The Welfare State and the Crisis

Abstract

The growth in the welfare state here and abroad came to an abrupt end in the mid-1970s. Public expenditure was cut back and, within this total, social expenditure suffered the most. The process began in Britain with the cuts in planned future expenditure announced in May and December 1973, which together lopped off £1700 million from expenditure in 1974/5, of which about £400 million was from social-service spending. The White Paper on Public Expenditure published in January 1975 reduced the planned growth in several programmes, but the overall trend was still upward. Shortly after-wards, however, the Chancellor announced in his budget statement in April 1975 a further cut in planned expenditure of £1.1 billion for 1976/7, of which about £335 million fell on the social services. The 1976 White Paper, published in February, sharply reduced planned growth from 1977/8 onwards but raised it somewhat for 1976/7. There then followed two more rounds of substantial cuts in July and December 1976 totalling £2 billion, which for the first time planned an absolute drop in total state spending in 1977/8 and the following year.¹ The official aim, according to the 1977 White Paper, ‘The Government’s Expenditure Plans’, was to reduce the total share of state expenditure in GNP up to the end of the decade. Using the Treasury’s new method of computing public expenditure, it was forecast to fall (as a percentage of GDP at factor cost) from 51 1/2 per cent in 1975/6 to 48 per cent in 1978/79.²