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”
Mr. Sensible
Another plank of the Coalition’s argument goes up in flaims…
13eastie
Yes, it took twenty years to get spending down to sane levels after the mess Callaghan left behind.
Labour open up deficits; Tories close them.
Are you really touting Brown’s catastrophic handling of the public finances by failing to run a balanced budget at any point since 2002 or to follow his own “Golden Rule” as something for Labour to gloat about?
FatBloke on Tour
MB
You are missing the 600lb gorilla in the room regarding Maggie and taxation, the windfall from the North Sea that saved her from financial oblivion.
Add in the unsustainable NL boom of 87-90, the selling of the family silver and the drop in public sector investment and MT’s record is of trainwreck proportions.
Compare and contrast 96-97 with 2007-08 and Sha**er doesn’t have a leg to stand on. KC was borrowing money to pay the wages while AD / GB had the current budget in surplus and was supporting a very necessary increase in the levels of public sector investment.
Under the Tories, if the world economy got the sniffles the UK was left facing Legionaires disease and a side order of the lurgy. AD / GB got us past the global Credit Crunch, the biggest financial event in 135 years without the social carnage so prevalent under Maggie and Sha**er.
Unfortunately we have Sniffy and the Dog Boilers in charge and the recovery is now stagnating and the future looks bleak. At some point the media in this country are going to start doing their job. Until then the news and the papers will be full of celebrity ping pong and photo opportunity barbecues.
Be afraid, very afraid.
trish
RT @georgeeaton Forensic blog on @leftfootfwd rebuts myth that overspending by Labour caused the deficit http://bit.ly/jqR6nZ
Acid Fascists
New Labour taxed and spent much less than Thatcher: http://bit.ly/jqR6nZ writes Michael Burke, @SocEconB