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Monday, December 05, 2016

Time to encourage the local

With all the fervour over Brexit, there is a peculiar vacuum in our national conversation about how Scotland is fairing in the face of low growth and a so-called “austerity” driven, purportedly, by massive “cuts” in public spending.

At TaxpayerScotland we have never bought the story of a public sector being hollowed out to its last bowl of gruel. Spending on annually managed expenditures is highly inflexible, and we are aware that other public sector overheads, particularly pensions and debt repayments, are gradually being dealt with - albeit from a very high starting level.

So, it is gratifying to have read Audit Scotland’s measured report on local government finance. We recommend it for all with a level head and scepticism about demands for more money by those who live off public spending.

A few highlights stand out:

  • Ten to fifteen percent of local council income goes on debt repayments. Past profligacy still costs today’s taxpayers a huge amount of our hard-earned cash
  • While debt levels vary, there is a general trend of very gradual reduction. But some councils are still deeply indebted.
  • Staff costs are being reduced, but again very slowly. And each staff layoff costs around £35,000 pounds of our money to achieve.
  • There is a wide range in performance between councils. The fact that taxpayers can compare this performance is one of the drivers of control and, we hope, change.
  • Council incomes are in fact going up, with both more money coming from central sources, and a large increase in fees from priced services. The pressures it seems are coming from the burden of social care and having to cater for a range of centrally imposed mandates.
  • Local Government finance is often thought to be turgid and boring, but the fact is that it is a lot more real than central government’s manipulation of Barnett consequentials, capital investment funding and puffed up promises over insignificant sums spun as if to declare them revolutionary. Key to local finance is that Council Tax is local and spent on local things local people can recognise; and it is a household bill that we actually have to pay.

    How much better if the central state had the courage to re-assess this localisation of tax and spend and trust the people to understand what is good value for money. We think taxpayers would quickly stamp on too much debt being carried, too many staff being employed and any repeatedly poor performance in delivery.

    Audit Scotland points out that forward planning at local level is being severely hampered by slow short-term planning from the centre. That’s a shame; local councils can act quickly if they get a clarity of purpose built into their management style. TaxpayerScotland recently gathered together all the functions we could find that our local councils performed on behalf of their taxpayers. We found at least 175 separate administration tasks. No wonder they like to have cabinet governance and corporate services departments, but again what a nonsense that the costs of these management structures is added to the repetitive tasks of bin collection, schooling and looking after the frail elderly.

    The obvious thing to do with our councils is to break up their corporate conglomerate structures and identify separated cost and revenue centres across the board; including localised overheads for each function. All those costs should be reported separately so that taxpayers can see the use to which their pounds have been put - and compare their council with others. We need to put in place the strongest possible incentives not to waste our money or spend it unnecessarily.


    Wednesday, November 30, 2016

    Responsible for progressive enthusiasm

    The Scottish Government is taking formal control of revenues from income tax from today. Soon, it will have full control over thresholds and bands. This adds to its existing responsibility over Land and Buildings Transactions Tax.

    What is this responsibility? For SNP politicians it is usually couched in positives – control over economic levers, the chance to create opportunity in Scotland, to enhance fairness and equality. Such sentiments are packaged in the assertion that we have a “progressive” government.

    But there is another responsibility here; to preserve faith with Scotland’s people that a dedication to being progressive will be successful. Power over economic levers are negative if they destroy economic activity and curtail the freedom of ordinary voters to spend their incomes in ways they see are productive – the people will respond by kicking “progressives” out of office. That’s accountability through taxation with representation. Democracy operating as it should as a constraining force; not as a state-building mechanism.

    As dedicated low tax supporters we are resolute in our view that progressivity in taxation can be a force for bad. Over-enthusiasm for using economic levers to enhance endless promises for re-distributions creates many malign unintended outcomes.

    We say “unintended” because too often our politicians fall into the trap of thinking that a small additional tax levy will hardly be seen by taxpayers and as an accumulated whole can do great good. This is precisely wrong. Economists have spent a century and more emphasising that behaviours of the moment by individuals are governed by what they see at any moment. We do not make decisions on abstract averages; we consider our actions based on the changing impacts of today.

