tag:theconversation.com,2011:/uk/topics/public-spending-17608/articlesPublic spending – The Conversation2023-08-01T14:53:38Ztag:theconversation.com,2011:article/2107462023-08-01T14:53:38Z2023-08-01T14:53:38ZThe UK’s top financial influencers skew Conservative – which helps explain why Keir Starmer’s Labour is so anxious about uncosted spending pledges<p>It has become a common complaint among some Labour supporters that Keir Starmer and shadow chancellor Rachel Reeves are being too cautious about their spending commitments in preparing for a future Labour government. At a recent national policy forum, the leadership clashed with the party’s left, which argued against “fiscal conservativism”. Starmer’s reply was that he doesn’t mind being <a href="https://www.independent.co.uk/news/uk/politics/keir-starmer-labour-government-spending-b2376121.html">described in these terms</a>.</p>
<p>At the forum, a majority of the participants were on his side in rejecting proposals for “unfunded” spending commitments <a href="https://www.huffingtonpost.co.uk/entry/keir-starmer-defeats-left-wing-critics-to-win-backing-for-costed-election-plans_uk_64bd7207e4b0229eb5652557">made by the Unite union</a>. Unite’s position on spending was not shared by other trade unions, notably the GMB, which supported Starmer’s economic strategy.</p>
<p>There is a logic to the criticism levelled at Starmer. If the party does not separate itself from the Conservatives’ austerity policies, then it could falter in the election campaign next year. If potential Labour supporters are not enthused by an alternative vision for the future, they may not vote at all. </p>
<p>However, those opposed to Labour’s economic plans, would be well advised to listen to the comment made by James Carville, Bill Clinton’s chief political strategist. He <a href="https://policyexchange.org.uk/blogs/beware-the-bond-markets/">said</a>: “I used to think that if there was reincarnation, I wanted to come back as the President or the Pope or as a .400 baseball hitter. But now I would want to come back as the bond market. You can intimidate everybody.”</p>
<p>Carville recognised that any politician who loses the confidence of influential financial players soon finds themselves in trouble. For example, one need only look at the financial crash which occurred following former prime minister Liz Truss’s ill-advised budget proposals. </p>
<p>Financial markets reacted very badly to her unfunded proposals for tax cuts and this affected <a href="https://www.bloomberg.com/opinion/articles/2022-09-26/uk-financial-markets-rebuke-liz-truss-and-her-mini-budget?leadSource=uverify%20wall">interest rates and the costs of mortgages</a>. The markets were powerful enough to trigger her resignation. </p>
<h2>Who are Britain’s financial players?</h2>
<p>For a potential Labour prime minister, there is even more to worry about, as can be seen using data from two sources. </p>
<p>The first is a detailed classification scheme of occupations originally created by the International Labour Organization – the <a href="https://www.ilo.org/public/english/bureau/stat/isco/">International Standard Classification of Occupations</a>. This includes more than 350 different occupations from “legislators and senior officials” to “doorkeepers and watchpersons”. </p>
<p>Among these are people who work as managers, traders and investment advisers in the finance industry. They are the financial decision-makers in Britain. They give advice on loans, mortgages and finances to the public. Those who work in banks make decisions about who can have a credit card and, as the recent row about Nigel Farage’s bank account shows, they even decide who can have a bank account.</p>
<p>The second source is the European Social Survey, a cross-national collaboration of researchers examining the political and social attitudes and behaviour of Europeans <a href="https://www.europeansocialsurvey.org/">over a period of more than 20 years</a>. Conveniently, it contains questions needed to identify occupations in the ILO scheme. </p>
<p>We can look at the voting records of individuals working as financial decision-makers in Britain. The country has participated in all ten survey rounds over the last 20 years. </p>
<p>So if we bundle these together there are close to 21,000 respondents and 254 of them are financial decision-makers. That makes it possible to chart their voting behaviour in comparison with people working in other occupational groups over the period of the surveys.</p>
<h2>How do financial players vote and why does it matter?</h2>
<p>Data from these two sources combined tell us that the people who influence the British financial sector skew more Conservative than the rest of the population. The chart below shows the voting behaviour of the 254 financial decision-makers over the whole period (in blue), compared with the rest of the population (in red). </p>
<p>It turns out that 41% of them voted Conservative compared with 32% of the rest of the population. Labour have a right to be nervous because only 32% of them voted Labour compared with 41% of the rest of the population. One is a mirror image of the other. </p>
<p><strong>Voting behaviour of financial decision-makers and others in Britain 2002 to 2020</strong></p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/540183/original/file-20230731-25-v810oj.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="A chart showing that financial influencers vote Conservative more commonly than the rest of the population" src="https://images.theconversation.com/files/540183/original/file-20230731-25-v810oj.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/540183/original/file-20230731-25-v810oj.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=409&fit=crop&dpr=1 600w, https://images.theconversation.com/files/540183/original/file-20230731-25-v810oj.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=409&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/540183/original/file-20230731-25-v810oj.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=409&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/540183/original/file-20230731-25-v810oj.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=514&fit=crop&dpr=1 754w, https://images.theconversation.com/files/540183/original/file-20230731-25-v810oj.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=514&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/540183/original/file-20230731-25-v810oj.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=514&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="caption">Percentage of financial decision makers who vote for each party compared to the percentage of the wider population who vote for each party.</span>
<span class="attribution"><span class="source">P Whiteley</span>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span>
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<p>To be fair, these people are unlikely to make financial decisions based on their party preferences. They are much more likely to try to maximise returns for themselves and their clients, whatever the political context of the time. Their adverse reaction to Truss’s budget shows this to be true since if their Conservative leanings were what mattered they would not have reacted so badly to her economic plans. </p>
<p>That said, it probably means they are more likely to react even more badly to Labour making unfunded spending promises than the Conservatives, since their political leanings are likely to encourage them to be more wary of a Labour government than a Conservative government. </p>
<p>This helps explain Starmer’s caution about announcing spending plans ahead of the election. If he promises large-scale spending without showing where the money would come from to pay for it, then a Labour win in the next general election could cause a financial crash and a run on the pound. </p>
<p>The prudent strategy for Starmer is to repeat what Tony Blair promised to do before the 1997 election. He committed the Labour government to stick with Conservative <a href="https://www.theguardian.com/politics/1997/jan/21/economy.uk">spending plans for the initial years in power</a>. This neutralised concerns by the financial decision-makers about Labour winning power at that time.</p>
<p>Starmer’s critics have to recognise that it would be a serious blow to Labour’s chances if the party spooked the markets. If they started a new term in power with a financial crash it would derail Labour’s plans to change the current government’s economic strategy.</p>
<p>On the other hand, the prudent strategy produces a serious dilemma for the party. If promising pretty much the same as the Conservatives on spending, they risk not being able to encourage potential supporters to vote for them in the general election.</p><img src="https://counter.theconversation.com/content/210746/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Paul Whiteley has received funding from the British Academy and the ESRC </span></em></p>The opposition is divided over whether it will win over voters by promising more public investment or by proving it is economically restrained.Paul Whiteley, Professor, Department of Government, University of EssexLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1957942023-01-03T11:54:57Z2023-01-03T11:54:57ZAusterity has its own life – here’s how it lives on in future generations<figure><img src="https://images.theconversation.com/files/501860/original/file-20221219-14-3mfq8r.jpg?ixlib=rb-1.1.0&rect=16%2C0%2C5447%2C3637&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Financial worries stemming from austerity could span generations.</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/worried-aged-mother-embracing-comforting-grown-1463151290">fizkes / Shutterstock</a></span></figcaption></figure><p>Austerity in the UK is here to stay. The Bank of England has warned that the country is facing the longest recession since records began, predicting that the economic slump will <a href="https://www.bankofengland.co.uk/monetary-policy-report/2022/november-2022">extend well into 2024</a>. At the same time, the most recent budget has been called austerity 2.0 by <a href="https://www.deloitteacademy.co.uk/node/4317">companies</a>, <a href="https://www.unison.org.uk/news/general-secretary-blog/2022/11/blog-the-government-paves-the-way-for-austerity-2-0/">unions</a>, <a href="https://www.london.gov.uk/media-centre/mayors-press-release/Mayor-accuses-Government-of-ushering-in-%E2%80%98Austerity-2.0%E2%80%99">political figures</a> and <a href="https://wbg.org.uk/analysis/uk-budget-assessments/misguided-plans-for-austerity-2-0-wbg-response-to-autumn-statement-2022/">policy experts</a>. This suggests the era of public spending cuts seen since 2010 has reached the next phase: austerity as the “<a href="https://www.ituc-csi.org/austerity-the-new-normal">new normal</a>”.</p>
<p><a href="https://www.theguardian.com/society/2020/mar/03/lost-decade-hidden-story-how-austerity-broke-britain">Austerity policies</a> implemented since 2010 have not been substantially reversed or retracted in recent years. In fact, they have often been levelled at the most marginalised social groups. </p>
<p>In 2019, cuts in total expenditure on welfare and benefit payments alone were expected to total <a href="https://journals.lwbooks.co.uk/soundings/vol-2019-issue-71/abstract-7603/">£37 billion a year by 2020</a>. And now, growing numbers of people in the UK are struggling with everyday costs of living, while a further <a href="https://www.theguardian.com/uk-news/2022/nov/17/uk-government-spending-where-the-cuts-will-fall">£28 billion</a> of cuts to public funding were announced in the government’s November 2022 budget.</p>
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Read more:
<a href="https://theconversation.com/autumn-statement-is-highly-political-compared-to-research-on-best-ways-to-fix-public-finances-195035">Autumn statement is highly political compared to research on 'best' ways to fix public finances</a>
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<p>All of this shows how keenly economic policies are <a href="https://journals.sagepub.com/doi/abs/10.1177/0309132518796280">felt in everyday life</a>, in the mundane: eating, heating, caring, shopping and travelling. And perpetual and cumulative cuts like those we have seen made in recent years to welfare, education, social and healthcare services shape daily lives and social relationships. The effects continue, across time and generations. They also worsen existing <a href="https://www.intersecting-inequalities.com/">inequalities</a> relating to <a href="https://journals.sagepub.com/doi/full/10.1057/fr.2014.42">gender</a>, race, class, age and disability.</p>
<p>My <a href="https://academic.oup.com/joeg/article/16/2/305/2413171">previous research</a> during the 2008-09 UK economic recession revealed how memories and intergenerational relationships are key to understanding what it means to get by in times of recession and crisis. For instance, upbringing, living through previous recessions, debt and hardship are central to how people respond to economic downturns. These experiences, family histories and memories are often shared across generations in a way that influences younger people about financial issues.</p>
<p>Policies that aim to tackle poverty and economic inequality need to go beyond a focus on “the household” because this is not the only (or even the predominant) framework for how social relationships are built. Instead, people live within and across households that intersect based on kinship, friendship, intimacy and more. These are the main mechanisms that people use to <a href="https://policy.bristoluniversitypress.co.uk/growing-up-and-getting-by">get by during difficult times</a>.</p>
<p>Further research shows how austerity can be experienced as a “<a href="https://rgs-ibg.onlinelibrary.wiley.com/doi/abs/10.1111/tran.12300">personal crisis</a>”, affecting the things people can do, afford and dream about, including having security at home and work. It even extends to whether or not people are able to make decisions about <a href="https://journals.sagepub.com/doi/full/10.1177/00380261221135753">having children</a>. Suffice it to say, economic policies have more than momentary effects, they ripple across people’s lives – and that of their children – even if their circumstances improve.</p>
<h2>A life of its own</h2>
<p>Taking this further, <a href="https://www.isrf.org/2022/02/23/the-social-life-of-crisis/">my latest research</a> shows how austerity policies also have their own life. In the UK, this started with the early dismantling of the welfare state alongside diminished investment in deprived and post-industrial areas from the 1980s onwards. <a href="https://journals.sagepub.com/doi/pdf/10.1177/0308518X17701729">These programmes</a> have <a href="https://equalitytrust.org.uk/scale-economic-inequality-uk">entrenched inequality in certain regions</a> of the UK. So, while the current era of austerity arose from the recession following the global financial crisis 14 years ago, it is more deeply embedded in certain parts of the country.</p>
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Read more:
<a href="https://theconversation.com/three-charts-that-explain-why-falling-living-standards-could-deepen-the-uks-north-south-divide-196088">Three charts that explain why falling living standards could deepen the UK's north-south divide</a>
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<p>We can get an idea of <a href="https://www.isrf.org/2022/02/23/the-social-life-of-crisis/">how austerity affects people’s daily lives</a> by listening to their stories. Yusuf, for example, spoke to me about the instabilities he currently faces at work and how that has affected his life choices. “There’s no job security or stability,” he says. “There’s not enough trade [as a mechanic] anymore like there used to be years ago.” As a result, Yusuf does not think he could afford to have children.</p>
<p>Employment opportunities and local industries across northern England (where my research was carried out), had already been hit hard by years of <a href="https://journals.sagepub.com/doi/full/10.1177/00380261221135753">local underinvestment</a>. But adding austerity to the mix meant these factors culminated in multi-faceted forms of insecurity and uncertainty for Yusuf. His lack of job security is then linked to being unable to afford to have children – a <a href="https://www.tandfonline.com/doi/full/10.1080/01459740.2021.1951261">different life</a> to the one he had imagined.</p>
<p>Even if austerity cuts were reversed today, the long-term effects for Yusuf and countless others could continue for generations. Economic policies should be implemented alongside forecasts of what their effects will be for future generations. Researching these future outcomes, as well as past and current experiences, will highlight the unevenness of austerity measures. This will help to ensure that austerity policies and the devastation they cause do not become normalised, condemning many more generations to their long-term negative effects.</p><img src="https://counter.theconversation.com/content/195794/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Sarah Marie Hall receives funding from UKRI and the Independent Social Research Foundation.</span></em></p>Public spending cuts and the soaring cost of living will not only affect people lives now, but could trickle down through generations.Sarah Marie Hall, Professor in Human Geography, University of ManchesterLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1532782021-01-14T13:18:00Z2021-01-14T13:18:00ZMega Millions jackpot is $750 million – where does all the lottery tax revenue really go?<figure><img src="https://images.theconversation.com/files/378652/original/file-20210113-20219-skuwi5.jpg?ixlib=rb-1.1.0&rect=137%2C68%2C2682%2C1847&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Tax revenue from lotteries is supposed to fund education and other public services.</span> <span class="attribution"><a class="source" href="https://newsroom.ap.org/detail/MegaMillionsJackpot/c810e6d106cb4568b01cedcb6271cc64/photo?Query=mega%20AND%20millions&mediaType=photo&sortBy=&dateRange=Anytime&totalCount=609&currentItemNo=2">AP Photo/Alan Diaz</a></span></figcaption></figure><p>The Mega Millions jackpot drawing for Jan. 15 <a href="https://www.megamillions.com/">has soared</a> to US$750 million and counting. This makes it the second largest pot in Mega Millions history – <a href="https://www.cnn.com/2021/01/12/us/mega-millions-jackpot-trnd/index.html">surpassed only</a> by the $1.537 billion winning ticket in October 2018 – and the <a href="https://en.wikipedia.org/wiki/Lottery_jackpot_records#United_States">fifth largest lotto jackpot</a> ever in the U.S.</p>
<p>In the middle of the 20th century, when lotteries first started in the U.S., they were sold to states a <a href="https://www.forbes.com/sites/kellyphillipserb/2013/12/18/everybody-wins-lotteries-like-mega-millions-benefit-taxpayers-seniors-schools-more/#4da07fb63dc9">benefit to the American public</a>. That suggests that bigger and bigger jackpots should mean more tax dollars to spend on public services like education. </p>
<p>But that isn’t happening. So what’s really going on?</p>
<h2>Big money, tiny odds</h2>
<p>First, let’s look at how lottery jackpots get so big. <a href="https://www.msn.com/en-us/tv/news/mega-millions-lottery-reaches-dollar750m-the-second-largest-payout-ever-after-no-one-wins-again/ar-BB1cJc74">Since Sept. 15, 2020</a>, week after week, no one has drawn the winning numbers and the unclaimed pot rolls over into the following week. As the tickets keep getting bought, the pot gets bigger. </p>
<p>You too have the chance to win the one of the biggest Mega Millions jackpots ever with the simple purchase of a $2 ticket. However, your chances are pretty slim. With a 1 in 300 million chance of picking the matching numbers, you are three times more likely to be <a href="http://moneyminiblog.com/interesting/things-more-likely-happen-winning-lottery/">killed by a vending machine</a>.</p>
<p>[<em><a href="https://theconversation.com/us/newsletters/the-daily-3?utm_source=TCUS&utm_medium=inline-link&utm_campaign=newsletter-text&utm_content=experts">Expertise in your inbox. Sign up for The Conversation’s newsletter and get expert takes on today’s news, every day.</a></em>]</p>
<p>An easier way to really wrap your head around these odds is to imagine a bathtub overflowing with white rice. Take one grain of rice, paint it gold and then bury it somewhere in the bathtub of rice. Now, have someone walk in the bathroom door, blindfold them and have them try, in one lucky dip, to pick out that single golden grain of rice.</p>
<p>According to a 2016 poll, about <a href="https://news.gallup.com/poll/193874/half-americans-play-state-lotteries.aspx">half of Americans</a> play the lottery today, compared to almost 70% in the 1980s. That means the lottery needs to extract more money from fewer people – a worrying trend for lottery runners. </p>
<p>Mega Millions decided to <a href="https://abc13.com/finance/4-changes-to-the-mega-millions-that-you-need-to-know/2563227/">decrease each person’s chances of winning</a>, in order to grow the jackpots bigger. <a href="https://blog.timesunion.com/capitol/archives/274243/mega-millions-lottery-tickets-will-go-from-1-to-2/">Before 2017</a>, players picked five numbers between 1 and 75 and then one number between 1 and 15. Now, each player picks five numbers between 1 and 70 and then one number between 1 and 25. This increases your chances of matching five numbers and receiving some sort of prize, while decreasing your chances of winning the whole shebang. What’s more, the price of a ticket has doubled.</p>
<p>Apparently, as the jackpot gets bigger, more people are <a href="https://www.marketwatch.com/story/is-this-1-billion-scratch-card-game-a-new-high-or-low-for-us-lotteries-2017-05-12">willing to buy a ticket</a>. According to the Bureau of Labor Statistics, in 2017 and 2018, the average American spent <a href="https://www.bls.gov/opub/ted/2019/how-much-money-do-americans-spend-on-lottery-tickets.htm">just under $70 a month on the lottery or betting pools</a>. And since only about half of the country plays, the average amount spent per player is higher.</p>
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<a href="https://images.theconversation.com/files/378656/original/file-20210113-17-1nrzm2.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="A photo of a pile of lottery balls." src="https://images.theconversation.com/files/378656/original/file-20210113-17-1nrzm2.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/378656/original/file-20210113-17-1nrzm2.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=380&fit=crop&dpr=1 600w, https://images.theconversation.com/files/378656/original/file-20210113-17-1nrzm2.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=380&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/378656/original/file-20210113-17-1nrzm2.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=380&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/378656/original/file-20210113-17-1nrzm2.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=478&fit=crop&dpr=1 754w, https://images.theconversation.com/files/378656/original/file-20210113-17-1nrzm2.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=478&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/378656/original/file-20210113-17-1nrzm2.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=478&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="caption">Your chances of winning are incredibly small, but lottos are a reliable source of tax revenue for states.</span>
<span class="attribution"><a class="source" href="https://newsroom.ap.org/detail/FranceLottery/f8e23a123ac146f68b8c02c90b6b95be/photo?Query=lottery%20AND%20balls&mediaType=photo&sortBy=&dateRange=Anytime&totalCount=67&currentItemNo=17">AP Photo/Michel Euler</a></span>
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<h2>Where the money goes</h2>
<p>Mega Millions profits are split between 47 lottery jurisdictions – 45 states, D.C. and the U.S. Virgin Islands. Overall, <a href="https://www.cbsnews.com/news/where-does-mega-millions-money-go-after-the-jackpot/">27 states earmark</a> some or all lottery revenue for education. In D.C., the lotto dollars go to a general fund; in Colorado, the funds go toward environmental protection; and in Kansas, some of the money pays for juvenile detention facilities. </p>
<p>The lottery was promoted as a way to create <a href="https://www.jstor.org/stable/41788710?seq=1#page_scan_tab_contents">more money for education</a> – but most state legislatures haven’t been using the money as additional funding. Instead, they use the lottery money to pay for the education budget, spending the money that would have been used on education if there wasn’t a lottery budget on other things. As a result, public schools rarely get a budget boost. </p>
<p><a href="https://nccppr.org/asknc-percentage-lottery-money-goes-education/">An April 2018 study from the North Carolina Center for Public Policy Research</a> showed that many states – including California, Florida and Michigan – simply substitute lottery revenues for normal appropriations. As of 2016, North Carolina devoted a smaller portion of its total budget to education than it did before starting the lottery. </p>
<p>With states like New York getting <a href="https://www.bizjournals.com/buffalo/news/2019/05/14/new-york-state-tops-the-nation-with-10-billion-in.html">a record $10 billion in sales</a> from the lottery in 2019, that is a pretty darn big bait and switch. </p>
<p>This doesn’t necessarily mean that it’s time to ax the lottery. But it does beg the question: Is lottery money a good thing for a state? It does fund some government services, but it isn’t always clear what. And the <a href="https://theconversation.com/will-gambling-be-good-for-the-people-of-massachusetts-the-evidence-suggests-not-32346">harm of gambling addiction</a> must be taken into account somehow. </p>
<p>For now, I’m off to buy a ticket for this Mega Millions jackpot. I mean, someone’s gotta win….</p>
<p><em>This is an updated version of an <a href="https://theconversation.com/the-mega-millions-jackpot-is-now-more-than-1-billion-where-does-all-that-lottery-profit-really-go-105279">article originally published</a> on Oct. 20, 2018.</em></p><img src="https://counter.theconversation.com/content/153278/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Liberty Vittert does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The Mega Millions lotto pot for Jan. 15 is the second largest it’s ever been. Taxes on the lotto go to state governments, but often the money isn’t spent in quite the way it’s supposed to be.Liberty Vittert, Professor of the Practice of Data Science, Washington University in St. LouisLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1386282020-05-18T18:50:43Z2020-05-18T18:50:43ZLow-income countries’ bids for World Bank funding raise serious concerns about their coronavirus strategies<p>The World Bank intends to give out loans and grants totalling US$160 billion (£132 billion) to lower-income countries. The aim of <a href="https://www.worldbank.org/en/news/press-release/2020/04/02/world-bank-group-launches-first-operations-for-covid-19-coronavirus-emergency-health-support-strengthening-developing-country-responses">this funding</a>, to be disbursed over 15 months, would be to “help countries respond to immediate health consequences of the pandemic and bolster economic recovery”.</p>
<p>It’s clear that low and middle-income countries will need assistance responding to coronavirus. Recent research suggests that the outbreak will have a <a href="https://www.imperial.ac.uk/news/197498/coronavirus-will-have-bigger-impact-worlds/">disproportionate impact</a> on the world’s most disadvantaged people.</p>
<p>But while the World Bank’s quick response to help the world’s weaker health systems has been entirely appropriate, we think more balance is needed. Applicants plan to spend more on infrastructure than human resources, despite not having enough healthcare workers in many cases, and the wealthier countries have asked for the most money. There isn’t a common approach, and countries are not using the evidence available from their own health systems to inform their decisions. </p>
<h2>Who is asking for what?</h2>
<p>As of May 3, a total of 57 countries had been approved for World Bank funding. Seventeen funding projects had been approved as grants (totalling US$252 million), 31 as loans (totalling US$2.3 billion) and nine as mixed grant and loan packages (totalling US$229 million). The remainder of the money will be allocated over the coming months.</p>
<p>The first thing to note is that there is a lot of variety across applications so far. Of course, the need is urgent, and it is entirely appropriate that national governments determine where they can best spend the money. It is also possible that for each country, the requested funding might be supporting a broader national plan funded by other sources. </p>
<p>But if this is the case, the applications do not make this clear. For example, the funding requested varies in scale from US$0.40 per head of population (Malawi) to US$14.2 per head of population (Maldives). Meanwhile, spending on infrastructure and medical equipment – which includes hospital buildings and services, equipment for intensive care facilities, personal protective equipment (PPE) and medicine – makes up between 9.1% (Kyrgyz Republic) and 97.0% (Myanmar) of applications.</p>
<p>Many countries have prioritised infrastructure and equipment spending. For example, Myanmar intends to upgrade and equip facilities across 51 hospitals and double its number of intensive care beds from 380 to 718. Nearly all of its US$50 million grant is dedicated to this.</p>
<p>But in some countries, such a focus is clearly problematic. Kenya is devoting US$4 million to buying <a href="http://documents.worldbank.org/curated/en/519251586427430405/pdf/Kenya-AFRICA-P173820-KENYA-COVID-19-EMERGENCY-RESPONSE-PROJECT-Procurement-Plan.pdf">250 ventilators</a>, but only <a href="https://www.medrxiv.org/content/10.1101/2020.04.08.20057984v1.full.pdf">22 out of 47 Kenyan counties</a> have at least one intensive care unit, with a small fraction of these in the public sector. It’s also not clear whether there are sufficient staff to make use of them – there are only <a href="https://www.anaesthesiakenya.co.ke/world-anaesthesia-day-2017/">160 physician anaesthetists</a> in the country, with fewer than 50 in the public sector.</p>
<h2>A potential oversight</h2>
<p>Staffing levels of healthcare workers are critically low in many of the countries that have applied to the World Bank. How this will affect their pandemic response is understated in the applications. Our analysis indicates that in almost half of the proposals, less than 20% of the funding requested is being spent on health staff. Four countries are making no request to support their workforce at all.</p>
<p>At the same time, based on what can be gleaned from the proposals, in 68% of the countries seeking funds for human resources, all of the expenditure is devoted to training. So while countries have prioritised capital spending on expansion of hospital facilities and intensive care, it is not clear how staff will deliver these extended services.</p>
<p>This raises major concerns that the workforce providing other critical services – such as maternal, neonatal and child health services – will be co-opted into the COVID-19 response, harming one sector of the population to benefit another. Of course, the countries applying may have plans to address such concerns, but if this is the case, they are not sufficiently discussed in the project documents.</p>
<p>We also mustn’t forget that health workers are at considerable risk from COVID-19. Those in low-income countries must be watching the scenes emerging from the US and Europe and think: “If that can happen at those facilities, then what will happen to us?”</p>
<p>Criticisms of the response to COVID-19 in higher-income countries have centred around access to PPE, but the situation in poorer countries is even more concerning. Health worker strikes and complaints centred on inadequate pay and poor conditions have become more common in recent years. <a href="https://gh.bmj.com/content/3/6/e001136">Strikes in Kenya</a>, for example, closed hospitals for several months in 2017.</p>
<p>It is unsurprising then that health workers in lower-income countries have united to complain about the dangers presented to them by COVID-19. There have been strikes and protests in <a href="https://www.thehindu.com/news/international/pakistan-doctors-on-hunger-strike/article31434755.ece">Pakistan</a>, <a href="https://mexiconewsdaily.com/news/coronavirus/imss-doctors-warn-they-will-strike/">Mexico</a> and <a href="https://www.telegraph.co.uk/global-health/science-and-disease/malawis-public-hospitals-close-medics-strike-lack-funding-covid/">Malawi</a>. Yet in spite of this, only three countries explicitly state plans to compensate workers for their increased risk. </p>
<h2>How the World Bank can respond</h2>
<p>We believe that the World Bank should consider its funding relative to a country’s overall response and budget plans. The variability across countries’ proposals may point to a need for more informed strategic thinking, especially in countries with weak health systems.</p>
<p>At present, it seems that infrastructure might be overemphasised in the proposals relative to workforce spending. The proposals also exemplify the “<a href="https://www.kingsfund.org.uk/publications/articles/inverse-care-law">inverse care law</a>”, in that those countries with the weakest health systems have asked for relatively less funding per capita and may suffer most from the pandemic.</p>
