The Overspending Myth Finally Exposed By the IMF, OECD, Treasury, ONS, OBR and IFS

The Overspending Myth Finally Exposed By the IMF, OECD, Treasury, ONS, OBR and IFS

"I never gave anybody hell! I just told the truth and they thought it was hell"

― Harry S. Truman

As more and more people discover the truth on social media, the deficit myth promoters know the game is up. They clearly underestimated people's ability to discover the truth and their enthusiasm to share it with others.

Below are the four overspending claims. The eight facts come from the Treasury, ONS, OBR, IMF, OECD and IFS. The claims are:

Claim One

When will you apologise for running a structural deficit even before the recession the recession?

Fact one, apologise for what for being a deficit denier? Structural deficits, budget deficits and government borrowings PSNB have occurred in nearly every year since records began. The fact is very rarely have we had surpluses - OBR page 104. According to this claim, we have been overspending for two centuries - nonsense. Also read Claim one.

Fact two, after ten years of growth in 2007 Labour had a structural deficit of virtually zero at - 0.4% and also budget deficit of - 0.4% OBR page 104.

Fact three, the IMF say the last time we Conservative were in office during 1979 - 1997 we had 18 structural deficits in 18 years. Therefore, we Conservatives also ran structural deficits before all three recessions that occurred during 1979 - 1997. Moreover, it is clear we never fixed the roof whilst the sun was shining.

Claim Two

When are Labour going to apologise for overspending?

No self-respecting economist would simply cherry pick a few years increase in the deficit during 1997 - 2007 and then have the Chutzpah to declare there was overspending in all of that period. This type of selective analysis is not only amateurish but it is also transparently biased and misleading. As in any other field or subject, the entire alleged period would have to be sampled before any such claim could be validated. The facts below are derived from the Treasury and ONS data collected by the OBRpage 104.

Fact four, in the alleged period of Labour overspending 1997 to 2007 the structural deficit was cut by 82%, the budget deficit by 85%, PSNB borrowings by 32% and Debt by 16% - read claim two.

Compare this to our mythical outstanding financial record during 1979 and 1997 and you discover we Conservatives are in no position to lecture Labour.

Hence, in 1979, we inherited a Budget deficit of - 1.8% and by 1997 we actually increased it to - 2.7%, which is a huge increase of +50%. Likewise, we also increased the structural deficit by +29% but cut borrowings PSNB by only 17% and we cut the debt by a mere 3%.

Fact five, 1997 to 2007 Labour's average budget deficits was virtually zero at - 0.1% per annum, the structural deficits was also - 0.1% whilst PSNB borrowings was mere 0.9%.

In contrast, our average budget deficit per annum was much higher at -1.9%, the structural deficit was a mere - 0.9% and borrowings PSNB was much higher at 3.3%.

Claim Three

If Labour were not running a structural deficit in the run up the recession, we would not have inherited the mess they created.

A structural deficit of virtually zero of - 0.4% or a budget deficit of also - 0.4% in 2007 was not the cause of a high budget deficit of - 7.6% and PSNB borrowings of 11.1% in 2010 - OBR March 2011 Page 141

Fact six, the IMF concludedthe UK deficit increased because of a large fall in income GDP and output caused by the global banking crisis.

Fact seven, a recession causes the deficit to increase because as income falls; tax revenues also decline; consequentially as businesses cuts back the unemployment rate rises, which causes government expenditure to increase because more people start to claim unemployment benefits and as result the budget deficit rises. This automatic chain reaction occurs in every recession and it occurred in 2008 triggered off by the global banking crisis - its basic economics.

Finally, it also increased because of the bank bailouts and the fiscal stimulus - read claim three.

Claim Four

Labour was running the biggest structural deficit in the G7 before the recession.

Hence, Andrew Marr asked Ed Balls:

"It is true to say, is it not, that in the run-up to the financial crisis Britain was running the worst structural deficit of any of the G7 countries?" - Marr 30th January 2011.

Fact eight, it was misleading to say: "It is true to say, is not" because at that time (January 2011) the IMF and OECD said the UK did not have the biggest structural deficit. TheIMFstated that the 2006 structural deficit was the third highest at - 2.6% and in 2007 it was the second biggest at - 3%. The OECD concluded the same thing as confirmed by the IFS who stated:

"On the OECD measure, the UK had a structural deficit of 3.5% of national income in 2007. This was the third highest among the G7 countries and the sixth highest among the 26 OECD countries" - IFS page 10 paragraph 3.

The 2006 and 2007 structural deficits was later changed to the biggest only when the IMF published its October 2012 data because the ONS then decided to double its figures - read claim four

So as not to mislead, it is very important to point out there are two structural deficits. The first is the actual measure based on the budget deficit, which George Osborne plans to eliminate, and was virtually zero at - 0.4% in 2007. The second is the OECD and IMF measure based essentially on the ONS PSNB borrowings figure.

To conclude, the claims simply fail to stand up to the facts and even if a few or all of the Labour MP's admit to overspending; it does not change or nullify the facts from the Treasury, ONS, OBR, IMF, OECD and IFS.

The overspending myth is over because the facts are not going away. As wise man once said:

"Facts do not cease to exist because they are ignored"

― Aldous Huxley

Hence, if like me you believe people are entitled to the truth; share this on Facebook, Twitter, blogs, WhatsApp and email; so the truth can be discovered by all; now and in the future. As the Bard said:

"Tell the truth and shame the devil"

― William Shakespeare


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