Public Expenditure and the British Economy 1996

In 1975, inflation in Britain reached 25 per cent, public sector borrowing was 10 per cent of GDP and public expenditure was 48 per cent of GDP. Robert Bacon and I summarised our apprehension of what we then regarded as the very real danger of complete economic destabilisation, in perhaps the most significant paragraph in the ‘Declining Britain’ articles which we published in The Sunday Times in November 1975 and in our subsequent book, Britain’s Economic Problem: Too Few Producers: As the unemployment figures rise, extra jobs can only be provided outside industry and only the government can provide jobs where there is no prospect of profits. Hence, governments are tempted to create still more jobs in the public services, and as they raise taxation to pay for them, in due course company profits and workers’ living standards are further squeezed with the result that there is still more pressure against company profits in industry. In consequence industry invests still less, more industrial workers become redundant and still more workers need to be fitted into the public sector. This ever-accelerating spiral leads nowhere except to total economic collapse and it is so deep-rooted in structural maladjustment that it is in no way amenable to tinkering. (1976, p. 24)