An honest politician

An honest politician or Why we need to target outcomes

Michael Lind quotes Jean-Claude Juncker.

Jean-Claude Juncker, the prime minister of the tax haven Luxembourg who became the president of the European Commission from 2014 to 2019, described how the European Council systematically expanded its authority by stealth: We decree something, then float it and wait some time to see what happens. If no clamor occurs . . . because most people do not grasp what had been decided, we continue—step by step, until the point of no return is reached. Michael Lind, in an excerpt from his book The New Class War, quoted here.

The quote goes a long way to explaining the wide, and widening, gap between politicians and the people they are supposed to represent. Our policymaking system is just too complex, protracted and boring for anyone other than powerful people, or their paid lobbyists, to follow and influence. That means, on the one side of the gap: politicians, bureaucrats and big business. And on the other, ordinary people and small businesses.

We are not heading toward a more simplified policymaking system. Society and the environment are not becoming easier for the public to comprehend. The trend is toward more complexity and, therefore, more opportunity for powerful interests to influence policy in their favour. The world economy might shrink as a result of, say, the pandemic, or climate change, or some other disaster. But there no indication that the rich and powerful will voluntarily relinquish any of their share. The future, then, might seem to be bleak: even greater inequality and, quite possibly, mass impoverishment.

I suggest that one way of avoiding such a miserable scenario is to re-orientate policymaking in such a way that most of us can understand it. Our current systems emphasise personality, image, spending pledges, legislation and organisational structures.These have in common one thing: they have nothing to do with outcomes that are meaningful to ordinary people.

Social Policy Bonds are a possible way in which we can express our policy goals in ways that people can understand and, in so doing, participate in their formulation and setting their relative priorities. So, for instance, rather than look at the sums spent on a health service, or at the numbers of people tested (or 'tested' - some of the results are spurious) for covid-19, or the quantity of protective (or 'protective'...) equipment acquired by a country, or other micro-targets, we would focus on the health of citizens, and target that for improvement. Social Policy Bonds would work by contracting out the achievement of our health goals to the market - which would include government bodies, so long as they are efficient. But the important first step would be to define our health goals, and let investment flow according to our health targets. My piece here gives more detail.

The great advantages of Social Policy Bonds are twofold. One, the market will reward only the most efficient approaches to achieving society's health goals. Two, a bond regime would require that we have explicit, transparent, broad, long-term goals that would be understood, and contributed to, by any members of the public who wish to get involved. That, perhaps even more than greater efficiency, would be a worthwhile benefit. It would certainly help avoid the cynicism of a Juncker, and the outrage that his world view—widespread I am sure among our leaders—ought to elicit.

The Coronovirus Bailout alternative: how it might work

My previous post was a letter published in the Financial Times, which suggested that instead of disbursing covid-19 bailout funds to businesses, the UK Government could instead issue coupons to people entitling them to spend the equivalent per capita sum in particular expenditure categories. Here I will sketch out some broad outlines as to how this scheme might work.

Guiding principles

• Aim for what’s best for the country.
• Aim to compensate sectors for losses incurred.
• Aim to give consumers choice about which businesses to support within each expenditure category.

The starting point is the sums that Government would otherwise spend on bailing out businesses hit my covid-19. 

Categories are broad, partly for simplicity, partly because coupon-holders should be able to choose between providers of services. Coupon-holders can choose within categories. All coupons are tradeable and exchangable. I would assume that all businesses have barcode or QR scanners but that many consumers don't.

• I suggest as examples of categories: 
• Air travel
• Surface travel
• Personal services (hair, nails, massage, body-piercing, tattoos, any similar one-to-one service) 
• Hospitality 
• Private healthcare, including dentistry

Expenditure statistics per UK household for 2019 are given here. To some extent categories will be decided by the statistics available. 

Example: The ONS says each UK household spends £51.30* per week on restaurants and hotels. Rather than try to assess and then compensate each business for any lost income, I suggest giving each household coupons worth 104 times £51.30* = £5335 to be spent on restaurants and hotels, within the UK, within the next two years. 

*Bear in mind that the UK Government's aim is to compensate UK business, so a sum representing expenditure on overseas hospitality would have to be subtracted from the £51.30 

There are other aspects that would need discussion. In particular, the entitlements of each household should be broken down to adults and children. 

The scheme would be more complex and more contentious than the likely government plan of direct compensation to big business. But, in my view, if properly done, its advantages could outweigh the disadvantages. The advantages, as outline in my previous post, are mainly that it would stimlate competition, and help small businesses. It would also benefit consumers who aren't interested in, for example, air travel who could swap their coupons for a smaller amount of cash or for other services that they want or need. Under this scheme, an adult could exchange their air travel coupon for a coupon for childcare or private dentistry.

The Coronavirus Bailout - an alternative suggestion

[This was published as a letter to the Editor of the Financial Times on 12 May, 2020. It has nothing to do with Social Policy Bonds!]

Already, it looks big businesses are are preparing their appeals for bailouts from governments all over the world, to compensate for income lost because of COVID-19. And, most likely, they'll get them. These titans of industry and their pals in government everywhere are probably already drafting the terms. I think we can foresee the result: more industry concentration, and a further widening of the gap between the rich and well connected on one side, and small businesses and ordinary people on the other. 

Here’s another idea. If we want to keep competitive markets going, give people rather than politicians the opportunity to choose who stays in business. Instead of lavishing enormous sums on favoured giants, let people have some say as to where taxpayers' cash should go. Take the total national expenditure on things like aviation, hospitality, and personal services, divide it by the number of people in the country, and issue coupons worth that much to each adult, to be spent on that service or product. So, if the average sum spent by an adult on air travel in the UK, say, was £200 last year, give each adult a coupon worth that sum, with the stipulation that it be spent on air travel over the next two years. Make the coupons tradeable, so that those of us who don’t want to fly can exchange them for cash or swap them for a couple of sessions at a body piercing salon, or a few weeks’ high street cappuccinos.

The alternative and, unfortunately, the more likely scenario, will be a form of central planning, in which government lavishes taxpayer funds on its favourites in exchange for some degree of control. We know what that will mean: inefficient, bloated and corrupt industries-- and yet more cynicism. Instead, tradeable coupons for purchases of designated coronavirus-hit services would restore some much-needed competition and consumer power.

My next post goes into a bit more detail about this suggestion.