Nor is there much risk that other countries will seduce our workforce away with their lower taxes. As the economist John Hills points out, we are a relatively low-taxed country already by international standards. But also, what is cut from taxes in some countries often has to be paid for privately. So in the US, for example, personal taxes are low but private health insurance is high. The high spenders did have higher unemployment, but it is hard to know whether lots of people out of work pushed up their welfare bills or whether high taxes undermined job growth.Although in theory it seems plausible that governments which push taxes and spending up too far will pay an economic price, in practice there is little evidence that we have reached the critical level.

William Waldegrave prefers 35 per cent.However, the evidence in support of their claims is extremely tenuous. When the economists Vito Tanzi and Ludger Shuknecht studied the matter in some detail for the International Monetary Fund, they found that the growth and inflation records of high-spending nations were no worse than those of low- spending nations. The Right tell us that there's a magic number below which state spending must fall Kenneth Clarke likes 40 per cent of GDP. How much we pay in benefit to those who cannot work - such as carers, the disabled, and the elderly - is a moral and political question. How we respond to the middle classes' demands for higher-quality healthcare and education is a difficult political problem. Allowing them to opt out into the private sector creates a two-tier system based on wealth. But funding luxury for everyone in the public sector is expensive.Politicians on both sides would like to pretend their hands are tied by economics.

Sensible policies to shift resources may be painful in the short term, but in the long term they will generate returns.Certainly there are additional upward pressures on public spending in the future, but these are political rather than economic. Better investment in the education of the current generation of disaffected youth might have saved on unemployment benefits today, and even raised national income in future.Similarly money spent investing in people's future employability - through wage subsidies, training or child care - can save cash by getting the unemployed off welfare and into work. No wonder then, now that the cupboard is bare, we are having trouble meeting our bills.At the same time we are paying the consequences of cutting public investment again and again. Infrastructure repairs are delayed until they become more expensive. But when the assets were sold, the income streams were lost too, yet the money raised was not invested.

Privatisation proceeds along with the revenue from North Sea oil went into current spending and tax cuts. Getting rid of those rusting dinner plates wasn't the problem Many are doubtless better polished in the private sector. For a start there is no reason why a properly managed welfare state should be exploding out of control. And second, the constraints on how much we can tax and spend are not economic at all, they are political.There is, admittedly, a real hole in the public finances right now, and it needs to be closed.