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The Regional Growth Fund omnishambles

May 11, 2012 1 comment

As regular readers will know, TCF has followed the Regional Growth Fund (RGF) story from the start with revelations and analysis posted both here and by Sunny at Liberal Conspiracy. 

From the first announcement in June 2010, the whole RGF thing smacked more of Cameronesque PR than real regeneration substance.  It was through TCF’s and Liberal Conspiracy’s diggings (Labour HQ never acknowledges that kind of thing, but the Guardian did) that Ed Miliband first turned the heat on Cameron’s basic governmental competence, when he used an October 2011 PMQs to ask how many businesses had yet been funded (answer: two at that stage, versus 22 press releases). 

This was the very first conscious use by Miliband of Labour’s now markedly successful ‘omnishambles’ narrative, which has largely replaced its (unsuccessful and incorrect) attempts to portray Cameron as Thatcher Mk II, rather than arrogant posh boy who sees basic governmental competence as beneath him.

The National Audit Office (NAO) today published its review of the first two rounds of the Regional Growth Fund (RGF).  It reeks of the omnishambles odour now hanging heavily from the government, and I hope Miliband will refer to it at the next PMQs.* 

Some of the more striking findings in the report** are follows:

1)  The incoming government abolished Regional Development Agencies (RDAs), deriding them as “ineffective and inefficient”.  The RDAs created jobs at an average cost of £28,000 each.  by contrast, each RGF job is estimated to cost £33,000 each (fig 7, p. 24)***

2) As of March 16th 2012, only a third of all applicants had received a final offer letter.  The report notes that the pace has improved since December 2011, as more staff have been brought to the task. Labour might well want to argue that it has improved only because they brought the dire situation to light in October (with my and Sunny’s help).

3) Similarly, in December 2011, the projected underspend on the £470m earmarked for the 2011-12 financial year was £366m, 77 % of the total.   Unfortunately, the departments supposedly running the fund had failed to agree any financial year rollover provisions with the Treasury, so stood to lose all of that money. 

They had in fact been able to reduce that underspend to £10m by March 2012, partly by piling in staff resources to do due diligence on outstanding bids – better late than never, I suppose – but also by “distributing some of the Fund via endowments managed by some of the programmes supported in the second bidding round” (para 3.15).  

As I set out here in my top 10 RGF tips, and in more detail here this simply adds another layer of decision making about who actually gets the money in the end; it is not actually genuine expenditure of the fund.

4)  “Work on agreeing terms and conditions with applicants progressed slowly. The Fund has no dedicated administration budget. Its small Secretariat struggled to manage the volume of work to conduct the appraisals for the second bidding round while also negotiating final project terms and conditions with companies offered funding in the first bidding round. Delays at this stage have a significant effect on the overall time taken to finalise offers, because due diligence cannot begin until the Secretariat and the bidder have agreed factors such as the precise activities that the Fund will support. The Secretariat was supported by up to 12 full-time-equivalent economists from other departments during the project appraisal phase, but all but one of these staff returned to their home departments, before the due diligence phase started.” (para 3.11)

Enough said.  It is clear that the government wildly underestimated what needed doing, apparently intent on learning absolutely nothing from the RDAs’ experience.  Vince Cable has already agreed to “making more administrative resources available“.  This will, of course, increase the cost per job above the £33,000 currently estimated by NAO.

I look forward to PMQs on Wednesday.

*You can tell how nervous the government is about it already,  from the fact that Vince Cable has been dragged out of hiding to defend it on the morning of its publication.  Note also that it now longer appears to be a joint Pickles/Cable department programme – Cable has been left as the human shield.

** It is beyond the remit of the report to cover the major expense of abolishing RDAs, only to find that creating jobs was cheaper through them.

 *** Oddly, the £33,000 per job figure doesn’t seem to follow from the £1.4bn expenditure divided by 41,000 jobs, which is actually £34,000 per job.  I can’t explain why.

