Chills, thrills and surprises: ten years of freedom of information in the UK

By Dr Ben Worthy

This post originally appeared on Oxford University Press’s OUPblog (10 April 2016). It is reposted here with the publisher’s permission.

The Freedom of Information (FOI) Act has been in the news again, when the controversial Independent Commission, much to the surprise of many, concluded the Act was ‘generally working well’, had ‘enhanced openness and transparency… there is no evidence that the Act needs to be radically altered’.

How can this be squared with the claims of Tony Blair, who passed the Freedom of Information Act back in 2000, that the law is one of his greatest regrets? Blair spent some time in his memoirs bemoaning how terrible and counter-productive FOI was:

The truth is that the FOI Act isn’t used, for the most part, by ‘the people’. It’s used by journalists. For political leaders, it’s like saying to someone who is hitting you over the head with a stick, ‘Hey, try this instead’, and handing them a mallet. The information is neither sought because the journalist is curious to know, nor given to bestow knowledge on ‘the people’. It’s used as a weapon.

He’s not the only politician who has fallen out of love with transparency. David Cameron began his time in office with a ringing commitment to make his government the most transparent ever and initiate a revolution in openness. In 2012 he was a little less enthusiastic, speaking of how FOI can ‘occasionally fur up the arteries of government’ and by 2015 he was referring to it as just another ‘buggeration factor’ alongside judicial review and Health and Safety laws. The Leader of the House of Commons Chris Grayling also complained that FOI was being abused by journalists (though the Daily Mail pointed out that he was quite a fan of FOI in opposition).

So why do politicians dislike it so much?

In part the unhappiness is due to a politician’s natural dislike of “surprises.” FOI is the antidote to “spin,” amid a growing emphasis on “spin.” FOI can often cause embarrassments and scandal, digging up stories and delving into forgotten corners. Imagine being a politician and think of the effect of seeing stories such as MPs’ expenses, councils’ use of credit cards or an online list of which politicians supported what controversial decisions. You can also glance over this fascinating list of snooping councils, inappropriate use of social media and escaped convicts revealed by FOI. Spare a thought also for the parish of Walberwick where the council resigned on masse over a combination of cover ups and Christmas trees exposed by FOI requests.

Another claim made is that FOI stops everyone writing things down, the so-called chilling effect. Despite endless discussion and Cabinet Secretary Gus O’Donnell’s rather creative warning that officials are ‘working on Brexit plans in their head’ to avoid FOI, we found the chilling effect to be a myth (as did a Parliamentary committee). The quality of official advice or government records is no worse and emails and “sofa government” have led to far more change than FOI. Despite this lack of evidence, it is still being talked about and the danger is it can becomes a self-confirming myth.

A final reason for their unhappiness has to do with how politicians meet FOI: senior politicians and officials only ever see a few requests, often the most sensitive or most potentially damaging, and often from journalists. They get a very narrow, and negative, view of what requests are received and are prone to view FOI as a ‘problem’ and see it as ‘abused’ by the media. Rather than Iraq, Tony Blair was upset with how FOI revealed who had visited him at chequers (and who gave him an iPod). This also plays into claims that FOI is an alleged resource burden as [some] local councils andpolice forces have claimed.

So, politicians easily go off FOI, through a mixture of unpleasant surprises, (imagined) chills, and bad memories. However, here hangs a paradox. FOI needs support from politicians to flourish and those very politicians most at risk from exposure need to get behind it or at least tolerate it. FOI will still be around in another 10 years but so will the complaints.

Read more on this topic.

Charities Regulation Under Scrutiny

By Alan Ware, Emeritus Fellow, Worcester College, Oxford & Senior Research Associate, UCL School of Public Policy

Charities Regulation Under Scrutiny

This post is a response to the Centre for the Study of British Politics and Public Life’s event Charities Regulation Under Scrutiny, held on 16 February 2016.

Regulating charities is extraordinarily complex because unlike most regulated organisations they are so diverse. There are about 160,000 of them and they share just one feature – they opted for a particular legal status, first established in 1601.  Only those bodies that meet a statutorily defined notion of “public benefit” are entitled to the privileges charitable status provides, including not being liable to corporation tax, for example. They vary enormously in size, in whether they rely or donations or on other sources of incomes (such as contracts, fees or grants), in whether or not they make use of volunteers, and in many other ways. Perhaps the most significant respect is whether they are subject to oversight by the Charity Commission or are exempt, as are universities and private schools, for which other regulatory agencies now usually have responsibility.

