Bogus public spending projections

Mike Denham has a very interesting TPA piece on bogus public spending projections. 


It’s taxpayers who foot the bill for bogus public spending projections

According to the OBR’s Budget forecast, public spending as a percentage of GDP will fall from 45.6 per cent this year to 44.7 per cent in 2031-32. For taxpayers that would be a small step in the right direction. But hardly anyone – probably including the OBR itself – actually believes the forecast. Because around half of future spending is almost certainly understated.

The spending ratio (Total Managed Expenditure – TME – as a percentage of GDP) has grown enormously during this decade. Even if the OBR’s forecast decline materialises, by 2031-32 it will still be 5.5 percentage points of GDP higher than in 2019-20, equivalent to £175 billion in today’s terms.

And we taxpayers should never forget that the funding burden falls almost entirely on our shoulders. For sure, part of it is debt financed, but that debt has to be serviced, and the OBR says the debt interest bill has mushroomed to £124 billion this year, rising to £160 billion – a heart-stopping £5,500 per household – in 2031-32.


The whole piece is well worth reading for what Denham says on public spending projections, but also as a reminder of wider issues around bogus government projections. 

For example, as public spending projections certainly are bogus, then why would anyone believe climate projections, Net Zero projections, HS2 projections?

To state the obvious, bogus public spending projections help nobody but politicians looking to kick that increasingly battered can a little further down the road. Much is made of satisfying the fiscal rules, but IMF praise notwithstanding, our rules are weak, and devaluing them further by understating the outlook for spending is asking for trouble. Which is why our government borrowing costs are already the highest in the G7.

As the TPA has long argued, spending is unsustainably high and needs to be reduced. But pretending that future spending will somehow be lower than current commitments and policies imply is the road to ruin. We desperately need policymakers who will deal with reality, not fantasy.