Posts Tagged ‘welfare state’

Alistair Darling, Drag Queen

Wednesday, March 24th, 2010

Darling, I want to cover you in pepper and sneeze all over you…

In his speech today, the Chancellor neglected to mention that tax allowances would remain stationary at £6 475 pa.

Noting that inflation is currently at around 4%, this means that people are going to be subject to “fiscal drag”: as their earnings rise, more of those earnings become taxable.

This is particularly damaging to the low paid (costing about £48 per basic rate tax payer).

Perhaps more worrying is the fact that the personal allowance is quite so low: for many, going from the dole to a part-time job is rarely worth it, given that tax/NIC combined with reductions in benefits means that they might be working 10 hours/week for only a couple of pounds extra.

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Posted in Politics by Callum Wood | No Comments »

Completing devolution

Friday, October 9th, 2009

Tony Blair’s “Clause 4 moment” was when he amended the Labour Party’s constitution to abolish their formal committment to nationalisation. A similarly significant moment for the Conservative and Unionist Party could be our renaming to just the Conservative Party.

There is just one Conservative MP in a Scottish constituency, out of 59. There are just three Conservative MPs out of the 40 MPs for Welsh constituencies.

Repealing the Union Act would significantly reduce Labour’s majority, significantly increase the forthcoming Conservative majority, and prevent Labour from governing England ever again. It would cause the centre-ground of politics to shift back to the Right.

Furthermore, Scotland, Wales and Northern Ireland have more tax money spent on them than they pay in taxes. England would be better off not having to subsidise them. But Scotland, Wales and Northern Ireland may well end up better off themselves. For example, half of all the money spent in Scotland is spent by the State, and one in four Scots are employed by the State. Independence could be the spur Scotland needs to become vibrant and productive again. It would also create tax competition, which would be beneficial for all. If they wanted, the Scotch could position themselves as a low-tax, low-regulation country and out-compete England.

The Scotch, Welsh and Northern Irish could be given the choice of whether to keep the Queen as monarch. Scotland could keep what’s left of the North Sea oil.

The principle is localism — that decisions should be taken as close as possible to the people they affect. Devolution is localist, but current devolution has not gone far enough, and has created problems like Scottish MPs voting on matters that affect only England. This is wrong. Furthermore, at the moment, the Scottish Parliament can spend money without electoral consequence. True devolution must put tax raising powers in the hands of those who spend the money, in order to make them truly accountable. Taxes should be raised locally. True devolution must give them complete control of their budgets and taxes. It should even give them control of the laws of the area.

And for it to really be effective over the long-term, it must not be reversible. The Westminster Parliament must not merely devolve these powers to the nations. Future Parliaments would always be tempted to overrule national decision-making about various things until, gradually, all decision-making had returned to Westminster. We’d end up back where we started. For localism to work, Westminster must give up the powers completely and irrevocably. Scotland, Wales, Northern Ireland and England must become independent, and the Westminster Parliament should become the English Parliament.

That would be true localism, as if we meant it.

Independence for England would not make us weaker. How could it, when in the absence of the other nations’ draining the taxpayer, we could spend more on our armed forces?

Independence would make England stronger. It would also make Scotland, Wales and Northern Ireland stronger. The Conservative Party should embrace it.

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Posted in Politics by Hugo Hadlow | 8 Comments »

Cuts and Grazes

Friday, September 25th, 2009

It’s pretty much universally accepted that in order to bring down HUGE public sector borrowing (roughly 60% of GDP according to the OECD) the government needs to increase its bank balances, either by spending cuts or by raising taxes, or a combination thereof. I don’t pretend to understand macroeconomics and I’ll leave to to others to explain the risks of a huge national debt.

Yesterday I visited the Freshers’ Fair at the University of Huddersfield (to “help out”), and got into an argument with some malcontenet who accused the Conservatives of raising taxes (apparently ignoring the fact that we weren’t in power yet). Of course, tax rises may be necessary, but only if cuts in public spending have been exhausted – pared to the bone, so to speak. The word “cuts” may conjure up imagery of Mrs Thatcher snatching milk from schoolkids and tipping people out of hospital beds, but it might be better to visualise cuts as a surgical operation to remove a tumour. A tumour, incidentally, becomes malign when it starts invading other tissues and diverting essential blood supply in order to fuel its own growth – a fairly nice anaology of the civil service, I feel.

The TaxPayers’ Alliance (report) identified over £50 billion of savings that would be fairly painless to implement (and in anycase, chemotherapy is particularly harsh but usually better in the long-term). My favourites include: a one year pay freeze on the public sector (exl. servicemen) – saving: £6.2bn; abolishing education maintenance allowance – saving £530 million; slimming down the civil service by 10% - saving £1.2bn; and abolisihing Child Benefits and CTFs - saving £8 447 000 000. (See the tables below)

Admittedly, some of these cuts may seem harsh, and having handouts taken out of people’s hands would be very unpopular for any government. However, if Cameron wins the election and makes these tough decisions within his first year of office, the taxpayer (hopefully) would be weaned off dependency on the welfare state and come to appreciate his own responsibilities by the 2014/15 election. I theorised to myself on the bus yesterday that every £1 spent in the public sector stifles £x in the private sector – so making serious cuts in inefficient/unnecessary areas of spending should seriously stimulate commerce and industry into getting the economy moving again. Crucially, it is businesses that will bring us out of a recession, NOT the public sector.

