Social care for the elderly

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It was reported yesterday that the government is considering the introduction of an additional death tax to fund their aspiration to create a 'National Care Service', which would provide universal, free-at-the-point of use care for the elderly. It would be levied at 10% of the deceased's estate, up to a maximum of £50,000. According to The Times:

All three parties agree that the current system of means-tested care is unfair, and have promised to introduce legislation in the next Parliament to ensure that in future people will not have to remortgage or sell their homes or spend their savings to fund the costs of residential care or other services.

Surprisingly enough, I don't agree with any of the parties. Their position amounts to saying that even if you have the cash to pay your own way, or even if you have assets that could be liquidated to allow you to do the same, someone else should be forced to pay for you. And what is 'fair' about that?

You'd think they would have learned something from the failings of the NHS, and that rather than creating a social care equivalent, they might think about doing something to promote private saving and insurance, and above all personal responsibility. People need to get the message that cradle-to-grave welfare is not sustainable, and that increasingly people are going to have to provide for themselves.

I'm sure there are people out there who will read this and accuse me of not caring about the elderly. In reality, however, I think the lack of respect and dignity accorded to the aged is one of the most depressing aspects of British society. I just don't think more collectivism is the answer.

People should save for their retirement while they are earning, and not expect current workers to pay their bills. Families should be far more prepared to look after their own, rather than passing the buck to the rest of us. Those who care about the elderly should be far more willing to fund voluntary care organizations. And the state should only step in as a last resort, to help those who really have no other options.

Why is American healthcare so expensive?

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Yesterday I wrote on some of the misrepresentations used to attack the American healthcare system. However, as Mark Littlewood pointed out in Tuesday’s debate, the American system is not one we should want to copy in its entirety. Although America has the highest quality treatment of any country in the world, and leads the world in medical innovation, the cost is simply too high.

The intelligent response therefore, is to ask why the cost is so high.

The answer to that is actually straightforward, but those on the economic left simply don’t want to admit it. It is, in fact, the same problem we have with healthcare in our country: People don’t pay for their own care.

Yes, you read that right; the problem at the heart of the increasing costs of healthcare is the same on both sides of the Atlantic, despite us having superficially very different systems. In Britain, it is obvious to people using the NHS that the government picks up the tab. In America the cost is borne either by the government, by the patient’s insurance company, or by their employer. In both systems, it is ultimately the patient who pays; through taxes, insurance premiums or lost job opportunities because of the costs imposed on employers. However, the cost is never made apparent to people in the same way it is when shopping for other goods.

In a functioning market, like we have for televisions or cars, people pay for what they take – they aren’t insulated from the costs. As Cannon and Tanner noted for the Cato Institute, if the current healthcare logic were applied to food, people would only ever eat fillet mignon (except vegetarians, obviously).

The solution is to channel government help through patients, not providers; putting the patients themselves in charge of their healthcare funds, so that people will see for themselves just how expensive healthcare really is. The patients themselves can then decide if they want to eat fillet mignon, sirloin steak or hamburgers, and will push for those innovations that drive healthcare costs down, just as they do when buying anything else. This will solve what is essentially the same problem on both sides of the Atlantic.

If it’s broke...

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Ian Craig, England's Chief Schools Adjudicator, has called on councils to make random checks on 10% of school applications to cut fraud and set up hotlines to catch parents who ‘cheat’ to get their children into their chosen school.

As it's only Mr Craig’s job to determine admissions arrangements, he really has only two options in the face of the estimated 4,200 fraudulent applications that were made in England: do nothing or act. In choosing the latter, he is advocating bringing in abhorrent impositions upon the freedom of the people of this country. This always happens when the state has a near monopoly on anything, fails to satisfy the demand, and people as a consequence dare to break the rules.

The real bogeyman in this instance is the Schools Secretary Ed Balls. He backs Mr Craig’s ideas. His defense of this position belies the failure of his government's approach to schooling:

While I am reassured that only a tiny minority of parents apply dishonestly, I am also clear that every place gained by deception is denying another child their rightful place.

Mr Balls' cake is only so big, so we can only have so many 'good' state schools: bad luck if you don't live in the right area.

And the following rhetorical twisting and turning shows that despite his best intentions, Mr Balls is ideologically up the proverbial creek without an intellectual paddle in sight:

No child should be punished for their parents' actions, but neither should families on waiting lists be unfairly disadvantaged or delayed.

I have not an ounce of bad will towards parents who lie about where they live in order to get their children into the best schools possible. These are taxpayers that have been let down by the government's failure to deliver an adequate education for their children.

I’ll end with a quote from a spokeswoman for the Local Government Association on this matter:

In an ideal world there would be no need to ask councils to investigate parents, because the system works best when everyone is honest and open in applying for school places.

What was it that Kant said about always treating people as ends in themselves, never as means to an end?

A balanced-budget rule

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An American colleague sent me a recent speech by Governor Christie, New Jersey's new, conservative governor.

