In defence of universality

Writing for the Independent, Ben Chu is not happy about proposals to extend public support for social care to the asset-rich. Universality, it seems, is terribly unfair. Ben’s main complaint is that it will help a generation of asset-rich pensioners to pass on even more, exacerbating the increased importance of inheritance recently highlighted by the IFS. I get Ben’s concerns, but his argument is muddled and he ends up attacking ideas I think he should support.

Before I explain why, let’s separate two issues. Ben is right to point out that demand for social care is projected to rise and that this will cost more money. It’s actually worse than Ben lets on, since the Treasury has been slashing local government funding. Social care budgets are falling at a time when they need to be rising. This does not seem like a sustainable situation.

However, I’m not sure anyone is suggesting that the “solution to the crisis is to scrap means testing and to load more costs on to taxpayers in order to protect the inflated housing inheritances of the already well-off”. Whether more support should be provided to people who currently use their assets to pay for care is a separate question, and this is where Ben’s article misses the point.

Risk pooling

To see this, we need to address a concept that is fundamental to this question, but is entirely missing from Ben’s piece: risk-pooling. This is best illustrated by an example.

Ben tells us that one in ten older people will face costs of over £100,000 in their lifetime. For simplicity let’s imagine that out of every ten older people, one will spend a few years in a care home costing £100,000 while the other nine will die without any significant care costs.

Now take ten people who each retire with £150,000 in housing assets. Under the current system whichever of these people gets sick enough to end up in a care home will have to sell their house and spend two-thirds of the value on care home fees, while the others will not have to pay a penny. Since social care needs are unpredictable, none of them know ahead of time if they will be the unlucky one.

Now imagine another system where each of these people agrees to pay £10,000, either up-front or from their estate after death. This money will be used to pay the social care costs of whichever of them ends up in a care home. Economists usually assume that people prefer this option because they are risk averse. Indeed, this is why we buy insurance in other areas of our lives and why we pool the risk of health care costs through the NHS.

We can buy many types of insurance privately, but others are best provided publicly. Health insurance is the classic example: a set of well-known market failures mean that private health insurance works badly, so all advanced countries (except the USA) provide it primarily via the state. Social care insurance has some similar characteristics. In fact, it’s virtually impossible to buy at the moment because there are very few products on the market in the UK. So if the government can help people to pool their risks, surely this is a good thing.

This is what Andrew Dilnot’s proposals are about. In fact, he proposed a rather modest version whereby risk pooling only applies to people who have already spent tens of thousands on social care. As Ben notes, these proposals have a (fairly modest) cost.

This is all predicted to cost around £6bn to the public purse over five years. And remember: those billions of pounds would otherwise have been extracted from the property assets of pensioners.

There’s a word missing from that last sentence. The billions of pounds will be extracted from the property assets of sick pensioners. Pensioners who don’t end up in care homes won’t have anything extracted from their property assets.

Distributional consequences

Notice that in my example above there is no distributional impact. I’ve taken ten equally rich people and shared a risk between them. The total amount of money passed on as inheritance hasn’t increased, it’s just more evenly distributed. Things are a bit more complicated in reality, but it is important to remember that the Dilnot proposals are about how to structure a risk-pooling scheme, not where to get the money from to pay for it.

So when Ben says:

That’s a £28,000 boost to the inheritance of the children, ultimately courtesy of the taxpayer.

I’m not quite sure who the “taxpayer” is. If we are talking about the people that pay the most income tax, then (insofar as there is a correlation in earning between generations) we are talking about many of the same people who stand to inherit significant wealth from their parents.

But who says we have to fund this from income tax? It may be politically toxic, but if you are worried about the increasing importance of inheritance, you could argue for increasing inheritance tax. This would get you pretty close to my example above – in fact, it would be much more redistributive, as inheritance tax is only paid by the very richest. Alternatively, you might want to suggest changing the tax rules around pension lump sums. These possibilities get only a passing reference in Ben’s article.

