"If you are in debt, you are not free. This might sound like a quote from the Bible. It is not. It is politics," writes Jens Henriksson in a report, Ten Ways About Budget Consolidation, doing the rounds at Westminster. This week it will get further perusal when Henriksson's old boss, the former Swedish prime minster Hans Göran Persson, comes to the UK to talk about how to hack away at debt.
Until now, the consensus was that Canada offered the best blueprint for paying down national debt, but Henriksson's essay is giving Canada a run for its money.
The Canadian government cut from all its departments – the department of transport saw its budget cut by 69%. The cuts to tax ratio was 7:1, meaning it used spending reduction seven times more than it used the tax system to balance the books.
Sweden took chunks of 11% out of almost all departments – among Henriksson's philosophical lessons is "when one strong interest group complains, you are in trouble. But if everybody complains, you are not". But taxation played a bigger role: making the ratio more like 2:1.
It's easy to see why Ten Ways About Budget Consolidation is popular on the left. But Henriksson's lessons are not wholly straightforward and the right response will probably be a mixture of tax and cut. He refers to work done by the economist José Tavares, in a study of all the major fiscal consolidations of the past 40 years, that concluded that spending cuts by the left and tax increases by the right were associated with the most successful adjustments.
However, it may simply be this line that jumps out: "The minister of finance who does something about [deficit] tends to get a better job afterwards."
