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The real debate on the future of the state is just beginning

    Remember that phoney election campaign we saw in 2010? Although all three parties paid lip service on the need for deficit closure within the Parliament, the TV debates were dominated by discussion of £6 billion worth of cuts in 2010. How silly does that seem now? With a deficit still over £120 billion, tomorrow’s Comprehensive Spending Review will set out plans for £11.5 billion of savings for 2015/16.

    During the time I’ve been here at the CPS, I’ve had to debate others in the media and at universities about what is needed to get our public finances in order. There’s two issues here: the short-term and the longer-term. In the short-term, our budget deficit is still high, and in the absence of increasing the productive growth rate of the economy through proper structural and supply-side reforms, we will not eliminate it without further restraint than already planned through to 2015/16. In the longer-term, we face the challenge of an ageing population. As my City AM column today makes clear, if provision for old-age health, social care and pensions are left unreformed, huge cuts to everything else will be required to stop our debt-to-GDP ratio exploding.

    After having made this argument, I usually suggest that what is required is a radical restructuring of the state. This is predictably greeted by the old “this is purely ideological” line.

    Well, here’s the thing. The remedy might be ideological, because it is shaped by the idea that we’ll be more prosperous with sustainable public finances if the government did less and reverted to providing just a low safety net whilst keeping taxes lower. That is what I believe. But it is just as ideological to suggest that we hike taxes massively, or that we continue cutting deeper and deeper into the liberal functions of the state (the armed forces, justice, the police etc.) in order to protect the welfare functions of the state (benefits, health, pensions and education).

    The truth is, the debate is bound to be ideological because the scale of the challenge required means that the Government will not have the resources to do everything it does today well. So far, the Government has really salami-sliced certain budgets whilst ring-fencing whole large areas of spending, but it seems clear that with the fiscal headwinds to come, this approach is unsustainable. Therefore, to start from the position of questioning “what should the role of government be?” and “what does government do well and what does it do badly?” seems inherently sensible. Should the government fund arts, “culture” and sport? Should the government provide universal healthcare free at the point of need? Should the government redistribute income? Should the government invest in the Trident nuclear deterrent? These are all ideological choices either way, based around what you think the role of the state should be.

    For the past three years, people have largely been trying to avoid this sort of debate though. We’ve heard a lot about “waste”, “inefficiency” and “means-testing” certain things, but little about changing functions of what the state actually does. With recent discussion of the sustainability of free-at-the-point-of-use health service provision, this appears to be changing. The real debate about the future finally looks like it is upon us. Those who wish to avoid it by using “ideology” as a dirty word are really just trying to close down debate: either to cover their own assumptions and ambitions for our future, or because they are incapable of recognising that not everyone agrees with their worldview.

    Ryan joined the Centre for Policy Studies in January 2011, having previously worked for a year at the economic consultancy firm Frontier Economics.

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    Comments

    michael rae - About 2644 days ago

    I have almost never heard the role of government questioned. The myth of the ability of government to control the economy goes unchallenged. I see countless examples of government crowding out and competing with private business. It is stupid.

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