The FishTank

Archive for April, 2010

There’s a certain irony in the role immigration is playing in this election. In 2005, the Conservatives politicked heavily on the subject, confirming the public opinion that they were still ‘the nasty party’ and losing the election as a result. This time, when Cameron’s new Conservatism is playing the subject down, it seems to be second only to the fiscal crisis on people’s priorities. And with the bigot-gate scandal spilling across the web this afternoon, clearly it’s an issue that will continue to garner headlines across the next week.

Interestingly, immigration is also an issue where the parties’ positions are recognisably distinct. Labour has gone for an Australian-style points system which, they claim, has already paid dividends in lowering migration. The Conservatives, whilst accepting this system, want to go further and impose an overall cap on numbers each year. The Lib Dems, seemingly trying to come up with a policy they can announce nationally and yet still play differently from seat to seat, have proposed a strange system of internal immigration barriers. Which one of these will work? Let’s take a look.

We’ll start with the existing problem. Nobody, with the exception of UKIP and the BNP, is against immigration per se. We all recognise our nation’s historic role as a destination for the world’s oppressed and the role this has played in attracting and exploiting talented individuals whose light could otherwise have been hidden under some foreign bushel. However, nobody except for knee-jerk liberals believes that the numbers should be completely unchecked. Had we kept the post-war policy of an automatic right to settlement for all citizens of the Commonwealth, our population density could now be higher than Hong Kong’s, we could be having to import any food that couldn’t be grown on a window ledge and people wouldn’t be talking about concreting over the green belt so much as concreting over the concrete. Unlimited migration is not sustainable. The perception is that immigration in recent years has been too much. There is a debate over how much of this was avoidable (or even intentional), whether we should have staged the admission of EU accession countries, whether migration from outside the EU constitutes a greater or smaller proportion of the total, but that people feel the current levels are unsustainable is an absolute fact, no matter if you do call them bigots when you think the microphone is off.

There is, therefore, a question of how much migration is sustainable. This isn’t an easy number to quantify, but it depends on what the immigrants can offer us, what we can offer them and – and it isn’t racist to feel this – how much immigration the existing population can comfortably accept. This last does matter, not simply because of feelings of racial or cultural tension, but because crowded residential areas lead to social tension. It’s why the high-density housing of the 1960’s failed; it’s why there were race riots in the 1980’s and it’s why the BNP are gaining seats in areas where people feel crowded out by an endless stream of new arrivals. Unfortunately, as I say, it’s very difficult to ascertain how much immigration is politically acceptable, but since tensions were lower in the past, it is theoretically possible to crunch the numbers and come up with a rough estimate. It’s not a good way to do it – which is why the Conservatives won’t answer the direct question on how much their cap should be – but taken with an objective analysis of the benefits and costs of immigration it can produce a figure.

Looking to the easily quantifiable issues, what the immigrants can offer us is the one most often addressed. Immigrants, we are told, take jobs that our people will not fill, whether because they are considered demeaning or demanding. Apart from roles in the NHS, this often implies unskilled work such as cleaning, waiting tables or hotel work. Two problems arise with this: the first is that the jobs being unskilled makes a mockery of any kind of points system. Clearly, if we say that anyone who can operate a squeegee will have enough points to enter the country we end up with a system where nobody is rejected. The second problem is that we have a great many people of working age who are wilfully economically inactive. Some of these people are hidden in the statistics by reclassifying them as disabled – about half of the disabled have been written off because of stress, for example – but even ignoring the reclassified there are still a great many people choosing to live on benefits rather than work. Welfare reform is therefore a key part of immigration reform: remove the luxury of choice from those capable but not desirous of work and you don’t need immigrants to fill unskilled roles; the points system begins to work.

