FIVE FALSE TRUTHS

13 Dec 2016

Imagine that your morning post contains an envelope that has your name and address written by hand in block capitals. Inside is a note, written by the same unknown hand that says, “YOU ARE SMELLY”.

What do you make of that? For a moment you will regret having two helpings of chilli con carne last night and you will think back to last Thursday when you had a shower. But then you will start wondering about who could have sent such a note. What kind of strange person would bother to take the trouble to deliver such childish (and doubtless unjustified) abuse. What kind of sinister creep does that? Is this the start of something that could escalate? Will it end with a chalk line on your floor marking the position of your dead body when it was discovered?  

Much of what passes for “social media” on the internet is effectively a worldwide digital version of an anonymous “YOU ARE SMELLY” note. And once you have asked yourself what sort of person spends time commenting, usually negatively, on anything that takes their fancy, with their ignorance protected with the cloak of anonymity, you must then come to a more awkward question: who in their right mind takes any notice of this stuff?

It is certainly the case that corporations and politicians manage their Twitter and Facebook (and doubtless many other apps that I’ve never heard of) identities carefully. They employ people to try to ensure that their public face is shiny and smiley. Television channels read out texts and tweets to give the impression that someone sitting at home sending messages to the TV is not sad at all but is really a member of an upbeat community.

Everyone is frightened of provoking a Twitterstorm, defined on Wikipedia as “a sudden spike in activity surrounding a certain topic on the Twitter social media site”. Sadly, Twitterstorms are frequently responses to someone questioning orthodox or just populist opinion. We pretend to revere people who challenge consensus but in practice they are fair game for mob anger.

(I appreciate that Donald Trump is the exception to the above: he is far from anonymous, he does not fear a Twitterstorm and challenging consensus is his brand: maybe he is a game changer).  

So, take the case of GM foods. Plenty of people are passionately – one might say fanatically – against genetically modified crops. I recently attended a lecture by a person who has earned these initials after their name:   MA MD PhD FFPM FRCP FMedSci FRSE. During the talk this person made the statement that people who label GM crops as “Frankenfoods” have been responsible for “dozens of millions of deaths”. I am protecting this person’s identity because I am of course frightened of provoking a Twitterstorm. 

So, to the real topic of this post. There are many “truths” that are either badly flawed or just simply wrong. Some believe them, many pretend to believe them or just duck them (“you can’t say that because it’s not PC)”. Here is a selection of five, in no particular order.

1) “THE UK NEEDS TO DEBATE ITS BREXIT NEGOTIATING POSITION”

The dictionary defines a negotiation as ‘a discussion aimed at reaching an agreement’. I would add that a true negotiation demands that the outcome must be unknown. Only in this way can all parties have some leverage. Everyone must be able to walk away from the table.

The terms by which the UK leaves the EU will not be negotiated by the UK. The will be negotiated between the 27 remaining nations and then dictated to the UK. If the UK does not like those terms it does not have the option of saying “well, if you’re going to be like that, we’re staying!” We cannot debate our negotiating position because it does not exist.

It is of course obvious that any gratuitous nastiness on the part of EU nations is likely to come back and bite them but that is a completely different story. And while we’re on this topic….

2) “THE UK HAS THE MOST TO LOSE FROM A TRADE WAR WITH THE EU”

I have seen a letter published in a newspaper explaining, as if to a particularly slow-witted child, that 44% of UK exports go to the EU but only 8% of EU exports go to the UK (NB if you exclude exports between EU countries themselves it rises to 17%). Why not go further? The rest of the world accounts for 100% of UK exports but the UK represents just c2% of rest of the world’s total exports. Following this logic takes us nowhere and tells us nothing.

The public debate on this topic takes as its premise that international trade is run by governments. This idea is simplistic garbage. International trade takes place between international businesses. It is true that politicians frequently try to introduce legal restrictions, quotas and tariffs that they believe will benefit their own constituents and that sometimes these are negotiated on a tit-for-tat basis with politicians from other countries and then published as “trade agreements”. These are impediments to trade.

I doubt if any single person has ever read a trade agreement drafted by the EU. I know that sounds like a ridiculous claim but I tried to read one once. If you want, try this one between the EU and the Southern African Development Community Economic Partnership Agreement States (South Africa, Botswana, Lesotho, Swaziland, Namibia and Mozambique). It is 2,118 pages and it is exhaustive enough to include rules about the export of space rockets. If this agreement is a boon to international trade then the election of Donald Trump might just be a great triumph for the feminist movement.

