Ministers still have power to effect policy change

As ministers prepare to take what will surely seem a well-earned break, they’ll probably be feeling a bit sorry for themselves. The celebrity induced honeymoon hasn’t given way to an economic miracle and the likelihood is that when they come back they will be straight into a fight with Brendan Howlin for money. The argument has been made that the new government’s ministers are impotent to change policy because they have very little money and what money they have is ring-fenced or otherwise constrained by the EU/ IMF loan arrangement.

This is rubbish.

It’s not rubbish that they don’t have a lot of money at their disposal. And it’s not rubbish that the EU and IMF aren’t watching carefully how they spend the money. But it is rubbish that the only policy tool government ministers have at their disposal is money.

Policy makers in Ireland (and elsewhere) tend to equate spending money on a problem with caring. How much money you were willing to throw at a problem became synonymous with how much you cared about a problem, and in the context of expectation beating revenues during the boom, there was a lot of love to go around. If you care about children, give their parents more money; if you care about poverty, increase dole payments; if you care about the elderly, increase the pension; if you care about education, increase spending, ditto health.

In fact as a policy tool – a way of getting things done – money has been shown to be pretty ineffective. Think about some of the policy problems that Ireland faces and has faced over the last ten or fifteen years. One was that the health service was not very good. So what did we do about it? We trebled the amount of money that we spent on the health service. And what happened. Our health service is still reported to be not very good.

It’s probably because the extra money was targeted at delivering more services. Instead most of the money went on increased prices for drug treatments (making the pharmaceutical companies very happy) and increased salaries for doctors, nurses and other public servants working in the health service (making the unions very happy). But it didn’t fix the broken health system.

So if spending literally billions more on a problem doesn’t solve it, what does?

The first thing we should do is to set out the policy problem more clearly. Too often policy makers work within existing policy architecture, so the only way they can consider a solution is through the existing system. So when we think about unemployment we think about the dole as the only tool we have. But these systems are rarely designed in such a way that if they didn’t exist we would design them this way.

Think of a problem highlighted recently, possible corruption of the NCT system. A simple and cheaper solution is to dismantle the whole NCT system and institute random testing. Will that happen?

Changing the system is difficult and usually causes resistance and resentment. For the Ahern regime avoiding flak from unions, employers and anyone else whose complaints might be taken seriously, was a priority. So throwing money at those people was regarded as good policy.

But now all those groups who can block change know that they are in a weaker position. Unions that had complained about the Croke Park agreement are now hoping that the offer is still on the table. The government has more power now to effect public sector reform that ever before. The question is; does it know what it wants?

One of the failings of the political system has been that it has produced very few politicians with imagination or intellectual curiosity. Most politicians have accepted the obsession with economic growth and forgot how this relates to what people actually want – to be happy.

Our progress is measured in a way that prioritises goods for which money changes hands, even though non-monetised goods might be more desirable. So if a parent looks after a child then this is ‘worse’ for our GDP than if the child is sent to a crèche, but the being looked after by the parent might be better for the child.

On our traditional measure of well-being – GDP growth – we are now a lot worse off. It clear that we cannot afford to buy new goods in the way had in the last ten years. Is this a bad thing?

In fact materialism is probably toxic for our happiness. We know that there is an element in our psyche in which we rate our own achievements by comparing them with others around us.

So the disappointment caused by our inability to buy new cars every two years could be alleviated if we change the number plate system. The year/ county number plate tells the world that our otherwise functional, comfortable and safe car is ten years old. A system that doesn’t allow people measure the age of the car would probably make people more comfortable in the car they drive, and maybe happier.

Other things we know that makes people happy are a sense of community, security, a good environment and being close to family. Government ministers can’t deliver these but they can think about ways to encourage them.

For instance the sense of community can be fostered if people take public transport. But public transport need not cost billions as projects in the past have. One could easily and cheaply reconfigure the bus system so that it acts like an over ground metro, with connecting lines and regular times. The signs that tell when the next bus is coming actually work and that we now know when buses are going to arrive will probably make a big difference to our bus use and while not free, is much cheaper than any of the underground systems proposed.

Vibrant and well designed urban centre spaces can also help foster community. A minister could quite easily renew cities and towns by imposing a minimum €5 parking fee on all out of town shopping centres and retail parks. This would be revenue raising and would help revitalise our cities.

Nama probably owns sites that if we were to think less about maximising economic return could be better used as say public parks or cultural spaces.

There are thousands of policy improvements that could be made which might cost very little or even savings could be made. Why aren’t they thought of or implemented?

One reason is that government has been and continues to measure success purely in terms of economic growth rather than in what will solve policy problems.

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6 thoughts on “Ministers still have power to effect policy change

  1. How in gods name can they take more than a two week holiday in the middle of an existential crisis? This country should be on a war footing, all leave and annual holidays need to be abandoned.

  2. “The argument has been made that the new government’s ministers are impotent to change policy”

    exactly who made this argument?

