{"id":2956,"date":"2010-04-29T09:50:23","date_gmt":"2010-04-29T09:50:23","guid":{"rendered":"https:\/\/mmm.9dotdigital.ca\/?p=2956"},"modified":"2025-03-27T15:49:00","modified_gmt":"2025-03-27T15:49:00","slug":"spending-cut-gloom-at-odds-with-1990s-evidence","status":"publish","type":"post","link":"https:\/\/mmm.9dotdigital.ca\/?p=2956","title":{"rendered":"Spending-cut gloom at odds with 1990s evidence"},"content":{"rendered":"<p>Budget forecasts imply that public spending (&#8220;total managed expenditure&#8221;) will fall from 48.1% of GDP in 2010-11 to 42.3% in 2014-15. The consensus view is that a cut-back on this scale will cripple economic growth and entail huge public-sector job cuts. Evidence from the 1990s suggests otherwise.<\/p>\n<p>TME fell from 42.5% of GDP in 1994-95 to 37.2% in 1998-99 &ndash; a 5.3 percentage point reduction over four years versus the 5.8 pp cut envisaged by current plans. GDP growth averaged 3.3% <em>per annum<\/em> over 1995-99. This resilience, moreover, did not reflect offsetting monetary policy loosening &ndash; Bank rate was little changed between the start and end of the period.<\/p>\n<p>Pessimists claim that public-sector jobs were slashed. They cite Labour Force Survey statistics showing that public-sector employment fell from a peak of 6.01 million in 1991 to a trough of 5.16 million in 1997, a reduction of 840,000. These numbers, however, are misleading because they fail to adjust for privatisations and outsourcing. An alternative measure unaffected by public-to-private-sector transfers is the Workforce jobs series covering public administration, education and health. This fell by only 130,000 &ndash; see first chart.<\/p>\n<p>Rather than slashing jobs, the pay bill was contained by limiting wage rises. Public-sector earnings growth lagged inflation and was much lower than in the private sector &ndash; second chart.<\/p>\n<p>Minimising the pain of fiscal adjustment requires policies to promote offsetting private-sector expansion. Rather than spending cut-backs, the key risks currently are tax rises that damage incentives to work and invest and excessive financial regulation that restricts credit supply needed for a sustained economic recovery.<\/p>\n<p><span class=\"full-image-block ssNonEditable\"><span><img decoding=\"async\" src=\"\/storage\/graphs\/uk-gov290410.gif?__SQUARESPACE_CACHEVERSION=1272546818037\" alt=\"\" \/><\/span><\/span><br \/><span class=\"full-image-block ssNonEditable\"><span><img decoding=\"async\" src=\"\/storage\/graphs\/uk-avg290410.gif?__SQUARESPACE_CACHEVERSION=1272546845344\" alt=\"\" \/><\/span><\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Budget forecasts imply that public spending (&#8220;total managed expenditure&#8221;) will fall from 48.1% of GDP in 2010-11 to 42.3% in 2014-15. The consensus view is that a cut-back on this scale will cripple economic growth and entail huge public-sector job cuts. Evidence from the 1990s suggests otherwise. TME fell from 42.5% of GDP in 1994-95 [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3],"tags":[],"class_list":["post-2956","post","type-post","status-publish","format-standard","hentry","category-money-moves-markets"],"_links":{"self":[{"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=\/wp\/v2\/posts\/2956","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=2956"}],"version-history":[{"count":1,"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=\/wp\/v2\/posts\/2956\/revisions"}],"predecessor-version":[{"id":5265,"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=\/wp\/v2\/posts\/2956\/revisions\/5265"}],"wp:attachment":[{"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=2956"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=2956"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=2956"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}