When I started writing this blog in April 2013, one of its main purposes was to highlight how poor we are at forecasting things, and suggest that our decision-making would improve if we acknowledged this fact. The best example I could find at the time to illustrate this point were the Office of Budget Responsibility (OBR) Gross Domestic Product (GDP) growth forecasts over the previous 3 years. They do not appear to have improved much since then.

Fast forward to 2025 and apparently we have a crisis. Rachel Reeves has been forced to defend her budget following rises in 10 year gilt yields to levels not seen since the financial crisis and the Prime Minister has been forced to say that she will stay in post for the rest of Parliament. Everyone has piled in, from the former Deputy Governor of the Bank of England to the Institute for Fiscal Studies. So is there in fact a crisis? Well no, not really. As an opinion piece in the FT has pointed out, the drivers of the latest rate rise are not really UK-specific at all. Another piece in the FT puts the gilt yield “crisis” into yet further perspective. Finally, there is the comparison with the US gilt market, which moved above its 2008 level in 2022.

The reason for all of the hype of course is the totally self-constructed cul-de-sac that the Government has built around its economic policy options. Tiny movements in government debt or CPI or GDP or indeed gilt yields have been given heightened significance by being explicitly tied to how much the Government will allow itself to spend on its various programmes. As stated in the FT:

Only the OBR can accurately predict how much headroom the Treasury has against its fiscal rules, the Treasury insisted on Wednesday. “Anything else is pure speculation,” it added.

I refer back to the aforementioned forecast history of the OBR and ask how we ever got in a situation where their forecasts would determine how the UK government behaved. As the recent essay by Stefan Eich (on Adam Tooze’s Chartbook) points out, Keynes said:

“Our power of prediction is so slight, our knowledge of remote consequences so uncertain that it is seldom wise to sacrifice a present benefit for a doubtful advantage in the future.” It was consequently rarely right to sacrifice the well-being of the present generation for the sake of a supposed millennium in the remote future.

Meanwhile we are now doing precisely this on the basis of OBR forecasts. As Rachel Reeves set out at the start of her chancellorship in July, in a precise inversion of Keynes:

Because if we cannot afford it, we cannot do it.

Unfortunately for the government, while they spend all of their time trying to solve this imaginary problem they have created for themselves, there are actual real problems that do need to be addressed, and which are currently being drowned out by the noise of political commentators with too little of substance to talk about apparently.

So Sir Michael Marmot, author of the landmark Institute of Health Equity reports on health inequalities in 2010 and 2020 and the recent report on the role of the property sector in improving health, referred to the maintenance of the two child benefit cap as “almost a form of eugenics”.

The Trussell Trust reports that:

A record 9.3 million people face hunger and hardship across the UK. This includes 6.3 million adults and 3 million children. This represents one in seven (14.0%) people across the UK, and one in five (20.9%) children. Current levels are more than a third higher than they were 20 years ago, when 6.7 million people faced hunger and hardship.

And a group from the Institute and Faculty of Actuaries, in partnership with Prof Tim Lenton and his team from the University of Exeter, set out in a report today (Guardian summary here, Planet Critical discussion here) the dangers of the current massive underestimation of climate change risk. As Tim Lenton says:

The choice is simple: continue to be surprised by rapidly escalating and unexpected climate and nature-driven risks, or implement realistic Planetary Solvency risk assessments to build resilience and support ongoing prosperity. We urge policymakers to work with scientists and risk professionals to take this forward before we run the ship of human progress aground on the rocks of poor risk management.

The part which really stood out for me (in such contrast to the equally massively exaggerated risks ascribed to movements in bond markets this week) was on the inadequacy of global risk management practices:

  • Policymakers often prioritise the economy, with their information flows focused on this. But our dominant economic model doesn’t recognise a dependence on the Earth system, viewing climate and nature risks as externalities.
  • Climate change risk assessment methodologies understate economic impact, as they often exclude many of the most severe risks that are expected and do not recognise there is a risk of ruin. They are precisely wrong, rather than being roughly right.
  • The degradation of natural assets such as forests and soils, or the acidification and pollution of the ocean, act as a risk multiplier on the impacts of climate change and vice versa. Traditional risk management techniques typically focus on single risks in isolation, missing network effects and interconnections, underestimating cascading, compounding risks.
  • Current risk management approaches fall short of the RESILIENCE principles detailed in this report for realistic and effective risk management. Consequently, policymaker risk information is likely to significantly understate the potential impact of climate and nature risks, weakening the argument for urgent action.
  • These limitations mean that policymakers are likely to have accepted much higher levels of risk than is commonly realised.

If policymakers judged these risks on the same calibration scale as they current view the knockabout on financial markets I doubt we would ever hear about the intricacies of the 10 year gilt yield or the decimal places of CPI ever again. Similarly, if the societal impact of prolonged policies targeting the poor was included (perhaps in the form of meaningful measures of poverty based on the work of the Social Metrics Commission), rather than the level of the FTSE 100, we might start to make inroads into the current dire statistics.

We have hard problems to solve which require a serious government prepared to be bold, do big things and take the political risk of doing so (because the political risks are so tiny compared to the actual risks the population face), not one so focused and constrained by minutiae that it defeats itself.

