The Left’s Irrational Addiction to High Public Spending 151


There is no correlation between high public spending and social and economic equality.

I favour much greater redistribution of both income and capital than allowed by the current political consensus in the UK. But I also favour much greater cuts in public spending – perhaps four times greater, over a decade – than Osborne just delivered. The two are not incompatible.

Under New Labour there was a massive step change in levels of public spending and in the percentage of GDP comprised of state activity. Did social equality improve? No. The wealth gap between the wealthiest and the poorest yawned wider and wider. Even in the public sector itself, the gap between richest and poorest grew until it is now seriously proposed, with a straight face, that the situation be redressed so that the highest paid executive in a public organisation should only (!) be paid twenty times more than the lowest paid employee.

Blairism should have shattered forever the notion that very high levels of public spending are the answer to social inequality. But it is a notion to which the left is addicted.

I favour redistribution because Sir Fred Goodwin, Wayne Rooney and Tony Blair area perfect reductio ad absurdumof the notion that a system that rewards the ability to grab money in a laissez faire manner has desirable results. The Duke of Westminster does the same for accumulated capital. I also truly hate the pvoerty in which so many good people are trapped. But the notion that Britain’s vastly over-inflated bureaucracies address this problem is tenuous, to say the least.

I also believe that it is not coincidental that New Labour’s huge physical increase in the state coincided with a massive erosion of civil liberty.

So I view those protesting against cuts in public spending as well-motivated but trapped in a historical accumulation of palliative devices which each attracted a massive superstructire of self-interested providers and administrators.


151 thoughts on “The Left’s Irrational Addiction to High Public Spending

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  • writerman

    Craig,

    I am not of the ‘left’. I am a… ‘conservative.’ However, whilst I’m critical of the utopian concept of ‘socialism’ and what are termed socialist economic theory; I am not an uncritical supporter of capitalist economics and liberal utopianism.

    The problem with these cuts, on this scale, at this particular time, is, what happens to demand when one shrinks the economy like this?

    I think the government’s policies will prove disasterous for the economy and society, cutting demand and leading to a downward spiral at precisely the wrong time, leading to even greater cuts to ‘balance the books’ which have been ‘unbalanced’ by the first round of cuts, and on and on… downwards.

    Creating so much unemployment will suck demand out of the economy, shrink tax revenues and arguably increase government expenditure; but the wrong kind of expenditure, wasting resources, instead of investing.

    Of course there are problems with the level of debt, but in the worst depression since the 1930’s, imposing cuts is madness and national suicide.

    We aren’t tightening our belts, we are putting our heads in a hangman’s noose!

    The idea that the private sector will magically conjure a million new jobs to take up the ‘slack’… is madness. It will not happen.

    The problem is… the UK has been on the wrong economic trajectory for at least thirty years, and the current depression is the culmination of an economic crisis that’s been slowing building for decades.

    Why did successive governments spend so much? One can see the welfare state as a massive form of state subsidy which actually benefits ‘capitalism’, that without massive state spending capitalism would have collapsed years ago. Capitalism has a series of in-built, structural, weaknesses; which if left to themselves lead inexorably to economic depression.

    What Keynes realized was that one hand to ‘save capitalism from itself’ which meant that the state had to prop up the weaknesses of the ‘market system’ by creating demand for goods and services.

    Now, I’m not an uncritical supporter of Keynes, however, I do think there is a concensus that Keynes’ methods worked in the nineteen thirties and ended the Great Depression, or was it really WW2?

    What’s happening now is that the government is pursuing the same failed policies that made the Great Depression worse, not better, and that is frightening.

    What’s needed now, in a depression, is to get the economy moving again, at almost any cost, and once it’s moving in the right direction, deal with the other problems.

    Put very simply, one cannot cut one’s way out of a depression, that only makes things worse.

  • Julian

    “a massive superstructure of self-interested providers and administrators”

    This for me is the most worrying aspect. It doesn’t seem right that one party has effectively bought itself electoral support by having so many voters dependent on the state for their incomes, whether at the lowest levels or throughout the spectrum to the top managers. It is in the short term interest of those voters to return to power the party that pays them. Of course, Labour didn’t get back into power, but it was far closer than it should have been given the stage of the political cycle and the acknowledged problems with leadership and direction.

