The strange death of local government - a comment on setting budgets (and what we do)

‘No new money from central government is being provided to councils in 2017/18. In fact, more than two thirds of councils will actually be worse off next year than they were expecting.'

You will have heard this sort of observation many times over many years. This version is from the current chairman of the Local Government Association (LGA), Lord Porter. The problem is that, while I think Lord Porter is right, over the years the repeated cries of pain from local government have destroyed much of our credibility on this matter - there may now be a wolf but nobody believes us.

That Night a Fire did break out--
You should have heard Matilda Shout!
You should have heard her Scream and Bawl,
And throw the window up and call
To People passing in the Street--
(The rapidly increasing Heat
Encouraging her to obtain
Their confidence) -- but all in vain!
For every time she shouted 'Fire!'
They only answered 'Little Liar!'
And therefore when her Aunt returned,
Matilda, and the House, were Burned.

Or in less poetic terms:

"Surrey County Council should hang their heads in shame.

"Surrey residents will have seen their council tax go up by around 85 per cent in the last two decades and have every right to feel that their local representatives have let them down once again."

So says the Taxpayers Alliance as it argues how paying councillors, high salaries for top officials and trips to conferences show there's no need for tax increases. After all, local government always says this:

"After years of striving to keep council tax as low as possible or frozen, many town halls have found themselves having to ask residents to pay more council tax ..."

That's Cllr Claire Kober, leader of Camden and chair of the LGA's resources board.

So is there any truth in all this? Are local councils being stripped bare as the easiest target for national government demanded austerity or is there still largess, waste and unnecessary expense out there in local government land?

I can't really comment on Surrey or indeed any local council other than my own, Bradford. Here's the state of our budget:



For the sake of precision, this is the 2016/17 revenue budget, third quarter report (taken from the papers for a Corporate Overview and Scrutiny meeting on 2 February 2017). What it shows is that Bradford Council's net expenditure for 2016/17 is £378m and gross expenditure is £1,230m (net expenditure being that gross figure less income). This is, for us mere mortals, a lot of money and most of it - including most of the income - is public money.

You will appreciate how, given the scale of the money we spend, saving a hundred thousand or so on paying councillors, senior officials or trade union reps isn't likely to fix the problem (assuming - see above - we accept there is a problem). And nor is this where we're spending the money. I'm going to focus on the unfunded part of the table above - the 'net budget' figure of £378m. This is funded from two sources - local taxes (council tax and, at some point, business rates) and Revenue Support Grant (RSG). When you hear about cuts to local budgets what is being talked about is reduction in RSG. It is the stated intention of the government to reduce this grant to zero - it is currently around £138m in Bradford. Some local authorities in England already have no RSG - the government cannot cut the budget of, for example, Sevenoaks District in Kent because they no longer give it any grant.

But enough of where the money comes from what about how its spent. Were I to ask an average Bingley Rural resident to tell me how much is spent on highways and how much on social care, I'd probably get similar numbers. The reality here is that we spend around ten times as much on social care as we do on highways. Look at that table above and you'll see that the net budget for adults' and children's care amounts to £207.8m out of that £378m net budget - that's 55% of the total net budget and over 70% of the money we spend on delivering services. Yet these are, in the main, hidden services that only the individual recipients know about.

In the budget planning papers for 2017/18 Bradford's finance director reports that, in terms of delivering care, we plan to spend £158m in the forthcoming year (note this is a different definition and calculation from the table above). And this will support 6,200 vulnerable people at a cost in excess of £25,000 per person. Oh, before you call this a scandalous waste recognise that this represents £480 per week in a world where average weekly cost in a care home (not a nursing home) is, according to Which, £600. And this hides significant cross-subsidy:

According to the healthcare market intelligence provider LaingBuisson, residential care homes in England currently need to charge fees of between £590 and £648 per week.

However, the average fee paid by English councils for residential care of older people was just £486 per week in 2016/17.

LaingBuisson estimates this means residents who pay from their own finances are filling a funding gap of £1.3bn a year.

What we're seeing in top tier local government is its gradual decline from being a maker of place into being the funder of care for vulnerable people. For county councils this is even clearer as they don't provide services such as refuse collection, leisure services, housing and economic development that metropolitan districts like Bradford provide. I'm guessing that the proportion of county budgets spent on providing care is touching 70%.