On being right about the riots

March 28, 2012 1 comment

The Riots Communities & Victims Panel has reported on the August 2011 riots:

When people feel they have no reason to stay out of trouble the consequences can be devastating. We must give everyone a stake in society……

The Panel spoke to many individuals from deprived backgrounds who did not riot. They told us that they had a stake in society that they did not want to jeopardise.

Which is pretty well exactly what I said on the very first evening of the riots:

Most people from richer areas, who have jobs or who have a good chance of getting a good job, will not riot in the next day or few because their retaining their job or job chance through not getting a criminal record is greater than any of the other incentives I have listed above.

It’s as simple as that. 

People from poorer, more deprived areas and backgrounds are rioting for different, shifting motivations, but they are doing so because they do not have enough invested in what the state can offer them to outweigh the benefits of that rioting.

Seven months on, there are less opportunities to invest in society than there were.

 

Categories: Terrible Tories

Labour must challenge the personal allowance lie

March 21, 2012 1 comment

“Forget rising tax allowance. VAT hike, real terms cuts to tax credits, Child and Council Tax benefit mean poor getting poorertweets Owen Jones.

Owen is, I think, quite wrong.  The personal allowance is the last thing we should be forgetting.  This is the key to the Tories’ claim that this a fair budget, and it needs to be challenged for what it is.

The Labour leadership, and the Labour PR machine under its instruction, will almost certainly focus its fire on the lowering of the basic tax rate, and on the huge hit on pensioners’ tax allowances.  This is classic squeezed middle territory (remember that we’re talking second, not state, pensions here).

Meanwhile, the Tory party and its press will focus its narrative on the decision to raise the personal allowance to £9,205. 

As George Eaton identified this morning, the personal allowance hike may be bad policy but it’s great politics; the distributional effects may well be skewed to the upper earning centiles, but it’s easy to understand and  voters are already in favour of it.  In general, people are interested less in how the benefit might be distributed than in the idea that they might at least get some.

So while Labour is busy working out complicated ways to show how “average” hard working families and pensioners are hit (e.g. the claim that average families will end up £235 per year worse off), the Tories will be able to get on with their simple, effective message that it’s they who are the real party of the poor. It’s already happening, as this tweet indicates:

The Coalition Govt has now HALVED the income tax bill of a full-time employee on the minimum wage.

So what should Labour (and Owen) do differently?  

The answer is to tackle the personal allowance issue head on, with examples that people can readily understand. 

Here’s one I prepared earlier.

Take a single parent dad with two school age children, working full-time on just £12,000 per year (before deductions) as of April 2013, when the allowance announced today comes in. 

The new personal tax allowance from 2013-14 will be £,9,205.  This means that he’ll have (£12,000 – £9,205) £2,795 to pay tax on and a tax bill of (£2,795×20%) £559.

This compares with a tax bill for 2012-13, during which the personal allowance is £8,105 of  ((£12,000 – £8,105) x20%) £779.

So the tax saved is £779 – £559 – a not massive £220.

This isn’t the whole story, though.   To get a proper sense of how this family will fare, we need to take into account a) the three year freeze on child benefit effective from April 2011; b) the new freeze on working tax credit to which this family would be entitled.

Child benefit remains at £20.30 for the first child and £13.40 for the second (£33.70 total).  If you calculate what the benefit rate would have been if it had been inflation rated from 2011-14 (at, say, 5%, 5% and 3% per year as inflation drops), you find that child benefit that would have been totalled £1,995.5 in 2014 actually totals £1,752.40.  That’s a loss to the family of some £245 per year.

Then there’s the working tax credit freeze.  You can put the information into this handy government calculator, and you find that without inflation  rises in 2012 and 2013, the family ends up a further £29 out of pocket.

So for all Osborne’s fine words, a single parent family wioth two children surviving on £12,000 per year will be £274 per year worse off simply as a result of Osborne’s recent tax and benefit changes, and before any of the other factors like general cost of living increases, and VAT, are taken into account.

This is one angle in which we should be taking on the government when it talks about how it has lifted low earnersout of tax:  it’s smoke and mirrors.

But the other way – to make the personal allowance hike relative to the 50p tax reduction for high earners – may be more effective.

