An economically liberal friend of mine whose politics nevertheless tend to haver between the Conservatives and the SNP contacts me from an overseas trip. He says that he fears that the coalition will simply continue the economic policies of Gordon Brown. Although I point out that those policies can not be sustained anyway, he remains nervous. In fact I have little doubt that the budget now announced for June 22 will show some very nasty red ink indeed. The question will be how to create a policy response that walks the line between fiscal responsibility and economic recovery. Most importantly of all, there is the question of the essential investment in public infrastructure such as Crossrail and HS-2. Are these projects to be delayed or even sacrificed because we still do not have a coherent approach to social welfare?
The fiscal drag created by Gordon Brown- i.e.the administration cost of collecting taxation on the one hand, and paying out benefits such as child credits on the other- is clearly very high. How high, we are not permitted to know: it is essentially a state secret. Nevertheless the integration of tax and benefits is long overdue- and it is time to abolish the collection of National Insurance separately, and be up front about what it is: an enhanced form of income tax. The government needs to get serious about the fact that we are funding long term payments, such as pensions, directly from current expenditure. We have no National Insurance Fund. If we did, then by now the level of income tax would have been reduced to less than 20%, since the rest would be funded by the National Insurance Endowment, as David Lloyd George originally intended, when the state pension was introduced.
No post-Communist country has followed the UK in its pay-as-you-go pension policy, all have created an endowment fund structure for future pensions, and yes that has had a drastic impact on those who were already retired, or are about to be: the spectacle of elderly ladies trying to sell flowers in the middle of snowy nights is one of the saddest sights in wintry Tallinn, although in fact they do seem to manage to get by somehow. The crucial point is that the social sacrifice is being made by today's old folk in order to fund a better life for their children. In Britain the impact of scandalously early retirement has been a huge transfer of wealth from the young to the old. With the smash and grab raid that Mr. Brown made on private pensions, the fact is that the British pensions cupboard is bare: and that is a developing crisis. Meanwhile the idea that "relative poverty" can or should be alleviated by redistributive taxation is being tested to destruction. Welfare families are indeed a reality- and one increasingly bitterly resented by those of us bearing the brunt of increasing taxation. The failures of education and the poverty of aspiration has left a group of unemployed and unemployable people, dependent on benefits. That the work is there is obvious: how else could we have around half a million central and eastern Europeans working in our country? But the question that Mrs Duffy should have asked in the election is why so many British workers are either unwilling or unable to take on the kinds of jobs that are being done by Poles, Lithuanians or Slovaks.
In any event, we can not afford this welfare burden: despite the recognised social evil of too wide an income gap I do not think that we can fix it in the way that we have chosen. The average income gap in a corporation has risen from 5x to 22x in forty years, but punitive taxation is clearly not the answer. Relative poverty has not been alleviated by public handouts: the gap grows ever wider. The time has indeed come to think the unthinkable, but that may well mean some pretty tough love on welfare: no welfare without work is an obvious start.
I also still believe that the issue of illegal- as opposed to legal mostly eastern European- immigration can not be solved unless we address the tens of thousands who have now been resident in the UK for over ten years. I believe an amnesty should indeed be offered to those already here, and then the policing of new immigration could be stepped up as resources are transferred to this, rather than the useless, toothless waste of border agency officials pursuing those already here: we are not going to expel thousands of people who have already integrated well into our country- that really does make no sense. Making these people legal is another way to improve tax receipts too.
However to enact these policies we are going to need to challenge something that is currently being defended rather strongly: the culture of secrecy and lack of accountability in the British government. The temptation to keep things secret is a very strong one for both politicians and state officials, especially in a coalition. Yet it is very dangerous to remove accountability- in the darkness, incompetence and corruption flourish. Paradoxically it also means that the most important state information becomes far more vulnerable to loss or misuse.
I have always opposed ID cards in the UK. I have supported them in Estonia, and this has led some people to suggest that I am being inconsistent. Let me explain why not. The difference is in the relationship that the individual has with the state in Estonia. Firstly, the citizen is allowed to know all the information that the state holds about them. Secondly, the systems are extremely secure: there is no evidence of them ever being successfully penetrated, even when the Russians launched their cyber-war against Estonia three years ago. Finally, the individual is able to find out whenever a state institution accesses their data, and to know which individual did so and for what purpose. Essentially the Estonian state is transparent to its citizens: all government meetings are publicly documented. The only exception is in extremely limited issues of National Security- and all such instances take place under the auspices of the Ministry of Defence or the Kaitsepolitsei: that is it. By contrast the UK presumes that all information is secret and that the citizen has only limited rights to find out even fairly mundane information- even to challenge mistakes in the data. This is what has allowed corruption scandals in the Home Office to be essentially unreported. In any event the British Press is more interested in the cheap thrills of Page Three than the expensive slog of real reportage. (Before the Daily Telegraph gets too smug, I would just note that the expenses scandal story was sold to them- they did not discover it for themselves).
So, perhaps Liberal Democrats and those who sympathise with liberal ideas amongst our coalition partners should now be thinking not just in terms of the nuts and bolts compromises of daily legislation, but also in terms of the big picture: the need for genuine political openness, the need for radical welfare reform, the need to rebuild our national endowment capital. Those who support these genuinely Liberal ideas may be regarded by the Liberal Democrats on the front bench with a questioning eye, but as my friend says: this government will need some clear strategic thinking, and they may be too bound up in tactical battles to see the real goals they need to go for. A Radical Liberal voice could still make all the difference, so at his suggestion I propose a group of like minded liberals, even those amongst the Conservatives as well as the large number in the Liberal Democrats to continue to focus on the big picture, the long term story and the whole vision of Liberalism.
I even like his name for it: the Tallinnban.