The Daily Mail are debt dunces

Michael Burke discusses how the coalition's economic policies represent a transfer of income from poor to rich, and how the Daily Mail are deficit dunces.

UPDATE: Left Foot Forward gives its sincere apologies. The piece is entirely accurate about the status of debt, however the headline had previously stated that the issue on hand was the deficit and for that our sub-editing skills deserve a dunce’s hat like the Daily Mail.


The national debt level has passed the £1 trillion psychological mark – and on cue the Tory press has manufactured a sense of alarm and outrage. Typical is the Daily Mail, whose headline screamed:

“£1 TRILLION: Our National Debt pushes through barrier to reach £40,000 per household”

But, then again, when do Daily Mail headline writers do anything other than scream?

To gauge the importance of large numbers requires meaningful comparisons. The chart below shows the level of public debt in the British economy in relation to GDP. This represents the income from which public debt must be financed, both the interest and the debt repayments as they fall due. Under the impact of the most severe recession since the 1930s public sector debt as a proportion of GDP rose from 35.5% to a projected 60% this year. This compares to a peak on the debt of 178% of GDP during the Great Depression, under Tory-led administrations.


The much milder recession under John Major was not a global phenomenon, but a uniquely British disaster of Tory policymaking. Yet the downturn then, just a fraction of the recent slump, produced a comparable rise in the debt level from 26.2% of GDP to 42.5%.

The policy pursued in the Great Depression, and under both Major and Thatcher, was to reduce government spending in response to rising deficit and accumulating debts. In all cases, the effect was to exacerbate the downturn – causing unemployment (and reducing income taxes), while providing tax breaks for companies and the rich. In every case the deficits rose and (apart from the windfall of North Sea oil under Thatcher), so did the national debt. This Tory-led government will produce the same result.

The debt level of £1trillion needs to be seen in light of the fact that the annualised level of GDP is currently £1.46trillion.

Even so, £40,000 debt per household does seem like a lot of debt, which comprises the other part of the Mail headline. Especially as households’ average wage incomes are not much more than £26,000. Except that this is a government debt, not a household one. Government revenues arise from both the household sector (direct taxes like income tax and indirect ones like VAT) and the business sector (corporation taxes, etc.).

But the effect of government policy is increasingly to shift the burden of taxation away from companies and towards individuals, especially the poor. While VAT was hiked, a string of other taxes were cut including corporation tax while the upper earnings limit on National Insurance was frozen. The amount gained from raising VAT is almost exactly equal to the amount lost from these tax cuts which benefit companies and the rich, £13bn compared to £12bn. These measures are therefore not about debt or deficit reduction at all. Together they represent a transfer of incomes from the poor to the rich.

The Office for Budget Responsibility recently forecast falling real incomes over several years, at the same time as modest real GDP growth. The Tory-dominated coalition does not dispute this. Logically, if total real incomes rise but the majority experience falling real incomes, then this must mean that a tiny minority will experience very strong income growth.

It is the falling incomes of the poor that are being saddled with the burden of the debt, while the rising incomes of the rich have tax cuts. This will prevent any significant reduction in either the deficit or the debt levels.

There is an alternative: The national debt was even higher after the costs of WWII. A Labour government which nationalised industries, introduced the welfare state and had a massive housebuilding programme was able to produce a sharp fall in the national debt, as the chart shows. Above all it is the commitment to full employment which rescued the economy and government finances in the process.

45 Responses to “The Daily Mail are debt dunces”

  1. Lee Hyde

    RT @leftfootfwd: The Daily Mail are deficit dunces: //bit.ly/e9zcFa

  2. Joe Gammie

    RT @leftfootfwd: The Daily Mail are deficit dunces: //bit.ly/e9zcFa

  3. salardeen

    RT @leftfootfwd: The Daily Mail are deficit dunces: //bit.ly/e9zcFa

  4. bedminsterbugbear

    RT @leftfootfwd: The Daily Mail are deficit dunces: //bit.ly/e9zcFa

  5. Matthew

    RT @leftfootfwd: The Daily Mail are deficit dunces: //bit.ly/e9zcFa

  6. Northern TUC

    RT @leftfootfwd: The Daily Mail are deficit dunces: //bit.ly/e9zcFa

  7. Chris Gudgin

    RT @leftfootfwd: The Daily Mail are deficit dunces: //bit.ly/e9zcFa

  8. 13eastie

    This kind of smugness is truly pathetic.

