British love their costly welfare state
March 28, 2010
By Landon Thomas Jr.
New York Times News Service
LONDON - Britain operates one of the largest welfare states in Europe. And that, it seems, is just fine with many of the British.
Despite the worst recession since World War II, many people here show little appetite for shrinking a system that eats up half the nation's economic output, more than in Portugal, Greece or Spain - all of which are trying to push through painful cuts. Indeed, as Britain's Labor government confronts a yawning budget deficit, public-sector workers are mobilizing to head off any reductions in wages or jobs.
As a midwife for the National Health Service, Rachel Voller is one of millions in Britain who have benefited from a decade of rising public spending. Now, she wants to protect her piece of the pie.
"We work hard and struggle to make ends meet, but they are the ones that get the bonuses," Voller, 34, said Monday, as she and a group of colleagues gathered at the headquarters of the Royal Bank of Scotland here to sneer at investment bankers and pre-emptively protest salary or job cuts for health workers.
While government spending is up in many parts of the world, it is the pace at which it is growing here that really sets Britain apart. Spending has increased from 44 percent of gross domestic product in 2007 to a projected 52 percent in 2010, the largest jump among wealthy nations.
As he delivered the government's budget to Parliament on Wednesday, Britain's chancellor of the exchequer, Alistair Darling, did his best to make the case that the Labor Party was committed to halving the deficit over four years. To do so, Labor is counting on a mixture of tax increases, public sector efficiency savings and - most crucially - a recovering economy.
But with a national election looming and the electoral gap between Labor and the Conservatives narrowing, Darling offered little assurance that he would put an end to more than 10 years of Labor largess. On the contrary, he said that public spending would increase by 2 percent in real terms.
And he minced few words in emphasizing how important such investment was to strengthening the economy. "Cuts in spending would be wrong and dangerous, and to start now would be to take a huge risk with people's jobs and futures," Darling said, in a swipe at David Cameron, the Tory party leader who sat opposite him and who has focused his now-flagging campaign on sharper spending cuts to close the deficit.
Recently, the government announced that while the private sector continued to shed jobs, the National Health System added 60,000 jobs in 2009, bringing its work force to a new high, 1.62 million. The service's share of the economy has doubled since 1986.
With its national debt at a comparatively low 60 percent of GDP, Britain has been able to borrow easily to finance such spending - and the chancellor indicated Wednesday that such high levels of borrowing would continue.
Prime Minister Gordon Brown has bet his political career that voters will accept his argument that government spending has been crucial to warding off an even deeper recession. And given signs that the economy is indeed starting to recover, British voters are having second thoughts about the Tories' assertion that deeper cuts are needed.
Sensing the shift, the Tories have begun to moderate their message in recent months, and they have not said exactly what they would trim. A recent poll commissioned by the 2020 Public Services Trust concluded that 75 percent of Britons thought that efficiency savings could eliminate the need for budget cuts.
"We will not accept any cuts in pay," said David Prentis, the general secretary of Unison, Britain's largest public sector union, with a membership of 1.4 million. "That will lead to industrial action."
While protests by British Airways workers have attracted public attention, it is Unison and other public sector unions that have the most sway.
That such a broad swath of the British public seems not to be willing to accept budget cuts is bad news for the Tories, who have built their campaign on gloomy predictions regarding Britain's capacity to repay its debts.
But the numbers may be even more daunting than the Tories have said. According to Nick Silver, an independent actuary who has studied Britain's liabilities, the nation's debt burden - including pension obligations and the cost of bailing out big banks - is actually 420 percent of GDP, twice the level of Japan, the world's leading debtor.
Most of these obligations come due in the decades ahead, but for now it seems that Brown is winning the argument that slashing the deficit would just tip the economy back into recession.
That stance is conspicuous in Europe, where other nations are becoming more aggressive in cutting their spending. Andrew Lilico, an economist at Policy Exchange, a free-market-oriented policy research organization in London, disputes Brown's contention that the Labor government spent more simply because of the recession. He says that 56 percent of spending from 2007-08 to 2010-11 has been directed toward public services such as health care and education, as opposed to investment and social security.
"The government has increased spending by 125 billion pounds in three years, and most of that is unrelated to the recession," said Lilico. "That is why the deficit is so high. I don't think people are scared enough."
