If Osborne takes us back to the thirties, how different will things look?

Does Osborne have any right to get ruffled about comparisons with the 1930s?

Does Osborne have any right to get ruffled about comparisons with 1930s spending cuts?

In its report accompanying yesterday’s Autumn statement, the Office for Budget Responsibility predicted that spending on public services was headed for an 80-year low.

The report suggested that Osborne’s failure to cut the deficit has led to squeezes that mean central government spending on public services will fall to 12.6 per cent of GDP in 2019-20. In 2009-10 it was 21.2 per cent.

Several newspapers have this morning described the measures as taking public spending ‘to its lowest since 1930s’, prompting George Osborne to accuse the BBC of ‘hyperbolic coverage’.

Certainly it is unflattering for Osborne to have his policies compared to those of a decade that has become an icon of economic misery. But in the spirit of nostalgia, we’ve taken a look back in time to see if the comparison is justified.

Although the human misery it caused was far greater, the 1930s recession was shorter than the one in 2008. Relative to the rest of the world, the UK’s economic output declined between 1929 and 1934.

As with the current recession, the rest of Europe was heavily involved; in the thirties, many European countries had accumulated huge debts for their involvement in the war. The failure of the German and Austrian banks in 1931 posed a further threat.

So what did the government do?

In the 1931 budget, the chancellor Lord Snowden and prime minister Ramsay MacDonald accepted that they would have to make cuts. Unemployment benefits and public sector wages were cut by 10 per cent, and taxes were raised. This split the Labour party, and MacDonald formed a coalition of – interestingly – mostly Conservative MPs in order to pass the budget.

In 1931 the pound was devalued by 25 per cent, allowing exporters to make their products cheaper abroad and thus kickstarting the economic recovery.

If we are, as Osborne is adamant, over the worst, then we should look at how government spending in the mid-thirties helped to prop up the shaky economy

The rates of economic growth from 1934 onwards were relatively impressive. In 1936 unemployment fell to eight per cent. However, and again much like today, the depression was averted only in some parts of the UK.

Wales and the north remained badly affected until the end of the decade. Between 1932 and 1937 half of the new factories in the UK were built in Greater London.

And in 1937 unemployment in London, the South East and the Midlands was between six and seven per cent, whilst it was 22.3 per cent in Wales.

The government attempted to stimulate growth in these areas through projects including road building, but efforts were ultimately insufficient.

In 1935, total government spending on public services was £1,348 million. That included:

£46.8 million on pensions

£77.6 million on healthcare

£157.7 million on education

£121.9 million on defence

£157.9 million on welfare

Proportionally, this works out roughly the same as what the coalition is willing to spend, as set out yesterday. The thirties are remembered as a time of squalid deprivation. George Orwell famously described the slums of the north as blackened, freezing places where rats and disease were rife.

In one memorable episode in his book The Road to Wigan Pier Orwell describes seeing a woman in abject poverty and remarks: “It struck me then that we are mistaken when we say that ‘It isn’t the same for them as it would be for us,’ and that people bred in the slums can imagine nothing but the slums. For what I saw in her face was not the ignorant suffering of an animal.”

What changes were being made?

Health services in England followed the trend of the early part of the century and continued to be decentralised throughout the thirties. Local governments began to acquire health powers funded both by local taxation and by state subsidy.

Many had expected yesterday’s statement to include some mention of devolving health powers down to local government level, including measures to allow some types of chemotherapy and dialysis to take place in GP surgeries.

Reforms were being discussed around this time with a view to raise the school leaving age. Ministers were concerned about the financial cost of this, which they estimated at about £8,000,000 in 1935. Consequently the law was not changed until 1944.

The decade also saw big changes in the way benefits were paid; in August of 1931 the existing welfare scheme was replaced by a fully government-funded system of unemployment benefits.

This was the first system to pay according to need rather than level of contribution. It came too late for many – the main reason that the 1930s recession was so bleak was the lack of proper welfare infrastructure to help desperate people.

