Ruth Lea on the welfare state

Ruth Lea is director of the Centre for Policy Studies think tank, which champions the case for less state intervention.

Attlee's post war government was elected 60 years ago and set about building a comprehensive "cradle to grave" welfare state, a "New Jerusalem" covering health, education, social security and housing.

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Building blocks of this "New Jerusalem" included the establishment of the National Health Service in 1948 and the 1946 National Insurance Act which set up a universal state-run insurance scheme with flat-rate contributions funding a wide range of flat-rate benefits.

Sixty years on the welfare state is under criticism as never before.

The rapid increases in public spending ("investment") on education and, especially, health have singularly failed to deliver the improvements that they should have done.

But, given that the chancellor's taxpayer-funded cash bonanza was on services that were basically unreformed, unresponsive to parent and patient, dominated by producer interests and centrally managed from Whitehall, this cannot be unexpected.

Tax 'nightmare'

Educational standards are still quite inadequate for an advanced country that has to compete in the modern world and the kindest thing that can be said about health is that there have been modest improvements in care since 1997 - but at immoderate cost.

The chancellor's partial redesign of benefits as tax credits has proved to be a costly and error-prone administrative nightmare, so abstruse that a casual observer can be forgiven if they suspect that obfuscation was one of the main objectives of the reform.

Moreover, the chancellor's obsession with means-tested state pensions has undermined the incentive to save for retirement and the skewing of the tax-benefit system against marriage has been greatly exacerbated, despite overwhelming evidence that young people brought up within married couple families tend to be more successful and less likely to be involved in criminal activities than those who are not.

The reasons for the failures and shortcomings of the current "welfare state" are many and various but a common thread running through them is the notion that the state knows best when it comes to providing for people's needs.

Moreover, the current government is quite shameless about steering the agenda of the public services, including education and health, and manipulating benefits in intrusive and highly questionable ways in order to achieve their "social engineering" goals irrespective of people's wishes.

Vouchers

The way forward for education and health, is, as far as possible, to get the state out of the provision of these services.

They should remain taxpayer funded but comprehensive voucher schemes should be introduced.

Vouchers serve parents and pupils well in schools in the Netherlands and Denmark, for example. They provide genuine choice which, in turn, drives up standards.

The Department for Education and Skills and the Department of Health should stop micro-managing schools and hospitals and trust the professionals, who serve and know their local communities, to manage these institutions.

Foundation Hospitals are undoubtedly a step in the right direction.

Turning to the tax-benefit system, the overwhelming need is to simplify the system, minimise the state's meddling in people's lives, and get rid of the perverse incentives that destroy personal saving for retirement (except for the rich) and discriminate so comprehensively against marriage.

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