Cameron, Thatcher and the Futility of Radical Retrenchment

Just a quick thought stemming from having re-read the excellent Thatcher and sons by Simon Jenkins and Dismantling the welfare state?: Reagan, Thatcher, and the politics of retrenchment by Paul Pierson. This is not an original point – indeed it is at the centre of arguments made by False Economy and other groups skeptical of the current agenda, but the point about Thatcher is made less often (indeed, most people still seem to buy into the idea that she significantly reduced expenditure; see Jenkins for a comprehensive dismantling of that) and the examples are interesting.

The cuts have hardly started to bite and the government is already realising how difficult it really is to reduce the total amount of public expenditure. Spending on mental health services has had to increase to cope with the immense stress and worry arising from people being laid off, having their benefits cut and a whole host of other injustices being inflicted on them. When the bulk of public sector job cuts hits us, the benefits bill will soar, as will spending on poverty relief programmes and other services that will have to step-in to mop up the consequences.

Thatcher had exactly the same problem. She came into office pledging to slash public expenditure and roll back the state but total public spending – and particularly social spending – increased significantly. She tried to cut unemployment benefits but all she ended up doing was pushing people onto Supplementary Benefit and various other assistance benefits that were activated when her cuts pushed people into lower income brackets. Not believing government should bear any of the financial or administrative burden of running industries, she sold most of them off but ended up creating unaccountable monopoly industries that required huge re-regulation, again at a significant cost. The Right-to-Buy scheme – apart from indulging Maggie’s belief that it was every Englishman’s duty to own his home and buying her millions of votes – was designed to free the state from the cost of maintaining a vast housing stock but all it ended up doing was deepening the need for Mortgage Interest Tax Relief and creating a huge shortage of social housing, meaning that governments ever since have had to shell out billions in Housing Benefit so that tenants can afford to pay extortionate rents.

In short, governments have a more or less fixed amount of spending required for society to tick over year after year. It can spend it in good ways and bad ways, efficiently or inefficiently, in ways that relieve human suffering or ways that extend it and in ways more or less consistent with one or another ideology. In the end, though, it will have to be spent. All Cameron can and will do is what Thatcher did: merely shuffle the same amount of spending around, and cause huge distress and disruption in the process.


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