Canada’s China Foreign Aid Policy

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Canada’s China Foreign Aid Policy

From here.

The average person, when considering the requirements for a country to be a foreign aid recipient, would envision a developing country where the majority of the population is living in poverty. They certainly would not consider a country with a booming economy, a healthy trade balance, large foreign currency reserves, one of the world’s largest armies and foreign investments and a foreign aid programme of its own, as a suitable candidate. Yet that is just the case with regards to China today.

In 1983 Canada and China signed a Development Cooperation agreement. In the first twenty years, the Canadian government contributed nearly $1 billion in foreign aid, most of it through CIDA (Canadian International Development Agency). In CIDA’s words, this aid was for ’a targeted program of specialized cooperation in which Canadian experience and expertise support China’s reforms in good governance, human rights, and democratic development and in environmental sustainability.’ Where is the evidence for any such ’reforms’, particularly in human rights and democratic development. Despite contributions for this purpose, little progress has been made in any of these areas. Only six years after signing the agreement, the communist Chinese government crushed the democracy movement. Since then it has continued to suppress Tibet, kidnapped the Panchen Lama, and persecutes pro-democracy dissidents, followers of the Falun Gong movement and other religious groups in China. There are very few human rights, as well as little democracy in the country, where the Chinese Communist Party is the sole political power, accountable to no-one but its own congress.

CIDA admits that China ’has made enormous economic strides’ in recent years. For this reason ’Canada does not provide funds to the government of China. Instead, we provide Canadian expertise to assist the country in undertaking reforms that China, itself, is implementing and funding. The cooperation program involves many Chinese and Canadian partners including government agencies, public and private sector enterprises, academic institutions, as well as community based and other civil society organizations.’

While Canadian groups involved include non-governmental organizations (NGOs), let us not deceive ourselves into believing that they are working with their counterparts in China. There is no way any of these experts is allowed contact with political dissidents or human rights activists. Those who they do meet most certainly have been thoroughly vetted for their political loyalties and views. Furthermore, as all these programmes are totally dependent upon the approval and cooperation of the Chinese communist government, one can only wonder at their actual effectiveness and success.

According to CIDA’s Country Development Programming Framework (CDPF), it plans to spend $250 million between 2005 and 2010, on the old stand-bys: human rights, democratic development, good governance, environmental sustainability and others.

Foreign aid proponents and the pro-China lobby will maintain that since Canadian experts are being paid by CIDA, the money is not really going to China. However, that is a mute point. The expertise that these experts are providing is being given to China for free. Canadian taxpayers are footing the bill, which could quite easily be paid by the Chinese. If China is truly interested in foreign or Canadian expertise in the area of ’human rights, democratic development, good governance, and environmental sustainability’, it clearly has the capability to pay for it itself, and not just the small contributions it presently makes!

While CIDA is the most recognizable entity through which foreign aid is channeled to China, another source of Canadian assistance is the Export Development Corporation (EDC). Over recent years it has provided, in the advanced technologies and telecommunications field, $841,884,442.32 in short-term and medium to long-term financing, including various kinds of insurance. There is no real information as to what kind of projects receive EDC funding. Nor is there any way of knowing to what purpose these technologies will be put. For all we know they may be used to further persecute dissidents, human rights activists and other groups presently on Beijing’s hit-list.

One of the EDC’s prime borrowers is the Bank of China. Other Chinese government owned financial institutions, which have a relationship with the EDC, are the State Development Bank of China, the Export-Import Bank of China and the Industrial and Commercial Bank of China. Canadian telecommunications companies will claim that these loans help them do business in China. For lack of a better comparison, it is as if your local family variety store would lend thousands of dollars to Donald Trump or Frank Stronach, to ensure that they patronized their business.

This EDC policy raises an interesting question. Would these same companies be equally successful in promoting or selling their products if the Canadian government did not provide these loans? Are these loans in actual fact little more than bribes? How are these loans repaid? Are they interest free, thus providing additional aid at Canadian taxpayers’ expense?