But the points system also fails to address another problem. Some degree of our immigration comes not from those who come here to work, but from those who come with them. Our current immigration policy does not discriminate against people with dependents, which means that we can easily take in a whole family for the price of one. A fairer system would mark dependents down against an immigrant’s total: most households in this country include two working adults, so it would not be unfair to expect an immigrant family to have the same in order to fund the extra burden on the state of any children they may bring with them. Since immigrant children present particular problems – multi-lingual schooling, culturally aware healthcare and suchlike – recognising their impact in the points system is both logical and reasonable. After all, what are the points for if not to establish whether someone is a net benefit to our society?

What we can offer immigrants falls into two distinct issues. The first is direct service provision. A one percent increase in population will, broadly speaking, require a one percent increase in public sector workforce to service it. This isn’t a problem if either some of these immigrants become public sector workers or at least generate enough tax revenue to pay for them. It is the second issue which leads to the sense of burden on services – capital provision.

To explain: if we have a one percent increase in children due to immigration this will leave us with a requirement to educate an extra one percent. Even if these children are already English-speaking and thus create no complications, that still means either an increase in class-sizes or an increase in the number of classes. If the former is undesirable or impractical, the latter is more expensive – because it requires the building of new schools. Clearly if a whole swathe of people suddenly turn up expecting a new school or hospital before having contributed a penny in tax money it presents a significant problem.

And this is where the issue of some kind of hard limit matters. If we say we will accept any people with skills or education above a certain level then, unless we are racist enough to assume the world outside is full of idiots, that still constitutes a great many potential immigrants. And, as long as our economic and political conditions look better than those at home, they will come. In fact, Labour’s much-trumpeted reduction in immigration is more likely due to the recession than to any deliberate government policy (unless Labour are now claiming the recession was deliberate). The Lib Dem idea of controlling where people go inside the country is an attempt to deal with areas suffering particular pressure, but because it controls where they work rather than where they live it does nothing to mitigate the impact on services – and that’s even if it could be made to work. The reason it works in countries like Canada or Australia is because these are highly nucleated societies, comprised mainly of large cities with great distances between them. If you tell someone they can only work in Quebec then they’re hardly going to commute from Vancouver.

And there is another problem with the Lib Dem policy, which is this: even if can ensure that people only live and work in areas that can sustain them it still leaves the question of how you determine where you want them to live and work. If we are saying that we don’t want people to keep coming to London, but send them to Liverpool then what we are – in effect – saying is that we are imposing a cap at a regional level. Since it stands to reason that Liverpool, Leeds or wherever else will not be able to absorb people ad infinitum this policy must, of necessity, be dynamic – it must be updated to restrict people in each area as they absorb what they can. Which means that what the Lib Dems are proposing is actually a cap. They aren’t giving figures, but then that’s what they say about the Conservatives. And given that the Lib Dem proposals have been condemned as unworkable what we are left with is a default position where the Conservative view – points, welfare reform and an adaptive immigration cap – is the only one that can possibly work.

Finally, beside immigration is the often conflated problem of illegal immigration and asylum. Much has been made of the prison-like centres in which failed asylum seekers are held. Much also has been made of the number of illegal immigrants in the country. It is not unreasonable to state, however, that if we didn’t hold failed asylum seekers prior to deportation the number of illegal immigrants at large would only increase as they disappeared into our society. The best we can do here is to make the system both fast and transparent. Fast, because we then wouldn’t need to hold people; transparent, because if people were aware of what grounds would lead to their rejection they’d be less likely to come here and fail in the first place. Finally, on illegal immigration, it’s tempting to accept Lib Dem policy as a humane and practical solution to a thorny problem. Unfortunately, the experience of other countries suggests that amnesties lead only to further increases in illegal immigration. Some countries have had many amnesties and the problem still remains. The Lib Dems point to their ten year criterion, but riddle me this: if someone has entered this country entirely illegally – and I mean smuggled in rather than failed to leave when their visa expired – how are you supposed to know whether they’ve been here for ten years or not? If someone tells you they’ve been here for ten years and can’t prove it, what then? Do you expect them to register and come back in another ten years? If you didn’t and you gave them the benefit of the doubt then you might as well dispose of the precondition in its entirety. It may not fit with the touchy-feely politics of the age and it may be the kind of thing that makes an unguarded politician mutter bigot, but the truth is that sometimes you do have to take a hard line to deal with a perceived problem – even if that does get you regarded as the nasty party.