    The Tories were rightly booted out in 1997. That Labout was trying to protect itself from the normal democratic process by having so many dependent on what they said only they would provide, is not good for democracy.

  • Stuart

    I agree the state is a massive industry that powers the economy of this country. And that is the main issue, you dont have to be an economist to understand that you cant run an economy on a welfare and state job merry go round. We pay benfits to people who spend it on pasma tv’s and play stations whos tax pays them and the 30 state employees who administer the benfits and tax who’s wage spending and tax pay the benfits etc. etc etc. If we get short of cash in the economy we pay state employees more and more benefits.

    And if we get in real trouble with the economy what do the state spends huge sums of cash on building things or making things for the state. Aircraft carriers, Crossrail, Schools, Roads. But these cost too much so we pay everyone more to get more tax revenue. This lot have not gone far enough in cutting the state. We need to get off this merry go round and encourage people to make things again and sell to our neighbours.Being a nation of State employees scroungers and shop keepers is never going to work. And I know the banking industry and finance makes money but that relies on lending the shopkeepers state employees and scroungers money to buy over inflated houses that keep the whole thing moving. I have travelled extensively in Eastern Europe and during communism and immediately after you would go in a chemist (state owned). A woman would take you prescription, A man or woman would go to give the slip to the pharmicist who whould prepare the drugs. Another woman would write you a chitty and you would then pay someone else. another reciept would be hand written an stamped and you would go to another person to get your prescription. This process would take 20 mins and is a total bereaucratic job creating excercise. I went to my local chemist in East London in a new polyclinic. I qeued up gave my prescription to a lady who put it in a little red box and handed it to a man who took it to another man who punched some details into a computer. A slip was printed and put put in a little box and was passed to a cashier who took my payment. About 20 min later a lady appeared with the little plastic box with my pills in it and another slip of paper this was checked with my reciept and I was given the pills. I suddenly flashed back to Warsaw 20 years ago. Funny how things go around.,

  • Liberal Neil

    A very sensible and timely post, Craig.

    It isn’t just about how much money the state spends, but who benefits from that spending and who pays for it.

    It is interesting to look at which public sector employees did best out of the last Labour Government.

    In the NHS – Consultants fees rose a lot, along with their ‘gold=plated’ bonuses, GP fees increased dramatically, but the salaries of ordinary nurses, orederlies and cleaners rose far less.

    In schools – Head Teacher salaries rose a lot, classroom teacher salaries rose, but not be nearly as much.

    In Local Government – senior officer salaries rocketed, ordinary staff salaries didn’t.

    And there is then the knock on effect that those whose salaries rose most will also have got more money put into their pensions and those on final salary schemes and even better pension as a result.

    The combined result of this is that the gap between the best off and worst off increased further.

    And as far as who pays in – the tax system overall became less progressive over the same period.

  • writerman

    My point is… that the state is an integral part of what we choose to call ‘capitalism’, and always has been, one way or another, going back to the very birth of modern, industrial, capitalism.

    The rise of the modern nation state and capitalism go hand in hand, arguably, one could not exist without the other; like two hands washing each other.

    This early tendancy, seen in the use of military might to invade and colonize the world, and ‘capture’ markets and ‘create’ demand through imperialism and colonialism, was vital to success of European, Western capitalism.

    The system we have now, is closer to a variant of Fascism, something Mussolini would have recognized as the corporate state, where, as he said, ideally there shouldn’t be a gap bigger than a cigarette paper between the state and the corporations.

    One can see the United States as a form of culmination of Mussolini’s ‘dream’. Here the vast, bloated, military budget, is the very heart of the economy, an imperial economy. The military budget which ammounts to somewhere between 1.5 to 2.0 trillion dollars a year, all things considered; is what has kept the US economy moving forward for half a century. The military budget is a direct, hidden form of state subsidy, on a collosal, ‘socialist’ scale.

    The question is, what would have happended to the US economy, without this form of direct and indirect subsidy?

    It would, of course, have to be radically re-structured; but this is easier said than done, as the ‘free market’ and the giant corporations, profit so vastly from this form of state handout and protection from market forces.

    Take away the corporate states’ involvement in the ‘free market’ and it collapses in on itself, undermined by its own structural weaknesses.