While one branch of the government was handing out aid to China, another branch (Natural Resources Canada) was holding meetings with Chinese ministers and mining representatives to ’facilitate dialogue between interested Canadian and Chinese parties towards establishing mining joint ventures or any other investment options in Canada.’
Chinese direct investment in Canada has grown from $54 million in 1991
to $220 million in 2004, when China Minmetals Corporation, a state-owned company, unsuccesfully attempted to buy Noranda Inc. and Falconbridge Limited. Then in 2005 China invested in two tar sands and one gold mining company. China’s National Offshore Oil Corporation (CNOOC) paid $150 million for a 1/6 interest in Calgary based MEG Energy Inc., while its Sinopec Group obtained a 40 per cent interest for $105 million in Synenco Energy Inc.’s Northern Light oilsands project in Alberta. The Zijin Mining Group invested $1.95 million in Vancouver-based Pinnacle Mines Ltd.

Clearly China is not an impoverished country if it has millions to invest in Canada alone.

Reasons why Canada should reconsider, or more specifically cancel, further foreign aid to China:

1) China has $1.43 trillion in foreign currency reserves, sufficient amount to pay for the experts and expertise that at present is being provided through CIDA by Canadian taxpayers.

2) From a Canadian trade deficit of $1.1 billion in 1995, the trade imbalance between Canada and China has grown by leaps and bounds reaching $7.6 billion in 2000 and $13.8 billion just three years later, in China’s favour. By 2004, imports from China were $24.1 billion, a 30 per cent increase over the previous year!

3) In 2004 China became the third largest trading nation after the US and Germany. With exports of $1.15 trillion US and imports of $561.4 billion, the balance of trade is greatly in its favour.

4) China’s defence budget is $30 billion and its army is the biggest in the world.

5) While Western democracies are concerned about what is happening in the Darfur region of the Sudan, China not only supplies arms to that country, but protects it from UN resolutions and action. In addition, it has invested about $4 billion U.S. in that country and imports about 10 per cent of its oil through the China National Petroleum Corporation built pipeline.

6) China has given aid to African countries from whom it is buying oil and gas, repressive regimes like Nigeria, Sudan and Angola. In 2006, a China-Africa summit was held in Beijing, at which China provided aid, technology and scholarships to the visiting African heads of state, in an effort to gain political influence in the region, and ensure it will get access to Africa’s oil, gas and mineral resources.
7) China supports repressive regimes around the world, such as North Korea, Sudan, Zimbabwe and Myanmar (Burma), a clear indication of its lack of respect for human rights. Whenever the UN tries to take action against any of these countries, such as Myanmar in late 2007, China uses its position to protect them. Its largest aid recipient is North Korea, a dictatorship whose leader lives in luxury while his people starve to death.

8) China is a nuclear power and also has its own space programme.

9) December 2007, China invested $5 billion in the brokerage company Morgan and Stanley. Here is a clear indication, if more proof was needed, that it is not short of funds to invest in its own country, or to help alleviate the poverty to be found there. However, it prefers to use its immense resources to gain political influence around the world, rather than concern itself about its impoverished citizens. With the Communist Party and an immense army in total control of the country, there is no need to seek favour with the disadvantaged. Unlike Western democracies, there is no electorate to be answerable to for its policies.

These are more than enough reasons for the present Harper government to take the bold decision to stop providing foreign aid of any kind to China. Any country that can contribute billions annually in its own foreign aid programmes, not to mention one that is the fastest growing economy in the world, is not an appropriate candidate for continued foreign aid. One thing is certain, no future Liberal government will make such a momentous decision. This is clear from the way previous Liberal governments, from Trudeau to Chretien to Martin, have treated relations with China.

Hon. Raymond Simard (Parliamentary Secretary to the Minister of International Trade, among other positions), reported in Hansard on Nov. 16, 2005, that according to statistics given him during a trip to the region in 2004, ’60 per cent of the building cranes in the world were in China’ and that ’between 150 million and 250 million middle class now exist both in India and China.’ Yet China remains the darling of Canada’s foreign aid community and is either the second or fourth recipient of Canadian foreign aid, depending upon the year or which data one looks at.

The most telling indication of the Liberal government’s misconceptions about the effectiveness of Canadian foreign aid to China, and Canada’s actual influence on its policies, was made apparent in early 2005. Aileen Carroll, then Minister of International Cooperation, in the House of Commons refused to stop aid to China, on the grounds that: “China influences hugely and will continue to influence the international scene. As such, it is very much incumbent on Canada to continue to work with the groups to build freedom in that country, to develop human rights and to develop a rules-based society ...... “We are helping China grow and influence it in the right way.”

