AFP reports Osborne as saying:

“Today’s figures show the private sector contributing all but 0.1 percent of the growth in the second quarter, and put beyond doubt that it was right to begin acting on the deficit now.

“While I am cautiously optimistic about the path for the economy, the job is not yet done.

“The priority now is to implement the budget policies which support rebalancing and help ensure … sustained growth.”

This is, of course, a bit misleading. GDP is calculated on a value-add basis – the difference between the value of a produced good or service, and the value of the materials used to create it.

What this means in practice is that the stated government contribution to GDP doesn’t accurately reflect government expenditure. For example, the government could buy £1bn of baked beans and fill the House of Parliament with them, and it would add very little to the government share of GDP. The value add would end up elsewhere – in consumer expenditure or exports/imports, for example.

So quite a lot of Government expenditure doesn’t show up in the government consumption share of GDP – this is the difference between what the Government produces on a value-add basis, and the total income it derives from taxation and borrowing (a lot of government expenditure is just a transfer from one group to another).

This is quite an important point in the context of savage cuts to government department budgets. When the government scales back expenditure, the feed-back effects are more broadly felt – we can expect wider consumption and capital investment to fall because some business and consumers rely on government transferring tax revenues to them (for which they may or may not provide services).

And if you scale back government expenditure by enough, you can start having material effects on non-Government components of GDP because of the way the national accounts are assembled. This may mean lower or negative GDP growth.

Osborne’s analysis of these results therefore seems a little naïve, or deliberately misleading.

Willingness to engage in competitive behaviour is important in the context of labour markets, where competition is likely to be higher (in general) for high-profile or well-remunerated jobs. This research might have important considerations from a policy perspective when designing programmes to promote competition in the workplace. Namely, when is the right time to intervene?

It might be possible to have greater impacts on outcomes later in life by targeting intervention from a very early age (pre-three years old) to boost the willingness to compete amongst females. However, this implies that the impact of nature and nurture are more balanced before the age of three (as there are no studies into competitive behaviour at such a young age, it is difficult to know).

Of course, if willingness to compete is largely innate, then it may not matter too much at what stage any interventions occur and, on balance, programmes are likely to have greater impacts if they focus on reducing competitiveness in the labour market to encourage wider participation amongst females.

On a broader, normative point – if we accept there are differences in willingness to compete given gender, then I’m not sure which course of action is more preferable – encouraging females to be more competitive, or making labour markets less competitive? Thoughts welcome…

Unregistered users of thetimes.co.uk are now “bounced” to a Times+ membership page where they have to register if they want to view Times content. Data from the web metrics company Experian Hitwise shows that only 25.6% of such users sign up and proceed to a Times web page; based on custom categories (created at the Guardian) that have been used to track the performance of major UK press titles online, visits to the Times site have fallen to 4.16% of UK quality press online traffic, compared with 15% before it made registration compulsory on 15 June.

These figures can then be used to model how this may impact on the number of users hitting the new Times site. Based on the last available ABCe data for Times Online readership (from February 2010), which showed that it had 1.2 million daily unique users, and Hitwise’s figures showing it had 15% of UK online newspaper traffic, that means a total of 332,800 daily users trying to visit the Times site.

Emphasis added

If I’m not mistaken, the Grauniad has taken Times ABCe figures and multiplied them with the Times’ share of national newspaper traffic (in a separate month from a different source) to derive an estimate at current daily users.

Just wrong.

UPDATE – It’s possible it is a case of bad writing, rather than bad maths. The quote above makes it appear like they have applied 15% to 1.2m to get 330k (which would be patently wrong).

It’s possible the maths works as follows: the 330k is the 15% of total UK quality print online daily readership (c.2.3m). Then 4% of 2.3m = c.80k, which in turn is <10% of the 1.2m (so a loss of more than 90% since Feb).

If that is the logic, then it is flawed for a number of reasons. Not least the mixing and matching of data sources and the assumption that readers who no longer read the Times Online read another UK national quality paper online instead.

Plus – as readers in the comments section of the original article point out – even if you lose 90% of your readership, if they are willing to pay more collectively than you got in click-through advertising making the same content available for free, then you’re better off behind a pay-wall.

