Proverbial Hawks

No Proverbial Hawks listed

So Deputy Governor Bean says that he and his colleagues at the Bank of England are watching inflation "like proverbial hawks".

Hmm. You have to wonder whether Proverbial Hawks watch the right bit of the field.

Because today's inflation figures have yet again surprised on the upside. CPI inflation has moved back up to 3.3%, and RPI inflation is back up to 4.7%. Inflation has been above the official 2% target for 39 out of the last 48 months, and with VAT going up to 20% in January that record is set to get even worse. Some hawk.

In Tyler's experience what actually happens is this: the economics establishment lock themselves into a particular world view and find it incredibly difficult to admit they've got it wrong. Even when the numbers start telling a different story, people cling on to their world view and explain away the numbers as a temporary aberration.

OK, the facts are these.

In the two years since Lehman blew up and we were told we faced the unfathomable horrors of deflation, the overall price level has increased by 5.2% (CPI). Prices have not fallen. We have not had deflation.

The impetus - as we've blogged many times - has come from import prices. The combination of weak sterling and soaring world commodity prices has pushed up the cost of our imports by 10%.

The Bank and others have argued that we can live with that, because it hasn't fed through into wage increases. In other words, there is no 70s style wage-price spiral in the making.

But wages have certainly not been flat. Despite the rise in unemployment and widespread concern about job security, average earnings have still gone up by over 3%. And although the recovery has only just started, one-third of firms are already reporting skills shortages. As they say in labour market circles, watch this space.

Of course, there is that other explanation for the Bank's inaction - the not-so secret plan to inflate away the UK's debts.

Like we've said before - sell money.

PS A great shame that Mr Dale has pulled the plug on regular blogging. He was one of the original UK political bloggers and was always well worth worth reading. He'll be missed.

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So Who Do You Want To Carry?

I ♥ NY. Not.

Back in the 70s the Big Apple nearly went bust. After years of gross fiscal incontinence under Mayors of both parties, the City of New York was on the skids.

Naturally, they turned for help to their fellow Americans - the folk with whom they had been bonded for two whole centuries, one nation under God.

And you know what their fellow Americans said?

Drop Dead. That's what they said. You got yourselves into this mess, so you can get yourselves out of it. Besides which, we never liked you anyway.

Four decades on, and five little PIIGieS find themselves facing a very similar predicament. Because although the Greeks and the Irish have so far been bailed-out by Northern European taxpayers (including us), nobody seriously believes that's the end of the matter. The fiscal deficits and banking debts of the PIIGS are way beyond their own ability to fund, and way beyond the total European bail-out fund already established.

But will Northern Europe's taxpayers be prepared to shell out even more to rescue the PIIGS? Will they want to carry that weight for a bunch of spendthrift Latinos who spend half the day dossing around in the shade, and with whom historic relations are perhaps best described as troubled?

This morning Boris highlights the issue. Just like he and we Eurosceptics have always said, it turns out Northern Europe's taxpayers really don't want to pay for the profligacy of others. Your average German does not recognise a duty to support the Spaniard.

Quite rightly, Boris demands an apology from all those arrogant half-baked Europhiles who denied there was a problem and wanted us to join the Euro - the ones who wrote us all off as "xenophobic, garlic-hating defenders of the pint and the yard and the good old bread-filled British banger".

Ah yes, how right he is.

Yet there's one bit of Boris's argument that sent the Tyler eyebows twitching skywards. Contrasting the disparate tribes of Europe with the cohesive whole that is Albion, he says:

"London contributes massively in net tax revenues to the rest of the UK, and by and large Londoners accept that this is part of belonging to a single political entity."

By and large, hmmm? A nice phrase, and a nice way of reminding the rest of Britain that they'd better keep the Golden Goose of Londinium sweet. Because to our certain knowledge, there are increasing numbers of London taxpayers who most definitely do not accept that their taxes should be carted off to fund the Picts and the Celts.

We've blogged the regional unfairness of Britain's fiscal arrangements many times (eg here). But just as a reminder, here's the latest analysis from Oxford Economics. It shows that Londoners are made to contribute a net £2 grand pa per head. That is, the average Londoner pays £2 grand pa more in tax than he gets back in terms of public spending:

As we can see, the only regions that actually make a net contribution are London, the South East, and the Eastern region - together comprising the Greater South East. Every single other region takes more than they pay (and in Scotland's case, Oxford Economics have allocated to them all North Sea taxes).