Political constraints notwithstanding, we can get pretty much any distributional effect we want by choosing where the money comes from to pay for reform. But we really shouldn’t be trying to solve our distributional problems through the social care system. This system is there to make sure that people get the care they need and to limit the financial disadvantages they face as result of becoming sick. As a way of getting at the assets of old people it is pretty terrible. If we care about distributional effects (and we should) we would better off looking at the tax system.

Taxing wealth is hard. It’s tough to figure out how much people have when they are alive and inheritance tax is unpopular. The IFS tells us that the importance of inheritance is increasing, which is hard to see as a good thing. But – at risk of repeating myself – letting the one in ten old people who become severely dependent spend down their assets while letting the other 90% keep everything is a shoddy way of dealing with it.

An assault on universality

The arguments in Ben’s article aren’t specific to social care. The same arguments can be used to attack universality in all its forms. Ben could have made all of the same arguments against universal coverage for health costs – after all, it is mostly old people who use NHS services and mostly working age people who pay for it. Why not ask them to sell their homes to contribute the cost of their latest operation? Except I don’t think that Ben, or many other people, would make that argument.

Universality does involve governments providing services and support to people who have money. It’s not how most of the public sector works in the UK, but it is not “pro-rich” – in fact, it’s probably the opposite. Its corollary is higher taxes, so the rich pay for it, while the main beneficiaries are the people who fall just outside the criteria of means-tested systems. It is no accident that the countries that we see as the most “progressive” – such as the Nordics – have a wide range of universal benefits and high taxes. It is also arguable that means-testing is divisive, splitting people into those that pay into the state and those that take out.

Priorities – a caveat

In defending universality, I don’t mean to say that it is always better. By all means give me an argument that political limits on taxation make means-testing necessary to achieve certain distributional aims. Please, tell me that wealth taxation is so hard and inheritance such a problem that letting the sickest 10% of old people use up their assets is the lesser of two evils. I am listening.

Nor do I mean to say that universal coverage is the priority for the social care system. Cuts to budgets mean that councils are struggling to fund even the means-tested system that we have now. If we can’t even support the poorest in society then a lack of risk-pooling may not be our most pressing problem.

But if we are going to talk about universality, let’s be clear about what it means. It is not a hand-out to the rich and it is not about protecting people’s inheritances – any more than the NHS is either of those things. Coupled with a fair tax system, it is a progressive goal and one worth defending. I invite Ben to reconsider which side of the argument he is on.

Advertisements

Austerity and Brexit in England

Ever since the UK voted to leave the EU, there has been a steady stream of articles and analysis trying to figure out why. Clearly there is more than one answer: different people voted for Brexit for different reasons. Nonetheless there are some patterns. By analysing the vote share by local authority, the Resolution Foundation found that areas with higher employment rates, larger student populations, more people with degrees and higher social cohesion were more likely to vote remain. Areas with more old people, more homeowners and those that have only recently seen an increase in immigration were more likely to vote leave.

But one possibility has proved controversial: was austerity partly responsible? Chris Dillow thinks it’s possible. Austerity contributed to stagnant incomes, which may have increased resentment towards “elites”, and to a decline in public services which the leave campaign blamed on immigration. Chris’ thesis received a bit of stick on Twitter from Giles Wilkes and Rupert Harrison.

In one sense, they have a point. The Resolution Foundation’s analysis looked at how average incomes in different areas were related to the share of votes for leave. While the level of income was important, recent changes were not, suggesting that the income effect isn’t related to austerity. But in another way Chris might be right. Stagnating incomes may be an indirect effect of austerity, but a rather more direct effect (which is not included in the Resolution Foundation’s analysis) is the deterioration in public services.