Secondly, a note on tax rises. It might be tempting to, say, keep universal bus passes for the elderly in exchange for, maybe, another penny on corporation tax or a static NI threshold. Higher taxes stifle the economy, lower spending stimulates growth. The TPA report, for example, includes this factlet –  ”A study of EU15 and OECD countries from 1970 to 2004 by the European Central Bank found that a 1 percentage point increase in the tax/GDP ratio reduces output by 0.12 percentage points for the OECD countries and 0.13 percentage points for the EU countries.”

Lastly, a point of principle: the Government got itself into a mess by spending money it didn’t have. It is only right that the public sector should have the bear the burden of its mistakes, instead of punishing hard-working, over-regulated families and small businesses.

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 Note that none of these cuts involve reducing the numbers of staff in schools, hospitals, etc.

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Posted in Politics by Callum Wood | 1 Comment »

Mental Health

Monday, August 17th, 2009

Committee member, token lefty, debater, hat-wearer, writer and Sharpe-fan, Ben Slingo, dispels some myths surrounding the “Obamacare” fracas.slingo

American healthcare. Oh dear. It’s all rather unedifying, both the system and the squabble about how to make ever so slightly less dysfunctional. Certainly recent evidence suggests that US psychiatric units are shutting their doors to many hundreds of needy cases.

Enjoyable as it would be merely to revel in the hysteria, it might be useful to correct some widespread misconceptions. As ever, there are faults on both sides.

1. It is not true that the American poor are denied all healthcare. The Medicare programme does provide treatment. This treatment, however, is

 a) inferior to that provided by the NHS,

b) confined largely to emergency care, excluding say consultations about worrying symptoms,

c) funded in a hugely inefficient way and

d) destined to bankrupt the system that sustains it ominously soon.

2. It is not true that the American system classically liberal or free-market oriented. Treatment is funded by insurance companies, who are in turn paid mostly by employers, who in turn offer an often very limited choice of insurance packages to their employees. The commercial relationship between patient and hospital is infinitely more tenuous than that between,consumer and supermarket. Since employers provide insurance, many American workers are unwilling to endure the disruption entailed by switching jobs, a reluctance that limits a vital condition of the free market : labour flexibility. Not only this, but precisely because the American system is privately operated many states have imposed very restrictive and expensive regulations on insurance companies and hospitals.

3. It is not true that simply because several doctors and nurses were very courteous to your ailing grandmother the NHS is a healthcare system of unrivalled quality that deserves its own religious cult (which should perhaps forthwith be declared blessed)

4. It is not true that ‘Obamacare’ would impose an NHS-style system in the States. First of all ‘Obamacare’ itself is a fanciful notion as the President has (unwisely) entrusted the plan to the Democrats in Congress. Something vaguely resembling American NHS may appeal to Mr. Obama and other liberal Democrats, but they are not reckless enough to propose it given its
likely reception.

5. It is not true that ‘Obamacare’ would sanction state-funded abortions (though I would imagine that some insurance premia
are already inflated by the cost of abortion). One might also note that tax revenue is most certainly spent on enforcing the death penalty, something equally repugnant to the Holy Apostolic Church.

6. It is not true that the very large discrepancy between levels of health spending in America (16 per cent of GDP) and western Europe (10-12 per cent) is entirely squandered. The very best American care is truly superb and surpasses that available on
the NHS. This care would not necessarily be threatened by ‘Obamacare’, though a government-backed insurance company would damage some of its private competitors.

7. It is not true that ‘Obamacare’ envisages death panels that would exterminate the Palin family. I decline to speculate on
whether this myth has been peddled by pro- or anti-Obama partisans.

-Ben Slingo

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Posted in Politics by Ben Slingo | 7 Comments »

Radically reforming welfare, part 2: Tradable Citizenship

Sunday, October 19th, 2008

In this article I consider another madcap scheme. This article should be read in conjunction with “Radically reforming welfare, part 1″.

Yesterday, I considered replacing all social security with cash payments.

One problem with welfare for all is that it encourages immigration that wouldn’t happen in a free market. For example, in the Union debate on Thursday (“This House believes the multicultural experiment has failed”), Nigel Hastilow mentioned the true story of an Afghan immigrant with seven children who receives £170,000 a year in benefits.

Any British welfare system needs to be paid for by British taxpayers. We can afford a welfare system which benefits a few, because most people work.

But if we offer benefits to everyone resident in the UK, we create a massive incentive for people to immigrate to the UK; to become resident and collect benefits. This is especially true for the benefits system I advocate. UK taxpayers could not possibly afford to pay for benefits for the whole world.

If we’re going to have benefits, the obvious solution is to only pay benefits to British citizens.

If we do that, we could do away with all migration controls and their costly bureaucracy, and have completely open borders.

I feel uneasy about mass immigration for one reason: population size. Just as London has become more built-up over the years relative to the rest of the country, I can envisage the UK becoming more built-up relative to the rest of the world. In 1726, César de Saussure could write, “Chelsea is one of the finest and largest villages outside London… Marylebone is a fine large village about one mile from London.” Could the UK become an “ecumenopolis”, with no greenery left?

