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Wednesday, 1 July 2009

Public vs private

This from the BBC website on today's PMQs

1220 From BBC political correspondent Reeta Chakrabarti:

Another clash over public spending - which elicited one extraordinary claim from Gordon Brown - and one admission. Total spending he insisted would rise - by 0% in 2013-14, prompting David Cameron to mock that that was a "0% answer". But Mr Brown did admit that capital spending would fall after 2011 - something he had avoided saying up till now. Technical and complicated stuff. But the debate did get to the nub of the issue - which is that the government says money should be spent now to stave off the worst effects of recession - and the Opposition wants to talk about the longer term state of the finances.

Well no, Ms Chakrabati, it isn't patricularly technical and it isn't particularly complicated. Either you are out of your deth, or you are covering for the government. We all know that it is government overspending that got us here, not the "recession".

Here once again is the graph I produced a few months ago of public versus private spensing growth in the UK. See once again how higher public spending killed the private sector economy starting three years ago. It hasn't changed much, except that you see that blue line? It drops even further on the right hand side now. This isn't a fiscal stimulus. It is more like a heroin overdose.


Ben Moore said...

Austerity is working out pretty well, isn't it?

John said...

You might be interested in Sydenham's Law which describes the detailed relationship between public spending and private sector growth.