Mixing up ‘Loopholes’ with ‘Incentives’

Here’s the reason for this recent tax shit-storm: the morons have mixed up ‘tax loopholes’ with ‘tax incentives’.

It kicked-off with an innocuous story  “Millionare Tax Avoiders ‘Shock’ Chancellor”.     The Treasury team intended to show they’re tuned into the zeitgeist of public concern over ‘tax avoidance/evasion’ and sought the front-foot.  Instead, within a week their imbecilic approach pushed them firmly on the back-foot with everyone.   How did they manage such an ‘epic fail’?

Whilst ‘tax avoidance’ is legal, there is no escaping that in common speak the words are always used pejoratively.  So if the chancellor is saying he’s going to crack down on it, you imagine he’s going to be going gunning for those offshore ploys, those spurious salaries for director’s spouses, the deferred payment of bonuses in copper futures or whatever; basically all that ‘creative accounting’ malarkey.

Instead they deliberately allowed the ‘tax avoidance’ label to be linked to everything that properly reduces a bill.  I quote:  “HMRC found the main methods used by people to reduce their bills was writing off business losses, offsetting the cost of business mortgages and borrowing on buy-to-let properties – all against their income tax bills.  Others took advantage of tax relief on charitable donations”.   My lord.  If they’re shooting at that I’m surprised they didn’t lump in ‘paying into ISA’s or ‘making pension contributions’ with equal disdain.

It was Parliament’s intent that folk can offset their business losses against their income before calculating tax owed.  That encourages folk to invest in new business which may take time to grow, or may even fail.  It encourages folk to stick with loss-making businesses a little longer rather than wind them up and make people redundant.  It isn’t a dirty loophole.  It is an incentive to help the economy.

It was Parliament’s intent to allow the cost of securing finance (business mortgage interest) to be treated as a pre-profit expense.  That encourages people to get business finance, to get business going, to help the economy.  It isn’t a dirty loophole.  It is an incentive to help the economy.

It was Parliament’s intent that folk give to charity tax-free to encourage folk to give to charity.  It isn’t a dirty loophole.  It is an incentive to support charity.

The sniping at that last one has generated the most news-print.  Philanthropists are right to be outraged, the way the reportage has been framed I’m pretty sure that most UK tabloid readers now believe that their generous giving has been at no actual net cost to them, and they are all ‘tax dodgers’.

It hasn’t hit the news in the same way, yet, but I imagine the networks of ‘business angels’ who risk huge losses by supplying capital to start-ups, at a time when banks will not, are also feeling equally bruised.   Is George also going to cap or limit the amount of losses you can offset?   Applying the same logic as to the Charity issue that can’t be far away.

I say ‘logic’ but of course there is very little of that.   I really do want to believe that the government intended to target the ‘abuse of’ all of these tax incentives rather than the incentives themselves, but what a cack-handed way of doing it, and what a miss in the presentation if that was the real target.

If there is an issue with folk setting up bogus charities overseas and funnelling money to them then the way to deal with that is to treat it as what it is – criminal fraud.  The policy on the table is basically saying  “we’re going to let it carry on, but don’t worry we’ve allowed people to only use a quarter of their income for this fraud rather than all of it in future”.  That doesn’t sound great does it?  However it is dressed up they’re also limiting the legitimate donations and making sure that stench of ‘tax dodgers’ for legitimate donors remains.

There are cases to be made for scrapping tax relief for charity donations.  A socialist may think that it is the job of the state to do the stuff charities do, so folk should just pay more tax with no relief and let the state do what needs doing.   A Conservative may make the case that the state has no business whatever with this attempt to socially engineer through the tax system with all the unnecessary (and costly) complexity added to the self-assessment system.  You may disagree with either of these on the basis of philosophy but at least they are intellectually coherent.  The government’s current thinking is not.

One feature of this Government, usually described as a weakness but actually a strength, has been that when a U-turn has been necessary it has come very quickly.  Nudge politics is central to Cameron’s view of the proper relationship between the state and the individual, the role of charity is another.   A proposed policy that acts as counter to both is nuts.  He needs to speak to George about that U-turn.  And fast.