    So, when politicians decide to raise a higher tax rate, or lower its threshold, the taxpayer’s reactions are taken not on the global rate, but the fact that more pounds are missing from their salary docket. That change is weighed up against what future spending plans are desirable, feasible and affordable now that that money is no longer there. Work and spending patterns then adjust.

    Politicians ignore this at their peril. A numeric example relating to housing might help. If you are a higher earner and have a city apartment worth £325,000 in Scotland and are saving, perhaps because you have young children, for a larger family house, you will enter the 10 percent LBTT tax bracket.

    Let’s say you are trying to invest another £100,000 of new capital into your new home. To save this from spare income you have been taxed at a 12.8 percent NIC and a 40 percent marginal income tax rate before it enters your savings account, so you have already paid more than £100,000 in marginal tax to save that £100,000.

    You then pay £10,000 in 10 percent LBTT, plus nearly £5,850 of lower rate LBTT. Add in moving costs and the fact that you will lose around £3,000 in yield by moving your capital into bricks and mortar (while raising your Council Tax bill, energy bills, maintenance et al in your new home) and you are facing an effective marginal tax rate on your purchase of around 20 percent. Is that a good use of £100,000 that has already cost you the same again in income tax to accrue?

    The people are not stupid – they will make decisions on the basis of the change they see happening around them and the benefits to their lives of those decisions. For those “progressives” who believe that the control of economic levers allows them to control the lives of many hard-working middle-earning folk there are many lessons to be learned.

    Chief among those is that there are reasons why high tax economies across the Western world are growing very slowly, why young people are feeling disenfranchised, and why the poor are not improving their lives because good jobs are unavailable. The politicians spent all our money, badly, on their Big Government state. That’s not progressive.

    Less Spending >> Lower Tax >> Higher Growth >> More Jobs


    Thursday, November 24, 2016

    Statistical nonsense can lose us our liberty.

    Can taxpayers be blamed from turning their backs on politics and, across the Western world, voting to crush the political and media class?

    Yesterday’s budget could be viewed as cautious and measured, but equally it can be interpreted as the outcome of a UK Treasury captured in the headlights of popular forces it cannot understand. Its sheer nothingness is matched only by the empty vessel of the Scottish Government’s legislative programme. Is it any surprise that one MSP was helping referee a football match when he should have been in committee, while another has been lecturing at his university.

    Where has this immobilisation come from? In part, it is because “the data” has become hugely distorted. Politicians use statistics like managerial armour; they let them pontificate virally with obfuscatory certainty about things over which they have discretion but very little knowledge. Ms Sturgeon’s views on the value of the EU come to mind. The hound dogs of the media, lapping up all this claptrap in a permanent desire for a quick fix to societal problems catch this virus too and broadcast a melange of confusing, contradictory messages.

    The paying public are becoming more and more baffled; are these people really spending half our incomes? Can any of these numbers be believed? It really is bizarre when the Office of Budget Responsibility is required by statute to provide an aggregate growth figure that it itself says is vague and unverifiable; then politicians are asked to defend that projected performance, even as they propose actions might make it meaningless.

    But managerial difficulties over explaining a chosen policy mission in numbers that don't add up are not enough to explain the sclerosis of the political elite. There is a much bigger story here which affects all who pay for the central state.

    It is failing.

    Politics is about the expression of values, and it is in the nature of party politics to express these values aspirationally; offering a vision of a better world; goals of no child left behind, health and security for all, allowing the (ill-defined) “just managing” obtain higher incomes, harnessing skills and entrepreneurship; in Scotland we are replete with these goals.

    Damnably, politicians then try to use our taxes to make them come about, and here is where the failure begins; central planning, which we know did not work in the communist world, also does not work in social democracies. Instead, it has driven us into a sea of debt as aspirational spending programmes have sucked up our taxes and created a vast managerial bureaucracy which spends half of our money planning how to escape from its own failures.

    Every time it comes up with a new plan, it wants more money; every time it gets some more, it fails, and ordinary taxpayers pick up yet another bill for failure. It is worth stressing that Philip Hammond is proposing to spend another £122 billion of our children’s money; in the hope that it might get the state out of the mire of its own making.

