Who pays when the state can’t?

David Floyd explores the inescapable reality of the shrinking state fund for public services. As we search for solutions what questions can we ask and what past experience can we learn from?

On coming to power in 2010, the incoming Coalition government announced plans to make £81billion worth of cuts in public spending during its time in office

The impact of cuts has been felt most strongly in local government. Barnet Council’s ‘Graph of Doom’, first published in 2012, outlined the fact that the Conservative-run borough would lose 30% of its income between 2011 and 2015, and that by 2022-23 the cost of delivering social services would exceed the Council’s entire budget.   

Whatever our views on the necessity of this approach, it’s an inescapable reality that benefits have become less generous, jobs have been axed and public sector agencies have been less able to provide services. It’s a situation that’s likely to continue for the foreseeable future. 

We don’t need public services and welfare spending primarily because commercial markets are a bad way of meeting social need but because they’re a bad way of determining what ‘social need’ means. Markets have a simple, blunt way of deciding whether people get things: ‘can you pay for it?’ 

In theory at least, through the politicians we elect, we decide collectively how much of our money we want to pool to meet social needs that wouldn’t be met if we just kept our taxes and spent them ourselves, and we decide which social needs are the highest priorities for that money to be spent on.  

There are some services which have to be funded through some form of taxation for practical reasons. For example, fire services. These haven’t always been funded through public spending. Until the early 1800s, competing private sector Fire Brigades offered insurance policies. As a result: “policy holders were given a badge, or fire mark, to affix to their building. If a fire started, the Fire Brigade was called. They looked for the fire mark and, provided it was the right one, the fire would be dealt with. Often the buildings were left to burn until the right company attended!” 

Nowadays, most of us would agree that the social need for emergency services is not one that can be usefully met through competitive markets. On the other hand, one leading example of a market-based solution to a social problem is unemployment benefits, a groundbreaking social innovation launched in beta mode in the UK by Herbert Asquith’s Liberal government in 1911.

Since then, various iterations of the benefit system have succeeded in harnessing the skills, expertise and logistical capacity of the private sector to enable to people with low or no incomes to buy food, clothes and other essentials. 

If governments stop paying the bills for services or meeting people’s social needs then there’s three obvious options: people pay themselves, someone else pays or those needs cease to be met. 

Maybe it’s right that people need to take more personal responsibility for their situation. A quote from then Conservative prime minister, Margaret Thatcher, in an interview with Women’s Own in 1987 famously begins: “And, you know, there's no such thing as society” but less famously continues: “There are individual men and women and there are families. And no government can do anything except through people, and people must look after themselves first. It is our duty to look after ourselves and then, also, to look after our neighbours.” 

Maybe it’s better for parents to foot the bill for adult children living at home rather than paying extra taxes to support the free university education, affordable housing and benefits system that would enable them to move out.

It’s more complicated, though, in the case of activities that are necessarily social but which the state no longer sees as a priority. How do we pay for a public library other than through public spending? 

The Coalition government’s answer, to the extent that it had one, was the Big Society: the idea that social needs which were not being met by either the market or the state could be met by groups of people choosing to work together. 

Big Society was wildly unsuccessful in political terms, primarily because, as social innovation thinker Dougald Hine notes in his essay ‘The Fairly Big Society’: “The Tories did not simply invent a half-baked cover story, they took other people’s ideas for a joyride, then smashed them into the dead end of their own ideology.”

It wasn’t (entirely) the government’s fault that they were attempting to promote Big Society whilst enacting massive cuts which, in many cases, left gaps that local social action couldn’t realistically come close to filling.  It was their fault that they shamelessly used Big Society to justify controversial but unconnected policies. A particularly dismal example was the use of the label to herald the launch of the Work Programme, a national marketization programme which saw the Department for Work and Pensions award huge contracts for back-to-work services to massive private outsourcing companies.

As Hine explains, though, the underlying ideas remain relevant: “there are reserves of enthusiasm, dedication and deep pragmatism which people draw on when they come together to do things for their own reasons, rather than because they have been paid or told to do them—reserves to which neither the state nor the market generally has access.” 

If, rightly or wrong, the era of ‘big government’ is coming to end, it may be that the most successful new social innovations will be ones that can tap into those reserves. 


Photo credit: Flickr