friend here. Assuming that we desire pensions savings to fund these large projects we want many different pensions funds to each fund a slice of each different project. On exactly the same grounds that we have pensions funds to fund pensions in the first place, we have diversified investments. This is what the idea of the fund does, we agglomerate the savings pool then allocate it in small slices so that all potential pensioners gain access to that diversification they can’t get individually.
It’s also remarkably unobservant. London is home to the world’s deepest and widest financial markets. Where it’s possible to invest in stocks and bonds doing near anything. And to float stocks and bonds to fund near anything. The stocks and bonds performing that function of allowing the funding of large projects while also still offering diversification to each investor.
That is, the SMF’s proposal is wrong in theory and entirely ignores the fact that we’ve already solved the problem anyway. Not a great recommendation of the proposal really.
Are the LEPrechauns spending our money wisely?
A leprechaun is the Irish for a small body not entirely engaged with our world, rather like, as will become clear, a Local Enterprise Partnership (LEP). 39 (now 38) LEPs were created in 2011, linked to local government, to devolve the simulation of economic growth across England. So far, they have spent about £7.6bn, but much more is in the pipeline, including the previous UK contribution to the EU for local enterprise support. The Ministry of Housing, Communities & Local Government (MHCLG) is responsible for supervision and funding.
The National Audit Office reviewed LEPs in May 2019 and was less than complimentary (para.13): “the Department [i.e. MHCLG] has made no effort to evaluate the value for money of nearly £12 billion in public funding, nor does it have robust plans to do so. The Department needs a grip on how effectively these funds are used. It needs to act if it wants to have any hope of learning the lessons of what works locally for future interventions in local growth, including the new UK Shared Prosperity Fund.” This will replace the €16.4bn. the UK received annually from the EU split equally across three funds: regional, agricultural and social, i.e. not enterprise. The government intends to use these funds to “reduce inequalities between communities”. Consultation is, or was, due during 2020.
Whitehall introduced no less than 54 local investment schemes between 1978 and 2016. The LEP Network Operations Plan 2017-2018 gives no indication of costs, objectives or achievements. The “plan” is simply that LEPs should communicate with one another. The “Local Growth Fund” has been the subject of continual tinkering since inception in 2013. And “Growth Hubs” which “are different to LEPs in that they are focused on the tangible delivery of business support within each region. Growth Hubs provide face-to-face professional advice to businesses and signpost them to the best resources from both the public and private sector within the area.”
In fact Growth Hubs are LEP subsidiaries and provide both advice and money. The Hertfordshire Growth Hub aims to be the best in the country. In 2018/19 it provided £570K to over 200 businesses, £300K being from the EU and £270K from the MHCLG. Advice is free from eight full time professionals, a consultancy firm and the local university but there is no indication of the cost of the Hub nor value for money. It is linked with the local chamber of commerce.
The question is whether LEPs contribute, on net, to the economy. Their title indicates that to be the intention: “Enterprise is another word for a for-profit business or company, but it is most often associated with entrepreneurial ventures.” The quarterly performance figures LEPs report to MHCLG, however, are only loosely connected with that word (NAO 2.26): “financial spend; jobs created; number of apprenticeships created; number of new homes completed; and flood risk prevention.” Job creation is most definitely not a measure of economic growth, particularly for a country seeking increased productivity.
42% of Growth Fund (LEP) expenditure goes on transport projects, 20% on “skills” (presumably apprenticeships), 17% on “economic development”, 9% on site development (mostly housing) and 12% on (unexplained) “other” (NAO Table 11). Economic development includes “broadband infrastructure, regeneration and business support”. In short, very little goes on enterprise.
Important as they are, housing, flood defence and infrastructure are public expenditure, i.e. matters for national and local government. Government should not pretend to be stimulating private enterprise when the money is really going on public projects. To confuse matters further, local government does spend on economic development alongside LEPs though this declined from £1bn. in 2010/11 to about £400M in 2012/3 and thereafter.
The LEP Network sees the future as creating vague “strategies”. The New Anglia LEP strategy, for example, notes three regional strengths (clean energy, agri-food and ICT digital creative), and the developments taking place in those sectors, but says not a word about actions to be taken, expected outcomes or the contribution the LEP will make. The local pictures are pretty enough but this is motherhood.
LEPs and the other local quangos are a maze of good intentions leading to muddle and confusion. Early stage entrepreneurs simply do not have the time to explore the myriad schemes available, still less go through all the application processes. There should be one simple and long-lasting scheme. What should be done? Let us start with some positives. Devolving economic stimulus from Whitehall to local is good and allows, as now happens, funds to be weighted towards the regions that need them most, notably the north. Some SMEs and start-ups need both money and advice, others one or the other.
Recommendations:
Growth Hubs should be retained but limited to face-to-face advice under the direction of local chambers of commerce which understand business better than local government. Advice should remain free to clients but costs, effectiveness and efficiency should be monitored professionally and performance compared across all Hubs in England.
Apart from those needed by Hubs, LEPs should be closed with public expenditure responsibilities being returned to local government, private sector advice to Hubs and private sector funding to a focused non-quango scheme. The Dragons’ Den provides a possible model. The taxpayer should have more faith in the judgment of a private investor keen to put his or her own money into a project than that of a small body of people not needed in the office. One possibility is the business angel top up scheme but just one simple scheme should be adopted. As with Hubs, the very little administration would best be conducted by the local chamber of commerce.
These recommendations, if adopted, should be piloted and revised before being rolled out nationally.
Measuring the costs of regulation
We’re entirely willing to believe that the net result of regulation is positive. Well, of some regulation at least, just as we’d be likely to insist that the net result of some other regulation is negative. However, the thing we would insist upon is that it’s the net price which is the important thing. That is, that regulation does have a cost as well as a benefit and it’s the balance between the two that is the justification.
This particular example is about fentanyl but the point stands more generally:
Wuhan’s lockdown represented a profitable “business opportunity” opportunity for others, say analysts. “Criminal enterprises shift and adapt much quicker than legitimate business or governments,” said Adrian Cheek, a British cyber-threat intelligence analyst and former police investigator who tracks online drugs trafficking. “Lockdown has been an opportunity for many.”
The cost there of regulation is that slowness in shift and adaptation. Which really is a cost, given that the world changes all the time and a slowness in adapting to such change is a price that is paid for the regulatory structure.
To move to a less controversial example than opiates. Recently the entire commercial feeding structure of the country closed down. Office canteens, restaurants, caffs providing the Full English, shut overnight. That significant portion of the nation’s consumption of calories had to be provided through the retail path of supermarkets. All things considered that switch was done blindingly well.
Yet there were costs here, costs which prevented it being done even better. The packaging for that commercial distribution network - more specifically, the food labels upon it - meant that it could not be simply shifted over to the retail channel. Supermarkets were, for a time at least, bereft of baked beans while catering packs of exactly the same product could not be sold in their place.
Food labels might even be a net plus to society but that does not mean they are costless. The same is true of any and every regulation which is why we need to be so suspicious of the imposition of more of them.