Deficit Halved or Doubled..Who actually Knows?
Posted on April 29, 2015
Which one of you reading this blog post can really say you know how financial figures are assessed and calculated, and how much in real terms, our nation’s debt is, and how much it is growing or indeed shrinking? We are told by one party that debt has halved and in the same instance informed by another it has doubled, leaving us all in a constant state of confusion.
At a stab, out of my regular reading base, I reckon there are only a few I could think of who have the time to understand the financial sector fully, but in all honesty that is just a guess really as most people are just too busy or trusting to study the intricacies of it all.
I have to admit that apart from percentage margins, VAT, taxation, bank charges and basic assessment of profit and loss, I am financially illiterate and as much as I try to understand financial terms such as quantitative easing, hedge fund, derivative and toxic loan, I often find I don’t have enough time in a day to learn enough cohesive information to back up my basic opinion that the country is being perpetually fooled by government statistics.
I guess that’s the way they want me and everyone else to think. Ignorance is bliss, particularly for these institutions that fund governments, because if the masses are in a state of perpetual confusion or apathy about the economy, it is easy to feed them with something as basic as a promise of a tax cut to keep them quiet and secure a victory at a general election. It is no coincidence that the banking industry poach many of Britain’s brightest scientists and mathematicians to create complex derivatives to obliterate the brains of us mere mortals.
Personally, I have long had suspicions about economic statistics and how politicians in particular, can massage figures to make them seem like they have gloriously rescued the country from the financial oblivion caused by the previous government. The Tories for example, have followed the same tiresome line that austerity has been the only viable economic plan to “clean up the mess caused by reckless public sector spending under the previous government”.
This line has been spewed out so many times to the financially illiterate that dominate our population, that they eventually believe it to be true. Churchill once said that a lie is half way around the world before the truth has a chance to get its pants on, which basically means that, with modern technology, a lie has circumnavigated the globe 50 times whilst the truth is still fast asleep.
The Conservatives are right to pump us with this lie as well, because ultimately, it is the economy that wins elections and they have been absolute masters at spinning information to the masses that terrifies us in to thinking that if we vote Labour, we are about to endure 5 years of hell where we will fall behind Greece in the league table of collapsed economies. The Conservatives are banking (excuse the pun) on an old Joseph Goebbels theory that if you tell a lie enough times the public will believe it.
So, convinced that in the run up to the election campaign, the economic statistics produced by George Osborne are that of a man with his pants on fire, I desperately tried to find an idiots guide to the truth about our economy. Rather staggeringly, I found it courtesy of not a radical socialist but that of a CONSERVATIVE VOTING financial analyst named Ramesh Patel.
Patel starts his article with one of George Osborne’s biggest claims; that when he took over as chancellor, Britain had the biggest debt in the developed world.
However, George was fibbing a bit, well a lot actually, because he has since admitted that he did not know that Britain in fact had the lowest debt in the G7 as confirmed by the OECD (Organisation for Economic Co-operation and Development). Was this just a daft oversight or a deliberate tactic to use cash terms over accurate percentages in a bid to scare and mislead us financial illiterates?
Basically, in cash terms, a millionaire’s debt would be greater than the average man in the street. Therefore, Britain would have a higher debt and deficit than most countries because it is the world’s sixth largest economy. As Patel says, “It is laughable to compare UK’s debt and deficit with Tuvalu’s, who only have a GDP/Income of £24 million whilst, the UK’s income is £1.7 Trillion.”
In 1997 Labour inherited a debt of 42% of GDP from the Conservatives, that is an undeniable fact. By the start of the global banking crises in 2008 the debt had fallen to 35% so it can be safely assumed that the economic crash was not caused by overpaid librarians, swimming pool attendants on the minimum wage or council administrative staff feeding off chocolate digestives rather than Rich Tea.
Osborne: Economics With the Truth
After the crash (the Conservatives/Lib Democrat period) in 2010 debt of GDP was around 50% and it now stands at around 80% so to say that they are cleaning up the mess that Labour left behind is a bit ambitious to say the least. It is worth noting that when Britain was allegedly great, just after WWII the national debt was 250% of GDP.
It is also written in the right wing press that Labour overspent, creating the biggest deficit in the developed world (11%). This is the PSNB (public sector net borrowing) and not the actual budget deficit which was -7.7%. So another little fib, not forgetting this article was published by a CONSERVATIVE! Labour inherited a deficit of 3.9% of GDP in 1997 and by 2008 it had fallen to 2.1% – a reduction in percentage terms of nearly 50%.
Then, out of nowhere the Global banking crisis in 2008 ruined everything which is another story, but to blame overspending on public services is as implausible as it is laughable. George Osborne is either a liar or he knows less about basic economics than me (an economic illiterate).
The IMF revealed that the UK experienced an increase in the deficit as result of a large loss in GDP caused by the global banking crisis and not even as result of the bank bailouts, fiscal stimulus and bringing forward of capital spending. Think economics in its most basic term, even I can do this; when output falls the deficit increases.
It is also easy to conclude that the huge reduction in output occurred because the UK, like the US, have the biggest financial centres and as this was a global banking crises Britain suffered the most. As a result the UK had the 2nd highest deficit in the G7 (not the ‘World’ as is so often banded about) after the US. As the IMF confirmed, it was nothing to do with overspending prior to and after 2008 crash.
What I have never been understand, is how useless Labour are at exposing what is basically, a pack of lies. Is it because the media have such power to ridicule and undermine their fiscal policy that they have to focus on other things such as the NHS?
Maybe, after decades of being bombarded by false economic information from the tabloids such as The Mail, The Express, The Sun and The Times (I love calling The Times a tabloid) the masses have been brainwashed into believing it is the Conservatives and only the Conservatives, that can be trusted with economy.
The facts stated by a Conservative prove that this is categorically and historically, not the case. However, the myth that the Conservatives are the only party to be trusted with the economy is one that they will protect ferociously through media tycoons such as Murdoch and Dacre.
They have no choice, because if the myth is exposed…they are a busted flush.