Coffee House

Fisking the coalition’s deficit-reduction boast

7 January 2013

‘We have reduced the deficit by a quarter in just two years’ — the coalition’s mid-term review.

True. But when Gordon Brown proposed to do precisely the same in Labour’s last budget, George Osborne criticised him for not moving fast enough and endangering the economy. The ONS shows that public sector net borrowing was down 24 per cent from 2009-10 to 2011-12. But George Osborne cannot claim to have stuck to his deficit reduction plan. That has been torn up. The below graph shows Brown’s plan (in the middle), Osborne’s original plan (at the bottom) and his current plan (at the top):

As you can see, Osborne is now cutting the deficit more slowly than Alistair Darling proposed in 2010. Darling planned to cut the deficit by 33.9 per cent by this year, compared to the 24.3 per cent Osborne has actually managed. And what about the Treasury’s preferred measure, the deficit-to-GDP ratio?


Of course, Darling’s forecasts were based on far-too-optimistic economic forecasts (the Treasury was predicting heroic growth of 3 to 3.5 per cent in 2011 and 3.25 to 3.75 per cent in 2012), and his spending plans would actually have resulted in higher deficits than Osborne is currently racking up. But back in 2010, listening to Osborne attack Darling’s plan to cut the deficit-to-GDP ratio by a quarter in two years, it was hard to believe that he would now be boasting about doing exactly that.

The downturn forced Osborne to choose between more debt or more cuts. He chose more debt, and partly as a result Britain’s AAA rating is now under threat (Standard & Poor’s, Moody’s and Fitch all have it on ‘negative outlook’). The coalition government has many achievements in two years. But deficit reduction is an example of where it has scaled back, rather than stuck to, its original plans.

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  • Millsy

    The intention was there from Osborne, which is more than can be said for Darling and Balls. They very reluctantly talked about cuts and following poor growth Osborne is cutting as much as he dares whereas Balls would have just turned on the taps again.

  • Span Ows

    This is ridiculous, how can you compare the actual to what Darling or Brown said? they are not in power, do you think for a nanosecond that the dotted line would be in the same place had they won in 2010? “But George Osborne cannot claim to have stuck to his deficit reduction plan. That has been torn up”. Of course it has! have you noticed a few ‘events’? Do you think for a nanosecond Osborne is happy about this change?

    • HJ777

      You’re quite correct.

      In fact, Brown claimed that his deficit reduction plan would “Cut the debt in half in four years” (that’s a direct quote – see the video of him talking to the ‘bigoted woman’ where he says exactly that) which would imply running a surplus.

  • Matthew Whitehouse

    I’d rather Osbourne than Balls

    • Tom Tom

      I think Brown should have been given cement shoes before 2007 and Alistair Darling could have started a return to sanity…..but Labour MPs are chicken just like the current Tory and LibDems who will follow their leader over the cliff

  • Daniel Maris

    My comments:

    1. Who we owe debt to is vitally important. If the government owed money to UK creditors well then it’s “all in the family”. That’s why Japan can run such a huge level of debt – because it’s (nearly) all in the family.

    2. What is the debt for? There is a huge difference between borrowing for capital investment and borrowing for revenue expenditure. It’s pretty much the same as the difference between taking out a mortgage on a house that is likely to appreciate in value and taking out a loan so you can go on a top of the range luxury cruise – the difference being that at the end of the day you have either an asset (or something that helps you live more cheaply e.g. a bridge) or you have simply a stand alone debt.

    3. We have to look carefully at private debt as well as public. Private debt is just as bad as public and UK private debt I believe has been high compared with international averages.

    4. Let us focus on the REAL economy: indigenous energy production, recycling, a strong manufacturing base, domestic agriculture, a government-led programme of material substitution to promote local raw materials, and the wealth-creating public services e.g. education.

    Let’s forget about: banks, the immigration conveyor belt (more immigrants to pay for the costs of the previous immigrants in terms of housing and so on), supermarkets and house prices.

