Press Story

Challenging the myth that higher social spending is incompatible with economic success, new IPPR Scotland analysis confirms that many European countries with high spending on social protection measures such as benefits, childcare and training, also sustain highly productive, innovative and dynamic economies.

Researchers found that countries like Germany, the Netherlands, Sweden, Finland, France, Denmark, Norway, Belgium, Austria and Switzerland spend much more on social protection per person than the UK and Scotland and have also had far superior economic and social outcomes sustained over the long run.

The UK has had lower GDP per capita throughout this past decade. Scotland’s GDP per capita, meanwhile, has been very close to the UK’s, and well below that of the 10 countries that the researchers focussed on.

This research demonstrates that high spending on social protection does more than just place a safety net for the economically disadvantaged; it helps economies to become more productive. For example:

Higher unemployment benefits give people the security and support to retrain, upskill and re-enter the workforce in a job that matches their skills, interests and expertise.
Measures like generous childcare investment enable high employment rates for women.
High spending on social protection can also encourage entrepreneurial risk-taking and help facilitate economic change.

The research shows that high-spending countries also perform well across a range of international indices of competitiveness and innovation. For instance, all the high social spending countries achieve a ranking in the top 25 nations in the 2024 Global Innovation Index, with six appearing in the top 10. Switzerland and Sweden fill the top two places.

Ahead of this year’s election, IPPR Scotland is urging the Scottish government to take learn from these countries and lead a renewed drive to build a national consensus on economic development. The next government should also examine ways in which spending can shift towards areas such as employability, childcare, and labour market support, that directly address both social and economic objectives.

IPPR Scotland director Stephen Boyd said:

“The experience of other countries shows – unambiguously - that it is possible to create a virtuous cycle between high social protection spending and economic dynamism. Scotland’s political parties should bear this in mind when developing manifestos and engaging in debate around this year’s election. The next Scottish government can and must build a new policy agenda. By focusing on areas like employability and childcare, we can tackle social challenges and boost the economy at the same time.”

Reacting to the report, Professor Patricia Findlay, Scottish Centre for Employment Research, Strathclyde University, said:

“This report is a timely reminder that there are no necessary trade-offs between economic growth and high social protection spending – and the many wider social benefits from the latter. The report carefully avoids a suggestion of causation between social spending and economic growth, though a positive causal relationship has some intuitive plausibility. The challenge, of course, is in the transition – what should Scotland do now to move from a vicious circle of low relative social spending and stagnant growth to a more virtuous circle present in other successful economies? There is no silver bullet, but the recommendations of investing in collective design of economic strategy, more active labour market policies and, crucially, stronger structures of social partnership and dialogue, would represent important steps towards better longer-term outcomes.”

AVAILABLE FOR INTERVIEWS:

Stephen Boyd, director of IPPR Scotland, and Dave Hawkey, senior research fellow, are available for interviews. Stephen lives in Glasgow and Dave lives in Edinburgh.

CONTACT:

Sukhada Tatke, media and impact officer at IPPR Scotland: s.tatke@ippr.org; 07901169121

NOTES TO EDITORS:

In 2023, GDP per hour worked was $73.7 in the UK, compared with $89.6 in Denmark, $89.8 in Belgium, $83.3 in Germany, $82.3 in the Netherlands, $92.5 in Norway and $85.2 in Switzerland. Every high-spending comparator country outperformed the UK on productivity, with the exception of Finland.
Social protection is a category under the UN’s Classifications of Functions of Government (COFOG) system. Its main components are support related to sickness, disability, old age, survivors of a deceased person, families and children, unemployment, housing and social exclusion. While it is largely made up of cash payments related to these issues, it also includes in-kind benefits such as childcare and employability support. Education and healthcare are not included in social protection, being represented under other headings in the COFOG system.
Scottish GDP was taken from the Scottish government’s Government Expenditure and Revenue in Scotland (GERS). We used the higher of the Scottish government’s estimates, which allocates to Scotland a geographical share of the North Sea.
Our estimate of international social spending is drawn from OECD data, and from GERS for social spending in Scotland. For the UK, we used data from both sources. While GERS and OECD methods have some differences, we compared Scotland to the UK using GERS, and the UK to other countries using OECD data. While social spending in Scotland is higher than in the UK as a whole (GERS), the difference is small compared with the differences between the UK and comparator countries (OECD).
IPPR Scotland shapes public policy in pursuit of a fairer, greener, more prosperous Scotland.