The Great Debate UK

Three big myths about public sector cost-cutting

- Andrew Wileman is a independent business consultant and writer, most recently writing about cost management in the private and public sectors in “Driving Down Cost” (Brealey Publishing). The opinions expressed are his own. –

“We only need to cut cost because of the credit-crunch crisis.”

No, there is a deep structural problem that was there before the crunch. The public sector has been driving up its share of GDP for decades, in the UK, the U.S. and almost all advanced western economies. Its momentum will be painful to slow down, let alone reverse. This underlying trend was concealed in the nineties and noughties (when the talk was of “the end of big government”) by a debt-bubble-fuelled growth in the private sector. In the UK, we are already over a 50 percent state share of GDP.

In the U.S., post-Obamacare, the state’s share of GDP, already at 45 percent, could also rise to over 50 percent in the next decade. An American Rip Van Winkle from the 1950s waking up to a 50 percent state economy would think the U.S. had lost the cold war and become a Russian satellite.

“To do serious cuts in government services we will need to accept a major deterioration in the level and quality of front-line service delivery.”