CONTRACT WITH BRITAIN?: Life in the reign of King William

The future could be bleak indeed, argues Andrew Marr

Is this leaked "Contract with Britain", composed in the Treasury, for real? Taken seriously, it provides one blueprint for radically reshaping the state and dramatically changing the lives of millions for better and worse. Its ideas would take decades to implement - reaching, perhaps, beyond the lifetime of Prince Charles and into the reign of his son.

That would require the defeat of post-war social democracy to continue in the decades ahead, with voters consistently choosing lower taxes in return for fewer services and a shrinking state. This is not impossible. The anti-statist trend emerged in Britain in the mid-Seventies, when thinkers such as Hayek influenced Margaret Thatcher and Sir Keith Joseph. Despite a backlash, it is running strongly in the US, it is making headway in Europe and it has been very influential in countries as diverse as Australia and Chile.

So the Treasury officials' thinking is not any longer radical in itself. What they are doing is taking 20-year-old ideas on how to "roll back" the state and extending them further than the Thatcher and Major governments. Instead of selling off industries or utilities, they toy with the idea of privatising some of the 20th-century state's core activities - parts of welfare, road transport, some higher education and the basic pension.

This would make millions of lives freer but riskier. For the talented, hard-working, prudent and lucky, it would mean lower taxes. That might attract more companies and generate new jobs. But for the people who have relied on state support, including the old, the feckless, the ill and poorer families with children, it would make the future bleaker and less secure. To that extent, it is government by the winners, for the winners.

So how seriously should we take it? This is only a discussion document, produced by people who were asked to produce different options. Only parts have been leaked. Parts may be impossible to carry out. But aggressive anti-statism is an agenda with widespread intellectual support on the right and it is being closely studied in many countries besides Britain.

It is not the Conservative manifesto for 1997. If it happens, it will be a long-term revolution, which would in some respects take Britain back several centuries, to a country of turnpike roads, low taxes, less security and little state welfare. But self-evidently, it is not unthinkable. Nor, given the changes of the past 20 years, is it implausible either.

In that spirit, we have tried to imagine some of its possible effects on Britons living under this Treasury "contract" in the reign of King William V in a few decades' time ... and one possible alternative to it.

Danny, just too clever by half

"Why did you have to be so bloody clever?" shouts Danny's father, stomping up and down the stairs. Poor old Danny Blake has won a place at Oxford and his parents are daunted at the cost.

The family already pays pounds 500 a year to top up the voucher for Danny's younger sister's schooling. They simply hadn't budgeted for a university education - and Oxford, of all the ridiculous places! Fees there are a massive pounds 4,000 a year, several thousand higher than the nearby John Moore's University.

"Consider it darling, please," pleads Danny's mother, "Moore's have two- year courses you know, as well - much cheaper than four at Oxford."

The Blakes had always known their son was bright. But somehow they had hoped he would work for a few years then go to college sponsored by Siemens or Nissan. Or perhaps he would study maths or computing. With the prospect of a lucrative job in the City or in new technology he could have taken out a student loan to fund the lot.

Not Danny, however. The young Mr Blake has lost his heart to the classics, and only a traditional Oxford College will do. Usually Oxford undergraduates get good terms from the student-loan brokers - after all, Oxford still churns out extremely employable bright young things. But interest rates are very high for prospective arts students. And what will they do with the rest of their lives? Most classics graduates struggle for the few remaining jobs in the low-paid, low-status civil service.

It brings a wry smile to Mr Blake's face as he contemplates that aspect of Danny's looming future. Those bright-spark Treasury "kids" back in the 1990s whom he still blames for his current penniless plight didn't quite anticipate the full implications of their vision for the slimmed- down welfare state. As Whitehall downsized and the Treasury was left with no spending to monitor, many of those mandarins are out on the street.

His wife is altogether more stoical about life. "You're paying the price of your own choices, darling," she tells him. You would insist on using Danny's voucher to send him to a traditional school. It's hardly surprising he left chattering in Latin and Greek. We're better off than the Harrisons. Young Emily can't afford to go to college at all."

