Monday, 22 August 2011

Big State? Small State? It's not a Theological Question

The Tea Party gives the case for small government a bad name. They treat it as a theological issue. (In contrast, they treat religion as a public relations issue: the important thing is to show very publicly that you do God. I doubt that God is impressed.)

There are times when government should expand its sphere of activity and times when it should contract. It's not a theological issue.

In World War Two, state activity expanded enormously in the UK and USA to meet the challenge of a determined and very powerful enemy. Some of that expansion was quite quickly reversed after the end of hostilities: rationing, for example.

If the economy goes into downturn, we know that it makes economic sense for the government to expand to pick up the slack. That is what the New Deal was about, though unlike later versions of it, the original New Deal actually got roads and hydroelectric power dams built. Modern governments find that too much of a challenge and prefer simply to hand out benefits to booost consumer spending. That's a pity.

That's also part of the incompetence of modern governments. If there is a case for smaller government in the UK - and there is - it's primarily because our unreformed and unreformable institutions cannot organise a piss up in a brewery. Give them money and they waste it. Better not give it them, then. You have to work with what you've got and we have got Whitehall and Town Halls.

I'd like to see taxes going down to around twenty percent of GDP. I'd abolish VAT, raise the income tax threshold dramatically but increase inheritance tax and introduce property taxes ("Mansion taxes"). It would be seriously illegal to ship your money to the Channel Islands. In other words, I'd introduce a progressive tax regime.

At the same time, I'd link benefits - unemployment benefit, access to health care, old age pensions - much more closely to contributory insurance schemes. Everyone should get their National Insurance number at birth and with it the assumption that they will contribute. I would reverse child benefits: parents should pay into the insurance schemes for their children from birth. In this way, we could encourage a more responsible approach to having children.

Many things would have to go. The Arts Council. The House of Lords. Most of the Armed Forces, since we would be a small state not a big state intent on invading other countries. Free Bus Passes. Private Finance Initiatives. Hiring private sector consultants to advise government - there, I am sure, is something we can agree upon.
And I'd move Whitehall to an office block in Croydon and release all that real estate for sale.

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