    That continuing failure should worry taxpayers. Political science pointed out long ago (read Hayek’s Road to Serfdom) that the response of the repeated failure of central planning is not to stop planning, but the call for a “strong leader”; someone who will somehow be able to pluck methods that can turn aspiration into results out of the air. Well, history tells us that those methods are usually pretty inimical to peaceful and joyful living – totalitarianism as a follow up to failed majoritarianism based on the false notion that democracy is a tool for good decision making is a horrible outcome for personal liberties. Wealth-destroying high taxation morphs into wealth-crushing authoritarianism. We will have to see if Mr Trump’s accession ends up as a damp squib of populist anger or a genuine strong-man initiative that curtails free trade and enhances American isolationism. I doubt very much if the US can become totalitarian, its democratic structures are too plural for that, and constitutionally locked to remain so, but the illiberality of many Trumpist values is very un-American.

    And that’s where the UK, and Scotland, can offer so much if they could just discard this fetish with what is in essence big state socialism with a “nice” corporatist face – even when bankrupt. Scotland invented liberalism, and if we confuse that with laissez faire or even corporatist capitalism we are making a huge mistake. Liberalism offers a set of other approaches to social and economic policy. They’re based on the idea of plurality of economic actions through localised institutions, with a particular emphasis on private voluntary methods. Liberalism trusts the people.

  • That means welfare mutuals to which we subscribe as disparate communities to support us in need or old age.
  • It means localised trusts to run our schools, roads, streets and other community assets.
  • It means social insurance for integrated health and social care that leaves the state to concentrate on those who cannot cope.
  • And it means localised skills training for our non-academic kids funded by business as a private endeavour that it can see benefits it locally.
  • These are not massively radical initiatives, they are what Big Government does today, but done in a different way - with a lot less politics; which is what people want.

    They also have two things in common. The first is that politicians have to give up central power to community powers – to allow plurality, and innovation through experimentation and competition. The second is that they would allow us to pay a lot less tax to the central state; a liberal state may well still require us to hand over a third of our income for collective and personal support but taxpayers would be able to link what they pay to what they get for their money; and be free to choose what they really wanted to pay for, instead of being forced to support bad policies through their taxes – the source of such disrespect and despair of the political class. The focus would then be much less on the politics of spending than on the performance gained for that cost.

    The rocks being thrown around in the political glasshouse are making our nations’ parliaments a laughing stock among their own people. That’s a bad development; a strong core to any state is needed; untoward events can strike at any time; no nation can respond strongly if its people have no confidence in its leaders. Government must change and free us from its failure.


    Monday, November 14, 2016

    Let’s allow manufacturing find out more by itself

    The Scottish Government is keen to gain plaudits from supporting the manufacturing that makes up more than fifty percent of Scotland’s international exports (and that includes exports beyond the EU). Its chosen mechanism is to develop a Manufacturing Action Plan that establishes a new quango – a National Manufacturing Institute for Scotland to “promote continuous innovation, improve productivity and increase investment”. Well, there’s yet more of our tax money gone to people in suits proselytizing about what might be done, but actually creating nothing.

    If that makes you weep a little how about this; the action plan for this new quango is embedded in another quango – Scottish Enterprise.

    Now get your biggest hankie out because when you read the plan you will be treated to the usual anodyne verbiage that passes for action planning in bureaucratic circles. We need leadership and we need skills, they tell us enthusiastically … and then it all begins to go a bit wrong.

    We also need, they say, a circular economy – that’s re-cycling to you and me - a plan for higher overheads. And we need energy efficiency and de-carbonisation – that’s an offer of higher fuel costs and expensive power. And better infrastructure; well maybe, but does that mean raising more public debt that taxpaying firms have to finance.

    It goes on; we need more “digitally enabled units of appropriate scale and location” the plan then adds. No, we don’t really know what that means either, but we expect it means that they are making the assumption that if we get better and more widespread internet we will be able to compete. It’s a common assertion, and the consensus among the business support chatterati, but tell the wee foundry in Rutherglen that spending more on broadband will increase their exports and they will probably show you the door.

    They want to make Scottish business smarter, and for SMEs to improve their supply chains, adopting new materials and processes. For this, they offer the services of yet another quango, the Scottish Manufacturing Advice Service to assist in enhanced asset reviews (that’s where they tell you that your machines are clapped out and too old; and you say that that’s because you can only just afford to pay the NIC for your workers and the VAT for your sales). They cite “the Vanguard Initiative, an EU policy to help regions unlock their growth potential” as a tool for “leveraging Scotland’s many international relationships”. There is in addition another initiative “Enterprise Europe Network” that will be plugged into this smorgasbord of help.

