Banking for the poor is about savings not borrowings

That the very poor of the world have been largely unbanked is entirely true. As is it almost certainly a good thing that they gain access to banking services. But it's not, not so much at least, the ability to borrow which is most desired, it's the ability to save:

As a sex worker in Kolkata, Rita Roy had no access to her own money. The brothel madam kept her earnings “safe” – shoving the notes into her bra – and whenever Roy needed money, she would never get the full amount she asked for.

Roy, 36, did not have a bank account. When she needed money to treat her father’s heart condition seven years ago, she was forced to visit a loan shark to borrow 2,000 rupees (£23). In one year, 13,000 rupees extra (£150) was due from the interest.

“When I couldn’t repay it, the money lender posted two men outside the kotha[brothel] to harass me every time I went out to shop,” says Roy. But now she has a bank account with the Usha Multipurpose Cooperative Society, which is run by and for sex workers. It began with 13 women pooling their savings – 30,000 rupees – in 1995. Today, the bank’s turnover is 300m rupees a year and it has a membership of 31,000 sex workers from across West Bengal.

We've seen much the same thing in other such adventures, Grameen Bank in Bangladesh, M-Pesa in East Africa. A secure method of transacting is desired, sure, some would like to borrow to invest or consume. But the thing which really has the poor beating down the doors of a financial system is a safe and secure method of savings. 

One lesson of which is that - again - Milton Friedman was right. When a middle aged (for that place she is) woman turning tricks for pennies is looking to save them we think that there must, quite obviously, be a large amount of truth in both the lifetime income hypothesis and in the smoothing of it that people wish to do.

Like so many descriptions of human behaviour we'd not say that it is 100% universal across all people all of the time. But most certainly enough that it's a reasonable description of human behaviour. It also has certain implications for policy - one of the best ways of enabling the poor it to create a system in which they can save, not necessarily borrow.

Where Paul Ryan and Matt Bruenig agree

Writing for the New York Times, Matt Bruenig proposes an idea to fix America’s ‘Massive Inequality Problem’. Noah Smith goes further and argues that Bruenig’s not only solved inequality but has also found “a way to insure the American middle and working class against technological change.”

So what’s Bruenig’s idea?

“It’s called a social wealth fund, a pool of investment assets in some ways like the giant index or mutual funds already popular with retirement savings accounts or pension funds, but one owned collectively by society as a whole. One that paid dividends not to the few, or even just to the shrinking middle class lucky enough to have their savings invested, but to everyone.

“The federal government would create and run a new investment fund, and issue every adult citizen one share of ownership. The fund would gradually come to own a substantial and diverse portfolio of stocks, bonds and real estate. The investment return that the fund generates would be paid out to each citizen in the form of a universal basic dividend, and the shares would be nontransferable to preserve the institution’s egalitarian purpose.”

Bruenig suggests that this could be funded through raising income tax, by swapping shares for government assets, raising taxes on the wealthy or simply printing the money. But, let’s put the funding to one side. Because there’s a more important point to make.

Bruenig’s proposed policy is, as the Tax Foundation’s Scott Greenberg points out, indistinguishable from a tax on business cash flow. And that’s not a bad thing.

Taxing cash flow is far superior to our existing system of taxing corporate income. As I’ve argued before, we can turn corporation tax into a cash flow tax with two simple tweaks. First, allow firms to deduct the cost of investments from their taxable income up front. Second, allow firms to carry forward the true tax value of past losses. As Sam Bowman points out, allowing firms to expense their investments up front could substantially increase rates of investment leading to higher wages and economic growth.

Gavin Ekins, also at the Tax Foundation, explains why full expensing is the equivalent to the government investing in an index fund (that covers the whole economy) with a neat example.

“Assume that each time a business purchases equipment or a building, the government purchases a portion of the equipment. For example, a bakery purchases a $1,000 professional oven for baking bread. The government tells the baker it will purchase $350 of the oven and the baker must provide the remaining $650. In return, the government receives a 35 percent stake in the oven, which gives the government 35 percent of all the capital income from the oven.

