The more you like government the more you want a V shaped recovery

A little bit of plain mathematics for those who think we should both have more government and also a smaller economy. Less of that horrible consumerism that so blights the environment and so on. There’s a mathematical problem with this.

To estimate numbers a bit - they’re close enough to reality to illustrate the point.

Before, in February, UK GDP was about £2 trillion a year and the tax take of that was some 35%. Now, with the GDP plunge, it is some £1.6 trillion a year. If the tax take remains at 35% then that means significant real term cuts in everything government does.

Alternatively, to keep the amount of government we have the tax take needs to rise to about 44% - rather more than we’ve managed to raise in modern Britain.

Further, note what happens if we increase the government portion of the economy from around the OECD average to high up in the distribution. We don’t gain any extra government at all. We only get to pay for the amount we already have.

The only way out of this is that the economy grows again.

Thus, the more that you desire more government programs to do such lovely things then the more you have to be arguing for swift economic growth from where we are now.

Our view is, of course, that as we gain that lovely economic growth then there are fewer problems that government need spend money upon. But that doesn’t change the simple maths above.