Good sense on the NHS

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Harriet Sergeant's article in Saturday's Daily Mail said almost everything that needs to be said about the current state of Britain's National Health Service. I heartily recommend reading the whole thing. In the meantime, here are a few edited highlights...

On public sector inefficiency:

But how on earth will it cope with the exploding number of elderly patients and the costly new procedures and treatments coming on to the market? The answer, says the health think tank the King's Fund, is to increase productivity in the NHS. But over the past decade, it fell by almost 4 per cent. (Over the same time, it rose by almost 23 per cent in the private sector).

How could this be?

I had not realised how costly the actual structure of the NHS is until I sat in on a hospital board meeting. Making sure the hospital complied with the latest government initiatives dominated the agenda. We didn't discuss patients, improving care, saving money or any issue relating to the hospital. The focus was on the bureaucratic process. The initiatives did not come cheap. The board has to prove to the DoH it is complying. So, for nearly every new initiative, the hospital appoints a manager, often on £50,000 to £80,000 a year - not to mention a secretary - to collect the all-important data that must then be submitted to the Department of Health.

The result?

The effect of this is clear. One consultant calculated the proportion of managers, administrators and support staff to nurses in the NHS is 41/2 times greater than in private hospitals, which are not subject to the government initiatives.

Why doesn't someone do something about it?

I spoke to one non-executive director who has a career in trouble-shooting ailing companies and who was astounded by the attitude of his local hospital. With only a cursory look at the books, he announced he could save £200,000 just by good accounting. The response he got? 'It was as if I was speaking Ancient Greek.' His ideas were dismissed as not applicable in a service funded by the Government. Worse, the hospital's chief executive feared that an investigation might expose failings and leave him vulnerable to political interference.

The real problem:

The problems with NHS finances are bound up with the problems of the institution itself. It was designed to be state- owned, centrally planned, financed and run. Until we engage with that basic premise, the NHS will continue to be inefficient and expensive. And we'll see more hospitals closed and front-line staff cut. It is clear to me that we can no longer afford this top-down approach. But where do we go from here?

The solution:

I believe that instead of devising its own solutions to problems, the Government should cease to micro-manage our healthcare. Instead, it should be creating the opportunities for individuals and companies, inside and outside the NHS, to come up with the most efficient and cost-effective solutions, with the Government's role as strictly regulatory.

I really couldn't agree more...

Why aren’t the Conservatives doing better?

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The latest poll (by YouGov for The Sun) has the Conservatives just 6 points ahead of Labour, with 38 percent compared with 32 percent. The Lib Dems are on 17 percent. Assuming a uniform national swing, that would leave the Tories 34 seats short of a majority.

The first thing to say about this is that we're almost certainly not going to see a uniform national swing at the election. The Tories have have been focusing their resources on the marginal seats that are going to decide the election, and polling suggests that they are doing better in these seats than they are nationally. That means they are likely to win more seats than pundits are currently predicting.

Nevertheless, there remains an interesting question here – why aren't the Tories doing better? The economy has gone down the pan. Gordon Brown couldn't be more unpopular. And Labour has been in for 13 years, meaning the political pendulum is almost certainly swinging against them (all governments run out of steam in the end). On this basis, the Tories should be polling comfortably above 40 percent, and maybe even pushing 50 percent.

The reason they're not, in my opinion, is because it remains more-or-less impossible to answer the question, 'what are the Tories going to do for me?' I follow politics closely, and I've really got no idea. So why should they expect the man on the Clapham Omnibus to bother voting for them?

If he wants to win big, David Cameron needs to find a more convincing 'retail pitch', and fast. I know Britain's precarious fiscal position leaves little room for manoeuvre, but at the very least he should promise that there will be no tax rises, no new taxes, and that any tax hikes already scheduled for 2010 and 2011 will be cancelled.

I also think that there is a rich vein of public sentiment to be exploited by railing against all the incremental infringements of our liberty that we have suffered over the last decade – promising to get rid of all the bureaucratic little Hitlers that make British lives a misery would surely be a vote winner. In 1951, Winston Churchill campaigned under the slogan "set the people free". If the Conservatives want to reverse their decline in the polls, they desperately need to capture that same sentiment.

Madsen & Eamonn win Enterprise Award

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Dr Madsen Pirie and Dr Eamonn Butler will be presented with the National Free Enterprise Award today. The Award will be made at the Institute of Economic Affairs annual conference on the state of the economy, held in the Institute of Directors near Westminster. It will be presented by Professor Stephen Littlechild.

The National Free Enterprise Award goes back three decades. Its lustrous past winners include the airline entrepreneurs Sir Freddie Laker and Sir Richard Branson, hotelier Lord Forte, Nobel economist Friedrich Hayek, politicians Sir Keith Joseph and Margaret Thatcher, Buckingham University head Dr Terence Kealey, and financial journalist Neil Collins.

