Higher Government Spending-Falling GDP In Britain

As most analysts, including me, had expected, the preliminary estimate for fourth quarter GDP in Britain shows that it is again contracting. This will likely again cause Keynesians to assert that this proves that David Cameron's "austerity" is failing.

The problem is that there is no evidence that Cameron has ever implemented such a policy. The idea that there has been reductions in government spending in Britain is a pure myth, an urban legend.

In fact, budget numbers shows that in 2012, government spending in Britain was £630 billion, a rise by 3.1%  from the £611.16 billion in 2011. Excluding interest payments, which dropped from £48.8 billion to £45.3 billion as falling yields due to Britain's undeserved "safe haven" status more than offset a rising debt, spending rose from £562.4 billion to £584.7 billion, a 4% increase. Meanwhile, as revenues barely rose  even in nominal terms, the budget deficit rose by nearly £20 billion.

While it is true that government spending rose even faster during previous Labuor governments, it still doen't count as "austerity" or "spending cut" if government spending continues to increase in real terms and relative to GDP.