Degrees are shrinking in value but all anyone talks about is cost

Students protesting against fee rises in line with inflation should actually be more concerned about the shrinking value of their degrees. Increasing numbers of students are exiting university and entering jobs they could just as easily have obtained without a degree. This renders many complaints about fee growth irrelevant since graduates’ earnings often mean that they are unlikely to ever pay off sums anywhere near their accumulated debts.

The government is developing a system in which well-performing universities are able to increase their fees in line with inflation. Despite students’ claims that such changes are unfathomable, it is clear that they were both inevitable and necessary for students to be able to enjoy the same quality of education from year to year. Students currently pay £9000 per year for the privilege of a university education. If inflation were on target each year at 2%, it would take around twenty years for this amount to fall in value by a third.

Expecting universities to maintain a good level of education with plummeting income from students seems far more unfathomable than tying university fees to inflation. Given that inflation in the cost of providing a university education currently sits well above the headline rate of inflation, tying fees to this latter figure will still encourage increased efficiency of provision whilst enabling universities a chance at maintaining quality levels.

Whilst the anger of students who are facing fee hikes and believed themselves to have signed contracts stipulating fees of £9000 per year is understandable, the outrage of those yet to start university is not. Nobody is forced to go to university. Those who go choose to do so because they believe that the value to them of attending university exceeds the costs. Though the university fees increasing in line with inflation should not have any bearing on the intrinsic value of a university degree, those who believe that it does, to the extent that the benefits of university fail to outweigh the costs, can simply choose not to go.

What should be of far more concern to current and prospective students is the falling value of having a degree. Work by Bryan Caplan suggests that much of the financial benefit accruing to graduates is the result of the signalling effects of their degrees rather than the skills they learnt during their degree per se. Whilst many find their time at university to be the best years of their lives, it seems a shame that the skills acquired during the process constitute so little of the financial value of having a degree. University certainly shouldn’t be all work and no play, but when students report that the work is barely harder than A–Levels, there is clearly an issue.

Indeed, many institutions have seen a trend shifting away from teaching students the valuable skill of how to think for themselves towards encouraging students to develop their ability to rote learn answers to questions. Something is amiss when students are complaining about exams containing questions on topics they’ve covered but of types they have not encountered before. In many jobs in the real world workers come across challenges, the likes of which they have never experienced before. Being able to problem–solve in such a situation is far more useful than being able to recite past answers to past paper questions.

One major complaint of those protesting against nominal fee rises is that they discourage those from poorer backgrounds from applying for university educations. This is both factually dubious and reliant on significant misunderstandings of how university debt works. In 2015, the BBC reported that more disadvantaged students were entering university than had entered when fees were lower. University education is actually becoming more accessible despite fee increases. This apparent reversal of logic can be easily explained by both increased access efforts of university admissions teams and the fee system itself, amongst other factors. Pretty much everyone embarking on a degree will leave university with a large lump of debt.

The amount of debt each student accrues (excluding maintenance costs) is not dependent on their parents’ income but upon their university of choice and length of degree. The amount of debt each student pays off is dependent on their future incomes alone. Poorer students should be no more sensitive to fee changes than their richer counterparts. The fear of high levels of debt may be greater for those from a poorer background, but the nature of the fee system makes this fear somewhat irrational – the debt is only repaid by those earning above a particular level, making it very different from “normal” debt. Fears about nominal fee hikes reducing social mobility are unfounded and should therefore not be used as an argument against them.

University fees are not Freddos rocketing to ridiculous levels; they are rising in line with inflation in the same way that all other goods and services in the world are. If universities are to be able to provide education of a consistent quality then they must continue to receive fees of a constant real value, and that means increasing them in line with inflation. Students protesting against the increasing of fees as such are fighting a losing battle – in vain.

EMPLOYEE GRIEVANCE PROCEDURE: NEEDS TO BE LEGALLY BINDING?

There has been a huge commotion in parliament over the last few days. Particularly involving
certain MPs and their overzealous acts of sexual conduct towards women, some of those
working in parliament themselves. This then calls for some sort of solution to fix the issue (or
at least reduce the risk). Theresa May as the PM comes under intense scrutiny for the need
to address the issue. To which she proposed that the code of conduct in parliament should
have some “legal standing” and a contractually binding grievance procedure for all MPs set in
place.

