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Trusting David Cameron on the Economy Is Anathema... Here's Why

The national debt doubled, wages stagnating, insecure and low paid work rampant, living standards falling and basic quality of life - having a vocation, a home, a family, being able to eat - becoming ever harder to obtain. The barometers of real economic health - wage growth, household debt, government debt, and productivity - are all pointing the wrong way.

Expectations are traditionally low when it comes to politicians and trust. When exposed to their rhetoric we often function with a presumption of deceit before proven honest. A certain amount of scepticism is certainly healthy, after all trust should be something earned not assumed, and with regards to our current Prime Minister this would probably be the most prudent position to adopt.

Over this last 5 years David Cameron has demonstrated a prodigious flair for being fast and loose with the facts. I would even venture to suggest that he has taken the deceit practiced by a Prime Minister to exceptional levels. Or perhaps that's too harsh. Perhaps he genuinely believes everything he says. Only he knows and I cannot prove it either way. But what can be put to the test are the factual basis of his claims.

So let me do that.

On several high profile occasions - the 2014 Conservative Party Conference, a 2013 political broadcast and even during the leaders' debates - David Cameron has claimed his government to be "paying down Britain's debts". Both times he made this claim he was rebuked and reprimanded for doing so by the ONS, the UK's official statistics authority, because quite plainly, this is just not true.

The UK national debt has categorically not been reduced. It has risen dramatically from £800 billion in 2010 to £1.6 trillion today, an increase of £800 billion, double. This is more debt than Gordon Brown accumulated in 12 years. This is even more than every post-war Labour government combined.

The idea that a vote for David Cameron is a vote against debt is farcical.

In a letter sent to the Prime Minister's Chief Of Staff, the head of the UK statistics authority Andrew Dilnott had to call out David Cameron and clarify that debt had in fact risen. The political impact and consequence whether a genuine mistake or not, was obvious - to misrepresent the government's record on borrowing and debt. Despite this official reprimand the Prime Minister has never apologised or acknowledged the error.

And it would seem our Prime Minister is a repeat offender. In July 2014 the Press Complaints Commission found he "significantly misrepresented" official job statistics in a Daily Telegraph article. David Cameron had described certain changes in employment figures as evidence of "new jobs", when they were in fact not new jobs at all. The Telegraph offered to print a correction, but the offer was withdrawn after objections from the Prime Minister.

Late last year a new claim began circulating in the media. That Britain's budget deficit - the annual gap between government spending and government income - had been 'halved'. Prior, David Cameron had been promoting a more accurate claim, that the deficit had been brought down by a third. But since last Autumn, the Conservatives decided to abandon the measure which they had been using for the last 5 years. They suddenly adopted a relative measure - the deficit as a percentage of GDP.

So why the change?

Quite simply, to distort public perceptions in their favour, to make their failure to eliminate the deficit sound less pathetic, less embarrassing, to exaggerate the extent to which the deficit has been reduced via statistical chicanery. Even if the 'halved' measure were to be accepted, that would mean George Osborne has only achieved what Labour had pledged to do in 2010, a pledge he derided at the time. Even Fraser Nelson the right wing pundit from the right wing Spectator could not deny this -

" the standards they set themselves, this government has failed. It came to power promising to put Britain's finances in order. By any sensible measurement it has signally failed to do so....the Prime Minster and his Chancellor are scurrying around the country misleading people. Never mind the national debt, the deficit has not been cut in half over the course of this parliament."

This tendency to cook the books was also exhibited in the formulation of new tax summaries, sent out to the public. The stated intention was to give people a more accurate picture of how tax payer pounds are used. In reality it does the complete opposite. The summaries were based on a disingenuous and unorthodox redefinition of what the government, and we the wider public, would commonly, reasonably define as welfare.

Would you consider the pensions of nurses, teachers and fire fighters as welfare? Because that is exactly what these summaries do.

Peculiar, but not without purpose. The effect of this redefinition was to dramatically ratchet up the total figure defined as welfare spending, something which the public already significantly overestimate.

But perhaps the gravest deceit of all is this.

Throughout the last 5 Years David Cameron has done his utmost to attribute all of Britain's economic woes to Labour policy. Terms such as "Labour's Great Recession", "Labour bankrupted the economy" and "Labour wrecked our economy" have featured prominently, becoming tory mantra. Yet these claims simply do not correspond with the evidence, and a faithful social economic history.

A recap for purposes of clarity.

The abolition of financial regulations during the 1980's in both the US and UK led to the creation of an array of new financial products such as currency derivatives, credit-default swaps, and mortgage-backed securities. By 2008, the derivatives market amounted to $680 trillion, credit-default swaps $50 trillion, and mortgage-backed securities $3 trillion.

In the same year that boom turned to bust and the world experienced the worst economic crisis since the Great Depression.

The roots of decay lay in the collapse of US subprime mortgage markets. Loans were given to individuals on very low or unstable incomes. They began with low interest rates that increased significantly after an introductory period. This local, US collapse had far reaching effects because brokers had sold the repayments of these mortgages to investment banks. In turn they had pooled the loans and packaged them into mortgage-backed securities. They then resold the risk attached to these securities to financial institutions.

