One of the hardest things for politicians and the public to get their heads around is the fact that most government spending comes with costs. To give the easiest possible example of this, consider a government giving people an increase in their rent allowance to combat the rising costs of renting a home. On the face of it, it is a good idea because it makes homes more affordable for people.
The problem, though, is this: That rent allowance does not make more homes available to rent. The number of places to rent remains the same (at least, the rent allowance doesn’t change it) while the number of people who can afford the cheapest of those homes goes up as a result of the rent allowance increase. As a result, you have more people bidding on the same homes, and if the highest bidder wins, that probably means the rent has gone up. And so, Government spending on rent allowance actually pushes up rents for everybody, which just leads to Government spending more money to achieve the same outcome as it would have achieved had it just left the rent allowance alone. When you increase demand, you increase prices, and the Government often ends up spending more just to stand still.
This is not to say that rent allowances should never be increased: Increasing them in line with inflation, for example, is the best way to ensure that cost of living increases are mitigated while not distorting the market. But big increases can just amount to wastes of money.
It is in that spirit that the Government’s big measure in the budget to make school books mostly free should be praised. It is that rare thing: An example of a big government spending programme that should not, on the face of things at least, distort the marketplace and drive inflation. In fact, if done properly, it might actually reduce costs.
In the first instance, this is spending that does not increase demand: Demand for school books should stay the same, or increase only in line with population increases in our schools. The Government’s actions should, on paper at least, have no impact on the number of books required annually. The only thing likely to change is who pays for those books, which means that money otherwise spent on schoolbooks goes (or more accurately stays) in the pockets of parents.
At the same time, if the programme is properly administered, the Government should be able to secure bulk purchasing discounts on many books. And, were the curriculum properly centralised, it should be able to reduce the variety of schoolbooks in use and reduce it to one or two for every subject or course. This should reduce the total national spend on school books, and is an example of how Government can use its power to create efficiencies.
But with everything, there is a downside, and this is where parents should be wary: If Government is buying the books, the Government is also much more likely to exert control over which books it is that your children are receiving. In most subjects – like Maths or French – that is not something that should keep people awake at night. In other areas, like civics and sex education, the potential for civil servants in the Department of Education to over-reach their new power and pick books that align with their personal ideologies is very high. This will be something to watch.
Nevertheless, this is a minority concern at the moment, for good or ill. For most voters who are parents, Government has simply found an innovative way of making them slightly wealthier. It is, above all else, a very good political move if you are in the vote-buying business, which all politicians ultimately are.
And unusually, it is an example of a big Government spending programme which if enacted properly should have a net positive effect on the economics of the area in which it is being enacted. Whoever came up with it deserves praise.