    But who is helping who here through the use of copious amounts of our tax money. There is a very telling sentence in the Scottish Government’s announcement:

    “To secure industry buy-in, we need to demonstrate the value gained from a long-term commitment to innovation and technology adoption – particularly within SMEs. Coordinating the national innovation resources and assets appropriate for the manufacturing base will be key to our success”.

    Now hold on a minute. If we read this correctly, Scottish Enterprise and its minions are saying that Scottish industry is not really committed to innovation and technology adoption; and, to mend this, their approach will be use coordinated central planning of what we think might mean the universities, other publicly funded research entities and, presumably, themselves. (That’s the people who develop Scotland’s international relations by flying to the Middle East at our expense and staying in very expensive hotels).

    In the process, they will add to business overheads by politically correct environmental schemes; while subsidising an army of busy-bodies telling industry what to do. So, what taxpayers face here is its taxes being used by the central state, swimming in a politically favourable (to itself) sea of Euro money, ladled out across its own fleet of highly paid chums and buddies. There is clearly a political back story here to prove also that the EU is vital to Scotland’s future; politics that has no place in industry.

    Central planning has never worked – ever – and when the managerial bureaucracy gets into its stride in support of that sort of planning like this, industrial success will simply get further and further away from Scotland’s grasp – at great expense to ordinary taxpayers. It really is time that this sort of 1970’s nonsense was consigned to the dustbin – along with Scottish Enterprise and all its sub-quangos and initiatives.

    What manufacturing needs is to be left alone, with much lower payroll and capital taxes to find out on its own what innovation works and what does not work. These quangos work against this process which is solely in the remit of those on the ground doing the innovating.


    Friday, November 11, 2016

    Trade Union Modernisation

    The Scottish Government managed to sneak through a new use of our taxes this week; on Wednesday when the Trump frenzy was at its greatest.

    Two hundred and fifty thousand pounds of our money has gone to "modernise trade unions". This is an oxymoron; it's admitted that the money is actually being spent to "mitigate the negative impacts of the Trade Union Act". That is, to avoid changes that many see as making trade unions more democratic.

    This is a wonderful example of double-speak; our money is in fact being offered as a subsidy to pay for staff support for what trade unions do - on the basis that the state should work "in partnership" with organised labour.

    That partnership is put forward as "supporting innovation in the workplace" by which is meant the "Fair Work Framework". You can find this here. It's the usual melange of woolly but well-meaning aspirations.

    But this is really a political use of money; the Scottish Government is buying votes, using our money for political purposes that raise a fist of contempt to Westminster and support their client constituency.

    The big problem with that is that it rejects most of Scotland's people in favour of supporting a minority with public money. As such it will always tend to make Scotland's working people more expensive to employ. That may or may not be a good thing for those particular unionised workers, most of them in the public sector these days, but it certainly will not help Scotland's growth prospects. It is more likely to deliver yet more rationing of public services as tax revenues shrink.

    Trade unions should be self-supporting entities, bringing the democratic will of working people to bear on bad employment practice. This self-reliance should also be mirrored by business, who also should not take subsidies - using the money from their customers to support their worldviews.

    The use of our taxes is meant to "underpin a fairer, more inclusive and more successful economy". No, that's wrong; the minute our tax money is ladled out to promote any specific political values; democracy is injured. Instead, privilege is given to one faction over another - and that leads to unfairness not inclusiveness. It will also curtail growth.


    Friday, November 04, 2016

    Thanks for not a lot?

    Tax progressivity has always been the mantra of the devolved Scottish Government. The consultation by its Local Tax Commission made clear that the option of higher taxes for larger properties was favoured – and the rises for the top four bands is no surprise.

    We submitted to that consultation and in discussions we were firm that increased progressivity would not produce the outcomes expected. We are still of this view.

    Council Tax payers dislike this tax bill, it’s the largest single outlay to their government that they actually have to find – as opposed to NIC, income tax and VAT which are embedded in pay packets and purchases. As such it has good qualities – it’s transparent and its imposition can easily be weighed up against what we might prefer to do with our money as an alternative. It allows us to weigh up our values against the values of our councils.