One of the most trumpeted figures in New Labour’s propaganda war is the number of police officers. The Conservatives, they claim, will reduce these numbers if they come to power. That’s not that the Conservatives have pledged to do this, of course, but by not promising to safeguard the police budget, cuts are implied and, consistent with Labour’s narrative throughout the election, this can only mean front-line staff.

Which would be fine if police officers were front-line staff. The Conservatives claim that in an eight hour shift the average police officer spends something like seven hours on paperwork with only one hour out on patrol. Numbers on patrol have been supplemented by Police Community Support Officers, part-time volunteers with limited training and even more limited powers.

According to the Home Office website, there are currently 142,688 police officers (up just under 17,000 from 1997) with 16,322 PCSOs and 82,340 police staff (up by 25,000 from 1997). That’s an increase of 13.5% of officers and about 50% of administrative staff. This suggests a large increase in bureaucracy compared to actual policework, particularly when taken with the perceived increase in paperwork done by actual police officers.

Some increase in bureaucracy is only to be expected: we now live in a vastly more accountable state and the days of a police officer clipping a child round the ear without fear of recrimination are long past. Police action has to be recorded meticulously to prevent the threat of litigation. Whilst we would no doubt welcome some changes in the law to lift this burden, people calling for a complete reversal would do well to watch Ashes to Ashes for some idea of just what happens when the police are left to police themselves.

A large, if hard to quantify, chunk of the new bureaucracy, however, has nothing to do with protecting people’s rights. Labour’s target culture, centralising the process of prioritising police action, requires a great deal of monitoring. Senior bureaucrats will also be commanding considerable salaries – inline with other government departments – making them little more than expensive propagandists. Since the police force in 1997 was perfectly accountable, it’s not unreasonable to suggest that most of the 25,000 new bureaucrats could be disposed of without any impact on the front-line services. If salaries average out the same amongst front-line and backroom staff, that could save about 12% of the policing budget.

The Lib Dems for their part, want to tackle the perceived lack of police presence by adding 3000 extra officers. It’s a nice idea, but if the anecdotal evidence about living behind a desk is true it’s not really helpful. This is akin to Labour’s handling of the NHS, pumping in extra money without any kind of reform. The simplest reform would be to ditch PCSOs. In America, civilians play a different role in the police force – helping with the work behind the desk rather than out on the street. OK, it’s less exciting than pounding the pavements, but people who genuinely want to help will be equally keen to take on that job – and will probably require less training. If 16000 Civilian Aids replaced the 16000 PCSOs, the liberated police officers would constitute an 11% increase in numbers on patrol. Better use of technology such as computer transcription could further ease the burden, allowing officers to make reports from on the scene and leaving the CAs to cross the t’s and dot the i’s.

Of course, none of this guarantees getting every flat-foot onto the beat for their every working hour, but – if we put Labour’s quasi-religious attitude to front-line services aside for the moment – what these measures may enable us to do is to simultaneously decrease police numbers and increase the number on patrol. After all, there’s not much point employing dogs to sit in the kennel whilst you do the barking yourself.

Another Brown tactic we’re hearing a lot of in this election is the implied opposition policy. In last night’s debate, for example, he asked Cameron why his manifesto said nothing about keeping such things as the free TV licence for pensioners. The intention, obviously, is to place in the voter’s mind the idea that Cameron intends to ditch these benefits at the earliest opportunity. On this occasion, Cameron was quick to refute the suggestion. In fact, he went further – attacking Labour leaflets which claim the Conservative plan to withdraw the benefits.

