Free stuff isn’t the answer to poverty
This follows a Scottish government trial of giving out sanitary products at food banks. This trial has been deemed ‘successful’, presumably in the sense that the free tampons and sanitary towels have been taken up. But as one of my female colleagues has observed, ‘you could leave free sanitary pads in the ladies room at the Ascot Royal Enclosure and I’m sure they’d disappear just as quickly’. People rarely refuse free stuff.
We should not belittle poverty, but giving things out for free is not a sensible way to approach the problem. Yet governments continually do this. It is inefficient and permanently locks in public spending even when people’s needs change. For instance, concerns over ‘fuel poverty’ led to the Winter Fuel Allowance, given to all pensioners, despite pensioner households now having higher average incomes than those of working age. Scrapping this benefit, or free travel on buses, or free TV licences for older pensioners, is now apparently politically impossible – although the resources involved could be put to much better use.
Something similar is happening with childcare, as Ryan Bourne and I have pointed out. The government’s offer of 30 hours free childcare is now considered a ‘right’. It will be very difficult to row back from it, even though it is having a negative effect on nursery workers’ wages, raising prices for those not eligible for the offer, reducing the availability of good quality care, and being disproportionately used by those who could afford to pay for it themselves.
It’s not quite the same thing, but we spend £25 billion a year on housing benefit to provide highly subsidised housing, which drives up rents and locks people into unsuitable accommodation, reducing labour mobility and thus productivity.
Many people would like to see the state go much further. The grandly-named ‘Institute for Global Prosperity’, an outfit based at University College London, is proposing we spend an extra £42 billion pounds annually on ‘universal basic services’ – free meals from a ‘national food service’, free phone and internet services, free housing, free TV licences for all and so on. Labour’s John McDonnell is unsurprisingly keen on this idea and has set up a working party to examine the proposal.
Advocates of this scheme explicitly see it as an extension of the principles underlying the National Health Service – which ought to ring some alarm bells. As we have again seen recently, this behemoth has an insatiable appetite for taxpayers’ money and is apparently unreformable. The idea of creating a range of similarly open-ended ‘services’ should give us pause.
One of the first things taught in economics is Lionel Robbins’s definition of the subject: “the science which studies human behaviour as a relationship between ends and scarce means which have alternative uses”. Because we have an infinity of needs and wishes, we have to allocate resources sensibly. Providing things for free does not help with this. It creates a sense of entitlement and takes responsibility away from individuals. It encourages waste and misallocation of capital and labour, since people are happy to consume things for which they would not be prepared to pay the cost.
There is genuine poverty in Britain, as in all countries at all times. But a sensible anti-poverty policy helps people into work where possible, supports their income if need be – and could do so more generously if we cut back on freebies to those who don’t need them – and encourages people to make their own decisions on how they spend their money, rather than distorting free choices by giving them what pressure groups like the BMA think they should have.