    Politicians are careful to recognise this by allocating the rises to uses that are difficult to reject – such as closing the educational attainment gap. But taxpayers should be careful; what they say they will do may not be what we actually get for our money.

    To understand why, you have to start from where we are now – for many households a council tax of well over £1000 is a real burden – it’s not only the rich who live in larger houses; many have got there through hard grind and foregoing consumption, others are the fabled widows left at home, more are inheritors of family assets. The inadequacy of Council Tax to “fairly” echo the circumstances of those living in diverse properties is well recognised.

    As such, the only decent thing to do with Council Tax is to recognise that its rates have to be kept low – the higher they get the more exemptions have to be created and the whole edifice becomes horribly complicated, with more and more people seeing it as unfair. The eight year Concordat was the politicians' answer to this; although they have done nothing about re-designing the spending side of the over-large multi-functional corporatised mini-conglomerates that we call "Local Councils" - oh, that they were truly local.

    When taxes are high, and are seen as unfair; trust dissipates and people change their behaviour. In housing, this means large homes are split up into flats, those with wealth stay where they are and buy rental properties; they also lay off gardeners, and stop spending money on updating their kitchens and bathrooms. Some with ambitions reject Scotland’s charms and leave town.

    Now a technical bit. What we are looking at here is the rate in change of consumption patterns through time across private and public spending. Around £100 million a year will be raised through these tax rises. This gets added to the annual budget of £4.9 billion in Scottish education. That £100 million is not used on the private activities cited above.

    What’s the net effect? Well, no-one can know, but if there is a calculation that could be done it would be between entities who have just produced a 195 page document for teachers on how to teach and a school constitution document that no one can understand; and small-town builders, gardeners, cleaners, florists, interior fitters and decorators trading out of second-hand vehicles. I think we know who, pound for pound, is adding more value.

    And that’s the key, the net value added from economic activity is the bit that creates tomorrow’s taxes. Again and again, we have to stress to the Scottish Government that its size is so large that it is actually damaging its own tomorrows by wrecking the supply-side today.

    The Scottish Government always talks about fairness – which should correctly be used to mean “deserving”; not shorthand for taking other people’s money for political ends based on values that are wrong.

    Of course helping the education of the least able is a good aspiration, but acting on that aspiration using higher tax rates, and centralising those taxes so that taxpayers do not see their local councils compete with other councils and learn how to innovate, is simply bad policy.

    How ironic if in attempting to raise funds to help our children and grandchildren improve their lives, our government achieves the exact opposite, by making them poorer. If the response to that is then to borrow yet more money to mend bad policy, we are punishing those children twice over.


    Monday, October 31, 2016

    Welfare futures - we need more than more management

    On Friday, the Scottish Government’s consultation period for submissions on social security came to an end. Scotland controls 15 percent of the total of £17.5 billion we spend here, although around a third of that goes on state pensions, so we control nearly a quarter of non-pension spending.

    This comes on the heels of reports of a plan to ask thousands of welfare recipients to help design a welfare system that treats people with “dignity, fairness and respect”. (We have asked in a previous blog for some respect for taxpayers who pay the bills.)

    The consultation paper “A New Future for Social Security” is deeply frustrating. It purports, in the usual way, to rest on principles but actually it is a managerial document – a tour de force of arcane obfuscation that lays out an enormous smokescreen – a process by which the present, failed, welfare system gets moved from one set of civil servants to another. Angela Constance has a sentence in her forward that tells the truth:

    The Scottish Government has a steep learning curve in front of us when it comes to social security, but with the help of Scotland’s community of advisers, practitioners, public service professionals, representative groups and users, then I am confident that we will meet the challenges ahead.

    Political economists can smell the rat here. Look at that peculiar “us”, not just the choice of first person plural, but who it is that is involved in that plurality. What we see here is rent-seeker capture of the welfare system by those who spend our taxes, and learn how to do so at our expense. Those paying the bills are again ignored.

    Politically, this is only to be expected, by necessity the SNP must continue to compete with alternative promises that might be made by Labour. Economically, however, it is inept and unsustainable.

    In an op-ed this weekend Iain Macwhirter, the Herald columnist, showing his honest left-wing principles as always, suggests that taxes are raised to help pay more to the NHS with its new focus on integrated health and social care. He says that the hard choices on spending in the face of NHS cost increases, and the effect of the living wage on care services, can only be resolved by further cutbacks, privatization or increased taxes. We assume he would open the doors to more taxation to support child, disability and in work benefits too.

