A special report on the future of the state: radical ideas from a fusty old island
For all its pomp and tradition, Britain has played an outsized role in promoting radical thought about the state. In the 19th century it championed modernisation, with the same liberal Victorians who campaigned for free trade (and set up this newspaper) also dismantling the courtly system under which posts in government were sold off or given to political allies. The Northcote-Trevelyan report of 1854 led to the creation of a politically neutral civil service, with appointments made on merit. Liberals prided themselves on the leanness of a state that ruled India with a few thousand bureaucrats. John Stuart Mill, himself a civil servant, famously defined this minimalism: “The only purpose for which power can be rightfully exercised over any member of a civilised community, against his will, is to prevent harm to others. His own good, either physical or moral, is not a sufficient warrant.”
Yet as the 19th century wore on, “New Liberals”, including Mill himself, began to question the morality of the “night-watchman state”. How could liberty flourish when so many people lived in misery and ignorance? Reforming governments introduced compulsory education, laws to regulate safety at work, tax-funded libraries and welfare—all robustly condemned by Herbert Spencer in his libertarian bible, “The Man versus the State” (1884). But the intellectual traffic was mainly towards more intervention, with socialists (Karl Marx and Friedrich Engels were based in London) and then Fabians taking New Liberal arguments to the extreme. A more active state became the answer.
Britain continued in that vein for most of the 20th century, with the Depression only increasing anti-market sentiment. In 1938 an ambitious young right-wing MP surveyed the British economy: “The weakness of partial planning seems to me to arise from the incomplete and limited application of the principles of planning. The lesson of these errors, which I regard as errors of limitation, is not that we should retreat. On the contrary, we must advance, more rapidly and still further, upon the road of conscious regulation.” Harold Macmillan went on to become a post-war Conservative prime minister, which shows how far the centre had shifted.
Gradually, however, an anti-state right began to emerge. In 1960 Friedrich Hayek wrote “The Constitution of Liberty”, partly in response to what he saw in Britain. In 1978 another young Tory with a Macmillanish pedigree, William Waldegrave, took a very different line in “The Binding of Leviathan”: “No one knows how to run bureaucracies. Bureaucracies are increasing. No wonder the public thinks something is wrong.” In 1979 Margaret Thatcher hurled herself at these bureaucracies—and a new creed, very different from Fabianism, rippled out across the world.
Now the promise of renewed radicalism is in the air. David Cameron’s coalition government of Conservatives and Liberal Democrats is pursuing the most daring course in the rich world. That judgment is based on two things: the severity of its spending cuts (many departments are being slimmed by a fifth) and the fact that it is trying to change the structure of the state.
The spending cuts currently dominate the British media. Manchester is in turmoil because it will be reduced to only one public lavatory. The Tories are plainly taking an economic gamble by tightening fiscal policy so fast, but seem less fixated on the overall size of the state than Mrs Thatcher was. For political reasons they left health care, perhaps the most wasteful part of the British state, out of the cuts. One senior Tory thinks you cannot reduce state spending below around 40% of GDP, or the politics will turn against you.
The bolder reforms, championed by Mr Cameron’s main domestic adviser, Steve Hilton, are centred on structure. They are hidden behind a confusing slogan that the Tories adopted to make themselves sound cuddlier: “The Big Society”. It brings together three things: pluralism, localism and voluntarism.
How to get there
To promote pluralism, the Tories aim to build the “post-bureaucratic state” that Tony Blair wanted (they even use the same phrase). Haunted by the idea that Mr Blair did not move fast enough, they are rushing to hand over many more state services to outside providers. They have opened the doors to Swedish-style free schools set up by parents, and they want more parts of welfare to be delivered by outsiders, paid by results. They have also announced the biggest shake-up in the history of the health service by shifting spending power to groups of general practitioners, who will buy in services from both public and private hospitals.
Haste has caused problems. Whereas the education reforms follow on neatly from the academies that Mr Blair set up, the changes in the health service, introduced with little prior warning, come just as the system is adapting to the previous round of reforms. Oddly for a party that believes in the free market, the Tories have rejected for-profit providers for some services, notably education.
Even so, pluralism could lead to a much smaller civil service than anyone thinks. “Once you start letting people compete, it is incredible how few people you need in the centre,” says one of Britain’s most senior mandarins. And, since the change is technocratic not political (the state, after all, is still paying), it will be difficult for a future Labour government to reverse.
Handing over control of schools to parents and medicine to local doctors also fits in with localism. The Tories want more cities to have elected police chiefs and, eventually, elected mayors, like London’s Boris Johnson. They are providing reams of information to make government more transparent; a new crime map of Britain’s streets crashed on its launch day because so many people wanted to see it. Combined with pluralism, this amounts to a substantial attack on the centralised state. For instance, Suffolk County Council hopes to knock a third off its budget of £500m by becoming a “virtual” authority that outsources all but a handful of its services to social enterprises or companies.
This localism is somewhat marred by the Tories’ deep distrust of local government. Handing over schools to local associations risks creating bodies that can be taken over by teachers’ unions, as in America. Lord Adonis, a Blairite who now heads the Institute for Government, a think-tank, argues that the Tories should also have given more power to elected local mayors, especially in the 14 big cities where one in three Britons live. Apparently Tory and Liberal-Democrat local councillors took against this.
Volunteer, or else
Volunteerism, the idea of Burkean small platoons taking on the functions of the state, is the trickiest part. On paper, this is a big idea. The people around Mr Cameron argue that just reducing the supply of government won’t wean people off the state; you also have to reduce the demand for it. That persistent demand, after all, has been the main reason for sprawling government from California to Cardiff.
In practice, however, the idea has flaws. Running your local library sounds attractive, but most people lack the time and expertise required, and there is not a lot of money around to help them (thanks to the spending cuts). Britons seem to band together of their own accord only when they want to oppose something—such as the government’s plans to sell off the nation’s forests, which they halted.
To be fair to the Tories, the Big Society is not their only scheme to reduce demand for government. Their welfare reforms are based on moving poorer Britons away from dependence on the state. A lot of state spending is “avoidable”, argues one insider: if you can get people into jobs, strengthen families, stop teenagers getting pregnant and teach children early, you will save a fortune a decade hence. Just two particularly troublesome families have cost British taxpayers £37m over three generations.
The Cameroonians are also trying to do something about the tangle of regulation that costs the British economy around 10-12% of GDP. A neat scheme whereby any new rule would have to show a net decrease in regulation was shelved after civil servants gamed the system. One of Mr Cameron’s advisers, Oliver Letwin, is now working on another plan. But not all the regulation is domestic. A British Chambers of Commerce study of 144 new rules in 1998-2010 put the total cost at £88 billion, of which two-thirds was attributable to European Union legislation.
Implementation is crucial: unless reform of the state is seen to be equitable and effective, citizens will not accept it. But with that huge caveat, two things stand out. First, the government’s breadth of ambition is impressive—even set against that of Mrs Thatcher, who did far less in her first year. And second, most other rich-world governments will have to do something similar soon. That is partly because of their fiscal situation: even America will have to start reconciling its revenues and its spending in the near future. And once you start to cut, you need to decide what should go and what should remain. Mr Cameron, for all his haste, is at the front of a great wave. In that, he resembles Mrs Thatcher—and those great reformers of the 19th century.