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The 2020 Public Services Trust Blog

Friday, August 28, 2009

Sand in the Wheels

By Henry Kippin

“If you want to turn London into a Marxist society, then great…”

At the risk of wading in to an area I know too little about… interesting to read reaction to Adair Turner’s comments this week on the idea of a global tax on financial transactions – known as a Tobin Tax.

This is essentially a tax on currency speculation, and a proposal that some development economists have floated as a means of generating revenue to support economic development in the global south.  In fact, the original purpose seems to have been more focused on dampening market volatility – as Tobin himself put it, throwing “sand in the wheels” of the market.

Obviously the finance industry have opposed this, along with those who argue that such a thing just isn’t feasible (tax avoidance reasons, for one).  But at Avinash Persaud notes in the FT today, times have changed:

“The real question today is not … feasibility; but … desirability. It is hard to argue that anything is not feasible today after governments have engaged in whole-scale bank nationalisation and credit guarantees, pushed budget deficits into double figures, become the buyer of last resort of assets they would not normally touch with a barge pole and threatened to legislate against private sector pay. Where there is a will there is a way.”

So I guess one reason why the idea might fly today is that global regulators are looking much more critically at a ‘swollen’ financial market, and a need to address excessive profit-making in the financial sector.  This is quite a conceptual shift and, as one might imagine, one that is not shared by many bankers (one of whom was responsible for the quote above).

There’s a serious trade off underpinning all of this – between the need to make sure we don’t return to the culture of excess and irresponsibility that brought us through boom, bust and recession; and the need for London to maintain its comparative advantage in an important revenue-generating industry.  Strong vested interests muddy the waters, so Lord Turner will need to navigate a difficult path between morality, social justice, regulatory prescience and macroeconomic stability.  Good luck to him.

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Friday, August 21, 2009

High Pay Commission – Yes or No?

By Henry Kippin

Some interesting debates going on over the Compass campaign for a high pay commission.  I’m going to try and set out some of it here:

Arguments For:

  • Some people earn an absolute fortune – true
  • Some people have repeatedly been rewarded for what most of us would see as failing – true
  • The government acted pretty successfully over low pay, establishing consensus over the minimum wage – true
  • A better and happier society would be a more equal one (or certainly less unequal) – progressives would probably say true

But say the commission is established, and sets a salary cap.  This might not be a good thing because:

  • A high salary cap would be indiscriminately lump together the bankers, with the entrepreneurs, with the footballers, with the pop stars etc etc on the basis of salary – true
  • It would therefore penalise some people who work very hard, and deserve their rewards (salary or bonus) – maybe true
  • It would ignore nuance in the value or spin-off benefits from these high salaried jobs – true
  • It would set an obstacle to high pay, but not an insurmountable one (people would use bonuses, incentives etc to get round that) – definitely true
  • It’s effectively a ceiling on aspiration, and thus damaging economically and morally – maybe true, but how many of us will live to find out?
  • High pay in the highest performing organisations is a function of a well-working market, so the government shouldn’t tinker with it – hmmmmm- not sure what the economic crisis says about this…

An alternative suggestion – put forward this week by David Aaronovitch Hamish McCrae (and there are other ideas) – is to make earnings transparent, along with establishing a more open and ‘straightforward’ tax system.  This sounds good, though certain footballers have demonstrated that public knowledge of salary details does not necessarily translate into more self awareness…

Anyway, I’m undecided about this one, and eager to hear more arguments for both sides. Anyone want to help?

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Posted by Henry Kippin at 3:11 pm
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Wednesday, June 24, 2009

Moral Markets

By Charlotte Alldritt

The new Speaker, John Bercow, presided over his first Prime Minister’s Questions earlier today and seemed determined to keep political mudslinging to a minimum. Bercow is attempting to restore confidence in our parliamentary democracy and remove the elements of “Punch and Judy” politics that often alienate the public from the system. Meanwhile, our economy continues to sit in the doldrums and the OECD has just declared that we are likely to experience a sharper recession than previously forecast.

Restoring public confidence in our economic, financial and political systems will be a tall order, but is the immediate challenge of our time. It is a challenge that Harvard Professor Michael Sandel has approached in the 2009 Reith Lectures.

In his series entitled ‘A New Citizenship’, Sandel argues that we need to rethink the role of markets in achieving the ‘public good’. He asks us “to think through the moral limits of markets,” and “to recognise that there are some things that money can’t buy and other things that money can buy but shouldn’t.” Sandel gives two good examples of the latter.

1. In America some schools are incentivising children to learn by paying them $2 for every book they read or $50 if they get a good score on standardised tests.
2. The Noble Prize winning economist Gary Becker has suggested that citizenship could be bought for a large fee. Becker argues that immigrants willing to pay such a cost would probably have desirable characteristics – youth, skills, ambition and diligence. They are unlikely to have to make use of welfare or unemployment benefits.

Sandel is right to question the role that markets can play in reshaping our norms and values; once we marketise citizenship – do we undermine its intrinsic value? Does paying children to learn de-value education? Does it teach them that life-long learning is valuable and worthwhile in its own right?