The idea of putting things you won’t change into your manifesto is, of course, ludicrous. Does Labour’s manifesto include a promise not to overturn the 1689 Bill of Rights or the Parliament Act? Does it promise not to go back on giving India its independence? Of course not – and nobody would expect it to. But Brown’s attacks are intended to do two things – to instil the idea in the minds of wavering Labour supporters that this is just the sort of thing the Tories would do and to cover up for the fact that Labour’s manifesto contains very little in the way of real policy.

This deliberate pigeon-holing of the opposition isn’t just an election technique. Throughout the last thirteen years, Labour have sought at every opportunity to present voters with a fable about the evils of the Thatcher and Major governments. I say fable because what is presented is a massive distortion – as was demonstrated when Labour’s Ashes to Ashes advert backfired by cultivating a sense of nostalgia in voters. The 80’s in particular were a time of massive social change, when the country finally got over its post-war nostalgia and reinvented itself for a new age. There were winners and losers – there always are – but the decade was mostly one of brash optimism. Even the punk music many left-leaning journalists use to illustrate clashes like the Miner’s strike was actually a product of the vastly darker years of the late 1970’s.

And it’s not just Labour who are guilty of reinventing the past. Secure in the idea that nobody would accuse them of the same policies as their 1920’s equivalent (largely because things outside living memory have no resonance) the Lib Dem’s also hark back to the 1980’s as evidence that Cameron’s Conservatives are not to be trusted. The fact that most of the Conservative front bench (and nearly all the new candidates) aren’t old enough to have played a significant role at the time seems to escape them. The irony, of course, is that the one party who could credibly be attacked as an unchanging simulacrum of their past is Labour. There is, after all, much similarity between the financial and social turmoil now and that of the last Labour administration under Callaghan. Perhaps things aren’t as bad as they were then, but that has more to do with globalisation than any measure of competence on display on the Labour front bench.

The big debate of this election is, of course, the economy. Over the last year we’ve gone from Labour investment against Tory cuts to a game of who can slash the most without actually admitting what it is they’re slashing, always with very little in the way of financial detail. Now, in an almost surreal twist, we seem to be wrangling about a mere fraction of the public sector spend – £6 billion – but a small sum which seems, by Labour calculations, to be paying for almost everything.

First let’s get the state of play into some kind of perspective: total government spending in 2009 came to approximately £638bn. Of that sum about a quarter had to be financed by the sale of government bonds, taking our national debt to £800bn. That quarter is what we refer to our as the deficit. Left to its own devices this means our debt would grow by that amount – plus interest – every year. Our GDP – the money earned by everybody in the country – by contrast, is approximately £1300bn.

The first point to be answered is why does this matter? If we’ve been able to borrow £800bn why can’t we just borrow some more to tide us over? The answer is another question – tide us over until when? The Conservative credit card analogy is a little simplistic, but it serves as an illustration. Our economy is currently in the same state that a man earning £20,000 a year would be if he had a credit card debt of £10,000, and was spending £2,500 more than he earned every year. Clearly, even if he had a generous credit limit and a low interest rate it would only take a few years before the credit card company started to wonder if he was going to default.

Government debt works in a slightly different way. When the Government wants to borrow money it issues what are known as bonds. These are fixed term loans which return a pre-determined rate of interest. So, for example, there might be bonds issued which return 10% over five years. When the bonds mature, the Government has to sell the debt again as a new set of bonds. It’s as if our man with the credit card had to apply for a new card every five years.

Generally speaking bonds are an attractive investment because they guarantee a fixed rate of return. Unless, that is, the government looks likely to default. Can this happen? In theory, yes. The interest which bonds generate is determined by how risky that debt looks; so, under the current circumstances our bonds are fetching a higher rate of interest than those issued by Germany. However, another effect of a government in financial trouble is that they impact on the value of the currency. If our currency fell in value by more than 10% over five years, the 10% return on the bonds sold would evaporate. Buyers who think this likely to happen will look elsewhere for investment opportunities. So, when the current batch of bonds expire, if the market for new bonds is poor the Government could be trapped with debt they couldn’t sell. They’d either have to print money or turn to the IMF for help.