Both are Pay As You Go (PAYG) schemes – where current payments are funded from the contributions of those who currently work – and both will become more difficult to fund in future years, largely for demographic reasons.

The are several problems for governments looking to tackle the issue of pensions – for example, people often don’t know the true value of their pension entitlement as it relates to a period a long way in the future; and older people are disproportionately vocal on the issue because it affects them currently, but any concessions we make to existing older generations makes it harder to rectify for future generations.

On State Pension Entitlement, the medium-term choice facing government is harsh – restrict pension entitlement to a shorter period of people’s lives (by raising the age at which the entitlement kicks in), or spread the benefits more thinly (i.e. pay less to each pensioner each week). It really is as stark as that, and the problem will get worse as the baby-boomers start retiring in this decade. (PwC did a good report on the impact to public sector debt if we don’t address this structural problem – and it would make the financial crisis look small by comparison). It is understandable in the context of better healthcare and the fact people are more active to a later stage in life that delaying the start of the benefit, rather than cutting the value of the benefit to each individual, is the preferred route.

I always thought Labour could and should have done more whilst in power to address the impending pensions crisis. I’m glad that the current government is speeding up measures announced by Labour, and thinking of going further. Linking the age at which state pensions kick in to average life expectancy – a measure which the current government is looking at – is a bold move, but one which I would support. Such a link reduces the downside financial risk to government/taxpayers of having to fund pensions over an ever increasing period of time, and ensures what limited resources are available to pensioners go further. Aligning the retirement ages of men and women is right and we should also make it easier for older people to carry on working, if they want to.

Of course, some of the problems which may occur in future in relation to state pension affordability will be directly consequence of measures they propose to introduce – in particular, the cap on non-EU economic immigrants will reduce the UK’s ability to afford pensions, for example by preserving the replacement ratio (roughly the ratio of the working age population to pensioners). This is another reason why that particular barmy proposal ought to be opposed.

As young people, it is important we contribute to the debate. After all, we are the generations which will have to fund baby boomer pension entitlements as well as face reduced entitlements ourselves. The short-sightedness (or selfishness?) of older generations isn’t a mistake we should repeat. When you add in funding our university education, environmental problems, and the massive transfer of wealth to them via housing stock, I think we are entitled to feel short-changed but it is important to address structural issues in our pension funding to avoid selling future generations down the river. (See David Willet’s book The Pinch for more on some of these intergenerational travesties).

Public sector pensions, on the other hand, are an altogether different beast.

There are a lot of arguments thrown around about public sector pensions – that they are lavish, ’gold-plated’, or act as compensation for employees who accept lower current wages than would be payable in the private sector. The truth, of course, is a little more complex.

In my own experience I know of people who have left private sector jobs to joint the public sector and who have secured higher pay, better pension entitlement and have to work a lot less for it. There is some evidence to suggest that the pay gap between private and public sector jobs has narrowed considerably over the last ten or so years, with a concurrent fall in public sector productivity. However, I think the worst excesses are mostly confined to management level positions, rather than more junior and frontline positions (nurses, firefighters etc). We should be careful not to assume that all public sector workers have it good.

In the context of a reduced number of current contributors to state pension funds (i.e. a smaller government workforce) as well as the demographic burdens of promises to older generations, it is understandable that the government want to limit the liability to the Treasury (i.e. the ‘unfunded’ bit of current pension payments). However, addressing this issue will be much harder for them than the state pension issue for a number of reasons:

• pensions are contractual entitlements, which would make it hard for the government to change already committed entitlements (which means they are unlikely to reduce current pension costs);
• changing pension benefits for new employees (for example, switching to average salary schemes) would not have a direct benefit to the public finances until those workers retire – possibly several decades;
• trade unions are likely to oppose any material changes to existing workers, and possibly new workers.

Making existing members of pensions schemes increase their payments into the scheme would be challenging, but probably the least worse option. Likewise, it might be possible to reduce the entitlement existing members accrue in future. Both are likely to meet strong opposition.