"By the time we got here," he say, "of the approximately $29 billion budget there was only $14 billion left. Of the $14 billion, $8 billion could not be touched because of contracts with public worker unions, because of bond covenants, and because of commitments we made accepting stimulus money. So we had to find a way to save $2.3 billion in a $6 billion pool of money. When I went into the treasurer's off in the first two weeks of my term, there was no happy meetings. They presented me with 378 possible freezes and lapses to be able to balance the budget. I accepted 375 of them."

Tough measures indeed, but necessary. Because nearly all US states have a balanced-budget provision. They have to balance their books, and there is little scope for fudging. That is why, just this week, Virginia – with a falling population and hard-hit by the credit crunch – has voted for spending cuts that would shrink spending to 2006 levels. Virginia legislators added plenty of spending when times were good: now they have to scale back again, and are trying to do so without cutting essential services.

A balanced-budget rule is something UK politicians should aspire to as well. All too often, government expenditure rises in the good times, but when there is a downturn we are told that it cannot be cut without damaging public services. Phooey. Governments just need to do what every family and business has been doing – identify the priorities, keep on with them, but cut out some of the inessentials. Spending has risen 50% under this government – but are our public services now 50% better? Hardly. We could lose all that spending without noticing the difference.

The incoming government will no doubt try to buy itself some time with public-sector wage and budget freezes. But that is no long-term solution. We need to re-think and prioritise what government actually does. And adopt a balanced-budget rule, so that the government sector's coat is cut according to the wealth-creating sector's cloth.

American healthcare: It is not a free market

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Healthcare featured prominently in the debate at ISOS event yesterday. Mark Littlewood of the IEA and Rushab Ranavat of Debate Mate had to defend the claim that the free market can provide efficient medical care, in order to propose the motion ‘that humans would flourish if the state withered away’. As was to be expected, the opposition, consisting of Tim Horton of the Fabian Society and Peter Barton of Debate Mate, praised the NHS and attacked the American system as the result of free market madness.

This misrepresentation of the American system is an error made all too frequently, even by those who otherwise defend free markets. The American healthcare system does not represent a free market any more than the British one does, or the Cuban one for that matter.

Firstly, out of every dollar spent on healthcare in the USA, 50 cents is spent by the government – The US government spends more on Medicare, Medicaid and SCHIP than is spent on defence by The Pentagon. Secondly, despite the government using the ‘commerce clause’ of the U.S Constitution to legitimise just about every reprehensible thing it does, it still hasn’t managed to use it for its proper purpose of breaking down barriers to trade - like those that forbid the selling of health insurance across state lines. Thirdly, enterprising people who have tried to set up small, cheap clinics aimed particularly at the uninsured have found themselves the targets of massive bureaucratic red tape, and been forced to close.

The claim that this ‘free market’ in the USA does not cover the poorest members of society was also debunked with a concise and neat speech from the floor during the debate yesterday. The point was made that of the 40 million uninsured; the vast majority can either afford insurance, or are eligible for government-provided cover. This point has also been made very eloquently on the Free Market Cure website, which is definitely worth a look.

One thing is for sure. Whilst critics of the free market continue to misrepresent American healthcare, the debate will not progress. Tomorrow I will show what the debate should focus on – the real problems and the real solutions.

Gone to the dogs

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“All dog owners in England and Wales would have to insure against their pet attacking someone, under Labour proposals to tackle dangerous breeds,” reports BBC Online, referring to what must be the silliest piece of pre-election policy-making since the Cones Hotline.

Apparently, Each week, more than 100 people are admitted to hospital as a result of attacks by dogs, and there has been a rise in levels of dog fighting and illegal ownership, particularly by gangs who are using dangerous dogs as status symbols.

As usual, Labour’s response is to penalise everybody. The responsible drinker is taxed, or forced to pay over the market rate for alcohol as a result of minimum pricing, because some drink too heavily; the responsible investor is obliged to guarantee the losses of those who are more careless; and now the responsible dog owner, who has chosen a mild-mannered and playful breed, is to be forced to insure their dog simply because another owner has chosen a more violent breed and then trained it to fight, or mistreated it so that it is ill-tempered and stressed.

It is a sign of extremely bad law-making that, rather than target criminal activity, the legislator seeks to make the wider community compensate for the bad behaviour of a few. It smacks of collective punishment: somebody from your village breaks the law, so your whole village is burnt to the ground. In this case, other people are dog-fighting, therefore you must pay.

In fact, it is even worse than that, because one may rest assured that the people most likely to own a dangerous dog are those least likely to insure it. Hundreds of thousands of people do not insure their cars, after all. Does the government really think that somebody who is prepared to break the law with respect to dealing Crack Cocaine is going to care whether he is legally obliged to insure his dog?