There were allegations made regarding the Tory party, including some senior ministers who Mrs. May
was working closely with in parliament. There were also allegations made towards MPs
from the Labour party. Did May know what was happening? If she did that’s a worrying concern
for the young female professionals, who have been reported to have been victims of these
alleged groping and propositioning incidents. But even then, many leaders lose sight of the
issues on their own team as I’m sure they would expect their team players to uphold the same
values as they do. Well, that clearly wasn’t the case and May is in a huge frenzy to have a
reshuffle of her cabinet.

We’ve been told government officials keep a “black book” of allegations against MPs hidden
away. So that leaves us to question, how long does the list track back from? And why has it
taken this long for these allegations to come into the public consciousness?

What was of shock to me regarding the scandal is that there is a “WhatsApp sex pest group”
that women who include parliamentary researchers, secretaries and aides are all a part of.
Who claim that politicians on both sides of the house have pestered them and given them
lewd nicknames. The code names for some of these MPs in parliament who committed the
acts were described as “Lift Lunger”, “Happy hands” and “Taxi Tickler”. All involved in groping
women in enclosed environments and even in public, which reveals the lack of awareness or
care these perpetrators had for the actions they were partaking in.

The recent allegations have come into fruition in the light of the recent global social media
campaign called #MeToo launched by Alyssa Milano, an American actress at the forefront of
it, who too was a victim of sexual assault. The campaign encourages all women to confront
the men they know, whether their brothers, friends or work colleagues about their attitudes
and behaviours. Thousands of women have come forward sharing their stories since the social
media hashtag was created. No doubt this had huge influence regarding the women in the
political sector to share their own stories, despite huge risk to their careers within parliament.
I say that as MPs hold immense power and as the young employee with a lack of voice
compared to their older counterparts, particularly when female, societies attitudes can be off
putting in believing their reports.

Alyssa Milano, the actress who started the #Metoo
campaign on Twitter

Echoing what Theresa May has proposed in her comments concerning the MPs in the scandal.
The current grievance procedures in government we have regarding employees and their
employer are not legally binding. It’s expected that the employer follows the necessary
guidelines to tackle the problems that may arise through complaints from the employee in the
work environment. But we know this is not always the case and it’s pretty difficult as a young
professional who are the most vulnerable in the workplace, due to their lesser status and lack
of experience. Combining that with being a female in the workplace, it’s an even tougher task
to share your grievances towards your employer, especially one who holds immense powers
in parliament. For a lot of women, they do not bother reporting incidents or if they do, it is not
taken as seriously.

Theresa May’s views on the grievance procedures should be the agenda needed to create
some legalities around the topic. Implementing some sort of policy around the instances of
sexual conduct towards employees and making it legally binding needs to be a course of
action in parliament. It’s a sad shame knowing what it is morally right and wrong cannot be
the indication we need to take complaints of sexual conduct in the workplace more seriously.
It seems when employers are threatened by legal action, they may tend to take matters as an
urgent need for attention rather than sweeping cases under the rug like many in parliament
have been doing to protect the most powerful and senior members of staff. Well this needs a
complete reform and female employees in this case need to know that their issues will be dealt
with accordingly and the relevant persons will not go unpunished. I think it will also be a wakeup
call for those who commit these revolting acts, that there will be repercussions for their
actions. Hopefully, it will also allow them to get the help they need for their habits.

Campaigns such as #Metoo are giving women and (men) the opportunity to voice their stories
more bravely than in the past and help others in the process to share theirs. Building a
community of victims to overpower the perpetrators who inflicted any sort of harassment or
assault towards them. Theresa May, now needs to enforce laws that are contractually binding,
that involve the issue of grievance in parliament and the workplace. That may be just one way
of tackling this ever troubling problem.

The Bogeyman Fallacy of Evil ‘Unregulated’ Banks: How Free Banking Could Bring Transparency, Stability, and Choice

There is a phantom menace that Marxists hold dear. Indeed, in the times of milk and honey following the overthrow the bloated bourgeoisie and the ascension of Comrade Corbyn, ‘unregulated’ banks will take their place as the sworn enemy of the workers in the songs and legends of the bards. Even now, the myth builds. Bankers, let loose by a free market, milk the people of their hard-earned money whilst the Tories in parliament watch with idle glee. Lily Allen, hero of the working classes and mother of the revolution, even mentioned it on twitter the other day. She wondered aloud why it was that Britain could ‘afford unregulated banks’, whist it couldn’t afford to throw more money at the NHS and pay teachers the piles of money they deserve for their selfless and heroic service.

https://twitter.com/lilyallen/status/833284090853982209

Lily Allen, as is often the case, is dead wrong. Firstly, she seems to have confused public and private spending; since an unregulated banking system, i.e. a system free from government intervention, would be privately run and not cost anything from government coffers. Secondly, the banking industry is probably one of the most regulated industries in the UK, and has been for decades. The simple truth is that banking is far from a free market. Marxists like Allen are so dogmatic in their committed assertion that free-markets are bad, that even evidently unfree markets like banking must be a free market. Why else would it be so bad?

