Back to 70s for big-spending Brown

GORDON Brown has just announced the biggest increase in public spending since the early Seventies. The scale of the outlay is so great that the country's largest enterprise - Her Majesty's Government - is now Britain's fastest growing industry.

And by the end of the decade, it will be getting through a cool half-a-trillion pounds a year. Spending this year on the National Health Service alone is about £70bn.

All this has raised fears that the state is cutting itself an ever bigger slice of the national cake, which it is, though not for the first time.

War and peace are the biggest factors in deciding how big the public sector will be. The biggest single shrinkage of the state during the last half century was caused by the end of the Second World War. During the war, the Government accounted for about 60p out of every pound spent, and the basic rate of income tax was a wallet-shrinking 50%.

Once the guns fell silent, the state share of the economy fell like a stone to about 33% by the end of the 1945-50 Labour government. And that despite a huge programme of nationalisation, the creation of the NHS, and the expense of equipping Britain with nuclear weapons.

The war in Korea saw the public-sector increase its 'take' again in the early Fifties, but it was not until the repeated economic crises of the late Sixties and early Seventies that it crept back again to top 40% and hit nearly 50% in 1975-76. It was then that the Home Secretary and later SDP leader Roy Jenkins warned that with such a huge state sector, 'we are close to the frontiers of a free society'.

The arrival in autumn 1976 of an International Monetary Fund hit squad to bail out the Callaghan government saw the public sector cut back as a condition of the IMF loan.

Ironically, in the early Eighties, it rose to more than 45% of the economy as the mass unemploymentof the early Thatcher years saw ballooning welfare payments account for a large share of national economic activity.

But privatisation of swathes of the public sector - from British Telecom in 1984 through British Gas, British Airways to British Rail in 1996 - rolled back the size of the state to about 38% of the economy by the middle of Tony Blair's first term. That put it on a par with the levels seen in the late Fifties and early Sixties.

But with the 2000 spending review, and even more so since this year's colossal public spending increases, the size of the state is returning to proportions last seen a quarter of a century ago.

Now 'Brown Plc' is bigger than Brazil

IF Whitehall, the NHS and the nation's town halls spun off into a separate country, it would rank in the world's top ten biggest economies.

At about £400bn ($628bn) the British public sector is only marginally smaller than the entire Canadian economy - which, at $650bn, is the seventh largest in the world. It tops the spend of Brazil - at just $610bn. And it is bigger than all of Africa put together. But other public sectors would give 'HMG plc' a run for its money.

The US government spends just 33% of gross domestic product against more than 40% for us. But given the size of the economy, this amounts to $3,300bn, or more than five times the British total.

Germany, spending 44.5% of a much larger national income, clocks up $919bn. Japan spends $1,428bn, even though its state share of national income is a shade lower than that of the US. France, with a near 48% share taken by the public sector, spends $690bn, making the French state larger than that of the Brazilian and New Zealand economies combined.