Transcript Busting the Single Narrative

Busting the single narrative
The debt crisis as just
another story –
or
Why are we prey to a
single narrative?
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This was ON Andrew Marr’s show……
“We were on
the brink of
bankruptcy…”
“You clearly need
to make the
savings,
the cuts
and raise taxes...”
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“The Chancellor has exaggerated the sovereign risks that are
threatening the country.”
Professor Christopher Pissarides,
Nobel Prize for Economics in 2010,
Daily Mirror 09.01.11
"I think it is likely that the economic downturn will last far
longer and human suffering will be all the greater."
Professor Joseph Stiglitz,
Nobel Prize For Economics In 2001,
Daily Telegraph 08.09.10
“The best guess is that Britain in 2011 will look like Britain in
1931, or the United States in 1937, or Japan in 1997.”
Professor Paul Krugman,
Nobel Prize for Economics in 2008,
New York Times 21.10.10
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You can only understand how
BIG
debt
is
when you compare it as a
percentage
of GDP
4
But what is GDP?
GDP =
Consumer spending
Business Investment
Government Spending
International Trade income
+
+
+
The GDP for 2010 is……
£1.435 trillion
5
NATIONAL DEBT
“Our debt is higher than it’s ever been…”
(Coalition Government)
6
...The Maastricht Treaty EU limit on debt
60% of GDP
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Our Current debt – GDP ratio
64.6%
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IF YOU DEDUCT WHAT
WE GAVE BANKS, debt
is EVEN LOWER
•
•
•
UK net debt is £952 bn
Excluding Financial sector
intervention, debt is £845
bn*
Or
57.1% of GDP!
Source: Office National Statistics (November 2010)
*This includes £100bn+ of the banks’ debts
that is now UK Government debt
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Our debt is historically low
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....our
debt is low compared to the rest of the world
UK
65%
CANADA
81%
USA
95%
FRANCE
77%
PORTUGAL
87%
GERMANY
72%
ITALY
119%
SPAIN
70%
GREECE1
87%
JAPAN
200%
Source:
Factbook
Source:
CIACIA
World
Factbook
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THE DEFICIT
“The Deficit is caused by overspending…”
(Coalition Government)
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THERE ARE 2 SIDE TO deficit
INCOME
Mainly taxes
SPENDING



Public services
Investment
Debt payments
Government
Is spending too high or income too low?
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Growth and deficit are linked
12
deficit
10
8
unemployment
6
4
growth
2
0
2005/6
2006/7
2007/8
2008/9
2009/10
2010
-2
-4
-6
-8
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There is a tax deficit
The UK TAX take 1995-2010
Without the recession tax revenues should have been £100bn
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more than today.
GROWTH REDUCED THE DEFICIT
Oct 2009 to March 2010
Deficit
£22bn
Growth
£165bn
£145bn
1.5%
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THE DEFICIT
“Interest repayments are higher than ever…”
(Coalition Government)
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0
-2
-4
Conservative Government
Source: Public Finances Databank, ONS
Labour Government
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2015-16
2014-15
2013-14
2012-13
12
2011-12
2010-11
2009-10
2008-09
2007-08
2006-07
2005-06
2004-05
2003-04
2002-03
2001-02
2000-01
1999-00
1998-99
1997-98
1996-97
1995-96
1994-95
1993-94
1992-93
1991-92
1990-91
1989-90
1988-89
1987-88
1986-87
1985-86
1984-85
1983-84
1982-83
1981-82
GOVERNMENTS ALWAYS BORROW
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Forecasts
from 2010-11
10
8
6
4
2
Our Borrowing is cheap, mainly from the UK
and can be repaid over 13-15 years
SO WHY PAY OFF THE DEFICIT OVER
4 YEARS?
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SERVICING THE DEBT….
• The Thatcher government paid the equivalent of
£174m per day
Debt Interest Payments
1981
1996
2006
2011
Payments(£bn)
13.2
26.7
26.2
43.3
As % of GDP
5.15
3.41
1.97
2.84
www.ukpublicspending.co.uk
Thatcher Government
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THE DEFICIT
“We have to make cuts…”
(Coalition Government)
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LEVY TAX…..
Tax as a proportion of
GDP (2007 - %)
EU 16
40.4
UK
36.6
Is THIS where the deficit
is?? We don’t pay enough
in tax to cover what we
spend.
Source - Eurostat newsrelease – June 22nd 2009
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SINCE 1975 we have replaced direct with
indirect taxes…
Change from Income Tax to VAT
90%
80%
70%
60%
HIGH TAX RATE
50%
40%
30%
BASIC RATE
20%
VAT
10%
2010
1997
1991
1981
1977
1975
0%
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The UK is now one of the MOST
UNEQUAL societies in the OECD
THE GINI CO-EFFICIENT – UN MEASURE OF INEQUALITY
Inequality
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THE DEFICIT
“What really caused the deficit?”
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Let’s not forget who’s to blame…
“…although the causes of the crisis may have been
rooted in the financial sector, the consequences are
affecting everyone, and will continue to do so for
years to come.”
(Mervyn King’s Address to the TUC conference – 15.09.10)
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how the banks affect our gdp…..
Increasing or reducing the supply of money into the economy
through household and business lending artificially inflates or
deflates our GDP – i.e. Banks manipulate the flow and quantity of
money
EXAMPLE: in the 2000s banks pumped between £10-14bn into
the economy every year through housing equity withdrawal .
Since 2009, banks are refusing to lend and have sucked £15bn
out of the economy per year
(Source of statistics: Bank of England)
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Growing influence of finance
The contribution of sectors as a % of GDP
30%
30
25
20
12%
15
9%
Finance
Manufacturing
10
4%
5
0
1970
2010
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Re-Balancing the economy
No
Yes
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So do we need cuts?
Debt is low compared to our history and
partner nations
Growth plays a key role in reducing the deficit
If tax is lagging behind spending, why not
borrow short term to encourage growth?
What would 3% per year growth for 5 years do
to the deficit?
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SO What is this a crisis of?
• National debt? NO
• Current account deficit? Depends on your
values - it’s political
• Economic governance? YES
• Employment? YES
• Banking? YES
• Democracy and public debate?
YES
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OUR SOCIETY IS MORE THAN OUR
ECONOMY!
“The gross national product does not
allow for the health of our children, the
quality of their education, or the joy of
their play.
It does not include the beauty of our
poetry or the strength of our marriages;
the intelligence of our public debate or
the integrity of our public officials.”
Robert Kennedy, 1968
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Economyths: prepared by
Barry Kushner
[email protected]
Saville Kushner
[email protected]
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