In deficit reduction, focus on reforming the state
According to The Observer: 鈥�Nick Clegg has staked his political reputation on a pledge that under the coalition government there will be no return to the savage cuts of the 1980s.鈥� But how savage were those cuts? In fact, were there actually any cuts at all?
The evidence suggests not. In fact, from May 1979 to April 1991, public spending rose from 拢330bn to 拢369bn. In real terms, that was an average spending increase of 1% a year. If the coalition government wants to meet its stated aim of eliminating the structural part of the budget deficit over the course of a five-year parliament, they鈥檒l need to do much better than that.
To be fair though, Nick Clegg does not himself talk about 鈥榯he savage cuts of the 1980s鈥� 鈥� those words belong to The Observer. But it does underline the fact that there are many misconceptions about the 1980s, and the extent to which the state was 鈥榬olled back鈥�. Both the 鈥榣eft鈥� and the 鈥榬ight鈥� tend to exaggerate it.
Clegg鈥檚 real argument in the Observer interview is that the coalition government is going to implement cuts in a different way, avoiding confrontations, social divisions, and regional disparities, and generally take the country with them. The idea is to make deficit reduction about more than just 鈥榗uts鈥�, and to put the focus on reforming the state. That鈥檚 a sentiment with which the Adam Smith Institute would heartily concur.
But no one should fool themselves that the necessary reductions in expenditure are going to be easy to implement, or that vested interests are not going to resist them bitterly. The nature Gordon Brown鈥檚 client state, under which millions of people are dependent on the taxpayers鈥� largesse for their pay and position, makes that impossible.
In other words, the deputy prime minister may be right to reject a 1980s approach to deficit reduction. But if the government is to succeed, it will still need to emulate Mrs Thatcher鈥檚 singularity of purpose and clarity of vision. I suspect both David Cameron and Nick Clegg know that.
------------------------------
海角大神 has assembled a diverse group of the best economy-related bloggers out there. Our guest bloggers are not employed or directed by the Monitor and the views expressed are the bloggers' own, as is responsibility for the content of their blogs. To contact us about a blogger, click here. To add or view a comment on a guest blog, please go to the blogger's own site by clicking on the link above.
