Saving the NHS with one market at a time
Or even, improve the NHS just by having markets in it. Two stories - we do not vouch for the absolute truth of either of them but do want to note the implications if they are indeed both true:
And:
Surgeons at one London hospital are performing an entire week’s operations in a single day as part of a ground-breaking initiative that could help tackle the record waiting lists in the NHS.
Guy’s and St Thomas’ NHS Foundation Trust has already slashed its own elective backlog in certain specialities by running monthly HIT (High Intensity Theatre) lists at weekends.
Under the innovative model, two operating theatres run side by side and as soon as one procedure is finished the next patient is already under anaesthetic and ready to be wheeled in.
These are both innovations, not inventions. To distinguish - invention is the creation of some new thing. A scalpel, forceps, that sort of thing. Innovation is the ongoing improvement in the way that things are used. Even, inventions to new uses - but still distinct from invention.
And we know the economics of this distinction from William Baumol. Governments, the state, can do inventions about as well as markets. But markets beat the state hands down at innovation. Partly because by their nature markets allow different ways of things to be tried out - the experimentation. Partly because markets - by their very nature - then produce the pressure to adopt more of those things that work.
For example, kiddie’s therapy, the people who maintain the old system with a year wait will be fine in a bureaucratic or planned organisation. In a market one they’ll be bust unless they adopt the policy that leads to the 7 week wait. So too the operating theatre idea - those who don’t do it in competition with those who do will go bust. The incentive to adopt best practice is therefore really up front and personal for all participants - which does make things happen.
We’ve said this before of course but truth bears repetition. One of the things that ails the NHS is the lack of competition - one of the ways to make the NHS better is to have more competition.
A little fun thing: The FT has a beat the Chancellor at the budget game. The rules are from the Resolution Foundation. One of those rules is that anything less than a 4% increase, per year and forever, in the NHS budget is treated as a cut. More markets, more innovation, greater productivity, is how we beat that.
Second fun little thing. Booker T and the MGs had a massive hit with Green Onions back in the day. A follow up record - for why not do more of what works? - was Mo’ Onions (we’ve been unreliably informed that that was titled “Scallions” in the US) which was, effectively, an inversion of the original melody.
So, you know, to follow up on our greatest hits, Mo’ Markets.
Tim Worstall
Sometimes the peak of the Laffer Curve is a 0% tax rate
As we’ve been pointing out for decades now there really is a Laffer Curve. A tax can be at such a rate that reducing it will increase tax revenues. As we’ve also been pointing out for decades this rate will be different for different taxes - and also reliant upon the surrounding society and legal/government structure.
Sometimes that peak of that Laffer Curve is a very low rate indeed. One of us wrote a paper that pointed out that even the European Union itself thought that a financial transactions tax of 0.01% was above that curve peak. Too high a rate to be revenue maximising even at 0.01%.
Dan Neidle is doing the public debate a favour by pointing out that stamp duty on shares is above that Laffer peak. We can go through varied IFS and CPS papers and find that the revenue maximising rate is, in fact, 0%. For the tax raises the cost of capital to companies, lowers pension returns, by so much that revenue from other taxes would rise to more than cover abolition.
So, let’s do that. Let’s abolish a tax that not only doesn’t, on net, raise any money it actively makes us poorer as it does so.
As Dan says, perhaps on that only Nixon can go to China basis we could have something useful from a Labour budget?
Tim Worstall
Arun Advani’s latest front group is Demos
Yet another proposal to increase inheritance tax and also to charge capital gains to inheritances. Now, where have we heard this before?
OK, so Arun Advani and Andy Summers find themselves forced to publish their idea for an exit tax under a wild variety of different groupuscule names.
There’s the IFS report, Arun Advani and Andy Summers. There’s the Centre of the Analysis of Taxation report. That’s Andy Summers and Arun Advani. The LSE report? Andy Summers. The study of HMRC records? Andy Summers and Arun Advani. That 5% wealth tax idea? Arun Advani and Emma Chamberlain.
