FRIEDMAN'S BIG IDEAS BACK IN VOGUE WITH RIGHT-THINKING BLAIR

It's enough to make Harold Wilson spin in his grave. Nearly a quarter of a
century after the previous Labour government was replaced, the ideas that
drove the Thatcher revolution are back in vogue with New Labour.

That's the claim made by some critics this week as the ideas of Professor
Milton Friedman, the great American monetarist, appeared to crop up in
several key government policies. The Nobel prize-winning economist, who
reaches the grand old age of 91 this July, has been credited as the
inspiration for the congestion charge introduced in London last week.

But his influence, although well known for its impact on Conservative
thinking from the Seventies to the present day, is also claimed in
everything from an independent Bank of England to a soft approach to drug
policy.

Mr Friedman, with his own inspiration Friedrich Hayek, is the man who has
made it his life's mission to promote the supremacy of the individual and
free markets in public policy. A staunch anti-Keynesian, Mr Friedman's
ideas reinvigorated the right on both sides of the Atlantic, a power
reaching its peak under the Thatcher and Reagan governments.

As much as old Labour MPs may dislike it, some of those ideas, from
demanding responsibilities as well as rights from welfare claimants,
letting the private sector build schools and hospitals and promoting global
free trade, are alive and kicking in Downing Street.

Congestion charging has clear Friedman roots. In his 1951 essay How to Plan
and Pay for the Safe and Adequate Highways We Need, he stated that "on a
crowded road ... it would be desirable to discourage traffic ... The people
who drive on a road should be charged ... in proportion to their use of the
service".

Forget Red Ken, this is true blue Milt talking. And of course, it was a
Labour government that legislated to allow the London experiment.
Similarly, Tony Blair hinted recently that he backed the use of wider road
tolls in Britain.

In a recent article, the Prime Minister wrote: "We must ... set the
parameters for the future partnerships we will need between tax-funding and
personal contributions, for example through user charges for road use or
university courses."

Just as Mr Friedman's central thesis advocates that the state should act as
"referee not provider", Mr Blair was similarly robust. "We should be far
more radical about the role of the state as regulator rather than provider,
opening up health care, for example ... and be willing to experiment with
new forms of co-payment in the public sector," he wrote.

Take drug policy, for example. David Blunkett, the Home Secretary, has now
decriminalised cannabis, freeing police to tackle serious crime. In a 1972
article, Mr Friedman stated: "In drugs, as in other areas, persuasion and
example are likely to be far more effective than the use of force to shape
others in our image."

Or take health care. Although Alan Milburn, the Health Secretary, would
deny it, his critics claim that his announcement that from December 2005
patients will have a choice of four or five different hospitals, including
private-sector ones, is nothing more than a voucher system. And vouchers
were a central tenet of Friedman's ideas.

Professor Andrew Oswald, an economist at Warwick University and a leading
proponent of top-up fees, says that there is a good case to be made that
Milton Friedman's influence extends over large areas of current government
policy.

"Charging for higher education, indeed all education, is a key idea he
advocates. Generally speaking his was the 'crowding out' argument. That
governments' good intentions crowd out what would happen anyway if
individuals were left to get on with things," he said.

"He believed strongly that central banks should not interfere with the
smooth running of the economy, for example. The Bank of England certainly
no longer tries to do this."

There's no doubt that the current Tory party is drawing many of its
policies from the American professor. Its proposals to give parents
vouchers to spend on public or independent schools, as well as its advocacy
of small government, is classic Friedman thinking.

Of course, there are ideas that even this Government would shy away from.
Mr Friedman is fiercely opposed to increases in public spending, wants
voucher systems for all schools and calls for the abolition of the
International Monetary Fund, all of which are anathema even to Mr Blair.
And drugs are still illegal if decriminalised. But in another quarter of a
century, who knows what may happen?

Gordon Brown would vehemently deny he has any strong link to Mr Friedman,
particularly given the Chancellor's belief that it is possible to have low
unemployment and low inflation at the same time. The American economist
believed that to keep joblessness low would require a permanently
accelerating rate of inflation.

But Mr Brown's firm belief that the public sector is incapable of keeping
costs down and delivering infrastructure projects on time and to budget,
the main rationale for PFI and PPP schemes, would have delighted Mr Friedman.

The Monetarist Godfather

Born in New York in 1912. After working at Columbia University, he became
Professor of Economics at Chicago University.

The "Chicago School" of Monetarist economists went from strength to
strength, and in 1976 he was awarded the the Nobel economics prize. Major
published works, most of which rebut Keynesian theory, include Essays in
Positive Economics (1953); A Theory of the Consumption Function (1957);
Capitalism and Freedom (1962); A Monetary History of the United States,
1867-1960 (1963) - his most important single work in economics; Free to
Choose: A Personal Statement (1980), his most popular book.

He popularised his views through a regular Newsweek column and a series of
television programmes in the early 1980s entitled Free to Choose. Friedman
worked for Nixon and Reagan and was a key influence on Margaret Thatcher
from 1979.

He is currently senior research fellow at the Hoover Institution.