"After paying for all the flour, utilities, facilities, and labor costs, the oven makes $200 per year for 10 years, at which point the oven must be retired. Each year the baker returns to the government $70 for its stake in the oven, and the baker keeps $130 for herself. Both the baker and the government receive 20 cents per year for each dollar they spent on the oven. Not a bad return for both investors."

“If the government did not purchase the 35 percent share, the baker would have to pay the entire $1,000 for the oven. The baker would still receive $200 per year, but could keep it all for herself. Just as before, the baker receives 20 cents per year for each dollar spent. The baker receives the same income per dollar per year as she would with the government as a co-investor but has laid out $350 more than if the government were a co-investor.”

“Full expensing has a similar effect to the government directly investing in a portion of the equipment or building purchased by businesses. Assume the government has a 35 percent tax rate on business income along with full expensing. When the baker purchases a $1,000 oven, she can deduct the expense from her taxable income, which reduces her taxes by $350. This effectively returns to the baker $350 when she files her taxes.

“Just as before the baker makes $200 from the oven each year. The baker pays her taxes, $70, and keeps the remaining $130 for herself. In both cases, the baker receives $130 after-tax per year for an investment of $650 after-tax rebate. Similarly, the government receives $70 per year but loses $350 initially. As such, full expensing with a tax is equivalent to an investment by the government without a tax.”

Full expensing is an idea that’s growing in popularity, is included temporarily in the Tax Cuts and Reform Act passed by the Senate, and was the key feature in Paul Ryan’s A Better Way plan for tax reform.

In a way, Ryan’s plan is more radical than Bruenig’s. Bruenig wants to compensate firms for their shares, Ryan simply takes his cut of their income without compensation. The only parts missing are Bruenig’s suggestion to print money, raise income taxes and dole out extra spending.

Why then go to all the effort of setting up a investment fund and coming up with creative ways to fund it? When you could just spend the money raised through higher income taxes and money printing directly. Will Wilkinson’s suggestion is probably why.

“The structure of rights and interests is radically different, which is why the politics are radically different, which is why there's basically zero chance that a real-world SWF would fund the same flow of transfers as a cashflow tax on privately held capital income.”

Or as Scott Greenberg puts it:

“It's almost as if someone got tired of arguments about the government "spending taxpayer money" and "taking money away from hard-working businesses" decided instead to call it "government ownership of equity".

If only Paul Mason understood social mobility

Paul Mason tells us that we should have more social mobility. Hmm, OK, but the problem is that he's misunderstood what it was that actually happened. This was not the cause of that great shift in the 1950s and 60s

My father lived through the thing that terrified Richard Hoggart, in The Uses of Literacy, and then Eric Hobsbawm: the decline of the implicitly brutal and subliterate “proletarian way of life”. Watch a movie such as Saturday Night and Sunday Morning or This Sporting Life to understand the yearning for improvement, non-brutality, tenderness and advancement that gripped working-class people in the 1950s.

This, in turn, had material roots: cheap rents, free education, aggressively interventionist social work against dysfunctional families, TV stations run by philanthropists rather than, as now, people determined to promoting ignorance.

If I wanted to save capitalism, I would tell Theresa May to implement all this urgently – and more.

No, really, that's not what happened. We agree entirely that this was not unusual:

I know this kind of social mobility is possible because I am a product of it. My paternal line on reads: hatmaker, hatmaker, hatmaker, miner, miner, economics editor of Newsnight.

The paternal line of a lot of us is very similar. It is of this writer for example even if shifted by a generation.

What did actually happen is something that even Polly Toynbee occasionally manages to get right. The British class system is not purely economic - everyone should know that. Further, there's a very strong tone in it of manual labour being working class, indoor work no heavy lifting being middle class of one sort or another. So, what is it that happened over the decades of that burst in social mobility?

