It's The Economy, Stupid: Economics for Voters

by Vicky Pryce

Figure 9 shows how the size of government has varied in the UK since 1979, when the first Thatcher administration embarked on a period of austerity to reduce its size. We can see that during the 1980s the size of government dropped from just under half the total value of economic activity (total managed expenditure) to around 39 per cent at the end of the decade. The recession of the early 1990s raised government spending back to 43 per cent of all economic spending in the mid-1990s (as unemployment benefits and other expenditures increase during recession), and then we see a fall to 35 per cent at the end of that decade. A rise back to around 40 per cent just before the start of the present recession reflects the more redistributive policies of Labour governments in the early noughties, and the present recession returned the size of government back to a level in 2010 similar to that at the beginning of the 1980s.