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Wednesday, September 28, 2005
Getting the language right for the Health Service

Critics of the way the National Health Service is organised often get sharply rebuked for questioning such a sacred cow. How gratifying then to hear Patricia Hewitt on the BBC this morning tip-toeing through this minefield using the New Labour language of "consumers, choice and independent provision".

The TPA has consistently called for the use of choice in public services to allow us as taxpayers to verify claims by tax-funded services that they are as good as alternatives might be. It's our money, and we want to be able to see that it is being spent wisely. Alternatives in provision are the starting point for this.

It's good that New Labour might allow us to choose, but it is only a first step, and this is why the public service unions are so set against even taking that step. If choice is a good thing for us acting as consumers of health, then logic dictates next that we be allowed to consume using our own money - choosing an "opt out". The best way to make that work is to ensure that our money follows us as patients, as is partly proposed now, but with the crucial leap to separation of payment from provision. We have to use health services as choosy buyers looking for results which we as individuals pay for.

That puts the incentives in the right place, for us to seek out the best services, for the providers to devise new top quality services knowing that it is our money we are spending.

Note that this does NOT mean that ways are not found to distribute available funds so that the less well off are helped to get the best care. But such fund transfers would be just that, money to help those in need. That would be a lot less taxing on our incomes. Subsidising producers and, much worse, turning them into planned monopolies lording it over both resources and funding has 50 years of observable evidence that it is a rotten deal for taxpayers.

The TPA will continue to press for choice through opt outs, putting our money into our hands, to consume services through direct contract wherever possible. We also believe in compassion for the unfortunate and damaged, but let's be transparent about that sort of goodness in giving - suppliers of caring services too can choose their prices - when we pay for services rather than being taxed for them.

Posted by Eben Wilson - TPA Editorial Director | Permanent Link

Thursday, September 15, 2005
Fixed pie versus bigger pie

In the past week, the main contenders in the Conservative leadership contest have moved beyond sloganising about their commitment to low taxes to reveal the detail behind their economic philosophy.

The contenders can be split in to two camps: fixed pie men versus bigger pie men - a distinction first revealed on The fixed pie men believe that spending restraint must precede any tax cuts, whilst the bigger pie men believe that tax cuts are essential to incentivise the kind of growing economy which supports increased public spending.

The main fixed pie man is Ken Clarke. In a speech at the Cass Business School, Clarke said: "What I do say is that reducing the tax burden can only follow reducing the growth in public expenditure. Tax cuts that are made before public spending control is achieved can only be financed by borrowing and borrowing is merely tax deferred. Conservatives are not in favour of tax cuts because they benefit the better off. We know that low tax economies are the successful economies. All of us benefit from the economic growth that low taxation can stimulate. But we must be honest with people and tell them tax cuts can only come only when they are affordable. And probably the first area for tax relief when we have done the necessary work to make it affordable will need to be pensions and savings rather than cuts in direct personal taxation."

The bigger pie men are David Davis and Liam Fox. In an article in The Scotsman, David Davis wrote: "Britain is one of only three countries in the EU where the tax burden will increase both this year and next. In fact, that burden will soon be at its highest level for 25 years. Other countries have taken a different path and have outperformed the UK as a result. In Australia, for example, the government has increased spending more slowly, run budget surpluses and steadily reduced taxes, lowering the basic rate to 15 per cent and raising the top rate threshold. Since 1996, Australia's economy has expanded by a third, compared to only a quarter in Britain. And just across the water, Ireland's tax-cutting policies have helped them overtake Britain in terms of the amount of GDP generated per head. As a flat tax revolution sweeps around the world, fuelling growth and raising living standards, Mr Brown's only response is to bury the evidence of its benefits and to sweep the idea aside. Contrast this approach with yesterday's intelligent speech on this subject by his Conservative opposite number."

This analysis was echoed by Liam Fox yesterday in a speech to the Centre for Policy Studies: "In the General Election campaign, the debate was merely about how to distribute the cake ather than how to increase the overall size of the cake. That must now change. Conservatives need to take time to explain both the economic and moral cases for reducing taxes. Conservatives must recapture the wealth creation agenda. There has been a lot of discussion recently about the Laffer Curve. It is not complicated really. If you keep all your earnings, the government will get no revenue. If the government tries to take all your earnings, you won't bother to work. The maximal tax yield, therefore, lies somewhere between the two."

Where does David Cameron stand? Writing in today's Daily Telegraph, Cameron argues that the Conservatives "need to explain that reducing taxation over time is not just "nice to have"; it's essential for job creation. That's why George is absolutely right to set up a commission to examine flatter and simpler taxes." However, he has previously been more ambivalent. In a
Daily Telegraph interview in June he said tax cuts should be a long term aspiration rather than an immediate priority. "I would hope that any Conservative government at the end of its time in power will have reduced taxes but if the first thing the Conservative government has to say is tax cuts and the smaller state then we haven’t ‘got it’. If we’re all in it together then we have to have well-funded public services."