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Debt, Did Someone Say Austerity

It was at the last general election, it is dominating this parliament, and it will be the big issue at the 2015 general election: the economy and its true state.

Yet trying to get behind the political rhetoric to discover the economic reality is surprisingly tricky. In a recent opinion poll conducted by ComRes for the Centre for Policy Studies, when asked what they feel is most accurate:

47% of British adults responding said they thought the Coalition Government is planning to REDUCE the national debt by around £600 billion between 2010 and the end of this Parliament in 2015.

12% said the Coalition was planning neither to reduce nor increase the national debt

32% said they did not know

And only 10% hit the true answer - that the Coalition Government is planning to INCREASE the national debt by around £600 billion by the end of this Parliament.

How little the public understands the mess that the country - and the coalition - is in.

This daunting gulf between public perception and financial reality was the subject of a recent – and brutally honest - posting on a Lib Dem website. Here are the opening paragraphs which draw on analysis by Dr Tim Morgan at money broker Tullett Prebon:

“The purpose of this post is to look at what I see as the top five myths currently being perpetuated about the economy, and to explain why I think our current debate is misleading the public and diverting us from finding proper answers….

 Myth 1: UK public spending is reducing

 So keen has been the Coalition and Labour (for their own different reasons) to talk up the extent of the Government’s spending cuts that the reality has been forgotten. Public spending is going up year-on-year under the Coalition, rising from £690bn in 2010-11 to £744bn (+8%) by 2014-15. If we allow for inflation, there will be a modest reduction: from £690bn to £668bn (-3%) by 2014-15.

That figure of £668bn public spending in the final year of this parliament will be higher than in every single year of the last Labour Government’s 13 years in office, bar its final one. Indeed, Coalition spending in 2014-15 would be higher even than that final Labour year (2009-10) if it were not for the increased cost in servicing the national debt.