    He’s wrong; the real issue of principle here is interests and incentives. Social security has become a political hot potato; the rent-seekers are deeply in cahoots with the politicians as to how to spend our money. There are many institutional forms that lie between the fully nationalised monolith of today and total privatization. We need to find those that work best; and in the process discard the pessimistic leftist notion that, for many, a life as a ward of state is an inevitable necessity. Rather, we should breed self-reliance to make our poor people free. Then they at least have a chance to become wealthy by their own efforts.

    Sadly, the rent-seekers above have an interest to retain their jobs as providers of compassion; they are unlikely to look outside of their box – scan the pages of the consultation paper to see the minutiae which fill their days as bureaucratic administrators. Any idea that they are merely continuing along a failed road to a high spending, high tax, less employed and lower growth failed society is simply ignored.

    There is a strange statistic that, despite official figures saying that only one percent of benefit claims are fraudulent; those living in areas of deprivation say that three quarters of their neighbours on benefits are on the fiddle. While both those figures are bound to be wrong, the very fact that we do not really know tells us something; that the best way of serving taxpayers would be to introduce some form of contributory element into our welfare. That could be as simple as a paper account of NIC payments made and benefits received, but it would begin a process of introducing a social contract between payee and payer that helped match the competing interests and incentives of both. We might even generate a meaningful debate about deservingness and equalisation (aka fairness and equality).

    Through that we could know more about individuals and their circumstances, how those change and how they cope with that – and how we can help them cope. Smaller, innovative mutual societies catering for services needed and, through time and competition, specialising for particular types of individual would let bureaucrats become de-politicised and more productive in their outcomes.

    In the end, that’s what really matters, every earned pound that is taxed simply must be used productively; the alternative is a spiral of economic decline as everyone attempts to live off everyone else. That way, we all lose our liberties.


    Wednesday, October 26, 2016

    Throwing money to the wind and sea

    Through an interview with an “environmental expert” the other day I counted seven “should” and five “oughts”. There was a distinct lack of “attempt” and “can do” in this litany of confident anti-progress rhetoric. The speaker’s purpose appeared only to laud the need for yet more of our money to be spent on renewables with the utmost certainty that our energy needs will be met.

    A droll friend of mine likes to point out that the old canard about asking the last person to leave a tanking economy to turn out the lights does not apply to Scotland; they will, he says, already be out and one has to hope that it really is a braw bricht moon lit nicht that nicht.

    The attempt to outwit the laws of physics in energy production may seem laudable, but by golly it’s costing all of us taxpayers a lot of money. Our colleagues at Scot Buzz point out in a recent piece that Scottish Enterprise, through its Investment Bank, has literally been pouring our taxes into the sea. Millions have been spent supporting wave power to companies that have then failed.

    A telling quote from SIBs head, claimed, “It’s been a very good year for the Scottish Investment Bank. The results illustrate the impact that our activity is having on the Scottish economy, both in terms of actual investments made and the support we’re providing to companies in helping to prepare them for investment”.

    Well, ha ha ha to taxpayers then; quango spin beats reality. Sink our hard earned money (which we could make a lot better use of by investing it ourselves) into failing enterprises and then claim success because some of these bungs might, just might reveal a success story. Well, not in wind, wave and solar power they won’t.

    That great big orange nuclear bomb of a ball in the sky burns a mass of (take a deep breath) 1980,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000 kilograms. Yet, it took 65,000,000 years for its fusion power to create shale gas and oil. That’s a really slow rate of stored energy creation from a huge energy source; yet the state thinks that slopping our money out in bucketfuls to funny wee schemes employing bendy-snake steel tubes and spindly windmills that capture that trickle of slow energy can compete in real time? Come oooaaaannn, Jim.

    Another acquaintance of ours, who happens to be a Professor of Economics, likes to tell his students that their initial position on environmentalists should be that all environmentalists are always wrong about everything. The reason, he says, is that their incentives are always to put political gain above physics and they achieve this by talking largely to each other and ignoring the facts. That sounds familiar to any observer of a Holyrood with a minority government propped up by Green votes.

