The politics of incentives

Why is the Right so obsessed with the notion that incentives are the answer to all our problems?

 

Are incentives the answer to mobilising people? © The Conservative Party

 

It started with market-led interventions in education.  Lower socio-economic groups both underperform educationally and are underrepresented in the best schools.  A Conservative solution? Expand the academy and the free schools programs.  Why? Because, as they have the most to gain, it will be disadvantaged and minority communities that will make the most out of these opportunities for more freedom in the setting up and running of schools.

As it turned out, this was just the beginning of a Conservative Party policy drive that reflects an insistence on market based economic solutions which is at odds with their claim to be a Party of the centre.

Following education reform, the Party’s attention turned to health.  Andrew Lansley has been fighting an uphill battle since early 2011 to convince the electorate that GPs know best when it comes to healthcare.  They have the right information, and importantly, could significantly cut costs.  To hell with claims that the door for privatization of the NHS will be opened, with potentially damaging consequences.

Given the importance of these two sectors for the overall functioning of the economy, one hardly needs any more evidence of the Conservatives’ refusal to abandon the economic (and political) right.  But the evidence is there for all to see.

Chancellor George Osborne has been one of the staunchest opponents of a Tobin style tax on financial transactions ever since the idea came to inter-governmental discussion.  ‘It provides an incentive for our best performing companies and our wealthiest individuals to relocate’ was the cry.

Fast-forward to this year, and the brain drain argument was used with equal vigor to justify the scrapping of the 50p tax rate.  Apparently, a 5p reduction in the rate of tax paid only on income over £150,00 will make all the difference to our economic prosperity.

The debate over the Government’s ‘workfare’ program increased in intensity early in 2012.  Again, it seemed that, as long as businesses had an added incentive to hire people, nothing else mattered.  Most recently, by hitting parents in the pocket, increasing fines for truancy is hoped to be the most effective way to keep children in school.

Conservative economic thinking was also behind the decision made to freeze the national minimum wage for under 21s as of October.  The last thing the government wants to do is to impede job creation by making employers pay too much for their young labour.  Interestingly, this decision was announced by Liberal Democrat Vince Cable, proving that, even as a Coalition, the Government is not afraid to lean to the economic right.

This adherence to the ideology of incentives certainly goes beyond areas normally conceived as ‘economic’.  For instance, Justice Secretary Ken Clarke’s proposed prison reforms under which jail time for certain offences could have been halved were ditched partly on the basis that this would encourage more crime.  But prison doesn’t work, mainly because the function of (punitive) incentives isn’t as black and white as that.  When reconviction rates still top 70% in some prisons, something has to change in terms of priorities.

But such a radical shift in economic thinking is unlikely to happen.  Cameron’s centrist image should not be fooling anyone; the Conservatives really are committed to traditional, incentive driven economics.

 

Justin Cash is an undergraduate at Durham University studying Politics, Philosophy and Economics.  He writes for a range of publications, and you can read his blog here. Find him on Twitter @Justin_Cash_1

 

This article was originally published at Catch21