In Bankrupt Britain, a report published by ConservativeHome, Malcolm Offord highlights some very uncomfortable truths about the UK's financial situation.
For instance:
If we assume that in 2009-10, UK GDP falls by 5% overall in real terms, we think that “business as usual" levels of public spending and taxation would lead to national debt (on the Maastricht definition) rising to around 105% of GDP by 2012 and continuing to rise thereafter to 156% of GDP by 2020.
As a result of which, Offord argues, public spending will need to be cut by £100bn if we are to restore any kind of sanity to the public finances. Though I don't agree with everything in the paper – the tax rises on top-earners that Offord supports would bring in little revenue and hamper economic recovery – it is well worth reading in full. Just don't expect it to bring a smile to your face.
On the subject of cutting spending, however, £100bn might not be quite such an outlandish target as people expect. According to the figures in this paper on public sector efficiency by two ECB economists for the Fraser Institute, the UK could get the same public sector output with 16 percent less public spending. If we could make the British public sector as efficient as the American, Luxembourgian, Japanese, or Australian ones, we could save almost £96bn a year without cutting any services. That's certainly something to think about.
