When it comes to fixing budget problems, could the U.K. end up bouncing back within just a few years?
British conservatives led by George Osborne are studying how Canada rapidly solved its debt crisis back in 1994 with enormous spending cuts.
Prime Minister David Cameron seems on board, warning the public that upcoming budget decisions will have ‘enormous implications’ for everyone.
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.
By 1997 the deficit had been eradicated. However, health and education budgets were slashed and thousands in the public sector lost their jobs.
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. They will announce the timetable for the public spending review this autumn, as well as a public consultation process.