I am inclined to support free markets, including free markets in labour and housing. Without state assistance, an immigrant can only move to a country if someone is willing to sell them a house and they are able to pay. If they are able to pay, they are likely to make a productive resident. And as more people move to the UK, property prices will rise, creating a neat negative feedback loop. But while free markets will allocate resources most efficiently, including the allocation of land, this may result in situations which most UK citizens would think are bad, such as the conversion of farmland and national parks into cities. Population growth in the UK is slowing, and without net immigration the UK population is expected to decline from about 2020. Immigration is the only thing that will increase the population. That said, I am inclined to trust the market, as long as distortions like benefits for immigrants are removed.

On average, citizens of other countries resident in the UK are net contributers of tax. But without the minority of immigrants who are net beneficiaries of the welfare system, we would be even better off. Immigration boosts GDP per person by a miniscule amount. Without unproductive immigrants we would be even better off.

In 2006, 400,000 people emigrated, but almost 600,000 immigrated. I wrote, “We can just cap immigration at 350,000, and implement a points system to get the most skilled immigrants.”

I now see that a points system is bad. It’s bad because it uses a bureaucracy instead of a market, so will cause an inefficient outcome. If we’re going to limit immigration, there are much better ways to do it.

Tim Harford explains the idea of tradable citizenship in his article “When it comes to foreign workers, some ideas aren’t so crazy” (Financial Times, 27th September 2008).

Shortly after the Soviet Union collapsed, a Russian bureaucrat travelled to the west to seek advice on how the market system functioned. He asked the economist Paul Seabright to explain who was in charge of the supply of bread to London. He was astonished by the answer: “Nobody.”

Fifteen years later, I had thought that almost everyone had abandoned the notion that a committee could plan its way through the unimaginable complexities of an advanced economy. I was wrong.

Earlier this month, the Migration Advisory Committee presented a list of professions that would qualify migrants for entry, broadly on the grounds of UK skills shortages. They include geologists of all stripes, veterinary surgeons (but not other veterinarians), chefs (but only those paid £8.10 an hour), sheep shearers with a British Wool Marketing Board bronze medal (or equivalent) and ballet dancers (but not choreographers, nor other dancers).

At least the old Russian bureaucrat would have had an answer to the question, “Who is in charge of the supply of sheep shearers to the UK?” It is the Migration Advisory Committee.

Cory Doctorow explains the problem:

“Jacqui Smith, the British Home Secretary, had unilaterally (and on 24 hours’ notice) changed the rules for Highly Skilled Migrants to require a university degree, sending hundreds of long-term, productive residents of the UK away (my immigration lawyers had a client who employed over 100 Britons, had fathered two British children, and was nonetheless forced to leave the country, leaving the 100 jobless).

If we’re going to limit immigration, the best way to do it would be to create a market for immigration, as Tim Harford explains:

Here’s a crazy alternative: the government could restrict immigration simply by auctioning the right to work in the UK. Permits would have various durations (a month, a year, in perpetuity). Citizens would get a free lifetime permit; non-EU residents would have to pay, or persuade their employers to pay. The price of the permits would depend on their scarcity, a decision that might just be within the competence of the state.

As well as allowing employers and migrants to decide for themselves whether they would get enough out of the match to justify the price of admission, the auction system would raise money to help pay for the public services migrants are so often blamed for clogging up.

It would have other advantages, too. Migration hawks would have a constructive way of expressing their xenophobia: they could buy permits and “retire” them, thus demonstrating that they really did value the absence of foreigners more than others valued what the foreigners had to offer. Citizens who wanted to leave could sell their permits on the way out.

I prefer a slightly different system: we make citizenship and the right to work the same thing. That would do away with tourists or spouses needing visas. More significantly, citizenship would then gain a person not only the right to work in the UK, but also also a Basic Income as described in “Radically reforming welfare, part 1″.

The government would not sell short-term permits. Rather, it would grant all current citizens a life permit. There would then be two ways to aquire citizenship:

  1. Be born here (actually this would be more complicated to prevent an incentive to come to Britain just to have a baby and gain your child an income for life).
  2. Buy it from a current citizen.

The population could therefore be kept below a maximum, but who precisely made up that population would be left to the market.

Now, I’ve said that if we remove artificial incentives to immigrate, so the only incentive to immigrate is the opportunity to build a better life for yourself, then we could have open borders and immigration would probably not be a problem.

So why am I advocating a limit on immigration at all?

America was founded as a libertarian society, to which people could come to make a better life for themselves, through their own efforts. At first, its population was composed of immigrants. It was a dynamic population: anyone with enough initiative to immigrate, without expecting any help, was someone with the initiative to create wealth. This helps to explain why America has created more wealth than any other country on Earth.

But over the years, its population has become a population merely descended from immigrants, and its population has become coddled by welfare, albeit much less than people in Europe (Charles Murray’s idea that that it “‘drains’ the life out of people – particularly the spiritual life and sense of meaning”).

UK citizenship under this scheme would be valuable for two reasons. It would guarantee an income paid by taxation, and it would give the holder the right to work in the UK. Someone living in the UK and not working would only be getting the first benefit: the guaranteed income. But someone who wanted to come to the UK and work would get both benefits. So citizenship would be more valuable to a would-be immigrant than to the current holder. If the guaranteed income was £5,000, and the market interest rate was 5%, a holder who wasn’t working would be willing to sell it for slightly more than about £100,000. They could move abroad to somewhere cheaper, and live in relative luxury for the rest of their life. They could invest that money and continue to receive an income for £5,000 for the rest of their life, but not paid for by the British state.

