Dollars wave.

It’s never enough, the Government is addicted to spending

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IN PREVIOUS articles (see below) I have outlined the clear inefficiency of the public sector. The bang for the buck is lamentable. Don’t take my word for it simply look at the Government’s own statistics on productivity.

What is perhaps under-appreciated, however, is the sheer scale of the State and how it has grown inexorably over time. In the modern media driven world, where a week is a long time horizon, it is easy to lose perspective so today we take a step back and look at the 120-year view.

In a long life the State has moved from being essentially a policemen and light law enforcer to the overwhelmingly critical agent of the economy with tentacles into almost every micro area of the nation. While there is an offset from a degree of service provision, albeit generally with one flavour, plain vanilla, the impact on personal choice and freedom has been immeasurable.

As the historian AJP Taylor observed:

Until August 1914 a sensible, law-abiding Englishman could pass through life and hardly notice the existence of the state, beyond the post office and the policeman… He could travel abroad or leave his country for ever without a passport or any sort of official permission… The Englishman paid taxes on a modest scale: nearly £200m in 1913-14, or rather less than 8 per cent of the national income.” 

This is borne out by the chart below with public spending, pre-1914 at modest levels and much of that on the defence of the realm. War changed everything. The post First World War world saw public spending double to around 30 per cent of GDP as the state took over many responsibilities hitherto undertaken by the private sector.

The Second World War embedded these trends with the state typically hovering around 40 per cent GDP. The 1980’s were perhaps the only period to see a sustained reversal of the trend of ever greater state control and even then levels of public activity were only reduced to mid-1950’s levels and briefly.

 

The chart above only tells part of the story for since the Second World War the great trend has been to reduce defence expenditure which has fallen from around 8 per cent GDP in the 1950’s to 2 per cent today. The last thirty years have thus seen an explosion of welfare and non-defence related expenditure up from 30 per cent GDP to a staggering 54 per cent today. Even excluding the covid-19 related spike, which will doubtless be much more embedded, given this Government’s current public sector spending promises, than the Treasury forecasts, the welfare state has increased very materially in both absolute and proportionate terms.

Last year HMG total managed expenditure was £1093bn. That £1093bn needs to be put in context. The entire size of UK GDP was just £1960bn in that year meaning the State is materially the largest operator.  Today British public spending proportionately is not far off the levels only the Soviets managed to achieve in cold war Eastern Europe.

Moreover through a network of Government agencies and an ever increasing regulatory rule book the influence of the State is even greater. Not content with spending over half the nation’s wealth Government now feels the need to direct at a micro level in numerous fields that even 20 years ago would have been unthinkable from environmental targets to diversity monitoring, from banking bonuses to buy-to-let and from planning and building consent to even the socio-economic make-up of university offers.

Despite this or perhaps because of this growth of the state our political and media debate is warped and fanciful. The more they centralise, control and direct the more they move activity from the private to the political sphere thus aggravating discontent.

The political and media perception is of poverty, austerity and under-investment. The reality is of massive transfer payments, unbridled explosion in public debt and a level of enforced economic inactivity which is not only damaging economically but socially and culturally too.

Government is creating the problem.

The truth is Britain is moving from a broadly free society into a highly managed, centralised statist one where the Minister and more likely the permanent bureaucracy is all powerful with the remaining private sector being forced to take its direction from the state rather than the state being a mere facilitator of private action.

The more the state grows the more it nationalises personal responsibility, degrading basic private enterprise and choice. It should not be a surprise that those on the left celebrate this direction for it is within their creed to believe that centralised action is superior to individual wisdom.  But what is tragic is when the so called right-wing party adopts the clothes and language of the left.

Britain is forsaking its long held advantages of moderate government, stability and a well of private initiative as we move towards technocracy, control and increasingly arbitrary rule. It is high time we took a step back and instead of reacting to the five minute media story we considered the long perspective and what we are in grave danger of losing.

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Previous articles in Ewen Stewart’s ‘Hard Economic Reality’ series: 

Pt 1 Our garden is far from rosy 

Pt 2 It’s the private sector stupid 

Pt 3 Will the attempt to level up actually level down 

Pt 4 Productivity and the public sector 

Pt 5 The risk of rising inflation 

Pt 6 The impact of woke economics 

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