Thursday, 19 August 2010

Coalition Government

I guess I have a different perspective on the UK's coalition government for a number of reasons.

I'm from New Zealand and in New Zealand we introduced Mixed Member Proportional (MMP) representation as the voting system in 1996. Under MMP, you get two votes in the general election. One is for the MP who will represent your constituency (natually, constituency MPs typically belong to a party). The second is for the party you want to run the country. Half of the MPs are constituency representatives; the other half are selected from a list to ensure that the number of seats each party is proportional to the party votes they received.

Since then, no party has won over 50% of the votes and every Government in New Zealand has been a coalition. Some have been better than worse, but what is most interesting is the way the political scene in New Zealand has matured. Like the UK, NZ has two major parties: Labour on the left and National on the right. These parties have always commanded the two largest shares of the parliament and one of them has dominated each Government. After each election, the major parties enter into negotiations with the smaller parties to decide who will govern. This is usually the party with the largest proportion of votes, allied with ideologically compatible smaller parties.

To manage these negotiations, the Cabinet Manual was published. This document outlines the conventions of the NZ Constitution and has a major section on handling the post-election period when the negotiations to decide the next government occur. This included provisions for a caretaker Government (the previous Government, with limited powers). It also defines the role of the civil service in negotiations, to ensure they support the process without biasing one side or another. I suspect the UK Government got their hands on this during the post election period in the UK. It took time to get to this process and, while never without political drama and tension, negotiations to form a new Government now proceed without hysteria.

The second interesting element is the small parties. There were always a number of smaller parties in NZ that received a few votes and, occasionally, a seat or two in the Parliament. But their real influence on politics in NZ was very small. With MMP, these small parties now had a very real chance of being involved in the Government. This forced them to up their game and offer more complete and coherent policies. This both allowed them to win more votes and to gain more power in a coalition Government. There were certainly cases of small parties wielding disproportionate power in the Government (NZ First in 1996 is the most obvious example). However, as the politicians got used to MMP, this is far less likely. At the same time, the two major parties had a new challenge. In the early 00s, the National party lacked clear direction. As a result, it lost nearly half its votes to various smaller parties - either socially conservative or on the economic right.

This segues nicely into the main point of this post: all political parties are coalitions. In the 1980s, Reagan formed a grand coalition between the social conservatives and the economic right. This coalition has dominated US politics for the last 30 years. In the UK, a similar coalition was formed in the UK under Thatcher. Both countries used the power of this coalition to restructure their economies - and the world economy - in the 1980s. On the other side of the house, Labour's coalition was more diverse: labour unions, most minorities, intelligencia are all the main electoral support for the left of centre. These coalitions are made of diverse interest groups, ideologies and personalities. The Liberal Democrats count both socially and economically liberal among their ranks. Each party's policies and actions are the result of negotiations, trade-offs, compromises and so on that are part of forming and maintaining a coalition. And a party where these divisions become public is usually a party in trouble: Labour's performance for most of it's last term in Government was a perfect example of this, with the conflict between Blair and Brown.

So in many ways, a coalition Government is nothing new. What is new, for the UK, is that the coalition is public and the differences between the two major partners are visible. We still know very little about what is said behind closed doors; about how the internal negotiations within the two parties happen. There is a lot in common between the economic liberals and the economic right. But there's a lot of conflict between the social conservatives and social liberals.

I'm not sure how long this coalition will last and what the lasting impact will be. I suspect that the Liberal Democrats will suffer on two fronts. Their major goal in joining the coalition was to get some sort of electoral reform to ensure that their participation in a coalition Government was not a one-time event. However, the social conservatives in the Tory party are unlikely to support electoral reform and they have alienated much of Labour's left who saw them as an ally (or at least a friendly opponent) against the common, Tory, enemy. This will make achieving electoral reform much harder. At the same time, it's hard to see that their alliance with the Tories will gain them votes. Their own left - the social liberals - may feel betrayed by the party's alliance with the conservatives. So even if electoral reform passes, they will have to rebuild their electorate.

Coalitions are here to stay - they are an integral part of politics. I hope that the UK electoral system is changed so the coalitions are made a little more visible and public. Public coalitions make politics a more open, if more complex, game. At the same time, there is a need for the politicians, the electorate and the media to mature. This will take time, but it can be done. The question is, will it be done?