Linked to this shift in local government priority is a secondary truth - we really have very little control over these budgets. With adult care the entitlement to care is set out in law and local authorities have a duty to provide (or enable provision of) that care. If an older or disabled person - and there are growing populations in both areas - qualifies, the council has to provide and has to pay. For children we have a little more flexibility but most councils rightly seek to avoid increasing the risks and government retains (and exercises) the power to intervene and direct decisions in children's services.

This strange death of local government belies the scale of our spending and the importance (or even self-importance) of councillors. The sad reality for many councillors is that their local parish or town council has more flexibility in decision-making than does the grand top tier council with its fine offices, highly paid officials and more-or-less full time councillors. None of this is a criticism of local councils or councillors but rather a recognition - something even the TPA recognises in its more measured moments - that most of the financial challenges facing local councils point back to national government where, despite all the rhetoric, local councillors are largely seen by officials as bumbling fools that get in the way.

I remember a grumpy old Labour councillor in Bradford called Syd Collard who, on the minibus to some planning committee site visit, went on at length about how being a councillor was a waste of time these days and he wouldn't recommend it to anyone any more. My Dad - a councillor for 35 years - says much the same. Wherever we look and regardless of national government cant about localism our ability to make local decisions about local services to local people are constrained by the interference of government regulations and the prejudices of the 'Man in Whitehall'.

I'm sure Syd and my Dad would agree that local government is important. But right now local councils - the top tier ones at least - are in danger of becoming merely the agents of care delivery for a combination of the NHS and national government departments. Without belittling care as a service, this isn't what we need and reminds me daily how the stupidity of the poll tax and the arrogance of ministers since resulted in the emasculation of local councillors - a gentling enacted in law by Blair's 2000 Local Government Act that left most of us sitting on the backbench being 'community leaders' rather than doing what people think they elected us to do.

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An everyday story of booze and bingo

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So we had a budget. We get one every year to great fanfare accompanied by every single pundit on everything issuing their 'budget review' or similar. No one sane human being can begin to comprehend the scale of gobbledegook production that is responding to the budget mere moments after the Chancellor of the Exchequer sits down.

Many years ago, in the days when I had a proper job in the private sector, we used to prop the office telly up in the board room, drag a few clients in and watch the budget. As the thing closed, we'd realise that the detail we needed wasn't in the great man's actual speech (there was always something somewhere in the darker recesses of the budget documentation about tax free limits on friendly society bonds or some bizarre but important tweak to postal regulations).

Now because this was in the days before the wild west of the web arrived, the next event was the arrival of a thick, badly printed and poorly proof-read analysis from either a bank or a big accountancy firm. This involved the firm's experts (I know they were experts because they told me so) restating what the Chancellor said only using longer words and maybe some graphs - or "charts" as they call them. All this being accompanied by urging us to take advantage of the expensive services of the bank, accountancy firm or consultancy.

Meanwhile the world returned to normal. The newspapers ran their headlines, crafting them to meet the expected tone of the rag in question all filtered through the tribal preferences of whoever was running the show at that time. The rest of us headed out to stock up on cigars, whisky and petrol ahead of the imminent deadline when, 'ping', all the prices would go up.

Budgets matter because people notice them. For once the apathetic Brit sits up and takes notice. Perhaps even talks to another person about how this political event impacts on their lives. More importantly, some time soon, the budget decision will really affect them - a few more pounds of take home pay, perhaps a more expensive shopping basket at the supermarket or maybe a little more saving and a little less taxing.

But understand this, it's not the headlines that are driving all this but the actual changes made in the budget. Cutting the duty on beer by a couple of pennies might not make any difference to what we pay but it might mean that your local doesn't close. And the same goes for bingo - for sure, it'll be a little cheaper for the punter but the real win is that the bingo halls stay open, carry on providing entertainment (and jobs) in places where those things are limited.

So when middle-class people who don't go to pubs and wouldn't be seen dead in a bingo hall accuse the chancellor of 'patronising' the working-classes by cutting taxes on beer and bingo, they miss the point entirely. And even worse when they dredge through 1984 to find the quote about beer and gambling as social control they just show contempt for people whose lives don't revolve around making grand (but still witty, ever so witty) statements about politics while paying £8 for a small bottle of achingly trendy craft beer.

