If you believe, as I do, that the banks are now the key issue in politics - not just sitting on wads of money but actively hoovering up the money in the world out of productive enterprise - then Obama's plan to break them up has to be an exciting move. It isn't very clear what he means by 'break them up', but since he says he wants to limit their size, I hope this will go beyond splitting domestic banking rom investment banking. We'll have to see.
The disappointment in all this is George Osborne. His rather evasive interview on the Today programme this morning made it clear that is certainly isn't in favour of breaking up the banks in any meaningful sense. They will remain monopolistic vacuum cleaners under his Chancellorship. But the real question is whether he will follow Obama into tackling risky trading.
In fact, as it turns out, his position is that he will wait for the rest of the world to do it. The answer is therefore a coded No.
This is a huge wasted opportunity. The combination of Osborne and Cable could push the Brown government into following the Americans. As it is, we may have to wait for the next crash but one.
Friday, 22 January 2010
Thursday, 14 January 2010
Why schools were closed
My son’s primary school is a wonderful institution, but I must admit I am beside myself with rage that it was closed again yesterday, after a few flurries of snow. And I am much calmer about it than some other parents, whose jobs and lives are less flexible than mine.
What is galling about this is the way the public sector under New Labour has come to treat us. A £50 fine per day if our child doesn’t attend school for what they consider an adequate reason. A £100 fine if we don’t get our tax return in on time. Fines for bin abuse – is there such a term? – and goodness knows what else.
Yet the moment there is a small amount of discomfort or risk, in this case of slipping over – or of the school not having the requisite number of staff – and the public sector abandons their responsibilities entirely.
I am aware also that the school was not actually being lazy, in this case – though I can think of local institutions where there is really no other explanation. They were responding to the limitations in their public liability insurance policies. In fact, what has been happening is not so much that people are becoming more risk averse – as politicians will endlessly tell you – it is that insurers are forcing their clients to become so. The health and safety industry – a huge and labyrinthine priesthood – is now, in effect, the cheerleader for the insurance industry.
This is a central political issue, or it ought to be. At stake is the way we live our lives, and whether the public sector can succeed in sloughing off their own risks onto us. We are witnessing, not the elimination of risk (that’s impossible), but the privatisation of it. And if we don’t want our institutions to become meaningless empty shells, we need to do something about it.
What is galling about this is the way the public sector under New Labour has come to treat us. A £50 fine per day if our child doesn’t attend school for what they consider an adequate reason. A £100 fine if we don’t get our tax return in on time. Fines for bin abuse – is there such a term? – and goodness knows what else.
Yet the moment there is a small amount of discomfort or risk, in this case of slipping over – or of the school not having the requisite number of staff – and the public sector abandons their responsibilities entirely.
I am aware also that the school was not actually being lazy, in this case – though I can think of local institutions where there is really no other explanation. They were responding to the limitations in their public liability insurance policies. In fact, what has been happening is not so much that people are becoming more risk averse – as politicians will endlessly tell you – it is that insurers are forcing their clients to become so. The health and safety industry – a huge and labyrinthine priesthood – is now, in effect, the cheerleader for the insurance industry.
This is a central political issue, or it ought to be. At stake is the way we live our lives, and whether the public sector can succeed in sloughing off their own risks onto us. We are witnessing, not the elimination of risk (that’s impossible), but the privatisation of it. And if we don’t want our institutions to become meaningless empty shells, we need to do something about it.
Sunday, 10 January 2010
The meaning of health and safety
I looked at the front pages of all the Sunday papers this morning in the newsagent, as I tend to, and it struck me how many of the stories were about health and safety regulations.
There was the story about parents having to accompany their teenage children to the loo in Glasgow cafes (unlikely, that one). There was the lead story in the Sunday Telegraph warning us that clearing the ice outside your house can open you up to legal action. Not to mention all the stuff about gritting being banned for similar health and safety considerations.
Before I dismissed the whole lot as the kind of nonsense you get in Sunday papers, I wondered whether – actually – this might not be the key issue after all.