<p>These concerns suggest greater attention should be paid to the balance of funding, to ensure it helps achieve the wider <a href="https://www.un.org/sustainabledevelopment/sustainable-development-goals/">Sustainable Development Goals</a> and realise countries’ plans for <a href="https://news.un.org/en/story/2019/12/1053271">universal health coverage</a>. This would also ensure that these countries’ COVID-19 responses don’t unnecessarily distort their health system priorities.</p><img src="https://counter.theconversation.com/content/138628/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Michael (Mike) English receives funding from the Wellcome Trust. He is affiliated with the World Health Organization through advisory roles only. </span></em></p><p class="fine-print"><em><span>Jacob McKnight and Yingxi Zhao do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The World Bank is giving $160 billion to help bolster the world’s weaker health systems – but it needs to do more.Yingxi Zhao, Doctoral candidate in Clinical Medicine, University of OxfordJacob McKnight, Health Systems Researcher, University of OxfordMichael (Mike) English, Professor of International Child Health, University of OxfordLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1299932020-01-15T13:04:29Z2020-01-15T13:04:29ZShould the government crowdfund a Big Ben Brexit bong?<figure><img src="https://images.theconversation.com/files/310244/original/file-20200115-134797-mzqpvg.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/brexit-london-english-european-flag-442486735">Shutterstock</a></span></figcaption></figure><p>An unexpected debate to emerge from Britain’s planned departure from the EU at the end of January 2020 has been over whether Big Ben should ring <a href="https://www.mirror.co.uk/news/politics/boris-bonkers-bung-bob-big-21278133">to commemorate the moment of Brexit</a>. The clock tower of the Houses of Parliament is undergoing <a href="https://www.parliament.uk/about/living-heritage/building/palace/big-ben/elizabeth-tower-and-big-ben-conservation-works-2017-/">renovation</a> and Big Ben – the name of the bell within it – is out of action. </p>
<p>To allow the clock tower to “bong” for Brexit would cost an <a href="https://www.bbc.co.uk/news/51107756">estimated £500,000</a> – £120,000 on installing the bonging mechanism and a temporary floor, along with up to £400,000 on the cost of the delayed construction work. Not wanting to appear flippant with taxpayer’s money in this instance, the prime minister, Boris Johnson, <a href="https://www.bbc.co.uk/news/uk-politics-51107646">suggested</a> that the cost could be directly funded by the public. Though none have gathered steam yet, a successful campaign could shake up government financing and set a precedent for future spending on public projects.</p>
<p>The traditional method of tax and spend governance has undergone a process of transformation in the last three decades. For example, Private Finance Initiatives (PFI), where the private sector joined in the provision of public services (with often questionable results), have been around <a href="https://theconversation.com/pfi-has-been-a-failure-and-carillion-is-the-tip-of-the-iceberg-90487">since the 1990s</a>. </p>
<p>Plus, as the <a href="https://www.cafonline.org/docs/default-source/about-us-publications/caf-uk-giving-2019-report-an-overview-of-charitable-giving-in-the-uk.pdf">persistence</a> of charity fundraising has shown, the public is not averse to giving large amounts, so long as they choose where the money is going. One could argue that the opposition Labour Party’s failure in the recent election to make headway on a traditional <a href="https://www.thetimes.co.uk/article/labour-launches-tax-and-spend-manifesto-j7pgr0ll6">tax-the-rich</a> economic programme, demonstrates a wider popular shift away from taxation as a method of funding public spending.</p>
<h2>Government funding for the future?</h2>
<p>If one discounts borrowing as a way of raising money for governments due to costs (or ideology), perhaps involving the public directly is the best way forward. The phenomenon of crowdfunding private projects took off with the rise of websites like Kickstarter and IndieGoGo. Applying this idea to public projects <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2434615">soon followed</a> and civic crowdfunding has been around <a href="https://www.nesta.org.uk/blog/crowdfunding-public-services-tapping-into-the-crowd-to-finance-public-projects/">for a few years now</a>. A number of <a href="https://www.localgov.co.uk/Crowdfunding">local government projects</a> have been financed this way. The main benefit is that citizens get to choose directly what and when to fund. </p>
<p>So it would be possible for the prime minister to crowdfund a temporary suspension to the renovation of Big Ben as part of its Brexit-related fiesta at the end of January. There is nothing technically wrong with this, nor is there any legal impediment, so long as government spending (after funds have been raised) complies with relevant <a href="http://eprints.whiterose.ac.uk/145481/1/Financing%20For%20Society%20-%20DAVIS%20Report%20v.final%20%28small%29.pdf">procurement</a> rules.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/310251/original/file-20200115-134768-182osp.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/310251/original/file-20200115-134768-182osp.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/310251/original/file-20200115-134768-182osp.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/310251/original/file-20200115-134768-182osp.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/310251/original/file-20200115-134768-182osp.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/310251/original/file-20200115-134768-182osp.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/310251/original/file-20200115-134768-182osp.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Big Ben is undergoing restoration work, which is why it will cost up to £500,000 to ring the bell for Brexit.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/scaffolding-around-elizabeth-tower-more-commonly-757133005">Shutterstock</a></span>
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<p>But should the government run with this idea and expand public fundraising to other, larger projects? It is always tempting to policymakers to fund their pet projects without raising taxes or increasing external borrowing. The executive may also have more <a href="https://www.huffingtonpost.co.uk/dr-ioannis-glinavos/trump-mexico-wall_b_14423138.html">flexibility</a> in setting up such schemes, avoiding parliamentary <a href="https://commonslibrary.parliament.uk/parliament-and-elections/parliament/the-estimates-parliaments-role-in-authorising-government-spending-plans/">scrutiny</a> that applies to other types of funding. </p>
<p>There is precedent of a sort for this. One example of project-specific fundraising carried out by government are war bonds. These, leading up to and during the second world war were an essential part of financing the war effort in Britain and the US. They were also used during the American Civil War and the first world war. They were effectively loans from private citizens to the government and helped alleviate reliance on external borrowing during wartime. </p>
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Read more:
<a href="https://theconversation.com/stanley-baldwin-asked-britains-rich-to-help-pay-off-the-national-debt-after-world-war-i-but-it-didnt-work-97125">Stanley Baldwin asked Britain's rich to help pay off the national debt after World War I – but it didn't work</a>
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<p>In the US they also became an iconic part of the home front war effort through a series of propaganda <a href="https://www.history.com/news/world-war-ii-propaganda-posters-photos-united-states-home-front">posters</a>. They were promoted by highly recognisable Hollywood stars of the era and buying these bonds was deemed a patriotic act, a small sacrifice compared with that of men drafted to fight. But bonds, by definition, pay interest upon redemption. Crowdfunding differs in that it is a grant of money from the public that would not be repaid.</p>
<h2>From bongs to Brexit and beyond</h2>
<p>The idea of using something like a war bond to finance targeted modern-day government spending was floated during Obama’s expansion of <a href="https://www.nytimes.com/2010/01/03/weekinreview/03story.html">military operations in Afghanistan in 2010</a>. Could a bond issuance be used to fund a larger specific project, like Brexit or even President Donald Trump’s wall with Mexico in the US? Technically yes, but it all depends on whether enough people can be persuaded to participate in the fundraising. </p>
<p>There is little precedent of this being successful during peacetime. A programme by the US Treasury Department to sell so-called Patriot Bonds after 9/11 <a href="https://www.csmonitor.com/2004/1220/p14s02-wmgn.html">raised limited amounts</a>. Lack of public uptake could be an embarrassment for a government and even sink a high-profile project. It could also expose thinning support among the electorate for a project, or indeed the government. Large-scale fundraising exercises could also reduce consumer spending, eating into economic growth.</p>
<p>Dangers aside, crowdfunding politically charged projects such as making Big Ben bong for Brexit will be tempting to Downing Street. It opens an avenue for funding that is cheap, politically useful and novel. As the amount sought is relatively small, it could gather enough support to become a successful test case for alternative financing.</p><img src="https://counter.theconversation.com/content/129993/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Ioannis Glinavos does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Boris Johnson has proposed the public ‘bung a bob for a Big Ben bong’ to commemorate Brexit.Ioannis Glinavos, Senior Lecturer in Law, University of WestminsterLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1242402019-10-02T13:54:40Z2019-10-02T13:54:40ZIf politicians are serious about tackling inequality they need to properly overhaul the tax system – here’s how<figure><img src="https://images.theconversation.com/files/295205/original/file-20191002-49397-4du61i.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/miniature-people-standing-on-piles-different-1072789088?src=2mVh9n6E4wpWtpghlusSOw-1-0">Shutterstock</a></span></figcaption></figure><p>Inequality has shot to the top of the agenda <a href="https://www.ifs.org.uk/inequality/wp-content/uploads/2019/05/The-IFS-Deaton-Review-launch.pdf">across the political spectrum</a>. Politicians, activists, and even <a href="https://www.bloomberg.com/news/articles/2019-06-24/billionaires-from-soros-to-pritzker-heirs-call-for-wealth-tax">billionaires</a> increasingly call for more radical measures to tackle the problem.</p>
<p>Britain’s Conservative government proclaimed the end to austerity in <a href="https://www.bbc.co.uk/news/business-49577250">its September spending review</a>. Its party conference also discussed <a href="https://conservativepartyconference.com/agenda">providing more equal access</a> to education and social services, along with plans to increase the minimum wage.</p>
<p>Meanwhile, the <a href="https://labour.org.uk/manifesto/creating-economy-works/">Labour party</a> vouched to raise taxes on corporate profits, incomes of the richest earners, and <a href="https://labour.org.uk/press/financial-transaction-tax-report-john-mcdonnell-responds/">transactions in the financial sector</a>. At its recent party conference, it announced <a href="https://labour.org.uk/press/mcdonnell-commits-labour-shorter-working-week-expanded-free-public-services-part-labours-vision-new-society/">an expansive programme of free public services</a>. </p>
<p>Until recently, the opposite kind of measures <a href="https://www.theguardian.com/politics/2003/aug/06/society.labour">were a priority</a>. Lowering taxes for both business and the wealthy, and <a href="https://theconversation.com/george-osbornes-spending-review-risks-creating-a-public-service-diaspora-45060">rolling back public spending</a> in favour of free market competition were seen as a lasting legacy of Ronald Reagan and Margaret Thatcher. </p>
<p><a href="https://www.open.edu/openlearn/society-politics-law/understanding-economic-inequality/content-section-0?active-tab=description-tab">Some argue</a> that inequality is necessary to give people incentives to compete and innovate, ultimately making the economic pie bigger for everyone. Thatcher halved <a href="https://www.telegraph.co.uk/tax/income-tax/labour-will-take-tax-rates-back-1970s/">the tax rate on highest incomes in the UK</a> from 80% to 40%, where it has hovered since. And <a href="https://www.theguardian.com/news/datablog/2010/apr/25/uk-public-spending-1963">public spending as a proportion of UK GDP fell</a> from nearly 50% in the mid-1970s to less than 40% in the early 2000s. </p>
<p>But at the same time inequality levels have become untenable. In the UK, <a href="https://wid.world/country/united-kingdom/">the richest 1% owned</a> 20% of all personal wealth in 2012 and earned nearly 12% of pre-tax national income in 2016. The numbers are even higher <a href="https://wid.world/country/usa/">in the US</a>, and are also increasing globally, including in <a href="https://wid.world/country/india">India</a> and <a href="https://wid.world/country/china">China</a>. </p>
<p>Average economic growth may be ticking upwards but there are too many visible disparities in societies where <a href="https://www.independent.co.uk/news/uk/home-news/empty-homes-uk-homelessness-housing-crisis-data-a8818326.html">record levels of homelessness</a> co-exist with a high and rising number of empty homes.</p>
<h2>Addressing the problem</h2>
<p>More information on the scale of inequality – and its <a href="https://www.theguardian.com/inequality/2018/sep/18/kate-pickett-richard-wilkinson-mental-wellbeing-inequality-the-spirit-level">consequences</a> – has put pressure on politicians to address the problem. In fact, elements of both the Labour and Conservative parties’ proposals are needed. Complementing tax increases with higher public spending has more potential to successfully reduce inequality in the long-run than either of these policies alone.</p>
<p><a href="https://www.ineteconomics.org/uploads/papers/WP_54-Lazonick-Value-Extracting-CEO-Mod-2017.pdf">Advocates of higher taxes</a> note that resources accumulated by the rich are largely saved and invested in personal assets such as luxury houses or yachts rather than reinvested in innovation and jobs. Similarly, an increasing portion of corporate profits is not spent on production: <a href="https://www.bankofengland.co.uk/-/media/boe/files/working-paper/2018/business-investment-cash-holding-and-uncertainty-since-the-great-financial-crisis.pdf">productive investment has withered</a> despite corporations building up <a href="https://www2.deloitte.com/content/dam/Deloitte/uk/Documents/corporate-finance/deloitte-uk-cash-paradox-jan-14.pdf">record cash reserves</a>. </p>
<p>The poorest earners <a href="https://www.independent.co.uk/news/uk/home-news/lowest-earners-more-tax-richest-office-national-statistics-inequality-council-tax-vat-equality-trust-a7704331.html">bear a greater tax burden</a> than the rich. So there is merit – and <a href="https://www.theguardian.com/business/2019/mar/19/most-people-want-higher-taxes-on-rich-to-support-poor-oecd">scope</a> – to increase rates on the highest earners to redistribute economic resources more fairly. </p>
<h2>Taxing wealth not income</h2>
<p>But this is only part of the solution. Many economists, inspired by Thomas Piketty’s <a href="https://theconversation.com/piketty-has-redefined-capital-after-200-years-of-confusion-25770">seminal work Capital</a>, argue for explicit taxes on wealth. <a href="https://www.cnbc.com/2019/02/12/bill-gates-supports-wealth-tax-like-aoc-but-income-is-a-misfocus.html">As the billionaire Bill Gates has pointed out</a>, most resources of the rich are contained in their assets rather than in their income streams, and so taxing wealth directly would be more effective in curbing inequality. </p>
<p>It is also vital to tighten the screws on the way transfers of wealth are taxed. For instance, inheritance taxes are in desperate need of reform, as they currently raise <a href="https://www.theguardian.com/business/2019/apr/03/inheritance-tax-loopholes-allowing-super-rich-to-pay-lower-rates">notoriously low amounts of revenue</a>.</p>
<p>Another proposal for taxing wealth transfers targets the financial sector. Short-term speculative trading between financial institutions <a href="https://theconversation.com/financial-speculation-the-good-the-bad-and-the-parasitic-33613">was responsible for triggering the 2007-08 financial crisis</a>. Taxing financial transactions could reduce the instability that results from risky financial activity by <a href="https://progressiveeconomyforum.com/wp-content/uploads/2019/09/Reinforcing-Resilience.pdf">increasing the costs of speculation</a>. This kind of tax could also lower inequality by making risky financial instruments less desirable and decreasing the potential gains available to financial elites.</p>
<h2>Preventing inequality from the get-go</h2>
<p>Tax reform is much needed. But even with strong political will, <a href="https://voxeu.org/article/missing-profits-nations">taxes tend to be avoided and evaded</a> through legal and illegal means respectively. A more comprehensive strategy is required, focused on “predistribution” – this means preventing inequalities from developing in the first place.</p>
<p><a href="https://madeinamericathebook.wordpress.com/2019/03/04/fixing-inequality-more-opportunity-is-not-the-answer/">Current proposals</a> for predistribution policies rightly target housing – one of the biggest financial concerns for people. Home ownership gives a boost to household wealth, but it may also make it more unstable if backed by large mortgage debt. </p>
<p>The 2007-08 crisis showed the pitfalls of relying on private markets to supply housing, with many families experiencing big losses as <a href="https://www.businessinsider.com/how-2007-financial-crisis-transformed-uk-housing-market-2017-7?r=US&IR=T">house prices plummeted</a>. Even programmes such as Help to Buy – which makes it cheaper for first-time buyers to put down a deposit on a home – relies on private developers to supply housing and has been widely <a href="https://www.theguardian.com/commentisfree/2019/jun/14/help-to-buy-well-off-housing-crisis-afford-market">criticised for fuelling inequality</a>.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/295209/original/file-20191002-49365-1lghad8.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/295209/original/file-20191002-49365-1lghad8.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=390&fit=crop&dpr=1 600w, https://images.theconversation.com/files/295209/original/file-20191002-49365-1lghad8.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=390&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/295209/original/file-20191002-49365-1lghad8.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=390&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/295209/original/file-20191002-49365-1lghad8.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=489&fit=crop&dpr=1 754w, https://images.theconversation.com/files/295209/original/file-20191002-49365-1lghad8.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=489&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/295209/original/file-20191002-49365-1lghad8.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=489&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Housing has to be a focus.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/row-typical-english-terraced-houses-409994218?src=0BB2Ny--daFXkXPGOwp4Aw-1-10">Shutterstock</a></span>
</figcaption>
</figure>
<p><a href="https://www.sciencedirect.com/science/article/abs/pii/S0954349X18302911?via%253Dihub">In a recent paper</a>, I found that people do not benefit equally from holding assets such as housing supplied by private providers. Women, people of colour, millennials and low-income families experience lower improvements in their financial well-being from holding wealth compared to others. This is because they are more financially vulnerable and their access to wealth, as well as the way that the value of this wealth changes over time, is not just down to individual decisions but is largely influenced by economic policy and the way in which financial markets operate. So a careful strategy of public provision of key assets is needed to support more vulnerable people and reduce inequality.</p>
<p>Politicians have started to notice the importance of these types of policies. The Labour party has committed to <a href="https://www.itv.com/news/2019-09-23/mcdonnell-backs-logical-approach-to-delay-on-labour-brexit-policy/">build a million new homes</a> and <a href="http://labour.org.uk/wp-content/uploads/2018/04/Housing-for-the-Many-final.pdf">regulate the private rental market</a> if elected. In the US, Bernie Sanders, a 2020 US presidential election hopeful, is promising “housing for all”, and similar initiatives <a href="https://www.marketwatch.com/story/heres-where-2020-presidential-candidates-including-elizabeth-warren-and-kamala-harris-stand-on-affordable-housing-2019-07-25">have been mentioned by other candidates</a>.</p>
<p>One initiative alone won’t fix inequality – a large overhaul is needed. A successful strategy should be comprehensive, complementing tax reform with predistribution policies. There are many potential difficulties to consider, but with political will in place, the time is ripe for systemic change.</p><img src="https://counter.theconversation.com/content/124240/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Hanna Szymborska does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Inequality has reached untenable levels – public spending and wealth taxes are needed.Hanna Szymborska, Lecturer in Economics, The Open UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1150502019-04-09T09:06:42Z2019-04-09T09:06:42ZA leaky roof and a democratic crisis within – what better time to get serious about redesigning Westminster?<figure><img src="https://images.theconversation.com/files/267949/original/file-20190407-115773-rxdj7h.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Shutterstock</span></span></figcaption></figure><p>The House of Commons recently <a href="https://edition.cnn.com/2019/04/04/uk/house-of-commons-water-leak-scli-gbr-intl/index.html">flooded</a>, right in the middle of a debate. As Conservative MP Justine Greening discussed unpaid tax and national insurance, she was interrupted by a cascade of water coming through the ceiling and the sitting was suspended 10 minutes later. </p>
<p>As water poured down through the roof on to the press gallery, it was hard not to make the connection between the broken building and a broken institution. Parliament’s failure to come to a consensus on Brexit has demonstrated that the institution is broken. That is not unrelated to the derelict state of the building itself. This moment offers a once-in-a-generation opportunity to reconnect a disaffected population with parliament.</p>
<p>The ongoing project to restore the Palace of Westminster could be used to address the longstanding cultural issues within parliament that promote embedded power dynamics and adversarial behaviour.</p>
<p>Brexit has only <a href="https://www.politicshome.com/news/uk/foreign-affairs/brexit/news/101346/voters-absolute-despair-about-mps-handling-brexit-new">amplified the public’s disaffection with British politicians</a> which was already considerable after the MPs’ expenses scandal. Children’s author Philip Pullman encapsulated this frustration and disillusionment recently when he tweeted that the whole building should be “exploded” and rebuilt from scratch, adding: “Much of our diseased politics is embodied in that building.”</p>
<p><div data-react-class="Tweet" data-react-props="{"tweetId":"1100530310427627522"}"></div></p>
<p>By the middle of the next decade part of Pullman’s wish is due to come true. MPs and Lords have agreed to leave the palace entirely so it can be rebuilt in their absence. Much of the essential infrastructure serving the building dates back to the 19th century and passed its expected lifespan decades ago. Indeed, the recent flood came as no surprise: in September 2016 <a href="https://www.parliament.uk/business/committees/committees-a-z/joint-select/joint-committee-on-the-palace-of-westminster/news-parliament-2015/restoration-of-palace-of-westminster-report-published-16-17/">a Joint Select Committee</a> warned that the palace “faces an impending crisis which we cannot responsibly ignore”.</p>
<p>Nor is the risk limited to flooding. There are regular small fires, caused by the outdated infrastructure, which have the potential to turn into major incidents. Wardens <a href="https://www.theguardian.com/politics/2017/jan/14/secret-report-palace-westminster-grave-risk-fire-saftey">patrol the building</a> 24 hours a day to manage the problem. Inside the building asbestos is widespread and outside masonry is crumbling – a “<a href="https://www.thetimes.co.uk/article/fallen-angel-causes-alarm-at-crumbling-westminster-3pfh8blc3">football-sized lump</a>” has fallen off a stone angel on the Victoria Tower.</p>
<p>As a Grade I listed building and part of a UNESCO World Heritage Site, the palace cannot be torn down – or “exploded” as Pullman suggested. As for moving elsewhere, a <a href="https://www.parliament.uk/mps-lords-and-offices/offices/commons/house-of-commons-commission/minutes/commons-commission-bulletins-to-members/bulletin-29-october-2012/">decision</a> was taken in 2012 by the governing bodies of the Commons and Lords that “ruled out the option of constructing a brand new building away from Westminster”. This decision was taken with no public consultation, or consideration of the potential costs or benefits of a new building.</p>
<figure>
<iframe width="440" height="260" src="https://www.youtube.com/embed/9otWzLbDeUM?wmode=transparent&start=0" frameborder="0" allowfullscreen=""></iframe>
<figcaption><span class="caption">Rain stops play in parliament.</span></figcaption>
</figure>
<p>Throughout our research, we’ve spoken to many parliamentarians who are concerned about the restoration project. Current estimates for the project are at least £3.5 billion and possibly much more (the cost estimates date back to 2014, and are expected to increase when a final budget is produced next year). The concern is that it may be difficult to justifying spending billions of taxpayers’ money on politicians, especially at a time of national austerity. But this fear may be unfounded – <a href="https://assets.ctfassets.net/xkbace0jm9pp/1vNBTsOEiYciKEAqWAmEKi/c9cc36b98f60328c0327e313ab37ae0c/Audit_of_political_Engagement_14__2017_.pdf">polling</a> suggests the public is broadly positive about the need to rebuild the palace.</p>
<p>The project is nevertheless dominated by a negative mindset. It is called a “restoration and renewal” programme but it is currently aimed solely at protecting the heritage of the building (the restoration), rather than the prospects of creating a parliament for the 21st century (the renewal). The physical fabric of the building is not currently a welcoming or open space. The programme has focused on repairing the crumbling infrastructure rather than addressing the masculine and adversarial design, which itself fails to promote openness to the public.</p>
<p>The project’s focus on the past may be because there is no clear single vision of what a future parliament should look like: it is a question that cannot be answered without a wide-ranging and imaginative public debate.</p>
<p>There have lately been a few positive steps in this direction. A joint select committee has <a href="https://www.parliament.uk/business/committees/committees-a-z/joint-select/draft-parliamentary-buildings-bill/news/restoration-renewal-report-published-17-19/">recommended that public engagement</a> must be an integral part of the restoration and renewal programme. As the group notes, “the country is evolving and so must the building in which the most important decisions which touch upon every member of the population are made”. Parliament’s handling of Brexit has exasperated and frustrated the public, not least because of confusing parliamentary procedures. The restoration and renewal programme is an opportunity to redesign an institution and open up the processes of parliament to the people it serves.</p>
<p>Before the ill-fated Commons sitting was suspended, and as he struggled to make himself heard over the gushing water, Labour MP Justin Madders suggested the flood offered “<a href="https://edition.cnn.com/2019/04/04/uk/house-of-commons-water-leak-scli-gbr-intl/index.html">symbolism … about how broken parliament is</a>”. Public engagement is necessary in order to fix a decaying parliament. The restoration and renewal programme is a key opportunity for positive engagement with a democracy that looks to the future instead of the past, encouraging discussions about openness, collaboration and inclusivity.</p><img src="https://counter.theconversation.com/content/115050/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The authors do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>As MPs flounder over Brexit, rain is leaking into the House of Commons. Was there ever a more fitting time to discuss what this building is for and what it should look like?Alexandra Anderson, Postdoctoral Research Associate - Department of Politics, University of SheffieldAlexandra Meakin, Research Associate, University of SheffieldLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1021452018-09-18T12:46:22Z2018-09-18T12:46:22ZEnding austerity: why public spending is key to building a stable and fair economy<figure><img src="https://images.theconversation.com/files/236879/original/file-20180918-158219-1llhyx0.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/uk-finance-256563658?src=wjTZeSvySVEoMknu6-DIeA-1-59">John Gomez / Shutterstock</a></span></figcaption></figure><p>The term “fiscal” comes from the Latin for “purse”. When it comes to fiscal policy – how the government manages the country’s budget – a lot of people wrongly compare the country’s purse, and how it’s managed, with that of an individual or household. </p>
<p>The government’s purse is like no other. Managed correctly, it can end austerity and make the economy both stable and fair.</p>
<p>The UK economy initially showed a strong recovery from the 2008 financial crisis. It began in late 2009 and continued into 2010. Then, eight years of austerity policies by Conservative governments <a href="https://www.lrb.co.uk/v37/n04/simon-wren-lewis/the-austerity-con">ended the recovery and brought recession</a>, stagnation and growing poverty. Excuses offered by Conservative politicians, from world market instability to Brexit anxieties, fail to conceal the real cause of this dismal post-crash economic performance.</p>
<p>The Conservative government suffers from <a href="https://www.theguardian.com/commentisfree/2010/mar/07/deficit-fetishism-government-spending">“deficit fetishism”</a> – where all public policy is held captive to hitting a fiscal balance of zero (or going into surplus) by means of expenditure cuts. But the huge cuts to public spending have <a href="https://theconversation.com/state-of-the-nation-a-dismal-record-for-the-uk-economy-39675">repeatedly failed</a> to achieve a balanced budget. Nevertheless, much of the British public remains gripped by the <a href="https://www.theguardian.com/business/ng-interactive/2015/apr/29/the-austerity-delusion">dysfunctional fiscal goal of deficit reduction</a>.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/236870/original/file-20180918-158240-1budzmu.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/236870/original/file-20180918-158240-1budzmu.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=408&fit=crop&dpr=1 600w, https://images.theconversation.com/files/236870/original/file-20180918-158240-1budzmu.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=408&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/236870/original/file-20180918-158240-1budzmu.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=408&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/236870/original/file-20180918-158240-1budzmu.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=513&fit=crop&dpr=1 754w, https://images.theconversation.com/files/236870/original/file-20180918-158240-1budzmu.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=513&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/236870/original/file-20180918-158240-1budzmu.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=513&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Britain’s woeful recovery from the financial crisis.</span>
<span class="attribution"><a class="source" href="https://www.ifs.org.uk/publications/13302">IFS</a></span>
</figcaption>
</figure>
<h2>Basic problems</h2>
<p>A basic problem with budget balancing in all its versions is the improbability of achieving it. Take the example of a deficit, a negative budget balance, and a chancellor committed to reducing the deficit quickly. This chancellor believes the way to reduce the deficit is to increase taxes or reduce spending. Conservative chancellors since 2010 have preferred spending cuts. </p>
<p>But spending cuts reduce the demand for goods and services bought by the public sector, such as medicines and medical equipment. As a result the companies that supply these goods and services reduce the number of people they hire and lower their investment. These declines result in a fall in corporate and household incomes. Tax payments then decline. So any fall in the deficit and public borrowing will be less than the cuts themselves. </p>