Austerity has led to cuts in many public services, but local councils – who take out the bins, run the libraries and provide social care – have been hit particularly hard. Local government spending power[i] in England fell by nearly 15% in real terms between 2011/12 and 2015/16, but the impact wasn’t felt equally in all parts of the country. Areas that collect a lot of council tax relative to their total spending got off lightly – Surrey’s spending power fell by less than 5% in real terms – while those that rely heavily on central government grants have been hammered – Liverpool City Council’s spending power fell by nearly 23%.

Big drops in spending power mean closing libraries, fewer bin collections and cuts to social care. It seems plausible that in areas where public services have deteriorated further, the argument that immigrants are overwhelming these services – as championed by the Faragist wing of the leave campaign – may have more traction.

The chart below shows how changes in spending power in local authorities in England[ii] between 2011/12 and 2015/16 are related to the share of votes cast for leave.

Change in local government spending power (horizontal axis) versus share of votes case for leave, upper-tier local authorities in England

Change in local government spending power (horizontal axis) versus share of votes case for leave, upper-tier local authorities in England

You might look at this and think there is no clear correlation – but the distribution is far from random. It looks to me like there are two things going on: a negative correlation for most areas, plus a cluster at the bottom left that seems to behave differently. There are no prizes for guessing where most of these outliers are located: they are London boroughs.

The next chart shows the same data with inner (blue) and outer (red) London boroughs highlighted. London voted differently to the rest of the country. Inner London (and some “outer London” boroughs such as Newham) saw big cuts in local government spending, but voted overwhelmingly for remain.

Change in local government spending power (horizontal axis) versus share of votes case for leave, upper-tier local authorities in England
Blue dots are inner London boroughs, red dots outer London

Change in local government spending power (horizontal axis) versus share of votes case for leave, upper-tier local authorities in England

Not all London boroughs followed this pattern. Havering had a relatively small drop in local government spending, but voted heavily for leave. This shows the limitations of using “London boroughs” as a sociological grouping. Havering is the most easterly London borough and surrounded on three sides by Essex. It is just a half hour’s drive from Newham, but a very different place.

Just as not all of London followed a “London-like” voting pattern, not all other areas followed an “unLondon” voting pattern. If we exclude London from the chart, there are still a few stray dots hanging around in that bottom left area – areas that, like many parts of London, voted remain despite large council cuts. Again, there are no prizes for guessing where these places are: successful cities like Liverpool, Manchester, Bristol and Brighton.

Change in local government spending power (horizontal axis) versus share of votes case for leave, upper-tier local authorities in England excluding London

Change in local government spending power (horizontal axis) versus share of votes case for leave, upper-tier local authorities in England excluding London

So it seems that we can divide England up into two groups: “London-like” areas, which include most London boroughs and some other successful cities; and “unLondon”, which is everyone else. Many London-like areas have seen big cuts to local services and still voted remain. But when we look only at unLondon[iii], we see a different pattern: areas with bigger cuts to local services cast a greater proportion of votes for leave.

On the basis of this, it seems quite plausible[iv] that austerity was one of the drivers of the Brexit vote – but this effect was mediated by cuts to local services, rather than stagnating incomes.

Change in local government spending power (horizontal axis) versus share of votes case for leave, upper-tier local authorities in unLondon

Change in local government spending power (horizontal axis) versus share of votes case for leave, upper-tier local authorities in unLondon


[i] Calculating trends in council funding is tricky, because responsibilities of councils change year-to-year. When responsibilities are added, extra money might be attached to them but this doesn’t ease the pressure on other services. Luckily, the Department for Communities and Local Government publishesspending powerestimates which (for any two adjacent years) try to take account of these changes. By cumulating the year-on-year changes, and adjusting for inflation, we can get a reasonable estimate of the changes over time in funding for local services.

[ii] The data are for upper-tier authorities. For two-tier areas (the shire counties) the spending power of the districts within each county has been included to make the figures comparable with unitary authorities.

[iii] For the purposes of this analysis, only Liverpool, Manchester, Brighton and Bristol have been excluded from unLondon, since they are the most obvious outliers.

