Understanding the difference between the deficit and the debt: the smaller one is going down but the bigger one is still rising
At this week’s Conservative Party Conference, the Prime Minister David Cameron told delegates and voters that the country has been “paying down its debts”. Is that true? Is it heck. At best, it was misleading; at worst, it was an outright fib.
Let me explain briefly …
The deficit is the difference in any given financial year between what the Government raises in taxes and what it spends in public programmes. The present government has reduced the deficit by around a third but, at the beginning of its term of office, it promised to eliminate the deficit entirely by now, so it is still less than half way to its target.
Now the debt is something different entirely. This is what the country owes in total, essentially as a result of past deficits. In a letter this week from the Chair of the UK Statistics Authority to the Labour Party’s Shadow Chief Secretary of the Treasury, he sets out that in June 2010 debt was £997.4 billion (equivalent to 64.0 percent of Gross Domestic Product) and in August 2014 it had risen to £1,432.3 billion (equivalent to 79.1% of GDP).
We need more truth-telling in politics.
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