This graph uses Eurostat data to show how the tax burden/GDP has changed (and is forecast to change) for a range of countries.
The UK is the only one of these countries to have materially reduced its tax burden over this austerity period.
Now let's look at indexed real total government spending over the same period
The relative severity of the UK's spending cuts is clear - only the extreme cases of Ireland and Greece (and to a lesser extent Spain) have suffered more.
I've kept the index scales the same so we can visually appreciate the difference between these two trend lines. If there was no GDP growth the sum of these two lines would roughly1 show us the trend in deficit. Of course in reality GDP growth acts as a multiplier to dampen (or potentially reverse) the trends we see in the first graph, so a key judgement call is whether the reduction in tax burden drives GDP growth more than the associated reduction in expenditure slows it.
So let's look at the net outcome of all of this in terms of deficit/GDP;
I would tentatively suggest that those countries which have been willing to use taxation to fuel spending (or at least haven't reduced spending to enable tax cuts) are currently seeing a better net outcome in terms of deficit reduction.
The core "anti-austerity" argument is that government spending is a key driver of economic growth, so to cut spending during an economic slow-down (and particularly when interest rates are close to zero) is damaging to the economy. It strikes me that if you look at the data it shows that the main driver of reduced spending in the UK is the obsession with reducing the tax burden. I wish more politicians had the courage to address that issue head-on.
Now of course if you're ideologically committed to reducing taxes you might argue that this is all well and good. Nobody wants to pay more tax in the same way that nobody wants austerity - and there are plenty who believe we should live in a lower tax / lower spend economy. I don't share that view, but I can understand it.
But even those who believe that a government's primary objective should be to reduce the tax burden (as opposed to, say, caring for the least well-off in society) must surely question the timing. Should we be reducing taxes and therefore reducing spending at a time when most would agree that the economy would benefit from increased government spending "if we could afford it"?
I've commented before that CEOs - who should be focused on long-term shareholder value - are actually incentivised to maximise "CEO lifetime remuneration value". I suspect most chancellors are in a similar situation; they are incentivised to make policy decisions which improve their chances of short-term political success rather than serving the long-term interests of the economy. Cutting taxes is awfully popular - as long as voters don't draw the connection between this and the hardship caused by "austerity".
A confession: the more astute among you may be asking why these graphs start in 2008 and why I've used indexed data in two cases. The answer is simple - it serves my argument best to present the data that way. It's all true, but unlike my previous post (> Who's Really Against Austerity) I have presented the data here in a way to help me make a (valid) point. I recommend you read that previous post if you want to see a less agenda driven presentation of the figures (and see some very interesting and informative comments posted in response )
1. Tax burden represents c.90% of the UK's total revenues and the only cost excluded from the expenditure graph is debt interest
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