THE FLOURISHING SOCIETY
One of the worrying things about Britain today is our inability to afford many of the public services we would like.
What we feel able to spend on the armed forces leaves us with defences that are inadequate.
Hospitals have waiting lists.
Doctors complain that this country does not offer them living standards to match those of doctors overseas. The railways raise fares and reduce the services they provide. [end p1]
Public services generally seem to be in decline?
There is a pervasive feeling that we are living in a crumbling society.
It is easy to be critical of the way that our public services are run.
But that is not my theme today.
One reason for their decline lies in quite another direction—and this may seem paradoxical. [end p2]
It lies not in our failure to devote sufficient attention to the quality of the public services themselves, but in our failure to recognise that thriving free enterprise is the only basis on which we can develop thriving public services.
Those who work in the public services—the forces, administration, health and education, even politics—naturally expect a similar standard of living to those who work elsewhere.
Many of the products which make up their standard of living are imported or contain imported material. [end p3]
The problem is that very few public services are exportable.
They can contribute little to meet the import bill.
That bill has to be paid for by exporting the products and services and industry and commerce, and over 90%; of these come from the private sector.
The message is simple. Unless their exports are big enough to pay for the imports consumed by almost the whole of society—including the public services—there will be a deficit on the balance of payments. [end p4]
And a balance of payments deficit of this kind is both a cause and a sympton of a crumbling society.
More than this, many of the domestic products and services that go to make up the standard of living of those who work in the public services, are themselves produced by private business.
In addition to paying for most of our imports, Britain's private business needs to be large enough to provide home-produced products and services for everyone in the country. [end p5]
In short, private business must be productive enough to satisfy all the demands on its capacity—both from within Britain and from overseas—and many of these demands come from those who work in public services.
Taxation, and borrowing, are the means by which Governments finance the public sector.
If the demands of that sector are kept within bounds, they can be met by the private sector without draining its reserves.
If the demands are too great, taxation becomes oppressive and industry is left with too little of its own resources for investment and working capital. [end p6]
And money borrowed for the public sector is not available for profitable use in the private sector.
Oppressive taxation and inadequate resources are other causes and symptoms of a crumbling society.
To put an end to the crumbling society, we must ensure that the free enterprise, private sector is large enough, and thriving enough, to provide an adequate tax base. [end p7]
That tax base will be “adequate” if first it allows those who work in the public sector—and indeed old age pensioners and those who are unable to work—to be given satisfactory living standards; and secondly it does so without imposing excessive taxation.
There is only one way in which the tax base provided in Britain by private industry can be made adequate.
That is by reducing the size of the public sector. [end p8]
Under the Socialists, the public sector has grown so much that private business is no longer able to sustain it.
The excessive size of the public sector has led to excessive taxation.
This has contributed significantly to both our balance of payments deficit and our inflation.
Immediate cuts in public spending are essential—real cuts, contrasted with the sham cuts announced by Mr. Healey. [end p9]
He really has been Denis-in-Wonderland. His White Paper promised to bring about a fall in public spending by arranging for it continuously to increase!
Without an effective cut in public spending and borrowing now, a more serious economic crisis must eventually follow.
If that crisis came, there would be no choice—not even for a Socialist Government.
Public spending would have to be substantially reduced. Sham cuts would no longer do. [end p10]
To avoid such a crisis, the Chancellor must ensure that the public services and public borrowing are no bigger than private business and private saving can sustain.
Only in this way can we reduce taxation again to bearable levels.
Without a reduction in Government overspending and borrowing, we risk a new burst of inflation.
This could only be worse than the last one because it would take off from a higher starting point. [end p11]
For the longer-term we can adopt a different approach to the public services.
All of us accept a significant public sector in a mixed economy like ours.
But the size and rate of growth of the public sector must never again be allowed to get out of hand.
In future, the public sector must always be kept to a size which private business can nourish.
If it is, we can change our crumbling society into one which thrives and develops. [end p12]
I want to see a flourishing society, in which the prosperity of all the people will be based on thriving free enterprise, producing the wealth on which alone a healthy public sector can be based.
We offer this vision especially to you who are young, for it is your efforts which will bring that flourishing society into being.
It concerns me greatly that so many young people in Britain seem to see private business as the enemy of the public sector and not as its foundation. [end p13]
They look elsewhere to fulfil their desire to help people: their wish to make their contribution.
But the flourishing society can only develop if more of our most able young people decide to work in private enterprise and especially in manufacturing industry.
As our economy matures, an increasing proportion of our home production, and of our exports, will come from the service side of the private sector.
So to pay for the growing volume of imports we must have for our survival, this country also needs to export massive quantities of manufactured goods and services of all kinds. [end p14]
Those who accept our vision of the flourishing society will recognise that to work in private business is to make an essential contribution to the development of the public services.
Private business provides their very life blood.
We have to replace the crumbling society with the flourishing society.
Indeed, we must go further. We must also have a caring and generous society. [end p15]
That generosity must come from two sources.
Those who are better off must be willing to go on supporting those who are less fortunate—the old age pensioners, those who are unable to find work, the handicapped, and the deprived.
In the flourishing society, taxation need no longer be oppressive.
In it we can willingly contribute, we can afford to contribute, our share of the taxation needed to sustain the old, the unemployed and the unfortunate. [end p16]
Many people seem to believe that when one calls for the encouragement of individual initiative, one is calling for selfishness and jealousy.
This is not so.
We require greater individual initiative to increase our wealth. But when we have that extra wealth, we must use it generously for the benefit of all.
The flourishing society must be a productive one. It must also be a rewarding one. Enforced equality will destroy the whole basis of the flourishing society. [end p17]
For why should anyone bother to work harder than average if he cannot earn more than average.
And average effort from all is not enough for prosperity.
It is another characteristic of the crumbling society.
The Marxist precept “From each according to his ability; to each according to his needs” has a fine idealistic ring about it. [end p18]
But it doesn't work in practice, as Russia's economic failures show.
We might do better to give more weight to a precept of that great Cambridge economist, Alfred Marshall.
He suggested that we should put more reliance on the strongest, rather than the highest, of human instincts.
Or put another way: “fine words butter no parsnips” .
The generous society must reward efficiency and enterprise by paying for it. [end p19]
The enterprising and the efficient are the benefactors of the whole of society—not least of the public sector—and must be rewarded more than they are at present for their efforts.
Perhaps most important of all, the generous society will need a changed attitude to profit.
As opinion surveys have shown, there are still some people who quite seriously imagine that the profits which major companies earn go into the pockets of their directors. [end p20]
Of course they do not.
Much profit goes into the pensions of those who are retired.
In an inflationary period, these pensioners are receiving too little, not too much.
The generous society must see profit not as the privilege of the few, but as the blessing of the many.
Profit is the best measure of business efficiency and the best stimulus to business effort that we have. [end p21]
It is also the main source of the investment in new factories and machinery on which the generous society must be built.
In the generous society, we must adopt a more generous, indeed a more realistic, attitude to profit.
We offer you, then, a vision.
We see a flourishing society where more of our effort, our skill and our ability go into enabling private business to provide the foundation of a healthy public sector. [end p22]
We see, too, a generous society, where the strong help the weak and where the weak see the strong as the source of their hope for the future.
In the words of Abraham Lincoln: “You cannot strengthen the weak by weakening the strong” .
Let us take this vision, and let us make it a reality.