December 5, 2014 by Paul Goldsmith
UK budget deficit as % of GDP
When you have to rely on the public not understanding Economics to make your point, you are really grasping at straws. So glancing at the many tweets from Labour figures, in addition to comments to the press and even in the Commons Chamber, about the Coalition’s management of the economy I have reason to be concerned for Labour.
The context is that the Coalition, rather eradicating the deficit (the amount that government spending exceeds tax revenue) as they promised by the end of this Parliament, haven’t even managed to halve it. This means that whilst in 2010 it was £168bn, it is now about £90bn. This means that £90bn is being added to our country’s debt every year. When the Coalition took over, our national debt was £1trillion and now it is £1.5trn (that is 1500000000 that we owe to our creditors), which means that we are paying about £50billion a year in interest on our debt, more than we spend on education. So there is a problem.
But where I think Labour is going wrong, and inviting ridicule and easy answers from the Conservatives in particular, is how they are attacking them for not meeting their deficit targets. It is hard enough for Labour to gain credibility on the economy having run up the deficit that they did (specifically for arriving at the recession in 2008, however it was caused, after 15 years of solid growth, without managing to create a budget surplus). It is hard enough for Labour to gain credibility with little explanation of how they will balance the books in the future. But when they use the tactic they used today, it really does make it too easy for the Conservatives to come back.
So what was the tactic. It was to point out all day that the Tories had ‘added to the debt’. Yes, fine, they have. But they had to get the deficit down from £168bn!This means that even if the Tories had managed to get the deficit down to zero as they thought they would, they would still have added to the debt. If they had achieved that feat, Labour would be in an almost impossible position now. But Labour instead are, whilst trying to point out that the deficit hasn’t come down as promised, are simply reminding us every time they mention the debt that they put us in £1trn of it themselves.
The Conservatives’ answer to this is pretty simple: “We led this economy into recovery. We started to get Labour’s deficit down. Every step of the way Labour has opposed the cuts we have tried to make to spending. Imagine what the debt and the deficit would be had they still been in charge. Imagine what would happen if they were in charge again.”
So if I were Labour, I would stop this line of attack. Quickly.