We made a back of an envelope prediction last month about what we expected the outturn to be and plumped for £135bn on the basis of the arguments we have persistently been making about the dividend from the previous government’s stabilisation of the economy and the growth it enabled.
The OBR also had its chance in the March 2011 budget – with all those models and only eight days left of spending before the end of the financial year – to make their prediction. They went for £144bn. Well, we’ll have to split the difference. The outturn for 2011 was (again) lower, thanks (again) to Labour’s growth dividend.
So the previous Labour government’s strategy of growth-supportive deficit reduction reduced the deficit from a prediction in March 2010 £163bn to today’s outturn of £141bn; a reduction of £22bn.
The new government’s strategy of cutting growth to crowd in private sector investment has meant that the OBR has added a further £35bn that this government will borrow over the lifetime of this parliament. And given that the OBR record is to be wrong, about 10% or so out, this could be a lot higher.
It’s distasteful that the benefit cuts of £7bn were justified by the OBR’s prediction of a £149bn deficit. That June prediction was wrong by £7.9bn – enough to pay for those benefit cuts. We wonder if they will sleep well tonight in the north Oxford beds.
Tags: Borrowing, deficit, Labour's growth dividend
Guys you can borrow my graph.. your figures need updating..
Darling’s red book actually forecast £175… so the total off the deficit thanks to higher growth is actually £34bn…
Feel free to take the chart..
£34bn of debt http://t.co/kRjwciH
I have never laughed so hard!
You are completely clueless.
Labour’s policy is run a 2-3% higher deficit in terms of GDP than the tories yet it would be impossible to achieve more than 1% extra growth.
Muppet economics.
The fact that the deficit is down is because councils and bloated state entities have realised finally that we are bankrupt and been forced to cut wasting hard earned taxes.
Labour bankrupted us as they did the last time they were in power.
When you cut a defcit of government spending where the net return is less than a pound of ‘investment’ (typically 30 pence) and replace with real private industry you get real sustainable growth.
Tafferel,
Interesting perspective.
There is of course several perspective, which I hope you would recognise.
One perspective is that Gordon Brown left office with annualised growth of 4.4% and in 26 weeks George Osborne turned that into -2.2% growth.
That’s a net turnaround of 6.6% in the speed and direction of economic recovery.
There are few formula one drivers who could take a bend as quick.
You are kidding me – right?!!!
The current government thought they would inherit £144bn of deficit, but ‘only’ inherited £141bn? Are you can have the utterly affronterly to call that a ‘dividend’!!!
This dividend aka deficit will need to be paid back – mostly by today’s youths, infants and unborn. The left has taken a major logical mis-step if it is no longer concerned with creating a better future for the next generation.
A ‘begggar thy children’ socialism is no socialism at all. Shame on you.
‘the arguments we have persistently been making about the dividend from the previous government’s stabilisation of the economy and the growth it enabled’.
Sweet Jesus there’s not a dry eye in this household. And who says the (pretrendy) Left don’t do comedy.
I do, for one.
I mean do you know anyone that’s ever been to a Mark Steel gig no me neither.
PS I can see that the author of that unthink-piece has chosen to stay anonymous.
Wise.
Very wise.
I think the phase is “rank hypocrisy”. You were as far out in your forecast as the OBR, just in the opposite direction. Budget forecasting sadly isn’t *that* exact a science in reality.
I’d rather the OBR erred on the side of caution, than the side of stupidity… government underspend is much better news than government overspend.
Eoin,
Ohh come on. You dont really believe that rubbish do you?
The pain we are suffering, whether as austerity, lack of growth, unemployment is as a direct result of the ponzi economy created by the last government.
Do you really think that the moment a government leaves power then from that second forward the new government are wholly responsible for the state of the economy?
Do you not believe in ’cause and effect’ economics???
The next 10 years of pain will be as a DIRECT result of the preceeding ponzi economy that created a fake idea of the wealth and sustainability of our economy.
Brown was riding on a global wave of bling or should I say ponzi growth. Funded by our future generations.
He created the very worst economy imaginable:
1) Huge deficit spending from around 2003 onwards,
2) A growing unfunded (and unpayable) state of dependents and benefits,
3) A private sector dependent on high finance (a tertiary industry not meant to be a primary one!),
4) Government induces so called ‘Keynesian’ spending in the downturn without realising that what Keynes said was- you only do this with savings and not with borrowed money.
There was no real economic growth. Nothing tangible. No exporting manufacturers, no enterprise zones where real private sector wealth can be created, no primary or secondary industries, no positive trade balance to draw wealth into the nation.
Answer me this: if state spending through deficits is so great and produces such a high return (ie greater than 1), why dont we run a 100% deficit and have no private sector at all?
Surely in such a situation our growth would be exponential to the government lead ‘investment’. Surely the state is a better allocator of capital then than private industry?
Surely the state can create taxes and jobs out of thin air and borrowed money much better than the private industry?
Or surely not. Reality will dawn on the Labour party one day.
I would give them an ounce of respect if the yadmitted the damage they caused to this country’s economy and looked for a better way of creating social justice through the creation of a real private lead economy and not some ponzi creation with the aim of drawing in the electorate until the music stops.
Do you honestly believe the way to solve a problem of too much debt is through the issue of more debt????
Have a read of Rogoff and Reinhart’s ‘this time is different – 8 centuries of financial folly’.
Once government debt hits 90% of GDP, growth stalls. Its clear empirical evidence. Labour’s policy of running debt up way quicker than the tories will result in stalled growth.
Labour’s economic policies are a complete joke.
They need to go away, have a change of direction and stop lying to the electorate about a ponzi government lead economy and come back with something SUSTAINABLE that will last.
They need to go away, have a change of direction and stop lying to the electorate about a ponzi government lead economy
Taffarel
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Blair at his most egregious regularly smirked out the line, ‘Labour investment, Tory cuts’.
Completely irresponsible; conning the electorate that somehow never-ending excess spending was a viable way to run an economy. I say ‘conning the electorate’, I’m probably being a bit unfair to the grate man, I suspect he believed it himself.
Cameron came out with the albeit weak, ‘sharing the proceeds of growth’ line because he (probably rightly at the time) believed he wouldn’t get elected without it.
At least (outside the TUCLabour Party) people seem to have received a lesson in cold hard economics.
@ Taffarel & Ian Ker
LOL. 🙂
You chaps are funnier than the two Ronnies. I particularly enjoyed Taffarel’s repeated use of the word “ponzi”. The icing on the cake was SUSTAINABLE (note caps) followed by “that will last” – a definition of sustainable to further emphasise the word.
One of the best comedy impersonations of “Tory trolls” I’ve seen in ages.
😎
On second thoughts…if you really truly believe a deficit is a dividend, I’ve got a bridge to sell you…
“Do you not believe in ’cause and effect’ economics???”
One wonders if Taffarel has the wit to apply this logic to the Thatcherite decimation of the British economy.
Given the lunacy of their economic arguments thus far, I dont hold out much hope.