Rethinking the size of the state

Hamish McRae is on superb form in his piece in the Independent on Sunday today. His article centres on the idea that the British government has never managed to raise the tax burden to anything over 38 per cent of GDP. This in effect provides a ceiling for the pot of tax revenue available for a government to spend but with state spending commitments perennially over 42 per cent of national income (or much higher as at present), hard choices will have to be made about the range and funding of public services in the future.

“you have to question the whole structure of the public sector. Goods and services that could be supplied by the marketplace have already been shed in the great wave of privatisations, starting in the late 1970s: oil companies, airlines, telecoms, motor manufacturers, power utilities and, more controversially, railways. But these were goods and services that people pay for. They are not funded in the main by the tax system. People expect to have free schools, but they never expected free flights or free phone calls. The core problem now is that we as a society want to spend a greater proportion of our income on services that are, to a greater or lesser extent, provided by the state: health care, welfare for the elderly and education. But we are not prepared to provide the finances in the form of taxation to fund this. That leads to two conclusions. One is that we have to improve the efficiency of the public sector; the other is that we have to get people in some way or other to pay more of their own (ie, taxed) income to buy these other services, either from the state or elsewhere”

More here