<p>The <a href="https://theconversation.com/autumn-statement-2016-tories-shift-to-growth-strategy-in-an-ed-balls-style-pirouette-66531">repeated</a> <a href="https://theconversation.com/uk-budget-2017-experts-respond-73998">failures</a> of Conservative governments to meet their fiscal targets since 2010 clearly demonstrates the effect of cuts to private incomes and spending. A budget balancing approach to fiscal policy reinforces the instability of Britain’s economy. When private spending is weak, budget balancing makes it weaker, magnifying small recessions into big ones. Economists call this “procyclical”.</p>
<p>Instead of the dysfunctional, procyclical budget balancing obsession, the chancellor <a href="https://www.oecd.org/eco/public-finance/45105376.pdf">should do the opposite</a> – use fiscal policy to minimise the instability of the economy. Economists call this a “countercyclical” approach.</p>
<p>An enlightened chancellor will be well aware that falling tax revenue in a recession is a good thing. It leaves households with more spending power than otherwise would be the case. Of course, the falling revenue means a growing deficit (or a declining surplus). By leaving people with more after tax income, the deficit is not a problem, though, it is part of the solution.</p>
<h2>Common sense</h2>
<p>The guidelines for an active countercyclical fiscal policy are common sense: use public investment to stimulate medium and long-term growth. Meanwhile current spending provides the tool to keep the economy at a stable and high level of output and employment. The following principles will help the government end austerity and build a better economy.</p>
<ol>
<li><p>Public investment in things such as education and transport is the instrument to stimulate growth. This spending takes time to implement and see a return so projects should not be stopped half way through. It is not an efficient instrument for the short-term management of economic output and employment even though it is very effective in stimulating the economy.</p></li>
<li><p>Adjusting current spending provides the tool to counteract the waxing and waning of private investment and exports that would otherwise cause inflationary pressures or recessional decline. For example, if the economy is in recession, an increase in pensions or a one-off bonus to public employees would prompt more household spending, which creates greater demand for private goods and services. If inflation threatens, the chancellor could introduce temporary tax increases to dampen private spending.</p></li>
<li><p>The public budget may show a surplus or a deficit as a result of this kind of active fiscal policy. This depends primarily on the behaviour of the private sector. Vigorous private sector demand favours a fiscal surplus, while weak private spending implies a fiscal deficit. Either is fine.</p></li>
<li><p>The balance between spending and taxation is the outcome of an active fiscal policy. That balance is not a policy goal in itself. The goal should be a progressive economy – where all who want jobs have them and those jobs come with decent pay and safe conditions, where public services thrive thanks to adequate funding, and economic benefits are distributed evenly across the country.</p></li>
</ol>
<hr>
<p><em>This article is part of <a href="https://theconversation.com/uk/topics/ending-austerity-series-59776?utm_source=TCUK&utm_medium=linkback&utm_campaign=TCUKengagement&utm_content=EndingAusterity">a short series</a> published in conjunction with the <a href="https://progressiveeconomyforum.com/2018/09/10/100-policies-end-austerity/">Progressive Economy Forum</a>, in which economists put forward viable alternatives to austerity.</em></p>
<ul>
<li><p><em><a href="https://theconversation.com/ending-austerity-stop-the-uks-dependence-on-private-debt-103395?utm_source=TCUK&utm_medium=linkback&utm_campaign=TCUKengagement&utm_content=EndingAusterity">How to stop the UK’s dependence on private debt</a></em></p></li>
<li><p><em><a href="https://theconversation.com/ending-austerity-create-a-national-investment-bank-103559?utm_source=TCUK&utm_medium=linkback&utm_campaign=TCUKengagement&utm_content=EndingAusterity">Why it’s time to create a national investment bank</a></em></p></li>
<li><p><em><a href="https://theconversation.com/ending-austerity-give-everyone-a-pay-rise-103576?utm_source=TCUK&utm_medium=linkback&utm_campaign=TCUKengagement&utm_content=EndingAusterity">Give everyone a pay rise</a></em></p></li>
</ul>
<p><em>For more evidence-based articles by academics, subscribe to our <a href="https://theconversation.com/uk/newsletters?utm_source=TCUK&utm_medium=linkback&utm_campaign=TCUKengagement&utm_content=EndingAusterity">newsletter</a>.</em></p><img src="https://counter.theconversation.com/content/102145/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>John Weeks is coordinator of the Progressive Economy Forum's council of economists and a member of the Labour Party.</span></em></p>Austerity policies cut Britain’s brief recovery from the financial short and brought recession, stagnation and growing poverty.John Weeks, Professor Emeritus, SOAS, University of LondonLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/959282018-05-08T10:39:41Z2018-05-08T10:39:41ZFederal Budget 2018: a state-by-state spending analysis<figure><img src="https://images.theconversation.com/files/217710/original/file-20180504-153914-539cxc.png?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Wes Mountain/The Conversation</span>, <a class="license" href="http://creativecommons.org/licenses/by-nd/4.0/">CC BY-ND</a></span></figcaption></figure><h2>New South Wales and ACT</h2>
<p><em>Anika Gauja, Associate Professor, Department of Government and International Relations, University of Sydney</em></p>
<p>With income tax cuts and a return to surplus earlier than expected, Treasurer Scott Morrison has certainly delivered a budget full of pre-election sweeteners. New South Wales itself isn’t a big winner, however, with only A$1.5 billion of the A$24 billion earmarked for infrastructure projects heading its way. </p>
<p>The projects that have been announced are strategically targeted: A$400 million will be spent on upgrading the Port Botany rail link, and A$50 million will go towards investigating the business case for the proposed <a href="https://theconversation.com/au/topics/badgerys-creek-9268">Badgery’s Creek airport rail</a>. The Pacific Highway will be upgraded with a new A$1 billion bypass at Coffs Harbour, bringing a windfall to the Nationals-held seat of Cowper. Scott Morrison’s own electorate will get A$25 million for a new monument commemorating the 250th anniversary of Captain Cook’s landing.</p>
<p>The “election budget” takes on even more significance in NSW, where voters will most likely go to the polls twice in the coming 12 months, with the next state election due in March 2019. By allocating only a modest proportion of infrastructure funding to NSW, the federal Coalition has made it hard for its NSW counterpart to capitalise on spending announcements during the state campaign. </p>
<p>If the state election is held before the next federal election, this might indicate confidence that Gladys Berejiklian’s government will be returned. Yet it might also signal a strategic focus away from NSW, where the state election could act as a buffer to absorb some of the disaffection that might otherwise be directed at the federal government.</p>
<hr>
<h2>Victoria</h2>
<p><em>David Hayward, Professor of Public Policy and Director, VCOSS-RMIT Future Social Service Institute, RMIT University</em></p>
<p>Victoria is one of the big winners from the budget, through a mixture of luck and good political management. </p>
<p>First the luck. Mainly due to higher-than-expected population growth, Victoria will receive a bigger share of the national Goods and Services Tax pool, with revenue growing by a whopping A$1.4 billion, or almost 10% to A$17.3 billion. For the first time, Victoria’s share of GST revenues will be almost the same as its share of Australia’s population.</p>
<p>Also growing rapidly is the state’s share of federal infrastructure spending, which is tipped to rise from barely 8% to 15%. This is where the good political management part comes in. Over the last three years, Premier Daniel Andrews and Treasurer Tim Pallas have hit the airwaves to great effect, <a href="https://www.premier.vic.gov.au/its-time-to-give-victoria-its-fair-share/">complaining bitterly</a> about the state’s low levels of infrastructure investment under the Turnbull government. </p>
<p>With an election only six months away, the federal government has finally responded with a cool A$7.6 billion in total. Most of that investment will flow into a <a href="http://www.abc.net.au/news/2018-04-13/melbourne-airport-train-victoria-commonwealth-need-to-agree/9648300">Melbourne Airport rail link</a> (A$5 billion), a North East toll road that is yet to gain the support of the opposition (A$1.75 billion), and a rail link to Monash University’s Clayton Campus (A$500 million).</p>
<p>Much of this money won’t be seen for many years, with the spend next year being just A$900 million. The airport rail link is unlikely to start being built until 2026. There will also be some wrangling well before then, with the federal government determined to “equity” fund and the Victorian government looking for good old-fashioned capital grants.</p>
<p>Overall, though, this is a good-news budget for Victorians and the Victorian government. Just don’t expect opposition leader Matthew Guy to be smiling. </p>
<hr>
<h2>Western Australia</h2>
<p><em>Ian Cook, Senior Lecturer in Australian Politics, Murdoch University</em></p>
<p>Today the budget confirmed that the West Australian government would get another A$2.8 billion to spend on transport infrastructure, and A$189 million to spend on hospitals. Low- to middle-income earners in WA, like everyone else in the country, can now expect around A$500 back by way of an increased tax rebate. West Australians were told last week that they would get around A$1 billion more through a revised GST carve-up.</p>
<p>The crucial question now is whether Western Australians will see the federal government’s budget and the GST boost as a visit from Santa or Scrooge.</p>
<p>They had been wondering where the money would come from to pay for infrastructure projects, especially Perth’s Metronet, promised by State Labor during the last election campaign. Now they know. Well, most of it. A couple of billion dollars more will be needed to fund the projects. </p>
<p>Western Australians were expecting 45 cents back for every dollar in GST raised in the state (up from 34c) and they were told they would in fact get 47c. But Victorians will get A$1.8 billion more in funding, and 98c in the dollar back from their GST.</p>
<p>Many people in the West will be wondering whether another A$10 a week in their pocket is all that much, especially given Perth’s notorious coffee prices.</p>
<p>In a pre-election budget, and in a state in which the Liberal vote is falling, the Santa or Scrooge question is important – and the answer is still not really clear.</p>
<hr>
<h2>Queensland</h2>
<p><em>Chris Salisbury, Research Associate, University of Queensland</em></p>
<p>As expected, Scott Morrison’s third federal budget is big on pleasure and light on pain for Queenslanders. With a federal election due within a year, and given Queensland’s status as a battleground state, the temptation to splash the cash in the Sunshine State is strong.</p>
<p>Committing almost A$536 million (A$478 million of it new) over five years to improve the health of the Great Barrier Reef has been welcomed widely, although criticised in some conservation circles for supporting programs that don’t directly address the impacts of climate change.</p>
<p>The biggest smiles are reserved for proponents of infrastructure spending, especially to relieve commuter congestion, with A$5.2 billion newly earmarked for projects in Queensland.</p>
<p>This includes a A$1 billion boost for expanding the M1 motorway between Brisbane and the Gold Coast, A$170 million for the Amberley interchange section of the Cunningham Highway near Ipswich, and A$3.3 billion for much-needed upgrades to the Bruce Highway. There is also A$390 millon for the Sunshine Coast rail line duplication, a project that has long been advocated by local Liberal National Party MPs.</p>
<p>Significantly, but not surprisingly, there is no federal funding for the Cross River Rail project in Brisbane, a <a href="https://www.brisbanetimes.com.au/politics/queensland/jackie-trad-is-hoping-money-for-cross-river-rail-will-be-in-the-federal-budget-20180507-p4zdts.html">longstanding bone of contention</a> between the Labor state government and the federal Coalition. Instead, Morrison has pledged A$300 million for the LNP-controlled Brisbane City Council’s Metro transport project.</p>
<p>Regional Queensland hasn’t been ignored, with A$176 million promised for the long-
proposed construction of Rockhampton’s Rookwood Weir, dependent on equivalent
state funding. Federal Nationals MPs hope this will boost Coalition support in marginal central Queensland seats, where the popularity of One Nation looms large.</p>
<hr>
<h2>Northern Territory</h2>
<p><em>Rolf Gerritsen, Professorial Research Fellow, Northern Institute, Charles Darwin University</em></p>
<p>The federal budget’s impact in the Northern Territory was determined before the territory’s own budget was released last week.</p>
<p>Two days before the NT budget came out, Treasurer Scott Morrison gave the territory a A$259 million top-up to compensate for its reduced GST revenue share. (A sweetener, perhaps, for <a href="http://www.abc.net.au/news/2018-04-17/fracking-to-resume-in-the-northern-territory-moratorium-lifted/9666022">approving fracking</a>?). </p>
<p>Morrison also promised a A$550 million contribution to the territory’s indigenous housing budget. The Country Liberal Party candidate for the Labor seat of Lingiari also announced A$250 million to extend the indigenous Ranger program. And the NT received $280 million in roads funding, as well. </p>
<p>The NT has three problems in coming years. Its public service expenditure is overly large and top-heavy, meaning its cost is rising faster than inflation. Secondly, its population is growing relatively slowly compared with the rest of Australia. Finally, the territory’s Aboriginal population is decreasing as a proportion of the national Indigenous population, as more people in cities on the east coast have begun identifying as Indigenous in recent censuses. </p>
<p>These factors affect the territory’s relativities as calculated by the Commonwealth Grants Commission. The NT’s relativities have declined from 5.4% to 4.6% in the coming year. This means the NT received A$540 million less in its general purpose grant than if the 2010 relativities settings were still in place. </p>
<p>That will likely only get worse as the territory’s debt burden is expected to become intolerable within two decades.</p>
<hr>
<h2>South Australia</h2>
<p><em>Rob Manwaring, Senior Lecturer, Politics and Public Policy, Flinders University</em></p>
<p>The twin focus of the 2018 budget was tax relief and a strong focus on support for older people. </p>
<p>This will have a mixed impact on South Australia. SA has a disproportionately older population compared with the rest of the country. In theory, the state should then benefit from a range of Scott Morrison’s measures to increase aged care places and support for in-home care.</p>
<p>The tax relief measures might also well offer some respite to residents, given concerns about cost-of-living prices.</p>
<p>Yet, the budget does little to directly tackle economic inequality in the state. SA has the highest youth unemployment in the nation. The lack of an increase to the state’s Newstart allowance will not help young people out of work. The treasurer also didn’t flag any specific measures to tackle other youth issues, including pathways into the housing market. Nor are there specific stimulus job measures, meaning any positive job growth effects might well take some time to kick in.</p>
<p>For Steven Marshall’s freshly minted Liberal government, however, there are opportunities in the budget, especially the 21st Century medical plan, which aligns well with his rejuvenation agenda to create medical precincts. </p>
<p>The government will also receive money to fund specific infrastructure measures, such as the North-South roads corridor. Whether this spending is proportionate to SA’s size and needs, however, remains unclear. The Marshall government will still likely need to be proactive to bring additional funding to the state for other infrastructure projects, such as solving traffic hot spots in Adelaide.</p>
<hr>
<h2>Tasmania</h2>
<p><em>Maria Yanotti, Lecturer of Economics and Finance Tasmanian School of Business & Economics, University of Tasmania</em></p>
<p>Cuts to GST revenue and personal income tax will have the biggest impact for Tasmanians. Changes to the GST carve-up could deliver a A$29 million drop in state government revenue, which will restrict state expenditure as GST payments account for 40% of the state’s budget. </p>
<p>Conversely, the cut to personal income tax will mean more disposable income for many in Tasmania, where annual average earnings are A$53,357, but the median annual income is just A$29,796.</p>
<p>The measures to improve longer life choices for older Australians, as well as the fully funded roll-out of the National Disability Insurance Scheme, will also be welcomed in Tasmania. People aged 65 years and over represent almost 20% of the state’s population, the aged care residential services industry employs 2.8% of Tasmanians (relative to 2% of all Australians), and the health care and social assistance sector is the state’s biggest employer.</p>
<p>Investment in infrastructure, defence equipment, space industry, and research and development are arguably the way to go into the future. Most Tasmanians will support the Great Barrier Reef package and some will indirectly benefit from the Melbourne airport train link. However, the federal budget is again offering little that’s truly new for Tasmania, with most of the funding going to pre-existing commitments. </p>
<p>Investment in agricultural competitiveness and access to export markets, accompanied by cuts in business taxes and business support, will stimulate growth of businesses in an economy that receives a large share of Commonwealth income. Meanwhile, levelling the playing field for small business will benefit many emerging boutique businesses in the state.</p>
<p>Tasmania’s population, tourism industry, private businesses and economy have all been growing, which is always good for the incumbent government. Launceston and Hobart are progressing with “City Deals”, and the University of Tasmania is “transforming”. However, this progress has been accompanied by strong house price growth and housing pressure, while educational levels are still low.</p><img src="https://counter.theconversation.com/content/95928/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Dr Chris Salisbury is a Research Associate with Queensland's TJ Ryan Foundation.</span></em></p><p class="fine-print"><em><span>David Hayward works for RMIT University, is Chair of the University’s Academic Board and is a member of RMIT Council. He has received Australian Research Council funding. He is also affiliated with the Victorian Council of Social Service, as a life member and Board member. He has previously done funded contract research for a variety of state and local government departments. He has also done funded contract research for a number of public service unions. He is a member of a variety of Victorian state government advisory committees in the areas of disability and family violence. </span></em></p><p class="fine-print"><em><span>Rob Manwaring is affiliated with The Fabians</span></em></p><p class="fine-print"><em><span>Rolf Gerritsen has received funding from the NT Departments of Education and Local Government.</span></em></p><p class="fine-print"><em><span>Anika Gauja, Ian Cook, and María Yanotti do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>With a federal election looming within a year, our panel looks at what each state and territory has been handed in the budget - and why it matters.Chris Salisbury, Research Associate, The University of QueenslandAnika Gauja, Associate Professor, Department of Government and International Relations, University of SydneyDavid Hayward, Professor of Public Policy and Acting Director, VCOSS-RMIT Future Social Service Institute, RMIT UniversityIan Cook, Senior Lecturer of Australian Politics, Murdoch UniversityMaría Yanotti, Lecturer of Economics and Finance Tasmanian School of Business & Economics, University of TasmaniaRob Manwaring, Senior Lecturer, Politics and Public Policy, Flinders UniversityRolf Gerritsen, Professorial Research Fellow, Northern Institute, Charles Darwin UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/886322017-12-05T04:06:22Z2017-12-05T04:06:22ZSydney’s stadiums debate shows sport might not be the political winner it once was<figure><img src="https://images.theconversation.com/files/197687/original/file-20171204-23018-162ucm3.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">NSW Sports Minister Stuart Ayres claims Sydney is falling behind other Australian cities in its big sporting event infrastructure.</span> <span class="attribution"><span class="source">AAP/Joel Carrett</span></span></figcaption></figure><p>Less than two decades after Sydney <a href="http://www.nytimes.com/2003/12/24/news/what-did-olympics-bring-sydney.html">hosted the Olympics</a>, its sports infrastructure is back in the national consciousness. </p>
<p>The New South Wales government has come in for heavy criticism over <a href="http://www.abc.net.au/news/2017-11-23/olympic-and-sydney-football-stadiums-demolished-and-rebuilt/9182798">its plan</a> to knock down and rebuild the Olympic Stadium (currently branded ANZ) in Sydney’s west and the Sydney Football Stadium (currently branded Allianz), which sits in the east alongside the Sydney Cricket Ground.</p>
<p>The cost? Somewhere above A$2 billion.</p>
<p>Suddenly, the media-sport-politics machine cranked up in earnest.</p>
<figure>
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<figcaption><span class="caption">Sydney’s Olympic Stadium has played host to many great sporting moments, including Cathy Freeman’s 400m win.</span></figcaption>
</figure>
<h2>A debate beyond the field</h2>
<p>Sydney Morning Herald columnist and sport aficionado Peter FitzSimons <a href="http://www.smh.com.au/sport/the-fitz-files/stadium-replacement-a-monument-to-excess-20171201-gzwthe.html">reported that</a> his article criticising the decision elicited the strongest reaction to anything that he’d written in the paper over three decades. There followed a <a href="https://www.change.org/p/premier-berejiklian-stop-nsw-government-wasting-2b-rebuilding-sfs-olympic-stadiums">change.org petition</a> and a welter of unfavourable publicity reaching well beyond Sydney.</p>
<p>Even the NSW opposition leader, Luke Foley, broke out of the state political freezer to <a href="http://www.abc.net.au/radionational/programs/breakfast/nsw-stadium-rebuild-an-outrageous-extravagance-foley/9226364">press his criticisms</a> on national radio.</p>
<p>This was, for Foley, a matter of west versus east, education and health versus big sport, and the state government pandering to its elite mates on the Sydney Cricket and Sports Ground Trust. <a href="http://www.sydneycricketground.com.au/about-us/governance/trustees/">Its trustees</a> include the influential broadcaster Alan Jones and uber-conservative businessman Maurice Newman.</p>
<p>Sport Minister Stuart Ayres had, by then, rolled out the familiar justifications that Sydney was falling behind the likes of Melbourne, Brisbane, Adelaide and Perth in its big event infrastructure. This was not just a matter of civic pride, but of jobs in the event sector. And, in any case, <a href="http://www.news.com.au/sport/sports-life/sydney-is-well-behind-other-aussie-cities-for-major-events/news-story/96055fadd5d8dfe39322d93f4efc2e51">Ayres claimed</a> the cost was only 1% of planned five-year expenditure on health and education.</p>
<p>The sport-friendly local tabloid, The Daily Telegraph, editorially supported him <a href="https://www.dailytelegraph.com.au/news/opinion/daily-telegraph-editorial-spending-2-billion-on-revamping-our-sports-stadiums-is-a-good-thing/news-story/d01c8e770a3fbca46cedb7fc7d770cea">with the unequivocal opinion</a>:</p>
<blockquote>
<p>Spending $2 billion on revamping our sports stadiums is a good thing.</p>
</blockquote>
<p>Judging by the amplified negative response, this riposte was finding the going hard.</p>
<h2>Is sport’s political power fading?</h2>
<p>What does all this claim and counter-claim over public investment in infrastructure tell us about sport, politics and economics?</p>
<p>First, it appears that sport does not have quite the privileged place at the front of the public trough queue it once occupied. </p>
<p>Whereas once there would have been a great deal of flowery language about sport’s unchallenged place in Australian hearts, the justification for the funding priority given to two large enclosed sport spaces has been almost entirely economic.</p>
<p>In Australia, as elsewhere in the world (especially North America), cities have been drawn into a place-marketing competition in which private sport concerns demand public subsidies. If governments don’t stump up the cash through building facilities, offering tax incentives and other inducements, sport franchises and signature events <a href="http://www.upenn.edu/pennpress/book/1743.html">threaten to relocate</a>.</p>
<p>In Sydney’s case, <a href="http://www.theaustralian.com.au/sport/nrl/state-backflip-could-lose-grand-final-for-anz-stadium/news-story/ba311701a3b5cd28fa79c6861f625d35">one threat</a> is that it may lose major events like the NRL Grand Final if it does not do what is expected of it by those who run the game. That many locals seem prepared to run that risk suggests that sport cannot simply appeal to its intrinsic worth as a substitute for reasoned argument.</p>
<p>But, if there is some well-founded scepticism about sport being unimpeachably good for the soul, it also seems that many people have become wary of the case that it is beneficial for the wallet.</p>
<p>The seemingly hard-headed world of sport event economics has been <a href="http://www.e-elgar.com/shop/handbook-on-the-economics-of-sport">frequently exposed</a> as a fantasy island of rubbery figures, optimistic projections and misleading extrapolations.</p>
<hr>
<p><em><strong>Further reading: <a href="https://theconversation.com/for-cities-hosting-major-sporting-events-is-a-double-edged-sword-76929">For cities, hosting major sporting events is a double-edged sword</a></strong></em></p>
<hr>
<p>Building sport infrastructure has become enmeshed with all the other contentious projects that are currently underway in Sydney. The best known of these is the $17 billion (and rising) <a href="https://www.westconnex.com.au/about">WestConnex road network expansion</a>. </p>
<p>The Australian auditor-general <a href="https://theconversation.com/westconnex-audit-offers-another-17b-lesson-in-how-not-to-fund-infrastructure-73206">has been highly critical</a> of the cavalier way in which public funds were committed at the behest of governments and interest groups. Public transport advocates <a href="http://www.westconnex.info/">have bemoaned</a> its lost opportunities.</p>
<hr>
<p><em><strong>Further reading: <a href="https://theconversation.com/westconnex-audit-offers-another-17b-lesson-in-how-not-to-fund-infrastructure-73206">WestConnex audit offers another $17b lesson in how not to fund infrastructure</a></strong></em></p>
<hr>
<p>The information-light argument that has been made for the Sydney stadium rebuilds has, it appears, a similar level of substance to WestConnex. Substituting “sport and jobs” for the “roads and jobs” mantra has been met with much cynicism, especially when more imaginative, lower-key ways of spending $2 billion on sport and other socially beneficial areas are being canvassed.</p>
<p>Building up suburban, community-based sport facilities, reducing junior sport registration costs, advancing school classroom renovation timetables and restoring the embattled technical and further education system <a href="https://www.parliament.nsw.gov.au/researchpapers/Documents/Privatisation%20in%20NSW%20-%20a%20timeline%20and%20key%20sources.pdf">have all been suggested</a> as better ways of spending on the public good out of the proceeds of privatisation.</p>
<p>Working out who should benefit from public funding inevitably raises questions of need and privilege. The NSW Coalition government’s efforts to keep both sides of town happy across the east-west divide has left it uncomfortably astride the M4 motorway that it is widening in the name of WestConnex.</p>
<p>Sport stadium debates, like the contests they stage, can be unpredictable affairs. The fate of governments may stand or fall with the grandstands.</p><img src="https://counter.theconversation.com/content/88632/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>David Rowe receives funding relevant to this article from the Australian Research Council for the following projects: 'A Nation of "Good Sports"? Cultural Citizenship and Sport in Contemporary Australia' (DP130104502) and 'Australian Cultural Fields: National and Transnational Dynamics' (with Tony Bennett et al, DP140101970).</span></em></p>The New South Wales government has come in for heavy criticism over its $2 billion plan to knock down and rebuild two of Sydney’s largest sports stadiums.David Rowe, Emeritus Professor of Cultural Research, Institute for Culture and Society, Western Sydney UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/877962017-11-22T14:03:53Z2017-11-22T14:03:53ZBudget 2017: experts respond<p>The UK chancellor of the exchequer, Philip Hammond, has delivered a budget which offered help to first-time home buyers and the prospect of more money for workers in the National Health Service, but his speech was partly overshadowed by sharp <a href="http://www.independent.co.uk/news/business/news/budget-2017-latest-uk-productivity-growth-economic-forecast-gdp-philip-hammond-statement-a8069321.html">cuts to GDP growth forecasts</a> from the Office of Budget Responsibility (OBR). </p>
<p>Our team of academics deliver their verdict on the measures introduced and opportunities missed.</p>
<h2>The economy</h2>
<p><strong><em>Michael Kitson, senior lecturer in international macroeconomics, Cambridge Judge Business School</em></strong></p>
<p>The UK economy is in desperate need of a reboot but the chancellor has delivered a “neither here nor there” Budget. The two big economic issues are stagnant productivity and the uncertainty of Brexit. </p>
<p>Productivity – often measured as output per hour – is the key driver of economic growth which in turn determines real wages, profits and tax revenues. But productivity is no higher now than it was just before the 2008 financial crisis and the OBR has <a href="http://budgetresponsibility.org.uk/efo/economic-fiscal-outlook-november-2017/">today revised down</a> its forecasts of future productivity growth. </p>
<p>The chancellor pretended to be the investor that the economy needs but he reverted to type with a budget based on the narrow principles of accountancy and the constraints of fiscal rules. Hammond outlined a hotchpotch of “action plans”, “task forces” and “reviews”. The one substantive policy was the much-needed investment in housing but even here the policy is a combination of “capital, loans and guarantees” with little detail of how much will be new money. </p>
<p>The government needs to substantially reformulate its fiscal rules and develop a coherent investment strategy if it to ensure long-term economic transformation and the development of an economy that can cope with turbulence of Brexit.</p>
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<p><strong><em>Chris Jones, reader in economics, Aston University</em></strong></p>
<p>Regardless of the size of the deficit and the economic effects of Brexit, the UK’s fundamental economic problem is productivity growth. Output per worker has been stagnant and there is a concern, as highlighted by the OBR’s forecasts, that the UK’s productive capacity has been severely damaged.</p>
<p>Until productivity rises, wages will remain stagnant. Although employment has been robust there is still significant underemployment built into the labour market. The government needs to create an environment that encourages businesses to invest. One way of doing this would be to create a public investment bank or a sovereign wealth fund to take advantage of the historically low borrowing costs available in the financial markets.</p>
<p>The OBR predicts that trend growth is now around 1.5%, much lower than the historic trend of around 2%. This lower projection suggests that the UK’s productive capacity has been permanently dented after the financial crisis, the impact of austerity and uncertainty related to Brexit.</p>
<p>The Conservatives have done fairly well on tax avoidance in recent years. The decision to deduct UK income tax from royalty payments by high tech companies is also a good move. However, given the impact of <a href="https://theconversation.com/uk/topics/paradise-papers-45854">the Paradise Papers</a> there was nothing on public country-by-country reporting which would generate much greater transparency as to where multinational firms locate their income.</p>
<h2>Housing</h2>
<p><strong><em>Gwilym Pryce, professor of urban economics and social statistics, University of Sheffield</em></strong></p>
<p>On the face of it the 2017 budget offers an impressive attempt to address the UK housing crisis, but it may simply be that the chancellor is running to stay still. </p>