We moved from a society in which a goodly percentage of the population, 30, 40, perhaps 50% dependent upon date, did manual labour to one where some 10% do now. The percentage of the population engaged in agriculture fell at the same time, near everyone works in some form of services these days. That's that indoor work no heavy lifting which our class system defines as middle class of some form or other. We're not going to have a similar movement again in the future as there just isn't that portion of the population to move out of manufacturing and manual labour.

It's worth noting that Mason is one of those who complains bitterly about the fact that we've no longer got all those manufacturing jobs. Exactly the change which caused, not just allowed, the social mobility he's celebrating. After all, if 50% of the people still need to report to a production line each day then we're not going to have a great deal of that class mobility away from working class jobs, are we?

 But by far the most embarrassing point we can make about Mason's argument is that he's not grasped something which even Polly Toynbee can.

Really, less perceptive than Polly? It's not a recommendation, is it? 

MPs need to be more enterprising to win the hearts of innovators

Facebook picked Britain as the location for its largest engineering hub outside the US. A Facebook spokeswoman said we were chosen due to our “entrepreneurial ecosystems and engineering excellence”. Making Britain the best place to start and grow a business and attracting big tech companies, is part of the answer to solve our productivity problem and boost dreary growth forecasts. 

The Entrepreneurs Network, in a survey conducted by YouGov and released today, asked MPs which policies would encourage and help entrepreneurship in the UK: Conservative MPs reckon a ‘hard Brexit’ will help founders, while Labour MPs think we’d be better off stopping Brexit altogether;  Labour are less keen than in previous years to lower business taxes; and all of Westminster are warming to the idea of making it easier for highly skilled workers to venture to the UK.

A majority of the entrepreneurs in our network voted to remain, and business polls pre-referendum showed most businesses felt the same way. Conservative MPs don’t share the same sentiment: a healthy majority of 66% of Conservative MPs want a ‘hard Brexit’ compared to only 8% of Labour MPs, when asked what would be best for UK entrepreneurship. In a similar vein, 71% of the Labour Party think remaining in the EU would be best for entrepreneurial activity in the UK, compared to 10% of the Conservative Party. If the Conservative Party want to remain the party of business, they will need to find other ways to appeal to entrepreneurs.

Perhaps one of these other ways could be in their continued support of low personal and business taxes. Our entrepreneurs will be pleased to hear that 91% of Conservative MPs think lowering personal taxes would be good for entrepreneurship, compared to just 26% of Labour MPs. Corbyn appealed to entrepreneurs and small business owners in his manifesto with penalties for late payments and scrapping quarterly reporting for businesses with a turnover of less than £85,000. Corbyn must drop his ‘tax ‘em high’ mindset, if he wishes to have continued support from these groups. 

For our entrepreneurs, both main parties are like one of those sweetened vitamin tablets: they might be sweet on the outside, but they leave a nasty taste in your mouth when you get to their core. Vote Conservative and you might get a Hard Brexit but low taxes, vote Labour and you could get a soft Brexit or even remaining in the EU but with higher taxes. 

The Parliamentary Snapshot did find something for every entrepreneur to smile about: MPs are increasingly open to the idea of welcoming highly skilled workers into the UK. Conservatives went from 40% to 50% from 2014-2017 and Labour, 53% to 70% in the same time frame. Despite differences over taxes and Brexit, MPs open minded attitude towards immigration of high skilled workers serves as an antidote for entrepreneurs. 

Our parliamentarians are increasingly aware of the issues facing entrepreneurs and are increasingly willing to help. But there is some way to go yet, too often tax relief and investment schemes that remain highly prized by innovators but unknown and undervalued by elected officials.

At least MPs are beginning recognise the importance of skilled talent, both to brand UK and to solving our productivity crisis. So, if they want more successes like Facebook, they should listen to what entrepreneurs are saying would be good for them. 