The maths are simple.  Someone who earns £1m per year will now pay £42, 500 less tax.  The personal allowance rise means someone on £12,000 will pay £220 less tax if you leave the previous freezes out of the equation. 

Someone earning a million earns 83 times as much as someone on £12,000, but will save 193 times as much in tax.  A simple measure of how regressive this is simple: 83/193 = the rich are being treated at least (193/83) 2.3 times better than the poor by today’s budget.

Of course, this is the dull maths, and someone in the Labour team will need to make the points a good deal more snappily than I can.  But the point remains that we shouldn’t just be letting the Tories get away with their lie that their personal allowance rise is doing anything at all for those on low incomes.

Why would the Head of Ofsted lie about our children’s literacy?

March 16, 2012 5 comments

Sir Michael Wilshaw, Chief Inspector of Schools and Head of Ofsted, was the object of some ridicule this morning for his failure to grasp a pretty basic mathematical concept (just like his boss Gove had done).  Polly Curtis at the Guardian’s Fact Check covered that well, drawing out how this slip of the tongue reflects how averages have gradually become targets.

There is, though, a much more serious charge to be levelled at Wilshaw.

On BBC radio 5 this morning (from about 2mins 11secs) Wilshaw stated:

It is a national concern and especially when you look at the international league tables which show that we’re down from 7th in the world 10 years ago to 23rd in the world and that countries are doing better than us…

This is out of keeping with the very Moving English Forward report he was on air to talk about. This report says (para 96):

 The government has placed increasing emphasis on international comparisons which appear to show that England has fallen down the league table when it comes to performance in literacy. The White Paper [The Importance of Teaching, 2010] argues: “What really matters is how we’re doing compared with our international competitors. That is what will define our economic growth and our country‟s future. The truth is, at the moment we are standing still while others race past. In the most recent OECD PISA survey in 2006 we fell from… 7th to 17th in literacy.

What that 2010 White Paper actually says (para 4.36) is:

England fell in the PIRLS rankings from 3rd out of 35 in 2001 to 15th out of 40 in 2006. In the most recent PISA survey in 2006, England fell from 4th to 14th in science, 7th to 17th in literacy, and 8th to 24th in mathematics.

So neither the PISA  (for 15 year old reading) or the PIRLS (for 11 year olds) data quoted show that England is in Wilshaw’s purported 23rd place.  

The PIRLS data quoted in the White Paper is in fact correctly quoted there (see table 1.2 of this report), but this is not referred to in his own organisation’s report, even though it is for the age group (11 year olds) about whom he expresses most concern.

So not only has Wilshaw apparently referred to his own report incorrectly both in terms of international comparison, he’s also managed to sign off a report which quotes the wrong age group figures in the first place.

From where, then, does Wilshaw pluck this mysterious 23rd place, different from the one given in his own report?  The answer may lie in an October 2011 Department for Education press release, which I examined at the time.  This press release  states:

England has tumbled down the international tables in the last nine years – from 7th to 25th in reading; 8th to 28th in maths; and 4th to 16th in science.

This 25th is only 2 places away from Wilshaw’s claim, and the two can be reconciled by the fact that in the original DfE coverage failed to notice that England was only behind Denmark and Chinese Taipei in the table because, though all three are on the same score, England starts with a later letter in the alphabet.

But as I noted in my earlier post, that DfE press release contains a catalogue of other, more serious errors; it fails to note that some 12 other countries nominally above England have statistically insignificant higher scores; it fails to note that two countries in the new table are there for the first time and so skew the trend; and it fails to take account of the OECD’s utterly explicit warning (para 2) against comparing earlier PISA results with the 2006 data, because the response rate for the earlier years was so low as to raise big concerns  about sample validity.

So what do we have, in summary? 

We have a Chief Inspector –  head of a supposedly independent organisation – operating in apparent collusion with a government department to give a deliberately false and negative impression of literacy standards and English teaching in England.  Why else would he discard the information provided in his own report, which he’s been asked onto radio to talk about, in favour of other, more negative figures apparently dredged from a dodgy press release?

This is not only potentially scandalous in terms of Wilshaw’s own lack of integrity.  It is also very bad news for teachers and children, because it reveals just how politicised literacy has become. 

