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December 01, 2012

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Gerard O'Neill

I can't vouch for the Daily Mail or ONS, but according to Eurostat social spending in the UK was 28% of GDP in 2010 (down from 28.9% in 2009):

http://epp.eurostat.ec.europa.eu/cache/ITY_PUBLIC/3-27112012-AP/EN/3-27112012-AP-EN.PDF

Left Outside

I was convinced until second reading you were responding to a particularly surprisingly clever Dean Gaffney tweet.

Shinsei1967

"Declan Gaffney has pointed out that the Daily Mail's claim that benefit spending accounts for 24.2% of "Britain's total income" is as truthful as we'd expect from the Mail - which is to say, utter bollocks."

Well, utter bollocks is a bit of an exaggeration.

The 24.2% is the amount of total benefits spending (incl pensions) as a percentage of government tax revenues.

Now I wouldn't use the phrase "total income" but it was fairly clear what the author meant.

Declan Gaffney

Gerard- Eurostat 'social spending' is not the same as benefits spending, obviously. Latter is DWP benefits + HMRC benefits, about 13% of GDP.

Shinsie 1967 24% is percentage of public expenditure, not tax revenues (cos we have a deficit, if you remember). As public expenditure is not and never has been 100% of national income, the Mail article was simply fallacious, though I think the author probably just made a mistake.

Simon

The psychology of how articles against deficit spending like this work is interesting to me. It seems that publications like the Daily Mail are encouraged by the rich to make the middle class hate the poor.

Keith

Simon is correct. What everyone needs to remember is that mailly graph type articles are lies intended to comfort the comfortable. The owners of the mail live as tax exiles in France in a Château as they are so patriotic. Which is why they hate the EU and Johnny Foreigner. Why they choose to live among the foreign types they affect to hate they do not explain. May be they like to live nears the people who vote Front National to relive the happy days when they told people Hitler was a good chap much misunderstood.

You need to look at the facts rather than the hypocritical codswallop.

Sam

Declan: Trying to claim that Working Tax Credit is somehow qualitatively different from Income Support because it's administered by HMRC rather than DWP is nonsense. The fact that a benefit is presented as a tax credit rather than a cheque is a completely artificial choice.

Declan Gaffney

Sam: what's your point? I said the figure for 'welfare' spending included DWP benefits and HMRC benefits. What is the 'claim' you're accusing me of making?

shtove

Tax credits included?

Declan Gaffney

HMRC benefits are tax credits and from 2003/4, child benefit

Penny L

Most benefit spending becomes someone else's income within a few days, often within the same community. Disability benefits and pensions are increasingly being claimed back as charges for council services, again providing local jobs for people who then pay tax. They are not enriching claimants in any sense. Means testing is expensive and often leads to under-claiming. Income tax should be the main way of funding services and leaving the poorest with as much as possible

Nigel Sedgwick

Oh dear; statistics is so difficult, and government statistics is even worse.

I have two doubts about Chris's figures, and provide links below to an alternative source with additional explanation.

My first doubt is that Chris's graph of "total welfare" does not seem to acknowledge the change is classification introduced by the UK Government in 1993. In this, after 1993 pensions (I assume the state pension) were accounted for separately; this led to a sudden drop in the government expenditure category of "Welfare". This is shown in both of my linked plots as the replacement of some of the blue bit by the red bit.

My second concern is the normalisation as a percentage of GDP. Although this is a common normalisation, and has something going for it, it confuses the issue somewhat when there are marked changes in GDP in booms and recessions. In addition, all government spending adds (one for one) to GDP; thus any change in welfare etc appears in both the numerator and denominator of the %GDP calculation. This is because GDP classifies all government expenditure as production, irrespective of how productive it actually is.

The links to the graphs follow, with my additional annotation (as the linked website unfortunately has problems with the titles for its vertical axis). In both cases, welfare expenditure is in blue and pension expenditure is in red, and they are stacked so the sum is the top of the coloured portion, both before and after the split in 1993.

Welfare/pension spending from 1950 to 2012, as % of GDP: http://www.ukpublicspending.co.uk/spending_chart_1950_2012UKp_12c1li011lcn_40t00t

Welfare/pension spending from 1950 to 2012, normalised to be per head of population and inflation indexed (to 2005 £): http://www.ukpublicspending.co.uk/spending_chart_1950_2012UKd_12c1li011lcn_40t00t

There is not a lot of reduction during the period of the last Labour government in the second plot: for either "welfare" or for the sum of that with "pensions". It is likely that at least some of the reduction in welfare payments over the post-1993 period was down to different means testing of some elderly people, after a larger than inflation increase in the state pension.

Best regards

chris

@ Nigel - my figures do include state pensions; they're the largest element (£74.2bn of £158.5bn of spending in 2011-12)
The figures exclude tax credits, but I don't think those who whine about the benefits bill do so because they think tax credits are too generous.
I take your point about GDP. But this cuts both ways; surely the fact that the share of benefits in GDP isn't astronomical even when GDP is depressed tells us something.

Sam

Declan: I apologise: lack of sleep caused me to read your Dec 1 comment exactly backward. I see now that you do explicitly make the point that some benefits are routed through HMRC and the tax system.

Declan Gaffney

Chris I think HMRC benefits are important part of story- some tax credit spending is substituting for earlier DWP benefits (family credit, child additions to out-of-work benefits) so we get an artefactually exaggerated fall in DWP spend in late 90's; more important though is transfer of child benefit to HMRC in 2003/4. It remains the case that spending fell sharply from mid-90's and then had longest period of stability ever 2000-2008. It's a pain that government doesn't produce an integrated series for this.

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