The Pin Factory Blog

Here's an idea. Give patients in Britain's state-run National Health Service (NHS) their own healthcare budgets. Then they would be able to buy in the treatment they want, from whatever source they choose, rather than having to put up with the decisions of some distant central bureaucracy. Most patients, especially those with long-term conditions, know what kinds of treatment work best for them, so aren't they best placed to decide their own treatment regime anyway?

You might think this idea is just another rant from the swivel-eyed market zealots of the Adam Smith Institute. But no, it comes straight from Britain's government – a Labour government. Health adviser and clinician Lord Darzi (pictured) wants tens of thousands of patients with diabetes, multiple sclerosis and motor neurone disease to get their own budgets.

I welcome this move. We've long believed that patients, or at least their family doctors, should be in charge of the money that is spent on patients – and that politicians, the Department of Health, and local officials should not be. Then perhaps care might be delivered to serve the needs of patients, rather than for the convenience of bureaucrats. That was where the NHS was heading before it went up a lengthy statist siding under Health Secretary Frank Dobson MP in 1997. So awful was that experience that Labour reformers have been trying to get it back on track ever since. But of course, nobody can admit that Mrs Thatcher's GP-budgets policy was in fact on the right lines.

So, direction-changing as it is, the new initiative is as typically cautious and – well, bureaucratic – as you would expect from a highly centralist administration. It's limited to folk with these very long-term conditions. And they won't get cash to spend, nor anything like it – a new voucher scheme is imagined. (And I can well imagine all the bureaucracy that will go along with that.) I really do wish that our leaders could simply admit that their former Health Secretary made a mistake, apologize for the billions of wasted taxpayers' money that has been thrown at trying to correct it, and agree that patient- or GP-centred budgeting is indeed the best direction of travel for UK healthcare. Don't you?

Following in the tracks of the USA, Australia and New Zealand, the government’s new website data.gov.uk has been launched today. Created with the help of internet mastermind Tim Berners-Lee, it is designed to make government information and statistics available and accessible to the public. Generating figures and statistics uses up time, resources and money. However, by making them available to the public, much more can be achieved than if they simply lay dormant in a department’s filing cabinet.

At the moment the website is still very much a work in progress; the data sets are rather limited, the website a little muddled and specific information hard to isolate. However, it is a step towards transparency, efficiency and the opening up of knowledge to businesses and individuals. The website invites you to make suggestions for ‘apps’ that utilize the information available - and allows you to upload your own creations. So far tools that allow you to check out your neighbour’s council tax band may not be revolutionary, but they could lead in a real change in the way people interact with public services and spending. As the minister for digital Britain Simon Timms notes, "by allowing industry to use data creatively they can develop new services and generate economic value from it."

The more public information made available through this website the better. George Osborne has pledged that a Tory government would put any government expenditure over £25,000 online. Posting such information along with data from local government could enable providers of services to compete with one another on price, delivering better value for taxpayers. The development of data.gov.uk would make scrutinizing the ‘success’ of policies in areas such as crime, health and education much easier, as well allowing the public to see just where their taxes go. If the concept of transparency and accountability really takes off in Westminster, perhaps the public will gain some political power, and the government will act like less of a ruler and more like the public servant it should be.

Here is an invaluable source of statistics from the AEI.

Although I’m usually not a fan of the Prime Minister’s, I don’t agree with people like Janet Daley that his party conference speech was dull. In fact, I thought it was one of the most exciting speeches from a politician in office that I’ve heard in a while, and it suggests that the coalition government might be prepared to be radical on market reform. I’m wary of reading much into political rhetoric but together with this week’s policy announcements, which I broadly welcome, there is cause for optimism.

I’ve already written about the proposals to cut child benefit for high income earners. I’m broadly in favour of them, although they should be coupled with reductions in income tax and their implementation leaves a lot to be desired. But what’s really interesting about these is that they tackle the idea of ‘universality’ in benefits – that is, the idea that everyone should pay into a big government pot, and that everyone should get something from that government pot. This is bad economics, because it assumes that ‘the rich’ are a bottomless pit of tax revenue, and it is also bad for society.

Benefit universality reduces personal responsibility and reduces choice by roping everybody into a single, one-size-fits-all system irrespective of their wants or needs. It says that one way of living is good – in the case of child benefit, having children – and one way is bad – in this case, not having children. Cameron’s speech, which touched on this issue, put the question into a wider perspective of promoting personal responsibility. I still haven’t figured out what the “Big Society” is, but if it is about removing the state from people’s decisions about their private lives, it might not be worthless.

The cuts are tiny in terms of overall government expenditures, but they set an important precedent: that welfare should provide a safety net for people in dire need, not be a second stream of income for the bulk of the population. Along with Michael Gove’s free schools and Iain Duncan Smith’s moves towards a single, unified benefits system, this speech potentially has big implications for the future of the British welfare state. We may be seeing the start of a move away from the state-providing model of welfare, where ministers run the health service and education system, towards a state-facilitating model, where the government gives a monetary welfare safety net to the country’s poorest while allowing individuals in society to handle the rest.

