ADAM SMITH BULLETIN
LEAD ARTICLE Workfare Pilot Schemes Mark Policy Shift
FUTHER ARTICLES IN THIS EDITION: Paying for higher education
Publications Seizing the initiative | Surgery at the surgery | Lifetime funding | Digging up trouble | Aiming high
Activities A likely story | A spectator sport | The next generation | Flying the flag
Forthcoming Ahead of us all | ISOS | Saving money | Health seminar | FSU Conferences | The ASI worldwide | Socks success


Members of the Next Generation Group pictured with the Prime Minister at the reception he held at Ten Downing Street in honour of the ASI


WORKFARE PILOT SCHEMES MARK POLICY SHIFT

ASI Initiative bears fruit

The announcement of more workfare schemes is seen by the ASI as the culmination of a long battle to inject sense into the handling of state welfare. The father of workfare is undoubtedly Ralph Howell MP, who first approached the ASI nine years ago with a piece entitled Why Not Work? He followed this with a book called Why Unemployment? and has fought a tireless campaign both in the House of Commons and in the media.

The basis of workfare is that after six months of unemployment, with help to assist people back into jobs, the state should require people to work in exchange for continued financial support. At the heart of the proposal lies the knowledge that people are unlikely to find work after long periods of unemployment. Indeed, after a year out of work, people have less than a five percent chance of finding work within three months.

If they have been doing work, however, on community, charity or environmental projects, their chances of finding private sector jobs are greatly enhanced. Under the Institute's workfare proposals, private and voluntary organizations are asked to oversee jobs they would like to see done, but for which they cannot afford the labour costs. Government pays the wages, at slightly above the level of job-seekers allowance.

There is no compulsion in the scheme, in that no- one has to work. The option to stay at home and draw welfare payments from society is ended, however. In return for support from society, the unemployed have to work for society.

Three groups of people leave the unemployment rolls for each workfare job created. The person who takes the new job signs off. the person who is working in the black economy and claiming benefit signs off because he or she cannot combine this with a workfare job; and finally, the person who could get a low-paid job but prefers to sit at home and draw benefit takes that job when the option to stay at home drawing benefit is removed.

The Institute predicts that the introduction of workfare on a national basis, after successful pilot schemes, will have more impact on unemployment, particularly on long-term unemployment, than any other measure which has been tried.

Paying for higher education

The ASI is preparing to submit its evidence to Sir Ron Dearing's committee on the finance of higher education. The Institute has long taken the view that a system designed to put one in nine of the population through university or college cannot be expected to cope unchanged when that proportion has risen to one in three. This is one of the unsung successes since 1979. What was available only to an élite then is rapidly becoming a normal option.

The Institute's approach takes two tracks. The first is that we can probably no longer expect two out of three to pay for three year's board and lodging for the other one. Someone who leaves home at 18 to take a job does not expect taxpayers to support them for three or four years. What is presently a maintenance grant plus a loan could be changed to a full loan system. A graduate tax, while it appears to do a similar job, allows non taxpayers, such as those who leave the country, to escape repayment.

The fee element, even if still financed by taxpayers, should be routed through the students in the form of vouchers. Instead of having funding councils decide which institutions and courses are to be favoured, the students would decide, by their choices, where the money was to be allocated. This would give them a consumer power which they lack under the current, centrally directed, system.

Publications

Seizing the initiative

The ASI followed up its barrage on the Private Finance Initiative (PFI) with a well-documented report Seize the Initiative, by Allan Stewart MP and Eamonn Butler. The report made it clear that the PFI is going off like a damp squib and will fail unless it is overhauled. Private firms are invited to undergo the expenses of bidding, only to be subjected to endless delays and difficulties. Those bidding costs often run into millions of pounds.

Among the irritations cited are the propensity for contracts to be specified in such detail that there is no room for the cost-saving ingenuity or the creativity of the private sector to improve on public performance. Typically, contractors are invited to bid for wholly unsuitable activities, yet squeezed out of areas where they could make a difference. The ASI authors conclude that each PFI project needs a Civil Service 'minder' to oversee it, and that the whole PFI should be taken from the Treasury and placed within the ambit of the First Secretary of State.

Surgery at the surgery

Health to the People by Professor David Gladstone and Dr Michael Goldsmith called for a raft of reforms to take the NHS Into the next century. Soon after its publication, Stephen Dorrell's white paper duly set out the government view. The fact that these were remarkably similar might owe something to the fact that Dr Goldsmith is an advisor to Mr Dorrell.

