Why is it so difficult to shrink government?

Government spending and regulation come about through an alliance of interests both within and outside the government, and once established the incentives to either grow the intervention or to resist change are overwhelming.

State funding has to be administered by someone inside government and is frequently given to someone outside government to disburse. Vested interests inside government often prefer to give it to a single partner organisation so they can keep control, and the partner will typically be a group involved in the creation of the programme in the first place, so they already have a constituency of support.

However valuable and well intentioned the original ideas might appear there is very unlikely to have been a serious cost benefit analysis or even a balanced debate. Immediately the programme is agreed, an unholy alliance is formed with its own very focused interdependent interests.

Government bureaucrats have strong incentives to defend their non-governmental partners and encourage them to find more urgent uses for extra funding because if they can make a good case to their political masters both positions are strengthened by larger budgets.  It is not in their interests to challenge their partners because any perceived shortcomings weaken the case for maintaining or increasing funding.

Moreover, non-governmental partners have strong incentives to promote their case as widely as possible, for example by distributing small amounts of funding to a large number of recipients in order to grow their constituency of support.  It is not in their interest to challenge the bureaucrats or the programmes in any way.

The importance of special interest coalitions is evident in the government’s efforts to cut spending in relation to the numbers and costs of quangos. Those under attack show a remarkable resilience and ability to reinvent themselves in another form or organisation because the interests and determination of those so immediately affected triumph over dispersed groups such as taxpayers.

The Forestry Commission debacle and government support for the film industry and sport are good examples – although the debate about funding for sport is somewhat clouded by the impending Olympics and the unholy alliance’s desire to avoid drawing attention to any shortcomings for the moment.

Also the role of the lottery blurs the lines in the debates where it is involved and although it may be a better way of paying for some things than direct money from the government, because a finite figure is involved, the nature of the lottery’s monopoly needs further exposure and discussion.

Of course the same unholy alliances can now be seen obstructing numerous proposed reforms, very much including health, education and public sector pensions, and even in foreign aid, the one area which has been singled out for expansion.

Unfortunately the general interest is widely dispersed and unless the government trying to make changes manages to focus that interest in its support the case will likely be lost.

In 1983 Milton and Rose Friedman suggested that there was a tyranny in the status quo made up of ‘the direct beneficiaries of laws, the bureaucrats who thrive on them, [and] the politicians who seek votes.’

Unfortunately this tyranny is as alive and vigorous today.

The IEA’s Big Steps to a Smaller State series of events kicks off on Weds 8 Feb, asking Shoud we abolish the DCMS?


Linda Whetstone is Chairman of Network for a Free Society and a member of the boards of the Institute of Economic Affairs, the Atlas Economic Research Foundation USA, the Mont Pelerin Society, the Istanbul Network for Liberty and British Dressage. She runs a small business in Sussex with her husband and writes on agricultural, trade and development issues. She is also daughter of IEA founder, Sir Antony Fisher.