Freeing up social care

Are Private Providence Accounts the solution?

By Eben Wilson

Free the incentives of personally funded providence

That we are to have yet another commission to propose reform of social care was predictable. Hayek tells us that when central plans fail, the response of central planners is always to adjust the plan; which will then fail again; the knowledge being unavailable to planners to construct success. Combine that with a statist program that involves change far beyond the electoral horizon of politicians and policy sclerosis becomes inevitable.

Could there be an alternative approach rooted in a classical liberal perspective; specifically adopting a focus on the interests and incentives of families seeking the freedoms of self-reliance while supporting those unable to harness the wealth to deal with the frailties of old age, physical or mental disability or genetic misfortune?

Adam Smith said: “What is prudence in the conduct of every private family, can scarce be folly in that of a great kingdom”. In contrast, the central state has exchanged private parental thrift based on localised familial knowledge for a public choice of false beneficence through giant, failed, Ponzi schemes where today’s parents are supported by tomorrow’s children. And as has been said, there is no money left.

The arithmetic of escaping from a Ponzi scheme is difficult; you must pay both the dues accrued in the past while accruing savings for the needs of the future. However, the power of compound interest, as always, can offer an escape route.