The tribal response to the appointment of John Hutton to chair a review into into public sector pensions was incredibly disappointing, and trivialises a very serious issue for the UK. It is likely we will need cross-party support for any measures to make public sector pensions affordable. Labour should be at the heart of those debates and contributing to the development of policy on those issues. Far from being deriding him for being a “traitor”, Labour should welcome Hutton’s appointment and make the most of his involvement.

After all, we can’t afford not to.

For what it’s worth, this is a (personal) summary of what I learnt at those hustings:

• The two Eds could barely conceal their contempt for one another. Ed M had a good line about it “being like the Treasury” when Ed B was pulled up for waffling. Ed B made some pointed remarks about the manifesto Ed M wrote.
• Diane Abbott will make the hustings more entertaining, for sure. But she’s likely to drag the other candidates left as they attempt to combat her popularity amongst a fairly vocal section of the Labour party. (See Hopi Sen’s post on why Mili D may come to regret Abbott being on the ballot).
• We should avoid a three-month long public self-flagellation. We lost the last election because we didn’t have a positive vision/narrative for the future of the country. Spending the whole leadership contest picking over what went wrong in 13 years will be an horrifically pointless waste of time and is unlikely to endear us to the electorate (this is an question of balance, not one of avoiding talking about the difficult introspective issues).
• Only two candidates, in my view, showed they had the ‘common touch’ – Diane Abbott and Andy Burnham. The Milibands show flashes of passion, although at times came across as managerial automatons. Ed Balls has a surprising ability to mix verbosity, pomposity and aggression when speaking.
• All of the candidates need better lines on the economic issues facing the country – Abbott, Burnham and the Milis need more substance, Balls need to stop sounding like he’s reading from a textbook.
• The consensus from those in the room tweeting about the event was that Andy Burnham had an awful hustings. I disagree. I thought he performed well and certainly better than could have been expected. He was passionate and refused to abandon his record for expediency – not populist, but principled. I think he will play well on television, too – unlike some of the other candidates. Far from being an “also ran”, I think Andy Burnham may be a dark horse in the campaign. Some of his answers lacked polish and substance, although this will change as the campaign drags on.
• David M was impressive on defence and foreign affairs. His answers on Trident showed real leadership potential, even if they weren’t universally welcomed by the audience (the event was co-sponsored by the CND).
• The battle between the Miliband brothers is going to be a key focus of the media, and their facile analysis of it will annoy and irritate me by the end of the summer.
• Andy Burnham’s make-up was good.
• This is going to be a long campaign, fuelled by the same half-baked phrases and jokes. I’m glad I’ll only be going to a couple of hustings. I’m more glad I’m not one of the candidates.
• We should have had a proper leadership contest in 2007.
• Hecklers should stop looking so smug with themselves. They are not big. Or clever.

I am undecided as to who to support. Genuinely.

In truth there is more that unites the candidates than divides them. Hopefully by September there will be an obvious choice for Leader.

For that reason, I’m sure some will discount what I’m about to write as the bitter ramblings of a malcontent, angered by the prospect of his white, middle-class brethren losing their bear-like grip on the upper echelons of the Labour party. Not only are they wrong, but such arguments are trite.

Harriet Harman’s proposals to impose an equality quota on the Shadow Cabinet – 50% men and 50% women – deserve proper scrutiny. Not because of the objective of greater gender balance in the highest ranks of politics, but because of the mechanism she believes will best achieve it.

And I hope our leadership candidates will join me in ensuring that Labour women are no longer kept in the shadows.

We have 81 Labour women MPs – more than all the other parties put together. Labour is the only party in parliament which speaks up for women in this country. We have some excellent experienced women and some brilliant new women MPs. We still do have twice as many men MPs as women. The labour men are great – but they are not twice as good as the women – so I want the PLP when we revise our rules for shadow cabinet elections to have 50.50 men and women in the shadow. It’s time for Labour women to step out of the shadows.