If only Lily Allen had bucked her long and colourful history of being wrong and was correct in her accusation. We have intervention in the banking market to thank for many of the problems we attribute to the industry. Let’s take the banking crash in 2008 as an example. Whilst many people like to think that the collapse was an inevitable symptom of capitalism; a by-product of greedy free markets, it was in fact a result of state intervention in markets that should be free. Big banks love regulations, which is probably why they spend so much time lobbying for them in Westminster and Brussels. They can afford crack legal teams to navigate bureaucracy and locate loopholes to exploit, whilst their smaller competitors cannot. Regulation passed by American and European governments in the lead up to 2008 pushed out small firms, distorting the market in favour of large firms, fostering a proxy oligopoly. Big banks – we’re looking at you Lehman Brothers – had become ‘too big to fail’. They represented so much of the market that if they were to collapse, they would bring most of the economy down with them. It is therefore unsurprising that when they did collapse following the bursting of the housing bubble, that governments chose to pump loser firms with taxpayer money to keep the economy afloat; creating hordes of zombie banks dependent on corporate welfare. They knew then, and they certainly know now post-bail out, that they don’t need to be responsible. The government will pick up the pieces, save the losers, and happily sponsor a disparity of competition and a dearth of fairness in the market. Talk about laughing all the way to the bank.

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Government presence in the banking industry doesn’t stop at bailouts and legislation; it is part of the banking industry’s very fabric in the UK. The Bank of England holds a monopoly on currency. It also possesses the authority to set interest rates, basically dictating the price at which banks can lend or borrow money. Whilst this is hardly unorthodox – almost the entire world runs on this system – it is by no means unregulated. If Lily Allen was indeed correct in stating that our banks are unregulated, we’d all be living in a free banking society, not one with a central bank.

Free Banking hasn’t had a presence for some time now but when it did, such as in Scotland until 1844 or British Canada until 1914, the results were positive. So why did central banking replace free banking? Most central banks were formed by governments with one idea in mind. They wanted an institution that would lend them masses of money, on agreeable terms, with few questions asked. Governments sought also, as they always do, to expand control over the economy. What better way to do this than to grant a dictatorial monopoly on determining interest rates to a central bank? Now the government can attempt to slow or speed spending if they so wish. As well as that they can print more money, which is basically government sanctioned counterfeiting, to reduce the value of money; eroding savings and wages whilst falsely inflating prices. With that in mind regulation and intervention sounds rather sinister, doesn’t it? This is cronyism, not capitalism.

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Why then, do so many people lament the idea of unregulated banks? Deregulation has become a bogeyman to villainise free markets, perpetuated by those with a fallacious understanding of the economy. When the government regulates banking and currency, it merely expands its control over the individuals it is sworn to serve. But how could free banking, a system where there is no central banks and very little regulation, work?

Historically in free banking economies, basic money was determined in either gold or silver standards. Minting gold or silver coin was normally monopolised by the government, in an effort to keep the value of these coins steady and provide an official base for free floating competitive currencies. Banks would then distribute banknotes and allowed people to open accounts denominated in whatever standard, normally gold or silver, had been determined by the government. Banks endeavoured to make their currency widely accepted by other banks in order to attract customers. Banks were forced here to accept all forms of currency, striking mutual deals with their competitors to accept each other’s notes and give customers a reason to bank with them. Private notes stayed more or less at the same value as their competitors. Retailers had no problem accepting different notes, just like they don’t have a problem today with accepting various checks and credit cards from differing banks. Notes in free banking economies proved to be more reliable than central banking societies. Unlike government backed issuers, free banks can’t purposely devalue their currency and get away with it, it’s a breach of contract. They can’t take on risky procedures like dishing out more than they have in their reserves or making questionable investments, because risky banks would prove unpopular with consumers, who can easily look elsewhere. In a free banking system, competition and choice places power in the demand side of the market, empowering consumers and gives consumers true sovereignty over banks.

Free banking is transparent, stable, and maximises consumer power. Which is presumably why governments would rather opt for a central bank. No matter how often Marxists like Lily Allen insularly reassure themselves that capitalism is bad, that the poison touch of government is good, and attribute all wrongdoings to free markets, there is a simple fact that remains. The freer the markets, the freer the people. Banking and currency is no exception. In fact, it’s a sterling example.

