Ooooh the outrage over Tesco and the other supermarkets

That Tesco's brands a few of its products with the names of fictitious farms is amusing, as is the outrage that this has brought forth from the usual suspects. But then matters take a turn for the worse as we get a question of such driveling stupidity as to potentially make our brains leaks from our ears. Or possibly to ponder whether this has already happened to the questioner. We refer to this from Yvonne Roberts:

How have we allowed a system to emerge that squeezes the whole supply chain in the name of profit and seduces us into ignoring our carbon footprint for that dubious consumer privilege called “choice”?

For this is the point and purpose of having an economy in the first place. Both Adam Smith and Frederic Bastiat tell us that we must always look at economic questions from the point of view of consumption. And we can and do go further than that ourselves: the point of this whole economy thing is to maximise the consumption possibilities of the population. What is to be consumed, how such consumption is to be valued, being the choice of said population. If choice is what said people value then an increase in such choice is an addition to the value they gain from consumption: which is, again we insist, the reason we have this whole structure of markets, exchange, production and all the rest. This is the very purpose of our efforts: to increase consumption opportunities.

Profit is simply a method of keeping score along the way. If you make a profit in your production process then that means that you are adding value. The value of your outputs is greater than the value of your inputs. More accurately, the alternative uses of those inputs would produce less value added for consumers to enjoy. Thus profit is a good thing, losses bad, for losses indicate that you are subtracting, rather than adding, that value which can then be consumed.

If growing a pig in Belgium, slaughtering it in Germany and eating it in England produces more value for the consumers to consume than to grow, slaughter and consume a similar pig in England then so be it: this is the very point of it all, to produce the greatest value of output that may be consumed from the limited resources at our disposal.

Choice, consumers, consumption, these are not things to be disdained from the comfort of an Islington eyrie, they are the entire damn point of having a society or an economy in the first place.

Take the Easter egg. The salt may have come from China; palm oil from south east Asia; whey from New Zealand; sugar from the Caribbean; cocoa from South America, on and on. Britain imports food from more than 180 countries.

Ain't it just fantabulously wondrous?

Yes, this is how school competition works

School competition works in exactly the same manner as other forms of competition that is. It's something that happens at the margin, that margin then dragging up the performance of others:

There is no evidence that academies perform better than council-maintained schools. The white paper highlights impressive improvements in primary schools – 85% of those are still maintained. 82% of maintained schools have been rated good or excellent by Ofsted, while three times as many councils perform above the national average in terms of progress made by students than the largest academy chains. Where a school is failing, there is no question that action must be taken – but converting every school to an academy will not tackle those issues.

Think of a different arena to study the effects of competition. We know very well that the firms who export are those at the productivity boundary: exporting firms are near always significantly more productive than the other domestic firms in that same sector. Now think of the flip side of that statement: imports from Germany into Britain expose British companies to the finest and most productive German forms. This is one of the major channels by which trade improves productivity. Domestic firms must compete against those imports and near by definition those imports are coming from firms with greater than average productivity. Thus the domestic firms have to pull their socks up.....or be replaced by those who do.

Imports are not, of course, a majority of the UK economy: but that exposure to the best does improve matters over the whole economy. Now back to academies and schools: that some small portion of the education system are academies is exactly what, entirely analagous to that effect from trade and imports, is improving the non-academy state sector. To state that non-academies are improving too is not some symptom of a failure of the program, it's evidence of the success of the program: competition works.

At which point, turning all schools into academies. If it works, as it does, if it's working, as it is, then why not? After all, we do all believe in evidence based policy making, don't we? Good, academies, the competition and freedom to experiment that they bring, are improving the school system by their existence. Thus let's do more of it so as to have an ever better education sector.

Unless, of course, we'd prefer to return to the policy based evidence making of yore which insisted that competition was a bad thing....

The NHS is not investment, it is current spending

We'd like to leave aside our well known biases on the subjects of the European Union and the NHS and make a still important point. Brexit itself is going to make no difference at all to domestic policy: what will is the policies adopted once the UK is again free to adopt whichever policies it wishes. And the NHS, sure, we're not wholly in favour of the current form of the organisation and think the same provision can be done better. But leave those both aside and consider this statement:

Norman Lamb, the Liberal Democrat MP and former health minister, backed Hunt’s EU stance.

