Boris Johnson’s welfare plan is a welfarist death spiral that must be stopped
What is the government thinking? This week, the Prime Minister is set to commit what can only be described as a huge political and economic blunder, announcing a major tax hike to fund the worst kind of welfare state expansion possible. in the social field.
Plans to increase national insurance contributions would not only be a violation of an election promise not to touch overall tax rates (in fact, the Conservative manifesto hoped to reduce them) and an attack on the small Low tax state, Thatcherite. core of the conservative electoral coalition. This would impose serious suffering on an economy which is already struggling under the weight of the existing historically high tax burden. Some ministers seem to have forgotten that high marginal tax rates and a larger state as a percentage of GDP tend to reduce economic growth. There is never a good time to tax WORK. This is perhaps the worst imaginable. The Tories will be accused of hypocrisy while turning into an imitation of Labor.
The money is also intended to go into a reform of the welfare system that seems shockingly thoughtless, repeating the mistakes of the past from which we are still suffering the consequences.
Liberal governments at the start of the 20th century created the embryonic welfare state, effectively nationalizing aid to the poor, unemployment protection and pensions; in 1948, the Labor Party created the NHS, nationalizing health care. The patchwork of pre-existing support – taxpayers and charities, once massive working-class welfare and welfare societies, a whole range of hospitals and private insurers – has failed to reach the universal coverage required of a modern society. Reform was needed. But the mistake was to destroy the old institutions rather than supplement them in order to create a mixed economy system, where everyone, including the poorest, would have been freed from the five giant evils of Beveridges.
We ended up with universal, largely unconditional rights that became unreformable – generating an ever-expanding architecture of bureaucracy to provide them and increasing the size of the state. Many European countries have done much better. They have adopted a health insurance model, with a mix of publicly and privately run programs, and a wider choice of services. Today, many other countries have better health or retirement arrangements than the UK; Singapore has shown how universalism, compassion and efficiency can go hand in hand.
The goal in the case of social assistance, likewise, should be a dynamic market for funding and delivery, supported by the state but not controlled or fully funded by it. Tragically, the logic of the government’s proposals – which would see the state bear all the costs for most people beyond a certain relatively low threshold – is that social services will fall victim to the same creeping nationalization, creating momentum. policy in which parties are encouraged to spend more and more taxpayers’ money on it.
No one denies that there is a problem in social care, where the quality and delivery depend on what the local authority will provide and what the user can afford to pay. The offer seems limited, ill-equipped for a rapidly aging population. And people may be forced to sell their assets, including their homes, to cover the costs.
But the conservative solution is wrong. They should intervene, but to create a viable insurance market. This could be done by working with the private sector: the state would guarantee care costs above, say, £ 250,000, and the private sector would be encouraged to sell insurance to cover the rest, protecting homes, with the partnership. public-private structured in such a way as to avoid an explosion of costs. The retirement home sector could be reorganized by appealing to pension fund investors, building a new generation of modern facilities that would be leased to local authorities. The poorest would be protected by the state. All of this would cost money, but not enough to justify tax hikes. There are many unnecessary programs including HS2 that could be cut to pay for this.
The Conservatives are playing with fire: they now seem to believe that the role of the state is to provide well-being to the middle classes, as well as the poor. This could be popular for a while, but if it comes at the cost of raiding workers to pay retirees, it will accentuate generational divisions and alienate young people – potentially accelerating their left turn. It is important to note that the rise in national insurance comes on top of the resurgence of inflation and the freeze in income tax cuts, so the effects on living standards will be far greater than that. some don’t seem to think so.
It’s not too late to turn around. Boris Johnson can still stop Britain’s descent into the welfarist death spiral that Margaret Thatcher tried to stop by cutting taxes in the 1980s and Cameron / Osborne by reforming rights in the 2010s. he does not, Mr Johnson risks reverting to Macmillan and Heath’s policy of rejecting new approaches in favor of overbidding the left. It’s a game he can’t win.