Government & Politics

‘Shrinking Whitehall’: Radically modernising a cumbersome state

Tim Ambler, Senior Fellow of the Adam Smith Institute, has published a book on radical reforms for Whitehall. ‘Shrinking Whitehall’ undertakes a forensic analysis of Whitehall’s statistics, and outlines key areas for reform.

  • The civil service has been long in need of a rigorous overhaul, with its tangled system hindering the efficiency of government.

  • Ambler’s work provides a bold direction for policy makers on how to achieve this reform, offering well-researched recommendations that could lead to significant improvements in government performance.

  • This provocative examination of our state seeks to widen the Overton window when it comes to what is thought to be possible.

The Rt Hon Jacob Rees-Mogg MP, former Secretary of State at the Department for Business, Energy, and Industrial Strategy, said of the book:

“Every decade or so an effort is made to reform the public sector. Michael Heseltine had a rather successful go for both Margaret Thatcher and John Major, whilst Francis Maude did an excellent job for David Cameron. Yet like the Hydra slain by Hercules, every time the civil service is cut it seems to grow back even more. This makes Tim Ambler’s book timely and welcome.”

Director of Research of the Adam Smith Institute, Maxwell Marlow, commented:

In this extensive work, Ambler outlines the brow-sweating inefficiencies of Whitehall and how to fix them. If Britain is to build back better from the pandemic and ensuing economic chaos, it is right that our civil servants are given the structure to ensure effective policy delivery.”

Shrinking Whitehall is available here at our Adam Smith Institute online store.

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NOTES:

  • The views expressed in this report are those of the authors and do not necessarily reflect any views held by the publisher or copyright owner. They are published as a contribution to public debate.

  • Tim Ambler is Senior Fellow at the Adam Smith Institute. 

For further comments please contact Director of Communications Connor Axiotes on connor@adamsmith.org, or 07584 778207.

The Magic Money Tree: The case against Modern Monetary Theory

A new paper by Professor Antony P. Mueller, a German professor of economics who currently teaches in Brazil, unpacks the logic behind Modern Monetary Theory:

  • Modern Monetary Theory (MMT) contends that government can spend without restraint and large deficits and debt don’t matter when the economy is not at full capacity. It asserts that the state, as the issuer of the nation’s currency, cannot go bankrupt because it can just keep creating and printing money; taxation exists not to obtain revenue but to oblige people to use a nation’s currency and control inflation; and that all public expenditure can be financed by debt or creating money.

  • MMT, whose theoretical foundations can be linked to the Marxist economic theories of Michal Kalecki, have come to prominence in recent months because of advocacy by the far-left of the Democratic Party in the United States and some left-wing commentators and campaigners in the United Kingdom.

  • MMT advocacy, particularly in the political sphere, is often driven by Utopian thinking by those who want massive unaffordable public spending programmes.

  • MMT is rejected by most economists. A recent survey by the University of Chicago found that no economic expert thinks that countries that borrow in their own currency need not worry about deficits because they can print money to finance debt. Similarly, none thought that it is possible to fund as much real government spending as you want by creating money.

  • There are a number of serious flaws in MMT:

    • MMT asserts, with limited evidence, that there is substantial unused economic capacity that government spending can activate. However, in practice, when government excessively expands the monetary supply (prints money) the impact is inflationary, if not hyperinflationary - as was the case in the Weimar Republic, Zimbabwe, and today in Venezuela.

    • MMT depends on governments knowing much more than they possibly could and acting more rationally than politics allows. It depends on government knowing precisely the natural rate of unemployment, and therefore when to spend, to stimulate activity, and when to tax, to drain the excessive inflationary impact of creating money. This ignores ignorance.

    • MMT is premised on substantial public employment policies to create economic activity for the unemployed. This policy underestimates the bureaucratic costs and the coordination problems that come with public employment policies. Only autocratic governments would have the means to enforce such policies.

