F.A.Smith, financial decision-making and the understanding of numbers

The holidaying Geek from Oxfordshire posted a little video explaining the problem with big numbers. It points out that huge numbers mean almost nothing to us – in truth we struggle to make the distinction or have any real grasp of the scales involved. And this becomes more problematic when political communicators (which some folk feel is spelled “L. I. A. R. S.”) mix up the measures used by switching between millions and billions or by referring to percentages in the same sentence as real numbers.

And this confusion is compounded by mixing up concepts – right now most of the public don’t know the difference between “debt” and “deficit”. This isn’t because the public are stupid – in their own lives they’re pretty good at understanding budget deficit (I’ve got more to pay out than I’ve got coming in) and total debt (I owe so much but only have to pay a little of it back right now). It is because our political leaders like us confused. And right now they’d like us to think that halving the deficit – reducing the country’s overspend by half – can be seen as somehow reducing the debt when that simply isn’t true as each year that debt is getting bigger.

Which brings us to F.A. Smith, who was born in a back-to-back in Heanor, Derbyshire, went down the pit at 14, got out of the pit and into college and ended up as a regional director of British Coal. He was also my grandfather and, most relevant to this discussion, Chairman of Penge Urban District Council in the 1950s. And we are concerned with his view on the setting of budgets, which can be stated as follows:

“…the amount of debate about a given budget item is in inverse proportion to its financial value.”

Thus an hour or more might be taken arguing about how much it cost to clean the Chairman’s car or the saving from not providing tea and biscuits at meetings whereas the multi-million pound redevelopment of the town centre will go through more-or-less on the nod. So to link back to the spin referred to above, we spend ages discussing how much NHS hospital chief executives are paid – and getting ever more indignant about it – while ignoring the fact that halving the pay of every senior civil servant will not make any noticeable difference to the scale of either deficit or debt.

When big decisions finally do get made about the deficit (and the debt), those decisions won’t be subject to great campaigns, intense scrutiny or detailed debate. Nor will they feature on the front page of the newspapers for weeks on end. These are big decisions about cuts in spending, about making jobs redundant and about stopping providing services or giving benefits that are given today. And they will be made in comfortable offices away from public attention, managed through party whips and delivered in the form of a dry statement from ministers.

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