Came across this on YouTube today and it was such a brilliant discussion in the same area as my post from yesterday (which went out before I had seen this), but which went much further in a number of really interesting directions, that I thought many of you would be interested. Look out for a mention early in the video for the late great Iain Banks, science fiction fans!

Picture of Pinhead character wearing a Deadpool type mask made out of one of his ties

Imagine a super-hero who could not be killed. No I don’t mean Deadpool. A more apt name for our super-hero would be Deadmeat. Deadmeat is empirically dead, but, rather like the Monty Python parrot, is being energetically kept alive by the pretence of its continued existence amongst all of those around it. So much so that it becomes impolite to expose the pretence and point out that Deadmeat is in fact dead. If you really push, and someone likes you enough to want to give you an explanation, you will have a hand put on your shoulder and be led away to a corner to have the pretence explained to you. What that explanation turns out to be is something like this. Deadmeat is of course the Paris climate agreement from 2015 which committed 193 countries plus the EU to “pursue efforts” to limit global temperature rises to 1.5C, and to keep them “well below” 2.0C above those recorded in pre-industrial times.

Deadmeat, it turns out, wasn’t shot. Deadmeat was overshot. Under overshoot, we bring the terrible thing back under control after it has done the damage and hope we can fix the damage at a later date. It’s a bit like the belief in cryopreservation or uploading our brains into cyberspace in the hope that we can have our bodies fixed with future medicine or be provided with artificial bodies. It means relying on science fiction to save us.

Andreas Malm and Wim Carton have considered this approach and how we got here in their latest book Overshoot. For me there are two big ideas in this book, although the account of how things definitively got away from us immediately post pandemic and exactly how that played out is mesmerising too. I thoroughly recommend a read.

The first big idea is the problem with the justification for overshoot in the first place, which is that at some point in the future we will be so much richer and more technologically advanced that it will be much easier to bring carbon dioxide levels down to sustainable levels than to try and stay within sustainable levels now. In what they call “The Contradiction of the Last Moment” Malm and Carton show how an intense fresh round of fossil fuel investment is almost certain to occur close to a temperature deadline (ie fossil fuel companies rushing to build more infrastructure while it is still allowed), whether it is 1.5 or 2 degrees or something higher. Then, as they put it “the interest in missing it will be overwhelmingly strong”. If an investment is 40 or 50 years old, then it might not be so disastrous to have it retired, but if a fossil fuel company has invested billions in the last few years in it? They will fight tooth and nail to keep it open and producing. And by prolonging the time until the retirement of fossil fuel infrastructure, the capital which has used the time to entrench its position and now owns a thousand new plants rather than a few hundred will be in a much stronger position to dictate policy. The longer we leave it, they argue, the harder it will become to retire fossil fuels, not easier.

The second big idea explains why, despite the enormous price collapse of solar power in particular, there is no Big Solar to compete with Big Oil. As they put it “there was no Microsoft or Apple or Facebook. More broadly, there was no Boulton & Watt of the flow, no Edison Machine Works, no Ford factories, no ascendant clusters of capital accumulation riding this wave.” The only remotely comparable company would be Tesla, but they produced cars. Why is this?

Malm and Carton talk about “the scissor”, the difference between the stock of the fossil fuel industry and the flow of renewable power. Fossil fuel’s “highly rivalrous goods: the consumption of one barrel of oil or one wagon-load of coal means that no one can ever consume it again. Every piece of fossil fuel burns once and once only. But supplies of sunlight and wind are in no way affected by any one consumer’s use.”

And this is the key I think. What economists call “public goods”, goods which are non-rivalrous (ie your use of the sun’s energy does not stop somebody else’s unless you put them in the shade) and non-excludable (ie you cannot easily stop someone else from using it, in this case by sticking a solar panel on their roof), are very difficult if not impossible to make a profit from. Private markets will therefore not provide these goods, possibly at all without extremely artificial regulation (something we have probably had enough of with our utilities in the UK) and certainly not in the quantity that will be required.

In Postcapitalism, Paul Mason discussed the options when the price mechanism disappears and additional units of output cannot be charged for. As he put it:

Technologically, we are headed for zero-price goods, unmeasurable work, an exponential takeoff in productivity and the extensive automation of physical processes. Socially, we are trapped in a world of monopolies, inefficiency, the ruins of a finance-dominated free market and a proliferation of “bullshit jobs”.

This also ties in with my own experience and others I have spoken to over the years about how hard it is to invest outside of fossil fuels and make a return.

Therefore if the private sector will not provide public goods and renewable power is predominantly a public good, then it follows that renewable power needs to be in public ownership. And if the climate crisis requires all power to be renewable and zero carbon, which it does, then it also follows that the entire power sector ultimately needs to be in public ownership too.

And then the motivation for overshoot becomes clear and how high the stakes are: not just the proceeds of the sale from one dead parrot as it turns out, but the future of private power generation. My fear is that the Deadmeat franchise may end up having as many sequels as Godzilla (38 and counting). With the potential to do rather more damage in the process.