  • Eratosthenes

    Nothing will change until the corrupt and rigged version of what is laughingly described as the ‘free market’ and associated F.I.R.E. sector has been allowed to collapse. Reform of the debt based casino monetary system is essential to bring about any real change.

    Waffle about the little tweaks and corrections politicians describe as radical reform is completely missing the point. The £1 Trillion handed over to coke snorting city kleptocrats gets barely a mention.

    Wake up Craig!

  • ingo

    NoLabour pandered to the middle and upper middle classes during its reign in a bid to get re elected as much as it did, hence its lack of humanity towards kids in poverty social services and the widening gap.

    I agree that the local public sector is bloated and wastes money on rigamarole like thewre is no tommorrow, but this slashing will not take my neighbour out of poverty.

    Where is todays announcements of thousands of jobs, apparently to be created by those who signed the letter on monday, unless off course, their support was empty bluster.

    lets wait for the first announcement of a 1 million bonus for some trader who managed to shuffle Government debts from left to right and then watch the response.

    NoLabour protected itself from the lower classes with lies and lack of nous. Lies about a Euro referendum and no nous about financial controls in 2006/7, when our public borrowing deficit visa vis to what we could afford, was already 3.5% of GDP.

    Blair and Brown refused to have the City regulated.

    I finbd it starnge that nobody here riles against the lax tax regime that governs this country.

    Should we tax all those found with carrying money in their pockets, regardless of what they carry, a nominal sum of 10%, unless they can show a chitty from their bank saying this money is taxed?

    Should this apply to all financial transactions into tax havens? at a rate that equals the amount of taxes to be avoided?

    Lets talk paying fair taxes, why don’t we?, no good relying to exclude the instigators of this fiancial bvlack hole from remedying it? Unless bonuses are capped/taxed/ or diverted this will mean an end to the social safetynet as it was once envisaged.

    I’m with writerman on the effects of these cuts, they will hit the poorest much harder than those who could afford to siphon off some nest eggs and ivest in this that or the other.

    Can you imagine what the public will say/do if this sham carries on as usual?

  • Louise Thomas

    The severity of the cuts worry me because of their likelihood of deepening the recession but two things frustrate me in general and they both, imo, have contributed to this situation.

    I agree with Craig – there tends to be an assumption on the Left that all public spending is ‘a good thing’ and to criticize it marks you as a ‘raving Tory.’ This attitude discourages scrutiny, which is a very bad thing.

    The other frustration is that Keynesian economics seems only to be brought up by the Left during recession.

    But it’s not supposed to work like that. For KE to work safely, Governments are supposed to follow it throughout the cycle, smoothing out both ends. This includes purposefully curtailing public spending and creating a surplus as the cycle begins to peak – rather than maxing out the country’s credit cards on more public spending. Granted, the banks made this downturn the crisis that it is, but we were long overdue a downturn anyway and a Keynesian government should’ve been prepared.

    As far as the percentage of GDP issue goes (this is pretty much a guess, so please put me straight) but weren’t the levels of GDP under Thatcher and Major mostly low due to recession? In which case their public spending would be higher as a percentage, I would have thought.

    I’m just wondering that with Labour governing during such an extended boom when GDP was particularly high, measuring the safety of public spending levels by that criteria was foolhardy.

  • somebody

    @stuart

    Read and learn

    DWP’s £4.6 billion ‘handouts’ to private sector companies in 2009-10

    “The scale of the DWP’s infiltration by the private sector is revealed in a list of the top 100 suppliers to the department in 2009 ?”10 who, between them, walked away with almost £4.6 billion of public funds.

    At the top of the list is a company few will ever have heard of, property management company Telereal Trillium who received a staggering £783 million of taxpayer’ cash.

    Next in line was American computer giants Hewlett Packard, who took almost £657 million out of the department.

    Further down the list at number six, job brokers A4E walked away with over £150 million of public money, even though the Public Accounts Committee reported last month that A4E had:

    “achieved on average less than half what they promised in the contracts they signed with the Department. Against an average target of 36% of participants into work, A4E has to date found work for 15% of mandatory participants.”