And the irony of accusing the government of 'social control' when cutting those booze and bingo taxes becomes stark when the big deal in the budget - reforming pensions - is discussed. Here's where the real contempt that those good thinking 'progressives' have for ordinary people comes gushing out - "you can't trust people to spend their own money sensibly" explains one especially smug Labour advisor while others tweet that people are bad at making long-term decisions.

If making it a little easier or cheaper to drink or gamble is social control then, compared to forcing people to invest their money in a specific, government-approved manner, it's a peculiarly liberating form of social control. And one I'm quite happy with! I know I'm supposed to nod sagely at the comparing of 'booze and bingo' to 'bread and circuses' (although Juvenal's quote does start with 'now no-one buys our votes any more') but these are examples of the little pleasures that, for most people, are what makes life something other than a drudge.

For the three-and-a-half million or so bingo players and about twenty-five million beer drinkers yesterday's budget will have been cheering - not so cheering as to change much about their lives (although raising the tax threshold will have helped too) but worth a smile and a cynical 'thanks, George'.

The proof will be in the cooking and eating. But so far the budget looks OK for ordinary folk and less good for the arrogant folk who think they know better.

Cheers George!

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Bradford and The Cuts

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There are some useful figures here about the actual changes to Bradford Council's budget since 2007/8 on the Conservative Group blog. It concludes with this paragraph which rather sums it up:

The truth is that Bradford Council has faced significant reductions in grants and that, outside the protected areas of education and public health, this has had quite an impact on service provision. However, we can find over £500,000 for union officials and their perks, can spend nearly £5m on ‘strategic support’ and can willfully turn down government grants so as to make a political point about council tax. This isn’t the sign of an organisation in crisis but of one that is only just getting to grips with waste and excess.

Do have a read of the whole piece.

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Paying more for less - Bradford Council's budget

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The Labour Party - backed by fellow socialists in the Green Party - pushed through a budget that will raise council tax by 1.99%. Now, setting aside the cynicism of this particular increase, the truth is that such an increase wasn't needed. Even if the Council chose not to take the grant available to Bradford to freeze the tax.

Give or take a farthing, this increase raises around £5 million. And to get this in the context of the whole budget (some £1.3 billion) it is about 0.4% of the amount that Bradford actually spends. This - however you look at it - is little more than a rounding error. Even as a proportion of the net budget (defined as the difference between what we need to deliver services and the amount of non-tax income) it amounts to just a little over 1%.

To get a still clearer understanding, Bradford Council has underspent every year for the last three years - by as much as £16 million in one particular year. Regardless of the debate about resources, cuts and priorities there was absolutely no need at all to charge the Bradford public more money to receive less service.

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Mash Beer Tax

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Yes folks the budget is coming and, unless something changes, your pint will be going up again in price. Here's a chance to do some lobbying - to try and get the government to stop killing the pub.

In 2008 the Government made a commitment to above-inflation duty increases on beer. Since then, while duty has increased by 42%, revenue has only increased by 12%

And also:
 

Beer is already taxed more in the UK than almost every other country in Europe. Britons pay 40% of the EU beer tax bill, but consume only 13% of the beer

Join the campaign here:


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Why I'm confused about those cuts...

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"Major cuts," is the cry. And I wonder. Mostly where the money is all going. For in the aggregate there are no cuts:

What’s more, the evidence indicates that U.K. has, at best, slowed down the growth of spending, but it has not engaged in actual spending cuts. I documented the trend in British spending earlier this year:

A look at the data in Her Majesty’s Fiscal Year 2012 Budget shows (see table 2.3) that total managed expenditures will increase from £696.4 billion in 2011–2012 to £733.5 billion in 2014–2015, and further to £756.3 billion in 2016–2017. Adjusted for population growth, this is slow growth, but not a savage cut. That table also shows a “projected” drop in Public Sector Gross Investment between 2012–2013, but if it ever materializes, it will be contained to that year alone.

