16 May 2013 16:13:20

Andy Mayer: A longer working life means a healthier life – policymakers should take note

By Andy Mayer of the Age Endeavour Fellowship

There is compelling evidence in a new report, Work Longer, Live Healthier: The relationship between economic activity, health and government policy, from the Institute of Economic Affairs and Age Endeavour Fellowship, that Sir Alex Ferguson may have more than one reason to regret his decision to stand down from Manchester United at a youthful 71 years of age.

Although he will feel good for a few months, in the long-term the impact on his health from not spending each Saturday shouting referees into favourable decisions will be negative. The same will be true for most of us – particularly if we choose early retirement.

For example, the research finds that the employment rate for men aged between 55-59 fell from over 90% to under 70% between 1968 and the late 1990s. From 80% to 50% for those between 60-64, and 30% to 15% for those between 65-69. This whilst both life expectancy and healthy life expectancy were rising.

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10 May 2013 09:00:12

Nick Faith crunches the numbers to explore the UKIP effect in marginal seats

Nick Faith is Director of Communications at Policy Exchange. Follow Nick on Twitter.

Everyone in Westminster is talking about UKIP. The purple surge that we saw in last week’s county council elections has got political anoraks talking. The Prime Minister needs to secure his core supporters with more of a focus on immigration, crime and the EU, say some. Others urge Cameron not to ape Farage as he won’t be able to out-Kip a Kipper. They’ll just come back to the table asking for more.

I personally don’t think there is a one-size-fits-all strategy for dealing with the Ukip problem. And here’s why.

General Elections in the UK are won and lost in only a handful of seats. This week, I asked my brother-in-law, a data-set wizard, to pull together some figures showing the core marginal seats that will be up for grabs in 2015. There are 108 of these marginal constituencies where the majority is less than 6%. Ukip will have a major say in at least 53 of these based on its share of the vote in 2010 (i.e. the party’s vote share is larger than the majority in that marginal).

Retention Plays

The Conservative party is incumbent in 24 of these seats, all but five of which are Tory-Labour battlegrounds. There is no doubt that MPs such as Jackie Doyle-Price in Thurrock, Eric Ollerenshaw in Lancaster and Fleetwood and David Mowat in Warrington South have a fight on their hands come 2015. They are under threat from UKIP eating into their very small majorities. However, they have to be conscious of another, arguably more dangerous problem – Labour eating into the Lib Dem vote as disillusioned progressives decide to back Miliband. Lord Ashcroft’s polling earlier in the year found that two fifths of Lib Dem voters from 2010 have switched to Labour or the Greens. And of all defectors from the Libs, those switching to Labour are the most likely to say they are sure how they will vote.

If, as a result of making overtures to Ukip, the Lib Dem vote breaks disproportionately for Labour, then holding onto seats in the North West and Midlands will be especially difficult for the Conservative incumbents.

However, a different approach might be required in other regions of the country. In the four Lib Dem battlegrounds down in the South West, for example, the local Conservative associations probably need to hold the vote and entice transient Kippers back into the Tory fold. Perhaps a more robust right-wing strategy is called for in the South West?

Fighting the Labour machine

As with the retention seats, the critical issue in the 15 constituencies that the Conservatives have to take from Labour to stand a chance of winning an overall majority at the next election, is how the Lib Dem vote will break for the Conservatives and Labour.

Tacking right probably won’t satisfy the 8.5% of voters who voted Ukip in Dudley North. And it will have the added effect of possibly pushing Lib Dem voters into the arms of Ed Miliband and Labour. However, any defections to Ukip will kill the chances of Tory gains in the Midlands and North West. This is an unenviable Catch-22 for the party machine.

Conclusion

There is no one-size-fits-all strategy for dealing with the Ukip problem. Party strategists have to ask themselves what is the biggest risk: Conservatives defecting to Ukip, or former Lib Dems breaking disproportionately for Labour?

