Is revenue from taxation the best way to fund services?

[stui magpie]

Thought experiment.

I thought I'd split this into a separate thread before David could.

OK, so I'm not an economist or historian or anything so the concepts I put across here are raw, but I'm interested in the thoughts of others.

The traditional model of running a group, lets just say country for simplicity, is for the rulers to collect revenue from taxing the population. This revenue is then used to pay for services for the population. In the past it was to pay for the armies etc but same principle applies.

So the traditional way is/was fully centralised or nationalised services. We can probably use post WWII England as an example of how badly that can work but I'll leave that commentary to Mugwump.

Selling off government assets and privatising services in Australia has had, to be fair, a mixed result but that doesn't mean it can't work well.

Health and education already have competition from the private sector but the playing field isn't level.

So, here's the thought experiment. Could a countries government govern and provide effective services with zero taxation and a miniscule by comparison public service with effective use of outsourcing?

The governments role, apart from law making and stuff, would be to determine what needs to be provided, work out what what the success measures they want achieved are and then contract out that service.

They don't sell it off and abdicate control, they retain total control of what's important and then contract that out to providers.

You don't need to have a sole provider for a state, let alone a country, you could contract a number of different providers to generate competition. Put each provider on a 3 year contract with renewal subject to achievement against target and competition against other providers.

You charge the providers a licence fee and provide them with limited not for profit status but with total transparency of financial reporting.

Using primary and secondary education as a rough example, the government would set the base curriculum and other mandatory requirements, fix school fees to a maximum figure based on a % of the parents income which the government has, and generally provide the framework but not the service.

Hypothetically I could see something like this working but I'm sure there's holes in it. Social security for example. I'm not sure of that, I haven't thought that deeply into it but I'm sure if we can step away from the traditional method of just handing over cash, there would be a variety of potential solutions of varying degrees of palatability.

Thoughts?

Ptiddy, try to keep it to yr 10 level, WPT, try not to let the programming by the KGB agent masquerading as your sociology professor back in the 60's inhibit your thoughts.

Has this model been tried anywhere?

[David]

It sounds like a bit of an American libertarian dream. Okay, granted, contracting is not quite the same as full privatisation. But you're still working on a system where all the money for infrastructure is coming from private sources (by necessity, if you've eradicated taxation). Except you probably dramatically increase the incidence of cronyism and backroom corruption as governments spend most of their time picking one contractor over another. Not saying there's nothing to it – and there are probably complexities to your proposal that I've overlooked – but I think I have more instinctive faith in a single public sector.

[stui magpie]

But your instinctive faith in the public sector is based on your perception having never worked in it or had a lot to do with it.

Cronyism and backroom corruption can be dealt with if you put the appropriate rules in place up front.

The revenue from the licensing fees would fund the outsourcing administration.

[David]

BTW, where do these contractors generate their budget from if they're not able to compete on the open market? Is what you're proposing kind of like a user-pays system?

[stui magpie]

With no taxation there'd need to be a user pays system, with appropriate constraints, checks and balances such as people below a set income level get the service free then a sliding scale. Like taxation but instead of the government collecting and spending the money, service providers compete for the right to buy a licence to operate for 3 years and fund their activities with the revenue they collect from providing the service.

[stui magpie]

BTW, I'm not proposing this as a viable alternative, I'm asking the question would it work? It's almost the polar opposite to the idea of the government needing to provide all the services and pay via taxation. Someone still needs to pay, people don't work for nothing, just testing the boundaries.

I can see holes I could drive a truck through but I'll leave them to others to come up with. I'm just challenging the traditional dynamic and asking what if. I think the concept is workable but would need a lot of fine tuning.

[ronrat]

I have seen outsourcing in Defence and it is largely shambolic. They have to retain staff and buildings to manage and negotiate the contracts.Invariably something comes up that was missed and the renegotiated contract costs you and arm and a leg. The following are real examples. A new catering contract was let at the Naval air station at Nowra. An in house bid lost on cost. By not much. The new contractor moved in and the next day at breakfast in the sailors wardroom there were no condiments. Oh you want salt and pepper and sauce. 800k later. Dog food was left off the catering contract in SE QLD at Oakey and Amberley and it took months to sort out. Maintainance contracts were worse. Technical skills were lost and when they were needed in the field it was too late.

Ban anyone say if the prison system is better? Do we want lots of toll roads ? I live about 2 hours from Bangkok and have to go through 5 tolls to get there. Who decides where roads and rail lines go? Speed cameras aside what part of the police force can we privatise. We already pay for the other emergency services through insurance levies but should we have a police levy. The sporting bodies pay, why not the citizen?

Can we outsource border protection and biosecurity? I suppose you could but it also provides valuable training for the Navy.

Fully sell of the ABC and SBS. Great, more reality and ME ME ME shows. Sell off the art galleries. The Museums. Our parks and gardens. They just charge more to get in. Plenty of land tied up in sporting facilities and footy grounds.Council provided grounds can be taken over by Spotless and those pesky volunteers replaced by kids on 10 bucks an hour. National archives can be run privately and researchers pay bigger fees. Same with free libraries. You rent DVDs, why not books?

Bike riders can start paying for the public land they use. Skateboarders too. Stuff it walking tracks too.

Hand over Indigineous housing to real estate agents.

