ConservativeHome's 100policies

Spencer Tasker: Hypothecation of revenues derived from specifically environmental taxes, charges and levies

As a first year student of Economics and Political Science Spencer was told by his tutor on more than one occasion that he ought to be taken out and shot because of his Tory opinions. More than two decades later he remains agreeably unleaded, despite his having subsequently studied at the Russian Academy of Sciences in Moscow. He is married with two teenage children, two dogs and opinions on almost everything.

> Explanation

All revenues from specifically environmental taxes, charges, surcharges and levies over and above the cost of collection should be hypothecated to environmental programs in the budget cycle following that in which they were collected. Such monies should be thus added to the amount which would normally be allocated to environmental programs out of consolidated revenue.

Directly Offsetting Cost Externalities – Environmentally destructive activities involve a transfer of cost, from the destructive party to innocent third parties. It is these latter parties who bear the cost in terms of degradation of environment.  By themselves, special taxes should be intended to result in the complete internalisation of these costs, thus, removing any economic advantage which attends the activity. Nevertheless, "making the polluter pay" does nothing to directly address the damage which the polluter has done or may continue to do, nor does it reduce the burden which falls on those who must live with the effects of environmental degradation. For example, spending monies collected from those who have damaged the rivers on some laudable project such as improving the levels of adult literacy leaves those who have to live with the damage no better off. There is a basic equity issue here. This policy initiative maintains that if we are to have a viable environment we must ensure that not only does the polluter pay, they must effectively make restitution for the damage they have done. In practice, environmental taxes must be used to fix the damage caused to the environment by the activities which occasioned collection of the taxes themselves.

Tax as Punishment – Environmental taxes are a form of punishment. They are intended to raise the cost of particular behaviours and, thereby, discourage them. As such they differ fundamentally from most other taxes in terms of their intention and represent a fiscal stick with which the offender may be beaten. Be this as it may the fact that this punishment involved a transfer of monies into the exchequer means that the state benefits from its meting out of punishment. As such it has a necessary interest in the crime. This being the case it seems worse than ingenuous for a Government to benefit fiscally from those activities which is ostensibly attempting to discourage.

The appearance of evil – Maybe I am cynical, but it would be a terrible thing if governments simply looked on environmental taxes as nothing more than a new way of raising revenue. To the extent that this is seen to be the case the greater will be the erosion of credibility which such taxes (and the governments which introduce them) will suffer. The hypothecation of such revenues sends an unequivocal message which circumvents this outcome.

Bring forth the carrot – If we are genuinely interested in doing our part for the planet then we should be glad of additional financial resources. Just as negative behaviours should cost the doer more, so positive ones should cost people less. Hypothecation provides a ready means of financially reinforcing positive behaviours ( e.g. subsidising the cost of insulation).

> Political risks and opportunities

There are very few political risks associated with this policy initiative.

Chi Chi and Friends - Potentially we could be seen as pandering to the greens.  But we already have expressed a commitment to the environment, so there is little for anyone to say in those grounds.

Less money for other programs - Consolidated revenue is diminished, and the fiscal flexibility of the Government is reduced by hypothecation of revenues – But most of these taxes are new, so the state is less habituated to these monies than would otherwise be the case.

Monies would be wasted – By only making revenues available in  the following year's budget cycle we better planning could take place than could otherwise be the case.

> Costs

Undetermined.

 

Richard Jenner: 100% reserve banking

Richard is a Postgrad student who has no economics qualification beyond A Level but is still going to give this a shot.

> Policy summary

To institute a system of 100% reserve banking and remove the Government from manipulation of the money supply, including the abolition of the Bank of England.

> Policy explanation

The free-market Austrian school of economics (Hayek was a member) have vociferously criticised the process by which banks create money by lending more than they have in their reserves. According to Austrian business cycle theory, the extra money artificially lowers interest rates and encourages investment in capital goods despite the lack of real savings. (This is because lower interest rates suggests less demand for consumer goods according to the Austrian theory of time preference.) As there is no genuine demand for the capital goods the investments will have to be liquidated - resulting in a bust. In short, bank-created money is the main culprit behind the business cycle. The Bank of England, by acting as lender of last resort, encourages this system by providing banks with backup funding if they are unable to pay their debts. Bank-created money also has the negative effect of benefiting those who first borrow the money at the expense of those who receive it in later transactions. Those who borrow first are able to take advantage of the fact that prices haven't yet risen. Suffice to say prices have risen (due to the extra credit) by the time the later recipients come to spend it.

