Government Economic Service

GOVERNMENT ECONOMIC SERVICEMaking economists betterMaking better use of economics

GES

UNCLASSIFIED

GES presentationFaith Bannier and Lauretta Gable, BEIS

•Economics of Government intervention•What economists in government do•Application process

I won’t duplicate the information online:

http://www.civilservice.gov.uk/networks/ges https://www.gov.uk/faststream

GOVERNMENT ECONOMIC SERVICEMaking economists betterMaking better use of economicsGE

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http://www.civilservice.gov.uk/networks/ges

https://www.gov.uk/faststream

Economics of Government InterventionGovernment intervenes in the market for two reasons


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Efficiency Equity

Making the optimum use of scarce resources

Addressing market failures to create Pareto improvements

Non-political: doesn’t make value judgement on what is right

An ‘efficient’ distribution may involve considerable inequalities

Redistributing resources to offset inequality

Political: involves democratic judgement on what is ‘fair’

Efficiency interventionsFirst rule of welfare economics:

A perfectly functioning market will lead to a Pareto efficient outcome:

•The right factor mix of inputs is used in production•The right things are produced, given existing inputs•Things are consumed by people that value them most

We can’t usually get a ‘Pareto optimum’ but we can make Pareto improvements when we make markets work better


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Efficiency interventionsWhen markets work better the UK is better off

•We produce more with the resources we have– GDP is higher

•We make sure our input factors are utilised better – More people have jobs, and jobs better suited to their skills

•We produce the right things (comparative advantage)– We can sell more exports

•Consumers have greater choice– People buy things that improve their personal welfare


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Efficiency


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Market failuresSometimes free markets won’t achieve Pareto efficiency


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Imperfect competition Natural monopolies, transport, energy markets

Externalities Negative: pollution, things with bad health impacts

Positive: spillovers from R&D, social benefits from education

Asymmetric information Healthcare, credit markets, insurance, quality/safety of goods

Public goods National defence, street lighting, national justice system

Tackling market failures


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Information, education and advice

Publishing league tables, crime stats, public education campaigns

(‘talk to Frank’), labelling, advisory services

Direct provision Government directly providing policing, armed forces, bird flu

vaccine

Economic instruments Taxes, user charges, subsidies, grants, tax credits, tradable

permits, loan guarantees

Regulation and legislation

Regulation of rail fares/utility prices, compulsory motor

insurance, trading standards, health & safety laws, banning

tobacco advertising

Tackling market failures


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http://www.ei-lat.ge/images/doc/understanding_policy_options.pdf

For further information read the Home Office document “Understanding policy options”

http://www.ei-lat.ge/images/doc/understanding_policy_options.pdf

Equity interventionsA Pareto efficient outcome might not be seen as ‘fair’ It is Pareto efficient if one person has everything!

Government may also intervene for reasons of ‘equity’ (ie redistribution of wealth) to tackle social deprivation

•Free prescriptions•Extra money for schools in deprived areas•Fee incentives to encourage access to HE to students from less well off background

Equity interventions depend on political/moral viewpoints


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What economists in government doThere are two main types of government intervention


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Regulatory Spending

Westminster/devolved government/EU brings in, changes or scraps a regulation

Economists look at the impact of the regulatory change (costs v benefits)

This is called an Impact Assessment

The Treasury allocates money at fiscal events (Autumn Statement, Budget, Spending Review)

Departments bid for money from the Treasury to finance their spending projects

Economists help put together Business Cases for these bids

Impact AssessmentsA regulatory change has benefits and costsExample: proposal to introduce minimum alcohol unit price


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https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/157763/ia-minimum-unit-pricing.pdf

Benefits: improved health, reduced NHS costs, reduced alcohol-related crime, reduced lost productivity due to alcohol (total: £21bn per year), some businesses will gain (eg pubs if people substitute from cheap supermarket alcohol)

Costs: higher prices to consumers, low income consumers especially affected, businesses face familiarisation, transition costs, exchequer may face reduced tax receipts

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/157763/ia-minimum-unit-pricing.pdf

Business casesEstablish the rationale for the spending (market failure)

Build an NPV model of the expected value to the economy

This will involve several assumptions – these must be underpinned by evidence (academic research/evaluations of similar policies)

