The real issue is the size of the state

FORGET about the students, the violence and the row over tuition fees. The real debate is not about the cost of universities. It is between those who think the state should account for an ever-greater proportion of the economy and society – and those who believe that the only way there will be any progress in Britain is for the government to shrink.

For the past decade, all of the pressure has been one way: towards an ever-larger state, funded by ever-greater amounts of tax (either on current workers, investors and consumers, or on their children via debt). The coalition is attempting to gradually reverse this trend. Its task is immense, as the latest figures from the OECD, published in its November economic outlook, demonstrate. Public spending troughed at 36.6 per cent of GDP in 2000, after which Gordon Brown turned on the spending taps. By 2007, spending had increased to 44.1 per cent of GDP, an astonishing rise of 7.5 percentage points of GDP. Then came the recession and the decision to continue spending at even greater rates.

Public spending jumped to 47.4 per cent of GDP in 2008 and then to 51.4 per cent of GDP in 2009; we waved good-bye to capitalism and became a socialist country. State spending remained at 51 per cent of GDP in 2010; the private sector spent less than half the nation’s income and the government more than half. Public spending has increased by 14.4 percentage points of national income in just a decade. If all goes well, the government’s share will fall back to 49.9 per cent next year, hardly a revolutionary change. All of these figures actually underestimate the state’s real size and exaggerate that of the private sector: GDP includes value added tax, which means that the tax to GDP ratio involves double-counting.

Of the 28 OECD countries, the UK is the tenth highest ranked by state spending as a share of GDP. The old free-market model is dead and buried. It is an astonishing transformation – one made all the more extreme by the fact that public spending is lower in London and the home counties – and concentrated in the rest of the UK.

If you were a social-democrat and believed that more public spending meant better public services, you would expect the quality of the UK’s schools to have improved beyond recognition. Yet the facts tell a completely different story. According to the OECD’s Pisa stats from earlier this week, England has fallen from 7th in reading in 2000 to 25th today, from 8th to 27th in maths and 4th to 16th in science. These findings are a disgrace. If they weren’t so self-interested, the left-wing agitators and students in the streets of London yesterday would have been protesting about the decay and rot in the UK’s primary and secondary education system, caused by governments of all parties and intensifying during the Labour years.

And what about the view that massive public spending will keep unemployment down? Again, the facts tell a different story. Official numbers (from a year ago) reveal that there are 5.87m adults on one of the out of work benefits, 15.8 per cent of the working age population. This extraordinary figure, which will have only slightly improved since, includes everybody officially on the dole, as well as all those on other benefits such as incapacity. We have tried big government. It has almost bankrupted the country. It hasn’t delivered the goods. It is time for the real debate to begin.
allister.heath@cityam.com

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