Who's got the biggest welfare state of them all?
The Chancellor, George Osborne, is making a speech this morning about Europe. In it, he urges the continent to reform economically, with a specific warning about its level of social welfare spending. “Europe,” he says, “accounts for just over 7% of the world’s population, 25% of its economy, and 50% of global social welfare spending.”
This made me curious about just how Europe’s members’ welfare states compare with other major economies around the world. The best source for the data is the OECD, and below is their measure for each country’s public spending on social welfare, as a percentage of GDP. There are, it perhaps goes without saying, all kinds of other definitions of what counts as social welfare spending, but this is, at least, a start. You can see that the Chancellor’s concerns are indeed borne out by the numbers. The biggest spender on social welfare is France, at 33% of GDP, followed by Denmark (30.8%) and Belgium (30.7%). Click on the chart itself to see a bigger version.
On this basis, Britain is where you might expect it to be: somewhere in the middle of the Atlantic, with social welfare spending (and these numbers are for 2013 by the way) of 23.8% of GDP, above the OECD average and above the US level of 20%.
However, what’s perhaps more telling is the fact that social welfare spending has increased in almost every country over the course of the past few years. The chart below shows the change in spending on the welfare state since 2005.
This is as you’d expect. When there’s a recession, unemployment and poverty rises, and the demand for the services provided by the welfare state tends to increase (plus absolute GDP falls, meaning the comparable proportion of welfare will always go up). It’s interesting, from this perspective, that welfare spending actually increased more in the United States between 2005 and 2013 than in the UK or many other European countries. Switzerland and Germany distinguish themselves by actually reducing welfare spending during this period.
Finally, since the Chancellor came into office in 2010, it’s worth seeing how welfare spending has changed in Britain and elsewhere since then, something shown in the chart below:
As this chart shows, welfare spending has fallen as a percentage of GDP during the coalition (it rose sharply between 2005 and 2010 due in part to Brownite reforms and in part to the impact of the recession). However, it has fallen far, far more in the most troubled eurozone nations, which have been forced into probably unprecedented reductions in their welfare states in order to conform with their bailout programmes.