He said: “I don’t agree with Jeremy over the current funding of the NHS.

“I’ve been very clear that I’d like to see the government investing more in the NHS and social care. But we could not even have that debate if we vote to leave the European Union.

Spending upon the NHS is not investment. Yes, parts of such spending are: building a hospital which will still be there in 30 years' time is investment. But by far the vast majority of NHS spending is upon wages and consumables and is thus current spending. We could, of course, just dismiss this as being pedantry, a symptom of "investment" to a politician being public spending upon anything said politician approves of. But sadly the issue goes deeper than this.

It is not just an apocryphal story that the original founders thought that after the backlog of problems had been cured then spending upon the NHS would go down: they really did think that it was investment. Get over the hump of untreated disease and costs would decline even as tax revenues from the newly again healthy would rise. That could indeed have been described as investment: if it had actually happened. It didn't of course, that nascent NHS went from consuming 3 to 4% of GDP to the current 9 to 10% and more (all figures are a bit hazy as exactly what is NHS spending is a bit hazy).

We're not going to get to a proper and rational discussion on what amount should be spent on the health of the nation, nor how that should be raised nor allocated, until we get over that 70 year old delusion that health care spending is an investment. It isn't: it might be just, moral, necessary, better organised in another manner, just perfect the way it is. But it's most definitely current spending and must be recognised as such before we can have a proper discussion about it.

For example, the correct question is, at heart, how much of current production of the economy should be devoted to health care? No, not how much should we borrow to "invest" in it, but what portion of current income should be devoted to it? That's what that essential division into capital and current spending aids us in seeing: and given that that's what we must see before we decide thus we must see it. Further, the insistence upon seeing it as current spending aids us in viewing that "how much" question in its proper light: what other things are we not going to have as a result of having health care?

Or as an economist would put it about everything, there are always opportunity costs. Thus the true price of something is what we give up to get it. There is no cute let out by calling it investment and thus that is the correct lens through which to view health care spending whether it's done through the NHS or not. What won't we get as a result of more NHS and is more NHS worth more or less than what we must give up?

After all, we can only find the right answer if we ask the correct question in the first place.

An interesting little example of political rhetoric

Apparently it is some terrible scandal that local authorities do not build anew those houses that are sold under the right to buy legislation. The answer given to this accusation being that they do, but slowly. What neither side actually says being the important part: local authority housebuilding is simply not a relevant measure of anything interesting at all:

Local authorities in England have replaced one in 10 of the homes sold through right to buy since discounts were increased in 2012.

Government figures show there have been 49,573 sales since the scheme was relaunched, while 4,594 have been started on site or acquired by councils.

About this we are told:

John Healey, shadow secretary of state for housing and planning, said government decisions were “leading to a huge loss of genuinely affordable homes to rent and buy at a time when they’ve never been needed more”.

He said: “Tory ministers have repeatedly promised that every home sold under right to buy will be replaced one for one, but these figures show that they are failing by a huge margin. Only one home is being built for every eight sold.”

That would seem to be a slam dunk, wouldn't it? And yet:

The DCLG said: “Under the right to buy one-for-one additions policy, local authorities have three years from the date of the sale of each additional home to provide an additional affordable property. There were 1,326 additional sales between Q1 of 2012-13 and Q3 of 2012-13. There have been 4,594 starts and acquisitions since Q1 of 2012-13, exceeding the target for one-for-one additions.”

What is not being said is that all of this is entirely irrelevant, The housebuilding statistics are here. Local authorities started perhaps 1.700 houses last year, out of some 150,000 for the country. They're 1% of the market, no more. No, this does not mean that "affordable housing" is not being built (quite apart from the fact that a house people can afford is affordable). Because we simply do not use local authorities to build such housing these days. That is now done by housing associations. They have taken over that 15% of the market that used to be councils.

