We don’t often look to smaller, less influential countries like Portugal when it comes to social & economic policy. Well, at least not until sovereign debt entered the wider public lexicon, and economists, politicians and financially-minded people realised that a failure of a small, quiet south European state to pay its debts had the potential of a knock-on effect on the more prosperous economies of the north.

Portugal has had particular difficulty of late in setting out trustworthy austerity plans, aimed to reduce its deficit, which reached as high as 9.3% of GDP in January this year. In order to shield itself from the effects of the credit crisis, and the ensuing recession, Portugal borrowed billions of euros to pay its bills. Having spent in total around two years living in Portugal, in one of Europe’s most amazing cities Porto, and as a speaker of Portuguese I have had the benefit of being able to follow politics and economics in Portugal relatively closely over the last seven years or so.

This knowledge of how Portugal works as a society and economy has me baffled as to where all of these billions are going. Whenever I contrast government spending and the size of the state of the United Kingdom with that of Portugal, I see two vastly different systems, attitudes and approaches. In the UK, everyone can see and experience the state almost on a regular basis. We have certain social and historical economic problems which one could argue require state intervention, which result in many, many people being dependant on welfare, and millions relying solely on the state for their housing needs. The Portuguese are much more self-reliant, either by spirit or just out of necessity. The footprint of the Portuguese state is smaller than in the UK, for some of the following reasons:

• There isn’t much in the way of a welfare culture. People find ways to make ends meet, and welfare is an absolute, distant option of last resort. It’s more likely that somebody would be helped by family and friends before claiming welfare. You have to work longer and contribute more in order to be paid unemployment benefit and even then the provision is hardly generous.
• There are very few state-provided social housing programmes. Rents are low, it’s relatively easy to purchase properties and overcrowding is not yet a serious issue.
• There is universal healthcare, but it is is hugely underfunded and fees are charged for almost any medical procedure (often significant fees). At least 25% of the population is covered either by private health insurance or by cover from mutuals and receive treatment privately.
• Although active in some conflicts over the last few decades, Portugal is not a major player on the world stage and therefore doesn’t have to spend much on defence.
• The education system is not as expensive as it is not as advanced as in some richer countries. The “functional literacy” rate of Portugal is one of Europe’s lowest. Nearly 50% of all secondary students drop out before completing their education.

Not only does Portugal have a small state, it has quite a large private sector influence in areas which states are often the main players. For example, all major roads in Portugal are owned by private enterprises, and they are free to collect massive amounts in tolls. As I mentioned above, 25% of healthcare is not provided by the public purse. The national airline, TAP Portugal, is to be privatised.

Portugal is currently governed by the centre-left Partido Socialista, under a charismatic Prime Minister Jose Socrates. There is a rising star on the right however, Pedro Coelho, who since taking over the leadership of the centre-right PSD in March has moved sharply to the right, and this is an interesting development. The next election is scheduled for 2014, although the current government is a minority one, and the President has the right to dissolve that government if they cannot deliver or if they cannot effectively slow down Portugal’s economic crisis. Pedro Coelho is more charismatic, younger and seems more in touch with the public than the current PM, and there is every chance that he will be Portugal’s next leader.

Two major developments have happened in the last week which should be of alarm to left-thinking people with an eye on EU countries like Portugal. The first is an attempt by PSD to amend the constitution to remove the right to free universal healthcare for all Portuguese citizens. In a country where the healthcare system already fails in many ways to provide the level of care one would expect of a developed western European country, this is indeed an alarming move which may result in even less Portuguese citizens receiving the treatment they need. Although having said that the Portuguese private healthcare system is much less expensive and more accessible that its equivalent in the UK, Switzerland or USA. The PSD would also like to remove the constitutional right not to be fired from a job without “just cause”.

The second is a speech today in which Coelho sought to further differentiate himself and his party with the centre-left PS. He said that “no more will people be able to say that PS and PSD are the same thing” and that the PS governs on the principle that “only the rich should contribute to the state and the poor should not”. He said he believes that “politicians should not be afraid of making a storm, or of introducing different kinds of policies for government, even if unpopular”. These statements, in conjunction with the attempts to remove minimum barriers to exclusion, equality and fairness from the Portuguese constitution, are a preview to a future government which will take Portugal sharply to the right, and which will see more of Portugal’s state services in the hands of private companies.

In a country which already has such a small state, this will be a very interesting experiment indeed. But if you live in Portugal, just don’t get sick, and don’t get fired otherwise you might view the political philosophy of this rising star as more terrifying than interesting.

Many people are unable to achieve their goals in life because of the heavy debt burden which prospective university students are presented with. The perception that in order to get a good education, one must laden oneself with £30,000+ in debt to cover tuition fees and living costs, is a powerful disincentive to continue education post-18. That’s why I welcome Business Secretary Vince Cable’s announcements today on higher education reform.