It's been like this for as long as anyone can remember, and the obvious question is why do those living in the Greater South East put up with it? Without the fiscal drain to subsidise the other regions, the average family in the Greater South East would be getting on for £5000 pa better off.  That's serious money, and you'd think most families would notice.

Which brings us to today's Localism Bill.

As regular readers will know, we're great fans of localism (eg see here). We absolutely believe that local councils should have greater authority over the services they provide, so they can respond both to local priorities, and to local cost conditions. So to that extent we welcome the Bill.

Unfortunately, as far as we can see, the Bill does not address the single most important requirement for localism to work - sorting out the money. What would really concentrate minds in local councils, and would make local electors really focus on the issue, would be if councils had to raise much more of their own money for themselves (aka fiscal decentralisation).

As things stand, they get the vast bulk of their cash from Whitehall, and they get it whether or not they satisfy local electors. Indeed, we have just about the most centralised system of local council finance anywhere in the developed world (eg see this blog).

It is a recipe for continued inefficiency at the local level, and a recipe for continued fiscal transfers from the productive to the less productive.

One day in the tough years to come, the Greater South East is going to wake up. One day, its families are going to look at that £5 grand pa being carted off elsewhere and ask why? One day, its taxpayers are going to tell the rest of the country to drop dead.

PS This morning's R4 Today gave us yet another example of BBC statism. According to them, the main problem with Pickles' localism is that it might result in mad-cap councils doing mad-cap things, and surely government has a responsibility to stop that. Like Whitehall has got everything taped.

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Pursue Greatness.

A new documentary focuses on Bruce Springsteen's recording of Darkness on The Edge of town back in 1977. In an aside he recalled his musical ambitions back then.

I didn't want to be rich.
I didn't want to be famous.
I just wanted to be great.

Not a bad marketing philosophy when you think about it.

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Spotted By BOM Correspondents

BOM correspondents have spotted the following, including news of some real old favourites:

1. NHS Supercomputer still haemorrhaging cash

Were you by any chance under the impression that our new broom government had scrapped Blair's wildly expensive and wildly useless NHS Supercomputer (see many previous blogs)? Er, no. All they've actually done is attempt to renegotiate the contracts with the IT suppliers.

AMB highlights an interesting post on the latest position by Tony Collins, the former Editor of Computer Weekly and a man who did much to expose the lunacy in the first place. He tells us that the Department of Health are signing a new agreement with one of the main suppliers (CSC) to deploy a system (Lorenzo) that the hospitals themselves don't want and may never use. Collins writes:

"The deal will commit CSC to deploying the Lorenzo system to NHS trusts that have no intention of deploying it; and the deal commits the DoH to paying CSC for a minimum number of Lorenzo deployments even if NHS trusts don't actually deploy the system.

For some in the NHS, the deal will mark a new low in the history of the NHS IT programme. It may also show why central government is congenitally ill-suited to signing big IT contracts."

So WTF is Lansley's Health Department doing this?

Well, on the positive side, the new agreement will apparently save around £0.5bn compared to the previous contracts. But it will still leave this bit - that may well not ever be used - costing us £2.7bn. That aside, Collins suggests three other highly plausible explanations for the Department going ahead:

1. Pulling the plug might have led to CSC suing the Department, just as another main contractor (Fujitsu) is already doing
2. It "defers any day of reckoning within Whitehall over what many in the NHS regard as a failed programme"
3. It "relieves the health minister Simon Burns from taking any tough decisions about the future of the NPfIT, at least for the time being".

And the cost to us taxpayers? As always, it's virtually impossible to know. All we can say is that the Supercomputer has already cost us something like £6bn, for which we have got sweet FA in terms of value.

(PS This of course is not the first Labour contract our new government has tried and failed to get out of. The contract for those two new aircraft carriers had been so heavily tilted against taxpayers that it was actually cheaper to carry on rather than pull the plug. Even though we can't now afford the aircraft to go on them, and we will have the first navy ever to sail two carriers with nothing to carry. Nelson must be spinning - see this blog)


2. Student Loans Company still malfunctioning

Peter T highlights the fact that the Student Loans Company (SLC) is still not managing to pay loans on time when they are needed. In other words, despite all their promises to do better in 2010 after the shambles of 2009, the SLC still failed to pay 26% of students by the first day of term this year.

