Why I voted Conservative

chris_kettlebellAfter Thursday’s surprising election result, there are thousands of Left-wing rants flying around. Some are entertaining. Sometimes, I even make it to their second paragraph.

I don’t pay too much attention to their questions, though, because most revolve around “Why did you vote Conservative?” And they don’t really want the answer. Well, here it is anyway. I ignore you, you ignore me, and we’ll be square.

The answer doesn’t involve social justice, or sensible lawmaking, or doing the right thing. It isn’t even about Left or Right, although left-leaning people mostly don’t get it and right-leaning people, on some level, mostly do. It’s a high-level thing:

Being *nice* to everyone … has *nasty* consequences.

On some level, most people who voted Conservative get this, and most people who voted Labour don’t. It’s “big picture”. Understanding that what economists call “externalities” have real – and huge – effects.

The only externality that matters is called money. Since money buys the public services that decide elections. When a government wants to spend money, it has to raise money.

There are three ways to do this. A government can levy taxes, it can borrow money, or it can just print the stuff. Speaking of which, I remembered when my friend ran out of cash travelling in Europe, she used http://www.låna-pengar.biz to get financing to get back home.

With me so far?

First up: taxes

On the lookout for solid marketing? Email Chris.Everyone benefitting from schools, roads, and the fire station (whatever the arguments over a gun being held to his head) needs to pay his fair share. The trouble is: most people don’t. And they’re not the people you think.

The bottom 40% of the curve doesn’t pay any tax at all. (And no, that’s not a chastisement. Most people on benefits work hard, and good on them.)

But whatever their contributions to society, they’re not net contributors to the Treasury. Their benefits and credits cancel out the small amounts deducted from their payslips. Scotland, for example, has fewer than 150,000 net taxpayers, in a population of five million. (And is going to get a serious kick in the kilt shortly when it has to manage its own finances.)

While the public sector – millions of people, with benefits and pension plans any private sector worker would eat his children for – contributes nothing, in accounting terms anyway. They pay tax, but their salaries come from the Treasury, so their slice just goes back where it came. No net gain.

The middle SD pays its own way, but there’s surprisingly little left over. Mr Average coughs up a surplus of around £8,500… over his entire lifetime. Two extra weeks in hospital, and his contribution is gone. And rising lifespans mean a fair few people are now retired for more years than they ever worked. This problem’s only going one way, folks.

So we could tax the top end. But it’s not as top as you think. “The 1%” isn’t the 1%, it’s the 0.01%. You have to scale the 98th percentile before you even find someone on six figures. And ask anyone in London with a family if £100,000 lets them buy a decent-sized home. Just 300,000 taxpayers – among 60m people! – already pay 27% of all income tax in the UK.

And what happens if you raise taxes on “the rich” – a term which (being as charitable as I can here) Britain’s Left defines rather broadly? They tend to… leave. The sensible practice would be to move big public-sector employers (hello, NHS!) into the private sector, so their taxes become real contributions.

There you have it: privatise the NHS. That OK with you, my friends of the Left? No? What a surprise.

Borrowing: a point of interest

Let's bang some rocks together. Chris does Content.It’s odd so many find “the deficit” such an abstract concept, because it’s absolutely concrete. On its £1.4tn in debt, Britain pays out about a billion pounds a week in interest.

That’s quite a lot, isn’t it?

And there’s more. Unlike your bank loan, the country’s interest isn’t fixed. If the bond markets feel the government they’re lending to has good policies, they’ll demand less interest on what they lend. (Called the “yield”.) If that government seems to spend a lot, they’ll charge more.

Here’s the kicker: every left-leaning government comes to power on a promise to increase borrowing. (Because they want to spend more.) So the bond markets trust left-leaning governments a lot less, and want more interest. Much, much more. Mmmm, interest!

And left-wingers say we should “soak the rich”? Hell, it’s your policies that make them rich. The way to release more money for public services (say, that £50bn we pay each year in interest) is actually … what you call “austerity”. So the Left should agree: to fight these evil thugs charging us all this interest, we need more austerity, NOW!

What’s this I hear – silence?