Anybody wanting to claim these benefits was first subject to a strict means test, amounting to a full inspection by a government official. This process was highly unpopular. Eighty years later, poor management means we still have a society with a huge amount of mistrust around benefit claimants, and where people have to ‘prove’ they are disabled.

The thirties was also a time of investment in the armed forces. German movements were arousing suspicion, and so in 1935 the government announced that it was increasing its defence spending. The plans were made ‘to demonstrate that Britain does not take lightly Germany’s continuing rearmament’.

The defence budget for 2014/15 is £36.43 billion.

The challenges facing Osborne may be on a lesser scale than those of the inter-war years, but Britain today increasingly has many of the same problems with inequality it had 80 years ago.

Ruby Stockham is a staff writer at Left Foot Forward. Follow her on Twitter

13 Responses to “If Osborne takes us back to the thirties, how different will things look?”

  1. swat

    McDonald, probably the most underrated PM ever. He saw Btritain through its worst crisis in peacetime. Smaller Govt is the dogma of the Tory Party.

  2. Keith M

    McDonald sold out.

  3. swat

    Depends, whether you think he put Country before Party, and which you think is the more important.

  4. JoeDM

    GDP fell by 7% in the years following the Brown crash in 2007. It will take another decade for the real economy to recover. And even longer for wages as long as we continue to allow a free inflow of cheap labour.

  5. Guest

    GDP was recovering nicely before your Coalition turned things round into a depression.

    And then you attack the real economy, attack workers, by repeating the same old lies about the Other, as you say wages are far too high because we allow trade. You are simply out to pay less in wages, as you refuse to admit it’s your right wing neoliberalism and austerity which is the problem.

  6. Leon Wolfeson

    No, not at all. The Tories are massively stateist and controlling. That they outsource some functions to for-profit corporations and make bank does not make them any less stateist.

    Moreover, they’re still massively moralistic, “for the good” of the poor crap…

  7. Phil Hove

    Of course we are not on the road to Wigan Pier.

    That is an absolutely wrong and preposterous national broadcaster analysis or comparison!

    The BBC really do not represent the UK in an honest and realistic way. The world’s real poor are laughing at us with such idiotic statements.

    Life is so much better now all round, but particularly there is no comparison whatsoever if you were poor in the 30s with no decent benefits like today, where, if you are unemployed, you can almost match the working person. Plus if you have a poorly paid job you can get extra working tax credits to take you higher. Now there is decent social housing, housing benefit, child allowances, NHS etc, etc, etc. We are now a model welfare state with our borders being literally breached by poor people from around the world trying to partake.

    One would think our state broadcaster could easily explain the severe financial predictions in the Autumn statement, since they have an army of some of the highest paid economic analysis experts on their staff in the land, courtesy of our taxes.

    They just need to see through the red mist which unfortunately has infected most of the BBC political reporting through their choice ‘left’ ethos, with recruitment policies to match, for decades now.

    I am just a mere ex-soldier and small businessman and it is all pretty clear to me.

    Basically, in 2010 the Coalition was bequeathed the worst peacetime economic legacy ever, at any General Election since WW2.

    No government of any colour would be able to pay off that huge deficit and debt under around a decade, such is the gigantic scale of the Blair and Brown legacy!

    Indeed if they had followed Labour’s ‘TOO FAR – TOO FAST’ advice, or not got through the welfare reforms so far, (every single one voted against by Labour), we certainly would now be facing today a ‘Greek Tragedy’.

    Under Labour, our country, a premier world banking centre, contributed greatly to the financial crisis with infection of many other nations banking systems too!

    It is of course accepted it was manly initiated in the USA by sub-prime and other
    lax banking practices, but Labour Treasury Ministers failed spectacularly in their
    dereliction of duty to regulate properly the City of London.

    They let these London based banks run riot, at great cost to the rest of us and also to the other Nations banks who obviously were encouraged to follow the ‘world class’ London example we set and that is now clear!