It is said that Europe will steal financial services from London. That might be true if a) Europe were an attractive place into which to sell financial services and b) international banks were run on behalf of their shareholders. Luckily, neither a) nor b) is true. With regards to b), large banks are run on behalf of their employees. With respect to Frankfurt, Milan, Amsterdam, Paris etc, I think it unlikely that there is going to be a stampede of English-speaking bankers relocating their families to any of these destinations.

3) “STUDENTS: THE MORE THE BETTER”

When I went down from Oxford in 1983 I had a job courtesy of the university careers’ office. To be truthful, it wasn’t too difficult to get a job even though the economy was just beginning to improve after the chaos of the 1970s. I quickly learnt some interviewee techniques such as researching and showing some interest in the work for which I was applying and implying that my dearest wish was to emulate the success of the person interviewing me. But the factor that really worked for me was that there were only around 80,000 of us graduating that year plus 20,000 who had completed further degrees (and would mostly have been aiming higher than the jobs for which I applied).

It is true that having a degree (even a poor one like mine) was a real boon in the 1980s. There were about the same number again of people emerging with diplomas and vocational qualifications from Polytechnics in 1983. After 1992 polytechnics became new universities, so the numbers graduating today are not directly comparable with 1983. Nevertheless, in 2011, someone leaving university with a first degree was job hunting along with 350,000 others. Moreover, the rise in people with further degrees was truly astounding – from 20,000 to 194,000. 43% of children now go into higher education. Every day, in every way, things have apparently been getting better.

The perceived added value of degrees, as well as their growing number, justified turning university education into a largely privately-funded enterprise. Students consequently need to find £15,000 or more per year to cover fees, accommodation, food and whatever ever else it is that they consume these days. Very few 18 year olds are good for the security on a £45,000 loan so it has been necessary to sell them sub-prime loans. Some will pay a high price for their education, subsidizing the large numbers who will default on their loans. That’s how sub-prime schemes work.

It has been well publicized that new undergraduates and postgraduates are now 56% female.  This is not a UK phenomenon: the average across the OECD is 54%. Women doing education degrees (i.e. with a view to becoming teachers) outnumber men by 6:1. Some people think that education is slowly becoming a female enterprise from one end to the other. Well, why not?

Women are also beginning to dominate healthcare: 57% of places for medicine and dentistry, 59% for biology, 81% of subjects allied to medicine (which includes nursing) and, most surprising to me, 73% for veterinary studies (they shoot horses, don’t they?). Many people wonder whether this trend has overshot but not many dare say so in public because they fear being called sexist.

Aside from the fact that it seems quite a good idea that the medical profession should reflect the population that it serves it has also been suggested that women will be more inclined to work part time as they reach the child bearing and caring years of their lives and that this implies a future strain on resources. And the NHS needs more strains on its resources like you need a hole in the head. A female peer who dared say this a while ago was Twitterstormed into issuing a public apology the next day.  

The spirit of educational inquiry should support those who are sceptical about the continuing expansion of further education. Don’t forget that there is a multitude of people employed in further education who have an interest in killing any such debate. Moreover, UK universities are in the middle of a spending boom now to attract yet more students. 

4) “EVERYONE LOVES THE NHS”

More than twenty years ago, Nigel Lawson wrote, in his memoirs, that the NHS is the closest thing that the English have to a religion and implied that many of the people who work in it believe themselves to have been ordained. It is rare to hear any news item about the NHS on mainstream media without someone saying that everyone works very hard under great pressure and with limited resources. Stories usually include interviews with representatives of one of the 250 NHS charities or the dozen or more trade unions or the twenty or so affiliated organisations of various kinds.

Perhaps it is the case that NHS employees deserve to be regarded as morally superior to the odds and sods who do less well paid work with poor job security and much inferior pensions.  If so, well done them. But my point is that the National Health Service is not highly valued by the citizens of the UK.

The brutal truth is that if you give something away for free your customers will happily adopt exactly that valuation. “Free at the point of use” is a very attractive offer but it does not make people love the NHS. Instead it makes them take it for granted. It makes them believe that no demand of their own is too much trouble for the good old, saintly NHS.

Here is a picture that I took last month. That’s 47 missed clinical appointments in a single week. And the irony is that you had to show up to see the notice.