The Blakes' Contract with Britain:

pounds 400 less in taxes, thanks to education cuts of pounds 7bn. pounds 500 more on top-ups for vouchers, and pounds 4,000 in fees for university.

John, on the road to nowhere

Road rage is rather an understatement for John Benham's state of mind. As he staggers through the front door, after two hot, sweaty hours driving the 12 miles home from his office in Pontefract, he is raging at roads, raging at the road utilities, and, above all, raging at Leon Redwood, chief executive of the company that owns this stretch of the M62.

Yorkshire Roads plc, the off-shoot of the Yorkshire super-utility company that supplies water and electricity intermittently to his house, is not popular locally. Several years spent avoiding the repairs to the tarmac, in order to keep up dividends to shareholders, have finally reached crisis point. The roads are now littered with cones, and traffic crawls along the M62 in single file. At home in Snaith, things aren't much better. The pavements in the cul-de-sac are crumbling, and there is still no sign of the long- promised speed bumps for the street by the shops.

Now the Yorkshire Roads boss is on the radio, calling on drivers to ration their car use, especially during the rush hour, to ease pressure on busy lanes. He has himself, he claims, avoided driving a car for three months during the cone-crisis.

John Benham knows why. As he was climbing into his car in the office car park this evening, he noticed a helicopter landing on the pad across the road; the bright yellow logo of Yorkshire Roads gleamed from its door. Waiting for the rotor to stop stood Mr Redwood's chauffeur. No wonder Leon Redwood doesn't bother driving. With the millions in bonuses and share options he awarded himself this year, he can afford a driver to take him through the jams.

It is little consolation to Mr Benham right now to remember that the cost of running his car is far less now than 20 years ago. Now that Vehicle Excise Duty has been abolished, he pays his annual charge to Yorkshire Roads, and any other travel is billed through an electronic card on his dashboard. But the frustration and pollution he endures is a high cost to pay for the extra pounds 50 in his pocket.

Nor is John Benham soothed by the fact that a few new gleaming toll roads have been built to sweep traffic from the Channel Tunnel to the big industrial centres in Wales and Tyneside. He doesn't want to go to Wales or Tyneside - he just wants to get home from work.

John Benham's Contract with Britain:

pounds 140 less in car tax, pounds 90 more in road charges and tolls, and hours and hours of stress.

Laura, the wealth creator

Laura is so relieved that the daily assault on her eardrums from loud Americans is finally over. After 10 years living in the US, earning a huge salary as a consultant, she has decided she'll be better off back at home in Bristol.

Income tax is only 20 per cent, and National Insurance contributions have been abolished altogether, so Laura, on her pounds 150,000 income, has tens of thousands of pounds more to spend each year than in the old quasi- socialist 1990s. That kind of cash makes a difference to entrepreneurial moneymakers like Laura. She and her international friends are flocking into Britain in their thousands.

Laura's American friends are extremely suspicious when they discover that her taxes are lower than in the US. "It's because we don't spend all that money on defence," she explains. Since Britain slid down the international pecking order, just as those Treasury mandarins predicted, the Government has been able to cut back foreign peace-keeping operations, leaving everything to the Japanese and the Germans.

Laura has brought with her countless employment opportunities, too. Now that she no longer has to pay National Insurance on behalf of her employees, she has just decided to take on an English butler to join her personal staff of four. Employment in service is booming, and unemployment in Britain hasn't been so low for decades. She finds it slightly irritating that her secretary always looks so tired, and suspects her of moonlighting in the local pub. Still, she reflects, at least there are job opportunities aplenty to keep the poor off the streets.

As a healthy 31-year-old with immense earning power, Laura pays low premiums on her private health and unemployment insurance. And now that she no longer has to subsidise social insurance for everyone else through her taxes, she is substantially better off.

Moreover, she prefers having the choice and flexibility in the kinds of insurance she takes out. Laura is a health freak, and an impatient one at that. The prospect of waiting in a grubby NHS waiting room full of other ill people, just to see her GP, horrifies her. So she is quite happy to pay the extra cash for the luxury option - especially because that way she can see exactly how her premiums are spent.

