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.
