Deficit caused by economic crisis, says Channel 4

CashBy Mark Ferguson / @markfergusonuk

Yesterday Ed Miliband attacked the Tories as “deficit deceivers” for claiming that the deficit was entirely caused by Labour:

“My concern is that a great deceit designed to damage Labour has led to profoundly misguided and dangerous economic decisions that I fear will cause deep damage to Britain’s future. What is this deceit? It is that the deficit was caused by chronic overspending rather than a global financial crisis that resulted in recession and a calamitous collapse in tax revenues.”

The Tories have spent most of the past year trying to establish a media narrative that says Labour are to blame for the deficit. Once they had acheived that, it was just a small step to argue that “austerity” was needed to fix problems “caused by Labour”. So it’s pleasing that Miliband’s defence of Labour’s economic record has been so swiftly vindicated by the respected Channel 4 factcheck, who said last night:

“In fact, as the 2009 budget shows, what actually happened is that the Treasury’s own projections for the tax take plummeted. They had expected growth in revenue, but in fact they got a collapse. By 2009/10 they were taking in about £112 billion less than they had expected to. And that’s why they needed to borrow so much. Yes, spending went up a bit. But really, they just had a lot less income than they had planned for…the drop in tax receipts triggered by the economic crisis is what’s behind the bulk of the £149bn deficit.”

Ed and his team will be pleased to see that the factcheck team agree that his argument stands up to scrutiny, but the difficult part is still to come – Miliband will need to hammer away at this point over the coming months – and tie in the VAT increase to his attacks – if he is to make Tory deception over the deficit receievd wisdom in the way that “there’s no money left” and Labour overspending already is for the public at present.

Update: Channel 4 have given us a “fiction” rating for this article, which seems a little unfair. Whilst factcheck were careful to state that they agree with both Miliband and Cameron, saying “the drop in tax receipts triggered by the economic crisis is what’s behind the bulk of the £149bn deficit” suggests that they do agree with Miliband, as well as agreeing with Cameron saying that Labour should have cut the deficit sooner – something he wasn’t advocating at the time.

No public sector broadcaster is ever going to back either major party on an issue which is so critical and divisive – but if you’re saying the bulk of the deficit was “triggered by the economic crisis”, then you would seem to be agreeing more with Miliband, than Cameron.

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