Thursday, March 24, 2011

The British government and Maoism?

One essential doctrine of Maoism is that practice comes first, theory afterwards. There is more evidence that the British government seems to be following this advice. This evidence is the surprise and out of the blue announcement of a windfall tax on the British oil industry noted here. Is this a good policy?

It is doubtful. While it will save motorists -- ready? -- about 1 penny per litre from midnight yesterday, there are planned tax rises of up to 6 pence that may hit next year so the situation for motorists in the budget are clearly worse on the whole. Moreover, the oil industry claims several thousand jobs are now at risk.

While I do not think that the government should never stand up to industry (and while I also believe that often industry may present misleading testimony, although I make no claim either way on this issue), I do think any government should explore all relevant potential options of public policy decisions. This does not appear to be true here as no one seemed to see this coming. Moreover, there is the risk that not only will many goods and services rise still higher because of the increasing taxes on oil (which may be very damaging for the economy on their own), this is now coupled with the potential large scale loss of unemployment -- clearly the last thing the government needs given its own forecasts that unemployment will continue to rise every year until at least 2015. A bad situation has been made worse.

Nor is this the first time that they have had practice first and theoretical explanations second. There is higher education policy which has been a particular mess. Don't forget also the bizarre policy that if a couple with one earning partner has an income of £44,000ish then they would lose full child benefits while a couple where both work and earn a combined £80,000 would retain their child benefits.

They say the era of spin is over. Well, at least with spin we had clever explanations. Now we don't even get that, but only poorly managed policies ill thought out on their implications in the hopes of never arising positive front page headlines. It is no wonder the government is deeply unpopular: it should expect to remain so until it gives public policy-making greater attention.

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