Wednesday, May 21, 2008

Sharing the proceeds, eroding the public

As a response to David Cameron’s speech on tax and spending, I think Hopi’s is pretty much unimprovable (especially the last three words). That said, Steve Richards is pretty good (less satirical), as is Danny Finkelstein (more sympathetic).

It seems that if Cameron really means what he says about choice in public services and dealing with social breakdown, then tax cuts wouldn’t be possible in a first term. My personal opinion (the rest of what I write being, of course, The Absolute Truth) is that Cameron and Osborne simply would not go into a re-election campaign without having cut taxes – which means that something else will have to give.

But what really does deserve closer attention than it gets is this “sharing the proceeds of growth” business. The theory, briefly: the economy grows, meaning that you can increase public spending in cash and even real terms while letting public spending decline as a proportion of GDP, thus making room for tax cuts as well as spending increases. Some have suggested this is mathematical sleight of hand, but it isn’t. On its own terms, it works. Further, you can quibble with the phrase itself (surely the private sector produces growth, the proceeds of which the Government then shares via tax and spending – the Cameron doctrine calls for less of this).

The problem is deeper, and indeed another Cameron innovation explains why. He has taken care to reposition the Tories as concerned not just about absolute poverty but also relative poverty (although many of us will wonder how much effort the party used to put into fighting even absolute poverty). They now accept, we’re told, that it’s possible to become absolutely better off while still becoming relatively poorer, and that this matters.

So be it. “Sharing the proceeds of growth” means that the state will become relatively poorer. The quality of the services that it can offer will dwindle relative to those in the public sector; so will the calibre of employees it can attract. This point applies, of course, not just to the public sector proper but also to the services that the state may contract out to businesses and charities, as these have to be paid for by the relatively dwindling public services budget.

The result will be that the state – and any entity funded by the state – will gradually have to do less and less to meet people’s rising expectations in what it does do, or else provide increasingly unsatisfactory standards. Public services will come to be seen, and come to be, poor-quality and for poor people as the better-off buy their way out.

Conservatives used to want to slash public services; now they merely want to erode them. That’s progress, I suppose.

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