Matt Nolan

Burgeoning government bureaucracy? Links

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There is some suggestion that the size and scope of governments around the world has become excessive.  Two recent examples of this are:

The Standard has suggested that similar comparison in NZ could be a little out of whack, and in the most part I agree with them.  After all, Labour was elected to a third term on the promise of larger government, National was re-elected to keep it at that level, as a result I think society is suggesting that they want government to continue spending a quarter of our income.

However, I do disagree with them with regards to the idea that government spending didn’t markedly rise as a proportion of GDP in Labour’s third term – to me the GDP Statistics seem to suggest this was the big mover (with the recent increase solely the result of a recession, and “automatic stabilisers”):

3 replies
  1. Hone
    Hone says:

    Dumb question: The Standard had a chart in their post too, albeit a curiously smooth series. Any idea why yours/theirs is so different?

  2. Matt Nolan
    Matt Nolan says:

    @Hone

    No no, it is an excellent question.

    The Standard used government spending from the Treasury accounts and GDP from the national accounts to get their ratio. I used (general – so central and local) government consumption and investment from the national accounts and GDP from the national accounts – just for the fact that they should provide more comparable series. However, the issue with the series I’m using is where you place the investment – since investment provides a “stream” of benefits, but the cost is only counted in a single period.

    If we think that Labour did a one off increase in investment which replaces future investment, then the ratio increasing seems justifiable.

    Now their series may be more smooth if they were using/extrapolating from annual figures (i’m not really sure tbh). Furthermore, I am unsure about whether their figures were either nominal on nominal or real on real or even nominal on real – it can be hard to compare figures from different series in the way they have.

    Also, I expect that there may be an issue of where exactly some transfer income comes in – which would lead to my figures understating the size of central govt methinks

  3. David
    David says:

    Here in the UK we have over 1200 quango’s at a cost exceeding GBP 62 BILLION equivalent to £2,550 per household. A lot of these quango’s don’t really perform any productive service to the taxpayer e.g. The British Potato Council 🙂

    I think that government spending as a % of GDP needs to come down globally…

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