The excellent new site Libertarianism.org has put together this discussion with David D. Friedman on his book The Machinery of Freedom. It's a fascinating discussion of a topic many refuse to consider — whether the institutions virtually everyone, including libertarians, consider the preserve of the state, could instead be carried out by private organizations as well or better than the state. Friedman discusses private courts and police, as well as, for me, the toughest question of national defence. Has private supply of these goods ever worked well in history, or are these what we need a state to provide?

Some find this kind of discussion esoteric or utopian. Indeed, the sort of anarcho-capitalist who insists that it is wrong for a state to exist because it necessitates some violence can be frustrating. But conflating arguments made by the likes of Friedman with this kind of puritanism is silly. It's quite reasonable to ask whether the things that make markets superior to the state in some areas, like organizing people's economic activity, might also make markets better than the state in other areas, like providing law. And it's intellectually valuable: just as an understanding of how a free market would work is a useful starting point in real-world economic analysis, an understanding of how a stateless society might work can help us understand the state-heavy world we live in.

Incidentally, a roughly-typeset (but still very readable) version of Friedman's book is available online. He's hoping to do a third edition of the book, if the peculiarities of copyright law don't stop him from doing so.

I’m studying Philosophy, Politics, and Economics, at Exeter College, Oxford, where I spend a lot of my time arguing, with anyone who will listen, for the free-market policies Britain needs. Thinking that my tutors and fellow students had probably heard enough, I applied for a summer placement at the ASI, who have offered me a chance to work for them over the next two months.

This is a brilliant time to be working at the ASI. The economic crisis - and the rocketing government spending, surging market intervention, and collapsing trust in capitalism that have followed - has made it more important than ever to argue for limited government, and limited spending; to point out to both policy makers and the public how government interference in the market led us to where we are; and to explain why the government can provide no easy route out. I’m really looking forward to playing a part in that.

As part of my degree I’m taking papers in British and American Politics, Political Theory, Money & Banking and Public Economics, which I hope will all prove helpful here. In time away from work, I‘m generally to be found flying aircraft, sitting in a pub, or playing golf badly.

Tory David Willetts could raise student fees to £7000. It's not enough.

The Conservative Shadow Minister for universities, David Wiletts, said that he would consider demands to raise the annual fees charged by universities fo £7,000, roughly twice the current levels. That's a step in the right direction. People complain about students leaving university with debts of £20,000 and suchlike – but the fact is that a university education can raise their future earning potential by much more than that, so it's still a really great deal.

If the universities had to balance their own books and pay for themselves instead of taxpayers handing them cash, their fees would have to be a lot higher than that, though. ASI Fellow Terence Kealey, himself the head of Buckingham University, reckons that £15,000-£20,000 would be nearer the mark – comparable to the fees in top US universities.

The public interest argument is that we don't want bright but poor students to be discouraged from going into higher education. Quite right. But the US universities solve that by accepting students only on the basis of merit, then having endowment funds to pay the fees for those who can't afford them. It's a very sensible sort of arrangement, and we should strive to have it in the UK. But I'm skeptical of the argument that the taxpayer should subsidize the universities because the country needs lots of graduates. The main benefit of a university education goes to the students themselves, and not to the general public. So the students should pay most of the cost – the real cost. A loan system is a good way to make that manageable for them. But it is right that people should look at the costs and benefits of higher education and decide on the basis of the realities – not on the basis of subsidized prices. That would be a more rational allocation of taxpayer funds, and better for the students themselves.

Dr Butler's book The Rotten State of Britain is now in paperback.

I’m currently in a hotel just outside Washington, DC, en route to a couple of conferences in Dallas. Watching the news here, it’s striking how obsessed Americans seem to be with the Royal Wedding. NBC had a special on it last night, while MSNBC was broadcasting live from Trafalgar Square this mornng. I can’t help wondering if they think the whole of England is still a bit like Brideshead Revisited. Speaking of transatlantic misconceptions, I ordered the ‘English Club Sandwich’ for dinner last night. It was fantastic, and not just because it followed a day of airport and plane food. But, needless to say, I’ve never seen anything like it in England. Why can’t we make decent sandwiches? We did invent them, after all. I guess socialism must be to blame somehow.

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The Spectator is always a great read, and I’m grateful to their Easter double issue for killing a couple of hours in the air yesterday. Matthew Parris’s column, bemoaning the regulated disappearance of the incandescant lightbulb, struck a particular chord with me. Energy-saving flourescent bulbs just aren’t an adequate replacement. They cast a horrible, cold light and tend to flicker. Yet the state forces us to use them. Anyone know how I can get hold of proper light bulbs?

