It’ll cost you

Charging for public services sometimes makes sense. Often, though, it is a racket

GETTING divorced? Going to the doctor? Flushing a loo? If so, you are increasingly likely to receive a bill from the government. As cash-strapped Western countries try to balance their books without raising unpopular taxes, they are charging higher fees for everyday services. American cities tap their residents for around a quarter more in such charges than they did at the turn of the century. Half the countries in the EU have increased health-care charges since the financial crisis. In Britain, where a severe fiscal squeeze is under way, new fees are popping up in unexpected places, from the criminal courts to municipal pest-control agencies (see article).

Pay-as-you-go government has advantages. Charging for services helps allocate resources efficiently, deterring overconsumption, just as parking meters stop people hogging spaces. And far from being uniformly regressive, fees can be fairer than general taxation. Selling water by the litre, as Ireland controversially began to do in January, means frugal users pay less than those whose taps gush. Tuition fees reduce the subsidies paid to students by those who never enjoyed the benefit of university. Some of the biggest consumers of free or subsidised services are the middle classes, who ought to pay.

But the recent spread of fees has less to do with economics than with political expediency. Politicians have seized on charges as an easy way of raising money, and have inflated some fees until they bear little relation to the cost of the service supposedly being purchased. Too often the result is a regressive, economically distorting swindle.

It is no wonder charges are popular with governments. Rather than being flagged up in finance bills, as new taxes are, they can be slipped into legislation that attracts less scrutiny. And they can be aimed at politically unorganised groups, rather than the public at large, meaning they are less loudly opposed than tax increases or welfare cuts. Britain’s government will lose fewer votes over a jump in the cost of getting divorced than an equivalent cut in benefits to the elderly, say.

Yet when a charge exceeds the cost of a service it becomes a tax. Take, for example, a visa for a dependent relative settling in Britain. The fee is £2,141 ($3,370), more than treble the true cost of processing the application. Immigrants pay a “surcharge” for the National Health Service whether they use it or not.

The easiest to soak are those who use the courts—literally a captive market. In Britain new charges mean petty offenders sometimes pay more in fees (over which judges have no discretion) than they do in fines. In America, whose courts are the most entrepreneurial in the developed world, charges are so high and widespread that many offenders end up in jail for non-payment. Criminals elicit little sympathy, but victims are being fleeced, too. After Britain introduced steep fees for employment tribunals in 2013, the number of sex-discrimination claims fell by 83%, with no surge in the success rate, so far—suggesting that people with strong cases have been priced out.

Giving with one hand

The root of the problem is an inability to raise money by more transparent means—that is to say, taxation. In Britain local councils are prevented from raising taxes by an overmighty central government. Elsewhere, notably in America, politicians have an ideological allergy to tax increases. This newspaper shares their desire for small government. But advocating low taxes while backing bogus, revenue-raising “charges” is a phoney sort of fiscal responsibility. A system in which the public finances are topped up by milking those unfortunate enough to need services over which the government has a monopoly is not responsible, it is a scam. –http://www.economist.com/news/leaders/21662545-charging-public-services-sometimes-makes-sense-often-though-it-racket-itll-cost-you?fsrc=scn/tw/te/pe/ed/itllcostyou