There is plenty more where this comes from: why do pensioners in full-time work pay no national insurance, for instance?
Because it\’s insurance: largely, these days, to earn the right to your pension. Which, once earned, you get to take rather than having to keep paying for.
Airport capacity, rail and road improvement, flood defences, broadband, early years and home care all need investment,
I\’m afraid that early years and home care are not \”investment\”. They are spending. The two are not the same. Investment leads to an asset from which something can be earned: not lashing out the cash on current spending.
umm, human capital?
http://www.heckmanequation.org/content/resource/why-early-investment-matters
Apart from the fact that broadband beyond 2mbps is a luxury for most people (Diablo 3 will download in 2 hours on fibre rather than 16), it has the same issue as solar, that the technology is still under development.
For rural areas, OFCOM are dealing with it with the “high coverage” slice of 4G. The highest bidder for that (O2 I think) of that will have to spend money on more radio masts. We can count that as a public good.
But we’ve already got FTTC rolling out. We’ve got WIMAX happening. Oh, and Samsung seemed to have worked out a way to use some bandwidth that wasn’t thought possible, to send data at 1Gbps. Even if we might need more than a couple of mbps of speed sometime in the future, why rush to implement now when there’s so many options being worked on?
True the word investment is often misused but the difference between current spending and investment is not clear cut at the macro level. Even Unemployment payments can be said to assist in the Division of labour, one of the biggest generators of wealth.
“I’m afraid that early years and home care are not “investment”.
Tim. Polly is a socialist – they don’t know the difference. All centralised spending is justified by calling it investment. Individual spending is “consumerism” and automatically evil.
If a pensioner is working(apart from a few who do a bit for social contact or actually enjoy their work) it is most likely that said pensioner is not well off to begin with. And this socialistic bitch wants even more from them?
She is busy kissing Ed Balls arse for announcing policy that, if BluLabour had announced it , she would have been cursing as heartless evil.
Her plans are crap anyway:
Airports –I thought Pol was part of the eco-gang who want to stop proles likes us from spoiling Gaia by flying on those cheesy hols?. Once we are priced out there should be plenty of airport space for her jaunts to Tuscany.
Road and Rail: OK but they only use a fraction of Road Tax thieved on the roads anyway–how much more?.
Flood defences–needed–but she is only hyping it because of the AGW bollocks.
Broadband: should be a private matter.
Early years: = state intervention in childhood such as the crap now going down in the socialist republic of Scotland–a gauleiter for every child.
Home care: of the elderly?–they should be working and paying their NIC the greedy bastards.
Why does the loss-making Guardian pay for such tripe?.
“True the word investment is often misused ”
How about we stop using the word investment altogether & just call it spending? It may be spending for a current need or spending anticipating a future need. It may be virtuous or foolhardy. But it’s all simply spending.
*Investment leads to an asset from which something can be earned*
The assets are human beings and earnings are the taxes we pay. That’s not a nice view but it fits with the language they use. It is a human Ponzi scheme.
Its important that government spending creates wealth and not destroys it as there will be no taxes and no more government.
So the government has a self interest in not destroying the tax base
Home care for the elderly obviously isn’t investment. But early years education is, in the economic sense of the term: it enhances the economy’s future productive capacity (it isn’t in an accounting or tax lawyer sense, of course).
When parents send their kids to private school, are they doing so primarily for present-consumption reasons (I guess golf-club boasting rights and/or not having to mix with Wayne and Shaniqua), or are they doing so primarily for investment reasons (kid -> good uni -> good job)?
Polly is a lightweight spoilt brat: a champagne socialist complaining about the evil capitalist system that keeps her in a very comfortable existence. I’m astonished that she gets much attention at all.
With the young-uns, I’m with you on it being spending and not investment. The investment is your own time. You cannot buy the same quality of time from caretakers as you could put in yourself. As such, early years schooling is just babysiting: an ongoing marginal cost decision that is worth your while, not an economic “investment” for the greater good of society.
Paddy, I’m with Luis on this one. There is substantial evidence that increasing spending on early years care and education is beneficial to society, both through private gains and public gains. It’s investment.
