Taxing and Spending

- Thursday, 15th February 2001

 

Both parties are now committed to the same spending programmes for health and education in the next parliament. So the issue is no longer ?who will spend most?? but ?who will spend best??.

There are two radically different approaches on offer. Labour seems to believe that these public services can be run better by increased central control, with management ultimately in the hands of politicians. That is partly a traditional Labour belief in bureaucratic centralism. But it has been reinforced by New Labour emphasis on spin which requires a continuous stream of political ?initiatives? to generate favourable headlines. Judged in those terms it has been pretty successful. But the effect on staff morale has been disastrous. Teachers, doctors and nurses find it pretty insulting to be told how to run their schools and hospitals in minute detail by ?men in Whitehall? ? worse still by politicians who have no professional experience at all. And more and more of their professional time is taken up responding to these gimmicky bureaucratic directives. Small wonder that despite extra tax payers? funds pouring in, record numbers of teachers, consultants and nurses are resigning in disillusion.

The Conservative alternative is to accept that doctors and nurses, teachers and lecturers know more about how to deliver health and education than politicians and bureaucrats ever will. Our Shadow Health Minister, Dr Liam Fox, worked as a GP before entering Parliament. So he knows that it would be disastrous to try to micro-manage every GP surgery or hospital from Whitehall.

The best approach, we believe, is to delegate decision making right down to the hospital and the school and to make them clearly accountable. Wherever possible patients and parents should be given more influence ? through allowing them to choose which hospital and school they or their children go to; making taxpayers? money follow patient and parental choice; and publishing clear and comparable information on the performance of schools and hospitals so that they can make informed choices.

If both parties are committed to spend the same amount on Health and Education how can the Conservatives deliver tax cuts?

The answer is to restrain the growth of spending in other areas, notably social security. This is by far the largest department accounting for over one third of all central government spending. For 50 years spending on social security grew twice as fast as the economy, taking a rising share of national income. It was the main factor driving up taxes.

For five years I was responsible for introducing reforms which for the first time set it to take a declining share of income paving the way for lower taxes. I know from experience that there is more that could be done by focussing help on those in real need, cutting out fraud and reducing welfare dependency.

As the economy grows tax revenues rise which pays for higher public spending. So if the growth of public spending is kept within the growth of the economy, there will be scope for cutting tax rates. But Labour plans to increase total public spending by ?68 billions which will outstrip the economy. We will introduce measures (in the DSS, etc.) to ensure growth in public spending is then kept within the growth of the economy. That will still allow an extra ?60 billion in public expenditure (mainly for health and education). But it will leave scope for ?8billion of tax cuts. That is good for incentives. And it means working families and retired people can enjoy some of the growth their work and savings will produce.

 

 

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