Vested interests will fight to block necessary spending cuts

 
Allister Heath
GIVEN the fury surrounding the welfare debate in Parliament yesterday, you would be forgiven for believing that this was about a major downsizing of the welfare state. In reality, the coalition will be capping the increase in most working age benefits to 1 per cent for the next three years, ensuring a real terms cut but only reducing total welfare spending by under 0.5 per cent compared to the level it would have been under the previous regime of inflation-linked hikes.

One reason it is so tough to cut the welfare bill is that so much of it is spent on pensioners, which the coalition wrongly seems to think it will be able to shield from austerity indefinitely. Another is that Gordon Brown ensured that far more people ended up in receipt of tax credits or benefits, expanding the number of families dependent on the state for at least some of their income and thus inflating the constituency with an incentive to oppose reform.

In fact, one of the most important facts about British society today is that over half the population receives more from the state in cash (including welfare) or kind (including the use of services) than pay in direct and indirect tax. Research from the Centre for Policy Studies reveals the number of such net dependents was just 43.1 per cent of total households in 1979; by 2000/01 the share was 43.8 per cent. But the numbers then shot up, reaching 53.4 per cent by 2010-11.

Of course, many of these are pensioners; lots of these net recipients vote Tory and may even support the cuts. There is no necessary link between being on the government’s payroll and supporting a bigger state.

But this nevertheless illustrates the challenge facing those who realise that the government needs to be downsized: the losers will be numerous and vocal; taxpayers, who stand to gain, probably won’t even notice.

FREE NO MORE
How free are British citizens? Not very, according to research out last night from the Cato Institute, which ranks us an all too realistic 18th. The league table uses indicators that assess what philosophers call negative liberty – the absence of coercion. These include freedom of speech, religion, individual economic choice, and association and assembly. In total, Cato’s human freedom index assesses 76 metrics, including measures of safety and security (including private crime against property and state crimes against citizens), freedom of movement, and relationship freedoms. Countries that discriminate against groups on the basis of gender or sexuality would fare poorly, for example, as would those with high taxes or onerous regulations.

The freest country on the index – the first such table to fuse economic and “social” freedoms – is New Zealand, followed by the Netherlands, Hong Kong, Australia, Canada and Ireland. The US comes seventh, ahead of Denmark, Japan, Estonia and Switzerland. The UK is ranked a pretty pathetic 18th, but that remains better than France (33rd), Germany (35th) or Italy (40th).

If classical liberals, who believe that a free society is conducive to creativity, free thinking, innovation and growth, are right, this is not good news for the UK and it is terrible news for the main Eurozone powers. Excessive restraints on freedom lead to stultified, stagnant societies, as countries and empires have discovered over the centuries. This is true of economics – with yesterday’s silly attack on pub companies by Vince Cable another blow – as well as other forms of individual choices. Let us hope we eventually remember this before it becomes too late.

allister.heath@cityam.com
Follow me on Twitter: @allisterheath