<p>Proposals to boost housing supply to 300,000 net additional homes a year on average by the mid-2020s, eliminate rough sleeping by 2027 and revive the homeownership dream for young people by cutting stamp duty are all welcome. However, there are questions about whether the proposals are compatible or achievable. Setting housing supply targets is easy. Meeting them is notoriously difficult. How will the plans to boost construction industry skills have any net positive effect given the likely fall in migrant construction workers as a result of Brexit?</p>
<p>The abolition of stamp duty for first time buyers on purchases up to £300k (£500k in London) is also dubious. Will this not simply boost demand in that sector of the housing market, further inflating prices of “entry level” housing? And in the absence of any significant new money for social housing it’s hard to imagine how rough sleeping, which has <a href="https://crisis.org.uk/media/236823/homelessness_monitor_england_2017.pdf">risen by over 130%</a> in England since 2010, will be significantly reduced any time soon.</p>
<p>There is little to address regional inequalities which lie at the heart of the UK housing crisis. And it’s hard to see how Hammond’s measures could offset what Boris Johnson called the “Kosovo-style social cleansing of London” and <a href="https://theconversation.com/poverty-is-moving-to-the-suburbs-the-question-is-what-to-do-about-it-35986">other major cities</a> as low income households are increasingly priced out of inner city areas.</p>
<p><strong><em>Ed Turner, senior lecturer in politics, Aston University</em></strong></p>
<p>There is good consensus now about housing issues that need to be addressed. There should be more ambition on supply along with investment; there should be concrete action to tackle the rise in rough sleeping; and there should be greater diversity in house-building with less reliance on high-volume house builders. There is also a need to address a land market which, left to its own devices, may see land being hoarded and used for speculation rather than being built out.</p>
<p>On each of these points, action is promised by the chancellor. Hammond issued a “use-it-or-lose-it” threat to developers, but critics would observe that detail is sketchy (with a review and a taskforce rather than concrete policies on land and on rough sleeping). Some themes (such as the land question) were raised in <a href="https://www.theguardian.com/commentisfree/2017/feb/28/britain-housing-crisis-land-ownership-white-paper">February’s White Paper</a> and are simply reiterated, without policy having developed in the meantime. Clearly the biggest headline will go to the stamp duty reduction <a href="http://www.independent.co.uk/news/uk/politics/budget-2017-stamp-duty-first-time-buyers-housing-market-property-300000-tax-a8069546.html">for first-time buyers</a>. The problem with such instruments is that they risk raising house prices rather than helping with supply.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/195843/original/file-20171122-6013-1bfqv50.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/195843/original/file-20171122-6013-1bfqv50.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/195843/original/file-20171122-6013-1bfqv50.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=449&fit=crop&dpr=1 600w, https://images.theconversation.com/files/195843/original/file-20171122-6013-1bfqv50.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=449&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/195843/original/file-20171122-6013-1bfqv50.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=449&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/195843/original/file-20171122-6013-1bfqv50.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=565&fit=crop&dpr=1 754w, https://images.theconversation.com/files/195843/original/file-20171122-6013-1bfqv50.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=565&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/195843/original/file-20171122-6013-1bfqv50.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=565&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Crossroads?</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/aerial-view-traditional-housing-suburbs-cross-736108735?src=nUWx2O9XrbAfExVed8UEaQ-2-10">Kev Llewellyn/Shutterstock</a></span>
</figcaption>
</figure>
<h2>Universal Credit</h2>
<p><strong><em>Jill Rubery, professor of comparative employment systems, University of Manchester</em></strong></p>
<p><a href="https://theconversation.com/uk/topics/universal-credit-26173">Universal credit</a> is a disaster waiting to happen. It introduces quite draconian cuts to some of the most vulnerable groups – the disabled and single parents in particular. It also provides employers with new opportunities to pass the costs of flexibility on to their workforce in the hope that the state will pick up the pieces. </p>
<p>It no longer provides the incentives to work promised when it was committed to. Changes in this budget to the implementation are welcome as they will reduce the catastrophe of the most vulnerable having no access to funds and at risk of losing their flats or houses even if they stop eating. </p>
<p>But the shambles of universal credit is evident in the fact that the measures to allow for advances and continuity of benefits is to cost £1.5 billion. It is not clear why these basic rights were not built into the initial plan unless it is evidence of neglect of the needs of benefit claimants. The plan seems to be to prevent the system itself attracting criticism, probably in the hope that the general public will not care so much about the cuts being introduced or the flexibility provided for employers to offer whatever hours they wish.</p>
<p><strong><em>Donald Hirsch, professor of social policy, Loughborough University</em></strong></p>
<p>This budget had some fine words about “helping families cope with the cost of living”. But for millions of families depending on benefits, tax credits and universal credit, it offered nothing to reverse the steady decline in living standards caused by freezing state support while prices rise. </p>
<p>All it really offered to low income families was a partial amelioration of the problems that recent policies have created. Some measures were designed to make the transition to universal credit less painful. The government also increased its “local affordability funding”, which compensates some claimants hit by the freeze on permissible Housing Benefit levels, in areas where rents are rising fastest. </p>
<p>The just-about-managing (and not-managing) families receiving these band aids will gain nothing from the removal of stamp duty on buying homes that they could not hope to afford.</p>
<h2>Fuel duty and electric vehicles</h2>
<p><strong><em>Paul Nieuwenhuis, senior lecturer and co-director of the Electric Vehicle Centre of Excellence, Cardiff University</em></strong></p>
<p>It seems that, despite <a href="http://www.telegraph.co.uk/news/2017/11/10/green-chancellor-philip-hammond-set-deliver-budget-tax-blow/">some dire warnings</a>, diesel drivers have been treated relatively leniently. Although older diesel cars will be moved up one band in terms of their Vehicle Excise Duty – which in some cases could add a few hundred pounds a year to their running costs – the fuel duty on both petrol and diesel will not be increased. </p>
<p>The extra income will be invested in the £22m <a href="https://www.gov.uk/government/consultations/air-quality-additional-measures-to-support-individuals-and-businesses-affected-by-local-no2-plans">clean air fund</a>. Commercial vehicles will not be penalised in any way, however. Also, no penalty is envisaged for the latest generation of “clean” diesel cars, which suggests the government has accepted the industry line on these, rather than emerging independent testing evidence. </p>
<p>The chancellor’s admiration <a href="https://theconversation.com/budget-2017-uks-driverless-cars-stuck-on-testing-roundabout-87805">for driverless cars</a> was included as one of the “cutting edge” UK technologies deserving of support under the government’s new industrial strategy. This was also linked with further support for electric vehicles, notably an additional £400m investment in charging infrastructure and a further extension of the plug-in <a href="https://www.gov.uk/plug-in-car-van-grants">car grant scheme</a>. Also relevant in this context may be the £1.7 billion promised for local authorities to improve transport in their areas. Detail is lacking at this point, but if this can also be used to promote electric vehicles, that could provide an additional boost to infrastructure.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/195844/original/file-20171122-6013-1xriy5l.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/195844/original/file-20171122-6013-1xriy5l.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/195844/original/file-20171122-6013-1xriy5l.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/195844/original/file-20171122-6013-1xriy5l.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/195844/original/file-20171122-6013-1xriy5l.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/195844/original/file-20171122-6013-1xriy5l.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/195844/original/file-20171122-6013-1xriy5l.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/195844/original/file-20171122-6013-1xriy5l.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Fuel for the tax take?</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/close-fuel-tank-nozzle-757270936?src=_4uXPYd-H-UK-x2rVL6DkQ-2-21">kpakook/Shutterstock</a></span>
</figcaption>
</figure>
<h2>Alcohol and tobacco</h2>
<p><strong><em>Linda Bauld, professor of health policy, University of Stirling</em></strong></p>
<p>The chancellor’s decision to <a href="https://www.thedrinksbusiness.com/2017/11/industry-rejoices-as-chancellor-freezes-wine-and-spirit-duty/">increase the duty on high strength cider</a> looks like good news at face value. High strength ciders commonly contain 7.5% alcohol by volume and are available in large bottles with up to 22 units (equivalent to a bottle of vodka) for as little as £3.50. </p>
<p>This product is consumed by heavy drinkers and young people and directly contributes to alcohol-related disease and death, violence and accidents. Increasing the duty could reduce harm, but in practice the budget increase is tiny and duty on other alcohol products has been frozen – a missed opportunity overall. </p>
<p>In contrast, the budget has <a href="http://www.independent.co.uk/news/uk/politics/budget-2017-cigarette-prices-rise-tax-duty-philip-hammond-treasury-drink-alcohol-pubs-a8069451.html">reinstated the tobacco tax escalator</a>. Smoking is still the leading preventable cause of death in the UK, and despite recent drops in prevalence, up to one third of adults still smoke in our poorest communities. Higher prices do deter smoking, and today’s announcements could help us make further progress towards a tobacco free future.</p>
<h2>Innovation</h2>
<p><strong><em>Geoff Rodgers, deputy vice chancellor (research and innovation), Brunel University London</em></strong></p>
<p>The additional £2.3 billion in research and development funding announced in today’s budget is very welcome and much needed. It will allow universities to build new research programmes in collaboration with industry that identify, characterise and implement the disruptive technologies necessary to drive change in the autonomous vehicle, mobile communication and artificial intelligence technology sectors, which should all now see a significant boost in funding.</p>
<p>These are areas where both UK industry and UK academic research is strong, and therefore the country is well equipped to compete globally. The combination of research and development in advanced technologies within these sectors, coupled with a good supply of talented young people entering these industries, will help drive improvements in productivity and promote economic growth within the UK. </p>
<p><strong><em>Peter Bloom, senior lecturer in organisation studies, The Open University</em></strong></p>
<p>A major theme of the budget is the need for innovation. The chancellor boldly promised that the UK will be “at the forefront of a technological revolution”. This claim is supported by an extra £500m to boost technology development around electric cars, artificial intelligence, and robotics. This, however, pales in comparison to the technological challenges facing the country. </p>
<p>Right now, the creation of a high-tech economy is as threatening as it is exciting. The rise of artificial intelligence, robotics, and automation brings risks of higher unemployment, greater feelings of social alienation, <a href="https://www.theverge.com/2017/7/13/15963710/robots-ai-inequality-social-mobility-study">and widening inequality</a>. What is absolutely crucial then is to promote a programme of innovation that directly addresses present and upcoming economic, political, and social challenges. </p>
<p>This includes investment in civic technology, the use of big data to create “smart solutions” to create more sustainable cities and communities, and the application of virtual and digital technology to improve public services. In the long term, we must ensure that this research and development is aimed at more than just commercialisation but opening up the possibilities of creating a more egalitarian, free, and less economically insecure tomorrow.</p><img src="https://counter.theconversation.com/content/87796/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Chris Jones has received funding from the British Academy.</span></em></p><p class="fine-print"><em><span>Donald Hirsch is a member of the Labour Party and co-author of The Living Wage from Agenda Publishing.</span></em></p><p class="fine-print"><em><span>Ed Turner has received funding from the German Academic Exchange Service (DAAD) to support comparative research into British and German Housing Policy. He is Deputy Leader of Oxford City Council and of the Local Government Association's Environment and Housing Board. He is a member of the Labour Party.</span></em></p><p class="fine-print"><em><span>Geoff J Rodgers receives funding from HEFCE, RCUK and the EU. He is a Governor of both Brunel University London and Heathrow Aviation Engineering UTC.</span></em></p><p class="fine-print"><em><span>Gwilym Pryce is on the Economic Advisory Panel for Defra. He currently has a number of research projects funded by the Economic and Social Research Council.</span></em></p><p class="fine-print"><em><span>Jill Rubery has received funding from from a wide range of sources including the European Commission, the ESRC, the Department of Health and the International Labour Organisation She is a Labour Party member and an active member of the Manchester Fairness At Work Research Centre at the University of Manchester.</span></em></p><p class="fine-print"><em><span>Linda Bauld is Director of the Institute for Social Marketing at the University of Stirling which receives research funding from Cancer Research UK and a range of other public sector organisations and charities. She is also a Deputy Director of the UK Centre for Tobacco and Alcohol Studies, funded by the UK Clinical Research Collaboration.</span></em></p><p class="fine-print"><em><span>Michael Kitson has received funding from BIS, HEFCE, EPSRC, ESRC, AHRC, NERC and the MRC.</span></em></p><p class="fine-print"><em><span>Paul Nieuwenhuis has in the past received funding relevant to this area from ESRC, EPSRC, ACEA, Greenpeace International, OECD. This article does not reflect the views of the research councils.</span></em></p><p class="fine-print"><em><span>Peter Bloom does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Academics deliver their verdict on Philip Hammond.Chris Jones, Reader in Economics, Aston UniversityDonald Hirsch, Professor of Social Policy, Loughborough UniversityEd Turner, Senior Lecturer in Politics, Head of Politics and International Relations, Aston UniversityGeoff J Rodgers, Deputy Vice Chancellor (Research&Innovation), Brunel University LondonGwilym Pryce, Professor of Urban Economics and Social Statistics and Director of the Sheffield Methods Institute, University of SheffieldJill Rubery, Professor of Comparative Employment Systems, University of ManchesterLinda Bauld, Professor of Health Policy and CRUK/BUPA Chair in Behavioural Research for Cancer Prevention, University of StirlingMichael Kitson, University Senior Lecturer in International Macroeconomics, Cambridge Judge Business SchoolPaul Nieuwenhuis, Senior Lecturer and Co-Director, Electric Vehicle Centre of Excellence (EVCE), Cardiff UniversityPeter Bloom, Senior Lecturer in Organisation Studies, Department of People and Organisation, The Open UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/868702017-11-09T16:32:12Z2017-11-09T16:32:12ZHate globalisation? Try localism, not nationalism<figure><img src="https://images.theconversation.com/files/194001/original/file-20171109-13299-1gj0mop.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">shutterstock</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/deflated-planet-earth-12399259?src=K_ngvD-YcTZvgGPV4SZdvg-1-21">italianestro/Shutterstock</a></span></figcaption></figure><p>It hardly needs saying, but there are changes afoot in the political economy of the world. Where there is <a href="https://en.wikipedia.org/wiki/Globalization">globalisation</a>, there are <a href="http://www.telegraph.co.uk/news/2017/07/06/watch-liveprotesters-gather-g20-demonstration-hamburg/">globalisation protestors</a>. This is <a href="http://www.huffingtonpost.co.uk/dr-andy-price/the-leftbehind-once-had-a_b_13297202.html">nothing new</a>, but it is becoming mainstream. </p>
<p>The antithesis of globalisation, <a href="https://en.wikipedia.org/wiki/Rise_of_nationalism_in_Europe">nationalism</a>, and the pursuit of your own country’s interests over those of everyone else, has bubbled <a href="https://www.ft.com/content/53fc4518-4520-11e6-9b66-0712b3873ae1?mhq5j=e5">back up in Europe</a>. And it’s not just Europe, of course. In the US, <a href="https://www.washingtonpost.com/news/monkey-cage/wp/2017/06/12/trump-is-a-new-kind-of-protectionist-he-operates-in-stealth-mode/">president Donald Trump</a> is (among other initiatives) <a href="http://fortune.com/2017/03/24/trump-executive-order-trade-deal/">rethinking the American commitment to free trade</a>.</p>
<p><a href="http://www.worldbank.org/en/news/feature/2013/10/25/The-Winners-and-Losers-of-Globalization-Finding-a-Path-to-Shared-Prosperity">In the rest of the world</a>, the experience of globalisation shows it creates some <a href="https://www.huffingtonpost.com/branko-milanovic/winners-of-globalization-_b_4603454.html">winners</a> and some <a href="https://theconversation.com/the-least-skilled-workers-are-the-losers-in-globalisation-63655">losers</a>. This varies <a href="https://www.theguardian.com/cities/2015/jan/19/north-south-divide-widen-thinktank-data">geographically</a> and in different <a href="http://www.telegraph.co.uk/finance/newsbysector/industry/11941578/The-perfect-storm-that-has-brought-Britains-steel-industry-to-its-knees.html">economic fields</a>, and is shown in <a href="http://oxfordindex.oup.com/view/10.1093/acprof:oso/9780198728863.003.0002">different aspects of our lives</a>.</p>
<p>And so, someone in London might find their house is worth more. As foreign capital flows in <a href="https://www.thetimes.co.uk/edition/news/new-homes-sold-to-corrupt-foreign-buyers-gh6v9vf3v">to buy up large swaths of the capital</a> it increases their wealth, while others might be priced out of the market. In some sectors of the market, wages <a href="https://www.forbes.com/sites/jeffreydorfman/2016/11/30/trump-is-right-globalization-has-slowed-middle-class-income-growth/#642557b22183">might be declining</a> as a result of global competition, migration, <a href="https://www.theguardian.com/business/2017/jul/06/uk-workers-poverty-pay-gig-economy-frank-field-report">casualisation</a> or <a href="https://www.theverge.com/2017/3/28/15086576/robot-jobs-automation-unemployent-us-labor-market">automation</a>. In the final analysis, however, it is not a matter of whether <a href="https://www.theguardian.com/commentisfree/2016/sep/30/globalisation-poverty-corruption-free-trade-liam-fox">globalisation causes these changes</a>, it is rather more that <a href="http://www.independent.co.uk/news/uk/politics/globalisation-poll-low-wages-inequality-technology-comres-a7467491.html">people feel that it does</a>.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/193964/original/file-20171109-27108-zd7r1e.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/193964/original/file-20171109-27108-zd7r1e.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/193964/original/file-20171109-27108-zd7r1e.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=401&fit=crop&dpr=1 600w, https://images.theconversation.com/files/193964/original/file-20171109-27108-zd7r1e.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=401&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/193964/original/file-20171109-27108-zd7r1e.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=401&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/193964/original/file-20171109-27108-zd7r1e.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=504&fit=crop&dpr=1 754w, https://images.theconversation.com/files/193964/original/file-20171109-27108-zd7r1e.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=504&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/193964/original/file-20171109-27108-zd7r1e.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=504&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Wealth curve.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/row-typical-english-terrace-houses-693209467?src=HkCE0-SoTz6Nn1dXXkC1-w-3-78">Tana888/Shutterstock</a></span>
</figcaption>
</figure>
<h2>Walls and Wails</h2>
<p>Globalisation is not, however, merely a matter of <a href="https://www.forbes.com/sites/mikecollins/2015/05/06/the-pros-and-cons-of-globalization/#70b76ee9ccce">trade</a>, <a href="http://www.oecd.org/insights/43568302.pdf">migration</a> and <a href="http://www.oecd.org/sti/ind/offshoringandemploymenttrendsandimpacts.htm">foreign outsourcing</a>. To many it seems <a href="http://www.independent.co.uk/news/business/outlook-we-cant-sell-all-of-britain-to-foreigners-1155179.html">Britain itself is for sale</a> as an increasing proportion of UK businesses and assets <a href="http://www.regionalstudies.org/uploads/documents/Britain-for-sale.pdf">answer to foreign owners</a>.</p>
<p>Economic theory suggests, therefore, the nation will increasingly be run for the <a href="https://www.msn.com/en-gb/money/companies/33-quintessentially-british-brands-that-are-not-actually-british/ss-AAfpa3h">benefit of foreign capital</a>, <a href="http://www.dailymail.co.uk/debate/article-1369046/Last-British-owned-port-sold-abroad-UK-sells-soul-highest-foreign-bidder.html">rather than the citizens</a>. On top of this, there is the danger that inflows of foreign capital will cause the exchange rate to appreciate, making it <a href="https://theconversation.com/steel-is-just-another-tipping-point-for-britains-unbalanced-economy-58298">more difficult to export</a>, reducing manufacturing output and reducing employment in those sectors affected.</p>
<p>To protect them from forces beyond their control, citizens across the world are increasingly looking to the nation state for protection, hence the rise of what is often called nationalism. <a href="http://housedivided.dickinson.edu/sites/lincoln/fragment-on-government-july-1-1854/">As Abraham Lincoln noted</a>: </p>
<blockquote>
<p>The legitimate object of government is to do for a community of people whatever they need to have done, but can not do at all, or can not so well do, for themselves – in their separate, and individual capacities.</p>
</blockquote>
<p>It is clear, no individual or community can stand against <a href="http://www.soc.ucsb.edu/faculty/robinson/Assets/pdf/Global%20Capital%20Leviathan.pdf">the forces of global capital</a>, and Western governments appear averse to giving the workforce the <a href="https://www.washingtonpost.com/news/posteverything/wp/2017/08/30/the-trump-administrations-ongoing-attack-on-workers/">means to protect itself</a>, through, for example, <a href="http://www.mirror.co.uk/news/politics/7-times-theresa-tried-slash-10426005">increasing employment rights</a> and <a href="https://www.newstatesman.com/politics/2015/06/conservatives-attacks-trade-unions-are-attack-our-most-fundamental-freedoms">unionisation</a>. However, in their search for a strong government to protect them, citizens are in danger of giving the state <a href="https://mises.org/sites/default/files/Road%20to%20serfdom.pdf">too much power over their lives</a>. </p>
<p>It is by no means assured that the policies which suit a strong domestic government will be better than those which suit foreign owned multi-national corporations. Also, history indicates the fear of global capital may be coopted by unscrupulous politicians into a fear of other nations or fear of other peoples.</p>
<h2>Think Locally</h2>
<p>Rather than nationalism, therefore, <a href="http://www.betterway.network/examples-of-localism/">we might turn to localism</a>. In the UK context, this <a href="https://www.gov.uk/topic/government/devolution">might be devolution</a> with real (financial) localised power, and that power realised through local government and local business.</p>
<p>An economy of big businesses (operated for the benefit of global owners) is less than ideal for the individual and society. In contrast, a society of many small local businesses is more resilient, more <a href="https://www.theguardian.com/money/2013/dec/06/shop-locally-small-business-saturday-seven-reasons">empowering</a> and more in keeping with the spirit of capitalism <a href="https://www.theguardian.com/money/2013/nov/22/house-prices-boosted-thriving-local-trade-small-businesses">and of the market</a>. We must also bear in mind that increasing business concentration (fewer, but larger firms) <a href="https://www.theatlantic.com/business/archive/2015/11/cities-economic-fates-diverge/417372/">is a driver of increasing inequality</a>. If a business is too <a href="http://news.sky.com/story/bank-of-england-governor-ending-too-big-to-fail-not-complete-11059507">big to (be allowed to) fail</a>, then the government has failed in its duty to keep business small.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/193972/original/file-20171109-27161-xhnd9y.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/193972/original/file-20171109-27161-xhnd9y.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/193972/original/file-20171109-27161-xhnd9y.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/193972/original/file-20171109-27161-xhnd9y.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/193972/original/file-20171109-27161-xhnd9y.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/193972/original/file-20171109-27161-xhnd9y.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/193972/original/file-20171109-27161-xhnd9y.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/193972/original/file-20171109-27161-xhnd9y.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Small enough?</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/tambov-russian-federation-june-22-2017-703381087?src=c1QU-JwmSMvCc4mEQCcISA-1-55">Ekaterina_Minaeva</a></span>
</figcaption>
</figure>
<p>Economic theory indicates that those with no stake in a community other than profit extraction avoid suffering from localised ill effects <a href="http://www.manchestereveningnews.co.uk/business/business-news/4000-more-people-unemployed-north-13777711">such as unemployment</a>, <a href="https://www.theguardian.com/voluntary-sector-network/2017/oct/05/poverty-austerity-england-charity-support">poverty</a>, <a href="https://www.theguardian.com/society/2017/aug/29/food-poverty-is-new-normal-in-uk-we-adopted-from-the-states">want</a> and <a href="http://www.independent.co.uk/news/uk/home-news/homelessness-rough-sleeping-rise-crisis-homeless-three-quarters-decade-a7884261.html">homelessness</a>. It follows those who live and work in a community have a greater stake in its prosperity.</p>
<p>The government might likewise consider how we might prevent those who do not even live in the country from <a href="https://www.bloomberg.com/news/articles/2017-10-31/new-zealand-to-slap-home-buying-ban-on-foreigners-to-ease-market">driving up house prices</a>. </p>
<p>Local protection from exploitation by global interests requires the right mix of global and local policies. And local government policies require adequate financing. By local financial power, I don’t mean local taxes. That has the potential to fragment the nation, <a href="https://www.theparliamentmagazine.eu/articles/news/european-court-justice-cracks-down-benefit-tourism">as it has, to some extent, in the EU</a> (whether <a href="http://www.telegraph.co.uk/news/worldnews/europe/11224615/EU-benefit-tourists-face-being-sent-home-after-landmark-court-ruling.html">perceived rightly</a> or <a href="http://www.employment-studies.co.uk/news/true-cost-welfare-tourism">wrongly</a>). </p>
<p>If we fund education or social care out of local taxes, for example, there will tend to be a race to the bottom as local authorities will be motivated to underperform to encourage vulnerable families <a href="http://www.independent.co.uk/news/uk/home-news/over-50000-families-shipped-out-of-london-in-the-past-three-years-due-to-welfare-cuts-and-soaring-10213854.html">to go and live elsewhere</a>. It follows taxes should be collected nationally, and shared proportionally (on the basis of demographic profile) to the devolved authorities.</p>
<p>There is no space here to discuss in detail other possible localism policies here, but there are many ways to promote local ownership and local empowerment. That could include local currencies, boosts to council housing, local authority ownership of utilities or support for locally-owned high street shops. However, it is not a policy mix I suggest, rather it is an emphasis.</p>
<p>Ultimately, the only viable alternative to the choice currently on offer, the choice of <a href="https://en.wikipedia.org/wiki/There_is_no_alternative">Big State or Big Business</a>, is Small State and Small Business, or more appropriately Local Government and Local Business. To pursue localism will require a systemic shift in how the national government goes about shaping society, but I suggest it is possible to promote social justice in a capitalist context in no other way.</p><img src="https://counter.theconversation.com/content/86870/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Kevin Albertson is a member of the Labour Party and a Fellow of the RSA. </span></em></p>Putting money into the hands of local communities will be a more useful antidote to the whims of world capitalism.Kevin Albertson, Professor of Economics, Manchester Metropolitan UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/864382017-11-01T10:03:48Z2017-11-01T10:03:48ZA British industrial strategy should start by reforming the Treasury<figure><img src="https://images.theconversation.com/files/192658/original/file-20171031-18738-1i97z9d.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/hm-treasury-building-london-england-uk-358757114?src=qpzybGOmpQ5THDPKZBJFrA-1-29">Alex Segre/Shutterstock</a></span></figcaption></figure><p>After decades of economic inaction, the UK is on the verge of adopting <a href="https://theconversation.com/how-to-drive-britains-new-industrial-strategy-80770">a comprehensive industrial strategy</a>. This will involve major commitments to infrastructure and other targeted public spending. Many will bemoan the fact that it took Brexit – a hammer to the heart of the country’s current development model – to trigger such a shift. Nevertheless, Brexit has the dubious honour of making the challenge ever more pressing. </p>
<p>When she became prime minister, Theresa May made the revival of industrial strategy one of the key elements of her <a href="https://www.gov.uk/government/speeches/statement-from-the-new-prime-minister-theresa-may">economic agenda</a>, believing it would help to address some of the distributional issues to which she attributes the Brexit vote.</p>
<p>The <a href="http://industrialstrategycommission.org.uk/">Industrial Strategy Commission</a>, a body set up by the universities of Sheffield and Manchester and <a href="http://industrialstrategycommission.org.uk/commissioners/">chaired by Dame Kate Barker</a>, has run in parallel to the government’s policy-making process. May’s commitment to industrial strategy has been important, but the commission’s starting point is that the UK needs an industrial strategy which endures beyond the life of a single premiership or government. </p>
<p>The 2017 general election was a useful reminder that political lives are fragile, but institutions endure: this is why the commission has made the <a href="http://journals.sagepub.com/doi/full/10.1177/1369148116667650">institutional landscape</a> around industrial strategy a focal point of inquiry. As such, one of the key <a href="http://industrialstrategycommission.org.uk/wp-content/uploads/2017/10/The-Final-Report-of-the-Industrial-Strategy-Commission.pdf">recommendations of the final report</a>, centres on Her Majesty’s Treasury, the UK’s omnipotent finance and economics ministry. </p>
<h2>Dominant force</h2>
<p>Under the 2010-2015 coalition government, the Liberal Democrat secretary of state for business, Vince Cable, consistently <a href="http://www.telegraph.co.uk/news/politics/9126795/Vince-Cables-letter-on-industrial-policy-in-full.html">complained</a> that the Treasury was hampering his efforts to develop a more interventionist industrial strategy. </p>
<p>And when the Conservatives became a majority government in 2015, the chancellor of the exchequer, George Osborne, effectively marginalised the Cable agenda and adopted a Treasury-led “<a href="https://www.gov.uk/government/publications/fixing-the-foundations-creating-a-more-prosperous-nation">productivity plan</a>” focused on tax cuts, labour market deregulation and local government reform. The more conventional industrial policies favoured by Cable were either discontinued, or at least deprioritised.</p>