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‘More complaints please!’: a public services problem

By Dr Ruth Carlyle, Macmillan Cancer Support and Associate Research Fellow, Birkbeck

A very British plea emerged from the House of Commons Public Administration Select Committee in April 2014: ‘More complaints please!’. In the case of British public services, particularly the National Health Service, the Select Committee noted a ‘toxic cocktail’ of reluctance to complain and unwillingness to learn from such complaints as are made (House of Commons Public Administration Select Committee, 2014: p.3)

The Public Administration Select Committee inquiry was triggered by the events at the Mid Staffordshire NHS Foundation Trust. The Francis inquiry identified that the problems at the Stafford hospital should have been apparent earlier, through complaints made by patients and their families. The Select Committee noted that Mid Staffordshire was not alone in its failure to learn from complaints, as a Which? survey of 94 NHS trusts found that only 20 percent reviewed learning from complaints (2014: p. 16). Unless people complain and managers learn from the complaints, services in a near-monopoly are unlikely to improve.

A similarly toxic problem with the Nigerian railways inspired Hirschman’s 1970 monograph on resolving ‘repairable lapses’ in firms, organisations and states. Hirschman identified that in an economic model managers may learn about problems through ‘exit’ from a product or service, but that in political terms consumers may also ‘voice’ concerns (Hirschman, 1970: p. 3). He indicated that customer ‘loyalty’ also needs to be taken into account: in a market, it may discourage early exit by customers who could provide useful feedback; but it might also deter feedback where customers do not have a realistic exit option (1970: p. 55). In the Nigerian railways, Hirschman identified that exit was not an issue for managers, as in a state-supported industry they were not unduly concerned by the loss of customers, and that voice did not operate as the most roused customers were those who transferred their custom to the road network (1970: p. 45).

The lack of a true exit option for users of NHS services creates different pressures from those in the Nigerian railways. For most patients within the NHS, private healthcare is not an alternative and so a choice to ‘exit’ is a choice not to be treated.  In these circumstances, voicing concerns is the only option to improve services.

The principal recommendations within the Select Committee report relate to improving how complaints will be managed, rather than increasing the number of complaints:

  • A single Minister responsible for complaints across public services
  • Changing professional attitudes to increase the value placed on complaints
  • Sharing learning from high-performing organisations
  • Cabinet Office audits of complaints
  • Annual reports from government departments to include management of complaints.

The title of the report, ‘More complaints please!’, points to the more complex issue of how to enable members of the public to complain. A Which? survey cited by the Select Committee found that just 65% of those with a cause to complain had made a complaint about the NHS; whereas 90% with those for cause to complain had done so in relation to high street retailers. The Select Committee propose that patients and families need to be supported to make complaints about the NHS.

Various attempts have been made to increase the public voice within the NHS, including lay governors in NHS Foundation Trusts, professionally-led engagement and state-funded voluntary schemes. The Select Committee refers to Community Health Councils, a form of state-funded public involvement institution, as having provided support in the past. Local Healthwatch groups, the current successors to Community Health Councils, were granted the right to support complainants as part of the Government’s response to events at Mid Staffordshire (Secretary of State for Health, 2013).

Given the complex loyalty issues for users of NHS services, it is likely to take more than independent support to increase the number of complaints made in the NHS.  Hirschman’s 1970 monograph continues to remain relevant, with its warning that having ‘locked in’ customers does not of itself ensure that concerns will be voiced (1970: p. 55).

REFERENCES

Hirschman, A.O., 1970. Exit, voice, and loyalty: responses to decline in firms, organizations, and states. Cambridge, Massachusetts: Harvard University Press.

House of Commons Public Administration Select Committee, 2014. More complaints please! Twelfth report of session 2013-14: report together with formal minutes relating to the report. London: The Stationery Office.

Secretary of State for Health, 2013. Hard truths: the journey to putting patients first; volume one of the Government response to the Mid Staffordshire NHS Foundation Trust public inquiry. London: The Stationery Office.

The End of an Era in Pension Reform

By Professor Deborah Mabbett

The Financial Times (20 March) called it ‘the biggest pensions revolution for almost a century’ but their timing is a few decades out. The Chancellor’s budget announcement on the lifting of constraints on drawing down retirement pension pots is the end of an era that began, not in 1921, but in the 1980s. Under Thatcher, the government sought to curtail spending on the state pension and promote private provision of retirement income. Private pensions would, supposedly, perform so well that state provision could die back under the heavy mulch of the funded layer, managed by our cutting-edge financial services industry and reaping the high returns that followed the big bang of financial market liberalisation.