The Austrian answer to this problem is to introduce a system of 100% reserve banking whereby banks are unable to lend more than they have in their reserves, thus ending the bank-created expansion of the money supply. This usually goes together with the idea of a gold standard although for practical reasons I wouldn't advocate that policy at this stage.

Milton Friedman and the Chicago School, although disagreeing with Austrian business cycle theory, have also supported the idea of a 100% reserve system. The difference is that they believe the Government should increase the money supply gradually by about 2% per year. The Austrians are opposed to this idea because they believe it has the same negative effects as bank-created inflation. Conservative policy, in my opinion, should be to implement a 100% reserve system, shut down the Bank of England and remove the Government from control of the money supply except for the minting of currency to replace lost or ruined coins and notes. All money created by loans that weren't backed up by real savings would have to be liquidated. It would be possible to back up all currently existing loan money with paper notes but as soon as the recession brought about by the business cycle kicked in, loans would have to be liquidated to prevent inflation. The advantage of immediately shrinking the money supply is it gets it over and done with in one go.

For a more in-depth analysis of the problem I recommend the following weblinks:

• Austrian Theory of the Business Cycle - a better summary than mine
• And here - another better summary than mine that is somewhat more in-depth
• And here - very in-depth explanation of the Austrian theory of the business cycle and proposed solutions
• The problem with Central Banks
• Application of the Austrian theory to the Great Depression
• Application of the Austrian theory to the dot.com boom

> Political risks and opportunities

It's a very radical idea. Very few free-market economists (if any) outside of the Austrian school (which is itself very small) accept the Austrian analysis of the business cycle and the idea of a 100% reserve system probably won't be espoused by many "mainstream" economists either, even if Friedman and co are sympathetic to it. One wouldn't expect to find the Bank of England happy about being shut down either.

Implementing the idea would also be highly painful at first - it would involve an immediate shrinkage of the money supply and a recession. As there would no longer be a lender of last resort banks and their customers would no longer be protected from bad investment decisions.

The primary political opportunity would be the promise of an end to the business cycle and inflation.

> Questions for ConservativeHome readers

• How do we measure the amount of money going missing and in need of replacement? Note that this proposal does not include the Chicago scheme of gradually increasing the money supply.
• What would be the technicalities of initially shrinking the money supply i.e. which loans and investments would have to be liquidated? Would it be a proportion of all loans for example?

> Costs

As mentioned above, an initial recession.

   

Rachel Joyce: Localise the NHS and integrate health and social care

Rachel Joyce is a doctor and a director in a Primary Care Trust.

> Policy summary

There is significant duplication of resources between health and social care, and at the same time there are major gaps in care, particularly for the elderly population. Localising the NHS would improve accountability and enable integration with social care services, which would not only dramatically improve efficiency, but would also improve outcomes and the care experience for patients.

> Policy Explanation

The recent significant rise in expenditure on the NHS has not resulted in significant improvements in health outcomes as compared to other OECD countries. Moreover, there has been a measurable reduction in NHS productivity. The NHS is a centrally driven monolithic organisation with an artificial divide between it and local government-run social care services.
There is significant duplication of resources by the NHS and social care services, at the same time as major gaps in meeting local needs. For instance, an elderly person living at home may be visited by a district nurse as well as a care worker on the same day. Either one may be able to meet the patient’s whole needs on that day, freeing up the other member of staff to meet other people’s needs, but artificial divisions in regard to what is a “health need” and a what is a “social need” lead to the inefficient use of both.

Furthermore, poor communication between the NHS and social care, as well as perverse incentives can see vulnerable patients “slipping through the net”, often leading to poorer outcomes for patients at higher long term cost to the tax payer. An example is the hospital admission that could have been avoided or shortened if the GP or hospital could have easily accessed social care that met the patient’s needs in a timely fashion. Hospital admission is usually more expensive than care at home, is less popular with patients, and can lead to undesirable consequences such as hospital acquired infection, or confusion in the elderly. The problem is that although better social care for this type of patient is an efficient and effective use of resources, it benefits the NHS, but is funded by social services (creating perverse incentives). There are also many other examples of perverse incentives that work the other way (such as better and more rapid stroke care and prevention paid for by the NHS can lead to a significant reduction in the need for social care services for these patients). 

In an attempt to overcome these problems, significant management resource is expended by both NHS and social services managers in “partnership working”, attempting to find ways around these gaps and duplications. However the perverse incentives are difficult to deal with in organisations facing budget deficits and no amount of management resource can deal with the root cause of this problem, and this management resource could be better employed elsewhere in the system.

