U.K. Spending Plans Would Mean Austerity in France and Germany

(Bloomberg) -- Britain may be heading for 1970s-style levels of government spending but the burden will still be less than in France, Italy and Germany.

If the opposition Labour Party wins the December general election, public expenditure in the U.K. could rise to 43.3% of economic output by 2023, according to the Resolution Foundation think tank. That’s just below the average elsewhere in the Group of Seven, as forecast by the International Monetary Fund.

With both Labour and the Conservatives pledging to end a decade of austerity, there are fears the election campaign could turn into an arms race of costly giveways.

The Resolution Foundation assumes that the Tories deliver on the 13.4 billion-pound ($17 billion) spending boost pledged for 2020-21 and then increase expenditure in line with GDP, while adding 20 billion pounds to the capital budget.

This takes public spending to 41.3% of GDP, though Prime Minister Boris Johnson has also held out of the prospect of big income-tax cuts, making it harder for the Conservatives to pay for their commitments.

For Labour, the foundation adds commitments made in the party’s 2017 election manifesto to Chancellor Sajid Javid’s post-Spending Review baseline. This adds 49 billion pounds of day-to-day expenditure -- an increase Labour says will be paid for with tax rises -- and 25 billion pounds of capital investment.

The Resolution Foundation noted that public spending is “relatively modest” by international standards at 95% of the Organization for Economic Cooperation and Development average. Britain spends more in relative terms than the U.S., South Korea and Ireland, but significantly less than France, Finland and Sweden, it said.

To contact the reporter on this story: Andrew Atkinson in London at a.atkinson@bloomberg.net

To contact the editors responsible for this story: Fergal O'Brien at fobrien@bloomberg.net, Brian Swint, Zoe Schneeweiss

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