Saturday, 14 August 2010

NHS Funding

As part of my day job, I spent a couple of days this week looking at the Government's white paper: "Equity and excellence: Liberating the NHS". This paper outlines the Government's reorganisation for the NHS. The highlights (from a structural and funding perspective) are:
  1. GPs become the primary fundholders and, as Consortia, will buy the health-care required for their patients
  2. Strategic Health Authorities and Primary Care Trusts will be abolished
  3. Increased possibility of private provision of health care, including private hospitals within the NHS
The first two changes go together. At present, the Primary Care Trust (PCT) is the main NHS fund-holder for patients in their area. They purchase services from NHS providers to serve their community. Under the new model, GP Practices will group together to form a consortium that will purchase services from the providers for their patients. The reason for this change sounds sensible: they want the GP to be in charge of their patient's care. In this paper's view, being in charge involves being responsible for funding decisions. I'm not convinced for three reasons.

Firstly, when I visit a GP, I want them focused on my care. If they are also part of the process of working out how to pay for my care, this introduces a potential conflict of interest. Obviously, there are limited resources and there have to be compromises between who gets the best care. However, I'm not the medical expert, my GP is. I want them on my side. I want them fighting for the best care for me. Of course they won't win every battle for those scarce resources, but I don't want them to be the ones compromising.

Secondly, GP Practices are private enterprises and it is reasonable to expect that GP Consortia will be private enterprises as well. So this means that approximately 80% of the NHS funds will be controlled by private enterprises. It is also reasonable to assume that private enterprises will operate commercially - with expectations of profit. At the same time, all the existing NHS Trusts that operate hospitals will become foundation trusts - that is trusts that partially operate on a commercial basis and will be regulated on the same basis as private providers.

Thirdly, it's not at all clear how GP Consortia will be formed. The early estimates seem to suggest that there will be more GP Consortia than the current number of PCTs (there are currently 152 PCTs; estimates of around 300 GP Consortia seem common; in Oxfordshire, there is one PCT and there are six GP Consortia). This represents significant fragmentation of the funding markets. For large providers, like the John Radcliffe in Oxford, this means managing six funding relationships where there was previously one - hardly a more efficient approach.

It's not likely this situation will last. Market forces - mostly economies of scale - mean that this sort of fragmented market doesn't usually last. Consortia combine forces to enhance their purchasing power, which leads towards an oligopoly where a small number of large players emerge. This starts to look remarkably similar to the US model, with the GP Consortia taking the place of the insurance companies. The US model is the most expensive health care system in the world and delivers worse performance than the NHS. I'm not sure this is a model worth replicating.

Thirdly, it doesn't directly address much by way of the real problems. The NHS is a big and expensive organisation. However, the UK's health spending per capita is relatively low. The Government spending on health (as a percentage of GDP) is lower than other European countries - including the US! The percentage of total health care spending from private sources is lower than these countries. And the total per capita spending on health is significantly lower: approximately have that of the US. Putting all of this together, it seems that the NHS is significantly under-funded. It is not clear that these changes will increase the funding available to the NHS (see here for the source data). In fact, the Government is expecting to cut NHS funding by up to 20% - which is supposed to be achieved without cutting front line services. This funding cut is meant to be achieved by improving efficiency. The belief is that by commercialising the health-care relationship, this will produce increased efficiency.

Probably the best comparison is Canada. Canada spends 10% of it's GDP on Health, compared to 8.2% in the UK. In Canada, 70% of this money comes from the Government, amounting to 17.2% of Government spending; for the UK, 80% of all health spending comes from the Government, or 16.5% of Government spending. So Canada spends a little more than the UK on health, but their health outcomes are significantly better than the UK - cancer and cardiovascular mortality rates are much lower.

The Canadian model is a Government funded insurance model. Each province has a Government run insurance scheme, funded from taxes (either from general taxation or from a specific health insurance levy, similar to National Insurance). Healthcare providers are mostly private enterprises that submit claims to the insurer. This insurance is administered by the Government and automatically covers all legal residents of Canada - in many ways, it's closer to the PCT model adopted in the UK.

All of this suggests that the real problems with the NHS are underfunding and the implementation of the funding model. Comparing the US and Canada suggests that a publicly controlled funding is both more efficient and more effective than a private model. It's not clear that reducing the total funding and privatising the control of funding will address these shortcomings.

Tuesday, 3 August 2010


The Government's first attempt at crowdsourcing has been largely ignored, with no Whitehall departments substantially changing their policy (see The Guardian and The Telegraph - remarkable similar articles: the cynic is me wonders if they both used the same press release as the source).

This can be read in a number of ways. For some people, this is a failure of democracy. In this view, democracy is about doing the will of the people. The Government used this approach to survey the will of the people, then chose to ignore it. That would be a valid argument, but for two faults. Firstly, democracy isn't really about the will of the majority of people. It's about making a government accountable to the people. But a democracy also has to respect the rights of all people. Without this, democracy can merely be another form of totalitarianism, enacted by the majority against the minority. Even if that were not the case, a few thousand - or even a few million - comments are not a majority. The second issue is eloquently captured by The Register. Comments on websites are notoriously parochial and ill informed (a criticism that can justly be extended to many blogs...). A plumber who has lost work to Polish competitors tends to focus on their Polishness, ignoring the fact they might be cheaper, more reliable or better. There may be some good, well considered comments there - but separating finding them is not going to be an easy task.

