Until the recession New Labour spent less as a proportion of GDP than Thatcher - any deficit was a result of taxing at a much lower rate than Thatcher did.
Now that government cuts have produced a widening in the deficit, it is worth examining the main myth of the Tory-led coalition – the myth that Labour’s profligate spending caused the deficit; Michael Burke investigates
Backers of the coalition often say that New Labour taxed and spent profligately, however the chart below, using Treasury data, shows this assertion to be factually incorrect. Until the ‘Great Recession’ New Labour spent less as a proportion of GDP than Thatcher did. The cause of any deficits over New Labour’s terms of office was a result of taxing at a much lower rate than Thatcher did.
As the chart clearly shows both spending and taxation were lower under the New Labour years than under Thatcher. The table below shows the average spending and taxation receipts over the period, as a proportion of GDP:
|
Average expenditure and taxation receipts, % GDP, 1978/79-2009/10 |
|
|
Average expenditure, % GDP |
Average taxation receipts, % GDP |
|
Callaghan 1978/79* |
45.6 | 41.3 |
| Thatcher 1979/80-1990/91 |
44.2 | 42.0 |
| Major 1991/92-1996/97 |
42.1 | 36.6 |
| Blair 1997/98-2006/07 |
38.7 | 37.5 |
| Brown 2007/08-2009/10 |
44.2 | 37.4 |
|
Source: UK Treasury, Public Finances Databank (Tables B2 & C1); * Last year only |
Before the ‘Great Recession’, New Labour had by some margin the lowest level of public spending of any of the governments identified. Even during the Brown premiership – which coincided with the deepest recession in the post-WWII period – spending only rose to the same average level as under Thatcher. Taxation receipts were also considerably lower.
Of course under Mr Brown the sharp decline in the level of GDP produces a declining denominator which magnifies both tax and spending as a proportion, while the economic effects automatically reinforce that effect – spending rises (welfare, etc) and tax revenues fall. New Labour taxed and spent much less than Thatcher.
83 Responses to “New Labour taxed and spent much less than Thatcher”
Anon E Mouse
Richard – The PFI is the point you idiot.
A Tory invention is bound to used by the Tories. I expected my party, Labour, to behave differently in government – especially with the huge majority they commanded.
Do you really not see the point or are you just being rude in public forums? Don’t worry though Richard it’s half term now so no school for a fortnight.
PS. The only benefits I have ever received were child benefit and WFTC – never unemployment benefit. On the odd period I have been unemployed I worked as a volunteer at a local day care centre teaching IT to the disabled and elderly.
FatBloke on Tour
Mr Mouse
It is you that just doesn’t get it.
What did TB / GB inherit in 97?
Screwdriver / low wage economy based on an unsustainable low pound.
Interest rates that had been kept low for 2 years due to politics not economics, do you remember the “Ken and Eddie” show?
Criminally low levels of public sector investment.
A deficit so large that KC was borrowing money to pay the wages.
In that context together with the shocking state of the public sector capital stock PPP / PFI was the right thing to do.
As for it being “your party” – I think not.
You are at best a TB fanboy at worst a Tory troll at the wind up.
Jog on as they say in WCS / Glesga.
Gramsci
New Labour taxed and spent much less than Thatcher http://t.co/Bn6hKcL
Robert
Add to that the PFI bill this country now has and Brown looks like a bloke who enjoyed spending to gain votes either that or he is rotten at maths after all
Mr. Right
Technologies such as Blogs and computers only exist because of low tax, small government, right-wing conservative policies in the USA. Of course, 100 years of hard evidence that socialist economies do badly (USSR, Britain in the 1970s) is not enough to convince the left wing person of anything. The left wing person self-labels as “progressive” and “liberal” even though their policies destroy economic progress and liberty. Quite insulting really.
Well, I suppose the whole reason the left decided to transform into pro-business New Labour was because they finally realised that they needed to live in the real world, where wealth must be nurtured and where throwing money at problems often makes them worse or encourages dependency. They probably also figured that most of the population are actually at the centre of political opinion rather than the left, and that appealing to the dwindling minority of marxists was never a recipe for winning an election. Let that be a forewarning for Red Ed.