On 6 May, it will be three years since the United Kingdom elected its first coalition government since World War II. The Cameron government has made rescuing public finances its most important goal – with the Coalition Agreement giving deficit reduction precedence over all other measures.

These plans for fiscal consolidation have (unsurprisingly) been controversial. Some commentators accuse the government of introducing self-defeating austerity in the face of weaker-than-expected economic growth. Other commentators argue austerity is a myth and that the government is in fact spending more than ever. While these debates will continue for years to come, potential lessons for countries, including New Zealand, are already starting to emerge.

Fiscal consolidation in the United Kingdom must first be put into context. Compared to New Zealand, the management of public finances in the United Kingdom has been poor. Current money problems are not just a result of the global financial crisis. Indeed, while the United Kingdom economy was growing strongly between 2001–02 and 2007–08, general government gross debt increased from 37% to 43.6% of GDP.

It is also necessary to distinguish the United Kingdom from the Eurozone. The experience of Eurozone countries is often cited as an example of self-defeating austerity. But unlike individual Eurozone countries, the United Kingdom has its own currency and an independent monetary policy, which can potentially lean against changes in spending and taxation.

Yet the Coalition has scored some own goals. The most serious mistake was to refuse to properly consider making savings in the NHS, pensioner benefits and schools. By protecting some of the biggest budgets, cuts in other areas have had to be deeper and tax increases greater than otherwise.

This approach is like putting the public finances on a crash diet that actually reduces the chances of long-term weight loss. There is a perception that services are being underfunded while the real drivers of spending are left untouched.

Protecting budgets has also created political problems. This has led to divisions in Cabinet and means that the government no longer presents a unified front. When all budgets are subject to the same principles of value for money, it is quite simply harder for individual ministers to complain.

In short, the UK experience shows it is not just enough to set out to do the right thing. The right thing must be done in the right way.