The headline suggestion that Mr. Cable has announced today is the replacement of the up-front tuition fee system with a “graduate tax” which would see graduates paying back their student debt through the tax code. The current system already has a link between payback of debt and earnings post-graduation; graduates start to pay back their government-lent tuition fees when they earn £15,000 or above.

The proposed graduate tax would alter the balance between state and individual in a positive way – instead of handing out debt at the start of university, and therefore making students dependent on the state early on, the state pays for one’s education with the bargain that the state will create a job for each graduate in order to be able to pay that debt back. Instead of a large handout of debt, one’s education is paid for at the point of use by the state.

I would like to see more initiatives like this, and I think Labour lost an opportunity to transform the culture of this country by making people slaves to the state instead of freeing people up to achieve their own goals. Tax credits is an example of this: instead of removing people from paying tax, you spend the same amount as the revenue you would lose by reducing the tax burden on the lower-middle income groups on handing out money each week or month to those people, making them clients to state handouts. It even costs more than a tax burden reduction would, because of administrative costs. Tax credits are an amazing achievement of the Labour government but the same goal could be achieved at the same time as making people feel independent and in charge of their own destinies.

Ed Miliband, one of the front-runners in the Labour leadership contest, supports the proposed Graduate Tax:

"the Graduate Tax is a fairer alternative (to tuition fees), and one I’ve been arguing for for some time"

The Graduate Tax will make it easier for people from less privileged backgrounds to become socially mobile through education. This is one of Labour’s principles is it not? Therefore, the whole of the Labour Party should support Cable’s proposal today and work towards removing huge up-front tuition fees which keep those less well-off from achieving their aspirations.

Ideally we would scrap tuition fees for people from certain socio-economic backgrounds altogether.

There’s a bit of a hoo-hah today around the latest news on graduate employability in the UK. According to the Association of Graduate Recruiters, there are now on average almost 70 applicants for every graduate position available. So if you’ve just had your new degree minted, you have a 1 in 70 chance of getting a job that might somehow be related to anything you’ve just spent 3-4 years learning at university. Oh and a sting in the tail comes with the apparent fact that more recruiters than ever are now looking for a 2:1 or a first in the qualifications part of an applicant’s CV.

What does this say about the way we educate our young in this country? I was always uncomfortable with the “let’s get at least 50% of young people into university” mantra that Tony Blair & Gordon Brown spouted as their answer to making Britain more economically competitive in a globalised age where British workers have to compete with Indian, Chinese, European & American counterparts. I mean I’m sure it’s a worthy aim trying to raise the number of people who go to university. Education is one of the most powerful tools we have in improving people’s chances in life. But when more and more people are getting degrees, the law of markets (supply & demand) would suggest that the value of each degree would be reduced.

But alas, hundreds of thousands of young people over the last few years have gone to university and studied for degrees, ending up in a tight market with no work experience and tens of thousands of pounds in debt. Labour did “successfully” raise the number of people going to university: in 2001 only 20% of the population had a degree, but in 2007 that figure went up to 30.8%. But today’s anecdotal evidence reflects on the fact that there are too many graduates, and in a struggling economy, not enough jobs.

Perhaps our graduates are being spoiled and inflexible in demanding higher paying, more professional jobs simply because they have degrees. You can’t really blame them though, this is the system our politicians created. The chief executive of the Association of Graduate Recruiters suggested that graduates might want to be more flexible in their choice of jobs, and even encouraged some to consider working at places like McDonald’s (I can hear a gasp all across Middle England as I write this!). In the light of austerity Britain, his quote is quite apt “Any employment is better than no employment [even] if it’s about flipping burgers or stacking shelves rather than being sat at home feeling sorry for yourself and vegetating”. I do agree Mr. Gilleard, and indeed I worked at McDonald’s when I was unable to find more professional work, without an ounce of shame.

I left school at 16 with a lot of motivation and some good ICT skills. I later went into politics and I’ve been lucky enough to advise Prime Ministers, MPs, presidential candidates and government agencies. I can provide for my family, and I have good work options in the future. I managed all this without a degree. Today, hearing about the exasperations of 2010’s graduates, I have to admit to a pang of schadenfreude and remember all the naysayers in my life who tell me I can’t get to where I want because I don’t have a fancy degree. I’m already half way there, and at least I have a job.

The answer, in my opinion, lies in helping people to find alternative career paths which don’t require a degree. We should make education through primary and secondary better, by implementing the International Baccalaureate which provides a broad, challenging and internationally compatible curriculum. At the same time we should spend more time and money exploring how vocational careers can be developed from an early age. For this we should be looking at Switzerland & Sweden, as well as other countries, for lessons and pointers. One thing is for sure: New Labour’s model of pushing more and more people into university has only de-valued the idea of a degree and has left hundreds of thousands of educated, bright young things on the heap of unemployment. We need to look a-fresh at how we tackle this challenge if we’re to get anywhere near 10 Downing Street ever again.

@chrisjw133 & @clairee_french also wrote on this subject.