The long-term challenge this country faces is not the deficit, because with common sense and political will it can be managed almost as comfortably as a similar deficit was in 1993. Rather the danger is that we will get back on an even keel without ever having to confront the fact that we have a dysfunctional benefits system, which has created a hugely corrosive dependency culture in a significant slice of the population and now serves as a huge drag on our ability to compete.Above all it has destroyed the work ethic. By some estimates 70% of the million or so jobs created in this country between 1997 and 2007 went to immigrants, including even the lower-end services jobs in construction, retail and restaurants, because native British workers either did not have the skills or did not want to do the work.Too much of our economic resource is ill educated, unskilled and unproductive, but if we are ever going to compete with Asia a way has to be found to motivate, mobilise and utilise it. This is where insurance comes in. Roughly a quarter of government expenditure goes on benefits of some form or another —unemployment, sickness, housing, residential care, pensions, top-up payments — and we can self evidently no longer afford it, neither in terms of the direct costs, nor in the way it distorts human behaviour.Benefits are in fact the state's way of providing the population with risk management against life's uncertainties, but this is exactly the business of insurance.So when Breedon talks of insurance as being part of the solution he opens the door to a world where much of this provision of benefit is transferred back from the state to the individual.Payments would come not from people paying taxes and collecting benefits from the government, but from people paying premiums and collecting benefits from the insurance industry.In the past the idea has been too radical for politicians to contemplate it but if this crisis does nothing else it provides political cover for contemplating such a move. What is needed is an open-minded examination of how best to provide and pay for basic levels of social protection and then do what is rational, not what is dictated by outdated political dogma.
Thatcher's one time advisor and one of my heroes, Ralph Harris of the IEA, was adamant that insurance enabled Britain's working class to be independent and maintain a strong identity, a pervasive work ethic and enormous self-reliance. The last word I think must go to Arthur Seldon of the IEA;
I was appalled by the insensitivity of governments to the efforts of the working classes to help themselves - the belief that they could not do all the necessary things. I began to sense a sort of anti working class sentiment in all parties. They wanted the State to do these things. They didn't like people to do things for themselves. They thought that ordinary people weren't capable. They forgot all the history of the working classes. The records are that the working classes were sending their children to schools by the 1860s. They were insuring for health cover and so on by 1910 - 11 when all parties in England, the main ones Tory and Liberal, with people like Lloyd George and Churchill and Beveridge at the centre, passed the infamous act of 1911 which forced the working class to insure with the State despite the fact that nine tenths of them were already covered by private systems. Politicians seemed to me to be saying you are not capable, you need us to ensure you take care of your families, which was nonsense.
Finally, I'd like to push you in Guthram's direction for details of a forthcoming series of events coordinated by the Cobden Centre; exactly the sort of thing we need to be talking about.