For what it’s worth my advice to David Cameron would be to forget about the various electoral connotations and focus on leading the country. Elections are increasingly decided on competency as Policy Exchange’s report, Northern Lights, found last year. As every good business leader understands, you need to be aware of what the competition is up to and be prepared to second guess their next steps. But a good leader also sticks to what they think is the right course of action, even if others – including friends – disagree.  

6 May 2013 07:35:12

Keith Boyfield: Why we need to simplify the planning system

Keith Boyfield is a Research Fellow at the Centre for Policy Studies

Britain’s planning laws have proved a gold mine for lawyers and the new sub-species of lobbyists known as planning consultants in recent decades.  Indeed, the Planning Bar has proved to be one of the fastest expanding branches of the UK legal system.  Long-running planning inquiries into airport development or infrastructure schemes, such as power stations or rail links, have helped fund the legal profession’s move into the country house market. In turn, they have benefitted from the soaring total returns to be derived from acquiring ‘amenity’ farms in the Home Counties and Cotwolds.

But for the UK economy as a whole, the labyrinthine complexity of the planning approval system has seriously damaged our economic growth and future ability to attract direct foreign inward investment. No nuclear power station is likely to be completed before 2020, nor for that matter any significant airport runway.

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20 Mar 2013 14:45:10

Centre right think tanks don't like Budget's complexity

By Tim Montgomerie
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Matt Sinclair of the TaxPayers' Alliance liked the populist measures - #Crosbynomics according to Matthew d'Ancona - but worried about the Budget's complexity:

"Unfortunately, the great limitation of this budget was that it relied far too much on complicated targeted reliefs instead of tax cuts across the board. Simpler, strategic tax reforms that reduce the overall burden would be fairer and do more to produce the stronger economy Britain needs."

David Skelton of Policy Exchange also welcomed what he called the "Boddingtons Budget," citing the end of the beer duty escalator and another freeze in petrol duty. He worried, however, that more could have been done on housebuilding:

“Although measures to help first time buyers are welcome, the UK is still on track to preside over the lowest level of housebuilding since the 1920s. More radical planning reforms combined with the introduction of measures such as self-build should be introduced to get Britain building.”

Professor Philip Booth of the IEA is concerned that the Chancellor's housing measures have actually learnt little from recent economic history:

"The decision to provide further Treasury guarantees for mortgages is leading the government to get involved in exactly the sort of reckless behaviour that led to the failure of major banks in 2007-2008. Any attempts to provide support for the housing market whilst not liberalising the planning system will simply lead to higher house prices and rents.”

3.45pm updates....

On behalf of the CPS, Ewen Stewart commented:

“The most significant announcement today was the proposed changes to the Bank of England’s inflation targeting remit. Whilst lip service was paid to maintaining the 2% inflation target, it’s clear Mark Carney will be given significant rope to engage in even more expansionary monetary policy. So far QE, despite being larger as a proportion of GDP than that undertaken in the US, has failed to generate growth. A further loosening risks embedding inflation and sterling weakness.”

Also from CPS Kathy Gyngell echoed my concerns from earlier today about the anti-family dimension to the Budget:

“This budget is worse than nothing for the stay at home mother (the single earner couple family). Already grossly penalised in the tax and benefits system for the instinctive and reasonable choice to care for their infants at home, now this couple are meant to subsidise rich working women’s nannies.”

The Adam Smith Institute lists its good, back and ugly conclusions here.

9 Jan 2013 06:36:08

Dalia Ben-Galim: The Coalition’s mid-term review was surprisingly silent on childcare

Dalia Ben-Galim is IPPR’s Associate Director for Family, Community and Work. She  joined IPPR after teaching social policy at Oxford University and carrying out research at the LSE. 

