Social Security spending is going to overtake the country’s Income Tax receipts this year. Worse still, soon servicing Brown’s debt is going to cost us more than we spend on education.
It’s this ignorance of the ‘opportunity cost’ of money taken from the private sector and individuals by the Government that continues to baffle and amaze me. I’ve said before myself, the Government now spends more in a year than the entire wage earners of Britain earn combined. If you think about it, that sort of figure – over 700 billion – is the equivilant of 28 million private sector jobs. That’s 700,000,000,000 divided into the average wage of £25k. 28 million jobs. More new jobs than there’s people in the country to do them.
Yet it actually buys us a mere 5 million public sector jobs. And the biggest reason given for protecting Government spending? It’ll cost jobs. Ha. Good one. What… wait? You’re serious? This is really happening?
If this is winning, I’d hate to know what losing feels like.
Measured said...
27 Jun 09 at 9:26 pm
Great post… But wait, factor in the public sector pensions bill and the Olympics. There is no escape from this poisoned chalice that we will all be increasingly beholden to.
Devil's Kitchen said...
27 Jun 09 at 9:31 pm
I’m going to go away to a quiet corner and weep. Then I’m lighting the torches…
DK
Tom James said...
27 Jun 09 at 9:35 pm
There are a couple of questions that need to be asked (and hopefully answered) about the situation you outline here:
1) What would actually happen if Gordon Brown and a plurality of MPs were to decide to “disband” the British state tomorrow?
2)Things like universal education are probably necessary for the efficient running of a free market economy – how could this good (an educated populace) be guaranteed in the absence of a nation state?
3) If the government were to hand back all that £700 billion what would people choose to do with it, i.e. would they save it, spend it, or invest it?
Also (and on a completely unrelated note) I’ve been wondering for some time what your position is on public limited companies – are you in favour of them or against them?
Charlotte Gore said...
27 Jun 09 at 11:23 pm
1) Couldn’t be done – there would be anarchy, looting, riots… potentially revolution. Not good. I think all libertarians are aware of the need to phase changes in over generations, in much the same way that it took generations to get to where we are now.
2) See above, not abolishing the state. I don’t necessarily think schools have to be owned and run by the state, nor do we necessarily have to have a national curriculum. Education, on the big scheme of things, is a tiny part of the Government’s budget.
3) They would do all those things – the point is they’ve earned it, it’s theirs to do with as they please. For example, the £16 billion from alcohol and the £10 billion from tobacco is a massive drain of money out of people’s pockets on nothing really worthwhile at all, and it hits the poor the most. For people on the lowest incomes this is their entire disposable income gone in tax, despite already paying income tax, national insurance, VAT, fuel duties, council tax etc. A smoker earning £20k a year will be paying out half the money they earn in tax. There’s a price to pay for that, and that price is the difficulty of accumulating any money to start businesses of their own, or difficulty in finding customers, or extreme susceptibility to getting caught in large amounts of debt to afford things basic household essentials like fridges, furniture, transport and so on.
The answer isn’t to tax ‘other people’ more. It’s to need significantly less in the first place, and to treat every single occasion where levying a tax is unavoidable as a serious blow, as a sign of failure – not something to be done casually as this Government has.
On a related note, considering this marginal rate of taxation, most people would find private health insurance, private unemployment insurance etc perfectly affordable on the average wage.
The problem is people are dependent, and dependency is not something that people like being liberated from as a general rule.
Caron said...
28 Jun 09 at 8:13 am
I’m not convinced that private industry could and would provide acceptable standard of health or unemployment insurance – look at the US where so many of the poorest don’t have access to health care if you want proof of that one.
Sure, we could easily get rid of shedloads of wasted government spending – I mean, why on earth are we spending billions on nuclear weapons, for goodness sake?
I agree that dependency on the welfare state is a bad thing, but there needs to be a humane way of ensuring that everybody who needs state help gets it.
Another point is that Government spending would need to be a darned sight higher if there weren’t so many carers ruining their own health and earning potential looking after sick relatives.