That view, foreshadowed in the previous ASI Bulletin, is that primary care should be developed and extended so that GPs' surgeries are turned into the new cottage hospitals, with clinics on site to perform much of what is currently done via hospital admission. Having treatment supplied locally will result in fewer stays in hospital, lower costs, and pleasanter conditions for patients.

Lifetime funding

Continuing its project on welfare state reform, the Institute published A Fund for Life, by Eamonn Butler and Matthew Young. The proposal to replace an unfunded, pay-as-you-go system by one based on Fortune Accounts, dominates the report. In particular, the transformation of the Chilean system is examined, to see how some of the rather different problems which beset the British system might be solved.

This is a must for anyone who wants an overall guide through the issues involved in the change- over, and a look at how the transition problems might be addressed. It is the sixth in the ASI series on the subject. Since the Institute began this drive, observers are begin to sense that the intellectual battle is being won. Most economic commentators and many political columnists are now on side, while there are large sections within both major parties convinced that a funded welfare and pensions system is the right way to go.

Digging up trouble

State control of industries was finally answered by privatization. Now state control of archaeology comes under critical scrutiny, and amateurization is proposed as the solution. In Who Owns the Past, Andrew Selkirk advances the view that excessive professionalism and state direction has been the ruin of archaeology, with amateurs and local volunteers squeezed out, to the detriment of the study.

The huge expansion of government spending on archaeology, heritage, and the environment, has led to the growth of large pressure groups pushing for public funds to be spent on favoured activities, and shutting out the amateurs who used to be the backbone of the discipline because they actually did things themselves instead of calling on government to do them.

Andrew Selkirk traces the results of that trend: an arid lack of new ideas and interpretations, and an obsession with 'theoretical' minutiae in their place. He puts the case for private ownership instead of the common or national ownership which in practice means no one has an Interest In protecting or developing the sites. His report is an intriguing look at a new field, and is both informative and well-argued.

Aiming high

A new study of the British privatization program parallels the ASI's look at the actual record of privatization. From the University of Nevada, Professor Alan N Miller has produced a study which measures the achievements against 13 aims of the programme. His look is an overview, taking the privatization programme as a whole, rather than the ASI's current industry-by-industry look.

Drawing on secondary, already published, sources, Prof Miller concludes that privatization achieved many of its aims to a significant degree, and achieved nearly all of them to at least some degree. Interestingly, he cites the aim of cutting taxes through privatization as one not achieved, on the grounds that government still spends over 40% of GDP. Some would argue that this would be much higher (as in Europe) without privatization, and that government spending is now programme-related rather than structural, and will decline relatively as the economy booms.

British Privatization: Evaluating the Results is a fascinating overview of the programme. It is methodologically innovative, and concise. This is recommended reading to deal with people who try to run down privatization. Ask Prof Miller directly about it. His c-mail is amiller@ccmail.nevada.edu

Activities

A likely story

The ASI's research on pensions leads it to suppose it unlikely that a state pension will give an adequate living standard in the future. The Institute commissioned a MORI poll to discover whether the country agrees with this. There were some surprising conclusions. When asked to pick out things which might happen to them, only 19% thought that a decent state pension would be one of them. This compares with the 22% who deemed themselves likely winners of a National Lottery jackpot!

Among men, only 17% expected an adequate pension, whereas 18% thought it likely they would be murdered. The under 35s were even more pessimistic, in that a quarter of them (25%) thought their own murder a likely event, versus only 14% who anticipated a decent pension. Indeed, among those making their way up the career ladder in the 25-34 age-group, that 14% was 3% less than the 17% who expected to be struck by lightning!

The poll reinforces the ASI view that pension expectations from the state are low, and that there are political returns, as well as moral, social and economic rewards, to be gained from the move to a funded system.

A spectator sport

In a new venture for the Institute, an insert with subscriber copies of The Spectator invited readers to become members of the ASI. The first quarter subscription was offered at 10, instead of the normal 30 for individual members. The ASI looks forward to welcoming at its activities the new members who join as a result of this initiative.

The next generation

The TNG group resumed its activities after the summer lull with a reception in mid-September. Michal Polczynski spoke for ten minutes on the state of the market in Denmark (it's bad). The October meeting began with a lecture on The Future of Education Reform by Dr John Marks, a leading authority on the subject for over 20 years. Wine of the month was Il Tasso Chianti. A group of the best and brightest of the TNG were present for the Prime Minister's Downing Street reception for the ASI in October.

After the November 5th reception. the next activity will be a lecture by Professor James Bennett of George Mason University on Thursday, December 12th in the House Of Commons, on Technology. the Workplace & the Future, followed by a reception in the Jubilee Room.