What happened instead was that the inadequacy of the National Insurance pension, linked to prices at a time when wages were rising strongly, brought increasing numbers of elderly people into the means-tested part of the social security system. This system was made more generous under Labour, which at least did something to address the problem of pensioner poverty. But it damaged the strategy of promoting private funded provision, because savers faced a ‘better off’problem. Basically, it was not worth saving for retirement if the expected level of savings was insufficient to steer clear of means-testing.

It was against this background that the Turner review found that we must return to a basic state pension, whether universal or contributions-based, which would be adequate to live on, so that means-tested supplementation could be put back in its box. This was strongly supported by the financial services industry, which had detected the potential for another mis-selling scandal affecting private pensions taken out by low income earners.

The industry’s problem became the government’s problem with the advent of automatic enrolment. While this has been marketed to the public as a clever application of behavioural economics, its public policy feedback effects have been neglected. If a government tells everyone that they will be better off saving for their retirement, and ensures that they are defaulted into schemes, then it risks some pronounced negative feedback if people are not in fact better off. Thus the recent scramble to find ways of ensuring that excessive fees are not skimmed from auto-enrolled pensions, and thus the decision announced in the budget to allow people to draw on their savings pots as they please.

The government is taking a risk: it is quite likely that many pots will be used up early in retirement, leaving people dependent on the state pension alone. The calculation is that the state pension will have to be paid anyway, so there are no savings for the Exchequer to be reaped from limiting drawdown. This assumes that means-tested supplementation will shrink and become confined to people who would never have saved for retirement. This is the point of the Triple Lock: it will keep the state pension at a sufficient level of adequacy. For historians of social policy, this is not the biggest change in a century but a return to Beveridge, who planned that flat-rate National Insurance benefits would drive out the remnants of the Poor Law. That plan failed, but this one might succeed, because the costs of failure will rebound on a government that has become in effect the main sales agent for private pensions.

The budget announcement has been pitched as an end to compulsory annuitization, brought about by the failings of the annuities market, supposedly about to be forensically exposed by a now-redundant retirement income Market Study. This is smoke and mirrors. The media have proved wonderfully manipulable: few have pointed out that compulsory annuitization ended in April 2011. What stayed after 2011, and has now gone, was a set of rules limiting the drawdown of funds from pension pots. These limits were set with reference to annuity values, but the government had the option of allowing more drawdown, and it exercised this option recently when it raised the drawdown limit to 120% of the corresponding annuity value. If annuities market failure was the problem, the drawdown limit could have been raised further.

The real problem is not the annuities market, but low interest rates on low-risk investments. Low returns are making money purchase pensions look rather sickly at the point of retirement, but they look twice as ill on a realistic assessment of the income stream they will generate. So let’s use a bit more behavioural economics, this time to cover the tracks of low returns. People value the lump of money in their pot at retirement way above the income stream it will generate. The government can avoid a tide of complaint about the results of auto-enrolment by letting people take their pots as lump sums.

Um – so what is the point of auto enrolment, since it is not to generate a retirement income? Some will invest the money differently: by paying off their mortgage, or buying a rental property. Buying a new car (preferably one that does not depreciate as fast as a Lamborghini), or replacing domestic appliances, or double-glazing the windows, might also be sensible decisions. The government is right that people may find better ways to use the money than the financial services industry can offer them, but it still leaves the question of why exactly auto-enrolment took this money in the first place. Why only get the lump sum at retirement? What about other times in life when a lump sum is useful? Perhaps we should just be allowed to draw down our pots every ten years or so? It’s not a rhetorical question: New Zealanders can draw on their auto-enrolled KiwiSaver pots to buy their houses; Americans can take money out of their 401k schemes if they are made redundant or face other major costly events.

It is well-known in public policy-making that problems are redefined to fit the solutions that are available. The solution is auto-enrolment, that beacon of ‘nudge’ policy-making. With a bit of imagination, we find a problem for it to solve. Here it is. The age of eligibility for the state pension is rising. Some people are working longer, but many are not. Life is tough for those who stop working before the state pension age. The available benefits have been cut in real terms: no triple lock for them. The process of claiming benefits, designed to deter scroungers and benefit tourists, will keep many self-respecting citizens from entering the doors of JobCentre Plus. How to survive until reaching pensionable age and entering the promised land, protected by Conservative voters? Answer: tap the pension pot that has been accumulated, which can be accessed ten years before the state pension age. Draw it down carefully, working towards the definite end date of pensionable age, not to an uncertain life expectancy.

