With the public finances, there has long been a glaring gap between rhetoric and reality. The Chancellor has been keen to use household imagery to outline our parlous economic state. At the Conservative party conference, he spoke about ‘paying off the country’s debts.’ Yesterday, David Cameron said that paying off the country’s debts was proving more difficult than expected. And if I had a pound for every time a Government minister spoke about the nation’s credit card, I’d probably be able to reverse the defence cuts.
Unbelievable though it may be for the public to believe politicians, the public appear to think (and who’s to blame them?) that the Government is making a concerted attempt to do what the above statements imply they are doing. A ComRes opinion poll undertaken on behalf of the Institute of Economic Affairs asked respondents whether they thought the Government intended to reduce, increase or keep constant the national debt. A huge 70% thought the government was reducing the national debt. Just 9% answered correctly that the national debt is set to increase (massively).
Then there are the so-called ‘savage cuts.’ So savage, that according to my calculations, expenditure will be a mere 7.8% HIGHER by the end of this Parliament in 2014-15 than it was in 2010-11 – a real terms cut of around 3%. Some departments are, of course, seeing large cuts, but only because debt interest payments are going up, and certain departments have been protected – the first problem of which would be exacerbated if borrowing was higher.
And what’s really happening to public debt? Well, it’s going up to the tune of around £500bn across this Parliament - or nearly £19,000 per household if we really want to ‘keep it real’.
The Government has therefore only itself to blame for wide misunderstanding about the public finances. They shift from talking about alien wonkish concepts like the ‘structural deficit’ on the one hand, to the use of the household debt metaphors on the other. The media obsess about whether the Government is going to meet its fiscal mandates as if these in themselves are somehow the promised land of Government policy. Others outline strategies for how deficit figures can be spun to retain credibility.
The whole message could, and should, be much simpler. Tell the public you will take the steps to balance the budget by a certain date. Leave the rest to the wonks and policy analysts. The markets want the Chancellor to show that he is committed to eliminate the public finance black hole – and the public deserve some honesty.