Steve Hilton, blues skies thinking and the resurgent deregulatory impulse

Steve Hilton has attracted flak across the old and new media following the FT’s revelations about his suggestions for stimulating economic growth. The proposals that hit the headlines included the abolition of maternity leave, labour market policies that contravened European law and the suspension of all consumer rights. Many have criticised the proposals for a range of offences including apparently overlooking the rule of law. Others have defended the utility of blue skies thinking when seeking ways to deal with the challenges that face us.

Personally I’m not averse to blue skies thinking. But the idea that off the wall thinking is central to the role of a strategy director is curious. One would have thought strategy should entail something rather more concrete and grounded, at some point in the process at least. And as someone more disposed to bottom up decision making and a Parliamentary party that is charged with representing the collective will of its members, I’m not so keen on the idea that one unelected, unaccountable and largely anonymous individual should have such influence over policy in the first place.

But the main thing that strikes me about these revelations is that they are not very “Blue Skies” at all.

Dispatching rogue landlords

Tonight’s C4 Dispatches programme provided some very clear evidence regarding poor standards of accommodation and management in the private rented sector. It is linked to the Shelter campaign to Evict Rogue Landlords. While the individual underhand practices deployed by landlords are very unpleasant, the impact of the programme will be mitigated by the problem that all research in this sector faces – that it is hard to quantify the scale of the problem. If one problem is that no one prosecutes rogue landlords, for example, then the statistics appear to show that unlawful behaviour by landlords isn’t a big problem. The logic is faulty – absence of evidence isn’t evidence of absence – but convenient for those who have no wish to act. The majority of private tenants are happy with their current landlord. But that tells us nothing about how many tenancies they’ve moved on from because of poor treatment by a landlord.

Grant Shapps was interviewed briefly in the programme. His contribution had two key elements. First, he argued that the national registration scheme for private landlords proposed by the previous Labour government ran the risk of becoming a bureaucratic exercise and so was dropped. In fact, his argument here was a little less than clear. But the net result is that this type of regulatory scheme appears to be off the agenda. Second, he argued that there are lots of local authority powers and regulations already in existence to deal with problem private landlords.

This second point is correct but almost entirely irrelevant.

Failures to care for vulnerable people: what lessons to draw?

The practices exposed by Panorama last week at Castlebeck’s Winterbourne View care home were profoundly shocking. The case continues to develop – several further arrests were made this week. Ghandi said that “a nation’s greatness is measured by how it treats its weakest members”. What we witnessed at that particular care home suggests our claims to greatness are debateable. And, of course, rumbling in the background we also have the Southern Cross debacle. There are grave concerns over the future of the country’s biggest private provider of care homes for older people. There appears to be a government guarantee on the table to see that residents are provided for, but no promise of a bail out.

Searching questions are quite rightly being asked. How can we have got into this situation? It is maybe rather late to be waking up to the issues here. Nonetheless, it is welcome that they are getting their moment in the spotlight. Let’s hope some positive changes result. But are the right lessons likely to be drawn from current troubles?

The elephant in the (waiting) room

The McNulty report – Realising the potential of GB rail – is a queer beast. The report, published last week, is the final report of a long term investigation, established by the last government, into the efficiency of the British rail industry. And the report identifies a sensible and quite extensive set of barriers to efficiency in the rail industry. But it then proposes a slightly odd set of solutions to address those barriers. Or, rather, it fails to address the most obvious question of them all – are the problems generated by the fragmented and semi-privatised ownership structure of the industry?

Actually, that’s not even true. The report identifies industry fragmentation as key part of the problem. But it doesn’t explore the most obvious solution to that problem – large scale reintegration. Whether that is a result of Sir Roy McNulty’s disposition or the DfT setting a brief that precluded asking the question publicly is less clear. It does, however, mean the review is a missed opportunity.

On bankruptcy constraints, soft and hard

One strand of the economic critique of government provision is that public providers face a soft bankruptcy constraint. If they operate inefficiently or extravagantly and run out of money then they can turn to government for a handout to cover any shortfall. If the government is short of money to bail them out they just put up taxes. Private providers, in contrast, operate in the face of a hard bankruptcy constraint. They must operate in the face of ever-present risk. If they don’t produce what consumers demand, and do so as efficiently as possible, then their continued existence is in doubt. Hence, the argument runs, a powerful incentive is missing from the sphere of public provision. This argument has been invoked as one component of the justification for shifting activities from public to private sector.