One final question: what about those who really want to save to provide income for their retirement, and do not want to be a landlord, or run their own share portfolio? The Chancellor does have something for them after all. For people aged 65 and over, NS&I will launch ‘market leading’ pensioner bonds, paying a significantly higher return than other safe assets. The financial crisis taught everyone that the financial system is underpinned by the state, but large parts of the industry already knew that. The annuities market in particular has always been heavily dependent on the government to provide the financial instruments that it needs to match its liabilities. Reformers have periodically advocated that the government should boost the market by creating tailor-made instruments such as ‘longevity bonds’ that would shift some risks from the insurer to the taxpayer, a process which we’re now all thoroughly familiar with.  In this light, the new bonds from NS&I are a great step forward: pensioners will be able to secure an income stream directly from the government, rather than paying the masters of the financial universe to buy government bonds on their behalf. No wonder the share prices of some financial intermediaries fell. At this rate, we’ll return to having a welfare state by the back door. It might be expensive, but now that we know how much financial intermediation can cost, the welfare state is beginning to look like quite a good idea.

Transparency: Unintended Consequences

By Dr Ben Worthy

Transparency is a force for good but can prove controversial. Although governments are moving towards internal co-operation, the devil is often in the detail, as seen with the G8 tax transparency pledge which has been heavily criticised. The ongoing Quality Care ‘cover up’ shows how transparency can have many, sometimes unexpected, consequences.

On 30th May Dr Tero Ekkila presented from his new book on the impact, unintended or otherwise, of transparency in Finland, one of the world leaders in openness. You can see his presentation here. The event was organised by the Finnish Institute, Embassy of FinlandCenter for the Study of British Politics and Public Life at Birkbeck University and the University of Helsinki (see the Institute’s blog here).

Finland has had Freedom of Information legislation since 1951 and has been pushing transparency further ever since. In fact, Finland is the home of the idea of government openness, pioneered in the 18th century by a cleric named Anders Chydenius (see his foundation here) and pamphleteer named Peter Forskål (see his 1759 pamphlet here).

Dr Ekkila pointed out that, despite this pedigree, exactly what transparency means changes over time. In Finland the concept itself has shifted from the idea of information simply being ‘public’ to a more economic idea of being ‘transparent’ about performance and benchmarking through Open Data and regular publication. Transparency is in the eye of the beholder.

This shift can have all sorts of unintended consequences. In Finland, high levels of trust in government combined with openness has led to some unusual steps, such as census data being available for sale or parts of government you would expect to be closed using openness to show how well they are performing.  I offered a few reflections on how the UK experience of openness compared.

The presentations were followed by a panel discussion with Christopher Cook (Financial Times), Paul Gibbons (SOAS) and Dr Gesche Schmid (Local Government Association) about the changing context in the UK around FOI and now, increasingly, Open Data and online transparency. They discussed the shifting aims of transparency, given the increasing emphasis on the economic benefits of data from the government. They asked who, crucially, will use the new data the government is publishing.

The panel pointed out that there may not be a clear distinction between ‘open’ data and ‘closed’ information. Given the complexity of the new data and need for specialists software, there may be a ’middle ground’ whereby specialists can use useful data under licence to disseminate. To make the picture even more complicated, there are growing concerns over the reverse side of transparency, privacy, not least with recent PRISM revelations.

The final question from the day was how all this information fits together. As our idea of transparency changes, time will tell whether all this new information is an empowering add on or a distracting alternative to a centuries old pressure for open government.

Dr Benjamin Worthy is a lecturer in politics at Birkbeck.

Mid Staffs: a failure of ‘fire alarms’?

By Dr Ruth Carlyle

The public inquiry into care at the Mid Staffordshire NHS Foundation Trust raises questions about the professional culture and the impact of placing targets over patient care. Considered from a political perspective, however, it also reflects a failure of political oversight.

Senior politicians responsible for public services have choices over the forms of oversight they use. McCubbins and Schwartz suggest that politicians may choose professional ‘police-patrol oversight’, or they may prefer less formal engagement with citizens and user groups to provide ‘fire-alarm oversight’ (1984: 167). In order to encourage ‘fire alarms’, politicians create mechanisms that allow interested citizens and voluntary groups to access information and to refer problems before they become disasters. In the NHS, I suggest that politicians have created a series of statutory public involvement institutions to act as ‘fire alarms’: Community Health Councils; Patient and Public Involvement Forums (PPI Forums); Local Involvement Networks; and, from 2013, local Healthwatch. Each of these institutions was made up of volunteers, supported by paid staff, with statutory rights to scrutinise services and to refer problems. Part of the story of Mid Staffs is the failure of the statutory public involvement institutions to raise alarms.