    One should not forget it was Brown Balls & Milliband, more than any other MPs who were in the treasury and are most to to blame for not regulating and the recession legacy they left.

    http://news.bbc.co.uk/1/hi/uk_politics/6240362.stm

    The country was basically on the brink of bankruptcy after 13 years of Labour. They certainly ‘did not fix the roof whilst the sun was shining’ borrowing to the hilt even during those financial good times when they should have been building the reserves, (not selling off 400 tons of gold at bargain basement prices) and leaving notes to their successors that there was ‘nothing left’.

    Even, now Labour have the brass neck to ‘slag off’ the other parties for wanting to privatise the NHS!

    They really think us ‘plebs’ did not notice PFI, for example, which is going to require our children and grandchildren to pay off £300 bn for the NHS over the next generation. This is causing great hardship in the NHS already!

    http://www.channel4.com/news/counting-the-cost-of-pfi-in-the-nhs

    Just hope the Tories now follow through with the Broadcaster Licence review and right an obvious wrong.

  8. Phil Hove

    You need a ‘LOONEY ALERT’, since you write such unsubstantiated drivel. It was the Coalition that has managed to avoid a ‘Greek Tragedy’. The last Labour Government legacy is shameful – they did not regulate the Banks, took us to illegal wars and left a legacy which is going to take another 5 years yet to right!

  9. Guest

    Yes yes, you want to push your PC bigotry at me for being on the left, as you talk Orwellian nonsense. America showed clearly what happens if Labour’s plans had been followed – recovery rather than depression.

    No surprise you’re all for the dictators, as you talk about how wages are too high for you, blah blah – and no, your austerity is self-sustaining, it creates the “need” for more cuts, so don’t pretend now!

    But keep screaming “lunny aport” or whatever you’re on about at the top of your voice at random people. I’m sure it works just fine.

  10. Guest

    No surprise you hate on the Government-loving BBC out of ideology, as you love how wages are falling and ignore the fact they’re a lower % of GDP than the 30’s.

    And of course you’re ignoring the fact that benefits are falling even faster than wages – as you spew the lies about our illegally low-paying benefit system.

    You remain a soldier for your far right, as ever. As you want to wipe out the middle class financially, as you hate on the NHS, support dictators, hate on the other and attack trade and wages – it’s shameful to you we are not isolated and poor. Well, the peons you dislike so much anyway, as you call for purges at the BBC so it’s the Tory And Only Tory Broadcasting Service.

  11. Phil Hove

    LOONEY ALERT – you must be that Leon fellow who just posts lies here – just like the Labour Party have hypocritically changed their immigration policy.

    Just like you have said above “GDP was recovering nicely before your Coalition turned things round into a depression”. Please substantiate in a credible way! Quite the reverse actually happened as rightly stated by JoeDM above and the Office of National Statistics – see http://en.wikipedia.org/wiki/Economy_of_the_United_Kingdom

  12. littleoddsandpieces

    England is in the Greek tragedy today and has been for last 5 years, with starvation risen 70 per cent since 2010, and now over a million benefit sanctions many months long when it takes a month to starve to death.

    Naitonal debt has massively risen since 2010 because of welfare admin costs and has not gone on alleviating the threat of death from starvation, as proved by doctors remarking on the huge rise in malnutrition hospital admissions.

    The flat rate pension will see women born from 1953 and men born from 1951 with NIL STATE PENSION FOR LIFE that for a great many is their sole food and fuel money.

    https://you.38degrees.org.uk/petitions/state-pension-at-60-now

    The Greens have the solution, but will not shout it from the rooftops. Why?

    Greens’ 2015 manifesto offers:

    – universal, automatic, Citizen Income, non-withdrawable, to the level of the basic tax allowance

    – Full State Pension at same rate as Citizen Income, irregardless of National Insurance contribution / credit history, mostly lost due to benefit rule changes and early retirement in lieu of redundancy under the massive austerity job cuts, that will now only get worse.

    Both above have a supplement for the disabled, who are losing benefits, now even when War Veterans pensioners.

  13. Guest

    Thanks for warning people about yourself, here.
    Especially since you’re randomly accusing people of being Labourites.

    And you try and deny UK official statistics with random Wikipedia links. That’s just sad.

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