How Should Britain's Government Spending and Tax Burdens Be Measured? A Historic Perspective on the 2009 Budget Forecasts

Abstract

The 2009 Budget projections imply that the ratio of general government expenditure to national income will rise to 53.4% in 2010, the highest ratio since World War II and 6.9% above the peak recorded in World War I. Public sector net borrowing is projected to increase from 8% of national income in 2008-09, to 14.1% in 2009-10, and 13.5% in 2011-12. There must be serious doubt whether deficits on this scale can be financed in a non-inflationary manner, without very large capital inflows from abroad. It is hard to see why such inflows should be forthcoming now that the British economy has become so highly taxed by international standards.

An Analysis of the Welfare Cuts in the Comprehensive Spending Review and the Budget 2010

“…Government expenditure is at record levels, while the potential to increase tax revenue has been largely exhausted. In peacetime history, the British state has never been able to extract a larger share of economic output through taxation for a sustained period (see Smith, 2009).…”