    It’s a shame for Scottish taxpayers that this is the world we live in. Here we are, a nation of engineers with existing nuclear plants; and the only country in Europe that has a petrochemical refinery sitting right on top of shale gas deposits - that it is banned from extracting, but can import from America. With a bit of “trying out” and stubborn “can do” Scotland could create huge competitive advantage for itself. We are tempted to say that ye couldnae mak’ it up, as they say, but actually as enterprising Scots, we could.


    Monday, October 24, 2016

    Finding how to make the best choices in child support

    Do taxpayers get good value from money spent on childcare? A blunt answer is that no-one has a clue. There are so many aspects to what different parents need, and multiple ways that those needs are met, that any generalities simply turn to dust. A recent Scottish Government report examines the influences.

    Yet varied roots of demand, and plural sources of supply are not unfamiliar in any economy – food, cars and household furniture show the same tendencies.

    So why then, do we see central government get so exercised about how much child care is on offer for families? The answer lies in a peculiar mix of decency about making sure every child is not left behind, and the desire of the state to make use of as many productive people as can be found to work. We probably ought also to mention the political aim of purchasing as many votes as possible from redistributions using taxpayers’ money to those without the money to pay for child care.

    These aims still do not remove the fact that complex patterns of supply and demand are best served by market mechanisms. To its great credit the Scottish Government has said that it will design the child support system such that “the money follows the child” – that is, children and their parents are seen as economic and not political actors. This is progress indeed from a left-leaning centralist government.

    For taxpayers, this approach opens up the prospect of genuine insight into who wants what and where – that is market information, as always, offering knowledge far beyond what any bureaucracy can find out. We would like to see the principle extended to individual welfare accounts where our tax money follows the claimant. Nothing would help the dependant less well-off more than being allowed to build their own pot of capital and learning to make better choices in life.

    The welfare system does taxpayers no credit if all it does is lock in claimants to become supplicants to the ignorance of the state; building knowledge of how to best become self-reliant is the sine qua non of a system that serves the long-suffering taxpayers who pay for it.


    Wednesday, October 05, 2016

    Oh … for a passage plan and a steady hand on the tiller.

    Scottish taxpayers should be watching the stramash over the timing of Scotland’s budget with some concern. There is some truth in the notion that this year's budget calculations are made more difficult by having a new UK Chancellor post-Brexit; but this should not be used by Derek Mackay as an excuse to haver.

    The problem is that political tactics are, as so often, overtaking common economic sense. It’s not this year’s budget that matters to Scotland; it’s this year’s and the five to ten years after that. It was notable that Philip Hammond, while maintaining his aura of the grey man in his quiet announcements at the Tory conference, concentrated on the adjustments to Mr Osborne’s Plan A up to 2020 and beyond. He knows that steadiness in policy is more important than delighting the media with budgetary surprises.

    This option is equally available to Derek Mackay. A Scottish Government with its GERS deficit needs a passage plan; the Fraser of Allander Institute has warned of the perils ahead; low growth and rising unemployment loom. The danger is that the Scottish Government is beginning to look like a rabbit caught in the bright headlights of today’s peculiar realities. Or, maybe that should be “headlines” as the First Minister continues her mischievous walk on the fence separating us from Indyref2.

    For taxpayers, these uncertainties are much more damaging than politicians realise. Those in boardrooms are not stupid; and they are not focussed on the minutiae of how our taxes are to be dispensed to the state’s quangos and planners. They can adjust to what comes their way, but they do need to know there is a passage plan and a steady hand on the tiller. If the impression takes hold that neither of these things exist, investors will jump ship and travel onwards elsewhere.

    The present uncertainty about the UK’s future actually offers a real opportunity for Scotland. In anticipation of the more devolved budgetary administration from next April, and with a Fiscal Commission emerging to calm uncertainties, the focus should be on showing the steady hand and the long term direction of travel; that is, our nation’s government should be acting as a responsible state intent on serving its taxpayers with frugality and responsibility. Tell us how the deficit and debt problem will be cured; show us where and when the growth for jobs will be created; offer hope to all Scots for a vibrant, creative and profitable future.

    There is nothing like certainty and respected authority to calm the crew of a ship in stormy waters. We don’t need to know who is due to scrub the scuppers on the next night watch; Mr Mackay should show us his vision of what is on the horizon without delay.


    'Government is the great fiction through which everybody endeavours to live at the expense of everybody else.'
    Frederic Bastiat