The would-be immigrant would be happy to pay £100,000 because they would get something more in return: not just an income of £5,000 (which their £100,000 was already getting them), but the right to work in the UK instead of wherever they lived already.

The UK would therefore gradually become full of dynamic people with initiative, who want to work, generating more wealth and making everyone better off. Everyone who receives the basic income would pay tax on the wealth they generate themselves, so if more wealth was being created, there would be less need for the basic income!

We need immigration controls in this manner, not because immigration is a problem, but because welfare is.

Politically impossible, of course, and perhaps impractical, too. But it cannot possibly make less sense than that list. If nothing else, the high price of permits might remind those of us lucky enough to have been born in a wealthy country how fabulously privileged we are.

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Posted in Politics by Hugo Hadlow | No Comments »

Radically reforming welfare, part 1

Saturday, October 18th, 2008

In this article I consider a “madcap scheme”.

The “Poverty Trap” (also known as the “unemployment trap” or the “welfare trap”) means any situation where the costs of moving into work are greater than the increase in income, caused by means-tested benefits.

A very simplistic example would be where the government gave £5,000 to everyone with a salary below £10,000. Someone with a salary of £9,999 would receive an additional £5,000 from the government, bringing their total income to £14,999. Imagine such a person was offered a better job or position, requiring slightly longer hours, more of their skills, or more responsibility, with a salary increase of £1000. Performing such a job would increase the wealth of society. But the person would not take it. For with a salary of £10,999, they would no longer receive benefits, so their total income would be £10,999. By working more, they would decrease their income by £4,000. So of course, while in an undistorted market they could better themselves by working more, with government distortions they would have no incentive to learn new skills or get a better job.

In practice, welfare payments are distributed by the government according to a much more complicated system. Usually they are not cut off suddenly, but phased out. But means-tested welfare, i.e. welfare that depends on your circumstances, will always mean that the pay increase from working better or longer will be less than it would be in a free market. There will be less incentive to work better or longer. The poverty trap discourages people from getting off welfare and bettering themselves with their own efforts.

In extreme real cases, working can indeed reduce income in absolute terms. Chris Dillow points out:

Our existing system already subsidizes idleness. Some people prefer to stay on benefits because they’d lose these if they went out to work. Take a married couple, both out of work. One’s offered a 16-hour week job at the minimum wage. How much better off are they if they take the job? Not at all – they are about 5% worse off. Table 1.4a of this massive pdf shows.

Sure, I’ve taken an extreme example. But it’s easy to find replacement ratios for part-time jobs of over 70%. For many, then, the financial gains from working are so small that the hassle’s not worth it.

As one commenter on Peter Hitchens’ blog said,

“A safety net is exactly what social security should be – not a way of life. I would suggest, however, that with 5.4 million people languishing on out-of-work benefits, Britain’s welfare system is more ‘comfort blanket’ than ‘safety net.’”

The solution is to make benefits non-means-tested. This means giving the same welfare payments to everyone, regardless of their income. Obviously there would be exceptions for the disabled, but for ordinary people, welfare payments should be the same, whether you are unemployed or a millionaire.

That way, working an hour at a job which pays £5/hour, increases your income by £5, instead of by some amount less than £5.

What we should do is replace all social security by giving every adult in the country £5,000, cash, with no conditions. My economics teacher at school suggested this briefly as a “madcap scheme”, but this idea is actually not as mad as it seems. I believe it should gain wide acceptance. It should be acceptable to both the left and the right. For those on the left who really want to help the poor, rather than just increase their dependence on the rulers, it maintains their income but massively simplifies how they get it. It frees them having to spend a lot of time dealing with the state, and allows them to pursue a more fulfilling life doing what they want, without discouraging them from working. For those on the right, it is certainly an improvement, because it removes the disincentive to work that goes with the current welfare system.

This is a Basic Income system, which could be implemented either as a “Citizen’s dividend” or the negative income tax advocated by Milton Friedman.

I was reminded of the Basic Income idea by Charles Murray’s book “In Our Hands”.

Another commenter on Hitchens’ blog described the book thus:

“For anyone who is interested in welfare reform, can I commend the works of Charles Murray. His thesis: the state [despite its good intentions] is inevitably wasteful and inefficient. As well as morally neutral, spawning vast bureaucracies etc.etc. The solution: end all redistributive welfare INCLUDING THE NHS. Cut out government and give the money straight to the people. To receive a monthly sum, people must be: over 21, have a bank account, have a British passport, to get a monthly sum (£10,000 pa) for life. Two rules only: they MUST buy health insurance, and they must invest in a pension plan. After that, they can do whatever they like.

The human urge to do what is best for the self (denied by the left) then comes into play. Because not getting a job, getting married and having babies too young hurts, and the counterpoint pays, people will behave in ways that are constructive, not destructive.”

Chris Dillow surveys some arguments here.

