According to the supercomputer Deep Thought the answer to the question of life, the universe and everything was 42 (in Douglas Adam’s Hitchhikers Guide to the Galaxy).
It turns out however that this number may be subject to localised quantum relativity effects – specifically on an insignificant island off the north-west coast of Europe, a continent on a small blue planet in an unfashionable part of the galaxy. Here, the number is 43, rounded up – well actually 42.51, but it keeps wobbling around all the time and is subject to Heisenberg’s Uncertainty Principle. So usually, most of the time, its sort of around 43. Ish.
This number is the average level of public spending as a percentage of GDP in Britain over the last four and a half decades, up to but not including the current crisis.
Before the current crisis started public spending was running at almost exactly 42.5% of GDP, so round about the average. And prior to the current crisis the main political parties all thought that was about where it should be.
Now it s shooting up towards 50% of GDP. Some of this change is a result of the stimulus spending package, but it is mostly the result of the collapse in private sector of the economy, especially the financial sector.
On the way down to the Public Administration Select Committee to give evidence today on the effects of the fiscal crisis on public administration I was reading the late Leo Pliatzky’s ‘The Treasury Under Mrs Thatcher’ (Pliatzky was a Treasury Mandarin back in the 1970s). Pliatzky sets out four deceptively simple questions any government has to answer (I paraphrase):
1) What services should be public?
2) How much in total (as a percentage of GDP) should we spend on public services and benefits?
3) How do we decide priorities when government instead of market forces has to resolve difficult allocation decisions?
4) How can we ensure efficiency and value for money?
In the Pre Budget Report next Wednesday (9th Dec) we’ll probably hear something about (3), a lot about (4) there will be some, probably implied, target for (2) and not much said about (1).
Until the current crisis hit, we had a political consensus, more or less, about the answers to most of these questions. There were quibbles around the edges, but by and large the main parties agreed. Now we are in unknown territory. It is not really clear what any of the three parties think about the future. Is the answer to question (2) – in the long-term – 43? Or should it be markedly higher or lower? Until you answer (1) and (2) discussions about the rest become meaningless, because it is not lcear what you are trying to achieve. Let’s hope before the election comes around we do get some answers.