Interns: The Whole System is Wrong

One of the more worrying American imports in recent years is the so-called ‘internship’. Nick Clegg launched an attack on them yesterday, and has opened himself up to ‘hypocrite’ charges as a result.

For anyone with no idea what a internship is – basically employers offer a program that gives students, new graduates or ‘gap-year kids’ the opportunity to get ‘work-experience’ for the company, unpaid, often for a University summer, sometimes for much longer. The argument goes that that the company is doing the kid a favour – these aren’t real jobs, really just admin – but it gives the interns a ‘foot-in-the-door’, a ‘network of contacts in the industry’, the chance to check it is really the right industry for them and most importantly the magic ‘experience’ to add to their CV. This helps escape the job-seeker’s paradox that you can’t get a job without experience and you can’t get experience without a job. The employers are often so impressed with interns that at the end job offers may be made. When presented like that it sounds like the company is doing a great social good. ‘Helping job-seekers!’. Very worthy. The reality isn’t quite so straightforward nor is it the win-win for all it first appeared.

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I am a huge advocate of the importance of both meritocracy and competition (see my philosophy page). Meritocracy is key to social mobility, which in turn is key to attaining social justice. As we drift to internships becoming a ‘cultural norm’ in the UK we’re creating a blocker to meritocracy. In the long run this will harm our economy and society.

When you listen to the work that interns really do they are typically not ‘work-experience’ in the sense of shadowing someone doing their day-job or having a go while the incumbent looks on. No, more normally they have interns doing ‘real jobs’. They’re expected to arrive and work set hours, and often kicked out of the program if they do not. They have set administrative duties to perform which keep the business going. To me this crosses the line from ‘work experience’ to outright exploitation. If the interns weren’t doing this work then somebody in paid employment would be. That person would then be off the unemployment register and paying tax and NI and pumping those earnings back into the economy. Instead we have them still on the dole whilst the student extends their debt and works for free with no guarantee of any reward at the end. I can only spot one real winner in the arrangement.

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We need to consider who has the means to take internships: Who can offer three months of their lives working without pay, living in a big city? Only people with alternative financial support. Straight away that excludes a whole chunk of society. The kids from the estates to who we’ve been preaching if they work hard they can achieve anything; who then put their heads-down, ignored the peer-pressure, worked hard, got the GCSEs and A-Levels, went to Uni and got the 2-1 or first degree’s now find themselves stuck in the old job-seeker’s paradox and flipping burgers, angry and disenchanted with society and saddled with university debt. Meanwhile, the well-to-do kid who scraped through their GCSEs and A-Levels thanks to the kind of one-on-one educational attention you only get at the best independent schools, who drank their way through uni but pulled their socks up just enough to get an OK 2:2 sails into the intern post because they can stay with Mum and Dad and have an allowance. They get the magic experience on the CV, they get the contacts and the reference, they get the end job. Now, they may well be ‘able’ enough to do the job, but the ‘better’ candidate has missed out. That stinks to me every bit as much as those well meaning, misguided affirmative action plans companies have in place. Both spit in the face of the idea of meritocracy.

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The trend is embedding. In some industries it is almost becoming a pre-requisite to entry that you have done an internship. We must level this playing field. It pains me to say it, because by nature I’m against regulation but to get proper meritocracy and competition working we should legistlate that if the internship has the characteristics of real employment then legally it must be treated as such with a formal contract, fair selection process, and at least a minimum wage salary. In the long run this will be a real win-win for every player in the economy.

Rather than wait for such regulation I hope the companies realise now that they are being short-sighted by saving pennies here which could cost them pounds later. The barrier to entry means they’re potentially missing out the very best, hungriest talent. The outlay of paying minimum wage for administrative support is minimal. The return on genuinely recruiting the best people into your firm for the long-run will pay back that tenfold. Meritocracy is not just good for society – it is good for business too.