I mean abolishing the CES was a great idea. The organisations that replaced them border on criminally taking money under false pretences.

And lets get back to paying to take a piss in public toilets.

[David]

Well said, RR. Not sure if all/most of that would eventuate under Stui's proposal, but that's certainly the direction that a taxless system would take us.

Here's another amusing what-if scenario (I suspect WPT and others will enjoy this):

http://www.newyorker.com/humor/daily-shouts/l-p-d-libertarian-police-department

[stui magpie]

Pretty sure Wokko has posted that before.

[David]

I think I'd happily file that under the category of "things that are worth posting twice".

[Mugwump]

^ Well I missed it the first time, so now it's worth posting three times. High-quality journalism and worth paying the government for.

[pietillidie]

On the OP, plainly it is, assuming we define these services as "essential productive social infrastructure" whereby:

• (a) There is an essential social minimum that cannot otherwise be guaranteed;
  
  
• (b) it is uneconomic to meet the essential social minimum at standard without the scale of a single or near-to-single provider (e.g., health care);
  
  
• (c) the services concerned are natural monopolies within the given context (e.g., providing fast broadband to Australians versus providing it to Hongkongese).
  

Other factors matter, too, such as highly-sensitive areas of security which are best served by single points of responsibility.

One of the major illusions here is that adjunct basic services, such as private security companies, private schools and private hospitals, and so on, all seem to do well enough on their own. And yet, they actually depend thoroughly on the core state infrastructure. Take away state infrastructure and funding, and those adjunct services are no longer economic and reliable, and become exclusively upper-tier services for the very wealthy.

We can debate certain things around the margins, but the ideology of blind privatisation is a religious nonsense. No one has ever produced data showing governments do worse than private companies in most of the traditional major social service areas dollar-for-dollar; nor that their waste is worse; nor that they're less accountable. People who believe that are invoking a Jesus ideology call, not valid real-world data.

Actually, in some areas the data are quite clear: E.g., during Obama's effort to introduce sane and rational single-buyer scale (i.e., governmental scale) to US healthcare, plenty of work showed the government system was vastly superior for obvious reasons such as its ability to negotiate with pharmaceutical companies, medical equipment suppliers, and so on.

Another illusion here is the difficulty of perceiving the importance of the stability of the social whole in daily life. You can't have military, health, public transport, education, telecommunications Dick Smith insolvencies without buggering up too many lives and too much of society. Imagine the chaos of that stuff happening all across essential social services - it would look like the market equivalent of a broke old socialist tyranny, or perhaps post-GFC Greece or one of the more impoverished and dysfunctional US states.

The importance of maintaining the stability of the whole across these key areas means you need layers of oversight so thick that you might as well be running them yourself. In fact, more than just "you might as well", a layer of government oversight under a layer of corporate delivery only leaves you with finger pointing, multiple failure and responsibility points, and so on. So you probably "have to".

Governments face the electorate; customers of private companies regularly face 50 minutes on hold for zero enforced responsibility taking. Elections are enforced and guaranteed responsibility taking, while governments are also subject to ongoing critique far more than private companies in the media, because governments are vastly more open by definition. Yes, they try to hide stuff, but private companies can hide stuff by right, and if there's cartel behaviour in the market or limited choice, elections actually amount to greater accountability than consumer behaviour.

So, not only is poorly-targeted privatisation uneconomic, unreliable and discriminatory, it also makes government capturable through backroom bribery, revolving doors and cronyistic transfers, rather than making them capturable by democratic election alone.

The final illusion to highlight is one we are all prone to, and one which cancels out the vast bulk of unreasoned opinions people blurt out on the subject. The vast portion of people hate whatever they perceive to be in their way. For some, its unions making management less flexible; for others, its the lack of unions buggering up their lives as family providers; for others it's government regulations foiling their plans to rule the universe; while for still others it's the lack of government presence keeping life-saving drugs beyond their grasp, or a decent education and a decent meal because dad left and mum is an insufficiently-treated manic depressant. Or whatever: One woman's interfering government is another woman's life saver.

A small handful of countries which act as effective tax havens or capital transit points can survive on low tax as they attract out-sized international investment and investment transactions, and can live off a lower tax on a greater number of transactions. But you can only have a couple of those small states in any region at most; obviously, if everyone were a capital haven the very concept would cease to exist, leaving you with a whole bunch of very poor, very unstable countries.

Overall, states without large transfers to large governments which deliver a large number of services are complete rubbish. Just totally crap dysfunctional messes. At the same time, this also implies a corollary every bit as crucial: A minimum amount of free enterprise is every bit as important as a minimum amount of quality-guaranteed government delivery, because of course you can't collect taxes without a great and vigorous market economy which is highly-productive and generates excess wealth. This, in my view, automatically excludes any form of socialist exercise from the discussion.

Put a minimum amount of quality-guaranteed government delivery and a minimum amount of vigorous market activity together and you get one or another version of the HQ countries you see in the world today. I can't see that combination changing in medium-term future, though AI has the potential to change the balance of things longer-term.

[David]

[stui magpie]

[David]

But in a purely free market, would such a charter be viable? I tend to think not. The job of a corporation is to maximise profit for shareholders, and the sad fact of the matter is that The Herald Sun makes money and the ABC – if it had to compete on the open market – probably wouldn't.