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We’ve Maxed Out Our Kid’s Credit Card. Can We Stop Now?

Dan Liddicott Midlands Coordinator and Young Libertarians Coordinator


Among all the drivel coming out of the Tory party conference there was at least one brief window of sanity. Ministry of Justice Under-Secretary of State, Dr. Philip Lee MP, admitted in a fringe event that our beloved NHS is actually funded as a Ponzi scheme as he questioned the morality of asking younger people today to keep paying for a service from which they may never benefit.

The BBC reported that ‘the Bracknell MP told the meeting how he had clashed with George Osborne in 2015 after he described the then chancellor’s pensioner bond scheme as “intergenerational theft” designed to woo older voters at the expense of younger people’.

‘He suggested it was not fair to tell the under-44s who were “struggling” with a family: “‘Oh, by the way, we’re also going to tax you even more because this Ponzi scheme that we’ve had in play for pensions and for healthcare and for social care for the past 30 years is about to collapse. So therefore we want you to work really, really hard, but when you get to 65, it’s not going to be there.’ Hands up who thinks that’s a really compelling narrative?”‘ (BBC, 2 Oct 2017)

A damning assessment he’s since tried to row back on somewhat, but in actual fact he’s quite right. The welfare state, in fact, state funding as a whole, is a Ponzi scheme – so groaning under its own weight – that successive tranches of new payees cannot provide enough tax to support it all.

“There is an expectation endemic throughout most of UK society that the government ought to do a lot of things for people. From education, to healthcare, to housing, a great many people think that if there is a ‘social’ need it is for the government to sort it out.”

There is an expectation endemic throughout most of UK society that the government ought to do an awful lot of things for people. From education, to healthcare, to housing, a great many people think that if there is a ‘social’ need it is for the government to sort it out. They habitually use the collectivist nouns of “we”, and “society” as if those others that fall under those terms are all equally consenting participants in whatever is being proposed in their name. And while “we” and “society” can be invoked for what they perceive to be good (helping the poor) or evil (yet another war in the middle east), the concept remains resolutely fixed, and the evil result quickly forgotten. We should not be surprised, people love sweetness and light – especially sweetness. We are experts at ignoring those things which conflict with our world view and with which we disagree, while simultaneously supporting policies which bring about those very ends we hate. In spite of this, in their own mind these most by and large are honest, hardworking, genuine people who, at the bottom of their hearts, believe in what they espouse regarding the welfare state – to contribute into it and take out of it when they need it. They, many of them, honestly believe it to be a ‘moral good’ to pay tax and leave it to the state to then look after them.

In theory, perhaps that wouldn’t be such a problem if it were voluntary. But there is a problem. It isn’t and never was, viable. The notion that a person can ‘pay in to the system’ their whole life and expect to be taken care of from cradle to grave is, forgive the pun, bankrupt! The generation who bought into it were sold a lie. The generation that followed it, believed the lie, and by now it is plain that this was a con. Yet successive governments, and generations of voters, have kicked the can down the road term after term, none of them having the guts to point out what is made clear with common sense and simple accounting – there isn’t enough money to do this.

So what was going on? If you think you can pay into a pot, and then withdraw at some later date some needed amount, then logic dictates that you, “we”, “society”, must have expected to pay in some amount of money in the equivalent of what you, “we”, “society”, later withdraws. If this was your bank account you could only work on such a principle, and only withdraw up to that amount that you had previously paid in. Amazingly this logic was not applied to the welfare state, and still isn’t. Instead a woefully inadequate amount (though costly to the individuals) gets paid in compared to what gets paid out. The welfare state, after all, may attract infinite demand… which it must then meet from only finite resources. But these trifling small details never mattered because as a philosophy it feels good. The collectivist nouns come out, “society” will look after us. “We” are all in it together. The warm fuzzies displace rigorous accounting, and visions of utopia dance in our heads, even though it runs headlong against everything that is common sense. Even if half of the “we”, rich or poor, don’t want to be “in it” with anyone – they are coerced into it, they don’t have the right to do their own thing, they are made to join in – how warm and fuzzy that must be (another topic).

By now it is clear that the promised socialist utopia is not coming (it never was), yet the creaking left over institutions are clung to by weeping masses of people as if they have magical properties capable of defying basic arithmetic, or they stand mesmerised by the smoke and mirrors while studiously, or ignorantly, paying ‘no attention to the man behind the curtain’ (as in the Wizard of Oz).

With every ounce of the common sense of our forefathers forgotten, with Dickens’ words of Micawber – that we should live within our means – ringing unheard after us, the wisdom of ages was put to one side, and replaced by belief in something akin to fairies, unicorns and magic dust. What in fact? Belief in a politician’s lies (that the collective noun will look after us). Do we never learn?

