Tuesday, 14 January 2014

Can we shrink the size of the state?

The debate about the proper balance between what the state should provide and what individuals should provide for themselves has a long pedigree and has never been fully resolved.  The critical question is how can we have a ‘good society’ and a ‘good state’?  As the state has grown bigger so those areas that previously would have been left to individuals have been vacuumed up leading to an expanding public sector and higher levels of taxation to fund those services whether through direct or indirect tax or through National Insurance contributions.  This had led to growing concerns that the state is doing too much and that it costs too much (a cost that is unsustainable) and  that individuals are taking little responsibility for their livelihoods.  It is true that over the past century the state has taken responsibility for providing benefits for those in need through the welfare system and provided ‘free at the point of need’ health care through the NHS.  This ‘welfare state’ has proliferated over the last twenty years with a growing number of increasingly confusing benefits that people may claim giving rise to the notion of a benefit culture with an imprecise numbers of people—the so-called ‘scroungers’—being supported by the state from cradle to grave.  This, combined with an aging population that puts pressure on pensions and health-care, has led to calls particularly though not exclusively from the political right that we need to ‘roll back the state’.  The problem is that people want the benefits but don’t actually want to see their personal taxation rise to pay for them and many people are prepared to countenanced benefit cuts as long. of course, it’s not their benefits that are cut.   Cutting the role of the state is fraught with difficulties since many benefits the welfare state provides have been accorded the status of sacred cows making them virtually untouchable by politicians without disastrous electoral fallout.
Therein lies the conundrum, politicians recognise that the current public sector is financially unsustainable and yet its reform requires political courage that most of them clearly do not have.  They are not prepared to say that we cannot continue with a financially burgeoning NHS or that people must (not should) take responsibility for providing certain things for themselves.  So they seek to reform or rather tinker round the edges of the problem hoping to reduced costs sufficiently to allow the unwieldy state to survive in its current form for a few more years.  As a society we have to accept that either we will have to pay more through taxation for the current services or that we will have to take greater responsibility for providing for ourselves through saving.  In Australia, for instance, people save about a tenth of their income for this purpose while in Britain the figure is less than half that.  This applies particularly to saving for old-age and saving to deal with health problems through private insurance.  We insure our private possessions against damage or theft and yet the overwhelming majority of people do not do the same for their own health.  We assume that, irrespective of our health needs, the state will provide free care. The same applies to pensions though recent attempts to make making private provision has been made easier for those in the private sector.  In both cases, this would shift responsibility from the state to the individual.  But, I hear you think, what about those who do not make such provision?  Well you can’t let them starve in old-age or die for want of medical treatment so individual provision has to be mandatory much as it is now with NI contributions but with a private provider not with the state.  But private providers aren’t reliable are they?  Well at present probably not but but there is no reason why they shouldn’t be…we take out health insurance when we travel abroad so why not when we’re at home?  There’s also no reason why private providers cannot do things better than existing state providers…in fact you might think they couldn’t do worse!!

1 comment:

Chanticleer said...

Your last sentence should be the core of the dilemma, not a throwaway remark. We have plenty of experience now of outsourcing and the consequences - fewer and fewer companies dominating the market etc. They can certainly do worse than the public sector, and almost inevitably do.