People periodically ask me why I’m so down on David Cameron, the Prime Minster of the United Kingdom. I’ve already pointed out that his pre-election agenda was big government. And I’ve pointed out that his post-election record is more spending.
(and you can read more of my whining and complaining here, here, here, here, and here)
But now I’m really disgusted, because the United Kingdom’s version of George W. Bush is now reversing one of the few pro-market aspects of British policy.
The Wall Street Journal Europe is appropriately disappointed.
On Tuesday Iain Duncan Smith announced a sweeping reform of the U.K.’s state-pension system. In the name of simplification, the Work and Pensions Secretary plans to raise the basic pension, eliminate the current multitiered system—and pay for it all by rolling back the personal retirement accounts that were first introduced by the Thatcher Government in 1987. Pension systems across the developed world are being stretched to the breaking point as populations gray and governments face ballooning public debts. Britain today is in the privileged position of possessing on top of its public savings system an extensive private one, relatively insulated from the government’s increasingly uncertain ability to deliver on its pension liabilities. Pity, then, that Mr. Duncan Smith’s reforms serve in the long run mostly to entrench the unsustainable elements of the British system and trash the desirable ones.
Addendum: Jose Pinera reminds me that George W. Bush actually proposed personal retirement accounts in 2005, one of the few positive actions of his eight-year reign. So Cameron’s actions may put him even further to the left than Bush on economic policy, a rather challenging achievement.
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My perception is that the UK on the whole has more intervention than the US economically (although I get the impression when it comes to agriculture and trade the US is quite interventionist) but the US has more social intervention.
Traditionally left wing parties are economically interventionist and socially libertarian, whilst right-wing parties are socially interventionist and economically libertarian. This has changed in the UK over the last 10 or 15, with Labour becoming socially more authoritarian (promoting ID Cards, CCTV cameras, longer detention of terror suspects), and in recent times Conservatives (particularly the younger ones) have to an increasing degree contested those changes, as well as softening their views on sexuality, drugs and prisons. This has led to the Labour Party being more authoritarian than the Conservatives on both economic and social policy. I very much like this as at least for each party it can be said that their views of the two spheres are relatively consistent with each other.
David Cameron would be one of the people that is more small-state than others, so I’m surprised to hear some of your views, although that may be because those of us that are younger have grown up in the context of a Labour government. However, the Government’s reforms of the NHS, the Education system and prisons, whilst in some cases only being an extension of Labour’s direction of reform, are still significant in shrinking the size of the state.
With regards to the state pension reforms (announced in (slightly) more detail today – http://www.bbc.co.uk/news/business-12954888) they get rid of pension credit and replace it with a flat rate, which strengthens the incentive for private saving, so I don’t see this as a move to the left. However I do have very grave concerns about the affordability. Indeed, I wonder whether, if I live to see 70 (I’m 23 currently), there will even be a state, let alone a state pension, at the rate we are going.
But for me the trouble is that a lot of these moves are politically motivated, which is another reason why I disagree the assertion about David Cameron being leftist – I think he is just in a hard place with the electorate. With regards to pensions, the baby-boomers are such a large demographic and generally very likely to vote, so if you can reform pensions in a way beneficial to them you can increase your chances of re-election. With regards to the 50% rate, although people may move abroad as a result, in the grand scheme of things whilst they may take a lot of money abroad, they don’t take many votes. As it is only on those above £150,000, this is almost equated to a tax on bankers, or generally the super-rich, and so most people are fine with it, and whilst not everyone would be up in arms if it was lowered from 50%, a significant number of swing voters, particularly younger ones, would see it as a tax break to the rich when the poor are having vital services withdrawn, which on its own would be unpopular. However, when you add to this that the Conservatives are still trying to shake the image of being heartless, desperate to ‘destroy’ public services, and only there for the rich, this could have a damaging effect for them in the long-run too, years after the actual change.
I’m sure the same could be said with regards to farm subsidies, trade barriers, etc. in the US, where any changes could lose a lot of votes, even if they would be more in-line with free-market management.
So perhaps it’s not about ideology (and whilst that seems to be a dirty word now surely you at least need some?) but also about trying to win over the median voter too.