“Britain’s public spending cuts are less severe than those in other European countries, an analysis has found. As a percentage of national output, public spending in the UK will fall by less than the average for the 17 Eurozone countries.” The Daily Mail, 23 May 2011

“Without Ireland pulling down the European average, the UK’s spending cuts would be running almost 0.5 per cent deeper than the European OECD average.” Channel 4 Fact Check Blog, 23 May 2011

Over the course of the Coalition Government's first year in office, no topic has been the subject of as much argument and discussion as the size and speed of the cuts due to be made to public spending.

While Ed Miliband and his Labour colleagues have repeatedly suggested that the Coalition are going “too far and too fast” with their deficit reduction programme, the Deputy Prime Minister Nick Clegg has suggested that Britain was setting an example for the rest of Europe to follow.

However several papers this week reported that Britons were actually facing smaller spending cuts when compared to their European neighbours. According to the Daily Mail, public spending in the UK would reduce by less than the Eurozone average.

So is the UK in fact a 'deficit dove' of the EU? Full Fact took a look.

The UK and the OECD

The newspaper reports made use of an analysis by the Centre for Economic and Business Research (CEBR), who were looking at public funding relative to GDP in the different regions of the UK, and between the UK and other OECD countries (the research was given to Full Fact on request).

To make international comparisons, the CEBR used OECD Economic Outlook data on public spending relative to GDP up to 2012. Using these figures, they conclude that: “Although much attention has been devoted to the “cuts” in the UK, the planned reduction in public expenditure between 2010 and 2012 is actually slightly lower than the average for Euro area countries. The OECD estimates that Euro area countries will on average reduce public expenditure by 2.4 percentage points as a share of GDP, while the UK will reduce the same by 2.2 points.”

The figures show that projected public spending in the UK falls less as a share of GDP than the EU average, although it does weigh in above the average for OECD nations.

Does Ireland skew the figures?

However looking more closely at the cuts for individual nations shows that certain nations in economic difficulty – in particular Ireland – have much higher projected cuts than others, potentially making the Euro area average top-heavy.

Indeed fellow factcheckers over at the Channel 4 Fact Check blog suggested that if our Gaelic neighbours are removed from the equation, the Eurozone average falls from 2.4 per cent of GDP to 1.86 per cent.

However as the OECD told Full Fact, this isn't quite accurate. Whilst totting up a rough average of each country's individual cuts as listed by the CEBR might produce this figure, it doesn't take account of the relative size of their public purses and economies.

Ireland's economy represents only 1.7 per cent of the total economic output of Eurozone countries, making it extremely unlikely that it could have such a profound impact upon average level of cuts across the continent.

Sure enough, when we weight these figures by each country's spending power, a more measured picture emerges. According to the OECD, public spending across the Eurozone is forecast to fall from $5.36 trillion in 2010 to $5.30 trillion in 2012. When Irish expenditure is removed, the fall is from $5.25 trillion to $5.22 trillion.

Similarly, Eurozone GDP is forecast to grow from $10.7 trillion to $11.1 trillion between 2010 and 2012. Without Ireland these figures are $10.5 trillion and $10.9 trillion respectively.

Using these numbers we can calculate that the average Eurozone cut expressed as a share of its GDP without Ireland is actually around 2.05 per cent. This means that although the Irish influence is still responsible making the average Eurozone cut larger than the UK's expected spending decrease of 2.2 per cent of its GDP, it may not be as profound as Channel 4 suggests.

Growth

However the matter is complicated further still by the fact that these calculations show the size of public spending relative to the size of the economy, not the size of “cuts” per se.

If an economy grows sharply but its public spending remains flat, its expenditure as a share of GDP would nevertheless dip, without a 'cut' having been made.

Fortunately, the OECD predicts that the UK economy will grow at exactly the same rate as the Euro area average, at a rate of 1.7 per cent in 2011 and 2 per cent in 2012. Because of this common baseline, we can measure the relative size of public spending reductions.

However Ireland actually has a higher projected compound growth rate, forecast to grow 1.5 per cent in 2011 and 2.5 per cent in 2012. Removing Ireland from this comparison would therefore hit the expected growth rate of the Eurozone, meaning the average cuts as a share of GDP would be higher still than the 2.05 per cent calculated above.

Indeed these points are indirectly noted by the Daily Mail, who report the OECD as saying that Germany’s fall in public spending relative to GDP (at 2.5 per cent) was more to do with the growth in the private sector than public cuts. While the UK is projected by the OECD to grow by 1.7 and 2.0 per cent in 2011 and 2012, Germany's respective forecast is 2.5 and 2.2 per cent.

It is also worth noting that the reduction in total national public expenditure that is measured by the OECD is not necessarily analogous to the “cuts” as they are often understood in the media.

As the OECD pointed out to us, it is important to keep in mind that: “The concept of public spending [used in these figures] includes both interest payments and social security spending, as well as covering all (not just central government) spending. Therefore, it does not provide a very clean measure of “cuts” as we might understand them in terms of discretionary reductions in non-social security spending by central government.”

Indeed looking at the Government's own forecasts, it expects to see social security expenditure rise over the next two years from £169 billion to £179.4 billion, as it continues to pay state pensions and benefits. The bulk of the cuts which are the subject of such fierce debate are those reductions in Departmental spending budgets, which are treated differently by the Treasury (the Budget separates Departmental Expenditure Limits from Annual Managed Expenditure, which is that money which is handed out, rather than spent, by Government).

A matter of timing

While the UK does seem to have lower cuts over the next two years than the Euro area based on the OECD data, some have cautioned against reading too much into this, as there is no data available for after 2012.

As the Daily Mail notes: “But the figures quoted in the report only cover two years to 2012. If the study were extended to 2015, the story might be different, as many of the most severe cuts are not due for a few years.”

The CEBR figures show that over the longer period up to 2015, UK wide public spending relative to GDP is expected to fall by a much larger 4.7 per cent.

As the March 2011 Budget sets out, total government spending declines more sharply after 2012 than it does beforehand. Whether or not the same can be said for other Euro area countries is not clear from the OECD or CEBR data.

Conclusion

In reporting the CEBR findings that UK cuts to public spending up to 2012 are less severe than the EU average, the Daily Mail's report was always likely to be controversial.

However, in this case the Mail's story is supported by the OECD data. Furthermore, it is commendable that the paper goes on to point out the potential pitfalls in using the data, noting that the picture painted by it may not be sustained beyond 2012.

When delving deeper into the numbers as Channel 4 Fact Check do, it is important that all the complexities, such as the relative size of the economies and the knock-on effect on growth rates, are accounted for. While Channel 4's point that the effect of the Irish cuts may make the average Eurozone spending reduction smaller than that which is expected in the UK does seem to broadly check out, the calculations used to back this up do not.