James Bartholomew describes it here:

“His idea, briefly, is this: that the government should give every person US$10,000 a year in place of all welfare benefits, retirement payments and healthcare. Of this, US$3,000 would have to be used to buy health insurance.
…
He said he was not primarily concerned that the welfare state costs too much “though it does”, nor that it tends to make things worse “though it does” but that it “drains” the life out of people – particularly the spiritual life and sense of meaning.
…
He said that if his plan were introduced, behaviour would be affected. There would be ‘feedback loops’. I think he implied that a girl would be less inclined to get pregnant out of wedlock if she knew she would get no extra money from the government. She would also be able to get money from the father because his regular money from the government would be paid to a known bank account and money could be taken from it. This would, Murray suggested, affect his behaviour, too. He would be more cautious about making women pregnant.
…
I am struck first of all by how he admitted that this was a compromise. He said he was making an offer to the Left. They would be allowed to keep big spending – since his plan would continue big state spending. But it would be in a different form that would curtail many of the bad effects of state welfare.

Many times I have been asked, when giving talks about my book, ‘so what is the answer?’ I have always felt it is impossible to give a satisfactory answer. The ideal solution – minimal state welfare – would probably not be politically acceptable in a democracy. But reforms that would be politically acceptable would probably not be radical enough to make a ‘good society’.”

As Sean Gabb says,

“Something we should leave substantially alone is the welfare state. The main assumption behind which the present ruling class justifies its looting of the taxpayers is that any cuts in public spending must fall on the welfare budget.

Of course, it is a false assumption, but it does not help that libertarians have always made a great noise about the corrupting effects of state welfare, and that libertarian schemes of improvement always give prominence to privatising or abolishing it. This shows a failure of political understanding.

All else aside, it would be madness to give the now displaced ruling class an issue on which it might claw its way back from oblivion. It may be regrettable, but most people in England like welfare. They like the thought that if they lose their jobs, they will receive some basic support, and that if they fall ill, they will receive treatment free at the point of use. That is what is wanted, and that is what a government of reaction must continue providing.”

I disagree with Murray about health insurance. Instead I would pay some of the money into Personal Health Accounts, as described by Hannan and Carswell in “The Plan”, because these also increase the incentive to use the money wisely.

All other social security would be ended, including the minimum wage, council housing and the NHS. Hannan and Carswell explain how the transition could be made from the NHS to private healthcare. There would be no difference in income for those living in places like London where living costs are higher. As one commenter on Chris Dillow’s blog said, “If I live in an expensive area and lose my job, and can’t find a new one, I will have to move somewhere cheap. Why is it beyond the pale for an unemployed CBI-only person living in London to consider moving himself to a cheaper town or city?” Another replied sarcastically, “it is universally recognised as an affront to civilisation and all we hold dear to suggest that someone who isn’t inclined to should leave London.”

There would be no child benefit. This would remove the incentive to have children, and indeed would give an incentive not to have children. Removing child benefit normally seems harsh because it penalises the child for the decision of the parent – a child does not choose to be born. But in this case it would be okay because the family would still be guaranteed enough income to live on.

The commenter on Hitchens’ blog said,

“I asked George Osbourne about the theories of Murray. His reply: I had lunch with him last week! But there are things I don’t believe in. Translation [to me]: I don’t possess the necessary size of testicles to do it.”

Tomorrow, I’ll be considering “tradable citizenship”.

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Posted in Politics by Hugo Hadlow | 2 Comments »

How much “right” to education?

Monday, May 19th, 2008

“Human rights”, which don’t “exist” but are a handy legal construct, always used to be very simple. They were enshrined in law, and by calling them “rights” we gave them the aura of special status, not to be taken away by future politicians.

They included the right to life, the right to free speech, etc. They were simple and easy to enforce. They didn’t cost much: only a legal system.

But then people started saying that these were only a subset of rights, called “negative rights”, and there were other rights called “positive rights” which previously hadn’t been recognised. These included the “right to education” and the “right to healthcare”.

The crucial difference is that positive rights cost money. There’s no such thing as free education: it has to be paid for, e.g. by taxes. So you can only get positive rights by taking money from other people.

That doesn’t mean positive rights are necessarily bad. But it must be recognised that they can only exist by forcibly taking money from other people. (Taxation is “extortion with menaces”.) Failure to recognise this leads to a lack of respect for public services (bad as they are). If, whenever you visit hospital, you remember that it is all paid for from other people’s hard work, you realise what a privilege it is to live in England where this is possible.

Whether “positive rights” are rights or not, they are certainly a privilege, funded by other people’s hard work.

The problem with positive rights is that they are a ratchet. People always want more, and a government can always buy a little short-term success by increasing taxes and increasing what some people get for free (and what other people pay for). Those that stand to gain always shout louder than those who stand to lose.

When the NHS was founded, the services they provided were small, though similar to contemporary private medicine. As new treatments are invented or discovered, these are added to what is available. The bill rises. The NHS now provides all manner of things that have nothing to do with what people need, but with what they merely want, including non-medical plastic surgery, fertility treatment (nothing to do with healthcare), and pseudoscience (homeopathy or magnetic bandages, anyone?).

It provides treatments costing tens of thousands of pounds. Because with finite resources it cannot provide everything, there is the amusingly named NICE (National Institute for Health and Clinical Excellence), whose job is the necessary but not nice task of deciding what to spend the money on. If someone needs a £100,000 drug to treat their cancer, they probably won’t get it because that £100,000 could do much more good if spent on lots of other people.

So here’s another problem with “positive rights”: they’re not necessarily even possible. Does someone have a “right” to a particular drug, if 50 years ago it didn’t exist, and certainly would have been unaffordable if it was? Would they have had the right to it 50 years ago if it was unaffordable? Would they have had the right to it 50 years ago if it didn’t exist?