Now Demos:
Demos urged the chancellor to introduce a banded system for inheritance tax based on the value of assets and to close a loophole that allows households to pass on estates to their children without paying capital gains tax.
• Arun Advani, Associate Professor, University of Warwick
• Emma Chamberlain, Barrister at Pump Court Tax Chambers
How wonderful that they’re able to get the band back together.
We do tend to think that there’s no groundswell of intellectual opinion here. Rather, the same ideas being published by the same people under multiple fronts to give the appearance of that intellectual groundswell. Of course, it’s very mean of us to say so. But what if it is in fact true?
For some reason they think that 85% tax rates upon inheritance will increase long term patient investment in the British economy. We rather disagree with that of course. But if it were - or is - such a wondrously good idea there would be rather more people pushing it, wouldn’t there?
Tim Worstall
The Myth of the Employer Contribution
The government has pledged not to increase National Insurance for employees, but has hinted that this does not necessarily apply to the employer’s contribution. This is either blatant ignorance or blatant deceit; maybe both. The reason is that the so-called employer’s contribution is in reality paid by the employee, not the employer.
Although most employees probably think it is paid by their employer, it is not. It forms part of what employers call the wage pool, the money that employees cost them. If the employer did not have to pay it to the Treasury, it would be available to increase the amount paid to employees. It keeps their wages lower than they would otherwise be because in reality it is a jobs tax.
All taxes change behaviour, and this is no exception. It makes it more expensive for an employer to take on an employee, so fewer of them do that. It thus diminishes job opportunities as well as wages.
The name ‘National Insurance’ makes the tax more acceptable to employees if they think that they and their employer are putting money into a fund that will pay for their pension in later life. This is also a myth. There is no meaningful fund because the UK operates on a pay-as-you-go-system under which today’s contributors are funding today’s recipients, rather than their own future needs.
At a time when nearly all analysts think that the UK needs to boost its growth, it makes no sense to increase the taxes on employment. The so-called employer’s contribution is a myth and always has been. Moreover, it is a damaging myth.
The Chancellor cannot - well, does not - do her own taxes
This is, of course, most amusing:
Rachel Reeves has claimed £1,225 on expenses to pay someone else to help file her tax return, it can be revealed.
One of the several amusements here is that hiring an accountant to do the taxes for someone on PAYE - as MPs and Ministers are - is not an allowable expense against those taxes that must be paid. But is, apparently, an allowable expense when claiming, umm, expenses as an MP. It’s possible to think that this is not the right way around.
An appropriate little story is, given that yesterday was her 99th, about St Maggie. The decennial census was coming up and she retreated into the office with a test form. After a certain number of “Tchah!”s, “How intrusive!”s and “An impertinence!”s she emerged to insist that this was all much too complex and must be simplified before everyone in the country must be forced, by law, to fill it out. So, it was simplified.
We think that this principle could be extended. Enshrined even, in law. All those who design such forms and then insist upon their use, all those who create complexity, must be forced to follow such rules unaided. In the case of MPs and Ministers we’d go further - they must be made to fill out the forms to gain the permissions to do things that they do not actually do. All should - for example - have to file a planning permission. Pretend that their now registerable ducks have been eating the Great Crested Newts in the pond. Ask permission for a grant. As well as, obviously, their own census and tax forms. With, as we insist, no aid.
Once we have a set of forms and permissions - whether we think of them as vital necessities or indignities - that can be done by a Richard Burgon, William Wragg or, if we are to be vicious about this, a Foreign Secretary, only then do we have something ready to be unleashed upon the public.
There is more merit to this than is at first obvious. For clearly such will require a significant amount of work in simplifying the system. Which does mean that for the next decade or so we’ll be free of any further indignities being heaped upon us - they’ll not have the time.
We recommend this to the House. Assuming there’re any Members capable of grasping an idea as complex as this.
Tim Worstall
Alex Salmond: An Obituary
I am saddened at the death of the onetime leader of the Scottish National Party, Alex Salmond. He will be remembered as one of the most adroit politicians of his time.
