But why would poor people buy the average item?

There’s a certain obviousness to this:

Suncream prices a third higher in April before families jet off on summer holidays

Well, yes. The reason producers charge more at different times of the year is because they can. So that’s solved then.

This though is a very common mistake:

Skin cancer charities have expressed concern that, with the average cost of a bottle of sun cream now at £19.95, poorer families are being priced out of sun protection.

We see this about all sorts of things. The average cost of housing, or average household groceries bill and so on. It doesn’t greatly matter which average is being talked of either, mode, mean or median.

Why would - or even should - the poor even be attempting to buy the average product? We did check this, Lidl offers perfectly acceptable suncream at €3.99 in its Irish stores. At least one of us has stuck the same stuff on grandchildren in other countries.

That is, the affordability of something to the poor isn’t, in the slightest, determined by the average price across the economy. For there are brands designed to extract the maximum from the richer, just as there are those designed to extract a few pennies from those poorer. What matters for availability to the poor is not the average price in the least, it’s the lowest price.

Poor folk cannot, for example, afford the average house. So what? What matters is whether the poor can afford housing, some of which will be smaller, cheaper, in less appealing places - you know, for the poor. The poor can’t afford the average grocery basket - so what? Is the diet affordable by the poor still sufficient?

All of this before we even examine the numbers themselves - someone really thinks the average bottle of suncream costs £19.95 do they?

This strikes us as being grossly silly

Britain's biggest banks have failed to pass on higher savings rates to customers, despite repeatedly increasing costs for mortgage customers.

That strikes us as blindingly obvious. Perhaps that’s just because we actually understand such things.

Banks live off the interest rate margin. The gap between what they charge to those who borrow from them and the amount they pay out to those who lend to them - or deposit with them. It’s entirely a commonplace that as interest rates in general have been rising recently then that rate margin has been expanding. It’s in literally every single one of bank financial reports and all commentary upon them.

The reason why is that the artificially low rates of the past decade and a half compressed those margins. On the very simple grounds that few are willing to deposit at a negative interest rate. Yes, such did exist in some places these past few years but here in the UK deposit rates tended not to actually go negative - they stuck at 0%. But of course lending rates dropped like a stone, those margins were compressed.

This is all a result of QE and as QE is unwound therefore those margins are increasing again. Back to what they were in fact. Shrug, seems simple enough to us. This is all a part of a return to normality. So, quite why the complaints about it we’re not sure.

But then we get this:

In its letter to MPs, the FCA said that its new Consumer Duty rules will “require firms to be able to justify and explain the rationale for the speed with, and degree to which, they make changes to their various savings rates”. The new rules take effect on July 31.

Firms operating in an open - yes there are new banks, there are new places to make deposits - competitive and free market now have to justify their pricing decisions to the bureaucracy? No, that strikes us as being very silly indeed.

If there are concerns about the possession of market power allowing non-market prices to be set then change the amount of competition so that the market power doesn’t exist. If that problem does exist then that should be done anyway. But having to explain prices to the clipboard wielders is to give those bureaucrats the pricing power themselves. That’s what’s really meant by “justify” here, that banks will have to change their prices at the whim of the civil service.

No, that didn’t work in the Soviet Union nor has such price setting ever worked anywhere.

If the analysis is that market power exists allowing non-competitive pricing then change the market structure so there is no market power. Anything else is very, grossly even, silly indeed.

Use prices to regulate things, not clipboard wielding

That Socialist Calculation Problem ever confounds the bureaucrats. That we know that it’s impossible to do - efficiently - the things we want done by employing a blizzard of paperwork doesn’t stop those who love form filling from trying. It’s simply not possible to track the entirety of something through the economy. That’s why the manufacture, supply, handling, of something cannot be done by planning in detail. The world’s just too large and complex for that. So, we have to use prices to provide the incentives to get the thing done:

Retailers have expressed concerns over proposed changes to the extended producer responsibility scheme due to start in April next year. It is estimated they will add an overall £1.7 billion cost to businesses.