Does someone have the right to a £100,000 drug now if the money could save more lives elsewhere? The phrase “right to life” always used to mean “right not to be killed”. Negative rights are all about stopping other people doing things to you, not forcing them to do things for you like “positive rights”. However, consider the recent case of Ann Marie Rogers, who tried to claim that by not paying for Herceptin (an expensive cancer drug) the NHS had violated her “right to life”. Clearly “right to life” had been redefined, from the old negative right not to be killed, to an absurd positive right to have one’s life sustained at all costs. Negative rights have a clear infringer. Positive rights don’t clearly specify who is to pay for what is demanded: just a vague “everyone”, through taxation.

Why was the NHS rather than anyone else accused of violating this woman’s claimed “right to life”? Would her right to life have been violated if she had an untreatable illness and was going to die within days? If so, by whom?

Another claimed right is the “right to (‘free’) education”. At present, state education is paid for through taxation. But we all recognise that once you have learnt a certain amount, you have to go off in to the world and earn a living.

You do not have the right to stay in education for the rest of your life, at other people’s expense. If everyone did that, there wouldn’t be any education because no one would be working to pay for it. If everyone exercised their positive rights, no one would get anything.

There is not, for example, a right to go to university to be taught about medieval art history.

What is the cut-off point? Does the state have a duty to teach you calculus if you’re good enough, or should it just teach you basic arithmetic?

The possible justification of tax-funded education is that we will be better off economically and/or socially if everyone can do basic arithmetic. That doesn’t mean it is a right. We might also be better off in a society where some people know about medieval art history. But that doesn’t mean our taxes should pay for it, and it doesn’t mean it is a right.

Clearly positive rights can be absurd. We should drop the phrase, recognising that talk of rights is not necessary for attempts to justify taxation to spend on things like the NHS and education. The “merit goods” argument does just as well, and doesn’t attempt to justify things like government-funded medieval art history.

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Posted in Politics by Hugo Hadlow | 3 Comments »

Response to two speakers: Simon Heffer and Lord Blackwell

Saturday, May 17th, 2008

Simon Heffer visited CUCA in Lent, resulting in the most attended and best talk of the term. He spoke of the creation of a “client state”, where the Labour Party massively increased the number of tax-funded state jobs in order to increase their voter base. People working in the state sector tend to vote Labour, so Labour’s strategy was clear: make more of them. This is massively costly, but seems to work.

Heffer’s solution is that the Conservative Party should not bother seeking these votes, because they will not vote Conservative anyway. Heffer is a critic of Cameron’s rebranding and apparent change of focus of the party, though has recently said he might consider voting Conservative. (He probably will.) He suggests that Cameron should not adopt policies to try to please everyone including these voters, but should focus on their traditional voter base.

In an article since, “Labour is malignant, not incompetent” (Telegraph, 2nd April 2008), he sees this strategy repeated by Labour with immigration. The Lords Economic Affairs Committee report on “The Economic Impact of Immigration” showed quite clearly that net immigration is not beneficial to the country. This has been obvious for years. The figures show that net immigration does not increase GDP more than it increases population, so has no effect on GDP per person and therefore general well-being. Government responses to this resort to obvious double-speak.

Heffer believes, as do I, that the government has known full well that net immigration is not beneficial, but has pursued it because it knows that immigrants tend to vote Labour. It has put electoral success above the country when it knows they are opposites.

Heffer calls for a radical cut in the amount of money spent by the government, which currently spends over £600 billion per year. Government spending has increased by 50% in real terms while Labour have been in power over the last ten years. As Lord Blackwell pointed out in his talk, the amount of stuff the government needs to provide doesn’t increase every year, so government spending should remain constant. Indeed, this means it should reduce as a percentage of GDP. If the government was spending the same as it was ten years ago, we could have abolished income tax.

Heffer demands tax cuts mostly to save money and free the economy to grow, but he echoes the calls of Sean Gabb for tax cuts to cut the funding to the ruling class – those who draw money and status from the state.

Lord Norman Blackwell visited CUCA yesterday, speaking and taking questions in the Union Dining Room, and then over dinner at Strada. Like me, he is very keen on policy: he worked on policy for Margaret Thatcher and John Major.

He started by talking about how radical some old policies seemed at the time, and how he believes others which seem radical now will be considered common sense in the future. For example, the Post Office used to run the telephone network in this country. As one might expect from a monopoly, the service was shoddy and expensive. If you wanted a telephone, you had to be put on a waiting list, and an engineer had to come to your home and fit one into the wall. You could only buy telephones manufactured by the state, which were very expensive.

People thought that the telecommunications couldn’t be provided by private companies. Now that it is, we know that of course they can.

Later, Lord Blackwell himself presented a report to British Telecom trying to convince them that it was safe for people to have telephone sockets, rather than a telephone hard-wired into the wall. Now, the idea that telephone sockets are dangerous is ludicrous. Then, it seemed radical.

Of course, there is an element of natural monopoly in landline telecomms. It does seem there needs to be some involvement by the state. But it should be as small as possible. As Hayek said, the state needs to create a legal framework in which competition can function. This should be designed to encourage as much competition as possible. Just because a market can’t function without the state, that doesn’t mean the sector should be run entirely by the state.