I don’t mean to suggest that we need no safety regulations. But there is something about the health and safety regime which has been constructed by New Labour, on the foundations of the regime built by the Major government – a mixture of American contract culture and Taylorist checklists – which is actually corroding some of the social networks which actually keep us safe.
The ruling about not clearing ice is a good example, set out by the professional body of health and safety officials. The actual effect of this kind of regulation is to make us less safe. The actual effect of much of the safe-guarding regime is to corrode the informal ways that neighbourhoods actually watch over children. It corrodes the way that frontline staff take responsibility and initiative, by chopping their jobs into tiny slithers, and subsuming them into intractable and controlling software.
So this isn’t just a story of how successive governments corrode social capital. It is the core story of why Blair and Brown invested such huge sums in public services, and yet rendered them so intractable, so elephantine, so narrowly focussed on symptoms rather than causes, and – over the long-term, therefore – so hugely ineffective and wasteful. That is the issue, really. No other issue is more important for the future of the nation.
There was the story about parents having to accompany their teenage children to the loo in Glasgow cafes (unlikely, that one). There was the lead story in the Sunday Telegraph warning us that clearing the ice outside your house can open you up to legal action. Not to mention all the stuff about gritting being banned for similar health and safety considerations.
Before I dismissed the whole lot as the kind of nonsense you get in Sunday papers, I wondered whether – actually – this might not be the key issue after all.
I don’t mean to suggest that we need no safety regulations. But there is something about the health and safety regime which has been constructed by New Labour, on the foundations of the regime built by the Major government – a mixture of American contract culture and Taylorist checklists – which is actually corroding some of the social networks which actually keep us safe.
The ruling about not clearing ice is a good example, set out by the professional body of health and safety officials. The actual effect of this kind of regulation is to make us less safe. The actual effect of much of the safe-guarding regime is to corrode the informal ways that neighbourhoods actually watch over children. It corrodes the way that frontline staff take responsibility and initiative, by chopping their jobs into tiny slithers, and subsuming them into intractable and controlling software.
So this isn’t just a story of how successive governments corrode social capital. It is the core story of why Blair and Brown invested such huge sums in public services, and yet rendered them so intractable, so elephantine, so narrowly focussed on symptoms rather than causes, and – over the long-term, therefore – so hugely ineffective and wasteful. That is the issue, really. No other issue is more important for the future of the nation.
Tuesday, 22 December 2009
Bank charges: we need more competition
So the Office of Fair Trading is withdrawing its attempt to force the banks to reduce their charges for going overdrawn to reasonable levels. This is a pity: we all have stories about the way banks behave to their customers. For a week or so, I was charged every time my account fluctuated above the critical level. If I hadn’t bothered to put money in, I would only have been charged once.
But regulating the banks into reasonable charges was always going to be a difficult call when the underlying economics of the situation allows them to charge pretty much what they like. The real issue here is not about regulation, it is about competition. We have too few banks – far too few compared to our competitors. That is why Britain is taking so long too claw its way out of recession.
There are only 170 branches per million people in the UK, compared to 520 in Germany and 960 in France. No wonder small businesses, and individual retail customers, get such a raw deal. We will carry on getting a raw deal until the government breaks up the oligopoly they have allowed to build up, which can charge what they like – and pay themselves what they like – because there is barely any competition.
What is fascinating about this approach is how shy the Conservatives are about it, and here is the dilemma for the Cameron government. Do they allow the semi-monopoly to continue, in the name of some perverse version of the free market, and pander to the financial lobbyists (as seems likely) or do they step in and create a proper free market in banking.
The first is unthinkable – for anyone who wants to make the UK economy thrive – but the second is so terrifying that they seem unlikely to do it. We look set to have another government which espouses open markets in theory but daren’t put them into effect in practice.
It is, in short, precisely the issue that the Liberal government of 1906 was swept to power on.
But regulating the banks into reasonable charges was always going to be a difficult call when the underlying economics of the situation allows them to charge pretty much what they like. The real issue here is not about regulation, it is about competition. We have too few banks – far too few compared to our competitors. That is why Britain is taking so long too claw its way out of recession.
