Unintended consequences

Mark Easton seems to post quite often about drugs, not that I'm complaining as they tend to be pieces that go against the grain of typical reporting in the area.  In fact most of what he says I find quite accurate.

His latest piece goes on the theme of unintended consequences.  The theory is that whilst mephedrone was legal people were taking this instead of cocaine and ecstasy and that this drug is actually less harmful.  Now that it is illegal people have moved from being able to buy it on the Internet to street dealers where the price is higher and the quality is less.

None of this is rocket science.  If you prohibit the use of a drug and target all of your resources in restricting the supply then prices will rise.  There is increased risk of the supply however the demand remains so people are willing to take the risk for the super-normal profits.  In addition due to the increased risk profit margins will be increasingly looked at with production made cheaper (and therefore a less pure and more dangerous product).  There will also be no legal method for the buyer to complain as the substance they are purchasing is illegal.

Prohibition continues to baffle me, people will always want to take drugs (unless there is a massive clamp down on the demand side but that is never going to happen).  As such by making them illegal governments put these people at risk by not regulating the substances on the market and allow criminal gangs to use these substances in order to generate profits.  If drugs were legal then large markets for organised crime would disappear instantly.  

My opinion as I have stated many times is that the best way to combat drugs use is legalisation, taxation, regulation and education.

A more educated population will have the facts at their disposal to make educated choices.  Regulation will ensure that the products are of satisfactory health requirements and not cut with other damaging chemicals.  Taxation will bring in vital revenue streams (coupled with the decreased costs of prohibition), allowing governments to spend money on counselling, rehabilitation and education.

This will also bring drug users out of the shadows of society in order for them to get help where necessary when required.  

I hope that Portugal continues with it's policies (as previously mentioned) so that they show the way to the rest of the world (to go even further).

Tuition fees...

Okay, I said I'd post my alternative, I did, I changed my mind.  It just goes to show it's not easy!

I guess the debate is an ideological one, should students be paying for their degree or should they not?

It is socially desirable to have an educated population, but some treat it as an excuse to get drunk for three years knowing that their degree would play minimal role in their future career.  Also why should others pay extra tax to send people to university if they didn't go themselves?

A few things have pissed me off with the reporting of the proposed changes, mainly that they have lead to a massive misunderstanding.  Their was a letter into the metro yesterday that said something along the lines of "increasing fees to £9,000 will place a financial burden on the poorest meaning that they couldn't afford to go to university".  That is just wrong.  Firstly fees will be raised to £9,000 only if the university proves that it has made it equally possible for students of all backgrounds to access their courses and none of these fees will be paid in advance, they will only be paid back on earnings over £21,000.  If they don't pay it back in 30 years the debt will also be wiped clean.

Now I'm not going to say I agree with this system, however when I attended University fees were circa £1,000 payable in advance.  In addition I took out a student loan which has me paying back 9% on everything I earn over £15,000.  As such, someone leaving University who goes straight into a job paying the same as me will be £40.50 a month better off than me and have spent £3,000 less than me.  

I guess the difference is that most people are unlikely to end up paying this back.  Three years tuition fees (£18k - £27k) plus student loans (£9k? I haven't heard any detail of this) means they'll have a debt of up to £36k.    By my rough calculations (assuming a 3% rate of inflation) they would need to average around £41,000 in order to pay this off in 30 years.  Given the same salary my debt would be gone in 6, leaving me £1,800 a year better off than them.  (I can only dream of earning £41,000 at the moment but the point still stands).  The total difference would therefore be around £45,000 better off than them, but only £22,600 better off if all cash flows are discounted at a 3% rate of inflation, despite the increase in fees to an assumed £8k a year more than me.    This obviously is only the situation if they pay it back!  If someone earns my wage for the next 30 years their debt will be written off in full and will have paid back (discounted) £10,500 LESS than I did on £1k fees and a 3k student loan per year.  I know this is all really rough calculations but to me it does actually seem more progressive than the system I had.  In fact, given assuming that they still receive a student loan of £9,000 over three years they would actually have had a (discounted) net increase in cash of £7,000!  

It would need the constant wage to be £28,000 before I'd be paying the same as the hypothetical other person.

So I guess the question is is that fair?  

Is that fairer than someone who doesn't go to university and therefore is likely to earn less having to contribute to their education?  Probably.  

Should it be everyone's right to go to university? No.  It is not socially desirable for there to be 100% of the population educated to university level, as this will result in a discrepancy between what skills are needed in the country and what we have.

Should a person contribute to their education?  I'd say yes, they will benefit, though as a rule so will society.

The more I look at the figures students would be paying back, the more I think that actually it seems fair, as surely someone earning £22,000 a year can afford to pay £90?  However, had I been a Lib Dem MP I couldn't vote for it because the Lib Dem policy is for £0 fees and we ran on campaigns of no more broken promises.

The solution?