Despite the speculation, the government’s mid-term review was surprisingly silent on childcare. Rumours suggest that there is a Yellow-Blue battle raging in government about the new childcare support package with details yet to be agreed. Conservatives tend to favour tax relief and the talk is of new childcare tax allowances of up to £2000. But tax relief tends to be regressive, with the winners likely to be middle class families with two or more children with high childcare costs. With many poorer working families hurting from welfare changes, Nick Clegg is apparently trying to skew any new support towards those on low and middle incomes. Next week we will know if he has been successful.

Liz Truss, the Childcare Minister, sidesteps that part of the debate in her ConservativeHome blog from yesterday on childcare reform. Truss’ claims are consistent and well known; public funding for childcare is complex; child-to-adult ratios in England are stifling for childminders; and regulation is burdensome. But her initial emphasis on recent Dutch reforms seems to be wavering – perhaps influenced by IPPR’s report  pointing out their flaws – and has shifted towards the French system. This is to be welcomed as there is much to learn from French provision, but again it’s important to understand the limits of comparing childcare systems, given the different contexts.

The French have a long history of pro-natalist family policy with relatively generous paid parental leave and home care subsidies. This means that nearly two thirds of children aged under three are cared for by their parents. Licensed family childcare assistants only look after some 18 per cent of under-threes at home, and they typically care for one to three children at a time, although they can now look after four children by law. Only in crèches, which cater for 8 per cent of under-twos, is a higher 5:1 ratio permitted. In addition, 35 per cent of two-year-olds – usually children from low-income families – are in nursery schools (écoles maternelles), a figure which rises to 90 per cent for three-year-olds, where ratios are much higher. So the comparison with France does shed light on a different system from which the UK can learn, but it is misleading to infer from it that looser ratios for childminders have much if any impact on childcare costs, since the proportion of under 5s for whom they cater is small.

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5 Jan 2013 12:26:09

The Centre for Social Justice warns that the Government’s child benefit plans are “another blow to marriage”

By Peter Hoskin
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With the Government’s “High Income Child Benefit charge” coming into effect on Monday, the past week has witnessed a flurry of criticism of the policy. My former colleague Jonathan Jones wrote a useful summary of those criticisms yesterday, which ticked off things like high marginal tax rates and the extra complexity that is being wired into the benefits system.

But there’s another criticism, and one that the Centre for Social Justice is highlighting today: the effect that the Child Benefit changes could have on marriage. Christian Guy, the managing director of the CSJ, puts it thus:

“The new rules will mean that married couples where one earns over £50,000 pa will be unable to avoid losing some or all of their child benefit. Meanwhile similar couples who are cohabiting will face unenviable choices: a severe financial penalty if they marry or breaking the law if they deny their relationship status.

This creates a potential ‘marriage penalty’, despite evidence showing how crucial marriage is to stable families and children. Research illustrates that break-up rates are three times higher for couples who cohabit compared with those who marry.”

It all comes down to keeping secrets from the taxman. As Christian Guy suggests, unmarried couples (where one partner earns over £50,000, etc., etc.) have one obvious way to avoid being stung by the Child Benefit policy: they don’t admit to being a couple. And if they don’t want to admit to being a couple, then they may not want to get married. Money could, at least theoretically, trump wedding bells.

In truth, it’s hard to know how many of the estimated 1.2 million families affected by the Child Benefit policy will choose that route. Perhaps it will only be a handful, or even none. But that will do little to salve the concerns of those Tories who already feel the Government isn’t doing enough to promote marriage in the tax system. No doubt, there will now be even more pressure on George Osborne to produce a tonic for them in the next Budget.

> READ: Paul's post from yesterday, on why George Osborne should say that the child benefit restriction is temporary

2 Jan 2013 07:04:35

Cut aid says new Civitas paper and put money into defence and BBC World Service budgets

By Tim Montgomerie
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A new paper published by the Civitas think tank recommends a sharp change of direction in UK aid policy.