    Equally dismaying for many claimants will be the discovery that Atos Origin also pocketed over £150 million from the public purse In Atos’ case the cash is for carrying out medicals whose findings are overturned in over 50% of appeals relating to incapacity benefit and over 40% of appeals relating to employment and support allowance.”

    All figures include VAT and the source of the data is the DWP.

    The full write-up (quoted above) on it is here

    http://www.benefitsandwork.co.uk/news/latest-news/1259-dwps-multi-billion-private-sector-handouts

    The full list is here

    http://www.kable.co.uk/department-work-pensions-top-100-suppliers-11oct10

    Here are the top 10 suppliers to the Department of Work and Pensions 2009-2010

    1 Telereal Trillium £782,949,477.68

    2 HP Enterprise Services £656,863,100.86

    3 Learning Skills Council £244,979,729

    4 British Telecom Plc £232,815,357.01

    5 Royal Mail Holdings Plc £175,300,755.13

    6 Action for Employment Ltd £150,835,957.26

    7 Atos Origin £150,798,434.69

    8 Working Links £134,722,405.31

    9 Accenture £87,114,892.12

    10 Shaw Trust £71,251,397.48

    and wait and see what happens to OUR NHS when the private fatcats wsiting in the wings get their sticky hands on the money.

    There is such a loathing of NuLabour here that some people will accept any crap that these ConDems from the Upper Sixth at Greyfriars hand out. Remember too that many of them are millionaires, and crooks too if you watched Dispatches Ch4 this week and Panorama last week.

  • Dunc

    “I favour much greater redistribution of both income and capital than allowed by the current political consensus in the UK. But I also favour much greater cuts in public spending – perhaps four times greater, over a decade – than Osborne just delivered. The two are not incompatible.”

    How do you feel about the recipe of greater cuts and *less* redistribution? Because that’s what we’re going to get…

  • Stuart

    Somebody

    Where are you coming from? You have just agreed with my argument. Who was in charge when all this DWP cash was handed out? When was the election again?

    6th may 2010 you say money handed out 2009/2010. How can fat cat ConDems be blamed for any of that. Get your facts right mate.

  • derek

    I wonder Craig if you have read the writings of the 19C American economist Henry George? (see link in signature)

    Simply put, George’s premise was that the ultimate beneficiary of all wealth creation is the person who collects the rent (like the Duke of Westminster), and the only fair form of taxation is Land Value Tax on the unimproved value of land.

    Income Tax discourages labour, and sales tax discourages commerce, but LVT encourages land owners to put land into useful production or else sell it to someone who will. George’s vision was that LVT would be the only tax needed. It would be cheap to administer and impossible to avoid (rich people cannot hide it away in Switzerland)

    Properly implemented an LVT would be redistributive and encourage job creation, but it is very hard to get people to properly understand it. People usually cannot get past ‘Daily Mail thinking’ that house price inflation is a ‘good thing’ as a friend of mine discovered when he stood against John Redwood on a platform of tax reform at the election.

  • Vronsky

    Craig’s argument rather smacks of telling someone about to have both legs amputated to cheer up, they needed to lose weight anyway.

    Without doubt some public funds are wasted in the public sector. Having worked most of my life in the private sector I can assure you that funds are wasted there too – and oftentimes they are public funds. No kind of spending will ever be 100% efficient even if we could all agree on how to define that: perceived inefficiency is not an argument for cuts – it’s an argument for doing something about inefficiency.

    And just how useful a figure is public spending as a percentage of GDP? Let’s ignore the many credible arguments that GDP isn’t a useful measure of anything, and assume that it matters. The portion that is public spending will appear to rise if (a) the public sector grows faster than the private (b) the private sector shrinks faster than the public. We know that real productive industry has been deliberately decimated in the last few decades so isn’t ‘high’ public spending just an inevitable arithmetic consequence?

    Anyway, public spending should not be portrayed as a left/right issue – the political right is perfectly comfortable with levels of public spending which would alarm the wildest socialist, just so long as the taxpayers’ money goes to their pals in boardrooms and bombers. Take a look at the multi-trillion dollar US arms industry.

  • McDuff

    Certainly from my point of view, my objections are not to “spending cuts” (although I do kind of struggle to see how redistribution takes place without the “spending” part of “tax and spend”), but to *these specific cuts* at *this specific time*.

