VAT, onion peel, varnish and innovation

26 Nov 2008 by Karl Hallam

The idea that 'when the facts change, I change my mind' (John Maynard Keynes) may or may not be coming in to play during the current debate about the pros and cons of the change in VAT. Opposition party responses to the 2.5% reduction have been broadly along the line that it won't help - which is not anunreasonable view. Strangely though the Conservative Party in particular is absolutely convinced that on the other hand a 1% increase would be catastrophic - a 'bombshell' indeed.

It would be a mistake to try to learn too much from such a typical British style political spat, but it does perhaps provide a little insight into why introducing innovation into government processes can be so frustrating.

Cadence's work on innovation (here for more) has picked up on the obsession that innovation must mean something new and clever and perhaps technology driven. Some great innovations are just like that, but many are much more simple, arise out of knowledge from front line staff, who themselves do not necessarily see what they have done as innovative. A good example of the kind of innovation that tends to attract less attention is the act of stopping doing something that does not work or can be done more effectively a different way. This should be easy, but often such an innovation is in danger of being called a u-turn by political opponents.

An interesting example is the use of onion peel in the production of varnish (drawn from Primo Levi's book, The Periodic Table, reference courtesy of Cadence Network's Gordon Macnair). Peel had been an essential ingredient of varnish for very many years, nobody questioned why. Apparently, back in the day, it was added because the peel changed in character when the varnish mixture reached a certain temperature. Once reliable thermometers became available it was no longer needed. It was a brave and innovative person who questioned the need for the peel.

The Government is criticised for the innovation of a VAT reduction, told it won't work and that 2.5% is not enough, but also told that when they do drop the cut and introduce a 1% rise, from the current rate, that will be disastrous. Is the lesson that it is best to do nothing?




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