Separated at birth?
A tale of two countries and two budgets, 15 years apart
The British government's new spending review features the largest cuts in public spending since the Second World War — all aimed at wrestling to the ground a deficit that reached £156 billion, or $252 billion Cdn, last year.
If the U.K.'s massive-spending-cuts-to-slay-the-deficit strategy looks familiar, it's not surprising. Chancellor of the Exchequer George Osborne and other senior British Tories have openly admired the deficit-slashing strategy Liberal Paul Martin used as Canadian finance minister in the 1990s.
British media reports say senior Conservatives have closely studied the Canadian budget experience of the mid-1990s and have gotten advice from those involved in the Canadian budget-making process back then.
Still, there are experts who say any comparison between the British and Canadian situations 15 years apart is a tricky one.
Martin himself acknowledges this.
"The two countries are very different," he told The Guardian newspaper earlier this year. "You had a financial crisis and a recession."
Reform, a British free-market think-tank, asked Martin earlier this year if he had any lessons to share with the U.K. He did.
"Because the cuts were sharp and deep they worked — the vicious circle turned virtuous and the positive payback was not long in coming," he wrote in a foreword to Reform's alternative budget proposal in June.
The lessons do not appear to have gone unheeded. The new British spending review features a similar deficit-slashing agenda.
Britain's spending review was arrived at through use of what's being called a "star chamber." A small group of cabinet ministers and Treasury officials met to plan the spending cuts by having each department justify its own spending. The approach was drawn from a model used by Paul Martin.
Here's a side-by-side comparison of the two documents — Canada's 1995 budget and the 2010 British spending review:
|A tale of two documents||1995 Budget - Canada||2010 Spending review - UK|
|Size of federal deficit||$42 billion Cdn (1994)||$252 billion Cdn(2009)|
|Deficit as % of GDP||4.8%||11.4%|
|Federal debt||$567.5 billion Cdn||$1.61 trillion Cdn|
|Debt as % of GDP||68%||71.3%|
|Public-sector job cuts||45,000 over 4 years (14% of public service)||490,000 over 4 years (8.2% of public service)|
|Spending cuts||$25.3 billion Cdn over 3 years||$132 billion Cdn over 4 years|
|Direct spending cuts as %||19% over 3 years||Average 19% departmental budget cut over 4 years|
|Across-the-board cuts?||No. Some departments saw 50% cuts, others much smaller cuts||No. Some departments like the Home Office and Foreign Office face 24% cuts, while health faces no cuts|
|Transfer payments cut?||Yes. Transfers to provinces and territories for health and education fell by $7 billion Cdn over 3 years||Yes. Local governments will see a 7.1% annual cut in their budgets|
|Sources: Canadian Finance Department, British Treasury|