So, why did the Government do this? If this was a PR exercise to give the people a sense of involvement in Government, then it seems to be a waste of time. The comments were merely used as a way of shaping the spin to justify policies that had already been decided. As such, it's more likely to have a negative effect and further alienate the electorate. I doubt, for example, the response on Europe will satisfy any Euro-sceptic and they will continue to hate Polish plumbers for being better plumbers.

My guess is this is a Liberal Democrat idea. The idea that people should have more input to Government is a good one and consistent with that party's ideology. It is, however, quite alien to both the traditional Tory party and to the civil service. It's also a little naive to take this particular approach, given the almost universal experience of newspapers and their comments section. I'm not sure if this is a poorly thought out approach or poorly executed, but in either case I suspect it has done more harm than good.

Monday, 2 August 2010

Motives and Money

I saw this video a few weeks ago, posted by RSA Animate (I found it from a link posted by @ericschmidt of Google). It was bought back to mind when I read this FT blog post. The whole video is well worth a watch, but I want to focus on one aspect.

The video generally challenges the idea that people are motivated to work harder by money. That particular idea is pervasive and almost universal in modern corporate thought. It's no mystery why this happened. Most people are aware that economics assumes that people are self-interested. But what is less often explained is that they are interested in. In classical economics, people are self-interested utility maximisers. Utility is the economic measure for the satisfaction derived from a particular behaviour. In economics, it's a relatively short step from utility to value and from value to money. So if money and utility are the same, it's easy to see that people will behave in ways to maximise the money they make. If that's all true, then I need to pay someone for the behaviour I want and I will get it.

There are a number of problems with this view. The RSA Animate clip talks about one of these: that assumption just doesn't stack up against the empirical evidence. Money is not a generic motivator: it motivates people under specific circumstances. For example, when you don't have enough money (however you define that), then the ability to earn more will motivate you to try and earn that extra. Another case where money motivates is when choosing between jobs. If given the choice of two jobs, I'd look first to the job that paid more. If the pay gap was large, then the lower paying job would have to be significantly better in other ways for me to consider it.

Another point is hinted at by RSA Animate: they show evidence that pay for performance works with simple, mechanical tasks but doesn't work when tasks require cognitive skill. This isn't very surprising, and there is a lot of evidence for this finding. In a sense, pay for performance is a form of behaviour modification, where pay (response) is linked to behaviour (stimulus). Behaviour modification works best when the link between the stimulus and response is immediate and unambiguous. You can achieve this with simple tasks. But for more complex tasks, that link breaks down.

The final factor, which isn't in the video, is that money is what James March and his colleagues called a garbage can. This is a decision making model, where decisions tend to attract problems, which all get dumped into the garbage can. There is often no real relationship between the solutions and the problems, apart from the fact they all sit in the same organisation. For example, if you have a disenfranchised and unmotivated workforce, this could be a result of a number of different factors: company culture, poor management, a few disaffected staff, or any one of hundreds of other problems. As a result of all these problems, people complain. One of their complaints may be about the rate of pay, but this isn't always the real problem; and it is rarely the only problem. But pay is relatively simple to change - at least compared to the effort involved in improving management or changing company culture. Conversely, if you run a good, happy workplace, then you don't need to pay the highest wages to satisfy your staff.

So, money is a motivator, but not the simple motivator assumed by economic theory. The Welfare reforms proposed by Iain Duncan Smith take the relatively simple assumptions of money as a motivator and use it to reform the welfare system. The problem is, this assumes that the presence of benefits is a disincentive for people to enter work. The system is being re-organised to reduce this disincentive (and, as the FT points out, this will only be partially successful). The problem is this approach is based on an ideology: that money motivates people to work. This ideology just doesn't stack up against the empirical evidence.

Wednesday, 28 July 2010

Speed Cameras

The Oxfordshire Council have turned off speed cameras in an effort to save money.

Surely this now suggests that speed cameras do not generate a profit. If they did, then surely the smart move would be to add more speed cameras. I wonder how many people claiming that speed camera are simply revenue gathering devices will reconsider their position? If their position was rational and based on facts, then this decision would never have been taken. If, however, their position was merely hyperbole and their own prejudice, then they'll probably feel pleased, even though they've been proven wrong.


I'm not sure how often I'll actually blog, but I will start now. It'll be a random collection of things that interest me - and for those who know me, the combination will be very random. At first glance, I suspect it'll include things like films, language, F1, books, music, science, philosophy, management, politics, dancing, TV, rugby and culture.

But that list is by no means exhaustive.