Requiem for the Brown years

UK public spending was 36.6% of gdp in 2000, and had edged up over 50% by 2009 and 2010 and now is still in the range of 49% or so. Most of the run-up came over the bubbly years of 2000-2006. Let’s start by calling that an unsustainable mistake. I would say that, looking back, they didn’t get very much for this spending boost, did they? That’s fact #1 that should start off any analysis of British fiscal policy looking forward.

Quite.

17 comments on “Requiem for the Brown years

  1. So UK public spending was roughly at the same levels before the onset of the GFC as it was when Labour came to power.. have I got that right?..

  2. 1) The average tax take as a percentage of GDP has been remarkably consistent over the last 50 years at c 35%. Which does rather suggest a base level for the size of the government.

    2) On the other hand some 25-30% of government spending must be directly related to OAPs either through pensions (£100bn+) and NHS care and this is a figure that for demographic reasons is only ever going to increase.

  3. 49% of GDP is government activity. People still talk about government and the Economy as two separate and remote things.

  4. @ Dinero: Absolutely right, they are hopelessly intertwined now.
    @ KJ :The debt pile is still growing and, in that sense, there have not been cuts, simply re-allocation of resources. The coalition, over the course of this Parliament, is borrowing £600bn, taking debt way past £1.5 trillion. This is seldom reported and never acknowledged by any mainstream politico. It may be true that the deficit is being closed, but the debt itself is not due to come down until some way into the next parliament. I very much doubt it will, and further excused will be made.

  5. Looking at these numbers (not the same as the OECD’s, but with the same trends) public spending under John Major increased from a low of 34.25% in 1989 to a high of 39.7% in 1993, before falling off slightly. Under Tony Blair, spending increased from a low of 34.63% in 2000 to a high of 38.93% in 2005, before falling off slightly.

    In both cases, a substantial part of the increase went to the NHS.

    Starting in 2007, a global financial crisis blew up the budget. The UK, under whichever government, has been particularly badly affected.

  6. “Do the likes of Capita and so on count as private or public sector?”

    Public spending will include payments to suppliers as well as the wageroll. Paying Capita a few billion to, er, fuck something up in a more cost-efficient way than it used to get fucked up, would be no different to buying a schoolbook. It’s where the money comes from that’s being measured – not where it goes to.

    (so no, the outsourcing boom hasn’t hidden hige rises in public spending – which, I presume, is what you’re interested in)

  7. There are a lot of things wrong with all the excuses for Brown, the first of which is that Keynes said the government should run a surplus during a boom but Brown ran a deficit during a bubble; the second is that all the “good” years were actually the product of Ken Clarke and Blair locking Brown into Clarke’s budget projections from 1997 to 2001 so Tyler Cowen is qyuite right to take 2000 as base year (KJ: please note); the third is that he produced the lowest real growth rate of any post-war Chancellor that I can think of once you strip out false accounting; the fourth is that New Labour was the only government since the 30s to make the poor poorer while making the rich richer – he did this, inter alia, by creating a mosaic of esoteric tax regulations that benefited those able to hire the likes of Murphy and made tax returns horrendous for the normal guy with anything other than a PAYE salary.
    FYI John Major had a surge in unemployment prior to leaving the ERM so govt spending on benefits rose while GDP fell so of course public spending as a % of GDP rose. The economic cycle was swinging up in 1997 so, in the absence of policy changes, govt spending as a % of GDP would have continued falling.
    While it is perfectly true that a financial crisis blew up in 2007 which was bound to affect the cyclical deficit, Brown is culpable, almost exclusively, for the structural deficit which his hand-picked appointee as Chancellor estimated as a horrendous 8% and others suggested was 10% or 12%.

  8. PaulB

    “Starting in 2007, a global financial crisis blew up the budget”

    a crisis that was waiting to happen….Sants has a knighthood, Brown is still a privy councillor. has anyone taken the blame apart from the scapegoat, Eric Daniels. He was the CEO of a bank widely criticised for its conservatism and the fact it wan’t posting huge earnings growth every year. Somehow, Brown and the Chairman forced him to take on the toxic Halifax Bank of Scotland stuff – built up by an acclaimed, visionary CEO – and Lloyds collapsed to the dismay of its loyal shareholders, who liked its conservative approach. Where do we get redress?

  9. @ Diogenes
    Er, I think that Fred Goodwin has justifiably taken some blame, as has the guy who ran the property book for Bank of Scotland.
    Lloyds did NOT collapse, but it was compelled by the government to make a Rights Issue to *increase* the margin by which its assets exceeded liabilities. Incidentally, most loyal Lloyds shareholders preferred Brian Pitman’s sensible approach to Eric Daniel’s cost-cutting at the expense of quality of service since Lloyds TSB shareholders were mostly customers as well.

  10. john 77 a very good attempt at diversionary tactics. there was a sound bank – Lloyds run by Eric Daniels – coerced to take on a toxic bank – HBOS. The fact that Goodwin has taken a little blame for his wilful destruction of RBS is not germane. He is not behind bars, where he ought to be,

  11. John77 makes a good point about unemployment under Major.

    Daniels wasn’t coerced to take over HBOS. He’d been looking for an acquisition, and he found he could buy HBOS at what looked like a cheap price, with the government waiving competition rules. He (and Blank) simply misguessed how bad things could be. From the point of view of the information available at the time, they got a good deal, albeit a risky one.

  12. PaulB

    “He (and Blank) simply misguessed how bad things could be. From the point of view of the information available at the time, they got a good deal, albeit a risky one.”

    If HBOS had been run like Lloyds, it would have been a good deal. I suspect much to their shock, HBOS was not actually run in any shape or form like Lloyds.

  13. My impression at the time was that Lloyds was strongarmed into taking over HBOS, but when I googled it I could find nothing corroborative of anything but what PaulB has said.

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