Of course Labour will cut much more than Margaret Thatcher: Labour and the BBC invent those cuts

One of the myths perpretrated by Labour and the BBC is that Margaret Thatcher came in and cut public spending. She did not – spending on the main services grew rapidly under her control. She did cut plans in 1981 to help the recovery, but the overall figures for total public spending including capital, current and debt interest were:

1978-9 (last Labour year) £71.2 billion
1980-81 (first full Cons year) £120.2 billion
1981-82 £130 billion
1983-4 £137.5 billion

(These are all cash figures taken from the Red Books of the day – they also represent rises in real terms, though on a much smaller scale than the cash increases)

She tackled the deficit and the need to fuel growth by asset sales in the middle and later years, and by better control providing better value for money. She also got the high rate of inflation down which she inherited, and put through crucial trade union and nationalised industry reforms.

Margaret Thatcher had no need to cut public spending by the £39 billion Labour now say they need to reduce it by,(or by the then equivalent) because she ran things more prudently and did not borrow so much.

I do wish the commentators and interviewers wouold look at the numbers and the published facts, instead of all this misleading spin. They could also point out that say a 10% per cent overall cut over 4 years is a very modest cut by private sector standards, and has been delivered by many private sector companies with no dimunution in quality of service. Outside the core protected areas this should not cause such alarms.

There are several simple truths – it is possible to cut public spending by substantial amounts without sacking a single nurse, teacher, doctor, soldier. It is possible to cut some public spending and make things better by doing so. It is possible to greatly increase efficiency throughout the public sector, if only someone started to run it with the taxpayers interests at heart.

It is also an immutable law of public sector reform in the UK that Labour spin doctors and some BBC journalists will wish to keep alive the myth of the massive “cuts” of Margaret Thatcher, and the myth that all cuts are damaging if not politically impossible.

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24 Comments

  1. Posted March 25, 2010 at 9:05 pm | Permalink

    it comes as no surprise that the BBC, which is essentially the propaganda arm of the Labour Party, are propagating lies about Margaret Thatcher; what causes me endless frustration is that I have to fund them to do so, even if only rarely watch their channels.

    • Stuart Fairney
      Posted March 26, 2010 at 7:58 am | Permalink

      I gave up long ago, just as long-suffering Russians would ignore Pravda in the past.

      I honestly think that non-consumption of their "news" product is the only way to remain sane and I hope that eventually, when no-one is watching, they will get the message.

  2. jo bowkett
    Posted March 25, 2010 at 9:41 pm | Permalink

    John please, please, please continue to make this point – we are being deluged with spin, misleading information and downright lies. We need to hear a strong counter argument to the siren voices being raised.

  3. Donna W
    Posted March 25, 2010 at 9:59 pm | Permalink

    The BBC are not interested in facts. They are only interested in pursuading as many of their audience as possible that Labour should be re-elected. This isn't for the good of the country; only for the good of overpaid BBC executives and in their own interest of maintaining the licence fee/tax so they don't have the uncomfortable experience of living in the real world.

    Cameron has said he believes in retaining the licence fee, so the BBC can continue to operate like this; biased, unaccountable and awash with public money. Stupid or what?

    • Stuart Fairney
      Posted March 26, 2010 at 8:01 am | Permalink

      Suicidally stupid. Why anyone would allow such an entity to continue spewing forth bile when they have the power to end the subsidy which allows it, simply baffles me.

      I'm just hoping he has a secret agenda to abolish them. Hoping, but not expecting.

  4. JimF
    Posted March 25, 2010 at 10:39 pm | Permalink

    In the 70s Labour had neither the time in government, media support nor the wit to have built up their client state as they have done in the past 12 years. These were the "nursery" years of Brown, Blair & Co., and they learned to pretend to act tough like a Tory but build the Trojan horse of socialism underneath.
    It would be interesting to hear how you think Thatcher, Keith Joseph et al would have handled this situation. I fear they would actually have had some difficulty getting their message across today, and would have been castigated as being slightly batty by the BBC and socialist parties. But at least when the brown matter hits the fan they would have been welcomed as saviours. With this Cameron Osbourne team, people will say "well Labour lost control, but the other lot never actually told us how they would have got us out of this either". The figures need laying out in black and white, of what has to be done and when. Just in case they're needed later.

  5. Bob
    Posted March 25, 2010 at 10:58 pm | Permalink

    The first cut I would want to hear about from a new government is the BBC.

  6. Posted March 25, 2010 at 11:26 pm | Permalink

    The other factor on the cuts is change in liabilities. Under Mrs T, the turnaround of nationalised industries and the eventual sell-off reduced the UK's liabilities. Also the bringing of debt down as a percentage of GDP Under Labour we have
    1. PFI initiatives which spreads the cost into the future.
    2. Debt acquired to fund future liabilities (through the Golden Rule)
    3. Banks, with promises to make them undertake risky loans, whilst forcing them to increase their capital.
    4. Increases real pay in the public sector well beyond the growth in the economy and increasing the payroll numbers. This carries a future liability to pay in the form of unfunded pensions.
    5. Promises on cutting CO2 emissions through windmills, without a proper costing of the consequences.

