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Policy Exchange

9 Mar 2012 08:18:40

Neil O'Brien: If we want smaller government, we will have to think big

Neil O'Brien is Director of Policy Exchange.  Follow him on Twitter.

Screen shot 2012-03-09 at 08.11.12Public spending in Britain rocketed from consuming just over a third of our national income in 2000 to just under half in 2010 - from 36% to 48%. In other words, we are right back to where we were before Mrs Thatcher. The coalition aims to get the state share of spending back down to 40% by 2016. But that means it will still be higher after the cuts than it was during most of the Blair years (1997-2004). So we are not heading for some small-state paradise once this is over.

Could the government go further?  Over the long term I think it can, and must.  Economic research in react years has shown a clear link between higher public spending and slow growth. Our large but inefficient state is one reason the UK has been so comprehensively outclassed by our international competitors over the last couple of decades.  At the same time many people feel crushed by the rising cost of living. Anything the government could do that would allow sustainable reductions in income tax, VAT, fuel duty and council tax would help a lot.  

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22 Feb 2012 14:30:12

Andrew Laird: The Government should pilot schools run by companies on a social enterprise model

Andrew Laird is a Director of Mutual Ventures, an organisation which supports social enterprise delivery of public services. He is lead author of Policy Exchange's new report - Social Enterprise Schools.

The schools system faces a perfect storm of rising demand and reducing resources. There is considerable rising demand (500,000 more primary school places are needed by 2018) and, for obvious reasons, public purse capital expenditure is being reduced (by 2014/15 this will be down 60% compared with 2010/11). Our new report from Policy Exchange looks at whether an element of for-profit provision in the schools system could provide some much needed investment and capacity to not only meet basic demand but to give pupils and parents a genuine choice.

We know that for-profit provision is already a fixture in other areas of public service such as health and welfare but what's particularly interesting is the for-profit provision that is already happening in and around schools themselves. Whilst most LAs don't know if a provider of school support services is not-for-profit or for-profit (interesting in itself) there are some good examples of how these service are provided. In Northumberland, 50% of Alternative provision for pupils is provided by for-profits. In Brent and Medway. over 30% of special school provision is provided by for profits and in Middlesbrough, nearly 90% of Nursery provision is provided by for-profits.

Statistics like these will surprise a lot of people, and they beg the question that if our youngest and most vulnerable children are receiving services from the private sector, then why is there such a cultural aversion to allowing a more mixed market within mainstream schooling?

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2 Feb 2012 14:13:51

Ed Holmes of Policy Exchange: Are Labour ministers being consistent on regional pay and benefits?

Ed Holmes is a senior research fellow at Policy Exchange.

Ed Milliband’s leadership has arrived at an interesting juncture this week. Liam Byrne – who apart from being Ed’s welfare spokesman moonlights as Labour’s policy review chief – has set tongues wagging in Westminster with his opposition to the Government’s £26,000 benefits cap:  “Let's be honest, a one-size-fits-all national cap simply would not work in practice.’ He even goes on to argue ‘a regional cap would clearly not be right. We need a local cap right for each area.”

What he does not spell out is why. Presumably the argument is that the cost of living is very different in different parts of the country.

That’s a fair point but it raises a tricky question of consistency. A separate debate is underway on national pay bargaining: a system its MPs and affiliated trade unions are strongly opposed to reforming. The Shadow Chancellor Ed Balls did not even mention it after the regional pay review was announced; only after some seven weeks did he set out Labour's position that: “‘we will oppose any moves to undermine the pay review bodies by shifting wholesale to regional and local bargaining in the public sector.”

In other words, it doesn’t matter that the cost of living is very different in different parts of the country.

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18 Jan 2012 05:51:06

Dr Simon Less of Policy Exchange: We need to focus on growth and being greener – not ‘green growth’

Dr Simon Less is the head of environment and energy at Policy Exchange. His report, "Greening the economy - not 'green economy'" can be found here.

