Bismarck beats Beveridge


The Euro Health Consumer Index (ECHI) 2009 was released this week, and got lots of media coverage in the UK because it ranked the NHS 14th out of 33 countries and said the British health service was let down by waiting lists and "uneven quality performance". Only 4 counties in the EU15 (Western Europe, roughly speaking) got lower scores – Italy, Spain, Greece and Portugal.

The report is full of interesting information, but one point (on p9) particularly interested me. In their words, "Bismarck Beats Beveridge – yet again!" To explain:

Bismarck healthcare systems are "based on social insurance, where there is a multitude of insurance organizations... who are organisationally independent of healthcare providers." They are named after Otto von Bismarck, who founded the German welfare state.

Beveridge systems are "systems where financing and provision are handled within one organisational system, i.e. financing bodies and providers are wholly or partially within one organization." They are named after Wiliam Beveridge, who founded the British welfare state.

Anyway, the point the reports makes is that, "Looking at the results of the EHCI 2006 – 2009, it is very hard to avoid noticing that the top consists of dedicated Bismarck countries, with the small-population and therefore more easily managed Beveridge systems of the Nordic countries squeezing in. Large Beveridge systems seem to have difficulties at attaining really excellent levels of customer value."

The following list shows the rankings of Western European healthcare systems according to their 2009 score. The Bismarck countries are in bold:

(1) Holland, (2) Denmark, (3) Iceland, (4) Austria, (5) Switzerland, (6) Germany, (7) France, (8) Sweden, (9) Luxembourg, (10) Norway, (11) Belgium, (12) Finland, (13) Ireland, (14) UK, (15) Italy, (16) Spain, (17) Greece, (18) Portugal.

Clearly there is something in what the authors of the ECHI say. They suggest two points which could explain the comparative underperformance of Beveridge systems:

(1) Managing organizations of this size (the NHS employees 1.5m staff) requires management skills which just don't exist in the public sector. (I'd say they are extremely rare in the private sector too.)

(2) The primary loyalty in Beveridge organizations tends to be to politicians and other top decision-makers, rather than patients.

Adopting a competitive social insurance system like Holland's would be a huge step forward for the UK, even if – in an ideal world – I would prefer something based on medical savings accounts. You can read more about it here, in our excellent 2002 report NHS Reform: towards consensus?

"Go" Orders: Guilty without charge


During the Labour party conference Home Secretary Alan Johnson revealed yet another reason to boot the party out at the next election.

Renewing Labour’s pledge to ‘clampdown on crime’ (read: creating more punishments and bureaucracy under the pretence of ‘action’), he has unveiled plans to bar alleged wife beaters from their homes through the Domestic Violence Protection Order. “Go" Orders can be placed on suspects, banning them from their homes for up to two weeks, while allowing victims of abuse time to consider legal action.

Apparently, this has been dreamt up to close a ‘loophole’ in legislation whereby the Police can only ‘protect’ a victim of domestic violence if a suspect has been charged with a crime. This ‘loophole’ sounds horribly similar to the long-standing practice in the UK of no-one having their liberty infringed upon without sufficient evidence to suggest it is in the public interest to do so.

If the police cannot prove a crime has been committed and an alleged suspect has not been charged, let alone convicted of an act, then that suspect has every right to be treated as a law-abiding citizen. It is inevitable that some of those banned from their own home will be guiltless and that some people affected by this order will not have charges brought against them. These people would be seriously wronged by such measure.

The breaking of a “Go" Order could land you in the magistrates for Contempt of Court and risking imprisonment. In practise, Johnson is stating that someone who has not even been charged with a crime could face a spell in jail, simply for breaking an order that was imposed without evidence and without justification.

Whilst in power New Labour has continually undermined a major right in the UK legal system: the presumption of the accused’s innocence until proven guilty. They have treated those yet to be tried as convicts through the use of Control Orders and treated those proven innocent as guilty through the retention of details on the DNA database. They are now seeking to treat as guilty those who are yet to be even charged with a crime.