Time for our biannual complaint that British rail tickets are too cheap

One of our little modern rituals is to point out twice a year that British rail tickets are too cheap. Once when the amount they will rise by is announced, sometime in the summer, and once when they are about to rise, at this time of year:

Rail passengers will be hit by the largest fares hike in five years next month.

Average ticket prices across Britain will go up by 3.4 per cent on January 2, industry body the Rail Delivery Group (RDG) said.

It is the sharpest rise since 2013, when fares increased by 3.9 per cent.

Passenger watchdog Transport Focus compared the news to "a chill wind" blowing down platforms as many passengers' incomes are stagnating or falling.

Contrary to much wibbling around the place the British system of railways is not notably more expensive than those of other countries. Rather, the difference is in who pays for it all. Here, passenger ticket prices pay for some 99% of operating costs. In many other countries there is a substantial contribution from the general taxpayer. That's what explains the difference in ticket prices.

We think it's just fine that those doing the travelling pay for the travel to be done. We do not see the point of taxing the dustman so that the Duke may go shooting.

There are parts of the network which really do need subsidy - the commuter lines around the largest cities. They also get that subsidy. Other parts of the network make a profit and the two largely balance each other. This might not be perfect but we do indeed insist that it's better than a general levy upon non-travellers to pay for those who travel.

That tickets are still too cheap is proven by the manner in which only operating costs are being covered - capital costs still largely devolve to the taxpayer. This should not be therefore tickets should cost more. 

Why is the government dumb on health?

All Whitehall departments want more money than is good for them but they cannot all have a bigger share of the pot. The bigger the spenders, notably Health and Defence, the more they demand. And, of course, the bigger the spender, the more they waste because, primarily, they have the money to do so.

In this autumn’s budget season, the clamour to increase the NHS England budget, sizably and immediately, has been intense, not just from the NHS but from almost all interested parties such as the chairman of the Commons Health Committee, the King’s Fund and the professions. In the event, the Chancellor provided about half the amount demanded but without any rationale for his decision. In the previous week, The Times had led us to expect the Chancellor to require that the NHS make good their promises of savings before they should expect their claims to be met. In riposte, NHS England asked which targets should be abandoned but they did concede that the NHS bill could be reduced by £200M p.a. if doctors stopped prescribing medications available over the counter. But we have heard that many times before - in 2012 for example. GPs are not employed by the NHS and are pretty much free to prescribe what they like.

No solid estimate exists for waste in the NHS. It could be as much as 10%, i.e. over £10bn p.a., but no one really knows. NHS England particularly do not want to know as it would undermine their case for more funding. The curious thing is that, after the Chancellor’s challenging words before the budget, there was no sign of them in his budget, no attempt to justify what most see as a miserly and inadequate handout. Why dumb?  Why is the Chancellor shutting up without putting up?

The public deserve the truth. Waste in the NHS is in nobody’s interest. There have indeed been genuine improvements in the use of resources, such as reduced stays in hospital. There have also been unmet claims of increased future “productivity”. The Chancellor should insist upon a priced list, audited by the NAO, of the savings that can and should be made. As the Russians say “Doveryai, no proveryai” (trust, but verify). The waste within the Department of Health, those 30 or so quangos outside the purview of the NHS itself, would be quite a good place to start.

To help things on their way, here are a few examples of waste:

