Tuesday, September 04, 2007

Mugs


No mugs for George
Following yesterday's depressing announcement that Dave and George are adopting Labour's spending plans, I just about forced myself to read George's Times article. I was going to decompose it, but the TPA have already done so in an excellent fisk here.

So instead I've refreshed my memory on the arithmetic.

Both main parties are now committed to increasing real spending by 2% pa for the next three years. As the TPA point out, forecast GDP growth is 2.5% pa (not the trend 2.75% George suggests). Which means that whoever is in power, spending is forecast to decline from 42.6% of GDP this year, to 42% in 2010-11 (see HMT Budget Report, Table C5). In today's money, 0.6% of GDP is about £8bn.

Contrast that with the the Tory plans Labour inherited and stuck to following the 1997 election. They produced a decline in the public spending ratio from 40.8% in 1996-97 to 37.2% in 1999-00 - 3.6% of GDP, or about £50bn in today's money.

Now, £50bn pa is serious money. £50bn is two grand per household.

Just think what George could do with that. He could abolish outright Britain's two most unpopular taxes (Council Tax and Inheritance Tax) and still have enough left over to cut the standard rate of income tax to 15p. He'd be hailed as a genius- marked down in the annals as one of the greatest Chancellors ever. Commemorative mugs... keyrings... appearances on Ready Steady Cook... there'd be no end to his fame.

Put the other way, £50bn pa is what Brown flushed away when he finally opened the sluices on public spending.

Gah.

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