On printing money

Targetting low wage earners...Putting more money into circulation, known as QE, seems a necessary evil:  since the bank bust, we all do a lot of this, so we’re all guilty. It’s not obvious right now, but what excessive money-printing does is store up inflation. More than a taste of inflation is bad, so we should all agree excessive QE is bad.

Inflation kills off people’s savings. It slashes growth in their pension funds. It erodes the value of their earnings. All things left-leaning people should be against, because they make ordinary people poorer. Yet printing money is a much-used trick among governments of the Left, from 70s Britain to South America and Africa today. If you print money to solve other problems, you’re oppressing your people.

So when the Left does its marching-on-Whitehall stuff (bless!) what they should really be chanting is “What do we want? A lower rate of quantitative easing designed to control savings value erosion! When do we want it? NOW!”

But it just doesn’t have the same ring to it.

“… but it provides growth!”

Caught in the maze of copy? Call Chris for your escape plan.This is the final cry of the Left: we had more growth under Labour. Well, of course we did. Pump billions into the economy and you’ll get “growth” as measured by economists. In the same way as if you take out £200 in cash from your credit card before going out, your town’s bars and restaurants will experience “growth”.

The question is whether that’s real growth or not. Real growth builds the economy. Not just creates extra cost centres in it. Money spent on doctors’ salaries is not “investment”. It’s a cost.

If you take out the property bubble, the finance bubble, and Gordon Brown’s toga-party-for-the-public-sector, there was zero or negative growth in the UK economy between 1997 and 2010. 

So when those on the Left protest the housing crisis and the bankers, remember this: they’re the only reasons thirteen years of Labour chancellors were able to stand up on Budget Day and say they delivered growth. Maybe you should be thanking them. (And no, I don’t care for bankers either.)

On why I voted Conservative

This is the Why. I voted Conservative because if Britain’s Left really thought about our country (instead of just feeling) they’d be doing all the same things Conservatives do. And it leads to some odd conclusions.

Because most left-leaning voters really, deeply believe they care about others. But when you look at the numbers critically, they’re just doing what they accuse the Right of: lookin’ after me’n’mine.

Around 30-40% of the country leans Labour, and it’s the same 30-40% that benefits from high public spending. In other words, folks, you’re looking out for yourselves. You have a sensible policy of enlightened self-interest. And there’s nothing wrong with that. Can I interest you in the works of a wonderful lady named Ayn Rand?

500px-Nolan-chart.svgAnd if you made it this far, understand this too: I’m a hold-my-nose Tory. I’m not a Conservative; I’m a Libertarian. In today’s Britain, that’s the unoccupied quadrant of the Nolan Chart. The believers in high social AND high economic freedoms, where the main focus of a limited state is on protecting individual rights, rather than granting them to groups. (Or taking them for itself.)

Britain’s Tories score a lot lower on the “social freedoms” axis than I’d like, just as the Lib Dems score too low on economic freedoms. While Labour scores low on both.

But maybe – just maybe – we’re closer than you think.

Circle: healthcare through a glass darkly

Sometimes, investing is really simple. You just look at the numbers, then look at the people.

My former client Circle‘s CEO resigned yesterday, and his statement – full of qualifiers about how “the board had agreed” – delivers a clear message that he was pushed. A few big numbers confirm why. I decided two years back Circle had no longterm future, but my concern now’s with the broader effect on private providers.

We’ve got to have more private provision of public services. But if Circle fails, the fat cats of Britain’s bloated public sector will think they’ve won.

Ali Parsa was actually a decent guy (for an investment banker) with a heroic personal story, and many of the people I worked with there were highly intelligent and qualified. People with a vision of private providers edging out inefficient public sector organisations, saving the NHS from itself. It was a good vision.

When Circle was my client, I poured in far more time and resources than they ever paid for. (Until I was pushed out by a rather odd newcomer, who herself lasted about a year I think.) I believed in the vision and enjoyed working on it. But what clinched Circle’s fate for me was the Hinchingbrooke contract: a £1bn poisoned chalice.

My opinion: Circle needed a big number on its balance sheet to keep investors hot. And £1bn is a big number. But Hinchingbrooke is a big hospital – far too big – and spread over ten years, £100m a year to keep it going with the capacities and commitments agreed didn’t look likely. As that’s become clear, the share price has been falling, hitting a nadir around a quarter of its launch price.