    1. The economy as described by capitalists is not the exono

    • Tom Tom

      Daniel, 66% Government Debt is owned by the Bank of England which in your book is fine but in Monetary Economics terms is a disaster. Your simple view does not take into account Monetary Base and Currency Collapse which the USA will learn to enjoy along with Britain. How do you want to retire this Debt ? The game so far is to issue more and destroy private savings. Capital is being destroyed by Government Policy so the economy is being Socialised – the ONLY source of Capital for Banks is Government; Banks do not provide Credit to the Private Sector but EXTRACT Real Interest from a Sector that receives little on Deposits. The Economic System is being LIQUIDATED

  • Noa

    The Coalition’s deficit reduction boast is specious and based on the public’s profound ignorance of the difference between the Debt and the Deficit.

    The Debt is the ever growing amount that every man, woman and child has a liability to repay, whatever government is in power, as a result of government spending and commitment in excess of its taxable receipts.
    The Deficit is the annual overspend by which the government grows that debt, as it might grow botulinum in a Porton Down test tube.

    And George is growing that overspend, (no George write out 50 times,”An overspend is not a reduction”), even faster than Brown’s appalling government.

  • AnotherDaveB

    I think it’s more accurate to describe Mr Osborne’s policy as ‘increasing taxation’.

    ‘Cutting the deficit’ suggests he is cutting government spending, rather than just hoping that the economy will grow faster than the increases government spending, allowing the burden of government to reduce as a %age of the economy.

  • CharlieleChump

    If Darling had been holding the key to the piggy bank (deeply unlikely anyway) he would not have achieved his own target; the markets would have panicked and crashed along with the pound, rates soared and we’d have been asking Guatemala for a fiver.

    Osborne is a complete failure though, classic Treasury capture.

    • Tom Tom

      Except that the expectation is of Sterling at $1.52 this year and a Sovereign Bond Crisis at somer stage. Gilts at 300 year highs leaves only one direction of travel and that makes Pension Funds and Bank Collateral look profoundly dodgy

  • Bellevue

    I do wish the Spectator would do more of this ‘fisking’. For example, how about fisking the PM’s assertion on Marr yesterday that Norway has ‘no say’ in EU legislation??? Or fisking almost anything that Balls says about anything?
    It would make for far more interesting reading than most of your posts.

    • AnotherDaveB
      • Bellevue

        Well, Another Dave, I beg to differ on whether it is a ‘good piece’ or not. I have left a comment.
        It seems to me that these guys (supposed eurosceptics) are all coming out of the woodwork trying to persuade us all – often with outright lies – that we need to stay in the EU. I reckon they are running scared; because nowadays we can read the internet and find out facts for ourselves and can see that their arguments are b**ll*cks!

    • Dimoto

      You are kidding.
      This little Nelson-Jones party piece has been repeated every month for the past two years.
      I guess, that with the passing of the months, they figure that their touching faith in a Brown-Balls-Darling election “promise” from 2009, will gain some sort of traction.

    • Span Ows

      “I do wish the Spectator would do more of this ‘fisking’.”
      This isn’t a fisking in the known blogosphere sense.
      “For example, how about fisking the PM’s assertion on Marr yesterday that Norway has ‘no say’ in EU legislation???”
      Good point, there’s enough info out there (EU Ref blog etc)
      “Or fisking almost anything that Balls says about anything?”
      Not just Balls, all the Labour shysters: EVERY DAY they are given free reign on the BBC and are NEVER pulled up by our ‘public service broadcaster’.
      “It would make for far more interesting reading than most of your posts.”

      I agreed again, so mine isn’t much of a fisking of you either! :-)

      • Bellevue

        Thank you, Span Ows. You can fisk me anytime!!

  • LordBlagger

    Still missing off the looted pensions.

    5,010 billion of debts there hidden off the books.

    430,000 per median wage earner stolen.

    That’s why people are poor.

    The state has robbed them blind.

    • CharlieleChump

      The increase in those middle income earners paying 40% is a complete disgrace, inevitable under tax-and-spend Liebor, disgusting from Tories.

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