Under the plans from the Department for Environment, Food and Rural Affairs, businesses that supply goods with packaging, from giant cardboard boxes to coffee cups, will be fully responsible for the full net cost of dealing with the waste, shifting the cost away from people paying council tax.

Companies that supply branded packaged goods to the British market or import products in packaging must track that packaging through its life cycle and collect an official note from a reprocessor to confirm the waste has been recycled. The costs will include a waste management fee based on the weight of packaging and a charge payable to the environmental regulator.

This is simply abject nonsense. It is assuming, at the start, that it’s even possible to track a bit of packaging wrap through the system. It isn’t - it’s not something that can be done. Therefore we’re going to have that blizzard of paperwork, those armies of clipboard wielders, achieving nothing at vast cost.

Now, we’re really very certain that packaging isn’t a problem that has to be dealt with. But imagine, for a moment, that it is. The way to do it is to have a price attached to packaging. Add, if we wish, a deposit to the packaging at the point of production (or import). Then that deposit is paid back to whoever brings it into the recycling or other disposal centre. We have now created the financial incentive for people to get the packaging back to that recycling or disposal point - job done.

Most businesses will return for the cash. Those that don’t will find that the Bob A Job week (although that’s now probably the Ton A Task week these days) or the impecunious looking for an income will collect up the remainder and deliver it. As happens in countries with a bottle deposit return scheme.

The abject nonsense here is that we already know how to achieve this task - add a price to it. Instead we’ve got people trying the Soviet answer circa 1955 to it.

Remind us - did we import our bureaucracy after 1989 from East of the Berlin Wall or is the education system really so terrible that civil servants think such a scheme will work?

Who's the boss

“To whom do civil servants report?”  

Back in 2012, Dame Margaret Hodge, then chairing the Public Accounts Committee, asked this simple question. 

They certainly report to the permanent secretaries of their departments but then to whom do permanent secretaries report? Their respective Secretaries of State? Or the Cabinet Secretary? Or because they are usually the “accounting officers” for their departments, direct to Parliament? And if so, to whom in Parliament? Or maybe the Civil Service Governance Boards are in charge? 

The question has yet to be definitively answered.

According to a government guide, civil servants “help and support” ministers but they are “independent of government”. In other words, they are consultants and not part of government at all. “The head of the Civil Service is supported in this by all his permanent secretaries through the Civil Service Governance Boards.’’ That makes the Cabinet Secretary a sort of CEO. But not quite. 

In 2010, the House of Lords Constitution Committee heard strong representations that being head of the civil service was incompatible with being, in effect, the permanent secretary of the Cabinet Office, i.e. the role of Cabinet Secretary should be split. Unsurprisingly the recent Cabinet Secretaries supported the current status quo and the Lords consented. The muddle continues.   

Ministers cannot sack civil servants however incompetent they prove to be: 

“It is a firm rule that ministers cannot dismiss civil servants that displease them or offer unwelcome advice. It follows that, if a Secretary of State falls out with their Permanent Secretary, there then needs to be a triangular discussion involving the Secretary of State, the Cabinet Secretary and the civil servant.   Where possible, this leads to two or more Permanent Secretaries swapping places.’’

So if ministers cannot dismiss civil servants, who can? This is Alice in Wonderland territory.  They are, technically, servants of the sovereign so the King can but clearly wouldn’t. The “four years in post” rule was introduced in 2004 but it turned out civil servants only stay two years in post anyway - not long enough to gain the relevant experience - so that was largely abandoned.

“Civil servants are not however covered by the statutory redundancy payments scheme available to other workers, but are instead covered by the much more generous Civil Service Compensation Scheme (CSCS). Indeed, the CSCS provides that those covered by the CSCS never receive less on redundancy than they would under the statutory scheme. The Government attempted, in 2009/10, to make the CSCS less generous but one out of the six main civil service unions resisted the changes. The courts then held that the legislation under which the scheme was made required that the scheme could not be altered without the agreement of all of the civil service unions.’’

Most permanent secretaries are the “accounting officers'' for their departments. Meaning once policies are decided, usually based on their advice, they are responsible for their execution including all financial aspects. Notably this responsibility does not fall on the minister.  