During the period covered by the Mid Staffs public inquiry first PPI Forums (2003-2008) and then Local Involvement Networks (2008-2013) were in place. The PPI Forum for the Stafford Hospital was criticised in the initial investigation by the Healthcare Commission for being too close to the hospital board to challenge the poor quality of patient care. Giving evidence to the public inquiry, the Secretary of State for that period indicated that he would have expected the PPI Forum to raise the alarm if there were problems with standards at Mid Staffs:

‘I would particularly have expected any concerns or issues in relation to Mid Staffordshire to have been highlighted by the local public involvement structure – the PPIF [PPI Forum] at that time – but to my knowledge nothing came through this channel either.’ Andy Burnham

The successors to PPI Forums, Local Involvement Networks, had a looser structure than their predecessors, working with local groups and individuals, rather than having a membership system. Staffordshire Local Involvement Network is criticised in the public inquiry for focussing on internal ‘squabbling’ during ‘the worst crisis any district hospital in the NHS can ever have known’.

At the opening of Chapter Six of the public inquiry report, Robert Francis states of statutory public involvement institutions that:

‘It might have been expected that concerns about the standards of service would have first become apparent through these channels. Such representatives and their organisations were intended to be accessible to patients and the general public and to have the means to identify concerns and communicate to those responsible for the management, oversight and regulation of providers. In practice, alarm bells were not rung by this route, or at least not sufficiently loudly to provoke any effective reaction.’

This comment suggests that Robert Francis expected that the statutory public involvement forums should have acted as ‘fire alarms’. In practice, it was not the state-funded public involvement bodies that raised the alarm, but a group of local people who established an independent campaign, Cure the NHS. In Stafford, local people were prepared to raise the alarm when the statutory public involvement institutions did not do so. The Mid Staffs story still reflects, however, the expectation that statutory public involvement institutions should have acted as ‘fire alarms’.

Whilst this is just one dimension to the Mid Staffs story, the failure of statutory public involvement institutions to raise the alarm may influence senior politicians’ choice of oversight mechanism in the future.

Bibliography

McCUBBINS, M.D., and SCHWARTZ, T., 1984. Congressional oversight overlooked: police patrols versus fire alarms. American Journal of Political Science, 28 (1), pp.165-179.

Dr Ruth Carlyle completed her PhD Sheepdog or watchdog? The role of statutory public involvement institutions in political management of the NHS, 1974-2010 at Birkbeck in 2012.  She works at Macmillan Cancer Support, currently as Head of Information, Financial and Work Support.

What is the point of banning discrimination on grounds of sex in insurance?

By Professor Deborah Mabbett

On 21 Dec 2012, a ban on the use of sex as a criterion in pricing insurance came into force throughout the European Union. In a forthcoming article in the journal Regulation and Governance (pre-publication version available at http://www.bbk.ac.uk/politics/our-staff/academic/deborah-mabbett/publications), I have examined how the ban came about and what its significance is. The ban was originally proposed by the European Commission in 2003, but the Commission was persuaded to drop the proposal. Instead, insurers were required to publish the statistical basis for discriminating between men and women, to show that differences in premiums were justified by differences in risk. This compromise was successfully challenged in the Court of Justice of the EU by the Belgian consumer association, Test-Achats.

At the root of the debate about sex discrimination in insurance was the question of whether discrimination was necessary for the market to function efficiently. Insurers do not use every relevant piece of information when pricing their products. Some information is too expensive to acquire, some is already subject to legal prohibitions (such as information about ethnicity or religion) and some is subject to voluntary restraint (such as genetic information). Furthermore, long-established practices of risk classification become entrenched in insurance. Long use yields long data series that enable insurers to check that their assessment of risk is robust, and consumers get accustomed to conventional discriminatory practices.

What drew the European institutions to disrupt the convention that sex is used in pricing some forms of insurance? One answer is that the Commission was concerned about the rise of defined contribution pensions, where individuals buy an annuity with their accumulated pension savings. Women get smaller annuities than men because they live longer, on average. However, on a straightforward cost-benefit analysis, this did not make a strong case for banning discrimination, as women are likely to pay more now for car insurance. Furthermore, insurers can find other indicators for long life expectancy (such as occupation and family history), and they will find new ways of identifying safer drivers too.

A stronger answer is that discrimination was already prohibited in some states of the EU, so different countries had different rules despite the supposed existence of a single market in insurance. The Court of Justice held that there should be a common rule across Europe. Since non-discrimination is a fundamental right, it held that this should be the basis for regulating the single market.