  • Professor Briggs and his team “found huge variations in the cost and quality of common treatments, with low-performing hospitals routinely ignorant about superior methods adopted elsewhere. The NHS could save hundreds of millions, if not billions, a year if the best and most efficient practices were applied across the country.” And “More than 300,000 patients a year are needlessly admitted to emergency surgery beds when they do not need an operation.” Their report did not total its examples but it reveals billions rather than millions of waste.
  • The under-use of expensive facilities such as operating theatres. The surgeons are willing but the bureaucrats are not.
  • Anything that takes doctors away from the treatment and cure of patients is, prima facie, waste. Clinical Commissioning Groups are an example. There are far simpler and fairer ways of allocating funds to GP practices which would involve GPs is far less admin.
  • Bed blocking. Adult social care is under-represented in the upper levels of the Department of Health and perhaps as a result the NHS gets more than its fair share. As a direct consequence, inefficiencies are introduced into the NHS. Having the value of the blocked beds, for example, passed to the adult social services would not reduce NHS capability whilst also providing more relevant help to the elderly.
  • The NHS should focus on the treatment and cure of individuals and not distractions such as general health. Of course prevention and dealing with epidemics are important but the Department of Health has the 5,500 staff in Public Health England to do that.
  • Similarly, the NHS should not duplicate the well funded Medical Research Council with its own National Institute for Health Research at a cost of over £1bn.
  • Bureaucracy is endemic throughout the primary and secondary NHS: “Bureaucracy takes up 3-4 hours [a week], of which maybe 50% is of any clinical value”according to one experienced GP practice head. Bureaucracy is compounded by having too many targets.
  • The number of managers, long a matter of complaint, has reduced somewhat but there are still layers of hierarchy in hospital trusts which may give respectability but do little for patient care.  Budgets are not set by boards but by battling consultants.  The NHS would save a lot by recognising reality.
  • Anyone who has spent time in a public ward will get the impression that medical staff spend more time nursing their computer terminals than nursing their patients. Of course each shift needs to brief the next but this misalignment aggravates shortage of nurses. On 22nd October 2017, in the otherwise excellent Frimley Park hospital, a 97 year old in a six patient ward was reportedly dead for up to three hours before the staff noticed.

The Chancellor has not made the case for his funding decision and he will not satisfy public opinion if he remains dumb. Likewise, the government has rejected Norman Lamb’s request, supported by 90 MPs, for a non-partisan, cross-party strategic review of the NHS to cover, inter alia, what it should fund and the extent to which patients should contribute, as we do with dentistry and prescriptions.  Again, no rationale has been provided. Surely a Tory government should be glad to get the topic off the table?  Dumb and dumber.

Sadly, it's true, environmental regulation kills people

Today's reminder of the basic economic lesson, that here are no solutions only trade offs, comes in the fled of environmental regulation. It is most certainly true that at least some such saves lives. But also, near all regulation is also going to cost lives as well. It is the net position that needs to be calculated and taken into account over any specific action, not the gross in one direction or the other.

We have a report on the general circumstance:

Regulations frequently aim to reduce mortality risk, and many of them may succeed to varying degrees. But regulations can also increase mortality risk in various ways owing to unintended consequences.

One of the general observations should be that yes, forcing people to do whatever in a more expensive manner may will save the lives of some of those doing it. But doing things more expensively also means resources that cannot be devoted to other activities, some of which might save more lives. Again, this is just a statement of an obvious economic truth, resources are scarce.

But we can be more specific too, as this example about Bangladeshi ship breaking yards points out. Regulation means that using rich country breaking yards is more expensive. This could be justified, might not be, that's not the point. That point being that there's a reaction to that extra expense:

 More than 800 large ships are broken up each year, the vast majority on Asian beaches. Owners can earn an extra $1m to $4m (£740,000 to £2.96m) per ship when selling to Asian yards via cash buyers, instead of opting for recycling yards with higher standards, says Jenssen.

In that more general sense that's $1 to $4 million per ship broken which cannot be devoted to other matters, resources really are scarce. In the more specific the higher standards at those rich country yards mean more breaking is occurring in these poor country ones. Quite possibly (no, not certainly, jut possibly) leading to an overall increase in danger and death rates than is the rich country regulation were weaker and thus cheaper - but still higher than those poor country yards.

No, this isn't an argument against all an any regulation anywhere. It's only one that insists we do not have solutions, only trade offs. As such our decision making has to be about those trade offs, something all too absent from all too many such discussions.

