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Thursday, 23 September 2010

Cuts in context - UK public spending since 1900

I'm broadly in favour of a round of cuts to public spending for a couple of reasons.  I believe when a government gets too large it can impinge on civil liberties - both through "nanny state" over-regulation and through an increase in resources for security services to monitor and track individuals (beyond that strictly necessary for national security and the prevention of terrorism).  I also feel a round of cuts will help trim excesses and force government departments to evaluate what their respective priorities should be.

Whilst I'm not a professional economist I'm also not naive - I know heavy cuts can affect local, regional and even national economies when a large number of jobs are lost.  Cuts in purchasing affect the whole supply chain and suppliers could ultimately be put out of business.

But as a project manager and inventor of budget control tools I also know about Parkinson's Law: Work expands so as to fill the time available for its completion.  Since time and money are somewhat interchangeable (in a professional setting, at least) a consequence of this adage is that spending expands to fill the available budget.

Over the last few years I've seen first-hand how public money has been wasted on fruitless projects and empire building to bolster the careers of department chiefs.

Yet I've just debunked a third reason why I thought public spending should be cut.  I recall numerous press stories throughout the last year or so which had me believe that public spending must be at an all time high.

I compiled the above graph from data published on ukpublicspending.co.uk.  It shows total government spending (central and local) since 1900 as a percentage of GDP.  In case of error I compared the data to an IFS study (PDF) which shows a similar picture from 1900-2000.  The picture to the right is an extract from the IFS report.

Yes, the data clearly shows that we are near to a peacetime record high.  Yet whilst there is a clear up-tick in public spending since 1997, the current level of public spending (around 45% of GDP) fits a long-term trend in the growth of the public sector.

Intuitively I feel a round of cuts will be beneficial in the long term, if only to consolidate after the substantial increase in public spending over the last 13 years.  But having looked at the data I'm less concerned about what some newspapers had described as the "relentless march of state spending".

Modern life is far more complex than in 1900.  Maybe I need to accept therefore that more money today needs to be spent by government e.g. to ensure technology is available to schools, complex medical treatments are available through the NHS and technological and scientific research is properly funded.

@JamesFirth

1 comment:

  1. What would be interesting is to put upper and lower control limits on the & graph. Set at, say, twice the standard deviation. That should show whether we really are in an exceptional position.

    ReplyDelete

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