Rachel Reeves writes to UK stats chief over Cameron’s misleading claims in PPB

January 24, 2013 11:14 am

Last night David Cameron claimed in a (scripted) Party Political Broadcast that “We are paying down Britain’s debts”. That’s not true – national debt is actually rising. Fraser Nelson has exposed the…untruth…here.

Update: The Prime Minister spokesman has contradicted him this morning, with the Mirror’s Jason Beattie reporting them as saying since the election “the debt as % of GDP has risen.”

Rachel Reeves has this morning written to the head of the UK statistics authority urging him to intervene – as he did a few months ago when Cameron appeared to have pre-leaked GDP information at PMQs, and when Cameron and Hunt tried to (wrongly) claim that NHS spending is up.Here’s the letter:

Andrew Dilnot CBE
Chair, UK Statistics Authority
1 Drummond Gate
London
SW1V 2QQ

24 January 2013

Dear Andrew

I am sure you will agree that it is vital that public debate is informed by accurate use of statistics.

However, in a Party Political Broadcast by the Conservative Party last night, the Prime Minister said:

“We are now halfway through the coalition’s time in government and in two and a half years we have achieved a lot but I know people don’t just want to hear from me, they want to know the facts… So though this government has had to make some difficult decisions, we are making progress. We are paying down Britain’s debts.”

As you will be aware, figures from the Office for National Statistics published this week show that the national debt is not being paid down, but is actually rising. Since this government came to office, public sector net debt has risen from £811.3 billion (55.3 per cent of GDP) in the second quarter of 2010, to £1,111.4 billion at the end of December 2012 (70.7 per cent of GDP).  

The Office for Budget Responsibility has also forecast that public sector net debt will continue to rise and the government’s target to get it falling by 2015-16 will not be met.

This is not the first time government Ministers have made similar claims about the national debt. However, last night’s Party Political Broadcast is the first occasion I am aware of when the Prime Minister has made such a claim in a scripted broadcast. This suggests that the Conservative Party may be attempting to deliberately mislead the public about these statistics and the government’s record.

I would be grateful if you could bring some clarity to the situation and advise on how we can ensure that in the future debate on the national debt is accurate and based on the facts.

Yours sincerely,

Rachel Reeves MP

  • Jeremy_Preece

    I am a keen supporter of the Labour Party and a party member whoi has and is still standing in local elections.

    As such I follow very keenly the whole debate about the government’s economic record. The attrocities that they carry out are always under the cover of reducing the deficit and reducing the national debt. Indeed, the reason for the pain is given that the UK could at no cost afford to loose our AAA rating.

    However we hear reports that we could be doing just that because of the effects of the cuts which have been too fast and too deep. We also hear the lead econopmist of the IMF saying the same.

    Cameron boast that jobs have been created in the private sector and unemployment is down, and yet we hear that these are low quality jobs being gained and most of them part time. The jobs which are being lost are the good jobs, well paid with proper hours safegaurds and so on. We are told that in order to be competitive we need to get rid of all worker’s rights and run the economy as a third world state, or at least be able to compete with China in the way that ordinary people are treated. Meanwhile of course the top 15 or 20 percent get richer and need to have their tax cut, or so we are told.

    In terms of hard economics it makes no sense.

    Against this background we hear Cameron banging on about how he has reduced public debt, and also how he has reduced the deficit by 25%. However his claims do not seem to add up and are contested by Labour and others.

    This whole issue takes us to the centre of the problem. If I cannot work out what exactly is true and what is totally made up in this arguament then how is the ordinary voter supposed to know what to make of it.

    So I don’t need a doctor, but is there a proper economist in the house please.

    I don’t want opinion and political rant, I want to know the facts about the following:

    1. Is public debt really being reduced as Cameron claims, or is it increasing?

    2. If debt in increasing who is prediciting that this increase is set to continue?

    3. Is the deficit actually being reduced or not?

    4. What is the truth about unemployment and what is the truth about the type of “new private sector jobs” that we are being told are being created and are reducing unemployment?