Which meant of course that many students were forced to look for emergency employment so they could eat. Bar-keeping and lap-dancing may well be good experience for later life, but that's not what we pay the SLC £94m pa in administration cost to deliver.


3. British Council still cocking-up

David Blackie reports on the latest cock-up by our old friends at the British Council.

The BC has a marketing arm for British education institutions seeking to sell courses to overseas students - Education UK. It was established a few years ago to provide a Big Government Solution in place of the private marketing operations that had existed previously. And yep, you guessed it - it's a disaster.

In fact, it's so shambolic, and its website is so dysfunctional, that the BC has now been forced to refund subscriptions to participating institutions. David writes:

"...the organisation has used taxpayers’ money and the machinery of government to send students to a site which is so bad that everyone gets their money back. Well, actually not everybody, because there will be no refund to the taxpayer for the extraordinary waste of public money, no refund to the schools and colleges who have lost business as students, parents and agents gave up trying to use a dysfunctional site, and – interest declared – no refund to the businesses compromised by the organisation using taxpayers’ money to divert monies into its own pockets."

As we've blogged many times, the hopeless BC should be abolished. And we're seriously disappointed that Cam has not only allowed it to survive, but reportedly clasped it to his bosom on those recent trips out East.

Gah.

4. International sports bunfights still losing money

Bobby Charlton (hmm... sounds familiar somehow) emailed to point out that South Africa didn't make nearly as much out of the 2010 World Cup as had been billed:

"South Africa made a return of just £323m on the £3bn it spent on building stadiums and infrastructure for this summer's tournament, according to official figures

Mike Schussler, director of consultants Economists.co.za, said: "The country made a bit of money but less than expected. We got a small part of the ticket sales and the foreign visitors' spending, but it's not as much as we expected."

Well, who'd have possibly guessed that?

Thank God we got shafted by that nice Mr Blatter.

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Season Of Goodwill

The Major has made his view very clear:

"Why the bloody hell should we law-abiding taxpayers tolerate a bunch of freeloading welfare scroungers smashing up London? We spend God knows how much on these revolting students - and will still do so even after the fees increase. But just look how they thank us! Why should we give them anything?! If they want to spend three years dossing around and rioting, let them pay for it themselves. And I'll bet half those scum desecrating the Cenotaph yesterday aren't even students at all - they'll be anarchists. And we'll be paying them! Housing benefit, child benefit, incapacity benefit... you name it.

It's time to draw the line - anybody convicted of violent disorder should go to jail - hard labour - and then lose all their welfare benefits for ever. Period. In future, if they want to eat they have to work like everyone else. And if they think they can rob instead, we'll lock them up somewhere where they will have to work. I'll get my mate Gomulka to organise something with the Soviets out East - that'll soon wipe the smile off their faces."

Now, of course, nobody objects to peaceful protest. No, indeed.

Well, that is, nobody objects to peaceful protest as long as it doesn't inconvenience us. And as long as it doesn't require us to pick up some huge tab for police overtime. So long as it takes place on a Sunday afternoon in say, a field somewhere outside Milton Keynes, and so long as the protesters pay for the policing, like in a football match, then everything's cool. In fact, under those circs, we might even allow a little recreational effigy burning - a weekly bonfire night for young people to let off steam. Kind of idea.

But who exactly are these rioters, and who is paying to keep them alive?

According to police hunting down those involved in the previous riot - the one last month at Tory HQ in Millbank - they are mainly teenage students of one kind or another. They say:

"We are finding that many of these people are young students who do not seem to have been in any trouble before. It appears they may have been provoked by more anarchist groups.

From a parent's point of view it must be very concerning. These are young people committing really serious offences which I suspect may result in prison sentences for some." (The maximum sentence for violent disorder is 5 years)

Provoked by anarchists? Certainly when you look at the wanted poster, one or two do look older than teenage:

.
But who are these anarchists exactly?