In fact the PIRLS data referred to in the 2010 White Paper (but left out of today’s Ofsted report) could be useful, not least because it shows up how much more unequal the distribution in achievement is between the upper and lowe percentiles compared with other countries (see Exhibit 1.1 in this PIRLS report).  This could, if properly used, have provided a clue that the measures needed are around narrowing inequalities at the lower achieving. 

Instead, Wilshaw prefers to ignore this kind of refined analysis and to bluster on in the press about the need to raise targets for everyone, even though there is no evidence that the actual target is the problem, and even though this is a 2010 White Paper announcement rather than something in the new report:

So one of the first questions we need to ask is whether the national end-of-primary-school target of level 4 is sufficiently high to provide an adequate foundation for success at secondary school.

In short, it’s hard to avoid the sense that Sir Michael Wilshaw is anything more than a Gove lapdog, happy to bash teachers and children for narrow political purpose, and to use manifestly incorrect data to do so. 

In the current political environment, therefore, he’ll go far.

Spanish lessons for In the Black Labour and the dangers of triangulatory reification

March 12, 2012 2 comments

10 days ago, Spanish Prime Minister Mariano Rajoy told Angela Merkel and the European Commission where they could stick their Fiscal Pact

He signed the pact, then promptly announced that Spain’s deficit budget target for the year would be 5.8%, not the 4.4% agreed with Brussels.

This took a lot of people by surprise, and accepted wisdom might have expected the markets to signal their displeasure at such blatant reneging on fiscal discipline.  

On Monday 5th March it looks as though the markets might do just that: 10 year Spanish bonds started to rise and soon topped 5% from their 4.95% starting point  On Tuesday they continued to climb, reaching 5.1%.

Then they fell.  Steadily, through the rest of the week, the rates fell back and closed on Friday at 4.99%, just 0.04% above where they’d started.  What had looked on Monday morning like it might be an inexorable move towards the unsustainable 6% level now looked consistent with a few moves from traders trying to get ahead of the game (and subsequent “herding“), followed by a realisation that nothing much had changed, and there were no great gains or losses to be made.

This little episode is, I suggest, provides a big lesson for the British Labour party.

Since the Autumn, Labour has been busy developing its new economic policy narrative.  This is encapsulated by the sages from the influential In the Black Labour team, who preach the overriding importance of “credibility“:

Taxpayers, voters and lenders to the British state feel they have a right to know what the main opposition party would do about high levels of borrowings and when they would do it by. Satisfying this demand is fundamental to being regarded as a credible alternative government.

At the heart of this new “fiscally conservative” narrative, though, lies a key false assumption.  This assumption is that “the markets” will always demand fiscally conservative policies, and will use their muscle to enforce these, through increased borrowing rates, if governments do not toe the line.

But 2012 is not 2010.  Those who work the bond markets for themselves or (mostly) for their financial institutions read the same economic news and analysis as the rest of us, and they recognise two things.   First, they know – much better than they did in 2010 – that forced austerity does not lead to economic recovery.  Second, they know that they stand to lose a great deal more if a country spirals towards default through enforced austerity than if it is allowed to pick a more sensible course of longer term deficit reduction.

Labour, however, is behind this curve.  It has taken a year since Miliband’s election for the hierarchy to work out that “credibility” can only be regained by talking tough on austerity, but in the time they have been reifiying* the markets in this way, they have moved on. 

This has negative consequences. 

Take last week’s PMQs.  Just as the markets were deciding that Spain had credible economic policies after all,  Cameron reached for the standard excuse for his welfare cuts: the government has a deficit to sort out and has to make difficult choices.   This time, he quoted Labour back in its face:

I think that it is time the right hon. Gentleman listened to his own shadow Chief Secretary, who said that “we must ensure we pass the test of fiscal credibility. If we don’t get this right, it doesn’t matter what we say about anything else.”

Cameron knows he’s on to a winner here.  As Labour Uncut points out, voters now appear to be more with the Tories on the need to cut spending than they were a few months ago:

Last Sunday brought a pivotal result in the polling. One of the intermittent questions asked by YouGov is whether voters prioritise action on the deficit or growth.