Chris Huhne said at the Renewable UK conference last October:

“We're missing a trick unless we start supporting low-carbon manufacturing here in Britain – and … creating the exports that will keep Britain competitive.... This government has resolved that we will be the largest market in Europe for offshore wind.… We will not heed the … green economy deniers.”

Both ‘green’ policies to promote reduced carbon emissions and growth policies (including to help pay for emissions reduction) are important priorities. But as Policy Exchange has consistently argued, muddling-up these priorities under ‘green growth’ ‘or the ‘green economy’ is damaging to both the goals of emissions reduction and growth.

The approach to securing maximum emissions reduction for minimum economic impact is to develop an effective long-term, technology-neutral carbon pricing framework to guide markets, with further support focused on maximising low carbon innovation.

But a goal of promoting ‘green growth’ instead leads the Government to favour and subsidise selected ‘green’ – usually renewable energy – industrial sectors. The ‘green growth’ argument is not that such subsidies are the best way to reduce emissions, but that they will increase overall levels of growth, exports and employment in the UK.

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3 Jan 2012 18:08:31

Cameron's former head of policy, James O'Shaughnessy, joins Policy Exchange to develop school federations

By Tim Montgomerie
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O'ShaughnessyQuite a coup for Policy Exchange (PX) today with the news that James O'Shaughnessy will be joining Neil O'Brien's team on a short-term basis to work on a project aimed at establishing school federations. James worked on supply-side policies for education and housing when he was PX's highly-respected Research Director before he then joined Conservative HQ and then Number 10 as Head of Policy.

In today's Times (£) James has written about his belief in the need to change expectations inside the education system:

"Vacancies in key positions offer the opportunity to expand the group of reformers around the Education Secretary. The appointment of Liz Sidwell, the former CEO of the Haberdashers’ Aske’s Federation, as Schools Commissioner and that outstanding head teacher Sir Michael Wilshaw as the new Chief Inspector of Schools are very welcome. The Prime Minister should now encourage Mr Gove to go farther and appoint a set of reform-minded outsiders to top education posts throughout the public sector. A demonstrable commitment to raising standards must trump time served in Whitehall as the main criterion for promotion."

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5 Sep 2011 14:00:04

Policy Exchange: How Muslims fought for Britain in the past, and how more can do so in future

By Paul Goodman
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Screen shot 2011-09-05 at 11.44.42 Coverage of 9/11's tenth anniversary will inevitably project images of terror, betrayal and loss.  So it's cheering to see Policy Exchange releasing a publication which, while touching on the terrible events of ten years ago, is an uplifting story of patriotism, sacrifice, duty, service and loyalty across any religious divide - and a reminder that practising Islam is no less compatible with being British than following any other religion (or none).

Shiraz Maher has already contributed one book, Choosing Our Friends Wisely, to Policy Exchange's series on security, integration and extremism matters. (Munira Mirza's Living Apart Together remains well worth revisiting some five years on.)  Its core argument - that the Government's Prevent policy should seek to target non-violent as well as violent extremism - has since become the foundation of the Coalition's revision of the policy, a tribute to the rigour with which it was argued.

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20 Aug 2011 07:27:18

Matt Oakley: Breaking the link between welfare and crime

Matt Oakley is Head of Enterprise, Growth and Social Policy at Policy Exchange. He contributes this latest entry in our series examining how to lift young people off the conveyor belt to crime. To read all entries - so far covering early intervention, parenting, policing and gang culture, click on this link and scroll down the page.

This week’s labour market statistics has been used by some to argue that consistently high youth or long-term unemployment, or a lack of ‘decent’ job opportunities contributed to the scenes we saw across the UK last week. In some senses, this is right, but rather than being a cause of the problems, it seems more likely that youth and persistent unemployment is a reflection of the same underlying root problem.

