A lesson from the US

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Spending more on public schools doesn’t increase students’ academic performance. Fill in the blank.

Power to us

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David Cameron is seeking to institute another step along the road towards more power in the hands of fewer parliamentarians. This time putting forward a cut in public spending via the curbing of the excesses of the Houses of Parliament. He wants to see a reduction of 10% in the costs of parliament, a 5% pay cut for ministers and the abolition of MPs' communications allowance. This along with a reduction in the number of MPs to 585 would see an overall saving of £120m a year. Or 0.0169% of the projected government expenditure of £710b in 2010/11.

Currently constituencies in the UK average around 68,492 eligible voters (England averages just over 70,000, Wales 55,000, Scotland 65,000 and NI 63,000). Under Mr Cameron's plan this would rise to an average of over 75,000 (if not more as the population grows) a distinct erosion of representation and yet more power coalescing in the hands of fewer (and lesser) MPs. Despite much of the UK's legislation being decided overseas this is a move that weakens our democracy. This piffling reform is yet more tinkering around the edges rather than attacking the real problems of our democracy.

Parliament needs to be able to concentrate on two things: defence and the implementation of a system of justice. Local government needs to be the level where decisions over health, education, welfare etc are made. The abolition of quangos should not mean that government departments take over the work, it should be left for local councils to pick up and ask the people to decide. Indeed government departments define how centralized this country has become. We may all live on an island but we all are different with different wants and needs. The time has come for a radical reshaping of the structure of democracy in this country. It would actually give power to the people.

(The figures used in this article are based on the 2005 General Election, and the ONS's latest population figures).

Banks: Some home truths

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Last autumn’s near collapse of the UK banking system was unprecedented. The reality was that two of the UK’s four major clearing banks – RBS and Lloyds (including HBOS) - were close to financial oblivion. And, whilst Barclays did not require an injection of public equity, it was in poor shape: its fortunes have subsequently recovered. As for Midland, its owner, the esteemed Asian-based Hong Kong and Shanghai Bank, was never likely to fail. Indeed, not surprisingly, it attracted a large inflow of deposits from discerning investors seeking a safe bank.

To enable the survival of RBS and Lloyds, the Government injected an astonishing £37 billion of new equity capital. It was the previous lack of sufficient equity, commensurate with the increasing risks that RBS - especially post the disastrous ABN-AMRO deal - and Lloyds were running, that proved their undoing. At the recent G20 gathering, there was an encouraging consensus that increased levels of bank equity capital were paramount.

There remains a strong case for periodic stress-testing of the UK’s four clearing banks, perhaps over a three-year cycle: immediate restorative action to boost balance sheets could be implemented if necessary. In terms of bankers’ bonuses, there is an ongoing debate both about capping and/or taxing them, and the widespread wish to maintain secrecy. Since the pay of directors is painstakingly reproduced in Annual Reports, perhaps a reasonable compromise would be to publish bonuses over a certain level.

Finally, the four clearing banks should not necessarily operate on a level playing- field. Two passed ‘Go’ to collect a massive level of Government equity to stay afloat – two did not. Hence, if like RBS, you end up with majority state ownership, your activities will inevitably be more constrained.

Moral: never get into a situation that requires a public bail-out. Correct?

No competition, no progress

As reported by the BBC, a recent study has found that there was no improvement in maths skills between 14-year- old students today and those studying during the 1970s. Considering all that has changed and definitely been improved upon in the last thirty years, this should be very troubling to all parents in England. Advancements in mathematics, engineering, and other major disciplines have worked to transform our world into a technological marvel compared to a mere thirty years ago. Most of these advancements are due to an increased number of private universities, and more importantly, increased competition between all universities. The competitive marketplace has thrived among universities in America, and has lead to a host of scientific and economic breakthroughs. When the evidence of what free market competition can do on an academic level is increasingly evident, why will government not allow it to enter into the primary and secondary schooling system? Why, after thirty years, can children not perform any better in basic maths skills? Without competition among schools, teachers have no incentives to improve teaching; they have essentially “levelled out" in their field of work. Principals and administrators have nothing personal to gain by putting more pressure on teachers. There is no adequate mechanism to hold administrators accountable for failure. Unless proper competition is injected into the education system we will be stuck in the same place in another thirty years (or worse). the simple truth is that more competition among schools will lead to more accountability placed on administrators and teachers, which will inevitably lead to better educated students.

Is it contagious?

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Cameron is already preparing himself for the great trials of running this country.

State of the nation

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Remember the days, just a decade ago, when the UK was reckoned to be the world's 4th most competitive economy? Well, the World Economic Forum (or 'Davos' as it's known, from its annual conference in the Swiss resort) had downgraded it yet again, from 12th last year to 13th now. They cite the UK's enormous and chronic public-sector debts as just one of the many causes for Britain's gloomy report card.

As they might. International economists figure that Britain is running a 'structural' deficit of around £100 billion. That's nothing to do with the crunch, and the bank bailouts, and the recession – it's the amount by which the government is spending beyond its means, year upon year upon year. And £100 bn is a big wedge of moolah. It's nearly 7% of the nation's income. You couldn't run your household by borrowing every year – you would soon run out of dough, and you would be eating bread, not spending it. And you can't run a country like that either.

