'What we need is a government which is not so much a universal provider but more of a facilitator'

- Advertisement -

By John Henwood

WITH age comes wisdom, or so they say. Why, then, am I struggling to understand the apparently universal expectation that government should bail us out of financial difficulties?

Everyone over the age of 60 should have some recollection of the fuel crisis of 1973–74, when, within months, the price of oil rose 300% following an embargo by Middle East producers. At the same time strikes by coalminers drastically cut fuel supplies, leading to a serious energy crisis.

The Conservative government led by Edward Heath did little by way of direct intervention to support hardship; instead, more widely targeted measures aimed at reducing energy consumption were applied. Businesses could only operate three days a week and we weren’t allowed to use cars, boats or planes on Sundays, while TV was closed down at 10 o’clock.

It wasn’t surprising that the Tory government fell in February 1974. The new Chancellor of a minority Labour government, Denis Healey, introduced support measures, including subsidies on food deemed to be essential, a reduction in VAT, a rent cap and increased pensions, but he stopped short of direct intervention through cash handouts. The effect was minor and short term.

A second election returned the Labour government under Harold Wilson with a small majority. However, it struggled to make significant economic progress or curb rising inflation and a change of leadership in 1976, by which time inflation was soaring to record levels, did not improve matters and we endured the so-called winter of discontent.

Labour lost the 1979 election and Margaret Thatcher came to power. Her response to rocketing inflation – it hit almost 25% that year – was to increase interest rates, which peaked at 17%. The personal financial difficulties represented by this double whammy were more severe for the average family than those we are experiencing now.

One result of the attempt to control money supply was rising unemployment as business adjusted to the high cost of borrowing and it wasn’t as effective at reducing inflation as had been predicted. Later, additional measures like deregulation of business, tax cuts and privatisation of nationalised industries led to economic growth and, because some measures were regressive, increased inequality.

By the mid-80s inflation was down to around 5% and the bank base rate back below 10%. If there had been doubts about the effectiveness of market-based, supply-side economics, they were dispelled.

Today, young people and older folk with short memories would have us believe the situation we find ourselves in is unique. Far from it – inflation is currently less than half the 1979 figure and the cost of a mortgage is a third of what it was at that time. Things are not easy today, but they’re not as hard as they were then.

So, why do we expect the government to bail us out of personal financial difficulties to an extent it never did before? What’s different is a creeping cultural change which has created a society that believes we can have it all, whether or not we can afford it, and when we discover that we can’t we turn to nanny (aka the government) to provide.

If you accept the principle of market economics, and like it or not it’s how most of the world operates, you will understand that rising prices is the signal that something is out of kilter. The cutting of gas supply from Russia is not much different from the oil crisis of 1973; the war in Ukraine is just as shocking as the Arab-Israeli conflict which sparked the oil crisis.

It should make us consider our options. We have freedom of choice about the way we apply our resources. What is more important, heating the home or subscribing to Sky, Netflix and Disney? It’s a decision we are not only at liberty to make, but which we should be taking before expecting government to subsidise the lifestyle to which we have become accustomed.

It must also be said such decisions do not arise for those for whom the choice between essential and nice-to-have does not exist; it is and always will be government’s role to help them. For the majority, though, choice does exist, but because of increased expectation, government appears to have taken responsibility for insuring everyone against price increases caused by events. The problem with this is the cost of the insurance policy.

Public expenditure goes up, taxes go up to compensate, enterprise is stultified, the economy falters and we drift into a downward spiral that ultimately helps no one. The lesson history affords is that this sort of indiscriminate intervention has failed Britain in the past and is failing other countries now.

To bring this issue into a local context, the package of support due to be outlined in the States next week by the Treasury Minister appears reasonable, but I’m not sure it’s wise to lift families earning nearly £42,000 entirely out of the tax net. The income tax threshold in the UK is around £13,000.

On the principle that we value the things we have paid for more than those we get for nothing, a free ride for those who should be able to make a modest contribution encourages the expectation that nanny will provide. And, despite our indebtedness to lenders and the increasing cost of borrowing, there appears no appetite by our new States to curb spending.

Many of my generation regret much of the way our island has changed over the last 40 years. Yes, there have been improvements, but the direction of travel is concerning. The number of young people who believe Jersey does not hold sufficient opportunity for them to spend the rest of their lives here is a worry. The feel-good factor is lower than for a very long time and appears to be declining.

What we need is a government which does not see its role as that of universal provider with all the associated cost, but as a facilitator. Stop being nanny and help us to remember how good it feels to stand on our own two feet.

- Advertisement -
- Advertisement -

Latest Stories

- Advertisement -

UK News

- Advertisement -
- Advertisement -

Read the latest free supplements

Read the Town Crier, Le Rocher and a whole host of other subjects like mortgage advice, business, cycling, travel and property.