I last talked about Chartered Actuary status here two years ago when the Institute and Faculty of Actuaries (IFoA) set out how they had decided to introduce it. I focused then on what we needed to do to make this a change worth making: like offering roles for actuaries on completion of core practice modules; not necessarily insisting on further actuarial specialisation as a requirement for senior roles within firms; getting comfortable with a much wider range of specialisms amongst those we consider to be actuaries. Some were already doing this then, but most of us have still not travelled very far in this direction. And I note that the Route to Becoming An Actuary still features a diagram where an IFoA Associate is shown as a milestone on the way to the final destination of becoming a Fellow.

But the fact is that Chartered Actuary status has finally been launched this week. I am a retired actuary now but I have claimed chartered status nevertheless because it is a designation I very much think needs to be supported. However ultimately the success of it will not depend on employers or even the profession itself, and certainly not on retired old duffers like me. It will depend on students now and in the future. Therefore, in the unlikely event that any actuarial students are reading my blog, I am addressing this piece directly to you.

Whether you are a student who, like most actuarial students, started work with no or perhaps just one or two exam exemptions, or a graduate from an actuarial science undergraduate programme with most or all of the core practice exemptions, this means that the barriers to you starting to take your actuarial career off in the direction you want it to go in and think the world needs just got a bit easier to jump. If you are a graduate from some actuarial MSc programmes or even possibly a single qualification like the MMath in Mathematics and Actuarial Science at the University of Leicester (last plug for my former employer, I promise), you may be able to claim Chartered Actuary Associate status already.

Using it may not necessarily be so easy, particularly in the early years. Some employers may be resistant to the new designation. But if you are planning to join the profession to make a positive difference in the world, and that is in my view the best reason to do so, then you are going to have to shake a few things up along the way.

Perhaps there is a type of actuarial business you think the world is crying out for but it doesn’t know it yet because it doesn’t exist. Start one.

Perhaps there is an obvious skill set to run alongside your actuarial one which most actuaries haven’t realised would turbo-charge the effectiveness of both. Acquire it.

Perhaps your company has a client who noone has taken the time to put themselves in their shoes and communicate in a way they will properly understand and value. Be that person.

Or perhaps there are existing businesses who are struggling to manage their way in changing markets and need someone who can make sense of the data which is telling them this. Be that person.

Whatever you decide to do, do it with a chartered actuary designation, whether associate or fellow, as a badge that you are prepared to look beyond traditional ways of doing things and, where the historical way of doing things is obviously no longer working or could clearly be massively improved, do the hard work of rethinking things from first principles if necessary. If you do it right, this can be seen as a badge for actuaries who are both rigorous and flexible in their thinking. If that happens, the chartered actuary designation will flourish and it will also be of maximum benefit to you too.

So now it is up to you what becomes of Chartered Actuary status. I am really looking forward to watching what you do with it!

The Stonebreaker is an 1857 oil-on-canvas painting by Henry Wallis. It depicts a manual labourer who appears to be asleep, worn out by his work, but may have been worked to death as
his body is so still that a stoat has climbed onto his right foot
The Stone Breaker, 1857 Artist: Henry Wallis. Creative Commons 0 – Public Domain. Photo by Birmingham Museums Trust, licensed under CC0

The Europe of the 1830s and 1840s was a place of extreme political ferment which led to long-term changes to the way in which all Europeans, including the ones across the English Channel, saw themselves. According to Christopher Clark’s excellent Revolutionary Spring – Fighting for a New World 1848-1849: “parallel political tumults broke out across the entire continent, from Switzerland and Portugal to Wallachia and Moldavia, from Norway, Denmark and Sweden to Palermo and the Ionian Islands. This was the only truly European revolution that there had ever been.”

However you wouldn’t know it from the current Radical Victorians exhibition at the Birmingham Museum and Art Gallery. This explores three generations of progressive British artists working between 1840 and 1910: the Pre-Raphaelite Brotherhood and their circle; the second wave of Pre-Raphaelite artists who gathered around Rossetti from the late 1850s, including William Morris and Birmingham-born Edward Burne-Jones; and a third generation of designers and makers associated with the Arts and Crafts movement, working from the turn of the century to just before the First World War.

It’s a very good exhibition, but the only painting I could find in it which referred to the economic crises of the 1840s and 50s at all was the one above, of a stone breaker worked to death. There was also the famous one of a couple emigrating to Australia (shown below) which may be a response to domestic economic circumstances although, based on a self portrait of Madox Brown as it is, it may just as well be a response to the lack of art appreciation in the UK:

The Last of England, 1852-1855 Artist: Ford Madox Brown Creative Commons 0 – Public Domain. Optional attribution: Photo by Birmingham Museums Trust, licensed under CC0

But that is it! Despite the Victorian Radicals’ believing that art and creativity could change the world and be a real force for good in society, their gaze rarely moved from “realistic” depictions of their friends posing in rustic or suburban landscapes at a time of massive social upheaval.

At the time Britain was rather smug about having avoided revolution, but the evidence suggests that it could have easily been very different were it not for the measures taken by Robert Peel’s Government: the reintroduction of income tax on upper middle class incomes in 1842; the Bank Charter Act of 1844 which suppressed financial speculation by restricting the right to issue bank notes to the Bank of England only and creating a maximum ratio between notes issued and the Bank’s gold reserves; and the repeal of the Corn Laws in 1846 which considerably weakened the landlords’ grain monopoly and allowed for grain imports which did reduce prices but fundamentally changed the structure of the UK economy. This was explosive stuff which brought down Peel’s government and split the Conservative Party.

