This extraordinary rise is a problem in itself — quite apart from any issues of increasing government debt or increasing the budget deficit. Spending at such a high level reduces the growth of the economy. Authoritative estimates produced by European Central Bank researchers suggest that each additional percentage point of GDP in public spending reduces the growth rate of the economy by 0.12-0.13%. So, raising spending by 10% of GDP would be expected to reduce the growth rate of the economy by 1.2-1.3% - halving it from its previous level of around 2.6% per year down to more like 1.3%. At this much slower growth rate, tax revenues would grow much more slowly and the government would struggle to repay the debts it is currently accumulating.
Labour’s 2009 Budget plans already include space for an additional £50bn-£70bn of fiscal tightening. Since 80% of the tightening they have scheduled after 2011 takes the form of spending cuts, we can therefore expected Labour, if re-elected, to cut spending by some £40bn-£60bn, perhaps more. If other parties are serious about controlling spending more tightly than Labour, they should therefore be anticipating spending reductions, relative to the 2009 Budget plans, greater than this.
If spending were immediately frozen at its 2008/9 level, apart from spending in areas such as benefits that rise automatically in a recession, by 2010/11 savings would already be above £50bn. If you don’t increase the spending now, you won’t have to cut it later. Do opposition parties really want to accept, unchallenged, plans in which there are huge spending rises in the run-up to the next General Election with rapid cuts scheduled for just before the following General Election? Was spending on health, education, etc. really felt to be so low in 2007/8 that we needed to increase it by nearly 20% in just three years? Does anybody believe there can be any serious return on such a wild spending spree? And why has there been so much discussion about the merits or otherwise of a £12bn tax cut and almost no debate at all about a £120bn spending rise?