[Nick Clegg’s] big promise to progressives is that the [public spending] squeeze will not be implemented with the savagery of Margaret Thatcher's axe swinging. "Our collective memory of difficult budget decisions all hark back to the harshness of the 1980s," he says. "That is our folk memory."…The problem with this is that our folk memory is defective. If we look at real current public spending (table C18 of this pdf), the Thatcher government cut overall spending in only year - 1988-89 - and froze it once - 1985-86.
Clegg pledges: "We're going to do this differently. We're not going to do it the way we did in the 80s."
Overall, current spending under Thatcher - from 1978-79 to 1989-90 - rose by 1.7% a year. This is only a smidgeon less than the 1.8% annual growth under New Labour’s first term.
We can put this another way. Between 1978-79 and 1989-90, current public spending fell from 38.2 to 35.3% of GDP- a drop of 2.9 percentage points, and that thanks largely to strong GDP growth in the late 80s. But between 1996-97 and 1999-00, it fell from 37.6% to 34.4%, a drop of 3.2 percentage points.
When Clegg says he’s going to do things differently from Thatcher, he’s right - he’ll cut overall spending by much more than she did.
This raises the question: why do we have this image of Thatcher as being a mad axe-woman?
Partly, it’s a contrast effect: under Thatcher, public spending did grow less than the 3.2% a year it grew under the 1974-79 Labour government. Also, I’ve been a bit generous with the figures. I’ve excluded public sector investment, which did fall under Thatcher. And because unemployment rose so much in the early 80s, some of the increase in spending was payment for failure rather than improving public services.
I can’t help but think, though, that it serves all sides to mythologize Thatcher as a great cutter. For “progressives” - God, I hate that word - it helps confirm her as a hate figure. And the right like to see her as a heroic free marketeer valiantly fighting statism.
But it wasn’t quite like that.