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.
30 Responses to “Did the welfare bill really get out of control under Labour?”
Mick Hall
Your being dishonest there is a great deal of difference between building houses for sale and lending money to folks who can not afford them, and investing in the future by building homes which people can afford to live in.
You seem to feel the more you use the word ‘debt’ the more it will sink it, but you have nothing to say about private dead, the type of sweet heart loans which allows the rich to buy soccer clubs then load the debt onto the club. Or swine like hedge fund asset strippers to borrow fast sums to buy companies and load the cost onto the business.
You have rapped your self in a tight noose and cannot think beyond your narrow reactionary ideology.
I have no interest in building houses, what I want to see is the government building homes for rent, I have no interest in building infrastructure which will make a profit for the shylocks. I wish to see people return to work and build infrastructure which will benefit the nation for decades. You know a decent railways system owned by us all and not the subsidy junkies like Branston and Stagcoach. You have nothing to say about these things, preferring to cheer from the sidelines when the coalition crash the living standards of you fellow countrymen and women.
Are you as ignorant as you pretend, or are you just one more neo liberal flim flm man. The reason the economies or Spain and Ireland fell through the floor was because on the type of economics you admired.
The reason politicians wish to cut things like free TV licences etc, as you well know, is because they see it as the thin end of the wedge, if they can do that they have set a precedent to cut State pensions and out the austerity axe will come.
You make no mention of ways for government to save money, military adventures overseas, trident renewall, raise tax for the most wealthy, etc. Why not I wonder, one can but guess.
You say you find debt offensive, pray tell me when did you complained about the massive loans the banks made throughout the last thirty years to big business and individuals who had not a hope in hell in paying them back, Or is it only recently you have become so offended by debt, Do you have a mortgage, bank loan, or credit card. If so how do you live with yourself?
You say the welfare state is a busted flush, not quiet, but people like you wish it were so. Tell me what will you replace it with, what type of nation will we become. Like the land of the free, 40 million without access to free health care at point of need, millions imprisoned in private jails, corrupt politicians, and a military and secret state which is out of control.
Or perhaps you prefer Russia, where the crooks control the Kremlin, at least they are more honest about their aims. Don’t tell me Singapore is where your heart is.
You wine on about ‘the debt’ like a child without any solutions as nanny is yet to fill you in, you claim the welfare state is busted and the poor people are to blame, quote numbers when they do not mean a dam thing.
Government can create debt and they can wash it away, they can create an international crises which will make you obsession with debt seem silly, as happened twice in the 20th century, believe it or not (only kidding) they can even print money at the drop of a hat and claim it is a master stroke and those markets you admire so much will cheer them to the rafters. They may even call it, let me think, Quantitative easing that sounds like a good name for a sham.
Let me pose a question; if the welfare State and all those things you hate the government doing disappeared overnight, things like looking after ordinary people when they are old, decent schools, roads, railways etc, Do you really believe the government would not find a sorry excuse to spend the money saved elsewhere. Would this ‘debt’ you spend your time raging about be morphed into being manageable.
While the government of the day wastes even more money on vainglorious wars overseas, even bigger tax cuts for business, a massive increase in the numbers of police and security services, after all many of the people your heroes will have impoverished will not meekly go to their graves.
Years ago I would have been angry with people like you, not any more, I just feel sorry for you, caught in a neo liberal time warp which if not challenged will run over you in the same wicked way as it will the rest of us.
Your attitude brought Martin Niemöller’s poem to mind.
PS: I bet Cameron will not give the national debt a second thought when he follows Obama over the top in Syria.
LB
All houses are built for people to live in. You’re ignoring the experience of Spain and Ireland. They did as you suggested and built lots of houses. It didn’t work.
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You seem to feel the more you use the word ‘debt’ the more it will sink it, but you have nothing to say about private dead, the type of sweet heart loans which allows the rich to buy soccer clubs then load the debt onto the club
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Man U fan? Have you seen the latest accounts? Or Arsenal? Loaded up with debt, Yes. They did. However, there’s one important point. The debts coming down.
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Last night United announced to the New York Stock Exchange that it was repaying around half of its outstanding bonds using a new bank loan from Bank of America. This will reduce the club’s interest bill from around £31m per year (pro-forma post the IPO) to around £21m per year.
http://andersred.blogspot.co.uk/2013/05/the-history-of-manchester-uniteds-debt.html
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21 million a year. With their ticket prices, and their sales, do you really think that 21 million is unaffordable? With the debts coming down too, it looks like a well run organisation.
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On the debts front.
It’s your pension. They have spent all your contributions. They money is gone. The debt is hidden off the books.
You’re are right about Niemoller. People like you will go for the rich, the bankers, the Jews. Whatever scapegoat politicans will pick on. Then as the debt kicks in they will are going for the middle class. Then as the universality goes, the rich and the middle class will say, we’re paying all this tax, and getting nowt. So unless democracy is completely subverted, they will elect a government that pulls the plug on the poor. Not good, but inevitable.
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Let me pose a question; if the welfare State and all those things you hate the government doing disappeared overnight, things like looking after ordinary people when they are old, decent schools, roads, railways etc, Do you really believe the government would not find a sorry excuse to spend the money saved elsewhere. Would this ‘debt’ you spend your time raging about be morphed into being manageable.
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Who said I hated those things? You’ve got a if you’re not in agreement with me, you must be against the things I want attitude.
I’m pointing out that because of the debts, you won’t be able to have decent schools that get 50% of pupils to 5 GSCEs. You won’t have railways because the subsidy has been pulled.
One question.
How much does the state owe for its pensions?
Can you tell us?
If not you’re in never never land.
Rick
The figures on this graph look like the DWP spend only. If you add in the HMRC spend (tax credits and child benefit) the cost is around 11% of GDP in the early 2000s and 13% by 2011/12.
See this parliamentary briefing paper.
http://www.parliament.uk/briefing-papers/SN02656.pdf
ChrisTavareIsMyIdol
Nice try, but you’re forgetting that the Labour party followed Conservaitive spending plans in their first term (1997-June 2001). And of course we had falling unemployment so you’d expect to see a fall.
ChrisTavareIsMyIdol
The Britain that Thatcher inherited was one of overmanned and inefficient nationalised industries, where union leaders were more famous than members of the Cabinet, had inflation at nearly 20% and interest rates of 12%. We’d had the IMF sitting in the Treasury checking what we were spending our money on before we were allowed to sign the cheque. We were known as the sick man of Europe, and rightly so.