Monetary Policy After The Crash: Lessons Learned

  • Conventional monetary policy has serious flaws and contributed to the 2008 Global Financial Crisis. Since then, emergency monetary policy has been relatively successful but lacks clarity. We should take the opportunity to reform policy such that the same rules apply in good times and bad.
     
  • The Bank of England’s Open Market Operations (OMO) should be reformed to reduce discretion and provide financial markets with greater certainty.
     
  • We should replace the Bank of England’s 2% CPI Inflation target with a nominal income (NGDP) target. Under current policy, the Monetary Policy Committee (MPC) must distinguish between demand shocks and supply shocks. Moving to an NGDP target resolves this problem as nominal income is aggregate demand, reducing the epistemic burden on the MPC.
     
  • Central bank intervention should be restricted purely to managing the money supply.
     
  • Open Market Operations should be as neutral as possible, focusing primarily on gilts. Financial markets should know in advance which margins the Bank of England intends to exploit. For example, if the Bank of England owns more than a certain percentage of gilts of a specified maturity, they then extend asset purchases to a pre-announced basket of investment-grade bonds.
     
  • Monetary policy can buy policymakers time, but it is unable to solve underlying problems of low productivity. The Bank of England cannot raise the Natural Rate of Interest in the long-term, but free market supply-side reforms should be a priority for government.
     
  • Stress tests, designed to measure the ability of banks to withstand market shocks, are complex. This makes them vulnerable to being gamed and it leads to risks that can be felt across the financial system. Prediction markets provide the best chance we have of avoiding future bailouts by boosting market competition and punishing excessive risk taking.

Read the whole paper

Chlorinated Chicken - why you shouldn't give a cluck

  • The EU has banned the import of chicken disinfected with chemical rinses for two decades.
  • Liberalising US poultry imports is expected to be a key feature of US-UK trade talks.
  • Americans safely eat upwards of 156 million such chickens each week.
  • Adults would need to eat 5% of their bodyweight in chlorinated chicken each day to be at risk of ill health from poultry alone.
  • US methods produce fresh chicken at 79% of the price of equivalent birds on British supermarket shelves.
  • British trade negotiators should be authorised to permit the import of chemically disinfected poultry from the US in return for a rapid free trade agreement.

Today in Washington teams from the UK and the United States will begin talks that both sides hope will end up in a trade deal between the two countries after Britain leaves the European Union.

Trade deals require pragmatism, they require compromise and they require the parties involved to look at their own regulatory frameworks and see if there are areas they can improve. With the UK leaving the European Union it can look again at restrictions on imports that the EU has imposed. Importantly these can be done through an evidence-based-policy lens.

Chlorinated Chicken is one of the areas that the UK can look at again as we enter talks. It is a safe treatment mechanism for meat practiced regularly in the US poultry sector. Importantly it is banned for import into the EU despite the European Food Safety Authority saying four types of chemical rinse, including chlorine dioxide, ‘would be of no safety concern’.

In fact a person would have to eat around 5 per cent of their body weight in chicken every day (nearly three whole birds a day for the typical British man) to reach the safety limit, according to European Commission data. Drinking water poses a far greater risk, making up 99 per cent of the disinfection byproducts consumed in a typical daily diet.

It does, however come with significant benefit. Immersing poultry meat in chlorine dioxide solution of the strength used in the United States reduces prevalence of salmonella from 14% in controls to 2%. EU chicken samples typically have 15-20% salmonella.

But why is this important? Because it's been a stumbling block on US-EU trade talks to date, with the USA likely to make increased access for American poultry exports to the UK market.

The UK can show it is serious about being open for business by striking a deal with the largest economy in the world and can simultaneously show it bases regulation on scientific evidence. That sounds like a win-win.

Read the whole piece here.

The Border after Brexit: How technology can secure Britain’s borders

• Britain’s Border Force is not equipped to quickly, accurately and securely monitor passengers in and out of Britain. After Brexit it will become even more important for Britain’s borders to be secure.