  3. Eoin,

    My first reaction on reading this post was to think of Paul Hunt, late of these pages, and wonder, what, as an economist, he’d make of it.
    To summarise my own immediate response – it’s a pity that political scientists don’t understand more about economics and that economists don’t understand more about political economy.
    This government is unusually constrained in that it cannot borrow on the open markets and must rely instead on loans from the IMF and EU institutions to finance programmes and public services. These resources are only being made available on the basis that government policy will be directed to closing the deficit between domestic tax revenue and expenditure within a defined period so as to position Ireland to go back to the markets. Thus, within the parameters of the MoU agreed between this state and its external lenders, any policy change with cost implications in one area must be compensated for by expenditure cuts of equivalent amount in some other area.
    All policy change, social or otherwise, implies either an increase or a decrease in expenditure or revenue, with concomitant ‘winners’ or ‘losers’ in society. Or policy change may be ‘revenue neutral’ in the sense that losses to the exchequer on one end are compensated by gains (through indirect or direct tax revenues or enterprise profitability) on the other. Departments advocating policy change of one kind or another have to take this into account, as well as evaluating the impact of a proposed policy change on overlapping policies ( e.g. a reduction in direct social welfare payments will affect rent levels charged on local authority housing with implications for local authority housing finances etc.); or through ‘benchmarking’ against overarching national policy goals such as poverty reduction targets.
    On the health service budget you rightly point out that spending has trebled without any great improvement in the overall quality of the service being delivered to the public. There has been some improvement in certain areas ( e.g. cancer treatment services); in others the old ‘third world’ tag still applies (e.g. mental health) and in still others, the service has got worse (e.g. A&E). However, it’s worth bearing in mind that expenditure on health in Ireland in the past fifteen or twenty years was starting from a pretty low base. Apart from quangoisation of whole areas of expertise throughout the health services, costs in health service provision tend to increase exponentially anyway. So for example, if an extra consultant is employed in a hospital, this may require capital expenditure on new theatre/ diagnostic equipment or facilities, plus appointment of qualified support teams, in order to have the consultant working productively as opposed to sitting around twiddling his/her thumbs. Apart from such inherent complexity and obvious huge mistakes such as creating the HSE whilst leaving the old health board structures – and their personnel levels – largely intact there’s been a fairly obvious imbalance in expenditure on bureaucracy within the health services as opposed to expenditure on the front-line service provision.
    ( As an aside, I might add that such explosions in bureaucracy are not limited to the institutions of the health services. Within third level education it’s been just as startling, as I can personally attest to having recently returned to full time education after thirty-five years absence to find myself stunned at the extraordinary layers of bureaucracy that now govern university life compared to what I once knew. It’s like finding oneself on a different planet and wondering what in hell justifies these layers of intermediaries, consultants, service evaluators etc.)
    All of this of course goes before you get to the politics of health, whereby vested interests or local communities campaign to stymie reform efforts, and politicians for reasons of electoral gain or local populism go along with them. Roscommon Hospital, and the burgeoning dispute about services at Loughlinstown, come to mind.
    In the other big expenditure departments, namely Education and Social Protection, economists like Karl Whelan, Colm McCarthy and others have pointed out that the problem is not that workable new policies are not devised but that they are almost invariably tacked on to existing policy programmes rather than replacing them. So for example, I wasn’t as enthused as most of the commentariat or the public by the Government’s recently announced jobs programme for two reasons; (1) because it took me back to the 1980s when similar ‘make work’ initiatives were announced and then more ‘new ‘ initiatives were announced as the much-lauded originals failed to deliver and failure compounded failure with ever increasing costs and no discernible effect; and (2)because all the ‘old’ programmes are being left in place, irrespective of their usefulness or merit.
    On throwing money at problems, that charge against the Bertie era is undoubtedly well-founded. But take the childcare provision for example: back in the late 1990s it was estimated, as I recall, that the introduction of a state childcare service would cost around 65m euro. Obviously, this would have to be paid for and the choice was between keeping child benefit payments static, or even reducing them, or simply increasing the direct payments under the guise that people prefer to make their own childcare choices. Of course , that was at the start of the boom. Can you imagine what would have happened to any government that proposed cutting direct child support or other social protection allowances whilst the exchequer was awash with money? Anyone remember how Michael Noonan challenged Charlie Mc Creevy’s tax individualisation proposals on the basis that he was robbing the woman in the home? Worse, that Mc Creevy responded with a once off 3,000 euro payment to families that was neither prudent nor justifiable? At least now we have a fiscal council who may be able to talk some sense about such crazy-paving spending initiatives should they cock their heads above the political parapet in the future.
    I’m not slagging off any politicians here; nor do I believe that Irish politicians are any worse or better than their counterparts in other liberal democracies. It’s not that our politicians, as individuals, lack imagination or intellectual curiosity either. There are certainly some bright sparks to be found across all parties. We have a similar blend too of the crass, the stupid and the dull average among our political class as in most other democratic countries. My main criticism of our political class is that they are an unusually risk averse bunch of people by international standards, which may have to do with the kind of society of which they are representative and the way relationships work in our society, in politics as in other walks of life.
    Sorry this response is so long.