We agree that falling life expectancy is an economic problem - just a different one

The Office for National Statistics tells us that lifespans aren't going to increase as we once thought they would. We agree entirely that this is an economic problem. It isn't, however, the one that such as Danny Dorling are screaming about.

Since we launched BRAVE NEW EUROPE we have stressed the violence of austerity. In 2013 David Stuckler and Sanjy Basu wrote a convincing book entitled “The Body Economic – Why Austerity Kills” concerning the short term effects upon health of austerity. In this article Danny Dorling and Stuart Gietel-Basten present arguments of how austerity kills long term.

Changes in life expectancy which are coincident with austerity (not that the UK has actually had any, government spending continues to rise in real terms) are not necessarily caused by austerity. This should be clear to any user of the scientific method - a group which may or may not include human geographers and sociologists.

What the ONS has actually said is:

Antibiotic resistance has caused a fall in life expectancy for the first time, the Office for National Statistics has said. 

Life expectancy in future years has been revised down after the statistics authority said that "less optimistic views" about the future had to be taken into account. 

Opinions on "improvements in medical science" had declined, it said, and fears of the "re-emergence of existing diseases and increases in anti-microbial resistance" meant people would not live as long as was previously expected.

We agree entirely that antibiotic resistance is an economic problem. In fact, it's a regulatory problem, we've got the regulations working against economic reality. We should thus change them in order to get them aligned of course.

The standard drug development incentive is the patent system. This is an economic solution to an economic problem, it costs a $ billion (less perhaps for an antibiotic) and a decade to get a new drug approved and once it is then anyone could (and would) copy it. Who would do this for no potential profit, it's a classic public goods problem. The answer is an artificial monopoly in the guise of that patent which protects for a decade of commercial life (20 years in full, minus regulatory approval time). Agreed, not a perfect system but a logical at least reaction to the basic public goods problem.

This does not work for antibiotics. For once a new one is developed we do not allow it to be widely used. We insist, instead and probably quite rightly, that it be held in reserve to only treat those infections which do not respond to the older treatments. That way we delay any build up of resistance to the new drug. But, obviously, we also deny the developers of the new antibiotic their chance to make their money back by widespread use of their new product.

Therefore few to no one develops new antibiotics. The problem here is in our economic system to deal with the public goods problem. We thus need a new one. No not for the entirety of the drug development system, just one to deal with this specific subset of it.

Purely by chance another discussion of the same basic point appeared concerning phages:  

If you want to know why phage therapy has problems evolving in the US, the answer is just three letters: FDA.

As phages are in a continuing red-queen evolutionary game (running as fast as you can to stay in one place) with evolving bacterial defenses and specific phages can be specific to sub-species of bacteria, there is no way of making money in this game if you have to prove “efficacy” to the FDA before you sell your specific phage for a specific sub-species of bacteria that are continually evolving.

To play this game, we will need an automated system to speed up the evolutionary selection of lytic phages as the bacteria evolve with hundreds of variations on the shelf to cover the evolutionary options open to the bacteria. All these variations need instant approval, but that would create a finite risk that the zero risk tolerant FDA won’t allow.

In a Petrie dish of E. coli, you can add a lytic phage that will kill 99.9999% of the bacteria in a few hours but by the next day, the bacteria have evolved resistance to that phage. This is what that CRISPER cas9 gene editing system is all about as the bacteria evolve to cut up the virus meanwhile the phage is mutating and evolving methods of countering the defense.

This does not fit the FDA model for a simple specific chemical and billion dollar decade-long approval systems for each chemical. Changing the US FDA appears to be a near-impossible task and our only hope is that bacteria control system based upon phages will evolve with animal culture in some other country, without FDA interference, and then move to humans outside the US and then, after massive numbers of people go somewhere else to treat multi-drug resistant bacteria, we will consider real change.