  7. Mark M
    Posted March 25, 2010 at 11:41 pm | Permalink

    Funny you should mention Mrs Thatcher as I was looking at the historic budget figures and Mrs T spent more as a % of GDP than Labour. She also taxed more as % of GDP. It seems strange to say that as the Tories were typically thought of as low tax, but it's how you get those taxes in that's important.

    If you ever needed proof of how well the Tories understood the economy, you need only look to the fact that in nearly every year under Mrs Thatcher the Tories took over 40% GDP in taxes whilst being considered 'low tax'. This Labour government, by contrast, struggles to take more than 37% even though they have spent a decade putting taxes up.

    As you often say, if you want to reduce the deficit you need to cut taxes.

  8. Rob
    Posted March 25, 2010 at 11:50 pm | Permalink

    Indeed, how would a public pay freeze "annihilate front-line services". It wouldn't! But Labour's paymasters aren't keen! It must be reiterated constantly that there wasn't one year in the "nasty, same old, evil" Tory years (1979-1997) when public sector spending was cut. Of course, now, we are so indebted that cuts are inevitable; please Mr Brown, stand up and collect your award!

  9. Mark M
    Posted March 26, 2010 at 12:17 am | Permalink

    Sorry to double post, but I wondered if you can help me understand the budget.

    According to Table C3: Current and Capital Budgets, net debt at the end of 2009-10 is estimated to be £776.6bn, up £159.6bn on the previous year end. But net borrowing is estimated to be £166.5bn. So why does the debt not increase by the same amount as the borrowing?

    I only ask as I'm interested to look at the figures to work out how long public expenditure would need to remain frozen for to get debt back to 40% GDP.

  10. Javelin
    Posted March 26, 2010 at 6:23 am | Permalink

    Yes but Labour want non-jobs.

    The more non the job the less non the vote.

    • alan jutson
      Posted March 26, 2010 at 10:39 am | Permalink

      Javelin

      More State jobs, more State benefits, more votes.

  11. Stuart Fairney
    Posted March 26, 2010 at 7:34 am | Permalink

    As a matter of interest a few years ago, I sent my local council a FOI request and it transpires that they employed about 100 more people two or three years ago than they did in the late 90's. From about 500 to 600.

    Now quite why they need to employ more than about 25 escapes me, but combine empire building internally and the "Chief Exec" deciding that bigger is better at justifying the salary with the incessant need of politicians to meddle and 'take action' in all manner of nonsense and you have the answer.

    Ron Paul makes an interesting point in one of his books about public sector bureaucracy*. I believe it is the city of NY who employ about 5,000 clerical workers to support their schools, where as the catholic diocese who educate only about 20% of the number the city educate, do it with clerical support numbering…..

    …. 27 people.

    • Denis Cooper
      Posted March 26, 2010 at 9:59 am | Permalink

      Partly because local councils have the job of implementing a lot of the rubbish that comes from the EU, the volume of which has increased and is still increasing.

      According to this on the website of the Committee of the Regions:
      http://www.cor.europa.eu/pages/PresentationTempla

      "… around three quarters of EU legislation is implemented at local or regional level …".

      As EU Regulations are directly applicable many of them by-pass the UK Parliament altogether, but what isn't clear to me is what proportion of them come to local authorities direct from Brussels without even passing through a central government.

      By which I mean in this context not just the UK government as far as England is concerned, but also the devolved governments.

      • Stuart Fairney
        Posted March 26, 2010 at 8:23 pm | Permalink

        That is a very well made point which shows perhaps, the hidden costs of the EU.

  12. GeoffH
    Posted March 26, 2010 at 9:31 am | Permalink

    Of course those 'Thatcher cuts' are part of Labour mythology now and have become accepted as part of the National mythology.

    These are 'facts' that are now unlikely ever to be amenable to correction.

    It's rather like the view, propagated by the Left from the '40s onwards that the 1930s were a terrible decade of unemployment, misery and economic failure. A view so strongly accepted that, in part, was responsible for the '45 Labour landslide. And even today, Peter Mandelson has used the meme as an attack on current Conservative ideas and policy.

    However, the 1930s were rather a good decade with rising living standards, economic recovery, technological development (how else did we get the Spitfire, the basics for radar, television etc) rising home ownership, the beginnings of consumerism (delayed, again, for the return of a Conservative government of the '50s) and the emergence of much wider and deeper middle class.

    Both these Labour mythologies are an illustration of how Conservative thinkers, policymakers and supporters have to battle against accepted the 'wisdom', which is almost always misplaced but is never displaced.

