A lesson from New Zealand

This is the next of our posts with REFORM looking ahead to the Spending Review. Earlier posts were on health, education, the first hundred days, welfare, the Civil Service and international experiences (New Zealand, Canada, Ireland).

Ruth Richardson, the former reforming Finance Minister of New Zealand, set the benchmark for the Spending Review in a lecture for Reform on Wednesday evening. The coalition Government has framed the Review in the right way – as a chance to reshape and redefine the role of government rather than just shave a few percentage points off the existing structure with all its structural flaws. Ruth Richardson explained what that should mean, addressing each of government’s roles as spender, tax collector, asset owner and law maker.  Her full lecture is here and a summary here.
 
The debate after her lecture (between Ruth, David Smith of The Sunday Times, Julian Glover of The Guardian and Steve Richards of The Independent) focused on the politics, and prefigured the political debate of this Parliament.  Ruth argued that voters across the world had swung against governments who have put the State at the heart of the economy and society, pointing to the UK, Australia and the forthcoming US midterms.  David Smith agreed that there was a tangible disquiet in the UK electorate at the level of public borrowing which had helped to cause the election defeat. That didn’t mean that the public would support every cut but it did mean that it would support the coalition in the wider argument against the deficit.  Steve Richards felt that there were many reasons for the UK election result separate to the size of the State (and indeed he was not in favour of a smaller State).  But he did support ideas to extract every pound of value from public spending, including radical ideas such as co-payments.  Julian Glover pointed out that the coalition is trying to avoid giving the impression that the cuts are ideological; Steve Richards argued that they inevitably were.
 
In response, Ruth said that her ideas did stem in part from her own ideological views on the size and role of government.  But much more importantly they were based on the practical reasons for reform – the evidence for market-based reform of health and education, the fact that middle-class welfare is a luxury item during an age of austerity, the reality that lower tax rates (due to lower public spending) help to get unemployed people back into work.  Above all, reforming politicians had to make the case. She concluded:

“We are all familiar with the scourge of special interests who will argue for preserving the privilege of the few at the expense of the many.  And as reformers, we become maddened by the fact that the discredited and dysfunctional status quo so often doesn’t have to justify itself and that the onus of proof is on the agents of change.  Well we just have to harden up and get ahead of the curve with attractive messaging and persuasive public arguments.  There is nothing like tangible and demonstrable results to validate the sweep of the reforms advocated in this lecture.”