British general election (3): has the government really halved the deficit?
The election campaign has begun and already a controversial claim has been made by the Conservative Party.
The first Conservative election poster, due to be on billboards around the country, has slogans superimposed over a long straight road running through countryside, which is blended into a union flag. It lists the party’s achievements as being “1.75 million more people in work”, “760,000 more businesses” and “the deficit halved”.
But has the deficit really been halved? The deficit – the difference between what the government raises in taxes and spends on public programmes in a given year – will only have fallen from its peak of around £153 billion to an estimated £91 billion by the end of 2014-15. So, measured in straightforward cash terms, the deficit will only have been cut by around 41%.
David Cameron, the prime minister, and George Osborne, the chancellor, argue that the most natural measure is the reduction of deficit as a proportion of Gross Domestic Product which is a measure of the size of the UK economy. By this metric, the deficit has fallen from around 10% of GDP to 5% of GDP. The reason for this is that, with this measure, two variables are in play and the deficit has fallen arithmetically while GDP or outcome has risen arithmetically.
So, while the Conservatives have a case, it is a bit of a cheeky claim because most individuals would measure their debts in cash terms and not as a proportion of their income.
One more thing: it is fair to compare a claim with an intention. When the Coalition Government took office, it said in its first budget statement that it planned to eliminate the deficit by 2016. There is no way that the Government is on course to achieve this. And that’s a fact.
January 3rd, 2015 at 3:17 pm
I think Fraser Nelson has it about right, writing on the Spectator blog: