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Following the money – Review of Paul Johnson’s latest book

  • 16 April 2024
  • By Nick Hillman

HEPI Director, Nick Hillman, takes a look at the lessons in Paul Johnson’s book ‘Follow the Money: How Much Does Britain Cost?’

This is one of the best books I’ve read. That’s really saying something, given it is a book on fiscal policy – or government tax and spend. It is informed, well-written and even amusing, in spite of the topic.

It slays (in the TikTok sense) when it slays (in the trad sense) common views and historical figures. For example, it attacks the sense that the NHS is sustainable in its current position. It also, notably, attacks the idea that William Beveridge was a visionary when, apparently, he didn’t get basic Maths right and was really bad at futurology.

The book is rammed full of both killer facts, which are the currency of policymaking, and more quirky points that illustrate the wider madness of how we have come to govern ourselves after years of accretion.

We are told, for example, that the failure to keep things up to date means:

The council tax bills for expensive properties in central London … are still lower in cash terms than the rates bills were at the end of the 1980s.’ (My emphasis.)

Clothing made from goats incurs VAT if the animals come from Mongolia, Yemen or Tibet but not if they come from elsewhere. Gingerbread men with chocolate eyes do not incur VAT but gingerbread men with more chocolate on do.

Intriguingly, Johnson asks whether SERPs (the State Earnings-Related Pension scheme) went wrong due to the fact that a 1970s Labour Pensions Minister (Brian O’Malley) and his Conservative shadow (Ken Clarke) shared a love of jazz and hammered out the details over cosy drinks at Ronnie Scott’s.

The book makes you think too. For example, Paul Johnson shows the money raised or saved from privatisations and stopping most building of public sector housing as well as cuts elsewhere have funded the propping up of the NHS for years. That rather puts the idea that Thatcher-style Conservatives want to make the NHS so bad that it has to be replaced by another healthcare system, which I seem to read daily on social media, in a new light. In reality, perhaps it was Thatcherism that secured the NHS – just as the NHS was also treated more positively than other areas during the post-2010 austerity, when it was protected against cuts, and also during the pandemic via massive increases in spending and borrowing.

I like to highlight and mark up the most interesting points in books and articles as I go, and I’ve highlighted a ridiculous proportion of the text in this one (and even though I like to think I knew a little about the issues in advance). The book is so depressingly clear on what is going wrong and how to fix it that it (almost) makes good policy seem easy – just so long as people choose to follow the evidence, consider what works in other countries and challenge shibboleths as well as, most importantly, plan for the long term.

Paul Johnson is also honest, however, about the challenges that democratic politicians face and which he – as a think tank head – can choose to ignore when designing better policies. And he stays at a relatively high-level whereas the problems in good policymaking often come in the nitty-gritty details. This is a comprehensive book that covers a lot of ground, but it still has fewer pages than some individual Bills on relatively small areas that go through Parliament.

But what about higher education? In many respects, the relevance for higher education is in the chapters that focus on other issues. For example, the chapter on ‘poverty and working age welfare’ explains how the relative spending power of benefits has fallen behind. This applies to maintenance support for students too.

The later chapters on schooling and post-18 education are thought-provoking too, not least because Johnson is part of the ever-louder chorus in favour of a broader curriculum for those in Year 12 / Year 13 (sixth form in old money). He also retreads his powerful critique of the available options for those not best suited to the route of traditional higher education.

This book isn’t perfect, though it’s pretty close to it. For me, although it’s a small complaint, the commentary is too sympathetic to Adair Turner and his Pensions Commission of 2004. Back then, I was partly responsible for the response of pension companies to the Commission (in my role as a Policy Adviser at the Association of British Insurers). So I watched the whole Commission process closely and even – rather dauntingly – gave oral evidence to it.

In Johnson’s view, Adair Turner’s Commission deserves most of the credit both for the increase in the State Pension Age and the partial resolution of the so-called ‘pensions crisis’ via the introduction of auto-enrolment for workers. Both these changes were wise and the second has already proved incredibly successful. But the Commission was far from the only important actor in the campaign to raise the State Pension Age. Moreover, even at the time of the Commission’s Final Report, it was regarded by some wise heads as having flunked the question of risk sharing by backing individualised defined contribution schemes more than smarter designed alternatives. While Johnson flags the benefits of risk sharing as a way of tackling the pension challenges that remain today, he could perhaps have ascribed the very limited success to date of new risk-sharing pension schemes (for example, via collective defined benefit schemes) to Adair Turner pulling his punches 20 year ago in exactly the same way as he credits Turner for the successes.

If all this talk of pensions sounds esoteric or detached from HEPI’s core interest of higher education, just recall that our sector’s current pension arrangements – such as post-92s’ membership of the Teachers’ Pension Scheme – may not be long for this world. If that is right, we need to consider the full range of alternatives properly. (More information on pensions in the UK higher education sector is provided in the new UCEA infographic reproduced below.)

The book struggles in a really interesting way with the challenge so often faced by policymakers who think both that current systems are not working and need shaking up and that they are not working in part because of endless reorganisations – or ‘re-disorganisations’ as Johnson and others label them. He doesn’t shy away from proposing big changes: he favours, as so many others before him have done, a major shake up of social care and urges Ministers to get on with raising the State Pension Age (again). On healthcare more widely, he warns ‘Our worship of the NHS is positively damaging.’ More specifically, he complains:

The self-declared defenders of the NHS who vociferously complain about ‘privatisation’ or ‘the end of free health care’ every time a private sector organisation is involved art, potentially fatal, damaging them which they came to cherish.

Rachel Reeves has repeatedly said that she is reading the book; perhaps Wes Streeting is too.

Johnson also favours better major educational changes but tempers these with a good dose of what is possible, which leads him to more conservative solutions in some areas. On qualifications, for example, he writes:

We don’t need another set of politicians drunk on the own sense of self-importance throwing it all up in the air and leaving another generation of young people, and another generation of employers, wrestling with yet another new and impenetrable set of qualifications.

The question faced by reforming policymakers is often whether to undergo one last major reorganisation or to live with what exists while making constant small tweaks. That question is today faced by higher education policy wonks too. Some think the biggest challenges faced by universities are best tackled by letting the current fees for home students float up as money changes value over time; others want major structural changes, perhaps preceded by a long review. On student loans, Johnson is perhaps closer to the second camp, writing: ‘The idea that the currently favoured system will be in place in its current form for the next forty years is for the birds.’

Paul Johnson will be speaking at the HEPI Annual Conference on Thursday, 13 June 2024. For further details, see here.

UCEA chart showing pension contributions in UK higher education
Source: UCEA (https://www.ucea.ac.uk/library/infographics/benefits/)

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