“You cannot buy the same quality of time from caretakers as you could put in yourself.”
1000 years of the English upper classes would beg to differ.
Both …not having to mix with Wayne and Shaniqua….
And….kid -> good uni -> good job
Are reasons why I send my children to private schools, despite not really having enough money for it.
Investment, surely, has to yield a return to the entity that made the investment.
Charities spending donations in Africa are not -investing-, are they?
Spending on maintaining a bridge is not -investing-, is it?
(I-ve made a mental list of more examples, and I notice that I start to feel uncomfortable as soon as I know Gordon Brown would have used the term as in, for example, -investing in infrastsructure-. )
Nope. It’s spending alright.
@BIS
I applaud the sentiment, but at the risk of playing D’s A, there is some difference between spending on future needs and investment. Surely – unless I’m not thinking straight post lunch – investment is something that is expected to make revenue back?
Though, for clarity, I do agree wholeheartedly that a) care homes are not investment, they are spending and b) the word investment is spuriously used too often.
She’s talking pish anyway.
Pensioners in full-time work DO pay NI – on their earnings. I know. I am one.
They just don’t pay it on their pensions, because as Tim points out, it’s supposed to be insurance.
at most basic level, in economics all output is either on investment or consumption. So investment is anything that is not consumption. Ambiguity over durables etc. where you are purchasing a flow of future consumption, similar to investing in future production of consumption. Plus many things – i.e. education – are a bit of both. Raising future productivity (so investment) for sure but also a thing in itself which is consumed.
there is no requirement for investment to make its money back, it’s still investment, just a poor one. There is no requirement for the person making the investment to be the one that captures future benefits. You could invest altruistically. You could invest in creating a public park that everybody uses for free – the benefits don’t have to be monetized.
@LuisEnrique in particular;
Many introductory econ textbooks usually start with a statement about investment vs consumption, and most seem to use the example of “in a basic agricultural economy, the grain we eat is consumption, and the grain we put away to grow next year’s crop is investment”. And from that point on the dichotomy is maintained, although I have never seen it really explained.
Has anyone proposed abandoning the dichotomy, and treating the two as essentially the same thing? Or more sensibly turning it into something of a spectrum, so we can account for “a bit of both”?
@ johnb #13
quote
I can understand the argument that spending on a good education beyond early learning could be viewed as investment, for example in imparting specialist knowledge in areas the family knows little about.
However, families hiring a nanny or sending young kids to board out are merely consuming present services, where the cost is outweighed by the conveniences, such as increased leisure time, increased working time, increased social status or enhanced child safety relative to the place of work/residence.
paddy, spend some time on the website I linked to #1. Investment in early years child care is not just about nannies it’s (more) about non cognitive, cognitive development.
MBE
I think the dichotomy is useful – there is a difference between something that is consumed and something that is an input to production. So I think it would be mistake to treat two as same thing. Building factories differs from eating doughnuts. But yes, many things are a bit of both. That’s OK.
Andrew Duffin – Only partial pish I’m afraid. There is no Class I or II NI on income once you reach state pension age. You would still pay Class IV so I assume you are self-employed? If not you are over-paying.
Also, it’s absolutely not insurance. It’s income tax the proceeds are part of general taxation and they are no way hypothecated to social security spending. So the fair point she’s making is that given that NI is really just income tax why the anomalous treatment of post retirement age earnings? I don’t have a point of view on that, just pointing out that it’s not a wholly stupid question.
I too oppose the misleading misuse of the word “investment” to describe spending, but childcare is not one of those cases. Government spends money on childcare services with the aim of getting parents (usually mothers) to spend more time at work. Their earnings at work are then taxed. That’s as clear a chain of events as you could hope for from putting money in to getting it back.
‘@Luis Enrique
“at most basic level, in economics all output is either on investment or consumption. So investment is anything that is not consumption.”
For a private individual or a company, I’ll give you that. But you can’t apply the word investment to what governments do with taxation. They haven’t got any money. All they’re doing is shifting costs through time. They’re not “investing in infrastructure when building a bridge” any more than you’re “investing in transport” when you buy a car. The cost of the bridge or car is simply that. An expense of what the item achieves. Consumption.