“The post carries personal (my emphasis) responsibilities to manage the organisation efficiently and effectively and to report to parliament accurately, meaningfully and without misleading.’’

Nothing, really, to do with the departmental Secretaries of State. In practice, “Parliament” normally means the Public Accounts Committee.

What with civil service uncertified days off sick being over 40% higher than the private sector, discipline being regarded as bullying, and most civil servants now working from home, It is a wonder the civil service gets anything done at all. It is high time the Hodge question was answered.  

Whitehall needs modernisation. If policies are to be implemented swiftly and cost effectively  sensible reporting lines and up-to-date HR practices need to be introduced.

Pathological failure

COVID-19 highlighted the flaws in UK pandemic preparedness. Yet the Government is still yet to take action to mitigate future risks.

The risk of biological threats is increasing due to several factors, including population growth, technological advancements, and increased global tensions. Advancements in synthetic biology have made biological materials more affordable and accessible to malign actors seeking to create bioweapons.

A biological threat can emerge from many reasons including a deliberate attack - seen in 2001 during the Salisbury attacks - an accidental release from a life sciences lab, or a zoonotic spillover, all of which have increased in likelihood.

As evidenced by COVID-19, nations such as our own are ill-prepared for major biological threats. In contrast to other deadly pathogens, COVID-19 was relatively mild and a deliberate biological attack could be far more dangerous and much more overwhelming for any state.

To reduce the chance of a future biological threat, a more effective biosecurity approach is needed. This requires strong prevention, detection and response capabilities that together can significantly enhance the UK’s residence against biological threats. 

Below, I propose a set of policy suggestions that I believe would strengthen our biosecurity and are therefore split into three sections; prevention, detection and response.

Prevention

Prevention is the most critical component within a biosecurity approach. Stopping biological threats before they emerge is preferable to mitigating them after the fact. 

Essential prevention strategies include:

• Regulating the purchase of synthetic biology technologies

• Including requirements for actors purchasing DNA synthesis and gene editing technologies to undergo full screening to ensure these materials are not being misused to synthesise dangerous pathogens.

• Invest money into creating computer software that can be installed into all DNA synthesis or gene editing devices that can immediately detect when materials are being misused.

• Enacting international agreements and export controls on materials and technologies that could be used to create bioweapons. 

• Regulate gain-of-function research:

• Gain of function research involves manipulating pathogens to increase their lethality in aim of understanding the potential threat to the population better. Due to the high risk of laboratory spillages, this type of research is often deemed controversial and has the ability to harm society greatly. 

• To control gain-of-function research, an independent government agency should be established that regulates and ensures that only essential and proven beneficial research is being conducted. 

Detection

The detection of potential pathogens can most efficiently be done through establishing strong early warning and monitoring systems. Currently detection strategies in the UK are limited; a monitoring system that is pathogen-agnostic (not looking for one specific pathogen but looking for all nucleic acids that could potentially generate into sometime dangerous) needs to be established. 

• An expansion in the Ministry of Defence’s budget for Research and Development to be spent on creating a biosurveillance system. This system would be on a national scale and would take data from a variety of sources, including looking at waste water in areas prone to a biological attack (urban areas, areas near BSL-3 and BSL-4 labs), testing the blood of patients in blood banks, screening passengers in airports. Testing could also expand to factory farm animals to detect potential pathogens in animals that could easily be spread to humans.

• Establish an online system that collates all the data from each source and turns them into information that can be easily interpreted by decision makers.

• Strengthen the Biological Weapons Convention (BWC) and work towards creating an international collaboration scheme that establishes regular communication, data sharing and global surveillance between countries. Data needs to be shared on a global scale so that if a country detects a pathogen early, other countries can shut down connections with them to properly isolate them - this leads to a quicker response and containment of a potential virus. 

Response

Once a potentially dangerous pathogen has been detected, a quick and effective response is needed to contain and control its spread. Covid-19 demonstrated the UK’s inability to do this efficiently, leading to countless more deaths than what would have been given the following suggestions were in place. 

