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.
Martin's 1995 "come hell or high water" budget launched a period of controversial spending cuts that got a lot of credit when the country's books were balanced by 1998.
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."
To be sure, the economic environment facing the U.K. today is unquestionably different from what Canada faced 15 years ago. The global economy of 1995 bears little resemblance to today's, and Britain is unable to download budget cuts to lower levels of government to the same extent Martin could. Martin also had the benefit of riding an economic recovery that greatly increased government tax revenues.
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|