Local authorities and their activities in the housing market are simply an irrelevance. We don't use then as we used to, we've changed the structure of the system. Bleating about irrelevances is, well, it's irrelevant.

This shows that Britons are significantly more generous than their government

An ever so slightly puzzling piece over in The Guardian. Telling us that we Britons are hugely well off by any historical or global standard, something which is true, and therefore perhaps we have a moral duty to spread some of our good fortune to those less fortunate. Also quite possibly true. We ourselves suggest buying things made by poor people in poor countries, this being what will make them richer. But we certainly have no problem whatsoever with the idea that you, we or anyone else might wish to simply send money to alleviate poverty or other human suffering.

What puzzles is this though:

If, in your ideal world, rich people and corporations such as Amazon and Google would pay more tax, and you believe it’s the government’s job to redistribute resources, it is hard to feel enthusiastic when charities pick up the slack created by cuts. Church-run food banks may have been appropriate in 1816 or 1916, but not now.

The collapse of Kids Company showed such concerns to be valid: with her brown envelopes of cash, Camila Batmanghelidjh oversaw a shadow benefits system on a personality-driven model far preferred by rightwing ideologues to the boring old state.

Well, we'd rather take issue with the idea that Kid's Company was a creation of the rightwing. But that's by the by. A centre left captivated by the idea that throwing money at something was more important than checking what was being achieved quite possibly.

In 1970 the UN set a target of 0.7% of GDP that economically advanced countries should give in development assistance. Sweden, Norway and others beat the UK to it, but last year this commitment was enshrined in British law. Just 12% of individual British donations go to charities working abroad, but it is striking that the UK’s aid budget of around £11bn is close to the total amount donated by individuals each year.

For a person on the median full-time salary of £27,000, 0.7% of their untaxed income equates to £15.75 a month, a couple of pounds more than what the Charities Aid Foundation calls a “typical” gift. On average, then, and if we regard the aid budget as a form of state charity, British people are a bit less generous than their government.

No, that last line is simply not correct. The government takes some £11 billion a year from our pockets and spends it on whatever foreign japes it thinks makes sense. This is not generosity at all: spending other peoples' money on other people does not come under that title. We Britons then dig into our pockets for near another £11 billion a year to send to things that actually have some effect in relieving poverty and other human afflictions.

That is, we are significantly more "generous" than the government, but only if it isn't the government spending the money. Given what the government does spend that money on probably quite rightly so too. Why, we might even suggest cancelling that official budget, returning the cash to the citizenry, and see how much better the little platoons can spend it.

Security with a government backdoor isn't secure

Today's tale of gibbering stupidity from those who would rule us. So, the Transportation Security Administration over in the US has been asking all the people who make locks for travel bags to conform to certain standards. Standards which allow the TSA to have master keys to the luggage being transported by the population of course. There's echoes here of the FBI's fight with Apple, with the more general arguments over the encryption of digital data and so on.

Well, fair enough you might think. At which point the TSA wants to show off how well it does, asks a newspaper to come see how it works. Which then publishes pictures of the master keys. Near immediately these are scanned and run through a 3D printer from those newspaper or magazine images:

THE TSA IS learning a basic lesson of physical security in the age of 3-D printing: If you have sensitive keys—say, a set of master keys that can open locks you’ve asked millions of Americans to use—don’t post pictures of them on the Internet.

A group of lock-picking and security enthusiasts drove that lesson home Wednesday by publishing a set of CAD files to Github that anyone can use to 3-D print a precisely measured set of the TSA’s master keys for its “approved” locks—the ones the agency can open with its own keys during airport inspections. Within hours, at least one 3-D printer owner had already downloaded the files, printed one of the master keys, and published a video proving that it opened his TSA-approved luggage lock.

Forget the gibbering stupidity for a moment and consider the underlying tale here. Any system of security, any system of encryption for example, that has a government backdoor is simply not secure. Theresa May might want to take note of this. We might want to take note of it in fact. It might, just possibly, even be true that we'd like there to be a way for our protectors to study the activity of those who would do us harm. But those backdoors will leak and there will then be no security at all.