• The Warning Index and Semaphore systems the Border Force uses are years out of date, and at times 7.5% of high risk flights have not been properly screened, which if representative of the whole year would translate into over four thousand high-risk flights not being met. This has allowed known terrorists to leave the country without being detained properly.

• The Border Force operates a slow service at peak times: during the summer of 2016, an average of three out of four Heathrow Terminals every month failed their target wait times for non-EEA passengers through passport control.

• After sovereignty, polls have found control of the UK’s borders to be the second most important driver of voting for Brexit, and many voters desired sovereignty itself in order to control who comes in and out of the country.

• Public trust in the UK immigration system, and its key enforcer, the UK Border Force, is crucial in order for the UK to have a sensible immigration policy.

• The Border Force is only collecting data from the Advanced Passenger Information System for 86% of passengers, making a mockery of “exporting the border” claims.

• Some past collaborations with the private sector, like the Raytheon project, have turned out badly, but these involved heavy governmental micromanagement; decentralised private companies like AirBnb prove that the private sector can create high trust, heavily-vetted systems.

• The government must thoroughly modernise the force and deliver a new, realtime database and biometric scanning system, collaborating with the private sector to deliver a technological solution and paying for results, not trying to build its own system from the ground up.

Read the full report here.

Catch of Today: A ten point plan for British fishing

This new report, written by the Institute's President Dr. Madsen Pirie, calls on the government to take back control of UK waters and bring an end to the billions of fish thrown back dead into the sea each year.

The report lays out a comprehensive ten point plan for how Britain can replenish its waters following Brexit and reveals the full extent of the damage caused by the European Common Fisheries Policy (ECFP).

  1. Extension of Exclusive Economic Zone from 12 miles to the 200 miles from UK shores as specified by the United Nations International Convention on the Law of the Sea. 
  2. Ban fishing in UK waters without specific consent and require all boats to be registered.
  3. Naval and air patrols over UK fishing waters to identify and intercept illegal fishing.
  4. Creation of a Maritime Research Institute tasked with monitoring fish stocks, examining the levels of the different species, mapping breeding grounds, and recording all catches made within UK waters.
  5. Creation of a National Fisheries Council to determine a total allowable catch for each species and assign a quota to each registered fishing vessel that is divisible and tradable. All catches must be landed, and if any exceed the quota, the vessel must trade or buy quotas from others.
  6. All boats fitted with satellite tracking devices, and their position constantly indexed.
  7. All catches size and species recorded on landing with information uploaded to a public database.
  8. UK fishing waters divided into administrative zones with the National Fisheries Council able to impose an immediate suspension of fishing in any areas where the sustainability of any fish stocks appears to be at risk.
  9. Inspections from the National Fisheries Council on any boat two times per year. 
  10. The National Fisheries Council and the Maritime Research Council to publish all their information online, accessible to members of the public as well as to the industry. 

Read the full report here.

UK PLC: Britain's debt time bomb

UK PLC: Britain's debt time bomb

Nigel Hawkins, in his new ASI paper, reviews the big numbers in the Whole Government Accounts, and finds that Britain's government liabilities go far beyond the national debt. In order to ensure stability in security in public finances into the future, he argues that the government must cut back further, as well as selling off some of the assets mentioned in his previous paper Cash in the Attic.

Read the paper here.

Parliamentary Snapshot: MPs on Entrepreneurship

Members of Parliament may talk a good talk about their desire to support entrepreneurship in the UK, but in practice there are multiple, competing policy options open to them – whether this is increasing tax breaks, spending more in various ways or cutting regulation. Due to the limited time and resources available to government it matters where the sympathies of our representatives lie within the context of the current policies already in force. Parliamentary Snapshot: MPs on Entrepreneurship is the first survey to uncover the views of MPs on policies impacting entrepreneurs, providing useful insights on the opinions and working knowledge of the House of Commons.

Read the report.