A CEO Pay Cap Would Cap The Welfare Of All

The share of national income going to top CEOs is going up and up. Government intervention to restrict this commits twin errors of assuming that rising pay at the top is an unwarranted endemic and assuming that intervention seeking to constrain pay at the top will necessarily improve the labour market opportunities of those at the bottom. Neither of these assumptions holds true. Governments trying to restrain CEO pay will hamper economic growth whilst simultaneously doing much damage to the living standards of those at the bottom of the earnings distribution.

A recent Institute of Economic Affairs publication by Ryan Bourne and Professor Len Shackleton reviewed a series of damaging changes proposed by those across the political spectrum. This included Jeremy Corbyn’s plan to “institutionalise fairness” by setting a maximum pay ratio between CEOs and the lowest paid worker and a proposal from the High Pay Centre that publicly listed firms in the United Kingdom should be forced to publish data on the ratio of CEO pay to median earnings. It concluded that concern over inequality at the top end of the pay distribution would be better dealt with by “a fundamental simplification of income tax to eliminate exemptions, loopholes and tax shelters” which would also work to affect other high–earning individuals such as private equity investors, business owners and celebrities.

Before exploring the potential harm that the proposed regulations could inflict, it is first interesting to challenge the idea that rising CEO pay necessitates regulation at all. Many politicians argue that extreme income inequality at the top is a symptom of some terrible corrosion of societal morals, holding back growth and damaging the life chances of those at the bottom. These claims are simply unfounded. The OECD found no evidence that “those with high incomes pulling away from the rest of the population harms growth”.

Conversely, rising CEO pay is actually associated with increasing firm value. When former Prudential Chief Executive Tidjane Thiam announced his move to Credit Suisse, the total value of their shares rose by £2 billion. The high pay earned by Thiam was clearly deemed worth it by shareholders. Increasing pay at the top is a reflection of an increase in the (perceived) value added. It has not caused those at the bottom to get any poorer. Why should the government intervene?

Attempts to regulate or cap CEO pay could seriously damage economic growth. Switzerland dodged a bullet by voting overwhelmingly against a reform that would see CEO pay capped to twelve times that of the lowest paid worker in the firm. Jeremy Corbyn’s proposal that the UK should adopt similar regulation is a plan to shoot oneself in the foot. There are three obvious ways that businesses can reduce the pay ratio between their cheapest worker and CEO: slashing CEO pay, grossly augmenting the pay of the lowest–paid, and cutting low–paid workers altogether. None benefit the economy.

FTSE–100 CEOs are currently paid almost two hundred times the pay of the average worker. To bring this ratio down via a reduction in CEO pay down to any so–called “sensible” level would require extreme cuts. Since few countries have regulations requiring the publication or capping of such a ratio, in an increasingly globalised market CEOs would simply jump ship.

Top CEOs bring much value to their organisations – such a loss of talent could seriously harm companies. Many businesses would be forced to either relocate to regain access to top executives or shut down altogether. Both responses damage economic growth and result in unemployment, particularly amongst immobile lower–paid employees.

Since a slashing of CEO pay appears unviable, firms might instead reduce their ratio by increasing the pay of the employees at the bottom of the pay scale. Since labour expenses often account for a large portion of business costs, this would be hugely damaging to a business’s profits. Furthermore, for competitive companies with large numbers of employees, the extent of wage augmentation needed would simply be unfeasible. Increasing the wages of those at the bottom of the wage ladder would lead to increases right up it to ensure some extent of differential pay based on value. This would be extremely expensive.

To add to this, a cap on the ratio would severely restrict the size of these value–based differentials, crushing incentives for workers to add to their human capital or encouraging higher–value workers to move abroad where regulations would less stringent, enabling them to earn fairer wages. Regardless, in the long–run, workers cannot be paid significantly above the value they add to a business. If firms are forced to pay some workers more than their value it is likely that other workers will pay the price: unemployment.

It would clearly be difficult for businesses to artificially manipulate their ratios by cutting CEO pay or increasing the wages of the lowest–paid workers. This means that many companies would likely be forced to take the uncomfortable step of making workers redundant. There is already a huge shift towards the mechanisation of work; the laws and requirements proposed above would unnecessarily and inefficiently speed up this process. Low–paid jobs would be outsourced or removed altogether. This would increase unemployment, with the bulk of displaced workers being the less–educated. Such a policy would not help the low–paid or the well–paid. It would help noone.

