How public spending rose under Thatcher

Thatcher squeezed public services but high unemployment meant spending rose by an average of 1.1% a year.

Despite the rhetoric of "rolling back the state", Margaret Thatcher was less successful in cutting public spending than many of her supporters (and opponents) like to believe. As the IFS graph below shows, real-terms spending rose in every year of her premiership apart from two. Only in 1985-86 and 1989-90 did spending fall, by 1.1 per cent in the former and 2.3 per cent in the latter. On average, it increased by 1.1 per cent a year. Under the coalition, by contrast, it is forecast to fall by an average of 0.4% a year in real terms (departmental spending is being cut by 11% but debt interest and high unemployment mean the total reduction is far smaller). 

While Thatcher squeezed spending on public services such as health and education, mass unemployment and the consequent increase in spending on benefits (which, unlike the current government, she allowed to rise with inflation) ensured that total expenditure remained high. 

But while spending generally kept pace with inflation, it did fall dramatically as a share of GDP. When Thatcher entered office, total expenditure stood at 45.1%. It was briefly reduced - to 44.6% - in her first year before rising every year until 1982-83 when it peaked at 48.1%. Spending then fell in every remaining year, totalling just 39.2% in 1989-90 after the economy grew by an average of 4.7% between  1984 and 1988. 

Spending under Thatcher as a percentage of GDP

  • 1979-80 44.6%
  • 1980-81 47%
  • 1981-82 47.7% 
  • 1982-83 48.1% 
  • 1983-84 47.8% 
  • 1984-85 47.5% 
  • 1985-86 45%
  • 1986-87 43.6%
  • 1987-88 41.6%
  • 1988-89 38.9% 
  • 1989-90 39.2% 

Source: HM Treasury

Public spending then rose under John Major, largely as a result of the 1991-92 recession, peaking at 43.7% of GDP in 1992-93. It later fell to a modern low of 34.5% under Labour in 2000-01 before rising in every subsequent year until it reached 47.7% in 2009-10 (the surge was largely a result of the recession, which saw spending rise by 3.2% compared with 2008-09). Osborne's axe will see it fall to 44% in 2014-15 and, if the election goes the Tories' way, to 40.5% in 2017-18. 

Margaret Thatcher making a speech, 22nd May 1980. Photograph: Getty Images.

George Eaton is political editor of the New Statesman.

Photo: Getty
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What Jeremy Corbyn gets right about the single market

Technically, you can be outside the EU but inside the single market. Philosophically, you're still in the EU. 

I’ve been trying to work out what bothers me about the response to Jeremy Corbyn’s interview on the Andrew Marr programme.

What bothers me about Corbyn’s interview is obvious: the use of the phrase “wholesale importation” to describe people coming from Eastern Europe to the United Kingdom makes them sound like boxes of sugar rather than people. Adding to that, by suggesting that this “importation” had “destroy[ed] conditions”, rather than laying the blame on Britain’s under-enforced and under-regulated labour market, his words were more appropriate to a politician who believes that immigrants are objects to be scapegoated, not people to be served. (Though perhaps that is appropriate for the leader of the Labour Party if recent history is any guide.)

But I’m bothered, too, by the reaction to another part of his interview, in which the Labour leader said that Britain must leave the single market as it leaves the European Union. The response to this, which is technically correct, has been to attack Corbyn as Liechtenstein, Switzerland, Norway and Iceland are members of the single market but not the European Union.

In my view, leaving the single market will make Britain poorer in the short and long term, will immediately render much of Labour’s 2017 manifesto moot and will, in the long run, be a far bigger victory for right-wing politics than any mere election. Corbyn’s view, that the benefits of freeing a British government from the rules of the single market will outweigh the costs, doesn’t seem very likely to me. So why do I feel so uneasy about the claim that you can be a member of the single market and not the European Union?

I think it’s because the difficult truth is that these countries are, de facto, in the European Union in any meaningful sense. By any estimation, the three pillars of Britain’s “Out” vote were, firstly, control over Britain’s borders, aka the end of the free movement of people, secondly, more money for the public realm aka £350m a week for the NHS, and thirdly control over Britain’s own laws. It’s hard to see how, if the United Kingdom continues to be subject to the free movement of people, continues to pay large sums towards the European Union, and continues to have its laws set elsewhere, we have “honoured the referendum result”.

None of which changes my view that leaving the single market would be a catastrophe for the United Kingdom. But retaining Britain’s single market membership starts with making the argument for single market membership, not hiding behind rhetorical tricks about whether or not single market membership was on the ballot last June, when it quite clearly was. 

Stephen Bush is special correspondent at the New Statesman. His daily briefing, Morning Call, provides a quick and essential guide to domestic and global politics.