And we're paying through the nose too:

Spending cuts in the UK can’t be blamed for the weak growth path the country is on. On the other hand, tax increases can. Here is a list:

• a VAT hike from 17.5 percent to 20 percent (probably the main culprit of the U.K.’s current problems)
• a new 50 percent tax bracket on incomes over £150,000, which will drop to 45 percent next year
• an increase in air-passenger duty to 8 percent
• “temporary” payroll tax of 50 percent on bonuses over £25,000
• a capital-gains tax hike
• a 0.088 percent levy on banks
• an increase to 7 percent in the stamp duty on the sale of properties worth more than £2 million and on properties bought through “non-natural persons.”

(For more, go here.) The bottom line is that the U.K. is another case of private-sector austerity (i.e., tax hikes) without public-sector austerity (i.e., spending cuts).

To paraphrase Ray Davies, I remain, yours truly...

...confused BD13.

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A thought on Council budgets and social services...

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Councils spend a lot of money - £1.3 billion in Bradford's case - but the bit that matters is the "net revenue budget". This is the bit that remains after we take account of fees and charges, remove money that is simply passed through the books (e.g. the money that goes to schools) and adjust for things we do on behalf of government like pay benefits.

In Bradford this figure is £425.9 million of which 38% comes from the Council Tax with the remainder (bar around £6 million taken from reserves) coming from central government grants. Between friends we can call this a 40/60 split. And, assuming the finance director's guesses are more-or-less right, future reductions in grant will mean that this split will be approaching 50/50.

Which brings an interesting observation - the Council's spending on what we used to call social services (children's services and adult social care) is now some £203.3 million. This is around 48% of the net revenue budget. In simple terms, the grants we receive from government pay for social services.

All this rather begs a question - since there is a national debate around adult care and a move from council commissioned block grants to personalised, individual purchase, there is little justification for this being seen as a necessary council service. The private and voluntary sector are more than capable - as is the case with housing - of making this provision. Local government is superfluous except perhaps as a quality regulator (much better and fairer when the council is not also a major provider).

Children's services remain a problem but, given the nature of these services and the limited scope for any meaningful councillor input, there is perhaps an argument - I would need convincing - for child protection and services to be run by a government agency. Service provision - children's homes, adoption and fostering services and so forth - could be commissioned (perhaps from the big children's charities).

If this were the case then nearly 100% of Bradford Council's funding would be raised locally.

It's thought...


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What I'd like to see in the budget...

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Over three years, Bradford Council will reduce it's cost to the taxpayer by around £100 million representing about a 25% reduction (although, dear reader, you should note that it is only around an 8% cut to the Council's £1.3 billion budget). There have been some negative effects on front-line services but these are mostly the result of political choice - our Labour leaders, faced with a slower rate of savings from reducing bureaucracy, made service cuts rather than use reserves.

Central government should set itself the same target over the same time period - a reduction of around £170 billion. I'm not going to set out precise details - that's what that Jeremy Hayward chap is for - merely that, if local councils can successfully reduce spending to this degree, I am absolutely sure central government can do the same.

And half those savings should go straight into tax cuts - raising the point at which income tax starts to minimum wage rates, abolishing the 50p rate of tax, reducing duty on beer, scrapping the tax on holidays and set in train a radical simplification of the entire tax system.

Won't happen...but wouldn't it be nice?

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So who is running Bradford? Looks to me like the trade unions...

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Who of course haven't been elected and don't exist to serve the interests of Bradford residents:

Bradford Council leader Ian Greenwood said that he could not comment on the Conservative plans, because his group’s budget needed to be submitted to the Trade Unions first.

And you thought you elected us Councillors to run the City!

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How open for business is Britain?

Today, with great fanfare, a new "Start Up Britain" campaign is launched:

Prime Minister David Cameron is launching a new private-sector business initiative today called Start Up Britain. It is aimed at encouraging people to set up their own businesses and will be a major part of the governments attempt to encourage economic growth through private enterprise. New businesses will be able to apply for help worth around £1,500 in areas such as internet advertising and IT training.

And the Government has roped in some big businesses - mostly those with a real interest in small business that extends to wanting to sell something to these new businesses!

O2, Virgin, Blackberry, Google, Experian, Barclays and AXA - all signed up and ready! Ready to sell mobile phone services, credit checking, insurance, banking and technology hardware. Not much in the way of philanthropy here - just some big businesses scamming government for a few nice sales opportunities.