Because of the convoluted and labyrinthine life cycle of these debts, when the subprime mortgage market deteriorated, nobody knew which financial institutions were holding the bad loans, the toxic assets. They had all been bundled together.

Banks stopped lending. Companies couldn't borrow money. Consumers stopped spending. Jobs and businesses were lost. The stock market crashed and banks were eviscerated.

Successive governments both left and right, had been seduced by the quick, short term wealth creation opportunities that the world of financial services offered. It was Thatcher who put in place a system of deregulation, that ended restrictive practices, and a framework of safeguards that had been developed after the 1930's crash.

The changes led to a massive boom, but also a massive accumulation of personal and corporate debt, debt being the lifeblood of the financial system. The removal of exchange controls increased the UK's exposure to fluctuations in overseas markets, particularly the US.

UK entities were now allowed to hold a high proportion of their assets in US mortgage securities. Banks were allowed to buy stockbroking firms, market makers, insurance companies and investment managers. Banks no longer had to restrict their lending to the amount of deposits they could attract. As the boundaries between banking and other services became blurred, risky business models and growth strategies were developed which depended on the cross-selling of products.

If it was possible for any one individual to claim ownership of this spectacular crash and the economic wildfire it created, it would probably be Margaret Thatcher. By stripping back the precautions of a regulatory framework, she created the conditions and the spirit which fuelled this form of casino hyper capitalism. At the time she was lauded precisely for this by those on the right, regarded as radical, innovative, pioneering.

From the mid 1980's right through to 2008, a political consensus existed that continuation of hands off, light touch regulation was the right policy. Labour governments were certainly complicit in maintaining that approach. But for the Conservative Party to claim a position of foresight is absurd, and to criticise, grossly hypocritical.

George Osborne and David Cameron were demanding even less regulation, not more. They even went to the trouble of erasing the entire pre 2010 archive of speeches and policy statements from the official Conservative website, so as to restrict access to evidence of this stance. It is entirely reasonable to presume that if they had been in charge, things would have been even worse.

Fuelled by the cost of almost £1 trillion in state bail-outs and guarantees the UK's national debt saw a rise of more than 70% from pre 2008 levels.

In the years preceding the financial crisis, the Labour government did not borrow irresponsibly, it was not profligate, as a country we were not living far beyond our means. In 2007 before the banking crisis, government debt as a percentage of GDP was near the lowest level in a century. In 2010 Britain was categorically not on the brink of a Greek-style crisis - to give some historical perspective, the last time a UK territory defaulted on state debt, it was England during the early 14th Century.

Between 2009 - 2010, the UK economy had been put back on a growth trajectory. A recovery was in place. It was when the Coalition came to power that the economy was torpedoed, and a slump ensued, which then became a downturn even worse than the Great Depression of the 1930s. This has been the slowest recovery in British history.

David Cameron sites low interest rates as vindication of Coalition policies. But in reality this is not down to his government's stewardship of the economy. Debt crisis countries like Italy and Spain can borrow at lower rates than the UK. David Cameron sites a belated return to growth as vindication of Coalition policies. But in reality UK productivity is lower than in 2007, and he has presided over an unprecedented absence of productivity growth not seen since World War Two. Before David Cameron came to power productivity growth had been consistent for 40 years, but has flatlined since 2010.

Household disposable income increased by a paltry 0.2% in December 2014 above May 2010 levels - the first time living standards increased under the coalition government - it took 4 years. Despite real wages increasing in the last 6 months, this has been largely a consequence of lower oil prices. Average real wages are 2% less than five years ago, and when we analyse different income groups, it becomes apparent that in those 5 years, the top 10% have experienced an increase in wages of 3.9%, and the remaining 90% have seen a decline of 2.4%. The majority of people aren't feeling richer because quite simply they aren't.

Economic growth requires either increased spending or increased investment. Investment has been low, 20 per cent below 2008 levels, and the amount of cash stashed on corporate balance sheets, relative to debt, is at a 50-year high.

So if growth is not coming from increased investment or from increased spending as a result of higher incomes, it must be from coming the use of household savings and household debt. And indeed, household borrowing is increasing at £1 - 2 billion per month.

Between 2012-17 Britain's savings ratio is forecast to drop from 7.2 per cent of income to 3.3 per cent, a decrease of more than half. The evidence logically points to the conclusion that the current UK recovery has been fuelled by increased household debt and depletion of household savings.

David Cameron's claim that his party are trustworthy stewards of the economy, a party of economic credibility and competence is fundamental to the Conservative campaign strategy. When we scratch the surface of these claims, it doesn't take long to ascertain that the reality does not match the rhetoric. The Conservative's are asking voters to judge them on their track record - when I look at their track record I see missed targets, deceit and broken promises.

The national debt doubled, wages stagnating, insecure and low paid work rampant, living standards falling and basic quality of life - having a vocation, a home, a family, being able to eat - becoming ever harder to obtain. The barometers of real economic health - wage growth, household debt, government debt, and productivity - are all pointing the wrong way.

David Cameron and George Osborne are the poison, not the cure.

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