By localising the NHS, there would be improved local planning that is based on LOCAL need, greatly improved efficiency, better health and social care outcomes, and increased patient satisfaction. Moreover, the services would be more accountable to local people, which will result in better engagement and ownership of people in regard to their own health. Improved efficiency of services could make the Wanless Social Care recommendations (extending social care) an affordable option.

Other advantages to localising the NHS include closer links with education and housing (which are run by local government), leading to further improvements in outcomes and efficiency (housing solutions such as “extra-care housing” can reduce the need for health and social care as well as the need for admission to nursing homes, and education is a major wider determinant of health).

Options for the method of localisation would include either:

• The Local NHS run or commissioned by local government (as social care is currently) with some central running of highly specialised services. An advantage is that it would also facilitate good links with education and housing. Accountability would be to the local electorate.
• A choice of More than one health and social care maintenance organisation available at a local level, funded by local or central government on the basis of their patient demography. This would provide the patient with a choice of health and social care organisation, and introduce an element of competition. Accountability would be direct to the patient, who can move their funding to another organisation if not satisfied.

> Political Risks and Opportunities

Risk: The NHS is thought of as a national treasure, and changing the way it works may lead to some concerns. However, improved efficiency and outcomes as well as accountability should reap early benefits.

Opportunity 1: The Government has so far failed to act on the recommendations by the Wanless Social Care Review. Localising the NHS and integration with social care could make these recommendations an affordable option.

Opportunity 2: The different local options (local government run/ commissioned or choice of organisation) will improve accountability, and the latter would lead to better choice.

> Questions for ConservativeHome Readers

• Should the policy include adopting the Wanless Social Care recommendations?
• Should the system be run/ commissioned by local government, or should patients have a choice of organisation?

> Policy Costs

There would be some minimal administrative costs in the short term, but probably no more than is spent on the constant minor reorganisations the NHS is subject to.  In the medium and long term, there would be improved efficiency and therefore improved cost-effectiveness compared to the current arrangements.

Will East: Open the NHS up to new providers, competing on price

Will East graduated from St John’s College, Oxford in 2005, and is training to become a barrister. He runs a political blog, John Wilkes, which focuses on civil liberties issues.

> Policy summary

Open the NHS up to new providers, competing on price

This would involve:

• Allowing private and voluntary sector providers to petition the NHS to let them provide better services
• Giving a statutory duty to primary care trusts, who commission NHS services, to consider each petition
• Changing the payment by results system, so that clinical providers can compete on price as well as quality.

> Policy explanation

Huge amounts of money have been pumped into the NHS over the last years - but there hasn't been an equivalent improvement in the service that patients receive. The health service is the third biggest employer in the world - after the Chinese state army and the Indian railways. But still it's nowhere near the best health service in the world. If we avoid reforming the NHS, then it will face a crisis: an increasingly elderly population and the higher costs of drugs and technology mean that the health service budget will be stretched more than ever before.

At the moment, we're failing to make use of the expertise that's out there among private and voluntary sector organisations, who have experience of providing healthcare efficiently and to a high standard. And, worst of all, there's often little or no stimulus for the hospitals, treatment centres and primary care clinics that make up the NHS to get any better. The government has done something about this, by introducing new providers into the health service - such as the privately run treatment centres that provide routine operations like cataract ops. But, it's nowhere near enough. Given recent form, and with the huge spending splurges of recent years drying out, the NHS will be facing a real financial crisis by the next election - and a Conservative government would need to do something about it.

The government's current reforms are building inefficiency into the system. The system of "payment by results" (by which hospitals are paid) is essentially a fixed price system, which makes hospitals compete on patients, but not on price. This means that there is no incentive for inefficient ways of working to be eradicated, and for costs to be driven down.

I propose that:

• Private and voluntary sector providers should be allowed to petition to run NHS services which are currently inefficient or poor in quality.

These organisations would petition primary care trusts, saying that they could run a service better than the present provider. Well performing NHS organisations, such as foundation trusts, would also be allowed to petition. If successful, they would then be able to take over that service. This principle could be applied to all NHS services, from back office work, such as payroll, to operations and general practice.

• Giving a statutory duty to primary care trusts, who commission NHS services, to consider each petition

There would need to be a statutory duty for primary care trusts, as commissioners of 75% of NHS services, to consider each petition they receive, examine the provider's proposals to see if they would provide better value for money and quality, and consult patients for their views. The PCTs would be required, at the same time, to announce that an offer has been made to take over the service in question, allowing other providers to also petition and try and beat the original offer.