[iv] There are two important caveats here. First, to believe in this correlation, you have to believe that the London/unLondon split makes sense and isn’t just a convenient choice to generate a spurious correlation. For me, the story works, but you will make up your own mind. Second, this analysis only looks at one variable, so it’s possible that the pattern is actually driven by something else, such as difference in average incomes. The Resolution Foundation’s work deals with this problem by including a wide range of variables – but nothing on cuts to local services. I’d like to see them add this to their analysis.

What the shared parental leave survey actually tells us

A recent survey, conducted by My Family Care and the Women’s Business Council, asked employers about take-up of shared parental leave in the UK. It has led to much hand-wringing. The hands of the mainstream press were the first to be wrung: why have only one percent of men taken up shared parental leave? What could have led to such a catastrophic policy failure?

For most men, the answer is of course that they haven’t had a baby in the past year. The majority of employers responding to the survey weren’t able to identify how many of their male employees had become fathers, so the take-up rates were presented as a proportion of all male employees – and widely misinterpreted by the press.

And so the hand-wringing quickly spread to more numerate commentators, who rightly bemoaned this as one of the worst cases of statistical misreporting in living memory. Factual corrections were made to some of the offending articles, but the headlines still pronounce the policy a failure – the proportion of men opting for shared parental leave is “tiny”.

*           *           *           *           *

This begs a question: tiny compared to what? Sure, 1% of men is tiny compared to all men, but that isn’t the relevant comparison. If 1% of men were to die tomorrow from a mysterious plague, tiny would be a rather inappropriate description of events.

A more useful comparison is with the proportion of male employees who have had a baby in the past year. Although this information isn’t readily available, we can make a reasonable estimate. On BBC Radio 4’s More or Less, Tim Harford gives us a back-of-the-envelope figure of around 5% – which seems to be the total number of babies born divided by the total number of male employees. With a larger envelope, we can do a bit better.

Tim’s estimate is probably higher than the real figure, since not all men who have babies are in employment. What’s more, both the likelihood of having a baby and the likelihood of being in employment are related to age. The ONS has data on both [i].

Men becoming fathers and employment

If we mash these numbers together, it looks like around 3.5% of male employees had a baby in 2014. So how does that compare to the results of the survey? Well, although the survey was widely reported as saying that 1% of men took up shared parental leave, these are the only numbers I could find in the report:

Parental leave survey extract

A quarter of employers didn’t know what proportion of men had taken shared parental leave – which seems strange in itself. But let’s ignore this group and look in a bit more detail at those employers that did respond. A histogram seems like a more informative way to look at the data.

Parental leave takeup histogram

Of the employers that could provide a figure, more than half said that not a single male employee had taken shared parental leave. This seems a worrying statistic. But we need to remember that there will be random variation between employers, particularly when we are looking at small companies. 15% of the employers surveyed had fewer than 50 employees. If around half of their employees are male, that’s fewer than 25 men per employer. A rough calculation [ii] suggests that, in any given year, more than half of these employers wouldn’t have a single man eligible for shared parental leave. Larger organisations are more likely to have new fathers in their workforce, but there will be a few that don’t.

Even if take-up were 100% among new fathers, we would expect around 10% of the employers surveyed to report that no male employees took shared parental leave. If the take-up rate were 10%, we’d expect over 45% of employers to return a zero.

*           *           *           *           *

So what should we make of these results? Overall, it is hard to defend the negative tone of the coverage of this survey. Clearly there are a lot of fathers not taking shared parental leave, but a decent number are. For a newly introduced policy, this could be considered a modest success.

But even accounting for random variation, the number of employers reporting no men taking shared parental leave seems high. On the other hand, a non-negligible number report quite high rates. This suggests systematic differences between organisations – perhaps some companies or professions are more accepting of fathers taking time off than others.

