Budget: Brown and the ‘costs of failure’

A measure of the new world we are entering. Between this financial year and next there is a cash increase of £30.2bn in public spending. Of that increase, fully £15.7bn is going on interest payments servicing our newly ballooning debt.

The total interest payments of £43bn will be more than non-investment spending in the defence budget, and seem to remain at around 3 per cent of GDP for the foreseeable future.

Now Gordon Brown used to refer to that proportion of additional spending devoted to debt interest and social security as “the costs of failure”. The then-chancellor said at the time of the spending review in 2000 that:

“Our promise was to reduce the costs of failure – the bills for unemployment and debt interest – in order to reallocate money to the key public services.

“In the two decades from 1979 until 1997, rising debt interest and unemployment and social security accounted for 42 per cent of all extra public spending and that meant that 42 pence in every additional pound spent was not available to the key public services.

“In the coming three years, unemployment, social security and debt interest payments will account for not 42 per cent but now only 17 per cent of extra public spending.”

Well, between 2009 and 2011, according to table C9 on page 238 of the budget, the “cost of failure” in terms of interest costs (called central government gross debt interest) is 52 per cent.

If you add in social security costs of £6.2bn, then that failure cost reaches 72 per cent. Now the Treasury will argue that the timeframe is arbitrary, and that social security costs should not be considered a failure.

But maybe it just goes to show that the boomtime claims of the then-chancellor warranted a little more scrutiny.