    You should be ashamed of yourself comparing the current debt to those following the two World Wars.

    We borrowed money twice in the last century to meet the cost of fending off tyrannical German agression and stopping genocide – the financial cost is very easily justified, and the ongoing benefit is plain, even to those of us born after WW2.

    This time around, by contrast, we’ve amassed a huge debt and developed a vast structural deficit in a vainglorious and self-serving attempt by Gordon Brown to turn the entire nation into benefit claimants (while freely giving away our hard-bought sovereignty to the Germans inter alia).

    THE ONLY THING WE HAVE TO SHOW FOR BROWN’S OUTRAGEOUS SPREE IS THE DEBT ITSELF. OUR CHILDREN WILL SEE NOTHING BUT MISERY ARISE FROM IT. TO COMPARE THE CURRENT SITUATION WITH THE 50’S IS TOO LAME FOR WORDS.

    Your own chart also shows that the debt started to increase shortly after 2000, while the economy, asset prices, and tax revenues were all growing, and well before any “international banking crisis”, completely at odds with the current Labour spin.

  9. Νέα Νέμεσις Εργασίας

    Debt now compares favourably with that incurred stopping Nazi genocide, argues @leftfootfwd //bit.ly/e9zcFa #Labour #UKUncut

  10. Dale Bassett

    RT @leftfootfwd The Daily Mail are deficit dunces: //bit.ly/e9zcFa << The "economics" in this article are almost-hilariously bad

  11. peetur

    Graphs are great, have you seen the house price graph, here – //www.housepricecrash.co.uk Rampant inflation has enslaved young people and removed virtue from the economy as Labour encouraged a buy-to-let stampede. Probably driving some of the youngsters to cheap booze…

  12. LondonStatto

    “This Tory-led government will produce the same result.”

    No, this **coalition** won’t.

    I used to call it “the government”, but after Labour’s shameful spin, it’s “the coalition” from here on out.

  13. Jon

    #1 Looks like the debt actually started to increase sharply in about 2008 actually…

    Also, it’s not just ‘after two world wars’, it was at every point in the history of the country. Witness from before the two world wars: //www.americanthinker.com/Chantrill%201.JPG

  14. william

    Michael Burke,you live in cloud cuckoo land.No nation state can borrow ad infinitum.Gordon Brown’s reckless spending has failed to buy votes,it’s naive intention,and merely succeeded in raising tax for the present and next generation.Please look at the condition of the public finances in 1997 and ask yourself how any future elector will consider a Labour candidate as future PM,if he or she does not DISOWN the pyschopath from Fife.

  15. LondonStatto

    Gordon Brown/Ed Balls/Ed Miliband: Not as bad for Britain as two world wars.

    Well, it’s an interesting slogan.

  16. LondonStatto

    You see how the Major peak is lower than pre-Thatcher levels, and the Blair trough (before Brown turned on the taps full blast) is higher than the end-Thatcher levels?

    And this despite the boom that let Brown dishonestly claim he’d ended boom and bust?

    It should have been sub-30% before the crisis. Then maybe we wouldn’t have had to say that the three events to cause 40-hear highs in national debt were WWI, WWII and Gordon Brown. (Note the 1930s peak is actually lower than the WWI peak).

  17. LondonStatto

    40-year highs, of course.

  18. Sean

    This post has got to rank along one of the dumber I have read on this site. You verify using empirical evidence that Labour ran up the debts during the longest economic expansion in centuries, when there was a benign global environment and Britain was not committing hundreds of thousands of men to war (WW2 is not comparable to Iraq).

    Yet your conclusion is that just because Britain ran up higher debts due to two world wars (when Britain was head of an Empire, had one of the worlds largest economies as a percentage of GDP and could fob its debt off to colonial bond holders) that it could happily do to again today.

  19. Andy C

    You say:
    “The much milder recession under John Major was not a global phenomenon, but a uniquely British disaster of Tory policymaking”

    Yet somehow Wikipedia has an entire article on a global phenomenon called Early 1990s recession. First line:
    “The recession of the early 1990s was an economic recession that hit much of the world in 1990–91.”

    Sorry – stopped reading your article at that point – if the rest is as inaccurate, what’s the point?