Well I obviously don't have all the answers.  It would take months of looking at the books and analysing ability to pay against actual costs in order to work this out, however here is my feelings:

• Each University should undertake a comprehensive spending review.  Look at how much is spent and how much needs to be spent.  There is in my opinion a lot of wastage, too much emphasis is placed on research and not enough on teaching.  The actual cost per student should be accurately and independently calculated, so that no student pays more than their education costs, irrespective of the payment system in place.
• Look at other ways a University can bring in money, I don't think they do enough considering they have thousands of students attending them, there must be more revenue streams available.
• The length of each course should be looked at.  In my final year I had 10 hours face time per week, and two 10 week semesters (plus 3 week period for exams).  I would suggest altering the structure of some universities so that they are two year courses with  13 week teaching periods: September - December (3 week break for Christmas and New Year), January - April (3 week break for Easter), April - July, 7 week summer break.  There is no reason for a four month long summer as some currently have!
• Socially desirable qualifications (medical doctors etc) should be free no matter what. These courses are long and there should be as much incentive for uptake in them as possible.
• An investment into alternatives to study, so there are more options for people leaving school and sixth form, so that University isn't seen as the only way forward.  Apprenticeship programs that create skills that are actually needed.
• Involve all relevant parties (as in the NUS, universities and the government) in open discussions on how best to meet the necessary funding, they all have their interests but surely they should all be able to see the others point of view.  Without seeing the figures I can't suggest what levels should be set, however perhaps a 50:50 split between students and the government to begin with?

The IFS answers… Is increasing VAT progressive?

Apparently yes... though my personal opinion is that this is a perfect candidate for John Rentoul's series.

I believe the main argument for it being a progressive tax is that those worse off spend proportionally less of their money on products with VAT attached to them and as such an increase in VAT will cost them proportionately less.

I can see this argument however I don't think this takes into account the actual effect on those lowest earners.

Low earners spend proportionately less on VAT related products because they have less money.  As a result they are on strict budgets, with many spending exactly what they earn each week/month/year and others spending more than that by utilising credit.

Higher earners however have a lot of discretionary spending and as a result are able to save money.  

I would argue that as a proportion of disposable capital available to spend (including income and capital reserves once essential expenditure is taken into account) a poorer person will be spending proportionally more on products with VAT than a more well off person.

Those living on a shoestring as a result are likely to have to forgo purchasing particular products as the rise bites and prices increase out of their range.  Those better off will easily be able to absorb the rise, hence it cannot be progressive.

I still think the Coalition (capitalised according to grammar Nazi John Rentoul as it has been around for more than 6 months) is doing some very positive things for the country but portraying an increase in VAT as progressive in my opinion is completely wrong, no matter what statistical data is thrown at it, the substance of the rise is the material effect that it will have on the real people who will be effected.

No more broken promises.

Following my rambling blogs last month I've had a little bit of time to think about the tuition fee debacle now and for the Lib Dems it principally does come down to one thing.  A promise is a promise.  The image above is a still from our campaign video that was shown pre-election, showing all of Labour's broken promises with the slogan of "no more broken promises" (Fred Carver highlighted this on his post on the Lib Dem Voice).   Should our MPs vote for any motion that includes an increase in tuition fees then we shall be doing exactly what the previous government did.  I also feel that it will be the Lib Dem vote that will sway this as even those in Labour who back it can't let an opportunity pass where they could defeat the government.  

In my next blog I shall outline what I actually think of the policies themselves.

The Government believes the drug classification system works...

Mark Easton has posted yet another excellent blog (here) highlighting the absolute nonsense that is government policy regarding drugs prohibition, following Professor David Nutt's latest publication.  I am too tired to read the article (I shall do so tomorrow) by Caitlin Elizabeth Hughes and Alex Stevens (here) regarding their analysis of the Portuguese system, however they have drawn some interesting conclusions.  They found that following Portugal's decision to decriminalise illicit drug use in 2001:

• small increases in reported illicit drug use amongst adults;
• reduced illicit drug use among problematic drug users and adolescents, at least since 2003;
• reduced burden of drug offenders on the criminal justice system;
• increased uptake of drug treatment;
• reduction in opiate-related deaths and infectious diseases;
• increases in the amounts of drugs seized by the authorities;
• reductions in the retail prices of drugs.

 Overall this points to the fact that prohibition just isn't the correct option.  It doesn't prevent much drug use and just pushes that use further underground, leading to people less likely to seek help when they need it and having to go to illegal sources to purchase their fix which will probably be of poorer quality and therefore more harmful.

Though I wouldn't care what the evidence suggested to be honest.  My stance on drug use is that of freedom of choice not on some cost benefit analysis.  I cannot see why a sane consensual adult should not be allowed to chose what they do in the privacy of their own home on the proviso that no other living creature is negatively effected by this.  I know I have expressed this opinion time and again but I am a Liberal in this sense.

Unfortunately it will be a long long long time before there is any reform in this area, the government's response to the research that has been published:

"The Government believes the drug classification system works"

Hopefully Portugal will continue their policies and this will show improvements that will allow other countries to follow, I wont be holding my breath for any improvement here though.