Why budget maths makes me thinks of Escher

A small state is smaller than a big state, right?

But now bear with me.

Take a glance at the heated rhetoric coming from Labour ranks about how the coalition government is hell bent on a right wing crusade to slash the size of the state.

Then consider this. The coalition’s spending plans will see public spending in 2015-16 at a fraction under 40% of GDP.

And you know what? That’s higher than it was under Labour in 1997-98 and in all the intervening years through to, and including, 2003-04. (See the graph here from Peter Hoskin.)

So the horrible dreadful right-wing small state still ends up actually bigger than seven complete financial years of a Labour Party government. That’d be the same Labour Party that talks about how it believes in a bigger state than nasty right wing extremist coalition government.

So smaller is bigger than big it would seem. It’s a bit like the higher point being lower than the lower point as in Escher’s famous picture.

Trust that’s all clear.

Footnote: having poked fun at Labour before for their silence over their own plans to cut public spending, it’s only fair to point out that Hopi Sen is an honourable exception as this excellent post shows.

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5 Comments

  • One of the unexpected downsides of the Lb Dems being a part of government is the sudden propensity of Lib Dem bloggers to start playing the ‘old politics’ game of one-upmanship with the opposition party.

    I thought the Lib Dems generally preferred sensible and meaningful debate. I honestly fail to see the benefit in responding in kind to the deconstructive and baseless attacks of the Labour opposition.

  • Anthony Aloysius St 2nd Jul '10 - 1:25pm

    I gather there has been some confusion over this. If I understand correctly, what is planned to fall below late 90s levels as a share of GDP is the total departmental expenditure limits. But total government spending also includes other contributions that don’t fall within these limits (annually managed expenditure), which is what makes the difference.

    Another factor that may be worth bearing in mind when making comparisons like this is the growth in NHS spending, which is projected to be about 19% of all public spending in 2015-6, compared with about 13% when Labour came to power.
    http://www.ifs.org.uk/budgets/budgetjune2010/crawford.pdf

  • Labour’s view is that greater spending by the state is automatically more egalitarian.

    This is a nonsense.

    Would reintroducing national service and expanding the size of the army to half a million soldiers, spending extra billions of £s in the process be an egalitarian step?

    Victorian radicals like Cobden and Bright would not have thought so. Their experience was all too often that higher taxation was used for patronage and rewarding the friends of the government – scanning who got appointed to senior quango positions under the last lot is always instructive.

    Consider instead a government that spent nothing on services at all but reduced the point at which 40% and 50% income tax started to bite and introduced a new 60% top tier coupled with a mansion tax [or better still land value taxation]. Now suppose the only thing the government did with the money it raised – apart from paying its tax collectors – was to pass on the funds to those who are poorest . Imagine the howls in the Daily Mail and the tory back benches. Would such a government be a right wing government?

  • Surely however it’s not higher than it was between 1997 and 2008 if you a) exclude debt interest, b) exclude the financial stability expenditure, and c) adjust for the economic cycle? There are some counter factors – defence spending is perhaps lower? But it’s important to compare apples with apples.

    On the % of GDP, it’s important to understand what this is. It means gross expenditure by government as a % of a net measure, GDP. Public spending can therefore vary quite a lot without actually implying much for the government’s share of the economy -in fact it could be over 100% of GDP. The measure which says how important government is in economy activity is Govt final consumption, and this tends to be about 20-25% of GDP.

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