[This is a rehash of an article on the subject I first wrote in Nov 2009]

The Daily Cost of Servicing Our Debt

This diagram graphically represents the size of our daily spending on servicing our debt in comparison with our daily spend on other areas.    It is a sobering reminder ahead of today’s budget of why eliminating the structural deficit must be a priority.   The depressing thing is that controlling the deficit will not change the daily interest on the existing debt – it’ll just stop it getting bigger and bigger.   We’re going to be paying for the party in the 90s for a long, long time to come.

“1.6 Million Children in the UK Live in Severe Poverty”. Erm. Really?

Today there has been an alarming headline that 1.6 million children in the UK live in ‘severe poverty’.   Examples of the reportage can be seen at the BBC and Guardian.  Every now and again a news stat sets off a little alarm bell in my head.  This was one of those times – according to the Office of National Statistics there are somewhere around 12.1 million children in the UK (2000 census, I suspect little variation since then).   So according to today’s reports approximately 13% of children in the UK must live in ‘severe poverty’.   That little alarm in my mind was making a coughing noise which only thinly disguised the words ‘bull-shit’.   I usually go off on one when pointing out the rotten state the UK was left in after 13 years of Labour but even with blue-tinted specs on I would never claim that they left us with 13% of all kids living in ‘severe poverty’.    This figure needed some sniffing.

The original report is from Save the Children.  It can be downloaded here.  It’s pretty hard to find how they technically defined ‘severe poverty’ for their ‘research’. After a bit of digging it turns out they define it as those living in households with incomes of less than 50% of the UK median income (disregarding housing costs).   A median single income in the UK is circa. £20k. I have no idea how they then use their methodology to ‘disregard’ housing costs – but the top and bottom is that a couple with two kids who, after housing costs are paid, have an income of £12.5k a year are classed as in ‘severe poverty’.

When you look at the methodology the metric they use is not about poverty – it’s a about income distribution.  Without wishing to belittle the quest for more equitable income distribution- I can’t help but think that such loose use of language cheapens the words ‘severe poverty’ and so insults those millions in the world (including in the UK) who, very literally, do not know where their next meal is coming from.    We could have a very important national debate about income disparity and this data could be used to support the case of those who believe the gap is too wide – however to hijack the language ‘severe poverty’ is a distraction from all that is valid in that debate.

Now don’t get me wrong: that couple with those two kids on that income are going to have a horrible time.  The report does do a good job of highlighting the very real issues they face.   I am also under no illusion that genuine severe poverty exists in this country – the kind were parents go and beg on the street to feed their children – I see some of this here in Birmingham.   Some stories that happen right now in my City would make you weep – but to say ‘severe poverty’ is anything other than at the very margins of our society is a fantasy.  To suggest, as the words they have chosen do, that 13% of all children live in squalid, desperate circumstances is ludicrous.  By overstating it, all Save the Children have done is muddle two debates and distract some focus from tackling those very real cases that do blight our society.

Ed Balls: The Return of Brownite Economics

Let’s face it:  Ed Balls was to Gordon Brown as Laurel was to Hardy.  His return will no doubt lead to ‘another fine mess’.   This surprise reshuffle does change the calculus of Labour’s electability.   When Ed Milliband decided not to appoint Balls to the role in October it was a deliberate and calculated move.   It was possibly the only truly leader-like think young Ed has done since he got the gig.   The reasoning at the time was surely:

• You would not want someone so intimately connected with the entire economic calamity facing this country back on point for economic policy
• You could not want someone who has had an insider view (and leading role) in using the office of Chancellor to undermine and oust a previous leader, sitting there ready for another metaphoric stab.

Well, nothings changed.  Those reasons still stand.  Yet here Balls is.  He’s got the job he craved from the moment he realised he was out-of-the game for the last leadership shot, and young Ed will be feeling his breath on his neck from here-on-in.

