Duncan’s Economic Blog

Everything you need to know about the public finances in two charts

Posted in Uncategorized by duncanseconomicblog on May 11, 2009

Andreas has an superb post up over at Common Endeavour.

He slays the Tory myth that ‘Labour always break the public finances and the Tories have to fix them’ with one simple chart.

nationaldebt-337x198-custom[1]

He also provides a link to a site I wasn’t aware of, UK Public Spending – it has loads of back data on UK public spending and is well worth a look.

You can use it to do all sorts of interesting charts. Like the one below.

interest payments
What matters is not the stock of debt (whether it’s 100% of GDP or 1,000% of GDP) but what it actually costs. As the chart clearly shows we are spending less now on interest payments then we were at anytime between 1940 and 1960.

13 Responses

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  1. newmania said, on May 11, 2009 at 10:35 am

    Duncan I appreciate you are young but you have presumably heard of a little event we often call the Second World War,.This graph is quite meaningless without factoring the post war state reconstruction and war debts not to say wildly misleading by making the scale not money but a proportion of GDP which is left out of the equation. The bit nipped off at the end is rather convenient as well. There is also a time lag we should have paid ff the debt during a boom not set up a spring board for bankruptcy .

    The incoming Conservative administration may very well also face increases in debt . This will no doubt be used by some future Duncan to show how good Labour were as he jets about in his travel pod and eats vitamin pills. Aint exactly so is it

    I find it increasingly hard to believe that you believe half of what you say

    • duncanseconomicblog said, on May 11, 2009 at 10:58 am

      Newmania,

      % of GDP makes a lot more sense than actual money amounts. Otherwise you don’t capture GDP growth. Which is vital in this discussion. Perhops I’ve made an error by adjusting for decimalisation?

      As for chart two, that is crucial. What matters is the ability to service debt.

      • Ian Jones said, on May 12, 2009 at 12:23 pm

        >> spending less now on interest payments then we were at anytime between….
        We are currently in a low interest rate phase, we cannot guarentee that for the future. Therefore, contrary to what you say, the capital is VERY important. Also we should remember that the headline figures for debt has been kept low by PFI.
        Debt is the biggest problem that the current goverment has left us.

    • Andreas Paterson said, on May 11, 2009 at 11:13 am

      Newmania – The last point on the graph is a 2010 estimate, so I can’t exactly be accused of lopping the end off the graph. As to my use of % of GDP, were I to use inflation adjusted figures the difference that would occur as a result of inflation using an arbitary basket of goods would be huge and would portray neither party in a good light.

  2. tory boys never grow up said, on May 11, 2009 at 1:16 pm

    Perhaps the chart should be taken back to before WW2 to show what happens when you don’t increase govt spending to address a recession – and to satisfy Newmania’s desire for a more historical perspective.

  3. newmania said, on May 11, 2009 at 1:51 pm

    Duncan , honest , I do understand what GDP growth is when that growth includes an explosive and illusory speculative property bubble and associated Banking services its rather distorting to the last ten years of New Labour and the wisdom of running deficits every year. When Not every Public sector cost is pegged to economic growth anyway and where are the savings everyone else has made to costs to produce the same result . My office would have had double the people init only five years ago.
    There has been a colossal increases in government spending roughly equal to the whole of today’s income tax about 55% adjusted , this has been disguised by equally dramatic growth . That has been paid for by debt and fiscal lag . There has also been housing inflation which has eroded most of the additional earnings except in the Public sector and banking especially in the South where New Labour are hated with a passion.
    The point of this graph is to present gigantic shifts after the war involving relatively tiny amounts of money so as to warp the scale and minimise the profound errors of the Gordon Brown administration . It also chooses and misleading time frame and the estimate of 50% is highly debateable even now . Seriously 50% we are already above that says the IMF

    TBSGU- I do not dispute there is a demand problem , there is also a fiscal problem and they have to be balanced . What defeats me is the ‘Duncan theory’ that its just as to fling it at Ethnic awareness consultants and their managers to waste as let people keep rewards from wealth creation . In other words Duncan thinks demand sits in isolation. On a desert Island he would be sitting calculating the advantages of a coconut leaf based currency to keep up demand while everyone else had to run around trying to kill the pig . Bonkers

    When Duncan was young his scrambled eggs turned up simply by demanding it from nanny . He knows nothing of egg and whisking

    • duncanseconomicblog said, on May 11, 2009 at 2:33 pm

      Newmania,

      Go to the public spending website I’ve liniked to. You can play with lots of numbers (since 1900) as % of GDP or absolute figures.