So how to get back on an even keel? Britain could simply renege on its debts: but that's hardly a way to get investors and customers to trust you. It could print money and pay everyone back in worthless, inflated currency: but that creates just as many enemies, and messes up your economy to boot. We could raise taxes: but that would stifle any recovery. Or we could cut public spending: which would be uncomfortable for politicians.

If you figure that an extra penny on income tax might raise £5 billion, you see how deep the hole is. Taxes are already high (as Davos complains), and raising them enough to fill the borrowing gap is just impossible. No, the brute fact is that, just as a household in debt has to cut back on its spending, a government in debt has to cut back on its public expenditure – which has ballooned so much that it absorbs nearly half of everything we earn.

Already, Chancellor Alistair Darling has started to mutter that there are 'hard choices' ahead. Well, the time for those hard choices is now. That is why the Confederation of British Industry will publish its own proposals to slash public spending next week. Let us hope it will bolster the Chancellor's resolve. And let's hope that the Conservatives' finance team gets more realistic on this question too. Otherwise, we will emerge from a General Election with all kinds of spending promises, and no plans worked out for reducing the costs of the public sector in ways that are as painless as they can be.

To save or not to save

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The Obama administration is divided on more than just its healthcare policy. The name Obama has been synonymous with spending since he first took office in a misguided effort to stimulate economic growth. While the Obama spending program for government is no secret, it has also aimed to entice consumers to spend more money in the hurting economy through government tax credits and rebates. However, now President Obama wants to create incentives for the American people to save more money.

I am not in anyway opposed to saving, but what exactly does the Obama administration want people to do? If the American people save all the money they receive in tax incentives and government rebates then the money spent by government to stimulate the economy would have zero effect. Not only does Obama’s proposed saving program give incentives for individuals to save, but it also creates incentives for companies to donate into employees savings as well. It is as if the government is trying to counteract all of its spending measures to stimulate growth. Perhaps Obama would have more success if his right hand knew what the left was doing.

Scans for all

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To put it bluntly the Society of Radiographers are a bunch of scare mongerers! Tesco, via their Clubcard, and in conjunction with a company called Lifescan, are offering vouchers that can be put towards the cost of having a CT scan. The Society of Radiographers believe this to be a danger to Tesco's customers. Stating that the low-levels of radiation are detrimental to people's health and that this promotion will create hordes of 'worried-well' people cluttering up doctors' waiting rooms. Tesco's customers should be grateful that their shop of choice thinks highly of them and offers them this deal.

The reasoning that the SoR uses for wanting this offer ended is weak and unfounded. The radiation levels are entirely safe, otherwise the company wouldn't be allowed to use the equipment it does. If people find that they've something wrong from this, and it's caught early enough then the treatment costs are lowered. Of course, having a scan would mean that many within the SoR wouldn't have an ill patient to scan in the future. Perhaps this competition concerns them. They should be encouraging this service, twith some warning about the low levels of radiation, rather than seeking its prohibition.

It's certain that Tesco would want to keep its customers alive for as long as possible and offering them the chance of an 'MOT', as they term it, is a visionary way of ensuring customer loyalty and longevity. It also saves the taxpayer money by discovering illnesses that can be treated a lot cheaper if found early. Scans for all, should be Tescos next venture, rather than books for schools.

The joy of forgetting

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The British Medical Association wants to see higher prices and advertising bans for alcohol. Meanwhile, American doctors have been praising alcohol, saying that despite the risks of over-indulging, it can stave off Alzheimer's. This doesn't strike me as good news: frankly, I don't want to remember all the stupid things I did when I was drunk.

A rubbish idea

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Yesterday saw the start of a new trial in the Royal Borough of Windsor and Maidenhead designed to encourage recycling.

Under this scheme, households will ‘earn’ vouchers to be used in local stores with each kilogram of waste that they recycle. 3,800 bins have been fitted with microchips in order to weigh household trash. There are several reasons why this trial seems somewhat idiotic.

Firstly, the council is trying to encourage its occupants to act in a ‘socially useful’ way, yet the scheme could well promote the opposite. By rewarding people for recycling as much as possible, it lowers the incentive for people to choose goods with less packaging. This distorts the market signals sent to shops and manufacturers that prompt them to cut down on unnecessary wrapping. If this were adopted nationwide, it would limit the way in which society reduces waste directly.

Such a system can be easily exploited by the placement of heavy, non-recyclable objects inside the chipped bin. While a spokesman for the trail claimed “rewards are much more effective than fines, which are complicated and expensive to administer", the council still needs to monitor the programme, which it proposes to do with on the spot checks and the withdrawal of access to vouchers - which is likely to be costly and unproductive.

This leads on to another issue: the cost of it all. Where is the funding for this scheme coming from? Landfill tax stands at £40 a tonne and a household can earn up to £130 a year through this trial, and so the setup, maintenance and payouts of the scheme can hardly be achieved through the reduction in rubbish arriving in landfill.

No, the answer is that the money will be coming out of council tax, so in effect households will be rewarding themselves for their own good behaviour. In fact, some will be rewarding the daily life of others; those with less recycling to be done such as the elderly will be subsidising payouts to families who inevitably consume and therefore throw out more.

Once you add this to the fact that the scheme forces the residents of Windsor & Maidenhead to have their recycling movements stored on an online database (what will we have monitored next, the frequency of our showers to reduce water consumption?), it can be seen that this scheme basically stinks.