One of the most dangerous myths that pervades the political debate today is the idea that “neo-liberalism”, as the left describe it, has a stranglehold over economic policy.
Certainly, if we compare the influence of government on our lives today with the early twentieth century, it is very clear that we live in a social democratic and not a free-market country. As AJP Taylor said in his Oxford History of England: “Until August 1914 a sensible, law-abiding Englishman could pass through life and hardly notice the existence of the state, beyond the post office and the policeman… He could travel abroad or leave his country for ever without a passport or any sort of official permission… The Englishman paid taxes on a modest scale: nearly £200m in 1913-14, or rather less than 8 per cent of the national income.” Bliss.
Since then, government spending has grown from around 10 per cent to nearly 50 per cent of national income, two-thirds of which is on health and welfare. The regulatory state has also increased in size. Approximately 13 per cent of all UK jobs now require some form of licensing, registration or certification from government – a proportion that has doubled in the last decade or so.
Since 1986, when the state took over responsibility for regulating financial markets, the volume of financial regulation has increased enormously. As Bank of England chief economist Andrew Haldane has pointed out, in 1980 there was one regulator for every 11,000 people employed in finance but, by 2011, there was one regulator for every 300 workers in the financial sector. If the trend continues, there will be more regulators than people actually working in finance in 60 years’ time. Anybody who believes that the 2008 crash was caused by “light-touch regulation” has not been studying the realities.
When the government brings in its new so-called “living wage”, it will determine directly the pay of 20 per cent of the workforce – so much for the abolition of incomes policies. In Scotland, the growth of the regulatory state is reaching disturbing proportions: from next year, every Scottish child will have a state guardian.
It might be thought that we need the state to fund all the things a civilised society demands – health care, income provision in hard times, education and so on. However, such things do not have to be provided by government. They were once provided by civil society institutions and commercial organisations, with the state playing an enabling role or filling in the gaps. And other countries have not gone down the route we have of completely sidelining the private sector and vesting more and more powers in the state.
By international standards our outcomes are poor. Nearly 20 per cent of those who leave UK state schools may be functionally illiterate – even though the UK has the highest secondary school completion rate in the world. Our National Health Service ranks twentieth out of 24 OECD countries in terms of five-year mortality rates for patients with breast, cervical and colorectal cancer. Other EU countries, such as Germany, with significant private funding and over 50 per cent of beds in the private sector, produce much better outcomes.
Of course, many people argue that, without the huge role that the state now has, we would go without health, education and welfare and, it is suggested, people did so before the state expanded its role in these areas. They should look more closely at the reality.
While the range and quality of those things the private sector provides has improved beyond all recognition, the quality of those things provided by the state has not done so. While the state has a legitimate role, it should not be spending nearly half of national income, tying us up in red tape and being the dominant provider of vital services.
The IEA’s Paragon Initiative will research and propose alternatives. It will suggest ways in which large parts of government activity can be returned to civil society, families and the private sector – leaving the state with a residual role in ensuring that all can afford key services. There will also be proposals to end the dominance of Westminster. Those functions that remain with government should be pushed down and managed locally, with revenue raised locally too.
In summary, the project will be a five-year programme designed to re-imagine what life would be like if the government returned to its proper role of serving – rather than dominating – the people, civil society and the community.