The source of the deficit

There are innumerable claims from the Coalition government and its supporters that the source of the public sector deficit is Labour’s over-spending. But one graph, on the Treasury’s own website, demonstrates that assertion is untrue. Scrolling down to the bottom of the screen reveals a chart showing public outlays and public sector incomes since FY1998/99 and the difference between the two; the level of public sector net borrowing.

Difference-between-UKs-spending-and-income-over-the-last-ten-years

What the chart shows is a widening in the deficit in FY 2008/09, which coincided precisely with the onset of the recession in Q2 2008. The deficit is a recession effect.

There are two direct recession effects on government finances. For economies with some degree of social safety net spending rises automatically as more people require welfare. For all economies with a tax regime, tax revenues decline as activity falls. In this particular case, public sector current expenditure rose by £15.4bn (June 2010 Budget Redbook, Table C16).

This is a modest rise of 2.8%. At the same time public sector current receipts fell by exactly the same amount, £15.4bn (Treasury Databank, C4, http://www.hm-treasury.gov.uk/psf_statistics.htm). They fell further again in the last FY, for a cumulative fall of £34.6bn over the 2-year period.

But, as we see from the chart, prior to the recession both revenues and outlays were rising as the economy expanded. From the time when Labour was elected in 1997 to the recession at the beginning of 2008, public sector current receipts rose by an annual average 6% (Databank, C1). But the trend growth in government spending over that period was 5.5% (Databank, B1).

To extrapolate, if the recession had not occurred and those trends had been maintained, spending would have been £597.5bn in the last FY. Instead, the outturn was £600.6bn, just £3.1bn higher. On the same trend basis, current receipts would have been £617.1bn.

But the outturn in the last FY was £514.6bn, a shortfall of £102.5bn. This is 66% of the entire public sector borrowing requirement of £154.7bn, while the increase in spending above trend is just 2%. The deficit is overwhelmingly attributable to plunging taxation receipts. (In the chart, the cost of the bank bail-out is included in public secto rborrowing- this is the other major source of the deficit.)

One of the Coalition’s arguments is that the Labour governments allowed spending to rise above taxation receipts over a prolonged period, well before the recession began. As the chart shows, there is indeed a deficit beginning in the FY 2002/03.

But this was after 4 years of surpluses. And again, it is important to look at the source of this deficit. From FY2002/03 to FY2007/08 (that is, before the recession) public sector current expenditure averaged 37.3% of GDP, whereas during the Thatcher years (FY 1979/80 to FY 1989/90) public sector current expenditure averaged 39.7% of GDP (Redbook, C16). Labour spent less than Thatcher.

The deficit from 2002/03 onwards is because Labour taxed too little. Current receipts averaged 37.6% during Labour’s entire period of office, compared to 42.4% under Thatcher. Labour taxed much too little, much less than Thatcher.

Now, with an extra 4.8% of GDP in tax revenues under its belt (equivalent to £65bn currently) a Labour government could engage in a significant programme of investment , which remains the key to long-term prosperity. It would revive businesses and get people back to work, and get both back paying taxes, the key to reducing the deficit.

http://twitter.com/jaqi/status/22899238348 jaqi

RT @leftfootfwd: The source of the deficit: http://bit.ly/9vtPfK
http://twitter.com/yorkierosie/status/22899295077 yorkierosie

RT @leftfootfwd: The source of the deficit http://bit.ly/9vtPfK
http://twitter.com/shamikdas/status/22899425101 Shamik Das

RT @leftfootfwd: The source of the deficit: http://bit.ly/9vtPfK
http://twitter.com/goodoldmj/status/22899439609 Martin Johnston

Fascinating stuff. "Labour taxed much too little, much less than Thatcher" RT @leftfootfwd: The source of the deficit: http://bit.ly/9vtPfK
http://twitter.com/jenni_jackson/status/22899623203 Jenni Jackson

RT @leftfootfwd: The true source of the deficit http://bit.ly/9vtPfK
http://twitter.com/rosshaffenden/status/22900563559 Ross Haffenden

RT @yorkierosie: RT @leftfootfwd: The source of the deficit http://bit.ly/9vtPfK
http://twitter.com/their_vodka/status/22901676660 their_vodka

RT @yorkierosie: RT @leftfootfwd: The source of the deficit http://bit.ly/9vtPfK
http://twitter.com/lindy43lyn/status/22902077487 Lynda

RT @leftfootfwd: The source of the deficit http://bit.ly/9vtPfK
http://twitter.com/thekingidiot/status/22903095408 ‘king idiot

