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Austerity

The public sector strike the other day, which Perry welcomed and I did not notice, was nominally about austerity. I have heard various conflicting claims about UK government spending, so I decided to find out myself and make my own graphs using figures from ukpublicrevenue.co.uk and ukpublicspending.co.uk.

ukgov_spending_fixed

Spending did go down a bit in 2012 and 2013, so I suppose that is the austerity. But it is still higher than in 2009, and much higher than revenue, even though the latter has increased every year, contrary to the narrative that austerity is to benefit rich taxpayers.

The years 2014 to 2016 are estimates, which if to be believed indicate the plan is to resume the growth of the state.

These are absolute numbers. Other charts I have seen correct for inflation or GDP and population. I do not trust official inflation figures, and I think government spending makes the GDP statistic less useful. So I got average earnings figures from measuringworth.com and using the population figures from ukpublicrevenue.co.uk calculated spending per person as a percentage of average earnings. This makes sense to me because the fraction of my earnings that are appropriated by the state is what directly affects me.

ukgov_spending_over_income

The graph ends in 2013 because I have no estimates for average earnings. There has been a slight decrease in spending by this measure in 2012 and 2013, but no return to conditions before the step change in 2008.

In short, there is a lot of talk about not a lot of action. I have a suspicion that small cuts have been made to the wages of particularly vocal and popular public servants in order to make austerity seem like a bigger deal than it is while keeping powerful public servants in the manner to which they have become accustomed.

You can see bigger graphs and my working out in my spreadsheet.

Edit: I had mis-labelled the y axis on the first graph; it shows revenue and spending per person in Pounds. I have fixed the labels now.

26 comments to Austerity

  • Julie near Chicago

    No matter how you measure it, it comes out “Unsustainable.”

  • Alsadius

    And yet, the most bitter complaining I heard about pigheaded, economy-destroying British austerity measures was in 2010-11, when they hadn’t happened yet. People are funny.

  • Lee Moore

    You completely misunderstand the meaning of the word “austerity.” Austerity is spending less than those complaining would like you to spend.

  • Julie near Chicago

    Lee: LOLOL! And perfectly true, too.

    (Even in private life….)

  • APL

    Try plotting the unfunded public sector pension obligations against GDP.

    That’s a shocker.

    Then for kicks and giggles, include a plot for funded pension liabilities where the funds are in deficit.

    Because those of us in the private sector, are just sooo mean when it comes to paying for other peoples retirement.

  • Paul Marks

    “government spending did go down a bit in 2012 and 2013″ there is a your one )(partial) error Rob, what happened was that some of the special (bailout)spending fell out of the figures, overall Welfare State (health, education and income support) spending continued to rise.

    There have been real cuts in some government departments – for example the military and local government, but overall (due to the Welfare State being out of control) we remain on the road to bankruptcy.

    And the people think that we are undergoing savage “austerity”.

    “But you supported welfare for the bankers Paul”.

    If anyone says that in reply, you should look at what I have actually said about the bankers (and the credit bubble financial system in general) over the last years (indeed DECADES).

    I do not (and have never) supported bailouts – open or hidden.

  • bradley13

    I really like the second graph, because it so markedly demonstrates how much the government really spends: for every 100 you earn, the government spends 40 thereof. Surely a shocking figure for anyone who is not a socialist!

  • MadNumismatist

    Excellent data, thanks for putting it together, but what’s the solution?
    As pointed out, when you throw in the unfunded pension liabilities, the numbers are just insane. I cannot see a means by which government can reduce spending in any meaningful way.

    Pensions, health and debt interest take almost half the budget.
    Economic growth, higher taxes, cull the old. What can be done, because whatever happens, it is not going to be pretty?

    Just as point of note, I speak with a lot of people about this, and the general consensus is, so what I am going to die soon. The lack of interest is truly staggering. I think people just believe they are screwed and government will help them out.

  • Paul Marks

    Well if you are young and have useful skills (I am neither) then move to somewhere where people will not starve if things go really bad (which they likely will).

    New Zealand is an obvious suggestion.

    That is a solution on a personal level – for people who are young and have useful skills.

    As for political solutions…..

    Some people (such as Senator Rand Paul) come up with real plans for how government spending can really be reduced – bankruptcy prevented.

    There is very little chance that such plans will be enacted in the United States.

    And they are not even being suggested in Britain.

  • MadNumismatist

    @ Paul Marks: I think your comment was in reply to mine, which if so, is a bit disheartening for us both ; )

    To paraphrase: unless young and skilled, bend over, touch your toes, and if you can afford it get some lube.

    That would be about what I am hearing in discussions on the topic, everybody seems to be resigned to the tax cavity search that is coming.

    I think it also shows the depth of political engagement, politics has moved so far away from the voters, few even bother anymore.

    Shame, but then again, I may not be young, or skilled, but I am married to a Pinay; back to Manila for me.

    PS: I will never forget the quote in the preface of Rascals in Paradise by James Michener, 10 short stories from the South Pacific. If I recall:

    “Foreseeing a war in Europe a young Australian knew his country would be drawn in. He scoured the globe looking for a safe place to ride out the storm and chose a tiny atoll in the South Pacific thinking it would be immune. The atoll was called Guadalcanal.”