Google's anarchist UK trail leads straight to the Anarchist Federation. But can they be in any way credible? Are real anarchists allowed to participate in such a restrictive and preposterous construct as a federation? It sounds more like the Mothers' Union. Besides, there's something seriously hollow about an organisation that wants to abolish oppressive government on the one hand, while maintaining Big Government spending on the other.

Googling Operation Malone - the police man-hunt for November's rioters - gives some far more promising leads.

Ian Bone (great name) is a veteran anarchist of 63. During the 80s he ran a newspaper called Class War, featuring pix of beaten-up policemen. And here he is addressing a Class War meeting in 1985 (parental discretion advised - some of his opinions are seriously juvenile - precisely the kind of thing which might appeal to disaffected teenagers at the University of Neverpay):



Anyway, Bone has some blogposts on the current riots that simply blew the Major away. For example, under the headline What a magnificent inspiring day - the London mob is fucking back Mr B writes:

"I salute everyone who atacked the police, the treasury, the Supreme Court, the Royal family, the tax avoiders today – a quite heroic and brave acievement. Full report tomorrow – ALL HAIL – IT’S THE POLL TAX RIOT MARK 2 – ‘we come from the slums of London……"

Now that's more like it. According to his own autobiography, Bone is the son of a butler and a housemaid (no, really) and obviously carries deep psychological scars from his parents' life below stairs:

"It is fucking phenomenol. the rich are targets whether its the Bullingdon Club, the Royals or Sir Philip Green... Yesterday was reminiscent of both the poll Tax Riot and the Gordon riots as a rich hating mob stormed through the streets... Organise and celebrate yesterday comrades…but theres more coming the way of the fucking rich…..much more.’WE COME FROM THE SLUMS OF LONDON’

All of which is absolutely fine.

Well, fine except for any incitement to riot bits obviously.

But what we need to know is how does Bone support himself?

He has published three books, including the carefully nuanced "Bash the Rich". But given that B the R is currently standing at 76,361 in the Amazon best seller list, you'd have to guess he has some other source of income. And his website gives no other clues.

One of those oldies' jobs in B&Q? At 63 it's possible.

A family inheritance? Seems a tad unlikely.

Money from Putin? In the 80s, Class War and its ilk were widely thought to have been financed by the KGB, so that has to be a runner.

But the Major reckons Bone and his like must be on some kind of welfare deal.

Unfortunately we have no way of finding out.

In this season of goodwill to all men, let's hope someone round at the DWP is looking into the entire question right now.

****

Meanwhile on an altogether more seasonal level, we've just updated the TaxPayers' Alliance Tax on Christmas paper.

We reckon that taxes on Xmas spending this year will cost the average family £283. The overall bill will be £7.2bn, an astonishing 40% increase on 2008, when we last did the calc.

Part of the increase has been driven by the growth in Xmas spending, 2008 coming immediately after the Lehman crisis. But the majority of it reflects higher tax rates - the hike in VAT from 15% back up to 17.5%, plus increases in various fuel and excise duties.

And the really bad news is that VAT increases again on 4 Jan to 20%. According to Treasury forecasts, the rise will cost the average family nearly £500 pa, taking the average family VAT bill above £4000 pa for the very first time.

Happy Xmas everyone.

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Are We Spending Too Much On Education?

How more can be less

Education, education, education.

And sure enough, during Labour's time in office, they whacked up state education spending by an astonishing 73% in real inflation adjusted terms. By 2009-10 spending had increased to £88.3bn - around £8 grand pa for every pupil and student between 5 and 21.

But what precisely have we taxpayers had in return? Where's the pay-off?

You can forget all those fiddled tractor production stats - as everybody now understands, they're not worth the dumbed down exam papers they're written on.

Much more important is yesterday's report from the OECD - the 2009 results from their Programme for International Student Assessment (PISA). That is based on a consistent and regular set of tests sat by 15 year olds across over 60 developed countries. And what it shows is us sinking further down the international league tables with each year that passes.

The Mail has a useful summary:

What should we make of that?

Some argue that it's largely a question of race - we're simply not as bright as the superbrains out East, and we just need to accept that as they build up their education systems we will sink ever further behind.

But even if true, that doesn't explain why we're so much worse than European countries like Finland and, gulp, Estonia.

Immigrants then. Some argue that Finland and others do well because they have far fewer immigrants dragging down the overall scores.