<p>The Treasury retains ownership of the productivity plan, and associated areas, even as May and the new secretary of state for business, Greg Clark, put together an industrial strategy which itself, to a large extent, seeks to address the UK’s chronically poor productivity. </p>
<p>Refreshingly, the government’s industrial strategy <a href="https://beisgovuk.citizenspace.com/strategy/industrial-strategy/supporting_documents/buildingourindustrialstrategygreenpaper.pdf">green paper</a> did suggest a concern with the institutions through which industrial policy is made and implemented. But it is clearly focused more on intermediary institutions such as sectoral bodies and innovation centres than those at the heart of central government. To succeed, and last, May’s industrial strategy must address the Treasury’s dominance directly.</p>
<p>The Industrial Strategy Commission, however, believes the Treasury should probably be given <a href="http://speri.dept.shef.ac.uk/wp-content/uploads/2016/03/Brief-21-Reforming-the-Treasury.pdf">more power, not less</a>. Crucially, the commission’s plan would entail significant reform of the Treasury, with the creation of a new industrial strategy division which would own the strategy, and act as an institutional hub for the coordination of all policies encompassed by the strategy across government. </p>
<p>The current orientation of the Treasury hamstrings British industrial policy, but a reformed Treasury, able to use its spending controls and high calibre civil servants to drive a coherent approach to economic management throughout Whitehall, would transform this negative into a sizeable positive.</p>
<p>Such changes need to coincide with a reimagining of <a href="http://journals.sagepub.com/doi/full/10.1177/1369148116667650">what industrial strategy is</a>, thinking of industrial strategy in terms of “strategic economic management”, deciding what kind of economy is wanted and how the state’s unique place within the economy can be deployed to bring this vision to life.</p>
<p>Clearly, the absence of an explicit industrial strategy does not mean that governments do not act to steer and shape the national economy: buying things, employing workers, educating people, collectivising risk and, occasionally, owning bits of the economy. But it does mean that government intervention is ad hoc and uncoordinated, and thus invariably ineffective from a long-term perspective.</p>
<h2>Delivery</h2>
<p>Industrial strategy is not about supporting industry <em>per se</em>, it is about enabling the industries we have to benefit all parts of the country. It is about making sure the industries of the future – whatever they may be – can emerge and thrive.</p>
<p>Within this framework, individual policies will be more or less interventionist, but they must also be designed in service of a strategic intent. The new Treasury division would operate strategic, cross-government action to decarbonise the economy, produce a healthier workforce, generate long-term investment and build the UK’s export capacity (among many other things). </p>
<p>A range of policy areas, such as R&D support, competition policy, financial regulation, government procurement and skills provision should all point in the same direction, in support of industrial strategy.</p>
<p>An independent body (which the Industrial Strategy Commission is calling the Office for Strategic Economic Management, or OfSEM) would monitor the government’s success in delivering against its long-term strategic objectives. Importantly, it would also <a href="http://global-perspectives.org.uk/wp-content/uploads/2017/10/making-the-future-count.pdf">develop new measures</a> of what economic success looks like.</p>
<p>We can expect some very worthwhile initiatives in the white paper on industrial strategy due later this month. At the very least, May and co. will probably reinforce elements of the coalition government’s agenda – perhaps with fewer austerity-related constraints (although, equally, <a href="https://www.theguardian.com/uk-news/2017/oct/30/uk-deficit-to-heighten-pressure-on-chancellor-ahead-of-budget">perhaps not</a>) and including more support for R&D and infrastructure investment. </p>
<p>But Brexit means the stakes are even higher now than when the coalition took office after the financial crisis. Leaving the EU may yet prove economically calamitous for the UK, but the Brexit vote was, among other things, a demand for political and economic transformation, not another round of tinkering. If the UK’s industrial strategy is to become authentically transformative, we should start with the way it is made.</p><img src="https://counter.theconversation.com/content/86438/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Craig Berry is a member of the Labour Party and sits on the Industrial Strategy Commission.</span></em></p>A new division tasked with delivering the country’s economic goals should be the first step.Craig Berry, Deputy Director, Sheffield Political Economy Research Institute (SPERI), University of SheffieldLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/833782017-09-11T12:42:22Z2017-09-11T12:42:22ZHow Britain can build a world-leading life sciences strategy<figure><img src="https://images.theconversation.com/files/185448/original/file-20170911-28467-jswuk7.jpg?ixlib=rb-1.1.0&rect=73%2C69%2C2519%2C1704&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption"></span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/young-students-chemistry-working-laboratory-710257885?src=02ivwvwSAPLa2OVwSlzQcw-1-15">nd3000/shutterstock</a></span></figcaption></figure><p>The UK is in the midst of a wide-ranging <a href="https://theconversation.com/is-the-uk-finally-getting-serious-about-industrial-strategy-71692">national industrial strategy</a> which will influence the country’s future role in the global economy. <a href="https://www.gov.uk/government/publications/life-sciences-industrial-strategy">The latest proposals</a> look at the life sciences and healthcare sectors, perhaps the areas of this grand plan which will affect most people, including through the successful development – or otherwise – of the National Health Service.</p>
<p>Sir John Bell was asked to work on how the UK might exploit its existing strengths in life sciences. His report issues the strong recommendation that research and development (R&D) spending should rise from 1.6% of GDP to 2.6% over the next five years – putting the UK in the top quartile worldwide. </p>
<p>He also <a href="http://www.pharmexec.com/uks-life-sciences-industrial-strategy-making-lemonade-out-lemons">wants the UK</a> to create two or three entirely new industries in the next decade, while increasing by 50% the number of clinical trials, and attracting capital investment for large and small manufacturing facilities. The plan is for the UK to end up with four life sciences and pharmaceutical firms with a market value of over £20 billion, attracting a host of world-class scientists into the country.</p>
<p>Quite how this can be achieved <a href="https://theconversation.com/how-european-academics-are-feeling-about-life-in-britain-a-year-after-brexit-vote-78687">in a post-Brexit landscape</a> is perhaps a matter for another day, but these aims will certainly require strong foundations on which to build. </p>
<h2>Incorporating AI</h2>
<p>One of the recommended actions refers to the use of artificial intelligence to transform pathology and medical imaging. This is <a href="https://www.math.snu.ac.kr/%7Ehichoi/infomath/Articles/Lighthill%20Report.pdf">a welcome advance from the 1970s</a> when the British government cut funding for robotics and AI on the advice of Sir James Lighthill. My father Donald Michie led the Edinburgh group who were world-leaders along with John McCarthy’s team at Stanford. I recall at the time my dad wrote: “It was said there would be Lighthill, and there was darkness.”</p>
<p>So, 40 years later, we’ve moved on from a time when pioneers in the field were labelled by Lighthill as the “artificial intelligencia”. We will have to wait for details on how that lost time will be made up to achieve Bell’s targets.</p>
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</figure>
<p>The paper refers to a review of AI, but <a href="https://beisgovuk.citizenspace.com/strategy/industrial-strategy/supporting_documents/buildingourindustrialstrategygreenpaper.pdf">the broad industrial strategy</a> lists just five priority sectors: life sciences; ultra low emission vehicles; industrial digitalisation; nuclear; and the creative industries. This makes it crucial that explicit plans are made for how AI and robotics – and other important sectors – will support these five priority areas.</p>
<h2>Funding</h2>
<p>Bell’s report highlights the importance of creating and sustaining hubs of activity, and life science clusters, as the UK seeks to develop manufacturing capacity. But building resilient regions across the country will require the drawing together of central, local, and regional government; and co-ordination in health, housing, and education policy alongside the industrial strategy.</p>
<p>The report cites <a href="https://hbr.org/1990/03/the-competitive-advantage-of-nations">Michael Porter’s work</a> from more than 25 years ago for how this might be done, <a href="https://academic.oup.com/cjres/article/3/1/3/340777/Regional-resilience-theoretical-and-empirical">but the latest research and policy advice</a> needs to be mobilised too. </p>
<p>Finance is key, of course, and the report recommends support for the <a href="https://www.gov.uk/government/publications/patient-capital-review">UK Treasury’s attempts</a> to tackle the root causes that affect the lack of long-term finance for innovative firms. For corporate global leaders to be built, this will be essential.</p>
<p>Specifically, the UK financial services sector doesn’t enjoy the sort of corporate diversity that other more successful economies do. In countries like Germany, publicly owned and mutually owned institutions operate alongside ones owned by shareholders – nationally, regionally and locally. The UK is still to achieve the pledge <a href="https://www.cefims.ac.uk/cgi-bin/research.cgi?id=109">in the 2010 coalition agreement</a> to boost corporate diversity in finance.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/185450/original/file-20170911-28467-x03fzl.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/185450/original/file-20170911-28467-x03fzl.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/185450/original/file-20170911-28467-x03fzl.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/185450/original/file-20170911-28467-x03fzl.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/185450/original/file-20170911-28467-x03fzl.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/185450/original/file-20170911-28467-x03fzl.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/185450/original/file-20170911-28467-x03fzl.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/185450/original/file-20170911-28467-x03fzl.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Money talks.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/london-england-panoramic-skyline-view-bank-710558962?src=aCeXqyUCKkqIuLCVbYwiPg-1-30">Zoltan Gabor/shutterstock</a></span>
</figcaption>
</figure>
<h2>Golden share</h2>
<p>The report is keen that companies spun-out from the <a href="https://www.theguardian.com/science/2017/aug/30/uk-needs-to-act-urgently-to-secure-nhs-data-for-british-public-report-warns">Health Advanced Research Programme</a> – which will undertake large research projects to help create those entirely new industries – remain anchored in the UK. It suggests a “golden share” as a mechanism. This would mean the government retains one share with particular rights, such as a veto on moving abroad.</p>
<p>Nothing is said, however, of the corporate purpose, ownership or governance of such companies. These would clearly be “public goods”, and so <a href="https://global.oup.com/academic/product/the-oxford-handbook-of-mutual-co-operative-and-co-owned-business-9780199684977?prevSortField=8&sortField=8&start=400&resultsPerPage=100&q=american%20politics&prevNumResPerPage=100&lang=en&cc=gb">a form of mutual ownership and governance</a> – with employees, customers and other stakeholders being members – would make sense. Such structures would not only deliver appropriate incentives, but would help to ensure the organisations remained anchored in the UK.</p>
<p>None of Bell’s proposals will be possible unless education and training are deployed in support of the strategy’s aims. Flexibility will be crucial, along with lifelong learning. Britain should positively encourage retraining, and the taking on of new skills. </p>
<p>This means enabling people to study new topics at the same level as existing qualifications. But the UK only backs those sticking to their old subject, obtaining ever-higher qualifications. Those wanting to move on to new areas <a href="http://www.hefce.ac.uk/lt/elqs/">aren’t supported</a>. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/185451/original/file-20170911-28510-1k51xrt.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/185451/original/file-20170911-28510-1k51xrt.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/185451/original/file-20170911-28510-1k51xrt.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=338&fit=crop&dpr=1 600w, https://images.theconversation.com/files/185451/original/file-20170911-28510-1k51xrt.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=338&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/185451/original/file-20170911-28510-1k51xrt.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=338&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/185451/original/file-20170911-28510-1k51xrt.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=425&fit=crop&dpr=1 754w, https://images.theconversation.com/files/185451/original/file-20170911-28510-1k51xrt.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=425&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/185451/original/file-20170911-28510-1k51xrt.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=425&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Back to school.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/background-shot-blackboard-scientific-algebraic-formulas-707313994?src=gLc1xXAz5yTq9VH84C9aJg-1-5">Media Whale/Shutterstock</a></span>
</figcaption>
</figure>
<h2>Cooperation</h2>
<p>A grand collaboration is needed if the UK is to genuinely improve healthcare and outcomes. It will require that the problem of social care be solved, requiring proper coordination with local government. One positive recommendation in the report is to support healthy ageing, which would likewise require proper involvement from local government, as well as decisive <a href="https://www.theguardian.com/society/2017/apr/06/andrew-dilnot-social-care-reviewer-condemns-uk-system-and-calls-for-new-tax">action on the Dilnot Review</a>, a 2011 report on social care which was effectively ignored by successive governments. </p>
<p>Life sciences by their nature require inter and multidisciplinary work, but this needs to become far more ambitious, to actively involve the social sciences in tackling big challenges. Bell looks to UK Research and Innovation (UKRI) – a government body to be launched next year – to increase interdisciplinary research, foster more effective working with industry, and support high-risk science.</p>
<p>The UK is rightly seen as a centre of excellence in research, and the life sciences industrial strategy is an attempt to make sure this translates into tangible success. To succeed will require government to do things it has previously baulked at – including implementing the Dilnot Review, delivering on the promise of greater corporate diversity in financial services, supporting lifelong learning and opportunities to re-skill, and restoring proper powers and funding to local and regional government.</p><img src="https://counter.theconversation.com/content/83378/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Jonathan Michie does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>As the government moves ahead with its industrial plan, a new report signals it will have to start doing things differently.Jonathan Michie, Professor of Innovation & Knowledge Exchange, University of OxfordLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/821542017-08-15T20:23:08Z2017-08-15T20:23:08ZMelbourne shows up Sydney in funding the most disadvantaged suburbs<figure><img src="https://images.theconversation.com/files/181908/original/file-20170814-28487-nui5ko.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">While state investment decreases on average with distance from the CBD, Melbourne's neediest suburbs aren't forgotten. </span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/aerial-view-melbourne-fading-day-night-424829368?src=kz7FcSs73_mwHl2rJmDU8A-1-7">ymgerman from www.shutterstock.com</a></span></figcaption></figure><p>Residents of neighbourhoods with good infrastructure and services often enjoy lower living costs and better wellbeing and life chances. But access to education, health, transport and other public amenities and services is <a href="https://www.ahuri.edu.au/__data/assets/pdf_file/0016/2176/AHURI_Final_Report_No225_Disadvantaged-places-in-urban-Australia-analysing-socio-economic-diversity-and-housing-market-performance.pdf">unevenly distributed in the city</a>. </p>
<p>Some suburbs are disadvantaged on multiple fronts, and it turns out these areas receive much more state funding in Melbourne than in Sydney.</p>
<p>From a social justice perspective, public funding of infrastructure and services should give priority to the most disadvantaged areas. This “redistribution” is seen as necessary to counter socioeconomic disadvantage and inequality. </p>
<p>In both Sydney and Melbourne, <a href="http://onlinelibrary.wiley.com/doi/10.1111/1745-5871.12245/pdf">our research</a> shows more funding goes to moderately disadvantaged areas, on average, than to more advantaged areas. In Sydney, however, government spending in the <em>most</em> disadvantaged suburbs was very low compared to Melbourne.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/181729/original/file-20170811-12395-tqo9ff.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/181729/original/file-20170811-12395-tqo9ff.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=353&fit=crop&dpr=1 600w, https://images.theconversation.com/files/181729/original/file-20170811-12395-tqo9ff.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=353&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/181729/original/file-20170811-12395-tqo9ff.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=353&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/181729/original/file-20170811-12395-tqo9ff.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=443&fit=crop&dpr=1 754w, https://images.theconversation.com/files/181729/original/file-20170811-12395-tqo9ff.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=443&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/181729/original/file-20170811-12395-tqo9ff.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=443&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Average per capita investment by socioeconomic status of suburb.</span>
<span class="attribution"><span class="source">Author provided</span></span>
</figcaption>
</figure>
<h2>Breaking down the funding distribution</h2>
<p><a href="http://onlinelibrary.wiley.com/doi/10.1111/1745-5871.12245/pdf">Our study</a> sought to understand how state funding is distributed in Melbourne and Sydney. We looked at the <a href="http://www.dtf.vic.gov.au/State-Budget/Previous-budgets">Victorian</a> and <a href="https://www.budget.nsw.gov.au/">New South Wales</a> state budgets from 1999 to 2015 to measure expenditure in different suburbs of both cities. This included transport, roads, health, education, justice, utilities, amenities, government facilities and community services.</p>
<p>In both Sydney and Melbourne we saw an overall redistributive pattern. Moderately disadvantaged areas received more on average than advantaged areas. </p>
<p>However, state investment in Sydney’s <em>most</em> disadvantaged suburbs was very low. In contrast, such areas in Melbourne benefited from relatively high state spending. </p>
<p>In Melbourne’s most socially disadvantaged suburbs, expenditure was higher than the metropolitan average in almost all categories of infrastructure and services. The exceptions were emergency services and amenities. </p>
<p>In Sydney’s most disadvantaged suburbs, expenditure was lower than the metropolitan average in health, justice, roads, amenities, urban development and utilities. Only expenditure on community services and education was above the average. </p>
<p>In both cities, expenditure on public housing development was relatively high in the most disadvantaged suburbs. Government investment in building more affordable housing in well-serviced areas is extremely important. A booming housing market has pushed disadvantaged people, including recently arrived immigrants, <a href="https://theconversation.com/new-to-australia-good-luck-migrants-can-no-longer-afford-gateway-suburbs-75201">away from well-serviced suburbs</a> that were once affordable.</p>
<p>However, in Sydney, new public housing development occurs disproportionately in the most disadvantaged suburbs that also lack good public infrastructure and services. </p>
<h2>Inner city does best</h2>
<p>The disadvantage of Sydney’s poorest suburbs can be attributed, in part, to a highly centralised pattern of government spending. It is disproportionately high in the inner city and progressively declines outwards. </p>
<p>The majority of Sydney’s most disadvantaged suburbs are located well outside the metropolitan centre, and therefore miss out. </p>
<p>Strategic plans for Sydney since 2005 have envisioned a shift towards a less centralised structure. Yet the pattern of infrastructure investment we observed is at odds with such rhetoric. </p>
<p>Most recently, the Greater Sydney Commission has promoted a “metropolis of <a href="https://www.greater.sydney/three-cities">three cities</a>”. The three centres are the CBD, Parramatta and the planned <a href="http://westernsydneyairport.gov.au/">Western Sydney Airport</a> in Badgery’s Creek. The impact of these strategies on infrastructure distribution will need close monitoring.</p>
<p>But, on its own, centralised expenditure does not fully explain why Sydney’s most disadvantaged suburbs miss out. Some of Sydney’s emerging outer suburbs benefited from much higher investment. And in Melbourne, despite a centralised pattern of investment (albeit less extreme than Sydney’s), the most disadvantaged suburbs did benefit from high expenditure.</p>
<p>We need to find other political and social explanations to explain these differences between Melbourne and Sydney. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/181909/original/file-20170814-28461-675vr.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/181909/original/file-20170814-28461-675vr.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/181909/original/file-20170814-28461-675vr.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=331&fit=crop&dpr=1 600w, https://images.theconversation.com/files/181909/original/file-20170814-28461-675vr.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=331&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/181909/original/file-20170814-28461-675vr.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=331&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/181909/original/file-20170814-28461-675vr.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=416&fit=crop&dpr=1 754w, https://images.theconversation.com/files/181909/original/file-20170814-28461-675vr.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=416&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/181909/original/file-20170814-28461-675vr.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=416&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Most of Sydney’s neediest suburbs are doubly disadvantaged by being far from the city centre and missing out on state funding.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/aerial-view-downtown-sydney-sunset-australia-164023496?src=ckht92t2o0TuNqeeEPfYPg-1-12">shutterstock</a></span>
</figcaption>
</figure>
<h2>Finding a fairer balance</h2>
<p>Despite the justifications for redistribution to the neediest areas, various political and economic dynamics work against it.</p>
<p>Public investment often favours other areas because these are expected to yield higher economic or <a href="https://theconversation.com/both-parties-to-launch-in-western-sydney-the-symbolic-heartland-of-uncommitted-but-powerful-voters-61017">electoral returns</a>. Better resourced communities can also lobby government more effectively – pushing for or <a href="https://theconversation.com/neighbours-fears-about-affordable-housing-are-worse-than-any-impacts-69291">against</a> facilities in their area, for instance. </p>
<p>Nonetheless, state governments can play a crucial role in reducing social inequalities in Australia’s major cities. In Sydney, infrastructure allocation decisions by successive state governments have failed the most disadvantaged communities. </p>
<p>Public spending on infrastructure and services will have to be redistributed to fix these problems. But simply channelling more funds to disadvantaged suburbs will not be enough. To maximise the transformative impact on such communities, the state must take the needs and wishes of diverse residents into account. </p>
<p>Crucially, this must include more affordable housing. Otherwise, investments in better infrastructure and services may well lead to the displacement of the very people who are meant to benefit.</p><img src="https://counter.theconversation.com/content/82154/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Ilan Wiesel receives funding from the Australian Research Council. </span></em></p><p class="fine-print"><em><span>Caitlin Buckle and Fanqi Liu do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The neediest suburbs get a much poorer deal in Sydney than in Melbourne. A new study provides a suburb-by-suburb breakdown of state investment, including what facilities and services have been funded.Ilan Wiesel, Lecturer in Urban Geography, The University of MelbourneCaitlin Buckle, PhD Candidate in Human Geography, UNSW SydneyFanqi Liu, PhD Student in Urban Geography, The University of MelbourneLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/724632017-02-08T07:56:23Z2017-02-08T07:56:23ZThe secret to happiness in later life is simple to discover, but hard to achieve<figure><img src="https://images.theconversation.com/files/155881/original/image-20170207-8356-wqn8i6.jpg?ixlib=rb-1.1.0&rect=525%2C431%2C5044%2C3345&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/senior-friends-dancing-on-beach-sunny-570240202?src=nyLZUbS-pdyDLk7d0a6yQw-1-36">wavebreakmedia/Shutterstock</a></span></figcaption></figure><p>We live in an extraordinary time: increasing numbers of us <a href="https://www.ons.gov.uk/peoplepopulationandcommunity/populationandmigration/populationprojections/datasets/tablea21principalprojectionukpopulationinagegroups">are living longer</a> than ever imagined before. It is a major achievement of modern science and healthcare. The tough part of longevity is working out how to ensure those extra years are spent happy and financially secure and living independently engaged in activities we value. </p>
<p>Anyone with grandparents or older parents has seen that survival until a later age exposes people to vulnerabilities that can make the ingredients for a happy life a challenge to achieve. As a society, <a href="https://www.gov.uk/government/publications/future-of-an-ageing-population">we cannot slack off</a> in acknowledging and responding to these challenges. </p>
<p>The costs of looking after a rising number of older people raise serious concerns about the sustainability of current provisions of care, especially when there are competing claims on the limited resources of a country. </p>
<p>It is into this context that the British charity Age UK has launched its <a href="http://www.ageuk.org.uk/wellbeingresearch">Index of Well-being in Later Life</a>, an authoritative reporting on what matters most for a good life in old age. </p>
<h2>Index-linked</h2>
<p>The index identifies how older people are doing in different aspects of their lives under five key areas – social, personal, health, financial and environmental. The knowledge it generates should take us a step closer to achieving greater well-being in later life, whoever we are and whatever our circumstances may be. The index is calculated using data from close to 15,000 individuals. The methods and interpretations have been checked in consultations with older people and experts.</p>
<p>First, what do we mean by well-being? Well-being refers to the happiness and life satisfaction of an individual. It points to a stock of personal, familial, and community resources that help individuals cope well when things go wrong. Well-being is a state in which an individual is financially comfortable, healthy and engaged in meaningful activities.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/155833/original/image-20170207-30937-dtgzor.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/155833/original/image-20170207-30937-dtgzor.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/155833/original/image-20170207-30937-dtgzor.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=450&fit=crop&dpr=1 600w, https://images.theconversation.com/files/155833/original/image-20170207-30937-dtgzor.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=450&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/155833/original/image-20170207-30937-dtgzor.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=450&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/155833/original/image-20170207-30937-dtgzor.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=566&fit=crop&dpr=1 754w, https://images.theconversation.com/files/155833/original/image-20170207-30937-dtgzor.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=566&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/155833/original/image-20170207-30937-dtgzor.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=566&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Ageing models.</span>
<span class="attribution"><a class="source" href="https://www.flickr.com/photos/patrick_q/210650722/in/photolist-jBD81-gxZyuW-gNg4eW-7xwd19-jiDzpb-6agmPN-8gk83W-kg2f2t-aApyDi-6bRgyu-b6WaSP-cxFWQG-e7g4q3-9Txqcz-dbxdJ4-nboH42-qGyNkU-5N1tdM-mwHHWC-fbkkmH-g12SZM-nv84wp-6d842E-BZJ5Vv-nqecf5-4qBMQC-dWq6cL-8SBfD6-87i7zt-hzTWZA-fYBtnG-dPkHa8-aaisWU-6JTbC5-bgcr4k-JmU69C-7Mdza-cRgFjW-nQasYu-rdth7J-fyarea-o8NVfm-9nMEfr-q5tsDd-jFwm7b-amRhqn-77gzwm-Ha9Dqz-5qJuVB-cUNU5Q">Patrick Q/Flickr</a>, <a class="license" href="http://creativecommons.org/licenses/by-nc/4.0/">CC BY-NC</a></span>
</figcaption>
</figure>
<p>There is good news and bad news: let’s start with the latter. Age UK’s index identifies the cohort of older people with low levels of well-being. And it is a big group – almost 3m older people in the UK are deemed to have low well-being. </p>
<p>From a practical perspective this group has a similar identity print: they are very likely to live on their own, do not have a strong friendship base and are largely disengaged from their local community. The vast majority have a long-standing illness or disability and are financially poor. </p>
<h2>Counting your blessings</h2>
<p>More positively the report provides evidence of what does work to enhance well-being. The index provides a dashboard of about 40 indicators of well-being in later life. You can see how the factors are weighted in the chart below. If you are approaching old age or have relatives for whom this is relevant, you might like to consider where you stand right now.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/155874/original/image-20170207-30937-uyoka3.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/155874/original/image-20170207-30937-uyoka3.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/155874/original/image-20170207-30937-uyoka3.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=649&fit=crop&dpr=1 600w, https://images.theconversation.com/files/155874/original/image-20170207-30937-uyoka3.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=649&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/155874/original/image-20170207-30937-uyoka3.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=649&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/155874/original/image-20170207-30937-uyoka3.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=815&fit=crop&dpr=1 754w, https://images.theconversation.com/files/155874/original/image-20170207-30937-uyoka3.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=815&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/155874/original/image-20170207-30937-uyoka3.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=815&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption"></span>
<span class="attribution"><a class="source" href="http://www.ageuk.org.uk/">Age UK</a>, <span class="license">Author provided</span></span>
</figcaption>
</figure>
<p>Among the key factors in your happiness in later years is an active social life. This might include going to a cinema, museum, historical site, taking part in arts activities, events or play, being member of a social or sports club, or being active in a community or voluntary group. What they all share is a social element which prevents isolation and loneliness – feelings very destructive for a state of well-being for all, but particularly for older people.</p>
