The Financial Times reports that the German Finance Ministry has produced a study showing that the burden of government spending in Germany is on track to fall below the level in the United Kingdom. Indeed, if OECD data is reliable, the UK became a bigger welfare state this year.
This is mostly a poor reflection on British PMs Tony Blair and Gordon Brown, who have presided over an explosion in the size of the state sector. But German politicians deserve a small pat on the back for imposing at least a modest bit of discipline on the growth of government spending:
Public spending in Germany, as a percentage of total economic output, has fallen sharply in the past three years and is fast approaching British levels, according to a finance ministry study. The report, obtained by the Financial Times, shows state expenditures reached 45.6 per cent of gross domestic product last year, compared with 44.1 per cent in the UK, which is generally thought of as a low-tax, low-spending economy.
…Instead of focusing on the fiscal deficit — the difference between state expenditures and revenues — the report concentrates solely on spending. The [German] spending-to-GDP ratio fell from 47.1 to 45.6 per cent between 2004 and 2006, making Germany the fourth-smallest spender in the eurozone. The same ratio rose from 42.7 to 44.1 in the UK over the same period.
…”Good progress has been made in the recent past, mainly in cutting public sector headcounts,” said Winfried Fuest, economist at the business-funded IW economic institute. But he expressed worries about government being tempted “to spend more now that the economy is doing better”.