However, it is essential to keep growth in public spending under control if we are to achieve balanced public finances. Otherwise we will be heading for unsustainable debt developments that will amplify the problems. Unlike many other countries, Denmark has little room for manoeuvre on the revenue side as taxes are already high. Consequently, balance must be achieved by reining in expenditure.
If we look at the development in public consumption as a ratio of GDP over the last 50 years – from the introduction of the welfare state until today – two facts stand out. Firstly, public consumption has increased relative to total output throughout the period – except in the first 4 years of the Schlüter government in the 1980s.