Of course printing money sounds tremendously attractive. If we could all print our own then we could buy anything we liked. Except, of course, that we couldn’t. The values of goods and services are not fixed – they are affected by the amount of money in the economy. This means that if you increase the money supply you cause prices to rise. If the rises are significant, people will expect to be paid more to compensate. This, in turn, causes a rise in the prices of the goods and services which those people are paid to deliver. In the worst case we enter an inflationary spiral such as seen in Germany in the 1930’s or, more recently, in Zimbabwe. The end result would be a currency with no value on the international markets, making it impossible for us to import goods from the rest of the world.

An IMF bail-out is also a less than easy option. The IMF, quite naturally, doesn’t hand people money to waste. Accepting help is usually a precursor to allowing the international community to poke around in your economy and tell you what you can and can’t spend.

So, too much debt is bad – we can’t let it rise indefinitely. The questions then are how much do we need to cut, how do we cut it and when do we start. How much is simple – we need to cut the deficit entirely. Although our debt will potentially be reduced when we return the nationalised banks to the private sector, it won’t do us much good if we return to the same level of indebtedness a few years later. It’s not sustainable. Labour like to use a cuddly piece of optimism by implying that everything will be fine when we return to growth. Trouble is it’s not true. Even if we could reach the 8-10% annual growth they’re currently seeing in China (an unlikely premise) that would still mean that our debt would be growing by more than our economy year on year. If we continue at the same rate of spending and the same rate of taxation it would take four years of unrealistic 10% growth until the tax take exceeded spending – and that would be four years with no additional spending on anything.

How we cut the debt is contentious. Labour, based on past form, would like to do it by tax rises. We currently pay just under 50% of our income in taxes of one kind or another. Find a stealthy way to take that up to 63% and the deficit just disappears. The debt doesn’t, of course – you’d need more tax for that – and, again, this is with no increases in spending. With people’s effective incomes falling this would prompt them to push for wage rises, triggering the very inflationary spiral we’re trying to prevent.

The Conservative view is that we can deal with the deficit by tackling waste. Just how much waste there is in the economy is a contentious point, but thumbing through the Guardian’s jobs page on the average day suggests a great many people are employed by government to do nothing of any importance at all – often at great expense. Labour, of course, therefore stresses that cutting waste will lead to unemployment, conveniently overlooking the fact that it is cheaper to pay a man unemployment benefit than it is to pay him a salary as head of the potato marketing board. Unless our economy is somehow supported by people buying potatoes they wouldn’t buy without being told to, it suggests there would be no downside to a few such people being returned to the job market.

And this brings us to the current bone of contention – the National Insurance hike. The Conservatives are not, as Labour claims, promising a tax cut, but resisting a tax rise. Labour’s argument is that ‘taking money out of the economy’ now would drive us back into recession, the Conservative’s that a ‘tax on jobs’ would be vastly more harmful. The sum of money in contention is about £6bn – a mere 1% of the total government spend and about 4% of the annual deficit. Whether that cut would be harmful depends largely on what you cut: Labour has, of course, no idea what the Conservatives would cut, but by telling us how many doctors, teachers or firemen it would pay for they hope to place the idea in our minds that it is these that are under threat. In fact, by using a different example every time what they are trying to do is to suggest the Conservatives would cut all of them – a Domesday scenario involving vastly more than the £6bn the Conservatives propose to save.

