Duncan’s Economic Blog

Welfare Spending: Some Facts

Posted in Uncategorized by duncanseconomicblog on October 27, 2010

The chart below is taken from the excellent UK Public Spending website.

It shows welfare spending as a percentage of GDP since 1950. The welfare spending that George Osborne is about to slash, that Labour ran up in order to build a “client state” and which “we can no longer afford”.

In 1997 welfare spending as percentage of GDP was 7.76% , in 2010 (despite a recession and higher unemployment) it is 7.26% – lower than in any year 1979 to 1997.

This is being cut, as Douglas Alexander argues, for political reasons. As Don Paskini notes, it will hit the low paid hard.

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  1. Strategy, not tactics « Hopi Sen said, on October 27, 2010 at 3:24 pm

    [...] It’s an iportant point, one that I think Labur has to be aware of. It’s clear that the general principle of reducing welfare spending has broad support, notwithstanding that welfare spending as a proportion of GDP, is not in fact historically high. [...]

  2. NM said, on October 27, 2010 at 6:12 pm

    What would be interesting to see is which areas have expanded in their percentage of spending against GDP over this period. My, completely without concrete figures, guess would be health as number one in this regard. With an ageing population, leading to higher demand for these services, as well as the known issue of healthcare inflation, the choice of welfare as an easy option for Osborne seems (slightly) less vindictive than one might otherwise think.

  3. [...] A better comparison is provided on Left Foot Forward contributor, Duncan Weldon’s excellent blog: [...]

  4. CharlieMcMenamin said, on October 28, 2010 at 8:56 am

    To be fair Duncan, if you add in pensions one does get a different graph entirely. I can’t work out how to cut and paste the graph but do go back to the site and choose pensions as the second variable (apologies if this is me teaching you, a most unlikely grannie, to suck eggs!)

    So the politics are more complicated- but, nonetheless, one may very reasonably ask why, if the problem is dealing with our ageing population, we’re cutting HB for all….

    • duncanseconomicblog said, on October 28, 2010 at 9:10 am

      Pensions has risen from 6% of GDP in 1997 to 8%.

      But that’s an aging population and is a different issue from “welfare” – certainly as theMail understands it!

      • CharlieMcMenamin said, on October 28, 2010 at 10:13 am

        True: but the Mail’s definition of ‘welfare (= scroungers) is not the same as considering the net total of transfer payment obligations on the govt. & shifting the debate to ‘how can we best look after our old folk?’ has some political advantages.

        • CharlieMcMenamin said, on October 28, 2010 at 2:14 pm

          Hmm. Sorry to go on about this, but I’ve been playing with those rather wonderful graphs. I see you can set them to report the financial information in two different ways – by function (presumably by UK govt dept and sub divisions therefore) or by COFOG, the standard methodology used by the UN.

          What is interesting is that in the COGOG classification ‘social protection’ does include old age, as well as sickness and disability, unemployment, housing etc, etc. The list of sub-categories in the COOG ‘social protection’ heading are, with the exception of ‘old age’, very similar to those under the ‘welfare’ heading (which you have used for the graph above) in the default functional view. So the graph you get for ‘social protection as %age of GDP is very different from the one in this post.

          Why am I being so boringly obsessive about this seemingly minor point on obscure economic classifications? Simples: just listen to the language of Newmania and other saloon bar wingnuts. Our economic problems are due to skivvers who are ‘are a distilliation of the worst in humanity’. Now, we can poo-poo this as offensive populism, but populism it is just the same. We can attempt to say – as you were trying to do – that there isn’t a problem but this doesn’t dent that saloon bar savagery. So I think we should take a different line.

          Insofar as we have a national problem with ‘welfare’- in the broad sense – payments it’s about looking after Granny. We on the left should try to turn the argument round to this basic fact. In fact our problems on this front are not so bad as, say, Japan’s, but it is a factor. Even so, in considering the size of the ‘welfare’ bill, we’re considering how to provide for Gran, not chasing imaginary armies of benefit cheats.