The panel of judges includes prominent supporters of free enterprise from various walks of life, and most made Pirie and Butler their first choice for the award. The pair have been prominent for defending bankers during the recent crisis, and pinning the blame on inept central banks, spendthrift politicians, and incompetent regulators. As Eamonn Butler put it: "The cause of this crisis was the tsunami of paper money that the US and UK kept printing over fifteen years. At first, all of us who surfed on it enjoyed the ride. But inevitably, it crashed into reality and of course destroyed everything before it."

The pair are known for humour as dry as their politics. Butler described his 30-year professional partnership with Pirie as "one of the great double-acts, like Jekyll and Hyde", while Pirie assured journalists that "absolutely no bullying was used on the judges."

Click here to find out how you can attend a reception this evening to celebrate this achievement.

We gain from trade with China

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To protectionists and Sinophobes, the news of China recently surpassing Germany to become the world’s largest exporter represents yet another nail in the coffin for manufacturing in “[insert Western country]”. But China’s exports include Apple’s ubiquitous iPods and countless other products designed in the West. More than a reflection of China’s growing economic might, this is testament to the erosion of economic, political, physical and technological barriers to production. The fall of the Berlin Wall and the collapse of communism as a viable model, together with containerised shipping, GPS, just-in-time supply, and other technological marvels, has spawned a global division of labour and production that defies traditional analysis – and trade accounting.

Typically, Chinese producers are at the final node of an assembly line that snaps together raw materials (say, minerals from Australia) and components (say, microchips from Taiwan), using software developed by teams in Redmond and Bangalore, while implementing designs from Cambridge (Massachusetts and England); all thanks to capital raised by consortiums based in New York City and Sao Paulo.

Two important points are worth making: “Chinese exports” are underpinned by valuable activities elsewhere, and product assembly adds less value than other activities along the production chain. For example, a recent University of California study concludes that the Chinese value-added embedded in a 30G Apple iPod accounts for only $4 of the total $150 cost. The fearmongers see the entire $150 chalked up as a Chinese export, and miss the money flowing back to Cupertino in the USA.

One of many local examples that follow a similar production pattern is Cambridge Audio. Its products are designed by teams of well qualified and richly-rewarded engineers here in the UK and are assembled cheaply in China. This offers Western consumers better quality at cheaper prices and allows the company to invest more in product development, which will ensure competitiveness, promote innovation and sustain high value-added jobs in the UK.

Don’t be afraid of China’s booming exports. In today’s economy, we all have a stake in their success.

Alec van Gelder is Project Director at International Policy Network.

Capitalism corrupted?

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There's a new book out, The Corruption of Capitalism by Richard Duncan. He's American but I guess he's in London because he was on the Today Programme this morning. The argument, which I subscribe to and which is reflected in The Alternative Manifesto, is that capitalism works just fine, but it has been corrupted by paper money and government borrowing. Before 1972, the US dollar was tied to gold, and other world currencies were pegged to the US dollar. So there was a limit to how many paper dollars (and pounds, and yen) could be printed. That did cause problems occasionally, but it kept our money sound.

Since 1972, there have been no such restraints. Governments could print as much money as they wanted. Meanwhile, the postwar belief in the desirability of large government spending programmes, and the Keynesian orthodoxy that the government could spend its way out of any crisis, made governments think they needed more and more money. The result is that they flooded the world with the stuff, using it to fuel excessive government growth and spending. (Our money is worth about 2% of what it was at the end of World War 1).

As soon as the gold restraint was gone, the Heath government set about printing so much money that inflation rose to 26%. The Wilson government that followed then raised expenditure even more, producing stagflation. In the mid1980s there was another boom, corrected only by a another recession, stock market crises and the rest. Governments still didn't learn, and off the cycle went again, bigger and bigger. Any crisis – the 1985 Savings and Loan Crisis, the 1997 Russian default, 9/11 in 2001 – was met by the authorities flooding the world with money, in a coordinated effort by London and Washington.

It was a huge fake boom, and as always it produced a huge real bust. The authorities have again tried to staunch it by printing money. If they hadn't, the scale of the bust would be obvious – about as big as the Great Depression. Of course, not many people want to go back to a gold currency – particularly when the Russians own so much of the world's supply. But we need something like it. The first duty of our monetary authorities is to keep the currency sound, not to debauch it. Governments need to be forced to balance their books, with strict spending, borrowing, and debt limits. And we need tougher reserve requirements on the banks, so that they cannot magnify the amount of money that governments produce and turn a drama into a crisis. And we need to get on with it now.

It's not too late to give Paris a call you know

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We've been told endlessly that the London Olympics is going to make us all such a wonderful profit! You know, never mind the expense, just feel the width of all that infrastructure. Poeple will be so impressed with London that they'll all come as tourists for years to come! Slightly missing the point that anyone who has the money to travel has almost certainly heard of London already.

To assuage our doubts over all of this we've been offered a number of papers from the various organisers and boosters stating that all will indeed be well. However, here's a paper looking at the costs, in an impartial manner, of the current Vancouver Games. Agreed, it's a student paper but at least it's not being paid for by people looking for a particular answer.