  20. James Farrar

    Lefty admits the three events to cause a 40-year high in national debt were World War I, World War II and Gordon Brown: //bit.ly/gkUShM

  21. LondonStatto

    And worst of all? Your headline calls the Mail “deficit dunces” — and then you talk only about debt!!!

  22. Slackbladder

    Debt/Deficit…both start with a ‘d’….well no doubt thats why the authors confused. Bless him, he’s trying hard after all.

  23. Pete

    Not gone quiet as well as you had hoped has it?
    The errors leap of the page, I would recommend that you go away and learn the difference between debt and deficit at the very least.

  24. Hanoi Hooton

    11/12/13: The article is quite consistent with its terminology about debt – there is no confusion at all within the article about concept of deficit. “Deficit Dunces” in the title is quite clearly an informal alliteration used for effect. Read the content of the article and criticise that.

  25. Hanoi Hooton

    National debt as proportion of GDP was lower in 2008 than in 1997. In 2008, the UK had 2nd lowest debt as proportion of GDP out of the G7 nations (only Canada had lower debt). The ensuing recession was caused by the global banking crisis, to which Britain was more heavily exposed due to its large financial sector in the City. The Tories all along from 1997 onwards encouraged more deregulation in the City. In late 2008, Gordon Brown stepped in with a plan to save the global banking system, and it worked. With which of these 5 facts do you disagree?

  26. Guido Fawkes

    So you illustrate an article on “Daily Mail deficit dunces” with a graph of the national debt? Is this now a “wrong-evidence-based” blog?

  27. Daniel Pitt

    RT @leftfootfwd: The Daily Mail are deficit dunces: //bit.ly/e9zcFa

  28. matthew fox

    @ Guido Fawkes

    Shouldn’t you hold your fire until they publish the PSBR for Dec 10.

    I hope you do comment on it.

  29. Sean

    Okay, here is an simple thought experiment for you guys.

    Was there a deficit before the crash? Yes. Was it caused by excessive spending? Yes.

    Would there have been a deficit if there was no crash in 2008, 2009 and 2010? Based on forward projections, sensitised for typically optimistic tax assumptions by Labour… yes.

    Therefore since there was a deficit before the crash caused by excessive spending and a forecasted deficit irrespective of the crash (a little thing called a structural deficit) then it is safe to say that the extent of the deficit is Labour’s fault.

  30. 13eastie

    @Jon #4

    How is anyone to reason with denial such as yours?

    Do you actually contend that there was no deficit prior to the “international banking crisis”? That during Brown’s “un-pree-cee-dented period of growth” Labour continuously balanced the books?

    As far as debt in the 19th century is concerned, you fail to recognise the obvious contrast: government investment in the 1800’s built the biggest empire the world has seen and left the UK as the most powerful nation on earth. Thirteen years of Labour has seen the UK itself fragment, while we are being overhauled by our competitors, marginalised internationally, and undermined by the EU.

    THERE IS SIMPLY NOTHING TO SHOW FOR BROWN’S DEBT.

    ZILCH.

  31. UNISON East Midlands

    The Daily Mail are deficit dunces //is.gd/nuIgck

  32. BenM

    I see a small error has got the Tory debt hysterics piling in. Don’t know what 13eastie has been drinking but it sure has made him annoyed.

    13eastie – the debt has ENSURED THAT UNEMPLOYMENT HASN’T BREACHED 3 MILLION. THAT’S TENS OF THOUSANDS OF HOUSEHOLDS SAVED FROM THE BLIGHT OF UNEMPLOYMENT.

    It is usually wise not to listen to the counsel of a hysteric.

    LondonStatto seems to think the debt to GDP ration “should have been below 30% before the crisis”. Why? Who says? LondonStatto? Why should anyone listen to LondonStatto for advice on the level of National Debt? Many western governments had debt much much higher than this at 2008 prior to the private sector caused credit crunch.

    The fact is that we have seen a small uptick in the Borrowing Requirement as unnecessary, economy destorying Coalition spending cuts kick in. We are about to re-learn the lesson of the Great Depresssion – cutting spending too soon maintains a deficit and, like Ireland, can even increase it.

    No amount of Tory shrieking about debt will wish that kind of Tory driven whammy away.

  33. Richard

    So Andy C relies on that emminently unrelialble source of information Wikipaedia. He truly takes the dunces cap.