And let me tell what the problem is for small businesses - it isn't the cost of IT training or the expense of internet advertising, it's the endless barriers to getting going. Here are a few examples:

Try setting up a bank account. You thought you just walked into the bank with some cash, filled out the forms and bingo, a shiny new bank account! Nope, you need the forms, photo ID, a meeting with a "business advisor" and evidence that the business is established. And if you try to open the account with a grand in cash there's a further pile of questions and forms related to money laundering and heaven knows what else

Then you'll need some insurance. Pretty easy to obtain and you have to have it even if you're only employing yourself. And if you're planning to bid for public contracts there's a whole load more rules - you'll need to spend at least a grand on assorted insurances.

Now find an angel investor. Ah, problem here. The investor will want equity - that's how it works. And regardless of how you and he choose to structure the equity, it has a load of negative tax implications for that investor. Change it to a loan? Oh no, the tax man's wise to that and will still nobble the investor.

So it's a loan from the bank? For a start up business, who're you trying to kid! The banks won't be taking that risk any time soon - unless of course you want a loan on crap terms that the bank insist on treating like a personal loan? Limited liability - that's a laugh isn't it!

I could go on - talk about VAT, about business rates (watch out for double taxation when you work from home), reporting rules, accountancy fees and a host of regulations specific to different types of business. And this is before we get to the burden of actually employing people - you know the "creating jobs" bit! That opens up a whole load more costs and rules - national insurance, PAYE, assorted employee rights (maternity, paternity, sick pay, holidays and so forth).

As my old boss, Judith Donovan put it in commenting prior to the recent budget:

“I passionately believe SMEs are the engines of growth; this Government so far is paying lip service to that concept while cuddling up to big business; we don’t need schemes and incentives and special favours.

“Yorkshire folk will do it for themselves if given a level playing field; lift the ridiculous and onerous employment law burdens for businesses employing under 10 people and the Yorkshire economy will fly; I should know. I built an SME to over £10m turnover and I sold because of these appalling laws and I would never start another business while they persist.”

Setting up a business is a pain - sometimes it's the only option but no-one enjoys it, there are huge bureaucratic barriers and costs before you can do anything, let alone start making some money!

There are plenty of people who would love to start a business. They don't bother because, right now, the cards are stacked up against the start up - regulation, tax, more regulation, more tax, controls, dictats, instructions, all things of no point, value or purpose to the businessman or woman.

That's what has to change - not lending us a tenner and getting Google to provide some second rate IT training.

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Not the budget....

 

Hundreds of articles, blogposts, commentaries and critiques will be published in response to George Osborne's second budget. This isn't one of them.

It's not that I have nothing to say or that the budget is unimportant but that my tuppence worth of comment is of little matter. If I say I like this and hate that it will change nothing and serve little to advance those things I want to see done (or more often, not done).

Instead I want to remark on the important matter of philanthropy - hence the picture of the gates to Foster Park in Denholme. The park was a gift to Denholme from William Foster in 1912 - hence the name - and the gates and railings were given in the 1920s (to mark the coming of age for William's son). The Foster's were, of course, the dominant employer in the village and having gained so much from the place chose to put some of that back.

I suppose we could get all sniffy and say that the Foster family could afford all that generosity, that their riches were built on the back of workers in Denholme and that they really were obligated to "put something back". But that's really the point of it all - poor people may be generous with time and kindness but only the wealthy are able to be so generous with cash or land (or both).

Today, when we want parks, halls or playgrounds we turn to the modern patron of all that is good - the government. And the result of this new tradition is that old philanthropy is pushed aside. The developer is not minded to pass over part of his profit to local beneficiaries when the government - through "section 106 agreements" or other impositions - has already extracted large sums from his pockets. And the businessman is less likely to make the sort of gifts that William Foster made when he sees an ungrateful government taking vast taxes and imposing ever more onerous and expensive regulations.

Philanthopy died as a result of government not because the character of wealthy people changed. And that government with its "progressive" taxes and special imposts on the rich says to such people: "your riches offend us, you are not welcome, just leave your cash for us." So the rich don't give - not in the manner of enhancing their local place. There are a few real benefactors - Barrie Pettman in Patrington, for example - but mostly the rich have turned their back on such giving. Fed up with the sniffy response of government, annoyed by ever higher taxes, the wealthy no longer play the part they played in times past.