Lions led by donkeys


One wonders sometimes whether the British Government is entirely worthless, not least when they are leaving valiant men and women to fight without protection and inadequate support, and then retreating behind a curtain of lies and half truths to defend their own actions and behaviour.

The government is piling pressure downwards through the Ministry of Defence to prevent the truth about what is actually happening in Afghanistan reaching us. But we are nonetheless all aware of the inadequate equipment and the shortage of helicopters that exemplify the poor treatment of the armed forces by their political leaders. One is reminded of the phrase 'lions led by donkeys'.

This article by Michael Yon makes a compelling case that unless politicians’ attitudes to the troops, to the public, and to reporters changes, meaningful progress in Afghanistan will be impossible. Not only does it outline his own poor treatment at the hands of puppets of the Ministry of Defence, it also explains how troops on the ground are routinely lied to by the politicians back home. This is a war that is fast becoming a political quagmire. The UK government desperately needs to rethink it's attitude towards the armed forces.

Fiscal alcoholism


Thanks to our Senior Fellow Tim Ambler for introducing me to a new phrase: fiscal alcoholism. It was coined by György Kopits, a member of the Hungarian National Bank's monetary council, in the Wall Street Journal recently. The phrase neatly sums up the illness in Hungary's public accounts – and in the spending habits of many other countries around the world. They know that they should be giving up their reckless spending and borrowing. But they like the high it gives them. And they reckon that one little bit more spending or borrowing can't do them much harm, can it...?

This is why we get booms and busts. When things are not going well, governments reduce interest rates, or print more money, or embark on any number of 'stimulation' packages. The immediate effects seem nice: business flourishes, investment increases, and unemployment falls. People take out loans to buy bigger houses, and new factories, and everything booms. But it is a boom built on sand: it was the cheap credit that created it, not some revolution in productivity and efficiency, or an influx of new customers. Bigger and bigger doses of the credit drug are needed to keep the high going. Eventually, it falters and the result is an awful hangover.

So I think fiscal alcoholism is a good way of describing this phenomenon. Unfortunately the G20 meetings simply provide an opportunity for all the fiscal alcoholics to get together and buy each other more drinks. It's a shame we don't have regular fiscal AA meetings where they all come and fess up: 'My name is Gordon Brown and I'm a fiscal acoholic...'

Or perhaps we should go further and take a leaf out of the Political Correctness manual. Round up the financial responsibility deniers and cart them off to jail. Then at least, with three-quarters of the world's politicians in jug, the other quarter could get on with balancing the books.

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

Beer and the nanny state


From pariahs to saints in a matter of months. The Brew Dog company were excoriated in the media and political circles for creating a porter that had an alcoholic content of 18%. The beer, Tokyo (Tokio in the US) is a beer that, "was all about the craft, the challenge and pushing the boundaries of beer and the perception of beer in Britain." It certainly pushed boundaries. So far, that the Portman Group and the Scottish executive want to ban its sale. Illustrating the point that when it comes to beer in this country the press and the politicians know nothing.

In response to the brouha regarding this strong porter they have developed a new ale: The Nanny State. It comes in at a whopping 1.1% and is technically not a beer and will not have any duty levied on it. As they say, they are awaiting the heartfelt praise that this beer deserves from those so outraged by the first. It is possible that because they are behaving as the state requires, they will slip under the radar.

While there may be a minority of teenagers and those in their twenties who are drinking beyond their own personal limits as they grow up they will learn to deal with drinking. There's no need to punish us all by lumping us together in the same hostelry. In the meantime this beer is awaiting it's much deserved fulsome praise...

The car scrappage scheme


In case you hadn't heard by now, car scrappage is the new path to economic nirvana. You take a perfectly serviceable old car and junk it. You then take a portion of the earth's valuable resources and turn them into a new car to replace the old one you just junked. Add a dash of government spin and you have a process that is somehow presented as both economically sensible and environmentally friendly to boot, even although it is clearly neither.