Leveraging Up on Bank Stress (II): improving the Bank of England’s Leverage Stress Test

This posting goes through the Bank of England’s leverage ratio stress test using an improved version of the leverage ratio to replace the one used by the Bank: it uses CET1 capital in the numerator instead of the looser and more gameable Tier 1 capital measure used by the Bank. Results show that the UK banking system performs extremely poorly by this stress test when assessed against the fully implemented leverage ratio requirements possible under Basel III, and even worse when assessed against minimum leverage ratio standards coming through in the United States and those recommended by experts.

In the previous posting, I examined the outcomes of stress tests that use the ratio of banks’ Tier 1 capital to leverage exposure as their capital adequacy metric. However, the use of Tier 1 capital in the numerator of the leverage ratio is problematic: Tier 1 capital is the sum of Core Equity Tier 1 (CET1) capital plus Additional Tier 1 (AT1) capital, and AT1 includes hybrid capital instruments such as Contingent Convertible (CoCo) instruments which are of unreliable usefulness in a crisis. Including these in our capital measure is undesirable because it might overstate the capital available to support a bank in a crisis and so undermine the principal purpose of any core capital measure.

We therefore need a more prudent capital measure and a natural choice is CET1 without any additional, softer, capital. Roughly speaking, CET1 approximates to Tangible Common Equity (TCE) plus retained earnings, accumulated other income and other disclosed reserves. [1] The ‘tangible’ in TCE means that it excludes intangible items such as goodwill and Deferred Tax Assets, and the ‘common’ means that it gives a measure of common share capital (i.e., shareholder capital stripped of more senior capital instruments such as preferred stock and other hybrid items). Of the measures available (and unfortunately, TCE is typically not available) CET1 is the best capital because its component elements are the most fire-resistant and hence most deployable in the heat of a crisis. To quote Tim Bush, CET1 is:

the plain old fashioned accounting shareholder interest. It's what bears the first loss, pays divs, and is what has to be recapitalised. It also excludes goodwill [and any other intangibles and] any expectant income and books all expected losses. [2]

Now define the CET1 leverage ratio as the ratio of CET1 capital to leverage exposure. If we take the outcomes of the Bank’s stress test applied to the CET1 leverage ratio and take the pass standard to be the potential maximum required minimum leverage ratio under fully implemented Basel III, then we obtain the outcomes shown in Chart 1:

Chart 1: Stress Test Outcomes Using the CET1 Leverage Ratio with the Potential Maximum Basel III Pass Standard


Notes to Chart 1:

(a) Author’s calculations based on information provided by the Bank of England’s ‘The Financial Policy Committee’s review of the leverage ratio” (October 2014) based on the assumption that the pass standard is the potential maximum required minimum leverage ratios under fully-implemented Basel III.

(b) The outcome is expressed in terms of the CET1 leverage ratio post the stress scenario and post any resulting management actions. These data are obtained from Annex 1 of the Bank's stress test report (Bank of England, December 2015).

It is fair to say that if the previous outcomes were disastrous, these are positively dire. The average outcome is 3.1%, the average pass standard is 4.2%, the average shortfall is over a hundred basis points and every single bank fails the test by a comfortable margin. By this test, the entire UK banking system is well and truly below water.

But it gets worse.

One problem is that reported CET1 values can be inflated by at least three different factors. Briefly:

  • The reported CET1s are based on IFRS accounting standards, and a key component of CET1 is retained earnings, the reported values of which are likely to be inflated because IFRS allows banks to inflate the underlying asset values. [3]
  • The regulatory definition of CET1 endorsed by Basel III involves an awkward ‘sin bucket’ compromise by which various items of softer capital (such as Deferred Tax Assets and Mortgage Servicing Rights) can be included in reported CET1 provided they account for no more than 15% of total reported CET1. [4]
  • The CET1 values reported here are book values and market values will typically be less. Thus, ‘true’ CET1 values can be considerably lower than those reported in the Bank of England’s stress test report. 