If anyone thinks that Canada has the influence to steer Chinese policies towards democracy and a respect for human rights, they are not only incredibly naive, but totally lacking in any semblance of common sense. A country that supports dictatorships or repressive regimes such as North Korea, Sudan, Myanmar, etc., is clearly not interested in democracy or human rights.

The problem here is that Canada is not alone in providing foreign aid to China. Among other countries are Japan, Germany, France, Australia and Great Britain, to name but a few, whose aid comes to billions of dollars. What is fuelling this misguided policy? Are businesses using their economic clout to influence their respective governments that business interests should take precedence over matters of principle? It is time the Western democracies, all of whom have increasing trade deficits with China, stopped providing foreign aid to a country which clearly no longer belongs to the ’have-nots’ of the world.

Rich Chinese Flault Their Wealth and Mix Expensive Wine with Coke.

Why is the West still giving Foreign aid to this country? From the Mail.

Talk to any upscale, London-based wine merchant and he’ll tell you two very important things about his rich Chinese clientele.

First, money is no object. Sotheby’s recently reported, for instance, that a vintage bottle of 1869 Chateau Lafite sold for more than £130,000 to a Chinese buyer.

And that’s for drinking now by the way: not to lay down in a cellar. ‘What we’ve seen emerging in the past year are people paying virtually any price for wine,’ said David Elswood, Christie’s head of wine. ‘That is not investment: that is just uncontrolled spending.’

Making London their home: Financier Andy Wong (right) with his wife Patti who is chairman of Sotheby's. They have been jovially nick-named 'bananas' - yellow on the outside, white on the inside

Second, and perhaps more ­crucially, the Chinese have their own way of imbibing their wine — a method that could cause offence to more traditional and pedantic oenophiles.

No slow and tentative sipping or deferentially swishing around on the palette for them. Even with a £6,000 bottle of 1982 Chateau Mouton Rothschild, the Chinese tilt the glass and knock it back.

Straight down the hatch. Or they mix it with Coca-Cola - so the story goes - to sweeten the taste.

It seems, too, that this behaviour is very much par for the course with the sudden Chinese invasion of London.

Even £6,000 wine is drunk straight down the hatch

With China’s once-booming finances now showing signs of slowing down, inflation alarmingly high and the property markets in Beijing and Shanghai overheating, China’s financial elite (China and Hong Kong now boast 89 billionaires, second only to the U.S.) are putting their money somewhere more secure — and many appear to have chosen our capital.

Before Christmas, the 57-year old Hong Kong real estate billionaire Joseph Lau Luen-Hung (fortune £2.5 billion) spent £33 million on a six-floor mansion in Belgravia.

Rich pickings: 57-year old Hong Kong real estate billionaire Joseph Lau Luen-Hung is the proud owner of this painting of Mao Zedong by Andy Warhol which cost a cool £11m

The house will make a splendid home for the Paul Gauguin canvas that Lau paid £25 million for in 2007, his £8 million Picasso and £11 million Andy Warhol of Chairman Mao. Also moving in will be Lau’s 10,000-bottle wine collection and the flawless blue diamond that he bought for £5.8 million last year.
Should Lau need to leave the UK in a hurry, he can call on the services of his £99 million Boeing jet, complete with a bespoke 4,786 sq m cabin.

Lau is not the only Chinese arriviste in the capital. A recent London Property Review released by estate agent Knight Frank suggests almost half of all investors in London come from Asia, and, most specifically, mainland China and Hong Kong. Knight Frank says Chinese buyers are by far the most active group of overseas investors in the capital.

In fact, this invasion of the so-called Peking Pound actually began two years ago. In 2009, data from tax rebate companies, which help foreign shoppers reclaim VAT on sales, suggested Chinese tourists were spending three to four times more than they were the year before.

Location location location: Joseph Lau Luen-Hung spent £33million on a six-floor mansion in Belgravia which will no doubt make a splendid home for his burgeoning art collection

One company, Global Refund, reported a 164 per cent rise in sales to Chinese customers on Bond Street in the first seven months of 2009. (By contrast, spending by ­Russians fell by 27 per cent.)