Quite possibly an extreme view but note the basic underlying point again. Our regulatory structure, set up to deal with that economic public goods problem, isn't appropriate for the economic incentives in this specific space. The answer thus is to change the regulatory structure to more closely accord with economic reality, isn't it? 

We could even say that, as with Danny Dorling, government action is necessary. But it isn't thus true that the answer is for government to be spraying yet more on the welfare state, is it? Government just needs to be doing what it is doing rather better instead. Sadly, a much harder task.

The clear and obvious merit to offshore banking

That offshore banking is one of the very terrors of the modern world is one of those things widely accepted. Yet it's possible to rework Joan Robinson's observation that the exploitation by capitalists is nothing compared to the misery of not being exploited by anyone. The existence of offshore banking does indeed limit the depredations that domestic governments can make upon our wallets, something very much better than there being no such limits to what they can do.

As Tyler Cowen points out:

Given this background, I’d like to speak up for offshore banking as a significant protection against tyranny and unjust autocracy. It’s not just that many offshore financial institutions, such as hedge funds registered in the Cayman Islands, are entirely legal, but also that the practice of hiding wealth overseas has its upside.

He then gives the example of Saudi Arabia where all the rich people have been locked up in a hotel until they "voluntarily" hand over some goodly portion of their wealth to the State. Then:

A recent study shows which countries are most likely to use offshore banking,......The top five countries on this list, measured as a percentage of GDP, are United Arab Emirates, Venezuela, Saudi Arabia, Russia and Argentina, based on estimates from 2007.

We do generally think that - as Adam Smith pointed out with his invisible hand comment in WoN - that domestic employment of capital is a jolly good idea. Offshore provides the escape hatch by which capital so deployed cannot simply be abstracted by said State. Thus reducing the risk of such deployment, thereby increasing the amount of it.

Precisely because offshore reduces the ability of the State to tax - in however a democratic or authoritarian manner -  it makes us richer. Which is a fair old justification for an economic practice really, us all getting richer being the point of having an economy in the first place.

Precisely because offshore provides a protection of sorts against confiscation that limits the amount of confiscation which is even attempted. Limiting the power of the State isn't the flaw, it's the point.

The tragedy of the £80,000 broadband connection bill

There's a reason economics is called the dismal science - it makes clear some uncomfortable truths. For example, this complaint about an £80,000 bill to be connected to broadband. If it's not worth paying that cost for the benefits to be gained then it's not worth the cost for the benefit, is it

The owners of one of rural Scotland’s most popular hotels for walkers and climbers has attacked the dire speed of broadband it can access after being asked to pay £80,000 to get a good connection.

Lesley McArthur, a partner in the Glen Clova Hotel in Angus, said it is forced to make do with an internet speed of only 0.5mbps and the connection disappears altogether if more than one guest decides to log on.

She argued that the remote hotel, which attracts hill walkers across the UK, makes a significant contribution to the local economy but in September was quoted the “absolutely ridiculous” sum of £80,000 by BT for a fibre-optic line.

Although Nicola Sturgeon has pledged that every premises will have superfast broadband with a speed of 30mbps by 2021, she said that the hotel could have lost “a lot of business” by the time this happens.

Let us make the - possibly unwarranted for who knows about BT's pricing but this is going to be true of at least some isolated places within our islands as it is true of electricity supply, piped water or sewage connections - assumption that £80,000 is the true cost. 

The hotel is stating that it's not worth their paying that bill for the economic benefits it brings. There is no spillover effect here, no value of a connection which they cannot capture. Thus, if it's not worth their paying the bill it's not worth anyone else doing so either.

That is, we've not changed the cost benefit analysis by suggesting that the taxpayer should pick up the bill instead. Or BT shareholders perhaps, through a universal service provision. Running broadband, with current technology, to every place out in the boonies (and looking at the map, this really is the boonies) simply isn't worth it. It makes us all poorer, the value added is less than the cost.

So, let's not do it, whoever is paying for it and however. Why would we want to make ourselves generally poorer?