    5. In terms of fact and figures what is happeneing about the widening gap between rich and poor in terms of:

    a) Who/which groups are gaining income and by how much

    b) which people are experiencing salary freeze and how much are they loosing in real terms?

    c) Who/which groups have experinced salary cuts (apart from junior police by £4,000).

    d) What are the official statistics about people living in poverty – especially children?
    To my mind these are the absolutely most important questions to be asking now. We really need to know the facts and we need to see where the government is lying and if (as I believe he is) the PM is misleading and incorrectly quoting figures. If he is not telling the truth then he his credibility goes down through the foor.

    • JoblessDave

      I’m glad you asked: while I am not an economist, I am (formerly) a qualified banker with (I hope) a fairly balanced view of the economic and political world and so I hope this helps:

      1. Debt is increasing. Cameron is wrong to suggest it is decreasing, and I suspect he will need to correct any official statement to the contrary. He is, however, not the first front bench figure to confuse debt and deficit (the latter being the rate of change of the former).

      2. Debt is currently forecast to increase (by all analysts I am aware of) for some time to come. The difficulty in any debt analysis is that it has, broadly speaking, always increased since about 1800, as the amount of debt that is appropriate and efficient for the country to most effectively operate increases in line with monetary inflation and earnings and productivity growth. Measures such as GDP are often used as a proxy to try and allow comparison from one year to another.

      Most political argument is around the rate of increase of the debt: orthodox right-wing politics will seek to significantly reduce or eliminate the rate of increase (lowering the deficit, or creating a surplus), with an ultimate aim of decreasing the public debt (alongside reducing the spending power and influence of the governmental authority – a smaller state). Orthodox left wing politics will argue the opposite, but against a threshold that is set by “the market” (and to an equal extent, common sense) that dictates that any money you need to meet your deficit must be borrowed from someone, somewhere, and while this represents a very large pool, it is not bottomless – if you are perceived to have borrowed too much then such investors will typically move in a manner akin to a herd, meaning there is lots one minute, and none the next and so the available money can “dry up” very quickly. The AAA rating is designed to be a measure of this, though some would argue it is self-fulfilling as the loss of AAA status will make other investors less likely to want to put their money into the country.

      There are various arguments that “this will never happen to the UK”, some of which are based on valid reasoning (the UK, for historic reasons, gets away with very long dated debt – far longer than Italy and Spain – and this means that investor problems are likely to be less pronounced as we have time to recover before the money has to be repaid or reborrowed), but some of which are just wishful thinking (“we are the most advanced nation on earth”/”we occupy a special place” etc.).

      3) Deficit (and by extension, since when you aggregate yearly deficits you will arrive at, debt) is defined by the spending in a year minus the income: income is tax, and during any recession it is normal that tax receipts go down, while spending commitments (welfare benefits, pensions and the NHS are the big three) remain static or rise.

      The deficit is being reduced. By how much depends when you measure from and to, but there is no denying that the government underestimated the reduction in tax income (e.g. more bankruptcies, but also reduced company activity – sitting on a pile of cash is not taxable, unlike investing in new plat machinery), so is reducing more slowly than they expected. Shadow policy has been that the cuts have been “too far, too fast” meaning that cuts in welfare are actually reducing income for companies and consequently increasing the welfare bill (for example: imagine a welfare recipient cutting back on their weekly shopping, causing Tesco both a profit fall and hence lower corporation tax bill, and requiring some store-worker redundancies, and hence higher joblessness.

      4) In addition to the above, the coalition are actively reducing the public sector relative to private sector employment: this is a classic right wing orthodoxy relating to a desire for small state, and inevitably any public sector job lost is a rise in welfare claimant. The government claim (with, as far as I can tell, some justification) that positive changes to company bureaucracy has allowed the private sector to hire at a faster rate than jobs are being lost from the public sector, enabling a faster deficit reduction and static or rising employment. Current statistics appear to support claims that more people are getting into work, however I have heard counter-claims that many of these “in work” people are actually part-time and so the figure is inflated. I have not seen statistics to verify this.

