Thursday, June 16, 2011

Was public debt really lower in 2008 than in 1997?

Ed Balls keeps banging away that the national debt was smaller before the crisis than they inherited from the Conservatives. The other day Labour List used this graph to illustrate his point.

Damning stuff, except it's two data points, let's look at the whole picture from 1999 to present courtesy of the ONS (It's the graph on the right we're interested in).

So what does this show, it shows that from when they took over and whilst they were following Conservative spending plans, national debt as a percentage of GDP did indeed fall, (aided as well by the sale of 3G mobile phone licences for £22.37bn in 2000, which as Ed Balls said this morning went towards paying off national debt.), but as soon as Labour economic policies kicked in we saw an upward trajectory. By 2008 we were already running a significant structural deficit, then we had the crisis which was an excuse for opening the spending taps even more. 

What's important to remember is that this graph excludes interventions in the banking sector, so the debt didn't go up in 2008 because we bailed out the banks, as the language Balls uses always implies. Trust me you don't even want to see that graph, in April 2011 debt including interventions was 148.9% of GDP.

So next time someone tells you that the debt was lower in 2008 than in 1997, ask them if they know what it was in 2002.

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