Government subsidies should be restricted to temporary help and start-ups. You know, just like the Scott Morrison approach to Newstart. They should not be a permanent fixture for businesses (including private schools) that cannot make it on their own.

And the same goes for private health insurance. If people want to provide health privately for a fee, fine. But if they cannot do it without a permanent government subsidy, like the car industry, they should go under.

It is fine for government to support start-up industries, like renewables, electric cars, or other new technologies, but if after a time they do not make it, it is no business of government to continue support because they have failed. Private health insurance has demonstrably failed in Australia. Without the tax concessions for premiums and without the Medicare penalty levy for people without insurance, they would go under.

The government subsidies of private education and private health also have a high incidental cost. They have has resulted in a swathe of articulate, engaged, middle-class, middle-income people leaving the public systems.

When that happens governments can get away with poor service. There are fewer articulate people to voice demands for better service at the cost of votes.

Further, when the articulate, middle-income people are engaged, they improve the public system. In wealthier suburbs, for example, the public primary schools thrive. Parents are engaged in school activities, parent-teacher sessions and in support generally. These middle-class parents can see the education is good in their area and see they can save on private fees.

Of course, come secondary schooling, they opt for private because they know the importance of connections and the old school tie.

But what if the whole of the Australian education system could be like those public primary schools in wealthy suburbs. Well, it could be. Just axe the government subsidies for private schools so only a tiny proportion of people could afford genuine free-enterprise education.

Same with health. Strip away the subsidies and only a very few would be able to afford genuine free-enterprise health.

It would mean a great proportion of articulate middle-income people would come back to the public sector and no government would get away with long waiting lists for elective surgery or starved public schools. They would be thrown out of office.

The 1960s flooding argument about health and education no longer washes. In the 1960s, private schools and private health argued that if the private systems were not supported and all the students and patients were thrown into the public systems the public systems would collapse. Wrong.

If that happened now, the public systems would thrive. This is because of the power of middle-income people to insist they get good service. Whingeing well-off baby boomers are a powerful electoral force – witness the electoral consequences of threatening to take away their precious negative gearing or capital-gain tax concessions.

Also, socially, society is worse off and less emphathetic when people do not mix with the full spectrum of society but stay within the group of families who can afford to send their children to private schools. If everyone goes to the same school they mix and understand each other more.

Further, the government support now given to private education and health is so high that per capita it is almost as much per capita as to public education and health anyway. So nothing lost. For every private student or patient who jumps ship, it will not cost government much more.

And money would not be wasted on non-core education and health – swimming pools and orchestra pits in education and five-star food and unnecessary procedures in health.

But how can change come about?

Federally, the Coalition is ideological bound to the status quo and Labor is wedged into dong nothing. We saw Labor Prime Minister Julia Gillard attempt financial reform under the very sensible Gonski I reforms, only to cave in to the private schools.

So it will require the states and territories to act. They should just end all financial aid to all private schools and divert it to public schools. Take the ACT, for example. Surely it could end all funding to schools like Canberra Grammar without too much electoral backlash. It could argue that with friends like Terry Snow who needs friends like the ACT Government.

And similarly for other states and territories.