Is the deficit down by a quarter?
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.