From the TUC

Is the deficit down by a quarter?

08 Oct 2012, by in Economics

Pledge cards at today’s Conservative conference have been proudly proclaiming that the deficit is down by a quarter. Is it? The reality is not that simple. 

Firstly, the Government assessment depends on using ‘net borrowing’ data rather than ‘current budget’ data.  But the latter data series is a measure of the difference between government expenditure and income, and therefore arguably a better measure of the state of the public finances, while the former data series includes cuts to investment spending.

On the current budget measure, borrowing has only fallen by £15.6 billion, or 14%, over the period in question. The difference between the two measures is because investment (capital spending) has fallen by £24.2 billion (50%).

But the Government’s claim also rests upon comparing annual data for the financial year 2009-10 to data for the financial year 2011-12. This means they have ignored the most recent data for the current financial year. This is important, as more recent data show a deteriorating outlook. In their most recent economic review ONS say that “taking the current budget balance…the latest figures suggest that the deficit is rising again.”

If, by the Government’s preferred net borrowing measure, you use the most recent data (the 12 month rolling period to August 2012) and compare it to the financial year 2009/10, the deficit on the net borrowing measure is down by a smaller 18% since the financial year 2009/10 (adjusting for the removal of Royal Mail pension fund liabilities from the balance sheet).

By the current budget measure the picture is far worse. ONS show that in the latest rolling 12-month period, covering the months September 2011 to August 2012, the deficit by this measure has crept back up to nearly £108 billion. This is only £2.7 billion lower than borrowing (again using ‘current budget’ data) for the financial year 2009/10 (the date that the Government has used for the starting point of its analysis). By this assessment (to repeat, using the most recent data, and looking at the current budget rather than net borrowing data), the deficit has only fallen by 2% since the financial year 2009/10. And if you look at annual change (using the 12 month rolling period) on this measure, the deficit is up 9% on the year.

So, at best the most recent data show that the deficit on the net borrowing measure is down 18% since financial year 2009/10, by the current budget measure it’s only down 2% and on the same measure and on the year it’s up 9%. I look forward to seeing the next Tory pledgecard.

PS it is also worth noting that the Labour claim that borrowing is up 22% on the year is also accurate – over the financial year to date (so April – August 2012) the net borrowing measure (controlling for Royal Mail) is 22% higher than the same period 12 months ago.

6 Responses to Is the deficit down by a quarter?

  1. Ron Graves
    Oct 8th 2012, 6:08 pm

    So – the government is, for all practical purposes, lying.

    There’s a surprise.

  2. PipsToday
    Oct 9th 2012, 8:17 am

    I just recently came through a article “How Much Trust Should We have in Economic Data?” Source: http://economistsview.typepad.com/economistsview/2012/10/how-much-trust-should-we-have-in-economic-data.html same deficit issue is raised there as well. So, I think, it is not new in economics.

  3. Is the economy healing? | ToUChstone blog: A public policy blog from the TUC
    Oct 9th 2012, 2:25 pm

    […] Nicola set out in great detail yesterday the myriad of problems with the ‘we’ve reduced … […]

  4. James Oliver
    Oct 9th 2012, 8:53 pm

    Is the deficit down by a quarter? No but the number of disabled people dying each week in the UK as a result of government policy has more than doubled.

    According to ATOS and the DWP disabled people are healing very quickly. 73 disabled people are dying in the UK each week according to figures released by the DWP after a FOI request. At this rate all disabled people – who as we know caused the economic corruption erm ‘troubles’ that so hamper our great nation – will be dead soon and the government will save loads-a-money for themselves and their banker friends.

    Disabled people who were lauded at the Paralympics and found they had services unknown before – like ramps at train stations which are now being withdrawn of course – who add diversity and talent to our nation yet are abused and NOBODY says anything. I never see anything on this blog about disabled people. Is there a reason for that? Don’t disabled people – many who are voters – add anything to the UK economy? is it easier for them to die?

  5. Anthony Neal
    Oct 12th 2012, 1:17 pm

    I have epilepsy and this government took away my livelihood (I am a management accountant) by closing the company I worked for in 2011, despite it having saved for its customers (46 fire services) more than twice as much in one year as it cost to fund the company from taxation. No alternative employment was offered or considered. Letters, emails and phone calls went unanswered. I want to get back to work so I can support my family, but the conditions created has caused so much stress and worry I don’t know when this will happen.

  6. FactHunt
    Dec 5th 2012, 8:03 am

    Interesting, so we should follow the Labour policy of spending more?