The reported capital ratio is inflated further by a downward bias in the reported leverage exposure, which is the denominator in the leverage ratio. This downward bias is another long story. In theory, the leverage exposure is meant to take account of off-balance sheet items that would not show up in traditional exposure measures such as total assets. However, the regulatory leverage exposure measure is a highly compromised measure that is the result of a lot of behind the scenes lobbying by banks keen to keep their measured exposures down, not least in order to minimise their resulting capital requirements. Given (a) that off-balance-sheet items considerably exceed on-balance-sheet ones and (b) that accounting netting rules tend to hide a great deal of financial risk, if only because many supposedly hedged positions often fall apart in a crisis, and (c) that we know that banks are riddled with major data quality problems, then we would expect any half-decent exposure measure to be much greater than, say, reported total assets. However, they are not. In fact, when I looked into this matter, I was astonished to discover that the leverage exposures of UK banks are not only of the same order of magnitude as their balance sheet total assets, but are sometimes even lower. For example, the reported 2015Q3 leverage exposure for Lloyds was only 88% of its reported total assets. So once again, we have a downward bias in the leverage ratio numbers and no real way in which we can assess what the extent of that bias might be. However, whatever this bias might be, we can reasonably infer that it must be large.

We should also note that the pass standard assumed in the test reported in Chart 1 is by no means a high one and the Federal Reserve, for one, is already preparing to impose even higher minimum leverage ratios. In April 2014, the Fed finalized a set of ‘enhanced’ Supplementary Leverage Ratios (SLRs) on the 8 U.S. global systemically important banks (G-SIBs) and their insured depository institutions. These are supplementary requirements in addition to those required under Basel III. As part of this requirement, the U.S. G-SIBs will have to meet a 5% SLR at the holding company level and a 6% SLR at the bank level, and are due to come into effect on January 1, 2018.

Well, to spell out the obvious: if the UK banks perform badly against a pass standard equal to the maximum potential standard under fully implemented Basel III, then they would perform even worse when assessed against the Federal Reserve’s higher standards.

There is also the question of what the required minimum leverage ratio should be, i.e., as assessed from first principles. Curiously, this is one of the few subjects in economics and finance where there is a considerable degree of consensus among experts – and their view is that minimum standards should be much higher than they currently are. We are not talking here about a couple of percentage points, but a minimum that is potentially an order of magnitude greater than current minimum capital requirements anywhere in the world. There is of course no magic number but what we want is a minimum requirement that is high enough to remove the overwhelming part of the risk-taking moral hazard that currently infects our banking system. As John Cochrane put it: it should be high enough until it doesn’t matter – high enough so that we never, ever again hear the call that banks need to be recapitalized at public expense.

This consensus was reflected in an important letter to the Financial Times in 2010, in which no less than 20 renowned experts – Anat Admati, Franklin Allen, Richard Brealey, Michael Brennan, Arnout Boot, Markus Brunnermeier, John Cochrane, Peter DeMarzo, Eugene Fama, Michael Fishman, Charles Goodhart, Martin Hellwig, Hayne Leland, Stewart Myers, Paul Pfleiderer, Jean-Charles Rochet, Stephen Ross, William Sharpe, Chester Spatt and Anjan Thakor – recommended a minimum ratio of equity to total assets of at least 15%, and some of these wanted minimum requirements that are much higher still. Independently, John Allison, Martin Hutchinson and yours truly have also called for minimum capital to asset ratios of at least 15%, Allan Meltzer recommended a minimum of 20% for the largest banks, Admati and Hellwig recommended a minimum at least of the order of 20-30%, Eugene Fama and Simon Johnson recommended a minimum of the order of 40-50%, and John Cochrane and Thomas Mayer have suggested 100%.

By these minimum standards, the UK banking system is not so much underwater as stuck as the bottom of the ocean.

So what can we conclude from these stress test exercises?

Without a shadow of a doubt, the entire UK banking system is massively undercapitalised even under the relatively mild adverse ‘stress’ scenario considered by the Bank of England.

End Notes

[1] For a more complete definition of CET1 capital, see Basel Committee on Banking Supervision (BCBS) “Basel III: A global regulatory framework for more resilient banks and banking systems” (Basel Committee, June 2011), p. 13.