    More than just the general unfairness of both increasing unemployment and cutting welfare, there’s also the fairly well established economic principle that government should spend countercyclically.

  • JimmyGiro

    The last government made the public sector so large, it was hoping to bribe its way into government for ever; the so called ‘client-state’. It was a close run thing, because if the state leviathan reaches critical mass, that will be the end of our democracy, since the state will be big enough to vote itself in power in perpetuam.

  • Stuart

    JimmyGiro

    You are 100% correct and I dont know other than the obvious self interest why this isnt argued more openly. Why are the present Government telling people this is why they are trimming the state back are they scared of riots or would people not believe them? If they told the truth it would be hard for Labour or the State employees and scroungers in society to argue against it?

  • Louise Thomas

    @somebody.

    Hi. I’m not saying I approve of the payments on the list as I don’t know what they were for, but I’m genuinely confused as to why they are labeled ‘handouts.’ Were these companies hired to do something or simply given the money in back-handers or something?

    I would expect most, if not all, of these companies were also suppliers of DWP under Labour. I know Atos – a reprehensible outfit with an appalling record in the States – was hired in by them.

    Also, the State will have to employ private companies in some cases – eg we don’t have a publicly owned telecommunications service. The only thing we can do is make sure we’re not being ‘ripped off.’

    That there have been cases of being ripped off by private companies, there’s no doubt – I’d single out Management Consultants in particular, for whom the UK public sector is well known as a soft touch and has been for years.

    But when Philip Green advised public departments to be far more rigorous in their dealings with suppliers to stop this sort of thing, his suggestions were roundly vilified by many on the Left.

    The whole debate confuses me and I think some of it boils down to public = good/private = bad again.

  • Anonymous

    Well get the tax evaders and the money problem goes away.

    reduce our money to the EU until it gets it financial act into gear and the problem goes away.

    Make the bank in profit buy bank their bad debts, I gotta say im not overtly happy asked some banker sitting pretty whilst the bottom feeders get screwed.

    implement a law for all business working for the government alongs the line of http://www.taf.org, and nail the swindlers…

  • Craig

    Derek

    Not only read Henry George, like all good liberals I can sing the song of his movement:

    The Land! The Land!

    Twas God who made the land

    The Land! The Land!

    The ground on which we stand.

    Why should we be beggars

    With the ballot in our hand?

    God gave the land to the people.

  • alan campbell

    “There is no correlation between high public spending and social and economic equality”

    Quite a lot of Scandinavians would disagree with you. Haven’t you read The Spirit Level yet?

    “So I view those protesting against cuts in public spending as well-motivated but trapped in a historical accumulation of palliative devices which each attracted a massive superstructire of self-interested providers and administrators.”

    OMG. Plain English, please!

  • Ruth

    Does anybody know exactly what Telereal Trillium gets the £782,949,477.68 for

    from the Department of Work and Pensions?

  • writerman

    I still think many people massively underestimate the level of demand needed to keep the wheels of a highly complex economy moving.

    Not only have we seen a colossal explosion of productivity, production and consumption of resources over the last thirty years; but, paradoxically, at the same time it’s debatable whether real wages have increased at all.

    This is certainly true of the US, where most peoples real wages have barely moved upwards over the last thiry years.

    So how one earth has the economy ‘grown’? The answer, if wages have stagnated… is the credit explosion. Wages have been replaced by credit, in order to keep demand up.

    This policy which has been followed by successive UK/US governments regardless of their nominal status as ‘left’ or ‘right’, is, of course, a fragile and highly unstable way of managing the problem of how to sustain demand.

    One of the major problems in the UK is that the level of consumption and average standards of living is way too big and high compared to the objective economic base the entire edifice is built on. Especially now, when the windfall revenues from North Sea oil and gas have declined so spectatcularly.

    If one looks at the UK economy over the last few decades, and excludes the revenues from the North Sea, to get a ‘realistic’ picture, one sees that things were far worse than they appeared; but the North Sea revenues allowed the real condition of the economy to be obscured and hidden from view.

    Much like the North Sea, the vast credit bubble, the housing bubble, the financial bubble… were all created to divert attention from ‘reality’ and keep demand up ‘artificially… like a gigantic Ponzi scheme. A gigantic house of cards built on nothing much more than ‘confidence’… a confidence trick of massive proportions.