  5. RP said, on October 28, 2010 at 8:58 am

    Very interesting graph. What’s the explanation for what looks like a very big drop from around 1997 to 1998?

    • duncanseconomicblog said, on October 28, 2010 at 11:33 am

      I’ll see what I can dig out on that!

  6. Newmania said, on October 28, 2010 at 9:49 am

    Yes a big drop as the Economy recovered in the late Major period into the Blair period. Then,in conditions of super heated growth ,we somehow manage to start increasing welfare spending almost as if we thought that boom and bust had been cured or something. Almost as if we liked creating dependency or something.
    This boom was moslty a property bubble anyway without much increased earnings to many ,certainly net of mortgage ,so the money increases in welfare are the important thing which you disguise with this graph.
    In any case we have lived in an era where real distress is very rare , no-one starves of gets put on the street. Plenty of ordinary people are under a lot of pressurre and I am one of them .Rather than thanking us for the help we do give it is the old story from Labour of calling everyone selfish while you swank around in your elite lifestyle despising the ordinary ambitions of working people for their famiies so long as you get to posture about “Fairness” on the telly .

    Whats fair about that ? The thing is |Duncan you don`t know any of these people , they all play the system they are a distilliation of the worst in humanity and they have decided to live that way almost without exception. Those of us who live around them and put up with them frankly resent a penny piece getting it no the hands of the lazy bastards .On top of that we get smoothies like you sitting around all day concocting spun sugar arguements to justify yet more of them.
    You are the wrong side of this . New Labour are already idenitifed only with shirkers unions and immigrants this policy is popular and will become more so

    Off to the far left you go.

    • duncanseconomicblog said, on October 28, 2010 at 11:38 am

      Newmania,

      Well – yes- creating jobs cuts the welfare bill. Hence importance of growth.

      On the “me not knowing them” part – whatever gives you that idea?

      I’m from Ashington in Northumberland and lived there until I was 18, my parents are still there, my sister, my school friends. Here’s what the Mirror said about it last week:

      It was once the world’s biggest pit community with more than 5,000 miners, and was birthplace of soccer icons Sir Bobby Charlton, Jack Charlton and Jackie Milburn.

      Now it is a shadow of its former self.

      Gone are its five cinemas. Clothing supplier Dewhirst shut in 2002 with the loss of 420 jobs.

      The demise of Woolworths was also a hammer blow. Plans to attract big-name stores and new hi-tech firms in their place have largely come to nothing.

      Like Morpeth, about half its population is employed by the state. But unlike its affluent neighbour, many more of its residents are on benefits.

      Ada McMutrie of the local Citizens Advice Bureau said bleakly: “We have no major private employers and public sector cuts will have a disastrous effect. Ashington has never recovered from the mine closures and there is nothing to support the local economy.” Carpet shop owner Dean Carruthers has seen business slump 30%. He said: “You don’t go out any more because people are fed up.

      “It used to be a laugh but now every other person has lost their job or been put on shorter hours.”

      Ministers’ defence for slashing away at the public sector is that private firms can take their place. That fails to take account of areas, such as large swathes of Northumberland, where there are few such employers.

      Once a region with a proud tradition of mining, ship building, steelworks and manufacturing, for much of the North East that is now history.

      Librarian Sue Dick, 54, summed up the area’s desperation as she said: “It’s getting harder for young people to find jobs. My son graduated and has applied for 50 jobs and got just two interviews. If he can’t get a job, I fear for other people.

      “We can’t cope with cuts. There are families here already at the bottom. They will have to start digging a hole to go any further down.”

      • Tyler said, on October 28, 2010 at 3:26 pm

        “Once a region with a proud tradition of mining, ship building, steelworks and manufacturing, for much of the North East that is now history.”

        Industries now history thanks to the proud tradition of trade unionism.

        • steward said, on October 29, 2010 at 9:18 am

          Heh. Good bullshitting.