So, is the Conservative policy dangerous? Probably not. Even if the promised ‘efficiency savings’ resulted in some job cuts, the financial cost of paying benefits would be considerably lower than the salaries. Labour likes to talk about people being left on benefits for life, but creating pointless public sector jobs with high salaries is actually just a more  expensive way of doing the same thing. In fact, it’s worse, since benefits for life end at death, whilst a non-job, once created, may well continue to drain the public purse for generations. The Conservatives for their part are also talking up the risks: a company would have to be operating very tight margins to collapse under the weight of the NI rise and companies have a tendency to suppress wage rises for their existing staff rather than restraining themselves from hiring needed personnel for new posts. That’s why private sector salaries are so depressed at the moment. It’s also why the Government’s policy would not be cost effective: it may actually suppress natural rises in tax.

If that’s not clear, assume a company has 10 staff each earning £20,000. Those staff will each be paying £4275 in direct taxes each year. If the company hires one more member of staff, the Government’s take increases by 10%. If the staff each receive a 10% payrise, however, they pay an additional 14% in taxes. If there isn’t enough money in the pot to do both – something made more likely by increasing the burden on business – most companies will prioritise new blood over payrises. They can, after all, make more profits with more people working for them. It is, therefore, in the Government’s best interest to create an environment in which companies can afford to give their staff reasonable pay increases and more tax isn’t the way to do it.

There is a theory of taxation known as the Laffer curve. The theory says that a government charging 0% tax makes no money. This much is obvious. It also says that a government charging 100% makes no money. If nobody earns anything from their work, they won’t work. This too is obvious. What follows, however, is that there must be a curve which defines how government tax take varies based on the marginal rate of tax. Statisticians have a tendency to drift toward some kind of ‘bell curve’, at its highest in the middle, drifting down at each end. In reality it’s probably slightly skewed – history suggests people don’t work their best if they’re giving half their money to the Government. The real danger in tackling a deficit through taxation is that it lowers people’s productivity. Whilst 10% growth may be an unrealistic dream, a discontented workforce who feel they’re being bilked may not work hard enough to generate even half that.

It’s been a while since I’ve done one of these, largely because I’ve been working on books, plays, etc and pinning down a full-time job. With an election pending, however, I feel an excessive amount of political bile working up inside me and feel it’s time to pour some out to equalize my internal order.

I’m going to try to be as balanced as ever, although I warn you now that this will not be easy. After thirteen years of Labour, it’s hard to find anything positive to say about them and, having been reading political history and theory as light bedtime reading, some of the few positive feelings I did have for them have evaporated too. Does that mean I’m voting Conservative? Possibly – I’m not sure – but I’m certainly not going to act like a newspaper columnist and gloss over every failing in order to create a grand narrative of perfection.

What I thought I’d start with is a look at some of the tricks you may have seen in recent weeks. Smoke and mirrors have always been part of the electoral playbook, but with this apparently tight contest you can expect to see more spinning than ever.

So we start with a trick much favoured by Tony Blair and now adopted as a pattern by his successor. It’s what the Americans would call a bait and switch. The approach works something like this: a government with a vague policy about some area claims they have the ideal solution; they then attempt to get support for this policy from the opposition either through a vote or simply by using an interview to challenge their opponents to match their pledge. The opposition either evades the question or refuses to support the policy. The Government claims that the opposition are against that policy’s intentions.

A case in point would be Labour’s cancer target. On the surface, a fixed waiting time for cancer treatment sounds like an attractive proposition; that a party would oppose it seems to suggest a lack of sympathy for sufferers. However, what we’ve seen with target culture in general is that it has nasty side-effects, either because it causes the de-prioritisation of other problems, or because people find ways to meet the targets without actually tackling the problem. So, for example, specifying a minimum waiting time of two weeks to see your GP didn’t result in everyone seeing their GP in two weeks – it merely meant that GPs refused to schedule appointments any further than two weeks in the future.

Opposing a policy can often mean just that – opposing the policy. The underlying flaw is the assumption that any policy, even if genuinely intended to tackle a problem rather than to score political points, is of necessity either the only policy to achieve that end or, indeed, a viable policy for the purpose. If someone tells you that the opposition doesn’t back measures to do something decent and helpful, ask yourself if the policy being proposed is the right one for that purpose.