@JohnB
“But early years education is (investment), in the economic sense of the term: it enhances the economy s future productive capacity”
OK. Now tell me anything governments spends for which you can’t make a similar case ? (see Brown G) How about increased salaries for MPs is an investment in better government > “enhances the economy s future productive capacity”?
Thin end of the wedge.
@ Squander Two
Then it’s a cost of getting parents to spend more time at work. Socialised.
BiS don’t be daft, investment doesn’t stop being investment because the government’s doing it.
I’m with Tobin @24. NI is just a slightly stealthier income tax. The ‘relief’ for pensioners, whilst grounded in good theory, is now one of the most oft quoted barriers to unification of Income tax and NI. With personal allowances rising to a sensible place, I’m content to withdraw that ‘relief’ in pursuit of a better overall system.
@Luis Enrique
Spending isn’t investment particularly because government’s doing it.
@LuisEnrique
“I think the dichotomy is useful
OI WORSTALL SORT IT OUT
@LuisEnrique
“I think the dichotomy is useful – there is a difference between something that is consumed and something that is an input to production. So I think it would be mistake to treat two as same thing. Building factories differs from eating doughnuts. But yes, many things are a bit of both. Thats OK.”
But if some things are ” a bit of both” then by definition it’s not a dichotomy. Of course it’s plausible to argue that the expenditure on an item is split (a purchase might be “40% consumption, 60% investment”) but how does one value the two components in such a case? Does someone run a clever regression?
Under Thatcher, roadbuilding was investment while railways got subsidies. They all abuse the language this way, not just the Pollyists.
Calling State spending on education investment makes the assumption that the State somehow has a call on any increased productive capacity thereby created. Which to me seems rather like slavery.
Its an interesting thought experiment – if enough young people started fucking off out of the country, how soon would it be before the Courageous State brought down the Iron Curtain?
“there is a difference between something that is consumed and something that is an input to production. So I think it would be mistake to treat two as same thing. Building factories differs from eating doughnuts.”
I think if you run a small business, which is where economics happens rather than in the pages of textbooks, these differences are not so clear cut. If you’re manufacturing something you need an input of materials & the plant. If you buy a new machine it’s not an “investment” in future production. It’s a cost of future production. The same as the materials are. If one’s made a wise decision one recovers the cost & more. But what you’ve paid for it is sitting on the books right now. There’s no “investment” can be liquidated to bring you back to square one.
Maybe the word we should be using is speculation. Because that’s what it is. A gamble. And government mightn’t be quite as free & easy talking about speculating 30 billion on HS2.
Jim
While most returns from education go to the private individual, there is evidence that there are public gains from early years education. These are in the form of increased sociability and academic results amongst the poor, which then means we pay less for prisons and remedial later. Thus the taxpayer benefits from this spending.
@ #17 Andrew Duffin
If you were over state pension age at the beginning of the fiscal year when they deducted NI you should immediately demand a refund (plus interest, a good ploy because that is a massive embarrasment and forces them to admit to superiors they got it wrong unless they can settle it quickly) – I do NOT pay NI on my earnings, not even Class IV.
@ #29 TTG
As someone over state pension age (with a pension from the job I left, or left me, more than 20 years ago and some part-time earnings) I should be financially worse-off by the merging of income tax and NI but I feel that it would be better than the current system where Brown raised NI rates as a concealed increase in income tax rates with an unjustified exemption for those over 65 (60 for women).
Those of us who can afford it have to bear most of the burden of sorting out the mess which Brown left us so I have to hope my financial chin is as sturdy as my physical one.
bis
gibberish.
Nobody said investments can be liquidated, they may very well be irreversible and sunk. Of course investments are a cost. But when a small business owner, or a large business owner, purchases a machine, they do so to produce something, and machines are the very definition of an investment good.
Jim,
> if enough young people started fucking off out of the country, how soon would it be before the Courageous State brought down the Iron Curtain?
A few years ago, a Dutch “feminist” MP wanted to introduce legislation to force female graduates who “wasted” their degrees by spending time at home raising children to pay the state back the cost of their higher education.