Spending Cuts for the UK

(her majesty's publick domaine photougraphe or something)

(her majesty's publick domaine photougraphe or something)

Tyler Cowen says spending cuts will be necessary in the UK and asks “what is the U.S. ‘progressive’ take on this question. Is it admitted that spending cuts are necessary?”

According to the Guardian when Labour took over in 1997, total public spending in the UK was something like 38.2 percent of GDP. That slowly-but-steadily rose over time until it stood at 43.3 percent of GDP in the 2008-2009 budget. I wouldn’t say that cuts from that level are “necessary” but it’s generally advisable for countries to have political coalitions alternate in power and after more than a decade of center-left spending hikes some center-right spending cuts could play a useful role in clearing out dead wood and such. Alternatively, a responsible center-left government could shut down bad programs of its own accord while perhaps continuing to boost overall spending. Then the crisis budget of 2009-2010 pushed public spending up to 48 percent of GDP (or probably more likely, the decline in GDP pushed the public share up).

That seems advisable as a crisis measure. The Tory-proposed austerity budget would have been a disaster. But 48 percent is at the very Scandinavian Bleeding Edge of what we’ve seen in terms of a sustainably-sized public sector and I think it’s perfectly reasonable to fear that one’s country can’t pull it off. So while I doubt cuts are strictly speaking necessary, they’re probably advisable once GDP is growing (which I believe was Gordon Brown’s position) which I believe is currently the case. The good news for Britain is that even in coalition mode it’s relatively easy for a UK government to act decisively.

Meanwhile at the moment both Denmark and Sweden are in the hands of center-right governments, but that’s likely to change in the near future. It will be interesting to see if one of those countries attempts to devise an economically and politically sustainable approach to getting over fifty percent.