• Increased investment into building highly effective, easy to use, cheap and abundant PPE which can be readily enforced if a new pathogen is detected. Once established, PPE should be stockpiled and given to healthcare/essential workers during a pandemic. Current PPE standards are low, they are not designed for extreme biothreats, expensive and short in supply. 

• Invest money into portable, easy to use ventilators and create a drone delivery scheme that would allow medication, ventilation, vaccine and PPE delivery for those living in remote locations. 

• Use the Operation Warp Speed model to develop vaccinations and PPE rapidly. OWS was a successful public-private partnership that led to a rapid response to COVID-19, resulting in the creation of Moderna, Johnson & Johnson and Pfizer-BioNTech vaccines. 

• The IFP identified four components of the OWN model: clear goal setting, market shaping mechanisms, whole-of-government strategy and streamlined regulations. These components can be applied to develop a biosecurity plan.

• A unique feature of OWS was an independent board with decision making authority, allowing for faster decision making without bureaucratic red tape which if similarly used against a biothreat, could allow for the quick creation of vaccines and PPE.

Having an industrial plan depends on what you mean by an industrial plan

A suggestion in The Times that Britain really should have an industrial plan. Part of which we actually agree with:

And the default option of doing nothing does not mean staying true to some kind of untainted free market codex. It just means allowing all our mistakes — chaotic energy policy, underinvestment, insufficient workforce training and an ill-planned net-zero agenda — to strangle thousands of otherwise viable businesses.

That untainted free market codex would probably include not having a net-zero agenda, leaving energy policy to the market rather than having one and so on. That is, the free market codex would solve those problems by not allowing an industrial policy to cause them - as the current one does. So there is that to be said for laissez-faire.

This though boggles the mind.

Beijing funnelled about $1 trillion of state cash into setting up venture capital funds to overcome the problem experienced by innovative start-ups: how to scale up production. The funds were meant to hire private sector experts and make a profit as well as deliver supply chain security. Some failed, hiring local officials and wasting cash on political projects. But others generated successes, like the scale-up of NIO, an electric vehicle company that now rivals Tesla and has become the centre of the world’s battery production hub in Hefei.

Beijing took a trillion off taxpayers - a trillion - and ended up with a car company worth $14 billion. This is the sort of success that we’re supposed to emulate?

No, really, just no. We’re fine with the idea of an industrial plan to undo all the mistakes of past industrial plans. But having decided they’re disastrous let’s not go and make new mistakes. Instead let’s do the sensible thing which is to keep politicians out of the business arena near entirely. After all, the reason they’re in politics is because they couldn't cut it in the real world in the first place, right?

Neither Healthy, Wealthy nor Wise

Long waiting times, low quality of care, both patient and doctor dissatisfaction, the NHS is not in a good place. The need for broad reform is clear. 

The government recognised this and last year the Chancellor engaged Patricia Hewitt (Labour Health Secretary 2005/7) to advise how the NHS should be reformed. Instead, only 2 weeks late - pretty good for the NHS - we got her report on integrated care systems (ICSs). As Deputy Chair of the Norfolk and Waveney Integrated Care Partnership Hewitt, is unsurprisingly keen on ICSs.

The thesis is that patient care would be enhanced if the NHS and social care providers worked more closely, optimising the individual's care with greater community involvement. No one will argue with that as an ideal but delivering it is another matter. And it will not cure the NHS.

“Integrated care systems (ICSs) are partnerships that bring together local government, the NHS, social care providers, voluntary, community, faith and social enterprise (VCSFE) organisations and other partners to improve the lives of people who live and work in their area.” (1.3)

In other words, ICSs are local multi-tier bureaucracies distracting front line medical and care staff from face time with patients and carers. Not exactly the panacea promised. 

The Hewitt Report should be read alongside the February 2023 Report from the Public Account Committee which documents some of the problems and concludes “In short, on ICSs, the jury is clearly still out”. Apart from their inherent added costs and time-wasting, ICS problems include: Who do they report to? Who pays for what? For an individual patient/caree, who decides what the system will do for him/her?  