He was a contemporary of mine at St Andrews. He was maybe a year or two behind me. At that time, I think he was the SNP. He was certainly active in promoting its cause, though any contact I had with him then was rather fleeting.
Some years later, when John Smith was Leader of the Opposition, I was invited up to Edinburgh to do a TV debate in which several of us would put questions to Smith, himself a Scot. A few days beforehand, I was phoned up by Alex. ‘Oh Eamonn,’ he gushed, as if I were his lifetime friend — I told you, he was an adroit politician. ‘I see we are both on the panel with John Smith. It will be good to see you again and we can catch up.’
Of course, I remembered Alex’s name, but I could not put a face to it. I wasn’t sure we had even met. But I thought that, when I turned up in the studio, I would probably recognise him instantly. Unfortunately when I got there and this person in a St Andrews graduate tie rushed up to greet me, though I reasoned it must be Alex, he was to all intents and purposes a complete stranger. I don’t think he had made any impact on me, or on student politics in St Andrews, at all. But of course in the meantime, he was building the SNP into a formidable party that would eventually take office in the Scottish Parliament, despite the whole constitution of that body being written (by Labour’s Gordon Brown and his colleagues) to prevent that.
Indeed, his remarkable political and debating skills were what made the SNP and got it, and him as First Minister, into government in Scotland. When he eventually stood town, the party pretty well imploded, and he had to come out of retirement to rescue it. Only Nicola Sturgeon was later able to hold it together, though of course she and her party were eventually overwhelmed by her many faults.
After the John Smith event I met Alex many times at conference and across the floor in debates. Though I did not share his politics, such meetings were always a pleasure, and his engaging personality, interest in other people, lovely use of language and powerful intelligence shone through. But he too had his faults, which would cause him much grief and put him at odds with his party and his successor.
The last time that I met him was at a service in Glasgow Cathedral to mark the planting of an olive tree to commemorate the victims of the Arandorra Star, a ship carrying German and Italian internees during the Second World War, which was torpedoed by a German warship. He was First Minister of Scotland at the time. He gave one of the most brilliant speeches I have ever heard. It was educated, knowledgable, at times amusing, never political, and pitched absolutely perfectly to the feelings of the largely Scottish-Italian congregation and to the dignity of the occasion.
But then, as I say, he was one of the most remarkable public figures and speakers of our time.
Happy Birthday Maggie
Two Tory prime ministers saved their country from the edge of ruin in the Twentieth Century. One was Winston Churchill, who saw off the threat of hideous Nazi fanaticism, and the other was Margaret Thatcher.
She inherited a nation with an appallingly high strike rate and an appallingly low growth rate, a country at the mercy of bully-boy trade union leaders and with state industries and services that failed to deliver an acceptable quality despite their enormous costs.
She left a country prosperous and self-confident once more, one that had regained its place among the world’s leaders. She was accused of gutting the coal industry, yet Labour’s Harold Wilson closed more pits than she did. She was accused of hollowing out UK manufacturing, yet it rose during her term. It decreased as a proportion of total output only because the service sector boomed as never before, bringing the UK away from subsidized outdated industries into modern ones that could make their way in a competitive world.
She didn’t take power away from the unions. Harold Wilson and Edward Heath had both been defeated in the attempt to do that. Instead she redistributed union power downwards from the leaders to the members, giving them the right to elect leaders by secret ballot and to vote before taking part in strike action.
She turned the loss-making state industries into successful private businesses that paid taxes instead of consuming them. She gave parents choices in education and allowed state schools to opt for independence from local authority controls.
With her US colleague Ronald Reagan, she toughened up the UK’s response to Soviet expansionism, and ultimately saw its downfall as it collapsed with its subject peoples yearning for the freedom and prosperity enjoyed by the West.
October 13th was her birthday in 1925, and next year will mark her centenary. Happy 99th birthday, Maggie. You restored the nation’s belief in itself, a belief it may someday recover. Your legacy of achievements will be remembered long after the leftist wokerati lie forgotten in the dustbin of history.