To give him his due Balls is a bruiser.  A political big-beast.  From today George Osborne will be looking forward to his turns in Parliament with a tummy rumble.  Balls knows his stats and figures and will not be easy to trip up.  Worse, he’s more than capable of scoring some points through sheer statistical battery.   But that’s all just fluff in the Westminster village.   Balls fundamentally is the living, breathing embodiment of the leftish or centre-leftish vision of Big Government/Big State/Spend and Tax Labour.  As Shadow Chancellor he will push them more so.  Even with all the current national woes, when push comes to shove that positioning is simply electoral poison.   The ‘squeezed middle’ – the people who count – the very people who switched to Labour in 97 and switched away from them in 2010 – those floating voters just don’t drift in that direction.

And that is the reel rub for Labour.  The one man on the Labour front bench who could appeal to that ‘thinking middle’ was Alan Johnson.  He was simply impossible to dislike.  Even though he was struggling to catch-up with his brief, even though he talked rot – people, even me, warmed to him.   For a politician that curious ‘nice bloke’ charisma is the X-factor stuff.  It is priceless political alchemy.  Blair had it.  Johnson had it.  Brown didn’t.  Balls doesn’t.   And so the Labour party is a weaker party this evening.

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As I say, for reasons I cannot put my finger on I like Alan Johnson despite his politics.  I have no idea why he has stepped down.  I wish him well and sincerely hope that whatever the personal issues are they are the kind that can be put right and have a happy ending by making this move.

Put the armour on. 2011 is going to Hurt

Happy New Year.   Or is it?  The reality is that 2011 is going to be pretty miserable for the whole country.   Any honeymoon period for the Coalition (if there was one) is up.  The reality of austerity measures are kicking-in.  Turning the economy is like turning an oil tanker.  Things will get worse before they get better.  We will see more public sector redundancies, we will see more cuts to other services,  the VAT rise will trickle to the till,  we wont see pay rises in the private sector, even the employed will feel  -and actually be in real terms – poorer this April than April two years ago.  Health and education reforms will spook the Unions.   Protest will spread.

The Government has to accept this and hold its nerve.   It cannot do what it needs to do and be popular in the immediate or short term.  It needs, in the national interest, to do the right thing rather than the popular thing.  With eyes wide-open it needs to understand that its popularity will fall this year and it needs to carry on regardless.  The instinct and philosophy of this government is the right one.  The challenge now is to be competent in delivery.   The quicker we get the pain over, the quicker we start the recovery.  If we start the recovery then the short-term unpopularity will dwindle and we have a fighting chance of re-election in 2015.  Dither and spread the pain over the whole five years and even if the objective of shoring up the economy is met it will just gift the country back to Labour to mess up again.

Labour will blame the Coalition for the pain. They’ll say: “They’re in Government.  We’re not.  It is their choices, it is their fault”  This is a bit like blaming a doctor for making you ill with chemo rather than the fags you only gave up six months earlier.  Nevertheless, while the pain is there the public will buy their argument.  The Coalition needs to see its program through and see it through quickly.

The lessons are there in History.  Those who remember the 1981 budget may spot certain parallels with today.  For the whole period between of 80 and 82  it was inconceivable that the Conservatives would be returned to power.  Nerve was held.  The budget worked.  Britain, after the pain, prospered.   Thatcher would have won even without the Falklands.   But we must also learn from that period.  Nobody would want to see the likes of the Brixton or Toxteth riots again.  That’s why it is so crucial that we don’t just deliver on the miserable austerity side of the program –  but also on the social side – IDS has made his case well for welfare reform – he needs to be allowed to now get on and deliver .  This is the year to get moving.   It’s also critical that we strike the right balance in the way we police inevitable protests.  Get that wrong and the Government could doom itself.

So on that dour note, I say again:  Happy New Year.  Put the armour on, 2011 is going to Hurt.

Does the Irish bailout teach the UK anything about austerity measures?

Ireland has bowed to the inevitable and accepted the necessity of a bailout.   There will be a lot written about the causes and blame for the sorry state of affairs.  Take your pick:  Reckless bank lending, reckless corporate and individual borrowing, reckless State spending, reckless lack of regulation, etc.   Folk will write very studious books on these events.  The headline conclusions will be the same old broad themes they have been after every financial crisis in history.  Initially people will earnestly take on board these lessons and kick off the new economic cycle.  The age old truth that the ‘collective memory’ is shorter than the ‘economic cycle’ will then slowly kick-in.   As time passes people will forget the lessons and again rationalise that the laws of economics ‘are different now’.  The whole thing will rise and collapse again – probably more than once or twice in our lifetimes.   It was ever thus.