Hewitt however is wonderfully utopian: 

“ICSs bring together all the main partners - local government, the voluntary, community, faith and social enterprise sector, social care providers and the NHS - in a common purpose expressed in 4 main aims: to improve outcomes in population health and healthcare; to tackle inequalities in outcomes, experience and access; to enhance productivity and value for money; and to help the NHS support broader social and economic development.” 

Some of us believe the NHS is there to treat and cure people, not supplant the government.  The Department of Health and Social Care (DHSC) and local authorities have huge departments dealing with broader health matters, like telling us to take more exercise, so why should the NHS, and DHSC, come to dabble in that area too?

Unfortunately, Patricia Hewitt also doesn't practise what she preaches. According to a local doctor, a North Norfolk surgery that comes under the wing of her ICS will be closed with no consultation even though the local council has been opposing it for months.  They have been ignored and the local community will now be faced by long drives (if they have cars). To tick the boxes, a “consultation” may take place but the decision has already been made. 

There is a mantra, popular among politicians, that prevention is cheaper and more effective than treatment and cure. If we had better prevention, apparently, none of us would get sick at all so we’d hardly need an NHS. Yes, I know immunisation works, but it has limited application. As for the idea, prevalent in Hewitt’s Report (1.12 – 1.15) that ICSs can remove health inequalities – tell that to the Chancellor. Health inequalities are driven by wealth inequalities.

The NHS should be removed from government and become a public corporation run by its CEO, Amanda Pritchard. It should focus on what it is betterat: treatment and cure. Social care today has no national CEO in parallel with the NHS, but it should have and it should also become a public corporation.

Of course they should cooperate at the local level, just as an army unit works closely with its neighbours, but they should not indulge in endless committee meetings taking doctors away from patients. Each GP should have an opposite number in social care with whom to liaise over mutual patients/carees. There is no need to involve the rest of the local ICS. Prevention (health) management should be examined closely to distinguish what works (free school meals for example) from what does not. 

Indeed, we have no real need of ICSs at all.

How does anyone think politics works?

We’re against the very idea of a national semiconductors plan. One of us did some work on the transputer, that result of the last such plan but three or four. What a waste of time and effort that was. One reason why we’re against such plans:

Technology bosses accused the government of being “distracted” after the minister who was due to launch the long-delayed semiconductor strategy this week confirmed that he was considering running as mayor of London.

Paul Scully, the minister for tech and the digital economy, was expected to outline the plan for the UK’s microchip industry at the Compound Semiconductor Applications Catapult just outside Newport tomorrow. However, sources said he pulled out on Monday, and then yesterday the Conservative MP for Sutton and Cheam confirmed he was mulling over his potential candidacy.

Dr Simon Thomas, chief executive of Paragraf, a Cambridge-based semiconductor business said, he was dismayed by yet another setback: “I am disappointed and angry with the government and the minister. He is clearly being distracted by his other career plans.”

This is how politics works. Decisions are taken not on the basis of what is good for an industry, what solves a problem for the country, but on the career ambitions of the politicians making the decision.

That’s just what politics is. Which is why, of course, we should not have decisions taken by politics unless it’s absolutely essential that they be so. Simply because such a decision - say, on the semiconductor industry - is not going to be taken on the merits of whatever of the problem or the industry but to suit the career ambitions of the politician taking the decision.

And let’s be honest about it, whatever the issues about semiconductors they have nothing at all to do with who is going to be Mayor of London next time around. Therefore the semiconductor decision isn’t going to be made on the merits of that industry, is it?

Does the public sector understand wages?

UK workers have been going on strike. But how do the teachers, nurses, and other public sector workers on strike know how much they should be paid? I can help steer them in the right direction with reference to the price system… let me explain.

Think about your own job - how do you know if you're underpaid? Overpaid? Or paid just about right? If you're in the private sector, there's a good chance that your pay is just about right, because there is nothing more efficient than the price system for determining the right levels of pay.

I'll oversimplify the following example slightly for the purposes of illustration. Suppose we have Jack, who is overpaid in his job, and Fred, who is paid about right. Imagine the country has lots of job vacancies at the right labour rates. If Jack's wages are cut to the marginal rate, then he'll be unhappy because he's no longer overpaid. If Fred's wages are cut, then he'll now be underpaid, and he can move to a job in which he will be paid his marginal rate.