That said, what we should really conclude from this exercise is that we need better data. The published analysis of the survey is inadequate, but I suspect there is richer data lying behind it. My Family Care and the Women’s Business Council should release this data publicly so that others can analyse the impact of the policy in more detail. And if the government is serious about implementing policies to improve gender equality in the workplace – and the home – then it should monitor the impact of these policies properly, rather than leaving it to third parties to conduct flawed surveys.

 


[i] The data I’ve used on employment rates is for both sexes. I’m sure the ONS has the data for men only, but I simply cannot spend any more time searching for data on their atrocious website. By using data for both sexes I’ve implicitly assumed that the age profiles of the male and female workforces are the same. In reality, I guess the female workforce might be younger (with some women in their 30s and 40s dropping out of work to raise a family). If so, my estimate for the proportion of men in the workforce having babies will be a bit too high.

[ii] In case you’re interested, I’ve modelled this as the sum of a set of binomial distributions with p=0.035 and n=the size of the employers who responded to the survey.

 


UPDATE

Via @wonkypolicywonk, it seems that the survey *did* actually collect some data on the proportion of new fathers who took up shared parental leave. As well as asking employers, they also spoke to “over 1000” employees and found out that, of male employees that had a baby in the past year, around a third took up shared parental leave.

Parental leave survey extract 2 - employee responses

This is hidden away at the back of the report, which instead takes its headline figures from a survey of employers. There is some justification for this. The survey of employees was very small: 1000 employees would probably equate to around 18 new fathers, of whom six have taken up shared parental leave. This is not a big enough sample to base any conclusions on, but you would think that these results might have led the researchers to consider whether it was misleading to say that “the overall take-up of SPL is still very low, i.e. less than 1% of men have engaged”.

Meanwhile, the sample of 200 employers contained some large organisations, with a total workforce (by my estimate) of over 200,000. We would expect this to include more than 3,500 new fathers, so this sample could the basis of some better analysis. It is quite plausible that analysis might draw a similar conclusion to the small sample of parents: a take-up rate of around a third among new fathers is entirely consistent with 1% take-up among all male employees, provided our estimate that 3.5% of male employees become fathers each year is about right.

But this analysis hasn’t been done, and it seems unlikely that it will be unless My Family Care and the Women’s Business Council release the survey data for others to analyse.

 

Three golden rules for discussing progressivity

What does it mean for a policy to be progressive? The way this question is addressed by the media (and often by government) can be infuriating. It’s got to the point where I am tempted to say the term should be banned, but instead I am going to make one last attempt to clarify it by proposing three golden rules.

I was reminded of this issue when reading Jo Maugham’s analysis* of the impact of the new “social care precept”. This is essentially a £2bn rise in council tax, a significant proportion of which will be paid by poorer households. Here are the figures that Jo gives:

Who pays what in council tax

So is this tax progressive or not? Well, rich people pay more, and for some that’s good enough. Fraser Nelson, for example, likes to point out that “the top 3,000 taxpayers in Britain stump up more income tax than the lowest-paid 9 million”. It is more common to look at how paying tax affects the living standards of different groups by comparing tax paid as a proportion of income. By this measure, council tax is regressive.

This is as far as the discussion usually goes. But both of these comparisons have no basis in reality – unless that reality involves collecting these taxes and throwing the money in the sea. The fact is that this money will show up somewhere else, either as increased spending or lower taxes. Which brings me to my first golden rule: the distributional effect of a policy change can’t be assessed without looking at both sides of the equation.

Since this is called the “social care precept”, we might think that it will lead to increased spending on social care. It’s not easy to find numbers on how social care spending is split between income groups, but modelling done in 2011 for the Dilnot Commission (see figure 11 here) made some estimates. Reading the numbers off the chart, I get something like this.

Council tax and social care by income group

Social care spending is more heavily weighted towards poor people than council tax collection, so lower income groups make a net gain from this policy. That is, the introduction of this policy increases the total amount of redistribution that the government does, which is the only sensible definition I can think of for the word “progressive”, with reference to a change in policy.