  34. Richard

    Biggest empire on the earth that asset stripped entire countries by force, that ran a slave trade, that suppressed the indigenous population, that ruled dictatorially with an iron fist, that tortured, starved and killed hundreds of thousands of people for not being white British, to name just a few of the atrocities committed in the name of empire. There is nothing at all in that to be proud of – unless, that is, you’re seriously and irrevocably deranged.

  35. John

    An empire that allowed most of its colonies to secure independence without armed uprising and left in its wake a commonwealth of countries whose members are free to leave – yet still stay members and who co-operate.

    As opposed to a political leader that ruled dictatorially with a clunking fist, a party that allowed people to be tortured starved and responsible for hundreds of thousands of people being killed in Iraq – just to name a few of the atrocities committed in the name of the Labour Party. There is nothing at all in that to be proud of – unless, that is, you’re seriously and irrevocably deranged.

  36. Michael Burke

    I note the criticism of Daily Mail Dunces has brought forth a torrent of vitriol. It wasn’t the intention to upset Daily Mail readers, or Dunces, or both.

    Yet the central arguments remain unchallenged. The current ‘scary’ deficit has actually risen much less as a proportion of GDP than in former crises – and it is much lower than before – previous Tory-led governments’ spending cuts led to both higher deficits and debts (except Thatcher, when debt was reduced by N Sea oil) – and the highest ever debt was reduced by the radical polices of the 1945 Labour govt by directing investment.

  37. Sean

    It seems that the central arguments remain challenged and anyone saying the contrary needs to reread the thread.

    For instance, Michael do you agree that Labour was increasing the debt both in absolute terms and as a percentage of GDP from the early 2000s? If you do, you must therefore acknowledge that this was brought about by an excess of spending because Britain was experiencing the longest run of uninterrupted growth in centuries.

  38. Andy C

    21, Richard,

    That Wikipedia has such an article raises immediate questions – although it isn’t an innerant source. However, it should be viewed as a pointer. For example, this article at CREI is rather more authoritative. A very quick google following that heads-up reveals recessions in Australia, the United States, Canada, Finland, … so the assertiona that is was “not a global phenomenon, but a uniquely British disaster of Tory policymaking” is comprehensively rejected.

  39. scandalousbill

    Sean,

    There are those who would argue that Labour spending of the early 2000 years was to offset the underinvestment of the previous administration in areas such as health, transport infrastructure and education.

  40. Sean

    scandalousbill,

    That is an opinion. What is an “investment” if the definition of an investment is so broad as to encompass any increase in government expenditure? Higher spending and falling productivity mean that public services are at either a standstill or barely going forward.

    There is also an argument that higher spending was an effort for Brown to position himself for the leadership and to change the nature of the country.

  41. scandalousbill

    Sean,

    While there is no doubt that much has been made of the Blair/Brown conflicts, from what I can recall. most of the spending policies at that time related more to manifesto commitments as opposed to a Brownite plot a la Black Adder.

    BTW, Andy C,

    If you review the article you cited, you will find that in section 16.3.1, pg. 366, the author dismisses the notion of a global impulse triggered recession of the 1990s in favour of Country specific factors.

  42. BenM

    28. Sean

    There is also an argument that higher spending was an effort … to change the nature of the country.

    Ooo! What a scandal! Politician tries to alter nature of the country shocka!

    Pssst! Sean! Don’t let this one get out will you?!!

  43. David Howell

    It would seem to me as though the confusion with the early 90s recession relates to how mainland Europe had their recession in the mid-90s instead. Economic cycles are not the same around the world, although they are interdependent to an extent due to global trade; the UK’s early 90s recession was in tandem with the North American economies, but not the mainland European economies. There was a cynical UK bubble, the Lawson boom, but that was certainly not a uniquely British, or a uniquely Tory, policy failure.

    As for the main story, all sides have an element of truth to it; the national debt is at a 40-year high relative to GDP, this increase started when Brown abandoned Tory spending plans but accelerated during the recession, austerity measures may not be the best way to address this problem.

    The elephant in the room: to what extent *is* this a problem? Britain’s debt is mostly long-term, so a Greek/Irish crisis is not so much an immediate existential threat as something to avert a number of years down the line. It’s a justification for careful budgeting in the long term, not right-wing shock therapy in the short term.

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