Public Expenditure In The UK Since 1976: Still the 'Private Government of Public Money'?
| Date | 01 January 1988 |
| Author | Colin Thain |
| Published date | 01 January 1988 |
| DOI | 10.1177/095207678800300103 |
| Subject Matter | Articles |
Public Expenditure In The UK Since 1976:
Still the ’Private Government of Public Money’?*
Dr Colin Thain, Department of Politics, University of Exeter
Prof. Maurice Wright, Department of Government, University of Manchester
*Note: The authors are grateful for the Nuffield Foundation’s support of the
research on which this article is based. It is a revised version of a paper presented
to the PAC Conference at the University of York, 7-9 September 1987.
Abstract
This article draws attention to the increasing importance of the politico-economic
context within which public expenditure decisions are taken; briefly outlines the
main changes in the system for planning and controlling public expenditure since
1976; and discusses why Heclo and Wildavsky’s model of the policy processes
stands in need of revision.
Since 1945 public expenditure has played a key role in economic policy. In the
heyday of the Keynesian consensus, adjustments to the total of public spending
and specific changes to key items within that total (for example public sector
investment) formed an integral part of an active fiscal policy. When the economy
was depressed the pump was primed; when the balance of payments or sterling
gave policymakers cause for concern, or when the economy was ’overheating’,
spending programmes were pared back. Similarly when governments became
concerned about growth and the need to ’plan’ the economy, public spending
was to take the lead in encouraging the private sector to increase output. In
political terms too, levels of spending became highly significant. Party competition
in the 1950s and 60s ,centred upon the issue of who could ’deliver’ the most in
terms of welfare spending. The ability of government to ’touch the accelerator’
through public expenditure increases led to academic interest in the ’political-
business’ cycle as General Elections coincided with higher real income. The
Thatcher years were no exception to this; expenditure plans were boosted prior
to both the 1983 and 1987 Elections.
The period after 1976 saw changes in the economic and political role of
spending. After 1975 public expenditure totals were not predicated upon assump-
tions about the achievement of full employment: containment actually became a
goal of policy despite rising levels of unemployment and falling output. The advent
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of the first Thatcher administration consolidated this change: public spending
was seen as an economic evil, reductions in its level would lead to lower inflation
and financial stability. The Medium-Term Financial Strategy unveiled in 1980
codified its new place in the order of things: medium-term reductions in total
spending were deemed necessary for the achievement of a whole set of objectives,
including reductions in monetary growth. (Thain, 1985) It was not that public
expenditure ceased to be economically important, but that it was no longer to have
the lead-part in macro-economic policy, rather it was to be in the supporting cast
helping to assure more important monetarist goals. The Thatcher years also show
how extraordinarily difficult it was to cut the real level of spending. Despite
political resolve, strong leadership, and seeming public support for action against
the ’bureaucracy’ of government, total spending has carried on rising. Of equal
significance, the elections of 1979, 1983 and 1987 highlighted how much of a
constraint public support of the NHS and other key aspects of the welfare state
had become on a government of the radical right.
Both policies for growth and restraint have been frustrated by the tendency
for expenditure to rise faster than intended or anticipated: it appears to have a
momentum independent of declared policy. In seeking the explanation for this
phenomenon there are many diverse and complex elements. Besides the aims and
constraints (and opportunities) provided by an international economic system,
which since the early 1970s has brought the economies of the industrialised
countries into a state of increasing interdependence; besides the familiar politics of
expenditure opportunism and expediency, there emerged in the mid-1970s the less
familiar politics of cuts and squeezes, elevated to ideology and doctrine in the ’new
right’ politics of the Conservative Governments after 1979. In turn, the supporters
of these ideas were confronted and challenged by ingrained societal attitudes and
expectations nurtured by more than two decades of growth-politics, and articulated
through elected representative bodies and their bureaucracies, and organised groups
representing special and general interests and clientele. The resultant compound of
the mix of these multiple, diverse, changing and conflicting elements - ’public
expenditure politics’ - emerged from policy processes which themselves were
subject to change, and which reflected a political/administrative culture affected
by and affecting those elements.
