What should the government pay for? Sometimes these things
are described as being free. But of course, they are not free. They are paid
from taxation.
This can be viewed in terms of a calculation. At the bottom of the scale someone with no income receives a lot from the government. He receives some form of unemployment benefit. He receives housing benefit. He receives medical care and schooling for his children. But he doesn’t personally pay for any of these benefits.
On the other hand, there may be someone who is very wealthy
who receives no benefits, pays for private medical care and private schools for
his children. This person pays a lot of taxes but receives few benefits.
Unless you earn a very great deal of money you
probably take out more than you pay in with tax. But this isn’t the only
calculation.
If there were no unemployment benefit, it doesn’t
follow that the unemployed would starve. There are many countries without a
welfare state like ours which do not have mass starvation. Rather the lack of a
welfare state means that the unemployed have a strong personal incentive to do
anything to earn money.
So too the lack of an NHS would not mean that we had
no health care it would just mean that we all had to pay some form of insurance
rather than pay taxes.
If schools were not paid for by taxation, we would
instead each pay for them out of income. Some of us would be better off some of
us would be worse off, but most of us would pay about the same as we do now,
only we would pay the cost of the school rather than taxation.
The point is not to suggest that we abolish the
welfare state or fund schools and healthcare by taxation. The point is to show
that it is just as possible to fund the services we want with our own income as
it is to give a proportion of our income to the government and have it fund it.
Some people with very high incomes would win some people with very low incomes
would lose, but everyone else would be about the same.
Funding things through taxation does not benefit the rich
and it does not benefit those on average earnings, it benefits those on low to
very low incomes who otherwise would be unable to afford schools and healthcare
and their living expenses without the subsidy from other people’s taxation. This
is usually called socialism. The poor vote for socialism because they want
other people’s money by taxing it instead of earning it themselves. If they
broke in to steal your money they would be called thieves, but because they
vote for Keir Starmer they are called virtuous.
If we were to have laissez faire capitalism in its
purest form, then there would be minimal taxation. The government might pay for
the police and the army, but otherwise would leave citizens to pay for
everything out of their own income.
This sort of society would have very little unemployment.
It would probably have better healthcare for those who can afford it and
schools would provide a better education because we would demand it for the money,
we all had to pay. A poor school would fail just like a poor shop that did not
give value.
Laissez faire capitalism would mean firms could pay
lower wages and lower taxes and would therefore make greater profits. They
would have no problem attracting workers because people would be willing to
work for lower wages as there would be no welfare state to pay them if they
didn’t. The result would be higher growth.
Again no one is suggesting that we should return to this
sort of Victorian model of capitalism. But it was precisely this model that
made Britain prosperous and powerful.
At the other end of the scale, we have the government
paying for everything. At this point we have socialism. Taxes are 100% and
income is distributed by the government so that everyone has equity. It doesn’t
matter if you are unemployed or Taylor Swift you receive the same amount.
But why should Taylor go to all these stadiums? Why
should she write all these songs? Why should she perform in a swimming costume?
She would receive just the same if she stayed in bed all day. This of course is
the problem with socialism. It takes away all of the incentives to work or
study or try to improve. It therefore has to compel you to work and prevent you
from going somewhere else where you can earn more.
We can all see the disadvantages of laissez faire capitalism
even if it would be economically advantageous. It leads to an impoverished
underclass like in Dickens. We can all also see the disadvantages of socialism.
The problem we have in Britain is that we are moving
away from a situation where people were happy to have schools and healthcare and
a welfare safety net, but where otherwise we all had to take responsibility to a
government which is paying so much in free this and free that it no longer
makes a profit and even people on average earnings are paying nearly 50% of
what they earn in taxes.
If laissez faire capitalism is the most efficient
economy and 100% socialism is the least efficient then Britain is at the
midpoint of the scale, and it is getting worse. This means not only is Britain
less efficient, it means we barely grow. Because we barely grow, we become poorer
in relation to those economies that do grow. Countries which only recently were
much poorer than us are now on a similar level or set to surpass us.
This is the danger of socialism. It may seem fairer,
and it certainly is beneficial to the poor in the short term. But if Britain
becomes steadily poorer because of socialism even the poor will be worse off
than they would have been. Would you rather be on benefits in Britain today or
in Albania? Well continue as we are, and you will find yourself in Albania.
So, the issue is what should the government pay for? I
might accept that the government should fund a limited welfare state, schools
and healthcare. But every new thing that government pays for pushes us nearer
to socialism and further away from laissez faire capitalism. It therefore makes
us poorer.
Should government pay for university tuition? No. The
person who benefits from university education ought to be able to pay back a
loan and if he will not be able to he ought not to study further but rather
work.
Should government pay for the arts? No. Theatre,
fiction, orchestras and art are forms of entertainment. They should pay for
themselves in the same way any other form of entertainment such as Taylor Swift
or wrestling.
Would this make art boring? On the contrary the most
boring forms of art are those that have benefitted from subsidy. Every great
novel and play I can think of was funded by the market.
The state needs to become smaller because then it will
become wealthier, and this will benefit all of us not only the wealthy but the
poorest also. If Britain can grow over the decades ahead, we will be able to
afford to provide a more generous welfare state to those who really need it. If
we continue to increase the size of the state not only will we become more
inefficient we will become poorer too and then we will be able to be generous
to precisely no one.
What should the government pay for? As little as
possible.
This is also the only way to discourage people from coming here.
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