WASHINGTONIt has been decades since any attempt was made to reverse the growth of government in developed countries. To the extent that leaders have shown reformist zeal, it has usually emerged at the local levelfor instance, the commendable crusade by Michelle Rhee, the chancellor of the District of Columbia Public Schools system, against the education bureaucracy. Given the long-standing reformist drought in rich countries, Prime Minister David Cameron’s efforts in Britain deserve attention.
In opposition, Cameron sounded like a politician versed in New Age vocabulary who set out to please everyone. His insufficient show in this year’s elections and the resulting coalition with the Liberal Democrats appeared to foreshadow a period of muddled politics under the tyranny of the status quo. But Cameron has unleashed the boldest assault on public spending and centralized bureaucracy anywhere todayand not a moment too soon. It has the whiff of revolution by comparison to the United States and the rest of Europe.
Britain’s Office for Budget Responsibility calculates that the deficit caused by the financial catastrophe and the ensuing recession amounts to almost 6 percent of the size of the economynearly 90 billion pounds sterling. The previous government was planning to close the hole by 2016. The measures announced by Chancellor of the Exchequer George Osborne will slash borrowing by 40 billion pounds more than the Labor government had planned. The last time the Tories confronted a deficit, in the early 1990s, they split the burden 5050 on spending cuts and tax hikes. Now 80 percent involves spending cuts.
More importantly, because this tackles head-on the essence of the welfare state, the brunt of the cuts will be borne by public services. The budgets of the various government departments will sustain in theory a 15 percent reduction. But since the health and aid budgets will be preserved, the real average cut in the other departments will be as high as 25 percent. Even areas as sensitive as defense and education will feel the fury of the budget ax.
The ambition of this plan has led Rowena Crawford and Gemma Tetlow of the Institute for Fiscal Studies to term it “the longest and deepest sustained period of cuts to public service spending since at least the Second World War.”
Even the sacred National Health Service, the jewel of Britain’s postwar welfare state, will be shaken up under a plan to bring choice and decentralization. Health Secretary Andrew Lansley’s white paper has already provoked howls of indignation, but Cameron is not backing down. Although the long-term finances are not mentionedand they are unsustainablethe government is proposing what Lord Norman Tebbit, a legendary Thatcherite who regularly criticizes the governing coalition for being too shy, calls “the demolition of the administrative structure put in place by Labor.”
The strategic health authorities and primary care trusts will be phased out, and the money that currently goes to those entities will be channeled directly to the country’s 35,000 family doctors, who will make the decisions with patients. In turn, patients will have an expanded choice of doctors. All hospitals will become foundation trusts. They will be on their own and able to look at innovative ways to supplement their government-generated finances, which, given the austere environment, will in reality drop even if the government is not saying so publicly.
Recently, Cameron has made international news for skewering the Israeli blockade of Gaza, denouncing Pakistan’s collaboration with al-Qaeda while he was on a visit to India, and placing the relationship with the United States in the broad perspective of a world with new important players. All of this pales in importance compared to what Cameron has set out to do domestically. If he succeeds, many others might follow.
We all know that the postwar statist structures are no longer affordable or compatible with the needs of competitive globalization; that the recent financial and economic crisis stemmed from the culture of profligacy; and that the prevailing model of entitlements is a political illusion. But hitherto no one seemed willing to put his or her political career on the line by acting on these truths.
It is early to say whether Cameron will deliver, and one cannot make too many assumptions about the unlikely coalition that sustains him. But the prime minister’s opening shots mark an inspiring contrast with the platitudes and bromides we have become accustomed to hearing at G-20 meetings.
Alvaro Vargas Llosa
Alvaro Vargas Llosa is Senior Fellow of The Center on Global Prosperity at The Independent Institute. He is a native of Peru and received his B.S.C. in international history from the London School of Economics. His weekly column is syndicated worldwide by the Washington Post Writers Group, and his Independent Institute books include Lessons From the Poor: Triumph of the Entrepreneurial Spirit, The Che Guevara Myth and the Future of Liberty, and Liberty for Latin America.
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