Research from the Department for Work and Pensions has found that roughly 10% of benefit claimants feel that whether to be on benefits or in work should be a choice for them to make. Another 20% felt that life on benefits had advantages that made them less keen to go back to work. Other research shows that people claiming unemployment benefits spend as little as eight minutes a day looking for work.

In essence, a belief in a right a right to benefits has replaced the notions of self reliance and of responsibility to families and the community. Policy Exchange have consistently argued that although current reforms to the welfare state are positive, they will not be enough to re-build a system with responsibility and a sense of morality at its core. We outlined in a Report earlier this year that to do this would require that:

  • The contributory principle in welfare in re-established. This would mean building a strong link between what people put in to the state in taxes and National Insurance and what they are entitled to if they become unemployed;
  • Jobseekers should be expected to be engaged in activities related to jobsearch for the equivalent time of a full-time job; and
  • Sanctions should be linked to total benefit – but protect dependents by working through a system of benefit cards that limit the types of things those who are sanctioned can buy.

As well as this, the state also has a responsibility to ensure that those with legitimate barriers to work receive the support they need to help them to find sustainable and rewarding jobs. Policy Exchange will publish a report in early September showing that to do this the benefits system needs to assess the needs that claimants have and target support much more heavily on those with the greatest needs. This will require significant reform of how Jobcentre Plus works and of the links between Jobcentres and private providers in the new Work Programme. But no-one able to of work would have the excuse that they are not receiving the right support.

Polling in an earlier Policy Exchange report showed that the public believe in a welfare state where: those who contribute get more in return; benefit claimants have a moral obligation to do all they can to get back to work; and Government is tough on those who do not. In short, they want the state to work for the majority – those on benefits because they are caring for others or because they are unable to work; those on benefits and doing all they can to find work; and those in work struggling to provide for their families to get by – not the minority. They want their contributions to be recognised. A system like this would go some way to re-instating the responsibility and morality that were very much missing last week.

18 Aug 2011 06:57:40

Blair Gibbs: The role of community policing in fighting crime

This is the third in a series of articles examining the conveyor belt to crime. Previous contributions have looked at the importance of early intervention and supporting families. Today, Blair Gibbs of Policy Exchange looks at policing.


Debate around police tactics during the riots has stoked interest in policing philosophies and the merits or otherwise of ‘community policing’.  The Prime Minister’s use of the phrase ‘zero tolerance’ distracts from this, and should only be taken as a signal of the legitimate public desire for a firm response by the wider criminal justice system to the serious criminality that occurred. 

‘Zero tolerance’ is not the same as ‘community policing’ and it is a mistake to conflate them. As Bill Bratton - the greatest police leader of his generation - has argued, ‘zero tolerance’ is a crude misrepresentation of the policing philosophy he advocated. Bratton’s success in New York, not to mention much more success with far fewer resources while he was chief in Los Angeles (2002-2009), did not come from ‘zero tolerance’. That is never sensible or practically possible. It implies mass arrests for all minor offences and the total absence of proportionality and officer discretion.

What really happened in New York was a change of leadership which drove a change of organisational culture, and with that, came a change of tactics on the ground.  Local commanders took control, were held accountable for crime, and whilst arrests went up, that was a product of a more proactive, disruptive policing approach – not an objective.  More important was the application of a new philosophy of community policing, that changed the way the police saw their role.

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26 Jul 2011 08:53:53

Here you go George; A Growth Manifesto from London's think tanks

By Tim Montgomerie
Follow Tim on Twitter.


On our Comment pages today Mark Field MP sets out the two great truths of the economic debate:

One: We must carry on with the Osborne deficit reduction programme. When you are in a worldwide debt crisis you have to get your debts under control.

Two: The Coalition hasn't got an adequate growth agenda.

Read Mark's piece.