Policing in the UK was also very muscular. 15,000 Chartist activists were arrested in 1843 and a meeting of 150,000 Chartists at Kennington Common in 1848 was met by 4,000 police, 12,000 troops and 85,000 special constables (volunteers with clubs, including the future Emperor Napoleon III who was in exile from France at the time). There were so many transportations to the colonies that there were mass protests in Australia and the Cape. There were riots in Jamaica and British Guyana when sugar tariffs were dropped to reduce prices back in the UK and when, rather than burdening British taxpayers further, taxes were applied in Ceylon (now Sri Lanka), a protest movement numbering 60,000 was created.

In June 2024, Michael Marmot and Jessica Allen published A programme for greater health equity for the next UK government. In it they say the following:

Much of what went wrong with respect to the social determinants of health equity in the period after 2010 comes under the rubric of austerity, imposed by a Conservative Party led coalition Government. In the 2020 Marmot Review, we reported that in 2010 public sector expenditure had been 42% of GDP. Over the next decade, public sector expenditure went down year on year. By the end of the decade, public sector expenditure had become 35% of GDP. An annual reduction of 7% is enormous. In 2023, total UK GDP was £2·687 trillion. 7 7% of that is £188 billion. At today’s prices, annual public sector expenditure in 2019 was £188 billion less than it was in 2010. It is then not a surprise that relative child poverty went up— the steepest rise among 39 OECD countries; 8 absolute measures of destitution increased; welfare payments apart from pensions did not keep pace with inflation; spending on education per pupil went down; the housing shortage became more marked and homelessness and rough sleeping increased; and increases in health-care expenditure fell sharply compared with historic trends. Alongside these major changes, came the slowest improvement in life expectancy in the UK during the decade after 2010, of any rich country except Iceland and the USA.

We have a new Government, 100 days in, in our new Carolian era. What will future generations say about who this government answered to? Will it turn out to have been our modern stone breakers, working themselves into sickness and early death below the radar of a modern media at least as divorced from the concerns of ordinary people as the Victorian Radicals were? Or will their hard decisions turn out to necessitate other priorities? Time will tell.

Alisdare Hickson from Woolwich, United Kingdom, CC BY-SA 2.0 https://creativecommons.org/licenses/by-sa/2.0, via Wikimedia Commons

Election day is approaching. It has been a bruising 5 years and the Labour Party’s landslide-super-majority seems like a distant memory. The Conservative Party was not quite wiped out in the end: less than 100 seats but still His Majesty’s Opposition. The Labour Government had well over 400 seats. Once all the levels of government jobs had been allocated: 95 ministers and whips, 41 parliamentary private secretaries, various party roles such as chairman, deputies, etc and perhaps a few trade envoys, and other roles had been occupied like select committee positions, there were considerably in excess of 200 MPs over who the Government had rather less leverage. In the case of the 60 or so MPs seen as left wing, the leverage was close to non-existent after 5 years of vilification of the Corbyn era and all who sailed with her. There had therefore been a great deal of scope for mischief to be made, and mischief duly followed.

This did not concern the new Government too much. It made it clear to all that they were very different to the Corbyn-led party, a point that they had been almost obsessive about (even likening the Conservatives to Corbyn in terms of uncosted commitments) in the 2024 election campaign. The left wingers were not particularly well coordinated in any case, and still felt considerably more loyalty to the Labour Government, however much they disagreed on policy, than the Government felt towards them. In the absence of an issue which unified MPs more widely, the potential damage was limited.

But then a party which had always been a party of protest suddenly found itself with a seat. In fact the Reform Party had 6 seats and very loud seats they turned out to be. However most of their manifesto or “contract” with the electorate was not shared with any of the other parties. The one exception to this – a manifesto position shared to some extent by the Liberal Democrats, the SNP, the Green Party and Plaid Cymru – was a more proportional voting system to replace first past the post (FPTP). This only amounted to 100 votes in total of course, but it was a start.

The Taking Back Our Seats campaign launched in September 2024. Its main argument was that a large number of the seats in parliament had not been granted by the votes cast. Labour had won 40% of the votes, which should entitle them to 252 seats but had instead landed them 435. The SNP had also done well out of FPTP. However the Conservatives, with half the Labour vote, should have expected 126 seats but got less than 100. The Liberal Democrats could also claim they were due 12 more seats. And the Green Party and Reform were the most hard done by: the Greens should have won 57 seats but gained only 4 and Reform’s 6 noisy seats should have been a cacophonous 101.

But even with all of the opposition parties on board, and a steadily increasing majority in the country in favour of changing the voting system as the campaign developed, they still had less than half of the Labour vote in parliament. Before the 2024 election, around half of Labour MPs were in support of Proportional Representation (PR), but their now dominant parliamentary position had caused many of those to reconsider, as well as bringing in a lot of new faces who owed their seats to the unfairness of the current system. About two thirds of Labour supporters were thought to be in favour of PR, which might become more relevant should the super-majority itself suddenly come under threat.

