The staggering cost of government websites . . .

June 25th, 2010

News yesterday from the Cabinet Office confirmed what many of us had suspected for some time – parts of the IT Industry have been ripping off the government and by extension the taxpayer for some time – particularly on websites.

It is a pretty staggering set of statistics that;

across government £94 million has been spent on the construction and set up and running costs of just 46 websites and £32 million on staff costs for those sites in 2009-10. The most expensive websites are:

Read the original report here. As I wrote some 18 months ago, I suspected that the cost of public  body/quango websites would be hard to justify and a future government should aim (amongst other measures) to achieve

Full disclosure and ranking for each quango of website expenditure and the consequent number of impressions and visitors and downloads (suspect quite a few scandals here – government websites tend to be very expensive and ineffective, there may be some successes too, let’s find out!)

I just didn’t know how bad it was.  To be fair, this process started long before the arrival of the new government the previous government had already shut down a lot of websites. So the Cabinet Office can’t actually take all of the credit, just some of it. But the openness vis a vis the release of raw data from the coalition is a very big departure from the past and to be welcomed.

Now we need to know what are the google search terms all these bodies are bidding on and what is their budget for it?

This would constitute the proof that government service providers are crowding private sector providers on an hourly basis. I’ve no doubt that they will have succeeded in bidding up the cost of google advertising for the private sector, so it’s only fair to know which ones for them not to compete with.

On alternative measures to GDP

June 18th, 2010

One of the pleasures of being abroad or somewhere different is to read the local/national newspapers. Right now in San Francisco I have been doing that and have to say, for an exciting, dynamic country they are surprisingly dull. I’m now not altogether surprised that so many regional newspapers have gone to the wall in the USA.  If you can forgive the tub-thumping patriotism, the likes of the Yorkshire Post knocks spots off the San Francisco Chronicle. And the Sunday Times for half the price is about 3 times better that the $6 plus sales tax NY Times on Sunday.

In contrast, the magazines though are a delight. They are a whole new level of vibrancy, content-rich and colour – as good as America’s newspapers are bad. And so to the theme of this post.  Today I picked up a copy of the Yale Economic Review – an academic magazine no less that I could actually buy in the shop. Would that be so in England !

In a piece entitled “A New Measure of Economic Performance”, Daniel Hornung points out that measuring growth in production, as in GDP, does not impart good information about actual living standards. Citing a report by Stiglitz and Sen,  amongst other points he posits that’s what needed is a measure that takes into account income and spending.  How much people are taking home and prepared to spend is a much closer indicator to how well off they really are.

Of course in most countries, we know what the data is on income and spending, the questions is how to roll it all into one and get something better than GDP?

The original report was commissioned by President Sarkozy and can be dowloaded here.

The housing market – two reasons for pessimism

June 3rd, 2010

News today that house prices were up 0.5% in May goes down well of course with Estate Agents, owners in negative equity and speculative buy-to-let landlords. It is bizarre how the UK has gone so overweight real estate – once tellingly decribed by Prof. Niall Ferguson as a “one-way, highly-leveraged bet on a highly illiquid asset“.

These figures though are a somewhat meaningless national average which actually contains extremely diverse regional bursts. Just look at the breakdown of those figures on Nationwide’s website here.  So here are  just two reasons for pessimism.

The ascendance of Sterling – you may recall that foreign buyers and foreign direct investment in general is at its strongest when the pound is at its weakest. Last year, there was actually quite a lot of buying at the premium end in upmarket areas by wealthy foreign investors. Since the beginning of the year, the nascent implosion of Euroland has led to a flight to relative quality – UK Gilts, driving up the value of the pound, but not to UK housing which is typically purchased through debt rather than cash in hand which you can’t get out of easily either.

A Capital Gains Tax rise – if you can’t risk a lot of your capital to make a substantial gain from buying property would you do it?

Probably not and the government should take note. Personally I’m all in favour of people making Capital Gains and big ones, especially if Banks are still not lending, consumers aren’t spending and the scope for government to increase aggregate demand through Keynesian pump-priming is limited by the size of the budget deficit. So it seems to me reasonable to aim long-term to reduce and eliminate all taxes on capital like CGT. Unfortunately Britain’s LibCon coalition does not see it that way and there are plans afoot to raise it considerably.

I hope very much that they will agree to something like John Redwood MP’s excellent compromise involving tapering relief.  Mr Redwood gave a superb and ever thoughtful speech to the EPC the other night some of which he flagged up on his blog here.  And because bank lending is still so meagre, the government could also endeavour to make tax-free gains made by retail investors who risk their capital on the purchase loan market organised by Zopa.