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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Will Corbynites be in charge of the Labour Party forever?

What yesterday's important rule changes say about Jeremy Corbyn and his senior team.

Corbynism forever? That's the general verdict on the consequence of Jeremy Corbyn's big victory on Labour's ruling executive yesterday, as the NEC passed proposals to reform the party's structures. The big ticket items: an expansion of the number of trade union and membership places on the NEC, and a reduction in the number of parliamentary signatures required for candidates for the party leadership, from 15 per cent to 10 per cent of the PLP. (That's 28 MPs and MEPs or 26 MPs if the next leadership election takes place if/when Brexit has happened and there are no MEPs.)

"Forever" is an awfully long time, and you don't have to remember that far back to a time when one member, one vote was meant to ensure that the likes of David Miliband would be elected leader forever. "Forever" turned out to mean "not at all". Labour has an amusing tradition of its constitutional quirks not quite working out the way its architects hope, and it may well happen the same way this time.

The far more interesting story is what these rule changes say about Jeremy Corbyn and his senior team. They're getting better at games of "you scratch my back, I scratch yours" with the trade unions. The leadership also backed the Jewish Labour Movement's motion giving the party tougher powers to kick anti-Semites out and released a statement about it, too. As well as being the right thing to do, there's a crude electoral argument here – if Labour can repair its relationship with the community, its dominance in the capital and elsewhere will only increase.

All in all, the Labour leader is taking the challenge of winning more seriously and his team are increasingly streetwise. His internal opponents, well, they seem to be going in the opposite direction.

You don't have to agree with it to see that there is a good principled case to be made against weakening the right of MPs to help select the party's leader. Making it might even help Labour's Corbynsceptics, as one of their biggest problems is that Labour members see them as unprincipled. Yet instead of making it, they're criticising the move as "a power grab", and one that divides Labour when they should be uniting against the Tories. Bluntly, Corbyn grabbed power once in September 2015 and again in September 2016 and consolidated it in June 2017.  And the problem is, it's only divisive because Corbynsceptics are opposing it.

(Also, let's face it, if June 2017 had ended in a Labour rout, you better believe that whichever Corbynsceptic MP emerged as leader would be changing the hell out of the Labour party rulebook right about now rather than focusing on beating the Tories.)

Although there are significant exceptions – Bridget Phillipson's recent longread for the New Statesman is one – it's all too rare to hear a senior Corbynsceptic argue from principle rather than expediency. And until that changes, Corbynites will, indeed, remain in charge of Labour forever.

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.