Gain from spending council tax on social care

But is higher spending on social care really the effect of this policy? That is, if it weren’t for the social care precept, would we see lower social care spending? You could argue that social care spending is going to rise either way, since we’ve got more old people than ever. If it’s not paid for by council tax rises it will be paid for by higher taxes elsewhere, higher borrowing, or cuts to other services.

So this is my second golden rule: identify a realistic counterfactual. We need to know whether the policy leads to more redistribution than what would otherwise have happened. That “what” can have a huge impact on how we view the distributional consequences.

Let’s say we believe that without the social care precept higher social care spending would have to be funded through an increase in income tax – or perhaps higher borrowing now, funded by future increases in council tax. As Jo points out, income tax is much more targeted on rich people than council tax. Here’s the net effect of raising £2bn through council tax instead of income tax.

Gain from raising council tax vs income tax

This policy change would give money to the richest 20% at the expense of everyone else. I think we can all agree that’s regressive. So depending on the counterfactual, the social care precept is either highly progressive or highly regressive. Take your pick. We need to decide which counterfactual is more realistic. In this case, the first one is probably closer to the truth (raising income tax and borrowing more are not top of this government’s agenda) so I’d argue that the policy is probably progressive.

But there’s another more fundamental question here: how much redistribution do we want? Requiring all policy changes to be “progressive” implies that we think we don’t currently have enough. But at some point, if we were to go on increasing redistribution, we’d have too much. Views will differ wildly as to what the optimal level is, but in principle there must be one. I imagine few people think that there should be no redistribution and few think that redistribution should fully equalise living standards.

And even if we want more redistribution, we might not care if a policy is regressive if its effect on the overall level of redistribution is small and it achieves some other aims. The state does not exist solely for the purpose of moving money from the rich to the poor. My third golden rule is therefore this: the overall level of government redistribution is what matters. We need to know whether we want to increase or decrease it, and how much we care about small changes relative to other policy aims.

These rules really are essential. It is impossible to say anything about whether a policy change is progressive without considering both sides of the equation and being clear about what you think the alternative scenario is. It is impossible to know whether you actually want the policy to be progressive, or whether you care, without considering the overall level of redistribution.

These are not new insights and many organisations (the IFS, the OBR, sometimes even the Treasury) are quite diligent about doing distributional analysis properly. But much of the public discussion of “progressivity” fails to follow a single one of these rules, giving us a rather poor standard of debate on the state’s role in reducing inequalities.


* I’m not picking on Jo’s analysis because it is a particularly egregious example. On the contrary, I am picking on it because is one of the better examples of someone tackling this question, so Jo has done most of my work for me.

The problem with professional politicians

Isabel Hardman asks what’s so bad about professional politicians. She concludes that it’s basically a euphemism for “selfish politicians who are out for themselves and will mow down anyone in their way”. I’d offer a different (and perhaps slightly more contrived) answer: the problem with professional politicians is the same as the problem with professional footballers and professional bankers – they have become too good at their jobs.

This is a problem because all three groups are employed to do something that is not quite the same as the purpose that they serve in society. They operate within a set of rules and structures that are supposed to ensure that by striving to do one thing (the direct aim of their job) they also achieve another.

Take footballers for starters. A footballer, or a football manager, is paid to win matches. If they’re good at it, riches and fame are theirs, if not, they end up on the losing side away at Exeter on a rainy Saturday in February. But the purpose of professional footballers is to provide people with entertainment. Usually, the spectacle of two highly-skilled teams putting everything on the line to win is entertaining. But footballers have worked out at least two ways to improve their chances of winning that aren’t.

The first is diving. It is in the interest of footballers to fall over whenever they are touched by an opposition player, especially in the penalty area. It’s very difficult for referees to know whether a person fell over too easily or not, and winning a penalty or getting an opposing player sent off can win you the game. But diving detracts from our entertainment when, rather than try to win by playing good football, Diego Costa or Ashley Young simply flings himself to the ground to try to con the referee. We see a similar thing when Jose Mourinho, a man who knows more than most about winning football matches, parks the bus when playing away against strong opposition. This clearly works, but it is not great to watch.