RT @leftfootfwd: The source of the deficit http://bit.ly/9vtPfK
http://twitter.com/neilrfoster/status/22903748825 neilrfoster

Must-read article on the real cause of the deficit from ace economist. http://www.leftfootforward.org/2010/09/the-source-of-the-deficit/
http://twitter.com/othertpa/status/22904130130 Other TaxPayers Alli

Essential analysis: The REAL source of the deficit: http://bit.ly/9vtPfK (via @leftfootfwd)
http://twitter.com/trewellard/status/22904225664 Eric Smith

http://bit.ly/9Wl1qr My dog Tammy loves to lick my muffin baking case really clean.
http://twitter.com/rooftopjaxx/status/22904610938 Rooftop Jaxx

RT @OtherTPA: Essential analysis: The REAL source of the deficit: http://bit.ly/9vtPfK (via @leftfootfwd)
http://twitter.com/richardwatts01/status/22905377514 Richard Watts

RT @neilrfoster: Must-read article on the real cause of the deficit from ace economist. http://bit.ly/acKVv3
http://twitter.com/abidoodah/status/22905525338 Marilyn Jessop

RT @OtherTPA: Essential analysis: The REAL source of the deficit: http://bit.ly/9vtPfK (via @leftfootfwd)
http://twitter.com/janewatkinson/status/22905991531 Jane Watkinson

Man that's a bloody good blogpost! RT @leftfootfwd: The source of the deficit http://bit.ly/9vtPfK
http://twitter.com/jameshaslam78/status/22906577178 James Haslam

RT @leftfootfwd: The source of the deficit: http://bit.ly/9vtPfK
http://twitter.com/publicsectorman/status/22906651711 PSM

RT @leftfootfwd: The source of the deficit http://bit.ly/9vtPfK
http://twitter.com/sms_policywatch/status/22907739010 SMS PolicyWatch

RT @leftfootfwd: The source of the deficit: http://bit.ly/9vtPfK
http://twitter.com/bangorunilabour/status/22908084468 Bangor Uni Labour

Labour's spending not to blame for deficit http://fb.me/H2ZtVv9k
http://twitter.com/yerlibird/status/22908249117 Baris Yerli

RT @leftfootfwd: The source of the deficit http://bit.ly/9vtPfK
http://twitter.com/atlantean7001/status/22908890549 Stuart Vallantine

RT @yerlibird: RT @leftfootfwd: The source of the deficit http://bit.ly/9vtPfK
http://twitter.com/jameshaslam78/status/22909124287 James Haslam

RT @OtherTPA: Essential analysis: The REAL source of the deficit: http://bit.ly/9vtPfK (via @leftfootfwd)….>labour spent less than maggie
Jim

That there is a deficit at all might have been pretty much unavoidable with the recession; as you point out, the combination of lower tax receipts and higher welfare payments account shifted the spending/income balance considerably.

But the size of the deficit, whether you think that’s a problem or not, *is* partly down to Labour. Had they not spent nearly as much or more than they brought in in the years prior to the recession, that deficit might not be so large. You don’t at all have to believe that’s a problem, but it’s something to consider.
http://twitter.com/themeekstar/status/22912654164 James Meeks

RT @leftfootfwd: The source of the deficit: http://bit.ly/9vtPfK
http://twitter.com/noukcuts/status/22914267873 No UK Shock Doctrine

RT @OtherTPA: Essential analysis: The REAL source of the deficit: http://bit.ly/9vtPfK (via @leftfootfwd)
http://twitter.com/beachybooks/status/22914489028 Beachy Books

RT @noUKcuts: RT @OtherTPA: Essential analysis: The REAL source of the deficit: http://bit.ly/9vtPfK (via @leftfootfwd)
Steve

Actually what the graph clearly shows is from 2002 onwards the government starting spending more than their income – what is generally called running a defecit. As this defecit was funded by by borrowing it was clearly going to be a disaster if the economy turned down which it duly did, regardless of Gordon’s claim to have got rid of boom and bust. the graph shows that despite falling revenue they kept increasing spending. Their choice, a prudent government would have reigned in spending as revenue fell. And all the head in the sand froom Labour will not obscure the truth.
http://torylies.blogspot.com Richard Blogger

I would accept this analysis if it wasn’t for this bit:

From FY2002/03 to FY2007/08 (that is, before the recession) public sector current expenditure averaged 37.3% of GDP, whereas during the Thatcher years (FY 1979/80 to FY 1989/90) public sector current expenditure averaged 39.7% of GDP (Redbook, C16). Labour spent less than Thatcher.