Flying the flag

ASI personnel continued to represent its ideas overseas. Madsen Pirie, Eamonn Butler and Michael Bell were all present at the September meeting of the Mont Pelerin Society in Vienna. Founded by F A Hayek in 1947, the MPS remains dedicated to the principles of a free society and a market economy. Both Eamonn Butler and Michael Bell spoke to the Liberal Institute in Slovakia, while Madsen Pirie addressed a Europe-wide conference of free enterprise students in the Czech Republic.

Dr Butler also spoke to a tax-payers union conference in Sweden, and to a meeting of the Geneva Association in Munich, about replacing state welfare and pensions by privately funded alternatives. Dr Pirie addressed a conference fringe meeting of the National Consumer Council on the subject of market environmentalism. The ASI has continued to address schools and universities whenever its timetable permits it.

Forthcoming

Ahead of us all

Professor James Bennett has agreed to deliver the next in the ASI's lecture series, on Thursday December 12th at 6pm in the House of Commons. He has chosen as his title Technology, the Workplace and the Future. Prof Bennett is a distinguished American scholar, with many publications to his credit, and a high reputation among free market academics.

Following the lecture there will be a reception in the Jubilee Room of the House of Commons, at which several of the parliamentary friends of the Institute, from different parties, will meet with ASI members and guests.

ISOS

The Independent Seminar on the Open Society (ISOS) is in its nineteenth year. Aimed principally at first year university students and sixth formers, the seminar tries to introduce young people to ideas they might not necessarily encounter as part of their school of university courses. The seminar will be held on Thursday and Friday, December 12-13th. Each afternoon there are six speakers, including well-known scholars and economists, offering 30 minute sessions each.

The Thursday evening closes with a lecture & reception, and on Friday the evening includes a visit to SegaWorld and dinner. Previous speakers have included Professors Patrick Minford, Kenneth Minogue, David Marsiand, & David Gladstone.

Saving money

The final of the ASI's Economy in Government Competition, jointly sponsored by Ernst & Young and the Daily Express, is held on Tuesday October 29th. The final eight winners are presented with certificates, with cash prizes for the overall winner and two runners up.

Lord Parkinson presides over the presentation, held at a celebratory lunch in London's Park Lane Hotel. Previous ideas from the competition have already saved public funds some hundreds of millions of pounds, and this years entries are reported to be of a high standard.

Health seminar

Following their book Health to the People, both Professor David Gladstone and Dr Michael Goldsmith will feature among the speakers at an Institute seminar on the subject of health service reforms. The seminar will focus on the way in which the NHS reforms can be taken forward to the next stage, and how the successes already achieved can be built upon. Particular focus will be placed on changes to liberate GP fund-holders from some of the restrictions which limit what they can offer to their patients.

People interested in participating in this seminar, which will be held in Westminster in late November, are invited to contact the ASI for more details and an invitation to attend.

FSU Conferences

The ASI's conference division is continuing its programme of events to assist the Former Soviet Union and the ex-Communist countries of Eastern and Central Europe adjust to a market economy. The programme is organized on an industry-by- industry basis, and most of it is held in Moscow or the central European capitals. Forthcoming events include conferences on energy, telecoms, port, sea & river transport, financial management, capital markets, mining, the paper industry, refining and banking.

The ASI worldwide

Teams from the Institute's International Division continue to assist countries throughout the world on programmes to introduce market reforms and privatization. Paul Reynolds was instrumental in persuading the Lesotho cabinet to partly privatize and submit to independent regulation the Lesotho Water & Sewage Authority. Paul also addressed the Namibian cabinet and the South African Public Enterprise Office. He is about to speak with Sri Lankan policy makers about the creation of a regulatory framework and institutions for privatized utilities.

Peter Young and Harry Chathli have launched the ASI's next three-year training programme for the Vietnamese equivalent of the Cabinet Office. This follows from the successful previous short project.

Following the ASI's ground-breaking programme of company law reform in Belarus, the Institute has now been asked to implement the first stage, a pilot enterprise employing 5,000 people.

Meanwhile the Guyana cabinet approved the ASI plan to privatize Linmine, one of the largest refractory Batixite mines in the world; and the team is helping with the privatization of several other enterprises there. Other ASI work includes pension and regulation advice in Croatia, and workshops on utilities, transport and competition law in the Czech Republic.

Socks success

Another idea from the ASI's Socks Manifesto was announced at the Conservative Party conference in October. The proposal is for a national readership challenge, a sort of intellectual equivalent of the Duke of Edinburgh's award scheme. Children aged 11-14 who enrol will have to read and be tested on 100 classic books, and win bronze, silver and gold awards by doing so.


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Updated: 28/10/96