I have collected data from budgets for many years. It's become something of a habit but I've probably not done enough with that information so over the next week or two, and in the run up to our next budget on 21 March, I thought I'd publish some highlights based on that data from 1997 to 2016. No, I'm not clairvoyant; all budgets include forecast data.
So let's start with some fairly straightforward stuff on GDP. That is gross domestic product and it's meant to measure how big the economy is. Since most Chancellor's have growth as their aim all of them want GDP to grow. However, it is real growth after allowing for inflation that matters, so I have looked at this issue of inflation adjusted growth over that period because it is pretty fundamental to assessing much of what follows.
The data used for this is issued by the Treasury. Forecast data comes from the Autumn statement, published last November. The data on GDP is updated regularly (including past data). That which I have used for the analysis here is the most recent, dating from December 2011. I've adjusted it to consistent 2010-11 prices using the GDP deflators also published by the Treasury and adjusted anticipated growth for forecast inflation. That ensures consistency. The result is that annual growth rates over this period as follows:
Labour delivered consistent growth from 1997 to 2008. The Tories are also promising that from 2013 onwards. Average growth under Labour to 2008, when it all went wrong, was 3.23% a year. The Tory promise in the final four years of this projection period is, surprisingly, 3.46% a year: they are actually suggesting (in no small part due to the exceptional projection for 2016-17) an overall rate higher than Labour.
This then begs the question, is this plausible? As we all know Labour increased government spending as proportion of GDP over its period in office. Government spending does of course have an impact on GDP. And meanwhile the Tories are going to cut government spending a a proportion of GDP. If the increase in government spending, after allowing for inflation, is taken off GDP growth we can deduce an estimate of the amount of GDP growth due to private sector activity. That proportion looks like this when plotted:
The two years with a 0% were years when there was a fall in GDP.
Suddenly what becomes very obvious is that Labour delivered real private sector growth, but after the hype of the dot.com boom right at the start of the period the private sector only delivered growth contributing about half of the increase in GDP bar a year in the immediate hysteria pre the crash. We also know that even then much of the private sector growth was debt fuelled and has in retrospect been considered unsustainable. The average private sector contribution was 56.1% from 1998 to 2008.
What this data also makes clear though is that the Tories are now claiming they will deliver average inflation adjusted growth between 2013 and 2017 at an overall higher rate than anything Labour achieved and that rate of growth will be achieved despite the private sector's biggest customer - the state - shrinking its relative demand. In fact, the higher rate of average growth the Tories are predicting will be overall in the final four years of this projection period be 88.1% down to the private sector. The implict private sector growth required, inflation adjusted, over the whole period looks like this:
How likely is that private sector growth to happen? Candidly, the reasonable probability is zero. Labour's period from 1998 to 12008 included two booms - the dot.com boom and the boom fuelled by debt from 2005 onwards. There's no sign whatsoever that a boom is going to happen at all. Even if it did, it would have to be a bigger boom than either of those periods of economic hype - both of which ended in tears. And nothing suggests any reason why that should occur. There is no technical innovation on the immediate horizon like the internet. Banks aren't lending. People and companies are saving. There's no indication that any of these things will change, much. A bit maybe; much, not at all.
In that case let's be blunt about the prospect of Tory forecasts being true: there is not a hope of this growth happening. For Osborne to deliver his plan requires private sector growth rates on a scale the UK has never delivered and is, I suggest, simply unable to deliver.
In that case the whole of the political opposition in the UK has to point out that he is selling the biggest lie in British political history - which is that he can supposedly balance the UK's budget. He can't on the basis of his current policies. It is impossible.
So it is time to tell this story and say so. Now. He's a phoney, he must know it and we have a duty to say so.
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Excellent analysis, Richard. I wonder if anyone at the OBR will give it a look? Perhaps the two Eds might find it useful, though.
I had a funny feeling about that too , America is in a terrible state at the moment , with there welfare cuts and medical care as well food stamps but that’s what happends when they print fake money it must be a fake economy. I do hope the American’s get Ron Paul in to the White House a courageous politician then maybe we in Britian can start to find some courageous Politician’s too !! we live in hope .
Ron Paul is about as far away from being a Courageous Politician as it is possible to get
Your readers would be better informed if you explained why you say that.
He’s an arch libertarian with a hatred for the state
That’s my definition of a cowardly politician running away from the responsibilities of office
Nothing wrong with the idea of auditing the Fed though, which was his original gimmick, from what I can tell.
Agreed
But one idea does not create a presidential candidate with credibility
I agree that Ron Paul is far from being a perfect candidate, but he’s the only one I can see who really would end these useless wars. The Commander in Chief can do that.
Cutting back the state would be difficult if not impossible for him as he still has to contend with Congress. So at least the Americans would see all that wasted spending on war (now over $1 trillion, if I’m correct) come to an end. However it’s all academic as he doesn’t have a hope in hell of getting anywhere near the Whitehouse. The ‘patricians’ won’t have anything to do with this idea of an audit of the Fed.
I see little difference between the US and the UK.
Neither have politicians running the shop, both do however have bought-politicians being told how to run the shop.
http://www.zerohedge.com/contributed/corporate-tax-dodge-code
Not much different to here ?
Personally, I would rather have some honest politicians of whatever colour…..but I’m afraid that honesty and politics (and business) do not go together.
