The idea that social security spending got out of control under Labour isn’t really backed up by Department of Work and Pensions evidence.
Gareth Millward is a History PhD student at the London School of Hygiene and Tropical Medicine
In the light of the recent debate about social security spending, Gareth Millward has taken a look at a common myth: Did social security spending spiral out of control under the last Labour government?
The idea that social security spending got out of control under Labour isn’t really backed up by Department of Work and Pensions evidence.
As the following charts show, overall government expenditure rose consistently both in cash terms and as a percentage of Britain’s Gross Domestic Product (GDP) during the years of the ‘classic welfare state’.
Even after the crisis of the mid-1970s, it continued to eat up more and more of Britain’s GDP. Margaret Thatcher could only buck the trend late in her premiership with unemployment dropping and the economy growing.
The recession in the early 1990s saw expenditure rocket again, before levelling off later in the decade. Since then we have spent more on social security (in cash terms), but at a much gentler rate of increase than at any point since the 1960s. Indeed, as the economy grew during the boom of the early 2000s, expenditure as a percentage of GDP actually fell.
The next increase, unsurprisingly, coincided with a new recession. If Labour wasted money on social security because they spent more in 2010 than in 1997 (in cash terms), what can we say about the Conservatives? Margaret Thatcher (first term, 1979-83) and John Major (1990-97) increased social security expenditure more rapidly than any other prime ministers in history.
By now there should be a key theme emerging – expenditure as a percentage of GDP increases significantly during recessions. We see ‘bulges’ in the early eighties, early nineties and late noughties. The key reasons? Higher unemployment and less growth to absorb the cost of those benefits.
Indeed, it is quite clear why New Labour was able to keep expenditure relatively flat over the early years of the millennium. Overall expenditure on key out-of-work benefits was kept under control in a time of relatively high employment.
Yes, the true scope of unemployment has been masked since the mid-1980s by disability pensions, but the fact remains that social security costs were kept steady despite a growing pensions bill.
The question of whether this is a ‘good thing’ remains in the eye of the beholder. Much like Conservative governments in the 1950s and 1970s maintained the new benefits created by Labour (even if they didn’t like the fact that they were created at all), New Labour continued the policies of its neo-liberal predecessors.
Thus, reforms made by the Thatcher and Major governments to restrict access to contributory Unemployment Benefit and Invalidity Benefit were tolerated and used as tools to keep spending down.
The worry must be, therefore, that the recent brutal cuts to Employment and Support Allowance (itself a New Labour invention) will be maintained by any post-2015 Labour government despite their clear negative impact on disabled people.
No doubt, once the economy recovers, social security expenditure will remain relatively flat. But that does not mean the welfare state will be adequately providing a safety net for those who suffer this misfortune of ill health and unemployment.
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30 Responses to “Did the welfare bill really get out of control under Labour?”
Gareth Millward
Even if you accept that premise, what is the alternative? To allow a large section of the population to starve and/or go without medical care? Why not look into why we seem unable (unwilling?) to get tax revenues above 35%? Or why, despite the recession, executive pay is rising? The money is clearly there in the economy, but it is being used neither to grow the economy (by creating jobs and demand) nor to clear up the mess caused by the recession.
If the poor have to pay for the mistakes made by other people, we need to be more honest with ourselves and accept what we are doing.
igiveup
i am one of those “unfortunates” unfortunately,and unfortunately i will become another statistic of the failure of this Con/Dem Gov. whom have condemned me, I give up , i cant and wont take anymore,i have made my peace with God thats all that matters anymore,s,orry i just cant take anymore lived in pain for years,only just passed atos med,but anything i will gain has been eaten by other cuts worse off than ever…..i cant do it struggled before now its impossible,i cant survive now,once im gone kids will be in care that will cost them more than it cost to me on ben.
Laura Lamarca
cutting the welfare bill isn’t an easy fix, not if no provisions are made
for the survival of those whose lifelines you cut. I agree that some
people are lazy and choose to fraud the system…but that is a minority
of people and not a majority. All should not be tarred by the brush of a
few. Cutting Incapacity and disability benefits only creates more
unemployment…surely the focus should be on companies, forcing them to
pay their taxes regardless of whether they pay-roll the Tories or not.
Creating employment opportunities with decent wages, providing training
and education within the work place and ceasing the out-sourcing of work
to companies such as ATOS etc. Killing off the poor in order to cut 5%
GDP is simply unacceptable, it’s inhumane. If jobs were created then
unemployment would be reduced, it stands to reason…as for punishing
the sick, disabled and youth of the UK for the debts of the rich, it’s a
joke and one that will carry its weight of consequences in the long
term for those with the ideology of a gnat.
Kevin Leonard
The government cannot create jobs and it will certainly stifle the private sector if it tries to take more resources from it. There is not much choice about spending less.
OH HOW WRONG YOU ARE the government are quite able to create jobs tomorrow if they would only release the local councils shackles regarding the building of social housing specifically for the rental market (COUNCIL HOUSING) building 10000 houses in each council area would energise the building sector by 75% nationwide whilst the increased tax take from these jobs along with the supply chain increase in manufacturing of household requirements(baths/toilets/sinks/bricks) also contributing to the growth.
It is however pie in the sky thinking as the government have no plans to sh1t upon their mates in the banking and finance world who demand “Affordable housing” be built to keep the housing bubble growing even if slowly.
Gideon keeps on boasting about how low the borrowing rates are for the UK but arrogantly refuses to use that advantage to re-start the economy for now BUT watch how much he will be willing to splurge next year in the run up to the election in the hope of being returned to the trough of plenty where he and his chums can wallow in sleaze and expenses to build up a nest egg to take with them to that holy place next door as a lord of the manor to which they are accustomed.
Derek Robinson
Ah… Tories never like you talking about the alternative do they.
Labour need to push this question a lot harder.