While all of these contradictory factors need to be analysed, our main concern
is with the policy processes and culture through which policies for public expendi-
ture are mediated and finally determined. Some may still argue that this ground
was well-worked by Heclo and Wildavsky (1974; 1981) and that further research
will add little to their classic account. To that we would reply that it relates to the
period of the early 1970s, roughly 1970-72, and that in the past fifteen years there
have been such changes in economic and political doctrines, in ’ideas-in-good-
currency’, as well as in the institutions and processes of public policymaking, that
their interpretation of ’private government’ stands in need of substantial modifi-
cation. Besides, that interpretation was a singular one; from the lack of competing
knowledge it has remained largely unchallenged. Even at the time of writing it
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paid little attention to the ’economics’ of public spending. While in its concern
with ’idylls of the constitution’, the study aspired to a general critique of the
centre of British government, boldy extrapolating from the particularities of
Treasury-departmental spending-relationships evidence for the weakness of collec-
tive decision-making.
The remainder of this article provides a research prospectus of those issues and
questions which have to be confronted in order to test the proposition that the
Treasury has been unsuccessful in both the planning and control of public expendi-
ture since 1976, and arguably since the system was evolved from the Plowden
Report of 1961. First, we briefly analyse the trends in public expenditure, and
then discuss the politico-economic context in which public spending decisions are
taken. We then discuss in some detail the changes which have occurred in PESC,
and, in particular, focus upon cash limits and cash planning. Finally, we look at
the policy processes and question the continued validity of the model constructed
by Heclo and Wildavsky.
TRENDS IN PUBLIC EXPENDITURE, 1976-87
The first point to note is that it is becoming increasingly difficult to interpret
public expenditure statistics in order to measure and verify what has happened,
and to determine ’success’ or ’failure’. This is particularly the case since 1982,
when volume figures were replaced by cash. Since then the Treasury has resisted
the Treasury and Civil Service Committee’s repeated plea for the inclusion of
comprehensive cost term figures. Since 1983 the trend of using the sale of public
sector assets (which by convenient convention count as negative expenditure
rather than revenue) to offset rises in the programmed expenditure, has also dis-
torted the planning total figures used by the Treasury to measure performance. In
addition, the planning total excludes net interest payments, thereby giving the
appearance of greater spending control than is the case. One calculation suggests
that the raw planning total had grown by 7.4 per cent in real terms between 1979-
80 and 1986-87. (Ward, 1985, pp.52-3) If the planning total is adjusted to include
asset sales, classification changes, the abolition of NIS and net interest payments, a
higher figure still of 13.1 per cent can be deduced. Similar problems have been
created for the analyst in trying to assess the success of the Government in achieving
public expenditure/GDP targets. Not only do asset sales distort the figure, but the
Treasury has begun to use General Government Expenditure rather than the
planning total as its comparator, which makes analysis over time problematic.
Public spending statistics are not the only factors to change over time: the
Thatcher Governments have also changed the objectives of public expenditure
policies. The 1979 Public Expenditure White Paper placed public expenditure at
the heart of Britain’s economic decline. (H.M. Treasury, 1979, p.l) In 1980,
the Government was committed to cutting total spending in volume terms, in real
terms, and as a proportion of GDP over the four year period to 1983-84. (H.M.
Treasury, 1980) By 1984 this had been changed to holding ’spending at broadly
its present level in real terms’. (H.M. Treasury, 1984, p.20) Subsequently policy
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switched to a commitment of gradually allowing public expenditure to fall as a
proportion of GDP. And the 1986 Autumn statement implied a further modifi-
cation of holding public spending steady as a proportion of GDP. In fact the
1986 Autumn statement was hailed by the Treasury and Civil Service Select
Committee’s advisers as the final admission by the Government of its failure to
achieve its objectives. The statement was...
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