Hmmm — unless say there is an unprecedented boom in the private health sector. Now what sort of policies could enable such a boom…
Not if at cost of an unprecedented decline in the NHS
Speaking of which, I wonder in passing if the pensions argument isn’t specifically made as it is in order to encourage a great number of practicing GPs to resign, leaving the NHS so depleted that, my goodness, the cavalry in the shape of private enterprise has to come to the rescue?
Definitely possible
Bet remember – there is no pool of doctors waiting to be called upon in the private sector
So it is a very poor strategy
“That’s my definition of a cowardly politician running away from the responsibilities of office”
Don’t you think this obsession with “courageousness” has run its course, Richard? Calling politicians who implements your policies “courageous” whilst labelling those who do not as “cowardly” is a bit childish, is it not? People courageously battle cancer or fight for their country. A politician who soaks the rich with higher taxes may or may not be doing the right thing but is hardly “courageous”, particularly if he is being egged on by his cheerleaders.
Some of the most vile leaders the world has seen no doubt exclaimed their policies as “courageous”.
The definition refers to those who believe in the duties of office and those who don’t
Ron Paul doesn’t
Nor do those who seek to undermine the state
You don;’t like it: that’s probably why it is very useful
Mark –
Sorry to be so blunt, but that’s absolue nonsense. Courage isn’t something that’s conferred on you by your situation, it’s something that is defined by your response to a situation.
People don’t battle cancer, medicine treats it. People may or may not show courage and determination in the face of cancer, each according to their personalities, but not everyone who suffers from cancer is automatically brave.
Not everybody in the armed forces is a hero. Plenty of them have had the opportunity to demonstrate considerable courage and heroism (more’s the pity, but that’s another story)… but the army has its fair share of malingerers and ne’er-do-wells, heroes and heroines, working stiffs and malcontents (or “people”, as I like to call them) just like everywhere else.
Courage can be found and is shown in situations of adversity. It is nobody’s right to be labelled as courageous simply because they’re a soldier or a fireman or . Courage can be shown by the weedy kid standing up to a bully in the playground, or the lone journalist blowing the whistle on terrible ethics at their paper, or anyone standing up for equal rights against those who prefer the inequality of the status quo.
Politicians are uniquely place to demonstrate courage… they can look at the inherent system of rule in the western world, spot that it’s yoking the masses to keep the few in luxury and say “No More!”. Personally, I don’t care if the first politician to make such a call flies a red flag, a blue one, a green one or a sky-blue-pink one… just as long as the courage required to say “enough is enough” is found. Then others will rally to the call, democracy will triumph and we will ALL benefit from that courage.
Plus, I’d like to see a few more courageous bankers who can look at their particularly well feathered nests and say to themselves “I feel guilty”. I’d like to see those bankers work from within to change the greedy and corrupt systems to ethical, progressive ones, to the benefit of all.
I’d like to see directors of large companies make the decisions that don’t hide profits in tax havens so that the people of their communities are properly served with the well-funded and properly administered welfare state they deserve.
In short, I’d like to see those who are in a position to make things better have the social conscience and courage to actually DO it.
There’s something dreadfully wrong with the way the world is run at the moment. Never has the gulf between the haves and the have-nots been so massive. Something has to happen to address that gulf… and that’s going to take guts.
Hence, we need courageous politicians. Richard just points that out.
Either you agree with the above, or you don’t. I can’t see how anyone with concern for their fellow man and a working moral compass can disagree with it too much, though.
Thanks
Good comment
I completely agree with you Richard on this and much else. Just to tackle the ‘courageous’ point above. I think it’s perfectly valid to characterise politicians as, ‘cowardly’ and ‘courageous’, because often the context is whether the politician in question has the will to take on vested interests, often in their own party, and still press for policies that they believe to be in the nation’s interest. In this particular case though, with Ron Paul, ‘courage’ is not the issue, rather, ‘vision’ I would suggest. Whlst I completely agree with his position on the Fed, which mirrors my position on BOE and all other Central Banks, as long as most money is issued by private banks as debt, especially when the newly issued money is then lent to the Central Bank, thereby creating national debt before anything is even done with the money, the system will continue to be unsustainable.Modern capitalism is not fit for purpose and so we shall continue to lurch from one crisis to another. How is it possible for the world economy as iterated by the WTO, to grow for ever?, not even taking into account the ever reducing resources problem and the continually growing population, not to mention the fact that there may not be much of Earth that’s habitable if we continue burning the planet at the rate we are doing now, it just isn’t possible to continue to grow for ever. The simplest and most obvious fact about the world economy, that world debt is many times that of world GDP, MUST surely give anybody with an ounce of common sense pause to think ‘How can world debt be paid down when it is such a ridiculously high figure. At bottom, you have to ask, ‘Who is all this money owed to?’ As Eddy George has said,’ Of all the possible ways to organise the world banking system, we have the worst’. If even the Governor of the BOE believes that the banking system doesn’t work then surely it’s up to some ‘Courageous’ politician to follow his lead.
[…] the Tories say they’ll rebalance the books, except as I’ve shown, there is no chance that they will do […]
Politicians do not generate economic growth, and besides, infinite growth on a finite planet with finite resources is not possible. We’ve reached the end of the ‘economic growth’ (or rather: perpetual population growth) financial-economic model.
And as for resources, and fertile ground, we seem to be using it up faster than it can regenerate. This can only have one very unhappy outcome.
The globe will not miss mankind once we go extinct. After all, it will recover from the destruction that we (the planet’s surface nuisance) have caused..
A point I fully embrace in The Courageous State