Investment bankers are employed to make as much money as possible. But their social purpose – and the reason that they are allowed to occupy such privileged positions within our economic system, with such huge potential for rent extraction – is to distribute financial investment efficiently throughout the economy. In principle, the joint disciplines of market forces and financial regulation should ensure that in trying to maximise profit they achieve this aim. But in recent years, bankers have come up with a range of ways to make stacks of money that avoid or even undermine this aim, such as packaging up mortgage debt in securities so complicated that the buyer fails to see the inherent risks. The results of this are plain to see: a massive global financial crisis that is still being felt more than half a decade later.

So what about politicians? The job of a politician is to win elections, but the purpose of politicians as a whole is to effectively manage the public affairs of a country in such a way as to improve the welfare of its citizens. Our democratic system, political institutions and free press are supposed to ensure that in order to win (or at least retain) power, politicians have to run the country fairly competently. But the last two decades have seen this diminish in importance relative to spin and soundbites.

This has reached its zenith with George Osborne, a chancellor whose primary occupation seems to be not running the economy, but trying to make the Labour Party look stupid. This doesn’t make much of a contribution to the welfare of British citizens, but it does seem to work. The Chancellor has managed to convince most voters that he is the one with the reliable economic plan, despite presiding over an economic disaster. George Osborne appears to be very good as his job, but very bad at fulfilling his purpose.

The public is at least loosely aware of this problem and this is part of the reason for Jeremy Corbyn’s popularity among Labour Party members. Here is a politician who seems to be focusing on fulfilling what he sees as the purpose of politics: to deliver his vision of better country. But this is no use if – as many in the Labour Party fear – in doing so he will fail to do his job, which is likely soon to be getting elected as Prime Minister.

If you’re a footballer and someone else wins more penalties than you, you could be stuck on the bench and unable to do anything to make the game more entertaining. If you’re an investment banker who refuses to make a profit at the expense of the rest of society, you might lose your job and become powerless to improve the morality of investment banking. And if Corbyn can’t compromise his ideals to win popularity with the press and the public, he may never be able to act on those ideals as Prime Minister.

In short, it’s not possible for one footballer, banker or politician to unilaterally reject this type of behaviour while the system rewards it. If we want to see changes, we need to fix the systems and incentives under which they operate. It is tempting to say that the answer is better rules and better enforcement, but there are reasons to be pessimistic that this will happen.

Video technology and retrospective bans for diving could make a huge difference in football. But unfortunately world football is run by a bunch of crooks and Mafioso who do little to improve the game and much to enrich themselves.

Breaking up the big banks so that they can be allowed to fail and the risk is not borne by the rest of society could change the behaviour of bankers, or at least ensure that they feel (to some degree) its consequences. But if a massive global financial crisis isn’t sufficient incentive for governments to do this, then what is?

The issue of politicians is perhaps more difficult, as there is no regulator that has power above that of Parliament. The role of keeping politicians in check and ensuring that they can’t get away with flimsy or misleading statements falls mostly to the press. But, either through partisan cheerleading or a preference for scare stories and embarrassing photos over policy and substance, it does not always do a good job of this.

Political parties are a crucial part of British democracy. Are they accountable enough?

With the Labour leadership contest almost upon us, it is looking ever more likely that Jeremy Corbyn will win. As the odds on a Corbyn leadership shorten, so the howls of anguish from centre-left commentators increase. My Twitter feed is almost unanimous on this: a Corbyn victory would make Labour unelectable and guarantee at least another decade of Tory government.

But why should this be the case? Jeremy Corbyn is, of course, tremendously popular. The latest polls show that 53% of Labour party members are planning to vote for him as their first preference, and that he would easily win a run-off against either Andy Burnham or Yvette Cooper.

