economics politics

What would you cut?

It’s judgement day today for Britain’s government budgets, as chancellor George Osborne announces the results of his comprehensive spending review this afternoon. The whole country, or at least the media and the public sector, is pretty much braced for the worst.

I’ve already said I don’t believe this level of cuts is at all necessary, and that it’s a big gamble, since government spending single-handedly got us out of the recession earlier this year.  It’s also partisan, since the places least affected by the cuts are all Conservative constituencies.

There are a host of massive misconceptions skewing the debate as well. Those favouring the cuts say we’re in danger of ending up like Greece and that Labour led the country to the verge of bankruptcy, which is untrue – we still had a triple A credit rating at the worst of the recession. Labour did spend rather foolishly in the boom times, but our debt situation is better than the US and they’re not talking about cuts yet.

We’ve also convinced ourselves that the public sector has grown out of all proportion, when it’s actually the same size it’s been for 60 years , as this little chart shows.

But its too late for all that. The cuts were no secret in the general elections and we made our choice, so I guess we need to live with it. And while we can still joke about it for a couple of hours, check out this nifty visual summary of government spending on the Guardian website. You can make your own savings and see how you’d fix the deficit. The ministries of defence and transport were the big losers in my version.



  1. There are a lot of misconceptions, indeed. To me the main culprit also seems to be interest, as it draws away money from public access as well as the economy at large. Welfare pay outs are almost entirely spent and re-enter the economic circuit, and education is a mandatory investment into the future within the European Union which entirely depends upon the brilliance of its minds.

    I am also wondering if the numbers are correct. Does “government spending” refer to total public spending? Other sources paint a different picture – all Western EU states are far above 40%, for the UK see: And the picture is painfully simplified as well. Let’s say the public health system would be entirely privatized (hey why not privatize governments altogether and let corporate councils operate our nations?): the government would be spared the health costs, but also the income from the health system. All in all it is not usually appreciated that we are talking about a complex dynamic system here. The decision makers look at individual aspects of a grand scheme of issues. And then they decide. Or rather they “make up” a decision based upon always incomplete views of reality. Hence decision maker.

    What makes me wonder is why we don’t have state banks that hand out credits to citizens. The interest then would at least benefit the community instead of useless private corporations that basically do nothing at all. The state would not have any financial problems then. It is kind of shady how this entire system came about.

    1. Yes, the figures on the chart there are just the expenditure figures from Ann Pettifor’s research, add all economic activity together it’s around 40%.

      The rate at the moment spending is running high, that’s a reality of economic cycles. The last time spending was this high was under Thatcher, during the 1970s oil crisis.

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