  7. pablopatito said, on October 28, 2010 at 12:14 pm

    Duncan, has Ashington improved much since 1997? My feeling about Labour is that its only solution to these areas was welfare payments and public sector employment, leaving them reliant on the state and vulnerable to future government cuts. Was I just being naive in expecting Labour to reverse Thatcher’s de-industrialisation of the North with a clever industrial policy? Even Thatcher went out of her way to attract Nissan to Sunderland. Isn’t this kind of approach better than Blairs?

    Anyway, I’m not a big fan of graphs that show very general expenditure as a percentage of GDP over fifty years. It just seems far too much of an over-simplification. As I’ve mentioned before on here, the welfare bill includes my child benefit and tax credits, and I don’t consider this as ‘welfare’ in the true sense of the word.

    Barring me from claiming income support during holidays when I was at university but reducing my income tax in my working years, reduced the welfare bill, but doesn’t materially make much difference to me. Paying for teenagers to go to college reduces the welfare bill, increases the education bill, but doesn’t increase said teenagers future income or job prospects – its just a transfer of public expenditure from one budget to another, often for purely political means.

    • duncanseconomicblog said, on October 28, 2010 at 12:26 pm

      The schools have certainly improved – my own went from failing in the late 1990s (when I was there) to satisfactory in the early 2000s to good now.
      There has been a lot of job creation – although it’s almost entirely public sector, the vast majority of my friends there that are in work are employed by either the DWP or HMRC.
      There have been attempts to stimulate private sector jobs – several new business parks and an EU funded “Go Wansbeck” programme.
      It’s certainly a better place than it was a decade ago, although this was to a large extent build around the public sector – it’ll ge hit hard over the next few years.

      Yes, the failure to have an active industrial policy was one of the major failings of the last government.

  8. Newmania said, on October 28, 2010 at 3:09 pm

    Well – yes- creating jobs cuts the welfare bill. Hence importance of growth.

    Not if you solve the unemployment problems in Warsaw and not if you create jobs that have no real value by puffing up unsustainable enterprise with free money from the Bank of Duncan Picks` em , or excess demand .Creating jobs was the top policy objective of Callaghan than shining symbol of left wing catastrophe on its own its a pointless and dangerous objective.

    Sound like Ashington is a shrine to New Labour . Throw other people`s money at it – the solution to everything

  9. Newmania said, on October 28, 2010 at 3:17 pm

    Hard to tempt employers into an area when the state is offering jobs for life with golden pensions on national pay scales …and all for coordinating community relations though the medium of face painting.
    I`d do it just for the free time

  10. pablopatito said, on October 28, 2010 at 3:30 pm

    I’ve always thought national pay scales are a bad idea. And rarely discussed, it seems.

  11. john said, on October 30, 2010 at 1:14 am

    “As I’ve mentioned before on here, the welfare bill includes my child benefit and tax credits, and I don’t consider this as ‘welfare’ in the true sense of the word.” Perish the thought,Bit like the “feckless mothers” in Ashington,Had they lived in Darras Hall,they,d be “stay at home mums” or Mams as we say on Tyneside

  12. [...] Duncan’s Economic Blog The chart below is taken from the excellent UK Public Spending [...]

  13. Neil Wilson said, on October 31, 2010 at 11:23 am

    The inference of ‘percentages of GDP’ is a problem and I think that needs explaining more carefully.

    This is not a zero sum game.

    If welfare spending is increased in terms of number of Pounds, then GDP will also go up by a number of Pounds.

    The question that needs answering then is whether the amount of real goods and services produced increased as a result of that extra spending in Pounds. Are we better off as a nation in real terms with or without the government taking action?

    Framing everything with reference to GDP has a tendency to ‘financialise’ the argument, when the real argument is whether every citizen in the UK has access to enough real goods and services to live a life free from the effects of poverty.

    The UK can always afford to do things in money terms if it can afford to do things in real terms.

  14. [...] [...]


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