What you are saying is that the average public sector expenditure as a %age of GDP are:

FY2002/03 to FY2007/08 37.3%
FY1979/80 to FY1989/90 39.7%

The problem is, as you mention, 02-08 are growth years, yet 80-81 and 90-91 (included in the “Thatcher Years”) were recessions. Can you compare like with like?
http://socialisteconomicbulletin.blogspot.com/ Michael Burke

Richard Blogger,

There seems to be a misunderstanding. The Thatcher years cited were from FY 1979/80 to FY 1989/90 *inclusive*. This was a period of policy-induced recession followed by growth.

For an absolute like with like comparison, Labour years versus Thatcher years was:

Public spending % of GDP

FY1997/08 to FY2009/10 36.7% (Labour)
FY1997/80 to FY 1989/1990 39.7% (Thatcher)

(Redbook, Table C16)
Mr. Sensible

These cuts being embarked on by the ultimate faulse economy.

Throwing people out of work means a bigger welfare bill, and cutting back on public sector contracts will effect businesses, thus both increasing the welfare bill and decreasing tax receipts.

That won’t do a lot for the deficit, will it.

Did Labour tax too low? Possibly. But the Con Dems have to accept that these cuts will not help the economy, jobs, or the deficit.
http://torylies.blogspot.com Richard Blogger

@Michael Burke

Thanks, so public spending was still more under Thatcher. Just to be complete, what about the tax revenue?

And for an extra bonus point, if Brown had kept the 22% lower rate income tax level he inherited, what effect would that have had on the graph?
http://twitter.com/wendybradley/status/22922069789 Wendy Bradley

"The deficit is overwhelmingly attributable to plunging taxation receipts" http://bit.ly/9vtPfK
http://twitter.com/futureisnowstuc/status/22922123265 STUC young workers

RT @leftfootfwd: The source of the deficit: http://bit.ly/9vtPfK
http://twitter.com/mauvedeity/status/22923350525 mauvedeity

RT @OtherTPA: Essential analysis: The REAL source of the deficit: http://bit.ly/9vtPfK (via @leftfootfwd)
http://socialisteconomicbulletin.blogspot.com/ Michael Burke

Richard Blogger.

Spending was an average 36.7% of GDP under Labour, 39.7% under Thatcher.

Tax revenues (in proportion to GDP) were:

FY1997/08 to FY2009/2010 (Labour) 37.6%
FY1979/80 to FY1989/1990 (Thatcher)42.4%

(Treasury Databank, Table C1)

Taxes were much lower under Labour than under Thatcher. One of the key aspects of that was that, during her time in office, there was a North Sea Oil bonanza. Govt. revenues were equivaent to over 17% of GDP uring her time in office. That will not be repeated; Britain is a net importer now of both oil and (early this year) natural gas.
JoshC

“Actually what the graph clearly shows is from 2002 onwards the government starting spending more than their income – what is generally called running a defecit. As this defecit was funded by by borrowing it was clearly going to be a disaster if the economy turned down which it duly did, regardless of Gordon’s claim to have got rid of boom and bust. the graph shows that despite falling revenue they kept increasing spending. Their choice, a prudent government would have reigned in spending as revenue fell. And all the head in the sand froom Labour will not obscure the truth.”

Steve, revenues only fell when the recession started so the central theme of the blog post, that the Tories are being less than truthful when they blame the spending on the public sector over Labours 13 years for the recession, is still valid.

Spending increased largely BECAUSE of this as the banks were bailed out to prevent a worse catastrophe and more people claimed benefits as they lost their jobs, which also put an added burden on the public sector. Are you actually saying that Labour should have done what no other country affected by this global recession did and slash it’s public spending instead of using that spending to cushion the economy? Not bailed out the banks but instead let them foreclose on a million mortgage deals instead? Not protected certain industries with stimulus packages? Cut the public sector at the very time more people needed it? Not learn a thing from the 1930s?
http://twitter.com/annafdd/status/22951076327 Anna Feruglio

RT @wendybradley: "The deficit is overwhelmingly attributable to plunging taxation receipts" http://bit.ly/9vtPfK
http://twitter.com/tonydowling/status/22956997189 Tony Dowling

RT @leftfootfwd: The source of the deficit http://bit.ly/9vtPfK
Tony

You say that it was fine to create a deficit in 2002 because of the time when Labour was following the conservatives spending plans had created a surplus…

Actually that surplus was paying down the debt as Keynes prescribed so that when the economy does start it’s inevitable down turn the country can safely create a larger safety net and protect Jobs in the private and public sector without cuts. Unless you’re arguing that the state shouldn’t help protect the economy during a recession?….