There are only 170 branches per million people in the UK, compared to 520 in Germany and 960 in France. No wonder small businesses, and individual retail customers, get such a raw deal. We will carry on getting a raw deal until the government breaks up the oligopoly they have allowed to build up, which can charge what they like – and pay themselves what they like – because there is barely any competition.
What is fascinating about this approach is how shy the Conservatives are about it, and here is the dilemma for the Cameron government. Do they allow the semi-monopoly to continue, in the name of some perverse version of the free market, and pander to the financial lobbyists (as seems likely) or do they step in and create a proper free market in banking.
The first is unthinkable – for anyone who wants to make the UK economy thrive – but the second is so terrifying that they seem unlikely to do it. We look set to have another government which espouses open markets in theory but daren’t put them into effect in practice.
It is, in short, precisely the issue that the Liberal government of 1906 was swept to power on.
Friday, 18 December 2009
Boyle's Law for public services
The writing is now on the wall for the combination of centralisation, process bureaucracy and inappropriate IT systems which have been such a disempowering feature of our public services for the past decade. Research published in the American Journal of Medicine shows that IT investment in health services doesn’t cut costs:
http://www.sciencedirect.com/science?_ob=ArticleURL&_udi=B6TDC-4XSCVHB-1&_user=8725334&_rdoc=1&_fmt=&_orig=search&_sort=d&_docanchor=&view=c&_acct=C000050221&_version=1&_urlVersion=0&_userid=8725334&md5=df823db1f8d6ba9cfbcf2eb0dce474f0
In fact, the hospitals which had invested most quickly in IT solutions had found that their administration costs had risen the most. Those on the ‘Most Wired’ list had not managed to cut their costs at all.
This is important stuff because it confirms that one of the most disastrous aspects of New Labour centralisation has been the massive IT projects in public services. They didn’t just cost a huge amount. They also set processes in concrete, so that they became inflexible.
That is the real disaster about the government’s misuse of IT: it has taken the exhausting bureaucracy and it has made it even more inflexible than before. It can’t now be reformed without dumping entire IT systems.
Go along to A&E at King’s College Hospital and you will find that nobody can help you until they have gone through more than 20 pages of questions on their IT system. This kind of inflexibility – more about satisfying the craving of the centre for data than it is about helping patients – is repeated throughout our public services, and goes some way to explain why they are as expensive as they are.
But there is an even more important aspect than this. The way IT has been use in public services has overwhelmingly been to remove the human element in healthcare, to make one doctor interchangeable with any other, just as they have tried to remove variable human beings from a range of other public service systems.
This is part of the agenda of the American healthcare industry, a slow shift to the position where real treatment decisions are based on a quick conversation about symptoms between the doctor and the insurance company, in order to slot patients into their huge database of NICE-style cost-effective practice. It is an agenda which has been driven, not by doctors but by health consultants, and it is parallel to the same kind of agenda that is creeping into education.
None of this is to suggest that IT is useless. Quite the reverse. It has obviously changed the way we all work and can vastly increase the efficiency of what we do, but not if we try and take people out of crucial relationships with professionals. Nor if we believe somehow that critical human relationships can be reduced to data.
The problem is that these systems are far more ambitious than simply easing people’s work with IT. They are moving into areas where they frustrate the process whereby change happens most effectively, which is in face to face relationships. In those circumstances, IT investment undermines people’s ability to use their intuition, trust and creativity. Huge IT investment is bound, therefore, to lead to less successful organisations, more mistakes, less imagination and more crass simplification. Hence the latest findings.
This is, in fact, my own version of Boyle’s Law: The more money that is spent on IT, the more it costs everybody else.
There are obviously exceptions to this law. I am not being a Luddite here, or not seriously. Where IT gets to be a problem is where technological solutions are used to suppress the brilliant possibilities of human beings. Then the shrinking ability of the organisation to learn, to achieve its objectives effectively and imaginatively, means that we all have to pay more – whether it is in buying the products or in our taxes because the health systems heal less effectively, or our schools educate less effectively. If people get ignored, it costs us.
