Wednesday, 30 June 2010

The Tricky Question of Parliamentary Sovereignty

The Institute for Government has recommended that the House of Commons should be subjected to audit by the National Audit Office, effectively bringing it in line with all other public sector bodies.

This is a good idea, but once again raises the tricky question of Parliamentary Sovereignty, a concept at the very heart of our constitution, but actually the cause of many problems with our democracy.

Consider that the House of Commons, and Parliament in general, does not, in the case of other legislatures around the world, derive it's sovereignty - it's authority to create the law - from the people. It is sovereign in itself. It has appropriated this sovereignty from the Monarch over many centuries, starting with the Magna Carta and culminating in the defeat of Charles I in the English Civil War.



Our Parliament, and by extension our entire political system, is built around the concept of independence from the Monarchy, rather than accountability to the electorate.

Now, this concept has served us well in past, in our nation's evolution from an autocracy to a democracy. But it now shows signs of creaking. The MPs' expenses debacle is a classic example - MPs, operating under the principle of Parliamentary privilege, abused taxpayers' money. Some of them even attempted to use Parliamentary privilege as a defence of their actions in court.

This entire concept, a foundation-stone of our constitution, is actually responsible for many of its flaws. Parliament is sovereign, so it's word is law. The Government usually holds a majority in Parliament, therefore the Government's word is law. This concept permeates our nation, from the rites and rituals of the State Opening of Parliament, to the design of the Palace of Westminster itself.

Wouldn't it be a good idea if the people were sovereign, not Parliament?

Wednesday, 23 June 2010

Budget II - Detailed Analysis

After my initial comments, I thought it would be best to do a more detailed analysis on the Budget.

The favourite complaint about the Budget seems to be that as the recession started in the private sector, why is the public sector being hit so hard?

First, recession is a stage in the economic cycle, termed as two consecutive quarters where there is negative growth in GDP (the size of a country's economy). All economic growth comes from the private sector. The public sector, by definition, is wholly subsidised by the taxpayer, and therefore does not provide real economic growth. The recession may have started in the private sector, but that's because it can't very well start anywhere else. The recovery will also by driven by the private sector.

Next, this graph from the HM Treasury website illustrates the current financial situation quite well:


It quite clearly demonstrates that, in every year since 2002-2003, the Labour Government operated the public finances in a state of deficit, spending more than they were getting in tax revenues.

It may have been the recession that caused borrowing to rise, but we were already spending too much before the recession. This is why we're in this horrible mess. Labour have been mismanaging the public finances for years, leaving us ill-prepared for the banking crisis, which triggered the deepest and longest recession in living memory. Their legacy is a hugely bloated public sector, now twice the size that it was 10 years ago, with a massive funding gap. And with the tax burden at roughly 40% of GDP (yes, 40% - for every £5 in the British economy, £2 is syphoned off as tax), revenues are unlikely to recover quickly enough to support this huge dead weight.

The only answer, therefore, is to cut public spending, and to minimise tax rises as far as possible. This increases the chances of revenues rising and brings our currently unsustainable public spending in line with what our (hopefully now rising) tax revenues.

The Budget did that.

Of course, the loony Left will continue to blame the banks, because that's the easiest thing to do. The banks are not innocent victims of this debacle, to be sure. The last few years have highlighted major issues in how they do business, taking unwarranted gambles and then expecting the taxpayer to clean up the mess. However, the responsibility for regulating the banks falls on the Government. And it is that lack of regulation at the macroeconomic level which allowed them to behave so irresponsibly. The banks are not blameless. But nor are they wholly responsible. They behaved irresponsibly and took unwarranted risks. But so did the Government, by refusing to regulate them properly, instead focusing regulation on smaller providers of financial services, and by mismanaging the public finances to such an extent that when the inevitable recession hit, we were not prepared for it.

This Budget was the best that could be had under the circumstances.

Tuesday, 22 June 2010

It Could Have Been Worse...

So, Budget II: The Revenge is unleashed.

I can't say I disagree with these measures:

  • Reforming and reducing benefits to target those most in need;
  • Cutting Corporation Tax to attract new investment and bolster the economy;
  • Reducing National Insurance to lower a financial disincentive to employment;
  • Increasing the Income Tax allowance for the lowest paid;
  • Consolidation of complex reliefs and allowances to save time and money.
All in all, it could have been a lot worse.