You also compare the economy of Thatcher to the time of Labour. For starters the Tories inherited an economy in the toilet, that seems to be a familiar picture for Labour. Secondly the global economy during the time was nowhere near as benign as it was under Brown, and that benign economy is something thats not going to occur again for a long time.

So basically the deficit is Labours creation with Brown spending the futures ‘fiscal stimulus’ when the economy was at it’s strongest. It’s no wonder he tried so hard to lie about the abolition of Keynes and economic cycles. And its such a shame that the media was complicit in his lie.
http://twitter.com/_thalamus/status/22960106666 Will Tisdale

RT @leftfootfwd: The source of the deficit http://bit.ly/9vtPfK
Ash

Steve -

“from 2002 onwards the government starting spending more than their income – what is generally called running a defecit. As this defecit was funded by by borrowing it was clearly going to be a disaster if the economy turned down which it duly did”

This is fair comment – the government could have chosen either to spend less or tax more, during good years, rather than borrowing. (Though the size of the deficit they were running and its role in putting us in this current pickle have been ludicrously overstated)…

“the graph shows that despite falling revenue they kept increasing spending. Their choice, a prudent government would have reigned in spending as revenue fell”

…but this isn’t right. Spending automatically rises when revenue falls during a recession, because tax revenues fall and welfare payments rise; and a bit of discretionary spending to stimulate growth at such times is also generally regarded as a prudent investment. (Even the Tories weren’t calling for spending to be cut *during* the recession – that would have been crazy.)
http://twitter.com/othertpa/status/22962554739 Other TaxPayers Alli

So good I'm tweeting it again – the REAL source of the deficit: http://bit.ly/9vtPfK (via @leftfootfwd)
http://twitter.com/nathanjharris/status/22963119889 Nath Harris

RT @OtherTPA: So good I'm tweeting it again – the REAL source of the deficit: http://bit.ly/9vtPfK (via @leftfootfwd)
http://twitter.com/guyclapperton/status/22963153364 GuyClapperton

RT @johnprescott: So good I'm tweeting it again – the REAL source of the deficit: http://bit.ly/9vtPfK (via @leftfootfwd)
http://twitter.com/bodiendoyle/status/22963169110 GARY ROWE

RT @OtherTPA: So good I'm tweeting it again – the REAL source of the deficit: http://bit.ly/9vtPfK (via @leftfootfwd)
http://twitter.com/thoades/status/22963213305 Paul Rhoades

The source of the deficit | Left Foot Forward – http://j.mp/bD7Ytl
http://twitter.com/ahiggitt/status/22963213926 Adam Higgitt

RT @OtherTPA: So good I'm tweeting it again – the REAL source of the deficit: http://bit.ly/9vtPfK (via @leftfootfwd)
http://twitter.com/adamramsay/status/22963248440 AdamRamsay

Some useful analysis of the real cause of the deficit: http://bit.ly/9vtPfK via @leftfootfwd & @OtherTPA
http://twitter.com/twistedwillow/status/22963417523 Sarah Long

RT @OtherTPA: So good I'm tweeting it again – the REAL source of the deficit: http://bit.ly/9vtPfK (via @leftfootfwd)
http://twitter.com/rogthornhill/status/22963549804 Roger Thornhill

Black is new Red. @OtherTPA and @leftfootfwd refuse to see shift from surplus to deficit in a boom http://bit.ly/9vtPfK nor logical solution
http://twitter.com/philrandal/status/22963597859 Phil Randal

RT @leftfootfwd: The source of the deficit: http://bit.ly/9vtPfK
http://twitter.com/hepy666/status/22963618676 Stuart Hepburn

LABOUR SPENT LESS THAN THE THATCHER YEARS… RT @johnprescott: RT the REAL source of the deficit: http://bit.ly/9vtPfK (via @leftfootfwd)
http://twitter.com/boredlondongurl/status/22963794940 Melissa Nicole Harry

RT @OtherTPA: So good I'm tweeting it again – the REAL source of the deficit: http://bit.ly/9vtPfK (via @leftfootfwd)
http://twitter.com/pronto4094/status/22963809375 Mike Everett

RT @OtherTPA: So good I'm tweeting it again – the REAL source of the deficit: http://bit.ly/9vtPfK (via @leftfootfwd)
http://twitter.com/carlhunt3r/status/22963867139 Carl Hunter

RT @OtherTPA: So good I'm tweeting it again – the REAL source of the deficit: http://bit.ly/9vtPfK (via @leftfootfwd)
http://twitter.com/waveydavey001/status/22963868167 WaveyDavey001

