Saturday, December 01, 2007

Competence in politics

The public are clearly rather unimpressed by HM Government (I doubt she's very impressed either).

The Telegraph have focussed on a perception of 'incompetence' as the main explanation of the Government's woes. Chris Dillow probably disagrees. He thinks competence is a political non-question as the opposition can't claim with seriousness that they will be more competent. In a sense he is right, no one could 'manage' an organisation like the NHS. For that reason there is little to be said for the poll question "A test of any Government is whether it is good at management: whether or not it provides the country with competent day-to-day administration. How would you rate the present Government's performance as managers in connection with each of the following?"

This question is either entirely meaningless, because no one can credibly claim that they can offer competent day-to-day management of organisations as dysfunctional as your average government department, or substantively meaningless as, while people might shift from party to party seeking elusive 'competence', every government will steadily prove itself 'incompetent' over time. They will slowly exhaust the public's patience.

The proper question we should be hoping people will ask is not "which party is more competent" but instead "which party will stop making ordinary people pay for their own hubris in imagining they can run politically managed services competently". On this measure I think there is some difference between the parties but Chris is entirely right that it isn't a lot.

The Telegraph asked another question: "Which of these statements comes closer to your view? Although it has had a fair amount of bad luck recently the present Government is basically competent and efficient. Or, the present Government is neither competent nor efficient: to put it bluntly, it couldn't 'run a whelk stall'." This opens our analysis up to a broader understanding of competence. I think there is another way of understanding competence and incompetence that is, perhaps, more enduringly relevant.

I think that competence in government isn't necessarily about managing, or mismanaging, anything. It can be understood as a purely policy phenomena. I would call someone incompetent if they make a policy decision that led to problems that could easily have been foreseen but that took them unawares (expected problems aren't incompetence, more often they are trade-offs). You can see this kind of incompetence in both of the major administrative scandals that are engulfing the Government. The tripartite structure's weakness in the face of serious pressure and the merging of HMRC combined with complicated tax credits and shortages of resources leading to administrative chaos and data protection failures.

I think that this is a key part of how the public understands political competence and incompetence. It essentially recasts competence as a simple question: how cautious is a politician of the possibility that their policies will have unintended consequences?

That seems relevant for even the least managerialist Government. The next thing that needs to be thought about is how a Government or opposition can make themselves more competent. An answer to this question is tricky but I think that subjecting their policies to a more severe 'trial by fire' within their party and movement would be crucial.

Thursday, November 29, 2007

'Liberals' conspire against the Public Sector Rich List

This post by Gracchi on the Liberal Conspiracy website attacking the Public Sector Rich List has plenty of phoney 'gotcha' moments. Fortunately, none of them remotely stack up:

"Firstly its noticeable that on their website, they claim the need for this survey because these public sector workers are paid so much more than teachers, soldiers and policemen. The politics of envy resurfaces and is evident in many of the comments! Such an argument presupposes a commitment of some kind to equality- and acknowledges the injustice of directors of the Royal Mail sitting in plush offices earning millions whilst soldiers sit in Basra risking their lives earning thousands. I’m not sure how that sits with the reductions in taxation that the TPA advocates elsewhere- nor am I sure that the only inequalities are within the public sector."

Let's look at the actual reasons why we said the Rich List was needed:

  • "Transparency. People and organisations that receive large amounts of taxpayers’ money should be accountable to the public they serve. Taxpayers should be able to judge for themselves whether the remuneration of senior officials represents good value for money.

  • Rewards for failure. People in the public sector should be paid well for good performance. But in far too many cases senior public sector officials are being paid over the odds for dreadfully poor performance, which in some cases would warrant a sacking in the private sector (see Table A1.2 for 10 examples)."

We did include the wages of soldiers, nurses and policemen in our report but as a comparison. Some of the bigger salaries are so high that the numbers can almost become meaningless. Just like the £101 billion of waste figure in the Bumper Book of Government Waste they need to be compared to something so that people can get their heads around them.

"Secondly they argue that the salaries of public officials should be justified- and they are right. Lets take Adam Crozier, chief executive of Royal Mail. He is paid a ridiculously vast amount of money, but he was recruited from being Chairman of the FA- and before that was a leading advertiser. If the TPA believe in the efficacy of private markets setting wages then Adam Crozier is probably being paid at about the market rate for a chief executive- and so are many others amongst these fat cats in the public sector. Ultimately the cause of the pay of the public sector fat cats is the pay of the private sector fat cats. If you want to get your hands on these types of people you have to pay these types of salaries. So if you want to take a look at public sector people being paid too much for these jobs, perhaps you have to either settle for rubbish directors (of which more in my third point) or you have to think about private sector pay scales."

Firstly, private sector Chief Executives often make far less than even the average in the Public Sector Rich List never mind Adam Crozier. This was pointed out by Chris Dillow in his response to a Comment is Free piece making a similar point to Gracchi's:

"The Institute of Directors reports (pdf) that the average managing director of a firm with turnover below £5m gets a basic salary of just £65,000. One with a turnover of £50-500m gets £141,440. These are decent professional salaries, but not a fortune. And the survey also finds that public sector bosses are already paid more than private ones, at least outside financial companies (which are managed so much better, of course)."

Of course, the Royal Mail is a big company and Crozier doesn't, necessarily, represent bad value. However, the Royal Mail's performance this year has been far from brilliant. Gracchi doesn't have the slightest clue whether he is being paid the right amount and the idea we should just trust the judgement of the Royal Mail's Remuneration Committee to get it 'right' is palpably ludicrous.

