The worst kinds of government spending

This is as build-up to a subsequent post but important in and of itself. Regardless of what taxes the government uses to raise money (on which I have strong opinions, obviously), there are various broad categories of government cash spending, which we can rank from best to worst as follows:

1. Spending on 'core functions', i.e. things which the free market would not provide; which add value; and for which there are no specific identifiable beneficiaries, like defence, law and order (in the wider sense, which overlaps with social workers to some extent), public health (in the very narrow sense), road maintenance, refuse collection, fire brigade (the fire brigade is not there for the benefit of the idiot who sets fire to his own house, it is there for the benefit of the owners of the houses next to him) and so on. These cost an alarmingly small amount of money, perhaps five per cent of GDP, and create vastly more in value than they cost.

2. Simple redistribution in cash, i.e .a Citizen's Income or a Citizen's Dividend. Keeping people from freezing or starving is A Good Thing. Although capitalism is the only and best way of creating wealth, it's a bit hit and miss in distributing it and there's nothing wrong with a bit of insurance against hard times and the state can usually provide the cheapest mass insurance.

And, crudely speaking, £1 is worth much more to somebody with very little income than it is to somebody with a lot of income so this adds to the overall happiness of the nation. But means-testing on the basis of income or financial assets has all sorts of unintended consequences (it's a particularly spiteful form of taxation) so the best thing we can do is make welfare flat-rate and universal.

3. Means-tested and targetted redistribution, which ensures that nobody starves or freezes, but brings with it enormous distortions and social and economic costs.

4. Provision of specific services which the markets could provide (even though some wouldn't be able to afford it), especially those provided free at point of use, primarily health and education. The NHS, were it stripped of all the quangogracy and crap, would be very good value in terms of outcomes. Our state education system is absolutely appalling and hugely expensive and it would be far better to replace it with cash vouchers instead. Whether earmarked subsidies for public goods are more akin to item 2. or item 3. above is another debate. Council housing is a separate topic and I will not bracket it in here - overall it is not cash spending as it more or less breaks even.

5. A small group of very senior politicians living very lavish lifestyles. While it is indefensible in principle for MPs to award themselves fantastic salaries and pensions etc, in absolute terms this is rather less than one per cent of total government spending, so in absolute terms, it is not really that terrible,

6. The self-serving quangocracy, i.e. out of eight million taxpayer-funded jobs, about two million are doing 'frontline stuff', two million are back up staff and about four million do, best case, absolutely nothing of any value, they just sit in offices shoving bits of paper round and dreaming up stuff that never goes ahead. The real cost of these people is the loss of output to the economy in general - the productive work that these people would otherwise be doing (which broadly speaking is equivalent to their headline salaries, although it could be less, or it could even be more because funding one such job destroys one-and-a-half private sector jobs).

To contrast 5 and 6, to my mind it is better for one Prime Minister to pay himself £1,000,000 a year than it is for him to pay himself £200,000 and to employ forty people @ £20,000 each to shove bits of paper round. Either we have one person doing nothing of real value or we have twenty-one people doing nothing of real value.

7. The worst kind is the meddling quangocracy, who not only cost as much as category 6, they actively reduce economic output by imposing all sorts of stupid regulations and restrictions on the freedom of the general public, whether in terms of freedom to live how you like or the free exchange of goods and services.

Then there is the dustbin category of really, really awful spending, but which in absolute terms is nowhere near as big as Categories 6 and 7, such as international aid spending; subsidies and tax breaks for favoured industries; payments to the EU and other supra-national bodies; propaganda spending;all this 'green' crap etc. The list is of course endless and non-exhaustive, but please point out if I've missed anything important.

Just sayin', is all.