  • Richard Thomas

    Bradley, not so shocking for anyone paying attention. I am surprised it isn’t closer to 50% in fact.

  • Paul Marks

    MadN. – I was indeed replying to you (my apologies for not specifying that).

    And the anecdote is correct – sometimes the very act of trying to get away from something can bring a person right into the centre of the storm.

    As for bend over and touch your toes.

    No I do not think the starving hoards will be interested in sodomy – more in cannibalism.

    Oh well – at least my big belly will serve a purpose.

  • Paul:

    Why starvation? Is it because we will lose the ability to apply technology and abilities we already have? Or is it because of civil unrest caused by shrinking the state?

    Why is New Zealand safer from these effects?

    MadNumismatist: “Pensions, health and debt interest take almost half the budget.” Could that actually be good news? We can afford pensions, we just need to cut other stuff.

  • Patrick Crozier

    I particularly like the second graph. Some time ago I heard Steve Davies say that no government anywhere, ever has managed to extract more than about 38% (or so) of national income. This rather proves his point. We have moved into a fantasy world where politicians believe that they can run deficits in perpetuity.

  • Patrick Crozier

    Rob: When Paul talks of starvation what he thinks he means is a breakdown in the capitalist system – collapse of the money transfer system for instance.

  • MadNumismatist

    I think it was an old FT Alphaville post linked to by Francis Coppola that brought me to this post. (Pheww, hope I covered the HT’s there) http://longorshortcapital.com/short-class-warfare-long-age-warfare.htm in which is quoted this:

    “While this seems to indicate the rise of a new age of internecine class warfare in America, we’d argue instead that these moves will lead to a new age of productive age warfare in America…………………………… Baby Boomer Bob and Baby Boomer Betty. You put US here with your wanton spending on cars, houses and erections, with your hubristic manipulation of interest rates and free markets, your sense of entitlement, the way in which you transformed politics and Government into a galvanized arena of Us vs Them. Your cohort’s giant ego has consumed the future.”

    Most, as mentioned above, do not have a clue, but some, like the Trotskyite Russell Brand, and his ilk do have influence; Laurie Penny, Owen Jones, Richard Murphy et al. Simply because they have thought about it and chosen a side.

    And maybe, just maybe, it is those that will have an influence on the outcome.

    As the original FT posts mockingly (I Hope) suggests: KILL THE OLD.

  • Paul Marks

    Starvation may be pushing it Rob – but I do not know.

    Why is New Zealand less likely to have total breakdown (as opposed to “just” a Great Depression)?

    It has a population density less than one tenth that of the U.K.

    The United Kingdom can not feed the population – we need to import food. And our manufacturing industry is not going to do well – and the credit bubble financial services industry is the credit bubble financial services industry.

    Desperate need to import plus nothing much to export.

    Work out the consequences.

    “But we could reform policy – be less statist”.

    In the United States this has been suggested (by Senator Rand Paul and others) – in Britain there is not even the suggestion of doing this.

    If anything policy is going to get even WORSE.

    Wait for E. Miliband.

  • Mr Ed

    Austerity, then why does the UK government have 35 rules for pedestrians and a website maintained to let us know?

    Thanks to the BBC, of all sources, for ever more helpful pointers on how to walk.

    And this is not funny, it is a very serious matter that taxed or borrowed money is spent on providing this sort of totalitarian advice. If you had told the men fighting in the First World War, ‘100 years from now, your government will give advice to people on how to walk’ what would they have thought?

  • I dunno, Mr Ed. That first link is to the web version of the Highway Code, the first 35 rules of which are for pedestrians. The Highway Code has been in existence since 1931. And it contained advice for pedestrians.

  • Mr Ed

    Rob,

    That was at least only one page, and cars had far inferior braking and tyres in those days. 35 rules. How about ‘If you are stupid or careless, you or others may be injured or killed, or property damaged.”

    Job done, free by me. We can crowd-source government ‘advice’ if they insist on stating the bleedin’ obvious, like ‘It can be hot in summer’. Let us be daring.

  • I agree, really. I suppose if roads were privately owned and operated then road franchises and insurance companies would come up with as many rules, but at least it would not be the state doing it. FWIW the eating advice seems newer, and more expensive.

  • I suppose if roads were privately owned and operated then road franchises and insurance companies would come up with as many rules

    I doubt it. I think that they would be more likely to adopt Ed’s approach.

  • Mr Ed

    I confess to chuckling at the eating advice. If you want to know what happens when you don’t eat, consider Bobby Sands.

    And if you eat too much, Daniel Lambert.

    If you can’t work out what to eat, who am I to patronise you?

    Again, job done, there you go.

  • Laird

    But Mr Ed, if you didn’t have all those rules for pedestrians what would the Ministry of Silly Walks do?

  • Paul Marks

    Patrick – some governments have managed to extract as much as half of output in taxes.

    Of course this undermines long term economic development and leads to cultural decline.

    But do governments(and “intellectuals”)care about either of these things?