At the end of this, the primary care trust would be required to make an objective assessment of the merits of the offers, and whether they would provide a better service than the existing provider. If so, the provider with the best offer would take over the service. Staff under employment with the incumbent provider would be transferred to the new provider initially if it so wishes. The new provider would have complete managerial power to reorganise the way the service is provided.

After a service has been taken over by a new provider, there would then be a moratorium on subsequent petitions for a period of 5 years. This would give more of an incentive for organisations to petition in the first place (as they would be guaranteed an income stream for 5 years if they won) and prevent constant petitioning from occurring.

• Changing payment by results, so that clinical providers can compete on price as well as quality.

At the moment, organisations which supply clinical services to the NHS (be they from the private, voluntary or public sector) are paid a fixed price known as the NHS tariff. The price paid for each type of operation is decided under the system and paid whenever the hospital provides that operation to a patient. This builds inefficiency into the system (see above). It would also prevent the idea of new providers petitioning to run services more efficiently, as these providers would only be able to compete on the basis of better quality services, not price.

I therefore propose that the fixed price system be abolished, in favour of a "benchmark" price that represents the average price of a particular operation across the NHS. New providers could offer to take over services, at prices that are lower than the benchmark price. Gradually, as these providers took over services, the "benchmark" price would come down, forcing incumbent providers like NHS hospital trusts to become more efficient. This would not be to the detriment of quality services for patients - as commissioners, when receiving petitions, would have to consider the effect of a new provider taking over on quality of service, as well as price.

> Political risks and opportunities

Opportunities:

• This would be a really radical solution to reforming the NHS, increasing efficiency for taxpayers and quality for patients
• It would be a solution which Labour would not be willing to adopt - making it a distinctive Conservative policy
• It would help pave the way for future tax cuts and the reduction of the £90bn plus health service budget

Risks:

• It would face a hail of protest from Labour and the unions, with accusations of "privatisation" and of the Conservative party returning to its "extremist" roots
• It would be a difficult policy to explain to voters, as Labour's policies on choice have been

> Questions for Conservativehome readers:

• Should patients be allowed to petition for new services to be provided, too?
• If so, what should be the mechanism for this?
• Should the moratorium period for subsequent petitions be longer than 5 years?
• What about services which are provided or commissioned on a national basis (eg the NHS IT programme)?

> Costs

Start-up costs

There would need to be extra employees within primary care trusts to consider the petitions in detail. As a policy affecting the whole of the healthcare system, the project would also require considerable resources to be devoted to it within the Department of Health and local NHS organisations. Having said that, there are already expert teams operating the payment by results system at national and local levels.

Running costs

The system would actually reduce the cost of the health service budget significantly, whilst improving quality for patients.

 

100policies is back!

Over the next week five more policy ideas will get the 100policies.com treatment...

• There'll be two health policies - Rachel Joyce's idea of localising the NHS and integrating health and social care and Will East's recommendation of opening up the NHS to new providers.
• There'll also be two environmental policies - Anne Main MP's council tax bonus for homes with low carbon footprints and Spencer Tasker's suggestion of hypothecating environmental taxes for green ends.
• We'll also host the boldest idea so far.  Richard Jenner will argue for 100% reserve banking.  Richard admits that the cost of the idea is an initial recession!  Could be interesting...

If you have submitted an idea but haven't heard from us please submit it again.  We're a long way short of finding 100 policies but will soon be making an interim submission to Tory policy chief Oliver Letwin and we're delighted that George Osborne has already embraced Wat Tyler's idea of transparency on government spending.

Andrew Gilbert: Ratify convention against human trafficking

Andrew is a Solicitor, Senior Lecturer in Law, Huntingdonshire District Councillor, and member of the CSJ's Writers' Forum.

> Policy Summary

Ratify and implement the Council of Europe Convention on Action against Trafficking in Human Beings.

> Policy Explanation

Almost two hundred years since the enactment of the Abolition of the Slave Trade Act 1807, the United Kingdom is faced with the challenge of how to tackle a modern manifestation of slavery. Trafficking in human beings is now a global problem, affecting almost every nation, and touching the lives of millions of adults and children. While a Home Office report from 2000 estimated that between 142 and 1420 women were victims of sex trafficking each year, the inherently covert nature of human trafficking makes it difficult to obtain accurate data concerning the scale of the problem.

