THE PRESS FRIDAY, OCTOBER 31, 1986. Making government pay

Press, 31 October 1986, Page 20

THE PRESS FRIDAY, OCTOBER 31, 1986. Making government pay

The president of the Federation of Labour, Mr Jim Knox, is not altogether astray in his criticism this week of an accountant’s approach to government. He was straining credulity a bit with his suggestion that the slavering wolves of private enterprise are poised to tear the public services in New Zealand to shreds for gain. He was closer to the mark with the statement that not all functions of the State can be reduced to commercial efficiency, to dollars and cents and profit and loss as the present Government is keen to do, without putting essential or valuable services at risk. Government is not an exact science; nor is it an exercise in accountancy. Any Government worth its salt will do its best to avoid profligacy and waste of its taxpayers’ money, of course. This is not the same as making a profit out of all of the functions of government that can be made profitable, and dispensing with the rest. Part of the reason that people in democracies consent to be governed is that the State can provide necessary services, or services that the people agree are desirable, which otherwise would not be provided. Sometimes this is because no individual or group of individuals is big enough or wealthy enough to provide the service, or to provide it evenly and adequately. The job requires the combined resources of the whole country. Often the reason a service is left to the State is that it is unprofitable and the inevitable loss is better shared.

The best government might be the least government; but in a modern, complex society it must be admitted there is more for a central administration to do than regulate the evil-doers, tax those who behave, and generally annoy all those under its sway. The provision of education and health services, for instance, is commonly held to be a proper function of government. The taxpayer who foots the bill expects value for money, but this is very much a subjective analysis and no-one seriously expects to be able to quantify the benefits in terms of dollars and cents. Nor would anyone seriously argue that, lacking a calculable profit in the balance sheet, education and health services should be dispensed with.

Yet this is the logic being pursued in some other areas of the public sector, where

services more mundane but no less worth while have come under threat from the pay-or-make-way policy that the Government is pursuing. The fallacy of treating all of the Government’s functions as expendable when financial returns are absent was expressed succinctly in Mr Knox’s address to the Asian and Pacific Conference of Public Employee Unions: “Measuring social efficiency in commercial terms is like trying to measure height in kilograms.” Thrift is a virtue in Governments as much as in individuals, but strict adherence to the profit motive in all its business is not good government.

Some Government services are not supplied evenly and it is tempting to suppose that these should be paid for directly by those who want them. The proposition breaks down immediately in respect of health services. The criterion for these is need as it arises. Scientific work done by Government agencies is another example of a legitimate State responsibility that should benefit the whole community. This research, however, cannot easily have its worth measured in dollars and cannot be apportioned precisely to particular consumers of the results. Governments must recognise that charges, reasonably levied on most people, may not be sufficient to provide a service to all; the taxpayer can fairly be called upon to pay for a subsidy to ensure that the service is equitably available.

Too much reliance on the user-pays slogan may even mean a dramatic slowing down of economic activity as well as a collapse of social services. By the time that people have worked out who should pay, the service may not be supplied at all. Standards of living fall as a result, simply because no clear channel of demand is created. Governments must be prepared to perceive social needs. Insisting that, unless someone comes forward with the dollars, the need does not really exist must end in a decline in the general welfare of society. All this assumes that the community has the basic wealth to sustain the standards to which it aspires, and a fair tax system that is capable of capturing some of that wealth for the purposes of the State as a whole. The decisions on what services shall be supplied must then be political, not accounting decisions. Mr Knox did well to draw attention to that point.