From the TUC

When should government give money to big business?

09 Feb 2014, by in International

I don’t often read the Daily Mail, so their faux outrage at the Department of International Development’s £4m Trade and Global Value Chains programme passed me by. But the good people at the Labour Campaign for International Development (LCID) drew my attention to it, so here goes.

The programme Justine Greening is being slammed for by colleague Peter Bone is designed to improve the working conditions of people making goods for British retailers’ global supply chains. That’s pretty much the agenda of the Ethical Trading Initiative, which DFID also funds, although slightly less lavishly (£1.2m over three years). Peter Bone argues that the companies being funded are all rich enough to do the work themselves, and that this is a waste of taxpayer’s money.

He’s right on the first part, but wrong on the second, and he and the mis-named Tax Payer’s Alliance who backed him up (do rent-a-quotes always come in pairs?) show a dismal lack of understanding of what government is for.

First, the TUC does have criticisms of the Trade and Global Value Chains (TGVC) programme. It is indeed dismal news that, due to yet more ideological bias from Justine Greening, the money is all going to companies, rather than to multilateral institutions like the ILO (which runs a Better Work programme for precisely this sort of thing) or trade unions. Because it is strong (and free) trade unions in Bangladesh, Kenya and South Africa which will actually have the most sustainable impact on workplace conditions and workers’ standards of living. Justine’s predecessor at DFID, Andrew Mitchell, chopped funding for the ILO and the unions, and although it is welcome that she has restored some limited programme support to the ILO, ideology still trumps effectiveness in DFID funding.

Second, however, the work that the TGVC programme is worthwhile, and worth the government spending real tax payers’ money on. Governments can stimulate good behaviour and restrain bad behaviour in many ways (passing and enforcing laws, tweaking tax arrangements, delivering services directly or taking them into state control, or paying out grants.) These actions are designed to address market and other individual failures, and that is what DFID is doing, correcting the failure of global supply chains to tackle poverty. Sometimes, that Government action does indeed incentivise bad behaviour, as we are discovering has happened with tax credits subsidising low pay or housing benefit encouraging rocketing rents (in both cases the solution is not what the current government is doing, though: higher pay and rent controls would be a start) – but that doesn’t undermine the basic argument that governments can and should intervene to correct market failure.

Still, I now await with bated breath Peter Bone’s outraged astonishment that we are paying the police to stop people doing illegal things like murder and theft. I mean these are things that criminals ought to be able to stop doing without the nanny state getting involved, aren’t they? And it would be a lot cheaper for the rate payers. Well, apart from the dead and the burgled, anyway…

Disclosure – I’m an ETI Director, but unpaid, so I may only see the occasional meeting-related sandwich out of the DFID funds.