<p>Who we live with, whether we connect with younger generations, and whether or not we have good cognitive skills are also strong determinants. It is interesting that factors such as good health or money are important, but not to the same extent as being socially engaged.</p>
<p>What about if you end up caring for a partner? Well, a higher intensity of obligations for family members does have a negative effect, and lower intensity of help and caring has a positive effect. It’s not totally black and white: caring obligations in general can offer a sense of purpose. But it is damaging for other things such as maintaining a job when care duties become onerous. </p>
<p>One other factor to pull out of the data is that physical activity is very important to well-being along with an open attitude to trying things out and a positive outlook towards an active and engaged life. Sound advice for any age, you might think. </p>
<h2>Damaging cuts</h2>
<p>The really critical point here is just how important the social circle becomes for well-being among older people. According to the Age UK’s WILL index, it counts for about a third of individual well-being. People can stomach poor health and financial poverty if they enjoy secure networks of family, friends and community.</p>
<p>It is perhaps these individuals who hold the key to understanding how well-being can be maximised. Many of them are older than 70, emphasising how extreme old age is no barrier to experiencing happiness in later years.</p>
<p>So how can we maximise that feeling of being part of the wider world? It is true that it is here where <a href="https://www.jrf.org.uk/sites/default/files/jrf/migrated/files/Summary-Final.pdf">cuts in central and local government funding</a> for older people act as a crucial obstacle. It affects provision of community and public services, and a particular consequence is the limiting of communal spaces for older people to socialise, participate and access essential healthcare and social care. </p>
<p>The clear message for government is just how crucial it is to sustain decent public services: without a local bus, for example, older people without alternative arrangements are forced to stay at home and become cut off. Often, those who are struggling most have lived in deprived areas with all that brings. And now a drastic lack of social care and hard-pressed health services diminishes their lives still further and undermines their resilience to illness and disability. An ageing population need not be an unhappy one. They deserve better and we must do more to help them.</p><img src="https://counter.theconversation.com/content/72463/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Asghar Zaidi receives funding from Age UK, United Nation Economic Commission for Europe, European Commission and UK's Economic and Social Research Council to undertake research on well-being of older people. He is also affiliated with London School of Economics and Political Science. </span></em></p>It’s not all about health and wealth.Asghar Zaidi, Professor in International Social Policy, University of SouthamptonLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/693872016-11-25T14:24:45Z2016-11-25T14:24:45ZCould an end to corporate tax help Britain’s Brexit-burdened finances?<figure><img src="https://images.theconversation.com/files/147440/original/image-20161124-15344-j4fqp9.jpg?ixlib=rb-1.1.0&rect=62%2C59%2C937%2C567&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><a class="source" href="https://www.flickr.com/photos/rajue/14281288764/in/photolist-nKZkAC-a3FHC7-6T18EB-97TcL-5bTCU-abDH5-5Pvp3e-5BwtM4-6ni7Dz-6fAAok-87WUzU-jTu1U2-pvbh-cGmnco-9z2pw7-odrbbs-Hq2bXZ-96hNh5-HyZkPt-a9Thxn-dJJ1bY-6iektN-qSoPsE-2bSkz-bd3ft4-7WC9x9-8hjibn-D6VeT5-cGmnaY-8UCrwN-8xLH8s-4f2eWA-cye5Tb-cGoXAU-a7n3ey-cGmneJ-9MazHF-f5sapZ-5J4yn5-4fWSm-4UUrtR-r9XFH4-5HZrvK-cyWZqE-cyWZnE-jt1VSN-5HZneT-cyWZsy-7sfoBM-4v5zR">Ralf-Juergen/Flickr</a>, <a class="license" href="http://creativecommons.org/licenses/by-nc-sa/4.0/">CC BY-NC-SA</a></span></figcaption></figure><p>For many of us small government liberals who thought that, however flawed the European project is, the UK was better off staying inside it, there was one <a href="https://theconversation.com/uk/eu-referendum-2016">Brexit</a> argument that resonated. This was the promise that once it had removed itself from <a href="https://theconversation.com/4-300-to-quit-the-eu-bring-me-my-cheque-book-59699">the shackles of Brussels</a>, with its penchant for interference, overregulation, and general <em>dirigisme</em>, the UK would be free to return to the halcyon days of the mid Victorian era. A time of low regulation, low tax and free trade.</p>
<p>What remains of these promises? As I suspected at the time of the referendum campaign, not much. There will be no North Atlantic version of Hong Kong – during its heyday, a free-wheeling haven from overbearing regulation and punitive taxes. My guess is that all the heavy-handed, overweening (and vaguely French) interventionism of the European Union will merely be replaced by good old British red tape. I for one will struggle to appreciate the difference.</p>
<p>On the bright side, it could have been worse. Though there was some additional spending on housing, infrastructure and R&D in the <a href="https://theconversation.com/autumn-statement-2016-tories-shift-to-growth-strategy-in-an-ed-balls-style-pirouette-66531">recent Autumn Statement</a> from chancellor Philip Hammond, we thankfully heard no more of the rhetoric about industrial policy that first <a href="http://uk.reuters.com/article/us-britain-eu-industry-idUKKCN10C3CR">accompanied prime minister Theresa May’s ascension to office</a> in the summer. Perhaps we can thank Hammond for that, or maybe it returns in the spring? </p>
<p>Economic theory as well as historical experience has taught us that best way to fix an ailing economy – and maintain popular faith in liberal democracy – might not be the method we have become used to. In the familiar scenario, we empower our social betters (politicians and Whitehall mandarins) to manage the nation’s resources (other people’s money) to the benefit of the most deserving firms (those that contribute most to the party in government) in areas of the country most in need of investment (marginal constituencies). </p>
<h2>Rising debt</h2>
<p>What we do know for sure is that the aforementioned small increases in government spending on R&D, infrastructure and housing – along with the freeze on fuel duty and the decision not to implement changes <a href="https://www.gov.uk/pip/overview">to the “PIP” payments</a> for those with disabilities or long-term ill-health – will play only a small part in preventing the UK from achieving a budget surplus by the end of this parliament. </p>
<p>More significant is the <a href="http://www.bbc.co.uk/news/uk-politics-38087110">revision downward in forecast growth</a>, accompanied by lower government revenue. By the end of the next fiscal year, the debt burden will have reached 90.2% of GDP. These are the sorts of numbers we normally expect to observe only in the aftermath of a fairly large war – the UK went from 24% to 127% <a href="http://www.res.org.uk/view/article5jan12Correspondence.html">over the course of World War I</a>. </p>
<p>And it gets worse, because any decline that follows will almost certainly be reversed by the end of the next decade due to the costs associated with the UK’s ageing population. This is a problem likely to be exacerbated by any steep reduction in immigration because most immigrants arrive at the beginning of their working lives and often pay more in taxes <a href="http://onlinelibrary.wiley.com/doi/10.1111/ecoj.12181/abstract">than they receive in benefits</a>.</p>
<p>There is a view, promoted by Carmen Reinhart and Kenneth Rogoff at Harvard, based on <a href="https://www.aeaweb.org/articles?id=10.1257/aer.100.2.573">their own empirical research</a>, that a 90% debt burden represents a singular threshold – borrow beyond that and a country suffers particularly low growth. This is a result that deserves to be treated with scepticism – it is generated by throwing into one dataset lots of very different countries across different time periods. Nonetheless, ever higher debts will need to be financed by ever higher tax rates. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/147444/original/image-20161124-15365-6f915k.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/147444/original/image-20161124-15365-6f915k.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/147444/original/image-20161124-15365-6f915k.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=399&fit=crop&dpr=1 600w, https://images.theconversation.com/files/147444/original/image-20161124-15365-6f915k.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=399&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/147444/original/image-20161124-15365-6f915k.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=399&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/147444/original/image-20161124-15365-6f915k.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=502&fit=crop&dpr=1 754w, https://images.theconversation.com/files/147444/original/image-20161124-15365-6f915k.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=502&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/147444/original/image-20161124-15365-6f915k.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=502&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">A new model for pensions?</span>
<span class="attribution"><a class="source" href="https://www.flickr.com/photos/bugmonkey/5051453089/in/photolist-8Go21M-kQpL4Q-ekHvpL-og5vk6-f2eU7s-og4UJy-8faxV5-orcGqY-9yyKsa-qLTVMD-fHy59G-6Y9PX-LuopP-dY4CGP-cmNJLW-seUGVq-iD1EvW-4HvnYB-jwzhXx-iCYmEs-4HaVvG-cswyyf-ps2Gjn-cswyr3-49NRmr-kQnQbn-5VXzE6-5W2Uff-JnwJBX-ozd6nb-ozftip-afK9pD-7YiQv-cSpYzo-kQnWGZ-fYdYPL-oR8g66-oR8jtt-oR8QqJ-fxHST2-D7YxQ-kQoNQn-cUbABA-guBEKy-5odLFi-ba31xi-p6ArtQ-p8CFJX-5cRi2z-ajqmzt">Neil Wilkie/Flickr</a>, <a class="license" href="http://creativecommons.org/licenses/by-nc-sa/4.0/">CC BY-NC-SA</a></span>
</figcaption>
</figure>
<p>Doubling a tax rate does not double the amount of revenue a government collects. The distortions and disincentives the tax creates suppress economic activity at an ever increasing rate, shrinking the tax base. Beyond a certain point a debt becomes unsustainable, when taxes can no longer rise enough to service debt interest payments. Though the UK and other western countries may still be far from this Greek scenario, they will suffer, particularly once interest rates begin to rise and refinancing the debt being accumulated becomes more difficult.</p>
<h2>Corporation tax</h2>
<p>So more spending and lower taxes would be a recipe for disaster. That does not mean that the present way the UK spends or taxes is in any way efficient. Hammond did announce that corporation tax cuts planned by his predecessor George Osborne would be implemented. A bolder move, and one more in keeping with the anarchic, anti-bureaucratic spirit of Brexit, would be to abolish corporation tax completely. </p>
<p>Why? Because this is a singularly distortionary tax, and I would argue, deeply unjust as well. It only generates <a href="https://www.ifs.org.uk/uploads/publications/bns/BN163.pdf">about 6% of UK government revenue</a>, but collecting it imposes vastly more administrative costs on UK businesses. Abolish it and armies of intelligent people working as lawyers and accountants could be repurposed to more productive activities in place of their current function of paying (or avoiding) this tax. Justice too would be served.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/147446/original/image-20161124-15359-xtjg3p.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/147446/original/image-20161124-15359-xtjg3p.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/147446/original/image-20161124-15359-xtjg3p.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=398&fit=crop&dpr=1 600w, https://images.theconversation.com/files/147446/original/image-20161124-15359-xtjg3p.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=398&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/147446/original/image-20161124-15359-xtjg3p.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=398&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/147446/original/image-20161124-15359-xtjg3p.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=501&fit=crop&dpr=1 754w, https://images.theconversation.com/files/147446/original/image-20161124-15359-xtjg3p.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=501&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/147446/original/image-20161124-15359-xtjg3p.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=501&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Reflecting on new tax arrangements for business.</span>
<span class="attribution"><a class="source" href="https://www.flickr.com/photos/powerbooktrance/465016782/in/photolist-H6khJ-p65J8c-bAEga1-2E4oz-ePdA2r-4EG82G-4qQTFK-ePpYMQ-fjPkMm-yweWc-6r6g8o-6JuV2v-6gceBv-4FZHmd-AMqJ-H6kiJ-9ZVjnr-H6kg5-8MnN24-4sWK41-nfa8r6-pTk24-ePpYPN-aN8wPF-aZirqa-b5uDgr-ePpYNJ-4EDQCx-5Zgh4b-adSjfV-kzKr8V-sfKi-9r44TS-ePpYYC-8Per87-4CqzEC-9iFBeM-nd7qoQ-oa9e9-yweWg-9oPzzs-8xYGnN-5kt1fX-j6rDos-9BKSHD-fiLCfS-2an28V-cT6ujf-89xyPL-7wiRNK">Terry Johnston/Flickr</a>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span>
</figcaption>
</figure>
<p>Personally, I am not bothered that Amazon or Starbucks do not <a href="https://www.theguardian.com/technology/2016/sep/02/multinationals-amazon-starbucks-austria-says">“pay their fair share”</a>. Indeed, I believe they have a fiduciary responsibility to their shareholders to pay only what the law requires and not a penny more. Demanding they do otherwise is an assault on the very concept of the rule of law and seems vaguely fascistic. </p>
<p>What does irk, is that their smaller competitors or new firms that might compete against these incumbents cannot shift their profits to Luxembourg or avail themselves of the services of lobbyists that would ensure that tax regulations are written in a way that benefits them. </p>
<p>Ultimately, shareholders pay this tax and unlike the income tax, everyone, whether a millionaire or a destitute pensioner pays here the same rate. Shifting the burden to income tax would yield less waste and would actually be more progressive. It would also support the creation of a more entrepreneurial society, one with more competition and fewer large monopolies.</p><img src="https://counter.theconversation.com/content/69387/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Michael Ben-Gad does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>A zero rate for business could actually be a progressive move and would reflect the anti-bureaucratic spirit of Brexit.Michael Ben-Gad, Professor of Economics, City, University of LondonLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/688682016-11-15T15:29:53Z2016-11-15T15:29:53ZGreece economy rallies while Germany stutters but restraint still required<figure><img src="https://images.theconversation.com/files/146072/original/image-20161115-31153-11zyfkj.jpg?ixlib=rb-1.1.0&rect=157%2C0%2C842%2C486&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><a class="source" href="http://www.shutterstock.com/pic-273465113/stock-photo-flags-of-germany-and-greece-painted-on-cracked-wall.html?src=SJVs2YpUeOy5rU7c_bE-nA-1-49">danielo/Shutterstock</a></span></figcaption></figure><p>Finally, some good news from Greece. It appears that the long-running contraction of the country’s economy <a href="https://www.theguardian.com/world/2016/nov/15/greece-edges-out-of-recession-with-two-quarters-of-growth">has finally halted</a> and there is some hope it has begun to enjoy modest growth. There is no reason for too much elation just yet as the Greek public finances remain problematic. Even after three bailouts the Greek state labours under a heavy debt burden that will remain well over 170% of GDP for the foreseeable future. </p>
<p>Yields on Greek ten-year bonds – a measure of the market’s enthusiasm for the Greek economy – have not dropped below 7%, and remember, this is the interest rate in euros, not a particularly inflation-prone currency. The good news has so far had no appreciable effect. By comparison, though the German economy has stuttered this quarter, German yields have been well below 0.5% – the difference is the quite elevated risk of Greek default anywhere between now and 2026.</p>
<p>The Greek <a href="http://www.reuters.com/article/eurozone-greece-gdp-idUSL8N1DF2ZC">statistics service data</a> showed an estimate for economic growth in the third quarter of 0.5%. In the second quarter, the rise in gross domestic product was revised up to 0.3%. In Germany, meanwhile, the <a href="http://www.bbc.co.uk/news/business-37984719">Federal Statistics Office reported</a> a halving of GDP growth, to 0.2% in the third quarter from 0.4% in the second as weaker exports weighed on the numbers.</p>
<h2>Reshuffle</h2>
<p>The growth in Greece is in some ways inevitable. An economy can only fall so far when it can rely on some measure of debt relief. Greek Prime Minister Alexis Tsipras understands that implementing the reforms he has promised to obtain support will become progressively more difficult. He <a href="https://www.theguardian.com/world/2016/nov/06/greek-prime-minister-tsipras-reshuffles-cabinet-to-boost-bailout-reforms">recently reshuffled his cabinet</a> to retain the goodwill he still needs from the International Monetary Fund, the European Central Bank (ECB) and his EU partners. </p>
<p>Perhaps his mind was focused by the way Portugal nearly lost access to the ECB’s quantitative easing programme last month after the last of four ratings agencies threatened to downgrade its debt below investment grade. That followed the introduction of a raft of populist policies by its socialist government this year, <a href="http://www.dbrs.com/industry/10036">reversing the downward trend</a> in its debt burden. This could still happen even though the country just chalked up its <a href="http://www.cnbc.com/2016/11/15/euro-zones-economy-grows-03-percent-in-third-quarter-up-16-percent-on-last-year.html">fastest growth since 2013 last quarter</a>.</p>
<p>Even if all goes according to plan, this Greek saga will last well past the middle of the century. In 2054 the Greek state will pay the European Financial Stability Facility €6.3 billion and over €1 billion a year to the European Stability Mechanism in each of the five years that follow. Again, that is if everything goes to plan, and that is over a very long and uncertain planning horizon. And so despite the relatively good news coming out of Greece today, the markets remain rightly very cautious about the future of its finances. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/146074/original/image-20161115-31129-9fg5d4.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/146074/original/image-20161115-31129-9fg5d4.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/146074/original/image-20161115-31129-9fg5d4.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=458&fit=crop&dpr=1 600w, https://images.theconversation.com/files/146074/original/image-20161115-31129-9fg5d4.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=458&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/146074/original/image-20161115-31129-9fg5d4.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=458&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/146074/original/image-20161115-31129-9fg5d4.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=576&fit=crop&dpr=1 754w, https://images.theconversation.com/files/146074/original/image-20161115-31129-9fg5d4.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=576&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/146074/original/image-20161115-31129-9fg5d4.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=576&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Caution remains high in debt markets.</span>
<span class="attribution"><a class="source" href="http://www.shutterstock.com/pic-279555938/stock-photo-stock-exchange-chart-graph-finance-business-background-abstract-stock-market-diagram-candle-bars-trade.html?src=aHt0a2TufjOii11Jv3yXuQ-1-14">autsawin uttisin/Shutterstock</a></span>
</figcaption>
</figure>
<h2>Spending patterns</h2>
<p>There is a lesson here for others. Conventional wisdom <a href="http://www.nytimes.com/2015/08/21/opinion/paul-krugman-debt-is-good-for-the-economy.html?_r=0">these days holds</a> that Western countries can safely remove the shackles of austerity and borrow to invest (proponents of government spending always use the word “invest” never “spend”). The rationale goes that this is because interest rates are so low that the borrowing amounts to “free money”. </p>
<p>It is wise to remember that not only do the interest payments need to be paid but the principal will need to be either repaid or (more likely) one day refinanced when interest rates are not so low. With its low debt burden, Germany can suffer even a severe recession and still not face a debt crisis, but if Greece experiences even a mild downturn it will need further bailouts.</p>
<p>Some projects may have the effect of growing the economy by enough to justify this extra burden, but this is not “free money”. Because that’s the thing about money, it is never really free. One thing that unites the politicians of the right and the left, Donald Trump, Hillary Clinton, Theresa May, François Hollande and Jeremy Corbyn, is the belief that tomorrow, or indeed the year 2059 will never come. At least it will only come long after they are gone.</p><img src="https://counter.theconversation.com/content/68868/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Michael Ben-Gad does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Athens can celebrate two consecutive quarters of growth. Berlin must stomach some weakness. Everyone should remember cheap money isn’t free money.Michael Ben-Gad, Professor of Economics, City, University of LondonLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/645862016-08-30T05:18:44Z2016-08-30T05:18:44ZCutting ARENA would devastate clean energy research<p>This week’s first sitting of the 45th Parliament of Australia is considering a A$6.5 billion “omnibus savings bill”, including a <a href="http://www.abc.net.au/news/2016-08-29/debates-on-both-sides-as-parliamentarians-return-to-canberra/7793088">proposed cut of A$1.3 billion</a> to the <a href="http://arena.gov.au/">Australian Renewable Energy Agency (ARENA)</a>. If adopted, it would effectively mean the end of ARENA and would devastate clean energy research in Australia. </p>
<p>From driving innovation and economic growth, to creating jobs, to addressing climate change and ensuring a reliable and affordable energy system for the future, ARENA plays a critical role. Most perversely, by reducing Australia’s role in the booming global clean energy industry, closing ARENA would likely reduce Australia’s capacity to balance its budget in years to come. </p>
<h2>What is ARENA?</h2>
<p>ARENA, an independent Commonwealth agency, has driven most of Australia’s innovative renewable energy projects in recent years. This includes Australia’s <a href="http://newsroom.unsw.edu.au/news/science-technology/unsw-researchers-set-world-record-solar-energy-efficiency">world-leading solar photovaltaics research centre</a> at UNSW, the <a href="http://inhabitat.com/australian-wave-energy-project-sets-world-record-with-14000-operating-hours/">Carnegie wave energy pilot</a> in Perth, AGL’s <a href="https://www.agl.com.au/about-agl/media-centre/article-list/2016/august/agl-launches-world-largest-solar-virtual-power-plant">virtual power station trial</a> and UTS’s own research into <a href="https://www.uts.edu.au/research-and-teaching/our-research/institute-sustainable-futures/our-research/energy-and-climate-2">local electricity trading and network opportunity mapping</a>. </p>
<p>ARENA has funded <a href="http://arena.gov.au/projects/completed-projects/">60 completed projects</a> and is managing a further 200. Many more are in the pipeline. It has also leveraged A$1.30 in private-sector R&D funding for every dollar of government funding – a fact that is often overlooked amid talk of budget savings. </p>
<p>Without ARENA’s grants and leveraged co-funding, very few of these projects would have happened. While its sister organisation, the <a href="http://www.cleanenergyfinancecorp.com.au/">Clean Energy Finance Corporation</a>, plays an important role in helping to finance established renewable projects and technologies, only ARENA can provide the research grant co-funding to develop these technologies in the first place. </p>
<p>ARENA was formed in 2012 as part of the Gillard government’s Clean Energy Future package. It drew together a range of clean energy programs and funds such as the Solar Flagships, the Australian Solar Institute and some, such as the Low Emissions Technology Demonstration Fund, which the Howard government established. ARENA was given the twin goals of:</p>
<ol>
<li><p>Improving the competitiveness of renewable energy technologies</p></li>
<li><p>Increasing the supply of renewable energy in Australia.</p></li>
</ol>
<p>ARENA was one of five key elements of the Clean Energy Future package <a href="http://www.governmentnews.com.au/2014/12/cormann-cant-kill-arena/">slated for abolition by the Abbott government</a>. While the <a href="https://theconversation.com/carbon-tax-axed-how-it-affects-you-australia-and-our-emissions-28895">carbon price</a> and Climate Commission were cut, ARENA, the CEFC and the <a href="http://climatechangeauthority.gov.au/">Climate Change Authority</a> were saved by opposition and crossbench support, albeit with a A$435 million cut to ARENA’s original budget. </p>
<p>Now, three years on, the Turnbull government has chosen to keep the CEFC but its plan to slash ARENA’s budget remains. The Labor opposition has yet to announce its position on the proposed cut. Meanwhile, clean energy researchers across Australia have written an <a href="https://theconversation.com/dear-politicians-please-dont-endanger-world-leading-solar-research-by-cutting-arena-64611">open letter</a> calling on all parties to support the agency.</p>
<h2>ARENA’s innovation role</h2>
<p>The process of energy technology innovation can be thought of as having a series of phases, which have different funding needs (see below). </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/135852/original/image-20160830-17884-h6tvam.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/135852/original/image-20160830-17884-h6tvam.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/135852/original/image-20160830-17884-h6tvam.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=288&fit=crop&dpr=1 600w, https://images.theconversation.com/files/135852/original/image-20160830-17884-h6tvam.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=288&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/135852/original/image-20160830-17884-h6tvam.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=288&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/135852/original/image-20160830-17884-h6tvam.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=362&fit=crop&dpr=1 754w, https://images.theconversation.com/files/135852/original/image-20160830-17884-h6tvam.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=362&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/135852/original/image-20160830-17884-h6tvam.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=362&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">The innovation chain for renewable energy technologies.</span>
<span class="attribution"><a class="source" href="http://arena.gov.au/files/2014/02/Commercial-Readiness-Index.pdf">ISF, based on ARENA's Commercial Readiness Index</a>, <span class="license">Author provided</span></span>
</figcaption>
</figure>
<p>The first phase is typically fundamental research and development. Two examples are the world-leading research programs at UNSW Australia and ANU, which have developed the world’s most efficient <a href="http://newsroom.unsw.edu.au/news/science-technology/unsw-researchers-set-world-record-solar-energy-efficiency">solar photovoltaic</a> and <a href="http://www.anu.edu.au/news/all-news/anu-scientists-set-solar-thermal-record">solar thermal</a> technologies. Both are ARENA-funded; neither could have been effectively funded by loans.</p>
<p>Technologies then need to be piloted in the real world – as in the case of the Carnegie Wave Energy project in Perth. This stage is often still too risky for most commercial lenders, so some public grant funding remains critical. </p>
<p>Next comes the large-scale demonstration phase – bringing technologies down the cost curve by developing viable business models and supply chains, with the aim of making them cost-competitive. Here, a mix of loan and grant funding is needed. </p>
<p>Australia’s large-scale solar industry is an example of a sector in this stage of development. In 2015, ARENA realised that despite having 1.5 million solar roofs and plenty of sunshine, Australia had a dearth of large-scale solar projects (only four operating and four in development). As such, it has committed A$100 million to help build more solar farms.</p>
<p>Finally, there are commercial renewable technologies that are already cost-competitive with other energy sources. Wind energy is the prime example of this, which is precisely why ARENA has not funded wind projects. </p>
<h2>Our changing energy system</h2>
<p>Innovation is not purely about technology development; it is also about addressing complex challenges such as how to manage the <a href="https://theconversation.com/australias-energy-sector-is-in-critical-need-of-reform-61802">changing nature of our energy system</a>. On a cents per kilowatt-hour basis, wind energy is now <a href="http://about.bnef.com/press-releases/renewable-energy-now-cheaper-than-new-fossil-fuels-in-australia/">cheaper than new-build coal</a> and <a href="http://reneweconomy.com.au/2015/solar-and-battery-storage-already-cheaper-than-grid-power-in-australia-66169">solar power is cheaper than grid electricity</a>. These two trends will continue, but our energy market is struggling to adapt to the new technology mix. </p>
<p>ARENA has a crucial role to play here. For example, it has funded the Institute of Sustainable Futures (ISF) at UTS to develop a set of <a href="https://www.uts.edu.au/research-and-teaching/our-research/institute-sustainable-futures/our-research/energy-and-climate-1">Network Opportunity Maps</a>. These show locations in the grid where demand management and decentralised generation (solar, storage etc) can help avoid costly grid upgrades. </p>
<p>ARENA has also funded ISF’s research into local energy trading (also known as peer-to-peer energy or virtual net metering). This is aimed at avoiding the predicted “energy death spiral”, by encouraging consumers and power companies to compromise in making the most of existing infrastructure, reducing consumers’ bills and supporting local power generation.</p>
<h2>Meeting our climate targets</h2>
<p>Finally, and perhaps most importantly, ARENA is helping to meet Australia’s greenhouse gas emissions target, which calls for a 26-28% cut relative to 2005 levels by 2030. </p>
<p>The electricity sector is Australia’s largest carbon emissions source. ARENA has a vital role in delivering cost-effective emissions reductions. There are two main mechanisms to decarbonise the sector: increasing energy productivity and efficiency, and switching from fossil fuels to renewables. As outlined above, ARENA is a key player in the latter process and is primed to play a leading role in the former.</p>
<p>It would be a tragic error to cut funding to an agency that is making such an important and successful contribution to fulfilling Australia’s obligations under the <a href="https://theconversation.com/the-paris-climate-agreement-at-a-glance-50465">Paris climate agreement</a>, as well as driving innovation and energy affordability. No other agency combines all of these facets.</p>
<h2>More renewable policy instability?</h2>
<p>In a <a href="https://www.youtube.com/watch?v=68tJXvn7cjk">2010 speech on low-carbon energy</a>, Prime Minister Malcolm Turnbull acknowledged the role of government in supporting clean energy innovation, saying: </p>
<blockquote>
<p>Government support for innovation and investment in clean stationary energy is important, particularly at the early stages. </p>
</blockquote>
<p>The need for this support is not going to go away. If ARENA and its research grant funding is abolished, a similar organisation will doubtless soon need to be re-established. In the meantime, millions of dollars in opportunities would have been wasted and irreplaceable industry and research expertise lost. </p>
<p>After years of policy instability around renewable energy, which has held back the domestic development of one of the world’s fastest-growing industries, do we really want to embrace even more uncertainty?</p>
<p>To paraphrase former Harvard University president <a href="http://quoteinvestigator.com/2016/05/03/expense/">Derek Bok</a>, if you think research is expensive, try ignorance.</p><img src="https://counter.theconversation.com/content/64586/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Nicky Ison is a Senior Research Consultant at the Institute for Sustainable Futures (ISF) at the University of Technology Sydney and a Founding Director of Community Power Agency. ISF undertakes paid sustainability research for a wide range of government, corporate and NGO clients. ISF has received several grants from ARENA which have helped to co-fund projects in clean energy research. Without ARENA co-funding, these projects would have been unlikely to proceed. For more information about these projects, please see: <a href="http://www.isf.uts.edu.au">www.isf.uts.edu.au</a>.
