The deficit might be falling but debt is rising and Plan B isn’t working. Try Plan A.
Aug 2012 28

The Government’s plan is to increase national debt by £600 billion over this Parliament, from 2010 to 2015. Despite this fact, just 10 per cent of the public understand that debt is planned to go up, according to a ComRes poll for the Centre for Policy Studies (CPS). Incredibly, 47 per cent of us think that the Government plans to cut national debt by £600 billion – the complete opposite of the reality.  Meanwhile, 12 per cent think it plans to keep national debt at the same level and the remaining 32 per cent said they didn’t know.

The Government does plan to cut the deficit, or the amount of additional borrowing it piles onto the national debt each year. So it does intend to make the national debt bigger at a slower speed, with steadily smaller increases each year. But the Government’s Budget plans are clear: they plan to borrow even more money and increase the debt every year until the next election in 2015.

So why are so many people so factually incorrect in their understanding about the Government’s plans for debt? As this great CPS video shows, it could be because the most senior members of the Government, including the Prime Minister and the Chancellor of the Exchequer, have not exactly been entirely accurate about it when talking to the media.

Before the election, Gordon Brown told Gillian Duffy that he had a plan to “cut the debt in half over the next four years”. Meanwhile, George Osborne told a conference  that “we should never take our eyes off the prize: a British economy free from its debt.”

Such talk is downright misleading. It’s no wonder the public have been hoodwinked into thinking that politicians are doing something about our soaring debt when the truth is that all they disagree about is how fast it should keep on climbing. And it’s also no surprise why the talk is only really about how fast we should be hiking up our debt.

Despite the rhetoric about cuts and despite already being almost half way through the current Parliament, the Government has only managed to implement six per cent of the cuts to the proportion of national income consumed by current expenditure that it had planned.  Meanwhile, it has made much faster work of hiking taxes, having carried out over 60 per cent of its tax raising plans. And that’s why the British economy is going nowhere.

Spending is too high. Taxes are too high. Plan B isn’t working. It’s time to try Plan A.

Rory is the Research Director of the TaxPayers’ Alliance. Rory’s work is focused on tax policy and economics, with a particular emphasis on tax simplification.

  • Nick

    Neither is correct.

    Repeat after me. Debt is not the same as borrowing.

    Again, just to drill it in. Debt is not borrowing.

    It’s just part of the debt figure.

    Where are all the other debts?

    State pension
    State second pension
    Civil service pensions
    Post office pensions
    Local government pensions black hole.
    Expected losses on the guarantees
    Nuclear decomissioning

    The true debt is going up at 400 bn a year, because almost all those debts are linked to inflation. Inflation that has been caused by BoE policy.

    So there is no choice about plan B. The B stands for Bankruptcy, because the state is bust.

    It is going to, and it is defaulting on its debts.

    By ignoring the debts that matter to most people you condemn them to being the victims.

    • blarg1987

      To play devils advocate some of those are not debts per say and are impossible to calculate to give an example to local government pension is heavily invested in the stock market, property and other assets which in the short term have taken a hit from the financial crisis (as have all investment funds). Also several of these things are guarantees rather then debts, be like you being the guarantor on someone else’s mortgage, does that mean you include their whole mortgage debt as yours?
      Factoring these things into the calculations I think the public sector debts will be a lot less then 400 bn a year. Granted things like PFI etc are not good, But we approved of it as it meant short term lower taxes.