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Public Spending and Social Policy: The United Kingdom 1950–1977*

Published online by Cambridge University Press:  20 January 2009

Frank Gould  and
Barbara Roweth
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Abstract

This article, in which we examine developments in public expenditure on social policy in relation to total public spending in the United Kingdom (UK) in the period after the Second World War, is part of a larger international study on developments in social welfare spending on which we are currently engaged.

In Section 1 we briefly sketch in the theoretical background to the study of public expenditure growth in general and social welfare spending in particular. We shall not in this article attempt to evaluate the validity of the competing hypotheses – this exercise is in hand as part of the international study, and we shall report the findings at a later date. Section 2 examines the growth of public expenditure in the UK at the aggregate level. In Section 3 we analyse public expenditure at the individual programme level and in Section 4 we summarize the conclusions.

Type
Articles
Information
Journal of Social Policy , Volume 9 , Issue 3 , July 1980 , pp. 337 - 357
Copyright
Copyright © Cambridge University Press 1980

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References

1 See The Government's Expenditure Plans, 1979–80 to 1982–83, Cmnd 7439, HMSO, London, 1979, pp. 17 and 24–6Google Scholar; and Willis, J. R. M. and Hardwick, P. J. W., Tax Expenditures in the United Kingdom, Heinemann, London, 1978.Google Scholar

2 See OECD, Public Expenditure Trends, OECD Studies in Resource Allocation, Paris, 06 1978.Google Scholar

3 For a discussion of Wagner's Law see Peacock, A. T. and Wiseman, J., The Growth of Public Expenditure in the United Kingdom, second edition, Allen and Unwin, London, 1967, PP. xxxii–xxxiii and 16–21Google Scholar; and for a critique see Wagner, R. E. and Weber, W. E., ‘Wagner's Law, Fiscal Institutions, and the Growth of Government’, National Tax Journal, xxx:1 (1977), 59–68.Google Scholar

4 See OECD, op. cit. ch. 2; and for a broader discussion Bell, Daniel, The Cultural Contradictions of Capitalism, Heinemann, London, 1976, pp. 232et seq.Google Scholar

5 For some key contributions in this area see Downs, A., An Economic Theory of Democracy, Harper and Row, New York, 1957Google Scholar; Niskanen, W., Bureaucracy and Representative Government, Aldine Publishing Company, Chicago, 1971Google Scholar; Heclo, H. and Wildavsky, A., The Private Government of Public Money, Macmillan, London, 1974Google Scholar; and Breton, A., The Economic Theory of Representative Government, Macmillan Press, London and Basingstoke, 1974.CrossRefGoogle Scholar

6 The Government's Expenditure Plans, 1979–80 to 1982–1983, p. 143.Google Scholar See also for a broader discussion of future trends Wirz, H. M., ‘The Implications of Demographic Change for Europe’, Futures, 02 1977, 45–52.CrossRefGoogle Scholar

7 For a discussion of this problem see Baumol, W., ‘The Macroeconomics of Unbalanced Growth: The Anatomy of the Urban Crisis’, American Economic Review, 06 1967.Google Scholar

8 Public Expenditure White Papers: A Handbook on Methodology, H. M. Treasury, HMSO, London, 1972, pp. 24–5.Google Scholar

9 These approaches are discussed more fully in Baran, P. A. and Sweezy, P. M., Monopoly Capital, Penguin Books, Bungay, 1966Google Scholar; and O'Connor, J., The Fiscal Crisis of the State, St Martin's Press, New York, 1973CrossRefGoogle Scholar; but see also Gough, I., ‘State Expenditure in Advanced Capitalism’, New Left Review, 92 (1975), 53–93.Google Scholar

10 See Peacock and Wiseman, op. cit.

11 A full statement of this approach, albeit polemical, can be found in Buchanan, J. M. and Wagner, R. E., Democracy in Deficit: The Political Legacy of Lord Keynes, Academic Press, New York, 1977.Google Scholar

12 See Wildavsky, A., The Politics of the Budgetary Process, second edition, Little, Brown and Company, Boston, 1974, esp. pp. 216–40.Google Scholar

13 The difference in the ratio for the two valuations amounts to 6.1 per cent for 1977.

14 Figures from earlier Blue Books have been reconciled with the later presentation.

15 For the details of these changes see ‘Government Income and Expenditure in the National Income Accounts: A Change of Presentation’, Economic Trends, 03 1977.Google Scholar

16 See The Government's Expenditure Plans, 1979–80 to 1982–83, para. 35, p. 246.Google Scholar

17 It might be noted that, with a percentage of 44.5, Britain ranked sixth in the league table of OECD countries (below the Netherlands, Sweden, Ireland, Norway and Denmark), taking average levels of public expenditure as a proportion of GDP between 1974 and 1976 – see OECD, op. cit. Table 2, p. 15.

18 This rise in the ratio reflects a relative decrease in GDP, which fell by 1.7 per cent in real terms in 1974, compared with a rise of 7 per cent in real terms for public expenditure. The annual inflation rate in that year was 28 per cent.

19 See for example Bell, op. cit. 232–43; and for a more popular expression of this view see Jenkins, Peter, writing in The Guardian 18 02 1976Google Scholar – ‘In both countries [the United States and Britain] the explosive growth in overall public expenditure was chiefly the consequence of transfer payments.’

20 The relative price effect, as outlined in Section 1, is the extent to which the price level for public expenditure rises at a different rate from that in the economy as a whole. The difference tends to be positive, but is not necessarily so – see The Government's Expenditure Plans, 1979–80 to 1982–83 Table 5.12, p. 234Google Scholar, which shows a negative effect in recent years. Statistically the effect arises partly from the fact that wages account for a large proportion (about 30 per cent) of public expenditure and wages have generally tended to rise faster than the general price level, and partly from the convention of measuring the services of employees (in terms of both price and product) by their wages and salaries. In periods of decline in real wages, the relative price effect will tend to decrease, or it will be negative.

21 The Government's Expenditure Plans, 1979–80 to 1982–3, paras 27 and 29, p. 244.Google Scholar

22 For a full analysis of the development of different programmes under different governments see Gould, F. and Roweth, B., ‘Politics and Public Spending’, The Political Quarterly, 49:2 (1978), 222–7.CrossRefGoogle Scholar

23 The intention to reduce the scale of public expenditure in this period was of course reinforced by the introduction of cash limits in 1976 – see Public Expenditure to 1979–80. Cmnd 6393, HMSO, London, 1976, p. 4.Google Scholar

24 Unemployment benefit and supplementary benefits are relatively small parts of the whole social security programme – 5 per cent and 13.6 per cent respectively in 1977. By far the largest sub-programme is that for retirement pensions at 48.5 per cent, which does not vary according to economic circumstances, but see Table 5 for a detailed breakdown of social security benefits.

25 See footnote 6.

26 OECD, op. cit. Table 6, p. 25.

27 See Central Policy Review Staff, Population and Social Services, HMSO, London, 1977, p. 49.Google Scholar

28 Government grants and loans to the public corporations are included, but their capital investment programmes are, with minor exceptions, not included. The intention is to show the extent to which their activities are financed from taxation.