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”
Jo Harrison
The main result of Labour’s increase in spending in the later years was a result of buying not one but two banks – as a result of a global recession NOT caused by UK expenditure. Gordon Brown buying the banks at a cut down rate meant that A) Half of the UK popoulation did not go bankrupt B)If we sold these shares back into the private sector today they would be worth double what they were when bought thus placing the UK VERY much in the green.
neilrfoster
@lukebozier Absolutely fucking bollock bullshit.Labour did not put an 'unsustainable burden on the public finances' >>> http://t.co/eFi1ZRj
neilrfoster
Fact of the day: New Labour taxed & spent less than Margaret Thatcher's government. http://t.co/PGd8VaW9 by @menburke
Tom Hoyles
@jack_frazer http://t.co/WhErKnqz #truth
Alan
1979 – 2000 saw debt & expenditure as %GDP fall across the breadth of the economic cycle; both figures, as we might expect, show upward spikes during periods of recession, but this is more than offset by the extent to which they were run down during periods of growth. 2000-2008 shows a different trend, the downward trend in debt & expenditure as %GDP reversing, albeit into only modest growth (but still a big change from a downward trend,) while the economy is still growing robustly.
By all means promote the government of 2000 – 2008 as one making strenuous efforts to reverse a long period of under-investment; but it is disingenuous to present them as an example of fiscal prudence superior to their predecessors.