Which it duly did. The early signs were there: talks with the junior doctors, which many had expected Labour to be able to settle quickly and for less than 35%, collapsed and a new wave of strikes were announced. Any lingering thoughts of a honeymoon period ended abruptly in 2025. The summer was a shocker, a late heatwave in August led to hundreds of excess deaths and widespread riots in the most overcrowded prisons in the system in Durham, Leeds, Preston, Wandsworth, Bedford and Lincoln. And then, towards the end of September, just as the nation’s children were setting off to campus, the first universities declared themselves bankrupt.

Coventry and Sheffield Hallam had been in very public difficulties for some time, but it soon became clear how much they had been relying on a very different funding deal from the incoming Labour Government. Different from the Conservatives of course but also from the statements made by the shadow cabinet in the 2024 election campaign. It had taken 12 months for the reality that the Labour Government meant what they had said in the election campaign to come into contact with the universities’ financial plans, but now there was nowhere else to go. Courses were closed and put on teach out mode, almost entirely online. Students expecting to take up places were suddenly back on a hastily organised late emergency clearing programme, with all those who could defer by a year advised to do so.

Bristol, Bournemouth, Southampton, Somerset, Dover, Havering, North Northamptonshire, Cheshire East and Bradford councils all issued section 114 notices in quick succession. There was talk of a large number of other councils not far behind them.

The election polling towards the end of 2025 indicated the fastest and biggest swing in polling history. 40% was now a distant memory as the level of support sank below 30%. The very real danger that the super-majority might be a one term phenomenon was being actively discussed in all the bars and tea rooms of Westminster. The question on everyone’s lips in government was whether something big and popular could be done quickly which might also put some kind of safety net under the Labour seat count. And Taking Back Our Seats suddenly started to make sense to more and more Labour MPs. It might not save all their seats, but the threat that the leverage which had worked on their increasing popular vote so powerfully in 2024 could be turned just as effectively against them in 2029 was being taken increasingly seriously.

A referendum was proposed for the following year. Taking Back Our Seats avoided the trap the 2011 referendum had fallen into when they advocated the Alternative Vote (AV) system as the alternative to FPTP. This had kept the single MP per constituency of FPTP which sitting MPs always claimed was so important to voters, but had been susceptible to charges that it was not really PR at all. AV, or instant-run off voting as it is sometimes called, involves voters ranking the candidates rather than just voting for one. The candidate with the fewest “1” rankings is eliminated and all its “1” rankings are then reallocated to the “2” rankings of those who ranked the eliminated candidate 1st. And so on until one candidate is left.

Taking Back Our Seats instead backed the single transferable vote (STP), which also lets voters rank candidates. However instead of organising constituencies around single candidates, they are clustered (into clusters of 3 to 6 seats). First choices are reallocated if those choices are eliminated as for the AV system, but also if candidates have more votes than they need to get elected. This means that each vote has broadly the same value and results in much more proportionality in outcomes. This compares with the current system at the 2019 election where, according to the Electoral Reform Society, 865,697 votes were required to elect each Green MP, while only 38,264 were needed for each Conservative MP. STV is the preferred voting system of the Electoral Reform Society and is used in the Australian Senate, Ireland and Malta.

The result was an almost exact reversal of the 2011 vote – 70% voted in favour of STV for the next general election and the enabling legislation was passed the following year.

The impact on the party system in Westminster even before the new voting system was used was interesting. Many of the disaffected Labour left group announced that they would not be standing as Labour candidates at the next election, and subsequently a new Socialist Labour Party emerged which attracted many of them, as well as Jeremy Corbyn, who had stood successfully in 2024 as an Independent. Others gravitated towards the Greens. The Conservatives, whose vote was still struggling to overtake Labour despite the many reverses of the last 5 years, were less prone to splits amongst their 100 remaining MPs, but a handful joined Reform and there was a smaller number of transfers between the Labour, Conservative and Liberal Democrat Parties as their positions had moved further apart at the prospect of a STV election.

And now here we are. On the brink of what feels like a big change. Everyone is a little nervous about where we are going with this, but there is also a certain amount of exhilaration in the air. We are all half expecting the politicians to find a way to turn this experiment against us, but also the thought that we will finally have a Parliament which properly represents us is a little bit intoxicating. Still lots of work to do on all the problems we have of course, but perhaps we now have the right tool to start that work.

We shall see…

For more information on the different voting systems mentioned in this little fable, I recommend Lessons Not Learnt, published by the Electoral Reform Society in January 2024.

The Telegraph thinks the shareholders are to blame. The Guardian has the Australian investment bank Macquarie in its sights. Martin Bradley’s (the European Head of Infrastructure at Macquarie Asset Management) attempts in Infrastructure Investor at justifying their actions only seem to be making things worse. The FT is using it as an excuse to have a go at the Capital Asset Pricing Model. Count Binface has included in his manifesto for the London Mayoral election a requirement for the company’s management to “take a dip in the Thames, to see how they like it”.

I am talking of course about Thames Water, which really does appear to be everywhere at the moment. But how did we get here?

The management of water works by private companies was originally a legacy of the Victorians – most of the water supply and all waste water services moved into local government control from the late 19th and early 20th centuries. Control then passed from 165 different water supply bodies to 10 regional water authorities in 1974 before these were sold back to private companies in 1989.