Skip forward a year to 2010 and Chinese shoppers spent more than £3 million on Bond Street in six months — more than double the previous period — according to figures from the Bond Street Association.

Retail analysts reckon the Chinese account for 30 per cent of the top-end goods market in Britain (British shoppers make up 15 per cent.)

Because of the endless Chinese custom of gift-giving, items such as watches and jewellery are bought as presents for relations, friends, business associates — oh, and mistresses.

A luxury London spa now offers Chinese medicine

Think high-end, heritage brands such as Louis Vuitton, Rolex and Burberry, bought in the UK partly because there’s a purchase tax rate of 20 per cent on the same luxuries bought in China.

The Chinese have become the biggest overseas spenders on such luxury items, beating visitors from Russia and the Arab nations. In short, the Chinese are taking on the oil sheiks and the oligarchs — and they’re winning.

A few weeks ago, during the pre-Christmas rush at Harrods, shop staff reported that more than half their clientele was from China.

Down the road is Harvey Nichols, bought in 1991 by Hong Kong-based entrepreneur Dr Dickson Poon.

Fine dining: Britain's new Chinese high society like to out in style and can often be seen dining in the likes of Hakkasan (pictured here) and China Tang at the Dorchester

Year-on-year sales figures there have shown a huge increase in Chinese clients, inspiring the famous department store to run a rather cheeky advertising campaign in Mandarin, tempting wealthy male Oriental customers with fine English tailoring.

‘The English gentleman is known for being a little boring in the bedroom,’ went the blurb. ‘Except, of course, when it comes to his wardrobe.’

Meanwhile, Harrods is offering the services of Mandarin-speaking staff, and Selfridges now accepts payment by China UnionPay card, the only domestic credit card available in China.

‘The influx of Chinese wealth [to Europe] has been primarily in the London market,’ says Aaron Simpson, founder of Quintessentially, the London-based luxury concierge service with offices in Shanghai, Beijing and Hong Kong.

‘People feel that London is on an upward trend, and it’s a good time to buy property. A lot of people come to take advantage of the private healthcare.’

Quintessentially’s property division currently has a number of mainland Chinese clients on its books looking for properties in Central London, with budgets ranging from £8-17 million.

What China's expat millionaires spend their money on

Joseph Lau Luen-Hung - £33m Belgravia mansion, £35m Paul Gauguin canvas, £8m Picasso and £11m Andy Warhol of Chairman Mao, £5m flawless blue diamond

Mystery Chinese buyser - vintage bottle of 1869 Chateau Lafite sold for more than £130,000

Chen Wai Kung - owns quintessential Savile Row tailor Gieves & Hawkes

Silas Chou - former owner of royal jeweller Garrard and Co, bought Pepe jeans London Corporation in 1991

Kenneth Fang - bought Pringle in 2000

Patti and Andy Wong - Lavish New Year parties have cemented their position within British society

When the Chinese are not shopping for houses, they are buying up businesses. Lots of businesses.

Chinese entrepreneur Silas Chou, former owner of royal jeweller Garrard and Co, bought Pepe jeans London Corporation in 1991.

Pringle, the venerable knitwear company, was purchased by the Hong Kong manufacturer Kenneth Fang in 2000, while Singaporean businessman Cheng Wai Kung now owns the 200-year-old Savile Row tailor Gieves & Hawkes.

Chinese investment is creeping into different markets, too. Earlier this week, on a four-day visit to Britain, China’s Vice Premier Li Keqiang confirmed energy and manufacturing deals worth £2.6 billion with companies including BP and Jaguar Land Rover.

Given Beijing’s decision to let the yuan appreciate against Western currencies, the influx of rich Chinese into London isn’t set to slow down anytime soon.

But there’s a crucial difference between the wealthy Chinese invading the capital and their Arab and Russian predecessors. For what the super-rich Chinese don’t do is show off.

They don’t cruise around in fast, over-revving Maseratis like the more rowdy summer visitors from Qatar and Saudi, or indulge in ostentatious Kristal champagne spraying marathons like young Muscovites at nightclubs such as Movida and Aura.

‘That decadent West thing doesn’t appeal to most Chinese people,’ explains Hong Kong-born, London-based financier Andy Wong.

‘Years of Communism have meant that the idea of having lots of money and splurging it around is considered distasteful. And they have never found the idea of lounging around on a yacht in St Tropez particularly aspirational.’