  13. Brian Tomkinson
    Posted March 26, 2010 at 10:16 am | Permalink

    I wondered how long it would be before the spectre of Margaret Thatcher was brought into the discussion. If only she were in charge now we would see some clear leadership. The concentration on discussing (actually failing to discuss) the reduction in the deficit is failing to highlight the current and rising debt and the increasing burden of debt interest payments. Reducing the deficit as indicated by Darling (but without any proper plans to do it) will result in a virtual doubling of the current colossal debt of £776 billion to £1.4 trillion by 2014/15! The cost of interest will rise to £63 billion per annum in 2014/15. People are being lulled into a false sense of security by Labour. The Conservatives have so far been too timid and frightened of saying the wrong thing to get a clear message across. Perhaps, now that the polls show that by so doing they have virtually forfeited the opportunity to take office, they will find the courage to fight to save this country from ruin. Perhaps re-hiring Saatchi will help to get the message across to the electorate.

  14. Iain
    Posted March 26, 2010 at 10:51 am | Permalink

    Unfortunately this is the result of the Conservatives being to feeble to defend their record and allowed the Left, BBC and all, to spin their myths.

  15. Posted March 26, 2010 at 2:02 pm | Permalink

    I must admit I was unaware of those figures. The BBC anyway, with a legal duty towards balance (if not to impartiality) should retract such claims. Of course they won’t.

  16. Javelin
    Posted March 26, 2010 at 2:11 pm | Permalink

    Interesting interview with Alan Greenspan just now on Bloomberg TV. He was worried about fiscal problems in the US. He made a point that they ‘can’t cut’ he quoted some important spending (C17 or something) that they couldnt even cut. He also said they are spending more than their assets. This implies rising taxes, unless their is surprise growth spurt. He hinted at a rising “consumption tax” and that would hit growth.

    I can see strong growth in the US – because their economy has less red tape. But their debts are huge and their spending (according to Greenspan) is fixed at leats for the next few years (including benefits), and going up because of medi-care. So I think the US is in a bit of a straight jacket.

    In the UK we have the luxury of too much spending – so we can cut. So we are in a better position than the US. But really we need to cut red tape and job disincentive benefits which are a double wins. But I think the UK must start to cut costs in a way that will increase growth asap because the growth will raise taxes to pay the debt off. So cut now and cyclical restricting spending now and cut structural fiscal spending in 2 years, but cut cleverly. We need to get into a positive cycle.

    Meanwhile the Chinese are hinting that they will let their currency rise in a controlled way – pushing up inflation up in the UK.

  17. Bill
    Posted March 26, 2010 at 2:35 pm | Permalink

    Knowing that you are walking into the “Satanic Nest” I would have thought that senior Tories would be prepped for the trick questions!

    Time and time again I watch limp or flaccid answers to these questions!

    Where would your savings be? How much? They meekly say that as no spending review has been done, no figures can be given!

    Wrong answer! The Conservatives should make it abundantly clear that no contract signed by Labour will be legally binding on a new Conservative Government! There is no such thing a penalty clause in English law. Only justifiable damages. Any contract signed for frivolous or non-core government business will be terminated. Make that known now! That will stop any scorched earth policy

    Call the “Deficit” what it is “Overspend” let the debt be debt! Bring it into clear focus that we as a nation are in deep financial trouble and the QE was nothing more than a money printing exercise to buy the governments own debt!

    Immigration if you are here illegally you will be deported! If you entered without a passport that is a criminal offence! You will be prosecuted!

    Stupid laws that criminalise ordinary people will be repealed! The Police are not social workers that are not mentors! They are not going to ride around arresting photographers for taking pictures in public places under section 44 to boost their arrest rate! Things will change!

    Stop trying to keep interest groups happy who shout loud and represent no one!

    Get some backbone for your colleagues!

    • waramess
      Posted March 27, 2010 at 10:23 am | Permalink

      ….and perhaps they should appear as certain of their plan to resolve the crisis as Brown and Darling assure us that they are of their plan.

      Maybe Cameron and Boy George are not very sure, but to appear as if they are not leaves the voters with a dilemma: to vote Brown in despite the mess he has made or to vote Cameron in, despite the lack of certainty of what to do about the mess.

      The perfect recipe for a hung government

  18. waramess
    Posted March 26, 2010 at 7:18 pm | Permalink

    This is abject nonsense as you will live to see if you get a chance at running the country.

    Margaret Thatcher was fortunate to have a second line option of de-nationalisation in order to fund the economy but the first line hope was always to cut public spending, because it was seen to be the potentially the quickest.

    You were in Margaret Thatchers inner team and so you must have known this.

    This time round there is no second line option

2 Trackbacks

  1. By cocorosie – armageddon « Finance Blog on March 25, 2010 at 11:14 pm

    […] Of course Labour will cut much more than Margaret Thatcher: Labour … […]

  2. […] This post was mentioned on Twitter by Ross Barker and G Llewellyn-Stevens, Charlotte Vere. Charlotte Vere said: Ha ha – I take back my previous Tweet – Thatcher didn't make cuts! John Redwood points out spending continued to rise http://bit.ly/cEe8MD […]

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    John Redwood won a free place at Kent College, Canterbury, He graduated from Magdalen College Oxford, has a DPhil and is a fellow of All Souls College. A businessman by background, he has been a director of NM Rothschild merchant bank and chairman of a quoted industrial PLC.

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