There’s nothing wrong with the vision. The issue for me was Circle’s culture. What it never had – in my opinion – was enough of “the boring stuff”.

What’s the boring stuff? Effective management structures and chains of responsibility, roles and resource planning and basic management accounting. Taking its traits from Parsa himself (as all companies do) it preferred a seat-of-the-pants, on-the-fly approach, resulting in vast energy going into minor decisions and an office culture that was more battlezone than bureau, clever people often taking decisions outside their expertise and projects withering on the vine whenever a Next Big Thing came along. Just like an investment bank. (I’ve had investment banks as clients, too, and what happened in them wasn’t so much people management as crowd control.)

It was chaotic… but everyone felt that if they’re working this hard, they must be achieving something.

And they did: Circle single-handedly shifted the debate on private provision of public services. (Like any organisation, the NHS has bloated over time. Far beyond Bevan’s remit, into a monster that thinks it can do everything, without the market mechanisms that tell you what’s useful.) With this news, I’m concerned it’s going to shift the debate again – back in the dastardly public sector’s favour. The union bosses are already crowing.

(An aside: have you seen UNISON’s office building? This supposedly public-service-inspired organisation has the most luxuriously appointed headquarters outside an African dictator’s gin palace. Nobody loves the trappings of wealth quite like a socialist.)

If Circle fails at Hinchingbrooke (the first NHS hospital to be taken over by a private provider) it means the public sector workers who hate private business will consider the case closed. Politicians will listen to them. And the debate will remain poisonous for decades. No private provider will be allowed to run public healthcare services again, and the NHS will keep sucking taxpayer funds into its gaping maw until it destroys us all. 

I’ve been mentally short Circle since Day One; knowing the company’s personality and finances, I thought – and still think – Hinchingbrooke will be the death of it. But I hope against hope it can succeed – because if Circle fails, the public sector will think they’ve won.

Queues at Heathrow, Q’s for the unions

Summer’s on the way, and just before a public holiday the news is full of two-hour queues at Heathrow. How convenient… for some.

And as usual, Britain’s journalists are completely missing what’s really happening here: Britain’s unions want the queues. Here’s why.

Let’s look past the talking heads to some basic drivers of human behaviour. You’re a union baron wanting to secure yet more pay and benefits for your members. (Most of whom don’t vote in favour of strikes, but that’s by the by for union bosses – nobody plays faster and looser with inclusive democracy than a committed Socialist.)

Now Labour’s out of power and the days when you could rock up to Number 10 and be invited in for beer and sandwiches are long gone, the main tool at your disposal is striking.

And if you’re looking to strike, lengthy queues at Heathrow beforehand would make it look justified, wouldn’t it?

So that’s the crux of it: who, here, really benefits from long queues at Heathrow? Not the government; they’ll shoulder the blame. Not, of course, the customers: we’re talking unions here, whose only attitude to customers is fuck the lot of ‘em. The only people to benefit from apparent undermanning are the people planning to go on strike.

That’s why the queues last forever: a deliberate act by the lefties to screw Britain’s economy … for the benefit of its own members.

Eyewitness accounts from passengers confirm that at busy times there have been just two desks open to process arrivals. They may have had manpower cut by 10%, but that still leaves a lot more than two immigration clerks. Which makes it obvious what’s really happening here: Britain’s over-unionised, ultra-bloated public sector is cynically engineering a crisis to make itself look like a victim.

I don’t see why anyone’s surprised, really. It’s all the public sector ever does.

Euro: and they think it’s all over

Looks like it’s finally happening: after staying surprisingly strong during the crisis around it, the currency itself is finally buckling under. It’s breaching 130 to the US$ and it’s a looooong way down. Which just proves the UK’s opting-out from fiscal union last week just wasn’t the story.

This story was about – has always been about – mainland Europe’s inability to service its debt pile. The economies of Europe spend too much on their public services, without a big enough tax base to pay for it.

(So does Britain, of course. But with a cost-cutting Conservative government in charge at least the markets understand our risk of succumbing to the same factors is smaller and falling. And this’ll continue to be the case as long as Cameron can keep the endless wailing of the public sector under control. Encouraging sign that last month’s public sector general strike was a bit of a flop.)