Back in the here-and-now there are political points being scored as the Irish brown stuff hits the whirly thing.   An argument gaining currency amongst leftist commentators is that the Irish humiliation shows that austerity measures (read government cuts) do not work.  There is one example here.   This needs to be taken head-on.

At first pass there does sound a clear logic to their argument.  Ireland hit breaking point first so went first with austerity measures .  The measures manifestly haven’t done the job given the need for this bail-out.  Therefore, ‘logically’, austerity measures do not work.   Therefore, ‘logically’, they would have been better to keep pumping more state money around the economy to avoid this final meltdown.  Therefore, ‘logically’, the UK must take note and course correct.

It is a compelling narrative.  It is also dangerous.  If you  stop and think about it this argument  is no more or less a ‘logical’  as saying “A man was in a hole, he stopped digging, he found he was still in a hole, therefore he should have kept digging”.

We cannot let their spin distract us from the fundamental issue:  the nation was spending four pounds for every three that it brought in.   We have an unsustainable debt and government spending polices were making it worse.  You don’t solve a problem and delaying the inevitable for longer.  When you have a bubble – sadly you have to let it burst.  Pouring more soap into it doesn’t let it down gently – it just makes for a bigger bang when it comes.

Student Tuition Fees: The Weird Thing

When tuition fees were introduced in Labour’s first year in office I actually marched on Parliament in protest.  At the time I had just completed my Masters and was clinging on for one last year as my University’s Student Union President (still the most fun ‘job’ I have ever had).

Every press release I sent out, every letter of protest that was written, every person who gave me the opportunity to bend-their-ear got the same message.  It seemed to me to be self-evident that the introduction of student fees could only:

• Lead to lower take-up of Higher Ed across the board
• More worryingly – lead to even greater social exclusion for those from poorer backgrounds
• Lead to University closures and a diminishing of Britain’s academic standing

The only crumbs of comfort I could think of was that if students were paying they would become far more fussy and demanding which would drive up the standard of tuition.

Here’s the weird thing:  I’ve never been more wrong with a set of predictions in my life.  The take up of higher education went up and up.  This includes an increase in take-up from people from disadvantaged backgrounds.  Far from closures the number of higher education institutions and overall capacity increased.  I was wrong on every count.  The anecdotal evidence I have is that even my certainty that tuition standards and one-on-one teaching time would improve was  off.  I still find just how wrong I was quite sobering.

I obviously mention this now, because with today’s announcement that fees will increase to between £6,ooo and £9,000 per year the current crop of Student Union Presidents up and down the land are making the very same points as the once fresher-faced me.

Despite being proved spectacularly wrong on this issue in the ‘90s, to be honest I am still as nervous this time around.  I can’t sit here all smug that I got through the system with fees paid for and a maintenance grant because  I now have to worry about how my own two kids will afford the opportunities I had.  At some point we surely must hit the tipping point?  There has to be a cost that will put people off?  The headline £27k for a degree before living costs does sound overwhelming.

This prompted me to dig a little deeper into the detail of what is proposed.  As is so often the case the reality of the detail isn’t quite as alarming as the screaming headline – but it is still scary.  The proposals have students only repaying their loans at 9% of their income at a real rate of interest when they earn £21,000, up to inflation plus 3% for those earning £41,000 or more.   Any outstanding loans are written off after 30 years.  If you don’t end up in employment, you don’t pay anything back.  In terms of the technicalities of repayment and pressure to repay these proposals are actually a step forward from the current arrangements – though of course the overall amount to be repaid is much higher – but a step forward nonetheless.  A kind of ‘no-win, no fee’ arrangement.

It is still a whopping burden though.  I really do pity the kids who start life with that kind of debt, on top of already silly marginal tax rates to pay for the excesses of their parents’ generation.