That is the disastrous hidden narrative of Gordon Brown’s public service reform, but it needs a political party to articulate it clearly.
Reference: David Himmelstein, Adam Wright and Steffie Woolhandler (2009), ‘Hospital Computing and the Costs and Quality of Care: A National Study’, American Journal of Medicine, 24 Nov.
http://www.sciencedirect.com/science?_ob=ArticleURL&_udi=B6TDC-4XSCVHB-1&_user=8725334&_rdoc=1&_fmt=&_orig=search&_sort=d&_docanchor=&view=c&_acct=C000050221&_version=1&_urlVersion=0&_userid=8725334&md5=df823db1f8d6ba9cfbcf2eb0dce474f0
In fact, the hospitals which had invested most quickly in IT solutions had found that their administration costs had risen the most. Those on the ‘Most Wired’ list had not managed to cut their costs at all.
This is important stuff because it confirms that one of the most disastrous aspects of New Labour centralisation has been the massive IT projects in public services. They didn’t just cost a huge amount. They also set processes in concrete, so that they became inflexible.
That is the real disaster about the government’s misuse of IT: it has taken the exhausting bureaucracy and it has made it even more inflexible than before. It can’t now be reformed without dumping entire IT systems.
Go along to A&E at King’s College Hospital and you will find that nobody can help you until they have gone through more than 20 pages of questions on their IT system. This kind of inflexibility – more about satisfying the craving of the centre for data than it is about helping patients – is repeated throughout our public services, and goes some way to explain why they are as expensive as they are.
But there is an even more important aspect than this. The way IT has been use in public services has overwhelmingly been to remove the human element in healthcare, to make one doctor interchangeable with any other, just as they have tried to remove variable human beings from a range of other public service systems.
This is part of the agenda of the American healthcare industry, a slow shift to the position where real treatment decisions are based on a quick conversation about symptoms between the doctor and the insurance company, in order to slot patients into their huge database of NICE-style cost-effective practice. It is an agenda which has been driven, not by doctors but by health consultants, and it is parallel to the same kind of agenda that is creeping into education.
None of this is to suggest that IT is useless. Quite the reverse. It has obviously changed the way we all work and can vastly increase the efficiency of what we do, but not if we try and take people out of crucial relationships with professionals. Nor if we believe somehow that critical human relationships can be reduced to data.
The problem is that these systems are far more ambitious than simply easing people’s work with IT. They are moving into areas where they frustrate the process whereby change happens most effectively, which is in face to face relationships. In those circumstances, IT investment undermines people’s ability to use their intuition, trust and creativity. Huge IT investment is bound, therefore, to lead to less successful organisations, more mistakes, less imagination and more crass simplification. Hence the latest findings.
This is, in fact, my own version of Boyle’s Law: The more money that is spent on IT, the more it costs everybody else.
There are obviously exceptions to this law. I am not being a Luddite here, or not seriously. Where IT gets to be a problem is where technological solutions are used to suppress the brilliant possibilities of human beings. Then the shrinking ability of the organisation to learn, to achieve its objectives effectively and imaginatively, means that we all have to pay more – whether it is in buying the products or in our taxes because the health systems heal less effectively, or our schools educate less effectively. If people get ignored, it costs us.
That is the disastrous hidden narrative of Gordon Brown’s public service reform, but it needs a political party to articulate it clearly.
Reference: David Himmelstein, Adam Wright and Steffie Woolhandler (2009), ‘Hospital Computing and the Costs and Quality of Care: A National Study’, American Journal of Medicine, 24 Nov.
Tuesday, 8 December 2009
The disaster of Gershon
The news that Sir Peter Gershon has been swallowed by the Conservative Party is bad news for public services. It implies that Cameron will follow the Gershon prescription for efficiency – and that means more of the same.