– John Steepek, 'The car scrappage scheme will cost us all in the long run' MoneyWeek

In the Realtime Worlds


The Herald Scotland reports that several successful Scottish computer game companies are thinking of moving to Ireland, tempted by the available tax breaks. This includes the maker of the much anticipated online role-playing game All Point Bulletin by Realtime Worlds.

As the Herald reports:

Colin Macdonald, studio manager of Realtime Worlds, the Dundee venture which employs 300 people and which has created globally renowned games such as Lemmings and Grand Theft Auto, said that the Irish overtures were enticing. “If the package on offer in Ireland was attractive we’d have to give it serious consideration," he said. “Dundee is a great place to be based, one of the main hubs for computer games in Britain, but at the end of the day we’ve got to look after our bottom line."

It will be interesting to see if these companies take up the offer from Ireland. The UK has proved a successful site for the game industry, but it remains to be seen for how long this will the case.

Could Labour split?


The results of Germany's elections are not just interesting because they produced a centre-right majority and saw the tax-cutting FDP increase their share of the vote. They are also worth noting for the fact that, even following an economic crisis for which 'capitalism' has taken much of the blame, the main party of the left, the SDP, had its worst election since World War II.

Obviously, the reasons for this could well be particular to Germany, and have no wider relevance. The fact that the SDP have for the past four years been in an uncomfortable coalition with the centre-right CDU certainly makes one wary of generalising.

But there may be implications for the UK in Germany's election, even if they should be taken with a pinch of salt. One is in the way Germany's political left has fractured, with the Greens and the socialist Left Party getting 11 and 12 percent of the vote respectively, compared with the SDP's 23 percent. Could the same thing happen in Britain?

Perhaps not while our first-past-the-post voting system endures. But there could still be a damaging split on the horizon for the UK's Labour Party. As William Rees-Mogg wrote in the Mail yesterday, many Blairites already feel closer to the Social Democrat wing of the Lib Dems than to their party leadership. If Labour reacts to electoral defeat by swinging back to the left – as seems likely given the financial and constitutional power of the unions – it is not inconceivable that they would jump ship.

For what it's worth, I think the German results also indicate how different British party politics would be if we had proportional representation. It's unlikely that Labour or the Lib Dems would survive such a change in their current forms. We would probably end up with the Conservatives and UKIP to the right, a (very) small liberal party in the centre, and a new 'Social Democrat Party' and a hard-line Old Labour–Green alliance on the left.

P.S. I'm not advocating proportional representation. I'm just suggesting one of the ways it would change things.

Car scrappage scheme extended


altThe government funded car replacement scheme in the UK has now been extended. The program is one of many that have been instituted throughout many countries to help stimulate the auto industry. But are the programs actually worth the money? To help with this question let’s examine the U.S. model since the program did spur large amounts of auto sales and since the program has ended we can look at some solid numbers.

Using average numbers from America - given that an average “clunker” or older car is getting 15 mpg and travels an average of around 12,000 miles per year it would use about 800 gallons of fuel. If the owner of the car took advantage of the government program and traded in for a vehicle that got 25 mpg they would use 480 gallons of fuel less each year. That adds up to a large amount of savings for the consumer so far, and that’s where the politicians would want the analysis to stop.

As reported by the New York Times nearly 700,000 vehicles were traded in during the program which means the total fuel consumption in the United States would be reduced by nearly a quarter of a million gallons which equals out to a little less than 11.5 million barrels (there are 19.5 gallons to a barrel). The problems start to become apparent in these numbers, the U.S. uses 20 million barrels of fuel everyday so the actual savings in fuel are just over a half a day’s worth. Although that isn’t that impressive, it’s still something. However, the real predicament is in how much that fuel is worth compared to the amount of money spent to save it. If there was 11.5 million barrels of oil saved, as of 11/09/09, it would be worth just over 816 million dollars, but the government spent 2.87 billion dollars to save that money. That means that for every dollar saved in the “cash for clunkers” program the government spent around $3.50 which is far from impressive.

Yes there may have been jobs saved, and increases in demand, but I am more than confident in saying that any short term benefits will soon be eclipsed by inflation and even worse by massive decreases in demand over the long run.