While insurers resisted this strongly, arguing that it would disrupt the market, their reaction now that the matter is decided is rather muted. On the Today programme on 21 Dec, the spokeswoman for the Association of British Insurers emphasised that the effects on premiums were unpredictable, that the market remains highly competitive, and that consumers should shop around. The fact is that insurers do not want an extended public debate about discrimination. They prefer the legitimation provided by market competition, which leaves insurers autonomy in determining their pricing strategies, subject to regulatory constraints. Public scrutiny is uncomfortable because it is prone to reveal that insurers’ practices have a weaker technical basis than they like to imply. During the debate on sex discrimination, statistical studies were done which suggested that premium differentials were not always explained by underlying differences in risk, and that some potential alternative predictors were ignored. This should not really surprise us. While insurers have competitive incentives to search for good predictors, they also have marketing reasons to set prices to the advantage or disadvantage of particular groups.

It is tempting to see the ban on sex discrimination as a step towards a more ‘social’ Europe, going beyond the creation of a free trade area and regulating market transactions for social purposes. However, it is not clear what the social purpose really is: the Court of Justice has upheld a principle rather than pursuing a goal. The case highlights that markets are based on conventions which come under scrutiny when they are exposed to cross-national comparison. The ban reconstitutes the European insurance market and adjusts the ‘playing field’ for competition, rather than addressing a social policy problem or promoting equality of outcomes.

The Emerging Neocommunitarianism

By Will Davies

When the magnitude of the current economic crisis became apparent in September 2008, many observers believed that they were witnessing an entire governing economic paradigm collapse in a matter of days. The BBC’s business editor, Robert Peston, has said that, at the time, he assumed that 2008 would come to symbolise for Western capitalism what 1989 symbolised for state socialism. The question of what would come after capitalism, or at least after neoliberalism, provoked excited debate. 

Four years later, the resilience of the ‘neoliberal’ model of policy-making provokes a certain confusion and some dismay amongst many people. Surely some sort of ‘paradigm shift’ ought to have occurred by now? The template of economic policy-making appears largely unchanged. 

Or maybe we’re just approaching this problem in the wrong way. If we understand neoliberalism a little more precisely and philosophically, we might also begin to identify ways in which it is being usurped by a new logic of government, which promises to alleviate many of the symptoms and crises of our age. In an article published in the new edition of Political Quarterly, I refer to this logic as ‘neocommunitarianism’.

One of the startling things about so many contemporary upheavals, from the banking crisis to the riots of 2011 to the apparent obesity epidemic, is how much they are interpreted as psychological in character. Individuals are assumed to be incapable of acting quite as rationally or as self-interestedly as policy-makers might once have hoped. This emphasis on psychology is both a legacy of neoliberalism, but also the path to a subtly different paradigm.

It is a legacy, inasmuch as neoliberalism is fundamentally about elevating the choosing, desiring mind to the status of society’s ultimate barometer of value. Neoliberalism, not entirely unlike classical liberalism, was initially a project of enshrining a form of value relativism. For thinkers such as Friedrich Hayek, the chief virtue of markets was that they provide a peaceful means of coordinating the choices of millions of individuals, without any over-arching view of what a ‘good’ or ‘correct’ choice consists of.

Policy makers today show a growing interest in economic psychology, as advanced by behavioural and happiness economics. This is in keeping with the neoliberal obsession with choice. But in its empirical dimensions, it disrupts the fundamental value relativism that was so important to Hayek and his followers. Increasingly, governments do have a view on what a good choice consists of, and point to wellbeing surveys and experimental evidence in confirming it.

Where our health, mental health, environment and personal finances are concerned, evidence is gathered on which choices produce greater wellbeing or long-term cost efficiency. Bad choices need identifying, and the conditions (or ‘choice architectures’, as Nudge refers to them as) and influences behind them need addressing. A new vision of the individual is emerging, as governed as much by social norms as by incentives. New techniques, tests and data-gathering methods are emerging, through which policy-makers can trace behavior and wellbeing.

In what sense is this ‘neocommunitarian’? Certainly not in the ethical sense of communitarianism propagated by ‘Red Tories’ or ‘Blue Labour’. But just as neoliberalism took a philosophical argument about justice and rights, and converted it into a technocratic policy toolkit, neocommunitarianism is effectively doing the same with respect to a philosophical argument about social relations and traditions. The pursuit of bodily, mental and collective ‘wellbeing’ takes the Aristotelian ethos of communitarianism, and rationalizes it to make it testable. Helping people pursue a healthy, financially stable life is now a job for public policy, in a way that the neoliberals never could have countenanced.

