Insights from the UK and beyond
UK looks to Canada on cuts
The Telegraph newspaper reported on Monday that Britain plans to take a leaf out of Canada’s book in tackling its massive deficit.
The headlines look good: in the mid-1990s, the Canadian government managed to turn a 9 percent budget deficit into a surplus in less than five years. But the small print makes for more sobering reading. Canda’s deficit reduction program involved massive cuts in areas such as healthcare and education and thousands of job losses. It also required a huge collective effort.
I was the rapporteur for the 2009 Canada-UK Colloquium, an annual event which last year took as its theme the global financial crisis. British attendees were naturally eager to hear from the Canadians about the 1990s experience, possibly in the belief that the Canadians somehow had some magic, and pain-free formula for deficit reduction. But the Canadians warned repeatedly about the dangers of underestimating their success and the preparation, planning – and pain – it would involve.
They identified several key features that were crucial to the deficit reduction:
1. Collaborative experience – departments identified their own budget cuts and the Cabinet worked together on budget reductions rather than engaging in departmental horsetrading;
2. Cuts were strategic: some areas of public spending were totally eliminated — a marked contrast to previous British spenidng cuts based on ‘equal misery’ for all departments;
3. The government identified not just where to cut but also where to spend;
4. The Prime Minister was pivotal in spearheading the plans.
All of that sounds eminently do-able in the UK’s new coalition spirit of agreement. But the Canadians also pointed out that the challenge for the UK is even greater, for at least 3 reasons:
1. The UK’s fiscal position is worse (11 percent deficit versus Canada’s 9 percent);
2. The global economic picture is also far worse;
3. The Canadian public was better prepared by the incoming government for the kind of cuts needed.
This last point could prove the UK’s biggest challenge. David Cameron and his team have warned repeatedly about the size of the problem and the tough measures that will be needed to tackle Britain’s debts. But whether or not Britons have really taken on board what that might means for jobs or services has yet to be seen.