Food stamps are just capital controls for poor people

If you want to introduce higher prices for poor people, at least do it openly.

The Guardian's Patrick Butler reports that food stamps are to replace the cash payments currently received by vulnerable people in short-term financial crisis. He writes:

Rather than, as now, offering a cash loan, most councils will from April offer new applicants who qualify for emergency assistance a one-off voucher redeemable for goods such as food and nappies.

Many of the 150 local authorities in England running welfare schemes have confirmed that they will issue the vouchers in the form of payment cards, which will be blocked or monitored to prevent the holder using them for alcohol, cigarettes or gambling.

In classic economics-blogging style, here's another news story. Cyprus is to impose capital controls, for a seven-day trial period. The FT's Joshua Chaffin reports:

Capital controls will be deployed to prevent a stampede of withdrawals by panicked depositors when the banks reopen, possibly on Thursday, after a closure that has dragged on for nearly two weeks.

In broad terms, they will limit the ability to withdraw money, or shift it between accounts or across borders, according to officials. The measures might also delay the processing of cheques.

The link is that both measures won't have the absolute effect that their promotors might hope; rather, they impose a huge, uncontrollable and grey-market tariff on attempts to do what people are used to being able to do freely.

The Cypriot capital controls are the more obvious example of this. For the next week, a euro in Cyprus is worth less than a euro elsewhere. How much less, we don't know, and there will probably never be a clear market rate – especially if the controls are lifted in early April, which the people of Cyprus will surely be hoping will happen.

Nonetheless, if a Cypriot finds themselves urgently needing to get a large number of euros out of the country – say, to close a purchase on a house in the French Riviera – it's relatively obvious what they have to do. Offer someone in the "real" eurozone a quantity of euros in Cyprus to spend the money for them. The premium offered depends on the risk that the capital controls will not be lifted, as well as the value our outsider places on euros which can only be spent in Cyprus, but it's fairly doable from a technical point of view.

Of course, if the premium is too high – if you'd need to promise €5m (Cypriot) to get someone to spend €1m (non-Cypriot) – then you'll likely see movement from the grey market to the black market. In other words, suitcases full of money crossing the Adriatic.

Those effects are basically the same as what we will see if food stamps become widespread. It's best to think of food stamps as a separate currency; one which can only be used buy a certain list of items. Just like the Cypriot euro, it has "capital controls" – you can't just walk up to a bureau d'exchange and hand food stamps in and get pound sterling in return. But just like the Cypriot euro, there are ways – easy ways – of getting around them.

The legal way – analogous to the complicated deal to hand over money in two nations – is as simple here as offering someone a £20 food stamp for a £12 bottle of gin. Given most people buy food, that's a relatively good deal for the person who ends up with £8 profit; they essentially get a portion of their groceries paid for by someone in crippling financial need.

Since food stamps are useful for most people, the premium is unlikely to be very high. But if it is, we get to the suitcase-full-of-money option: find someone who'll take food stamps in exchange for "contraband". Given the ease with which 15-year-olds get drunk in this country, it's a fairly good bet that there are a few shops happy to sell booze to people they aren't allowed to. They might charge rip-off prices, knowing that the buyer's hardly going to complain, but they'll do it.

In the end, then, what is the outcome of food stamps? All things considered, they don't force people in financial difficulty to spend their money on "necessities" rather than "luxuries" (with the two categories odiously defined by government, rather than the individuals themselves). Instead, they impose a tariff on purchases of "luxuries" for those people.

The same economic effect could be had more directly by requiring shops to display two prices for booze and fags: a regular price, and a higher price for "poor people". Given the bizarre crossover between those in favour of welfare cards yet against minimum pricing because it hits the poor hardest – a peculiarly Tory type of libertarianism (fauxbertarianism? libertoryanism?) – perhaps making the doublethink explicit might change their minds one way or another.

US style food stamps. Photograph: Getty Images

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

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Five things Hillary Clinton’s released emails reveal about UK politics

The latest batch of the presidential hopeful’s emails provide insight into the 2010 Labour leadership contest, and the dying days of the Labour government.

