Thatcher's "axe"

The Observer reports:

[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."…
Clegg pledges: "We're going to do this differently. We're not going to do it the way we did in the 80s."

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.
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. 

Comments

[Shuggy]

"This raises the question: why do we have this image of Thatcher as being a mad axe-woman?"

Yeah - the story in Reagan's America is quite similar. Part of it is, I reckon, Mark Twain's observation that if you give a man a reputation as an early riser, he can sleep til noon. Give a politician a reputation as a fiscal conservative, then he or she can spend as much and borrow as much as they like. [The story with inflation is similar too, no? Inflation didn't reach seventies levels under Thacher but did it not get to around 20% at one point? Contrast and compare with the Blair/Brown years.]

Also I've wondered if part of it is that Thatcher was disinclined to disabuse people of this misconception - being rather fond of the hard-woman reputation, herself?

[Rob]

I thought it was odd/significant that Clegg used the term "folk memory", which implies he does know that the memory isn't quite the truth. As for the difference now, I agree - the scale of today's cuts will be bigger than those (such as they were) in the 1980s, although we are starting from a much higher base level of public spending. The difference Clegg hopes to make, I guess, is to ensure that cuts are as "gentle" as possible, in that they fall upon services that won't be missed much.

[Matthew]

It might, as Clegg said, matter what the money was spent on. Unemployment benefits you mention (and I think is an important factor) but also perhaps defence spending (although I know the story of thatcher and defence spending also is partly a myth) etc?

[ad]

Clegg is clearly being misleading, if not frankly lying. I wonder if this is altogether wise.

If Cameron says that, "These cuts are harsh, but necessary due to the lousy mess we inherited", he might be believed. After all, the cuts are necessary, and will certainly be harsh.

But if Clegg claims that, "These cuts will be nothing like as bad as those in the 1980s", and they are in fact far worse, people might never forgive him.

[pablopatito]

Norman Lamont was interviewed on 5Live this morning about this issue. He said the difference is that in the early Eighties the Tories made massive cuts to nationalised industries like coal and steel, which had a disproportionate effect on the North, particularly Clegg's Sheffield constituency. The cuts this time will be less localised, and therefore less savage, and this is the point Clegg is making.

[Gaw]

I think Pablopatito is on the right lines. That combined with the ultra-high interest rates of the early '80s, which did a lot of 'cutting' if not of public spending.

[Alex]

"Also, I've been a bit generous with the figures. I've excluded public sector investment"

In other words, you were lying when you started out this piece.

Also, as pablopatito said, Clegg wasn't talking about the level of the cuts, he was talking about their distribution. We already know the cuts will be worse than Thatcher's - all three potential Chancellors stood up in front of a Channel 4 audience and said so.

And really, you can't make the claim that "it wasn't quite like that" when this post doesn't show that. Look at all the things you say in the penultimate paragraph. Those are quite substantial points against the view that "it wasn't quite like that".

[BenP]

"Progressive cuts".

Clegg's remarks are doubly offensive; the rich don't use public services so won't be affected by cuts and double up by avoiding paying tax that could be used to pay down the defecit. Obviously it's also an insult to the intelligence.

[guthrie]

Not being an economist I have no idea where to look to find out public sector investment during the last 30 years. I've tried the ONS online, but they have nothing. Does anyone know what the figures were? It would be interesting to compare them.
I am also under the impression that public services did need a lot of capital investment to make up for years of neglect, but Brown chose the most expensive way of doing it.

[bill j]

Also its because Thatcher did not limit herself to attacking the public sector but smashed up the private sector too.
This time round there's very little of a private sector to smash up.
The other point about it is that we still need to see how much of this is rhetoric, exaggerating the pain so that when they only deliver 80% of the cuts they can be credited with letting us off their entirety.

[Glenn]

Many more public services are now contracted out to private sector delivery than they were in the 1980s. Will be interesting to see how public expenditure cuts will impact on private contractors...

If they cut as hard as the rhetoric suggests, then we're into a double dip recession. Another quarter of export contraction will also help nudge us there. 500,000 public sector job cuts is a helluva lot - are the transitionary (e.g. redundancies) welfare costs (new claimants etc), and indirect spending impact in local economies etc worth it?

We're already seeing capital investment being slashed on things like transport. So we're taking this creaking transport system whose capacity is lagging behind demand and cutting it back more?

My fear is that we're back to the shabby dilapidated country with high unemployment and severe social problems that we were in the 1980s and early 1990s.

Emigration never seemed so attractive.