Keep renaming the groupuscule, Mateys
After all, it works for everyone else, doesn’t it? Keep pumping out the same - usually bad - idea but under a variety of names and people will think there’s a groundswell of support for the - usually bad - idea. The reason this has to be done for the bad ideas is because the good ones gain support simply from being expressed. “Oh, yes, why didn’t someone think of that before?”
This same old threat is always levelled over any check on the soaring wealth of the richest in Britain, but research shows that rich people rarely follow through. An LSE report published in January, Tax Flight? Britain’s Wealthiest and Their Attachment to Place, strongly suggests they are going nowhere.
That report is from Andy Summers.
A study of HMRC records by Arun Advani, David Burgherr and Andy Summers following the last cut to non-doms’ tax relief shows that, despite the threats, just 5% left – and the ones who did leave were those paying the least tax in the first place.
Oh, that’s Arun Advani and Andy Summers.
A report published this week by the Centre for the Analysis of Taxation showed how an “exit tax”, which is imposed by almost all G7 countries, could bring in £500m a year.
Centre for the Analysis of Taxation?
Dr Andy Summers, Associate Professor at LSE and Director of CenTax, said: “Charging CGT on people who leave the UK is not about punishing them for leaving. It’s simply saying: ‘you need to pay your bill on the way out’. Most of the UK’s international peers already do this, and there is no reason why the UK couldn’t as well.”
Dr Arun Advani, Associate Professor at University of Warwick and Director of CenTax, said: “Tax flight happens less than most people think, but does happen. If politicians are worried about emigration, they could follow Australia, Canada and many other countries by taxing the gains of people who leave. It’s a policy choice to let them emigrate tax free.”
Gosh. We are finding a wide range of intellectual opinion here, aren’t we?
Back a bit, that idea of a 5% wealth tax backed by an exit tax. The one we said was tantamount to theft:
Arun Advani among others. That was the tax everyone 5% of their wealth idea and if they try to leave then take it anyway. Something that one of us derided as simple theft when discussing it with the Treasury Committee.
And the IFS report which suggests an exit tax:
Stuart Adam, Arun Advani, Helen Miller, Andy Summers
We’re really having a good old survey of different opinions here, no?
OK, so Arun Advani and Andy Summers find themselves forced to publish their idea for an exit tax under a wild variety of different groupuscule names. That they have to do that is one of those inclinations - not proofs, just an inclination - that they themselves think it a bad idea. For why would they do that if it was so obviously a good one that the first clear statement of it will bring general agreement?
By their tactics ye shall know them, eh?
As far as we can tell there are exactly two people in the country - Andy Summers and Arun Advani - who think an exit tax is a good idea. Or, perhaps, those two and a rotating cast of their mates. We can’t help but think that a slightly wider evidence base could be a good idea.
Tim Worstall
Sure we should count government assets - but also government debts
Much is being made of the idea that if government borrows to invest therefore that is different from government borrowing to spend. Which is true, obviously. Therefore we should be including the things government invests in on the balance sheet, as well as the borrowing government has done to do that investing. Seems reasonable enough. Mark Carney:
The debate over new fiscal rules is therefore as welcome as it is overdue. It makes little sense to ignore the nation’s assets when calculating the national debt, particularly when some initiatives — such as the National Wealth Fund — are expressly designed to do what they say on the tin, namely build national assets.
We do bump up against a few problems. What politics designs something to do and the actual outcome aren’t quite the same thing. So, we need to include the value of those assets when they’re up, running and paying back not at the point that the plan is declared. Further:
The Office for Budget Responsibility (OBR) has warned that successive Labour and Tory governments have found it “particularly difficult” to deliver quick and meaningful increases in capital spending, even when budgets are increased substantially.
We’ve that interesting problem that it’s d’md near impossible to actually build anything in Britain so we’re likely to find out that the costs of having built are rather higher than the value of what is built that can be put on that balance sheet. The £300 million the planning application for the Lower Thames Crossing has cost is most certainly a cost but it’ll not be an asset that produces revenues in the future and so is not a positive to put on the balance sheet.
