Tories urged to privatise benefits

UNEMPLOYMENT benefit, maternity benefit and state-funded residential care for the elderly were yesterday put on the agenda for the Government's fourth wave of privatisation, by the right-wing Adam Smith Institute.

Madsen Pirie, who heads the institute, also urged the Government to allow people to opt out of the basic state pension and into private insurance schemes.

An adviser to the Prime Minister on the Citizen's Charter, Mr Pirie believes the Thatcherite agenda in the report will meet John Major's search for more competition for public services.

It comes as Michael Portillo, a leading right-winger in the Cabinet and Chief Secretary to the Treasury, embarks on a radical review of public expenditure. It called on the Government to provide inducements, such as tax incentives or bonds, for more people to opt out of state benefits, including the basic pension, by taking out private insurance.

The cost of funding statutory sick pay and the industrial injuries scheme could be shifted to employers. That would allow national insurance contributions to be reduced. Private insurers would be better at policing the schemes and making sure benefits were paid only to those who genuinely qualified, Mr Pirie said. Those who opted out of state benefits should be excused part of the contribution they currently made toward state schemes. The Government would require evidence that the private schemes offered adequate benefits and were protected against the failure of any individual company.

Updating the Tory commitment to contracting out public services, he said local authorities should award contracts for services such as refuse collection to two private companies who could compete for their share of custom from the council tax payers.

It would be simple to overcome the objection that it would be uneconomic for two firms to operate the same service, he added. 'The firms would issue bins and bags of different colours. One firm would go through picking up the red bags; the other would collect the blue ones. The local authority might specify one collection day to avoid the problem of having unsightly garbage piled up on too many days. Each firm would pick up from its own customers.'

The Radical Agenda, Privatization of Choice; Madsen Pirie; Adam Smith Institute, 23 Great Smith Street, London SW1P 3BL.