In the UK, British Telecom runs the lines (and even this is changing), but other companies can run calls on top of them. Much like Network Rail running the train tracks, but other companies running the trains. This is much better than BT doing everything, without having to compete and therefore having no incentive to provide a good, cheap product.

The same thing has been done with broadband internet. Can you imagine what our internet would be like if the government still had complete control of telecomms? Atrocious! Things would never have improved so rapidly.

We probably wouldn’t even know what we were missing out on. In Cuba, the state has to stop its subjects from finding out about the standard of living in other countries, so that they don’t know what they’re missing (toasters). What are we missing at the moment that we don’t know we’re missing? We’ll only find back if we stop the state slowing us down.

So telecommunications is one area where those advocating privatisation have been proved right. So are railways. Alex Singleton of the Globalisation Institute addressed CUCA at the Gin & Tonic party at the beginning of term, and he pointed out that by every objective measure, the railways have been improving since Conservative privatisation – the turning point.

Lord Blackwell suggested that healthcare and education are next to be privatised. People don’t know what they’re missing. They don’t know how good things could be.

However, Lord Blackwell didn’t suggest that “privatising” healthcare meant abolishing tax-funded (“free”) healthcare. Abolishing state-run schools doesn’t mean abolishing free education.

He suggested a voucher system. Consider education. The system would require very little change. Instead of being told what school you must go to, you could choose. Instead of only the state being able to set up state-funded schools, anyone could. That’s all.

He suggested not using the word “vouchers”, for two reasons. One, he thought it was as tainted as “privatisation” for many voters. Two, people didn’t know they wanted it, even though they wanted its consequences. If you offer people “choice” in your manifesto, they say “We don’t want a choice of schools. We don’t want to send our child to the next village. We just want to send our child to the local school, and we want it to be good.”

Choice (i.e. competition) doesn’t even need to be exercised to have beneficial effects. You don’t have to take your business from the local pub and drive to the next town. It’s just the fact that you could that means your local pub has to make an effort.

Similarly, if you go to a bad school and a good new one starts up, things won’t just be improved if everyone moves to the good school and the bad school shuts down. In most cases this won’t even be necessary. All that is necessary is that you can move. That is enough to give the old school some incentive to improve.

A similar scheme could be implemented for healthcare.

He suggested rolling out education vouchers in poor areas first. Even though this would mean richer areas wouldn’t get the benefits so quickly, it would demonstrate that the measures were to improve education in poor areas the most. This might help get voters used to them.

“Privatisation” seems radical in the UK at the moment, but it won’t when people see the consequences. We just need to look at the success of the Swedish implementation of vouchers.

People like to claim that there is something special about education and healthcare: that they are “public services” rather than products like any other. This is wrong. They are products like any other. People said the same about telephones.

Lord Blackwell used much libertarian rhetoric, and seemed to consider himself a libertarian. I’m not sure whether I’m a libertarian or not, though I have very strong libertarian sympathies.

I think vouchers are a good idea. But they’re not a libertarian idea. Vouchers roll back the state by allowing the state to pay for, but not run, education and health. They do mean that the state bureaucracy is smaller even if taxes stay the same. But libertarians would not even have taxes to pay for education or healthcare.

It may be that complete abolition of the welfare state is better for the country, especially in the long run. As Andrew Perraut says, “if markets are as massively productive as we libertarians believe and compounding returns to growth in the long term are taken into account, you could probably justify no more than very basic safety nets, for fear of distorting the economy and dramatically lowering everyone’s goods in the future.” But the safety net could include healthcare and education.

In any case, vouchers are better than the current system, and we need them fast.

My commitment to reducing the size of the state is Perraut’s: any taxation reduces economic growth. Some taxation is necessary, but the optimum amount is far lower than it is at present.

Lord Blackwell’s seems to be for a different reason. Statism cows people. It reduces the striving, self-reliant ethic. If people have a problem, it encourages them to expect the state to solve it, rather than solve it themselves. This attitude reduces economic growth because it discourages innovation.

He ended on a quotation that Lady Thatcher looked up while they were working on a speech. It is one of the closing sentences from John Stuart Mill’s “On Liberty”:

“a state which dwarfs its men, in order that they may be more docile instruments in its hands, even for beneficial purposes, will find that with small men, no great thing can really be accomplished.”

Postscript.

Afterwards, over dinner, he talked about the historical consequences of global cooling, including the halt of the expansion of the Roman Empire. This would be an excellent way to write an article aiming to change people’s minds about global warming. The scientific evidence that global warming will stop, rather than being catastropic, is clear. We haven’t had any for over ten years. So take this for granted! Treat global cooling as inevitable, and write an article about its historical consequences and how we must prepare to meet them again.

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Posted in Event reviews, Politics by Hugo Hadlow | No Comments »

Individual Social Responsibility

Saturday, October 27th, 2007

One of the most disconcerting aspects of modern British society is the lack of social responsibility. It is a pervasive trait that can be traced back to the creation of the Welfare State after World War Two, and the authoritarian rule that is associated with many aspects of socialist thinking.

The Welfare State effectively took away individual people’s responsibility for the society in which they were members, and placed it in the hands of the State. To pay for this, and to continue to pay for this Welfare State, it is necessary to maintain high taxation.