So what can the Coalition do to achieve growth? I asked some of London's top think tanks to recommend some ideas. The list below is far from exhaustive. Missing, for example, are ideas to modernise trade union laws and the Civitas think tank's thinking on better procurement. I also dismiss the idea that a growth agenda cannot have immediate effects. While it's true that many supply side measures can take years to yield benefits (this is certainly true of the Coalition's excellent welfare and school reforms) some - such as tax reforms and deregulation - can produce immediate benefits. There is also the impact on confidence. If the government looks serious about long-term competitiveness then overseas and domestic investors are more likely to stay and expand in Britain.

"If the Government keeps living beyond the means of British taxpayers and businesses, then growth will continue to be limited.  By reducing the incentive to work and invest, high taxes diminish economic growth.  For some tax cuts, the economic effect is dramatic enough they can increase revenue.  That is the case with a lower corporate tax rate, the Government could cut a lot further and faster than they are, and abolishing the 50p rate of income tax.  But there are other tax cuts that would boost growth as well, such as a cut in National Insurance.  And more broadly the relationship between spending and growth shows that imposing too great a burden on taxpayers depresses growth.  European Central Bank estimates imply Brown’s increase in spending as a share of national income left GDP over £100 billion lower by 2010-11." - Matt Sinclair of The TaxPayers' Alliance

More: The TaxPayers' Alliance's Tax Reform Commission.

"In the current circumstances it is clear that the UK cannot afford, above all unilaterally, to move to a low carbon, let alone a zero carbon, economy. A low carbon economy means a high energy cost economy. At the very least, the Government should phase out all energy subsidies of all kinds, and suspend unilateral targets until such time as all other major nations have signed up to the same course. For the UK to go it alone is not merely suicidal but pointless. Decarbonisation requires growing subsidies from the taxpayer and sharply increased energy bills for business, industry, and households. At a time when painful cuts are unavoidable, it makes no sense to make British industry – and manufacturing in particular - uncompetitive, or to drive it overseas, and thus greatly weaken our economy, by ratuitously driving up energy costs." - Benny Peiser of the Global Warming Policy Forum

"The coalition needs to create an environment much more conducive to enterprise. A systematic programme of deregulation should be at the heart of this. The government should start by dismantling employment regulation. Legislation that makes it more expensive to hire workers, such as anti-discrimination legislation, should be repealed. The minimum wage should be regionalised. If the government has not got the courage for radical reform, wide-ranging exemptions for small firms would be a start." - Mark Littlewood of the Institute of Economic Affairs

More: Deregulating the labour market; deregulating energy and transport; deregulating financial sector; deregulating business; and deregulating business.

"Coherent reform of public services is a necessary part of the recovery. It will enable public spending to be restrained while meeting the demands for improved services and it will increase the productivity of the economy, raising living standards for everyone. Poor performing education, health and welfare systems already impose significant costs on the wider economy.  Demographic changes mean that the costs facing government in areas like pensions and healthcare are accelerating rapidly.  The Treasury has made the right call on the big question of deficit reduction, but has undermined the Government's commitment to value for money by ring-fencing certain public sector budgets.  The commitment to the National Curriculum is just one example of the fact that neither Health nor Education have dismantled central regulation and made services accountable to their users." - Andrew Haldenby of Reform

More: Reform's "It Can Be Done" report on public service reform.

“Any growth strategy has to deal with the problem of excessive employment law. According to the World Bank, UK labour market flexibility has slipped down the international league table – from 17th in 2007, to 21st in 2008, to 28th in 2009 and then to 35th in 2010. What was once a source of strength for the UK has become a source of weakness. A moratorium on new laws combined with some deregulation would boost business performance, job creation and restore the UK’s labour market competitiveness. For example, we need to deal with the fact that too many employers are being held to ransom in employment tribunals by vexatious employees and their ‘no win no fee’ lawyers.” - Alistair Tebbit of the Institute of Directors

