David Cameron, talking about the Thatcher years earlier this week, remarked:
We never in the 1980s actually managed to cut public spending.
He’s right, of course. As this graph shows, public spending is one of the few things that can seemingly defy gravity. It continued to rise under a Conservative government that was ideologically opposed to the public sector.
When the figures are adjusted for inflation there are some real-terms decreases, although these are only small percentages.
According to the Institute of Fiscal Studies, the only significant real-terms cut in public spending in real terms was in 1988 -89, when it fell by nearly three percent, and that even this was due in part to a fall in unemployment and a reduction in social security claims.
Both Labour and the Conservatives have an interest in sustaining the myth of savage public spending cuts in the 1980s but, in truth, the cuts didn’t go very deep. The public sector didn’t get the increases it wanted and, in the odd year, it had to make do with increases below the rate of inflation. Over the long-term, though, public spending continued to grow.
At no point, even during the 1980s, was the public sector told that it was going to get less money next year. In fact, during the careers of all those currently of working age in the UK, there have never been cuts to the total amount of money the government spends.
It’s become a bit of a cliché to say that we are in uncharted waters but the public spending cuts being drawn up by politicians and civil servants really are unprecedented. Even the government’s relatively modest 9.3% real-terms cut over four years means that public sector organisations will have their budgets significantly reduced year by year. Many public sector managers will simply have to manage with less cash.
This has never happened before. Few people can imagine what a Britain with falling public spending will look like because they have never had to experience it. All but the very oldest among us have grown up in a period where the state did more and more each year and our expectations rose accordingly.
At the moment the public discussion of spending cuts is still theoretical. As psychologists say, we are intellectualising the idea of spending cuts but we haven’t internalised it yet. Most people seem to agree that a large reduction in spending is needed. I’m not sure that people will react quite so stoically when the axe falls on specific services that they use. The Education Secretary’s suggestions for cutting £2 billion from the education budget were greeted with howls of rage earlier this week. Cuts are fine in the abstract but there is a lot less enthusiasm for the real thing.
There is a similar sense of unreality among many public sector managers. Cuts might be discussed in executive team meetings but that doesn’t stop people going away and submitting an increased headcount budget for next year. “Sure, there will have to be huge public spending cuts in the future but next year my department needs more staff.” Like the rest of us, public sector workers have no experience of spending cuts and, for many, the reality hasn’t sunk in.
Whether the spending cuts start in 2011 or 2012 they will come as a massive shock, and not just to those who work in the public sector. Most of us have only ever known an expanding state. We have no idea what a contracting state looks like and what its impact will be on our lives.