Laura's Contract with Britain:

More than pounds 20,000 less in tax, pounds 3,000 more in private insurance, pounds 2,000 less in NI contributions for her employees.

Zoe, fighting battle of the bulge

Harry has been growing suspicious for a while now. True, his PA, Zoe, has always had a taste for cream cakes. But could she really have put on so much weight through overeating in the past six months?

Now Harry isn't a hard man, but he does have a business to run. As he glances surreptitiously at her bulging tummy, he wonders whether it's time to start recruiting Zoe's permanent replacement. If she does turn out to be pregnant, there is absolutely no way he can afford to give her maternity pay.

"Still," he tells himself, "it probably won't come to that. She'll take a few weeks off, then be back at work slightly more tired than usual, just like all the others."

Since statutory maternity pay, alongside unemployment benefit and incapacity benefit have all been abolished, employees are desperate to stay at work under all circumstances. Unemployment is an appalling prospect, as you end up having to plead with the state for some of the few remaining and stigmatised means-tested benefits.

Zoe, who is indeed pregnant, is terrified of losing her job. She is stuffing her face to pretend she is just getting fat. Her husband is unemployed and they have missed payments on their health insurance and their mortgage insurance in the past few months. They can't get unemployment insurance at all - they have both changed jobs and lost jobs too many times. What will happen if she has expensive complications during child- birth? She doesn't know. Without her current job, she fears they will lose the house too.

At least, she reassures herself, she is 23 and married. Were she a single teenage mother, she wouldn't even qualify for means-tested benefits.

As she contemplates her baby's future in this uncertain world, she thinks back to her own childhood. The memory of that night in July 1996 when her father came home from work grinning mischievously haunts her again. "I've given it to the Times," she remembers him telling her mother. "You remember that secret document we were preparing for Terry Burns? The one where we listed every loopy thing we thought the Conservatives might want to do? It will be in tomorrow's papers. That'll really make fools of them."

Zoe bites into another jam doughnut. If only her father had known.

Zoe's Contract with Britain:

pounds 1,000 less in NI contributions, pounds 800 more in pension payments, pounds 600 to cover sickness and mortgage insurance.

Alternatively, if the levellers held sway ...

Or, of course, it could turn out very differently. It is possible that Britain stands today at the end of the right-wing era which began in the Seventies and is about to return to an era in which taxes are relatively high and the state reclaims many of its old functions.

Perhaps there will be no King William V, because by then Scotland will be independent and England will have declared herself a federal European republic. The aged and now-corpulent Will Hutton, a former left-wing scribbler and editor, will be Life President, presiding over a land of compulsory higher education, higher pensions and higher income taxation.

In that country, the effusions of Treasury officials back in 1996 will be regarded as a historical oddity, a last outbreak of radical mania. The former Chancellor, Kenneth Clarke will be regarded as the most interesting Conservative thinker of our era and the pound sterling will be a folk- memory.

The executive country homes of the Thatcher era will have been broken up into flats. Any school-leavers who fail to get jobs in private companies will be taken on by one of the great renationalised corporations, such as British Telecommunications, or the BBC.

There will be no beggars on the streets, and no expensive motor-cars on the roads: trains, municipal trolley buses and high petrol taxes have long since cleared the country of Jaguars, Porsches and Mercedes. In South Yorkshire, coal is being mined once again and the annual conference of Trades Union Congress is reported at length on the front pages.

All British children will be expected to go to university; money will be tight for them, but there is plenty of cheap subsidised food, thanks to the warm climate. A minimum income and generous pensions ensure that older Britons do not suffer serious want. On the other hand, no one is permitted to earn more than twice the average wage, or to inherit property of more than token value.

Sometimes we look enviously abroad at the decadent Germans, or arrogant new world powers such as Thailand, which has recently taken our seat on the UN Security Council. We live in a less glamorous country, but a safer one. And on the whole we prefer it that way.