"There are two fundamental requirements of competitive markets: first, the possibility of 'free entry' for new players and 'free exit' for those that fail; second, that cartels do not dominate a market. British banks fail on both points. That is why they are still not lending enough to small businesses. Why they are still paying senior staff huge bonuses (on top of salaries that were increased to make up for supposed cuts in bonuses). And how the top five banks control 80% of the market (a percentage that is climbing higher and higher). Deep seated banking reform must break up this cosy cartel. We need a new Financial Competition Commission to carry out investigations of individual firms or of product areas, with the power to make recommendations to the Bank of England to promote competition between banks; to remove barriers to entry (and promote new competition); to take steps to permit the orderly exit of failed institutions (break up institutions that are ‘too big to fail’); and to do more to ensure products and services offered are themselves subject to competition. Finally, state-owned banks must be returned to the private sector as soon as they are strong enough; and at the best possible price and greatest reward for the taxpayer (who took on all the risk when the shares were nationalised)." - Tim Knox of the Centre for Policy Studies

More: Niall Ferguson's Too Big To Live; Andrea Leadsom MP's Boost Bank Competition; and James Conway's Give Us our Fair Shares.

"Domestic competition is seen as good because it keeps producers sharp. So why resist it from abroad? Yet we slap import duties on shoes, cereals, electronics – there’s even a tariff of up to 48.5% on Chinese bicycles. Such protectionism allows our producers to coast along instead of becoming world class. It means less choice and value for consumers. And if we are buying less from abroad, people in other countries will have fewer pounds in their pockets to spend back here, so other UK exporters suffer. Let’s not wait for world agreement, but push for bilateral free trade treaties with any country we can – particularly the poorest, who have most to gain." - Eamonn Butler of the Adam Smith Institute

"Welfare reform should not go faster nor deeper than an £18 billion cut. It should, however, move beyond ‘making work pay’. This would mean: Increasing conditionality by asking more of individuals who spend as little as eight minutes a day looking for work; introducing welfare accounts that re-instate the link between what people contribute through national insurance and what they can get out; and privatising some functions of Jobcentre Plus and re-negotiating parts of Work Programme contracts to allow some claimants to get personalised support from day one of their claim. These reforms would provide a critical boost to growth: they would make the welfare system effective in matching claimants to jobs and make the best of the talent of the UK population." - Matt Oakley for Policy Exchange

"In terms of short term hindrances to growth, the total annual cost of family breakdown is £41.74 billion or £1,364 for every taxpayer. Reducing these direct costs would plug a big hole in national and local finances but there are other harder-to-measure indirect costs which hamper our long term economic prospects. The fallout from broken family relationships can hinder children’s educational achievement, dampen their self esteem and affect their physical and mental health - ultimately threatening their creativity, well-being and future productivity. We need to make sure the next spending review includes specific investment in universal credit to eliminate the couple penalty; local councils should collect data on relationship statuses and be set delivery outcomes by national government so they can demonstrate how their policies  are providing relationship support and stabilising relationships in their area; other initiatives that help families (such as Family Nurse Partnerships and Family Intervention Projects) should specifically include couple support - often most effectively delivered by the voluntary sector." - Samantha Callan of the Centre for Social Justice

More: Action on the family.

"The Government needs to push for a long-term solution to the eurozone debt crisis – bailouts aren’t working, debt restructuring will be needed. The longer the crisis goes on, the worse the prospects for eurozone growth and stability look and, as our biggest trading partner, this will have an impact on the UK economy. In the medium-term the UK needs to seek allies in pushing for a better-functioning single market, including deregulation, removing cross-border barriers to services and digital industries, and protecting the interests of the City of London from the EU’s new financial supervisory architecture. This includes securing the flexibility to apply capital requirements for banks as the UK sees fit. In the longer term, the UK should look to diversify its trade away from the eurozone, tapping into the growth potential of emerging markets, which will be necessary in any case but also provides a Plan B if the eurozone fails to get its act together. The UK also needs to continue to push for a reduction in EU external trade barriers and encourage the expansion of free trade agreements with other economies/trading blocs." - Stephen Booth of Open Europe

More from the Open Europe blog: Liberalising the Single Market, Greek debt restructuring, Financial regulation and Trade.

