Anthony Browne is MP for South Cambridgeshire, the Chair of the Conservative backbench Treasury Committee and a member of the Treasury Select Committee.
A constituent who insisted I remove an encroaching vine clearly had a different view from me on the role of MPs. But her confusion is a microcosm of a major challenge we face: there is no consensus and little debate on the different responsibilities of the state and the individual. This leads to angry conflicts on where the boundary between public and private should lie. That boundary has generally over the last century moved in one direction: a bigger role for the state. That in turn has meant higher taxation.
There are many factors behind the growing state. States have always been responsible for ensuring national security and law and order. But gradually other roles have been added.
The introduction of the Poor Laws was a result in changing morality that made it imperative to relieve hardship. Concern about the plight of working children lead the Victorians to introduce employment protection. Until the twentieth century, so few people travelled thatthere was little need for immigration control, and it was only with the 1905 Aliens Act that the British government enforced borders. Few western Governments tackled joblessness until the great depression in the 1930s. After the Second World War, healthcare was largely nationalised in the UK, with the creation of the NHS, which now consumes 10 per cent of GDP. As powerful technologies arrive, such as cars, television and the internet, new legislation is required to limit downsides.
It is politically more difficult to reduce the role of the state than expand it, especially when the state gives benefits to individuals. When I worked for the Mayor of London, the Chief Executive of the Greater London Authority, earning over £200,000 a year, loved boasting of his free bus pass for over 60s. It is a common jibe that elderly dukes in their palaces should not get government help with their winter fuel bills.
It is not all one way. The wave of privatisations from the 1980s – first in the UK and then elsewhere – reflected a growing realisation that Governments are not good at managing companies. The last Conservative government scrapped tax relief for mortgage interest, and the last Labour government scrapped tax relief for private medical insurance.
But the growing role of the state is shown by the growth of Government spending. In most Western countries, that was under 10 per cent of GDP until the First World War. It has bounded up over the past century, and now is generally around 40 per cent – an historically unprecedented shift in the size of the state. With our aging population, most economists expect it to rise further: we have entered an era of big government.
But where does it all end? Does it matter? And can anything be done about it?
The growing role of the state certainly poses challenges for those who prefer individual liberty to state control – and lower taxes. That is a particular challenge for centre right parties such as the Conservatives.
There are long debates about the difference between left and right, but one of the clearest is in the attitude to the role of the state. When I ran Policy Exchange, I used to tease my opposite numbers at the Labour-friendly Institute of Public Policy Research that the main difference was that I saw state action as a last resort, and they saw it as a first resort.
Certainly, in most of the battles over the role of the state, it is the left pursuing a bigger role, and the right resisting it. The left push for the expansion of free school meals to cover more children, and new laws restricting freedom of speech. When Gordon Brown introduced tax credits – basically benefits for people in employment – I annoyed him by predicting the almost limitless potential for expansion in scope and cost. By the time Labour finished, you could earn almost £100,000 a year and be on state benefits. Labour campaign for a definition of poverty – income below 60 per cent of the national median – that ensures that officially recognised poverty is widespread, continually justifying state intervention.
There are many things that can be done to resist the tide. The first would be for ministers to make the philosophical case for where state responsibility ends, and personal responsibility starts. I personally believe that the state should only step in when it can show there is a clear benefit in doing so.
As Chief Executive of the British Bankers’ Association, I did a lot of work on personal indebtedness. But I was dismayed when a bishop told me he would never preach that people should aim to live within their means. But that is not just a basic life skill, but also moral: you have no right to expect others to pay for you (unless in real hardship). The Treasury should aim to never have a marginal rate of taxation of over 50 per cent – accepting that if someone increases their earnings, they should be able to keep most of it rather than have to give most to the Government.
Public attitudes have been shifting in recent decades. During the 1970s energy crisis, the Government did not pay domestic heating bills, whereas in our current energy crisis: that has become the expectation. With interest rates rising, opposition parties have called on Government to help pay mortgages. I am glad that the Government resisted.
With a clearer set of principles of when the state should step in, it would be easier for governments to draw lines. When I was responsible for the London Development Agency, I inherited from Ken Livingstone many schemes giving state loans to small businesses that no bank would lend to. I couldn’t see why taxpayers money was spent subsidising sub-prime businesses, and stopped the schemes. I had to tell officials it is the role of government to make sure markets operate by fair rules, but not to operate in the market itself.
Parliament is a machine for producing laws, but rarely scraps them. We could have more sunset clauses, and also review old legislation. A recent Rest is History podcast listed the medieval treason laws that are still in force. We could start a rolling programme of modernising our legislation, starting with reviewing any laws more than 100 years old.
I crowd-sourced ideas for this article from my activist policy group, and one popular suggestion is forcing the police to stop investigating things that are not crimes (noticeably non-crime hate incidents). The Home Secretary has called for that, but it is still going on.
Local Government is often far too byzantine – in my county, we have a mayor, a county council, a city unitary, district councils, parish councils and a sub-regional body called the Greater Cambridge Partnership. It is a recipe for cost and inaction.
Our tax system is excessively complex, essentially because Treasury officials are too clever for our own good, seeking to plug loopholes that don’t really matter. The tax system needs to be good in practice rather than perfect in theory. Nigel Lawson liked to scrap at least one tax at every budget – a tradition it would be good to bring back.
But none of this will happen without the Government providing a sense of direction: a rebuttable presumption that the role of the state should be less unless there is a clear reason for the state to do more. Only then will we turn the tide.