Water is obviously a resource vital to all of us, as well as being what economists call a natural monopoly. There have been debates for quite some time now about renationalising the water industry – some arguing that it is too expensive and that a Welsh Water not-for-profit model is the answer, others saying that water, electricity and Royal Mail together would cost less than £50 billion to nationalise and would pay for themselves within 7 years if investors were just repaid what they had invested in the businesses, others saying that water is a failed business and could be acquired without compensation for shareholders as happened with Northern Rock.

What none of these appear to be arguing is that private monopolies should not exist as a reason for renationalising water. We have become so used to monopoly or oligopoly profits in everything from utilities to transport to mobile phones to supermarkets, that we sometimes forget that it has not always been like this.

This point was made to me powerfully in Cory Doctorow’s excellent The Internet Con – How to Seize the Means of Computation. The 19th century debate in the US Senate about monopolies was impassioned. Senator John Sherman of the 1890 Sherman Act effectively put the war against monopolies on an equivalent footing with the War of Independence from the British Crown:

If we will not endure a King as a political power we should not endure a King over the production, transportation, and sale of the necessaries of life. If we would not submit to an emperor we should not submit to an autocrat of trade with power to prevent competition and to fix the price of any commodity.

It’s stirring stuff. The “harmful dominance” theory of antitrust (ie the idea that companies which dominate an industry are potentially harmful just because they are dominant, before they even start to abuse their dominant positions) led to the dismantling of several “empires”, including that of Rockefeller’s Standard Oil Company in the early 20th century.

But then enter Robert Bork. Famous amongst other things for having an extremely dull taste in video rentals, Bork was Solicitor General of the US between 1973 and 1977, under Presidents Nixon and Ford, and Acting US Attorney General from 1982 to 1988 under President Reagan. Bork developed what he called a “consumer welfare” theory of antitrust. This allowed mergers and monopolies to proceed provided prices were lowered and/or quality improved, or even if they weren’t as long as some “exogenous factors” could be blamed for the price hikes or reduction in quality.

Sound familiar? It should, as we all still live in Bork’s world. For example, the microeconomics part of the Institute and Faculty of Actuaries’ Business Economics syllabus relating to imperfect markets reads as follows:

Note the focus on the different ways firms supposedly maximise profits (this approach is fairly thoroughly debunked by Steve Keen here) rather than on the market power they wield. The part which should include the regulation of monopolies reads as follows:

Note the lowering of expectations in 3.1.6: “Why government intervention might not improve market outcomes in practice even if the existence of ‘market failures’ suggest they can in theory”. However the real limitations are laid bare in 3.2. The main targets of “competition policy” in the text book (Economics by Sloman et al) you are pointed to by the core reading turn out to be what are referred to as “exclusionary abuses”, ie where businesses actively prevent effective competition from actual or potential competitors. As the preamble on competition policy in Sloman says:

Competition policy could ban various structures. For example, there could be restrictions on mergers leading to market share of more than a certain amount. (This is the harmful dominant approach, about which no more is said) Most countries, however, focus on whether the practices of particular monopolists or oligopolists are anti-competitive. Some practices may be made illegal, such as price fixing by oligopolists; others may be assessed on a case-by-case basis. Such an approach does not presume that the existence of power is against the public interest, but rather that certain uses of that power may be.

So, in other words, we will leave monopolistic businesses with the power and attempt to detect abuses of that power on a case-by case basis via overworked and under-resourced regulators. Sherman could have never cut Standard Oil down to size with this approach.

Yanis Varoufakis’ contention, in Technofeudalism, is that capitalism now only operates within the framework provided by the most extreme monopolists of Big Tech, with most of us either “cloud proles” (ie wage slaves working for Big Tech under feudal conditions) or “cloud serfs” (ie the rest of us working for Big Tech for free by creating content and sharing our data on their platforms). Big Tech’s size massively increased as a result of the bank bail out of 2008 and additional money pumped through them and the corporations working for them coupled with austerity for everyone else, which was therefore almost totally financialised – leading to the “everything rally” for asset owners.

As Varoufakis says:

When an activist state makes fabulously wealthier the same bankers whose quasi-criminal activities brought misery to the majority, while they are punished with self-defeating austerity, two new calamities beckon: poisoned politics and permanent stagnation.

Again, sound familiar?

It is not too late to push back against the monopolies which control our lives. Doctorow’s big idea in The Internet Con is interoperability, the ability of new technologies to plug into Big Tech’s services, systems and platforms, which Big Tech tends to resist with all of the power at its disposal. He makes a convincing case for how this simple change could reduce the size of Big Tech companies quickly and bring them within the scope of democratic control once more.

And for those businesses which need to be at monopoly scale to work at all? Water, for instance. That sounds like an unanswerable case for nationalisation to me. Perhaps assuming that dominant private companies are bound to be harmful needs to come back into fashion.

My evidence to the House of Lords Economic Affairs committee on the sustainability of the UK’s national debt is now available on the parliamentary website.

