I recently criticised advocates of a National Health Service for being nationalistic, and alluded to my free-market tendencies. Although the distinction between capitalism and socialism remains valid, and those who promote centralised ownership must engage in that debate, I agree that it can be misleading to think in those polar terms.
I do think that government provisions that are serviced through taxation have a place in society, (and for the purposes of this article I am referring to government production, rather than redistribution). I am not advocating anarcho-capitalism. Where I differ from statists is that I object to "the nation" as being a starting point for such policies. The reason why the NHS applies to 60m people is not because that's the optimal user-level for the service, but because of wholly irrelevent population patterns that happen to occur within an arbitrary political boundary.
If government decisions are made at as local a level as possible, then we might hopefully see the benefit of Tiebout sorting. Local government, competing for the residency of a mobile population, will offer a mixture of local public goods and taxation, and the people are free to "vote with their feet". Those who are willing to pay a local tax for a clean beach will be able to do so, whilst those who'd rather the coastline were used for watersports will find a political entrepreneur willing to offer that service too.
The crucial point is that decisions are made locally, and benefits result from competing localities.
Tiebout's model doesn't deal with "national public goods", such as defense or law. For non-market provision, there would have to be a higher level of political power that has the right to decide how these things are financed and provided, but surely if we dispense nationalist thought, why would nations need different policies?
As we've become more interwined with our neighbours, and trading links have fostered friendships, we exist in a world characterised by global cooperation. Human rights are not nation-specific, and so entities like the United Nations can and should defend them. NATO demonstrates how national defense can be integrated with other nations, toward cooperative consensus. If we value freedom - free migration, free trade, free speach, Human rights, etc - then these values superscede national interest and imply global enforcement. National government only exists for trade policy to strengthen one's own countries special interest (e.g. the UK farmers) at the expense of worldwide consumers and competing (usually poorer), producers.
So governments are good for two things: the defense of universal freedom and law (which have nothing to do with location) and the provision of local services (which do). For the latter, there's no reason they should be produced at a national level with a top down authoritative approach, rather let's permit voluntary groups to emerge, allow people to opt out, and ensure that local politics is a fluid system that shrinks and grows based on the needs of it's users.
So in answer to Owen's question: What is Westminster Government For? my answer is simple: nothing.