The US State Department has released thousands of Hillary Clinton’s emails. This is part of an ongoing controversy regarding the presidential hopeful’s use of a private, non-governmental server and personal email account when conducting official business as Secretary of State.

More than a quarter of Clinton’s work emails have now been released, in monthly instalments under a Freedom of Information ruling, after she handed over 30,000 pages of documents last year. So what does this most recent batch – which consists of 4,368 emails (totalling 7,121 pages) – reveal?
 

David Miliband’s pain

There’s a lot of insight into the last Labour leadership election in Clinton’s correspondence. One email from September 2010 reveals David Miliband’s pain at being defeated by his brother. He writes: “Losing is tough. When you win the party members and MPs doubly so. (When it's your brother...).”


Reaction to Ed Miliband becoming Labour leader

Clinton’s reply to the above email isn’t available in the cache, but a message from an aide about Ed Miliband’s victory in the leadership election suggests they were taken aback – or at least intrigued – by the result. Forwarding the news of Ed’s win to Clinton, it simply reads: “Wow”.


Clinton’s take on it, written in an email to her long-time adviser, Sidney Blumenthal, is: “Clearly more about Tony that [sic] David or Ed”.

Blumenthal expresses regret about the “regression” Ed’s win suggests about the Labour party. He writes to Clinton: “David Miliband lost by less than 2 percent to his brother Ed. Ed is the new leader. David was marginally hurt by Tony's book but more by Mandelson's endorsement coupled with his harsh statements about the left. This is something of a regression.”
 

Peter Mandelson is “mad”

In fact, team Clinton is less than enthusiastic about the influence Mandelson has over British politics. One item in a long email from Blumenthal to Clinton, labelled “Mandelson Watch”, gives her the low-down on the former Business Secretary’s machinations, in scathing language. It refers to him as being “in a snit” for missing out on the EU Commissioner position, and claims those in Europe think of him as “mad”. In another email from Blumenthal – about Labour’s “halted” coup against Gordon Brown – he says of Mandelson: “No one trusts him, yet he's indispensable.”

That whole passage about the coup is worth reading – for the clear disappointment in David Miliband, and description of his brother as a “sterling fellow”:


Obsession with “Tudor” Labour plotting

Clinton appears to have been kept in the loop on every detail of Labour party infighting. While Mandelson is a constant source of suspicion among her aides, Clinton herself clearly has a lot of time for David Miliband, replying “very sorry to read this confirmation” to an email about his rumoured demotion.

A May 2009 email from Blumenthal to Clinton, which describes Labour politicians’ plots as “like the Tudors”, details Ed Balls’ role in continuing Tony Blair and Gordon Brown’s “bitter rivalry”:


“Disingenuous” Tories “offending” Europe

The Tories don’t get off lightly either. There is intense suspicion of David Cameron’s activities in Europe, even before he is Prime Minister. Blumenthal – whose email about a prospective Cameron government being “aristocratic” and “narrowly Etonian” was released in a previous batch of Clinton’s correspondence – writes:

Without passing "Go," David Cameron has seriously damaged his relations. with the European leaders. Sending a letter to Czech leader Vaclay Klaus encouraging him not to sign the Lisbon Treaty, as though Cameron were already Prime Minister, he has offended Sarkozy., Merkel and Zapatero.

He also accuses him of a “tilt to the Tory right on Europe”.

In the same email, Blumenthal tells Clinton that William Hague (then shadow foreign secretary), “has arduously pressured for an anti-EU stance, despite his assurances to you that Tory policy toward Europe would be marked by continuity”.

In the aftermath of the 2010 UK election, Blumenthal is apprehensive about Hague’s future as Foreign Secretary, emailing Clinton: “I would doubt you’ll see David again as foreign secretary. Prepare for hauge [sic, William Hague], who is deeply anti-European and will be disingenuous with you.”

Anoosh Chakelian is deputy web editor at the New Statesman.