For philanthropy to work, we have to celebrate wealth and success - to recognise that the modern day Fosters are there and should be encouraged, supported and smiled upon. And their generosity encouraged rather than scorned.

For philanthropy to work we have to allow space for giving and, above all, treat the wealthy as a national treasure rather than a group to be enviously taxed until they depart to warmer, friendlier shores.

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Bradford Council's budget...plus a thought about tweeting!

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The deed is done - the Council has set a budget. For most folk the most important thing about it remains the answer to the question: "so how much is my Council Tax going up by?" I know, I know - the real story is about the cuts - either spiteful and targeted at vulnerable people or forced onto innocent and efficient Councils by the evil monster Pickles. But when - in about an hour - I arrive at the Club ready to win the quiz, I know it will be the Council Tax question that gets asked.

Don't get me wrong here, the 'cuts' are important - especially important if you're the poor soul who has lost a job or no longer get a particular service. But in the round taking £56m out of a £1.2bn budget isn't going to make the wheels fall off the wagon - especially if, as in Bradford's case, the Council anticipated the scale of reductions. Nevertheless the decision today included decisions to cut services - closing small libraries, removing off-highway rural bin collection and dramatically reducing the budgets for maintaining highways, parks and local facilities. These decisions - for all the talk of equity and equality from the Council's leadership - disproportionate affect people living in rural parts of the district.

So when I'm asked why I voted against the budget it isn't because I could write a better one (although I could) but because the Labour Party chose to target cuts directly and deliberately at the people I represent.

And I shall be telling those people about that decision.

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Partly related to this is a comment from that rarity - someone in the public gallery during a council meeting - who asked why I was 'playing with my phone'. In truth I was tweeting - commenting on what was being said by members during the budget debate. To do this I have to listen to what's being said!

And it means that a load of people who might not be able to or want to come to the actual meeting are able to get a flavour - albeit coloured by my bias - of what's happening. Perhaps a few hundred people knew something - certainly more than would be the case in past years - about our budget deliberations.

I don't consider that to be disrespectful but to be an enhancement - its extending our engagement and people's involvement in the processes of democracy. I was able to give response and comment on things people were concerned about - care for the elderly, children's services and support for the arts - as decisions about those very things were being discussed.

So no, I wasn't playing with my phone. I was enhancing democracy - something more Councillors should do!

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Bradford could just give Cullingworth the cash and let us get on with it?

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There’s a dawning realisation that – while the ‘cuts’ will result in an net increase in Government spending by 2014 – they are going to have a massive impact on the delivery of services. Already we see the doom and gloom headlines:

Birmingham City Council to make £230m of savings

Or

Chief executive Tony Reeves can't rule out compulsory redundancies

Or

5,600 Bristol public sector jobs are set to be axed within six years

The volume of ill-informed shouting is rising (such as describing £230 million from a £3,500 million budget as 25%) and this is drowning out those voices asking whether this really is a chance to do things rather differently. And within the Councils themselves the focus is on those elusive, mythical beasts – “efficiency savings”. Recruitment freezes (a further joyous nail in the Guardian’s coffin I hope), better sickness management, senior management restructures, facililies consolidation and the delights of ‘cuts talk’.

What I don’t hear from these big councils is – we’ll stop doing it. Let’s hand our assets over to community organisations, to parish councils, to new trusts. Let’s find out whether effective, flexible public service delivery is possible without the superstructure of massive local council bureaucracy. And let’s try out other solutions – social enterprise, the voluntary sector, small business, co-ops, self-help groups – to delivering local services.

Perhaps we might take the idea of a ‘place cheque’ promoted so keenly by the Local Government Association and apply it to local communities – handing over the cash the Bradford spends in Cullingworth on street cleaning, emptying bins, filling in potholes, fixing street lights and providing a warden service. And the parish council, the ward members, the village hall management and others can buy the services we need – back from the Council or from other suppliers if that’s our wish.

It has to be worth a try – but I’ll be holding my breath a long time before we see it happen!