Harriet Harman speech to Unite, 3 June 2010

As a short term proposal, there is much to commend it:

• A greater number of women in the highest ranks of the Labour party will provide positive role models for other women to aspire to.
• Better gender balance in the Shadow Cabinet will ensure gender equality is prominent in public debate.
• Better gender balance in positions of power will ensure some of the obstacles to greater gender equality are dismantled sooner by those pioneers, thereby providing greater equality of opportunity for future generations.
• It is shrewd politics – the Shadow Cabinet will show up the lack of gender balance in the Cabinet.

And yet, it is at once a problematic idea. If quotas are seen as a sort of compensation for structural issues which prevent their ascension to the very highest ranks of politics, then it is right to ask what is being done about those obstacles at source. Factors such as culture, party selection procedures and parliamentary working practices may be part of the root cause for lack of gender balance, but quotas do little (directly) to address these issues. And there is a danger – as has arguably happened with All Women Shortlists – that such quotas are seen as sufficient to redress gender balance issues, whereas they actually mask the underlying problem(s).

So gender quotas should be welcomed in the short term for the reasons listed above, but maybe they should come with a firm sunset clause. This may incentivise greater and faster action to remove structural and cultural barriers to achieving the same end without output based regulation.

Because, in the long run, true equality is not needing quotas at all.

Rising VAT is a prospect that has been met with resistance from the left. Richard Exell of the TUC argues on Left Foot Forward that increasing VAT to 20% would be regressive and should be opposed.

True, economic theory suggests sales taxes are more regressive than other forms of taxation, but I think such statement of theory is too simplistic when considering the likely impact of a VAT rise on lower income households.

We also need to consider:

1. The elasticity of demand for the goods subject to the sales tax – the tax is only regressive if demand for the goods to which sales taxes are imposed is inelastic.

   Not by chance, such issues have already been considered and codified in the taxation system, with ‘necessary’ goods, such as food and childrens clothing and heating, being subject to zero- or reduced-rate VAT.

   Click here for the HMRC list of reduced or VAT-exempt items.

2. The spending mix of those on lower incomes.

   It is likely that lower income households spend more of their income (as a percentage) on those necessary items which are subject to zero- or reduced-rate VAT. So an increase in the main rate of VAT is unlikely to affect this expenditure.

   On the margins, it may result in decreased demand/delayed demand for luxury goods, such as electrical appliances and cars; or in forms of substitution – either to lower quality goods of this sort, or to alternative goods (e.g. buying more children’s clothes instead of a new vacuum cleaner).

I think the most likely effect of increase in VAT is that higher income households would see a disproportionately higher increase in the amount they pay in indirect taxation compared to lower income households as most goods to which the standard VAT rate applies are ‘luxury goods’. (This could probably be demonstrated using sample data from the Expenditure survey undertaken by the ONS.) Note this is consistent with the justification for reducing the VAT rate to 15% as part of the fiscal stimulus measures last year – the rationale then was to increase demand for larger purchases, such as cars and electrical items, which are unlikely to represent a core part of the consumption basket of lower income households.

So I’m not sure the regressive nature of sales taxes in general is a solid argument against increasing the rate of VAT applied to ‘luxury’ goods.

The fact we have items to which we apply zero- and reduced-rate VAT invites a more pertinent question: have we got the right goods in these buckets? Are there some items in there to which we could actually apply a higher rate of VAT without making lower income households significantly worse off? And I think the answer to that question is yes – for example, it isn’t clear to me that gambling is a ‘necessary’ good, yet it is not subject to VAT.

Most of the document represented a mix of the Conservative and Liberal Democrat policies outlined in their manifesto. Some of those – like immigration caps – are patently daft. Others are a true blend of Con-Lib policy positions – tax policy, for example. But the one issue which appears to be raising some genuine debate on blogs and Twitter this morning is the following passage on political reform:

The parties agree to the establishment of five year fixed-term parliaments. A Conservative-Liberal Democrat coalition government will put a binding motion before the House of Commons in the first days following this agreement stating that the next general election will be held on the first Thursday of May 2015. Following this motion, legislation will be brought forward to make provision for fixed term parliaments of five years. This legislation will also provide for dissolution if 55% or more of the House votes in favour.