The NHS is surely the recipient of the most comprehensive and largely uncritical lobbying of any UK institution. It will always be in a funding crisis because the demands from the public are both high-handed and theoretically infinite. So here’s the most uncomfortable truth of all. If the charities, unions, pressure groups and watch dogs really held the NHS in high esteem they would be lobbying for ways in which patients could be made to value it properly.

Perhaps they could start by charging for missed appointments?

5) “WE NEED TO BUILD MORE HOMES”

I have written about this before and apologise for returning to it but it drives me nuts. Allow me to recap with a history lesson.

To understand the demand for houses it is a good idea to look at birth rates. Birth rates in the UK since the beginning of the last century have been noticeably affected by wars and recessions. In the UK during the 1914-18 war it really was the case that most of the young men went away, many never to return. Births rose from 787,000 in 1918 to a celebratory 1,126,000 in 1920 (still an all-time high). The economic problems of the 1920s and 1930s rather put a restraint on that sort of business and then came the 1939-45 war. In 1941 births were even lower than 1918 (695,000) but they bounced again in 1947 (1,025,000).

Then followed what are known as the “baby boomer” years. The last really high year was 1964. People who complain about baby boomers getting their hands on all the stuff are over-simplifying as people do but it is a remarkable fact that the birth rate fell every single year from 1964 until a trough of 657,000 in 1977 (I remember it well). The 1970s may be experiencing a modest nostalgic revival now, but it was an inflationary economic horror story and the only thing that was free was the contraceptive pill.

Births have fluctuated since then but always at a lower trend that the baby boomer years. And if you are 40 next year you are even more unusual than you thought.

After the second world war much of the UK’s surviving housing stock was inadequate. The Conservatives won the 1951 election by pledging to build 300,000 houses a year. Their manifesto stated that: “Work, family life, health and education are all undermined by crowded houses”.

In those days the government was instrumental in house building. Raw materials like steel came from industries that had been nationalised by the Attlee government after the war and necessary supplies had to be guaranteed. Planning red tape was cut and half of all new houses were built by local authorities that could borrow from the central government at subsidised rates and pay back through future rental income.

It was an impressive alliance of state and private investment and it probably helped to keep the Conservatives in power until 1964. This may be why so many politicians today think that housebuilding is a guaranteed vote winner.

I have said that the post-war housing stock was inadequate. I assume that as the years and the birth rate progressed some people were able to do arithmetic. Any year’s births give you reasonable grounds on which to have stab at how many 18 year olds there will be in 18 years’ time. So by 1960 it must have been obvious that the population was growing and that a growing proportion of it was going to be of working age. Most economists will tell you that this is a key component of prosperity.

From a low base, GDP grew by 40% in absolute terms from 1950 to 1960 and by 35% from 1960 to 1970. And the British began to become a nation of home owners. It may seem obvious now that property was a great investment. Great investments are always obvious in retrospect.

The 1949 Rent Control Act and the 1954 Landlord & Tenant were designed to curb the activities of slum landlords but they also served to make private letting less attractive (it is not easy to balance the rights and interests of both parties) thereby restricting the supply of homes for rent. Buying one’s own home became increasingly viable. I think it also right to point out that the UK’s respect for property ownership has a long and largely unblemished history. Compare and contrast with the rest of Europe.   

So the UK became a home-owning and then property-investing democracy with the result that, decades on, politicians are utterly conflicted, being simultaneously terrified of falling house prices and of denying young voters access to home ownership.  

As I have written elsewhere, the Blair government commissioned a report from Kate Barker which tried to tackle the fact that house prices were becoming unaffordable for people on ordinary incomes (this was in 2003!).

Barker concluded that “reducing the long-term trend in house prices to zero real growth would imply an additional 240,000 homes per annum across the UK. To lower real trend price to 1.1 per cent, 145,000 more houses per annum might be needed, about double the current private sector housing output of 150,000 units.”

The emphasis of this report was about building homes with the specific intention of restricting price rises. But of course it was presented as a report about housing needs. And this fiction has continued ever since, despite the fact that its pursuit bankrupted half the housebuilding industry in 2008.

If we assume, reasonably, I hope, that most first time buyers of property between now and 2030 will be in the age group 30-59 we can pretty much know how many extra of them there will be. According to the ONS the answer is 292,000 or c.20,000 a year. So when the housebuilders are regularly and routinely berated for building only 150,000 new residential properties a year, you might reasonably suspect that they have done those sums.

There are expected to be nine new over-75s for every one new 30-59. I am buying McCarthy & Stone shares. We do need to build more homes – retirement homes.