Why Cameron was right about the regions

Given that Labour has put out a hilarious plea to discuss “issues” rather than personality (or lack thereof), I would like to rise to this challenge to discuss an excellent point raised by David Cameron on Friday: that the state spending/GDP ratio is far too high in many parts of the UK and needs to be lowered. Stating this utterly uncontroversial fact landed him in a bit of trouble, I suspect because of lack of understanding of the issues. So, in the spirit of Labour’s plea, here are some facts.

Cameron told Paxo that:

“In Northern Ireland, it is quite clear – and almost every party accepts this – that the size of the state has got too big. We need a bigger private sector. There are other parts of the country, including the north east. The aim has got to be to get the private sector, to get the commercial sector, going.”

Here he was merely restating the fifth of Osborne’s eight pledges. But as Iain Martin suggested at the time, this would allow Labour to misrepresent this as a “Cameron to slash spending” story – when he clearly said he wished to decrease the ratio by growing the local economy (or ‘private sector’, to use Labour’s argot). Right on cue, The Guardian produced this following – and misleading – front page headline yesterday:

Cameron has no agenda (or mechanism) to cut locally: it’s a nonsense headline (the text of the story, by Nick Watt, was fine). The Tories might have responded by producing the below regional spending/GDP ratios from the CEBR (pdf) which I have juxtaposed alongside OECD data (table 25) for countries. This puts the appalling problem in perspective:

 
Cameron said these ratios were higher than the Eastern bloc: I could not, alas, find any data for them*. But you get the picture. State spending is deforming the economy in the regions: how can economies grow if bureaucracies suck up young talent? Anyone who cares about (or lives in) these parts of our country should be worried about this. Even the Guardian. Cameron made a very good point, and on his trip to the North East today I hope he followed up on it.

* A bottle of champagne for any CoffeeHouser who manages to find state spending/GDP ratios for the Soviet bloc countries.