And the answer that's found is that, even if the Games stuck to their orignal book costs (an assumption in our own case which has been blown through by a factor of four already and we've still two years to go) then the nett benefits of the Games would be negative. There's a very clever little observation in there as to why this might be so as well:

“Economic theory casts doubt on a substantial windfall for the host city from the Olympic Games. Cities competing with one another for the Games would theoretically bid until their expected return reached zero.”
(Rob Baade)

Quite: in order to get the games you've got to bid more than everyone else. More in terms of the new stadia you will build, more you'll spend on making it the bestest outdoor jamboree for track suited drug addicts ever. And it takes place in an auction atmosphere, which leads to the winner's curse, the bidding is done by politicians which is never a good sign and the bidding is done with other peoples' money which is a violation of Uncle Milt's the four ways to spend money.

Then we go off and hire a bunch of superannuated politicians (look, Seb Coe was a great runner and is a nice man but losing your seat as an MP in Falmouth does not make you a great construction manager) and we're surprised when the Olympics bankrupt most of the places that hold them?

I'd just like to repeat the point that it's really not too late to give Paris a phone call and ask if they're still interested. Indeed, I think we might find that Athens has everything necessary and it's certainly true that they could use the influx of what cash there is right now. They've already built all the stadia anyway....

H/T Anti-Dismal.

Dismantling the pensions pyramid

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Others here at the ASI have written at some length about the need to dismantle the government's Madoff-style pension fraud before it unravels and plunges us all into fiscal disaster. However, the dire warnings have usually been countered by fears that current retirees will not be protected, or that the younger generations will have to pay an unfair amount to cover them during the transition from state to private – in effect, paying twice.

I propose that both of these difficulties in privatizing the state pension scheme can be overcome by adapting a plan developed for the American Social Security system by the Cato Institute. This plan can spread the costs of ensuring cover for older people, without unnecessarily burdening one generation with debt. Crucially, it phases in the reform slowly, and gives people a rational choice of whether or not to participate.

At the moment, the government dishonestly promises young people that they will be entitled to a state pension when they retire, but has no means of guaranteeing it. If the government were honest about the predictable future shortfalls, young people could act rationally; saving nearly half of their National Insurance Contributions privately to provide for their own retirement, whilst relinquishing their right to a state pension that will likely not materialise anyway. Thus they could still support the older generations who rely on state aid, whilst being allowed the freedom to secure their own futures.

A more detailed look at the proposal can be seen in the Think Pieces Section here.

Tough on crime, tough on the causes of crime

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We are continually being told that the causes of crime are both complex, built into the very structures of our society, and simple: it's all inequality, innit? Poverty, deprivation, righteous anger at the greed of the rich: fill in your own quotations from Polly Toynbee here.

However, there's another theory entirey: that much crime, if not most of it, is opportunistic. It takes place because those who would have more and are willing to get more through either violence or other illegality meet up with those who have the more and cannot defend it. Our problem is of course that we very rarely get the sort of natural experiment that we need in order to test which of these two is correct: or, if we are to be fair, or both could have some relevance, which explains the greater part of it. Rarely, but not never:

The Baltimore example is that over the period of the recent blizzards – when most potential victims were stationary, and not accessible to the police, the crime rate dropped.

For example, murders – of which there were 18 in the first 37 days of the year – dropped to 0 in 9 days.

Now it certainly isn't possibly true that inequality, poverty, deprivation or righteous anger dropped in those days of the snowstorms. It's also most certainly not true that policing had anything to do with it as they were as trapped as everyone else. No, we're rather left with our second explanation: the root cause of crime appears to be the opportunity to commit a crime. When that opportunity isn't there, nor is the crime.

A state of distrust

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The ASI has long campaigned against intrusive government; they lack the right to pry into citizen's lives, and cannot be trusted to look after and use the information they amass responsibly. And now, new polling by the Joseph Rowntree Reform Trust suggests that the average Joe is becoming increasingly wary government activity too.

63% of those questioned were worried about the government holding data on them, up from 53% in the 2006 poll. 53% respondents now believe that ID cards are a 'bad' or even worse idea; a staggering leap from opposition of 33% in 2006. In addition, 56% of people think government power too centralized, while a massive 88% of respondents want local communities to have more say over decisions that effect them.

What these figures clearly show is that people are becoming fed up of government projects that gather and centralize information and power. Indeed, the significant rise in the number of people who are concerned about the Big Brother state is striking. The current low standing of politicians and past scandals with lost data have surely gone some way to increase the public's aversion to the retention of personal information. However, somewhere along line, New Labour's erosion of our privacy has also caused people to switch from thinking 'If I have done nothing wrong than I have nothing to hide', to having real apprehension about government's plans.

Obviously, the incumbent government is charging full steam ahead with Operation Observation, by rolling out ID cards on a (for now) voluntary basis to the 16-24 year olds of London. While both the Conservatives and Liberal Democrats have pledged to scrap the cards, neither party has developed a meaningful agenda to really break down the monolithic state that currently looms over Britain and sucks in political and economic power at every opportnity. In politics, too much information and power is held by too few, and the Rowntree poll results suggest that a tipping point in the nation's tolerance could well be approaching.

Dr Butler in the Times today

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Focus on growth. Don’t argue about cuts.