“@johnprescott: So good I'm tweeting it again – the REAL source of the deficit: http://bit.ly/9vtPfK (via @leftfootfwd)” – Interesting
http://twitter.com/spex357/status/22963873657 Brian lee

Labour spent less than Thatcher http://bit.ly/acKVv3 Its not news to me, i have always thought so
http://twitter.com/actuallyrobin/status/22963933001 ActuallyRobin

@johnprescott – Watching Saturday Kitchen and reading http://www.leftfootforward.org/2010/09/the-source-of-the-deficit/
http://twitter.com/phoenixbusiness/status/22964076845 Renu Marley

RT @OtherTPA: So good I'm tweeting it again – the REAL source of the deficit: http://bit.ly/9vtPfK (via @leftfootfwd)
http://twitter.com/paulduxbury/status/22964218187 Paul Duxbury

Be fascinating to hear Gideon explain why ConDems have lied about The source of the deficit http://tinyurl.com/2u8muga
http://twitter.com/idot/status/22964289319 tim lewis

RT @OtherTPA: So good I'm tweeting it again – the REAL source of the deficit: http://bit.ly/9vtPfK (via @leftfootfwd)
http://twitter.com/boarderstu/status/22964341880 Stu Sklinar

RT @OtherTPA: So good I'm tweeting it again – the REAL source of the deficit: http://bit.ly/9vtPfK (via @leftfootfwd)
http://twitter.com/leejamesbrown/status/22964405724 lee james brown

@edballsmp your speech on economy was excellent. This good too: the REAL source of the deficit: http://bit.ly/9vtPfK (via @leftfootfwd)
http://twitter.com/snim2/status/22964434568 snim2

RT @OtherTPA: So good I'm tweeting it again – the REAL source of the deficit: http://bit.ly/9vtPfK (via @leftfootfwd)
http://twitter.com/markrich/status/22964566373 Sir Marky

RT @OtherTPA: So good I'm tweeting it again – the REAL source of the deficit: http://bit.ly/9vtPfK (via @leftfootfwd)
http://twitter.com/jennybunker/status/22964678328 Jenny Bunker

RT @OtherTPA: So good I'm tweeting it again – the REAL source of the deficit: http://bit.ly/9vtPfK (via @leftfootfwd)
http://twitter.com/adamjennison/status/22964927136 Adam Jennison

RT @OtherTPA: So good I'm tweeting it again – the REAL source of the deficit: http://bit.ly/9vtPfK (via @leftfootfwd)
http://twitter.com/challi27/status/22964973271 Christopher Allison

RT @OtherTPA: So good I'm tweeting it again – the REAL source of the deficit: http://bit.ly/9vtPfK (via @leftfootfwd)
http://twitter.com/jamiea3/status/22965112590 James Mason

RT @OtherTPA: So good I'm tweeting it again – the REAL source of the deficit: http://bit.ly/9vtPfK (via @leftfootfwd)
http://twitter.com/docrichard/status/22965188908 DocRichard

The deficit is due at least in part to falling tax take from recession, not just Labour overspending http://bit.ly/bieo3q #noshock
http://twitter.com/garyhurdman/status/22965499422 Gary Hurdman

RT @OtherTPA: So good I'm tweeting it again – the REAL source of the deficit: http://bit.ly/9vtPfK (via @leftfootfwd)
http://twitter.com/jamesmills1984/status/22965590022 James Mills

RT @leejamesbrown: @edballsmp your speech on economy was excellent. This good too: the REAL source of the deficit: http://bit.ly/9vtPfK …
http://twitter.com/carlhunt3r/status/22965599393 Carl Hunter

RT @leftfootfwd The source of the deficit: http://bit.ly/9vtPfK < Interesting blog regarding #toryfail (possible) budget/deficit/IMF lies.
http://twitter.com/racco/status/22965849338 Racco

RT @OtherTPA: So good I'm tweeting it again – the REAL source of the deficit: http://bit.ly/9vtPfK (via @leftfootfwd)
http://twitter.com/teresasmisc/status/22966447646 TeresaMary

RT @DocRichard: The deficit is due at least in part to falling tax take from recession, not just Labour overspending http://bit.ly/bieo3q #noshock
http://twitter.com/mrshobba/status/22966565539 Linda Hobson

RT @OtherTPA: So good I'm tweeting it again – the REAL source of the deficit: http://bit.ly/9vtPfK (via @leftfootfwd)
http://twitter.com/socialtechno/status/22966997722 Gordon Rae

