Tuesday, March 29, 2011


Last week, I was sent a paper written by Tim Morgan of the Centre for Policy Studies. Entitled "Five Fiscal Fallacies",  it articulates, in detail, the need for reducing public expenditure by the current Coalition government.

Most importantly, it debunks some of the myths that have been pushed by the Labour Party and the Trade Union movement over the last ten months, namely that the reductions in public expenditure are “savage” cuts.

For example, “in 1999-2000, government spending totaled £343 billion, which, had it simply moved in line with inflation, have reached £438 billion by 2009-10. In fact, spending in that year was £669 billion, a real-terms increase of 53% over a ten year period in which GDP had increased by less than 17%. By 2014-15, and again expressed at 2009-10 values, aggregate spending will be a modest 3% below the 2009-10 figure, which cannot remotely be described as a “massive” cut. Moreover, spending will remain 48% higher than in 1999-2000”.

So, to deal with the worst financial crisis that any UK government has had to face for generations, public sector expenditure will need to be reduced by 3 per cent by 2014-2015.

The author also makes the critical point about the low levels of public sector productivity in the UK, an issue which very few commentators have picked up upon.

“Research compared the published 3.4% decline in public sector productivity between 1997 and 2007 with the 28% gain recorded in the private sector and concluded that taxation could have been lower by £58 billion had the public sector achieved private-sector levels of productivity improvement”.

Given that the BBC and much of the press has been unswerving in accepting, at face value, the Labour Party’s propaganda, this paper is worth reading if only to get a more balanced view.