George Osborne's new favourite toy

However, there was one, wasn't there?

VAT.

It was bound to happen. The potential to raise so much revenue could not be ignored. And, of course, typically, much of the debate (read: screaming at each other) has been along ideological lines, rather than from the application of common sense.

So allow me to apply some.

Certain 'essentials', such as food and children's clothes, are exempt, or 'zero-rated' (they're charged VAT at 0% - important difference) from VAT. As such, people on lower incomes will be less affected by the tax rise than those on higher incomes, as they will be spending a greater proportion of their income on such essentials. So it's not as bad as Labour make out.

But here's the catch: not all 'essentials' are actually essential, and some things that are essential aren't actually 'essentials'.

For example, VAT is still charged on fuel, energy, adult's clothes, household appliances, most utility bills like telephone and broadband (odd, but an increasingly relied-upon resource). So the effect of the rise on the lowest paid isn't as minuscule as the Conservatives would have us believe.

So, the lowest-paid will not be as badly affected by the VAT rise as the well-off. So that's good, right?

Wrong.

VAT is a tax on goods and services. It is a tax on purchases. It is a tax that can be easily and legitimately avoided.

Did it not occur to the Chancellor that, if the price of just about everything is about to go up, people might not spend money that they otherwise would?

Raising VAT might not generate as much revenue as the Government think.

Friday, 18 June 2010

Borrowing: Government Overstatement?

According to Simon Ward, Chief Economist at Henderson Global Investors, the newly-formed Office of Budget Responsibility is overstating the Government's borrowing projections for 2010-2011. Following George Osborne's decision to use the OBR's 'independent' forecasts instead of Treasury ones, which have a history of being massaged for political reasons, the OBR have announced that they expect the budget deficit to be £155billion in 2010-2011. However, public finance figures released in May are consistent with the deficit actually reducing to £126billion.

I have questioned the independence of the OBR previously. This suggests more evidence that the figures are still being massaged, only this time to make it look like it's worse than it actually is. Is this an attempt to politically point-score against Labour? Or is it an attempt to justify unnecessary fiscal tightening?



My personal opinion is that the deficit should not just be reduced, it should be eliminated. And that it should be financed entirely by spending cuts, not tax rises. This is reinforced that, according to the World Bank, in 2008, tax revenues accounted for 29% of GDP, the highest in the developed world.

But decisions on spending cuts should be driven by the requirement for value for money for the taxpayer, and a debate on what services should actually be provided by the State in the first place. They should not be made for ideological reasons.

Christ, I sound positively socialist. Time for a drink.

Wednesday, 16 June 2010

3DTV

Whilst watching the World Cup, I've been noticing all the adverts for new TVs. Despite getting a kick out of the one with Captain Sulu in it, I've also been a bit bemused about all the ones urging me to buy a 3DTV, because the ~£1,000 I spent just 2 years ago on a 1080p HDTV, Blu-Ray player and Surround Sound system just wasn't enough, damn it.

All of this commercialisation has led me to look at the subject of 3DTV, to see exactly what all the fuss is about. I started out by seeking to answer a pretty basic question: do I need a 3DTV to watch 3D content, or, if you prefer, what does a 3DTV do that an HDTV can't?

The answer was not immediately obvious, but lies within the various 3D formats that you can get. They are, briefly:

  • Anaglyph - this is the traditional format that requires the red-and-blue glasses. One image is transmitted in red for one eye, the other in blue for the other eye. As each eye can only see in one colour because of the glasses, your brain puts the two images together to make it 3D;
  • Polarised - one image is transmitted in a 'light' wavelength and the other in a 'dark' wavelength. They are displayed simultaneously on a specially reflective screen, and need specially polarised glasses for you to get the 3D effect;
  • Close Shutter - Both images are transmitted alternately, with the frames interlaced, so it goes 'left-right-left-right' really fast. Special glasses which effectively wink in synchrony with the display are needed to get the 3D effect;
  • Lenticular - Both images are transmitted at the same time, one overlaying the other, onto a screen made up of tiny cylindrical prisms. No funky glasses are needed for this format, because the light is reflected in the right way on the screen.
You with me so far?

