Taking the long term view in policymaking

I spent last week at Sydney's Graduate School of Government. It's run by Geoff Gallop who is the ex-Premier of Western Australia and good friend of Tony Blair's since their college days together. Geoff was kind enough to invite me to Sydney as a visting fellow and guest lecturer at the University.

I gave a number of talks on strategy and policymaking, as well as an evening address on long-termism in government (rather embarassingly to most of the public service's top brass from past and present). It'll be podcasted soon, but otherwise available here.

My argumentation was that we should broaden the concept of long-termism; and that governments are typically poor at planning for the long-term, but increasingly need to get better at it, and can do so through:

1. Creating spaces for long-term thinking in the architecture of government, with examples of the Strategy Unit, Foresight and so on
2. Using independent reviews and more independent analysis to create public value and consensus on long-term issues, such as through the Nick Stern Review of the Economics of Climate Change
3. Designing systems, rules and incentives for long-termism through reform to national accounting rules and performance management approaches
4. Developing a culture and practice of long-termism in the public service workforce
5. Aligning strategic policy analysis to a level most appropriate to taking the long-term view

Interestingly, in so far as these are the right components, I think the UK is ahead of other countries. In discussion I also tried to emphasise that different combinations of these will be approporate in different circumstances. So, for example, simple accounting rules is unlikely to be much use in addressing the long-term threat of climate change, but the public value approach through honest and open debate might be more so.

The 'Ekka'

Today is a public holiday for Queensland’s ‘Ekka’ festival. Its official name is the Royal Queensland Show, though like many Australian words was shortened to ‘Ekka’ from its original title, the ‘Queensland Intercolonial Exhibition’, which dated back to 1876.

It’s principally an agricultural show and was, and to some extent remains, an opportunity to demonstrate new technologies and inventions. Lasting a week and held on Brisbane’s showgrounds, it’s the annual chance for many Queenslanders to visit the ‘big smoke’, many of whom will travel distances over 2,000km to get here (and that’s just within the state).

I went along last night and it was quite an experience (and good fun). It was full of people donning cowboy hats, sheepskin jackets and leather boots. Entertainment included rodeo, wood chopping, monster truck driving, various agricultural prize shows, and a laser and fireworks show sponsored by the Dairy Farmers union. Not much more to add really, but thought as it's such an iconic Queensland event I couldn’t not add something on it.

An argument for consumption taxes

Australia’s Treasury has recently kicked off a fundamental review of the tax and transfer system, with publication of a discussion paper and creation of a review panel.

It’s got a pretty immense scope. On the tax side, Australia’s three big taxes are - like most OECD countries - income tax, corporation tax and consumption tax (in that order). Together these make up about 85% of total revenue, with a further 122 taxes making up the rest.

For my part I’ve long thought the left needs to get over its fear of consumption taxes and shift this up the revenue hierarchy. Why?

Here’s a quick list of 10 for starters…

1. Easy to administer: unlike many other taxes a consumption tax doesn’t need such a level of bureaucracy and administration to run.
   


2. Hard for the rich to avoid: let’s face it – it’s pretty easy to avoid many taxes if you’re wealthy enough to pay for a decent accountant or smart enough to know how to shift money into different forms or between different countries. Consumption – paid at source – is almost impossible to avoid.
   


3. Consumption is a better tracker of long-term income: while incomes used to be relatively stable over the life course, today many people’s incomes will fluctuate considerably (e.g. as people take career breaks or move between different sectors). Taxing consumption is actually a lot fairer way to pay your share over the long term.
   


4. Earned income less correlated with wealth than consumption: again, while in the past earned income formed a sizable proportion of total wealth, today unearned income (like from share investment) rising and difficult to tax. So income tax becoming relatively unfairly burdenous on middle and low-middle income earners. Consumption more closely linked to total income.
   


5. Income and corporation taxes are not the tax bases that they once were: Income tax is less useful these days as unearned income rises in proportion of wealth. In any case income taxes always a drag on productivity through their labour supply effect. And there’s strong downward pressure on corporation taxes in a global economy. Meanwhile the revenue side needs to come from somewhere.
   


6. Link between consumption and happiness weak: the line from classical economists has always been that people know best how to spend their money. I’d broadly agree but at the margins the evidence looking clearer that that marginal DVD really doesn’t matter that much to us anymore.
   


7. We need to save more anyway: Anglo-Saxon economies have long been over-consuming and under-saving. Indeed I’d argue that’s one of the causal factors driving the current downturn. A marginal shift to consumption taxes will raise the savings rate.
   


8. Possible to exempt goods for social objectives: the left always been afraid of effect of consumption taxes on the poor. But easy to exempt for things like babies clothes (which we do already).
   


9. And vice versa on ‘sins’: good evidence that price (as part of a wider package of behaviour drivers) can reduce unhealthy smoking and drinking.
   


10. There are other economic benefits to consumption taxes like their neutrality on differential investments (unlike corporation and income taxes).

Australian Politicians (5): Troy Buswell

Australian politicians come in many moulds. Most are very entertaining. So it is today with regret that Australia bids farewell to Western Australia Leader of the Opposition, Troy Buswell.

Not quite at the same bizarre level of fetishism as former British politician Mark Oaten*, but certainly a record of survival that would make Peter Mandelson proud, Troy has over his year career in politics…

• Been caught out several times as a ‘seat sniffer’ of chairs vacated by female aides. On one occasion Troy apparently ‘groaned and writhed in sexual pleasure after lifting a chair above his head and sniffing the seat deeply’
  
  
• Pulled bra-snapping tricks on Labor party staffers
  
  
• ‘Squirrel-gripped’ (i.e. grabbed the testicles of) a fellow Member of Parliament.

Anyhow Troy today decided to quit politics to move 'onwards and upwards' in life. I supposed it'd be hard to go much lower...

(* if you've forgotten the exact reason why Mark Oaten resigned, a googling of 'shit', 'face', 'rent-boy', and 'eat' should assist)

Making the news in Queensland ...

Two Queensland news stories have dominated for over a month now. Together I think they show how difficult it is running a government in today’s media world. The first is about a sex offender, Dennis Ferguson. A repeat offender, Ferguson was released in July after the judge decided he wouldn’t receive a fair trial for his latest offense. Since then he’s spent the last month being hounded by the media and public from one safe house to another.

The second story is about a surgeon nicknamed “Dr Death” who is accused of gross incompetence while practicing in Queensland. Jayant Patel arrived in Australia several years ago, seemingly after various counts of professional misconduct in America. Employed without full checks, Patel was subsequently linked with the deaths of up to 87 patients. Fleeing back to America he was extradited back a few weeks ago and is awaiting trial. Again, there’s a good chance it’ll be thrown out because he won’t get a fair trial.

Both these stories have severely damaged the Government’s reputation in recent weeks, with them unable to gain any control. They are the sort of things that hit governments from time to time; I guess Queensland has been particularly unlucky to have both running together.

What to do? Like most others I’m pretty stumped...

• Distract with other announcements? Hard to see what would sufficiently grab the attention and in any case risks being accused of doing such would hardly win favours.
  


• Tackle head on? Difficult to see what government can actually do in these sort of situations. Any sign of interference with due process and they’ll surely get slapped down by the judiciary.
  


• Put your hands up and admit there’s nothing to be done? Yes, but the man on the street demands that something must be done.
  


• Tough it out with hard rhetoric and little action? Hmmm, maybe that’s the one.