      5)a) There has been a widening in the gap between rich and poor (often quoted relative to the highest and lowest deciles – i.e. top and bottom 10%) since as far back as I have ever seen, however there was a significant increase in the rate of change in the 1980s which has proceeded to date. I don’t have the exact figures to hand but from recollection poor salaries are increasing at or below inflation (i.e. 1-5% depending on which year you look at), while top end salaries are increasing at nearer 15-20% annually. This is commonly and conveniently expressed as the so-called “Gini coefficient”, but the salient factor is that society is actively becoming less equal at present (and over the last few decades). WHY this is happening is a difficult one for greater minds than mine to ponder, but increasing globalisation and inter-connectedness has been quoted as a part of the reason, but one that cannot be undone – i.e. we cannot realistically pretend cheap international alternatives exist and force people to buy the more expensive local version.

      b)+c) Salary freezes are being applied widely: governmental freezes have been applied to large swathes of the public sector (where they directly pay the salaries), however accurate figures are hard to come by here. There are, confusingly, two types of pay freeze – an “actual” freeze (i.e. if you earned 25,000 in 2012, you will earn 25,000 in 2013) and a so-called “real terms” freeze where your pay increases in line with inflation (25,000 might become 25,500, but any increase in take home salary will likely immediately be spent on increased utility and food bills, leaving you with no additional spending power). By comparison to the “real-terms” freeze, an “actual” freeze can be considered a “real-terms” cut since you will likely have to reduce your spending because of increases in prices

      I do not know of any salary “cuts” other than the starting salary of future junior policemen (and arguably this is not even a cut, since no-one should be told “your salary is being reduced” as a result), but would not be surprised if many exist, particularly in the private sector where a reduced salary could mean the difference between bankruptcy and continuing employment.

      d) This question strays outside my area of “core” knowledge, however I am aware that there are a number of different measures of “poverty”, making this hard to measure or debate. Some of these measures are relative, i.e. as society gets richer so the threshold of poverty gets higher, while some are absolute i.e. if you don’t get this then you are in poverty. The use of one or the other is justified based on circumstance: however speaking frankly in my current life (working with so-called Base of Pyramid communities in Africa) I struggle with a small number of the measures of poverty used in some political debates, as some of the “qualifying” people represent a level of unimaginable wealth and opportunity by comparison to the “genuine” poverty I have experienced at first-hand. The political challenge to all parties is maintaining an appropriate level of compassion and proportion: clearly orthodox right-wing are more likely to err on the wrong side of compassion than orthodox left-wing, but conversely left-wing are more likely to err on the side of trusting people to do what’s right, and be taken advantage of (e.g. a small number of fraudulent benefit claimants), leading to public revulsion and knee-jerk reactions (championed by the Daily Mail etc.).

      • Dave Postles

        Stephen P. Jenkins and John Micklewright, eds, Inequality and Poverty Re-examined (OUP, 2007) . Gini coefficient, Lorenz curve and poverty line are all unidimensional measures of inequality. The calculation of the Gini coefficient (0-1) involves much more than the top and bottom deciles. Also Avner Offer, The Challenge of Affluence. Self-control and Well-being in the United States and Britain since 1950 ch 12 (‘Inequality hurts’). Lagarde has just reiterated the point that inequality actually tends to obstruct economic growth – which is one interpretation.

    • PeterBarnard

      Jeremy,

      You can obtain the numbers published by ONS and HM Treasury :

      (1) for the monthly figures going back to around 2000, “Public Sector Finances” (ONS)

      (2) for long-term stuff (going back around 40 or so years), “Public finances databank” (HM Treasury)
      (3) for monthly “labour market statistics” : ONS
      (4) for more detailed/long term stuff on departmental spending, going back around 25 years, “Public Expenditure statistical analyses”
      (5) for OBR predictions on debt, the latest is contained in the “Autumn statement 2012″ ; previous predictions are obtained via past budgets (all at HM Treasury). OBR also publish a “fiscal report” (I forget the exact title) twice a year, complementing the budget and the autumn statement
      That should keep you occupied for a little while … and I wish you well in your candidature!

      • Jeremy_Preece

        Thanks

    • aracataca

      Good post. Have a look at this article on LL and the comments.

      http://labourlist.org/2013/01/borrowing-is-rising-under-the-tories/

      The fact that Cameron is coming out with false statistics that would shame a double glazing salesman is appalling but sadly not surprising. He lies with monotonous regularity at PMQs.