So, what do they do instead? ‘Oh, you know, they like looking at birds,’ says Andy breezily.

‘Calligraphy, painting . . . that sort of thing.’

The secret to his success: Sir David Tang runs the hugely successful Chins Tang restaurant as well as being the brains behind luxury clothing brand Shanghai Tang

Andy Wong and his wife, Patti, the chairman of Sotheby’s, are what the Chinese community jovially refer to themselves as ‘bananas’ — yellow on the outside, white on the inside.

Both Oxbridge-educated, they are the millionaire offspring of a brace of Hong Kong bankers. Andy’s grandfather founded the Bank of East Asia, Hong Kong’s largest independent Chinese Bank, while Patti’s grandfather founded Hang Seng, the second largest.

The Wongs arrived in London in 1995, and with the help of a decade or so of annual and very lavish Chinese New Year parties, attended by the likes of Prince Andrew and Shirley Bassey, they quickly became socially ubiquitous.

‘London’s Chinese do like shopping,’ confirms Patti. ‘But not for clothes. They buy property, businesses, art. And they’re food-obsessed.’

They eat at jaw-droppingly expensive Chinese restaurants such as China Tang at The Dorchester and Hakkasan, where Peking Duck comes with Beluga caviar at £165 a pop.

What super-rich Chinese never do is show off

From next month, should they need a respite from all this activity, they can hang out at The Langham hotel, which is opening the first luxury spa in ­London to offer traditional Chinese medicine.

Lisa Tseng, a beautiful, whip-smart, Kensington-based philanthropist, calls the new Chinese rich ‘the uncomfortable billionaires’.

‘They aren’t impressed by the high-society side of London,’ she says.

‘Anyone expecting the wealthy Chinese to behave like their Russian counterparts, spending money on designer goods and going to noisy nightclubs, will be very disappointed,’ adds Sir David Tang, the plummy-voiced Hong Kong entrepreneur behind the aforementioned China Tang and the Shanghai Tang boutique on Sloane Street.

‘We get plenty of very rich Chinese in my restaurant, but they are low key. They don’t care for parties or clubs. There are no flashy cars. We’re talking about stealth wealth here, not Versace.’

George Lucas fully believes 2012 is the end of the world

From here.

Funnyman Seth Rogen was left stunned by a recent encounter with his moviemaking hero George Lucas - because the Star Wars director spent 20 minutes telling him the world would end in 2012.

Rogen was left speechless when Lucas and Steven Spielberg joined a movie meeting he was a part of - but the encounter has left him worried his life will be over next year.

He recalls, “George Lucas sits down and seriously proceeds to talk for around 25 minutes about how he thinks the world is gonna end in the year 2012, like, for real. He thinks it.

“He’s going on about the tectonic plates and all the time Spielberg is, like, rolling his eyes, like, ’My nerdy friend won’t shut up, I’m sorry...’

“I first thought he (Lucas) was joking... and then I totally realized he was serious and then I started thinking, ’If you’re George Lucas and you actually think the world is gonna end in a year, there’s no way you haven’t built a spaceship for yourself... So I asked him... ’Can I have a seat on it?’

“He claimed he didn’t have a spaceship, but there’s no doubt there’s a Millennium Falcon in a garage somewhere with a pilot just waiting to go... It’s gonna be him and Steven Spielberg and I’ll be blown up like the rest of us.”

Sean Connery on Wife Beating

Russian strength and conditioning and...dancing.

I'd bet the strength and condition for this came from pood and a half Russian kettlebell training.

Traffic Lights at busy intersection turned off, traffic flow improves.

Nudge, nudge, wink wink... How the Government wants to change the way we think

Image via Wikipedia

Shame, vanity, laziness and the desire to fit in are all to be used as tools of Government policy by ministers acting on the advice of a new psychology unit in Whitehall.

The first glimpse into the confidential work of the Cabinet Office's Behavioural Insight Team came on Tuesday when ministers suggested members of the public should be able to make small charitable donations when using cashpoints and their credit cards.

On Friday, the Cabinet Office again followed the unit's advice in proposing that learner drivers be opted in to an organ donation scheme when they apply for a licence, and also floated the idea of creating a lottery to encourage people to take tests to prove they have quit smoking.