March 28, 2010
By Landon Thomas Jr.
New York Times News Service
LONDON - Britain operates one of the largest welfare states in Europe. And that, it seems, is just fine with many of the British.
Despite the worst recession since World War II, many people here show little appetite for shrinking a system that eats up half the nation's economic output, more than in Portugal, Greece or Spain - all of which are trying to push through painful cuts. Indeed, as Britain's Labor government confronts a yawning budget deficit, public-sector workers are mobilizing to head off any reductions in wages or jobs.
As a midwife for the National Health Service, Rachel Voller is one of millions in Britain who have benefited from a decade of rising public spending. Now, she wants to protect her piece of the pie.
"We work hard and struggle to make ends meet, but they are the ones that get the bonuses," Voller, 34, said Monday, as she and a group of colleagues gathered at the headquarters of the Royal Bank of Scotland here to sneer at investment bankers and pre-emptively protest salary or job cuts for health workers.
While government spending is up in many parts of the world, it is the pace at which it is growing here that really sets Britain apart. Spending has increased from 44 percent of gross domestic product in 2007 to a projected 52 percent in 2010, the largest jump among wealthy nations.
As he delivered the government's budget to Parliament on Wednesday, Britain's chancellor of the exchequer, Alistair Darling, did his best to make the case that the Labor Party was committed to halving the deficit over four years. To do so, Labor is counting on a mixture of tax increases, public sector efficiency savings and - most crucially - a recovering economy.
But with a national election looming and the electoral gap between Labor and the Conservatives narrowing, Darling offered little assurance that he would put an end to more than 10 years of Labor largess. On the contrary, he said that public spending would increase by 2 percent in real terms.
And he minced few words in emphasizing how important such investment was to strengthening the economy. "Cuts in spending would be wrong and dangerous, and to start now would be to take a huge risk with people's jobs and futures," Darling said, in a swipe at David Cameron, the Tory party leader who sat opposite him and who has focused his now-flagging campaign on sharper spending cuts to close the deficit.
Recently, the government announced that while the private sector continued to shed jobs, the National Health System added 60,000 jobs in 2009, bringing its work force to a new high, 1.62 million. The service's share of the economy has doubled since 1986.
With its national debt at a comparatively low 60 percent of GDP, Britain has been able to borrow easily to finance such spending - and the chancellor indicated Wednesday that such high levels of borrowing would continue.
Prime Minister Gordon Brown has bet his political career that voters will accept his argument that government spending has been crucial to warding off an even deeper recession. And given signs that the economy is indeed starting to recover, British voters are having second thoughts about the Tories' assertion that deeper cuts are needed.
Sensing the shift, the Tories have begun to moderate their message in recent months, and they have not said exactly what they would trim. A recent poll commissioned by the 2020 Public Services Trust concluded that 75 percent of Britons thought that efficiency savings could eliminate the need for budget cuts.
"We will not accept any cuts in pay," said David Prentis, the general secretary of Unison, Britain's largest public sector union, with a membership of 1.4 million. "That will lead to industrial action."
While protests by British Airways workers have attracted public attention, it is Unison and other public sector unions that have the most sway.
That such a broad swath of the British public seems not to be willing to accept budget cuts is bad news for the Tories, who have built their campaign on gloomy predictions regarding Britain's capacity to repay its debts.
But the numbers may be even more daunting than the Tories have said. According to Nick Silver, an independent actuary who has studied Britain's liabilities, the nation's debt burden - including pension obligations and the cost of bailing out big banks - is actually 420 percent of GDP, twice the level of Japan, the world's leading debtor.
Most of these obligations come due in the decades ahead, but for now it seems that Brown is winning the argument that slashing the deficit would just tip the economy back into recession.
That stance is conspicuous in Europe, where other nations are becoming more aggressive in cutting their spending. Andrew Lilico, an economist at Policy Exchange, a free-market-oriented policy research organization in London, disputes Brown's contention that the Labor government spent more simply because of the recession. He says that 56 percent of spending from 2007-08 to 2010-11 has been directed toward public services such as health care and education, as opposed to investment and social security.
"The government has increased spending by 125 billion pounds in three years, and most of that is unrelated to the recession," said Lilico. "That is why the deficit is so high. I don't think people are scared enough."