Upstairs at Eric’s – What’s on the big guy’s mind?

Earlier this month Communities and Local Government launched what they describe as an ‘informal consultation exercise’ reviewing the statutory duties placed on local government.  It’s aiming to gather views on the full range of statutory duties with a view to identifying any that are no longer appropriate or necessary. The Department makes it clear that this is not an exercise expected to deliver short term outcomes. This is the long game. And it needs to be seen in context. The accompanying explanatory note makes this clear:

In order for this Government to achieve its goal, as announced in the Coalition Agreement, of decentralisation and promoting the radical devolution of power and greater financial autonomy to local government and community groups, clarity is needed about what the current demands on local authorities are and careful consideration as to whether they can continue to be justified in the move towards decentralisation and localism.

So one could see this as an exercise of profound significance. Yet, at another level, the way in which the exercise has been set up seems almost custom-made not to gather any very useful information. As with much that originates within the Pickles empire, it is an initiative that raises a host of profound questions.

The mundane malfunctioning of markets – a tale of life and death

We are currently awaiting the fourth visit from a well-known high street electrical retailer to fit a new hob in our kitchen. The first two visits led to a new hob being fitted, only to discover that the new one was faulty. The third visit occurred on the wrong day. No one was at home. When my partner phoned to point this out the company had no record of the booking. They couldn’t revisit on the date we’d agreed (today) because there were now no available spaces. So they are coming next week. Fourth time lucky?

Clearly this is not the end of the world. Rather more salad is being eaten than is normal for this time of year. And there is more oven-based cooking than typically happens. But it isn’t a disaster.

This is the mundane reality of markets. They don’t always work very well. And sometimes the consequences can be considerably more significant.

Magical markets and medical muppets

You don’t come across that slightly touching, naive market fundamentalism quite as often now as you did a few years ago. The financial crisis and its aftermath has increased the circumspection of some market advocates, at least for the moment. One place you do sometimes come across the dogmatic view of markets is among those who live in former state socialist and communist countries. The other would appear to be the Coalition government.

I quite regularly have the opportunity to discuss the relative merits of the state, the market and points in between with citizens from transition and developing economies coping with the legacy of state socialism. While some have a sophisticated understanding of the issues, others could perhaps engage with the complexities a bit more deeply. There is a strand of very simplistic thinking which sees the public sector as fundamentally corrupt and markets as a solution to most of society’s ills. The former view may be born of bitter personal experience, but it is treated as an inherent characteristic. Markets, on the other hand, have almost magical properties.  They are the repository of dynamism, entrepreurialism, efficiency. Markets are reified and deified. The idea of private sector inefficiency, monopoly or villainy doesn’t compute. Even when the post-transition society they live in might reasonably be characterised as a kleptocracy.

So what about the Coalition?

Who’s wrong? The Government or the Economists?

Where should we draw the boundaries of the state? When should Government take responsibility for providing or funding services? And when should it be left to the market to sort out? One characteristic of the current government is that it has destabilised well-established understandings of where the boundaries lie. Most prominently we have the debate over higher education funding. But there are a range of other fields – including social care, rail pricing, school sports, arts funding and library provision – where central or local government is stepping back from funding and/or provision. While the financial crisis is typically invoked as the trigger for this, there is more than a suspicion that this can act as a handy pretext for furthering an agenda of state retrenchment, leaving more to the market, the voluntary sector or informal provision.

From the point of view of economists interested in social policy and social problems this is intriguing. Many economists who concern themselves with such matters tend to operate from a social liberal or social democratic position – they tend to favour a mixed economy and acknowledge a significant role for the state, if only in funding rather than provision. This is in part because they are a self-selecting group. The dyed-in-the-wool market fundamentalists don’t tend to spend too much time thinking about the role of the state. Rather, they tend to assume that Milton and the Public Choice boys have put that particular question to bed – the state should keep well away from just about everything.