The welfare state as it is just does not work – it routinely leaves people without any sort of income for weeks on end, and the amount of benefit the individual gets is barely enough to live on. I can’t imagine that, given a decent shot at the alternative, anyone would actually choose to live that way. Thing is, those people don’t often have a decent shot at the alternative and it’s going to take a huge effort to change that. I think it’s worth doing, but it would cost in the short term.
At the same time, why the hell do I get tax credits? It would be much more sensible for the £40 per month that I get to go to making a proper difference, offering better long term life chances, for someone who really needs it. Why on earth do my parents, who have an extremely healthy income by any standards, get free bus passes because they are over 60?
At the moment we are spending billions on a really crap system – I’d rather spend the same amount of money on something that actually delivered and gave people the chance to get out of dependency and poverty.
In the long term, the amount you’d have to spend would reduce because more people would be working and providing for themselves.
Measured said...
28 Jun 09 at 8:37 am
I, for one, am prepared to pay not to have security bars on my windows, not to let anyone be hungry and to ensure children are well cared for, but I do not want to pay for well-meaning social policies that end up being divisive or middle management who invent their own roles. Cut them out of the 5m and we would save a heap of money.
Devil's Kitchen said...
28 Jun 09 at 1:10 pm
Caron,
To understand why the US Health System is as it is, you really need to look at the history of it, i.e. it grew out of the wage caps that the government instituted in the 40s. As such, companies started offering other incentives, such as health insurance, in order to attract workers and, as such, the system is skewed against individual contributions.
There are any number of health systems across the world and most of the developed countries have systems rather better than ours.
However, if you wanted an interim stage, then you could try Canada’s system — the government still pays, but the hospitals are private and so compete for funds.
The French system is, of course, consistently rated the highest and involves government and insurance company co-payments, and privately run hospitals, GPs, etc.
I think that people should pay some insurance premium, and they should pay it personally (not through a company scheme) because in that way they will be encouraged to maintain their own health.
If, for instance, you knew that the next time that you were carted to A&E because you got stinking drunk your insurance premium would rise by a tenner a month, you might be more careful with your drinking habits.
Right now, if people get absolutely rat-faced then we — everyone who pays taxes — get charged and the drunk in question suffers not one jot. Incentives matter.
DK
Ian B said...
28 Jun 09 at 1:18 pm
Things like universal education are probably necessary for the efficient running of a free market economy – how could this good (an educated populace) be guaranteed in the absence of a nation state?
Universal education is probably the most destructive of the Big Progressive Ideas and I would suggest is the wellspring from which many of the vexing “social” problems of our society flow. Beyond basic language and arithmetic skills- which can be easily taught by parents or local community schools (the greatest sadness of the educational ideology is the creation of the belief that the learning of these things is hard), the massive superstructure of schooling, as an institution, in which we trap young people in the misery of the school environment- a miniature “tyranny”, is a folly that desperately needs reversal.
It was invented and imposed, from the outset, as a social engineering project intended to produce “good citizens” and to supply the needs of mass employers. It worked, to an extent, in the days when the proles could have a few years of it then dutifully march through the factory gates next door for the rest of their life. As a means of developing human beings in any meaningful sense it is an utter, dismal failure. Every generation wrings its hands about its deficiencies and how to fix them, starting from the erroneous assumption that it ought to work, much like trying to fix the bugs in a perpetual motion machine while refusing to consider that it may be a fundamentally flawed idea.
There are many ways for human beings to learn, and to develop their intellects and personalities. Locking up young people in an institution ranks low on the fitness for purpose scale.
Rab C. Nesbitt said...
28 Jun 09 at 2:41 pm
Tax credits encourage so called ‘working men’ not to work, a problem which continually bewilders and frustrates me whilst at work.
http://tinyurl.com/n365tk
Rod C said...
