Coffee House

Byrne’s cuts deception

25 February 2010

Liam Byrne has caught the Brown bug – not for raging in his underpants you understand, but for fiscal conceits. Tony Wright, the Public Administration Select Committee Chairman, called Liam Byrne (and the opposition as well) to task for misleading the public on the dire effects of cuts. Wright may be proved right: frontline services could well be decimated by the cessation of funding. But he missed Byrne’s deception. The indispensible Andrew Sparrow reports:

‘Byrne said that between 1985-86 and 1988-89 public spending as a share of GDP dropped by 8.6%. Between 2011-12 and 2014-15 it is forecast to drop by 5.9%.’

Because Treasury figures have been constantly out, the percentages, both of GDP and real terms departmental spending, are likely to exceed Byrne’s breezy optimism. The point was made by the IFS’ Gemma Tetlow in the wake of the Pre-budget report, which Fraser blogged about at the time.  Tetlow established that there would a cumulative 12.3 percent cut in non-ringfenced departmental spending over two years, and she stated that it would amount to 19 percent over three. Byrne plans for a fourth year, who knows what the cumulative figure will be on that? Small wonder the ghosts of Galtieri have risen again if the Defence budget faces a possible 25 percent cumulative cut. All in all, it’s a very long way from ‘Mr 10%’.

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  • Mints Needed

    Liam Byrne has got exceptionally bad breath.

  • Major Plonquer

    Just a quick note that I stayed up late the other night to watch the Spectator’s Coffeehouse National Debt Counter go through £777,777,777,777.

    Truly an historical event. I remember when my dad’s Morris Minor went through 100,000 miles (do we still have miles?). This puts that in perspective.

    Did anyone else feel as I did – that the hand of history has just picked my wallet?

  • Alex Sabine

    To focus on the substance of David’s post, let’s examine Liam Byrne’s claim and (a) whether it is supported by the facts and (b) whether it puts those facts in an appropriate context.

    Byrne’s claim that public spending (Total Managed Expenditure) declined rapidly as a share of GDP during the period he refers to is correct.

    The claim that it fell by 8.6% of GDP is also correct, but he (perhaps deliberately) gets the base year wrong: it fell by that amount between the 1984-85 and 1988-89 financial years (ie over a four-year period) not between 1985-86 and 1988-89 (a three-year period). Public spending accounted for 47.5% of GDP in 1984-85 and 38.9% of GDP in 1988-89. (It was 45.0% of GDP in 1985-86, so the decline from then to 1988-89 was 6.1% not 8.6%.)

    The more important point is the absence of any context. As John Moss points out, the mid-to-late 1980s was a period of high (indeed excessive) GDP growth, which was obviously conducive to a rapid fall in the spending:GDP ratio.

    Nonetheless it is true that public spending was controlled more tightly for longer from 1984-85 to 1988-89 than it was at any other point during the 1979-97 Tory government.

    As John says, it did grow in cash terms in each of those years – but then the last year when spending actually fell in nominal terms compared to the previous year was 1947-48!

    But inflation was high and rising during the late ’80s, so smallish nominal-terms rises represented real-terms falls; moreover, the booming (overheating) economy led to a rapid fall in unemployment and therefore the benefit bill.

    In real terms spending fell by 1.4% in 1985-86, grew by 0.5% in 1986-87, grew by 0.4% in 1987-88 and fell by 2.5% in 1988-89 – an average fall of 0.75% over the four-year period. (The biggest real-terms fall in a single year in modern times was 3.9% under Denis Healey in 1977-78, when the IMF cuts were taking full effect.)

    This period of spending restraint was followed by a pre-election splurge in 1991-92 and then recession-driven increases in spending in 1992-93, but that’s another story.

    What Byrne presumably didn’t point out is that GDP is highly unlikely to be growing as rapidly from 2011-12 to 2014-15 as it did in the late ‘80s, so spending will fall more slowly as a share of GDP for any given level of cuts.

    From what I can make of the government’s sketchy plans, it plans a real-terms freeze in total public spending over those four years. But because of spiralling debt interest bills, keeping the overall total steady will necessitate real-terms cuts in departmental spending.

    Since it also plans to ring-fence most NHS and education spending, and has no apparent plans to scale back social security spending or the scope of tax credits, the scale of cuts in all other departments will have to be large.

    This is a simple matter of fact that has been pointed out tirelessly by the IFS and others, but which this government (and Brown in particular) can never bring itself to admit in a straightforward way.

    If Byrne’s point is that spending cuts totalling 5.9% of GDP should be achievable, I agree; indeed more will be needed. But to base that claim on a comparison with the situation in the mid/late 1980s – when the economy had been out of recession since 1981 and was growing well above trend, tax receipts were pouring in and debt service costs were falling – seems pretty tenuous to say the least.

  • Victor Southern

    It is really about time that politicos stopped talking about GDP because they don’t really understand what it means. The GDP of a country can increase without any improvement in the standard of living which can go in the opposite direction.

    GDP per capita might have some more ring of truth about it but that might still be no measure of general wellbeing as the advancement may benefit heavily a small group – such as bankers whilst farmers became poorer as did the lowest paid workers.

    Again, all the providers of power and fuel might increase their prices by 100%. This would push up the GDP of the nation but make almost everybody poorer.