This is not how we imagine a paradigm shift. It is even less of an ideological shift. It is more diffuse and technical than that. But by paying attention to techniques of valuation and how the policy failures of neoliberalism are being interpreted, we get a glimpse of how contemporary crises becomes managed, if not quite resolved.

William Davies is Assistant Professor at the Centre for Interdisciplinary Methodologies, University of Warwick. His article, The Emerging Neocommunitarianism appears in the new edition of Political Quarterly.

Lessons from the Big Society

Dr Jason Edwards

The idea of the Big Society was conceived prior to the present crisis, yet it was informed by anxieties regarding neo-liberal government that had amounted over decades 

The Big Society has been seen by many on the left as no more than rhetorical bombast or an ideological justification for the coalition’s deficit reduction programme. But as much as critics are right to point out how Big Society policies pursued by the coalition to date resemble established neoliberal exercises in state shrinking and marketisation, those on the progressive left would do well to take seriously the ideas that lie behind Big Society thinking.

Read the rest of the piece on the Policy Network website, here.

What’s in an index?

As the government reportedly plans to freeze most social security benefits for two years, before uprating them in line with wages rather than prices, Professor Deborah Mabbett investigates the politics of indexation.

The BBC reported earlier this month that ‘sources’ suggest that the government is planning to freeze social security benefits (except old age pensions) for two years, and then uprate them in line with wages rather than prices. It could be that the ‘sources’ are unruly elements in the Conservative party, speaking under the influence of an extended campaign about the relationship between benefits and earnings. But it could be that the government thinks that there is more room for cutting benefits in a stealthy way through an opportunistic choice of index. It has worked the trick once, changing from RPI to CPI indexation (of which more below). Can it do it again? I think not. The art of indexation in retrenchment politics is to achieve savings through a process which runs automatically, without evident government interference. Tweak the index too much, and the process is no longer automatic. Each up-rating starts to look like a political decision. To paraphrase Lady Bracknell, for the government to change the index once is a misfortune; to change it twice looks like carelessness.

Why do we have indexation arrangements at all? In some political systems, where legislation is not easy to get through Parliament, indexation may be a way of locking in an agreement that the parties have struggled to reach. Lock-in has not been an important motive for UK governments, because they can generally pass legislation readily. However, its close cousin, agenda control, does play a role. Governments want to be able to pick their fights. Consigning a policy to run automatically leaves the government able to spend its time on other policies with more political rewards.

When the Conservatives came to power in 1979, only some parts of the social security system were subject to legislation on indexation: principally old age pensions. They were meant to increase by prices or earnings, whichever was the higher. The Thatcher government changed this to price indexation. While there was some opposition to this change, its potential impact was not apparent to many. Opponents found the case for earnings indexation difficult to communicate. Ministers emphasised that price indexation maintained the real value of the pension, and insisted that the formula was not a major assault on state provision.

The Thatcher government’s policy on other benefits appeared more radical. In 1980 it applied a 5% ‘abatement’ to increases in benefits other than the state pension (this was a period of very high inflation, so benefits still rose in nominal terms). However, the government soon lost its appetite for high-profile fights about benefit levels. The convention that benefits would increase in line with prices became established, and was backed by statutory provisions in 1986 and 1992, although the government never tied its hands completely. Indexation for the Tories had an element of ‘stop me before I kill again’: having made some deep cuts, they accepted a commitment to maintain benefits relative to prices. Some on the right of the party may have found this too soft, but the status quo was set nearer the centre-right, where fiscal planners knew what Outraged of Tunbridge Wells did not: that the formula would see benefits fall steadily relative to earnings, provided the economy grew.

By the time New Labour came to power, benefits and pensions had fallen substantially relative to earnings. In a different constitutional system, it might have made sense for the new government to try to lock in a better deal for benefit recipients with new legislation, but legislation does not lock in policies in the UK. For Labour, it was more attractive to maintain the existing indexation conventions and then claim credit for selectively increasing benefits by more than inflation. The clearest example was Child Benefit, which the Conservatives had refused to index. Labour not only increased Child Benefit substantially; it also enhanced provision for children in the system of in-work benefits. This system was greatly expanded in scope and generosity under the new name of Tax Credits. In short, price indexation left a lot of scope for new credit-claiming policies. Labour had no reason to tie its hands with more generous indexation rules.

In both these periods, we can see how indexation was used to control the agenda: holding a defensible position against those who would cut benefits further under the Tories, creating space for more generous but selective policies under Labour. However, to work in this way, indexation must lock in a sustainable position. Otherwise, pressure for a change will build up, not only among affected recipients but also among policy specialists. Whereas the general public pays little attention to indexation rules because the year-by-year changes they produce are small, indices are the bread and butter of policy analysis. Policy specialists make projections and discern the cumulative effects of indexation.