In fact, the 2004 Gershon Review – which included coachloads of representatives from the IT consultants PA Consulting – has been disastrous for public services. It decided (surprise, surprise!) that huge investment in IT was required.
The result has been huge factory back office processing systems, vast waste, less human contact with the general public – who have to interact via call centres which may or may not have the particular issue they are calling about on their software.
It has meant a de-humanising sclerosis for public service systems, and it has locked inefficiencies into concrete processes. The systems thinker John Seddon reckons that public sector call centres are wasting between 40 and 80 per cent of their efforts as a result. See for example some of the discussion on this on www.systemsthinking.co.uk
But it does provide an opportunity for the Lib Dems for a coherent critique of public sector efficiency, if they have the nerve. But Gershon is not anything that should be emulated.
In fact, the 2004 Gershon Review – which included coachloads of representatives from the IT consultants PA Consulting – has been disastrous for public services. It decided (surprise, surprise!) that huge investment in IT was required.
The result has been huge factory back office processing systems, vast waste, less human contact with the general public – who have to interact via call centres which may or may not have the particular issue they are calling about on their software.
It has meant a de-humanising sclerosis for public service systems, and it has locked inefficiencies into concrete processes. The systems thinker John Seddon reckons that public sector call centres are wasting between 40 and 80 per cent of their efforts as a result. See for example some of the discussion on this on www.systemsthinking.co.uk
But it does provide an opportunity for the Lib Dems for a coherent critique of public sector efficiency, if they have the nerve. But Gershon is not anything that should be emulated.
Thursday, 3 December 2009
How to save RBS from its directors
Vince Cable was quite right on the Today programme this morning. The response to the RBS director’s threat to resign if they are not allowed to pay the bonuses they want to their failed, cash-strapped, state-owned bank should be to say: go ahead.
But we need to look a little more closely at the business of banking bonuses. They are paid out of a percentage of the profits of the investment divisions, sometimes up to fifty per cent. The money would otherwise go to the shareholders – the same ones who failed to exercise proper control over the bank they owned.
There are some, and Fortune magazine is among them, who say that they are better shared with the staff than shovelled at the owners – and that’s right as far as it goes.
But the real question is not why the bonuses are so high. It is why the profits are so high. They come, after all, out of all of our pension investments, or the debt that goes to build productive business, or capital investments in public infrastructure. The real scandal is that these bonuses are paid out of fees which ought rightly to stay with the small investors who are watching the value of their pensions falling.
The fact that the banks are able to award themselves such hefty fees is purely because we have allowed a semi-monopoly to build up in banking, both domestic and investment banking. So here is the real solution: slash the bonuses, accept the resignation of the directors, put in their place bankers who are prepared to do what is necessary to break up RBS into its constituent businesses and regions.
In the process, they can rebuild the competitiveness of RBS and their investment arm by massively slashing the fees they charge borrowers, individual pensioners and savers. That is a business model that might work: genuine competition.
But we need to look a little more closely at the business of banking bonuses. They are paid out of a percentage of the profits of the investment divisions, sometimes up to fifty per cent. The money would otherwise go to the shareholders – the same ones who failed to exercise proper control over the bank they owned.
There are some, and Fortune magazine is among them, who say that they are better shared with the staff than shovelled at the owners – and that’s right as far as it goes.
But the real question is not why the bonuses are so high. It is why the profits are so high. They come, after all, out of all of our pension investments, or the debt that goes to build productive business, or capital investments in public infrastructure. The real scandal is that these bonuses are paid out of fees which ought rightly to stay with the small investors who are watching the value of their pensions falling.
The fact that the banks are able to award themselves such hefty fees is purely because we have allowed a semi-monopoly to build up in banking, both domestic and investment banking. So here is the real solution: slash the bonuses, accept the resignation of the directors, put in their place bankers who are prepared to do what is necessary to break up RBS into its constituent businesses and regions.
In the process, they can rebuild the competitiveness of RBS and their investment arm by massively slashing the fees they charge borrowers, individual pensioners and savers. That is a business model that might work: genuine competition.
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