Madsen Pirie: To transform Britain permanently, the next Government should start by taking the lowest paid out of income tax and replacing council tax with a local sales tax
Dr Madsen Pirie is the President of the Adam Smith Institute, a leading free market think-tank. His new book, Zero Base Policy, was published yesterday, and can be purchased via Amazon.co.uk.
Anyone who supposes that a dozen years of Gordon Brown's vandalism can be put right by tweaking a few policies and running things rather more efficiently is mistaken. The parlous state of Britain requires a jump-shift in policy rather than an improved continuity. Proposals which lie beyond the box of the commonly acceptable might not make for good election manifestos, but they could mend a broken economy and a broken society.
My Adam Smith Institute colleague, Dr Eamonn Butler, detailed in his book, The Rotten State of Britain, how bad things have become, and how the optimistic promises of 1997 failed to bring results. The UK, once a model low tax economy now ranks amongst the heavily taxed ones. The pensions system, then the envy or Europe, now faces an unfillable black hole. Where we were promised "education, education, education," we have lower social mobility and more children leaving school without any meaningful qualifications. In place of the comparatively free society we enjoyed, we now have a society of snoopers, with severe restrictions on our freedom of speech, of assembly, and of the right to peaceful protest.
The counterpart of this critique is a programme of action to set Britain back on the path to prosperity and progress. This week the ASI publishes Zero Base Policy, setting out a shopping list of 33 proposals to put things right.
At the top is tax and the economy. People who earn just over £6,000 pay income tax. This is half the minimum wage and less than a quarter of the average wage. Taxing with one hand means we hand out benefits with the other. There is a word for this: madness. The ASI call is for the low paid to be taken out of income tax altogether, with a threshold for them of £12,000 a year.
Higher up the income scale there is a plethora of rules, qualifications, exemptions and allowances that have doubled to over 10,000 the pages it takes to explain them. The ASI call is for the upper threshold for the 40% rate to be raised in stages to a level at which nobody pays it. This would achieve a single income tax rate of 20%. The government will immediately demand to know what spending cuts will for this, but the answer is that it will pay for itself. More revenue will be raised under the ASI proposals because the tax base will expand massively. Not that there are no savings to be made. Our estimate is that efficiency savings and the cessation of unnecessary programmes could raise at least £100bn.
The highly unpopular Council Tax should be replaced by local sales taxes and locally set business rates, with local budgets requiring electoral approval before they take effect.
Civil liberties are not so far gone that they cannot be saved. We call for a one-year Judicial Commission to review them (in public) and make recommendations. Meanwhile, terror laws should be limited to suspected terrorism, and public surveillance restricted to police and security services only.
The chance for the biggest difference lies in education. It could be the 'council house sales' of the next government if it gives parents the right to spend the state educational allowance at any school which is non-selective and charges no additional fees. This is the highly successful Swedish model which so rapidly gained mass support that its opponents abandoned plans to repeal it. It must also be made much easier to start and run new schools, so they can proliferate rapidly as they did in Sweden.
Narcotics remains a controversial area, but it is not controversial to say that current policies have failed. The calls for 'tougher action' are calls to do more of what we already know does not work. Addictive narcotics should be medicalized, made available for free consumption at high street clinics subject to medical examination and supervision. Recreational drugs should simply be legalized, subject to restrictions on their production and sale. These simple measures would eliminate a large proportion of UK crimes, and curb the violence of drug gang turf wars.
There are more radical proposals in the ASI shopping list, but right at the end is a call for MPs of English constituencies to constitute the English Parliament, meeting in the Palace of Westminster, choosing a First Minister, and exercising the same powers as those of the Scottish Assembly.
The ASI list is innovative and far-reaching, but it does offer a chance to undo the damage inflicted over the years, and to transform Britain permanently. We do not expect all of them in the first term of the next government, but a start could and should be made.