Earnings rose more than prices throughout the 1980s and 90s, so pensions and benefits, indexed to prices, fell substantially relative to earnings. Was this sustainable? Yes, if you believed that income maintenance by the state could be allowed to wither away, with private savings and insurance taking the place of public provision. No, if private provision failed to fill the gap, and more and more people fell into poverty. Under Labour, tax credits were meant to provide a route from poverty for working-age people, but that still left pensioners out in the cold. By the time Labour came to power, pensioner poverty had come onto the political agenda. The indexation arrangements were a target, especially when the index produced an embarrassingly small increase in pensions of 75p in 1999.  Pensioner organisations sought restoration of the earnings link, by then much better understood than it had been in 1980.

New Labour fended off the pressure by improving the means-tested supplementation of the basic pension, variously named ‘Pension Credit and ‘Guarantee Credit’. This minimum pensioner income standard was indexed to earnings rather than prices.  However, the advance of means-testing in old age pension provision began to produce disfunctionalities of its own: more and more people were put in the position that they would not benefit from saving for their retirement, as they would not achieve an income above the means-tested level. It was against this background that the Pensions Commission proposed that the basic state pension should be improved and the earnings link restored. Price indexation of pensions was no longer seen as ‘good policy’ by specialists. Yet, for the reasons explained above, neither the Conservatives nor Labour wanted to give up the room for manoeuvre that price indexation gave them. It fell to the Liberal Democrats to advocate a change, in the form of a ‘triple lock’: pensions should be uprated in line with wages, prices or by 2.5% at minimum. This policy was written into the Coalition Agreement.

Thus George Osborne started the Spending Review with a policy that would work in quite the wrong way for his austerity plans. Public pensions had been on a path that would see them taking a diminishing share of GDP; now savings had to be found elsewhere. However, the blow was lessened by a new reason to take benefits off automatic control: price indexation was no longer producing steady savings. Since the financial crisis struck, prices have been rising faster than wages. In mid-2012, real wages were back where they had been in 2005 (since 2005, the Consumer Price Index has risen 23%; average weekly earnings have risen 22%). With a period of low growth in store, price indexation looked less attractive than at any time in the previous three decades.

At first sight, there might seem to be little to stop the government switching to manual: freezing benefits, or choosing the amount to increase benefits at its own discretion. But automaticity is valuable to a coalition government: the less that comes up for debate the better. The trick is to find a mode of indexation that really takes the issue off the agenda. Switching the price index to one that would produce lower increases was evidently very attractive. The government announced a switch from RPI to CPI in 2010, although, out of deference to the pensioner vote, it postponed its implementation for pensions for a year.

Several organisations have sought to explain the differences between RPI and CPI and I won’t try to replicate their efforts here (one of the best explanations is offered by Jill Leyland of the Royal Statistical Society: link). What is interesting is how statisticians have responded to the government’s manouevre. Back in the 1980s when the convention of annually up-rating benefits in line with inflation became established, there was a serious discussion about the appropriate composition of a cost-of-living index for benefit recipients, bearing in mind that their consumption patterns are not necessarily the same as for the population at large. The Royal Statistical Society has made it clear that it feels that the government has avoided this discussion with its latest change. It points out that the CPI was established for different purposes than benefit up-rating, and implies that the government’s adoption of the measure is opportunistic and unprincipled.

Does this matter? Probably not: the government will get away with a change that will save it £10 billion per annum by 2015. The statisticians will keep nibbling away and there may be changes to the CPI that reduce the savings it generates, but the switch is a big gain for austerity. Few people realise that changing from RPI to CPI is the largest single cutback in the government’s expenditure plans. Much more high-profile measures, such as the introduction of the ‘benefits cap’, which limits the maximum benefit a family can receive to a designated fraction of average earnings, are small beer by comparison (the benefits cap is supposed to save about £270 million a year).

Now the siren voices on the right of the Conservative Party are calling for further changes. Having seen real wages fall, they want to know why benefit recipients are protected. The answer is pretty obvious: because they are already on the breadline. This is where Lady Bracknell comes in. While the political climate remains hostile to benefit recipients, it is not clear that it would stay that way if their benefits fell much more. Furthermore, the government has a coalition to maintain, which points to taking its winnings now and getting benefit levels off the agenda. And finally, real wages will not fall forever, so the government could find itself adopting the wrong index for its preferences. To have to re-open benefit indexation once was a misfortune; to do it twice would be careless.