“The Competition Commission needs to be reformed so that it rewards, rather than punishes, firms who share their knowledge on product development and innovation with other UK firms. At present, the UK’s institutional approach encourages firms to compete with each other at every stage, rather than cooperate. Vital information for businesses tends to remain in a particular sector instead of spreading around the whole economy. This puts UK firms at a disadvantage compared to many of their international competitors. Through better knowledge transfer, they can share their ideas on the best strategies to increase revenues and, hence, economic growth.” - Ian Mulheirn of the Social Market Foundation

"Our Government should start by not making matters worse, which means cutting the 50p tax rate, reducing costly regulation, and reversing climate-change policies that are adding so much to the cost of electricity that our key industries will be forced overseas. It should also pursue our enlightened national interest through industrial policy. It should encourage local enterprise banks to restore the initiative to localities. People in the North East, for example, would rally to a local enterprise bank that provided a safe home for their savings and invested them in providing solid, sustainable jobs in the North East." - Dr David Green of Civitas

Read more about Civitas' ideas for a new industrial policy.

"The discussions about boosting the economic performance of UK economy lack clarity and focus. Everyone understands that entrepreneurship and innovation are important for growth, and also that the government has a formidable aptitude to discourage both by ill-advised tax and regulatory policies. We need to move beyond these truisms towards more specific proposals. While we subscribe to many of the views expressed by our colleagues from other London-based think tanks, we believe that any credible pro-growth policy needs to reflect the following two insights, which are conspicuously missing from our present-day discussions.

  • Incentives for private-sector employment for high-productivity individuals. In present times, highly skilled individuals are often likely to end up in professions with low social rate of return and in rent-seeking occupations, instead of going into the private sector and contributing to higher rates of innovation and entrepreneurship. Those occupations might include lobbying, tax advisory services, certain elements of legal counselling, and also the work for the underperforming branches of the public sector. Very often, government jobs bid away labour away from marginal private sector jobs. This is especially worrying in situations when the private sector jobs involve significant positive externalities, which are not reflected in employees' paycheck - such as jobs in private R&D. Tax changes, and removing many of the advantages of public-sector employment, as well as employment in some of the rent-seeking professions, could partly correct for this distortion. Also, a flat subsidy could be given to individuals who migrate into private occupations that can reasonably be seen as productive.
  • Restoring the approbation associated with entrepreneurship and innovation. This might just require a simple change of rhetoric on the part of the coalition. The government should be more vocal in praising succesful entrepreneurs and innovators as the true heros of our societies, instead of lambasting them for not paying their "fair share" in taxes."

- Dalibor Rohac of Legatum

13 Jul 2011 10:30:09

Neil O’Brien: Andy Burnham is failing to provide a serious challenge to the Coalition's schools policy

O'BRIEN-NEIL Neil O'Brien is Director of Policy Exchange.

Andy Burnham made first major policy speech yesterday.  While it told us a bit about the sort of issues he cares about, it doesn’t tell us much about Labour’s position on many of the most important issues in education.

Amazingly, he failed to reference academies or free schools once during his half an hour talk. There’s a good reason for this curious omission.  Though it is probably the central issue in the schools debate at present, Labour seems deeply uncertain about whether it supports or opposes the free schools policy.

In 2000, Tony Blair and Andrew Adonis launched an academies programme that provided Labour with the opportunity to lead the way in school reform. Those reforms slowed in 2007 when Ed Balls and Gordon Brown, supported by the trade unions, decided to pull back from the programme. Nevertheless, 200 odd academies had opened by the time the Coalition won the election last May.

Ed Miliband lost an opportunity to set the agenda on schooling by not moving quickly to build on Labour’s academies programme.  Initially, the new government focused on allowing good schools to convert to academy status.  Blairites would have liked to have outflanked the Government by proposing a policy more heavily based on replacing underperforming schools.  But this would have been controversial.  So instead the party said nothing. 

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