Conservative research shows there’s no debt crisis

David Cameron mentioned the phrase "debt crisis" eight times in his speech yesterday. On Sunday, speaking on the Andrew Marr show, George Osborne said, "the difference between Britain and countries like France and Germany is that we have an absolutely enormous budget deficit." But research used by the Conservative Party show that Britain's debt position is far from in crisis despite their claims.

David Cameron mentioned the phrase “debt crisis” eight times in his speech yesterday. On Sunday, speaking on the Andrew Marr show, George Osborne said, “the difference between Britain and countries like France and Germany is that we have an absolutely enormous budget deficit.”

The two may seem logically consistent but they are not. There is no doubt but Britain has the largest fiscal deficit in the G7. This is the result of the fiscal stimulus announced in the Pre-Budget Report last year, the automatic stabilisers such as unemployment benefits, and a structural deficit which both parties now recognise must be addressed. But Britain’s debt position is far from in crisis despite Conservative claims.

In their policy white paper on sound banking, the Conservatives produce a graph (page 9) showing that government debt will increase in the UK from 2007-10 by 42 per cent of GDP, the highest in the G7. There is debate about which figures are most accurate, but using the same OECD source (Annex Table 32), Left Foot Forward is able to produce a graph that shows total debt/GDP ratios for the G7.

The graph shows that Britain was better placed than any other G7 country going into the downturn and in a good position to absorb a 42 per cent rise. Indeed, although the UK’s stock of debt will have surpassed Canada and Germany by 2010, at 89.3 per cent it will still be below the OECD average of 100.2 per cent.

The money markets, of course, know all this. On Newsnight last night, Philip Hammond said, “We need to send a clear message to the markets. Two of the ratings agencies have already warned us that the Britain’s AAA rating will be at risk if the next Government does not show greater determination than this Government has so far demonstrated.” (14’57”) This contrasts with the report in today’s Financial Times that, “A growing political consensus on the need to cut public spending as the economy recovers is set to preserve Britain’s top-notch triple-A credit rating.” According to Pierre Cailleteau, head of sovereign risk at Moody’s, a downgrade was “very unlikely.”

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15 Responses to “Conservative research shows there’s no debt crisis”

  1. matthew bond

    Excellent job. The Tories are exceedingly vulnerable on the economy. Got to get people to stop thinking of the state as a household and to realise Tories are out of step with all countries in G20.

  2. Paul Cotterill

    @davesemple Here you are comrade. Have a bit of rampant plagiarism from TCF for your birthday

  3. Payback on debt is historically low | Left Foot Forward

    […] “the Economist has [the UK] in the highest debt group.” As Left Foot Forward showed yesterday using figures favoured by the Conservative party, the UK is actually in the good standing – […]

  4. Chris Clothier

    Great post. Out of interest do the OECD data reflect off-balance sheet debt. If so would the UK’s position look as (relatively rosy). You could also argue that Moody’s sanguine stance is a function of the Tories lead in the polls and their strong rhetoric on the deficit.

  5. Richard Angell

    Excellent analysis! Well done!

  6. Richard Angell

    Great blog on @LeftFootFwd re: national debt –

  7. Miller 2.0

    Great post guys.

  8. Tom Miller

    Conservatives own research spikes their ‘debt crisis’ claim. This is for the journos:

  9. The Earl

    Allow me to debunk some myths and tell you a few home truths. First, you are completely incorrect to assert that we are well placed to increase our debt burden. Have you forgotten the £100 billion that the government keeps off its balance sheet as a result of PFI? Or what about the public sector pensions crisis? That’s a real corker, that. Recent estimations put that deficit at a cheeky little £1 TRILLION pounds. Then there’s the cost of decommissioning old nuclear power stations, which comes in at a paltry £70 billion. Oh, and there’s the miniscule matter of Network Rail’s £21 billion. And I’ve not even mentioned the scale of the personal debt crisis in the UK.
    Your economic wonder graph above fails to account for any of this hidden debt.
    You have proven, spectacularly, just how incompetent the Left is when it comes to economics.

  10. Will Straw


    @The Earl. Thanks the the comment. I deliberately used a source favoured by the Conservative Party so I could not be accused of cherry picking the figures. I conceded this by stating that, “There is debate about which figures are most accurate.”

    Nonetheless, you neglect to mention that other countries have similar off balance sheet liabilities. Richard Murphy has more on his Tax Research blog:

    The best judge of all this is the money markets as I pointed out above.

    @Chris Clothier. This is pure speculation but I suspect that it was Labour’s shift from the defenceless “investment vs cuts” line to Darling’s new position that triggered the AAA announcement since the Conservative position has been clear for some time.

  11. The questions that George Osborne must answer | Left Foot Forward

    […] Foot Forward has previously shown that OECD figures used in Conservative party publications show that the UK’s debt burden is […]

  12. Tristan Osborne

    @Joe_Armitage Not true. Our debt-GDP sustainable on Lab deficit cut plans in 2010 –

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