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The UK is toast. Mega will be pleased...
The UK is toast. Mega will be pleased...
Budget 2010: Relentless march of state spending
Government spending accounts for more than half of the economy for the first time on record after substantial public sector growth under Labour.
Official figures before the Budget on Wednesday disclose that public spending makes up 52 per cent of the gross domestic product.
When Labour came to power in 1997, the state’s share was 40 per cent. However, it has risen steeply over 13 years in which Government spending and the size of the public sector workforce have increased significantly, paid for by higher taxes.
At the same time, industry and private commerce have suffered in the recession. The figures from the Organisation for Economic Co-operation and Development (OECD) disclose that central and local government spending made up 52.1 per cent of Britain’s GDP last year.
The OECD forecast that this proportion would continue to rise over the next two years as more Britons became reliant on the welfare state.
Only a few developed countries, such as France and Sweden, now have a higher rate of public spending.
The figures mark an important turning point for Britain, which historically has prided itself on being a nation of private enterprise and endeavour.
They do not include the costs of part-nationalising failing banks — which could push the levels close to that of communist countries.
Henrik Braconier, who studies Britain for the OECD, said the figures “definitely” signified that something was wrong in the economy.
“This won’t go away by itself,” he said. “There need to be cuts in expenditure or rises in tax to balance this situation over the longer term.”
New analysis released yesterday showed that Britain already has the highest income tax rates in the G8 group of the world’s biggest economies. Overall, the average Briton now pays twice as much tax as when Labour came to power.
Despite this, the country is facing a record public deficit estimated at more than £150 billion.
The OECD figures will intensify the pressure on Alistair Darling, the Chancellor, to cut public spending.
Philip Hammond, shadow chief secretary to the Treasury, said last night: “We can’t afford five more years of Gordon Brown’s waste.
“While most other OECD countries managed to reduce public spending as a share of the economy while improving services, Gordon Brown has now left us with the biggest deficit in the developed world. The choice at this election is between the Conservatives’ pledge to raise the private sector’s share of the economy in every region; and five more years of Labour’s debt-driven model.”
Although Mr Darling insisted in an interview yesterday that there would be “no giveaways” on Wednesday, promising a “sensible, workmanlike” Budget, any significant cuts are unlikely.
The votes of civil servants and other public sector workers could be decisive in the forthcoming election.
Britons will face a series of tax rises to fund new projects. The new 50p rate of tax for high-earners will be introduced next month. Next year National Insurance will also increase. [No representation, just taxation].
However, there are growing calls for proposed increases in fuel duty and alcohol taxes to be delayed or scrapped. Discussions over freezing fuel duty are continuing.
The Conservatives pledged that their manifesto would include a commitment to increase the private sector’s share of the economy.
The Organisation for Economic Co-operation and Development provides detailed statistics about the economies of 30 leading countries.
The OECD assessment of government expenditure at 52.1 per cent of GDP was up from 47.5 per cent the previous year.
This is the highest proportion since its figures began in 1970. The previous record high was 49.4 per cent in 1981 as Britain recovered from near bankruptcy in the 1970s.
Government spending accounts for just 40.9 per cent of GDP in America.
The OECD estimates that the proportion will remain above half, with state spending predicted to rise to 53.4 per cent of the economy this year and 53.2 per cent in 2011.
Ben Williamson, an economist at the Centre for Economics and Business Research, a City think tank, said: “It [state spending] is unsustainable now that income levels from the City have collapsed. It should have been tackled before the recession but now that has pushed it into a crisis.”
Last week, Lord Mandelson, the Business Secretary, apparently broke ranks within the Cabinet to suggest that tax rises may be necessary in addition to spending cuts.
Mr Darling yesterday ruled out a rise in Vat but refused to be drawn on other tax rises.
The CBI, which represents businesses, will today warn that the British economic recovery will be sluggish and is unlikely to pick up “much pace” until mid-2011.
Government spending accounts for more than half of the economy for the first time on record after substantial public sector growth under Labour.
Official figures before the Budget on Wednesday disclose that public spending makes up 52 per cent of the gross domestic product.
When Labour came to power in 1997, the state’s share was 40 per cent. However, it has risen steeply over 13 years in which Government spending and the size of the public sector workforce have increased significantly, paid for by higher taxes.
At the same time, industry and private commerce have suffered in the recession. The figures from the Organisation for Economic Co-operation and Development (OECD) disclose that central and local government spending made up 52.1 per cent of Britain’s GDP last year.
The OECD forecast that this proportion would continue to rise over the next two years as more Britons became reliant on the welfare state.
Only a few developed countries, such as France and Sweden, now have a higher rate of public spending.
The figures mark an important turning point for Britain, which historically has prided itself on being a nation of private enterprise and endeavour.
They do not include the costs of part-nationalising failing banks — which could push the levels close to that of communist countries.
Henrik Braconier, who studies Britain for the OECD, said the figures “definitely” signified that something was wrong in the economy.
“This won’t go away by itself,” he said. “There need to be cuts in expenditure or rises in tax to balance this situation over the longer term.”
New analysis released yesterday showed that Britain already has the highest income tax rates in the G8 group of the world’s biggest economies. Overall, the average Briton now pays twice as much tax as when Labour came to power.
Despite this, the country is facing a record public deficit estimated at more than £150 billion.
The OECD figures will intensify the pressure on Alistair Darling, the Chancellor, to cut public spending.
Philip Hammond, shadow chief secretary to the Treasury, said last night: “We can’t afford five more years of Gordon Brown’s waste.
“While most other OECD countries managed to reduce public spending as a share of the economy while improving services, Gordon Brown has now left us with the biggest deficit in the developed world. The choice at this election is between the Conservatives’ pledge to raise the private sector’s share of the economy in every region; and five more years of Labour’s debt-driven model.”
Although Mr Darling insisted in an interview yesterday that there would be “no giveaways” on Wednesday, promising a “sensible, workmanlike” Budget, any significant cuts are unlikely.
The votes of civil servants and other public sector workers could be decisive in the forthcoming election.
Britons will face a series of tax rises to fund new projects. The new 50p rate of tax for high-earners will be introduced next month. Next year National Insurance will also increase. [No representation, just taxation].
However, there are growing calls for proposed increases in fuel duty and alcohol taxes to be delayed or scrapped. Discussions over freezing fuel duty are continuing.
The Conservatives pledged that their manifesto would include a commitment to increase the private sector’s share of the economy.
The Organisation for Economic Co-operation and Development provides detailed statistics about the economies of 30 leading countries.
The OECD assessment of government expenditure at 52.1 per cent of GDP was up from 47.5 per cent the previous year.
This is the highest proportion since its figures began in 1970. The previous record high was 49.4 per cent in 1981 as Britain recovered from near bankruptcy in the 1970s.
Government spending accounts for just 40.9 per cent of GDP in America.
The OECD estimates that the proportion will remain above half, with state spending predicted to rise to 53.4 per cent of the economy this year and 53.2 per cent in 2011.
Ben Williamson, an economist at the Centre for Economics and Business Research, a City think tank, said: “It [state spending] is unsustainable now that income levels from the City have collapsed. It should have been tackled before the recession but now that has pushed it into a crisis.”
Last week, Lord Mandelson, the Business Secretary, apparently broke ranks within the Cabinet to suggest that tax rises may be necessary in addition to spending cuts.
Mr Darling yesterday ruled out a rise in Vat but refused to be drawn on other tax rises.
The CBI, which represents businesses, will today warn that the British economic recovery will be sluggish and is unlikely to pick up “much pace” until mid-2011.
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