The REAL source of the deficit. Labour spent less than Thatcher, but didn't tax enough: http://bit.ly/9vtPfK
http://twitter.com/tonyisyourpal/status/22967021561 tonyisyourpal

We already knew New Labour spent less than Thatcher – one of the main complaints ! http://bit.ly/9vtPfK (via @leftfootfwd)
http://twitter.com/gajukes/status/22967808189 time

RT @OtherTPA: So good I'm tweeting it again – the REAL source of the deficit: http://bit.ly/9vtPfK (via @leftfootfwd)
http://twitter.com/rhoneysett/status/22967857157 Richard Honeysett

So good I'm tweeting it again – the REAL source of the deficit: http://bit.ly/9vtPfK (via @leftfootfwd) /via @OtherTPA
http://twitter.com/mr_pukeko/status/22968581530 Matt Jeffs

RT @OtherTPA: So good I'm tweeting it again – the REAL source of the deficit: http://bit.ly/9vtPfK (via @leftfootfwd)
http://twitter.com/haymoncollins/status/22968882187 haymoncollins

RT @GuyClapperton: RT @johnprescott: So good I'm tweeting it again – the REAL source of the deficit: http://bit.ly/9vtPfK (via @leftfootfwd)
http://twitter.com/sjrw/status/22968950366 Stephen

RT @OtherTPA: So good I'm tweeting it again – the REAL source of the deficit: http://bit.ly/9vtPfK (via @leftfootfwd)
http://twitter.com/bottsey/status/22969739021 Tom Bottomley

RT @OtherTPA: So good I'm tweeting it again – the REAL source of the deficit: http://bit.ly/9vtPfK (via @leftfootfwd)
http://twitter.com/paul0evans1/status/22969856727 Paul Evans

RT @OtherTPA – the REAL source of the deficit: http://bit.ly/9vtPfK (via @leftfootfwd)
http://twitter.com/anneharper76/status/22969955142 Anne H-S

RT @OtherTPA: So good I'm tweeting it again – the REAL source of the deficit: http://bit.ly/9vtPfK (via @leftfootfwd)
http://twitter.com/footballreport/status/22970027275 Football Report

RT @OtherTPA: So good I'm tweeting it again – the REAL source of the deficit: http://bit.ly/9vtPfK (via @leftfootfwd)
http://twitter.com/matt0wen/status/22970193124 Matthew Owen

RT @leftfootfwd: The real source of the deficit http://bit.ly/9vtPfK
http://torylies.blogspot.com Richard Blogger

@Michael Burke

Thanks, it’s good to get the actual figures that Labour is not “high spend, high tax” but is the opposite. This is vital information that is needed to nail the lie that the deficit was due to overspending which is being used as an excuse to cut the public services that we depend upon.
http://twitter.com/libbyaitch/status/22971033794 Libby Hayward

RT @OtherTPA: So good I'm tweeting it again – the REAL source of the deficit: http://bit.ly/9vtPfK (via @leftfootfwd)
http://twitter.com/gapboy/status/22971047706 Daniel

RT @OtherTPA: So good I'm tweeting it again – the REAL source of the deficit: http://bit.ly/9vtPfK (via @leftfootfwd)
Mike

The cause of the deficit was the cyclical reduction in tax receipts due to demand decline caused by a recession. If you recall Brown claimed “No return to boom and bust” which was the opposite of the truth. The economy shrank in size as did tax receipts WHILST Labour continued to increase the level of public spending..that is the cause of the deficit. I don’t think there is any dispute about this.

What to you propose? Keep spending (this 4.8% of GDP) which in effect means to borrow more and more money from the bond markets (the bankers you hate so much) at increasing rates of interest in order to fund today public services to be paid for by our children in the future by ever increasing taxes. Keep the enonomy moving forwards based on a debt fuled economic growth backed up by low interest rates driving asset price inflation (housing) and housing equity withdrawl. That was the essence of New Labours economic policy and its the economics of the madhouse, you are prposing to keep this party going.
http://twitter.com/superfurryandy/status/22973222949 Andy Bean

RT @OtherTPA: So good I'm tweeting it again – the REAL source of the deficit: http://bit.ly/9vtPfK (via @leftfootfwd)
http://twitter.com/triciaindahouse/status/22973640088 Patricia Hill

RT @OtherTPA: So good I'm tweeting it again – the REAL source of the deficit: http://bit.ly/9vtPfK (via @leftfootfwd)
http://twitter.com/cantpaywontpay/status/22973744084 CoalitionResistance