The paper written by Jonathan Foreman - a freelance journalist - makes the following five key recommendations:

1. One-third of Britain's aid budget should be diverted over the next few years from development spending and go to expand Britain's defence capabilities and also the reach of the BBC's World Service.
   • By choosing not to hit the 0.7% target Mr Foreman argues £3bn could be added to the MoD's budget and be used to develop dual use road, air and sea equipment that could both serve military and emergency humanitarian purposes.
   • Foreman also says that part of the money should be used to fund all of the BBC World Service's foreign language services (at a cost of about £250m). The House of Commons' Foreign Affairs Select Committee has made similar recommendations in the past.
2. A Royal Commission on aid that would examine the purpose and effectiveness of Britain's development budget.
3. Reverse Tony Blair's 1997 decision to establish the Department for International Development and re-integrate DfID into the Foreign Office.
4. Recruitment of forensic investigators from the Serious Fraud Office to investigate abuses of British aid by foreign governments.
5. Cut Britain's contributions to wasteful multilateral organisations such as the EU where aid monies do not go to the world's poorest people but often to nations of political importance to France and Germany.

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5 Dec 2012 16:48:59

Where's the radicalism George? Think tanks worry at Osborne's "tinkering".

A few think tank reactions to the Autumn Statement...

Mark Littlewood, Director General at the Institute of Economic Affairs, focused on the big picture and the fact that Britain is becoming a high debt nation: "The Chancellor has basically stuck to his spending plans, but not to his deficit plans. Low growth and weak tax revenues demanded that he made greater reductions in spending today. His plan is now to add around £6,000 to the national debt for every man, woman and child in the UK between 2013 and 2018. By the end of this Parliament this will mean the UK’s national debt is close to £65,000 per household. It’s clear the government is still failing to take the necessary action to restore economic credibility. It’s all very well acknowledging the need to get public spending under control, but it requires substantial reform. Limiting benefit rises to 1%, scrapping the planned fuel duty increase, devolving power over teacher pay to schools and cutting corporation tax are steps in the right direction. But they are tiny, tinkering measures – not radical reforms."

Sam Bowman of the Adam Smith Institute was even more depressed at the Chancellor's lack of boldness on spending and public service reform: "Deeper cuts to public spending are clearly needed to cut the deficit, but these are not possible without a fundamental shift away from socialistic monoliths like the NHS. The only way real cuts to expenditure can be made is by shifting to more efficient, market-based models of social insurance for healthcare and welfare. The claim that we can make substantial savings by ‘trimming waste’ is a lie – and we’re fast learning what a dangerous one it has been.”

Graeme Leach, speaking for the Institute of Directors, was more positive: "Graeme Leach, Chief Economist at the Institute of Directors, said: “This was a tricky job, well done by George Osborne. Faced with a weaker outlook for GDP growth, the Chancellor needed to raise business confidence whilst at the same time keeping the deficit on a downward path. And he largely succeeded, particularly with the surprise reduction in Corporation Tax. Ideally, we would have wished for further and faster deficit reduction but political reality always made this unlikely. Our key concern is that the OBR’s growth forecasts will yet again prove too optimistic, with the result that the deficit in the out years will be much higher than forecast. Business confidence will be boosted by the corporation tax cut.”

While welcoming many of the Chancellor's measures Jonathan Isaby of the TaxPayers' Alliance expressed concern at the increasing number of people paying the 40p tax band: "The Chancellor has sent out entirely the wrong message to those earning, or hoping to earn, the increasingly modest wage where almost half of your income starts to be taken in Income Tax and National Insurance.  Hundreds of thousands of new people are being ensnared by a punitive rate of tax."

Christian Guy of the Centre for Social Justice regretted that - yet again - the Chancellor had failed to introduce a tax allowance for married couples: “The Government said it would introduce a transferable tax allowance for married couples, it is disappointing that this pledge has still to be fulfilled as it is shown that it would have a positive impact on the incomes of the poorest working households. It would also play a part in tackling the perverse incentives which currently persuade many people on low incomes  to reject  couple formation and the stability of marriage.”