29 Jun 09 at 3:08 pm
Charlotte, I’m interested in your unhappiness with taxes on ‘harmful goods’ such as alcohol and tobacco. As an emerging libertarian, I can see that it’s in no way the state’s role to discourage citizens’ bad behaviour from a moral perspective. But if by eliminating taxes on these goods, consumption increases and the medical effects increase in number and severity, this has a negative effect on society as a whole doesn’t it? Not least the NHS budget. I just can’t quite understand how a market-based solution will resolve this particular societal problem so I’d appreciate your thoughts. [And I imagine these arguments could be extended to the drug legalisation issue too. If we legalise/decriminalise illegal drugs, should we tax them to regulate their use or allow the market to find some kind of equilibrium?].
Laurence Boyce said...
29 Jun 09 at 3:34 pm
“I just can’t quite understand how a market-based solution will resolve this particular societal problem.”
Then go up and read Devil’s post. People who want to smoke and drink themselves to death will find themselves paying higher medical bills or increased insurance premiums. Pretty much the worst thing about the NHS is that it is free. The irony is that most people think that is the best thing about the NHS. So we have a bit of work to do.
Rod C said...
29 Jun 09 at 3:41 pm
“People who want to smoke and drink themselves to death will find themselves paying higher medical bills or increased insurance premiums.”
Hmmm. I don’t really buy this given that those that are most likely to smoke or drink themselves to death (or at least into chronic illness) are the ones in society who will be least likely to be willing or able to afford insurance premiums of any kind. So where does this leave them? Does society abandon them to their fate or does it provide some kind of safety net in extermis*?
* Is that kind of talk considered blasphemous on here?
Charlotte Gore said...
29 Jun 09 at 3:58 pm
You highlight an important issue – the state’s moral authority to impose ’sin taxes’ comes from the model of health care we have.
In a system where individuals paid for their own health insurance then smoking would certainly cause either exemptions or significant premiums to be added. Of course, considering the amount smokers currently pay in taxes versus how much it costs to treat smoking related diseases then you can see that smokers could, theoretically, pay a lot less.
It would be like people with extremely fast cars pay more in car insurance. It’s up to them.
The difference is that smokers would be paying what it costs, and it would be an honest transaction. The Government, on the other hand, uses smokers as a source of free money and it does it through the most underhanded, dirty techniques (and with huge popular support.)
As Laurence says, free at the point of use just means people don’t have to take responsibility for their own health.
Same goes for drugs, although I would say that it would be predominantly uninsured young people that would be using drugs the most. They do have the habit of believing themselves to be indestructible. I would expect the charitable sector to pick up this sort of thing though. The point is that they’d be gambling with their health and their minds, not with a criminal conviction
As heretical as it might sound, I really have no problem at all with someone whose chain smoked their entire lives without insurance suddenly finding themselves unable to get treatment. It would be horrible and a complete tragedy, but the tragedy is not the lack of treatment – it’s the 40 years that came before it. Every smoker is gambling with their lives and they know it, and the ’sin taxes’ make them feel that they’re fully entitled to claim whatever medical treatment they can get – after all they’ve paid for it four-fold. Anyone who can currently afford to smoke could afford to insure themselves to smoke.
Those e-Cigarette things are nearly at the point where they can successfully manage a lifelong Nicotine dependence without the lethal effects of tobacco – so people do, in fact, have a choice.
What I really believe in more than anything else is that people should be free to take risks, and deal with what happens either way. That’s what being an adult is about: Calculated risks.
I want to write more about drugs at some other date btw
Laurence Boyce said...
29 Jun 09 at 4:02 pm
OK then, make the fags free, not the healthcare. The free fags should be a bit crap, just like the NHS is now. If something is important (like health), then the last thing you want is for it to be free. Free means you have no personal hold over quality, as anyone who tries to return those free fags to the shop for a refund will soon discover.
Sean O'Hare said...