In fact, it is questionable whether people should be forced to insure themselves at all. Enforced insurance makes no difference to most people – not even victims. If a person is legally culpable for the harm inflicted to another (as a driver or as a dog owner), then the courts will require them to pay compensation whether they have insurance or not. Indeed, if less responsible people don’t have insurance they are more likely to be wary of incurring the costs. The only people who really benefit from enforced insurance are the insurance industry, which will get 7.3 million new customers as a result of this legislation.

But maybe I am downplaying a genuine danger. Maybe all dogs are potentially vicious, and even now I may be harbouring a potential killer in my house. I’d better run home and make sure she isn’t dangerous!


 

Eamonn's book launch

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ASI Director Eamonn Butler's new book is unveiled at a book launch party at St Stephen's Club in London. With a welcoming speech to introduce it by author and journalist Peter Oborne, the book, "The Alternative Manifesto," sets out what ought to be done to rescue Britain. It's a punchy 12-point plan of radical policies on everything from taxation to drugs policy. There is no doubt that the programme it sets out would transform Britain for the better in very short order.

The new book comes only two weeks after Eamonn celebrated winning, jointly with Madsen, the National Free Enterprise Award for 2010. Madsen, meanwhile, is working on an economics primer for school students, teaching about what does not work in economics in order to highlight what does.

Both Eamonn and Madsen have handsome new websites that illustrate their activities. Eamonn's is here, and Madsen's here.

The government, property and free markets

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Interesting piece by the excellent John Stepek in MoneyWeek magazine's Money Morning email this week. It recounts the story of Fergus and Judith Wilson, a couple of maths teachers from Kent, who built up a buy-to-let empire of about 700 properties. Until the crash, that is. Now, of course, their properties are full of tenants who can't pay the rent, and they are trying to unload their properties onto a ropy market, but the potential buyers (particularly first-time buyers) just can't get the banks to give them a loan. Still, the one thing that is saving the Wilsons is the fact that they are paying hardly anything on their own mortgages, thanks to the Bank of England slashing interest rates to 0.5%.

There's something of a morality tale in this. About how our government and monetary authorities have systematically undermined the free-market system. By throwing money and cheap credit around for a decade, the government presided over a housing boom. Buy-to-let landlords simply couldn't lose. Then, too late, the Bank realised it had over-egged things and cut back, fast. So the banks ran out of money, and the rest you know.

As Stepek says, the Wilsons – and thousands of other buy-to-let speculators – took a big risk, did not correctly anticipate the crunch coming, and so should bear the consequences, like every other entrepreneur. Except that now, the Bank has cut interest rates to just 0.5% – cutting the Wilsons' own mortgage costs. What should have happened is that they had a fire-sale of their over-ambitious, debt-driven property portfolio, and Kent first-time buyers would have been in the pink. Instead, the Bank of England is bailing them out – at taxpayers' expense.

"You can argue the toss about the morality of all this – actually, you can't. It's a travesty," says Stepek. "It's a complete betrayal of the capitalist system and anyone who foolishly thought that this was how the game was played."

That's the trouble. How can you play the game of capitalism, when governments keep changing the rules? You can't. So people either don't bother to go into the wealth-creating sector (despite all the 'cuts' talk, the public sector is still much safer, and better rewarded), or walk off and go to some country that nourishes the enterprise system. Thanks, Gordon.

British horseracing – The going is heavy

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Whilst the going for next week’s Cheltenham Festival is drying out nicely, the financial outlook for the British horseracing industry is rather less propitious.

Flat racing is being seriously impacted both by the recession and, more specifically, by the financial crisis which has imploded in Dubai, whose rulers - the boys in blue - have invested massively both in world bloodstock and in British horseracing.

Major flat races, too, are being eclipsed. The Derby, once one of Britain’s great sporting occasions, has been greatly diminished, although the brilliance of such winners as Nijinsky and the ill-fated Shergar endures.

National Hunt racing is arguably in a rather better state, although the major meetings – the Cheltenham Festival and the annual drama of Aintree’s Grand National - mask the reality that most racing is at modest tracks with modest attendances.

Historically, through various guises, the bookmaking industry has been the key financial backer of British horseracing. However, with rapidly increasing betting levels on other sports, notably soccer, leading bookmakers are now less focussed on just one sport.

Importantly, recent results from bookmakers were very lacklustre. Despite a £275 million rights issue, Ladbrokes’ UK Retail operating profits fell by 28% compared with 2008. William Hill’s financial profile has been similar: poor 2009 trading figures and a £350 million rights issue. These setbacks are hardly helpful either for boosting the valuation of the Tote, which the Government has been seeking to sell.

If horseracing’s appeal continues to wane, UK racecourses may increasingly replicate many of those overseas, such as in the US and Brazil. In many cases, with virtually no spectators, horseracing has simply become a betting medium on television.

And if there is a long-lasting recession, horseracing could undergo the prolonged demise of greyhound racing. In which case, how many of the c60 racecourses in Britain could survive?