These initiatives are examples of the application of mental techniques which, while seemingly paradoxical to the Coalition's goal of a smaller state, are likely to become a common feature of Government policy.

The public will have "social norms" heavily emphasised to them in an attempt to increase healthy eating, voluntary work and tax gathering. Appeals will be made to "egotism" in a bid to foster individual support for the Big Society, while much greater use will be made of default options to select benevolent outcomes for passive citizens – exemplified by the organ donation scheme.

A clue to the new approach came early in the life of the Coalition Government, in a sentence from its May agreement: "Our Government will be a much smarter one, shunning the bureaucratic levers of the past and finding intelligent ways to encourage, support and enable people to make better choices for themselves," it read.

The Prime Minister, David Cameron, established the seven-strong unit in July, since when the Government has declined to divulge all its members and the full extent of its work. However, The Independent has learnt its guiding principles and some of the projects that have used its favoured techniques.

One experiment involved Her Majesty's Revenue and Customs (HMRC) secretly changing the wording of tens of thousands of tax letters, leading to the collection of an extra £200m in income tax.

Other ideas tried elsewhere that have been studied by the unit include reducing recidivism by changing public perception of ex-prisoners, and cutting health costs by encouraging relatives to look after family members in "patient hotels".

The unit draws inspiration from the Chicago University professor Richard H Thaler and his colleague Cass Sunstein, whose book Nudge: Improving Decisions About Health, Wealth and Happiness is required reading for Conservative frontbenchers.

Professor Thaler, who advises the UK team, suggests that instead of forcing people to behave more virtuously through legislation, governments can guide them in the right direction using psychology. Ministers should become, in his jargon, "choice architects", making virtuous choices more attractive than unvirtuous ones. In his books he quotes the example of automatically opting workers into company pensions to raise the amount saved for old age, which will come into force in the UK in 2012 having been enacted by Labour. Another is from Amsterdam's Schiphol airport, where flies were etched on to urinals to give men something to aim at, reducing spillages in the gent's toilets.

Mr Cameron embraced nudge theory two years ago in a speech about "Broken Britain", but has subsequently placed more emphasis on his own idea of the Big Society, where individuals and charities play a much greater role ias the state shrinks.

Both ideas, however, fit neatly into the work of the insight team, which reports to key Government figures including Jeremy Heywood, the Prime Minister's Permanent Secretary, Steve Hilton, Mr Cameron's director of strategy, and Sir Gus O'Donnell, the Cabinet Secretary.

Central to this is limiting regulation and cost, according to the unit's director, Dr David Halpern, a former Cambridge University social psychology lecturer.

In comments to policymakers and businesspeople in Brussels recorded by The Independent last month, Dr Halpern said: "One of the policies of this new administration is essentially a 'one in, one out' approach to regulation, so departments wanting to introduce a new form of regulation have to get rid one at the same time. One of the fashionable things to say is: 'Well, what are the alternatives to regulatory instruments?' – spending money – which they're not very keen on. So it tends to support this shift towards behavioural economics."

Dr Halpern has experience of seeking unconventional solutions to policy problems via his role as chief analyst at Tony Blair's Strategy Unit, which looked into ways of increase happiness in the UK that – in common with other western countries – have not kept pace with economic growth.

Dr Halpern's approach, carried over from his days with Mr Blair, centres on his favourite term, "Mindspace," an acronym that stands for: Messenger (i.e. he who communicates information affects its impact); Incentives; Norms (what others do influences individuals); Defaults (pre-set options tend to be accepted); Salience (revelance and novelty attract attention); Priming (sub-conscious cues); Affect (the power of emotional associations); Commitments (keeping public promises); and Ego (the stroking of which encourage positive action).

Seeking to explain Messenger he told his Brussels audience: "It matters who tells you. If you are go to say something about vaccination, you are much better off having the Chief Medical Officer say it than a Cabinet minister ... if you want anybody to follow the advice."

Similarly, tax officials who reinforce "norms" dramatically increase their collection rates. The authorities tend to be "quite aggressive and assertive" when chasing late payers, Dr Halpern said. "We will send you a rude letter and say: 'We're going to come and find you and break down your door and take away your children.' So [HMRC] officials had been reading a bit of [nudge] literature and they changed letters on just one block of letters [chasing] £600m in unpaid tax.

