British government is bigger than its private sector

Luke Macgregor/Reuters
Light trails made by a passing bus illuminate the night sky in front of Britain's Houses of Parliament in London. The British government has grown from 15 percent of the economy in 1900 to over 52 percent today.

Britain's government sector is now bigger than its private sector. It accounts for 52.1% of Gross Domestic Product according to the OECD – the highest since the organization's records began. Sure, government was even bigger in the early 1940s, but then at least we were fighting a war to save Europe from Nazi dictatorship. There is no such excuse this time.

In 1900, the government was a mere 15% of the economy. It was given a boost by World War I, but for most of the interwar years it remained in the 20%-30% range. After World War II it stayed below 40% until Harold Wilson's 1964-70 Labour government broke that barrier, and now Gordon Brown has taken it through the next.

Keynesians might rejoice: spend your way out of recession, they say. The trouble is that governments spend other people's money. And those people, in the private sector, can spend – and invest – it a lot more efficiently than civil servants can. The Keynesian solution takes money out of the wealth-creating side of the economy and throws it into the wealth-spending side. That is no way to generate the new economic growth that we need to earn our way out of the debt dungeon. We need to reduce government spending drastically. And that requires nothing less than a complete re-think about what government departments, agencies, and programs exist for.

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