29 Jun 09 at 7:46 pm
DK,
I understand your libertarian ideas and have a lot of sympathy with much that you say. What worries me is how one could make the transition between a state run health system and one funded as you propose. For example, I am now in my mid 60’s and as a fairly high wage earner throught my career have paid my fair share of NI. Typically I have suffered some health problems in later life. Would you propose that I should now forego any expection to free treatment and start paying private health insurance premiums, given that these would be heavily weighted and nodoubt exclude existing conditions?
Ian B said...
29 Jun 09 at 8:18 pm
Sean, I think any libertarian looking at the real world has to recognise that the transitionary period may be considerable, as the state has accrued numerous responsibilities. Obviously you can’t just tell pensioners to sod off and find some private insurance, when they’ve paid taxes and NI their entire life and depend on the NHS.
In a sense, discussing libertarianism from a theoretical position is like discussing a car in a ditch; the best strategy is not to drive into the ditch, but once in there a different strategy for disenditchment is required. A century of progressivism has put the whole population in the ditch to various degrees; how we all get out of it would require considerable thought.
I also think this quote from commenter Ivan at Samizdata is so good it’s worth repeating in full, as it focuses very well on the health provision issue-
This is in fact the core of the problem. There has never been such thing as “health insurance,” and the whole concept is a giant misnomer and generator of confusion.
An example of real insurance is fire insurance. There’s a small probability that your house will burn down as a consequence of a totally random event, so you pay a small amount for the right to be compensated in case of this unlikely disaster, and the insurer can stay profitable while charging each client only a small fee because only a small percentage of the clients will ever need to be paid.
In reality, only a small part of health care could ever work like this. Young and healthy people could indeed insure themselves against the costs of treating accidents and unforeseeable diseases. However, the enormous bulk of health care consists of entirely foreseeable expenses. First, there are relatively minor expenses that nearly everyone incurs regularly, such as periodic general medical checks, childbirth and postnatal care, etc. Second, there are disabled and chronically ill persons who are guaranteed to incur large costs at a more or less constant rate for the rest of their lives. Third and most important, nearly all people age to the point where they become permanent patients on whom practically infinite resources could always be spent to achieve some yet further improvement in life quality and expectancy.
None of these costs are amenable to “insurance” in any meaningful sense of the word. They don’t represent an insurable risk, because they are not subject to risk, but high certainty. Any scheme devised to finance them, whether public or private, cannot be other than a savings program or a transfer in disguise. All the existing schemes, including the present American mixed corporatist/socialist model, represent a transfer from the young and healthy to the old and chronically sick (and to the medical cartel, of course). The way it’s used in practice, the phrase “having health insurance” means having the right to place oneself on the receiving end of these transfers. No honest discussion of the situation is possible until the entirely false and misleading concept of “health insurance” is dropped.
Perhaps indeed it is time we stopped referring to health “insurance”.
Ian B said...
29 Jun 09 at 8:32 pm
I fail at HTML :’(
Charlotte Gore said...
29 Jun 09 at 8:35 pm
Ah I see what you did, fixed
Matthew Huntbach said...
30 Jun 09 at 9:56 am
Arguing about the cost of dealing with smoking-related diseases is nonsense. We all have to die at some time. If we don’t die early due to a smoking-related disease, we will die later due to something else. The cheapest thing for the state is for people to die suddenly of something rather than to have a long lingering death requiring its of patching-up and palliative care. Plus, of course, it’s much cheaper if they die before retirement age. If we were cynical, we would encourage smoking in order to kill people off quickly and so reduce the pension bill.
Another cynical point – public health care spending is one of those things we do because we want other people to have it and not just us. I.e. we don’t want lots of sick poor people lying about on the streets because they can’t afford health care.
On another issue, regarding the 5 million public sector jobs, I think there are less of them than there used to be due to contracting out. We should beware of hocus-pocus which makes a fairly minor difference in something look major because a token nameplate change means something that was “public” is now “private”.
Sean O'Hare said...
30 Jun 09 at 11:49 am
@Ian B
Thanks very much for a very full answer. It would obviously be a very difficult transation to make. I suppose that phasing it in a manner similar to the way that the state pension age is being moved right might just work without causing too much upheaval.