[2] Personal correspondence.

[3] These and other problems with IFRS accounting standards are explained further by Tim Bush, “UK and Irish Banks Capital Losses – Post Mortem,” Local Authority Pension Fund Forum, 2011, and Gordon Kerr, “The Law of Opposites: Illusory Profits in the Financial Sector”, Adam Smith Institute, 2011.

[4] For more on this subject, see Basel Committee on Banking Supervision, “Basel III: A global regulatory framework for more resilient banks and banking systems," revised version June 2011, pp. 13, 21-26 and Annexe 2, and Thomas F. Huertas, Safe to Fail: How Resolution Will Revolutionise Banking, Palgrave, 2014, p. 23.

Sugar is not uniquely bad

The government's new "sugar tax" is a bit of a mess. First of all, it's not a sugar tax—it's a tax on the sugar in soft drinks except fruit juices and those based around milk. Secondly, given that people can easily substitute into other sweet and calorific foods, a tax at the rate the government's proposing is expected to reduce calorie intakes by about 2 kcal each.

But I think that these are relatively minor concerns. After all, the government will probably follow up this baby step with more extensive measures, with a broader, more logical scope, and set at a higher level. The bigger issue is that a couple of papers in the latest issue of the International Journal of Obesity question the entire narrative that sugar is a unique, hellish, dietary evil.

Just as the diet-obsessed obsessively avoided fat in the 1980s (just read the book American Psycho—protagonist Patrick Bateman won't eat a single fried thing), those attempting to follow the best diet guidance avoid sugar today. The Harvard School of Public Health and the Swedish diet buraeu have set the trend. But what if the current anti-sugar crusade is just a rerun of previous dietary fads?

This seems at least possible, given these last two papers. The first, by Luc Tappy, argues that popular ideas about the especially bad nature of sugars in general and fructose in particular are based on misconceptions and misunderstandings:

In this closing perspective, the author exposes why targeting a single nutrient like sugar is in his opinion unlikely to be efficient in preventing obesity and metabolic diseases. He defends the proposal that the concept of fructose toxicity is based on major misconceptions of nutritional physiology. He specifically proposes that (1) sugar being a non-essential nutrient does not obligatorily imply that it has no beneficial effect; (2) alterations of blood triglyceride concentration and hepatic glucose production within the normal range may merely reflect adaptations to a fructose-rich diet rather than early markers of diseases; (3) overfeeding is a normal physiological response to exposure to an energy-dense, palatable nutrient rather than the consequence of ‘leptin resistance’; (4) we may presently overemphasize the role of biological regulations and of gene-related heredity when assessing the effects of fructose in particular, and the determinants of obesity in general.

The second, by Theodore Angelopoulos and James Rippe questions the validity and quality of most of the animal model studies that have been used to push the line that sugar is uniquely important in obesity or health (as opposed to over-eating in general). It says:

The effects of added sugars on various chronic conditions are highly controversial. Some investigators have argued that added sugars increase the risk of obesity, diabetes and cardiovascular disease. However, few randomized controlled trials are available to support these assertions. The literature is further complicated by animal studies, as well as studies which compare pure fructose to pure glucose (neither of which is consumed to any appreciable degree in the human diet) and studies where large doses of added sugars beyond normal levels of human consumption have been administered. Various scientific and public health organizations have offered disparate recommendations for upper limits of added sugar. In this article, we will review recent randomized controlled trials and prospective cohort studies. We conclude that the normal added sugars in the human diet (for example, sucrose, high-fructose corn syrup and isoglucose) when consumed within the normal range of normal human consumption or substituted isoenergetically for other carbohydrates, do not appear to cause a unique risk of obesity, diabetes or cardiovascular disease.

I am not an expert in nutrition, and I am not qualified to judge whether these papers are the best in the whole of nutrition. But the evidence on 'sugar is evil' seems far from clear. As such, even if the practical problems with the levy are solved, I don't expect the sugar tax to have many positive effects either on obesity or on health.

