It didn’t feel like it at the time, but in 2000, the UK’s public sector was lean and mean. Just 39.8 per cent of our GDP went the way of the state, much lower than Germany’s 45.1 per cent, and not that much higher than the US’s 34.2 per cent.
But today, it’s a different story. The UK’s public sector has grown, while in Germany, it’s actually shrunk – at least relative to GDP – so that today the UK and Germany both see their public sectors make up 44.1 per cent of GDP.
We still lag a long way behind France – which sees 53.2 per cent of its GDP going to the state – but, and here’s the surprise, in some regions of the UK the ratio of public spending to regional GDP is even higher than in France.
According to the Centre of Economics and Business Research (CEBR), in 2007 state spending in London was just 33.2 per cent of the capital’s GDP, but in Northern Ireland it was a staggering 70.5 per cent. The ratio was also over 60 per cent in Wales and the Northeast, which, according to CEBR, is “likely to be among the highest in the whole of the European Union.”
But at least the last 12 months has seen a fall in the ratio. Apparently, public expenditure’s share of GDP peaked in 2006 with a share of 45.0 per cent. This year CEBR expects the share to drop back to 44.1 per cent.
© Investment & Business News 2013