Today's budget in context


As we head towards the UK government's biggest Budget deficit ever, a black hole of at least £118 billion, can anything be done about it?

No, raising taxes on the rich is the wrong answer (I will blog later about why). The problem is simply that government spending has grown out of control.

For a while Brown's booming spending was almost hidden by the booming economy, which almost raised the taxes to pay for it. But now the boom has turned to bust the true state of the public finances is revealed.

In 2000, when we were already three years into the Labour government, the government spent £343 billion. This year it plans to spend £653 billion: nearly twice as much.

Just what are they spending all that extra money on? What useful things does the government do now that it didn't do in 2000?

If spending has nearly doubled, are schools educating twice as many pupils? Are hospitals treating twice as many patients?  Are the police catching twice as many criminals? Of course the government has statistics to suggest that various things have improved, but most of us who actually use public services would say that overall they are much the same as in 2000.

But if little has changed, why has the cost doubled?

Even if we allowed for inflation since 2000, government spending would now be just £407 billion - £246 billion less than this year's proposal. That's enough to wipe out the deficit, abolish VAT entirely, cut corporation tax to match Ireland's 12.5%, and abolish Council Tax, and still have £10 billion spare.

So you can have today's public services, today's taxes, and a government debt that will cripple our economy for a generation. Or we could have the public services we had in 2000, pay no VAT or Council Tax, have no deficit, and have one of the most competitive economies in Europe. Do you even need time to think about it?