Wednesday, 13 April 2011

Is Government Debt "too high"?

Listen to any Tory (including those Tories that used be known as The Lib Dems) talking about the economy, and they are bound to mention the "horrendous cost of paying off our debt..."..."simply horrendous old boy, never seen anything like it since Lord Poodlebody had to sell of the country pile top pay orff his gaming debts at Boodles...". ... "historic...".

But is it "historic"?

LabourList has a interesting graph showing Debt Interest as a % of Government Spending since 1997/98. 
The figures are compiled from the Government's own statistics, from the Red Books for the chosen years. As you can see, debt interest on that calculation was considerably higher in 1997/8, when Labour took over from the Tories, than it is now.

So why the shock-horror? More germeine, why the cut-fast-and-quick strategy of the ToryDems? The debt burden is not "unprecedented", nothing like it. It has been higher for much longer and, more often than not, the Tories were to blame (if blame is he word).....

The cuts are being implemented "fast-and-deep",  not just to pay off the debt, but to to achieve the idealogical aims of the Conservatives: they have always wanted to privatise the NHS and other public services. If they can fool the country that the situation is more desperate than it really is (and it is bad, no doubt about it), they can make their cuts and pretend that, in the immortal words of their patron saint, Margaret Hilda Thatcher, There Is No Alternative....


  1. Watching Question time without paying too much attention the other week, someone from the audience tried to make a similar point to this, which led to pretty much everyone on the panel stroking their chins and agreeing that the debt problem is a 'structural deficit' - which is why Labour were looking to make 80% of the cuts that the Tories are implementing...

    The Labour MP on the panel agreeed that it was a 'structural deficit' which Labour had also identified as needing addressed. She didn't refute the figures of 80% of the Tory cuts either.

    The problem I have is that I don't really understand what a 'structural deficit' is - or more pertinently how it could have gotten so out of control whilst we had the steady hand of economic genius Gordon Brown at the tiller... oh!

  2. The article was not about addressing the deficit, but paying back the debt.

    There is a difference.

    On the point of not understanding what the structural deficit is...

    The structural deficit is the deficit that remains across the business cycle, because the general level of government spending is too high for prevailing tax levels. The observed total budget deficit is equal to the sum of the structural deficit with the cyclical deficit or surplus.

    Some economists have criticized the distinction between cyclical and structural deficits, contending that the business cycle is too difficult to measure to make cyclical analysis worthwhile.

    Gordon Brown was a very good chancellor, if not quite the economic genius that you claim...

  3. should have given credit to wikipedia for the definition.

    Not absolutely sure all economists would agree...

  4. "Gordon Brown was a very good chancellor"

    Aye Right!

    Gordon who announced that he was selling the Gold before selling the gold at a 20 year market low - contrary to the advice of the bank of England

    Gordon who forced PFI upon public bodies, which, deliberately or otherwise, hid the true extent of public borrowing in order to meet his self imposed and arbitrary rules on public borrowing... hmm! How did that structural deficit get so out of hand again?

    Gordon Brown was anything but a good chancellor. He may have buried the skeletons deep, but we're paying the price for his profligacy now, make no mistake of that!

  5. " it could have gotten so out of control whilst we had the steady hand of economic genius Gordon Brown at the tiller..."

    Jim, you caled him a genius, I was just toning it down a bit.. :)

    And BTW, your economic analysis is challengeable. I mean, there is a different POV.

  6. Braveheart

    I think the current parlous state in which we find the countries finances... you know the deficit... the one which led Liam Byrne to write
    "Dear chief secretary, I'm afraid to tell you there's no money left"

    That the parliamentary Labour party all agree the country has to go through a period of austerity in order to reduce the deficit tells me that there really must be something to it, despite your graphs.

    That Gordon Brown was the Chancellor for 10 years of Labour rule then Prime Minister tells me that he should really bear the brunt of the blame for the poor state of affairs we find ourselves in...

    Challenge away though on his economic record! As far as I can see the highlight of his reign would be the decision not to join the Euro.

    I think deregulating the banks will in the long term be his low light, but I note that his decision to sell the gold at the 20 year low price is known as the <a href=">Brown Bottom</a> amongst those who take an interest in such things...


  7. This post is about debt repayments, not the deficit (they are different).

    Anyway, there is at least a case for saying that the main cause of the problem is the banks' behaviour. And the cost of bailing them out. Neither of these are unique to the UK, so it can't all be GB's fault.

    But you've made up your mind to blame him, so all evidence has to point in that direction.

    Typical nationalist one-track mind: whatever happens, it's proof that we "need" "independence".

  8. Braveheart

    Where have I mentioned Nationalism or Independence in this thread?

    I certainly have decided that much of the blame for our financial woes must lay at the door of the man who was UK chancellor of the Exchequer for 10 years and Prime minister for 2 years - was he not in power exactly because he thought he could make a decent fist of running things i.e. avoiding this sort of calamity.

    During his time did he not form close alliances with the bankers? Indeed, did he not knight Sir Fred Goodwin?

    Did he not succumb to their claims of over regulation and pressurise the FSA into 'light-touch regulation'. I'll grant you that was at the behest of his buddies, the bankers, but the point of government is that they should have been protecting our interests from the insanity of this unfettered capitalism.

    The thing is - and you Labour boys need to get your head around this - I didn't decide he was to blame before looking at the evidence.

    Your (Labour) defence of him (Brown) seems to be that he was some helpless bystander watching some unstoppable force of nature appear from nowhere to come close to destroying the economy... if he was truly so incapable, why the devil was he put in charge of the economy of the country where the global centre of financial services sits?

    He cocked it up big style! 12 years of Labour rule and all we got out of it was a royal shafting from the very people that Labour should have been regulating.

    No case for independence, just a damning critique of Brown's failings and the insanity of unfettered global capitalism.

  9. @Jim "Where have I mentioned Nationalism or Independence in this thread?"

    Nowhere. But, as I said, the blog is about the debt repayments not, as you insist on addressing, the deficit. And if you can change the subject to suit yourself, so can I.

    after all, it's my blog :)

  10. Braveheart

    The starting point for all this was my observation of a question time program, where a similar argument about the cuts was proposed i.e. that the situation we're in is no worse than has been previously, if you don't think about the 'structural deficit'.

    The panel, including Labour MP, unanimously agreed that the point entirely missed the need to address this deficit and therefore that the cuts were necessary. Indeed Labour were planning cuts on a similar scale - 80% was the figure published by the Guardian, mentioned by Boris Johnston and not refuted by the Labour MP...

    The change in topic was your (it's your blog after all) claim that Gordon Brown was a 'very good chancellor'. Sadly that simply doesn't stack up with the outcome of his time in office. I only have the facts to go by and they're nothing to do with Nationalist fervour or dogma - anyway, it turns out I'm a Greenie... ;-)