Nutbar. Showing some basic competency and a general knowledge of the rules of the road is an absolute requirement for the safety of everyone.
Fundamentally, the primary requirement should be that one be able to pay for any damage one does. If one wants to post $150,000 collateral, fine. If one can convince an insurance company to insure one, fine. It's unlikely that an insurance company would want to ensure a driver who had not passed some sort of competency test, and it's unlikely that someone who could afford to post $150,000 collateral wouldn't want to seek out some training to minimize the risk of having to pay it out, but governments have abused their claim that transportation is a privilege rather than a right; while it may be politically tough to buck the trend, I'm glad some politician at least recognizes the issue.
Then require high limits of liability policies, and let the insurers demand a test of competency.
Why does the government have to carry out this function? Have they done well in weeding out incompetent drivers?