It is, perhaps useful to digress briefly to discuss the issue of taxation in more detail. The government has taken the rather patronising position that it can spend people’s own money more wisely. As a result of this, people want to feel the effect of the government spending their money wisely (such as on health-care and education). The problem is, this means that issues, such as ending famine in the Third World, are side-lined. In general, the government, by appropriating responsibility to itself, is expected to be responsible for all the woes that afflict society and the world. However, some charity (such as ending poverty) can only be undertaken effectively by individuals and not by the State; too many people slip through the cracks.

Paradoxically, this is an example of excessive individualism. The State, by removing individual responsibility for the woes of society, ensures that ordinary people are free from guilt; people can then concentrate on themselves, and themselves alone.

This brings me to my main point: the government, by appropriating social responsibility for itself has eroded the idea that individuals have to take an active role within this society. We have a society based on rights, but without the responsibility to complement them. This means that there is now a destructive ideology that all the problems of society have to be, and should be solved by government. The effect of this is ever increasing authoritarianism. It is only in this way that the State can solve everything that it is now expected to be responsible for (by its own actions through the foundation of the Welfare State).

What we need to do is to return to the idea of social responsibility. However, this cannot be achieved unless the government is willing to accept that it has to dismantle its spider-web of bureaucracy and interference in everyday and ordinary life.

If people keep hold of their own money, and are made aware of the fact that they are part of a society to which they owe something, people are more likely to take responsibility of their own for the problems that are prevalent all around us. This was the case in the nineteenth century when groups of people organised themselves into Friendly Societies in order to make everyone’s life better. Notably, these and similar organisation provided an almost national, but independent health-care and educational network.

It is time that we realised that ordinary people have the power to do good in the world as individuals in society; governments merely complicate this fact.

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Posted in Politics by James Arthur Sharpe | 3 Comments »

Why do people run up debt? Why has it become socially acceptable? What is the solution?

Sunday, September 30th, 2007

The nature of debt, and our attitude to it, has changed significantly since the nineteenth century. While the debtors’ prison used to spark fear into people’s minds, we are now, in Britain, living with a £1.3 trillion debt mountain. The cause of this change to the perception of debt can be traced to growing affluence allowing people to have mortgages, and the creation of the Welfare State leading to the entitlement mentality.

To assess the modern debt culture, it is necessary to consider how people’s attitudes to debt have changed. In the late-seventeenth and eighteenth centuries when banking and credit systems developed most people were too poor to gain credit. As such, there grew a popular image that only dishonest businessmen and the feckless upper classes were able to fall into debt.
This attitude toward debt changed in the late twentieth century as more people were able to gain credit. With growing affluence and the desire to own one’s own home, mortgage debt became more common. Thus, debt lost its association with the greedy and frivolous as it became just as common among hard working families. However, because debt was no longer stigmatised, people were able to abuse credit systems for their own self-indulgence.

The idea of using credit to support a lifestyle beyond one’s means is derived from the culture of entitlement that began with the creation of the Welfare State. The Welfare State is based on the idea that everyone has an equal entitlement to certain things, most notably, education and health care. However, this precedent has led some people to believe that they are ‘entitled’ to a standard of living that is beyond their means. Thus, credit is seen as a right because it liberates people from the limits their income places on their lifestyle. The most common example of this is mortgages. Although house prices have outstripped the increase in real wages, people remain unwilling to accept that they cannot afford the same quality of house as they may have done ten years ago. The result is more excessive debt.

Of course, this is not the only reason. In addition, the credit card has transformed the way people view money. Instead of conducting transactions directly with real currency, people are now paying virtually. The result is that people’s perception of their wealth and their spending is reduced. Moreover, it can be argued that banks and loan companies have accentuated the problem of debt by offering larger loans to those who cannot afford the repayments. Nevertheless, this must not distract us from the central fact that excessive debt and its social acceptance is a manifestation of the modern culture of entitlement.

On one level, the process of changing people’s attitude to excessive debt and its acceptability has already begun. There are increasing signs that the economic climate is changing for the worse. In structural terms, a debt-based economy relies on liquidity in order to pay off, and take out, loans quickly and efficiently. Thus, the recent ‘credit crunch’ and its adverse effects, most notably on Northern Rock, demonstrates the flaws of a debt-based economy. Moreover, the Citizen Advice Bureau has pointed out that the number of people making debt enquiries has doubled in ten years to 6,600 every day. In all, people are increasingly aware that excessive debt breeds instability and cannot be supported in a period of economic turmoil.

Nevertheless, it must be appreciated that changing the mentality of entitlement is key. This is a long process with no certain means of implementation. However, in general, people need to be instilled with a sense of social responsibility. This can only be achieved by making people realise that they cannot rely on the government to solve all of their problems, but that sometimes they need to use their own initiative. We need to do away with the ‘people dreaming of systems so perfect that no one will need to be good’ as described by T.S. Eliot.

In conclusion, as mortgage debt became more common, debt in general lost its stigma. Some people were then able to abuse this liberal attitude to debt by borrowing money to live the lifestyle to which they thought themselves entitled; a mentality derived from the Welfare State. The solution is to make people appreciate that they cannot support excessive debt in a period of economic instability, of which it itself is a cause. Moreover, more generally, it is necessary to combat the mentality of entitlement by instilling a concept of social responsibility.

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Posted in Politics by James Arthur Sharpe | 1 Comment »