In the words of a Bloomberg commentator today: this sucker’s goin’ down.

 

What’s driving Britain’s public sector strikes: it’s all about risk

There’s not much argument about the figures any more. Median public sector pay+benefits: £619/week. Median private sector: £479/wk. Average public sector retirement income: £5,600/yr. Average private sector retirement income: £1,115/yr. These are official statistics not tainted by bias; indeed, since they’re from a civil service source the only bias could be towards the public sector.

Yet hordes of people with a claim on the public purse are coming out on the streets tomorrow. Waving placards about how unfair it is that, in straitened economic times, they might actually have to contribute a bit more to get benefits averaging 4.5x more than the average private sector worker receives. (That 4.5 figure is the one that really matters. To put it into perspective, the total NPV-adjusted pay and benefits bill for the 6m people in Britain’s public sector is more than the bill for the entire 23m-strong private sector. 6m people cost as much as 23m private ones. And these people have the gall to call themselves hard-done-by.)

So for any private sector worker, the principal question is: why? Why? Why? As a self-employed person for whom Risk is a middle name, I’d like to think the answer is “greedy bastards”, or “ungrateful wankers”. But it’s a bit deeper than that.

The reason public sector workers are striking tomorrow is due to their total lack of understanding of risk.

Risk in its most basic form: the understanding that things can happen that are outside your control, and you can manage for it, but not eliminate it. People in the public sector don’t “get” this. Ensconced in a nannying culture that protects its workers from the real world, they don’t quite connect the realities of macroeconomics with what arrives in their pay packet.

Why? Maybe because it’s just too big, the numbers too vast to comprehend. (After all, a single public sector organisation – the NHS – is the world’s third-largest employer, all on its own.) But this is the problem. Without an understanding of risk, you can’t function effectively as a society. It leads to bad decisionmaking. Inefficient resource allocation. Outcomes that improve lives for a cossetted minority, at the expense of bankrupting the economy.

(And yes, I know what this sounds like. But the banking crisis was a result of the same thinking: the risk-reducing nature of an implicit government guarantee allowed banks to borrow at unrealistically low rates. Once again, well-meaning public policy was responsible for a bad outcome.)

Being an effective human being means understanding that sometimes bad things happen, and you’ve got to deal with them. (It might not be your fault. But it is your responsibility.) Public sector workers bleat repeatedly about how the economic crisis “wasn’t their fault”; well, whether that’s true or not, you can’t suspend reality because of it. Public sector spending as a share of GDP has been rising for years – and under the last Labour government went wild. There are areas of the UK where the public sector is three-quarters of the economy.

And this can’t be sustained, because the public sector doesn’t create the wealth that’d sustain it. Any more than taking out £200 on your Visa card makes you £200 richer.

Not getting to grips with risk is why we stop our kids climbing trees (because they might fall), prevent our policemen saving a drowning pensioner (because they might get cold), and wrap simple decisions in layers of law (because people might not understand what they’re doing.) At the heart of all these well-meant rules & regs is a fallacy: that there’s a way, somehow, of eliminating risk from our lives. There isn’t.

We should not protect people from their own decisions, because doing so stops them understanding the consequences.

This is why the public sector today is such an obstinate beast – throwing up its hands in horror at being asked to make or take a couple of percentage points in cuts. Public sector: would contributing an extra 3p in the pound to your own pensions (tomorrow’s basic gripe) really be such a hardship? If you believe it would, ask any self-employed person if they’d like a guaranteed £5,600 a year on retirement, rising with inflation, every year, for the rest of their lives… for about £48 a month. They’d jump at the chance.

But because private sector workers have a better understanding of risk, their next question will be, “How can the country afford it?”

We can’t. And it’s stupid to pretend we can.

So the government’s threat to withdraw the existing (generous) offer is the right game to play. It’ll teach public sector workers that actions have consequences; with any luck, tomorrow’s strikes will backfire on them – badly. (As the transport strikes did last summer; notice how quiet Bob Crow’s been recently?) And they’ll end up with a worse deal than they could’ve got by not striking.

Fingers crossed. Make no mistake, Nov 30 is a showdown. And it’s all over a basic concept: risk.