    Yet this ‘confidence trick’ is the very essence of modern ‘capitalism’ in the major economies of the industrialised west.

    What’s tragic is that this bloated, unstable, Potempkin economy… is environmentally disasterous as well. Massive over-consumption ‘financed’ by ‘air’ and at tremendous cost to the planet… building a culture of over-consumption of resources which is insanely over-optimistic about the planet’s ability to sustain exponential economic growth, infinitely.

    This is the crux of the crisis of capitalism. The absurdity, madness… the impossibility of sustaining infinite economic growth on a small planet with a finite resource base.

    And then we arrive at the Big Question, if the modern model of capitalist mass-consumer society, is not only unstable, unsustainable… and doomed… what do we replace it with and how?

  • somebody

    No idea Ruth but probably buying up job centres and leasing them back with a management contract. Something similar happened with HMRC and the company they were involved with were offshore like many of the financial interests of Conservative donors and ministers.

    The non executive director of Trillium is vice chairman of Goldman Sachs. Nice.

    http://www.telerealtrillium.com/showpage.asp?pageid=68

    We aint seen nothing yet. The ConDems will make NuLabour look like amateurs.

  • Courtenay Barnett

    @ All,

    If a concession were to be made that there is credence in Craig’s observation, and more particularly his comment:-

    “… I view those protesting against cuts in public spending as well-motivated but trapped in a historical accumulation of palliative devices which each attracted a massive superstructure of self-interested providers and administrators”

    Well ?”let’s take the comment a step further, as follows:-

    i) I wager that the largest single itemmised expenditure in the budget is defence and the military.

    ii) I further wager that for several years that has been the position.

    iii) The observations are posited:-

    a) What use is it to have nuclear weapons that can’t be deployed if humankind is to survive?

    b) What use is it to produce chemical and biological weapons that if used would be in contravention of international treaties to which the UK is party to, and even if not a party to, if used would still be in violation of international humanitarian law?

    c) Is there not a price tag to each of the weapons referenced at a) and b) above?

    If the argument is extended to a measure of utility and value for money in the sphere of public expenditure, then we might observe:-

    – The weaponry that has been built, bought and fully paid for, sits as useless pieces of armory ?” with no value to be recouped.

    – Budgetary commitments to bigger guns, war ships and planes might itself be questioned on the utility and cost/benefit assessment chart.

    The point is that because of traditional and deeply entrenched ideas on public policy, there is an area of massive wastage and that somehow remains unquestioned ( in any deeply probing and meaningful way) ?” thus ?” now tell me vis-a-vis ?” public servants employed; education; housing; infrastructure ?” where should the deepest cuts start?

    Consider for a moment the lunacy of Tony Blair and the ‘special relationship’ between Britain and the US. Mad man Bush pushes for the war in Iraq and his lunatic compatriot in the UK embraced the idea and in his mendacity cannot to this day admit the manifest error. Yet, of greater moment is the fact that there is a President in the US who is not an overt war monger, but is trapped in a system that gives special meaning to what Eisenhower termed the military-industrial complex, and inadvertently and unintentionally, Craig has given us a very useful reference point, in this truncated quote:-

    “… a historical accumulation of palliative devices which each attracted a massive superstructure of self-interested providers and administrators.”

    For that if the US and Israel decided to use nukes on Iran tomorrow, then pee, pee, cluck, cluck, there would only be chickens in the entire UK political hierarchy and we would be there again in pursuit of a greater destructive military pursuit.

    All, of this, both that which has already been actualised in military pounds spent, and those that would have to be spent in the speculative scenario of an attack on Iran, would inflict further devastating financial damage not only to the UK’s national budget, but would constitute a scourge on the face of all humanity. I trust that I am incorrect as regards as that which I perceive as probable.

    The short point is that the UK has wasted the largest portion of its budgetary pounds on the military.

    Thus, Craig might be answered as follows:-

    “I view those protesting against cuts in public spending as well-motivated but trapped in a historical accumulation of palliative devices which each attracted a massive superstructure of self-interested providers and administrators” ( in the military)!

    PS. Was it the left that promoted and caused these expeditures? Well if you included Blair in the arena – then there you may very well have an answer.