The problem may be that Corbyn is too popular with party members. That is, he is giving them what they want – a kind of intra-party populism – rather than trying to sell to them a platform that he thinks can win an election. A successful modern politician, it seems, must make tough choices and compromises, between her ideals (and those of her party members) and what she think the rest of the voting public wants. Populism only works if applied to a sufficiently large number of voters.

In a democracy, compromise is essential. Different sections of the population have different preferences and one group can rarely have everything it wants. But the way in which a democracy is administered determines how and where these compromises are made.

In countries with proportional voting systems, people can (in principle) vote for the party that best represents their beliefs. The parties win seats in parliament according to the number of votes they receive, and will then begin the process of thrashing out a compromise and forming a government. Compromises are reached within the democratic institution of a parliament, through negotiations between elected members who represent the various viewpoints of the population.

In the UK, with our first-past-the-post voting system, it doesn’t usually make sense to vote for the party that is best aligned with your beliefs. Just ask the millions of people who voted for the Greens and UKIP earlier this year, for a return of two seats. Instead, the rational approach is generally to vote for whichever of the two main parties has come up with the best-looking compromise.

However, the compromises that we get to choose between are not formed within our public institutions, but within the political parties. The wider electorate doesn’t get a say in these compromises, except insofar as party members try to second guess their preferences in developing an electable platform. As a result, the major parties are themselves crucial parts of the UK’s democratic machinery – yet they carry out their role outside of the institutions that are supposed to govern our democracy.

Now, I don’t mean to argue that a proportional voting system is necessarily a better way of reaching a compromise. In the UK, voters can choose between manifestos that represent complete programmes for government with ready-made compromises, while under PR voters might have to choose their representatives without knowing what compromises they will ultimately make. But in the UK, the messy compromises that are crucial to a democracy are worked out within the two main political parties, whose memberships comprise less than one percent of eligible voters. It seems reasonable to ask whether that is a sufficient level of engagement and accountability for such a central part of our democratic system.

2043: a demographic end to German hegemony

Throughout the recent Eurozone crisis, it has been taken for granted that Germany calls the shots in Europe. The reason for this is that it has by some distance the largest economy – some 40% larger than the economies of the UK and France, the next biggest countries by GDP.

The German economy is big for two reasons. First, there are a lot of people working in Germany: there are around 49 million people aged 20-64, compared to around 38 million in the UK and 37 million in France. Second, as you may have heard, Germany is pretty efficient. Economic output per person aged 20-64 is around $71,000 per year, compared to just $65,000 in the UK and $66,000 in France. That doesn’t make the Germans the most productive people in Europe – Sweden and the Netherlands both produce over $75,000 per year per working age person, but they are much smaller countries.

GDP per worker in large EU economies

But something is happening in Germany that might fundamentally alter the dynamics of the European Union: the population is shrinking. While all developed countries are seeing a rise in the proportion of older people in their populations as life expectancies rise, Germany also has falling birth rates. As the chart below shows, birth rates in France and the UK are expected to remain fairly flat over the next 35 years. But in Germany, the birth rate is projected to tail off dramatically, meaning that as young people age they are not replaced. The result of this is that the working age population will shrink significantly in absolute terms (while it stays roughly the same size in France and grows in the UK).

Demographics in large EU economies

This means that even if Germany retains its productivity advantage over Britain and France, the size of their economies will converge. In fact, if relative productivity remains constant, the UK economy will be larger than the German economy sometime in the early 2040s and France (probably) sometime in the 2050s.

GDP projections for large EU economies

It’s difficult to project what will happen in Europe over the next year, let alone the next 30 years. But, assuming the European Union survives in something like its present form – and assuming the UK remains intact and a part of it – the balance of power in the EU may well shift towards our side of the channel. Something to bear in mind for the upcoming referendum: stay in the EU, wait for 30 years, then we (or our children) will be running the show. What could possibly go wrong?