      Remember how Grant Shapps, AKA Self-styled Internet Guru ‘Michael Green’, got blackballed by Google for practices that went against their code of conduct? Not sure whether he was involved with the concept and script for this PPB (though as party chairman he probably was), but it seems to show the same disregard for spiv-like disregard for truth and integrity that got him in trouble with Google.

      • aracataca

        I wonder whether because the man Cameron calls ‘the Master’ – ie Tony Blair – was branded a liar, maybe Cameron thinks that makes it OK for him to lie – perhaps in his warped way he thinks that’s one factor that makes a pragmatic and effective Prime Minister.

        I know it’s not a popular view, but I don’t think Blair did lie about WMDs – rather, he was given poor intelligence which he wanted to believe. He was no doubt misguided but he was not a liar, but let’s not open that can of worms – Miliband has made it clear he was always against the war in Iraq and has drawn a line under all that.

        Cameron’s continuous lying does indicate a very flawed and dangerous personality.

        • Jeremy_Preece

          Thanks aracataca. By the way I am also with you on our Tony. Again without wishing to open up old wounds I didn’t like Sadam very much and even if he didn’t actaully get caught with the WMD he had invaded another country and caused a world war in the early 1990′s, and he certainly did leave a lot of evidence of the way he treated his opposition – i.e. the mass graves etc.

  • PeterBarnard

    That’s a monumental comment, Jobless D, and I have added my “like” ; just a couple of remarks, if I may :

    • JoblessDave

      Thanks for your comments (and the corrections, particularly on historical public debt :) ) Peter, and a Happy 2013 to you too. I have had to revert to this slightly older account as my other one (posting under “David”) mysteriously stopped allowing me to login around the year end.

      Sadly this has also had the effect of putting me back on moderation, so hopefully this message will come through before this topic “falls off” the front page.

      I guess the one thing I would point out is the relative danger of using “pure” statistical measures such as PSND : GDP to work out the maximum potential public debt as a) it does not incorporate factors related to the growth of “off balance sheet liabilities” which have been an unhealthily growing interest of governments of all hues over the last 30 years, and b) it may be necessary to pay greater attention to the “soft” factors that influence investor’s desires to invest (and this will always be loosely related to comments made by the IMF, ratings agencies and others, all of which appear to imply we are towards the upper end of our debt ceiling given our current situation, in contrast to the figures your correctly quote).

  • jaime taurosangastre candelas

    What is this vast increase being spent upon? Many departments have cuts, and the increase in welfare payments is dwarfed by the size of the increase in debt by an order of magnitude, so it is not that. Any increase in annual “Total Managed Expenditure” figures for some departments do not add up to the amount either. Capital expenditure is being cut, as well.

    Is it an effect of the financial interventions to bail out the banks? I thought that was in many senses “virtual” money, as the majority is in the form of loan guarantees and not proper expenditure.

  • robertcp

    It is a bit worrying that the Prime Minister got the National Debt mixed up with the deficit. It was inevitable that the National Debt would rise during this Parliament but it was not inevitable that the deficit will probably increase during the 2012/13 financial year.

  • rekrab

    In the year of our lord 2010, a new tranny of elitist abusers would once again hold power and throw a dark cloud of austerity over my peoples nation once again.What goes round comes around and what happened before will happen again but this time let our hearts be strong and our minds be steadfast and let us rise above the ideals of elitism for some and strike down the serpent of doom with the wisdom of goodness that compels us all to do the right thing at the right time. Alba be strong and may the brave weather and defeat those who would do us all harm.

  • Jeremy_Preece

    Thank you very much for that comprehensive answer JoblessDave :)

  • http://twitter.com/jackjoh01219520 jack johnson

    What’s new? They wouldn’t be Conservatives if they didn’t lie.

  • http://twitter.com/jackjoh01219520 jack johnson

    At the risk of over simplification I have always said that Conservative economics can not
    possibly work because they always rely on cutting workers pay.Take money from the worker then he has none to spend on your businesses. Tax take is lower and benefits
    always higher. Simples!

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