Wednesday, June 23, 2010


We are all used to hearing, both, that the average person needs, for instance, the NHS, or needs the state to fund schooling, and should tax the rich to pay for this. We are also used to hearing that libertarians are nuts because the state should at least provide people with a "safety net." It is not clear what is meant by the analogy of a safety net, despite its being trotted out so regularly. One gets the idea that those that use it like to think that people should work to support themselves by their own efforts, make provisions for themselves "just in case," but, as a last resort, something exists between them and starvation/death if these efforts should fail. I think this is a fair summation. Indeed, Churchill described the concept of a guaranteed minimum income as being a floor beneath which none may fall, though they could still climb ladders to earn an even greater income. I suppose, in political philosophy terms, philosophers would refer to it as a "sufficiency theory" of distributive justice: Above a certain level, it doesn't matter how much more some have than others.

The trouble is, though, I cannot see how this idea of a welfare state as a safety net, even if it was a good idea (it might be appealing, I'll grant, but complaints could be made that it still involves some coerced transfers, or that absence of a safety net creates more incentives to develop ways to ensure one never falls, or that the cost of the safety net may itself impose height limits on Churchill's ladders, so preventing others from being as successful as they could be), justifies anywhere like the existing welfare system. The principle reason is that our welfare state, by which I mean not just the various benefit arrangements that fall under "social security," but also the NHS, the state education system, the national pension, etc., quite simply is not a "last resort."

Just take, for example, health. The NHS is considered the crowning glory of the post Second World War attempts to increase the degree of social democracy in the UK, and make this country a fabian socialist society. Touching it is political death, even now. But in 1939, even though nineteen million people were covered by compulsory national health insurance, that being two fifths of the population, another 27.5 million people still obtained GP's services through either direct payment, friendly societies, dispensaries, etc. Little of this seems to be the case now. The first port of call for most people is the NHS, and only a fifth of the population in 1990 were covered by private health insurance.

I suggest, in contrast, that the average person even in today's society, is quite capable of doing without all this, or much less of it. I would, of course, as market anarchist, suggest that the state should do nothing at all. But, I would like to show that the average person, even in today's society where prices are held up by state granted monopoly privileges, where the value of money is reduced by inflation through the state banking system, and where people are taxed on the goods they buy, the income they earn, and the property they live in, the average person does not need the state to pay for his or her child's education, needs it far less to pay for their healthcare, and needs it far less to pay for police patrols.

First off, who is the average person. Since we are talking about what the average person can afford, we need to know what the average person earns. One form of "average" is called "the mean." This is worked out by adding all incomes together and then dividing the sum by the number of incomes there are. The trouble with this figure is that if by far most people earn a small income, but a minority earn a very large income, the mean income will actually be a good deal higher than the income most people actually earn.

A better way to work out what most people earn is to find out the median income is. That is determined by putting all incomes in a line, and finding out which income is in the middle. This way the number of people earning different levels of income is taken into consideration.

Median monthly income is £2072.

A rented two-to-three bedroom house costs £550 pcm.

Food for two for a month would cost £200

Income Tax on a median income would cost £314
Council tax on a monthly basis would cost £87

National Insurance on a median income costs £178

Gas, electric, and phone/broadband/set top £130

That comes to a total monthly expenditure of £1459. Median monthly income minus monthly expenditure leaves £613.

The mean cost of a private prep-schooling per month for one child is £487 (£14,000 plus £25,000, divided by two for the mean, divided by twelve months).
Health Insurance for one adult and a child would cost £60.46.

Those come to £547.46. Taken from £613, that leaves inly 65.54 a month. That would mean no savings, and nothing set aside "just in case," or money for entertainment and clothes, etc.

Nope, a household with two earners would probably be needed to pay for all this.
If another person in the house got a part time, twenty-four hours a week on minimum wage, that would bring £554.45 a month. Income tax on that would be £10.31 a month, and National Insurance would come to £10.94. That leaves net pay of £533.20 a month. Added to the leftovers, that means £598.74 more to have for entertainment, clothes, and "just-in-case" things. Of get a private schooling for another child, and add that child, and partner, to the health insurance.

The average family income is £32,779 before tax. That is £2731.58, which is an extra £105.58 a month beyond the combined pre-deduction income of the hypothetical couple I imagined above. That means that the average family could afford what I have suggested.

So, the average family (the average number of children is 1.8) does not need state funded education and could pay for private schooling, and could afford to pay for most medical costs through private insurance.