Bourne and Shackleton conclude that a war against high CEO pay would both be unsuccessful and highly detrimental, causing “collateral damage” across the economy. Basic populist rhetoric on the topic skates over many of the important issues and so should not form the foundations for effective policy design. They state that the government should not extend requirements on firms to publish data on executive pay. If, despite the overwhelming evidence suggesting otherwise, high pay is felt to be a problem, “it should be dealt with through simplifying the tax system and eliminating loopholes” not through rules and regulation which leave everybody worse off.

Let’s demand a better British agricultural system post-Brexit

With Brexit looming, the time to discuss the future of British agriculture is now. “Britain’s farmers will need help” says the Financial Times; “Farmers who vote leave now in deep regret” claims the Independent. But don’t worry, there’ll be some provision, promises Theresa May’s government, in some form, and at some time. But what do we really want and, more importantly, need to see in the coming months of negotiation?

Well, The National Trust has called for a total reform of the subsidies programme, and that is a fantastic place to start. It is time to tear back the basic income support system and consider the work of our farmers in an environmental market context. As it stands, the current system sidelines successful arable methods, crushes incentives to innovate, and wraps agribusiness in regulatory red tape.

Subsidies, and the broader government approach to farming, entirely fails to account for the negative externalities created by the industry that effect not just the UK, but contribute massively to the global climate change dilemma. Ignorance is no longer an option for us, we cannot continue to ignore this pressing issue, no matter how politically inconvenient it may be.

Once upon a time, subsidies for agriculture made a lot of sense. When you have inelastic demand for goods and an inelastic supply of produce, you need to be able to stay in business and produce even when you have a bad year. But a lot has changed since then: our crops are much hardier now, and more controversially, we pump our cattle with so many chemicals and antibiotics before killing them off within just a few years that we overwhelmingly over-supply animal-products. This means that the British consumer has access to British milk and Angus steak at a cheaper price, but  is not paying the full cost. The subsidised price does not take in to consideration the environmental implications that the product has had throughout the process.

The peculiar thing is that no other industry is still subsidised this way, because when an industry struggles and fails, we don’t tolerate it. Instead we import from another country that has a comparative advantage in that sector. In this sense, protectionism over free trade has very serious consequences for our environment and the taxpayer.

Ultimately, there are two points to take away from this discussion:

First, this is a golden opportunity to do something about the disaster that agricultural subsidies have become. The system is a cesspit of government failure, and it is draining obscene quantities of money that can be better spent elsewhere. Brexit provides not only the opportunity to reevaluate the system, incentivise innovation in farming, and put the free market first… but it presents the chance to save billions.

Second, it is time to start talking about agriculture in the environmental context that is the unfortunate reality. Pastoral agriculture is the leading cause of water pollution, deforestation, and emissions contributions globally. We need to internalise those externalities, and we can do so through the free market price mechanism and allowing producers to embrace consumer demands.

This is a big discussion, and one that is long over due. However, we have a very real opportunity to demand a better system that not only helps the industry and consumers, but helps the environment.

It is Time to End the Attack on Buy-to-Let

Over the last year the Cameron government used the tax code to heavily discourage buy-to-let investment, through such means as the 3% surcharge on second homes, the changes to mortgage interest relief and the exclusion of buy-to-let from the cut to capital gains tax, leave landlords paying almost 150% as much tax on their profits as other investors. Even before these developments the IFS showed that rental properties faced a worse tax environment than owner-occupied and social-rented housing. Now that Cameron has given way to May, the time is ripe for a rethink.

There are two motives for the policies Cameron was pursuing. First, it is a politically expedient way to raise revenues for the treasury: few will cry for landlords. Second, and far more important, it is intended to raise home-ownership – alleviating the housing crisis through tax tinkering. If buy-to-let investors are discouraged fewer will buy new houses and more will sell off their properties, which means more houses sold to owner-occupiers and a rise in home-ownership. It is, tentatively, working: the National Landlords Association predicts 500,000 properties will be sold from the rental sector in the next 12 months. That means 500,000 more people, couples and families in homes of their own.

But there’s another side to this story. Those are 500,000 homes drained from the British rental stock, and many more properties that would have become rentals in another climate. The sudden drop in supply will lead inevitably to higher rents, poorer service, or both, in what remains of the rental sector. The increased costs faced by landlords will also be passed on to their tenants. This will harm students, the young and the poor most: the very people increased home-ownership is supposed to help. They are also people who don’t usually have the £33,000 required for the average deposit on a mortgage, or even the £10,000 or so needed for deposits on some of the cheapest properties, so the added houses for sale won’t do them much good.