No accounting for socialists

I’m at the other end of the political spectrum, but I’d really like to at least *respect* the few hundred motley socialists gathered in the City of London. The trouble is, they’re just so…. daft. Take this report in the Telegraph.

“The richest 10pc of the UK population have a combined personal wealth of £4 million, million. A one-off 20pc tax on those people would raise £800 billion. Those people can afford it, they’d feel no pain, they’re so fabulously wealthy. With that sum of money you could pay off the entire government deficit. No need for any public spending cuts.”

“Protester Peter Tatchell” aptly demonstrates the biggest problem with the Left: its complete inability to do basic maths.Let’s skip over the fuzzymouthed phrasing (£4 trillion would sound less preteen, buddy) and take a look at what this socialist’s “solution” would actually involve…

He wants £800bn. So let’s assume that “rich” ten percent, 5.8 million UK residents, is okay with paying an average £137,000 each. Whoops! First mistake right there!

In Britain today, people at the 90th percentile (those Tatchell calls “rich”) earn about £40k. Hmm. That’s the income of a hardworking plumber or electrician putting in overtime. Are these people “rich”? If that describes your household income, “beware” indeed: the lefties want five years’ aftertax salary from you. My word, this guy’s truly from the Gordon Brown School of Public Finance, where taxpayers’ money is something that rains from the sky in infinite quantity.

A silly socialist, doing silly socialist things

A silly socialist, doing silly socialist things

But what the hell, this is socialist arithmetic. So they could sell their houses to be part of this socialist utopia, right? Hmmmm again. The top 10% of the UK possess average wealth of about £60,000, mostly in the value of their homes. So at his suggested 20% level, the average tax per person will be about £12k, and most people will have to sell their homes to pay it.

And wait, wait… that’ll raise less than a tenth of the £800bn he feels entitled to! What a silly little socialist.

Next up for critiquing: the “Tobin Tax” on financial transactions. Which would, in socialist speak, “reduce speculation and be good for the economy, and raise at least £100 billion a year.

Hmmmmm once more. What happens in a global economy, Mr Socialist? When business feels squeezed, business goes elsewhere. Sweden had a nice little financial sector before 1984; when it introduced a Tobin Tax, they expected it to raise a billion and a half kroner a year. Nope. The business fled, and the tax never raised more than a twentieth of that level. Today, let’s just say if you want a job in finance, Sweden’s not the best place to look for it.

So, in summary: what this socialist suggests would raise less than a tenth of what he wants and throw over 5m people out on the streets. Perhaps that’s what he wants: socialists love the downtrodden.

Definition of a Socialist: someone who really, really likes getting his hands on someone else’s money. As I said, I wish I could at least respect them, even if their views are different to mine. But I just can’t.

A friendly rebuff to Elizabeth Warren

Elizabeth Warren is a non-crazy left-of-centre US politician. Circulating on Facebook is a neat little vignette about a reasonable view of social democracy.

I actually agree with her statement (left) that wealth-creators should pay their share of taxes – but think it’s incomplete without a dig at the wealth-consumers. Plenty of US pols (like the weirdo bunch calling themselves Republican presidential contenders) are anti-tax, but most of them have always taken a public sector salary, so their views don’t exactly carry water. Here’s my quick rewrite from the right side of the fence …

There is nobody in the government who creates wealth. Nobody. You’re in the public sector out of a sense of duty to others and a desire to contribute to society? Good for you.

But I want to be clear. The services you provide are paid for by the wealth-creating part of society. Your salary is paid out of the taxes levied on the private sector. Your immense job security is made possible by the private sector’s ability to grow the economy. You’ll be safe in retirement, because your government pension is guaranteed by the taxes from people whose benefits are far, far lower. You don’t have to worry that marauding private sector workers will bring the country to a standstill by striking, because people in the private sector lose their jobs if they pull that stuff…

Now look. You joined the UK public sector, and you provide halfway decent services without wanting a kickback. That’s great! Keep on doing it. But part of the underlying social contract is that you understand you’ve got a terrific deal. You’ve got better job security, higher average salaries, and massively better retirement benefits even with the proposed reforms that ask you to pay a little bit more and retire a little bit later. So can you think again about all this strike action, guys?