At the time of the UK's most significant general election for a generation, I am living in New York. That has disadvantages and advantages: the disadvantage is distance from the campaign; the advantage is the ability to stand back. When I do so, I find myself struck by the existential choices confronting the UK: will it become a big Greece or a big Netherlands?
The UK has a huge fiscal deficit, a bloated state and soaring public debt, It is far poorer than expected three years ago. Adjustments must be made. The question is whether the country drives those adjustments or is driven by them. Yet both politicians and the public are denying the choices. As the FT's on-line simulator shows, even the ￡37bn ($57bn) in cuts to be delivered in the next spending review would hurt a great deal. Yet, note my colleagues, “all three main parties refuse to explain how at least ￡30bn of these savings will be found”. The Institute for Fiscal Studies has spelled out how incomplete, foolish and incredible are the longer-term plans for cuts in spending. The IFS has also released a devastating report on the quality of planned tax changes. For idealists who believe that democracy is about informed debate, this election has to be brutally disillusioning.
Yet the challenges are huge. The UK's share of public spending in gross domestic product is higher than in Greece, Italy, Portugal and Spain. As the Centre for Economics and Business Research has noted, many regions of the UK are now little more than government dependencies. The International Monetary Fund forecasts the fiscal deficit this year at 11.4 per cent of GDP, which is higher than the 8.7 per cent of Greece and Portugal and Spain's 10.4 per cent. The Organisation for Economic Co-operation and Development forecast UK net public debt at 70 per cent of GDP at the end of 2011, below Greece's 101 per cent, but close to Portugal's 69 per cent and far above Spain's 49 per cent.