David Cameron's flirtation with libertarianism?


Although I’m usually not a fan of the Prime Minister’s, I don’t agree with people like Janet Daley that his party conference speech was dull. In fact, I thought it was one of the most exciting speeches from a politician in office that I’ve heard in a while, and it suggests that the coalition government might be prepared to be radical on market reform. I’m wary of reading much into political rhetoric but together with this week’s policy announcements, which I broadly welcome, there is cause for optimism.

I’ve already written about the proposals to cut child benefit for high income earners. I’m broadly in favour of them, although they should be coupled with reductions in income tax and their implementation leaves a lot to be desired. But what’s really interesting about these is that they tackle the idea of ‘universality’ in benefits – that is, the idea that everyone should pay into a big government pot, and that everyone should get something from that government pot. This is bad economics, because it assumes that ‘the rich’ are a bottomless pit of tax revenue, and it is also bad for society.

Benefit universality reduces personal responsibility and reduces choice by roping everybody into a single, one-size-fits-all system irrespective of their wants or needs. It says that one way of living is good – in the case of child benefit, having children – and one way is bad – in this case, not having children. Cameron’s speech, which touched on this issue, put the question into a wider perspective of promoting personal responsibility. I still haven’t figured out what the “Big Society” is, but if it is about removing the state from people’s decisions about their private lives, it might not be worthless.

The cuts are tiny in terms of overall government expenditures, but they set an important precedent: that welfare should provide a safety net for people in dire need, not be a second stream of income for the bulk of the population. Along with Michael Gove’s free schools and Iain Duncan Smith’s moves towards a single, unified benefits system, this speech potentially has big implications for the future of the British welfare state. We may be seeing the start of a move away from the state-providing model of welfare, where ministers run the health service and education system, towards a state-facilitating model, where the government gives a monetary welfare safety net to the country’s poorest while allowing individuals in society to handle the rest.