It’s all about the deficit

This was going to be a quick post after the budget except that I then spent ages trying to find some statistics and had to give up!

The big thing George Osborne had to say (apart from a few gimmicky changes to pull in the voters in a few weeks time) was that he was “reducing the deficit.”

But what does this mean?

I remember taking out a mortgage and seeing it shrink. But not because I was paying any of it back – it was an interest only mortgage so I owed as much money at the end as when I took it out. But it did not feel like I owed as much. Why? Because I had just started work and my salary was increasing each year and the value of the house was on the way up. So every way I looked at it, my mortgage was smaller – it was a smaller proportion of the value of the house than when I took it out and it was a smaller proportion of my salary.

And this is what George means when he says he has got debt falling. His statistics are

George's budget debt percent“debt as a share of GDP falls from 80.4% in 2014-15; to 80.2% in the year 2015-16. And it keeps falling to 79.8% in 2016-17; then down to 77.8% the following year, to 74.8% in 2018-19 before it reaches 71.6% in 2019-20.”

But he is actually going to borrow more money.

The forecast amounts we will BORROW over the next few years are:

George's budget real debt

(source Red Book Table 1.3 or 1.4)

But he has not actually paid off any of the debt. (Yes he did talk about paying back some old debts

“I can tell the House that we will increase the number of long-dated gilts that we sell. We’ll also redeem the last remaining undated British Government bonds in circulation. We’ll have paid off the debts incurred in the South Sea Bubble, the First World War, the debt issued by Henry Pelham, George Goschen and William Gladstone”

But he has done this by remortgaging {see Red Book Table B.1 which shows borrowing through gilt sales around twice the level of repayments through gilt redemptions}. It is like paying off Barclays by going to HSBC.)

I would like to compare the amount this government has borrowed with its predecessor, but could not access the data to show that he has borrowed as much as the previous government if one excludes banking crisis debt (which is what all the quoted government statistics appear to do).

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