Visit any libertarian web site and you will see lots about what is wrong and a great deal of rhetoric about abolishing welfare and the like, but virtually nothing on the practical question of how to move from a society dominated and to a large degree controlled by the state to one where individual choice is paramount.
If a transition to a much less intrusive state is to happen, we need to consider how that will be achieved – unless of course you are either a revolutionary or a pessimist. In the first case you will think that only revolution can achieve the sort of radical change needed, in the second you will think that only revolution can achieve the sort of radical change needed!
I don’t really think I am a libertarian, although I have had a long standing interest in anarchism and mutualism so I must make it plain that what follows is not meant to be a programme for a libertarian party. In any case, there are probably as many flavours of libertarian as there are ultra-left Trotskyist sects and they are likely to exhibit as much fellow feeling. A libertarian party is almost inevitably doomed to failure for that reason alone. In practice all the main UK political parties have intellectual traditions that could be built on to provide some sort of libertarian or minimal government platform. Nor do I intend to consider the many other ways in which the state intrudes into our daily lives – health and safety legislation, employment law and the like.
These thoughts have been triggered by reading Tim Harford’s book, the Undercover Economist, which describes how China made its transition from a full-blown communist state in the late 1980s to its present position as a major market economy. China’s growth has been in stark contrast to events in the former Soviet Union, where what appears to be emerging after the sort of short sharp shock advocated by the likes of the IMF is a vicious oligarchy of the sort described by Jack London in ‘The Iron Heel’.
Unlike the Soviet Union, China did not abandon the state planning process overnight. Instead it froze the plan. Any production achieved over plan levels remained with the enterprise for sale as they wished. It appears that this simple device was the key factor behind the huge economic advances of the Chinese economy since the early 1990s.
So, how might this help us in the UK to make the transition to a minimal state (setting aside for the moment any discussion of quite what ‘minimal’ means in this context)?
My suggestion is simple. On a given date, Government tax revenue would be frozen – in cash terms without any messing around making ‘allowances for inflation’. We have after all seen what governments can do with such measures when it suits them. At the same time, every private individual or corporate body would also have his or her tax payments frozen – again in cash terms. Tax includes everything paid to government – National Insurance etc for individuals, Corporation Tax etc for business. At this stage I am unsure about Capital Transfer Taxes, Inheritance tax etc – I would like to see them abolished, but I am not sure at what stage in the process.
Should personal or corporate income fall, the tax payable would also fall, paid at the aggregate rate established when the tax collectable was frozen.
Taken alone, this would not be enough to have a significant impact on reducing government spending or increasing personal disposable income. However freezing of tax revenue collected would only be the first stage in the process. Even so, some people would be able to increase their incomes and all of that increase would be tax free and available to spend as they wished. Similarly there would be a strong incentive for business to increase turnover and profits since all increases generated would be free of tax, so allowing them to increase dividends payable and spreading the benefits of their growth further into the economy.
Anyone setting up a new business would immediately be free of tax. This would include businesses created by demergers and spin offs from existing companies. This would have two benefits. Obviously the incentive to start up new businesses would be huge, but by including demergers and independent spin offs, the balance would swing away from the sort of dominance exercised by firms like Tesco in favour of smaller, looser structures such as federations, franchises and cooperatives.
Over a period of 5-10 years, individual personal allowances would increase, so putting further income out of the reach of the taxman. The effect would be to place increasing pressure on government spending in parallel with an increase in personal disposable income and a massive increase in the growth of new businesses aiming to get a share of that money through the provision of goods and services. The objective is to simultaneously increase personal untaxed disposable income to the point where all normal services are affordable by most people, while pressurising service providers to move towards a market oriented approach by reduction and eventual withdrawal of all state funds.
Inevitably some ‘public’ services would need to be cut back or abandoned. The only way in which they could survive would be by attracting people willing to pay directly for the services they provide out of their increased disposable income. Schools and other institutions like them would increasingly have to take a much more market oriented approach if they want to continue to exist.
At some point all these institutions, whether schools or leisure centres would need to become independent of the state. Using schools as the example this would mean that they would be handed over to the staff at a point when staff felt confident that they could generate enough income to keep the school in being. At handover all central funding would cease, although this could perhaps be phased over say three years. At some point however all these bodies would need to either close or be independent, so creating an incentive for early independence in order to get a ‘long run’ up to that final point.
Continued provision would need to be made for those in receipt of some state benefits, for example the chronically sick and disabled. One option might be to set up local or regional charitable foundations funded by a ‘dowry’ from government but afterwards on their own. These could take on the role of providing the ‘safety net’ for those in chronic need. There is no reason why these charities should not compete also – after all the sick and disabled have as much right to a good standard of service as everyone else. Existing charities could perhaps also make a business case for ‘dowry’ funding.
If such a programme as this is to get public support, some guaranteed level of protection for people who are chronically sick or disabled (for example with MS or disabled following accident) would be essential. Initially this might be by requiring ‘dowry’ funded bodies to provide a minimum level of provision.
Another political hot point would be health care. Here GPs could move, like schools, from total state funding through the provision of paid services to complete independence of the state. Major hospitals would probably deal with doctors rather than the public at large, hiring facilities and providing services for consultants and other health care professionals. Smaller cottage hospitals of the sort common in more rural areas could move to a funding model similar to GPs, but could also no doubt hire out facilities and provide local services like X-ray to GPs and others.
Again the essential principle is one of first freezing then squeezing state funding in parallel with increasing the ability of people to pay for their services by reduction in tax levels, starting with the lowest paid. As the state is increasingly under financial pressure, it will need to respond by developing new paying services or moving existing services out of the public sector onto the market in order to survive.
These are really only sketches of a possible process. I don’t intend to set this process out in full detail. That would take a book, not a blog post.