So good I'm tweeting it again – the REAL source of the deficit: http://bit.ly/9vtPfK via @leftfootfwd & @OtherTPA
http://twitter.com/pkdequalslegend/status/22974183812 Mark Best

RT @OtherTPA: So good I'm tweeting it again – the REAL source of the deficit: http://bit.ly/9vtPfK (via @leftfootfwd)
http://twitter.com/comolliolli/status/22975416072 Kristen Comolli

RT @OtherTPA: So good I'm tweeting it again – the REAL source of the deficit: http://bit.ly/9vtPfK (via @leftfootfwd)
http://twitter.com/hove9/status/22975458548 Marshall Matthews

But this shows 8 years of consecutive overspending RT @johnprescott: RT @OtherTPA: … the REAL source of the deficit: http://bit.ly/9vtPfK
http://twitter.com/moonjuju/status/22976186858 moonjuju

RT @OtherTPA: So good I'm tweeting it again – the REAL source of the deficit: http://bit.ly/9vtPfK (via @leftfootfwd)
http://twitter.com/michaelward82/status/22981794574 Michael Ward

The real source of UK deficit http://bit.ly/9vtPfK
http://twitter.com/jood88/status/22983067391 Jude Shirres

RT @OtherTPA: So good I'm tweeting it again – the REAL source of the deficit: http://bit.ly/9vtPfK (via @leftfootfwd)
http://twitter.com/tom_earnshaw/status/22987094343 Tom Earnshaw

RT @leftfootfwd: The source of the deficit http://bit.ly/9vtPfK
Steve

Ash quotes me as sayig ““the graph shows that despite falling revenue they kept increasing spending. Their choice, a prudent government would have reigned in spending as revenue fell” and responds with

…but this isn’t right. Spending automatically rises when revenue falls during a recession, because tax revenues fall and welfare payments rise; and a bit of discretionary spending to stimulate growth at such times is also generally regarded as a prudent investment. (Even the Tories weren’t calling for spending to be cut *during* the recession – that would have been crazy.)”

Also not right. Welfare spending rises only when unemployment rises. It didn’t to any degree during the period under discussion. Government spending rose yes, but it was not welfare that was driving the rise, it was discretionary spending.

Simply, you can only increase spending when revenue falls by increasing borrowing. Ultimately that capital must be repaid, and in the interim the interest must be paid. We now have future annual interest payments higher than the whole education and defence budget combined. The answer surely is that in a recession, unnecessary borrowing must be reigned back to finance any increase in spending required to compensate. Just to blindly continue increasing spending in those circumstances without regard to how on earth we are going to pay that debt was the act of a madman.
http://socialisteconomicbulletin.blogspot.com/ Michael Burke

Steve,

you seem to have missed the point of the post- it was falling taxes (66%) which are responsible for the deficit, spending increases hardly at all (2%). Of the remainder the bulk is the spending on the bank bailout.

It is also not true that ‘welfare spending only rises when unemployment rises’ as govt. spending also automatically rises when impoverishment occurs through short-time or temporary work increases. It can also increase if government decides that welfare benefits are insufficient for subsistence.

Lastly, if you ‘reign back’ spending during a recession you introdce a pro-cyclical policy, one in which government cuts exacerbate the downturn. (And presumably do the opposite during a boom, thereby accentuating the boom-bust cycle).
http://twitter.com/cicerobevin/status/23049138079 Robert John Carr

RT @OtherTPA: So good I'm tweeting it again – the REAL source of the deficit: http://bit.ly/9vtPfK (via @leftfootfwd)
George W. Potter

Sorry, I seem to be missing something here. The graph shows that public spending has outstripped income sine 02-03 – long before the recession. If anything, this seems to reinforce the Coalition argument.
http://twitter.com/willgtucker/status/23052164160 Will Tucker

http://tinyurl.com/2u8muga – must read
http://twitter.com/stephentall/status/23053966152 Stephen Tall

V odd @leftfootfwd post trying to prove Lab innocent of deficit http://bit.ly/9XI3j6 yet shows spend>income during growth part of econ cycle
http://twitter.com/jamesgraham/status/23054277815 James Graham

RT @stephentall: V odd @leftfootfwd post trying to prove Lab innocent of deficit http://bit.ly/9XI3j6 yet shows spend>income during growth part of econ cycle
http://twitter.com/nickthornsby/status/23054310424 Nick Thornsby

*Actual facepalm*. Depressingly stupid RT @stephentall: V odd @leftfootfwd post trying to prove Lab innocent of deficit http://bit.ly/9XI3j6
haydoni

You’re mad.