It also discourages mobile professionals who will find fewer accommodations when they look to move for work, lowering labour marketing mobility and so damaging the wider economy. What’s worse, it may well mean less house-building: between 1996 and 2013 83% of all new dwellings created in England were created by investments in the private rented sector. Don’t just take my word for it: the treasury select committee has said much the same thing.

All of this is to say that the attack on buy-to-let investment is misguided. It temporarily alleviates symptoms of the housing crisis by shifting a fraction of the existing housing stock from owner to owner, true, but its unintended consequences are likely more damaging than any benefits. Policies like the expansion of shared ownership housing are a far more pragmatic and less damaging way of increasing home-ownership, but also are not enough. The housing crisis comes from demand outstripping supply. Increasing supply by building more houses is a solution to the housing crisis. Decreasing demand by decreasing net immigration or increasing the rate of cohabitation is a solution to the housing crisis. Nudging people with the tax system to shift the pre-existing supply is not, and the May government should abandon its predecessor’s efforts to do so, and end the counterproductive attack on buy-to-let.

A National Investment Bank? Come off it Corbyn

It seems almost everyone thinks that the Tories have this election in the bag. With the latest ComRes poll giving the Tories 50% of all votes, it’s not hard to see why. But perhaps there is good reason for this. Labour leader, Jeremy Corbyn is not just a friend to controversy, he also seems to flirt with very silly ideas. One of many is the idea of a national investment bank, which he says would enable £500 billion worth of investment in infrastructure and industry. This would allegedly create one million new jobs, which might seem like a nice thing until you remember that unemployment in the UK is now hovering around 5% – the best it has been in a long while.

Corbyn’s idea seems even more preposterous when you also consider the current national debt of 1.6 trillion. But the idea of a National investment bank is not just unnecessary, it is foolish. The track record of the idea is really rather shocking. Tony Benn’s similar National Enterprise board in the 70s threw money at all kinds of wacky things. From British Leyland motors, to British leather, money was spent where it would create no wealth. Meanwhile private industries in the tertiary and quaternary sectors grew and those industries that Benn’s National Enterprise Board tried to protect simply fizzled out.

There is no reason that a rebranded version of Benn’s failed project would do any better. It would just lavish taxpayer’s money on projects run by those with political connections, creating arbitrary jobs in Labour seats. And even if you concede that the National Investment Bank’s job creation is a good thing, the kind of jobs that it aims to create are not going to help the kind of people who need helping. Gone are the days when building roads required hard unskilled labour. The kind of people who are likely to be employed to build infrastructure nowadays are engineers, operators of technical machinery, and other skilled and educated individuals who are unlikely to be unemployed.

A national investment bank has the potential to really hurt private investment too. The enormous amount of borrowed money required to pull it off would mean issuing extra bonds, which in normal times means competing with private firms for investment funds. Private firms would have to pay more to borrow, or re-consider their own investments – meaning less private capital spending on factories, machine tools, training, R&D, and housing. So when the government borrows to fund its own investment, private investment has to fall. Occasionally government investments are worth it, but boondoggles like the Millennium Dome are de rigeur. When even the most switched on venture capitalists find it difficult to pick sound investments, technocrats with no commercial experience are likely to find it impossible. Because of this, the national investment bank is not just unnecessary, but completely unworkable.

What Now for Bitcoin?

Over recent years Bitcoin has had a habit of defying expectations. Since its dramatic 2013 price rise it has held level in spite of the constant predictions of naysayers that it’s just a fad, that regulation will catch up and that it will ultimately fail.

Yet today, bitcoin is used seriously in a wide range of roles, including everyday transactions, venture capitalism, currency exchange, charity and even dedicated bitcoin gambling.

The future of bitcoin is now the subject of intensive debate. Will this success continue, or will it soon be a thing of the past?

The block-chain technology underpinning it is undeniably revolutionary, but some have suggested the success of the technology may overtake Bitcoin itself.

But while some of the advantages of the decentralised system may be adapted by the mainstream in the future, a lot of Bitcoin’s success lies in its role as an outsider to the conventional financial system.

Indeed much of its criticism also stems from this point. Some countries and territories have banned its use, while others have been quick to point out that payment and consumer protection rights don’t apply.

Likewise its potential for anonymity makes it attractive to black marketeers and those wishing to hide their online purchases. That in turn makes it a target for regulators and opens it to calls for clampdowns on its free use. However the anonymous nature of Bitcoin is itself a subject of debate.

Another threat to Bitcoin is also one of its most exciting aspects. There is an increasing threat of conventional currencies moving to a cashless system, removing the facility for individuals to store their own money away from the threat of negative interest rates and transact without fear of monitoring.