Community Power Agency is a not-for-profit organisation working to grow a vibrant community energy sector. Community Power Agency is in regular contact with ARENA about how to best support the emerging Australian community energy sector. </span></em></p><p class="fine-print"><em><span>Chris Dunstan is a Research Director at the Institute for Sustainable Futures (ISF) at the University of Technology Sydney. ISF undertakes paid sustainability research for a wide range of government, corporate and NGO clients. ISF has received several grants from ARENA which have helped to co-fund projects in clean energy research. Without ARENA co-funding, these projects would have been unlikely to proceed. For more information about these projects, please see: <a href="http://www.isf.uts.edu.au">www.isf.uts.edu.au</a></span></em></p>The Australian Renewable Energy Agency is facing a $1.3 billion budget chop as part of the federal government’s savings measures. But sacrifice the lead agency for green energy developmentNicky Ison, Senior Research Consultant, Institute for Sustainable Futures, University of Technology SydneyChris Dunstan, Research Director, Institute for Sustainable Futures, University of Technology SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/642962016-08-23T04:38:17Z2016-08-23T04:38:17ZHow to get a better bang for the taxpayers’ buck in all sectors, not only Indigenous programs<p>A <a href="https://www.cis.org.au/publications/research-reports/mapping-the-indigenous-program-and-funding-maze">report</a> released today by the Centre for Independent Studies (CIS) has drawn attention to the lack of quality evaluations being conducted on Indigenous programs. </p>
<p>The report identified 1082 Indigenous-specific programs delivered by government agencies, Indigenous organisations, not-for-profit NGOs and for-profit contractors. It found 92% have never been evaluated to see if they are achieving their objectives.</p>
<p>While it oversteps in some regards, this report raises a very important point: we don’t really know what works if we don’t check. That’s a lesson that applies to all areas of public policy spending, not just Indigenous affairs.</p>
<h2>A bit of perspective</h2>
<p>The <a href="https://www.cis.org.au/app/uploads/2016/08/rr18.pdf">report</a> asserts:</p>
<blockquote>
<p>Indigenous-specific funding is being wasted on programs that do not achieve results because they are not subject to rigorous evaluation.</p>
</blockquote>
<p>This is a contradiction. With no rigorous evaluation, how could we know if it’s a waste or not? The point should be that we mostly don’t really know if those programs are improving outcomes. But a lack of evaluation is indeed a major problem, and we can do better.</p>
<p>The report only addresses Indigenous programs but it’s important to note the issues raised are not confined to Indigenous programs. I was not entirely surprised by these findings because I have seen similar patterns in other sectors, such as education spending. </p>
<p>A recent <a href="http://www.nber.org/papers/w22130.pdf">paper</a> published by the US’ <a href="http://www.nber.org/">National Bureau of Economic Research</a> reviewed the evidence from randomised evaluations on the impact of education programs (not confined to Indigenous programs) in developed countries. Of the 196 experiments it identified, only two were conducted in Australia.</p>
<p>If we were to withdraw funding from all programs conducted by Australian governments whose impact has not been verified through rigorous evaluation, then I don’t think we’d have many programs left.</p>
<p>That said, it may be that rigorous evaluation for Indigenous programs in Australia is of extra importance. In other areas (take education or design of the income support system), it is perhaps easier to piggy-back on the rigorous evaluations conducted in other countries; taking evidence “off-the-shelf” from overseas.</p>
<p>The CIS’ report is correct to draw attention to the paucity of rigorous evaluations. It feels good to spend money on Indigenous programs, just as it feels good to spend money on all worthy causes. But greater investment on evaluating those programs would almost certainly be money well spent, as long as the evaluations are of high quality.</p>
<h2>Not all evaluations are created equal</h2>
<p>We need to be very aware that not all evaluations are equally compelling. There can be a temptation for government departments to conduct tokenistic, low-quality evaluations that tick-the-box for a program being evaluated. </p>
<p>Many evaluations rely only on asking program participants or workers if they believe that a program has had a favourable impact. While such work has merit, it doesn’t actually measure impact. We don’t rely only on such evidence in medicine. Nor should we for social policy. </p>
<p>Such evaluations are usually inconclusive, which has the added benefit of not risking embarrassment to the minister championing the program. </p>
<p>We have made tentative steps toward fixing this problem. The Productivity Commission convened a roundtable of experts in 2009 on the topic of <a href="http://www.pc.gov.au/research/supporting/strengthening-evidence">Strengthening Evidence-Based Policy in the Australian Federation</a>.</p>
<p>In his <a href="http://www.pc.gov.au/research/supporting/strengthening-evidence/13-chapter10.pdf">submission</a> to the roundtable, Andrew Leigh – then a professor of economics at the Australian National University, now the shadow assistant treasurer – outlined what he called a “hierarchy of evidence” that would help policymakers better understand what social programs were actually worth the money and effort:</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/135085/original/image-20160823-18734-1d5s430.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/135085/original/image-20160823-18734-1d5s430.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/135085/original/image-20160823-18734-1d5s430.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=337&fit=crop&dpr=1 600w, https://images.theconversation.com/files/135085/original/image-20160823-18734-1d5s430.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=337&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/135085/original/image-20160823-18734-1d5s430.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=337&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/135085/original/image-20160823-18734-1d5s430.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=423&fit=crop&dpr=1 754w, https://images.theconversation.com/files/135085/original/image-20160823-18734-1d5s430.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=423&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/135085/original/image-20160823-18734-1d5s430.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=423&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption"></span>
<span class="attribution"><a class="source" href="http://www.pc.gov.au/research/supporting/strengthening-evidence/13-chapter10.pdf">Evidence-based policy: summon the randomistas? Andrew Leigh, 2009</a></span>
</figcaption>
</figure>
<p>Leigh’s proposed hierarchy itself may need more scrutiny, debate and refinement. My view is that studies relying only on <a href="https://en.wikipedia.org/wiki/Matching_(statistics)">matching</a> or <a href="http://www.statsoft.com/Textbook/Multiple-Regression">multiple regression</a> are a lower grade of evidence than genuine <a href="https://theconversation.com/reimagining-nsw-tackling-education-inequality-with-early-intervention-and-better-research-57483">quasi-experimental work</a>.</p>
<p>The CIS report recommends:</p>
<blockquote>
<p>All programs receiving taxpayer funding should be subject to independent evaluations. At the same time, governments and organisations should cease collecting data that does not make a valuable contribution towards improving the level of knowledge about the effectiveness of programs.</p>
</blockquote>
<p>I think we need to go further and ensure that we conduct the best possible evaluations. This includes conducting randomised trials as part of the mix. </p>
<p><a href="https://thenumbercruncherdotorg.wordpress.com/2013/02/03/poor-indigenous-economics-part-i/">Nicholas Biddle</a>, a quantitative social scientist at the Australian National University, has asked whether the challenges facing programs targeting Indigenous people in remote Australia may have similarities to those targeting poverty in developing countries.</p>
<p>If so, then we should consider drawing on the considerable experience of the leaders in such evaluations, such as the <a href="https://www.povertyactionlab.org/">Abdul Latif Jameel Poverty Action Lab</a>, a network of professors who argue for policy informed by scientific evidence. Importantly, the Indigenous community must be involved in every step.</p>
<p>The CIS plans to follow up their report with a detailed review of the evaluations that have been conducted of Indigenous programs. </p>
<p>Whatever it finds, it is clear that more prominence should be given to understanding the variation in the quality of evidence.</p><img src="https://counter.theconversation.com/content/64296/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Peter Siminski has previously received funding from the NSW Department of Education. </span></em></p>A new report highlights how little we know about what works and what doesn’t when it comes to publicly-funded Indigenous programs. It’s a similar story in other policy areas – but we can do better.Peter Siminski, Associate Professor of Economics, University of WollongongLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/620112016-07-08T07:32:50Z2016-07-08T07:32:50ZCould a corporation tax rate of 15% work for the UK?<figure><img src="https://images.theconversation.com/files/129587/original/image-20160706-12746-1gupg20.jpg?ixlib=rb-1.1.0&rect=0%2C44%2C1024%2C665&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Do the Chancellor's sums add up.</span> <span class="attribution"><a class="source" href="https://www.flickr.com/photos/fairtomiddling/4388010872/in/photolist-7FKGKS-tNqSoR-4dTchT-4dTcb2-69yHQa-4dXbJG-3gi5Xo-4dTcex-ngcnDG-wEXhf-6XgqcB-bjA1qz-5eXXH-bjA1jF-7Fikp7-fmeAzJ-4dXbFL-8noDKP-7JiyY-5rhwgv-bjA1h2-aDGgn8-5TumkC-bjzX4g-4KD6HV-E5MPx9-awz6oL-dzHdMu-FpToUL-bjzXbZ-bjzX9Z-bjzX8P-bjzX6c-bjA1bX-6dv6AX-6HRCJD-9ejWzz-8Y2j5w-7DmLiG-bjzWNM-5aUurf-7HNZ3n-fboCKM-bjA1NT-eC1X7-bjzWQi-cHAH1d-bjA1RP-5mzkHd-5EE5Vq">Sean McGee Hicks/Flickr</a>, <a class="license" href="http://creativecommons.org/licenses/by-nc/4.0/">CC BY-NC</a></span></figcaption></figure><p>Britain’s chancellor of the exchequer, George Osborne, has proposed a significant <a href="https://next.ft.com/content/d5aedda0-412e-11e6-9b66-0712b3873ae1">cut in the main rate of corporation tax</a>. The move has largely been seen as an attempt to soothe the concerns of UK businesses struggling to understand the implications of the EU referendum vote and has been <a href="http://www.independent.co.uk/news/world/europe/corporation-tax-cut-george-osborne-brexit-eu-leaders-uk-economy-a7124386.html">met with some scepticism</a>.</p>
<p>A tax cut for companies is sometimes perceived as something that only helps the businesses directly affected, but the economic reality is that it has a far greater impact. With all taxes, regardless of whether they are charged on an organisation, it is only individuals that bear the burden. A company is not a living entity; it cannot be made worse off. </p>
<p>Setting aside the benefits of public spending for a moment, there are three groups that bear the burden of corporation tax: employees (in the form of reduced wages and layoffs), customers (in the form of higher prices), and the shareholders (due to reduced dividends). Cutting the headline rate of corporation tax will not only increase the incomes of these three groups, the subsequent effect on behaviour should increase revenues in other taxes. The hope will be that those changes offset any revenues lost through a cut in the main rate. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/129580/original/image-20160706-12753-1sfimgo.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/129580/original/image-20160706-12753-1sfimgo.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/129580/original/image-20160706-12753-1sfimgo.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=450&fit=crop&dpr=1 600w, https://images.theconversation.com/files/129580/original/image-20160706-12753-1sfimgo.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=450&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/129580/original/image-20160706-12753-1sfimgo.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=450&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/129580/original/image-20160706-12753-1sfimgo.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=566&fit=crop&dpr=1 754w, https://images.theconversation.com/files/129580/original/image-20160706-12753-1sfimgo.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=566&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/129580/original/image-20160706-12753-1sfimgo.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=566&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">The economics works, in theory.</span>
<span class="attribution"><a class="source" href="https://www.flickr.com/photos/jaimelondonboy/4211613257/in/photolist-7qaBTF-9Tjrgs-9Tjro7-94ECPR-9TgCar-7g7Yh2-8gAR9-7qewBN-hnn5My-CQw8sZ-qC1iKh-94ECt4-7qewfj-7XDDD-7xLz8m-grtEd-4ignkL-4pHT4j-C1K9EX-7qexzy-8MjrPZ-vs61A-8amXDB-7qexcY-7qazrB-7qexo7-7qaABz-7qaBtB-7qevaU-7qeCHj-7qaC7p-8aqcqS-7qaCUt-7qazDV-7qew4j-7qaAqz-7qaA3B-7qazRg-7g7WRV-dH18hq-7gbTf9-7XDDA-dEGuYD-7XDpJ-7gbSrN-7XDDB-8aqcu7-g2bY-7XDDz-uYMajv">Jai'me/Flickr</a>, <a class="license" href="http://creativecommons.org/licenses/by-nc-nd/4.0/">CC BY-NC-ND</a></span>
</figcaption>
</figure>
<p>Put simply, if you get higher wages after your company factors in a tax cut, you will pay income tax and national insurance on the increase, but will still be better off than before. You might then choose to use the net increase to buy that slightly-too-expensive toaster you’ve had your eye on alongside other goods which incur sales taxes such as VAT and other duties. If it all works unhindered, then this subsequently increases the income of the business producing the goods – and the cycle continues. </p>
<p>So, as well as potentially raising revenues through other taxes, the reduction in the corporation tax rate could help stimulate enough growth to raise revenues of corporation tax revenues in the medium-to-long term to the same levels as before the cut. </p>
<h2>Investment case</h2>
<p>This has certainly been the case for the UK over the past 35 years. Since 1983, the main rate of corporation tax has decreased from 52% to its current rate of 20%, but revenues have remained generally buoyant – corporation tax receipts consistently <a href="https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/532373/May16_Receipts_NS_Bulletin_Final2.pdf">make up about 9-10% of all HMRC receipts</a>. The <a href="http://www.ifs.org.uk/wps/wp0404.pdf">Institute for Fiscal Studies</a> has explained this by pointing out other changes in tax law which offset the cuts, an increase in the size of the corporate sector and economic conditions which have boosted profitability.</p>
<p>However, it is not known at this stage whether changes in the main rate will be accompanied by other measures. These may include reductions in the annual investment allowance, which lets a company deduct its spending on fixed assets like machinery or vehicles from its taxable profits. This is a great help to smaller firms considering investment in new equipment. </p>
<p>The government has changed the level of the allowance <a href="https://www.gov.uk/capital-allowances/annual-investment-allowance">several times over the last six years</a> and could conceivably do so again. Any reduction in allowances increases the tax base (the revenues liable for taxation) and therefore increases revenue for the Treasury. Before the merits of any corporation tax rate change can be fully analysed, issues such as this need to be taken into account. </p>
<h2>Growth fears</h2>
<p>While there is an economic argument to reduce the corporation tax rate, it is less certain how much this could boost the damaged confidence in the UK as a marketplace. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/129591/original/image-20160706-12727-zuvg.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/129591/original/image-20160706-12727-zuvg.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/129591/original/image-20160706-12727-zuvg.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=450&fit=crop&dpr=1 600w, https://images.theconversation.com/files/129591/original/image-20160706-12727-zuvg.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=450&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/129591/original/image-20160706-12727-zuvg.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=450&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/129591/original/image-20160706-12727-zuvg.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=566&fit=crop&dpr=1 754w, https://images.theconversation.com/files/129591/original/image-20160706-12727-zuvg.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=566&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/129591/original/image-20160706-12727-zuvg.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=566&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">The pound’s decline is a continuing risk.</span>
<span class="attribution"><a class="source" href="https://www.flickr.com/photos/59937401@N07/5474185981/in/photolist-9kJCLV-9VAgWk-9VDM5N-7W8QqN-9VzJ8p-9VyHut-9VAQQG-9VByc5-9VAnRw-9VDaWY-9VBzSG-9VC3iE-9VAwVp-9VCzps-9VBgGi-9kNZEL-6Nfq1h-9VBaMr-9VCwLq-9VB7jC-9Vzk46-9VALmE-9VwzJV-9VAQ4b-9kP1zQ-9VAuME-bRAZ3H-9kP2U7-9kJE8x-9VAub5-9kMGKG-9VxCXn-9VzHe8-9VAn7m-9VxFgX-9VAMK9-9VAF9B-9VDxpf-9Vy2Q6-9VANzf-9VzeFx-bACF1-in6yLn-9VxWEK-6SF8Ar-9VxN1g-6SKbxo-9VDwno-9VD4DS-c9g7k1">Images Money/Flickr</a>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span>
</figcaption>
</figure>
<p>Financial markets have largely stabilised after the immediate post-Brexit fluctuations – with the exception of sterling’s <a href="http://www.telegraph.co.uk/business/2016/07/06/what-does-a-falling-pound-mean-for-the-british-economy/">worrying downward trajectory</a>. The prime fear now is a short-term reduction in growth resulting from cautious markets. This week, Bank of England governor <a href="https://twitter.com/BBCNews/status/750270078889828352">Mark Carney pointed to</a>: </p>
<blockquote>
<p>…growing evidence that uncertainty about the referendum has delayed major economic decisions such as business investment, construction and housing market activity.</p>
</blockquote>
<p>Should there be a substantial short-term decline in growth resulting from a “wait-and-see” policy, this may cause a recession in itself and the negative consequences that brings. </p>
<h2>Tax lag</h2>
<p>To assess whether a corporation tax cut would help offset this, it is worth looking at a hypothetical example. Suppose a multinational company currently posts a pre-tax annual profit of £100m. The current corporate tax rate of 20% would give the company a net profit of £80m. Now let’s assume a future tax rate of 15%. In order to achieve the same net profit of £80m the company would have to post a pre-tax profit of just over £94m (with the tax liability at £14m). So if a recession dented that company’s profits by just 6%, that would immediately negatively offset the benefits of a reduction in the tax rate for both the company and the government. </p>
<p>Should a further recession occur, a corporation tax cut could prove to be something of a reckless gamble. Some economists argue that it would be possible to build a robust and equitable tax system without corporate taxes – where the increase in incomes of the three groups mentioned above create increased revenues in other taxes. But defenders of corporation tax highlight the timing benefits. Simply put, the treasury gets the money sooner rather than waiting for it to trickle down through the three groups. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/129684/original/image-20160707-30685-1ln3qip.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/129684/original/image-20160707-30685-1ln3qip.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/129684/original/image-20160707-30685-1ln3qip.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=399&fit=crop&dpr=1 600w, https://images.theconversation.com/files/129684/original/image-20160707-30685-1ln3qip.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=399&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/129684/original/image-20160707-30685-1ln3qip.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=399&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/129684/original/image-20160707-30685-1ln3qip.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=501&fit=crop&dpr=1 754w, https://images.theconversation.com/files/129684/original/image-20160707-30685-1ln3qip.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=501&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/129684/original/image-20160707-30685-1ln3qip.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=501&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">A question of timing.</span>
<span class="attribution"><a class="source" href="https://www.flickr.com/photos/hyku/3632644702/in/photolist-6x1fHd-4c5Wcy-6NcytT-nQhoxb-7NVqen-hcu5v-7tHPnq-aoGKZj-JnUSkL-eJ8Y5c-dGaWcW-enVRfk-5Wg1ZW-6zVvbt-df5oWz-6kScb9-pTq9J7-4GwdmZ-7sNZob-a23E8y-8Tv4Nj-GB9Ze5-u5MgD-6qmvxQ-6wW5Lc-7UbYc7-89gSq-5gpork-51NmPZ-bvp63w-6Fmkka-521cip-4sFE4v-8fvPqs-y7dxCu-ydcr5P-qCnVkS-dD5P2R-cXe3v9-egmRk6-reT6Yr-4YuiuM-q5aDH2-4f3RNr-6WSFR4-pMtmJX-nvbKHq-pdGqQA-aEzGnw-huX3Lt">Josh Hallett/Flickr</a>, <a class="license" href="http://creativecommons.org/licenses/by-sa/4.0/">CC BY-SA</a></span>
</figcaption>
</figure>
<p>This is a key reason why, in a recession, corporation tax revenues are usually the first to be negatively affected and the last to recover. When the economy does improve, companies could still offset any losses incurred during a recession while the economy recovers. Reducing the rate of tax could jeopardise any immediate, much-needed revenue for the government.</p>
<p>As well as the economic argument for reducing corporation tax, the government will have to tackle the political argument. The example given earlier highlighted the three groups affected by corporation tax, but most people still look on corporation tax as something paid by wealthy companies, rather than passed on to employees, consumers and pension fund holders.</p>
<p>At the same time as proposing this tax cut, Osborne also warned of further austerity measures – and it would be easy for political opponents to draw parallels between the two issues to highlight wealth inequality. It risks being a debate about “haves” and the “have nots”, so great care will need to be taken over how proposed cuts are framed to the public.</p><img src="https://counter.theconversation.com/content/62011/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Gavin Midgley does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Rates of corporation tax have a very human impact.Gavin Midgley, Teaching Fellow in Accounting, University of SouthamptonLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/595762016-06-23T10:04:36Z2016-06-23T10:04:36ZIs Panama on the verge of a scientific brain drain?<figure><img src="https://images.theconversation.com/files/126169/original/image-20160610-17209-1cyn17x.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Panama City, Panama. The gleaming metropolis reflects a rapid economic growth with a marginal national investment in research and development.</span> <span class="attribution"><span class="source">Carlos A. Donado Morcillo</span>, <span class="license">Author provided</span></span></figcaption></figure><p>Government support for research into new scientific learning and new technologies is crucial – and difficult to get. What little money is available is hotly contested among researchers. They fight to justify investing taxpayer dollars in projects that at times appear risky, but offer significant returns if they are successful – solving global problems, advancing human knowledge and improving economic development.</p>
<p>In developed nations, national research and development expenditure is at most <a href="http://data.worldbank.org/indicator/GB.XPD.RSDV.GD.ZS">four percent of gross domestic product (GDP)</a>, including funding for industrial, military and commercial work. Israel, South Korea, Japan, Sweden, Finland, Austria and the United States <a href="http://www.oecd.org/innovation/inno/researchanddevelopmentstatisticsrds.htm">lead the pack</a>. </p>
<p>Even so, scientists’ struggle for funding is commonplace. In France, <a href="http://www.sciencemag.org/news/2016/05/top-french-scientists-slam-surprise-budget-cut">massive research budget cuts</a> have the scientific community <a href="https://theconversation.com/la-recherche-francaise-est-elle-en-crise-61233">raising its voice in disapproval</a>. Research results and funding are two sides of the same coin: To get <a href="http://www.chiefscientist.gov.au/2015/03/science-a-major-contributor-to-the-economy/">political backing for funding</a>, researchers need <a href="http://dx.doi.org/10.1038/533S20a">patents and publications</a>.</p>
<p>In developing nations, scientists have an even more difficult task. Scientists working in countries without <a href="http://www.scidev.net/global/technology/news/developing-nations-urged-spend-on-science-UN.html">advanced manufacturing infrastructure</a> and <a href="https://www.cairn.info/revue-journal-of-innovation-economics-2013-2-page-13.htm">strong military programs</a> have fewer opportunities to offer local benefits. And their cultures of science, technology and innovation are often <a href="http://www.uis.unesco.org/Library/Documents/tech%205-eng.pdf">not as developed</a>. That leaves just one major incentive for government to invest in science and technology: improving scores in <a href="http://rieoei.org/rie30a03.htm">international competitiveness comparisons</a>, like those <a href="https://www.oecd.org/development/WP319%20AE.pdf">published by the Organisation for Economic Co-operation and Development (OECD)</a>.</p>
<p>In Panama, where we work, there is a <a href="http://www.forbes.com/sites/steveforbes/2016/05/10/the-real-story-about-panama/">thriving service economy</a> and <a href="http://www.tradingeconomics.com/panama/gdp-growth-annual">sustained GDP growth</a>. But since 2001, government expenditure for science has been a <a href="http://www.tradingeconomics.com/panama/research-and-development-expenditure-percent-of-gdp-wb-data.html">decreasing share of GDP</a>. This research funding crisis may have dire consequences for <a href="http://dx.doi.org/10.1038/469462a">Panama’s lofty ambitions</a> to develop a sustainable scientific ecosystem.</p>
<h2>The Panamanian reality</h2>
<p>National investment in research has remained below 0.4 percent <a href="http://www.senacyt.gob.pa/wp-content/uploads/2016/03/Resolucion_Plan-y-Politicas.pdf">since 1991</a>. In the late 1990s, scientific and political pressure pushed Panama to create SENACYT (the Spanish-language acronym for the National Secretariat for Science, Technology and Innovation). The agency’s search for funding began internationally, seeking loans from <a href="http://idbdocs.iadb.org/wsdocs/getdocument.aspx?docnum=460887">the Inter-American Development Bank</a> for money to fund research grants, scholarships and other science programs. The goal was to strengthen the local scientific system and to lure Panamanians with science experience back from abroad to build their careers at home. </p>
<p>In the mid-2000s, the country’s investment expanded to include an ambitious scholarship program helping Panamanians pursue graduate studies at <a href="http://www.senacyt.gob.pa/transparencia/descargas/103/2012_inf.pdf">top universities abroad</a>. Most of them went to study in the U.S. and Spain, in areas related to biology, engineering and information technology.</p>
<p>Since 2010, more than 200 newly minted Ph.D. graduates have returned to find little improvement to the country’s extremely limited infrastructure and funding. Rather than boosting a growing academic community, this new generation of scholars has increased competition for the scarce funding that is available to keep Panamanian science afloat.</p>
<p>SENACYT had projected an increase of government funding <a href="http://www.nature.com/news/2011/110126/full/469462a.html">to 0.6 percent of GDP would be needed by 2014 to support the returning talent</a>. But today, it’s only <a href="http://www.senacyt.gob.pa/wp-content/uploads/2016/03/Resolucion_Plan-y-Politicas.pdf">0.2 percent</a> of GDP. In fact, the share of GDP dedicated to SENACYT science funding has <a href="http://www.prensa.com/sociedad/ciencia-dinero-limitado_0_4478552228.html">shrunk since 2014</a>. And in 2017, SENACYT’s budget will be no higher than it is <a href="http://www.prensa.com/sociedad/ciencia-dinero-limitado_0_4478552228.html">this year</a> – about US$33 million.</p>
<p>Julio Escobar, head of SENACYT from 2004 to 2009, told us this effort has been equivalent to “moving the machinery, materials and building a bridge, but once built, leaving it without access to any main roads, thus not solving any real traffic problems.”</p>
<h2>Across Central America</h2>
<p>The story is quite different in Costa Rica, a country with slightly larger population and GDP than Panama. Investment in science is around 0.5 percent of the GDP – still far lower than in developed nations, but much closer than Panama to the OECD Latin American average of 0.7 percent. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/127776/original/image-20160622-7181-1nrpife.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/127776/original/image-20160622-7181-1nrpife.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/127776/original/image-20160622-7181-1nrpife.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/127776/original/image-20160622-7181-1nrpife.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/127776/original/image-20160622-7181-1nrpife.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/127776/original/image-20160622-7181-1nrpife.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/127776/original/image-20160622-7181-1nrpife.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/127776/original/image-20160622-7181-1nrpife.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Pacific entrance of The Panama Canal. The predominant service based economy, fueled by the Panama Canal and the porting industry, seeks immediate profit rather than the long-term returns offered by research programs.</span>
<span class="attribution"><span class="source">Carlos A. Donado Morcillo</span></span>
</figcaption>
</figure>
<p>Like Panama, Costa Rica does not have a defense program. But Costa Rica’s active manufacturing industry is a key driver of the country’s science spending. In contrast,
the <a href="http://www.senacyt.gob.pa/transparencia/descargas/93/Resolucion_Plan-y-Politica.pdf">Panamanian National Plan for Science, Technology and Innovation for 2015-2019</a> forecasts virtually no private-sector research investment – at most 0.3 percent of the total amount spent. Panamanian government efforts to encourage private investment have not succeeded, because of the predominantly <a href="http://www.senacyt.gob.pa/transparencia/descargas/93/Resolucion_Plan-y-Politica.pdf">low-tech, service business culture</a>, which seeks immediate profit rather than the long-term returns offered by research programs.</p>
