Friday, January 13, 2006

The Orange Booker Slur, part 4

Chapter 5: Liberal Economics and Social Justice by Vince Cable

That Cable advances economic liberalism can be guessed from the title. The question is whether he is weak on social liberalism. Pertinent to this are the questions of regulation and taxation.

Cable rejects a simple identification of more regulation as bad and left-wing, and the converse. Regulation is justified by market failures of which the world is full. "An almost infinite amount of regulation can be justified in these terms. The issue is a more practical one of whether government failures associated with regulation, and the cost of regulation, outweigh market failures and ... destroy ... entrepreneurial and competitive impulses..."

The question he asks is whether while many regulations in isolation are socially progressive and desirable, the cumulative effect is excessively onerous.

From these first principles it would be possible to defend both much higher and much lower levels of regulation than we currently suffer and enjoy. We are in the realm of tough political choices where philosophical first principles don't seem to help as much as they should. Perhaps Cable is willing to risk the suggestion of social illiberalism in order to emphasise the costs of regulation.

On taxation, Cable suggests a fiscal rule that the tax burden (or spend benefit?) should not exceed a figure around 40%. In terms of todays debate it would be that we should argue for fairer but not higher taxes. This has been criticised by some as a terribly right-wing position to take.

It seems to me that the support for tax rises or cuts comprises two constituencies. That which supports the rise or cut in question, and that which supports an ongoing programme of further cuts or rises of which this is only the beginning. The second constituency is an electoral bogeyman. It hurt Labour in 87 and 92 and the Conservatives in 05.

A fiscal rule seems a good way of promising that a tax proposal is not the thin end of a wedge. Of course much depends on what level the rule is set at. Does support for 40% rule in a 39% county make you a social liberal, and support for a 40% rule in a 41% country make you an economic liberal? Has this government turned me from one into the other in the last 5 years? The bounders! Perhaps social liberalism is the ultimate question of life the universe and everything, and the answer is 42%.

Of course I am being flippant. We are all, I hope, social and economic liberals. Deciding on taxation and spending priorities is another hard political choice that first principles do not inform so well as we would like. Even right and left wing do not summarise our response to this choice well, particularly if this prediction comes true. Big state or small state? Or, more precisely, a 40% state.

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