Europe curbing welfare costs, Lilley says: Report says Britain spending more on benefits. Rosie Waterhouse reports

THE SPIRALLING costs of spending on health and social welfare has prompted most Western countries to introduce stringent cuts according to Peter Lilley, Secretary of State for Social Security, launching a report yesterday on international comparisions of spending.

The survey of the cost of 'social protection' and measures to curb it, produced by the Department of Social Security, shows a 32 per cent increase in actual spending per head of population in the UK between 1980 and 1990.

Annual spending per head has risen from 2,122 ecu ( pounds 1,644) in 1980 to 2,801 ecu ( pounds 2,171) in 1990. This is higher than the EC average spending which rose from 2,528 to 3,103 ecu ( pounds 1,959 to pounds 2,405) over the same period.

However, the amount spent as a proportion of the UK's Gross Domestic Product (GDP) has risen from 22 per cent in 1980 to just 23 per cent in 1990; less than the 26 per cent average across the EC.

Normally Mr Lilley's department produces statistics just for social security spending but the table comparing spending on social protection includes spending on the NHS, personal social services, social security and occupational pensions.

Spending on social security alone in 1990 was 10 per cent of GDP, while the pounds 80bn in 1993 is 12 per cent.

Mr Lilley said the report 'shows that most of our European partners are facing similar problems of rising costs despite having different social security systems.

'The underlying causes are ageing populations, social and labour market changes.

'EC countries in particular face tough decisons, as they are among the world's highest spenders.'

To combat this the Netherlands is reducing disability benefits, France is raising contributions people must pay, Italy is raising its pension age and Germany is proposing to reduce unemployment benefits.

Australia, Canada and New Zealand are moving from universal to targeted benefits and Sweden is cutting benefits.

Steven Webb, an economist from the Institute for Fiscal Studies, an independent think- tank, said: 'The department's estimates show spending as a share of GDP will not rise significantly by 2000.

'What everybody is talking about is how we will be spending billions more in future. But the economy is growing so we can afford to spend more.'

Donald Dewar, Labour's spokesman on social security, said: 'This document is part of a campaign to condition public debate. Mr Lilley's gloss on the statistics looks suspiciously like a softening up exercise - a hard sell for the hard right.'

Mr Lilley's use of statistics was 'very odd', he said. 'The minister is trying to take a message about social security spending from a very different base . . . which includes NHS costs. There is a need for rational debate but there is nothing here to support the wholesale assault on the role of the state favoured by Messrs Lilley and Portillo (Michael Portillo, Chief Secretary to the Treasury)'.

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