Magazine article The Spectator

How to Save and Spend

Magazine article The Spectator

How to Save and Spend

Article excerpt

NEW and challenging ideas are unpopular in British political parties at the threshold of a general-election campaign. In a twoparty system the key to winning general elections is to attract the floating voters in the middle, not to curry favour with people at the ends of the political spectrum who have nowhere else to go.

To judge from some of their recent rhetoric, Labour and the Conservatives share a large measure of common ground. Mr Blair has talked of `the Thatcherite settlement' of privatisation, free enterprise and sound public finances. Meanwhile Mr Hague has denied that the Conservatives have plans to change the way in which health services are provided: they are to remain free at the point of delivery. When Mr Portillo promised to match Labour's extra spending on both health and education, he implicitly accepted the New Labour belief that more public expenditure is the right way to achieve better services.

Sure enough, Mr Portillo has criticised Mr Brown's plans to increase public expenditure faster than national income over the next three years, insisting that under the Conservatives public expenditure will grow only at a rate the economy can afford. But he has evaded giving even the smallest hint that he wants to reduce the ratio of public expenditure to national income. There is no suggestion that the Conservatives would like to lower the ratio of public expenditure - now a little under 40 per cent of national income - to, say, 30 per cent or less. In fact, the ratio of public expenditure to national income has been remarkably stable in Britain since the early 1960s, despite four changes of power between Labour and the Conservatives.

Yet general elections matter. Who would have conjectured, in 1979, that 15 years later all the major nationalised industries would be in private hands, and that the transfer of control from bureaucrats to shareholders would lead to enormous efficiency gains and large price-cuts for consumers? In a recent speech, Mr Hague said that he would like to see 'a second supply-side revolution' in the main social services - particularly health and education - to match the first supply-side revolution in the once state-owned utilities. It was only a phrase, and the press ignored it. Nevertheless, he may privately have more interest in radical ideas than at moments of great political sensitivity he is prepared publicly to admit.

Despite her reputation as the leader of a government of transformation, Mrs Thatcher did relatively little to change the basic structures of health and education provision. Two years before she came to power, Arthur Seldon of the Institute of Economic Affairs published a book with the attractively simple title Charge, which set out an agenda for extending choice and improving efficiency in these key areas. In essence, the suppliers of health and education should set prices for their services, and the state should give citizens vouchers to cover the new charges. The vouchers would continue to be financed from general taxation, but spending decisions would be taken by parents and patients, not by politicians and bureaucrats on their behalf.

Mrs Thatcher and her ministers seem to have been mostly unimpressed by Seldon's ideas. Part of the trouble may have been that the proposal to charge and to distribute vouchers was presented as a means of strengthening choice, not as a route to lower taxation. …

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