In last Sunday’s results, 38% agreed with the proposition that the government should stick to its current strategy of reducing the deficit, even if growth remains slow while 34% agreed with the statement that the government should change its strategy to concentrate on growth even if this means the deficit stays longer or gets worse.

For the first time, voters’ had prioritised tackling the deficit, and by a clear margin of 4%. In comparison when the question was last asked in late November, the numbers choosing growth had led by 1%.

Labour Uncut, being Labour Uncut, draws entirely the wrong conclusion from this polling, arguing that Labour should therefore focus on talking about where it will make cuts, not on where it will stimulate growth. 

In fact, the opposite should apply. Labour is currently caught in a trap of its own triangulation (or maybe that’s triangulatory reification).  The more it kowtows to fiscal conservatism, the more the voters appear to distrust it; after all, if you want fiscal conservatism, at the beck and call of the markets, as an overriding priority, and irrespective of the social costs, the Conservative party is bound to be a better bet.

While Labour triangulates the votes out of itself, Spanish rightwinger Rajoy has just provided pretty good evidence that the markets are, if the political will is strong enough, not the implacable force for austerity they’ve been taken for.  Meanwhile, across the Pyrenees, a central aspect of Francois Hollande’s campaign is the denouncing of high finance, and a commitment to growth over austerity**.  At the moment, lest you hadn’t noticed, Hollande is on course to win.

Labour, rather than working within the confines of the supposed economic realities set out by In the Black Labour, should be committing itself to change those realities.  Then, as in France (and even in Spain), the electorate might at least sit up and take note.

* By reification I simply mean ascribing to “the markets” an independent “in themselves”-ness, tending to automaticity of action, rather than seeing them as a set of actors open to economic and social influences (while recognising that some trading is carried out via computer algorithm to the point that, in some cases, “the markets” might actually be acting automatically).

 ** This is not to say that Hollande’s campaign is without its commitments to spending restraint, but the broad narrative set out in his 60 engagements and subsequent speeches is about contesting the Merkozy orthodoxies, principally through a commitment to a renegotiation of the Fiscal Pact, where – strangely – he may now find he has support from Spain.

Revealed: How the DWP lied about Clegg’s Youth Contract

February 29, 2012 1 comment

On Nov 25th 2011, the Department for Work and Pensions issued a press release about the new Youth Contract, announced with great fanfare by Nick Clegg.  The press release included this statement:

An extra 250,000 Work Experience places over the next three years, taking the total to at least 100,000 a year. This will come with an offer of a Work Experience place for every 18 to 24 year-old who wants one, before they enter the Work Programme.

Further to my complaint to the BBC about its handling of this press release, I submitted a FOI request to DWP seeking details on how the supposed £1bn Youth Contract was made up.  The request was made well before the latest revelations about “workfare”.

Yesterday I received my reply.  This stated:

The Get Britain Working measures includes Work Experience, sector-based work academies and Mandatory Work Activity.

Nowhere in the November press release was Mandatory Work Activity mentioned.  This suggests DWP were keen to keep its part in the Youth Contract secret.

More importantly, this means that the DWP’s claim that the scheme is “for every 18 to 24 year-old who wants one” must be a direct lie, since clients are forced into Mandatory Work Activity on the claim that they do not want to engage.

The text of the FOI reply is copied below:

Dear Mr Cotterill,

Thank you for your Freedom of Information request of 22 January 2012. You asked:

Please provide a full breakdown of the costs of the Youth Contract set out in your press release of 25th November 2011, and available online at http://www.dwp.gov.uk/newsroom/press-releases/2011/nov-2011/dwp132-11.shtml

The statement indicates in the first paragraph that the total value of the Youth contract is £1bn, and four of the five items set out in the press release have costs set against them. The final item (work experience) has no cost set against it. Please therefore provide a copy of any summary paper put together within the Department for Work and Pensions which give details on how the total value of £1bn is reached.