Of course, Labour will oppose these moves.  That’s the nature and job of opposition.  There is no need to put forward an alternative, you can just yell ‘nay’.  The media will ignore that it was the Labour Government (actually Mandelson) who commissioned the Browne Report in 2009 that led to these changes.  In many ways this is history repeating itself.   In 1996 the then Conservative Government appointed Ron Dearing to do an ‘independent’ report knowing full well the recommendations that Blair and Blunkett would inherit and which led to the first tuition fees.  This time Mandelson and G. Brown knew full well what would be recommended by Lord Browne and that whoever won would have to go with it.  One silver lining for the loser of this last election was always going to be not having to catch and deal with being lobbed this particular ticking grenade.

The Coalition have actually watered down Browne’s recommendations a bit.  There is a cap on fees (albeit a quite high one), and there is more money for bursaries for the poor and early repayment levies so that the richer folk can’t get out of paying their share by paying off their loan early.

It is what it is.  The choice was always either to revisit student funding or cut back on HE provision.  Access to Higher Ed benefits the whole of society and so it was the right choice to revisit funding.

The changes are necessary but still depressing.  All I can do is hope that the weird thing happens again and that effects of student financing policy continue to be subject to counter-intuitive economic freakery that prove me, and all those earnest fresh-faced student union presidents, totally wrong.

CSR: Coalition learn a trick from New Labour

New Labour used to do this thing.  If they wanted to do something they knew would be unpopular with the Unions they would ‘leak’ that something far worse was in the planning.  Once it was time to officially announce the policy they would then ‘retreat’ from the position that had been leaked to what they always wanted to do in the first place.  So if they wanted tuition fees of £3000 they would first leak that they would be £6000, let people rage about it for a couple of months, and then announce the £3000 figure.  Folk would think that this didn’t sound so bad and it would feel like a compromise.  The passion would then be taken out of any opposition.  They could  then implement exactly what they had always planned.  They did it again and again throughout their reign.  It was quite a trick.

I can’t help but wonder if the Coalition has learned well from this technique.  For months we’ve had this 40% figure of expected cuts out in the wild.  Today we learned the figure is actually 19%.    It really doesn’t sound that bad now does it?

The more tribal Labour supporters have had 20^th October circled on their calendars for months.  It was supposed to be the day that the ‘True face of the evil Tories’ would be demonstrated by these ‘savage 40% cuts’.  Winter fuel for pensioners would go.  Schools and the NHS would be slashed.  October 20^th was going to be Armageddon.   If you believed the hype they have been spouting then today was supposed to be about the Tories rolling back the state all the way to Feudal times.  Instead, we find out that the intent is merely to roll back the state all the way to the public spending we last saw way back in…………….   2008.   Yes, for all the bluff and fluster public spending is going back to the same level it was at after 11 years of Labour rule.   School spend is protected.  NHS spending will increase.

The appropriate response today from all the doom-mongers should be relief and a slight feeling of churlishness.  Not a bit of it.  Instead a quick search of the blogosphere shows they are wallowing in a curious mix of disappointment and denial.  My personal hopes that a spell of Coalition government would edge us away from our tradition of tribal politics sadly seem as unlikely now as at any point since May.

Our failure to pull everyone into a new ‘grown-up politics’ means that for our politicians the ‘X-Factor’ still matters.   This is a problem for Osborne.  He has little love from the press or public and his delivery today was cursed by a frog–in-the-throat that we haven’t seen since IDS was in his pomp.  In comparison Alan Johnson stood up and was a Mr Charisma Snake-Oil salesman.   If you were to score Osborne and Johnson you would give a 10-nil win to Osborne on substance, but you would have to give Johnson a 10-nil win on style.  In 2010, for right or wrong, style impacts the voters more.  We should be pleased that AJ did not stand for the Labour leadership as he has an almost Blair like capacity to get the public to trust and like him.  I even, strangely, like him myself – I couldn’t help but chuckle at his shot at Clegg about his change of mind ‘between the close of polls and opening of ministerial car doors’.  And on a chuckling note, I also laughed out loud at some random lefty’s ironic twitter shout that “We need these cuts so that people like the contestants in the Apprentice don’t leave the country”.