If the current economic crisis marks “the end to market triumphalism” as Sandel maintains what does this mean for how public services are conceived and delivered (particularly in light of the UK political and fiscal crisis)? Should the state intervene if and only if the market fails (as neo-liberals suggest)? What are the appropriate structures of accountability? What are the responsibilities of citizens? What other potential sources of welfare are available to us? Finally, how (if at all) can these questions be answered within a coherent, new social settlement?

Sandel begs that politicians be brave and that they engage the public in a genuine discourse about the moral limits of markets. Once something politicians shied away from for fear of offending swing voters, such a discussion is crucial in mapping a route towards radical reform of public services within an ailing economic and political context. Sandel should be pleased to see that conversation is starting to happen.

 

The final lecture in this year’s series is on Tuesday 30th June, 9pm on Radio 4.

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Posted by Charlotte Alldritt at 4:57 pm
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Tuesday, April 21, 2009

Public Service Reform – Geordie Style

By Henry Kippin

Ive just read an intriguing new book from Compass that arrived in our office last week – called Public Service Reform…but not as we know it! (not my exclamation mark…). The publication is a timely reminder of the public sector’s capacity to drive internal reform and cost savings – based on a case study of Newcastle Council’s ICT infrastructure over the last nine years. Apologies for the long blog, but I’m a Geordie…

The study shows how, under the pressure of open competition, council employees recognised existing problems, reorganised and successfully prepared their own bid for maintaining and developing Newcastle’s ICT infrastructure.

According to author Hillary Wainwright, their success shows the folly of assuming that ‘in-house services could never be transformed to match the savings offered by the private sector’. To the contrary, she argues that ‘contrary to New Labour’s criticism of and lack of confidence in local government – public sector managers and staff can drive and lead change, generating innovative ideas and successfully implementing them’.

This is no doubt an argument worth listening to – especially at a time when government must open their ears to all possible strategies for squeezing better value from public spending. And the approach taken by the author: personal portraits, lyrical style – makes it an easy read.

A few positive elements I took away:

1. The case study shows that truly engaging public sector workers in the processes of reform that impact upon them can be productive. Public sector professionals are frequently cast as part of the problem – but they can also facilitate and be part of effective solutions.

2. Choice and competition are not exclusive to (nor do they inevitably require) private sector solutions. If our starting points are providing a better service for citizens and the delivery of ‘best value’, we should be open to whatever solutions are optimal – private or public.

3. Strengthening local accountability is a key driver of effective reform. A recent discussion between Phil Collins and John Cruddas debates this.

4. In a broad sense – a well-managed public sector player in the market can push up quality, through raising the bar for private participants. This can facilitate a well-functioning market; and also exposes public sector providers to valuable information on the wants and needs of service users.

However,

5. The role of agency is key. The bid was pushed along by a strong union (UNISON) presence with a reform-minded leadership, in tandem with engaged and articulate management at the Newcastle Civic Centre. Where this is lacking, the experience will be harder to replicate.

6. The bid emerged from a vigorous anti-privatisation campaign, as well industrial action by IT staff. This provided a strong sense of motivation and – crucially – mobilisation. The question is – would such mobilisation be evident without such a political drive?

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Thursday, March 26, 2009

Accountable Capitalism and Market Citizenship

By Henry Kippin

There’s an interesting report available today from the IPPR’s Tomorrow’s Capitalism series, exploring the idea of ‘accountable capitalism’. Its authors take the financial crisis as their starting point, and argue that simply blaming the bankers is a red herring. The crisis, they contend, is evidence of systemic failure – a ‘collision of self-interests’, not the fault of one set of agents.

This starting point leads into a discussion of what should replace our failed system. The focus, they argue, should be on five pillars: responsibility; accountability; relevant information; independent adjudication; and vigilant participants. The first pillar is already a central element of the Cameron message, which has pushed the idea of ‘fiscal responsibility’, ‘civic responsibility’, and even responsibility for obesity. Accountability is high on the Labour agenda, with the PM trailing the Cabinet Office’s ‘Working Together’ document as ‘ushering a new world of accountability’. The need for relevant information and effective adjudication has also been thrown into light by recent turmoil at the FSA.

So far so essential – but also relatively uncontroversial.

The authors’ discussion of vigilance is, however, a new avenue – interesting as much for what it doesn’t say as what it does. The essay explores trustee accountability and grass-roots shareowner movements as ways of shaking people out of a ‘hardy culture of passivity’, and using Web 2.0 networking capability to ‘pressurise investors into continuous engagement’. The overarching argument is that insiders (or market participants in this case) are often more effective regulators of market processes than outsiders – with the potential to drive up structures of transparency and accountability.

This is not self-regulation, but a nod towards the idea that we are all stakeholders in the financial crisis – and thus we all share a degree of responsibility for how it should work in the future.

The question is how far we take this idea. What would a citizen focused view of the market look like? Would it imply more than simple transfer and exchange? Should we be more than consumers? Should we be demanding a company balance sheet with our take-away cappuccinos? The IPPR are pushing at an open door with regard to re-evaluating the role of values in markets; but the debate will also have wider implications – sharing elements with emerging debates over public service reform. It is a creative avenue worth following.

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