<p>Other Central American governments are even farther behind in backing science. For instance, research and development investment in Guatemala, Honduras, El Salvador and Nicaragua is still <a href="http://data.worldbank.org/indicator/GB.XPD.RSDV.GD.ZS">below 0.05 percent</a> of their respective GDPs. However, support from international agencies in <a href="https://www.giz.de/en/worldwide/north_and_central_america.html">Germany</a>, <a href="http://www.jica.go.jp/project/english/area/america.html">Japan</a> and the <a href="http://eeas.europa.eu/ca/index_en.htm">European Union</a> has helped provide funding. The EU also <a href="http://eranet-lac.eu/index.php">offers specific grants</a> <a href="http://eulachealth.eu/description/">to Latin America</a>, and a <a href="http://www.enlace-project.eu">Central America-specific program</a> as well.</p>
<h2>Looking to the future</h2>
<p>Panamanian leaders have struggled to understand the importance of science and technology in a country where economic growth has been steady with only minute investments in research. Today, however, the potential benefits of the investment already made in developing scientific talent are at risk. With scarce resources, scientists are forced to seek opportunities abroad – which could escalate into a national brain drain problem.</p>
<p>Weak science investment forces returning scholars to become entrepreneurs and politicians, which not all researchers enjoy. In addition to doing scientific work, they must find ways to promote research in a country that has no definite political commitment to its long-term scientific development plan.</p>
<p>A solution to this crisis will not be found in science. Building a truly viable science and technology sector in Panama – and across Central America – will require continuous political lobbying, cohesive planning and research spending increases proportional to economic growth. </p>
<p>Beyond academic institutions, the promotion of a culture that embraces research and science will have to permeate industry, government, and the general public. The new generation of scientists is up for the task, but will they be heard?</p><img src="https://counter.theconversation.com/content/59576/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Javier Sanchez-Galan received funding from SENACYT for pursuing his masters and doctoral studies.</span></em></p><p class="fine-print"><em><span>Carlos A. Donado Morcillo does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>In the midst of a rapidly growing economy, research budget shortcomings threaten a young scientific community that struggles to stay afloat.Javier E. Sanchez-Galan, Associate research scientist, Universidad Tecnológica de PanamáCarlos A. Donado Morcillo, Adjunct Researcher, Universidad Católica Santa María La AntiguaLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/577212016-04-20T20:13:11Z2016-04-20T20:13:11ZLimits to growth: policies to steer the economy away from disaster<figure><img src="https://images.theconversation.com/files/119406/original/image-20160420-25592-rinu4n.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">The earth is a finite place. </span> <span class="attribution"><span class="source">Earth image from www.shutterstock.com</span></span></figcaption></figure><p>If the rich nations in the world keep growing their economies by 2% each year and by 2050 the poorest nations catch up, the global economy of more than 9 billion people will be around <a href="http://www.amazon.com/Prosperity-without-Growth-Economics-Finite/dp/1849713235">15 times larger</a> than it is now, in terms of gross domestic product (GDP). If the global economy then grows by 3% to the end of the century, it will be 60 times larger than now.</p>
<p>The existing economy is already <a href="http://science.sciencemag.org/content/347/6223/1259855">environmentally unsustainable</a>. It is utterly implausible to think we can “decouple” economic growth from environmental impact so significantly, especially since recent decades of extraordinary technological advancement have only increased our impacts on the planet, <a href="http://www.pnas.org/content/112/20/6271.abstract">not reduced them</a>. </p>
<p>Moreover, if you asked politicians whether they’d rather have 4% growth than 3%, they’d all say yes. This makes the growth trajectory outlined above all the more absurd.</p>
<p>Others have shown why limitless growth is a recipe for <a href="http://sustainable.unimelb.edu.au/sites/default/files/docs/MSSI-ResearchPaper-4_Turner_2014.pdf">disaster</a>. I’ve argued that living in a <a href="https://theconversation.com/life-in-a-degrowth-economy-and-why-you-might-actually-enjoy-it-32224">degrowth economy</a> would actually increase well-being, both socially and environmentally. But what would it take to get there? </p>
<p>In a <a href="http://d2hqr0jocqnenz.cloudfront.net/cdn/farfuture/RFOgKDaIzpgM9yjt1sW6ZSXfvlC5ZrJve7xLCgiDqh4/mtime:1461028632/sites/default/files/docs/MSSI-IssuesPaper-6_Alexander_2016.pdf">new paper</a> published by the Melbourne Sustainable Society Institute, I look at government policies that could facilitate a planned transition beyond growth – and I reflect on the huge obstacles lying in the way. </p>
<h2>Measuring progress</h2>
<p>First, we need to know what we’re aiming for. </p>
<p>It is now widely recognised that GDP – the monetary value of all goods and services produced in an economy – is a <a href="http://thenewpress.com/books/mismeasuring-our-lives">deeply flawed</a> measure of progress. </p>
<p>GDP can be growing while our environment is being degraded, inequality is <a href="https://en.wikipedia.org/wiki/Capital_in_the_Twenty-First_Century">worsening</a>, and social well-being is <a href="http://www.amazon.com/The-Spirit-Level-Equality-Societies/dp/1608193411">stagnant or falling</a>. Better indicators of progress include the <a href="http://rprogress.org/sustainability_indicators/genuine_progress_indicator.htm">Genuine Progress Indicator</a> (GPI), which accounts for a wide range of social, economic and environmental factors. </p>
<h2>Cap resources and energy</h2>
<p>Environmental impact is driven by demand for resources and energy. It is now clear that the planet cannot possibly support current or bigger populations if developing nations used the same amount of resources and energy as developed nations. </p>
<p>Demand can be reduced through efficiency gains (doing more with less), but these gains tend to be reinvested in <a href="http://www.pnas.org/content/112/20/6271.abstract">more growth and consumption</a>, rather than reducing impacts. </p>
<p>A post-growth economy would therefore need diminishing “resource caps” to achieve sustainability. These would aim to limit a nation’s consumption to a “fair share” of available resources. This in turn would stimulate efficiency, technological innovation and recycling, thereby minimising waste.</p>
<p>This means that a post-growth economy will need to produce and consume in far less resource-intensive ways, which will almost certainly mean reduced GDP. There will of course be scope to progress in <a href="http://simplicityinstitute.org/wp-content/uploads/2015/04/TheCaseforSimplicitySimplicityInstitute.pdf">other ways</a>, such as increased leisure time and community engagement. </p>
<h2>Work less, live more</h2>
<p>Growth in GDP is often defended on the grounds that it is required to keep unemployment at <a href="http://www.theaustralian.com.au/business/business-spectator/faster-growth-needed-for-jobs-rba/news-story/aaeda6b567f77ad705893fad83576e75">manageable levels</a>. So jobs will have to maintained in other ways.</p>
<p>Even though GDP has been growing quite consistently in recent decades, many Westerners, including <a href="http://www.abc.net.au/news/2014-11-19/researcher-warns-of-health-impacts-of-long-work-hours/5901092">Australians</a>, still seem to be locked into a <a href="http://www.amazon.com/Work-Leisure-Environment-Overwork-Consumption/dp/1847201032">culture of overwork</a>. </p>
<p>By <a href="http://www.neweconomics.org/publications/entry/time-on-our-side">reducing the average working week</a> to 28 hours, a post-growth economy would share the available work among the working population. This would minimise or eliminate unemployment even in a non-growing or contracting economy. </p>
<p>Lower income would mean we would have less stuff, reducing environmental impact, but we would receive more freedom in exchange. <a href="https://www.createspace.com/5461040">Planned degrowth</a> is therefore very different to unplanned recession.</p>
<h2>Redirect public spending</h2>
<p>Governments are the most significant player in any economy and have the most spending power. Taking limits to growth seriously will require a fundamental rethink of how public funds are invested and spent.</p>
<p>Among other things, this would include a swift <a href="https://theconversation.com/unburnable-carbon-why-we-need-to-leave-fossil-fuels-in-the-ground-40467">divestment</a> from the fossil fuel economy and reinvestment in renewable energy systems. But just as important is investing in efficiency and reducing energy demand through behaviour change. Obviously, it will be much easier to transition to 100% renewable energy if energy demand is a fraction of what it is today. </p>
<p>We could fund this transition by redirecting funds from military spending (climate change is, after all, a <a href="https://www.climatecouncil.org.au/climatesecurity">security threat</a>), cutting <a href="http://www.theguardian.com/environment/2015/may/18/fossil-fuel-companies-getting-10m-a-minute-in-subsidies-says-imf">fossil fuel subsidies</a> and putting an adequate price on carbon. </p>
<h2>Reform banking and finance</h2>
<p>Banking and finance systems essentially have a “<a href="http://www.paecon.net/PAEReview/issue57/Trainer57.pdf">growth imperative</a>” built into their structures. Money is loaned into existence by private banks as interest-bearing debt. Paying back the debt plus the interest requires an expansion of the monetary supply. </p>
<p>There is so much <a href="http://www.economist.com/content/global_debt_clock">public</a> and <a href="http://www.businessinsider.com.au/new-record-the-rise-and-rise-of-australian-household-debt-2015-2">private</a> debt today that the only way it could be paid back is via decades of continued growth. </p>
<p>So we need <a href="http://positivemoney.org/wp-content/uploads/2015/06/Our-Money-A4.pdf">deep reform</a> of banking and finance systems. We’d also need to <a href="https://theconversation.com/the-debt-jubilee-an-old-testament-solution-to-a-modern-financial-crisis-11816">cancel debt</a> in some circumstances, especially in developing nations that are being <a href="http://www.globalpolicyjournal.com/blog/12/12/2013/donors%E2%80%99-dilemma-aid-reverse-how-poor-countries-develop-rich-countries">suffocated by interest payments</a> to rich world lenders. </p>
<h2>The population question</h2>
<p>Then there’s population. Many people assume that population growth will slow when the <a href="http://www.scientificamerican.com/article/fast-growth-can-solve-climate-change/">developing world gets rich</a>, but to globalise affluence would be environmentally catastrophic. It is absolutely imperative therefore that nations around the world unite to confront the population challenge directly. </p>
<p>Population policies will inevitably be controversial but the world needs bold and equitable leadership on this issue, because current trends suggest we are heading for <a href="http://science.sciencemag.org/content/early/2014/09/17/science.1257469.abstract">11 billion</a> by the end of this century. </p>
<p>Anyone who casually dismisses the idea that there is a limit to how many people Earth can support should be given a <a href="http://simplicitycollective.com/earth-as-a-petri-dish-the-problem-of-growth">Petri dish</a> with a swab of bacteria. Watch as the colony grows until it consumes all of the available nutrients or is poisoned by its own waste.</p>
<p>The first thing needed is a global fund that focuses on providing the education, empowerment and contraception required to minimise the estimated <a href="http://www.who.int/whr/2005/chapter3/en/index3.html">87 million</a> unintended pregnancies worldwide every year. </p>
<h2>Eliminating poverty</h2>
<p>The conventional path to poverty alleviation is the strategy of GDP growth, on the assumption that “a rising tide will lift all boats”. But, as I’ve argued, a rising tide will sink all boats. </p>
<p>Poverty alleviation must be achieved more directly, via redistribution of wealth and power, both nationally and internationally. In other words (and to change the metaphor), a post-growth economy would eliminate poverty not by baking an ever-larger pie (which <a href="http://www.theguardian.com/global-development-professionals-network/2015/nov/01/global-poverty-is-worse-than-you-think-could-you-live-on-190-a-day">isn’t working</a>) but by sharing it differently. </p>
<p>The richest 62 people on the planet own more than the poorest <a href="http://www.theguardian.com/business/2016/jan/18/richest-62-billionaires-wealthy-half-world-population-combined">half of humanity</a>. Dwell on that for a moment, and then dare to tell me that redistribution is not an imperative of justice.</p>
<h2>So what’s stopping us?</h2>
<p>Despite these post-growth policy proposals seeming coherent, they face at least four huge obstacles – which may be insurmountable. </p>
<p>First, the paradigm of growth is deeply embedded in national governments, especially in the developed world. At the cultural level, the expectation of ever-increasing affluence is as strong as ever. I am not so deluded as to think otherwise.</p>
<p>Second, these policies would directly undermine the economic interests of the most powerful corporations and institutions in society, so fierce resistance should be expected.</p>
<p>Third, and perhaps most challenging, is that in a globalised world these policies would likely trigger either capital flight or economic collapse, or both. For example, how would the stock markets react to this policy agenda?</p>
<p>Finally, there is also a geopolitical risk in being first to adopt these policies. Reduced military spending, for instance, would reduce a nation’s relative power. </p>
<p>So if these “top-down” policies are unlikely to work, it would seem to follow that if a post-growth economy is to emerge, it may have to be driven into existence <a href="http://simplicityinstitute.org/wp-content/uploads/2011/04/TransitionMovement.pdf">from below</a>, with communities coming together to build the new economy at the grassroots level. </p>
<p>And if we face a future where the growth economy grows itself to death, which seems to be the most <a href="http://sustainable.unimelb.edu.au/sites/default/files/docs/MSSI-ResearchPaper-4_Turner_2014.pdf">likely scenario</a>, then building up local resilience and self-sufficiency now will prove to be time and energy well spent. </p>
<p>In the end, it is likely that only when a deep crisis arrives will an ethics of <a href="https://www.createspace.com/5625313">sufficiency</a> come to inform our economic thinking and practice more broadly.</p><img src="https://counter.theconversation.com/content/57721/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Samuel Alexander does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The global economy is already unsustainable – let alone if it gets bigger.Samuel Alexander, Research fellow, Melbourne Sustainable Society Institute, The University of MelbourneLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/551702016-03-01T05:36:58Z2016-03-01T05:36:58ZFactCheck: has Australian government spending as a share of GDP been at GFC levels since last election?<blockquote>
<p>Since the election, this government has had spending as a percentage of GDP at GFC levels. <strong>-– Shadow treasurer, Chris Bowen, <a href="https://cdn.theconversation.com/static_files/files/17/55170-2016-02-26-labor-media-release-media-release-labor-chris-bowen-2016-02-26.pdf?1518058726">media release</a>, February 17, 2016.</strong></p>
</blockquote>
<p>During an election year, the focus is once again on the federal <a href="http://www.budget.gov.au/2015-16/content/myefo/html/03_part_3.htm">budget deficit</a>. According to the most recent estimate in the government’s Mid-Year Economic and Fiscal Outlook (MYEFO), the <a href="http://www.budget.gov.au/2015-16/content/myefo/html/03_part_3.htm">deficit</a> is estimated to be around A$37.4 billion for 2015-16.</p>
<p>One of the main questions is whether the current and forecast deficits are due to not enough tax revenue or too much spending, or both.</p>
<p>Labor’s shadow treasurer, Chris Bowen, told journalists that the government has had spending as a percentage of Gross Domestic Product (GDP) at global financial crisis (GFC) levels since the last federal election, which was in 2013.</p>
<p>Is that right?</p>
<h2>Checking the source</h2>
<p>When asked for official data to support his assertion, Bowen’s spokesman referred The Conversation to the <a href="http://www.budget.gov.au/2015-16/content/myefo/html/16_appendix_d.htm">MYEFO 2015-16</a>, saying:</p>
<blockquote>
<p>Here’s the official data for the purpose of comparison.</p>
<p><a href="http://www.budget.gov.au/2015-16/content/myefo/html/16_appendix_d.htm">MYEFO 2015-16</a> (most recent data available)</p>
<p>Payments as a % of GDP</p>
<ul>
<li>2009-10: 26.0%</li>
<li>2014-15: 25.6%</li>
<li>2015-16: 25.9% (estimate)</li>
</ul>
</blockquote>
<p>Those numbers are found in Table D1 of the MYEFO, which show general government <em>cash payments</em> as a percentage of GDP. Here’s how those figures look in a chart.</p>
<iframe src="https://datawrapper.dwcdn.net/MOgvq/2/" frameborder="0" allowtransparency="true" allowfullscreen="allowfullscreen" webkitallowfullscreen="webkitallowfullscreen" mozallowfullscreen="mozallowfullscreen" oallowfullscreen="oallowfullscreen" msallowfullscreen="msallowfullscreen" width="100%" height="400"></iframe>
<p>Bowen’s spokesman also referred The Conversation to a September 2015 <a href="http://www.abc.net.au/7.30/content/2015/s4318562.htm">interview</a> in which treasurer Scott Morrison said that:</p>
<blockquote>
<p>… we’ve got 26% or thereabouts of GDP of government expenditure. Now that is at the level of what we were at in the GFC. </p>
</blockquote>
<h2>Cash payments vs expenses</h2>
<p>If you’re using the cash payments data in Table D1 of MYEFO, then Bowen’s statement is in the right ballpark – as long as you’re comparing with 2009-10 spending to represent “GFC levels”.</p>
<p>Bear in mind, though, that cash payments for the current financial year are an estimate only. Pedants will also note cash payments did, in fact, drop slightly as a percentage of GDP in 2014-15.</p>
<p>And as <a href="https://theconversation.com/factcheck-is-australian-government-spending-as-a-share-of-the-economy-falling-53962">this previous FactCheck on government spending</a> explains, it may be better to measure expenditure by checking the expenses data in Table D6 of MYEFO. That data shows expenditure when the expense occurs rather than when the cash payment is made (which is what Table D1 shows).</p>
<p>The expenses data detailed in Table D6 of MYEFO show expenses as a percentage of GDP as follows:</p>
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<p>Still, Bowen’s statement is broadly correct – as long as you remember that the 2015-16 figures are an estimate only and you take 2009-10 as your reference point for “GFC levels”.</p>
<h2>What do we mean by “GFC levels”?</h2>
<p>The <a href="http://www.sbs.com.au/news/article/2009/09/15/gfc-timeline">global financial crisis began in late 2007</a> and continued throughout 2008. A literal interpretation of Bowen’s statement could compare current government spending with spending levels in 2007-08, when the GFC was beginning and when expenses as a percentage of GDP was at 23.8%.</p>
<p>The effects of the GFC really began to take hold in late 2008-09.</p>
<p>Former prime minister Kevin Rudd launched the A$42 billion <a href="http://ministers.treasury.gov.au/DisplayDocs.aspx?doc=pressreleases/2009/009.htm&pageID=003&min=wms&Year=&DocType=0">Nation Building and Jobs Plan in February 2009</a>, and by 2008-09 expenses as a percentage of GDP was at 25.8%.</p>
<p>In other words, both Bowen and Morrison have compared current expenditure with a period of time in which the federal government was spending heavily in an effort to stimulate the economy in a time of global crisis.</p>
<h2>The economic context</h2>
<p>While comparing spending between years is important, it can be a misleading snapshot when viewed without further context.</p>
<p>It’s worth noting that current government spending is, in part, due to commitments and policies of previous governments. The Coalition government is, to some degree, locked in to policies that began under their predecessors, such as the Gonski education funding agreements, the National Disability Insurance Scheme and the National Broadband Network.</p>
<p>The 2015-16 Budget also includes <a href="http://www.budget.gov.au/2015-16/content/myefo/html/16_appendix_d.htm">interest repayments</a> of A$11.166 billion on government debt that resulted from the huge increase in government borrowing to fund the previous government’s stimulus spending.</p>
<p>More broadly, the Australian economy has been <a href="https://theconversation.com/australias-economy-is-slowing-what-you-need-to-know-47036">growing since the 2013 federal election, but at a slower rate</a> than its long-term average rate of economic growth. </p>
<p>This means that the unemployment level has been higher recently than it was during the strong growth years. That reduces tax revenue for the government and means the government has to spend more on unemployment benefits and concessions.</p>
<p>But the economy is growing – the most recent annual figure from the Australian Bureau of Statistics puts <a href="http://www.abs.gov.au/ausstats/abs@.nsf/mf/5206.0">economic growth</a> at 2.3%. This compares to 0.3% during the <a>financial year 2008-09</a> – the worst growth year following the global financial crisis (GFC).</p>
<h2>Verdict</h2>
<p>Chris Bowen’s statement that government spending as a percentage of GDP since the last federal election is at GFC levels is correct – if you define “GFC levels” as 2009-10. This is the year that GFC spending programs were at their largest.</p>
<p>However, it’s important to note that government spending in part reflects the policy commitments and borrowings of previous governments. <strong>– Anne Garnett</strong></p>
<hr>
<h2>Review</h2>
<p>The author’s arguments are correct. The statements around the economic context are very relevant here. If we adjust for the state of the business cycle (which is tricky to do) and for interest, then it could be argued that spending is down. But with <a href="https://theconversation.com/budget-explainer-debts-and-deficits-is-australia-really-the-worst-40086">debt up</a>, interest payments will be up for a while. So if we really want to tackle deficit and debts, then we need to get other spending under control or raise revenue. <strong>– Mark Crosby</strong></p>
<hr>
<p><div class="callout"> Have you ever seen a “fact” worth checking? The Conversation’s FactCheck asks academic experts to test claims and see how true they are. We then ask a second academic to review an anonymous copy of the article. You can request a check at checkit@theconversation.edu.au. Please include the statement you would like us to check, the date it was made, and a link if possible.</div></p><img src="https://counter.theconversation.com/content/55170/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Anne Garnett has received funding from the ARC and NCVER in the past.
</span></em></p><p class="fine-print"><em><span>Mark Crosby does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Shadow treasurer Chris Bowen told journalists that since the last federal election, the government has had spending as a percentage of GDP at GFC levels. Is that right?Anne Garnett, Senior Lecturer in Economics, Murdoch UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/536542016-01-28T04:21:12Z2016-01-28T04:21:12ZQuality, free university education is necessary – and possible<figure><img src="https://images.theconversation.com/files/109204/original/image-20160126-19645-bf35e1.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Students demand free access for all at the University of Cape Town in South Africa.</span> <span class="attribution"><span class="source">Mark Wessels/Reuters</span></span></figcaption></figure><p>There have been some disquieting contributions to the debate about South Africans’ right to access quality public university education. Some suggest that it is <a href="http://www.news24.com/SouthAfrica/News/free-higher-education-for-all-impossible-nzimande-20151203">unsustainable</a>. Such people insist that fee payments are unavoidable. Making free, quality university education available to all would impose a <a href="https://theconversation.com/free-education-is-a-worthy-goal-but-south-africa-isnt-ready-for-it-yet-49414">greater burden</a> on the economy, and will only benefit students who can already afford to pay, we are told.</p>
<p>As academics working at South African universities and a student involved with the <a href="https://theconversation.com/south-african-student-protests-are-about-much-more-than-just-feesmustfall-49776">#FeesMustFall</a> movement, we wish to take issue with such perspectives by locating the discussion in its proper context. </p>
<h2>“Limited resources” are no excuse</h2>
<p>Any discussion about the provision of health, education and similar public and social goods is unavoidably about a view of society and transformation. The same is true of any discussion about the funding of education as a public good. Many corporatist discourses on the subject talk about the “costs and benefits”, “rates of return” and the “economics” of education. These are predicated on a particular reading of the value and purposes of education. </p>
<p>Such perspectives attempt to limit the state’s capacity in favour of market mechanisms, among them “public-private partnerships”. This approach is merely a way of inserting the agendas of private appropriation and accumulation into the domain of public good. It has allowed the evolution of what has become a global “education industry”. It has led to the rise of corporate empires intent on commodifying education.</p>
<p>One common argument against universal free university education is that there are only “limited resources” available for public systems. And yet there are always resources for other choices made by government. These include the purchase of weapons, vanity projects such as World Cup soccer stadia and costly investments in non-renewable energy generation. It’s apparent that the idea of “limited resources” is based on a particular line of reasoning derived from conservative economic thinking. The present funding approaches are selective and limited. They do not address the country’s structural inequalities. Instead they increase social divisions and continue the exploitative practices of apartheid capitalism. </p>
<p>What, then, is a useful approach to the question of funding the full cost of public higher education? </p>
<p>It depends, in our view, on a number of prior values and principles and the assumptions underpinning these. Very importantly, society as a whole is implicated in a discussion about the choices made about the provision of public services. These choices should not be preempted by discussions about the quantum of fiscal and other resources. </p>
<h2>The alternatives</h2>
<p>What are we are proposing as alternatives to the status quo?</p>
<p>Firstly, a conceptual framework must be established around which practical possibilities can be built. Public will and democratic accountability needs to be mobilised. All people must be given the space to think more deeply about universal, free and quality public education as a constitutive condition for democracy and the public good. It is already possible to begin this process at universities and elsewhere through events devoted to robust and critical dialogue.</p>
<p>Universities and similar public institutions have a responsibility and a significant role to play in guiding discussion about the criteria for framing public choice. They can help people to understand how public funds are spent. Importantly, they can provide spaces where the views of those marginalised and excluded can be recognised and heard. Institutional decision making must be democratised beyond its limited managerial forms. </p>
<p>The fiscal debate must be opened up so that everyone can see what sources of funding can be immediately made available. These could examine, for instance, past and present models of universal free education globally. They might also explore the possibility of expanding the State’s revenue base through wealth and other redistributing taxes.</p>
<p>There will also need to be discussions about what sort of detailed research is needed to pave the way for universal, free and quality public education. These and other strategies informed by alternative social, political, economic and cultural choices could lead to a humane society where the potential of all its citizens will be realised.</p>
<h2>A public good</h2>
<p>Education as a public good should be regarded as essential to the development of citizens in a democratic society. Public resources must be used in ways that can support and engender ideas and practices which enhance cooperation, collegiality, social sharing, social responsibility, caring and social equalisation. </p>
<p>This sort of education can help to reconceptualise the goals of a socially just society. It can reorganise social relations more fundamentally than the current system does. </p>
<p>The goal of public quality education is to bring all of society, not just the “historically disadvantaged”, into the process of social transformation. It involves both those who are wealthy and those in poverty. This allows a process of genuine social reorganisation to start, and enables South Africa to address the structural characteristics of <a href="https://theconversation.com/factcheck-is-south-africa-the-most-unequal-society-in-the-world-48334">social inequality</a>.</p>
<h2>Now is the time</h2>
<p>We realise the enormity of this undertaking. But we also recognise the great potential of the social agency demonstrated by history - such as the end of statutory apartheid. </p>
<p>The time is ripe. Since early 2015 South Africa’s university students and workers have <a href="https://theconversation.com/after-protests-it-cant-be-business-as-usual-at-south-africas-universities-50548">set in motion</a> the processes needed for deep and enduring social change. They have simultaneously defined the critical role that learning and education play in any such change.</p><img src="https://counter.theconversation.com/content/53654/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The authors do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Many people dismiss the idea of free, quality public university education out of hand. But there are many ways to make it happen - and it all ties back to the idea of education as a public good.Salim Vally, Director of the Centre for Education Rights and Transformation and Associate Professor of Education, University of JohannesburgEnver Motala, Researcher Social Sciences, University of Fort HareLeigh-Ann Naidoo, PHD Scholar, Wits School of Education, University of the WitwatersrandMondli Hlatshwayo, Senior Researcher in Labour Studies and Education, University of JohannesburgRasigan Maharajh, Chief Director: Tshwane University of Technology - Institute for Economic Research on Innovation; Node Head: DST/NRF Coe SciSTIP; and Professor Extraordinary: Stellenbosch University - Centre for Research on Evaluation, Science and Technology , Tshwane University of TechnologyLicensed as Creative Commons – attribution, no derivatives.