Britain to emulate Canada’s radical solution to tackle debt
The Chancellor will announce a « once-in-a-generation » revolution in public spending inspired by Canada in the mid-1990s, when the government turned a budget deficit of nine per cent of GDP into a surplus. Canada brought public spending under control guided by the principle that people should ask « what needs to be done by government and what we can afford to do ».
Mr Osborne and his Liberal Democrat deputy, Danny Alexander, will attempt to bring about a similar change of mindset in Britain. The ambitious plan will be welcomed by those who believe swift and decisive action is necessary to bring Britain’s budget deficit and spiralling national debt under control quickly.
At the height of the Canadian debt crisis in 1994, the country had a budget deficit of around 9 per cent of GDP. The following year, Jean Chrétien, the Liberal prime minister, unveiled what became known as the « bloodbath budget », in which departmental spending was reduced by an average of 20 per cent.
Mr Osborne and Mr Alexander will set out in detail tomorrow how they intend to emulate this approach to cut Britain’s £156 billion budget deficit. The source added: « For 13 years spending reviews have suffered from the assumption that central government always knows best. The result has been falling public sector productivity and waste on an industrial scale.