"The normal repayment rate is about 50 per cent. The [new] letter says: '94 per cent of people pay their tax on time', so now you emphasis the underlying social norm – and then: 'Even if one person doesn't it has a significant impact'. The repayment rate went up to 85 per cent, [collecting] £200m just in that experiment."

Intriguingly, closer co-operation between the unit and HMRC was referred to in passing by the Cabinet Office on Friday. At the centre of the unit's work, though, are its priorities: well-being, public health, the environment and philanthropy.

While there are few details so far on how the unit will tackle happiness, plans for public health are more advanced. Britons have one of the worst records in Europe when it comes to rates of obesity, drug use, and sexually transmitted diseases (STDs). The Health Secretary, Andrew Lansley favours nudging rather than legislation and has controversially recruited food and drink multinationals, who profit from unhealthy behaviour, to devise appropriate strategies.

One is likely to see signs placed at supermarket checkouts reinforcing social norms about the amount of fruit and vegetables bought by the average shopper. Another is the idea of "patient hotels", a Continental innovation where relatives can sleep alongside patients, cutting costs and improving outcomes. This has the added attraction of reducing health spending at a time when the NHS budget will come under increasing pressure from rising demand.

Public health campaigns on STDs are likely to replace factual warnings with questions designed to emphasise social norms. So, instead of advising people of the likelihood of sexual partners having an STD, posters would ask: "What would your girlfriend think of you if you say you don't want to use a condom?"

Some professional health organisations, such as the British Medical Association, are concerned that nudges will be used at the expense of new legislation on tobacco advertising, tax on junk food and other issues.

But Nick Chater, Professor of Behavioural Science at Warwick Business School, who is not involved with the unit, welcomed the new emphasis on psychology. "Broadly speaking, I think it's a valid approach," he said.

"If you are interested in changing people's behaviour for their own or the collective good, then regulation is often a blunt tool and it often doesn't harness goodwill. But it's misleading to think with a few nudges consumer behaviour will head off in another direction. [Behavioural economics] is definitely an additional tool, [but] I don't see it as a way to eliminate regulation or redistribution."

The nudge unit's priorities

* Health

Public health is a priority for the unit, because half of UK health spending goes on treating the consequences of unhealthy behaviour such as drinking, smoking and having unprotected sex. Yet only one half of one per cent of NHS spending goes on promoting healthy behaviour. The unit suggests using respected medical figures to give health warnings and reinforcing social norms about other people's behaviour, to spur consumption of fresh produce and condom use.

* Environment

The unit has been drafted in to help the Coalition achieve its aim of being the greenest Government ever. While investing in new sources of low-carbon energy generation should limit greenhouse gas emissions, individuals will also need to make greener choices.

* Giving

Creating a band of active citizens who contribute to public life is central to the Big Society. The Coalition wants to create a "culture change" to increase time and money for good causes. Its green paper Giving last week noted that the average UK citizen spends 16 hours a week watching TV, but only one hour doing voluntary work. But telling people that volunteering increases life satisfaction is unlikely to be enough, it warns. As Dr Halpern explains: "Evolution has endowed us with a social brain that predisposes us to reciprocate acts of kindness, not to just blindly help anyone and everyone, regardless of how they treat us."

* Social networks

The unit believes that individuals' social contacts and connections are vital to their health and welfare, and are an untapped resource for the whole of society. "Harnessing the capacity of social networks and affecting the behaviour of the individual" is one of its aims. The Giving green paper said it wanted to do more to support community groups, charities and social enterprises.

* Well-being

Monthly polls by Ipsos-Mori show that the UK is a fearful place. Despite being among the wealthiest in Europe, Britons are less happy than others in Europe, particularly in Scandinavia. We are also less trusting of our fellow citizens. The unit is looking towards Denmark, which studies suggest is the happiest nation in Europe. The most important thing to Danes is "love". By contrast, the least happy people, Bulgarians, are "much more worried about jobs and money", Dr Halpern told an EU conference in Brussels.

Related articles

• Nudge, nudge, wink wink... How the Government wants to change the way we think (independent.co.uk)
• First goal of David Cameron's 'nudge unit' is to encourage healthy living (guardian.co.uk)
• Lords to hold 'nudging' inquiry (bbc.co.uk)