The Youth Contract is a package of measures covering several Government Departments worth almost £1bn and was announced on 25th November 2011 http://www.dpm.cabinetoffice.gov.uk/news/1-billion-package-tackle-youth-unemployment. The table below sets out the anticipated expenditure for each element of the Youth Contract. It covers the overall cost of the Youth Contract (£939m) of which the DWP element is £660m, with the remainder going to other Government Departments and the Devolved Administrations.

                                                                                                            Cost (£m)

Net cost of wage incentive and Work Programme         £391

JCP Support                                                                                   £169

Expansion of Get Britain Working measures                     £93

Operations                                                                                        £7

Sub-total for Employment support DWP              £660

Northern Ireland consequentials @ 2.9%                          £19

Sub total for employment measures                      £679

Outreach & Skills

ENGLAND                                                                                        £218

DEVOLVEDS                                                                                    £42

Sub total for outreach and skills                                  £260

 Total Cost                                                                                    £939

Notes:

• Jobcentre Plus (JCP) support includes the cost of weekly face-to-face contact from five months and extra advisor support.

• The Get Britain Working measures line includes Work Experience, sector-based work academies and Mandatory Work Activity.

• Outreach and skills includes funding for Apprenticeships and support for 16 and 17 year olds.

• Departmental Expenditure Limit (DEL) refers to planned Departmental expenditure. More information on public spending planning can be found at: http://www.hm-treasury.gov.uk/psr_spend_plancontrol.htm

If you have any queries about this letter please contact me quoting the reference number above.

Yours sincerely,

xxxxxx (redacted)

Labour Market Interventions Division

Categories: Terrible Tories

Empiricising Osborne’s debt interest rate nonsense

February 12, 2012 1 comment

Duncan Weldon has a piece up at Touchstone debunking the ongoing Tory pretence that the UK has low debt interest payment rates because of its economic policies. He quotes Bloomberg:

Chancellor of the Exchequer George Osborne’s pledge  to eliminate the budget deficit isn’t the main reason U.K. government-bond  yields are at record lows, say most analysts in a Bloomberg survey.

The Bank of England’s quantitative-easing program,  which has so far purchased a quarter of outstanding gilts, was identified as  the single biggest cause by a third of 27 economists polled. Just over a  quarter said investors fleeing other European bonds were driving U.K. rates  lower, while 22 percent said Osborne’s plan was the main reason.

The ‘safe haven’ cause is the one backed in Casenove Capital Management’s latest (to Dec 2011) analysis of its own performance, sent out to the owners of the funds it manages:

Heightened anxiety caused government bond yields to fall substantially during 2011.  The UK, the US and Germany continued to be viewed as safe havens, with 10-year yields falling to 1.96%, 1.81% and 1.83% respectively. The difference between equity and bond yields is a clear reflection of investors’ risk aversion. 

That was the picture as of December (the 1.96% low on UK bonds was reached on 29th December).  So it’s interesting to see what Matthew Vincent has to say in the FT about the latest position:

Investment managers are moving more money into shares, in response to improving market sentiment towards Europe and the US. But opinions still differ over where, and how long, to maintain these equity holdings.

In the past week, several UK firms have announced new, or “overweight” positions in equity markets, having shifted funds out of bonds, cash and other lower-risk asset classes.

Vincent goes on to say that the switch to equities may be short-lived, especially with the ever-present possibility of chaos as a result of “events in Greece.” 

If we do see a sustained movement to equities over the next month or two, however, a concomitant rise in the UK bond yield would provide pretty good empirical evidence that Osborne has indeed been talking total bollox about the reason why they are currently so low.  (The yield on 10 year UK Bonds had already increased by 0.25% since the start of February to 2.23% at close on Friday.)

If yields do rise, it will be important for those critical of Osbornomics not to try to have their cake and eat it too, by blaming any rise in borrowing costs on UK economic policy, at least in the short term.  While Osborne is clearly lying about why rates are currently low as a justification for his continued austerity madness, proper economists should stick with the pretty obvious conclusion that – the effects of QE aside – what rate the UK bond rate continues to depend how much of a mess the rest of the world the big investors think the world is in.

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