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Small government and low taxes will harm society, not heal it ... or feed it

By Michael Carberry

A foodbank in Nottingham, UK

As expected, Liz Truss has now come out top in the contest to succeed Boris Johnson as leader of the British Conservative Party and Prime Minister. The leadership campaign has been notable for what might be described as a race to the right with all the candidates declaring themselves in favour of what they term “Conservative values”: small government, low taxes, personal responsibility. The essence of this mantra, trumpeted by many right-wing Conservatives Party members, is that tax cuts are necessary to promote investment and create jobs; that individuals are best qualified to decide how to spend their money and that we should encourage personal responsibility and not allow people to be dependent of the government for everything.

It is a seductive message but like all siren songs it conceals an ugly reality. ‘Small government’ and ‘low taxes’ are not of course ‘values’; they are policy options which derive from values – values which uphold individualism against collectivism and put self-interest before the interests of the community as a whole. This philosophy, sometimes categorised as ‘social Darwinism’, the survival of the fittest, is perhaps best exemplified in Margaret Thatcher’s famous dictum that “there is no such thing as society; there are individual men and women, and there are families.”

The idea is, of course, nonsense. Since the dawn of history men have lived in communities to hunt and gather food, for protection and mutual support. To be human is to live in a social group. What has changed over the millennia, is the scale of the society in which we operate. As our interactions with other human beings increased so we have developed institutions to reflect the changed situation. The early hunter-gather groups gave way to the tribe, the tribe to medieval kingship and so on until the development of the complex modern state. Even in ancient times, the most successful and prosperous states were those which had the most complex and proactive forms of government. But it is really since the 19th century, beginning in the UK with the factory acts of the early 1830s which regulated excessive working hours and the exploitation of child labour, that governments began to intervene massively in all aspects of everyday life: education, healthcare, policing, transport, trade and commerce, housing, infrastructure, even sport. The result has been an exponential increase in the quality of life for most of the human race.

Far from being the ‘dead hand’ of government portrayed by right-wing conservatives, for most people, government intervention has been entirely positive: liberating them from poverty, squalor, ill health and ignorance; enabling them to, acquire education and training; and enriching their lives by giving them access to clean air, a better environment, and affordable transport and communications. Anyone who has experience of a developing country where you cannot always rely on these benefits will understand to what extend we tend to take good government for granted. Far from taking away people’s responsibility, positive interventions by government can empower them to take control of their own destiny by opening up new horizons and giving them the opportunity to enjoy a standard of living which their parents could scarcely dream of.

The basis for this kind of constructive government intervention is an intelligent use of the tax system to spread the benefits of a country’s gross domestic product widely across society. The relatively high-tax economies found in many Western European countries tend to be more equitable, more prosperous, more socially cohesive and relatively less scarred by crime and violence than countries with high income differentials between the wealthiest and poorest people. By contrast, low tax regimes are regressive. What is a small tax benefit to the average man is a huge tax benefit to the rich, and no benefit at all to the working poor or unemployed. And what is usually a small financial benefit to individuals represents a huge loss to the Treasury with consequent cuts in resources for health, social care, education, investment in infrastructure and so on. In reality tax cuts represent a channelling of the nation’s resources away from the majority of the population, including the poorest and most vulnerable, in favour of a minority - the wealthiest people in society. In a recent BBC Newsnight programme, Professor Sir Charles Bean, former Deputy Governor for monetary policy at the Bank of England, when asked if he thought tax cuts would help stimulate growth, said he would believe it when he saw it. While he did not rule out that there might be some slight stimulus, that was not his experience. Spending money on helping the least well-off to cope with the cost-of-living crisis would be much more effective, even if to do so meant increased borrowing in the short term.

That is not rocket science, merely political and economic common sense. Investment is demand-led. Almost every additional pound made available to poor or low-income families is spent on essentials - accommodation, food, clothing, transport, beddings, kitchen equipment and other items essential for everyday living. Widely spread across the whole society this increased demand provides a huge stimulus to the economy, provoking a virtuous cycle, stimulating increased investment by small businesses. This is a much more efficient way of creating jobs and raising household incomes than by cutting taxes for the better off and hoping that, rather than spend the extra money on foreign holidays, second homes or luxury cars, which have minimal impact on the wider economy, they might chose to invest it in productive enterprises and hope that some of the benefit will trickle down.

History shows that this is rarely the case. The huge profits made by 19th century mill owners, coal owners or investors in railways, shipping etc. helped to fund the great houses and lavish lifestyles of the Edwardian upper classes but very little of that filtered down to ordinary working people. Come the First World War, many volunteers had to be rejected because of rickets or other diseases related to poverty and malnutrition. By contrast, in the years after the Second World War, the re-distributive tax policies and huge investments in housing, education and health care made by the reforming Atlee government, played a major role in helping to drive the economic reconstruction which led to a prolonged boom with steadily rising standards of living. These policies were largely continued by the ‘one nation’ Tory governments which followed so that in the 1959 general election Conservative Prime Minister, Harold Macmillan, could boast, “You’ve never had it so good.” He was right.

Throughout those years the income differential between rich and poor steadily declined. But in the mid-1970s that process started going into reverse in the wake of the tax-cutting economic policies pursued by the Reagan/Thatcher partnership. The result is that income differentials are now almost back to what they were in Edwardian times with the grotesquely inflated executive salaries of senior business executives, pop stars and professional sports men and women contrasting starkly with the alarming rise in child poverty, in-work poverty, job insecurity, unaffordable housing, and health and social services under severe financial strain.

But Liz Truss and those who have rallied around her are not interested in the well-being of their fellow citizens. The new Prime Minister is on record as saying she does not believe in “handouts”. And despite a blistering attack from Paul Johnson of the independent and highly regarded Institute for Fiscal Studies, who labelled her tax cutting ideas as “simplistic and dangerous”, she remains determined to go ahead, dismissing the opinions of the experts with a breath-taking arrogance possible only in a complete amateur, blinded by doctrine and lacking in the slightest compassion for the most vulnerable in society.

In reality, the advocates of small government do not usually want to roll back the state across the board. They are usually very keen to spend resources on defence, on policing, courts and prisons – on those aspects of government spending which they perceive as being in their own interest, protecting their lives and property. It is an essentially selfish and anti-social position which is fundamentally contrary to the national interest and deeply unpatriotic.

Fortunately, this attitude is not typical of most people. It is striking how, in every country and at every period in history, people rally to the support of their fellow human beings often at no little cost to themselves. From those who voluntarily risk their lives in war zones like Syria or Ukraine, or as fire-fighters or life-boat crews, or open their homes to refugees, or man soup-kitchens or night patrols for down and outs, down to those who just do the shopping for an elderly neighbour, millions of people, in every country in the world feel a responsibility towards their fellow human beings. Many millions more chose to go into occupations such as education, health or social care, or the arts, not from reasons of self-interest – these are rarely lucrative professions – but because they want to do something worthwhile and make a contribution to the society in which they live. People such as these represent the vast bulk of ordinary citizens; people who, in their own small way want to help create a better society. Those, like Liz Truss, who want to roll back the state want to roll back the course of human progress, to make society less equitable and less inclusive. They will ultimately fail because they are fighting against the tide of history – against what it means to be really human.


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