      You’ll enjoy it.

      I didn’t have a nanny and I make decent scrambled eggs. I use lots of butter.

    • Andreas Paterson said, on May 11, 2009 at 2:59 pm

      The three largest areas of government spending are Health, Education and Social Protection. The jobs of nurse, doctor or teacher have very little scope for the kind of efficiency improvements that have been achieved in the insurance industry. Benefits have also needed to grow with the economy to a degree.

  4. tory boys never grow up said, on May 11, 2009 at 3:33 pm

    Efficiency improvements in the insurance industry – certainly not from this customers perspective – premiums rise above inflation every year and service quality deteriorates.

  5. newmania said, on May 11, 2009 at 3:37 pm

    Well lets take education shall,we Andreas .In the last ten years spending on education has gone up 68 percent ,adjusted . We have acquired 40,000 extra teachers and 100,000 classroom assistants. Teachers pay has gone up about 20% ( again adjusted and about double private sector reward which obviously includes some real biggies ) They work part time ,have secure jobs for life , golden pensions as well as key worker give away houses, and more cash for those in London etc( That really mounts up in a real scholl there will loads of £60k plus packages) . Now what is the justification for this ? Applications for teacher training courses are up, with the Training and Development Agency for Schools reporting a 40% increase in inquiries.
    Meanwhile according to Sir Cyril Taylor, chairman of the Specialist Schools and Academies Trust, there are 17,000 sub-standard teachers in England ( yeah and the rest ) who we cannot get rid of . I don t want to go into details but the result has been pitiful

    Meanwhile, since you mention it those of us paying for all this in amongst other things insurance have been subject to brutal competition emanating from the EU. …..well don’t get me started. This cannot be justified by the growth of the economy , !!!!! It jas nothing whatsoever to do with it . This was a Policy decision to swell the gaping beaked Public sector and fling money at any perceived problem without care or control . What makes me laugh is that they are often so well paid they do not want vote Labour and go Liberal (who gets most parasite votes)

    Ha bitter ha

  6. Alex said, on May 12, 2009 at 9:57 am

    Newmania: you don’t actually *have* a point, do you? There’s no difference between WW2 debts and any other kind of debts; they all need paying back (unlike all our competitors’ – thanks, uncle sam!). And despite all the wanking, every Labour administration – indeed every administration of whatever political colour from Attlee to Blair finished with lower debt as a % of GDP than they started with, although it was a close run thing for John Major.

    Further, Dunc, are those Maastricht-compliant figures or with the Rock, RBS etc included?

    • duncanseconomicblog said, on May 12, 2009 at 10:13 am

      Rock/RBS etc not included as far as I am aware.

      It’s a difficult issue though – on standard measures we would just ass in their liabilities but not include their assets.

      RBS is the case in point – liabilities of £2,163bn. But assets of £2,238bn. Even if 10% of those assets are worthless the net liability would be ‘only’ £150bn. A big thing figure but not £2.2 trillion.

      Equally we are not ‘as the State’ paying any interest on the banks liabilities.

      What I’ve kept banging on about is gilt yields. As long as they stay below 5% (current 3.66%) I’m not especially concerned about the public finances.

      If gilt yields do break 5%, I’ll be the first to say – ‘we have a problem’.

      • Alex said, on May 12, 2009 at 11:31 am

        Well, yes. I mean, what are teh markets going to buy instead – mortgage backed securities? Bank shares? T-bills, bunds, or French bonds, when all those governments are more indebted than we are? Swiss bonds, with a huge bank-shaped boil on their backside? BRICland is a huge net buyer of government stock…so what does that leave?


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