    • @Veronica,

      Thanks for thinking of me, but, like you-know-who, I haven’t gone away. I’ve being taking stock of the effort/result balance and it’s not looking very healthy. When it comes to the issues under consideration here I see four parallel universes or silos. The most important is the executive silo comprising government, its advisers and the top layers of the civil service and the quangocracy (the ‘government machine’) engaging behind the scenes with the various vested interests to decide policy and executive actions that will be rammed through the Oireachtas. The second is the Oireachtas silo where the charade of parliamentary democracy is strenuously maintained.

      The third is the political science silo where the most active portagonists seem to have thrown all their chips into this Citizens’ Assembly bucket. And finally, we have the economics silo whose economic models and analysis, particularly in the microeconomic area, are worse than useless in that they are abused by the vested interests that have suborned the executive.

      Given the severity of the economic and financial crisis here – and the extent to which its severity could be linked directly to unrestrained and woeful misgovernance by successive governments – I nursed a vain hope that the barriers between these silos would be broken down to generate a new approach to governance. I was wrong.

      Some worm-holes exist between some of these parallel universes, but they have been used to suck people in to the executive universe. For example, some economists, capable of conducting and presenting independent and objective analysis have been pulled into the executive silo – and, effectively, silenced. And the Chair of this ‘wethecitizens’ initiative is on the Taoiseach’s XI. Any reforms of the Oireachtas silo will be optical illusions carefully designed to appear more than they seem and, at all costs, not to diminish the dominance of the executive silo.

      I was much encouraged by the UK House of Commons putting the ‘fear of god’ into the government and brushing aside any opportunity for deliberations by the quangocracy in the Murdoch affair. It was a timely, necessary and long overdue assertion by Parliament that it exercises ultimate authority in the UK between general elections. I see some potential for this re-awakening to be consolidated in a number of policy areas – and I hope to engage with that.

      I can only hope it will have some demonstration effect on the Dail.

      It was good while it lasted. I’ll keep a watching brief. Many thanks to all here.

  4. I’m not sure where these musings fit into the diminant ‘political reform’ theme of this board, but they provide food for thought. Probably the most chewy is:
    “One of the failings of the political system has been that it has produced very few politicians with imagination or intellectual curiosity. Most politicians have accepted the obsession with economic growth and forgot how this relates to what people actually want – to be happy.”

    Echoes of Jefferson’s ‘life, liberty and the pursuit of happines’? However, I think politicians have some justification for their obsession with economic growth – as it is the only way Ireland will have any chance of sloughing off the enormous burdens that are currently weighing it down. The problem is that it is being tackled exclusively in the context of the macroecnomic identity:
    Y = C + I + G + (X – M)

    Ignoring all sorts of elasticities and multiplier effects there will be GNP (Y) growth if the positive change in net exports (X – M) outweighs any combined reduction in consumption (C), investment (I) and government spending (G). But, apart from a handful of notable exceptions, hardly anybody in the political, policy-making or economics sphere is tackling the underlying microeconomic issues and problems that are being reflected in the top-level macroeconomic numbers.

    Balanced economic growth – that enhances general prosperity and well-being – relies totally on productivity gains and efficient economic behaviour at the micro level. But most economists have little to contribute because they fear moving away from their comfortable model of ‘perfect competition’ and confronting the economic reality in which most businesses, workers and consumers operate. It sometimes seems that they operate in a parallel universe. This would be fine if it weren’t for the fact that their naive notions about perfect competition and efficient markets are used and abused as a convenient cover by those who exercise economic and market power to price-gouge consumers, exploit workers and capture unjustified profits – and this is accepted by policy-makers and regulators who seem to know little and care less. The economic crisis has revealed the policy and regulatory dysfunction at the micro level that is hindering recovery. While the bubble got bubblier and the boom got boomier nobody had any interest in exposing or tackling this economy sapping dysfunction. Now the chickens are coming home to roost.

    Under the terms of the EU/IMF MoU, the Government is being forced, kicking and screaming, to address some of these microeconomic issues. The various vested interests are lobbying furiously behind the scenes to protect their ill-gotten gains at the expense of most citizens and consumers. The quangocrats are busily shoring up their defences lest their complicity in this consumer-gouging be exposed.

    The next year could be interesting, but it’ll all be played out behind the scenes. As for any political reform initiatives that will be pursued they might as well be happening in a parallel universe as they will have absolutely no impact on the decisions that will be made behind closed doors – decisions that will impact on the well-being of every citizen – and eventually presented as a fait accompli.

    Like the Bourbons, we seem to have learned nothing – and forgotten nothing.

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