Mind your language

What has ‘deadweight’ got to do with Rishi Sunak’s magic money tree?

18 July 2020

9:00 AM

18 July 2020

9:00 AM

I was trying to understand what they meant on the wireless by deadweight costs. These were something to do with the magic money that Rishi Sunak, the Chancellor, was throwing out from his tree. Then my eye was caught by my husband dozing over his newspaper where a little patch of whiskyish dribble had spread over the business pages, and I felt enlightenment.

Deadweight itself is plain enough. In the 17th century, when the earliest examples appeared, deadweight meant a static mass, as opposed to a mass in movement possessing kinetic energy. A deadweight, though, might drive clockwork by hanging from the works.

In the 19th century, which I regard as yesterday, every political soul would have recognised a reference to deadweight. After Waterloo, the government found itself having to pay £5 million a year in pensions for sailors and soldiers. It offered an annuity of £2.8 million to anyone who would pay pensions for the dwindling number of pensioners for 45 years (after which the pensioners would all be dead). The pensions were a ‘deadweight’, the government declared. The South Sea Company (yes, the traders on whose account Thomas Guy’s statue at Guy’s Hospital has been nailed up in a box) had a go, but couldn’t keep it up, and in 1823 the Bank of England had to step in.

Today, I hear Mr Sunak’s deadweight costs explained as the amount spent on persuading people to do what they would have done anyway. If the government spends £10 reducing menu prices, well, some would have gone out to eat in any case.

If the government subsidises a meal, it benefits the eater and the restaurant, and it also increases the number of meals. But the cost to the government is more than the benefits to eater and restaurant combined. The gap is the deadweight cost. It is the inverse of taxing products.

The government is also incurring deadweight debts: borrowing money to bring in no extra income. It would be otherwise if you hired a donkey for £50 a week and it helped you to earn £500 a week selling vegetables. Spending £50 a week on a dead donkey is a deadweight cost.

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