Friday, 10 December 2010

What Labour think is cost-effective

Anthony Painter has responded to my post here defending EMA and I have responded here because my post wouldn't fit in the comments box.  I’m assuming that he is this Anthony Painter, prospective Labour MEP. He’s the first response I’ve had that hasn’t either attacked me for being a Lib Dem and has actually engaged with the substantial issues, so thank you.  We’re having a statistical quibble about some points – he doesn’t appear to have read to the end of the IFS report,  which does make a difference, see here for even further details – but what is interesting is that he completely concedes the deadweight issue – the problem that 90% of EMA goes to kids who would stay on without it.  NUS, are you reading this? Numerate Labour supporter concedes deadweight issue.

Then, incredibly, he does two things. After acknowledging that 90% of EMA is wasted in this way, he says 1) that it would be impossible to have a better targeted scheme with similar aims and 2) given this, EMA in its current form should be protected – it still offers value for money.

Quite frankly, this tells you all you need to know about the current Labour party and all you need to know about why there is such a fiscal mess. First, there’s the astonishing assertion that in a scheme where all sensible people accept that 90% of the cost is wasted, you cannot possibly cut any of that waste.  This should at first sight be so implausible as to be ridiculous. Imagine if teachers only worked for 10% of the school day. Imagine if you bought 100 interactive whiteboards and only ten worked. Imagine if you built ten prisons but only used one of them. Even the EMA-defender of this paper acknowledges that there are quite a few cuts you could make to solve the deadweight issue – not as many as the government are proposing, certainly, but still quite a few. But Anthony Painter doesn’t want to even consider that – for him, it’s a  ‘choice is between a £500 million policy which meets its objectives or a £50 million scheme that doesn't’.

Let’s just as a thought experiment accept that he is right here and that there absolutely nothing you could do about the £450m deadweight cost. I am afraid if this was the case and there was only the ‘choice’ presented above I still could not defend EMA.  You are getting an improvement in 5-10% of the kids on EMA, and to get that improvement you have to give away money to another 90-95%. That seems to me colossally poor value for money. I can think of several ways of spending £500m of the education budget that would be much more valuable. Of course, what people like Anthony Painter then turn round and say is that I am condemning thousands of kids to be drop outs. Where would this end?  Doubtless if you gave every NEET a million quid on pain of attending college three times a week they wouldn’t be NEETs any more, does that mean my failure to advocate such a policy is condemning thousands of kids to be NEETs? If you paid every MP a salary of £50 million quid, I am sure that most of them wouldn’t fiddle their expenses, does that mean my failure to advocate such a policy is condemning MPs to fiddle expenses? Quite apart from the astonishing elision of individual moral responsibility in this vision, it’s just not affordable. I’ve got a lot of sympathy here with the people on NICE and Sarah Palin’s beloved ‘death panels’. There are some ‘solutions’ to medical and social problems that offer a very limited benefit for an extremely large cost.  It sounds callous to say you want to deny people these benefits, but as Paul Krugman – no crazy right-winger he – points out, unless you do so, you get rampant healthcare inflation in the US example, and social policy inflation in the UK example. It's the dartboard theory of public finances.

But in actual fact, in this example the above paragraph is actually entirely academic because if you are wasting 90% of a budget there are quite clearly ways to make savings, and any political party who tell you otherwise shouldn’t be let near the public finances. 

1 comment:

  1. Just for clarity: my response is in the comments to the last post- I'd strongly recommend reading for a fuller explanation of my argument. I also wrote a Left Foot Forward article earlier this week.

    Two further points:

    i) The deadweight is between 80% and 88% it would appear but difficult to conclude- but this is a statistical quibble that impacts a mere 28,000 or so of the least advantaged students or so (!!)
    ii) Nowhere do I assert that it is 'impossible' to eliminate 'waste.' I just question the assertion that 'deadweight' is 'waste' on the basis that would mean almost all public programmes would fail a value for money test. And I argue that you have to look at interventions in the round and do a full cost-benefit appraisal. You have not subjected the alternative plan to such an appraisal. Again, more in my comments to the last post.