I was rather surprised to see that only 37 people submitted written evidence. My evidence was as follows (with the hyperlinks which got removed restored and the addition of the graph of the history of public sector net debt):

The “incredible” £2.6 trillion mentioned by Lord Bridges of Headley in the call for evidence suggests that you are using the public sector net debt excluding public sector banks figure, which is £2.671 trillion or 97.5% of GDP as at November 2023 according to the Public Sector Finances bulletin on the ONS website. You could more reasonably use the public sector net debt excluding public sector banks and the Bank of England figure, which recognises that otherwise you are notionally including a debt attributed to an organisation which has no debt, which therefore reduces this debt to £2.419 trillion or 88.3% of GDP. Or even better, you could also deduct the Bank of England Asset Purchase facility, which was used for QE and is held by a subsidiary company of the Bank of England controlled by the Treasury and therefore also not a debt in the commonly accepted sense of the word. This stands at £0.597 trillion in Q2 2023 according to the latest quarterly report from the DMO and would further reduce the debt to hopefully a slightly less incredible £1.822 trillion or 66.5% of GDP.

Even if you want to stick with your original number, despite a large part of it not being owed to anyone with any interest in being paid back, the public sector net debt according to the ONS following a global pandemic and Brexit as a percentage of GDP is lower in the UK than at any time between 1916-17 and 1960-61.

Our latest general government debt available on the IMF Datamapper, which is from 2022, of 101.4% of GDP also compares favourably with the United States (121.4%), Japan (261.3%) and France (111.7%), with only Germany (66.5%), China (77.1%) and India (83.1%) of our major partners or rivals with lower debt.

With this perspective in mind, my responses to a selection of the questions set out for the call for evidence would be as follows:

What is meant by a “sustainable” national debt? Does the metric of debt as a percentage of GDP adequately capture sustainability?

I think this means affordable, both currently and in the future. The only reason our current level of debt (which, as I have shown, is not particularly high either by international or historical comparison) is felt by some to be unaffordable is the sharp increases in interest rates by the Bank of England over the last two years. Central government debt interest, net of the Asset Purchase Facility was £112.1 billion in 2022-23, compared to £60.9 billion in 2021-22 and £26.7 billion in 2020-21.

According to the World Economic Outlook from the IMF in April 2023:

Overall, the analysis suggests that once the current inflationary episode has passed, interest rates are likely to revert toward pre-pandemic levels in advanced economies.

This is therefore a temporary problem and does not suggest that the level of debt is unsustainable at all. Interest rates should be brought down as quickly as possible, and the rate of interest on the Asset Purchase Facility should be reduced immediately to very low levels, as is already the case in many other countries including the Eurozone and Japan (the case for this was made in June 2022 in the New Economics Foundations’ report Between A Rock And A Hard Place).

The Government’s target is for public sector net debt (excluding the Bank of England) to be falling, as a percentage of GDP, by the fifth year of the OBR’s forecast. How meaningful is this target; and how does it inform an evaluation of the sustainability of our national debt?

I think this target is essentially meaningless given the high likelihood of a change of Government within the next year. In my opinion Government spending needs to be set according to need rather than by setting an arbitrary target for the level of debt as a percentage of GDP.

What are the market risks created by high levels of public debt; and what factors will influence the market’s appetite for this debt?

As the DMO Annual review for 2022-23 states: “The average cover ratio at gilt auctions in 2022-23 was 2.39, in line with 2.41, in 2021-22”, ie there are consistently nearly two and a half times as many bids for gilts as gilts being offered for sale. This indicates a continued strong demand for gilts.

What levels of productivity and growth are required to ensure our national debt is sustainable?

Our national debt is already sustainable.

If we are to ensure our national debt is sustainable, what might this mean for fiscal policy?

Our national debt is already sustainable.

Should the definition of the national debt differentiate between debt incurred for investments (which generate revenue for the Government), and other areas of spending?

Yes. One example would be where nationalised entities such as Network Rail are included as a liability but the corresponding revenue-producing asset is not set against this when included in the national debt figures.

It is striking to me what questions you are not asking, eg:

If we are to ensure our national debt is sustainable, what might this mean for monetary policy?

This seems to me to be a much more relevant question, as it would appear that the sole reason the unsustainability of the national debt has become an issue is due to the monetary policy of the Bank of England. Japan has negative interest rates, the Eurozone’s rate is 0.75% below ours. The high level of interest rates in the UK is having a negative impact on economic growth, investment and unemployment, as well as sharply increasing the cost of the national debt. The independence of the Bank of England and the nature of the targets it is set would both be more interesting subjects for a call for evidence than the sustainability of the national debt.

A member splatted against the relentless forehead of a streamlined, efficient, simplified and clarified IFoA

So the proposals which I wrote about last month have been reconsidered by the newly elected Institute and Faculty of Actuaries (IFoA) Council on 15 October, where they agreed some tweaks to the original proposals as follows:

Council devised and ultimately voted for revised measures based on the member feedback it had received on the previously approved reforms. You told us that you wanted the new President and Council (2023-2024) to reconsider the reforms and we agreed this at our meeting on 1 September 2023. You told us that you wanted better communication and more engagement and we have embarked on one of the biggest member engagement exercises in our history which will continue next year into the role of Council. You told us that you were uncomfortable with the idea that actuaries would be in the minority on the board. We have responded by changing the makeup of the new IFoA Board so that it will continue to have a majority of actuaries. You told us that you wanted safeguards to ensure the IFoA Board could be held to account and that a “bad board” could not self-perpetuate. We have responded by ensuring that appointments of members and independents to the IFoA Board will need to be ratified by Council on first appointment and every 3 years for the remainder of their term.

