Too often, inefficient solutions are defended by focusing on the need for the solution. Thus, apologists for the Kyoto Protocol, an extremely inefficient solution, make reference to the problem of global warming. My last column, which questioned Kyoto, produced colourful emails from the faithful defending their solution; this week I am going to risk more anger by talking about the public sector in the UK.
However, just as I was not playing scientist with global warming, neither am I playing politics here. I am not questioning the need for the size and scope of the public sector, but rather the economics of the "solution" on offer. We have public-sector stagflation - we are paying more and getting less.
In the public sector, we are suffering badly from what economists call producer capture: businesses that are run for the benefit of the staff rather than that of customers. We have been here before, of course. In the 1960s and 1970s, the UK's nationalised industries were models of inefficiency and waste. Highly unionised and run mainly to the workers' advantage, they produced low-quality products at high prices and yet required ever greater amounts of taxpayers' money to keep them afloat. Sound familiar?
Before you rush to your emails, I am not talking about privatising health or education; rather, I am suggesting we allow consumers more influence over the services the state provides. And that does not mean focus groups, regulators, targets, charters or citizens' rights; it means replacing bureaucracy with market signals. Producers can lobby and influence even the most robust bureaucrats, particularly when the real paymaster is a politician spending someone else's money. Meanwhile consumers encouraged to believe services are free will overconsume, in the case of health, or have no influence, in the case of almost everything else.
The Adam Smith Institute commissioned an interesting study last year that polled consumers to find out their priorities in services they received from education providers, the police and local councils. In every case, those of the consumers were almost diametrically opposed to the apparent priorities of the producers. But, again, the solution is defended by reference to the problem.
So what can be done? Well, a few obvious things spring to mind. Charging people even a nominal amount to see their doctors would reduce the apparent 40 per cent of missed appointments. But in one sector there does appear to be a free-market solution that is already working - and it is in that bastion of evil capitalism, Sweden. Parental choice, as represented by school vouchers, allows parents greater influence over their children's education and significantly reduces the central bureaucracy, allowing teachers to teach and parents to influence how their children are taught. Any two qualified teachers can set up a school, and parents can (and do) vote with their feet. Schools are set up within communities and the horrors of the school run are all but absent. For those of you who think it unfair that people who work in the city should get a voucher, then count it as a taxable benefit. The important thing is that it is a voucher, a contract between the school and the parent - consumer capture.
As with Kyoto, what ultimately matters is not the problem, or the proposed solutions, but what policy-makers actually do. The Conservatives seem to have backed away from a voucher system but the Government may yet embrace the idea as public dissatisfaction with public-sector stagflation grows. After all, more consumers than producers vote.
Mark Tinker is a director of Execution Stockbrokers. firstname.lastname@example.orgReuse content