Cutting Jack's pay was a good move for his employer, but cutting Fred's pay was a bad move for his. Why? Because Fred's employer has been outbid by a more competitive employer paying the marginal rate. Fred's ability to find another job at the rate he was on is pretty much all the evidence you need that he was not overpaid. But Jack's grievance at his pay cut stems largely from the fact that he'd find it difficult to get another job at the same rate, which is pretty much all the evidence you need that he was overpaid.

Remember, in economics, the price system for labour in terms of the employee also has a logical standard - the worker ought to be paid the amount that makes their job more desirable than the next best alternative. That's why there is competition for employers to pay rates that will attract the best employees.

I don't know what the exact rates of pay should be for doctors, nurses, paramedics or teachers, but I can tell what we should want to see if we want those industries to thrive. We want to see the wages set to enable the vacancies filled, and to the level that public sector workers are invested in their careers, and satisfied in their work, but not so satisfied that they are earning over their marginal rate. In economic terms, we want them to prefer their job to the next best alternative, and we want their pay to reflect those preferences in accordance with the price system.

The situation should reflect the following: given a pool of identical employees, some of whom are producing X a month in the private sector, and others who are producing X + Y a month in the public sector (and vice-versa), you'd want to move the marginal worker to the sector closest to X (where X is the correct marginal rate) - and this should extend in both sectors in all industries until the two productivities reach equilibrium. At which point, we have an efficient allocation, whereby the output of the doctors, nurses, paramedics or teachers would be the same as it would be in a private sector job.

There's another reason why it's important for public sector employers to pay their employees something approximating the market rates, and not underpay or overpay them. We want a society in which everyone is incentivised to contribute most, in accordance with their talents and skills - and, again, there nothing as efficient as the price system for determining who is doing what. Every highly skilled and talented individual who is hired in one sector is no longer available in the other.

If workers are overpaid in one sector at the expense of the other sector, then labour rates are not optimally set in a way that draws the right employees into the right jobs and careers. We don't want the brightest neurosurgeons incentivised to work in IT, we don't want the brightest data scientists in public sector middle management jobs, and we don't want our top physicists tempted to work in the retail industry. For that reason alone, as much as we don't want our public sector workers to be underpaid, we don't want them to be overpaid either.

As we've said, the best way to determine the right level of pay is the price system; and the best way to determine if the public sector pay levels are right is to ensure that they as closely matched to the equivalent roles in the private sector as possible. The trouble is, in most cases, it is difficult to know which jobs in the private sector are comparable or equivalent to jobs in the public sector - there are too many factors to make an easy comparison, which makes the desires and the negotiations somewhat intractable.

We really do think the quality of analysis needs to rise on this subject

Another one of those claims that kids are all so fat these days they’re about to pop if the diabetes doesn’t get them first. For a start, as Chris Snowdon keeps pointing out, none of us should believe the numbers about obesity in children in the first place. In this particular piece the relative measure of child poverty is used to show that parents cannot afford food. But relative poverty isn’t the correct measure of not being able to afford food in the slightest - we need absolute poverty for that. Which isn’t the measure being used.

We’re also amused by the insistence that the use of food banks is a measure of how bad the problem is rather than an alleviation of it. However, we think this is a just lovely example of how bad the thinking is in this area:

Compare this to analysis from Impact on Urban Health, which found that simply expanding free school meals to all children in state-funded education settings in England would inject £41.3bn into the economy and the way forward should be clear.

That analysis is here and no, really, just no. The world doesn't work that way. As even a moment of thought will tell us.

GDP - that’s the measure we use of the economy after all - is the final value of output (or if we prefer, incomes or consumption) at market prices. So, if we remove something from market prices - decide to offer something free instead of charge for it - then we reduce GDP. Because we’ve just reduced the amount of economic activity we’re measuring by our use of market prices. QED.

We agree entirely that GDP doesn’t measure everything, not even everything important. And yet this is still true. We’re not going to gain additions to our economy by making something free. The claim we are just shows that folk aren’t thinking on this subject.