Political reaction against the new right is in full swing. The intellectual reaction is much less far advanced. Certainly, academic critiques of philosophical individualism, and of the free market as the model for all social organisation, have gathered strength. They now form the new conventional wisdom. Nearly everybody agrees that we need values and attitudes other than the self-interest that fuels markets, and that these values and attitudes must be embodied in a variety of institutions.
But the positive side of this critique, the alternative to the philosophy of the new right, is still vague. And this means that the old philosophy remains highly influential; people are influenced by it even as they disown it. The strength of the new right's world view was not only that it offered a coherent story; after all, at the level of "narrative," Blairites can tell good stories, too. But the new right also told a fertile story; it generated policy implications quite readily. Faced with a concrete dilemma, it often indicated what you should do. Its successor stories on the left, or in the radical centre, do not often have implications which run right down to the determination of policy.
This can have weighty consequences. At present there is a debate about the future of the welfare state. What services should the state provide for its citizens and how should they be financed? There is widespread dissatisfaction with the quality of public services such as health and education; that is one reason for the fall of the Conservatives. Yet these areas are seen as a bottomless pit for money, while taxpayers are thought to be at the limit of their tolerance for providing it. How can demands be met without introducing some sort of pricing? The shadow of Hayek murmurs that there is no way. Likewise, pensions are perceived as inadequate; the poverty lobby complains about the excluded and the plight of those on benefit. Yet the benefit bill rises as a share of GDP and analysts, such as Robert Skidelsky, worry about a tide of indolence and the breakdown of the family, all caused by the effect of welfare in rotting a person's character.
While the right may be in retreat, its prescriptions hold the field: the state must withdraw; people must provide more for themselves. So far the debate looks like a fight between right-wing logic and residual left-wing sentiment. But money is on the side of the logic. If those remain the terms of the debate, there can only be one winner. The change of government will then turn out to be less material than the electorate hopes.
We cannot invent an operational centre-left world view overnight, but we can shift the grounds of debate. To do so, we must make distinctions. There are two reasons why the state gets involved in the provision of services. One is to compensate for market failures which prevent people and markets sorting themselves out; insurance markets, for example, are prone to fail in some circumstances. The second is redistribution.
Redistribution is not fashionable these days, but it is almost the sole reason for state involvement in health and education. If you do not believe that, consider the following thought experiment. Suppose the state said it had no further interest in spending ?30 billion a year on education. It would give away or sell all educational assets to the people who ran them, and spend no more. It would increase child benefit and cut VAT to the value of the ?30 billion it currently spends; almost everybody would be better off in cash terms, but they would have to buy their own or their children's education (which could remain compulsory). Educational establishments would compete in a market just as garages compete. That would be quite feasible. Indeed, I expect the Institute of Economic Affairs has already suggested it. Would education cease? No. Would it even deteriorate for most people? Probably not. But would educational inequality increase? You can be sure it would. There would be posh schools for the rich and poor schools for the poor. Every possible gradation in between would exist; your position would depend on how much money you had. The really poor or feckless would not send their children to school at all-or not pay, involving the state in new expenditures on an educational police force to track down absentees.
The whole apparatus of state education can be justified only on the grounds that it is supposed to provide broadly equal facilities to all children, irrespective of their backgrounds or family incomes, and is therefore an essential component of ensuring equality of opportunity in our society. The same applies to the NHS. And if we really took seriously our protestations about equality before the law, it would also apply to a national law service.
No one really believes in equality of outcomes any more, but everyone still believes in equality of opportunity. The difference between left and right is that the left, on the whole, is prepared to compromise other values to achieve it. The right is not that concerned, and is prepared to sacrifice it as soon as it conflicts with other values or interests. Some notion of personal freedom or freedom of choice is usually trotted out to defend inequalities of opportunity. That is why the right cannot really understand why the state has to be involved in health and education, and why it is always coming out with schemes to privatise them.
So the first distinction is between services where the state is simply filling in for some market failure and providing insurance or ensuring some basic minimum-civilised minimum services-and those where it is ensuring universal entitlement to a good level of service in the interests of equality of opportunity-universal entitlement services. Civilised minimum services include unemployment benefits and pensions. In those areas, the right-wing idea of personal contributions has its merit. If people want to spend more individually and get better services, that is up to them. But in the case of universal entitlement services, which include health and education, universal entitlement on distributional grounds is the whole point. Increasing personal contributions to try to relieve the taxpayer defeats the whole purpose. The centre left can make common cause with the right on many aspects of pensions and national insurance; many of these issues are technical. But on health and education the differences are fundamental.
There is another distinction. What I have said so far applies to entitlements. It is a defence of universal entitlements to free education and basic health care. But there are many ways of delivering those services. The fact that people are entitled to free education at a level as good, or nearly as good, as society can provide does not mean that all schools have to be state-run or that all teachers have to be civil servants. We could imagine a system where all schools were private but were obliged to take not cash but coupons, which were redeemed by the state. Cash payments for education would be illegal. The state would then issue everyone with the same number of coupons. That would ensure equality of opportunity with a market-type supply system completely different from the present. Various schemes involving vouchers, weighted according to the characteristics of the pupil, have already been proposed. I am not advocating such a system. I am merely saying that the choice between it and state schooling should be made on purely pragmatic grounds.
Whatever works best, however, must be understood in terms of our principles: "works best" in the sense of providing good education and equal opportunities. Universal entitlement is a matter of principle. We withdraw those services which crucially affect life chances from the money nexus and declare that access to these does not depend on ability to pay. But the delivery mechanism is not itself a matter of principle.
What of the argument that there is some fundamental financial problem with universal entitlement? Must principles founder on a shortage of cash? Specifically, if services are provided free at the point of delivery, will not demand always exceed supply, will not the pressures for more always put upward pressure on the tax burden?
At the margin some rationing is always implied in any system that does not ration by price. There is no point in denying that or being apologetic about it. The system is not perfect, but it is better than any other. Decisions about how many kidney dialysis machines to purchase should be made as a matter of policy rather than having the market in such machines "clear," with life or death a consequence of income. We must improve our procedures for making rationing decisions, developing devices such as citizens' juries to guide the responsible authorities which, in turn, will be subject to democratic accountability.
Will political pressures still force a growth of such services faster than the country can afford? Not necessarily. Recent technical developments can lower costs in both health and education provision, while in the past, technical progress always raised costs by expanding possible facilities. Once the correct distinctions are made and the government recognises the importance of the very few universal entitlement services that exist, it should be able to redirect expenditures there from other areas. In the month that Hong Kong was ceded to China and the British empire came to an end, the Royal Navy showed the flag in the South China Sea and issued a briefing to the effect that it was still important to "maintain our global reach." No doubt it is delightful to be able to send a powerful flotilla to the South China Sea. But that capability cannot be regarded as a serious use of taxpayers' money.
If establishing priorities solves the short-term problem, it is also possible to ensure against the risk that health and education spending might outstrip taxable capacity in the remote future. That could be done by the state building up a community fund, invested in equities, whose income would grow faster than GDP to supplement tax revenue. That is a long-run solution for a long-run problem.
This does not amount to a new centre-left view of the world. But if we hang on to the two distinctions-between civilised minimum services and universal entitlement services, and between entitlement and delivery-we shall avoid the influence of the new right from beyond the grave.