    In much the same way Gordon Brown has fooled most of the nation by talking about “investment” in schools, hospitals etc. Investment did not take place by the government – it was by private capital on the very lucrative PFP schemes. There was no investment by the government since they owned nothing. The fact is that they “spent”, and overspent, our money whilst the nation’s hard assets reduced year by year by sell-offs which converted capital assets into a source of revenue for current spending. That is known in commerce as disinvestment.

    The end fact is that the nation became poorer during these 13 years whilst the population rose by at least 10% and the national debt more than trebled.

  • Holly ……

    The IMF did not agree with Labour at all.
    They put out a document saying low interest rates and nothing too drastic = GOOD.
    Big government debt(deficit) =BAD.
    Osborne has continuously said he would keep interest rates low = GOOD and would not do anything drastic..also = GOOD.
    Osborne has been scorned because he wants to start cutting the big government debt,the big government debt = BAD
    cutting it =GOOD
    So Osborne is actually correct..going on what the IMF said in their document and the IMF is backing Osborne’s economic policy.
    See how the MSM turns everything on it’s head.
    The IMF document is from Jan 2010.


    Yes indeed Stephen
    Osborne is the single biggest reason why the Tories may not win an Election that should be in the bag.
    With Vince Cable as C of E they’d walk it standing on their head before breakfast.
    Can he be bribed to come over?
    A slush fund perhaps…..

  • Liberty

    Why is it high spending good and low spending bad? Driving down costs should be the aim. There is very little point in all of us in the private sector to relentlessly drive down costs only for it to be taken by the government who spend as much of it as they can.

  • John Moss

    Labour will use whatever construction of figures they can to make their plans sound plausible.

    85/6 – 88/9 was a period of excessive GDP growth cause by Lawson’s boom, especially after 87 when he shadowed the DM rather than continuing to bear down on inflation. I am not sure, but I suspect that public spending also grew in cash and quite possibly in real terms as well during that period, just proving that statistics can tell lies about anything.

    11/12 – 14/15 will be a period of slow economic growth as we struggle with Brown’s debts. Labour’s plans are wholly inadequate to deal with the debt and a 6% reduction over four years will be eaten up by increasing debt interest payments and then some, leaving us no better off.

    The man is a fool if he thinks he can bamboozle us with figures, even more of a fool if he thinks, right or wrong, we will believe anything Labour tell us.

  • stephen

    Why is the Coffee House flagging this not Osborne? The Boy seems more interested in making “key note” speeches that none of the media are particularly interested in[very little coverage]. The Mais speech only continues the debate of “when to cut” which Labour seem to be winning in the public’s eyes with more economists[than the Tories] and the IMF supporting Labour. Can’t Dave use some mature heavyweights like Hague and Clarke to lead the charge against Labour; leaving the Boy in his backroom where he is best. He neither looks or talks like an “Iron Chancellor”

  • 2trueblue

    dennis cooper. Having difficulty with Liebores figures? Go figure, be bothered. No one ever knows what Liebores figures mean, the devil is always in the detail.

  • denis cooper

    It would take too long to find out what Byrne meant by “public spending”, and what he meant by it dropping by x% or y% as a share of GDP, and I can’t be bothered.

  • Edward Palmer

    Err, front-line services NEED to be decimated, which, (as any fule kno) means reduced by 10%

  • Ivy Eileen

    TrevorsDen and 2trueblue – agree absolutely. With “friends” like this, who needs enemies ? Perhaps the Spectator would like the Tories to cede the election now ? And why give valuable space to the increasingly erratic Rod Liddle ? – leave him to the Sunday Times.

    2trueblue’s first paragraph says it all.

  • Irene

    Michael Booth:

    More to the point which side does the Speccie bat for now?

  • 2trueblue

    TrevorsDen. Absolutely so. It is the season for killing off any hope of real journalism and supporting Liebore into the bargain.
    What on earth is going on? We know who got us where we are, we know that they are totally incompetent, monetarily incontinent, are good at talking about initiatives and rubbish at delivery, so what do we get? Journalists who spend the time telling us that the Tories have no ideas!

    That is really rich. Liebore have flip flopped on how they are going to or not going to deal with the deficit, when it will begin, if it will begin and the media are incapable of reporting about what Liebore have really done, or even think of doing.

    It is no surprise that Liebore is awash with people like Byrne who has real difficulty articulating the truth. What is amazing is that it comes as a surprise to anyone.

  • John Wilkes

    I think the Labour government should pass just one more law making it a criminal offence to make any form of posting about Liam Byrne without including at least one link to his instructions to his civil servants on taking office – here’s one from the Guardian (just to be as balanced as I can be about it):

  • Pete

    Hopefully Liam Byrne will lose his seat in the election and one of the most odious and smug junior ministers will disappear from our TV screens (along with Phil Woolas).

  • Michael Booth

    which side does Byrne bat for?

  • Nash

    I do NOT believe Liam Byrne has been telling PORKYS, like most politicians he is just NOT NUMERATE.

  • TrevorsDen

    I see your magazine cover has the fallacious ‘tories go off the rails’ as a headline.

    It does seem the spectator is actively campaigning for a labour victory – why not just come out and admit it?

    Especially as your other headline is ‘Brown is not a bully just bad mannered’. I strongly suspect about 50% of the PLP would disagree with you on that.

    But carry on campaigning.

  • toco

    Well what a surprise Liam Byrne telling porkie pies.Deception with numbers comes naturally to the unpleasant and attack dog type of person Byrne represents.He has learned his trade from his dysfunctional master in Downing Street.

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