All said, the medicine has been dished and it doesn’t seem as bitter as we have been steeling ourselves for.  Time will tell if we have held back too much and perhaps should have cut deeper.   The challenge now having announced the cuts is to get out there and deliver them and get this country back on its feet quickly.

Sir Philip Green: Great Report – Wrong Conclusion

We don’t need a Ministry of Paper-Clips, Open Data is the Answer.

Sir Philip Green’s report on government spending  is now online.  Unlike most Government reports it’s a succinct thirty page slide deck in big print that can be read in five minutes.   If that’s too much then I’ll give you the gist:  he finds the government wastes money then concludes we must centralise buying.

I’ve no issue at all with his findings.  The examples he cites confirm everything we already suspected about wasteful and lazy Government procurement.  Some of the examples are jaw-dropping.  I’ve also no issue with his central theme that the Government has failed miserably to take advantage of its scale or credit rating.  On that he’s right.  He  obviously knows a trick or two about keeping hold of money so I feel a bit cheeky calling him out here –  but  I have to:  The findings might be good, the theme sound, but his conclusion is wrong.

It is nuts to propose that a problem of poor or lazy administration will be solved by more bureaucracy.   The Coalition Government is rightly extolling the virtues of localism at the core of its agenda.  There is an obvious intellectual contradiction between pushing localism and enforcing centralised procurement.  The last thing we need to do now is set up yet another Government Agency that would literally be the ‘Ministry for Paper-Clips’.  No matter how well intentioned it would fail.   I’ve spent long enough working with big business watching the pendulum swing back and forth from localised  business models to centralised models to know that the prize of lower procurement costs will come at the expense of agility and innovation.  It is in this agility and innovation that the very biggest prizes lie.

The diversity of Government activity is not comparable with running a chain of identical Top Shops.  If the proposal goes ahead you can imagine the scenario – a nimble cost-cutting  government department identifies a new way to deliver a service at a fraction of the cost of the existing way.  The project to implement it will need new kit.  Being new stuff, the central agency doesn’t have it on its catalogue – cue a tedious process to get into the approved kit list, another process to approve possible vendors, another process to then raise the purchase orders.  All these no doubt delayed because the new ministry is dealing with back-logs from every department and school and council and prison in the country for their regular stuff.  At the same time you would also be crushing the ability of SMEs to tender for government business as there is no way they would have the scale to operate at a whole government level rather than at a smaller niche.  Hurting that part of the British economy is not something we should be engineering.  Instead, we’re supposed to be marching into a brave new post-bureaucratic age and Green’s proposal runs counter to that end.

No, the answer to all the issues that Green has identified can be solved by removing the veil of bureaucracy  and accelerating proposals for complete transparency of  Government data on-line.   Every single contract and purchase order for more than £500 should be there for everyone to see.   It is our tax money so the spend data is our data.  Arguments by vendors about contract  ‘commercial sensitivity’ are a sham ,they don’t want it exposed they are ripping us off.  The public has a right to see that vendors are not charging the government more than they charge in the high street.  Overnight, by publishing all this data you would free-up departmental procurement officers to see what is the going-rate or a fair price.  More importantly you would allow commercial competitors to see the price they need to compete with. This more than anything  would continually drive prices downwards.  Rather than a procurement officer going to a vendor and saying “I need 10,000 of x what is our agreed price?”  You would have vendors ringing procurement officers and saying “I see you bought 10,000 x and paid y – in future I can do it z cheaper”.   You would stop at once the procurement officer who buys the slightly more expensive stuff because he gets more air miles or because the vendor sent him on a nice day-at-the-races during the bid.  The armchair auditors (or the press) would not allow it.  Transparency is to everyone’s advantage.  It will retain our localism agenda and leave space for agility and innovation in departments.  It will also mean we don’t need to waste time or money setting up a Ministry of Paper Clips.