Under these conditions, expectation and demand were divorced from actual effort, results or resources. As a result, over time, what was no doubt a boon to some people in genuine need – became an entitlement for many and then a right enshrined in law for all. The law is, after all, an ass – but must we be reminded in so dire a fashion?

You see, it is easy to declare things in law, it is quite another to provide them. As former Secretary of Agriculture under Eisenhower, Benson, put it:

“Unless the people bake one loaf of bread for each citizen, the government cannot guarantee that each will have one loaf to eat. Constitutions can be written, laws can be passed, and imperial decrees can be issued, but unless the bread is produced, it can never be distributed.”

Except that, as usual with such systems, there were never enough ‘loaves of bread’ being baked for these projects, and there were never going to be.

“…no wise provision had been made for the future as would have been the case were individuals to have kept their money for their own future…”

Quite early on this must have been obvious to some few or many holding the reins of power. Yet, for whatever reasons of their own, perhaps popularity, the foolish path continued to be traversed. So in thrall of the philosophy, and so ignorant of the lie, the population would not see it any other way than their right. It must have been clear that this could not work, but pride, ignorance or dissonance or whatever it was, provided a powerful anodyne. Whatever the source of the deception or reason for the ignorance, what should not have been forgotten, was lost – that the system was not self-funding – and so to perpetuate it, to meet demand, it was, to all intents and purposes, a Ponzi scheme.

A Ponzi scheme is a form of fraud in which belief in the success of a non-existent enterprise is fostered by the payment of quick returns to the first investors from money invested by later investors: an apt description of the welfare state. In essence, it was necessary that for the system to keep going without revealing its failure – the withdrawals would have to be bailed out by those who perhaps thought they were contributing to their own futures. In reality it was more like current workers paying for current pensioners, and current healthy people paying for current sick people, and current working people paying for current unemployed people. How do we know recipients do not understand this reality? Because those now retired, in all honesty and sincerity do say (for I have heard them) – “I paid into this my whole life”, and no doubt the vast majority did! Unfortunately, when they came to make their withdrawal there was no money building up, there was no policy maturing, it had already been spent on other people. Those paying in now will find exactly the same when they come to retire – their contribution will have already gone.

But the money they ‘contributed’ had not only gone on other people, it had gone on other things. There had been no transparent link between contributions and their promised purpose. Government after government had directed funds however they pleased, no wise provision had been made for the future as would have been the case were individuals to have kept their money for their own future savings, insurance or pension. None of that had happened! No, it had been spent. It was a fraud on a massive scale. But rather than revolution an utterly bizarre stockholm-esque expectation set in. Instead of “what have you done with my money?” it was “I’ve paid in my whole life now it’s someone else’s job to pay for me”. But not in those words, because the connection is rarely made. You see rather than fully realising the awfulness of the situation – that, yes, we are really asking future generations to pay for our lack of preparation, wisdom and austerity – we blame government. “It’s the government’s fault”. Well, in many ways it was, because they lied, and they covered up failure. But it was also our fault, because this was obvious! Or it ought to have been.

Consequently, not only have successive governments, with a blithely complicit population, reached the point that they dared not tax current workers any more than they have, they still cannot pay for all the demands. Yet rather than admit this is unsustainable they decided to keep borrowing. Borrowing!? What were they going to pay it back with if we can’t pay our bills now? On who’s authority? On mine? On yours? Did you sign a credit agreement? I didn’t, but we are on the hook for it, with national debt now equivalent to £78,000 per person and climbing. How much?! Would any of us, if offered a £78,000 credit card have maxed it out on all the things our government did? No. And over the years they just didn’t stop. Successive governments have in effect signed credit agreements that people will have to honour who have not even been born yet! (Talk about taxation without representation). We really have maxed out our own cards and are maxing out our kid’s credit cards too.

And in spite of all of that no one seems willing to address this! Much sympathy is, perhaps rightly, with those who are now tight on funds who expected better care from the fraud and now can’t have it. The chickens are home to roost, this should have been stopped decades ago. Barely one in ten has the guts to sit down, to do the figures and admit that what we thought we were owed we cannot afford to be given. The Ponzi scheme is still running, so something needs to be done to wind it down, but that is not happening. Instead government continues to be blamed, which makes us feel better because we complained a bit, and we can pretend it’s not our fault, and that means we can still demand ‘our rights’ no matter what the cost to future generations – whether that be NHS, or pensions, or vanity projects or anything the government does that we want. In so doing we claim to be aggrieved in the very act of being selfish. The sa