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On the other hand, I was astounded by an article by William von Raab arguing that the US should “get tough – really tough – with Mexico” and advocating “the same action toward the [drug] cartels in Mexico as… towards al-Qa’eda in Afghanistan”. What planet is he living on? As I wrote a while back: “Decades of bitter experience have shown that no amount of military might can win a ‘War on Drugs’. Indeed, all such interventions actually achieve is to raise the market price of these substances, and give the cartels an even greater prize to fight over. The human cost of this failure is enormous. Surely it is time to accept that the only sensible solution is to take narcotics out of the hands of gangsters, and legalize, licence and regulate their production and sale.”

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Finally, the Washington Post reports (hat-tip to the Wall Street Journal) that Liu Zhijun, until recently China’s railways minister, was fired after embezzling tens of millions of dollars and running up $271bn in debt. Journalist Charles Lane concludes, “Rather than demonstrating the advantages of centrally-planned long-term investment, as its foreign admirers sometimes suggested, China’s bullet-train experience shows what can go wrong when an unelected elite, influenced by corrupt opportunists, gives orders that all most follow”. I can’t help wondering whether we’ll be applying that lesson to China as a whole before too long.

With unemployment now at around 2,435,000, it is clear that despite all the talk of green shoots, they are certainly not taking root in the job market.

Unsurprisingly, those in the public sector are still doing nicely. In the three months to May the public sector saw an average pay rise of 3.7%, while average annual rate of pay rose at 2.5%. For those in the manufacturing sector that saw an average pay increase of 1.1%, this is a slap in the face.

The response to unemployment by both Lord Mandelson and George Osborne has been to attack the other for their lack of policies. Yet it is quite clear that both are at something of a loss on how to deal with unemployment beyond the introduction of equally wasteful and ineffective government initiatives. Of course Mervyn King has had an idea – namely quantitative easing – whicn I would rather he had kept to himself. The BBC reports that he is planning other stimuli. Inflation is certainly not the best way out of recession.

In truth, the only sustainable way to deal with unemployment is to remove the shackles placed upon businesses of onerous and multifarious government regulations. A good place to start would be scrapping the minimum wage. Although when we were riding high on the credit bubble, such talk of its removal would have been met with bafflement by many, now that the bubble has popped, this policy could be an honest way to work our way out of this recession.

Scrapping the minimum wage would have immediate benefits for those employers that could afford to take someone on for less than £5.73 per hour and for the workers who would rather work for less than not at all. And certainly many of those currently unemployed do indeed want to work. The statistics show that many recently unemployed are not turning to the state for handouts but are instead relying upon family and savings, a dignified mentality that this government cannot understand (it is launching an investigation into the discrepancy).

As the IEA found in its extensive analysis of the minimum wage prior to its introduction in 1999, “in a period of sustained economic growth, a minimum wage has negligible positive or negative effect; but in a period of recession a minimum wage is likely to deepen that recession by preventing labour markets from clearing. Firms will be unable to take on new employees willing to work for relatively low wages in order to escape unemployment; if firms cannot take on new employees and people cannot exit from unemployment, then the route out of recession becomes much slower and more arduous."

Scrapping the minimum wage is a policy that the opposition parties could and should immediately adopt. The economics and morality behind such a decision are entirely sound. This Prime Minister should be held to account for his decision to introduce and increase the minimum wage when he was Chancellor and the effect these decisions are now having upon the job market and in prolonging the recession.

A new report out telling us all that we've been very naughty boys and that as it is we that stunk the planet up then it's us that has to pay to deal with it.

A fair point of course, that those responsible for damage should pay to repair or alleviate that damage. Further:

Second, 99% of the casualties linked to climate change occur in developing countries. Worst hit are the world's poorest groups. While climate change will increasingly affect wealthy countries, the brunt of the impact is being borne by the poor, whose plight simply receives less attention.

Entirely true of course, but this is hardly specific to climate change. It is always the world's poorest groups who are worst hit, the poor who bear the brunt of the impact. Because, well, does it really need to be said?, they are poor.

For that is the very meaning of the word poor, that people do not have excess resources, they don't have any margin between what they need to stay alive today and what they've got available to them today. So if disaster does strike then they are indeed going to carry  heavy cost: unlike us rich people who have spare resources in reserve.

Where I part company with this statement of the obvious is in what the distinguished panel of writers suggest we do next. We need to stop climate change so as to protect the poor. Me, I'm not so sure about that. I am rather convinced that it would be easier to stop people being poor so that they could, like us, deal with the necessary adaptations. However, allow me in my magnaminity to concede that I might be wrong on this. Perhaps reducing poverty will only help, not solve, this problem.

Very well, but it is, as we are told, a problem of such massiveness that every little bit helps, correct? And what do we know would reduce such poverty? A reduction in our own trade barriers would help would it not?

Excellent, so how about a small agreement here. I'll agree that this impact of climate change upon the poor really is a serious problem, one we should do anything to alleviate, when those telling me this start proposing that we abolish our trade barriers against those products made by poor people in poor countries.