Commentators blame the slowdown on 'spending cuts'. WHAT spending cuts?
Last week, our national debt passed the trillion pound mark. Government borrowing in November was more than 11 per cent higher than a year earlier, at the height of Gordon Brown's manic profligacy. Britain borrowed more last month than in any month since the national debt was instituted in 1694 in the reign of William III.
Ponder these extraordinary figures, which tabulate the increases in government spending since the general election (hat-tip, John Redwood). Every single month since the Coalition was formed, borrowing and expenditure have been up. Total spending during the first seven months of this government was £23.3 billion higher than during the equivalent period in 2009: a rise of seven per cent.
So where the devil are these "cuts" that we keep hearing about? What exactly is it that the trade unions are complaining about? True, some money is being reallocated, meaning that some individual budgets are shrinking; but there hasn't been a single day when this wasn't happening somewhere in the government machine. The plain statistical truth, though it contradicts almost universal belief, is that overall spending is rising.
I am reminded, in some ways, of the 1980s. Government spending expanded continuously during Margaret Thatcher's years in office, with especially large increases in health and welfare (both up by 32 per cent between 1979 and 1990) . But that's not how it is remembered. Like therapists triggering a false childhood memory, our commentators have succeeded in convincing us that the Eighties were a period of vicious "Tory cuts".
What Margaret Thatcher did achieve, of course, was much faster economic growth. Britain, under her premiership, outperformed every country in Europe except Spain. In other words, the public sector grew, but the private sector grew faster; spending rose in absolute terms, but declined as a proportion of GDP. The current government aims to do something similar. It is important to understand that the deficit reduction strategy is based on an economic recovery, leading to higher tax revenue, rather than on absolute spending cuts.
Yet this point has not been understood. On the contrary, almost all the commentary over the past week has been about the prospect of a double dip recession caused by imagined "spending cuts". The Coalition thus finds itself in the same position as the Thatcher administration: it suffers the political pain of being thought to be slashing budgets, without the commensurate fiscal gain of actually slashing them.
The paradox is that, according to the polls, most voters do accept the need for budget reductions. We are living through one of those rare moments in a modern democracy when an administration can cut spending and be popular – thereby allowing itself, in a couple of years' time, to cut taxes and be more popular still.
So long and thanks for all the clicks
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