The argument appears to be: the difference only became *much* greater during the recession, so if there wasn’t a recession it wouldn’t be so bad. But you must recall that there *was* a recession, wasn’t there.

*Why* weren’t Labour taking enough in taxation during the ten year boom? If
we’d have had surplus, maybe we could have afforded to “spend our way out of recession”, but we didn’t, did we.
http://twitter.com/smallcasserole/status/23055552547 Ian Hopkinson

RT @stephentall: V odd @leftfootfwd post trying to prove Lab innocent of deficit http://bit.ly/9XI3j6 yet shows spend>income during g …
http://twitter.com/indigo80/status/23058177419 t b

RT @stephentall: V odd @leftfootfwd post trying to prove Lab innocent of deficit http://bit.ly/9XI3j6 yet shows spend>income during g …
http://twitter.com/nickjbarlow/status/23058236809 Nick Barlow

RT @NickThornsby: *Actual facepalm*. Depressingly stupid RT @stephentall: V odd @leftfootfwd post trying to prove Lab innocent of deficit http://bit.ly/9XI3j6
http://twitter.com/chrisjenkinson/status/23058706655 Chris Jenkinson

Dear Michael Burke, look at the data in future before writing silly blog posts http://bit.ly/9vtPfK
Steve

This graph dosen’t take into account PFI. Nor that Brown has about half a billion of liability not declared as public sector spending.

Frankly, this is a half baked analysis based on half the facts.
http://twitter.com/jenni_jackson/status/23072727513 Jenni Jackson

True source of current deficit – fr Treasury website… http://bit.ly/abNwPv
http://twitter.com/scarletstand/status/23074539219 Emma Burnell

RT @jenni_jackson: True source of current deficit – fr Treasury website… http://bit.ly/abNwPv
http://twitter.com/blissedoutjo/status/23074992955 Jo C

RT @jenni_jackson: True source of current deficit – fr Treasury website… http://bit.ly/abNwPv
http://twitter.com/stackee/status/23075226372 S

RT @jenni_jackson: True source of current deficit – fr Treasury website… http://bit.ly/abNwPv
http://twitter.com/adam_grant_bell/status/23139958474 Adam Bell

Bizarre @leftfootfwd article claiming that the recession wasn't caused by Labour, including graph that shows opposite. http://bit.ly/9XI3j6
http://twitter.com/sambrowse/status/23149025765 Sam Browse

RT @leftfootfwd: The source of the deficit http://bit.ly/9vtPfK <= great, understandable article by Michael Burke.
http://twitter.com/8minstosunrise/status/23150211245 Milena Buyum

RT @leftfootfwd: The source of the deficit http://bit.ly/9vtPfK
http://twitter.com/jameschanuk/status/23176467735 James Chan

RT @leftfootfwd: The source of the deficit – less tax revenue (unemployment) and the bank bailout – http://bit.ly/9vtPfK
http://twitter.com/mrsgulp/status/23214735329 Michelle Swallow

This is rly interesting RT @michaelward82: The real source of UK deficit http://bit.ly/9vtPfK
http://brightgreenscotland.org/index.php/2010/09/time-to-join-a-union/ Time to join a union | Bright Green

[...] say we can probably afford to borrow another 50% of GDP without long term consequences, while the bulk of the increase in deficit recently is caused not by spending too much but a falling tax take. Cutting back on [...]
http://twitter.com/boredlondongurl/status/24113871390 Melissa Nicole Harry

if you haven't seen this already… the REAL cause of the deficit http://bit.ly/9vtPfK (via @leftfootfwd)
http://twitter.com/blueapesrevolt/status/24132001643 Robert Levy

RT @leftfootfwd: The source of the deficit http://bit.ly/9vtPfK
http://twitter.com/alystarrzan/status/24293389490 Alys Tarr

@sunny_hundal @sowadally Disagree with you comment here completely: it's too high, but not because of Labour's doing: http://bit.ly/amZRkm
http://twitter.com/goodoldmj/status/26458583576 Martin Johnston

@steve_lake indeed. I've got a file of things for voters to read this should be in there too http://bit.ly/c9dmtT
http://twitter.com/sowadally/status/27063916696 Stewart Owadally

@jazzifull And to demonstrate why it isnt, we can use the source of the deficit http://tinyurl.com/2u8muga The deficit is a recession effect
http://twitter.com/stevekettell/status/28911742371 Steve Kettell

This being quite good: http://www.leftfootforward.org/2010/09/the-source-of-the-deficit/
http://www.leftfootforward.org/2012/01/george-osborne-deficit-calculator/ Introducing George’s Marvellous Deficit Calculator | Left Foot Forward

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