There’s even that basic logical problem that if something were vastly profitable to build then the private sector would be clamouring to do it already. If government’s necessary we’ve at least a presumption of the idea that it’s not going to be one of those vastly profitable things.
But, OK, brush all of these away. Assume them away, as economists so like to do, in order to have a look at the underlying model. We should have a proper government balance sheet, showing both assets and liabilities, positives and negatives over time. Cool. We do, already, sort of have this in the Whole of Government accounts. So why aren’t we just using those?
Because if we do bring those whole of government accounts, properly constituted, to the forefront of the national debate then the financial markets are going to shriek in fright and head for the hills. Because those whole of government accounts, properly constituted, include the truly vast, trillions of pounds, bills for the things we’ve already promised ourselves. Unfunded public sector pensions, unfunded state pensions, the costs of the NHS as an increasing ageing population passes through it on that one way road. The asset to offset those is the future tax revenues that can be squeezed out of a captive population. Which is, absent immigration, shrinking and shrinking quickly.
That is, properly looking at the state assets, state liabilities, gives us a very much worse picture than the way we currently do things. Which is why people generally mutter and pass on to easier subjects when the use of whole of government accounts is mentioned.
Sure, we should include both assets and liabilities on the state balance sheet. It’s just that given the way the politicians have been spending promises this past century the outcome is not just worse than is generally known it’s worse than most will even believe.
Tim Worstall
Exit taxes are a terrible idea - they remove the limit on taxation
The idea of exit taxes is raising its ugly head again. This time it’s in an IFS report. But that’s from Arun Advani and Andy Summers, which makes it very like the last time an exit tax was suggested - by Arun Advani among others. That was the tax everyone 5% of their wealth idea and if they try to leave then take it anyway. Something that one of us derided as simple theft when discussing it with the Treasury Committee.
Theft because retroactive changes in taxation are theft. Think of that idea so happily used in political philosophy, the social contract. Well, contracts are things offered and then agreed to or not. If that overall contract on offer by a country is not to the liking of someone offered it then they can leave - not sign that social contract. Insisting upon changing the terms and not allowing that exit is, as we claimed, that theft.
No, it’s not possible to say that people should not be able to escape the social contract of their current citizenship. At least, not in a country accepting a million immigrants a year it isn’t - if inward mobility is fine and dandy, even, as some would say, a moral duty then the same must apply to outward.
Moving from moral to pragmatic, exit taxes on those with any money are going to make sure that the incoming are unlikely to be those with money. Which, in a country that runs a large current account deficit is not a good idea- we do actually require, need, incoming capital. Taxing those leaving is going to reduce those coming.
But for us the gripping hand argument against exit taxes is that it increases the ability to tax. Of course, that’s exactly why those proposing it want it. So that they can ramp up taxation. And they’ll ramp up taxation on you too.
There’s an idea that if the rich can be forced to pay more tax then and therefore the tax burden on the rest of us will be reduced. Aha, aha, no, this isn’t the way politics works. Government, the state, politicians, will spend the heck out of however much they can get ahold of. That’s why we’ve tax and spending at post WWII highs right now and that spending class is still whining about an austerity that never happened. If the political system can squeeze more tax then it will not only do so it will spend it all. Which is the very reason for those calls for a 5% wealth tax, an exit tax.
If those an increase in taxation will bite upon can reject the new social contract and leave then that limits the bite that can be put upon the rest of us. Which we think is good. We think limiting the bite that can be put on the population is a good idea in and of itself.
If people can leave because taxes are too high then that lowers the peak of the Laffer Curve. Which means a revenue maximising government can tax the whole population less harshly. Which is why we’re against an exit tax - it removes that limitation upon government taxation powers.
Do not forget, a revenue maximising tax rate is not a growth maximising one - it’s rather higher in fact. But since we’re obviously not going to get a growth maximising size of the state at least we should be working to lower that revenue raising one so as to close the gap a little. For revenue raising is something politics understands even if growth isn’t. Even the most dullard politician isn’t going to plan to reduce the amount of our money they can spend after all.
Tim Worstall