But while with 10.6% immigrant pupils we are much higher than say Finland, other countries with high immigrant percentages also do much better than us. For example, Canada and Australia both have higher percentages, yet both beat us in the league tables.

No, the real problem seems to lie with our school system rather than the pupil mix per se. Despite a huge additional injection of cash, we still aren't getting the results we need - in fact, we seem to be going backwards.

Which raises the obvious question as to whether spending all that extra money was worth it? And whether in these straitened times we ought to cut some of it back?

Because what the OECD report also highlights is that although we are now among the world's top education spenders, others achieve similar or better results while spending much less:

"Only seven OECD countries spend more per student than the United Kingdom...

[but]... moderate spending per student cannot automatically be equated with poor performance by education systems. For example, Estonia and Poland, which spend around US$ 40 000 per student, perform at the same level as Norway and the United States, which spend over US$ 100 000 per student. Similarly, New Zealand, one of the highest performing countries in reading, spends well below the average per student. While the United Kingdom spends almost US$ 85 000, Germany or Hungary achieve a similar average performance and spend around US$ 63 000 and US$ 44 000 respectively."

So if we cut spending back to say German levels, then according to Tyler's fag packet we could save an average $22k over each pupil's 10 years of school education up to age 15. Which works out at an annual saving to taxpayers of around £10bn pa. Not bad.

And it isn't just schools. When last sighted (2006) we were spending 5.9% of our GDP on education as a whole, whereas Germany was spending only 4.8%. Which is equivalent to about £15bn pa - money British taxpayers could save if we cut back to German spending levels.

And remember this - in this post-bubble world, Germany is beating the pants off us. Jeremy Warner has the picture story here including this chart that shows how much lower is their youth unemployment:

It seems German companies actually want to employ the products of German schools.

So what does Germany do right and we do wrong?

Hmm... now, let me see... what could it be... ah yes, selection. That thing nobody is allowed to mention here any more.

It is surely time to ask ourselves a serious question - can we any longer afford an education system that is run by the social engineering commissariat? Prizes for all and A*s all round was a lovely way of spending the last days of summer, but winter's here now.

In this new and tougher world nobody owes us a living. We need an education system that prioritises academic excellence for those with the ability to generate our future wealth, and a strong grasp of basic skills for those at the bottom - it is shocking that the OECD finds that after a decade or more of schooling, 20% of our 15 year olds are functionally illiterate.

Germany shows it can be done. We can get over the fact that our school pupils are not all Chinese. We can cope with the fact that over 10% of our pupils are immigrants. And we can even save £10 - £15bn pa in the process.

We just need to grasp one nettle.

And this time, we should do it properly and fairly (see this blog).

PS And while we're on the subject, Tyler keeps swallowing his false teeth listening to those future politicos who "speak for" the revolting students. You see, English literature degrees are not essential to the future of the nation. There is no God-given right for 18 year olds to spend three years getting pissed at taxpayer expense. The Browne recommendations on university funding and student loans are fair to everyone - both taxpayers and students (see this blog). And the thought of these future Jack Straws ruling over us for the next 40 years makes Tyler gag.

PPS Talking of English Lit degrees, Mr and Mrs T saw Rory Kinnear's Hamlet last night. Stunning - possibly the best live Hamlet Tyler has ever seen. Fresh interpretation, strong performances all round. Mrs T thought they'd slightly overdone the modern instances, but Tyler was... well.. stunned. Highly recommended.

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Fiddling With Value.

A woman and a friend sit in a coffee shop at a railway station. They're engrossed in their iPhones and serving staff later report that they also kept a close eye on their computers.

So much so that they didn't notice that the other package beneath their table had gone missing. All very 21st century. A busy environment, attention in one tech-related direction, thieves in the other. Nothing to write home about, except that the package contained a bow worth £62,000.

What does that tell us about our concept of value today? The social value of the phone connection and the related value of the computer seem to take precedence over the greater financial value of the package. The social tools were more important than the tools of her trade - for yes she was a violinist.

I don't know if that's a new phenomenon, but it's a timely reminder that value is constantly shifting depending on context and mood.

And yes the violin went missing too. It's apparently worth £1.2 million, but when you get into figures like that, you perhaps lose sight of what was really going on.

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