In the private sector when a senior manager is paid too much shareholders should be up in arms. The revolt over Jean Pierre Garnier's deal at GSK is a classic example that should be emulated more often. In the public sector the public need to fulfil that role. They need to fight the temptation for public sector organisations to be run for the benefit of management instead of the public. Our rich list allows them to do that.

"Thirdly, ah says my Taxpayers’ alliance friend- but the question is whether they have any impact on their organisations. But again that presents him with an ideological problem. Generally researchers for the TPA believe in hierarchy and hence in differentiated pay. There is lots of evidence, just have a look at Chris Dillow’s blog, that company directors don’t necessarily have an impact on their company stock’s performance- and its quite possible that the same thing applies in the public sector but again all the arguments in favour of or against hierarchy apply similarly in both sectors and hence all the arguments for and against large pay differentials and packets!"

The idea that because you believe some managers are good value you should believe all managers are good value is idiotic.

"The ultimate problem with this kind of Daily Mail politics is that in order to establish that well paid bosses don’t make the public sector any better off, the Taxpayers’ alliance would have to accept that well paid bosses don’t have any positive impact on any organisation. Otherwise they are arguing for poorer public services! (Or perhaps that equality is a moral good which trumps efficiency, but again is that a unique truth for the public sector!) All these arguments seem to me to rebound upon their owners."

This is full of non-sequiturs. Just because we think some public sector bosses offer poor value we don't have to be opposed to well-paid bosses in general. Equally, just because we find big pay packets in the public sector alarming doesn't mean we have to in the private sector. If a firm in the private sector pays its senior management way too much then they will be hurting their ability to compete in the market. Public sector organisations, by contrast, are often monopolies and are paid for by money taken from a taxpayer who has little say in the matter. They don't face the threat of creative destruction if they prove inefficient.

"In a sense this isn’t important- the list they did didn’t really make the national media."

This is utter leftie hubris. I'm afraid a little boasting will be necessary to refute it.

The report got excellent coverage in the national media. It was initially an exclusive for the Sunday Times who put it on the front-page, gave it two pages inside the paper and wrote a leader on the subject. It was then covered by Sky News, BBC News 24, the Mirror, the Express, the Scotsman, the Times, the Telegraph, the Financial Times and the Sun - in many cases quite prominently. It's hard to think of a recent thinktank publication that has had better national media coverage.

Finally, we had this in the comments:

"Of the top ten on the list, six cost the tax payer nothing at all.

Network Rail, Royal Mail, BNFL, and Channel 4 are not parts of the civil service. They are public owned market bodies. They earn their revenues from business activities, and they pay their from those revenues.

So what do they have to do with the tax payer’s alliance?"

These are organisations either owned or heavily subsidised and guaranteed by the taxpayer. If they go belly up we will wind up with a hefty bill to pay. Every penny the Royal Mail pays to Adam Crozier is a penny that will not contribute to the Royal Mail's return on the taxpayers' big investment in owning Royal Mail.

Gracchi's article is a mish-mash of simplistic assumptions and clumsy logic that can't stand up to the slighest scrutiny.

Cross-posted from the TaxPayers' Alliance blog

Wednesday, November 28, 2007

Putting a politician in charge of financial stability

Defending financial stability in an economy near you... soon...

Peter Franklin strikes again:

"Devoting a Cabinet minister to financial stability is no guarantee of financial stability, but it would help and, if nothing else, would send a message to the anxious savers and pension fund holders of Middle England that we take their concerns seriously."

At the moment no one has direct overall responsibility for financial stability. I think that just about the only way you could make things worse is to put a politician in charge. This isn't an area where there are many ideological issues at stake that should be decided democratically. It is, instead, an area that requires expert and experienced judgement.

Your ideal person to put in charge of financial stability is someone respected by the markets with a real knowledge of economics and how the system works. A non-politician. Make it a ministerial post and you're highly unlikely to wind up with someone qualified to oversee the financial system (of course the same can be true with the Civil Service - see Sir John Gieve). There aren't really people with those kinds of qualifications in the Commons - just a few ex-financial journalists and the odd banker.

You'll probably get someone who won't have real experience in anything but politics. Particularly given that it will be a job where people only notice the minister if things go wrong. Just like the Home Office at the moment it will be a poisoned chalice which will mean it won't even get the brightest ministers. Whoever got the job would just have to watch, fearfully, and hope things take care of themselves. If something went wrong there would probably be a carefully established media strategy but little idea of what to actually do about the problem. The stability of the British financial system would be further impaired and Middle England wouldn't be impressed.

"The EU is cutting emissions" - which EU?

Brilliant bit of deconstruction over at the Cooler Heads blog:

"Reader, beware. Europe has quietly swapped out one “we” for another, such that the “we” Dimas refers to now is the EU-27, a whole ‘nother kettle of fish. This does not reflect the performance of “Europe” according to Kyoto, which is the EU-15, or “Old Europe”.* The remaining States only afford such rhetoric by bringing to the table an emissions inventory well below their 1990 baseline, due to economic collapse, an artifact of political history unrelated to the Kyoto agenda."

Go there for more detail.

Tuesday, November 27, 2007

Stay positive

Great post by Mark Wallace over on the TaxPayers' Alliance blog. About the things you can learn from an unscientific BBC web poll.