Okay, here's for the pros and cons:
  • Anaglyph:
    • Pros:
      • You don't need a new TV. The images are filtered on colour, so how fast the image changes on the screen isn't a problem, and you don't need a special screen.
      • It's cheap, both to produce and consume. Existing content could, with relatively little expense, be converted, and you don't need fancy new hardware.
    • Cons:
      • Filtering on colour is shit. It's little better than black-and-white in terms of picture quality, as most of the detail is lost as you limit the colour palette to 2 blocks of the spectrum.
      • Those Flash Gordon specs are even crapper. They make you look like a complete tool, and belong in the 1950s. How shit would they be when you want to watch a film?
  • Polarised:
    • Pros:
      • The viewing experience is a lot better - the full visible spectrum is available as a colour palette. 3DTV how it should be.
    • Cons:
      • That specially reflective screen. Yup, you need a new TV. It won't work on existing HDTVs - they're just not designed for it.
      • It's expensive - content can't easily be converted from 2D to 3D, and new content requires filming using a double-lensed camera.
      • You still have to wear glasses. You don't look like a reject villain from Flash Gordon, but Cyclops out of X-Men. Not a fantastic upgrade.
      • The polarised glasses reduce light, so not great for films with a darker palette, and you have to sit right in front of the TV to maximise the effect.
      • People have complained about headaches and motion sickness caused by the glasses, dubbed 'the Avatar Effect' - polarisation is the technique used in cinemas.
  • Close Shutter:
    • Pros:
      • You might not need a new TV, as there's no requirement for special reflectivity. Each viewing angle is displayed alternately, in sync with the glasses.
      • The glasses don't darken the view or filter on colour, like the previous 2 methods. Full, un-darkened colour palette. Thank you.
    • Cons:
      • Although your TV doesn't need a special screen, there is a question of refresh rates. Your TV has got to be able to change the image fast enough. If not... grab your wallet.
      • The glasses have motorised shutters that go in sync with the film. They'll need recharging, will probably make a noise, are bulky and if they get out of sync, will make you feel ill.
      • It's expensive. You might need a new TV, content will need producing with a double-lensed camera, and the glasses are likely to be steep on price too.
      • Fucking glasses. Motorised ones. Vibrating on your nose bridge. Sounds real fun. You're not going to end up loathing them at all, are you?!
  • Lenticular:
    • Pros:
      • NO GLASSES! The 3D effect is totally generated by the prism screen, meaning no dorky cumbersome glasses are required.
      • No darkening or colour filtering, unlike the anaglyph or polarised methods. Full 3D in full colour. Now we're talking.
    • Cons:
      • Expensive. And I mean expensive. New TV required, currently with a £6,000 price tag. Content needs to be made using a double-lensed camera.
In my 'umble opinion, m'Lud, lenticular appears to be the best. But with a £6,000 price tag for a replacement TV, and (incidentally) the odds-on requirement for a new Blu-Ray player in order to transmit the double images at the same time, it ain't 'appening soon.

Oh, and did I mention that these are all different formats? Anyone remember Betamax? Or HD-DVD? That's right. Expect another format war.

Tuesday, 15 June 2010

Budget II

Not long before Budget II: The Revenge.

No doubt the Labour benches will be cat-calling and boo-hissing George Osborne as if he's a pantomime villain, rather than the Chancellor of the Exchequer bequeathed with the unenviable task of restoring order to the public finances.

 George Osborne*

I have noted that he will be using forecasts from the newly-formed and independent Office of Budget Responsibility, instead of the Treasury's own, thus eliminating an ancient conflict of interest. However, I have noted that it's independence is not all it's put up to be. For example, Sir Alan Budd, the OBR's chairman, was appointed to his position by George Osborne. The OBR actually work in the Treasury building. Hmmm... not too independent, then, are we? Perhaps simply having the public finances audited by a firm of accountants may be better. You know. Like companies do.

Interestingly, though, the OBR have come up with the suggestion that perhaps public sector pension schemes are about to get considerably more expensive. Now, pensions are things I know something about.

Public sector pension schemes are incredibly generous, being final salary schemes, which basically means that, based on your length of service, you will receive a proportion of your salary at retirement (i.e. your 'final salary') regardless of the prevailing economic conditions at the time. This is a rather formidable guarantee.