So am I happy now? The answer is no in some respects and I don’t know in others. No I am not happy that a member vote still seems to be proposed for 2026, giving this proposal the inside track to becoming the final permanent governance structure by only asking for a vote after most of us will have become quite hazy about what went before it.

I don’t know because we are still not going to be given sight of any part of the DAC Beachcroft report to which these proposals are supposed to be a response. We are therefore being asked to completely trust the description of what was in it by the very people trying to sell us their proposals. That is a big ask in my view.

However it is also difficult to raise any formal objections to the proposed amendment to Regulations 2, 3, 4, 5, 6, 10, 11, 12 and 13 in this state of enforced ignorance. I will therefore be raising the concerns I have set out here by contacting the Corporate Secretary at the IFoA. If you feel that you can go further and formally object on the basis of what you have or have not been told, then those objections should be raised by 30 January to be considered.

Perhaps I am making too much of what I don’t know, but I was struck by the references here to any future consultation being confined to the role of Council, with the rest of the governance structure seemingly regarded as done and dusted. Also if you watch to the end of the little video there, you are confronted with this message:

Is our ability to continue to self-regulate at all really under threat? I would have expected to be told rather more about why this is before being asked for my views in a member organisation such as the IFoA.

I accept that many of the IFoA’s functions may need a more streamlined system to run them effectively. There are many different alternative structures which we could consider to achieve this. But these proposals are about changing the very nature of the IFoA and that requires full disclosure to members about why we are doing this and a chance to vote before we do so in my view. More than a tweak, in other words.

Copyright ©Steve Bell 2009/All Rights Reserved e.mail: belltoons@ntlworld.com tel: 00 44 (0)1273 500664. Reproduced by kind permission of Steve Bell https://www.belltoons.co.uk/bellworks/index.php/leaders/2009/2913-16-10-09_BOINGUSES

We have been here many times before, even in recent memory. The 2008 banking crisis, memorably immortalised by the Steve Bell cartoon above; the MPs’ expenses scandal the following year; the successive disappointments of Brexit; and now the the Post Office Horizon scandal. All of these had in common an initial public expression of outrage, followed by loud condemnations of aspects of it from within the Establishment, followed by a series of measures which generally failed to change anything substantive. So the ring-fencing legislation brought in to isolate the risk taking within banking from retail customers has steadily been lobbied against and is now gradually being unravelled. MPs continue to have expenses scandals. I don’t know how to encapsulate in a sentence the Muppet Show of how the Establishment has been trying to deal with Brexit since 2016. And now this.

The Post Office scandal seems to be being discussed everywhere: beyond the TV, radio and social media, it is in the pub, the supermarket queue, in families and workplaces. The Establishment condemnation is already underway, as pithily summarised by Marina Hyde here. I do not really care about the implications for the honours lists, but very much hope that the sub-postmasters and sub-postmistresses get the compensation they are seeking. However this time the response cannot stop there.

As David Allen Green has written in Prospect today (with a great overview of what has happened from a legal point of view), the scandal also represents a failure of the legal system. This was partly caused by the repeal, in 1999, of the part of the Police and Criminal Evidence Act 1984 which presumed in favour of individuals rather than computer systems. This has been particularly unfair in these cases as the evidence defendants needed to show that Horizon was at fault often remained undisclosed by the Post Office. It was also caused by the Post Office’s eagerness to pursue private prosecutions.

Coincidentally, I came across the concept of private prosecutions a couple of weeks ago while reading the excellent Butler to the World: How Britain became the servant of tycoons, tax dodgers, kleptocrats and criminals by Oliver Bullough (which also suggested to me that I should revisit the issue of Scottish Limited Partnerships soon, but I digress). As Oliver points out:

Under measures introduced in the post-2010 austerity agenda, defendants…have no prospect of reclaiming their expenses from public funds if they are convicted. Even if they’re acquitted, they can only get their expenses back if a request for legal aid has previously been turned down…Meanwhile, private prosecutors – whether individual or companies – can claim back all reasonable expenses if they lose. Financially speaking, a private prosecution is a one-way bet. As long as you can afford the upfront cost of bankrolling the case, you’ll get your money back because under common law you are acting on behalf of the Crown.

David Allen Green has called for private prosecutions to be abolished, which I would agree with. But I also think the burden of proof needs to be returned to the operators of computer systems in what I predict will become increasingly frequent human-expert system disputes in the future. In fact we need to go further than that and have a full public consultation into what legal protections individual humans will need in a world increasingly driven by decisions and calculations made by non-human systems.

Over seven years ago I wrote an article in response to Cathy O’Neil’s excellent Weapons of Math Destruction, where she set out the case against devolving important decisions to mathematical models without adequate feedback loops. I said then (with an Oppenheimer reference too!) that:

If mathematical models are to be the dominant regulatory tool of a financial world, and of the consultancies and financial firms competing in that world, then the time will come when mankind will curse the names of the highly paid professionals who followed inappropriate rules rather than exercising their own expert judgement when it mattered.

It is starting to look like we may be there already unless we act fast.