Bitcoin presents one possible escape from that, in being a currency not beholden to the will of any central authority and, at least for the moment, largely anonymous. If the prospect of a cashless economy does come on line in the future, that could well be good news for Bitcoin and other crypto-currencies.

on the other hand, its unregulated nature and the speculation over its future does leave it open to wild price fluctuations. That volatility may settle as it becomes more established and if it becomes widely accepted as a mainstream means of transaction, but until then having money in Bitcoin has the potential to lose, or make, the holder a lot of money, depending on how well it fares in the future.

Ultimately Bitcoin’s future is at the mercy of a lot of external factors, particularly government regulation and economic policy, as well as the development of the system and potential competitors. However currently Bitcoin is an unchallenged force in this space, and in a time where the use of money is rapidly changing, that status gives it the potential to grow massively.

Already it is being taken increasingly seriously, with Bitcoin ATMs in operation, major retailers accepting it and blockchain technology being seriously pursued by mainstream institutions. There is still a great deal of growth ahead if it is to become a permanent, established medium of exchange, but some recent news has been very encouraging.

Ultimately, whichever way it goes, it’s exciting to watch and be involved with something with so much potential to radically alter the way we do business. Bitcoin is one great example of how technology has radically altered economics in the internet age, and whether or not it ultimately succeeds, it and the technology it has brought into widespread use will undoubtedly continue to disrupt and reshape the world.

That alone seems reason enough to be optimistic.

The Euro is Deepening the Depression in Southern Europe

Currency union used to be very fashionable. There was a time when the Euro was the future – it led to increased growth, lower unemployment, and greater prosperity. Opposing it – and opposing the Exchange Rate Mechanism that was intended as its precursor – could only derive from some atavistic nationalism. How times have changed.

The ERM crashed the British Economy in 1992 and the Eurozone is not prospering today, instead it is going through a deep economic depression. This can be seen most clearly in Southern Europe – by which I mean Greece, Spain, Portugal, and Italy – where youth unemployment ranges from 25 to 50%, economic growth is either near non-existent or negative and political instability is growing. The Euro did not merely fail to prevent this crisis: it actively helped to cause it, and it is making it worse.

While times were good, participation in the Euro allowed nations with weaker economies – like those of Southern Europe – to borrow at low interest rates that reflected trust in the ECB, not in the national governments it represented. This allowed them to pursue wasteful policies, to cripplingly restrict their labour markets and make themselves less competitive, all without having to borrow at higher rates like other countries would.

On top of this the EU did not enforce the laws intended to keep Eurozone countries solvent, enabling economic mismanagement. The international bond markets did not punish economic mismanagement as they would with normal countries – these nations were allowed to become more and more uncompetitive until the financial crisis brought the house of cards crashing down.

All of that cannot be undone, only recovered from, but the Euro makes such recovery far harder. As the Euro is a very strong currency – thanks in the main to the economic success of Germany – it crushes the export markets of weaker economies, while the benefits to imports that a strong currency brings aren’t much use to countries in economic free-fall. The USA began its recovery when Roosevelt devalued the dollar. Argentina dug its way out of its depression in the 90s by unpegging from the dollar and allowing its currency to devalue. Greece, Portugal, Spain, Italy and France cannot devalue their currencies because they are in the monetary straitjacket of the Euro.

Any reasonable attempt to help those economies would have at least allowed them to unpeg from the euro until they returned to economic health, as even Wolfgang Schäuble once suggested. That though, would be a blow to federalism, which ensures that the dogmatically federalist EU will not be reasonable.

This is not to say that structural reforms aren’t needed. They are, and they are being slowly made, but without devaluation to kick-start a recovery it could be decades before Southern Europe returns to economic health. That time will see millions of vibrant young people across Southern Europe unemployed and becoming unemployable, birthing a veritable lost generation.  It will mean more bailout dramas, brinkmanship and radicalism. It will mean poverty, desperation and resentment. Southern Europe is on its knees, and the Euro is throttling it.

The only hope for a more pragmatic policy in Brussels is the foreclosure of the federalist dream. We in Britain have a chance to bring about just that. We have a chance to make Brussels rethink its dogmatic federalism – to be reasonable and to give South Europe the monetary flexibility it desperately needs. That chance comes on June 23rd.

Budget 2017: Social Care Forgotten

“Over a million of our elderly aren’t receiving the care they need and over £6 billion will have been cut from social care budgets by next March. I hope the honourable member begins to understand what it’s like to wait for social care stuck in a hospital bed, or for other people having to give up their work to care for them.”

