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The economy is the big issue

It was at the last general election, it has dominated and will dominate 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. Here is the opening  few paragraphs from a recent posting on a Lib Dem website – surprisingly well informed  - but then it does draw on material from the excellent Tullett Prebon website.

“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.

Myth 2: The Coalition is bringing UK debt down

Not surprisingly, given 1) the economy isn’t currently growing and any recovery is forecast to be weak, and 2) the Government is continuing to maintain historically near-record levels of public spending, the national debt is forecast to continue rising throughout the lifetime of this Parliament. Yet politicians, including Nick Clegg as well as the media, persist in confusing the different concepts of deficit (at its simplest, the excess gap between what we earn and what we spend as a nation in a year) and debt (the accumulation over years of all our borrowing).

So, for the record, here are the public debt figures for the UK. The UK’s debt is increasing throughout this Parliament on the following three measures:

  • Nominal figures: from £903bn (2010-11) to £1,251bn (2014-15);
  • As %-age of GDP: from 61% (2010-11) to 69% (2014-15);
  • At 2010-11 values: from £903bn (2010-11) to £1,125bn (2014-15).