3 Dec 2012 13:37:04

Autumn statement run-up: Reform looks at fiscal rules. The CPS recommends wage and aid freezes - and no carbon price floor

By Paul Goodman
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The think tanks are starting to set out their stalls in the run-up to Wednesday's autumn.  Today, we have a paper from James Zuccollo of Reform on Long-Term Fiscal Sustainability. He says that -

• Fiscal rules must not allow for creative accounting that keeps some government expenses out of scope, as was the case with investment under the golden rule.  "Essentially, the restriction of the golden rule to the operating balance did not ensure counter-cyclical fiscal policy, nor did it ensure a safe overhead before the debt limit was hit. In addition, the rules granted explicit leeway for the Government to depart from the rules, so long as it gave reasons and provided a schedule for return."

• Secondly, arbitrary debt targets, such as the sustainable investment rule, provide a false sense of security and should be avoided. Optimal macroeconomic policy will often involve using debt as a short-term buffer to accommodate unexpected shocks.  A more flexible rule allows that to occur while still maintaining credibility. The difficulty, then, is in designing a rule flexible enough to be credible, strict enough to be binding, and simple enough to be easily monitored.

• Finally, there are lessons from abroad.  Zuccollo cites Switzerland's " 'Debt Brake', requiring a yearly balanced structural budget, ensures that spending growth never eclipses cyclically adjusted tax revenues; Chile and Russia, where "natural resource exports are an important part of economy, so mechanisms are needed to manage large and on-going revenue fluctuations from change in the terms of trade", and New Zealand, which target "a particular operating balance and back[s] this approach with a debt limit."

There is also a recent briefing from Ryan Bourne and Tim Knox of the Centre for Policy Studies.  Three of their main recommendations are:

• Implement cash freezes to several spending streams. "The Chancellor could freeze all benefits which would usually be increased by the September CPI inflation rate for one year, except for the state pension. He could freeze spending on aid, and abandon the 0.7% of GDP target which has no economic rationale." Finally, the Chancellor should set a clear framework and guidelines for how pay freezes should work in the public sector."

• Avoid introducing new punitive wealth taxes or council tax bands. "There is scope, however, to embark on a revenue neutral tax reform programme according to the principles of broadening bases and lowering marginal rates, starting with the full merging of income tax and employees’ National Insurance into a single income tax rate (with employers’ National Insurance replaced with a simple payroll tax)."

• Abandon the unilateral carbon price floor planned for 2013 and "go further in deregulating small businesses and employment law, roll out a framework for ‘sunset clauses’ for new regulations, put forward a new Consolidated Act which rationalises all the 100+ Statutes that impact on planning and development and, in line with Nick Clegg’s recent speech, lay out a framework for new Garden City developments.

8 Nov 2012 07:08:47

Georgianna Vaughan: Iran and the bomb. It's not on the nuclear threshold and sanctions are working.

Georgianna Vaughan is a Policy and Research Officer for the Conservative Middle East Council.

In the last decade, Iran has grown increasingly closer to nuclear weapons capability. It currently has around 10,000 centrifuges spinning, has produced 7,000kg of uranium enriched to 3.5% and nearly 190kg of uranium enriched to a much more dangerous 20%. The Iranian regime is currently in a state of flux with elections due in the summer of 2013, and the political elite riven with divisions. Nevertheless, there are pressing questions to be answered:

1. Does Iran really want nuclear weapons?
2. How long would it take Iran to acquire nuclear weapons?
3. Would we know if Iran was actively building nuclear weapons?
4. How dangerous is a nuclear Iran to Britain and its allies?
5. Would a nuclear Iran set in motion further nuclear proliferation?
6. Are sanctions working?
7. Is military action a solution?

In a recent publication for the Conservative Middle East Council, Shashank Joshi, the academic and RUSI Research fellow tackles these questions, and the points below are drawn directly from his report:

1. Does Iran really want nuclear weapons?

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