Intemperate words from Jeremy Corbyn yesterday, bellowing across the dispatch box, in response to a budget that has been greeted with widespread disappointment and which made no mention of social care, despite the continuing crises in the system.

Days before the budget, 90 MPs, over a third of whom are Conservatives, wrote to the Prime Minister demanding cross-party action on social care, telling the PM that “the need for action is greater than ever.” Perhaps the plea did not find its way next door to number 11.

Repeated failures

None of the government’s half-hearted attempts to close the care-funding gap have been successful.

Early this year the Financial Standards Authority criticised the Better Care Fund in the harshest possible terms, saying that it had “failed to meet any of its objectives.” The Local Government Association recently said that the Fund “has lost credibility and is no longer fit for purpose.”

The Social Care Precept enabled local authorities to choose to raise council tax to help fund social care. It has been widely adopted by desperate councils. But because the precept depends on council tax, and therein property values, many decried it as benefiting poorer areas least, ironically those areas where local authority funded care is most necessary.

The chancellor would likely point to the £2 billion ring-fenced for social care in this year’s Spring Budget, to be spent over the next three years, some of which has already been allocated to councils. This, coupled with the Precept has seen social care funding rise by 3% this year, an increase of £556 million, the first year on year increase since 2009/10.

However, as funding is increasing so is demand, and the latter is still outstripping the former. By 2019-20, The King’s Fund estimates that social care will still face a funding gap of £2.5bn, despite these measures to increase funding. With a current average of 5,000 new requests for care every day in England, this is as daunting as it is understandable.

Councils on the brink

Separate research by the Local Government Association predicts that caring for the elderly, other vulnerable adults and children, will consume almost 60p out of every £1 of council tax by 2020, a 41p increase since 2010/11.

The LGA is sounding the alarm that the costs of social care are taking more and more money away from day-to-day services, such as repairing potholes, keeping streetlights on, parks clean and so on. Councils could be forced to ration essential services if the care-funding gap persists.

The way councils raise money is also undergoing a radical change. The largest source of central government funding; the Revenue Support Grant is being phased out. In return, councils will retain more of the money raised through business rates, from 50% in 2015 to a targeted 100% by 2020.

However, the changes to business rate retention were not included in the Queen’s speech, nor cited in the budget statement this week, leaving councils uncertain about how concrete this measure is and how they will be funding services in years to come.

Bigger thinking

Addressing the immediate crises in social care will require additional funding. However, the long-term solution for elderly social care provision in the UK requires deeper thinking. The endless, circular arguments about social care funding are reminiscent of many debates in our country when it comes to social services, where any form of insurance scheme is anathema.

One of the fundamental goods of the NHS is the ability to receive all manner of treatment without any form of point of use payment, this is a social service provided by general taxation, akin to policing, firefighting and national defence.

We could choose to fund social care through central taxation, as we do with the NHS. But can we honestly say with confidence that this would ensure sustainability and drive up outcomes long term? When answering this we should pay attention to the current crises faced by the NHS itself.

When it comes to social care, other options should at least be open to consideration. Our society and ways of life have changed. We all know that we are living longer and unlike in bygone eras, it is rare for elderly relatives to live with their sons and daughters. Because of these deep societal changes and others, we need to think rationally about the best way to fund social care, not with the sole aim of cutting costs, but to improve services, make the system sustainable and a guarantor of dignity and wellbeing in later life.

Another option to fund care services in the future is to move towards an insurance-based model. Take the example of the ultra-liberal, egalitarian Netherlands, where insurance schemes for social care, run by not for profit agencies, are compulsory. However, even systems like those in the Netherlands, which combine compulsory insurance and central taxation, are encountering their own funding shortfalls.

That familiar green glimmer on the horizon

Poor economic performance and the fact that care funding has already been increased – however lacklustre that increase has been – may have led the chancellor to believe he could ignore social care, as so many chancellors and minsters have in the past.

Phillip Hammond’s attitude may have been buoyed by the announcement that the long awaited green paper on care and support for older people will be published by summer 2018. Indeed the timing of the announcement, two days before the budget, was probably a pre-emptive defensive manoeuvre. For some time now, the green paper has been the go-to get out of jail free card for any minister or prime minister facing a grilling on social care.

Hope then, springs eternal. Truly effective policies are what everyone desires from the green paper. Accomplishing the shared goal of improved care, which is sustainable and affordable, will require data driven decisions, original approaches and perhaps just as important; political will and personal courage.