The knowledge base concerning child trafficking in the UK is even less substantial and reliable. The exact extent of trafficking activity, both globally and in the UK, is simply unknown. What is clear, however, is that urgent and effective action is required to stem the tide of this most dehumanising crime.

Trafficking is essentially the movement of human beings by means of threat, force or deception for the purpose of exploitation. It can be distinguished from people smuggling in that smuggling is usually limited to delivering a person to the country they wish to enter, at which point the relationship between the smuggler and the smuggled comes to an end and the illegal migrant is left to their own devices. By contrast the will of trafficking victims remains subjugated to the trafficker throughout the period of exploitation.

Human trafficking has only been a discrete offence in English law since the enactment of the Nationality, Immigration and Asylum Act 2002. The relevant provisions of that Act have now been replaced by sections 57, 58 and 59 of the Sexual Offences Act 2003, which deal respectively with trafficking into, trafficking within, and trafficking out of the UK for the purpose of sexual exploitation. Trafficking for purposes other than sexual exploitation (e.g. domestic labour) is caught by the Asylum and Immigration (Treatment of Claimants, etc.) Act 2004. All offences carry a maximum prison sentence of 14 years. 

The Council of Europe Convention on Action against Trafficking in Human Beings was finalised on 16 May 2005 and is a comprehensive treaty focussing on three main purposes: to prevent and combat trafficking; to protect the human rights of victims; and to promote international cooperation on action against the crime. To date 32 member states have signed the Convention and two have gone on to ratify it (Moldova and Romania). In many respects the UK is already acting in ways consistent with the Convention (notably in its concerted law-enforcement efforts), but it is in the area of the treatment of victims that it appears most to be falling short.

Current policy appears unclear and there is evidence that some victims have been deported within days of being rescued, with the consequent danger that they may be quickly retrafficked upon their return home. Under the Convention victims are entitled to a temporary residence permit and to a 'reflection period' of at least 30 days. The reflection period is designed to enable the victim 'to recover and escape the influence of traffickers and/or to take an informed decision on cooperating [in giving evidence against their traffickers] with the competent authorities'.

The government is currently refusing to sign the Convention because of concerns that it will create a 'pull factor', encouraging illegal immigrants to present themselves as trafficking victims in order to obtain preferable treatment. This is in spite of the fact that such concerns have not been an insurmountable problem to the numerous countries that have already signed up to it, including some with more porous borders than our own such as Germany and the Netherlands.

There have been widespread calls for the UK to ratify the Convention by various NGOs such as Anti-Slavery International and Amnesty International as well as by a cross-party group of MPs and peers in a letter to The Times on 27 June 2006. It is submitted that the Conservative party should commit itself to ratifying and implementing the Convention and, after considering compelling evidence from UK NGOs working with victims suggesting that a much longer reflection period is needed, going still further by promising even more generous, yet appropriate, measures of victim support.    

> Policy Risks

Risks

• The policy would need to be presented clearly as an human rights and criminal justice issue and not muddled with the current government's immigration debacle. There is a danger that the (probably) spurious 'pull factor' argument could carry significant and unjustifiable weight in the current climate.
• There is a danger that we are seen to be signing up to 'yet another European convention'. The stock of the European Convention on Human Rights is currently relatively low in the public's perception and without proper explanation of the trafficking Convention the public may have little appetite for signing up.

Opportunities

• To demonstrate a coordinated anti-trafficking approach from both criminal justice and human rights perspectives.
• To be seen to be following good practice in the eyes of the international community and taking a global lead against a global problem.
• To send an unequivocal statement to traffickers that the UK is off-limits to their activities, and to victims that if they are rescued in the UK they will treated compassionately and given appropriate support.

> Questions for ConservativeHome Readers

• The Convention sets out recommended minimums. Should the UK go further in its support of trafficking victims? (The average stay of trafficking victims with the Poppy Project (a London-based trafficking victim support service) is around 8 months.)
• If it transpires that ratification does serve as a 'pull factor', how can the procedures for dealing with purported trafficking victims be sufficiently robust to identify bogus victims whilst at the same time protecting those who have genuinely been caught up in trafficking?
• Should we look to provide the various rights afforded under the Convention through purely domestic measures rather than resorting to ratifying the Convention?

> Costs

The costs are not known at this stage. Clearly costs would be incurred as a result of mounting ongoing counter-trafficking operations as well as providing support services to rescued trafficking victims. By way of illustration, the Poppy Project has received a Home Office contribution of £2.4 million over 2 years to fund its work with up to 25 victims at any one time. There is scope for costs to be met (at least in part) from the recovery of traffickers' criminal assets.