Are tax credits cost effective?

Theresa May, whom I have met, may be best known for her choice of shoes, but is actually one of the smarter members of Dave Cameron's team who tries to do some original thinking about important issues.

In a speech last week she made it clear that any government elected next year would struggle to prevent unemployment rising and that it was unlikely to return to pre-recession levels before 2016. She pointed out that unemployment had cost the British taxpayer £340bn in benefits since 1997.

The difficulties of dealing with the long-term unemployed have been emphasised in a series currently being screened on Channel 4 which looks at private contractors trying to get them back into work. But the jobs aren't there and most of them are ill equipped to deal with them because of the way in which long-term unemployment has affected their morale and ability to work, quite apart from any skill deficiencies.

The most interesting part of Ms May's speech was when she hinted that the Conservatives would re-examine tax credits for the less well off. Gordon Brown regarded this as one of his greatest achievements as chancellor, a redistribution by stealth in favour of working people with families.

Dave Cameron has already signalled that tax credits could be scrapped for middle income earners and Ms May said, 'Tax credits do not help people get better jobs; in fact they can create poverty traps that actually disincentivise people from working more hours or finding a better job.'

Certainly getting rid of them or reducing them substantially would save a lot of public money. However, one member of my family is a beneficiary. With two young children, tax credits have effectively covered the nursery fees for the younger child which means she is able to continue working (she earns more than her husband). It would be difficult for her to work more hours because of child care issues.

These issues are never straightforward, but they need to be debated.

The stakes are quite large

Henry Kissinger aptly said that academic debates are so vicious because the stakes are so small, but there are some substantive issues being raised by this spat behind all the name calling: The economy

On the subject of ultra Keynesianism, my former colleague Robert Skidelsky has brought out a new book on Keynes which according to Sam Brittan's review in the Financial Times is very good (as I would expect).

Keynes wrote and said so much that one can put whatever content one wants into his views. As he said (I haven't checked the exact wording), 'If the facts change, I change my opinion.'

When I read Robert's three volume biography of Keynes, I must say that it seemed to me at times as if Keynes was being presented as a closet monetarist. But it was a formidable achievement and when Bill Clinton came to Warwick to make his last official speech as president, he picked Robert out of the crowd to congratulate him.

A military funeral

Yesterday afternoon I went to sit in the park in which the Lutheran church in Vaasa, Finland is situated. I wanted to do some reading. I then became aware that a funeral was taking place in the church some distance away.

Then out of the church came a large honour party carrying wreaths. The coffin was then preceded by the Finnish flag, including the special version for Vaasa which includes a central device to record its valour against the Russians in the 19th century.

Even from some distance away, it was evident that the widow, embraced by the senior military officer present, was relatively young and accompanied by a boy about ten or twelve years old.

I had to check that Finland is fighting in Afghanistan, but it is. Of course, Finnish troops distinguished themselves fighting against the Russians in the Second World War. The funeral could, of course, be for someone killed in an accident.

When I came back to Britain, I saw another set of funerals being held in Wootton Bassett with the accompanying outpouring of grief. Each of these events represents a personal tragedy for a family.

It's not a conscript army and those who join it should be aware of the risks they are taking, but probably hope it won't be them. I was of a generation that escaped military service, but I am conscious of the sacrifices of those that do join up.

Majority public opinion would probably be in favour of the army leaving Afghanistan. It is difficult to see how a 'troops out' movement would effectively mobilise politically, as the Conservatives have criticised what they see as deficiencies in the equipment provided for the troops and the strategy followed without actually saying that they would pull out British troops.

Labour appoint Twitter Tsar

Vaasa, Finland: Labour have appointed a 'Twitter Tsar' to help them use the social networking medium in their election campaign: Tsar

The NHS

An off message MEP has caused a few problems for Dave Cameron, although I thought Andrew Lansley retrieved the situation well on Radio 5 this morning by emphasising that the Conservatives wanted an equitable health service (always difficult to achieve in practice whoever forms the government) but also one that was more responsive to its clients.

The MEP who started the storm has set out his views here: NHS

Whatever the merits of Singapore style health accounts, they would represent a fundamental change in the current NHS. How 'centralised' or 'statist' it is is a matter for debate, but I don't think it is helpful to Conservatives to have questions raised about their commitment to the NHS which, for all its shortcomings, has broad popular support.

Obama's efforts to provide health care for 47 million Americans has provoked a visceral debate in the US. This is really not about socialism or a Soviet model but trying to fix a situation where the US spends twice as much as a share of GDP on health than then UK does, but without achieving significantly better outcomes.

But Fox news is keen to get any Brit to contribute to their narrative of the situation. Don't let evidence stand in the way of an ideological claim.

MPs pay and expenses

Alan Duncan's remarks about MPs pay and expenses have apparently not pleased Dave Cameron and the Daily Mail has already commented that MPs still do not 'get it'.

Duncan has apologised, but does he have a point? 64k a year is a lot for a person on the average wage, or even more so someone out of work. But it is way behind most professional and managerial salaries.

Consider dentists, for example. I have to have a crown done and it is costing me £640. It is difficult to believe that the dentist is impoverished. Indeed, apparently even 400 NHS dentists are earning more than £300,000 a year and have an average salary of £89,000 and private dentists surely earn a lot more (indeed I know this as I once had responsibility for approving a postgraduate programme in cosmetic dentistry). As someone said to me 'Dentists: pain in the mouth, pain in the wallet.'

Now it is true that there are still plenty of people who want to become MPs and many of them are making considerable personal sacrifices in the process (I have one particular example in mind). Whether they are power crazed or have a real sense of public duty is a matter for debate. My view is that most of them do at least start out wanting to make things better.

It is an awful job, particularly given the demands that constituents make these days where the MP is supposed to function as a portmanteau social worker, albeit that does keep him/her in touch with the problems constituents face in their everyday lives. It is difficult to see how it is compatible with raising a family - unless you base yourself in London.

Dave had drink while student - revelation

Apparently shortly before the general election a documentary will be screened about the Bullingdon Club at Oxford. It will show that Dave Cameron and George (Gideon) Osborne were members of this club and that its members had a few too many drinks and caused some mayhem.

This is a revelation on a par with the story that formed the lead item on the local Fox when I was teaching at Washington University. Shock horror, students at frat houses were having parties over the weekend at which kegs of beer were brought in and consumed. It was almost on a par with their story about two escaped Rottweilers on some island which showed two obese cops spraying the bush with bullets.

I think one might go to one of the lowest ranked universities in the country and find students having too many drinks. Indeed, there were occasions when I did when I was a student.

Of course the sub-text here is that this is some kind of elitist conspiracy comparable to the Skull and Crossbones club Dubya was in at Yale. Now that probably was more like an elitist conspiracy whereas the Bullingdon Club is a bunch of amatures by comparison. Admittedly, they probably drunk champagne rather than Stella Artois. Or perhaps both? No doubt the programme will tell us.

I'm not sure that the background of many Labour MPs as professional members of the political class, lawyers or teachers qualifies them any more to be in touch with so-called 'ordinary people' than Dave.

My serious point is that what should be happening is a through scrutiny of Conservative policies. This is important even for committed Conservative supporters. There is a view going around that once the Conservatives are in they will be there for at least ten years and admittedly that is the pattern of recent British governments.

However, if they get it wrong, they could pay a heavy price. And it's actually bad news for all of us.