Conservative-Liberal Democrat coalition agreement (emphasis added)

This 55% threshold would have the effect of allowing a Conservative minority administration to continue even if the coalition broke down – taking into account the fact Sinn Fein don’t take up their seats in Parliament, the Conservatives account for 47% of MPs in Parliament. This appears cynical, and out of kilter with the image of “new politics” being portrayed currently.

However, my understanding is that this rule could be amended by a simply majority in Parliament (assuming opposition parties could force a vote on the issue). So if the Government lost the confidence of a simply majority of MPs in Parliament, they may well be able to force an election, but it would require (1) a vote on the issue of the threshold required to result in a dissolution of Parliament and (2) a vote of Confidence. Simply put – it doesn’t guarantee a full fixed term, but makes it harder for opposition parties to force a minority Conservative administration from power (and even if they remained in power, they might find it hard to introduce any primary legislation).

So, while it looks bad on the face of it, I’m not quite sure what its practical impact would be.

To avoid contributing to the guff pandemic which is sweeping Westminster, here is a very brief reflection on the speeches made by the outgoing and incoming Prime Ministers – there was a subtle but important contrast in their vision.

My main point is this: Gordon Brown yesterday articulated a better vision of what power can achieve than David Cameron managed on the steps of Number 10.

Yes, Cameron probably wanted to appear businessmanlike and, yes, maybe Brown should have shown more vision during the campaign. Nonetheless, the contrast between the individualist and collectivist approaches to goverment were evident in the speeches made yesterday by the incoming and outgoing Prime Ministers.

David Cameron, speech on steps of 10 Downing Street, 11 May 2010:

I came into politics because I love this country. I think its best days still lie ahead and I believe deeply in public service. And I think the service our country needs right now is to face up to our really big challenges, to confront our problems, to take difficult decisions, to lead people through those difficult decisions, so that together we can reach better times ahead.

….

I want to help try and build a more responsible society here in Britain. One where we don’t just ask what are my entitlements, but what are my responsibilities. One where we don’t ask what am I just owed, but more what can I give. And a guide for that society – that those that can should, and those who can’t we will always help.

Gordon Brown, speech to Labour Party HQ, 11 May 2010:

We fought for the future.

And we continue to fight unceasingly because progress is not a word we just speak but a reality we have been creating where the ambit of opportunity always expands and never contracts. And we fight for progress because we know the energy and talent of the British people are boundless whenever they are released from stereotype and allowed to soar.

We know that progressive change is possible, because our very record shows it is.

POSTSCRIPT: Maybe the above is a proof of the saying that one “campaigns in poetry, but governs in prose”.

Notwithstanding the charitable zeal with which Mr Snow launched his flotilla of five dinghys across the Channel, the example does highlight a couple of problems with a vision of the Big Society.

• The Big Society vision will probably only have traction for a narrow set of circumstances. Air travel crises aren’t amongst them – with tens of thousands of holiday-makers stranded across the globe, it is likely that State involvement in rescue efforts is not only desirable, but necessary (as the Conservatives themselves recognised over the weekend).
• A Big Society would result in wide variation in the quality of services available to people. Mr Snow managed to rescue a tiny fraction of those impacted by the current air crisis. Yet there are many people stuck further afield who did not benefit from Snow’s efforts, and some who would probably never benefit given the logistical/financial difficulties in assisting them (i.e. market failure can still occur even when charities are involved). A consequence of a Big Society is a “postcode lottery”.
• A Big Society still requires resources to be committed to causes. Mr Snow might have pockets deep enough to assist a few hardy travellers, or have pliant enough friends/relatives that such resources can be raised. However, if the State in the Big Society wants ends to be achieved – such as the rescuing of all stranded travellers – then they will either need to act themselves, or commit resources to third parties to act on their behalf. In either case, the small State in the Big Society is spending taxpayers money and would be accountable for doing so. Thus a Big Society may not help alleviate the deficit, nor alleviate governance surrounding the spending of State resources – two supposed benefits of a Big Society, rather than a Big State.

Far from being a golden example of the Big Society in action, Dan Snow’s escapades highlight some of its difficulties.