•Total economic costs: exchequer cost plus leveraged private spending •Expected returns on the investment•How much of the returns are additional (not displacement, deadweight, leakage, substitution)•Wider benefits: including spillovers, positive externalities


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Policy evaluationImpact assessments and Business cases are examples of policy appraisal – done before the policy is brought in

After the policy is brought in evaluation tells you how well it worked/is working

Various evaluation techniques: randomised control trials, quasi-experimental methods, difference in differences

Key point is establish the counterfactual (what would have happened if the policy wasn’t brought in) and estimate the difference, eg increased output, jobs, improved health


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The Green Book


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For further information on appraisal and evaluation techniques

https://www.gov.uk/government/publications/the-green-book-appraisal-and-evaluation-in-central-governent

Parts to read before the Economic Assessment Centre:

- Chapter 3: Justifying action- Annex 1: Government intervention

(explains efficiency/equity and gives you definitions of all the market failures)

- Annex 4: Risk and uncertainty- Annex 6: Discount rate



Other things economists do


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Writing evidence papers Writing a published/unpublished paper on the evidence base for a particular theme

Managing external projects Develop a research theme/evaluation, draw up an invitation to tender, assess bidders, award contract and manage the contractor up to publication

Economic support for Ministers

Written and oral Parliamentary Questions, briefings and submissions, briefing on pre-release statistics

Career pathAssistant Economist (£26k-32k)- Rotate jobs every year in your department- After 2 years can move department- After 2 years may be opportunities for funded MSc Economic Adviser (Grade 7; £45k +)- No longer rotate jobs- Significant responsibility, lots of economics

Grade 6- Still an economist but more ‘strategic’ role

Senior Civil Service


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Application processApply for the Economist option on the Analytical fast stream

https://www.gov.uk/civil-service-fast-stream-how-to-apply

Economics assessment process

Online application form for economist scheme

Half-day Fast Stream Assessment Centre

Video interview

E-Tray exercise

Online selection questionnaires

Application and diversity questions and select your scheme choices


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https://www.gov.uk/civil-service-fast-stream-how-to-apply

Example: Fast Stream Assessment

UNCLASSIFIED

Group Exercise 45 minutes : Discussion in a group of 5/6 to defend your policy option

Policy Written Exercise

90 minutes: Read a pack of information and write a report to recommend one of two policy options

Leadership Exercise30 minutes to prepare: how you would lead a team to solve a problem10 minute presentation, followed by questions.

Interview45 minutes: evidence of something you have done in the past, measured against competencies (Use STAR structure)


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**DISCLAIMER** These are examples of exercises that have been used in the past, sign up for 2016 process to get more details of the exercises included

Example: Economics Assessment


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Go to the EAC Open Day

Technical report 30 mins to type answer on pre-released question written for economists

Plain English report 30 mins to type answer on pre-released question written for non-economists

Short Answer Q’s 30 mins: 10 questions on variety of micro and macro

Interview 20 mins: short presentation on answer to pre-released question (with follow-up questions from interviewers)20 mins: questions on SAQs (to help you gain marks)20 mins: question on your chosen specialised topic

**DISCLAIMER** These are examples of exercises that have been used in the past, sign up for 2016 process to get more details of the exercises included

Application timetableApply in either Round 1 or Round 2

You can only apply in one round per year, so if you are apply in Round 1 and are unsuccessful you have to wait till Round 1 next year, you can’t apply in Round 2 as well.

* may change


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Round 1 Round 2Open for applications Late September 2016 Feb 2017*

Application deadline End October 2016 April 2017*

Student placementsThe GES provides year-long sandwich student placements and 6 to 12 week summer internships

To be eligible 50 per cent of your course must be in economics and you must be on track for a 1st or 2:1

First year undergraduates aren’t eligible

Summer placement applications will open in January 2017


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Find out more

1.Check out the GES and Fast Stream websites2.Check out the Green Book and Understanding Policy Options

• If you can’t access them online, email me for the pdfs3.Look at the Economy part of the ONS website

• Follow on Twitter / like on Facebook 4.Look for Nicholas Barr’s book The Economics of the Welfare State

Contact for questions:

[email protected]@beis.gov.uk


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mailto:[email protected]