Saturday, September 27, 2008

Government spending over time

There is a great site called, that tells you exactly what the government spends it's money on. You can go back in time, looking at historic data, and also look at the data in billions or as percentages of GDP.

% of GDP is the best way to look at things as you get an accurate look at how spending changes relative to income. All figures quoted are the total of central government and local government spending. Here's a look at what has happened since 1997:

1997 2001 2005 2008

Pensions 6.060% 6.807% 6.998% 7.308%
Health Care 4.976% 5.408% 6.721% 7.515%
Education 4.553% 4.522% 5.126% 5.615%
Defence 3.091% 2.878% 2.721% 2.819%
Welfare 7.895% 6.173% 6.366% 6.610%
Law&Order 1.891% 1.880% 2.294% 2.372%
Transport 1.225% 0.908% 1.294% 1.448%
Gen govt 0.796% 0.952% 1.587% 1.869%
other spending 4.611% 3.999% 5.065% 5.492%
Interest 3.444% 2.624% 1.971% 2.248%
Balance 0.476% 0.426% -0.268% -0.388%
Total 39.019% 36.578% 39.874% 42.908%

Other spending consists of agriculture, forestry and fishing, waste management, government sponsored R&D, broadcasting, pollution abatement etc.

You can see certain trends over time. Health spending is jacked up (though our spend remains lower than that of any G7 country with the exception of Japan). Spending on state pensions goes up due to increased number of older people, plus Labour increasing the state pension through minimum income guarantee, plus other payments and free services for the elderly (free eye tests, free local bus pases etc). Spending on education and law and order is also up.

Spending on welfare goes down due to unemployment dropping. In future, as the reforms to incapacity benefit kick in, it should continue to drop. Spending on debt interest drops too - Labour spent the first six years paying off debt, and renegotiated a bunch of it at lower interest rates and most debt issued by this govt has been at low coupons (the lowest being 4% in 2005).

Many Tories believe that a potential conservative government would cut tax - but Cameron has boxed them in somewhat by his statements. He has said that the NHS is sacred and they wouldn't make any cuts there (and given our low spend relative to other countries, pretty hard to shave spending in this area without trying to destroy the service and returning it to the shambles of the Major years). They would probably not touch state pensions as most of their supporters come from the over 60's. The over 60's are the stroppiest part of the electorate - despite Labour spending a lot more on their state pensions, they still believe that they arn't getting enough. Tories have signed up to Labour's education policy. They want to increase defence spending, and it's doubtful they could do better on welfare spending than Labour (Labour's record on reducing welfare spending is much better than the Conservative one).

Which leaves them with cutting back on such vital things as waste management and pollution abatement etc. The Thatcher and Major governments paid for their tax cuts by simply privatising assets. Essentially previous Labour governments used to go to the pain of raising tax in order to buy out shareholders and nationalise assets. Then Tories would take this store of money helpfully put away by Labour, and sell the assets and spend the loot. New Labour hasn't played the nationalisation game though. We've nationalised just two entities - Railtrack (which no one wants to buy) and Northern Rock, which people might want to buy once it's back on it's feet. Northern Rock's market capitalisation was about £4bn prior to it crashing - raising that in a privatisation is peanuts in the context of government expenditure.

So I'm very interested to hear what the Conservatives have to say at their party conference. The only way they can supply tax cuts is for Cameron to abandon his commitments to the NHS, state pensions and education. But of course those are the very commitments that his populatity is based on.


broncodelsey said...

Cut spending on the £100 bn a year spent on quangos,many of which are duplicated and the main function appears to be to provide jobs for reject politicians and their supporters.

snowflake5 said...

broncodelsey - quangos were set up under Thatcher, and she tried desperately to cut back, and they grew and grew. If Thatcher couldn't do it, Cameron with lesser ability won't be able to either.

And don't forget that demographics are moving against you - older populations not only mean more spent on state pensions, but more on the NHS, as most healthcare is consumed by the old in the last couple of decades before death.

Harry Flashman said...

Look at those pension liabilities !

Time to scrap all final salary pensions for all public sector jobs.

snowflake5 said...

Harry Flashman - those are the cost of the state pension, - y'know, the one every citizen is entitled to.

Public sector pension liabilities are separate in their own hypothecated funds - the state pays a contribution, which comes out of general government spending, the employee pays a contribution, from their paypacket, they amount goes into a fund administrated by the government actuaries and is invested in gilts. So public sector pension liabilities are fully reserved for.

It is quite possible that a dunce-like Tory might mistake the spending on state pensions for spending on public sector pensions - just like yourself in fact - and seek to abolish state pensions. But you'd then get an almighty shock as it is the over 60's who are the mainstay of Tory support. If you took their state pension away, they'd be furious. Pleading stupidity will not save your hide!

P.S. the spending on state pensions is set to rise sharply as the population ages. And as the old are the chief consumers of heathcare, spending on the NHS will go up too.

Fun, isn't it?

broncodelsey said...

I don't think anyone would miss the Zoos forum,Culture East midlands,British potato council,British wool marketing,Covent Garden marketing,West Northants Development council or indeed the Thurrock Development corporation.

Or do we really need the Carbon trust that gets £ 85 million to advise business and government bodies to become low carbon when £ 22 million is handed over to Envirowise (another quango) to do the same thing?
We also of course have the Energy Saving Trust doing the same job for home owners with a staff of 142 and cost of £ 43 million.

The real cost of quangos was estimated at £ 101 billion in 2007 employing some 700,000 bureacrats.

If this was halved would anyone notice apart from the loss of revenue for the Guardian in not advertising these non jobs?

Anonymous said...

Snowflake5 - Osborne seems to have something about the bank of england not being nationalised.
If you look at his comments about Northern Rock and Bradford and Bingley he keeps flipping on it.
In his response to B+B he argued against nationalisation because it 'risks' tax payers money but somehow believes that his solution of putting B+b in the BOE does not involve tax payers money.

snowflake5 said...

broncodelsey - you can abolish all the "zoos forums" you want, but it won't cut costs of quangos as long as new ones are introduced in their place. And your mate Osborne mentioned new quangos in his speech - eg the "budgetry oversight quango", which will duplicate the work currently done by the Commons Select Committee on Finance, the treasury and the BoE. And then there was the quango he would set up to monitor if councils were cutting their spending so they could qualify for a tax freeze.

And that was just one speech when he is not yet in government! If and when he does get into government, the quangos will mushroom as he tried to get appointees to take responsibility for things that parliament should control.

I would have thought that his speech banished all belief that Osborne is a quango-cutting man. But you are clearly clinging fast to your beliefs that he will somehow u-turn and remove quangos and "waste" and you will get your tax cuts. Dream on.

snowflake5 said...

P.S. Not sure where you get your £101 billion for quangos. The NHS costs £101bn to run at 7.5% of GDP and it's the largest item in the budget.

You could pretend that the people administering the NHS, and state pensions and welfare payments etc are one big quango and can be abolished - but actually they are essential workers. The service won't run without them.

Harry Flashman said...

I saw this and thought of you..

The Pensions Policy Institute report revealed that unfunded public sector schemes for teachers, NHS staff and civil servants were projected to soar by 40 per cent over the next 20 years.

Perhaps the PPI are a bunch of dunces too ?