Now, there are some public sector schemes where the guarantee is not heavily subsidised by the taxpayer  - the Police Pension Scheme is an example of this, where members have to contribute a whopping 11% of their salary into the scheme every year. Admittedly, the Police Scheme is better than your average bear - early retirement, enhanced benefits build-up and superior death benefits, but the point still stands.

On the other hand, the Civil Service Pension Scheme still provides a guarantee, albeit with a standard retirement age, death benefits and benefits build-up rate, but members are only required to contribute 1.5% of their salary!

Contrast this with the private sector. Final salary schemes are no longer the norm - many of them are poorly funded, e.g. British Airways, or closed to new members. Some are being wound up completely. The pension scheme of choice in the private sector is money purchase, where contributions are invested. The actual pension benefits you receive depend on investment performance up to your retirement, prevailing economic conditions at retirement, and what options you choose.

Of course, proponents of money purchase schemes argue that they're more flexible, easier to administrate, blah, blah, blah... they're cheaper. There's a limit to the employer's liability. The employee will be asked to pay typically 6%, which is usually matched by the employer. So that's it. The employer will never be called upon to bail out the underfunded pension scheme. The liability for losses is shifted firmly onto the shoulders of the employees.

That's not fair, I hear some people moan. People deserve a guarantee!

To that I answer this: rubbish. It is completely fair. You get what you've got, and what you do with it is up to you. Seems perfectly fair to me.

I hope that George Osborne announces the immediate closure of all final salary public sector schemes, with new money purchase schemes being set up to replace them. Pension contributions should be an average of 6% of salary, which will be matched by the State as employer. Only people in special occupations, such as the Police and Fire Service, should get anything better.

*Not actually George Osborne, but Simon Callow as Capt. Hook.

Friday, 11 June 2010

Benefits Reform

The BBC have reported that Frank Field, appointed by David Cameron as a 'poverty tsar' (off on a tangent, I hate that phrase whenever it's used in Government - 'enterprise tsar', 'poverty tsar', all that bollocks. Tsar is a Russian contraction of Caesar. They're not fucking Emperors, for Christ's sake) is considering taxing or age-relating Child Benefit.

Frank Field, Poverty Tsar*

I have a better idea.

Abolish it.

Yes, that's right. Get rid of it.

Here's why:

The State shouldn't be in the business of financially incentivising people to have children.

I should point out that I am a divorced father of two who does not receive it. I haven the past. I wish I hadn't.

The subject of benefits reform is a thorny one, quite simply because of the culture of dependence in this country. Nowhere else in the world is the State expected to provide so much to so many. Over £100billion a year is spent on working-age benefits. And the system is creaking.

To my mind, the entire system needs wholesale change. There are currently between 30 and 40 discrete State benefits. These can quite easily be rationalised by taking a more holistic approach to who should receive benefits and when.

Firstly, benefits entitlement should be limited to British Citizens. That's how to solve that irritating immigration problem. Same with the NHS - free treatment only to British Citizens. Everyone else is expected to pay for it.

Next, sever the link between National Insurance contributions history and benefits entitlement. The whole point of the benefits system is to help people when they need help, not when they need help provided they've paid a wad of tax already.

Next, look at which people you need to help. To my mind, there are only 4 sets of circumstances when you should be claiming anything from the State:
  1. You're too old to work - if you're past the State Pension Age, fair enough. Thanks for your efforts, here's your pension;
  2. You're too ill to work - if your ability to work is compromised, either partially or totally, by illness or injury, then you need support. This would also include the disabled;
  3. You can't work because you need to care for someone else - if your ability to work is compromised, either partially or totally, by the requirement to care for others, such as children or disabled friends/relatives, then you need support;
  4. You aren't working because you're temporarily unemployed - if you're unemployed, but are actually capable of work, the State should be supporting you but doing everything it can to return you to suitable long term employment as soon as possible.
The only other circumstances where you would actually be out of work are:
  1. You're rich enough so that you don't have to work, in which case you certainly don't need to be claiming benefits;
  2. You're too lazy to work, in which case you are perfectly entitled to the freedom of laziness. However, you are also entitled to the freedom to starve.
So the entire benefits system can be rationalised into 4 basic benefits. How much administration will that save?

Just a thought.

*Not actually Frank Field, but Nicholas II, last Tsar of Russia. Hobbies included murdering Jews and commanding armies despite only being a second-rate cavalry officer.