L'Ombre de l'Olivier

The Shadow of the Olive Tree

being the maunderings of an Englishman on the Côte d'Azur

27 November 2006 Blog Home : November 2006 : Permalink

A Contract With the Government

(Warning this post contains swearing -it is after all about the govt, that is a 4 letter word and where one 4 letter word goes others tend to follow)

The big brains at ZANU Labour thought up a brilliant new wheeze last week - a social contract:

A new contract between the state and the citizen setting out what individuals must do in return for quality services from hospitals, schools and the police is one of the key proposals emerging from a Downing Street initiated policy review.

Examples include an expectation that a local health authority will only offer a hip replacement if the patient undertakes to keep their weight down. Parents might also be asked to sign individually tailored contracts with a school setting out what the parents must do at home to advance their child's publicly-funded education.

This idea does not seem to have quite garnered the raptuorous welcome they probably hoped. The British blogosphere pointed out the fundamental problems here and there, problems that one suspects could also be figured out by the worst educated chav on the worst sink estate in the land. Basically all the obligations are on the citizens and all the benefits acrue to the politicians and the ranks of bureaucratic jobsworths and busy bodies.

However, just as one can use Polly T as a source of inspriation for radical benefit and tax reform, one can use this brainfart as the source of other governmental action. Rather than having the citizens sign up we should have the government sign up to promises of competance. Perhaps then one could use the concept of a contract to hold the government accountable for its miscellaneous fuckups and errors? How about holding the lying politicians and bumbling bureaucrats accountable for the mistakes they make and the taxpayers' money that they waste?

Consider the 2012 Olympics - budget already up £900M or more from what we were assured initially and with smartarses telling us that this is perfectly normal:

Last night, Derek Wyatt, the Labour MP who chairs the all-party Olympics committee at Westminster, agreed that building costs were likely to be far higher than original estimates.

But Mr Wyatt dismissed Mr Lemley as "out of his depth" and said it was commonplace for Olympic project costs the world over to increase.

"Just look at the legacy of Athens, Sydney, Atlanta and Barcelona. I think you will find the costs are double the original estimates.

"Original costs spell 'x' and come out as a 'y'. I think Mr Lemley was out of his depth."

Perhaps we could make all civil servants, MPs and others (e.g. Ken Livingstone) involved in the original bid liable for the increase. Bankrupt the lot of them and use their assets to fund the shortfall. I reckon we'd see a distinct lack of enthusiasm for under estimating costs on public projects in the future.

Then there are the fuckwits who run the MoD's logistics and procurement. As the EU referendum blog pointed out (again) this week, the closure of the Royal Ordnance factories was predicted to cause the ammo problems seen in Afghanistan. While we're on about it, who ever let MoD Ministers claim that the UK's presence into Southern Afghanistan would likely not involve them firing a shot should probably be sent there at their own expense, given MoD supplied land rover, gun, armoured vest and ammo and told to report back. And those who like the Pinzgauer coffins should test drive one in Basra. Do you think the budget might suddenly be used on rather better equipment if the civil servants who ordered and approved it had to use it?

Then there are the Augean stables that is the Home Oriface and the other one of the NHS. I'm sure that similar incentives could be found - you too can be locked up in an MRSA ward with 3 drug addicts if you forget your departmental ID card....

But while all that is attractive it is just fantasy, if it were implemented it also might end up falling foul of the law of unintended consequences by making bureaucrats even more risk-averse than they are now. Oliver Letwin in today's Wapping Liar makes a sound point:

The truth is that risk-averse bureaucracy is one of the causes of poverty. In a bureaucracy, there are no significant rewards for taking successful risks; but there are plenty of penalties for failure. So bureaucrats respond (as we all would) by building defences — bulwarks of procedure, forms and monitoring that will reduce risk. Bang goes any hope of the vitality, the flexibility, the enterprising spirit and the human touch that are needed to deal with highly intractable social problems.

If we are serious about tackling the causes of deep poverty, we need a different model — one in which government as a matter of policy encourages local communities and the third sector to take risks in the name of social responsibility.

Punishing bureaucrats for taking what look like risks is probably bad. What we need to do though is align them with the interests of the tax payer. As David Farrar (via Samizdata) found - Milton Friedman had an excellent grasp of the basic problem with government and spending money:

There are four ways in which you can spend money. You can spend your own money on yourself. When you do that, why then you really watch out what you're doing, and you try to get the most for your money.

Then you can spend your own money on somebody else. For example, I buy a birthday present for someone. Well, then I'm not so careful about the content of the present, but I'm very careful about the cost.

Then, I can spend somebody else's money on myself. And if I spend somebody else's money on myself, then I'm sure going to have a good lunch!

Finally, I can spend somebody else's money on somebody else. And if I spend somebody else's money on somebody else, I'm not concerned about how much it is, and I'm not concerned about what I get. And that's government.

What we need to do therefore is make spending money painful for bureaucrats and politicians. I propose to do this by imposing a simple surtax on all civil servants, MPs and paid political assistants. Essentially they will pay a share of government expenditure themselves. Furthermore we want to give them an incentive to reduce the government expenditure in both nominal (% of GDP) and real terms. So the plan is this: any year where government spending increases or remains constant as a proportion of GDP the government employees get taxed an equivalent of 0.25% of government spending. Anytime spending is reduced in real terms the government employees get to split 10% of the savings. Anytime spending rises in real terms but falls in nominal terms because the economy has grown there is nothing.

Current UK government annual expenditure is of the order of £400B, so 0.25% of it would be a nice £1B. There are 558,000 civil servants and they earn an average salary of about £20,000. Thus total civil service wages are approximately £11B. When you add in ministers, MPs, assistants and all external income from these folks (because I'm not just charging the tax on their government income) I reckon you get about £12B. So that 0.25% works out at roughly one month's salary. After the first year of a rise, I bet government spending would contract rapidly. Of course they could all go on strike. But that would just help reduce expenditure as they would no longer receive wages so they might get a bonus if the strike lasts long enough...

All in all it seems like a Win-win situation. It occurs to me that the same approach could work wonders for the USA and most other countries too. The pork-busters would have all of the federal government fighting on their side instead of against them.

I despise l'Escroc and Vile Pin