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Why, if you have to put up taxes (and you don't), VAT is the right tax to raise

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Much noise has been made about the intention to raise VAT in January 2011. Now, I’d better start by saying that I’d rather the money came from spending reductions than from tax rises. But, if we’re to have tax rises I’d prefer them to be taxes on spending rather than taxes on working and earning.

The debate about the increase in VAT has boiled down to a rather sterile, ‘did-didn’t’ argument about whether the tax is or is not regressive. The argument goes that increasing VAT is really really bad because it falls hardest on poor folk who spend (rather than save) more of their income. The Labour Party produced some rather dodgy stats showing how terrible was this impost (and before anyone asks, the stats are dodgy for a whole host of reasons the biggest being a classic rule of metrics – not comparing two scales measuring different things – but I digress).

Now I’m absolutely sure that those who have high levels of saving pay a lower proportion of their earnings in VAT. But, I’m also sure that those folk (largely in the third quartile rather than the bottom quartile) for whom housing costs are proportionately highest also pay less of their earnings in tax. Indeed the VAT changes – relatively if not absolutely – are good news for those mythic “hard-working families”.

But yes, VAT does tend to be regressive. And, you know, I don’t care. The use of the tax system as a tool for social engineering is a moral affront – whether it’s ‘sin’ taxes on booze, fags and driving or a so-called ‘progressive’ income tax system. But worse – and this is important because economics is, of course, amoral – such uses for the tax system are inefficient. Progressive tax systems are less efficient at securing the funds needed for the government to deliver its programmes.

Worse still progressive systems are market distorting – the tax system sends out sub-optimal incentives that affect behaviour as people seek to maximise their post-tax income (a situation that can and does lead to actual and virtual international flight). Taxing spending is less likely to result in these distortions (unless – as is the case with booze and fags – special extra, market-distorting taxes are imposed) and is therefore fairer and less damaging to the economy.

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Banks, budgets and the Archbishop calling for unethical behaviour

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Every now and then national newspapers – in what I guess is some form of social service – hand over prominent columns to senior churchmen. Mostly the resulting mushy thinking can be ignored or ridiculed in the same manner we treat thought for the day but sometimes the opinions expressed are thoroughly disturbing.

The Sunday Telegraph published a column penned by the Archbishop of Westminster – England’s top catholic priest – in which he urges the banks (or more specifically the leaders of banks) to behave unethically.

A key part of the change needed is to forge a cultural consensus in the financial sector that its licence to operate depends on a clear and demonstrable commitment to service. Of course, profits have to be made if an efficient and thriving financial sector is in fact to serve society. But the ethical judgment, which has to be transmitted right through the organisations concerned, is that profit must only be a means to this end, and not an end in itself. We have a long way to go to achieve this.

What the priest is saying is that managers within banks should make decisions that are not about securing the maximum return on the capital invested in the business. So what, I hear you all saying? This is wrong – not just against the interests of the business but straightforwardly unethical. Those managers – however much they are paid – are merely agents of the business owners. And the business owners require that the business focus on maximising return on investment (I know this because I am one of those business owners).

Secondly this priest says that financial organisations operate only under licence. Where on earth he gets this idea from (perhaps it comes from on high) but it is again suggesting that there should be some other relationship of significance beside those between owners and managers and between the business and its customers. Again it is unethical to suggest that a business should only operate under some unspecified entitlement rather than as a consequence of the free use of property.

The article then descends into typical priest-speak about social justice, equality and demonstrating a profound ignorance of economics and the point of measuring economic performance. And up pops the mushy thinking:

A great deal of the support which any government needs in such difficult circumstances will depend on the extent to which it is seen to be acting impartially and prudently, with a demonstrable care for basic human needs and a continuing sense of our responsibility in the wider world. A powerfully positive message will be sent if in Tuesday’s Budget the overseas aid programme to assist the development of the world’s poorest people is not cut.

Sorry Archbishop but the support for the government will come if it’s seen to be sorting out the mess – that’s it really. Where it matters – the bond markets, the stock exchange, the real economy – the positive response will come if the deficit is eliminated and the debt begins to fall. And not giving India £300 million thereby allowing them to buy up our manufacturing industry might be a good start towards achieving that aim.

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