Sometimes we despair over this gender pay gap thing


So the Women and Equalities Committee has released its report on the gender pay gap:

The 19.2% gender pay gap that exists in the UK is much more than an equality issue. It represents a significant loss to UK productivity which must be addressed in the face of an ageing workforce, a skills crisis and the need for a more competitive economy. There is a clear case that tackling the underlying causes of the gender pay gap can increase productivity, address skills shortages and improve the performance of individual organisations.

It boggles that anyone could say that. Productivity is the measure of the value of output from an hour's work measured against the cost of employing someone for an hour. Thus the lower the pay on offer, holding output static, the higher the productivity is. The claim here is that women earn less than men but are as productive. The gender pay gap therefore increases UK productivity by the amount that women are paid less for their output than men are.

Fortunately the committee does get told the truth:

Professor The Baroness Wolf of Dulwich, from King’s College, London, told us there was little evidence that direct discrimination is a major factor in the gender pay gap today. However, she did acknowledge that discrimination had been an issue for older women in the past:

Among people under 40, in comparable jobs, with comparable time in the workplace, there is no evidence of continuing gender discrimination in pay. Among cohorts over 40, and especially those now over 50, we can still observe the impact of having started work in more ‘discriminatory’ times, but this is a carry-over.

Their major focus in this report was the pay gap for women over 40. That is part of the answer, this is the other part:

The Institute of Directors and Chris Giles suggested that, as younger, better educated women move through the system, we should see the gender pay gap fall. Mr Giles pointed to evidence that:

There is a generational shift … Women in their 20s closed the full-time pay gap in about 2004; in 2012, by the time they reached their 30s, it had disappeared. It has halved for women in their 40s since the data series began in 1997. In contrast, there has been no significant improvement for working women over 50.

That really is the answer. There most certainly used to be discrimination against women in career choice, working options after childbirth, education and so on. We've made the changes to society that take care of those: all we're doing now is waiting to see those changes pass through society along with the age cohorts. We're done.

Oddly enough it's a Guardian column that manages to get this right. There is still, even after all that education, change in social attitudes and so on, a pay gap. But it's not caused by employers at all:

Take a glance at the British Social Attitudes survey, and it might seem as if the British public still supports the traditional family model. But look more closely, and it’s clear that change is coming. When asked whether they agree with the statement: “A man’s job is to earn money; a woman’s job is to look after the home and family”, only 4% of men and women aged 18 to 25 agreed. There was little difference between the genders. Attitudes toward parental leave reveal a similar change. Asked whether paid leave should be divided between the mother and father, 44% of those aged 18 to 25, and 26% of those aged 26 to 35, agreed that it should, compared with just 13% of over-65s. Yes, baby boomers, your kids turned out all right. But we can’t start celebrating just yet.

The current ability to share parental leave comes from an analysis we published here: we know who picked it up, ran with it in policy circles and thus it became law. So we feel rather proprietorial about this point. Currently some majority of the population have those gendered opinions on who should be running the household and who should be providing for it. Our own opinion is that this isn't unusual in a mammalian species but we're perfectly happy with the idea that those attitudes will change at some time. It might well be this coming millennial generation that changes. Currently mothers earn about 10% less than non-mothers for each child they have. Fathers seem to earn (after adjusting for age and all that) some 6-8% more than non-fathers. American research shows that there is no pay gap for those with equal and equivalent familial duties. Primary carers of either sex earn less than primary providers of either sex.

If this is a problem then so be it, declare it to be a problem. But the solution is not in law nor is it with employers. It's with the attitudes toward family life of the population. And as the good little liberals we are we're entirely happy that people get to live their lives as they wish, make the decisions they wish to make. And if those decisions change then so be it.

As we have been saying for a decade now, and when we started saying it it was a very lonely thing to be saying, there are differences in the gross pay of men and women in the UK. The cause is not discrimination by the State, employers or the society at large, but discrimination by those who have children and how they wish to raise them. We might call it a caring pay gap, a motherhood pay gap, a child pay gap, but it is no longer a gender pay gap. We don't regard this as a problem that needs solving, you might. But given that this is the cause the only solution is however people decide to raise their children, something that's really rather up to them we feel.