  • Courtenay Barnett

    Here is the Ministry of Defence’s statement on what it does as regards taxpayers’ money.

    “Defence Spending

    Information about key areas of the Defence Budget.

    The Government plans departmental spending through the process of the spending reviews. As part of most recent settlement, the Defence Budget is set to increase from a baseline of £32.6Bn in 2007/08 to £36.9Bn in 2010/11 in Total Departmental Expenditure Limit (Total DEL). In real terms (i.e. after inflation) it represents average annual growth of 1.5%. By 2010/11 the Budget will be some 11% higher in real terms than in 1997, and represents the longest period of sustained growth since the 1980s.

    The Defence Budget

    £million 2007-08 2008-09 2009-10 2010-11

    Resource Budget 32,618 33,602 35,165 36,702

    Capital Budget 7,404 7,871 8,187 8,871

    Total Departmental Expenditure Limit (DEL) 32,579 34,057 35,365 36,890

    Of which near cash 29,411 30,763 31,921 33,628

    The extra resources have allowed us to proceed with two new aircraft carriers, the Queen Elizabeth and the Prince of Wales, which will be the largest vessels ever operated by the Royal Navy. We will also proceed with ordering more armoured vehicles for the Army and have recently ordered a sixth C17 Globemaster for the Royal Air Force to increase its strategic lift capacity.

    We are also proceeding with a number of other equipment programmes, both to introduce new capability and replace older systems, which will ensure that our Armed Forces remain equipped to meet not only the challenges of today, but of tomorrow as well. The Settlement also ring-fenced £550m from the sale of Chelsea Barracks to be reinvested in improving Service accommodation.

    The Ministry of Defence is committed to making value for money savings worth £2.7Bn over the CSR period to reinvest in Defence. Initiatives to achieve this include: a 5% year-on-year reduction in the MOD’s administrative overhead, including a 25% saving in the Department’s Head Office in London and the continued simplification of single Service Budgetary and headquarters structures.

    Operations

    The additional net costs incurred on operations (for example in Afghanistan and Iraq) are not paid for from the Defence Budget, but rather by the Treasury Reserve. Since 2001, the Reserve has provided an additional £9.5Bn on top of the Defence Budget to cover operational costs. This reflects over £3.6Bn that has been approved for Urgent Operational Requirements. This is a process designed to provide commanders on the ground with the equipment they need quickly.

    International Comparisons

    According to the latest figures (2007), the UK is the second highest spender (in cash terms) on Defence in the world behind only the United States.At 2.5% (2006) of GDP, the Defence Spending of the UK is above the NATO European average. We spend about the same proportion as France and more than Italy and Germany.Further information on international comparisons can be found in the Stockholm International Peace Research Institute (SPIRI) Yearbook in the related links section of this page.

    Government Expenditure

    Long Description

    Government spend by function in £bn – please click on image to see larger version.

    This chart sets out Government spending by function, which means some elements of the Defence Budget (such as pensions) are stripped out. In 2006/07, spending on Defence measured in this way represents some 5.8% of total UK Government expenditure.Further information on the CSR settlement can be found in the related links section of this page. Information on historical spending on Defence is published by HM Treasury in the Public Expenditure Statistical Analyses (PESA) which is also linked.”

  • Craig

    Courtenay,

    The military is a glaring example. But the same thing is found everywhere in public service, including the NHS which is ridden with excess administration, particularly of artificial “internal market” mechanisms, and stupid costs like the PFI.

  • alan campbell

    IFS reports on Craig’s “not great enough” cuts:

    http://www.ifs.org.uk/projects/346

    “Britain’s leading independent economic analysts have delivered a powerful critique of George Osborne’s spending cuts, describing them as the deepest since the second world war and saying they will hit the poorest harder than the better off.

    Contradicting earlier claims by the government, the Institute for Fiscal Studies identified families with children as the “biggest losers” and said welfare cuts were the deepest since the 1970s.

    In its analysis of the spending review the chancellor presented to the Commons yesterday, the IFS said the changes would reinforce the “regressive” nature of the government’s plans to tackle the deficit, including its £7bn of benefit cuts.

    It said that with the exception of the richest 2% of the population, the less well off would be proportionately the hardest hit.”

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